world financial meltdown: 12/21/08

John Robb: Financial Crisis Could Lead to Spread of Guerilla Groups in U.S.

Rampant financial bankruptcy -- the double digit percentage growth in the

U.S. national debt late this year bode danger here. Entrenched corruption

- think government employees unused to financial deprivation not getting

paid except by graft. An inability to govern territory and a general loss of

legitimacy . . . A rapid increase in the number and power of criminal

guerilla groups that will challenge nation-states. These groups will flourish

within the ungoverned spaces that emerge, particularly in urban areas and

even within the U.S. The combination of access to global markets, rapidly

mproving technology, and new methods of warfare mean these groups will

be ascendant militarily until successful strategies emerge to counter them.

Global Research: Fed Suspending the Normal Functioning of Private Credit

On December 16 2008, the Bernanke Fed took the most unusual step of

lowering the overnight inter-bank lending rate, the federal funds rate, to a

level never reached before, i.e. zero percent with an upside limit of 0.25

percent. It also announced that it will buy “large quantities of” mortgage

-backed securities and is considering doing the same thing with Treasury

bonds of longer maturities, in order to lower the entire yield curve. What it

did not say explicitly is that the Fed is ready to debase the U.S. dollar to

artificially low levels in order to reflate the U.S. economy. What the Fed

wants is to trigger monetary inflation and change deflation expectations at

all costs through large-scale debt monetisation and thus floating excess

debts in a sea of newly created money. Overall, what the Fed has done, in

effect, is to announce that it is suspending the normal functioning of

private credit and capital markets, according to supply and demand, and

has decided to micro-manage failing markets for the foreseeable future,

that is to say as long as deflationary pressures, in its own view, persist . .

Politico: Adviser to Intel Agencies Says U.S. Could be the Next Zimbabwe

Rickards calls it the "A to Z" problem: What are the threats that could

make the U.S. economy look less like America and more like Zimbabwe? He

sees them everywhere – in the Chinese ownership of vast amounts of

American debt, in Russia’s increased centralization of its economy, in Al

Qaeda’s long-established fascination with damaging the U.S. economy. In

many ways, Rickards is the ultimate bear. He’s not just thinking about

whether the stock market will decline, but whether or not the stock

market will survive. All that puts Rickards decidedly outside mainstream

economic and political thinking in America. But he does have an influential

audience: the United States intelligence & defense communities. Rickards is

a regular adviser on financial issues to the director of national intelligence's

office, and he gives financial advice to the national security community.

MSNBC: Americans Deciding Between Paying the Mortgage or Buying Food

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 should

remain a worst-case scenario. But with the deepening economic crisis fast

adding to the 12 million mortgages already "underwater" — the term for

when a home's debt exceeds its market value — it's an option more are

likely to consider as home prices continue to fall. Mortgage and financial

experts hesitate to recommend a voluntary action that not only threatens

to wreck your credit score for years but can result in authorities coming

after other assets. But depending on state laws, they now acknowledge it

makes sense to at least look at it in certain situations. "You have to make

the best decision for yourself, business-wise, which could be walking away

from the house," said Nicole Gelinas, a chartered financial analyst . . .

The great job bust of 2008 is being felt keenly in communities across the

U.S. Few may be suffering more than Greensboro, N.C., one of the South's

most scenic and livable cities and no stranger to disruptive economic

change. Greensboro's local economy has been stress-tested by global

outsourcing since the early 1990s, when jobs tethered to its two once

dominant industries, textiles and furniture, began to move to Asia. Until

recently the city had made up many of those job losses by repositioning

tself as a financial back-office center serving the banks of nearby Charlotte

and insurance companies from across the country. It also built itself up as

a transportation hub and a home of high-tech manufacturing. Now the

question is, can "this new three-legged stool weather titanic national

economic forces," says Keith G. Debbage, a professor at UNC Greensboro.

USA Today: More Homeowners Finding Themselves Trapped Underwater

It's a problem that's only expected to get worse for legions of homeowners

across the USA. Nearly one in seven homeowners is underwater, owing

more on their mortgages than their homes are worth. That's about 12

million homeowners, nearly double the number underwater at the end of

2007, according to Moody's Economy.com. Most are homeowners who

bought between late 2003 and 2007. Home prices are projected to drop on

average another 10%, bringing to about 14.6 million the number of

homeowners who will be underwater on their mortgages by fall 2009, says

Mark Zandi, chief economist at Moody's Economy.com. By contrast, about

2.5 million homeowners had negative equity in their homes in 2006 . . .

London Times: Agencies Warn Loans Won't Prevent Big Three Bankruptcy

A short-term emergency loan of $17.4 billion to help bail-out America's

biggest car companies has done nothing to reduce their risk of bankruptcy,

Wall Street's credit rating agencies claimed last night. Fitch, the credit

agency, today cut its rating on General Motors' bonds to C, the last notch

above default, after it warned investors that the rescue loan would not

avert the real threat of collapse for the car maker. With just over a month

left in the White House, President Bush today announced that the U.S.

Government would lend $17.4 billion to General Motors and Chrylser who

had warned politicians on Capitol Hill that without immediate federal aid

they might run out of money by the end of the year. General Motors and

Chrysler are expected to receive the funds by December 29, just two days

before Rick Wagoner, the head of General Motors and Robert Nardelli, the

chief executive of Chrysler said they could be broke. While Washington was

scared that the collapse of General Motors and Chrsyler would also cause

Ford 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 . . .

Washington Post: Moody's Predicts 70% Chance GM Will File Bankruptcy

General Motors is likely to file for bankruptcy protection with government

backing, giving bondholders a recovery of more than 25 cents on the

dollar, according to Moody's Investors Service. There is a 70% probability

the restructuring plan for U.S. automakers will consist of a prepackaged

bankruptcy financed by government loans to get GM and Chrysler through

to 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 . . .

ABC News: States Seizing Citizens' Property to Balance Budgets (Relink)

Attorney Bill Palmer represents her and countless other citizens in a class

action 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?" California

law used to say property was unclaimed if the rightful owner had had no

contact with the business for 15 years. But during various state budget

crises, the waiting period was reduced to seven years, and then five, and

then three. Legislators even tried for one year. Why? Because the state

wanted to use that free money."That's absolutely correct," said California

State Controller John Chiang, who inherited the situation when he came

into office. "What we've done over the last two decades has been wrong."

NY Times: SEC Official Pulled Into Bernard Madoff Hedge Fund Collapse

Eric Swanson received a startling call last Thursday from his wife, Shana D.

Madoff, who said that something was terribly wrong. Officials from the

Securities and Exchange Commission and the Justice Department had just

swooped down on the offices of Madoff Investment Securities, where Ms.

Madoff was the compliance lawyer, seizing records and asking pointed

questions as they began investigating one of the largest frauds in Wall

Street history. Mr. Swanson, who only a year earlier had married into the

Madoff family, had an intimate familiarity with the S.E.C. For 10 years he

had been a midlevel official at the commission’s Washington headquarters.

Reuters: Madoff Fraud Could Burn Those Who Pulled Money Out Years Ago

Disgraced money manager Bernard Madoff's suspected $50 billion fraud

scheme looks set to burn even those who pulled their investments out long

before the scandal rippled into the global financial system. Such investors

may have counted themselves fortunate, withdrawing their money years

ago to buy a house or to pay for a daughter's education, and may have

even sighed with relief because they ended ties with Madoff long before the

scandal erupted late last week. But they, too, could face trouble. Because

of a legal concept known as "fraudulent conveyance," they could be forced

to return their profits and even some of their initial investments to help

offset losses incurred by others involved in the long-running Ponzi scheme.

Time: "How I got screwed and financially wiped out by Bernard Madoff"

The call came at 6 p.m. on Thursday, Dec. 11. I had been waiting for it for

five 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 and

devastating: we were financially wiped out. Of course, I knew this instantly

from the look on my wife's face. Her words to the person handling our

financial matters, grew insistent: "You're joking? This is a joke, right?" We

didn't know it yet, but we had been playing in the Bernard Madoff Securities

LLC Fantasy Financial League. It began when we sold our home at the peak

of the market, collected what was left from an old divorce, found other

monies and then, with a combination of pleasure and trepidation, handed

over our life savings to someone named Stanley Chais, the Los Angeles

network organizer for a man named Bernard Madoff. Of course, we never

heard the name Madoff - which has a peculiarly Dickensian ring - and had

no idea how he achieved such fantastic returns over the past 40 years.

Bloomberg: Giants Football Team Downn $300 Billion to Lehman Brothers

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 skyrocketing

interest rates to the bankruptcy of its investment bank, the Super Bowl

champions have taken one hit after another financing what co- owner John

Mara 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 the

bank owes the National Football League club more than $300 million after

defaulting on interest-rate swaps. The team also is subject to rate swings,

refinancing charges and legal fees, the papers say. "We continue to work

expeditiously to determine the full extent of our loss,” the club has said.

London Times: Gazprom Threatens to Cut Natural Gas Supply to Ukraine

Gazprom will cut off gas supplies to Ukraine in January if the former Soviet

republic 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 in

Moscow and in Kiev, where Ukrainians protested the rampant inflation

caused by the collapse of their currency. In Moscow, the Russian federal

Government hinted that public investment programmes would be affected

by the worsening economic climate and a deputy minister admitted that

the Russian economy was shrinking, with recovery not forecast before the

second half of next year. Gazprom said that Ukraine had paid $800 million

of arrears, but a spokesman said: "If the debt is not paid and no other

decision is found, we will not be able to sign a new contract and will have

no legal grounds to supply Ukraine with gas starting from January 1, 2009."

world financial meltdown

Sunday, 21 December 2008

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