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| A World Financial Armageddon? | |
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| Topic Started: Sep 25 2008, 10:43 PM (11,169 Views) | |
| Wil | Sep 25 2008, 10:43 PM Post #1 |
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 Sorry all I accidentally deleted this thread of the same name, here is the original article:Credit crisis II A world financial Armageddon? by Christopher Laird, PrudentSquirrel.com | Date, 2008 Where are we now in the credit crisis, and why isn’t the massive Fed and ECB weekly lending working to loosen interbank lending? Why is the credit crisis not really improving? Where is this going next? We describe what may happen next as Credit Crisis II in this article. Now that the credit crisis that started in 2007 is a year old, there has been a debate about whether the financial system will recover, or will the Western/world financial system end up like the Japanese financial system after the stock and real estate crashes in the 1990’s. In that case, the Japanese banks more or less carried their tremendous losses for ten years, and Japan entered a mild but painful decade of deflation. To this day, Japan is battling some of the deflationary forces from that time. The question now becomes, will the Western financial system recover some normalcy, or are things merely going to get worse and the world end up with a financial malaise lasting ten years like Japan’s? If the second alternative is the case, then the central banks which are merely propping up the financial institutions with their ‘temporary’ lending will find they are taking the losses off the banks hands, taking them on to their balance sheets, and effectively monetizing the losses. The ECB and the Fed are both hoping to find a way out of having to keep the bad assets they took as collateral. They have lent hugely to financial institutions, taking their bad mortgage bonds, securities, derivatives as collateral. And at the same time, the financial institutions in question are carrying a sum total of $500 billion of losses on their books, the losses they admit so far, while estimates of ongoing losses from these bad assets runs well over $1 trillion. In effect, the Western credit industry is still crippled. Why is it so crippled still? Either the financial industry earns its way out (will take ten or more years) and drastically pull back credit, or they find enough new investors to pony up new capital infusions, perhaps through stock sales. And new such investors are becoming increasingly hard to find. Hence, the central banks are the only alternative. A theme now arises where it is becoming apparent that it is impossible to actually purge the escalating losses from the financial system, and that even big public bailouts don’t purge the losses because of interlinkages between stocks, bonds and derivatives. If one class or institution is bailed out, the losses of capital merely move to the other class. And the losses are clearly so huge as of now, that they weigh on the currencies themselves and cause a fall in their exchange rates. It is estimated that the USTreasury/Fed/FHLB has infused a total of $2 trillion and counting since Aug 07 to the various credit infusions to the US financial system, and that the ECB is in at similar levels. And even after $ 4 trillion worth of infusions over the last year has been thrown out by the Fed and ECB, the world credit/financial system is actually getting worse. What will be the outcomes into 09? Bankrupt en masse In effect, this means the Western banks, etc are bankrupt en masse. The only thing propping up the entire Western financial system, and its respective stock markets has been massive ‘temporary’ lending, on an ongoing basis, by the Fed and ECB. Both central banks are beginning to balk at this situation. Even as they are starting to have second thoughts, the Western financial institutions continue to borrow more money than ever on a weekly basis. Why aren’t things loosening up? Can’t stop or else And, if the ECB or the Fed stops the emergency infusions, or even admit who the borrowers are, another round of collapsing banks/bank runs ensues as investors flee and pull their money out. In other words, the central banks have no choice but to continue the weekly $30-50 billion or so of infusions each for the Fed and the ECB, or else face a cascade of bank runs around the world. …And each week the Fed and the ECB are effectively taking on another $30 or $50 billion of the bad assets from the various and sundry financial institutions scattered across the EU and the US. So, week after grueling week, the Fed and the ECB keep adding another $50 to $100 billion of bad assets to their balance sheets, as ‘collateral’ and making ‘temporary’ loans they keep having to roll over and extend the repayment on. Ie, the junk stuff is becoming a permanent resident on the central bank’s balance sheets. If either the Fed or the ECB stop the weekly infusions, quite possibly the entire Western financial system stops dead. And we get a massive world stock crash. The question now becomes, what happens when these two central banks finally decide they have to let go? You are not going to tell me they are going to keep infusing a combined $50 to $100 billion worth of financial bailouts each week forever? This massive temporary lending certainly has to end at some point. And even with all this new money every week, the credit system is barely functional anyway right now. And this half dead world credit system is dragging economies downward, as there is less and less and less credit. This is a paltry return for all the bailouts and massive temporary lending. Probably what is happening is that this is a classic case of a parabolic world credit peak, as more and more money is needed each week merely to keep the bubble from collapsing. And the only ones left to infuse this money are the central banks. No one else is willing to step in. Financial institutions won’t lend to each other, and investors won’t recapitalize the crippled banks. As financial institution’s stocks fall, issuing new stock becomes prohibitively expensive. Parabolic peak One could say all that is happening is that all financial institutions in the world don’t really trust each other, and won’t lend to each other. And that an astounding $50 to $100 billion of weekly infusions from the Fed and the ECB is not fixing the situation, and that we are witnessing the final parabolic peak of the world credit bubble that has built up for the 63 years after WW2 ended. That, and the end of the USD and Yen driven credit/asset/finance bubble which ensued from the early 1970’s. So, before we continue, it might be said that the present development of the credit crisis, from August 07 to now, is Credit Crisis I. And the present state of affairs is that the Fed and the ECB have to infuse a weekly $50-100 billion plus into their respective financial regions merely to prevent a world finance implosion. I also have noticed that the Credit Crisis I has had a one year periodicity of major new developments, ie that if one major sector had a problem on a given month, that the next year the same sector seems to reinvent a new worse manifestation. I made a graphic to describe the general situation: So, when the central banks stop this massive weekly lending, what happens? Massive forced deleveraging and probably world financial Armageddon. This would be Credit Crisis II, or Phase II. We will look into Credit Crisis II in a moment. This is the conclusion we came to here at PrudentSquirrel, trying to ascertain where we are in the big picture on the Credit Crisis now. It is that the Central Banks are desperately trying to stave off Credit Crisis II, and they are losing, and probably knowing this, they will at some point confer together and pick a time to let the credit system implode, and try to weather the stock/financial crashes that will occur at that time. Likely, some currencies can collapse as well, and a great deal of FX (foreign exchange) chaos and restrictions will ensue for several years after the fatal date. If it is true, as we suspect, that we are at the peak of a credit/financial bubble that started right after WW2 ended, and it is at a parabolic peak and cannot be sustained, then the world’s central banks already know this too. They probably are trying to decide when to let go…They all don’t have to agree, it only will take one major Central Bank to let go, then the others will be forced to follow. The central banks in question would be the BOJ, the US Fed and the ECB, and likely the BOC. The Russian central bank is an odd man out and is a wild card, but not as central to the equation. Either all the major central banks listed keep up the same rate of infusions, or the end of the world credit system comes in a week or two after one ‘lets go’. Now as to the USD strengthening now, and gold’s vexing $100 plus volatility, it just seems best to make any protective moves well ahead of the fatal day. Once the situation gets out of control, Credit Crisis II begins, in a week from that point you will find it hard to make any changes. I view gold’s present volatility as a total side issue, compared to what would happen if all one’s money was tied to the financial system, the USD and so on, and then one’s financial situation was frozen if the central banks decide to let go, and world foreign exchange restrictions are instituted. Gold is still one of the best ways to ride out what may come to pass. Our present state of affairs in Credit Crisis I Let’s look at a few examples of why I am saying the world is at a parabolic credit bubble peak, and why the Central banks are finding they have no choice but to keep pumping out $50 plus billion a week of new ‘temporary’ lending, or else face a real financial Armageddon… The ECB, Spanish banks, and North-South EU dissention How Spanish banks are creating mortgage securities to get ECB funding is a perfect example of our present financial crisis…and how the ECB seems to have no choice but to continue the short term funding of the entire EU financial system, and it is causing big dissention between the North EU and South. By Ambrose Evans-Pritchard Last Updated: 3:06pm BST 21/08/2008 The European Central Bank has issued the clearest warning to date that it cannot serve as a perpetual crutch for lenders caught off-guard by the severity of the credit crunch. Not Wellink, the Dutch central bank chief and a major figure on the ECB council, said that banks were becoming addicted to the liquidity window in Frankfurt and were putting the authorities in an invidious position. "There is a limit how long you can do this. There is a point where you take over the market," he told Het Finacieele Dagblad, the Dutch financial daily. "If we see banks becoming very dependent on central banks, then we must push them to tap other sources of funding," he said. While he did not name the chief culprits, there are growing concerns about the scale of ECB borrowing by small Spanish lenders and 'cajas' with heavy exposed to the country's property crash. Dutch banks have also been hungry clients at the ECB window. One ECB source told The Daily Telegraph that over-reliance on the ECB funds has become an increasingly bitter issue at the bank because the policy amounts to a covert bail-out of lenders in southern Europe. "Nobody dares pinpoint the country involved because as soon as we do it will cause a market reaction and lead to a meltdown for the banks," said the source. This "soft bail-out" is largely underwritten by German and North European taxpayers, though it is occurring in a surreptitious way. It has become a neuralgic issue for the increasingly tense politics of EMU. The latest data from the Bank of Spain shows that the country's banks have increased their ECB borrowing to a record €49.6bn (£39bn). A number have been issuing mortgage securities for the sole purpose of drawing funds from Frankfurt. These banks are heavily reliant on short-term and medium funding from the capital markets. This spigot of credit is now almost entirely closed, making it very hard to roll over loans as they expire. The ECB has accepted a very wide range of mortgage collateral from the start of the credit crunch. This is a key reason why the eurozone has so far avoided a major crisis along the lines of Bear Stearns or Northern Rock. While this policy buys time, it leaves the ECB holding large amounts of questionable debt and may be storing up problems for later. The practice is also skirts legality and risks setting off a political storm. The Maastricht treaty prohibits long-term taxpayer support of this kind for the EMU banking system. Few officials thought this problem would arise. It was widely presumed that the capital markets would recover quickly, allowing distressed lenders to return to normal sources of funding. Instead, the credit crunch has worsened in Europe…” Bold emphasis is mine Telegraph.co.uk Fannie and Freddie rescue dilemma- their stocks and debt are held by other banks Another perfect example of the impossible state of affairs in the world credit crisis is Fannie/Freddie. And that means that if the Fed/Treasury does a bailout, their stocks collapse in value, and all the other financial institutions take losses on that because they hold lots of Fannie and Freddie stock. Of course the stock is already in the tank, but the issue is still there and shows the interlinkages. Then there is the question of the Fannie and Freddie bonds out. That is another can of worms, and the Chinese just stated this week that a collapse of Fannie-Freddie could lead to an economic catastrophe – their Central Bank advisor Yu Yongding stated. The Chinese hold hundreds of billions ($376 billion mostly in US agency bonds) of Fannie and Freddie debt and stock. In many respects, because of all these cross holdings of the Fannie Freddie bonds and stocks by banks everywhere, and by Central Banks, it would seem that the losses cannot really be removed from the financial system – ie purged. If Fannie and Freddie are bailed out, their stocks collapse and those losses now translate to all these other banks and central banks that hold them. It’s virtually a no win situation. These cross linkages reveal that it is virtually impossible, even with bailouts, to purge the ever growing $500 billion and counting losses of capital from the banking/financial system. The latest numbers being speculated on are the losses will be over $1 trillion (IMF) and $2 trillion or more (Roubini). Now, maybe $2 trillion doesn’t sound like a lot compared to the entire world economy. The trouble is, that capital is leveraged anywhere from 10 to 50 times by the financial system. Fannie and Freddie have 60 to 1 leverage. Losing $2 trillion of capital will totally wipe out the entire world financial system for a decade because of the leverage at 60 to 1. Basically, unless those losses can be purged in some way, it has to be earned back over a period of years/decades. That essentially cripples the entire world financial system. I remember a very well put quote from a banker last Fall 07 about the credit crisis then. (I’m sorry, I don’t remember his name.) He stated “The credit deleveraging will not be denied.” I think that sums things up very well. It appears that a relentless unwinding of the world credit/finance bubble with many dimensions and twists and turns cannot be avoided, even if the central banks were willing to try. The issue is the cross linkages and the fact that the capital losses in every corner of the world will not and maybe cannot be purged from the financial system, even with big public bailouts. There is possibly no way to do it other than to allow things to just unwind and try to re earn it all back the hard way. Even if it appeared the central banks could figure out a way to purge the losses from the financial system, and take them on their books, then their currencies are in danger. The capital losses are there – period. The deleveraging of 60 to 1 credit is happening – period. The financial institutions don’t trust each other – period. The Fannie – Freddie bailout proposals are being discussed in the light that the US government/Treasury can just about double the so called national debt from $9 trillion by possibly adding another $5 plus trillion, as they effectively have to guarantee those GSE bonds. That is now playing into a debate on the US fiscal situation….as if the USD needed another problem. In short, once again, we see that it appears impossible to purge the effects of so much lost capital to the world financial system. The deleveraging will not be denied. We see this a year after the Credit Crisis I exploded worldwide Aug 07. End of a huge world bubble If that is true, then the theory I laid out above, that we are witnessing a peak in a parabolic finance/asset/stock bubble of world proportions, is going to pan out. I think the entire credit crisis can be looked at from that perspective. We are merely witnessing the relentless unwinding of the biggest financial bubble in history. And, ominously, this particular bubble has grown from the end of WW2 to the present. That is one HUGE economic bubble, and this one envelops the entire world. This is not just a bubble in one country’s economy. The point of emphasizing it’s from the end of WW2 is that we are not talking merely about a banking crisis, or whatever. We are talking about the deleveraging of the greatest economic/finance bubble in history. Once the level of leverage reached 60 to 1, it becomes impossible to stay ahead of the deleveraging, even for central banks. The implications are staggering. Every major economy in the world is involved. The outcomes of deleveraging this monster bubble, represented by the green oval, will be what I term Credit Crisis II. At 60 to 1 leverage, a loss of 1 to 2% wipes out the capital. Whether it’s the Chinese Central Bank (BOC), the Fed, the ECB, and then all the other world financial institutions of every type, insurance companies, gigantic retirement funds, other banks, you name it, the present losses of capital to the world financial system is pervasive worldwide. Nobody will escape the wrath of this deleveraging, and that is why I call it Credit Crisis II. Credit Crisis I was only the preliminary round…Credit Crisis II is characterized by the realization that the gigantic losses of capital cannot be purged from the financial system, even with big public bailouts. And that this deleveraging cannot be stopped. There are too many interlinkages. And, without writing a book on this, the next victim when Credit Crisis II unfolds, will be massive world currency instability. This will make any of the banking and currency crises we have seen since WW2 look like child’s play. It is not clear when Credit Crisis II begins but it is threatening already. http://www.financialsense.com/fsu/editorials/laird/2008/0825.html |
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| Wil | Sep 25 2008, 10:47 PM Post #2 |
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US ‘will lose financial superpower status’ By Bertrand Benoit in Berlin Published: September 25 2008 11:55 | Last updated: September 25 2008 20:28 The US will lose its role as a global financial “superpower” in the wake of the financial crisis, Peer Steinbrück, German finance minister, forecast on Thursday in the most outspoken comments by a senior European government figure since Wall Street plunged into chaos two weeks ago. Mr Steinbrück, a Social Democrat and long-time champion of tougher financial market rules, said the US government was to blame for the severity of the crisis because it had resisted European calls for stricter regulation until it was too late. “The US will lose its status as the superpower of the world financial system” with the emergence of stronger, better-capitalised centres in Asia and Europe, he told the German parliament. “The world will never be the same again.” His comments echo deep anger in Germany at the perceived recklessness of Anglo-Saxon financial engineering and a feeling that the US model of economic liberalism has failed while the more regulated, long-term oriented and industry-based German economy has proved more resilient. “Ten years from now,” he later told journalists, “we will see 2008 as a fundamental rupture. I am not saying the dollar will lose its reserve currency status, but it will become relative.” The minister said it had been “irresponsible” of the US government to oppose stricter regulation even after the subprime crisis had broken out. This laisser faire ideology, he said, “was as simplistic as it was dangerous ... This largely under-regulated system is collapsing today.” Mr Steinbrück did have warm words for the US’s crisis management in the past fortnight, including the planned $700bn rescue package for the financial sector. Washington, he said, had acted not just in the US’s interest but also in the interest of other nations. Speaking after Nicolas Sarkozy, the French president and current holder of the European Union presidency, called for an emergency G8 meeting on the financial crisis, Mr Steinbrück said tougher capital market rules were now urgently needed. His proposals include a ban on “speculative short selling”; a crackdown on variable pay for bankers; a ban on banks securitising more than 80 per cent of any asset they hold; international standards making bank managers personally responsible for their trades and increased supervisory co-operation. He said France and Germany would set up a working group of treasury, central bank and supervisory authority officials. http://www.ft.com/cms/s/0/1d6a4f3a-8aee-11dd-b634-0000779fd18c.html?nclick_check=1 |
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| Wil | Sep 25 2008, 10:48 PM Post #3 |
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China banks told to halt lending to US banks-SCMP Wed Sep 24, 2008 9:52pm EDT BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday. The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries. "The decree appears to be Beijing's first attempt to erect defences against the deepening U.S. financial meltdown after the mainland's major lenders reported billions of U.S. dollars in exposure to the credit crisis," the SCMP said. A spokesman for the CBRC had no immediate comment. (Reporting by Alan Wheatley and Langi Chiang; editing by Ken Wills) http://www.reuters.com/article/marketsNews/idUSPEK16693720080925 |
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| Wil | Sep 25 2008, 10:51 PM Post #4 |
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Economic analysts fear more pain to come September 26, 2008 - 6:55AM Troubled credit markets suggest the global banking system remains under stress amid fears of further collapse despite efforts of central banks to stimulate lending, analysts say. The strains in the financial system can be measured by the so-called "spreads" of interbank loans compared with central bank rates and relatively risk-free US Treasury bills. Analysts said the difference between the three-month LIBOR, or London interbank offered rate, and the yield on the three-month Treasury bill reached its widest point on record this week, suggesting that banks are parking their cash in extremely safe places and refusing to make loans. At one point on Thursday, the three-month LIBOR rate was as much as 3.37 percentage points above the Treasury bill for the same period, signalling tight credit conditions. "Don't let the stock market fool you. The credit market is imploding," said Bennet Sedacca at Atlantic Advisors. "When you see this skyrocketing it means banks are not willing to take the risk" of lending to other banks, said Joel Naroff at Naroff Economic Advisors. "You're seeing an insane spread. That's a warning to the markets that the perception of risk is extremely high and an indication of how much one has to pay for credit." Peter Morici, economist at the University of Maryland, said, "All the banks are nervous the other banks won't be able to pay them back. They are all skating on thin ice, so to hold one another's hands means they can all go under." Morici said the high risk factor "is a reflection of a fundamental breakdown of confidence in the banking system." The credit spreads have been widening due to the high rate banks require for loans, a so-called "risk premium". At the same time, banks have been pouring any remaining funds into Treasury bills as a safe haven to ride out the market storm. That has driven short term Treasury yields down to near zero because of high demand. "Banks are hoarding cash. Firms are starting to hoard cash. How long before people start hoarding cash?" said David Gilmore at Foreign Exchange Analytics. In an effort to stimulate credit flows, central banks have been pumping tens of billions of dollars into the system. But this has done little to get banks to ease lending among banks or for short term corporate needs, the credit flows that help underpin economic activity. That is why officials have been pressing for the massive $US700 billion ($A841.25 billion)rescue plan, to buy up the toxic mortgage-related debt that is hurting banks and other financial companies. Morici said however the bailout is not enough to fix the banking system, which has been living on high fees. "The problem is the cost structure of banks," he said. "They can't make the kind of money to pay executives by borrowing at five per cent and lending at seven per cent. To pay a banker eight million dollars a year they have to pay 4,000 dollars an hour. To do that you have to have complex securities with a lot of layers and a lot of fees." He added, "To fix the system you have to go back to traditional banking, with much lower cost structures, and then you can take the toxic paper off their books." http://news.theage.com.au/business/economic-analysts-fear-more-pain-to-come-20080926-4o9g.html |
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| Lazarusty | Sep 26 2008, 12:06 AM Post #5 |
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I believe a part of David Wilkerson's The Vision is being fufilled before our very eyes concerning the economic crisis. ...The United states is going to "overreact" to the confused economic developments. I see a flurry of near-panic decisions being made by various government agencies - but these hasty efforts to shore up the economy will backfire. The President of the United States will make one, and possibly two, national radio and TV appearances to reassure the nation that all is well, and that the best of economic times is just ahead. It will not work. People will distrust these statements, and their fears will lead to a revolution at the polls... I was prompted to find the above excerpt after Bush's recent TV broadcast. It appears he has tried to do the very thing this prediction said would happen. That may very well have been the first appearance mentioned. The second thing, that has been in the back of my mind from years ago when I first read it, is that it would be close to an election. What else could "revolution at the polls" mean? Edited by Lazarusty, Sep 26 2008, 12:07 AM.
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| Wil | Sep 26 2008, 12:43 AM Post #6 |
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Wow 'rusty this is the first time I've seen this and it's pretty much exactly what's happening now. Interesting to say the least to see exactly what's going to happen, and as of right now it's not looking too good: Bailout talks in disarray High stakes talks over $700 billion rescue end in chaos, one day after President Bush warns 'entire economy at risk.' By Tami Luhby, CNNMoney.com senior writer Last Updated: September 25, 2008: 10:46 PM ET NEW YORK (CNNMoney.com) -- One day after President Bush said the nation's economy is at grave risk, the high-stakes negotiations over the proposed $700 billion bailout of the financial system ended in chaos on Thursday. Lawmakers bickered over competing counterproposals and hours of meetings between key lawmakers broke down without any progress late into the evening. A meeting at the White House between President Bush, congressional leaders and the presidential candidates was meant to speed approval of an agreement. Instead, the session revealed deep divisions between Democrats and House Republicans. As a result, House and Senate leaders and Treasury Secretary Henry Paulson rushed to Capitol Hill at 8 p.m. to try to hash out a deal. But shortly after 10 p.m., Rep. Barney Frank, D-Mass., the lead House Democrat on the issue who had been in close talks with Paulson for days, accused Republicans of refusing to negotiate. "At this point, we have absolutely no participation or cooperation from House Republicans," Frank said. The next step was not clear late Thursday night. One thing seems certain: Lawmakers won't recess for the year on Friday, as originally planned. Instead, if they can't reach a deal in the next 24 hours, they're likely to work through the weekend. The page many thought they were on Leading Democrats said they were presented for the first time with the House Republican principles at the White House meeting. Senate Banking Committee Chairman Christopher Dodd, D-Conn., said the White House meeting was thrown off course when participants were blindsided by a new "core agreement" that emerged in the meeting that not many had seen before. Earlier in the day, congressional negotiators said they had agreed to a set of principles on revisions to the rescue plan, which calls for the Treasury Department to buy up bad mortgage securities from banks in an effort to get them to lend again. The proposal, as amended by leaders in both chambers, will help homeowners, curb executive pay packages at participating firms and provide oversight of Treasury's actions, Dodd said in a lunchtime address. "We've reached a fundamental agreement on a set of principles, one, for taxpayers, which is tremendously important," he said. "We're very confident we can act expeditiously." Details on the plans The principles the Democrats said had been agreed upon call for Congress to make $250 billion available immediately with $100 billion available, if needed, without requiring additional congressional approval, said two senior Democratic aides familiar with the negotiations. The second half of $350 billion would then become available by a special approval of Congress. On executive compensation, the draft would require limits on compensation for executives of any company participating in the bailout. These caps would apply for as long as the company is in the program. This would include some language to limit excess "golden parachutes." Treasury will also get an equity stake in the companies being helped by the bailout, though what type remains to be worked out. Still to be worked out is whether to allow bankruptcy judges to modify mortgage terms, a provision backed by many Democrats and community activists but opposed by Republicans and the banking industry. What House Republicans want The bankruptcy provision is not the only sticking point, however. House Republicans are not on board, according to Minority Leader Rep. John Boehner, R-Ohio. "House Republicans have not agreed to any plan at this point," Boehner said. Instead, they issued a statement of economic rescue principles that calls for Wall Street to fund the recovery by injecting private capital - not taxpayer dollars - into the financial markets. Easing tax laws would prompt investors to put in their own dollars, they said. The plan also calls for: participating firms to disclose the value of the mortgage assets on their books, ending Fannie Mae and Freddie Mac's securitization of "unsound mortgages," reviewing the performance of the credit rating agencies and having the Securities and Exchange Commission audit failed companies to ensure their financial standing was accurately portrayed. House Republicans also want to create a panel to make recommendations for reforming the financial industry by year's end. Meanwhile, the ranking Republican on the Senate Banking Committee has another idea. Sen. Richard Shelby, R-Ala., said he doesn't support the Treasury plan until there is serious consideration of alternatives. He proposed Thursday adding funds to the Federal Reserve and Treasury to allow them to lend more to financial institutions. Bush still hopeful Before the afternoon meeting, Bush said he expects a deal "very shortly." After, a counselor to the president said "we're getting closer. There's some more that has to be done. It's going to be a consensus plan at the end of the day." "Both sides are going to have to work hard to get to an agreement," presidential counselor Ed Gillespie said on CNN. Administration officials have spent countless hours this week behind closed doors with and in public hearings before Congress. Lawmakers were hoping to have a deal agreeable to both parties hammered out before Thursday's meeting at the White House. On Wednesday night, Bush took the nation's airwaves in a prime-time address in which he laid out a looming economic disaster. "The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold," Bush said. "More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically." http://money.cnn.com/2008/09/25/news/economy/deal_reached/index.htm?postversion=2008092513 |
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| Lazarusty | Sep 26 2008, 03:18 AM Post #7 |
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I've just scanned the whole first chapter of The Vision which is about the economic crash. Remember, this was written in 1973.        Edited by Lazarusty, Sep 26 2008, 04:08 AM.
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| kamcco | Sep 26 2008, 07:51 AM Post #8 |
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Thank you for posting this Lazarusty! Talk about perfect timing. It was as if DW was watching the national news last night. Edited by kamcco, Sep 26 2008, 08:26 AM.
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| Wil | Sep 26 2008, 09:04 AM Post #9 |
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Not looking good on the Street today... Futures plunge on bailout impasse, bank collapse Fri Sep 26, 2008 7:45am EDT NEW YORK (Reuters) - Stock index futures fell on Friday after congressional talks on a $700 billion financial sector bailout stalled and authorities seized the largest U.S. thrift, heightening worries about the fallout from the credit crisis. Congressional leaders were set to try again on Friday to agree on a rescue plan, one of the costliest since the Great Depression, after talks descended into chaos overnight. Meanwhile, investors moved to pare back risk, with stock markets falling in Asia and in Europe. In another worrying development, U.S. banking authorities closed Washington Mutual (WM.N: Quote, Profile, Research, Stock Buzz) in by far the largest failure of a U.S. bank. WaMu had about $307 billion of assets and $188 of deposits. Its banking assets were sold to JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) for $1.9 billion. "The negotiations over the bailout are sapping the enthusiasm that people could have for the market," said Rick Meckler, president of investment firm LibertyView Capital Management in New York. "I think with no agreement, it's going to be hard for the market to push ahead." S&P 500 futures fell 22 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dropped 178 points and Nasdaq 100 shed 24 points. The talks on the proposed bailout are due to enter a ninth day on Friday, but it was uncertain whether a group of balking House Republicans would participate. Financial stocks were under pressure, with the U.S. electronic-traded fund that tracks the financial sector XLF.A down 3.8 percent before the bell. Friday's economic data includes a final estimate of second-quarter gross domestic product at 8:30 a.m. and a final reading on consumer sentiment for September when a Reuters/University of Michigan report is released at 9:55 a.m. The failure of Washington Mutual, a savings and loan founded in Seattle in 1889, is another blot on the U.S. financial landscape, coming nearly two weeks after U.S. investment bank Lehman Brothers Holdings (LEHMQ.PK: Quote, Profile, Research, Stock Buzz) filed for bankruptcy protection. Washington Mutual shares were down 82 percent at 29 cents before the bell. In Europe investors' jitters hit Belgian-Dutch financial services firm Fortis, whose stock sank nearly 10 percent, on market concerns about its liquidity and funding. Across the world, central banks scrambled to meet a desperate demand for cash, both in their own currencies and the U.S. dollar, as news of the bailout hitting new roadblocks kept nervous banks from lending to each other. U.S. President George W. Bush reiterated on Thursday that the United States was facing a serious financial crisis and urged bipartisan cooperation on the bailout bill. Wall Street had snapped a three-day losing streak on Thursday on hopes that a deal on the bailout might be imminent. (Editing by Kenneth Barry) : http://www.reuters.com/article/hotSt...080926?sp=true |
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| kamcco | Sep 26 2008, 09:04 AM Post #10 |
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[ The President of the United States will make one, and possibly two, national radio and TV appearances to reassure the nation that all is well, and that the best of economic times is just ahead. ] President Bush is getting ready to speak (to the country) again this morning at 9:35 am EST. hmmmm |
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| Sarah | Sep 26 2008, 09:19 AM Post #11 |
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That makes 4 appearances by GWB. I think no matter what he says, the fact that he has been "saying" so much this week is a message in and of itself. |
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| kamcco | Sep 26 2008, 09:51 AM Post #12 |
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Basically this is what was said... -------------------------------------------- Bush renews plea for bailout plan President Bush says there is no disagreement on the need for the $700 billion financial bailout plan and he again asked Congress for quick passage of the package. Bush said there are disagreements among lawmakers over details of the plan, but he said everyone agrees action is needed now. "We are going to get a package passed," he said. "We will rise to the occasion." developing story @ http://www.cnn.com/ |
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| Lazarusty | Sep 26 2008, 05:11 PM Post #13 |
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Maybe it's still not THE main speech yet, where he tries to assure people that all is well, but rather a foreshadowing.
Edited by Lazarusty, Sep 26 2008, 05:12 PM.
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| kamcco | Sep 26 2008, 05:45 PM Post #14 |
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Yeah Lazarusty, if the deal goes through tonight (as they are are predicting -- before midnight) maybe we'll here a longer "all is well" speech from GWB in the very near future. |
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| Lazarusty | Sep 26 2008, 06:23 PM Post #15 |
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It's going to be an interesting couple of months to the election, that's for sure. But it means the end of the economy isn't yet as some are trying to say, that it will be gone by Oct 2nd or somesuch, but that it is the beginning of a major deterioration. Edited by Lazarusty, Sep 26 2008, 06:24 PM.
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| TwilightRose | Sep 26 2008, 06:31 PM Post #16 |
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Definitely major deterioration and consolidations. Few banks left, consolidated power, makes it easier to control everything and issue debit/credit micro-chips. |
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| kamcco | Sep 26 2008, 10:26 PM Post #17 |
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Report: Wachovia talking to possible suitors By Rick Rothacker rrothacker@charlotteobserver.com Posted: Friday, Sep. 26, 2008 Wachovia Corp. has begun preliminary merger talks with Banco Santander SA of Spain, Wells Fargo & Co. of San Francisco and Citigroup Inc. of New York, the Wall Street Journal and New York Times reported today, citing people familiar with the matter. The report came on a day in which Wachovia shares fell 27 percent, or $3.70, to $10. The plunge came after Seattle-based thrift Washington Mutual Inc. failed and was acquired by JPMorgan Chase & Co. and as Congress weighed a bailout plan for the financial industry. Wachovia said it doesn't comment on merger speculation. The Journal said that Wachovia executives are exploring various alternatives but aren't in a rush to do a deal. Earlier in the day, the bank worked to stress the company's soundness, amid the sharp fall in its shares. Spokeswoman Christy Phillips-Brown said the bank had a “strong and stable deposit base” and had added 745,000 checking accounts since June. That contrasted with WaMu, which the Office of Thrift Supervision said shed $17 billion in deposits since Sept. 15. Wachovia chief executive Bob Steel posted a message on the bank's Web site today that said management “is watching these events carefully and must plan and remain flexible,” adding “we are strategically protecting and managing liquidity and capital in this challenging environment.” Steel, as he has done since taking the job in July, also highlighted the company's strong customer service, retail banking franchise, large brokerage operation in affluent markets and corporate banking expertise. “Our core franchises are extremely valuable and continue to operate well relative to our competition,” Steel said. He also said Wachovia remains optimistic that leaders in Washington “will provide comfort to the markets with a plan to stabilize the housing and short-term funding markets.” Investors may be sending Wachovia's shares downward because they're worried that the government's $700 billion bailout will be tabled. If that's the case, Wachovia will seem "a lot more vulnerable," said James Early, an analyst at The Motley Fool. "A lot of it depends on political moves, and that's a very hard thing - to figure out what the government is going to do," Early said. Saddled with mortgage losses from its 2006 Golden West Financial Corp. acquisition, Wachovia has been perceived as one of the nation's more troubled financial institutions. But in recent months, Steel has been taking steps to cut costs, shed troubled loans and preserve capital. He investigated a merger with investment bank Morgan Stanley & Co., but those talks apparently broke off this week. WaMu was battered by mortgage-related losses and then a run on its deposits, leading to a deal facilitated by the Federal Deposit Insurance Corp. WaMu had been a subprime lender and the second-biggest provider of exotic option adjustable rate mortgages with a $55.9 billion portfolio as of the first quarter of this year, according to Inside Mortgage Finance. JPMorgan said last night that it was buying WaMu's deposits and most of its assets in a transaction that protects WaMu customers from losing their deposits. Wachovia, which no longer makes so-called Pick-A-Payment loans, has the biggest option ARM portfolio at $122 billion. The Charlotte bank is treating the loan book as a “distressed asset” separate from the bank and working to refinance customers into more traditional loans. Overall, financial stocks had a mixed day, with shares of banks such as JPMorgan and Bank of America Corp. in positive territory while others have taken steep drops. Cleveland-based National City Corp. is down about 25 percent. Staff writer Christina Rexrode contributed. http://www.charlotteobserver.com/100/story/215903.html |
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| TwilightRose | Sep 26 2008, 10:35 PM Post #18 |
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I missed this. David Wilkerson from what I know and have read has always been right on. He's not one of those prophecy speakers who is always coming up with speculative dates and prophecies to tickle the ears. I have never read "The Vision" and the highlights you posted do seem like it is happening now. Something to watch for , definitely |
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| Wil | Sep 28 2008, 01:07 AM Post #19 |
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http://www.cnn.com/2008/POLITICS/09/28/bailout.ap/index.html Congressional leaders reach tentative deal on bailout WASHINGTON (AP) -- Congressional leaders and the Bush administration have reached a tentative deal on a bailout of imperiled financial markets that could cost taxpayers hundreds of billions of dollars. The House could vote on it Sunday and the Senate on Monday. House Speaker Nancy Pelosi announced the accord just after midnight Saturday and said it still has to be put on paper. Treasury Secretary Henry Paulson talked of finalizing the deal but added: "I think we're there." The aim of the deal is to prevent credit from drying up and causing a meltdown of the U.S. economy. |
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| dibldabl | Sep 28 2008, 01:09 AM Post #20 |
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This is the first country substantially at risk at defaulting on their international loans that I've heard of in a while. I am not saying this is THE country that Wilkerson mentioned in his vision (http://all-things-new.net/single/?p=27601&t=9569) although it is interesting that this article notes that some of Pakistans debt is owned by Vienna-based Erste Sparinvest KAG. Also, Pakistan is only in danger of default and has not formally defaulted. Other countries may be at risk to begin defaulting too. The Fannie/Freddie buyout triggered a derivatives cascade that has caused much of the turmoil in America and abroad since then. Also note that the Belgian Fortis bank is in dire straits. It would be no stretch to say that the turmoil mentioned in this part of Wilkerson's vision could easily happen in these troubled days. Keeps your eyes peeled.   ---------------------------------------------- Pakistan May Seek Aid Amid Concern of Debt Default (Update2) By Michael Dwyer http://www.bloomberg.com/apps/news?pid=20601091&sid=abRpN5r_0nAU&refer=india Sept. 24 (Bloomberg) -- Pakistan President Asif Ali Zardari will ask the U.S., U.K. and other industrial nations for financial aid amid concern South Asia's second-largest economy is in danger of defaulting on its debt. Zardari will seek ``economic assistance'' at a meeting in New York on Sept. 26 with U.S. Secretary of State Condoleezza Rice and representatives of other Group of Eight countries, according to the state-run Associated Press of Pakistan. Moody's Investors Service lowered Pakistan's credit outlook to negative yesterday, citing a risk of ``missed repayments.'' ``Pakistan has no other option but to extend a begging bowl,'' said Haider Hussain, an economist at Elixir Securities Ltd. in Karachi. ``A negative outlook may damage Pakistan's overall posture, eroding foreign investors' confidence.'' Pakistan is the world's riskiest government borrower, according to credit-default swap prices from CMA Datavision, with investors concerned by a deterioration in security that saw 53 people killed in a weekend bomb attack on the Islamabad Marriott hotel. The nation is running short of money to repay state debt, as foreign-exchange reserves have almost halved to $9.16 billion in early September from $16.5 billion a year ago. ``The fall in forex reserves, especially if combined with substantial capital flight, could see Pakistan resort to borrowing from international agencies,'' said Maheen Rahman, head of research at BMA Capital Management Ltd. in Karachi. ``The pressure is intense and will only get worse in the absence of significant foreign inflows to fund the external deficit.'' The Pakistani rupee has plunged 21 percent against the dollar this year amid higher payments for imported oil that widened the current account deficit to a record $14 billion in the year ended June 30. Foreign Reserves The currency gained 0.04 percent to 78.17 per dollar as of 5 p.m. in Karachi. The government's bond due 2036 rose for the first time in nine days, lowering the yield to 10.29 percent from 10.32 percent. ``In the end I can imagine there will be some assistance from foreign countries, maybe some IMF program, some help from other sovereign national organizations,'' said Anton Hauser, a fund manager who helps oversee $2.4 billion of emerging-market debt at Vienna-based Erste Sparinvest KAG, and owns about $6 million of Pakistan's dollar-denominated debt. ``There'll definitely be conditions from the IMF program in fiscal policies, leading to some adjustment in the current account.'' Finance Minister Naveed Qamar announced a four-point ``economic stabilization plan'' at a press conference last week with central bank governor Shamshad Akhtar, aiming to restore investor confidence in the $146 billion economy. Pakistan will increase domestic finances through asset sales, eliminate subsidies on power and fuel by June 2009 and raise funds from overseas, Qamar told reporters in Islamabad. Political Uncertainty The measures may help revive a sliding economy that's forecast to grow at the slowest pace since 2003 and bridge the budget deficit, which is at 10-year high. Qamar's efforts have been hampered by six months of political uncertainty following the March election of Pakistan's first civilian government since 1999 and strained relations with the U.S. after the ruling coalition forced President Pervez Musharraf to resign in August. The Bush administration has increased pressure on Prime Minister Yousuf Raza Gilani's government to do more to curb rising militancy in Pakistan and the U.S.-led forces in neighboring Afghanistan have increased cross-border raids against pro-Taliban and al-Qaeda militants. Default Risk Investors aren't convinced that government efforts to stimulate economic growth will succeed. Karachi's KSE100 Index has lost more than a third of its value this year, ranking behind only China and Vietnam as Asia's worst-performing benchmark stock index. The index fell 0.1 percent to 9,190.75 after a one-month ban on short selling started today. Credit-default swaps on Pakistan's $2.7 billion of dollar- denominated bonds outstanding have jumped to 1,500 basis points. That means it costs $1.5 million annually to protect $10 million of the country's debt from default for five years, triple the cost on Lebanon's debt, according to data compiled by Bloomberg. Credit-default swaps, financial instruments based on bonds or loans, were conceived to protect bondholders by paying the buyer face value in exchange for the underlying securities should the borrower default. An increase indicates a deterioration in the perception of credit quality. ``Investors feel that their funds will not be safe and that is why they are reluctant to invest,'' said Mohammed Sohail, director of research at JS Global Capital Ltd. in Karachi. `Corrective Measures' Governor Akhtar said last week that ``corrective measures'' have been taken to prevent the slide of the rupee and that the central bank doesn't want to manage the exchange rate. The State Bank of Pakistan raised its benchmark interest rate by one percentage point to 13 percent on July 29, the third increase in 2008 to ease inflation that reached a 30-year high last month. ``The government's inability thus far in securing external financing is fast draining forex reserves, causing the rupee to slide endlessly,'' said Asif Ali Qureshi, head of research at Invisor Securities Ltd. in Karachi. ``It may well be the time for the authorities to reconsider their pledge to the flexible exchange-rate regime.'' |
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