Honestly, if I were Greece – I would default on all external debt. It’s going to happen sooner or later – paying ever increasing interest rates on your debt is unsustainable. Interest payments will continue to consume more and more of their budget (sound familiar?) – with no end in sight.
Why go through all of the pain and economic suffering for months/years to pay back external bankers when default is inevitable? Allow the bankers to grind your economy to a halt or kick them out now? It sounds like Greek politicians are beginning to understand this (below). Better to make the changes now and get control of your country back from the international bankers.
Karl is right on the money here (no pun intended) – default on the external bankers – exit the Euro – and issue their own non-debt backed currency.
The obvious question is what will they do? When will they do it?
What will we do when this happens to us?
I believe the world needs to take a step back and consider what God has to say. When it comes to charging excessive interest – He is clear. What is the world doing? The opposite of what He says. What is happening? The world’s economy is being brought to its knees by a monetary system that charges excessive interest – leading to massive debt loads for individuals, corporations and governments. This should surprise no one.
God’s commands are not suggestions.
“He who increases his wealth by exorbitant interest amasses it for another, who will be kind to the poor.” (Proverbs 28:8)
“Do not charge your brother interest, whether on money or food or anything else that may earn interest.” (Deuteronomy 23:19)
" 'If one of your countrymen becomes poor and is unable to support himself among you, help him as you would an alien or a temporary resident, so he can continue to live among you. Do not take interest of any kind from him, but fear your God, so that your countryman may continue to live among you. You must not lend him money at interest or sell him food at a profit.” (Leviticus 25:35-37)
“In you men accept bribes to shed blood; you take usury and excessive interest and make unjust gain from your neighbors by extortion. And you have forgotten me, declares the Sovereign LORD. 'I will surely strike my hands together at the unjust gain you have made and at the blood you have shed in your midst’. (Ezekiel 22:12-13)
“He lends at usury and takes excessive interest. Will such a man live? He will not! Because he has done all these detestable things, he will surely be put to death and his blood will be on his own head.” (Ezekiel 18:13)
“who lends his money without usury and does not accept a bribe against the innocent. He who does these things will never be shaken.” (Psalm 15:5)
“So I continued, "What you are doing is not right. Shouldn't you walk in the fear of our God to avoid the reproach of our Gentile enemies? I and my brothers and my men are also lending the people money and grain. But let the exacting of usury stop! Give back to them immediately their fields, vineyards, olive groves and houses, and also the usury you are charging them—the hundredth part of the money, grain, new wine and oil." "We will give it back," they said. "And we will not demand anything more from them. We will do as you say." Then I summoned the priests and made the nobles and officials take an oath to do what they had promised. I also shook out the folds of my robe and said, "In this way may God shake out of his house and possessions every man who does not keep this promise. So may such a man be shaken out and emptied!" At this the whole assembly said, "Amen," and praised the LORD. And the people did as they had promised. “ (Nehemiah 5:9-13)
jg - April 14, 2010
_________________________
We Swirl The Bowl With Greece
Karl Denninger
http://www.market-ticker.org/
April 14, 2010
Many cheered the "Greece Bailout" deal Sunday night.
As I have repeatedly reported, however, there is in fact no deal. At least not yet.
The problem is that there really isn't a good reason for Greece to consent to any deal, whether they get one or not. Specifically, their economy is contracting yet borrowing costs are rising. This is the toxic death-spiral that inevitably follows profligate spending and debt-hiding operations when the market loses confidence.
(As an aside, are you paying attention Washington? If you think this can't happen here you're sadly mistaken.)
All sovereigns think they have the unlimited ability to countenance and commit fraud. Witness the hearings on WaMu, three panels worth that I had on background all day long yesterday.
Virtually every second word was "fraud" in those hearings. Fraudulent mortgages, fraudulent underwriting, fraudulent securities sales.
Fraud fraud fraud fraud fraud.
An incredulous Senator Levin along with others pounded the witlesses (sic), and they proved worthy of the name "witless". Key among the points raised was that as early as 2004 and 2005 the bank knew that bogus loans were being produced "en-masse." Yet despite more than three years of internal memos and actual knowledge, the FBI never was brought in - and still hasn't been.
Nor should they have had to be "brought in" - the FBI wrote a report itself in 2004 warning of an "epidemic" of mortgage fraud.
Yet nobody in the production system for those fraudulent loans - in the case of two offices that WaMu ran more than half of all production was fraudulent - have been indicted.
Nor have any of the corporate executives involved, even though some of them admitted, under oath, they were aware of the bogus loans - and that bogus loans were being sold to investors.
The rule of law rests above all other considerations, by and large, when it comes to the legitimacy of any government and the stability of any society.
Greece is discovering quite rapidly that their endemic scam-based financial system and government, which had fraudulently mis-stated deficits and other government liabilities, is now being held to account by the market - their one-year treasury bill went out at 4.85%, or 430 basis points over what Germany borrows at.
To put this in perspective that's nearly nine times the interest rate that Germany pays.
No, that's not sustainable folks. All that has happened here is that Greece has built up tremendous rollover risk - perhaps fatal rollover risk, that will come back to haunt them.
The opposition political party in Greece said today:
Opposition politicians in Athens have begun to question whether it is in the country's interests to accept harsh wage deflation in order to pay foreign creditors. "This is usury: we need restructuring of debts," said the Righti-wing LAOS party.
Such views are gaining support in parts of the ruling PASOK party, raising the risk that it will splinter as further austerity is imposed.
Greece should tell the EU and ECB to bugger off. Stick the banks over there with their losses; default all their externally-held debt. Declare their externally-held Treasuries worthless by fiat and leave the Euro. Arrest and prosecute everyone involved in government book-cooking, including the banksters that conspired with them. Without external borrowing a crushing austerity would be imposed as government spending would be forced to immediately contract to that which could be taxed, but the benefits, once the pain was endured, would belong to the Greeks, not the bankers from France and Germany.
Issue a non-debt-backed currency and tell the bankers to stuff it, relegating them to pursuit of profit in the private markets, not on the back of the government and citizens via taxation.
Radical? Maybe.
But this much I do know - we currently live in a world where outright and abject fraud is perfectly ok provided it is committed by a banker. The display in the Senate Committee for Investigations was literally jaw-dropping - if you didn't get to watch it live, do so on CSPAN replay from the above link.
Never in my life have I heard lawmakers recite a litany of felonies as long as this one. Remember that mortgage fraud violates a whole host of statutes, including wire fraud, bank fraud, money laundering and where there is a pattern of conduct, racketeering.
If we do not see our government bring out the handcuffs, and soon, I predict we will follow the lead of Greece. Not today, and probably not tomorrow, but inevitably we shall, because the first requirement for trust - that laws will be enforced and fraud will not be tolerated - have been utterly cast aside, so long as you're banker.
The stability of both our society and markets will not survive in this state for long.
_____________________
Is Greece Beginning To Consider A "Strategic" Default?
www.zerohedge.com
Submitted by Tyler Durden on 04/13/2010 22:11 -0500
And why not - after all it's all the rage among those waiting in line for iPads so they can be first to buy "The Steve Jobs Guide for Deadbeat Dummies Trying To Learn To Read Good." Now that Obama has given his blessing to an entire generation of Americans to tear up contracts (very appropriate coming from a contract law professor), the follow up to moral hazard is resulting in not just individuals and companies, but entire nations simply opting out of paying their dues. Evans-Pritchard reports that after today's ludicrous rates on 3 and 6 month Bills the tide may be turning in Greece, with both parties in the country finally realizing its creditors will do everything in their power to bleed it dry, at "usurious" rates. With economic growth negative for a decade and debt interests quite certainly positive, the marginal difference will destroy not only economic output, but sink Greece ever more in debt, as existing creditors fund capital shortfalls at maturity (or default) by ever increasing interest rates. Greece has the option to stop funneling domestic capital to Germany later (inevitable) or sooner (if it finally makes the right decision).
From the Telegraph:
There are still questions that need to be answered on the EU deal," said Julian Callow from Barclays Capital. "Greece has a Herculean task ahead. The economy is contracting yet fiscal tightening has hardly begun. We expect growth of minus 4.3pc this year, and minus 1.9pc in 2011 which will be difficult for debt dynamics."
Opposition politicians in Athens have begun to question whether it is in the country's interests to accept harsh wage deflation in order to pay foreign creditors. "This is usury: we need restructuring of debts," said the Righti-wing LAOS party.
Such views are gaining support in parts of the ruling PASOK party, raising the risk that it will splinter as further austerity is imposed. Diplomats see a direct parallel with Oskar Lafontaine's Linke movement drawn from the Left-wing of Germany's Social Democrats.
Not only will a delay in defaulting do nothing for the economy except bleed it to death slowly, but ever more frequent risk flare episodes culminating in bank runs will intensify the deposit outflows and impair the banking system beyond repair (for depositors to keep their money in Greek banks, they need to be compensated for the risks: double digit rates sound about right), thus dooming any hope for an economic recovery. Evans-Pritchard's conclusion: a dead-end Greece may be on the road to the same societal splintering that post-Weimar Germany experienced, and culminated in some very tragic consequences.
Showing posts with label sovereign debt default. Show all posts
Showing posts with label sovereign debt default. Show all posts
Friday, September 15, 2006
Evidence Mounts of Strong Recovery??
Mainstream media has provided lots of positive economic articles over the past few weeks. The following is a front page article in the Wall Street Journal this morning.
Evidence Mounts Of Strong Recovery
Shoppers turned up in surprising force at U.S. stores, auto dealers, restaurants and elsewhere in March, adding to a growing sense that the recovery could prove faster than anticipated.
Combined with a rebounding service sector, rising financial markets and new efforts to forgive mortgage debts, March's 1.6% surge in retail sales is tempting forecasters to upgrade their assessments of the economy's ability to restore the 8.2 million U.S. jobs lost since the recession began.
The renewed consumer and business activity also helped propel J.P. Morgan Chase & Co. to a 55% profit gain in the first quarter, increasing optimism among investors that banks, too, are rebounding from the crisis that floored the industry.
"There's a growing risk that we're underestimating the strength of the recovery," said Stephen Stanley, chief economist at Pierpont Securities, noting that deep recessions tend to be followed by steeper recoveries. "If the economy pops, it's going to be faster than anyone is forecasting."
What is the truth? Can you have an economic recovery in this system if lending and our money supply continues to contract? Can you have economic recovery if unemployment continues to rise? Can you have economic recovery if $8+ million Americans have lost their jobs during this recession with little chance of finding a new job anytime soon?
I assure you – you cannot.
We see this in the housing market.
March Foreclosures Surge To Absolute Record, At 369,491, 19% Jump from February
April 15, 2010
www.zerohedge.com
RealtyTrac reports the next catalyst that will surely take the Dow to 12,000 by 9:31 am tomorrow. "Foreclosure filings were reported on 367,056 properties in March, an increase of nearly 19 percent from the previous month, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005." And people were wondering where consumers get all their money from. Of course, those foreclosed upon have likely figured out ways to continue squatting in their house so they dont have to pay mortgage and rent.
We continue to see this in unemployment data.
Jobless Claims Rise for Second Straight Week
Wall St. Journal
April 15, 2010
WASHINGTON—The number of workers filing new claims for jobless benefits surged last week despite expectations of a drop, but a Labor Department economist blamed the increase on technical factors and not on rising layoffs.
The Labor Department said in its weekly report Thursday that initial claims for jobless benefits rose by 24,000 to 484,000 in the week ended April 10.
The previous week's level was left unrevised at 460,000. Economists surveyed by Dow Jones Newswires expected initial claims to decrease by 15,000. This marks the second straight week of increases in initial claims. Last time the increase was blamed largely on the Easter holiday and other seasonal factors. A Labor Department economist said Thursday that this latest rise can also be pegged to lag effects from the spring holidays including Easter and Cesar Chavez Day, which is celebrated in worker-heavy California.
Labor Department ‘economists’ can make all the excuses they want (Cesar Chavez day – are you kidding me?) – the truth is that we are not in a recovery. Our economy continues to deteriorate.
Many people that are paying attention now believe that the recent increase in consumer spending is due primarily to many consumers no longer paying their mortgage. What did Bank of America say last week? They expect foreclosures to increase significantly over the next year. Housing sales and prices continue to decline – there’s no way for housing to recover quickly with so many foreclosures on the market.
Big banks and Wall Street may be enjoying profits at the expense of American taxpayers – but small businesses continue to struggle. Who provides the majority of jobs in the U.S. – that would be small businesses.
Optimism at Small Businesses Falls
Wall St. Journal
Economists may be debating when the recession ended, but small business owners report little pick up in their sales or confidence in March, according to a report released Tuesday. The weak readings explain why small businesses remain reluctant to hire.
The Small Business Optimism Index lost 1.2 points to 86.8 in March, said the National Federation of Independent Business.
The NFIB noted that nine of the 10 components declined or failed to contribute to an increase in the top-line index. The lone improvement came in the subindex covering expected business conditions. It rose 1 percentage point to -8%.
The report said 34% of respondents said “weak sales” were their top business problem. The subindex on earnings trends fell 4 points to 43%, and sales expectations subindex dropped 3 points to -3% in March.
The lack of revenue may be holding back job growth. The March employment index fell 1 point to -2%. The NFIB said businesses may be finished with layoffs, but companies will only add workers if owners think “new hires can generate enough additional business to pay their way.”
Earlier in April, payroll giant ADP reported that its jobs survey showed small businesses — with 49 or fewer employees — cut 12,000 jobs in March.
A New York Times poll reported this morning that 77% of Americans believe the economy is ‘fairly bad’ or ‘very bad’. You can try – but you can’t hide the truth.
So – what is the real purpose of all of this positive media spin?
I believe we’re being conditioned for a couple of things. Whatever the ‘event’ is that finally triggers a collapse (stock market crash, sovereign debt default – see Greece, etc.) – our financial and political leaders will say that they did everything they could to help us get back on track. If this ‘event’ had not happened – our economy would be A-OK. Disregard the fact that our monetary system will have caused the ‘event’.
I believe that the other possible reason for all of the positive spin is so the Federal Reserve (and other Central Banks throughout the world) can justify raising interest rates. As you’ve seen me say before – if something else hasn’t already caused a collapse – raising interest rates on a heavily indebted world will certainly be the final nail in the coffin.
There is a very deceptive game being played here – and few can see it.
The following is another very well written and researched article by Chris Martenson that examines many of the contradictions we’re seeing within government economic data.
jg – April 15, 2010
___________________________
Irreconcilable Differences
Wednesday, April 14, 2010, 5:35 pm, by cmartenson
I may have to get a divorce from the news, nothing adds up anymore.
For example, even as the stock market surges along, as one might expect at the tail end of trillions in stimulus and bailouts, and retail sales apparently roared ahead in March according to the Commerce Department, small businesses are as gloomy as they've ever been.
I really do have a difficult time trying to understand the source of the disconnect between these entirely divergent reports:
Retail sales surge in March
NEW YORK (CNNMoney.com) -- Retail sales soared in March, the government said Wednesday, in the latest sign of improving consumer confidence.
The Commerce Department said total retail sales jumped 1.6% last month, the largest monthly increase since November, from an upwardly revised 0.5% gain in February.
Peering into these excellent results a bit deeper, we find many sources of strength:
Thomson Reuters, which tracks monthly same-store sales for 30 chains including Costco and Target said last week that chain stores posted the biggest single monthly sales gain on record in March, extending a run of seven straight monthly increases.
It would appear, then, that the consumer is back and that we're all but out of the woods.
Then how come nobody invited small businesses to the party? Look at this dismal survey of small businesses, comprising 50% of GDP and over 60% of hiring, for the same month of March.
Small Business Optimism Declines in March
WASHINGTON, April 13, 2010 – The National Federation of Independent Business Index of Small Business Optimism lost 1.2 points in March, falling to 86.8. The persistence of index readings below 90 is unprecedented in survey history.
“The March reading is very low and headed in the wrong direction,” said Bill Dunkelberg, NFIB chief economist. “Something isn’t sitting well with small business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy.”
The index has posted 18 consecutive monthly readings below 90. In March, nine of the 10 Index components fell or were unchanged from February’s not-so-great readings.
This is a very sour report and does not reconcile well with the idea of surging sales and seven straight months of increasing consumer activity. Even more to the point, the report continues with some dire specifics about the state of retail affairs for small businesses.
Sales and Inventories
The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past three months improved 1 point to a net negative 25 percent.
Widespread price cutting continued to contribute to reports of lower nominal sales. The net percent of owners expecting real sales gains lost three points, falling to a net negative 3 percent of all owners, seasonally adjusted.
Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stock. A net negative 18 percent of all owners reported gains in inventories (more firms cut stocks than added to them, seasonally adjusted), 10 points better than December’s record reading but unchanged from February.
Widespread price cutting and negative sales? Continued liquidation of inventory stock? These are not even remotely consistent with the retail reports coming out of the government right now. Something doesn't add up.
But wait, the disconnect gets worse. According to the retail data supplied by the government not only are sales up seven months in a row, they are up a hefty 7.6% on a yr/yr basis. That's huge.
The only problem is, somebody forgot to tell the retailers to collect and remit sales tax on those purchases to the states in which they are operating.
Texas sales tax revenue down 7.8 percent in March
April 7, 2010
Texas sales tax collections were down 7.8 percent in March, compared with the same month a year ago.
Texas Comptroller Susan Combs said Wednesday that the state collected $1.46 billion in sales tax revenue in March. Although that's down, she said collections continue to moderate for the second month in a row.
How are we supposed to reconcile a 7.6% surge with a 7.8% decline? Oh well, Texas is just one out of 50 states, albeit a big one, so perhaps their experience is highly unusual?
New Jersey Taxes $250 Million Behind Christie Plan
April 6 (Bloomberg) -- New Jersey will get about $250 million less revenue than Governor Chris Christie projected for this fiscal year and next because of lagging retail sales taxes, according to a copy of a legislative analyst’s report provided by a person who received it before its release.
Okay, so New Jersey is in the same boat but good state-by-state sales tax receipt data is hard to come by, so perhaps there's a lot of good news coming from all the other states besides the two I listed. I'll keep searching.
For now, the difference between what small businesses are reporting about the condition of their businesses and what the government and major chains are reporting is hard to reconcile. There's an enormous gap there.
States and Municipalities Experiencing Real Pain
The other disconnect is between the incredibly optimistic stories we are reading about how great the economy is doing and how poorly states and municipalities are doing. The size of the gap is very difficult to reconcile. Much of the income for states and municipalities comes from sales, property and income taxes. While there appears to be some evidence that these tax receipts have stopped declining, there is as yet no major evidence of a strong rebound. I remain at a loss to understand how retail sales can be up while sales tax receipts remain flat or even down.
Illinois owes its contracted business partners more than $4.5 billion which it has simply failed to pay and the 'plan' for dealing with them is to build them up even higher and roll $6 billion of them into the next budget year.
Los Angeles is desperately trying to avert outright bankruptcy. California has an enormous hole in its budget and Minnesota is delaying payments on some bills so it can afford to pay others. Don't even ask about Detroit, it's too scary.
There are dozens more stories like these and they speak to mounting, not easing, fiscal pressures.
Individuals Experiencing Real Pain
Meanwhile individuals are experiencing mounting fiscal pain as well as evidenced by rising bankruptcy and foreclosure rates in recent months to new highs. It is hard to reconcile massive increases in consumer spending with these data unless we consider the theory that people suddenly freed from credit card or mortgage payments are spending that additional cash on stuff. I can't discount this entirely as a possible explanation for the apparent renewed consumer buying frenzy.
Still, I have great difficulty in reconciling the idea of a buoyant, consumer led recovery when I read items like this each week:
One Out of Ten Mortgages is Delinquent
Despite a slight seasonal improvement over last month, mortgage delinquencies still hover near record highs, 21 percent above a year ago. One of ten mortgages are delinquent as of the end of February and new delinquencies continue to run at record rates.
The total number of non-current first-lien mortgages and REO properties is now more than 7.9 million loans.
Furthermore, the percentage of new problem loans is also at its highest level in five years.
More than 1.1 million loans that were current at the beginning of January 2010 were already at least 30 days delinquent or in foreclosure by February 2010 month-end.
That’s the frightening news from Lender Processing Services latest Mortgage Monitor Report, which also reported that the nation’s foreclosure inventories also reached record highs. February’s foreclosure rate of 3.31 percent represented a 51.1 percent year-over-year increase.
One out of ten mortgages? The highest percentage of bad loans in five years? 7.9 million bad loans? A 51.1% increase in foreclosure inventories?
Further, a record breaking number of Americans are on food stamps and fully 44% of the 15 million unemployed have been out of work for more than 6 months.
While I understand that at bottoms and tops the signals are sometimes mixed, these data are not mixed, they are simply horrible. These are signs of severe economic pain and are entirely inconsistent with the notion of a buoyant recovery.
Stock Market on a Tear While Bonds Float Along
Today the stock market put on yet another display of force not only magically levitating along in heavily over bought territory but even peeking up through the upper Bollinger band and closing there right at the high of the day.
There can be no doubt that there is a lot of liquidity and bullishness available as fuel for the stock market. I've long been warning my readers that the flood of liquidity offered up by the stimulus, bailout and GSE MBS purchase programs would have to go find something useful to do, and it seems to have wandered over to the stock market to have a party.
You've got to admit, that's a pretty impressive run. Meanwhile, given all the stock market bullishness, and the bearish talk about bonds coming from some pretty big players, such as Bill Gross, you might think that bonds would be in retreat.
You'd be wrong.
The ten-year bond interest rates is exactly where it started the year, give or take a basis point or two. If this were a normal set of markets at all, then we might expect to see more of the normal see-saw relationship between stock and bonds prices.
But we don't, and I chalk that up to the enormous distorting influence provided by the Fed's actions. Under normal conditions we might expect that money might slosh back and forth between the stock and bond markets but all we see is a strangely quiet bond market coincident with a rising stock market.
To me this is indicative of the massive official support for bond sales and other forms of ersatz liquidity trampling across the normal relationships that exist between the various markets.
It has been one of my enduring mysteries as to how the Treasury bond market can float hundreds of billions in new issuances and rollovers each week without a hitch while the interest rate remains pegged in an extremely narrow range even as the stock market surges along.
Conclusion
My main conclusion is simply this; we are experiencing the very best recovery that several trillion in freshly minted money and credit can buy. Frankly, I expected more. I am underwhelmed with a recovery that mainly seems to exist on Wall Street and in government statistics more than it does on Main Street and in people's real lives.
I have no doubt that we are experiencing a bounce, the question is whether it is the enduring sort or a flash in the pan. Without the participation of small businesses, and with states and municipalities retreating and retrenching, I remain quite skeptical of this recovery.
My prediction is that much of this manufactured bounce will wear off this summer and that we'll see another renewed round of stimulus and Fed liquidity programs before November and the elections. Given the political dimensions involved, it is almost certainly a slam-dunk to predict more money being dumped into the situation prior to the elections, so that's not really much of a prediction at all. It's more a characterization of the American political process.
I remain glued to the markets seeking signs that a change in trend is upon us. So far, I haven't seen anything to suggest that the flood of liquidity has crested and has begun to fall.
Until the situation clears up, consider me to have irreconcilable differences with the news.
Evidence Mounts Of Strong Recovery
Shoppers turned up in surprising force at U.S. stores, auto dealers, restaurants and elsewhere in March, adding to a growing sense that the recovery could prove faster than anticipated.
Combined with a rebounding service sector, rising financial markets and new efforts to forgive mortgage debts, March's 1.6% surge in retail sales is tempting forecasters to upgrade their assessments of the economy's ability to restore the 8.2 million U.S. jobs lost since the recession began.
The renewed consumer and business activity also helped propel J.P. Morgan Chase & Co. to a 55% profit gain in the first quarter, increasing optimism among investors that banks, too, are rebounding from the crisis that floored the industry.
"There's a growing risk that we're underestimating the strength of the recovery," said Stephen Stanley, chief economist at Pierpont Securities, noting that deep recessions tend to be followed by steeper recoveries. "If the economy pops, it's going to be faster than anyone is forecasting."
What is the truth? Can you have an economic recovery in this system if lending and our money supply continues to contract? Can you have economic recovery if unemployment continues to rise? Can you have economic recovery if $8+ million Americans have lost their jobs during this recession with little chance of finding a new job anytime soon?
I assure you – you cannot.
We see this in the housing market.
March Foreclosures Surge To Absolute Record, At 369,491, 19% Jump from February
April 15, 2010
www.zerohedge.com
RealtyTrac reports the next catalyst that will surely take the Dow to 12,000 by 9:31 am tomorrow. "Foreclosure filings were reported on 367,056 properties in March, an increase of nearly 19 percent from the previous month, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005." And people were wondering where consumers get all their money from. Of course, those foreclosed upon have likely figured out ways to continue squatting in their house so they dont have to pay mortgage and rent.
We continue to see this in unemployment data.
Jobless Claims Rise for Second Straight Week
Wall St. Journal
April 15, 2010
WASHINGTON—The number of workers filing new claims for jobless benefits surged last week despite expectations of a drop, but a Labor Department economist blamed the increase on technical factors and not on rising layoffs.
The Labor Department said in its weekly report Thursday that initial claims for jobless benefits rose by 24,000 to 484,000 in the week ended April 10.
The previous week's level was left unrevised at 460,000. Economists surveyed by Dow Jones Newswires expected initial claims to decrease by 15,000. This marks the second straight week of increases in initial claims. Last time the increase was blamed largely on the Easter holiday and other seasonal factors. A Labor Department economist said Thursday that this latest rise can also be pegged to lag effects from the spring holidays including Easter and Cesar Chavez Day, which is celebrated in worker-heavy California.
Labor Department ‘economists’ can make all the excuses they want (Cesar Chavez day – are you kidding me?) – the truth is that we are not in a recovery. Our economy continues to deteriorate.
Many people that are paying attention now believe that the recent increase in consumer spending is due primarily to many consumers no longer paying their mortgage. What did Bank of America say last week? They expect foreclosures to increase significantly over the next year. Housing sales and prices continue to decline – there’s no way for housing to recover quickly with so many foreclosures on the market.
Big banks and Wall Street may be enjoying profits at the expense of American taxpayers – but small businesses continue to struggle. Who provides the majority of jobs in the U.S. – that would be small businesses.
Optimism at Small Businesses Falls
Wall St. Journal
Economists may be debating when the recession ended, but small business owners report little pick up in their sales or confidence in March, according to a report released Tuesday. The weak readings explain why small businesses remain reluctant to hire.
The Small Business Optimism Index lost 1.2 points to 86.8 in March, said the National Federation of Independent Business.
The NFIB noted that nine of the 10 components declined or failed to contribute to an increase in the top-line index. The lone improvement came in the subindex covering expected business conditions. It rose 1 percentage point to -8%.
The report said 34% of respondents said “weak sales” were their top business problem. The subindex on earnings trends fell 4 points to 43%, and sales expectations subindex dropped 3 points to -3% in March.
The lack of revenue may be holding back job growth. The March employment index fell 1 point to -2%. The NFIB said businesses may be finished with layoffs, but companies will only add workers if owners think “new hires can generate enough additional business to pay their way.”
Earlier in April, payroll giant ADP reported that its jobs survey showed small businesses — with 49 or fewer employees — cut 12,000 jobs in March.
A New York Times poll reported this morning that 77% of Americans believe the economy is ‘fairly bad’ or ‘very bad’. You can try – but you can’t hide the truth.
So – what is the real purpose of all of this positive media spin?
I believe we’re being conditioned for a couple of things. Whatever the ‘event’ is that finally triggers a collapse (stock market crash, sovereign debt default – see Greece, etc.) – our financial and political leaders will say that they did everything they could to help us get back on track. If this ‘event’ had not happened – our economy would be A-OK. Disregard the fact that our monetary system will have caused the ‘event’.
I believe that the other possible reason for all of the positive spin is so the Federal Reserve (and other Central Banks throughout the world) can justify raising interest rates. As you’ve seen me say before – if something else hasn’t already caused a collapse – raising interest rates on a heavily indebted world will certainly be the final nail in the coffin.
There is a very deceptive game being played here – and few can see it.
The following is another very well written and researched article by Chris Martenson that examines many of the contradictions we’re seeing within government economic data.
jg – April 15, 2010
___________________________
Irreconcilable Differences
Wednesday, April 14, 2010, 5:35 pm, by cmartenson
I may have to get a divorce from the news, nothing adds up anymore.
For example, even as the stock market surges along, as one might expect at the tail end of trillions in stimulus and bailouts, and retail sales apparently roared ahead in March according to the Commerce Department, small businesses are as gloomy as they've ever been.
I really do have a difficult time trying to understand the source of the disconnect between these entirely divergent reports:
Retail sales surge in March
NEW YORK (CNNMoney.com) -- Retail sales soared in March, the government said Wednesday, in the latest sign of improving consumer confidence.
The Commerce Department said total retail sales jumped 1.6% last month, the largest monthly increase since November, from an upwardly revised 0.5% gain in February.
Peering into these excellent results a bit deeper, we find many sources of strength:
Thomson Reuters, which tracks monthly same-store sales for 30 chains including Costco and Target said last week that chain stores posted the biggest single monthly sales gain on record in March, extending a run of seven straight monthly increases.
It would appear, then, that the consumer is back and that we're all but out of the woods.
Then how come nobody invited small businesses to the party? Look at this dismal survey of small businesses, comprising 50% of GDP and over 60% of hiring, for the same month of March.
Small Business Optimism Declines in March
WASHINGTON, April 13, 2010 – The National Federation of Independent Business Index of Small Business Optimism lost 1.2 points in March, falling to 86.8. The persistence of index readings below 90 is unprecedented in survey history.
“The March reading is very low and headed in the wrong direction,” said Bill Dunkelberg, NFIB chief economist. “Something isn’t sitting well with small business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy.”
The index has posted 18 consecutive monthly readings below 90. In March, nine of the 10 Index components fell or were unchanged from February’s not-so-great readings.
This is a very sour report and does not reconcile well with the idea of surging sales and seven straight months of increasing consumer activity. Even more to the point, the report continues with some dire specifics about the state of retail affairs for small businesses.
Sales and Inventories
The net percent of all owners (seasonally adjusted) reporting higher nominal sales in the past three months improved 1 point to a net negative 25 percent.
Widespread price cutting continued to contribute to reports of lower nominal sales. The net percent of owners expecting real sales gains lost three points, falling to a net negative 3 percent of all owners, seasonally adjusted.
Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stock. A net negative 18 percent of all owners reported gains in inventories (more firms cut stocks than added to them, seasonally adjusted), 10 points better than December’s record reading but unchanged from February.
Widespread price cutting and negative sales? Continued liquidation of inventory stock? These are not even remotely consistent with the retail reports coming out of the government right now. Something doesn't add up.
But wait, the disconnect gets worse. According to the retail data supplied by the government not only are sales up seven months in a row, they are up a hefty 7.6% on a yr/yr basis. That's huge.
The only problem is, somebody forgot to tell the retailers to collect and remit sales tax on those purchases to the states in which they are operating.
Texas sales tax revenue down 7.8 percent in March
April 7, 2010
Texas sales tax collections were down 7.8 percent in March, compared with the same month a year ago.
Texas Comptroller Susan Combs said Wednesday that the state collected $1.46 billion in sales tax revenue in March. Although that's down, she said collections continue to moderate for the second month in a row.
How are we supposed to reconcile a 7.6% surge with a 7.8% decline? Oh well, Texas is just one out of 50 states, albeit a big one, so perhaps their experience is highly unusual?
New Jersey Taxes $250 Million Behind Christie Plan
April 6 (Bloomberg) -- New Jersey will get about $250 million less revenue than Governor Chris Christie projected for this fiscal year and next because of lagging retail sales taxes, according to a copy of a legislative analyst’s report provided by a person who received it before its release.
Okay, so New Jersey is in the same boat but good state-by-state sales tax receipt data is hard to come by, so perhaps there's a lot of good news coming from all the other states besides the two I listed. I'll keep searching.
For now, the difference between what small businesses are reporting about the condition of their businesses and what the government and major chains are reporting is hard to reconcile. There's an enormous gap there.
States and Municipalities Experiencing Real Pain
The other disconnect is between the incredibly optimistic stories we are reading about how great the economy is doing and how poorly states and municipalities are doing. The size of the gap is very difficult to reconcile. Much of the income for states and municipalities comes from sales, property and income taxes. While there appears to be some evidence that these tax receipts have stopped declining, there is as yet no major evidence of a strong rebound. I remain at a loss to understand how retail sales can be up while sales tax receipts remain flat or even down.
Illinois owes its contracted business partners more than $4.5 billion which it has simply failed to pay and the 'plan' for dealing with them is to build them up even higher and roll $6 billion of them into the next budget year.
Los Angeles is desperately trying to avert outright bankruptcy. California has an enormous hole in its budget and Minnesota is delaying payments on some bills so it can afford to pay others. Don't even ask about Detroit, it's too scary.
There are dozens more stories like these and they speak to mounting, not easing, fiscal pressures.
Individuals Experiencing Real Pain
Meanwhile individuals are experiencing mounting fiscal pain as well as evidenced by rising bankruptcy and foreclosure rates in recent months to new highs. It is hard to reconcile massive increases in consumer spending with these data unless we consider the theory that people suddenly freed from credit card or mortgage payments are spending that additional cash on stuff. I can't discount this entirely as a possible explanation for the apparent renewed consumer buying frenzy.
Still, I have great difficulty in reconciling the idea of a buoyant, consumer led recovery when I read items like this each week:
One Out of Ten Mortgages is Delinquent
Despite a slight seasonal improvement over last month, mortgage delinquencies still hover near record highs, 21 percent above a year ago. One of ten mortgages are delinquent as of the end of February and new delinquencies continue to run at record rates.
The total number of non-current first-lien mortgages and REO properties is now more than 7.9 million loans.
Furthermore, the percentage of new problem loans is also at its highest level in five years.
More than 1.1 million loans that were current at the beginning of January 2010 were already at least 30 days delinquent or in foreclosure by February 2010 month-end.
That’s the frightening news from Lender Processing Services latest Mortgage Monitor Report, which also reported that the nation’s foreclosure inventories also reached record highs. February’s foreclosure rate of 3.31 percent represented a 51.1 percent year-over-year increase.
One out of ten mortgages? The highest percentage of bad loans in five years? 7.9 million bad loans? A 51.1% increase in foreclosure inventories?
Further, a record breaking number of Americans are on food stamps and fully 44% of the 15 million unemployed have been out of work for more than 6 months.
While I understand that at bottoms and tops the signals are sometimes mixed, these data are not mixed, they are simply horrible. These are signs of severe economic pain and are entirely inconsistent with the notion of a buoyant recovery.
Stock Market on a Tear While Bonds Float Along
Today the stock market put on yet another display of force not only magically levitating along in heavily over bought territory but even peeking up through the upper Bollinger band and closing there right at the high of the day.
There can be no doubt that there is a lot of liquidity and bullishness available as fuel for the stock market. I've long been warning my readers that the flood of liquidity offered up by the stimulus, bailout and GSE MBS purchase programs would have to go find something useful to do, and it seems to have wandered over to the stock market to have a party.
You've got to admit, that's a pretty impressive run. Meanwhile, given all the stock market bullishness, and the bearish talk about bonds coming from some pretty big players, such as Bill Gross, you might think that bonds would be in retreat.
You'd be wrong.
The ten-year bond interest rates is exactly where it started the year, give or take a basis point or two. If this were a normal set of markets at all, then we might expect to see more of the normal see-saw relationship between stock and bonds prices.
But we don't, and I chalk that up to the enormous distorting influence provided by the Fed's actions. Under normal conditions we might expect that money might slosh back and forth between the stock and bond markets but all we see is a strangely quiet bond market coincident with a rising stock market.
To me this is indicative of the massive official support for bond sales and other forms of ersatz liquidity trampling across the normal relationships that exist between the various markets.
It has been one of my enduring mysteries as to how the Treasury bond market can float hundreds of billions in new issuances and rollovers each week without a hitch while the interest rate remains pegged in an extremely narrow range even as the stock market surges along.
Conclusion
My main conclusion is simply this; we are experiencing the very best recovery that several trillion in freshly minted money and credit can buy. Frankly, I expected more. I am underwhelmed with a recovery that mainly seems to exist on Wall Street and in government statistics more than it does on Main Street and in people's real lives.
I have no doubt that we are experiencing a bounce, the question is whether it is the enduring sort or a flash in the pan. Without the participation of small businesses, and with states and municipalities retreating and retrenching, I remain quite skeptical of this recovery.
My prediction is that much of this manufactured bounce will wear off this summer and that we'll see another renewed round of stimulus and Fed liquidity programs before November and the elections. Given the political dimensions involved, it is almost certainly a slam-dunk to predict more money being dumped into the situation prior to the elections, so that's not really much of a prediction at all. It's more a characterization of the American political process.
I remain glued to the markets seeking signs that a change in trend is upon us. So far, I haven't seen anything to suggest that the flood of liquidity has crested and has begun to fall.
Until the situation clears up, consider me to have irreconcilable differences with the news.
BIS Warns Countries Over Debt - June 28 2010
Here we see the people behind the New World Order telling us what’s coming – a global ‘double-dip’ recession/depression. You know we’re nearing something significant if we see quotes like this in mainstream media.
"To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse," the BIS said.
Let’s apply some truth to the statement above. What are the ‘remaining vulnerabilities’? That would be a world monetary system saturated with debt. What is the ‘intensive care’ mentioned above? That would be all of the various government ‘stimulus’ packages that have done nothing but prolong the inevitable collapse of the system while increasing sovereign debt around the world by massive amounts.
This is like pulling a drowning man out of the water – giving him a few moments to breathe – and then tossing him back in the water. Thanks for the help.
Basically, you and I are being told that the nations of the world are in a no-win situation – compliments of the world’s current monetary system. Get ready for some ‘solutions’ that will replace the current system. It’s only a matter of time.
On the latter, it cautioned that a continued deterioration in the public finances could result in political pressure on central banks to tolerate stronger price growth and inflate away the public debts. In an extreme case, high and rising debts could make investors less willing to hold government bonds, forcing the central bank to step in. In such a case, raising interest rates may no longer act on inflation, since any rate rises would boost debt-interest payments and increase the debt further.
jg – June 28, 2010
__________________________________
JUNE 28, 2010, 8:40 A.M. ET
BIS Warns Countries Over Debt
By NATASHA BRERETON
Wall St. Journal
BASEL, Switzerland—Global policy makers face a "daunting" task to balance their support for still-fragile economies and markets, while avoiding unwanted side effects from long-standing stimulus policies, the Bank for International Settlements said Monday.
In its annual report, the bank for central banks highlighted the risks posed by high public-debt levels, concerns about which are already jeopardizing recovery in the euro zone, and in the longer term could curb potential growth and make it harder to keep inflation low and stable.
Central banks will have to take the impact of much-needed fiscal tightening into consideration when judging their appropriate policy stance, but they must also be aware of the dangerous distortions that can occur from keeping interest rates extremely low for an extended period, it warned.
"To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse," the BIS said.
European Union finance ministers and the International Monetary Fund agreed last month to commit €750 billion ($928.95 billion) to support euro-zone governments that have difficulty borrowing in the international bond markets, after investors' fears about Greece's creditworthiness spread to other countries.
The European Central Bank began to buy euro-zone government bonds in an effort to bring down borrowing costs, while the U.S. Federal Reserve also simultaneously reopened dollar swap lines with several major central banks.
The BIS said that events in Greece underscored the risk that highly indebted governments now have hardly any financial room for maneuver, and may not be able to act as buyers of last resort to save their banks in a crisis.
Unless countries take resolute action to address their fiscal problems, there's a "key risk" that investor concerns will worsen and engulf other countries, it warned. "The sovereign debt crisis in Greece is clearly jeopardizing Europe's nascent recovery from the deep recession brought on by the earlier crisis," it said.
The BIS also noted that persistently higher levels of public debt over the longer run could make economies more vulnerable to adverse shocks, reduce their growth potential and endanger prospects for monetary stability.
On the latter, it cautioned that a continued deterioration in the public finances could result in political pressure on central banks to tolerate stronger price growth and inflate away the public debts. In an extreme case, high and rising debts could make investors less willing to hold government bonds, forcing the central bank to step in. In such a case, raising interest rates may no longer act on inflation, since any rate rises would boost debt-interest payments and increase the debt further.
While acknowledging that such scenarios are unlikely in the near-term, a greater likelihood that they might come to pass could push up public inflation expectations, prompt investors to demand greater compensation for inflation risk and cause medium- and long-term interest rates to rise.
"So far, there is no evidence that inflation expectations have become unanchored," the BIS said. "However, a failure by governments to make headway in restoring fiscal sustainability increases the risk that inflation expectations may abruptly and unexpectedly change."
The BIS also warned that while recovery in the large advanced economies is "far from self-sustained," the longer emergency policy measures are maintained, the greater the risk of creating unhealthy distortions.
"Such powerful measures have strong side effects, and their dangers are beginning to become apparent," it said, adding that such direct support was delaying essential post-crisis adjustments and "runs the risk of creating zombie financial and non-financial firms."
Still-fragile market and economic conditions continue to make tightening risky in many places. But "we cannot ignore the fact that the culminating side effects themselves pose a danger that, at the very least, implies exiting sooner than may be comfortable for many," the BIS said.
"A prolonged period of exceptionally low real interest rates alters investment decisions, postpones the recognition of losses, increases risk-taking in the ensuing search for yield and encourages high levels of borrowing," it warned.
An additional risk for central banks is that although output in the countries that were worst affected by the crisis is still well below potential, the amount of economic slack could be smaller than conventional measures of the output gap suggest, the BIS said.
The buildup of imbalances before the crisis suggests that potential output growth wasn't as high as was commonly believed, it said, and noted that financial disruption and the lost skills of the long-term unemployed could reduce potential output. "Inflationary pressures could therefore reappear earlier than anticipated," it warned.
The BIS noted that while implementation of macroprudential policy measures should improve the resilience of the financial system, monetary policy needs to play a greater role in leaning against the buildup of systemic financial vulnerabilities during booms.
"A monetary policy strategy narrowly focused on stabilizing inflation, looking out over a short horizon of about two years, is not sufficiently forward-looking to ensure financial stability and is thus not sufficient to stabilize inflation over the longer term," the BIS said.
It added that since credit and asset prices have boomed, even during times of low and stable inflation, there is a risk that monetary policy could accommodate or even contribute to the buildup of financial vulnerabilities.
"Adding a few years to the monetary policy framework, beyond the two years ahead commonly focused upon, would help monetary policy makers to weigh longer-term threats to financial stability, including the impact of interest-rate settings, against nearer-term inflation," it said.
Additionally, the BIS predicted further "substantial" declines in household debt in the U.S., U.K. and Spain.
It also expressed doubts about the sustainability of bank profits, citing potential for further asset writedowns, high exposure to sovereign risk, possible difficulties refinancing and a renewed squeeze on dollar funding. It noted that in 2009, profits at many U.S. and European banks were heavily based on volatile fixed-income and currency markets, while credit extended to the private sector shrank, and loan-to-deposit ratios for many international banks fell. Furthermore, the trend toward investing in longer-dated securities could also backfire if the yield curves flattens, it said.
Write to Natasha Brereton at natasha.brereton@dowjones.com
"To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse," the BIS said.
Let’s apply some truth to the statement above. What are the ‘remaining vulnerabilities’? That would be a world monetary system saturated with debt. What is the ‘intensive care’ mentioned above? That would be all of the various government ‘stimulus’ packages that have done nothing but prolong the inevitable collapse of the system while increasing sovereign debt around the world by massive amounts.
This is like pulling a drowning man out of the water – giving him a few moments to breathe – and then tossing him back in the water. Thanks for the help.
Basically, you and I are being told that the nations of the world are in a no-win situation – compliments of the world’s current monetary system. Get ready for some ‘solutions’ that will replace the current system. It’s only a matter of time.
On the latter, it cautioned that a continued deterioration in the public finances could result in political pressure on central banks to tolerate stronger price growth and inflate away the public debts. In an extreme case, high and rising debts could make investors less willing to hold government bonds, forcing the central bank to step in. In such a case, raising interest rates may no longer act on inflation, since any rate rises would boost debt-interest payments and increase the debt further.
jg – June 28, 2010
__________________________________
JUNE 28, 2010, 8:40 A.M. ET
BIS Warns Countries Over Debt
By NATASHA BRERETON
Wall St. Journal
BASEL, Switzerland—Global policy makers face a "daunting" task to balance their support for still-fragile economies and markets, while avoiding unwanted side effects from long-standing stimulus policies, the Bank for International Settlements said Monday.
In its annual report, the bank for central banks highlighted the risks posed by high public-debt levels, concerns about which are already jeopardizing recovery in the euro zone, and in the longer term could curb potential growth and make it harder to keep inflation low and stable.
Central banks will have to take the impact of much-needed fiscal tightening into consideration when judging their appropriate policy stance, but they must also be aware of the dangerous distortions that can occur from keeping interest rates extremely low for an extended period, it warned.
"To put it bluntly, the combination of remaining vulnerabilities in the financial system and the side effects of such a long period of intensive care threaten to send the patient into relapse," the BIS said.
European Union finance ministers and the International Monetary Fund agreed last month to commit €750 billion ($928.95 billion) to support euro-zone governments that have difficulty borrowing in the international bond markets, after investors' fears about Greece's creditworthiness spread to other countries.
The European Central Bank began to buy euro-zone government bonds in an effort to bring down borrowing costs, while the U.S. Federal Reserve also simultaneously reopened dollar swap lines with several major central banks.
The BIS said that events in Greece underscored the risk that highly indebted governments now have hardly any financial room for maneuver, and may not be able to act as buyers of last resort to save their banks in a crisis.
Unless countries take resolute action to address their fiscal problems, there's a "key risk" that investor concerns will worsen and engulf other countries, it warned. "The sovereign debt crisis in Greece is clearly jeopardizing Europe's nascent recovery from the deep recession brought on by the earlier crisis," it said.
The BIS also noted that persistently higher levels of public debt over the longer run could make economies more vulnerable to adverse shocks, reduce their growth potential and endanger prospects for monetary stability.
On the latter, it cautioned that a continued deterioration in the public finances could result in political pressure on central banks to tolerate stronger price growth and inflate away the public debts. In an extreme case, high and rising debts could make investors less willing to hold government bonds, forcing the central bank to step in. In such a case, raising interest rates may no longer act on inflation, since any rate rises would boost debt-interest payments and increase the debt further.
While acknowledging that such scenarios are unlikely in the near-term, a greater likelihood that they might come to pass could push up public inflation expectations, prompt investors to demand greater compensation for inflation risk and cause medium- and long-term interest rates to rise.
"So far, there is no evidence that inflation expectations have become unanchored," the BIS said. "However, a failure by governments to make headway in restoring fiscal sustainability increases the risk that inflation expectations may abruptly and unexpectedly change."
The BIS also warned that while recovery in the large advanced economies is "far from self-sustained," the longer emergency policy measures are maintained, the greater the risk of creating unhealthy distortions.
"Such powerful measures have strong side effects, and their dangers are beginning to become apparent," it said, adding that such direct support was delaying essential post-crisis adjustments and "runs the risk of creating zombie financial and non-financial firms."
Still-fragile market and economic conditions continue to make tightening risky in many places. But "we cannot ignore the fact that the culminating side effects themselves pose a danger that, at the very least, implies exiting sooner than may be comfortable for many," the BIS said.
"A prolonged period of exceptionally low real interest rates alters investment decisions, postpones the recognition of losses, increases risk-taking in the ensuing search for yield and encourages high levels of borrowing," it warned.
An additional risk for central banks is that although output in the countries that were worst affected by the crisis is still well below potential, the amount of economic slack could be smaller than conventional measures of the output gap suggest, the BIS said.
The buildup of imbalances before the crisis suggests that potential output growth wasn't as high as was commonly believed, it said, and noted that financial disruption and the lost skills of the long-term unemployed could reduce potential output. "Inflationary pressures could therefore reappear earlier than anticipated," it warned.
The BIS noted that while implementation of macroprudential policy measures should improve the resilience of the financial system, monetary policy needs to play a greater role in leaning against the buildup of systemic financial vulnerabilities during booms.
"A monetary policy strategy narrowly focused on stabilizing inflation, looking out over a short horizon of about two years, is not sufficiently forward-looking to ensure financial stability and is thus not sufficient to stabilize inflation over the longer term," the BIS said.
It added that since credit and asset prices have boomed, even during times of low and stable inflation, there is a risk that monetary policy could accommodate or even contribute to the buildup of financial vulnerabilities.
"Adding a few years to the monetary policy framework, beyond the two years ahead commonly focused upon, would help monetary policy makers to weigh longer-term threats to financial stability, including the impact of interest-rate settings, against nearer-term inflation," it said.
Additionally, the BIS predicted further "substantial" declines in household debt in the U.S., U.K. and Spain.
It also expressed doubts about the sustainability of bank profits, citing potential for further asset writedowns, high exposure to sovereign risk, possible difficulties refinancing and a renewed squeeze on dollar funding. It noted that in 2009, profits at many U.S. and European banks were heavily based on volatile fixed-income and currency markets, while credit extended to the private sector shrank, and loan-to-deposit ratios for many international banks fell. Furthermore, the trend toward investing in longer-dated securities could also backfire if the yield curves flattens, it said.
Write to Natasha Brereton at natasha.brereton@dowjones.com
Damon Vrabel - Sovereign Debt: The Death of Nations vs. the Wealth of Nations - July 7 2010
More truth from Damon Vrabel.
jg – July 7, 2010
_______________________
http://economicedge.blogspot.com/2010/07/damon-vrabel-sovereign-debt-death-of.html
WEDNESDAY, JULY 7, 2010
Damon Vrabel - Sovereign Debt: The Death of Nations vs. the Wealth of Nations
Damon with more truth telling...
Sovereign Debt: The Death of Nations vs. the Wealth of Nations
http://csper.wordpress.com/2010/07/07/sovereign-debt-the-death-of-nations-vs-the-wealth-of-nations/
The gap between the truth vs. the lies that pass for truth in the media has never been so wide. But living a lie is very destructive, so it's important to cross this gap. Today I want to clear up one of the most important lies reinforced by the media--the idea that we have sovereign countries.
No doubt most of you have heard of the sovereign debt crisis that so many countries are facing. We hear endless economists, reporters, and billionaire hedge fund raiders talk about it. But the phrase they use is fictitious. It is a fabrication of the Ivy League, Wall Street, and erudite periodicals like the Financial Times of London. Sovereign debt is an impossibility. It cannot exist.
It seems ridiculous to point this out, but sovereign debt implies sovereignty. Right? Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions? How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs? Why would they be subjugated to the whims of auctions and traders?
A true sovereign is in debt to nobody and is not traded in the public markets. For example, how would George Soros attack, say, the British royal family? It's not possible. They are sovereign. Their stock isn't traded on the NYSE. He can't orchestrate a naked short sell strategy to destroy their credit and force them to restructure their assets. But he can do that to most of the other 6.7 billion people of the world by designing attack strategies against the companies they work for and the governments they depend on.
The fact is that most countries are not sovereign (the few that are are being attacked by CIA/MI6/Mossad or the military). Instead they are administrative districts or customers of the global banking establishment whose power has grown steadily over time based on the math of the bond market, currently ruled by the US dollar, and the expansionary nature of fractional lending. Their cult of economists from places like Harvard, Chicago, and the London School have steadily eroded national sovereignty by forcing debt-based, floating currencies on countries. So let's start being honest and stop describing their debt instruments as sovereign.
We long ago lost the free market envisioned by Adam Smith in the "Wealth of Nations." Such a world would require sovereign currencies, i.e. currencies that are well-regulated rather than floating, and an asset rather than an interest-bearing debt. Only then could there be a "wealth of nations." But now we have nothing but the "debt of nations." The exponential math of debt by definition meant that countries would only lose their wealth over time and become increasingly indebted to the global central banking network.
So thanks to debt-based, free-floating currencies, the "wealth of nations" transitioned to the "debt of nations" which is now transitioning to the "death of nations." The new world economic order with one currency, one banking system, one government, and one integrated corporate empire is on the horizon. Perhaps that's a good thing, but if it were, why would the establishment concoct oxymorons like "sovereign debt" instead of telling the truth? That's my only goal here--I think people can be trusted with the truth. Lies harm not only the population hearing them, but also the powerful people telling them.
Those powers have the best salesmen in the world, so why don't they just sell the population on the truth? Apparently they don't think you'd like it. Well now you have it. And it's coming unless countries follow Iceland's lead and recover their sovereignty. The choice is ours.
Love it! The "Wealth of Nations" becomes the "Debt of Nations" which leads to the "Death of Nations." Adam Smith would be so proud! (NOT)
jg – July 7, 2010
_______________________
http://economicedge.blogspot.com/2010/07/damon-vrabel-sovereign-debt-death-of.html
WEDNESDAY, JULY 7, 2010
Damon Vrabel - Sovereign Debt: The Death of Nations vs. the Wealth of Nations
Damon with more truth telling...
Sovereign Debt: The Death of Nations vs. the Wealth of Nations
http://csper.wordpress.com/2010/07/07/sovereign-debt-the-death-of-nations-vs-the-wealth-of-nations/
The gap between the truth vs. the lies that pass for truth in the media has never been so wide. But living a lie is very destructive, so it's important to cross this gap. Today I want to clear up one of the most important lies reinforced by the media--the idea that we have sovereign countries.
No doubt most of you have heard of the sovereign debt crisis that so many countries are facing. We hear endless economists, reporters, and billionaire hedge fund raiders talk about it. But the phrase they use is fictitious. It is a fabrication of the Ivy League, Wall Street, and erudite periodicals like the Financial Times of London. Sovereign debt is an impossibility. It cannot exist.
It seems ridiculous to point this out, but sovereign debt implies sovereignty. Right? Well, if countries are sovereign, then how could they be required to be in debt to private banking institutions? How could they be so easily attacked by the likes of George Soros, JP Morgan Chase, and Goldman Sachs? Why would they be subjugated to the whims of auctions and traders?
A true sovereign is in debt to nobody and is not traded in the public markets. For example, how would George Soros attack, say, the British royal family? It's not possible. They are sovereign. Their stock isn't traded on the NYSE. He can't orchestrate a naked short sell strategy to destroy their credit and force them to restructure their assets. But he can do that to most of the other 6.7 billion people of the world by designing attack strategies against the companies they work for and the governments they depend on.
The fact is that most countries are not sovereign (the few that are are being attacked by CIA/MI6/Mossad or the military). Instead they are administrative districts or customers of the global banking establishment whose power has grown steadily over time based on the math of the bond market, currently ruled by the US dollar, and the expansionary nature of fractional lending. Their cult of economists from places like Harvard, Chicago, and the London School have steadily eroded national sovereignty by forcing debt-based, floating currencies on countries. So let's start being honest and stop describing their debt instruments as sovereign.
We long ago lost the free market envisioned by Adam Smith in the "Wealth of Nations." Such a world would require sovereign currencies, i.e. currencies that are well-regulated rather than floating, and an asset rather than an interest-bearing debt. Only then could there be a "wealth of nations." But now we have nothing but the "debt of nations." The exponential math of debt by definition meant that countries would only lose their wealth over time and become increasingly indebted to the global central banking network.
So thanks to debt-based, free-floating currencies, the "wealth of nations" transitioned to the "debt of nations" which is now transitioning to the "death of nations." The new world economic order with one currency, one banking system, one government, and one integrated corporate empire is on the horizon. Perhaps that's a good thing, but if it were, why would the establishment concoct oxymorons like "sovereign debt" instead of telling the truth? That's my only goal here--I think people can be trusted with the truth. Lies harm not only the population hearing them, but also the powerful people telling them.
Those powers have the best salesmen in the world, so why don't they just sell the population on the truth? Apparently they don't think you'd like it. Well now you have it. And it's coming unless countries follow Iceland's lead and recover their sovereignty. The choice is ours.
Love it! The "Wealth of Nations" becomes the "Debt of Nations" which leads to the "Death of Nations." Adam Smith would be so proud! (NOT)
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