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Loss of petrodollar recycling to add pressure to the dollar

Friday, November 28, 2008, 3:48 PM

What is "petrodollar recycling"?

It refers to the use of dollars for the purchase of oil and the subsequent reinvesting of those same dollars by oil exporting nations back into the US financial markets.

Many hundreds of billions of US dollars have flowed from its shores only to come back in the form of oil and purchases of Treasury and  Agency debt.

That mechanism is certainly wounded now...

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Daily Digest - Nov 28

Friday, November 28, 2008, 9:15 AM

GM asks for flight anonymity, a deadly shopping stampede, Robert Shiller interview, US credit line at risk?, and an interview with Jeremy Grantham.

Blog

Happy Thanksgiving

Thursday, November 27, 2008, 9:57 AM

Hello. 

I just wanted to say thank you to everyone for contributing to this site, in ways both large and small.

For US readers, I wish you a happy and safe holiday.

Things will be a little quiet around here today.  I will not have a major blog post today, just this little one.

Today is about remembering all the things we have to be thankful for, and my list is long.

  • I have my health
  • I have a loving family
  • I have a strong community
  • And I am blessed with the intelligent community forming around this site and the messages of the Crash Course.

Be well and be thankful.

All the best,
Chris Martenson

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Daily Digest - Nov 27 Happy Thanksgiving

Thursday, November 27, 2008, 9:09 AM

Food insecurity in the land of plenty, reigniting that crazy shopping flame, how much will one share buy, and the ECRI falls to lowest level ever.

Blog

The Daily Digest - Nov 26

Wednesday, November 26, 2008, 10:10 PM

Downturn in China puts breaks on industry, mortgage rates plummet, a Bloomberg interactive on where that $7.4 trillion went, commercial real estate - the next shoe to drop, Treasury conference call reveals insider bias, and buy one get one free (trucks).

Blog

Stocks gain on horrible economic news

Wednesday, November 26, 2008, 5:17 PM

US stocks gain, economic data falls.

Over the past four days, US stocks gained the most (percentage wise) since 1933. On the surface this is significant, because 1933 marked a significant turning point for stocks even though the economic crisis had a ways to go yet.

But is that a valid linkage to make?

Now, the stock market is sometimes called “the great discounting machine” for its supposed ability to sniff out great changes in trend well before those changes are obvious elsewhere. In times past, stocks have made a habit of rising months in advance of job gains, economic activity, profit gains, and other such economic data.

However, I will note that the stock market has gotten a bit off the rails lately and it completely missed the warning signs of an impending credit crunch that were given off more than a year ago. The stock market carried on and made new highs even as the financial underpinnings of our entire system were collapsing into the bay. So in some circles (mine included), “the great discounting machine” has lost some of its utility and impartiality along the way.

Today the economic news was horrible.

Blog

CitiBank - No Questions Asked

Tuesday, November 25, 2008, 2:24 PM

When the Big Three automakers were finally settled in their chairs before the Congressional committee investigating whether they deserved a handout of $50 billion, they were asked a defining question; “How many of you flew commercial airlines to get here?

No hands went up and they were sunk. Somehow the hubris of trotting about on private jets while asking for public money was simply too much for a suddenly stingy Congress.

No such questions were asked of the Citi bankers, in fact no hearings were even held, and they were given access to over $306 billion on the most favorable terms you could possibly imagine. This illustrates the power that the banking industry holds over our political process and it is a ruinous power. Why should Citi receive not only special treatment, but exorbitantly preferential treatment at taxpayer expense? I don’t know, but I’d like some answers.

First, check out the terms of the deal:

Blog

Daily Digest - Nov 25

Tuesday, November 25, 2008, 12:15 PM

Economy

Turkeys Can't Fly 

'In the space of two months, Ben Bernanke has doubled the balance sheet of the Federal Reserve. He is accepting bubble gum wrappers, old shoes, and Dick Cheney's defaced copy of the Constitution as collateral for loans from the Fed. When Paulson and Bernanke were selling their rescue plan in front of Congress in September they stressed transparency, oversight and openness. The total lack of transparency and oversight were the reason that our financial system came to a grinding halt.' 

Sherman's Comments: Of all my reads yesterday, this one was clearly the best. I hope you enjoy it as much as I did.Quinn really nails the "Negative Wealth Affect," I wasn't one hundred percent on-board with the big 3 numbers but my guess is that his university isn't weathering a storm like Harvard's as the result of his insight. Just a guess.

Blog

The Fed Is Out Of Ammunition

Monday, November 24, 2008, 5:09 PM

This title is not mine, but that of an article that appeared in The Wall Street Journal today (Nov 24), which closely mirrors my own assessment of where we are and what is likely coming next. In short, deflation is so unacceptable to a debt-based money system that it will be avoided at all costs. And I do mean all costs.

This was written by an equity strategist in Hong Kong; be sure to catch his startling conclusion at the end. Startling because of where it was printed – in the main circular of the high church of fiat money, a.k.a. the WSJ.

The whole thing is worth a read, and a ponder, but let’s review some of the more relevant bits.

Blog

Daily Digest - Nov 24

Monday, November 24, 2008, 11:29 AM

Economy

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Fed Pledges Top $7,400,000,000,000.00 (trillion) to Ease "Frozen Credit" 

Nov. 24 (Bloomberg) -- The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago. 

The unprecedented pledge of funds includes $2.8 trillion already tapped...

..When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

"Whether it's lending or spending, it's tax dollars that are going out the window and we end up holding collateral we don't know anything about," said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. "The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones." 

Sherman's Comment: $24,000.00 per every man woman and child?! That might have stimulated the economy had it have been disbursed differently. In any event monetizing debt of this size will have far reaching ramifications.