Joe's Investo-Blog

…Especially for Currency Issuing Soveriegn States

Escaping the Sovereign Debt Trap: The Remarkable Model of the Commonwealth Bank of Australia

http://www.globalresearch.ca/PrintArticle.php?articleId=20473

by Ellen Brown

The current credit crisis is basically a capital crisis: at a time when banks are already short of the capital needed to back their loans, capital requirements are being raised. Nearly a century ago, the Commonwealth Bank of Australia demonstrated that banks do not actually need capital to make loans – so long as their credit is backed by the government. Denison Miller, the Bank’s first Governor, was fond of saying that the Bank did not need capital because “it is backed by the entire wealth and credit of the whole of Australia.” With nothing but this national credit power, the Commonwealth Bank funded both massive infrastructure projects and the country’s participation in World War I.

President John Adams is quoted as saying, “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” The major conquests today are on the battlefield of debt, a war that is raging globally. Debt forces individuals into financial slavery to the banks, and it forces governments to relinquish their sovereignty to their creditors, which in the end are also private banks, the originators of all non-cash money today. Read more…

Banks, Currencies, Economics, Financial Crises, Inflation/Deflation Banks, collapse, Currencies, debt, deflation, Economics, exchange rates, history, IMF, inflation, The Fed, trade, US treasury

http://comstockfunds.com/default.aspx?act=Newsletter.aspx&category=SpecialReport&newsletterid=1534&menugroup=Home&AspxAutoDetectCookieSupport=1

We understand that we have discussed the debt problem in this country for what seems to be forever, but we can’t stop talking about it now that the debt is clearly the catalyst for the latest stock market downturn. Debt is discussed by the pundits on financial TV also, but in almost every case the discussion revolves around government deficits relative to GDP or government debt relative to GDP. They are constantly comparing the U.S. government debt to every other country in the world (especially Portugal, Italy, Ireland, Greece, and Spain-PIIGS). We believe that the government debt should be taking a back seat to the private debt which is much larger and must eventually be deleveraged.
Read more…

Banks, Currencies, Economics, Financial Crises, Inflation/Deflation, uncategorized Banks, Bonds, collapse, debt, deflation, Economics, economy, fiscal policy, history, inflation, liquidity trap, monetary policy, monetary velocity, quantitative easing, The Fed, US treasury

by Ambrose Evans-Pritchard
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7857595/RBS-tells-clients-to-prepare-for-monster-money-printing-by-the-Federal-Reserve.html

Entitled “Deflation: Making Sure It Doesn’t Happen Here”, it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: “The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.”

Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).

Investors basking in Wall Street’s V-shaped rally had assumed that this bizarre episode was over. So did the Fed, which has been shutting liquidity spigots one by one. But the latest batch of data is disturbing.
Read more…

Asset Allocation, Economics, Financial Crises, Inflation/Deflation Banks, collapse, debt, Economics, economy, fiscal policy, history, inflation, monetary policy, The Administration, The Fed

By Paul Krugman
http://www.nytimes.com/2010/06/28/opinion/28krugman.html

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
Read more…

Asset Allocation, Economics, Financial Crises, Inflation/Deflation, Markets Banks, collapse, congress, debt, deflation, Economics, economy, EU, fiscal policy, history, IMF, monetary policy, strategy, taxes, The Administration, The Fed

There Is No Such Thing as a Sovereign Budget Deficit.

By Mike Whitney

Deficits create demand. Demand generates spending. Spending generates economic activity. Economic activity generates growth. Growth generates jobs, increases government revenues, reduces deficits and ends recessions.

Simple, right?

When consumers have too much debt, they will not spend no matter how low interest rates are. This is not theory, this is fact.

If the government cuts spending at the same time as consumers, then overall spending declines and the economy slips into recession. This is what the deficit hawks want–a return to recession. This is politics, not economics.

KEYNE’S KOAN: Increasing the deficits, lowers the deficits
Read more…

Economics, Financial Crises, Inflation/Deflation, Politics Asset Allocation, collapse, Currencies, debt, deflation, Economics, EU, exchange rates, fiscal policy, history, IMF, inflation, monetary policy, Politics, Regulators, trade

The E.U.’s Dangerous Game

By MARK WEISBROT
Published: May 12, 2010

The agreement by the European Union and the International Monetary Fund to provide up to $960 billion of support to the Continent’s weaker economies, as well as to financial markets, has appeared to calm investors worldwide, for the moment.

But this does not resolve the underlying problem, even in the short run.

The problem is one of irrational economic policy. The Greek government has reached an agreement with the E.U. authorities (which include the European Commission and the European Central Bank), and the I.M.F. that will make the current economic problems even worse.

This is known to economists, including the ones at the E.U. and I.M.F. who negotiated the agreement. The projections show that if their program “works,” Greece’s debt will rise from 115 percent of gross domestic product today to 149 percent in 2013. This means that in less than three years, and most likely sooner, Greece will be facing the same crisis that it faces today.
Read more…

Asset Allocation, Bonds, Currencies, Economics, Inflation/Deflation, Politics Bonds, collapse, Currencies, debt, Economics, economy, EU, exchange rates, fiscal policy, IMF, monetary policy, Politics

http://www.bloomberg.com/apps/news?pid=20601103&sid=aqpASviGyLQc

April 26 (Bloomberg) — The bond vigilantes who punished governments for profligate spending in past years have gone into hiding.

Sovereign bonds yield an average 2.385 percent, about the same as a year ago and below the average of 3.08 percent in 2008 when the credit market seizure led investors to seek the safety of government debt, according to Bank of America Merrill Lynch index data. The cost to borrow is steady even though the amount of bonds in the index that includes nations from the U.S. to Germany and Japan has grown to $17.4 trillion from $13.4 trillion two years ago.

While the debt helped the global economy recover from its first recession since World War II, yields show bond investors aren’t troubled that the growth will spur inflation. Consumer prices excluding food and energy costs rose 1.5 percent in February from a year earlier in the 30 countries that form the Organization for Economic Cooperation and Development, the smallest gain on record.

“The fact that inflation is very well behaved, that provides the cover for central banks to remain on the sidelines and continue to pursue accommodative policies to help the economy,” said Thomas Girard, a senior money manager who helps oversee $115 billion in fixed-income assets with New York Life Investment Management in New York.
Read more…

Asset Allocation, Bonds, Economics, Inflation/Deflation, Markets Asset Allocation, Bonds, collapse, debt, deflation, Economics, economy, fiscal policy, inflation, monetary policy, Politics, Regulators, strategy, The Fed, US treasury

To My Clients:

Our accounts are up 5.4% Y-T-D and up 25.1% for the last twelve months.

The markets continue to show buoyancy as the economy very slowly begins a recovery. To a degree, this is largely a result of the Fed’s ineffectual efforts of getting money in circulation. Using the lowest interest rates in generations, the tactic is still seeking evidence of success. The curse of our banking system that in order to create money in circulation, it is wholly dependent upon loan and debt creation to inject money into the economy. However, consumers having been severely burned, no longer want to be in debt and, banks likewise, don’t really want to lend, sometimes even to their best credits. Money in circulation cannot grow unless people borrow and banks lend. Given the recent rising markets, it appears that banks are largely pumping and loaning money into financial assets instead of into bricks and mortar businesses that create jobs. Full recovery will still take some time.

Having said all of that, the economy is Read more…

Asset Allocation, Banks, Economics, Financial Crises, Gold, Markets, Portfolio Management, Stocks Asset Allocation, Banks, collapse, debt, Economics, economy, monetary policy, performance, Portfolio Management, stock market, Stocks, strategy, The Fed

• Force Credit Default Swaps onto Transparent Exchanges
• “Too Big to Fail” Must Go
• Excessive Leverage Must Go
• Separate Commercial and Investment Banking – Again

Read the entire John Mauldin article here: http://www.frontlinethoughts.com/article.asp?id=mwo040910

Credit Default Swaps

What happened in the last credit crisis was that interlocking credit default swaps among so many banks made the ENTIRE system too big to fail. AIG basically sold naked options in the form of credit default swaps to all. Yet nothing has changed. We again have credit default swaps (CDS) growing, and no one knows who could be overextended. Once again, everyone could be dependent on everybody else, and we have no idea if there is a Bear, Lehman, or AIG in these woods. CDS’s are good things, just like futures. But they must go to a transparent exchange. There needs to be position limits, just as there are in futures and commodities. There needs to be very transparent pricing and commissions. And someone needs to monitor who owns them and what risks they are taking.

Too Big to Fail Must Go
We have large banks that take massive risks, which allow them to pay huge bonuses to management and traders; and then if they have problems the taxpayer has to take the losses. We can see why the banks like it. The problem is that parts of these large banks are essentially hedge funds, working with cheap commercial deposit money and putting the entire bank at risk. As taxpayers, we don’t want to be taking the risk so some big bank can have a trading desk and make large profits that only benefit their shareholders and management, where we have to pick up the pieces with our tax dollars when they fail. Separate traditional banking and investment banks. Commercial banks should be boring, traditional lending to customers, services, etc.

Excessive Leverage Must Go
The problem of too big to fail is ultimately one of leverage. If a small bank fails, no one really notices. If a giant bank fails and puts the system at risk, it costs us a lot. We must reduce the allowable leverage the larger a bank gets? This would clearly reduce their risk and encourage them to only make prudent bets (otherwise known as loans), as their risk capital would be limited. If they wanted to make more loans, then they could raise more capital or retain more earnings. Would that hurt earnings and shareholders and limit share prices? Yes, but the world of privatizing the gains and socializing the risks must become a thing of the past.

Banks, Economics, Financial Crises, Markets, Politics Banks, collapse, congress, debt, economy, Politics, Regulators, The Administration

Read the entire article here: http://baselinescenario.com/2010/03/04/why-exactly-are-big-banks-bad/#more-6656

Big banks cannot be reined in through some clever tweaking of the rules. The issue before us is intensely political – just as it was in the first decade of the twentieth century (and in Jackson’s era). There is again a confrontation between concentrated financial power and our democracy. One side will win and the other side will lose.

The banks start with a definite edge. The public relations machines of today’s bankers may be even more effective than those of Morgan and Rockefeller – although the campaign contributions and control of the Senate exercised by those titans was immense.

But it is still early days – the Senate legislation expected this week or next will achieve nothing, except make the stakes clearer and motivations more transparent. If the banks win this round, as seems likely, they will become even larger – and more dangerous. At current scale, our megabanks bring no social benefits and great social risks.

Just as a hundred years ago, the consensus on big banks has to change. In this instance, either we break them up or they will soon break us all.

Banks, Financial Crises, Politics Banks, collapse, history, Politics, Regulators, The Fed, US treasury

What the Peoples Bank of China Can and Cannot do with its Foreign Currency Reserves

http://mpettis.com/2010/02/what-the-pboc-cannot-do-with-its-reserves/

February 22nd, 2010 by Michael Pettis

China did not reduce its dollar holdings
Beijing is not Washington’s banker
Can PBoC reserves protect China?
Balance sheet mismatches
Are there no winners and losers?
Wealth is transferred within China

It is a real toss-up as to which generates more bizarre comment in the international press: Beijing’s long-feared dumping of US Treasuries, or the use and value of the PBoC’s central bank reserves. The revelation last week that Chinese holdings of US Treasury obligations fell in December by $34.2 billion, to $755.4 billion, generated a frisson of fear and excitement, leading one prominent newspaper to worry that “If there is one thing that gets investors twitchy, it is the fear that China is losing its appetite for US government bonds.”

And shouldn’t they get twitchy? After all this reduction in Chinese holdings of Treasury bonds comes from the USG’s TIC data, so it must be true that China is dumping dollars, right?

No need to twitch, it means no such thing. Read more…

Banks, Bonds, Currencies, Economics, Financial Crises Banks, Bonds, collapse, Currencies, debt, Economics, exchange rates, fiscal policy, inflation, monetary policy, The Administration, The Fed, trade

Here’s a guy who finally understands his job. Let’s see if Pres. Obama understands his and get’s behind this guy. It still remains to be seen if the banks really do own Congress and are able to derail this upstart.

CFTC’s Gensler Turns Back on Wall Street to Push Derivatives Overhaul

By Ian Katz and Robert Schmidt
Bloomberg News
Friday, February 12, 2010

http://www.bloomberg.com/apps/news?pid=20601109&sid=a3OkrdITAZtA&pos=10

WASHINGTON — Gary Gensler, chairman of the Commodity Futures Trading Commission, is shattering any illusions that his 18 years at Goldman Sachs Group Inc. would make him sympathetic to Wall Street’s effort to weaken derivatives legislation.

Over a private lunch at the Waldorf Astoria hotel on Jan. 6, Gensler, 52, told bank executives that while he once shared their goals — to boost revenue and increase their bonuses — his responsibility now was to American taxpayers. And if he gets his way, Gensler said, their firms will be less profitable, according to three people familiar with the discussion.

Attending the lunch were David B. Heller, co-head of the securities division at Goldman Sachs; Seth Waugh, chief executive officer of Deutsche Bank Americas; Timothy O’Hara, head of global credit at Credit Suisse Holdings USA Inc., and Robert P. Kelly, CEO of Bank of New York Mellon Corp. When one banker asked Gensler what he sees as the biggest obstacles to reform, he gestured toward his hosts and replied, “You.”

Read more…

Banks, Financial Crises, Politics Banks, collapse, Politics, Regulators, The Administration

Recently Sally Hutchins commented on a recent post as follows:

Please continue. So printing more money is creating more debt? Educate me. Love, Sally

Love? Yep. She’s my adorable sister.

Hi Sally:

Let me try to answer your question as succinctly as I can.

“Printing money” is a term used today that nobody really knows what it means. Historically it meant the government physically printed little pieces of paper which were then spent into circulation by buying goods and services the government needed. For example, in the Revolutionary War, the government printed continentals to pay the troops. Allegedly, British counterfieting rendered the currency eventually worthless. Again, when New York Bankers refused Abraham Lincoln additional financing during the Civil War, Lincoln then decided simply to print “greenbacks” to pay the troops. It worked. Merchants accepted greenbacks because Lincoln decreed that greenbacks would be accepted by the government for the payment of taxes. “Greenbacks” remained in circulation for decades and largely contributed to massive subsequent economic growth.

Today, 99 percent of all money in circulation isn’t currency at all, but mere electronic blips or signals recorded on the computerized ledgers of the banking system. Obviously actual printing of money doesn’t really happen anymore in any meaningful way. However, “money creation” is probably a more appropriate term. Money is created when a bank makes a loan. Presto. That’s it. I already know that you’re going to ask Read more…

Banks, Economics, Financial Crises, Inflation/Deflation, Politics Banks, collapse, Currencies, debt, deflation, Economics, economy, fiscal policy, history, inflation, monetary policy, Politics, taxes, The Fed, US treasury, war

Harsh lessons we may need to learn again
By Joseph E. Stiglitz (China Daily)

http://www.chinadaily.com.cn/opinion/2009-12/31/content_9249981.htm

Joseph Stiglitz recounts five “harsh lessons” from 2009:

1. Markets are not self-correcting.
2. Recent Markets failed because too-big-to-fail financial institutions had perverse incentives.
3. Keynesian policies do work.
4. There is more to monetary policy than just fighting inflation.
5. Not all innovation leads to a more efficient and productive economy – let alone a better society.

The best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on which we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the world. The world has also learned some valuable lessons, though at great cost both to current and future prosperity – costs that were unnecessarily high given that we should already have learned them.

The first lesson is that markets are not self-correcting. Indeed, without adequate regulation, they are prone to excess. In 2009, we again saw why Adam Smith’s invisible hand often appeared invisible: it is not there. The bankers’ pursuit of self-interest (greed) did not lead to the well-being of society; it did not even serve their shareholders and bondholders well. It certainly did not serve homeowners who are losing their homes, workers who have lost their jobs, retirees who have seen their retirement funds vanish, or taxpayers who paid hundreds of billions of dollars to bail out the banks.

Under the threat of a collapse of the entire system, the safety net – intended to help unfortunate individuals meet the exigencies of life – was generously extended to commercial banks, then to investment banks, insurance firms, auto companies, even car-loan companies. Never has so much money been transferred from so many to so few.
Read more…

Banks, Economics, Financial Crises, Inflation/Deflation, Markets, Politics Banks, collapse, deflation, Economics, economy, fiscal policy, history, inflation, monetary policy, Politics, taxes, The Fed, US treasury

In today’s Senate hearings to confirm the re-appointment of Federal Reserve Chairman Ben Bernanke, Senator Bunning succinctly lays out the greivous mistakes of the Fed in the years leading up to, during, and in the aftermath of the recent financial meltdown. It is hard to refute his argument that the privately owned Fed did nothing for the taxpayers and everything for it’s stockholders, the member banks of the Federal Reserve System.

Statement of Senator Bunning

Four years ago when you came before the Senate for confirmation to be Chairman of the Federal Reserve, I was the only Senator to vote against you. In fact, I was the only Senator to even raise serious concerns about you. I opposed you because I knew you would continue the legacy of Alan Greenspan, and I was right. But I did not know how right I would be and could not begin to imagine how wrong you would be in the following four years.
Read more…

Banks, Economics, Financial Crises, Markets, Politics Banks, collapse, debt, deflation, economy, history, monetary policy, Politics, The Fed, US treasury

During the 1991 recession (if you can call it that) Bill Clinton made a campaign issue of “It’s the economy stupid.” It’s true, it is all about the economy. But it’s also a little more fundamental than that. It’s something that people have known intuitively for centuries. In a good economy, there was always “plenty of money” and in hard times it was “money is scarce”. Things haven’t changed, except that now those responsible for money creation are intentionally clouding the picture with all kinds of economic jawboning (dutifully reported daily by the media) to create a paranoia of both hyperinflation and deflation.
Read more…

Banks, Economics, Financial Crises, Inflation/Deflation Banks, collapse, debt, deflation, Economics, economy, history, inflation, monetary policy, stock market, The Fed

From Northern Trust Research
September 21, 2009

Chairman Bernanke noted last week that a recovery is most likely underway. Our forecast is for a 2.5% increase in real GDP during the third quarter, which is slightly lower than the market consensus. The advance estimate of real GDP for the third quarter will be published on October 29.

The Index of Leading Economic Indicators rose 0.6% in August, the fifth consecutive monthly increase of the index. On a year-to-year basis, the index moved up 1.89%, the largest gain since May 2006. The July-August average translates to a 1.32% from the third quarter of 2008, the first increase since the first quarter of 2007. Historically, the year-to-year change in the LEI advanced one quarter has a strong positive correlation with the year-to-year change in real GDP (see chart 1). This evidence and other economic reports — ISM manufacturing survey, industrial productions index – support expectations that an economic recovery commenced in the third quarter of 2009.

Real GDPLEI advanced 1 quarterIndex of Leading Economic Indicators vs. Real GDPyear-to-year percent changepercent changer = 0.79

In August, the workweek held steady, jobless claims, orders of non-defense capital goods and real money supply declined. The remaining seven components – orders of durable consumer goods, supplier deliveries, building permits, interest rate spreads, index of consumer expectations, and stock prices moved up. Effectively, there is a widespread improvement in economic conditions, which had been brought about by policy changes. The impact from monetary policy accommodation is evident. The possible impact from the $787 billion fiscal stimulus package will be available in 2010. By the end of fiscal year 2009, roughly 24% of the fiscal package will have been spent.

Asha G. Bangalore
agb3@ntrs.com
Northern Trust Global Economic Research
50 South LaSalle
Chicago, Illinois 60603
northerntrust.com

Economics, Financial Crises Asset Allocation, collapse, deflation, Economics, economy

This is a transcript of Prof. Joseph Peden’s 50-minute lecture “Inflation and the Fall of the Roman Empire” given at the Mises Institute Seminar on Money and Government in Houston, Texas on October 27, 1984. The original audio recording is available courtesy of the Mises Institute.

Two centuries ago, in 1776, there were two books published in England, both of which are read avidly today. One of them was Adam Smith’s The Wealth of Nations and the other was Edward Gibbon’s Decline and Fall of the Roman Empire. Gibbon’s multi-volume work is the tale of a state that survived for twelve centuries in the west and for another thousand years in the east, at Constantinople.

Yet Gibbon in looking at this phenomenon commented that the wonder was not that the Roman Empire had fallen, but rather that it had lasted so long. And scholars since Gibbon have devoted great deal of energy to examining that problem: how was it that the Roman Empire lasted so long,   Read more…

Banks, Currencies, Economics, Financial Crises, Gold, Inflation/Deflation Banks, collapse, Currencies, debt, Economics, economy, exchange rates, fiscal policy, Gold, history, inflation, monetary policy, taxes, The Fed, US treasury, war

The Secrets of China’s Growth: The Government Owns the Banks rather than the Reverse

By Ellen Brown

“The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. They frankly own the place.” — U.S. Senator Dick Durbin, Democratic Party Whip, April 30, 2009

While the U.S. spends trillions of dollars to bail out its banking system, leaving its economy to languish, China is being called a “miracle economy” that has decoupled from the rest of the world. As the rest of the world sinks into the worst recession since the 1930s, China has maintained a phenomenal 8% annual growth rate. Those are the reports, but commentators are dubious. They ask how that growth is possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums. Economist Richard Wolff skeptically observes:  Read more…

Banks, Currencies, Economics, Financial Crises, Inflation/Deflation, Markets Banks, collapse, Currencies, debt, Economics, economy, exchange rates, Gold, inflation, monetary policy, strategy, The Fed, US treasury

Humor, Portfolio Management, Stocks collapse, Humor, Portfolio Management, stock brokers, stock market, Stocks

June 21, 2009
by Gary North

Back in 1973, gold standard advocate John Exter made a phrase famous in hard-money circles: “Pushing on a string.” Exter argued that prices of all assets except gold (he ignored silver) would someday collapse because of the pyramiding of debt. Banks would eventually cease to lend, out of fear of default. That would cause the default.

The FED would inflate the monetary base, he said, but this would not reverse the price decline. The commercial banks would not lend. The FED would therefore push on a string. Its attempt to inflate would fail.

Read more…

Banks, Economics, Financial Crises, Inflation/Deflation Banks, collapse, debt, deflation, Economics, economy, fiscal policy, Gold, inflation, monetary policy, strategy, The Fed, US treasury

How California Could Turn its IOUs into Dollars
By Ellen Brown
Global Research, July 22, 2009

California has over $17 billion on deposit in banks that have refused to honor its IOUs, forcing legislators to accept crippling budget cuts. These austerity measures are unnecessary. If the state were to deposit its money in its own state-owned bank, it could have enough credit to solve its budget crisis with funds to spare.

California could pull its deposits out of those depository banks refusing its IOUs and put them instead in its own state-owned bank, following the lead of North Dakota, which now has the only state-owned bank in the country. Set up in 1919 to escape Wall Street predators, the Bank of North Dakota has been generating low-interest credit for the state and its residents for nearly a century. North Dakota is one of only two states (along with Montana) currently able to meet their budgets.

Read more…

Banks, Economics, Financial Crises Banks, collapse, debt, fiscal policy, The Fed

To My Clients:

Our accounts were up 1.01% during the first quarter of this year.  The major stock market indexes are all down between 3-13%.

The current recession, the longest and deepest in decades is the result of massive debt defaults and deleveraging. Banks are now undercapitalized and are preserving capital by tightening lending standards (if they lend at all) resulting in a vicious cycle of a shrinking economy making money become even more scarce. Read more…

Asset Allocation, Banks, Bonds, Economics, Financial Crises, Gold, Markets, Portfolio Management Banks, Bonds, collapse, debt, economy, fiscal policy, Gold, monetary policy, performance, Portfolio Management, stock market, strategy, The Fed

The Treasury’s new website, financialstability.gov is actually not a bad website for getting some actual information about the administration’s efforts to address the financial crises. It gives us some idea, state by state, about where the money is going and where it went. For example, if you click on Utah, you will find that we got an ample share with most of it going to Zions Bank. And going to the transactions page, we find out that our very own local Zions Bank was, after the 9 largest banks, third in line for the next tier of payouts getting $1.4 BILLION. But even that kind of money still didn’t stop its stock price from plummeting from over $32 bucks a share on the day of the award to less than $7 bucks a share within a few weeks.

Hopefully the website won’t devolve into a propaganda tool, but will get better with more and better content.

Very Best Regards,

Joe

Banks, Economics, Financial Crises Banks, collapse, economy, fiscal policy, US treasury

I’ve written about Simon Johnson and the banking oligarchs before here and here. The Atlantic Monthly just published his most recent writings on the banking crisis. He is scathing in his assessement of our finanancial institutions (the oligarchs), almost as scathing of our governmental response, and lays out precisely what we must do to restore our economy, with which I am obviously in agreement since I am posting a link to the article here for your reading enjoyment. It’s lengthy so read it when you have some time.

Simon Johnson happens to be a pretty smart guy as he is a former chief economist of the International Monetary Fund, is a professor at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. I follow his analysis closely in his own blog at baselinescenario.com.

Very Best Regards,

Joe

Banks, Economics Banks, collapse, debt, Economics, economy, fiscal policy, monetary policy, The Fed