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Thread: Financial crisis coming

   
   
       
  1. #21
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    Bear Stearns Bailout: Is this the tipping point

    Post 21: 1 May 08

    New article discussing this. Watch the FED's moves closely. That is the starting point of the financial tsunami.

    Bailout of Bear Stearns questioned by ex-Fed staffer
    Submitted by cpowell on Tue, 2008-04-29 12:50. Section: Daily Dispatches

    By Greg Ip
    The Wall Street Journal
    Tuesday, April 29, 2008

    http://gata.org/node/6265

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  2. #22
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    Another step nearer the tipping point

    Post 22: 1 May 08

    Last night, the US Fed cut Federal Funds Target Rate and the Discount Rate by another 0.25%. This author here is suggesting that they are taking another gamble without giving any indication whether they will stop cutting all not.

    Bernanke takes one more gamble
    By Julian Delasantellis

    http://atimes.com/atimes/Global_Economy/JE02Dj01.html

    Apparently, their focus is more on saving the banks than on fighting inflation. This is consistent with the bailout of Bear Sterns. But setting the interest rate at below cost is hurting the foreign govt holders of US Treasuries as they are seeing the value of their holdings dropping due to US policies. Eventually, they may get tired and decide to dump the USD. So far, because they are holding too much USD, they can't afford to crash the USD. But you never know.

    If that happens, it will trigger the "long-awaited" financial crash. Then the fun starts.

    Ask yourself:

    What areas in your finances are vulnerable?
    What are you doing about it?

    py
    py

  3. #23
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    Watch The Storm Signals

    Post 23: 3 May 08

    Volcker says U.S. imbalances underpin financial crisis
    By Pedro Nicolaci da Costa and Burton Frierson?Reuters
    Wednesday, April 9, 2008

    NEW YORK: Financial crises do not happen in a vacuum and the current U.S. banking debacle is linked to imbalances in an economy that favoured spending at the expense of saving, Paul Volcker, the former Federal Reserve chairman, said on Wednesday.

    The U.S. economy is on the verge of recession as a persistent housing slump drags down the banking sector, pushing up unemployment.

    Volcker said a propensity to consume more than it produces is what got the United States into this sort of trouble.

    "Financial crises usually don't come along unless there are other underlying problems in the economy," Volcker said at an event sponsored by the Harvard Club. "You can't go on forever spending more than you're producing. You have to rely on unorthodox finance to sustain it."

    Volcker, who as Fed chairman during the 1980s raised interest rates to historic highs in an effort to rein in double-digit inflation, said policy-makers should be leery of inflating their way out of crises.

    http://www.iht.com/articles/reuters/...MY-VOLCKER.php

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  4. #24
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    Volcker slams Bear bailout

    Post 24: 3 May 08

    9 April 2008
    The Federal Reserve has been strongly criticised by a former governor for its actions in rescuing the stricken investment bank Bear Stearns last month.

    Paul A Volcker said yesterday that the current incumbent, Ben S Bernanke, worked at the "very edge" of the institution's authority in the bailout.

    http://www.bobsguide.com/guide/news/...r_bailout.html

    What is it important is to keep our eye on the ball and not allow ourselves to be distracted by the spin of the news media?

    Here is an important no. to watch:

    US Fed Reserve balance sheet reserve: USD 889 billion
    Bear Sterns Bailout: - USD 29 billion
    Nett balance USD 860 billion

    Why are we treating the Bear Sterns incident as a bailout?

    The Fed has accepted Bear Sterns' toxic financial derivatives as collateral against a loan of USD 29 billion.
    Those derivatives are effectively worthless as it cannot be sold in the open market.

    Many financial institutions, including the top banks, do not report their Over The Counter OTC financial derivatives
    as marked to market, meaning what is the market willing to pay for it.
    Instead, they mark it to model - they assign whatever value they like to it.

    This is a dangerous situation as there are nearly USD 700 trillion of financial derivatives floating around.
    And no one knows who holds what. So banks are scared to lend to each other, thus creating a credit freeze.
    Last August 07 was just one incident. The World Central Banks have been throwing money around, hoping to stem the collapse.
    It didn't work. The total volume of money is too big even with all the banks' money in the world.

    USD 700 trillion is more than 12 times the world's GNP!

    The Fed's reserves is only worthed 0.13% of this value.
    Hardly enough to defend against a financial collapse.

    (Side note: Those excess money found its way into the food market, leading to a huge run-up in prices - wheat, rice, corn)

    Once the Fed goes down this slippery slope by setting such a precedent, Congress will demand that they carry out more bailouts.
    Politicians are good at getting the taxpayers to pay for their (or their constituents') troubles.

    Some of us may be wondering why we are so concerned with the US Fed.

    1. The Feds are the issuers of the USD. The USD has no asset backing - only based on the confidence of the holder.
    2. If the confidence collapse, so will the USD.
    3. On average, in 2007, the USD constitutes 63.3% of the foreign currency reserves of the world.

    For simplicity, unless we have Bank Negara data, we will assume Malaysia has a similiar %.

    See page 2 of related article here:
    http://www.usj.com.my/bulletin/uploa...ad.php?t=22746

    If the USD collapses, so will the RM.

    The final question will be:
    How do we protect ourselves?

    Keep following the thread as new articles are added.

    py
    py

  5. #25
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    LIVE BELOW YOUR MEANS

    Post 25: 3 May 08

    Comment by orchipalar
    Err buddy Pywong...at this point...increase savings/income...spending prudently...n not spending more than you can earn...would be some of the wisest steps to take.

    Investing in Gold is not...
    Farming your own food is not...
    The Disposal of sound properties...secured stocks or bonds is not...

    Orchi,

    Living below your means is always a wise step practised for thousands of years.

    Protecting the purchasing power of your assets is another prudent move.

    Do your own investigation and make your decision accordingly.

    Don't allow anyone to influence you inordinately.

    After all, it is your money.

    Having said that, keep an eye on the horizon.

    Always learn to ask the right questions.

    Some wrong questions to ask after the event:
    Why didn't I do something about it when I had the chance?

    Why did I not see it coming? It was so obvious!

    All the best.

    py
    py

  6. #26
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    SITUATION IN CALIFORNIA

    Post 26: 3 May 08

    Comment by lady-o-leisure
    Being in CA now, i hear people complaining that times are tough here. I don't hear anyone talking about how great the economy is doing. The price of fuel is going up and no one is happy since it is unlike the price increase in Msia of a few sen each liter, over here it goes up a tremendous amt each time. Food prices are ridiculous, the number of houses for sale around my area have gone up, coz people can't make the payments. It's a problem widely talked about. Electricians, contractors, plumbers,are looking for work to do but there isn't much to be found.

    lady-o-leisure,


    Thanks for sharing. It is good to know what is the real situation there rather than reading from the news media. What appears to me is not prices moving up rather than the USD moving down. The commodity producers/suppliers want more USD to cover its loss of purchasing power.

    We, in Malaysia because our RM is still loosely tied to the USD, suffer accordingly.

    Last year, there was a website implodermeter.com which was monitoring the no. of financial institutions collapsing. The number was scary, more than 150 and rising. That site was taken out late last year.

    Are there still more failures?

    The one to monitor is JP Morgan. That will be the mother of all failure if it happens.

    py
    py

  7. #27
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    USD IS NOT GOING TO DROP

    Post 27: 4 May 08

    Comment by lady-o-leisure
    Latest news though, word is out that the US$$ is not going to keep dropping. How that will be done, i don't know. I'm waiting to see what measures are bring taken.


    The US Dollar Index (http://www.akmos.com/forex/usdx/) is now at 73.5 (http://www.fxstreet.com/rates-charts/usdollar-index/). Based on the persistent US trade deficit and its large foreign debt, it is expected that the index may eventually drop to the 50's.

    The other concern is the US Treasury's gold holdings. The people at GATA estimates that the actual holdings could less than half of the reported holding of 8,100 mt. There is a legal suit under the Freedom of Information Act to force the FED to come clean. I will try to elaborate on this in the posting on Financial Education:
    http://www.usj.com.my/bulletin/uploa...ad.php?t=22746

    py
    py

  8. #28
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    Gold Investment Account

    Post 28: 4 May 08

    Comment by Sato
    This is off topic, is this a good time to invest in "Gold Investment Account"?


    See here: What is good to invest nowadays? http://www.usj.com.my/bulletin/uploa...132#post301132

    py
    py

  9. #29
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    IS THE WORST OVER?

    Post 29: 9 May 08

    Is The Worst Over?
    Not really.

    Consider these:

    Credit Crunch?

    An assessment by the International Monetary Fund that potential losses as a result of the credit crisis could exceed US$1 trillion, including warnings that further losses and write-downs on prime mortgages, commercial real estate, leveraged loans, and consumer finance were likely. Losses are distributed between banks, insurance companies, pension funds, hedge funds, and other investors. Even credit card finance & car finance has been included in assets acceptable to the Fed as collateral.

    Record U.S. Trade Deficit

    February recorded a Trade deficit of $62.3 billion against a January deficit of $59.0. Annualised $720 billion deficit. Oil prices over $120 a barrel and Chinese imports still flooding in, the prospects are for a worse annual Trade deficit than ever.

    Oil prices

    With OPEC talking of a potential oil price of $200 a barrel something has to be done to stop more than a decline in the $; a stop must be put to the massive global scramble for resources by a combination of the developed world and the emerging world, because prices will continue to rise until they are so high that some will have to do without.

    Do you have a Plan B?

    py
    py

  10. #30
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    Supply fears push oil beyond $126

    Post 30:

    Comment by kuma
    Just saw on bbc.com today.

    Supply fears push oil beyond $126

    Here the link to the article - http://news.bbc.co.uk/2/hi/business/7391576.stm


    This is scary. I heard some rumours that Malaysia sold Petronas oil to the Taiwanese in 1999 for 20 years at 1999 prices. But I can't find anything on it.

    Does anyone have information on this? This would explain why the govt cannot afford to maintain subsidies for fuel when the oil price goes up - we cannot enjoy the price increase since our oil has been sold at a fixed price already.

    py
    py

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