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Credit Collapse & the Shadow Banking System

Posted on Sep 27, 2010 in Economic News

Source: Web of Debt

via Blacklisted News

While local banks are held in check by the new banking czars in Basel, Wall Street’s “shadow banking system” has hardly been curbed by regulators at all; and it is here that the 2008 credit crisis was actually precipitated.  The banking system’s credit machine is systemically flawed and needs a radical overhaul.

On September 13, the Bank for International Settlements issued heightened capital requirements that will make lending even more difficult for local banks, which do most of the consumer and small business lending today.  The new rules are ostensibly designed to prevent a repeat of the 2008 credit collapse, but they fail to address its real cause, which involves a “shadow” banking system that has largely escaped regulation.

What went wrong in September 2008 was not that the existing Basel II capital requirements were too low but that banks found a way around the rules.  The Basel II rules base a bank’s capital requirement on how risky its loan book is, and banks can make their books look less risky by buying unregulated “insurance contracts” known as credit default swaps (CDS).  ...

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Americans Enjoying Final Days of Artificial Economy

Posted on Sep 20, 2010 in Economic News

Source: PR Newswire

FORT LEE, N.J., Sept. 16 /PRNewswire/

The National Inflation Association today released the following inflation update to its http://inflation.us members:

In recent days, Japan has intervened in the foreign currency market to artificially drive down the value of the yen. Japan’s actions to weaken the yen have driven it from 83 to 85.73 against the U.S. dollar. Most analysts in the mainstream media are portraying this as Japan’s attempt to “head off a deflation spiral.” Almost everybody is applauding Japan’s move, saying it was needed in order to “shore up its export-driven economy.”

The truth is, although Japan claims to be helping Japanese citizens with this move, Japanese citizens are the ones who will actually suffer. Despite Japan’s economy entering into recession last year, the Japanese were able to maintain their same standard of living because prices were falling due to their strong currency. Some of the largest Japanese exporters like Toyota and Sony saw their revenues decline last year by 20.8% and 12.9% respectively, but this was only bad for shareholders of these companies. Despite rapidly declining revenues for Japanese exporters, Japan’s unemployment rate only reached a peak of 5.6% last year and is now down to 5.2%....

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GMAC Halts Foreclosures In 23 States After Florida Judge Finds JPM Committed Court Fraud In Mortgage Misappropriation

Posted on Sep 20, 2010 in Economic News

Source: Zero Hedge

As we pointed out last week, a certain judge in Florida set quite a precedent when he found that JPM, as servicer for a Fannie mortgage, had committed court fraud by foreclosing while not in possession of the actual mortgage. We then concluded that “The implications for the REO and foreclosures track for banks could be dire as a result of this ruling, as this could severely impact the ongoing attempt by banks to hide as much excess inventory in their books in the quietest way possible.” Not a week has passed since, and we are already proven right. Today, Bloomberg discloses that GMAC Mortgage, a unit of the affectionately renamed Ally Bank, has halted all foreclosures in 23 states, including Florida, Connecticut and New York. Who would have thought that being caught with your pants down, doing something so blatantly illegal as collecting on something you do not own, would actually have adverse consequences. And GMAC is just the beginning – we expect many more mortgage servicers to scurry now that the light has been shone on their shell game....

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Summary Of Global Events In The Week Ahead

Posted on Sep 06, 2010 in Economic News

Source: Zero Hedge

Summer is over, and now the real scramble for performance begins with just 3 weeks left in the quarter. Here is a look at the key economic events in the upcoming week, from around the world.

From Thomas Stolper and Mark Tan at Goldman Sachs

Week Ahead

Summer comes to a close and markets swing back into full gear again following the Labour day weekend in the US. The political temperature in Europe, latest round of Eurozone IP data and China data at the end of the week will be in focus. We also get a few interesting central bank meetings from around the world.

Post summer blues in the Eurozone? We’ll be watching closely for signs of rising political tension in the Eurozone, with the upcoming few weeks critical in gauging the political risks surrounding the pending implementation of key reforms in a number of Eurozone countries. The first milestone will be the September 7th general strikes planned in France in response to a parliamentary debate about the much needed increase of the retirement age. The potential for negative headlines and rising political uncertainty is one of the reasons why we have been cautious not to sound the all clear for the Euro just yet....

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The Wolf You Feed

Posted on Aug 31, 2010 in Police, Military, & War

Source: Lew Rockwell

by Karen Kwiatkowski, Ph.D., Retired USAF Lieutenant Colonel

Legend has it that one evening an old Cherokee told his grandson about a battle that goes on inside people. He said, “My son, the battle is between two wolves inside us all. One is Evil. It is anger, envy, jealousy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority, and ego. The other is Good. It is joy, peace, love, hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, compassion and faith.”

The grandson thought about it for a minute and then asked his grandfather: “Which wolf wins?” The old Cherokee replied, “The one you feed.”

As guidance for individual lives, it works. In philosophy or religion, this story has a sure place. But when it is applied to government, there may be a completely different lesson to be learned. And Americans are going to learn it soon, ready or not.

Chairman of the Joint Chiefs of Staff, Admiral Mullen rightly understands that the national debt is the biggest single risk to the enterprise to which he has devoted his entire adult life, the military industrial complex....

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Hyperinflation, Part II: What It Will Look Like

Posted on Aug 31, 2010 in Economic News, Featured Articles

Source: Zero Hedge

by Gonzalo Lira

I usually don’t do follow-up pieces to any of my posts. But my recent longish piece, describing how hyperinflation might happen in the United States, clearly struck a nerve.

It was a long, boring, snowy piece of macro-economic policy speculation, discussing Treasury yields, Federal Reserve Board monetary reaction, and the difference between inflation and hyperinflation—but considering the traffic it generated, I might as well been discussing relative breast size in the porn industry. With pictures.

Essentially, I argued that Treasury bonds are the New and Improved Toxic Assets. I argued that, if there was a run on Treasuries, the Federal Reserve—in its anti-deflationary zeal, and its efforts to prop up bond market prices—would over-react, and set off a run on commodities. This, I argued, would trigger hyperinflation.
 
The disproportionate attention my post garnered is indicative of people’s current fears. As I’ve said before, people aren’t blind or stupid, even if they often act that way. People are worried—they’re worried about the current state of affairs: Massive quantitative easing, toxic assets replaced by the full faith and credit of the U.S....

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The Conspiracy of Economics

Posted on Aug 24, 2010 in Economic News

Source: Personal Liberty Digest via Truth Offering

The Conspiracy of Economics

Ever wonder why year-after-year, decade-after-decade, politicians and economists alike are always “surprised” by the effects of their policies? When they create some new policy, we’re assured it will take care of whatever problem ails us…yet a few years or more down the road, we wind up at an even worse place than where we started!

It’s as if they have no idea what they’re doing!

Or, they know exactly what they’re doing:

“If they are constantly surprised by the results of their policies, could it be that they don’t really know what they’re doing? Or is it that they know and are lying while they line their pockets and the pockets of those who pull their strings?”
Bob Livingston

The second guess sounds right to me. These are, after all, some of the brightest minds in the world! Ben Bernanke, for example, is supposedly a genius. He was acknowledged to be a child prodigy during his grade school years; he scored a near-perfect 1590 out of 1600 on his SATs; he went to Harvard, earning his BA in Economics in 1975, only to earn his PhD from MIT four short years later; Dr....

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How Hyperinflation Will Happen

Posted on Aug 23, 2010 in Economic News, Federal Reserve & Bankers

Source: Gonzalo Lira

How Hyperinflation Will Happen

Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain.

To counter this, the U.S. government has been running massive deficits, as it seeks to prop up aggregate demand levels by way of fiscal “stimulus” spending—the classic Keynesian move, the same old prescription since donkey’s ears.

But the stimulus, apart from being slow and inefficient, has simply not been enough to offset the fall in consumer spending.

For its part, the Federal Reserve has been busy propping up all assets—including Treasuries—by way of “quantitative easing”.

The Fed is terrified of the U.S. economy falling into a deflationary death-spiral: Lack of liquidity, leading to lower prices, leading to unemployment, leading to lower consumption, leading to still lower prices, the entire economy grinding down to a halt. So the Fed has bought up assets of all kinds, in order to inject liquidity into the system, and bouy asset price levels so as to prevent this deflationary deep-freeze—and will continue to do so....

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Hindenburg Omen Confirmation #1

Posted on Aug 19, 2010 in Economic News

Source: Zero Hedge

Today we got our first Hindenburg Omen confirmation. The number of new highs was 136, and new lows was at 69 (per the traditional WSJ source). Granted this particular criteria set was a little weak as the 69 is precisely on the borderline for confirmation (the 2.2%), and the new highs number was not more than double the new lows (although it was close). Less gating were the McClellan oscillator which was negative at -83.6, and the 10 week MVA, which rose, which were the two remaining conditions. The first omen was spotted on August 12 – a week later the H.O has been confirmed. The more confirmations, the scarier it gets from a technical perspective, not to mention the conversion into a self-fulfilling prophecy (like every other technical indicator)....

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The Purpose Behind Engineered Economic Collapse

Posted on Aug 19, 2010 in Economic News, Featured Articles

Source: Giordano Bruno

Neithercorp Press

The Purpose Behind Engineered Economic Collapse

“From now on, depressions will be scientifically created.” — Congressman Charles A. Lindbergh Sr. , 1913

Everyone loves money. Even people like myself who abhor the abuse of money and commerce, who understand the fraudulent nature of the system we live in, still work hard and save so that we might attain a sense of stability within that system. Many people see money as a focal point to their existence. But is it really money that they are after, or is it something else entirely? In truth, money represents ‘security’ in the minds of the masses. Money affords us the ability to survive, and the more of it we have, the safer we all feel. Because we subconsciously associate the extension of our very life with the variable health of the economic structure in which we live, we tend to become unwitting devotees to its continued existence, even if it is corrupt and condemned to failure. We gullibly deny the system or the currency that supports it is doomed to the contrary of all evidence because, even though it has beaten us bloody, we have never known anything else....

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China Slashes U.S. Govt Bond Holdings By The Largest Amount Ever

Posted on Aug 18, 2010 in Economic News

Source: Business Insider

China began reducing its holdings of U.S. government bonds again in June, and in fact cut just its holdings by the largest 1-month amount ever.

Bloomberg:

The nation’s holdings of long-term Treasuries fell in June for the first time in 15 months, dropping by $21.2 billion to $839.7 billion, a U.S. government report showed yesterday. Two- year yields headed for a fifth monthly decline in August, falling today to a record 0.48 percent.

Two-year rates will rise to 0.85 percent by year-end as the U.S. economy rebounds in 2010 from a contraction in 2009, according to Bloomberg surveys of financial companies. Reports today will show improvement in housing and manufacturing, signs of stability even as growth is less than expected, analysts said.

This happened as U.S. treasury yields declined to ever historically-lower levels during June, but selling in June wasn’t a good move in retrospect. That’s because U.S. yields fell even further in July and early August....

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Without a Revolution, Americans are History

Posted on Aug 16, 2010 in Political Issues

Source: Dr. Paul Craig Roberts

The Ecstasy of Empire

The United States is running out of time to get its budget and trade deficits under control.  Despite the urgency of the situation, 2010 has been wasted in hype about a non-existent recovery.  As recently as August 2 Treasury Secretary Timothy F. Geithner penned a New York Times column, “Welcome to the Recovery.”

Without a revolution, America is history.

As John Williams (shadowstats.com) has made clear on many occasions, an appearance of recovery was created by over-counting employment and undercounting inflation. Warnings by Williams, Gerald Celente, and myself have gone unheeded, but our warnings recently had echoes from Boston University professor Laurence Kotlikoff and from David Stockman, who excoriated the Republican Party for becoming big-spending Democrats.

It is encouraging to see some realization that, this time, Washington cannot spend the economy out of recession. The deficits are already too large for the dollar to survive as reserve currency, and deficit spending cannot put Americans back to work in jobs that have been moved offshore. 

However, the solutions offered by those who are beginning to recognize that there is a problem are discouraging....

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Economy in for a Long Dark Period – Here’s How to Survive

Posted on Aug 11, 2010 in Economic News

Source: Safe Haven

Economy in for a Long Dark Period – Here’s How to Survive

The success of the multi-year machinations of the U.S. Government and the Federal Reserve’s attempts to manage the fiscal crisis can best be summarized in a single word – and that word is ephemeral – yes, ephemeral! This beautifully succinct word, ephemeral, is defined as “lasting for only a short period of time and leaving no permanent trace.” Yes, indeed, what better word is there to describe the Government’s so-called rescue plan than ephemeral – here today and gone tomorrow – and without a trace of lasting benefit!

While I tend to be short on words and to the point, as my previous articles* will attest, trying to achieve both accuracy and brevity on this subject was difficult to achieve but what follows should provide a reasonably fair and complete assessment.

Myriad of Statistical Measurements are Being Manipulated and Massaged

There have been a myriad of statistics presented by analysts attempting to quantify the short- and long-term impact of the economic and fiscal policies deployed over the last couple of years....

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The Death of the Dollar

Posted on Aug 11, 2010 in Economic News, Featured Articles, Federal Reserve & Bankers

Source: American Thinker

The Death of the Dollar: an Economic Funeral

Nothing can save our financial system in the long run.  It is doomed to collapse. This is inevitable, because our government controls and manages its very foundation — the dollar.
The federal government began its takeover of the dollar in 1913 when it established the Federal Reserve Banking System. Prior to that, the dollar was a real store of value. In the period from 1783 to 1913, there was a long period of currency stability with virtually no inflation. If you saved one dollar in 1800, your great-grandchild could buy roughly the same amount of goods with the same dollar one century later.
In 1913, five dollars could get you the following:
15 pounds of potatoes, 10 pounds of flour, 5 pounds of sugar, 5 pounds of chuck roast, 3 pounds of round steak, 3 pounds of rice, 2 pounds each of cheese and bacon, and a pound each of butter and coffee … two loaves of bread, 4 quarts of milk and a dozen eggs.
In 2010, five dollars barely gets you two pounds of cut chicken meat....

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Stocks Slide on Unemployment Report, Dollar Will Continue to Weaken

Posted on Aug 10, 2010 in Economic News

Source: CNBC

Stocks slipped Friday after the US government report showed more jobs were lost last month than expected. Quincy Krosby, chief market strategist at Prudential Financial, and David Spika, vice president and investment strategist at WHG Funds, discussed their insights.

“The job report this morning is confirmation of why you want to invest in companies with exposure to faster-growing foreign markets,” Spika told CNBC.

Hayden’s Note:

Unless you are a full time trader, broker or investment guru, exposing your money to the international market while the dollar is so volatile is simply crazy. 

The employment and job numbers were so low because this is the first major report since they laid off all of the Census workers!  I said this back in January, March, April… they inflated the numbers to look good and buy themselves a few more months.  Now we are seeing that we actually have a net loss since the beginning of the year – unlike Obama’s claim that they created 130,000 jobs each month in the first and second quarter (or some other nonsensical number).  These were Census workers being hired one month, then 6 weeks later they were “re-hired” to be trained. ...

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