The inverse trade to the USD is gold.

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says

By Shigeki Nozawa

Oct. 15 (Bloomberg) — The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

The dollar last week dropped to the lowest in almost a year against the yen as record U.S. government borrowings and interest rates near zero sapped demand for the U.S. currency. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, has fallen 15 percent from its peak this year to as low as 75.211 today, the lowest since August 2008.

The gauge is about five points away from its record low in March 2008, and the dollar is 2.5 percent away from a 14-year low against the yen.

“We can no longer stop the big wave of dollar weakness,” said Uno, who correctly predicted the dollar would fall under 100 yen and the Dow Jones Industrial Average would sink below 7,000 after the bankruptcy of Lehman Brothers Holdings Inc. last year. If the U.S. currency breaks through record levels, “there will be no downside limit, and even coordinated intervention won’t work,” he said.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency. Hossein Ghazavi, Iran’s deputy central bank chief, said on Sept. 13 the euro has overtaken the dollar as the main currency of Iran’s foreign reserves.

Elliott Wave

The greenback is heading for the trough of a super-cycle that started in August 1971, Uno said, referring to the Elliot Wave theory, which holds that market swings follow a predictable five-stage pattern of three steps forward, two steps back.

The dollar is now at wave five of the 40-year cycle, Uno said. It dropped to 92 yen during wave one that ended in March 1973. The dollar will target 50 yen during the current wave, based on multiplying 92 with 0.764, a number in the Fibonacci sequence, and subtracting from the 123.17 yen level seen in the second quarter of 2007, according to Uno.

The Elliot Wave was developed by accountant Ralph Nelson Elliott during the Great Depression. Wave sizes are often related by a series of numbers known as the Fibonacci sequence, pioneered by 13th century mathematician Leonardo Pisano, who discerned them from proportions found in nature.

Uno said after the dollar loses its reserve currency status, the U.S., Europe and Asia will form separate economic blocs. The International Monetary Fund’s special drawing rights may be used as a temporary measure, and global currency trading will shrink in the long run, he said.

Original Article

Russia ready to abandon dollar in oil, gas trade with China

Putin in Talks with China

BEIJING, October 14 (RIA Novosti) – Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings, Prime Minister Vladimir Putin said on Wednesday.

The premier, currently on a visit to Beijing, said a final decision on the issue can only be made after a thorough expert analysis.

“Yesterday, energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans,” Putin said.

He stressed that “there should be a balance here.”

On Tuesday, Russia and China agreed terms for Russian gas deliveries at a level of up to 70 billion cubic meters a year. China also imports oil from Russia.

The Russian prime minister said the issue would be addressed among others at a meeting of Shanghai Cooperation Organization (SCO) finance ministers, who are to convene before the end of the year in Kazakhstan.

Britain’s Independent newspaper reported last Tuesday that Russian officials had held “secret meetings” with Arab states, China and France on ending the use of the U.S. dollar in international oil trade.

The countries are reportedly seeking to switch from the dollar to a basket of currencies including the euro, Japanese yen, Chinese yuan, gold, and a new unified currency of leading Arab oil producing countries.

The Independent said the meetings have been confirmed by Chinese and Arab banking sources.

Original Article

Federal Reserve

Did I not say the Fed would be the buyer of all these new Treasury Issuances??

If you are in the bond markets, why?

Get safe while you can. This can end only one way. Dollar Deadpool.

Fed Extends Bond Purchases Until October But Not Amount

(Reuters) – The US Federal Reserve said Wednesday the economy was showing signs of leveling out after 20 months of recession and it will extend the duration but not the size of a program to buy long-term government securities to minimize any disruptions from completing it.

The U.S. central bank also kept its benchmark short-term interest rate steady near zero and said it would likely stay there for an extended period.

“To promote a smooth transition in markets as these purchases of Treasury securities are completed, the committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October,” the Fed said in a statement at the conclusion of its policy-setting meeting.

* (Click here to read the statement.) http://www.cnbc.com/id/32390276/

The Fed launched the debt buying program in March when it had already chopped interest rates to zero but wanted to open the money taps even wider to support the struggling economy.

Treasury purchases were previously scheduled to expire in September. “They see the worst with the economy is behind us but they don’t want to jump the gun and pull back quickly,” said Craig Thomas, a senior economist at PNC Financial Services in Pittsburgh.

US Treasury prices tumbled fell after the Fed statement in apparent disappointment that the Fed did not increase the amount of debt that it plans to buy but subsequently regained some ground.

However, major U.S. stock indexes extended gains and the dollar rose against the yen.

The Fed slashed interest rates to a range of between zero and 0.25 percent in December and has pumped hundreds of billions of dollars into financial markets to stimulate economic activity in the worst recession in decades.

The economy has shown signs it is coming out of its swoon and job losses, which have already topped 6 million, may be moderating.

The Fed gave its clearest statement to date that it sees the recession nearing an end and that shattered financial markets are healing.

“Information since the Federal Open Market Committee met in June suggests economic activity is leveling out,” the Fed said.

“Conditions in financial markets have improved in recent weeks.” It is the first time since August 2008 the panel’s statement has not characterized the economy as contracting, weakening or slowing.

The Fed in July forecast that growth would return in the second half of the year after contraction in five out of the last six quarters, but cautioned that unemployment should stay high well into 2011.

In its statement, the Fed renewed its warning that economic activity is likely to stay soft for “a time.” Household spending, while stabilizing, is still weak as a result of the grim labor market and tight credit, the Fed said.

The Fed renewed its pledge to keep rates exceptionally low for an extended period.

To quell worries the Fed’s bloated balance sheet may sow the seeds of dangerous inflation once the recovery gains traction, Fed Chairman Ben Bernanke has taken pains to explain the Fed’s tools to pull money out of the financial system to prevent price pressures from rising.

Original Article

China - Hungry Dragon

I have been saying for a long time that China has been aggressively stockpiling commodities, buying mineral rights all over the globe, and buying up companies that produce products of the earth.

This signals a new tactic for the Chinese: outright unsolicited offers for mining companies.

Normally the Chinese are more reserved, tactful, willing to be patient and win via masterfully executed maneuvers – much like Sun Tzu’s Art of War.

It seems their patience, as well as their willingness to depend on the dollar retaining its value (and thus the buying power of their portfolio) is coming to an end.

I think this is the beginning of an ever more aggressive stance towards purchasing commodities and raw materials. They know the dollar is going to the deadpool of currencies, and want to buy while it still commands the value it does.

Gold will again reign as the king of currencies.

China makes unexpected grab for Canadian miner

State-controlled Jilin Jien launches a surprise bid for Canadian Royalties, a stark change in tactics for the Asian superpower

ANDY HOFFMAN

From Tuesday’s Globe and Mail Last updated on Wednesday, Aug. 12, 2009 02:44AM EDT

China’s insatiable hunger for natural resources has officially turned hostile.

State-controlled Jilin Jien Nickel Industry Co. Ltd. launched a surprise $148.5-million unsolicited takeover bid for Canadian Royalties Inc. yesterday, marking one of the first times the Asian economic superpower has gone after foreign resource assets without first winning a friendly agreement with management.

China has become an active acquirer of foreign resources amid the global economic crisis, investing in copper, oil and iron ore needed to fuel its fast-growing economy. But despite massive financial resources and a mandate to diversify its $2-trillion (U.S.) in foreign exchange holdings into so-called hard assets such as commodities, most of China’s resource deals have been friendly.

The hostile offer comes as federal Finance Minister Jim Flaherty is in Beijing on a trade mission to encourage Chinese investment in Canadian companies.

“China has a need for resources. China has … substantial U.S. dollar cash reserves,” Mr. Flaherty told reporters yesterday. “China is looking for investments abroad. Commercial investments, subject to proper governance, are welcomed in Canada.”

Mr. Flaherty wants China to invest in publicly traded Canadian companies. His comments suggest that, despite political and security concerns, Ottawa is comfortable with such an investment structure. Mr. Flaherty plans to meet today with Lou Jiwei, chairman of China’s $200-billion sovereign wealth fund.

The unexpected bid for Canadian Royalties, which is developing the Nunavik nickel project in northern Quebec, marks a significant change in tactics for a Chinese state entity. “This is new. … This could be the tip of the iceberg,” one mining investment banker said.

Glenn Mullan, chairman and chief executive officer of Canadian Royalties, said the takeover offer blindsided his company. Neither Jien nor its Canadian partner, Goldbrook Ventures Inc. of Vancouver, which has a 25-per-cent stake in the company created to make the bid, contacted Canadian Royalties’ management before launching the offer.

“This one has a long way to go. I think you’ll see lots of interest in Canadian Royalties going forward,” Mr. Mullan said in an interview.

Canadian Royalties was a market darling during nickel’s heyday in 2007, when the price of the metal used to make stainless steel soared above $20 a pound.

However, the commodities crash and the credit crisis last fall resulted in a sharp reversal of fortune for the Montreal company. Financing for the $500-million Nunavik project collapsed and Canadian Royalties was forced to put the operation on care and maintenance.

Mr. Mullan said Jien and Goldbrook are taking a run at the weakened company in an attempt to pick up its valuable resources on the cheap. The Nunavik project contains approximately 20 million tonnes of ore, grading about 1 per cent nickel and 1 per cent copper. Because of its small size, the bid would not require Ottawa’s approval under the Investment Canada Act.

“At the end of the day, this is all about assets, commodities – nickel specifically – and China’s appetite for commodities,” Mr. Mullan said.

The company has hired advisers and expects to officially respond to the bid soon.

In 2004, a bid for Canada’s Noranda by state-backed China Minmetals Corp. fell apart amid pressure from Canadian politicians to scrap the takeover. In 2005, China National Offshore Oil Corp. pulled an $18.5-billion offer for Unocal Corp. following a firestorm of opposition from U.S. legislators. Australia recently blocked a $1.7-billion bid for Oz Minerals by Minmetals, citing national security concerns. The deal had to be restructured to exclude a key mine asset near an Australian military site.

In a more typical, friendly, deal struck last month, sovereign wealth fund China Investment Corp. (CIC) agreed to invest $1.74-billion to become the largest B-class shareholder in Teck Resources Ltd., Canada’s biggest base metals miner.

Original Article

Remember what the ’sub-prime’ catastrophe did to the economy?

Get ready for market panic 2.0

Remember Sub-Prime?

Interesting piece from Deutsche Bank on rapidly deteriorating Construction loans. DB predicts that “construction loans will be the epicenter of bank loan problems”

• By far the riskiest type of loan product in bank portfolios;
• Substantial portion represents loans to homebuilders;
• Market currently penalizing properties with vacancy issues extremely severely;
• Newly constructed (or only partially constructed) properties are the poster children for vacancy problems in CRE;
• Values of most newly constructed properties are down massively;
• Expect extremely high default rates and extremely high loss severity rates, both likely to be in excess of 50%;
• Total expected losses of 25% or more.

Commercial Loan Delinquency

The Chinese are pretty smart cookies. Ya, I know, I go on and on about the Chinese, but why shouldn’t I?

In many ways, they are taking the exact same path the US took in its rise to dominance.

The US used to have strategic stockpiles of virtually everything, from base metals to rare metals used in military applications, to silver, gold, oil, etc. Today, those stocks stand depleted, or completely sold off.

China on the other hand is buying raw materials hand over fist. The copper consumption of the Chinese is off the charts for example. This is a simple and expedient way for China to diversify their massive stockpile of USD denominated foreign reserves (roughly $2Trillion) and buy up commodities while the USD is still retaining its value, as well as position themselves in the investments that will hold the greatest value moving forward.

If I were diversifying out of my reserves I would also buy US Treasuries, not because I thought they were worth anything, but because it maintains the buying power of my other $2Trillion USD…call it the cost of doing business. Keep in mind, the Chinese have also found a means of using their USD Treasuries as collateral for direct exposure to the commodities markets via hedge funds…this puts a backstop in place that if the US wanted to slam commoditites prices to prop up the dollar it would do so at the potential risk of devaluing the Treasury instruments the Chinese are using as collateral for their margin calls. Quite brilliant.

Then, when the fiat system resets, China will be holding the aces…commodities…both in raw form and the companies that produce them.

Gold and silver will be much more relevant as money moving forward, do not forget there are 1.4 QUADRILLION dollars worth of OTC derivatives currently in the process of blowing up…it is the biggest paper market on earth..that virtually no one knows about or talks about. As the current fiat currency cycle hurtles towards a reset, people will rush into ‘honest money’.

China to deploy foreign reserves

By Jamil Anderlini in Beijing

Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.

“We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,” he told Chinese diplomats late on Monday.

Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.

The “going out” strategy is a slogan for encouraging investment and acquisitions abroad, particularly by big state-owned industrial groups such as PetroChina, Chinalco, China Telecom and Bank of China.

Qu Hongbin, chief China economist at HSBC, said: “This is the first time we have heard an official articulation of this policy … to directly support corporations to buy offshore assets.”

China’s outbound non-financial direct investment rose to $40.7bn last year from just $143m in 2002.

Mr Wen did not elaborate on how much of the $2,132bn of reserves would be channelled to Chinese enterprises but Mr Qu said this was part of a strategy to reduce its reliance on the US dollar as a reserve currency.

“This is reserve diversification in a broader sense. Instead of accumulating foreign exchange reserves and short-term financial assets, the government wants the nation to accumulate more long-term corporate real assets.”

State-owned groups, particularly in the oil and natural resources sectors, have stepped up their hunt for overseas companies and assets on sale because of the global crisis.

China Investment Corp, the $200bn sovereign wealth fund, has been buying stakes in overseas resources companies and has taken a 1.1 per cent stake in Diageo, the British distiller.

In an interview published in state-controlled media, the chairman of China Development Bank said Chinese outbound investment would accelerate but should focus on resource-rich developing economies.

“Everyone is saying we should go to the western markets to scoop up [underpriced assets],” said Chen Yuan. “I think we should not go to America’s Wall Street, but should look more to places with natural and energy resources.”

“India’s gold demand as reflected in imports have fallen drastically in the first six months,” Harmesh Arora, vice president of the Indian association said today in a phone interview from Mumbai. “There are still no signs of demand picking up as global prices are moving higher,” said Arora, who also believes China could overtake India in gold consumption.

Still, India meets most of its demand from imports, some of which are brought in through unofficial channels and are not represented in official data, said Mukul Sonawale, partner of Mumbai-based Narrondass Manordass Co. and a past president of the Bombay Bullion Association.

“China can emerge as the world’s biggest consumer only on paper,” he said. “The official figures of imports will be quite deceiving as they don’t capture all the imports. With India doubling the import duty on gold, the unofficial channel is bound to increase.”

* I still see a global monetary collapse. A crisis of confidence in fiat currencies triggered by a USD collapse. Gold will do well. Here are the 10 reasons :

The Stimulus Effect:Including $1 trillion in cash infusions, the stimulus plan will pump $9.7 trillion into the economy, according to Bloomberg. As the Globe & Mail reports flatly, “Many believe that the monetary stimulus efforts will cause a spike in inflation,” driving gold higher.

COMEX Traders Predict $1,600 Gold… by December: If gold trades at or above $1,600 by December, some 100,000 call option contracts will be “in the money.” Big-money players Goldman Sachs and JPMorgan are reportedly helping to drive the action, ahead of a huge purchase of gold futures contracts.

“Big Money” Inflows:In 2008, NYC-based hedge fund Paulson & Co’s flagship fund returned 37%, as the world markets burned. Paulson’s bullish on gold, big time, including the Mar. 17 purchase of 39.9 million shares of AngloGold, worth $1.28 billion. Other major hedge funds are piling into gold, too, including Eton Park Capital, Green light Capital and Hayman Advisors.

China’s Doubling Down! China just revealed that it has doubled its gold holdings to 1,054 tons. Yet that still only equals 1.6% of its overall reserves. As China moves out of U.S. Treasuries and into gold, this will help fuel the next leg of the run-up.

Demand Building across the Board:Worldwide demand for gold jumped by $29.7 billion in the first quarter, a 36% bolt, according to the World Gold Council. Demand for gold ETFs (Exchange Traded Funds) rocketed 540%… another trigger for the coming gold boom.

The Paper Dollar’s 30% Drop: Since 2001, the U.S. Dollar Index has tanked 30%… while gold has risen 300%. With all the downward pressure on the dollar, and inflation on the way, this trend is about to pick up steam.

Gold/Dow Ratio Signals $8,000 Gold: During major gold bull markets (and corresponding equity bears), gold and the Dow converge at a 1-to-1 ratio. During the last gold bull, the Dow sank to 850 and gold rose to $850. The Dow is now over 8,000… But even if it fell to 4,000, we could see $4,000 gold before this bull run is over!

U.S. Treasury Dept. Signals $5,468 Gold: Currently, the U.S. government holds about 286.9 million ounces of gold. It has printed about $1.569 trillion worth of paper dollars. If each dollar were backed by gold, that would put the price at $5,468.80 an ounce.

Riding the “Commodity Super Cycle”: Jim Rogers expects the Commodity Super Cycle to drive commodity prices higher for another eight years… including gold. And he’s stockpiling the yellow metal by the day. Every pullback, says Rogers, is another buying opportunity. Considering he’s been dead right on every major trend of the past 40 years, we wouldn’t bet against him.

Historic Model Predicts $6,214 Gold: During the last gold bull, the yellow metal ran from $35 an ounce to $850, a 24-fold increase. This bull started with gold at $255.95, meaning that if historic trends hold, the price target would be $6,214 an ounce.

Here is a little global economy roundup:

Many still think the economy is on the verge of recovery. While the rest of the developing world continues to steam ahead plowing through obstacles, the western world continues to spiral downward. This still does not take into consideration ALT-A and ARM loan resets through 2011.

July 9 (Bloomberg) — The $3.5 trillion commercial real estate market is a ticking “time bomb” that may lead to a second wave of losses at large U.S. banks, congressional Joint Economic Committee Chairwoman Carolyn Maloney said.

About $700 billion in commercial mortgages will need to be refinanced before the end of 2010 and “doing nothing is not an option,” Maloney, a New York Democrat, said at a committee hearing today. This “looming crisis” may lead to significant losses for banks, force shopping center and hotel owners into bankruptcy, and impede economic recovery, she said.

Meanwhile, the rest of the world forges onward.

The IMF  claims Asia cannot decouple from the western world economies and will not continue to grow until the west recovers…this article doesn’t agree. Also….has the head economist of the IMF forgotten that China has almost $2 Trillion in savings that it can spend?

SAN FRANCISCO (MarketWatch) – China wrestled the new-car sales crown from the U.S. through the first half of the year, topping 6 million cars and trucks at a time when the long-time global sales leader grapples with historic declines.

Do you really think the worlds leaders believe all this BS about green shoots? If they did, would they be plowing money into commodities like this? Or maybe is it, that they know that if you print $13.5 Trillion (and growing) you will see massive inflation of real prices, so they are buying while its cheap and using lip service to keep the dollar value from dropping to preserve as much buying power as possible?

BEIJING, July 10 (Reuters) – China’s imports of unwrought copper and semi-finished copper products in June hit an all-time record for a fifth straight month of 475,999 tonnes, from May’s record 422,666 tonnes, data from the General Administration of Customs showed on Friday.

Rats from a sinking ship

More Diversification out of Dollar…Japan has always been one of the biggest supporters of the USD…and now there is public discussion of diversifying out of it…this is very bearish for the USD (and very bullish for gold)…this may be a prelude to a new ‘basket of currencies’ as an index to a new global exchange currency

July 13 (Bloomberg) — Japan’s opposition party, leading in polls ahead of next month’s election, said the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds.

The next world reserve currency

President Medvedev has called for a gold backed currency over and over. This time, he isnt just calling for it, he is producing examples of it. He handed coins to the leaders of G8 delegations, a proto-type of a potential new global currency…and these coins were pure gold. Any move in this direction would be extremely bullish for gold. Read an article I wrote regarding shifting to a gold back currency to understand why.

July 10 (Bloomberg) — Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a “united future world currency.”

My colleagues have been right so far, having called the current economic crisis over a decade ago. This video proves it: Millennium Money as it was produced in the mid 90’s.

Our portfolios also reflect the fact that those who listened to us over the last few years are doing quite well right now. Those who did not…maybe not so much.

I will be sending out a ‘Rapid Trends Insider’ email later today with an exclusive chance to listen in on a recent round-table discussion with my colleagues regarding the global supply / demand situation, as well as an interview we did with David Morgan, one of the worlds top recognized silver analysts.

You can join our newsletter here: Rapid Trends Insider

For those of you who dont know, the USD is the world reserve currency, and for decades all world trade has been settled in it.

Governments of the world are not going to stand by until the US fixes it problems, China has been steadily putting the pieces in place to conduct global trade with or without the Dollar.

If using methods of trade settlement besides the dollar becomes common practice, it means further pressure on the dollar downward…which means dollars come home.
MOSCOW (Reuters) – Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia’s president Dmitry Medvedev said in an interview with Kommersant daily published on Friday.

China has already entered similar agreements with Brazil and Belarus. The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase.

“I think that we can think about such positions, for example the rouble against yuan,” Medvedev was quoted by Kommersant as saying. Russia’s own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

Original Article

We are now officially directly monetizing debt, and creating money out of thin air.

God forgive us for what we are about to do to our children.

September 17, 2008
HP-1144

Treasury Announces Supplementary Financing Program

Washington- The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week.  To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.

The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve.  The program will consist of a series of Treasury bills, apart from Treasury’s current borrowing program, which will provide cash for use in the Federal Reserve initiatives.

Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules.  Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.

http://www.ustreas.gov/press/releases/hp1144.htm

***

Bernanke: ‘We have lost control’

Economist recounts talk with Fed chairman

By Joshua Boak | Chicago Tribune reporter
September 17, 2008

NAPLES, Fla. — Several months ago, economist David Hale had a private meeting with Federal Reserve Chairman Ben Bernanke, who was trying to ward off a recession by lowering interest rates and increasing the money supply in the economy.

“Ben, you are playing a very unique role in world economic history,” Hale recalled telling Bernanke, an expert in the Great Depression. “You are the first central bank governor of the United States to preside over a recession with no decline in commodity prices.”

“We have lost control,” said Hale, quoting Bernanke. “We cannot stabilize the dollar. We cannot control commodity prices.”

http://www.chicagotribune.com/business/chi-wed_oilsep17,0,4833605.story

***

Government steps in again, bails out AIG with $85B

By JEANNINE AVERSA, IEVA M. AUGSTUMS and STEPHEN BERNARD, AP Business Writers 1 hour, 30 minutes ago

In the most far-reaching intervention into the private sector ever for the Federal Reserve, the government stepped in Tuesday to rescue American International Group Inc. with an $85 billion injection of taxpayer money. Under the deal, the government will get a 79.9 percent stake in one of the world’s largest insurers and the right to remove senior management.

http://news.yahoo.com/s/ap/20080917/ap_on_bi_ge/aig;_ylt=AonHCCQ2_HZ__h1XWo5HDf2s0NUE

***

Global credit system suffers cardiac arrest on US crash

By Ambrose Evans-Pritchard
Last Updated: 11:59pm BST 17/09/2008

The global credit system almost grinds to a halt as yields on US Treasury bills reach zero for the first time since the Great Depression, writes Ambrose Evans-Pritchard

The global credit system came close to total seizure yesterday. Key parts of the derivatives market shut down and a panic flight to safety depressed the yield on three-month US Treasury bills to almost zero for the first since the Great Depression in 1934.

The closely-watched TED-spread measuring stress in the interbanking lending market rocketed to 238 as the share prices of Morgan Stanley, Goldman Sachs, Citigroup, Wachovia, and Bank of America all went into a tailspin yesterday.
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The collapse in investor confidence is a harsh verdict on the judgment of the US Federal Reserve, which chose to ignore market pleas for a rate cut to halt what amounts to a modern-era run on the banking system. Almost none of the current Fed governors have market experience. Most are academic theorists.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/18/ccambrose118.xml

***

Bright Side of a Total Financial Market Collapse: Michael Lewis 

We’ve just witnessed the largest bankruptcy in U.S. history and we know neither the inciting incident (though there is speculation that sovereign wealth funds decided to stop lending to Lehman Brothers Holdings Inc.), nor the deep cause. But there’s now a pile of assets and liabilities smoldering in New York awaiting inspection.

The assets include subprime mortgage-backed bonds and no doubt many other things that aren’t worth as much as Lehman hoped they might be worth. But it’s the liabilities that are most intriguing, as they include more than $700 billion in notional derivatives contracts. Some of that is insurance sold by Lehman, against the risk of other companies defaulting.

http://www.bloomberg.com/apps/news?pid=20601039&sid=a9xtBHJoZTOw&refer=home

***

Panic Is the Word of the Hour

Traders abandoned the NYSE temple visually defeated and immune to the TV crews waiting. The disastrous closing prices were flickering on the ticker above the NYSE entrance: American Express -8.4 percent; Citigroup -10.9 percent; JPMorgan Chase -12.2 percent. American icons, abused like stray dogs. Even Apple took a hit.

“I don’t know what else to say,” stammered one broker, who was consoling himself with white wine and beer along with some colleagues at an outdoor bar called Beckett’s. Ties and jackets were off, but despite the evening breeze, you could still make out the thin film of sweat on his forehead. His words captured the speechlessness of an industry.

http://www.spiegel.de/international/business/0,1518,578944,00.html

***

New World Order: Likely Morgan Merger Leaves Goldman Last Man Standing

Posted Sep 18, 2008 10:48am EDT by Aaron Task in Investing, Recession, Banking

As of this writing, the fate of Morgan Stanley remains uncertain although continued independence seems unlikely. The investment bank is having merger talks with a variety of players, including Wachovia and HSBC, while China’s sovereign wealth fund is looking to raise its stake in the firm, according to various reports. (After rallying early Thursday on such reports, Morgan shares recently turned negative, about $2 below its early high of $22.32.

The bigger story is a Morgan merger would leave Goldman Sachs as the last remaining major independent brokerage firm, when four existed a week ago and five were operating at the beginning of 2008.

“A new world order is upon us. A seismic shift that is redefining the brokerage intermediary,” writes Todd Harrison, CEO of Minyanville.com.

http://finance.yahoo.com/tech-ticker/article/62699/New-World-Order-Likely-Morgan-Merger-Leaves-Goldman-Last-Man-Standing?tickers=MS,GS,WB,BAC,XLF,AIG

***

In the Military, we called this “going to sleep on watch”, which during wartime was an offense punishable by death.

If we are not currently at war in the most desperate fight for our financial system and form of government, and if Congress is not falling asleep at the watch, then they need to reach down, grab a hold of their manhood, and put a stop to this before its too late.

Our Congress and Senate are the only powers within our laws that have full legal authority over the issuance of currency, and have only temporarily delegated it to the Federal Reserve. It is their DUTY and their RESPONSIBILITY to this generation and every generation of Americans to follow, to ACT and not GO HOME.

This is EXACTLY the reason our country is so incredibly screwed up right now.

Our “Leaders” are basically spineless, ignorant, “politicians” who have no clue as to how we got in this mess, let alone how to fix it.

But most important of all, it appears they do not have the courage to fix it, and that is what saddens me the most.

Democratic Congress May Adjourn, Leave Crisis to Fed, Treasury

By Kristin Jensen
More Photos/Details

Sept. 18 (Bloomberg) — The Democratic-controlled Congress, acknowledging that it isn’t equipped to lead the way to a solution for the financial crisis and can’t agree on a path to follow, is likely to just get out of the way.

Lawmakers say they are unlikely to take action before, or to delay, their planned adjournments — Sept. 26 for the House of Representatives, a week later for the Senate. While they haven’t ruled out returning after the Nov. 4 elections, they would rather wait until next year unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, who are leading efforts to contain the crisis, call for help.

One reason, Senate Majority Leader Harry Reid said yesterday, is that “no one knows what to do” at the moment.

“When you rush to judgment, you usually make mistakes,” said Sherwood Boehlert, a former Republican congressman from New York. “This is something you can’t go on forever without addressing, but Congress in a short span of time is best served by going home.”

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aVPBaUbYV_qQ

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The result?

Gold soars as safe haven from Wall Street

By Alden Bentley

NEW YORK (Reuters) – Gold logged its biggest price advance ever on Wednesday and oil snapped a two-day rout as fears that the bailout of U.S. insurer AIG would not end the turmoil on Wall Street restored the luster of an established safe haven.

Gold’s 8.97 percent futures rally was the largest daily percentage gain in since February 2000. In absolute terms, bullion had a record day, leading a recovery across the commodities asset class after several days of liquidation sales to raise cash.

http://www.reuters.com/article/newsOne/idUSN1724013520080917?sp=true

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Summary: If this thing goes to hell in a handbasket it will happen very quickly.

If that occurs, you will not have time to fix it afterwards.

Anchor your finances in gold and silver now, while you still have time.

Smart Rapid Trenders are already doing this. We may end up taking care of everyone else.

May God watch over us all.

Buy Gold and Silver Bullion