AS I LOOK DEEP INTO AMERICA’S FALL AND SEE HER DOLLAR’S DECLINE I CAN’Y HELP BUT THINK ABOUT ALL OF THOSE PROPHETS WHO WISHED THAT THEY COULD LIVE TO SEE JUST ONE OF THESE DAYS(OF THE SON OF MAN).WE ARE ACTUALLY BLESSED TO BE LIVING IN THIS TIME .WE ARE FAVORED BECAUSE WE ARE WATCHING THIS WORLD OF LIES,CORRUPTION,DEATH,PROFIT,EXPLOITATION,GREED,AND DISREGUARD FOR HUMAN LIFE OR TRUTH OF GOD IS BEING PUSHED OUT BY GOD IN PERSON .WE ARE ALSO BLESSED TO BE ALIVE THIS DAY BECAUSE AS WE CONTINUE TO WATCH THIS WORLD(WAY OF CIVILIZATION) EXPIRE BECAUSE OF THE LIMITED WISDOM THAT PRODUCED IT,WE SHOULD STAND IN AWE AND MARVEL AT THE NEW WORLD OF RIGHTEOUSNESS, FREEDOM, JUSTICE, AND EQUALITY BEING ESTABLISHED @ THE SAME TIME.FOR THE REMOVAL OF ONE NATION(WORLD/CIVILIZATION) PAVES THE WAY FOR ANOTHER…..
LOOK AROUND AN PAY ATTENTION TO THE SIGNS THAT ARE OPENLY TELLING YOU THAT BABYLON THE GREAT(AMERICA) IS FALLE..FALLEN.IF YOU NEED IT,LET ME PRESENT A FEW;”Plunging dollar will set world markets reeling
By Heather Stewart, economics correspondent
12/03/06 “The Observer” — — The slowdown in the US economy, which has sent the dollar into freefall over the past fortnight, will have devastating knock-on effects in markets around the world, analysts warn.
As the US slows, and consumers in the world’s biggest economy feel the buying power of the dollar in their pocket declining, global growth will be hit hard, economists say. The greenback took yet another turn for the worse on Friday, after a survey of the US manufacturing sector showed output declining for the first time in more than three years.
Wall Street is now betting that Federal Reserve chairman Ben Bernanke will slash interest rates to stave off a recession. The dollar ended the week at $1.98 against the pound, and $1.32 to the euro, but analysts say there is further weakness to come. ‘I think the dollar’s going to hell in a handbag,’ said David Bloom, currency strategist at HSBC. ‘
Some analysts have argued that a more balanced global economy, with strong growth in Asia and Europe, means the impact of a US slowdown will be limited; but Stephen Roach, chief economist at Morgan Stanley, believes China – and in turn the rest of Asia – will follow.
‘America is China’s largest export market, accounting for 21 per cent of its total exports over the past five years,’ he said, adding that economies such as Japan, Korea and Taiwan, which export directly to the US but also sell components to China that are assembled before being sent on to the US, will be hit.
Eurozone finance ministers have expressed alarm at the strength of the euro against the dollar, fearing that their exporters will suffer; but the European Central Bank is expected to push up interest rates by another quarter-point on Thursday, as it frets about inflation.
Despite increasing signs of weakening demand in the world’s biggest economy, ECB chairman Jean-Claude Trichet has insisted the 12-member single currency zone can shrug off a US slowdown.
‘The ECB’s in a complete state of denial,’ said Paul Mortimer-Lee, global head of market economics at BNP Paribas. ‘Quite a lot depends on how Trichet plays it at the ECB press conference next week. They’re hankering after raising rates again next year.’
Wall Street will also be watching Bernanke for signals of a change. The Fed has left rates on hold at 5.25 per cent since the summer, after increasing them 17 times over the previous two years as the US economy recovered from the post-dotcom downturn. Bernanke sought to reassure the currency markets last week by stressing that the Fed is still concerned about inflation, but his words failed to stem the sell-off. ‘It’s as though the markets are saying, “you central bankers are worrying about inflation, we’re worrying about the reality of life”,’ said Bloom.
Mortimer-Lee said the Fed would wait for definitive evidence before making a move. ‘At the end of the tightening cycle, you know you’ve got an inflation problem, and it’s only when the evidence is overwhelming that you move.’ However, he believes that evidence will come soon: with investment in construction already falling as the housing boom turns to bust, BNP Paribas is predicting that a million jobs will be lost in the building industry alone over the coming 18 months.
Equity markets are already wobbling as investors weigh the cost of a US slowdown. Graham Turner of GFC Economics said a shake-out would raise questions about this year’s merger frenzy.
‘We have had an absolute monster year in terms of leveraged transactions,’ he said. ‘A lot of them looked quite dubious in terms of their economic value. Once the market starts to retreat, all the suspect things that went on come out of the woodwork.’
© Guardian News and Media Limited 2006″—–SO THINK ABOUT YOUR POSITION HERE IN LIFE AND BE AWARE OF ALL THINGS.LOOK AT HOW THE SAME ONES WHO TALK YOU INTO THE MARKETS ARE THE FIRST TO BAIL BECAUSE OF WHAT THEY SEE ON AMERICA’S DOORSTEP;”Anything-But-Treasuries Credit Gaining After AIG Ruin (Update2)
Share | Email | Print | A A A
By Liz Capo McCormick
Sept. 8 (Bloomberg) — Wall Street’s biggest bond dealers are loosening their grip on U.S. government debt at a record pace, signaling a continued rally in credit markets.
Holdings of Treasuries by the 18 primary dealers of U.S. government debt that trade directly with the Federal Reserve fell to a negative $10.5 billion last month — a so-called net short position — from a record net long of $93.6 billion in June, according to data compiled by the central bank.
The fastest turnaround since the Fed began tracking the data in 1997 shows dealers are purchasing and financing higher- risk debt even as investors express doubt about the economic recovery. Dealers typically place bets against Treasuries to hedge corporate and mortgage bonds, and net short positions averaged $63 billion in the 10 years before the collapse of subprime home loans caused credit markets to freeze in 2007.
“It’s money going back to work again in some level of riskier assets,” said Donald Galante, the chief investment officer and senior vice president of fixed income at New York- based MF Global Ltd., a broker of exchange-traded futures. “Panic has receded and you are in a more normal world, with dealers starting to take on a little bit more leverage. They are taking on some inventory in the corporate world and hedging with Treasuries again.”
The two-month decline in net positions was interrupted last week, as net longs rose to $16.2 billion. The amount remains almost 60 percent below the weekly average this year.
Fed data also show dealers, which include Goldman Sachs Group Inc. and Bank of America Corp., are lending more to buyers of high-yield company loans and mortgage bonds at what may be the fastest pace since 2007. They held $27.6 billion of securities as collateral for financings lasting more than one day as of Aug. 12, up 75 percent from May 6.
The jump suggests money is being used for riskier home- loan, corporate and asset-backed securities because it excludes Treasuries, agency debt and mortgage bonds guaranteed by Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, or Ginnie Mae in Washington.
“Dealer behavior in the fixed-income market has begun to return to normal,” said Joseph Abate, a money-market strategist in New York at Barclays Capital, another primary dealer. “The collateral hoarding, most particularly in Treasuries, that dominated earlier this year has started to abate.”
While the Federal Deposit Insurance Corp. is closing banks at the fastest pace in 17 years, shuttering 89 as of last week, none have sparked a panic like the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos. in 2008.
Net short positions add to evidence that efforts by President Barack Obama and Fed Chairman Ben S. Bernanke to spur the economy are working. Obama endorsed Bernanke again last month, when he nominated him to a second four-year term while on his family vacation in Martha’s Vineyard, Massachusetts.
Bernanke made reviving the credit markets a priority this year. Consumers can now get 30-year mortgages with rates that average 1.78 percentage points more than 10-year Treasury yields, down from a spread of 3.28 percentage points in 2008, according to Bloomberg data. For auto loans, rates average 3.63 percentage points more than the London interbank offered rate, down from 8.09 percentage points.
For all the progress, minutes of the Federal Open Market Committee’s Aug. 11-12 meeting showed that policy makers expressed “considerable uncertainty” about the strength of the recovery.
U.S. Treasury Secretary Timothy Geithner and European Central Bank President Jean-Claude Trichet said it’s too soon to declare victory over the deepest recession since World War II, during a meeting of finance officials from the Group of 20 nations in London on Sept. 4 and 5.
Treasury two-year notes rallied last week, pushing yields down nine basis points, or 0.09 percentage point, to 0.93 percent as the unemployment rate jumped to 9.7 percent in August from 9.4 percent in July. The yield fell two basis points to 0.91 percent at 6:48 a.m. in New York. The price of the 1 percent note due August 2011 rose to 100 5/32, according to BGCantor Market Data.
The bond market is signaling doubt about the pace of the global recovery. Investors pushed yields on government debt down to 2.23 percent on average last week, the lowest level since April, Merrill Lynch & Co.’s Global Sovereign Broad Market Plus Index shows.
“We are heading into what we call the New Normal, which is a period of time in which economies grow very slowly,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., wrote in his September investment outlook posted on the Newport Beach, California-based firm’s Web site last week. “The invisible hand of free enterprise is being replaced by the visible fist of government.”
The economy will expand 2.3 percent next year after shrinking 2.6 percent in 2009, according to the median estimate of economists surveyed by Bloomberg.
Banks tightened standards on all types of loans last quarter, and said they expect to maintain strict criteria on lending until at least the second half of 2010, the Fed said in its quarterly Senior Loan Officer survey published on Aug. 17.
The amount of leveraged loans — the kind private-equity firms use to finance company purchases — has shrunk to $67.7 billion this year from $311.2 billion in 2008 and $962.9 billion in 2007, Bloomberg data show. Leveraged loans are rated below investment grade, or less than Baa3 at Moody’s Investors Service and BBB- by Standard & Poor’s.
Net short positions reached a record $193.7 billion in July 2007, just before subprime mortgages contaminated credit markets, leading to $1.61 trillion in writedowns and losses at the world’s biggest financial institutions, according to data compiled by Bloomberg.
Holdings turned positive by December 2008, accelerating after the collapse of Lehman three months earlier, as the bailout of insurer American International Group Inc. and the forced sale of Merrill Lynch & Co. sparked concern the global financial system was close to collapse, driving traders to the perceived safety of U.S. government debt.
Those fears have since abated. AIG, founded in Shanghai in 1919, in May said it hired Blackstone Group LP to advise on the sale of its Asian unit, American International Assurance Co. The U.S. insurer is targeting an initial public offering in Hong Kong for the division, people familiar with the matter said at the time.
AIG has announced sales of some $9.8 billion of assets, including an auto insurer, an equipment guarantor and a Japanese office tower, to help repay Fed loans extended as part of the firm’s $182.5 billion bailout. AIG is soliciting bids for its Taiwan unit, Nan Shan Life Insurance Co. The company is the island’s second-biggest life insurer, with 4 million policyholders.
The move back to a net short position “is a sign that dealers are better able to provide liquidity to customers,” said Louis Crandall, chief economist at Jersey City, New Jersey- based Wrightson ICAP LLC. The research firm, which specializes in government finance, is a unit of London-based ICAP Plc, the world’s largest inter-dealer broker. “This is a positive development for the market, and over time more pieces will fall into place.”
Extra yield demanded by investors to own corporate bonds instead of Treasuries narrowed to 3.82 percentage points on Sept. 4, from the peak this year of 8.09 percentage points in March, according to Merrill Lynch’s Corporate & High Yield Master Index. Spreads contracted as companies sold a record $926 billion of debt this year through last week, compared with $872.9 billion in all of 2008, Bloomberg data show.
The senior-most bonds backed by adjustable-rate Alt-A home loans, or those with little to no documentation of a borrower’s finances, jumped to 52 cents last month from a low of 35 cents in March, according to Barclays.
Credit markets have gotten help from the Fed’s Treasury purchases, according to George Goncalves, chief fixed-income rates strategist at Cantor Fitzgerald LP, another primary dealer. To help thaw credit markets and contain borrowing costs, the central bank began buying $300 billion of the debt in March. Purchases under the program total $276.4 billion.
“If the market was left to its own devices, it would mean much wider funding and credit spreads as we have now moved from focusing on liquidity risk to true credit loss risk, which still is plaguing the system,” Goncalves said.
S&P says the U.S. speculative-grade default rate will rise to 13.9 percent in July 2010, from 10.2 percent last month, even as the economy emerges from the worst recession since the 1930s. Deutsche Bank AG analysts Karen Weaver and Ying Shen in New York forecast last month that as many as 48 percent of mortgages may be “underwater,” or exceed the value of the property, as home prices drop through the first quarter of 2011.
“The actual level of yields now is consistent with a forecast for lethargic economic growth, which will be way below what we are used to in terms of coming out of recession,” said Campbell Harvey, a finance professor at Duke University’s Fuqua School of Business in Durham, North Carolina. He is also a research associate of the National Bureau of Economic Research, which determines when recessions begin and end.
Money markets are showing increased confidence. After soaring in October 2008 to 4.64 percentage points, the difference between what banks and the Treasury pay to borrow money for three months shrank to 0.18 percentage point today. The so-called TED spread is now below its average of 0.32 percentage point this decade before mid-2007.
The Libor-OIS spread, another gauge of the reluctance of banks to lend, contracted to 0.14 percentage point, from a peak of 3.64 percentage points in October. Former Fed Chairman Alan Greenspan said in June 2008 he would consider credit markets back to “normal” if the spread was 0.25 percentage point.
While S&P expects defaults to rise, the number of non- financial companies having their credit ratings reduced is declining. Some 2.5 percent of borrowers outside the bank, insurance or real estate industries were cut in July, down from the peak of 6.4 percent in March, S&P said in an Aug. 20 report.
“There is a lot of cash and liquidity” in short-term debt, said Derrick Wulf, a money manager who helps invest $70 billion in mostly fixed-income assets at Dwight Asset Management Co. in Burlington, Vermont. “There is plenty of confidence about the relative stability of the financial system in the short term.”
To contact the reporters on this story: Liz Capo McCormick in New York at email@example.com.
Last Updated: September 8, 2009 06:59 EDT”———-” WEF ranks US among most economically unstable nations
(AFP) – 14 hours ago
GENEVA — The United States fared badly in a new assessment of world economies, with the financial crisis accentuating its weakness as one of the most economically unstable nations, the World Economic Forum said Tuesday.
In contrast with its overall ranking second only to Switzerland in the WEF’s 2009 Global Competitiveness Report, the United States now placed 93rd among the 133 countries in terms of macroeconomic stability.
“The United States has built up large macro-economic imbalances over recent years,” said the WEF, which hosts the annual Davos pow-wow of business and political leaders.
“Repeated fiscal deficits have led to burgeoning levels of public indebtedness, which are presently being exacerbated by significant stimulus spending,” it added.
The widening government budget deficit and low national savings rates helped drag the United States down.
The White House has projected that its budget deficit would reach 9.05 trillion dollars for the 2010-2019 period.
But the United States is not only grappling with a state deficit, its citizens also hold too much debt and insufficient savings, according to analysts.
In the years leading up to the financial crisis, the country’s national savings rate had dropped to almost zero.
“More generally, given that the financial crisis originated in large part in the United States, it is hardly surprising that there has been a weakening of the assessment of its financial market sophistication, dropping from ninth last year to 20th overall this year in that pillar,” said the WEF.
The United States also scored badly for the soundness of its banks, in 108th place, just ahead of Venezuela, Serbia and Vietnam.
Like the United States, the banking industries of Britain, Ireland and Iceland brought up the rear, as their financial centres all suffered in the crisis.
Iceland’s banks were ranked the fourth most unsound, rivalled only by Zimbabwe, Mongolia and Ukraine, while Britain was the ninth from last and Ireland the 13th worst.
While major Swiss banks also suffered in the economic crisis, Switzerland managed to come out top overall, overtaking the United States to lead the global competitiveness chart this year.
Researchers found that Switzerland had remained “relatively stable, whereas the United States has seen a weakening across a number of areas.”
Singapore moved up to third place from fifth a year ago, helped by strong government institutions, infrastructure and a focus on education.
Nordic countries — Sweden, Finland and Denmark — took the fourth to sixth places, with strong macroeconomic stability and transparent institutions.
Among the BRIC (Brazil, Russia, India and China) emerging giants, China performed best, gaining one place to 29th place. It remained 20 places ahead of India, thanks to its strong fiscal position.
India had “fairly well functioning institutions” but ranked poorly on health and primary education, macroeconomic stability and infrastructure.
Brazil was boosted by its growing domestic market and one of the region’s most developed financial centres, but it was weighed down by poor macroeconomic stability and its institutional environment.
Russia was the only BRIC country to slide down the ranking this year, falling 12 places to 63rd.
It was hit by structural weaknesses including a lack of government efficiency, judicial independence and property rights, according to the report”
————————“Dollar hits low for year as gold tops $1,000
By TALI ARBEL (AP) – 3 hours ago
NEW YORK — The dollar fell to a low for the year Tuesday as gold prices shot above $1,000 an ounce before giving some ground and investors switched funds into riskier investments.
Commitments from global leaders this weekend to continue underwriting the global recovery helped drive investors away from the “safe haven” dollar and into emerging-market currencies and equities, analysts said.
Published comments from a Chinese government official in a British newspaper knocking the Federal Reserve’s policy of buying bonds also drove the dollar lower, said Joseph Trevisani, chief market analyst at FXSolutions.
“The Chinese have serious influence,” he said. China is the largest holder of U.S. Treasury securities, and its buying of U.S. debt enables the government to fund its deficit spending.
The 16-nation euro rose as high as $1.4535 in afternoon trading, its highest level this year, from $1.4337 late Monday, before backtracking to $1.4490 in later trading.
The British pound rose to $1.6494 from $1.6335, while the dollar dropped to 92.27 Japanese yen from 92.96 yen.
The dollar index fell as low as 77.05 against a basket of six major world currencies that includes the euro, yen, Canadian dollar, British pound, Swedish krona and Swiss franc. That’s its lowest since last September.
Markets have been rising after finance officials from the Group of 20 leading economies pledged to maintain government spending, low interest rates and expansion of the money supply in order to buck up the global economy. The ministers met this weekend in London.
Those moves could help boost economic activity and liquidity in financial markets, but can weigh on the value of a currency. The current U.S. rate near zero means investors can earn better returns on their funds in countries with higher yields, such as, for example, Poland, Turkey, Brazil and Australia.
“People are loading up on high-yielders,” said Win Thin, senior currency strategist at Brown Brothers Harriman in New York, as they get more optimistic about the global economy’s growth outlook.
A report from a United Nations agency released on Monday also called for a reduced role for the dollar as the world’s primary reserve currency. And in an interview published on Sunday, Cheng Siwei, a Chinese official, knocked the Fed’s policy of buying bonds as an inflation trigger that will undermine the dollar.
The Federal Reserve has committed to buying up to $300 billion in longterm Treasurys to boost liquidity in financial markets and hold down interest rates.
“Most of our foreign reserves are in U.S. bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” the Chinese official said in the interview in the U.K.’s Telegraph newspaper.
China and Russia have been vocal this year about the need to diversify reserves away from the dollar as its value dropped. Chinese officials have called for the creation of a new global reserve currency by the International Monetary Fund.
Siwei’s interview and the U.N. report have “drawn attention back to the fact that we have twin deficits and low interest rates,” said Michael Woolfolk, senior currency strategist at Bank of New York Mellon in New York. That’s “simply feeding into current negative dollar sentiment” as sovereign nations gradually sell their U.S. dollars.
There’s an assumption that “when Chinese officials speak on this topic they are not doing it without having their remarks vetted by the Chinese government,” Trevisani said. Whether that is true or not, he said, “you assume that there is some warning here.”
China, the largest foreign holder of U.S. Treasury securities, trimmed its holdings, to $776.4 billion in June from $801.5 billion in May. Russia also reduced its holdings 3.7 percent to $119.9 billion in June.
The price of gold, meanwhile, shot past $1,000 an ounce for the first time since February. Gold for December delivery peaked at $1,009.40, the highest since March 2008, on the New York Mercantile Exchange before falling back to $999. Gold is often used as a hedge against inflation and a weak dollar.
Other currencies also climbed against the dollar, especially those in countries which are major exporters of commodities, as oil prices gained more than $2. A strong economy would use more commodities in factories and transportation.
The New Zealand dollar hit its strongest point since last September at 69.83 U.S. cents, while the Australian dollar peaked at 86.58 U.S. cents, its highest level in more than a year. The dollar dropped to 1.0811 Canadian dollars from 1.0763 and tumbled to 1.8250 Brazilian reals from 1.8445 reals late Monday.
In other trading, the dollar hit a low for 2009 against the Swiss franc at 1.0428 on Tuesday, down from 1.0597 late Monday. It later traded at 1.0462 Swiss francs.
Copyright © 2009 The Associated Press. All rights reserved.”Click here for reuse options!