Another Day, Another Euro

[cwd]

Entering the Greatest Depression in History

More Bubbles Waiting to Burst

 

While there is much talk of a recovery on the horizon, commentators are forgetting some crucial aspects of the financial crisis. The crisis is not simply composed of one bubble, the housing real estate bubble, which has already burst. The crisis has many bubbles, all of which dwarf the housing bubble burst of 2008. Indicators show that the next possible burst is the commercial real estate bubble. However, the main event on the horizon is the “bailout bubble” and the general world debt bubble, which will plunge the world into a Great Depression the likes of which have never before been seen.

 

In late June of 2009, the BIS reported that as a result of stimulus packages, it has only seen “limited progress” and that, “the prospects for growth are at risk,” and further “stimulus measures won't be able to gain traction, and may only lead to a temporary pickup in growth.” Ultimately, “A fleeting recovery could well make matters worse.”

 

The BIS has said, in softened language, that the stimulus packages are ultimately going to cause more damage than they prevented, simply delaying the inevitable and making the inevitable that much worse. Given the previous BIS warnings of a Great Depression, the stimulus packages around the world have simply delayed the coming depression, and by adding significant numbers to the massive debt bubbles of the world’s nations, will ultimately make the depression worse than had governments not injected massive amounts of money into the economy.

 

Worth reading the whole thing.

 

 

 

a good summation of events that have been chronicled here. From the same article

 

China’s economy primarily relies upon the United States as a consumption market for its cheap products. However, “The slowdown in U.S. consumption amid a credit crunch has exposed the weaknesses in this export-led financing model. So now China is turning instead to cheap debt for funding, a shift suggested by this year’s 35% or so rise in bank loans.”[31]

 

In August of 2009, it was reported that China is experiencing a “stimulus-fueled stock market boom.” However, this has caused many leaders to “worry that too much of the $1-trillion lending binge by state banks that paid for China's nascent revival was diverted into stocks and real estate, raising the danger of a boom and bust cycle and higher inflation less than two years after an earlier stock market bubble burst.”[32]

 

The same reasoning needs to be applied to the US stock market surge. Something is inherently and structurally wrong with a financial system in which nothing is being produced, 600,000 jobs are lost monthly, and yet, the stock market goes up. Why is the stock market going up?

[cwd]

From a free e-mail from Gary North. His conclusions are similar to the Greater Depression author. Scary

 

CONCLUSION

 

Bankers see what is coming: more defaults, more real

estate declines, more foreclosures, and more write-downs.

They remain in paralysis mode.

 

The economy has been hollowed out by monetary

inflation, followed by a sharp decline in output. Demand

is low. Caution is at the forefront.

 

Businesses are not going to hire new workers when

things turn up. They are going to add hours to the workers

who are still on the payroll.

 

The effect on the work force is going to be the

Keynesian's nightmare: a recovery without increased

spending. They will demand more Federal deficits. They

will demand another stimulus. The government will absorb

more investment dollars. The government will crowd out the

private sector.

 

Recovery without new capital? It's not possible.

 

We now live in pink slip nation. We will live in it

for a long time.

[quanta]

Your worst nightmare

 

Cuba, in the grip of a serious economic crisis, is running short of toilet paper and may not get sufficient supplies until the end of the year, officials with state-run companies said on Friday.

 

Is this a portent of things to come?

 

Big hint: Save anything before you are wiped out!

 

[Charmin]

Recovery without new capital? It's not possible.

 

A recovery with new capital from printed federal dollars that gets soaked up by whomever needs it. The "law" will be used to direct it wherever it best meets their agenda.

[cwd]

Have you wonder where the money to drive the SM has come from?

This writer makes some arguments that seem reasonable to me

 

What does it mean?

 

It means the revered professor Bernanke figured out a way to circumvent Congress and dump more than a trillion dollars into the stock market by laundering the money through the big banks and other failing financial institutions. As Kessler suggests, Bernanke knew the liquidity would pop up in the equities market, thus, building the equity position of the banks so they wouldn't have to grovel to Congress for another TARP-like bailout. Bernanke's actions demonstrate his contempt for the democratic process. The Fed sees itself as a government-unto-itself.

 

Over at Zero Hedge, Tyler Durden did the math and figured that the recent 45% surge in the S&P 500 had nothing to do with the fictional economic "recovery", but was just more of the Fed's hanky panky. Durden noticed that the money that's been sluicing into stocks hasn't (correspondingly) depleted the money markets. That's the clue that led him to the truth about Bernanke's 6 month stock rally.

 

Zero Hedge: "Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts!

 

Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount. Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer who net equity was almost negative on March 31, could have some semblance of confidence back and would go ahead and max out his credit card. Alas, as one can see in the money multiplier and velocity of money metrics, U.S. consumers couldn't care less about leveraging themselves any more."

 

So, the magical "Green Shoots" stock market rally was fueled by a mere $400 billion from the money markets. The rest ($2.3 trillion) was main-lined into the market via Bernanke's quantitative easing (QE) program, of which Krugman and others speak so highly.

 

Wouldn't you like to know if Bernanke sat down with G-Sax and JPM executives and mapped out the details of this swindle before the printing presses ever started rolling?

 

So, how long can this kind of fakery go on before our creditors grow weary of dealing with chiselers and stop buying US Treasuries altogether? Here's a blurp from Friday's Wall Street Journal on that very topic:

 

Global research

[Charmin]

Your worst nightmare

 

Cuba, in the grip of a serious economic crisis, is running short of toilet paper and may not get sufficient supplies until the end of the year, officials with state-run companies said on Friday.

 

Is this a portent of things to come?

 

Big hint: Save anything before you are wiped out!

 

 

In Cuba there is land to grow things, but who would want to slave at it when the population gets $20 per month and beans & rice to live on. There isn't much incentive to work. Remember, Fidel was for "change" and it came by nationalization. If you don't think this country will end up operating under the same rules of deployment some day then you might be in for a rude awakening.

[GregFokker]

The same reasoning needs to be applied to the US stock market surge. Something is inherently and structurally wrong with a financial system in which nothing is being produced, 600,000 jobs are lost monthly, and yet, the stock market goes up. Why is the stock market going up?

Because the value of the dollars in which it's being measured is going down. The stock market valued in, say, gasoline or Canadian or New Zealand dollars isn't going up at all. But in devaluing US dollars, yes, it's going up.

[Charmin]

Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer who net equity was almost negative on March 31, could have some semblance of confidence back and would go ahead and max out his credit card."

 

I believe it was partly to save pension funds. I haven't heard much about the government having to bail out many of them lately. I believe that many people needed that kind of confidence. States are having a difficult time in this area right now. Even in my own company, the pension fund is down 37% and the company needs big bucks to fund the shortfall and eventually will pay huge penalties if the market doesn't provide the makeup.

 

That's why I was kinda stressing the fact that the market would need to go up another 30-40% to regain this shortfall in many pension funds or else more cost cutting will continue across the land.

 

Yes, more cost cutting, job cutting and whatever else will continue. Sales are down big time - even when it comes to electricity consumption.

 

As for maxing out credit cards - I don't think so. U.S. June Consumer Credit falls $10.3 billion and the estimate was 5.0 billion. They are cutting consumer credit.

[POTUS]

Zero Hedge: "Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts!

 

Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount.

 

Absolute drivel backed by voodoo math meant to appeal to the feeble minded.

 

The increase in "purchasing power" came from the increase in the notional value of the listed stocks. $2.3 Trillion did not move into stocks. Only enough flowed into stocks to force the total valuation up.

 

Just like if one house on street of 50 goes up by $100k, it doesn't take $5M of investment to move the "average" price of all of them up by $100K.

[quanta]

I believe it was partly to save pension funds. I haven't heard much about the government having to bail out many of them lately. I believe that many people needed that kind of confidence. States are having a difficult time in this area right now. Even in my own company, the pension fund is down 37% and the company needs big bucks to fund the shortfall and eventually will pay huge penalties if the market doesn't provide the makeup.

 

That's why I was kinda stressing the fact that the market would need to go up another 30-40% to regain this shortfall in many pension funds or else more cost cutting will continue across the land.

 

Yes, more cost cutting, job cutting and whatever else will continue. Sales are down big time - even when it comes to electricity consumption.

 

As for maxing out credit cards - I don't think so. U.S. June Consumer Credit falls $10.3 billion and the estimate was 5.0 billion. They are cutting consumer credit.

 

Yeah, nobody is really tracking the implosion of pension funds, possibly because they take so long to implode...

 

July 22: Bailout Watch 571: $6.25 Billion Worth of Delphi Pensions Dropped on PBGC

 

July 31: PBGC Moves to Protect Pensions at Metaldyne Corp.

 

August 5: PBGC Assumes Hurd Windows & Doors Inc. Pension Plans

 

 

Maybe there is a Pension fund Implode-O-Meter?

[Charmin]

Yeah, nobody is really tracking the implosion of pension funds, possibly because they take so long to implode...

 

July 22: Bailout Watch 571: $6.25 Billion Worth of Delphi Pensions Dropped on PBGC

 

July 31: PBGC Moves to Protect Pensions at Metaldyne Corp.

 

August 5: PBGC Assumes Hurd Windows & Doors Inc. Pension Plans

 

 

Maybe there is a Pension fund Implode-O-Meter?

 

Man, you dragged that up fast. I was so lazy I hadn't looked for evidence in a long time. Thanks

 

Just think what the payouts are for the PBGC if it continues.

 

I told the president of my company to dump the pension plan and give the employees their lump sum and let them manage it themselves through the 401k. Why? Because the employees could lose money as bad as the idiot fund managers who don't know how to manage risk. Let the employees learn how to manage risk at their own discretion and avoid the bureaucrat between them and their retirement money. It certainly would benefit the company anyway. The company might end up forking over 1.8 million just to get the pension fund back in order.

 

Same goes for heathcare: I don't want a bureaucrat between myself and my doctor.

[Charmin]

Yipeee

 

"The 2nd quarter earnings reporting period is over, and next week has a fairly light schedule of potential market moving economic reports coming out, but including Retail Sales, and Consumer Sentiment. To see the full schedule, day and times of the releases, click here, and look on the left side of the page it takes you to.

 

We expect the market will move now on concerns about the overbought condition and whether it has factored in more optimism about the potential economic recovery than is realistic." http://syhardingblog.com/new/

[Jimi]

Absolute drivel backed by voodoo math meant to appeal to the feeble minded.

 

The increase in "purchasing power" came from the increase in the notional value of the listed stocks. $2.3 Trillion did not move into stocks. Only enough flowed into stocks to force the total valuation up.

 

Just like if one house on street of 50 goes up by $100k, it doesn't take $5M of investment to move the "average" price of all of them up by $100K.

Yup.

 

Lot of incoherence out there. Here is some coherence on the issue:

 

The anal cysts and financial news reporters who observe this enormous swamp of short-term money market securities, and talk about “cash on the sidelines” as if it is spendable in aggregate immediately reveal themselves to be unaware of the concept of equilibrium and of the nature of secondary markets (where there must be a buyer for every security sold, and a seller for every security bought).

 

If you sell your stocks or bonds or money market securities, they don't cease to exist. Somebody else has to purchase them. Somebody else has to hold them. As I've said numerous times, if Ricky wants to sell his money market funds and buy stocks, then his money market fund has to sell money market securities to Nicky, whose cash goes to Ricky, who uses the cash to buy stocks from Mickey. In the end, the cash that was held by Nicky is now held by Mickey. The money market securities that were previously held by Ricky are now held by Nicky. And the stocks that were once held by Mickey are now held by Ricky. There is exactly as much “money on the sidelines” after these transactions as there was before. Money doesn't go into or out of the stock market – it goes through it. Prices don't move because supply exceeds demand or demand exceeds supply. In equilibrium, the two are identical because that's exactly what a trade is. Prices move because the buyer is more eager than the seller, or vice versa.

Hussman

[swordfish]

true unemployment statistics

http://economicedge.blogspot.com/2009/08/e...chart-form.html

[Jetlag]

Same goes for heathcare: I don't want a bureaucrat between myself and my doctor.

 

 

Yeah if you happen to get a couple of fingers chopped off for some reason you'll be able to discuss with your doctor right on the operating table which ones you want to keep if you only got coverage for less than the total fingers that got chopped instead of having a bureaucrat demand and pay for all the fingers.