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Wednesday, March 24, 2010

Federal Reserve to Remove Bank Reserve Requirements?

Looks like the same bright lights who created the ideas of no money down on home mortgages and "you tell us what you earn - wink, wink", are at it again, this time at the Federal Reserve. Capital requirements for banks? What for?
Look here.

Now would you want to put your savings in a bank that didn't have any capital in reserves? Isn't fractional reserve banking already a shaky proposition when banks start to have less than 20% in reserve capital?

It's just another sign of the Alice in Wonderland thinking that is taking us further off the surface of this planet and closer to much bigger financial chaos.

Greece, Portugal, then Spain, the U.K. and the U.S.?

Today, the rating agency Fitch downgraded Portugal's debt to AA- from AA. This is not entirely unexpected. The U.S. dollar index surged on the news and commodities generally moved lower.

The rotating sovereign debt default death-watch continues. Several countries' financial situation continues to deteriorate in an unsustainable manner. The holes in the dikes are getting bigger and more frequent. In the meantime, equities and various other sectors around the world are blowing into greater and greater bubbles on the back of artificially low interest rates aimed at preventing (or shall I say forestalling) impending private and government debt collapse. The Euro is threatened, the British Pound is threatened and ultimately the U.S.$ is threatened as the focus rotates from one to the next to the next.

Do I sound a little concerned? Cynical? Well, it would help a lot if nations would start dealing with reality rather than engaging in Cinderella-like behaviour. Maybe then I wouldn't be so terrified by what I see.

At the base of this crumbling pyramid we have the U.S. and the world's current reserve currency, the $US. Unfortunately, this base looks pretty rotten. See my previous blog entry on the tragedy of America here.

Friday, March 19, 2010

More on Paul Krugman and China/US Reality

Well, I see quite a few people are astounded by Mr. Krugman’s puzzling non-sequiturs. I particularly enjoyed reading Peter Schiff's take on it here.   Peter Schiff is dead on!

Oh, and today March 21, 2010, yet another attack on Paul Krugman here by John Mauldin.

China, Paul Krugman and Alice in Wonderland

It wasn't that long ago that folks like Paul Krugman would lambaste the U.S. Government as well as American business and consumers for the growing addiction to cheap Chinese imports in exchange for a flood of dollars which were made possible by borrowing from those same Chinese. See, for example, this op-ed piece from 2005 in the New York Times. My, how times have changed. Today, Mr. Krugman and many others have apparently concluded that China is the problem rather than U.S. greed and short-sightedness. Not only is it all China's doing, but the solutions are really simple and, oh, we have the Chinese over a barrel too! Take a look at this piece by Paul Krugman published March 14, 2010.

The denials, frantic scape-goating and grasping for straws are very reminiscent of the type of logic used by hardened alcoholics. How sad.

Monday, March 15, 2010

China Reduces U.S. Treasury Debt Holdings

The figures for January 2010 are out and China continues to reduce its holds of U.S. Treasuries. See the Globe and Mail article here.  Looking at another of my posts showing the continuing slide in the U.S. financial situation, can you blame them?  They need to get out while they can but they are trying to do it slowly to avoid a general run for the exits by the market. That wouldn't help China or anyone else.

U.S. National, State and Private Debt Statistics

At USDebtClock.org there is a fantastic summary of animated statistics depicting all sorts of debt categories for the United States. The figures put into sharp focus the rapidly deteriorating financial condition of the U.S. in general.

Sunday, March 14, 2010

Credit Card holders are dumping debt

Further to yesterday's blog on Debt statistics published by the Federal Reserve, here is more proof that one needs to be careful how to interpret articles that have lots of spin. This article from MarketWatch says that 90% of the reduction in credit card debt is due to credit card holders just walking away (defaulting) not from repaying amounts owing. Read the article here.

Lehman revelations continue

Articles appeared this week detailing fresh revelations on how Lehman "misled" investors. An example from BusinessWeek here. To me it is just more evidence of the fraudulent mentality that has overtaken a lot of Wall Street. For a lot more on the shenanigans on Wall Street and the Federal Reserve, see this special report.

Saturday, March 13, 2010

U.S. Debt grows at slowest pace on record

This type of article can be a little misleading. See the one on Marketwatch, for example. The article is based on the Federal Reserve's report of March 11, 2010, available here. The Marketwatch article talks about consumer "deleveraging". But that is not what is happening in most cases. Consumers and business are walking away from their mortgages, defaulting on their loans and credit cards and declaring personal and business bankruptcies. So the level of debt is falling alright, but deleveraging? Deleveraging occurs when you are paying your debt down, not when you are defaulting on it. It's just more spin. Meanwhile, as you can see from the excerpt below, government debt continues to expand briskly. Some of these folks will eventually also walk away from their debts, methinks.
Percentage changes; quarterly data, seasonally adjusted annual rates
                  Total   Households   Business   State/local gov.   Federal
2009Q4        1.6       -1.2               -3.2                +4.7              +12.6


 

Wednesday, March 10, 2010

Tuesday, March 9, 2010

China not interested in Gold?

Today a number of press reports appeared suggesting China was cool towards gold. See the Marketwatch article, for example.

Well, I guess you could say that it had the predictable effect. Gold promptly sold off about $12 before recovering most of this by the end of the trading day. The Chinese are getting to be every bit as good as Wall Street when it comes to manipulating the markets. They will pick up more gold at lower prices than otherwise possible as they downplay their involvement in the gold market. Who can blame them? China has a rising foreign exchange resrves to contend with.


Gold continues to migrate from weak to strong hands as the shenanigans continue.