Stocks are heading lower and gold and silver are heading higher this morning. Gold is breaking out through overhead resistance (again!) as is the U.S. dollar. For a change, gold is outperforming silver, so far anyway. We’ll see where we end the day. Meanwhile, here’s what I am reading …
Another $3T of U.S. Debt: Don’t Count on Foreigners to Pay for Our Bailouts
- The Fed’s balance sheet doubled to as much as $2 trillion before contracting a bit in January and early February; it will likely double again as the central banks acts as buyer and guarantor of last resort.
- The U.S. federal deficit is likely to be $1.5 trillion in fiscal 2009 and $1.25 trillion in fiscal 2010.
- The Treasury will need to issue close to $3 trillion of debt to fund that deficit.
In what could turn out to be the greatest fraud in US history, American authorities have started to investigate the alleged role of senior military officers in the misuse of $125 billion in a US -directed effort to reconstruct Iraq after the fall of Saddam Hussein. The exact sum missing may never be clear, but a report by the US Special Inspector General for Iraq Reconstruction (SIGIR) suggests it may exceed $50 billion, making it an even bigger theft than Bernard Madoff’s notorious Ponzi scheme.
RED ALERT: FX Dislocation In Process - Updated (11:47 PM)
Someone, apparently someone in Asia, wants dollars. A LOT of dollars. There is a forced-liquidation event underway that is massive, it is against all asset classes and it is spreading.
It originated at approximately 7:15 CT this evening and originated out of Asia somewhere. All of the primary currency crosses got hit at once - Euro, Pound, Yen - all weakened dramatically against the dollar and it is still going on. The Asian stock markets got walloped at the same time in coordinated waves of forced selling.
At the same time the US futures markets got nailed as well, down some six handles on the /ES in a near-vertical drop. While this sounds “not that big” to move these markets in a coordinated fashion like this is a trillion-dollar enterprise - this is not some small company that went bankrupt, or even a large company.
There is no news coverage at the present time identifying the source of this but it is not small and contrary to some reports it is not “automatic selling”; this is forced liquidation.
XX Sean’s note — and here’s why that is happening: Chinese Central Bank Adviser Sees Dollar Domination
In other news …
Asian demand helps gold break $960
Gold prices surged on Tuesday to a fresh seven month high on Tuesday, trading above $960 a troy ounce and hitting record highs denominated in euros and sterling, boosted by strong buying by Japanese and Chinese investors.
The strong buying in Tokyo came a day after Japan, the world’s second largest economy, reported it suffered its worst economic slump in 35 years, with the economy contracting 3.3 per cent quarter-on-quarter in the last three months of 2008.
So Much For Stimulus: Chinese Loans Diverted to Stocks, Feeding Rally
The China bulls have commented approvingly on the growth in loans in China, seeing it as a sign of pending recovery, along with an upswing in stock prices. We’ve pointed out that economist and China commentator Michael Pettis has heard quite a few reports that many of these loans were in fact sham transactions to meet government targets.
And now it gets even better. One analyst estimates that more than 1/3 of the total “new” lending (assuming that the loans were truly extended) may have gone into the stock market.
Short of opening a Radio Shack in an Amish town, Dubai is the world’s worst business idea, and there isn’t even any oil. Imagine proposing to build Vegas in a place where sex and drugs and rock and roll are an anathema. This is effectively the proposition that created Dubai - it was a stupid idea before the crash, and now it is dangerous.
XX Sean’s note — the Dubai article is very well written (and has must-see video) but I’m not sure I agree with the premise. Time will tell if building Dubai was a bad idea or not. Oil won’t last forever, and the UAE rulers have made a serious effort to find “what comes next.” Plenty of European/American cities have seen their own booms and busts as well.
Simon Johnson’s premise is that the big Wall Street banks represent an oligarchy that is exerting undue influence and control on our government and the economy. They are turning this crisis to their advantage, and circumventing the democratic process. What we are seeing looks to Simon Johnson like a financial coup d’etat.
Related Posts
- China, Post-American World, Global Warming & … (05/12/08)
- How Big Is Your Earthquake Risk? (01/20/10)
- Where in the World is Sean Brodrick? (05/21/08)
- Postcards from the End of the World as We Know It (01/26/10)
- Where in the World Is Sean Brodrick? (11/14/09)
{ 1 trackback }
{ 0 comments… add one now }