Bits Bucket for June 9, 2012
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
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Bangkok Post
The World’s Window on Thailand
Spain bailout bid expected
Published: 9/06/2012 at 07:33 PM
A protester holds a placard reading “Bankers get fat with our money” during a demonstration in Coruna last weekend. AFP Photo
Spain is moving closer to becoming the fourth euro zone nation to receive aid, amid an IMF report that its feeble banks need at least 37 billion euros (US$46 billion).
German and EU sources said a formal Spanish request for a bank bailout could come during a conference call of euro zone finance ministers scheduled for 4pm Madrid time on Saturday.
In time for the call, the International Monetary Fund released a report overnight disclosing its estimate for the extra capital Spain’s banks need to cope with a worsening economy.
Spain may need to go beyond the 37 billion euros of capital needs identified and build a buffer of 60-80 billion euros, said an IMF official, who declined to be named.
Prime Minister Mariano Rajoy is resisting pressure from European officials to accelerate any request for help as Greek elections loom and Spain’s access to markets narrows.
He said on Thursday that he would not make any decisions about how to shore up lenders until seeing the results of the IMF analysis and similar tests by two international consultants due this month.
Deputy Prime Minister Soraya Saenz de Santamaria declined to comment when asked at a briefing on Friday whether Spain was seeking a rescue.
A bailout for Spain, reeling from a recession and the bursting of a property bubble, may dwarf previous rescues in the effort to stem the turmoil that began with Greece’s disclosure in 2009 that its finances were in worse shape than was previously known.
Since then, European governments and the IMF have made 386 billion euros in loan pledges to Greece, Ireland and Portugal. Spain’s economy is more than twice the size of the three countries combined.
…
BERLIN — The head of the German central bank, Jens Weidmann, is pressing Spain to seek a bailout for troubled banks from the eurozone’s current rescue fund, the EFSF.
“If Spain feels overwhelmed by its financial needs, it should use the instruments which have been created for that,” Weidmann said in an interview to appear on Sunday in the weekly Welt am Sonntag.
“The motto must not be: Above all no rescue funds. Hoping for central bank aid to avoid fulfilling one’s responsibilities is a bad move,” the Bundesbank chief was quoted as saying in a pre-release of the interview.
http://www.google.com/hostednews/afp/article/ALeqM5hPin4N-NwYc_7kjyZuKNSRZlTojg?docId=CNG.9a764cf99dbfaebf6f57ff59e51f6f34.701
Message to Spain. Your on your own, no help from Germany.
Message to Germany, from the grave of my deceased high school tennis coach:
“Talk is the cheapest commodity on Earth.”
Something wrong in world economy
By: The Economist
Posted: 1:00 AM
German Chancellor Angela Merkel.
German Chancellor Angela Merkel. (JENS MEYER / THE ASSOCIATED PRESS ARCHIVES)
When people are prepared to pay the German government for the privilege of holding its two-year paper, and are willing to lend America’s government funds for a decade for a nominal yield of less than 1.5 per cent, they either expect years of stagnation and deflation or are terrified of imminent disaster.
Whichever it is, something is wrong with the world economy.
That something is a combination of faltering growth and a rising risk of financial catastrophe. Economies are weakening across the globe. The recessions in the eurozone’s periphery are deepening. Three consecutive months of feeble jobs figures suggest America’s recovery may be in trouble, and the biggest emerging markets seem to have hit a wall: Brazil’s GDP is growing more slowly than Japan’s, India is a mess and even China’s slowdown is intensifying.
A global recovery that falters so soon after the previous recession points toward widespread Japan-style stagnation. That looks like a good outcome, however, compared to the growing danger of a fracturing of the euro.
The European Union, the world’s biggest economic area, could plunge into a spiral of bank busts, defaults and depression, a financial calamity to dwarf the mayhem unleashed by the bankruptcy of Lehman Brothers in 2008. The possibility of a Greek exit from the euro after its election on June 17, the deterioration of Spain’s banking sector and the rapid disintegration of Europe’s cross-border capital flows have all increased this danger.
And this time it will be harder to counter. In 2008, central bankers and politicians worked together to prevent a depression. Today the politicians are all squabbling. Even though the technocrats at the central banks could — and should — do more, they have less ammunition at their disposal.
Nobody wants to test these various disaster scenarios. It is now up to Europe’s politicians to deal finally and firmly with the euro. If they come up with a credible solution, it does not guarantee a smooth ride for the world economy — but not coming up with a solution guarantees an economic tragedy.
To an astonishing degree, the fate of the world economy depends on Chancellor Angela Merkel of Germany.
…
Whichever it is, something is wrong with the world economy.
What? You mean the incessant offshoring of jobs to slave wage nations, the ballooning of private and public debt while relying on America and to a lesser degree Europe to be the consumers and importers of last resort is finally going to take its toll?
Who could have possibly seen it coming?
We’ve lied to ourselves that trade imbalances do not matter.
NO! Worse than that, we’ve convinced ourselves they are great, the only path to prosperity.
The trade deficits are telling us the truth. It is just politically unacceptable to listen.
I have two questions for the HBB brain trust:
1) What are the likely U.S. financial market impacts of this “much larger than I.M.F.-recommended” Spanish bank bailout?
2) Will attention on the international financial stage now shift to a workout for Italy, as all four other PIIGS have been bailed out at this point?
9 June 2012 Last updated at 13:52 ET
Spanish banks to get rescue funds
Breaking news
Spain is to get loans to help shore up its struggling banks, its economy minister has confirmed.
He was speaking following an emergency meeting of eurozone finance ministers.
Luis de Guindos said Spain had agreed to officially request assistance from eurozone rescue funds.
He did not say how much the financial system would get, but he said it would be “significantly” more than the 40bn euros ($50bn; £32bn) recommended by the International Monetary Fund.
…
“rescue funds” to try to help –
Just don’t call it a ‘bailout.’
The funded amount is 2.5 times the I.M.F. recommendation. That ought to keep Spanish banksters fat and happy while the Spanish people struggle under the yoke of austerity measures.
BBC News
9 June 2012
Spanish banks to get up to 100 bn euros in rescue funds
Spain is to get up to 100 bn euros (125 bn dollars; 80 bn British pounds) in loans from eurozone funds to try to help shore up its struggling banks.
…
It is interesting how the big players on Wall Street seem to always get the news 2 days ahead of everyone else.
Perhaps they made the decision?
HEARD ON THE STREET
Updated June 9, 2012, 7:31 p.m. ET
Spain’s €100 Billion Gamble
By SIMON NIXON
Spain has finally grasped a nettle that should have been grabbed a long time ago. By asking the euro zone for a loan of up to €100 billion ($125 billion) to recapitalize its banks, Madrid has acknowledged what the market already knew: that Spanish bank balance sheets have been massively understating the losses arising from the country’s property bust.
But can this “financial aid” for the banks be presented in a way that ring-fences the problem, enabling the government to retain access to bond markets? This is the huge gamble: if it can’t, a far bigger bailout may be needed.
The tragedy for Spain is that if it had confronted its banking mess at any time over the last four years, it could probably have funded the clean-up on its own. Yet the new government of Mariano Rajoy followed the same path as its predecessor, squandering valuable time and credibility with a series of half-baked restructuring plans that failed to provide any fresh capital to the system. For much of this year, Madrid has been engaged in a futile effort to persuade the euro zone to bail out its banks directly, without channelling the loans via the government.
Perhaps the market will buy the euro zone’s assurances that this is a targeted program — the exact amount will be determined following the completion of an independent audit of bank balance sheets — with only limited conditionality focused on the banks. The sums involved are not too large in the scheme of things, equivalent to around 8% of GDP. And arguably, the market has been anticipating a recapitalization of this size for weeks, so it’s possible the bailout is already reflected in 10-year bond yields over 6%.
…
FPSS,
Hey. Was in NYC last weekend for nephew’s birthday. Between carting ice and helium balloons to Riverside Park and all the rest of the family stuff, I excused myself for a few hours to finally see the new Islamic Art galleries at the Met. Wow. I spent hours. Could have doubled it and wanted to stay longer.
Sigh. I miss New York.
Do you miss $4,000/month to rent a 1 bed/1bath in Manhattan or $20,000 in property taxes on a crap hole 3 bed/1.5 bath in the inner suburbs?
My, aren’t you Mr. Sunshine today.
I didn’t live in Manhattan except during law school. $900 a month for a gigantic 2 bedroom I shared with one other student. The kitchen was a closet - literally, the building was a converted old hotel - but other than that it was great. When she moved out to be with her boyfriend while studying for the bar, I got to keep the whole thing for my half of the rent, $450 a month.
I lived in a studio in Brooklyn for over three years for $725 a month. This was when I paid off $70K of student loans in just under 3 years.
And I had a “junior 2″ all to myself in Jersey City starting at about $1100 a month and finally ending up at around $1400 a month 9 years later. At least one year, I renewed my lease at a lower price per month. I could get from the front door of my apartment (not the building, my actual apartment) to sitting in class at NYU (walking to the train station, waiting for train, taking train, exiting station, walking to class, getting to my classroom) in less than 25 minutes. Admittedly, it took a little longer to get to the Met, but not anything that kept me from going whenever I wanted to.
And my niece just got into one of the top gifted and talented programs in the city. 9 years of outstanding education guranateed for the grand additional cost to her parents of $0. The program is better than most of the private schools in the city. Ones that easily fill their classes with kids whose parents pay $40K a year or close to it for tuition. They will have no need to move to the suburbs.
$900 for a gigantic 2 bedroom in Manhattan? When was this?
I lived in NYC for 2 years right after college in the mid 90s. I don’t think it was possible to get a studio for $900 unless your wardrobe consisted of kevlar exclusively.
I said I was in school. The university did not charge market rate rents. It was early 90’s. My Brooklyn studio was one subway stop from Manhattan on 3 different lines. That was market rate.
Calls for more Keynesian stimulus of the Chinese economy grow louder:
China Slowing Inflation, Output Add to Easing Pressure
Bloomberg News
Saturday, June 9, 2012
(Corrects spelling of economist’s name in 21st paragraph)
June 9 (Bloomberg) — China’s consumer prices rose the least in two years in May and industrial output and retail sales trailed estimates, adding pressure for more loosening after this week’s interest-rate cut.
Inflation slowed to 3 percent from a year earlier, the National Bureau of Statistics said today, compared with the 3.2 percent median forecast in a Bloomberg News survey. Production increased 9.6 percent, lower than a projected 9.8 percent gain, and retail sales increased 13.8 percent, the Beijing-based bureau said in separate statements.
Today’s data adds to concerns that global growth is stalling as Greece teeters on the edge of exiting the euro, Spain prepares a request for a bank bailout and U.S. job growth weakens. Premier Wen Jiabao may introduce additional stimulus to protect a full-year growth target of 7.5 percent even as the nation wrestles with bad loan risks from local government debt.
“These data should defeat any remaining complacency that the policy response has been adequate to maintain steady growth,” said Shen Jianguang, chief Asia economist for Mizuho Securities Asia Ltd. in Hong Kong. “More dramatic easing, especially in housing and local government financing vehicles is urgently needed and necessary to avoid a hard landing in the Chinese economy.”
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/06/09/bloomberg_articlesM5BTL16K50XS01-M5CE9.DTL#ixzz1xIqQ8iuS
‘More dramatic easing, especially in housing and local government financing vehicles is urgently needed and necessary to avoid a hard landing’
Free money for govt cronies and real estate speculators, or you’ll all be eating gruel!
I’ve heard this before somewhere…
Darrell must be sleeping late this morning, or I am sure we would be hearing it again here.
Given Congress’s irreconcilable differences in 2011, why would S&P expect them to behave differently come 2013?
S&P says U.S. to avoid “fiscal cliff,” risks remain
By Daniel Bases
NEW YORK | Sat Jun 9, 2012 2:19am EDT
(Reuters) - Standard & Poor’s said on Friday it expects U.S. lawmakers to set aside their differences to prevent a combination of tax hikes and spending cuts from hurting the economy in early 2013.
The rating agency affirmed the AA-plus rating of the world’s biggest economy but cautioned that its outlook remains negative.
The affirmation of the rating restarts the six- to 24-month period in which the agency could again cut the U.S. rating.
“One thing we do expect Republicans and Democrats to agree on — given an unemployment rate of about 8 percent and continued risks to the U.S. economic recovery — is avoiding sudden fiscal adjustment,” the agency said in a statement.
The United States lost its top-tier AAA credit rating from Standard & Poor’s last August in the wake of a bruising fight in Congress over lifting the government’s debt limit.
…
So long as the Fed’s printing press is in good working order, where is the problem with coming up with another $500bn in bail?
Easy Street
Hey Brother, Can You Spare $500 Billion for America’s Banks?
Chris Hondros/Getty Images
A trader on the New York Stock Exchange enters a Chase bank branch in New York City.
by Heidi N. Moore
Jun 6, 2012
It may be spring in much of the country, but the air in the financial world carries a definite chill reminiscent of the fall of 2008.
So we have to ask again: is the world’s banking system strong enough to withstand the forces of a global recession? A number of prominent people - more on them below - are dubious that the banking system is as strong as it should be. They believe that “systemic risk” - defined as the risk that most of the financial system will fail together - is on the upswing again.
If you forgot the term “systemic risk” from your 2009-vintage financial crisis dictionary, it refers to the state of affairs when the financial system as a whole is “undercapitalized” - which means that banks don’t have enough money to continue doing business. The whole system becomes at risk - thus, “systemic risk.” Systemic risk could be prompted when something — usually a shock like the fall of Lehman Brothers - causes banks to stop lending to each other and investors like money market funds to pull their money out of the banking system. Right now, Europe’s financial crisis is seen as a potential systemic risk that could wound the banking system.
One Nobel Prize winner - economist Robert Engle- has some pretty chilling predictions on just how much money it would take us to bail out a struggling financial system.
So what would American banks need to survive another crisis? Using Engle’s calculations, it would take $513.65 billion in fresh capital for the top firms including JP Morgan, Goldman Sachs and Citigroup.
Here’s the chilling part: How does that compare to 2008? It’s about the same amount. Back then, those top banks would have needed to raise $539.4 billion.
Meaning: we haven’t come very far at all, although certain firms have reduced their risk.
…
Meaning: The banks haven’t improved at all. The money fed to them was consumed by the bankers themselves. The system could use a good tonic, to flush out the intesinal parasites.
You mean they didn’t create jobs?
Why should the banks improve? They know they will be bailed out again and again. Might as well roll the dice for some nice profits. If those risky bets fail - there is always the taxpayer.
Let a few go banks go bankrupt and liquidate them. Have the top executives go to jail.
We would all be amazed how quickly this mess would be cleaned up.
Maybe your candidate (Romney) could step up to the podium and make an offer to clean up Wall Street. He and his top economic adviser, Glenn Hubbard, might be amazed by his huge margin of victory, come November!
Crickets: CHIRP! CHIRP!
Still waiting for your reply. But meanwhile, let me just reiterate what many have pointed out on this blog over the past few years.
Wall Street has an ongoing campaign to make massive contributions to the leading presidential contenders of both major U.S. political parties. That way, no matter who is elected, the president feels a debt of gratitude to Wall Street which is repaid by lax regulation and generous financial assistance in time of need.
Or announce he will appoint Spitzer as the new attorney general….
“They know they will be bailed out again and again.”
Not if Dodd-Frank has any teeth.
“Two years later, Dodd-Frank is groaning on its deathbed. The giant reform bill turned out to be like the fish reeled in by Hemingway’s Old Man – no sooner caught than set upon by sharks that strip it to nothing long before it ever reaches the shore. In a furious below-the-radar effort at gutting the law – roundly despised by Washington’s Wall Street paymasters – a troop of water-carrying Eric Cantor Republicans are speeding nine separate bills through the House, all designed to roll back the few genuinely toothy portions left in Dodd-Frank.”
http://www.rollingstone.com/politics/news/how-wall-street-killed-financial-reform-20120510
And they will all get killed by the democrats in the Senate. Unless things change in the election and they get reintroduced in the next Congress.
No banker will be left behind until the country collapses.
Regardless of the election results.
“Meaning: we haven’t come very far at all, although certain firm$ have reduced their ri$k.”
Once their were x4 … now only x3 … ain’t that progre$$ & improvement$?
[Yes, asking who benefit$ is a valid question!]
It seems increasingly likely at this point like FPSS was correct in his prediction that the Fed would go for QE3. This offers the prospect of a near-term Wall Street rally — a good chance for those who bought the dip at the end of May to take a few chips off the table.
Bernanke says Fed to act if Europe crisis deepens
Counterparties: The Fed puts (possibly) doing something back on the table
Spain calls for bank aid
Pedestrians walk past the Federal Reserve Building in Washington April 3, 2012. REUTERS/Joshua Roberts
By Pedro da Costa and Mark Felsenthal
WASHINGTON | Thu Jun 7, 2012 4:00pm EDT
(Reuters) - Federal Reserve Chairman Ben Bernanke said on Thursday the U.S. central bank was ready to shield the economy if financial troubles mount but offered few hints that further monetary stimulus was imminent.
He told Congress the Fed was closely monitoring “significant risks” to the U.S. recovery from Europe’s debt crisis but struck a decidedly different tone from the central bank’s No. 2 official, who argued in favor of monetary support on Wednesday.
For investors hungry for clues about the prospect for a third round of large-scale Fed bond buying, Bernanke’s testimony disappointed.
“The Federal Reserve remains prepared to take action as needed to protect the U.S. economy in the event that financial stresses escalate,” Bernanke told the congressional Joint Economic Committee.
Stocks pared gains on Bernanke’s remarks but remained positive after a steep rally on Wednesday, while the dollar strengthened against the euro.
…
If the Fed conjures up some more Trillions to give to Europe (again) would you consider that a “QE”? Is it a QE even if done in secret?
The Obama free$hit army marches on.
The sense of entitlement is disgusting. These people feel entitled to constantly increasing stock prices, continued credit expansion, bubble inflation, reduced consumer protections, the ability to pollute, and anything else needed for constantly increasing corporate profits.
The rich must get richer, at all costs. They are entitled!
What does Obama have to do with the above story?
Please explain, with supporting references, or cease and desist.
Hyperbole: an extravagant statement or figure of speech not intended to be taken literally
Doesn’t this pretty much describe everything you post here?
I agree Pbear…..IMO, it just reveals the darker side of ones bias…
I was mocking 2banana and his constant use of the term without proof the person is an Obama supporter.
So that we would respect you more?
He was just having fun. Lighten up folks.
Check ‘em out:
http://codex.wordpress.org/Using_Smilies
For Darrell’s post I recommend “roll”
“The sense of entitlement is disgusting.”
Just leave off the Obama and put in Government. However, I’m sure if it were anyone as President, they’d get the blame as well. The government for many is the President. What is interesting for me is the level of frustration that is starting to show up as this free spending party continues. The rational people know that there will be a hell of a price to pay down the road.
that there will be a hell of a price to pay down the road ??
And very few in congress will be there when it comes down to paying the price…They will be off chasing the sun and drinking drinks with little umbrellas in them…
No.
“Obama” is just the biggest cog in the machine. He can stop stuff, but he can’t do it himself.
“Government” is too broad. When you hate on government, you hate on a lot of people who are protecting you, whether you know it or not. I don’t mean only the military, I refer to many other workers. Did you read about some disaster in the paper today? Plant explosion? Radiation leak? Food poisoning? No? Then someone in government did his job.
I guess the best party at which to aim your vitriol is “campaign contributors.”
You might as well say that if you made it through the day, Angels are responsible, it’s because of your lucky rabbit’s foot or even that campaign contributors are on the job.
“No.
“Obama” is just the biggest cog in the machine. He can stop stuff, but he can’t do it himself.
“Government” is too broad. When you hate on government, you hate on a lot of people who are protecting you, whether you know it or not. I don’t mean only the military, I refer to many other workers. Did you read about some disaster in the paper today? Plant explosion? Radiation leak? Food poisoning? No? Then someone in government did his job.”
There are about 3 million govt bureaucrats at the federal level alone. That’s a lot of plant explosion prevention, huh?
LOL, Darrell
“Bernanke says Fed to act if Europe crisis deepens”
The same tired script, some drama, and no consequences.
As any honest doc will attest, end-of-life care is very expensive.
Investing
6/02/2012 @ 10:41PM |994 views
More QE Coming To Europe Next Week
How LTRO and QE work. From Zero Hedge.
Quantitative easing is the pump primer of the post-crisis years. Without it, markets have no where to go. Central Bankers are left to hope that throwing walls of money out there will eventually force big investors to take on risk.
It has. Until the QE goes away. Then it has a reverse effect.
Yet, in the emergency room that is the European Union, more pumping is necessarily to get a heart beat.
Next week, investors are expecting the European Central Bank to announce their latest round of QE, known best in Europe as LTRO — the long-term refinancing operation. It will be used to save the day once again, sold as an insurance against a run on banks in peripheral Europe.
Investors were blindsided like a contestant on reality game show Survivor when the government said it could not afford to bail out Bankia. The news sapped an already dwindling investor confidence in the euro zone’s ability to deal with its debt problems. Spain is a much bigger problem than Greece. It’s vulnerability to large capital outflows — from bank runs of common Spaniards, to the local one-percenters scrambling to move money offshore — all makes the renewed loss of investor confidence a major concern. The Greek situation will remain unresolved until elections there in three more weeks.
QE has not helped, unless one is to say that it added a few months of life to a dying patient.
…
And why is the patient dieing? We keep pumping in blood, but it isn’t helping.
I know this is a stretch, but perhaps there is some blood leaking out somewhere.
Meanwhile the bill just keeps getting bigger…
The patient is dying of a real-estate-related self-inflicted gunshot wound.
So, the housing bubble of 2002-2007 caused total debt to increase from $4KT to $21T between 1980 and 2002?
We’ve been living on bubbles for 30 years. Junk bonds, Texas real estate, tech (dot com) stock bubble,
If it had not been real estate, it would have been something else.
Exactly. Krugman’s article on Friday said that Reagan was keynesian after all. Heads could blow up in the blog if they read the article. Probably one of the few times I actually agreed with him. We have been living on this keynesian nightmare for last 30 yrs starting with Reagan period. It would have been another bubble if not for the housing.
There is nothing Keynesian about trying to persist trade imbalances via unsustainable debt growth.
Keynes advocated counter-cyclical deficits and surpluses to flatten the business cycle in an otherwise sound economy.
He never advocated persistent government deficits even as private sector debt was expanding at an unsustainable pace, to expand the total money supply fast enough to allow us to pretend that we can eat our cake, and have it too.
“Krugman’s article on Friday said that Reagan was keynesian after all. Heads could blow up in the blog if they read the article.”
Not my head. I made the same point about Reagan here on a recent post. He allegedly was a ‘C’ student in college economics; he probably never even heard of Keynes.
It doesn’t really matter what Reagan did. My understanding is that thanks to Carter’s and Volcker’s much hated version of austerity, Reagan could jump start Morning in America with an empty credit card, which he promptly ran up to outspend Russia in the Cold War. Meanwhile, Jack Welch and Co used the cover of the defense boom to eviscerate the middle class in the MIdwest and South and move everything to China.
The job boom under Clinton (thanks DARPA!) paid some of it down. The real problems started in 2001.
“My understanding is that thanks to Carter’s and Volcker’s much hated version of austerity…”
And yet, folks I know who are highly supportive of austeriy measures continue to scream that (if not saying it about Obama) Carter was our worst President ever while holding Reagan up as the model to which we need to aspire. Sigh….
““Krugman’s article on Friday said that Reagan was keynesian after all. Heads could blow up in the blog if they read the article.”
Well if Krugie - Enron economic consultant Krugie- said it, it must be true.
Krugman also predicted a recession for 2003, 2004, 2005, and 2006. He finally got it right with his prediction for one in 2007. Almost as accurate in predicting recessions as he was in helping Enron out.
Krugie in 2010 writing about Germany: “budget cuts will hurt your economy and reduce revenues by reducing economic growth.” How accurate was he? In 2011 Germany’s GDP grew by 3%. Good call Krugie, good call indeed.
But Krugie’s opus of stupidity has to be…
““If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better off.”
The US economy grew sufficiently after WWII, while the rest of the world lay in ruins, so that the massive debt, while not paid down, because a smaller percentage of GDP.
Is that the trick we’re expecting this time? Because if not, then what?
In a word, what is the present state of the global financial system?
Precarious.
Argentina loses a third of its dollar deposits
08 Jun 2012
Related News
Analysis: Greeks not alone in bank savings exodus
Fri, May 25 2012
Analysis & Opinion
Argentine CDS spiral on “peso-fication” fear
Fri Jun 8, 2012 4:46pm EDT
* Argentines reacting to foreign exchange restrictions
* About $100 mln in dollars withdrawn every day
* Rush toward greenback started in November
By Jorge Otaola
BUENOS AIRES, June 8 (Reuters) - Argentine banks have seen a third of their U.S. dollar deposits withdrawn since November as savers chase greenbacks in response to stiffening foreign exchange restrictions, local banking sources said on Friday.
Depositors withdrew a total of about $100 million per day over the last month in a safe-haven bid fueled by uncertainty over policies that might be adopted as pressure grows to keep U.S. currency in the country.
The chase for dollars is motivated by fear that the government may further toughen its clamp down on access to the U.S. currency as high inflation and lack of faith in government policy erode the local peso.
“Deposits keep going down,” said one foreign exchange broker who asked not to be named. “There is a disparity among banks, but in total it’s about $80 million to $120 million per day.”
…
I noticed there is no mention of a rush toward gold.
Greenbacks (aka dollars) yes, but not gold?
Usless, unbacked fiats are preferred over The Only True Money?
(snort)
Why Lower Gold Prices Won’t Last
by Greg Canavan on 9 June 2012
The gold market is an incredibly complex beast, so I’m going to try and simplify things as much as possible.
To get you in the right frame of mind, consider that the history of gold and humanity has a span of 6,000 years. Think about that. It is a long time. The history of the US paper dollar — and the global financial system that it underpins — spans just 41 years.
That quote was believed to be written by a banking insider who went by the pseudonym of ‘Another’. The background to Another’s ‘thoughts’ is a long one…it’s a fascinating story that I’ll endeavour to write to you about at some other time.
…
“For example, if a bank needs US dollars in a hurry, putting up gold as security is the cheapest and easiest way to obtain the loan. That’s because physical gold has no conterparty risk, And it’s why in times of a liquidity crisis (2008 for example) gold falls in price … because gold is sold short term to obtain dollars to meet short term liquidity commitments.”
” … gold is sold short term to obtain dollars to meet short term liquidity requirements.”
Selling gold to get dollars. Sort of what we see happening all around us, no?
So … which is the true money, gold or dollars?
“which is the true money, gold or dollars?”
The only thing that matters is what the ransom has to be paid in. If you’re not in debt, you really don’t care.
So … which is the true money, gold or dollars?
Gold isn’t legal tender, we all know that.
That said I sure wish I had bought some gold when it was $300 an ounce.
So what do you call something that’s worth more than legal tender?
So … which is the true money, gold or dollars?
“The only thing that matters is what the ransom has to be paid in.”
“Gold isn’t legal tender, we all know that.”
Two separate posts add up to one answer:
1 + 1 = 2.
“So what do you call something that’s worth more than legal tender?”
In the case of Gold, you call it a commodity.
A commodity that is very useful as decoration.
” Gold, you call it a commodity”
According to the International Monetary Fund, it is money.
So what do you call something that’s worth more than legal tender?
——-
true love?
Can’t Buy Me Love
The government down there is threatening to give depositors pesos even though the accounts are in USD. Argentina has a habit of paying off its debts at pennies on the dollar. Pesos on the dollar would be about the same game.
Mexico did the same some many years ago.
I know of a few who people who possessed bragging rights because they were earning twelve-percent-or-so on their USDs in Mexico - paid out in US dollars - until … something Interesting happened.
It sure did, I was down there when it happened. I knew more than a few people who wished they had bought Centenarios (Gold) instead of depositing their savings into “MexDollar” accounts.
“…until … something Interesting happened.”
A couple of days back I mentioned the idea of ‘no-arbitrage condition’ in financial economics. This is a nice variant: If an investment is offering a far more attractive return than categorically similar investments, there is a good chance it comes with a much higher risk of collapse.
Consider Spanish bonds, currently yielding between 6-7 percent, compared to record low yields on German bunds and U.S. Treasurys.
Consider the S&L CD I purchased in the late-1980s which yielded 8%+. Young and green, and knowing nothing about finance, I was shocked when the S&L closed down within the CD’s five-year maturity period.
“Pesos on the dollar would be about the same game.”
Similar, perhaps, to drachma on the Euro?
Will Greece return to the drachma
Aris Messinis/Getty Images
Five drachma coins. If Greece were to leave the eurozone, how much would it cost?
by Jeff Tyler
Marketplace Morning Report for Friday, June 8, 2012
David Brancaccio: Spain will formally ask the European Union for money to bail out its banks tomorrow, according Reuters news agency sources. On Thursday, Fitch Ratings cut the Spanish government’s creditworthiness three notches, given its banks exposure to bad mortgages and contagion from Greece.
With the Greek general election set for later this month and the possibility that country could stop using the euro, Marketplace’s Jeff Tyler looks at the mechanics of rolling out the replacement currency, the drachma, if it ever comes to that.
Jeff Tyler: When Greece adopted the euro, its old currency — the drachma — was collected and destroyed. Plus, the machine that printed those notes is out-dated. It now sits in a museum. Getting a new, modern currency designed and printed would take weeks, if not months.
Marios Efthymiopoulos is president of Strategy International, a research firm based in Greece. While waiting for a new currency, he says the country would need a temporary substitute.
Efthymiopoulos: We will be working with coupons. Also, everything sold now in euros would need a new price tag.
Jacob Kirkegaard is a research fellow at the Peterson Institute for International Economics. He says the shift could cause hyperinflation.
He says many of the country’s trading partners would likely refuse to be paid in the new currency. Making a new drachma effectively worthless outside of Greece.
I’m Jeff Tyler for Marketplace.
Argentina already have clamped down well before. Sell them machines and get paid with a comodity contract that you will have to sell to another country that will let you repatriate your funds.
Their contracts are about 15% cheaper so there is the possibility of added profit -
Feds to sell off delinquent loans, aiding South Florida borrowers in foreclosure
Posted: 5:45 p.m. Friday, June 8, 2012
By Kimberly Miller
Palm Beach Post Staff Writer
Thousands of South Florida borrowers in foreclosure and ineligible for a loan modification may get another chance to save their home in an expanded Federal Housing Administration program announced Friday.
Beginning in September, defaulted loans insured by the FHA will be sold in discounted pools to private investors who have more flexibility in negotiating lower mortgage payments, reducing loan amounts or offering other options such as rent-to-own.
The investors, which can include non-profit community agencies, must delay foreclosure proceedings for at least six months while working with the homeowner.
Florida has about 366,650 loans insured by FHA, according to a first quarter report from the Mortgage Bankers Association. Of those, 15 percent are in foreclosure or 90 days or more late on payments.
Nationwide, FHA insures about 6.7 million loans, 9 percent of which are in foreclosure or seriously delinquent.
“This will be another chance, another lifeline that they weren’t expecting,” said Shaun Donovan, U.S. Housing and Urban Development secretary. “There might be a set of options that arrives on their doorstep that is the best news they’ve ever heard.”
The program, called the Distressed Asset Stabilization Program, was announced during the two-day Clinton Global Initiative America Meeting in Chicago.
The FHA began a test of the program in 2010 and has since sold more than 2,100 single-family loans to new servicers.
About 5,000 defaulted mortgages are expected to be sold every quarter under the expanded program, which also makes buyers agree not to resell for three years at least half of the homes they buy.
Florida International University real estate economist Ken H. Johnson said the sale is a gamble on the part of buyers and the FHA.
“The only way the FHA can get rid of these products is if they sell at significant, dramatic losses,” he said. “They have to make the loss big enough that someone is willing to take the chance in this market and right now, and I’m not sure who that is.”
To be eligible for sale through the program, the loan must be at least six months delinquent and in foreclosure. The borrower cannot be in bankruptcy and must be ineligible for FHA-offered modification programs.
Acting FHA Commissioner Carol Galante said although the administration’s inventory of repossessed homes for sale is at its lowest level since 2009, the number of homeowners seriously late on payments is at an all-time high.
“This will be a hybrid of people who know how to service mortgages and work with homeowners to get their loans performing again,” Galante said about prospective buyers of the loans.
The loans will be sold on a nationwide basis, but also in groups in communities hit hardest by the real estate crash. Galante didn’t specify which areas will be targeted, but said they will release more specifics soon.
Florida ranked fourth nationwide in March for the number of homes in foreclosure, according to RealtyTrac.
“Thousands of South Florida borrowers in foreclosure and ineligible for a loan modification may get another chance to save their home in an expanded Federal Housing Administration program announced Friday.”
“Acting FHA Commissioner Carol Galante said although the administration’s inventory of repossessed homes for sale is at its lowest level since 2009, the number of homeowners seriously late on payments is at an all-time high.”
The Perfect Storm - The Final Fight
http://www.youtube.com/watch?v=18VxPw-OCrc - 144k -
Extend-and-pretend is alive-and-well.
“This will be another chance, another lifeline that they weren’t expecting.”
Keeping hope alive.
Pump and dump. Dump and pump.
“This will be another chance, another lifeline that they weren’t expecting.”
The Perfect Storm - The Final Fight
Skip we`re gonna make it.
She`s not gonna let us out.
Keeping debt repayment alive, subsidized as necessary by U.S. taxpayer-provided guarantee of principle.
“Beginning in September, defaulted loans insured by the FHA will be sold in discounted pools to private investors who have more flexibility in negotiating lower mortgage payments, reducing loan amounts or offering other options such as rent-to-own.”
Which will encourage other underwater owners to default hoping to be part of the next pool to be sold to private investors that have that “flexibility.” How is this any different than FHA doing it except that the private investors have only their own profit in mind and FHA could do it with other restrictions (no mods for people whose original documents included false statements)?
Perhaps, at least, the private investors will hire enough staff to research the loans and not offer deals to people with other assets like substantial savings from their rent free lifestyle.
The FHA will take the loss upfront (on behalf of you and me) and then turn the debtors over to sharks. The sharks will do what sharks do.
Why does the FHA (the taxpayers) own these mortgages in the first place?
How did the banks unload them at par?
Why do we keep bailing out the banks expecting a different result each time?
Because we are trying to avoid cascade debt default into depression.
Because the bankers make large campaign contributions.
“Because the bankers make large campaign contributions.”
Which is why a “GOP Landslide” would make no difference whatsoever. It will be business as usual.
“Because we are trying to avoid cascade debt default into depression.”
Please. Re-pumping used houses back up to bubble levels does nothing of the sort. It may save your bacon, but does nothing for those of us with no skin in the game.
Why does the FHA (the taxpayers) own these mortgages in the first place?
FHA owns these loans because we spent the last 5yrs incenting “homeowners” to refi into new FHA loans (by artificially holding rates at all-time lows), so that the banks would be made whole on the old loans that they refi’ed out of.
“…so that the banks would be made whole on the old loans that they refi’ed out of.”
How many more years will it take to complete the mortgage bailout process to transfer all of the toxic mortgage debt from Wall Street to Main Street?
It will likely be the same people who securitized loans in the O’s that will be buying the discounted bundles…Make it on the way up and again on the way down…
“The investors, which can include non-profit community agencies, must delay foreclosure proceedings for at least six months while working with the homeowner.”
That’s cool. Have the investor pool buy the property and rent it back at their current mortgage rate. After they move just adjust the rent to market.
They aren’t buying the property. They are buying the loan.
The devil is in the details in this deal. You have to read the entire agreement the investors have to sign in order to be able to buy loans in the program. So far we know they can’t foreclose for 6 months. OK. What else? So they have to actually do a work out? If so under what terms? Without access to the entire text of the agreements you have no idea what they are going to do.
Trade figures a blow for recovery
Written by Roger Showley
7:34 p.m., June 8, 2012
Also of interest
Trade numbers bode ill for economic outlook
California export growth slows
Calif. exports outpace nation’s
Calif. exports drop for fifth month in row
Calif. exports shrink 20 percent since last year
U.S. exports dropped for the first time in five months, the Commerce Department reported Friday. And that does not bode well for economic recovery in San Diego and around the country for the rest of the year.
“With growth in Asia cooling, Europe in recession and the U.S. dollar strengthening, exports are likely in for another rough ride over the next year,” said James Marple, senior economist at TD Economics.
The downturn was offset by a drop in imports, resulting in a 4.9 percent decline in the trade deficit to $50.1 billion in April. Exports fell 0.8 percent to $182.9 billion as imports, which set a record in March, dropped an even faster 1.7 percent to $233 billion.
Los Angeles-based Beacon Economics said the figures for California were no better. The state’s merchandise export trade stood at $13.03 billion in April, up 1.1 percent from year-ago levels. But after accounting for inflation, it was actually down more than 1 percent — the first such drop since November 2009.
“It certainly is what we had been seeing in the last few months — a spreading malaise through the global economy,” said Beacon’s international trade adviser, Jock O’Connell. “We’ve been forecasting since the early part of the year that California trade would start to get a little sluggish. It’s not that we’re not producing good products — it’s that they don’t want to buy them at this particular time.”
The implications for the general economy are not good.
“Up until now, export growth had been one of the real strong points in California’s economic recovery,” O’Connell said.
Merchandise exports generally pay relatively high wages, he said. “Those are particularly vital jobs to have.”
By contrast, he said, the tourism and hospitality sector is gaining in jobs, but those are at relatively low wage scales.
“That’s why it’s critically important that we succeed in the export sector,” he said.
…
What a crazy world we live in. Rising food and gasoline prices is announced as a “recovery”. Falling prices are seen as “a spreading malaise”.
Food and gas are still too expensive. May I have some spreading malaise please?
“Food and gas are still too expensive.”
Housing as well.
Filled the tank for under $60 today, due to San Diego gasoline finally dropping under $4/gal for the first time in several months. Let’s hope Obama keeps driving down the gasoline price from now until November election day.
Haha, if it makes you happy I guess.
Absolutely stunning…
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The Fed Balance Sheet: What Is Uncle Sam’s Largest Asset?
Advisor Perspectives | 6-8-2012 | Doug Short
Pop Quiz! Without recourse to your text, your notes or a Google search, what line item is the largest asset on Uncle Sam’s balance sheet?
A) U.S. Official Reserve Assets
B) Total Mortgages
C) Taxes Receivable
D) Student Loans
The correct answer, as of the latest Flow of Funds report for Q1 2012, is … Student Loans.
The rapid growth in student debt has been a frequent topic in the financial press. One stunning chart that caught my attention illustrated the rapid growth in federal loans to students since the onset of the great recession. Here is a chart based on data from the Flow of Funds Table L.105, which shows the Federal Government’s assets and liabilities.
As I point out on the chart, the two callouts are for Q4 2007, the quarter in which the Great Recession began (December 2007) the most recent quarter on record, Q1 2012. The loan balance has risen and astonishing 332% over that timeframe, most of which dates from after the recession.
This chart only includes federal loans to students. Private loans make up an even larger amount. Earlier this year the Consumer Financial Protection Bureau (CFPB) posted an article with the attention-grabbing title: Too Big to Fail: Student debt hits a trillion. The details of the private student loan market are not readily available, but CFPB plans to publish its study results on the topic this summer.
But back to our quiz. Student loans may be a liability on the consumer balance sheet, but they constitute an asset for Uncle Sam. Just how big? Nearly 35% of the total federal assets, over four times the 8.6% percent for the total mortgages outstanding.
“what line item is the largest asset on Uncle Sam’s balance sheet?”
The L.105 lists the governments FINANCIAL assets. That is this money stuff that is backed by other peoples’ debt.
The author of this story seems to think that the ONLY assets of the federal government are other peoples’ debt. Even I do not go that far.
As for his claim that the L.105 shows a 322% increase in student loans owed to the government, the L.105 doesn’t list this information.
There is this thing called “Credit Market Instruments” and it is up half a trillion dollars.
Half a trillion more owed to the US Government. Ohs, nos. What if all those people do not pay anything back! It would be all of 1/12th of the other deficit spending we have engaged in over the last 4.5 years.
I’m far more concerned that the government owes an extra $6T than I am that people owe the government an extra $500B.
Don’t forget that the federal government owns a LOT of land. 30% of the US territorial land is owned by the feds.
Wow 2ban, your anti-banker vitriol here, today, is resonating with me. Good stuff.
You’re not all nuts.
But he’s always bananas.
clean, Carl.
“clean, Carl.”
Sound like a used car salesman.
Good Afternoon Welcome to Shady Motors my name is Carl and you are?”
Can I get you my card? What are you looking for today? Have you heard about our today-only special that’s going on?
LOL Carl. I was at a dealer earlier today. Just browsing without any intention to buy. The guy gave me every line in the book. We have today-only specials. We have today-only financing available. We have today-only sales. He will work with his manager to give me a great deal, but only today. But I guess it must work on people otherwise they wouldn’t do it, right?
WHAT? The sale ends today?!?!? And that special financing is only for today?!??!? S**t then I better buy now.
Tooby posts some very accurate stuff. It’s unfortunate when he turns partisan. However, I think his goal is purely political and would find all the current shenanigans acceptable if it were the GOP running the show.
I’m still waiting for his response to my question about his candidate, though not expecting one.
Have you seen the latest realtor filth and propaganda on TV? It’s vomit inducing.
NAR makes the wild, offensive claim that kids raised in a household where the house is owned by the parents are smarter, better behaved and earn better grades than those households where parents lease or rent the structure. A stunningly outlandish misrepresentation of reality.
At what point does the Federal Trade Commission come in and shut down this corrupt, lying, criminal organization for flat out lying to the public?
You’re reading NAR. When are you people going to stop lying to the public?
Sorry, I’m not often subject to TV. They probably include all the wannabe debt junkies, who are loaning the house from the bank, as “owners”. If they are right, it just means that substance abusing parents produce higher scoring kids.
I just saw that add the other day. Yes, stunning.
It’s only a matter of time before the NAR says owning a house will make a man’s _ _ _ _ bigger.
“NAR makes the wild, offensive claim that kids raised in a household where the house is owned by the parents are smarter, better behaved and earn better grades than those households where parents lease or rent the structure. A stunningly outlandish misrepresentation of reality. At what point does the Federal Trade Commission come in and shut down this corrupt, lying, criminal organization for flat out lying to the public?”
But is it a lie?
I’d like to see data (if it exists) that compares grades of kids of renters vs. kids of non-renters. I would guess the NAR claim is technically truthful. Upper income people tend to own vs. rent while lower income people tend to rent vs. own. And when it comes to education, upper income parents are more involved in their kids’ education which leads to better grades. Kids who go to top schools don’t tend to come from renting families. Maybe NYC would be the exception.
It’s the wrong cause and effect of course- owning per se doesn’t create smarter kids. But I think factually what the NAR says is true.
How about NAR being HONEST and compare renters and borrowers at equal household incomes.
I need recommendations on accommodations near the US Open in SF. Nice areas, no ghetto scenes.
Done, nevermind.