Fri, Jun 27 2008
HOUSING WOES JUST STARTING
...and this is just residential real estate. Wait until the stripmall loans start going belly up...
Fri, Jun 27 2008
WHY INFLATION WON'T STOP IF GASPRICES GO DOWN
The growing belief that if gas price goes down prices across the board will drop, is naive. Here's why (from an insightful analysis from the excellent Monty Guild):
IT IS NOT THE CASE THAT FOOD AND ENERGY ARE THE SOLE OR MOST IMPORTANT DRIVERS OF INFLATION TODAY.
INFLATION DRIVER #1: THE LONG GLOBAL ECONOMIC EXPANSION CREATES INFLATIONARY TENDENCIES IN AN ECONOMY
APART FROM THE DEVELOPED WORLD, EVERYONE IS STILL GROWING…AND SOME BIG COUNTRIES ARE GROWING VERY FAST.
PROLONGED AND INCREASING ECONOMIC GROWTH STIMULATES INFLATIONARY EVENTS IN THE ECONOMY.
IN BOOM TIMES, PRICE INCREASES ARE EASY TO PASS THROUGH. THIS LEADS TO PROFIT MARGIN EXPANSION.
INFLATION DRIVER #2: GOVERNMENTS ARE QUICK TO ADDRESS THE DOWNSIDE RISKS TO THE BANKS AND THE FINANCIAL SYSTEM. THIS IS DUE TO A NUMBER OF FACTORS, BUT PRIMARILY IT IS DUE TO A CHANGE IN THE PSYCHOLOGY OF GOVERNMENTS REGARDING BANK SOLVENCY AND ECONOMIC GROWTH.
SIMULTANEOUSLY, THEY HAVE BECOME SLOWER TO MOVE TO STOP INFLATION FROM BECOMING EMBEDDED IN THE SYSTEM.
MORAL HAZARD
INFLATION DRIVER #3: GOVERNMENT SUBSIDIES
INFLATION DRIVER #4: PRICE CONTROLS
INFLATION DRIVER #5: TARIFFS
INFLATION DRIVER #6: GLOBAL COMMODITY DEMAND IS GROWING FASTER THAN NEW SUPPLIES CAN BE ADDED
INFLATION DRIVER #7: THE FUTURE SUPPLY OF SOME COMMODITIES, AND THE INFRASTRUCTURE TO DELIVER OTHER COMMODITIES, IS LIMITED. THIS IS ANOTHER DRIVER OF LONG-TERM PRICE INFLATION.
INFLATION DRIVER #8: WAGE INFLATION
WAGES ARE RISING QUICKLY IN THE DEVELOPING COUNTRIES
INFLATION DRIVER #9: EXCESSIVE MONEY SUPPLY GROWTH
INFLATION DRIVER #10: DOLLAR PEGS AND CENTRAL BANK STERILIZATION OF INFLOWS
Fri, Jun 27 2008
FED BAILS OUT ITS BANKERBOY MASTERS
... and in doing so, threw the ordinary American citizen to the wolves. They're deliberately scuttling the ship so the Fat Rats can offload their loot.
Socialized Medicine: Bad, Socialized Bailouts of Wall Street FatCats: Good
Notice who the head of Goldman Sachs, one of the Fed Owners, was in 2005 - that's right, our keeper of the loot, current Secretary of the Treasury, Hanky Panky Paulson!:
Fed aided Wall Street to avert "contagion"
WASHINGTON (AP) - The Federal Reserve was scrambling to prevent a "contagion" from infecting the nation's financial system when it took unprecedented actions to back a Bear Stearns rescue package and provide emergency loans to big Wall Street firms.
The Federal Reserve released documents Friday providing insights into its private deliberations in March that led to those controversial decisions. The Fed's actions came at a time when credit and financial problems were intensifying, threatening to paralyze the entire financial system and plunge the economy into a recession.
Given the fragile conditions of the financial markets at that time, the Fed said it felt compelled to intervene because an "immediate failure" of Bear Stearns would bring about an "expected contagion."
[Note: fuck free markets, fuck investors, fuck hard working joes and janes, fuck the dollar - let's save Big Wall Street Firms! OLIGARCHY FOREVER!]
Fed Chairman Ben Bernanke and his colleagues initially moved on March 14 to provide temporary emergency financing to investment bank Bear Stearns Cos. through an arrangement with JP Morgan Chase & Co. Two days later as the investment bank teetered on the brink of bankruptcy, the Fed agreed to provide backing for up to $30 billion of a deal where JP Morgan would take over the troubled company.
That same day — March 16_ the Fed said it would allow big Wall Street firms to go directly to the Fed for emergency loans, a privilege only commercial banks had enjoyed. It was the broadest use of the Fed's lending powers since the 1930s.
The Fed's decision to take this action was "based on recent, rapidly changing developments," the documents said. "These developments demonstrated that there had been impairment of a broad range of financial markets" that Wall Street firms rely on for financing.
There was fear that other Wall Street firms could become in jeopardy, sending problems cascading through the financial system.
Democrats in Congress and other critics contend the Fed's actions are akin to a government bailout and are putting billions of taxpayer dollars at risk.
However, Bernanke has defended the actions and in appearances on Capitol Hill has said he doesn't believe taxpayers will suffer any losses.
The Fed's financial lifeline in JP Morgan's takeover of Bear Stearns was subsequently changed to $29 billion and — most recently — to $28.82 billion.
The documents said that the Fed, in discussions on March 16, believed that the takeover — and its involvement in helping to bring it about — was "necessary to avoid serious disruptions to financial markets." The Fed said that "many potential investors" had been invited to back Bear Stearns but the investment firm determined that JP Morgan was "the most suitable bidder."
Bear Stearns began to unravel last year when two hedge funds it managed collapsed because of heavy bets on subprime mortgage securities, which soured when the housing market fell into a deep slump. Along with other big investment banks, it was forced to take multibillion-dollar write-downs on the bad investments. Then rumors in mid-March about the company's cash position triggered a run on the investment bank that left it close to bankruptcy.
Earlier this month, JPMorgan closed its acquisition of Bear Stearns, bringing to an end an 85-year old institution.All news articles and images provided under the Fair Use Notice.