Rampant financial bankruptcy -- the double digit percentage growth in theU.S. national debt late this year bode danger here. Entrenched corruption - think government employees unused to financial deprivation not gettingpaid except by graft. An inability to govern territory and a general loss oflegitimacy . . . A rapid increase in the number and power of criminal guerilla groups that will challenge nation-states. These groups will flourishwithin the ungoverned spaces that emerge, particularly in urban areas andeven within the U.S. The combination of access to global markets, rapidly mproving technology, and new methods of warfare mean these groups willbe ascendant militarily until successful strategies emerge to counter them.On December 16 2008, the Bernanke Fed took the most unusual step oflowering the overnight inter-bank lending rate, the federal funds rate, to alevel never reached before, i.e. zero percent with an upside limit of 0.25percent. It also announced that it will buy “large quantities of” mortgage-backed securities and is considering doing the same thing with Treasurybonds of longer maturities, in order to lower the entire yield curve. What itdid not say explicitly is that the Fed is ready to debase the U.S. dollar toartificially low levels in order to reflate the U.S. economy. What the Fedwants is to trigger monetary inflation and change deflation expectations atall costs through large-scale debt monetisation and thus floating excessdebts in a sea of newly created money. Overall, what the Fed has done, ineffect, is to announce that it is suspending the normal functioning ofprivate credit and capital markets, according to supply and demand, andhas decided to micro-manage failing markets for the foreseeable future,that is to say as long as deflationary pressures, in its own view, persist . .Rickards calls it the "A to Z" problem: What are the threats that couldmake the U.S. economy look less like America and more like Zimbabwe? Hesees them everywhere – in the Chinese ownership of vast amounts ofAmerican debt, in Russia’s increased centralization of its economy, in AlQaeda’s long-established fascination with damaging the U.S. economy. Inmany ways, Rickards is the ultimate bear. He’s not just thinking aboutwhether the stock market will decline, but whether or not the stockmarket will survive. All that puts Rickards decidedly outside mainstreameconomic and political thinking in America. But he does have an influentialaudience: the United States intelligence & defense communities. Rickards isa regular adviser on financial issues to the director of national intelligence'soffice, and he gives financial advice to the national security community.Walking away from a mortgage has always been a homeowner's last resort— it flies in the face of the American dream. And experts say it shouldremain a worst-case scenario. But with the deepening economic crisis fastadding to the 12 million mortgages already "underwater" — the term forwhen a home's debt exceeds its market value — it's an option more arelikely to consider as home prices continue to fall. Mortgage and financialexperts hesitate to recommend a voluntary action that not only threatensto wreck your credit score for years but can result in authorities comingafter other assets. But depending on state laws, they now acknowledge itmakes sense to at least look at it in certain situations. "You have to makethe best decision for yourself, business-wise, which could be walking awayfrom the house," said Nicole Gelinas, a chartered financial analyst . . .The great job bust of 2008 is being felt keenly in communities across theU.S. Few may be suffering more than Greensboro, N.C., one of the South'smost scenic and livable cities and no stranger to disruptive economicchange. Greensboro's local economy has been stress-tested by globaloutsourcing since the early 1990s, when jobs tethered to its two oncedominant industries, textiles and furniture, began to move to Asia. Untilrecently the city had made up many of those job losses by repositioning tself as a financial back-office center serving the banks of nearby Charlotteand insurance companies from across the country. It also built itself up asa transportation hub and a home of high-tech manufacturing. Now thequestion is, can "this new three-legged stool weather titanic nationaleconomic forces," says Keith G. Debbage, a professor at UNC Greensboro.It's a problem that's only expected to get worse for legions of homeownersacross the USA. Nearly one in seven homeowners is underwater, owingmore on their mortgages than their homes are worth. That's about 12million homeowners, nearly double the number underwater at the end of2007, according to Moody's Economy.com. Most are homeowners whobought between late 2003 and 2007. Home prices are projected to drop onaverage another 10%, bringing to about 14.6 million the number of homeowners who will be underwater on their mortgages by fall 2009, saysMark Zandi, chief economist at Moody's Economy.com. By contrast, about2.5 million homeowners had negative equity in their homes in 2006 . . .A short-term emergency loan of $17.4 billion to help bail-out America'sbiggest car companies has done nothing to reduce their risk of bankruptcy,Wall Street's credit rating agencies claimed last night. Fitch, the creditagency, today cut its rating on General Motors' bonds to C, the last notchabove default, after it warned investors that the rescue loan would notavert the real threat of collapse for the car maker. With just over a monthleft in the White House, President Bush today announced that the U.S.Government would lend $17.4 billion to General Motors and Chrylser whohad warned politicians on Capitol Hill that without immediate federal aid they might run out of money by the end of the year. General Motors andChrysler are expected to receive the funds by December 29, just two daysbefore Rick Wagoner, the head of General Motors and Robert Nardelli, thechief executive of Chrysler said they could be broke. While Washington wasscared that the collapse of General Motors and Chrsyler would also causeFord to fail and trigger the loss of around three million jobs across the US,auto experts warned that such concerns would prove to be unfounded . . .General Motors is likely to file for bankruptcy protection with governmentbacking, giving bondholders a recovery of more than 25 cents on the dollar, according to Moody's Investors Service. There is a 70% probabilitythe restructuring plan for U.S. automakers will consist of a prepackagedbankruptcy financed by government loans to get GM and Chrysler throughto 2009, Moody's said in a report dated December 15. Under that scenario,bondholders would be likely to lose less than 75% of their investment . . .Attorney Bill Palmer represents her and countless other citizens in a classaction lawsuit against the state of California. "They figured the safety-deposit box was safer than keeping it under the mattress," Palmer said."In the case of a lot of citizens, they were wrong, weren't they?" Californialaw used to say property was unclaimed if the rightful owner had had nocontact with the business for 15 years. But during various state budgetcrises, the waiting period was reduced to seven years, and then five, andthen three. Legislators even tried for one year. Why? Because the statewanted to use that free money."That's absolutely correct," said CaliforniaState Controller John Chiang, who inherited the situation when he cameinto office. "What we've done over the last two decades has been wrong."Eric Swanson received a startling call last Thursday from his wife, Shana D.Madoff, who said that something was terribly wrong. Officials from theSecurities and Exchange Commission and the Justice Department had justswooped down on the offices of Madoff Investment Securities, where Ms.Madoff was the compliance lawyer, seizing records and asking pointedquestions as they began investigating one of the largest frauds in WallStreet history. Mr. Swanson, who only a year earlier had married into theMadoff family, had an intimate familiarity with the S.E.C. For 10 years hehad been a midlevel official at the commission’s Washington headquarters.Disgraced money manager Bernard Madoff's suspected $50 billion fraudscheme looks set to burn even those who pulled their investments out longbefore the scandal rippled into the global financial system. Such investorsmay have counted themselves fortunate, withdrawing their money yearsago to buy a house or to pay for a daughter's education, and may haveeven sighed with relief because they ended ties with Madoff long before thescandal erupted late last week. But they, too, could face trouble. Becauseof a legal concept known as "fraudulent conveyance," they could be forcedto return their profits and even some of their initial investments to helpoffset losses incurred by others involved in the long-running Ponzi scheme.The call came at 6 p.m. on Thursday, Dec. 11. I had been waiting for it forfive years. When the call finally arrived, it was my wife who answered.What the person said on the other end of the phone was both simple anddevastating: we were financially wiped out. Of course, I knew this instantlyfrom the look on my wife's face. Her words to the person handling ourfinancial matters, grew insistent: "You're joking? This is a joke, right?" Wedidn't know it yet, but we had been playing in the Bernard Madoff SecuritiesLLC Fantasy Financial League. It began when we sold our home at the peakof the market, collected what was left from an old divorce, found othermonies and then, with a combination of pleasure and trepidation, handedover our life savings to someone named Stanley Chais, the Los Angelesnetwork organizer for a man named Bernard Madoff. Of course, we neverheard the name Madoff - which has a peculiarly Dickensian ring - and had no idea how he achieved such fantastic returns over the past 40 years.The New York Giants are 11-3 on the field. On Wall Street, they’re down$300 million and counting. From a bond market collapse and skyrocketinginterest rates to the bankruptcy of its investment bank, the Super Bowlchampions have taken one hit after another financing what co- owner JohnMara calls the world’s most expensive sports venue: a $1.6 billion New Jersey stadium to be shared with the New York Jets when it opens in 2010.The team, which borrowed $650 million toward its share of the stadium,can’t say exactly how much that’s now costing, according to court papers.Mara sent a bill to Lehman Brothers Holdings Inc. in October claiming thebank owes the National Football League club more than $300 million afterdefaulting on interest-rate swaps. The team also is subject to rate swings,refinancing charges and legal fees, the papers say. "We continue to workexpeditiously to determine the full extent of our loss,” the club has said.Gazprom will cut off gas supplies to Ukraine in January if the former Sovietrepublic fails to settle a $2.4 billion bill, the Russian utility said on Thursday.The threat to Ukraine emerged as signs of economic distress multiplied inMoscow and in Kiev, where Ukrainians protested the rampant inflationcaused by the collapse of their currency. In Moscow, the Russian federalGovernment hinted that public investment programmes would be affectedby the worsening economic climate and a deputy minister admitted thatthe Russian economy was shrinking, with recovery not forecast before thesecond half of next year. Gazprom said that Ukraine had paid $800 millionof arrears, but a spokesman said: "If the debt is not paid and no otherdecision is found, we will not be able to sign a new contract and will haveno legal grounds to supply Ukraine with gas starting from January 1, 2009."
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