The man who trades freedom for security does not deserve nor will he ever receive either. – Benjamin Franklin
The International Monetary Fund will next week forecast that the US economy will go into recession this year, a German newspaper reported Tuesday, citing an upcoming report.
The IMF believes the US will experience at least two successive quarters of negative growth — the technical definition of a recession — and will grow only half a percent over the whole of 2008, weekly Die Zeit reported.
Germany and other industrialized nations are desperately trying to brace themselves against the threat of a collapse of the global financial system. The crisis has now taken its toll on the German economy, where the weak dollar is putting jobs in jeopardy and the credit crunch is paralyzing many businesses.
A trader reacts in front of the DAX board at the Frankfurt stock exchange.The Bundesbank, Germany’s central bank, doesn’t like to see its employees working too late, and it expects even senior staff members to be headed home by 8 p.m. On weekends, employees seeking to escape the confines of their own homes are required to sign in at the front desk and are accompanied to their own desks by a security guard. Sensitive documents are kept in safes in many offices, and a portion of Germany’s gold reserves is stored behind meter-thick, reinforced concrete walls in the basement of a nearby building. In this environment, working overtime is considered a security risk.But the ordinary working day has been in disarray in recent weeks at the Bundesbank headquarters building, a gray, concrete box in Frankfurt’s Ginnheim neighborhood, where the crisis on international financial markets has many employees working late, even on weekends.
Public’s feelings about economy are bleakest since ’73, survey indicates Americans are bracing for rising unemployment and shrinking salaries, a gloomy outlook that could translate into a serious cutback in consumer spending, the primary engine of the economy.
A survey of about 2,500 households found that Americans feel worse about the economy’s prospects than at any time since 1973, when Americans struggled with soaring oil prices and runaway inflation.
NEW YORK (Reuters) – Investment banks Goldman Sachs Group Inc , Lehman Brothers Holdings Inc and Morgan Stanley are testing a new program that allows investment banks to borrow directly from the Federal Reserve, according to people at the banks.In a bid to stabilize jittery markets, the Fed said on Sunday that it would allow investment banks to borrow from its discount window using a wide range of investment-grade securities as collateral.
(Hey, hey lets spend all our money and then just ask Uncle Bernanke for a few more billions.
Come on guys lets do that. Uncle Bernanke can print a few billions for us if we are broke.
Good to have him around. Life is so good. – The Infinite Unknown)
Wall Street is bracing itself for another week of roller-coaster trading after more than $300bn (£150bn) was wiped off the US equity markets on Friday following the emergency funding package put together by the Federal Reserve and JPMorgan Chase to rescue Bear Stearns.
One UK economist warned that the world is now close to a 1930s-like Great Depression, while New York traders said they had never experienced such fear. The Fed’s emergency funding procedure was first used in the Depression and has rarely been used since.
A Goldman Sachs trader in New York said: “Everyone is in a total state of shock, aghast at what is happening. No one wants to talk, let alone deal; we’re just standing by waiting. Everyone is nervous about what is going to emerge when trading starts tomorrow.”
NEW YORK (Reuters) – Financial firms face a “new world order” after a weekend fire sale of Bear Stearns and the Federal Reserve’s first emergency weekend meeting since 1979, research firm CreditSights said in a report on Monday.
More industry consolidation and acquisitions may follow after JPMorgan Chase & Co on Sunday said it was buying Bear Stearns for $236 million, or $2 a share, a deep discount from the $30 price on Friday and record share price of about $172 last year.
“Last evening the Bear Stearns situation reached a crescendo, as JPMorgan agreed to acquire the wounded broker for a token amount of $2 per share,” CreditSights said. “The reality check is that there are many challenged major banks, brokers, thrifts, finance/mortgage companies, and only a handful of bona fide strong U.S. banks.”
Read moreBanks face “new world order,” consolidation: report
Last May, a Saudi Arabian conglomerate bought a Massachusetts plastics maker. In November, a French company set up a new factory in Adrian, Michigan, adding 189 automotive jobs to an area accustomed to layoffs. In December, a British company bought a New Jersey maker of cough syrup.For much of the world, the United States is now on sale at discount prices. With credit tight, unemployment growing and worries mounting about a potential recession, American business and government leaders are courting foreign money to keep the economy growing.
Foreign investors are buying aggressively, taking advantage of American duress and a weak dollar to snap up what many see as bargains, while making inroads into the world’s largest market.
Last year, foreign investors poured a record $414 billion into securing stakes in U.S. companies, factories and other properties through private deals and purchases of publicly traded stock, according to Thomson Financial, a research firm.
NEW YORK (CNN) — President Bush’s assurances that we’ll all be “just fine” if he and Congress can work out an economic stimulus package seem a little hollow this morning.Much like Federal Reserve Board Chairman Ben Bernanke’s assurances last May that the subprime mortgage meltdown would be contained and not affect the broader economy. And it seems Treasury Secretary Henry Paulson has spent most of the past year trying to influence Chinese economic policy rather than setting the direction of U.S. economic policy.
There is no question that Bush, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid will quickly come up with an economic stimulus package simply because they can no longer ignore our economic and financial crisis. That economic stimulus plan will amount to about 1 percent of our nation’s gross domestic product, an estimated $150 billion.
But all of us should recognize that the stimulus package will be inadequate to drive sustainable growth in our $13 trillion economy. An emergency Fed rate cut and an economic stimulus plan are short-term responses to our complex economic problems, nothing more than bandages for a hemorrhaging economy.
Robert Reich warns a recession, or worse, could be coming.
Think the last few days have been bad for Wall Street and the rest of the world’s markets? Hang on, things are probably going to get worse, says Robert Reich, President Clinton’s former secretary of Labor and author of the recent book “Supercapitalism: The Transformation of Business, Democracy and Everyday Life.” According to Reich, who currently teaches public policy at the University of California, Berkeley, the United States might even be headed toward a depression.
Reich: 'Now we have a mess on our hands. Bernanke has the only
pooper-scooper in town, but it is too small for the job.'
Ron Paul was the only hope for America.
“I would tell audiences that we were facing not a bubble but a froth – lots of small, local bubbles that never grew to a scale that could threaten the health of the overall economy.” Alan Greenspan, The Age of Turbulence.
That used to be Mr Greenspan’s view of the US housing bubble. He was wrong, alas. So how bad might this downturn get? To answer this question we should ask a true bear. My favourite one is Nouriel Roubini of New York University’s Stern School of Business, founder of RGE monitor.
Recently, Professor Roubini’s scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is “a rising probability of a ‘catastrophic’ financial and economic outcome”**. The characteristics of this scenario are, he argues: “A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.”
Prof Roubini is even fonder of lists than I am. Here are his 12 – yes, 12 – steps to financial disaster.
WASHINGTON (AP) — In more bad economic news, consumer confidence and home prices posted sharp declines while higher costs for such basics as food, energy and medicine left wholesale inflation rising at a pace unseen since late 1981.
The new reports Tuesday documented the latest in a series of blows to the economy as a prolonged housing downturn has pushed the country close to a recession.
AMMAN, Jordan – Even as it enriches Arab rulers, the recent oil-price boom is helping to fuel an extraordinary rise in the cost of food and other basic goods that is squeezing this region’s middle class and setting off strikes, demonstrations and occasional riots from Morocco to the Persian Gulf.
The cost of many basic foods, like at this market in Amman, has doubled. Some in the middle class are tilting toward poverty
UN Secretary General Ban Ki-moon has said he is deeply concerned about the sharp rise in global food prices.
Mr Ban said the trend would hinder progress towards the millennium development goals (MDGs), which aim to halve extreme poverty by 2015.
The UN World Food Program (WFP) and other agencies may be forced to ration food aid, he said in a BBC interview.
He said shortages might be eased by a “green revolution” to transform farming methods in Africa.
Global food prices have risen by 40% in nine months and food reserves are at their lowest for 30 years.
The WFP is facing a $500m (£248m) shortfall in its attempts to feed 73 million people this year.
Global confidence in the US economy has reached zero, as was proved by last month’s stock market meltdown. But there is an enormous anomaly in the US economy above and beyond the subprime mortgage crisis, the housing bubble and the prospect of recession: 60 years of misallocation of resources, and borrowings, to the establishment and maintenance of a military-industrial complex as the basis of the nation’s economic life
Stocks surged, bonds fell and the long-suffering U.S. dollar soared in reaction to the moves, a sign financial markets saw the plan as a step in the right direction to ease a crisis that has threatened world economic growth. The Dow Jones industrials closed nearly 3.6 percent higher.
In the latest effort to ease a credit contraction that has disrupted global finance, the Fed, Bank of Canada, Bank of England, European Central Bank and Swiss National Bank announced a series of aggressive measures to boost liquidity. It was the second time in three months that central banks from around the globe had launched coordinated efforts.
Wall Street economists were quick to call the new lending facility a step in the right direction, but what’s most needed is time for the de-leveraging of billions of dollars in loans globally.
The global economy is falling apart all around us. We can expect a continued rise in the price of gold and silver as it is becoming increasingly apparent that the Federal Reserve, the U.S. government and even Alan Greenspan are doing everything they can to destroy the value of the U.S. Dollar. In fact, the policies currently being implemented by the establishment is criminal because by devaluing the U.S. Dollar they are indirectly robbing from the American middle class by destroying the purchasing power of everyone’s bank accounts that are denominated in U.S. Dollars. At this point it is becoming increasingly clear that the establishment wants a weaker U.S. Dollar considering some of the insane policies they are implementing and insane things that they are saying.
What makes this rise in precious metals particularly interesting is the fact that the IMF has been dumping gold on to the market and gold continues to move up in value. The manipulation of the gold market is starting to fail as is the policy of managing a slow decline of the U.S. Dollar without a parabolic rise in precious metals. The rise in silver has been particularly spectacular rising around $1 in price yesterday and it shows no signs of slowing down. At this point we could easily see gold at $1,000 an ounce and silver at $20 an ounce within the next month or two. So why is all of this happening? Let’s take a look at some of the news that has come out in the past few days.
The corporate controlled media is finally starting to talk about the economic problems that the alternative media and assorted precious metals advocates have been talking about for years now. We are facing a potential inflationary depression. Independent estimates of the M3 money supply show that we are seeing an annual increase in the M3 money supply by around 16 to 17 percent. The Federal Reserve chose to stop producing this report right around the time when these figures began going parabolic on their chart showing a massive increase in the money supply. An increase in the money supply results in a devalued currency and that’s one of the primary reasons why we are seeing the price of gold flirt with the $1,000 an ounce mark and silver explode past the $20 an ounce mark. The U.S. Dollar Index is now treading water around the 72 to 73 mark and it is becoming increasingly clear that the role of the world’s reserve currency is shifting from the U.S. Dollar to the Euro. Some ask how low the U.S. Dollar could go and that answer is simple. The U.S. Dollar could go to zero because it is a fiat currency with no real tangible backing. Every fiat currency in the history of man has been replaced or collapsed and there is nothing fundamentally different between the U.S. Dollar and these other fiat monetary systems of the past.
Cleaning up the mess that Mr Greenspan left behind was never going to be easy. Banks and brokers around the world face more than half-trillion dollars in write-offs as a consequence of the US sub-prime mortgage crisis, which is spreading from the US property market and roiling global stock markets. It’s toppled the US economy into a recession and the tremors are also rattling Asian stock markets.
Roughly $7 trillion has been wiped from world stock markets since the beginning of the year amid fears of a severe US economic recession and financial institutions reporting more mega losses. “The market crisis will preoccupy us well into 2008,” he said German Finance Minister Peer Steinbrueck on Feb 15th. “The financial risks securitized by banks contained packaged explosives,” and he accused rating agencies of having a conflict of interest in the role they played in the process.
So far, the Bernanke Federal Reserve has pumped more than half-a-trillion dollars into the markets with open market operations and special emergency lending schemes, to help cushion the blow to the US economy and stock markets. However, there’s evidence that the Fed’s prescription for dealing with the sub-prime debt crisis, is actually making matters much worse, and leading to “Stagflation.”
Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on payments.
NEW YORK (CNNMoney.com) — More home owners than ever are losing the battle to make their monthly mortgage payments.
Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report’s quarterly, 36-year history.
Another 381,000 households, or 0.83% of borrowers, saw the foreclosure process started during the quarter, which was also a record.
Additionally, the number of mortgage borrowers who were over 30 days late on a payment in the last three months of 2007 is at its highest rate since 1985.
“Boy, that was ugly,” said Jared Bernstein, an Economic Policy Institute economist of the data.
“It’s another reminder that anyone who thought we had hit bottom was wrong. This was a huge bubble, and when a bubble of this magnitude breaks, it creates a huge mess,” he said.” It could take a lot longer for the correction to work through the system.”
Housing rescue: What you need to know
One reason it may take so long is that there seems to be no end in sight for falling home prices.
On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to “determine the total insured amount for each depositor….as of the day of the failure” and return their money as quickly as possible. The agency is “modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions.” The implication is clear, the FDIC has begun the “death watch” on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC’s job nearly impossible. Good luck. – Mike Whitney
Read moreThe Bush Bust of ’08: “It’s All Downhill From Here, Folks”
Bejing: For almost two decades, it was close to the perfect match of buyer and seller.
Denied weapons and defense technology from the West, China was almost totally reliant on Russia for the hardware it needed to jump-start an ambitious military buildup. And while the Russian economy teetered in the aftermath of the Soviet Union’s collapse, huge orders from China helped keep a once-mighty defense industry afloat.
But powerful new forces, including a fear in Moscow of renewed rivalry with its neighbor and a desire in Beijing to become more self-reliant, have led both sides to re-evaluate this trade.
After orders peaked at more than $2 billion a year early in this decade, Chinese arms deals with Russia shrank to almost nothing in 2006, and no major new contracts are in the pipeline, according to Russian, Chinese and U.S. defense experts.
Congressman Ron Paul slammed Federal Reserve chairman Ben Bernanke during a House Financial Services Committee meeting today for following a policy of deliberately destroying the dollar and wiping out the American middle class.
Paul held Bernanke to task over his refusal to address the decline of the dollar and its clear link to inflation.
“Inflation comes from the unwise increase in the supply of money credit….to argue that we can continue to debase the currency, which is really the policy of that you’re following, purposely debasing value of currency – which to me seems so destructive….it just puts more pressure on the federal reserve to create capital out of thin air inorder to stimulate the economy and usually that just goes into mal-investment,” said Paul.
Watch it.
“Ron Paul Schools Ben Bernanke Yet Again”
Paul highlighted the fact that the M3 money supply was rising at a rate of 16 per cent and that this was the real rate of inflation.
“History is against you,” Paul told Bernanke, “History is on the side of hard money – if you look at stable prices you have to look at the only historic sound money that’s lasted more than a few years – fiat money always ends, gold is the only thing where you get stable prices,” he added, pointing out that despite the price of oil’s rapid ascent, it had remained flat when compared to the price of gold.
“I cannot see how we can continue to accept the policy of deliberately destroying the value of money as an economic value,” said Paul, adding that the policy was “immoral,” and would lead to a reduction in American’s living standards and “the middle class being wiped out.”
Asked how he could defend a policy of deliberately depreciating the dollar, Bernanke stumbled through his response and was basically forced to agree with Paul’s point. Paul’s comments come on the day that the dollar hit its all time low against the Euro.
Earlier this week, former Fed chairman Alan Greenspan laid the groundwork for the further collapse of the greenback by encouraging Gulf states to abandon their dollar peg.
Watch Paul’s opening statement.
“Ron Paul opening statement to Bernanke at FSC – 2-27-2008”
Feb. 20 (Bloomberg) — Grain farmers will need to harvest record crops every year to meet increasing global food demand and avoid famine, Potash Corp. of Saskatchewan Inc. Chief Executive Officer William Doyle said.
People and livestock are consuming more grain than ever, draining world inventories and increasing the likelihood of shortages, Doyle said yesterday in an interview on Bloomberg Television. Global grain stockpiles fell to about 53 days of supply last year, the lowest level since record-keeping began in 1960, according to the U.S. Department of Agriculture.
“If you had any major upset where you didn’t have a crop in a major growing agricultural region this year, I believe you’d see famine,” Doyle, 57, said in New York.
Potash, the world’s largest maker of crop nutrients, has more than doubled in market value in the past year as record crop prices allowed farmers to spend more on fertilizer to boost yields. The company has more than doubled net income in the past two years to $1.1 billion and expects gross profit from potash to expand to $8 billion within five years from $912 million in 2007. Potash is a form of potassium that helps plants grow.