The man who trades freedom for security does not deserve nor will he ever receive either. – Benjamin Franklin
LOS ANGELES (Reuters) – Starbucks Corp (SBUX.O) said on Tuesday it plans to close another 500 underperforming stores and eliminate as many as 12,000 fill- and part-time positions.
The company, which now plans to close a total of 600 underperforming stores, will take related charges totaling more than $325 million.
The majority of the stores will be closed by the end of the first half of its fiscal year ended September 2009, the company said.
Related article: Fortis Bank Predicts US Financial Market Meltdown Within Weeks
Strategists at Barclays accuse Ben Bernanke of a policy blunder
Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall “below zero.”
“We’re in a nasty environment,” said Tim Bond, the bank’s chief equity strategist. “There is an inflation shock under way. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth.”
Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. “This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that’s possible. It has lost all credibility,” said Mr Bond.
The grim verdict on Ben Bernanke’s Fed was underscored by the markets yesterday as the dollar fell against the euro following the bank’s dovish policy statement on Wednesday. Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of “anti-dollar” and as a market reproach to Washington’s easy-money policies.
The Fed’s stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2 to 5pc over the last year. Mr Bond said the emerging world is now on the cusp of a serious crisis. “Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and 1970s,” he said.
“They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box.”
Read moreBarclays warns of a financial storm as Federal Reserve’s credibility crumbles
BRUSSELS / AMSTERDAM (DFT) – Fortis expects within the next few days to weeks to complete the collapse of the U.S. financial markets.
That explains the bank insurers interventions of the series Thursday at dealing with € 8 billion.
“We are ready at the last minute. It goes in the United States much worse than thought, “said Fortis chairman Maurice Lippens, who maintains that CEO Votron to live. Fortis expects bankruptcies of 6000 U.S. banks that now lack coverage. “But Citigroup, General Motors, there begins a complete meltdown in the U.S..”
Fortis took yesterday € 1.5 billion with a share issue. At the end of last year was the Belgian-Dutch group € 13 billion of new shares for the takeover of ABN Amro, for which it paid € 24 billion. Lippens bases its concern on interviews with bankers. “Two months ago we knew not so bad that it is in America. And it will be much worse. We have a thick mattress needed for the next eighteen months to come when we can bring to ABN Amro. ”
Two weeks ago reported the U.S. investment bank and adviser to Fortis Merrill Lynch certainly € 6.2 billion in additional capital was needed. The VEB yesterday demanded clarification of Fortis: CEO Jean-Paul Votron stopped in late april Fortis maintains that after the purchase of ABN Amro does not need on the capital market. In one year € 30 billion in market capitalization destroyed. After Votron last confession kelderde the share price by 19.4%, although yesterday climbed by 4.4% to € 10.65.
The massive unrest around the bank insurers, especially with our neighbours in Belgium as a bomb broken. While the fuss arose in the Netherlands to the limited financial world, it is with our neighbours the call of the day. Not only is the bank dominates the streetscape, but by the mokerslag for the Belgian volksaandeel are also hundreds of thousands of small investors hit hard.
All Belgian newspapers opened yesterday with real rampenkoppen, where the free fall of the bank insurers was wide coverage. ‘Fortis crashes, “” Rampdag for Fortis’ and’ Fortis loses 5.3 billion, “opened three leading newspapers.
Read moreFortis Bank Predicts US Financial Market Meltdown Within Weeks
Vincent Quinones works on the floor of the New York Stock Exchange Wednesday after the Federal Reserve issued a mixed assessment of the economy. Yesterday, the Dow Jones industrial average closed down 358 points. (By Andrew Harrer — Bloomberg News)
So much for that second-half rebound.
Truth be told, that was always more of a wish than a serious forecast, happy talk from the Fed and Wall Street desperate to get things back to normal.
It ain’t gonna happen. Not this summer. Not this fall. Not even next winter.
This thing’s going down, fast and hard. Corporate bankruptcies, bond defaults, bank failures, hedge fund meltdowns and 6 percent unemployment. We’re caught in one of those vicious, downward spirals that, once it gets going, is very hard to pull out of.
Only this will be a different kind of recession — a recession with an overlay of inflation. That combo puts the Federal Reserve in a Catch-22 — whatever it does to solve one problem only makes the other worse. Emerging from a two-day meeting this week, Fed officials signaled that further recession-fighting rate cuts are unlikely and that their next move will be to raise rates to contain inflationary expectations.
Since last June, we’ve seen a fairly consistent pattern to the economic mood swings. Every three months or so, there’s a round of bad news about housing, followed by warnings of more bank write-offs and then a string of disappointing corporate earnings reports. Eventually, things stabilize and there are hints that the worst may be behind us. Stocks regain some of their lost ground, bonds fall and then — bam — the whole cycle starts again.
It was only in November that the Dow had recovered from the panicked summer sell-off and hit a record, just above 14,000. By March, it had fallen below 12,000. By May, it climbed above 13,000. Now it’s heading for a new floor at 11,000. Officially, that’s bear market territory. We’ll be lucky if that’s the floor.
In explaining why that second-half rebound never occurred, the Fed and the Treasury and the Wall Street machers will say that nobody could have foreseen $140 a barrel oil. As excuses go, blaming it on an oil shock is a hardy perennial. That’s what Jimmy Carter and Fed Chairman Arthur Burns did in the late ’70s, and what George H.W. Bush and Alan Greenspan did in the early ’90s. Don’t believe it.
Truth is, there are always price or supply shocks of one sort or another. The real problem is that the underlying fundamentals had gotten badly out of whack, making the economy susceptible to a shock. The only way to make things better is to get those fundamentals back in balance. In this case, that means bringing what we consume in line with what we produce, letting the dollar fall to its natural level, wringing the excess capacity out of industries that overexpanded during the credit bubble and allowing real estate prices to fall in line with incomes.
The last hope for a second-half rebound began to fade earlier this month when Lehman Brothers reported that it wasn’t as immune to the credit-market downturn as it had led everyone to believe. Lehman scrambled to restore confidence by firing two top executives and raising billions in additional capital, but even that wasn’t enough to quiet speculation that it could be the next Bear Stearns.
Since then, there has been a steady drumbeat of worrisome news from nearly every sector of the economy.
American Express and Discover warn that customers are falling further behind on their debts. UPS and Federal Express report a noticeable slowdown in shipments, while fuel costs are soaring. According to the Case-Shiller index, home prices in the top 20 markets fell 15 percent in April from the year before, and Fannie Mae and Freddie Mac report that mortgage delinquency rates doubled over the same period — and that’s for conventional home loans, not subprime. United Airlines accelerates the race to cut costs and capacity by laying off 950 pilots — 15 percent of its total — as a number of airlines retire planes and hint that they may delay delivery or cancel orders of new jets from Boeing and Airbus. Goldman Sachs, which has already had to withdraw its rosy forecast for stocks, now admits it was also too optimistic about junk bond defaults, and analysts warn that Citigroup and Merrill Lynch will also be forced to take additional big write-downs on their mortgage portfolios.
June 27 (Bloomberg) — European confidence dropped more than economists forecast this month and retail sales plunged, signaling that economic growth is continuing to cool even as the European Central Bank prepares to lift interest rates to a seven-year high to tackle inflation.
An index measuring sentiment in the euro area fell to 94.9, the lowest since May 2005, from 97.6 the previous month, the European Commission in Brussels said today. Separate reports showed European retail sales plummeted, while inflation accelerated in Germany and Spain.
Stocks fell in Europe today as oil climbed to a record above $140 a barrel and Carrefour SA, Europe’s biggest retailer, scaled back its earnings forecast. With soaring food and energy prices boosting inflation, ECB President Jean-Claude Trichet has said the bank may raise the benchmark rate next week by a quarter point to 4.25 percent.
``The economy has hit the wall,” said Ken Wattret, senior economist at BNP Paribas SA in London. ECB officials “run the risk of tipping the euro area into a recession” as the inflation outlook increases the risk that the central bank “may need to go beyond one rate rise.”
Confidence among the manufacturing, construction and retail industries across the 15 nations that share the euro declined this month, as did consumer sentiment, according to today’s commission report.
The Bloomberg retail index, based on a survey of more than 1,000 executives compiled by Markit Economics, fell to 44 this month from 53.1 in May. A reading below 50 indicates contraction. Europe’s manufacturing and services industries also contracted this month.
Export Growth
The euro has increased 17 percent against the dollar in the last 12 months, threatening export growth, and was at $1.5770 today. The Dow Jones Stoxx 600 index fell 1.3 percent to 284.67 as of 11:29 a.m. in Brussels.
Separate figures today showed France’s economy expanded less than initially estimated in the first quarter as household spending, the driving force of growth, stagnated. U.K. first- quarter growth was revised lower today.
ECB council member Miguel Angel Fernandez Ordonez said today a July rate increase is not a certainty.
“Nothing is inevitable in life,” Ordonez told reporters in Rome today. “What we said was that the increase is not certain, but possible.”
Still, the ECB remains focused on consumer-price growth, according to ECB Executive Board member Juergen Stark. He said yesterday the bank sees its primary aim as being to “firmly anchor inflation expectations.”
16-Year High
Euro-area inflation reached a 16-year high of 3.7 percent in May. In Spain, inflation accelerated to 5.1 percent this month, the fastest on record, according to data today. Inflation in four German states also accelerated this month.
Oil prices have doubled in a year and Libyan National Oil Corp. Chairman Shokri Ghanem said yesterday that $150 a barrel may be “around the corner.”
Companies expect to raise prices more than previously anticipated to recover soaring costs, the commission report showed. A gauge of companies’ selling-price expectations rose to 18 in June from 16 in May, which compares with an average reading of 6 over the last 18 years. Consumers also expect prices to rise more sharply than they did last month.
The “worrying combination” of falling confidence and rising price expectations, “will add to fears of stagflation in the euro zone,” said Martin van Vliet, an economist at ING Group in Amsterdam.
`Remain Elevated’
“Inflation is likely to remain elevated for a longer period than we initially expected,” EU Monetary Affairs Commissioner Joaquin Almunia said in London today. It “should only begin to show a significant deceleration around the end of this year, although further possible rises in the price of oil and agricultural products cannot be ruled out.”
June 25 (Bloomberg) — American Express Co., the biggest U.S. credit-card company by purchases and cash advances, said customers are falling further behind on their debt, signaling the economy is worsening.
“Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,” Chief Executive Officer Kenneth Chenault said in a statement today announcing the company would receive as much as $1.8 billion in a settlement with competitor MasterCard Inc.
American Express and rivals Capital One Financial Corp. and Discover Financial Services have fallen by more than a third in the past 12 months in New York trading as consumers absorb the housing slump, rising unemployment and higher food and fuel bills. New York-based American Express adopted a “cautious view” for the year in January after cardholder spending slowed and overdue payments rose in December.
“If you look at the employment situation, clearly that’s deteriorated, and consumer confidence is down as well,” said Sanjay Sakhrani, an analyst with KBW Inc. in New York who has a “market perform” rating on the stock. “Both play a key role in the credit-card industry.”
The Federal Reserve today left its benchmark interest rate at 2 percent, saying “uncertainty about the inflation outlook remains high.” Consumer prices rose 4.2 percent in the 12 months ended in May, the fastest pace since January, while the unemployment rate rose by the most in more than two decades.
Consumer Confidence
Confidence among Americans dropped to the lowest level in 16 years, the Conference Board said yesterday.
Dollar to fall to metals in upcoming rallies, rate hikes soon wont be able to fix economic problems, real inflation understated for years, USDX contracts plummet, why arent people fleeing from the stock market… Exchange Traded Funds are a disaster, losses from global write downs, Fed still invited to intervene in spite of failures
The dollar has once again collapsed. Get ready for the next dollar debacle and the coming rally in gold and silver which have just broken out. The elitists have lost all credibility. The would-be lords of the universe have told so many pathological lies that no one “in the know” believes anything emanating from the forked tongues of Buck-Busting, Bear-Bashing, Big-Ben Bernanke and Hanky Panky Paulson. If our Fed Head and Treasury Secretary had been characters in the Walt Disney movie entitled “Pinocchio,” their noses would have quickly grown to lengths that could have been wrapped around the earth’s equator several times. God would have had to reverse the earth’s rotation to extricate them.
Wall Street tells us the odds favor two quarter percent rate hikes to the Fed funds rate by the end of the year. We ask whether that would be before or after the economy collapses? If before, the Fed’s rate hikes will destroy what is left of our economy, and the dollar will collapse, thereby erasing any benefits from the rate hikes. If after, you will see rate cuts instead of rate hikes as the Fed attempts to save the fraudsters on Wall Street who are not even remotely close to recovering from the credit-crunch despite what the elitists might tell you to the contrary. We ask who the morons are that make up these odds, and what planet they come from. They give aliens a bad name. These index predictions are just another form of jaw-boning and disinformation.
As soon as the economy starts its final descent into Davy Jones’ Locker, which is likely to occur in the very near future, the Fed and the US Treasury will unceremoniously toss the so-called “strong dollar” policy into the nearest financial dumpster in order to save the economy and the fraudsters. Accompanying the “strong dollar” policy on its way to the dumpster will be the next round of derivative toxic waste that is on its way courtesy of the upcoming surge in fallout from tanking real estate markets in a process that will see the Fed blow what remains of its general collateral in exchange for such waste. Once the Fed’s general collateral is exhausted, we will be ushered into a new hyperinflationary era characterized by direct monetization of US treasuries to fund our deficits and to absorb more toxic waste as it continues to pour down on elitist financial institutions like Niagara Falls.
A few measly quarter percent cuts will do absolutely nothing to slow the acceleration of inflation, especially if the Fed keeps the M3 at current levels. Only a double-digit Fed funds rate and greatly reduced M3 could have any eventual and meaningful impact on the inflation that is built into the system for at minimum the next year and one half at levels in the area of 15% to 18%, and even then the impact will not be felt until the current baked-in inflation has run its course. Direct monetization of treasuries to replenish Fed collateral and to absorb our growing deficits will put inflation beyond the point of no return, as will the breaking of OPEC dollar pegs.
As you can see, there is no way that any of the proposed diminutive rate hikes will have a positive impact on the economy, on the dollar or on the balance sheets of the fraudsters. Therefore, there will not be any rate hikes. Any increase in the Fed funds rate would be accompanied by an economic catastrophe of epic proportions that would occur as a direct result of the raising of that rate. Any rate hike would take a year to a year and a half to have an impact on inflation. By the time the anticipated Fed rate hikes could have any kind of impact whatsoever, the economy will already be in a state of rampant hyperinflation, and would be well on its way to depression, far too late to save the dollar or the economy. Ergo, the new elitist motto will soon become: “Damn the inflation, full greed ahead!”
Related articles:
– Gold
– Weimar Inflation in America
– Silver Rationing
– Don’t Be Afraid Buy Gold
– The Only “Win-Win” Investment I know of …
June 19 (Bloomberg) — Gold prices may rise to $5,000 an ounce as investors seek to protect themselves against accelerating inflation, said Schroder Investment Management Ltd., which oversees $277 billion of assets globally.
“You could easily see for the next several years that prices rise not to $1,000 an ounce, but prices rise to $5,000 an ounce or beyond as inflation psychology becomes more and more embedded and people become desperate to have a source of value,” said Christopher Wyke, London-based emerging market debt and commodities product manager at Schroder, which oversees about $10 billion of commodity assets.
Investors are turning to gold for protection as two-thirds of the world’s population cope with inflation rates that are climbing to more than 10 percent, Wyke said. Cash and inflation- linked bonds are poor substitutes as low interest rates, coupled with surging inflation, erode the real value of assets, he said.
Read moreGold May Rise to $5,000 on Inflation, Schroder Says
June 19 (Bloomberg) — High-net worth individuals, those coveted financial-services customers with at least $2 million to invest, are shifting assets from brokerages and large global banks to smaller, more conservative alternatives.
“For the first time in my career, I saw concern about the location of one’s assets,” said Robert Balentine, the head of Wilmington Trust Corp.‘s investment management group. “We’ve seen tangible evidence of very wealthy clients shifting assets out of brokerage firms in great numbers.”
Trust companies like Wilmington are benefiting from record subprime-infected losses at companies led by Zurich-based UBS AG, the world’s biggest money manager for the rich. UBS clients probably withdrew a net $39 billion during the past three months after the company reported more than $38 billion of writedowns and credit-market losses in the past year, London-based analysts at JPMorgan Chase & Co. estimate.
Clients may say “if UBS can’t manage its own capital, then what the hell are they going to do with mine?” said David Maude, a financial services consultant in Verona, Italy, who calls UBS the “Rolls Royce” of the industry. “It does tarnish their reputation, certainly.”
UBS contacted 2.5 million Swiss consumer and wealth- management customers last month after losing 11.5 billion francs ($10.9 billion) in the first quarter and seeing a net withdrawal of 12.8 billion francs in its asset and wealth-management units.
The company has responded with “proactive, ongoing communication” with clients, said Jim Pierce, co-head of UBS’s U.S. Wealth Management Advisory Group, in an e-mailed response to questions. UBS is “willing to have the difficult conversations,” Pierce said.
U.S. Market
Read moreWealthy Investors Shift Funds From Global Banks to Reduce Risks
Jean-Claude Trichet is taking a hard line on rates
The clash between the European Central Bank and the US Federal Reserve over monetary strategy is causing serious strains in the global financial system and could lead to a replay of Europe’s exchange rate crisis in the 1990s, a team of bankers has warned.
“We see striking similarities between the transatlantic tensions that built up in the early 1990s and those that are accumulating again today. The outcome of the 1992 deadlock was a major currency crisis and a recession in Europe,” said a report by Morgan Stanley’s European experts.Morgan Stanley doubts that Europe’s monetary union will break up under pressure, but it warns that corked pressures will have to find release one way or another.
This will most likely occur through property slumps and banking purges in the vulnerable countries of the Club Med region and the euro-satellite states of Eastern Europe.
“The tensions will not disappear into thin air. They will find fault lines on the periphery of Europe. Painful macro adjustments are likely to take place. Pegs to the euro could be questioned,” said the report, written by Eric Chaney, Carlos Caceres, and Pasquale Diana.
The point of maximum stress could occur in coming months if the ECB carries out the threat this month by Jean-Claude Trichet to raise rates. It will be worse yet – for Europe – if the Fed backs away from expected tightening. “This could trigger another ‘catastrophic’ event,” warned Morgan Stanley.
The markets have priced in two US rates rises later this year following a series of “hawkish” comments by Fed chief Ben Bernanke and other US officials, but this may have been a misjudgment.
An article in the Washington Post by veteran columnist Robert Novak suggested that Mr Bernanke is concerned that runaway oil costs will cause a slump in growth, viewing inflation as the lesser threat. He is irked by the ECB’s talk of further monetary tightening at such a dangerous juncture.
Ben Bernanke is reported to be irked by the ECB’s approach
Read moreMorgan Stanley warns of ‘catastrophic event’ as ECB fights Federal Reserve
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
“A very nasty period is soon to be upon us – be prepared,” said Bob Janjuah, the bank’s credit strategist.
(Got Gold and Silver? More under “Solution” – The Infinite Unknown)
A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
Such a slide on world bourses would amount to one of the worst bear markets over the last century.
RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the “Crossover” index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.
“I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.
“Cash is the key safe haven. (No way!!! Yet it is still good to have some cash. – The Infinite Unknown)
This is about not losing your money, and not losing your job,” said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.
RBS expects Wall Street to rally a little further into early July before short-lived momentum from America’s fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.
“Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point,” he said.
US Federal Reserve and the European Central Bank both face a Hobson’s choice as workers start to lose their jobs in earnest and lenders cut off credit.
The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. “The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation,” he said.
“The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets,” he said.
“Jim Tucker from the American Free Press speaking on the Alex Jones show today stated that one of his Bilderberg sources revealed to him that the global elite are planning to push forward their cashless society grid agenda with the use of implantable microchips. The implantable microchips would be sold as a way for people to easily move through the militarized control grid that they’ve setup via the bogus terror war.”
_________________________________________________________________________________________
Fresh off of the 2008 Bilderberg Meeting, it looks as if New York Federal Reserve president Timothy Geithner is set to push a new agenda in the world of central banking that was likely decided upon at Bilderberg. Geithner yesterday, wrote an article in the Financial Times calling for a global regulatory banking framework.
In addition, Geithner called for the Federal Reserve to have an instrumental role in this new framework. Geithner cites all of the problems that were actually created by the central bankers in the first place as the rationale for having greater centralized power. It is interesting Geithner decides to write this piece right after the Bilderberg Meeting where some of the most powerful figures in the world of central banking attended.
With the who’s who of central banking attending the Bilderberg Meeting, it is highly unlikely that what Geithner is proposing in his Financial Times article was not discussed at the Bilderberg Meeting. It is no secret that the true objective of the Bilderberg Meeting is to steer the world into accepting a global government.
By establishing a new global regulatory banking framework, this will inch the planet ever closer to a one world currency operating in a cashless society where microchips are used to facilitate transactions. Make no mistake about it, this system will not be good, because it will be controlled by a bunch of criminal psychopaths like the one’s who attended the 2008 Bilderberg Meeting.
In his Financial Times article, Geithner wrote the following:
WASHINGTON – The credit crisis triggered by bad home loans is spreading to other areas, forcing banks to tighten credit and probably extending the credit crisis that’s dragging down the economy well into next year, and perhaps beyond.
That means consumers are going to have an increasingly difficult time getting bank loans for car purchases, credit cards, home equity credit lines, student loans and even commercial real estate, experts say.
When financial analyst Meredith Whitney wrote in a report last October that the nation’s largest bank, Citigroup, lacked sufficient capital for the risks it had assumed, she was considered a heretic.
However, Whitney was proved correct: Citigroup pushed out its CEO, sought foreign investors and slashed its dividend. Her comments now carry added weight on Wall Street, and she has a new warning for ordinary Americans: The crisis in credit markets is far from over, and it increasingly will affect consumers.
“In fact, we believe that what lies ahead will be worse than what is behind us,” Whitney and colleagues at Oppenheimer & Co. wrote in a lengthy report last month about threats faced by big national banks, including Bank of America, Wachovia and others.
The warning is scary considering what’s already behind us in the credit crisis – the resignation or firing since last August of CEOs at almost every large commercial or investment bank; the Federal Reserve lowering its benchmark lending rate by 3.25 percentage points; a Fed-brokered deal to sell investment bank Bear Stearns; and weekly auctions of short-term loans from the Fed worth billions of dollars to keep credit markets functioning.
(Got Gold and Silver? – The Infinite Unknown)
Read moreCredit crisis expands, hitting all kinds of consumer loans
Oil prices leaped to record highs yesterday as Israel warned about Iranian nuclear sites and the dollar slumped on the biggest jump in American unemployment for 22 years.
The global crude price ended a run of lower prices earlier this week as it jumped by more than $9 a barrel to $136.79 (£69.44) – it has risen by over $14, or 10%, in just two days. The week before last saw an all-time high of $135.09 a barrel but, by Wednesday this week, prices had receded to as low as $122.
Already jittery oil markets were sent into spasms by remarks from Israel’s transport minister that an attack on Iranian nuclear sites looked “unavoidable”. Iran is a big Opec oil producer and any attack on the country would threaten oil supplies from the whole region.
Prices were also boosted by a prediction from investment bank Morgan Stanley that crude prices might reach $150 by July 4.
Earlier in the day the dollar – in which oil is priced – had fallen against the euro partly on speculation that the European Central Bank might consider raising interest rates to curb inflation.
But subsequently markets were rocked by a monthly report from the US showing that unemployment suffered its biggest monthly rise since February 1986.
Shares on Wall Street dived after the US unemployment rate unexpectedly??? jumped to 5.5%, intensifying fears that the world’s biggest economy is sliding into recession.
The Dow Jones industrial average lost nearly 300 points, or 2.2%, to around 12,320. In London the FTSE 100 closed the week down 1.5%, or 88 points, at 5,906.
Read moreOil hits new high as Israel calls strike on Iran ‘unavoidable’
Fed auctions $75 billion to banks to ease credit woes, total is $435 billion since December
WASHINGTON (AP) — Battling to relieve stressed credit markets, the Federal Reserve said Tuesday it has provided a total of $435 billion in short-term loans to squeezed banks since December to help them overcome credit problems.
The central bank announced the results of its most recent auction — $75 billion in short-term loans — the 11th such auction since the program started in December.
It’s part of an ongoing effort by the Fed to help ease the credit crunch, which erupted last August, intensified in December and January and took another turn for the worst in March.
The housing, credit and financial crises have weakened the economy and threaten to push it into recession.
In the latest auction, commercial banks paid an interest rate of 2.220 percent for the loans.
There were 71 bidders for the slice of the $75 billion in 28-day loans. The Fed received bids for $96.62 billion worth of the loans. The auction was conducted on Monday with the results released Tuesday.
In mid-December the Fed announced it was creating an auction program that would give banks a new way to get short-term loans from the central bank and to help them over the credit hump. A global credit crisis has made banks reluctant to lend to each other, which has crimped lending to individuals and businesses.
Read moreFed auctions $75 billion to banks to ease credit stresses
As banks look to shore up their balance sheets in the wake of the credit squeeze, Philip Aldrick asks whether it is all short-term trickery
Investors gather in New York’s financial district after the stock market crash of 1929, which heralded the onset of the Great Depression
‘We are in the midst of the worst financial crisis since the 1930s,” warns the eminent financier George Soros in his latest book, The New Paradigm for Financial Markets. It’s a rather extreme view, but the man who broke the Bank of England is not alone in his dark funk. At a recent event, one banker laced Soros’s sentiment with a little gallows humour, ruefully predicting “10 years of depression followed by a world war”.
Comparisons with the great crash of 1929 are inevitable and the parallels manifold. Then it was an over-inflated stock market that burst before wider economic malaise ushered in the Great Depression.
This time, in the words of Intermediate Capital managing director Tom Attwood, sub-prime was merely “a catalyst” for the inevitable pricking of the credit market bubble as “disciplines were bypassed in favour of loan book growth at almost any cost”. Again the talk is of recession, certainly in the US and possibly in the UK.
Perhaps the most intriguing parallel, though, is the crude attempt at self-preservation made by the investment trusts in 1929 and the banks now.
In the great crash, investment trusts with vast cross-holdings in each other tried to stem their collapse by buying up their own stock in what the economist JK Galbraith in his book, The Great Crash 1929, described as an act of “fiscal self-immolation”. At the time, “support of the stock of one’s own company seemed a bold, imaginative and effective course,” Galbraith wrote, but ultimately the trusts were just “swindling themselves”.
Modern economists have compared the trusts’ actions with what the banks are now doing. “They seem to be just papering over the cracks,” says Brendan Brown, chief economist at Mitsubishi UFJ Securities.
Read moreBanks’ credit crisis solutions have echoes of 1929 Depression
“Instead, take those steps necessary to protect yourself and your family to prepare for the dollar’s inflationary collapse. Buy gold. Buy silver. Avoid the US dollar.” – James Turk
___________________________________________________________________________________________
Probably almost everyone is familiar with the hyperinflationary episode that engulfed Germany after the First World War. That nation’s economy was crippled by monetary problems that resulted in dreadful personal hardships, even though up to that time Germany had achieved one of the highest living standards in the world.
The newly formed German government, named for the city where their constitution was drafted after the Kaiser’s abdication in 1918, kept pumping up the money supply. The process started relatively slowly, but quickly the pace of money creation accelerated.
The Weimar government was paying its bills on credit – just like Zimbabwe is now doing. The Weimar government was issuing currency in exchange for valuable goods and services that it was receiving, and the vendors of those goods and services accepted the newly issued currency in the expectation that they would be able to exchange it for goods and services of like value. However, they soon realized that they were deluding themselves. Prices were rising rapidly, with the consequence that a flight from the currency into commodities and other tangibles began.
There was no discipline on the creation of new currency, with the result that it was being issued to excess. Within a few short years, the German government eventually destroyed the Reichsmark, the currency it had been issuing, making the words Weimar Germany synonymous with hyperinflation, economic collapse, deprivation and personal hardship. All the wealth saved in Reichsmarks was wiped out.
For example, in his classic book, “Paper Money”, penned three decades ago under the pen name of Adam Smith, George J.W. Goodman recounts the story of Walter Levy, an internationally known German-born oil consultant in New York. Levy told him: “My father was a lawyer, and he had taken out an insurance policy in 1903. Every month he had made the payments faithfully. It was a 20-year policy, and when it came due, he cashed it in and bought a single loaf of bread.”
The following photo is from an insightful book by Bernd Widdig entitled “Culture and Inflation in Weimar Germany”. This photo shows one way in which people coped with rising prices.
As the inflation worsened, people sold whatever they could to survive. Widdig succinctly describes it in the caption to the above photo as follows: “The impoverished middle class has to sell its cherished possessions.”He should have correctly stated though that it was the “newly impoverished middle class”. They only became destitute after the inflation had destroyed their savings and ability to maintain their standard of living.
Sadly, the problems of Weimar Germany are now appearing in the US. To survive the impact of rising prices, Americans today – like Germans did eight decades ago – are selling cherished possessions, as explained in a recent story by Associated Press entitled “Americans unload prized belongings to make ends meet”. The full article is available at the following link: http://abcnews.go.com/Business/Economy/story?id=4750846&page=1
Ford Motor plans to cut its U.S. salaried work force by up to 12 percent after its turnaround plan stalled because of the downturn in the U.S. economy, the Detroit News reported Wednesday.
Ford warned last week it would not achieve its long-standing goal of returning to profitability in 2009 because of the U.S. economic downturn and a permanent shift in demand toward cars and crossovers and away from large trucks and SUVs.
The automaker also told employees in a memo last week that it expected to make cuts in hourly and salaried employees by Aug. 1 and would detail those steps in July.
The International Energy Agency has ordered an inquiry into whether the world could run out of oil in four years’ time, it was reported yesterday.
The IEA has concerns about what might happen in 2012, when demand for oil, boosted by the rapid growth of the Chinese and Indian economies, is expected to have reached 95 million barrels a day. Global supply at that point is projected at only 96 million barrels a day. Such a thin margin would be vulnerable to any sudden supply crisis in volatile countries such as Nigeria, Venezuela or Iraq, now estimated to have overtaken Saudi Arabia as the biggest oil nation.
The IEA said its inquiries would form part of short and long-term forecasts to be published in July and again in November. Its energy research chief, Lawrence Eagles, said: “Up to now we have believed that supply can cope with demand. One caveat is that we don’t know for certain whether estimates of reserves in countries such as Saudi Arabia are entirely accurate.”
John Waterlow, analyst at oil research consultancy Wood Mackenzie, commented: “Many oil-producing countries are closed, secretive societies where it can be difficult to pinpoint the level of provable reserves.”
The IEA’s inquiry follows last week’s new record high for black gold at $135 a barrel, fuelling inflation and possible world recession.
Read moreIEA inquiry into whether oil supplies will run dry by 2012
Peter Schiff is the author of the book: Crash Proof: How to Profit From the Coming Economic Collapse
Source: You Tube
(Preparedness is everything! Have a closer look at the World Situation and the Solution.
– The Infinite Unknown)
Speculators are largely responsible for driving crude prices to their peaks in recent weeks and the record oil price now looks like a bubble, George Soros has warned.
The billionaire investor’s comments came only days after the oil price soared to a record high of $135 a barrel amid speculation that crude could soon be catapulted towards the $200 mark.
In an interview with The Daily Telegraph, Mr Soros said that although the weak dollar, ebbing Middle Eastern supply and record Chinese demand could explain some of the increase in energy prices, the crude oil market had been significantly affected by speculation.
 |
| Telegraph TV: George Soros on oil prices |
“Speculation… is increasingly affecting the price,” he said. “The price has this parabolic shape which is characteristic of bubbles,” he said.
The comments are significant, not only because Mr Soros is the world’s most prominent hedge fund investor but also because many experts have claimed speculation is only a minor factor affecting crude prices.
Oil prices stalled on Friday after their biggest one-day jump since the first Gulf War earlier in the week.
At just over $130 a barrel, the price has doubled in around a year, causing misery for motorists and businesses.
However, Mr Soros warned that the oil bubble would not burst until both the US and Britain were in recession, after which prices could fall dramatically.
Oakland economist John Williams doesn’t seem like the kind of guy to pick fights with the government.
He’s slow moving and soft spoken, conservative in politics and personal habits, a pale and portly 59-year-old who favors Oxford shirts, Rep ties and sensible shoes. Williams is the sort who pays his taxes on time, waits when the signal says “Don’t Walk” and snaps to attention when the national anthem is played.
But don’t be fooled. The New Jersey native is leading a one-man crusade to expose official economic data as grossly misleading at best and, at worst, a pack of lies.
His Shadow Government Statistics Web site (shadowstats.com) has become a magnet for those convinced that official data put a happy-talk gloss on the nation’s economy. The growing popularity of the site, which costs subscribers $175 a year, is testimony to the deep suspicion many Americans harbor about government information as the economy falls into a swoon.
“There’s something wrong with the numbers,” said ShadowStats subscriber Harry Seitz, a retiree in Davie, Fla. “Over the years, (Williams) has essentially been proven correct.”
By Williams’ estimation, the government’s calculation that unemployment was 5 percent in April and that inflation was 4 percent and economic growth 2 percent over the last year, is fantasy. It might even be disinformation.
An update e-mailed to ShadowStats subscribers at the beginning of the month warned darkly that “GDP (gross domestic product) and Jobs Data Appear Rigged” and “Despite Manipulated Data, the Recession Deepens.”
By his reckoning, the economy shrank 2.5 percent in the year that ended in March, unemployment is really 13 percent and year-over-year inflation is 7.5 percent.
Government economic data are “out of touch with common experience. That’s why people used to believe the numbers but no longer do,” Williams said during an interview in his modest one-bedroom apartment near Lake Merritt.
BERLIN (Reuters) – The United States is already in a recession and it will be longer as well as deeper than many people expect, U.S. investor Warren Buffett said in an interview published in German magazine Der Spiegel on Saturday.
He said the United States was “already in recession” and added: “Perhaps not in the sense that economists would define it” with two consecutive quarters of negative growth.
“But the people are already feeling the effects,” said Buffett, the world’s richest man. “It will be deeper and last longer than many think.”
Riots, protests and political unrest could multiply in the developing world as soaring inflation widens the gap between the “haves” and the “have nots”, an investment bank predicted yesterday.
Economists at Merrill Lynch view inflation as an “accident waiting to happen”. As prices for food and commodities surge, the bank expects global inflation to rise from 3.5% to 4.9% this year. In emerging markets, the average rate is to be 7.3%.
The cost of food and fuel has already been cited as a factor leading to violence in Haiti, protests by Argentinian farmers and riots in sub-Saharan Africa, including attacks on immigrants in South African townships.
Merrill’s chief international economist, Alex Patelis, said this could be the tip of the iceberg, warning of more trouble “between nations and within nations” as people struggle to pay for everyday goods. “Inflation has distributional effects. If everyone’s income moved by the same rate, you wouldn’t care – but it doesn’t,” said Patelis. “You have pensioners on fixed pensions. Some people produce rice that triples in price, while others consume it.”
A report by Merrill urges governments to crack down on inflation, describing the phenomenon as the primary driver of macroeconomic trends. The problem has emerged from poor food harvests, sluggish supplies of energy and soaring demand in rapidly industrialising countries such as China, where wage inflation has reached 18%.
Unless policymakers take action to dampen prices and wages, Merrill says sudden shortages could become more frequent. The bank cited power cuts in South Africa and a run on rice in Californian supermarkets as recent examples.
“You’re going to see tension between nations and within nations,” said Patelis.
The UN recently set up a taskforce to examine food shortages and price rises. It has expressed alarm that its world food programme is struggling to pay for food for those most at need.
Last month, the World Bank’s president, Robert Zoellick, suggested that 33 countries could erupt in social unrest following a rise of as much as 80% in food prices over three years.
Merrill’s report said the credit crunch has contributed to a global re-balancing, drawing to a close an era in which American consumers have been the primary drivers of the world’s economy.
In a gloomy set of forecasts, Merrill said it believes the US is in a recession – and that American house prices, which are among the root causes of the downturn, could fall by 15% over the next 18 months.
Read moreSurging inflation will stoke riots and conflict between nations, says report
A Californian woman says she is forced to sleep in her car
|
High house prices in one of the wealthiest US cities have forced increasing numbers of women and elderly people to sleep in their cars.
According to organizers of a program that makes it possible for the homeless to sleep safely in their cars at night, more people are living in their cars in the city of Santa Barbara, while many of them even hold part time jobs.
The organizers believe the high house prices, which average at around $1 million, are driving many people to bed down for the night in their vehicles in the exclusive coastal city.
New Beginnings is the organizer of the program. It runs 15 car parks that open from 7pm to 7am in the rich city allowing the homeless to park at night.
New Beginnings Coordinator Nancy Kapp said the demand for the program was growing due to the economic recession. “The way the economy is going, it’s just amazing the people that are becoming homeless. It’s hit the middle class,” she said.
Meanwhile, New Beginnings Executive Director Gary Linker also said that one third of the people who use the program have part-time jobs.
MJ/PA
Thu, 22 May 2008 11:15:43
Source: Press TV