“The data we have are accurate reflections of the financial conditions of those banks,” says Fed head Ben Bernanke regarding the stress test results… Hmmm…
It’s clear to at least some that banks can’t subsidize the banks forever. So where does that leave bank share prices? It’s a valid question, even if it can’t be heard right now over the din of champagne corks popping and the chorus of Hallelujahs wafting up over Wall Street and the White House.
Back in December, with the U.S. recession in its 12th month – and showing no signs of abating – Money Morning Contributing Editor Martin Hutchinson warned that an “L”-shaped recession was very possible.
The record drop in consumer spending in October is clear evidence of a profound weakening of the US economy. Even President Bush think thinks the situation is bad. At the G20 summit over the weekend, he said it was conceivable that the US “could go into a depression greater than the Great Depression“.
Really. It’s too much. Yesterday, George W. Bush told foreign leaders “Our aim should not be more government, It should be smarter government.” Didn’t Bush just spend the past eight years embodying the exact opposite? Where was the smart part creating an “ownership society” with phony money? Where was the smart part of running up record deficits? Or the war in Iraq?
Dan Denning takes issue with the idea that the Fed will be able to mop up the excess liquidity caused by its monetary expansion. Foreign savers are not going to keep funding US deficits forever. And that means the Fed must print more dollars to raise money. And that is super inflationary.
It was only a few months ago that some economists were screaming for a Fed rate hike to keep consumer price inflation under control.
Things have changed dramatically since then. The biggest economic fear for the foreseeable future is now deflation.
Economist Nouriel Roubini of New York University said that rapid decline in oil prices indicate that deflation is more of a problem than inflation.
“I think deflation is going to be the story, or what I refer to as ’stag-deflation,’ a period of economic recession and deflation,” said Nouriel Roubini. “And why do I say that? We’re now seeing the beginning of a slacking goods market with aggregate demand falling relative to supply.”
Roubini says the commodity prices that were at…
Kuwait, Saudi Arabia and even the mighty Dubai are getting dragged down by the global economic turmoil. “The global financial storm rolled across the Persian Gulf on Sunday,” reports the WSJ, “as Kuwait’s central bank guaranteed bank deposits and cobbled together a hasty bailout for one of the country’s largest banks.”
This is what it looks like when the shit hits the proverbial fan. In this case, the shit being one subprime meltdown, eight years of a monkey in the White House and and $1 trillion in chaotic government hand outs. The fan being everything just about everything else. Yesterday, the talismanic Dow plunged 514.
Economics professor, former Clinton advisor and perma-bear forecaster Nouriel Roubini says the “severe systemic financial crisis” ripping through the markets will get worse before it gets better.
He warned investors on Bloomberg TV that the US now faces a meltdown in financials that Hank Paulson’s bailout bill won’t fix. Roubini says the bill is merely a way of “privatizing gains and socializing losses.”
He also warned investors that stock prices could fall another 20% and trigger a period of severe deflation.