It never ceases to amaze me, how sophisticated analysis eludes many experts. I think this is because they can’t think about things on the mythological/magical levels. Even after Greenspan and others admit that banking is magical, the ability to understand the implications of all this still eludes even experts, especially experts. The world economic system is imploding. This is simple: it exploded for a number of years. Now, it has to implode in order to come back into balance. There are a few very good analysts who understand this. Very few. Most of them never appear on TV or at Davos.
UK Telegraph’s economics correspondent Ambrose Evans-Pritchard:
“Global banks have so far written down half the $2,200bn losses estimated by the IMF. On top of this, EU banks have $1,600bn of exposure to Eastern Europe — increasingly viewed as Europe’s subprime debacle, and EU corporate debts are 95pc of GDP compared to 50pc in the US, a mounting concern as default rates surge….
It’s the same wherever banks merged their commercial and investment branches. Debt has skyrocketed to unsustainable levels destabilizing the entire economy. The banks have been operating like hedge funds, concealing their activities on off-balance sheets operations and maximizing their leverage through opaque debt-instruments. Now the global economy is caught in the downdraft of a collapsing speculative bubble. East Europe has been hit hard, but it’s just the first of many bowling pins that will fall. All of Europe has been infected by the same virus which originated on Wall Street. Monday’s New York Times summarizes developments in the EU:
The write-offs are now over $1.7 trillion. And they will continue until it is zeroed-out. In Europe, the buyout/buy-up mania was very intense. I am happy that Evans-Pritchard gives some hard data here. When the amount began to equal Europe’s GDP, it collapsed. The US had less corporate debt vis a vis our own GDP but we made up for this by running up housing debts to 100% of GDP. Not to mention, our national debts.
There were several manias running triumphantly here: allowing investment banks to infest all banking was one major mistake. The other mistake was the concept of ‘free trade’. Obviously, this was a total failure. It rapidly sent global trade grossly out of kilter. Balance was lost. One of my main themes is ‘Libra is balance’ and if we ignore this celestial being, we end up in deeper and deeper holes.
One problem I have with the British analyst here is, he won’t or can’t locate the locus of the debt creation. Long ago, I mentioned a group of very old myths. In these stories, there is a machine that grinds infinite gold or a well that has infinite waters or some such thing that is infinite. These infinity machines are controlled by various goddesses or animals who can talk. Always, a human looks at these things and says, ‘I want to have INFINITE stuff!’ and then, the human steals the infinity making machine and takes it far away from the control of the goddesses/animals.
Then, sitting down, filled with fell greed, the human tries to run the machine to infinity. Very swiftly, everything is either drowned in oceans of liquid or a mountain of gold turns into salt and then falls into the oceans, making the sea salty, or some such utter, natural catastrophe. In the end, the goddesses/animals take back control of the Infinity Machine and force us to labor in order to gain very small portions of what the Infinity Machine created without effort.
When Japan’s central bank created and began running the ZIRP infinity machine, lending money for no charge at all, pretty much at the cost of principal of the loan, this opened the banking Pandora’s box. The fact that zero interest lending has existed only very briefly and at that, only once, in the entire history of Western banking, should have sounded alarm bells when Japan did this for more than a decade and is still doing it. And all efforts of the G7 nations has nakedly become an attempt to regain the joys of the Japanese carry trade years. They have not, I repeat, they have NOT repented of all this. They feel no guilt nor horror at it. They profess to not even understand that this is the fundamental cause of the present total global banking and now, currency collapse!
Below is an example of extremely shallow and useless commentary about this collapse. The bubble bimbos hired for their good looks are grilling two men who have a very surface, even juvenile understanding about this collapse.
Bill Gates and others who lined up to hear this duo talk was so they could feel good, not learn anything. If I were delivering this talk Bill Gates would flee the room, covering his ears. For he is one of the causes of this collapse. He screwed up the entire computer world with his lawsuits, predatory destruction of other computer businesses, underpricing them until they collapse and then running the systems as a monopoly. Monopolies destroy economic systems. Interlocking monopolies and cartels are pure evil. Bill Gates also bribed many politicians into supporting his monopolizing attempts. I refuse to use his stuff for this reason alone. This is by far, the main reason I began, IN PROTEST, to buy only Apple or other systems. This is why I support Linux and encourage the use of alternative systems.
The reason I buy only Apple, though, is that all systems that are not Apple are loaded with Microsoft products before selling them so you can’t escape paying Bill Gates his entry fees to the computing world. I firmly believe that Microsoft should be busted up. The buyout/buy-in mania has created a much nastier world of much bigger, much deeper in debt and more exploitive monopolies and interlocking cartels!
It is not just a banking problem but a cartel/monopoly problem brought on by the ZIRP lending system in Japan! The only way to bust this up is for everyone owing money to the banks and buying monopoly products via loans, to go bankrupt. All other attempts at stopping this were knocked down by politicians who accepted bribes from the super-rich and corporate entities. Now, a quick run thorough the news to prove my points:
After the withering reception his bank rescue plan received in Washington, Treasury Secretary Timothy F. Geithner could be excused for seeing his first trip abroad as a well-timed respite….
Mr. Geithner, whose last job was head of the Federal Reserve Bank of New York, has spent his career studying and carrying out international financial policy. So two days spent in Rome brainstorming with finance ministers from the Group of 7 nations about fixing the global economy played to his specialty.
But amid signs that Europe’s worsening slump has created fissures among G-7 leaders about how to deal with the crisis, Mr. Geithner found himself on the defensive in Rome this weekend, though not to the extent he was in Washington.
In a statement, the G-7 ministers promised to cooperate on the global economic crisis and said they had taken steps to inject cash into banks and identify troubled assets. They said the effects of such measures would build over time.
The G7 is desperate to restart the status quo. The major economic powers in the G7 are the US, the world’s #1 economy [and major trade terminus point], #2 economy, Japan and #4 economy, Germany. Japan and Germany lead the coalition of nations that have trade surpluses with the US. They all want this. It is pretty simple. The US should hate this and fight this tooth and nail. Instead, due to being deep in debt to all our trade rivals, we are doing the opposite. We enable this. I will note here that the hardest position to fill for Obama happens to be Commerce Secretary. He has to locate a good, treasonous person who wishes to increase our trade deficit, I am guessing. It is a hot potato because even our politicians realize, this position is a treasonous one as it is now set up. This is why Bush gave it to a foreigner who ran it as an anti-Castro operation focused on isolating Cuba. He did absolutely nothing about the rest of our commerce situations.
Japan Finance Chief May Consider No-Interest Bonds
Japan may consider issuing bonds aimed at encouraging households to save less and help fund spending in an economy heading for its worst postwar recession, newly appointed Finance Minister Kaoru Yosano said yesterday.
Lawmakers from Japan’s ruling Liberal Democratic Party last week proposed issuing bonds that pay no interest in return for a reduction in future inheritance taxes.
“It is worth considering no-interest-bearing bonds,” Yosano said at a press conference in Tokyo after taking over the post from Shoichi Nakagawa, who resigned yesterday. The idea “requires a considerable study,” he said.
Japan’s households have around 1400 trillion yen ($15.2 trillion) in financial assets, half in savings and cash. Some lawmakers are seeking to unlock those savings and raise money to fund stimulus programs to spur the economy after gross domestic product fell at an annual 12.7 percent pace last quarter, the fastest since 1974….
The new finance chief also said the biggest challenge for a financial services minister is to bolster funding for Japanese companies, which is “getting severe” after a slump in exports slowed orders to both smaller and larger companies.
The ZIRP system is becoming set in stone. When Japan had inflation over 3%, the ZIRP system continued. When Japan’s GDP grew for a record number of years, the ZIRP system persisted. Now, they are going into hyper-negative territory. By selling the futures of tax revenues, they hope to fund things today while…and this is most critical….WHILE NOT TOUCHING THE WORLD’S #2 FOREX HOLDINGS OR SELLING US TREASURIES. It is quite simple: unlike Russia, OPEC nations or China, the Japanese will not let go of a penny of their holdings of US debt and dollars because this keeps the yen weak and enables the ZIRP business! So Japan’s gigantic sovereign wealth funds remains tied up even as the US frantically lends dollars to others to prop up the system. When the world’s longest-running 0% lending system refuses to allow one of the biggest collections of US $ to circulate, we get a lopsided system that has many dire side effects!
Last year, the US tried to make fun of these huge FOREX reserves and mocked everyone holding them. But now, these reserves must flow again and China is already doing this. But not Japan. Instead, the LDP continues to loot the future earnings of Japan, rather then release some of these dollars into the mainstream of the world’s economy systems.
So far, Japan’s politicians have been unable to find a way out of this mess. While another $53 billion stimulus package works its way through parliament, fully one-third of Japan’s prefectures have instituted emergency economic stabilization measures.
But the big issues elude short-term solutions. Though Japan’s leaders are currently cutting back on military expenditures and domestic services, they’re unable to agree on budgets or reform plans. They have no strategic road map for reining in the yen, opening up to international competition, or taking an economic leadership role in Asia that will promote growth and strengthen democratic, market-oriented societies.
Things don’t have to turn out this way. If Japan’s leaders can craft a monetary policy that ends Japan’s deflationary spiral by carefully expanding the money supply, recommit to structural reform, and halt the yen’s rise, they can jump-start economic growth. They should also ignore the powerful domestic agriculture lobby and embrace a robust free-trade agenda, which would help them as well as the rest of Asia.
Auslin is typical of Americans trying to figure out things! He knows that Japan’s economy depends on a WEAK YEN. This is so they can undercut the competition! So why is Auslin for this? Is he nuts? HAHAHA. Yes. The treasonous thinking systems that infests our analytical babbling class is obvious. Do the Japanese worry about the US running a huge trade deficit with Japan? HAHAHA, again. Nope. They are happy with this. But why should we want this? Eh, Mr. Auslin?
And the last thing Fortress Japan wants is ‘free trade’ whereby China can overwhelm Japan with its own exports?
Some have speculated that the UK may have to seek IMF support if capital markets become frightened of the size of its foreign financial liabilities, which increasingly appear to have become supported by the state. But there are a swathe of Eastern European countries which appear particularly vulnerable and may need IMF support.
With the Fund’s warchest expected to run dry later this year, the Japanese confirmed in Rome that they would supply an extra $200bn of capital to the Washington-based institution.
Mr Strauss-Kahn, who warned recently that his resources could run dry within six months, said: “This is the largest loan ever made in the history of humanity.
And here is the news: Japan is releasing part of its sovereign wealth dollars and euros! TO THE IMF. This is significant: it is not being used by Japan to buy US or European goods. Japan is rapidly decreasing sales of the few luxury items from Europe and America. No, this is a LOAN. And HAS TO BE PAID BACK. So the $200 billion remains on Japan’s ledgers. It is not a gift. It is a loan. And a huge one, at that.
Japan is one of the countries with the most government debts. But unlike the US and UK, it owes 87% of this to the Japanese people, in the US and UK, it is the opposite. And Japan has a huge FOREX reserve.
China Feasts on Miners as ‘Bank of Last Resort’ Wuhan Iron & Steel Group and Jiangsu Shagang Group Co., China’s third- and fifth-largest steelmakers, are shopping for iron ore mining stakes in Australia and Brazil, executives said in interviews….
The world’s top metal user, China has agreed to acquire $22 billion worth of commodity assets this year after a 70 percent drop in metals and oil since July ended a six-year boom in raw materials. With U.S. and Australian banks still hesitant to lend, Rio Tinto Group and OZ Minerals Ltd., laboring under combined debt of $40 billion, agreed this month to sell stakes to Aluminum Corp. of Chinaand China Minmetals Corp., respectively.
“China has turned out to be the bank of last resort,” said Glyn Lawcock, head of resources research at UBS AG in Sydney. “China is a net importer of copper, bauxite, alumina, nickel, zircon, uranium. China is looking for ways to secure supply of these raw materials.”
People who don’t understand the difference between sovereign wealth countries and countries running huge trade and government deficits while holding virtually no reserves, don’t understand how China can go through a contraction with the stock markets falling rapidly and yet, is still rising in power and control over all other systems.
Ever wonder why our markets are collapsing slower than China’s internal stock markets? Think! Who is buying our stocks? Take a wild guess. Not the average American. China is determined to be in control of its commodity needs when the next boom arrives. We lost control of our commodities.
According to Yi, zero interest rate policy does not suit China’s current condition, citing the factors such as the outstanding saving deposits account for a large portion of China’s GDP, rising domestic labor productivity, and banks with limited intermediary services and business structure that needs to be further optimized. Banks could not survive under very low interest rate, Yi said.
He said that the central bank is determined to curb deflation and keep a stable exchange rate for the yuan.
The central bank had cut interest rates five times since last September, lowering the benchmark one-year yuan lending rate to 5.31 percent from 5.58 percent and the one-year yuan deposit rate to 2.25 percent from 2.52 percent.
JP Morgan predicted that February’s CPI might post negative growth, saying the central bank should continue to cut rates to reduce enterprises’ financing costs.
However, Zhuang Jian, senior economist with Asian Development Bank’s China Resident Mission told Xinhua that it was not imperative for the central bank to further lower interest rates as money supply and credit extension had already accelerated.
The Dragon makes it clear, the ZIRP system is evil. They are right. It is. Look at their interest rates! Guess what? When lending flows again, money seeking a high interest rate of return will flow to China. We will have to hike rates suddenly by a lot to attract these funds. Yesterday, I had various graphs that clearly show that the flow of funds to the US from foreign holdings has dropped like a rock to nearly zero, this last year.
The presidents of Russia and Turkey signed a joint declaration in Moscow yesterday aimed at deepening friendly relations and improving multidimensional cooperation between the two countries, with the Russian side defining the declaration as a “strategic document.”
Turkish President Abdullah Gül arrived in Moscow on Thursday, accompanied by State Minister Responsible for Foreign Trade Kürşad Tüzmen and Energy Minister Hilmi Güler, in addition to his spouse, Hayrünnisa Gül, and a large business delegation. Foreign Minister Ali Babacan joined the delegation, traveling from Riga, Latvia, where he paid an official visit, to Moscow late on Thursday.
The four-day visit by Gül, a former foreign minister, to Moscow in his capacity as president was classified as “a state visit” upon the Russian side’s request, although it was earlier planned as “an official visit.” Moscow’s request displayed the importance attached to the visit — as a state visit is described as the highest level of state protocol — and made Gül the first Turkish president to ever pay a state visit to Russia.
Russia is supposed to be broke. But they are not losing diplomatic or even financial power. They have POWER which is different from money. If necessary, they can squeeze Europe to death if they have to and they will do this, eventually, if Europe doesn’t move fast to be friendlier.
Turkey was locked out of the EU and insulted repeatedly including the recent Davos insults. When the representative of Turkey stormed out of the neo-con warmongering panel run by the American Jews, his popularity soared in Turkey. Turkey was friendly to Israel so the EU would let them into the union. Now, there is nothing to gain with Europe and Turkey is now looking for new friends. The Turks know that the US is essentially bankrupt. So they are looking to Russia and China for aid and political power.
Chancellor Angela Merkel’s government appears ready to end weeks of intense debate and back a new law this week which would give Berlin the right to seize private property for the first time in the postwar era.
The law, an extension of bank rescue legislation agreed last year, is due to go before Merkel’s cabinet on Wednesday and would set the stage for a nationalisation of Hypo Real Estate (HRXG.DE), a high-profile casualty of the financial crisis.
Her government decided last month it needed to take control of Hypo, a Munich-based lender, after giving the bank 87 billion euros (77 billion pounds) in state guarantees over the past year and seeing no improvement in its financial condition.
But negotiations on the legal details of taking it over have dragged on for weeks amid disagreements over how to handle U.S. private equity firm JC Flowers, whose Hypo stake of about 25 percent must be bought to give Berlin the full control it wants.
Up until 1995, Germany had this wonderful, conservative, sober banking system. Then, they modernized it to ape the US system. Now, they are seeing a repeat of the Weimar Republik in their rearview mirrors and are in a panic. I expect nationalization to pass and Germany will move fast to restore the older banking system.
Eastern Europe is about to blow. If it does, it could take much of the EU with it. It’s an emergency situation but there are no easy solutions. The IMF doesn’t have the resources for a bailout of this size and the recession is spreading faster than relief efforts can be organized. Finance ministers and central bankers are running in circles trying to put out one fire after another. Its only a matter of time before they are overtaken by events. If one country is allowed to default, the dominoes could begin to tumble through the whole region. This could trigger dramatic changes in the political landscape. The rise of fascism is no longer out of the question…
Foreign capital is fleeing at an alarming rate; nearly two-thirds gone in matter of months. Deflation is pushing down asset prices, increasing unemployment, and compounding the debt-burden of financial institutions. It’s the same everywhere. The economies are being hollowed out and stripped of capital. Ukraine is teetering on the brink of bankruptcy. Poland, Latvia, Lithuania, Hungary have all slipped into a low-grade depression. The countries that followed Washington’s economic regimen have suffered the most. They bet that debt-fueled growth and exports would lead to prosperity. That dream has been shattered. They haven’t developed their consumer markets, so demand is weak. Capital is scarce and businesses are being forced to deleverage to avoid default. All of Eastern Europe has gotten a margin call. They need extra funds to cover the falling value of their equity. They need a lifeline from the IMF or their economies will continue to crumble.
The UK Telegraph’s economics correspondent Ambrose Evans-Pritchard has written a series of articles about Eastern Europe. In “Failure to save East Europe will lead to Worldwide meltdown” he says:
“Austria’s finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria’s GDP.
“A failure rate of 10pc would lead to the collapse of the Austrian financial sector,” reported Der Standard in Vienna. Unfortunately, that is about to happen.
The US and EU both taunted Putin and pushed Russia aside and encouraged wild spending and wild borrowing in the former Warsaw and Soviet states. All of which will collapse. And Mother Russia will re-embrace these invasion points. For these states are a danger to Russia for obvious, historical reasons. Just like the Lowlands of Holland and the Netherlands are a dangerous corridor of armies moving between France and Germany or fighting England.
Foreign capital is ‘fleeing’ Eastern Europe? Well, it is fleeing the US, too. And the UK, Ireland, Spain, Iceland, Russia, etc, etc, etc. Actually, it is not ‘fleeing’. It is VANISHING. An important point. It is not flowing to anywhere except Hell. And this brings me back to the oldest stories told by humans around campfires while the wolves and hyenas howled in the icy wastelands. Wealth can and will vanish in a flash if humans are too greedy. The goddesses who do this are extremely ancient, older than the gods worshipped by many religious people.
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