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alstry (35.68)

Money Drying Up....around the world

Recs

15

December 25, 2008 – Comments (9)

Make no mistake about it. What is taking place right now in Ukraine is extraordinarily serious. The IMF have recently agreed a support loan to the country, but the politicians themselves still can’t agree on whether or not they are actually going to abide by the conditions attached to it. Meantime, as we can all see on our TV screens, tensions with Russia continue to escalate, fuelled by the conflict-ridden negotiations over Ukraine’s gas debt.

And just to add to the nighmare, Ukrain’s economy made a dramatic entry into recession in Q4 2008. In fact, so severe has been the slowdown that nobody at this point can even muster enthusiasm for opening up one of those interminable discussions about whether or not what the country is going through really counts as a “technical recession” (in terms of two successive quarters of GDP contraction) or not, since the drop in national output has been enormous, and it it fairly obvious that isn’t about to come bouncing back up again.

http://fistfulofeuros.net/afoe/economics-and-demography/as-the-politicians-battle-it-out-ukraines-economy-tunnels-south-in-search-of-australia/

For those of you not familiar, the Ukraine is no Georgia........

“There is a burgeoning economic crisis in the European periphery,” Krugman said on the ABC network Dec. 14. “The money has dried up. That’s the new center, the center of this crisis has moved from the U.S. housing market to the European periphery.”

The European Periphery....Ukraine, Latvia, Greece, Iceland, Argentina and the list grows and grows....a record number homeless in America....unemployment growing, wages being slashed, oil prices imploding, containers going back and forth empty across the ocean, entire regions of China shutting down, Russia feeling significant stresses.....

The money is drying up.....that pretty much says it all......Money is becoming very scarce these days....unless of course you are a bank or can convert into a bank......if you are not a bank.......you may want to save as much as you can.........and pay off whatever debt you can afford to........

Good bye Santa......Hello Grinch.

 

9 Comments – Post Your Own

#1) On December 25, 2008 at 7:13 PM, alstry (35.68) wrote:

You think leaders aren't concerned.........maybe you should be too.....not scared.....but prepared......not worried......but informed.

I asked him to justify the burning and looting of shops belonging to people not remotely connected to the death of Alexis Grigoropoulos.

"When we have revolutions, we don't drink tea in our saloons, we have fights in the streets," Mr Constantinou shouted.

So should Greece's European Union partners dismiss this talk of revolution as being little more than extremist rhetoric, or is there something more substantial to fear?

The riots have clearly unsettled France's President, Nicolas Sarkozy. He has postponed plans to reform the curriculum of secondary school pupils in case they ignite copycat protests.

"In the name of symbols, they can overthrow the country. They are regicidal," Mr Sarkozy told the French parliament. "Just look what's going on in Greece."

http://news.bbc.co.uk/2/hi/europe/7798056.stm

2009 should be an interesting year..... 

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#2) On December 25, 2008 at 8:39 PM, johnw106 (60.90) wrote:

I am surprised China is holding up as well as it has so far. But that will not last long.
Russia will not tolerate civil unrest within its borders, and as always its answer to economic hard times is to declare war on someone else to "boost" the economy.
Austrailia will start collpasing very soon. They have their own mortgage/debt crisis that is just getting under way. And with China shutting down they are losing a major export market.

Getting back to China for a moment. People who focus on China are looking in the wrong direction. China has always been and will always be a minor player in the never ending trade wars. If they allowed their currency to float it would imediatley crash. They can not dump their dollars, and any noise coming from that sector can be ignored.


Japan is the center. Keep an eye on the yen and the carry trade. That is where the action will be. They will not allow the yen to continue to gain against the US$ and the Euro. And to a lesser extent China is in the same fix. Both countries will continue to buy US debt in an effort to support the dollar. They simply have no choice.

And in an answer to those who say that other countries may dump the dollar for something else. First they have to convince the American public and our government to dump the dollar first.
People tend to forget we are the number one economy in the world. And all the others depend on the USA and its never ending need to buy their exports. Nothing has changed on that front. The market may be smaller, and fewer goods may flow in the next few years, but the USA will still be the number one consumer and importer.

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#3) On December 25, 2008 at 9:55 PM, GorillaGorilla (< 20) wrote:

Hi Alstray,

 I'm all on for the S&P 600, al la Nouriel Roubini but in regard to the stories:

Ukraine and Russia have bikkered about this  every winter since 2004. In 2006, Russia turned off the gas? Why do you think it is different this time?

 -- empty across the ocean, entire regions of China 

Indeed, half of the dry bulk is iron ore to  China. The Chinese do want the ore again, or if they didn't why are they negotiating with Rio, Vale & Billiton? Empty ships are a symtom of the negotiation.

Have you got a ref for the regions of China shut down? That would be interesting. Are we talking about the Eastern provinces / Exporters regions here?

cheers

 rich

 

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#4) On December 25, 2008 at 10:48 PM, alstry (35.68) wrote:

Gorilla,

If you review my blogging...I am generally early from what hits the mainstream press.  I have a number of friends in transporation and other areas.  With just in time manufacturing, when one assembly plant shuts down in America....five or ten manufacturing facilities could shut down around the world.

We all know how America is slowing down and in some cases factories are shutting down completely.  Many of those factories use component parts from around the world.  With manufacturing and retail slowing, factories are getting hammered in many parts of Asia.

[T]otal retail sales, excluding automobiles, fell over the year-earlier period by 5.5% in November and 8% in December through Christmas Eve, according to MasterCard Inc.'s SpendingPulse unit.

When gasoline sales are excluded, the fall in overall retail sales is more modest: a 2.5% drop in November and a 4% decline in December.

"This will go down as the one of the worst holiday sales seasons on record," said Mary Delk, a director in the retail practice at consulting firm Deloitte LLP.

Although  I sometimes embelish my headlines, I try to keep my blogs factually based......it helps control emotion on both sides of the game.

PS...as far as the bickering....I grant you that......but you must look at it in light of the bigger picture......we should have a much clearer picture in the next 90 to 180 days.

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#5) On December 25, 2008 at 11:33 PM, starbucks4ever (99.53) wrote:

Things are not as bad in the Ukraine as you might think from the headlines. The bickering between Ukrainian politicians is beyond any possibility of description, it would take another Gogol to convey the essence of Ukrainian politics. What is missing in the headlines, however, is that a) people have long stopped following politics or caring about what these clowns might do and b) it's due to this constant infighting that, while boasting the most corrupt politicians in the world (second only to Russia, or maybe beating Russia by a tiny margin or maybe sharing the first place together...I don't know...whatever), the country has relatively moderate corruption. These crooks are deadlocked in a clinch like two spent swimmers that do cling together and choke their art. As for the gas dispute, don't make too much of it, it's just usual negotiations, Ukrainian-style. When push comes to shove, Kiev has enough money to pay its gas bill. It's a very rich country that will come out of the crisis stronger...just like Russia.

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#6) On December 26, 2008 at 12:36 AM, brwn8484 (91.16) wrote:

What amuses me most these days are dire predictions that now crowd the airwaves and blogosphere.  Just several months ago, most politicians and wall street experts were predicting that our economy was growing and there were many who predicted that we were not even in a minor recession. 

Where are all these (foolish) experts today?  Obviously they know little more today than when this crisis really began to occur.  It really began 25 years ago, when our brilliant politicians decided to start creating free trade agreements with countries that have continued to illegally and criminally flood our country with sub-par goods and services.  Ask yourself why we were paying less for electronics here in the US than Japanese and Chinese were paying at home?  Ask yourself why we continue to buy toxic products from China?  Ask yourself why we in the US continue to pay the highest corporate taxes in the free world while our economy collpases and our politicians can only stand in complete ignorance and ask us to add more tax in the form of a TARP.

The Asians were illegally funneling paybacks under the table to unfairly compete in electronics.  The politicians unfairly and immorally raised our corporate and personal tax rates.  The Middle East created perceived Oil shortages in the 70's and we are now being  treated to Oil price spikes by a lack of planning and foresight by our leaders.  Most foreign countries have insulated themselves from the oil shocks by creating energy sources like nuclear.  But we here in the US are blindly and naively doing nothing to eliminate our dependance on foreign oil.

In addition we are continuing to allow corrupt practices to continue in the Insurance and Finance arena's.  Ask your senator(s) why we are not investigating the crooks that came up with Mortgage Derivatives?  Ask your senators why no investigation of Credit Agencies that (mis)labeled investment grade mortgages that were really sub-prime junk and now are continuing to operate normally while you and I pay for their excesses.  Ask yourself why no one is questioning the brilliant politicians that are trying to make our currency and country like the rest of the third world countries... socialistic and in slavery to the ruling class.  

Wake up America.  Do your homework and think for yourselves.  This problem began long ago and we are just now paying the price for all the criminal and immoral behavior of our leaders.  Our freedoms( economic, social and financial) have been eroding for years.  Only when we rise up and demand moral and just governing will we be able to solve the financial crises we have allowed.  Yes we are all at fault by our inaction and our own greed.  We are so interested in saving our own rears that we have allowed fools to lead us into an economic and financial crisis of epic proportions.  Only God can reverse and correct the terrible and immoral acts being committed by our political, social and economic leaders.  Pray for our leaders and our nation.  Pray that we will be able to survive the coming hyper-inflation and survive the foolish decisions and actions of our leaders.

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#7) On December 26, 2008 at 12:45 AM, alstry (35.68) wrote:

Some more support for hyper inflation........I found this on a different Blog......don't say Alstry isn't fair and balanced.....just holds a different perspective at the current time.

The post-July 2008 US $ rally is over, the US dollar has given back half of its gains in the speed of light. Currencies do not move that way, this is extraordinary. These moves usually take place in a year time frame.

The Fed is now strongly hinting that it will soon issue its own debts. That is totally insane. The Fed is proposing to issue its own bonds, notes and t-bills, absurd, however that is life. Get ready, what is going to happen the next two to three years is unprecedented. The Fed will pay a rate of interest, the interest will be paid in Fed notes, non-interest paying debt paper which the Fed can create in unlimited quantity. This, by definition, makes the US dollar not worth saving, buying or even holding. If the issuer of a debt can service the debt, and later redeem it – repay the principal amount of the loan–with its own non-interest paying notes, then no repayment has been made at all. One debt: the non-interest rate bearing Fed note–will be used to repay the other. And you thought the Greeks were crazy? To repay debt with another debt is fraud. That is what the Fed has started to do.

Mr. G.N says "I have never seen anything like this ever in my lifetime. The adjusted monetary base of the Federal reserve over the last eight weeks has risen 341%. M-1 money supply in four to five weeks period has grown for 46.8% per year" , people this is insane, pure insanity.
The system could be just starting to tip over to galloping inflation that could -God forbid- turn into what John Williams is predicting. You want to know numbers, this is the man–you must subscribe to his newsletter. He has been doing this for three decades and he is the Bible.

Now let's look at the reserves of the world's central banks. Up to August we can easy see their expansion in their reserves, however I looked at the September numbers and something very strange happened: contraction. October numbers were even worse, and the November numbers: pitiful. All the numbers were shrinking greatly. Now you have to understand that the number of the reserves of the world's central banks are comprised of various major currencies, and the major component of international bank is the us dollar. Now here is the question: what does all this mean? If the reserves are no longer growing but diminishing. it very likely means that the exporting countries are no longer buying and accumulating the US, British and European debt. But if they are not accumulating more foreign currency bonds and debt, then the fiscal deficits of the US, British and European union countries are no longer being funded. Especially important to the US, which is running an immense fiscal deficit. Now if the debt is not being funded that means that the deficit is simply being monetized by somebody. Who is the somebody? That is a good question: The Federal Reserve of the United States.

Just give it a year or two and the Feds will bring us into the twilight zone playground. Everybody will run for the exits at same time, however it will be too late then because the populace ( the mass - 99% of people) are always wrong and will realise what is happening a minute before the destruction of their financial system (Aristotle - In Politico).

Rumours out of the new president's transition team now point towards a stimulus package of spending initiatives to at least $850 billions to up $1 trillion. The entire Obama package is, of course, to be added to the US federal budget deficit, the huge sums have to be borrowed before they can be spent. In fact, deficit spending is intellectual fraud. In a barter economy, the concept would amount to the local ruler inviting the entire tribe to a party to eat a herd of negative cows - cows which are literally not even there. In fact, economically this can not really happen. Spending, any spending, can only take a portion of economic goods out of the present supply of economic goods.

Once taken out and consumed, these economic goods are no longer here, but the money which was borrowed by government in order to get these goods certainly is here. It is circulating through the economy as are all the new debts. Deficit spending leads to over-consumption of the economic goods which government chooses to acquire while increasing the quantity of money in circulation and adding to the amount of government debt which people in the private economy will have to pay later in higher taxes. An official spending cut would have the opposite effect, because it would leave more goods in private hands with which to rebuild. In the US economy , it is all but over. The consumers have consumed most of the producers and the ones who remain are now too few and too under-capitalized. That is why the US dollar is not worth saving.

This is Austrian economics 101.

"Say's law of the markets" is simple. It is: "the supply of each producer creates his demand for the supplies of other producers."Supply creates its own demand. It works at all levels of economics from plain barter to the most sophisticated levels of exchange. It is not about consumption–that is what America forgot. Consumption today comprises 73% plus. Mathematicaly speaking that is not sustainable.

The most recent number of over-the counter derivatives - OTC- is approx. 1.4 QUAD-TRILLION, the world's GDP -gross domestic product- is approx. 48-50 trillion. This means that the productive capacity of the entire planet is leveraged 25 years into the future.

As our friend J. says, there are only two things you need to know:
"Hyperinflation takes birth and is currency visible during major economic upheavals." There is no historical truth that business recovery is a neccessary criterion to transmutate massive increases in money supply into hyperinflation.

What has been the major cause of the transmutation of massive liquidity into hyperinflation has been one form or another of quantitative easing combined with a loss of confidence in the inflator. 'QUANTITATIVE EASING' is what Mr. Bernake announced last week.

For the moron financial TV hosts claiming that major inflation is well down the road because inflation requires a business recovery to occur, tell them to review:

Angola 1991-1999
Argentina 1981-1992 2002-2003
Belarus 1993-2008
Bolivia 1984-1986
Bosnia-Herzegovina 1992-1993
Brazil 1986-1994
Chile 1971-1981
China 1948-1955
Georgia 1993-1995
Germany 1919-1923
Greece 1943-1955 at the high point prices doubled every 28 hours. greek inflation reached a rate of 8.5 billion percent per month
Hungry 1944-1946
Israel 1971-1985
Japan 1934-1951
Nicaragua 1987-1990
Peru 1987-1991
Poland 1990-1994
Romania 1998-2006
Turkey 1990-2001
Ukraine 1992-1995
Usa 1773
Yugoslavia 1989-1994
Zaire 1989-present. now congo
Zimbabwe 2000- to present. inflation 516 quintillion percent per year. N GO AND CASH-SPEND THE MONEY

We now know that the Fed has moved into the Quantitative Easing. Quantitative Easing is what non-economists call 'turning on the printing press'.

Hyperinflation comes about via a loss of confidence in money. This can be political as well as economic. It can happen to any major currency that weakens. It simply has never occurred by an upturn in business.

Until next time, do some thinking what is about to happen. And feel free to send me your thoughts. This is not doom and gloom, it is reality. Protect yourselves.

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#8) On December 26, 2008 at 1:07 AM, brwn8484 (91.16) wrote:

Yes... It is a matter of time ... Not if but when Hyperinflation will present itself.    Any study of history will prove that hyperinflation is a very real and present danger.

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#9) On December 26, 2008 at 2:13 AM, alstry (35.68) wrote:

NOTHING RECESSION PROOF 

from the WSJ:

The sour economy is striking the one source of government financing that had been widely regarded as recession-proof: lotteries.Education programs are a common beneficiary of lottery sales, which fell 2% in the third quarter from a year ago.

Across the U.S., many state lotteries are reporting hefty declines, with ticket sales down nearly 10% in California and more than 4% in Texas over the past few months. In good years, these lotteries have turned over more than $1 billion apiece to education programs, the most common lottery beneficiaries.

Lottery officials have long praised their games as low-cost entertainment that grow even more appealing to players when the economy turns down. But lottery sales nationwide fell about $215 million, or nearly 2%, from July through September compared with the same stretch in 2007, according to La Fleur's magazine, which tracks the lottery business.

The decline in lottery sales "is an unusual phenomenon," said John W. Kindt, a gambling critic and business professor at the University of Illinois. A big proportion of lottery tickets are bought by people with gambling problems who are likely to play more in bad economic times, he said, even as intermittent players cut back.

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