Daily Digest

Daily Digest - October 15

Thursday, October 15, 2009, 9:51 AM
  • When Money Is Worthless
  • Trending Towards Hyperinflation
  • China Bans Foreign Investment, Tech Partnerships In Its Online Gaming
  • TIPS: Fed mortgages future of great-grandkids, Dorothy and now, Toto too
  • Dollar Loses Reserve status to Euro and Yen
  • Ponzi Finance 
  • Dollar loses reserve status to yen & euro 
  • The New Carry Trade 
  • Unfortunately, It's Screw the Shareholders!
  • Bill Moyers Interview Kaptur, Johnson (Video)
  • The Quiet Coup 
  • Bill Moyers/William K Black (Video) 
  • Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says
  • JPMorgan Scores Big In Latest Quarter 
  • The Ongoing Cover Up of the Truth Behind the Financial Crisis May Lead to Another Crash
  • Quinoa & Amaranth: The Incan Answer

Economy

When Money Is Worthless (Claire H.)

The Financial Times on October 6 noted a disturbing new trend - hedge fund and other investors are increasingly seeking to invest in physical commodities themselves, rather than in futures. Given the excess of global liquidity, this is not entirely surprising. It does, however, raise an ominous possibility of a supply shortage in one or more commodities, caused by investor demand that exceeds available mine output and inventory. That could potentially produce a collapse in economic activity similar to that from the 1837-41 and 1929-33 liquidity busts, but with the opposite cause.

Trending Towards Hyperinflation (MW)

Seven short steps to the cost of living doubling or more inside 3 years...

hina Bans Foreign Investment, Tech Partnerships In Its Online Gaming (Mayank J.)

More U.S. gaming companies and VCs are looking to the Chinese online gaming model—micro-transactions, virtual goods and subscriptions—as a source of inspiration and potential investment. But as far as actually owning a piece of a money-making company like Tencent, consider it forbidden, as Reuters reports that the General Administration of Press and Publication (GAPP), China’s video game industry regulator, plans to start enforcing its ban on foreign investment in its online gaming industry.

TIPS: Fed mortgages future of great-grandkids, Dorothy and now, Toto too (Claire H.)

BlackRock Inc., Pacific Investment Management Co. and Vanguard Group Inc., which together manage $3.45 trillion, say investors are pouring money into inflation-linked debt even as consumer prices post the longest series of contractions since Dwight D. Eisenhower was president in 1955.

Dollar Loses Reserve status to Euro and Yen (Joemanc)

Ben Bernanke's dollar crisis went into a wider mode yesterday as the greenback was shockingly upstaged by the euro and yen, both of which can lay claim to the world title as the currency favored by central banks as their reserve currency. Over the last three months, banks put 63 percent of their new cash into euros and yen -- not the greenbacks -- a nearly complete reversal of the dollar's onetime dominance for reserves, according to Barclays Capital. The dollar's share of new cash in the central banks was down to 37 percent -- compared with two-thirds a decade ago.

Ponzi Finance (Douglas A.)

This is an excerpt from a letter I got from Mauldin. He reprinted this quarterly report from the Quarterly Outlook from Hoisington Investment Management. The inflation outlook from the monetary and fiscal standpoint looks truly deflationary, yet some believe that dollar weakness will reverse this circumstance and create inflation. This is unlikely.

Dollar loses reserve status to yen & euro (Ben J.)

Over the last three months, banks put 63 percent of their new cash into euros and yen -- not the greenbacks -- a nearly complete reversal of the dollar's onetime dominance for reserves, according to Barclays Capital. The dollar's share of new cash in the central banks was down to 37 percent -- compared with two-thirds a decade ago.

The New Carry Trade (Claire H.)

Markets can move fast when they head down, and when a carry trade unwinds, few things move faster.

Unfortunately, It's Screw the Shareholders! (David M.)

“Unfortunately it’s screw the shareholders!!” Charles K. Gifford wrote to a fellow director in an e-mail exchange that took place during the call. “No trail,” Thomas May, that director, reminded him, an apparent reference to the inadvisability of leaving an e-mail thread of their conversation. The e-mail messages, reviewed by The New York Times, were handed over to the House Committee on Oversight and Government Reform this week as Bank of America opened a collection of documents that it has kept secret about the ill-fated merger.

Bill Moyers Interview Kaptur, Johnson (Video) (MW)

Transcript here.

The Quiet Coup (MW)

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

Bill Moyers/William K Black (Video) (MW)

The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout. Transcript can be found here.

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says (Vinny A.)

The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

JPMorgan Scores Big In Latest Quarter (Vinny A.)

JPMorgan Chase delivered its strongest performance since the financial crisis first took hold two years ago, as the company reported earnings on Wednesday that towered above Wall Street's expectations.

The Ongoing Cover Up of the Truth Behind the Financial Crisis May Lead to Another Crash (Vinny A.)

William K. Black - professor of economics and the senior regulator during the S & L crisis - says that that the government's entire strategy now - as during the S&L crisis - is to cover up how bad things are ("the entire strategy is to keep people from getting the facts"). Indeed, as I have previously documented, 7 out of the 8 giant, money center banks went bankrupt in the 1980's during the "Latin American Crisis", and the government's response was to cover up their insolvency.

Environment

Quinoa & Amaranth: The Incan Answer (David M.)

Quinoa and amaranth are two very old, high-protein plants that hail from South America. They were held sacred in ancient Inca and Aztec cultures. Both now hold great potential for self-sustaining gardens in the northern hemisphere. They grow as easily as their weedy relatives (pigweed or lamb's-quarters) and the quality of food they offer far surpasses that of our common grains. Traditional hand-harvesting methods can obtain bounteous harvests.

6 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4235
Re: Daily Digest - October 15

"California’s two largest pension funds face total loss of their investments in a Manhattan real estate deal that is collapsing under its own debt."

 

 

"A large number of adjustable-rate loans are slated to reset, which means they can bring higher monthly payments for homeowners. Higher payments, coupled with a 9.8% unemployment rate that is expected to rise above 10%, could also cause a growing number of borrowers to lose their homes.

This could amount to a sizable second wave of foreclosures.

There are presently 2.8 million active interest-only home loans with an outstanding principal balance of $908 billion, according to First American CoreLogic."

 

"A labor-friendly CalPERS board offered local governments an incentive eight years ago to boost public employee pension benefits, now called “unsustainable” by some.

CalPERS said it would reward higher benefits by inflating the value of the local government’s pension investment fund, making it easier to pay for more generous pensions."

"The cost of shoring up Calpers, the troubled $200 billion pension fund for California public employees, will ultimately fall on the state's 38 million residents, who are already dealing with tax increases and reduced public services.

The state and local governments are contractually bound to increase their payments to Calpers to help it make up for its investment losses of more than $50 billion in the fiscal year ended June 30."

    (Posting despite a few disagreements with this)

    "The White House put the cost at $13 billion."

  • 11)

New York's deficit up another $1.1 billion

  • 12)

Illinois Gov. Pat Quinn's adds another $900 million to deficit

  • 13) New Orleans bond sale expected

to be pushed back

  •   (Lower than expected sales taxes. Pension fund payments)
  • 14) State Attorney

General Andrew Cuomo (New York)

"Cuomo said today that so far, seven investment companies had signed onto a Public Pension Fund Reform Code of Conduct and agreed to collectively return $70 million associated with the the New York state Common Retirement Fund.

Further, four people have so far pleaded guilty to securities fraud charges and two others have been indicted. The investigation is still under way, Cuomo said.

The state pension fund dropped from about $150 billion to about $120 billion due to the downturn in the stock market, he said.

As a result, in addition to residents having to deal with the economy and pay higher state, local and property taxes, they will also be asked to pay a pension tax to help make up for the shortfall, Cuomo said."

  • 16)

Greenspan Says He’s Not Concerned About Dollar’s Drop    (Then he says this):

"the increase in federal debt is the “most worrisome aspect of the economic agenda in the United States.”

“There are equations in which certain relationships become progressively explosive,” as increasing interest payments expand the deficit and debt, which increases interest payments in a continuing cycle, Greenspan said.

Throughout U.S. history, the capacity of the government to finance the debt has provided a “cushion” that made the dollar “such an important currency in the world,” he said.

“There is no question that the cushion is going down,” and when long-term interest rates start rising and inflation pressures build, “that’s very late in the game to turn it around,” Greenspan said."

  " There is no alternative to the dollar as an international reserve currency at present, but it would be desirable if an alternative could be created, Libya's central bank governor said Thursday."

"Peru's currency, the sol, is expected to remain on its appreciating trend, propelling the country's central bank to continue to intervene in the foreign-exchange market by purchasing U.S. dollars.

The sol has gained 8.9% against the greenback so far this year, ending Wednesday at PEN2.858 per U.S. dollar.

Strong demand for the sol forced the Central Reserve Bank of Peru to sharply pick up the pace of its dollar purchases this week as it aims to ease the appreciation pressures on the free-floating sol."

Central banks in Taiwan, South Korea and the Philippines intervening last night too?  Same with India. There also is pressure on Canada to intervene.

 

  • .....For those watching the U.S. dollar it's finally

slightly higher. With all  the currency interventions the dollar is probably just  being propped up.

One1776's picture
One1776
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Re: Daily Digest - October 15

More Taxes: VAT Explained by CATO's Dan Mitchell.

brjohnson789's picture
brjohnson789
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Re: Daily Digest - October 15

re the article(s) on the dollar being replace by the euro/yen as a reserve currency, does anyone know where one could find historical data on the % of new reserves of non-US banks put towards the US $?  I think the 3 months in a row of other currencies being mostly taken instead of the US $ is disturbing, but if this has happened frequently in the past it may not be quite as bad a sign. 

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Plab20
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Re: Daily Digest - October 15 - broken link fix

http://www.pbs.org/moyers/journal/04032009/transcript1.html

This is the correct link for the transcript

 

Bill Moyers/William K Black (Video) (MW)

The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout. Transcript can be found here.

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Re: Daily Digest - October 15

Goldman profits, but home defaults surge

By business editor Peter Ryan for The World Today

http://www.abc.net.au/news/stories/2009/10/16/2716193.htm?section=justin

The recent share market rally on Wall Street has most economists tipping the worst of the global financial crisis might be over.

That optimism was underscored today when the big investment bank Goldman Sachs reported a surge in its third quarter profit to more than $US3 billion.

Goldman Sachs is doing so well that it is setting aside 47 per cent of its revenue to pay bonuses to staff.

targetbuster's picture
targetbuster
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Posts: 27
Stock Market Value

I find it ironic that so much of our economic well being is judged by the stock market value. Wow, just hit 10K. To all those pundits I'd like to mention that our dollar is worth 64% of what it was 10 years ago. Why don't they ever include this in their analysis??

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