September 29, 2007

On Thinking

Bonner Might Sound Bright, but you can't really take him seriously

...when he makes a basic arithmetic error in the first paragraph.

Bonner says: "if the dollar were still worth what it was in 2002, they’d get 20% more. In other words, the dollar has lost 20% of its value..."

Wrong.

If buyers got 20% more in 2002 that means the dollar has lost 16 2/3 % of its value. ( 20 divided by 120 equals 16 2/3 %)

Alternatively, if the dollar has lost 20% of its value then people got 25% more in 2002. (20 divided by 80 equals 25 %)

We all make mistakes but if you can't do simple arithmetic maybe you aren't cut out for economics.





Closing Shop

Housing inventories are at an 18-year high.

Housing sales (resales) are at a 5-year low.

Housing prices, according to Case/Shiller, fell in America’s top 20 cities last month – 3.9%.

Late payments are running well above the historical average.

More than 150 mortgage companies have closed up shop.

Welcome to subprime nation




September 28, 2007

U.S. Economy: New-Home Sales Slump, Prices Drop Most Since 1970

13.9 trillions are due for health care and social security. The incomes in the US and in the west are declining and taxes and prices are going up. Add the inflation in the US and the will learn it the hard way.


Debt Ceiling

October 1st is fast approaching, and the significance of this is that Treasury Secretary Henry Paulson told Congress on Wednesday that the federal government will hit the current debt ceiling on Oct. 1.

The current debt limit is $8.965 trillion. Unless Congress votes to raise that ceiling, the country would be unable to borrow more money to keep the government operating and to pay debt obligations coming due. The United States has never defaulted on a debt payment but the decision on whether to raise the debt ceiling often sparks a prolonged political battle in Congress.

The House approved an increase in the debt limit in May when it adopted the annual congressional budget resolution, but the full Senate has yet to act to raise the limit.

Partial excerpt from here


NetBank shut down by federal regulators

Is this where the crash is gonna happen? Remeber, in 1929 new forms of investment, or storing money came around...just like today.

NetBank shut down by federal regulators

WASHINGTON (AP) — NetBank Inc., an online bank with $2.5 billion in assets, was shut down by the government on Friday because of an unsustainable level of mortgage defaults.

It was the largest thrift to fail since the tail end of the savings and loan crisis more than 14 years ago. Federal regulators appointed the Federal Deposit Insurance Corp. as a receiver for Alpharetta, Ga.-based NetBank.





September 25, 2007

Global regulator vs global cooperation

Foreign central banks have obviously lowered rates (or refrained from rises) in the last couple of months to minimize the damage done to the greenback by Fed rate cuts. Cooperation serves as an international central bank.


September 21, 2007

Mortgage Debt

These debts are merely IOU's.

In fact all debts that these financial wizards have built their money empire upon are just IOU's.

How could they ever consider them an asset? The economy of the world is being sucked dry by financial leeches. The only use for an economy in the first place is to provide human beings with their physical-biological necessities and simple pleasures. And the labor of human beings is worth whatever they, as a collective group, can produce and distribute.

So that if Mercedes can produce a Mercedes-Benz for every adult who drives, than everyone who wants one should get one. After all, their labor went in to the production and distribution of it.

What this blowout means is the death of the medium of exchange-money. We are seeing it happen before our eyes.


September 15, 2007

Private Debt Much Higher Than During the Great Depression

America is frequently called the 'richest nation on earth', but the reality is that the American people are living on borrowed money. There is not one sector in the U.S. that has shown any measure of refrain. Government, corporate, and consumer debt are all at record levels. Private debt, which is debt from a private entity, such as a bank, has skyrocketed in the last three decades alone.


September 7, 2007

Is China quietly dumping US Treasuries?

A sharp drop in foreign holdings of US Treasury bonds over the last five weeks has raised concerns that China is quietly withdrawing its funds from the United States, leaving the dollar increasingly vulnerable.

China threatens `nuclear option' of dollar sales
Data released by the New York Federal Reserve shows that foreign central banks have cut their stash of US Treasuries by $48bn since late July, with falls of $32bn in the last two weeks alone.

"This comes as a big surprise and it is definitely worrying," said Hans Redeker, currency chief at BNP Paribas.

"We won't know if China is behind this until the Treasury releases its TIC data in November, but what it does show is that world central banks are in a hurry to get out of the US. They don't seem to be switching into other currencies, so it is possible they are moving into gold instead. Gold is now gaining momentum across all currencies and has broken through resistance at 500 euros," he said.

While the greenback has been resilient over recent weeks - even regaining something of a 'safe-haven' role as banks scrambled to buy the currency to cover dollar debts - most experts believe that America's $850bn current account deficit will eventually cause the dollar to resume its relentless slide.

David Powell, an economist at IDEAglobal in New York, pointed the finger at Beijing as the main suspect in the sudden bond flight this summer.

In a client note entitled "Has China started to dump US Treasuries?", he said the sales appear to coincide with early moves by Beijing to launch its new $300bn sovereign wealth fund.

The scheme is part of the government's plan to diversify it $1,340bn reserves from bonds (mostly in the US) to a broader portfolio of investments and a better yield.

If so, the switch comes at a very delicate time, just as tempers flair on both sides of the Pacific over China's policy of holding down yuan by currency intervention. A bill in Congress calls for punitive tariff sanctions of 27.5pc against Chinese imports, and there has been a growing outcry over contaminated pet food and lead-tainted toys.

Two top advisers to the Chinese government gave strong hints in August that Beijing should use its estimated $900bn holdings of US Treasuries and agency bonds as a "bargaining chip", words taken as an implicit threat to trigger as US bond crash if provoked.

The Chinese government has since put out an official statement clarifying that it has no intention in taking such an irresponsible step, which would in any case backfire by devaluing China's remaining holding.

Mr Powell said the switch out of Treasuires was a purely commercial decision. "If if turns out that the Chinese are behind this, it is merely an attempt to increase returns on investment. It has nothing to do with settling protectionist scores," he said.

Any evidence that China was pulling out would risk setting off an unstoppable stampede, which is why such a policy would never be announced. It holds the world's biggest pool of resrves, followed by Japan.

Robin Bhar, a metals analyst at UBS, said there was little evidence yet that Asian central banks were switching heavily into gold. Most of the recent buying of gold has been on the COMEX futures markets, the playground of hedge funds.

Central banks tend to buy their bullion in London at the AM and PM fixings, leaving a footprint that is visible to experts. They seem to have been largely absent from the market so far.




September 3, 2007

Wealth

Reasons for getting in debt are numerous. This post will focus on those who have so much wealth, and despite all the wealth they create they have to one day die and leave it, I think they would come to some degree of realization that it is all an exercise in vanity and futility. If humans lived forever on earth, that would be the only reason I would seek after vast riches. Evidently, you need to have a financial base for your own personal survival and sustenance but these people take it beyond the extreme.





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