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Global Economy - acharya - 10-10-2008
<img src='http://s.wsj.net/media/fedfunds-081008-1-5.gif' border='0' alt='user posted image' />
October 8, 2008, 2:49 pm<b>
Will Fed Cut Again in Three Weeks?</b>
The Federal Reserve cut interest rates today by a half percentage point in a coordinated effort with global central banks, and already some economists are wondering whether more cuts are imminent.
The Federal Open Market Committee convenes again in three weeks for its scheduled rate-setting meeting, and even though todayâs move drops the federal funds rate to 1.5%, some economists see a further drop on Oct. 29.
In a research note, RBS Greenwich Capital said it expects the central bank to cut the fed funds rate to 1% at its next meeting. âIn recent years, whenever rates have been cut between meetings in an emergency fashion, another easing has been adopted at the subsequent meeting,â the economists said. âIn the current case, the argument for further rate cuts is even stronger than it might have been in prior episodes. The Fed will clearly take the view that âa stitch in time saves nine.â Stabilizing the financial situation is paramount right now, as the Fed cannot allow things to go too far.â
However, Alan Levenson of T. Rowe Price said that the Fed may be willing to wait a bit and see what other central banks are willing to do. He also notes that in previous situations following an emergency cut, the rate was still at a relatively high rate. âAt 1.5%, the funds rate is not far from the 1% level that could threaten the viability of money market funds,â he noted.
Michael S. Hanson of Barclays Capital said that while he expects the Fed to cut again later this month, much depends on what happens in the markets. âShould markets respond positively to the many initiatives enacted by monetary and fiscal authorities around the globe, the FOMC may be less aggressive in its interest rate decision at end October,â he said. However, âshould markets take a further leg down before the end of the month a second intermeeting rate cut cannot be ruled out. Having started down this path, the Fed will act as needed in a timely manner to help restore confidence in the markets.â âPhil Izzo
Permalink | Trackback URL: http://blogs.wsj.com/economics/2008/10/08/...eeks/trackback/
Global Economy - Guest - 10-10-2008
Shanghai Composite 1,994.776 9:43PM ET 79.807 (3.85%)
<b>Hang Seng 14,717.52 10:00PM ET 1,225.72 (7.69%) </b>
BSE 30 11,328.36 Oct 8 0.00 (0.00%)
Jakarta Composite 1,451.6689 Oct 8 0 (0.00%)
KLSE Composite 968.89 5:02AM ET 1.30 (0.13%)
<b>Nikkei 225 8,288.41 9:54PM ET 869.08 (9.49%)</b>
NZSE 50 2,828.408 9:52PM ET 115.987 (3.94%)
<b>Straits Times 1,948.69 10:00PM ET 154.02 (7.32%) </b>
Seoul Composite 1,200.32 10:15PM ET 94.57 (7.30%)
Taiwan Weighted 5,130.71 1:46AM ET 75.69 (1.45%)
Nikkei dives, eyeing biggest fall since '87 crash
Global Economy - Guest - 10-10-2008
Late future trading oil droped
Oil <b>82.24 </b>-4.35 -5.02 %
BRENT CRUDE FUTR <b>78.910</b> -3.750 -4.54 %
Indian Rupee currently trading at 49.30 per dollar.
10:02 AM - The market has opened with a huge gap down on Friday. Sensex is at 10270.32 -9.34% , down 1000 points from the previous close. Nifty is at 3243, down 270 points
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->JAKARTA (Reuters) - Indonesia dropped plans to reopen its stock market on Friday morning after a two-day suspension and despite policy makers unveiling new measures aimed at calming fears that Southeast Asia's largest economy faces a new crisis.<!--QuoteEnd--><!--QuoteEEnd-->
<b>CHINA </b>where are you ?
Global Economy - acharya - 10-10-2008
<b>
FORECASTER OF THE MONTH
Top forecasters see severe recession</b>
Harris, O'Sullivan win fifth championship in MarketWatch contest
By Rex Nutting, MarketWatch
Last update: 12:01 a.m. EDT Oct. 10, 2008
Comments: 72
WASHINGTON (MarketWatch) -- Award-winning economist Jim O'Sullivan of UBS takes no solace in the accuracy of his long-standing forecast that the housing bubble would severely impact the U.S. economy.
"It is what it is, whether we forecast it or not," O'Sullivan said. "It's a painful time on Wall Street."
O'Sullivan and his boss, Maury Harris, won their fifth Forecaster of the Month award from MarketWatch in September, beating 44 of their peers in the monthly contest that honors those who've done the best job of forecasting the tricky monthly numbers that most move financial markets.<!--QuoteBegin-->QUOTE<!--QuoteEBegin--> Maury Harris,
Jim O'Sullivan
UBS
 Forecast Actual*
Nonfarm payrolls -80,000 -84,000
ISM 49.5% 49.9%
Trade gap $60 bln $62.2 bln
Retail sales 0.4% -0.3%
CPI -0.1% -0.1%
Industrial production -0.8% -1.1%
Housing starts 925,000 895,000
New homes 505,000 460,000
Durable orders -3.0% -4.5%
Consumer confidence 59 59.8
* Subject to revision<!--QuoteEnd--><!--QuoteEEnd-->
Harris and O'Sullivan think the U.S. economy will be weaker for the next five or six months before a gradual recovery in the second half of the year behind further significant actions by the Federal Reserve to unfreeze the credit markets and stimulate growth again.
They expect the Fed to lower its target interest rate to 1% (from 1.5% currently) and provide even more support to financial firms and credit markets through special lending and liquidity operations.
The Fed "will do what has to be done" to maintain a functioning financial system, O'Sullivan said. There's "an awful lot more they can do," he said, adding "They do get it."
The recession will be "much more severe than the last two," although he suggests that any comparison with the Great Depression is ludicrous. The unemployment rate peaked at about 25% in the Thirties; he sees the official unemployment rate rising to about 7.3% late next year from 6.1% now.
Measured by the expected 0.8% decline in gross domestic product, this recession is likely to be milder than the average 2% drop in post-World War II recessions. Measured by the increase in the unemployment rate, it's likely to be a little worse than average. If it began in December and ends next March, it would tie the 1973 and the 1981 as the longest downturns since the Depression.
But those metrics may hide the depth of this downturn. In the 1950s through 1980s, recessions were marked by sharp declines in output and employment, followed by a quick snap back as inventories corrected.
The last two recessions, however, have been followed by "jobless recoveries." It took years for employment to bounce back to pre-recession levels. It's likely to be like that this time around too, O'Sullivan said.
"It's hard to see where the surge comes from," O'Sullivan said. "The recovery will be defined as the period when unemployment stops rising."
Harris and O'Sullivan won the September contest with top forecasts on the consumer price index and industrial production. They also had among the most accurate forecasts for payrolls, consumer confidence, durable goods, housing starts and the trade balance.
With their fifth victory, the UBS team joins economists for Citigroup and RBS Greenwich Capital as the only five-time winners in the contest that was inaugurated in the autumn of 2003.
The consensus forecasts published by MarketWatch each week come from the median forecasts of the 10 economists who've done best in our contest over the past year, plus the forecasts of MarketWatch economist Irwin Kellner, and the forecasts of the most recent winner of the monthly contest. See Economic Calendar.
Over the past 12 months, the top economists are, in order: Stephen Stanley of RBS Greenwich Capital; Dean Maki's team at Barclays Capital; Stephen Gallagher of Societe Generale; Michael Feroli at J.P. Morgan; Jan Hatzius' team at Goldman Sachs; Harris and O'Sullivan of UBS; Nigel Gault and Brian Bethune of Global Insight; David Wyss of Standard & Poor's; Avery Shenfeld of CIBC World Markets; and David Greenlaw and Ted Wieseman of Morgan Stanley. End of Story
Rex Nutting is Washington bureau chief of MarketWatch.
Global Economy - Guest - 10-10-2008
China Shangai lost 4000 point in one year. They are not coming out with book, they sneaked out for few hours and went back to community hall.
It will be interesting to watch, how much they are effected.
<b>Mexico sells more foreign reserves to boost peso </b>AP (Fri 1:31pm)
⢠Euro/US Dollar Forecast to Decline According to Forex Trading Signals Daily FX (Fri 12:46pm)
⢠<b>Dollar climbs on global market rout</b> CNNMoney.com (Fri 12:34pm)
I think India is doing same to stablize Rupee.
China is sitting doing nothing. <!--emo&
--><img src='style_emoticons/<#EMO_DIR#>/smile.gif' border='0' style='vertical-align:middle' alt='smile.gif' /><!--endemo-->
Global Economy - acharya - 10-11-2008
Depressionomics
Published: 21:30 - 09/10/08
It is time to get real. The western financial system is now, perhaps, stabilised. Banks, and bankers, are in retreat, with civil servants taking their place. The Federal Reserve, for example, can now lend directly to companies. That leaves the most important policy objective: supporting economic growth. The International Monetary Fund forecasts that world growth will fall to 3 per cent in 2009, although it could slump to as low as one. The challenge is to stop this chance of global recession turning into a depression.
This is as true of developed countries as it is of the developing world. Some exporting countries will be fine: oil prices remain three times higher than they were five years ago. But not all emerging economies are so lucky. The World Bank reckons as many as 30 face severe balance of payments problems. Even China, with its huge treasure chest of foreign reserves, is not immune. Without high economic growth, Chinese unemployment explodes. Recession, always arbitrarily defined, is relative.
The ability of governments to boost growth will be crucial. This may go against the purest free market grain. But look at it this way. The IMF estimates that US and European banks need to shrink their balance sheets by $2,000bn a year over the next five years. That is a terrifying contraction in the supply of global credit. If governments do not pick up the slack, the world risks falling into what is called the "paradox of thrift" where everyone cuts back spending simultaneously. Companies retrench, unemployment rises, consumption falls further, and so on in a vicious spiral. This was the plight of Asean countries after their 1997 crisis. They only wriggled free thanks to growing exports â a solution that cannot work for the whole world.
The G7 meeting in Washington this weekend is an opportunity to announce synchronised state action that mirrors Wednesday's coordinated rate cuts. Ministers can choose between direct spending or tax cuts, depending on their political hue. But either way, fiscal rules, such as Europe's Maastricht criteria, are there to be broken. Now is the time to do so.
Global Economy - acharya - 10-11-2008
Economic orthodoxy was built on superstition
Madeleine Bunting
There is no alternative, went the mantra. Now this corrupt mythology lies in tatters, the crisis of conviction is profound.
Over morning newspapers with BBC radio in my ear, I eye my garden nervously. If I ripped up the roses and the lavender, how many rows of potatoes could I fit in? Enough to feed a family? Is this madness or not? And why is it that I no longer trust the economists and policymakers to give me a straight answer to that question?
There is a strange air of suspense. Everyone agrees that things could get grim, but what does that mean? Grim, as in a bit of nasty unemployment, or grim, as in total economic breakdown with queues for soup kitchens and millions living off their allotments? If the latter sounds fanciful, there are countries like Argentina and Russia who can tell you from bitter recent experience what happens when economies collapse.
Gordon Brown, fearful of âself-fulfilling prophecies,â instead offers a tinny upbeat message. Everyone knows now that it is all about confidence: will savers panic and move their money to Ireland, crippling British banks? The circumspection of the wise men becomes sinister. On BBC radioâs morning Today programme, presenter John Humphrys pressed Richard Lambert, director general of the Confederation of British Industry, for his forecast. Mr. Lambert hesitated, replying with, âmy hope is ....â âNo, no,â interrupted Mr. Humphrys, âwhat is your forecast?â There was another hesitation before Mr. Lambert nervously âforecastâ a grim 18 months before life resumed as normal. It sounded like a hope. No one has any idea what is going to happen.
No sooner do economists or government ministers make a pronouncement using words such as âimpossibility,â âunlikelyâ or ânever,â than they are having to eat them. If these are uncharted waters then perhaps we are at the moment when the tsunami is visible on the horizon, and the tide has suddenly retreated, and fish are stranded, gasping for oxygen all over the beach. But donât get too bogged down in seed catalogues (and forget trying to get your head around collateralised debt obligations â even the Financial Timesâ banking correspondents admit it is âfiendishly complicatedâ), the average citizen has a far more important plot to unravel: how did we get in this mess, and how do we make sure it doesnât happen again?
Answering these two questions does not require a crash course in high finance and economics, because this crisis is as much about politics and ideology as anything. If youâre pressed for time, the reading list can be very short. Key is Karl Polanyiâs The Great Transformation, published in 1944, an economic history which sets out to explain 1929, the Great Depression and the rise of fascism. Polanyiâs book came out the same year as another influential Austrian economist, Friedrich Hayek, brought out the central text of neoliberalism, The Road to Serfdom.
Hayek became the founding father of a model of economic management which has brought us to the current crisis; Polanyi, with extraordinary prescience, warned that the crisis would come; he rejected the idea that the market is a âself-regulatingâ mechanism which can correct itself. There is no âinvisible handâ such as the neoliberals maintain, so there is nothing inevitable or ânaturalâ about the way markets work: they are always shaped by political decisions.
At the time Polanyi was writing, there were many who agreed with him that free-market capitalism was chronically and destructively unstable, with terrible political consequences. But in the 1970s and 1980s, Hayekâs neoliberalism began to take hold on the U.S. ruling elite, Margaret Thatcher was recruited â and in due course Tony Blair and Gordon Brown. âRoll back the state, leave the economy to run itselfâ has held sway ever since. As Ann Pettifor points out on her website, debtonation.org, Alan Greenspan wrote enthusiastically in August that âthe past decade has seen mounting global forces (the international version of Adam Smithâs invisible hand) quietly displacing government control of economic affairs.â He blithely continued that the greatest danger facing the economy was that âsome governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs.â Last week, Greenspan did a gigantic volte-face as he pleaded for government to do just that â reassert its grip in the form of the bail-out.
Self-destructive
We are now learning what countries across the developing world have experienced over three decades: unstable and inequitable neoliberal economics leads to unacceptable levels of social disruption and hardship that can only be contained by brutal repression. Add that to the two other central charges against deregulated capitalism: first, it may create wealth but it does not distribute it effectively; and second, that it takes no account of what it cannot commodify â neither the social relationships of family and community nor the environment, which are vital to human wellbeing, and indeed to the functioning of the market itself. Ultimately, neoliberal capitalism is self-destructive.
We are now witnessing the collapse of this absurd economic orthodoxy that has dominated politics for nearly 30 years. Its triumphalist arrogance, its insistence on orthodoxy, has been comparable to Soviet communism in its scale. For two decades, weâve been told âTinaâ â âThere is no alternative.â
Economists talk of trust, belief, faith; we now understand that all along neoliberal capitalism was a form of mythology. Thatâs why the triumphalism was necessary â you could not afford to have anyone challenge the system or we might all realise we were gawping at the emperorâs nakedness. Rowan Williams, the leading English churchman, was right to quote Marx, that âunbridled capitalism becomes a kind of mythology, ascribing reality, power and agency to things that have no life in themselves.â Richard Dawkins should be critiquing this superstitious belief system.
Fortunately, Thomas Frank did so in his brilliant book, One Market Under God (2001). This is the second book on the reading list, because it explains how neoliberalism entrenched its triumphalism into the political system of the U.S.; how it marginalised and delegitimised all challenge and established hegemony in the so-called free world.
Now, as it all totters, we can take stock. We can ask how and why the critique â of which Frank was a part and Polanyi the bible â which was emerging in the late 1990s was crippled. The anti-globalisation movement argued that neoliberal capitalism was unjust, unstable and destructive to human and environmental wellbeing. Sounds sensible now, but at the time it mysteriously got smeared by association with anarchists with a penchant for smashing Starbucksâ windows. The broad network of social grassroots movements â U.S. unions, Mexican peasants, Indian farmers â were misnamed, misunderstood, ridiculed and ignored. There is no alternative, the politicians intoned mantra-like.
Then 9/11 and for the next seven years a sideshow was offered as a distraction with caricature villains and thriller drama. While eyes were on the absurd charade of the âthreat of Islamist terrorism to western civilisation,â the real doomsday scenario that poses a far greater threat to western civilisation (whatever that is) was gathering pace right next to Ground Zero, in Wall Street.
As in all mythologies, the only option, according to Timothy Garton Ash (not noted for his religious faith) in the London-based Guardian recently, is to pray. What makes me frightened is that this is a corrupt mythology which, like that of the Aztecs, may require a lot of human sacrifice. â © Guardian Newspapers Limited, 2008
Global Economy - Guest - 10-11-2008
Today Huckabee said, this was "economic terrorism". Some people within US, and external players played important role, it was according to some high officials in govt.
Global Economy - acharya - 10-12-2008
<b>Impact on Asia will be less: Y.V. Reddy
</b>
M. Ramesh
Rasheeda Bhagat
Singapore, Oct. 11 Former Governor of Reserve Bank of India, Dr Y.V. Reddy, on Saturday said the impact of the global financial turmoil on Asia will not be as much as on the Western countries. Indeed, this could eventually lead to Asian countries supplying goods and capital to the entire world, he said.
âI am less pessimistic about Asia,â Dr Reddy said, while speaking at the Pravasi Bharatiya Divas, a conference of the Indian diaspora.
Giving reasons, he said banks in Asia were better capitalised and not much exposed to sophisticated derivatives. Secondly, Asian economies were in a high-growth mode and hence they had a better ability to withstand the crisis. Further, most of the Asian countries enjoyed a strong fiscal position and current account surpluses. This gave them an ability to bail out a failing financial institution, if necessary.
Leverages
Also, anecdotal evidence showed that âfinancial leverageâ (or borrowings relative to networth) in these countries was not much, Dr Reddy said. In an economy, there were three entities that borrow â households, companies and financial intermediaries (banks and non banking finance companies). If one of the two entities was over-borrowed, the problem was manageable, but if two out of the three were over-borrowed âone has to be carefulâ. But on this count too, Asia scored better, he said.
Dr Reddy also said the âintensity of the dilemma of the policy makers was also becoming less acuteâ as commodity prices were coming down, and in tandem, so were inflationary expectations.
The former RBI governor also spoke of different structures of financial institutions in Asia and diffusion of financial centres across the region. These also gave strength to the region to withstand any financial turmoil, he said.
He said there would be some impact on Asian countries in line with their dependence on the US for exports. But even then, the issue would be of trade and not a financial meltdown.
Dr Reddy also had a word of caution on the integration of the financial sector with the global financial system. Trade integration was good, he observed, but financial integration called for a ânuanced approachâ, he said but did not elaborate.
Lot of good news
Dr Reddy said he did not quite know if all the bad news had come out, but âthe worst is behind us in terms of sentiment.â However, he pointed to many âgood newsâ. For example, he said the governments across the globe were âvery, very proactiveâ.
Not only were the central banks taking a coordinated approach, the governments were also acting in tandem, he said. As long as the problem was one of liquidity, it was up to the central banks to manage it, but when it became a solvency issue, it became the responsibility of the governments, he said, adding that, fortunately, governments were playing their role.
An outcome of the crisis, according to Dr Reddy, is the âhistorically significant redefining of the concept of the central bankâ.
Global Economy - acharya - 10-12-2008
<b>Developing countries worried about growth prospect</b>
Global Economy - shamu - 10-12-2008
Is there any Russia hand in pricking American economic bubble?
Global Economy - Guest - 10-13-2008
<!--QuoteBegin-shamu+Oct 12 2008, 01:20 PM-->QUOTE(shamu @ Oct 12 2008, 01:20 PM)<!--QuoteEBegin-->Is there any Russia hand in pricking American economic bubble?
[right][snapback]89085[/snapback][/right]
<!--QuoteEnd--><!--QuoteEEnd-->
I think some linked with Democrats and Soros. some politicians name is also making circle. Before buying big piece of Halibuton, Soros and his buddies flaoted lot of negative articles and media especially CNN and NBC played bigger role, when stock came down, his Hedge Fund bought maximum piece of Haliburton and now stock price is up. I hope Pres. Bush will name people and Hedge Fund managers involved in this world wide attack on financial insitution. People sitting in Dubai had manipulated lot.
Russia stock market tanked. China had fake stock opening in Friday. Nothing is coming out from them.
Now we have to watch Oil price. If prices goes down under $70 this week, then Russian Oil Billionaries supported by Putin are not involved.
This is not US problem anymore, rest of world is very much effected, now we have to see how many countries will survive and unrest all over world.
In India and China, public unrest is very much possible.
For India, type of crop they have planted this farming year, very much possible food shortage, unemployment and high inflation and later deep deflation is possible.
Global Economy - Guest - 10-13-2008
This is just for information, no need to panic, I can't confirm how true is this. - Journalist is leftist<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>FEMA sources confirm coming martial law, says Wayne Madsen</b>
By staxbrix | October 8, 2008
Wayne Madsen a Washington based investigative journalist, author, columnist and former U.S. Naval Officer is reporting a document called the âC & Râ document is being passed around among senior members of Congress and their staff.
<b>Bush planning martial law</b>
FEMA sources have told Madsen that the Bush administration is putting final touches on a plan that would initiate <b>martial law in the event of continuing economic collapse causing massive social unrest, bank closures resulting in violence against financial institutions and another fraudulent presidential election</b> that would result in rioting in major cities and campuses around the country.
<b>Troops on American streets</b>
In addition to FEMA sources, Army Corps of Engineer sources report that the assignment of the 3rd Infantry Divisionâs 1st Brigade to NorthCom to augment FEMA and federal law enforcement for the purpose of traffic control, crowd control, curfews, enhanced border and port security, and neighborhood patrols in the event a national emergency being declared.
<b>America may default on itâs loans</b>
The âC & Râ document reportedly states that if the United States defaults on loans and debt underwritten from China, Japan and Russia and America unilaterally cancels the debts, America can expect a war that will have disastrous results for the United States and the world.
<b>âConflictâ is the âC wordâ in the document.</b>
Washington fears a popular Revolution
The other possibility discussed in the document is that the federal government will be forced to drastically raise taxes in order to pay off debts to foreign countries to the point that the American people will react with a popular revolution against the government.
â<b>Revolutionâ is the documentâs âRâ word.</b>
http://waronyou.com/2008/10/fema-sou...-wayne-madsen/ <!--QuoteEnd--><!--QuoteEEnd-->
Global Economy - dhu - 10-13-2008
<!--QuoteBegin-acharya+Oct 11 2008, 08:17 PM-->QUOTE(acharya @ Oct 11 2008, 08:17 PM)<!--QuoteEBegin-->Economic orthodoxy was built on superstition
There is no alternative, went the mantra. Now this corrupt mythology lies in tatters, the crisis of conviction is profound.
[right][snapback]89055[/snapback][/right]
<!--QuoteEnd--><!--QuoteEEnd-->
It is the end of the American myth of Rugged Individualism. There is nothing more pathetic than Ummahwalas pretending to be individualists.
Global Economy - dhu - 10-13-2008
<b>Behind the Panic: Financial Warfare over Future of Global Bank Power</b>
By F. William Engdahl, 10 October 2008
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->What's clear from the behavior of European financial markets over the past two weeks is that the dramatic stories of financial meltdown and panic are deliberately being used by certain influential factions in and outside the EU to shape the future face of global banking in the wake of the US sub-prime and Asset-Backed Security (ABS) debacle. The most interesting development in recent days has been the unified and strong position of the German Chancellor, Finance Minister, Bundesbank and coalition Government, all opposing an American-style EU Superfund bank bailout. Meanwhile Treasury Secretary Henry Paulson pursues his Crony Capitalism to the detriment of the nation and benefit of his cronies in the financial world. It's an explosive cocktail that need not have been.
Stock market falls of 7 to 10% a day make for dramatic news headlines and serve to foster a broad sense of unease bordering on panic among ordinary citizens. The events of the last two weeks among EU banks since the dramatic state rescues of Hypo Real Estate, Dexia and Fortis banks, and the announcement by UK Chancellor of the Exchequer, Alistair Darling of a radical shift in policy in dealing with troubled UK banks, have begun to reveal the outline of a distinctly different European response to what in effect is a crisis 'Made in USA.'
There is serious ground to believe that US Goldman Sachs ex CEO Henry Paulson, as Treasury Secretary, is not stupid. There is also serious ground to believe that he is actually moving according to a well-thought-out long-term strategy. Events as they are now unfolding in the EU tend to confirm that. <b>As one senior European banker put it to me in private discussion, 'There is an all-out war going on between the United States and the EU to define the future face of European banking.'</b>
In this banker's view, the ongoing attempt of Italian Prime Minister Silvio Berlusconi and France's Nicholas Sarkosy to get an EU common 'fund', with perhaps upwards of $300 billion to rescue troubled banks, would de facto play directly into Paulson and the US establishment's long-term strategy, by in effect weakening the banks and repaying US-originated Asset Backed Securities held by EU banks.
<b>Using panic to centralize power</b>
As I document in my forthcoming book, Power of Money: The Rise and Decline of the American Century, in every major US financial panic since at least the Panic of 1835, <b>the titans of Wall Street-most especially until 1929, the House of JP Morgan-have deliberately triggered bank panics behind the scenes in order to consolidate their grip on US banking. </b>The private banks used the panics to control Washington policy including the exact definition of the private ownership of the new Federal Reserve in 1913, and to consolidate their control over industry such as US Steel, Caterpillar, Westinghouse and the like. They are, in short, old hands at such financial warfare to increase their power.
<b>Now they must do something similar on a global scale to be able to continue to dominate global finance, the heart of the power of the American Century.</b>
That process of using panics to centralize their private power created an extremely powerful, concentration of financial and economic power in a few private hands, the same hands which created the influential US foreign policy think-tank, the New York Council on Foreign Relations in 1919 to guide the ascent of the American Century, as Time founder Henry Luce called it in a pivotal 1941 essay.
It's becoming increasingly obvious that people like Henry Paulson, who by the way was one of the most aggressive practitioners of the ABS revolution on Wall Street before becoming Treasury Secretary, are operating on motives beyond their over-proportional sense of greed. Paulson's own background is interesting in that context. Back in the early 1970's Paulson started his career working for a rather notorious man named John Erlichman, Nixon's ruthless adviser who created the Plumbers' Unit during the Watergate era to silence opponents of the President, and was left by Nixon to 'twist in the wind' for it in prison.
Paulson seems to have learned from his White House mentor. As co-chairman of Goldman Sachs according to a New York Times account, in 1998 he forced out his co-chairman, Jon Corzine 'in what amounted to a coup' according to the Times.
Paulson, and his friends at Citigroup and JP Morgan Chase, had a strategy it is becoming clear, as did the Godfather of Asset Backed Securitization and deregulated banking, former Fed Chairman Alan Greenspan, as I have detailed in my earlier series here, Financial Tsunami, Parts I-V.
Knowing that at a certain juncture the pyramid of trillions of dollars of dubious sub-prime and other high risk home mortgage-based securities would come falling down, they apparently determined to spread the so-called 'toxic waste' ABS securities as globally as possible, in order to seduce the big global banks of the world, most especially of the EU, into their honey trap.
They had help. In recent testimony under oath by Mr Lynn Turner, Chief Accountant of the Securities & Exchange Commission (SEC) testified that the SEC Office of Risk Management which had oversight responsibility for the Credit Default Swap market, an exotic market worth nominally $62 trillions, was cut in Administration âbudget cutsâ from a staff of one hundred people down to one person. Yes that was not a typo. One as in 'uno.'
Vermont Democratic Congressman Peter Welsh queried Turner, â... was there a systematic depopulating of the regulatory force so that it was impossible actually for regulation to occur if you have one person in that office? ...and then I understand that 146 people were cut from the enforcement division of the SEC, is that what you also testified to?â Mr. Turner, in Congressional testimony replied, âYesâ¦I think there has been a systematic gutting, or whatever you want to call it, of the agency and it's capability through cutting back of staff.â
Was that just ideological budget cutting fervor, or was it deliberate? Was former Goldman Sachs man, the man who convinced the President to hire Paulson, Bush's former Director of the Office of Management and Budget (OMB), Joshua Bolten, now the President's Chief of Staff, responsible for insuring there was no effective government oversight on the exploding securitization of mortgage assets?
These are perhaps some questions which the good Congressmen ought to be asking people like Henry Paulson and Josh Bolten, and not such red herring questions as how large Richard Fuld's bonus pay at Lehman was. Are Mr Bolten's fingerprints on the corpse here? And why is no one questioning the role of Paulson as CEO of Goldman Sachs, then the most aggressive promoter of exotic and other Asset Backed Securitization products on Wall Street?
It now would appear that <b>the Paulson strategy was to use a crisis-a crisis that was pre-programmed and predictable as far back as 2003 </b>when Josh Bolten became head of OMB-<b>when it exploded, to panic the more conservative European Union governments into rushing to the rescue of US toxic waste assets.</b>
Were that to have happened, it would in the process destroy what was left of sound EU banking and financial institutions, bringing the world one step closer to a global money market controlled by Paulson's cronies-US-style Crony Capitalism. Crony Capitalism is certainly appropriate here. <b>Paulson's predecessor at both Goldman Sachs and at Treasury, Robert Rubin, liked to accuse the Asian bankers of Thailand, Indonesia and other lands hit with the speculative attacks of US-financed hedge funds in 1997 of 'crony capitalism,' leaving the impression the crisis was home grown in Asia and not the result of a deliberate executed attack by US-financed financial institutions to eliminate the Asia Tiger model among other goals, and turn Asia into the funder of US debt.</b>
Interesting to note is that Rubin is now a Director of Citigroup, obviously one of Paulson's crony bank 'survivors,' and the bank which to date has had to write off the largest sum in toxic waste securitized assets.
If the allegation of pre-planned panic, a la the Panic of 1907 is accurate, and it is a big if, then the plan workedâ¦up to a point. That point came over the weekend of October 3, coincidentally the national unification holiday of Germany.
<b>Germany breaks with US model</b>
In closed door talks well into the evening of Sunday October 5, Alex Weber the hard-nosed head of the Bundesbank, BaFin head Jochen Sanio and representatives of the Berlin coalition Government of Chancellor Merkel came up with a rescue package for Hypo Real Estate of a nominal â¬50 billion. However, behind the dramatic headline number, as Weber pointed out in a September 29 letter to Finance Minister Peer Steinbrück that has been made public, not only did the private German banks have to come up with 60% of that figure, the state with 40%. But also, given the careful manner in which the Government in cooperation with the Bundesbank and BaFin, structured the rescue credit agreement, the maximum possible loss, in a worst case scenario, to the state would be limited to â¬5.7 billion, not â¬30 billion as many believed. It's still real money but not the blank check for $700 billion that a US Congress under duress and a few days of falling stock market prices agreed to give Paulson.
The swift action by Finance Minister Steinbrück to fire the head of HRE, in stark contrast to Wall Street where the same criminal fraudsters remain at their desks reaping huge bonuses, indicates as well a different approach. But that does not cut to the heart of the issue. The situation of HRE arose as noted previously, from excesses in a wholly-owned daughter bank of HRE subsidiary DEPFA in Ireland, an EU country known for its liberal loose regulation and low tax regime.
<b>
A British policy shift</b>
In the UK, after the costly and foolish bailout of Northern Rock earlier in the year, the Government of Prime Minister Gordon Brown has just announced a dramatic change in policy in the direction of Germany's position. Britain's banks will get an unprecedented 50 billion-pound (â¬64 billion) government lifeline and emergency loans from the Bank of England.
The government will buy preference shares from Royal Bank of Scotland Group Plc, Barclays Plc and at least six other banks, and provide about 250 billion pounds of loan guarantees to refinance debt, the Treasury said. The Bank of England will make at least 200 billion pounds available. The plan doesn't specify how much each bank will get.
That means the UK Government will at least partially nationalize its most important international banks, rather than buy their bad loans as under the unworkable Paulson plan. Under such an approach, costs to UK taxpayers once the crisis abates and business returns to more normal conditions, the Government can sell the state shares back to a healthy bank at perhaps a nice profit to the Treasury. The Brown Government has apparently realized that the blanket guarantees it gave to Northern Rock and Bradford & Bingley merely opened the floodgates of government costs without changing the problem.
The new nationalization policy is a dramatic contrast to the Paulson ideological 'free market' approach of buying the worthless bonds held by the select banks Paulson chooses to save, rather than recapitalize those banks to allow them to continue to function.
<b>The battle lines drawn</b>
What has emerged are the outlines of two opposite approaches to the unfolding crisis. <b>The Paulson plan is now clearly part of a project to create three colossal global financial giants-Citigroup, JP MorganChase and, of course, Paulson's own Goldman Sachs, now conveniently enough a bank. </b>Having successfully used fear and panic to wrestle a $700 billion bailout from the US taxpayers, now the big three will try to use their unprecedented muscle to ravage European banks in the years ahead. So long as the world's largest financial credit rating agencies-Moody's and Standard & Poors-are untouched by the scandals and Congressional hearings, the reorganized US financial power of Goldman Sachs, Citigroup and JP Morgan Chase could potentially regroup and advance their global agenda over the coming several years, walking over the ashes of a bankrupt American economy made bankrupt by their follies.
By agreeing on a strategy of nationalizing what EU finance ministers deem are 'EU banks too systemically strategic to fail,' while guaranteeing bank deposits, the largest EU governments, Germany and the UK, in contrast to the US, have opted for what will in the longer run allow European banking giants to withstand the anticipated financial attacks from the likes of Goldman or Citigroup.
The dramatic selloff of stocks across European bourses and across Asia is in reality a secondary and far less critical issue. <b>According to market reports, the selloff is being driven mainly by US hedge funds desperate to raise cash as they realize the US economy is going into economic depression, that they are exposed and that the Paulson Plan does nothing to address that.</b>
A functioning solvent banking and interbank system is far the more strategic issue. The ABS debacle was 'Made in New York.' Nonetheless, its effects have to be isolated and viable EU banks defended in the public interest, not just the interest of Paulson's banking cronies as in the US. Unregulated offshore vehicles such as hedge funds, unregulated banking, unregulated insurance all went into building the $80 trillion ABS Tsunami as I have called it. Certain more conservative EU hands are not about to buy the remedy being offered by Washington.
The coordinated interest rate cut by the ECB and other European central banks while grabbing headlines, in effect do little to address the real problem: banks fear to lend to each other until their solvency is assured.
By initiating state partial nationalizations across the EU, and rejecting the Berlusconi/Sarkozy bailout scheme, the governments of the EU, interestingly enough this time led by the German, are laying a more sound foundation to emerge from the crisis.
<b>Stay tuned, it's far from over. This is a fight for the survival of the American Century which has been bvuilt since 1939 on the twin pillars of American financial dominance and American military dominance-Full Spectrum, Dominance.</b>
<b>Asian banks, badly burned by Wall Street's manipulated 1997-98 Asia Crisis, are apparently very little exposed to the US problem. </b>European banks are exposed in different ways, but none so serious as in the US banking world.<!--QuoteEnd--><!--QuoteEEnd-->
Global Economy - Guest - 10-13-2008
10:02 AM - The market has opened higher on Monday and is moving up. Sensex is at 10,919, up 391 points from the previous close. Nifty is at 3393, up 113 points
Singapore and Hongkong opened high.
Global Economy - ravish - 10-13-2008
Despite very low opinion of the Indian political and government functioning by certain individuals, in the current financial sunami , the Indian economy so far has remained much stable than many others.It only proves that all are not fools and idiots , who are running the show in Delhi.
Global Economy - Guest - 10-13-2008
Yes, India economy is doing real great, managed by smart genius of World, inflation is just low 14%, unemployment is just low 10% officially and it will go futher low to 15%. Farmers are committing sucide, no money for infrastructure.
Last week Government had to sell foreign reserve to stablize Rupee, Ruppe is now hovering around 48-49 to USD. Governmnet had to pour Rs 3000000 crore in system last week to stablize nationalized banks. Now how they are going to pay? Good question, I am not genius here.
Ya, it just proves they are just genius, no one can beat them.
Global Economy - Guest - 10-13-2008
<b>The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means</b>.
<i><b>George Soros</b>, the legendary financier, philanthropist and bestselling author, has written a new book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means.</i>
Good timing.
Global Economy - Guest - 10-13-2008
<b>IPOs witness value erosion of over $3 bn</b><!--QuoteBegin-->QUOTE<!--QuoteEBegin-->The Indian primary market has virtually dried up as the total value of initial public offering of 2007 has witnessed an erosion of about $3.43 billion so far this year, with the media space being worst hit, a latest report says.
The bullish trend in the capital market was see in the IPO volume of 2007, as a record volume of $8.18 billion was raised.
However, <b>rough market conditions have resulted in a negative return of about 42 per cent or a value erosion of $3.43 billion in absolute terms till October 10</b>, according to a report of Nexgen Capitals, the merchant-banking arm of brokerage firm SMC Global Securities.
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Because of genius who are running India, no effect on India.