No Economic Recovery in Sight: More Financial Chaos Ahead

September 3rd, 2009

Published on Global Research.ca, by Bob Chapman, Sept 3, 2009.

The Financial elites are desperate. They are appealing the Bloomberg directive to reveal who received funding to keep from going bankrupt from the Federal Reserve.  

In addition HR 1207 will pass in the House this month. The question is in what form. No matter what happens the financial elites know  we are hot on their trail. They have to do everything possible to end the depression, or go for broke.

Thus far there has been little recovery even with an official $23.7 trillion committed by the Treasury and the Fed. This number alone shows you how serious this situation is. The banking sector is still broke and is using TARP funds to buy out failing smaller banks. The residential TARP funds returned will go toward helping bail out the collapsing commercial real estate industry. Quantitative easing has not worked, nor has TARP and the endless stream of money from TALF. We are anxious to see if the FASB sticks to its guns and demands mark-to-market accounting.

That will pull the cover off of the fraud known as mark-to-model, which really is mark to whatever you want it to be. As you can now see this is a much deeper problem than a subprime problem. That just triggered events. As we pointed out before we are still facing a new wave of subprime loans written over the past year by FHA, Ginnie Mae, Fannie Mae and Freddie Mac, plus ALT-A, Option ARMS Pick-and-Pay Loans and the failure of prime loans that will stretch to 2013. On top of that we have commercial real estate loans now to deal with and credit card failure. This is what the Illuminati crime syndicate has brought you in their lust for more power and riches. We must not forget as well, standing in the wings, are America’s creditors, especially the Chinese who are dumping $25 billion to $100 billion in dollar denominated assets monthly.

Their goal is to be out of dollar paper in another 1-1/2 years. Then there are the other sellers. There are few buyers, so the Fed will have to monetize trillions of dollars in dollar denominated bonds, which they are doing secretly presently. It is no wonder they are terrified of an audit, which would not only uncover their illegal activities, but also expose their leadership and participation in the outrageous suppression of gold and silver prices. The status of foreign creditors could turn on a dime. We predict they will abandon ship one at a time, as the dollar slips lower and lower. The Fed and the Treasury have tried over and over to keep the USDX, dollar index, over 80 for weeks and they have been totally unsuccessful. It settled this past Friday at 78.31, just ready to break to new lows. We wonder how long these countries will tolerate such arrogance and the dream of world government? One must remember these countries are suffering the fallout of the actions that have been deliberately executed by these Illuminists and they are not happy about that. They are all suffering recession and many depression. It is only a matter of time before they too dump dollar denominated assets …

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… It is imperative that Audit the Fed come before the House and Senate on its own merits.

The American people stand behind a thorough audit of the Fed, and we should not be adding additional powers when we don’t fully know what is being done with the ones they currently have.

Call Speaker Nancy Pelosi’s office today at (202) 225-0100 and urge her to stand with the American people by giving the Audit the Fed bill full debate and a standalone vote on the House floor.

Click here for contact information for your representatives and senators and ask them to get behind Audit the Fed if they have not yet done so. If they have already cosponsored, tell them to push for a roll call vote on HR 1207 and S 604 on the bills’ own merits.

Our movement has worked hard to bring transparency and accountability to one of the nation’s most secretive institutions. Audit the Fed has received a bipartisan level of support that is very rare in politics today.

Together, we can see a comprehensive audit of the Federal Reserve signed into law, but it should not be accompanied by more of the same interventionist legislation that helped create the current crisis.

U.S. manufacturers saw output rise for the first time since January 2008 last month. On Tuesday, the Institute for Supply Management reported that its manufacturing index for last month came in at 52.9, from 48.9 in July and 44.8 in June. Numbers over 50 indicate growth.

August’s reading were over the 50.9 that economists had expected to see. The current index matches the reading seen in June 2007.

Construction spending in the U.S. unexpectedly fell during July, dragged down a big drop in the commercial sector that offset strength in the housing industry.

Total spending decreased by 0.2% to a seasonally adjusted annual rate of $958.04 billion compared to the prior month, the Commerce Department said Tuesday.

Wall Street had expected spending would increase, by 0.2%.

Overall construction spending rose 0.1% in June; originally, June spending was seen 0.3% higher.

Year over year, spending in July was down 10.5% since July 2008.

Spending in July on residential construction projects soared 2.3% to $254.2 billion. Residential spending fell 0.3% in May, a revision from the originally reported increase of 0.7% for the month. Year over year, residential spending was 26.9% below the July 2008 level.

The Obama administration has insisted that the pledge will stand. But the President’s top economic advisers have refused to rule out broad based tax increases to close the yawning gap between federal revenue and government spending and are warning of tough choices ahead.

This is about the end of the post war political system in Japan, said Gerry Curtis, a Japanese expert at Columbia University. It marks the end of one long era, and the beginning of another one about which there is a lot of uncertainty. Japan is aging more quickly than any other rich country. More than a quarter of its people will be 65 or older by 2015. [It’s the end of US domination of Japan]

Japan’s opposition party says it would refuse to buy American government bonds denominated in US dollars, if elected. But, he added, it would continue to buy bonds only if they were denominated in yen the so called samurai bonds.

The chief finance spokesman of the Democratic Party of Japan, Masaharu Nakagawa, told the BBC he was worried about the future value of the dollar [He was elected]

Although initial jobless claims are trending down, the total number collecting unemployment insurance inclusive of those recorded in all programs  continuing claims, Extended.

Benefits and Emergency Unemployment Compensation has risen to 9.63 million for the week ended.

August 8. The special programs data lag initial claims by two weeks. There was a small dip seen in total continuing claims including special programs in the early weeks of July, but the decline has been partly reversed in the past few weeks.

Average credit card debt among low and middle income Americans 65 and older carrying a balance for more than three months reached $10,235, up 26 percent from 2005, according to a recently released study by the public policy group Demos. It was the fastest increase of any age group. Soon to be retirees are also struggling with debt.

Aging and retired baby boomers will be a demographic drag on the stock market for years because they will no longer be spending lavishing and investing. Instead they will be liquidating assets to live. This is the opposite dynamic that generated the great stock market boom of the eighties and nineties.

For decades, the Federal Deposit Insurance Corp. disclosed all bids on failed banks to the public. That was then. This is now: no disclosure on losing bids, no explanation to date, and the change might become permanent.

Industry insiders are crying foul. The records are used in formulating future bids and, with the pace of failures accelerating, the about face could not come at a worse time, they said. Some observers also questioned whether the FDIC can legally withhold such records and accused the agency of flouting the Freedom of Information Act, which details what can be kept confidential and requires public disclosure in all other cases.

Charlie Rangel, the Congressman who is charge of crafting tax laws, has been hiding assets and income. Earlier this month the Chairman of the tax writing Ways and Means Committee amended his 2007 financial disclosure form to the tune of more than a half million dollars in previously unreported assets and income. That number may be as high as $780,000, because Congress’s ethics rules only require the Members to report their finances within broad ranges. This voyage of personal financial discovery brings Mr. Rangel’s net worth for 2007 to somewhere between $1.028 million and $2.495 million, while his previous statement came in at $516,015 and $1.316 million.

When you’re a powerful Congressman and working diligently to increase tax rates to pay for President Obama’s health care plan, we suppose it’s easy to lose track of one of your checking accounts. That would be the one at the federal credit union with a balance somewhere between $250,001 and maybe as high as $500,000. And when you’re crunched for time and pulling together bills to pass in a rush, we guess, too, that you might overlook several other investment accounts, even if some of them are sizable, such as the ones Mr. Rangel missed at JP Morgan, Merrill Lynch, Oppenheimer and BlackRock.
The nation’s largest labor union and some allied Democrats are pushing a new tax that would hit big investment firms such as Goldman Sachs reaping billions of dollars in profits while the rest of the economy sputters.

The AFL – CIO, one of the Democratic Party’s most powerful allies, would like to assess a small tax about a tenth of a percent on every stock transaction.

Small and medium sized investors would hardly notice such a tax, but major trading firms, such as Goldman, which reported $3.44 billion in profits during the second quarter of 2009, may see this as a significant threat to their profits.

Rasmussen: Overall, 46% of voters say they at least somewhat approve of the President’s performance.

That’s the lowest level of total approval yet measured for Obama. Fifty three percent (53%) now disapprove. Eighty one percent (81%) of Democrats approve while 83% of Republicans disapprove. As for those not affiliated with either major party, 66% disapprove.

Ann Pettifor predicted a painful end to the good times. Now she says that only radical action can prevent further gloom Then, in 2006, her book

The Coming First World Debt Crisis, warned that rich countries were heading for a debt crisis that would overshadow anything seen in the developing world.

The economy is no longer in freefall and, as a result, there’s an enormous amount of complacency from politicians, in particular, about what will happen next. I believe politicians have given away the opportunity to restructure the banks and reconfigure the system. She is baffled that the Government has used billions of pounds of public money to rescue the banks without insisting on any change in behavior.

Charles Biderman on Bloomberg TV: Insider selling is 30 times insider buying, while corporate stock buybacks are non existent. Companies are saying they don’t want to touch their own stocks. I don’t know where the money is coming from to keep the markets from not plunging.

National chain store sales fell 0.6% in August from a month earlier, according to Redbook Research’s latest indicator of national retail sales released Tuesday.

The Johnson Redbook Index also showed seasonally adjusted sales were down 4.3% compared with August 2008. Both the month-to-month and year-to-year drops met targeted declines. The year-to-year comparison is skewed by Wal-Mart Stores Inc. (WMT) no longer being included. That is because the retail giant in May said it would no longer provide monthly sales figures.

Redbook noted consumer interest last week was on seasonal and back-to-school merchandise. It added that the sales declines are expected to continue, with preliminary targets for September of down 4% from last year and 1.5% from August.

Consumer prices in developed economies were lower in July than in the same month a year earlier, the second straight month of deflation.

According to figures released by the Organization for Economic Cooperation and Development Tuesday, consumer prices in its 30 members fell by 0.6% in the 12 months to July, having fallen 0.1% in the 12 months to June.

The drop in June marked the start of the first episode of deflation since the OECD began compiling data in 1971. As recently as July 2008, the OECD inflation rate stood at an 11-year high of 4.8%.

The plunge in the inflation rate between July 2008 and July 2009 is testament to the severity of the global financial crisis and the recession it engendered.

Chrysler Group LLC U.S. sales fell 15 percent in August as the company ran out of inventory of more fuel-efficient models, a person familiar with the data said.

The person declined to be identified because Chrysler’s results are being released later today. A spokeswoman, Shawn Morgan, had no comment

As California heads into another season of wildfires that have been growing more frequent and more ferocious, homeowners are facing higher prices to insure their property.

In the last year, some big insurance companies have won approvals from regulators for premium hikes ranging from 4% to 7%. And a round of requests for similar increases has been submitted to the state insurance commissioner.
In a state parched by a three-year drought, wildfires are at least partly to blame for the price increases, industry officials and even some consumer advocates agree.

A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.

The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.

While the details of the report could not be confirmed, it was Monday’s hot topic in financial circles from Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges could simply renege on the deals, costing banks millions of dollars in profit.

The warning from SASAC follows a series of measures from Beijing this year to crack down on the sale of derivative products by foreign banks to Chinese enterprises, principally big consumers, who bought protection against higher prices last year only to watch the market collapse – leaving them with losses.

Florida’s pension lost $250 million it invested in Stuyvesant Town and Peter Cooper Village, Manhattan’s largest rental-apartment complex, the fund’s trustees were told.

“We are carrying that investment at zero because the market softened dramatically,” Ash Williams, executive director of the State Board of Administration, which oversees $121.9 billion of pension and other assets, said at a meeting in Tallahassee yesterday.

The SBA bought in 2007 its share of a limited partnership run by Tishman Speyer Properties LP and Blackrock Inc., owners of the property, said Williams, who was hired in October 2008.

Tishman and Blackrock acquired the 80-acre, 11,200-unit Stuyvesant Town and Peter Cooper complex for $5.4 billion in 2006 at what Williams called “the top of the market.”

If indeed China is prodding its companies to default of derivative contracts, the next crisis phase will unfold.  And US solons are to blame because they have not enacted the necessary reforms or restructuring, especially concerning the quadrillion derivatives market.

Now China will show the world how to handle the intractable derivative problem.  Will the default ploy extend to non-commodity contracts? How many other nations will now tell Wall Street toxic waste peddlers to take a hike? How will Wall Street mark those worthless derivatives? We wonder how JP Morgan’s estimated $60 trillion to $80 trillion derivative book will be impacted.

We’ve been warning for months that foreigners are avoiding agency paper.  The Fed has been monetizing agencies like crazy as a result.  Yesterday the NY Fed announced a change in its monetization policy.

Prior to August 31, 2009, purchases were focused on off-the-run securities in that category. Going forward, purchases will include on-the-run securities in that category. This change represents a technical adjustment designed to mitigate market dislocations and to promote overall market functioning. Over the course of the program, the Federal Reserve may change the scope of purchasable securities.

In other words, the US is having difficulty placing agency paper, so the Fed must monetize new issuance.

While the usual suspects heralded the moderately better than expected ISM (52.9 vs.50.5), most ignored the explosion in prices paid to 65 from 55 (57.8 expected).

As the largest banking companies try to unload thousands of distressed properties, they are using a controversial practice that can win them new loans and has competitors crying foul.

It is called “cross-qualifying,” and it works like this: Say that Lender A is selling a repossessed property, or has a troubled borrower who wants to sell the home through a short sale. Someone makes an offer to buy the house and has been pre-qualified for financing from Lender B. But Lender A will not consider the bid unless the prospective buyer qualifies for one of its mortgages.

Acceptance of the purchase offer is not conditioned on actually getting a loan from Lender A. It just provides assurance that the deal can close even if Lender B backs out. But another motivation for requiring a “cross-qual,” many industry insiders say, is to drive origination business to Lender A.

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