my back-of-the envelope calculation shows that the losses they have admitted to so far (which are only a small fraction of the true losses, since a lot of stuff has been hidden under the level 3 accounting rug or remains off balance sheet) amount to more than twice the capital of the entire US banking system at the end of 2007. several large banks (such as C and BAC) are de facto insolvent, and would have been in chapter 11 proceedings for quite some time already if not for the treasury guaranteeing their losses and keeping these zombies on artificial life support with tax payer funded capital injections. shareholders continue to trun the risk to be diluted into oblivion as the losses continue to mount in the ongoing global depression. outright nationalization of the zombie banks down the road is practically assured. the collateral backing their huge exposure to mortgage debt continues to falter at accelerating rates of change. house prices are likely to fall anopther 20 to 40%, and the markit indexes show already that the entire sub-prime loan area is a COMPLETE write-off. AAA rated debt pools trade for 35 cents on the dollar. leveraged corporate loans are likewise going down the drain, and so are increasingly credit card loans and other consumer loans. there's no mileage in pretending that things are not what they are. the system is kaput - which is why Bernanke announces today that he will print up another $1,1 TRILLION in new 'money'. good luck with that! ( oh , and the rubes all just got poorer again courtesy of the Fed diluting the value of their savings).
Why the U.S. Dollar Is Vulnerable to Decline Now [View article]
while the dollar does look potentially vulnerable to a correction, i doubt it will be falling a whole lot. first one must ask: against what is it supposed to fall? surely not against the euro, but that terminally ill currency makes up 60% of the DXY basket considered in the chart at the beginning of the article. there is a reason why the dollar has been, and continues to be strong. we have a global debt crisis, and most of this debt is denominated in dollars. banks worldwide have trouble financing their dollar liabilities, as their dollar-denominated assets (CDOs, MBS, etc) have crashed in value. this creates a steady stream of insatiable dollar demand, and is set to continue to support the dollar for quite some time, especially against the euro. it matters little that economic fundamentals in the US are no less catastrophic as they are elsewhere. the dollars HAVE to be bought, like it or not.
i agree with this article 100%. one can not spend one's way to prosperity. if that were the case, Zimbabwe would be a utopia of riches. i have recently taken Krugman to task as well:
the problem with your study is its starting point - 1971. prior to 1971, the gold price had been fixed at $35/oz. for almost 40 years, but there was a lot of monetary inflation in those 40 years, which your study perforce ignores. therefore one could argue that the run-up in the early 70's merely corrected gold's undervaluation vis-a-vis those 4 earlier decades of inflation. it may be better to use the 1974 price - the first major price peak in the run-up - as the 'fair value' starting point , or move the starting point further back in time, to 1933 ,and use the amount of TMS extant then .
The Fed is Deflating: 10 Reasons Why [View article]
sorry, the Fed is decidedly NOT deflating. the narrow money gauges such as M1 and the monetary base are not growing due to sweeps - which have made it unnecessary for banks to keep reserves at the Fed for all the credit they have been creating. meanwhile, the credit creation is now a non-M1 component of M2, and if we look at MZM, it's growing at a parabolic rate of change. the Fed has put out over 50% of its balance sheet in dubious 'short term financing' via new special facilities, and you really believe it is 'deflating'? come on, you can't be serious.
the bell that is currently ringing the loudest is the alarm bell. gold and gold stocks have failed to make new highs for the past 12 months now, while paper assets have been soaring world-wide. it won't take much for the gold stock indexes to break long-standing uptrend lines. the dollar is very oversold and widely hated - and has only just begun to bounce off support that has held for decades. you bet it's a 'drag' on the metals - and will likely continue to be one. every tiny bounce in gold stocks has recently met with selling , which has of late grown more determined. this is not to say that the secular bull market is over, but it could be in for a rest, and that rest could be very painful for holders of precious metals shares. the 1970's mid-cycle correction produced a 60% sell-off in gold stocks between 1974 and 1976, if something similar happens here, one would do best to sit it out. in short, one should now wait to see if the supports actually hold, and only adopt an outright bullish posture when they clearly do.
Are U.S. Banks Really Worthless? [View article]
AAA rated debt pools trade for 35 cents on the dollar. leveraged corporate loans are likewise going down the drain, and so are increasingly credit card loans and other consumer loans. there's no mileage in pretending that things are not what they are. the system is kaput - which is why Bernanke announces today that he will print up another $1,1 TRILLION in new 'money'. good luck with that! ( oh , and the rubes all just got poorer again courtesy of the Fed diluting the value of their savings).
Why the U.S. Dollar Is Vulnerable to Decline Now [View article]
there is a reason why the dollar has been, and continues to be strong. we have a global debt crisis, and most of this debt is denominated in dollars. banks worldwide have trouble financing their dollar liabilities, as their dollar-denominated assets (CDOs, MBS, etc) have crashed in value. this creates a steady stream of insatiable dollar demand, and is set to continue to support the dollar for quite some time, especially against the euro. it matters little that economic fundamentals in the US are no less catastrophic as they are elsewhere. the dollars HAVE to be bought, like it or not.
Still Blaming the Market Victims [View article]
i have recently taken Krugman to task as well:
www.acting-man.com/200...
Gold Price and the Money Supply [View article]
The Fed is Deflating: 10 Reasons Why [View article]
Gold and Silver Bells Are Ringing [View article]
the dollar is very oversold and widely hated - and has only just begun to bounce off support that has held for decades. you bet it's a 'drag' on the metals - and will likely continue to be one. every tiny bounce in gold stocks has recently met with selling , which has of late grown more determined.
this is not to say that the secular bull market is over, but it could be in for a rest, and that rest could be very painful for holders of precious metals shares. the 1970's mid-cycle correction produced a 60% sell-off in gold stocks between 1974 and 1976, if something similar happens here, one would do best to sit it out. in short, one should now wait to see if the supports actually hold, and only adopt an outright bullish posture when they clearly do.
Gold and Silver Bells Are Ringing [View article]