World economy talk

[tidus1203]

Job Losses is 95,000, worse than expected. Unemployment rate stays at 9.6%.

USD tanks!

[uls]

below 82 na

USD/JPY

[uls]

Job Losses is 95,000, worse than expected. Unemployment rate stays at 9.6%.

USD tanks!

check out U-6 (the REAL unemployment rate)

http://www.bls.gov/news.release/empsit.t15.htm

[tidus1203]

Meron pa palang "REAL" unemployment rate. So what we are getting is the "FAKE" one...

Wow 17.1% real unemployment rate. I assume that also includes people who gave up looking for work. Kasi sa government version if you are not looking for work but you don't have one you are not considered unemployed...

[uls]

hehe

they use U-3 as the official unemployment rate

but U-3 doesnt include people who have given up looking for work

U-6 includes everyone

[uls]

meanwhile, in the currency war...

Europe fires a shot across the Atlantic

Euro is too strong at $1.4-Eurogroup President
http://www.reuters.com/article/idUSWEA161020101008

Oct 8 (Reuters) - The euro exchange rate against the dollar is too strong at $1.4, as the dollar does not reflect the economic fundamentals of the United States, the chairman of euro zone finance ministers Jean-Claude Juncker said on Friday.

"The euro is too strong today," Juncker told a meeting in Washington ahead of a meeting of finance ministers and central bankers of the Group of Seven most industrialised countries.

"I don't think the dollar is in line with underlying fundamentals," he said.

[tidus1203]

hehe

they use U-3 as the official unemployment rate

but U-3 doesnt include people who have given up looking for work

U-6 includes everyone

Funny how these economists love to put levels kinda like M1 M2 and M3. The Fed hates it if you talk about the M3. In fact they don't divulge M3 anymore cause most of the money printing (asset purchases) is in M3 category and can't be seen in M1 and M2...

[uls]

CBOT grains prices went limit up last night

USDA reported smaller harvests

wheat


corn


soybeans

[tidus1203]

What a timing. And combine that with money printing expect more riots as poor people can't even buy food... I guess this is nature's way of reducing the overpopulation...

[uls]

tidus, have you have come across news about US foreclosures?

Bank of America just stopped foreclosures in 50 states, PNC in 23 states

JPM and GMAC already stopped foreclosures earlier

Citi and Wells likely to follow

the banks have been rushing foreclosures and are overwhelmed by the volume

a lot of sloppy paperwork

houses that were not supposed to be foreclosed were foreclosed

people who bought foreclosed houses find out the previous owners havent moved out yet

problems with title ownership, title insurance

complaints are all over the place

the complaints have reached politicians and politicians have been calling for foreclosure moratorium all over the US

this is gonna be a major problem for the banks in the coming months

[tidus1203]

Yeah I heard BOA was stopping foreclosures at the moment... Not sure with the reason...

[uls]

the foreclosure crisis has gone viral

[ame="http://www.youtube.com/watch?v=9kPCYcBm-C8"]YouTube - Foreclosure fraud parody[/ame]

what is H.R. 3808?
http://www.govtrack.us/congress/bill.xpd?bill=h111-3808

H.R. 3808: Interstate Recognition of Notarizations Act of 2010
To require any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce.

H.R. 3808 is supposed to make foreclosures easier for banks (they have more than a million houses to foreclose this year, gotta fasttrack the process)

now that foreclosures have been stopped, the banks can't liquidate the houses

(good news for homeowners who aren't paying their mortgages, they get to stay rent-free in the houses longer)

this is costing the banks

the banks are bleeding right now

in 2011, the TBTF banks could ask for another bailout

[Monseratto]

US and China playing hardball...

http://edition.cnn.com/2010/BUSINESS...ex.html?hpt=T2

Global clash over economy,
By Chris Giles and Alan Beattie
October 11, 2010 -- Updated 0131 GMT (0931 HKT)

(FT) -- Global economic co-operation was in disarray and further battles in the currency war looked likely after the weekend's international meetings of finance ministers and central bankers broke up with no resolution.

The world's largest economies remained as far apart as ever on currencies. China accused the US of destabilising emerging economies by allowing ultra-loose monetary policy to flood the emerging world with money, while the US insisted the International Monetary Fund should intensify its focus on exchange rates and the reserve accumulation of China.

The lack of any substantive agreements and brinkmanship on proposed reforms to the IMF is likely to exacerbate currency volatility in the month running up to the Seoul Group of 20 summit.

Mohamed El-Erian, chief executive of Pimco, the world's largest bond investor, said: "A once promising global response has now been replaced by inadequately co-ordinated national economic policies and growing frictions among countries."

The communiqué following the main IMF meeting spoke of countries working "co- operatively" but contained no evidence that leading economies could find agreement on any of the issues that divide them.

Dominique Strauss-Kahn, IMF managing director, called on countries not just to sign up to warm words but to take concrete steps. "The language is ineffective. The language is not going to change things. Policy has to be adapted."

But there was little sign that China would let the renminbi appreciate faster, to the growing frustration of the US. "The IMF must strengthen its surveillance of exchange-rate policies and reserve accumulation practices," said Tim Geithner, US Treasury secretary.

This pressure on China is now being met with stiffer resistance. Zhou Xiaochuan, China's central bank governor, told the IMF meeting the focus on currencies was one-sided. "The continuation of extremely low interest rates and unconventional monetary policies by major reserve currency issuers have created stark challenges for emerging market countries in the conduct of monetary policy."

Prof Eswar Prasad of Cornell University said: "China's aggressive pushback against criticism of its currency policy by shifting the line of attack towards loose monetary policies and rising public debt in advanced economies reflects its growing assertiveness and strong resistance to international pressure."

Other finance ministers told the Financial Times of their despair at the intransigence of both sides. Pravin Gordhan, of South Africa, said: "If you listen to the Chinese, they have one interpretation of what is going on. If you listen to the Americans, they have another. There has to be give and take by all."

To try to regain the initiative, the IMF has proposed a new mechanism to enhance its scrutiny of different countries' economic policies by focusing on the ways one economy affects others. But experts do not see this as likely to resolve the deep divisions over policy.

[uls]

tama ang China

the US accuses China of being a currency manipulator pero mas currency manipulator ang US

look at what the Fed is doing

trade war ang susunod dyan

China won't let its currency rise, the US will impose high tariffs on China goods

[safeorigin]

Funny how these economists love to put levels kinda like M1 M2 and M3. The Fed hates it if you talk about the M3. In fact they don't divulge M3 anymore cause most of the money printing (asset purchases) is in M3 category and can't be seen in M1 and M2...

it is for the same reason that they also intervened when it comes to obesity

[ame="http://www.youtube.com/watch?v=hRoSJ1y1FSY"]YouTube - The Onion Movie- Obesity[/ame]

[Monseratto]

tama ang China

the US accuses China of being a currency manipulator pero mas currency manipulator ang US

look at what the Fed is doing

trade war ang susunod dyan

China won't let its currency rise, the US will impose high tariffs on China goods

The US is threading in dangerous waters. Most US companies are doing well because of the Chinese economy. GM sold more cars in China than in the US in the past few months.

[Monseratto]

It's now China's fault for the US sub prime crash...

http://edition.cnn.com/2010/OPINION/...ex.html?hpt=T2

The recession was made in China
By David Frum, CNN Contributor
October 11, 2010 -- Updated 2123 GMT (0523 HKT)


Washington (CNN) -- The Financial Times reported Sunday that "global economic co-operation is in disarray and further battles in the currency war look likely after the weekend's meetings of finance ministers and central bankers end with no resolution."

The rancorous meeting took place here in Washington, in the sleek headquarters of the International Monetary Fund. The ministers and bankers had gathered to settle a big dispute over interest rates and currency between the United States and China.

China thinks U.S. interest rates are too low, and the U.S. dollar too cheap. America argues the contrary: It is China's currency that is out of line.

Many influential Americans share the Chinese point of view: Thomas Hoenig, head of the Kansas City Federal Reserve, has strongly argued for higher U.S. rates to prevent future inflation. The Hoenig view is endorsed by prominent financial commentators, such as CNBC's Larry Kudlow and the editorial page of The Wall Street Journal.

But this is one case where the conventional wisdom in America is right. In fact, the conventional wisdom does not go nearly far enough.

We all can see the responsibility of Wall Street and the U.S. mortgage market for today's global recession. Yet behind both is a more fundamental cause: China's financial rise. As much as the products in the aisles at Wal-Mart, this recession was made in China.

China earns its living by selling to the United States. In recent years, it has sold more and more: China's exports doubled in the 1990s. In the 2000s, they doubled -- twice. And of course far and away the biggest market for Chinese goods was the United States.

Economists would expect that China's huge trade surpluses with the U.S. must sooner or later cancel themselves out. It's basic supply and demand.

1) China sells us more than it buys.

2) Therefore China accumulates dollars.

3) Therefore China spends the dollars.

4) Therefore the dollar declines relative to Chinese currency.

5) Therefore Chinese goods become more expensive.

6) Therefore Americans buy less from China and sell more.

7) Therefore the trade surplus ends. It's all beautifully self-regulating.

The trouble with the theory is that in China's case, step 3) does not happen.

To keep China's population working -- and to stop China's population from protesting -- the Chinese government must keep the exports moving. To keep the exports moving, China must keep the currency cheap. To keep the currency cheap, China manipulates its banking system so the accumulated surplus dollars never get spent.

Instead, the Chinese lent the dollars back to us. And because the Chinese had so many dollars, they lent the dollars very, very cheaply.

You got a fabulous deal on your mortgage because China's workers were prevented from spending the money they had earned.

This process accelerated through the 2000s, but it went into hyperdrive in 2005, when China's trade surplus abruptly spiked. Bigger surplus, more dollars, more lending. 2005 was the year the subprime mortgage boom began.

China's lending spree translated into an American debt binge. The debt of the U.S. nongovernmental sector surged after 2005 to levels last seen in -- uh oh -- 1929. And from the top of the roller coaster, it's a long, scary ride back to Earth.

The U.S. Federal Reserve has tried to cushion the pain of the Great Recession by cutting interest rates to zero. But those low interest rates have done an interesting thing: They have turned the tables on the Chinese.

Zero interest rates in the U.S. are pushing down the value of the U.S. dollar against every world currency. A dollar bought about 110 yen in the summer of 2008. A dollar now buys 83 yen.

The Chinese government has fiercely resisted a corresponding decline in Chinese currency. But that resistance has nasty internal effects for China.

As America prints more and more money to prevent deflation, China must (if it wants to sustain the dollar-renminbi parity) print equal money -- risking inflation. The excess cash that once triggered a housing bubble in the U.S. is now sloshing back into China, creating an even more horrifying housing bubble in China's big cities. China has been placed back where we were in 2005.

China faces two main policy options.

One would be to accept the need to stop Chinese inflation and allow its currency to rise -- accepting reduced exports and employment in China.

The other? Continue manipulating the currency to sustain Chinese exports and employment -- and accept accelerating inflation and probably an ultimate crash.

If China's finance ministers and bankers are yelling at Americans at the IMF, it is not because Americans are wastrels and spendthrifts. It is because China wants us to subject the American population to more economic pain to redress a problem the Chinese themselves have created for the world and for us.

Nuts to that. Let 'em howl.

The opinions expressed in this commentary are solely those of David Frum.

[uls]

China was not responsible for low rates in the States that caused the housing boom (and crash)

Alan Greenspan needed to create another bubble after the dotcom bubble burst

the Fed lowered rates in 2001 to keep the US economy going

by 2002, the Fed funds rate was 1%

the rate was kept low till 2004

remember that's when the housing boom in the US began

in 2004, Greenspan suggested people should take out adjustable rate mortgages (ARMs)

then the Fed began raising rates

by 2006, the Fed funds rate is 5.25%

that caused many subprime ARMs to reset to higher rates

people defaulted

which triggered the subprime crisis

--

it was during Greenspan's low rate era when there was huge demand for mortgage-backed securities

institutional investors (pension funds, insurance companies, hedge funds etc) demanded higher yielding instruments that are investment grade

Wall St. mad scientists created securities from mortgages pooled together, sliced and diced and packaged, and had the credit rating agencies put investment grade ratings on the securities

the securities were then sold to investors

the investors wanted more... they couldnt get enough of the securities

so there was this huge securitization boom

the securitization boom created huge demand for mortgage loans

mortgage lenders couldnt find enough borrowers

anyone who had a pulse was given a loan

in 2007, things started to fall apart

the rest is history

blame that on China?

[tidus1203]

And now Bernanke is trying to the same as Greenspan. After the bubble bursted they try to artificially re-inflate. People have no 9/11 now though so there is no more "sympathy" for the economy so to speak unlike during 9/11 Bush used that as an excuse to make people spend and help the economy and their country...

[uls]

Goldman Sachs' mortgage servicing unit also stops foreclosures

http://www.americanbankingnews.com/2...-foreclosures/

Goldman Sach’s (NYSE: GS) mortgage-servicing business, Litton Loan Servicing LP, said that it will be halting some of its foreclosures to review how the documents are related to the cases are handled.

“Litton Loan Servicing has suspended foreclosure proceedings in certain cases while it completes a review of its procedures,” Donna Marie Jendritza, a spokeswoman for Litton, said in an e-mailed statement to the press.