JAMES PICKETT WESBERRY Jr >>>> PERSONAL WEBSITE

CRISIS QUOTES AND FACTS

Introduction to Jim Wesberry
GIVING THANKS
E-Magazines by Jim Wesberry
THE FALTERING EAGLE: Speech made in 1970
MIAMI KEYNOTE: Public Financial Management, 2016
CONFERENCIA: CONTROL INTERNO Y ÉTICA: ESTARÍAN PERTINENTES EN 2025?
CONFERENCIA 6a Conferencia de Auditores Ecuador: El Auditor Interno Frente sus Tres Mayores Desafios
CONFERENCIA CReCER 2015: Empresas Estales en Busca de Etica---State Enterprises in Search of Ethics
CONFERENCIA QUITO HONESTO: Ambiente Etico = Municipio Eficiente: Principios de Conducta Etica, 2014
DOCTORADO HONORIS CAUSA - UNIVERSIDAD INCA GARCILASO DE LA VEGA, LIMA, PERU - 2013
DECORATION BY THE PERUVIAN GOVERNMENT 1972
CONFERENCIA EN HUANUCO, PERU - El Auditor enfrenta la Erupcion de Corrup$ion del Siglo XXI -2013
CONFERENCIAS EN CHILE - 3 Mayores Desafios al Auditor Interno - 2012 - VIDEO y TEXTO
DOLLARCRACY ->>>>>>>>>>>>>>>>>>>>>>>>>>> $$$ COUNT.........PEOPLE DON'T
THE CONTINUING FINANCIAL CRISIS
GEORGIA CORRUPTION ON MY MIND
Personal Information
My Resume (in English)
Mi Curriculum Vitae (en español)
Technology Use in Fighting Corruption
ACTIVITIES & EVENTS INITIATED
The Top Quartile of Life
AMERICA IN DECLINE? The Life Cycle of a Great Power
ACCOUNTANCY & AUDITING: MY CHOSEN PROFESSION
SERVICE AS PAGE IN US HOUSE OF REPRESENTATIVES 1949-51
SPECIAL INVESTIGATOR OF CORRUPTION IN STATE GOVERNMENT 1959-60
LEGENDS: Georgians Who Lived Impossible Dreams
Wesberry v. Sanders, 376 US 1 Landmark US House Reapportionment Case
POLITICS - MY FIRST CAMPAIGN 1961
POLITICS - ELECTION TO GEORGIA STATE SENATE 1962
The Best Speech I Ever Made
Why I Quit the Georgia Senate
Activities in the Junior Chamber of Commerce
Contador Benemerito de las Americas (Most Meritorious Accountant of the Americas)
Articles from The Journal of Accountancy
My Credo
Media
Interview about Leadership
ACCOUNTABILITY - RESPONDABILIDAD
THE EVER GROWING, EVER STIFLING BUREACRACY
PONZIS and PIRAMIDES
THE NATIONAL DEBT
GRAPHIC DISPLAY OF US DEBT
CALCULATE YOUR DEBT LIABILITY
Fraud-Corruption-Bribery
Collusion Breaks Internal Controls
FORENSIC AUDITING --- AUDITORIA FORENSE
ETHICS
FRIENDSHIP - AMISTAD
Creencia - Belief
Think -------- Pensar
WOMAN -------------- MUJER
Dawn
Message to Garcia - Mensaje a García
THE GREATEST SPEECHES OF ALL TIME
Education
Interesting!
POEMS
ATLANTA, GEORGIA USA - MY HOME TOWN
WASHINGTON DC - MY OTHER HOME TOWN
PERU
ECUADOR
MEXICO
PHILIPPINES
COLOMBIA VS KLEPTOKAKISTOCRACIA: Presentación para el Día Internacional Anti-Corrupción 2011
LECTURE AT MANILA'S UNIVERSITY OF THE EAST: Integrity & Honor, Corruption & Dishonor VIDEO
MANILA LECTURES AT FAR EASTERN & SANTO TOMAS UNIVERSITIES: Good Governance and Social Responsibility
EFFECT OF 2008 GLOBAL CRISIS (JW presentation in English)
SEGUNDA GRAN DEPRESION 2010 (JW presentaciónes en español)
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WHAT THE EXPERTS (AND
 
 OTHERS) ARE SAYING...
 
“This is a financial crisis that became an economic crisis that’s becoming a massive jobs crisis that will become a human crisis,” Angel Gurria, OECD Secretary General

“Our wallet is empty.
Our bank is closed. And
our credit is dried up.”

The problem with bubbles, is that each bubble has to be bigger than the previous one and they only temporarily stimulate the economy. Another stimulus package would only make matters worse.

“The whole economic expansion driven by a bubble in America has been a total disaster and has shifted wealth from the ordinary people who work … to the Wall Street elite,” ... "Total employment in the US today is lower than in 2000.'...Marc Faber

Governor Arnold Schwarzenegger before a rare joint session of the California legislature

UNTIL 2013?
The stress tests may be over, but banks "are far from a recovery, and the banking crisis has merely entered a new phase," credit rating firm Standard & Poor's says. And the problems that have pushed financial institutions to the brink and roiled global markets may last until 2013.

If that prediction is even close to correct, it suggests the faint signs of economic recovery that have popped up recently -- the rallying stock market and "less bad" unemployment and housing figures -- may be illusory. After all, the economy probably won't strengthen as long as major banks are cutting back on lending...Tim Catts

We have been told by that usual bringer of bad tidings, George Soros, that the “economic freefall” has stopped. The normally cautious president of the European Central Bank, Jean-Claude Trichet, has identified a slowing down of the rate of decrease in gross domestic product and, in some cases, "already picking up". The Organisation for Economic Co-operation and Development composite leading indicator shows at least a slight uptick. The admittedly highly erratic Easter UK retail sales figures show an actual increase and surveyors report more property inquiries. Financial commentators talk of “green shoots” and one of them has even suggested that the recession came to an end in April. So – Bank of England dissenting – everything is all right and we can get back to normal life.

Except that it isn’t. It is perhaps unfair to cite the continuing horrifying rise in unemployment in so many countries. For that is admittedly a lagging indicator. A better reason for being suspicious is that so much of the new optimism is associated with a very recent recovery in equities. These lost up to half their value in the key US and UK markets, but have come less than a third of the way back since early March. Paul Samuelson once said that the stock market had predicted eight of the last five recessions. The same might be said of recoveries....Samuel Brittan in FT

CUTBACKS: Americans are paring down the list of familiar household appliances they say they can't live without, according to a new national survey by the Pew Research Center's Social & Demographic Trends project. Click for full report in PDF.

HIGHEST EVER MASS LAYOFFS: Since the official start of the recession in December 2007 through april 24, there have been 31,414 mass layoffs, causing 3.2 million people to lose their jobs.

According to New York University Professor Nouriel Roubini, the Anglo-Saxon model of supervision and regulation of the financial system has failed the same may be true for numerous corporations.[3] Professor Roubini remarks, "Indeed, it seems that for approximately nine years, the U.S. Securities Commissions Enforcement Division chose to ignore red flags that Bernard Madoff was orchestrating a large scale financial fraud".[4] Congress seeming inability to pass laws and for the executive branch to issue effective regulations in large part can be attributed to effective lobbying by corporations. (Click for more)

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President Barack Obama

January:  “We start 2009 in the midst of a crisis unlike any we have seen in our lifetime – a crisis that has only deepened over the last few weeks."

February: Economic crisis 'not as bad as we think'

March: "There are certain institutions that are so big that if they fail, they bring a lot of other financial institutions down with them. And if all those financial institutions fail at the same time, then you could see an even more destructive recession and potentially depression."

April:

  • "...the worst thing that we could do in a recession this severe is to try to cut government spending at the same time as families and businesses around the world are cutting back on their spending. So as serious as our deficit and debt problems are – and they are very serious – major efforts to deal with them have to focus on the medium and long-term budget picture.
  • in tackling the deficit issue, we simply cannot sacrifice the long-term investments that we so desperately need to generate long-term prosperity.
  • the problem with our deficit and debt...has been building dramatically over the past eight years, largely because big tax cuts combined with increased spending on two wars and the increased costs of government health care programs...if we want to get serious about fiscal discipline – and I do – then we are going to not only have to trim waste out of our discretionary budget, a process we have already begun – but we will also have to get serious about entitlement reform. 
  • from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America’s future that is far different than our troubled economic past."

May: "Wall Street will remain a big, important part of our economy, just as it was in the ’70s and the ’80s. It just won’t be half of our economy. And that means that more talent, more resources will be going to other sectors of the economy. And I actually think that’s healthy. We don’t want every single college grad with mathematical aptitude to become a derivatives trader. We want some of them to go into engineering, and we want some of them to be going into computer design. And so I think what you’ll see is some shift, but I don’t think that we will lose the enormous advantages that come from transparency, openness, the reliability of our markets. If anything, a more vigorous regulatory regime, I think, will help restore confidence, and you’re still going to see a lot of global capital wanting to park itself in the United States."

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...our economy has become more addicted than ever to low interest rates. But because bank assets will now be collecting income at record low rates, when and if the Fed tries to raise rates it will only be able to do so on the margin. If Bernanke raises rates substantially to fight inflation, banks will be paying out more on deposits than they collect on their income streams. Couple that with their already distressed balances sheets and look out!

Additionally, not only do the consumers need low rates to keep their Financial Obligation Ratio low, but the Federal government also needs low rates to ensure interest rates on the skyrocketing national debt can be serviced. Our projected $1.8 trillion annual deficit stems from the belief that the government must expand its balance sheet as the consumer begins to deleverage. In fact, both the consumer and government need to deleverage for total debt relief to occur, else we're just shuffling debts around and avoiding a healthy deleveraging entirely.

In order to have viable and sustainable growth total debt levels must decrease, savings must increase and interest rates must rise. But that would require an extended period of negative GDP growth-a completely untenable position for politicians of all stripes. Ben Bernanke would like you to believe inflation will be quiescent and he can vanquish it if it ever becomes a problem...IRA

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The economy is cratering, so the Fed is printing money. When the Fed prints money, this eventually produces inflation (more dollars, same amount of goods).

Ben Bernanke assured us yesterday that, this time, the Fed's money-printing won't eventually lead to inflation because the moment the economy begins to recover, the Fed will stop printing money and start burning it. Specifically, the Fed will start selling assets instead of buying them and thus shrink the money supply. Unfortunately, Ben is unlikely to keep this promise. Why?...

First, it will be hard to confidently assert that the economy in full recovery. Remember, in 2007, Ben (and most other people) thought the economy was in great shape as far as the eye could see. He and most other observers missed that disastrous turning point. So why do we think he'll correctly spot the next one? Especially because, if he blows it by jacking up rates too early, he'll kill the recovery.

Second, there will be intense political pressure to MAKE SURE that the economy is in rip-roaring health before hammering consumers and businesses by raising interest rates. Everyone loves low interest rates. And they'll only stop screaming about your taking them away when they're fat and happy (which will be long after inflation really gets going).

Third, the US government desperately needs low interest rates to fund its soon-to-be-monstrous debt load, so there will be another source of pressure on Ben to keep rates low. When we finish with all this stimulus, we're going to owe a boatload of money. We're really going to allow our Fed chief to send interest rates to the moon and jack up our refinancing costs?

Fourth, many of the assets that Bernanke has been buying to print money won't be easy to sell. This time around, the Fed isn't just buying easy-to-sell Treasuries. It's buying trash mortgage assets, et al. To reduce the money supply, it will need to sell them to someone. But who?

...we're now officially addicted to low interest rates and...Bernanke will be both unwilling and unable to raise them significantly when the time comes. And the failure to raise, them, of course, will lead to hyper-inflation.

The better answer? Stop denying reality and force the country to take its losses. Restructure existing debts, instead of encouraging people to borrow more. That, after all, is what got us into this mess in the first place. 

___________________________________

The IMF's experience of 122 banking crises around the world had taught it that economic recovery was impossible until banks were cleaned up, whether this was done quickly or slowly.

____________________________________

The United States is experiencing “the greatest financial crisis since the Great Depression,” Simon Johnson, former chief economist for the International Monetary Fund, said. He projected that economic recovery will be sluggish, perhaps imitating Japan's experience during the 1990s except on a global scale. And while he did not mention the word “stagflation,” Mr. Johnson did say the sluggish U.S. recovery could be accompanied by rising unemployment and inflation.

Michael Mussa, another former IMF economist speaking at the same Washington forum, predicted Tuesday that personal consumption during the current economic downturn will plunge by the largest amount of any postwar recession, while the unemployment rate will take its biggest leap in more than 60 years. By those standards, this would be the steepest recession in the postwar period, Mr. Mussa said....WT, 4/8/09

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Joseph E. Stiglitz

THE Obama administration’s $500 billion or more proposal to deal with America’s ailing banks...is a win-win-lose proposal: the banks win, investors win — and taxpayers lose...The main problem is not a lack of liquidity. If it were, then a far simpler program would work: just provide the funds without loan guarantees. The real issue is that the banks made bad loans in a bubble and were highly leveraged. They have lost their capital, and this capital has to be replaced...What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other. And such partnerships — with the private sector in control — have perverse incentives, worse even than the ones that got us into the mess.

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La crisis económica es mundial y la desconfianza de los ciudadanos se extiende por todo el planeta. En algunas áreas geográficas, como en los países árabes, la perspectiva es menos pesimista, pero ya nadie cree que no va con ellos lo que está sucediendo en la economía global. La consecuencia más inmediata es que la mayoría de los ciudadanos ha decidido reducir sus gastos, por si todavía faltan más debacles en actividades insospechadas. La desconfianza sobre la forma de manejar la crisis los gobiernos y la poca credibilidad del sistema financiero nos lleva a una falta de credibilidad tan global como la propia crisis.
Ésta es la principal conclusión del barómetro mundial sobre la crisis financiera realizada por la prestigiosa compañía Worldwide Independent Network of Market Research (WIN)...Maite Vazquez del Rio, ABC España.
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Soros: Insolvente, el sistema financiero en EU

México, 6 de abril.- El empresario e inversionista George Soros aseguró que la economía estadounidense está en la "desaceleración final" y no se recuperaría este año, mientras que el "sistema financiero como un todo es básicamente insolvente".  En entrevista con agencias internacionales, Soros aseguró que mientras la nacionalización de los bancos está "fuera de discusión" dijo que las pruebas de tensión realizadas por el Tesoro estadounidense en las entidades podrían ser precursores de una exitosa recapitalización.  Pero advirtió sobre el peligro de flexibilizar las reglas contables del sistema financiero y dijo que esto crea las condiciones para prolongar la vida de los bancos "zombies" estadounidenses...El Financiero _________________________________

In the past three decades, the typical income for a family right in the middle of the U.S. economic pack has climbed about 23%. From $56,375 in the early 1970s, the income in constant 2007 dollars rose to $69,406 by the mid-2000s.

But the variability of that family's income has also increased. In the early 1970s, annual income in any one year swung in a range of plus or minus $9,546. In other words, a bad year might turn that $56,375 into 17% less, or $46,829. By the mid-2000s, the range of that annual swing had climbed to plus or minus $17,692. A bad year in those later years could turn that larger income of $69,406 into $51,714. That's potentially 25% less in any one year.

The increase in variability hasn't been limited to just one part of the income pyramid. For families in the 10th percentile, those who make more than only 10% of all U.S. families, income variability started the period at plus or minus 30% and climbed to almost 50% by the mid-2000s. In any one year, the income of a family in this bracket could deviate by 50% up or down from its average.

For families in the 90th percentile, who earn more than 90% of U.S. families, income variability climbed from a swing of 16% up or down ($16,860 in the 1970s) to one of 28% up or down ($43,000 in the 2000s). In dollar terms, that's a potentially disastrous difference. 

"Stop for a moment and imagine what would happen to your life right now if your annual income plunged by $43,000. Even if it eventually rebounded -- and not all do -- could you keep up your car and mortgage payments, continue your kid's music lessons and keep children on the hockey team?"  Peter Gosselin in "High Wire. __________________________________

In "The Ascent of Money," Nial Ferguson offers a parallel trend, an endless cycle enmeshing the worlds of finance, warfare and international politics:
"In the 400 years since the first shares were bought and sold on the Amsterdam Beurs, there has been a long succession of financial bubbles. Time and again, asset prices have soared to unsustainable heights only to crash downward again. So familiar is this pattern ... it is possible to distill it into five stages."
"Displacement: Some change in economic circumstances creates new and profitable opportunities.
  • Euphoria, or overtrading: A feedback process sets in whereby expectation of rising profits leads to rapid growth in asset prices.
  • Mania, or bubble: The prospect of easy capital gains attracts first-time investors and swindlers eager to mulct them of their money.
  • Distress: The insiders discern that profits cannot possibly justify the now exorbitant price of the assets and begin to take profits by selling.
  • Revulsion, or discredit: As asset prices fall, the outsiders stampede for the exits, causing the bubble to burst."
In "The War of the World: Twentieth-Century Conflict and the Descent of the West," Ferguson identified three global factors that "made the location and timing of lethal organized violence more or less predictable in the last century."
  • "Ethnic disintegration: Violence was worst in areas of mounting ethnic tension.
  • "Economic volatility: The greater the magnitude of economic shocks, the more likely conflict was.
  • "Empires in decline: When structures of imperial rule crumbled, battles for political power were most bloody."

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Extract from

"THE UNITED STATES OF PONZI"

by Nouriel Roubini who predicted the current financial crisis two years ago.  Dr. Roubini is a professor at the Stern Business School at New York University, chairman of Roubini Global Economics, and a weekly columnist for Forbes.com.

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...Americans lived in a "Made-off" and Ponzi bubble economy for a decade or even longer. Madoff is the mirror of the American economy and of its over-leveraged agents: a house of cards of leverage over leverage by households, financial firms and corporations that has now collapsed in a heap.

When you put zero down on your home, and you thus have no equity in your home, your leverage is literally infinite and you are playing a Ponzi game.

And the bank that lent you, with zero down, a NINJA (no income, no jobs and assets) liar loan that was interest-only for a while, with negative amortization and an initial teaser rate, was also playing a Ponzi game.

And private equity firms that did over a $1 trillion of leveraged buyouts (LBOs) in the last few years with a debt-to-earnings ratio of 10 or above were also Ponzi firms playing a Ponzi game.

A government that will issue trillions of dollars of new debt to pay for this severe recession and socialize private losses may risk becoming a Ponzi government if--in the medium term--it does not return to fiscal discipline and debt sustainability.

A country that has--for over 25 years--spent more than income and thus run an endless string of current account deficit--and has thus become the largest net foreign debtor in the world (with net foreign liabilities that are likely to be over $3 trillion by the end of this year)--is also a Ponzi country that may eventually default on its foreign debt if it does not, over time, tighten its belt and start running smaller current account deficits and actual trade surpluses.

Whenever you persistently consume more than your income year after year (a household with negative savings, a government with budget deficit, a firm or financial institution with persistent losses, a country with a current account deficit) you are playing a Ponzi game. In the jargon of formal economics, you are not satisfying your long-run inter-temporal budget constraint as you borrow to finance the interest rate on your previous debt, and are thus following an unsustainable debt dynamics that eventually leads to outright insolvency.

According to Hyman Minsky and economic theory, Ponzi agents(households, firms, banks) are those who need to borrow more to repay both principal and interest on their previous debt; i.e., Minsky's "Ponzi borrowers" cannot service either interest or principal payments on their debts. They are called "Ponzi borrowers" as they need persistently increasing prices of the assets they invested in to keep on refinancing their debt obligations.

By this standard, U.S. households whose debt relative to income went from 65% 15 years ago, to 100% in 2000, to 135% today were playing a Ponzi game.

And an economy where the total debt to GDP ratio (of households, financial firms and corporations) is now 350% is a Made-Off Ponzi economy. And now that home values have fallen 20% (and they will fall another 20% before they bottom out) and equity prices have fallen over 50% (and may fall further), using homes as an ATM to finance Ponzi consumption is not feasible any more. The party is over for households, banks and non-bank highly leveraged corporations.

The bursting of the housing bubble, the equity bubble, the hedge funds bubble and the private equity bubble showed that most of the "wealth" that supported the massive leverage and overspending of agents in the economy was a fake bubble-driven wealth. Now that these bubble have burst, it is clear that the emperor had no clothes, and that we are the naked emperor. A rising bubble tide was hiding the fact that most Americans and their banks were swimming naked; and the bursting of the bubble is the low tide that shows who was naked.

Madoff may now spend the rest of his life in prison. U.S. households, financial and non-financial firms, and government may spend the next generation in debtor's prison having to tighten their belts to pay for the losses inflicted by a decade or more of reckless leverage, over-consumption and risk-taking.

Americans, let us look at ourselves in the mirror: Madoff is us and Mr. Ponzi is us!

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Recall that military history is written by victors. Economic history is written, to a degree, by central bankers. In both cases you have to take the official version with a large grain of salt. Doctored accounts often gain wide circulation in the sphere of economics, too. Unfortunately, false beliefs are very difficult to overturn by facts, and fallacies play a significant role in economic policy discourse...

                                            Steve H. Hanke

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Citigroup Inc Chairman Richard Parsons said... that the bank does not need any more capital injections from the government and expressed confidence that Citi would remain in private hands.

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SC Governor Mark Sanford:

"What you're doing is buying into the notion that if we just print some more money that we don't have and send it to different states, we'll create jobs…If that's the case, why isn't Zimbabwe a rich place?"

Zimbabwe has been in the throes of an economic meltdown ever since the southern African nation embarked on a chaotic land reform program. Its official inflation rate topped 11 million percent in 2008, with its treasury printing banknotes in the trillion-dollar range to keep up with the plummeting value of its currency.

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US economist Joseph Stiglitz...warned that stimulus plans launched by governments were "too small" and "too slow" and said the West should help developing nations through the crisis.

The 2001 Nobel economics laureate underlined that the 787-billion-dollar plan passed by the US Congress last week was insufficient compared to the millions of people who are expected to become unemployed..."The responses of governments are too small, too slow," he said...

Stiglitz...is heading a UN special commission on the global crisis...He outlined some of the recommendations the commission is likely to present...They include western aid to help developing nations out of the crisis, better market regulation, a reform of central bank practices and of international financial institutions, as well as the creation of a new structure such as a United Nations economic council.

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Another Great Depression?

What's the difference between a financial crisis and a Depression? At least initially, the symptoms appear similar. Banks won't lend to one another, even overnight. Strong and respected businesses cannot borrow short-term money in the commercial paper market even though their default rates are negligible.

The banking systems in many countries have ceased functioning and required major government intervention. It is like a patient experiencing multiple organ failure because the basic circulatory system has gone kaput. Despite urgent measures, the patient appears unresponsive.

Yes, it's that bad ... but is it the beginning of another Great Depression?

The American Great Depression of the 1930s is the most familiar--and most studied--economic collapse, but it is important to know that it is not the only one. Other countries suffered prolonged downturns in the 1930s, and many, including Japan, Mexico, Chile, Argentina, Brazil, New Zealand, Switzerland and Finland have experienced prolonged episodes of below-trend output in the period since the Great Depression...

...there's a common theme that emerges: It is that unwise policy choices made in the throes of a crisis exacerbate and prolong the real downturn associated with the crisis. In particular, government policies that affect productivity and hours of work are most often responsible for throttling economic growth.

That this was true in our Great Depression is now clear. While earlier historians focused attention on the failures of monetary policy, and on the distortions caused by the Hawley-Smoot tariffs, evidence now points more strongly to policies that tried to keep wages artificially high (under Hoover and then Roosevelt) and to cartelize industry (under Roosevelt).

OK, now here's the "but" part: Policies matter. Roosevelt was viewed as a great activist leader during the Depression. In fact, he was a great experimenter, willing to try one thing, then another, to turn the country around. The result was an economic downturn that lasted for many years longer than it might have.

For many decades following the Great Depression, conventional historians viewed the crash as a failure caused by laissez-faire policies, rampant speculation and the incompetence of people like Hoover and Andrew Mellon. They attributed the subsequent recovery to the inspired leadership of Roosevelt and to the role of the government in directing economic activity. We are beginning to hear these rumblings again, along with rhetoric that is hostile to trade, globalization and immigration, not to mention a mounting distrust of markets.

These are easy populist positions to adopt, but they are dangerous and false--even dangerously false--because policies matter. They matter deeply, and once adopted, it is extremely hard for the country to change course....Thomas Cooley

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WHAT AMERICANS SAY THEY NEED AT THIS TIME
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Soon there may be nobody left to lend to America...Chinese premier Wen Jiabao said he was a little bit worried that America might cheapen its currency and pay back the $1.2 trillion it owes in depreciated dollars. Now that the Fed has moved, he must be a lot worried. The Feds decision to pump trillions into the money markets comes on top of President Barack Obamas proposal to drive the federal deficit to 12% of GDP by borrowing trillions to fund a few stimulus projects, universal healthcare, a green energy system and a host of other programmes...(Click to read all)

¿Esta crisis implica que el capitalismo está acabado? ...esto es lo más cerca que el sistema ha estado de un fracaso desde la década de los 30. El sistema tiene problemas, e incluso sus mayores devotos, como el antiguo presidente de la Reserva Federal, Alan Greenspan, han expresado alarma sobre cómo se derrumbó el sistema. La dificultad es que otros sistemas, notablemente el socialismo y el comunismo no han demostrado beneficios superiores. China y Rusia han adoptado una estrategia de capitalismo modificado, llamado capitalismo autoritario o autocrático. Eso hizo poco para ayudar a Rusia durante el reciente desplome ya que el mercado bursátil del país cayó y el corretaje fue detenido por varios días. China parece haber soportado el temporal, pero su falta de transparencia hace que sea difícil juzgar qué tan bien está haciéndolo. (Clic para leer "TODO LO QUE NECESITA SABER SOBRE LA CRISIS" del Wall Street Journal)

"FASB deserves enormous credit for acknowledging that the mark-to-market
                           accounting rule exacerbated panic-selling in a downward
                           market.  This new
                           guidance is an important step to adding more stability to the market, and
                           fixing the structural problems that prolonged this financial crisis."...Newt Gingrich
 
New records being set:
 

* BUDGETS:

-- Japan had a current account deficit of 172.8 billion yen ($1.8 billion) in January, its first time in the red since January 1996 and much bigger than a forecast of 15.3 billion yen. The deficit came as the global financial crisis dried up demand for Japanese exports.

-- U.S. President Barack Obama on February 26 forecast a deficit of $1.75 trillion for 2009, which at 12.3 percent of GDP would be the biggest since World War Two. A $569 billion U.S. budget deficit for the first four months of fiscal 2009 was a record for the period.

-- China's 2009 budget deficit is expected to leap eight-fold to 950 billion yuan ($139 billion), its biggest on record.

-- Britain's budget deficit for the fiscal year so far hit a record high and statisticians warned bank bailouts could raise total debt by up to 1.5 trillion pounds ($2.15 trillion), or 100 percent of GDP. Public sector net borrowing stood at 67.201 billion pounds between April 2008 and January, the highest since records began in 1993.

* CORPORATE LOSSES:

-- American International Group Inc reported a $61.7 billion fourth-quarter loss on March 2, the largest quarterly loss in U.S. corporate history.

-- Royal Bank of Scotland posted the biggest loss in UK corporate history on Feb 26 with a 24.1 billion pound ($34.3 billion) loss for 2008.

* FUNDS:

-- Investors pulled a record $155 billion out of hedge funds in 2008 marking just the second time since 1990 that the industry suffered net annual outflows.

* INDUSTRIAL OUTPUT:

-- Japanese industrial production fell 10.0 percent in January the largest monthly drop ever.

-- Euro zone industrial production in November fell by a record 7.7 percent year on year, the steepest drop since records started in 1990.

-- German industrial output in December fell by a record 4.6 percent month on month and by 12.0 percent from a year earlier.

* INFLATION:

-- Sweden's yearly inflation rate posted its biggest monthly decline since records began in the 1950s, eclipsing a 1.0 percent decline in January 1998.

-- Prices fell a monthly 1.3 percent in December 2008 versus a forecast 0.5 percent decline and a 0.8 percent drop a month earlier. The official consumer price data series began in 1980 but before that there was another monthly cost-of-living indicator that started in 1954.

* INTEREST RATES:

-- The European Central Bank cut interest rates to an all-time low of 1.5 percent on March 5, the lowest level in the ECB's 10-year history.

-- The Bank of England cut interest rates by 50 basis points to a record low of 0.5 percent on March 5, their lowest level since the bank was created in 1694.

-- Sweden's central bank cut its key interest rate a record low of 1.0 percent on February 11, lowering the repo rate, now at its lowest level since its introduction in 1994 and marking the lowest official Swedish interest rate since records began in 1907.

* JOBS:

-- The U.S. unemployment rate rose to a 25-year high of 8.1 percent in February as employers, axed 651,000 jobs. February's jobless rate was the highest since December 1983. The increase was the biggest for any month since April 1980.

-- Canada cut a record 129,000 workers in January in its worst job losses since data began in 1976

-- Ireland's unemployment benefit claims in January hit the highest monthly level since records began in 1967. Its seasonally adjusted Live Register tally hit 326,100 in January up from 293,100 in December, the highest ever monthly rise.

* MERGERS & ACQUISITIONS:

-- More mergers and acquisition deals were withdrawn in 2008 than ever before, with overall activity down 35 percent as more than 1,100 deals were canceled.

* STOCKS:

-- Gloom over the global economy hurt the Tokyo stock market, with the Nikkei average hitting a 26-year closing low on March 9, of 7,086.03.

-- Tokyo's Nikkei stock average fell around 42 percent in 2008, the biggest loss in its 58-year history.

-- World stocks, measured by the MSCI index, on February 24 hit their lowest level since April 2003

-- Japan's broad TOPIX index touched a 25-year intraday low on March 9.

-- China's stock market fell 65 percent in 2008 in the worst fall in its 18-year history and the worst performance by major stock market for the year.

* TRADE:

-- Britain's goods trade gap with the rest of the world widened to 8.330 billion pounds ($12.46 billion) in November from 7.631 billion in October, the biggest since records began in 1697. Economists had forecast a deficit of 7.5 billion pounds.

-- Canada posted a trade deficit of C$460 million in December, its first since March 1976 when it was C$79 million.

)________________________________________________

 El número de casas vacías en EE.UU. llegó a los 19 millones en el cuarto trimestre de 2008, un alza de 6% frente al mismo período del año anterior. Las tasas de ocupación hotelera han caído de 65,5% hace un año a 55,2% a principios de marzo, según la firma de estudios de mercado Smith Travel Research. Las plantas manufactureras operaron en febrero a un promedio de 67,4% de su capacidad, el nivel más bajo desde que la Fed empezó a seguir estos datos en 1948.

El Departamento del Trabajo informó que el número de nuevas solicitudes de seguro de desempleo cayó la semana pasada a 646.000. El promedio de cuatro semanas, sin embargo, subió a 654.750, el nivel más alto en 26 años. El total de estadounidenses que recibe seguro de desempleo saltó a casi 5,5 millones, un nuevo récord.

En general, el número de desempleados en EE.UU., ajustado por temporada, ascendió a 12,5 millones en los últimos 12 meses, elevando la tasa de desempleo a 8,1%. Otras 8,6 millones de personas están trabajando a tiempo parcial, pero preferirían tener un puesto a tiempo completo. Cuando se contabilizan estos trabajadores, la tasa de "subempleo" —un índice más amplio de la capacidad ociosa en el mercado laboral— llega a 14,8%.

____________________________________________________________________________________

Commercial banks should be separated from investment banks in order to avoid another crisis like the U.S. is experiencing, according to former Federal Reserve Chairman Paul Volcker. “Maybe we ought to have a kind of two-tier financial system,” Volcker, who heads President Barack Obama’s Economic Recovery Advisory Board, said today at a conference at New York University’s Stern School of Business. Commercial banks would provide customers with depository services and access to credit and would be highly regulated, while securities firms would have the freedom to take on more risk and practice trading, “relatively free of regulation,” Volcker said. Volcker’s remarks indicated his preference for reinstating some of the divisions between commercial and investment banks that were removed by Congress’s repeal in 1999 of the Great Depression-era Glass-Steagall Act. Volcker’s proposals, included in a January report he wrote with the Group of 30, would allow commercial banks to continue to do underwriting and provide merger advice, activities traditionally associated with investment banking, he said...Bloomberg

________________________

31.8 million Americans received food stamps at the latest count, an increase of 700,000 people in one month with the United States in recession

 

Shares of Citigroup once the world's most valuable bank, tumbled below $1...taking its year-to-date drop to 85 percent.

______________________

General Motors Corp.'s auditors have raised "substantial doubt" about the troubled automaker's ability to continue operations, and the company said it may have to seek bankruptcy protection if it can't execute a huge restructuring plan...

 
The automaker revealed the concerns Thursday in an annual report filed with the U.S. Securities and Exchange Commission.
"The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," auditors for the accounting firm Deloitte & Touche LLP wrote in the report...
 
"The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," auditors for the accounting firm Deloitte & Touche LLP wrote in the report.
 
GM warned last month that its auditors may raise the doubts, and industry analysts said auditors' statements may trigger clauses in some of GM's loans, placing them in default. But the company said in its filing that it has received waivers of the clauses for its $4.5 billion secured revolving credit facility, a $1.5 billion term loan and a $125 million secured credit facility...AOL News
 
Los auditores de General Motors Corporation plantearon "dudas sustanciales" de que la empresa automotriz pueda continuar sus operaciones...

La empresa reveló esas preocupaciones, planteadas por la firma de contabilidad Deloitte & Touche LLP, en su informe anual...
GM dijo en su informe que los auditores citan las cuantiosas pérdidas, el declive de las acciones y la incapacidad para pagar deudas como prueba de que la empresa probablemente no podrá seguir funcionando...
 

 Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections  indicate that the fund balance will approach zero or even become negative.”

 

Mortgage Bankers Association: one in every eight U.S. households with mortgages ended 2008 behind on their mortgage payments or in foreclosure as job losses intensified a housing crisis created by lax lending practices.

48 percent of the nation's homeowners who have a subprime, adjustable-rate mortgage are behind on their payments

_________________________

The Bank of England has embarked on something it has never done before in all of its 315-year history. It is creating new money, quite literally, out of thin air.

The central bank announced on Thursday, after it cut interest rates to a record low of 0.5%, from 1.0%, that the British government had given it permission to expand its balance sheet by 75.0 billion pounds ($105.4 billion) and to use that money to buy government bonds and toxic assets that banks have been unable to sell. In buying these assets from its banks, Britain hopes to encourage more lending to consumers and businesses. The government has set an upper limit to the program at 150.0 billion pounds ($210.9 billion).

The central bank is not creating a new division or hiring new staff to carry out the stategy, known as quantitative easing, though it has set up a subsidiary, or bookkeeping entry, from which it will be able to transfer the newly created money to the accounts of banks from which it buys assets. 

Nor is the central bank "printing money" per se--the actual note circulation value in the United Kingdom, which hovers around the 40 billion pound ($56.7 billion) mark, will stay the same. Instead it will increase the reserve balances that commercial banks maintain with the central bank. The principle is similar, though, in that the Bank of England is creating electronic money in its accounting system...Forbes

________________________________--

 
“…the continuing collapse in financial markets around the globe reflected an absence of faith that the trillions of dollars that governments have deployed to try to contain the damage will do the trick -- and a realization that, from Europe to Japan to the Americas, the flow of goods and services is drying up…In the United States, stocks are down 22 percent this year and 55 percent from their peak in 2007…”                  
                                                    Washington Post, 3/3/09

U.S. economic conditions worsened in January and February and businesses do not expect improvement until late this year or early 2010, a Federal Reserve survey published on Wednesday said.

"National economic conditions deteriorated further," the Fed said in its Beige Book summary gathered from districts around the country. "The deterioration was broad based," the Fed added.

The report was taken from information gathered by the San Francisco Fed on or before February 23.

Battered housing markets remained "in the doldrums" in most areas, with only scattered, very tentative signs of stabilization reported, the Fed said.

Demand for commercial, industrial and retail space also fell, with evidence of more rapid deterioration than previously, the report added.

The Fed's report signaled economic conditions have worsened even after the central bank lowered interest rates to near zero and pumped hundreds of billions of dollars into the slumping economy, which has been battered by events triggered by the collapse of U.S. housing markets.

Claudio Loser, a former western hemisphere chief at the International Monetary Fund, calculates that 40 per cent of Latin America’s financial wealth was wiped out in the first 11 months of 2008 through falls in stock and other asset markets and currency depreciation. That $2,200bn (£1,440bn, €1,610bn) loss alone could cut domestic spending by 5 per cent next year, he estimates.

 ________________________________

 

General Motors said on Tuesday that its European arm could run out of money by as early as next month, putting up to 300,000 jobs on the continent at risk.

Fritz Henderson, the struggling Detroit carmaker’s chief operating officer, said that GM would face a liquidity crunch “early in the second quarter” if emergency funds from European countries did not materialise.  FT, 3/3/09

______________________________________

Richard Abbey, Head of Kroll's London Financial Investigations Practice, added: "The recession is contributing to the increase in fraud. Previously honest employees may be compelled to exploit corporate weaknesses as a result of their own financial situation or low morale; or a well-intentioned worker or 'corporate saviour' could juggle numbers to try and mask the company's true financial position from other stakeholders.

"Companies are more likely to pay closer attention to their balance sheets during tougher times, which means that the chances of fraud being uncovered are far greater. While controls help reduce risk, the majority of frauds are still uncovered by accident or as a result of whistle-blowing. This has to change."

           Insurance Journal International, 3/04/09

__________________________________

Simply put, mark-to-market accounting rules, enforced by the SEC and the government's designated accounting oversight group, require a company to value -- or "mark" -- assets on its books based on the price they would bring if they were sold today. In theory, mark-to-market provides good information for potential investors and prevents businesses from assigning any value they choose -- likely a higher one -- to things they own. But mark-to-market can cripple businesses when no market for an asset exists, like now. Big banks are struggling to survive -- shares of Citigroup, once the world's largest bank, closed at $1.02 today -- because their balance sheets are poisoned with assets for which no market exists. Chiefly, the mortgage-backed securities based on lousy mortgages. No one wants to buy them right now, so that means no market exists. Some day, there will be a market for those securities. But until there is, banks have to account for them at fire-sale prices, and that's what's making the banks sick...Frank Ahrens, WaPo, 3/5/09
__________________________________

More than 8.3 million U.S. mortgage holders owed more on their loans in the fourth quarter than their property was worth as the recession cut home values by $2.4 trillion last year…An additional 2.2 million borrowers will be underwater if home prices decline another 5 percent, First American, a Santa Ana, California-based seller of mortgage and economic data, said in a report today. Households with negative equity or near it account for a quarter of all mortgage holders….Bloomberg, 3/4/09

____________________________________

The nation is caught in a dangerous cycle in which an endless stream of grim news -- waves of layoff announcements, signs that banks are teetering financially and negative economic data -- has contributed to anxiety among American consumers and businesses. That, in turn, has caused further economic weakness. The White House appears to be moving to arrest that cycle…WaPo, 3/4/09

POLL: LUXURIES VS NECESSITIES
luxuriesvsnecesities.gif

Professor Peter Morici of the University of Maryland, formerly the chief economist for the U.S. trade representative and one of the best forecasters in the business, has an interesting definition of the difference between recession and depression.

Recessions, he maintains, are self-correcting, "like stock market corrections that eventually rebound without government intervention. Federal Reserve interest rate cuts and stimulus tax rebates and spending have shortened the lives and eased the impact of post-World War II recessions, but those policies did not end them. The economy self-corrected."

By contrast, he argues, "A depression is not self-correcting. Roosevelt administration stimulus packages -- huge deficit spending -- eased the pain but failed to end the Great Depression. Similarly, President-elect Obama's massive stimulus package, alone, won't fix the U.S. economy."

Morici identifies three structural problems of the current crisis that are not self-correcting and will require robust government intervention. The first is bad management practices at the large money center banks. The second is the huge foreign trade deficit, and the third is part of the second: the dependence on imported energy.

"The economy will not recover without fundamental changes in banking and trade policy," Morici believes. "A large stimulus package, though necessary, will only give the economy a temporary lift, but then unemployment will rise again and continue at unacceptable levels indefinitely without successively larger stimulus packages and huge federal budget deficits. The economy is in a depression, not a recession."

President-elect Barack Obama will find a great deal of support in reforming the banks and ensuring that they reward the federal government's loans and guarantees by renegotiating mortgages and making loans to creditworthy businesses.

It will be tougher to fix the trade deficit, particularly when putting more money into consumers' pockets through tax cuts is likely to result in more imports of cheap Chinese consumer goods. Morici, a longtime critic of China's manipulation of its currency to keep its exports competitive, wants tough measures against China.

"Fixing trade with China will require a tax on dollar-yuan transactions if China continues to refuse to stop subsidizing dollar purchases of yuan to prop up its exports and shift Chinese unemployment to the U.S. manufacturing sector," Morici claims.

Many economists fear this could start the kind of protectionist trade war that made the 1930s Depression so much worse by strangling world trade. And Morici's argument on the energy deficit is also likely to be controversial, although it makes eminent sense.

____________________________________

 

"The ideology of the last decade was self-regulation, which means no regulation. If we don't want a backlash against trade, we have to have prudential regulation of the financial system."

Nouriel Roubini, New York University Economist

 at World Economic Conference 2009, Davos.


Japan is suffering its worst downturn in 35 years. The British economy is facing its sharpest decline in almost 30 years. Germany is slumping at its worst pace in nearly 20 years. Meanwhile, the job market in the United States, at the picentre of the global downturn, is the worst in decades. And emerging economies are contracting at a pace few had predicted just months ago. Even China, whose economy still is growing at a 6.8 percent annual pace, is grappling with vast numbers of the unemployed, raising fears of unrest.

                                               WaPo, Feb 18, 2008

 

 "Our world is far different than the world my grandfather lived in when the first Stanford company was founded ... As a company founded in the midst of the Great Depression -- an environment of despair and negativity -- we have a long-proven understanding of how even the most severe downcycles can bring opportunities that yield significant benefits in the long run."…Allen Stanford

___________________

The Stanford Financial Group, through its political action committee and employees, has contributed $2.4 million to political candidates, parties and committees in the U.S. since 1989, with nearly two-thirds going to Democrats, according to the Center for Responsive Politics, a group that tracks campaign spending….in the Senate...the biggest recipients

         have  been: 

Sen. Bill Nelson, D-Fla. ($45,900); 

   Sen. John McCain, R-Ariz. ($28,150); 

      Sen. Chris Dodd, D-Conn. ($27,500); and

         Sen. John Cornyn, R-Texas ($19,700). 

Rep. Pete Sessions, R-Texas also received $41,375.

Stanford and his wife Susan also donated $931,100 of their own money, with 78 percent going to Democrats, including $4,600 to President Barack Obama's presidential campaign last May 31…

Yahoo News

____________

"Germany will not refuse to (financially) support the IMF if necessary," German Chancellor Angela Merkel 

_____________

 

Remittances sent home by Ecuadorians living abroad fell 22 percent in the fourth quarter of last year relative to the same period of 2007, the Central Bank said. The total value of money transfers to Ecuador between October and December 2008 came in at $643.9 million, $181.7 million less than the amount registered in the fourth quarter of the previous year… The decline was due in large part to the global financial crisis and especially the economic slowdown in the United States, where an estimated 1.5 million Ecuadorians - half of that nation's total emigrant population - reside….
 

UK “Public debt is in danger of rising to £1,200bn – or 80 per cent of national income – in the next three years, double the level the government thought possible a year ago, as recession tightens its grip on the country. A sharp drop in tax revenues over the past three months, coupled with mounting likely losses in the banking sector, will force the government to confront much higher public borrowing when it presents the Budget in April.”  FT

 Gold prices rose above $1,000 an ounce Friday, for the first time in nearly a year, as stocks fell to multi-year lows and investors flocked to the metal to preserve capital.  CNN 2/20/08

From the first book published on the Madoff scandal. Madoff: Corruption, Deceit, and the Making of the World’s Most Notorious Ponzi Scheme by Peter Sander (available on line see below):

  • Fifty billion is about $163 for each of the 305 million people estimated to be living in the U.S. in December 2008.
  • Fifty billion is more net worth than Warren Buffett accumulated in sixty years of investing.
  • Fifty billion is more than all but six U.S. states spend each year.
  • Fifty billion is more than the annual budgets of the U.S. Departments of Labor, Interior, Transportation, Treasury, and NASA—combined.

_________________________

U.S. Federal Reserve chairman Ben Bernanke said on Friday that small banks were understandably angry about Wall Street bailouts, and called for a better way of allowing huge financial firms to fail.

Mr. Bernanke said he saw no "realistic alternative" to preventing the disorderly collapse of large companies, and reiterated that the economy cannot fully recover unless some reasonable degree of financial stability is restored.

"Many of you likely are frustrated, and rightfully so, by the impact that the financial crisis and economic downturn has had on your banks, as well as on the reputation of bankers more generally," Mr. Bernanke said in a speech to a community bankers convention.

"You may well have built your reputations and institutions through responsible lending and community-focused operations, but nonetheless, you now find yourselves facing higher deposit insurance assessments and increasing public skepticism about the behavior of bankers -- outcomes you perceive were largely caused by the actions of larger financial institutions."

The first book on Madoff is available on line from DailyLit

 

Everyone is talking about trying to save the banks, but the one thing they're missing is that in order to save the banks or the Big Three or any other company, we must first rescue something else from the brink of collapse: our values. 

Despite what Ben Bernanke or Timothy Geithner tell you, we do not have a liquidity problem in this country. There is no shortage of cash. But there is a major shortage of the currency more important than the almighty dollar and that's honor, honesty and integrity. 

Glenn Beck

___________________________________________
 
La crisis financiera mundial que supera a lo sucedido en 1930, generada por la ola especulativa del sector inmobiliario en contubernio con el sector bancario, ha creado un resquebrajamiento del mercado en general, los grandes monopolios y especuladores tanto del sector inmobiliario como de la bolsa de valores crearon papeles basura sobrevalorados para financiar créditos hipotecarios con garantías subvaloradas. En resumen estos son los causantes del inicio de una serie de acontecimientos económicos graves que están afectando al mundo entero...La Gaceta, Ecuador
_________________________________________
 

“Suppose you spent $1 million every single day starting from the day Jesus was born — and kept spending through today. A million dollars a day for more than 2,000 years. You would still have spent less money than Congress just did.” …TV ad

 

---------------------------------------------------
 

"En este punto, con la actividad económica global débil y los precios de los bienes básicos en niveles bajos, prevemos pocos riesgos de una inflación inaceptablemente alta en el corto plazo", sostuvo Bernanke. "De hecho, esperamos que la inflación sea bastante baja por algún tiempo".

Presidente de la Reserva Federal, Ben Bernanke

__________________________________________________

 

"No recuerdo ningún momento, quizá incluso en la Gran Depresión, en que las cosas se hayan desplomado tan rápido, de manera tan uniforme alrededor del mundo",

                                                Paul Volcker

__________________________________________________

 

Possibility of Default

The U.S. is borrowing so much that it may have trouble paying the money back, said Jaemin Cheong, a bond trader in Seoul at Industrial Bank of Korea, the nation’s largest lender to small- and mid-sized companies.

“Yields are headed higher,” Cheong said in an interview. “More issuance will be needed to support the economy. The possibility of default is more and more as time passes.”

The government is depending on overseas investors to help fund its $787 billion economic plan. China is the largest overseas holder of Treasuries, with $696.2 billion, followed by Japan, with $578.3 billion….Bloomberg

 

 

Las esperanzas de una pronta recuperación de la economía china comienzan a desvanecerse, desinflando el optimismo que ha ayudado a que la bolsa del país sea la de mejor desempeño del mundo en lo que va del año.

En las últimas semanas, algunas empresas e inversionistas habían considerado un alza en los préstamos bancarios y un aumento en los precios del acero —un indicador clave para la economía altamente industrializada de China— como signos de que el gigantesco paquete de estímulo del gobierno ya estaba surtiendo efecto.

Los precios del acero, sin embargo, han vuelto a caer y un análisis más detallado de los datos bancarios sugiere que muchos de los préstamos no impulsarán el crecimiento económico de inmediato. Mientras tanto, el comercio se siguió contrayendo a medida que se evapora la demanda de exportaciones chinas por parte de EE.UU. y Europa. A su vez, las empresas y los consumidores chinos compran menos productos extranjeros.

El resultado final es que un auténtico repunte de la economía china podría demorar meses o incluso más. Esas son malas noticias para una economía global en la que China es la única potencia que sigue creciendo. …WSJ 2/27/08

 

General Motors underlined its dire financial condition on Thursday as it reported an unexpectedly heavy cash drain in the final three months of 2008 and warned that Deloitte, its auditor, might cast doubt on its standing as a going concern.

The Detroit carmaker, dependent on government aid for survival, reported a fourth-quarter loss of $9.6bn, bringing the 2008 loss to $30.9bn. GM has racked up losses totalling $86.6bn during the past four years.

President Barack Obama's budget director said on Thursday that without a shift in policies the U.S. deficit would reach $9 trillion over the next decade.

White House budget chief Peter Orszag said the Obama administration's budget outline reflects costs for the war in Iraq and other items that were previously not included in the budget.

"All told we are showing $2.7 trillion in costs in this budget that were excluded from previous budgets and I think that is a mark of the honesty and responsibility contained in this document," he said….Reuters 2/27/08

______________________________________

The S&P is off 53% from its October 2007 peak and has now seen its worst six-month drop in percentage terms -- 42.7% -- since 1932, when it dropped 45.44% in the six months ending in June…. Wsj 2/27/08

 

>>…the American International Group is going to report the largest quarterly loss in history. Rumors suggest it will be around $60 billion, which will affirm, yet again, A.I.G.’s sorry status as the most crippled of all the nation’s wounded financial institutions…( a researcher) predicts that A.I.G. is going to cost taxpayers at least $100 billion more before it finally stabilizes, by which time the company will almost surely have been broken into pieces, with the government owning large chunks of it. A quarter of a trillion dollars, if it comes to that, is an astounding amount of money to hand over to one company to prevent it from going bust. Yet the government feels it has no choice: because of A.I.G.’s dubious business practices during the housing bubble it pretty much has the world’s financial system by the throat…If we let A.I.G. fail, said Seamus P. McMahon, a banking expert at Booz & Company, other institutions, including pension funds and American and European banks “will face their own capital and liquidity crisis, and we could have a domino effect.” A bailout of A.I.G. is really a bailout of its trading partners — which essentially constitutes the entire Western banking system…(another expert said) “It was extreme hubris, fueled by greed.” Other firms used many of the same shady techniques as A.I.G., but none did them on such a broad scale and with such utter recklessness. And yet — and this is the part that should make your blood boil — the company is being kept alive precisely because it behaved so badly. When you start asking around about how A.I.G. made money during the housing bubble, you hear the same two phrases again and again: “regulatory arbitrage” and “ratings arbitrage.” The word “arbitrage” usually means taking advantage of a price differential between two securities — a bond and stock of the same company, for instance — that are related in some way. When the word is used to describe A.I.G.’s actions, however, it means something entirely different. It means taking advantage of a loophole in the rules. A less polite but perhaps more accurate term would be “scam.”…

Here’s what is most infuriating: Here we are now, fully aware of how these scams worked. Yet for all practical purposes, the government has to keep them going. Indeed, that may be the single most important reason it can’t let A.I.G. fail. If the company defaulted, hundreds of billions of dollars’ worth of credit-default swaps would “blow up,” and all those European banks whose toxic assets are supposedly insured by A.I.G. would suddenly be sitting on immense losses. Their already shaky capital structures would be destroyed. A.I.G. helped create the illusion of regulatory capital with its swaps, and now the government has to actually back up those contracts with taxpayer money to keep the banks from collapsing.<< NYT, 2/28/08

______________________________

 

(In his testimony on the above Fed Chair) Bernanke went on to call AIG "a hedge fund that was attached to a large and stable insurance company" that had "no regulatory oversight," exploited a "gap in the system" and made "huge and irresponsible" business decisions…Bernanke noted that the massive amounts of federal borrowing required for the stimulus will push the national debt from 40 percent of GDP to about 60 percent, the highest percentage since the early 1950s, when the U.S. began paying off its war debt…WaPo, 3/3/09

__________________________

 

"I know, personally, because I have discussed it with them, a number of law enforcement agencies in the United States, plus a number of prosecutors who have been looking at Mr Stanford for the past 15 years…If he does (talk), he's got a real problem because he knows an awful lot. And I would suspect there are a number of people, very heavyweight people, throughout the offshore world and in other jurisdictions who really don't want to be associated with Mr Stanford and are not going to be pleased if he talks.”

                        Jeffrey Robinson, expert on international fraud

 

UBS was sued on Tuesday in a Swiss federal court by wealthy American clients seeking to prevent the disclosure of their identities as part of a tax-evasion investigation by the United States Justice Department. The lawsuit accuses UBS and Switzerland’s financial regulator, the Swiss Financial Market Supervisory Authority, or Finma, of violating Swiss bank secrecy laws and of conducting what Swiss law considers illegal activities with foreign authorities. It also named Peter Kurer, the chairman of UBS, and Eugen Haltiner, the chairman of Finma, as defendants. The suit, filed by a lawyer in Zurich, Andreas Rued, on behalf of nearly a dozen American clients, underscores the growing clash between Swiss banking secrecy laws and those of the United States. Tax evasion is not considered a crime in Switzerland. Disclosing client names under Swiss law is a criminal offense and can expose bank executives and officers to fines, prison terms and other penalties. UBS is the world’s largest private bank and Switzerland is the world’s largest offshore tax haven, with trillions of dollars in assets….NYT

 

President Barack Obama forecast the biggest U.S. deficit since World War Two in a budget on Thursday that urges a costly overhaul of the healthcare system and would spend billions to arrest the economy's freefall.

An eye-popping $1.75 trillion deficit for the 2009 fiscal year is projected in Obama's first budget. That is equal to 12.3 percent of U.S. gross domestic product -- the largest share since 1945 when the country ran a shortfall of 21.5 percent of GDP.

Reuters 2/26/08

 

El Banco Mundial, el Banco Europeo de

 

 Inversiones (BEI) y el Banco Europeo de

 

Reconstrucción y Desarrollo (BERD)

 

acordaron hoy destinar 24.500 millones de

 

euros para ayudar a estabilizar a los bancos

 

 de los países del centro y el Este de

 

Europa, que se han visto afectados con

 

especial virulencia por la crisis financiera, y

 

 facilitar la reactivación del crédito a las

 

empresas, en particular a las pymes.

 

El apoyo financiero incluirá inyecciones de

 

capital y financiación de la deuda, líneas de

 

 crédito y garantías frente al riesgo

 

político….EUROPA PRESS, 2/28/08

 

 

Concept of One Europe Is Strained by Financial Crisis

PARIS — The leaders of the European Union gathered Sunday in Brussels in an emergency summit meeting that seemed to highlight the very worries it was designed to calm: that the world economic crisis has unleashed forces that threaten to split Europe into rival camps. An urgent call from Hungary for a large bailout for newer, Eastern members was bluntly rejected by Europe’s strongest economy, Germany, and received little support from other countries…

With uncertain leadership and few powerful collective institutions, the European Union is struggling with the strains this economic crisis has inevitably produced among 27 different countries with uneven levels of development. The traditional concept of “solidarity” is being undermined by protectionist pressures in some members states and the rigors of maintaining a common currency, the Euro, for a region that has differing economic needs…NYT, 3/1/09

 

 

The following video shows various instances where the Bush Administration tried to warn the country about the pending crisis involving Fannie and Freddy Mae that unheeded then later sparked the crisis of 2008

Whenever you find you are on the side of the majority, it is time to pause and reflect

                     --- Mark Twain

We have never observed a great civilization with a population as old as the United States will have in the twenty-first century; we have never observed a great civilization that is as secular as we are apparently going to become; and we have had only half a century of experience with advanced welfare states...Charles Murray

Kella
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