“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Sunday, March 16, 2008

Past Time to Rescue the Dollar.

Bear Stearns collapsed in less than a week. Oil and gold will be followed by any other commodity or hard asset as investors panic to conserve capital and flee a falling dollar. Gresham's Law dictates that good money drives out bad and if something is not done fast, we will be closing in on a dangerous flash point. Act!


Ailing dollar plunges to new low against euro

The dollar plunged to a new record low against the euro and stayed at a 12-year low against the yen in early Asian trading on Monday amid deepening worries over the US economy, traders said.

The euro hit 1.5737-40 dollars in early trading shortly after 7:00 am (2200 GMT), the highest level since it was created in 1999, before easing to 1.5687 dollars later.
The dollar also fell to 98.02 yen in early trading, down from 99.18 yen in New York. It was trading at 99.01 yen in Tokyo Monday morning.

The dollar fell as worries over the US economy have deepened, said Kenichi Yumoto, vice president at the foreign exchange sales and trading department of Societe Generale in Tokyo.

"It's all about Bear Stearns," he said, referring to news Friday of an emergency loan to prop up the crisis-hit Wall Street investment bank.

The fact that US regulators intervened to drag the bank from the brink of collapse highlighted worries over the health of US financial companies, he said.
Company officials said Sunday Bear Stearns would be bought by J.P. Morgan Chase for two dollars a share.

But Yumoto said the dollar's renewed plunge may come to a halt in Asia after a new round of selling runs its course.


  1. WASHINGTON (MarketWatch) -- The following is the text of the Federal Reserve statement issued March 16.
    The Federal Reserve on Sunday announced two initiatives designed to bolster market liquidity and promote orderly market functioning. Liquid, well-functioning markets are essential for the promotion of economic growth.
    First, the Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets. This facility will be available for business on Monday, March 17. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities. The interest rate charged on such credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.
    Second, the Federal Reserve Board unanimously approved a request by the Federal Reserve Bank of New York to decrease the primary credit rate from 3-1/2 percent to 3-1/4 percent, effective immediately. This step lowers the spread of the primary credit rate over the Federal Open Market Committee's target federal funds rate to 1/4 percentage point. The Board also approved an increase in the maximum maturity of primary credit loans to 90 days from 30 days.
    The Board also approved the financing arrangement announced by JPMorgan Chase & Co. and The Bear Stearns Companies Inc

  2. not yet..

    we need to screw the chinese some more...

    need a nice recession to cause chinese layoffs and riots...


    let the crisis spread thru out the world a bit more...

    increase the cost of food 400% in the 3rd world (bread riots in egypt) to cooking oil shortages due to increase kerosene costs....


    fuck with theusa we will drop our dollar, screw that false pegged yuan...

    yep patience...

  3. The farmers and WiO may be the only ones in America having a good year:)

    And Soros, and the other fat cat what's his name that shorted the dollar.

    The Vegas real estate market seems to be collapsing, as well.

    Help Save The Country--Buy American--Buy Your American Made Buying In America Guide Here

  4. Wall Street fears for next Great Depression
    By Margareta Pagano, Business Editor
    Sunday, 16 March 2008

    Wall Street is bracing itself for another week of roller-coaster trading after more than $300bn (£150bn) was wiped off the US equity markets on Friday following the emergency funding package put together by the Federal Reserve and JPMorgan Chase to rescue Bear Stearns.

    One UK economist warned that the world is now close to a 1930s-like Great Depression, while New York traders said they had never experienced such fear. The Fed's emergency funding procedure was first used in the Depression and has rarely been used since.

    A Goldman Sachs trader in New York said: "Everyone is in a total state of shock, aghast at what is happening. No one wants to talk, let alone deal; we're just standing by waiting. Everyone is nervous about what is going to emerge when trading starts tomorrow."

    In the UK, Michael Taylor, a senior market strategist at Lombard, the economics consultancy, said on Friday night: "We have all been talking about a 1970s-style crisis but as each day goes by this looks more like the 1930s. No one has any clue as to where this is going to end; it's a self-feeding disaster." Mr Taylor, who had been relatively optimistic, has turned bearish: "It really does look as though the UK is now heading for a recession. The credit-crunch means that even if the Bank of England cuts rates again, the banks are in such a bad way they are unlikely to pass cuts on."

    Mr Taylor added that he expects a sharp downturn in the real UK economy as the public and companies stop borrowing. "We have never seen anything like this before. This is new territory for us. Liquidity is being pumped into the system but the banks are not taking any notice. This is all about confidence. The more the central banks do, the more the banks seem to ignore what's going on."

    Mr Taylor added that the problems unravelling at Bear Stearns are just the beginning: "There will be more banks and hedge funds heading for collapse."

    One of the problems facing the markets is that, despite the Fed's move last week to feed them another $200bn, the banks are still not lending to each other.

    "This crisis is one of faith. We are going to see even more problems in the hedge funds as they face margin calls," said Mark O'Sullivan, director of dealing at Currencies Direct in London. "What we are waiting for now is for the Fed to cut interest rates again this week. But that's already been discounted by the market and is unlikely to help restore confidence."

    Mr O'Sullivan added that the dollar's free-fall is set to continue and may need cuts in European interest rates to trim the euro's recent strength against the dollar. "But the ECB doesn't like cutting rates," he said.

    On Europe, Mr Taylor said that while the German economy remains strong, others such as Italy's and Spain's are weakening. "You could see a scenario where the eurozone breaks up if economies continue to be so worried about inflation."

    European financial markets were relatively unscathed by Wall Street's crisis but traders expect there to be a backlash when stock markets open tomorrow.

    The Fed's plan will give 28 days of secured funding to Bear Stearns, which saw its value slashed over the week by more than a half to $3.7bn. JP Morgan will provide the funding, but the Fed will bear the risk if the loan is not repaid. Fed chairman, Ben Bernanke, who pumped $200bn of loans to cash-strapped institutions last week, said more would be available to help others in distress.

    The Independent

  5. From Bear Stearns web site:


  6. But will the loss announcement occur?

  7. No problem with the banking system.

    as of close, 03/14/2008 (NYSE)

    Last 30.00
    Change -27.00
    Bid N/A
    Ask N/A
    Day High 54.79
    Day Low 26.85
    Volume 186,986,843
    52 Week Hi 159.3600
    52 Week Low 50.48

    Today: JPMorgan to buy Bear for $2 a share. Talk about a haircut. Investors and traders bought 187 million shares on Friday for over $26 per share. In the morning their shares will be worth $2.

  8. Bear's Biggest Holders Added Shares in Fourth Quarter (Update1)
    By Sree Vidya Bhaktavatsalam

    March 14 (Bloomberg) -- Bear Stearns Cos. biggest investors, including Morgan Stanley and billionaire Joseph Lewis, raised their stakes in the fourth quarter, holdings that may be wiped out if the firm collapses.

    Lewis, the second-largest shareholder of the New York-based securities firm, added 1.8 million shares to bring his holdings to 9.4 percent as of Dec. 31, according to data compiled by Bloomberg. Morgan Stanley, the third-biggest investor through mutual funds offered to clients, upped its position to 5.4 percent with the purchase of 4.7 million shares.

    Bear plunged a record 47 percent today after the New York Federal Reserve and JPMorgan Chase & Co. stepped in to rescue the 85-year-old firm with emergency funding. The Fed is trying to prevent a demise of the second-biggest underwriter of U.S. mortgage bonds that might trigger further market declines.

    ``If they're really terribly impaired, and most of their capital is gone, then most of their business will be taken over by someone else,'' Richard Sylla, a professor of the history of financial institutions and markets at New York University's Stern School of Business, said in an interview. ``The stockholders will basically get nothing back.''

  9. Own dirt. They aren't making anymore, it doesn't talk back, you can squat on it, in a good year it will feed you, and it's not on the stock exchange.

  10. This whole transaction seems highly suspect. What the heck's going on here? How is it the stock is selling for $26 Friday, and it's sold over the weekend for $2? Are the stockholders getting some J.P. Morgan shares out of the deal? The stockholders will be livid, and asking for some redress, if that is all there is to it, I'd think. What was holding the stock price in the twenties when all this negotiating was going on? Surely there should be some warning signs, bells going off, of something cataclysmic coming along. If they are nearly broke, why the twenty something price? This thing really smells.

  11. The balance sheets on these banks must be far worse than they are saying. JPM and the fed must have come to the conclusion that there were sufficient losses in the assets that exceeded Bear's capital. Many people are going to ruined.

    Maybe Bernake is correct and the banks would be better off writing down mortgages instead of foreclosing.

  12. The central banks need to start burning the short sellers.

  13. This comment has been removed by the author.

  14. How do banks get to a situation like this?

  15. I've read, but don't know if it is right, that the regulatory agencies, whoever they are, had a big part in the home loan stuff, by lowering the standards the banks were supposed to abide by when making the loans. Some Congressional bill, somewhere, I suspect, is lurking in the background, too.

    It's all George's fault.:)

    If gas is going to $4, or more, it's going to make it tough for McCain, though he's certainly not at fault, at least any more than anyone else. The Lundberg Letter, I think it was, was telling me just a couple weeks ago, gas was going to drop 50 cents. I don't know what to believe any more.

    I hope Cheney tells them in no uncertain terms that if they don't pump more, the protection dries up. As it might, too, under an Obama.

  16. I donno Bob, I kinda like this explanation:

  17. The Dollar must be pretty strong. It only takes two of them to buy a share of Bear Stock. Sheesh.

  18. Investor confidence in the global financial system took yet another beating after JPMorgan Chase & Co. (JPM) agreed to buy Bear Stearns Cos. (BSC) at a massive discount and the Federal Reserve stepped in with an emergency discount rate cut. The Fed seems poised to cut the Fed funds rate by up to 100 basis points Tuesday, even as it took the unprecedented step of guaranteeing loans to Bear.


    The companies' boards have unanimously approved the transaction, which will be a stock-for-stock exchange. JPMorgan Chase will exchange 0.05473 shares of JPMorgan Chase common stock per one share of Bear Stearns stock.


    Traders and insiders said fears about Bear's precarious position intensified late last week as some banks began demanding additional collateral from the company and refused to engage in credit swaps with the bank. As those rumors spread, clients who had already been nervous about Bear's ability to survive escalated their concerns and began moving business away.


  19. It wuz dun purty slik.

    First, the Fed let JPM bring some of Bear's crap to the window, and borrow against it (guaranteeing JPM that they would - NOT BE REPONSIBLE FOR IT) and, Then, And ONLY THEN, did JPM buy Bear.

    Guess who OWNS THAT CRAP?

    Ooh, ooh, We have a WINNER! Deuce, and Bobal, and Whit, and Doug, and all the other good ol' drinkers at the Bar, and even dum ol' Rufus, his dam self.

    Ye gotta love it. I'm sure no one will notice; aren't you?

  20. :)
    Well, yes, I say, it all becomes rather clear, doesn't it, when explained in that manner, and the last laugh, is on, me! Er, well, rather upon us all!

  21. Time to buy some enhanced shares of HillaryRodhamClintonInc., leveraged, with the government bailout option, of course--

    Time to Buy Hillary Clinton
    By John McIntyre

    Three reasons why it may be wise to become bullish on Senator Clinton becoming the next U.S. President.

    1) Senator Obama's "problem" in regards to his long-time pastor is a real issue. Brian Ross' report Thursday on Good Morning America, and more importantly the surfacing of the incendiary video(s), make this an explosive subject that will not go quietly away.

    2) The very serious meltdown in the financial markets is likely to focus the country's attention on the health, stability and future of the American economy. Fairly or unfairly, Senator Clinton will benefit from her association with Bill Clinton's administration in the prosperous Nineties, and that perceived experience on the economy will stand in stark contrast to Senator Obama's dearth of experience.

    3) The mostly unnoticed switch of Puerto Rico from a caucus on June 7 to a primary on June 1, gives Hillary Clinton a very real opportunity to surpass Barack Obama in the popular vote count. If Senator Clinton can "win" the popular vote, this will provide undecided superdelegates ample rationale to go with the less risky general election option of Senator Clinton.

    Currently on Intrade Senator Clinton's odds to become the next president stand at 17.9%, down from a 2008 high of 47.5% on January 22. With Senator Obama unlikely to win another primary until May, it is time to be buying Hillary Clinton.
    She's the girl can fix these financial markets. Look how good she did on cattle futures, or whatever it was.

  22. "Well, yes, I say, it all becomes rather clear, doesn't it, when explained in that manner, and the last laugh, is on, me!"

    Youz gots a pension fund? You old sod.