G
Gandalf Grey
Guest
The Last Dead Bull on Wall Street
By Mike Whitney
Created Nov 13 2007 - 8:37am
What a week for the stock market. On Wednesday the market took a 360 point
nosedive followed, two days later, by a 220 point belly-flop. By the time it
was over, the trading pits looked more like a sausage-packing plant than the
world's financial epicenter. After the bell, downcast traders could be seen
tiptoeing through the carnage on their way to the local liquor store to load
up on "Stoly" and boxes of Franzia---anything that would steady their nerves
and put the week behind them.
Everyone could see it coming; the train-wreck. It was mostly carry-over from
the night before when Asian stocks took a thumping on reports of slower
growth in the US and growing troubles in the credit markets. That put the
first domino in motion. Fed chief Bernanke's announcement that the economy
will face "a sharp slowdown from the housing market's contraction" and an
"inflationary surge from sharply higher oil prices and the weaker dollar",
didn't help either. His remarks triggered a blow-off in the currency markets
while equities were frog-marched to the chopping-block.
The Shanghai market took the worst hit dropping nearly 5% before the
trading-day ended. Taiwan and Hong Kong followed suit, sliding 3.9% and 3.2%
respectively. Share prices in Japan fell 2%. The next morning, Wall Street
crashed. It was a massacre.
This is a bear market now. The last bull was dragged from the Street on
Friday with a harpoon in its chest.
The subprime contagion has now spread beyond the US and Europe to markets in
the Far East. No one is fooled by Bernanke's sunny predictions that the
economy will bounce back next year with a strong showing in the first
quarter. That's baloney and everyone knows it. The economy has stumbled down
the elevator shaft and is just waiting to hit bottom. Consumer confidence is
flagging, housing is falling, foreign capital is fleeing, and the greenback
is one flush away from the sewage-treatment plant. Bernanke's soothing
bromides are meaningless.
"I don't see any significant change in the broad holdings of dollars around
the world. Dollars remain the dominant reserve asset and I expect that to
continue to be the case," Bernanke said to the Congressional Economic
Committee.
Really? So why is the greenback plummeting if people aren't dumping it, Ben?
What an absurd comment. The dollar has lost 63% against the euro and dropped
to record lows against a basket of world currencies. Foreign central banks
and investors have been ditching it as fast as they can before it loses more
value. The dollar's tumble has been the most dazzling currency-flameout in
modern times and Bernanke is acting like he's still asleep at the switch.
It's madness.
The greenback is getting clobbered by the Fed's "low-interest" snake oil and
the gargantuan current account deficit. If Bernanke clips rates again to
bail out the stock market, the dollar will slip into irreversible
respiratory failure. Food and oil prices will shoot to the moon overnight
and the remains of the greenback will be carted off to the nearest boneyard.
September's trade deficit was another blow to the waning dollar. The Census
Bureau reported on Friday that the deficit clocked in at $56.5 billion.
That's $684 billion per annum! Bush has been crowing about the "shrinking
deficit", but the numbers are nothing to boast about. We're still borrowing
more than we're producing. We're still living beyond our means. The lower
numbers just reflect the decline in home construction which is
import-intensive. The fact is, we're addicted to debt-fueled consumption and
forgotten that, eventually, the trillions that we've borrowed from foreign
creditors, will have to be repaid. If the dollar is replaced as the world's
reserve currency, then we'll have to pay back $9 trillion of outstanding
debt. We might as well hang out the "Foreclosed" sign right now and get
fitted for Chinese workers-suits.
This is from Bloomberg News:
"As the dollar tumbles, concern is growing that its weakness may augur the
end of the U.S. currency's 62-year reign as the world's specie of choice for
trade, financial transactions and central-bank reserves..The dollar owes its
position as the world's premier international currency to its status as a
haven during times of turmoil, the absence of a suitable rival, weak
domestic demand in other countries and plain old inertia. Geopolitics also
play a role."
Nonsense. Who believes this rubbish? The dollar is the so-called
"international currency" because the Federal Reserve and its well-heeled
patrons are the directors of the US-Euro-Japan banking cabal which is at the
center of the global Fiat money scam. There's nothing more to it than that.
Notice the recent "unilateral" clamp-down on Iran by the US-led banking
syndicate. The action was initiated without UN approval for the simple
reason that the UN, the World Bank, the IMF, the WTO and thousands of NGOs
are just more of the Central Banks' prime properties. Don't expect the
father to ask the child for permission to punish one of his errant children.
The banks are the one's who really call the shots and--behind the curtain of
feigned respectability---they are the driving force behind the endless wars.
The Fed's plan to "devalue" our way to prosperity appears to have hit a few
ill-placed speed-bumps. The stock market is hanging by a thread and consumer
confidence is at its lowest ebb since the start of the Iraq War. The falling
dollar is expected to put a damper on Christmas spending and knock equities
for a loop. That can't be good for economy--especially when 72% of GDP comes
from consumer spending.
We're already begun to see the telltale signs that the consumer is loosing
ground and about to slip into a debt-induced coma.
According to data from the University of Michigan:
"Consumer confidence reached its lowest level in more than two years this
month amid concerns over record-high oil prices, continued trouble in the
housing market and higher inflationAlthough consumer attitudes deteriorated
across the board, the substantial drop in expectations contributed heavily
to the sizeable decline in the overall index."
The average working stiff doesn't put any stock in Bernanke's palavering. He
sees what's going on for himself every time he pulls up to the gas pump or
goes the grocery store. He doesn't need the University of Michigan to tell
him he's getting screwed; he knows it! The economy is sinking, inflation is
skyrocketing, and the country is adrift. Every farthing in the public till
has been shoveled into a black hole in the Middle East. Does Bernanke really
think working people don't know that? Everyone knows that. Everyone knows
the economy is on life-support; just like everyone knows the country is
collapsing from mismanagement. Even the flag-waving, war-mongering maniacs
on the Wall Street Journal's op-ed page are starting to shutter from the
avalanche of bad news. They see what's going on and they're scared---scared
sh less.
Unfortunately, the sudden shift in consumer sentiment is the hurting
retailers who depend on Christmas to carry them through the year. We've
already seen the sluggishness in housing and auto sales. Now it's showing up
in retail. Abercrombie, American Eagle, Ann Taylor, Chicos, Dillards, The
Gap and Nordstrom are all reporting sagging sales. Walmart, Lowes and the
other big-box stores are lowering their projections as well. It's going to
be a lean Christmas.
The poor US consumer is finally maxed-out and can't tap into his home equity
anymore for presto-credit. He's mortgaged "to the hilt" and he's already run
up 6 or 7 credit cards to their limit. In fact, credit card debt is a
growing concern for the banks, too.
The commercial banks are the victims' of their own success. After years of
seductive promotions and saturation mailings the credit card industry is at
its zenith leaving consumers with a staggering bill of nearly $1 trillion.
($915 billion) More and more customers are finding themselves unable to make
even minimum payments on their balances and defaults are piling up at a
record pace. This is the next phase of the subprime fiasco and it has the
potential to be nearly as disruptive as the housing meltdown. The problem is
complex, too. After all, most credit card debt in the last 6 years has been
"securitized" and passed on to investors in the secondary market. (pension
funds, hedge funds etc.) That means we can expect more tremors in the stock
market as corporate earnings go south after credit card-backed bonds are
downgraded. It's just more of the same "structured finance" chicanery; debt
stacked on debt, until the whole edifice caves in.
It's looking more and more like Reagan's "shining city on the hill" was
erected on a mountain of toxic debt. It's a wonder it hasn't sunk already.
The country is headed for recession and there's nothing that Bernanke can do
to stop it. The only question is whether we'll be facing a colossal
economy-busting meltdown like 1929 or a milder 5 or 6-year slump. That's up
to the Federal Reserve. If the Fed chief decides to pit himself against the
falling markets by slashing rates and destroying the currency; then we are
likely to be digging-out for years. But if Bernanke steps aside, and lets
the chips fall where they may, then the pace of recovery will be quicker.
Whatever choice he makes, there's no avoiding the inevitable downturn. The
hammer is poised to strike the anvil. The stock market will fall, the
over-extended banks and hedge funds will collapse, and the country will go
into a protracted, economic tailspin. That much is certain. Economic
fundamentals can only be shrugged off for so long. When markets correct it's
like a tidal-surge that sweeps-away the deadwood of bad bets and
over-levered investments leaving behind a broad-expanse of empty beach.
Recession is a normal part of the business cycle. It can't be avoided. The
economy needs to unwind so debts can get written off and businesses can
retool for the future. The upcoming recession is shaping up to be worse than
its predecessors---a real doozey.
The damage caused by the Fed's excessive credit has been considerable. It'll
take years to mop up the red ink and set the house aright. The markets are
in a shambles, investors have been battered and confidence is gone.
Structured finance has been an unmitigated disaster. It needs to be
scrapped. We need a new financial system for a new epoch; a system that is
heavily regulated and supervised to discourage the crooks and con-artists; a
system that it maintains its essential link to the real, productive
underlying economy and avoids the galaxy of complex derivatives,
"securitized" liabilities, and opaque debt-instruments that have brought on
the present crisis; a system that responds to the needs of working people
and takes into consideration the looming problems of environmental
degradation, resource scarcity, and climate change; a system that reinvests
in communities, education and health-care rather than fattening the
bottom-line of corporate racketeers and brandy-drooling elites. It's time to
remove the rotten scaffolding and rebuild the whole contraption brick by
brick.
The system is broken. Maybe Greenspan did us all a favor by blowing it up
with his "low interest" dynamite. Good riddance.
_______
Mike Whitney
About author Mike Whitney lives in Washington state. He can be reached at
fergiewhitney@msn.com
--
NOTICE: This post contains copyrighted material the use of which has not
always been authorized by the copyright owner. I am making such material
available to advance understanding of
political, human rights, democracy, scientific, and social justice issues. I
believe this constitutes a 'fair use' of such copyrighted material as
provided for in section 107 of the US Copyright
Law. In accordance with Title 17 U.S.C. Section 107
"A little patience and we shall see the reign of witches pass over, their
spells dissolve, and the people recovering their true sight, restore their
government to its true principles. It is true that in the meantime we are
suffering deeply in spirit,
and incurring the horrors of a war and long oppressions of enormous public
debt. But if the game runs sometimes against us at home we must have
patience till luck turns, and then we shall have an opportunity of winning
back the principles we have lost, for this is a game where principles are at
stake."
-Thomas Jefferson
By Mike Whitney
Created Nov 13 2007 - 8:37am
What a week for the stock market. On Wednesday the market took a 360 point
nosedive followed, two days later, by a 220 point belly-flop. By the time it
was over, the trading pits looked more like a sausage-packing plant than the
world's financial epicenter. After the bell, downcast traders could be seen
tiptoeing through the carnage on their way to the local liquor store to load
up on "Stoly" and boxes of Franzia---anything that would steady their nerves
and put the week behind them.
Everyone could see it coming; the train-wreck. It was mostly carry-over from
the night before when Asian stocks took a thumping on reports of slower
growth in the US and growing troubles in the credit markets. That put the
first domino in motion. Fed chief Bernanke's announcement that the economy
will face "a sharp slowdown from the housing market's contraction" and an
"inflationary surge from sharply higher oil prices and the weaker dollar",
didn't help either. His remarks triggered a blow-off in the currency markets
while equities were frog-marched to the chopping-block.
The Shanghai market took the worst hit dropping nearly 5% before the
trading-day ended. Taiwan and Hong Kong followed suit, sliding 3.9% and 3.2%
respectively. Share prices in Japan fell 2%. The next morning, Wall Street
crashed. It was a massacre.
This is a bear market now. The last bull was dragged from the Street on
Friday with a harpoon in its chest.
The subprime contagion has now spread beyond the US and Europe to markets in
the Far East. No one is fooled by Bernanke's sunny predictions that the
economy will bounce back next year with a strong showing in the first
quarter. That's baloney and everyone knows it. The economy has stumbled down
the elevator shaft and is just waiting to hit bottom. Consumer confidence is
flagging, housing is falling, foreign capital is fleeing, and the greenback
is one flush away from the sewage-treatment plant. Bernanke's soothing
bromides are meaningless.
"I don't see any significant change in the broad holdings of dollars around
the world. Dollars remain the dominant reserve asset and I expect that to
continue to be the case," Bernanke said to the Congressional Economic
Committee.
Really? So why is the greenback plummeting if people aren't dumping it, Ben?
What an absurd comment. The dollar has lost 63% against the euro and dropped
to record lows against a basket of world currencies. Foreign central banks
and investors have been ditching it as fast as they can before it loses more
value. The dollar's tumble has been the most dazzling currency-flameout in
modern times and Bernanke is acting like he's still asleep at the switch.
It's madness.
The greenback is getting clobbered by the Fed's "low-interest" snake oil and
the gargantuan current account deficit. If Bernanke clips rates again to
bail out the stock market, the dollar will slip into irreversible
respiratory failure. Food and oil prices will shoot to the moon overnight
and the remains of the greenback will be carted off to the nearest boneyard.
September's trade deficit was another blow to the waning dollar. The Census
Bureau reported on Friday that the deficit clocked in at $56.5 billion.
That's $684 billion per annum! Bush has been crowing about the "shrinking
deficit", but the numbers are nothing to boast about. We're still borrowing
more than we're producing. We're still living beyond our means. The lower
numbers just reflect the decline in home construction which is
import-intensive. The fact is, we're addicted to debt-fueled consumption and
forgotten that, eventually, the trillions that we've borrowed from foreign
creditors, will have to be repaid. If the dollar is replaced as the world's
reserve currency, then we'll have to pay back $9 trillion of outstanding
debt. We might as well hang out the "Foreclosed" sign right now and get
fitted for Chinese workers-suits.
This is from Bloomberg News:
"As the dollar tumbles, concern is growing that its weakness may augur the
end of the U.S. currency's 62-year reign as the world's specie of choice for
trade, financial transactions and central-bank reserves..The dollar owes its
position as the world's premier international currency to its status as a
haven during times of turmoil, the absence of a suitable rival, weak
domestic demand in other countries and plain old inertia. Geopolitics also
play a role."
Nonsense. Who believes this rubbish? The dollar is the so-called
"international currency" because the Federal Reserve and its well-heeled
patrons are the directors of the US-Euro-Japan banking cabal which is at the
center of the global Fiat money scam. There's nothing more to it than that.
Notice the recent "unilateral" clamp-down on Iran by the US-led banking
syndicate. The action was initiated without UN approval for the simple
reason that the UN, the World Bank, the IMF, the WTO and thousands of NGOs
are just more of the Central Banks' prime properties. Don't expect the
father to ask the child for permission to punish one of his errant children.
The banks are the one's who really call the shots and--behind the curtain of
feigned respectability---they are the driving force behind the endless wars.
The Fed's plan to "devalue" our way to prosperity appears to have hit a few
ill-placed speed-bumps. The stock market is hanging by a thread and consumer
confidence is at its lowest ebb since the start of the Iraq War. The falling
dollar is expected to put a damper on Christmas spending and knock equities
for a loop. That can't be good for economy--especially when 72% of GDP comes
from consumer spending.
We're already begun to see the telltale signs that the consumer is loosing
ground and about to slip into a debt-induced coma.
According to data from the University of Michigan:
"Consumer confidence reached its lowest level in more than two years this
month amid concerns over record-high oil prices, continued trouble in the
housing market and higher inflationAlthough consumer attitudes deteriorated
across the board, the substantial drop in expectations contributed heavily
to the sizeable decline in the overall index."
The average working stiff doesn't put any stock in Bernanke's palavering. He
sees what's going on for himself every time he pulls up to the gas pump or
goes the grocery store. He doesn't need the University of Michigan to tell
him he's getting screwed; he knows it! The economy is sinking, inflation is
skyrocketing, and the country is adrift. Every farthing in the public till
has been shoveled into a black hole in the Middle East. Does Bernanke really
think working people don't know that? Everyone knows that. Everyone knows
the economy is on life-support; just like everyone knows the country is
collapsing from mismanagement. Even the flag-waving, war-mongering maniacs
on the Wall Street Journal's op-ed page are starting to shutter from the
avalanche of bad news. They see what's going on and they're scared---scared
sh less.
Unfortunately, the sudden shift in consumer sentiment is the hurting
retailers who depend on Christmas to carry them through the year. We've
already seen the sluggishness in housing and auto sales. Now it's showing up
in retail. Abercrombie, American Eagle, Ann Taylor, Chicos, Dillards, The
Gap and Nordstrom are all reporting sagging sales. Walmart, Lowes and the
other big-box stores are lowering their projections as well. It's going to
be a lean Christmas.
The poor US consumer is finally maxed-out and can't tap into his home equity
anymore for presto-credit. He's mortgaged "to the hilt" and he's already run
up 6 or 7 credit cards to their limit. In fact, credit card debt is a
growing concern for the banks, too.
The commercial banks are the victims' of their own success. After years of
seductive promotions and saturation mailings the credit card industry is at
its zenith leaving consumers with a staggering bill of nearly $1 trillion.
($915 billion) More and more customers are finding themselves unable to make
even minimum payments on their balances and defaults are piling up at a
record pace. This is the next phase of the subprime fiasco and it has the
potential to be nearly as disruptive as the housing meltdown. The problem is
complex, too. After all, most credit card debt in the last 6 years has been
"securitized" and passed on to investors in the secondary market. (pension
funds, hedge funds etc.) That means we can expect more tremors in the stock
market as corporate earnings go south after credit card-backed bonds are
downgraded. It's just more of the same "structured finance" chicanery; debt
stacked on debt, until the whole edifice caves in.
It's looking more and more like Reagan's "shining city on the hill" was
erected on a mountain of toxic debt. It's a wonder it hasn't sunk already.
The country is headed for recession and there's nothing that Bernanke can do
to stop it. The only question is whether we'll be facing a colossal
economy-busting meltdown like 1929 or a milder 5 or 6-year slump. That's up
to the Federal Reserve. If the Fed chief decides to pit himself against the
falling markets by slashing rates and destroying the currency; then we are
likely to be digging-out for years. But if Bernanke steps aside, and lets
the chips fall where they may, then the pace of recovery will be quicker.
Whatever choice he makes, there's no avoiding the inevitable downturn. The
hammer is poised to strike the anvil. The stock market will fall, the
over-extended banks and hedge funds will collapse, and the country will go
into a protracted, economic tailspin. That much is certain. Economic
fundamentals can only be shrugged off for so long. When markets correct it's
like a tidal-surge that sweeps-away the deadwood of bad bets and
over-levered investments leaving behind a broad-expanse of empty beach.
Recession is a normal part of the business cycle. It can't be avoided. The
economy needs to unwind so debts can get written off and businesses can
retool for the future. The upcoming recession is shaping up to be worse than
its predecessors---a real doozey.
The damage caused by the Fed's excessive credit has been considerable. It'll
take years to mop up the red ink and set the house aright. The markets are
in a shambles, investors have been battered and confidence is gone.
Structured finance has been an unmitigated disaster. It needs to be
scrapped. We need a new financial system for a new epoch; a system that is
heavily regulated and supervised to discourage the crooks and con-artists; a
system that it maintains its essential link to the real, productive
underlying economy and avoids the galaxy of complex derivatives,
"securitized" liabilities, and opaque debt-instruments that have brought on
the present crisis; a system that responds to the needs of working people
and takes into consideration the looming problems of environmental
degradation, resource scarcity, and climate change; a system that reinvests
in communities, education and health-care rather than fattening the
bottom-line of corporate racketeers and brandy-drooling elites. It's time to
remove the rotten scaffolding and rebuild the whole contraption brick by
brick.
The system is broken. Maybe Greenspan did us all a favor by blowing it up
with his "low interest" dynamite. Good riddance.
_______
Mike Whitney
About author Mike Whitney lives in Washington state. He can be reached at
fergiewhitney@msn.com
--
NOTICE: This post contains copyrighted material the use of which has not
always been authorized by the copyright owner. I am making such material
available to advance understanding of
political, human rights, democracy, scientific, and social justice issues. I
believe this constitutes a 'fair use' of such copyrighted material as
provided for in section 107 of the US Copyright
Law. In accordance with Title 17 U.S.C. Section 107
"A little patience and we shall see the reign of witches pass over, their
spells dissolve, and the people recovering their true sight, restore their
government to its true principles. It is true that in the meantime we are
suffering deeply in spirit,
and incurring the horrors of a war and long oppressions of enormous public
debt. But if the game runs sometimes against us at home we must have
patience till luck turns, and then we shall have an opportunity of winning
back the principles we have lost, for this is a game where principles are at
stake."
-Thomas Jefferson