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TOKYO (Reuters) - Toyota Motor Corp , the world's biggest automaker, is to halt production at all its Japanese plants for a total of 11 days in February and March...
NEW YORK (Reuters) - Bob McCann, head of brokerage at Merrill Lynch & Co, announced his plans to leave the securities firm, just days after its acquisition by Bank of...
HONG KONG (Reuters) - Asian stocks edged up for a seventh day on Tuesday, boosted by hopes for a global economic recovery later in 2009, though the rising yen and...
SINGAPORE (Reuters) - Oil was steady above $48 on Tuesday after rising 5 percent overnight, as Israel's deepening incursion into Gaza and a spat between Russia and Ukraine over gas...
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DETROIT (Reuters) - U.S. auto sales plunged by 36 percent in December led by outsized declines at Chrysler LLC, Hyundai Motor and Toyota Motor Corp as the battered industry closed...
NEW YORK (Reuters) - Apple Inc Chief Executive Steve Jobs sought to soothe investor concerns about his health on Monday, saying his weight loss was caused by a hormone imbalance...
SAN FRANCISCO (Reuters) - Top economists at the Allied Social Sciences Association's annual meeting have been searching -- in some cases, in vain -- for signs of life in the...
LOS ANGELES (Reuters) - Health insurer Cigna Corp said on Monday it will cut 1,100 jobs, or about 4 percent of its workforce, and consolidate certain operations as it...
NEW YORK (Reuters) - The Federal Reserve on Monday kick-started its latest unconventional program to boost the moribund economy, this time taking aim at the heart of the slumping housing...
Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.
MPC founder member Willem Buiter
The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter.
Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.
The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency's prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama's mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.
Writing on his blog, Prof Buiter said: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place."
He said that the dollar had been kept elevated in recent years by what some called "dark matter" or "American alpha" - an assumption that the US could earn more on its overseas investments than foreign investors could make on their American assets. However, this notion had been gradually dismantled in recent years, before being dealt a fatal blow by the current financial crisis, he said.
"The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the US materially weakened financially, economically, politically and morally," he said. "Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the US must recognise that its financial system has collapsed."
He said investors would, rightly, suspect that the US would have to generate major inflation to whittle away its debt and this dollar collapse means that the US has less leeway for major spending plans than politicians realize.
WASHINGTON (AP) - The heavy toll of the Bernard Madoff scandal is being brought before Congress Monday as a House panel tries to determine how, despite warnings over a decade to federal regulators, Madoff continued to operate his alleged Ponzi scheme.
"I am a human face on this tragedy," says Allan Goldstein, a retired New York textile distributor.
In his radio address today, President-elect Obama uses some new language when discussing what he wants the stimulus package to achieve in terms of jobs. First off, he has a name for the package -- the "American Recovery and Reinvestment Plan." Read More...
JONATHAN WEISMAN and NAFTALI BENDAVID : Wall Street Journal
WASHINGTON -- President-elect Barack Obama and congressional Democrats are crafting a plan to offer about $300 billion of tax cuts to individuals and businesses, a move aimed at attracting Republican support for an economic-stimulus package and prodding companies to create jobs.
The size of the proposed tax cuts -- which would account for about 40% of a stimulus package that could reach $775 billion over two years -- is greater than many on both sides of the aisle in Congress had anticipated. It may make it easier to win over Republicans who have stressed that any initiative should rely more heavily on tax cuts rather than spending.
$2 Trillion Increase May Test Federal Ability to Borrow
With President-elect Barack Obama and congressional Democrats considering a massive spending package aimed at pulling the nation out of recession, the national debt is projected to jump by as much as $2 trillion this year, an unprecedented increase that could test the world's appetite for financing U.S. government spending.
For now, investors are frantically stuffing money into the relative safety of the U.S. Treasury, which has come to serve as the world's mattress in troubled times. Interest rates on Treasury bills have plummeted to historic lows, with some short-term investors literally giving the government money for free.
But about 40 percent of the debt held by private investors will mature in a year or less, according to Treasury officials. When those loans come due, the Treasury will have to borrow more money to repay them, even as it launches perhaps the most aggressive expansion of U.S. debt in modern history.
With the government planning to roll over its short-term loans into more stable, long-term securities, experts say investors are likely to demand a greater return on their money, saddling taxpayers with huge new interest payments for years to come. Some analysts also worry that foreign investors, the largest U.S. creditors, may prove unable to absorb the skyrocketing debt, undermining confidence in the United States as the bedrock of the global financial system.
While the current market for Treasurys is booming, it's unclear whether demand for debt can be sustained, said Lou Crandall, chief economist at Wrightson ICAP, which analyzes Treasury financing trends.
"There's a time bomb in there somewhere," Crandall said, "but we don't know exactly where on the calendar it's planted."
WASHINGTON (AP) - The Treasury Department opened the door Friday to using a Citigroup-style rescue package to help other troubled financial institutions.
The financial lifeline thrown to Citigroup Inc. (C) in late November involved backing billions in risky assets and providing the banking giant with a fresh capital infusion. Read More...
HONOLULU — President-elect Barack Obama will meet with congressional leaders on Monday during his first full day back in Washington in an attempt to assuage rising concerns among Republicans and some Democrats that his economic stimulus plan is too costly and too rushed.
Obama will first sit down with House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) to discuss the scope and timing of a plan that could cost up to $775 billion, a Democratic source said Thursday. Read More...
Martin Weiss writes: I have just received a series of urgent questions about the massive crisis swirling all around us. So to help you prepare for 2009, I am going to give you my best answers right here and now.
Urgent Questions from Readers
Q: I see disturbing similarities between this crisis and The Great Depression. Both were triggered by the bursting of massive debt bubbles, for instance. But this time, the government is doing so much more to pump up the economy. So is it safe to assume that this crisis will be a lot less severe than the 1930s?
A: No, it's not safe to make that assumption. True, the government's massive intervention is a major factor. But there are also powerful factors that can offset or even overwhelm the government's impact:
* Broader speculative bubbles. In the years prior to the Crash of 1929, the bubbles were limited primarily to stock speculation and restricted to a minority of the population. This time, the speculation has engulfed not only stocks but also millions of homes, commercial properties, local governments, corporations, and entire nations.
* More household debt. U.S. households are in far greater debt today with much less savings. In the 1930s, mortgages were rarer and less onerous. For all practical purposes, second mortgages, home equity loans, creative financing, and credit cards didn't even exist. Today, they are everywhere in our society.
* U.S. is now a debtor nation. In the 1930s, the U.S. had large surpluses of foreign reserves and was a creditor to the rest of the world. Now, it has minimal reserves and huge foreign debts. As a result, there's ultimately a limit to how much Washington can throw good money after bad to save the U.S. economy before foreign investors rebel, refusing to continue providing abundant credit.
* Derivatives. In the early 1930s, derivatives were virtually unknown — a tiny niche of little consequence. Today there are nearly $600 trillion in notional value derivatives globally, according to the Bank of International Settlements. The forced liquidation of many of these derivatives could frustrate government efforts to revive credit markets, driving the global economy into a deeper decline than would normally be expected.
The steel industry, having entered the recession in the best of health, is emerging as a leading indicator of what lies ahead. As steel production goes — and it is now in collapse — so will go the national economy.
That maxim once applied to Detroit’s Big Three car companies, when they dominated American manufacturing. Now they are losing ground in good times and bad, and steel has replaced autos as the industry to watch for an early sign that a severe recession is beginning to lift.
A gun-toting man with large dark glasses, large hat pulled down, stands in front of a bank teller, who is reading a demand note. It says, “Give me all the money in my account.”
Bernie Madoff showed us how it was done: you induce many investors to invest their money, promising steady above-market returns; and you deliver – at least on paper. When your clients check their accounts, they see that their investments have indeed increased by the promised amount. Anyone who opts to pull out of the game is paid promptly and in full. You can afford to pay because most players stay in, and new players are constantly coming in to replace those who drop out. The players who drop out are simply paid with the money coming in from new recruits. The scheme works until the market turns and many players want their money back at once. Then it’s game over: you have to admit that you don’t have the funds, and you are probably looking at jail time.
A Ponzi scheme is a form of pyramid scheme in which earlier investors are paid with the money of later investors rather than from real profits. The perpetuation of the scheme requires an ever-increasing flow of money from investors in order to keep it going. Charles Ponzi was an engaging Boston ex-convict who defrauded investors out of $6 million in the 1920s by promising them a 400 percent return on redeemed postal reply coupons. When he finally could not pay, the scam earned him ten years in jail; and Bernie Madoff is likely to wind up there as well.
Most people are not involved in illegal Ponzi schemes, but we do keep our money in accounts that are tallied on computer screens rather than in stacks of coins or paper bills. How do we know that when we demand our money from our bank or broker that the funds will be there? The fact that banks are subject to “runs” (recall Northern Rock, Indymac and Washington Mutual) suggests that all may not be as it seems on our online screens. Banks themselves are involved in a sort of Ponzi scheme, one that has been perpetuated for hundreds of years. What distinguishes the legal scheme known as “fractional reserve” lending from the illegal schemes of Bernie Madoff and his ilk is that the bankers’ scheme is protected by government charter and backstopped with government funds. At last count, the Federal Reserve and the U.S. Treasury had committed $8.5 trillion to bailing out the banks from their follies.1 By comparison, M2, the largest measure of the money supply now reported by the Federal Reserve, was just under $8 trillion in December 2008.2 The sheer size of the bailout efforts indicates that the banking scheme has reached its mathematical limits and needs to be superseded by something more sustainable.
WASHINGTON (AP) - Chief Justice John Roberts said Wednesday that Congress should be as generous to judges as it already has been to itself, by approving an inflation-related increase in their pay. "I must renew the judiciary's modest petition: Simply provide cost-of-living increases that have been unfairly denied," Roberts said in his annual year-end report on the federal judiciary.
Alone among federal employees, judges will not receive a cost-of-living allowance in 2009. Members of Congress are getting a 2.8 percent boost, worth $4,700. But they refused before Christmas to give an identical increase to judges. Read More...
Jan. 1 (Bloomberg) -- The U.S. Treasury threw the door open to taxpayer financing for a widening array of companies and industries by drafting broad guidelines on aid to the auto industry.
The Treasury’s guidelines, published yesterday, would let officials provide funds to any company they deem important to making or financing cars. That leaves room for the government to provide money from the Troubled Asset Relief Program beyond loans already committed to General Motors Corp., GMAC LLC and Chrysler LLC. Read More...
The worst annual performance for Wall Street stocks since the Great Depression ended with a modest rally on the final day of trading as the Federal Reserve pushed ahead with its plan to buy mortgage-backed securities.
The central bank’s plan to buy up to $500bn of mortgage bonds by the middle of 2009 helped spur a 1.4 per cent gain on the day for the S&P, which finished 2008 at 903.25. Read More...
NEW YORK (Reuters) - Connecticut lawmaker Frank Nicastro sees saving the local newspaper as his duty. But others think he and his colleagues are setting a worrisome precedent for government involvement in the U.S. press.
Nicastro represents Connecticut's 79th assembly district, which includes Bristol, a city of about 61,000 people outside Hartford, the state capital. Its paper, The Bristol Press, may fold within days, along with The Herald in nearby New Britain.
This is the time of the interregnum, the week between Christmas and the New Year, in the period between the end of the Bush disaster and the beginning of the Obama ascendancy.
It is a quiet time, a slow week (except for wars and coups, of course) and a moment for reflection before we cheer more for the passing of the last year then the coming of the next. The Zogby Poll found, “Americans are overwhelming glad to say goodbye to 2008 but are somewhat unsure of the future. Americans are guardedly optimistic about 2009, but just as many feel that the coming year will be worse or the same as 2008.”
Many of us are looking for guidance from the past, perhaps even from the period when Herbert Hoover bid adieu and FDR waited for his turn at bat. The year was 1932. Here’s what it looked like:
It was year of famine in Russia, hunger marches in Britain, Nazis emerging in Germany, Gandhi striking for India’s independence, and 13 million Americans out of work. A temporary halt to foreclosures had been ordered while working hours and wages were cut.
The worst was still to come.
Clearly, prices have gone up quite a bit since then. Yet Randall Parker who wrote “Reflections on the Depression” sees parallels with today:
“In the 1920s, most everyone was saying that this was a new economy and all the old rules did not apply, Parker says. "We know from economic history — they said the same things in Japan in the 1980s and during the Internet bubble of the 1990s — that when you hear those words it is time to run like hell."
The year 2008 will be remembered as one that exposed the fatal flaws in free-market capitalism, sending it to an untimely death.
Or will it?
That capitalism’s obituary is already being written suggests the enemies of the free market were waiting to pounce.
Last week, Arianna Huffington, co-founder of the Huffington Post, wrote that laissez-faire capitalism, “a monumental failure in practice,” should be “as dead as Soviet Communism” as an ideology.
On National Public Radio, Daniel Schorr pronounced “the death of a doctrine” in his year-end review.
All I could think of was Winston Churchill’s assertion about democracy. Capitalism is surely the worst economic system, except for all the others that have been tried.
With its ideology under fire and its practice falsely maligned, it is to the defense of free markets that I devote my final column of the year.
Before you can declare free markets a failure, you have to establish that they exist, says Paul Kasriel, chief economist at the Northern Trust Co. in Chicago.
“We do not have free markets in credit in the U.S. or anywhere else that I know of,” he says. “The price of short- term credit is fixed by central banks. It would only be by accident that a central bank would fix the price of short-term credit” at the precise level that a free market would.
Buying a few gold coins or the odd mini-ingot and hiding them away has been a successful investment strategy over the past five years. Even in the annus horribilus of 2008 investors who chose gold over other asset classes have been well protected while others have seen their wealth decimated. US dollar gold prices have been maintained while gold in Australian dollars, for example, was one of the best performing global asset classes in 2008.
For 2009 the resumption of a strong bull market in gold is one of the few positive predictions that look reliable. The sell-offs by hedge funds which kept gold future prices down in 2008 are coming to an end, and that should unleash a powerful new up leg in the gold market.
Chartists can already see this happening in their technical analysis. The spot price of gold has moved above the futures price, something known as ‘backwardisation’. This is almost always a signal that a huge price shift is about to occur. The same ‘backwardisation’ is also present in the silver price chart.
Japan’s recession evidently deepened even further in November as industrial output fell at the fastest pace in 55 years. Production plunged 8.1 percent month on month from October (Trade Ministry data), and was down an enormous 16.2% year on year. For an economy which lives from the prowess of its industrial exports, this is simply an earthquake.
click to enlarge
The decline in production was the largest since data for the present time series was first published in February 1953. As a result the ministry downgraded its output assessment to “declining rapidly.”
click to enlarge
This report comes hot on the heels of an earlier one, which showed that Japan’s exports plunged 26.7 percent in November, the sharpest drop since at least 1980. Japanese retail sales also fell in November - by an annual 0.9%. According to data from the Ministry of Economy, Trade and Industry, on a monthly, seasonally adjusted basis, sales were down 0.1% in November. Sales at large retailers decreased 3.2% on the year. These results were rather better than expected, but I wouldn't hold out much hope simply on that count, since the job market is still holding up reasonably well at this point, and consumers will be getting some benefit from slowing price increases (or even from price decreases). It is important to remember that this data is not price corrected, which makes it all just a little bit misleading.
“The American Dream is that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position."
--Historian and writer James Truslow Adams in his 1931 book Epic of America.
Mr. Adams penned these words in the midst of the Great Depression, the worst economic crisis in our history. It is timely to reflect on these words, as it appears that the American Dream is slipping further out of reach for most Americans. If the dream of a better life for our future generations is lost, it will truly mark a turning point for our great Republic. The reason the American Dream is slipping away is due to the actions of politicians running our government and bureaucrats running the Federal Reserve. Those with ability who have earned a better life through their hard work, intelligence and integrity should be attaining a higher position in the social order. Instead, our government is rewarding those Americans who have taken unwarranted risks, made brainless decisions, and willingly chose the course of excessive debt to climb the social ladder.
As the politicians scurry to “save” capitalism through the use of communist measures, more Americans are becoming disheartened. The definition of communism according to Webster’s is:
A system in which goods are owned in common and are available to all as needed.
George Bush, Henry Paulson and Ben Bernanke have decided to seize money from the vast majority of Americans who lived within their means, utilized debt sparingly, and worked hard to get ahead, and give it to the most appalling failures in our society. They have shoveled billions to banks that operated their businesses like gambling parlors. They have shoveled hundreds of millions to people who bought houses with no money down, interest only mortgages and fraudulent loan applications. They are now rewarding automakers who made the wrong vehicles, pay 30,000 workers per year to not work, and have only been able to “sell” cars by giving them away with 0% financing to anyone who could sign on the dotted line. These acts fit the definition of communism. We are now more communist than China.
When news broke of Bernard Madoff’s alleged $50 billion worldwide Ponzi scheme, news accounts first portrayed him as a shadowy hedge fund manager outside the scope of regulation by the Securities and Exchange Commission. But as the sheer magnitude of the fraud became clearer, so did the picture of Madoff’s place in the Wall Street-Washington world.
Madoff’s businesses were actually subject to a variety of financial regulations, something Madoff would actually use as a selling point to investors. Last year in a speech, Madoff said, “In today’s regulatory environment, it’s virtually impossible to violate rules.” He registered as an investment adviser in 2006, and had been under the SEC’s extensive regulatory framework for securities broker-dealers since he founded his firm almost 50 years ago.
BEIJING, Dec. 28 (Xinhua) -- The world has undergone remarkable changes this year, but international security situation on the whole remained stable with "peace" and "development" prevailing as the themes of the times.
In 2008, the world has continued moving toward multi-polarization, resulting in a distinctive shift of international forces. Globalization is developing in depth and regional cooperation is gathering momentum.
WASHINGTON - The first big wave of change in the new Obama administration, a roughly $850 billion economic stimulus package, has brought out a swarm of Minnesota officials, businesses and special interest groups vying for a chunk of the nationwide infrastructure buildup.
With President-elect Barack Obama and the Democratic-led Congress poised to embark on the nation's biggest building spree since the interstate highway system was built a half-century ago, road builders and building contractors from every corner of America are sharpening their pencils at the prospect of more work.
On June 15, 2007, Ron Paul introduced HR 2755: Federal Reserve Abolition Act. There were no co-sponsors, no further action was taken, and the legislation was referred to the House Committee on Financial Services and effectively pigeonholed and ignored.
It's a bold and needed measure to "abolish the Board of Governors of the Federal Reserve System and the Federal reserve banks, to repeal the Federal Reserve Act, and for other purposes."
The bill provides for management of employees, assets and liabilities of the Board during a dissolution period, and more as follows:
it designates the Director of the Office of Management and Budget to liquidate Fed assets in an orderly and expeditious manner;
transfer them to the General Fund of the Treasury after satisfying all claims against the Board and any Federal reserve bank;
assume all outstanding Board and member bank liabilities and transfer them to the Secretary of the Treasury; and
after an 18-month period, submit a report to Congress "containing a detailed description of the actions taken to implement this Act and any actions or issues relating to such implementation that remain uncompleted or unresolved as of the date of the report."
On November 22, "End the Fed" protests were held in 39 or more cities nationwide (including New York, Chicago, Los Angeles and Washington, DC), but you'd hardly know it for lack of coverage. Attendee demands were simple and emphatic:
end a private banking cartel's illegal monopoly control over the nation's money supply and price;
return that power to the US Treasury as the Constitution mandates;
end a fiat currency system backed by the waning full faith and credit of the government; and
return the country to a sound, hard currency monetary system.
"End the Fed! Sound Money for America!" is their slogan, and writer and US policy critic Webster Tarpley puts it well:
"....the privately owned central bank....has been looting and wrecking the US economy for almost a hundred years. We must end a system where unelected, unaccountable cliques of bankers and financiers loyal to names like Morgan, Rockefeller, and Mellon set interest rates and money supply behind closed doors, leading to de-industrialization, mass impoverishment, and a world economic and financial depression of incalculable severity."
In theory, the Fed was established to stabilize the economy, smooth out the business cycle, manage a healthy, sustainable growth rate, and maintain stable prices. In fact, it failed dismally. It contributed to 19 US recessions (including the Great Depression) and significantly to the following equity market declines that accompanied them as measured by the Dow or S & P 500 average - the S &P's inception was 1923; it became the S & P 500 in 1957:
