Ponzimonium and the end of banking as we know it

Collapsing markets expose 'Ponzimonium' of scam artists http://www.guardian.co.uk/business/2009/mar/20/ponzi-schemes-ponzimonium-bart-chilton

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5947159.ece

Threat of 100% bonus tax raises fears for future of US banks

Zimbabwe ditches USD for RAND

http://www.marketskeptics.com/2009/03/zimbabwe-ditches-us-dollar-in-favor-of.html
Zimbabwe chooses rand as reference currency

http://www.mg.co.za/article/2009-03-21-zims-blueprint-for-recovery
Zimbabwe has unveiled an ambitious US$5-billion short-term economic recovery plan, which President Robert Mugabe was expected to announce on Thursday, laying out for the first time the coalition's plan to reverse years of economic turmoil under his rule.

Fed to Buy $300 Billion of Longer-Term Treasuries

Fed to Buy $300 Billion of Longer-Term Treasuries (Update2)

By Craig Torres

March 18 (Bloomberg) -- The Federal Reserve plans to buy $300 billion in Treasury securities and acquire more mortgage and agency debt in an effort to bolster housing and hasten the end of the recession.

"To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage- backed securities," the Federal Open Market Committee said after a unanimous vote in Washington today. "Moreover, to help improve conditions in private credit markets, the committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months."

Chairman Ben S. Bernanke is opening a new front in monetary policy after unemployment climbed to 8.1 percent and economists forecast the economy will shrink through the middle of the year. Fed officials also kept the benchmark interest rate at between zero and 0.25 percent and said it will consider expanding the Term Asset-Backed Securities Loan Facility to include "other financial assets," the statement said.

"We are not even close to the bottom and therefore the Fed is engaging in a massive quantitative easing," William Poole, former president of the St. Louis Fed, said in an interview today with Bloomberg News. "We still have a very serious recession in front of us," said Poole, now a senior economic adviser to Merk Investments LLC in Palo Alto, California, and contributor to Bloomberg News.

Historic Rally

Treasuries surged, sending benchmark 10-year note yields down to 2.50 percent from 3.01 percent late yesterday, the biggest decline since 1962. The Standard & Poor's 500 Stock Index jumped 2.9 percent to 800.66 at 2:54 p.m. in New York.

Bernanke is trying to prevent the credit contraction from deepening what already may be the worst recession in 60 years. The U.S. jobless rate jumped to the highest level in more than a quarter century last month. Industrial production fell 1.4 percent, the fourth consecutive decline, while factory capacity in use slumped to 70.9 percent, matching the lowest level on record.

"Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract," the FOMC said in the statement. "The committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth."

Global Contraction

The global economy will contract this year for the first time since World War II, the World Bank predicts, forcing central banks to keep pumping money into their economies when conventional interest rates are at, or close to, zero. The Bank of England is buying government bonds and corporate debt, the Bank of Japan is snapping up government notes and making subordinated loans to banks, and the Swiss National Bank is intervening to weaken the franc.

The Fed has cut the benchmark rate from 5.25 percent, beginning in September 2007, as credit froze and the economy buckled. Policy makers are now focused on how to further channel money to the economy. The Fed has already committed to buying $600 billion of mortgage-backed securities and bonds sold by government-sponsored housing agencies.

Home-Loan Rates

The Fed's actions pushed the average rate on a U.S. 30-year fixed rate mortgage to 5.03 percent on March 12, down from 5.15 percent the previous week. Still, rates are high relative to benchmark Treasury issues: Prior to today's meeting, the difference between rates on 30-year fixed mortgages and 10-year Treasuries is 2.1 percentage points, Bloomberg data show. That's up from an average of 1.75 percentage points in the decade before the subprime mortgage market collapsed.

Through emergency loans and liquidity backstops, U.S. central bankers have expanded Fed credit to the economy by an unprecedented $1 trillion over the past year. At the same time, forecasters at Macroeconomic Advisers LLC in St. Louis predict a 5.2 percent decline in first-quarter gross domestic product, following a 6.2 percent drop in the fourth quarter.

'Choked Off'

"It is the worst credit crunch since the Great Depression," Laurence Meyer, a former Fed governor and vice chairman of Macroeconomic Advisers, said before the decision. "The banking system is reeling, credit is being choked off, it is dramatic in size."

Banks worldwide have posted $1.2 trillion in write downs and credit losses on mortgage loans and other assets. U.S. Treasury officials will put the largest 19 banks through "stress tests" and decide whether they need more capital. The banks can raise equity privately or seek more government funds. Officials are also looking at ways to remove bad assets.

Bernanke, 55, told CBS Corp.'s "60 Minutes" on March 15 that he sees "green shoots" in some financial markets, and that the pace of economic decline "will begin to moderate."

The Standard and Poor's 500 index is up 11.5 percent this month. Chief executive officers from Bank of America Corp., JPMorgan Chase & Co., and Citigroup Inc. said their banks made money in the first two months of the year.

Coca-Cola Co., health insurer WellPoint Inc. and more than 30 other companies are tapping longer-term credit markets and paying down their short-term IOUs, a sign of some investor confidence.

Retail Sales

Sales at U.S. retailers in February fell less than forecast and a gain in January exceeded the previous estimate, indicating the biggest part of the economy may be starting to stabilize.

Housing starts in the U.S. unexpectedly snapped the longest streak of declines in 18 years in February, adding to the series of data that suggest the pace of the economy's decline may be easing.

Consumer prices rose 0.4 percent in February from a month earlier, the Commerce Department reported today. The annual core inflation rate increased to 1.8 percent, within the range most Fed officials say is their objective, easing concern about a deflationary spiral.

"There are always going to be some signs of revival; this is a resilient country," said Julian Mann, who helps manage $4 billion in bonds at First Pacific Advisors LLC in Los Angeles. "But consumers are fearful, and when they are fearful they aren't going to spend."

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net.

Last Updated: March 18, 2009 14:59 EDT

NO CHANGE by fed

U.S. Federal Open Market Committee March 18 Statement: Text

March 18 (Bloomberg) -- The following is a reformatted version of the full text of the statement released today by the Federal Reserve in Washington:

Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Last Updated: March 18, 2009 14:17 EDT

Russians pitch new global currency

At G20, Kremlin to Pitch New Currency http://www.themoscowtimes.com/article/600/42/375364.htm

 

Americans sharpen their pitchforks

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/16/AR2009031602961_pf.html A tidal wave of public outrage over bonus payments swamped American International Group yesterday. Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn't show up at all.

Now-needy FDIC collected little in premiums

http://www.boston.com/news/nation/washington/articles/2009/03/11/now_needy_fdic_collected_little_in_premiums/
Now-needy FDIC collected little in premiums

Swiss declare war on currencies

http://www.ft.com/cms/s/0/a9ec76dc-0f40-11de-ba10-0000779fd2ac.html?nclick_check=1
Swiss action sparks talk of 'currency war'

The Swiss National Bank moved to weaken the Swiss franc on Thursday, the first time a big central bank has intervened in the foreign exchange markets since Japan sought to weaken the yen in 2004.

SNB did not like CHF trend, so they are trying to change it

FX NOW! USD/CHF, EUR/CHF Flows- SNB did not like CHF trend, so they are trying to change it

Mar 09: 18:35(LDN) - FX NOW! USD/CHF, EUR/CHF Flows- SNB did not like CHF trend, so they are trying to change it

SNB has never been a particularly subtle institution and the flagging performance of the Swiss economy has prompted Swiss central bankers to warn the market more than once that they were prepared to do whatever is necessary to support the economy. Today's rate cut and program to buy bonds is vaguely similar to steps taken by many other central banks. But, the announcement that they were going to buy other currencies to soften the CHF was a surprise. One wonders what kind opf precident has been set. M.B.

Free offices in City of London, German exports drop 38%

Dmitry Orlov, author of Reinventing Collapse; The Soviet Example and American Prospects (New Society Publishers, 2008), watched the collapse of the Soviet Union in the 1990s and predicted a similar crisis would later occur in America .

Buckminster Fuller had also predicted the collapse of the Soviet Union and America in 1981— the twilight of the world's power structures— in his book, The Critical Path (St. Martin's Press, 1981). Both nations crippled by excessive debt brought on by excessive military spending (what Bucky called killingry ) were fading behemoths whose passing would make way for a better world.

http://www.marketoracle.co.uk/Article8082.html

China's customs agency said Wednesday that merchandise exports in February plunged 25.7% from a year earlier. That is one of the biggest drops on record, and extends the 17.5% fall in January for a fourth straight monthly decline.    http://online.wsj.com/article/SB123674128193891921.html

http://www.marketoracle.co.uk/Article9296.html Euro in Freefall as European Monetary Union Faces Collapse

London Mayor Boris Johnson is trying to bolster the city's position as a global financial center by offering overseas companies one year's free rent if they relocate to the U.K. capital.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aoDmfRIgv68Y&refer=home

The Bloomberg Professional Global Confidence Index fell to 5.95 from 8.5 in February. A reading below 50 means pessimists outnumber optimists. Sentiment about Europe and the U.S. slid, while respondents in Asia were less pessimistic about their region, the survey showed. German factory orders fell 38 percent in January from a year earlier, the government said today.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aEgHLmYvjmek

March 11 (Bloomberg) -- German manufacturing gorders collapsed in January as the global recession smothered exports.

Orders plunged 38 percent from a year earlier, the biggest drop since data for a reunified Germany started in 1991, the Economy Ministry in Berlin said today. From December they fell 8 percent, four times as much as economists expected and extending their worst decline on record.

"The annual slump is absolutely catastrophic," said Alexander Koch, an economist at UniCredit MIB in Munich. "The extent of declines is terrifying."     http://www.bloomberg.com/apps/news?pid=20601068&sid=apE182UITs2E&refer=home

Gerald Celente Expect Hunger Riots all over 03-Mar-09

Warning of Total collapse of the system unless Washington acts

What's Dead (Short Answer: All Of It)

Just so you have a short list of what's at stake if Washington DC doesn't change policy here and now (which means before the collapse in equities comes, which could start as soon as today, if the indicators I watch have any validity at all.  For what its worth, those indicators are painting a picture of the Apocalypse that I simply can't believe, and they're showing it as an imminent event - like perhaps today imminent.)

• All pension funds, private and public, are done.  If you are receiving one, you won't be.  If you think you will in the future, you won't be.  PBGC will fail as well.  Pension funds will be forced to start eating their "seed corn" within the next 12 months and once that begins there is no way to recover.
  
• All annuities will be defaulted to the state insurance protection (if any) on them.  The state insurance funds will be bankrupted and unable to be replenished.  Essentially, all annuities are toast.  Expect zero, be ecstatic if you do better.  All insurance companies with material exposure to these obligations will go bankrupt, without exception.  Some of these firms are dangerously close to this happening right here and now; the rest will die within the next 6-12 months.  If you have other insured interests with these firms, be prepared to pay a LOT more with a new company that can't earn anything off investments, and if you have a claim in process at the time it happens, it won't get paid.  The probability of you getting "boned" on any transaction with an insurance company is extremely high - I rate this risk in excess of 90%.
  
• The FDIC will be unable to cover bank failure obligations.  They will attempt to do more of what they're doing now (raising insurance rates and doing special assessments) but will fail; the current path has no chance of success.  Congress will backstop them (because they must lest shotguns come out) with disastrous results.  In short, FDIC backstops will take precedence even over Social Security and Medicare.
  
• Government debt costs will ramp.  This warning has already been issued and is being ignored by President Obama.    When (not if) it happens debt-based Federal Funding will disappear.  This leads to....
  
• Tax receipts are cratering and will continue to.  I expect total tax receipts to fall to under $1 trillion within the next 12 months.  Combined with the impossibility of continued debt issue (rollover will only remain possible at the short duration Treasury has committed to over the last ten years if they cease new issue) a 66% cut in the Federal Budget will become necessary.  This will require a complete repudiation of Social Security, Medicare and Medicaid, a 50% cut in the military budget and a 50% across-the-board cut in all other federal programs.  That will likely get close.
  
• Tax-deferred accounts will be seized to fund rollovers of Treasury debt at essentially zero coupon (interest).  If you have a 401k, or what's left of it, or an IRA, consider it locked up in Treasuries; it's not yours any more.  Count on this happening - it is essentially a certainty.
  
• Any firm with debt outstanding is currently presumed dead as the street presumption is that they have lied in some way.  Expect at least 20% of the S&P 500 to fail within 12 months as a consequence of the complete and total lockup of all credit markets which The Fed will be unable to unlock or backstop.  This will in turn lead to....
  
• The unemployed will have 5-10 million in direct layoffs added within the next 12 months.  Collateral damage (suppliers, customers, etc) will add at least another 5-10 million workers to that, perhaps double that many.  U-3 (official unemployment rate) will go beyond 15%, U-6 (broad form) will reach 30%. 
  
• Civil unrest will break out before the end of the year.  The Military and Guard will be called up to try to stop it.  They won't be able to.  Big cities are at risk of becoming a free-fire death zone.  If you live in one, figure out how you can get out and live somewhere else if you detect signs that yours is starting to go "feral"; witness New Orleans after Katrina for how fast, and how bad, it can get.
  

The good news is that this process will clear The Bezzle out of the system.

The bad news is that you won't have a job, pension, annuity, Social Security, Medicare, Medicaid and, quite possibly, your life.

It really is that bleak folks, and it all goes back to Washington DC being unwilling to lock up the crooks, putting the market in the role it has always played - that of truth-finder, no matter how destructive that process is.

Only immediate action from Washington DC, taking the market's place, can stop this, and as I get ready to hit "send" I see the market rolling over again, now down more than 3% and flashing "crash imminent" warnings.  You may be reading this too late for it to matter.

http://market-ticker.org/archives/852-Whats-Dead-Short-Answer-All-Of-It.html

http://market-ticker.org/

http://www.dailyreckoning.com/dividend-drop-off-when-cushions-turn-to-rocks/ "the nation's five largest railroads have put more than 30% of their boxcars – 206,000 in all – into storage." Yikes! A third less volume!

Cramer admits nationalization may cause revolution

http://video.mainstreet.com/msvideo/10465571/cramer-nationalization-would-crush-america.html#10465571 Cramer nationalization would wipe out insurance and pose social threat

Asian central banks are abandoning a six-month campaign of defending their currencies, reversing course to cheapen exports that are falling the most in a decade.... http://www.bloomberg.com/apps/news?pid=20601087&sid=a92NeP7O8ogk&refer=home

"We are doing things now that are potentially very inflationary," he said. Buffett called on Congress to unite behind President Barack Obama, comparing the economic crisis to a military conflict that needs a commander-in-chief. "Patriotic Americans will realize this is a war," he said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=azL2a7n4_.Wc&refer=home

http://www.bloomberg.com/apps/news?pid=20601087&sid=aZ1kcJ7y3LDM&refer=home Global Financial Assets Lost $50 Trillion Last Year, ADB Says

http://www.mainstreet.com/article/smart-spending/bargains/deals/no-cash-no-problem-bartering-booms-online Barter Booms online

Currency Performance of Emerging Markets weakens

FROM RGE * YTD Currency performance as of Mar 6, 2009: Worst-performers->S.Korea (-18.7%), Malaysia (-7.3%), Singapore (-7%). Depreciated->India (-5.8%), Thailand (-3.6%), Indonesia (-5.9%), Philippines (-2.5%), Pakistan (-2%), Taiwan (-5.6%), Hong Kong (-0.08%), China (-0.2%), Vietnam (+0.1%)

Causes:

* Slowing capital flows: Heightened global risk aversion and investor redemption from EMs, bond and equity sell-off by FIIs and capital outflows from Asia; liquidity crunch amid money market turmoil; strengthening of USD. Unwinding of foreign currency debt by domestic entities; unwinding of carry trade. Aggressive interest rate cuts and low possibility of allowing appreciation in near-term are also deterring inflows. FDI is showing signs of easing amid global credit crunch. External bank borrowing and capital raising activity in international capital markets have also taken a hit

* Easing external balances: exports are contracting in all emerging Asian countries due to global recession, with most exports bound to US/EU. EMs are slowing significantly and China's imports for re-export are also slowing. Commodity price correction is hurting exports of Malaysia, Indonesia, Vietnam which benefited from 2008's commodity boom. High oil and commodity prices and strong domestic demand in 2008 had also put pressure on commodity importers. But countries with stronger FDI prospects and/or stronger fiscal and current a/c positions are less vulnerable to currency depreciation than their peers. Also, imports contracting (slowing industry, imports for re-exports, consumer demand) greater than exports in some countries is containing risks to the trade deficit

* Central Banks: To prevent large currency depreciation, central bank intervention in FX markets like India, S.Korea, Thailand, Philippines, Indonesia has increased in recent months leading to a decline in forex reserves. For countries with smaller reserves, intervention might be limited ahead. Some central banks also injecting dollar liquidity, arranging USD swap agreements with Fed and introducing other restrictions on converting currency in domestic markets. Some central banks are also easing foreign capital inflows, restricting USD outflow and currency conversion. Contracting exports is also causing several Asian central banks shift to depreciation bias to support growth esp. as interest rates cuts are approaching low levels in many countries with risk of deflation and are ineffective to stimulate lending, and size of fiscal stimulus is constrained by fiscal deficit in many countries

* Risks: Currencies will face downwards pressure since exports will continue to contract through most of 2009 and foreign investor risk aversion will also continue esp. as risks to Asian growth escalate. FDI, remittances and debt inflows incl. bank borrowings will be hit more than expected. Depreciation bias will instead raise import cost for firms and consumers, and impact trade balance and import inflation

Outlook:

* With many currencies (most notably KRW and INR) having already reverted back to where they stood at the start of 2002, the pressure on currencies shouldn't prove as extreme from here on

* ANZ: Although risk aversion and debt redemptions remain an immediate hurdle for KRW, USD-KRW will lead USD-AXJ lower later in 2009. Singapore's monetary policy to re-centre and widen the S$NEER policy band would pave way for further gains in USD-SGD. Further gains are assured in USD-TWD with staggering drop in exports, record contraction in GDP, and bleak outlook

* Scotia: Depreciation trend will be reversed in the latter part of 2009 if China resists internal pressures to devalue the renminbi; Fiscal stimulus, rising savings will limit capital outflows that have pressured the exchange rates; Developing Asia may be convinced they cannot rely on export-led growth models; implications of the U.S. financing requirements

* Morgan Stanley: AXJ currencies most vulnerable amid significant risks to growth and capital outflows in near-term but will rally once global economy bottoms; fiscal rather than monetary stimulus (rate cuts) to contain crisis and slowdown will support the currencies. Sharp depreciation of currencies against USD (except those with large current a/c surpluses) has caused dislocations in balance sheets of many companies and countries with external liabilities

* Standard Chartered: Given the fundamentals are solid and growth prospects are bright, KRW, PHP, INR, IDR to lead the rally in AXJ currencies in H2-2009 just as they led the AXJ currency correction in 2008. Small, open economy currencies such as SGD, MYR, TWD,THB, VND will weaken on slowing growth, capital outflows, global recession

* Credit Suisse: Countries most exposed to G-3 (Taiwan, Singapore, Malaysia, S.Korea) will witness more depreciation relative to those less exposed to G-3 (India, Indonesia, China, Philippines, Thailand)

* ABN Amro (not online): Taiwan, Malaysia, Thailand will perform better due to current a/c surplus, lower capital dependence; India, S.Korea, Vietnam will weaken as high import bill impacts current a/c deficit

* DBS: Singapre dollar is facing the strongest technical pressure to depreciate, based on the recession and the fact that Singapore manages its currency against the euro which has also weakened

 

Mar 7, 2009

Gordon Brown vows to end shadow banking system and tax havens

http://www.telegraph.co.uk/news/newstopics/politics/gordon-brown/4949859/Gordon-Brown-calls-for-morality-in-financial-system.html
Mr Brown said the new rules were about "building rewards on long term results."

He also pledged to "bring tax havens and the shadow banking system into the regulatory net."

http://www.youtube.com/watch?v=-r_-QRKyu6g Kucinich Bill nationalize the fed