06
Aug
As Inflation Climbs, The Fed Downplays the Danger; Personal Wealth Drops
FROM THE FCNL: Sixty-three years ago this week, the United States dropped nuclear bombs on the Japanese cities of Hiroshima and Nagasaki. In the United States and around the world, people will commemorate the lives lost and the destruction and horror that those weapons brought on August 6 and 9, 1945, and beyond.
FED DECIDES NOT TO FIGHT INFLATION
AS HOUSING VALUES DROP, WEALTH DISAPPEARS
MORE ON THE ANTHRAX STORY
Did you see the article that said consumer spending is up? It was taken as a sign of an economic turnaround because more money was in circulation and being spent at the malls etc. But, then, the next day, someone pointed out that more money was being spent because of inflation—i.e. because everything costs more. Oh.
Knock Knock!
The Federal Reserve Bank used to SAY they were worried about inflation. Not no more.
NYT: Fed Holds Rate Steady While Easing Concern Over Inflation
Policymakers seemed to give less importance to the inflationary risks of keeping rates low than they had at their meeting on June 25.
INVESTMENT NEWS REPORTS: Richard W. Fisher, president of the Federal Reserve Bank of Dallas, was the lone member to cast a negative vote, saying the key rate should be raised to fight inflation.
GOING, GOING, GONE
(Reuters) - Morgan Stanley told thousands of clients this week that they will not be allowed to withdraw money on their home-equity credit lines, Bloomberg News reported Wednesday, citing a person familiar with the situation. Most of the clients had properties that have lost value, the agency reported, citing a person who declined to be identified.
We are losing money and will lose more. Read this on the relationship between the fall in housing prices and personal wealth.
CREDIT CRUNCH ONE YEAR ON
BRUCE MARKS: PROSECUTE SUBPRIME CRIMINALS
The CEO of NACA has been challenging Fannie Mae for funding predatory lending for years. He testified on these practices in Congress in 2000.
NYT: Freddie Mac CEO Ignored Warnings
The chief executive of the mortgage giant Freddie Mac rejected internal warnings that could have protected the company from some of the financial crises now engulfing it, according to more than two dozen current and former high-ranking executives and others. In 2004, CEO Richard F. Syron received a memo from Freddie Mac’s chief risk officer warning him that the firm was financing questionable loans that threatened its financial health. Today, Freddie Mac and Fannie Mae, are in such perilous condition that the federal government has readied a taxpayer-financed bailout that could cost billions. Though the current housing crisis would have undoubtedly caused problems at both companies, Freddie Mac insiders say Mr. Syron heightened those perils by ignoring repeated recommendations.
NYT: Jamie. Dimon of JP Morgan Chase-”in call with analysts last month said he expected losses on prime loans at his bank to triple in the coming months, and described outlook for them as”terrible”.
Thomas H. Atteberry, First Pauly Advisers-”subprime was tip of the iceberg, prime will be far bigger in its impact.”
From a post by Jim Fitch of Some Assembly Required.
Coal Mine: Citigroup reports a $176 million 2Q08 loss on credit-card secutization. A pittance, but perhaps the canary for a business that previously generated over $3 billion in revenues.
Company’s Here: For the first time since the 70’s, inflation is rapidly rising around the world. Morgan Stanley reports double-digit inflation in over 50 countries. Seems globalism’s downside spreads faster than its upside ever did.
Tough Times: The wealthy have taken to telling their personal shoppers to look for bargains.
Catch The Wave: The crest of the next wave of mortgage defaults will either be (a) a larger number of foreclosures or (b) a smaller number of more expensive foreclosure
Pillow Talk: Jet Blue is charging customers $7 to use a pillow and blanket, $4 each if sharing the blanket… US Airways, charging $2 for water and but $1 for coffee is “vigorously moving towards more a la carte options.” And truth in pricing.
Fed holds interest at 2%. What does that 2% mean? That is the amount of interest that the people in charge of our government charge to their generous friends on wall street for a loan. So, for example, Bob Rubin at Citibank can go over to the federal government and borrow millions of dollars for his business activities, and only pay 2% interest per year on everything he borrows.
And whose money is it that Citibank is borrowing? That would be my money. The treasury of the United States consists of money that belongs to the taxpayers, to the working people, to the citizens. Yet the people in charge of our government allow Citibank, all the financial institutions, and now many of the speculators and criminals on wall street, to borrow my money and only pay me 2%. What’s up with that?
I don’t feel inclined to be that generous to people who have looted our country and are lining their own overseas secret accounts while the rest of us are unemployed and homeless. Are the people in charge of the treasury being bribed? Do they receive kick-backs? Is there any explanation at all for why they are so generous with wall street and so punitive towards the citizens of this country that they are legally charged with protecting?
So what happens to citizens when the fed holds interest at 2%? For one thing, the banks will only pay something pathetically low on any savings accounts or CDs. Any type of vehicle where people can put their money with the principal not being at risk — you will receive interest on that money at such a low rate that it won’t come close to keeping up with inflation. Theoretically, someone could put money into an account at a low interest rate, leave it there, and in ten years the money would be worth less than when it was deposited. Because of inflation.
So what can a prudent person do with their meager savings? Can’t invest in real estate because that’s unstable, falling, treacherous at this point.
So the only place to put money and try to stay even is the stock market. Which probably means in the short term more money will stay in the stock market than otherwise would in such a volatile economy (when prudent people would be more likely to put their money into cash because of fear of a market collapse). By holding down the interest, the feds know that they will essentially coerce people to keep more money in the stock market because they have no other good options. So the boys on wall street earn more money buying and selling stocks, charges fees. The portion of the money that is now involuntarily in the market will likely be withdrawn in one big rush, whenever the next big financial or economic disaster is revealed. So the fed’s action will likely increase the odds that we will end up in a severe depression, not just a recession. Just like the fed’s action in lowering interest years ago set up this real estate bubble that made billionaires out of a few and paupers out of the many.
It would be fair to say that all of the money, the assets, the resources of this country, created by generations of working people, has been taken over by a few corrupt politicians and turned over to their friends on wall street.
Remember when they said that the Clinton staff removed the B letters from the typewriters, or something stupid (which was untrue). Well the Bush people are removing all the money from the country, all the assets, all the resources. And that is the truth.
August 6th, 2008 at 3:46 pmIt should be to every middle-class American, conclusive, that the federal government, or I should say, the administrators of OUR government, are hell-bent on economically destroying the middle-class in this country. Everything our administrators have done to date, every bill the congress has passed, is evidence of that fact.
I suggest, if the government REALLY wanted to stimulate the economy and help the American people, they would have passed a moratorium on the Federal Income Tax instead of providing a so-called stimulus package that did little more than create more debt and further devalue the currency. Wake Up America! Our time is short if we continue to remain passive.
Michael N. Kashouty
August 6th, 2008 at 3:58 pm