| Author | Message | | Alpha | | Posted: Sun Jan 27, 2008 5:14 am Post subject: |
| The Profile of a Third World Country
How Bush Destroyed the Dollar
By PAUL CRAIG ROBERTS
It is difficult to know where Bush has accomplished the most destruction, the Iraqi economy or the US economy.
In the current issue of Manufacturing & Technology News, Washington economist Charles McMillion observes that seven years of Bush has seen the federal debt increase by two-thirds while US household debt doubled.
This massive Keynesian stimulus produced pitiful economic results. Median real income has declined. The labor force participation rate has declined. Job growth has been pathetic, with 28% of the new jobs being in the government sector. All the new private sector jobs are accounted for by private education and health care bureaucracies, bars and restaurants. Three and a quarter million manufacturing jobs and a half million supervisory jobs were lost. The number of manufacturing jobs has fallen to the level of 65 years ago.
This is the profile of a third world economy.
The "new economy" has been running a trade deficit in advanced technology products since 2002. The US trade deficit in manufactured goods dwarfs the US trade deficit in oil. The US does not earn enough to pay its import bill, and it doesn't save enough to finance the government's budget deficit.
To finance its deficits, America looks to the kindness of foreigners to continue to accept the outpouring of dollars and dollar-denominated debt.
The dollars are accepted, because the dollar is the world's reserve currency.
At the meeting of the World Economic Forum at Davos, Switzerland, this week, billionaire currency trader George Soros warned that the dollar's reserve currency role was drawing to an end: "The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency. Now the rest of the world is increasingly unwilling to accumulate dollars."
If the world is unwilling to continue to accumulate dollars, the US will not be able to finance its trade deficit or its budget deficit. As both are seriously out of balance, the implication is for yet more decline in the dollar's exchange value and a sharp rise in prices.
Economists have romanticized globalism, taking delight in the myriad of foreign components in US brand name products. This is fine for a country whose trade is in balance or whose currency has the reserve currency role. It is a terrible dependency for a country such as the US that has been busy at work offshoring its economy while destroying the exchange value of its currency.
As the dollar sheds value and loses its privileged position as reserve currency, US living standards will take a serious knock.
If the US government cannot balance its budget by cutting its spending or by raising taxes, the day when it can no longer borrow will see the government paying its bills by printing money like a third world banana republic. Inflation and more exchange rate depreciation will be the order of the day.
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: PaulCraigRoberts@yahoo.com | |  | | Alpha | | Posted: Sun Jan 27, 2008 10:46 pm Post subject: Wall Street braces for more volatility |
| Wall Street braces for more volatility
By MADLEN READ, AP Business WriterSun Jan 27, 2:08 PM ET
Investors are exhausted after their whipsaw week, but they're not ruling out another one. All the assumptions Wall Street made when it recovered from steep losses last week — that the Federal Reserve will cut rates again, that President Bush's stimulus plan will proceed, and that any recession that occurs might actually be shallow and quick — are going to be tested.
On Monday night, Bush will make his State of the Union address. If it looks like the proposed $150 billion tax rebate for Americans could hit a snag in Congress, the markets' fears about consumer spending could balloon again.
Then on Wednesday, the Fed — which helped put a floor under the market last week by making an emergency, three-quarter-point rate cut — will finish its two-day meeting and release its rate decision. A failure to deliver the quarter-point reduction traders are betting on, or signs that the Fed is hesitant to loosen its policy further, could send stocks sliding.
And Friday, two snapshots of U.S. manufacturing and employment will tell investors how the economy fared in January. Economists expect jobs to increase but manufacturing activity to contract.
Wall Street, which lived up to its fickle reputation last week, could even be disappointed if it gets exactly what it wants but little else.
"If their expectations are met, they quickly ask, what's next?" said Alan Gayle, senior investment strategist and director of asset allocation for Trusco Capital Management.
Last week, after plunging, posting its biggest one-day upswing in five years and then capping the week with a loss, the Dow Jones industrial average finished the week up 0.89 percent. The blue chip index, down 8 percent since the beginning of the year, is on pace to log its worst January since 1960.
The Standard & Poor's 500 index finished the week 0.41 percent higher, while the Nasdaq composite index closed down 0.59 percent.
"If we're not at a bottom, we're probably very close," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. But, he added, the market is mercurial because there are many questions still unanswered — a big one being, how risky is the debt on banks' books right now following their bad bets on subprime mortgages?
"Volatility won't be over for a while," Conroy said. "These credit issues don't go away overnight."
And neither do worries of a recession without hard evidence that the United States is not headed for one.
According to Michael Sheldon, Spencer Clarke LLC's chief market strategist, the dramatic lows reached in the stock market last week could make for a multi-week rally, but that more ground may be lost in the coming months. He noted that in the 11 recessions since World War II, on average, stocks fell 26 percent, the recessions lasted 10 months and Wall Street bottomed out six months into them.
One can only determine a recession in hindsight, but investors will try to use what data they can to piece together an accurate picture.
The Commerce Department releases on Monday a report on December new home sales, on Tuesday a report on December durable goods orders, on Wednesday, its first estimate of fourth-quarter gross domestic product, and on Thursday, a report on December's personal spending.
Meanwhile, Dow companies such as American Express Co., McDonald's Corp., Verizon and ExxonMobil Corp. report earnings this week, as well as other major names including the recently acquired Countrywide Financial Corp., Starbucks Coffee Co., homebuilders Centex Corp. and Pulte Homes Inc., and Internet companies Google Inc. and Yahoo Inc. | | | | Alpha | | | | Alpha | | Posted: Mon Jan 28, 2008 11:27 am Post subject: |
| Asian markets drop, tracking Wall Street
By CASSIE BIGGS, Associated Press Writer 10 minutes ago
Global market turmoil continued into a second week as Asian markets tumbled Monday in the wake of Wall Street's sell-off Friday amid persistent worries about a possible U.S. — and worldwide — economic slowdown.
China's benchmark index plummeted 7.2 percent to its lowest point in six months on concerns that a recession in the U.S. would mean less demand for Chinese-made products.
European markets fell in early trading, and U.S. stock index futures also were down, suggesting that Wall Street was poised to drop again when markets opened.
Investors around the world have been jittery for weeks about a U.S. slump, which would likely weaken demand for exports and drag on global growth. There is also concern about a worldwide credit crunch triggered by rising defaults in risky U.S. mortgages, which has led to mountains of bad assets at major American and European banks.
"There's a lot of uncertainty out there: uncertainty over the U.S. economy, uncertainty over China's economy," said Rob Hart, an analyst with Morgan Stanley in Hong Kong.
"People are also worried about contagion in Europe. If the U.S slows down, will it trigger a slowdown in Europe?" he said.
In Europe, the U.K.'s FTSE dipped 1 percent to 5,807.9 in morning trading. Germany's DAX slipped 1.2 percent while France's declined 1.7 percent.
In Asia, Tokyo's benchmark Nikkei 225 index fell nearly 4 percent to close at 13,087.91, erasing its jump on Friday, while Hong Kong's Hang Seng index sank 4.3 percent.
Declines were more modest in India, where the Sensex index — which plunged 4 percent in the first 10 minutes of trading — was down just 1.1 percent in late afternoon trading.
The sharpest declines came in China, where the Shanghai Composite index plunged 342.39 points to 4,419.29 amid worries about weaker demand from American consumers. Concerns over the potential impact of a prolonged bout of severe winter weather also took a toll.
"Investors, especially institutional investors, are very cautious," said Chen Huiqin, an analyst at Nanjing-based Huatai Securities. She said investors were waiting for possible "market rescuing" signals from the Chinese government.
"That could have a strong impact on the market," Chen said.
Global markets dropped sharply early last week on worries about slower U.S. growth. They rebounded after a hefty three-quarters cut in U.S. interest rates by the Federal Reserve last Tuesday, as well as on news of a stimulus package that Washington is hammering out.
But investors in Asia and Europe dumped shares again Monday after Wall Street sank Friday, when the Dow Jones industrials slid 1.38 percent and the technology-heavy Nasdaq composite index declined 1.47 percent.
Some traders said Asian markets dropped on concern that the Fed may not slash interest rates again — or as much as expected — when its policy planners meet Tuesday and Wednesday.
"The possibility for a 50 basis points cut is looking less likely," said Castor Pang, a strategist at Sun Hung Kai Financial in Hong Kong, pointing to future prices in New York.
Dow futures were down 80 points, or 0.65 percent, to 12,156, while Nasdaq futures were down 16.5 points, or 0.92 percent, to 1,777.
Japan's economy — heavily dependent on exports — may already be contracting, said Tetsufumi Yamakawa, chief economist at Goldman Sachs Japan.
He pointed out that five of the 11 components of Japan's business condition diffusion index have already hit highs and begun to deteriorate. Declines in six of the 11 components often indicates a recession is coming.
"A recession, which was nothing more than a risk scenario six months ago, is now turning into our main scenario," Yamakawa said in a report released Friday.
Japanese traders also were cautious ahead of a slew of corporate quarterly earnings this week, including Honda Motor Co. on Wednesday and Sony Corp. on Thursday.
____
AP Business Writer Elaine Kurtenbach contributed to this report from Shanghai. | | | | Alpha | | | | Alpha | | Posted: Mon Jan 28, 2008 12:51 pm Post subject: |
| AP
European Stock Markets Follow Asia Lower
Monday January 28, 7:28 am ET
By Toby Anderson, AP Business Writer
European, Asian Markets Slide on US Recession Fears
LONDON (AP) -- Global market turmoil extended into a second week as European and Asian markets tumbled Monday in the wake of Wall Street's drop on Friday amid persistent worries about a possible U.S. -- and worldwide -- economic slowdown."With no market moving news out today, the slide follows on from losses suffered in the U.S. markets at the end of last week and in Asia this morning," said Nathan Miller, a trader at CMC Markets in London.
In Europe, the U.K.'s FTSE dipped 1.9 percent to 5,754.9 around midday. Germany's DAX slipped 1.6 percent while France's CAC 40 declined 2.2 percent.
China's benchmark index plummeted 7.2 percent to its lowest point in six months on concerns that a recession in the U.S. would mean less demand for Chinese-made products.
Tokyo's benchmark Nikkei 225 index fell nearly 4 percent to close at 13,087.91, erasing its jump on Friday, while Hong Kong's Hang Seng index sank 4.3 percent.
U.S. stock index futures also were down, suggesting that Wall Street was poised to drop again when markets opened.
Investors around the world have been jittery for weeks about a U.S. slump, which would likely weaken demand for exports and drag on global growth. There is also concern about a worldwide credit crunch triggered by rising defaults in risky U.S. mortgages, which has led to mountains of bad assets at major American and European banks.
"There's a lot of uncertainty out there: uncertainty over the U.S. economy, uncertainty over China's economy," said Rob Hart, an analyst with Morgan Stanley in Hong Kong.
"People are also worried about contagion in Europe. If the U.S slows down, will it trigger a slowdown in Europe?" he said.
Declines were more modest in India, where the Sensex index -- which plunged 4 percent in the first 10 minutes of trading -- was down just 1.1 percent in late afternoon trading.
The sharpest declines came in China, where the Shanghai Composite index plunged 342.39 points to 4,419.29 amid worries about weaker demand from American consumers. Concerns over the potential impact of a prolonged bout of severe winter weather also took a toll.
"Investors, especially institutional investors, are very cautious," said Chen Huiqin, an analyst at Nanjing-based Huatai Securities. She said investors were waiting for possible "market rescuing" signals from the Chinese government.
"That could have a strong impact on the market," Chen said.
Global markets dropped sharply early last week on worries about slower U.S. growth. They rebounded after a hefty three-quarter-point cut in U.S. interest rates by the Federal Reserve last Tuesday, as well as news of a U.S. stimulus package that Washington is hammering out.
Monday's declines overseas follow a drop Friday on Wall Street, where the Dow Jones industrials slid 1.38 percent and the technology-heavy Nasdaq composite index declined 1.47 percent.
Some traders said Asian markets were dropping on concern that the Fed may not slash interest rates again -- or as much as expected -- when its policy planners meet Tuesday and Wednesday.
"The possibility for a 50 basis points cut is looking less likely," said Castor Pang, a strategist at Sun Hung Kai Financial in Hong Kong, pointing to future prices in New York.
Ahead of Monday's opening, Dow futures were down 48 points, or 0.25 percent, at 12,188. Standard & Poor's 500 futures were off 7.1 points, or 0.19 percent, at 1,322.90 and Nasdaq 100 futures down 18 points, or 0.99 percent, at 1,775.5.
Japan's economy may already be contracting, said Tetsufumi Yamakawa, chief economist at Goldman Sachs Japan.
He pointed out that five of the 11 components of Japan's business condition diffusion index have already hit highs and begun to deteriorate. Declines in six of the 11 components often indicates a recession is coming.
"A recession, which was nothing more than a risk scenario six months ago, is now turning into our main scenario," Yamakawa said in a report released Friday.
Japanese traders also were cautious ahead of a slew of corporate quarterly earnings this week, including Honda Motor Co. on Wednesday and Sony Corp. on Thursday.
Associated Press Writer Cassie Biggs in Hong Kong also contributed to this report. | | | | Alpha | | Posted: Mon Jan 28, 2008 6:56 pm Post subject: |
| Say goodbye to the US dollar (with the falling interest rate) just as Ron Paul has warned:
Stocks rise on rate cut hopes
By MADLEN READ, AP Business Writer 37 minutes ago
A jittery Wall Street advanced Monday, reversing some of Friday's sharp losses as investors took a dismal new home sales report as a sign that the Federal Reserve will lower rates this week.
The Commerce Department reported sales of new homes in December fell by 4.7 percent, and that 2007 new home sales plunged by a record 26.4 percent compared to 2006.
The report exacerbated the market's concerns about fallout from the housing and mortgage crisis but raised hopes that the Fed might cut rates again by a wide margin to stoke the weakening U.S. economy.
"Anticipation of another Fed rate cut is the main magnet in the market today," said Alfred E. Goldman, chief market strategist at A.G. Edwards & Sons Inc.
But he said he was skeptical the gains would stick — anything the Fed decides after its two-day meeting lets out Wednesday could be met with disappointment. If the rate cut is small or nonexistent, the market will likely be unsatisfied; if the cut is wide, the market may worry the economy is worse than it thought.
The Dow Jones industrial average rose 96.49, or 0.79 percent, to 12,303.66, by early afternoon after falling as many as 95 points in morning trading. On Friday, the blue chip index tumbled 171 points after a two-day advance of more than 400 points.
Broader stock indicators also advanced Monday. The Standard & Poor's 500 index rose 13.17, or 0.99 percent, to 1,343.78, while the Nasdaq composite index rose 13.43, or 0.58 percent, to 2,339.63.
Profit reports were ostensibly upbeat, but revealed some troubling signals about the economy. Fast food seller McDonald's, a Dow component, said its quarterly profit rose 3 percent due to tax benefits and strong sales, but December U.S. sales were flat with a year ago as cash-strapped consumers pared back spending.
McDonald's shares fell $3.25, or 6 percent, to $50.85.
Merger and acquisition news Monday added to the market's uncertainty. Blackstone Group LP on Monday said it is still interested in buying Alliance Data Systems Corp., but that the $6.4 billion deal is in jeopardy because regulators want to place onerous terms on the takeover. ADS dropped $25.50, or 38.9 percent, to $40.10. Blackstone slipped 9 cents to $19.27.
Government bond prices were little changed. The 10-year Treasury note's yield, which moves opposite its price, was at 3.59 percent, up from 3.58 percent last Friday.
The dollar fell against major currencies, and gold prices rose.
Crude oil fell 73 cents to $89.98 a barrel on the New York Mercantile Exchange.
Trading this week is expected to be volatile due to such major events as President Bush's final State of the Union address Monday evening and the Federal Reserve's interest rate announcement, are expected to influence trading.
Last Tuesday, in an emergency move, the Fed lowered rates by 0.75 of a percentage point. Traders are betting on at least a quarter-point rate cut after the central bank's two-day meeting ends Wednesday afternoon.
Hopes for a very large cut had been tempered late last week by news that French bank Societe Generale sold European index futures to close positions taken by an alleged rogue trader. It is thought those trades may have aggravated the massive losses one week ago in Europe and Asian trading, when the U.S. markets were closed.
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 777.3 million shares.
The Russell 2000 index of smaller companies rose 7.91, or 1.15 percent, to 696.51.
Asian trading saw steep losses — in Tokyo, the Nikkei stock average dropped 4 percent and a key index in Shanghai plunged 7.2 percent. In Europe, London's FTSE 100 fell 1.36 percent, Frankfurt's DAX rose 0.03 percent and Paris's CAC 40 lost 0.61 percent.
___
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com | | | | Alpha | | | | Alpha | | Posted: Mon Jan 28, 2008 8:10 pm Post subject: |
| Forwarded:
Re: NAF Event Link: As the economy screams
Here is a link to the event page. The video clip is on the right and a downloadable MP3 audio file is at the bottom of the page. Sorry you couldn’t make it to NAF, but we’re glad that you are joining our virtual audience.
http://www.newamerica.net/events/2008/economy_screams
Here is a link to the event page. The video clip is on the right and a downloadable MP3 audio file is at the bottom of the page. Sorry you couldn’t make it to NAF, but we’re glad that you are joining our virtual audience.
http://www.newamerica.net/events/2008/economy_screams | | | | Cowboy | | Posted: Tue Jan 29, 2008 3:51 am Post subject: |
| | Quote: | | Re: NAF Event Link: As the economy screams |
Dow was up 176 today
| Quote: | | Falling interest rate crashing the US dollar as Ron Paul as warned: |
And US exports rising as a result. | | | | | ©2002-2009 WarWithoutEnd.co.uk |
