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)

Thx to the BigPicture

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 Cryptogon

Wachovia Has Record $8.9 Billion Loss
July 22nd, 2008

WARNING: This is not a recommendation to buy, sell or hold any financial instrument.

If Wachovia goes down, it would wipe out FDIC liquidity about 16 times over. That calculation is based on the following numbers: Wachovia’s assets, $808 billion, divided by $49 billion, which is roughly what the FDIC may or may not have on hand.

Do you still keep money in a U.S. bank account? Yeah, me too. I have about $89 in mine. * hint *

Via Bloomberg:

Wachovia Corp., the U.S. bank that hired Treasury Undersecretary Robert Steel as chief executive officer two weeks ago, reported a record quarterly loss of $8.9 billion, slashed the dividend and announced 6,350 job cuts. The stock fell as much as 12 percent in early New York trading.

The second-quarter loss of $4.20 a share compared with net income of $2.3 billion, or $1.23, a year earlier, the Charlotte, North Carolina-based company said today in a statement. The loss included a $6.1 billion charge tied to declining asset values.

The writedown, job cuts and second dividend reduction in three months reflect Steel’s response to the worst housing market since the Great Depression, which cost former CEO Kennedy Thompson his job after eight years. Wachovia has dropped more than 75 percent in New York Stock Exchange composite trading since it spent $24 billion two years ago to buy Golden West Financial Corp. just as home prices were peaking.

Via The Wall Street Journal

Through history, outrageous financial behavior has been met with outrage. But today Wall Street’s damaging recklessness has been met with near-silence, from a too-tolerant populace, argues James Grant

“Raise less corn and more hell,” Mary Elizabeth Lease harangued Kansas farmers during America’s Populist era, but no such voice cries out today. America’s 21st-century financial victims make no protest against the Federal Reserve’s policy of showering dollars on the people who would seem to need them least.

Long ago and far away, a brilliant man of letters floated an idea. To stop a financial panic cold, he proposed, a central bank should lend freely, though at a high rate of interest. Nonsense, countered a certain hard-headed commercial banker. Such a policy would only instigate more crises by egging on lenders and borrowers to take more risks. The commercial banker wrote clumsily, the man of letters fluently. It was no contest.

The doctrine of activist central banking owes much to its progenitor, the Victorian genius Walter Bagehot. But Bagehot might not recognize his own idea in practice today. Late in the spring of 2007, American banks paid an average of 4.35% on three-month certificates of deposit. Then came the mortgage mess, and the Fed’s crash program of interest-rate therapy. Today, a three-month CD yields just 2.65%, or little more than half the measured rate of inflation. It wasn’t the nation’s small savers who brought down Bear Stearns, or tried to fob off subprime mortgages as “triple-A.” Yet it’s the savers who took a pay cut — and the savers who, today, in the heat of a presidential election year, are holding their tongues.

Possibly, there aren’t enough thrifty voters in the 50 states to constitute a respectable quorum. But what about the rest of us, the uncounted improvident? Have we, too, not suffered at the hands of what used to be called The Interests? Have the stewards of other people’s money not made a hash of high finance? Did they not enrich themselves in boom times, only to pass the cup to us, the taxpayers, in the bust? Where is the people’s wrath?

Read Full Article

via Telegraph.co.uk

It feels like the summer of 1931. The world’s two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution.

The International Monetary Fund has abdicated into schizophrenia. It has upgraded its 2008 world forecast from 3.7pc to 4.1pc growth, whilst warning of a “chance of a global recession”. Plainly, the IMF cannot or will not offer any useful insights.

Its “mean-reversion” model misses the entire point of this crisis, which is that central banks have pushed debt to fatal levels by holding interest too low for a generation, and now the chickens have come home to roost. True “mean-reversion” would imply debt deflation on such a scale that would, if abrupt, threaten democracy.

The risk is that these same central banks will commit a fresh error, this time overreacting to the oil spike. The European Central Bank has raised rates, warning of a 1970s wage-price spiral. Fixated on the rear-view mirror, it is not looking through the windscreen.

The eurozone is falling into recession before the US itself. Its level of credit stress is worse, if measured by Euribor or the iTraxx bond indexes. Core inflation has fallen over the last year from 1.9pc to 1.8pc.

The US may soon tip into a second leg of this crisis as the fiscal package runs out and Americans lose jobs in earnest. US bank credit has contracted for three months. Real US wages fell at almost 10pc (annualised) over May and June. This is a ferocious squeeze for an economy already in the grip of the property and debt crunch.

No doubt the rescue of Fannie Mae and Freddie Mac - $5.3 trillion pillars of America’s mortgage market - stinks of moral hazard. The Treasury is to buy shares: the Fed has opened its window yet wider. Risks have been socialised. Any rewards will go to capitalists.

Read full article

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

It seems I managed to get back to breakeven with the demonstration account (okay there are some negative open positions ,but this problem should be solved within the next week and End with about 8%+ IFmy plan works out).

It was an hard struggle..especially to loose around 25% in the first weeks ..but i kept it up and will add more gains in the future. I hope this shows anyone interested in trading that u should never judge your performance in days or weeks..u need months of trading ur strategy to see if it works or not..DON’T GIVE UP EARLY BECAUSE U HAD SOME BAD WEEKS as 75% of new traders do! This profession needs years of sweat & blood !

Here my favorite trading quote for such loosing streaks ->

“My centre is collapsing, my right is in retreat. Situation excellent: I attack!”

Marechal Foch, Battle of the Marne

And I KNOW i did not update anything yet on the empty blog pages ;)

Time will come for this!

Have a great weekend!

Analyzing my “watchlist” ( 4 posts ago) I was right on all of them besides aud/cad (which did not go anywhere)..even if i could only squeeze 60pips from the EUR/USD movement..but the longterm trend for gold and eur/usd are up so I am happy with what i got!

The Short squeeze in equitites especially Dow Jones and DAX over the last 4days was VERY tradeable ..gosh..i should start trading those sometime in the future..!