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THE NEXT GREAT DEPRESSION

The News Stories You Missed Because They Were Too Boring, Too Complicated or You Thought They Just Didn't Matter Or You Were Watching American Idol Or Snowboarding. You Made a Big Mistake. Read Them Now.

 

NOTE - February 2009 - At this point it doesn't matter, does it?

Reading news about the current economic crisis is like watching a horrible train wreck. Once that awful image is burned into your brain, you can't look away, no matter how badly you want to. Here are sources to follow up in the coming days: The Drudge Report, Bloomberg, Financial Times, Breitbart

March 14, 2008

A Vicious Circle Ending In A Systemic Financial Meltdown  (We're Toast)
Mike Whitney Information Clearing House at tickerforum.org - Reproduced here in its entirety due to the need to join the forum to see this post.
In his prepared statement, Bernanke announced that the Fed would add $200 billion to the financial system to shore up banks that have been battered by mortgage-related losses. The news was greeted with jubilation on Wall Street where traders sent stocks skyrocketing by 416 points, their biggest one-day gain in five years.

"It's another round of the credit crisis. Some markets are getting worse than January this time. There is fear that something dramatic will happen and that fear is feeding itself," Jesper Fischer-Nielsen, interest rate strategist at Danske Bank, Copenhagen; Reuters

Yesterday's action by the Federal Reserve proves that the banking system is insolvent and the US economy is at the brink of collapse. It also shows that the Fed is willing to intervene directly in the stock market if it keeps equities propped up. This is clearly a violation of its mandate and runs contrary to the basic tenets of a free market. Investors who shorted the market yesterday, got clobbered by the not so invisible hand of the Fed chief.

In his prepared statement, Bernanke announced that the Fed would add $200 billion to the financial system to shore up banks that have been battered by mortgage-related losses. The news was greeted with jubilation on Wall Street where traders sent stocks skyrocketing by 416 points, their biggest one-day gain in five years.

"It's like they're putting jumper cables onto a battery to kick-start the credit market," said Nick Raich, a manager at National City Private Client Group in Cleveland. "They're doing their best to try to restore confidence."

"Confidence"? Is that what it's called when the system is bailed out by Sugar-daddy Bernanke?

To understand the real meaning behind the Fed's action; it's worth considering some of the stories which popped up in the business news just days earlier. For example, last Friday, the International Herald Tribune reported:

"Tight money markets, tumbling stocks and the dollar are expected to heighten worries for investors this week as pressure mounts on central banks facing what looks like the "third wave" of a global credit crisis. Money markets tightened to levels not seen since December, when year-end funding problems pushed lending costs higher across the board."

The Herald Tribune said that troubles in the credit markets had pushed the stock market
down more than 3 percent in a week and that the same conditions which preceded the last
two crises (in August and December) were back stronger than ever. In other words, liquidity was vanishing from the system and the market was headed for a crash.

A report in Reuters reiterated the same ominous prediction of a "third wave" saying: [/size] "The two-year U. S. Treasury yields hit a 4-year low below 1.5 percent as investors flocked to safe-haven government bonds. The cost of corporate bond insurance hit record highs on Friday and parts of the debt market which had previously escaped the turmoil are also getting hit."

Risk premiums were soaring and investors were fleeing stocks and bonds for the safety of government Treasuries; another sure sign that liquidity was disappearing.

Reuters: "The level of financial stress is likely to continue to fuel speculation of more immediate central bank action either in the form of increased liquidity injections or an early rate cut," Goldman Sachs said in a note to clients."

Indeed. When there's a funding-freeze by lenders, investors hit the exits as fast as
their feet will carry them. That's why the lights started blinking red at the Federal Reserve and Bernanke concocted a plan to add $200 billion to the listing banking system.

New York Times columnist Paul Krugman also referred to a "third wave" in his article
"The Face-Slap Theory". According to Krugman, "The Fed has been cutting the interest
rate it controls - the so-called Fed funds rate - (but) the rates that matter most directly to the economy, including rates on mortgages and corporate bonds, have been rising. And that's sure to worsen the economic downturn.".(Now) "the banks and other market players who took on too much risk are all trying to get out of unsafe
investments at the same time, causing significant collateral damage to market
functioning." What the Times' columnist is describing is a run on the financial system
and the onset of "a full-fledged financial panic
."

The point is, Bernanke's latest scheme is not a remedy for the trillion dollar unwinding of bad bets. It is merely a quick-fix to avoid a bloody stock market crash brought on by prevailing conditions in the credit markets.

Bernanke coordinated the action with the other members of the global banking cartel-The
Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve,
and the Swiss National Bank-and cobbled together the new Term Securities Lending
Facility (TSLF), which "will lend up to $200 billion of Treasury securities to primary dealers secured for a term of 28 days (rather than overnight, as in the existing program) by a pledge of other securities, including federal agency debt, federal agency residential-mortgage-backed securities (MBS), and non-agency AAA/Aaa-rated
private-label residential MBS. The TSLF is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally." (Fed statement)

The plan, of course, is wildly inflationary and will put additional downward pressure on the anemic dollar. No matter. All of the Fed's tools are implicitly inflationary anyway, but they'll all be put to use before the current crisis is over.

The Fed's statement continues: "The Federal Open Market Committee has authorized
increases in its existing temporary reciprocal currency arrangements (swap lines) with
the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements
will now provide dollars in amounts of up to $30 billion and $6 billion to the ECB and the SNB, respectively, representing increases of $10 billion and $2 billion. The FOMC extended the term of these swap lines through September 30, 2008."

So, why is the Fed issuing loans to foreign banks? Isn't that a tacit admission of its
guilt in the trillion dollar subprime swindle? Or is it simply a way of warding off litigation from angry foreign investors who know they were cheated with worthless toxic bonds? In any event, the Fed's largess proves that the G-10 operates as de facto cartel determining monetary policy for much of the world. (The G-10 represents roughly 85% of global GDP)

As for Bernanke's Term Securities Lending Facility (TSLF) it is intentionally designed
to circumvent the Fed's mandate to only take top-grade collateral in exchange for loans. No one believes that these triple A mortgage-backed securities are worth more than $.70 on the dollar. In fact, according to a report in Bloomberg News yesterday: "AAA debt fell as low as 61 cents on the dollar after record home foreclosures and a decline to AA may push the value of the debt to 26 cents, according to Credit Suisse Group.

"The fact that they've kept those ratings where they are is laughable," said Kyle Bass,
chief executive officer of Hayman Capital Partners, a Dallas-based hedge fund that made
$500 million last year betting lower-rated subprime-mortgage bonds would decline in
value. "Downgrades of AAA and AA bonds are imminent, and they're going to be significant." Bass estimates most of AAA subprime bonds in the ABX indexes will be cut by an average of six or seven levels within six weeks." (Bloomberg News) The Fed is accepting these garbage bonds at nearly full-value. Another gift from Santa Bernanke.

Additionally, the Fed is offering 28 day repos which -if this auction works like the Fed's other facility, the TAF-the loans can be rolled over free of charge for another 28 days. Yippee. The Fed found a way to recapitalize the banks with permanent rotating loans and the public is none the wiser. The capital-starved banksters at Citi and Merrill must feel like they just won the lottery. Unfortunately, Bernanke's move effectively nationalizes the banks and makes them entirely dependent on the Fed's fickle generosity.

The New York Times Floyd Norris sums up Bernanke's efforts like this:

"The Fed's moves today and last Friday are a direct effort to counter a loss of liquidity in mortgage-backed securities, including those backed by Fannie Mae and Freddie Mac. Given the implied government guarantee of Freddie and Fannie, rising yields in their paper served as a warning sign that the crunch was worsening and investor confidence was waning. On Oct. 30, the day before the Fed cut the Fed funds
rate from 4.75 percent to 4.5 percent, the yield on Fannie Mae securities was 5.75 percent. Today the Fed Funds rate is 3 percent, and the Fannie Mae rate is 5.71 percent, virtually the same as in October... A sign of the Fed's success, or lack of same, will be visible in that rate. It needs to come down sharply, in line with
Treasury bond rates. Today, the rate was up for most of the day, but it did fall back at the end of the day. Watch that rate for the rest of the week to see indications of whether the Fed's move is really working to restore confidence."

Norris is right; it all depends on whether rates go down and whether that will rev-up the moribund housing market again. Of course, that is predicated on the false assumption that consumers are too stupid to know that housing is in its biggest decline since the Great Depression. This is just another slight miscalculation by the blinkered Fed. Housing will not be resuscitated anytime in the near future, no matter what the conditions; and you can bet on that. The last time Bernanke cut interest rates by 75 basis points mortgage rates on the 30-year fixed actually went up a full percentage
point. This had a negative affect on refinancing as well as new home purchases. The cuts were a total bust in terms of home sales.

Still, equities traders love Bernanke's antics and, for the next 24 hours or so, he'll be praised for acting decisively. But as more people reflect on this latest maneuver, they'll see it for what it really is; a sign of panic. Even more worrisome is the fact that Bernanke is quickly using every arrow in his quiver. Despite the mistaken belief
that the Fed can print money whenever it chooses; there are balance sheets constraints;
the Fed's largess is finite. According to MarketWatch:

"Counting the currency swaps with the foreign central banks, the Fed has now committed
more than half of its combined securities and loan portfolio of $832 billion, Lou Crandall, chief economist for Wrightson ICAP noted. 'The Fed won't have run completely out of ammunition after these operations, but it is reaching deeper into its balance sheet than before."

Steve Waldman at interfluidity draws the same conclusion in his latest post:

"After the FAF expansion, repo program, and TSLF, the Fed will have between $300B and
$400B in remaining sterilization capacity, unless it issues bonds directly." (Calculated Risk)

So, Bernanke is running short of ammo and the housing bust has just begun. That's bad.
As the wave of foreclosures, credit card defaults and commercial real estate bankruptcies continue to mount; Bernanke's bag o' tricks will be near empty having frittered most of his capital away on his Beluga-munching buddies at the investment banks.

But that's only half the story. Bernanke and Co. are already working on a new list of hyper-inflationary remedies once the credit troubles pop up again. According to the Wall Street Journal, the Fed has other economy-busting scams up its sleeve:

"With worsening strains in credit market threatening to deepen and prolong an incipient recession, analysts are speculating that the Federal Reserve may be forced to consider more innovative responses -- perhaps buying mortgage-backed securities directly.

"As credit stresses intensify, the possibility of unconventional policy options by the Fed has gained considerable interest, said Michael Feroli of J. P. Morgan Chase. He said two options are garnering particular attention on Wall Street: Direct Fed lending to financial institutions other than banks and direct Fed purchases of debt of Fannie Mae and Freddie Mac or mortgage-backed securities guaranteed by the two shareholder-owned, government-sponsored mortgage companies. ( "Rate Cuts may not be Enough", David Wessel, Wall Street Journal)

Wonderful. So now the Fed is planning to expand its mandate and bail out investment banks, hedge funds, brokerage houses and probably every other brandy-swilling Harvard grad who got caught-short in the subprime mousetrap. Ain't the "free market" great?

But none of Bernanke's bailout schemes will succeed. In fact, all he's doing is destroying the currency by trying to reflate the equity bubble. And how much damage is he inflicting on the dollar? According to Bloomberg, "the risk of losses on US Treasury notes exceeded German bunds for the first time ever amid investor concern the subprime mortgage crisis is sapping government reserves. Support for troubled financial institutions in the U. S. will be perceived as a weakening of U. S. sovereign credit."

America is going broke and the rest of the world knows it. Bernanke is just speeding the country along the ever-steepening downward trajectory.

Timothy Geithner, President of the New York Fed put it like this:

"The self-reinforcing dynamic within financial markets has intensified the downside risks to growth for an economy that is already confronting a very substantial adjustment in housing and the possibility of a significant rise in household savings. The intensity of the crisis is in part a function of the size of the preceding
financial boom, but also of the speed of the deterioration in confidence about the prospects for growth and in some of the basic features of our financial markets. The damage to confidence-confidence in ratings, in valuation tools, in the capacity of investors to evaluate risk-will prolong the process of adjustment in markets. This process carries with it risks to the broader economy."

Without a hint of irony, Geithner talks about the importance of building confidence on a day when the Fed has deliberately distorted the market by injecting $200 billion in the banking system and sending the flagging stock market into a steroid-induced rapture. Astonishing.

The stock market was headed for a crash this week, but Bernanke managed to swerve off
the road and avoid a head-on collision. But nothing has changed. Foreclosures are still
soaring, the credit markets are still frozen, and capital is being destroyed at a faster pace than any time in history. The economic situation continues to deteriorate and even unrelated parts of the markets have now been infected with subprime contagion. The massive deleveraging of the banks and hedge funds is beginning to intensify and will continue to accelerate until a bottom is found. That's a long way off and the road ahead is full of potholes.

"In the United States, a new tipping point will translate into a collapse of the real economy, final socio-economic stage of the serial bursting of the housing and financial bubbles and of the pursuance of the US dollar fall. The collapse of US real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down massively."
(Statement from The Global Europe Anticipation Bulletin (GEAB)

Is that too gloomy? Then take a look at these eye-popping charts which show the extent
of the Fed's lending operations via the Temporary Auction Facility. The loans have
helped to make the insolvent banks look healthy, but at great cost to the country's
economic welfare.

The Fed established the TAF in the first place; to put a floor under mortgage-backed securities and other subprime junk so the banks wouldn't have to try to sell them into an illiquid market at fire-sale prices. But the plan has backfired and now the Fed feels compelled to contribute $200 billion to a losing cause. It's a waste of time.

UBS puts the banks total losses from the subprime fiasco at $600 billion. If that's
true, (and we expect it is) then the Fed is out of luck because, at some point, Bernanke will have to throw in the towel and let some of the bigger banks fail. And when that happens, the stock market will start lurching downward in 400 and 500 point increments. But what else can be done? Solvency can only be feigned for so long.
Eventually, losses have to be accounted for and businesses have to fail. It's that simple.

So far, the Fed's actions have had only a marginal affect. The system is grinding to a
standstill. The country's two largest GSEs, Fannie Mae and Freddie Mac, which are
presently carrying $4.5 trillion of loans on their books, are teetering towards bankruptcy. Both are gravely under-capitalized and (as a recent article in Barron's shows) Fannies equity is mostly smoke and mirrors. No wonder investors are shunning their bonds. Additionally, the cost of corporate bond insurance is now higher than
anytime in history, which makes funding for business expansion or new projects nearly
impossible. The wheels have come of the cart. The debt markets are upside-down, consumer confidence is drooping and, as the Financial Times states, "A palpable sense of crisis pervades global trading floors." It's all pretty grim.

The banks are facing a "systemic margin call" which is leaving them capital-depleted and unwilling to lend. Thus, the credit markets are shutting down and there's a stampede for the exits by the big players. Bernanke's chances of reversing the trend are nil. The cash-strapped banks are calling in loans from the hedge funds which is causing massive deleveraging. That, in turn, is triggering a disorderly unwind of
trillions of dollars of credit default swaps and other leveraged bets. Its a disaster. Economist Nouriel Roubini predicted the whole sequence of events six months before the credit markets seized and the Great Unwind began". Here's a sampling of his recent testimony before Congress:

Roubini's Testimony before Congress:

"There is now a rising probability of a "catastrophic" financial and economic outcome; a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and
about the risks of a systemic financial meltdown. Capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction. In illiquid market actual market prices are now even lower than the lower fundamental value that they now have given the credit problems in the economy. Market prices include a large illiquidity discount on top of the discount due to the credit
and fundamental problems of the underlying assets that are backing the distressed
financial assets. Capital losses will lead to margin calls and further reduction of risk taking by a variety of financial institutions that are now forced to mark to market their positions. Such a forced fire sale of assets in illiquid markets will lead to further losses that will further contract credit and trigger further margin calls and disintermediation of credit.

To understand the risks that the financial system is facing today I present the "nightmare" or "catastrophic" scenario that the Fed and financial officials around the world are now worried about. Such a scenario - however extreme - has a rising and significant probability of occurring. Thus, it does not describe a very low probability event but rather an outcome that is quite possible."

Roubini has been right from the very beginning, and he is right again now. Bernanke can
place himself at the water's edge and lift his hands in defiance, but the tide will come in and wash him out to sea anyway. The market is correcting and nothing is going to stop it.

 

March 15, 2008

Falling Like Dominoes

Lehman Brothers Obtains $2 Billion Bank Credit Line

Lehman Brothers Holdings Inc. obtained a $2 billion credit line as the investment bank tried to blunt the stock's worst drop in almost eight years and assure investors the firm isn't short on cash.

The unsecured, three-year facility from 40 banks replaces an existing credit line, New York-based Lehman said today in a statement. JPMorgan Chase & Co. and Citigroup Inc., also based in New York, led the effort, the firm said. More

February 25, 2008 - Business TimesOnline - U.K.

"THE world is only ten weeks away from running out of wheat supplies after stocks fell to their lowest levels for 50 years.

The crisis has pushed prices to an all-time high and could lead to further hikes in the price of bread, beer, biscuits and other basic foods.

It could also exacerbate serious food shortages in developing countries especially in Africa.

The crisis comes after two successive years of disastrous wheat harvests, which saw production fall from 624m to 600m tonnes, according to the United Nations’ Food and Agriculture Organisation (FAO)."

Had enough?  We thought so.

 

Now go back to our main page and get to work. By the time you read this, it might already be too late.

March 16, 2008

Wall Street fears for next Great Depression

Wall Street is bracing itself for another week of roller-coaster trading after more than $300bn (£150m) was wiped off the US equity markets on Friday following the emergency funding package put together by the Federal Reserve and JPMorgan Chase to rescue Bear Stearns.

One UK economist warned that the world is now close to a 1930s-like Great Depression, while New York traders said they never experienced such fear. Read More

 

March 17, 2008

Bernanke Plays `Whack-A-Mole' With Turmoil in Markets

"The Fed has been playing the equivalent of Whack-A-Mole as financial turmoil keeps cropping up in new and unexpected places,'' says former Fed Vice Chairman Alan Blinder, referring to the arcade game where players try to hammer down plastic critters that randomly pop out of holes. "Yet many of the problems facing us are beyond its reach.'' Read More

 

March 17, 2008

Greenspan Warns of Worst Crisis Since 1945

"The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War," Greenspan said in a Financial Times commentary. "The crisis will leave many casualties," he said, his remarks coming after Bear Stearns, the fifth largest US investment house collapsed Friday and was taken over by JPMorgan Chase for a fraction of its value of only a week ago. Read More

 

March 17, 2008

Wall Street waits for the next domino to fall

Bankers say last week’s near-collapse of one of the most feared and influential US brokerage firms could not have come at a worse time for a sector battered by bad news and huge losses. Read More

 

March 16, 2008

It's Just About Over for the Dollar

Gulf Arab States Should Scrap Dollar Currency Pegs

Marc Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom report, said Persian Gulf economies should revalue their currencies after the dollar slumped to record lows.

Saudi Arabia, the United Arab Emirates and three other Gulf states should link their currencies ``to a basket, and not the weakest currency in the world,'' Faber told a Middle East investment conference in Abu Dhabi today. ``They should have de- pegged their currencies a long time ago,'' he said. Faber, who advised investors to buy gold at the start of its six-year rally, this month said Federal Reserve moves to cut interest rates to avert a U.S. economic slowdown will ``destroy the U.S. dollar.'' Read More

 

 

March 16, 2008

The Dreaded Margin Calls Have Begun

The Ides of March--The Dreaded Margin Calls Have Begun at Banks and Hedge Funds

You may ask, "What does all this high finance news mean to me? I don't have any money in hedge funds or investment banks." This bad news means that not only will there likely soon be some big bank runs, but also there will be The Mother of All Bailouts, in which the US taxpayers will foot the bill to bail out boutique investing banks, possibly a few big money center banks, and dozens of hedge funds. We are talking about hundreds of billions if not trillions of dollars that don't exist. Read: monetization. So get ready for mass inflation of the US Dollar! Read More

 

March 16, 2008

JP Morgan Agrees to Buy Bear Stearns for $2 a Share
JP Morgan Chase agreed to buy troubled investment bank Bear Stearns for about $2 a share, or $236 million, a fraction of what the company was worth on Friday.

The boards of both companies unanimously approved the transaction late Sunday.

According to a press release, the transaction will be a stock-for-stock exchange will exchange 0.05473 shares of its common stock for each share of Bear Stearns stock. Based on the closing price on Friday, the transaction would have a value of approximately $2 per share.

Effective immediately, JPMorgan Chase is guaranteeing the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations. Other than shareholder approval, the closing is not subject to any material conditions.
The transaction is expected to have an expedited close by the end of the calendar second quarter 2008. The Federal Reserve, the Office of the Comptroller of the Currency (OCC) and other federal agencies have given all necessary approvals.

In addition to the financing the Federal Reserve ordinarily provides through its Discount Window, the Fed will provide special financing in connection with this transaction. The Fed has agreed to fund up to $30 billion of Bear Stearns' less liquid assets.

"JPMorgan Chase stands behind Bear Stearns," said Jamie Dimon, Chairman and Chief Executive Officer of JPMorgan Chase. "Bear Stearns' clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns' counterparty risk. We welcome
their clients, counterparties and employees to our firm, and we are glad to be their partner."

Dimon added, "This transaction will provide good long-term value for JPMorgan Chase shareholders. This acquisition meets our key criteria: we are taking reasonable risk, we have built in an appropriate margin for error, it strengthens our business, and we
have a clear ability to execute."

"The past week has been an incredibly difficult time for Bear Stearns. This transaction represents the best outcome for all of our constituencies based upon the current circumstances," said Alan Schwartz, President and Chief Executive officer of Bear Stearns. "I am incredibly proud of our employees and believe they will continue to add tremendous value to the new enterprise."

The transaction is expected to be ultimately accretive to JPMorgan Chase's annual earnings.

"This transaction helps us fill out some of the gaps in our franchise with manageable overlap," said Steve Black, co-CEO of JPMorgan Investment Bank. "We know the Bear Stearns leadership team well and look forward to working with them to bring our two companies together."

"Acquiring Bear Stearns enables us to obtain an attractive set of businesses," said Bill Winters, co-CEO of JPMorgan Investment Bank. "After conducting due diligence, we're comfortable with the quality of Bear Stearns' business, and are pleased to have them as
part of our firm."

"JPMorgan Chase's management team has a strong track record of effective merger integration," said Heidi Miller, CEO of JPMorgan Treasury & Securities Services business. "We will work closely in the coming weeks with Bear Stearns' clients and management to execute the transaction quickly."

 

March 14, 2008

Leading Economist: Dollar Faces Outright Collapse: Financial experts issue dire warnings as Fed and Treasury continue to say they are "committed to a strong dollar"

Another prominent economist has warned that the bottom may soon drop out of the dollar completely as the currency hits fresh lows and continues to sink worldwide. Peter Schiff, a dollar-bear at Security Pacific Capital, told the London Telegraph that the greenback faced the danger of outright collapse as countries in Asia and the Middle East mull plans to break their dollar pegs, which are fueling inflation across the region. Read More

March 15, 2008

Market Panic Forces Governments Into Action

We are watching the biggest panic in global financial markets that has occurred in my 65 years of life and 50 years of stock, bond and commodities investing. It’s the Saint Patrick’s Day weekend and old Saint Patrick would probably be fascinated to see all the rich and worldly people running around in a panic. Read More - Scroll Down for This Story

March 15, 2008

Which bank is going to follow the Bear?

“This is going to go all the way up the chain. There is a risk that all broker dealers are going to become an endangered species if the credit crisis is not sorted out. If they can’t fund themselves, they will have to shrink. All the other firms are in danger, too.” Read More

March 14, 2008

THE IMPLOSION IS ACCELERATING, PREPARE WHILE YOU CAN

National Guard units are training and preparing for urban combat. The United States has just reached an agreement with Canada’s armed forces to come in to this country and assume combat roles should they be needed in American cities and towns. The Federal Reserve’s last ditch effort to stem the “blood loss” in the sub-prime and other currency markets has failed. The dollar has been abandoned for Euros. The stock market can’t find its ass with both hands and a Chinese made, Wal-Mart sold ass finder. Israel has demanded that all of the financial aid it receives from Washington (that’s us) be paid for in Euros. The ultimate irony and slap in the face. Oil, dairy, wheat, wheat products, gold, silver, copper prices, the list goes on and on, are racing for the stratosphere with no end in sight. An implosion has begun and it has no known method of stopping or reversing until critical mass is reached. It will be followed by an explosion in the economy and the political realm unseen since the founding of this nation. Read More

From South of the Border where Taco Riots Are Taking Place - Americans aren't the only ones who will be fighting for American jobs:

Legislators from Mexican State Angry at Influx of -- Mexicans  'Mexico is not prepared for this, for the tremendous problems' it will face as more and more Mexicans working in Arizona and sending money to their families return to hometowns in Sonora without jobs. Read more

March 14, 2008

Fed takes boldest action since the Depression to rescue US mortgage industry

The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis.

The Fed's in a desperate race with spectre of collapse The Bank of England, the key European central banks, and the Bank of Canada all joined in a coordinated move with a mix of policies to halt the downward spiral in the credit markets, expanding on the "shock and awe" tactics used late last year. Read More

March 5, 2008

Prepare To Panic!

"There will probably be some bank failures." (Federal Reserve Commissar Ben Bernanke, in a presentation to Congress last week intended to forestall panic. )

The U.S. economy is sinking, and it will take the global economy with it.

This is the perfect time to panic. If we wait until our rulers give us permission to panic, we'll be dragged to the bottom along with everyone else.

One needn't be a devoted student of history to recall the proud boast that attended the launch of the Titanic: "Not even God could sink this ship." As it happens, God didn't have to bother, since an iceberg -- not one of his more notable creations -- proved adequate to that task.

Just as the Titanic was too mighty and cunningly designed to sink, Citigroup is supposed to be too big and too powerful to fail. In fact, Citi is supposed to help rescue smaller banks when they get in trouble. Read More

February 16, 2008

Planned Collapse of the U.S. Real Economy

From the Global Europe Anticipation Bulletin

According to LEAP/E2020, the end of the third quarter of 2008 will be marked by a new tipping point in the unfolding of the global systemic crisis. At that time indeed, the cumulated impact of the various sequences of the crisis (see table below) will reach its maximum strength and affect decisively the very heart of the systems concerned, on the frontline of which the United States, epicentre of the current crisis. In the United States, this new tipping point will translate into a collapse of the real economy, final socio-economic stage of the serial bursting of the housing and financial bubbles (1) and of the pursuance of the US dollar fall. The collapse of US real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down massively (2),...  Read More

February 26, 2008

'Panic' wheat buying across the US
In the wheat price surge this week, the leading wheat contract in Minneapolis, US, has risen by more than the entire worth of the contract just months ago. Prices rallied by $5.75 a bushel on Monday, being up by nearly 30pc at one point compared with Friday's close.

Eight months ago on June 19, the lead Minneapolis wheat contract settled at over $US5.00 a bushel.

Panic over commodity shortages continues to emerge as the dominant factor in the global markets, with both end user and speculative buyers of corn, soybean, cotton, rice and a host of other commodities taking note of what's happening in the wheat pit.

While US has made improvements to increase crop production efficiency in recent years, the world hasn't really put sufficient investment into production agriculture for several decades.

The net result has been declining stocks at the same time that expanding global wealth has demanded more raw commodities.

The net result on Monday was new all-time record high prices for corn, soybeans and wheat on the same day.

Sentiment in the marketplace is changing from, 'buying just-in-time' to one of, 'buy what you need at any price' and then to 'buy even more to restock the shelves'.

In other words, there's evidence to suggest that we're beginning to enter the hoarding phase of the inflationary cycle.

Along that line, commodity traders are attempting to hoard land on which to produce their respective commodities by bidding up prices in an acres war.

The market should remain in this phase until supply reaches surplus levels and everything collapses, similar to what was seen in the late-90s.

However, there's little evidence at this point that the market will begin that collapse anytime soon, especially with the US growing season still weeks away and weather being as large as it's ever been this year.

That doesn't mean that there aren't risks and that there won't be large price swings similar to what have been seen in the wheat pits over the past six months.

But it does mean that end users and speculators alike, remain anxious to buy those price breaks when they occur.

Corn was largely a follower on Monday, reacting to sharply higher wheat and soybean prices.

Demand remains good, but most of the focus was with the above two commodities that are facing immediate supply shortfalls.

The real strength in corn is in the fear that other crops will rob too many acres from the feed grain, rendering it short in supply in the next marketing year that begins September 1.

Solid demand for soyoil and soybeans, especially from China, continues to fuel buying interest in the oilseed complex.

China is said to be buying both to fight food inflation and to build inventories ahead of this year's Olympics.

Supply fears created by adverse weather in China's rapeseed belt earlier this month, simply reinforced the sentiment.

The outright panic seen in the wheat pits today sent additional tremors through the oilseed market, where traders couldn't help wonder if a similar scenario could be in its future.

The panic buying came on the day that Minneapolis lifted all daily limits on the March contract, hoping to ensure that the contract would enter into its delivery period in an orderly fashion on Friday.

Nobody wanted to be a seller in this environment, causing the lead contract to quickly surge above $23/bus.

The Minneapolis March contract eventually reached $25 per bushel, before correcting lower to $24 at the close, up $4.75 on the day.

The deferred Minneapolis contracts locked the expanded 90c daily trading limit higher for much of the day.

Limits on those contracts will expand to $1.35 tomorrow, beginning with electronic trade this evening (US central time).

Chicago and Kansas City contracts locked the 60c daily trading limit higher today, with those limits expected to increase to 90c.

 

Source: FarmOnline, North Queensland Register (Australia) ARLAN SUDERMAN, FARM PROGRESS GRAIN MARKETS ANALYST

 

February 25, 2008

Middle Class May Be Subject To Food Rations, Warns UN
Source: Prison Planet- Paul Joseph Watson
 

The UN is warning of a food shortage crisis and drawing up plans for food rations which will hit even middle-class suburban populations as inflation and economic uncertainty causes the prices of staple food commodities to skyrocket. The United Nation's World Food Programme cautions today that if it doesn't receive more funding, it will have to halt food aid to developing countries like Mexico and China.

"The WFP crisis talks come as the body sees the emergence of a "new area of hunger" in developing countries where even middle-class, urban people are being "priced out of the food market" because of rising food prices," reports the Financial Times.

The warning coincides with a speech by William Lapp, of US-based consultancy Advanced Economic Solutions, who cautioned that rising agricultural raw material prices would translate this year into sharply higher food inflation. It also parallels a prediction by Don Coxe, a Chicago-based global portfolio strategist for BMO Financial Group who correctly forecast the fall of the dollar and the rise in price of gold and oil years in advance, who last week spoke of a "global food crisis" which will cause the world to enter into, "A period of food shortages and swiftly rising prices," leading to government embargoes.

With the U.S. on the verge of a recession and, as many analysts have warned, a potential second great depression, those long scoffed at for hoarding vast quantities of storable food may unfortunately be able to say "I told you so" if the dollar continues to deteriorate and people begin to be priced out of the food market.

Global food prices have skyrocketed by as much as 60 per cent in the past year, while UN officials warn of the likelihood of food riots.

"If prices continue to rise, I would not be surprised if we began to see food riots," said Jacques Diouf, director-general of the UN's Food and Agriculture Organisation, last October.

Many see the food shortages, whether real or manufactured, as simply another pretext for the implementation of martial law and the introduction of foreign troops to patrol major U.S. cities. A recent announcement by Northcom confirmed that U.S. and Canadian troops will be allowed to patrol each other's countries in the event of a national emergency.

"U.S. Air Force Gen. Gene Renuart, commander of North American Aerospace Defense Command and U.S. Northern Command, and Canadian Air Force Lt.-Gen. Marc Dumais, commander of Canada Command, have signed a Civil Assistance Plan that allows the military from one nation to support the armed forces of the other nation during a civil emergency," reads a Northcom press release.

 

February 22, 2008

Depression + Inflation + Famine = Chaos!

Oftentimes it seems so inconceivable that we could have come to this place, yet here is exactly what we are facing, right now: Depression in the housing market; retail inflation (due entirely to the price of oil and the plummeting dollar), credit availability all but shut down, and today we discover that grain stores are at their lowest point since they began measuring in

1960: 53 days. According to the CEO of Potash Corp., the Canadian fertilizer giant, if there is any disruption to this year’s grain harvest, the world will be facing famine in 2009. And this is not a question of the rock-concert-for-third-world-countries famine, folks. He is describing global shortages of wheat. Food prices are already on the rise; with grain shortages, will surely come hoarding and hyperinflation in food. Read More