SacredTHCRitual
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this might be a good time for the NW united states to recede from the nation
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Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping.
The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained.
In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.
The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.
“When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”
France, as current head of the Group of 20 countries, will help the transition to a global financial system based on 'several international currencies', French Economy Minister Christine Lagarde said today.
Lagarde, speaking ahead of a G20 finance ministers meeting in Paris on Friday and Saturday, said the world had to move on from the 'non-monetary system' it now has to one 'based on several international currencies'.
Accordingly, France wants to see less need for countries, especially the emerging economies, to accumulate huge foreign reserves, she said.
At the same time, international capital flows should be better regulated and the role of the Special Drawing Rights issued by the International Monetary Fund should be reinforced by the inclusion of China's yuan in the system.
The death of the dollar draws closer. The market at wide no longer sees it as a "flight to safety" when things get shitty as they have in the Middle East. In other words, the party for King Dollar and the American Empire is almost over. Thank you Federal Reserve for debauching our currency with military-Keynesianism.The single most astonishing fact about foreign exchange is not the high volume of transactions, as incredible as that growth has been. Nor is it the volatility of currency rates, as wild as the markets are these days.
Instead, it's the extent to which the market remains dollar-centric.
Consider this: When a South Korean wine wholesaler wants to import Chilean cabernet, the Korean importer buys U.S. dollars, not pesos, with which to pay the Chilean exporter. Indeed, the dollar is virtually the exclusive vehicle for foreign-exchange transactions between Chile and Korea, despite the fact that less than 20% of the merchandise trade of both countries is with the U.S.
Chile and Korea are hardly an anomaly: Fully 85% of foreign-exchange transactions world-wide are trades of other currencies for dollars. What's more, what is true of foreign-exchange transactions is true of other international business. The Organization of Petroleum Exporting Countries sets the price of oil in dollars. The dollar is the currency of denomination of half of all international debt securities. More than 60% of the foreign reserves of central banks and governments are in dollars.
The greenback, in other words, is not just America's currency. It's the world's.
But as astonishing as that is, what may be even more astonishing is this: The dollar's reign is coming to an end.
I believe that over the next 10 years, we're going to see a profound shift toward a world in which several currencies compete for dominance.
The impact of such a shift will be equally profound, with implications for, among other things, the stability of exchange rates, the stability of financial markets, the ease with which the U.S. will be able to finance budget and current-account deficits, and whether the Fed can follow a policy of benign neglect toward the dollar.
“There is sufficient justification to question whether outside forces triggered, capitalized upon or magnified the economic difficulties of 2008,” the report says, explaining that those domestic economic factors would have caused a “normal downturn” but not the “near collapse” of the global economic system that took place.
Suspects include financial enemies in Middle Eastern states, Islamic terrorists, hostile members of the Chinese military, or government and organized crime groups in Russia, Venezuela or Iran. Chinese military officials publicly have suggested using economic warfare against the U.S.
Asked by The Times who he thought to be the most likely behind the financial attacks, Mr. Freeman said: “Unfortunately, the two major strategic threats, radical jihadists and the Chinese, are among the best positioned in the economic battle space.”
Also, the report lists as suspects advocates of Islamic law, who have publicly called for opposition to capitalism as a way to promote what they regard as the superiority of Islam.
The first phase of the economic attack, the report said, was the escalation of oil prices by speculators from 2007 to mid-2008 that coincided with the housing finance crisis.
In the second phase, the stock market collapsed by what the report called a “bear raid” from unidentified sources on Bear Stearns, Lehman Brothers and other Wall Street firms.“This produced a complete collapse in credit availability and almost started a global depression,” Mr. Freeman said.
The third phase is what Mr. Freeman states in the report was the main source of the economic system’s vulnerability. “We have taken on massive public debt as the government was the only party who could access capital markets in late 2008 and early 2009,” he said, placing the U.S. dollar’s global reserve currency status at grave risk.
“This is the ‘end game’ if the goal is to destroy America,” Mr. Freeman said, noting that in his view China’s military “has been advocating the potential for an economic attack on the U.S. for 12 years or longer as evidenced by the publication of the book Unrestricted Warfare in 1999.”
When a bankrupt zombie company offers to purchase from the Fed the very instruments that put it in bankruptcy in the first place, and which the Fed was forced to put on US taxpayers in order to perpetuate the status quo farce, you know the words Banana republic don't even start to begin to express the describe the lunacy we live in.
From Reuters:
* Submits offer to buy all of rmbs owned by Maiden lane II for $15.7 billion in cash
* If accepted, this offer will substantially reduce the amount of outstanding government assistance to AIG
* If accepted, offer will guarantee frbny earns a profit on its interest in Maiden lane II
* Says total outstanding assistance from U.S. government will be reduced by about $13 billion to total of about $26 billion
* Says conditions that necessitated Maiden lane II have been resolved
* Aig's outstanding assistance from the U.S. government totals approximately $39 billion
* Says is offering to purchase all of the approximately 800 rmbs owned by Maiden lane II in a single transaction
* Anticipates more than 98 percent of Maiden lane II securities will be classified as naic 1 securities by regulators
* Says does not expect the transaction to have a material effect on its ratings
* Says set aside the cash necessary to pay the purchase price in full
Incidentally, $15.7 billion is below the value the Fed has Maiden Lane II marked at as of today, which is $15.9 billion. We are confident that this will not prevent the Fed from doing everything in its power to bend over to the nationalized insurer's demands.
And yes, Maiden Lane was created by the Fed to front the insolvent AIG cash back in 2008, and purchase AIG's own toxic paper. To wit:
Purpose: ML II LLC was created to alleviate capital and liquidity pressures on American International Group Inc. (AIG) stemming from its securities lending program by purchasing $20.5 billion in residential mortgage-backed securities (RMBS) from several of AIG’s U.S. insurance subsidiaries.
Terms: The New York Fed lent ML II LLC approximately $19.5 billion. The loan has a 6-year term and accrues interest at 1-month LIBOR plus 100 basis points. The AIG insurance subsidiaries agreed to defer receipt of $1 billion of the purchase price. The fixed deferred purchase price accrues at 1-month LIBOR plus 300 basis points.
Investment Objective: Maximize the long-term cashflows of the portfolio to repay the New York Fed’s senior loan (including principal, interest, and residual), while refraining from disturbing general financial market conditions. Monthly loan repayment commenced in January 2009.
WASHINGTON – American International Group Inc. is offering $15.7 billion for a heap of toxic mortgage bonds that the Federal Reserve Bank of New York took off its hands at the peak of the financial crisis in 2008.
The insurance conglomerate said in a letter to the New York Fed Thursday that the sale would reduce the amount of government money it holds to $26 billion, including an unused $2 billion line of credit, from $39 billion.
AIG received the largest bailout of the financial crisis. The New York Fed and Treasury Department extended lifelines worth a total of $182 billion.
The insurer is paying off its government debts by selling businesses and restructuring its balance sheet. Treasury still owns 92 percent of AIG's common shares.
Seriously? This why we are in so much trouble. We'd rather promote ignorance and blind faith in criminals that "things will work themselves out" somehow, someway. Just as long as we don't have to think about anything or do anything that will effect our daily lives. In the face of crisis we'd rather bury our head in the sand as to not deal with the consequences of our actions. LOL.blah blah blah, ignorance is bliss !!!
haha but really, things will work themselves out for the best as usual...
.things will work themselves out for the best as usual...
Treasury Bonds: I learned something last week. I learned that fully 40% of the over $9 trillion in Treasury debt currently outstanding to the public has a maturity of 3 years or less. Put another way, it means that we are rapidly approaching $4 trillion in U.S. debt that matures by 2014 or sooner. As I write this, the yield (interest rate paid) on a 2-year Treasury note is 0.645% or about 2/3 of one percent. The yield, at the same time, on a 10 year Treasury note is 3.4%, and on a 30 year is 4.55%. In bond parlance, this is called a "steep yield curve" where interest rates get much higher as you go farther out in time.
It's pretty clear why the Treasury is doing this. By issuing mostly short-term notes, the Treasury is paying less interest, thereby keeping interest costs and, consequently, the deficit down. In addition, the Federal Reserve is in the middle of its "quantitative easing #2" (QE2) under which it is buying $600 billion of our own Treasury debt over about a 6 month period. The Fed is not buying the short-term notes, but is buying 10 year maturities and longer in order to hold those rates down. And, since the Fed is earning the interest thereon (paid by the U.S. Treasury), it is improving its yield. We are currently running a deficit of about $130 billion per month, so the Fed is basically buying all of the new bond issuance from the deficit for almost 5 months.
What does this all mean? I understand that the Fed and the Treasury are trying to keep interest rates low and improve the economy and the deficit. But, when coupled with the huge deficits, these moves look a bit like a Ponzi scheme that will soon unravel.
We are printing money ($600 billion) to buy our own debt so that the full effects of the deficit are not felt. We are buying long-term bonds to artificially hold down the rates on those bonds since home mortgages and many other things are based on those rates. We are selling the short-term bonds at cheaper rates to hold down costs now, but are leaving ourselves open to huge cost increases when interest rates go up. And, we are at historic lows on these short-term bond rates. If they were to rise by 3 points (which would put them where they were at as recently as 2008), our deficit would increase by another $150 billion per year, even if the long-term rates stay the same. And, once the Fed ends QE2, even if it doesn't reverse it, the markets will then have to absorb a new influx of long-term bonds at a time when our ability to pay them is in question. The Fed can cure a bunch of this simply by printing a lot more money. That, however, will result in an inflationary period with major wealth destruction and economic malaise.
In the period between 2005-2007, we were sowing the seeds of the 2008 financial crisis through too much leverage in the private sector. But, very few people could see it coming. Today, we are sowing the seeds of another crisis with too much leverage in the public sector. This time, though, it's easy to see it coming.
13 Fed officials have given us speeches over the past fortnight. We have heard various views. From Kocherlakota who suggested that interest rate should rise by the end of the year, to Dudley who made it pretty clear that he thinks it would be a mistake to back off the gas pedal anytime soon.
None of those speeches matter much. The only thing that counts is Bernanke. The Fed will end up doing what he wants. There is no true debate at the Fed. All the speeches are show ponies to demonstrate that there is open thinking at the Fed. I don’t believe a word of it. But I do believe when Jon Hilsenrath echoes Ben’s thinking. I believe the Ben/Jon duo was at work in this WSJ article today. The critical words from Ben’s lips: (link)
a $600 billion program of Treasury bond purchases known as quantitative easing looks likely to run its course as planned in June. This will effectively mean the Fed is moving to a neutral stance of no longer easing while not beginning to tighten policy.
Mark Ben’s, Jon’s and my words. This is what the future will bring us. QE will end in June. But the policy of ZIRP will be with us for a long time to come.
There are so many factors at play in the big capital markets these days. The Fed is just one element in the equation. But if you focused on just their effort you would have to conclude that the end of QE but never ending ZIRP will bring us the following:
There are so many factors at play in the big capital markets these days. The Fed is just one element in the equation. But if you focused on just their effort you would have to conclude that the end of QE but never ending ZIRP will bring us the following:
-Long end yields are going higher. I think the Fed moves have set us up for a 5% long bond and a 4% 10-year. Long bonds are a sucker play when the Fed continues to pour on the gas.
-ZIRP is good for stocks. We shall see about this. One can’t deny that equities are a better place to be than in cash that has a negative return.
-The dollar is going to get crushed. The Yen is a wild card that is influenced today by the uncertainties of Fukushima. We could see more weakness there. But the rest of the currencies of the world are going to have to move higher. I see the Euro over 1.5 the Pound pushing 1.7 and the CHF at around 85 to the dollar. The C&A dollars will be a good place to hide as well.
-PMs have to move higher. We will maintain a policy of cheap money and dollar debasement. How could the metals not respond?
-Inflation is going to roar. The food and energy component of the puzzle that Bernanke refuses to consider is going straight up in my opinion. I wouldn’t be at all surprised to see the non-core CPI up by 5% by the end of the year. We could easily see $5 gas in six months.
I think this is an insane next step for monetary policy. We will all pay a very dear price for this. I think it is also insane to have monetary policy conducted through speeches, innuendo and newspaper leaks.