Asia Times Online :: Asian news and current affairs 

Central bank's easy virtue, easy money
By: Julian Delasantellis

The best media article read this week. Enjoy. It has been a long day.

I also think that (not right now 'cause everybody needs dollars) a lower US dollar does increase import prices and causes a rise in the inflation rate.

AND this is the big daily in Japan:

"In compiling their business plans, officials of IHI Corp. forecast a yen exchange rate of 110 yen. Therefore, the current high rate has not been such a blow, they said.

However, IHI President Kazuaki Kama said, "If a strong yen trend should continue further, our shipbuilding and commercial airplane engine sectors will be affected negatively."

Officials of Fujitsu Ltd. also said a further appreciation of the yen would hurt their information technology-related equipment sector.(IHT/Asahi: August 17,2007)"

Fear in the City as shares plunge again - Telegraph

Fear in the City as shares plunge again - from the London Telegraph.

Premium content | Economist.com

THE ECONOMIST 8/16/2007 EDITION
Banks in trouble
The game is up
Credit markets and the crisis of confidence in global finance

Er, Japan is not the US. Not by a long shot.

The US is the consumer of last resort. Take a gander at the last page of the economist, the small table of exports. Who exports, and who imports?

The US is the 600 lb import gorilla.

FT.com / China / Finance & Markets - China Everbright in $2.6bn bail-out

Financial Times.com 8/17/2007

China Everbright Bank in $2.6bn bail-out

BOVESPA 2007 = NASDAQ 2000

?????

- NY Times

The New York Times

Stronger Asia Seen as Better Able to Deflect ripples, or Big Waves, From U.S.

I have to bet it will lead to a global slowdown. The consumers of China, India are simply not geared as yet to buying on tick ( though they are getting there), to reduce saving and replace the US consumer. Even the infrastructure to support consumption isn't there - I'm thinking shopping malls of the style and type and quantity that we have here. That would take several years to develop. Throw in the change in psychology that's required - I'd say a decade or so - and IMO there is no chance that the US consumer will be replaced anytime soon. The rational bet has to be on a global slowdown.

-K

CR,
as US 70 trillion household assets take a big hit ..and hedge fund redemptions continue...and emerging market spread (already widest today since 2005) keep widening...capital flows from emerging will come back to US propping USD (despite deficit!)
The outward flows will hit the emerging market as debt financing for them gets more expensive (just like the risky US homebuyer)
that 70 trill estimate can easily go down to 40 tril or so.

- NY Times

The New York Times

At Treasury, the Secretary Waits It Out

Why the hate?

Banker, no, the $64 Trillion dollar question is, where do the Govt get $64 Trillion dollars for those unfunded liabilities......which have to start getting funded next year as the early retirees (besides Tanta) start collecting their checks.

Everyone talks about the credit crunch and its impact on the economy. That $64 Trillion question is the 64 Trillion pound gorilla in the room. David Walker is the keeper and is saying he's hungry...but no one, sigh, seems to be listening.....

Keep in mind as the months tick on and bank capital declines - the FDIC historically closes banks on either Thursday or Friday typically Friday (unless there is a run then it is almost immediate to stop the run). Once FDIC begins its Friday press releases of bank closings there may be an abrupt market swing depending on the bank's size, etc.

And last I checked, foreclosures are already pushing up rapidly in the UK, even though prices have barely started to flatten. Imagine the rest of the damage to global credit markets when these other bubbles deflate. We have a long long painful ride down ahead of us, sorry to say.

- NY Times? pagewanted=1

Stronger Asia Seen as Better Able to Deflect ripples, or Big Waves, From U.S.

Well if Stronger Asia has a lot to do with that monster US trade deficit, then things might not work out so well.

It's worth considering that maybe Asian consumers simply don't share enough of the wealth created by business and government to consume the goods they produce.

Strong consumption requires political power and relative equality between labor and capital.

If US exports drop off in Asian countries and their laborers don't magically ascend to the status of "Super-Consumer" that took Americans years and years of excess borrowing and confidence to achieve, they could end up drowning in a nightmare of overcapacity and oversupply.

A hundred story building is only a good thing if you build it with the right materials.

Seems like the article is making the causal links that AC, me and others here have been trying to get through the thick skulls of some others recently, that the relative size of the US consumer market as a share of global GDP is pretty important, and kind of makes the decoupling argument silly on its face. It looks even sillier each day as the US consumer spending outlook fades.

And yeh, the Japanese dont seem to like the thought of the US consumer passing on their exports. Down only 4% so far tonight on the Nikkei.

Any rumors on who bought 80m of CFC around 3:20 yesterday? That's 2/5 of the day's volume.-F. Frederson

i did

the Asian mentality is to save, save, save after working 60h work weeks. ac's point about inequality btwn those controlling the business interests and the laborers is a good one. Chinese laborers get paid squat and will never equal the Joe average beer belly.

Asia mostly Red

vader

Are we reasserting the communism domino theory again ? in 2007?

-K

CR, I think it wil lead to a global slowdown, but I hold out hope that we are not talking depression, here is my half baked reasoning:
- definitely a hit from declinging MEW, but MEW is at 4% of DPI now, down from 8%, that's DPI not total income.
- definitely a hit to GDP of 1% or maybe more from housing slowdown
- some small benefit from perhaps cheaper oil and other commodities, assuming no dollar meltdown.

How horrible is the net effect of those things really?

The whole unwind is of course the problem, maybe there is some more efficient way to clean up the banking mess. Something about clearing out all the bankrupt middle men/hedge funds who are shaving points off the payments between the mortgage payer and the MBS/CDO holder. Empty out their offices and just leave a few computers there forwarding the cash while taking no skim LOL. You would think that each time a middleman goes BK, the cash payment has one less step to make to get to the bond holder.

The social security liabilities are easy to take care of, simply reduce benefits. Now there's a ponzi scheme -in the most real sense of the word!!

Medicare will cost much more than social security, that is the scary one.

Nikkei 225 15,336.51 -811.98 14:40

Nikkei 225 15,280.98 -867.51 14:54

Shut her down, Clancy, she’s pumping mud!

Nikkei 225 8/17 - *close
15,273.68 - 874.81

CFC humor...

This video clip has within it a series of clips of Mozilo over the years. It shows how the Tan Man has gotten darker!

Video - CNBC.com

The rest of the video is not humorous, unless you are short CFC. Now where's my popcorn?

I have never understood the NZD-YEN carry trade: How can one expect to get 7% a year with more and more YEN coming in and not think about the day these funds will move back to Japan.

If someone would show me that in Japan they started to consume hugh amount of NZ dairy and in NZ they stopped buying Toyota I would say: OK there is a way for the other side of the carry trade to work - but that is not the case:

Japan does not need NZD and NZ does need YEN so when the carry trade money wants to come back home there is only one option:

YEN UP and NZD down:
Australian, New Zealand Dollars Slump as Investors Reduce Carry - Bloomberg.com

13% already.

Go chase yield.....

and I recall someone here telling this is how Soros made his money: On getting higher yield. I don't know if true but this whole getting higher yield in NZD is a perfect ponzy scheme that only works as long as the NZ central bank willing to give money away and more and more jananese invetor going into NZD.

Japan - Worst day in seven years. Nikkei down ~18% in the last 1 month. Will Japan be the first to enter recession /( or D )?

I'm guessing carry trade profits made a considerable part of Japanese consumer spending. Add to that higher Yen which may hit Industrial production.

We have plunged into an liquidity crisis that was inevitable. Cash is now king, and the closer your assets are to cash (ie. the more liquid you are) the safer you are from harm.

Unfortunately, there isn't nearly enough cash to go around for all the credit that has been created.

So, the cash-rich will be able to snatch up plenty of bargain basement assets. But only for a while. The US (and other) governments will soon be forced to increase the amount of real cash to match the rapidly-shrinking amount of phoney cash (ie. extended credit). And the only way to do that is to hyperinflate.

I've been predicting for the last two years that everyone will be whipsawed by this process: first a deflationary collapse the makes cash desperately scarce, and then the printing presses roar into action and the cash becomes as worthless as Weimar marks. In short, neither cash nor gold alone will protect anyone. People need both. Cash to survive the first month or two, then gold to survive the coming hyperinflation.

(And then probably, as a few here have observed, guns.)

BTW, it seems not unlikely that before long there will be real runs on banks and other accounts, and so they will be frozen. It may save people a lot of pain they have a few thousand in cash at home.

"How long did you think we could sustain this bullshit? Agents inflating prices...buyers BUYING with no money invested...borrowers paying 1%...(seriously wow, 1% interest!)...the chop shop shadey brokers...the idiot loan officers who did not even know fundamental elements of finance, economics, and real estate...the appraisers who would push values based on remodeled grass and flowers...the banks giving 4+ points in rebate (wow)...the investors who bought them and sold them (wow again). "

Mortgage Grapevine: Countrywide -- Probably GONE when we wake up!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

The run on CFC bank is real and not just in Florida:

A rush to pull out cash -- latimes.com

From the American Bankruptcy Institute (their motto is kind of disheartening:
“The Essential Resource for Today’s Busy Insolvency Professional!”):

The total number of U.S. bankruptcies filed during the first six months of 2007 increased 48.23 percent over the same period in 2006 in all bankruptcy court districts, according to data released today by the Administrative Office of the U.S. Courts. Total filings reached 404,090 during the first half of the calendar year of 2007 (January 1-June 30), compared to 272,604 cases filed over the same period in 2006.

Filings by individuals or households with consumer debt increased 48.34 percent to 391,105 for the six-month period ending June 30, 2007, from the 2006 first-half total of 263,660.

See: American Bankruptcy Institute | Bankruptcy Filings in First Half of 2007 Up 48 Percent from a Year Ago

And also:
Federal Judiciary News Release

Dear Yal

That is some strange behavior from that LA Times article on CountryWide Bank...

"It's got my wife totally freaked out," he said. "I just don't want to deal with it. I don't care about losing 90 days' interest, I don't care if it's FDIC-insured -- I just want it out."

It is FDIC-insured...

Some "Bankerdome" type thinking going on out there.

(Of course, with all due respect to you...Banker, I know you are not really stocking up on tuna.)

Regards,

Europe not looking too good this morning...hell...even Oslo is in the red:

Major World Indices - Yahoo! Finance 

Total US Bank reserves are about 41 billion, which is, I think, about a half percent of total deposits. The other trillions have been loaned out, and if depositors start runs on other banks, as they are on Countrywide's, banks will be shut down by executive order. FDR did it, and other nations faced with a failure of fractonal reserve banking, have done it, too. Because, 41 billion divided by the US population would provide only about $130. per person, and you can bet it won't be divided up equally.

Sure, it's a fat-tail event. But it looks increasingly possible. FDIC is a sham. Reimbursement would take years, and be paid in inflated $$$.

And it's not entirely true that "no Americans have cash, only CC's." I do. My CC's, like my house and cars, are paid off, and I did it on blue-collar wages. I must be a "moron," eh, Risk Capital?

So here's advice from this moron. Whether in debt up to your eyeballs or not, stash greenbacks at home. You can always put cash back in the bank if the Pollyanna's turn out to be correct. But if our banks shut their doors for a few months, your family will starve.

Worried - You are correct twice. The discount window is always open and, yes, Cramer did demand that it be opened.

Now. What can you conclude from that?

Is the collateral for borrowing though the Discount Window the same as Repos?

Worried - I didn't at all mean to trivialize your situation, so my apologies.

I have no doubt Cramer makes money, in the same sense that Jerry Springer makes money. Both of them are very smart in a particular way. But there are more reliable sources of information, evidently, than Mr. C., as you no doubt realize.