Reinko

The First (and Possibly Last) Euro Decade

Not often such a dumb article was published around here.

So many actual faults in it and it still gets published?

Just look in the gold reserve positions in the table as publised above:

USA with a 300+ million population,
The Netherlands with only a 16+ million population

and we are to believed that gold reserves stand at:

USA = 76.5 % of reserves &
My country = 57.8 % of reserves...

In my country these reserves are not borrowed out, in the USA it is different.

Lets leave it with that....

Ok ok one more blast against this kind of stupidity:

In the USA the reserves of the FDIC are only Treasuries, all the money paid by the banks is gone by now. All their insurance money is replaced by US Treasuries. And every bank saved is only via tax payer money, or as lately money press fun from Ben Bernanke.

Here in the Dutch landscape we are not that stupid, here when we talk about reserves we talk about reserves.

That is saved money....

In the USA the only saved money is belly fat and on the bank accounts only debt is found.

Big Troubles for the Euro

To David and Talin.

David is right about the German pm Angela Merkel who now suddenly came forward with putting an infinite ceiling of saving deposits. I think that in the panic this has emerged because contrary to the USA all rescue funds are filled with real money paid by the European banks themselves.
The US FDIC fund is only an accountancy vehicle, all money needed to rescue banks had to be borrowed. There are no reserves anywhere in the system.

Another example: Here in Holland in 2009 likely workers do not have to pay for unemployment insurance because the fund is overfull. We name that 'anti cyclical taxing', in the good times you save for the bad.
The USA can only stimulate the economy with more new debt.

To Talin: If you think the US government will make money out of their 700 billion investment better think twice: if they buy stuff on the cheap than losses have to be taken by the banks. This is not very realistic, Bernanke has stated that a lot will be bought at near maturity levels because otherwise 'it will not work'.

And believe me, it will not work because elementary calculations indicate there is at least another 3 trillion in toxic waste coming from the housing correction only. Under numbers like that I do not see any profits for the borrowed 700 billion US$ bailout fund...

Dollar Bulls and Bears Struggle for Dominance

Stupid me: I forgot to post the source link!

Sorry, I can be exponentially stupid too, but here is the link:

www.federalreserve.gov...

Go to the one before last column and scroll down to you see the latest fun like 16.5 trillion US$ size.

Don't forget: There are still plenty millions of US citizens that think they have a constitutional right to refi and that there is no problem in letting total debt levels grow faster than the GDP for decades...

But when your debt level is 3 times the GDP what will happen???
And 4 times? And 5 times?
Do you now mean what 'credit crisis' actually means?
This has nothing to do with sub prime, this is the big hammer...

Dollar Bulls and Bears Struggle for Dominance

The fact that there is a struggle between the bulls and the bears simply reflects that the bulls are far away from fundamentals.

Some fundamentals are:

US financial sector debt rose another 1.5 trillion in the last year, we had the latest FED Z1 release out last week. And the last thing money traders do is going through all those difficult statistical nonsense!

But it clearly says:

Total US fin sector debt:

2007 Q2: 14998.1
2008 Q2: 16507.5 billions of US$

Just 1500+ billion standing on the debt side of the US bank books.
The 700 billion bail out plan only affects the 'asset side' of the bank books but the dollar bulls can't care less...

BTW, the 700 billion toxic debt is old debt from a few years ago, the new 1500 billion debt is toxic within a few years.

Are there still weird bulls out there? (As a matter of fact there are, beside debt also stupidity can grow exponentially!)

Market Nosedive Pushes Dollar Down

Quote from the one before last link in the article above:

Top government agencies are working to supply themselves with much needed liquidity Wednesday, as they scramble to raise capital to salvage crumbling financial institutions on Wall Street. The U.S. Treasury Department is working to raise $40 billion through the sale of cash management bills, which it will then send to the Federal Reserve as they attempt to salvage the swiftly disappearing bedrock of Wall Street.

Comment: For over four years I am studying the US financial system, today I found another thing I knew nothing about:

What are cash management bills exactly? If you can sell that stuff at a 40 billion a day pace, that stuff is very interesting.

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For the rest: Good currency actions observed, gold was hammering hard and I hope the food prices like wheat, soya, rice and grain stay under control. If not:

More decoupling is needed...

Pending Fed Rate Decision, Dollar Loses Steam

Amazing; about 250 pips up in the last 24 hours on the €/US$ pair...

The rumor that the FED will do a 'surprise cut' looks not very realistic:
1) In the first place there is a long tradition of the FED sitting on her hands at this phase of the US eclection cycle.
2) All those 'providing liquidity' programs from the FED (like the money auctions or the bond auctions for the primary dealers) did nothing for the spreads. Why should a 25 basis point cut do?

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About the Juncker words: No Europe is right now not on the verge of recession but in the long run I have not observed one detail that clearly says we will prevent stagflation. There is so much commodity induced inflation in the pipeline at the producer/wholesale level that at the time recession sets in, inflation does to.
Hence for Europe the stagflation expectation is still dominant.

For the USA: Look at your own commodity stuff and price indexes on the import/producer/wholes... level. Beside this: The fundamentals are far more against the USA as against Europe.

While Iran Threat Keeps Oil Elevated, U.S. Stocks and Dollar Slip

Upon Iran:

Finally OPEC is talking some sense and we must not forget that the latest time the Iranians went on an agressive war was somewhere in the 19th century...

Until now there is no quantum of proof that the Iranians are indeed building nuclear weapons, I follow this for years and there is not one quantum of proof.

There is only stupid talk by stupid generals.

Beside this many years ago I explained to the Iranians how to build bunkers that could withstand the US bunker busters.
Lately the USA had a brand new model of far bigger bunker busters but in case the Iranians have followed my bunker building advices the new bunker busters are not a real threat.
The trick is very simple: Since bunker busters are very 'needle like' shaped all you have to do is destabilize the tip of the weapon at impact.

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On the paragraph 'US Manufacturing Improves':

In the first place the reported 50.2 in some vague statistic falls inside the white noise range, that means it is not statistical significant.
In the second place, it is related to exports so it has nothing to do with local USA demand.
When the US$ declines it is rather logical exports climb...

Another Record Oil Surge Leans on Stocks and Dollar

The Bear rescue by the US FED the author mentions is very interesting:

Many months before the sudden collapse of Bear Stearn Cos I already expected a tidal wave of bankruptcies in the US financial sector.

So I was a bit disappointed when Bear got rescued but I knew I only had to wait some time longer...

And guess what? I have it from a commisioner from Fortis Bank, he stated they needed to raise another 8 billion Euro (that's above 12 billion US$) in order to prepare for 'that what is coming' from the USA.

When asked by the journalist what exactly was coming, the Fortis guy said: "Right now 6000 regional US banks go busted".

__________

So far the Fortis guy, I knew already of a lot of problems in the regional banks. For example they cannot merge because in that case the banking books needed mark to market value...

Let the good times roll & what happens to the petro dollar?????

Oil Jumps, Stocks Slide, Dollar Succumbs

Hello my lovely, did we have today a 140 US$ breach of the one barrel oil??????

In that case it coule be that the OPEC has opened a third oil trade center where folks can buy stuff at the expense of one yard wide US females.

Lets hope there are more oil markets out there but in the meantime I will always follow your lovely ways of thinking.

Oh Grace, you are my Queen.....

Intense Inflation Pressure: Fed, Bank of England Have Their Hands Tied

Hello Grace, again one of your beautiful articles.

You mention that producer prices grew 1.4%, the highest in six months. Well, this is very nice but are these month on month figures or year on year stuff?

Let me quote from your source (gracecheng dot com):

The report showed that the producer price index rose 1.4 percent in May following an unrevised 0.2 percent increase in April. The increase came in well above economists’ expectations of an increase of about 1.0 percent.

Comment: This means that it is a mom figure... (Because April was not revised...)

So yoy fun is 1.014^12 = 1.18 hence 18% year on year producer fun.

Of course core inflation without that stupid food and energy is only 0.2% so the populace will be protected against that nasty inflation. Really true...

Week in Review: Dollar's Biggest Advance Vs. Euro in 3 Years

Correction: It must be 'everybody' instead of 'everybode'.

Week in Review: Dollar's Biggest Advance Vs. Euro in 3 Years

Oh Grace your articles are always a feast for the eye:

Bernanke suddenly sees no economical downturn any longer and points to the inflationary dangers of a low US$.
In fact when we are supposed to believe the inflation reports, in Europe and the USA they are about the same size of about 4% yoy right now.

And we have a rather strong currency...

But when you, just like me, digg a bit deeper in the wonderful world of US financial stuff you can calculate that from the top of 2006 US family home equity will get a ram of over 10 trillion.

Since Bernanke, just like me, is an academic; he too is capable of making such easy to understand macro calculations. That leaves you wonder why Bernanke tells crap like this?

Very simple: Because everbode wants to hear that kind of crap.

Yet rather likely the law of gravity will also apply to US housing value (let alone commercial real estate) so a few more trillion of home equity will fade away and it is hard to see economical recovery under such conditions...

The Push for a Stronger Dollar

It is a habit of this Republican governemnt (not that the Democrats are much better) of stating that the fundamentals of the US economy are 'strong' or 'good'.

But they never ever name one of those fundamentals.....

Only Dubya lately came up with a 'good fundamental', namely exports were up.
Yeah yeah, it's only up because of the weak dollar.

Lets look at another fundamental: Worker productivity is still up year on year.
Hmmm, interesting; here in Holland minimum wages are about 10 US$/hour while in the US it is only 6 to 7 dollar. So simply on the minimum wages jobs there has to be about 50% more worker productivity to get the same worker productivity as in Europe.

No, the only fundamental that is better is unemployment. Indeed it is much lower in the USA compared to Europe.
But if you live in the USA and you only have a 40 hours the week minimum wage job, your standard of living is below that of an unemployed in Europe.

Of course the Americans will argue: Here are the taxes far lower!
Ok, they are lower, that is true. But the US economy has over 50 trillion of debt on herself and at a reasonable level of interest, say 5%, there would be 2500 billion needed a year just to pay for the interest. That is about the same amount as the US government takes in as revenue.

So Republicans, I dare you:

Bring up those so called strong fundamentals!