Greenspan says U.S. “on the edge” of recession
What do you think?
Yahoo- Former U.S. Federal Reserve Chairman Alan Greenspan on Thursday said the U.S. economy is “clearly on the edge” of a recession.
Greenspan said the economy will continue to erode until there is a stabilization of U.S. housing prices.
“We have a long way to go” before housing prices hit a bottom, Greenspan told energy executives at the CERA conference.
High oil prices are dragging on the economy, but the fact that they haven’t done more damage shows its resiliency.
“It’s a burden now,” Greenspan said. He added that it’s “quite remarkable” that the U.S. economy is “able to do reasonably well” with oil prices near historic highs.
The latest “shoe to drop,” is bond auctions
quote:
The most recent development has been in a rather obscure market called the auction-rate note market. Auction-rate securities are an unusual type of long-term bond that behaves like a short-term bond. While the terms vary, let me quickly try and describe a typical bond, for those who are not familiar with them. A tax-exempt authority like a school district, hospital district, or municipality will issue a long-term bond, but within the covenants of the bond is the stipulation that it will be auctioned every 7 or 30 days. The issuer does this because it allows them to pay a lower overall rate.
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Take the Port Authority of New Jersey (PANJ). Their $100,000,000 auction-rate bond offering failed. Their interest rate went from about 4% to 20%! It is costing them an extra $300,000 a week. That is serious money. No one would seriously contend that the PANJ is a financial risk. But buyers simply do not want to take the risk for 4%.
I suspect that the PANJ will quickly put together a $100 million offering and buy back the expensive bonds, but in the meantime they are paying higher rates than they could get from the local Tony Soprano over by the docks.
Investor’s Insight
Any money being paid out in higher interest whether it is like this or for your minimum credit care payments where some rates are now 30%, not the 20% these guys are paying, is money not being spent on goods and services. This is how a credit crisis can spread to the general economy and cause a recession led by less consumer spending.
quote:
China’s Superbanks Told to Hit the Brakes
Chinese banks are being urged to slow lending and tighten monetary policy to cool the country’s overheated economy.
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“It’s not that we are doing well, it’s just that our rivals overseas are doing badly,” Industrial and Commercial Bank of China Chairman Jiang Jianqing says.
“Being the world’s largest bank by market value is not our goal. We want to become the most profitable,” he says.
It looks like that may already be happening.
For the first time, China’s banks are the biggest in the word, with a market cap that leaves Citigroup far behind. The country’s three largest banks — ICBC, China Construction Bank and Bank of China — are valued at $608 billion.
Industry analysts consider this reversal the clearest sign yet that shareholders are betting on banks in the emerging markets, instead of investing in U.S. banks that dominated world banking for most of the past century.
Money News
It is correct, “It’s not that we are doing well, it’s just that our rivals overseas are doing badly,” and that is what we need to focus on.
We are killing ourselves. We, not some other nation is destroying our economy and ability to compete in the world. We are driving our jobs and businesses overseas. We are even losing R&D, Financial services, stock listings, etc.
We are sending hundreds of billions in interest to other nations. We are borrowing money to spend on social programs and defense from people that interest helps them compete against us by reducing the taxes their own citizens have to pay.
We are borrowing money from them for homes, city and state projects, corporate projects. There is nothing wrong with that but, we have to remember that many of those loans are from government trade surplus funds that means our interest to them is like paying their taxes so their citizens don’t have to or so their businesses don’t have to pay as much and thus, taxes included in prices are lower and our consumer then buy their products instead of ours.
Debt, whether personal, city, state, corporate or federal that is from foreign governments makes them healthier and us weaker.
You need $9 trillion? No problem.
Just a sec, let me fire up the printing press…
Hyperinflation, here we come.
I agree and some of it is already here in food and energy. If we have hyper-inflation, those will get much worse, too.
For 20 years the “Dogs of the Dow” were in a trading range. But, look at what they really did when adjusted for inflation
Not sure if that code works so here is the link to the chart
Dogs of the DOW