First!

This Article from August 25,2008 Dealbreaker blogspeculates that the Fed is allowing the Freddie Bonds to be used as collateral to borrow from the Fed’s Term Facility. Arbitraging the differentialin interest rates and leveraging on the purchase of the Freddie Debt. This would seem to allow a high volume of Freddie Debt to be sold due to the leveragein the purchase. The Fed would end up with a ton of Freddie debt as collateral! What do you guys think?Trade of The Day: Buy Freddie Paper With Fed LeveragePosted by John Carney, Aug 25, 2008, 4:24pmShares of Freddie Mac are soaring today, up more than 20 percent right now. The rise is being attributed to Freddie’s success in selling $1 billion of three-month and $1 billion six-month notes in a weekly auction, which has supposedly eased fears that the government sponsored mortgage company would have trouble financing its ongoing operations. But today’s debt sales may not be the endorsement of the financial health of Freddie Mac from bond investors that many believe it to be.The pricing on Freddie Mac’s three-month notes was about 90 basis points more than similar-maturity U.S. Treasuries. The spread on the six-month notes was about 92 basis points. Last week the spreads were 61 basis points on the three month notes and 80 basis points on the sixth month.The big boost of confidence in the shares, however, seems to have come from the fact that there were more bidders this time around, or at least bidders seeking more of the Freddie notes. Of course, the higher pricing is attractive to some bidders. But there may be a more technical and less transparent reason for the increased demand.We don’t know who bought the Freddie notes today. But buyers of Freddie notes who have access to borrowing from the Federal Reserve would have found the decision to bid relatively easy. That’s because the ability to exchange the Freddie debt for Fed cash means banks can buy Freddie debt with a huge amount of leverage, dramatically increasing the return on their capital.Here’s how it works. A bank that bought the six month notes from Freddie this morning could also bid to borrow from the Fed’s Term Facility, which held an $75 billion auction today. As collateral for the borrowing, the bank could offer the newly purchased Freddie notes, for which the Fed would give them credit for 97% of their market value. Recently, the TAF pricing topped out at 2.35 percent for 28-day borrowing. So a bank buying $100 million of Freddie paper yielding 2.858% could flip it to the Fed, borrowing $97 million at around 2.4% (assuming the pricing will be slightly higher this time around).At the end of the day, a credit desk could buy $100 million of Freddie debt for just $3 million down. On that $3 million, the desk would receive a 17.7% annualized return, or 8.8% over six months, for paper that is this close to being explicitly backed by the Treasury Department. Not a bad deal at all.

THE SILENCE IS DEAFENINGYou can be sure that Lehman has been examined thoroughly by every financial institution, SWF, hedge fund and private equity fund in the world by now. At a market cap of a measely 9 billion, it would require mere pocket change for one of these entities to pick up this “crown jewel”. But none have made a move. This can mean only one thing: Lehman’s assets are far less than its liabilities. Nobody is going to come in and buy Lehman without the Fed ponying up big bucks. The silence is deafening and quite informative.

@ MSN Money Market Events this morning: “August consumer confidence rose 9.6% month-over-month to 56.9, topping the median economist estimate of 53.0. The survey shows increased plans to buy a car, a home and major appliances within the next six months.”A la the Bill Clinton dictionary: “It depends on what the meaning of the word ‘is’ is.” All that this confidence “rise” means, IMO, is that it’s still bouncing around in the basement.It seems that if most financial news is negative when the market bell rings in the morning, investors can sometimes rally around better numbers in the Consumer Confidence Index (CCI). That’s a consumer sampling and chart managed by a team of impartial scholars and statistical experts, right? In your dreams, truth seekers!The CCI is operated by the “Conference Board,” an international organization started and run by major corporations. Its “Board of Trustees” includes prominent chief executives who lead global corporations.The Conference Board (Wikipedia defined) “is a non-profit global business organization.”Non-profit is a strange concept coming from a powerful organization of profit makers who can benefit from a little blip in “consumer confidence” when it’s most needed.

@ mammon: “Here’s how it works. A bank that bought the six month notes from Freddie this morning could also bid to borrow from the Fed’s Term Facility, which held an $75 billion auction today. As collateral for the borrowing, the bank could offer the newly purchased Freddie notes, for which the Fed would give them credit for 97% of their market value. Recently, the TAF pricing topped out at 2.35 percent for 28-day borrowing. So a bank buying $100 million of Freddie paper yielding 2.858% could flip it to the Fed, borrowing $97 million at around 2.4% (assuming the pricing will be slightly higher this time around).”At the end of the day, a credit desk could buy $100 million of Freddie debt for just $3 million down. On that $3 million, the desk would receive a 17.7% annualized return, or 8.8% over six months, for paper that is this close to being explicitly backed by the Treasury Department. Not a bad deal at all.”Don’t that beat all? As said by Stan Fischer (as reported in Bloomberg) and quoted by Professor Roubini above: “The financial crisis has revealed ways “to listen better and filter warnings better in the future…”Does this mean this devastation is going to start all over again? Fischer is a key financial observer. Before becoming head of the Bank of Israel, Fischer served as Vice Chairman of Citigroup and President of Citigroup InternationalA quick glance at Fischer’s wikipedia bio gives this summary cutline under his picture — Stanley Fischer, Governor of the Bank of Israel: Born 15 October 1943 (age 64) Northern Rhodesia (Now Zambia); Nationality: Israeli, American; Fields: Economics; Institutions: Bank of Israel 2005-, Citigroup 2002-05, IMF 1994-01, World Bank 1988-90, MIT 1973-88, 1990-94: Alma mater: LSE (BSc ,MSc), MIT (PhD); Doctoral advisor Franklin M. Fisher; Doctoral students: N. Gregory Mankiw, Ben S. Bernanke.http://en.wikipedia.org/wiki/Stanley_Fischer.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a8w9MI4Btco4&refer=exclusiveSome excerpt on Paulson:The legislation gives Paulson all of the major items he asked for, including unlimited authority for 18 months to make emergency loans to Fannie Mae and Freddie Mac and possibly buy stakes in the two mortgage giants. The legislation also created a long-sought new regulator to oversee Fannie and Freddie. Bush signed it into law on July 30.Trading the presidential objections for Democratic backing was classic Paulson, says Edwin Truman, a senior fellow at the Peterson Institute for International Economics and a former Treasury official.`He’s a Dealmaker’“He’s a dealmaker,” Truman says. “It’s one skill that Treasury secretaries need to have.”Paulson sold his 3.23 million shares in Goldman, worth about $500 million at the time, when he took the Treasury job, according to regulatory filings. He was exempted from paying capital gains tax on the sale of those stakes under a rule meant to avoid penalizing wealthy people who take government jobs and are forced to sell assets.Paulson also sold about $25 million of holdings in a Goldman fund whose sole asset was a stake in Industrial & Commercial Bank of China, the world’s largest publicly traded financial institution. The bank raised $22 billion in its initial public offering in October 2006, the world’s biggest IPO.Managing the U.S. relationship with China is an increasingly important part of the Treasury secretary’s job. During the Fannie and Freddie crisis in July, Paulson used his credibility with Chinese leaders to reassure them that the U.S. mortgage companies weren’t in jeopardy.Paulson, who’s ruled out staying on at Treasury after Bush leaves office in January, says his next role may well be at an environmental group. “A big part of my life will be devoted to conservation and the environment,” he says. “The only thing that isn’t a certainty is whether that will be my primary or sole focus.”

Unbelievable:Cindy McCain flies to Georgia for Saakashvili talksThere are now nine NATO warships in the Black Sea with nine more said to be coming. In response, the Russians send their Black Sea flagship, a missile cruiser, back to sea. The NATO ships have over 100 tomahawk (land attack) and harpoon (sea attack) missiles on board. Such concentration of forces can lead to misunderstandings and escalation. They should be avoided.Russia has air cover over the Black Sea and owns a lot of the coast. In a conflict, the NATO fleet would likely get a serious beating.But a conflict in the Black Sea would virtually guarantee a McCain victory in the upcoming U.S. election. U.S. foreign policy is always determined by domestic politics. That is what makes me really nervous about these escalations.http://www.moonofalabama.org/2008/08/danger-in-the-b.html#comments

@ GloomyI think that Lehman gives a new meaning, and magnificently captures the essence of the expression “A GOING CONCERN”.From Answers.com:Concern:v.tr. 4: To cause anxiety or uneasiness in: The firm’s weak financial posture is starting to concern its stockholders.n. 3: A troubled or anxious state of mind arising from solicitude or interest. See synonyms at anxiety.It is giving headaches and making anxious not only the management (Mr. Fuld) but also the Fed, the Treasury, the administration and the global financial system. The same applies to F&F

@ aleister perdurabo: ““He’s a dealmaker,” Truman says. “It’s one skill that Treasury secretaries need to have.”…Paulson sold his 3.23 million shares in Goldman… when he took the Treasury job… Paulson also sold about $25 million of holdings in a Goldman fund whose sole asset was a stake in Industrial & Commercial Bank of China, the world’s largest publicly traded financial institution. The bank raised $22 billion in its initial public offering in October 2006, the world’s biggest IPO… Managing the U.S. relationship with China is an increasingly important part of the Treasury secretary’s job. During the Fannie and Freddie crisis in July, Paulson used his credibility with Chinese leaders to reassure them that the U.S. mortgage companies weren’t in jeopardy…It interesting to note that the Congress gave Treasury Secretary Paulson a blank check signed by the American taxpayer to bail out Freddie and Fannie and selected cohorts.On July 13, 2008, a Sunday, the federal government had moved in to help bolster Fannie Mae and Freddie Mac with Paulson’s Treasury Department proposal setting the stage for the government-orchestrated rescue.Paulson had been pressing for unhindered Treasury power, free from any Congressional oversight, on the claim that his backup plan would calm investors and stabilize financial markets. That same Sunday, on July 13, the Fed had issued the following release:“The Board of Governors of the Federal Reserve System announced Sunday [July 13, 2008] that it has granted the Federal Reserve Bank of New York the authority to lend to Fannie Mae and Freddie Mac should such lending prove necessary. Any lending would be at the primary credit rate and collateralized by U.S. government and federal agency securities. This authorization is intended to supplement the Treasury’s existing lending authority and to help ensure the ability of Fannie Mae and Freddie Mac to promote the availability of home mortgage credit during a period of stress in financial markets.”Board chair of the Federal Reserve Bank of New York is Stephen Friedman, retired chairman of The Goldman Sachs Group who currently serves as chairman of Stone Point Capital, LLC.He joined Goldman, Sachs & Co. in 1966 and became a partner in 1973. He was vice chairman and co-chief operating officer from 1987 to November 1990, and co-chairman or chairman from 1990 to 1994. Friedman is chairman of the President’s Foreign Intelligence Advisory Board and of the Intelligence Oversight Board. From December 2002 to December 2004, he served as assistant to President George W. Bush for Economic Policy and director of the National Economic Council.Friedman is currently a board member of The Goldman Sachs Group.Says moneynews.com., “Central bank holdings of agencies (including those of Fannie Mae and Freddie Mac) have soared over the past two years and likely exceed $1 trillion. China accounts for half that total, Japan has over $250 billion (split between private and official sector holdings), and Russia holds about $100 billion (especially short-term).

Did I mention incompetence and stupidity?War With Russia Is On The AgendaBy Paul Craig Roberts26/08/08 “ICH” — – Thinking about the massive failure of the US media to report truthfully is sobering. The United States, bristling with nuclear weapons and pursuing a policy of world hegemony, has a population that is kept in the dark–indeed brainwashed–about the most important and most dangerous events of our time.The probability of War is now extremely high, taking into consideration the rabid irrationality and insanity indicators of the “Leadership” of the USA.Ho humPeterJB

@AfaVery good-Going, going, gone!

Apologies… above link may not be functional. Just tweaking my RGE/HTML tags..Here is the URL: http://www.spiegel.de/international/world/0,1518,574486,00.html

@ The Russian re: BILDT, MERKEL, GORBACHEV and MILIBAND (17:13:02)Except for Gorbachev, this is NATO talking. NATO is financed by the U.S. Its foreign policy is run by the neocons. South Ossetia and Abkhazia are a part of the boundary of Georgia that is recognized by the entire world. Now, that boundary is going to change, thanks to neocon Randy Scheunemann et al. Now the border of Georgia is going to have two big chunks out of it.This is RUSSIA these folks are talking about, the Red Army, the second largest nuclear power in the world. And THEY are going to play footsie with it? Russia does not play footsie; it plays for keeps.The West thought it was cute, rushing over and talking Poland into setting up a U.S. manned “Patriot” missile system within 100 miles of Russia’s border. If the West wants to play in this game, it better remember it’s Russian territory. And they’re rough.Georgia’s boundaries are going to be changing, and you know what? There’s nothing the U.S. can do about it. We’ve spent decades working out peace with Russia and war is not an option. War is not, as many young people want to believe, air force and missiles; war is tanks and flame throwing and bombs and infantry and house-to-house burning and killing.Merkel is just playing the U.S. for everything she can get – the old NATO game. NATO was organized as a protection against the Stalin people. He’s not there anymore. Yet the West just keeps encircling Russia with NATO. And as Pat Buchanan said, you make these breakaway provinces a part of NATO, and we’re in a war.Georgia already has proved the point; it was Georgia vs. the Red Army and the Red Army won.It’s interesting to note that Carl Bildt already has been questioned for his role as a member of the International Advisory Council of the Committee for the Liberation of Iraq, a group with ties to the Bush administration pushing for an invasion of Iraq in 2003, of which Scheunemann was executive director.Now Scheunemann is the neocon agent in place in McCain’s camp – pushing for invasion of Russia.

The whole Russia-Georgia-NATO business smells like a rotten egg.When all of the desperate machinations of the Fed, Treasury, and Congress have failed to slow the credit crisis in the past year you know they have to be grasping at straws.”Worst financial crisis since the great depression.” And it took an enormously destructive war to get us out of the great depression. Global war – the super super SIV.History does indeed repeat itself. Only this time around, we will play the role of England in WWII, the empire in decline. China will play the role of the US, the powerhouse who emerges at the end with her industrial might at its peak.Ot dare I say that we are Germany and Japan, and our overextension and dependence on imported oil will be our undoing?We will rue the day we awakened the sleeping bear.

Fannie, Freddie Post Biggest Profits on Mortgages Since 1998http://www.bloomberg.com/apps/news?pid=20601087&sid=a17G1.vWMkuU&refer=homeFannie and Freddie’s holdings are shrinking at a monthly rate of about $20 billion because of refinancings, home sales and borrower defaults, according to an Aug. 21 report from New York-based Citigroup analysts Scott Peng, Brad Henis, and Brett Rose. That money can be reinvested into higher yielding securities.That is one reason “there is no pressing need” for a bailout, they wrote in the report, titled “All That Sound and Fury, Signifying Nothing New.”With a fed lending rate at 2%, basic 30 year fixed mortgage around 6.3%, a 4% + spread in lending rate is not so bad and may start working its way onto bank’s balance sheets. Too big to fail, big brother helping big friends. Little savers don’t get 6.3%, little mortgage payers don’t pay 2%.

bwhahahbwahaha, hahahahahaaverage voter, bwahahahahano..no..no, we dont need to discuss this with those low than average IQ voters, whats good for us is good for themhttp://www.bloomberg.com/apps/news?pid=20601068&sid=a.7OGRdxkXSE&refer=economy“The conventions are aimed at the average voter,” he said Aug. 25 in Denver. “You don’t go into Quinlan’s bar and ask them what to do about the” Securities and Exchange Commission.Financial Crisis Is Absent From Agendas of Parties, CandidatesBy Rich MillerAug. 27 (Bloomberg) — The U.S. is facing the worst financial crisis since the Depression. You would never know that from the Democrats’ platform in Denver or its Republican counterpart, or from listening to Barack Obama or John McCain.While both candidates have bemoaned the ravages of the subprime crisis, they have yet to spell out steps for tackling it, such as using taxpayer money to shore up banks and housing.“They fail to come to grips with the biggest danger that is going to hit the next president in his first few months in office: the crisis in the capital markets,” said David Smick, a Washington-based consultant to hedge funds and author of “The World is Curved: Hidden Dangers to the Global Economy.”The Democrats’ platform, adopted at their Denver convention this week, labels the crisis a “debacle” and promises to jump-start the economy with a $50 billion stimulus package. It says nothing about helping banks or bailing out the mortgage-finance firms Fannie Mae and Freddie Mac.The draft of the Republicans’ plank, to be adopted next week at their convention in St. Paul, Minnesota, supports “timely and carefully targeted aid to those hurt by the housing crisis” and opposes bailouts of private financial institutions. It doesn’t mention Fannie and Freddie.Fannie, FreddieMany Democrats shy away from tackling the credit crisis because of the party’s historical support for Fannie and Freddie. The Republicans, for their part, are reluctant to draw attention to a crisis that occurred on their watch. The subprime meltdown isn’t the only item missing from the parties’ agendas. The list also includes the Democrats’ failure to set out a strategy for countering Russia’s assertiveness and the Republicans’ silence on income inequality.Senator Charles Schumer, a New York Democrat, said conventions aren’t the place to discuss detailed plans for dealing with the markets.“The conventions are aimed at the average voter,” he said Aug. 25 in Denver. “You don’t go into Quinlan’s bar and ask them what to do about the” Securities and Exchange Commission.

Maybe calling the US militarily weak is incorrect. Militarily stretched is probably a better term. But it will be weak when they cannot afford to run the military anymore (which I do see happening in time to come).

“So Fed is to borrow money from…”the god?

i want to buy lehman bothers. how must is it?

should I take over fredie or fannie?I got 10 billion Euro.

due lei lo mou!mei kwok yan ching pot kai.

Speaking of hitting it exactly on the head:”There are numerous problems with this approach, starting with the fact that it was the bankruptcy of the banking system which created the demand for more cash from the mortgage system—the issue was never houses per se, but the creation of ever larger volumes of mortgages to feed the securities machine and the derivatives markets. The sale of houses was a byproduct of the looting of the population through mortgage debt.”http://www.larouchepub.com/other/2008/3534peering_jackson_hole.htmlI think that I also suggested something along these same lines some time ago. Some good points in this article and very colourful, as always.I’ll stick with incompetence and stupidity but am happy to add in parasitical relationships flying false colours.Ho humPeterJB

OK smart folks on this blog riddle me this…why, if the Treasury is going to fund Phony, Fraudie AND the FDIC, why the hell aren’t bond prices tanking? The 10 year bond should be well over 5% given that sceanrio-any answers?

FDIC Chairman Sheila Bair commented in a press conference this afternoon that she expects the credit markets to continue to worsen, and judging by the recent action in credit spreads, the market seems to agree. According to Merrill Lynch data, interest rates on investment grade corporate bonds are currently not only at higher levels than they were at the Bear Stearns low, but they are also at their highest levels ever. As of yesterday’s close, investment grade corporate bonds were yielding 312 basis points more than Treasuries, which is a 118% increase over year ago levels.

Trying to reduce the number of voters for Obama in November??Federal agents round up nearly 600 plant workers in small Mississippi town of Laurel as the largest single-workplace immigration raid in U.S. history causes panic

Gazprom Leads Surge in Russian Debt Risk to Five-Month HighAug. 27 (Bloomberg) — OAO Gazprom led a jump in the cost of protecting Russian companies from default to the highest in almost five months on investor concern the country’s military incursion in Georgia will trigger a rise in borrowing costs.Credit-default swaps on the world’s largest natural-gas producer increased 36 basis points to 260 this month, and Moscow-based oil-pipeline operator OAO Transneft rose 33.5 to 265, according to at CMA Datavision prices at 3:15 p.m. in London. Contracts on Russia’s government debt climbed 32 to 134, the highest since April 2.The credit crisis has already prompted a jump in Russian corporate funding costs, with the nation’s largest lender, OAO Sberbank, increasing rates on outstanding loans by an average of 2 percentage points last month. International investor concern over the Georgia military action may add at least a further 0.5 percentage point to annual interest payments, according to Mikhail Galkin, a fixed-income analyst at MDM Bank in Moscow.`Access to capital for Russian corporations, already severely damaged by the global credit crunch, has further deteriorated on the back of increased political risks,’ Galkin said in an interview todayhttp://www.bloomberg.com/apps/news?pid=20601087&sid=a8nwkeO3hqbs&refer=worldwide

Guest: “OK smart folks on this blog riddle me this…why, if the Treasury is going to fund Phony, Fraudie AND the FDIC, why the hell aren’t bond prices tanking? The 10 year bond should be well over 5% given that sceanrio-any answers?”————Absolutely in any sane, rational economy the bond prices would have long ago responded to this drastic fiasco on Wall St. One of the great ironies today is that China has allowed its stock market to trade freely (even with a substantial loss in value), while the US market is rotten to the core with manipulation. What does that say about real “freedom” ?By the time US bonds really plunge, the American economy will be in tatters. We are on course for that future … it lies ahead.If you check the Fed listings for Foreign Purchases of US debt, you’ll notice a line item called “Carribean Banking Ceneters”. Some people claim this represents hedge funds buying US bonds, and to some degree they may be right. But my theory is that the Fed & US Treasury have some sort of proxy hedge fund that operates through this window to buy back US bonds when no-one else wants them. Hence they maintain the illusion that there is adequate demand for our bonds. In reality, we’re buying back the unsold bonds ourselves, and burying the transactions.The purpose of the manipulation is to keep bond prices from soaring, and hence mortgage rates from rising rapidly. That would further sink the housing market, and lead to a dramatic deterioration is assets held by (insolvent) banks on Wall St.PeteCA

@ PeterJB: “the issue was never houses per se, but the creation of ever larger volumes of mortgages to feed the securities machine and the derivatives markets. The sale of houses was a byproduct of the looting of the population through mortgage debt.” ~Yes. In America’s not so distant past, the old rule was “Never spend a penny ‘less you are forced to, yet pay cash for everything.”The deferred payment system is our greatest curse.Think how reasonable the price of a house would be today when compared to the average man’s salary if there were no interest payments: if Bernanke could not print money for the moneylenders to artificially raise the price of a house.It boggles the mind to compute the “interest” America’s families turn over each month, for thirty years, to these “lenders” – who neither spin nor weave — and to the tax man in “property taxes.” All for a “home.”

Can someone explain what is behind today’s durable goods order number? Is it indicative of a economic recovery or some kind of accounting gimmick?

“Eventually,” explained Georgian President Mikhail Saakashvili according to the AP, “we would have chased them away, but we would have had to go to the mountains and grow beards. That would have been a tremendous national philosophical and emotional burden.”As the third graders used to say on the schoolyard: “Yeah, you and whose army?”Whose army, indeed. The Kremlin says Mikhail is delusional and dangerous. But as a characterization of the neocons pushing the U.S. foreign policy that made Mikhail what he is today, “delusional and dangerous” is only half right; more likely it’s “intentional and dangerous.”

“Why did Strong do it? Why did he allow Montagu Norman tolead him around by the nose and to follow an unsound policyin order to shore up Britain’s unsound monetary structure?Some historians have speculated that Norman exerted a Svengalilikepersonal influence over the New Yorker. It is moreplausible, however, to look at the common Morgan connectionbetween the two central bankers. J. P. Morgan & Co., as wehave seen, was the fiscal agent for the Bank of England and forthe British government. Norman himself had longtime personaland family ties with New York international bankers. Hehad worked for several years as a young man in the New Yorkoffice of Brown Brothers & Co., and he was a former partner inthe associated London investment banking firm of Brown,Shipley & Co. Norman’s grandfather, in fact, had been a partnerin Brown, Shipley and in Brown Brothers. In this case, as inmany others, it is likely that the ties that bound the two menwere mainly financial.”THE MYSTERYOF BANKINGoMurray N. Rothbard

Any word on the nature of the cause of FAA flight plan system failure yesterday? A cursory look at the FAA’s website reveals nothing.Best …

Why Russia recognised rebel regionshttp://straitstimes.asia1.com.sg/Breaking%2BNews/World/Story/STIStory_272384.htmlMOSCOW had no option but to recognise Georgia’s breakaway regions of South Ossetia and Abkhazia as independent states, Russian President Dmitry Medvedev wrote in Wednesday’s Financial Times.The United States, Nato and European powers have strongly condemned Russia’s recognition of the regions, after it sent tanks and troops into Georgia to push back the forces of the Caucasus state.’It was not a step taken lightly, or without full consideration of the consequences,’ Mr Medvedev wrote in the London-based newspaper.He said Russia had tried hard to prevent conflict in Georgia but the West had helped provoke it by its handling of Kosovo.’Ignoring Russia’s warnings, western countries rushed to recognise Kosovo’s illegal declaration of independence from Serbia,’ Mr Medvedev wrote.’We argued consistently that it would be impossible, after that, to tell the Abkhazians and Ossetians (and dozens of other groups around the world) that what was good for the Kosovo Albanians was not good for them.’In international relations, you cannot have one rule for some and another rule for others.’Georgian President Mikheil Saakashvili bore the blame for the conflict, Mr Medvedev wrote.’Only a madman could have taken such a gamble. Did he believe Russia would stand idly by as he launched an all-out assault on the sleeping city of Tskhinvali (in South Ossetia), murdering hundreds of peaceful civilians, most of them Russian citizens?’He added: ‘Russia had no option but to crush the attack to save lives. This was not a war of our choice. We have no designs on Georgian territory.’Mr Medvedev said that after South Ossetia and Abkhazia appealed for Russian recognition of their independence, ‘a heavy decision weighed on my shoulders’.'I sincerely hope that the Georgian people, to whom we feel historic friendship and sympathy, will one day have leaders they deserve, who care about their country and who develop mutually respectful relations with all the peoples in the Caucasus.’Russia is ready to support the achievement of such a goal,’ he wrote. — REUTERS

WHAT JUST CAISED 10yr YIELDS TO PLUNGE???

considering that the official inflation rate is likely not even close to the real inflation rate, as explained here:http://www.lewrockwell.com/suprynowicz/suprynowicz90.html…has the stock market really went up or down?…in real dollars, that is…

GOODBYE CIVIL LIBERTIES, HELLO MCCAIN WITH CHENEY AS VEEP

NEW ORLEANS — On the cusp of Hurricane Katrina’s third anniversary, nervous Gulf Coast residents watched Wednesday as a storm threatened to strengthen and crash ashore, testing everything the city has rebuilt.

Is the US prepared for $170 oil? Too late now!

It’s all OK everybody, the recession is off the table…orders for non-aircraft machinery and other capital goods — jumped 2.6% in July, double the June advance……..”This suggests the credit crunch is not having a profoundly adverse impact on capital spending that most economists, myself included, assumed it would,” said David Resler, an economist at Nomura Securities……..The numbers “hardly look recessionary or pre-recessionary,” said Robert Brusca, head of Fact and Opinion Economics in New York.So that’s nice.http://latimesblogs.latimes.com/money_co/2008/08/what-happened-t.html

Speaking of China, the US Dollar and Stealth:”Beijing swells dollar reserves through stealthRule changes for commercial banks are acting as cover for exchange rate intervention,writes Ambrose Evans-Pritchard”http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/26/ccchina126.xmlAnything new here? Guess not.Ho humPeterJB

@PeterJBGreat article you linked:http://www.geocities.com/tubeguy@rogers.com/troubledbanks.htm

@ Guest on 2008-08-26 22:35:06[NATO']s foreign policy is run by the neocons.Nonsense.SWK

Gospodin Medvedev does not regard the areas now controlled by Russia to be Georgian territory, certainly not the free states of Abkhazia and South Ossetia. Not sure how he would describe the port city of Poti.

SWK is pretty consistent in following the neocon party line.

and you know what, if a war do start,Russia will named as the aggresor,the one who started ww3,why? because in order to counter the pre-emptive doctrine+missile shield in europe tacticRussia must first take out those missile shields, that move is a certainty and as those missile is in europe, EU is considered attacked..that suits US just fineUS just have to act like dr strangelove and let Russia make the move

@Guest 23:52:44For the record, I think the Bush Administration’s plan go locate a missile defense shield in Poland to have been short-sighted and unnecessarily provacative.SWK

THE RUSSIANS ARE COMINGSUCH A PITY BACK WHEN NURIEL WAS ECONOMIC ADVISER TO CLINTON ADMINISTRATION HE ORCHESTRATED WITH THE HELP OF WORLD BANK AND IMF AND USA TREASURY TO BAIL OUT RUSSIA OUT OF BANKRUPTCY. THE RUSSIANS ARE SUCH TYRANT INSTEAD BE THANKFUL TO USA FOR SAVING THEM ,THEY SPIT ON THE FACE OF USA.THE USA GOVERNMENT IS THE MOST GENEROUS GOVERNMENT IN THE WORLD. NAME ME ANOTHER COUNTRY IN THE WORLD THAT Gives BILLIONS OF US DOLLAR LOANS TO OTHER NATIONS AND THEN FORGIVES THAT LOAN. ZERO, ONLY USA FORGIVES THE LOANS.SO LETS STOP SAYING USA IS BAD.USA OF AMERICA IS A PIOUS NATION. A PIOUS HEGEMONY NOT A TYRANT UNLIKE OTHER NATIONS.HELLO RUSSIA GOODBYE NATOTHE AMERICANS ARE COMINGHELLO USAGOODBYE IRAN.

Dr Roubini,In light of yesterday’s surprising durable goods orders number, will you be revising your 3Q08 GDP forecast?

@SWK aka kilgores on 2008-08-27 22:32:07Hmm. Competitive devaluation, then a Historic Piece of Paper. Have we not seen this before?http://en.wikipedia.org/wiki/Image:MunichAgreement_.jpghttp://www.themoscowtimes.com/article/1010/42/369748.htmAnd from Yes Prime Minister …Jim Hacker: We should always fight for the weak against the strong.Sir Humphrey: Well, why don’t we send troops to Afghanistan to fight the Russians?Jim Hacker: The Russians are too strong.http://www.tv.com/yes-prime-minister/a-victory-for-democracy/episode/156003/summary.htmlWe seem to be going according to script. US prints, China devalues. Europe takes the high (interest) road and falls off the cliff (once again).Enjoy the ride!P1AQL.

@ Anonymous on 2008-08-28 00:49:41>Don’t you think it would be stupid for Russia, having their citizens in Tskhinvalli murdered and having won the ensuing short war, to take nothing for their trouble, to give back everything?>Life doesn’t work that way.One object of the international legal regime is to establish collective rules among sovereign states to prevent wars and violent conflicts between them, and militate against a “might makes right” world order. Russia’s military intervention in Georgia is in clear violation of international law respecting the use of force, and calls for an appropriate and effective response by the international community (and I don’t mean a rush to war).The presence of any substantial number of Russian nationals in Tskhinvali and elsewhere in South Ossetia was the product of the Russia government issuing Russian passports to residents there as part of a cynical plan to illegally annex sovereign Georgian territory. The recognition by the Russian government of these breakaway Georgian provinces is merely in furtherance of this plan. Russia should not be permitted to gain from its illegal use of force in Georgia, and its breach of Georgian territorial integrity, without suffering severe consequences and international censure. Russia’s interest in Georgia has less to do with protecting the nominal Russian nationals there than with controlling the oil that flows through Georgia to Western Europe.>I don’t recall that Hitler had a similar excuse for his expansionism — his neighbors didn’t have the colossally stupid “foreign policy” that the US bloc does now — but if he did and reacted by taking territory and not giving it back, then the comparison to Medvedev is apt: both were doing the natural thing.The circumstances surrounding Russia’s designs on Georgia are similar in many respects to those surrounding Nazi Germany’s designs on Czechoslovakia in 1938.>Israel still hasn’t given back land it captured in the Six Day War. It won the war, it keeps the land. This seems like the best parallel to me, to what is happening in areas that were formerly in Georgia.We aren’t talking about Israel; however, Israel’s occupation and annexation of Palestinian lands since the Six Day War — which occurred over 40 years ago — are patently illegal under international law, too. Israel’s actions, as many on this blog have pointed out, have been roundly condemned by the international community for many years.SWK

@AFA BACK IN JUNE WHEN I POSTED THIS BLOOMBERG ARTICLE ALL OF YOU;INCLUDING PROFESSOR RUBINI SCREAMED THIS ARTICLE DOES NOT BELONG TO THIS BLOG. AND YOU ALL LAUGHED. I AM GOING TO POST lt;;THE BLOOMBERG ARTICLE FROM JUNE OF THIS YEAR AGAIN.Russia Risks Armed Clash in Abkhazia to Stop Georgia NATO Bid;By Henry Meyer;June 24 (Bloomberg) — Almost 20 years after the Cold War ended, Russia’s neighbor Georgia has become a new flashpoint for tensions with the West.Russia wants Georgia, its former Soviet possession, to stay out of NATO so badly it is risking armed conflict to support the breakaway region of Abkhazia. In the past two months, Russia has sent almost 1,000 troops into Abkhazia, established direct economic ties with it and downed an unmanned Georgian spy plane. An outbreak of fighting between Georgia, a U.S. ally, and Russia would provoke the worst crisis in East-West ties since the Soviet Union collapsed in 1991. It also would undermine Russia as it prepares to host the 2014 Winter Olympics in Sochi, 30 miles from the Abkhaz border. “The risk of the high level of brinkmanship exploding into conflict has gotten higher,” said Andrew Kuchins, an analyst at the Washington-based Center for Strategic and International Studies, in a phone interview. “Russia has upped the ante. Russian President Dmitry Medvedev and Prime Minister Vladimir Putin see the expansion of the North Atlantic Treaty Organization to Georgia and Ukraine as a U.S. bid to usurp Russia’s influence in its backyard. The two leaders also are in conflict with the U.S. over a planned missile shield in former Soviet bloc countries Poland and the Czech Republic, which they see as a threat to Russia’s nuclear capability.`Negative Confrontation’ Moving Georgia “artificially into NATO” would “certainly lead to another spiral of very, very negative confrontation,” Medvedev, 43, told Georgian President Mikheil Saakashvili, 40, at a meeting in St. Petersburg on June 6. Officials in Georgia, the route for a pipeline carrying Caspian oil to Western European markets, have denounced what they call Russia’s “annexation” of Abkhazia. Georgia is stepping up preparations for an offensive, said the Brussels- based International Crisis Group in a report this month. The most recent confrontation occurred on June 17, when Georgian police detained four Russian soldiers, confiscating what they said were 20 anti-tank missiles. The Russian military said it would respond with force to further “provocations.”Since the U.S. and its European allies in NATO promised Georgia and Ukraine, another former Soviet neighbor, eventual membership at an April summit in Bucharest, Russia has taken a series of military steps that have angered Georgia. Russia deployed 400 troops to Abkhazia on May 31, saying they were needed to rebuild a railway track. In April, Russia bolstered its UN-sanctioned peacekeeping force in Abkhazia with an additional 550 troops equipped with heavy artillery, on top of the 2,000 peacekeepers there already.On April 20, a Russian fighter jet shot down a Georgian unmanned reconnaissance plane over Abkhazia, according to a United Nations investigation.Abkhaz border guard Tengiz Manaka saw the wreckage fall to the ground. The 23-year-old raced to the top of a watchtower on the seafront to keep a lookout for Georgian warplanes. “We thought war was about to break out,” he said. Abkhazia, slightly larger than the U.S. state of Delaware at 3,300 square miles, is a subtropical Black Sea territory dotted with palm trees that was once a favorite playground of Soviet dictator Josef Stalin. Since the territory split from Georgia in 1991, sparking a two-year conflict that killed up to 20,000 people and the exodus of 240,000 Georgian refugees, Russian peacekeepers have been policing an uneasy cease-fire.“The Russians are trying to destabilize Georgia and prevent us from joining NATO,” said Georgia’s State Minister for Euro-Atlantic Integration, Giorgi Baramidze, in an interview in Tbilisi. “We are doing our best to stay as calm as possible, especially now when aggression is continuing. Russian Foreign Ministry spokesman Boris Malakhov said in a phone interview that Russian forces stationed in Abkhazia for more than a decade have “succeeded in keeping the peace and avoiding a resumption of hostilities. The U.S., which has trained and equipped Georgia’s military and in 2006 approved almost $300 million in aid over five years, says Russia’s tactics will backfire.“The longer that Russia remains so provocative and that Georgia remains so responsible, we’ll see support for Georgia’s NATO membership will grow,” said U.S. Undersecretary of State Matt Bryza in a phone interview. The official U.S. position on the breakaway conflict calls for restraint on the part of Georgia and negotiations with Abkhazia.Eventual Members Georgia and Ukraine failed to win fast-track NATO membership status in April because of opposition from Germany and France. As a compromise, the Western military alliance agreed that both countries will eventually become members. For its part, Abkhazia is on a war footing, with 30,000 reservists who keep weapons at home and can deploy with hours’ notice in response to any attack.“Our armed forces are on a constant state of alert,” Deputy Defense Minister Gari Kupalba said in an interview in the capital of Sukhumi. Nina Khrushcheva, the great-granddaughter of ex-Soviet leader Nikita Khrushchev, says she is concerned that Putin and Saakashvili won’t show the same restraint as Khrushchev and President John F. Kennedy did during the 1962 Cuban Missile Crisis. The deployment of Soviet missiles to Cuba brought the U.S. and the Soviet Union to the brink of nuclear war. “Who can promise that it won’t get to the point of the Cuban missile crisis?” said Khrushcheva, a professor of international affairs at the New School in New York. “Both sides are escalating.– With reporting by Helena Bedwell in Tbilisi. Editors: James Hertling, Anne Swardson. To contact the reporter on this story: Henry Meyer in Sukhumi, Georgia, through the Moscow newsroom at Hmeyer4@bloomberg.net. Last Updated: June 23, 2008 16:00 EDT. HELLO RUSSIA GOOD BYE NATO. Written by  MASHIACH BEN CHANA

Good link PeterJB.http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/26/ccchina126.xmlChina is in a downturn/slow down and there is deflation in housing prices in major Chinese cities. Meanwhile the Chinese banks are required to keep bank reserves in U.S.$ in an apparent attempt to soak up more excess dollars and keep the yuan competitive to help prevent an even further slide in exports to the U.S. Why is it that we aren’t likely to see a global depression again Professor? As the credit bubble continues to deflate housing price deflation certainly seems to be going global.”They are now more worried about growth than overheating, and you are seeing that play out in the currency markets. There has been a remarkable change of view,” said Simon Derrick, exchange rate chief at the Bank of New York Mellon.China’s PMI purchasing managers index fell below 50 for the first time in July, signalling an outright contraction in manufacturing output. Hong Kong’s economy contracted 1.4pc in the second quarter. The Politburo has rushed through special rebates for textile producers now caught in a ferocious downturn.Much of the clothing, footwear and furniture industry has been hit, leading to mass plant closures in the Pearl River Delta.”During the first half of this year, about 67,000 small and medium-sized companies went bankrupt throughout China, leaving more than 20m people out of work,” said the National Development and Reform Commission. “Bankruptcies of textile and spinning companies have numbered more than 10,000. Two thirds are on the brink of bankruptcy.”Last week’s rebound on the Shanghai stock market stalled on fading hopes of a fiscal stimulus package. “It is unrealistic to expect the government to rescue the market,” said Li Ka-shing, chairman of Hutchison. “Speculators should be very cautious now. The worst is not over in the global credit crisis.”Lehman Brothers warns of a risk that a housing slump and the 55pc equity crash since October could combine with a global downturn to set off a “vicious cycle”. House prices have already fallen 18pc in Guangzhou and 9pc in Beijing. Prices are now falling in cities that make up over half China’s population.

Just a guess, but with tomorrow being FDIC Friday, can you imagine a better time for a major bank shutdown than a 3 day weekend after an obviously fraudulent GDP report pumps up the market?

>>>>>>>> NEW THREAD 2006 and 2007 IMF Speeches by Roubini Predicting the Recession and the Financial Crisis…And the Five Stages of Grief… Nouriel Roubini | Aug 28, 2008