Friday, October 31, 2008

China suggests U.S. dollar should be banished from international trade

The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, the official newspaper of China's ruling Communist Party says.

The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.

A few days later, Russian Prime Minister Vladimir Putin proposed that Russia and China ditch the dollar and gradually switch over to national currency payments in their bilateral trade, expected to total $50 billion in 2008. Chinese Prime Minister Wen Jiabao described strengthening bilateral relations as "strategic."

Saturday, October 25, 2008

Dollar to be replaced by Chinese currency as the world's "reserve currency"?

The Bush administration and the EU have called for an economic summit to be held by the 20 largest economies sometime after the presidential elections, to create another Bretton Woods wherein control of the global economic system was delivered to those same nations. It's likely, however, that the outcome will turn out considerably different than anticipated.

Already, under China's leadership, 12 Asian nations have agreed to set up an 80-billion-dollar fund to protect their economies from currency-runs, capital flight or other financial disruptions. China has the world's largest reserves at $1.9 trillion followed by Japan at more than $1 trillion. Clearly the two richest nations will set the agenda and play a central role in deciding how best to deal with the global recession.

's Deputy Prime Minister, Olarn Chaipravat, told Bloomberg News: "The message of this initiative is for China to consider whether or not China would open up its banking system and allow the strongest currency in the world, which is the Chinese yuan, to be the rightful and anointed convertible currency of the world."

Friday, October 17, 2008

The 56 Trillion Dollar U.S. Deficit

The former U.S. Comptroller General, David Walker, interviewed by Bill Maher, highlights some astounding numbers that add to the scope of the financial crisis:

The U.S. deficit is actually more like 56 Trillion dollars!

The share of this debt works out to $480,000 for each U.S. household!

Watch the 6 Minute Video

Monday, October 13, 2008

IMF: World on brink of financial collapse

The global financial system is on the brink of a systemic meltdown despite interventions by the US and Europe to stabilize markets, the head of the International Monetary Fund says.

Even with unprecedented actions in major economies, including co-ordinated central bank rate cuts, IMF Managing Director Dominique Strauss-Kahn said those measures had so far failed to calm the situation.

He said the financial crisis had deepened and was now affecting many more parts of the global financial system, including emerging markets, which until now had been shielded from the crisis.

Strauss-Kahn said conditions were likely to remain very difficult, restraining global growth prospects, while credit conditions are set to get tougher and constrain the ability of banks and companies to access funding.


Wednesday, October 08, 2008

IMF: “Most dangerous shock in mature financial markets since the 1930s”

The International Monetary Fund, in a World Economic Outlook released today, predicted the United States - the epicenter of the financial meltdown - will continue to lose traction, adding, "The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s." (AP)

Tuesday, October 07, 2008

Economic equivalent to cardiac arrest

On Wall Street, the panic drove the Dow Jones Industrial Average slipping below the key psychological level of 10,000 for the first time since 2004. The mild euphoria that greeted the passage of the $700 billion bail-out of Wall Street(*) on Friday evaporated as traders digested the more bad news from Europe.

The UK stock market has suffered its worst one-day fall in history as the banking crisis intensified. The FTSE's tumble was mirrored across Europe, as markets in France, Germany, Italy and Spain all recorded heavy falls.

Here's how Nouriel Roubini sees it: "It is now clear that the US financial system - and now even the system of financing of the corporate sector - is now in cardiac arrest and at a risk of a systemic financial meltdown. I don’t use these words lightly...The Commercial paper market is shut down...Corporations have no access to long or short term credit markets. Brokers are increasingly not dealing with each other. The interbank market is seizing up."

(*) BTW, has anyone even attempted to explain how Secretary of the Treasury Henry Paulson expects to recapitalize the banks--which are loaded up with $2.4 trillion in mortgage-related investments—with the relatively paltry $700 billion from the so-called rescue plan?

Friday, October 03, 2008

Bailout raises the U.S. national debt to $11.315 trillion

Last July, President Bush signed legislation that raised the debt ceiling to $10.615 trillion.

Today he signed the financial bailout legislation passed by the Senate last night that raises the debt ceiling to $11.315 trillion.

Under the Bush Administration, the gross national debt as a percentage of the gross domestic product has hit a 50-year high. The following chart illustrates the trend nicely.

Bush did three things to skyrocket the debt from $5.7 trillion to $10 trillion:
1. He lowered taxes on the rich (by far the biggest item).
2. He invaded Iraq and Afghan-Pakistan.
3. He did not regulate an out-of-control Wall Street.


Wednesday, October 01, 2008

Bank Bailouts underway in Europe

Monday's stock market plummet posted the first post-$1 trillion day ever, another ominous record set.

In Europe, Dutch-Belgian banking giant Fortis NV has been partially nationalized with a 11.2 billion euros ($16.4 billion) rescue from the governments of Belgium, the Netherlands and Luxembourg, after investor confidence in the bank disappeared. The Belgian government also announced morning a €6.4 billion ($9.2 billion) plan to rescue faltering bank Dexia, which ran up huge losses in its U.S. operations.

The British government nationalized mortgage lender Bradford & Bingley, taking over the bank's 50 billion pound ($91 billion) mortgage and loan books, the second bank nationalized by the British government. In a similar move, the Icelandic government bought a 75 percent stake in Glitnir, the country's third largest bank, for 600 million euros ($878 million). In Germany, the country's second biggest commercial property lender, Hypo Real Estate Holding AG, secured a multibillion euro line of credit from several banks.

The Irish government said it would guarantee all deposits in Irish banks following a massive drop in the value of Irish bank stocks.

Meanwhile, the Bank of Japan has pumped 20 trillion yen ($192.3 billion) into money markets, amid an effort among the world's central banks to calm worries about a global financial crisis.