May 26, 2009 – 5:43 pm


The Federal Reserve is a cartel of private banks created in 1913, principally by JP Morgan and John D. Rockefeller. History says the bankers were no more popular in 1913 than they are today, so any bill putting a private bank in charge of the people’s money was dead on arrival. To counteract the popular sentiment toward them, Morgan and Rockefeller lied and publicly opposed Federal Reserve Act of 1913 as they were funding it and privately working behind the scenes push it through. The game plan has not changed since, and now along comes along Paul Krugman, who, since winning the Nobel Prize, can’t seem to say anything that even I know isn’t true.

The global economy’s “free fall” may have ended, which could in turn hurt the U.S. dollar, Nobel Prize-winning economist Paul Krugman said. 

Well Krugman isn’t lying there. He is just kidding you.

The world economy is projected to shrink 1.3 percent this year, the International Monetary Fund said in April, reversing a previous forecast of 0.5 percent growth. Still, confidence in the global economy has jumped to the highest level in 19 months, based on a Bloomberg survey last week.

Interest-rate cuts by the U.S. Federal Reserve, moves by the Fed to buy assets such as mortgage-backed securities, and government stimulus spending have eased the crisis, Krugman told a seminar today in Ho Chi Minh City, Vietnam. The American economy may expand “slightly” in the second half, he said, citing a slowdown in the pace at which jobs are being lost.

That’s a bald faced lie.  Those moves by the Fed created the crisis. Interest rate cuts were steroids which caused kidney failure to the economy, and more steroids won’t help. The lie is so bad that to tell it Pauly had to stoop down to the bologna that the Bureau of Labor calls statistics. Still Krugman ignores the obvious.  Witness:

As job losses rise, growing numbers of American homeowners with once solid credit are falling behind on their mortgages, amplifying a wave of foreclosures.

Indicators

“Just about all of the economic indicators out there are suggesting that the free-fall has come to an end, that weve stabilized,” said Krugman, an economics professor at Princeton University in New Jersey. “Probably the worst in terms of shocks to the system is over.”

Singapore’s economy shrank less than initially estimated in the first quarter, signaling the nation may be past the worst of its deepest recession since 1965. The Bank of Japan may tomorrow raise its assessment of the economy for the first time since July 2006, said economists including Yasunari Ueno from Mizuho Securities Co. in Tokyo.

More lies! The free fall hasn’t ended on a mark-to-Mickey Mouse stock rally. “Probably the worst in terms of shocks to the system is” yet to occur, and all the management of lowered expectations can’t keep it away.

Measures of stress in financial markets have eased, Krugman told today’s seminar. 

Which measures? The same ones used to test the banks?

“The acute stress that we had last fall after the failure of Lehman has been reduced,” he said. “Interest-rate spreads on commercial paper are way down, interest-rate spreads on corporate debt are down a little bit. The spread on interbank lending is down.” 

Interest rates are way down. PERIOD, you dope!

The London interbank offered rate, or Libor, for three- month dollar loans fell 3 basis points yesterday to 0.75 percent, the British Bankers’ Association said, the 35th straight drop. The Libor-OIS spread, a gauge of banks’ reluctance to lend, narrowed to 55 basis points, the least since February 2008. It was as high as 364 basis points in October.

But hiding in the LIBOR is the story that ‘Exceptionally Wide’ Bank Spreads tells, namely that the banks are still hoarding the bailout cash.

The drop in the London interbank offered rate, the benchmark for $360 trillion of financial products, to a record low masks a growing gap between the rates that the biggest banks charge each other for credit. 

The difference between the highest and lowest interest rates banks say they pay for three-month dollar-denominated loans is near the widest this year, according to data compiled by the British Bankers’ Association. The spread signals that lenders still lack confidence in each other, even though measures ranging from the so-called Libor-OIS spread to corporate bond sales show credit markets have recovered from the freeze caused by the Sept. 15 collapse of Lehman Brothers Holdings Inc.

“It’s premature to judge that the credit meltdown is fully over,” said Kazuto Uchida, chief economist in Tokyo at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan’s largest bank. “Banks remain wary of extending credit to each other due to strenuous concerns about counterparty risk.”

But Krugman just can’t quit.

Global purchasing managers’ indices have improved, as have industrial production figures in the U.S. and freight-loading figures at major ports, Krugman said. 

“All of the indicators are telling the same story,” he said. “Things are getting worse, but they’re getting worse more slowly.”

Oh I get it. Crisis over. Get this Paul.

Following a trend that began in late 2007 and prevailed throughout 2008, US home prices continued to fall at a record pace over the first quarter of this year, dampening hopes the housing slump is nearing an end.

The S&P/Case-Shiller US National Home Price Index recorded a 19.1% decline in Q109 compared to Q108, marking the largest decline in the series’ 21-year history.

“We see no evidence that a recovery in home prices has begun,” said David Blitzer, chairman of the index committee for Standard & Poor’s

Pauly won’t say, but I will. There will be no stock market recovery, no milk maid’s recovery, no recovery of any kind, not even your kid from a cold, until the housing market recovers, stabilizing the defaulting of mortgage bonds. And just for your information Pauly, the housing market wont recover until we get lower house prices, not lower interest rates. Got it yet, Pauly? Then get it here.

Mark Gongloff touches upon some truisms in today’s Ahead of the Tape column in the WSJ. Most significantly, he quotes Rosie on the Shadow Inventory, which when you include REOs and spec investors waiting to put their involuntary rentals back on the market, sends total inventory back over 12 months supply.
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As to halting the fall of prices, I believe that’s backwards — we want prices to normalize, so that more people can afford homes. Until that happens, Housing cannot begin to recover. 

Bounce or Stay?

While the first year of the current global economic crisis resembles the first year of the Great Depression, further declines along the lines of the 1930s-era financial collapse are unlikely, Krugman said.

There is no comparison.  In the Great Depression at least we had sound money, thus no hyperflation, and support from which the economy could bounce.

“I don’t think we’ve hit bottom, but the bottom is not too much further below us,” he said.

He is 1/2 right.

“My big concern is that we don’t hit the bottom and bounce, we hit the bottom and stay there. 

It is no concern at all. Aas soon as the marked-to-make-believe stock market rally fades, we will not bounce because we have not bottomed, so we will break.

“It’s not obvious where recovery comes from.” 

It’s obvious there will be no recovery until we let the banks fail and houses bottom.

A global economic stabilization may hurt the U.S. dollar, as will external American deficits, Krugman said.

“The U.S. dollar is going to fall quite a lot, or at least significantly,” he said. “The demand for dollars has been temporarily inflated by the crisis. Good news is actually bad news for the dollar. If things stabilize, then the safe-haven demand for dollars falls off.”

The main thing that’s been inflated is the dollar itself. “A global economic stabilization” wont hurt the U.S. dollar a bit, but the afore mentioned interest-rate cuts and printing of dollars by the trillions will throw it off the cliff.

China’s government in March suggested the creation of a new international reserve currency to replace the dollar.

“I view the Chinese agitation about a new currency as basically an attempt to have somebody rescue them from their own investment decision,” Krugman said. “China bought too many dollars. Now it’s looking at it and saying, ‘we’re going to lose a lot of money on this investment’.”

The Chinese view is that the FED screwed them with a printing press to rescue the bankers from their own investment decisions, which is the same view shared by Americans who’s purchasing power is screwed. I view your criticism of the “Chinese agitation about a new currency as basically an attempt to” keep your fat cat pals at the FED in the money monopoly captian’s seat.

Any currency, including a single world currency, can be debased. But more importantly, if too many dollars are being pumped out, people can start holding other currencies such as the Euro. If businesses and people don’t trust the government issuing a particular currency, they can write contracts in whatever they want. With a single world currency, there is nowhere else to go. As a general rule, competition is good – and money is no exception. 

Even more competition in currency would be beneficial. During the double-digit inflation of the late 1970s, American Express tried unsuccessfully to be allowed to pay interest on its Travelers Cheques. The Federal Reserve blocked the move because it feared that people would want to hold Travelers Cheques instead of dollars. As usual, government monopolies fear competition.

The FED is a private monopoly in control of the governments money, but don’t expect them to send you a brochure telling you all about it. They prefer everybody remain in the dark.

The Chinese want a currency out of Anglo, England, i.e. FED control. I view you criticism of the “Chinese agitation about a new currency as basically a criticism of competition to your pals at the FED.

So, just why did you sell out Pauly? Was it for the Nobel reason or was the Nobel just payout for the sell out?
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