by
Chris Martenson
Tuesday, October 28, 2008
In this report I will review the advice and predictions I made on May 27, 2008 (exactly five months ago) in a report entitled Charting a Course Through the Recession.
In striving to be accurate, fair, and complete, and in the spirit of constant improvement, it’s important to review where we went right and where we went wrong. I’m pleased to say that many of my predictions were right on target. I didn’t anticipate such an aggressive dollar advance, but now I see this trend continuing for awhile. I am continuing to recommend some of the same prudent actions as always. Stay out of debt, keep cash close by, get some money out of the dollar (gold), and know your neighbors. And stay tuned for more from me in future reports.
Market Predictions and Outlook Update
PREVIEW by Chris MartensonTuesday, October 28, 2008
In this report I will review the advice and predictions I made on May 27, 2008 (exactly five months ago) in a report entitled Charting a Course Through the Recession.
In striving to be accurate, fair, and complete, and in the spirit of constant improvement, it’s important to review where we went right and where we went wrong. I’m pleased to say that many of my predictions were right on target. I didn’t anticipate such an aggressive dollar advance, but now I see this trend continuing for awhile. I am continuing to recommend some of the same prudent actions as always. Stay out of debt, keep cash close by, get some money out of the dollar (gold), and know your neighbors. And stay tuned for more from me in future reports.
by
Chris Martenson
As bad as the US is, there are worse problems elsewhere. This is why I think this credit crisis will not play out like any previously and why I think there’s a better than even chance of a systemic banking crisis.
In times past when a country experienced a bubble or a banking crisis, there was always a country next door that hadn’t where the savvy could hide out. Where does one hide out today?
Europe on the brink of currency crisis meltdown
The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.
“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.
Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis,” this time unfolding in Europe rather than America.
Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.
Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.
Those figures in the bottom two paragraphs are quite the eye-openers. Somehow Austria’s bank system loaned out 85% of Austria’s GDP to emerging markets that are even now resorting to emergency measures to stem the erosion of the their currencies against the dollar. The problem, apparently, is that these countries were loaned vast amounts of money denominated in dollars. The faster their currencies fall, the more it costs them to pay back their loans.
Some of these currencies have fallen by 40% in a matter of weeks.
International instability
by Chris MartensonAs bad as the US is, there are worse problems elsewhere. This is why I think this credit crisis will not play out like any previously and why I think there’s a better than even chance of a systemic banking crisis.
In times past when a country experienced a bubble or a banking crisis, there was always a country next door that hadn’t where the savvy could hide out. Where does one hide out today?
Europe on the brink of currency crisis meltdown
The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.
“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.
Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis,” this time unfolding in Europe rather than America.
Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.
Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.
Those figures in the bottom two paragraphs are quite the eye-openers. Somehow Austria’s bank system loaned out 85% of Austria’s GDP to emerging markets that are even now resorting to emergency measures to stem the erosion of the their currencies against the dollar. The problem, apparently, is that these countries were loaned vast amounts of money denominated in dollars. The faster their currencies fall, the more it costs them to pay back their loans.
Some of these currencies have fallen by 40% in a matter of weeks.
by
Chris Martenson
Here are some interesting stories I collected this week.
US surrenders power to appoint World Bank president
The US is to lose its power to appoint the president of the World Bank after the UK’s development secretary, Douglas Alexander, brokered a deal to throw open the post to candidates from any country.Backed by European governments and developing countries, Alexander overcame resistance from the US and Japan to secure a reform he described last night as "a significant step forward".
My Comment: This may not seem like much, but symbolically it is huge. The World Bank wields enormous influence, and for Europe, et al., to demand, and receive, the right to fill the post speaks volumes about US prestige and power at this time.
US losing influence, housing starts, and the next Iceland
by Chris MartensonHere are some interesting stories I collected this week.
US surrenders power to appoint World Bank president
The US is to lose its power to appoint the president of the World Bank after the UK’s development secretary, Douglas Alexander, brokered a deal to throw open the post to candidates from any country.Backed by European governments and developing countries, Alexander overcame resistance from the US and Japan to secure a reform he described last night as "a significant step forward".
My Comment: This may not seem like much, but symbolically it is huge. The World Bank wields enormous influence, and for Europe, et al., to demand, and receive, the right to fill the post speaks volumes about US prestige and power at this time.
by
Chris Martenson
As the US government and Federal Reserve work tirelessly to assure that the engines of a debt-based economy (the banks and lending institutions) remain well-supplied with capital and liquidity, the wheels are falling off.
First, retail sales and store traffic suffered some of the most pronounced drops on record in September, indicating that a consumer-led recession is upon us – which would make this the first one since 1991.
…the number of people in U.S. malls and department stores declined 9.3% year over year in September. The U.S. Commerce Department this morning reported that retail sales fell 1.2% in September, marking the biggest decline in three years.
Next, a measure of manufacturing activity in the Philadelphia and NY regions and a different measure of nationwide manufacturing capacity utilization both took very sharp turns for the worse:
WASHINGTON (MarketWatch) — Turmoil in the credit markets has spilled over with a vengeance into the factory sector in the Philadelphia region, the Philadelphia Federal Reserve said Thursday.
The Philly Fed index plunged to a reading of negative 37.5 in October from a positive 3.8 in September. It was the sharpest one-month decline on record and marked the lowest level for the gauge in 18 years. On Wednesday, the New York Fed reported that factory activity in the Empire State region also fell sharply.In addition, about 43% said the recent turmoil had forced them to scale back their capital-spending plans.
The region’s manufacturing executives expect no growth over the next six months. The index of future activity fell to negative 4.2 from 30.8 in the previous month.
Earlier Thursday, the Federal Reserve reported a stunning 2.6% drop in industrial production in September, the biggest one-month drop in 34 years.
The data "make clear that the factory sector has taken a powerful turn for the worse," Action Economics said in a note to clients. "In total, since August, the economy has shifted from a profile of remarkable resilience to one of freefall at a pace that is consistent with a sizable, rather than mild, recession," Action Economics said.
The real economy – manufacturing and sales are off … way off.
by Chris MartensonAs the US government and Federal Reserve work tirelessly to assure that the engines of a debt-based economy (the banks and lending institutions) remain well-supplied with capital and liquidity, the wheels are falling off.
First, retail sales and store traffic suffered some of the most pronounced drops on record in September, indicating that a consumer-led recession is upon us – which would make this the first one since 1991.
…the number of people in U.S. malls and department stores declined 9.3% year over year in September. The U.S. Commerce Department this morning reported that retail sales fell 1.2% in September, marking the biggest decline in three years.
Next, a measure of manufacturing activity in the Philadelphia and NY regions and a different measure of nationwide manufacturing capacity utilization both took very sharp turns for the worse:
WASHINGTON (MarketWatch) — Turmoil in the credit markets has spilled over with a vengeance into the factory sector in the Philadelphia region, the Philadelphia Federal Reserve said Thursday.
The Philly Fed index plunged to a reading of negative 37.5 in October from a positive 3.8 in September. It was the sharpest one-month decline on record and marked the lowest level for the gauge in 18 years. On Wednesday, the New York Fed reported that factory activity in the Empire State region also fell sharply.In addition, about 43% said the recent turmoil had forced them to scale back their capital-spending plans.
The region’s manufacturing executives expect no growth over the next six months. The index of future activity fell to negative 4.2 from 30.8 in the previous month.
Earlier Thursday, the Federal Reserve reported a stunning 2.6% drop in industrial production in September, the biggest one-month drop in 34 years.
The data "make clear that the factory sector has taken a powerful turn for the worse," Action Economics said in a note to clients. "In total, since August, the economy has shifted from a profile of remarkable resilience to one of freefall at a pace that is consistent with a sizable, rather than mild, recession," Action Economics said.
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