Perspectives on the global economic meltdown- (Nov 28 2010)
Re: Perspectives on the global economic meltdown- (Nov 28 20
There are reports today that Germany has decided to repatriate some gold back to Germany.
Here is one commantary about that
5 things repatriating gold bullion says about the country
Here is one commantary about that
5 things repatriating gold bullion says about the country
Re: Perspectives on the global economic meltdown- (Nov 28 20
http://www.theatlantic.com/magazine/arc ... ks/309196/
What’s Inside America’s Banks?
Some four years after the 2008 financial crisis, public trust in banks is as low as ever. Sophisticated investors describe big banks as “black boxes” that may still be concealing enormous risks—the sort that could again take down the economy. A close investigation of a supposedly conservative bank’s financial records uncovers the reason for these fears—and points the way toward urgent reforms.
What’s Inside America’s Banks?
Some four years after the 2008 financial crisis, public trust in banks is as low as ever. Sophisticated investors describe big banks as “black boxes” that may still be concealing enormous risks—the sort that could again take down the economy. A close investigation of a supposedly conservative bank’s financial records uncovers the reason for these fears—and points the way toward urgent reforms.
The financial crisis had many causes—too much borrowing, foolish investments, misguided regulation—but at its core, the panic resulted from a lack of transparency. The reason no one wanted to lend to or trade with the banks during the fall of 2008, when Lehman Brothers collapsed, was that no one could understand the banks’ risks. It was impossible to tell, from looking at a particular bank’s disclosures, whether it might suddenly implode.
For the past four years, the nation’s political leaders and bankers have made enormous—in some cases unprecedented—efforts to save the financial industry, clean up the banks, and reform regulation in order to restore trust and confidence in the American financial system. This hasn’t worked. Banks today are bigger and more opaque than ever, and they continue to behave in many of the same ways they did before the crash.
Consider JPMorgan’s widely scrutinized trading loss last year. Before the episode, investors considered JPMorgan one of the safest and best-managed corporations in America. Jamie Dimon, the firm’s charismatic CEO, had kept his institution upright throughout the financial crisis, and by early 2012, it appeared as stable and healthy as ever.
One reason was that the firm’s huge commercial bank—the unit responsible for the old-line business of lending—looked safe, sound, and solidly profitable. But then, in May, JPMorgan announced the financial equivalent of sudden cardiac arrest: a stunning loss initially estimated at $2 billion and later revised to $6 billion. It may yet grow larger; as of this writing, investigators are still struggling to comprehend the bank’s condition.
The loss emanated from a little-known corner of the bank called the Chief Investment Office. This unit had been considered boring and unremarkable; it was designed to reduce the bank’s risks and manage its spare cash. According to JPMorgan, the division invested in conservative, low-risk securities, such as U.S. government bonds. And the bank reported that in 95 percent of likely scenarios, the maximum amount the Chief Investment Office’s positions would lose in one day was just $67 million. (This widely used statistical measure is known as “value at risk.”) When analysts questioned Dimon in the spring about reports that the group had lost much more than that—before the size of the loss became publicly known—he dismissed the issue as a “tempest in a teapot.”
Six billion dollars is not the kind of sum that can take down JPMorgan, but it’s a lot to lose. The bank’s stock lost a third of its value in two months, as investors processed reports of the trading debacle. On May 11, 2012, alone, the day after JPMorgan first confirmed the losses, its stock plunged roughly 9 percent.
The incident was about much more than money, however. Here was a bank generally considered to have the best risk-management operation in the business, and it had badly managed its risk. As the bank was coming clean, it revealed that it had fiddled with the way it measured its value at risk, without providing a clear reason. Moreover, in acknowledging the losses, JPMorgan had to admit that its reported numbers were false. A major source of its supposedly reliable profits had in fact come from high-risk, poorly disclosed speculation.
It gets worse. Federal prosecutors are now investigating whether traders lied about the value of the Chief Investment Office’s trading positions as they were deteriorating. JPMorgan shareholders have filed numerous lawsuits alleging that the bank misled them in its financial statements; the bank itself is suing one of its former traders over the losses. It appears that Jamie Dimon, once among the most trusted leaders on Wall Street, didn’t understand and couldn’t adequately manage his behemoth. Investors are now left to doubt whether the bank is as stable as it seemed and whether any of its other disclosures are inaccurate.
The JPMorgan scandal isn’t the only one in recent months to call into question whether the big banks are safe and trustworthy. Many of the biggest banks now stand accused of manipulating the world’s most popular benchmark interest rate, the London Interbank Offered Rate (LIBOR), which is used as a baseline to set interest rates for trillions of dollars of loans and investments. Barclays paid a large fine in June to avoid civil and criminal charges that could have been brought by U.S. and U.K. authorities. The Swiss giant UBS was reportedly close to a similar settlement as of this writing. Other major banks, including JPMorgan, Bank of America, and Deutsche Bank, are under civil or criminal investigation (or both), though no charges have yet been filed.
Libor reflects how much banks charge when they lend to each other; it is a measure of their confidence in each other. Now the rate has become synonymous with manipulation and collusion. In other words, one can’t even trust the gauge that is meant to show how much trust exists within the financial system.
Accusations of illegal, clandestine bank activities are also proliferating. Large global banks have been accused by U.S. government officials of helping Mexican drug dealers launder money (HSBC), and of funneling cash to Iran (Standard Chartered). Prosecutors have charged American banks with falsifying mortgage records by “robo-signing” papers to rush the process along, and with improperly foreclosing on borrowers. Only after the financial crisis did people learn that banks routinely misled clients, sold them securities known to be garbage, and even, in some cases, secretly bet against them to profit from their ignorance.
When we asked Ed Trott, a former Financial Accounting Standards Board member, whether he trusted bank accounting, he said, simply, “Absolutely not.”
Together, these incidents have pushed public confidence ever lower. According to Gallup, back in the late 1970s, three out of five Americans said they trusted big banks “a great deal” or “quite a lot.” During the following decades, that trust eroded. Since the financial crisis of 2008, it has collapsed. In June 2012, fewer than one in four respondents told Gallup they had faith in big banks—a record low. And in October, Luis Aguilar, a commissioner at the Securities and Exchange Commission, cited separate data showing that “79 percent of investors have no trust in the financial system.”
When we asked Dane Holmes, the head of investor relations at Goldman Sachs, why so few people trust big banks, he told us, “People don’t understand the banks,” because “there is a lack of transparency.” (Holmes later clarified that he was talking about average people, not the sophisticated investors with whom he interacts on an almost hourly basis.) He is certainly right that few students or plumbers or grandparents truly understand what big banks do anymore. Ordinary people have lost faith in financial institutions. That is a big enough problem on its own.
But an even bigger problem has developed—one that more fundamentally threatens the safety of the financial system—and it more squarely involves the sort of big investors with whom Holmes spends much of his time. More and more, the people in the know don’t trust big banks either.
After all the purported “cleansing effects” of the panic, one might have expected big, sophisticated investors to grab up bank stocks, exploiting the timidity of the average investor by buying low. Banks wrote down bad loans; Treasury certified the banks’ health after its “stress tests”; Congress passed the Dodd-Frank reforms to regulate previously unfettered corners of the financial markets and to minimize the impact of future crises. During the 2008 crisis, many leading investors had gotten out of bank stocks; these reforms were designed to bring them back.
And indeed, they did come back—at first. Many investors, including Warren Buffett, say bank stocks were underpriced after the crisis, and remain so today. Most large institutional investors, such as mutual funds, pension funds, and insurance companies, continue to hold substantial stakes in major banks. The Federal Reserve has tried to help banks make profitable loans and trades, by keeping interest rates low and pumping trillions of dollars into the economy. For investors, the combination of low stock prices, an accommodative Fed, and possibly limited downside (the federal government, needless to say, has shown a willingness to assist banks in bad times) can be a powerful incentive.
Yet the limits to big investors’ enthusiasm are clearly reflected in the data. Some four years after the crisis, big banks’ shares remain depressed. Even after a run-up in the price of bank stocks this fall, many remain below “book value,” which means that the banks are worth less than the stated value of the assets on their books. This indicates that investors don’t believe the stated value, or don’t believe the banks will be profitable in the future—or both. Several financial executives told us that they see the large banks as “complete black boxes,” and have no interest in investing in their stocks. A chief executive of one of the nation’s largest financial institutions told us that he regularly hears from investors that the banks are “uninvestable,” a Wall Street neologism for “untouchable.”
That’s an increasingly widespread view among the most sophisticated leaders in investing circles. Paul Singer, who runs the influential investment fund Elliott Associates, wrote to his partners this summer, “There is no major financial institution today whose financial statements provide a meaningful clue” about its risks. Arthur Levitt, the former chairman of the SEC, lamented to us in November that none of the post-2008 remedies has “significantly diminished the likelihood of financial crises.” In a recent conversation, a prominent former regulator expressed concerns about the hidden risks that banks might still be carrying, comparing the big banks to Enron.
A recent survey by Barclays Capital found that more than half of institutional investors did not trust how banks measure the riskiness of their assets. When hedge-fund managers were asked how trustworthy they find “risk weightings”—the numbers that banks use to calculate how much capital they should set aside as a safety cushion in case of a business downturn—about 60 percent of those managers answered 1 or 2 on a five-point scale, with 1 being “not trustworthy at all.” None of them gave banks a 5.
A disturbing number of former bankers have recently declared that the banking industry is broken (this newfound clarity typically follows their passage from financial titan to rich retiree). Herbert Allison, the ex-president of Merrill Lynch and former head of the Obama administration’s Troubled Asset Relief Program, wrote a scathing e-book about the failures of the large banks, stopping just short of labeling them all vampire squids. A parade of former high-ranking executives has called for bank breakups, tighter regulation, or a return to the Depression-era Glass-Steagall law, which separated commercial banking from investment banking. Among them: Philip Purcell (ex-CEO of Morgan Stanley Dean Witter), Sallie Krawcheck (ex-CFO of Citigroup), David Komansky (ex-CEO of Merrill Lynch), and John Reed (former co‑CEO of Citigroup). Sandy Weill, another ex-CEO of Citigroup, who built a career on financial megamergers, did a stunning about-face this summer, advising, with breathtaking chutzpah, that the banks should now be broken up.
Bill Ackman’s journey is particularly telling. One of the nation’s highest-profile and most successful investors, Ackman went from being a skeptic of investing in big banks, to being a believer, and then back again—with a loss of hundreds of millions along the way. In 2010, Ackman bought an almost $1 billion stake in Citigroup for Pershing Square, the $11 billion fund he runs. He reasoned that in the aftermath of the crisis, the big banks had written down their bad loans and become more conservative; they were also facing less competition. That should have been a great environment for investment, he says. He had avoided investing in big banks for most of his career. But “for once,” he told us, “I thought you could trust the carrying values on bank books.”
Last spring, Pershing Square sold its entire stake in Citigroup, as the bank’s strategy drifted, at a loss approaching $400 million. Ackman says, “For the first seven years of Pershing Square, I believed that an investor couldn’t invest in a giant bank. Then I felt I could invest in a bank, and I did—and I lost a lot of money doing it.”
A crisis of trust among investors is insidious. It is far less obvious than a sudden panic, but over time, its damage compounds. It is not a tsunami; it is dry rot. It creeps in, noticed occasionally and then forgotten. Soon it is a daily fact of life. Even as the economy begins to come back, the trust crisis saps the recovery’s strength. Banks can’t attract capital. They lose customers, who fear being tricked and cheated. Their executives are, by turns, traumatized and enervated. Lacking confidence in themselves as they grapple with the toxic legacies of their previous excesses and mistakes, they don’t lend as much as they should. Without trust in banks, the economy wheezes and stutters.
And, of course, as trust diminishes, the likelihood of another crisis grows larger. The next big storm might blow the weakened house down. Elite investors—those who move markets and control the flow of money—will flee, out of worry that the roof will collapse. The less they trust the banks, the faster and more decisively they will beat that path—disinvesting, freezing bank credit, and weakening the structure even more. In this way, fear becomes reality, and troubles that might once have been weathered become existential.
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Re: Perspectives on the global economic meltdown- (Nov 28 20
David Cameron promises in/out referendum on EU
Unmentioned reason for this is financial. It is well known that City of London's lax financial regulations is the main reason for current global financial fraud. Germany understood this and is tightening financial regulations for all EU countries. UK sensed that that will kill the advantages City of London has and want to change the rules for it or exit EU. If UK exits, it will definitely pull the rug under Euro.
Planned date for the referendum is between 2015-2017 and EU leaders are already screaming about it.
BTW, this announcement came after Germany wanted its gold in its soil.
Why did I post this news in this thread?The prime minister said he wanted to renegotiate the UK's relationship with the EU and then give people the "simple choice" between staying in under those new terms, or leaving the EU.
Unmentioned reason for this is financial. It is well known that City of London's lax financial regulations is the main reason for current global financial fraud. Germany understood this and is tightening financial regulations for all EU countries. UK sensed that that will kill the advantages City of London has and want to change the rules for it or exit EU. If UK exits, it will definitely pull the rug under Euro.
Planned date for the referendum is between 2015-2017 and EU leaders are already screaming about it.
BTW, this announcement came after Germany wanted its gold in its soil.
Last edited by shyam on 26 Jan 2013 10:38, edited 1 time in total.
Re: Perspectives on the global economic meltdown- (Nov 28 20
Guest Post: The Gold Guarantee Blowing Up In Singapore?
Get your physical gold, always, and not paper gold.
Get your physical gold, always, and not paper gold.
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Re: Perspectives on the global economic meltdown- (Nov 28 20
Can someone comment on this:
This is the full report: http://www.federalreserve.gov/pubs/feds ... 301pap.pdf
From: http://www.federalreserve.gov/pubs/feds ... 01abs.htmlAbstract: Over the past few years, the Federal Reserve's use of unconventional monetary policy tools has led it to hold a large portfolio of securities. The asset purchases are intended to put downward pressure on longer-term interest rates, but also affect the Federal Reserve's balance sheet and income. We present a framework for projecting Federal Reserve assets and liabilities and income through time. The projections are based on public economic forecasts and announced Federal Open Market Committee policy principles. The projections imply that for the next several years, the Federal Reserve's balance sheet remains large by historical standards, and earnings remain high. Using the FOMC's stated exit strategy principles and the Blue Chip financial forecasts of the federal funds rate, the projections have the Federal Reserve's portfolio beginning to contract in 2015, returning to a more normal size in 2018 or 2019, and returning to a more normal composition a year thereafter. The projections imply that Federal Reserve remittances to the Treasury may decline for a time, and in some cases fall to zero. Once the portfolio is normalized, earnings are projected to return to their long-run trend. On net over the entire period of unconventional monetary policy actions, cumulative earnings are higher than what they might have been without the Federal Reserve asset purchase programs. To illustrate the interest rate sensitivity of the portfolio, we consider scenarios where interest rates are 100 basis points higher or lower than in the baseline. With higher interest rates, earnings tend to fall a bit more and remittances to the Treasury stop for a longer period than in our baseline projections, while with lower interest rates earnings are a bit larger and remittances continue throughout the projection period.
Keywords: Federal Reserve's balance sheet, unconventional monetary policy, monetary policy implementation
This is the full report: http://www.federalreserve.gov/pubs/feds ... 301pap.pdf
Re: Perspectives on the global economic meltdown- (Nov 28 20
pentaiah wrote:Gold will not come down much leave alone crash
As long as the US deficit is controlled which is long ways away
Umaraojaan, Didn't people also think of Apple same way?
Lets look at what structural factors enable the rise of gold to bubble levels and see whats going on geo-politically that weakens those factors.
Re: Perspectives on the global economic meltdown- (Nov 28 20
ramana wrote:pentaiah wrote:Gold will not come down much leave alone crash
As long as the US deficit is controlled which is long ways away
Umaraojaan, Didn't people also think of Apple same way?
Lets look at what structural factors enable the rise of gold to bubble levels and see whats going on geo-politically that weakens those factors.

src: http://www.bloomberg.com/news/2013-01-2 ... rium-.htmlGovernor of Chinese Central Bank wrote:Yi, who heads the State Administration of Foreign Exchange, said he’s concerned about the potential fallout from expanded asset-purchases programs and near-zero interest rates in the world’s advanced economies.
“Quantitative easing for developed economies is generating some uncertainties in financial markets in terms of capital flows,” Yi, who is also head of China’s foreign-exchange regulator, told reporters. “Competitive devaluation is one aspect of it. If everyone is doing super QE, which currency will depreciate?”
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Re: Perspectives on the global economic meltdown- (Nov 28 20
European Debt Crisis - Economic Collapse In 3 Minutes :
http://www.youtube.com/watch?feature=pl ... nuAh3esdpE
http://www.youtube.com/watch?feature=pl ... nuAh3esdpE
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Re: Perspectives on the global economic meltdown- (Nov 28 20
^^^^
"You are wasting very valuable good time"
This was great.





"You are wasting very valuable good time"
This was great.
Re: Perspectives on the global economic meltdown- (Nov 28 20
Former officials of Italian BMPS have been named in a financial scandal probe.
The investigation also centres on the bank's 2007 acquisition of Antonveneta from Spanish banking group Santander for 10 billion euros ($A13.10 billion), at least 2.0 billion euros more than the small bank's estimated value at the time.
Accusations range from conspiracy to fraud, including the provision of false information and preventing proper oversight by banking authorities.
Codacons, which has also called for Bank of Italy Governor Ignazio Visco to step down, claims the Bank of Italy was not transparent in granting the bailout and said it will lodge a complaint that the central bank violated EU rules on state aid.
Rome prosecutors have opened an investigation regarding market manipulation and obstructing the work of banking watchdogs.
Re: Perspectives on the global economic meltdown- (Nov 28 20
I liked the title of latest Max Keiser episode
"Fake-it-til-you-make-it economy".
"Fake-it-til-you-make-it economy".
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Re: Perspectives on the global economic meltdown- (Nov 28 20
Pimco’s Gross: US Economy ‘Running Out of Time’
http://www.moneynews.com/StreetTalk/Gro ... de=124FD-1
http://www.moneynews.com/StreetTalk/Gro ... de=124FD-1
Re: Perspectives on the global economic meltdown- (Nov 28 20
Clinton created tech bubble that crashed soon after he left the office. Bush created real estate bubble that burst just before he left. Obama created bond bubble that will explode.....
When tech bubble crashed few people in that industry were affected. When real estate bubble burst almost everyone in the world suffered. When bond bubble crashes, that will be an apocalypse.
When tech bubble crashed few people in that industry were affected. When real estate bubble burst almost everyone in the world suffered. When bond bubble crashes, that will be an apocalypse.
Re: Perspectives on the global economic meltdown- (Nov 28 20
OK will bite. What is bond bubble?
Re: Perspectives on the global economic meltdown- (Nov 28 20
Cash exiting the other bubbles going into bonds and bond funds, driving up prices and pushing down yields. These include a variety of bond issues, ranging from treasuries to TIPS to muni bonds of near insolvent towns (e.g. Modesto or Stockton). All the cash into one bubble doesn't magically disappear - it just appears in another place soon: tech->housing->bonds. Recently though, there's been a trend of a significant increase in allocation back into stocks.
Re: Perspectives on the global economic meltdown- (Nov 28 20
Bond is in bubble because yields are historic lows, thereby record low cost for borrowing. Low yields mean that value of bonds is very high, implying governments and corporations can borrow more money for the bonds they sell. From the bond investor point of view he is parking money safely for very low returns. But if the yields go up, i.e. bonds fall, he is going to lose the asset value.
I don't agree with Suraj's thesis that cash is chasing different assets creating bubbles. There is a hidden hand of central banks that makes it happen. Greenspan reduced borrowing cost to create real estate bubble. Today Bernanke prints $85B every month to purchase treasury bonds indirectly. This is what really brought down the bond yields. Effect of central bank money printing is that US bonds are at highest point since it was founded and British gilts are 300 year high. This is nothing but historic bubble. Some even call it mother of all bubbles. Difference is that ordinary people who don't understand economics can not see this.
abhishekcc posted some time back about Fed's plan to clean up its book from 2015, and that means that it may stop money printing. That is when the apocalypse could start. Today 10 years bond yield is ~2%. GOTUS spends ~$400B annually for debt interest payments alone, with record low rate. After 2015, if bond market crashes, the yields can go up to 10%, 15% or even 20%. Then its debt interest payment can go up anywhere from 5 times to 10 times, which is just not possible to service. Keep in mind that US debt in 2008 was ~$9T. Today it is $16.5T and another $2T will be added by Fed alone by 2015. There will be massive exit of money from all kinds of bonds, treasury/muni/corporate making it impossible for them to refinance the debt, causing many to go bankrupt.
Just like AIG in 2008, bond insurers will be on the hook for compensating for loss of bond value. Without viable bond insurers, the bond yields can go up even higher.
Many bond investors use bonds as collateral for their borrowing. When bond values go down, that too when general market itself is going down, these borrowers will be forced to cough up more money for the loss of collateral value and that can strain their finances and may even bankrupt them.
I don't agree with Suraj's thesis that cash is chasing different assets creating bubbles. There is a hidden hand of central banks that makes it happen. Greenspan reduced borrowing cost to create real estate bubble. Today Bernanke prints $85B every month to purchase treasury bonds indirectly. This is what really brought down the bond yields. Effect of central bank money printing is that US bonds are at highest point since it was founded and British gilts are 300 year high. This is nothing but historic bubble. Some even call it mother of all bubbles. Difference is that ordinary people who don't understand economics can not see this.
abhishekcc posted some time back about Fed's plan to clean up its book from 2015, and that means that it may stop money printing. That is when the apocalypse could start. Today 10 years bond yield is ~2%. GOTUS spends ~$400B annually for debt interest payments alone, with record low rate. After 2015, if bond market crashes, the yields can go up to 10%, 15% or even 20%. Then its debt interest payment can go up anywhere from 5 times to 10 times, which is just not possible to service. Keep in mind that US debt in 2008 was ~$9T. Today it is $16.5T and another $2T will be added by Fed alone by 2015. There will be massive exit of money from all kinds of bonds, treasury/muni/corporate making it impossible for them to refinance the debt, causing many to go bankrupt.
Just like AIG in 2008, bond insurers will be on the hook for compensating for loss of bond value. Without viable bond insurers, the bond yields can go up even higher.
Many bond investors use bonds as collateral for their borrowing. When bond values go down, that too when general market itself is going down, these borrowers will be forced to cough up more money for the loss of collateral value and that can strain their finances and may even bankrupt them.
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Re: Perspectives on the global economic meltdown- (Nov 28 20
That is a good explanation. US has no option but to keep printing money. They are caught in a trap. The day they stop printing money there will be massive tsunami in the market. I bet US will keep printing money leading to more and more inflation ultimately leading to hyper inflation. What happened to indian rupees will happen to US dollar. I remember in 1995 if you have 100 rupee note in pocket you will feel secure. You can at least eat for few days in 100 rupees. In 2013 a 100 rupee note will not even fetch a single meal in a middle class restaurant.
Americans are becoming poorer by stealth. One day the world will realize that US is taking them for a ride and the world will dump the US dollar as reserve currency.
My 2 cents.
Americans are becoming poorer by stealth. One day the world will realize that US is taking them for a ride and the world will dump the US dollar as reserve currency.
My 2 cents.
shyam wrote:Bond is in bubble because yields are historic lows, thereby record low cost for borrowing. Low yields mean that value of bonds is very high, implying governments and corporations can borrow more money for the bonds they sell. From the bond investor point of view he is parking money safely for very low returns. But if the yields go up, i.e. bonds fall, he is going to lose the asset value.
I don't agree with Suraj's thesis that cash is chasing different assets creating bubbles. There is a hidden hand of central banks that makes it happen. Greenspan reduced borrowing cost to create real estate bubble. Today Bernanke prints $85B every month to purchase treasury bonds indirectly. This is what really brought down the bond yields. Effect of central bank money printing is that US bonds are at highest point since it was founded and British gilts are 300 year high. This is nothing but historic bubble. Some even call it mother of all bubbles. Difference is that ordinary people who don't understand economics can not see this.
abhishekcc posted some time back about Fed's plan to clean up its book from 2015, and that means that it may stop money printing. That is when the apocalypse could start. Today 10 years bond yield is ~2%. GOTUS spends ~$400B annually for debt interest payments alone, with record low rate. After 2015, if bond market crashes, the yields can go up to 10%, 15% or even 20%. Then its debt interest payment can go up anywhere from 5 times to 10 times, which is just not possible to service. Keep in mind that US debt in 2008 was ~$9T. Today it is $16.5T and another $2T will be added by Fed alone by 2015. There will be massive exit of money from all kinds of bonds, treasury/muni/corporate making it impossible for them to refinance the debt, causing many to go bankrupt.
Just like AIG in 2008, bond insurers will be on the hook for compensating for loss of bond value. Without viable bond insurers, the bond yields can go up even higher.
Many bond investors use bonds as collateral for their borrowing. When bond values go down, that too when general market itself is going down, these borrowers will be forced to cough up more money for the loss of collateral value and that can strain their finances and may even bankrupt them.
Re: Perspectives on the global economic meltdown- (Nov 28 20
This is known as monetory trap. The monetrary policy uses bonds (buy bonds) to inject cash into the market or reduce cash(sell bonds) in the system..shyam wrote: I don't agree with Suraj's thesis that cash is chasing different assets creating bubbles. There is a hidden hand of central banks that makes it happen. Greenspan reduced borrowing cost to create real estate bubble. Today Bernanke prints $85B every month to purchase treasury bonds indirectly. This is what really brought down the bond yields. Effect of central bank money printing is that US bonds are at highest point since it was founded and British gilts are 300 year high. This is nothing but historic bubble. Some even call it mother of all bubbles. Difference is that ordinary people who don't understand economics can not see this.
Many bond investors use bonds as collateral for their borrowing. When bond values go down, that too when general market itself is going down, these borrowers will be forced to cough up more money for the loss of collateral value and that can strain their finances and may even bankrupt them.
US fed can neither devalue the dollar since large external dollar demand does no allow it to. This keeps th jobs outside US with imports cheaper from the far east. Nor US FED can keep the current value of the dollar to keep its hegemony. THis is due to inflation pressure and credit vacuum in the economy due to failed banks and failed credit system. US Fed hs to keep printing money
Look for signs of stealth war on currency between PRC and US
Shyam can you lookup the bloomberg news report of Soros buying gold reported 3-4 months back.
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Re: Perspectives on the global economic meltdown- (Nov 28 20
Here is a documentary based on James Rickards's book "Currency Wars" and a documentary called "America's Coming Economic Pearl Harbor."
Posting without comment other than to say tighen your langots a bit before you begin watching
Posting without comment other than to say tighen your langots a bit before you begin watching

Re: Perspectives on the global economic meltdown- (Nov 28 20
shyam: I don't think we are disagreeing. Even the treasury is just one of the several buyers whose actions are pricing up bonds and lowering their yields. They just happen to be the most influential dog in the market because of their authority to print money and buy bonds. I would argue that they're not a hidden hand at all - they're being quite explicit in saying what they're doing, to the extent of saying how much they're buying per day
As to this leading to hyperinflation, that requires the money to move. Right now, these actions are just balancing the books of financial institutions today, at the cost of a debt load on the population in the future due to the burgeoning deficit. By doing so, banks that previously held collateral (houses etc) on their books based on inflated prices, can now reinflate those values so that their losses are wiped out. However, they're not willing to lend much despite the record low rates.
The Fed is now using QE to hold down rates and force back real estate nominal values enough for the economy to pick up. I would also argue that they want moderate inflation, since that is their friend - deficits are easier to wipe out using debased dollars. Even homeowners on fixed rates mortgages would love inflation, because it keeps their prices fixed, while enabling them to rent out property at rising nominal rates.

As to this leading to hyperinflation, that requires the money to move. Right now, these actions are just balancing the books of financial institutions today, at the cost of a debt load on the population in the future due to the burgeoning deficit. By doing so, banks that previously held collateral (houses etc) on their books based on inflated prices, can now reinflate those values so that their losses are wiped out. However, they're not willing to lend much despite the record low rates.
The Fed is now using QE to hold down rates and force back real estate nominal values enough for the economy to pick up. I would also argue that they want moderate inflation, since that is their friend - deficits are easier to wipe out using debased dollars. Even homeowners on fixed rates mortgages would love inflation, because it keeps their prices fixed, while enabling them to rent out property at rising nominal rates.
Re: Perspectives on the global economic meltdown- (Nov 28 20
Thanks suraj and shyam.
Shyam, Please put all that info on a couple or more of Powerpoint slides for future use. When ready send them to me.
Thanks in advance.
Shyam, Please put all that info on a couple or more of Powerpoint slides for future use. When ready send them to me.
Thanks in advance.
Re: Perspectives on the global economic meltdown- (Nov 28 20
precisely when the banks have adjusted the books (to wrte off all the losses or charges)with freshly printed money what happens then?As to this leading to hyperinflation, that requires the money to move. Right now, these actions are just balancing the books of financial institutions today, at the cost of a debt load on the population in the future due to the burgeoning deficit. By doing so, banks that previously held collateral (houses etc) on their books based on inflated prices, can now reinflate those values so that their losses are wiped out. However, they're not willing to lend much despite the record low rates.
The banks will lend the new money which will drive the hyper inflation, everybody the (people and entities that massed the money during the crunch) and the Feds/Govts (all over EU) are playing slow musical chairs so as not to unleash the hyper inflation but kind of sort of soft land the inflation....
thebtru reflection as (I often said here ) is the oil price, Bullion, and other commodity prices that show the inflation growing....
adjusting to seasonal and local supply of commodities.
Please read todays NYT about what I said the coming crunch of commodity price spiral and how each country, investment bankers, VCs are hedging in commodities/food
http://www.nytimes.com/2013/02/06/opini ... .html?_r=0
The chief drivers of the global farmland race — population growth, food and energy demand, volatile commodity prices, land and water shortages — won’t slow anytime soon. Neither will extreme weather events and other effects of climate change on natural resources.
In theory, host countries could limit how much land can be acquired by foreigners, or require that a minimum portion of harvests be sold in local markets. Argentina and Brazil have announced measures to limit or ban new land concessions. But investors use their wealth and their own governments’ power to impede regulation. Host governments should establish better land registration practices and enact safeguards against the displacement of their citizens. The World Bank and other international entities must ensure that their development projects are free from the taint of exploitative practices.
Of course, this will be difficult because so many host governments are riddled with corruption and prioritize profit-making land deals over the needs of their populations. Cambodia, Laos and Sudan — all sites of transnational land purchases — are among the world’s 20 most corrupt nations, according to Transparency International.
“Buy land, they’re not making it anymore,” is a quotation often attributed to Mark Twain. These days, that advice is being heeded all too well.
Re: Perspectives on the global economic meltdown- (Nov 28 20
the banks will not lend freely unless GOTUS tells them to do so. greenspan encouraged such lending. america has run out of eligible borrowers again. last time, GOTUS policy led to the bubble which burst. i dont think GOTUS will do that again. but housing is the single biggest driver of wealth. what do do? what do to?
Re: Perspectives on the global economic meltdown- (Nov 28 20
Banks have to lend after the books are cooked otherwise we dont need banks, as it is US house hold debt is showing downward trend, they cant borrow, no one lends might be the driver but House hold savings are also showing upward trend.
But every one knows all major banks are in hole and thast not wholesome
But every one knows all major banks are in hole and thast not wholesome
Re: Perspectives on the global economic meltdown- (Nov 28 20
That brings to my age old rantSuraj wrote:Cash exiting the other bubbles going into bonds and bond funds, driving up prices and pushing down yields. These include a variety of bond issues, ranging from treasuries to TIPS to muni bonds of near insolvent towns (e.g. Modesto or Stockton). All the cash into one bubble doesn't magically disappear - it just appears in another place soon: tech->housing->bonds. Recently though, there's been a trend of a significant increase in allocation back into stocks.
Debt is neither created nor destroyed it only changes hands and forms.
Re: Perspectives on the global economic meltdown- (Nov 28 20
Suraj: I call it hidden hand because I read some people accusing Fed of selling treasury put options to enable people buy treasury bonds at very low yields. But didn't see any formal admission of that by Fed. Also, there is inflation that Fed wants, it is only that they don't want to see that. If medical insurance provider Blue Shield of California wants to raise insurance premium by 20%, it is because they face inflation. When house prices go up, rents go up, US postal department losses go up, they all point to one thing - existence of inflation. But people who compute inflation wants to change the formula again based on the argument "if price of one item goes high, people will switch to cheaper alternative, and so inflation has to be computed with lower price alternative". It can be extended tomorrow that if the price of one item goes high, people will stop buying that and so the inflation is negative!! So you will never have official inflation.
Fed will not admit this inflation because if they do, they will have to raise interest rates undoing whatever they achieved so far. Even the house prices will come down at a much faster rate.
Acharya: Soros buys GLD ETF and not physical gold. So, at this point we cannot assume that he expects dollar collapse. Rather a short term spike in gold price. But, I think, ETF also has provision for big investors to take physical delivery. So he may be covered for that eventuality.
Ramana: I'll try to make one.
Added later: Checked GLD website about gold physical delivery
Can you take physical possession of the gold?
Fed will not admit this inflation because if they do, they will have to raise interest rates undoing whatever they achieved so far. Even the house prices will come down at a much faster rate.
Acharya: Soros buys GLD ETF and not physical gold. So, at this point we cannot assume that he expects dollar collapse. Rather a short term spike in gold price. But, I think, ETF also has provision for big investors to take physical delivery. So he may be covered for that eventuality.
Ramana: I'll try to make one.
Added later: Checked GLD website about gold physical delivery
Can you take physical possession of the gold?
In the event of crisis, people like Soros will take physical delivery of gold, while other small investors will be left holding the bag. Not a safe investment of gold for long term. Useful for cashing in short term price swings.The Trustee, The Bank of New York Mellon, does not deal directly with the public. The Trustee handles creation and redemption orders for the Trust's shares with Authorized Participants, who deal in blocks of 100,000 shares. An individual investor wishing to exchange shares for physical gold would have to come to the appropriate arrangements with his or her broker
Re: Perspectives on the global economic meltdown- (Nov 28 20
The problem with this type of thinking is that people don't see gold price as reflective of currency value. Pentaiah is right. As long as the Fed continues to print money and create inflation the value of the dollar will go down. Therefore, you will require more dollars to buy lets say an ounce of gold. The trouble lies with the dollar. If gold wasn't money, central banks all around the world wouldn't be acquiring it.ramana wrote:pentaiah wrote:Gold will not come down much leave alone crash
As long as the US deficit is controlled which is long ways away
Umaraojaan, Didn't people also think of Apple same way?
Lets look at what structural factors enable the rise of gold to bubble levels and see whats going on geo-politically that weakens those factors.
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Re: Perspectives on the global economic meltdown- (Nov 28 20
They are trying to create a new paradigm where Gold is no longer the global asset. This was the original plan. But the deeper plan in the long run looking at history of gold was to remove gold as the primary asset of countries in the world and the target was INDIA!RoyG wrote:
Gold will not come down much leave alone crash
As long as the US deficit is controlled which is long ways away
Umaraojaan, Didn't people also think of Apple same way?
Lets look at what structural factors enable the rise of gold to bubble levels and see whats going on geo-politically that weakens those factors
The problem with this type of thinking is that people don't see gold price as reflective of currency value. Pentaiah is right. As long as the Fed continues to print money and create inflation the value of the dollar will go down. Therefore, you will require more dollars to buy lets say an ounce of gold. The trouble lies with the dollar. If gold wasn't money, central banks all around the world wouldn't be acquiring it.
Why Aug 15 1971?
http://www.usagold.com/gildedopinion/ro ... 60531.html
The significance of August 15, 1971
That was the day that President Nixon closed the gold window, ending the ability of other central banks to convert their dollars into gold at the fixed price of $35.00 per ounce.
From 1971 through to 1998 nearly 6000 tonnes of official sector gold were sold while official sector buying, mostly by Muslim countries, was about 900 tonnes with Taiwan, the non-Muslim exception, accounting for 350 tonnes.
There may still be family jewels in the vault but the amount remaining may well be considerably diminished.
So what does this mean for the gold price which has been rising in all currencies over the last few years? Are their any currencies that are gold backed? Not anymore! Today most currencies are faith-backed, depending only on the goodwill of the holders, which is a belief in the fact that they are worth something. But is it true?
How long can this game go on? At what point do holders of US $'s finally get the idea that they do need to swap out of paper into commodities? Or is this now what's taking place re the rising prices of all commodities?
Or are commodity prices rising because the US $ is depreciating in terms of its purchasing power by the fact that the world is awash with them? This is what happened in the late 1970's and I suspect it is what is happening now, but to a much larger degree.
What is of interest also is that way too many commentators are calling for a top being in place for commodities, saying that this is another bubble not dissimilar to the tech boom of the late 1990's and that we can expect a substantial lowering of current prices. Now I seem to recall hearing the same thing about tech stocks back in 1996 and yet they kept rising through to March of 2000.
Perhaps the relevant question is, how much physical metal is there remaining to meet rising demand as a result of profits from rising oil prices and an increasing reluctance to hold US dollars?
Re: Perspectives on the global economic meltdown- (Nov 28 20
Man Offers Random People A Free One Ounce Gold Coin
Re: Perspectives on the global economic meltdown- (Nov 28 20
^^Americans are a clueless lot. Central banks are adding to their reserves and the price has been steadily rising due to expansion of money supply. The problem is they don't teach fiscal responsibility and the role of gold in school's anymore. All those who were clueless about 2008 financial crisis and the futility of quantitative easing still think pumping money into the system and rubbishing gold is adequate and people still follow them.
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Re: Perspectives on the global economic meltdown- (Nov 28 20
If he is trying to show that price of gold does not matter and gold is no longer goin to be a safety net then this i propagandashyam wrote:Man Offers Random People A Free One Ounce Gold Coin
There is tendency to bash traditions in US
See the comment of the German.
CompDivplan 2 days ago
It is hopeless. 99% of Americans are sheep. They literally cannot function beyond what they are told to believe. There is a reason that only a small percentage of the country owns everyone else. There is a reason why most people need to be told what to think, what to believe. It is beyond sad at this point and I am embarrassed for most Americans. People live in their own ignorance and then cry when they don't get theirs. People are getting exactly the life they deserve.
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TheKyffhauser 2 days ago
Thank you, I am saying this for years. And as a German I have to add that it is not just the Americans that are so stupid. Seems like the entire population of the western world is ****** in the head somewhat.