Friday, 26 June 2009

WHACKOJACK

yo!...the zombie king...innit!



PALOOKAVILLE FINANCIAL 
capitulation day
+278...



...today...

...here in...

...palookagrad... 

...everyone is in mourning...


THRILLER

...the zombie king will sing and dance no more...

...but...

...the zombie banks will play and play...



..."But Mr King’s differences with the Treasury and Financial Services Authority over the future of the UK’s tripartite system of financial regulation are of greater importance. In testimony this week, Mr King revealed the extent to which regulators in one of the world’s great financial centres have yet to agree on the lessons to be learnt from the banking crisis. Mr King’s claim that he has not even been consulted on the government’s forthcoming white paper on reform of financial regulation, which is likely to give the FSA a share in responsibility for financial stability, certainly does little to boost confidence that the Bank will swing into line in support of the UK’s proposed new regulatory framework...."
...LEX...

IT AINT ME BABE

...“All we can do at present, before a bank is deemed by the FSA to have failed, is to write our Finanicial Stability Report and give speeches. These are important things. But in the end I don’t believe that people change their behaviour simply because we publish reports. Now, that’s fine by me. I’m very happy with that position if you want us just to publish reports. I’m very content with that. But I do want it to be absolutely crystal clear that you in parliament understand the Bank of England can do no more than publish reports and make speeches.
“If you’re content with that, that’s fine by me. What you can’t do is turn around afterwards and say ‘You have the statutory responsibility, why didn’t you do something?’ when there is nothing we can actually do.
“So all I’m saying is just align carefully powers and responsibilities. But believe me I’ve got more than enough work on my plate at present. I’m not looking for a whole lot more.” king


"The feud between the Bank of England and the Treasury intensified on Wednesday as Mervyn King said he had not been consulted on the contents of the Government's imminent White Paper on financial services."


LEST WE FORGET


...it was Brown wot took away powers from the BOE...

...and give em to the FSA an the Treasury...

...his name is all over this bust...

...oh...

...and he sold our gold...


...at the very bottom of the market...


BROWN


the real king of the zombies



Wednesday, 24 June 2009

GROW YOUR OWN DOPE

yo!..plant an investor...innit!


PALOOKAVILLE FINANCIAL
capitulation day
+276...

...
Wall Street struggles for direction...

...“I don’t think this is the start of a major pull-back,” said Jeff Kleintop, chief market strategist at LPL Financial Services.

“Buyers and sellers have come together and begun to agree on a fair price following the powerful rally, which is why we have seen sideways trade.”

But Tim Howkins, chief executive of IG Group, said: “Equities need to go down again. They bounced too quickly and the feeling is

we still need to see a complete capitulation.”...FT


NOT IF BUT WHEN


...here, this morning...

...in palookaville...

...we await capitulation...

...we have been denied for so long...

...the zombie forces ranged against us...

...are legion...

...and well entrenched...

...they believe that they know the correct prices for all the various...

...financial assets...


...until the forces of creative destruction...

...rally to the cause...

...the zombies will continue to hold sway...


CAPITULATION DAY


...will arrive...

...eventually...

...the longer it takes...

...the greater the eventual bill...

...two lost decades in Japan...

...have not taught the zombie masters...

...that they do more harm than good...

Tuesday, 23 June 2009

GET OUT OF DEBT FREE

yo!...debt pays...innit!



PALOOKAVILLE FINANCIAL
capitulation day
+275...


...struth...


...an they said the bum was in on housin...


...'We'll pay you £25,000 to take your mortgage elsewhere'...


...

Monday, 22 June 2009

DEBT AND BET

yo!...casino capitalism...innit!



PALOOKAVILLE FINANCIAL
capitulation day
+274...


...In palookaville today...


...everyone is a winner...


...the chinese have made all this cheap money available...


...for their many millions of gamblers...


...to play with...


...Chinese bail-out cash heads for Macau’s casinos rather than Guangdong factories...


and

...Xie: Chinese Banks Funding Commodities Speculation, Casting Doubt on Recovery...


...so...


...funny how so much of what we are told...


...by those pollyanna people...


...is proved bollox...


...eventually...


HERE IS THE NEWS


...the fruit machine has stopped...


...payouts are history...


...get a job...


...if you can...




IN GERMANY THEY DO IT DIFFERENTLY



...Berlin weaves a deficit hair-shirt for us all...



!NON!


...Sarkozy rejects austerity measures...

Wednesday, 17 June 2009

GOOD TIMES AND BAD Extended Recession Version

yo!...for your pleasure...innit!



PALOOKAVILLE FINANCIAL
capitulation day
+269...


..."me, I liked him. He had all the guts they ever made".




oh yeah...an this too


Tuesday, 16 June 2009

A Zombie Because

yo!...this is not advice...


PALOOKAVILLE FINANCIAL
capitulation day
+266...


..."The world is setting up for a big crash, again.

Market chatter over green shoots and rising prices has fueled a bear market rally that won't last, despite policymaker 'noise.'

Since the last bubble burst, governments around the world have not been focusing on reforms.

They are trying to pump a new bubble to solve existing problems.

Before inflation appears, this strategy works.

As inflation expectation rises, its effectiveness is threatened.

When inflation appears in 2010, another crash will come.

If you are a speculator and confident you can get out before it crashes, this is your market. If you think this market is for real, you are making a mistake and should get out as soon as possible. If you lost money during your last three market entries, stay away from this one – as far as you can."

petey : sounds about right to me....

always read the full article an we don't give advice. we just suckers like you...




Monday, 15 June 2009

Zombiegrad Spring

yo!...good news week...innit!



ZOMBIEGRAD FINANCIAL
capitulation day
+265...


...this morning...


...here in...


...zombiegrad...


...even the msb...


...are carryin the real news...


GERMAY F**KED


..."Paul Krugman: The "Nipponisation" of the world economy with a bunch of "Argentinafications" playing a role in the acute crisis. But even after those are over, we have the Nipponisation of the world economy. And that's really something.

Will Hutton: What was the heart of the Japanese problem? What was at the heart of their 17 years of going nowhere?

PK: Well, my guess is that it was that the balance-sheet problems took a very long time to resolve. And it is difficult to get enough demand in an economy where you have really very adverse demography ...

WH: So, which countries look closest to being Nipponised - combining balance-sheet problems and ageing populations?

PK: Well, the US doesn't have the same combination. But in Europe, Germany and Italy look comparable. France is better and Europe as a whole is considerably better.

WH: Germany matches Japan to an uncanny degree. You talk about the Nipponisation of the world economy: I'm not so sure. But I would talk about the Nipponisation of Europe via a German economy at its centre in the grip of the same problem - and that starts to be a global problem.

PK: Germany has huge inadequacy of domestic demand. Their economic recovery in the first seven years of this decade rested on the emergence of gigantic current account surplus.

How is it possible that Germany, which did not have a house price bubble, is having a steeper GDP fall than anyone else in the major economies?

The answer is that they depended upon exporting to the bubble regions of Europe, so they actually got side-swiped by the loss of those exports worse than the bubble regions themselves got hit.

It's Germany on a global scale that is the concern. We worry about the drag on world demand from the global savings coming out of east Asia and the Middle East, but within Europe there's a European savings glut which is coming out of Germany. And it's much bigger relative to the size of the economy.

WH: And on top there is an unique and unaddressed huge potential banking crisis. The Germans pride themselves on their three-legged banking system, but it is incredibly interlinked. The IMF warns that Germany could have to take at least $500bn of writedowns, which its banks have not begun to recognise. German banks hold a trillion dollars - maybe more - of maturing collateralised debt obligations that can only be refinanced by crystallising the losses. We've had RBS and you've had Citigroup. Germany's GDP will fall 6% this year - before the banking crisis has hit it....

...PK: That the cause is primarily financial. Certainly, Lehman and all of that alerted us all. And it did trigger an immediate drop in demand. But the housing bust was going to happen regardless.

The fall in business investment is at least to a large degree a response to excess capacity, which is the result of falling consumer demand and the housing bust. So we don't know.

WH: I think we know more than that. The links between bank capital, loan losses, credit availability and economic activity and asset prices have never been clearer. That was why there was a threat of Depression.

PK: Clearly, re-establishing stability in the financial markets is a necessary condition for recovery. But we're not sure it's sufficient.

WH: That's very scary.

PK: Well, that is part of the reason why I am so depressed.

WH: In one of your lecture charts you seemed to be suggesting that we're 12 months into what you think could be a 36-month period of downturn, albeit at a slower rate.

PK: Easily.

WH: It's quite shocking that you think it will be that severe.


petey : Im shocked that you're shocked...Will

PK: If we measure the 2001 US recession by when the labour market finally started to turn around, it was a 30-month recession. It was really 30 months in before you started to see the unemployment rate come down."

...guardian...


wolfgang in the FT...

..."The March signs of revival turned out to be little more than a technical inventory correction, with no change in the underlying trend. The world economy is still contracting, though perhaps not quite as fast as at the start of the year.

As an analysis by economists Barry Eichengreen and Kevin O’Rourke* shows, global industrial output is still on the same trajectory as it was during 1930.

The only question is whether we can avoid 1931 and 1932.

The answer is yes, but on conditions that seem increasingly implausible if we extrapolate current policies. We can avoid calamity if monetary and fiscal policies remain supportive throughout the duration of this crisis, if we fix the banking system and if we impose regulations to constrain a resurgent financial sector. We also have to be lucky to avoid another round of market turbulence in the near future.

In other words ... the answer may well be no. Central banks and governments therefore risk moving too swiftly out of a recession-mode strategy. When Axel Weber, president of the Bundesbank, publicly talks at this time about how to communicate a rise in interest rates, it tells me that the danger of a premature exit, at least in Europe, is clear and present....


...So at this point, I see the chances as roughly even between a global slump and a return to quasi-stagnation. What is so galling about this scenario is that it is avoidable. The central banks took the right decisions. But the political reaction has been near-catastrophic almost everywhere.

Instead of solving the problems to generate a recovery, the political strategies have consisted of waiting for a recovery to solve the problem. The Europeans are relying on the Americans to generate growth. The Americans are relying on the Chinese, who in turn are waiting for the rest of the world.

Even if the US were to generate some growth, as is likely after this summer, it would not benefit global exporters; China may be one of the fastest growing economies in the world, but it is only about half as large as the eurozone in dollar terms. And as Brad Setser** has pointed out in his blog, there is absolutely no evidence that China contributes to a global recovery. While Chinese investments are up by more than 30 per cent from last year alone, imports are down 25 per cent. All this hype about decoupling and China pulling the world out of recession is baloney. The data tell us that China’s exports and imports are both falling, and that imports are falling faster.

As everybody expects the others to move first, nobody ends up moving. In the meantime, the problems grow worse. US house prices, which are down by a little over 30 per cent from their peak, still have some way to fall. Until the US housing market hits rock bottom, perhaps sometime in 2010, there is no chance of a recovery in the securitisation market, without which there may not be sufficient credit growth....

...The only potentially good news in the past three months has been the receding threat of a currency crisis in central and eastern Europe. But I am not even sure that this is for real. The persistent refusal by eurozone policymakers to concede fast-track euro accession for central and eastern member states could yet prove destabilising.

Last week, the ECB had to provide €3bn in euro liquidity to Sweden’s Riksbank, in the absence of which Sweden may have experienced its second banking meltdown in less than two decades. The inevitable collapse of Latvia will have ripple effects on the Baltic region and may cause panic among investors in other central and east European countries.

This is why last week’s news about the withering green shoots is so important.

It tells us that the non-strategy of waiting until things get better is not working.

The March signs of life reinforced complacency.

Optimism will get us out of this crisis only if it is founded in reality.

Last week showed us that this is not the case."

...FT...


..."Neil Mackinnon, chief economist at ECU Group, said Washington believes European states are "free riding" on American stimulus, expecting the US to pull them out of crisis yet again.

Europe's industrial output continued to slide in April and was down 22pc from a year earlier, suggesting that talk of a "V-shaped" rebound is premature. At best, the pace of decline has slowed. Production fell 23pc in Germany and 24pc in Italy.

The ECB expects the eurozone economy to contract by 4.6pc this year and a further 0.3pc next year, with no recovery until mid-2010.

Structural rigidities of the region raise risks that it will remain trapped in slump well after the rest of the world has turned the corner, as it did after the dotcom bust.

This time Europe faces the extra head-winds of a strong euro, over-valued against the 45-odd countries such as China that are linked to the dollar. This currency effect is slowly "hollowing out" Europe's industrial core...."

...ambrose...


...oh yeah!..

...an this...








Thursday, 11 June 2009

OF BONDS AND ZOMBIES

yo!..as good as it gets...innit!


PALOOKAGRAD FINANCIAL
capitulation day
+261...


...here in...


...palookagrad...


...the zombie capital of the worst...


...the gangreene shoots of zirp forced ungrowth...


...have stolen our hearts away...



AFTER THE NEXT UNLECTION


..."It really is 1979 all over again – and perhaps even worse. I don't know whether that is something David Cameron is relishing or dreading, but I hope he knows what he's in for....


...we have not dealt with the massive overhang of debt racked up by individuals and governments over the past decade or so.
In the 1930s, the flipside of mass bankruptcy, bank failures and record unemployment was that in a relatively short time private debt levels dropped back down to manageable levels. This time, we have avoided the bankruptcy; the consequence is that we still need to repay the debt.

And, as I wrote last week, the slow reinvigoration of the financial sector is down to the Faustian pact it made with the Government: the public sector has assumed its enormous debts, on the proviso that the banks will operate on a shorter leash. Even amid signs of recovery, those banks remain nervy, paranoid institutions, unwilling to take even mild risks.

In the immediate future, they will remain zombie banks.

Barring another disaster of some sort (which should not be ruled out), the Bank of England will at some point in the next year start raising interest rates. All those households which have only survived because of near-zero borrowing costs will hit a massive financial wall.

They are zombie households.

Then there is the Government. As George Osborne pointed out in his speech to the Association of British Insurers this week, the biggest challenge in the coming decade is how to bring down the national debt. Britain has three options: default on the debt (fatal for our long-term prospects), inflate it away (near fatal, but feasible) or pay it back through a long period of austerity.

The latter course is by no means easy. The Tories insist it can be done through spending cuts, but they will almost certainly also have to raise taxes to get the books back in order. Don't be surprised if VAT is higher than 17.5 per cent before long.

This week, London has been crippled by Tube strikes that presage the next few years, which will be peppered with clashes between heavily unionised public-sector workers and a government with no choice but to bring down costs...."

...edmund...


..."Unveiling mixed results, which saw Homebase return to sales growth for the first time since 2005, Mr Duddy said he will "continue to plan cautiously" for the year ahead.

"I don't think we're strong proponents of green shoots at this early stage of the year," said Terry Duddy, chief executive of Home Retail, which owns Argos and Homebase. "The first quarter was helped by increases in disposable income because of lower interest rates, and it was not offset by unemployment. That could easily change," he said, citing forecasts of unemployment rising to 3 million by the end of the year...."

...telegraph...


..."Not that it will feel that good, because unemployment and company failures will continue to rise.
And the big worry is that the British patient, after a feeble recovery, could suffer a relapse.

If the upturn we are seeing now is in large part because of restocking, there will be a spike in orders which will inevitably fall back again. How far they fall back depends largely on the strength of consumer demand.

And there the picture is still pretty gloomy.

Consumers remain shackled by heavy debts, battered by the housing slump, fearful of unemployment and hampered by banks still reluctant to lend.

Public spending provides no alternative, since the massive burden of government borrowing is about to force severe cutbacks.

The industrial production figures show some signs of the hoped-for rebalancing of the economy away from its dependence on the indebted (zombie)consumer.

But without a big easing of credit or a strong rebound in export demand, the recovery is likely to be anaemic, if it is sustained at all."

...times...(petey ; my emphasis and zombie)


..."The fall in Chinese exports and imports accelerated in May, dashing hopes that a collapse in the country’s external trade flows had bottomed out and pointing to the continued weakness in global demand......

....“The global economic situation has hit a bottom but it will still take time to recover. I expect it to take one to three years,” said Hu Yifan, chief economist (global) at CITIC Securities in Hong Kong.

“A technical rebound [in exports] may happen in November but a demand-driven rebound will not come in the short term.”

Beijing has announced a Rmb4,000 ($586bn) stimulus plan after its exports-powered economy was hit hard by weak global demand.

The stimulus packages have spurred investment in government-supported sectors such as transport infrastructure, the power grid and housing, as reflected in a 38.7 per cent rise in fixed asset investment in May from a year earlier.

This marked a larger increase than in April, when FAI rose 33.9 per cent. For the first five months of this year, investments increased 32.9 per cent from the same period in 2008, compared with 30.5 per cent in the first four months of the year and against an estimate of 31 per cent.

“Fixed asset investment in China continues to increase on the back of state-directed projects ... This will help keep the economy growing but there are increasing concerns about the amount of lending that has been required to fund the projects,” said Alaistair Chan, economist at Moody’s Economy.com."...

...FT...



SOONER OR LATER
ONE OF US MUST BLOW



..."“Once the 30-year is out of the way, the market should have a window to rally,” said analysts at MF Global. “The bull story rests in higher mortgage rates slowing the recovery.”...FT


..."Now both groups are out on market patrol, trampling green shoots back into the dust. Every $1 rise in the price of oil costs global consumers $82m more a day. Meanwhile UK 10-year gilts on Thursday hit a seven-month high of 3.98 per cent, while US Treasuries sold for 3.99 per cent at auction, their highest since August.

Further rises would lynch the recovery. Then, as market strategist Ed Yardeni puts it, the vigilantes can go back home and do what they like best: nestle up with bonds...."

...lex...

Wednesday, 10 June 2009

The Unconamy...

yo!...meadowlands...innit!


PALOOKAVILLE FINANCIAL
capitulation day
+260...


...great change is not afoot here in ...


PALOOKAGRAD


...comrade brown has achieved...


...zombie status...


...knifed in the back...


...by cabinet colleagues and long time cronies...


...laughted at in the state controlled media...


...humiliated in the democratic elections...


...his new puppet master...


...father mandelson...


...has propped him up in the saddle...


...like el cid...


...and sent him out in westminster...


...as...


the lord of the flies



BETTER RED THAN DEAD


...as we look out this morning here in...


...palookagrad...


...there is still no sign of perestroika...


...comrades mandelson and brown...


...oversee the state planning as normal...


...yes...


...dead is the new normal...


...here in...


...palookagrad...


...a wall is being built to keep in all the palookas...


...rotten teeth and sallow faces...


...green around the gills...


...line dancing with a great zombie crooner...


..."he's not in debt with...


...billie jean"...



THRILLER


...the new five year plan is to rig the voting system...


...proportional representation is being dug up...


...instead of a change of government...


...we have a...


...zombie administration...


...in office...


..but not in life...


...with an economy...


...no longer dead...


...but not alive...


...not financed...


...by...


...zombie banks...


...but dead...



LIFE SUPPORT


...kept in half-life...


...by the zirp...


...and the money presses...


...the...


...unconomy...


...has twitched...


...in april and may...


...this is evidence...


...of life...


...of the end of the recession...


...say the commisars...


...well...


...they would say that wouldn't they...



HERE ARE THE FACTS



...the boom that was...


...is bust...


...the foreign money that financed it...


...has gone...


...there will be no return of the housing boom...


...not at these prices...


...leverage is history...


...what was unsustainable...


...has been unsustained...


...taxes will rise...


...to replace the revenue from booming sales...


...interest rates will rise...


...unemployment will rise...


...capacity will fall...


...inventories will have to fall...


...if only this labour soviet would fall...





Monday, 8 June 2009

Love Is Not The Drug

yo!...cheap debt is...innit!


PALOOKAVILLE FINANCIAL
capitulation day
+258...


...every day here in...


...palookaville...


...we have the famous fiesta...


ECONOMY OF THE LIVING DEAD


...it's official...


...our prime minister has achieved...


...zombie status...


...dead politician walking...


...all here agree...


...it's the right thing for a zombie economy...



IT'S LIFE JIM BUT NOT AS WE KNEW IT


...long ago there was demand...


...people bought what they needed...


...and were prepared to pay real money for it...


...or...


...pay decent interest rates in order to own their own home...


...now...


...the blood has drained away...


...demand can only be brought back to life...


...by the zirp...


THE ZOMBIE INTEREST RATE


...no one here in palookaville...


...will admit that the economy is dead...


...the banks are dead...


...and...


...our great leader is now dead too...



NOTHING SUCCEEDS LIKE
EXCESS


...the zombie housing boom...


...is in all the papers...


...brown set out to bring it back to life...


...and has succeeded...


...like he succeeded with the banks...


...now everyone is happy again...


...except the savers and the pensioners...


...and the people who had the money...


...and the first time buyers who were waiting for prices to fall...


...in order for them to afford to buy...



ZOMBIE SAYS DO THIS


...the zombie economy...


...controls prices...


...and knows best what each asset is worth...


...nothing dies...


...nothing new is created...


...this may go on for some time...

..."Large swaths of Britain have been left excessively dependent on taxpayer-funded activity that has crowded out the private sector and stifled enterprise. The State accounts for more than two thirds of the economy in the North East, Scotland, Wales and Northern Ireland. Now, with a protracted period of austerity in public spending made inescapable by the Government’s record plunge into the red, these regions will suffer disproportionately as the Treasury is forced to retrench...."

Times











Saturday, 6 June 2009

Brown But Not Out update 1

yo!..for now...innit!


PALOOKAVILLE FINANCIAL
capitulation day
+255...

...it's election time today...


...here in palookaville...


OUT BUT NOT BROWN


...nobody voted him in...


...but he's still here...


...all his ministers have gone...


...but he's still here...


...all his labour councils have gone...


...but he's still here...


...he robbed our pensions...


...let the banks bust the country...


...raised taxes...


...even on the poor...


...his agenda is...


...a client state...


...well...


NOBODY LIKES BIG BROTHER



...tax credits...


...state control...


...our money is their money...


BUY TO RUIN


...without this unfair system...


...there would have been no property bubble...


...people who lived in a town or village...


...could have afforded to buy homes where their parents lived...


...but nobody in government wanted to legislate...


...to stop this disasterous game...


...they did not want to tax it...


...they were all doing it themselves...


...big time...


PALOOKAVILLE FINANCIAL
capitulation day
+256...


...liam...

..."We're paying a heavy price for Brown's successes

Everyone knows, of course, about Gordon Brown's policy failures. During his 10 years at the Treasury, the Prime Minister clearly spent recklessly and stored up massive future liabilities (many buried off balance sheet).

It would be tough to design a worse way to tackle poverty than Brown's complex, fraud-ridden tax-credits.

His annual raid on pension schemes, a policy buried in his first Budget, has also gained pariah status – depriving our retirement funds of some £130bn and counting, a stealth tax they can ill afford.

What's happening now, though, is that even Brown's policy "successes" – the basis of any claim he has to a "legacy" – are starting to unravel.

The 1997 Bank of England Act has often been cited as his masterstroke. Handing the Bank "operational independence" to set interest rates was clearly the right thing to do.

The Monetary Policy Committee hasn't been truly independent, featuring too many of Brown's stooges for my liking, but has worked quite well. Over the past 12 years, inflation has generally been lower than it otherwise would have been because populism has been tempered by economic common sense and rates set with at least an eye on price pressures.

In recent months, though, quantitative easing has destroyed even the pretence of independence. Brown and his henchmen have yanked control back from the Bank – creating money to buy government debt, a policy doomed to backfire.

Last week the other aspect of Brown's once-lauded 1997 legislation came under attack as the House of Lords' Economic Affairs Committee laid into his decision to strip the Bank of responsibility for banking supervision and transfer it to the newly-created Financial Services Authority.

This resulted in "an inadequate definition of roles and responsibilities of the Bank of England, the Treasury and the FSA", said the committee, causing "failures of regulation and supervision that contributed to the UK financial crisis".

Their Lordships infer the Bank was deprived of crucial information about specific institutions, hindering its ability to make well-informed decisions on overall financial stability.

A separate paper on the same subject by Sir Martin Jacomb, also published last week, went further. Brown's tripartite regime has been "disastrous" said the one-time Prudential Chairman, accusing the former Chancellor of splitting supervisory responsibilities between the FSA and the Bank in order to "divide and rule".

As Sir Martin says: "Brown's desire for ultimate control was decisive, and ultimately ended in failure"....liam...

THEY STILL THINK IT'S ALL OVER

...ambrose..."

Those of us who still question whether the world has purged its toxins are reduced to the same tiny band of moaning Druids from early 2007, when we shook our heads in disbelief as the carry trade swept Iceland to fresh madness and bankers laughed off sub-prime rot at Bear Stearns.

We learned then to thicken our skins with walnut juice, lie down in dark rooms, and dissent from Goldman Sachs. Such seclusion is called for once again as Goldman replays its BRIC anthem and raises its oil forecast to $85 a barrel this year, betting that the world will roar back on a tidal wave of liquidity....

...The elastic was bound to snap back, just as it did in the bear rally of early 1931. Whether the underlying economy has begun to heal is another matter. World Bank chief economist Justin Yifu Lin said capacity utilization is running at an historic low of 50pc-60pc. Companies will have to fire a lot of workers. This is where the danger lies, and why he fears that deflation is creeping up on us.

Trade data from Asia are flashing warning signals again. Korea's exports were down 28.3pc in May, reversing the April rebound. Malaysia has slipped to -26pc, and India has touched a new low of -33pc.

US freight data is getting worse, not better. The Association of American Railroads said traffic was down 22pc in the third week of May from a year earlier. Canadian freight was down 34pc.

The American Trucking Association (ATA) said it saw fresh drops of 4.5pc in March and a further 2.2pc in April. Tonnage is down 13pc over 12 months. Bob Costello, the ATA's chief economist, said companies have not cut inventories fast enough to keep pace with declining sales. The contraction in truck volume has "accelerated".

Yes, the Baltic Dry Index for bulk shipping of resources has quadrupled since January, but this reflects China's bid to stockpile metals while prices are low....ambrose...


MIND THE DEBT

...irwin..."...Treasury IOUs are flooding the market to finance deficits that by White House estimates will take the national debt from 40% of GDP to 70% (the Congressional Budget Office puts the figure at 80%) by 2011, the highest level since the second world war. Throw in the printing of money to support the Fed’s efforts to prop up credit markets and investors have good reason to fear inflation and a decline in the value of the dollars with which the government will repay their loans. So they are driving up long-term interest rates. And dumping dollars.

If those trends continue, the green shoots will wither as higher rates abort the housing recovery, and make it more expensive for businesses to make job-creating investments. Bernanke told Congress that “we, as a nation, [must] begin planning now for the restoration of fiscal balance . . . [that] will require a willingness to make difficult choices”. This can only be interpreted as a warning to the administration that if it doesn’t get the deficit under control, the Fed will start contracting the money supply and allow interest rates to rise. Just how the president and Congress can be persuaded to make those “difficult choices” remains unclear.

Perhaps that friendly persuasion will come from the folks who, like the Fed, pose a threat to the Obama agenda: the Chinese who are sitting on about $1.4 trillion of America’s IOUs. On last week’s trip to China, Tim Geithner, the Treasury secretary, was greeted with derisive laughter when he assured students at Peking University that “Chinese assets are very safe”. Their elders were more polite. Guo Shuqing, chairman of the China Construction Bank, helpfully noted that the dollar will remain the world’s reserve currency “in the short term” because the American “economy is No 1 in terms of competitiveness, in terms of innovation”. Longer-term prospects are being made clear by Chinese officials who are warning that unless America puts its fiscal house in order they will seek to reduce the role of the dollar in world trade and will not buy IOUs at anything like current interest rates....irwin...


THOSE GREEN, GREEN SHOOTS OF HOME


...david..."For me, one of the central questions is whether a pick-up in growth can be sustained even when bank lending remains weak. Amid the flurry of stronger news last week was some downbeat evidence from the Bank of England on lending.

Lending to households rose a modest 0.2% in April, the Bank said, and was up by 3.4% on a year earlier. But lending to nonfinancial companies fell by 0.9% and was a tiny 0.8% up on a year earlier.

This chimed with a survey from the Engineering Employers’ Federation, which showed that 45% of firms had seen an increase in the cost of their finance and only 4% had seen an improvement in credit availability in the latest three months. It is a familiar story throughout business.

Charlie Bean, the Bank’s deputy governor, buys into the story of a resumption in growth before the end of the year, but he also warned in a recent speech that bank lending was likely to remain subdued, at best, for some time.

“We are still some way from having banks feel sufficiently secure that they can lend normally, and from investors that have enough confidence in the banks to provide them with sufficient funds,” he said.

The government’s October banking measures were a straightforward rescue operation but its subsequent actions, particularly in January, have been intended to get lending flowing again. Quantitative easing, confirmed last week at £125 billion for now, was intended to boost lending and, while it is early days, is not doing so"....david...

...petey...

...inquirin minds should visit the links an read the lot...innit!

Monday, 1 June 2009

Special 'Flation Issue

yo!...


PALOOKAVILLE FINANCIAL
capitulation day
+250...


...people may think that...


...here in palookaville...


...we are firmly in the...


...deflationary camp...


WE DON'T DO CAMP


...eyes on the road...


...ears to the wall...


...watch out for Mr Inbetween...


..."It all depends upon unit labour costs and the state of demand in the economy. In fact, pay here seems to have responded more quickly to the economic downturn. Average earnings growth actually turned negative earlier this year. Although this was primarily due to the impact of sharply lower bonuses in the City, the figure was also boosted by continued strong pay growth in the public sector. And that can't last. In the private sector not a day goes by without another company announcing a freeze or even a cut in regular pay.

So the upshot is that the deflation danger is not yet old hat. People are watching the wrong thing. Don't look at the short term twitchings of the RPI or CPI but rather at the behaviour of wages and salaries.

Of course, if the Chancellor is right and by the end of this year the economy is bouncing back strongly, then the deflation danger, like all the others, will quickly melt away as the strengthening economy eventually boosts employment prospects, pay rates harden and firms are more able to push prices up. But if you want to back that particular horse, I would strongly advise you to put your money on each way."

...Roger Bootle...


Mortgage Meltdown, More Pain To Come

..."What can't be paid back will be defaulted on. Consumers with no job have no chance of paying back those debts. Many others who could, won't (because it is in their best interest to walk away). The Alt-A and Option ARM defaults are going to be massive.


Think this leads to inflation? Think again."

...mish...