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Originally Posted by roachboy
it's quite odd, what is going on. i've been getting curious about how this mess is being seen outside the states, what it's being linked to, how it's being interpreted. for the moment, i'll put up stuff as i find it in english...working my way along....feel free to comment (not entirely sure if this is a threadjack or not--i just don't think there's a wide enough angle on this so far..)
http://www.ft.com/cms/s/0/8ad0ca52-f...0779fd2ac.html
alan greenspan is quoted as estimating this will "probably turn out to be the most serious crisis since world war 2..." see this article from le monde (in french):
http://www.lemonde.fr/economie/artic...#ens_id=951246 |
Interesting....roachboy. I don't know if these two foreign sourced articles I came across earlier today are simply based on newer information than the article featured in your post, or not, but they tend to contradict or to mitigate some of the points in your ft.com article.
The point I highlighted in the second piece below, fits with my prediction in an earlier post on this thread that the real danger we face is the one the Fed has long feigned a lack of concern about; the coming damage to debtors that deflation will bring. <h3>The Fed could have left short term interest rates near their 6 percent level in January, 2001.</h3> But nooooooo..... the perception then was that the Fed could turn the stock market decline "around", avoiding or lessening the effects of the perceived economic slowdown in the US.
Gold was $250ish an oz, silver was under $4.00, oil was $30 bbl and the average national home price was about $140,000. The Fed proceeded to lower short term interest rates down to one percent, federal annual borrowing just $18 billion in fiscal year ended 9/30/00, roared up to <a href="http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm">$421 billion</a> on the yeare ended exactly two years later.
The Bush presidency, within it's first four months distributed a $70 billion "stimulus" package of tax rebates, just as it is about to do in the next six weeks. Added to all of that new stimulus to the economy was relaxation of lending qualification regulations and new lax mortgage loan terms.
The Bush administration tax cuts, touted as THE REASON for economic growth that followed, was actually just icing on the new liquidity wave "cake".
Home prices, oil, gold, were all driven up massively in price. Serial refinancing by homeowners mining rising home valuation, made it easy to run up credit card balances, buy a new RV every two years or a scond home, and roll it all over with a "cashout refi", resulting in a new higher mortgage balance, after each refi.
By 2005, the rise in home prices influenced the "fortunate" homeowners who found new wealth in their home refi application appraisal process, resulted in $800 billion in MEW (mortgage equity extraction) in just one year.
Of course, this economic miracle was all attributed by the presdient and his party to the effects of his "tax cuts"....arguing that they were so successful that they should be made "permanent".
The increased federal borrowing initially triggered by the president's spring 2001 tax rebate program, resulted in $3.8 trillion in additional federal debt since 2001. The national debt was totalled $5.65 trillion in fall, 2000, and the total debt today is $9.4 trillion.
http://www.treasurydirect.gov/NP/BPD...application=np
During the Clinton admin., yielding to the lobbying of the finance and banking interests, congress repealed the post depression formulated consumer protection of the <a href="http://en.wikipedia.org/wiki/Glass-Steagall_Act">Glass Steagall Act</a>, and Clinton signed the repeal legislation. The Act had prohibited banks and brokerages from direct ownership affiliation.
I described this Fed "relaxation" of the rules, in a post 3 moinths ago:
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http://www.tfproject.org/tfp/showpos...9&postcount=12
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....Citicorp is bankrupt, the largest US bank is getting a "bailout" at 11 percent annual interest, form an Abu Dhabi state owned "entity" to put "lipstick on the pig", to delay the FACT that Citicorp is insolvent. The Fed has allowed the four biggest US banks to loan up to 30 percent of their assets to their brokerage subsidiaries, instead of the ten percent limit conditioned by FDIC deposit insurance. They've put that insurance fund at risk by raising the limit:....
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Now the people who rented during the "roaring Bush era" and those who did not do "cash out refis", or "trade ups" to bigger and better homes, will be saddled with the new rise in national debt coming from this mess. They are the actual victims of the mass "leave taking" from a sane sense of
economics.
The rising tide was only a pyramid scheme, and when the "new blood", non english speaking cleaning ladies qualified for $500k subprime loans for the purchase of one bathroom 1920's bungalows in "Cali", ran out because loan approval became less likely, America stated slipping towards the economic depression that will be at least the size and scope of the excess that it will be the consequence of.
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http://business.smh.com.au/keep-up-w...0316-1zsd.html
Keep up with the new order, China's on speed
John Garnaut
March 17, 2008
Page 1 of 2
Each month the number of new houses being built in the US drops to a new low and the world copper price takes a little hit.
That is because global hedge fund managers are programmed to know that every new US home eats up about 200 kilograms of copper wire, copper pipes and copper fittings, and each new home owner buys about 10 kilograms of copper embedded in their home appliances.
Why then, with the US suffering "about the worst housing market in a century", according to the home lender Freddie Mac, has the price of copper more than quadrupled in five years to hit a new record high this month?
The answer seems to be that a surprisingly high number of daily traders in the hedge fund world are playing yesterday's game.
US copper consumption has fallen 8 per cent a year for five years and now accounts for just 12 per cent of the world market, says the mining consultant Urandaline Investments.
For all its considerable economic and financial woe, the US makes a minor contribution to changes in global demand for most commodities, other than oil.
China, on the other hand, already accounts for 27 per cent of world copper demand, and it has clocked up 13 per cent annual demand growth for five years. China buys 60 per cent of all new global production.
A better leading indicator for copper is China's fixed asset investment, which is growing at 24 per cent a year.
This figure encompasses the greatest housing boom in history, with apartment blocks going up to house 1.5 million new urban migrants every month. It also includes the world's greatest road and railway construction boom.
In January, for example, the Mayor of Shanghai, Han Zheng, warned his city's commuters to brace for "tough times" because his municipal workers would obstruct more than 1000 roads as they dug away at a subway network that will end up one quarter larger than the London Underground.
Han plans to build 116 subway stations this year - compared with Australia's grand total of seven - as he lays 276 kilometres of new underground railways by 2012. Beijing says its subway network is going to be bigger still. And 35 other large Chinese cities have plans or have asked permission to extend their subway networks or build them from scratch. That is a lot of copper, nickel and, above all, steel. But China's construction industry accounts for only a quarter of the country's hunger for copper. New power generators and transmission lines consume double that share. China built more electricity generating capacity in the past five years than it did in the previous 50. But that was not enough to keep up with the country's electricity demand. Similar stories can be told for tin, which rose $US850 a tonne on Friday to a new record. And oil, which hit $US111 a barrel at the weekend, and lead, iron ore, coal, uranium, wheat and almost every other commodity with which Australia happens to be overly endowed....
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http://www.telegraph.co.uk/money/mai.../ccview117.xml
Foreign investors veto Fed rescue
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 1:13pm GMT 17/03/2008
As feared, foreign bond holders have begun to exercise a collective vote of no confidence in the devaluation policies of the US government. The Federal Reserve faces a potential veto of its <a href="http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/12/cnfed112.xml">rescue measures</a>.
Contagion fears sweep across the Atlantic
Dollar plunges as Fed steps up moves
Desperate measures: Bernanke and the Federal Reserve need to keep on top of the crisis and continue to intervene if needed
Asian, Mid East and European investors stood aside at last week's auction of 10-year US Treasury notes. "It was a disaster," said Ray Attrill from 4castweb. "We may be close to the point where the uglier consequences of benign neglect towards the currency are revealed."
The share of foreign buyers ("indirect bidders") plummeted to 5.8pc, from an average 25pc over the last eight weeks. On the Richter Scale of unfolding dramas, this matches the death of Bear Stearns.
Rightly or wrongly, a view has taken hold that Washington is cynically debasing the coinage, hoping to export its day of reckoning through beggar-thy-neighbour policies.
It is not my view. <h3>I believe the forces of debt deflation now engulfing America - and soon half the world - are so powerful that nobody will be worrying about inflation a year hence.</h3>
Yes, the Fed caused this mess by setting the price of credit too low for too long, feeding the cancer of debt dependency. But we are in the eye of the storm now. This is not a time for priggery.
The Fed's emergency actions are imperative. Last week's collapse of confidence in the creditworthiness of Fannie Mae and Freddie Mac was life-threatening. These agencies underpin 60pc of the $11,000bn market for US home loans....
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