Lehman likely to follow Bear Stearns into the grave-Ken Rogoff
Maverick
equitycollector
Aug 21, 2008
http://groups.google.co.in/group/equitycollector/
browse_thread/thread/aa1c6d39f9d09706?hl=en
Yesterday, Kenneth S. Rogoff jumped on the bandwagon, warning that not ONLY will we see many mid-sized banks go belly-up in the months ahead; we’re about to see one of the biggest banks or investment banks in the nation crash and burn!
Rogoff, former Fed governor and Chief Economist of the International Monetary Fund and currently professor of economics at Harvard University, went even farther; warning that and I quote ...
"Fannie Mae and Freddie Mac are not going to exist in their present form in a few years."
As if to validate Mr. Rogoff’s warning, financial stocks plummeted AGAIN yesterday. Lehman cratered a staggering 13% in a single session and Morgan Stanley, Merrill Lynch, Citigroup and Bank of America plunged in tandem.
And late yesterday, Goldman Sachs slashed its third-quarter forecasts on most Wall Street banks, pushing financials even lower after hours.
Lehman Brothers is on life support: In the second quarter, Lehman lost $2.8 billion, mostly in residential real estate investments.
Now, JPMorgan Chase says the firm may have to write-down $4 billion in assets in the third quarter to cover mounting losses from bad bets made in the mortgage market.
Bank of America is suffering huge loan losses: When BofA bought Countrywide, it was thought that the big bank would save the subprime lender from failure. Now, it’s looking more like Countrywide could bring Bank of America to its knees.
American International Group America’s largest insurer is on the ropes: AIG plunged 5.9% yesterday after Goldman Sachs warned that the company may have to pay $20 billion on credit-default swaps, suffer ratings-downgrades on its debt and have to raise capital on a "large scale."
CapitalOne is headed for disaster: Just this Monday, shares of Capital One Financial plunged nearly 5% after the credit card lender released data showing loan losses in its auto finance and international divisions are soaring.
Saturday, August 23, 2008
Friday, August 22, 2008
Why does fiat money seemingly work?
Why does fiat money seemingly work?
written by Trotsky, edited by Mish
Mish's Global Economic Trend Analysis
June 27, 2007
http://globaleconomicanalysis.blogspot.com/2007/06/
why-does-fiat-money-seemingly-work.html
Flashback: Rome 27 BC
Rome’s history of inflation and money debasement actually began with Cesar’s successor Augustus, whereby his method was at least not a prima facie fraud. He simply ordered the mines to overproduce silver in an attempt to finance the empire that had grown greatly under Cesar and himself.
In AD 274 Aurelius entered the scene with a well-intentioned monetary reform, which fixed the silver-copper content of the then most widely used coin (the Antonianus)at 1:20 – however, just as soon as this reform was instituted, the silver content resumed its inexorable decline.
The leap from clipping coins to outright fiat money
There are two distinct intertwined historical developments that led ultimately to the present system.
Goldsmiths become bankers
The idea of fractional reserve banking was first introduced by the forerunners of our modern day banking system, the goldsmiths.
Tally sticks and Charles II
The other historical development that can be seen as an ancestor of the modern day fiat money system is England’s application of the medieval ‘tally stick’ method of recording debt payments.
written by Trotsky, edited by Mish
Mish's Global Economic Trend Analysis
June 27, 2007
http://globaleconomicanalysis.blogspot.com/2007/06/
why-does-fiat-money-seemingly-work.html
Flashback: Rome 27 BC
Rome’s history of inflation and money debasement actually began with Cesar’s successor Augustus, whereby his method was at least not a prima facie fraud. He simply ordered the mines to overproduce silver in an attempt to finance the empire that had grown greatly under Cesar and himself.
In AD 274 Aurelius entered the scene with a well-intentioned monetary reform, which fixed the silver-copper content of the then most widely used coin (the Antonianus)at 1:20 – however, just as soon as this reform was instituted, the silver content resumed its inexorable decline.
The leap from clipping coins to outright fiat money
There are two distinct intertwined historical developments that led ultimately to the present system.
Goldsmiths become bankers
The idea of fractional reserve banking was first introduced by the forerunners of our modern day banking system, the goldsmiths.
Tally sticks and Charles II
The other historical development that can be seen as an ancestor of the modern day fiat money system is England’s application of the medieval ‘tally stick’ method of recording debt payments.
Thursday, August 21, 2008
A Fabrication Bottleneck or Something More
A Fabrication Bottleneck or Something More
GoldMoney Alert
James Turk
17 August 2008
http://www.goldmoney.com/en/commentary/2008-08-17.html
The Internet is abuzz with reports that precious metal dealers have stopped selling coins and small bars because they have run out of inventory.
For example, Franklin Sanders reports on goldprice.org that his inability to purchase product from his suppliers is something that he has never seen before in his "twenty-eight years of brokering silver and gold." On Friday afternoon, Kitco posted the following notice: "Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products."
The rush out of fiat currency and into precious metals on this latest drop in prices is not just a North American phenomenon. The Times of India reports: "There is a shortage of the yellow metal in the bullion banks and traders."
The bottom line is that it is difficult, if not impossible, to buy coins and small bars. Mints and refiners are back-ordered. Dealer shelves are bare. But the question is, why? Is it just a fabrication bottleneck, or is something else happening?
GoldMoney Alert
James Turk
17 August 2008
http://www.goldmoney.com/en/commentary/2008-08-17.html
The Internet is abuzz with reports that precious metal dealers have stopped selling coins and small bars because they have run out of inventory.
For example, Franklin Sanders reports on goldprice.org that his inability to purchase product from his suppliers is something that he has never seen before in his "twenty-eight years of brokering silver and gold." On Friday afternoon, Kitco posted the following notice: "Due to market volatility and higher demand in the entire industry, we are anticipating delays in supply of all bullion products."
The rush out of fiat currency and into precious metals on this latest drop in prices is not just a North American phenomenon. The Times of India reports: "There is a shortage of the yellow metal in the bullion banks and traders."
The bottom line is that it is difficult, if not impossible, to buy coins and small bars. Mints and refiners are back-ordered. Dealer shelves are bare. But the question is, why? Is it just a fabrication bottleneck, or is something else happening?
Wednesday, August 20, 2008
Dr. Lee Carlson's review of Chain of Blame
Dr. Lee Carlsons review of
Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis
Amazon.com
July 26, 2008
http://www.amazon.com/review/R1GSVQVRQZGC4E/ref=cm_cr_rdp_perm/
From a quantitative perspective, to sort through the current "mortgage mess" would take an intense effort, requiring a large number of researchers and computer time. No one has performed this kind of analysis as of yet, but there have been quite a number of individuals who have given anecdotal and semi-historical accounts of the turmoil in the credit/mortgage markets in the last few years.
There is of course an obvious danger in giving such a narrative account: it imputes market expertise to these individuals at a level that cannot be justified, given the complexities of the financial markets. No individual, whether a low-level analyst or the chief executive officer of a major mortgage firm, has the intellectual capacity or market savvy to describe or move the markets to a degree that is typically reported in the popular and financial press. Such individuals may think they do, and their actions and boasting reflect the mental confabulation that they have fallen prey to, but at best they have a limited picture of financial dynamics, and whatever monetary success they have is due to events that are completely out of their control. Many authors and reporters though have succumbed to an unjustified admiration as regards the senior management of financial firms, wherein they have assumed, falsely, that those who occupy the top echelons of the company hierarchy have special insight or knowledge into financial events that others do not. Frequently these managers are given accolades and awards for this expertise, thus exacerbating the excess of veneration devoted to them.
The authors use the savings and loan fiasco as an example of how things can go completely amok when an economic sector is suddenly deregulated, and how the Washington peddlers of influence can pretend to be in favor of free markets but instead game the system to favor themselves and a few others in their cabal. The authors report the savings and loan fiasco as costing the taxpayers $150 billion: tax dollars extracted from them coercively by those in government at the time who preached about the moral and economic superiority of the "free market". They love "free markets" as long as they do not cost them money. If they do, they quickly use government resources and regulation to "help" the consumer and "stabilize" the economy, masking their real intentions of protecting their economic status and that of their financially incompetent buddies. Put out on their own to compete in a truly free market without the arbitrary and capricious assistance of the federal government, this gang of moochers would fall flat on their faces.
It would take a gargantuan effort from the members of the populace to rid themselves not only of the irrational individuals who populate the governmental hierarchies and monetary regulatory agencies, but also to once and for all rid themselves of the excess of veneration paid to those who head the financial centers of the world.
Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis
Amazon.com
July 26, 2008
http://www.amazon.com/review/R1GSVQVRQZGC4E/ref=cm_cr_rdp_perm/
From a quantitative perspective, to sort through the current "mortgage mess" would take an intense effort, requiring a large number of researchers and computer time. No one has performed this kind of analysis as of yet, but there have been quite a number of individuals who have given anecdotal and semi-historical accounts of the turmoil in the credit/mortgage markets in the last few years.
There is of course an obvious danger in giving such a narrative account: it imputes market expertise to these individuals at a level that cannot be justified, given the complexities of the financial markets. No individual, whether a low-level analyst or the chief executive officer of a major mortgage firm, has the intellectual capacity or market savvy to describe or move the markets to a degree that is typically reported in the popular and financial press. Such individuals may think they do, and their actions and boasting reflect the mental confabulation that they have fallen prey to, but at best they have a limited picture of financial dynamics, and whatever monetary success they have is due to events that are completely out of their control. Many authors and reporters though have succumbed to an unjustified admiration as regards the senior management of financial firms, wherein they have assumed, falsely, that those who occupy the top echelons of the company hierarchy have special insight or knowledge into financial events that others do not. Frequently these managers are given accolades and awards for this expertise, thus exacerbating the excess of veneration devoted to them.
The authors use the savings and loan fiasco as an example of how things can go completely amok when an economic sector is suddenly deregulated, and how the Washington peddlers of influence can pretend to be in favor of free markets but instead game the system to favor themselves and a few others in their cabal. The authors report the savings and loan fiasco as costing the taxpayers $150 billion: tax dollars extracted from them coercively by those in government at the time who preached about the moral and economic superiority of the "free market". They love "free markets" as long as they do not cost them money. If they do, they quickly use government resources and regulation to "help" the consumer and "stabilize" the economy, masking their real intentions of protecting their economic status and that of their financially incompetent buddies. Put out on their own to compete in a truly free market without the arbitrary and capricious assistance of the federal government, this gang of moochers would fall flat on their faces.
It would take a gargantuan effort from the members of the populace to rid themselves not only of the irrational individuals who populate the governmental hierarchies and monetary regulatory agencies, but also to once and for all rid themselves of the excess of veneration paid to those who head the financial centers of the world.
Tuesday, August 19, 2008
List of recessions in the United States
List of recessions in the United States
Wikipedia
http://en.wikipedia.org/wiki/List_of_recessions
Panic of 1797 (1797-1800)
The effects of the deflation of the Bank of England crossed the Atlantic Ocean to North America and disrupted commercial and real estate markets in the United States and the Caribbean. Britain's economy was greatly affected by developing disflationary repercussions because it was fighting France in the French Revolutionary Wars at the time.
Depression of 1807 (1807-1814)
The Embargo Act of 1807 was passed by the United States Congress under President Thomas Jefferson. It devastated shipping-related industries. The Federalists fought the embargo and allowed smuggling to take place in New England.
Panic of 1819 (1819-1824)
The first major financial crisis in the United States featured widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. It also marked the end of the economic expansion that followed the War of 1812.
Panic of 1837 (1837-1843)
A sharp downturn in the American economy was caused by bank failures and lack of confidence in the paper currency. Speculation markets were greatly affected when American banks stopped payment in specie (gold and silver coinage).
Panic of 1857 (1857-1860)
Failure of the Ohio Life Insurance and Trust Company burst a European speculative bubble in United States railroads and caused a loss of confidence in American banks. Over 5,000 businesses failed within the first year of the Panic, and unemployment was accompanied by protest meetings in urban areas.
Panic of 1873 (1873-1879)
Economic problems in Europe prompted the failure of the Jay Cooke & Company, the largest bank in the United States, which bursted the post- Civil War speculative bubble. The Coinage Act of 1873 also contributed by immediately depressing the price of silver, which hurt North American mining interests.
Long Depression (1873-1896)
The collapse of the Vienna Stock Exchange caused a depression that spread throughout the world. It is important to note that during this period, the global industrial production greatly increased. In the United States, for example, industrial output increased fourfold.
Panic of 1893 (1893-1896)
Failure of the United States Reading Railroad and withdrawal of European investment lead to a stock market and banking collapse. This Panic was also precipitated in part by a run on the gold supply.
Panic of 1907 (1907-1908)
A run on Knickerbocker Trust Company stock on October 22, 1907 set events in motion that would later lead to the Great Depression in the United States.
Post-World War I recession (1918-1921)
Severe hyperinflation in Europe took place over production in North America. It was a brief, but very sharp recession and was caused by the end of wartime production, along with an influx of labor from returning troops. This in turn caused high unemployment.
Great Depression (1929-1939)
Stock markets crashed worldwide, and a banking collapse took place in the United States. This sparked a global downturn, including a second, more minor recession in the United States, the Recession of 1937.
Recession of 1953 (1953-1954)
After a post- Korean War inflationary period, more funds were transferred into national security. The Federal Reserve changed monetary policy to be more restrictive in 1952 due to fears of further inflation.
Recession of 1957 (1957-1958)
Monetary policy was tightened during the two years preceding 1957, followed by an easing of policy at the end of 1957. The budget balance resulted in a change in budget surplus of 0.8% of GDP in 1957 to a budget deficit of 0.6% of GDP in 1958, and then to 2.6% of GDP in 1959.
1973 oil crisis (1973-1975)
A quadrupling of oil prices by OPEC coupled with high government spending due to the Vietnam War lead to stagflation in the United States.
Early 1980s recession (1980-1982)
The Iranian Revolution sharply increased the price of oil around the world in 1979, causing the 1979 energy crisis. This was caused by the new regime in power in Iran, which exported oil at inconsistent intervals and at a lower volume, forcing prices to go up. Tight monetary policy in the United States to control inflation lead to another recession. The changes were made largely because of inflation that was carried over from the previous decade due to the 1973 oil crisis and the 1979 energy crisis.
Early 1990s recession (1990-1991)
Industrial production and manufacturing-trade sales decreased in early 1991.
Early 2000s recession (2001-2003)
The collapse of the dot-com bubble, the September 11th attacks, and accounting scandals contributed to a relatively mild contraction in the North American economy.
Wikipedia
http://en.wikipedia.org/wiki/List_of_recessions
Panic of 1797 (1797-1800)
The effects of the deflation of the Bank of England crossed the Atlantic Ocean to North America and disrupted commercial and real estate markets in the United States and the Caribbean. Britain's economy was greatly affected by developing disflationary repercussions because it was fighting France in the French Revolutionary Wars at the time.
Depression of 1807 (1807-1814)
The Embargo Act of 1807 was passed by the United States Congress under President Thomas Jefferson. It devastated shipping-related industries. The Federalists fought the embargo and allowed smuggling to take place in New England.
Panic of 1819 (1819-1824)
The first major financial crisis in the United States featured widespread foreclosures, bank failures, unemployment, and a slump in agriculture and manufacturing. It also marked the end of the economic expansion that followed the War of 1812.
Panic of 1837 (1837-1843)
A sharp downturn in the American economy was caused by bank failures and lack of confidence in the paper currency. Speculation markets were greatly affected when American banks stopped payment in specie (gold and silver coinage).
Panic of 1857 (1857-1860)
Failure of the Ohio Life Insurance and Trust Company burst a European speculative bubble in United States railroads and caused a loss of confidence in American banks. Over 5,000 businesses failed within the first year of the Panic, and unemployment was accompanied by protest meetings in urban areas.
Panic of 1873 (1873-1879)
Economic problems in Europe prompted the failure of the Jay Cooke & Company, the largest bank in the United States, which bursted the post- Civil War speculative bubble. The Coinage Act of 1873 also contributed by immediately depressing the price of silver, which hurt North American mining interests.
Long Depression (1873-1896)
The collapse of the Vienna Stock Exchange caused a depression that spread throughout the world. It is important to note that during this period, the global industrial production greatly increased. In the United States, for example, industrial output increased fourfold.
Panic of 1893 (1893-1896)
Failure of the United States Reading Railroad and withdrawal of European investment lead to a stock market and banking collapse. This Panic was also precipitated in part by a run on the gold supply.
Panic of 1907 (1907-1908)
A run on Knickerbocker Trust Company stock on October 22, 1907 set events in motion that would later lead to the Great Depression in the United States.
Post-World War I recession (1918-1921)
Severe hyperinflation in Europe took place over production in North America. It was a brief, but very sharp recession and was caused by the end of wartime production, along with an influx of labor from returning troops. This in turn caused high unemployment.
Great Depression (1929-1939)
Stock markets crashed worldwide, and a banking collapse took place in the United States. This sparked a global downturn, including a second, more minor recession in the United States, the Recession of 1937.
Recession of 1953 (1953-1954)
After a post- Korean War inflationary period, more funds were transferred into national security. The Federal Reserve changed monetary policy to be more restrictive in 1952 due to fears of further inflation.
Recession of 1957 (1957-1958)
Monetary policy was tightened during the two years preceding 1957, followed by an easing of policy at the end of 1957. The budget balance resulted in a change in budget surplus of 0.8% of GDP in 1957 to a budget deficit of 0.6% of GDP in 1958, and then to 2.6% of GDP in 1959.
1973 oil crisis (1973-1975)
A quadrupling of oil prices by OPEC coupled with high government spending due to the Vietnam War lead to stagflation in the United States.
Early 1980s recession (1980-1982)
The Iranian Revolution sharply increased the price of oil around the world in 1979, causing the 1979 energy crisis. This was caused by the new regime in power in Iran, which exported oil at inconsistent intervals and at a lower volume, forcing prices to go up. Tight monetary policy in the United States to control inflation lead to another recession. The changes were made largely because of inflation that was carried over from the previous decade due to the 1973 oil crisis and the 1979 energy crisis.
Early 1990s recession (1990-1991)
Industrial production and manufacturing-trade sales decreased in early 1991.
Early 2000s recession (2001-2003)
The collapse of the dot-com bubble, the September 11th attacks, and accounting scandals contributed to a relatively mild contraction in the North American economy.
Sunday, August 17, 2008
Where is The Economy Going?
Recession.org
Where is The Economy Going?
http://recession.org/library/where-is-the-economy-going
Fifteen key economists, policymakers and strategists weigh in on the current volatility and economic turmoil.
A Meltdown: Nouriel Roubini - professor of economics and international business at New York University's Stern School of Business.
Financial Folly: Kenneth Rogoff - professor of economics at Harvard University.
U.S. Recession: Stephen Roach - chairman of Morgan Stanley Asia.
Innocent Victims: Robert J. Shiller - professor of economics at Yale University and a cofounder of MacroMarkets LLC.
Losing Momentum: Jim O'Neill - senior economist at Goldman Sachs, specializes in emerging markets.
A Return to Growth: Holger Schmieding - head of European economics at the Bank of America.
Tug of War: Mohamed A. El-Erian - co-CEO and co-CIO of PIMCO.
Discontent: Ruchir Sharma - head of global emerging markets at Morgan Stanley Investment Management.
Averting the Abyss: Barton Biggs - managing partner of the Traxis Partners hedge fund in New York.
Much Uncertainty: Heizo Takenaka - director of the Global Security Research Institute at Keio University and Economics minister of Japan.
We Need Greater Transparency: Lawrence Summers - professor of economics at Harvard University and a managing director at D.E. Shaw & Co.
The Prospect of Stagflation: Sri Mulyani Indrawati - Finance minister of Indonesia.
Now We Have a Mess on Our Hands: Robert Reich - secretary of Labor in the Clinton administration, is the author of "Supercapitalism: The Transformation of Business, Democracy and Everyday Life"
Now the Illusions Are All Gone: Masaaki Kanno - chief economist at JPMorgan in Tokyo.
Optimistic: Rupert Stadler - chief executive officer of Audi.
Where is The Economy Going?
http://recession.org/library/where-is-the-economy-going
Fifteen key economists, policymakers and strategists weigh in on the current volatility and economic turmoil.
A Meltdown: Nouriel Roubini - professor of economics and international business at New York University's Stern School of Business.
Financial Folly: Kenneth Rogoff - professor of economics at Harvard University.
U.S. Recession: Stephen Roach - chairman of Morgan Stanley Asia.
Innocent Victims: Robert J. Shiller - professor of economics at Yale University and a cofounder of MacroMarkets LLC.
Losing Momentum: Jim O'Neill - senior economist at Goldman Sachs, specializes in emerging markets.
A Return to Growth: Holger Schmieding - head of European economics at the Bank of America.
Tug of War: Mohamed A. El-Erian - co-CEO and co-CIO of PIMCO.
Discontent: Ruchir Sharma - head of global emerging markets at Morgan Stanley Investment Management.
Averting the Abyss: Barton Biggs - managing partner of the Traxis Partners hedge fund in New York.
Much Uncertainty: Heizo Takenaka - director of the Global Security Research Institute at Keio University and Economics minister of Japan.
We Need Greater Transparency: Lawrence Summers - professor of economics at Harvard University and a managing director at D.E. Shaw & Co.
The Prospect of Stagflation: Sri Mulyani Indrawati - Finance minister of Indonesia.
Now We Have a Mess on Our Hands: Robert Reich - secretary of Labor in the Clinton administration, is the author of "Supercapitalism: The Transformation of Business, Democracy and Everyday Life"
Now the Illusions Are All Gone: Masaaki Kanno - chief economist at JPMorgan in Tokyo.
Optimistic: Rupert Stadler - chief executive officer of Audi.
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