Thread: A note of caution for those with deposits in US Banks

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Investor commits suicide in New York

Tuesday 23 December 2008
Thierry de la Villehuchet, a 65-year-old co-founder of Access International, which raised funds in Europe to invest with alleged fraudster Bernard Madoff, has committed suicide in New York. Police confirmed thay had found him dead.


France 24 | Investor commits suicide in New York | France 24

U.S. Economy: Housing Prices Collapse at Near-Depression Pace

Dec. 23 (Bloomberg) -- Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing hopes that the market was close to a bottom.

Purchases of both new and existing houses dropped 7.6 percent, the biggest decline since January 1989, to an annual rate of 4.43 million, government and industry figures showed today. A 13 percent drop in the median resale price was the most since records began in 1968 and was likely the largest since the 1930s, the National Association of Realtors said.

“Housing is still in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

The figures were worse than economists had forecast and signal that the battered housing market that led the economy into a recession may be taking another lurch down. Sliding property values mean more Americans will be under water on their mortgages, destroying household wealth and undermining consumers’ purchasing power. "

Bloomberg.com: Worldwide

The collapse is now gathering pace to a unstoppable speed. People will owe $200K on houses worth 50 and walk away with Uncle Sam holding the baby. Those that hold Uncle Sam (China, etc.) will then tell them to fek off.

Originally Posted by bkkandrew

The collapse is now gathering pace to a unstoppable speed. People will owe $200K on houses worth 50 and walk away with Uncle Sam holding the baby. Those that hold Uncle Sam (China, etc.) will then tell them to fek off.

another made up story by our resident story teller

once upon a time, there was Uncle Sam, his baby and Mrs China.....

and they all lived happily ever after

Moorlach Sees Up to 10 Municipal Bankruptcies in Coming Year


By Joe Mysak

Dec. 23 (Bloomberg) -- The accountant who predicted the nation’s largest municipal bankruptcy says as many as 10 insolvencies will roil the $2.7 trillion U.S. market for state, county and city debt next year as public finances worsen amid calls for federal aid to state and local governments.

John Moorlach said in 1994 that Orange County, California’s leveraged investing strategy could wreck its finances. The county went bankrupt about six months later after losing $1.6 billion.

As many as four cities in the Golden State and six others nationwide may seek court protection from creditors next year under Chapter 9 of the bankruptcy code, the section devoted to municipal governments, Moorlach said in an interview.

“The total could be higher,” said Moorlach, 53, now chairman of the Orange County Board of Supervisors. He didn’t name any cities outside California, which has seen the cost of insuring state debt against default more than quadruple since September. He said his estimate was based on general economic conditions.

Bloomberg.com: Exclusive

Form an orderly queue for your bailouts!

so silly andrew, as you can see now, municipal debt is not part of the Federal government, as you claimed before, wrongly

Originally Posted by Butterfly

so silly andrew, as you can see now, municipal debt is not part of the Federal government, as you claimed before, wrongly

Obviously your heckling skills do not extend to reading posts you are heckling at:

Originally Posted by bkkandrew

state, county and city debt next year as public finances worsen amid calls for federal aid to state and local governments.

and from before:

Originally Posted by bkkandrew

(California) State governors are to meet President-elect Barack Obama later on Tuesday to press the case for federal help.

Governor Schwarzenegger on Monday invoked powers allowing him to declare a fiscal emergency as the new state legislature was sworn in.

"Without immediate action, our state is headed for a fiscal disaster," Mr Schwarzenegger said, saying that the current $11.2bn shortfall could swell to "a staggering $28bn" over the next 18 months.

"I compare the situation that we are in right now to finding an accident victim on the side of the road that is bleeding to death," the Republican governor told a news conference in Los Angeles.

nice distraction,

you have been claiming that Federal debt was missing the Municipal and state components, going to great length how they were one when in reality they are completely separate

it's like claiming GM debt was part of the Federal government,

Originally Posted by Butterfly

nice distraction,

you have been claiming that Federal debt was missing the Municipal and state components, going to great length how they were one when in reality they are completely separate

I have never claimed that. Link?

No, you spread lies and disinformation in a shameless way. The only thing I said that in debt to GDP comparisons, the Wiki source you were mistakenly using compared countries figures that included State, County and Municipal debt in with their numbers with countries that didn't.

Originally Posted by Butterfly

it's like claiming GM debt was part of the Federal government,

It is actually exactly the same now, a new, quasi-guaranteed state of bailout, promise of further bailout and nudge, nudge, wink, wink we'll cover the bill for you.

It is precisely this lack of rules and separation that is bankrupting the FED.

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IMF approves bail-out for Latvia


There have been protests in Riga against tax rises


The International Monetary Fund (IMF) has approved a 1.68bn euro ($2.35bn; £1.59bn) rescue loan for Latvia.

It is part of a 7.5bn euro package that includes funding from the European Union, World Bank and other countries.

It will allow Latvia to maintain its currency's peg to the euro, but there will be sacrifices such as cuts in public sector wages and state spending.

Value added tax will be raised from 18% to 21%, which has prompted protests in the capital, Riga.
Latvia has also agreed to keep its budget deficit below 5% of gross domestic product next year and reduce it to 3% by 2011. The other countries involved in the bail-out are the Czech Republic, Poland, Estonia and the Nordic countries.


From:

BBC NEWS | Business | IMF approves bail-out for Latvia

NEW YORK (Reuters) - American Express Co and CIT Group, received approval to get $5.72 billion (3.8 billion pounds) under the government's financial bailout program on Tuesday.

Both companies, struggling with mounting credit losses and higher financing costs, morphed into bank holding companies in order to qualify for funds under the $700 billion U.S. Treasury's Troubled Asset Relief Program.

The new status would also allow American Express, the fourth-largest U.S. credit card company, and CIT to borrow funds directly from the Federal Reserve's discount window.

From:

American Express, CIT get approval for TARP funds | Reuters

Note that the first $350BN of the TARP has been used up. This is from the second half, which has yet to be approved by Congress. At this rate they will have allocated it all before it is approved.

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Fortis, the troubled Belgian bank whose future has been clouded by a top-level political crisis, has admitted losing almost €300m (£280m) after an ill-fated move into sterling and the US dollar.

The loss, which makes a significant dent in Fortis's remaining cash reserves, was incurred following the suspension of its proposed takeover by France's BNP Paribas.

Fortis said this morning that it had bought undisclosed amounts of both currencies on 8 December, in preparation for the merger with BNP. The deal was hit by a legal challenge four days later and the subsequent collapse of the Belgian government.

The pound and the dollar have since slid in value versus the euro, and it appears that Fortis did not take the precaution of hedging the transaction.

"Given the current uncertainty, Fortis decided to sell the US dollars and pounds sterling again, resulting in a net loss for Fortis of €295m. This loss reflects the recent devaluation of the US dollar and the pound sterling," it said today.

The loss cuts Fortis's net cash reserves down from €2.1bn to €1.8bn. Shares in the bank fell by almost 10% following the admission.

A deal to save Fortis was hammered out at the end of September by the European Central Bank with the governments of the Netherlands, Belgium and Luxembourg.

From:

Belgian bank Fortis racks up £280m loss on ill-fated currency deal | Business | guardian.co.uk

Oh dear, it really isn't going well for them is it...

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Japanese industrial production dropped steeply in November after factories reduced their production on lower demand, official data showed Friday. At the same time, the year-over-year growth in consumer price inflation eased more than expected amid a recession.

A preliminary report released by the Ministry of Economy, Trade and Industry said industrial production declined by a record 8.1% month-on-month in November, showing a decrease for the second consecutive month. On a yearly basis, production was down 16.2% in November. Economists had predicted a monthly decline of 6.8% and annual drop of 15%.

Industries that mainly contributed to the decrease were transport equipment, general machinery and electronic parts and devices. Production of large passenger cars, large trucks and drive, transmission and control parts declined sharply in November.

According to the Survey of Production Forecast in Manufacturing, production is expected to decrease 8% in December and to drop 2.1% in January.

From:

RTTNews - Realtime Economic Newswire, Asian Economic News, Economic Audio News....

16% declines eh? 2009 is shaping up to be quite a year!

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Russian industrial output plunges 10.8%

By Catherine Belton in Moscow

Published: December 16 2008 20:07 | Last updated: December 16 2008 20:07

Russia’s industrial output had its biggest fall in November since the country’s 1998 economic crisis as a sharp fall in global commodity demand and expectations of rouble devaluation continued to push Russia towards recession.

Industrial production fell by 10.8 per cent in November on the previous month, and 8.7 per cent year on year, according to data released on Tuesday. The new figures made Russia the third large developing economy to report a downturn in industrial output in recent days; China and India have recorded similar falls.

<snip>

Russian authorities are steeling themselves for a potential social backlash with officials predicting up to 200,000 job losses over the next few months. Economists warn the real number is likely to be much higher, while data released on Tuesday showed that wage arrears have doubled to 7.8bn roubles ($284m, €205m, £185m), so far affecting 2 per cent of the total workforce.

From:

FT.com / In depth - Russian industrial output plunges 10.8%

I see trouble ahead.

Average home price $18,513 - Unemployment rate 21%

December 21, 2008


The Great Depression has reached Detroit. The average price of a home is now $18,513 and unemployment has reached 21%, and it’s expected to get worse. Detroit is facing a crisis of epic proportions that officially puts Detroit statistically (and real term) on par with the great depression. Many readers of Tribble Ad Agency are advertising centric.. and due to the rash of layoffs within all Detroit Advertising firms has put the city on the map for the wrong reasons.

It has become the center of all that is wrong with America… and nothing of what is right.

For example, the crime rate has fallen…. because of lack of targets within the city. Meaning there is nothing left to steal. In fact, even the criminals don’t want to leave jail.

Heard confirmed that some offenders, notably those without homes of their own, were now expressing reluctance to leave jail when their sentences were done.

Home values have plummeted to levels not seen in 1/2 a century… and the 21% unemployment has in some cases been projected to double within 12 months if the auto industry totally collapses.

To make matters even worse, Detroit has superseded New Orleans as the “worst city” in America…. but New Orleans had a Hurricane they could assign blame to… Detroit has no such natural disaster crutch.

“It’s a depression — not a recession,” McDuell said, with the authority of someone who has lived through both. “It will get worse before it gets better.”

From:

Average home price $18,513 - Unemployment rate 21% : Tribble Ad Agency : The Advertising Agency of Record

I love the bit from later on in the article:

Bottom Line: The average priced house in Detroit ($19,448) is cheaper than the average price new car ($22,650).

This is the future of the USA. Some are just starting to latch on to this reality...

I am confused, the thread title says this is about US deposits, and all I see are links to UK, Iceland, and Russian economy and some silly end of the world prediction,

shouldn't this thread be renamed to "bkkandrew worldwide prediction garbage" ?

Originally Posted by Butterfly

I am confused

So, what else is new?

Originally Posted by Butterfly

the thread title says this is about US deposits, and all I see are links to UK, Iceland, and Russian economy and some silly end of the world prediction,

Obviously you can't see the US based links. Try an optition.

Most people can see how this collapse has started in the US banking sector and now spread to all areas of business and finance. As you are little slow on the uptake, I am not surprised you are still somewhat behind the curve on this.

Originally Posted by Butterfly

shouldn't this thread be renamed to "bkkandrew worldwide prediction garbage" ?

No, but if a mod would like to rename it to something more appropriate, I am sure they will.

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Will Banks and Financial Markets Recover in 2009?

NEW YORK - Global financial markets in 2008 experienced their worst crisis since the Great Depression of the 1930's. Major financial institutions went bust; others were bought up on the cheap or survived only after major bailouts. Global stock markets fell by more than 50%; interest-rate spreads skyrocketed; a severe liquidity and credit crunch appeared; and many emerging-market economies staggered to the International Monetary Fund for help.

So what lies ahead in 2009? Is the worst behind us or ahead of us? To answer these questions, we must understand that a vicious circle of economic contraction and worsening financial conditions is underway.

The United States will certainly experience its worst recession in decades, a deep and protracted contraction lasting about 24 months through the end of 2009. Moreover, the entire global economy will contract. There will be recession in the euro zone, the United Kingdom, Continental Europe, Canada, Japan, and the other advanced economies. There is also a risk of a hard landing for emerging-market economies, as trade, financial, and currency links transmit real and financial shocks to them.

In the advanced economies, recession had brought back earlier in 2008 fears of 1970's-style stagflation (a combination of economic stagnation and inflation). But, with aggregate demand falling below growing aggregate supply, slack goods markets will lead to lower inflation as firms' pricing power is restrained. Likewise, rising unemployment will control labor costs and wage growth. These factors, combined with sharply falling commodity prices, will cause inflation in advanced economies to ease toward the 1% level, raising concerns about deflation, not stagflation.

Deflation is dangerous as it leads to a liquidity trap: nominal policy rates cannot fall below zero, so monetary policy becomes ineffective. Falling prices mean that the real cost of capital is high and the real value of nominal debts rise, leading to further declines in consumption and investment - and thus setting in motion a vicious circle in which incomes and jobs are squeezed further, aggravating the fall in demand and prices.

As traditional monetary policy becomes ineffective, other unorthodox policies will continue to be used: policies to bail out investors, financial institutions, and borrowers; massive provision of liquidity to banks in order to ease the credit crunch; and even more radical actions to reduce long-term interest rates on government bonds and narrow the spread between market rates and government bonds.

Today's global crisis was triggered by the collapse of the US housing bubble, but it was not caused by it. America's credit excesses were in residential mortgages, commercial mortgages, credit cards, auto loans, and student loans. There was also excess in the securitized products that converted these debts into toxic financial derivatives; in borrowing by local governments; in financing for leveraged buyouts that should never have occurred; in corporate bonds that will now suffer massive losses in a surge of defaults; in the dangerous and unregulated credit default swap market.

Moreover, these pathologies were not confined to the US. There were housing bubbles in many other countries, fueled by excessive cheap lending that did not reflect underlying risks. There was also a commodity bubble and a private equity and hedge funds bubble. Indeed, we now see the demise of the shadow banking system, the complex of non-bank financial institutions that looked like banks as they borrowed short term and in liquid ways, leveraged a lot, and invested in longer term and illiquid ways.

As a result, the biggest asset and credit bubble in human history is now going bust, with overall credit losses likely to be close to a staggering $2 trillion. Thus, unless governments rapidly recapitalize financial institutions, the credit crunch will become even more severe as losses mount faster than recapitalization and banks are forced to contract credit and lending.

Equity prices and other risky assets have fallen sharply from their peaks of late 2007, but there are still significant downside risks. An emerging consensus suggests that the prices of many risky assets - including equities - have fallen so much that we are at the bottom and a rapid recovery will occur.

But the worst is still ahead of us. In the next few months, the macroeconomic news and earnings/profits reports from around the world will be much worse than expected, putting further downward pressure on prices of risky assets, because equity analysts are still deluding themselves that the economic contraction will be mild and short.

While the risk of a total systemic financial meltdown has been reduced by the actions of the G-7 and other economies to backstop their financial systems, severe vulnerabilities remain. The credit crunch will get worse; deleveraging will continue, as hedge funds and other leveraged players are forced to sell assets into illiquid and distressed markets, thus causing more price falls and driving more insolvent financial institutions out of business. A few emerging-market economies will certainly enter a full-blown financial crisis.

So 2009 will be a painful year of global recession and further financial stresses, losses, and bankruptcies. Only aggressive, coordinated, and effective policy actions by advanced and emerging-market countries can ensure that the global economy recovers in 2010, rather than entering a more protracted period of economic stagnation.

Guatemala News | Will Banks and Financial Markets Recover in 2009?

^ Your view, BA?

^I have followed Roubini's take on things closely, as he correctly predicted (in 2004) the events of the past 24 monts with uncanny accuracy in his '12-steps to financial disaster'.

This paragraph is the most interesting:

While the risk of a total systemic financial meltdown has been reduced by the actions of the G-7 and other economies to backstop their financial systems, severe vulnerabilities remain. The credit crunch will get worse; deleveraging will continue, as hedge funds and other leveraged players are forced to sell assets into illiquid and distressed markets, thus causing more price falls and driving more insolvent financial institutions out of business. A few emerging-market economies will certainly enter a full-blown financial crisis.

Roubini has deemed the risk of total systemic failure to be now reduced after the various bailouts, yet I think that he has not stated that the quid pro quo risk of Govenrmental fiscal failure has increased in inverse proportion. Of course, there is still a large risk that we will get both.

Originally Posted by Spin

Many look to the uk and wrongly claim a housing bubble there. There is no bubble there because you have a tight demand supply metric unique and entirely different to the oversupply situation in the USA for example.
Mid 2009 should be a fantastic oppourtunity to buy property in the uk.

I disagree and believe the 'pent-up demand' argument spun for the past 4-years has long been exploded in the UK. The mass repatriation of recent immegrants, 'flipped' apartments now empty, people moving back with parents due to severe recession all point to a much worse scenario than the 1989 house price crash. And for those that can remember, that time round prices started to recover in 1995...

Why 2009 Will be Worse than 2008

using a prediction of property bubble burst that everybody knew it was coming, and extrapolating that prediction to all kind of other tangents and linear projections is NOT really a reliable methodology to predict the future,

everything is curbed in this world, so following one guy who got it right in 2004 about something hardly means he will be right again for some other silly non-sense