Perspectives on the global economic meltdown (Jan 26 2010)

shyam · Post by **shyam** » 08 Nov 2010 09:29

Jim Grant's classic comments:

- Economy is not measuring up, so the Fed is changing the rulers
- US's greatest export - US Dollars. So you can guess what will be US's greatest export when USD depreciates..

wig · Post by **wig** » 08 Nov 2010 09:59

http://www.nytimes.com/2010/11/08/busin ... ml?_r=1&hp
the new york times reporting on one of the PIIGS economies faltering steps

When interest rates soared last week on Irish government bonds, it served as a grim warning to other indebted nations of how difficult and even politically ruinous it could be to roll back decades of public sector largess.
An Irish bond market already in free fall plunged further after Ireland announced on Thursday that it planned to nearly double its package of spending cuts and tax increases to try to rein in its huge deficit. Investors took it not as a sign of resolve but rather of Ireland’s desperation and uncertainty about the true extent of its problems.

“The scale of the deficits are just so big,” said Philip R. Lane, a professor of international economics at Trinity College in Dublin. “The issues are political as much as they are economic.”

International concerns about the high budget deficit in the United States, and Washington’s seeming willingness to print money rather than tackle tough debt-cutting measures, help partly explain the recent anti-American criticism from countries as diverse as Brazil, China and Germany. Countering those critics may be one of the biggest tasks for President Obama in Seoul, South Korea, this week at the Group of 20 meeting of the leaders of the world’s biggest economies.

In this respect, Ireland, where the deficit is currently 32 percent of its G.D.P., is exhibit A.

A year ago, as cascading mortgage defaults brought down the biggest Irish banks, Ireland became the first major developed nation to impose an austerity program. The country was hailed worldwide as an exemplar of probity and national consensus.

wig · Post by **wig** » 08 Nov 2010 10:13

the fundamental object lacking in the western economies has been a singular lack of willingness to question/ control the blind greed of big money (read: banks, investments bankers, financial institutions)
earlier too it was the abject failure of the oversight authorities in various countries who for reasons that are in the realm of conjecture failed to report on pyramid scheme (ponzi) operators like Madoff.
it was reported then that SEC inspectors did inspect his books records etc but reported nothing to be amiss.
this implies to me one of the following:
a) the auditors/inspectors were incompetent or overawed, when they found themselves to be inspecting books of what they concieved to be financial role models of probity and profitablity
b) the auditors/inspectors were overburdened and under remunerated and hence just mechanically went over the records and while recognising that there was something amiss did not report it. (keep it in mind that qualifying a report for an auditor means quantifying the qualification). this means a whole lot more work will need to be done
c) the auditors/inspectors were in the know all along but played the game to the full because they were partners in gains

however this masks the intent of the other stakeholders at large. it seems that everybody thought that huge profits were fine and no thought needed to be given to the source- was it sustainable or was it plain cooking of books. it needs to be kept in mind that profits are not necessarily sourced from core operations and can also be simply redistributing assets and incomes. when people lose money on the markets (share, commodity etc) it reflects on somebody's income. this is not profit as such, just a redistribution of money. were they aware or wilfully blind to the intent of unbridled profiteering that has let in the economies of nations such as Iceland

Neshant · Post by **Neshant** » 08 Nov 2010 10:29

what the...

what does the word 'modified' mean in this context ?

--------

World Bank chief moots return to gold standard
Sun Nov 7, 11:07 PM

LONDON (AFP) - World Bank chief Robert Zoellick on Monday urged the world's leading economies to consider returning to a modified

gold standard as fears of an upcoming currency war mount.

The bank boss promoted a system that is "likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation," in a letter published in the Financial Times.

"The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values," the letter continued.

http://ca.news.finance.yahoo.com/s/0811 ... ndard.html

svinayak · Post by **svinayak** » 08 Nov 2010 11:56

. the Global Corporations (i.e. the Global Elite who exist above, and without any allegiance to, any nation) now have complete control of the U.S. government and are thoroughly looting the U.S. to collapse. Americans still do not accept this obvious truth... because they do not understand that the Global Elite have more to gain by taking the U.S. down while moving the means of both production and consumption to other locations around the world.

Unfortunately, this concept is NOT gaining traction among Americans. Instead, the corporate media (the propaganda engine for the Global Elite) have convinced Americans that their government caused the economic destruction by over-supporting tens-of-millions of "undeserving", "unproductive" Americans at the bottom of our society. Not only are these "entitleme nt-depende nt" Americans (who control the government?) the cause of all our problems, they are "criminals" (traitors, socialists, communists, terrorists?) intent on destroying the U.S.

By convincing Americans "it's all the government's and poor people's fault", the Global Elite have accomplished two major objectives: 1) they've diverted attention and accountability away from their on-going accelerated looting, and 2) they've trained Americans to expect MANY more poor people (who "deserve to be poor"?).

Americans need to recognize what's going on and figure out how to protect themselves. If the Global Elite's actions are not criminalized (thousands thrown in jail and trillions of wealth repatriated) then the U.S. will continue to fall MUCH further.

ShivaS · Post by **ShivaS** » 08 Nov 2010 12:43

Acharya ji>> you are one of a kind you dont provide context nor do you provide any comments. skull heads like me ok moron like me cant decipher.
can you change your ways for the benefit of Man kind

kmkraoind · Post by **kmkraoind** » 08 Nov 2010 19:14

China Newspaper Warns of Disaster Over Fed Move

Yesterday Germany and now the main opponent China, what next...

svinayak · Post by **svinayak** » 08 Nov 2010 21:41

ShivaS wrote:Acharya ji>> you are one of a kind you dont provide context nor do you provide any comments. skull heads like me ok moron like me cant decipher.
can you change your ways for the benefit of Man kind

Just ignore. I just had a dream

shyam · Post by **shyam** » 08 Nov 2010 22:13

About Ireland:

If you thought the bank bailout was bad, wait until the mortgage defaults hit home

WHEN I wrote in The Irish Times last May showing how the bank guarantee would lead to national insolvency, I did not expect the financial collapse to be anywhere near as swift or as deep as has now occurred. During September, the Irish Republic quietly ceased to exist as an autonomous fiscal entity, and became a ward of the European Central Bank.

It is a testament to the cool and resolute handling of the crisis over the last six months by the Government and Central Bank that markets now put Irish sovereign debt in the same risk group as Ukraine and Pakistan, two notches above the junk level of Argentina, Greece and Venezuela.

September marked Ireland’s point of no return in the banking crisis. During that month, €55 billion of bank bonds (held mainly by UK, German, and French banks) matured and were repaid, mostly by borrowing from the European Central Bank.
....
What is driving our bond yields to record levels is not the Government deficit, but the bank bailout. Without the banks, our national debt could be stabilised in four years at a level not much worse than where France, with its triple A rating in the bond markets, is now

ramana · Post by **ramana** » 08 Nov 2010 23:36

There is book called World Crisis about the recent financial collapse and what it means to the West.

The big picture the writer is painting is that its like the Western world after Carthage was defeated by Imperial Rome or Persia by Byzantium and the exhaustion after that which led to slow collapse.

paramu · Post by **paramu** » 09 Nov 2010 00:03

Interesting thing about recent crisis is that no external enemy was involved in this. It is western governmets' own actions that caused the crisis.

Prem · Post by **Prem** » 09 Nov 2010 00:30

World Bank chief moots return to gold standard
Sun Nov 7, 11:07 PM

Wonder if any one has done study on increase in the net worth of Indians because of their gold loving/hoarding habits.

Prem · Post by **Prem** » 09 Nov 2010 00:31

Leading Indicators for China and Brazil Point Strongly Downwards
http://seekingalpha.com/article/235494- ... -downwards

OECD composite leading indicators (CLIs) for September 2010 point to diverging patterns of economic growth across major economies.The CLIs show signs of continuing expansion in Germany, Japan, the United States and Russia, while pointing to a moderate downturn in Canada, France, India, Italy and the United Kingdom.The CLIs for Brazil and China continue to point strongly downwards, edging below the long term trend and implying that the level of industrial production will fall below its longer-term trend in these two economies

paramu · Post by **paramu** » 09 Nov 2010 00:58

One comment in ZH:

The only reasonable explanation for QE2 is that Treasury has no market for all of the U.S. debt other than the FED unless rates are to rise dramatically. We currently have 70% of U.S debt with maturities of 5 years or less and with costs of between .01% and 1.00%. All of the FED chatter about boosting "stock market" or "unemployment" is a smokescreen.

ramana · Post by **ramana** » 09 Nov 2010 01:19

Can you see that from the data?

paramu · Post by **paramu** » 09 Nov 2010 01:23

We will have to wait for the data to come.

For the last quarter we have this news.
Record Bond Buying by Banks Frustrate Bernanke Easing for Loans

ramana · Post by **ramana** » 09 Nov 2010 01:54

Two stories:

QE2 wont help Mortgage mess

...
LL: Will QE2 help the housing mess?
BG: QE2 is helpful to a degree but its like fixing a leg with antibiotics. It may help but not fix the broken bone. What has happened here is Bernanke has achieved the Greenspan head fake factor. By talking about QE2, a lot of QE2 is already priced in without spending a dime. You keep the interest rates already low and what good will it do for the economy and the housing mess?

You can fix unemployment and the housing mess with interest rates alone. If we are going to use interest rates to try and solve this problem, more people need access to that interest rate. Current homeowners currently underwater, or not, need to have access to that interest rate as well as homebuyers who can afford the home but don't have the down payment or stellar credit should also have access to the low interest rates as well.

LL: But that means banks have to start lending.

BG: Banks need to either have to start lending or allow people to access lower rates without going through the full underwriting process. The securitization market isn't willing to lend money without additional underwriting and making sure their loans are in tack and there really is no incentive for the banks to do so.

LL: Then how do we incentivize the banks (and to me the word "incentivize" should be the word of the year here)- How do you incentivize banks to lend?

BG: The tool at the government's disposal right now is interest rates and legislation on banks really isn't going to do the job. Its just not. See, the challenge right now for homeowners is that the future looks so uncertain. The future of interest rates, the future of home prices, and the future for the value of that loan to those who securitize them.

LL: But we haven't really hit a true bottom yet. When the Fed intervened, which they had to, put a false bottom in this market. Will QE2 prolong the process of the housing market to hit a bottom? What is needed to for the real estate market to truly bottom?

BG: When we're talking about a bottom I think home prices need to fall to be a bottom. How much they fall depends on the local market and interest rate. Real estate has been a shell game of using equity and low interest rates to upgrade. If we see higher mortgage rates that hits home ownership. The town home owner wants a home, the smaller home owner wants to move to a bigger home. Its a huge headwind when we look out five years.

LL: How would you characterize the health of the housing economy right now?

BG: Fragile. Very fragile.

LL: Are we at a risk to dip down again?

BG: The good news is that lending standards have increased where people have to put money down in terms of a down payment. People are saving more now and many more can handle a five or ten percent decrease in the equity of their home and still walk away or break even. That's a good thing.

The challenge is really going to be is home prices. I don't see home prices increasing in the next several years. But as prices increase you'll see a flood of people that have investment property try and sell their property.

There is huge pressure against rising home prices right now. Do I think home prices will plummet? I don't think so. The thing that would have home prices to go down in value is if QE2 is not effective or we finish QE2 and interest rates are just far higher. The creditors of the United States could demand more.

and

Barron's

Is the crowd wrong about QE2?

.....
What really sent the averages bounding to their best prices in two years was confirmation by the Federal Reserve that it was launching its second try at quantitative easing and pledging to inject $600 billion of stimulus between now and the end of June into the still-parched financial system. In the process, it hoped to stir the inflation devil, which by Mr. Bernanke's measure (apparently, he hasn't had to buy any food or gasoline lately) has been slumbering peaceably, and crank up the frustratingly sluggish recovery.

The announcement gave the markets—commodities as well as equities, foreign as well as our own—a shot in the arm, while further hammering the bruised and battered dollar. This latest outbreak of euphoria, inspired partly by the scent of future inflation, lasted a whole day or two, helped along by panicky shorts scrambling for cover. Friday, things settled down a bit.

The Street consensus was that QE2 would have very little positive impact. It would intensify the pressure on the greenback and irritate foreign friends and whatever (China, if you can believe it, complained about "currency manipulation"). It also, we were assured by assorted stock-pushers, enhanced the attraction of equities, presumably as a cheap inflation hedge.

Such widespread agreement doesn't mean the crowd is necessarily wrong. But it makes us wonder. It also prompted us to read with some care the contrary opinion of Northern Trust's Paul Kasriel and Asha Bangalore, that "QE2 is likely to be more successful than QE1." (Which, in itself, isn't saying much.)

We don't have space enough to offer more than some snippets from the full report, but hope you'll get the flavor. Paul and Asha point out that QE1 covered the 16 months ended March 2010, during which stretch the Fed's outright holdings increased by a net of only $200 billion, while other elements of Fed credit shrank by a net $1.3 trillion, including an $875 billion contraction in the commercial-banking system's credit. The net change in credit in the first round of QE came to -$675 billion, which explains why its effect was so feeble.

By contrast, they reckon that during the next seven months of QE, it's conceivable that the combined Federal Reserve and commercial-system credit could increase by more than 5%, the most since March 2009. That wouldn't be enough to spark a boom in nominal aggregate demand, they concede, but it would "help prevent the economy from slipping back into a recession in the face of substantial headwinds emanating from the housing and state/local government sectors."

Not a panacea for what ails us, but avoiding a double dip is no small thing, either.

.....

Who is Asha Bangalore?

Hari Seldon · Post by **Hari Seldon** » 09 Nov 2010 04:55

Well, picture == 1000 words and all that....

Ramana garu,

There was some prelim indication that USTs were finding it a tad challenging to find buyers esp at the longer end of the maturity curve and hence the restrictions afresh on primary dealers on that score. Thx to the primary dealer system, there's No chance of a failed bond auction in the US. The primary dealers remain in the club because of preferential access to the fed funds window, among other privileges.

Neshant · Post by **Neshant** » 09 Nov 2010 05:25

A simplified diagram of the above :

Federal Reserve fiddling around -> Crisis

paramu · Post by **paramu** » 09 Nov 2010 05:57

OK Ramana, here is the interesting piece for you.

Dallas Fed Admits "For The Next Eight Months, The Nation’s Central Bank Will Be Monetizing The Federal Debt", Opens Door To Bernanke Impeachment

Yet when an actual Federal Reserve Fed President, in this case Dallas Fed's Dick Fisher states it without any trace of hiding the underlying intent, then things get a little serious. To wit: "For the next eight months, the nation’s central bank will be monetizing the federal debt."

This appears like Clinton's famous video but more lethal.

mnag · Post by **mnag** » 09 Nov 2010 08:45

bond insurer ambac files for bankruptcy

http://dealbook.nytimes.com/2010/11/08/ ... ?src=busln

i am watching to see if even MBIA is next

ShivaS · Post by **ShivaS** » 09 Nov 2010 10:43

dont make your dream a liability of BRF, BRF can get sued if you dont indicate the source...
Also you prove that you are the greatest "Plagiarizer" ever to visit BRF.

I dont understand how BR admins let this go away.. with out posting any reference and posing as if he is the source of the Gyan...
I used to think you have some substance but looks like .....

****
Admins 14 years into BRF I have never complained against a member what is this with this member that such alttitude is extended?

Anybody hazard a astrological guess on this case?

shyam · Post by **shyam** » 09 Nov 2010 14:13

People are predicting Irish default.

Grant, Brynjolfsson Interview About Ireland Debt Crisis

svinayak · Post by **svinayak** » 09 Nov 2010 21:44

shyam wrote:People are predicting Irish default.

Shyam, can you help the troubled souls in this thread

shyam · Post by **shyam** » 09 Nov 2010 22:33

Umrao... Acharya is the sociologist in this forum and people's reaction become his study material. It is better to avoid his provocations. Let admins worry about legality of his posts.

BTW, I always wondered why nobody was raking up QE2 issue and commitments made to G20. But Europeans are planning to question it.
European panic over QE2

"I think that the Europeans who are sitting around the G20 table will obviously have to put questions to our American friends regarding recent monetary decisions, because they don't seem to be in line with what was agreed at preparatory meetings for the G7 and the G20,"

Prem · Post by **Prem** » 10 Nov 2010 00:47

China Cracks Down on Hot Money

BEIJING—China's foreign-exchange regulator on Tuesday announced measures to further crack down on speculative hot-money inflows, with senior officials in the country expressing concern in recent days that loose U.S. monetary policy might send excessive amounts of money into emerging markets.
The State Administration of Foreign Exchange measures don't appear revolutionary, and are largely focused on strengthening oversight of inflows and implementation of existing rules. But they reflect concern in Beijing that excessive liquidity could cause inflation and asset bubbles, and come before the summit this week of leaders from the Group of 20 industrial and developing nations in South Korea

http://online.wsj.com/article/SB1000142 ... 82348.html

Ameet · Post by **Ameet** » 10 Nov 2010 01:06

Bank of America Edges Closer to Tipping Point

http://www.bloomberg.com/news/2010-11-0 ... -weil.html

AFL-CIO attorney Damon Silvers, openly worried at a hearing last week about the risk that Bank of America might need another bailout.

The problem for anyone trying to analyze Bank of America’s $2.3 trillion balance sheet is that it’s largely impenetrable. Some portions, though, are so delusional that they invite laughter. Consider, for instance, the way the company continues to account for its acquisition of Countrywide Financial, the disastrous subprime lender at the center of the housing bust, which it bought for $4.2 billion in July 2008.

Here’s how Bank of America allocated the purchase price for that deal. First, it determined that the fair value of the liabilities at Countrywide exceeded the mortgage lender’s assets by $200 million. Then it recorded $4.4 billion of goodwill, a ledger entry representing the difference between Countrywide’s net asset value and the purchase price.

That’s right. Countrywide’s goodwill supposedly was worth more than Countrywide itself. In other words, Bank of America paid $4.2 billion for the company, even though it thought the value there was less than zero.

Since completing that acquisition, Bank of America has dropped the Countrywide brand. The company’s home-loan division has reported $13.5 billion of pretax losses. Yet Bank of America still hasn’t written off any of its Countrywide goodwill.

wig · Post by **wig** » 10 Nov 2010 09:26

the G-20 summit will convene in s korea later this week. in this backdrop the german finance minister is interviewed by the newsmagazine spiegel. a full read is instructive into the facets of eurozone aspirations and how they look at the us economic scenario unfold

Interview With German Finance Minister Schäuble
'The US Has Lived on Borrowed Money for Too Long'
In an interview with SPIEGEL, German Finance Minister Wolfgang Schäuble, 68, criticizes US calls for Germany to reduce exports, outlines his plans for an insolvency framework for indebted European nations and the emphasizes the significance of the German-French axis for Europe.

SPIEGEL: Last week, the US Federal Reserve Bank decided to flood the economy with $600 billion in new money. Will this stimulate the economy as hoped?

Schäuble: I seriously doubt that it makes sense to pump unlimited amounts of money into the markets. There is no lack of liquidity in the US economy, which is why I don't recognize the economic argument behind this measure.

SPIEGEL: But the United States isn't the only country that's responsible for unrest in the markets. The euro crisis also continues to smolder. The risk premiums for government bonds from the crisis-plagued countries Ireland and Greece have gone up again. How much longer will it take before Europe has to issue new state guarantees?

Schäuble: I'm not that pessimistic in this regard. Although the Irish have accumulated huge debts to bail out their banks, they are making good progress in cleaning up their economy. And I also have great respect for the Greek government's resolve. A few months ago, hardly anyone would have believed that the Greeks would manage to implement such a drastic austerity program. They're moving in the right direction now.
SPIEGEL: You'll also have to convince your fellow Germans. When the euro was introduced, it was said repeatedly that German taxpayers would never have to pay for the debts of other countries.

Schäuble: Precisely because we want German taxpayers to be called upon as little as possible in a crisis, an organized debt restructuring involving the private investors is so important. But we should all recognize that keeping the euro stable is primarily in our interest. No one benefits from the common currency as much as the biggest European economy.

http://www.spiegel.de/international/wor ... 01,00.html

shyam · Post by **shyam** » 10 Nov 2010 10:58

Do you remember the days when Goldman Sucks used to bet against PIIGS and created near economic collapse in those countries? Looks like somebody is doing this against US, that too in gold!

Slightly old article that makes sense now:
Washington Must Ban U.S. Credit Derivatives as Traders Demand Gold (Part One)

Congress should act immediately to abolish credit default swaps on the United States, because these derivatives will foment distortions in global currencies and gold. Failure to act now will only mean the U.S. will be forced to act after these "financial weapons of mass destruction" levy heavy casualties. These obligations now settle in euros, but the end game is to settle them in gold. This is so ripe for speculative manipulation that you might as well cover the U.S. map with a bull's-eye.
...
When U.S. credit default swaps were first introduced, the price of protection was around two basis points. According to Bloomberg, the price for five-year protection was around 38 basis points (per annum) on Friday. But the price in the over-the-counter market -- where this stuff actually trades -- was almost double or around 75 basis points.

Since most traders in U.S. credit default swaps don't think the U.S. will default any time soon, why are they trading U.S. credit default swaps? They are speculating on price movements the way a day trader buys and sells stocks to speculate on stock price movements.

Volume in U.S. credit default swaps is relatively small, but it can explode rapidly, just as volume expanded rapidly for credit default swaps on mortgage debt in 2006 and 2007.
...

Speculators Want U.S. CDS Payoffs in Gold

Remember AIG? When prices moved against AIG on its credit default swap contracts, AIG owed cash (collateral) to its trading partners. AIG paid billions of dollars and owed billions more when U.S. taxpayers bailed it out in September 2008.

U.S. credit default swaps currently trade in euros. After all, if the U.S. defaults, who will want payment in devalued U.S. dollars? The euro recently weakened relative to the dollar, and market participants are calling for contracts that require payment in gold. If they get their way, speculators on the winning side of a price move will demand collateral paid in gold.

The market can create an unlimited number of these contracts very rapidly. The U.S. wouldn't have to ever default to trigger a major disruption in the gold market. Spreads (or prices) on the credit default swaps could simply move based on "news," and demand for gold would soar.

If this speculation drives up the price of gold, and the available gold supply becomes limited, are you willing to post your children as collateral? I am pushing the point so that we put a stop to this before it is too late.
...
...
World leaders shouldn't merely ask for limits on sovereign credit derivatives. They should demand a ban on all sovereign credit default swaps. {Ha... it matters when the weapon is used against the originator}

Author doesn't say who is selling those CDSs. However, if what she says is true, expect strong action by uncle to put pressure on gold prices.

kmkraoind · Post by **kmkraoind** » 10 Nov 2010 13:40

China Ratings Agency Downgrades America

You had to see this coming: The Chinese cut our debt rating — again. This time, the Chinese rating agency Dagong reduced our sovereign credit rating from "AA" to "A+". Why? No surprises here either: Quantitative Easing.

kmkraoind · Post by **kmkraoind** » 10 Nov 2010 13:41

Roubini: Here's Why a Gold Standard Won't Work

ShivaS · Post by **ShivaS** » 10 Nov 2010 13:56

Its not a matter of Gold or even Gold fingering of Dollar, its time for global shift from USD to other currencies. The pre eminance of USD is long gone, and US has to come to grips as it always touts free market but wont let dollar free world... in trade

Neshant · Post by **Neshant** » 10 Nov 2010 14:19

The interview starts at 20:00 min into the audio clip

Peter Schiff vs Robert Prechter

http://www.schiffradio.com/site/rd?saty ... Y5Kip8.mp3

Neshant · Post by **Neshant** » 10 Nov 2010 15:04

Its a clever move by RP to introduce competition and put an end to the unholy practice of money printing and passing on losses to suckers by banking crooks. Its effect is to eliminate taxation on gold. If you convert your savings to gold, the dollar goes down and you convert it back - you don't pay a tax on 'captial gains'. In reality there was no capital gains. You did not gain anything but rather just protected yourself against being ripped off by money printing crooks.

The Federal Reserve will object to this because the private banking cartel it represents requires suckers to offload its losses on through printing and inflating.

------------

Ron Paul : "Allow Gold and Silver to be legal tender"

The Federal Reserve is “self-destructing” through of its efforts to jump-start the US economy with more monetary easing, Rep. Ron Paul, (R-Texas), told CNBC Monday.

Paul said the Fed’s decision last Wednesday to spend an additional $600 billion in quantitative easing—buying Treasurys to lower interest rates—won't work and will destroy the dollar's value around the world.

“They (the Fed) can’t manage a dollar like this,” said Paul. “People are going to desert the dollar. I think the Chinese are hinting that already: They’re not wanting our dollars as much as they want raw materials and other things."

Paul, a frequent critic of the Fed, is likely to become chairman of a subcommittee that oversees monetary policy when the new Congress takes over in January.

In an interview last week with CNBC.com's NetNet, Paul said his first priority will be to open up the books of the Fed.

“I will approach that committee like no one has ever approached it because we’re living in times like no one has ever seen,” Paul said.

In the CNBC interview Monday, Paul was particularly critical of Fed Chairman Ben Bernanke.

"Bernanke is very clear at what he's going to do," said Paul. "He's going to create money until he gets economic growth, and there's no evidence creating money creates economic growth."

About Bernanke's statement that he wants four percent inflation, Paul said: "When he gets to four and decides to go to eight, there's no way they can stop it. If they withdraw, it might make things worse. They think they have control. They don't."

Paul said the Fed would "disappear" if it had competition.

"What I would do is legalize competition," he explained. "You have competition on the international markets: When China gets fed up with our dollar, they start buying hard assets.

"So the American people should have the right to do this," he added. "We should...allow gold and silver to be legal tender, allow us to carry out transactions in another currency and have it go back and forth. And then I think the the Fed would just disappear eventually, because nobody will want to deal in dollars. Competition to the Fed will make the Fed be more cautious."

Pauls comments came as World Bank President Robert Zoelick, a former member of the Bush cabinet, said leading economies should consider "employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”

http://www.blanchardonline.com/investin ... ticle=1374

shyam · Post by **shyam** » 11 Nov 2010 00:03

Short Sellers Move Into Financials, Out Of Tech

Short sellers moved into the shares of large financial firms, perhaps sensing the effects of new regulation and an exit from proprietary trading businesses

The short interest in Citigroup (NYSE: C) rose 4.8% to 423.8 million, the largest short position in any stock. Shares short in Wells Fargo (NYSE: WFC) rose 21% to 53.2 million. The short interest in Ambac, which recently went bankrupt rose 14% to 59.2 million. Share short in Bank of NY rose 27% to 21.1 million. Shares short in Synovus Financial were up 9% to 106.9 million. Shares short in KeyCorp rose 9% to 34.6 million

ramana · Post by **ramana** » 11 Nov 2010 01:47

So they expect the banks to fall down?

Neshant · Post by **Neshant** » 11 Nov 2010 07:38

I'm hearing rumours of a bank holiday due to problems at Bank of America. Don't know if its fake rumours flying around or if there is any substance to it.

If there was any problem it would be taken care of behind the scenes and not declared out in the open I would think.

RamaY · Post by **RamaY** » 11 Nov 2010 07:44

^ Could it be massa internal power struggle between old money and new money?

The old money was gold-standard (accumulated from colonies and Nazis) where as new money is paper standard

ShivaS · Post by **ShivaS** » 11 Nov 2010 08:42

The only way Banks in US and Europe can recoup their loses is to enter India into the insurance segment which Ombaba wants to be opened further...

Insurance is the most profitable business (P&C, Motor/Car) not CDS

wig · Post by **wig** » 11 Nov 2010 08:45

finally the Deficit panel a bipartisan us body come out of its closet and offers 'painful' program for U.S.!

The chairmen of President Obama's bipartisan deficit commission on Wednesday outlined stark recommendations they say are necessary to secure the nation's fiscal standing, including reforms of the tax code and entitlement programs that would likely spark opposition from lawmakers and interest groups.

Anticipating resistance, the draft proposal from Democrat Erskine Bowles and Republican Alan Simpson acknowledges that the suggestions are "painful," but warns that "there's no easy way out."

"America cannot be great if we go broke," the 50-page plan says in a statement of principles. "Our economy will not grow and our country will not be able to compete without a plan to get this crushing debt burden off our back."

The document makes five basic recommendations: First, to "enact tough discretionary spending caps" and find $200 billion in savings by 2015. Second: tax reform "that dramatically reduces rates, simplifies the code, broadens the base and reduces the deficit." The third step addresses reforms of the health system. Fourth: mandatory savings from farm subsidies and civilian and military retirement costs. And fifth: reforms to Social Security to ensure its solvency "while reducing poverty among seniors."

The chairmen say these steps could reduce the deficit to 2.2% of gross domestic product by 2015, and achieve $4 trillion in deficit reduction by 2020.

"A sensible, real plan requires shared sacrifice — and Washington should lead the way and tighten its belt," the chairmen state.

Proposed changes to Social Security — the so-called "third rail" of American politics — may be particularly challenging to enact. The draft proposal suggests raising the retirement age, altering the formula for cost-of-living increases, and raising the payroll tax threshold. The normal retirement age would rise to 68 by 2050, and 69 by 2075.

Bowles, a White House chief of staff under Bill Clinton, and Simpson, a former senator from Wyoming, developed their recommendations after months of meetings with an 18-member panel. The commission was created by executive order in February after Congress failed to agree on creating its own panel, which may have had more legislative might.

The White House responded with a statement emphasizing the preliminary nature of the draft, calling it "only a step in the process."

"The president will wait until the bipartisan fiscal commission finishes its work before commenting," spokesman Bill Burton said. "[He] looks forward to reviewing their final product early next month."

It's unclear whether these recommendations will go beyond the drawing board, particularly if the members of Congress who occupy a majority of seats fail to agree on core recommendations. The structure of the panel requires 14 of 18 members to support the draft for it to move to Congress for consideration.

"The proposal laid out today by Commission Co-Chairs Bowles and Simpsons is a starting point for the conversation about how to rein in the deficit and control spending here in Washington," said Illinois Sen. Dick Durbin, the majority whip. "This draft proposal has some painful cuts, some things that inspire me and some things that I hate like the devil hates holy water. I'll continue to work on making some changes to this draft, but it is an interesting starting point for future conversations."

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called the recommendations "truly remarkable."

"This plan does it all — allows time for the economy to strengthen, brings down future deficits and debt, protects the most disadvantaged, makes government more effective and efficient, and promotes economic growth and competiveness," she said in a statement.

Also Wednesday, the Treasury Department announced that the federal government began its fiscal year with a deficit of $140.4 billion in October, the third-highest on record.

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