Wednesday, October 31, 2007

Dollar Devaluation

You want to know why so many Americans are struggling financially? Because the U.S. Dollar has been devalued by a third (1/3) over the past 5 years!

Today the FED cut interest rates by a quarter of a point in another effort to salvage the economy.

The Dollar has hit a new low, and devaluation means the cost of everything is going up.

The Middle Class is getting annihilated from this silent event. Incomes are not keeping up. This was done because this administration equates stock market success with economic success and has directed their efforts to drive up equities at literally any cost.

Meanwhile the Wall Street Banking Firms continue to make huge profits.

[Excerpt of an article by Robert McHugh, Ph.D.]

Friday, October 19, 2007

The ailing U.S. economy

With today being the 20th anniversary of “Black Monday,'' when the Dow fell 23 percent in one day, it seems a good time to post an overview on the latest on the economy.

- U.S. stocks tumbled the most in two months after earnings reports from banks, manufacturers and industrial companies heightened concern about the health of the financial markets and the economy.

- Oil prices have soared to another record high above $90 per barrel on Friday amid global supply jitters and tensions between Turkey and crude producer Iraq.

- It is on record that Japan and China led a record withdrawal of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields.

- China now exerts enormous influence over the economies of virtually every country in the world, so that a slight change in its domestic economic policy has the potential to send shockwaves rippling throughout the world. Nowhere is this more apparent than with the United States, which is very much at the mercy of China when it comes to prices, wages, interest rates, most importantly, the value of the Dollar.

- Meanwhile, currency traders were given a green light to continue selling the US dollar, as the International Monetary Fund said the greenback "remains overvalued" and rejected claims the euro, which continues to increase in value, had risen too far.

Sunday, October 14, 2007

The Crash that comes

America is frequently referred to as the “richest nation on earth”, but the reality is that most American people are just living on borrowed money, and for many the transformation from “seeming rich” to “poor” could happen overnight.

In fact, 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 is now much higher than during the Great Depression, and has been allowed to grow as if there were no consequences to borrowing, and no limit to what can be paid back in the future. The U.S. is more leveraged by private debt than ever before, and families have the lowest rate of saving since 1929, the beginning of the Great Depression.

The Federal Reserve has bailed out the U.S. economy a couple times in recent months, to the tune of billions of dollars. This has involved the Fed pumping liquidity into the system to thwart greater economic chaos, and also cutting the interest rate on the money it lends directly to banks.

What most American citizens don't realize is that the Federal Reserve, which controls the U.S. currency, inflation, and deflation at the cost of the American people, is a private corporation.

While the name “Federal Reserve” might suggest otherwise, it is simply a private company set up by big bankers in 1913, a company that makes decisions based on profits, as required by stockholders. The Federal Reserve System controls the U.S. currency, inflation, and deflation at the price of the American people.

The fact that Americans hold a great deal of private debt isn't troublesome to them, merely profitable.

Saturday, October 13, 2007

Banks show shakey third quarter losses

Investment bank Merrill Lynch said credit and mortgage woes will lead to it post a third-quarter loss, as it takes almost $5 billion in writedowns in the wake of a credit crunch that paralyzed Wall Street this summer.

And Merrill Lynch was not by any means the only institution to announce its earnings would take a significant hit due to the declining mortgage market. Washington Mutual Inc. said its third-quarter earnings would tumble 75 percent on loan write downs and substantially higher provisions for loan losses.

Citigroup said its quarterly earnings would fall 60 percent, as it planned to write down more than $3 billion in securities backed by underperforming mortgages and loans tied to corporate bonds.

JPMorgan Chase and Bank of America are expected to disclose losses of about $3 billion in mortgage securities and leveraged loans when they report earnings this month, the Financial Times reported, citing an analyst.

Meanwhile, data from the U.S. Department of Housing and Urban Development suggests there about 750,000 homeless across the U.S. on any given night, with about 40 percent of those members of homeless families.

The cause: A convergence of low wages, high housing costs, an increase in housing foreclosures and cuts in federal and state housing assistance programs. One official explains: "I think what we are seeing here is a perfect storm.”

Thursday, October 04, 2007

The Dollar's double Asian blow

Vietnam is planning to cut its purchases of US Treasuries and other dollar bonds, raising fears that other Asian central banks with control over two thirds of the world's foreign reserves may soon join the flight from US assets.

Vietnam is seen as weather vane for the bigger Asian powers. Asia together holds over 65 per cent of the world's total. The concern is that once one or two members of the region jump ship, it could set off a broader scramble.

Separately, the gas-rich Gulf state of Qatar announced that it had cut the dollar holdings from 99 per cent to 40 per cent, switching into investments in China, Japan, and emerging Asia. The move can easily be seen as a vote of no confidence in US economic management.

Last month, Saudi Arabia set off jitters in the currency markets when it decided not to cut interest rates in lockstep with the US Federal Reserve, raising doubts about its commitment to the Saudi dollar peg.

Kuwait has already abandoned its dollar peg, fearing that its economy would overheat if it continued to import America's loose monetary policies.

Separately, Iran said it would soon refuse to accept dollars for its oil exports, preferring to be paid in a "more credible currency".

If a number of OPEC suppliers began demand long-term futures contracts in euros instead of dollars, this would have an impact over time.

Hans Redeker, currency chief at BNP Paribas: “OPEC and Asia have been the two blocks funding the US current account deficit."

[The Telegraph]

Tuesday, October 02, 2007

U.S. nears $10 Trillion in the red

Congress just raised the limit once again, and the U.S. debt nears $10 trillion.

That's comes out to about $30,000 for every American.

For the fifth time since 2001, Congress is raising the debt limit, increasing it by $850 billion to $9.815 trillion. That's $9,815,000,000,000.00.

According to the folks who follow this stuff closely, the national debt has been rising by an average of $1.36 billion per day since September of last year.

Congress has an easy solution to deal with the rising tide of red ink. Instead of fretting over it, members simply allow the government to borrow more money, much to the consternation of some critics.

Sen. Kent Conrad, D-N.D., who heads the Senate Budget Committee, said the United States is ''in hock'' to Japan, owing more than $600 billion, and China, owing more than $400 billion.

He said the rising debt comes at the worst possible time, right before a flood of baby boomers retires, but that Congress has no choice but to raise the debt ceiling.

''If we fail to act in a timely way on raising the debt limit, the creditworthiness of all United States instruments would be called into question,'' Conrad said. "That could have a very severe effect on already shaky financial markets.''

[Excerpt of an article by Rob Hotakainen, McClatchy News Service]