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Is the age of weakness over?
I'll take them all just tell me where to send the SASE.
TWA Flight 800 crash wasn’t due to gas tank explosion, former investigators claim
http://news.yahoo.com/blogs/lookout/twa-flight-800-crash-investigation-ntsb-141624708.html
The producers of an upcoming documentary on TWA Flight 800—which exploded and crashed into the waters off of Long Island on July 17, 1996, killing all 230 people on board—claim to have proof that an explosion outside the Paris-bound flight caused the crash. And six former investigators who took part in the film say there was a cover-up, and want the case reopened.
"There was a lack of coordination and willful denial of information," Hank Hughes, a senior accident investigator for the National Transportation Safety Board, said Wednesday during a conference call with reporters. "There were 755 witnesses. At no time was information provided by the witnesses shared by the FBI."
Jim Speer, an accident investigator for the Airline Pilots Association who sifted through the recovered wreckage in a hangar, said he discovered holes formed consistent by a high-energy blast in the right wing, and requested it be tested for explosives. When the test came back positive, he said, he was "physically removed" from a room by two CIA agents.
Is Your Bank Account Safe?
March 28th, 2013
Goto commentsLeave a comment
Don’t be surprised when the global elite confiscate money from your bank account one day. They are already very clearly telling you that they are going to do it. Dutch Finance Minister Jeroen Dijsselbloem is the president of the Eurogroup – an organization of eurozone finance ministers that was instrumental in putting together the Cyprus “deal” – and he has said publicly that what has just happened in Cyprus will serve as a blueprint for future bank bailouts. What that means is that when the chips are down, they are going to come after YOUR money. So why should anyone put a large amount of money in the bank at this point? Perhaps you can make one or two percent on your money if you shop around for a really good deal, but there is also a chance that 40 percent (or more) of your money will be confiscated if the bank fails. And considering the fact that there are vast numbers of banks all over the United States and Europe that are teetering on the verge of insolvency, why would anyone want to take such a risk? What the global elite have done is that they have messed around with the fundamental trust that people have in the banking system. In order for any financial system to work, people must have faith in the safety and security of that financial system. People put their money in the bank because they think that it will be safe there. If you take away that feeling of safety, you jeopardize the entire system.
So exactly how did the big banks in Cyprus get into so much trouble? Well, they have been doing exactly what hundreds of other large banks all over the U.S. and Europe have been doing. They have been gambling with our money. In particular, the big banks in Cyprus made huge bets on Greek sovereign debt which ended up failing.
But what happened in Cyprus is just the tip of the iceberg. All over the planet major financial institutions are being incredibly reckless with client money. They are leveraged to the hilt and they have transformed the global financial system into a gigantic casino.
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If they win on their bets, they become fabulously wealthy.
If they lose on their bets, they know that the politicians won’t let the banks fail. They know that they will get bailed out one way or another.
And who pays?
We do.
Either our tax dollars are used to fund a government-sponsored bailout, or as we have just witnessed in Cyprus, money is directly confiscated from our bank accounts.
And then the game begins again.
People need to understand that the precedent that has just been set in Cyprus is a game changer.
The next time that a major bank fails in Greece or Italy or Spain (or in the United States for that matter), the precedent that has been set in Cyprus will be looked to as a “template” for how to handle the situation.
Eurogroup president Jeroen Dijsselbloem has even publicly admitted that what just happened in Cyprus will serve as a model for future bank bailouts. Just check out what he said a few days ago…
“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders”
Dijsselbloem insists that this will cause people “to think about the risks” before they put their money somewhere…
“It will force all financial institutions, as well as investors, to think about the risks they are taking on because they will now have to realise that it may also hurt them. The risks might come towards them.”
Well, as depositors in Cyprus just found out, there is a risk that you could lose 40 percent (and that is the best case scenario) of your money if you put it in the bank.
Why would anyone want to take that risk – especially in a nation that is already experiencing very serious financial troubles such as Greece, Italy or Spain?
As if that was not enough, Dijsselbloem later went in front of the Dutch parliament and publicly defended a wealth tax like the one that was just imposed in Cyprus.
Dijsselbloem is being widely criticized, and rightfully so. But at least he is being more honest that many other politicians. His predecessor as the head of the Eurogroup, Jean-Claude Juncker, once said that “you have to lie” to the people in order to keep the financial markets calm…
Mr. Dijsselbloem’s style contrasts with that of his predecessor, Jean-Claude Juncker, Luxembourg’s prime minister, who spoke in a low mumble at news conferences and was expert at sidestepping questions. Mr. Juncker once even advocated lying as a way to prevent financial markets from panicking—as they did Monday after Mr. Dijsselbloem’s comments.
“When it becomes serious, you have to lie,” Mr. Juncker said in April 2011. “If you have pre-indicated possible decisions, you are feeding speculation in the financial markets.”
But Dijsselbloem is certainly not the only one among the global elite that is admitting what is coming next. Just check out what Joerg Kraemer, the chief economist at Commerzbank, recently told Handelsblatt about what he believes should be done in Italy…
“A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product”
Yikes!
And as I wrote about the other day, the Finance Minister of New Zealand is proposing that bank account holders in his nation should be required to “take a haircut” if any banks in his nation fail.
They are telling us what they plan to do.
They are telling us that they plan to raid all of our bank accounts when the global financial system fails.
And calling it a “haircut” does not change the fact of what it really is. The truth is that when they confiscate money from our bank accounts it is outright theft. Just check out what the Daily Mail had to say about the situation in Cyprus…
People who rob old ladies in the street, or hold up security vans, are branded as thieves. Yet when Germany presides over a heist of billions of pounds from private savers’ Cyprus bank accounts, to ‘save the euro’ for the hundredth time, this is claimed as high statesmanship.
It is nothing of the sort. The deal to secure a €10?billion German bailout of the bankrupt Mediterranean island is one of the nastiest and most immoral political acts of modern times.
It has struck fear into the hearts of hundreds of millions of European citizens, because it establishes a dire precedent.
And when you cause paralysis in the banking system, a once thriving economy can freeze up almost overnight. The following is an excerpt from a report from someone that is actually living over in Cyprus…
As it stands now, nowhere in Cyprus accepts credit or debit cards anymore for fear of not being paid, it is CASH ONLY. Businesses have stopped functioning because they cannot pay employees OR pay for the stock they receive because the banks are closed. If the banks remain closed, the economy will be destroyed and STOP COMPLETELY. Looting, robberies and theft are already on the rise. If the banks open now, there will be a massive run on the bank, and the banks will FAIL loosing all of its deposits, also causing an economic crash. TONIGHT there are demonstrations at most street corners and especially at the parliament building (just 2 miles from me).
Many are thinking that the ECB and EU are allowing Cyprus to fail as a test ground for new financial standards.
Just wanted all you guys to know the real story of whats going on here. Prayers are appreciated (although this is very interesting to watch) many of my local friends have lots of money in the banks.
Would similar things happen in the United States if there was a major banking crisis someday?
That is something to think about.
In any event, the problems in the rest of Europe continue to get even worse…
-The stock market in Greece is crashing. It is down by more than 10 percent over the past two days.
-The stock markets in Italy and Spain are experiencing huge declines as well. Banking stocks are being hit particularly hard.
-The Bank of Spain says that the Spanish economy will sink even deeper into recession this year.
-The latest numbers from the Spanish government show that Spain’s debt problem is rapidly getting worse…
“The central government’s interest bill surged 15 percent last year to 26 billion euros, while tax receipts slumped 21 percent. The cost of servicing debt represented 30 percent of the taxes collected at the end of December, up from 20 percent a year earlier.”
-The euro took quite a tumble on Thursday and the euro will likely continue to decline steadily in the weeks and months to come.
For a very long time I have been warning that the next major wave of the economic collapse is going to originate in Europe.
Hopefully people are starting to see what I am talking about.
As this point, the major banks in Europe are leveraged about 26 to 1, and that is close to the kind of leverage that Lehman Brothers had when it finally collapsed. As a whole, European banks are drowning in debt, they are taking risks that are almost incomprehensible and now faith in those banks has been greatly undermined by what has happened in Cyprus.
Anyone that cannot see a crisis coming in Europe simply does not understand the financial world. A moment of reckoning is rapidly approaching for Europe. The following is from a recent article by Graham Summers…
At the end of the day, the reason Europe hasn’t been fixed is because CAPITAL SIMPLY ISN’T THERE. Europe and its alleged backstops are out of money. This includes Germany, the ECB and the mega-bailout funds such as the ESM.
Germany has already committed to bailouts that equal 5% of its GDP. The single largest transfer payment ever made by one country to another was the Marshall Plan in which the US transferred an amount equal to 5% of its GDP. Germany WILL NOT exceed this. So don’t count on more money from Germany.
The ECB is chock full of garbage debts which have been pledged as collateral for loans. If anyone of significance defaults in Europe, the ECB is insolvent. Sure it can print more money, but once the BIG collateral call hits, money printing is useless because the amount of money the ECB would have to print would implode the system.
And then of course there are the mega bailout funds such as the ESM. The only problem here is that Spain and Italy make up 30% of the ESM’s supposed “funding.” That’s right, nearly one third of the mega-bailout fund’s capital will come from countries that are bankrupt themselves.
What could go wrong?
Right now, close to half of all money that is on deposit at banks in Europe is uninsured. As people move that uninsured money out of the banks, the amount of money that will be required to “fix the banks” will go up even higher.
It would be wise to try to avoid the big banks at this point – especially those with very large exposure to derivatives. Any financial institution that uses customer money to make reckless bets is not to be trusted.
If you can find a small local bank or credit union to do business with you will probably be better off.
And don’t think that this kind of thing can never happen in the United States.
One of the key players that was pushing the idea of a “wealth tax” in Cyprus was the IMF. And everyone knows that the IMF is heavily dominated by the United States. In fact, the headquarters of the IMF is located right in the heart of Washington D.C. not too far from the White House. When I worked in D.C. I would walk by the IMF headquarters quite a bit.
So if the United States thought that confiscating money from bank accounts was a great idea in Cyprus, why wouldn’t they implement such a thing here under similar circumstances?
The global elite are telling us what they plan to do, and the game has dramatically changed.
Move your money while you still can.
Unfortunately, it is already too late for the people of Cyprus.
This article is brought to you courtesy of Michael Snyder from The Economic Collapse Blog.
Related Tickers: Financial Select Sector SPDR ETF (NYSEARCA:XLF), Ishares MSCI Europe Financial Sector Index Fund (NASDAQ:EUFN).
http://etfdailynews.com/2013/03/28/is-your-bank-account-safe/
Gittin' it yet?
I agree- been 18 months since we wacked direct tv.
Not going back...
I have 2 friends that own small businesses that employ 10-12 people.
Both could easily double their business, adding jobs, local economic activity,
etc. Neither does (one did once and paid the price) because they claim that 80%
of the additional profit would go into taxes, complaince, code conformance, etc.
Why do the extra work just to pay taxes?
So when zippy or any other meathead politician laments jobs growth please
realize that they know damn well their b.s. is one major component of job
stagnation in the private sector.
Some people will never get the fact that jobs are not charity cases.
Companies only hire when hiring new employees generates or supports the generation of new revenue. Right now for many reasons the cost of new employees is up and the potential for revenue generation is down. All of that means poor to negative job growth.
Unless of course your "business" involves OPM.
Alexandra is the person who runs the forbidden knowldge tv site.
My name is Don.
I don't do anything special to dry the puff balls. Slice them and run them thru a dehydrator. We then store them in jars or in ziplock bags in the freezer. Then just toss them into whatever you are cooking.
Good stuff.
I really like the mushroom board- thank you.
oops sorry missed that link over on the mushroom board.
Had a hard time with the puffballs this fall- too many maggots in them. My son and I found enough too eat but no extra to dry for later.
check out forbidden knowledge tv lotsa good stuff there...
KNOW YOUR MUSHROOMS follows
über myco visionaries Gary Lincoff and
Larry Evans as they lead us on a hunt
for the wild mushroom and the deeper
cultural experiences attached to the
mysterious fungi.
Combining material filmed at the Telluride
Mushroom Fest with animation and archival
footage along with a neo-psychedelic soundtrack
by The Flaming Lips and The Sadies, KNOW
YOUR MUSHROOMS opens the doors to
perception and takes the audience on a
longer, stranger trip.
Video (about 72 mins):
Know Your Mushrooms
- Alexandra
P.S. Please share Forbidden Knowledge TV e-mails
and videos with your friends and colleagues.
P.P.S. There is no electricity or Internet where I
live right now - and possibly not for another couple
of weeks, so it's difficult to answer all your emails -
but I'll get back to you when I can.
Alexandra Bruce
Publisher, ForbiddenKnowledgeTV.com
Daily Videos from the Edges of Science
Buy Books by Alexandra Bruce
Gardening Links
Cold Frame Gardening
http://www.lightmorning.org/Journal/Journal--2001A/cold_frame_mar.htm
http://www.ext.colostate.edu/mg/files/gardennotes/722-Frost.html
http://www.frontrangeliving.com/garden/coldframe.htm
EXTENDING YOUR GARDENING: A GUIDE TO COLD & HOT FRAMES
http://www.floydcountyinview.com/coldframes.html
Season Extension Techniques for Market Gardeners
http://attra.ncat.org/attra-pub/seasonext.html
or http://attra.ncat.org/attra-pub/PDF/seasonext.pdf
How to improve profitability through season extension
http://www.newfarm.org/depts/talking_shop/0403/seasonextention.shtml
Season Extension Cornell
http://hort.cals.cornell.edu/cals/hort/research/seasonextension.cfm
Season Extension Marketing Strategies for Farmers and Ranchers
http://www.sare.org/publications/marketing/market05.htm
Winter Vegetable Gardening
http://www.organicgardening.com/feature/0,7518,s1-5-19-203,00.html
Cold Frames
http://www.organicgardening.com/feature/0,7518,s1-5-19-106,00.html
Floating Row Covers
http://www.gardensalive.com/product.asp?pn=2005&sid=13418&eid=&bhcd2=1198963841
Please take the time to listen to this…
I think this interview is why we need more JHK out talking.
Jim is the perfect spokesmen because he is so hard to peg.
He is a self described lifelong democrat. However what he says is so truth based
or as an "actualist" much of what he exposes is just fact and appeals to all of
us just looking for a little sanity in our shared crazy world.
From my perspective Jim would not normally be my cup of tea but he is so hard
reality that as an engineer he is like gravity hard to deny. Read him wanting to
hate on him but ended up respecting him and finding myself on common ground with
him.
Bless you Jim and get out there more my friend more people need to hear what you
have to say.
--- In thelongemergency@yahoogroups.com, "Don" <fugeguy@...> wrote:
>
> The Survival Podcast
> http://www.thesurvivalpodcast.com
> <http://clicks.aweber.com/y/ct/?l=4wuu7&m=IeWEAFjX_Ug3dL&b=HF2gqqRZtNJrw\
> LPCJey26A>
>
> Helping You Live the Life You Want, If Times Get Tough, Or Even If They
> Don't
>
> 1. Episode-996- James Howard Kunstler on ¡°The Long Emergency¡±
> <http://clicks.aweber.com/y/ct/?l=4wuu7&m=IeWEAFjX_Ug3dL&b=xDnCgsJJTJ4m3\
> XiVeTBA8w> - 2012-10-11 13:30:32-04
> James Howard Kunstler wrote The Long Emergency, published by the
> Atlantic Monthly Press in 2005, about the challenges posed by the coming
> permanent global oil crisis, climate change, and other ¡°converging
> catastrophes of the 21st Century.¡± His 2008 novel, World ¡
> Continue reading ¡ú
> <http://clicks.aweber.com/y/ct/?l=4wuu7&m=IeWEAFjX_Ug3dL&b=0IBd7f4GKsWIG\
> 8CCLBBTcQ>
>
>
>
>
> 5201 Rio Ct, Arlington, TX 76017, USA
> PS ¨C Are you getting 25 cents of value from each edition of The
> Survival Podcast? If so consider joining our Supporting Members Brigade
> to support the show and get exclusive content available only to
> Supporting Members. Learn more at http://survivalpodcast.net/members/
> <http://clicks.aweber.com/y/ct/?l=4wuu7&m=IeWEAFjX_Ug3dL&b=26Ww05zDl2XI0\
> SPbt_rxwA> PPS - Make sure to check out the TSPCopper.com
> <http://tspcopper.com/> for cool copper rounds. They are both AOCS
> Barter Medalians and a great way to share important messages like The
> Survival Podcast, The Real Truth About Money, The Second Amendment and
> more. http://tspcopper.com
> http://www.aweber.com/z/r/?bGws7JwstCzsTEzMLByctEa0jGwMLIyM7Jw=
> <http://www.aweber.com/z/r/?bGws7JwstCzsTEzMLByctEa0jGwMLIyM7Jw=>
>
> To unsubscribe or change subscriber options visit:
> http://www.aweber.com/z/r/?bGws7JwstCzsTEzMLByctEa0jGwMLIyM7Jw=
> <http://www.aweber.com/z/r/?bGws7JwstCzsTEzMLByctEa0jGwMLIyM7Jw=>
>
Please take the time to listen to this…
I think this interview is why we need more JHK out talking.
Jim is the perfect spokesmen because he is so hard to peg.
He is a self described lifelong democrat. However what he says is so truth based
or as an "actualist" much of what he exposes is just fact and appeals to all of
us just looking for a little sanity in our shared crazy world.
From my perspective Jim would not normally be my cup of tea but he is so hard
reality that as an engineer he is like gravity hard to deny. Read him wanting to
hate on him but ended up respecting him and finding myself on common ground with
him.
Bless you Jim and get out there more my friend more people need to hear what you
have to say.
--- In thelongemergency@yahoogroups.com, "Don" <fugeguy@...> wrote:
>
> The Survival Podcast
> http://www.thesurvivalpodcast.com
> <http://clicks.aweber.com/y/ct/?l=4wuu7&m=IeWEAFjX_Ug3dL&b=HF2gqqRZtNJrw\
> LPCJey26A>
>
> Helping You Live the Life You Want, If Times Get Tough, Or Even If They
> Don't
>
> 1. Episode-996- James Howard Kunstler on ¡°The Long Emergency¡±
> <http://clicks.aweber.com/y/ct/?l=4wuu7&m=IeWEAFjX_Ug3dL&b=xDnCgsJJTJ4m3\
> XiVeTBA8w> - 2012-10-11 13:30:32-04
> James Howard Kunstler wrote The Long Emergency, published by the
> Atlantic Monthly Press in 2005, about the challenges posed by the coming
> permanent global oil crisis, climate change, and other ¡°converging
> catastrophes of the 21st Century.¡± His 2008 novel, World ¡
> Continue reading ¡ú
> <http://clicks.aweber.com/y/ct/?l=4wuu7&m=IeWEAFjX_Ug3dL&b=0IBd7f4GKsWIG\
> 8CCLBBTcQ>
>
>
>
>
> 5201 Rio Ct, Arlington, TX 76017, USA
> PS ¨C Are you getting 25 cents of value from each edition of The
> Survival Podcast? If so consider joining our Supporting Members Brigade
> to support the show and get exclusive content available only to
> Supporting Members. Learn more at http://survivalpodcast.net/members/
> <http://clicks.aweber.com/y/ct/?l=4wuu7&m=IeWEAFjX_Ug3dL&b=26Ww05zDl2XI0\
> SPbt_rxwA> PPS - Make sure to check out the TSPCopper.com
> <http://tspcopper.com/> for cool copper rounds. They are both AOCS
> Barter Medalians and a great way to share important messages like The
> Survival Podcast, The Real Truth About Money, The Second Amendment and
> more. http://tspcopper.com
> http://www.aweber.com/z/r/?bGws7JwstCzsTEzMLByctEa0jGwMLIyM7Jw=
> <http://www.aweber.com/z/r/?bGws7JwstCzsTEzMLByctEa0jGwMLIyM7Jw=>
>
> To unsubscribe or change subscriber options visit:
> http://www.aweber.com/z/r/?bGws7JwstCzsTEzMLByctEa0jGwMLIyM7Jw=
> <http://www.aweber.com/z/r/?bGws7JwstCzsTEzMLByctEa0jGwMLIyM7Jw=>
>
A wholehearted second...
Fantastic Fungi: The Spirit of Good
http://www.forbiddenknowledgetv.com/videos/biology/fantastic-fungi-the-spirit-of-good.html
Emerging from their axial homes, fungi
are beginning to be understood as germane
to ecological sustainability. Dr. Paul Stamets
explores mycology and compels support for
our fungal allies.
Video:
Fantastic Fungi: The Spirit of Good
- Alexandra
P.S. Please share Forbidden Knowledge TV e-mails
and videos with your friends and colleagues.
That's how we grow. Thanks.
Alexandra Bruce
Publisher, Forbidden Knowledge TV
Daily Videos from the Edges of Science
http://www.ForbiddenKnowledgeTV.com
"Alan Greenspan caused the housing bubble by printing too much money"
and Benny Hill Bernacke "fixed" it by printing even more...
Another lesson, a very important lesson, is that you don't build a strong society by reinforcing and rewarding bad behaviors- whether at the top or bottom rungs of society.
One might argue that we are reinforcing bad behaviors all around...
azomite sandwiches?
The End is Near
At the risk of looking/sounding like some crazed religious fanatic usually seen carrying a sign or proclaiming: "Repent, the end is near," I shall avoid the word "repent. To me, the rest of that proclamation appears accurate and reasonable, at least with regard to our economic condition.
The US and world economy are near collapse. Sovereign debt, driven by increasingly desperate government interventions, spirals upward at accelerating rates. There is no recovery and there can be no recovery with the debt levels of both governments and citizens.
Keynesian Interventions
For a time fiscal and monetary stimulus were undertaken in the hopes that they would enable economies to achieve traction and return to normal growth paths. The political myth of Keynesianism demanded such "conventional" tools be applied. Almost five years into the economic crisis, there has been no recovery, despite trillions of dollars wasted. Nor can there be one without massive debt liquidation and the redeployment of misplaced capital.
Lip service is still given to the pseudo economics known as Keynesianism. Die-hards like Paul Krugman and other Statists continue to insist it is the answer to a recovery and push for additional interventions. Statists defend this alchemy because it is the source of government growth and power. In applying more of these remedies, the ultimate resolution of the crisis is deferred but made worse.
Why Do Interventions Continue?
Interventions, primarily in the form of monetary expansion, continue. Many in the political class realize additional stimulus cannot solve the economic problems. The reason for favoring them is not for an economic cure but as a means to continue government spending at its unsustainable levels. Keynesian economics has always been a political rather than economic tool. The pretense otherwise is becoming harder to maintain. Lance Roberts, commenting on the latest Richmond Fed data, states:
The injections of liquidity into the system were able to drag forward future consumption, a consequence of which we will have to deal with later, in order to keep economic growth in positive territory.
This chart was part of the rationale for Mr. Roberts' position:
The impact of no QE3, as described by Mr. Roberts, was devastating in July:
Shipments came to a screeching halt declining from 0 to -23 in July while Inventories rose from 9 to 21. Rising Finished Goods Inventories sitting on the shelves is not an economic positive as the build is likely unwanted given the weakness in New Orders. The weakness in orders also leads to decreasing rates of Capacity Utilization which slipped from -4 in June to -16 in July.
What If Monetary Easing Is Not Re-instituted?
Stopping monetary infusions means a downturn in the economy. The Fed will likely announce new stimulus, especially given the political election. The quaint notion of Fed independence and its unwillingness to take policy actions at this stage in an election cycle will be tested and found wanting. The Fed is a creation of Congress and a political animal, just as any other governmental agency. Incumbents, overwhelmingly want the appearance of a good economy in order to enhance their re-election prospects.
Daniel Amerman described the motivations for printing more money:
1. Creating money out of thin air on a massive basis is all that stands between the current state of hidden depression, and overt depression with unemployment levels in excess of those seen in the US Great Depression of the 1930s.
2. It is the weapon of choice being used to wage currency war and reboot US economic growth.
3. It is the most effective way to meet not just current crushing debt levels, but to deal with the rapidly approaching massive generational crisis of paying for Boomer retirement promises.
4. Political survival and enhanced power for incumbent politicians.
Not reinstating some form of quantitative easing (printing money) would quickly reveal the bankruptcy of the federal government. Last year the Fed purchased 61% of treasuries issued. The Fed now has surpassed China (who is attempting to divest) as the largest holder of US debt. Federal funding needs are no less this year and in the future. Without printing, government cannot pay its bills. Tax collections and private capital markets are insufficient to meet the level of spending.
Maturing debt can be retired only with the issuance of new debt. Government spending continues upward, never downward. The political elite of all countries behave as carnival barkers, promising benefits that cannot be delivered and plundering the productive in an effort to continue their failing scam. As Gerald Celente expressed it (my emboldening):
The entire financial system is under collapse. It's not about the Greeks; it's not about the Spanish; it's not about the Italians; it's not about the English; it's not about the Americans; it's not about the Chinese; it's about everybody.
Capital pools, the normal source of funding, are not large enough to fund governments' debt. Sovereigns survive only via the charade of lending to themselves via central bank money creation. The mechanics are made deliberately obscure, but that is all that keeps governments afloat. Central banks, questionable institutions to begin with, are now nothing but counterfeiting operations for governments out of control.
Capitalism has devolved into something little different from the central planning that was practiced under the Soviet Union. As Judy Shelton pointed out:
The problem for the Soviet government was that financing provided by the state-controlled bank was supporting an increasingly unproductive economy—bailing out unprofitable enterprises that had long since quit producing real economic gains that might have raised living standards. The extension of credit to these entities had little to do with merit or potential usefulness.
That description now fits what were once capitalist economies. For these societies the ending will be similar to that of the Soviet Union. Ms. Shelton also commented on the real need for a central bank, as seen by Lenin:
Lenin had been wise about the uses of banks. Shortly before the October Revolution, he wrote: "Without big banks, socialism would be impossible. The big banks are the `state apparatus' which we need to bring about socialism, and which we take ready-made from capitalism."
The Relationship Between Growth and Debt
As debt increases as a percentage of GDP, economic growth slows. The theoretical basis for this belief is obvious. Debt reflects advanced consumption which means less future consumption in order to retire the debt. Interest payments only exacerbate matters. Both government and private economists tend to ignore this relationship, forecasting future rates of growth independently of the debt burden.
A study by Carmen Reinhart, Vincent Reinhart and Kenneth Rogoff provide empirical support to the drag imposed by debt. Daniel Amerman says of the study:
[It] examines 26 different "debt overhangs" that have occurred around the world since 1800, with "debt overhang" being defined as public debt exceeding 90% of GDP for at least five years. Among the many nations studied were the United States, the United Kingdom, Japan, Canada and Australia.
The analysis determined that while growth averaged 3.5% per year when public debt was less than 90% of GDP, it went down to only 2.3% per year when public debt was more than 90% of GDP. This is a reduction of 1.2%, or a little more than a third of annual economic growth.
The temporary boost in economic activity in the short term produced by increased debt is a nice by-product, but one that is costly in the long term. Soon, monetary expansion or debt will no longer to provide this temporary diversion. For all practical purposes, the US and Europe have reached this saturation point.
Economies which benefited from the excessive consumption of the past, now stagger under the burden of having lived beyond their means. The siren song of John Maynard Keynes' short run has played out and we have reached the long run where "we are all dead."
The fallacy of national income accounting must be noted. It measures spending rather than net worth. Hence profligate nations can look good while they consume the capital provided by earlier generations. High consumption can be achieved by dis-saving and borrowing. Just as your seeming wealthy neighbor with the big house and new cars appeared to be doing well, so can an economy. But when your neighbor loses his home and assets because he was in debt beyond his capabilities, his life style looks less attractive. GDP looks good the more people spend, but ultimately the strength of an economy, just like an individual, is measured in net worth. Consuming capital to appear prosperous is a means to ruin.
The time to cure the debt problems via economic nostrums has passed. Our current situation is better understood by simple arithmetic rather than esoteric economic theories. As Mitch Daniels observed:
Whether one believes in a large, very active government or something more limited, mathematically, the amount of debt we already have and the terrifying rate at which it is accumulating will lead to national ruin
Keynes is gone, but his bromides now threaten the very survival of Western civilization.
Some Hard Data
Most citizens have no idea what their government is doing to them. Recipients (dependents) of government largess understand what they are getting but have little understanding where it comes from. To them, they are entitled to be supported by government. Few understand that government has no "stash," produces nothing and gains only from plundering the productive. Robbing Peter to pay Paul may buy votes, but it is not an economically viable strategy.
The Ponzi scheme of government has been going on for the last six or seven decades. Like all such schemes, it eventually exceeds its ability to continue. Every country in the world that has adopted the social welfare state model (a polite description of various stages of Socialism) is insolvent and hopelessly indebted to degrees from which they cannot recover.
Desperation on the part of the governing elite is apparent and has been for a decade or so. The death spiral of these democracies is well underway. Collapse could occur any time or it could stretch out for some time as a period of stagnation and declining living standards. Japan has managed to extend their misery for about thirty years.
The US, hardly the worst of the lot, is doomed nevertheless because of its profligate government spending and promises. It may not be the first to go belly-up, but neither will it be the last. To understand how serious its situation is, consider this observation from Ty Andros:
In the United States the government spends more than $31,000 dollar per household per year. ABSURD. Every citizen OWES $440,000 towards the national debt and UNFUNDED entitlements. In order to meet their obligations they plan to attempt to take everything the private sector HAS.
Let this sink in: A family of four's share of federal government debt and promises is $1,760,000. This number does not include the debt and unfunded liabilities of state and municipal governments. Nor does it include the personal debt of the family — mortgages, car loans, credit cards, etc.
There is no economic solution to this problem. Nor is there any other solution. The laws of arithmetic preclude one. Modern economies have reached the point where they have only two options as correctly described by Ludwig von Mises:
There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.
It is just that simple. No political rhetoric or economic policies can alter the outcome.
http://www.economicnoise.com (http://s.tt/1j8NL)
http://www.economicnoise.com/2012/07/27/the-end-is-near/
Better yet hire one group to go around breaking things and another group to drop money from heliocoptors so people will have the money to hire other people to fix the things getting broke.
TA DAAAAA!
yea 4 more years of zippy and the dollar won't be worth its weight in spit...
Plus don't forget that government programs are usually more efficient than planned which means they end up costing less ;)
"Or suppose all of us receive a guaranteed income? Then everyone would benefit from these advances"
This economic thought process has resulted in the deaths of more human beings than any other single thing. But many would look at that statement, at face value, and consider it humane.
one could only hope?
Fed Is Buying 61 Percent of U.S. Government Debt
Written by Bob Adelmann
Thursday, 29 March 2012 14:58
In his attempt to explode the myth that there is unlimited demand for U.S. government debt, former Treasury official Lawrence Goodman explained that there is high perceived demand because the Federal Reserve is doing most of the buying.
Wrote Goodman,
Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis.
This not only creates the false impression of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.
What about Japan and China? Aren’t they the major purchasers of U.S. debt? Not any more, notes Goodman. Foreign purchases of U.S. debt dropped to less than 2 percent of GDP (Gross Domestic Product) from almost 6 percent just three years ago. And private sector investors — banks, money market and bond mutual funds, individuals and corporations — have cut their buying way back as well, to less than 1 percent of GDP, down from 6 percent. This serves to hide the fact that the government can’t find outside buyers willing to accept rates of return that are below the inflation rate (“negative interest”) given the precarious financial condition of the government. It also hides the impact of $1.3 trillion deficits from the public who would likely get much more concerned if real, true market rates of interest were being demanded for purchasing U.S. debt, as such higher rates would increase the deficit even further. Finally it takes pressure off Congress to “do something” because there is no public clamor over the matter, at least for the moment.
One of those promoting the myth that buyers of U.S. debt must exist because interest rates are so low is none other than one of those recently seated at the Federal Reserve’s Open Market Committee table, Alan Blinder. Now a professor of economics at Princeton University, Blinder was vice chairman of the Fed in the mid-nineties and should know all about the Fed’s manipulations and machinations in the money markets. Apparently not.
On January 19 Blinder wrote in the Wall Street Journal that
Strange as it may seem with trillion-dollar-plus deficits, the U.S. government doesn’t have a short-run borrowing problem at all. On the contrary, investors all over the world are clamoring to lend us money at negative real interest rates.
In purchasing power terms, they are paying the U.S. government to borrow their money!
Blinder repeated the error in front of the Senate Banking Committee just one week later: "In fact, world financial markets are eager to lend the United States government vast amounts at negative real interest rates. That means that, in purchasing power terms, they are paying us to borrow their money!"
Aggressive promotion of a myth never makes it a fact. All it does is hide, for a period, the reality that the world isn’t willing to lend to the United States at negative interest rates. This places the burden on the Fed to make the myth appear real by expanding its own balance sheet and gobbling up U.S. debt.
There are going to be consequences. As Goodman put it,
The failure by officials to normalize conditions in the U.S. Treasury market and curtail ballooning deficits puts the U.S. economy and markets at risk for a sharp correction…. [Emphasis added.]
In other words, budget deficits often take years to build or reduce, while financial markets react rapidly and often unexpectedly to deficit spending and debt.
The recent release by the Congressional Budget Office (CBO) of future inflation expectations provides little assurance either as it mimics the line that inflation will stay low for the foreseeable future: "In CBO’s forecast, the price index for personal consumption expenditures increases by just 1.2 percent in 2012 and 1.3 percent in 2013."
With the Fed continuing to buy U.S. government debt, which keeps interest rates artificially low, when will reality set in? Amity Shlaes has the answer. Writing in Bloomberg last week, Shlaes explains:
The thing about [price] inflation is that it comes out of nowhere and hits you….
[It] has happened to us before. In World War I … the CPI [Consumer Price Index] went from 1 percent for 1915 to 7 percent in 1916 and 17 percent in 1917….
In 1945, all seemed well. Inflation was at 2 percent, at least officially. Within two years that level hit 14 percent.
All appeared calm in 1972, too, before inflation jumped to 11 percent by 1974 and stayed high for the rest of the decade….
One thing is clear: pretty soon, we’ll all be in deep water.
Doug Casey agrees: “Don’t think there are no consequences to our unwise fiscal and monetary course; a potentially ugly tipping point is more likely than not at some point.”
All of this goes to show that the Fed’s attempts to fix the price of money below market rates are likely to have other, perhaps more important, effects. It hides the truth about real market rates from investors, it puts the whole discussion of deficits on the back burner, and allows Congress to continue to ignore the issue and kick the can down the road. At some point, reality will click in and investors, Congress, and taxpayers will discover they’ve run out of road.
Fed Is Buying 61 Percent of U.S. Government Debt | Print |
Written by Bob Adelmann
Thursday, 29 March 2012 14:58
In his attempt to explode the myth that there is unlimited demand for U.S. government debt, former Treasury official Lawrence Goodman explained that there is high perceived demand because the Federal Reserve is doing most of the buying.
Wrote Goodman,
Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis.
This not only creates the false impression of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.
What about Japan and China? Aren’t they the major purchasers of U.S. debt? Not any more, notes Goodman. Foreign purchases of U.S. debt dropped to less than 2 percent of GDP (Gross Domestic Product) from almost 6 percent just three years ago. And private sector investors — banks, money market and bond mutual funds, individuals and corporations — have cut their buying way back as well, to less than 1 percent of GDP, down from 6 percent. This serves to hide the fact that the government can’t find outside buyers willing to accept rates of return that are below the inflation rate (“negative interest”) given the precarious financial condition of the government. It also hides the impact of $1.3 trillion deficits from the public who would likely get much more concerned if real, true market rates of interest were being demanded for purchasing U.S. debt, as such higher rates would increase the deficit even further. Finally it takes pressure off Congress to “do something” because there is no public clamor over the matter, at least for the moment.
One of those promoting the myth that buyers of U.S. debt must exist because interest rates are so low is none other than one of those recently seated at the Federal Reserve’s Open Market Committee table, Alan Blinder. Now a professor of economics at Princeton University, Blinder was vice chairman of the Fed in the mid-nineties and should know all about the Fed’s manipulations and machinations in the money markets. Apparently not.
On January 19 Blinder wrote in the Wall Street Journal that
Strange as it may seem with trillion-dollar-plus deficits, the U.S. government doesn’t have a short-run borrowing problem at all. On the contrary, investors all over the world are clamoring to lend us money at negative real interest rates.
In purchasing power terms, they are paying the U.S. government to borrow their money!
Blinder repeated the error in front of the Senate Banking Committee just one week later: "In fact, world financial markets are eager to lend the United States government vast amounts at negative real interest rates. That means that, in purchasing power terms, they are paying us to borrow their money!"
Aggressive promotion of a myth never makes it a fact. All it does is hide, for a period, the reality that the world isn’t willing to lend to the United States at negative interest rates. This places the burden on the Fed to make the myth appear real by expanding its own balance sheet and gobbling up U.S. debt.
There are going to be consequences. As Goodman put it,
The failure by officials to normalize conditions in the U.S. Treasury market and curtail ballooning deficits puts the U.S. economy and markets at risk for a sharp correction…. [Emphasis added.]
In other words, budget deficits often take years to build or reduce, while financial markets react rapidly and often unexpectedly to deficit spending and debt.
The recent release by the Congressional Budget Office (CBO) of future inflation expectations provides little assurance either as it mimics the line that inflation will stay low for the foreseeable future: "In CBO’s forecast, the price index for personal consumption expenditures increases by just 1.2 percent in 2012 and 1.3 percent in 2013."
With the Fed continuing to buy U.S. government debt, which keeps interest rates artificially low, when will reality set in? Amity Shlaes has the answer. Writing in Bloomberg last week, Shlaes explains:
The thing about [price] inflation is that it comes out of nowhere and hits you….
[It] has happened to us before. In World War I … the CPI [Consumer Price Index] went from 1 percent for 1915 to 7 percent in 1916 and 17 percent in 1917….
In 1945, all seemed well. Inflation was at 2 percent, at least officially. Within two years that level hit 14 percent.
All appeared calm in 1972, too, before inflation jumped to 11 percent by 1974 and stayed high for the rest of the decade….
One thing is clear: pretty soon, we’ll all be in deep water.
Doug Casey agrees: “Don’t think there are no consequences to our unwise fiscal and monetary course; a potentially ugly tipping point is more likely than not at some point.”
All of this goes to show that the Fed’s attempts to fix the price of money below market rates are likely to have other, perhaps more important, effects. It hides the truth about real market rates from investors, it puts the whole discussion of deficits on the back burner, and allows Congress to continue to ignore the issue and kick the can down the road. At some point, reality will click in and investors, Congress, and taxpayers will discover they’ve run out of road.
Fed Is Buying 61 Percent of U.S. Government Debt | Print |
Written by Bob Adelmann
Thursday, 29 March 2012 14:58
In his attempt to explode the myth that there is unlimited demand for U.S. government debt, former Treasury official Lawrence Goodman explained that there is high perceived demand because the Federal Reserve is doing most of the buying.
Wrote Goodman,
Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis.
This not only creates the false impression of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.
What about Japan and China? Aren’t they the major purchasers of U.S. debt? Not any more, notes Goodman. Foreign purchases of U.S. debt dropped to less than 2 percent of GDP (Gross Domestic Product) from almost 6 percent just three years ago. And private sector investors — banks, money market and bond mutual funds, individuals and corporations — have cut their buying way back as well, to less than 1 percent of GDP, down from 6 percent. This serves to hide the fact that the government can’t find outside buyers willing to accept rates of return that are below the inflation rate (“negative interest”) given the precarious financial condition of the government. It also hides the impact of $1.3 trillion deficits from the public who would likely get much more concerned if real, true market rates of interest were being demanded for purchasing U.S. debt, as such higher rates would increase the deficit even further. Finally it takes pressure off Congress to “do something” because there is no public clamor over the matter, at least for the moment.
One of those promoting the myth that buyers of U.S. debt must exist because interest rates are so low is none other than one of those recently seated at the Federal Reserve’s Open Market Committee table, Alan Blinder. Now a professor of economics at Princeton University, Blinder was vice chairman of the Fed in the mid-nineties and should know all about the Fed’s manipulations and machinations in the money markets. Apparently not.
On January 19 Blinder wrote in the Wall Street Journal that
Strange as it may seem with trillion-dollar-plus deficits, the U.S. government doesn’t have a short-run borrowing problem at all. On the contrary, investors all over the world are clamoring to lend us money at negative real interest rates.
In purchasing power terms, they are paying the U.S. government to borrow their money!
Blinder repeated the error in front of the Senate Banking Committee just one week later: "In fact, world financial markets are eager to lend the United States government vast amounts at negative real interest rates. That means that, in purchasing power terms, they are paying us to borrow their money!"
Aggressive promotion of a myth never makes it a fact. All it does is hide, for a period, the reality that the world isn’t willing to lend to the United States at negative interest rates. This places the burden on the Fed to make the myth appear real by expanding its own balance sheet and gobbling up U.S. debt.
There are going to be consequences. As Goodman put it,
The failure by officials to normalize conditions in the U.S. Treasury market and curtail ballooning deficits puts the U.S. economy and markets at risk for a sharp correction…. [Emphasis added.]
In other words, budget deficits often take years to build or reduce, while financial markets react rapidly and often unexpectedly to deficit spending and debt.
The recent release by the Congressional Budget Office (CBO) of future inflation expectations provides little assurance either as it mimics the line that inflation will stay low for the foreseeable future: "In CBO’s forecast, the price index for personal consumption expenditures increases by just 1.2 percent in 2012 and 1.3 percent in 2013."
With the Fed continuing to buy U.S. government debt, which keeps interest rates artificially low, when will reality set in? Amity Shlaes has the answer. Writing in Bloomberg last week, Shlaes explains:
The thing about [price] inflation is that it comes out of nowhere and hits you….
[It] has happened to us before. In World War I … the CPI [Consumer Price Index] went from 1 percent for 1915 to 7 percent in 1916 and 17 percent in 1917….
In 1945, all seemed well. Inflation was at 2 percent, at least officially. Within two years that level hit 14 percent.
All appeared calm in 1972, too, before inflation jumped to 11 percent by 1974 and stayed high for the rest of the decade….
One thing is clear: pretty soon, we’ll all be in deep water.
Doug Casey agrees: “Don’t think there are no consequences to our unwise fiscal and monetary course; a potentially ugly tipping point is more likely than not at some point.”
All of this goes to show that the Fed’s attempts to fix the price of money below market rates are likely to have other, perhaps more important, effects. It hides the truth about real market rates from investors, it puts the whole discussion of deficits on the back burner, and allows Congress to continue to ignore the issue and kick the can down the road. At some point, reality will click in and investors, Congress, and taxpayers will discover they’ve run out of road.
In his attempt to explode the myth that there is unlimited demand for U.S. government debt, former Treasury official Lawrence Goodman explained that there is high perceived demand because the Federal Reserve is doing most of the buying.
Wrote Goodman,
Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis.
This not only creates the false impression of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.
What about Japan and China? Aren’t they the major purchasers of U.S. debt? Not any more, notes Goodman. Foreign purchases of U.S. debt dropped to less than 2 percent of GDP (Gross Domestic Product) from almost 6 percent just three years ago. And private sector investors — banks, money market and bond mutual funds, individuals and corporations — have cut their buying way back as well, to less than 1 percent of GDP, down from 6 percent. This serves to hide the fact that the government can’t find outside buyers willing to accept rates of return that are below the inflation rate (“negative interest”) given the precarious financial condition of the government. It also hides the impact of $1.3 trillion deficits from the public who would likely get much more concerned if real, true market rates of interest were being demanded for purchasing U.S. debt, as such higher rates would increase the deficit even further. Finally it takes pressure off Congress to “do something” because there is no public clamor over the matter, at least for the moment.
One of those promoting the myth that buyers of U.S. debt must exist because interest rates are so low is none other than one of those recently seated at the Federal Reserve’s Open Market Committee table, Alan Blinder. Now a professor of economics at Princeton University, Blinder was vice chairman of the Fed in the mid-nineties and should know all about the Fed’s manipulations and machinations in the money markets. Apparently not.
On January 19 Blinder wrote in the Wall Street Journal that
Strange as it may seem with trillion-dollar-plus deficits, the U.S. government doesn’t have a short-run borrowing problem at all. On the contrary, investors all over the world are clamoring to lend us money at negative real interest rates.
In purchasing power terms, they are paying the U.S. government to borrow their money!
Blinder repeated the error in front of the Senate Banking Committee just one week later: "In fact, world financial markets are eager to lend the United States government vast amounts at negative real interest rates. That means that, in purchasing power terms, they are paying us to borrow their money!"
Aggressive promotion of a myth never makes it a fact. All it does is hide, for a period, the reality that the world isn’t willing to lend to the United States at negative interest rates. This places the burden on the Fed to make the myth appear real by expanding its own balance sheet and gobbling up U.S. debt.
There are going to be consequences. As Goodman put it,
The failure by officials to normalize conditions in the U.S. Treasury market and curtail ballooning deficits puts the U.S. economy and markets at risk for a sharp correction…. [Emphasis added.]
In other words, budget deficits often take years to build or reduce, while financial markets react rapidly and often unexpectedly to deficit spending and debt.
The recent release by the Congressional Budget Office (CBO) of future inflation expectations provides little assurance either as it mimics the line that inflation will stay low for the foreseeable future: "In CBO’s forecast, the price index for personal consumption expenditures increases by just 1.2 percent in 2012 and 1.3 percent in 2013."
With the Fed continuing to buy U.S. government debt, which keeps interest rates artificially low, when will reality set in? Amity Shlaes has the answer. Writing in Bloomberg last week, Shlaes explains:
The thing about [price] inflation is that it comes out of nowhere and hits you….
[It] has happened to us before. In World War I … the CPI [Consumer Price Index] went from 1 percent for 1915 to 7 percent in 1916 and 17 percent in 1917….
In 1945, all seemed well. Inflation was at 2 percent, at least officially. Within two years that level hit 14 percent.
All appeared calm in 1972, too, before inflation jumped to 11 percent by 1974 and stayed high for the rest of the decade….
One thing is clear: pretty soon, we’ll all be in deep water.
Doug Casey agrees: “Don’t think there are no consequences to our unwise fiscal and monetary course; a potentially ugly tipping point is more likely than not at some point.”
All of this goes to show that the Fed’s attempts to fix the price of money below market rates are likely to have other, perhaps more important, effects. It hides the truth about real market rates from investors, it puts the whole discussion of deficits on the back burner, and allows Congress to continue to ignore the issue and kick the can down the road. At some point, reality will click in and investors, Congress, and taxpayers will discover they’ve run out of road.
http://thenewamerican.com/economy/commentary-mainmenu-43/11357-fed-is-buying-61-of-us-government-debt
'cept GE that is...eom
Awesome!
Food for thought for those who think big gov should run more of our lives?
If nothing else you have to be impressed with the balls on these guys.
I mean they weren’t happy just bankrupting the company- they stole their customers money too.
And they want to be paid a bonus for doing it!!!
Cascading failure or just taking out the trash?
I don’t see how all the CDS and other bond insurance can be covered?
Portugal urged to heed PSI lessons
IFR 1924 10 March to 16 March 2012 | By Christopher Spink
People & Markets
Country could ask holders of domestic law bonds to swap into new foreign issues
Portugal should consider offering investors the opportunity to voluntarily tender their bonds, even at a notional premium to current market prices, after the success of Greece’s own restructuring exercise, according to a sovereign restructuring legal expert close to Greece’s legal adviser Cleary Gottlieb.
At present, Portugal’s leaders have denied they are considering any such move and eurozone leaders have said that Greece’s decision to apply a haircut to private sector investors – via the so-called PSI debt swap – is a “unique case” and no other eurozone country should follow that lead.
However, Mitu Gulati, professor of law at Duke University in New York, urged Portugal last week to heed lessons from Greece’s experience and publish a mild offer to investors that hold bonds issued under Portuguese domestic law.
“The lesson of Greece is that the rights of foreign law bonds should be respected but you have more leeway to impose terms on instruments issued under domestic law,” he said.
Gulati, who visited Lisbon last week, is a confidante of Lee Buchheit, the veteran Cleary Gottlieb sovereign restructuring lawyer who has been advising Greece.
Fear of God
Gulati noted that, as with Greece and many other eurozone nations, the majority of Portugal’s bonds are issued under domestic law.
“I think the Greek actions will have put the fear of God into anyone holding eurozone domestic law bonds, if not particularly Portugal,” he said.
He puts the odds of Portugal choosing to restructure its debt at “between 60% and 70%”.
That is certainly not the view of ECB President Mario Draghi, who said last week that the latest review of Portugal’s €78bn programme from the EU, IMF and ECB “showed that on the fiscal and structural side that programme is marching according to the book”.
A sovereign financial adviser agreed that any kind of restructuring was unlikely “in the short term” because “for the time being all other Troika programmes seem to be going relatively well”. He added, though that “the implications [of Greece] will take time to be digested”.
“I think the Greek actions will have put the fear of God into anyone holding eurozone domestic law bonds”
Gulati’s favoured route would be to offer holders of medium to longer-term domestic law bonds the opportunity to tender at somewhere near secondary levels for new longer maturity bonds written under the protection of English law, as happened with Greece. Medium-term bonds, such as threes and fives, are trading around 75% of par, while the 10-year benchmark is changing hands nearer 50%.
“Not everyone will take a haircut in the 35% to 40% area but that would give Portugal a more sustainable ratio of debt to GDP,” he said. “You can only do it because it’s what Greece has effectively done.”
Market return?
Nearly a third of Portugal’s bonds, or roughly €40bn in all, mature before the current €78bn programme from the eurozone, ECB and IMF finishes in May 2014. Concerns that Portugal might be unable to return to the market then has sent the yields of medium-term issues soaring above 15% (see chart).
Ireland recently managed to assuage a similar problem by getting most investors holding a €3.5bn January 2014 4% bond to swap it for one paying 4.5% maturing 13 months later in February 2015. Portugal’s incentive could be to offer such bondholders new longer-term paper written under the protection of English law.
Such instruments are in effect “senior” to domestic law bonds, which might suffer the same fate as those issued by Greece. “The enduring lesson of this debt exchange could be to confirm that differences in governing law can result in a de facto seniority ranking across bonds,” Gulati said.
In a paper written with the EBRD’s Jeromin Zettelmeyer, Gulati wrote that the Greek restructuring represents a “large gift from the Greeks to the parts of the eurozone that face debt crises. By conducting its debt exchange in the way it did, Greece has in effect resurrected the plausibility of purely voluntary debt reduction operations in Europe.”
Last month, IFR learnt that advisers had already sounded out Portugal on options to restructure its €121bn of debt.
One involved in preliminary discussions said: “If there is success with PSI in Greece, then it could open the eyes of some governments. It would show that after all debt reduction is possible and not the end of the world. That could create an interesting precedent.”
http://www.ifre.com/portugal-urged-to-heed-psi-lessons/21004977.article
Hitting the credit card wall – Credit card debt contracts 17 percent as the grand American household deleveraging continues. Average household with credit card debt carries $16,000 at an average rate of 15% – Real broke housewives. Orange County California witnesses a 600 percent jump in bankruptcies.
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•mybudget360 in bailout, banks, cram downs, credit cards, debt, economy, wall street
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Credit card debt has become a big financial albatross for many American families. According to the Federal Reserve Survey on Consumer Finance over 176 million credit cardholders exist in the United States. This is an amazing figure when you actually think about what a credit card is. A credit card essentially allows you to spend money you do not have today on the promise you will pay it off tomorrow. We constantly hear how great it is to have credit cards to build credit as long as you pay off your balance each month. The data tells us something very different from this ideal utopia vision of credit card debt. The average credit card debt per household with a credit card balance is close to $16,000. Given that some households have little credit card debt, you can imagine how high the debt is for others. A big part of our economy was built on the back of credit card debt. Because of the massive deleveraging experienced by Americans, credit card debt has now contracted by $171 billion since the recession began. What happens when the credit card bill comes home?
Credit card debt trends
The apex of revolving debt in the US was hit in 2008 when the recession was raging at a full pace. Over $970 billion in credit card debt was hit at this point:
Keep in mind that this $970+ billion in credit card debt was being carried over from previous months. In other words, people that do not pay off their credit card debt balance in full. This deleveraging in credit card debt is truly a once in a generation type event:
Going back to data from 1968 there wasn't one year where year-over-year credit card debt fell in the United States. So to see a 17 percent contraction in revolving credit is a monumental event. For the US household something akin to a peak event in debt was reached. And is it any wonder? The average debt for US household is roughly $78,000:
The above figures are even more startling when you realize that the per capita income is $25,000. Even using the median household income of $50,000 we realize that many households are significantly leveraged for years, even decades to come. Why else would credit card debt contract so severely after nearly half a century of unimpeded growth? You also need to examine the younger household debt and how much of it is now being replaced by student loan debt. The college debt bubble will burst at some point as student loan debt surges to roughly $1 trillion in 2012.
Part of it has to also do with the high interest rates charged by credit card institutions:
Source: CreditCards.com
So take the typical household with credit card debt at $16,000 and assume they only pay the minimum amount each month. If they are only covering the interest, at the national average rate, they are paying roughly $200 a month without having one cent going to the initial principal. This is why credit card debt can become so troublesome for many Americans and essentially a transfer of wealth from the majority to a few giant financial institutions with access to cheap readily available funding.
While a good number of credit card debt is being paid off, a large amount is being paid off by bankruptcy. This isn't exactly the kind of deleveraging that is healthy. When people look at the mortgage debt stalling out they fail to examine the fact that a giant portion of this was because of forced deleveraging via the 5,000,000 or so completed foreclosures since the recession hit. Nothing can clear mortgage debt faster than simply not paying your mortgage and giving the house back to the bank.
The addiction to debt
If you really want to see the addiction to credit card debt just look at the actual number of credit cards floating out in the economy:
There are more credit cards out in the economy than households since the average number of credit cards per household is over 3. These are devices that essentially allow people to spend money they don't have on potential future earnings. It would be one thing if people paid off their credit cards each month and didn't pay 15 percent interest on funds they borrowed. Yet the $800 billion in outstanding credit card debt tells you that this is not the case. Banks are immensely profitable here since they can borrow from the Federal Reserve at virtually zero percent, they will pay you virtually zero percent on your savings deposits, but then they will charge you 15 percent on money loaned out to you. Now that is a racket we should all be fortunate to be a part of.
Some tend to think this is only happening in very poor areas of the country. You can look at Orange County California, home of all those reality housewife shows, and realize that too much debt is also an issue with supposedly wealthy counties:
Source: OC Register
So much for the idea that only the poor file for bankruptcy. Orange County bankruptcies are up 600 percent from 2006. The drop from 2005 to 2006 was largely due to people rushing to file before new rules came into place in 2005 that made bankruptcy even tougher. Even with that said, Orange County is now seeing a peak in bankruptcies near the 2010 highs. Credit card debt and other forms of debt can impact all parts of the country. The great deleveraging of the American household continues well into 2012.
http://www.mybudget360.com/credit-cards-number-united-states-credit-debt-falls-17-percent-orange-county-bankruptcies/
Oil Disruption is Zooming and Global Panic Awaits
Posted: 24 Feb 2012 02:06 PM PST
Oil is up to $110 and it is on a roll.
The last time oil went in this direction, it caused a slowing in the global economy that led to a global financial panic.
What's causing it? Peak oil, Chinese growth and lots of potential oil disruption. Pretty much the same factors that caused it last time.
The pipeline disruption is a little different this time.
Israel
The headline player is Iran due to its nuclear program. But Iran isn't actually disrupting the production system, they are merely making threats.
If you unwind this a bit, it's pretty clear that the countries actually sending shockwaves of fear through the markets are Israel and the US. However, of the partners in this relationship, Israel is in the drivers seat. They are calling the shots on the timing of an attack on Iran and they will take the world along for a ride.
The funny thing, to set this entire disruption event in motion, the Israeli attack on Iran doesn't have to be that big. It just needs to be public and able blow something up.
NOTE: IF you start seeing people with strong connections to the Israeli government buying up oil futures contracts for the "Widows and Orphans fund", start buying like crazy.
Nigeria
Nigeria's MEND (Movement for the Emancipation of the Niger Delta) is back for the first time since the 2009 amnesty-payoff. The government recently decided to stop the big (although small $$ compared to the amount top gov't and corporate players in the country are paying themselves) payments to MEND guerrillas and they have resumed operations.
They are making attacks again on foreign oil company pipelines. Last time they were able to hit nearly 1 m barrels a day of disruption. We'll see if they can hit that level again.
Another factor is oil theft. Bunkering on the pipelines of Shell and other foreign oil firms operating in the Delta is reaching a new level of dynamism. The number of bunkering valves inserted into company pipelines is up to 4 a kilometer! Lots of money is being made at the grass roots level.
Global Heart Attack
This is shaping up to be an amazingly violent global heart attack. Another in a long line, with more yet to come. Worse, everytime it happens, we get weaker and the global elites get stronger. We still have the 16% unemployment due to the last one while the fortunes of the global 0.001% zoomed.
You should be looking for a long term solution. Something that will allow you to get out of a global system in a flat spin.
What is that solution? A Resilient Community. If you don't know what that means, read something I wrote today called, "What is a Resilient Community?" These communities have the potential to provide you a much better quality of life in a decade than you have today, across nearly every measure.
So don't wait. Start small. Get smart. Join our online community on ResilientCommunities.com by signing up for the free newsletter. You might even be able to find other people there you would be interested in starting a community with.
You can also join us on Facebook.
We're on the journey to make this happen before depression sets in. Let's roll.
http://globalguerrillas.typepad.com/globalguerrillas/
Just a another common wall street crook.
Is This Recovery? Part II
by: Econophile February 16, 2012
<<< Click here for Part I
Where are we going and why?
Part II
The role of money supply
If much of our positive economic data, especially manufacturing, employment, and price inflation is tied to monetary policy, then that begs the questions of where is money supply (MS) now, where is it heading, and what will the Fed do?
The Fed has been trying to stimulate the economy by making credit available to banks, by keeping interest rates (Fed Funds) at near zero (ZIRP), and by direct injections of money into the economy (QE, quantitative easing). Those policies as anticipated by the Fed have largely failed. In a truly recovering economy, credit would be expanding because businesses would be borrowing in order to expand and hire. Interest rates would be so attractive to borrowers, they couldn't resist expanding through borrowing. The problem is that it hasn't worked.
What is happening instead is that economic gains are coming largely from quantitative easing, a once-in-a-lifetime policy of last resort. While Chairman Bernanke denies it, creating money out of thin air (QE) has the same effect as printing new currency and throwing it out of the Chairman's proverbial helicopter.
Look at how QE has expanded the Fed's balance sheet from securities purchased on the open market, which is how the Fed creates new money:
click to enlarge
As you can see, its balance sheet exploded during the Crash (QE1) and has continued to grow (QE2). The Fed has injected about $2 trillion into the economy since 2008. One can't deny that such injections have impacted the economy. It has rewarded the financial markets (S&P500: 3/6/09=666; 2/14/12=1,350), it has rewarded the multinationals and exporters, and it has caused a positive CPI despite massive deflationary forces.
MS itself has been on a rocky track, but it has expanded in response to QE. Bank credit expansion (loans) is the easiest way to cause MS to grow. While the Fed has made massive amounts of credit available to banks, without loan demand lenders are satisfied to keep it locked up at the Fed (excess reserves). Without landing activity, in order to make MS grow, the Fed has found it must inject new money directly into the economy via QE .
To measure MS, I use the Austrian concepts of money supply, what is called "Austrian" or "True" money supply. Specifically I use what I consider to be the most accurate "Austrian" data which is from Michael Pollaro's The Contrarian Take (with his kind permission), which looks like this:
As you can see the percentage YoY change of TMS2 (bright blue line), the data which I think is most accurate, is actually declining. What does this mean?
Let me try to explain this with a more detailed, and unfortunately, a more complicated chart. This is the same chart as above with an addition of the QE events (vertical salmon and blue bars), the addition of GDP data (black line), and the addition of the NBER's dates for the Great Recession as a vertical gray bar. The scale on the inside of the chart on the left shows quarterly changes in GDP from 2006 to Q4 2011, and it is shown on the black line. I have exaggerated GDP by showing percentage changes of GDP on a quarterly basis to make it fit to Pollaro's chart and to make my point clearer. Another chart below shows GDP alone.
What I believe this chart shows is that, after a delay, quantitative easing has caused much of the "recovery" by increasing MS which in turn has increased GDP .
In terms of measuring money supply, I use the bright blue line (TMS2) which shows annualized changes. If you are a believer in M2, Pollaro shows that as well (dark blue line). QE1, starting in November 2007 and ending in March 2008, brought a huge infusion of new money into the economy, about $1.3 trillion in only 3 months. The Fed, as you recall, went on a massive buying campaign which including a lot of "bad" assets (GSE debt, etc.). GDP is a lagging indicator, but as you can see it was well on its way down by Q1 2007 as real estate values collapsed and Lehman went under. By Q4 2009 GDP started to pick up which was a 6-month lag from the end of QE1.
As the effects of QE1 wore off, as one would expect it to do in the face of massive deflationary forces, GDP began to stall out and unemployment continued to climb. By October, 2009 unemployment reached 10%, and people were talking about a jobless recovery. GDP peaked in Q4 2009 and started declining again in Q1 2010. The Fed took action starting in November 2009 through June, 2010, and QE2 brought another $600 billion of new fiat money into the economy over a four month period. GDP bottomed out in Q1 2011 and since then it has been expanding but at a snail's pace. On a YoY basis GDP is stagnating, but not declining. Again, there was about a 6-month lag between the end of QE2 and GDP turnaround.
Here is a chart that makes it easier to see real GDP:
To those out there who see this as an exercise in curve fitting, faulty logic (post hoc ergo propter hoc), or Monetarist theory, these data are consistent with Austrian Business Cycle Theory (ABCT) and one would expect to see these results after flooding the economy with fiat money. I believe that the gains, such as they are, are not "real" in the sense that they are not based on real savings, but on fiat money which always redirects capital into projects that eventually will become malinvestments.
When money is injected in the QE fashion, it takes longer for the money to get into the farther reaches of the economy. When you think about it, the cash initially goes to the Fed's Prime Dealers and they use it to make investments, which indirectly leads to productive activities, but takes time to expand beyond, say, New York City. Bank credit expansion through loans is a more direct transmission into productive activities rather than investment activities (businesses borrow to expand business, consumers borrow to buy homes and cars).
The thing about GDP is that it is not necessarily a very good measure of economic activity in the sense that it measures what we spend. If you inject more fiat money into the economy it means there will be more spending and a higher GDP. More spending doesn't always mean that those activities will be productive and lasting. That is especially the case with QE. But, for whatever it's worth, the world pays attention to GDP and so will we; it's just very tricky footing for forecasters.
It appears that TMS2 MS growth is declining. One look at the above chart will confirm this. This has to do with a lot of factors, but mainly it is occurring because QE2 is wearing off. This is occurring despite the fact that we are finally seeing modest increases in bank lending activity:
The above chart shows total loan activity (blue line) and the components that are business loans (red line) and consumer loans (green line). Ignore the straight line increase in Q2 2010; that is a recalculation based on a change of the government's methodology. While it shows recent modest improvement, loans have not grown since April, 2010. The latest Fed data (H8) shows that consumer loans actually declined 0.7% YoY in 2011 and business loans only grew 1.7% YoY. The commercial and industrial (C&I) portion of business loans were up a very positive 9.6%. The problem is that there are fewer potential borrowers, and the value of C&I business loans has actually declined (blue line):
Another MS factor to consider is what is happening in Europe. The European Central Bank and the Bank of England are inflating: the ECB with purchases of sovereign bonds and LTRO (Long-term Refinancing Operations), and from QE with the Bank of England. According to Michael Pollaro, some of this money is finding its way back to U.S. Treasurys.
That being the case, declining MS growth is likely a stronger trend than is apparent.
Where are we?
QE has finally given the economy a bit of a ride, but it appears that it is running its course, otherwise, we would see healthier bank credit expansion, and an increasing MS without Fed money steroids, and that isn't happening yet.
Exports are the other thing to be watched as the EU, China, and the rest of the world slow down. Whatever one thinks of the role of U.S. exports, this is a serious negative factor. Recall that exports are about 10% of our economy and are seen by most analysts as an important driver of our economy.
Based on these data, it is likely that the U.S. will start to see more weakness in the economy during Q2-Q3 2012. The timing is based on the fact that this "recovery" is fragile in the sense that it has been supported more by fiat money stimulus rather than real capital/savings. The data show that as MS declines, the economy, at least as represented by GDP, reacts rather quickly and negatively.
The issue really comes down to whether or not bank credit will take off again. If we consider the present state ofdeleveraging and liquidation of malinvestments, we are about half-way to the end zone. (This will be the subject of my next article.) Also, while C&I loans are growing, modestly, real estate loans and consumer loans are still weak. The NFIB reports that small business credit demand is still tepid, relatively unchanged for 2011. Small businesses represent about one-half of the U.S. economy. Thus it is unlikely that MS will expand from an orgy of borrowing.
That leaves the Fed with only one effective tool in their proverbial toolbox. That is, of course, QE3.
What other tools do they have? They could pay no interest on excess reserves, or even charge interest on reserves, but I don't think it will force banks to lend because there isn't enough demand to drain reserves. As Michael Pollaro pointed out, it is more likely that banks will run into loan limits because of capital ratio constraints before they tap into excess reserves. As well, while there is some easing of credit terms, it is unlikely that consumers will go on a spending/borrowing binge for the reasons mentioned above. More Operation Twist? Unlikely. Low interest rates aren't the problem, ZIRP has seen to that.
Conclusion
Quantitative easing has only been used once before in U.S. history, and that was during the Great Depression. You might wish to ponder that bit of information. What that is telling us is that we cannot compare what is occurring now to our experience in prior recessions.
With all due respect to Rogoff and Reinhart, this time is different for the U.S., at least in terms of our modern experience. Fed policies employed in previous recessions which were then thought to work, have failed in our current cycle. Those policies were mainly forms of lowering the Fed Funds rate, reducing bank reserve requirements, and discount window operations. We now have ZIRP and that has done nothing to stimulate the economy as the Fed had hoped it would.
This time we have persistent high unemployment, economic stagnation, a "liquidity trap", high civilian and government debt, low savings, flat to declining wages, and substantial asset devaluation. This has been going on since 2008, a full four years. If it all sounds familiar, these same things happened in the 1930s.
This time is far worse than any other modern recession. What we are seeing now is a depression, despite what the NBER would have you believe. If you are still looking for the "Big One" to happen, you are too late. It happened here and it is still happening here and in Europe. They, like us, have tried to paper over most of the effects of the boom-bust business cycle malinvestment, and they have failed and the piper is at their door.
Within that context, let me sum up my thinking:
1. The economic "good news" is largely based on fiat money steroids and will not last without continuous injections of new fiat money into the economy.
2. The last injection of fiat money (QE2) is already wearing out and money supply is most likely declining.
3. A declining MS will result in further economic weakness (stagnation) and flattening-to-increasing unemployment.
4. This is likely to occur in Q2-Q3 2012.
5. As soon as unemployment goes up again, the Fed will announce QE3.
6. The dollar will continue to be weak.
7. It is likely that price inflation will continue to be "modest" (as the Fed sees it) in light of ongoing real estate related asset devaluation. This depends on the amount of QE.
Thanks to DoctoRx and Michael Pollaro for their help with this article.
This article originally appeared in The Daily Capitalist.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
http://seekingalpha.com/article/370771-is-this-recovery-part-ii?source=email_macro_view&ifp=0
Moody's warns may downgrade 17 global banks,
Reuters – 2 hours 8 minutes ago
By Ian Chua and Soyoung Kim
(Reuters) - Moody's warned on Thursday it may cut the credit ratings of 17 global and 114 European financial institutions in another sign that the impact of the euro zone government debt crisis is spreading throughout the global financial system.
The U.S. rating agency said its action on financial institutions from 16 European nations reflected the impact of the debt crisis and deteriorating creditworthiness of its governments.
It cited more fragile funding conditions, increased regulatory burdens and a tougher economic environment for its review of banks and securities firms with global reach.
Moody's salvo follows rounds of downgrades in European sovereign ratings as the euro zone's struggle to keep its weakest link Greece afloat has been driving up borrowing costs and straining finances of other nations.
Last Monday, Moody's cut the ratings of six European nations including Italy, Spain and Portugal and warned it could strip France, Britain and Austria of their top-level AAA grade.
Last month, Standard & Poor's cut France's and Austria's top ratings and downgraded seven other euro zone nations. It also cut the euro zone's bailout fund by one notch.
Moody's said it was reviewing the long-term ratings and standalone credit assessments of Bank of America (NYSE:BAC - News), Citigroup (NYSE:C - News), Goldman Sachs (NYSE:GS - News), JPMorgan Chase (NYSE:JPM - News), Morgan Stanley (NYSE:MS - News) and Royal Bank of Canada (Toronto:RY.TO - News).
The long-term ratings and standalone credit review of European banks includes Barclays (LSE:BARC.L - News), BNP Paribas (:BNPP.PA), Credit Agricole (:CAGR.PA), Deutsche Bank (DBKGn.DE), HSBC (LSE:HSBA.L - News), Royal Bank of Scotland (LSE:RBS.L - News) and Societe Generale (:SOGN.PA).
Moody's said it was also extending the reviews of the long-term ratings and standalone credit assessments of Credit Suisse (:CSGN.VX), Macquarie (:MQG.AX), Nomura (:8604.T) and UBS
(VTX:UBSN.VX - News) (:UBS.N).
"Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions," Moody's said in a statement.
As a result, the longer-term profitability and growth prospects of the institutions under review had diminished.
In its review of European banks, Moody's said that once it is completed, the ratings will "fully reflect the currently foreseen adverse credit drivers."
European banks' bond holdings of struggling euro zone nations Greece, Portugal, Ireland, Spain and Italy have trapped Europe in a vicious circle.
The falling value of the debt puts pressure on banks, which in turn weighs on lending and economic activity, making it tougher to sustain the growth that governments badly need to shore up their finances.
European Union leaders have been trying to put a financial "firewall" around the most afflicted nations, but jittery market sentiment suffered a fresh setback on Wednesday when several EU sources told Reuters that the euro zone was considering a delay in parts of a second bailout plan for Greece.
Moody's said that for 99 European financial institutions, the standalone credit assessments have been placed on review for downgrade. For 109 institutions, the long-term debt and deposit ratings have been placed on review for downgrade.
For 66 institutions, the short-term ratings have been placed on review for downgrade.
(Additional reporting by Wayne Cole in Sydney: Writing by Tomasz Janowski; Editing by Neil Fullick)
http://finance.yahoo.com/news/moodys-may-downgrade-17-banks-003723628.html
Cold fusion and borrowing more money to pay off debt.
A perfect combination.
Will China´s Skyscraper Craze Herald The Beginnings Of An Economic Crash In 2012?
by: Del Bosque February 10, 2012
Countless analysts have predicted an impending decline of China´s incredible economic growth over the last 20 years. And still the "world´s factory" continues to grow its economy (10% average a year for the last 20 years). However there are now more analysts than ever treading much more carefully around the Red Dragon, as more potential signs of an economic downturn are apparent. These potential warning signs are of course merely speculative, and, as China has done so time and again, who is to say that the country will not just keep on growing?
Is skyscraper building going to be China´s undoing?
China is home to 53% of the world´s skyscrapers that are currently under construction. One survey claimed that China will see the equivalent of one new high-rise completed every five days during the next three years and within five years the country will have a total number of 800 skyscrapers. Barclay´s Capital called this, "evidence of the expanding building bubble."
The Chinese are consuming steel and iron at unprecedented levels. They have more property projects in construction than any other nation in history. The colossal number of skyscrapers being built is accompanied by a government order of 36 million urban households by 2015.
In a report carried out by Barclays Capital last month, it found that over the last 140 years every period of skyscraper building is quickly followed by an economic downturn. The erecting of 40 Wall Street, the Chrysler Building and the Empire State building in New York, occurred just before the Great Depression. The 1997 Asian Financial Crisis began just as Kuala Lumpar´s Petronas Towers was finished. More recently, Dubai unveiled the Burj Khalifa, the world´s tallest building, to the world in 2010. The building cost an estimated $1.5 billion. Just one month before, Dubai was saved from bankruptcy by its neighbor, Abu Dhabi, in a loan deal worth $10 billion. Soon after, the building´s rents plummeted by 40% due to the slump in the Dubai property sector. These are hard facts that cannot be ignored.
Why China´s skyscraper obsession could push the country toward an economic crash
There are various reasons why skyscraper building can destabilize an economy. Building booms are usually a sign of excess credit. According to Andrew Lawrence, from Barclays Capital, skyscraper construction has historically "been characterized by bursts of sporadic, intense activity that coincides with easy credit, rising land prices and excessive optimism" but by the time of the skyscrapers´ completion, the economy finds itself in a recession.
Added to this, there are other factors that could contribute to a downturn. China´s growth has been so remarkable mainly because of an export trade at low costs that no other country has been able to match. However, since 2008, exports have inevitably suffered as a result of the global downturn. To counteract this, China has focused on real estate and infrastructure development (rail building, bridges, roads) but workers cannot pay the high rent prices, so the skyscrapers go empty and the roads not driven on.
There is even a belief that much of the skyscraper craze is down to simple competition among Chinese cities, particularly the smaller cities. Small by China´s standards may still mean a population of a few million people. Analysts such as James Quinn highlight that the central government has lost control over local government. What may emphasize the slowing of the Chinese economy, the second and third quarters of 2011, showed growth of just 1.5%. With so many problems simmering under the surface, it is hard to imagine that the direction China is taking is sustainable.
Potential U.S. listed Chinese stocks to consider
Any potential economic downturn though not out of the question, will likely not happen in the immediate future but if it were to happen, it would be within the next five years. Chinese stocks however, remain to offer investment opportunities. Melco Crown (MPEL) was one of the best performing U.S. listed Chinese stocks of 2011, though at the time of writing, it recorded a fall from 11.91 to 11.82. Youku Inc. (YOKU) is benefiting from China´s internet growth. At the time of writing, its stock is up 0.70% to 23.00. However saying that, Sohu.com Inc. (SOHU) is down almost 2% on the previous day´s trade, at 50.90. Baidu, Inc. (BIDU), another of last year´s strong performers is up 3.48% at 135.45. As China´s internet use exceeds the 500 million mark and just before Baidu announces its fourth-quarter results for 2011, on February 16 2012, this stock in particular has been tipped in some quarters.
Regarding China there are two general schools of thought. The first believes that China cannot be stopped. It survived the Asian Financial Crisis of 1997, it just keeps growing and growing, the country and economy is simply too big and its destiny is to overthrow the U.S. as the world´s number one economy. Then you have your second group, the skeptics, who believe that China´s very own pragmatic capitalism will catch up with the country. It is now in the grip of a bubble, and like every bubble, it will burst. In what Quinn likened to a "house of cards," China´s economy is looking ever more precarious. Virtually every country that has gone through a property boom where bank loans are so easily attained, eventually goes through a downturn. "Oh, but this time it´s different." Is it really?
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
http://seekingalpha.com/article/357791-will-chinas-skyscraper-craze-herald-the-beginnings-of-an-economic-crash-in-2012?source=email_macro_view&ifp=0
For the list of links:
Re: PEAK OIL & DEPRESSION - SUSTAINABILITY LIVING LINKS 02 07 12 [ #board-9881 ]
I would like to suggest these two links:
the first is about water wells
http://sunweber.blogspot.com/2011/11/onthewaydown-1.html
the second is about passive solar
http://sunweber.blogspot.com/2010/10/summer-of-2010.html
John Weber
Northern Minnesota
http://www.rea-alp.com/~dragnfly
http://sunweber.blogspot.com
The list is a hit on the TLE board.
Thank you.