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Death, taxes, and Mr. Market calling the bluff
VK, the automatic earth
The persistent notion that there’s only $1-2 trillion in losses remaining in the banking system, as some people conclude from what Roubini and others may have stated, is false; that would be peanuts. The Federal Reserve printed $1.55 trillion to buy up toxic MBS plus Treasury paper. But the problem has not been cured, in particular: most of the toxic debt still remains hidden through the application of shady accounting practices. There is no solution in sight in the current political paradigm.
Think about it this way: the US government has implicitly and explicitly guaranteed, loaned, subsidized and given away about $12.8 trillion to banks while these banks have only $10 trillion or so in real assets. Why is the government giving so much assistance, a sum far greater then all assets combined of the US banking system?
Simple really, the derivatives aka bets are far larger than global GDP, estimated to be between $500 trillion and $1,5 quadrillion. JP Morgan alone holds $90 trillion or so in derivatives while the entire US GDP per annum is no more than one-sixth of that, at $14-odd trillion.
So those bets have gone bad and gone wrong and they have been kept hidden in the broom cupboard thanks to creative fictional accounting practices, in level 3 assets on bank balance sheets, and in off balance sheet items.
The losses are real, the bets went bad, and Washington is attempting a show of CONfidence to prevent a systemic collapse. But when Mr. Market calls the government’s bluff, and he will, then people will realize the US Government is the naked emperor, with no money to back up those guarantees for failed and long dead enterprises…
(19 Dec 2009)
Forget the Happy Talk: Longer, Deeper Recession Lies Ahead, Execs Warn
dlindorff, This Can’t Be Happening
If you google “recession easing,” you will find articles all the way back to April quoting Federal Reserve Chairman Ben Bernanke as saying that the recession is easing, and that the economy is “improving modestly.” Newspapers and TV news programs too, on their own, have run rose-tinged stories about how things are bad but getting better.
Spins get put on every hint of good news, as when last month “only” 11,000 jobs were lost (a story that was quickly followed by an “unexpected” jump in new unemployment claims by 474,000 in early December).
What didn’t get widely reported was a report by the Association of Financial Professionals, a trade association that includes CFOs, treasurers, comptrollers, and risk managers of mid-sized and large corporations, which asked over 1000 of these executives the question: “When do you expect your company to begin hiring again?”
The answer tells you all you need to know about the depth of the current economic crisis, and blows all the media and government happy talk out of the water.
This Outlook Survey by the APF, which was funded by Wells Fargo Bank, shows that 26 percent of executives expect to see their company payrolls continue to shrink in 2010, while 46% more expect employoment to stay at current low levels. Put another way,only 25% of companies surveyed expect to return to pre-recession hiring levels in 2011, while 32% don’t expect a hiring rebound until 2012. And fully 30% “do not expect their organizations ever to return their payrolls to pre-recessionary levels.”
And here’s another troubling bit of news. The same survey respondents say that their companies’ access to credit–the willingness of banks to lend–has barely budged. In fact only one in six reported that the had found credit a little easier to obtain in the last six months, while one in five actually reported that it had become harder to obtain credit. So much for the Obama administration’s and the Federal Reserve’s vaunted efforts to throw so much money–literally trillions of dollars–at the banks that they would start lending…
(22 Dec 2009)
CITY FOCUS: Why Britain is still in recession
Sam Fleming, the Daily Mail
What ails Britain? Yesterday Denmark became the latest economy to leave us trailing in its wake, as the Nordic minnow propelled itself out of recession in the third quarter.
Separate figures showed the US expanded 0.6 per cent in the same period, a weaker performance than previously estimated but still creditable growth compared with earlier this year.
By contrast, revised Office for National Statistics figures showed Britain remains the only G20 economy to fail to expand between July and September, recording a 0.2 per cent fall in gross domestic product…
(23 Dec 2009)
sent in by new EB reader Doug Saker
The “Slow Money” Movement May Revolutionize the Way You Think About Food
Kari Lydersen, alternet
The slow food movement that started in Italy two decades ago has gained much attention and popularity, with a blossoming of community supported agriculture (CSA), local organic farms and general awareness of where our food comes from. But money doesn’t grow on trees, and in an economy structured around industrial-scale global agriculture, starting and sustaining small farms and local, sustainable food processing and delivery systems can be a challenge.
About five years ago, veteran financial manager Woody Tasch and his colleagues at the Investors’ Circle began discussing how an intentional and organized influx of investment into localized sustainable food systems could be paired with a general increasing philosophical commitment to slow food principles.
The result is the Slow Money movement, shepherded by the Slow Money Alliance, of which Tasch is executive director. Now 750 members, including individual investors and sustainable farms and food-related businesses, are members of the alliance, and 450 people attended a Slow Money conference in Santa Fe in September.
The goals and structure of the alliance and the movement are fairly amorphous — cynics might say squishy — more on the philosophical than pragmatic level for the time being. Tasch’s recent book “Inquiries Into the Nature of Slow Money: Investing as if Food, Farms, and Fertility Mattered” (Chelsea Green) aims to spark and incubate investment at all levels in local or regional food systems. This means not only organic farms, dairies and ranches, but food processing facilities, food artisans (makers of jelly, cheese, etc.) and retail or distribution networks, restaurants and stores.
“It is two things: a new way of thinking about money at a macro level, in terms of philanthropy and social investing, and on the ground it is getting money into local food systems,” said Tasch. “Our objective is a very robust network at regional and local levels across the U.S. — many, many players who are all interested in the same goal: rebuilding local food systems.”…
(22 Dec 2009)
