a week for the stock market. Last Wednesday the market took a
360 point nosedive followed, two days later, by a 220 point belly-flop.
By the time it was over, the trading pits looked more like a sausage-packing
plant than the world's financial epicenter.
After the bell, downcast traders could be seen tiptoeing through
the carnage on their way to the local liquor store to load up
on "Stoly" and boxes of Franzia - anything that would steady their
nerves and put the week behind them.
could see it coming; the train-wreck. It was mostly carry-over
from the night before when Asian stocks took a thumping on reports
of slower growth in the US and growing troubles in the credit
markets. That put the first domino in motion. Fed chief Ben Bernanke's
announcement that the economy will face "a sharp slowdown from
the housing market's contraction" and an "inflationary surge from
sharply higher oil prices and the weaker dollar" didn't help either.
His remarks triggered a blow-off in the currency markets while
equities were frog-marched to the chopping-block.
market took the worst hit, dropping nearly 5 per cent before the
trading-day ended. Taiwan and Hong Kong followed suit, sliding
3.9 per cent and 3.2 per cent respectively. Share prices in Japan
fell 2 per cent. The next morning, Wall Street crashed. It was
This is a
bear market now. The last bull was dragged from the Street on
Friday with a harpoon in its chest.
contagion has now spread beyond the US and Europe to markets in
the Far East. No one is fooled by Bernanke's sunny predictions
that the economy will bounce back next year with a strong showing
in the first quarter. That's baloney and everyone knows it. The
economy has stumbled down the elevator shaft and is just waiting
to hit bottom. Consumer confidence is flagging, housing is falling,
foreign capital is fleeing, and the greenback is one flush away
from the sewage-treatment plant. Bernanke's soothing bromides
see any significant change in the broad holdings of dollars around
the world. Dollars remain the dominant reserve asset and I expect
that to continue to be the case," Bernanke said to the Congressional
subprime contagion has now spread beyond the US and Europe
to markets in the Far East. No one is fooled by Ben Bernanke's
sunny predictions that the economy will bounce back next
year with a strong showing in the first quarter.
So why is the greenback plummeting if people aren't dumping it,
Ben? What an absurd comment. The dollar has lost 63 per cent against
the euro and dropped to record lows against a basket of world
currencies. Foreign central banks and investors have been ditching
it as fast as they can before it loses more value. The dollar's
tumble has been the most dazzling currency-flameout in modern
times and Bernanke is acting like he's still asleep at the switch.
is getting clobbered by the Fed's "low-interest" snake oil and
the gargantuan current account deficit. If Bernanke clips rates
again to bail out the stock market, the dollar will slip into
irreversible respiratory failure. Food and oil prices will shoot
to the moon overnight and the remains of the greenback will be
carted off to the nearest boneyard.
trade deficit was another blow to the waning dollar. The Census
Bureau reported last Friday that the deficit clocked in at US$56.5
billion. That's $684 billion per annum! Bush has been crowing
about the "shrinking deficit", but the numbers are nothing to
boast about. We're still borrowing more than we're producing.
We're still living beyond our means. The lower numbers just reflect
the decline in home construction which is import-intensive.
The fact is, we're addicted to debt-fueled consumption and forgotten
that, eventually, the trillions that we've borrowed from foreign
creditors, will have to be repaid. If the dollar is replaced as
the world's reserve currency, then we'll have to pay back $9 trillion
of outstanding debt. We might as well hang out the "Foreclosed"
sign right now and get fitted for Chinese workers-suits.
This is from
"As the dollar
tumbles, concern is growing that its weakness may augur the end
of the U.S. currency's 62-year reign as the world's specie of
choice for trade, financial transactions and central-bank reserves.
The dollar owes its position as the world's premier international
currency to its status as a haven during times of turmoil, the
absence of a suitable rival, weak domestic demand in other countries
and plain old inertia. Geopolitics also play a role."
Who believes this rubbish? The dollar is the so-called "international
currency" because the Federal Reserve and its well-heeled patrons
are the directors of the US-Euro-Japan banking cabal which is
at the center of the global Fiat money scam. There's nothing more
to it than that.
Notice the recent "unilateral" clamp-down on Iran by the US-led
banking syndicate. The action was initiated without UN approval
for the simple reason that the UN, the World Bank, the IMF, the
WTO and thousands of NGOs are just more of the Central Banks'
prime properties. Don't expect the father to ask the child for
permission to punish one of his errant children. The banks are
the ones who really call the shots and - behind the curtain of
feigned respectability - they are the driving force behind the
dollar has lost 63 per cent against the euro and dropped
to record lows against a basket of world currencies. Foreign
central banks and investors have been ditching it as fast
as they can before it loses more value.
Fed's plan to "devalue" our way to prosperity appears to have
hit a few ill-placed speed-bumps. The stock market is hanging
by a thread and consumer confidence is at its lowest ebb since
the start of the Iraq War. The falling dollar is expected to put
a damper on Christmas spending and knock equities for a loop.
That can't be good for economy - especially when 72 per cent of
GDP comes from consumer spending.
begun to see the telltale signs that the consumer is loosing ground
and about to slip into a debt-induced coma.
to data from the University of Michigan:
confidence reached its lowest level in more than two years this
month amid concerns over record-high oil prices, continued trouble
in the housing market and higher inflation. Although consumer
attitudes deteriorated across the board, the substantial drop
in expectations contributed heavily to the sizeable decline in
the overall index."
working stiff doesn't put any stock in Bernanke's palavering.
He sees what's going on for himself every time he pulls up to
the gas pump or goes the grocery store. He doesn't need the University
of Michigan to tell him he's getting screwed; he knows it! The
economy is sinking, inflation is skyrocketing, and the country
is adrift. Every farthing in the public till has been shoveled
into a black hole in the Middle East.
Does Bernanke really think working people don't know that? Everyone
knows that. Everyone knows the economy is on life-support; just
like everyone knows the country is collapsing from mismanagement.
Even the flag-waving, war-mongering maniacs on the Wall Street
Journal's op-ed page are starting to shutter from the avalanche
of bad news. They see what's going on and they're scared - scared
the sudden shift in consumer sentiment is the hurting retailers
who depend on Christmas to carry them through the year. We've
already seen the sluggishness in housing and auto sales. Now it's
showing up in retail. Abercrombie, American Eagle, Ann Taylor,
Chicos, Dillards, The Gap and Nordstrom are all reporting sagging
sales. Walmart, Lowes and the other big-box stores are lowering
their projections as well. It's going to be a lean Christmas.
US consumer is finally maxed-out and can't tap into his home equity
anymore for presto-credit. He's mortgaged "to the hilt" and he's
already run up 6 or 7 credit cards to their limit. In fact, credit
card debt is a growing concern for the banks, too.
country is headed for recession and there's nothing that
Bernanke can do to stop it. The only question is whether
we'll be facing a colossal economy-busting meltdown like
1929 or a milder five or six-year slump.
commercial banks are the victims' of their own success. After
years of seductive promotions and saturation mailings the credit
card industry is at its zenith leaving consumers with a staggering
bill of nearly $1 trillion ($915 billion). More and more customers
are finding themselves unable to make even minimum payments on
their balances and defaults are piling up at a record pace. This
is the next phase of the subprime fiasco and it has the potential
to be nearly as disruptive as the housing meltdown.
The problem is complex, too. After all, most credit card debt
in the last six years has been "securitized" and passed on to
investors in the secondary market (pension funds, hedge funds,
etc.). That means we can expect more tremors in the stock market
as corporate earnings go south after credit card-backed bonds
are downgraded. It's just more of the same "structured finance"
chicanery; debt stacked on debt, until the whole edifice caves
more and more like Reagan's "shining city on the hill" was erected
on a mountain of toxic debt. It's a wonder it hasn't sunk already.
is headed for recession and there's nothing that Bernanke can
do to stop it. The only question is whether we'll be facing a
colossal economy-busting meltdown like 1929 or a milder five or
six-year slump. That's up to the Federal Reserve. If the Fed chief
decides to pit himself against the falling markets by slashing
rates and destroying the currency; then we are likely to be digging-out
for years. But if Bernanke steps aside, and lets the chips fall
where they may, then the pace of recovery will be quicker.
choice he makes, there's no avoiding the inevitable downturn.
The hammer is poised to strike the anvil. The stock market will
fall, the over-extended banks and hedge funds will collapse, and
the country will go into a protracted, economic tailspin. That
much is certain. Economic fundamentals can only be shrugged off
for so long. When markets correct it's like a tidal-surge that
sweeps away the deadwood of bad bets and over-levered investments
leaving behind a broad expanse of empty beach.
is a normal part of the business cycle. It can't be avoided. The
economy needs to unwind so debts can get written off and businesses
can retool for the future. The upcoming recession is shaping up
to be worse than its predecessors - a real doozey.
caused by the Fed's excessive credit has been considerable. It'll
take years to mop up the red ink and set the house aright. The
markets are in a shambles, investors have been battered and confidence
finance has been an unmitigated disaster. It needs to be scrapped.
We need a new financial system for a new epoch; a system that
is heavily regulated and supervised to discourage the crooks and
con-artists; a system that maintains its essential link to the
real, productive underlying economy and avoids the galaxy of complex
derivatives, "securitized" liabilities, and opaque debt-instruments
that have brought on the present crisis; a system that responds
to the needs of working people and takes into consideration the
looming problems of environmental degradation, resource scarcity,
and climate change; a system that reinvests in communities, education
and health-care rather than fattening the bottom-line of corporate
racketeers and brandy-drooling elites. It's time to remove the
rotten scaffolding and rebuild the whole contraption brick by
is broken. Maybe Greenspan did us all a favor by blowing it up
with his "low interest" dynamite. Good riddance.
Mike Whitney is a well respected freelance writer living in Washington
state, interested in politics and economics from a libertarian
perspective. He can be reached at firstname.lastname@example.org.
Market Mayhem And Bush's Moral Swamp
Flameout: California Falls Into The Sea
Time For The Banks To Face The Hangman
Era Of Global Financial Instability
Banks Brace For Storm Surge As Dollar And Credit System Reel
Are The Banks In Trouble?
Stock Market Brushfire: Will There Be A Run On The Banks?
Judgment Week On Wall Street