Daily Digest

Daily Digest - August 24

Monday, August 24, 2009, 9:51 AM
  • "The Countdown to the Implosion of the Dollar" (H/T PineCarr)
  • "PIMCO Says Dollar to Weaken as Reserve Status Erodes (Update 4)" (H/T PineCarr)
  • "Monetization of USTreasurys in Isolation" by Jim Willie (H/T PineCarr)
  • Elizabeth Warren - Listen Carefully...(Possible Repost, Video)
  • Cumulative estimated losses to the Deposit Insurance Fund (DIF) and the quarterly assets of the DIF
  • Failed Banks and the Deposit Insurance Fund
  • Palast Investigates (H/T Investorzzo, Video)
  • Day Late: Sunday Funnies (Humor)

Economy

"The Countdown to the Implosion of the Dollar" (H/T PineCarr)

Here's a warm-fuzzy from that article (although he does not cite where he gets this info from): "It is my understanding that the BRIC countries, not China alone, have given the US until early November to deliver. As a result of the above I see 81 days left for the US dollar."

"PIMCO Says Dollar to Weaken as Reserve Status Erodes (Update4)" (H/T PineCarr)

Here is a clip: "Sovereign Funds Bill Gross, who runs the $169 billion Pimco Total Return Fund, is also warning the U.S. currency will fall. Holders of dollars should diversify before central banks and sovereign wealth funds do the same because of concern government budget deficits will deepen, Gross said in June. Gross’ fund has returned 12 percent in the past year, outperforming 96 percent of its peers, according to data compiled by Bloomberg

"Monetization of USTreasurys in Isolation" by Jim Willie (H/T PineCarr)

2

Elizabeth Warren - Listen Carefully...(Possible Repost, Video)

Seemingly the only voice of sanity, Elizabeth pretty much tells it like it is but in a polite and politically acceptable way. I would be much more blunt.

Note how she admits that the toxic waste is still on the balance sheets, something Meredith Whitney is no longer talking about. Warren also nails the mark-to-fantasy illusion.

Cumulative estimated losses to the Deposit Insurance Fund (DIF) and the quarterly assets of the DIF

Failed Banks and the Deposit Insurance Fund

The graph shows the cumulative estimated losses to the FDIC Deposit Insurance Fund (DIF) and the quarterly assets of the DIF (as reported by the FDIC). Note that the FDIC takes reserves against future losses in the DIF, and collects fees and special assessments - so you can't just subtract estimated losses from assets to determine the assets remaining in the DIF.

Palast Investigates (H/T Investorzzo, Video)

Day Late: Sunday Funnies (Humor)

20 Comments

DavidC's picture
DavidC
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Re: Daily Digest - August 24

I just read this after seeing a link in ZeroHedge.

http://krugman.blogs.nytimes.com/2009/08/23/how-big-is-9-trillion/?apage=2#comments

How can someone as supposedly clever as Krugman be so naive? If we do move/are moving into a 'new normal' then his suppositions are just that - suppositions.

DavidC

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JAG
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A Truly Fantastic Presentation

HI Everyone,

I just wanted to share a fantastic presentation given by Australian economist Steve Keen. Unfortunately, I don't know how to embed this particular type of video, so you will have to go to Mish's site to watch it.

Global Debt Bubbles, Causes and Solutions

Its the best 20 minutes that I have spent in a long time....Jeff

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Re: Daily Digest - August 24

No "Cure" for Mortgage Delinquencies

http://www.cnbc.com/id/32541066

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Re: Daily Digest - August 24

Davos, quickly I've given more thought to your question of what camp I'm in. I'm in the inflation/hyperinflation camp. What camp I don't really care. I'm really resisting any herd mentality quests. The here and now is the field I'm playing in, investments are up, pantry is full, gold glimmers in the safe,  Canadian dollars (I live on the border with Canada) are neatly stacked, and most importantly I have the love of my family. All being watched over by the family pet (125 pound Rottweiler)...What camp would this be by the way?

Jeff, the video was indeed worth the time. Thank you

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Re: Daily Digest - August 24

Hello Robert: Sounds like you have a good plan.

It was a badly worded title. I should have called the thread Keynesian inflation or Austrian inflation.

Take care

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wawawa
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The Count Down

On the first article it says "It is my understanding that the BRIC countries, not China alone, have given the US until early November to deliver."

My question is "to deliver" what ?

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MikeJE
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It's OK we can come out now...? Times comment.

No cause for celebrations across Europe just yet


With economic figures around the world now indicating that the Great Recession is more or less over, the big question is what sort of recovery to expect. My hunch is that this economic cycle will follow the normal historic pattern.

This means that the recovery will be stronger than generally expected in America and possibly in Britain, while in continental Europe and possibly Japan the depth of the recession will produce longer-term structural problems that limit growth for several years ahead.

The prospects for a relatively strong recovery are suggested by quite a few forward-looking statistics: the biggest six-month rally since the early 1930s in global equities, and especially in cyclical shares; the rebound in OECD leading indicators; the sharp improvement in the British housing market (and more recently in US housing, too); and last week’s announcement by the New York-based Economic Cycle Research Institute (ECRI) that its future economic growth indicator, which has had an excellent record in tracking previous recoveries and recessions, has just hit a 26-year high.

As Lakshman Achuthan, the ECRI’s managing director, told Reuters on Friday: “It is high time to break from the herd of pessimistic analysts who will continue to bemoan economic weakness long after the Great Recession is history.” He added that recovery in the coming quarters is likely to be stronger than in any American cycle since the early 1980s, when GDP growth accelerated for several quarters to more than 5 per cent.

That is the good news, if you want to believe it. But what about all the financial chaos, the consumer deleveraging and the global imbalances that have made this recession so different from any in the past?

Unprecedented events are, by definition, impossible to analyse on the basis of past historical relationships, which provide the only solid evidence that economists and financiers have to go on. Given the near-death experience suffered by the world economy last autumn, when the global banking system almost collapsed, scepticism about a neatly symmetrical V-shaped economic cycle is understandable and probably justified.

What is much harder to understand is the growing confidence about economic recovery in Europe, in contrast to the continuing widespread pessimism about the prospects for Britain and the United States.

Conventional wisdom holds, of course, that America and Britain, because of their dependence on finance, have been hit much worse by this recession and now face years of debt repayment, while Europe has been less affected by the financial upheavals and should find it easier to return to sustained growth. But there are several reasons why this conventional wisdom appears to be wrong.

First, this recession has, contrary to general expectations, been only slightly worse than previous US downturns, while in continental Europe and Japan it has been a genuinely unprecedented disaster. Hence history may be a better guide to the shape of the recovery in America than in Europe and Japan. Britain’s experience may lie somewhere between.

While there has been a certain amount of schadenfreude in Europe about the fact that Germany and France grew marginally in the second quarter while the US and British economies continued to decline, the fact is that the collapse in Europe last October was so severe that output simply could not go on falling much longer without Germany and other leading European economies disappearing off the map of the world.

German GDP fell at an annualised rate of 13.4 per cent in the first quarter, after a decline of 9.4 per cent in the fourth quarter of 2008. This compared with a maximum annualised fall of 6.4 per cent in the US. Germany’s recession has not just been much steeper but also much deeper than America’s, with a peak-to-trough decline of 6.4 per cent, compared with 3.9 per cent in the US. And while the US had experienced recessions of comparable severity in previous cycles — for example, a 3.6 per cent peak-to-trough decline in 1958 and 2.7 per cent in 1982 — postwar Germany has never suffered anything remotely similar to this recession.

In the case of Britain, the slump of 5.7 per cent in GDP during this recession has been slightly smaller than the 6.1 per cent peak-to-trough decline in 1980-81.

Second, the unprecedented severity of this recession, especially in Germany, may have caused more permanent damage to the industrial structure not only in Germany but across Europe, than it has in the US and Britain.

Industrial production in Germany has now fallen back to the same level as in January 1991. In America, contrary to the widespread belief in catastrophic de-industrialisation, industrial production is still 41 per cent higher than it was 18 years ago, even after the post-Lehman slump.

The contrast between German and US industrial production is particularly worrying for Europe in view of the structural shifts in the global economy that are almost certain to occur in the years ahead. One way or another, the US is bound to increase its share of world exports as American consumers tighten their belts and the US current account deficit narrows.

The same is likely to be true of Britain. As the Anglo-Saxon countries reduce their trade deficits, their share of global export markets is bound to increase. The question is which other regions of the world will lose net exports to allow this global rebalancing to occur.

This leads to the third reason for believing that Europe’s recovery will be weaker than America or Britain: the persistent strengthening of the euro against the dollar and pound. This malignant hardening of the euro looks increasingly like the mechanism that will ensure that European companies, rather than exporters in Japan or China, bear most of the losses as consumers deleverage while American and British exporters gain global market share.

Europe, fourthly, is actually more vulnerable to deleveraging than generally believed, since German and French companies tend to have more debt than US or British rivals. Meanwhile, government finances, especially in Southern Europe, are much worse than they are in Britain or the US. Germany is particularly dependent on overleveraged consumers in Southern and Eastern Europe.

The idea that German industry will recover on the back of Chinese demand is plain silly, since China and Hong Kong account for only 5 per cent of German exports, while the rest of the European Union accounts for 63 per cent.

Finally, the employment conditions in Britain and America are likely to stabilise quite quickly after the decline in industrial production is over, but in continental Europe unemployment is almost certain to go on rising for several years ahead. European employment has not been slashed in line with production.

As a result, job losses are likely to continue for years after the recession is over, with businesses gradually downsizing their workforce in response to lower production. This is what happened after the 1991-93 recession, when unemployment in Germany went on rising for five years after the recession was over. In the US and Britain, by contrast, unemployment has generally peaked within a few quarters of GDP starting to rise.

The long lags in Europe between production declines and cutbacks in employment result from political and social constraints on both firing and hiring, which tend to make recessions shallower but also much more persistent.

This can be seen in Germany, where the recession of 1991-93 was followed by another recession in 1995-6 and a further near-recession in 1998.

In short, worries about a “W-shaped” or “double-dip” recession should be focused on Germany and the eurozone, not on Britain and especially not on the US

 

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presentmoment
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Re: Daily Digest - August 24

JAG,

Thanks for sharing a presentation given by Prof. Steve Keen.  I appreciated its content.

presentmoment

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Re: Daily Digest - August 24

JAG,

Thanks for sharing a presentation given by Prof. Steve Keen.  I appreciated its content.

presentmoment

JAG's picture
JAG
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Update to Steve Keen's Lecture

I found Steve Keen's lecture videos (that I referenced previously) on youtube (h/t Nate).



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Re: It's OK we can come out now...? Times comment.

MikeJE

In America, contrary to the widespread belief in catastrophic de-industrialisation, industrial production is still 41 per cent higher than it was 18 years ago

 

I suppose depending on how one calculates value -- my guess is that the values considered do not take the drop in the value of the dollar, and probably not even the official suspect inflation factor ........... if you consider that the real value of today's production in today's dollars is worth somewhere around 30 to 40% of what it was 18 years ago in 1981 dollars then our industrial production is actually down something like 40 or 50%

Or am I missing something?

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JAG
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Money As Debt-Part 2

Not sure if this is a repost, but Money As Debt II is out. The first segment of 8 is displayed below:

Davos's picture
Davos
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Re: Daily Digest - August 24

Here Comes THE JUDGE!

Aug. 24 (Bloomberg) -- The Federal Reserve must make public reports about recipients of emergency loans from U.S. taxpayers under programs created to address the financial crisis, a federal judge ruled.

 

Stick THAT in your pipe and smoke it Bernanke!

 

What our CONgress refuses to do the judiciary comes through with! Transparency - one way or another.

 

Now if we can just get all this fraudulent accounting and violations of prompt corrective action in front of a Judge.....

 

PS: Ben, here's my gift of the day to you:

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Davos
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Re: Daily Digest - August 24

Jim Quinn's latest

The moment when the system stopped functioning was our “Minsky Moment”. Hyman Minsky was an American economist and professor of economics at Washington University. Dr. Minsky put forward theories linking financial market vulnerability, in the normal life cycle of an economy, with speculative investment bubbles produced by financial markets. Minsky declared that in good times, when corporate cash flow rises beyond what is needed to pay off debt, a speculative bubble develops, and soon thereafter debts exceed what borrowers can pay off from their incoming revenues, which in turn produces a financial emergency. As a result of such dangerous debt bubbles, banks tighten credit availability, even to companies with good credit, and the economy enters recession.

This movement of the financial system from stability to crisis is the “Minsky Moment". At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the asking prices previously quoted, leading to a swift and steep collapse in markets and a dramatic drop in market liquidity. What Dr. Minsky failed to address was that the Federal Reserve has been responsible for every financial crisis in the United States since 1913.

 

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JAG
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Money As Debt II: The New Crash Course?

I have to say I was extremely impressed by the Money As Debt II: Promises Unleashed presentation. In my opinion, its as good as Dr. Martenson's Crash Course. 

Though I was a fan of the original Money As Debt video, this one stands alone in its ability to focus on the problems inherit to our monetary system, and offers viable solutions. 

I'm inspired!

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Davos
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Re: Daily Digest - August 24

This is funny!

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Mike Pilat
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Re: Daily Digest - August 24

I don't know if anyone had seen this article: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/608246...

Now China is moving to ban or greatly restrict the export of rare earth metals. Since China mines 95% of the the world's production of these materials, this could be uh, disruptive to the high tech industries that require them. As built today, hybrid cars require rare earth metals.

Davos's picture
Davos
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Re: Daily Digest - August 24

Wow. This looks like it is going to be a good read, thank you Mike

ernie's picture
ernie
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Re: Daily Digest - August 24

Peter Schiff getting excited about the US $9trill debt budget for the next 10 years.

 

 

 

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joemanc
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Spin Machine in action

on cnbc.com - Economy in much worse shape than expected

Quote:

Obama himself may have drowned out the rising deficit news with the announcement Tuesday that he intends to nominate Ben Bernanke to a second term as chairman of the Federal Reserve.

The Bernanke news could neutralize any disturbance in the financial markets caused by the high deficit projections. 

Bingo!

http://www.cnbc.com/id/32551478

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