Prelude To A Crash

The Fed’s easy money policies have pushed margin debt on the New York Stock Exchange (NYSE) to record levels laying the groundwork for a severe correction or another violent market crash. In December, margin debt rose by $21 billion to an all-time high of $445 billion. Buying equities on margin, that is, with loads of borrowed cash, is a sign of excessive risk taking the likes of which invariably takes place whenever the Central Bank creates subsidies for speculation by keeping interest rates pegged below the rate of... Read article

Is This The Big One?

The New Wave of Financial Instability… Global stocks were hammered on Friday for a second straight day on news of a slowdown in China and turbulence in emerging markets. The Dow Jones Industrials suffered its worse drubbing in more than two years, tumbling 318 points on Friday to end a 490 point two-day rout. Emerging markets currencies were whipsawed by capital flight as foreign investors fled to the safety of U.S. Treasuries. Turkey’s lira and the Argentine peso were particularly hard hit setting record lows... Read article

Obama’s Corporate Plantations

Deregulation, Privatization, and Cheap Labor… The man who promised to restore hope and bring change to America, has announced a plan to open five corporate plantations in the United States. On Thursday, President Barack Obama, whose policies have resulted in the greatest number of public sector job losses in US History (Public sector jobs have declined by 718,000 jobs since Obama took office.) announced the opening of five “Promise Zones” located in San Antonio, Philadelphia, Los Angeles, southeastern Kentucky,... Read article

Don’t Plan On Retiring – Work Until You’re Dead?

Millions of older Americans say they will never be able to retire. They simply don’t have the savings. According to CNN, “Roughly three-quarters of Americans are living paycheck-to-paycheck, with little to no emergency savings…50% have less than a three-month cushion and 27% had no savings at all….” (“76% of Americans are living paycheck-to-paycheck“, CNN Money) “No savings at all”? That’s right. So retirement is out of the question. A sizable chunk of the adult population is going to punch a clock... Read article

The Incredible, Shrinking Presidency of Barack Obama

According to a new Washington Post-ABC poll, Barack Obama now ranks among the least popular presidents in the last century. In fact, his approval rating is lower than Bush’s was in his fifth year in office. Obama’s overall approval rating stands at a dismal 43 percent, with a full 55 percent of the public “disapproving of the way he is handling the economy”. The same percentage  of people “disapprove of the way he is handling his job as president”.  Thus, on the two main issues, leadership and the economy,... Read article

Did Someone Say “Crash”?

Guess who’s investing in America’s future? Nobody, that’s who. Just check out this excerpt from an article by Rex Nutting at Marketwatch and you’ll see what I mean. The article is titled “No one is investing in tomorrow’s economy”: “The U.S. economy simply isn’t investing enough to ensure that there will be enough good paying jobs for our children and our children’s children. Net investment — the amount of capital added to our stock — remains at the lowest levels since the Great Depression. … Net... Read article

Escape From The Dollar: An Interview With Paul Craig Roberts

Paul Craig Roberts thinks the Fed has backed itself into corner. A rise in interest rates would strengthen the dollar, give the dollar new life as world reserve currency, and halt the movement into gold, but a rise in rates would collapse the bond and stock markets and reduce the value of derivatives on the banks’ balance sheets. I asked Dr. Roberts if the Fed would sacrifice the dollar in order to save the banks and what the effect would be on Washington’s power viv-a-vis the rest of the world. His answers to these... Read article

Does The Dollar Have A Future?

A Flimsy Piece of Worn Out Script… “If the dollar does indeed lose its role as leading international currency,  the cost to the United States would probably extend beyond the simple loss of seigniorage, narrowly defined.  We would lose the privilege of playing banker to the world, accepting short-term deposits at low interest rates in return for long-term investments at high average rates of return.  When combined with other political developments, it might even spell the end of economic and political hegemony.” –... Read article

What Recovery?

“4,594,000 Mortgages Going Unpaid in the United States.” Buying a house is a lot like buying a car. If you don’t look under the hood, you could wind up with a lemon. Only with housing, it’s not as simple as checking the dipstick or looking for oil under the rear axle. No, smart home buyers check the data to see what’s really going on. That’s the best way to cut through the hype and separate the fact from the fiction. Lately, interest rates have been inching higher while prices have been rising.... Read article

Repo, Baby, Repo: How Unregulated Banking Triggered The Crash of ’08

“Repo has a flaw: It is vulnerable to panic, that is, ‘depositors’ may ‘withdraw’ their money at any time, forcing the system into massive deleveraging. We saw this over and over again with demand deposits in all of U.S. history prior to deposit insurance. This problem has not been addressed by the Dodd-Frank legislation. So, it could happen again.” – Gary B. Gorton, Professor of Management and Finance, Yale School of Management (lifted from Repowatch) Subprime mortgages did not cause the financial crisis,... Read article

A Repo Implosion – The Nightmare Scenario

President Barack Obama is determined to prevail in his battle with GOP congressional leaders on the debt ceiling issue, but not for the reasons stated in the media.  Obama is less concerned with the prospect of higher interest rates and frustrated bondholders than he is with the big Wall Street banks who would be thrust back into crisis if there is no resolution before October 17.  Absent a debt ceiling deal, the repurchase market–known as repo–would undergo another deep-freeze as it did in 2008 when Lehman Brothers... Read article

Give The World A Break! America The Pest

The United States is the world’s biggest pest. It doesn’t matter where you live or what you do, the US will find some excuse to poke its nose in your business and make your life miserable. That’s why the US has so many enemies, because its the world’s biggest budinski. The people in Washington just can’t stand the idea that someone, somewhere might be having a normal, happy life without getting bombed to death in drone attack or shunted off to some black site where the CIA can rip out their fingernails or beat... Read article

American Workers: Hanging On By The Skin of Their Teeth

After five years of Obama’s economic recovery, the American people are as gloomy as ever.  According to a Bloomberg National Poll that was released this week, fewer people “are optimistic about the job market” or “the housing market” or “anticipate improvement in the economy’s strength over the next year.” Also, only 38 percent think that President Obama is doing enough “to make people feel more economically secure.”  Worst of all,  Bloomberg pollsters found that 68 percent of interviewees thought... Read article

Crushing The Middle Class

The Federal Reserve presently lends money at a lower rate than anytime in history. In fact, the rate at which the Fed lends money is more than a full percentage point below the current rate of inflation. That means the Fed is subsidizing borrowing. Naturally, zero rates create price distortions which are greatly amplified by the Fed’s asset purchase program called Quantitative Easing. During its three rounds of QE, the Fed has ballooned its balance sheet by more than $2.8 trillion inflating the prices of financial assets... Read article

Bernanke’s Head Fake Sends Stocks Soaring

Fed chairman Ben Bernanke shocked the world on Wednesday when he announced there would be no change in the Fed’s $85 billion-per-month asset purchase program dubbed QE. The announcement sparked a buying frenzy on Wall Street where all three major indices shot to record highs. The Dow Jones Industrial Average (DJIA) climbed 146 points to 15,676 while the S & P 500 logged another 38 points to 1,725 on the day. Bonds and gold also rallied big on the news with the yield on the benchmark 10-year US Treasury dipping sharply... Read article

Is The Housing Recovery Over?

Mortgage rates are rising and the housing market is getting weaker.  In May of 2013, the 30-year fixed rate mortgage was 3.59%. Today it is 4.71%, more than a full percentage point higher. That means that the payment on a $200,000 loan is 15 percent more than it would have been just two months ago. The higher rates mean that would-be homebuyers are getting less bang for their buck and might not be able to afford their dream home.  It means that housing sales will fall and prices will drop. Higher rates are poison for... Read article

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