GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN
SOVEREIGN DEBT & CREDIT CRISIS
Plea for fixed rules to halt banks’ excess
& LOCAL GOVERNMENT
US cities face big public pension deficits
CENTRAL & EASTERN EUROPE
Study highlights CDS shortcomings FT
The Rise And Fall Of The Shadow Banking System
Pandit Recruits Citigroup Army as Costs Erode U.S. Bank Margins
COMMERCIAL REAL ESTATE
9-RESIDENTIAL REAL ESTATE - PHASE II
States to Probe Mortgage Mess WSJ
|A group of as many as 40 state attorneys general is expected
to announce an investigation into the mortgage-servicing industry,
an effort some of them hope will pressure financial institutions
to rewrite large numbers of troubled loans.
general immediate aim is to determine the scale of the document
problems and correct them. But several of them have said that the
investigation could force the lenders and servicers to agree to
mass loan modifications or principal forgiveness schemes. Other
possibilities include financial penalties or changes in mortgage
Lenders and servicers have largely resisted reducing principal
on mortgages, instead focusing on interest-rate reductions or term
extensions. Banks say they are worried about lawsuits from
investors, some of whom could lose money in a principal write
Former New Jersey attorney general Peter Harvey, now a trial
lawyer in New York, said that a settlement with state attorneys
general would likely "to give the banks some cover" to make
changes that might otherwise result in lawsuits by investors in
The primary weapon the states could wield would be their
respective laws against unfair and deceptive acts and practices,
said Prentiss Cox, a professor of law at the University of
Minnesota and former Assistant Attorney General in Minnesota.
1-Bank of America widened its foreclosure freeze to all 50 states.
2-J.P. Morgan Chase & Co.'s Chase Home Mortgage unit suspended
3- GMAC announced that it was suspending foreclosures in the 23 U.S. states where
judges are required to sign off on them
Foreclosure Fraud For Dummies - 4 Part Series Rortybomb.wordpress.com
Home Prices Are Love Affair Heading for Rocks- Matthew Lynn
10- EXPIRATION FINANCIAL CRISIS PROGRAM
11- PENSION & ENTITLEMENTS CRISIS
13- GOVERNMENT BACKSTOP INSURANCE
14- CORPORATE BANKRUPTCIES
China raises big banks' required reserves - sources Reuters
Fast yuan revaluation no panacea - top banker China Daily
Shanghai index hit a 4-month high with record turnover Shanghai Daily
Chinese yuan reaches new high China Daily
China Plans Two-Year Inflation Fight, Will Lower Housing Prices, Zhou Says
Consumers in China, Brazil Discover Debt WSJ
19- PUBLIC POLICY MISCUES
A Letter to Senator Scott Brown - The Fed's Political Interference
Must Be Stopped Sheehan
Lawmaker Vows to Ban Insider Trading on the Hill
The 2010 Spending Record WSJ
In two years, a 21.4% increase.
OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE
19-US PUBLIC POLICY MISCUES
26-GLOBAL OUTPUT GAP
31-FOOD PRICE PRESSURES
Corn price surges on fears of food crisis FT
Rise follows downgrade of expected US harvest
Farm Economy Bounces Back WSJ
|Agriculture is coming out of the recession far faster than
most other sectors, as export demand boosts prices for many crops,
even once-tattered cotton.
Cargill Profit Climbs 68% WSJ
|Cargill's fiscal first-quarter profit rose 68% as the
agribusiness company benefited from volatile commodity markets.
CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES
Fed Suggests Action Is Needed WSJ
|Barring surprising improvements in the economy, most
U.S. Federal Reserve officials believed new steps would be
needed to jump-start growth when they last met Sept. 21. "Meeting participants discussed several possible approaches to providing
additional accommodation but focused primarily on further purchases of
longer-term Treasury securities and on possible steps to affect inflation
expectations," the minutes showed.
The minutes also revealed that the
Fed's staff cut the projections for economic growth in
2011 and expected the underlying inflation rate -- already
below the central bank's informal objective -- to slow
further next year.
Because of the economy's weakness, inflation is
currently running below the Fed's informal target of
between 1.7% and 2.0%. The central bank's most
closely-watched indicator put underlying inflation, which
strips out volatile food and energy prices, at only 1.4%
Fed officials discussed several ways they could affect
short-term inflation expectations, including providing
more detailed information about the rates of inflation
considered consistent with its dual mandate of stable
prices and full employment.
"Targeting a path for the price level rather than the
rate of inflation" was one of the strategies that was
considered by officials, the minutes showed.
Yellen Recognizes Risks of Low Rates WSJ
Federal Reserve Vice Chairman Janet Yellen, one of the
U.S. central bank’s key defenders of low interest rates to
support a weak economy, warned on Monday there may be
dangers to an overly easy monetary policy.
In her first remarks since becoming the Fed’s No. 2
official last week, Yellen said low interest rates can
lead to excessive risk-taking in the economy, adding she
couldn’t rule out using monetary policy to limit such
“It is conceivable that accommodative monetary policy
could provide tinder for a buildup of leverage and
excessive risk-taking in the financial system,” Yellen
said in prepared remarks to the annual meeting of the
National Association for Business Economics, or NABE, in
Yellen has been one of the Fed’s key supporters of low
interest rates to fight a stubbornly high unemployment
rate. But she’s bristled at the widespread perception on
Wall Street that she is one of the Fed’s most dovish
members, supporting overly easy monetary policy amid few
worries about the risk of unintended consequences, such as
a new asset bubble or inflation. Yellen has countered that
her outlook flows from her expectations of the economic
outlook, and that if price pressures are ebbing and the
jobless rate remains high, it is entirely appropriate to
support an aggressive stance for monetary policy.
In her brief remarks about the economy, Yellen
underlined how the U.S. recovery has been “agonizingly
slow” and how the economy was still reeling from an “epic
The Final End of Bretton Woods 2?
|The time may finally be at hand when the imbalances
created by Bretton Woods 2 now tear the system asunder.
The collapse is coming via an unexpected channel; rather
than originating from abroad, the shock that sets it in
motion comes from the inside, a blast of stimulus from the
US Federal Reserve. And at the moment, the collapse
looks likely to turn disorderly quickly. If the
Federal Reserve is committed to quantitative easing, there
is no way for the rest of the world to stop to flow of
dollars that is already emanating from the US. Yet
much of the world does not want to accept the inevitable,
and there appears to be no agreement on what comes next.
Call me pessimistic, but right now I don't see how this
situation gets anything but more ugly
Rather than a
reliance on US financial institutions to intermediate the
channel between foreign savers and US households, a
modified Bretton Woods 2 - Bretton Woods 2.1 - relied on
the US government to step into the void created by the
financial mess and become the intermediary, either by
propping up mortgage markets via the takeover of Freddie
and Fannie, or the fiscal stimulus, or a dozen of other
programs initiated during the financial crisis.
understand the challenge ahead, we need to begin with two
points of general agreement.
1- The first is
that the US has a significant and persistent current
account deficit, which implies that domestic absorption of
goods and services, by all sectors, exceeds potential
output. In other words, we rely on a steady inflow
of goods and services to satisfy our excess demand, a
situation we typically find acceptable during a high
growth phase when domestic investment exceeds domestic
2- The second point of agreement is that
high unemployment implies that actual output is far below
potential output. We clearly have unused capacity.
An excessively high dollar is the explanation for the
simultaneous existence of 1) a sizable current account
deficit and 2) excessive unemployment. Indeed, there
appears to be a externally determined downward limit
to real value of the Dollar, and we are close to pushing
Money Is Power Spiegel
An Inside View
of the IMF's Massive Global Influence
|The New World Order: The United Nations will probably become less important; the organization is far
too slow-moving and sluggish. And, if one understands DSK correctly on this
point, the importance of the United States -- that egomaniacal country which is
incapable of action -- will also decline. Of course, Strauss-Kahn would never
speak in such terms, but he does point out that it was the United States that
reacted to the 2008 crisis, not with a long-term view, but bank by bank. "They
tried to solve Bear Stearns first, and then Fannie and Freddie, and really
believed that each hurdle was the last one," he says.
What will become important, however, is the G-20, that coalition of the
strongest economies, the center of power in a new world. The G-20 gave the IMF
$850 billion (€620 billion) and the mission to solve the crisis. What followed,
says, Strauss-Kahn, was "the biggest global coordination ever." Does this mean that the IMF became the first post-crisis world government?
In Strauss-Kahn's view, the IMF should become an
administrative unit of sorts for the G-20, an agency that
"tries to find solutions for global and national problems,"
and comes up with plans and create values. "In the end we
aim at much more than just the right financial and economic
policies. The ultimate goal, of course, is world peace
through economic stability."
DSK came to Washington in 2007, after having been
nominated by French President Nicolas Sarkozy. The two men
had been rivals, but now France was strengthened and
Strauss-Kahn disposed of -- a diabolical plan on Sarkozy's
part, as it seemed.
In 2007, the IMF had only $2 billion in lending
commitments on its books -- an amount best described by the
word "peanuts." Today that number has jumped to $195
billion. At the 2008 annual meeting of the World Economic
Forum in Davos, Strauss-Kahn called for a global stimulus
plan. It was a shocking idea, given the IMF's history of
reacting after a crisis and never taking preventive action.
Now the IMF had about $900 billion at its disposal -- up
from $250 billion before the crisis -- enabling it to
intervene quickly anywhere in the world.
Blow to plans for dealing with bank crisis
Policymakers criticise post-Lehman US proposals
Doubts on US bank resolution plan FT
Asia’s problem of plenty: liquidity MW
Emerging markets rush turning into secular move Reuters
Marc Faber Says World Heading for `Major Inflection Point' BL
Global markets are heading for an “important turning point” as
interest rates begin to rise within about three months and the
U.S. dollar gains, according to investor Marc Faber .
FLASH CRASH - HFT - DARK POOLS
The Real Flash-Crash Culprits Barron’s
Faber- I'm Ultra-Bearish On Everything, And We're At A Turning Point Where
It's Time To Dump Bonds BI
420 banks demand 1-world currency Independent
The Institute of International Finance, a group that represents
420 of the world's largest banks and finance houses, has issued
yet another call for a one-world global currency,
Jerome Corsi's Red
"A core group of the world's leading economies need to come
together and hammer out an understanding," Charles Dallara, the
Institute of International Finance's managing director, told the
Financial Times. An IIF policy letter authored by Dallara and
dated Oct. 4 made clear that global currency coordination was
needed, in the group's view, to prevent a looming currency war.
"The narrowly focused unilateral and bilateral policy actions
seen in recent months – including many proposed and actual
measures on trade, currency intervention and monetary policy –
have contributed to worsening underlying macroeconomic
imbalances," Dallara wrote. "They have also led to growing
protectionist pressures as countries scramble for export markets
as a source of growth."
Dallara encouraged a return to the G-20 commitment to utilize
International Monetary Fund special drawing rights to create an
international one-world currency alternative to the U.S. dollar as
a new standard of foreign-exchange reserves.
Likewise, a July United Nations report called for the
replacement of the dollar as the standard for holding
foreign-exchange reserves in international trade with a new
one-world currency issued by the International Monetary Fund.
United Nations World Economic and Social Survey 2010 UN (176
baulks at sharing the West's post-party hangover
|"From a Chinese perspective, then, a
renminbi revaluation is, in truth, a dollar devaluation and,
hence, an American act of default to its foreign creditors..."
|Stephen King, the managing director of economics at HSBC
"the rich Western world has over-consumed in recent years. It has too many debts.
But rather than dealing with those debts – living a
life of austerity, accepting a period of relative stagnation –
the West wants to shift the burden of adjustment on to its creditors, even when
those creditors are relatively poor nations with low per capita incomes. And that rankles not just with the Chinese but also with many other countries in
Asia and in other parts of the emerging world. During the Asian crisis in
1997-98, Western nations, under the auspices of the IMF, insisted that Asian
nations, having borrowed too much, should now tighten their belts. But the US
doesn't seem to think it should abide by the same rules. Far better to use the
exchange rate to pass the burden on to someone else than to swallow the bitter
pill of austerity. No wonder the Chinese are not willing to play ball."
"The Chinese reject the conventional thinking.
They could point to
the yen's extraordinary rise over the last 40 years – from JPY360
against the dollar at the beginning of the 1970s to approaching
JPY80 today – and note that, despite this huge appreciation,
Japan's current account surplus has got bigger, not smaller.
2- They could argue that America's prescription for China's
economic rebalancing – a stronger currency and a boost to domestic
demand – was precisely the policy followed by the Japanese in the
late-1980s, leading to the biggest financial bubble in living
memory and the 20-year hangover that followed.
3- They could
argue that the demand for a renminbi revaluation is, in truth, a
policy of American default.
4- During the Asian crisis in
1997-98, Western nations, under the auspices of the IMF, insisted
that Asian nations, having borrowed too much, should now tighten
their belts. But the US doesn't seem to think it should abide by
the same rules"
Currency wars are necessary if all else fails
|"while the French deny that they are in
talks with China over the creation of a new currency regime, I
heard French finance minister Christine Lagarde say in person at a
meeting in Italy that France would use its G20 presidency to push
for an alternative to the dollar. She specifically cited the
“Bancor”, the idea floated by Keynes in the 1940s for a commodity
currency priced off a basket of metals."
|Asian investment in plant has run ahead of Western ability
to consume. The debt-strapped households of Middle America, or
Britain and Spain, can no longer hold up the dysfunctional
edifice. Asians must take over, or it will come down on their own
heads. The overwhelming fact of the global currency system is that
America needs a much weaker dollar to bring its economy back into
kilter and avoid slow ruin, yet the rest of the world cannot
easily handle the consequences of such a wrenching adjustment.
There is not enough demand to go around.
bomb, of course, is quantitative easing by the Federal Reserve.
America has in effect issued an ultimatum to China and G20: either
you stop this predatory behaviour and agree to some formula for
global rebalancing, or we will deploy QE2 `a l’outrance’ to flood
your economies with excess liquidity. We will cause you to
overheat and drive up your wage costs. We will impose a de facto
currency revaluation by more brutal and disruptive means, and
there is little you can do to stop it. Pick your poison.
Washington has begun to retaliate in earnest, and not just by
passing the Reform for Fair Trade Act in the House (not yet
the Senate), clearing the way for punitive tariffs against
Korea's Lee warns of big trouble if FX accord fails
Poland’s Central Bank Governor Belka on Currency Wars
Subbarao Says India May Intervene in Currency Market...
turn up currency pressure on China
Concerns over capital flight emerging
G20 currency fist fight rolls into town FT
Gold Miners Head for Hills WSJ
|Gold-mining companies are accelerating new projects and
scouring the globe with renewed vigor, to take advantage of
soaring prices of the metal.
AUDIO / VIDEO
QUOTE OF THE WEEK
"The global financial system continues to be unsound in
the same way that a Ponzi scheme is unsound: there are not
enough cash flows to ultimately service the face value of all
the existing obligations over time. A Ponzi scheme may very
well be liquid, as long as few people ask for their money back
at any given time. But solvency is a different matter -
relating to the ability of the assets to satisfy the
of Safety, No Room for Error