Monday, January 31, 2011

More Judges Pushing Back on Dubious Foreclosure Documents

"Even though this example involves only three judges in Ohio, don’t underestimate its significance. The fact that judges of their own initiative have started insisting that all attorneys provide certifications of foreclosure-related documents, a standard now in effect in New York state, shows how much their credibility has fallen.

From the Columbus Dispatch (hat tip reader Lisa Epstein):

In response to a national outcry over fraudulent foreclosure filings, three Franklin County judges are requiring lawyers to verify that all of the documents in residential-foreclosure actions are valid..."


World Income Inequality

"Here, courtesy of Catherine Rampell of Economix, is a remarkable chart from Branko Milanovic's book The Haves and Have Nots. Along the horizontal axis are within-country income percentiles running from the bottom 5% (1st ventile) to the top 5% (20th ventile). Along the vertical axis are world income percentiles.

The graph shows that the bottom 5% of Brazilians are among the poorest people in the world but the top 5% are among the richest. Thus the vertical range of the curve tells us about within-country inequality.

Comparing between countries we see that the poorest 5% of Americans are among the richest people in the world (richer than nearly 70% of other people in the world). The poorest 5% of Americans, for example, are richer than the richest 5% of Indians..."


Sachs: America’s Ungovernable Budget

"Jeff Sachs argues that we must raise taxes:

America’s Ungovernable Budget, by Jeffrey D. Sachs, Commentary, Project Syndicate: ...In his recent State of the Union address, President Barack Obama ... rightly emphasized that competitiveness in the world today depends on an educated workforce and modern infrastructure. ...

That is why Obama called for an increase in US public investment in three areas: education, science and technology, and infrastructure... He spelled out a vision of future growth in which public and private investment would be complementary, mutually supportive pillars. ...

But Obama’s message lost touch with reality when he turned his attention to the budget deficit. Acknowledging that recent fiscal policies had put the US on an unsustainable trajectory of rising public debt, Obama ... called for a five-year freeze on what the US government calls “discretionary” civilian spending.

The problem is that more than half of such spending is on education, science and technology, and infrastructure – the areas that Obama had just argued should be strengthened. After telling Americans how important government investment is for modern growth, he promised to freeze that spending for the next five years! ...

The truth of US politics today is simple. ... Both political parties ... would rather cut taxes than spend more on education, science and technology, and infrastructure. And the explanation is straightforward: the richest households fund political campaigns. Both parties therefore cater to their wishes.

As a result, America’s total tax revenues as a share of national income are among the lowest of all high-income countries..., not enough to cover the needs of health, education, science and technology, social security, infrastructure, and other vital government responsibilities.

One budget area can and should be cut: military spending. But even if America’s wildly excessive military budget is cut sharply (and politicians in both parties are resisting that), there will still be a need for new taxes..., and that – as George H. W. Bush learned in 1992 – is no way to get re-elected..."


Here Comes The Greek Brady Plan Together With 35% Bond Haircuts...And A Caption Contest

"Just in case you were expecting a full recovery on those Greek bonds stashed away under the mattress (ahem ASSGEN) here comes Euro Intelligence to spoil your day (and maybe, just maybe, wreak some havoc with your CDS). In a nuthsell: we are about to see a Brady plan with 35% haircuts. If true, we may be seeing some pretty interesting unintended consequences in the near to very near-term future.

From Euro Intelligence:

We think this story from To Vima in Greece is true. It contains a lot detail about discussions currently under way for a future Greek debt restructuring. The paper says that the EU, IMF and the ECB have reached basic agreement that a debt restructuring for Greece is inevitable, with the following concrete options being discussed. 1. A haircut of 35%. Technically, this will be an exchange of existing bonds with bonds of 65% of their value. 2. A bond swap to 30-year bonds with low interest rates. 3. A new loan package of 25% of the previous volume. The paper recalls the Brady plan, under which the US organised a similar debt swap for Latin American debt, with the help of a Fed guarantee. The paper also quotes Greek sources as confirming that they no longer expect the rebound of growth to happen immediately..."


Sunday, January 30, 2011

Rising Debt and Manipulation of the Gold Market

"...Gold has spent the last two years moving up in price as it challenged the US dollar for supremacy as the world reserve currency. Now, inflation is again in investor’s sights, as companies are forced to raise prices 6% to 15%, after having raised prices over the past year mostly in the form of small packaging. We’d call that stealth inflation. Manufacturers and producers think they are fooling the American public, but they are not. They are just demonstrating how deceitful they are. Raw materials costs are rising and they will continue to rise and so will real inflation, and that makes gold and silver move higher to reflect the loss in purchasing power of the public and the loss of value of all currencies versus gold and silver. In our previous report this week we pointed out the massive short covering by commercials in the gold pits. Unprecedented net short reduction, which can only portent a major upward move in gold and silver. The percentage of silver short covering was not nearly as successful for JPM, HSBC, GS and Citi. That is still yet to come. It will expedite the upside as it has done recently. All the elitists have done is ended their short bias and now will join you on the long side of the market. Their tactics have given you another opportunity to buy at cheaper prices.

The bond market yields will move slowly higher on the long end for the remainder of the year and thus, bonds should move slightly lower.

Stocks, which are way overpriced, will eventually fall probably back to 10,000 on the Dow..."


Geopolitical unrest and world oil markets

"...I think the bigger worry for oil markets would be that the process may yet spill over into other key oil-producing countries. Iraq will be a huge factor in determining medium-term growth in world oil production, and Iran is twice as important as Iraq in terms of current production. And should we see the temporary cessation of Saudi production, it would be an event without historical parallel.

I do not know where current developments will lead. But I am quite confident in the conclusion from my survey of historical oil shocks:

given the record of geopolitical instability in the Middle East, and the projected phenomenal surge in demand from the newly industrialized countries, it seems quite reasonable to expect that within the next decade we will have [an additional observation] with which to inform our understanding of the economic consequences of oil shocks..."


Marc Faber : Bernanke cannot print Gold

"Marc Faber : Cash at 0% doesn’t accumulate wealth either. The moment central banks implement monetary policies where they keep interest rates negative in real terms, in other words interest rates are lower than the rate of cost of living increases, then it is very difficult to value anything. The only thing I can say is, Mr Ben Bernanke, Chairman of the Federal Reserve, and other central banks, they can print an unlimited quantity of money, but you cannot print gold. Gold is limited by its annual supply of around 2,500 tonnes annually. So it is not that gold is going up, it is that the paper value of money, the purchasing power of money is going down vis-à-vis a unit of account, which is gold..."


Saturday, January 29, 2011

Banks grip on prime shadow inventory growing: Morgan Stanley

"Whether they like it or not, the nation's banks control most of the country's shadow inventory, according to a report Friday from Morgan Stanley.

Even more, properties in imminent default are typically cheaper homes with prime mortgages. The analyst adds that their findings buck conventional wisdom that these homes are either concentrated in the slums of Detroit, or prevalent amongst cardboard cutter McMansion neighborhoods.

The shadow inventory, they say, is the biggest problem for average Americans living in the nation's major cities.

And, what's more, the homes are more and more being controlled by the banks, as opposed to Fannie Mae, Freddie Mac or private securitization trusts..."


How can the Architects of the Crisis Investigate it?

"The Financial Crisis Inquiry Commission (FCIC) issued its report today on the causes of the crisis. The Commissioners were chosen along partisan lines and the Republicans, one-upping the Republicans’ dual responses to President Obama’s State of the Union address, have issued three rebuttals. The rebuttals follow a failed preemptive effort by the Republicans to censor the report – they insisted on banning the use of the terms “shadow banking system” (the virtually unregulated financial sector that conducts most financial transactions), “Wall Street,” and “deregulation.” The Republicans then issued their first rebuttal last month, their “primer.” The primer, following the lead of the censorship effort, ignored the contributions that the shadow banking system, Wall Street, and deregulation made to the crisis. The combination of the demand that the report be censored and the primer’s crude apologia critical role that the unmentionable Wall Street, particularly its back alleys (the unmentionable “shadow banking system”), and the unmentionable deregulators played in causing the crisis was derided by neutrals. The failure of their preemptive primer has now led the Republican commissioners to release two additional rebuttals to the Commission report. Again, they issued their rebuttals before the Commission issued its report in an attempt to discredit it..."


Davos: Two Worlds, Ready Or Not

"...Self-anointed “fiscal conservatives” claim the budget issues we face are all about discretionary nonmilitary spending. This is nonsense. The U.S. faces an incipient fiscal crisis (a) in the shorter term, because of what the big banks did and what they are likely to do in the future, and (b) over the next few decades, if we fail to control rising health care costs (both in general and as funded by government budgets).

The gap between the CEOs’ world and the real world should be bridged by the official sector. But where are the politicians and government officials who can explain what we need and why? Who can confront the CEOs in the highest profile public forums, and push them on the social responsibility broadly defined?

The biggest disappointment at Davos was not the attitude of the corporate sector; these people are just doing their jobs (as they see it). To the extent the U.S. or eurozone official sector showed up at all, it continued to demonstrate the deepest levels of intellectual capture. The reasoning seems to be: As long as we do what the big banks and big firms want, everything will turn out all right. There was zero high-profile public debate at Davos this week on anything related to this way of seeing the world.

Corporate Davos was borderline exuberant. Even if a deeper crisis looms, does the global business elite really care?..."


Tracking The Gold "Conspiracy" - GATA's Must Read Presentation To The Cheviot Asset Management Sound Money Conference

"In September 2009 Jim Rickards, director of market intelligence for the Omnis consulting firm in Virginia, was interviewed about the currency markets on the cable television network CNBC. Rickards remarked: "When you own gold you're fighting every central bank in the world."

That's because gold is a currency that competes with government currencies and has a powerful influence on interest rates and the value of government bonds. This was documented in an academic study published in 1988 in the Journal of Political Economy by Lawrence Summers, then professor of economics at Harvard, future U.S. treasury secretary, and Robert Barsky, professor of economics at the University of Michigan -- a study titled "Gibson's Paradox and the Gold Standard"

This close correlation among gold, interest rates, and government bond values is why central banks long have tried to control -- usually suppress -- the price of gold. Gold is the ticket out of the central banking system, the escape from coercive central bank and government power.

As an independent currency, a currency to which investors can resort when they are dissatisfied with government currencies, gold carries the enormous power to discipline governments, to call them to account for their inflation of the money supply and to warn the world against it. Because gold is the vehicle of escape from the central bank system, the manipulation of the gold market is the manipulation that makes possible all other market manipulation by government.

Of course what Jim Rickards said about gold was no surprise to my organization, the Gold Anti-Trust Action Committee. To the contrary, what Rickards said has been our premise for most of our 12 years, and we have documented it extensively. But while the gold price suppression scheme is a hard fact of history, it is seldom mentioned in polite company in the financial world. So it is a thrill for me that everyone here today is being so polite.

How have central banks tried to suppress the price of gold?

The gold price suppression scheme was undertaken openly by governments for a long time prior to 1971.

That's what the gold standard was about -- governments fixing the price of gold to a precise value in their currencies, a price at which governments would exchange their currencies for gold, currencies backed by gold.

Though the gold standard was abandoned during World War I, restored briefly in the 1920s, and then abandoned again during the Great Depression, that was not the end of government efforts to control the gold price. Throughout the 1960s the United States, Great Britain, and some of their allies attempted to hold the price at $35 per ounce in a public arrangement of the dishoarding of U.S. gold reserves. This arrangement was known as the London Gold Pool.

As monetary inflation rose sharply, the London Gold Pool was overwhelmed by gold demand and was shut down abruptly in April 1968. Three years later, in 1971, the United States repudiated the remaining convertibility of the dollar into gold -- convertibility for government treasuries that wanted to exchange dollars for gold. At that moment currencies began to float against each other and against gold -- or so the world was told.

In fact since 1971 the gold price suppression scheme has been undertaken largely surreptitiously, seldom acknowledged officially. But sometimes it has been acknowledged officially, and with a little detective work, still more about the price suppression can be discovered..."


The Riots In Egypt And The Price Of Oil

"As if the world economy did not have enough problems already, now the riots in Egypt threaten to send the price of oil soaring into the stratosphere. On Friday, the price of U.S. crude soared 4 percent. A 4 percent rise in a single day is pretty staggering. The price of Brent crude in London closed just under the magic $100 a barrel mark at $99.42. The incredibly violent riots in Egypt have financial markets all over the globe on edge right now. Any time there is violence or war in the Middle East it has a dramatic impact on financial markets, but this time things seem even more serious than usual. Many believe that we could see an entirely new Egyptian government emerge out of this crisis, and the uncertainty that would bring would make investors all around the globe nervous. Financial markets like predictability, peace and security. If Egyptian President Hosni Mubarak's 30 year reign is brought to an end, it will severely shake up the entire region, and that will not be good news for the global economy..."


Friday, January 28, 2011


"...Does the United States still have an economic problem? Yes. What is that problem? The problem is that having thrown massive fiscal and monetary stimulus at the economy it is still growing too slowly to bring down the unemployment rate. um what is the answer to that problem? some people say more fiscal stimulus and that indeed is what is being done and more monetary stimulus, and that indeed is what is being done in the form of QE 2. That may well have some short term impact but there is a risk that the fiscal position of the United States tips over from being stimulative to being unsustainable. And the big worry is that at some point this year, could be next year, the level of borrowing the United States engages in pushes inflation expectations or even default expectations to the point that nominal yields really start to spike and then The Fed is in a jam b/c it would then have to do QE3 on a massive scale and quite quickly we could be facing a really major dislocation either in the bond market or currency markets that is the problem. Is the U.S. screwed? No not the way Japan is screwed or even the way the Euro zone is screwed but the U.S. is certainly not out of trouble..."


Has Joe Cassano Committed Perjury: AIG Took Subordinated Pieces Of CDOs It Insured

"For more than three years, AIG’s Joe Cassano has insisted that his firm was careful only to assume the credit risk on the “super-senior” tranches of a CDO, only the most senior of tranches rated triple-A. A document released by the FCIC shows that AIG also among the largest investors in some of the most deeply subordinated tranches of the CDOs that it insured. According to a schedule of trades prepared by Goldman Sachs detailing trades on its notorious ABACUS synthetic CDOs, AIG bought subordinate tranches of ABACUS 2005-3, ABACUS 2005-CB1, and ABACUS 2005-2. The other big “investor” in the subordinated tranches was Goldman’s own CDO desk. This new information demonstrates, once again, that the CDO market was more of an orchestrated illusion than it was a reality, and that almost everything is kept secret in order to protect the guilty..."


Substantial Future Home Price Declines Predicted By Goldman Sachs And Peak Theories

"...Second, the recent decline in the volume of mortgage applications points to a decline in home sales in the near term. Given the one-month lag between existing home sales and mortgage applications, the model suggests that existing home sales will slow to a growth rate of about 2% in January and then decline by around 4% in February. New and pending home sales are predicted to decline by around 4% and 5% in January, respectively.

Taken together, the predictions from the recent decline in mortgage applications are consistent with our view that the housing market will remain weak in 2011. In particular, we expect only a moderate pickup in housing starts and home sales throughout 2011..."


Warning Signs

"The truth is that we have a real mess on our hands. The following are 20 economic warning signs that should be of great concern to all of us....

#1 Over the past seven days, the price of wheat has risen by 11 percent as concerns about food shortages continue to grow around the world.

#2 The price of corn is up a staggering 94 percent since last June.

#3 The United Nations is projecting that the global price of food will increase by 30 percent in 2011.

#4 According to the U.S. Department of Labor, the number of Americans applying for unemployment benefits rose last week to the highest level since last October.

#5 According to the Pew Charitable Trusts, of the 14 million Americans "officially" unemployed in December, 30% of them had been unemployed for one year or longer.

#6 Beginning in the month of March, the U.S. Postal Service will begin shutting down up to 2,000 post offices across the United States..."

#7 In an absolutely stunning move, Standard & Poor's has downgraded Japanese government debt from AA to AA-.

#8 72 percent of the major metropolitan areas in the United States had more foreclosures in 2010 than they did in 2009.


Thursday, January 27, 2011

New Claims for Unemployment Insurance Increase Sharply and Unexpectedly

"The data on new claims for unemployment insurance brought a surprise. Claims are up sharply over last week. The Department of Labor reports.

In the week ending Jan. 22, the advance figure for seasonally adjusted initial claims was 454,000, an increase of 51,000 from the previous week’s revised figure of 403,000. The 4-week moving average was 428,750, an increase of 15,750 from the previous week’s revised average of 413,000...

...The other piece of news today was the fall in new orders for durable goods. Orders fell by 2.5% last month, an unexpected decline, and this is the fourth decline in the last five months, This is yet another signal that the economy is not yet on firm footing..."

Jim Rogers Extremely Bullish on Commodities

"Legendary investor Jim Rogers was Larry Kudlow’s guest on tonight’s The Kudlow Report. Jim Rogers started with predicting a $150 per barrel oil.

“It’s not going to $150 this week or this month, but the surprise is going to be how high the price of oil stays,” said Rogers. “We are running out of known reserves of oil. These are simple facts. We have not had a major elephant oil field discovery over 40 years,” he added. He doesn’t agree with T. Boone Pickens that natural gas will replace oil anytime soon.

Jim Rogers also talked about inflation. He said everywhere in the world, including Europe and Australia, there’s inflation.

“The Americans lie about it and the British lie about it,” said Rogers. He added that inflation is supply driven and he gave the decline in oil reserves as an example.

Rogers thinks that the recent decline in gold and copper is nothing more than corrections in a major bull market, and it still has years to go. Rogers argued that massive money printing will make investors put some of their money in the stock market, but that more money will go into commodities. Whenever paper money is debased, people will want to own real assets. Nevertheless, Rogers isn’t terribly bullish about stock markets anywhere in the world..."


U.S. Budget Deficit to Pass $1.5 Trillion This Year

""Grim" doesn't seem to be a terrifying enough word to describe the budget outlook that the CBO released Wednesday.  Oh, sure, we sort of knew this was coming--tax cuts are expensive if you don't find spending cuts to match.  And yet the numbers still hit one like a punch to the gut.  From a guy wearing brass knuckles.  Wrapped around a roll of  quarters.  Shiny new quarters that you can't really afford to use for punching people, because you've got a $1.5 trillion budget deficit this year..."


Global food prices and inflation targeting

"Rising food prices once again pose central banks a tricky question. How far should they ignore food price inflation? This column suggests that food tends to have stronger predictive power on global inflation cycles than oil. The problem is more severe in emerging markets where consumption basket weights for food are two or three times larger than in rich nations. Central banks should pay close attention..."


Japan's Credit Rating Cut First Time in 9 Years; S&P Cites "Lack of Coherent Strategy to Address Debt"

"Japan has the largest debt problem in the G20 by measure of debt-to-GDP ratio near 200%. Moreover, Japan's aging demographics and lack of growth give Japan little ability to pay that debt back.

Citing those debt concerns, Japan’s Credit Rating Cut to AA- by S&P

Japan’s credit rating was cut for the first time in nine years by Standard & Poor’s as persistent deflation and political gridlock undermine efforts to reduce a 943 trillion yen ($11 trillion) debt burden..."


Wednesday, January 26, 2011

Mortgage applications tumble 12.9% as refinancing activity falls 15.3%

"The level of mortgage applications took a turn for the worse last week, as refinancing activity declined significantly.

The Mortgage Bankers Association said its market composite index decreased 12.9% on a seasonally adjusted basis for the week ended Jan. 21. Unadjusted, the index fell 12% from the prior week. The MBA said results don't include an adjustment for last Monday's Martin Luther King Jr. holiday..."


American Lose Faith in Pretty Much All Big Organizations, Especially Banks and Corporations

"The Financial Times reports on an international poll by the consulting firm Edelman to be presented at Davos on Wednesday on public trust in various types of institutions. The interesting finding is that Americans are becoming less confident in all types of organizations, which is contrary to the trend in most other nations, where perceptions are rising..."


The CBO Reveals 10 Cringeworthy Facts About U.S. Government Spending

"2009's deficit to GDP ratio was the highest in 65 years. That's before the end of World War II.

U.S. government debt held by the public will more than double between 2010 and 2020.

The projected U.S. budget deficit for 2011 is $1.5 trillion. That's $4,808 per person in the U.S..."


FCIC Investigation Misses the "Big Picture" Cause of the Crisis; Next Financial Crisis Brewing Already

"The Next Crisis

I do not know what the next financial crisis to bring the global economy to its knees will be, but here are five likely candidates

1.Sovereign debt crisis in Europe
2.Sovereign debt crisis in Japan
3.Trade wars with China
4.Derivatives meltdown
5.Currency wars

Please note that not a damn thing is being done about any of those except the first one. Even then, regulators are avoiding the only thing likely to offer a permanent solution: writedowns of sovereign debt. Instead the EU is inflating money supply hoping to avoid the one thing likely to help!..."


As Bankers Kill Off Mark-To-Market For Good, Former FDIC Chairman Gloats

"By now everyone is aware that following tremendous pressure by the banker lobby, which knows too well the Ponzi jig will be immediately up if Quantitative Easing's TBTF Madoffs are forced to disclose the true value of their worthless assets (yes, true value comes from asset cash flow generation, not from diluting money), the FASB decided to stop its push for a return to MTM. From the WSJ: "Accounting rule makers, bowing to an intense lobbying campaign, took a key step Tuesday to reverse a controversial proposal that would have required banks to use market prices rather than cost in order to value the loans they hold on their balance sheets." Transparency? What moron would propose that in an economy that is so obviously healthy and surging. After all, the only way to validate a surging stock market, er, economic recovery, is through bullshit numbers pulled out of the ass. That way they can pretend to tell us the truth, we can pretend to believe them, and everyone will frontrun the Fed who pretends not to be buying stocks. And it would have been great if it ended there. Alas no. Following the announcement, none other than Bill Isaac, current Chairman of LECG, but far more importantly, former Chairman of the FDIC under Ronald Reagan decided to send out a gloating email to his entire address book explaining what a moral victory it is to kill the MTM monster that is the sole reason for the near collapse of capitalism in 2008, and how truly wonderful it is for everyone to live in perpetual lack of knowledge of what the true value of any company's assets really is. Unfortunately, this just goes to show what the existing, extremely bribed, leaders of the nation's most vital organizations really think..."


Tuesday, January 25, 2011

America Appears To Be Trapped in a Massive Coverup of Control Fraud and Corruption

"I think most readers with an economics background would be familiar with a liquidity trap, which is a situation where monetary policy is unable to stimulate an economy suffering a non-cyclical credit contraction, either through lowering interest rates or increasing the money supply because expectations of adverse events (e.g., exogenous deflationary factors, insufficient aggregate demand, or civil or international war) make persons with liquid assets unwilling to invest.

America is caught in a confidence or credibility trap, in which the changes, investigations, and reforms necessary to restore trust to an economy or market are rendered unlikely because doing so would expose a pervasive corruption that the principals fear would destroy any remaining trust. It could also endanger the careers of politicians and business people who may have permitted and even appeared to facilitate the control fraud that caused the financial crisis in the first place. Personal risk trumps public stewardship.

The fraudulent activity is covered up and therefore continues or at the very least appears to continue, crowding out most productive business investment and activity which cannot possibly hope to compete with the highly profitable fraudulent activity ad asset bubbles under such opaque and uncertain circumstances. Informed market participants are unwilling to invest their liquid assets in a system which they suspect is riddled with accounting fraud, insider trading, and regulatory weaknesses, except of course in a few situations and somewhat ironically in some existing frauds, such as a bubble in equity valuations for example, which they think they understand..."


How Severe Is Europe’s Intertwined Debt Crisis?

"Economics correspondent Paul Solman reports on the ongoing fallout from Europe’s debt crisis, which has led to political woes and bank bailouts among other problems. His update is park of his ongoing series on Making Sen$e of financial news..."


Case Shiller Index Points to Housing Double Dip


Bank of America’s Mortgage Headaches Won’t End.

"After more than a week of largely upbeat financial results from banks and brokerages, the markets got solid reminders that the fallout from the home-lending crisis isn’t over. Not by a long shot..."



"No real surprises here as the Case Shiller housing report shows continued declines in housing prices. The lack of government involvement, negative seasonal trends and generally poor fundamentals are resulting in continued home price declines throughout much of the country.

I don’t think this is any reason to panic, but it does increase the risk that the recovery could become increasingly fragile. For now, I am still expecting stabilization in the middle portion of 2011 and then a general stagnation in the market. The negative fundamentals combined with continuing consumer weakness should keep any substantive housing recovery from reemerging..."


Marc Faber : we will have QE3

"Economist Marc Faber, nicknamed Dr Doom, predicts disaster and advises buying gold. Cash at 0% doesn’t accumulate wealth either says Dr. Marc Faber : The moment central banks implement monetary policies where they keep interest rates negative in real terms, in other words interest rates are lower than the rate of cost of living increases, then it is very difficult to value anything. The only thing I can say is, Mr Ben Bernanke, Chairman of the Federal Reserve, and other central banks, they can print an unlimited quantity of money, but you cannot print gold. Gold is limited by its annual supply of around 2,500 tonnes annually. So it is not that gold is going up, it is that the paper value of money, the purchasing power of money is going down vis-à-vis a unit of account, which is gold, there are no sound currencies anymore , the only sound currencies are gold silver platinum and palladium , you cannot print gold unlike paper money says Dr. Marc Faber ....we clearly have a bubble in china , if you really believe in china , the way to play China is by buying oil industrial commodities Australian and Canadian dollars , because if there is strong growth in china the prices of commodities go up , for the average investor this is the best way to play china rather than investing in Chinese companies and stocks where the accounting is frequently questionable and in-transparent....there are better ways to play China than to invest in China , Marc Faber says that he believes the Euro will survive but that some weaker members like Spain Portugal Ireland Greece ... will eventually default..."


Monday, January 24, 2011

The Fed's new policy tools

"We had to throw out our textbook descriptions of how monetary policy is implemented after the fall of 2008, as the Fed turned from its traditional tools to active use of large-scale asset purchases. A number of studies have now been conducted of the potential efficacy of these new policy tools. I surveyed some of the new studies last October. Today I'd like to discuss three new papers that have come out since then.

Let me begin with a little background. Prior to the fall of 2008, the focus of monetary policy was to choose a target for the fed funds rate, which is the interest rate banks charge each other for overnight loans of Federal Reserve deposits. In normal times, this rate was extremely sensitive to the quantity of those deposits created by the Fed, enabling the Fed to achieve its target for the fed funds rate with relatively modest additions or withdrawals of reserves. But by the end of 2008, the Fed had driven the fed funds rate essentially to zero and began paying interest on reserves. Since then, banks have been content to hold an arbitrarily large amount of excess reserves, and the overnight rate has been as low as it could go. In other words, the traditional tools of monetary policy have become completely irrelevant in the current setting..."


Does the US Need a Bankruptcy Law for States?

"When former adviser to President Bill Clinton was asked what he wanted to be re-incarnated as, he answered, “The bond market. Everybody’s scared of the bond market.” If he was right, then the current discussion regarding the federal government enacting a law making it possible for a state to file for bankruptcy should be over before it really gets started..."


More rumors surface on future explicit guarantee of Fannie Mae MBS

"Bank of America Merrill Lynch analysts say there are rumors the Treasury Department will recommend an explicit guarantee from the government for Fannie Mae mortgage-backed securities in its white paper due out in February.

The Dodd-Frank Act called for the Obama administration to release a plan for the future of the government-sponsored enterprises by Jan. 31, but The Wall Street Journal reported over the weekend that the deadline may be pushed back to the middle of February. There is much debate within Congress on how much of a role the government should play in the future of housing finance, specifically whether or not taxpayers should support securities if they go bad..."


$1 Trillion to Flow Into Emerging Nations in 2011.

"Investment and cash flows to emerging nations will surge to nearly $1 trillion dollars this year, adding pressure to developing economies already overheating, a trade group of the world’s largest banks said Monday.

Strong expansion in Asia and Latin America, combined with low interest rates and sluggish growth in advanced economies, are the main factors fueling the capital flows, according to the Institute of International Finance. The group forecasts $960 billion moving from rich to emerging economies in 2011 and topping $1.04 trillion next year.

Global banks fear governments may over use capital controls — rather than fiscal or monetary policy — to put the brakes on such “hot money.”



"Jim Rogers says oil is headed to $200 in a recent BBC interview (thanks to Global Economic Analysis). He doesn’t provide a specific timeframe on the surge, but we can be certain that this is an economic mess in the making if the timeframe is shorter than most might think..."


Accounting Rule Changes at the Fed will Mask Losses

"Many people have taken notice of changes slipped into the Fed's balance sheet reporting rules that will allegedly shield the Fed from devastating losses. Please consider Accounting Tweak Could Save Fed From Losses.

Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.

"Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

"Any future losses the Fed may incur will now show up as a negative liability as opposed to a reduction in Fed capital, thereby making a negative capital situation technically impossible," said Brian Smedley, a rates strategist at Bank of America-Merrill Lynch and a former New York Fed staffer.

"The timing of the change is not coincidental, as politicians and market participants alike have expressed concerns since the announcement (of a second round of asset buys) about the possibility of Fed 'insolvency' in a scenario where interest rates rise significantly," Smedley and his colleague Priya Misra wrote in a research note...."


Italian Scientists Claim To Have Discovered Nickel-Hydrogen Cold Fusion, Create Copper As Byproduct

"According to, two Italian scientists from the University of Bologna have taken on one of physics' historically most discredited concepts, cold fusion, and have actually succeeded in creating a sustainable reaction. Aside from the major implications of the energy market should this be validated and recreated (an issue that buried the original Cold Fusion discovery by Stanley Pons and Martin Fleishmann), one of the more economically important side effects of this purported rediscovery is that one of the byproducts of the reaction is none other than recently uber-bubbleicious copper. One wonders what the implications for the copper supply and demand curves (and equilibrium price) would be should the reaction documented by Andrea Rossi and Sergio Focardi be proven to not be a hoax. Is modern day alchemy the only thing that can dethrone copper from its historic price highs?..."


Marc Faber identifies The golden trade for the next 3 years

"Marc Faber :" ....In three years or 10 years time, precious metals will be higher than they are today. But we may have a correction coming in the next, say, three months. But in general, when I look at the risk and the reward, it is very likely that precious metals will continue to perform reasonably well. But if S&P drops to around 950, then the Fed will again massively ease and print money. So the surprise could actually be that in nominal terms, equity markets actually go up. They may not go up in gold terms, but they may go up quite strongly in nominal terms. So I would not be overly bearish about equities. "


Stiglitz discusses "Creating a Learning Society: An Agenda for Dynamic Societies in Uncertain Times"

"Speaking at AUC The American university in Cairo Egypt , on the global economic crisis and its aftermath, winner of Nobel Prize in economics 2001 Joseph Stiglitz argued that for a learning society to develop, states must be able to fulfill five critical criteria: emphasize the importance of education, demonstrate openness to new ideas, allow competition, promote industrial policies such as a stable and fair exchange rate, and create an innovation system. "Where there are good policies and a comprehensive agenda required, this will make for a more interesting and dynamic society and economy," said Stiglitz, Columbia University professor and best-selling author..."


Saturday, January 22, 2011

Faulty Foreclosures Actually Own Property

"Oh boy, if you think the Massachusetts Supreme Judicial Court decision on Ibanez, which raised serious questions about the validity of transfers in mortgage securitizations, turned heads in the banking industry, you ain’t seen nothin’ yet.

The SJC is considering what has the potential to be another widely-watched case, Bevilacqua v. Rodriguez. Note this case was heard at the lower court level by the same land court judge, Keith Long, that ruled on Ibanez, and the SJC in large measure affirmed Long’s take in that case. The issue is key: whether a buyer can own a piece of real estate acquired from a party that lacked the right to foreclose upon the previous owner.

The background via Bloomberg (hat tip April Charney):

Francis J. Bevilacqua III went to Long’s court to force the original owner to say whether he had a claim on the property in Haverhill, about 36 miles (58 kilometers) north of Boston. A city assessment website lists four condominiums at the location with a total value of $600,300.

Bevilacqua asked Long whether he could try to find the original owner through newspaper notices, said his lawyer Jeffrey B. Loeb, of Rich May PC in Boston, in a phone interview.

In August, Long ruled that Bevilacqua wasn’t the property’s owner and didn’t have standing to inquire about claims. U.S. Bancorp, which sold Bevilacqua the property in 2006, conducted an invalid foreclosure because it didn’t properly own the mortgage at the time, Long said.

The mortgage transfer to U.S. Bancorp, which oversees the mortgage-backed trust containing the loan, happened after the foreclosure, Long said. All Bevilacqua had was a deed from an invalid foreclosure sale, the judge said.

“I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote..."


Number of the Week: Americans Dipping Into Savings.

"$311 billion: The net amount US consumers have withdrawn from savings and investment accounts over the past two years.

In the course of the recession and recovery, Americans have dipped deeper into their savings than at any point in the past six decades. That’s helping the economy now, but could leave it less prepared to withstand shocks in the future.

Over the two years ending September 2010, Americans withdrew a net $311 billion — or about 1.4% of their disposable income — from their savings and investment accounts, according to the Federal Reserve. That’s a sharp divergence from the previous 57 years, during which they never made a net quarterly withdrawal. Rather, they added an average of 12% of disposable income to their holdings of financial assets — including bank accounts, money-market funds, stocks, bonds and other investments — each year..."


Treasury Says Anything But A Debt Ceiling Hike Would Lead To Default, As M.A.D. Escalates A Notch

"After in the past week, the blogosphere had been hobbled by one after another mindless oped claiming that the US can easily avoid default by just paying the interest on its obligations, and thus does not have to worry about the debt ceiling, we decided to put some sense to this debate when we pointed out that the "US Debt-to-Deficit Difference Hits Fresh Record, As Treasury Continues To Issue 50% More Debt Than Needed To Fund Deficit" meaning that i) it is not a debt ceiling, it is a debt target (© Lizzie363), and ii) the hundreds of billions of monthly obligations that are funded through debt, are "legal" obligations of the US government that have to be paid in full every month or a default will occur regardless. Neal Wolin, Deputy Secretary of the Treasury, has just released a statement on the Treasury's blog saying pretty much just that. Which, however is certainly not a good thing, as it merely confirms just how totally screwed this country is, and that absent a hike in the ceiling to $15.5 trillion (which we believe is where the debt ceiling will be through March of 2012 when it will be raised to $17 trillion), the dollar will be backed by several trillion in insolvent Federal Reserve Notes, er, assets (that should quickly end all debate about EUR-USD parity). It also confirms that Bernanke has no choice but to continue monetizing debt, through QE and to do that, he needs to make it palatable to the general public, which in turn will mean either a material economic deterioration, or, as the two are apparently identical in the Chairbeast's mind, the Russell 2000..."


Friday, January 21, 2011

China Hearts Silver... Market Top?

"FT Alphaville reports (via Bullion Vault dealers):

Looking at China’s latest import data, 2010 saw silver imports (net of exports) rise four-fold from 2009 note analysts at Mitsui in London – a total of 3,500 tonnes.

A heavy seller of silver bullion after lifting the state’s 50-year monopoly in 2000, China was a net export of 3,000 tonnes as recently as 2005..."


The Financial Stability Oversight Council Defers To Big Banks

"As required by Section 123 of the Dodd-Frank financial reform legislation, Treasury Secretary Tim Geithner, as chair of the Financial Stability Oversight Council (FSOC), has released an assessment on the costs and benefits of potentially limiting the size of banks and other financial institutions. This report, four-and-a-half pages in a longer “Study of the Effects of Size and Complexity of Financial Institutions on Capital Market Efficiency and Economic Growth”, is represented as a survey of the relevant evidence that should guide policy thinking on this issue.

Mr. Geithner’s team conclude rather vaguely “there are both costs and benefits to limiting bank size”, and consequently “This study will not make recommendations regarding limits on the maximum size of banks, bank holding companies, and other large financial institutions.”

This is an analytically weak report that presents a skewed and incomplete assessment of the evidence. Given that the paper was prepared by some of the country’s top experts, who are well aware of the facts, the only reasonable inference is that our leading relevant officials prefer not to take the Dodd-Frank Act seriously with regard to reducing systemic risk. Instead, on all major points, the Financial Stability Oversight Council is allowing the big banks to prevail – and to pursue whatever global expansion plans they see fit

Given Treasury’s attitude during the financial reform debate of 2009-10, this is not entirely surprising. Still there are three major issues with the substance report that should be considered particularly embarrassing to Mr. Geithner and his colleagues.

First, on whether large banks benefit the broader economy, the authors neglect to mention even the most basic facts regarding the increase in the size of our largest banks in recent years. As a result, the entire discussion of bank size in this report reads as it is completely divorced from current economic and political realities.

The largest six bank holding companies in the US had assets valued at 64 percent of GDP at the end of the third quarter of 2010 (the latest available comprehensive data). The same banks accounted for just less than 55 percent of GDP at the end of 2006 and a mere 17.1 percent of GDP in 1995. (All the numbers in this column are updates from what we presented in 13 Bankers, using the latest revised official sources.)

The assets of Chase Manhattan in 1995 amounted to 4.1 percent of GDP. The assets of JP Morgan Chase, as measured officially, were 14.5 percent of GDP in 2010; if we included their off-balance sheet assets (including derivatives), this total would be substantially higher. There has been a similar increase in all the Big Six Banks.

The balance sheet of Goldman Sachs, for example, increased from 1.3 percent of GDP in 1995 to around 6.2 percent of GDP at the end of last year (based on this week’s report); by the firm’s measure, assets expanded 7 percent from the end of 2009 to the end of 2010..."


Stunner: Gold Standard Fully Supported By... Alan Greenspan!?

"You read that right. After such establishment "luminaries" as World Bank president Robert Zoellick, Warren Buffett's father Howard, Jim Grant, and, most recently, Kansas Fed president Thomas Hoenig, all voiced their support for a return to a gold standard, the most recent addition to the motley group of contrite voodoo shamans is none othe than the man who is singlehandedly responsible for America's addiction to cheap toxic credit, who spawned such destroyers of the middle class as the current Chaircreature, and who currently is the chief advisor in John Paulson's crusade to gobble up every ounce of deliverable physical in the world: former Fed Chairman - Alan Greenspan! In an interview with Fox Business, the man who refuses to go away into that good night: "We have at this particular stage a fiat money which is essentially money printed by a government and it's usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity... There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard."


Which Of The Currencies Of The World Is Going To Crash First?

"Last year was an absolutely fascinating time for world currency markets. The yen, the dollar and the euro all took their turns in the spotlight. Each experienced wild swings at various times, but the overall theme that we saw was that faith in paper currencies is dying. The biggest reason for this is the horrific sovereign debt crisis that has swept the globe. The United States, Japan and a whole host of European nations are all drowning in debt. The U.S. and Japan are both steamrolling toward insolvency, and several European nations would have already defaulted on their debts if they had not been bailed out. So which of the major currencies of the world is going to crash first? Will one (or more) of the big currencies fall before the end of 2011? Once one major currency collapses will the rest start to fall like dominoes? The truth is that the world has never seen a sovereign debt crisis of this magnitude in all of human history. Almost the entire globe is drowning in a sea of red ink and it has brought us right to the brink of financial disaster.

So which of the currencies of the world is going to be the first to come crashing down? Well, let's take a quick look at the yen, the euro and the dollar...."


Thursday, January 20, 2011

A Trillion Here, a Trillion There...

"A billion here, a billion there, and pretty soon you're talking real money.
--Attributed to the late Sen. Everett Dirksen

With the kinds of numbers we are seeing nowadays, I reckon the good ole Republican Senator from Illinois might have been known for a slightly different quip if he had lived for another 40 years or so:

Consumer credit outstanding: $2.4 trillion

Mortgage debt outstanding: $10.6 trillion

Federal debt outstanding: $14 trillion

Commercial/multifamily mortgage debt outstanding: $3.2 trillion

Municipal bonds outstanding: $2.8 trillion

Corporate debt (non-financial companies) outstanding: $7.4 trillion

Public pension underfunding: $2.5 trillion

Infrastructure investment needed: $2.2 trillion

U.S. fiscal gap: $202 trillion

Not so funny anymore, however..."


Systemic risk in banking ecosystems

"Andrew G. Haldane & Robert M. May

In the run-up to the recent financial crisis, an increasingly elaborate set of financial instruments emerged, intended to optimize returns to individual institutions with seemingly minimal risk. Essentially no attention was given to their possible effects on the stability of the system as a whole. Drawing analogies with the dynamics of ecological food webs and with networks within which infectious diseases spread, we explore the interplay between complexity and stability in deliberately simplified models of financial networks. We suggest some policy lessons that can be drawn from such models, with the explicit aim of minimizing systemic risk..."


Shiller: A People's Economics

"Busy week, busy day, so no time to say much right now. But the comments on this one might be better left to all of you in any case:

A People’s Economics, by Robert J. Shiller, Commentary, Project Syndicate: We are in the midst of a boom in popular economics: books, articles, blogs, public lectures, all followed closely by the general public.

I recently participated in a panel discussion of this phenomenon at the American Economic Association annual meeting... An apparent paradox emerged...: the boom in popular economics comes at a time when the general public seems to have lost faith in professional economists... So, why is the public buying more books by professional economists?

The most interesting explanation I heard was that economics has become more interesting, because it no longer seems to be a finished and closed discipline. ...

The financial crisis delivered a fatal blow to ... overconfidence in scientific economics. It is not just that the profession didn’t forecast the crisis. Their models, taken literally, sometimes suggested that a crisis of this magnitude couldn’t happen.

One way to interpret this is that the economics profession was not fully accounting for the economy’s human element, an element that can’t be reduced to mathematical analysis. ...

Of course, economics is in many ways a science, and the work of our scholars and their computer models really does matter. But, as the economist Edwin R. A. Seligman put it in 1889, “Economics is a social science, i.e., it is an ethical and therefore an historical science….It is not a natural science, and therefore not an exact or purely abstract science.”

To me, and no doubt to the other panelists, part of the process of pursuing the inexact aspects of economics is speaking honestly to the broader public, looking them in the eye, learning from them, reading the emails they send, and then searching one’s soul to decide whether one’s favored theory is really close to the truth..."


Still Too Much Capacity

"The below chart shows that capacity utilization in the system is slowly recovering, but remains remain very low..."


"No Question You'll See Cities Default"

"...Earlier today, before I saw the Vallejo plan, I noted a number of Mayors discussing bankruptcy. Please consider LA Mayor Says "No Question You’ll See Some Cities Default"; Mayor Daley Says "I wouldn’t doubt it"; NY Mayor Goes After Public Pensions..."


12 Economic Collapse Scenarios That We Could Potentially See In 2011

"The following are 12 economic collapse scenarios that we could potentially see in 2011....

#1 U.S. debt could become a massive crisis at any moment. China is saying all of the right things at the moment, but many analysts are openly worried about what could happen if China suddenly decides to start dumping all of the U.S. debt that they have accumulated. Right now about the only thing keeping U.S. government finances going is the ability to borrow gigantic amounts of money at extremely low interest rates. If anything upsets that paradigm, it could potentially have enormous consequences for the entire world financial system.

#2 Speaking of threats to the global financial system, it turns out that "quantitative easing 2" has had the exact opposite effect that Ben Bernanke planned for it to have. Bernanke insisted that the main goal of QE2 was to lower interest rates, but instead all it has done is cause interest rates to go up substantially. If Bernanke this incompetent or is he trying to mess everything up on purpose.

#3 The debt bubble that the entire global economy is based on could burst at any time and throw the whole planet into chaos. According to a new report from the World Economic Forum, the total amount of credit in the world increased from $57 trillion in 2000 to $109 trillion in 2009. The WEF says that now the world is going to need another $100 trillion in credit to support projected "economic growth" over the next decade. So is this how the new "global economy" works? We just keep doubling the total amount of debt every decade?

#4 As the U.S. government and the Federal Reserve continue to pump massive amounts of new dollars into the system, the floor could fall out from underneath the U.S. dollar at any time. The truth is that we are already starting to see inflation really accelerate and everyone pretty much acknowledges that official U.S. governments figures for inflation are an absolute joke. According to one new study, the cost of college tuition has risen 286% over the last 20 years, and the cost of "hospital, nursing-home and adult-day-care services" rose 269% during those same two decades. All of this happened during a period of supposedly "low" inflation. So what are price increases going to look like when we actually have "high" inflation?

#5 One of the primary drivers of global inflation during 2011 could be the price of oil. A large number of economists are now projecting that the price of oil could surge well past $100 dollars a barrel in 2011. If that happens, it is going to put significant pressure on the price of almost everything else in the entire global economy. In fact, as I have explained previously, the higher the price of oil goes, the faster the U.S. economy will decline.

#6 Food inflation is already so bad in some areas of the globe that it is setting off massive food riots in nations such as Tunisia and Algeria. In fact, there have been reports of people setting themselves on fire all over the Middle East as a way to draw attention to how desperate they are. So what is going to happen if global food prices go up another 10 or 20 percent and food riots spread literally all over the globe during 2011?

#7 There are persistent rumors that simply will not go away of massive physical gold and silver shortages. Demand for precious metals has never been higher. So what is going to happen when many investors begin to absolutely insist on physical delivery of their precious metals? What is going to happen when the fact that far, far, far more "paper gold" and "paper silver" has been sold than has ever actually physically existed in the history of the planet starts to come out? What would that do to the price of gold and silver?

#8 The U.S. housing industry could plunge the U.S. economy into another recession at any time. The real estate market is absolutely flooded with homes and virtually nobody is buying. This massive oversupply of homes means that the construction of new homes has fallen off a cliff. In 2010, only 703,000 single family, multi-family and manufactured homes were completed. This was a new record low, and it was down 17% from the previous all-time record which had just been set in 2009.

#9 A combination of extreme weather and disease could make this an absolutely brutal year for U.S. farmers. This winter we have already seen thousands of new cold weather and snowfall records set across the United States. Now there is some very disturbing news emerging out of Florida of an "incurable bacteria" that is ravaging citrus crops all over Florida. Is there a reason why so many bad things are happening all of a sudden?

#10 The municipal bond crisis could go "supernova" at any time. Already, investors are bailing out of bonds at a frightening pace. State and local government debt is now sitting at an all-time high of 22 percent of U.S. GDP. According to Meredith Whitney, the municipal bond crisis that we are facing is a gigantic threat to our financial system....

"It has tentacles as wide as anything I’ve seen. I think next to housing this is the single most important issue in the United States and certainly the largest threat to the U.S. economy."

Former Los Angeles mayor Richard Riordan is convinced that things are so bad that literally 90% of our states and cities could go bankrupt over the next five years....

#11 Of course on top of everything else, the quadrillion dollar derivatives bubble could burst at any time. Right now we are watching the greatest financial casino in the history of the globe spin around and around and around and everyone is hoping that at some point it doesn't stop. Today, most money on Wall Street is not made by investing in good business ideas. Rather, most money on Wall Street is now made by making the best bets. Unfortunately, at some point the casino is going to come crashing down and the game will be over.

#12 The biggest wildcard of all is war. The Korean peninsula came closer to war in 2010 than it had in decades. The Middle East could literally explode at any time. We live in a world where a single weapon can take out an entire city in an instant. All it would take is a mid-size war or a couple of weapons of mass destruction to throw the entire global economy into absolute turmoil..."

Tuesday, January 18, 2011

Why Europe’s periphery should restructure their bonds

"The drumbeat for debt restructurings on Europe’s periphery is becoming too loud to ignore. The Economist has now come out strongly in favor; its leader gives the strongest case for biting the bullet now. And Mohamed El-Erian has now officially signed on:

You do not solve a debt problem by adding new debt on top of old debt. Yet it seems that European officials are fixated on this approach…

More people are recognising that the time has come for another approach – what this week’s Economist magazine calls “Plan B”. This involves the orderly restructuring of some European sovereign debt on terms that allow a meaningful chance of re-accessing markets in future at sustainable rates. This would be accompanied by measures to enhance growth prospects in highly indebted European countries; ring fence the other, fundamentally sound economies; and push banks and other institutional holders of restructurable debt to raise prudential capital..."


Oil shocks and economic recessions

"I've just completed a new research paper that surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Here I report the paper's summary of oil market disruptions and economic downturns since the Second World War. Every recession (with one exception) was preceded by an increase in oil prices, and every oil market disruption (with one exception) was followed by an economic recession..."


Cumulative Output Loss

"...Macroeconomic conditions, as well as the projections of potential output, have changed somewhat since I undertook that calculation earlier this year, so I decided to update the calculation. I present the estimated cumulative loss from 2008Q1-2010Q3, as well as the cumulative loss from 2010Q4-2011Q4..."


By the Numbers: Internet 2010

"107 trillion – The number of emails sent on the Internet in 2010.

294 billion – Average number of email messages per day.

1.88 billion – The number of email users worldwide.

480 million – New email users since the year before.

89.1% – The share of emails that were spam.

262 billion – The number of spam emails per day (assuming 89% are spam).

2.9 billion – The number of email accounts worldwide.

25% – Share of email accounts that are corporate.


255 million – The number of websites as of December 2010.

21.4 million – Added websites in 2010..."


China fact and sentence of the day

"China has lent more money to other developing countries over the past two years than the World Bank, a stark indication of the scale of Beijing’s economic reach and its drive to secure natural resources..."


ECB Allows Irish Central Bank to Counterfeit 51 Billion Euros

"Ireland central bank counterfeited 51 billion Euros out of thin air. The amount is not backed by government bonds. Nor was it a loan from the ECB or anyone else. The money is counterfeit in every sense of the word.

Please consider the facts as depicted in Central Bank steps up its cash support to Irish banks financed by institution printing own money.

The Irish Independent learnt last night that the Central Bank of Ireland is financing €51bn of an emergency loan programme by printing its own money.

The figures also provide the latest evidence that responsibility for funding Ireland's broken banks is being pushed increasingly back on to Irish taxpayers. The loans are recorded by the Irish Central Bank under the heading "other assets".

A spokesman for the ECB said the Irish Central Bank is itself creating the money it is lending to banks, not borrowing cash from the ECB to fund the payments. The ECB spokesman said the Irish Central Bank can create its own funds if it deems it appropriate, as long as the ECB is notified..."


Austerity In America: 22 Signs That It Is Already Here And That It Is Going To Be Very Painful

"The following are 22 signs that austerity has already arrived in America and that it is going to be very, very painful....

#1 The financial manager of the Detroit Public Schools, Robert Bobb, has submitted a proposal to close half of all the schools in the city. His plan envisions class sizes of up to 62 students in the remaining schools.

#2 Detroit Mayor Dave Bing wants to cut off 20 percent of the entire city from police and trash services in order to save money.

#3 Things are so tight in California that Governor Jerry Brown is requiring approximately 48,000 state workers to turn in their government-paid cell phones by June 1st.

#4 New York Governor Andrew Cuomo is proposing to completely eliminate 20 percent of state agencies.

#5 New York City Mayor Michael Bloomberg has closed 20 fire departments at night and is proposing layoffs in every single city agency.

#6 In the state of Illinois, lawmakers recently pushed through a 66 percent increase in the personal income tax rate..."


Monday, January 17, 2011

The Concord Group projects no housing recovery until the end of 2012

"Continued high unemployment and a lack of demand for new homes will keep any housing recovery at bay until the end of 2012, according to one real estate strategy firm.

The Concord Group also expects the seemingly ever-growing inventory of distressed properties to create challenges for a recovery, as well..."


Are The CBO's U.S. Debt Burden Projections Overly Optimistic?

"The Congressional Budget Office is estimating that annual interest payments on federal debt will more than double over the next decade to $778 billion.

Put another way, the U.S. will soon be paying federal debt interest (much of it to Asian and Middle East creditors) equal to the U.S.'s annual defense budget.

What assumptions lay behind the CBO's estimates? From the WSJ:

In 2010, it (the U.S. federal government) paid an average of about 0.1% interest on 3-month Treasury bills, and 3% on ten-year notes. Total net payments amounted to $197 billion, or 1.4% of annual economic output. That’s a bit more than what the government spent on unemployment insurance.

Low interest rates, however, won’t last forever — assuming the U.S. economy doesn’t succumb to long-term, Japanese-style stagnation. The CBO estimates that interest rates on 3-month bills and 10-year notes will reach 5.0% and 5.9%, respectively, by 2020. That, together with a rapidly rising debt load, would cause annual net interest payments to more than double by 2020 — to $778 billion, or a record 3.4% of GDP.

As bad as that sounds, I believe the CBO could be painting an overly optimistic scenario.

Whether the U.S. will actually be able to borrow long-term at a (historically) relatively low 5-6% interest rate in a decade's time is pure speculation by the CBO..."


Niall Ferguson On Whether The Financial Crisis Will Lead To America's Decline And A Glimpse Of The "Post-Pax Americana" Dark Ages

"Two weeks after we presented Niall Ferguson's video lecture - "Empires On The Verge Of Chaos" to tremendous reader response and almost 30,000 views, we follow up with another must watch video presentation, this time highlighting the intellectual rigor of Ferguson, David Gergen and Mort Zuckerman. The topic once again is the Financial Crisis, and specifically how, why and whether it will lead to America's decline. Of particular note is Ferguson's spot on characterization of the primary deficiency in the so-called brains of economists, namely that they see patterns, equilibria and stable systems where there are absolutely none: i.e., in the complex (as in Lorenzian) world of economics: "Complex systems look like they are in equilibrium, but they are not: they are constantly adapting, highly decentralized, interdependent systems and this process of adaptation can continue for quite a long time. And you think to yourself when you look at it, that's in a wonderful equilibrium. That's how we think about the economy. That is how economists teach economics. They talk about it in terms of equilibrium. The bad news is that in fact we inhabit a complex system that has virtually nothing to do with the neoclassical model that you are taught in Econ 101. And that's why the economists failed to predict the financial crisis... For me American power if you generalize beyond the realm of finance through the geopolitical system is a perfect example of a highly complex system which looks like it is in equilibrium but like all the great empires of the past is quite close to the edge of chaos. And our nightmare scenario should be that something happens to us like happened to the Soviet Union... It suddenly just falls apart. And I think the trigger, the catalyst if you want to switch to chaos theory the butterfly in the tropical rainforest that flaps its wings and posits the distant thunderstorm is going to be the credibility of fiscal policy. That just seems to me like the obvious place where things can turn nasty, and they turn nasty with amazing speed."


Food Riots 2011

"The stunningly violent food riots in Tunisia and Algeria show just how quickly things can change. Just a few months ago, these two northern Africa nations were considered to be very stable, very peaceful and without any major problems. But now protesters are openly squaring off with police in the streets. Many of the protesters are throwing "fire bombs" or are shooting fireworks at the authorities, and the police are responding with a tremendous amount of violence themselves. In Algeria, several protesters have been killed by police and several others have actually set themselves on fire to protest the economic conditions. In Tunisia, more than 100 people have been killed and the president of that country actually had to flee for his life. But on a global scale, food shortages have not even gotten that bad yet. Yes, food prices are starting to go up and food supplies are a little bit tighter right now, but much worse times than these are coming. So what in the world are the cities of the world going to look like when we have a very serious food shortage?...

...Just consider the following five facts....

#1 Approximately 1 billion people throughout the world go to bed hungry every single night.

#2 Approximately 28 percent of all children in developing countries are considered to be underweight or have had their growth stunted as a result of malnutrition.

#3 Every 3.6 seconds someone starves to death and three-quarters of them are children under the age of 5.

#4 "Least developed countries" spent 9 billion dollars on food imports in 2002. By 2008, that number had risen to 23 billion dollars.

#5 A study by the World Institute for Development Economics Research discovered that the bottom half of the world population owns approximately 1 percent of all global wealth.

So if things are this bad already, what kind of food riots are we going to see if all of this weird weather continues and global harvests are much lower than anticipated in 2011?..."


Sunday, January 16, 2011

Europe Stands on the Brink of New Debt Crisis

"Debt crisis of the European countries of Spain, Portugal and Greece will cause the EU to experience a new crisis, says Ethan Harris, principal analyst for the economies of developed countries BofA Merrill Lynch. The crisis will begin in the coming months if the EU does not find ways to solve sovereign debt problems. Yet, China is already rushing to help and ready to buy Spanish bonds. is citing Harris who said that the EU continues to take steps which in reality do not solve the problems of the market and the economy, and raise serious concerns about the situation with the European banks. So far the EU has not comprehensively addressed the banking problem. This means that in a few months the crisis will reemerge..."


America Replicating Japan's Depression

"An except from Franck Biancheri's new book titled, "World Crisis: The Path to the World Afterwards" states:"The (current) financial and economic crisis....marks the end of the world order established after 1945." In 1991, the Soviet Union dissolved, and since fall 2007, we've "witness(ed) the accelerated decomposition of the 'Western pillar' with" America advancing disintegration.

After decades "spent living in the myth of an 'ended history' in which" Western ideology was triumphant, "it is almost impossible to imagine 'a world after' " without Washington/Wall Street dominance, "where 'Anglo-American' would not necessarily mean 'modern,' and where the dollar would no longer be king."


Commercial CDO delinquencies begin to take toll on investors

"Delinquencies within collateralized debt obligations in commercial real estate loans closed 13% higher in 2010 than a year earlier, according to Fitch Ratings.

The credit rating agency said the rate of December delinquencies rose to 13.6% from 12.7% in November, due primarily to higher defaulted REIT debt and increased credit impairments in CMBS..."