Global financial system implosion begins

[fractionMan]

 

[goebfwai]

Jim Rogers interview on Channel 4:

http://www.channel4.com/news/articles/business_money/interview+jim+rogers/3009962

 

[david dissadent]

Uk mortgage lending collapses by 50% year on year.
First time buyers frozen out of market.

Total number of loans is less than half seen in January 2008
Just 8,900 loans were advanced to first-time buyers

link I guess many people will be trapped in there houses, unable to sell and not wanting to lose out big time as they have to cover negative equity.

People will also be needing big deposits these days. The property ladder looks a bit broken.

 

[gorski]

He [Rodgers] mentions "the money changers"... i.e. himself... in his previous incarnation...

And now.... let's go produce again... Farmers with drive Ferraris, hehe...

Farmers need oil and infrastructure and government help...

Ach, the so called free marketeers...

What rubbish!!!

 

[gosub]

DD:The figures I cited, were off London Tonight a couple of weeks ago, which I remembered coz Alister Stewart trying to spin that the fall wasn't as bad as people suspected while completely ignoring the volume I'll take the CML sourced Guardian report as more accurate. The advice of taking fixed rate is I think sound.

The property ladder was broken for a long time 5x salary on 100% mortgage to get on the bottom rung made for the bubble, and home ownership the core of the Thatcherite capitalism model. The woes will keep coming until that stabilizes. If I was negotiating pay rounds I'd be flexible on everything except the need to increase the frequency of pay rounds..


Agric Production is ultra competetive with the low £, though you want to to check on on and off balance sheet loans before investing

 

[slaar]

An article on the looting of the US economy (and it's very similar here) from that radical left wing publication the, er, New York Times:

http://www.nytimes.com/2009/03/11/business/economy/11leonhardt.html

I understand this chain of events sounds a bit like a conspiracy. And in some cases, it surely was. Some A.I.G. employees, to take one example, had to have understood what their credit derivative division in London was doing. But more innocent optimism probably played a role, too. The human mind has a tremendous ability to rationalize, and the possibility of making millions of dollars invites some hard-core rationalization.

Either way, the bottom line is the same: given an incentive to loot, Wall Street did so. “If you think of the financial system as a whole,” Mr. Romer said, “it actually has an incentive to trigger the rare occasions in which tens or hundreds of billions of dollars come flowing out of the Treasury.”

...............................

At a time like this, when trust in financial markets is so scant, it may be hard to imagine that looting will ever be a problem again. But it will be. If we don’t get rid of the incentive to loot, the only question is what form the next round of looting will take.

Mr. Akerlof and Mr. Romer finished writing their paper in the early 1990s, when the economy was still suffering a hangover from the excesses of the 1980s. But Mr. Akerlof told Mr. Romer — a skeptical Mr. Romer, as he acknowledged with a laugh on Tuesday — that the next candidate for looting already seemed to be taking shape.

 

[david dissadent]

Bank of America Expects to Post Full-Year 2009 Profit

March 12 (Bloomberg) -- Bank of America Corp., the biggest U.S. bank, expects to make money for the full year after posting a profit for January and February, Chief Executive Officer Kenneth Lewis said.

“We have been profitable for the first two months of the year,” Lewis told reporters after a speech to the Boston College Chief Executives’ Club in Boston today. “We expect to be profitable” in 2009. In his speech, Lewis said the bank may earn $50 billion this year, measured before taxes and provisions, and the company won’t need more federal aid.

“At some point we’ll see housing prices stabilize and that would reignite the market,” he said. Lewis said he would pay particular attention to California, which he called “the poster child of the housing decline.”

California will not be recovering anytime soon. It has a growing backlog of repossesed houses and many houses in default that have not yet begun repossesion while the state is basicaly bankrupt and at least one city has already gone chapter (the US provision for municiple bankruptcies), this means that job losses in the public sector together with pay cuts will be severe: ergo home forclosures to come. Additionaly the Alt A, Prime and Jumbo sector mortgage resets have only really begun.

Regulators are subjecting Bank of America and 18 more of the biggest U.S. banks to stress tests to determine whether they can survive average unemployment of 8.9 percent in 2009 and 10.3 percent next year, along with a further decline in U.S. housing prices. The testing is to be completed by late April, according to the Treasury Department.

Hmmm stress testing or smoke screen? Dunno.

Bank of America’s expected pretax earnings of $49.3 billion in 2009 exceed the $38.3 billion in total losses likely to be recognized over the next few years, Fox-Pitt Kelton Cochran Caronia Waller analyst Andrew Marquardt wrote in a report last month. The bank has already recognized $31.7 billion in losses by marking down the value of loans and securities, he said.

“Based on our estimates, it would take less than a year to cover estimated remaining loss content,” Marquardt wrote in the report. He rates the bank at “outperform.”

BoA was not really one of the real 'gits' in all this. But they did by the zombie corp par excellence Countrywide which helped through it in the mire. Many suggest that BoA was counterparty to alot of Countrywide debt..... meaning it was better to take the company at pennies to the dollar, keep it going and get its loan book of off them. Im sure this was all posted last January.

U.S. Economy: Retail Sales Fall Less Than Forecast

Sales at U.S. retailers in February fell less than forecast and a gain in January exceeded the previous estimate, indicating the biggest part of the economy may be starting to stabilize.

The Commerce Department’s figures mean the decline in gross domestic product this quarter will probably be less than anticipated. Still, a sustained recovery in purchases is unlikely until later in the year because of mounting unemployment, falling home and stock values and shrinking wealth, analysts said. Household wealth fell by a record $5.1 trillion in the last three months of 2008, Federal Reserve figures showed today.

“People are responding to discounting” as companies seek to get rid of surplus inventory, Roger Kubarych, chief U.S. economist at UniCredit Global Research in New York, said in a Bloomberg Television interview. “In order to have a sustained increase in personal consumption, wealth has to go up.”

Retail purchases decreased by 0.1 percent following a 1.8 percent jump in January, the Commerce Department said today in Washington. Excluding cars, sales climbed 0.7 percent. The Labor Department said more than 600,000 Americans filed jobless-benefit claims for a sixth straight week, the worst streak since 1982.

Hmmmm I seriously doubt this is the bottom. Not even close but it may be a sign of a slowing of the descent, especialy ifthe bailout money starts moving into the economy. The past few months have scared the bejesus out of everyone who was not expecting this. I reckon a couple of weeks of breath catching then we should see the pessimism seep in and the bad results keep rolling in as the job losses are felt in purchasing power.

Paul Krugman very much has the ear of the administration and him and Roubini seem to be on the same page atm. I am thinking that after this much ballyhood stress testing of the banks using gloomy models there will be a couple of full nationalisations to kill the threat of the lurching zombies that haunted Japan in the 90s. I reckon that some fancy book keeping at Citi is how they got a 'profit' (whats tier three capital under Basel I???), to try to keep it in private hands.

Who knows anyway. Certainly not me.

 

[frogwoman]

Stock markets are up today ...

 

[elbows]

Well as poor sentiment is a big part of the problem, they might be making a concerted effort to deliver positive bank news this week, partly in response to the hammering the markets took in recent weeks, they might be trying to give the bounce a little helping hand.

 

[goebfwai]

The imbalances that could sink the G20
Paul Mason

http://www.bbc.co.uk/blogs/newsnight/paulmason/2009/03/the_imbalances_that_could_sink.html

 

[sleaterkinney]

There's a great line in the ft.

Another ideological god has failed. The assumptions that ruled policy and politics over three decades suddenly look as outdated as revolutionary socialism.

http://www.ft.com/cms/s/0/c6c5bd36-0c0c-11de-b87d-0000779fd2ac,dwp_uuid=ae1104cc-f82e-11dd-aae8-000077b07658.html

 

[Barking_Mad]

Another US stimulus proposal, already?

David Obey, the chairman of the appropriations committee, said he has instructed his staff to start drafting another stimulus proposal, though he emphasised no deadlines or timelines had been set.

http://www.telegraph.co.uk/finance/...ts-draw-up-plan-for-second-stimulus-bill.html

 

[goebfwai]

Radio Netherlands: 'The State We're In'

How we treat each other in hard times

- Soup kitchen in Iceland
- Better focus on life
- When money means nothing (interview with Dmitry Orlov)

http://www.tswi.org/

 

[Wolveryeti]

Chinese getting pissy about their treasury bill investments losing value. Guys - if you had let the reminbi appreciate, we probably wouldn't be in half the mess we're in.

 

[yield]

Chinese getting pissy about their treasury bill investments losing value. Guys - if you had let the reminbi appreciate, we probably wouldn't be in half the mess we're in.

You'd probably be a bit "pissy" too if you'd lent them $1trillion, which is $1,000 billion or $1,000,000 million.

China 'worried' about safety of US assets
The Guardian, Saturday 14 March 2009

"We have lent a huge amount of money to the US. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried." In rare comments on another country's financial health, he added: "I'd like to take this opportunity here to implore the United States ... to honour its words, stay a credible nation and ensure the safety of Chinese assets."

 

[Wolveryeti]

True, but it's hard to sympathise with the govt officials at least when the mass buying of US T-bills looks like it was part of a deliberate strategy to keep the Reminbi at artificially low levels. Floating exchange rates are an important means of promoting equilibrium.

 

[david dissadent]

True, but it's hard to sympathise with the govt officials at least when the mass buying of US T-bills looks like it was part of a deliberate strategy to keep the Reminbi at artificially low levels. Floating exchange rates are an important means of promoting equilibrium.

It also provided the credit to help keep America buying.

 

[Poi E]

d d: you are very well-informed. Is this just interest or profession?

 

[Barking_Mad]

IMF poised to print billions of dollars in 'global quantitative easing'

The International Monetary Fund is poised to embark on what analysts have described as "global quantitative easing" by printing billions of dollars worth of a global "super-currency" in an unprecedented new effort to address the economic crisis.

 

[Barking_Mad]

Ukraine and Lativia warn of financial disaster in the West if they are not helped

Government officials from the two countries, which are at risk of bankruptcy as a result of the global financial crisis, told the Daily Telegraph that the European Union's biggest powers were in danger of repeating the worst mistakes of the 1930s depression by retreating into isolationism and protectionism.

Grigory Nemyria, Ukraine's deputy prime minister, said that the EU had to overcome bitter internal differences over how to deal with the economic crisis in eastern Europe when world leaders met next month at the G20 summit in England.

 

[david dissadent]

Meanwhile, AIG revealed last night that since receiving a government bailout in September, it has been obliged to pay more than $90bn to a list of clients and counterparties dominated by European banks. The institutions were on the other side of credit default swaps and other instruments provided by AIG to hedge against liabilities which exploded once the credit crunch set in.

Goldman Sachs was the top *beneficiary, receiving $12.9bn. But among the other top names are Société Générale and *Deutsche Bank, both of which got more than $11bn. Barclays has received $8.5bn, HSBC has had $3.5bn and Royal Bank of Scotland has been paid $700m.

The spectre of US taxpayers' money flowing to European banks is unlikely to play well with the American public.

http://www.guardian.co.uk/business/2009/mar/16/fury-at-aig-staff-payouts

 

[TomPaine]

The spectre of US taxpayers' money flowing to European banks is unlikely to play well with the American public.

Yes I heard this on the radio this morning. People where not happy that there Tax money was being sent abroad. Can't say I blame them, however had it been EU countries bailing out banks sending money this way, then I am sure people would be saying "Well they owe it so have to pay up".

 

[david dissadent]

Commentary: U.S. exports falling at 49% pace as customers fade away

WASHINGTON (MarketWatch) -- For a while, some analysts held out hope that the rest of the world would be spared the devastation of the collapse of the great American credit bubble. The global economy had de-coupled, they said. America's problems were her own.
No one is saying that any more.
In fact, the latest evidence shows that global trade flows are plunging at an alarming rate.
The Commerce Department reported that the volume of U.S. imports from abroad fell 4.6% in January while exports declined 8.6%, the most since the monthly trade figures were first collected in 1992. See full story.
Over the past five months since the credit crunch intensified, real exports have plunged at a 49% annual rate, while real imports have fallen at a 30% pace.
The pace of the decline is unprecedented in modern times, economists say. "We doubt even during the Great Depression that trade collapsed with such ferocity," said David Greenlaw, an economist for Morgan Stanley.

d d: you are very well-informed. Is this just interest or profession?

I work in software in an unrelated industry. Just interest.....

 

[elbows]

Yes I heard this on the radio this morning. People where not happy that there Tax money was being sent abroad. Can't say I blame them, however had it been EU countries bailing out banks sending money this way, then I am sure people would be saying "Well they owe it so have to pay up".

The issue of AIG paying large bonuses to people in the unit which caused their problems seems to be grabbing the headlines, and statements from Obama, more than the counterparty list of other banks at the moment.

 

[david dissadent]

These are the numbers that illustrate the trend of the shift in debt from comercial and banks to the state.

The "Flow of Funds" illuminates why the collapse of the greatest credit bubble in history has not yet translated into one of the greater economic collapses. Despite financial panic and the freezing up of credit markets, total non-financial credit expanded at a 6.3% annualized rate during the fourth quarter. While down from the third-quarter's 8.1% pace, I would argue that 6% plus credit expansion was about the minimum required to forestall systemic implosion. Importantly, this feat was achieved by the federal government expanding borrowings at a 37% annualized rate.

I am guessing that the drop in 1.6% of household debt would be a combination of people paying down mortgages that were not being replaced by new issued mortgages and debt being written off through bankruptcy.

Sure enough, household mortgage debt contracted at a 1.6% rate during the quarter, with household (non-mortgage) credit sinking at a 3.2% pace. Corporate debt growth, having expanded at a double-digit rate during the first half of 2007, slowed markedly to 1.2%. Yet, despite collapsing markets for private-sector credit, total (economy-wide) compensation for the 4th quarter was actually up 1.9% y-o-y to a record (annualized) $8.096 trillion. For the year, national income was up 1.5% to a record $12.453 trillion, with total compensation up 3.1% to $8.058 trillion.

"Asset backed securities" include the infamous CDO's.

Remarkably, domestic financial sector debt growth accelerated from Q3's 6.8% pace to a 7.2% rate of expansion. On a seasonally-adjusted and annualized rate (SAAR) basis, total financial sector borrowings jumped to $1.222 trillion during the quarter. This was in the face of the asset-backed securities (ABS) market contracting SAAR $616 billion. This critical contraction in private sector credit was, however, largely offset by combined growth in government-sponsored entities' (GSE) debt and mortgage-backed securities (MBS) growth of SAAR $569 billion. Bank commercial loans expanded SAAR $858 billion, while open market paper increased SAAR $341 billion.

Combined federal and quasi-federal securities outstanding ballooned an incredible $1.955 trillion in just one year. For comparison, Treasury and the agencies combined to increase debt securities $1.146 trillion during 2007, $514 billion in 2006 and $390 billion in 2005. This ramp up of government credit growth is outdoing even the historic surge in mortgage credit during the mortgage finance bubble years.

Bugger me and the stimulus package is still to be accounted for.
.

At the Federal Reserve, total assets expanded an unmatched $729 billion during the quarter to $2.270 trillion, with one-year growth of 139%. Washington should feel quite fortunate that the markets continue to accommodate such alarming debt expansion at such meager little interest rates. There is no mystery why the Chinese and our other creditors are increasingly disturbed by our government's borrowing habits.

I am not 100% sure what total household assets are.... I am guessing the total value of your house and contents, reflecting the falling house market????

During the fourth quarter, total household assets dropped a record $5.419 trillion, or 31% annualized, to $65.719 trillion. Wow! Financial asset values sank a record $4.537 trillion (to $40.814 trillion), and real estate dropped a record $871 billion (to $20.512 trillion). Little wonder auto purchases and retail spending went into a tailspin, as household net worth shrank a record $5.110 trillion during the quarter (to $51.477 trillion).

I am not a flat out panicked as I was this time last year, this guy seems to be in a similar place.

I suppose I'll for now reside in the camp that believes the system is perhaps not as acutely unstable today as many fear. The unfolding government finance bubble is - until it isn't - a major stabilizing force. Government finance by its nature will not exert sufficient stimulus to rejuvenate deflating asset markets, but it is nonetheless playing a major role in underpinning wages and incomes.

Up shit creek but almost still clinging on to a paddle.......



And this hints at the possible.......

But such extraordinary stabilization does not come without a heavy price. I am firmly in the camp that believes that Washington is now trapped in a massive inflation of government obligations - the latest round of historic credit inflation captured clearly throughout the Q4 2008 "Flow of Funds" data. The worst-case scenario unfolds when our creditors and the marketplace turn against these government obligations.

KABOOM! scenario......

Link

 

[goebfwai]

I see 'Operation Restore Confidence' is now underway with Bernanke predicting the probable ending of the recession later this year. Although it was good to see a realistic discussion of what that mean on Newsnight tonight. There were three experts on, I think one mentioned he thought a v shaped recession was likely, the other a u shaped one and another an l shaped stagflation.

 

[david dissadent]

Although it was good to see a realistic discussion of what that mean on Newsnight tonight. There were three experts on, I think one mentioned he thought a v shaped recession was likely, the other a u shaped one and another an l shaped stagflation.

Any names for who was predicting.

 

[goebfwai]

I've found the video for the show below. There were other interviews and clips but in the studio itself there was a guy from Schroders called Andy Brough, William Daily, ex US Secretary of Commerce and Obama transition team advisor and author and investment banker Will Hopper.
http://www.bbc.co.uk/iplayer/episode/b00jc34y/Newsnight_16_03_2009/
(it was actually 2 predicting a u shaped recession - and both dead against a v shaped recovery [presumably these have high inflation risks?) - and 1 predicting an L shaped stagflation)

I suppose with the all the economic numbers falling so far and so fast, we can only cross fingers and hope 'the only way is up'...?

 

[Dr Jon]

AIG Won't Release Names Of Executives, Citing Death Threats

"All the executives and their family should be executed with piano wire around their necks. My greatest hope: If the government can't do this properly, we the people will take it in our own hands and see that justice is done. I'm looking for all the CEO's names, their kids, where they live, etc."

Let's hope "the people" televise this as a lesson to other money juggling parasites...

 

[slaar]

DD - If the Treasury bubble bursts then we really are all f*cked.