Chicken Little Demands Apology Sky Falling

[darkbeaver]

The Bush Bust of '08
“It's All Downhill From Here, Folks”
By Mike Whitney

"I just saw a picture Bernanke stripped to the waist in the boiler-room shoveling greenbacks into the furnace.” Rob Dawg, Calculated Risk blog-site ​

On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to “determine the total insured amount for each depositor....as of the day of the failure” and return their money as quickly as possible. The agency is “modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions.” (http://www.fdic.gov/news/news/financial/2008/fil08002.html#body)
The implication is clear, the FDIC has begun the “death watch” on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC's job nearly impossible.
Good luck.
It's worth noting that, due to a rule change by Congress in 1991, the FDIC is now required to use “the least costly transaction when dealing with a troubled bank. The FDIC won't reimburse uninsured depositors if it means increasing the loss to the deposit insurance fund....As a result, uninsured depositors are protected only if a bank acquiring the failed bank will pay more for all of the deposits than it would for insured deposits only.” (MarketWatch)
Great. That's reassuring. And there's more, too. FDIC Chairman Shiela Bair warned that “as of Sept. 30, there were 65 institutions with assets of $18.5 billion on its list of "problem" institutions;” although she wouldn't give names.
So, what does it all mean?
It means there's going to be an unprecedented wave of bank closures in the US and that people who want to hold on to their life savings are going have to be extra vigilant as the situation continues to deteriorate. And it is deteriorating very quickly.http://www.informationclearinghouse.info/article19307.htm

 

[Kreskin]

I'm waiting for that 90% decline in the greenback DB. When is that going to happen? Check with the informationclearinghouse and let us know.

 

[Toro]

I'm waiting for that 90% decline in the greenback DB. When is that going to happen? Check with the informationclearinghouse and let us know.

I've always wondered about this line of thinking.

"The dollar is going to collapse."

Collapse? Against what?

 

[darkbeaver]

Financial Crisis: Asset Securitization-- The Last Tango
Endgame: Unregulated Private Money Creation

by F. William Engdahl

Global Research, February 8, 2008



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The Financial Tsunami, Part IV.


Endgame: Unregulated Private Money Creation
What had emerged going into the new millennium after the 1999 repeal of Glass-Steagall was an awesome transformation of American credit markets into what was soon to become the world’s greatest unregulated private money creation machine.
The New Finance was built on an incestuous, interlocking, if informal, cartel of players, all reading from the script written by Alan Greenspan and his friends at J.P. Morgan, Citigroup, Goldman Sachs, and the other major financial houses of New York. Securitization was going to secure a "new" American Century and its financial domination, as its creators clearly believed on the eve of the millennium.
Key to the revolution in finance in addition to the unabashed backing of the Greenspan Fed, was the complicity of the Executive, Legislative and Judicial branches of the US Government right to the Supreme Court. In addition, to make the game work seamlessly, it required the active complicity of the two leading credit agencies in the world—Moody’s and Standard & Poors.
It required a Congress and Executive branch that would repeatedly reject rational appeals to regulate over-the-counter financial derivatives, bank-owned or financed hedge funds or any of the myriad steps to remove supervision, control, transparency that had been painstakingly built up over the previous century or more. It required that the major government-certified rating agencies give their credit AAA imprimatur to a tiny handful of poorly regulated insurance companies called Monolines, all based in New York. The monolines were another essential part of the New Finance.
The interlinks and consensus behind the massive expansion of securitization among all these institutional players was so clear and pervasive it might have been incorporated as America New Finance Inc. and its shares sold over NASDAQ.
Alan Greenspan anticipated and encouraged the process of asset securitization for years before his actual nurturing of the phenomenal real estate bubble in the beginning of the first decade of the new Century. In a pathetic attempt to deny his central role after the fall, Greenspan last year claimed that the problem was not mortgage lending to sub-prime customers but the securitization of the sub-prime credits. In April 2005, he sung a quite different hymn to sub-prime securitization. Addressing the Federal Reserve System’s Fourth Annual Community Affairs Research Conference, the Fed chairman declared,

"
​

 

[darkbeaver]

I've always wondered about this line of thinking.

"The dollar is going to collapse."

Collapse? Against what?

That's an interesting question isn't it? It will collapse against what it's backed by.Worthless paper and unsecured confidence. Triple A really! Proove it. Greenspan and the banks did this through deregulation. Foxes watching chickens, never did work, as soon as you have a fox telling you that it can, you got chicken problems.

 

[darkbeaver]

[FONT=Verdana, Arial, Helvetica, sans-serif][SIZE=-1]BIZNETDAILY[/SIZE][/FONT]
[FONT=Palatino, Georgia, Times New Roman, Times, serif][SIZE=+2]Half of gold in central banks gone?[/SIZE][/FONT]
[FONT=Palatino, Georgia, Times New Roman, Times, serif][SIZE=+1]Watchdog: 'We want to expose and stop the manipulation'[/SIZE][/FONT]
[SIZE=-1]Posted: January 29, 2008
1:00 am Eastern

[/SIZE] [FONT=Palatino, Times New Roman, Georgia, Times, serif]By Jerome R. Corsi[/FONT]
[SIZE=-1] © 2008 WorldNetDaily.com [/SIZE]

U.S. central banks may have less than half the gold they claim to possess in their vaults, charges a watchdog group in an ad scheduled for publication in the Wall Street Journal this week.
As WND reported, the Gold Anti-Trust Action Committee, or GATA, claims the Federal Reserve and the U.S. Treasury are surreptitiously manipulating the country's gold reserves by participating in undisclosed leases, according to an advance copy WND obtained of the ad running in Thursday's edition of the Journal.
GATA believes much of the borrowed gold out on lease will never be returned to the central banks.
"With the demand for gold so strong worldwide, it has become impossible to return much of the leased gold without driving the price to the moon," said GATA's chairman, William J. Murphy III.
"Most observers calculate central bank reserves are supposed to have about 30,000 tons of gold worldwide in their vaults, but we believe the amount of gold actually there may be more like 15,000 tons," Murphy said. "The rest of the gold is gone."
The U.S. Treasury denies the claim, insisting the stock is accounted for regularly.
(Story continues below) adsonar_placementId=1270202;adsonar_pid=663759;adsonar_ps=1451068;adsonar_zw=300;adsonar_zh=250;adsonar_jv="ads.adsonar.com";
"We want to expose and stop the manipulation of the gold market by the United States Treasury and Federal Reserve right now," Murphy said.
"The purpose of this ad is to wake people up in the investment world as to what is going http://www.wnd.com/news/article.asp?ARTICLE_ID=59935

Chávez pushes for withdrawal of international reserves from U.S. banks

The Associated Press
Published: January 27, 2008

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CARACAS: The president of Venezuela, Hugo Chávez, urged his Latin American allies to begin withdrawing billions of dollars in international reserves from U.S. banks, warning of a looming U.S. economic crisis.
Chávez made the suggestion Saturday as he hosted a summit aimed at increasing Latin American integration and countering U.S. influence.
"We should start to bring our reserves here," Chávez said. "Why does that money have to be in the north? You can't put all your eggs in one basket."
To help pool resources within the region, Chávez and other leaders launched a new development bank at the summit of the Bolivarian Alternative for the Americas, or ALBA.
The left-leaning regional trade alliance supported by Chávez is intended to offer an alternative, socialist path to integration while snubbing U.S.-backed free-trade deals.
http://www.iht.com/articles/2008/01/27/america/venez.php

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[Toro]

That's an interesting question isn't it? It will collapse against what it's backed by.Worthless paper and unsecured confidence. Triple A really! Proove it. Greenspan and the banks did this through deregulation. Foxes watching chickens, never did work, as soon as you have a fox telling you that it can, you got chicken problems.

All currencies are backed by nothing, and all countries have the same, if not worse future problems than America concerning liabilities. America has better demographics than Europe or Canada, and the US guarantees less for pensions and medical services. Thus, as populations age, Europeans will have bigger problems than the United States.

That's the point of my question. Against what?

Some time ago, I saw a study which said Canada's health liabilities will be much worse than America's. Canada will be better off on pensions because the CPP has essentially be privatized and growing higher returns, but a bedrock of being a Canadian is Medicare. As the population of Canada gets older faster than America, and as the state has guaranteed more of a person's medical expenses, Canada will be on the hook for far more proportionally than the American government.

As for GATA, wll they've long been conspiratorial, though they do some good work. I don't know if they are right, but who cares? I own a lot of gold, so let's fan those flames! lol

And as for Hugh, well, that's Hugh being Hugh. Of course, he may be pissed know that Exxon has pwned Venezuela in court.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=axp1Dt_uI67Q

 

[darkbeaver]

I'll disagree Toro, currencys are backed by strong economies and tranparency that invites investment. American Theocracy listed five or six conditions which indicate imperial decline (economic decline) of which the USA has all of them, a small industrial capacity, reliance on a service sector, reliance on a financial sector, overspending on the military, and religious fundementalism. None of those are means of production. America has no base for economic recovery that all went offshore in the last two decades. Europeans and Canadians will be healthier as they age thus reducing those costs of lost productivity and expendatures that are avoided by prevention rather than expensive after the fact treatment which is what the American private system feeds on, Americans HMOs and Pharmasuetical corps actually promote illhealth and disease to drive up profits. Why cure a cash cow whose ailments stuff your accounts eh?
The American government has been a corporate insturment for at least half a century, wall street is not in the nation maintennance bussiness right, so the nation has not been maintained as witnessed in the dismal infrastructure problems. If the banking industry and Wall Street are not heavily regulated they will eat themselves if in fact that has not already happened. Not to worry though as the present situation must surely have been by design, this is Greenspans little monster offspring, there's nothing like a forced collapse of an economy, and that my friend has been the purpose of deregulation ever since the words were whispered in the ear of that decrepid ****head Reagan all those years ago. You cannot offshore industrial capacity and employ a nation of waiters and clerks and survive, that's the law and it was broken by those who knew full well what the consequences would be. If you can see a fix I can't and none of the people I read can either, but they can see a direction, NAU and a far different North America and war to no end. Gold did good today did it not? Monday will be interesting, maybe somebody can whip up some movement, haha, don't hold your breath. She looked pretty well stuck in neutral all week. And the stories from the talking heads were hilarious what. Conspiratorial, you use that word as if conspiracy wasn't the fuel of modern economics, you better conspire to get your hands on more gold Toro, when we have that drink someday I don't want to be passing a bag back and forth, though that'd be fine if it was the best you could muster, I wouldn't think less of you for it.PS inflations running at 12% not 4%.;-)

 

[darkbeaver]

Bernanke's State of the Economy Speech:
"You are all Dead Ducks"
By Mike Whitney
16/02/08 "ICH" -- - Even veteran Fed-watchers were caught off-guard by Chairman Bernanke's performance before the Senate Banking Committee on Thursday. Bernanke was expected to make routine comments on the state of the economy but, instead, delivered a 45 minute sermon detailing the afflictions of the foundering financial system. The Senate chamber was stone-silent throughout. The gravity of the situation is finally beginning to sink in.
For the most part, the pedantic Bernanke looked uneasy; alternately biting his lower lip or staring ahead blankly like a man who just watched his poodle get run over by a Mack truck. As it turns out, Bernanke has plenty to worry about, too. Consumer confidence has dropped to levels not seen since the 1970s recession, real estate has gone off a cliff, credit-brushfires are breaking out everywhere, and the stock market continues to gyrate erratically. No wonder the Fed-chief looked more like a deck-hand on the Lusitania than the monetary-czar of the most powerful country on earth.
Bernanke's prepared remarks were delivered with the solemnity of a priest performing Vespers. But he was clear, unlike his predecessor, Greenspan, who loved speaking in hieroglyphics.
Bernanke: "As you know, financial markets in the United States and in a number of other industrialized countries have been under considerable strain since late last summer. Heightened investor concerns about the credit quality of mortgages, especially subprime mortgages with adjustable interest rates, triggered the financial turmoil. However, other factors, including a broader retrenchment in the willingness of investors to bear risk, difficulties in valuing complex or illiquid financial products, uncertainties about the exposures of major financial institutions to credit losses, and concerns about the weaker outlook for the economy, have also roiled the financial markets in recent months.”
Yes, of course. The banks are ailing from their subprime investments while Europe is sinking fast from $500 billion in unsellable asset-backed garbage. The whole system is clogged with crappy paper and deteriorating collateral. Now there are problems popping up in auction rate sales and the normally-safe municipal bonds. The whole financial Tower of Babel is cracking at the foundation.
Bernanke continues: "Money center banks and other large financial institutions have come under significant pressure to take onto their own balance sheets the assets of some of the off-balance-sheet investment vehicles that they had sponsored. Bank balance sheets have swollen further as a consequence of the sharp reduction in investor willingness to buy securitized credits, which has forced banks to retain a substantially higher share of previously committed and new loans in their own portfolios. Banks have also reported large losses, reflecting marked declines in the market prices of mortgages and other assets that they hold. Recently, deterioration in the financial condition of some bond insurers has led some commercial and investment banks to take further markdowns and has added to strains in the financial markets."
Bernanke sounds more like an Old Testament prophet reading passages from the Book of Revelations than a Central Banker. But what he says is true; even without the hair-shirt. The humongous losses at the investment banks have forced them to go trolling for capital in Asia and the Middle East just to stay afloat. And, when they succeed, they're forced to pay excessively high rates of interest. The true cost of capital is skyrocketing. That's why the banks are protecting their liquidity and cutting back on new loans. Most of the banks have also tightened lending standards which is slowing down the issuance of credit and threatens to push the economy into a deep recession. When banks cramp-up; the overall economy shrinks. It's just that simple; no credit, no growth. Credit is the lubricant that keeps the capitalist locomotive chugging-along. When it dwindles, the system screeches to a halt.

"DOWNSIDE RISKS TO GROWTH HAVE INCREASED"

Bernanke again: "In part as the result of the developments in financial markets, the outlook for the economy has worsened in recent months, and the downside risks to growth have increased. To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so. The virtual shutdown of the subprime mortgage market and a widening of spreads on jumbo mortgage loans have further reduced the demand for housing, while foreclosures are adding to the already-elevated inventory of unsold homes. Further cuts in homebuilding and in related activities are likely.....Conditions in the labor market have also softened. Payroll employment, after increasing about 95,000 per month on average in the fourth quarter, declined by an estimated 17,000 jobs in January. Employment in the construction and manufacturing sectors has continued to fall, while the pace of job gains in the services industries has slowed. The softer labor market, together with factors including higher energy prices, lower equity prices, and declining home values, seem likely to weigh on consumer spending in the near term."

So, let's summarize. The banks are battered by their massive subprime liabilities. Housing is in the tank. Manufacturing is down. Food and energy are up. Unemployment is rising. And consumer spending has shriveled to the size of an acorn. All that's missing is a trumpet blast and the arrival of the Four Horseman.
How is it that Bernanke's economic post-mortem never made its way into the major media? Is there some reason the real state of the economy is being concealed from 'we the people'?
Bernanke continues: "On the inflation front, a key development over the past year has been the steep run-up in the price of oil. Last year, food prices also increased exceptionally rapidly by recent standards, and the foreign exchange value of the dollar weakened. ...(If) inflation expectations to become unmoored or for the Fed's inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank's policy flexibility to counter shortfalls in growth in the future."
Right. So, if the Fed's rate-cutting strategy doesn't work and the economic troubles persist (and prices continue to go through the roof) then we're S.O.L. (sh** out of luck) because the Fed has no more arrows in its quiver. It's rate cuts or death. Great. So, we can expect Bernanke to hack away at rates until they're down to 1% or lower (duplicating the downturn in Japan) hoping that the economy shows some sign of life before it takes two full wheelbarrows of greenbacks to buy a quart of milk and a few seed-potatoes.
Sounds like a plan!
We don't blame Bernanke. He's been remarkably straightforward from the very beginning and deserves credit. He's simply left with the thankless task of mopping up the ocean of red ink left behind by Greenspan. It's not his fault. He should be applauded for dispelling the decades-long illusion that a nation can borrow its way to prosperity or that chronic indebtedness is the same as real wealth. It's not; and the bill has finally come due.
Of course, now that the low-interest speculative orgy is over; there's bound to be a painful unwind of hyper-inflated assets, falling home prices, tumbling stock markets, increased unemployment, and a generalized credit-contraction throughout the real economy. Ouch. Who said it was going to be easy?
Bernanke's summation:
"At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt....It is important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated, or that credit conditions may tighten substantially further."
(Editor's translation) "Discount everything I've said here today if the economy blows up---as I fully-expect it will---from decades of regulatory neglect and the myriad multi-trillion dollar Ponzi-schemes which have put the entire financial system at risk of a major heart attack".
Bernanke's candor is admirable, but it is little relief for the people who will have to soldier-on through the hard times ahead. Perhaps, next time he could spare us all the lengthly oratory and just forward a brief cablegram to Congress saying something like this:
"We are deeply sorry, but we have totally fu**ed up your economy with our monetary hanky-panky. You are all in very deep Doo-doo. Prepare for the worst."
our sincerest regrets,
the Fed

 

[Toro]

I'll disagree Toro, currencys are backed by strong economies and tranparency that invites investment. American Theocracy listed five or six conditions which indicate imperial decline (economic decline) of which the USA has all of them, a small industrial capacity, reliance on a service sector, reliance on a financial sector, overspending on the military, and religious fundementalism. None of those are means of production. America has no base for economic recovery that all went offshore in the last two decades. Europeans and Canadians will be healthier as they age thus reducing those costs of lost productivity and expendatures that are avoided by prevention rather than expensive after the fact treatment which is what the American private system feeds on, Americans HMOs and Pharmasuetical corps actually promote illhealth and disease to drive up profits. Why cure a cash cow whose ailments stuff your accounts eh?
The American government has been a corporate insturment for at least half a century, wall street is not in the nation maintennance bussiness right, so the nation has not been maintained as witnessed in the dismal infrastructure problems. If the banking industry and Wall Street are not heavily regulated they will eat themselves if in fact that has not already happened. Not to worry though as the present situation must surely have been by design, this is Greenspans little monster offspring, there's nothing like a forced collapse of an economy, and that my friend has been the purpose of deregulation ever since the words were whispered in the ear of that decrepid ****head Reagan all those years ago. You cannot offshore industrial capacity and employ a nation of waiters and clerks and survive, that's the law and it was broken by those who knew full well what the consequences would be. If you can see a fix I can't and none of the people I read can either, but they can see a direction, NAU and a far different North America and war to no end. Gold did good today did it not? Monday will be interesting, maybe somebody can whip up some movement, haha, don't hold your breath. She looked pretty well stuck in neutral all week. And the stories from the talking heads were hilarious what. Conspiratorial, you use that word as if conspiracy wasn't the fuel of modern economics, you better conspire to get your hands on more gold Toro, when we have that drink someday I don't want to be passing a bag back and forth, though that'd be fine if it was the best you could muster, I wouldn't think less of you for it.PS inflations running at 12% not 4%.;-)

First of all, DB, I have not read that fellow's book, but if what you state is what he wrote, he is wrong. For the last great empire, which was British, had not seen a relative decline in manufacturing capacity until after it had ceased being an empire in all but name only. In fact, it reached its zenith in the late 1950s, early 1960s, long after Britain began dismantling its empire.

Using past comparisons are similarly false because most prior empires had been dominated by agriculture. Mining and metal-crafting had been significant industries but were dwarfed by simple subsistence farming on which the vast majority of the residents relied.

It also misreads history because the advancement of economic growth - almost all of it having been created over the past 200 years - has been a function of technological application. It is technology which has allowed us to move from an agarian economy - from which roughly half of our economy was comprised in 1900 - to a manufacturing economy to an economy based on human capital. Today, less than 5% of our output is agricultural, yet we produce about 30x more in agriculture than we did 100 years ago.

Similarly, the author's contention of a declining manufacturing base is absolutely false. What is true is that manufacturing output as a percentage of the economy has been declining, as has employment, but the total amount of manufacturing output is rising.

For it matters not what is actually made but the technological application of which the good embodies.

There is and has never been anything magically inherent in making "things." We could make a billion lathes, and even though we'd have all this great manufactured product, we'd be bankrupt. Rather, what has mattered is the technological application of the thing being produced. And once the technology in that product had become obsolete, some other thing would take its place, it being cheaper and faster, freeing up resources and raising standards of living.

But it wasn't making a physical thing that mattered. What mattered was the technology. Today, America leads the world in the development of technology. And as long as America retains its lead, regardless of where the production of the physical embodiment of the technology occurs, its future is solid. For the physical production is not the value-added function from which higher standards of living arise. It is not the physical capital. It is the application of the human capital that matters.

Yes, we are going into a recession to clean out the excesses of the past decade, and maybe it will be a doozy. No surprise there. And yes, the dollar and all fiat currencies in the developed world will continue to depreciate. But economic progress has been about the application of technology to different industries, not the other way around. And just like the Luddites smashed the sewing machines and the Malthuses of the world of the past predicted apocalypse as the world grew smaller and as we moved from one stage of economic advancement to the next, the modern prophets of doom will be wrong as well.

 

[darkbeaver]

Numbers That Do Not Add Up

by Rob Kirby | February 15, 2008

Print Having just learned about the plans of U.S. financial elites to cease publication of another swath of economic data, producing this short report took in a timely fashion has taken on new meaning – after-all, in another month or two – the data on which it is based may have disappeared too.
The Latest Data Scheduled to Disappear Behind the Iron Curtain:
Due to budgetary constraints, the Economic Indicators service (http://www.economicindicators.gov) will be discontinued effective March 1, 2008.

• Advance Monthly Sales for Retail and Food Services
• Advance Report on Durable Goods
• Construction Put in Place
• Gross Domestic Product
• Manufacturers' Shipments, Inventories, and Orders
• Manufacturing and Trade: Inventories and Sales
• Monthly Wholesale Trade
• New Residential Construction
• New Residential Sales
• Personal Income and Outlays
• Quarterly Financial Report
• Quarterly Services
• Retail E-Commerce Sales
• U.S. International Trade in Goods and Services
• U.S. International Transactions

A few more bones to hide in the closet, ehhh?
Anyway, the real reason for this report [I’m typing quicker than usual] is the latest Qrtrly. Derivative Fact Sheet [Q2-07] – published by none other than the Office of the Comptroller of the Currency for the United States of America.
The following is segment of a table on page 32 of the latest quarterly derivatives report which shows the size of J.P. Morgan’s and Citibank’s outstanding notional amounts in derivatives in general – and specifically – the enormity of their exposure to Credit Derivatives, which is the root source of most of the problems that ail the financial system:

Source: Page 32 of Q2/07 OCC Quarterly Derivatives Report
The chart above shows at Q2/07 [or Sept. 30 07] Citibank had outstanding notional Credit Derivatives of 3 Trillion. At this point in time, remember, the sub-prime melt down was only about two months old [having been widely acknowledged in early August 07].
The deleterious effects on Citibank’s financial performance stemming from this excess only began to be reported in Q4:
New York, NY, January 15, 2008 – Citigroup Inc. (NYSE:C) today reported a net loss for the 2007 fourth quarter of $9.83 billion, or $1.99 per share……
Management Comment
"Our financial results this quarter are clearly unacceptable. Our poor performance was driven primarily by two factors – significant write-downs and losses on our sub-prime direct exposures in fixed income markets, and a large increase in credit costs in our U.S. consumer loan portfolio. Looking beyond these two factors, revenues and volumes continued to grow strongly in a number of our franchises and we generated record results in international consumer, transaction services, wealth management, and advisory," said Vikram Pandit, Chief Executive Officer of Citi.
Citibank Bleeds While J.P. Morgan Exceeds

Knowing that so much of what ails Citibank’s finances is effectively “fenced” by their 3 Trillion of notional Credit Derivatives – shouldn’t someone, somewhere be asking what’s really going on over at J.P. Morgan who has 7.8 Trillion in notional of the same stuff that is burying Citibank?
The sub-prime meltdown is categorically and beyond a shadow of a doubt a credit derivatives induced / related event.
It behooves me that this institution manages to avoid any scrutiny in the mainstream financial press – unless perhaps one stops to consider this development [circa May, 2006] where Dawn Kopecki reported in BusinessWeek Online in a piece titled, Intelligence Czar Can Waive SEC Rules,
“President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye.”
When one stops to consider this – suddenly all of the numbers, or lack thereof, make perfect sense!
addthis_url = location.href; addthis_title = document.title; addthis_pub = 'financialsense';

 

[darkbeaver]

TT Focus

27
​

Reading the numbers
Simon Davies
Sott.net
Tue, 26 Feb 2008 17:23 EST








The UK government is desperately trying to rescue a large UK mortgage lender while the Federal Reserve is secretly funding US banks to keep them afloat. The collapse of the international banking system is imminent. For the elite it will be a bonanza while for the rest of us it spells a return to servitude in a feudal society.
The Northern Rock rescue
£110 billion is an awful lot of money. £110 billion is also the amount of public money the UK government is using to "bail out" Northern Rock plc (the UK's fifth largest mortgage lender) according to news reports. That's £1,800 (about $3,600) straight out of the pocket of every man, woman and child in the UK. It is more than the UK government spends in one year on the entire National Health Service.
So why is the UK government doing this and where is the money going? I decided to try to find out, and started by downloading Northern Rock's most recent interim report for the period ending 30th June 2007 .

Northern Rock - assets and liabilities
The report tells us that Northern Rocks total assets at the end June 2007, 3 months before the UK government stepped in to rescue the bank, were £113 billion, of which 91% were residential mortgages. In other words, the bank has lent £103 billion to people to buy their homes and the bank holds those homes as security for the loans. If the rescue is really going to cost £110 billion then the bankers are telling the government that Northern Rock is 'bankrupt' and all those homes are worthless - think about that. UK bankers advising the UK government think that homes purchased for over £103 billion are worthless - do they know something we don't?
The principle sources of debt financing these assets were:

- £24 billion deposits from retail customers (private individuals)
- £27 billion from "non-retail" (ie. from banks, other professional investors and funds)
- £46 billion in securitized notes (banks, other professional investors and funds own the notes) and
- £8 billion in covered bonds (banks, other professional investors and funds own the notes)).
​

That means that at the end of June 2007 private individual customers of Northern Rock had loaned Northern Rock £24 billion. Those individuals are voters so there would seem to be at least a political expedient in the UK government wanting to protect them. But what about the other £81 billion, who is lending that money to Northern Rock? This is where the water gets murky as we can't tell from the accounts of Northern Rock. What we can discern is that £27 billion has been lent directly while £

 

[darkbeaver]

Speculative Onslaught. Crisis of the World Financial System: The Financial Predators had a Ball
Financial Tsunami, Part V

By F. William Engdahl

Global Research, February 23, 2008

Colossal Collateral Damage
The multi-trillion dollar US-centered securitization debacle began to unravel in June 2007 with the liquidity crisis in two hedge funds owned by Bear Stearns, one of the world’s largest and most successful investment banks. The funds were heavily invested in sub-prime mortgage securities. The damage soon spread across the Atlantic to a little-known German state-owned bank, IKB. In July 2007, IKB’s wholly-owned conduit, Rhineland Funding, had approximately €20 billion of Asset Backed Commercial Paper (ABCP). In mid-July, investors refused to rollover part of Rhineland Funding’s ABCP. That forced the European Central Bank to inject record volumes of liquidity into the market to keep the banking system liquid.
Rhineland Funding asked IKB to provide a credit line. IKB revealed it didn’t have enough cash or liquid assets to meet the request of its conduit, and was only saved by an emergency €8 billion credit facility provided by its state-owned major shareholder bank, the Kreditanstalt für Wiederaufbau, ironically the bank which led the Marshall Plan reconstruction of war-torn Germany in the late 1940’s. It was soon to become evident to the world that a new Marshall Plan, or some financial equivalent, was urgently needed for the United States economy; however, there were no likely donors stepping up to the plate this time.
The intervention of KfW, rather than stopping the panic, led to reserve hoarding and to a run on all commercial paper issued by international banks’ off-books Structured Investment Vehicles (SIVs).
Asset Backed Commercial Paper was one of the big products of the asset securitization revolution fostered by Greenspan and the US financial establishment. They were the stand-alone creations of the major banks, set up to get risk off the bank’s balance sheet.
The SIV would typically issue Commercial Paper securities backed by a flow of payments from the cash collections received from the conduit’s underlying asset portfolio. The ABCP was a short-term debt, generally no more than 270 days. Crucially, they were exempt from the registration requirements of the US Securities Act of 1933. ABCPs were typically issued from pools of trade receivables, credit card receivables, auto and equipment loans and leases, and collateralized debt obligations.
In the case of IKB in Germany, the cash flow was supposed to come from its portfolio of sub-prime US home mortgages, mortgage backed Collateralized Debt Obligations (CDOs). The main risk faced by ABCP investors was asset deterioration—that the individual loans making up the security default—precisely what began to cascade through the US mortgage markets during the summer of 2007.
The problem with CDOs was that once issued, they were rarely traded. Their value, rather than being market-driven, were based on complicated theoretical models.
When CDO holders around the world last summer suddenly and urgently needed liquidity to face the market sell-off, they found the market value of their CDOs was far below book value. So, instead of generating liquidity by selling CDOs, they sold high-quality liquid blue chip stocks, government bonds, precious metals.
That simply meant the CDO crisis led to a loss of value in both CDOs and stocks. The drop in price of equities triggered contagion to hedge funds. That dramatic price collapse wasn’t predicted by the theoretical models built into quantitative hedge funds and led to large losses in that part of the market, led by Bear Stearns’ two in-house hedge funds. Major losses by leading hedge funds further fed increasing uncertainty and amplified the crisis.
That w

http://www.globalresearch.ca/index.php?context=va&aid=8158

 

[darkbeaver]

Global systemic crisis – End of 2008: Pension funds go off the rails


According to LEAP/E2020, by the end of 2008, a formidable debacle will affect pension funds all over the world, endangering the entire system of capital-based pensions. This financial calamity will bear a particularly dramatic human dimension because it will come at the precise moment when the first wave of baby-boomers phase out of the labour force in the US, EU and Japan: pension fund revenues are collapsing at the very moment when they should be making their first large series of payments to pensioners. In this 23rd edition of the GEAB, our team anticipates the evolution of the upcoming pension fund crisis, details which countries are the most exposed (in particular in Europe) and provides a number of operational and strategic recommendations to face the situation.
Meanwhile, in the present issue (on subscription), LEAP/E2020 anticipates what the global systemic crisis (now obvious to everyone) will bring along in the next few months, as regards in particular to the negative side effects of the US Federal Reserve’s bank loans currently contributing to weaken even more the US financial system, and as regards also to bank exposure in the US and in the most exposed European countries. Simultaneously our team analyses the effect of today’s US economic and financial crisis on the probability and consequences of an attack on Iran by Israel and the US before the next US presidential election.
In any event, with the announcement of an emergency plan to save the US 5th largest private bank, Bear Stearns [1] (preluding to its being sold or its failing in the coming weeks), it turned out that a large financial institution indeed went bankrupt in the first quarter of 2008, as anticipated by our team in GEAB N°19 [2].
Meanwhile, the US dollar resumed plummeting against Euro, Yen, Yuan; gold soared over 1,000 USD per ounce, oil reached 110 USD per barrel, global stock markets lost 20 percent in three months, and the Fed’s most recent attempt to stop the financial crisis through a 200 billion USD bank loan plan has already proved to fail... the bases of the financial and economic order that prevailed in the last decades are collapsing under our eyes, at an increasing pace… all the signs of a systemic crisis are gathered [3].
The whole world is now aware that we are faced to a crisis of unprecedented scope and nature. This level of awareness enables our team to refine some of their anticipations. About currencies for instance, our team undertook to review their estimation of the value of the US dollar against the three other strategic currencies - Euro, Yen and Yuan. LEAP/E2020 now estimates that the EURUSD exchange rate will reach 1.75 at the end of 2008 (instead of the 1.70 estimation made in 2006); the USDYEN rate should fall down to 90 and the USDYUAN down to 6 [4].

US Dollar Index (benchmark currency basket [5]) on 03/14/2008 - Source FxStreet

Faced to the extent of the Very Great US Depression currently unfolding [6], LEAP/E2020 is glad that the US authorities took into consideration the numerous protests [7] and decided to maintain the publication of US economic indicators on the website EconomicIndicators.Gov. In such difficult times, it is important that statistical information on the US economy remains easily available to everyone. The money of a great number of private and public, individual and collective operators depends on this transparency.
In the same sense, the Federal Reserve of Atlanta distributes for free a DVD entitled « Crisis Preparedness: Reconnecting the Financial Lifeline » and designed to help operators of all kinds to anticipate a crisis and get prepared to it [8]. In the perspective of a collapse of the real economy in the US (expected to happen in September 2008 according to LEAP/E2020’s anticipations [9]), these official advices take a special meaning. For instance, like we have been repeating for months, the DVD keeps saying that in the event of a severe crisis « Cash becomes king », whether the crisis is linked to a natural disaster or a human-made one, as shown by the fact that US insurers have already lost more money because of the subprime crisis than because of the Katrina hurricane, though the worse natural disaster in the history of the US [10].

Non-Borrowed reserves of US depository institutions (1950 – 02/2008) - Source Federal reserve of Saint Louis

To finish with, graphics such as the one above illustrate in a striking manner that the situation is infinitely worse that what the cleverest leader (and they are not many) can imagine. It shows that the US financial system, and that of a large part of the world, is lethally hurt. US banks have no more money; it is as simple and dramatic as that. Contagion will now enter a second phase of development, generating a new series of bank failures by this summer, as anticipated in GEAB N°20, entailing a dislocation of the global financial system in the second semester of 2008.


[1] Source: Reuters, 03/14/2008
[2] In GEAB N°19 we said it would take place in February ; it is on March 14th that this first large US bank defaulted. We remind that from now on, according to our November 2007 anticipations, more US, EU and Asian banks will follow.
[3] As a matter of fact, this CNN/Money title is very lucid: « Issue N°1: America’s money ». Source: CNN/Money. That is indeed what it is all about: the pure and simple evaporation of thousands of billions of US Dollars illusively accumulated all those years on the accounts of financial institutions, companies, individuals and governments, scattered all over the world. That is exactly the problem detected in the first GEABs at the beginning of 2006.
[4] LEAP/E2020 wishes to stress the fact that in the case of a combined US/Israel attack on Iran this year, our US dollar index estimations for the end of 2008 presented in GEAB N°23 would be even worse. About the rumours suggesting that a concerted action of the central banks will put a stop to the plummeting of the US currency, they do not have any basis: a similar action can no longer be implemented because central banks now have diverging interests due to the decoupling of the world’s largest economic regions, as anticipated by LEAP/E2020 many months ago. The collapse of the US Dollar is the result of a US economy in recession and a related devaluation by 50 percent against the other big currencies.
[5] Dollar Index currencies: Euro, Yen, Canadian Dollar, British Pound, Swiss Franc and Swedish Crown. If the Chinese Yuan was added to this list, the US dollar index would fall even more dramatically.
[6] Some websites are even specialised on this subject, such as Depression2.TV whose sub-title is clear: « Surviving the second great depression ».
[7] Excerpt of the announcement posted in the website EconomicIndicators.gov : « ... ESA (Economics and Statistics Administration) initially planned to discontinue the service due to cost concerns but given the feedback ESA received, the decision has been made to continue the site and improve its functionality... ».
[8] Source: Banking Information, Federal Reserve Bank of Atlanta (to order the DVD, here is the direct link)
[9] See GEAB N°22
[10] Source: Bloomberg, 03/14/2008

 

[darkbeaver]

500lbs dried beans,
10 cords dry firewood,
ammonition,
matches,
lamp wicks,
500 flour,
1 mule,
beer,
grass,
rubber boots,
bible,
condoms,
20L toothpaste,
cash,
bigger ammonition,
gas,
Greenspans last book,
50lbs salt,
3 cases kippers,
3 cases smoked oysters,
2 cases bacardis,
socks,
long underwear,
100 rolls toilet paper,
more ammonition,
powdered cheeze,

 

[Toro]

Non-Borrowed reserves of US depository institutions (1950 – 02/2008) - Source Federal reserve of Saint Louis

This is an amazing graph. Someone brought my attention to this a few months ago.

I'm going to put it on my site and send it to banking expert I know.

 

[Toro]

500lbs dried beans,
10 cords dry firewood,
ammonition,
matches,
lamp wicks,
500 flour,
1 mule,
beer,
grass,
rubber boots,
bible,
condoms,
20L toothpaste,
cash,
bigger ammonition,
gas,
Greenspans last book,
50lbs salt,
3 cases kippers,
3 cases smoked oysters,
2 cases bacardis,
socks,
long underwear,
100 rolls toilet paper,
more ammonition,
powdered cheeze,

I'd also suggest guns and lots of ammo.

 

[darkbeaver]

The Black Death of financial collapse

By James Cumes

11/04/08 "Asia Times" -- -- The financial and economic crisis now upon us is by far the most menacing of the past century - even more so than the Great Depression of the 1930s. It is not just a "subprime" crisis; it is systemic - affecting the entire financial system. It is also global, affecting various countries in various ways but affecting them all. In achieving a certain "globalization", we have been uniquely successful in globalizing collapse, chaos and misery. It is a globalization which, in our short-sighted negligence, we never envisaged.

In this crisis, even a country such as Australia is no more than a subordinate, neo-colonial, financial and economic dependency. In essence, we have reverted to what we were before and during the Great Depression of the 1930s, when Whitehall, Westminster and

the Bank of England played the tune to which we jigged. Then, from 1945 to 1969, for the first time, we played our own tune of full employment and stable economic growth. Wild radicals such as minister Eddie Ward in the governments of John Curtin (1941-45) and Ben Chifley (1945-49) warned us to be wary of Wall Street.

The cynics might now say that Eddie, who died in 1963, was right. After 1969, we forgot his warning. Indeed, the Americans themselves forgot to guard against the chicaneries of Wall Street, where eternal vigilance should always be the watchword. They forgot what the mania of Wall Street can do to the reality of Main Street; and we shared their amnesia.

From 1969 and especially from 1971, when the United States cut the dollar link with gold, Australia surrendered any worthwhile independence in its economic and financial thinking. We swallowed American financial and economic formulae, whether we were academics or policymakers, industrial entrepreneurs, banks or providers of "financial services."

 

[darkbeaver]

The Dollar Hasn't Bounced
I first presented the following chart with its downward pointing arrow in my alert on November 11, 2007, and made the following observation. "When taken together, the eerie calm as the dollar collapses and the arrow in the above chart pointing to the building downside momentum suggest that the dollar is nowhere near its final low."

I drew the downward pointing arrow back then purposefully. All the signs indicated to me that years of dollar mismanagement were finally taking its toll. I concluded that the dollar was heading for a major collapse that would culminate in a currency crisis by this summer, which is the time frame indicated by the arrow.
Anyone who has read these alerts or the book I co-authored with John Rubino knows that I am expecting a total collapse in the dollar. As I have said many times, the dollar is on the road to the fiat currency graveyard. But the question I am always asked is when will it get there? When will it collapse? The answer is in the above chart – this summer.
The dollar of course has been collapsing for years. Inflation has eroded its purchasing power, and inferior assets on bank balance sheets have debased its quality. What's more, rather than being left unfettered as a neutral tool for use in global commerce by one and all – which is the role required of the world's reserve currency – U.S. politicians have turned the dollar into an imperial weapon to extend their influence, further undermining its usefulness as currency. So it is not surprising that the Dollar Index has declined 41% from its peak on July 5, 2001, nor is what is happening now a surprise. Maybe I should say what isn't happening now. The dollar hasn't bounced.
We can see on the above chart the dollar's steep drop from December 20, 2007 to March 17, 2008. Under intense selling pressure, the dollar fell on 40 of these 60 trading days from 77.79 to its record low of 71.46. That 8.1% drop equates to a breathtaking 50% annual rate of decline. After a drop like that, one would expect a bounce in normal circumstances, just like the dollar bounced after the other huge drops that we can see on the chart. But it didn't happen. Why not?
One can only conclude that these are not normal circumstances. In other words, I think we have reached the 'tipping point'.
More people want out of the dollar than those who are willing to hold it. The final collapse of the dollar begins now. It will I expect play out over the next three to six months, culminating in a major dollar crisis.
I have been waiting for two events in particular to signal that the final collapse of the dollar had begun. One was for the Dollar Index to make a new record low by breaking below 78.30, which it did just a few weeks before I drew the arrow in the above chart last November. The other event was for gold to break above $1,000, which I anticipated would happen this year. Gold did briefly break above $1,000 last month before being beaten back down below that much-watched level by the gold cartel. I recommend reading the article in the current issue of Investor's Digest by John Embry of Sprott Asset Management describing this brief encounter with $1,000.
So the gold cartel once again 'circled the wagons', just like it has done for years at other critical price levels. It temporarily put a lid on gold, thereby keeping it from rising in order to blunt gold's signal that severe problems with the dollar are building. This activity by the gold cartel will be a major topic in next week's conference sponsored by the Gold Anti-Trust Action Committee. GATA's international press release announcing this important conference can be found at the following link: http://www.gata.org/node/6226. Extensive documentation about government intervention in the gold market is available free on GATA's website.
Regardless of these recent price capping activities by the gold cartel, there is an important message about recent events embedded in the price action of the above chart. Despite all the central bank intervention, despite the repeated declaration of the so-called "strong dollar" policy, despite all the maneuvering by the Federal Reserve to remove inferior assets off over-leveraged bank balance sheets, despite all the tough talk about being vigilant to "fight inflation", the dollar hasn't bounced. None of these things have helped strengthen the dollar's exchange rate to the world's other major currencies. To me that means the front gate of the fiat currency graveyard is wide open, and the grim reaper is waiting for the dollar to enter on the next new low in the Dollar Index. When that happens, it won't take long for gold and silver to climb back above $1,000 and $20 – and this time stay there.
Published by GoldMoney
Copyright © 2008. All rights reserved.
Edited by James Turk, alert@goldmoney.com

 

[darkbeaver]

Meltdown of U.S. Dollar Underway as China Dumps the Currency

by David Gutierrez


Global Research, April 17, 2008
NaturalNews

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(NaturalNews) Comments by China that it intends to move away from its reliance on the dollar triggered a sharp drop in the Dow Jones Industrial Average and heightened worldwide fears about the U.S. currency's stability. Chinese Central Bank Vice Director Xiu Jian said that his country is planning to shift much of its $1.4 trillion national currency reserve from dollars to more stable currencies, such as the euro or Canadian dollar. After these comments, the dollar fell to record lows relative to other currencies -- the lowest ever against the euro, the lowest in a generation against the British pound, and the lowest in 57 years against the Canadian dollar.

"The big issue on any currency is if its rate of depreciation is so fast that it scares away all capital, and the announcement that we heard from China sort of feeds those fears," said Larry Smith, chief investment officer at Third Wave Global Investors.

China is the world's largest investor in U.S. Treasury bonds and securities, holding more U.S. debt than any country but Japan. Because China's currency is linked to the dollar, the country also maintains a massive reserve of the currency.

But this policy had already begun to shift at the time of Xiu's comments. China has divested approximately 5 percent of its $400 billion holdings in the U.S. Treasury and established a $200 billion fund to help diversify its investments in equities and stocks around the world.

"We will favor stronger currencies over weaker ones, and will readjust accordingly," said Cheng Siwei, vice chairman of China's National People's Congress.

It is not just U.S. investors who are concerned. Because the dollar's fluctuations have driven up the euro, exports in Europe have fallen and sparked fears for the stability of that continent's economy. In a recent speech, French president Nicolas Sarkozy added his voice to those calling for the Bush administration to act to stabilize the currency.

"The dollar cannot remain 'someone else's problem,' " Sarkozy said. "If we are not careful, monetary disarray could morph into economic war. We would all be its victims."