There Must Be Some Way Out Of Here

Interesting to witness how criminals react when backed against the wall. Fascinating historical moments unfolding right before us. Thanks for the updates and new links.

JP Morgan Analyst - Crisis Could Occur 'At Any Moment'

Reuters
By Eric Burroughs
August 4, 2002

NEW YORK (Reuters) - Severe stress in global markets has nerve-wracked investors fearful that one big shock could jam the gears of the financial system -- much like the crisis days of 1998.

"People feel like gasoline has been dumped on the floor and it wouldn't take much to ignite it," said James Glassman, senior U.S. economist at J.P. Morgan Chase.

Plunging stocks and multibillion dollar bankruptcies the past month have investors assessing the widespread damage to banks and insurers. If more scandals or failures come to light further straining capital markets, it could force central banks to jump to the rescue, pumping money into the system through lower interest rates.

Fear is starting to hurt economies as well. The financial market squeeze in both the United States and Europe is depriving businesses of crucial capital and sharply increasing their cost of borrowing at a time when global growth, led by the $10 trillion U.S. economy, appears to be losing steam.

"The Fed has to get concerned about the capital markets effectively tightening for the Fed at a time when it wants policy to remain accommodative," said Brad Stone, chief U.S. market strategist at Barclays Capital.

"The Fed may need to lean against that. Some weeks ago that looked like a very low risk. Now it's definitely a real risk," he added.

MONEY HARD TO GET

Interest rates charged on high-quality corporate debt right now stand at near-record levels -- 2.2 percentage points above risk-free Treasuries, up more than half a percentage point since early June.

Investors, scared they cannot trust corporate balance sheets, have proven reluctant to lend money. Corporate bond issuance by investment grade companies sank in July to $22 billion, down 63 percent from its January to June average. Last week investment grade debt suffered its worst week since at least 1997, and junk bonds are set for their worst year ever.

Funding through the short-term commercial paper market also has become very difficult, with total outstanding issuance for nonfinancial and financial firms falling a hefty $93 billion this year. Banks have turned skittish about lending. Initial public offerings have dried up.

"The way the events are unfolding right now for the near term, dealing with these many financial constraints is going to impinge and impinge and impinge on economic activity," said prominent Wall Street economist Henry Kauffman, who has argued the Fed should cut interest rates.

Swap spreads -- a measure of banking sector risk that signaled the systemic distress in 1998 -- popped out last week on the credit anxiety about J.P. Morgan before stabilizing. Investors are even raising risk premiums on assets usually considered very safe like mortgage-backed securities.

With markets so stretched, harried traders are looking anxiously for the one trigger that could set off an explosion.

"The markets continue to scan for a 'smoking gun' to justify some emergency policy response," said Michael Wallace, an economist at Standard & Poor's MMS.

Rattled markets showed their heightened state of anxiety on Friday when rumors of an emergency central bank meeting in Europe to help a failing bank or insurance company swept through trading desks, sparking selling of stocks and powering gains in safe-haven short-term Treasuries.

Banking trouble fears hit a fever pitch on July 24 when rumors spread of liquidity problems at J.P. Morgan Chase -- the largest U.S. bank-- and Citigroup after congressional revelations of their dealings with failed energy trader Enron Corp. The impact across credit markets was harsh and swift.

Later that day ratings agency Standard & Poor's said such talk was unfounded and reaffirmed the ratings of both banks, but investors remain shaken and the damage to market conditions has not improved much.

Europe has also seen its fair share of worries about the quality of its banks and insurance companies on the asset losses, providing fodder for the rumor mill.

On July 25 Germany's second largest bank, HVB Group , posted a second-quarter loss and described business conditions as among the worst since World War II.

'98 REDUX?

Economists are quick to point to the differences between this episode and the late summer of 1998, when Russia's debt default sent investors rushing out of risky assets globally and nearly brought the financial system to its knees when the hedge fund Long-Term Capital Management almost collapsed.

Conditions were so bad then that even the massive U.S. government bond market -- considered the most liquid in the world and a refuge from turmoil -- nearly froze as dealers demanded higher and higher premiums to execute trades.

Eventually the Fed cut rates to restore investor confidence, even though the economy was in good shape.

The current pain in capital markets has yet to reach those extreme levels of distress, said J.P. Morgan's Glassman. But he said the market sees conditions as deteriorating to the point where a crisis could happen "at any moment."

JP Morgan Fails to Report $45 Billion in Gold Derivatives to the SEC

Dow Plunges 270, Nasdaq Slides 42, S&P 500 Falls 30 - "Everyone is worried about where the market's headed"

Dow Closes Down 270

Wall Street Falls for Third-Straight Session

DISNEY Falls 7% - Moody's Investors Service said it was reviewing the company's long-term debt for possible downgrade

Signs suggest stocks could drop more

GLOBAL MARKETS-Stocks suffer as economic outlook sours

Treasury yields plumb record lows as stocks dive

Dow hammered as financial, telecom issues tumble

U.S. stocks sag after latest dim economic data

Australian stocks seen hit as U.S. economy slows

IMF Sees Gloomier Economic Outlook

IMF says risks facing the U.S. economy have intensified

Airline sector tanks, sits 20% under post-Sept.11 low

Cisco slumps on Lehman downgrade

Cox shares plunge 19 pct

Scowcroft Warns invading Iraq would cause an 'explosion' in Middle East

United Airlines Begs Politicians For Billions More

Tokyo stocks seen weak after U.S. techs dive

Monday, 8/5 Market Wrapup

Pushing South America Toward Default

Stocks Plummet on Renewed Fears of Recession

Stocks tumble, Dow drops triple-digits again

Fears of double dip blast markets

Tech's turmoil batters Nasdaq

Wall Street Takes Another Dive
"On the Dow, financial services giants J.P. Morgan Chase and Citigroup led the decline, falling 6.3 percent to $22.34 and 7.2 percent to $28.65, respectively."

Tokyo Stocks Fall 220 Points

Nikkei Slides 2.3 Percent

Taiwan's Market Falls as Ties With Beijing Worsen

Brazil Teeters. Will It Be Contagious?

Will Argentine flu sicken Latin America?

Australia Stock Market Sinks

Report Deepens Stocks' Slump - Service Sector Slows

IMF Sees Gloomier Economic Outlook

HSBC Raises Loan Reserves as 6-Month Profit Falls 7%

Swiss Shares Dip on Worry About Financier

Optimism Falls on Wall Street

Market Place: Shares Plunge as Ad Agency Delays Report on Earnings

Mirant Says It Is Subject of Inquiry by S.E.C.

Just Wait Until Things Get Real Bad - These Are Americans - It ain't Gonna Be Your Grandpa's Depression

A briefing given last month to a top Pentagon advisory board described Saudi Arabia as an enemy of the United States, and recommended that U.S. officials give it an ultimatum to stop backing terrorism or face seizure of its oil fields and its financial assets invested in the United States

Global market stress weighs on the US economy

US stocks slump, dragged by fears of soft economy

Economy Stirs G.O.P. Worry in House Races

Collins & Aikman Shares Fall After Second-Quarter Loss

Protests mar launch of Japan "national ID system"

"The economy has been weaker than we all thought for longer than we all thought. Without the consumer, the market's in trouble. The consumer is the last leg before you fall in." - FOX NEWS

US backs $10b bailout for Brazil

HOW CONSERVATIVE IS PRESIDENT BUSH?

"There must be some way out of here" ?

You're working on it (affectionately, It is almost too late).

Thanks for ALL the links Uncle Bill.

You Bought. They Sold. All over corporate America, top execs were cashing in stock even as their companies were tanking. Who was left holding the bag? You.

The New Improved Game of Insider Trading

New York Stock Exchange Chief Richard Grasso failed to disclose his stock ownership properly to financial regulators

Corporate debt saps nation - Credit stress hits Depression level
"Moody's Investor Research now says the nation is in the worst credit stress since the Great Depression of the 1930s."

The most dramatic drop in tax revenue since 1946 - Economists appeared to be at a loss to explain it. Crippen merely called it "astounding." LOL! Magic.

Nigeria just defaulted on $33 Billion debt! - Who will pay? You.

Bailouts for everybody. Uh, well, except you. Sorry. Somebody has to pay.

Stock Horror - The Economist

Washington spending going wild

Bush Spending Exceeds Anything Known To Man

George W. - Master of Disguise

In an effort to boost the economy, socialist George W. thinks the "Government ought to have a policy that helps people with a downpayment." This is not a joke, he really stated it.

Socialism: the Forbidden Ideology

HOW CONSERVATIVE IS PRESIDENT BUSH?

GEORGE W. BUSH: CLINTON'S THIRD TERM © - Norman Liebmann

Please, make this all go away

Fiscal conservatives’ in Congress help keep spending on the rise

DON'T GET FOOLED AGAIN

Too Much Supply, Too Little Demand

Thanks Uncle Bill.

Inside the all-powerful Federal Reserve - Geoff Metcalf interviews veteran journalist Anne Williamson

"Congress passed the Federal Reserve Act on the 22nd of December 1913, and from that day forward the United States of America ceased to be a republic."
Anne Williamson - THE FED, March 2001, WorldNet, a monthly publication of WorldnetDaily.com.

Central Bankers Meet to Assess Anti-Recession Efforts

The Associated Press
By Joseph Rebello August 29, 2002
Source

JACKSON HOLE, Wyo. (Dow Jones/AP) - The world's best-known economists and central bankers are meeting here this weekend to try to decide a question Wall Street resolved long ago: Who is best equipped to fight recessions - elected government officials or central bankers?

Investors are paying attention anyway, hoping that the predictably academic tone of the annual economic conference of the Federal Reserve Bank of Kansas City will not keep Alan Greenspan from shedding light on a more urgent question: Does the Fed need to do more to fight the current U.S. economic downturn?

The U.S. economy, after all, remains sickly despite the unprecedented dose of stimulus it got last year in the form of tax cuts enacted by Congress and interest-rate cuts executed by the Fed. Consumer confidence is wobbly and business investment is tepid. The Fed hinted two weeks ago that it might cut interest rates again, but more recent comments by some Fed policy makers have puzzled investors.

"Alan Greenspan knows what people are interested in," said James Glassman, an economist with J.P. Morgan in New York. "If he chooses to signal anything, he can do so in a few words at this conference. The markets just want to know what the Fed's frame of mind is - what would it take for the Fed to act again" to boost the economy.

Greenspan, who enjoys superstar status among the central bankers gathering in Jackson Hole, is scheduled to deliver a speech at 10 a.m. EDT Friday that kicks off the two-day meeting. He traditionally confines his remarks to the main topic of the conference. But analysts say the topic this time - "Rethinking Stabilization Policy" - is broad enough to give him an opportunity to clarify Wall Street's doubts about the Fed's intentions.

Those doubts grew last week after three Federal Reserve regional bank presidents suggested the Fed should not cut interest rates again despite the central bank's view that the chief risk facing the economy is of a renewed slowdown. Chicago Fed president Michael Moskow said the Fed "cannot - and should not - try to smooth out every bump" in the economy. Investors' expectations of another rate cut this year receded as a result.

The conference also will provide a platform to central bankers from other leading industrial economies to shed light on the outlook for those economies. The deputy governor of Japan's central bank, Yutaka Yamaguchi, is scheduled to make a presentation on monetary policy and economic conditions in his country. He also is likely to hear from other economists on what the Japanese must do to end the country's decade-long recession.

Ottmar Issing, a member of the European Central Bank's executive board, is set to discuss the ECB's efforts. And Guillermo Ortiz Martinez, governor of Mexico's central bank, is scheduled to describe the Mexican experience.

The central bankers, however, typically spend most of their time listening to presentations by top academic economists. Those economists, according to participants in the meeting, are expected to argue that governments are generally ineffective when they try to fend off recessions by cutting taxes or increasing spending. The job of fighting recessions should be left instead to central banks.

That isn't a novel idea. Many Wall Street economists agree that legislatures typically take too long to organize a fiscal stimulus, which means the economy gets that stimulus when it is no longer needed. Still, those economists also say, the U.S. tax cuts last year show that governments can be effective if they manage to act quickly.

"We ended up with a milder recession than we would have had" if tax cuts had not been enacted, said David Jones, an expert on the Fed. "At least this time the timing was much better."

HOW BIG IS THE GOVERNMENT'S DEBT? - 33.1 Trillion - By Andrew J. Rettenmaier, a NCPA senior fellow and the executive associate director of the Private Enterprise Research Center at Texas A&M University.

The Fall of the Republic

Appreciate the Williamson interview!

The only certainty in life is that no one can predict the future. Of course, with so many pundits saying so many contradictory things, some of them are bound -- in hindsight -- to say they were correct.

My only question is, will the '90s be called the Clinton Bubble?