Financial Armageddon!!

[Perry]

Lies, Damned Lies & Survey Results

Some interesting graphs on the USA situation.
Does it indicate an awakening? A video, here.


Retail sales: down
Consumer credit: down
Personal savings: up!

[muppet]

US bank failures hit more than a 100 for year

US bank failures hit more than a 100 for year

DANIEL WAGNER, WASHINGTON

October 26, 2009
THE number of US banks that have failed so far this year topped 100 on Friday - hitting 106 by the end of the day - the most in nearly two decades.
But the trouble in the banking system from bad loans and the recession goes even deeper.
Dozens, perhaps hundreds, of other banks remain open even though they are as weak as many that have been shuttered.
Regulators are seizing banks slowly and selectively - partly to avoid inciting panic and partly because buyers for bad banks are hard to find.
Going slowly buys time. An economic recovery could save some banks that would otherwise go under. But if the recovery is slow and smaller banks' finances get even worse, it could wind up costing even more.
This year's 106 bank failures are the most in any year since 181 collapsed in 1992 at the end of the savings-and-loan crisis.
When a bank fails, the Federal Deposit Insurance Corporation swoops in, usually on a Friday afternoon. It tries to sell off the bank's assets to buyers and cover its liabilities, primarily customer deposits. It taps the insurance fund to cover the rest.
Bank failures have cost the FDIC's fund that insures deposits an estimated $US25 billion ($A26.94 billion) this year and are expected to cost $US100 billion through 2013. To replenish the fund, the agency wants banks to pay in advance $US45 billion in premiums that would have been due over the next three years.
The FDIC won't say how deep a hole its deposit insurance fund is in. It can tap a credit line from the Treasury of up to a half-trillion US dollars to cover the gap.
The list of banks in trouble is getting longer. At the end of June, the FDIC had flagged 416 as being at risk of failure, up from 305 at the end of March and 252 at the beginning of the year.
Yet the pace of actual bank failures appears to be slowing. The FDIC seized 24 banks in July, 11 in September and 11 in October.
AP

http://www.businessday.com.au/business/us-bank-failures-hit-more-than-a-100-for-year-20091025-herk.html

[Perry]

Oh, No! How Can It Be?

Iceland Says Goodbye To The Big Mac
Tue, 27 Oct 2009

The Big Mac, long a symbol of globalisation, has become the
latest victim of this tiny island nation's overexposure to the
world financial crisis.

Iceland's three McDonald's restaurants - all in the capital
Reykjavik - will close next weekend, as the franchise owner
gives in to falling profits caused by the collapse in the
Icelandic krona.

More here.

[Austrokiwi]

Iceland Says Goodbye To The Big Mac
Tue, 27 Oct 2009

as they say every cloud has a silver lining

[TonyMacaroni]

Possible Credit Dislocation: Be Warned

From Karl Denninger at the Market Ticker 26/10/09:
http://market-ticker.org/archives/15...Be-Warned.html

I have reason to suspect that the "monetary transmission mechanism" is full of rocks (again), and we are about to have another instance of what could colloquially be called "fun." (Yes, that's sarcasm.)


Here's what we know and what I can deduce from it:

• JP Morgan's "cash position" was analyzed by a writer who published on SCRIBD, which showed that actual cash held has deteriorated radically. By more than half in the last year. The deterioration is continuing, not slowing.
• I am hearing repeated anecdotes from multiple areas that foreclosed property held by banks with multiple full-price offers that include a financing requirement are being sold instead to people with actual cash at radical reductions from that price. This implies that these financing contingencies are regarded as not only potentially no good but factually no good, as if the banks know for a fact that the credit pipeline will (not might), within weeks or months (in the time required to close), disappear. There is no other rational explanation for this behavior.
  
  
• Citibank's credit-card terms change implies a willingness to accept and even provoke a complete and intentional destruction of their credit card business as a very high probability outcome, given that nobody in their right mind will accept a 30% interest rate who has an alternative. The obvious implication is that only those who can't transfer balances out will remain and if your credit is that impaired there's a good chance you will default - either intentionally or otherwise. This too implies foreknowledge of a near-complete impending freeze in the credit markets.
  
  
• The change in terms on credit accounts is NOT confined to Citibank. I have received a fax from a customer of Infibank with substantially identical terms, in which both the standard and penalty rate was adjusted to 29.99%. This strongly implies that whatever Citibank smells the problem is not confined to them.
• Both of these credit card "adjustment" letters are of course marginal rate changes. That is, they are both based off the PRIME rate. The importance of that is missed by many. Don't be one of them (more on that below.)
• I recently received a back channel communication indicating that The Fed is aware that this has been and still is a solvency problem and has so briefed certain members of Congress. This from a source believed reliable, but which cannot be independently confirmed.

This data is not conclusive. But - if you are dependent on credit access and these anecdotes are in fact indicative of actual knowledge of an impending lock-up you are at grave financial risk.
Note that "margin" type rates that are based on the PRIME rate could hurt you far worse than you believe. With PRIME at historic lows should any such dislocation spike the prime rate your interest rate could go much higher with little or no notice or ability to do anything about it.
IF this is going to manifest as a dislocation of some sort it will probably occur within the normal closing window for real estate transactions, since the anecdotes related to that have the best-defined "reach", and the discounts being accepted to avoid this risk are massive to the point of denoting near-certainty of this event in the minds of the market participants who are electing to accept these cash-discounted offers.
Therefore, if you are dependent on such credit access I would take immediate action to do whatever is necessary to mitigate, to the extent you are able, the consequences of such a dislocation.
Consider how you survive returning to what essentially amounts to a cash economic posture in your business and personal life.
Note that the indications above are far stronger than what we saw going into last fall before the wheels came off. As a consequence if these actions are those of people with real knowledge (and this is not a guess on their part) I would expect the outcome to be worse than what we saw last fall in terms of economic impact.
Those who are short dollars (synthetically or in the actual market) need to beware - if I am reading this correctly you're about to get a really ugly surprise.
If you want to speculate on this outcome levered bets on radical dollar appreciation look like one of the best choices out there, followed closely by bearish levered bets on commodities. I would not consider such a speculative play that is not characterized by defined risk, as this analysis is based on nothing more than observation of behavior by market participants that all point toward their foreknowledge of an event that might happen in the reasonably-near future and is not, at present, backed up with actual significant credit-spread widening or other objective criteria.
Disclosure: Initiated a small speculative, defined-risk play LONG the US Dollar (UUP CALL options for March 2010)

I wonder if this means the NZ$, gold and silver are about to tank again as they did this time last year...

[muppet]

Former NZ economist predicts more global gloom

4:00AM Wednesday Oct 28, 2009
By Simon Collins
Robert Wade believes tackling inequality will be very problematic. Photo / Steven McNicholl



Another plunge into global recession in 2010 or 2011 is being tipped by expatriate New Zealand economist Robert Wade - unless governments tackle the underlying causes of the past year's crisis.
Wade, a professor at the London School of Economics who made his name analysing East Asia's economic "tigers", believes the crisis was driven by a combination of unregulated lending and a huge upswing in borrowing, which he links to widening income gaps in major economies such as the United States.
But he is "not optimistic" that governments will seriously tackle either side of the problem.
"I think we are in for a period of very considerable turbulence and it's quite possible we will have another plunge into recession," he said in Auckland yesterday.
"I don't think this is going to be a stable rise out of recession.
"If we have another double-dip recession in 2010 or 2011, then those pushing for more serious action along the lines I've talked about may be strengthened and the forces reining it in may be weakened.
"Unless something like that happens, I don't see that very much will be done beyond cosmetics."
He said sharemarkets were already over-valued, especially in emerging markets, such as China, India and Brazil.
"Relative to historic valuations and any other measure you care to use, such as historic price-earnings ratios, emerging stockmarkets are in big-time bubble territory," he said.
Wade's 1990 book, Governing the Market, argued that Asian "tigers", such as Taiwan and South Korea, owed their success to active state protection and support for target industries, including managed exchange rates which kept exporters competitive.
He said yesterday that the past year's crisis was partly because of relaxation of controls on international financial flows and domestic banking capital ratios, fuelling huge imbalances between overspending economies, such as the US, and under-spenders, such as China.
The other side of the picture was a surge in borrowing, fuelled by a massive rise in inequality which linked back to the rise of the financial sector.
He said the top 1 per cent of income-earners increased their share of total US income from around 16 per cent to a peak of 22 per cent in the decade up to the 1929 sharemarket crash - "the age of the robber barons".
Their share plunged during the regulated years of the Great Depression and World War II and bottomed at just 9 per cent of US national income in 1977.
But deregulation from the Reagan era onwards and the rise of the financial sector helped the top 1 per cent raise their share to 22 per cent again by 2006.
"This concentration of income at the top meant that there was a sort of waterfall of money going into the financial sector, into buying assets, because these people didn't consume the enormous share of income they were getting," Wade said.
Rising house prices, in turn, enabled lower-income earners, whose real incomes barely changed in the quarter-century to 2005, to borrow heavily against their houses and fuel a US trading deficit which by 2006 was bigger than the entire national income of India.
Wade advocates re-regulating finance by strengthening financial consumer protections, raising capital requirements for financial institutions, separating commercial and investment banks, international co-operation on exchange rates, and temporary taxes such as a 2 per cent tax imposed by Brazil last week on foreign portfolio investment.
But he believes tackling the other side of the problem, inequality, will be "very problematic".
"The people at the top have now got enormous political power and would be extremely resistant to any serious increase in the progressivity of income tax which is one obvious way to do it."
"The fall in inequality from the 1930s was made possible by the catastrophe of the Great Depression and World War II and the returning servicemen demanding goods and services, public goods like education and so on, and just not tolerating the degree of inequality that had been opened up in 1929," he said.
Professor Wade will deliver the annual Bruce Jesson Lecture at Auckland University's Maidment Theatre at 6.30 tonight.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10605760

[TonyMacaroni]

Max Keiser On the Edge Oct 30

Discusses the news of the week and investment tips for uncertain times with Catherine Austin Fitts.

From: http://www.youtube.com/watch?v=fRS7yvZ6CVA

From: http://www.youtube.com/watch?v=Xewmpwggc9M

From: http://www.youtube.com/watch?v=X_4SRw3Nxw0

From: http://www.youtube.com/watch?v=oJDZV2inXWc&feature=response_watch

[tpr2]

Is this the guy that John Daley makes fun of on the Daily Show?

[TonyMacaroni]

CIT Approaches Bankruptcy After Striking Icahn, Goldman Accords

By Pierre Paulden and Linda Shen
Oct. 31 (Bloomberg) -- CIT Group Inc., the 101-year old commercial lender seeking to avoid collapse, may file for a prepackaged bankruptcy as soon as this weekend after striking deals with billionaire Carl Icahn and Goldman Sachs Group Inc.
A prepackaged bankruptcy “is probably going to go through,” Icahn said yesterday. He will supply a $1 billion loan for “supplemental liquidity” that can be used as bankruptcy financing, the New York-based company said. CIT also said it reached an agreement with Goldman Sachs to keep a credit line open should the lender file for court protection.
The accords were disclosed the day after a deadline passed for CIT to solicit votes in support of either a $30 billion out- of-court debt exchange or a prepackaged bankruptcy. CIT is seeking to reduce debt by at least $5.7 billion after being locked out of credit markets it relies on for funding and posting nine quarters of losses totaling more than $5 billion.
...
CIT’s agreement with New York-based Goldman Sachs will reduce a $3 billion credit facility to $2.13 billion and keep the line open should CIT file for bankruptcy.
Goldman Sachs Agreement
In exchange, Goldman Sachs received $285 million in termination fees, CIT said yesterday in a filing with the U.S. Securities and Exchange Commission. Under the terms of the two companies’ original agreement, Goldman Sachs would have been due a $1 billion termination payment to close the credit line after a CIT bankruptcy.
...

http://www.bloomberg.com/apps/news?p...2p2GTk.I&pos=1
Goldman likely to profit from yet another large financial bankruptcy... surprise, surprise.

More at Zerohedge.

[TonyMacaroni]

Nine U.S. banks seized in largest one-day haul

REUTERS — 5:46 AM ET 10/31/09

By Sam Mircovich and Edwin Chan

LOS ANGELES (Reuters) - U.S. authorities seized nine failed banks on Friday, the most in a single day since the financial crisis began and the latest stark sign that substantial parts of the nation's banking industry are being crippled by bad loans.

The move brought the total number of failed banks in 2009 to 115 -- their highest annual level since 1992 -- with analysts expecting more to come. Among the lenders seized Friday was Los Angeles-based California National Bank, in what was the fourth-largest U.S. bank failure this year.

The largest institution to fail in the current financial crisis was Washington Mutual, which boasted $307 billion in assets when it was shuttered in September 2008.

U.S. Bancorp on Friday acquired the nine banks that had been held by FBOP Corp, picking up $18.4 billion in assets and $15.4 billion of deposits.

Visibly worried employees lined up to file into Cal National's head offices in the heart of a deserted downtown Los Angeles on a chilly Friday evening, where they had their employers' fate explained to them, regulators said.

"We're getting ready to turn everything over to U.S. Bank," said Roberta Valdez, a spokeswoman for the Federal Deposit Insurance Corp, which helped supervise the transfer of FBOP's assets. "They will continue to operate as normal in the interim," she added, referring to lenders acquired from FBOP.

U.S. Bancorp -- which has been buying up distressed assets this year -- is picking up the lenders once owned by FBOP, a private Illinois group with over $18 billion in assets that owned banks in Texas, Illinois, Arizona and California.

Cal National is FBOP's largest bank by branches. Others that will now go under the U.S. Bancorp umbrella included BankUSA, Citizens National Bank, Madisonville State Bank, North Houston Bank, Pacific National Bank, Park National Bank, San Diego National Bank, and the Community Bank of Lemont.

"This transaction is consistent with the growth strategy that we have outlined many times in the past, which includes enhancing our existing franchise through low-risk, in-market acquisitions," said Rick Hartnack, vice chairman of consumer banking for U.S. Bancorp.

"This transaction adds scale to our current California, Illinois and Arizona footprints."

NEXT BIG HEADACHE

In the "near future," all nine lenders' branches will be re-branded U.S. Bank, which is the California-focused unit of U.S. Bancorp's that operates a network of more than 770 branches across Illinois, Arizona and California.

U.S. Bancorp did not specify what would happen to the new employees it inherits.
...

More here.

[Austrokiwi]

Ron Pauls strange interpretations

Senator Ron Paul has an interesting article on CNN. I find his point of view novel and somewhat baffling.

http://edition.cnn.com/2009/OPINION/10/30/ron.paul.fed/index.html

One of the things I find baffling is his understanding of Greshams law he writes:

Gresham's Law describes this phenomenon, which can be summed up in one phrase: Bad money drives out good money. In the absence of legal tender laws, Gresham's Law no longer holds. If people are free to reject debased currency, and instead demand sound money, sound money will gradually return to use in society.

Given that Greshams law was orgional focused on specie based money, the assertion that without legal tender laws Greshams law won’t apply is wrong.

Greshams law was not, as popular understood, first stated by Gresham but by Ibn Taimiyyah (1263–132. The law basically states that debased coins will drive out non-debased coins. A modern day example of this; In Austria Silver €5.00 pieces can be legally used for purchasing goods. However, I have never seen one in my change and have not heard of anyone ever spending the coins. I understand the reason for this non use in these terms at a personal level; I would rather use a €5.00 bank note for making purchases than give up the ownership of a silver coin of the same value.

When Silver was money globally:

Governments in times of a paucity of silver ( as the Ottoman empire periodically experienced), could only maintain the money supply was to reissue the coinage with a lower standard of silver. This resulted in people keeping the heavier non debased coins (or alternately melting them and selling the silver obtained)

The debasement of coinage in the Ottoman Empire often had exactly the same effect as printing money can have today; inflation. Now traders did indeed start to choose other coins in preference to the national currency (notably the Dutch Lion Taler). The effect of this was to create of flow of silver into the empire (exactly as the Ottoman rulers might have wanted). Through the taxation system those foreign silver coins were added to the gvts treasury and then used to issue more debased coinage to allow the economy to continue growing. Reactions of the European states was predictable, they from time to time banned the export of their silver coins.

[Perry]

This excerpt from Wikipedia is intereasting:

"Bad" money

"Bad" money is money that has a commodity value considerably less than its face value, is in circulation along with money with a higher commodity value, and with both forms required to be accepted at equal value as legal tender.

In Gresham's day, bad money included any coin that had been debased. Debasement was often done by the issuing body, where less than the officially specified amount of precious metal was contained in an issue of coinage, usually by alloying it with a base metal.

The public could also debase coins, usually by clipping or scraping off small portions of the precious metal. Other examples of "bad" money include counterfeit coins made from base metal.

In the case of clipped, scraped or counterfeit coins, the commodity value was reduced by fraud, as the face value remains at the previous higher level. On the other hand, with a coinage debased by a government issuer the commodity value of the coinage was often reduced quite openly, but the face value of the debased coins was held at the higher level by legal tender laws.

All modern money is "bad money" in this sense, since fiat money has entirely replaced the commodity money to which Gresham's law applies. This money is not redeemable for any kind of valuable commodity, relying entirely on the government's decree for its legitimacy, and valued purely in terms of the quantity of money in circulation relative to available goods. The ubiquity of fiat money could indeed be taken as evidence for the truth of Gresham's law.

• If a citizen debases the currency, its fraud;
• If a government debases the currency, its OK.

Probably just dismissed as 'inflationary pressures.' But as it's
now all debased fiat / paper, it's no longer relevant, anyway.

[TonyMacaroni]

How Goldman secretly bet on the U.S. housing crash

WASHINGTON — In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.
"The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's banks. "This is fraud and should be prosecuted."
...

Video on page.

[Perry]

Aucklander Takes Stand Against The Central Banking System
By Clare Swinney
ECONOMY 2 November 2009, 4:52PM

Brian Reiersen, a 64-year-old Auckland bus driver, who formally owned a range of successful businesses, has started taking action against what he regards as an outrageous scam which has dragged the New Zealand economy into an abyss.

He kicked his campaign off on the 20th of October by submitting a formal complaint to the Commerce Commission, in conjunction with 24 pages of supporting evidence regarding the $12 billion a year the New Zealand government is paying out as interest on overseas debt, on the grounds that the money the government borrowed was created out of thin air. This form of banking is by its nature destructive, as it can only lead into ever increasing indebtedness, he says.

While he believes the Commerce Commission should take action, he was not surprised by their reply, in which Diane Gibson, Contact Centre Team Leader, claimed that the matter was not their responsibility.

The primary reason for making the complaint he says, was to make a political statement about a matter of huge importance to everyone in the country, that the mainstream media and politicians do not seem to be willing to talk about.

Reiersen, who has a rare ability to think outside the square, says the knack leads him to contact MPs to offer them advice, some of which has been reported on TV. His advice to them now is that New Zealand must start creating its own money, and stop relying on a source which does not have the people's best interests at heart. "Creating our own money is the only way we can end this virtual slavery of taxation and interest," he maintains, which as this map of the public debt per capita for each country shows, has sunk New Zealand more heavily into debt, than many other nations around the globe.

The Kiwibank, which is New Zealand-owned should function as the Reserve Bank and provide 3% housing loans on all owner occupied dwellings in Reiersen's opinion. "We need to dissociate ourselves from the Central Banking system completely. If we do that, I believe we can have a bountiful life in this country," he asserts.
While he's one of an increasing number who advocate cutting ties to the Central Banking system, he is concerned that many in New Zealand are unaware a problem even exists. As he puts it, there's an elephant in the living room and the first step we have to take is to make people aware it's there and "get people talking about it over the water coolers."

To help initiate this process, since October the 20th, he has e-mailed approximately 500 professionals, including every MP and the editors of all the major publications in New Zealand, and he encourages others to do the same. The e-mails he is sending, include his complaint to the Commerce Commission, and allude to the stranglehold this octopus-like network has over the New Zealand economy. They state that the largest shareholder in the companies that form the backbone of the Australasian economy is J P Morgan, and that J P Morgan is the company which created the private money-making machine - US Federal Reserve, in 1913 at the behest of the House of Rothschild. In addition, he includes mention of Prime Minister John Key's links to the US Federal Reserve and that Queen Elizabeth II is one of the major shareholders in the companies that form the backbone of the country's economy.

For those who would like to learn more about the banking system and its history, Reiersen suggests you watch The Money Masters, which exposes the far-reaching plan the elite bankers have. They aim to create a world system of financial control in private hands, that's able to dominate the political system of each country and the economy of the world as a whole.

Needless to state, even if many know the truth, it is still going to be an uphill battle to bring about changes - Reiersen knows this. The banking system can throw its fake money around to get folks to do their dirty work for them. WND reported a case of this happening recently. Dr Ron Paul, who's called for an end to the Federal Reserve banking system, sponsored a bill to bring more transparency into banking, which was “gutted”. Dr Paul indicated this bill was undermined due to the unscrupulous work of a legislator whose campaign coffers had been topped up by the banking industry.

"If a well-respected, long-serving American politician like Ron Paul, has so much difficulty getting the truth out, owing to the insidious control the banking sector has over the politicians, top civil servants and the media, we know we're in for a long battle to bring truth to the people of New Zealand," says Reiersen.

Nonetheless, he believes a revolution will come. Until then he says this journey of a thousand miles begins with a single step and his work thus far, has been one of them. Many more dedicated marchers are required for this journey, so he's urging others to join him now.

To get involved or get further information, e-mail Brian Reiersen at [email protected]

Related:
The formal complaint Brian Reiersen submitted to the Commerce Commission is below, and the 24-pages of supporting evidence, is at this link:
Supporting Evidence Compiled By Brian Reiersen.

[spaceman]

Hmmmm wikipedia ....

This excerpt from Wikipedia is intereasting:

• If a citizen debases the currency, its fraud;
• If a government debases the currency, its OK.

Probably just dismissed as 'inflationary pressures.' But as it's
now all debased fiat / paper, it's no longer relevant, anyway.

.... one of the problems with wikipedia is the fact that anybody can contribute even complete morons.

This money is not redeemable for any kind of valuable commodity

...... what complete and utter tot!!! I haven't had any problems redeeming my money for all sorts of valuable commodities, from gold and diamonds to cheese.

As for the fraud bit???? ummm hello you live in a society with laws, if you're not happy with the fact the the government is allowed to control the money, who would you suggest is given that control???? everybody??? nobody???

Cheers
Spaceman

PS.....LOLZ was reading post 1771 and after the second paragraph said to myself "I bet this idiot has spent too much time at the money masters web site" ...and what do you know???? ....

Reiersen suggests you watch The Money Masters, which exposes the far-reaching plan the elite bankers have.

.... lol again