Global economic situation for liveaboard cruising yachties

[masrapido]

Originally Posted by Tcubed

The wise does not waste his valuable time trying to educate fools.

(Although he might waste a little just for his own perverse amusement)

What can I say. You are a gentleman and a scholar.

And I have a confession to make...

You have a crush on him?

"us engineers"... Where'd ya' go to school?

[masrapido]

Originally Posted by hoytedow

If U.S. is so bad, it is curious that so many prians would rather live here than on the little island.

No brainer that one. First you move in, buy everything from the locals, leave them jobless and forced to buy your products. Empoverished they cannot even afford to go to school and at least learn something. You then apply brainwashing propaganda how usa is the "best", the "first democracy" of the world (let us conveniently forget how blacks and other "coloured" are treated in democracy. and that separate busses for black and white pupils in many states were only abolished around Clinton's ascent...), how they, the poor, are the wretched pieces of **** who are to be saved by usa, and if they resist, install a military junta to teach them some sense, fuckin' insubordinates...

And then wonder innocently why they prefer to live in your hell, instead in their own. Don't forget to stick a flower in your hear for authentic angelical image!
(Assuming that you have those luscious blond locks still on your top)

[masrapido]

Masalai, let us assume that you are right and that the gold reaches $50 000usa. What would that mean? Only one thing, which is what you have been saying for a while now: the usa dollar devalued to zimbabwe whatever the currency called there. Worth nothing.

Let us now assume that gold reaches 50 000 euros instead. with 7 billion of people, being paid (in what?) equivalent of gold, that would be 0.214grams of gold needed for their salary, assuming an average yearly 23 000 euros.

We agree that whatever your currency, it must be covered by gold value, as you suggest. Hence you would be able to guarantee only that one off payment.

My yearly on the ship was $60 000 euros. You would need to come up with 0.6kg every year just for my salary.

The gold being finite, as you recognised too, is limited and would not last a year.

The only constant value, and renewable (not subject to "inflation") is the human work. I hope you respect and value yourself and agree that your expertise in something IS worth something.

That is your real currency. No one can alienate it from you and then re-sell it for a profit. No one can kill you and make money on your skills. Unlike oil or gold. If you have gold, or oil, or natural gas, you are a target.

If you have a skill, or skills, you are the value yourself. And you can be remunerated with whatever you need providing that your skills make up for the value of the goods you consume.

Simple, clean and removes the war for natural resources. And, by the way, gold is for girls, not for men. Men decorating themselves with gold are homosexuals.

MasRapidoDorado, go to school and then contact the blind man for advice. You have the IQ of an empanada and are not qualified to speak in a public forum. And your "yearly on the ship was $60 000 euros"? First, how did you go to sea and not know anything about ships? Then, why are you nightwatchman stealing computer time instead of making a wage that makes you Mr. Curanilahue? Last, you are a known liar - everyone assumes that if you were to work aboard ship, you would exaggerate your salary. So, what did your sugar-daddy that worked at sea really take in?
Just think, real gold rather than gilded plastico to go around your neck...or would that clash with the pearl necklasses you already receive? Go to sea and be a MAN, weon.



Ahhhh, forget it.


The lines are pretty much grey there already...

And, a day in Barackland (Chicago). http://www.youtube.com/watch?v=H78i7...&feature=email What you boys need is some good shock therapy like what this little lady can dish out...

"us engineers"... Where'd ya' go to school?
I thought so.

[Bamby]

Obama's permanent depression
By Spengler

President Barack Obama may be remembered for permanent depression, the way that Leon Trotsky's name is linked with permanent revolution. Fiscal stimulus combined with near-zero interest rates have proven to be a toxic cocktail for the United States, the macroeconomic equivalent of barbiturates and alcohol.
Keynesian spending creates a deficit that sucks all the available capital out of the grassroots economy and transfers it to the Treasury market. Easy funding terms from the Federal Reserve allow financial institutions to make money in government bonds while shutting off credit to the rest of the economy. It's classic crowding out, in which the government's misguided effort to spend its way out of recession pushes the productive economy deeper into the hole.

Panic is starting to take hold at the Obama White House over the relentless deterioration of the job market. US jobs in September declined by about 263,000 jobs, worse than the 175,000 drop expected by Wall Street economists. To the 15.1 million on the official unemployment count, add 9.2 million "involuntary part-time workers" and 2.2 million who were dropped from the tally because they had not sought work in the past month, and the unemployment rate would rise to 17.1 million.

That doesn't include another three million long-term discouraged workers - those who want to work but who have long since stopped looking. That would take the number up to 20%. In past recoveries, a number of economists observed, all the job growth came from small business, but small business is lagging in the present crisis. The financial crisis crushed the entrepreneurs, as surely as Joseph Stalin crushed the kulaks, the relatively affluent peasants.

Obama inherited a crisis, to be sure, but he has made it much worse. America is in the kind of trap into which Japan fell during the "lost decade" of the 1990s, whence it never really emerged. In the Keynesian world of Larry Summers, director of the White House's National Economic Council, and the Obama economics team, the problem is that Americans save too much and spend too little. To restart the economy, the government has to spend money for them - hence the US$800 billion stimulus package.

There are two things terribly wrong with this notion. The first is that it is simply a matter of what John Maynard Keynes called the "marginal propensity to consume". Americans have saved almost nothing during the past 10 years, relying instead on home equity that now has vaporized. The proportion of Americans over 60 will jump to 25% from 19% during the next 10 years, an unprecedented shift. Americans must save to compensate for past profligacy, from a lower starting point after the destruction of so much wealth, and with lower prospective returns. The demand for savings is bottomless.

The second problem is that even if the government borrows money, the money has to come from somewhere. Right now it's coming from households who choose to save rather than borrow, and from the balance sheet of the Federal Reserve or the banks, as well as foreign investors.

A quick walk through the numbers puts the problem in context.

Lenders to the US federal government, first half 2009.

All Federal borrowing
(annualized, in $US billions) $1,667.4
Households $709.4
Rest of the world $545.6
Fed balance sheet $368.1
Banks $44.3
Broker dealers $24.4

Obama's government borrowed $1.7 trillion at an annual rate, or about 12% of gross domestic product (GDP). Households coughed up less than half of that as they shifted from spending to savings. Foreigners bought $545 billion, a bit less than a third of the total. The Federal Reserve and the banks bought $400 billion worth, or about a quarter of the total.

Household purchases of Treasuries kept spending low and the economy contracting. Even with this massive shift, though, the central bank still had to print money. Most alarming is that the Federal Reserve's rate of purchase of Treasuries is accelerating:

Federal Reserve monetization of government debt, 2009

Fed purchases of treasuries
(annualized, in $US billions)
First quarter $88.9
Second quarter $647.4
Third quarter est $676.1

The rest of the world doesn't want an additional half-trillion dollars worth of Treasury securities each year; it doesn't want the Treasuries it now has to own. Households can't continue to put a trillion dollars worth of Treasuries away per year - that's 8% of all personal income.

That leaves the Fed and the banking system. The central bank bought Treasuries during the third quarter at an annual rate of nearly $700 billion, and provided nearly zero-interest money to banks and broker-dealers, who bought a good deal more. The Fed is buying much more than Treasury securities, to be sure; during 2009, it bought a remarkable $700 billion of mortgage-backed securities in a fruitless attempt to stimulate the housing market.

Federal Reserve total securities holdings



Despite the unprecedented largesse of the Federal Reserve, banks are reducing risk and cutting off the small-business sector in particular. During the third quarter, US commercial banks added Treasury securities to their balance sheets at a $350 billion annual rate. But they cut loans to business at a $300 billion annual rate. Extremely cheap funding makes it possible for a bank to finance the purchase of a two-year Treasury note paying 0.86%, or a two-year AAA municipal note yielding 0.75%, with overnight money costing 0.25%. Cheap money turns the commercial banks into an extension of the balance sheet of the Federal Reserve.

The near-zero interest rate allows banks to shift their balance sheets towards nearly riskless assets, and reduce risky commercial and industrial loans.

US commercial banks' holdings of Treasury securities
vs commercial and industrial loans, past 12 months



Cheap money has crushed the dollar, and the sinking dollar has buoyed equity prices, perversely enough.

Trade-weighted US dollar vs S&P 500 Equity
Index, 2009 to date



American assets are cheaper to foreign investors, and as the dollar fell against other major currencies, foreign investors bought more American stocks:



In short, the rise in US stock prices has less to do with economic recovery than with the drop in the global price of American assets. The dollar can only fall so far, however, because other currencies can only rise so far before a rising currency parity damages competitiveness. This game seems to be played out for the moment.

This outcome was perfectly foreseeable a year ago; in fact, I forecast just this result last November (see Who will finance America's deficit?, Asia Times Online, November 13, 2008). I reviewed the difficulties attendant on financing America's deficit and concluded:

Monetization of debt remains a possibility, and to some extent would only continue the current trend. Total Federal Reserve Bank credit outstanding has more than doubled in the year to November 6, 2008, rising by $1.2 trillion to $2.06 trillion. This reflects loans, securities purchases, and related actions by the Fed to bail out the financial system. If the deflation persists, the Federal Reserve may be compelled to purchase US government debt ...

The point of lowering the risk-free rate is to push investors towards riskier assets. In a normal business cycle, falling output leads to lower yields on low-risk bonds, which in turn encourages investors to add risk to their portfolios by investing in businesses. If the safest of all investments, namely US Treasuries, suddenly offer much higher real yields, comparable to the boom years of the late 1990s, why should investors take risk? ... If the Treasury tries to spend its way out of recession, the results are likely to be very disappointing.

The parallels between America in 2009 and Japan in 1989 are uncanny. An asset price bubble has collapsed, just before a tsunami of prospective retirements that the asset bubble was supposed to fund. Demand for savings is bottomless, and the government satisfies demands for savings by running a huge deficit and issuing debt. The crippled banking system borrows at an interest rate of zero and buys government securities. And the economy shrivels up and dies.

Japan, though, had one advantage: it knew how to export. There is only one way to drastically increase savings while maintaining full employment, and that is to export. America has neither the export capacity nor the customers. It could get them, but that is a different story. Francesco Sisci and I told it here US's road to recovery runs through Beijing (Asia Times Online, November 15, 2008).

Source

Screw exporting. We can do it on our own.
"Obama inherited a crisis" - Remember that the clown's career has been trying to bilk the top half America. Remember that he was in Congress causing this mess. He is the same age as I, with a sponsored education, with everything handed to him since coming to America. Remeber, this fool couldn't afford a room for the Democratic Convention the year they lost to Reagan and was a multi-millionaire by the time Reagan was gone - That's what he inherited!
The way out of this crisis is to leave Afghanistan, seriously close our borders and let the rest of the world fend for themselves for awhile, stop all spending except for defense and upkeep of infrastructure, vote out every politician that won't agree to rescinding their retirement and benefits beyond other gov employees, keep the tax rate exactly where it is but make it evident, nay, law, that when we balance the budget the tax rates will be brought down and made proportional by getting rid of income and property tax and change to a sales tax, bearing in mind that presently the top half pays 97% of taxes, the middle class pays 3% and the bottom half IS F"ING SUPPORTED BY EVERYONE ELSE, hang, I mean HANG, corrupt politicians.

Our taxes at work (both pics).

[Bamby]

Tuesday’s action by the Federal Reserve has placed us into the history books. The Fed cut the federal funds rate to an unprecedented 0.25% and gave a rather firm statement that they are prepared to keep the rate at this low level as long as the markets deem it necessary. When asked why they didn’t cut rates down to 0 a Fed official replied that it would help the credit markets run more smoothly. The markets don’t believe that. In fact, the markets have been trading near the zero percent mark for some time now.

As the market volatility has increased causing 2008 to be one of the most volatile years on record, we are seeing some historical action occur. First, let us look at 3 key economic indicators:

Let me try to walk you through a few things here. First, the federal funds rate is now sitting at a historic low. We are now seeing a zero interest rate policy regardless of what the Fed is saying. The fact the rate was left at 0.25 is merely symbolic. What the move signals is the Fed is basically done with monetary measures. It has no choice. It has reached the bottom of the barrel.

What led it to the bottom of the barrel is how quickly the red line on the chart above is shooting lower, consumer inflation. Some are trying to call it “dis-inflation” but let us be honest, this is deflation. This is scaring the Fed into doing unprecedented things. So why is this deflation? Let us count the ways:

(a) Housing market is imploding taking prices down

(b) Employment is skyrocketing keeping wages stagnant for many and wiping out income for others

(c) Stock markets are tanking across the globe. With nearly $50 trillion in global wealth lost in one year.

There is nothing remotely close to calling this inflation. In fact, the CPI released fell the most on a monthly basis in 61 years. In fact, this was off the charts since the BLS started keeping track of this data point in 1947. It dropped 1.7 percent in November. Compound that with the 1 percent drop in October and you can quickly see that we are quickly approaching a year over year percent drop on the CPI. The last time the CPI dropped on a year over year basis was in the early 1950s as you can see from the chart above.

The other point on the chart is the reserve bank credit which is over $2.2 trillion. Now some may argue that this is inflationary. It is only inflationary if it makes its way into the hands of Joe and Susie public and that is not happening. How can we tell? Because when we look at reserve bank credit which includes much of the bailout funds, banks are pouring them into treasuries and sitting tight:

bank reserves

This is unprecedented. Banks are scared witless to lend because of the grim reality of all the losses they will face in subsequent quarters. In fact, most banks are simply gearing up for a long economic winter and bailout funds are being used as a cushion. The blame does fall with banks but what did one expect with the Treasury lending banks money and at the same time expecting banks to lend with stricter standards? It was a losing proposition from day one. Why? First, the massive credit boom of the last 30 years was dependent on a healthy employment base and lax credit. Now, we have the exact opposite. We have a quickly deteriorating employment picture and banks are expected to be more strict in lending money.

The only way credit will flow again as it once did is for someone to become the large non-prime lender. Wall Street and foreign banks took up that role gladly during this decade. Now, the only entity with enough power to fill that role is the government. The Federal Reserve in conjunction with the U.S. Treasury are attempting to become the biggest non-prime lender of all time. Consider that 0.25 a teaser rate for a future of economic trouble.

It sometimes helps to see what is being sacrificed here. The first major casualty is the U.S. Dollar which got pummeled by the Fed rate cut:

U.S. Dollar Index

The U.S. Dollar has been in a steady decline. That is, until early summer of this year when it started a ferocious rally. What occurred near this time? A few things. Global decoupling was laid to rest and the oil bubble burst. Massive deleveraging led investors to a common resting spot. The U.S. Dollar. Keep in mind the one thing we are not hearing anyone talk about is a strong dollar policy. Why? Because it wouldn’t sound too good to the American public if the Fed stated that they were systematically trying to destroy the value of the U.S. Dollar on the global exchange markets. Why? Well, unfortunately the massive amount of debt which amounts to approximately $49 trillion in the U.S. is simply back breaking. The Fed is desperately going to do anything it can to bring back inflation even if it means an all out war on the U.S. Dollar. You need only look at the chart above to see what is happening.

Anyone that has traveled abroad realizes the destruction of the U.S. Dollar. Let us take a longer view of this and you will understand why:

In the last 7 years the U.S. dollar has fallen a stunning 33 percent. In global terms we are steadily getting poorer and poorer and the Fed and U.S. Treasury are happy to oblige. You need to remember that it would be very easy for the Fed to strengthen the dollar. All they need to do is increase the fed funds rate to encourage saving. Yet the only people that are saving right now are foreigners and many are happy to invest at 0 percent rates of return:

Is this even good for our country? It depends if you enjoy a weak dollar that is systematically being attacked. The Fed is desperately trying to engineer inflation to get us out of our massive debt. Remember that in deflation debt is the worst possible thing to have. The reason for this is asset values are declining while the face value of the note remains the same. Housing is a perfect example. Say you bought a home for $500,000 and took out a $450,000 mortgage. The home is now worth $300,000. A current buyer purchase a similar home for $300,000 today and takes out a $250,000 note. You have a $450,000 mortgage still and the new buyer has a mortgage $200,000 cheaper than the one you have. Now multiply that over thousands of times. Deflation is to be avoided at all cost because it renders the Fed a wizard behind the curtain (at least that is what they hope to avoid).

It may be worthwhile to take a look at Japan since they went down a similar path:

They followed a zero interest rate policy and injected billions into their banks after their real estate market bubble collapsed and their stock market burst. If you take a look at the chart above, the Bank of Japan systematically started cutting rates in the early 1990s and has held them low ever since. Nearly 2 decades after. How did this help their stock market and real estate market?

I remember when this argument was made in the initial days how quickly it was brushed off. We are not Japan echoed the argument. That is true. We are different in many ways. Yet we have similar circumstances especially in our financial markets. Let us outline at least the similarities and you judge for yourself:

(a) Massive unsustainable real estate bubble

(b) Lax lending standards

(c) Over building

(d) Massive stock market bubble

(e) Stock market and real estate bubbles burst together

(f) Japanese government injects liquidity into banks

(g) Bank of Japan cuts official discount rate to near zero

(h) Start of deflation

We’re playing out the same scenario above. Sure, Japan is different culturally and in many other ways but a through h above are essentially what we are living. That is simply a fact. We had a real estate bubble and stock market bubble burst together. We had horrifically bad lending standards. There was massive over building in real estate. Our government is now injecting capital into banks. Our Federal Reserve is approaching the zero interest rate policy. We are now seeing a taste of deflation.

The only ace in the hole is that the Fed is trying all these other creative instruments to get credit going again. You know what is the only thing that will work? The only way this will work is if the Fed and U.S. Treasury nationalize all banks and enforce lax lending standards and bring back the bubble days. That way, they can directly oversee how the funds are being disbursed. Otherwise, banks privy enough to get a cut of the bailout funds will sit comfortably looking for deals as banks not on the bailout list implode. Next year we know that we will be seeing massive fiscal stimulus and it is hard to say how the market is going to react to an aggressive Fed while the government becomes the number spender. We’ve never been down this road before.

Yet the major losers here are those who are prudent and savers. If you look at savings rates at your local banks, you are looking at another zero interest rate policy. The notion of dollar cost averaging into the stock market has gone out the window for probably a generation. If we were to go back to historical rates of 5 to 6 percent many savers would start storing money especially given the current economic shock. Yet we are doing the opposite. The Fed now is trying to make rates so low that banks will be forced to lend. Yet here is the kicker. A bank would rather have a 0 percent rate of return than a certain loss to a bad borrower.

I mourn for the U.S. Dollar primarily. It is a very tough time to be a saver with our current Fed and U.S. Treasury destined to annihilate our once mighty greenback.

Several graphs and source here

[masalai]

More coming "The carry trade" where US$ are borrowed and exported because there seems to be NO DOWNSIDE as happened with Japan a decade ago - the downside was the increasing value of the Yen, but that will not happen for USA, because the US$ is bound to hit a wall of resistance soon and NO ONE will want US$ denominated anything, and the carry trade will repatriate the borrowings at a heavy discount, much to the disadvantage of USA...

These economic problems were brought on by your bankers - - Look up/for a quote along these lines.... "Whoever controls the presses (Printing and Issuing of money), controls the country".... IT is the BANKERS & Their OWNED instrument The FED............

All politicians are far too naive for this game which started when the FED was created at the insistence of the bankers as a way to keep the economy stable and predictable - - but the bankers wanted the opposite to be able to maximise their return and minimise their losses by controlling supply of money.... Now is "minimise losses" time as a bubble burst midst the blind on a greedy feeding frenzy...

- - - A supply and demand game using a "free" resource (money printing press) that can be manipulated into scarcity of surplus quicker than the blink of an eye... The politicians are just smart enough to find a good trough from which to feed... and you haven't twigged yet... Can it be spelt out any simpler????

My bad is that I did not think Americans were either, so outrageously corrupt, or, so bloody stupid as to not see or if they saw, do nothing about the total corruption in their economic system... No one in the rest of the world would care if it were not a currency with international impact because of its RESERVE STATUS and the GLOBAL RESPONSIBILITY attached thereto... Zimbabwe's currency went nuts and at best got a shrug, US$ is savagely manipulated, and justly and rightly the rest of the world can look in disgust and scorn - - Your efforts (or lack thereof) will haunt you all in some way...

More lies being "corrected" partially? from Casey's Daily dispatch... # # "... The potential revision for the year through last March would mean that the economy lost 5.6 million jobs for the period instead of the 4.8 million now on the books. ..."

"... an article titled What the Bottom Line Hides by Paul Lim, writing in the New York Times today. Some excerpts…
# # So far this year, nearly all of the earnings improvements have been achieved through major cost-cutting efforts. Overall selling and administrative costs among S.& P. 500 companies fell 5.7 percent in the second quarter versus the period a year earlier.
# # This represents far more drastic cuts than were undertaken in the recessions of 1991 and 2001.
…declines in S.& P. 500 sales are picking up speed, according to S. & P. After slumping 14 percent in the fourth quarter of 2008 and nearly 17 percent in the first quarter this year, corporate revenue tumbled nearly 20 percent in the second quarter.
# # To be sure, aggressive cutting of expenses will ultimately improve corporate profitability when revenue recovers. “Once sales kick in, this will have a leveraged effect on earnings,” says Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago. ..."

# # "... Now all we need is a recovery. But the recovery may not be felt here first in the U.S. of Debt, but rather overseas. Thus, much of the smart money is headed overseas or flowing into multinationals with significant revenues from foreign markets. In either instance, you have the opportunity to benefit not only from the bounce when it ultimately comes (and it will), but from the currency differential as the U.S. dollar sinks under the weight of our energetic government spending. ..."

http://www.usagold.com/cpmforum/
http://www.gata.org/node/7859 "Another gold price suppression document disclosed"
http://www.financialsense.com/Market...2009/1005.html
http://financialsense.com/editorials...2009/1005.html
http://www.economist.com/specialrepo...ry_id=14530093
http://www.usagold.com/cpmforum/?p=173160 - - video - -
http://www.business24-7.ae/Articles/...5bf71f43d.aspx
http://www.mineweb.net/mineweb/view/...0221&sn=Detail
http://www.gata.org/node/7860 "Arabs, Asia, Russia said planning to drop dollar in oil trade" That will hurt the USA economy....

[masalai]

http://www.gata.org/node/7861 "Fed Should Release Borrowers’ Names, Bloomberg Says (Update2) http://www.bloomberg.com/apps/news?p...d=aPXkf9Z0xZ4A

By Mark Pittman

Oct. 5 (Bloomberg) -- The Federal Reserve should be forced to identify companies that received loans from the central bank because it can’t demonstrate that borrowers would be harmed by the disclosure, according to lawyers who won a Freedom of Information Act lawsuit.

There’s nothing proprietary in the details sought by the Bloomberg News unit of Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, attorneys for the company said today in court papers. The filing by Bloomberg opposes the Fed’s request for a court to halt disclosure of information while an appeal proceeds.

Bloomberg won a ruling from Manhattan’s chief federal judge on Aug. 24 affirming the right of U.S. taxpayers to know about the financial firms that borrowed money. The Fed last year began extending credit directly to companies that aren’t banks for the first time since it was created in 1913. Total lending by the Fed was $2.12 trillion on Sept. 30.

Divulging specifics about the loan program might touch off a run by depositors, unsettle shareholders and hurt the central bank’s “ability to perform important statutory functions at a time of economic upheaval,” Fed lawyers have said in legal filings.

David Skidmore, a Fed spokesman, declined to comment.

‘Cataclysmic’ Crisis

Details about the borrowers and their collateral are “central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression,” attorneys for Bloomberg said in the suit.

The Freedom of Information Act obliges federal agencies to make government documents available to the public. The Bloomberg suit didn’t seek money damages.

Bloomberg responded today to the Fed’s motion to keep the borrower information confidential while it seeks to overturn the Aug. 24 ruling in the U.S. Court of Appeals in New York, according to Thomas Golden, a lawyer at New York-based Willkie Farr & Gallagher LLP, who represents the company.

Today’s filing couldn’t be immediately confirmed in court records.

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Mark Pittman in New York at mpittman@bloomberg.net.
Last Updated: October 5, 2009 20:26 EDT "


http://www.businessspectator.com.au/...N?OpenDocument

http://www.youtube.com/watch?v=ZYcIQvSAHZ8


""" From Dan Denning in St. Kilda: http://www.dailyreckoning.com.au/

--Goldman Sachs has raised its rating on large banks to "attractive." In related news, Neal Barofsky, the special inspector general for the Troubled Asset Relief Program has said that the Feds may have, er, not quite told the truth about the health of the banks receiving TARP funds. He didn't use the word, lie though. How are these two items related? We'll explain below.

--First, Goldman's buy on the banks seemed to buoy the market. The Dow finished up 112 points and is just under 9,600. Meanwhile, Aussie stocks shrugged off that sense of impending doom and rallied 43 points yesterday. The ASX 200 is at 4,622 and thoughts of 5,000 by the end of the year must surely be dancing like sugarplums in the heads of some investors.

--Ho! Ho! Ho!

--But seriously. The banks? Really? Aren't you the least bit suspicious that Goldman is talking up the banks? Doesn't this mean Goldman is probably already short on the banks?

--We have been hanging out at what we now call the "Trading Nebula" in our new offices. Our research department is growing, so we like to drop by and see what the traders think is happening. Often, it seems nebulous to us, given the peculiar vocabulary of indicators and charts the guys are using. Hence the "Trading Nebula."

--But Murray Dawes was especially clear this morning when he told us that his screens are producing all sorts of warning signals on the banks. He is obviously running a different trading algorithm than Goldman. But then, he's producing trading leads for our new Slipstream Trader, which is designed to produce long and short ideas on ASX 200 stocks. In our chat this morning he told me that two banks showed up, although neither were part of the big four.

--If Murray is suspicious that the banks can lead the market to higher highs, at least he's in good company. Bear heroine and noted financial analyst Meredith Whitney wrote in the Wall Street Journal over the weekend that, "Anyone counting on a meaningful economic recovery will be greatly disappointed. How do I know? I follow credit, and credit is contracting."

--You don't say?

-- "Access to credit is being denied at an accelerating pace," Whitney adds. "Large, well-capitalized companies have no problem finding credit. Small businesses, on the other hand, have never had a harder time getting a loan...In the U.S., small businesses employ 50 percent of the country's workforce and contribute 38 percent of GDP...Without access to credit, small businesses can't grow, can't hire, and too often end up going out of business."

--What then, has the regulatory and policy reaction actually produced? It's propped up large institutions that still have heaps of bad assets and have used the last six months to increase their leverage. But at the regional and local level, real businesses with real customers and real capital needs can't get credit.

--To summarise: We have saved the zombie companies with zombie assets at the expense of the living, breathing engine of the free market; the small business. This leads Whitney to conclude, that "We are only in the early stages of the second half of this credit cycle...I expect another $1.5 trillion of credit-card lines to be removed from the system by the end of 2010."

--What will happen to the economy then? And what will happen to Australia then? Will it matter? The ability to extend credit to small businesses and households is concentrated in the hands of the Big Four. Does that make us safer? Or does it concentrate the risk in a few major players, jeopardising the whole system of credit?

--What's clear is that the supply of commercial credit is more concentrated now than ever before. Will the Big Four shun risk and build a capital cushion by cutting off small business credit? Will they double down on their housing lending in order to support house prices; a scheme which supports the value of the assets the banks carry on their balance sheets?

--If we're making it sound like the market and the economy are at a critical inflection point, it's because they are. The complacency of the last six months is giving way to some real questions about what to do with troubled assets that are still troubled and bad debts that are still bad. Can a global economy really grow when the financial system is weighed down by so much debt?

--Professor Michael Hudson is coming to Australia and he says "No!" If you're interested in hearing what he has to say in person, check out his schedule here. You can RSVP for the event near you, provided seats are still available. If you can't make it, there's a good You Tube video of his ideas here.

--We're not familiar with everything Dr. Hudson has to say. We're planning on catching up for lunch and will report back to you how it goes. In the meantime, he gave an interview with the folks over at Business Spectator and put his views lucidly: "There's a basic mathematical principle; a debt that can't be paid won't be paid."

--Talking about the explosion in consumer debt world-wide, including here in Australia, Hudson says, "These debts are beyond people's ability to pay and so we're going to see breaks in the chain of payment and this means that a lot of debts are going to go bad. It means that people are going to hesitate to realise that they can't pay, a kind of cognitive diffidence [sic] that people have about the fact that they really can't pay their debts."

--"They're willing to run down their savings, they're willing to sell off their assets and do everything, but in the end they default and this is what breaks the back of an economy. The houses are defaulted on, they're put up for sale, that crashes real estate prices all the more and, again, the commercial real estate is even in more serious condition than residential real estate right now."

--Coming back to Barofsky and Goldman then, and if Hudson is right, is this the time to buy the banks? Barofsky's report concluded that not all nine of the banks that received $125 billion in capital infusions from the U.S. government here as "healthy" as Ben Bernanke and Hank Paulson made them out to be.

--The nine institutions combined had over $11 trillion in assets. But Paulson made it sound as if the capital infusion would not only stabilise the banking sector, it would prompt the resumption of credit flows in the economy. That turned out to be...not true.

--So what is the truth? Well, as we suggested at the time, the TARP was just a massive delaying tactic. The capital infusions (putting aside that it wasn't really capital but money the Federal government borrowed that must be repaid) were designed to prevent the banks from going insolvent on further asset write downs. But the whole logic of the deal was that asset values would stabilise and even improve, meaning the banks wouldn't have to take losses or raise more capital.

--Give it time baby. Time heals all asset values, right?

--No. It all goes back to what you mean by "troubled." And this is the real heart of the issue behind our mistrust of the stock market rally. There has been no real improvement in the quality of troubled assets in the last year. In fact, they are more troubled than ever. The financial system remains troubled, and not much in it has really changed.

--This leaves the highly-leveraged banks in the same precarious position as they were before, albeit with slightly more confidence from a gullible public. But at the balance sheet level, have things really improved? And more importantly, have the trillions in assets in the financial system related to residential and commercial real estate really become more valuable in the last six months? Or is just a Ponzi Finance pyramid of junk waiting to go up in flames?

--In our view, the last year has been a policy and regulatory sham to cover the retreat by bankers. The people heavily invested in the old system of debt-based asset appreciation are stalling for time. They hope that the passage of time will improve earnings for a quarter for two.

--And if they are the religious sort, they pray that some other scheme will be established to take the troubled assets of their hands. But time cannot heal troubled asset values. Faith healing doesn't work in financial markets. We'd humbly suggest that the day of reckoning is still out there, hiding somewhere on the calendar, waiting to rise again. Until then... """

[masalai]

and to think those poor deluded "terrorists" were trying to do you a favour.... FU.... or is that spelt Phew!?

Bamby, You are worth responding to.
I have many problems with your last post but I don't have the energy to face them all...But for starters;
"Let me try to walk you through a few things here"- Thanks for walking me through!
"There is nothing remotely close to calling this inflation." - I have a different definition of inflation but it is not the one economists like to use because it is simple. Inflation is printing more dollars than are buried, lost, or worn out (okay, adjust it for expansion of the economy). CPI is but an oft-times symptom of inflation. The falling price of goods and services is because the economy is tanking. It is going to get worse because its wheels are being stolen. Remember, Barack Obama is from Detroit (you think ACORN is corrupt?!). Taking money from the best and brightest, hence investments of the best and brightest, investments that create businesses and jobs, has always been stealing but taking more than any reasonable entity will put up with is killing the goose that lays the golden eggs! Check out how many oil companies have moved to Zug, Switzerland because of the low tax rates! WE, IN AMERICA, LOSE because of this. A dipshit like Barack will think "Well, we'll just tax their imports and make up the money there!" You do see the problem there, don't you?
"The only way credit will flow again as it once did is for someone to become the large non-prime lender" True! ...but who in their right mind will loan money at zero interest (forgettting that there is risk)when it will be worth far less shortly? These guys are no dummies!
"the one thing we are not hearing anyone talk about is a strong dollar policy. Why? Because it wouldn’t sound too good to the American public if the Fed stated that they were systematically trying to destroy the value of the U.S. Dollar on the global exchange markets. Why? Well, unfortunately the massive amount of debt which amounts to approximately $49 trillion in the U.S. is simply back breaking. The Fed is desperately going to do anything it can to bring back inflation even if it means an all out war on the U.S. Dollar." - this a circular argument as I DON"T UNDERSTAND IT. But (again "but"), If we are going to have others buy our ****, a weak dollar helps. I get European money every August and like a somewhat weak dollar for this reason but it is love/hate because while, yes, I'm getting plenty of funny-lookin' money, I know instinctively that a strong US economy would be better, a more "complete", satisfying meal (and better for the world, too, when we are better able to go fight wars and give charity in the name of good - no matter what ignorant clucks have to say in discord).
"
(a) Massive unsustainable real estate bubble
(b) Lax lending standards
(c) Over building
(d) Massive stock market bubble
(e) Stock market and real estate bubbles burst together
(f) Japanese government injects liquidity into banks
(g) Bank of Japan cuts official discount rate to near zero
(h) Start of deflation
We’re playing out the same scenario above" - Hey, We kinda are doing the same thing as Japan in the "lost decade" but (there we go again)...let me start by pointing out that "h" does not necessarily follow "g" and I'm not going to get into an argument with whoever from who (I like whom here, but it is pretentious and going out of style) you sourced your information. Japan knows how to export (remember Usa, Japan? Remember the reverse engineering of the boxer, water-cooling it, and beating the world with its timing and appropriateness? Remember cheap consumer electr...oh, yeah, we still have those - witness electronics box-stores dropping like flies after poison chitlins). We don't. Japan had a big brother (Us). We don't. The world (with a F'ing cheering section) wants us to fail.
Let's not let this happen. waddaya say?