Borrowing from Peter to pay Paul?

American Dollars to prop up the Euro:

Central Banks Act in Concert to Ease Fears on Europe Debt

FRANKFURT — Worried that Europe’s debt impasse posed a growing threat to the global financial system, the world’s major central banks moved Thursday to assure that European banks would not run short of cash as troubled nations like Greece and Italy sought to stabilize their economies.

The central banks, in a coordinated action intended to restore market confidence, agreed to pump United States dollars into the European banking system in the first such show of force in more than a year. Some banks have found it hard to borrow dollars as American lenders grew nervous about their financial condition.

Thursday’s action, coming almost exactly three years after the collapse of the investment bank Lehman Brothers, lifted global stock markets, sharply increasing the value of shares in banks heavily exposed to debt from Greece and the other struggling members of the euro zone. The euro, which had been falling in recent days, rebounded.

The central bank action came as European finance ministers and other policy makers were gathering in Wroclaw, Poland, for meetings on Friday and Saturday. The United States Treasury secretary, Timothy F. Geithner, who was scheduled to attend, was expected to urge European officials to act more aggressively to contain the sovereign debt crisis, which has already begun to undercut growth in Europe.

While the move will relieve some pressure on troubled banks, it does not address the underlying problems that made it difficult for the banks to borrow dollars on their own.

[...]

The European Central Bank said it would allow banks to borrow dollars for up to three months, instead of just for one week as before, giving them breathing room for the rest of the year. The E.C.B. said it was acting in cooperation with the Federal Reserve of the United States, the Bank of England, the Bank of Japan and the Swiss National Bank.

In recent days some European banks have faced difficulties in borrowing dollars, whether from other banks or from money market funds in the United States. There was fear that if they could not borrow dollars, they would be forced to cut off loans to American companies or sell dollar-denominated assets, perhaps forcing prices down in already unsteady markets.

The move was possible under deals between the central banks that were already in existence, and the Fed saw no need to make an announcement on Thursday.

While there now is more certainty that banks will have access to funds, deeper issues remain unresolved, including whether they have enough capital to withstand a possible default by Greece on its government debt.

An official forecast warned Thursday that growth in Europe would come “to a virtual standstill” toward the end of the year. It predicted, though, that Europe would just barely avoid a double-dip recession.

[...]

Analysts said they expected Mr. Geithner to press European ministers in Wroclaw to increase the resources available to their bailout fund for the euro zone countries. But even the expansion of the fund to 440 billion euros ($611 billion), agreed to in July, has yet to be ratified. There is some worry that countries guaranteeing the bailout fund might themselves face doubts about their own credit. [...]

Gee, ya think?

Worried about losing your high credit rating? Just borrow from somebody whose already lost theirs.

     

Why the "Recovery" is stalling

We need real job creation, but it isn't happening. Guess why:

Barack Obama: The great jobs killer

[...] It's time to call Obama what he is: The Great Jobs Killer. With his massive spending and tax hikes -- rewarding big government and big unions, while punishing taxpayers and business owners -- Obama has killed jobs, he has killed motivation to create new jobs, he has killed the motivation to invest in new businesses, or expand old ones. With all this killing, Obama should be given the top spot on the FBI's Most Wanted List.

Meanwhile, he has kept the union workers of GM and Chrysler employed (with taxpayer money). He has made sure that most government employee union members got their annual raises for sleeping on the job (with taxpayer money). He made sure that his voters got handouts mislabeled as "tax cuts" even though they never paid taxes (with taxpayer money). And he made sure that major campaign contributors collected billions off government stimulus (with taxpayer money).

As far as the taxpayers -- the people who actually take risks with our own money to create small businesses and jobs and pay most of the taxes -- we require protection under the Endangered Species Act.

[...]

I've polled all my friends who own small businesses -- many of them in the Internet and high-tech fields. They all agree that in this new Obama world of high business taxes, income taxes, payroll taxes, capital gains taxes, and workers compensation taxes, the key to success is to avoid employees. The only way to survive as a business owner today is by keeping the payroll very low and by hiring only independent contractors or part-time employees provided by temp agencies.

The days of jobs in the private sector with big salaries, full benefits, and pensions are over. We've all seen where those kinds of jobs get you as a business owner -- in Bankruptcy Court or surviving on government welfare like GM and Chrysler. Or in the case of government itself -- completely insolvent, but surviving by ripping off taxpayers and fraudulently running printing presses at the Fed all day and night to print money by the trillions.

Unfortunately, small businesses don't have the power to impose taxes or print money. So unlike government, we'll just have to cut employees and run lean and mean.

[...]

The days of believing the Obama propaganda about a jobs recovery are over. The trillion-dollar corporate handouts (neatly named "stimulus") may have kept big business in the money for the past 18 months, and artificially propped up the stock market, but small business is the real canary in the coal mine.

My small business-owning friends aren't creating one job. Not one. They are shedding jobs. They are learning to do more with fewer employees. They are creating high-tech businesses that don't need employees. And many business owners are making plans to leave the country. In a high-tech world where businesses can be run from anywhere, Obama has a problem. His one-trick pony -- raise taxes, raise taxes, raising taxes -- is chasing away the business owners he desperately needs to pay his bills.

So who is going to pay Obama's taxes? Not his voters. They want government to pay them. Who is going to create Obama's jobs? Not his voters -- they've never created a job in their lives. [...]

But what can you expect from an Administration that is openly hostile to the private sector? Who's leader has referred to it in his books as "the enemy"? What can you expect from an administration whose members keep insisting that "Capitalism has failed". They are doing their best to make sure that it does, so they can replace it with something else.

And it's having repercussions globally:

With the US trapped in depression, this really is starting to feel like 1932

[...] Investors are starting to chew over the awful possibility that America's recovery will stall just as Asia hits the buffers. China's manufacturing index has been falling since January, with a downward lurch in June to 50.4, just above the break-even line of 50. Momentum seems to be flagging everywhere, whether in Australian building permits, Turkish exports, or Japanese industrial output.

On Friday, Jacques Cailloux from RBS put out a "double-dip alert" for Europe. "The risk is rising fast. Absent an effective policy intervention to tackle the debt crisis on the periphery over coming months, the European economy will double dip in 2011," he said.

It is obvious what that policy should be for Europe, America, and Japan. If budgets are to shrink in an orderly fashion over several years – as they must, to avoid sovereign debt spirals – then central banks will have to cushion the blow keeping monetary policy ultra-loose for as long it takes. [...]

And yet, government seems to be doing exactly opposite of what they need to be doing. How much time is there left to turn it around?
     

The Weak Spots in the Global Economy

Ten Things That Could Still Go Wrong with the Economy

From The Business Insider, June 11, 2009:

The recent buoyancy of the financial markets has created a sense of calm about the economy. The overall sense of panic has gone.

But there's still a wariness in the air, a feeling that the fragile "green shoots" of the recovery might be stomped out by some new crisis. People are waiting for the next shoe to drop.

Here we suggest 10 things that might stymie our recovery. Some are purely financial events. Others are geopolitical. [...]

In our increasingly interconnected global economy, the weakspots are also interconnected. This list of ten things are ten things to watch closely.
     

Global Banking Crisis? Leading to...?

Planetary Bankruptcy

[...] Interestingly, American taxpayers seem to keep their eyes on the ball better than their lawmakers. Has a stimulus ever been necessary at all? Anti-Bailout coalitions and advocacy groups have begun to mushroom nationwide. A recent poll revealed that 60% of Americans want the bailout of the financial sector to stop; yet the DC Geniuses (who still can't figure why printing our way out of debts will aggravate the liquidity crunch) plot the next step after aid to Citigroup and Bank of America. Unethical premises and remedies multiply moral hazards. One of the unintended consequences to finance those 'has-been businesses' is creating a new menace to the economy: 'Zombie' Debtors that will be feeding off the taxpayers and stockholders — as healthier rivals become increasingly threatened with 'organized competition' put in place by Lawmakers. The price of protection shows its true colors: it allows the government to decide who can live - or die: it is fascism in disguise. The ugly side of intervention is precisely its addictiveness. And that is why institutionalized debtism has a lethal track record.

An 'almost incomprehensible' amount of cash evaporated, this the Global crisis 'has destroyed 40pc of world wealth', Steve Schwarzman admitted. Indeed, where the heck did all the money go? When money is debt it is negative wealth... got it?

[...]

As credit card spending in 'The Rich West' screeched to a halt, China Central Bank, which called Paulson a 'gangster', is trying to prevent a quagmire; and so far the only remedy is the Yuan devaluation. How smart is this really? Doing so is extremely tricky because competitive devaluation (race to the bottom) has limits. If things really go wrong, it may lead to a professional run on banks. So much for our fabulous globalization, heh?! But what if banks do not start lending again (what wouldn't fix the downhill trends if they did either)? Evans-Pritchard leans toward a collapse that could drag the entire planet into a remake of the Great Depression. SocGen warned too that the Chinese economy is imploding and speculates about the possibility of regime change. Flash back: that very dire outcome was forecast in 2004 by Krassimir Petrov. There is practically no doubt that the Chinese will overcome the shock a lot better since they are already accustomed to sweatshop wages. For us, it will be a rude awakening and we could see, in the so-called free world, a suicide epidemic as currently witnessed among young Chinese women.

In Russia, troubles are brewing too. Last November, its stock market is down 70 percent from late spring 2008 and since then anti-Western rhetoric abound. In December alone, the central bank spent $70BN to rescue its currency and avoid the panic of a currency collapse reminiscent of the 1998 crisis. As of January 13, the WSJ reported that the drastic measures didn't prevent the Ruble from nose-diving and massive lay-offs from bringing wages back to earth. The Jungle is surely fairer than our financial environment. Ireland is in the midst of a housing bust and real estate prices are predicted to fall by 80%. Icelanders have to go back fishing to survive the complete demise of their banking system - now seen as the worst economic crash of any country in peacetime, BBC reported. The Japan's jobless are encouraged to accept a government program that focuses on reviving the ageing countryside amid a worsening recession. All this is a mere glimpse of what is coming next: your government will soon turn out being the biggest employer, that's where minimum wage laws start fitting the big picture. How great is this? But wait, the avalanche of bad news isn't over just yet... 40% of Latin America’s financial wealth was wiped out in the first 11 months of 2008. On the old continent, the monetary union has left Eastern Europe trapped in depression. Um-um, wasn't that part of the world too in the midst of a b-o-o-m-i-n-g housing market until early 2008, setting off alarms bells at the IMF? Financial alchemists like Lorenzo Bini-Smaghi, a ECB board member, perfectly knew that the euro pegs would lead to boom and bust cycles. How bad could it really get? Just look at the Zimbabwean hyperinflation (hitting 231 million percent!) that has left the country with more than half the population starving and of course, the United Nations is begging for more aid. Once again, the UN is showing its uselessness!

[...]

And it shouldn't be wise to bet on 2010 at all, as such a leverage needs a lot more than two years to be cleaned up. Think of ten years or more instead. The Euro could be toast for good. Meanwhile Germany forecasts the worst economic growth since WWII and riots spread throughout in Eastern Europe. An article in The Spiegel even describes Great Britain as a second Iceland and Italy as a second Argentina. The European Parliament lamented that six to eight countries had to reduce their deficits but no receipe as how they might go about doing that. There is no solution other than debt liquidation. On the other side of the North Sea, in Ireland (whose economy will shrink 10% by 2010), a leading economist advised a withdrawal from the euro unless Ireland gets its part of the bailout pie.

(01/19/09) "If we have a single currency there are obligations and responsibilities on both sides. The idea that Germany and France can just hang us out to dry, as has been the talk in the last couple of days should not be taken lying down," he said.... By keeping with the current policy, the state is ensuring that Ireland turns itself into a large debt-repayment machine. Is this the sort of strategy to win wars?", he said. more

Speaking of bailouts, The European Commission approved a French plan to allocate firms affected by the crisis up to EUR500,000 in aid. In America, Bailout money used for lobbying and Obama promises that he will push bankers to lend more, he doesn't want them to sit on the money that they got from taxpayers. Paid by the taxpayers... then borrowed again by them with an interest... doesn't this make sense or perhaps is debt laundering legal? In England, dementia struck a step further as the BofE’ s multibillion-pound scheme will offer credit to new car buyers to rescue the moribund motor industry. And there is more, the government also contemplates an insurance crackdown targeting two million uninsured drivers who, as a result, could get their cars seized and crushed! There is even sillier: US Financial Services Committee Chairman, Barney Frank who declared that companies with corporate jets may forget about the bailout money. Nevertheless, a few days later the press reported that taxpayers were also funding Citibank's jet.

Black clouds are gathering above the horizon. Europeans are waking up to the abrupt demise of democracy as discovering the fine print in all the treaties. The IMF just announced that the world trade collapsed by staggering 45% in the last quarter of last year. Even the euphoria of Obama's inauguration didn't last long. The same day Dow closed below 8,000 as banking fears were gripping the European markets and bringing shockwaves from the United Kingdom too. British Banks got a £1TN injection which didn't prevent RBS shares to plunge 70%. London is faced with a bloodbath. [...]

I'm taking this article with a few grains of salt. It borders on hysteria in parts. And it ends with a link to The Venus Project, which has it's own agenda. So I'm not certain that all the dots connect in the ways the author would have you believe. But it's still interesting, for it's many links. And because clearly, there is a great deal going on right now. There are so many factors, influences and variables, and nobody can say for sure what's coming next.