"...this is the last chance to get your financial house in order at prices which you will unlikely see again for years to come."
Attached is the chart I sent on 12/14/2011 showing what I was expecting the market to do. I have not changed the chart but it has been updated with the market action since that time. The lines drawn on the chart were to show the form of the market action but not related to time on it. As I said, I expected the market to rally to the trend line around the 12,400 area shortly in the new year. On Tuesday we reached the trend line, but I could not count a completed 5 ways up so unless we had a 5th wave failure I expect one more rally to the trend line before wave minor 2 is over and minor wave 3 down begins. It would not surprise me if the news tomorrow was positive enough to send the DOW rallying up through the trend line in a high volume thrust before reversing and starting the decline I am expecting. In fact I personally would like to see it happen and it would be viewed by me as a blow off top with a complete wave count. I have said over the past few months that if my count is correct, this is the last chance to get your financial house in order at prices which you will unlikely see again for years to come. The next few days will let me know if I am right or something else is happening. I don’t believe it is, but I will do my best to keep you updated if the wave structure develops into something else other than what I believe is happening. I would also like to take this time to wish everyone a Happy New Year blessed with good health, happiness, and yes prosperity. I will update as soon as circumstances dictate.
Asian trading countries coming together in the initial global trade war...
“China and Japan announced a wide-ranging currency accord on Christmas day that is expected to give the yuan a more prominent role in international trade. Among the measures, the two countries agreed to promote direct yuan-yen trade, rather than
converting their currencies first to dollars, and also for Japan to hold yuan in its foreign-exchange reserves
Barry Eichengreen, University of California at Berkeley:
I think the new accord is squarely in line with China’s strategy for internationalizing the yuan, which is to proceed in stages: first encourage its use in trade invoicing and settlement, then encourage its use in international investment, and lastly encourage its use as international reserves. They’ve been moving unilaterally to implement the strategy, most recently permitting offshore holders of yuan to invest in the Chinese stock market.
What’s new here is that they are working with and have the support of the Japanese government, which seems to be acknowledging implicitly that there will be a single dominant Asian currency in the future and that it won’t be the yen.
Jeffrey Frankel, Harvard University
Before the yuan becomes a true international currency, let alone rivaling the dollar, it must become a normal currency. I would interpret the increased use of the yuan in China’s international trade as indicating movement toward becoming a normal currency.
Morris Goldstein, Peterson Institute for International Economics
The China-Japan initiatives will obviously increase the regional use of the yuan, although much depends on their scale and timing. That said, I don’t see them as game changers in the broader issue of if and to what extent the yuan becomes a serious rival to the dollar as the dominant global currency.
To do the latter, China would need to be willing to take some fundamental policy decisions, including changing its market intervention and sterilization strategy, undertaking interest rate liberalization, building a larger corporate bond market, reducing much further restrictions on international capital flows, and putting the banking system on a more market-oriented basis — to say nothing about avoiding a crash due to excessive investment in real estate.
Each of those policy choices involves tough trade-offs and reform on the whole package is likely to be some time down the road.
So yes, we are moving to a more multiple-currency world, but it is likely to be a slow process and is not likely to accelerate until China is prepared to give up much more to obtain much wider international use of the yuan.
I don’t think the US should either encourage or discourage it; it should allow the market to choose. Besides the international role of the dollar depends much more on what we do (e.g., U.S. fiscal reform) than on these kinds of yen/yuan initiatives.
I think the international role of the dollar is a moderate plus for the U.S. but this latest initiative is not something the U.S. needs to react too; this is a long-distance race not a sprint.
"The central bank said it would lead a team to clear up the mess — gold exchanges will be altered or closed, banks will stop providing clearing services to them; and some people will be put under police investigation, PBOC said."
"For the first time in more than three decades of generous US government subsidies for the domestic ethanol industry, coupled with a steep tariff on imports, the United States market will be open to imported ethanol as of January 1st, 2012, without protectionist measures. The adjournment of the 112th Congress means both the US$0,54 per gallon tax on imported ethanol and a corresponding tax credit of US$0,45 per gallon for blenders, the VEETC (Volumetric Ethanol Excise Tax Credit), will expire as expected on December 31st."
Does the USA have an unemployment problem? Or does it have an immigration problem? Did you know that during the Great Recession we brought in record numbers of immigrants? Take a look at this chart
That’s right. Even when the unemployment rate went over 11% in 2009, immigration kept on going full steam ahead. The 10-year moving average stands at an all time high, as you can see on this chart:
Note: The first chart goes through 2009 since that’s when the decade ended. The second chart goes through 2010.
These numbers are not insubstantial in relation to unemployment. We have 13.1 million people unemployed now (FRED LNU03000000). If we had merely been running immigration at our historical average of 400,000 per year over the last two or three decades, unemployment wouldn’t even be an issue now.
Now, look back at the first chart. Look at the “1930″ bar. It’s almost the smallest in history, right? During the Great Depression, the Roosevelt administration shut down immigration. It was just common sense; we didn’t have jobs for new people.
Why didn’t President Bush have that same common sense in 2008? And what’s President Obama’s excuse now?
Answer: during the 1930s, the USA was a nation of the people, by the people, and for the people. And today we are a nation of the corporations, by the corporations, and for the corporations.
Corporate profits benefit from mass immigration because the increased supply of labor drives down business “costs” – a.k.a. your paycheck.
Now, look at the decades when the mighty American Middle Class rose to power: the 1940s, 1950s, and 1960s were periods of low immigration. That isn’t a coincidence. Whether or not this nation has a middle class is a policy choice. Back then, we deliberately created a middle class beginning with the 1944 GI Bill.
Today, we have thrown the process in reverse. The vast wealth of the middle class is being converted into corporate profits via mass immigration, and wide-open free trade with low-wage nations that sucks entire industries out of the USA.
If the history books of the future are not written by corporate lobbyists (like our laws are today), the Great Recession will be recorded as the greatest betrayal of the American people in history.
"Repo lenders and parties to derivative contracts are exempted from the “automatic stay” rule in bankruptcy."
Excerpt from an analysis by David Malone of how counterparty banks were able to ”legally” swindle folks who had their money in accounts at MFGlobal...
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) the order was changed. And that change is the crucial event.
What was this ammendment? The ammendment exempted repos (and hypothecated and re-hypothecated assets) and a whole range of derivatives from the automatic stay. It also allowed lower quality assets to qualify for the exemptions.
Which means,
The special bankruptcy treatment given repos and derivatives means that repo lenders and parties to derivative contracts can keep the collateral if their trading partner becomes insolvent. This exempts them from the “automatic stay” rule in bankruptcy, which prohibits most creditors from trying to collect ahead of others.
Or as the official report from the US Financial Crisis Inquirey Commission said,
under a 2005 amendment to the bankruptcy laws, derivatives counterparties were given the advantage over other creditors of being able to immediately terminate their contracts and seize collateral at the time of bankruptcy. (p. 48)
So when a bank goes bankrupt, BEFORE even the most senior bond holders, the repo lenders and derivatives traders can remove, or keep all the assets pledged to them.
This amendment which was touted as necessary to reduce systemic risk in financial bankruptcies also allowed a whole range of far riskier assets to be used, making them too immune from the automatic stay in the event of bankruptcy. Which meant traders flocked to a market where risky assets would be traded and used as collateral without apparent risk to the lender. The size of the repo market hugely increased and riskier assets were gladly accepted as collateral because traders saw that if the person they had lent to went down they could get your money back before anyone else and no one could stop them.
It also did one other thing. Because the repo and derivatives traders ran no risk – they could get their money out of a failing bank before anyone else, it meant they had no reason at all to try to stop a bank from going under. Quite the opposite.
All other creditors – bond holders – risk losing some of their money in a bankruptcy. So they have a reason to want to avoid bankruptcy of a trading partner. Not so the repo and derivatives partners. They would now be best served by looting the company – perfectly legally – as soon as trouble seemed likely. In fact the repo and derivatives traders could push a bank that owed them money over into bankruptcy when it most suited them as creditors. When, for example, they might be in need of a bit of cash themselves to meet a few pressing creditors of their own.
The collapse of both Bear Stearns, Lehman Brothers and AIG were all directly because repo and derivatives partners of those instituions suddenly stoppped trading and ‘looted’ them instead.
According to Enrico Perotti, professor of international finance at Amsterdam Business School speaking at the London Conference on The Future of Bank Funding, held in June of this year, 2011,
The financial crisis happened when repo lenders and derivative parties lost confidence in the mortgage-backed securities they’d accepted as collateral for repo loans and credit default swaps. They demanded to be paid, forcing their troubled trading partners into fire sales of their holdings to raise cash. They were unconcerned that they might drive their trading partners into bankruptcy, because they were exempt from the automatic stay.
Professor Perotti went on to say,
As often in financial regulation, this leads to unintended consequences. As a default leads to repossession of collateral for all safe harbor claims, repossession accelerates fire sales, resulting in a disorderly resolution, with a rush to sell collateral ahead of others, creating a downward spiral in valuations. The timing of the jumps in risk spreads on Lehman, two days after the default, demonstrates this effect, as does AIG.
Should the bankers and their political fluffers like Mr Leach have known? Well they were warned at the time. In 2005 a paper entitled “Derivatives and the Bankruptcy Code: Why the Special Treatment?” by Franklin R. Edwards and Edward R. Morrison, in the Yale Journal of Regulation http://www1.gsb.columbia.edu/mygsb/faculty/researc...
VI. Conclusion
… the Code’s special treatment of derivatives contracts cannot be justified by a fear of systemic risk…. Indeed, exempting derivatives counterparties from the automatic stay may make matters worse by increasing systemic risk….Our analysis, however, should worry members of Congress and legislators in other countries. They have been lobbied heavily by special interest groups (such as ISDA) to expand the special treatment of derivatives on grounds that such legislation is necessary to prevent a systemic meltdown in OTC derivatives markets should a derivatives counterparty suffer financial distress.
Our analysis casts serious doubt on this proposition. Systemic risk may be a real threat, but bankruptcy law has no role to play in addressing it.”
We all know the when and the how our factory jobs were "off shored"
For those who are not aware of the how and when, Matt Trivisonno wrote about it in his blog today:
Newt GinGRICH is parading around acting like he is some sort of economic genius. He says he will be the “Paychecks President” as opposed to Obama the “Food Stamps President”, and claims that he created the economy that allowed Mitt Romney to get rich.
But nothing could be further from the truth. As a matter of fact, Gingrich is one of the Founding Fathers of modern American poverty. Not only did Gingrich vote for NAFTA, but he worked with Bill Clinton to ram GATT through Congress, thus surrendering the USA’s economic sovereignty to the World Trade Organization.
That was in November 1994. Now, allow Mexico, China, and India a few years to ramp-up their infrastructure, building sea ports, air ports, power grids, water systems, sweatshops, worker barracks, railroads, highways, etc. By 2000, they were ready to accept the mass exodus of American factories and offices as ordained by Gingrich.
And so they did. And our stock market crashed. And when the “jobless recovery” baffled the Fed, Greenspan kept his foot on the gas, no doubt chanting “free trade will create jobs” over and over, praying to his libertarian gods. But the economy couldn’t respond like it had in the past, because Gingrich had relocated it to foreign lands. And all the cash that Greenspan injected to stimulate our newly hollowed-out economy blew up a giant housing bubble, destroyed our banks, and crashed our stock market again.
Today, our once powerful economy bumbles along, eeking out meager job growth while the Fed holds interest rates at 0% – lower than Greenspan dared.
Nice work, Newt.
Mitt Romney says he will put an end to the dollar-yuan currency peg imposed on America by Beijing. But, he says that he will do so by petitioning Gingrich’s WTO. This approach is, shall we say, effete. I can see Romney now, petitioning the WTO on bended knee:
“Please! Throw us a scrap of economic sovereignty! We’re dying here!”
Pathetic.
Ron Paul is just as clueless. As a Fed-stalking, libertarian ideologue, he is in complete denial about the colossal failure of his precious free-trade ideology. He makes fellow libertarian Alan Greenspan the villain, but Greenspan was only responding to the consequences of wide-open trade with low-wage nations that H. Ross Perot so presciently warned us about.
And Gingrich knew exactly what he was doing in 1994. He publicly stated that the USA was giving up its economic sovereignty:
“…twenty years from now we will look back on this as a very important defining moment.”
Well, I’m looking back right now.
Note to Newt. You were right; the moment you ended American prosperity was indeed a defining moment. The 13 million people unemployed, and the 46 million on food-stamps are more your responsibility than almost anyone else.
Note: Here is what Gingrich told the House Ways and Means committee in June 1994
“I am just saying that we need to be honest about the fact that we are transferring from the United States at a practical level significant authority to a new organization. This is a transformational moment. I would feel better if the people who favor this would just be honest about the scale of change.
“I agree … this is very close to Maastrict [the European Union treaty by which the EU member nations have surrendered considerable sovereignty], and twenty years from now we will look back on this as a very important defining moment. This is not just another trade agreement. This is adopting something which twice, once in the 1940s and once in the 1950s, the U.S. Congress rejected. I am not even saying we should reject it; I, in fact, lean toward it. But I think we have to be very careful, because it is a very big transfer of power.”
At the beginning of ABC’s presidential debate last night, Diane Sawyer asked the candidates how they would “bring jobs back from overseas.” None of the six Republican candidates answered the question. Maybe Sawyer herself should be president. At least she knows what the right question is.
Here is a link to the Sir James Goldsmith interview by Charlie Rose pleading with America to not go down that road. Goldsmith even testified before Congress at the time.
Wall Street executives, in a private meeting with a top Federal Reserve official in late September, recommended a coordinated effort by central banks to remedy the European financial crisis, according to Fed documents received in an open-records request. The meeting, led by Louis Bacon, founder of hedge fund Moore Capital Management, preceded a joint action Wednesday by the world's major central banks, which banded together to provide liquidity to the markets through cheap U.S. dollar loans. Wednesday's moves involved central-bank coordination to lend to European banks, and it couldn't be determined what precisely prompted the Fed and the other central bankers to act. Mr. Bacon is one of 12 Wall Street members of a 14-member Fed panel, the Investor Advisory Committee on Financial Markets, set up in the wake of the financial crisis to give New York Federal Reserve Bank President William Dudley a pipeline into investors' thinking. The Sept. 27 meeting with Mr. Dudley exemplifies the private meetings some Wall Street investors have with top Fed officials, in which they can gain access to potential early clues about Fed actions. Hedge funds have been pushing to get more information about the inner workings of the Fed, according to people familiar with the situation, as detailed in a Wall Street Journal page-one article Nov. 23. The Fed's meetings with investors present a delicate situation for U.S. officials. They must balance the need for information from investors about the markets against the Fed's internal policy discouraging employees from arranging meetings with investors that would confer a commercial advantage. The Fed's Mr. Dudley declined to comment. In a statement, Mr. Bacon defended the meetings, saying, "The Fed and Treasury canvass market opinions extensively through a variety of private-sector committees, contacts and trading desks in their task to fund the nation's exploding debt load, stabilize markets and optimize economic outcomes." Members of the Investor Advisory Committee on Financial Markets include some of the biggest names on Wall Street, including Keith Anderson of Soros Fund Management; Mohamed El-Erian of Allianz SE's Pacific Investment Management Co.; Peter Fisher of BlackRock Inc.; Joshua Harris of Apollo Management LP; Alan Howard of Brevan Howard Asset Management; Deryck Maughan, a former chief executive of Salomon Brothers who now is at Kohlberg Kravis Roberts & Co.; and David Tepper of Appaloosa Management LP. The group suggested a number of ways to address the European crisis, including "coordinated credit easing and/or quantitative easing by" the European Central Bank. The group also urged "central bank guarantees of sovereign debt," "investments in European sovereigns and banks," "implementation of capital controls" and "government guarantee of bank funding and/or depositors," as well as "recapitalization of the IMF," according to the minutes.
The ex-parte nature of these civil forfeitures concern me. The government does make mistakes. An innocent domain owner must present evidence regarding lack of knowledge of the property’s involvement, or his reasonable steps to prevent it.
On another point, if the law is used to stop the counterfeiting of luxury goods, democracy will survive. If, once the apparatus is well greased, it starts getting used for political ends, that slippery slope has a pretty bad ending.
After a series of one-sided hearings, luxury goods maker Chanel has won recent court orders against hundreds of websites trafficking in counterfeit luxury goods. A federal judge in Nevada has agreed that Chanel can seize the domain names in question and transfer them all to US-based registrar GoDaddy. The judge also ordered “all Internet search engines” and “all social media websites”—explicitly naming Facebook, Twitter, Google+, Bing, Yahoo, and Google—to “de-index” the domain names and to remove them from any search results.
The case has been a remarkable one. Concerned about counterfeiting, Chanel has filed a joint suit in Nevada against nearly 700 domain names that appear to have nothing in common. When Chanel finds more names, it simply uses the same case and files new requests for more seizures. (A recent November 14 order went after an additional 228 sites; none had a chance to contest the request until after it was approved and the names had been seized.)
How were the sites investigated? For the most recent batch of names, Chanel hired a Nevada investigator to order from three of the 228 sites in question. When the orders arrived, they were reviewed by a Chanel official and declared counterfeit. The other 225 sites were seized based on a Chanel anti-counterfeiting specialist browsing the Web.
That was good enough for Judge Kent Dawson to order the names seized and transferred to GoDaddy, where they would all redirect to a page serving notice of the seizure. In addition, a total ban on search engine indexing was ordered, one which neither Bing nor Google appears to have complied with yet.
Missing from the ruling is any discussion of the Internet’s global nature; the judge shows no awareness that the domains in question might not even be registered in this country, for instance, and his ban on search engine and social media indexing apparently extends to the entire world. (And, when applied to US-based companies like Twitter, apparently compels them to censor the links globally rather than only when accessed by people in the US.)
At a Occupy LA Teach In, he sums up the incredible disregard that the US Government has towards all the looting and fraud by the banks. Not one criminal referral from the bank regulators. Fraud with impunity.
WSJ reports on the edge Fed chairman Ben Bernanke and other Fed officials are giving the insiders:
"Hours after an Aug. 15 meeting with Federal Reserve Chairman Ben Bernanke in his office, Nancy Lazar made a hasty call to investor clients: The Fed was dusting off an obscure 1960s-era strategy known as Operation Twist.
The news pointed to a boom in long-term bonds.
It was a good call. Over the next five weeks, prices on 10-year Treasury bonds soared, offering double-digit returns in an otherwise dismal year.
By the time the Fed announced its $400 billion Operation Twist on Sept. 21, the window for quick profits had all but slammed shut.
Ms. Lazar is among a group of well-connected investors and analysts with access to top Federal Reserve officials who give them a chance at early clues to the central bank's next policy moves, according to interviews and hundreds of pages of documents obtained by The Wall Street Journal through open records searches. Ms. Lazar, an economist with International Strategy & Investment Group Inc., wouldn't comment for this article.
The access is part of a push by hedge funds and other traders to get more information about the inner workings of government. Developments in Washington have become more important after the financial crisis in 2008 spawned new regulations and a stronger hand by lawmakers in businesses...
Such talks are perfectly legal but create a delicate dance for the Fed, which tries to sate its need for information to help guide monetary policy without giving Wall Street an unfair advantage over Main Street.
Mr. Bernanke discusses only matters already public, a spokeswoman said. But hedge fund managers and Wall Street executives who meet regularly with him and other Fed officials—both in his office and through advisory committees—say they get valuable insights during the face-to-face talks.
"It's like an inquisition, they have a topic," said Laurence Fink, chief executive of investment-management giant BlackRock Inc. "By the questions they ask, by definition, you know what's on their mind."...
Mr. Fink had phone calls and meetings with Fed officials ten times over the past two-and-a-half years, according to their calendars and open records requests. He said most of the conversations related to BlackRock's role as a paid adviser to the New York Fed about complex financial structures formed during the financial crisis.
New York Federal Reserve Bank President William Dudley also meets regularly with investors, both in his office with individuals and in committee groups. The New York Fed, one of 12 regional banks that constitute the Federal Reserve System, has the strongest ties to investors because it conducts the Fed's bond-market transactions...
Over the past two-and-a-half years, Mr. Dudley has had dozens of private meetings, according to his calendar, which lists SAC Capital Advisors, Citadel Investment Group, Duquesne Capital Management, and Tudor Investments, among others. Lloyd Blankfein, chief of Goldman Sachs Group Inc., and Mr. Fink, of BlackRock, also had private meetings, according to Mr. Dudley's calendar...
Worries about Fed access surfaced a year ago. On Aug. 18, 2010, former Fed governor Laurence Meyer, who runs a research service predicting and analyzing Fed actions, told clients in a note the central bank's "bazooka is loaded" to buy bonds to stimulate the economy.
The note described how the Fed's "doves," members inclined to ease monetary policy, had said the Fed couldn't "sit on its hands," according to Mr. Meyer's account. An Aug. 20 note included some specific information about the Fed's balance sheet.
A week later, Mr. Bernanke said during a speech in Jackson Hole, Wyo., that "policy options are available to provide additional stimulus" to the economy. Stocks rose on the news, which by then had given Mr. Meyer's clients plenty of time to profit."
Iceland may hold new currency auctions within weeks as the island scales back its defenses against capital flight, central bank Governor Mar Gudmundsson said.
“We’ll begin the auctions as soon as we get applications from the intermediaries and when the amounts are sufficient to permit an auction,” Gudmundsson said in an interview in Reykjavik. “I’m hoping that it will be in the next weeks.”
The island, whose banks defaulted on $85 billion in 2008, is moving into the final stages of its resurrection plan as the last vestiges of crisis management are gradually removed. Iceland’s decision, taken together with the International Monetary Fund, to impose capital controls three years ago was key to surviving the bleakest moments of the crisis and helped prevent an all-out run on the island’s assets, Gudmundsson said.
“Without the capital controls it would have been much more difficult to ensure stability in the exchange rate, calling for much higher interest rates and an inability to shelter the domestic economy as well as we did,” he said. “With the turbulence in the international markets lately, the capital controls have sheltered Iceland considerably, since there’s no way of doing a run on the financing of the Icelandic state or the financing of the Icelandic banks.”
The auctions are part of a first phase to free up offshore kronur. A second phase will deal with foreign investors’ holdings of onshore kronur, according to the central bank. That phase will start when the offshore and onshore rates converge. Offshore kronur trade at about 250 to the euro, according to Reykjavik-based brokerage HF Verdbref. The onshore rate was 159.35 on Nov. 18.
Outperforming Euro Area
Iceland’s economy will grow faster than the euro-area average this year and next, the IMF estimated in September. The cost of insuring against an Icelandic default, using credit default swaps, is lower than the average for the euro area.
Iceland’s economy will grow 2.5 percent this year and next, versus 1.6 percent in the euro area this year and 1.1 percent in 2012, the IMF said Sept. 20. Next year, Iceland’s current account surplus will widen to 3.2 percent of the economy and unemployment will be 6 percent, versus 9.9 percent joblessness in the euro area, the fund said.
The stabilization of the island’s economy has allowed the central bank to press ahead with capital liberalizations that the government estimates won't be fully dropped until 2013. The approach allows foreign investors eager to offload their krona holdings to transfer them to foreign or local investors willing to commit long-term to the island, according to the central bank.
Foreign Direct Investment
“This will show how much interest there is in direct foreign investment in Iceland,” Gudmundsson said. “This step will help us considerably in reducing the amount of offshore kronur and transferring them from those, who might unwillingly hold them, into the hands of those who are willing to use them in Iceland. That will have a great effect on how we’ll be able to move on to the full abolishment of capital controls.”
The process is the second step of the first phase in easing controls. The first step had allowed investors, via foreign currency auctions, to place kronur in long-term government bonds. The second step broadens the terms to allow investors to place their kronur in assets such as equities and real estate. The bank isn’t progressing according to a timetable, and announces each step once the economic and financial conditions are in place.
“How many weeks” it takes before the currency auctions start “and whether it will be less than a month or more than a month is hard to say,” Gudmundsson said. “There are no guarantees that this will take place before Christmas, and if not, then hopefully we’ll be able to have a strong beginning in 2012.”
"Composite leading indicators (CLIs) for September 2011 continue pointing to a slowdown in economic activity in most OECD countries and major non-member economies. Compared to last month’s assessment, the CLIs point more strongly to slowdowns in all major economies. In Japan, Russia and the United States the CLIs point to slowdowns in growth towards long term trends. In Canada, France, Germany, Italy, the United Kingdom, Brazil, China, India and the Euro area, the CLIs point to economic activity falling below long term trend."
U.S. banks have guaranteed a total of 518 billion dollars worth of government, bank and corporate debt of Greece, Portugal, Ireland and Italy via sales of credit default swaps.
Yet, JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc., the leading CDS underwriters in the U.S., report less than that amount by claiming their net positions are smaller because they purchase swaps to offset ones they're selling to other companies.
Absolute BS.
These swap contracts are worthless. They will never be paid. There will never be a hard default declared by the ISDA. These banks continue to make millions by selling worthless insurance.
This could be a huge problem going forward. I get the feeling that somehow the US taxpayer will be forced to cover the trades.
Clearinghouses Preparing For Potential Bankruptcy Of MF Global Sources
By Jacob Bunge, Of DOW JONES NEWSWIRES
Exchange clearinghouses and U.S. regulators were preparing late Sunday for a potential bankruptcy filing or other restructuring by broker-dealer MF Global Holdings Ltd. (MF), according to people involved in the process.
The New York-based broker has been working this weekend to secure the sale of assets or the entire company, but by late Sunday a restructuring was seen as one option for all or parts of the company.
MF Global is one of the largest customers of a raft of derivatives exchanges in the U.S. and overseas, and had over the last week remained "in good standing" --or fit to trade--despite its sliding share price and concerns over liquidity and customer defections.
Clearinghouse officials Sunday held a series of conference calls with MF Global and regulators to assess the impact of any bankruptcy filing, according to people close to the matter.
Exchange clearinghouses guarantee both sides of an exchange-based trade, storing collateral posted by members that provides a cushion against large trading losses or potential defaults.
CME Group Inc. (CME) operates the biggest U.S. clearinghouse for futures trading. Other major clearinghouses are run by IntercontinentalExchange Inc. ( ICE), New York Portfolio Clearing and the Options Clearing Corp., the latter of which handles all trade in U.S. stock options.
If MF Global slides into bankruptcy, the outstanding trading positions of its customers would be protected by U.S. laws governing derivatives markets. However, these positions would need to be transferred to other members of the clearinghouse, a process that requires the exchange or parent company of each clearing facility to rally other members and keep regulators apprised.
Should a bankruptcy filing happen, some officials anticipated larger-than- usual volatility to churn the markets where MF Global is most active, such as futures linked to the price of commodities, interest rates and stock indexes.
The company wasn't immediately available for comment on any discussions with the clearinghouses.
Emerging market output growth (covering manufacturing and services) eased to a nine-quarter low in Q3 2011. Additionally, the EMI reading was the fourth-lowest in the series history, only surpassing levels registered between Q4 2008 - Q2 2009.
"...this is the last chance to get your financial house in order at prices which you will unlikely see again for years to come."
Attached is the chart I sent on 12/14/2011 showing what I was expecting the market to do. I have not changed the chart but it has been updated with the market action since that time. The lines drawn on the chart were to show the form of the market action but not related to time on it. As I said, I expected the market to rally to the trend line around the 12,400 area shortly in the new year. On Tuesday we reached the trend line, but I could not count a completed 5 ways up so unless we had a 5th wave failure I expect one more rally to the trend line before wave minor 2 is over and minor wave 3 down begins. It would not surprise me if the news tomorrow was positive enough to send the DOW rallying up through the trend line in a high volume thrust before reversing and starting the decline I am expecting. In fact I personally would like to see it happen and it would be viewed by me as a blow off top with a complete wave count. I have said over the past few months that if my count is correct, this is the last chance to get your financial house in order at prices which you will unlikely see again for years to come. The next few days will let me know if I am right or something else is happening. I don’t believe it is, but I will do my best to keep you updated if the wave structure develops into something else other than what I believe is happening. I would also like to take this time to wish everyone a Happy New Year blessed with good health, happiness, and yes prosperity. I will update as soon as circumstances dictate.
http://urbansurvival.com/landryjan6.pdf
Asian trading countries coming together in the initial global trade war...
“China and Japan announced a wide-ranging currency accord on Christmas day that is expected to give the yuan a more prominent role in international trade. Among the measures, the two countries agreed to promote direct yuan-yen trade, rather than
converting their currencies first to dollars, and also for Japan to hold yuan in its foreign-exchange reserves
Barry Eichengreen, University of California at Berkeley:
I think the new accord is squarely in line with China’s strategy for internationalizing the yuan, which is to proceed in stages: first encourage its use in trade invoicing and settlement, then encourage its use in international investment, and lastly encourage its use as international reserves. They’ve been moving unilaterally to implement the strategy, most recently permitting offshore holders of yuan to invest in the Chinese stock market.
What’s new here is that they are working with and have the support of the Japanese government, which seems to be acknowledging implicitly that there will be a single dominant Asian currency in the future and that it won’t be the yen.
Jeffrey Frankel, Harvard University
Before the yuan becomes a true international currency, let alone rivaling the dollar, it must become a normal currency. I would interpret the increased use of the yuan in China’s international trade as indicating movement toward becoming a normal currency.
Morris Goldstein, Peterson Institute for International Economics
The China-Japan initiatives will obviously increase the regional use of the yuan, although much depends on their scale and timing. That said, I don’t see them as game changers in the broader issue of if and to what extent the yuan becomes a serious rival to the dollar as the dominant global currency.
To do the latter, China would need to be willing to take some fundamental policy decisions, including changing its market intervention and sterilization strategy, undertaking interest rate liberalization, building a larger corporate bond market, reducing much further restrictions on international capital flows, and putting the banking system on a more market-oriented basis — to say nothing about avoiding a crash due to excessive investment in real estate.
Each of those policy choices involves tough trade-offs and reform on the whole package is likely to be some time down the road.
So yes, we are moving to a more multiple-currency world, but it is likely to be a slow process and is not likely to accelerate until China is prepared to give up much more to obtain much wider international use of the yuan.
I don’t think the US should either encourage or discourage it; it should allow the market to choose. Besides the international role of the dollar depends much more on what we do (e.g., U.S. fiscal reform) than on these kinds of yen/yuan initiatives.
I think the international role of the dollar is a moderate plus for the U.S. but this latest initiative is not something the U.S. needs to react too; this is a long-distance race not a sprint.
http://tinyurl.com/83y7z7s
"The central bank said it would lead a team to clear up the mess — gold exchanges will be altered or closed, banks will stop providing clearing services to them; and some people will be put under police investigation, PBOC said."
http://www.cnbc.com/id/45794782
Wishful thinking by a lobby group?
"For the first time in more than three decades of generous US government subsidies for the domestic ethanol industry, coupled with a steep tariff on imports, the United States market will be open to imported ethanol as of January 1st, 2012, without protectionist measures. The adjournment of the 112th Congress means both the US$0,54 per gallon tax on imported ethanol and a corresponding tax credit of US$0,45 per gallon for blenders, the VEETC (Volumetric Ethanol Excise Tax Credit), will expire as expected on December 31st."
http://tinyurl.com/6ptlm6r
from the Electronic Data Gathering And Retrieval (EDGAR) system...
http://english.economicpolicyjournal.com/2011/12/o...
Volatility (VXX), gold (GLD), crude oil (BNO), the dollar (UUP) and U.S. Treasuries (TLT)
via etfreplay.com
http://tinyurl.com/6w96cdq
"In this nation of immigrants, I'm always astonished at how immigration-unfriendly the U.S. has become."
The following is re posted from http://www.trivisonno.com
Does the USA have an unemployment problem? Or does it have an immigration problem? Did you know that during the Great Recession we brought in record numbers of immigrants? Take a look at this chart
http://www.trivisonno.com/wp-content/uploads/USA-I...
That’s right. Even when the unemployment rate went over 11% in 2009, immigration kept on going full steam ahead. The 10-year moving average stands at an all time high, as you can see on this chart:
http://www.trivisonno.com/wp-content/uploads/USA-I...
Note: The first chart goes through 2009 since that’s when the decade ended. The second chart goes through 2010.
These numbers are not insubstantial in relation to unemployment. We have 13.1 million people unemployed now (FRED LNU03000000). If we had merely been running immigration at our historical average of 400,000 per year over the last two or three decades, unemployment wouldn’t even be an issue now.
Now, look back at the first chart. Look at the “1930″ bar. It’s almost the smallest in history, right? During the Great Depression, the Roosevelt administration shut down immigration. It was just common sense; we didn’t have jobs for new people.
Why didn’t President Bush have that same common sense in 2008? And what’s President Obama’s excuse now?
Answer: during the 1930s, the USA was a nation of the people, by the people, and for the people. And today we are a nation of the corporations, by the corporations, and for the corporations.
Corporate profits benefit from mass immigration because the increased supply of labor drives down business “costs” – a.k.a. your paycheck.
Now, look at the decades when the mighty American Middle Class rose to power: the 1940s, 1950s, and 1960s were periods of low immigration. That isn’t a coincidence. Whether or not this nation has a middle class is a policy choice. Back then, we deliberately created a middle class beginning with the 1944 GI Bill.
Today, we have thrown the process in reverse. The vast wealth of the middle class is being converted into corporate profits via mass immigration, and wide-open free trade with low-wage nations that sucks entire industries out of the USA.
If the history books of the future are not written by corporate lobbyists (like our laws are today), the Great Recession will be recorded as the greatest betrayal of the American people in history.
"Repo lenders and parties to derivative contracts are exempted from the “automatic stay” rule in bankruptcy."
Excerpt from an analysis by David Malone of how counterparty banks were able to ”legally” swindle folks who had their money in accounts at MFGlobal...
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) the order was changed. And that change is the crucial event.
What was this ammendment? The ammendment exempted repos (and hypothecated and re-hypothecated assets) and a whole range of derivatives from the automatic stay. It also allowed lower quality assets to qualify for the exemptions.
Which means,
The special bankruptcy treatment given repos and derivatives means that repo lenders and parties to derivative contracts can keep the collateral if their trading partner becomes insolvent. This exempts them from the “automatic stay” rule in bankruptcy, which prohibits most creditors from trying to collect ahead of others.
Or as the official report from the US Financial Crisis Inquirey Commission said,
under a 2005 amendment to the bankruptcy laws, derivatives counterparties were given the advantage over other creditors of being able to immediately terminate their contracts and seize collateral at the time of bankruptcy. (p. 48)
So when a bank goes bankrupt, BEFORE even the most senior bond holders, the repo lenders and derivatives traders can remove, or keep all the assets pledged to them.
This amendment which was touted as necessary to reduce systemic risk in financial bankruptcies also allowed a whole range of far riskier assets to be used, making them too immune from the automatic stay in the event of bankruptcy. Which meant traders flocked to a market where risky assets would be traded and used as collateral without apparent risk to the lender. The size of the repo market hugely increased and riskier assets were gladly accepted as collateral because traders saw that if the person they had lent to went down they could get your money back before anyone else and no one could stop them.
It also did one other thing. Because the repo and derivatives traders ran no risk – they could get their money out of a failing bank before anyone else, it meant they had no reason at all to try to stop a bank from going under. Quite the opposite.
All other creditors – bond holders – risk losing some of their money in a bankruptcy. So they have a reason to want to avoid bankruptcy of a trading partner. Not so the repo and derivatives partners. They would now be best served by looting the company – perfectly legally – as soon as trouble seemed likely. In fact the repo and derivatives traders could push a bank that owed them money over into bankruptcy when it most suited them as creditors. When, for example, they might be in need of a bit of cash themselves to meet a few pressing creditors of their own.
The collapse of both Bear Stearns, Lehman Brothers and AIG were all directly because repo and derivatives partners of those instituions suddenly stoppped trading and ‘looted’ them instead.
According to Enrico Perotti, professor of international finance at Amsterdam Business School speaking at the London Conference on The Future of Bank Funding, held in June of this year, 2011,
The financial crisis happened when repo lenders and derivative parties lost confidence in the mortgage-backed securities they’d accepted as collateral for repo loans and credit default swaps. They demanded to be paid, forcing their troubled trading partners into fire sales of their holdings to raise cash. They were unconcerned that they might drive their trading partners into bankruptcy, because they were exempt from the automatic stay.
Professor Perotti went on to say,
As often in financial regulation, this leads to unintended consequences. As a default leads to repossession of collateral for all safe harbor claims, repossession accelerates fire sales, resulting in a disorderly resolution, with a rush to sell collateral ahead of others, creating a downward spiral in valuations. The timing of the jumps in risk spreads on Lehman, two days after the default, demonstrates this effect, as does AIG.
Should the bankers and their political fluffers like Mr Leach have known? Well they were warned at the time. In 2005 a paper entitled “Derivatives and the Bankruptcy Code: Why the Special Treatment?” by Franklin R. Edwards and Edward R. Morrison, in the Yale Journal of Regulation
http://www1.gsb.columbia.edu/mygsb/faculty/researc...
VI. Conclusion
… the Code’s special treatment of derivatives contracts cannot be justified by a fear of systemic risk…. Indeed, exempting derivatives counterparties from the automatic stay may make matters worse by increasing systemic risk….Our analysis, however, should worry members of Congress and legislators in other countries. They have been lobbied heavily by special interest groups (such as ISDA) to expand the special treatment of derivatives on grounds that such legislation is necessary to prevent a systemic meltdown in OTC derivatives markets should a derivatives counterparty suffer financial distress.
Our analysis casts serious doubt on this proposition. Systemic risk may be a real threat, but bankruptcy law has no role to play in addressing it.”
Here’s a link to the full report: http://tinyurl.com/chujodt
We all know the when and the how our factory jobs were "off shored"
For those who are not aware of the how and when, Matt Trivisonno wrote about it in his blog today:
Newt GinGRICH is parading around acting like he is some sort of economic genius. He says he will be the “Paychecks President” as opposed to Obama the “Food Stamps President”, and claims that he created the economy that allowed Mitt Romney to get rich.
But nothing could be further from the truth. As a matter of fact, Gingrich is one of the Founding Fathers of modern American poverty. Not only did Gingrich vote for NAFTA, but he worked with Bill Clinton to ram GATT through Congress, thus surrendering the USA’s economic sovereignty to the World Trade Organization.
That was in November 1994. Now, allow Mexico, China, and India a few years to ramp-up their infrastructure, building sea ports, air ports, power grids, water systems, sweatshops, worker barracks, railroads, highways, etc. By 2000, they were ready to accept the mass exodus of American factories and offices as ordained by Gingrich.
And so they did. And our stock market crashed. And when the “jobless recovery” baffled the Fed, Greenspan kept his foot on the gas, no doubt chanting “free trade will create jobs” over and over, praying to his libertarian gods. But the economy couldn’t respond like it had in the past, because Gingrich had relocated it to foreign lands. And all the cash that Greenspan injected to stimulate our newly hollowed-out economy blew up a giant housing bubble, destroyed our banks, and crashed our stock market again.
Today, our once powerful economy bumbles along, eeking out meager job growth while the Fed holds interest rates at 0% – lower than Greenspan dared.
Nice work, Newt.
Mitt Romney says he will put an end to the dollar-yuan currency peg imposed on America by Beijing. But, he says that he will do so by petitioning Gingrich’s WTO. This approach is, shall we say, effete. I can see Romney now, petitioning the WTO on bended knee:
“Please! Throw us a scrap of economic sovereignty! We’re dying here!”
Pathetic.
Ron Paul is just as clueless. As a Fed-stalking, libertarian ideologue, he is in complete denial about the colossal failure of his precious free-trade ideology. He makes fellow libertarian Alan Greenspan the villain, but Greenspan was only responding to the consequences of wide-open trade with low-wage nations that H. Ross Perot so presciently warned us about.
And Gingrich knew exactly what he was doing in 1994. He publicly stated that the USA was giving up its economic sovereignty:
“…twenty years from now we will look back on this as a very important defining moment.”
Well, I’m looking back right now.
Note to Newt. You were right; the moment you ended American prosperity was indeed a defining moment. The 13 million people unemployed, and the 46 million on food-stamps are more your responsibility than almost anyone else.
Note: Here is what Gingrich told the House Ways and Means committee in June 1994
“I am just saying that we need to be honest about the fact that we are transferring from the United States at a practical level significant authority to a new organization. This is a transformational moment. I would feel better if the people who favor this would just be honest about the scale of change.
“I agree … this is very close to Maastrict [the European Union treaty by which the EU member nations have surrendered considerable sovereignty], and twenty years from now we will look back on this as a very important defining moment. This is not just another trade agreement. This is adopting something which twice, once in the 1940s and once in the 1950s, the U.S. Congress rejected. I am not even saying we should reject it; I, in fact, lean toward it. But I think we have to be very careful, because it is a very big transfer of power.”
At the beginning of ABC’s presidential debate last night, Diane Sawyer asked the candidates how they would “bring jobs back from overseas.” None of the six Republican candidates answered the question. Maybe Sawyer herself should be president. At least she knows what the right question is.
http://www.trivisonno.com/gingrich
Here is a link to the Sir James Goldsmith interview by Charlie Rose pleading with America to not go down that road. Goldsmith even testified before Congress at the time.
http://video.google.com/videoplay?docid=5064665078...
via WSJ
Wall Street executives, in a private meeting with a top Federal Reserve official in late September, recommended a coordinated effort by central banks to remedy the European financial crisis, according to Fed documents received in an open-records request. The meeting, led by Louis Bacon, founder of hedge fund Moore Capital Management, preceded a joint action Wednesday by the world's major central banks, which banded together to provide liquidity to the markets through cheap U.S. dollar loans. Wednesday's moves involved central-bank coordination to lend to European banks, and it couldn't be determined what precisely prompted the Fed and the other central bankers to act. Mr. Bacon is one of 12 Wall Street members of a 14-member Fed panel, the Investor Advisory Committee on Financial Markets, set up in the wake of the financial crisis to give New York Federal Reserve Bank President William Dudley a pipeline into investors' thinking. The Sept. 27 meeting with Mr. Dudley exemplifies the private meetings some Wall Street investors have with top Fed officials, in which they can gain access to potential early clues about Fed actions. Hedge funds have been pushing to get more information about the inner workings of the Fed, according to people familiar with the situation, as detailed in a Wall Street Journal page-one article Nov. 23. The Fed's meetings with investors present a delicate situation for U.S. officials. They must balance the need for information from investors about the markets against the Fed's internal policy discouraging employees from arranging meetings with investors that would confer a commercial advantage. The Fed's Mr. Dudley declined to comment. In a statement, Mr. Bacon defended the meetings, saying, "The Fed and Treasury canvass market opinions extensively through a variety of private-sector committees, contacts and trading desks in their task to fund the nation's exploding debt load, stabilize markets and optimize economic outcomes." Members of the Investor Advisory Committee on Financial Markets include some of the biggest names on Wall Street, including Keith Anderson of Soros Fund Management; Mohamed El-Erian of Allianz SE's Pacific Investment Management Co.; Peter Fisher of BlackRock Inc.; Joshua Harris of Apollo Management LP; Alan Howard of Brevan Howard Asset Management; Deryck Maughan, a former chief executive of Salomon Brothers who now is at Kohlberg Kravis Roberts & Co.; and David Tepper of Appaloosa Management LP. The group suggested a number of ways to address the European crisis, including "coordinated credit easing and/or quantitative easing by" the European Central Bank. The group also urged "central bank guarantees of sovereign debt," "investments in European sovereigns and banks," "implementation of capital controls" and "government guarantee of bank funding and/or depositors," as well as "recapitalization of the IMF," according to the minutes.
http://tinyurl.com/7d7ccdg
The ex-parte nature of these civil forfeitures concern me. The government does make mistakes. An innocent domain owner must present evidence regarding lack of knowledge of the property’s involvement, or his reasonable steps to prevent it.
On another point, if the law is used to stop the counterfeiting of luxury goods, democracy will survive. If, once the apparatus is well greased, it starts getting used for political ends, that slippery slope has a pretty bad ending.
The power of the corporation...
After a series of one-sided hearings, luxury goods maker Chanel has won recent court orders against hundreds of websites trafficking in counterfeit luxury goods. A federal judge in Nevada has agreed that Chanel can seize the domain names in question and transfer them all to US-based registrar GoDaddy. The judge also ordered “all Internet search engines” and “all social media websites”—explicitly naming Facebook, Twitter, Google+, Bing, Yahoo, and Google—to “de-index” the domain names and to remove them from any search results.
The case has been a remarkable one. Concerned about counterfeiting, Chanel has filed a joint suit in Nevada against nearly 700 domain names that appear to have nothing in common. When Chanel finds more names, it simply uses the same case and files new requests for more seizures. (A recent November 14 order went after an additional 228 sites; none had a chance to contest the request until after it was approved and the names had been seized.)
How were the sites investigated? For the most recent batch of names, Chanel hired a Nevada investigator to order from three of the 228 sites in question. When the orders arrived, they were reviewed by a Chanel official and declared counterfeit. The other 225 sites were seized based on a Chanel anti-counterfeiting specialist browsing the Web.
That was good enough for Judge Kent Dawson to order the names seized and transferred to GoDaddy, where they would all redirect to a page serving notice of the seizure. In addition, a total ban on search engine indexing was ordered, one which neither Bing nor Google appears to have complied with yet.
Missing from the ruling is any discussion of the Internet’s global nature; the judge shows no awareness that the domains in question might not even be registered in this country, for instance, and his ban on search engine and social media indexing apparently extends to the entire world. (And, when applied to US-based companies like Twitter, apparently compels them to censor the links globally rather than only when accessed by people in the US.)
http://tinyurl.com/7prmcro
The US Government seized another batch of domain names last week:
http://www.ice.gov/news/releases/1111/111128washin...
At a Occupy LA Teach In, he sums up the incredible disregard that the US Government has towards all the looting and fraud by the banks. Not one criminal referral from the bank regulators. Fraud with impunity.
http://tinyurl.com/ch7go3h
WSJ reports on the edge Fed chairman Ben Bernanke and other Fed officials are giving the insiders:
"Hours after an Aug. 15 meeting with Federal Reserve Chairman Ben Bernanke in his office, Nancy Lazar made a hasty call to investor clients: The Fed was dusting off an obscure 1960s-era strategy known as Operation Twist.
The news pointed to a boom in long-term bonds.
It was a good call. Over the next five weeks, prices on 10-year Treasury bonds soared, offering double-digit returns in an otherwise dismal year.
By the time the Fed announced its $400 billion Operation Twist on Sept. 21, the window for quick profits had all but slammed shut.
Ms. Lazar is among a group of well-connected investors and analysts with access to top Federal Reserve officials who give them a chance at early clues to the central bank's next policy moves, according to interviews and hundreds of pages of documents obtained by The Wall Street Journal through open records searches. Ms. Lazar, an economist with International Strategy & Investment Group Inc., wouldn't comment for this article.
The access is part of a push by hedge funds and other traders to get more information about the inner workings of government. Developments in Washington have become more important after the financial crisis in 2008 spawned new regulations and a stronger hand by lawmakers in businesses...
Such talks are perfectly legal but create a delicate dance for the Fed, which tries to sate its need for information to help guide monetary policy without giving Wall Street an unfair advantage over Main Street.
Mr. Bernanke discusses only matters already public, a spokeswoman said. But hedge fund managers and Wall Street executives who meet regularly with him and other Fed officials—both in his office and through advisory committees—say they get valuable insights during the face-to-face talks.
"It's like an inquisition, they have a topic," said Laurence Fink, chief executive of investment-management giant BlackRock Inc. "By the questions they ask, by definition, you know what's on their mind."...
Mr. Fink had phone calls and meetings with Fed officials ten times over the past two-and-a-half years, according to their calendars and open records requests. He said most of the conversations related to BlackRock's role as a paid adviser to the New York Fed about complex financial structures formed during the financial crisis.
New York Federal Reserve Bank President William Dudley also meets regularly with investors, both in his office with individuals and in committee groups. The New York Fed, one of 12 regional banks that constitute the Federal Reserve System, has the strongest ties to investors because it conducts the Fed's bond-market transactions...
Over the past two-and-a-half years, Mr. Dudley has had dozens of private meetings, according to his calendar, which lists SAC Capital Advisors, Citadel Investment Group, Duquesne Capital Management, and Tudor Investments, among others. Lloyd Blankfein, chief of Goldman Sachs Group Inc., and Mr. Fink, of BlackRock, also had private meetings, according to Mr. Dudley's calendar...
Worries about Fed access surfaced a year ago. On Aug. 18, 2010, former Fed governor Laurence Meyer, who runs a research service predicting and analyzing Fed actions, told clients in a note the central bank's "bazooka is loaded" to buy bonds to stimulate the economy.
The note described how the Fed's "doves," members inclined to ease monetary policy, had said the Fed couldn't "sit on its hands," according to Mr. Meyer's account. An Aug. 20 note included some specific information about the Fed's balance sheet.
A week later, Mr. Bernanke said during a speech in Jackson Hole, Wyo., that "policy options are available to provide additional stimulus" to the economy. Stocks rose on the news, which by then had given Mr. Meyer's clients plenty of time to profit."
Iceland may hold new currency auctions within weeks as the island scales back its defenses against capital flight, central bank Governor Mar Gudmundsson said.
“We’ll begin the auctions as soon as we get applications from the intermediaries and when the amounts are sufficient to permit an auction,” Gudmundsson said in an interview in Reykjavik. “I’m hoping that it will be in the next weeks.”
The island, whose banks defaulted on $85 billion in 2008, is moving into the final stages of its resurrection plan as the last vestiges of crisis management are gradually removed. Iceland’s decision, taken together with the International Monetary Fund, to impose capital controls three years ago was key to surviving the bleakest moments of the crisis and helped prevent an all-out run on the island’s assets, Gudmundsson said.
“Without the capital controls it would have been much more difficult to ensure stability in the exchange rate, calling for much higher interest rates and an inability to shelter the domestic economy as well as we did,” he said. “With the turbulence in the international markets lately, the capital controls have sheltered Iceland considerably, since there’s no way of doing a run on the financing of the Icelandic state or the financing of the Icelandic banks.”
The auctions are part of a first phase to free up offshore kronur. A second phase will deal with foreign investors’ holdings of onshore kronur, according to the central bank. That phase will start when the offshore and onshore rates converge. Offshore kronur trade at about 250 to the euro, according to Reykjavik-based brokerage HF Verdbref. The onshore rate was 159.35 on Nov. 18.
Outperforming Euro Area
Iceland’s economy will grow faster than the euro-area average this year and next, the IMF estimated in September. The cost of insuring against an Icelandic default, using credit default swaps, is lower than the average for the euro area.
Iceland’s economy will grow 2.5 percent this year and next, versus 1.6 percent in the euro area this year and 1.1 percent in 2012, the IMF said Sept. 20. Next year, Iceland’s current account surplus will widen to 3.2 percent of the economy and unemployment will be 6 percent, versus 9.9 percent joblessness in the euro area, the fund said.
The stabilization of the island’s economy has allowed the central bank to press ahead with capital liberalizations that the government estimates won't be fully dropped until 2013. The approach allows foreign investors eager to offload their krona holdings to transfer them to foreign or local investors willing to commit long-term to the island, according to the central bank.
Foreign Direct Investment
“This will show how much interest there is in direct foreign investment in Iceland,” Gudmundsson said. “This step will help us considerably in reducing the amount of offshore kronur and transferring them from those, who might unwillingly hold them, into the hands of those who are willing to use them in Iceland. That will have a great effect on how we’ll be able to move on to the full abolishment of capital controls.”
The process is the second step of the first phase in easing controls. The first step had allowed investors, via foreign currency auctions, to place kronur in long-term government bonds. The second step broadens the terms to allow investors to place their kronur in assets such as equities and real estate. The bank isn’t progressing according to a timetable, and announces each step once the economic and financial conditions are in place.
“How many weeks” it takes before the currency auctions start “and whether it will be less than a month or more than a month is hard to say,” Gudmundsson said. “There are no guarantees that this will take place before Christmas, and if not, then hopefully we’ll be able to have a strong beginning in 2012.”
http://tinyurl.com/6vkhg6x
FULLY SYNCHRONIZED
"Composite leading indicators (CLIs) for September 2011 continue pointing to a slowdown in economic activity in most OECD countries and major non-member economies. Compared to last month’s assessment, the CLIs point more strongly to slowdowns in all major economies. In Japan, Russia and the United States the CLIs point to slowdowns in growth towards long term trends. In Canada, France, Germany, Italy, the United Kingdom, Brazil, China, India and the Euro area, the CLIs point to economic activity falling below long term trend."
http://tinyurl.com/6wmxr9x
I wonder what is the size of their leverage...
http://www.jefferies.com/html/OurFirm/NewsRoom/Pre...
U.S. banks have guaranteed a total of 518 billion dollars worth of government, bank and corporate debt of Greece, Portugal, Ireland and Italy via sales of credit default swaps.
Yet, JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc., the leading CDS underwriters in the U.S., report less than that amount by claiming their net positions are smaller because they purchase swaps to offset ones they're selling to other companies.
Absolute BS.
These swap contracts are worthless. They will never be paid. There will never be a hard default declared by the ISDA. These banks continue to make millions by selling worthless insurance.
http://tinyurl.com/6glhnln
This could be a huge problem going forward. I get the feeling that somehow the US taxpayer will be forced to cover the trades.
Clearinghouses Preparing For Potential Bankruptcy Of MF Global Sources
By Jacob Bunge, Of DOW JONES NEWSWIRES
Exchange clearinghouses and U.S. regulators were preparing late Sunday for a potential bankruptcy filing or other restructuring by broker-dealer MF Global Holdings Ltd. (MF), according to people involved in the process.
The New York-based broker has been working this weekend to secure the sale of assets or the entire company, but by late Sunday a restructuring was seen as one option for all or parts of the company.
MF Global is one of the largest customers of a raft of derivatives exchanges in the U.S. and overseas, and had over the last week remained "in good standing" --or fit to trade--despite its sliding share price and concerns over liquidity and customer defections.
Clearinghouse officials Sunday held a series of conference calls with MF Global and regulators to assess the impact of any bankruptcy filing, according to people close to the matter.
Exchange clearinghouses guarantee both sides of an exchange-based trade, storing collateral posted by members that provides a cushion against large trading losses or potential defaults.
CME Group Inc. (CME) operates the biggest U.S. clearinghouse for futures trading. Other major clearinghouses are run by IntercontinentalExchange Inc. ( ICE), New York Portfolio Clearing and the Options Clearing Corp., the latter of which handles all trade in U.S. stock options.
If MF Global slides into bankruptcy, the outstanding trading positions of its customers would be protected by U.S. laws governing derivatives markets. However, these positions would need to be transferred to other members of the clearinghouse, a process that requires the exchange or parent company of each clearing facility to rally other members and keep regulators apprised.
Should a bankruptcy filing happen, some officials anticipated larger-than- usual volatility to churn the markets where MF Global is most active, such as futures linked to the price of commodities, interest rates and stock indexes.
The company wasn't immediately available for comment on any discussions with the clearinghouses.
-By Jacob Bunge, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com
via HSBC emerging markets index report Q3 2011:
Emerging market output growth (covering manufacturing and services) eased to a nine-quarter low in Q3 2011. Additionally, the EMI reading was the fourth-lowest in the series history, only surpassing levels registered between Q4 2008 - Q2 2009.
Link:
http://tinyurl.com/438ka37