Federal Reserve losing control

[isachar]

Freemason,

He says *IF the credit crisis deepens* we might still get a recession. We're in one now in spite of any skewed numbers that say otherwise.

Read Doliner as presented by isachar above, and decide which of these guys you want to believe. I'd suspect that Leamer of UCLA is parroting a govt line but I've not seen the creds of either of these writers. So I use my own sense & experience to make the judgement, which is admittedly personal. To me now, any presentation by media or institution including govt is suspect.

You should see our local newspaper; they have a fixed practice of including a pic of prez Dub in every daily issue. Do I believe anything they print? No.

By definition, a recession is two successive quarters of negative economic growth. Accordingly, one only know for sure if there is or has been a recession until after it has begun.

Various prognosticators have different opinions as to whether the US entered a recession in Q407 (which would require Q108 to also be negative growth). The 'official' numbers for both quarters (Q's) won't be available until perhaps May (can't recall the exact dates for release of the relevant economic statistics).

Personally, I think the chances for us either being in one now, or that we soon will be, are quite high. But, like they say economicsts have predicted 10 out of the last 5 recessions. In truth, economists as a group are probably the least reliable at predicting such things since few of them live in the real world of main street (most being either academics or corporate shills), and their models are inherently unable to predict turning points.

I'd rely on anecdotal evidence from shop owners, landlords, contractors and small businesses, and primary data on jobs, new car sales, foreclosures, housing starts, new business formations, utility hookups, as well as your own behavior before I'd rely on an economists judgment as to whether we're in or will be in a recession.

The FED is pulling out all stops to (ostensibly) avoid a recession. Whether they're successful remains to be seen. They have been flooding the market with cheap money and the struggling banks and financial sector with liquidity in an unprecedented manner for several months now. I have no doubt the Pluge Protection Team has also been active in the futures markets since last August. Clearly, the circumstances are about as dire as any faced by this country since the 1920/1930's.

This unprecedented behavior isn't because they're worried about a run of the mill recession. IMO, they're worried about wholesale collapse of the credit markets and the destruction of asset values (and perhaps their and their friend's Cayman and Greek island retreats, and Leer jets).

Perhaps they will be successful in fending off negative economic growth - for now. Perhaps they won't.

In either case, the clear policy for the near term is to inflate by lowering interest rates below the rate of inflation and by flooding the struggling banks with cheap 'money' (literally 'bits' of credit on a computer) at easy terms in exchange for securities of dubious, little, or no current value.

[ninakat]

from Dan Norcini at Jim Sinclair's site:

original PDF file (emphasis mine)

(...)

What is particularly amusing to read is the comments of those pundits quoted by the wire service writers spinning today's latest helicopter money drop as somehow decidedly dollar friendly. It looks like we are back to the "this is positive for growth so it is positive to the dollar" spin. Maybe I am the one who is hopelessly confused but I fail to see how monetizing worthless debt is good for the dollar. What's next? Will the Fed get into the car-repo business and start buying them all up? I had no idea that Car-Max was going to get some new competition as the Fed opens a used car lot. I wonder if I will get a warranty on the drive train from them? I had better get one considering that the course the Fed has embarked on is going to result in me having to pay $100,000 for a used Ford Mustang before long!

Seriously, while Wall Street is positively giddy with delight that the Central Bank is going to buy their worthless crap by firing up the printing presses to the tune of $200 billion and counting, the rest of us who love our nation and can see where this is headed are both sickened and saddened by what our nation's economic system has become - it is nothing but a gigantic insiders' game where the "boys" regularly bail-out the stupidity and insatiable greed of their fellow cronies at the big investment banks at the expense of the average law-abiding citizen. Think about what we are witnessing here - those huge investment banks MADE GAZILLIONS OF DOLLARS IN COMMISSION PEDDLING the swill they concocted to their victims and as soon as they got into trouble, they ran screaming and crying to their "UNCLE FED" who is bailing them out "FOR THE GOOD OF THE SYSTEM."

This pathetic spectacle which is being played before our very eyes comes at the tragic expense of the next generation which will be saddled with the effects of this ruinously short-sighted policy. What needs to happen is for some of these institutions to go under - that might actually result in some sanity being restored to the lending system in the future but don't count on that happening anytime soon.

(...)

[isachar]

from Dan Norcini at Jim Sinclair's site:

original PDF file (emphasis mine)

...I fail to see how monetizing worthless debt is good for the dollar.

This pathetic spectacle which is being played before our very eyes comes at the tragic expense of the next generation which will be saddled with the effects of this ruinously short-sighted policy.

(...)

Ninakat,

He's spot on about monetizing worthless debt (which really means the cost of this worthless debt will be borne by every man woman and child in the country).

However, I disagree that the expense will be borne by 'the next generation'. I think these chickens are going to come home to roost, one way or another, sooner rather than later.

[Byrne]

Market panic after Bear Stearns reports

By Ambrose Evans-Pritchard
Last Updated: 6:40am GMT 11/03/2008

Panic swept the credit markets on reports of an insolvency crunch at both the US investment bank Bear Stearns and the mortgage giant Fannie Mae, triggering a dramatic surge in default insurance and rumours of yet another emergency rate cut by the US Federal Reserve.

Financial shares plummeted on Wall Street in another day of wild trading as the markets began to fear that the $200bn (£100bn) life-line pledged by the Fed last Friday would not be enough to halt a vicious downward spiral.

The Dow Jones index fell 153.54 to close at 11,740.15, breaking through the crucial support line of its January lows.

Credit default swaps (CDS) measuring bankruptcy risk on Bear Stearns debt rocketed from 246 points to 792 on fears that it had been unable to raise capital to cover mortgage losses and was preparing to invoke Chapter 11 bankruptcy protection.

The company denied the reports, insisting that it had $8bn of ready credit lines and enough funds to meet its debt obligations for the next year without having to sell assets or take out fresh debt. "There is no truth to the liquidity rumours," said a spokesman.

The bank's share price ended down 11pc at $62.30.

Lehman Brothers, the biggest mortgage underwriter, was also mauled on leaked reports that it planned to slash its worldwide workforce by 5pc. Lehman CDS contracts leaped 60 points to 395.

Almost every indicator of credit stress was flashing warning signals. The CDX index measuring default risk on US investment grade bonds rose to 190 and the iTraxxx Europe touched 150.

Bank of America said the Fed would have to cut rates to 1.5pc by the middle of the year. The futures markets have begun to price in the serious possibility of a 100 basis point drop next week.

Goldman Sachs said the Fed chairman, Ben Bernanke, might push through an emergency cut even sooner.

[ninakat]

Ninakat,

He's spot on about monetizing worthless debt (which really means the cost of this worthless debt will be borne by every man woman and child in the country).

However, I disagree that the expense will be borne by 'the next generation'. I think these chickens are going to come home to roost, one way or another, sooner rather than later.

Good point isachar. Dan Norcini writes for Jim Sinclair's site, and Sinclair has been saying "This is it" for several months now, meaning that things are breaking down now, and specifically between now and 2011. So when Norcini talks about the tragedy for the next generation, one can presume he's not excluding the present and simply projecting further into the future where things will never turn around for the next generation.

It's the short-sightedness (greed) that's the key problem. But that's the typical mindset, not just of the Fed but of policymakers -- let someone else worry about the mess later. Trouble is, the mess is gargantuan, and all these bailouts are simply going to exacerbate the problem so when it eventually hits, it's going to hit hard. Real hard from what I'm reading -- likely with hyperinflation, possibly as bad as in the Weimar Republic.

The new concern is the derivatives. $516 trillion of them. Here's a mainstream article talking about that little bump in the road.

Derivatives the new 'ticking bomb'
Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen

And, there's commentary by Jim Sinclair on the above article at his site: http://www.jsmineset.com/

Here's a picture of a 20 Billion Mark banknote from 1923:

More pictures and info here.

[MASONIC PLOT]

They will cut rates to zero before this is over, free money for everyone.

[whipstitch]

Dollar Falls to Record Low on Concern Fed Package Won't Succeed

By Ye Xie and Gavin Finch

March 12 (Bloomberg) -- The dollar fell to a record below $1.55 per euro as firms from Citigroup Inc. to Goldman Sachs Group Inc. said the Federal Reserve's plan to inject $200 billion into the banking system may fail to break the freeze in money-market lending.

The U.S. currency erased almost half of yesterday's 1.6 percent rally versus the yen, the biggest in six months, which came after the Fed said it would lend Treasuries to financial institutions in return for mortgage debt. Traders bet the Fed will cut rates by as much as three quarters of a percentage point next week to avert a recession, while the European Central Bank keeps borrowing costs unchanged.

``It's difficult for the dollar to gain traction,'' said Paresh Upadhyaya, who helps manage $50 billion in currency assets at Putnam Investments in Boston. ``The Fed is probably running out of options; the market is fixated on interest-rate differentials, which are clearly negative for the dollar.''

The dollar fell to $1.5504 per euro, the weakest since the euro's 1999 debut, and traded at $1.5484 at 11:19 a.m. in New York, from $1.5338 yesterday. The previous historic low was set yesterday. It dropped to 102.67 yen from 103.42, within 1.5 yen of an eight-year low. The euro rose to 158.95 yen from 158.61.

Euro gains were limited after Luxembourg Finance Minister Jean-Claude Juncker told reporters in Brussels he is ``very vigilant'' on exchange rates. The remark echoes comments from March 4, when the region's finance ministers said they were concerned the euro's rally risks hurting the economy.

Yen Versus Rand

The yen climbed against a dozen major currencies, including a 1.5 percent gain versus South Korea's won, as a government report showed Japan's economy grew an annualized 3.5 percent last quarter, faster than the 2.3 percent median forecast of economists surveyed by Bloomberg News.

The euro extended its climb against the dollar earlier after a European Union report showed industrial production in the region increased for the first time in three months in January. It rose 0.9 percent from the prior month, more than twice the rate forecast by economists surveyed by Bloomberg.

The euro also rose on speculation ECB President Jean-Claude Trichet will highlight inflation risks today at a press conference. ECB council member Axel Weber yesterday said that he sees ``no room'' to lower rates.

The ECB's main rate is 1 percentage point above the Fed's 3 percent target for overnight loans between banks. The euro interbank offered rate for three-month euro loans rose a seventh day, by 1 basis point to 4.61 percent, the highest since Jan. 7, the European Banking Federation said.

`Stay Short'

The dollar dropped to $2.0187 per U.K. pound from $2.0064, and to 1.0241 Swiss francs from 1.0335.

Policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed yesterday on a second round of emergency- loans to curb rising money-market rates, on top of the Fed loans.

``Read the need for such new measures as being a symptom of what ails the world and not a panacea for its problems,'' said David Simmonds, the London-based global head of currency research at Royal Bank of Scotland Plc, the world's fourth- biggest foreign-exchange trader. ``Stay short dollars.''

The collapse of the U.S. subprime mortgage market has caused losses and writedowns of $190 billion at the world's biggest financial institutions. Concerted action announced Dec. 12 temporarily eased the shortage of cash in money markets.

`Not a Panacea'

The Fed's measures are ``not a panacea, more like an aspirin for the dollar,'' analysts led by Daniel Tenengauzer, New York-based head of global currency strategy at Merrill Lynch & Co., wrote in a research note today. ``There is a reasonable risk that this Fed move reflects the depth of their concern with U.S. asset markets, not a Fed formula to resolve U.S. asset- market difficulties.''

Goldman Sachs analysts said in a report that ``we are not convinced that yesterday's move will solve all the multiple challenges facing credit markets and the financial system.'' Citigroup said ``credit concerns are likely to persist and averting a drawn out recession is becoming increasingly challenging.''

The dollar will extend declines against most major currencies in the next six months as the U.S. economy slows, a survey of 5,430 Bloomberg users showed.

March 18 Bets

The Dollar Index traded on ICE Futures in New York, which compares the currency to those of six trading partners, declined to 72.54. It set a record low of 72.462 on March 7.

Traders bet the Fed will cut its target rate as much as 0.75 percentage point on March 18 to keep the U.S. from falling into a recession. The likelihood of a reduction to 2.25 percent was 68 percent, according to futures on the Chicago Board of Trade. The balance of bets is on a cut to 2.5 percent.

``There has not yet been a U.S. dollar crisis,'' Henry Kaufman, president of Henry Kaufman & Co. in New York and the former chief economist at Salomon Brothers Inc., said in a Bloomberg Radio interview yesterday. ``Dollar weakness is critical only if it becomes disorderly, and so far in the price movements we haven't seen real gapping taking place.''

To contact the reporters on this story: Ye Xie in New York at Yxie6@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

[MASONIC PLOT]

Identical Elements of the 1929 and Current Depressions

1929 Depression

Liquidity expansion:
In the "roaring twenties" the value of shares in the
New York Stock Exchange, the biggest in the world,
had increased five fold

Stock market crash:
1932: stocks had lost 89% of their 1929 peak value
1929 share value was not reached again until 1954

Bank failures:
President Hoover refused to assist failing banks
All banks failed in 1932

GDP:
Down 50% in 1932

Unemployment:
13 million workers became unemployed with no relief to speak of; a third of the population sank into abject poverty

Fake investment (gambling) funds:
Brokers' loans, buying on margin: investors could pay down only a percentage of what they were investing


Current Depression

The FED has continued to pump currency into the stock market and investment funds resulting in the dot.com, stocks, and housing bubbles bursting

Stock market crash:
A series of crashes beginning in the 1980s

Bank failures:
Banks are failing worldwide but most failures are being covered up by central bank loans
Banks are having to "write off" tens of billions of bad investments and are now going hat-in-hand to foreign investors to sell a piece of their business

GDP::
20% decline in the GDP and a 50% decline in the value of the dollar

Unemployment:
Unemployment figures are falsified; at least 25% of American workers are unemployed or underemployed
A third of the population lives in poverty

Fake investment (gambling) funds:
Hedge funds: The estimated assets of these funds have risen from $491 billion in 2000 to $1.75 trillion in 2007. The funds' complicated financial transactions, mostly secret and unregulated, use debt as a tradeable security in the search for short term gain

In both the Great Depression and today, interest rates have been held artificially low for an extended period. As a result, both then and now, extensive wealth has been transferred from the US overseas. In the 1920's, this was done to help save the banks in the UK. Today, the main beneficiary seem to be China.

The result of the low interest rates in both cases was a stock market bubble and various other bubbles.

The situation will be worse this time, because back then the country still had a solid industrial base. The US economy today is 90% service-based.


Seems that he target in the last depression was privately held gold. The target of this one is privately held real estate.

[slow_dazzle]

Right now I see it at $110:10 for LSC on the Nymex Exchange. Part of the reason is the depreciation of the $ against other currencies. Nevertheless, the price is going to go up and up and up. Some people are talking $120 by summer and $150 by the end of 2008.

And the Fed just pumped in $200 billion of funny money to keep the system solvent. Not "liquid' because this crisis doesn't seem to be a credit or liquidity crisis rather than a solvency crisis.

The financial system is going to fall to bits as oil prices keep climbing up and up, despite what the silly cornucopians might claim. Home loans will be foreclosed, companies will continue to make people redundant ("downsize" is a euphemism) and more and more people are going to be impoverished. This is all because the supply and demand lines for oil have intersected.

Once the real decline sets in this will get worse. Most people who know about this agree on a 2-3% decline year on year. Some people talk of up to 10% depending upon how the figures are done. Either way we are in financial meltdown and no amount of guff about the NWO or Satanic elites will change that.

I think it was et in Arcadia ego who once said "hard times a coming" in a post not so long ago. By god he was right.

Unless, of course, zero point energy or Tesla magic nonsense will save our butts. I wouldn't bet on it even if I were a gambler.

PS Since I started typing the price has gone up to $110:17.

[MASONIC PLOT]

Maybe Steve Fosset will show up from his visit to the next dimension with good news...

[freemason9]

I supplied that earlier posting from MSNBC as a contrast. I don't necessarily buy into it; in fact, I definitely do not. But there is some humor to be gained from it.

I stopped believing federal information releases back during Reagan's tenure. The unemployment rate understates unemployment, the inflation rate understates inflation, and the stock market has nothing at all to do with the economic well-being of America.

In the same way, the current "official" method of identifying recessions is meaningless, because having two consequetive quarters of contraction depends upon who is measuring it, and how it is measured.

I know this, though.

Wages and salaries for most of us have been stagnant for over 25 years. Inflation has been high for the last four years. Energy costs have risen even faster than health care, which averages in the double digits.

Oil will get more expensive as the dollar falls in value; and the more dollars are circulated by the feds, the lower the value will go.

This economic crisis is only partly fueled by the credit crunch and the housing bubble. Remember, 2/3 of our economy depends upon consumer spending. The money is gone, folks. It is just gone, that's all.

The stock market is a lottery, nothing more, nothing less. Anyone earning $75,000 or under is a fool to play the market. Go to the conservative funds, and don't mess with it. If you start to feel like a sophisticated "investor," be prepared to lose your ass.

Sorry if I rambled there, but the stock market's time is nearly over, and corporations need to be outlawed.

[Joe Hillshoist]

and corporations need to be outlawed.

No wonder people think Freemasons are evil.

[Byrne]

Carlyle Capital Corporation go bust - US$16.6 BN ++++ down the tubes...more to follow



We posted about the woes of Carlyle Capital Corporation last Friday, March 07, 2008 - Carlyle leads the way with Triple A mortage Fire Sales as margin calls cannot be met.

Now today they have issued notice that effectively they have gone bust - Carlyle Capital Corporation (CCC) Unable To Reach Agreement With Lenders; Lenders Likely to Take Possession of Remaining Assets Carlyle Capital Corporation Limited listed on Euronext Amsterdam ticker symbol: CCC; ISIN: GG00B1VYV826 it is a Guernsey investment company that was formed on August 29, 2006 and completed its initial offering in July 2007. Carlyle Investment Management L.L.C. (“CIM”) manages the Company pursuant to a management agreement. - CCC has not been able to reach a mutually beneficial agreement to stabilize its financing.

Which means they have run out of money.

The only assets held in the Company’s portfolio as of today are U.S. government agency AAA-rated residential mortgage-backed securities (RMBS). (There are of course avariety of views as to whether these actually represent assets - ie they have actually no tradeable value - like Lord Patel's 600 Vinyl LP's)

In the last week Company received margin (and could not meet margin calls of more than US$400 million.

Unable to meet them the lenders proceeded to foreclose on the RMBS collateral.

Beware - adjust your clothing before reading the next sentence.

In total, by last night, the Company has defaulted on approximately $16.6 billion of its indebtedness. The remaining indebtedness (?) is expected soon to go into default.

Today we expect margin calls tomorrow of approximately US$97.5 million.

CCC IPO'd last July at US$ 20 a share , today they are worthless. Carlyle Gropup are said to own 15% of CC .Says something about the management skills of Carlyle Investment Management L.L.C.

Share Price Graph

According to CCC's annual report, counterparties for its repurchasing agreements as of the end of 2007 (ie the folks who are left holding those wonderful AAA-rated residential mortgage-backed securities (RMBS)) were Bank of America, Bear Stearns, BNP Paribas, Calyon, Citigroup, Credit Suisse, Deutsche Bank, ING, JP Morgan, Lehman Brothers, Merrill Lynch and UBS.

[chiggerbit]

Oil will get more expensive as the dollar falls in value; and the more dollars are circulated by the feds, the lower the value will go.

Is that what accounts for the sudden jump in price of oil the last couple of weeks, fm, the plummeting value of the dollar?

[Gouda]

"With brush fires, you clear out the underbrush and then you can have some growth again. A lot of people will get hurt, a lot of hard-working blue-collar workers, but at some point you have got to draw a line in the sand and let the markets do what they're going to do. And sometimes a recession, as painful as it is, it blows out all the bad that's in the economy."

-- Todd Benjamin, CNN International Business Editor, Wall Street aficionado

______________________________________________________________

In other words:

"The capitalist state is owned and operated by the capitalist class. Under conditions of stability and productivity, it represents capital-in-general. This often means that it has to suppress or even eliminate certain fractions of capital – whose range of view is limited by its own business cycle – in order to ensure continued power by the class as a whole.

In the classic Brando film “Burn,” based loosely on the history of Haiti, the colonial military commander orders an entire island colony set ablaze, including its lucrative sugar plantations, in order to crush a Black proletarian rebellion. One of the island’s capitalists pleadingly objects that the commander has wiped out the island’s profits. The commander then explains that the destruction of the island is necessary to send the message to other workers on the rest of the colonized islands, and that this “pacification” is required to ensure profits for all, not just over the next business cycle, but for the next decade."
[url=http://www.fromthewilderness.com/free/ww3/110105_exterminism_katrina2.shtml]
-- Stan Goff[/url]