Free Republic

US Treasury Secretary Tim Geithner confessed on Wednesday that he had not read the plans by China's central bank governor for a "super-sovereign reserve currency" run by the International Monetary Fund, but nevertheless let slip that Washington was "open" to the idea. Whoops. This is how matters quickly escalate in geo-finance. China's suggestion – backed by Russia, Brazil, and India, and clearly aimed at breaking US dollar hegemony – is making its way onto the agenda of the G20 Summit next week. 'Dollar-dämmerung' no longer looks so far-fetched. China's paper, by Governor Zhou Xiaochuan, is couched in understated language –...

CNBC has been a hotbed for commentary - both left and right, from Rick Santelli's call for a tea party on the floor of the Chicago Mercantile Exchange to the hiring of former Democratic Committee Chairman Howard Dean as a CNBC contributor. This time, one of the hosts on CNBC's March 26 "Power Lunch" dropped an expletive during President Barack Obama's online town hall meeting as the network broke away from their coverage: ...more (w/video)...

WASHINGTON (MarketWatch) -- U.S. Treasury Secretary Timothy Geithner will on Monday provide details about the government's latest plan to help rid banks of toxic assets clogging the financial system. The Treasury Department said in a press release that it will hold the briefing at 8:45 a.m. EDT on Monday. The Treasury Department's program involves setting up a new investment fund to buy mortgage-related securities and other assets weighing down bank balance sheets. The new Public Private Investment Program would combine taxpayer money with private funds, aiming to buy loans and free up banks to renew lending. The Wall Street Journal...

Most investors don't take seriously warnings about the future of the economy and the financial marketplace, but those who did avoided the dreaded "Cs" of finance: the Credit Crisis and Crash of '08. What warnings are we talking about you might ask? Well, it was the headlines of several years ago screaming that a 'Category 6 Fiscal Storm', 'Debt-Driven Meltdown', 'Systemic Banking Crisis', 'Financial Train Wreck', 'Wild Ride', 'God-Awful Fiscal Storm', 'Major Upheaval', 'Rude Awakening', 'Great Disruption', 'Debt Bombshell', 'Major Upheaval', 'Unwelcome Economic Spiral', 'Perfect Financial Storm', 'Serious Collapse', 'Drastic Fall', 'Financial Disaster', 'Major Bear Market' and/or an 'Economic Earthquake'...

The government shouldn’t run anything, because it cannot run anything. This whole AIG fiasco — where the entire political class is suddenly screaming over bonuses paid to derivative traders in AIG’s financial-products division — is just a complete farce. What it really shows is how the government has completely bungled the AIG takeover. Blame the Bush administration and the Obama administration. It also shows, once again, why the government shouldn’t run anything, because it cannot run anything. AIG should have been placed in bankruptcy last fall under some sort of government sponsorship. While in bankruptcy, all the salary contracts (and...

Credit isn’t wealth. A lot of people are discovering that the hard way. Welcome to the credit deflation prelude to hyperinflation. During a credit deflation, things get cheaper. Without lines of credit, people can’t bid things up and prices fall to their “cash on hand” level. Given a long enough time, things settle out and prices relative to wages actually become attractive. But it’s a long and bumpy ride from here to there. The trick is to maintain roughly the same level of income as others take wage cuts or lose their jobs entirely. Add this to the general lack...

The US Treasury and Congressional "shopaholics" are tickled pink with the "flight to safety." Never mind whether those rampantly popular Treasury bonds are actually preventing recovery by crowding out private sector credit. They're giving the US government's representatives the power to "buy, buy, buy" ...and conveniently solidifying their voters' support in the process. But not everyone's enjoying the "flight to safety." And Switzerland's response in particular points to a dangerous new trend that's sweeping the globe. Competitive Devaluation Hits the Majors "The Swiss franc slumped by a record amount against the euro Thursday after the country's central bank confirmed it...

Helicopter Ben is no longer the appropriate appellation for the Chairman of the Federal Reserve System. Under the tutelage of this former economics professor, Chairman Bernanke launched an ICBM into the market today and I will dub him ICBM Ben. The Committee voted to expand the balance sheet of the Fed by a whopping $1.150 trillion. The Fed will buy an additional $750 billion mortgages, an additional $100 billion agencies, and for the first time they have added $300 billion longer dated Treasuries to the list. The move in the market is huge, historical and hellacious. I do not have...

The anger and outrage over $165 million in bonuses paid out to American International Group (AIG) executives has many upset and outraged, but it also has some scratching their head wondering where that same emotion is over the entire government spending/bailout culture that has encapsulated Washington, D.C. Earlier on March 17, CNBC reporter Rick Santelli suggested on CNBC's "Squawk Box" some of this outrage could be purely political. However, liberal talk radio host Ed Schultz said on MSNBC's March 17 "1600 Pennsylvania Avenue," host by David Shuster, this "outrage" is welcomed by President Barack Obama. "David, I think the Obama...

Since his now-famous Chicago Tea Party outburst from the floor of the Chicago Mercantile Exchange in February, CNBC's Rick Santelli had seemingly disappeared from the spotlight. However, on CNBC's March 17 "Squawk Box," Santelli, using similar theatrics, noted that the Obama administration as been very concerned about $165 million in bonuses paid out to American International Group (AIG) executives, even though they were recipients of bailout money from the Troubled Asset Relief Program (TARP). "Well, I mean it seems as though the administration really hit this one head on. They're not happy about it, right?" Santelli said. ..more (w/video)..

All the current outrage and attention to bonuses paid out to employees of institutions that received federal bailout money is misplaced, according to an analyst that appeared on CNBC Asia on March 16. The media is making much of the news that American International Group (AIG) executives are receiving compensation in the form of bonuses. But Kirby Daley, senior strategist at the Newedge Group explained how the focus was in the wrong place. Although some say allowing Lehman Brothers to fail in September 2008 was a mistake, it prevented the problem of taxpayer money being used for executive compensation. "I'm...

In 2006 a CJR editor (a seasoned journalist formerly with Time magazine in Asia, The Wall Street Journal Europe, and The Far Eastern Economic Review) called me to discuss suspicions he was forming about the US financial media. I gave him leads but warned, “Chasing this will take you down a rabbit hole with no bottom.” For months he pursued his story against pressure and threats he once described as, “something out of a Hollywood B movie, but unlike the movies, the evil corporations fighting the journalist are not thugs burying toxic waste, they are Wall Street and the financial...

A year ago, most economists were projecting fairly mild unemployment for the U.S. this year. Most were forecasting a range of 7 to 8 percent. In February, the figure has already gone beyond that. Now that it is clear that the recession will last for the year, forecasters are upping their jobless rate estimates -- by a lot. The new "stress-testing" program for banks assumes a worst case for unemployment at 10 percent. The closely followed economist Nouriel Roubini says the figure could go above that. Add to the gloom a respected survey of other economists. According to Bloomberg, "The...

Austrian Enginomics Fundamentals The fundamental premise of Austrian Enginomics is described on my home page (www.austrianenginomics.com), and it references two macroeconomic conditions, 1) Resource misallocation, and 2) Overvaluation of assets (bubbles) in Stocks, Bonds, and Real Estate. These conditions have built up to unprecedented extremes during the past 35 years reaching a pinnacle about one year ago. In our modern day world of virtual reality people have been conditioned to believe financial assets are "real wealth"(1). It’s not surprising because we are all used to exchanging financial assets for “real wealth”; hence we all believe that the greater our financial...

“Negative growth,” says today’s paper. Yes, dear reader. Stocks are advancing to the rear…and economies are growing…smaller. How we love these oxymorons! If only we could age negatively…and eat all we wanted and gain minus pounds! The commentators have it all wrong. Look on the bright side. The world economy is not in a period of negative growth. It’s in a period of positive collapse! That’s why the Great Depression was so great, after all. What’s positive about this depression is that it is clearing away a generation’s worth of mistakes, misallocations of resources and misplaced confidence. Stocks are down...

<p>David Rosenberg, North American Economist at Merrill Lynch is talking about a " Depression-Style Jobs Report "</p> <p>Judging by the leading indicators – 600,000+ jobless claims, Challenger layoffs up an eye-popping 158% from a year ago, the 78,000 plunge in temporary employment, the record-low workweek – suggest that we will have to endure an 800,000 employment slide when the March data roll out, and a 1 million loss cannot be ruled out. We may have to redefine yet again what a ‘new normal' is at that point. The bottom line is that a recovery in domestic economic activity is, at best, a late-2009 story, but at this stage, even that could be a fairy tale.</p>

Subprime Tsunami to be followed by Option Arm / Alt A Asteroid - May you live in interesting times . Just as we thought we could stop holding our collective breath as the subprime tsunami starts to recedes, new specters appear on the horizon and you probably have not heard of them - yet. Meet subprime mortgage 's ugly cousins: Option ARM and Alt A mortgages . ARM stands for Adjustable Rate Mortgage and guess what: the rates are not about to go down. As Whitney Tilson explains on 60 minutes using data collected by Credit Swiss, this will cause...

In a fiat world, money is printed into existence by the central bank - in the United States the Fed. Given there is nothing backing up this money, it is inherently worthless. However, one can think of as real. It was printed (even if only electronically), therefore it exists. In addition to the previously mentioned money supply, fractional reserve lending allows credit to be extended by banks and financial institutions on top of that inherently worthless money. Indeed, banks and financial institutions have leveraged credit to base money at ratios of 30-1, 50-1 or even higher. It's pretty amazing if...

Could it soon be criminal to lose money for taking on too much risk? If Rep. Barney Frank, D-Mass., has his way, it might. Just don’t expect him to talk to the media about his role in the crisis. Frank, the chairman of the House Financial Services Committee held a press conference on March 5 to announce he would hold hearings to push for federal and local statutes to prevent a similar economic downturn – but not just by imposing civil penalties, but criminal ones as well. “I am asking very firmly the attorney general, and I’ve checked with the...

The stock market is crashing—slowly, and in plain view of the people who count on it most. The 53% plunge in the Dow Jones industrials since October 2007 has wrecked the college- and retirement-savings plans of millions of investors. It has permanently lowered the long-term investment projections of private endowments and pension funds. It has sent corporate compensation experts scrambling to figure out how to reward top employees. All told, more than $10 trillion of stock market wealth has vanished, and with it the confidence that springs from financial security. While 17 months may feel like an eternity, it could...

After 16 failed banks to date in 2009, the FDIC raised fees and assessments on member banks to prevent insolvency later this year due to its forecast for more bank failures. FDIC Chairman Sheila Bair Says Insurance Fund Could Be Insolvent This Year “Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group. “A large number” of bank failures may occur through 2010 because of “rapidly...

PROLOGUE & AFTERMATH - The World Economic Forum took place in Davos Switzerland last week. The global picture enabled a nice snapshot of sentiment, fault for the crisis, blame doled out, the vacuum of leadership, the perks for blunderers in a country club setting (instead of prison), and warnings on a potential situation that could spiral out of control. Amidst all the finger pointing, surprisingly little blame was given to themselves, the corporate chieftains in attendance. Let's be clear! The Davos Forum was a funeral wake, and Putin rode in on a white horse to announce there is a new...

THIS WEEK, THE UNITED STATES SENATE WILL VOTE ON A SPENDING PACKAGE TO FUND THE FEDERAL GOVERNMENT FOR THE REMAINDER OF THIS FISCAL YEAR THE SENATE SHOULD REJECT THIS BILL. IF WE DO NOT, PRESIDENT BARACK OBAMA SHOULD VETO IT. THE OMNIBUS INCREASES DISCRETIONARY SPENDING BY 8% OVER LAST FISCAL YEAR'S LEVELS, DWARFING THE RATE OF INFLATION ACROSS A BROAD SWATH OF ISSUES…APPROPRIATE FOR A NATION FLUSH WITH CASH OR UNCONCERNED WITH FISCAL PRUDENCE, BUT AMERICA IS NEITHER. OUR NATION'S CURRENT FISCAL IMBALANCE IS UNPRECEDENTED, UNSUSTAINABLE AND, IF UNADDRESSED, A MAJOR THREAT TO OUR CURRENCY AND OUR ECONOMIC VITALITY. THE...

For the first time ever, I spent nearly a full hour with my favorite host, Sir Larry Kudlow, on CNBC's "The Kudlow Report" last night. From my perch, the feature of the show was my call that the U.S. stock market could make a 2009 low this week, a very tough call but a position that I have been edging toward over the past several days. The lion's share of the last segment of "The Kudlow Report" was devoted to my analysis of Warren Buffett and Berkshire Hathaway (BRK.A Quote - Cramer on BRK.A - Stock Picks), and my market...

Rep. Peter DeFazio (D-Ore.) has proposed H.R. 1068, a bill that would impose a 0.25 percent transaction tax on trading stocks, options and futures. The move would kill trading, folks. If you want our markets to remain the most liquid on the planet, then you need to oppose this nutjob. If you want to turn our markets into the same illiquid CDOs and CMO markets that have crushed 99 percent of the banks and financial institutions in the United States, then by all means support this idiotic legislation. To oppose it, follow this link: http://tinyurl.com/c9lawe

John Maynard Keynes is one of the most influential and controversial economists in history. He warned of the huge burden war reparations placed on Germany and its allies after WW I. He played an integral role in establishing the post-WW II financial world. His economic theories established the impetus for governments to spend like mad during downturns. He made, lost, and made back a massive fortune in the stock market. He counted Pablo Picasso and Virginia Wolf as friends. He's done a lot. His impact on the world is extensive. But today we'll look at one of his truly lasting...

A Blast from the Past! A short excerpt to get you started. - - - - - C L I P - - - - - Graphically, What Does the Illusion Look Like? Note: There are two key issues: One is asset overvaluation, and second is the overly optimistic expectation of annual asset value growth. The conditions combine to create a “double whammy” expectation of future wealth. Assumptions: “Expected” by the Average Investor: An expected “real” asset valuation growth of 5% annually; excluding inflation. “Reality Based upon History”: · A -21% current asset base adjustment to reflect historical asset-to-GDP ratios....

Who pays more, less and nothing at all under the president's proposals. In Depth: How Obama Tax Plan Affects Eight Families WASHINGTON, D.C.--The $787 billion stimulus package passed in February and President Barack Obama's budget plan released on Thursday contain a confusing assortment of changes to the tax code.

"Amid the worst economic contraction since 1982, bond yields should be plunging...but that's certainly not the case since mid-January as Treasury bonds continue to decline in value," says Investment Director Eric Roseman, "If the economy is so badly fractured then why are bond yields rising?" "Since the beginning of the year the yield on the benchmark ten-year Treasury bond has surged almost 100 basis points from 2.25% to 3.03%. The 30-year T-bond has declined even more as yields have climbed from 2.68% on January 1 to 3.71%." "The obvious answer to this bond market enigma is supply and demand." "The...

Buyers are worn out on high house prices. The successful sellers have homes priced at less than 6 times per capita income.

- - - - - c l i p - - - - - And here’s a good question for you, dear reader: If the smartest investor in the world can’t make money in this market, how do you expect to? If we were you, we wouldn’t even try. You see, this is not a recession…and it’s not a buying opportunity. It’s a depression. And at this stage in a depression, the best thing to do is to sell stocks, not buy them. Because they have further to fall…and because they could take a long, long time to recover. We’ve...

They are not listening. The president is not listening. His advisers are not listening. They are not watching or listening to the stock market. It seems to be meaningless to them. ... But there should be some sense that the market is totally falling apart and that we could be at levels that will wreck so many people's live savings -- yes, there is that much in the market -- that it wouldn't be so bad to say, "Here are my goals, I want to do cap and trade, I want to make it so we are being prudent about...

"It's bad enough to be in the middle of a global financial panic that could be worse than the Great Depression," says Wealth Preservation & Tax Consultant Mark Nestmann, "But if you're an American, even if you manage to avoid investment losses, you could be wiped out by the coming 'lawsuit tsunami.'" "People sue because they're angry, desperate, or think they can get some easy money from a deep pocket. And in a depression, there's plenty of anger and desperation. Here's a preview of what you can expect on the lawsuit front in the next few months: A blizzard of...

The Gotham Gal opened the NY Times (NYT) this morning and she says to me, "Didn't we just put money into Citibank (C)?". The we being all of us taxpayers here in the US. I said, "Yes, a couple times I think". And then she got upset. Because there at the bottom of the NY Times is a big advertisement for Citibank (see the photo above). She went on. "We are paying for that ad. In a newspaper that less and less people read every day. No wonder they are in trouble". There's something poetic, ironic, and iconic about...

It’s a tough time to be a bank shareholder. You’re not just worrying about whether the ongoing recession or a further lurch downwards in housing prices is going to decimate the value of your bank’s loan portfolio. You’re also worrying about whether some government “stress test” or – worse still – nationalization is going to destroy most or all of your investment’s remaining value. And finally, if you’re smart, you’re worrying about whether some cockamamie government loan scheme is going to artificially force down the nice juicy interest margins your bank is earning on the new loans it makes. Clearly,...

Larry Edelson writes: Could the economy and the financial system get any worse than they already are? Absolutely! As I've often warned here in my Money and Markets columns, central banks and governments of the world will do anything and everything to try and prevent a meltdown of the global economy. They will fight it tooth and nail. They will backstop and guarantee just about anything. They will print money like crazy … issue their mountain of new debt. Invest in banks, mortgage brokers, and even effectively semi-nationalize real estate! Some of their policies will help. Most will fail …...

A lack of industrial and commercial demand keeps prices down. The Energy Information Agency's Natural Gas Weekly Update reports, “ The impact of the current recession outweighed the space-heating demand, as the lack of industrial and commercial demand continues to depress natural gas spot prices. The decreases in spot prices appear not to be weather driven, as some areas of the country are experiencing relatively cold weather, but still failed to register any price increases. ” Will the government win the War on Recession? One of the great lessons of liberal theory concerns the extraordinary capacity of free exchange to...

As most of us who carefully follow the macro-economic picture know quite well - there is a certain logical “order” to things and that order has been accurately anticipated by some of us for a very long time. One of the things that's been looming dark-and-large on the economic horizon is the impending and apparently unstoppable hurricane that's about to hit the commercial real estate markets. A short drive around most U.S. towns or cities will provide convincing evidence of the destructive power of the early “outer band” winds that are hitting the free-falling commercial sector. The vacancy signs that...

Here's what people are thinking. They are looking at what is up on their screens, and they are saying, "Will Obama come after these winners tomorrow?" Oil is up. That's a natural one to hammer, isn't it? He could come out tomorrow with a huge carbon tax. Abandon Peabody Energy (BTU)! The banks are up. You know that Tim Geithner's not going to stand for that. He's a populist, and the reporters who tell him what to do will no doubt say that he'll be seen as rewarding Goldman's (GS) Lloyd Blankfein and Bank of America's (BAC) Ken Lewis --...

Dr. Hospers is Professor of Philosophy, University of Southern California, Los Angeles. Let’s suppose we all start out equally, say with $1000. How long would this equality last? Some people would spend the whole thousand the same day and be penniless by nightfall. Others would spend it in a week, others in a month. Still others would put the money to work: in a bank, to collect interest; or in stocks or bonds; or as down payment on a farm or shop. The most adventurous ones would put the whole $1000 into some such new enterprise and even borrow, at...

There are opaque and early signs that the U.S. economy has started the beginning of a bottoming process. Just like a diving submarine needs to stop its downward motion and reach its lowest depth before it can resurface, the economy needs to go through the steps of slowing its decline and stabilizing before it can start rising again. Some recent economic data seems to suggest that the rate of economic decline has started to slow and that sometime in the second or third quarter the bottom may be found. Of course, external events such as a large natural disaster, war...

The LA Times came out Saturday with a widely-noticed article on Beijing real estate, which features my friend Jack Rodman. Jack, who runs a firm called Global Distressed Solutions, is a bad-loan and distressed real-estate expert who has spent the last several years in China, and somehow has the energy to poke around among all the spectacular buildings in Beijing and other cities, worm his way in, and see if behind the beautiful façades there is actually some semblance of economic viability. - - - - - C L I P - - - - - Any conversation about Chinese...

A.P. Giannini, the man who founded Bank of America in the early 1900s, likely is "rolling over in his grave" over how the company he built has been managed, hypothesizes his granddaughter. Virginia Hammerness, the 75-year-old heiress to the family’s banking fortune and a big stockholder, told CBS 5 in San Francisco (via Huffington Post) that the bank’s current "idiot" managers’ actions are "totally repulsive." More than that, they’re ruining her family’s legacy Giannini founded Bank of America (originally called Bank of Italy) in San Francisco’s North Beach in 1904 because he was upset that banks then usually only lent...

On Thursday, Sept. 18, 2008, the astonished leadership of the U.S. Congress was told in a private session by the chairman of the Federal Reserve that the American economy was in grave danger of a complete meltdown within a matter of days. "There was literally a pause in that room where the oxygen left," says Sen. Christopher Dodd (D-Conn.) As the housing bubble burst and trillions of dollars' worth of toxic mortgages began to go bad in 2007, fear spread through the massive firms that form the heart of Wall Street. By the spring of 2008, burdened by billions of...

In an earlier post on the declines that individual stocks in the S&P 500 have seen over the course of the index's six-day losing streak, we noted that because of their market caps, if they were being considered for inclusion into the index today, many of the losers on the list wouldn't even qualify. Expanding on that theme, we wondered how many stocks in the S&P 500 don't even meet the current market cap threshold ($3 bln+) for inclusion into the index. Readers looking for the complete eligibility requirements for inclusion into the S&P 500 can get them by clicking...

B I G - - - - - C L I P - - - - - - - Unsustainable Policies & Practices The definition of unsustainable is, not able to be maintained or supported in the future. To me, a picture is worth a thousand words. Source: Robert Shiller As Congressional moron after Congressional moron goes on the usual Sunday talk show circuit and says we must stop home prices from falling, I wonder whether these people took basic math in high school. Are they capable of looking at a chart and understanding a long-term average? The median value...

In one of the more ridiculous Keynesian theories to date, Gauti B. Eggertsson at the New York Fed comes to the conclusion Tax Cuts Will Deepen The Recession . Simple logic would dictate that letting people and businesses keep more of their money would be a good thing but amazingly Eggertsson comes to the opposite conclusion C L I P And as soon as the bridges are fixed and the potholes patched and nothing happens, the Keynesian clowns will be back at it wanting government to spend still more taxpayer money. Not one Keynesian ever has said what happens once...

The Federal Reserve cut its economic outlook for 2009 on Wednesday and warned that the United States economy would face an “unusually gradual and prolonged” period of recovery as the country struggles to climb out of a deep global downturn.

One of the chief mandates of the U.S. Federal Reserve is to manage the nation's monetary stock. This essay analyzes the historic growth of the American monetary stock (or aggregates) since 1960 and looks at some recent developments revealing a marked adjustment in policy. These changes are a direct response to the on-going worldwide financial crisis that escalated in September 2008 following the collapse of Lehman Brothers C L I P The Fractional Reserve Banking System Fractional reserve banking is the practice whereby the value of issued bank loans far exceeds the amount of cash held in reserve. 2 Assuming...

... (5) The easiest method to raise the money from Wall Street is a securities transfer tax, a tax that has a negligible impact on the average investor. (6) This transfer tax would be on the sale and purchase of financial instruments such as stock, options, and futures. A quarter percent (0.25 percent) tax on financial transactions could raise approximately $150 billion a year. (7) The United States had a transfer tax from 1914 to 1966. The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 38 Stat. 745)) levied a 0.2 percent tax on all sales or...