Post by geronimo on Nov 29, 2009 1:50:26 GMT -4
devastate economy: book
Tue Nov 24, 2009 5:29pm EST
Email | Print | Share| Reprints | Single Page[-] Text [+] By John Parry
NEW YORK (Reuters) - A dollar plunge could ravage the U.S. economy as soon as 2012, when foreign investors are likely to exit en masse from U.S. assets, according to a new book by two analysts who forecast the recent credit crisis.
Even after credit, stock and housing bubbles popped in the past two years, dollar denominated assets are still overvalued, and a bigger crisis is yet to come, write the authors of "Aftershock: Protect yourself and profit in the next global financial meltdown".
Huge U.S. government debt issuance will drag the dollar into a much deeper dive, say analysts David Wiedemer and Robert Wiedemer, and writer Cindy Spitzer.
In the short term, China and other foreign investors will keep buying Treasuries to curb their currencies' appreciation against the dollar, say the analysts, who forecast the financial crisis in the 2006 book, "America's Bubble Economy".
Over the long run, investors will slash purchases as bond prices drop, according to the book published this month.
Though most of the pressure on the dollar will come from the Chinese yuan and other resurgent Asian currencies, the euro will eventually punish the debt-burdened dollar, said Robert Wiedemer in a telephone interview with Reuters this week.
The euro will rise to about $2 over the next two to three years, before surging rapidly above $3, forecast Wiedemer, whose risk assessment firm advises hedge funds and businesses.
At first, Treasuries will keep their safe haven status. A year or two of double-digit inflation and interest rates will then trigger a sell off in U.S. government bonds and batter stocks, says the book published by John Wiley & Sons.
This view is extreme even among those economists who expect the dollar to decline in coming years.
On Tuesday, the euro traded just below $1.50, near 15-month highs but below its record high above $1.60 hit in July 2008.
For Wiedmer, the biggest myth about the dollar is that foreign investors have nowhere else to go. The book says many foreign central banks and governments have already started shifting part of their dollar foreign exchange reserves into other currencies, gold or commodities.
Over the long term, foreign central banks and pension funds will abandon ship if the returns from U.S. assets shrink in a depressed economic environment, the book forecasts.
U.S. government debt is expected to exceed $11 trillion by the end of 2009 and the government will ultimately exceed its credit limit when investors come to view Treasuries as toxic assets, the authors expect.
"At that point, Treasury auctions will begin to fail completely, meaning no one will buy our debt."
(Reporting by John Parry; Editing by Andrew Hay)
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NSAQ, CAEL)Options & Future Only Highlight Positive GE Research Call (GE) »FDIC Fund Goes Into the Red
Posted: November 24, 2009 at 10:20 am
Print Email Subscribe Free Newsletter Follow us on Twitter 24/7 Wall St Real Time 500 It seems that the healthy banks will get to come up with new funds all over again to protect the unhealthy banks, or maybe it is the regionals and community banks which will get to fund the problem. Or with any luck, the taxpayers can get to participate in the misery here. The Federal Deposit Insurance Corporation, or FDIC, has reported that the deposit insurance balance has now slipped into negative territory in the third quarter. The balance fell by $18.6 billion and is now at -$8.2 billion. Part of the reasoning for this is because the FDIC had to set aside $21.7 billion in provisions for additional bank failures.
There were 50 banks which failed and were taken over in the quarter. But this list of “troubled banks” rose to 552 in Q3 from 416 in Q2. Interestingly enough, the banks covered posted a profit of $2.8 billion despite credit coming in sharply and despite loan balances being down almost 3% or $210 billion. That drop in loans is the largest on record. Assets fell by 0.4% or by over $54 billion.
Thankfully we have seen slower charge-offs from more recent data outside of this report, because the charge-off figure was $50.8 billion from the banks in Q3 with the highest reading at 2.71% of loans. Delinquent loans (non-current) were up over 10% to $366.6 billion in Q3.
This marks the second time in the FDIC history that the funds have gone into the negative balances. With the troubled banks rising and with the total count of seized banks now over 100, this is probably going to continue looking awful for the Q4 report as well. The good news is that, just like unemployment, is a lagging indicator…. as long as it doesn’t keep going on and on.
JON C. OGG
NOVEMBER 24, 2009
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Gerald Warner
Gerald Warner is an author, broadcaster, columnist and polemical commentator who writes about politics, religion, history, culture and society in general. Climategate e-mails sweep America, may scuttle Barack Obama's Cap and Trade laws
By Gerald Warner Politics Last updated: November 26th, 2009
204 Comments Comment on this article
Just a few considerations in addition to previous remarks about the explosion of the East Anglia Climategate e-mails in America. The reaction is growing exponentially there. Fox News, Barack Obama’s Nemesis, is now on the case, trampling all over Al Gore’s organic vegetable patch and breaking the White House windows. It has extracted some of the juiciest quotes from the e-mails and displayed them on-screen, with commentaries. Joe Public, coast-to-coast, now knows, thanks to the clowns at East Anglia’s CRU, just how royally he has been screwed.
Senator James Inhofe’s Senate Committee on Environment and Public Works has written to all the relevant US Government agencies, acquainting them with the nature of the e-mails. But the real car crash for Obama is on Capitol Hill where it is now confidently believed his Cap and Trade climate legislation is toast. It was always problematic; but with a growing awakening to the scale of the scientific imposture sweeping the world, as far as the Antipodes, the clever money is on Cap and Trade laws failing to pass, with many legislators sceptical and the mid-term elections looming ever closer.
At the more domestic level, the proposed ban on incandescent light bulbs, so supinely accepted in this servile state of Britain, is now provoking a huge backlash in America. US citizens do not like the government coming into their houses and putting their lights out. Voters may not understand the cut and thrust of climate debate at the technical level, but they know when the Man from Washington has crossed their threshold uninvited.
The term that Fox News is now applying to the Climategate e-mails is “game-changer”. For the first time, Anthropogenic Global Warming cranks are on the defensive, losing their cool and uttering desperate mantras such as “You can be sceptical, not denial.” Gee, thanks, guys. In fact we shall be whatever we want to be, without asking your permission.
At this rate, Copenhagen is going to turn into a comedy convention with the real world laughing at these liars. Now is the time to mount massive resistance to the petty tyrants and hit them where it hurts – in the wallet. Further down the line there may be, in many countries, a question of criminal prosecution of anybody who has falsified data to secure funds and impose potentially disastrous fiscal restraints on the world in deference to a massive hoax. It’s a new world out there, Al, and, as you may have noticed, the climate is very cold indeed.
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Government OUTRAGE: 65% tax rates coming
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Tuesday, November 24, 2009
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By David Galland in Casey's Daily Dispatch:
Having spent Friday’s missive singing from a rather gloomy song sheet, I anticipated that after a relaxing weekend, I might return to these daily musings in a lighter frame of mind.
After coming across the following news item, that anticipation ran straight up on the reef…
Lawmakers Propose 'War Surtax' to Pay for Troop Increase in Afghanistan
Two top Democrats say they want to impose a new tax on the wealthy to finance any increase in U.S. troops for the Afghanistan war.
Rep. David Obey, D-Wis., chairman of the purse string-controlling House Appropriations Committee, is calling the idea a "war surtax." He said that just as the federal government is expected to pay for its proposed intervention in the health care sector with new taxes, any escalated involvement in Afghanistan should come with a payment plan.
"If we have to pay for the health care bill, we should pay for the war as well ... by having a war surtax," Obey told ABC News in an interview that aired Monday. "The problem in this country with this issue is that the only people that has to sacrifice are military families and they've had to go to the well again and again and again and again, and everybody else is blithely unaffected by the war."
Sen. Carl Levin, chairman of the Senate Armed Services Committee, is making a similar demand.
Now, readers of any duration know I’m vehemently opposed to the doomed adventure in Afghanistan. On that front alone, the idea of a war tax is like a shard of glass in my eye.
But it’s even worse than that. It shows just how degraded this country has become – picking the pockets of the productive is now pretty much the only remaining source of funding the administration and its allies can imagine.
Just to be sure we keep this in perspective: At this moment, if you earn more than $250,000 a year (which isn’t what it used to be, given the steady erosion of inflation over the last 30 years), you will pay federal income taxes of about 35%, no estate taxes, and a 15% capital gains tax should the money you put at risk in the market return a profit.
As soon as next year – should the government move up the expiration of the Bush tax cuts, as I very much expect them to – the top tax bracket will go to 39%. On top of that, the current healthcare legislation will add a 5.4% surcharge. Then, add in the Democrats’ proposed 5% war tax. Okay, so straight up we’re talking 49%.
Then there’s a near doubling of capital gains taxes, from 15% to as high as 28%. And, of course, the return of the estate tax.
Of course, that’s just for starters, because everywhere you look states and municipalities are raising taxes and fees, and attorney generals, taking a page out of Caligula’s playbook, are casting about for their next deep-pocketed victim.
At the end of the day, the top tax rate in the U.S., starting as early as next year, will soar way over 50% of income. While further number crunching is required, it is a very safe assumption that top income earners will soon be paying over 65% of their income in taxes.
Which is to say, if you are in a top tax bracket, every penny you earn between January 1 and August 25 will go straight into the coffers of one layer of government or another.
And this while more than 40% of Americans pay no income taxes at all.
Per the general theme of my musings on Friday, this is just another symptom of the single biggest problem now facing the U.S. (and for that matter, the world): the ballooning size and cost of government. And there are no speed bumps in sight...
Is there no hope? One obvious scenario is for the Democrats to lose control of either the House or the Senate come next November’s elections, thereby returning the nation to some form of political gridlock. The best of all worlds, in my view. And the way things are heading, this is now a certainty.
But before you get overly excited about the prospects of a political solution, don’t forget the role the Republicrats have played in bringing the nation to this sorry state over the past several decades. If you’re holding out for an outbreak of capitalism or other signs of fiscal sanity once Republicans regain some modicum of political power, you are delusional. They may package their programs in different-colored paper, but when you rip away the wrappings, you’ll find the same statism and the same promises of a chicken in every pot.
Look after yourself – no one else is going to do it for you.
Crux Note: Casey's Daily Dispatch is free to Casey Research subscribers. One of the best ways we know to "look after yourself" is to keep up with the ever-changing political and investment landscape with a subscription to The Casey Report. We consider it "must read" investment research. To learn more, click here.
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