Via Cryptogon

Via: Telegraph:

Khalid Shahenshah, who was the former Pakistan prime minister’s security chief at the time of her assassination, was killed in a drive-by shooting as he left his house in the southern port city of Karachi on Tuesday, police said.

Mr Shahenshah, 45, was riding in Mrs Bhutto’s bullet-proof car when she was killed in a suicide attack in the northern city of Rawalpindi on December 27.

He was expected to be called to give evidence at a United Nations probe into her death.

“He was a key witness in the case and was also interviewed by the Scotland Yard experts who came to Pakistan to investigate her killing,” said Waqar Mehdi, the junior information minister of Sindh province.

“There is a possibility that his killing could be linked to his status as a witness, although investigations are still underway.”

A team of Scotland Yard detectives concluded in February that Mrs Bhutto was killed by a suicide bomb and not by gunfire, backing the previous Pakistani government’s claim the attack was masterminded by Baitullah Mehsud, Pakistan’s top Taliban commander.

But the UN earlier this month agreed to set up an independent panel to investigate her slaying, following a request by Pakistan’s new government.

via FreeTheMarketMan

A few who predicted this mess tell us what they see coming next.

By Carol Vinzant
Published Jul 20, 2008

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(Photo: China Photos/Getty Images)

“We are now the largest debtor nation in the history of the world. We owe $13 trillion, and we get $1 trillion further into debt every fifteen months. That’s the world giving up on America.”
—Jim Rogers, investor, who has predicted a stock-market fall and commodities boom

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(Photo: Anna Summa/Getty Images)

“The house next to mine in Florida sold for $105,000 in 1998, $765,000 seven years later. My guess is that it may more properly be worth around $275,000. Getting from $765,000 to $275,000, if it happens, is going to involve a lot of pain.”
—Andrew Tobias, investment guru, who has warned of a real-estate bubble since 2002

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(Photo: Rick Maiman/AFP/Getty Images)

“The American consumer is toast. We’re talking a multiyear adjustment, at least two or three years, maybe more. Does that mean America is over? Does that mean we have a whole new world order? The jury’s out on that.”
—Stephen Roach, former chief economist at Morgan Stanley, who in 2004 warned of impending economic “Armageddon”

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(Photo: Eric Thayer/Getty Images)

“I think we are maybe 10 percent into this crisis. The economic distortions have been building for longer than we’ve seen in the history of the world. Never have we had such confidence falsely placed in a reserve currency.”
—Ron Paul, former presidential candidate, who advocates a return to the gold standard

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Those News really made my head turn 360degrees.Do those ripoff artists now convert to North Korean Style tactics ?

via Cryptogon 

We already knew that Wachovia was/is in deep trouble.

And there is no way that this is a coincidence. Ten counterfeit $100 bills in one transaction, from a struggling bank, in the middle of a banking crisis!? No way.

I know. I know. People will say, “If this was a conspiracy to keep a large, struggling bank alive for perception management purposes, they’d use supernotes and those would be mixed in and nobody would know the difference. It’s just a coincidence that this couple got ten counterfeit $100 bills (out of 36) in one transaction.”

Maybe there aren’t enough supernotes available for the scale of the present crisis… Just a guess.

If you’re trying to talk yourself into believing that there’s nothing to see here, do you remember Waiting for Clarity on the Brink of Oblivion? If not, you may want to review that one now, as we learn that, in the midst of a banking crisis, the forth largest U.S. bank, which also happens to be distressed, is distributing counterfeit money…

(Man, I knew it was going to get weird, but I never anticipated this one.)

I don’t know how much more clarity a person would need, but I’m afraid that it’s about to become crystal clear to just about everyone.

UPDATE 1: Florida Wachovia Distributed Counterfeit $20 Bills in June

POSTED: 7:51 am EDT June 26, 2008
UPDATED: 8:49 am EDT June 26, 2008

ORANGE COUNTY, Fla. — An Orange County woman said she received counterfeit cash from a teller inside a bank.

The woman said she cashed a check at the Wachovia bank in Pine Hills. She took the cash straight to a bank where she had a savings account, but that’s where another teller recognized something wrong.

“She was feeling it as she counted it,” said the woman. “She pulled those two bills out of the bunch that was there and she asked another coworker to come over and he said ‘yeah, those are counterfeit.’”

The Secret Service was called in to investigate and found a pair of fake $20 bills. They’re trying to determine how the money ended up at the bank.

—End Update—

Via: Local6:

A couple has contacted the Secret Service claiming a Central Florida bank gave them 10 counterfeit bills during a transaction.

Ulises Garcia said he was withdrawing cash from a Wachovia Bank and depositing it into a Bank of America so he could pay his bills online.

However, the Bank of America teller noticed something funny about 10 of the 36 $100 bills Garcia said he received from Wachovia Bank — they were counterfeit, Local 6’s Tony Pipitone reported.

However, the bank has not given Garcia or his fiancé, Joann Rodriguez, any money.

“We have big plans,” Rodriguez said. “We were planning to get married in about two or three months.”

“And this money’s pretty important?” Pipitone asked.

“Very important,” Rodrguez said. “It’s a big part of our wedding.”

“It is really frustrating for us,” Garcia said. “The bank is not doing anything about it. (It’s) just not giving us any solutions at all.”

A Wachovia representative said it will not refund any money because it can’t verify the $1,000 in counterfeit notes were the same bills Garcia was handed by their teller.

But weeks later, Wachovia did refund $40 to another customer with a similar story, Local 6 has learned.

Garcia said Wachovia is ripping him off and has alerted the sheriff’s office, the Secret Service and the media.

“Ten (bills) in one transaction to come from one bank, that is definitely unusual,” U.S. Secret Service representative Jim Glendinning said.

“But is it possible?” Pipitone asked.

“Remotely, yes it is,” Glendinning said.

Glendinning said he was not surprised the Bank of America caught the counterfeits but wondered how a Wachovia could pass the bills unless a bank employee was in on it, Pipitone reported.

The United States Secret Service Web site shows people how to detect counterfeit money.

Research Credit: EB @ Cryptogon

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Pentagon User Searches for Infomation About Wachovia Distributing Counterfeit Money

The Pentagon—Headquarters Department of the Army (HQDA)—user (host: host-141-116-70-190.ptr.hqda.pentagon.mil, ip: 141.116.70.190) conducted the following Google search: wachovia passing out counterfeit bills.

The Pentagon user visited the following Cryptogon pages:

WACHOVIA BANK IN FLORIDA DISTRIBUTING COUNTERFEIT $100 BILLS

Mysterious $100 ‘Supernote’ Counterfeit Bills Appear Across World

SAIC User Searches for Infomation About Wachovia Distributing Counterfeit Money

The SAIC user (host: proxy1.east.saic.com, ip: 198.151.13.8) conducted the following Google search: customers claim that wachovia is handing out counterfeit bills.

The SAIC user visited the following Cryptogon pages:

/ (Home)

Karadzic Arrested in Serbia

UK: Plan Would Allow Banks to Seek Emergency Funding in Secret

Record Decline in U.S. Home Prices in May From a Year Ago

Thumbs up to the Cryptogon creator for an great News Coverage !!

via International Herald Tribune

Is America too big to fail?

In the narrative that has governed American commercial life for the last quarter-century, saving companies from their own mistakes was not supposed to be part of the government’s job description. Economic policymakers in the United States took swaggering pride in the cutthroat but lucrative form of capitalism that was supposedly indigenous to their frontier nation.

Through this uniquely American lens, saving businesses from collapse was the sort of thing that happened on other shores, where sentimental commitments to social welfare trumped sharp-edged competition. Weak-kneed European and Asian leaders were too frightened to endure the animal instincts of a real market, the story went. So they intervened time and again, using government largess to lift inefficient firms to safety, sparing jobs and limiting pain but keeping their economies from reaching full potential.

There have been recent interventions in America, of course - the taxpayer-backed bailout of Chrysler in 1979, and the savings and loan rescue of 1989. But the first happened under Jimmy Carter, a year before Americans embraced Ronald Reagan and his passion for unfettered markets. And the second was under George H.W. Bush, who did not share that passion.

So it made for a strange spectacle last weekend as the current Bush administration, which does cast itself in the Reagan mold, hastily prepared a bailout package to offer the government-sponsored mortgage companies, Fannie Mae and Freddie Mac. The reasoning behind this rescue effort - like the reasoning behind the government-induced takeover of Bear Stearns by JPMorgan Chase just a month before - sounded no different from that offered in defense of many a bailout in Japan and Europe:

The mortgage giants were too big to be allowed to fail.

…

The central banks of China and Japan are on the hook for hundreds of billions of dollars worth of Fannie’s and Freddie’s bonds - debts they took on assuming that the two companies enjoyed the backing of the American government, argues Brad Setser, an economist at the Council on Foreign Relations.

Commercial banks from South Korea to Sweden hold investments linked to American mortgages. Their losses would mount if American homeowners suddenly couldn’t borrow. The global financial system could find itself short of capital and paralyzed by fear, hobbling economic growth in many lands.

Nobody with a meaningful office in Washington was in the mood for any of that, so the rescue nets were readied. The U.S. Treasury secretary, Henry Paulson Jr., announced that the government was willing to use taxpayer funds to buy shares in Fannie and Freddie. The chairman of the Federal Reserve, Ben Bernanke, said the central bank would lend them money.

The details were up in the air as the week ended, but some sort of bailout offer was on the table - one that could ultimately cost hundreds of billions of dollars. Whatever the dent to national bravado, or to the free-enterprise ideology, the phrase “too big to fail” suddenly carried an American accent.

Read Full Article

Economic Horror Movie in Britain and Eurozone

Via Mish’s Global Economic Trend Analysis

Things are rapidly deteriorating In the US, UK, and the Eurozone. Let’s take a look a couple top stories starting with Hundreds of thousands face job loss in UK, says top economist.Britain’s economy is tipping headlong into a recession that could last more than a year and cost hundreds of thousands of jobs, warns Professor David Blanchflower, a member of the Bank of England’s interest rate committee, in an interview with the Guardian today.

Blanchflower says the Bank must cut interest rates rapidly to prevent the downturn being too painful, and thinks the UK could be in for a worse time than even the United States, where interest rates have already been slashed and taxes cut to stimulate the economy.

The economist said the recent rises in unemployment are “the tip of the iceberg”. The number of people out of work and claiming benefit is 840,000 but the broader measure of unemployment is 1.6 million, 5.2% of the workforce. Blanchflower said it could climb to more than 7% - a figure that would mean several hundred thousand people losing their jobs.

His warning comes days after the chancellor acknowledged that the slowdown could be “profound” and hinted he would change the Treasury’s fiscal rules as the slowing economy looks set to bust them.

Today a leading thinktank, the Ernst & Young Item Club, says the economic outlook for Britain is like a “horror movie” as a result of the credit crunch and tumbling house prices.

Deflationary Hurricanes In US And UK

I agree Blanchflower having previously stated Deflationary Hurricanes to Hit U.S. and U.K. In fact, I believe the US is in deflation now.

However, Blanchflower is mistaken if he thinks lower rates are going to be some kind of magic bullet. One look at the US should be proof enough.

Ugly Picture In Eurozone

Ambrose Evans-Pritchard is writing European recession looms as Spain crumbles.
The eurozone is tipping into a deeper downturn than America itself despite the tremors in the US mortgage industry, and may already be in full recession for the first time since the launch of the single currency.

Industrial production for the EMU bloc fell 1.9pc in May, according to fresh Eurostat data. It is the sharpest one-month decline for the region since the exchange rate crisis in 1992. Officials in Berlin have warned that Germany’s economy could contract by as much as 1.5pc in the second quarter as export orders crumble.

Industrial output in both Italy and Greece has slumped 6.6pc over the past year. Portugal is off 6.2pc. “It is a very ugly picture: we’re on maximum alert,” said Emma Marcegaglia, head of Italy’s business federation Confindustria.

Rome is now lobbying for a “New Deal” to revive Italy’s economy through massive infrastructure projects.

Jacques Cailloux, Europe economist at the Royal Bank of Scotland, said a “reverse decoupling” is now under way as Europe goes down harder than the US - just as it did after the dotcom bust. “There is loss of momentum across the board. We can’t exclude a recession,” he said.

Spain is now spiralling into the worst crisis since the Franco dictatorship. “The economy is in dire straits,” said Dominic Bryant, Spain expert at BNP Paribas.
The global economy has clearly peaked. Clearly the US, UK, and EU are not prepared for it. Is any country?

Mike “Mish” Shedlock

Via Los Angeles Times

As thousands of customers waited hours in the heat Monday to withdraw deposits from failed IndyMac Bank, investors dumped the stocks of many mortgage lenders, precipitating the steepest one-day decline in banking shares since 1989.

Southern California fixtures Downey Financial Corp. and FirstFed Financial Corp., specialists in the nontraditional mortgages that fueled the housing boom, were among the hardest hit, with their stock prices down 24% and 19% respectively. Shares of Washington Mutual Inc., the biggest savings and loan, fell nearly 35%.

Via Bloomberg

At an investor presentation in May, Citigroup Inc. Chief Executive Officer Vikram Pandit said shrinking the bank’s $2.2 trillion balance sheet, the biggest in the U.S., was a cornerstone of his turnaround plan.

Nowhere mentioned in the accompanying 66-page handout were the additional $1.1 trillion of assets that New York-based Citigroup keeps off its books: trusts to sell mortgage-backed securities, financing vehicles to issue short-term debt and collateralized debt obligations, or CDOs, to repackage bonds.

Now, as Citigroup prepares to announce second-quarter results July 18, those off-balance-sheet assets, used by U.S. banks to expand lending without tying up capital, are casting a shadow over earnings. Since last September, at least $100 billion of assets have flooded back onto Citigroup’s balance sheet, accompanied by more than $7 billion of losses.

Haha i loved this post by Barry Ritholz..and copied it for you..

Via BigPicture

“DON’T PANIC” - Words inscribed in large, friendly letters on front cover of The Hitchhiker’s Guide to the Galaxy, the ultimate compendium of practical knowledge on practically any conceivable subject, and the most popular book in the known universe. This is partly because it is slightly cheaper than the Encyclopedia Galactica, but is mostly because it has the words Don’t Panic inscribed in large friendly letters on it’s cover.”

Look who is telling us not to panic again: The WSJ Op Ed page!

“So there is no reason for stock market panic, nor for handwringing in the credit markets about an imminent default. Indeed, with the Senate finally — after months of dithering — passing legislation on Friday for a strong new Fannie and Freddie regulator, there is hope that the government will finally be able to rein in the excesses of these enterprises.”
-There Is No Reason to Panic

Of course, the last time this self same page told us not to panic, it was Bear Stearn’s David Malpass exhorting us not to Panic About the Credit Market:“Equity markets have recently lost over $2 trillion in the U.S. and even more globally — many times the likely amount of mortgage and corporate debt losses in the foreseeable future. This is in part a correction from the sharp global equity run-up through mid-July. Current prices still signal growth ahead.”

How’d THAT work out?

How come every time a WSJ editorial tells us not to panic, we learn in subsequent hindsight, that Panicking is pretty much exactly what we should be doing?

By Panic, I mean pulling out all the stops to make sure any virally malignant, planet destroying financial cancer does not metastasize any further, mangling the good and the bad alike (or destroying a planet to make way for an interstellar bypass)? 

Is there any reason to expect this chuckle-headed plea is going to turn out any different than the last chuckle-headed plea did?

Via Cryptogon / Sydney Morning Herald:

IN A modern financial system nothing is more frightening than a run on the bank. The US has now suffered a series of them, and they are escalating in size and scope, posing a serious threat to an already reeling economy.

Rumours swamped financial markets on Friday that the US Government would be forced to step in to aid the mortgage finance giants Fannie Mae and Freddie Mac, which together own or guarantee $US5 trillion ($5.16 trillion) in US home loans.

In Wall Street’s version of a run on the bank, investors drove Fannie Mae and Freddie Mac shares to 17-year lows, signalling a gnawing lack of faith in the companies’ ability to survive rising mortgage defaults without the Government’s help.

Later on Friday regulators took over IndyMac Bank of Pasadena, saying the $US32 billion lender had collapsed under the weight of bad home loans and withdrawals by spooked depositors. It was the second-largest bank to fail in US history.

Friday’s events were felt around the world, knocking the battered US dollar lower and driving up interest rates.

“This is a flare-up in the financial forest fire that is far beyond anything we’ve seen before,” said Christopher Low, chief economist at the investment firm FTN Financial in New York.

It is triggering worries that would have been unthinkable even a year ago, including that the US Treasury’s debt might lose its AAA credit grade because of heavy blows to the nation’s fiscal health from the housing mess.

…

In 2002 weary investors were hit by a wave of corporate accounting scandals. They simply felt they could not trust what many companies were telling them about their sales or earnings. Share prices dived further.

This time the crisis of confidence is in the US banking system. Fearing more severe losses than they have already suffered, investors in recent weeks have fled stocks of some of the US’s biggest financial institutions at a pace that has stunned Wall Street. Last week they turned with a vengeance on Fannie Mae and Freddie Mac.

Despite the companies’ assurances that they had adequate capital cushions against surging defaults on the mortgages they own or guarantee, the market does not believe them.

For the Government that poses a quandary. Because of their size and importance to the mortgage market, it is inconceivable that Fannie Mae and Freddie Mac would be allowed to fail. But an outright takeover of the companies by the Government, as some experts have suggested, could frighten foreign investors - who are big lenders to the Treasury - by in effect adding the companies’ $US5 trillion debt load to the Treasury’s already substantial debt.

Nationalising the companies “would put the full faith and credit of the Treasury at risk”, said Allen Sinai at Decision Economics in New York.

“It would make foreign investors think hard about buying US Treasury debt.”

The way you stop a bank run is to restore confidence. For the US, the challenge is not just to restore confidence among Americans, but to make sure it does not evaporate among foreign creditors.