The deterioration of the global economy in the wake of the ongoing U.S. housing bust and subsequent credit crunch is accelerating at a frightening pace. In the U.S., nothing captures the concussive force of the downturn better than the Consumer Price Index issued Wednesday, which showed prices falling by one per cent in October after being flat in September. Suddenly, the prospect of outright deflation in the U.S. economy — and all the risks that entails — is a clear and present danger. "With the unemployment lines growing ever-longer there is a genuine risk that the U.S. economy could fall into a corrosive deflationary phase," says Sheryl King, Senior US economist at Merrill Lynch.
At the core of the mounting global concerns about deflation is this: the global financial system is going through a vicious process of deleveraging: financial institutions are reducing debt and raising capital, either directly from governments or from private sector sources. By desperately trying to rebuild their battered balance sheets and regain some semblance of investor confidence, banks and investment banks are not doing much lending.
The result — a deflationary bust — is evident everywhere. On Thursday morning crude oil prices — as good a barometer as any for global economic activity — plunged below $50 a barrel. In July crude peaked at $147.
Breaking News --- US Markets will go up on Monday
Obama to announce economic team on Monday in order to calm the markets.
Some Good News Stories..........
Chinese Want To Buy the Big 3 Automakers Huffington Post
Unable to recognize voices, unless it's Sean Connery The Body Odd
Goldman's Gold Standard Is Less Golden Walll Street Journal Sallie Krawchek, when she was an analyst at Sanford Bernstein covering Wall Street, dared to point out the obvious: it was better to be an employee of a securities firm than a shareholder. Note the reverse was generally the case when they were private partnerships. We said when Goldman went public it would eventually be the ruination of the firm.
China Now Largest Foreign Creditor Of United States Boom2Biust
Contemplating CAPM Option Armageddon
The Return of the $70 Per Hour Meme Felix Salmon. Debunking an urban legend.
Time for the Government to Buy Citigroup Brad De Long
Paulson Trying To Rewrite His Own History Bespoke Investment Group
Just give us the money Willem Buiter decided to become a bank (hat tip Ed Harrison).
Argentina's Impending Bankruptcy Independent Accountant
The Equity Market Has Nothing on Credit EconomicPic Data
The Simple Arithmetic of Hank Paulson's Financial Disaster David Fiderer, Huffington Post
The Big Easing Chevelle, Models and Agents. On how Bernanke lacks cojones.
FOMC Minutes: Recession & Depression Simultaneously
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Labels:
Economy
Fed eyes year long recession.
FOMC sees inflation retreating to comfort zone
FOMC sees gradual recovery in second half of 2009, into 2010
Fed members see contraction last four quarters, minutes say
Fed policymakers see yearlong recession, FOMC minutes show
The pace of economic activity appears to have slowed markedly......
A decline in consumer expenditures.
Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports....
Intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit....
Expects inflation to moderate in coming quarters to levels consistent with price stability.
The crux is this": Recent policy actions, including today’s rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability. IN SHORT: MORE RATE CUTS OR MORE CREATIVE ACTIONS
More important than any of the minutes is the OUTLOOK from the FOMC in the full minutes, and these are just the "central tendency numbers":
FOMC sees inflation retreating to comfort zone
FOMC sees gradual recovery in second half of 2009, into 2010
Fed members see contraction last four quarters, minutes say
Fed policymakers see yearlong recession, FOMC minutes show
The pace of economic activity appears to have slowed markedly......
A decline in consumer expenditures.
Business equipment spending and industrial production have weakened in recent months, and slowing economic activity in many foreign economies is damping the prospects for U.S. exports....
Intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit....
Expects inflation to moderate in coming quarters to levels consistent with price stability.
The crux is this": Recent policy actions, including today’s rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability. IN SHORT: MORE RATE CUTS OR MORE CREATIVE ACTIONS
More important than any of the minutes is the OUTLOOK from the FOMC in the full minutes, and these are just the "central tendency numbers":
What Happens if the domestic auto industry collapses
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Labels:
Economy
The U.S. Auto Industry and the Ripple Effect.
Carmakers Face Uphill Battle For Bailout
Carmakers Face Uphill Battle For Bailout
30 Reasons for Great Depression 2 by 2011
1. America's credit rating may soon be downgraded below AAA
2. Fed refusal to disclose $2 trillion loans, now the new "shadow banking system"
3. Congress has no oversight of $700 billion, and Paulson's Wall Street Trojan Horse
4. King Henry Paulson flip-flops on plan to buy toxic bank assets, confusing markets
5. Goldman, Morgan lost tens of billions, but planning over $13 billion in bonuses this year
6. AIG bails big banks out of $150 billion in credit swaps, protects shareholders before taxpayers
7. American Express joins Goldman, Morgan as bank holding firms, looking for Fed money
8. Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states
9. State revenues down, taxes and debt up; hiring, spending, borrowing add even more debt
10. State, municipal, corporate pensions lost hundreds of billions on derivative swaps
11. Hedge funds: 610 in 1990, almost 10,000 now. Returns down 15%, liquidations up
12. Consumer debt way up, now at $2.5 trillion; next area for credit meltdowns
13. Fed also plans to provide billions to $3.6 trillion money-market fund industry
14. Freddie Mac and Fannie Mae are bleeding cash, want to tap taxpayer dollars
15. Washington manipulating data: War not $600 billion but estimates actually $3 trillion
16. Hidden costs of $700 billion bailout are likely $5 trillion; plus $1 trillion Street write-offs
17. Commodities down, resource exporters and currencies dropping, triggering a global meltdown
18. Big three automakers near bankruptcy; unions, workers, retirees will suffer
19. Corporate bond market, both junk and top-rated, slumps more than 25%
20. Retailers bankrupt: Circuit City, Sharper Image, Mervyns; mall sales in free fall
21. Unemployment heading toward 8% plus; more 1930's photos of soup lines
22. Government policy is dictated by 42,000 myopic, highly paid, greedy lobbyists
23. China's sees GDP growth drop, crates $586 billion stimulus; deflation is now global, hitting even Dubai
24. Despite global recession, U.S. trade deficit continues, now at $650 billion
25. The 800-pound gorillas: Social Security, Medicare with $60 trillion in unfunded liabilities
26. Now 46 million uninsured as medical, drug costs explode
27. New-New Deal: U.S. planning billions for infrastructure, adding to unsustainable debt
28. Outgoing leaders handicapping new administration with huge liabilities
29. The "antitaxes" message is a new bubble, a new version of the American
dream offering a free lunch, no sacrifices, exposing us to more false promises
30. At a recent Reuters Global Finance Summit former Goldman Sachs chairman John Whitehead was interviewed. He was also Ronald Reagan's Deputy Secretary of State and a former chairman of the N.Y. Fed. He says America's problems will take years and will burn trillions.
He sees "nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds." It'll get worse because "the public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs, all very costly and all done by the government."
Reuters concludes: "Whitehead said he is speaking out on this topic because he is concerned no lawmakers are against these new spending programs and none will stand up and call for higher taxes. 'I just want to get people thinking about this, and to realize this is a road to disaster,' said Whitehead. 'I've always been a positive person and optimistic, but I don't see a solution here.'"
Source Marketwatch
2. Fed refusal to disclose $2 trillion loans, now the new "shadow banking system"
3. Congress has no oversight of $700 billion, and Paulson's Wall Street Trojan Horse
4. King Henry Paulson flip-flops on plan to buy toxic bank assets, confusing markets
5. Goldman, Morgan lost tens of billions, but planning over $13 billion in bonuses this year
6. AIG bails big banks out of $150 billion in credit swaps, protects shareholders before taxpayers
7. American Express joins Goldman, Morgan as bank holding firms, looking for Fed money
8. Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states
9. State revenues down, taxes and debt up; hiring, spending, borrowing add even more debt
10. State, municipal, corporate pensions lost hundreds of billions on derivative swaps
11. Hedge funds: 610 in 1990, almost 10,000 now. Returns down 15%, liquidations up
12. Consumer debt way up, now at $2.5 trillion; next area for credit meltdowns
13. Fed also plans to provide billions to $3.6 trillion money-market fund industry
14. Freddie Mac and Fannie Mae are bleeding cash, want to tap taxpayer dollars
15. Washington manipulating data: War not $600 billion but estimates actually $3 trillion
16. Hidden costs of $700 billion bailout are likely $5 trillion; plus $1 trillion Street write-offs
17. Commodities down, resource exporters and currencies dropping, triggering a global meltdown
18. Big three automakers near bankruptcy; unions, workers, retirees will suffer
19. Corporate bond market, both junk and top-rated, slumps more than 25%
20. Retailers bankrupt: Circuit City, Sharper Image, Mervyns; mall sales in free fall
21. Unemployment heading toward 8% plus; more 1930's photos of soup lines
22. Government policy is dictated by 42,000 myopic, highly paid, greedy lobbyists
23. China's sees GDP growth drop, crates $586 billion stimulus; deflation is now global, hitting even Dubai
24. Despite global recession, U.S. trade deficit continues, now at $650 billion
25. The 800-pound gorillas: Social Security, Medicare with $60 trillion in unfunded liabilities
26. Now 46 million uninsured as medical, drug costs explode
27. New-New Deal: U.S. planning billions for infrastructure, adding to unsustainable debt
28. Outgoing leaders handicapping new administration with huge liabilities
29. The "antitaxes" message is a new bubble, a new version of the American
dream offering a free lunch, no sacrifices, exposing us to more false promises
30. At a recent Reuters Global Finance Summit former Goldman Sachs chairman John Whitehead was interviewed. He was also Ronald Reagan's Deputy Secretary of State and a former chairman of the N.Y. Fed. He says America's problems will take years and will burn trillions.
He sees "nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds." It'll get worse because "the public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs, all very costly and all done by the government."
Reuters concludes: "Whitehead said he is speaking out on this topic because he is concerned no lawmakers are against these new spending programs and none will stand up and call for higher taxes. 'I just want to get people thinking about this, and to realize this is a road to disaster,' said Whitehead. 'I've always been a positive person and optimistic, but I don't see a solution here.'"
Source Marketwatch
Gallup's Economic Indicators
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Labels:
Economy
Gallup Organization has developed five new indicators of daily economic activity and people’s perceptions that offer new insights into how the economy is doing and where it may be headed.
The Gallup World Poll showcases data which Alan Greenspan says might revolutionize economic forecasting. See the video below.
About Gallup
The Gallup Poll is the division of Gallup that regularly conducts public opinion polls in the United States and more than 140 countries around the world. Gallup Polls are often referenced in the mass media as a reliable and objective measure of public opinion. Gallup Poll results, analyses, and videos are published daily on Gallup.com in the form of data-driven news.
The Gallup World Poll showcases data which Alan Greenspan says might revolutionize economic forecasting. See the video below.
About Gallup
The Gallup Poll is the division of Gallup that regularly conducts public opinion polls in the United States and more than 140 countries around the world. Gallup Polls are often referenced in the mass media as a reliable and objective measure of public opinion. Gallup Poll results, analyses, and videos are published daily on Gallup.com in the form of data-driven news.
Market Analysis For This Week
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Labels:
Markets
- US: CPI and FOMC Minutes
- U.S. Leading Indicators Continue to Weaken in Q4 2008: Will 2009 Look Worse?
- U.S. Housing Starts and Regional Manufacturing Indices
- Will the Treasury Bailout the Failing U.S. Auto Sector?
- TIC Data - Are Foreign Central Banks Still Buying Treasuries?
- FDIC Interbank Guarantee Modification?
- The Future of Fannie & Freddie: Paulson’s Speech and Congressional Hearing
- Moody’s: Record Number of Corporates are Cash-Strapped
- The Future of Investment Banking: What Might It Look Like?
- Portfolio Management: Are Indexes In, and Active Management Out?
- The Financial Crisis and Climate Change Momentum
- Oil Exporter Government Spending
- Global Oil Demand: Still Falling?
- Canadian Corporate profits for 3Q, Wholesale Trade and CPI
- BoE minutes: What’s next?
- UK Retail sales: Consumption collapsing?
- Has Quantitative Easing Returned To Japan?
- More details on China’s fiscal stimulus - Who Will Pay for It?
- Australia: Housing Finance and Wage Price Index Data
What is ZIRP(zero interest rate policy)???
Zero interest rate policy is coming again.. Japan had to maintain its benchmark interest rate at or near zero for most of the 1999-2006.....
America is almost there too. Since October 29th, the target for the federal funds rate has been at 1%, but the rate at which funds actually change hands, known as the “effective rate”, has averaged around 0.25%.
The US is at 1% and Japan at .3%. Some analysts even reckon the Fed could move toward outright ZIRP (zero interest rate policy) to revive the economy and financial system.
We are nowhere near the end of this housing/credit/insolvency crisis and think ZIRP is not out of the question in our future. Each time a new crisis erupts, the fed will print/cut/inject in an effort to contain it, but will eventually run out of monetary ammunition... That's when the real hyperinflationary fireworks will begin.
With the Fed funds rate already down to 1 percent, and below one percent on many days, the central bank is fast approaching what economists call the “zero bound.”
The Bank of Japan had to maintain its benchmark interest rate at or near zero for most of the 1999-2006 period, before policymakers finally felt comfortable that the economy was in a sustainable recovery.
The real question for policy makers is what to do if they reach a zero rate and still want to rev up the economy. Fed officials have studied the question closely, and the Fed chairman, Ben S. Bernanke, gave a famous speech on the issue when he was a Fed governor in 2002.
America is almost there too. Since October 29th, the target for the federal funds rate has been at 1%, but the rate at which funds actually change hands, known as the “effective rate”, has averaged around 0.25%.
The US is at 1% and Japan at .3%. Some analysts even reckon the Fed could move toward outright ZIRP (zero interest rate policy) to revive the economy and financial system.
We are nowhere near the end of this housing/credit/insolvency crisis and think ZIRP is not out of the question in our future. Each time a new crisis erupts, the fed will print/cut/inject in an effort to contain it, but will eventually run out of monetary ammunition... That's when the real hyperinflationary fireworks will begin.
With the Fed funds rate already down to 1 percent, and below one percent on many days, the central bank is fast approaching what economists call the “zero bound.”
The Bank of Japan had to maintain its benchmark interest rate at or near zero for most of the 1999-2006 period, before policymakers finally felt comfortable that the economy was in a sustainable recovery.
The real question for policy makers is what to do if they reach a zero rate and still want to rev up the economy. Fed officials have studied the question closely, and the Fed chairman, Ben S. Bernanke, gave a famous speech on the issue when he was a Fed governor in 2002.
Truths About Hedge Funds
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Labels:
Markets
It’s only a vehicle for investing, albeit one that happens to be less constrained than most. Your run-of-the-mill mutual fund, for example, buys stocks and bonds, and that’s pretty much it. Most are not even allowed to employ short selling, a way of betting that the price of a security will fall. Hedge funds can employ whatever investing tools they want, including leverage, the use of derivatives like options and futures, and short sales. The New York Times decided years ago to incessantly refer to hedge funds’ use of these instruments as “exotic and risky,” thereby adding to their aura of mystery. The funny thing: Practically all financial institutions use these “exotic” instruments.
Hedge funds are not regulated and consequently aren't required to make the same detailed financial disclosures that are required of publicly traded companies.
Hedge funds are not required to file reports with the U.S. Securities and Exchange Commission. They are supposed to make money all the time, and when they fail at this, their investors redeem and go to someone else who has recently been making money. Every three or four years, they deliver a one-in-a-hundred-year flood.
Hedge funds operate in private, but they often affect the public. Many market-watchers believe that hedge fund managers -- nervous about holding on to assets overnight -- sold stocks in such massive amounts that they caused the recentsteep declines in the Dow Jones industrial average that haveoccurred repeatedlyjust before the market closed.
Hedge funds often present many different barriers to withdrawal, and there are essentially no regulatory prohibitions on these barriers.
Certain hedge funds may only accept investments from individuals who hold at least $5 million in investments.
Hedge funds are not regulated and consequently aren't required to make the same detailed financial disclosures that are required of publicly traded companies.
Hedge funds are not required to file reports with the U.S. Securities and Exchange Commission. They are supposed to make money all the time, and when they fail at this, their investors redeem and go to someone else who has recently been making money. Every three or four years, they deliver a one-in-a-hundred-year flood.
Hedge funds operate in private, but they often affect the public. Many market-watchers believe that hedge fund managers -- nervous about holding on to assets overnight -- sold stocks in such massive amounts that they caused the recentsteep declines in the Dow Jones industrial average that haveoccurred repeatedlyjust before the market closed.
Hedge funds often present many different barriers to withdrawal, and there are essentially no regulatory prohibitions on these barriers.
Certain hedge funds may only accept investments from individuals who hold at least $5 million in investments.
Outcome of G20 Meeting
The Group of 20 summit Saturday came together on principles for regulations that may avert future crises but stopped short of an agreement for a global financial market enforcer, analysts said. Finance ministers, given a list of some 47 things to follow up on, agreed to meet again before the end of April.
Highlights of G20
G20 tries to get ball rolling on recovery
G20: Steps needed to restore funding for emerging economies
G20: IMF to take leading role in drawing lessons from crisis
G20 calls for new 'colleges' of supervisors for global banks
G20 wants quick action on credit default swaps
G20 agrees to push quickly for regulation of hedge funds
G20 quick steps focused mostly on accounting issues
Bush: Obama team 'fully briefed' on U.S. G20 stance
G20 sets 5 actions to be put in place by March '09
Bush: One meeting 'is not going to solve world's problems'
G20 calls for completion of Doha global trade round
G20 agrees to meet again by end of April '09
Bush: Efforts to stabilize markets 'beginning to work'
G20: Regulators need to increase global cooperation
G20: Do 'whatever' needed to stabilize markets
G20 calls for broader response to global downturn
Brown: We need to build new institutions for the future
G 20 Video from Wall Street Journal
Highlights of G20
G20 tries to get ball rolling on recovery
G20: Steps needed to restore funding for emerging economies
G20: IMF to take leading role in drawing lessons from crisis
G20 calls for new 'colleges' of supervisors for global banks
G20 wants quick action on credit default swaps
G20 agrees to push quickly for regulation of hedge funds
G20 quick steps focused mostly on accounting issues
Bush: Obama team 'fully briefed' on U.S. G20 stance
G20 sets 5 actions to be put in place by March '09
Bush: One meeting 'is not going to solve world's problems'
G20 calls for completion of Doha global trade round
G20 agrees to meet again by end of April '09
Bush: Efforts to stabilize markets 'beginning to work'
G20: Regulators need to increase global cooperation
G20: Do 'whatever' needed to stabilize markets
G20 calls for broader response to global downturn
Brown: We need to build new institutions for the future
G 20 Video from Wall Street Journal
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