Saturday, January 28, 2006

At Davos, The Chinese Warn Us Our Credit Is Near Limit

By Elaine Meinel Supkis

The Chinese at Davos, the World Economic Forum, warn us the credit limit has been reached and we are in for a world of hurt now. And that Bernanke is not competent. I agree.

From Reuters:
Ben Bernanke is poised to take over at the U.S. Federal Reserve next week just as financial markets are heading into a very volatile period for which he is untested, senior bankers said on Wednesday.

Dealers and investors worry that Bernanke, known as a sophisticated academic and inflation targeter, is more focused on fighting consumer inflation than current dangers of markets awash with cheap cash and a sharp U.S. dollar drop, they said.
I remember when his appointment was announced. Stocks went up, many economy bloggers thought this was Jim Dandy and here I was: Bernanke Will Continue Same Policies Until We Die. Haha. Seems like more than one foreign banker is screaming this today in Davos! Do they read me or what? Like, Cassandra hits again!

Then there was this article: Fed Chief Will Be Foolish Bernanke. Again, the things I pointed out about him seem to be exactly that which is irritating bankers in important places like China.
Zhu Min, executive assistant president of Bank of China, one of China's top four banks, said markets are extremely sensitive to Bernanke's succession. "You have a very, very vulnerable financial economy. I expect to see volatile markets," he said.
translation: "Foreign devils, we have you by your throats and we will now start tormenting you by dumping dollars on international markets when we bid up the price of oil when you bomb our ally, Iran." Of course, he is well trained to be polite and obscure but still threatening.
Zhu said his background left markets uncertain about how Bernanke would respond to the challenges they face.

Masses of cheap credit left in markets despite 19 months of Fed rate tightening -- which now has been joined by other major central banks -- presents a huge vulnerability, he said.

Excess liquidity is the key issue confronting financial markets today, not consumer inflation, he and Roach said.

The concern is that, if the Fed tightening cycle is nearing its peak, what happens if a financial shock occurs and markets do not need the usual Fed response of pumping in more money, given this excess liquidity, Zhu said.

"People have no idea where there is a shock absorber. That is why you will have market volatility," Zhu said.
I am not a people so I happen to know where the shock absorbers are and they ain't here in America, they are over in places like China. And the shock absorber there is rapidly morphing into a shock giver, namely, they aren't going to soak up all the excess currency we crank out forever. The limit is rapidly approaching.
A hallmark of Greenspan's era was to slash interest rates to soften the blow of financial market crises. Mostly recently the Fed cut rates to 1 percent after the 2000-2002 high technology stock crash. Since June 2004, it has tightened rates to 4.25 percent and is signaling that hikes are nearing an end.
All B.S. The interest rates were dropped to Japanese levels with the permission of Japan who got very significant concessions from us, note that their markets have stayed locked shut like there is no such thing as trade while ours gapes wide open! We did the same deal with China, too, and both soaked up an amazing $2 TRILLION in red ink. This is a very significant sum of money. We were able to then party like there was no tomorrow and not pay for our collapsing stockmarket. We even used the credit extended to us to run up huge debts in housing and consumer purchases.

We are utterly addicted to charging these two countries and promising to pay next Tuesday we forgot there is an upper limit. Well, we are getting really near it and there is no sign we are taking it seriously. The Chinese are about satiated and are now turning inwards to resecure their own empire. Meanwhile, Bush is suggesting cutting the National Guard, cuttting all social programs, gutting much of our interior systems, New Orleans isn't gettting rebuilt, no one is preparing for the inevitable huge hurricanes that are lurking in super warm oceans, just waiting for the sun to creep a little more to the north.

This is my earlier cartoon about the new Fed thief chief. A quote from the article:
Professor Barnanke invented the "Global Glut" to explain why hostile foreign governments are offering us seemingly unlimited loans. He thinks they are doing this because America is a good investment. I say, they are setting a trap.
A childish man. Bet he falls for those Nigerian e-mail scams!

From one of my first articles about this guy:
We are all taught that saving is good -- indeed, Americans are often chided for spending too much and saving too little. But what if the problem of today's global economy is that people elsewhere -- in Europe, Asia and Latin America -- are saving too much and spending too little? Former Princeton University economist Ben Bernanke argues that this is precisely the case. He calls it "the global savings glut."

This article is hilarious. The economist who came up with this latest excuse for our irresponsible economics reminds me of small children when they are doing something very naughty. "He MADE me do it," the child whines while pointing to usually a smaller and younger child. Good mothers seldom are impressed with this sort of reasoning.

There is no "global glut in savings". There are many billion and millionaires who squirrel massive amounts of money out of country so it won't be taxed or traced. We see how they operate like at the trial of the CEO of Tyco. he wails, "I didn't know where the money came from or where it went, the kids over there made me lose all that money and bankrupt my company!" Of course, the kids over there were all in his pay and under his supervision.

And then there was this cartoon from last November. I wish America would change course but it is too much fun, shopping until we drop.
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