Blog

Daily Digest - Jan 30

Thursday, January 29, 2009, 9:23 PM
  • New Record, Fed, Activity Declined in Every State (Dec. 2008, Charts)  
  • Layoff Daily (Website, Hat Tip CM)
  • US-China currency war eclipses Davos, and threatens the world (Hat Tip PineCarr)
  • Russia, China Blame Woes on Capitalism 
  • Russian Ruble Trouble (Chart)
  • New Home Sale, Monthly, NSA (Chart) 
  • Why Your Bank Is Broke  
  • Bank Bailout Could Cost Up to $4 Trillion: Economists 
  • Initial and Continued Unemployment Claims (Chart)
  • 10-Year Treasury yield reaches key juncture (Chart in article) 
  • NYC Budget Axe To Carve Out $1 Billion 
  • Soros at Davos 2009 (Video)
  • Union leaders condemn delegates on crisis response

 

Economy

 

New Record, Fed, Activity Declined in Every State (Dec. 2008, Charts)

New Record, Fed, Activity Declined in Every State (Dec. 2008, Charts) 

Russian Ruble Trouble (Chart)

Layoff Daily (Website, Hat Tip CM)

US-China currency war eclipses Davos, and threatens the world (Hat Tip PineCarr)

Russia, China Blame Woes on Capitalism  

The premiers of Russia and China slammed the U.S. economic system in speeches Wednesday, holding it responsible for the global economic crisis. 

Both focused on the role of the U.S. dollar, with China's Premier Wen Jiabao calling for better regulation of major reserve currencies and Russia's Prime Minister Vladimir Putin calling over-reliance on the dollar "dangerous."

Wen Jiabao and Vladimir Putin address the World Economic Forum in Davos.
Speaking on the opening day of the World Economic Forum in Davos, Switzerland, they both urged more international cooperation to escape the downturn. They also talked up the abilities of their own economies to ride out the recession. Mr. Wen said he was "confident" China would hit its 8% growth target for this year even though that was "a tall order." (See the full text.)

The Russian and Chinese leaders also called for cooperation with U.S. President Barack Obama, but it was a chilly reception for the new administration that reflected growing anger in economies that are now getting hit hard by a financial crisis that began with subprime mortgages sold in the U.S.

Mr. Putin was characteristically blunt. He called for the development of multiple, regional reserve currencies in addition to the dollar. "Excessive dependence on a single reserve currency is dangerous for the global economy," Mr. Putin said. (See the full text.)

New Home Sale, Monthly, NSA (Chart) 

Turning a corner in the labyrinthine corridors of the Davos nerve-centre, I ran smack into Chinese premier Wen Jiabao - followed by a regiment of retainers and senior offices in full regalia. 

They have not quite adapted to the "sport" dress code of capitalism in Alpine retreat. Jeroen van der Weer - a Davos stalwart - wears horrendous corduroy trousers (pink sometimes) with a 1950s-era Tyrolean woolly. I dread to think how they react to Swiss prices if they venture into the restaurants.

Mr Jiabao smiled at me benignly, but he is not in a good mood. Indeed, he is fuming over the remarks by US Treasury Secretary Tim Geithner that China was "manipulating" its currency to gain market share. Reports were circulating this afternoon in Davos that Mr Jiabao erupted into a tirade after lunch at the mere mention of Mr Geithner's name.

Mr Geithner - the first US Treasury chief who can actually speak Chinese, and Japanese, nota bene - is clearly operating under instructions from President Barack Obama. If his resolve fails, Hillary Clinton is there at Foggy Bottom (State Department) to renew the broadside against Beijing - at least judging by her Sinophobe reflexes in the campaign.

This has the makings of an almighty superpower bust-up. It is fast becoming the theme of Davos 2009. It may soon be the burning issue of our times. We will all learn how to pronounce Renminbi.

The Bush Administration -- in its day -- deflected all attempts by Congress to crack down on China's currency policy. Perhaps sagely, perhaps not.

There is no question that Beijing has pursued a mercantilist strategy of conquering US and European markets by holding down the yuan/renminbi. It has a monthly trade surplus of $40bn, the highest ever recorded by any country. Or put another way, China is exporting its surplus capacity to the rest of the world. It has become a global deflation machine.

Even so, Mr Geithner is playing with fire. Beijing has amassed reserves of $1.9 trillion. From what we know, most of this money is held in the form of US Treasuries and other bonds. Creditors exercise power. Don't be fooled by claims that China could not deploy this weapon without damaging its own interests. All kinds of things can and do happen when tempers flare, and they were flaring today. 

Why Your Bank Is Broke  

Even without doing the math, you probably get that the government's financial-rescue effort is failing. The signs are hard to miss. Your friend in finance got pink-slipped. A house sale down the street fell through because the buyer couldn't get a mortgage. A local bank is closing a nearby branch or maybe shutting down altogether. 

But do the math, and you can begin to understand how really botched this bailout has been. Since October, the government has deposited $165 billion into the accounts of the nation's eight largest banks. Yet those same financial firms are now worth $418 billion less than they were four months ago, and the Congressional Budget Office estimates that the government's preferred shares are worth at least $20 billion less. In Wall Street terms, that's throwing good money after bad. All told, the government's annualized rate of return on its investment in the nation's largest banks is -1,096%. That's well beyond Bernie Madoff territory; he topped out at a mere -100%. (See pictures of the demise of Bernie Madoff.) 

Bank Bailout Could Cost Up to $4 Trillion: Economists 

The cost of restoring confidence in U.S. financial firms may reach $4 trillion if President Barack Obama moves ahead with a "bad bank" that buys up souring assets. 

The figure far exceeds even the most pessimistic estimates of how great the loan losses might be because there is so much uncertainty about default rates, which means the government may need to take on a bigger chunk of bank debt to ease concerns.

Goldman Sachs economists said ideally the public sector would step in to remove the hardest-to-value assets, which would alleviate nagging worries about future losses and hopefully help get lending going again.

"Unfortunately, with an unprecedented meltdown in mortgage credit and a deep recession in the broader economy, there is a great deal of uncertainty about the value of almost every asset," they wrote in a note to clients.

Obama and his economic advisers are expected to lay out their policy plan as early as next week. One idea that seems to be gaining traction is setting up an entity to buy troubled assets and hold them until they mature or resell them.

The hope is that once banks get rid of those bad loans, they can attract private investors, get back to the business of lending, and help revive the economy. 

Initial and Continued Unemployment Claims (Chart)

Americans receiving jobless benefits hits record  

SHINGTON (AP) -- The number of people receiving unemployment benefits has reached an all-time record, the government said Thursday, as layoffs spread throughout the economy.
The Labor Department reported that the number of Americans continuing to claim unemployment insurance for the week ending Jan. 17 was a seasonally adjusted 4.78 million, the highest on records dating back to 1967.

A department analyst said that as a proportion of the work force, the tally of unemployment recipients is the highest since August 1983. 

The total released by the department doesn't include about 1.7 million people receiving benefits under an extended unemployment compensation program authorized by Congress last summer. That means the total number of recipients is actually closer to 6.5 million people.

Meanwhile, the tally of Americans filing new jobless benefit claims rose slightly to a seasonally adjusted 588,000 last week, from a downwardly revised figure of 585,000 the previous week.

That's close to the 26-year high of 589,000 reached in late December, though the labor force has grown by about half since then.

Companies have announced more than 125,000 layoffs in January, according to an Associated Press tally. 

Cargo Plummets 22.6% in December 

Geneva - The International Air Transport Association (IATA) released international scheduled traffic results for both December 2008 and the full-year. 

In the month of December global international cargo traffic plummeted by 22.6% compared to December 2007. The same comparison for international passenger traffic showed a 4.6% drop. The international load factor stood at 73.8%.

For the full-year 2008, international cargo traffic was down 4.0%, passenger traffic showed a modest increase of 1.6%, and the international load factor stood at 75.9%.

"The 22.6% free fall in global cargo is unprecedented and shocking. There is no clearer description of the slowdown in world trade. Even in September 2001, when much of the global fleet was grounded, the decline was only 13.9%," said Giovanni Bisignani, IATA's Director General and CEO." Air cargo carries 35% of the value of goods traded internationally. 

International Cargo Traffic (Chart)

10-YEAR TREASURY YIELD REACHES KEY JUNCTURE (Chart in article) 

Even with the Fed's reiteration that they were considering outright purchases of US Treasuries, the yield on the 10-Year has been climbing steadily higher from its lows in December. At 2.77%, the 10-Year is approaching yields that it traded at before the bottom dropped out in early December. How we trade in the next few days will go a long way in determining whether the current sell-off is simply profit taking after a massive rally, or the beginning of the end of the latest bubble in asset classes (stocks, real estate, commodities, etc...).

 

NYC Budget Axe To Carve Out $1 Billion 

After sharpening his red pencils and spending long nights squeezing the treasury for every penny, Mayor Michael Bloomberg is set to tell New Yorkers on Friday that the budget for the next year will be excruciatingly painful. 

Jobs will be axed, programs slashed and lots of things will cost more.

Wall Street and the spiraling out of control economy have dealt New York City a bad hand. The mayor has no trumps to play as he lays out a spending plan whose gap has grown nearly 400 percent in three months.

Shrinking tax revenues have turned the $1.3 billion November budget hole into a now-$4 billion chasm.

The only way to fix it, sources tell CBS 2 HD, is with:

* $1 billion in program cuts, affecting virtually every city agency.

* New taxes and fees, including more taxes on clothing, a fee for plastic shopping bags in grocery stores and higher fees for lots of other city services.

* The capital budget will be slashed.

* City employees will be asked to pay part of their healthcare costs.

* There will be a reduction of 23,000 jobs through layoffs and attrition. That's more than 7 percent of the city's employees. 

Soros at Davos 2009 (Video)

Union leaders condemn delegates on crisis response

 

The gloom surrounding this year's World Economic Forum descended into confrontation yesterday as international labour leaders launched a withering attack on the 1,400 business executives and 41 heads of government at Davos over what the labour leaders alleged was their failure to respond effectively to a deepening crisis of their own creation.

 

Guy Ryder, the general secretary of the International Trade Union Confederation (ITUC), said that the current financial turmoil had triggered a social timebomb that would lead to deepening civil unrest and soaring crime.

The comments from the confederation, which represents 168 million workers in 157 countries, are the most ferocious example yet of a backlash that has persuaded many who attend frequently to stay away from Davos this year. Yesterday Alistair Darling, the Chancellor, became the latest political figure to stay away from the meeting, after a similar move by David Miliband, the Foreign Secretary.

Mr Ryder, speaking as strikes involving hundreds of thousands of workers erupted across France and Germany, told The Times: "We are on the road to serious social instability, which could be extremely dangerous in some countries to democracy itself."

He said: "Davos does not make me at all confident. I don't see any of the leadership here that is needed to get us out of this crisis . . . There is very little contrition here."

The ITUC warned that around the world more than 50 million jobs could be lost this year and that more than 200 million people would be driven into absolute poverty. The confederation said that the financial crisis had arisen because of "rampant speculation and financial profiteering" and that new global financial architecture needed to be established to "support regulation and ensure coherence".

Sharan Burrow, the president of the Australian Council of Trade Unions, said that the world was now witnessing the human cost of "casino capitalism" as the impacts of rising unemployment and home repossessions and of plunges in savings and pension funds hit millions of families.

Ms Burrow said: "Why shouldn't working people be angry? Their money is being used to stabilise the financial system, but it is their wealth, their jobs and the welfare of their children that is being stripped away."

 

 

Endorsed Financial Adviser Endorsed Financial Adviser

Looking for a financial adviser who sees the world through a similar lens as we do? Free consultation available.

Learn More »
Read Our New Book "Prosper!"Read Our New Book

Prosper! is a "how to" guide for living well no matter what the future brings.

Learn More »

 

Related content

29 Comments

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Jan 30

 r2871781183.jpg?x=400&y=269&q=85&sig=cAT9V8a_MNrvTevY6_xdrA--

DavidLachman's picture
DavidLachman
Status: Silver Member (Offline)
Joined: Jul 4 2008
Posts: 153
Re: Daily Digest - Jan 30
Davos wrote:

He said: "Davos does not make me at all confident. I don't see any of the leadership here that is needed to get us out of this crisis . . . There is very little contrition here."

 

Well Davos, can you show this guy a little contrition?

Vanityfox451's picture
Vanityfox451
Status: Diamond Member (Offline)
Joined: Dec 28 2008
Posts: 1636
Re: Daily Digest - Jan 30

Hi Davos,

after watching the film of George Soros, I found this article on Wikipedia :-

http://en.wikipedia.org/wiki/George_soros

...What a fascinating man with a very interesting past!

Wonderful picture of snowy mist you put up the other day, is that the view from your home? I could show you a picture of my view - a ploughed field of unwalkable mud, but hey, its home!!

Take Care,

Paul

P.S. Just watching the Hungarian Forint (I live in Hungary) getting ploughed under by the Euro also :-

http://www.ecb.int/stats/exchange/eurofxref/html/eurofxref-graph-huf.en.html

...May the games begin...Gulp!!!

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Daily Digest - Jan 30

Re: Bank Bailout Could Cost Up to $4 Trillion: Economists

http://jessescrossroadscafe.blogspot.com/2009/01/goldman-sachs-says-bank...

"Can we get an estimate that assumes we nationalize Goldman Sachs,
Morgan Stanley, Citigroup, and J.P. Morgan, place them in receivership,
selectively default on their derivatives, sell all their assets, and
criminally prosecute their executive management from the year 2000
under the RICO statutes?" - Jesse's Cafe Americain

Now that's an idea I could support!

Vanityfox451's picture
Vanityfox451
Status: Diamond Member (Offline)
Joined: Dec 28 2008
Posts: 1636
Re: Daily Digest - Jan 30

Sam,

"...And Everybody Say I !!!!!!!!!"

Paul

ToucanSanctuary's picture
ToucanSanctuary
Status: Member (Offline)
Joined: Dec 23 2008
Posts: 7
Re: Time Article "Why your Bank is broke"

After reading the full text of this article, I really take exception with some of the "facts" that Time Magazine is spreading through it's mains stream media outlet. I've got a pretty good grasp on the general principles of how our monetary/banking system works. That is, new money is created out of thin air every time a new loan is given. Furthermore the principle is only created and not the corresponding interest payments. This gives way to the growth imperative of our economy, otherwise there won't be enough money out there to keep servicing the debt.

The article that Davos posted in today's Daily Digest:
http://www.time.com/time/business/article/0,8599,1874702-1,00.html

I think it's misleading because of this paragraph:

Playing with House Money

To understand why nationalization may be inevitable, you have to get a handle on the true source of the banks' problems. The banking business — at least the way George Bailey practiced it in It's a Wonderful Life — was all about deposits and loans. You take in deposits, on which you pay a relatively low interest rate, say 2%. Then you lend that money to other people at a higher interest rate, say 7%. Pocket the difference. Repeat. But starting in the early 1970s, banks began funding less of their lending with old-fashioned deposits. Bank deposits backed 90% of all loans four decades ago; today they back 60%. Where does the rest of the loan money come from? From the bank's past earnings and the money given to it by its investors. Using the house's money has generated higher profits — with significantly higher risks

This makes it appear that the bank is loaning out money that already exists. Since existing deposits can't completely back the loans now, they are loaning out money that comes from the banks prior earnings. After Reading "Web of Debt" by Ellen Brown, I'm fairly certain all money loaned by banks is created, fresh and new, for that loan. It wasn't already in the system. In fact, if new money wasn't created with every loan, then the existing loans wouldn't be serviceable in a very short time period.

Is there something I'm missing? Is there something else in this article that makes the paragraph I quoted true? Is Time Magazine printing gross misstatements of fact?

TS

ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 465
Re: Daily Digest - Jan 30

Hi ToucanSanctuary,

I would offer that Time is owned by the big bankers so they would obviously not want us to know the truth. If it is in the media it is likely untruth, half truth and nothing but the ...........(same old crap they have been feeding us for the last 100 years).

Sorry for  negativity but I passed my limit of B***S*** for the week.

Coop

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Jan 30

Hello David:

Yeah, he should have remorse for not going to Chris's site, our everyday forums could, if nothing else, show them the problem is insolvency... and all the credit crisis, bailouts, unemployment and everything else are just symptoms of being broke and not even knowing it.

Take care 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Time Article "Why your Bank is broke"

 Hello ToucanSanctuary:

I only posted this article for one line, it is: 

 

All told, the government's annualized rate of return on its investment in the nation's largest banks is -1,096%. That's well beyond Bernie Madoff territory; he topped out at a mere -100%. 

 

Basically, I thought the article had merit because it says Madoff was less of a loser than Paulson. If we took Madoff's ankle iron off him and put him in the Treasury we'd have saved 996%. Believe me, I look for the nuggets within the nuggets, I have yet to find the perfect article :)

 Take care 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Jan 30

Hello VanityFox451:

He had an amazing life, I read a few of his books, it seems to me that he is instinctual when it comes to danger and has suvivalistic genes. Of all the self made billionaires my bets are with him, right now my bets are on Soros. 

Yup, that is our place, someone asked how the snow/ice was....Take care 

Vanityfox451's picture
Vanityfox451
Status: Diamond Member (Offline)
Joined: Dec 28 2008
Posts: 1636
Re: Daily Digest - Jan 30

Davos,

Yep, that was me.

Did you also know that George Soros is Hungarian!! My partner tells me you pronounce his name 'Shorrosh' - you have to roll the rrr...

Anyway, back to the violence and political grindUndecided,

Keep Warm,

Paul

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Jan 30

Hello Paul:

Yes, quite a life, read how his Dad changed names, then how they moved and advised, I think the Swiss? And then he went to school in England for finance.

Kepp safe! Take care

Trad's picture
Trad
Status: Bronze Member (Offline)
Joined: Jan 1 2009
Posts: 25
Re: Daily Digest - Jan 30

Whoa! Glenn Beck explains the financial situation on fox news. Whew! Get your wheel barrows ready to haul cash to grocery store.

http://www.foxnews.com/video2/video08.html?maven_referralObject=3479955&maven_referralPlaylistId=&sRevUrl=http://www.foxnews.com/glennbeck/index.html

 

 

Trad's picture
Trad
Status: Bronze Member (Offline)
Joined: Jan 1 2009
Posts: 25
Re: Daily Digest - Jan 30

Cargo Plummets 22.6% in December 

I have been aware of this for quite some time now. I remember seeing an aerial photo of Hong Kong Harbor back in Sept. I think, and it looked like you could walk across the harbor on top of empty cargo ships.

Then I started reading stories about cargo ship workers being sent home and asked to check back next year.

 

 

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: Daily Digest - Jan 30

Thanks for the video, Trad. It seems Glenn Beck is starting to get on board with the "hockey sticks!" This is most certainly worth pursuing. Perhaps it could eventually aim in the direction of having Beck interview CM? I want it to become impossible for the political and banking establishment to be able to ignore these issues.

Trad's picture
Trad
Status: Bronze Member (Offline)
Joined: Jan 1 2009
Posts: 25
Re: Daily Digest - Jan 30

Yup! As soon as I heard him quote the "Hockey Stick" I figured he had seen CM's videos recently. Would love to see him interview Chris on live TV.

 

nickbert's picture
nickbert
Status: Diamond Member (Offline)
Joined: Jan 14 2009
Posts: 1207
Re: US-China currency war

What wonderful signal of things to come from our new Treasury Secretary Geithner... he starts off his first week on the job by 'poking the bear', i.e. picking a fight with China by complaining about currency manipulation.  Even if a statement is true, there is such a thing as tact and knowing when to keep your mouth shut for the sake of your own self-interest.  The US Treasury complaining to China about currency manipulation is the equivalent of going to your loan shark who lent you 100 grand and throwing a rock through his window, making out with his wife, and calling him an a**hole. 

Oh yes, I expect MANY great things from him... ;^)

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: US-China currency war

nickbert,

I couldn't believe Geitner's words either.  I also wonder what the heck he thinks the Fed does every day other than manipulate our currency?

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Seriously Alarmed

Latest exchange rate $1.427 = GBP 1.00

http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2009/01/20/seriously_alarmed

SERIOUSLY ALARMED

Posted By: Ambrose Evans-Pritchard at Jan 20, 2009

The slide in sterling has turned "disorderly".

We can argue over
whether or not the first phase of devaluation acted as a shock-absorber
for a badly mismanaged economy, providing a cushion against debt
deflation and the housing crash. But the latest dive has a very malign
feel.

For the first time since
this crisis began eighteen months ago, I am seriously worried that
British government is losing control.

The currency has fallen five cents today to $1.39 against the dollar.
It is now perched precariously on a two-decade support line -- the
levels tested in 2001 and 1992. If it breaks that line, traders may
send it crashing down towards dollar parity.

The danger is blindingly
obvious. The $4.4 trillion of foreign liabilities accumulated by UK
banks are twice the size of the British economy. UK foreign reserves
are virtually nothing at $60.6bn. (on this, more later in a piece I'm
writing today)

If the Government is
forced to nationalise RBS and perhaps Barclays with their vast exposure
in dollars, euros, and yen, it risks being submerged. It is one thing
for a sovereign state to let its national debt jump in a crisis -- or a
war -- perhaps even to 100pc of GDP. It is another to take on foreign
debts on such a scale with no reserves. Yes, the banks have foreign
assets as well to match the debts. But how much are these assets really
worth?

This is the moment when
the "rubber hits the road" -- to borrow from American argot -- the
moment when the reckless debt experiment of our economic and political
leaders comes back to haunt.

We cannot even do what
Iceland did to save its skin. Reykjavik refused to honour the foreign
debts of its buccaneering banks. It let them default, parking the
losses in Resolution Committees. Small islands can do that. Iceland has
fish instead, and lots of metals.

Britain cannot follow
suit. The debts are too big. If London takes such disastrous action it
will set off global panic and lead to an asset death spiral, drawing
the entire world into deep depression.

What have our leaders
wrought? The reckless conduct of City, the fiscal incontinence of
Gordon Brown (3pc deficit at the top of the cycle), and the pitiful
regulation of the UK housing boom have all combined to bring the
country to the brink of disaster.

England has not defaulted since the Middle Ages. There is a real risk it may do so now.

And no -- just so there is no misuderstanding
-- it would not have been any better if Britain had joined the euro ten
years ago. The bubble would have been just as bad, or worse, as Ireland
and Spain can attest. We have our disaster. They have their disaster.
When the dust has settled in five years we can make a proper judgement
on the sterling-EMU issue. Not now.

The Baby Boomers have
had their moment in power. The most spoilt generation in history has
handled affairs with its characteristic hedonism. The results are
coming in.

The blithering idiots.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Gas chief warns of energy crunch

Gas chief warns of energy crunch

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - Jan 30

Ah yes, you have to hand it to my country of origin.....  they know how to party!

Vive la Revolution!

Mike 

deadman's picture
deadman
Status: Member (Offline)
Joined: Mar 12 2008
Posts: 14
Re: Daily Digest - Jan 30

Is anyone considering investing in the yuan or the ruble?

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: Daily Digest - Jan 30

If I knew how, I'd buy some Yuan.

As for Rubles, only if the store runs out of TP.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
Re: Time Article "Why your Bank is broke"

Good catch TS.

Someone needs to ask TIME how it's possible for total credit market debt to equal $52 trillion while total bank deposits equal something less than $10 trillion, bank reserves stand at less than a trillion, and M3 money stock is in the vicinity of $14 trillion.

Seems to me that there's a lot more debt/credit than deposits or reserves.

Admittedly, some of that debt is not being held within the banking system, but all  money originates from banks.

Federal Reserve Notes, that is "money", are the liability of the Federal Reserve and, by extension, the entire banking system. 

Thus we can back up, squint at the entire pile of credit as compared to reserves and deposits (and money) and come to the conclusion that TIME's claims are inconsistent with both the data and a basic understanding of how fractional reserve banking operates.

But, of course, this is not a surprise.  For some reason, the basic mechanics off banking, which could be taught in elementary school, are not taught at any level in our educational system.  

cat233's picture
cat233
Status: Platinum Member (Offline)
Joined: Aug 20 2008
Posts: 575
Re: Time Article "Why your Bank is broke"

... And thank you Chris for teaching us!  I know you ARE the CC, but I do hope you someday will have a book as well.

Cat

Mike Pilat's picture
Mike Pilat
Status: Platinum Member (Offline)
Joined: Sep 8 2008
Posts: 929
Re: Daily Digest - Jan 30

I second that, Chris. Even if your book was not focused on the mechanics of the monetary system and resource scarcity, I think that many people would like to hear your personal story of education, VP, then Crash Courser. Of course, Erik says you must never sleep, so scheduling time for that would be understandably challenging...

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - Jan 30

Do you own land outright?  A water supply?

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: Daily Digest - Jan 30

Patrick,

 

I'm not recommending it but Wisdom Tree has an ETF for yuan.

 

SG

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: Daily Digest - Jan 30

Thanks!  Didn't know about that.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments