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Chris Martenson

Image | Treasury seeks “unprecedented borrowing”
Treasury seeks “unprecedented borrowing”

I nominate this for understatement of the year:

Ryan Says Treasury to Need `Unprecedented’ Financing
"This year’s financing needs will be unprecedented,” said Anthony Ryan, the Treasury’s acting undersecretary for domestic finance, at a Securities Industry and Financial Markets Association conference in New York, where he was a last-minute substitute for Treasury Secretary Henry Paulson.

"Unprecedented" hardly does this justice; we need a more superlative word.  "Ginormous" comes to mind.

Perhaps the Germans have a single word that means "future destroying" that we could use.

Treasury seeks “unprecedented borrowing”

I nominate this for understatement of the year:

Ryan Says Treasury to Need `Unprecedented’ Financing
"This year’s financing needs will be unprecedented,” said Anthony Ryan, the Treasury’s acting undersecretary for domestic finance, at a Securities Industry and Financial Markets Association conference in New York, where he was a last-minute substitute for Treasury Secretary Henry Paulson.

"Unprecedented" hardly does this justice; we need a more superlative word.  "Ginormous" comes to mind.

Perhaps the Germans have a single word that means "future destroying" that we could use.

Image | The Fed cuts rates to 1.00% – the war on savers continues
The Fed cuts rates to 1.00% – the war on savers continues

Fed cuts rates half-point, leaves door open for more

WASHINGTON (MarketWatch) – The Federal Reserve on Wednesday slashed overnight interest rates by a half-point to 1.0%, and signaled that downside risks to growth remain, indicating even more rate cuts could come.

In its statement, the Federal Open Market Committee said the pace of growth has slowed "markedly" and the extraordinary financial market stress could put the economy at greater risk.
The Fed said that inflation was no longer a threat and that the central bank will cut rates as needed to boost the economy.

No real surprise here, but I will make a comment or two. The Fed, representing status quo interests, is desperately trying to recreate the exponential expansion of credit and debt that marked the last 2 decades (but really picked up steam from 2000 onwards).

The Fed cuts rates to 1.00% – the war on savers continues

Fed cuts rates half-point, leaves door open for more

WASHINGTON (MarketWatch) – The Federal Reserve on Wednesday slashed overnight interest rates by a half-point to 1.0%, and signaled that downside risks to growth remain, indicating even more rate cuts could come.

In its statement, the Federal Open Market Committee said the pace of growth has slowed "markedly" and the extraordinary financial market stress could put the economy at greater risk.
The Fed said that inflation was no longer a threat and that the central bank will cut rates as needed to boost the economy.

No real surprise here, but I will make a comment or two. The Fed, representing status quo interests, is desperately trying to recreate the exponential expansion of credit and debt that marked the last 2 decades (but really picked up steam from 2000 onwards).

Image | IEA says world’s oilfields declining faster than expected
IEA says world’s oilfields declining faster than expected

I know that the whole issue of Peak Oil seems to be on the back burner, given the financial crisis. Many think that oil demand will be knocked far enough back that even if Peak Oil were happening right now we’d have several years respite before it becomes a significant problem due to demand destruction.

So I’ve been patiently waiting for any estimates that would allow us to compare world oil production declines to demand destruction to see where we are in the oil sweepstakes race.

On the demand side, I’ve seen estimates that world oil demand will fall off as much as 4%-5% this next year.

Now for the supply side.
IEA says world’s oilfields declining faster than expected

I know that the whole issue of Peak Oil seems to be on the back burner, given the financial crisis. Many think that oil demand will be knocked far enough back that even if Peak Oil were happening right now we’d have several years respite before it becomes a significant problem due to demand destruction.

So I’ve been patiently waiting for any estimates that would allow us to compare world oil production declines to demand destruction to see where we are in the oil sweepstakes race.

On the demand side, I’ve seen estimates that world oil demand will fall off as much as 4%-5% this next year.

Now for the supply side.
Image | Market Predictions and Outlook Update
Market Predictions and Outlook Update
 PREVIEW
Tuesday, October 28, 2008

In this report I will review the advice and predictions I made on May 27, 2008 (exactly five months ago) in a report entitled Charting a Course Through the Recession.

In striving to be accurate, fair, and complete, and in the spirit of constant improvement, it’s important to review where we went right and where we went wrong.  I’m pleased to say that many of my predictions were right on target.  I didn’t anticipate such an aggressive dollar advance, but now I see this trend continuing for awhile.  I am continuing to recommend some of the same prudent actions as always.  Stay out of debt, keep cash close by, get some money out of the dollar (gold), and know your neighbors.  And stay tuned for more from me in future reports.

Market Predictions and Outlook Update
 PREVIEW
Tuesday, October 28, 2008

In this report I will review the advice and predictions I made on May 27, 2008 (exactly five months ago) in a report entitled Charting a Course Through the Recession.

In striving to be accurate, fair, and complete, and in the spirit of constant improvement, it’s important to review where we went right and where we went wrong.  I’m pleased to say that many of my predictions were right on target.  I didn’t anticipate such an aggressive dollar advance, but now I see this trend continuing for awhile.  I am continuing to recommend some of the same prudent actions as always.  Stay out of debt, keep cash close by, get some money out of the dollar (gold), and know your neighbors.  And stay tuned for more from me in future reports.

Image | Pompous Prognosticators
Pompous Prognosticators

This is a post from last April that I want to bring back to the forefront.

Below, I’ve liberally excerpted from an article I read a couple years back that always stuck with me.

Since our challenge today is to know whom to trust and which story to believe, I thought I’d bring this one
back to the forefront, because the parallels are so striking between the late 1920’s and now.

Below is a graph of the Dow Jones during the years of the 1920’s bubble, the stock market crash of 1929, and the onset of the Great Depression. The numbers in bubbles indicate when one or more quotes from a famous expert were captured.

I happen to believe that we are somewhere between points #8 and #18.

I get chills every time I re-read them…
Pompous Prognosticators

This is a post from last April that I want to bring back to the forefront.

Below, I’ve liberally excerpted from an article I read a couple years back that always stuck with me.

Since our challenge today is to know whom to trust and which story to believe, I thought I’d bring this one
back to the forefront, because the parallels are so striking between the late 1920’s and now.

Below is a graph of the Dow Jones during the years of the 1920’s bubble, the stock market crash of 1929, and the onset of the Great Depression. The numbers in bubbles indicate when one or more quotes from a famous expert were captured.

I happen to believe that we are somewhere between points #8 and #18.

I get chills every time I re-read them…
Image | International instability
International instability

As bad as the US is, there are worse problems elsewhere.  This is why I think this credit crisis will not play out like any previously and why I think there’s a better than even chance of a systemic banking crisis.

In times past when a country experienced a bubble or a banking crisis, there was always a country next door that hadn’t where the savvy could hide out.  Where does one hide out today?

Europe on the brink of currency crisis meltdown


The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis,” this time unfolding in Europe rather than America.

Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.

Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.

Those figures in the bottom two paragraphs are quite the eye-openers. Somehow Austria’s bank system loaned out 85% of Austria’s GDP to emerging markets that are even now resorting to emergency measures to stem the erosion of the their currencies against the dollar.  The problem, apparently, is that these countries were loaned vast amounts of money denominated in dollars.  The faster their currencies fall, the more it costs them to pay back their loans.  
Some of these currencies have fallen by 40% in a matter of weeks.

International instability

As bad as the US is, there are worse problems elsewhere.  This is why I think this credit crisis will not play out like any previously and why I think there’s a better than even chance of a systemic banking crisis.

In times past when a country experienced a bubble or a banking crisis, there was always a country next door that hadn’t where the savvy could hide out.  Where does one hide out today?

Europe on the brink of currency crisis meltdown


The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis,” this time unfolding in Europe rather than America.

Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.

Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.

Those figures in the bottom two paragraphs are quite the eye-openers. Somehow Austria’s bank system loaned out 85% of Austria’s GDP to emerging markets that are even now resorting to emergency measures to stem the erosion of the their currencies against the dollar.  The problem, apparently, is that these countries were loaned vast amounts of money denominated in dollars.  The faster their currencies fall, the more it costs them to pay back their loans.  
Some of these currencies have fallen by 40% in a matter of weeks.

Image | Trouble In The Real Economy
Trouble In The Real Economy

While I was driving home today, the airwaves were filled with happy news of credit markets unfrozen and signs of renewed liquidity in the paper markets.  Specifically, NPR had a 10-minute piece that was nothing but one high level money manager after another saying things were better.

Lost in this "news" was any sense that our economy is something more than the flow of billions between and among various debt markets.  The implication was clear: Now that our ability to lend more freely has been fixed, we’ve turned the corner.  Whew!  

Glad that’s behind us!

Unfortunately, it’s not so easy.  In a debt-based market economy, there are two parties involved – a willing lender and a willing borrower.  It would seem that the willing lender part is being fixed, but what about the willing borrower?

Here, the signs are decidedly less favorable.
Trouble In The Real Economy

While I was driving home today, the airwaves were filled with happy news of credit markets unfrozen and signs of renewed liquidity in the paper markets.  Specifically, NPR had a 10-minute piece that was nothing but one high level money manager after another saying things were better.

Lost in this "news" was any sense that our economy is something more than the flow of billions between and among various debt markets.  The implication was clear: Now that our ability to lend more freely has been fixed, we’ve turned the corner.  Whew!  

Glad that’s behind us!

Unfortunately, it’s not so easy.  In a debt-based market economy, there are two parties involved – a willing lender and a willing borrower.  It would seem that the willing lender part is being fixed, but what about the willing borrower?

Here, the signs are decidedly less favorable.
Image | Alert – Global markets melt down.
Alert – Global markets melt down.

Hang on, it’s going to be a bumpy ride.

Last night global markets sold off more than 10% in a few spots in Asia (Korea & India) and are down between 7% and 8% in Europe.

Here in the US, our stock futures are "Lock Limit Down," meaning that automatic circuit breakers have tripped, preventing any further trading.
Alert – Global markets melt down.

Hang on, it’s going to be a bumpy ride.

Last night global markets sold off more than 10% in a few spots in Asia (Korea & India) and are down between 7% and 8% in Europe.

Here in the US, our stock futures are "Lock Limit Down," meaning that automatic circuit breakers have tripped, preventing any further trading.
Image | Money stampeding out of the market
Money stampeding out of the market

While the myth is that the stock market is a discounting machine, the reality is that it is mostly a liquidity measuring device.

What I mean by this is that the gigantic machinery of Wall Street, which includes all the people working at brokerages, as well as all of the buildings and infrastructure involved in operating a market, are not cheap, and the money to operate all of that has to come from somewhere.

It is safe to say that just keeping the machinery well-oiled requires several billions of new money each month to keep it fed at a subsistence level (for the pin-stripe crowd, I mean).

Yes, we could look at stock’s p/e ratios and scrutinize annual reports, but the sad truth is that if more money is leaving the market than entering it, prices will fall.

It’s very simple:
Money stampeding out of the market

While the myth is that the stock market is a discounting machine, the reality is that it is mostly a liquidity measuring device.

What I mean by this is that the gigantic machinery of Wall Street, which includes all the people working at brokerages, as well as all of the buildings and infrastructure involved in operating a market, are not cheap, and the money to operate all of that has to come from somewhere.

It is safe to say that just keeping the machinery well-oiled requires several billions of new money each month to keep it fed at a subsistence level (for the pin-stripe crowd, I mean).

Yes, we could look at stock’s p/e ratios and scrutinize annual reports, but the sad truth is that if more money is leaving the market than entering it, prices will fall.

It’s very simple:
Image | US losing influence, housing starts, and the next Iceland
US losing influence, housing starts, and the next Iceland

Here are some interesting stories I collected this week.

US surrenders power to appoint World Bank president
The US is to lose its power to appoint the president of the World Bank after the UK’s development secretary, Douglas Alexander, brokered a deal to throw open the post to candidates from any country.

Backed by European governments and developing countries, Alexander overcame resistance from the US and Japan to secure a reform he described last night as "a significant step forward".

My Comment:  This may not seem like much, but symbolically it is huge.  The World Bank wields enormous influence, and for Europe, et al., to demand, and receive, the right to fill the post speaks volumes about US prestige and power at this time.  

US losing influence, housing starts, and the next Iceland

Here are some interesting stories I collected this week.

US surrenders power to appoint World Bank president
The US is to lose its power to appoint the president of the World Bank after the UK’s development secretary, Douglas Alexander, brokered a deal to throw open the post to candidates from any country.

Backed by European governments and developing countries, Alexander overcame resistance from the US and Japan to secure a reform he described last night as "a significant step forward".

My Comment:  This may not seem like much, but symbolically it is huge.  The World Bank wields enormous influence, and for Europe, et al., to demand, and receive, the right to fill the post speaks volumes about US prestige and power at this time.  

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