ALARM BELLS GO OFF AS 11 CRITICAL INDICATORS SCREAM THE GLOBAL ECONOMIC CRISIS IS GETTING DEEPER

ALARM BELLS GO OFF AS 11 CRITICAL INDICATORS SCREAM THE GLOBAL ECONOMIC CRISIS IS GETTING DEEPER

alarm-clock-public-domain-460x306By Michael Snyder

Economic activity is slowing down all over the planet, and a whole host of signs are indicating that we are essentially exactly where we were just prior to the great stock market crash of 2008.  Yesterday, I explained that the economies of Japan, Brazil, Canada and Russia are all in recession.  Today, I am mainly going to focus on the United States.  We are seeing so many things happen right now that we have not seen since 2008 and 2009.  In so many ways, it is almost as if we are watching an eerie replay of what happened the last time around, and yet most of the “experts” still appear to be oblivious to what is going on.  If you were to make up a checklist of all of the things that you would expect to see just before a major stock market crash, virtually all of them are happening right now.  The following are 11 critical indicators that are absolutely screaming that the global economic crisis is getting deeper… Continue reading “ALARM BELLS GO OFF AS 11 CRITICAL INDICATORS SCREAM THE GLOBAL ECONOMIC CRISIS IS GETTING DEEPER”

Past the Point of No Return?

Casey Research has an article, “The U.S. Government is About to Get Hit with the ‘Perfect Storm’ of Debt. Anyone concerned about the financial health of the US, and the world, should read the article.  Here is an excerpt:

Hearing President Obama’s economic peptalks, you might be under the impression that the U.S. needs to keep spending for just a little while longer to stimulate the economy – but then will swear off big deficits.

Reinforcing the point, to address concerns stirred by a Congressional Budget Office (CBO) forecast that the U.S. government will accumulate total deficits in excess of $6 trillion over the next decade, in February President Obama issued an executive order to create a bipartisan fiscal commission. The commission’s task is to deliver recommendations to the president by December 1 for limiting future deficits to 3% of GDP. (The FY 2009 deficit approached 10% of GDP. The FY 2010 deficit will probably go even higher.)

It’s our contention that the president’s fiscal commission is mostly for show; the 3% limit is just a hoop for the clowns to jump through. U.S. government finances are now past the point of no return; the U.S. government lacks not just the will but the ability to close the gap between revenue and expenditure.

At The Casey Report, we like to focus on facts. Unfortunately, when it comes to government debt, the facts aren’t pretty. They show that the country is already sliding towards financial collapse and hyperinflation in a way not dissimilar to the Weimar Republic.

Let’s first look at recent history to see how reliable CBO forecasts have been. In 1999 the CBO issued its 10-year forecast for 2000-2009 (see charts below). It looked as though we were heading into ten years of prosperity that would rescue us from little worries like the trillions in unfunded liabilities of Social Security and Medicare.

As you can see in the charts titled “CBO Revenue Projections 2000 – 2009” and “CBO Outlay Projections 2000 – 2009,” the CBO expected a budget surplus in every year from 2000 to 2009. And not just that, but that the surpluses would grow at an annual rate of more than 13% and would accumulate to $2.5 trillion over the decade.

The article is quite sobering and indicates that it is possible we have reached the point of no return. Continue reading “Past the Point of No Return?”

Warren Buffet has a better credit rating than the USA

By Daniel Kruger and Bryan Keogh

March 22 (Bloomberg) — The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.

Warren Buffet
Warren Buffet

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.

The $2.59 trillion of Treasury Department sales since the start of 2009 have created a glut as the budget deficit swelled to a post-World War II-record 10 percent of the economy and raised concerns whether the U.S. deserves its AAA credit rating. The increased borrowing may also undermine the first-quarter rally in Treasuries as the economy improves.

“It’s a slap upside the head of the government,” said Mitchell Stapley, the chief fixed-income officer in Grand Rapids, Michigan, at Fifth Third Asset Management, which oversees $22 billion. “It could be the moment where hopefully you realize that risk is beginning to creep into your credit profile and the costs associated with that can be pretty scary.” Continue reading “Warren Buffet has a better credit rating than the USA”

Loan Loss Reserves Restrict Banks From Making Commercial Real Estate Loans

In addition to keeping an eye on declining property values, falling rents and rising vacancy rate numbers, the commercial real estate community is also concerned over ominous signs in banking industry numbers.

One big area of concern is the fact that banks are stowing away more money to cover problem loans. The amount being set aside is rising rapidly and is now higher than it has been for a quarter of century. Meanwhile, the amount of problem loans is rising at even more than twice that rate.

The implications of the increased loan loss coverage for the commercial real estate industry is that it will likely further limit the amount of money available for borrowings. Those numbers also signify that this will continue to encourage “extend and pretend” policy that some lenders have pursued, and it may further encourage lenders to be optimistic about their recovery rates to avoid taking further losses/writedowns. And at the same time, lenders won’t hesitate in demanding more money out of borrowers’ pockets. Continue reading “Loan Loss Reserves Restrict Banks From Making Commercial Real Estate Loans”

Senator Dodd Urges Action on Commercial Real Estate

By Kevin Drawbaugh and Corbett B. Daly
http://www.reuters.com/article/idUSN2220875620100222

WASHINGTON, Feb 22 (Reuters) – U.S. Senate Banking Committee Chairman Christopher Dodd, citing concerns about the outlook for commercial real estate, asked regulators on Monday for action and a report on efforts to stabilize the sector.

“The weakness in the (commercial real estate) market requires prompt and robust responses from the regulators to guard against harmful effects on financial institutions and the economy,” Dodd said in a statement.

“I urge you to redouble your efforts to provide appropriate oversight of this vital component of our economy,” he said.

Dodd asked regulators for an update on their work to stabilize the market. The letter went to Federal Reserve Chairman Ben Bernanke and other top regulators.

This month, a congressional watchdog panel said the commercial real estate market has fallen more than 40 percent from early 2007 and a wave of loan failures in the next few years could threaten the U.S. economy just as it struggles back to its feet from the worst recession in 70 years.

Dodd noted that a Fed official testified last month before the watchdog panel that examiners at the U.S. central bank are reporting a “sharp deterioration” in commercial real estate loan quality.

The letter comes amid a broader debate on Capitol Hill over rewriting the way the U.S. financial services industry is regulated in the wake of the financial crisis.

The Obama administration is urging lawmakers to support a U.S. financial consumer watchdog that is strong and independent, pushing Senate Democrats to resist compromises sought by Republicans and bank lobbyists.

Treasury Secretary Timothy Geithner said the administration is still fighting “to consolidate the fragmented authority of seven separate agencies into a single, independent and accountable Consumer Financial Protection Agency (CFPA).

Seeking compromise, Dodd in recent weeks has discussed multiple options with Republicans, who oppose the CFPA, but has not struck a deal.

The Connecticut Democrat is working closely with Tennessee Republican Senator Bob Corker, a committee member, on crafting an agreement they hope will win broad support. Its release is expected within days.