Busted: Bankers and The Global Economy

November 8, 2008

Where has inflation gone?

inflationary-dollarFor those that are wondering where all the inflation-talk has gone, look no farther than the back-burner economic news articles. In fact, Dallas Federal Reserve President Richard Fisher says that inflationary forces have vaporized. Don’t you believe it. Right now, the only concern is for the hope of stability and authorities are bent on that match. The economy is so depressed coupled with global recession that the immediate inflationary pressures have moderated. Other than housing prices, do you see any real pricing changes? Are prices down at all? America still has inflation, but hyperinflationary pressures have cooled.

securityWages are down. The middle class and below is suffering. America has stagflation, a nasty mix of inflation and a stagnant economy. What’s more, any measure of heightened inflation in the future isn’t being discussed with the idea that if we don’t talk about it, inflation won’t happen. The United States faces the same plight as Japan did in the 1990’s. However, right now, the U.S. dollar is not deflated in comparison with other benchmark currencies because of the global span of the crisis. Mr. Fisher says the dollar isn’t deflated, but admits that we will see “headline inflation.” Every measure taken in an effort to insure economic stability is destined to propel inflation to new heights. That isn’t now, so who cares as long as we can cool the heat now. This detracts from the idea that the United States has a major national security issue. ~ E. Manning

August 10, 2008

Banks Eat Billions; Credit Crunch Expands

paranoid banking firms gamble on their importance

paranoid banking firms gamble on their importance

The Securities and Exchange Commission stepped in and decided that auction-rate securities have been improperly sold to the public. They haven’t said much else as they carefully watch over the fold of now paranoid bankers. Investment bankers have plenty of egg on their face with punitive action in the immediate future by the Feds.

Citigroup and Merrill Lynch have decided to buy back billions of dollars of securities without admitting liability officially because of state regulator pressure. Bank of America and Countrywide are firmly ensconced in trouble. Swiss giant UBS is in the throes of negotiating a payout that could be in the 25 billion dollar region. As private citizens and investors, we know the reality of the situation. Bankers have tried to play us for fools for the almighty dollar and perhaps investors bit off too much, too soon in the haste for profit.

In theory, when times get better larger investors and even banks should be able to sell off the securities once the markets ease and there’s more credit in the system. That is the public line, but the truth is probably altogether different. Selling off investments with major liquidity issues is a big maybe considering the quantity of these beleaguered banking instruments. Following the aftermath of the subprime mortgage debacle, this is yet another blow to the reputation of investment banks, who may struggle to sell such “sweet deals” in future times even at fire sale prices.

British banks are taking huge hits as a result of the credit crunch with increased pressure to perform for stockholders. Lloyds, Halifax and Alliance & Leicester have been fairly decimated profit-wise. Now RBS and Barclays are taking turns with profit thrashing. British banks haven’t found the credit crunch much easier than U.S. banks. Housing prices continue to drop in the U.S. and the United Kingdom. Foreclosures are a uniform blight in both economies while bankers and economies struggle to adjust. The U.S. market has lost nearly a million homes to foreclosure with more on the way: the worst since the Great Depression.

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