THE MOGAMBO GURU
Fried in the financial sun
Any thoughts that the decline in bank holdings of derivatives means all is now well can be thrown out the window when you consider just who exactly bankers are, and if you didn't already know who they are the latest interbank lending claims will tell you. Yet you still want to hold stocks? At a price-to-earnings ratio of 57 and climbing? Hahaha! Suckers.
CREDIT BUBBLE BULLETIN
The meaning of stage II
The return of confidence and greed to the financial markets is persuading even seasoned strategists that the worst of the financial crisis is behind us. Yet distortions in the US and global economies remain and will continue as authorities risk global financial and economic catastrophe to sustain the unsustainable. The countdown to stage II of the crisis has started. (Apr 28, '08)
Doug Noland reviews the previous week's events each Monday.

MARKET RAP
The calm before the storm?
China's reduction of a stock transaction tax energized a local market that was edging closer to a decline as precipitous as the 50% slide seen over the past six months. Survival of the optimism in Shanghai and elsewhere in Asia may depend on the US Federal Reserve's thoughts, to be aired next week. (Apr 25, '08)
R M Cutler runs his eye over the ups and downs in the week's markets

Opec head sees oil price hitting $200 a barrel His comments, coming as oil touched a record $120 a barrel on Nymex at one stage yesterday, are seen as rejecting pleas from America and Europe for Opec to turn on the taps and help rein in the price.

Buffett says recession may be worse than feared


Morgan Stanley see big bank woes just beginning


Investors pull out of mutual funds


The Bottom Is Up Ahead

U.S. Consumer Confidence Drops to Five-Year Low on Job Concern, Fuel Costs Confidence among U.S. consumers fell this month to the lowest level in five years as Americans worried about jobs, record gasoline prices and falling home values.

Stocks in U.S. Drop as Consumer Confidence Falls; Merck, Newmont Retreat U.S. stocks fell as consumer confidence slid to a five-year low, property values slumped and a drop in metal prices pushed commodity producers lower.

Home Prices in U.S. Fall 12.7%, Most Since 2001, Case-Shiller Survey Shows Home prices in 20 U.S. metropolitan areas fell in February by the most on record, pointing to an imbalance between supply and demand that shows no sign of ending.

US Fed Expected to Cut Interest Rates to 2% on Wednesday - 28th Apr 08 - William_Patalon_III
Warnings of US Heading for Depression Plague US Economy - 28th Apr 08 - Gerard_Jackson
US Federal Budget Deficit Doubles as Fed Walks a Tightrope Against Inflation - 28th Apr 08 - Anthony_Cherniawski
Bank of England Mortgage Backed Securities Pricing System - 27th Apr 08 - Mick_Phoenix
GOTTERDÄMMERUNG- The Twilight of Irredeemable Debt - 27th Apr 08 - Professor_Emeritus
Alan Greenspan: The Age of Hubris (and the long road back) - 27th Apr 08 - Clif_Droke
US Fed To Blame for Global Food Crisis - 26th Apr 08 - Mike_Whitney
US Bond Investors Finally Waking Up to the New Reality of Massive Inflation! - 26th Apr 08 -Money_and_Markets

HALE STEWART
The Possibility Of A Consumer Led Recession Just Increased huffingtonpost.com — If this trend of declining job growth leading to declining wages leading to declining sentiment leading to lower spending continues, the second half of this year might have some ugly surprises in store for us.

80,000 More Jobs Lost reuters.com — The economy likely shed more jobs in April as the economy continued to weaken against the backdrop of a deeper deterioration in the housing market and a growing credit crunch. Economists have forecast that the economy lost 80,000 jobs after losing the same amount a month earlier.

Americans unload prized belongings to make ends meet : Struggling with mounting debt and rising prices, faced with the toughest economic times since the early 1990s, Americans are selling prized possessions online and at flea markets at alarming rates.

Bernanke takes one more gamble

United States Federal Reserve chairman Ben Bernanke's decision to cut key interest rates one more time was always in the cards. More astonishing was the scant concern he showed towards the inflationary risks inherent in his actions over the past few months, risks that food riots make clear are already a harsh reality in the world beyond the US. - Julian Delasantellis (May 1, '08)

Fed cuts rate to 2.0 percent, keeps options open (AFP)

Economy takes US center stage
A major new survey finds that oil prices and other economic issues are edging out foreign policy concerns on the US public's worry list. Seventy percent of respondents say they worry "a lot" about soaring energy costs, and the survey's aptly named "Anxiety Indicator" shows that 84% worry about the way things are going for the US. - Jim Lobe (May 1, '08)

Fed may want inflation
US Federal Reserve chairman Ben Bernanke continues to cut interest rates, even as concerns grow at home and abroad at rising prices across swathes of the global economy. Despite public pronouncements to the contrary, it is possible the Fed chief sees more pros than cons for the US in the inflation he risks stoking. - Axel Merk (May 1,

THE MOGAMBO GURU
Banking on a house of cards
Investors in Swiss bank UBS have found out the hard way that putting your cash in the hands of investment management "professionals" is as good a way as any to ensure you get back less than you put in. Now just wait and see what happens to American banks ... and then to American shares ... and houses, and bonds. Doomed? Absolutely.

The twilight of
irredeemable debt
Debts used to be considered obligations and issuance of irredeemable debt a crude form of fraud. This is now ignored by courts and academics alike. But banks will eventually learn there is no way to rid the system of poisonous bad debt by creating more. - Antal E Fekete

<h1 align="left">The Price-Wage Squeeze </h1> <h1 align="left">The Fed Sinks the Dollar </h1>

This simplistic philosophy was a hallmark of the Greenspan era. Changing the interest rate alone meant that the Fed didn’t have to “think,” didn’t have to regulate markets, raise reserve requirements on bank loans to fuel the asset-price inflation that the Fed confused with real “wealth creation.” It didn’t have to regulate subprime lending or rain in widespread financial fraud. All it had to do was raise interest rates when this gave banks an opportunity to charge more and increase their earnings – or cut interest rates to lower cost of bank borrowing from the Fed.

But surely not even the ideologically hide-bound Federal Reserve can still imagine that a structural problem – the looming depression from the Fed’s favoritism to the banking sector promoting de-industrialization of the economy – can be solved by lowering interest rates yet again. While the Fed lowers its rate for lending to banks, these banks have not been passing on the rate cuts to their customers. Credit card rates are going up, and entire Christmas trees of penalties are further increasing banks’ rake-off. Mortgage rates remain high, so that real estate markets remain in the doldrums. The banks simply are not lending.

What they are doing is speculating, above all against the dollar. They thus are emulating what Japanese banks did after that nation’s financial bubble burst in 1990. Japan’s banks became the most active players in the international “carry” trade: borrowing at very low interest rates in a weak currency (the yen after 1990, the dollar today) to lend to high-interest borrowers, preferably with strong or at least stable currencies (such as to Iceland before it became so debt-ridden that its currency began to collapse last year; and today, the to European borrowers in euros).

So fiat US credit is being directed to Europe. US banks create or borrow credit at 2%, and lend it out at 6% or more – and get a speculative foreign-currency gain as the euro continues to rise against the dollar.

The aim evidently the same as it was in Japan after 1990. Many banks are nearly insolvent as a result of the b ad real estate loans on their balance sheets. To rescue them (so that it is not necessary to nationalize them, as England recently had to do with Northern Trust) is to help banks “earn their way out of debt” – by making profitable loans.

But bank lending and profitability has become decoupled from the economy at large. Banks are not lending to finance tangible capital investment and new hiring. Helping them thus does not help pull the US economy out of the deepening depression. (A recession is short and is followed by recovery. Today’s looming economic depression is headed toward a widespread forfeiture and transfer of property from debtors to creditors.)

The ultimate effect is to inflate the power of finance, credit and real estate relative to labor’s wages and industrial capital. This is not a way to encourage new tangible investment. It is just the opposite of Keynesianism. Rather than signaling “euthanasia of the rentier,” it is empowering finance and applying euthanasia to labor and industry.

And to Europe, I should add. The Fed’s act to subsidize U.S. bank lending to Europe will help raise the euro’s exchange rate relative to the dollar. This will be a boon to currency speculators. And it will help keep the price of oil and food down to European consumers. But it also will raise the price of European labor and other domestic costs (including the cost of real estate, which is playing a rising role in employee budgets throughout the world). This will tend to make European exports even more expensive in global markets – including the Airbus, much to the joy of Boeing, and European autos, much to the joy of GM and Ford. (No wonder Kirk Kirkorian recently began buying back into the U.S. auto industry.)

In the 1930s, countries competed with one another by imposing rival tariff walls and non-tariff trade barriers (led by the United States) and “beggar my neighbor” currency depreciation (again, led by the United States). But European central bankers for their part are so brainwashed with modern Chicago School monetarist ideology – and so unaware of their own continent’s economic history – that they pursue a knee-jerk reaction to domestic inflation by raising interest rates. This merely increases their currency value all the more, attracting yet more foreign “carry trade” loans. (Economists call this a “backward bending demand curve” and find it an “anomaly,” as they find most reality to be these days.) So while U.S. monetary policy helps subsidize the banking system relative to the industrial sector and labor, European monetary policy goes along with today’s parallel-universe thinking and undercuts its own industry.

An innocent victim of the dollar depreciation caused by the Fed’s action will be Third World food-deficit countries whose currencies are tied to the dollar. Latin America, much of Africa an Asia will find that in their currencies the price of raw materials denominated in euros will rise.

But their domestic wages and other income for the population at large are not increasing. The wage-price squeeze will go on – while their oligarchies no doubt contribute by joining the speculative outflow into hard currencies by moving their domestic funds offshore.

Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JPMorgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world’s first sovereign debt fund for Scudder Stevens & Clark. Dr. Hudson was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com

CHAN AKYA
Abandoning
USS Titanic
As the world comes to grips with declining United States power both in political and economic terms, it is surreal that global media appear so keen to paper over the cracks. But with even the corrupt and unctuous Gulf dictators rebelling against the US dollar, this is the beginning of the end.

Funny numbers are no joke
There's something funny happening to the money that the US Federal Reserve actually has under its direct control. It is not just that a bigger and bigger chunk of this is going overseas. One set of figures has the country's monetary base rising steadily over the years, which at least is positive. Other data show it actually falling. That's a reason to press the panic button.

Hank Paulson: Is He a Grant or a McClellan? - Steve Forbes, Forbes
Ben Bernanke Takes One More Gamble - Julian Delasantellis, Asia Times
AIG's Never-Ending Corporate Divorce - Roddy Boyd, Fortune
Gold Isn't A Wise Long-Term Investment - Knowledge@Wharton
Seeing Past The Chicken Littles - David Harsanyi, Denver Post
Why Britain’s Economy Will Change - Martin Wolf, Financial Times
Dollar Reserve Status Is Tale of Fading Glory - Michael Sesit, Bloomberg
Let's Pop the Deficit Bubble - Will Marshall, Wall Street Journal

Another Fed Move: Now What?by Doug FabianThe decision has been rendered, and the Federal Reserve once again has cut the cost of capital. The central bank's Federal Open Market Committee (FOMC) lowered its benchmark fed funds rate by 25 basis points to 2%. The FOMC also took down the discount rate by 25 basis points...

The Secrets of Top Hedge Fund Performanceby Nicholas A. VardyIt's now official: hedge funds as a group have recorded their worst quarter in six years. The HFRX Global Hedge Fund Index fell 2.78% in the first quarter of 2008. That may not sound bad compared to the S&P 500's drop of just more than 11%. But it's the worst performance for these new Masters of the financial Universe since the tail end of the dot-com collapse.

Bearish on Banksby Doug FabianIn my opinion, we are at the beginning of a new wave of dividend cuts, especially from traditional dividend-paying sectors such as banks and other financial institutions. I really am bearish on banks right now, and for that matter any company that makes a living by loaning money...

The delusion
of markets

Markets buoyed by the illusion that US GDP rose in the first quarter ignore the impact of years of stagnant workers' earnings and rising unemployment. A significant portion of the middle class is being squeezed - and their votes will count come the November presidential election. - Max Fraad Wolff

The Fed's deformed maturity
The purportedly independent US Federal Reserve betrays its origins with its knee-jerk response to downturns from technology stocks to housing prices, its willingness to finance large fiscal deficits through low interest rates and its blindness to the impact of inflation and demands for economic justice. The US Congress and policymakers should remain indifferent no longer. - Hossein Askari and Noureddine Krichene

Downsizing on the menu
The ghastly mess that is the US economy is giving consumers plenty to chew over - such as how producers mask inflationary horrors by cutting portion sizes while pushing up the cost-per-mouthful of your breakfast favorite. Even so, eat while you can before your local state government starts figuring out how to plug the gaping hole in its finances.

CREDIT BUBBLE BULLETIN
More than one step backwards
American economist Hyman Minsky warned a decade ago that evolution in the financial world is not necessarily a progressive process. Since that insight, a whole new financial structure appears to have evolved, one that is definitely retrograde with its need for ever-expanding non-productive debt. (May 5, '08)
Doug Noland reviews the previous week's events each Monday.

Fed wins space
for more cuts

The US Federal Reserve was expected to call a halt to its series of interest rate cuts at its meeting next month, amid mounting concerns over inflation. But the latest productivity data give the Fed latitude to further reduce interest rates if economic conditions warrant. - Peter Morici

G7 loses grip on global policy
The world's seven leading economies until recently had the power to effect coherence to the policies of the great triumvirate of the international economic system - the World Trade Organization, the International Monetary Fund and the World Bank. No longer. Developing nations grouped as Outreach 5 have taken control and are not going to return it.

SPEAKING FREELY
The Gulf's currency solution
The declining value of the US dollar, and with it the wealth of all countries linked to it, has prompted oil states such as Kuwait, Qatar and the United Arab Emirates to consider ending their US dollar currency pegs. The history of the region holds the answer to their quest for an alternative. - Nathan Lewis

THE MOGAMBO GURU
A fear of falling Fed credit
Increasing a country's money supply by raising debt is unwholesome, bizzare and utterly discredited, but that is how it works, which means that when total Fed credit stands still, as it has just done, that is worse than bizzare and incredibly unwholesome. The ramifications are terrifying. This is what is meant by "doomed".
CREDIT BUBBLE BULLETIN
More than one step backwards
American economist Hyman Minsky warned a decade ago that evolution in the financial world is not necessarily a progressive process. Since that insight, a whole new financial structure appears to have evolved, one that is definitely retrograde with its need for ever-expanding non-productive debt. (May 5, '08)
Doug Noland reviews the previous week's events each Monday.

MARKET RAP
Pacific remains pacified
Traders taking a break from their labors in Asia could do so reasonably satisfied with unfolding events. Once heady share-price declines appear to be halted with prospects of strengthening markets ahead. That apparent local stability may be welcome if the sense of panic returns to Wall Street. (May 2, '08)
R M Cutler runs his eye over the ups and downs in the week's markets

THE BEAR'S LAIR
Draining national prosperity
Relief engendered by the latest US GDP figures is misplaced, given recent monetary and fiscal inputs. Gradually increasing output and the optimistic stock market will sooner or later be confronted by consumer price figures. At that point, the US will suffer a monetary and political crisis. Awkwardly, that is more likely to occur before November's US presidential election. - Martin Hutchinson (May 6, '08)

Stocks in U.S. Drop, Led by AIG on Writedowns; Delta Air Retreats on Oil U.S. stocks fell, sending the market to its first weekly drop in a month, as American International Group Inc.'s plan to raise $12.5 billion to cover writedowns renewed concern more losses are coming in the financial industry.

Citigroup's Pandit Plans to `Wind Down' About $400 Billion of Bank Assets Citigroup Inc. Chief Executive Officer Vikram Pandit plans to ``wind down'' about $400 billion of assets over the next three years as part of his plan to return the biggest U.S. bank to profitability.

AIG Declines as Insurer Gives `No Assurance' Credit Writeoffs Have Ended American International Group Inc., the world's biggest insurer by assets, fell the most since February in New York trading after saying losses tied to faltering credit markets may continue.

Trade Deficit Shrinks More Than Forecast as Imports Drop Most in Six Years The U.S. trade deficit narrowed more than forecast in March as imports dropped by the most in more than six years, reflecting the economic slowdown.

Kerkorian Signals More Ford Stock Purchases Beyond 20-Million-Share Offer Billionaire investor Kirk Kerkorian said he may increase his Ford Motor Co. stake beyond 5.5 percent as he followed up on his plan to buy additional shares.

Rebates Will Fail to Spark U.S. Economy as Fuel Prices Soar, Survey Shows The Bush administration's tax rebates won't prevent the U.S. economy from stagnating in the second quarter as soaring food and fuel bills hurt consumers, a Bloomberg News survey showed.

A nightmare of magic tricks
The latest US version of that great statistical trick called a deflator means we can fall asleep peacefully knowing that inflation is still less than 3% - and dream of where US banks magically and silently "disappear" US$49 billion and dream of why folk are buying Dow Industrial stock that won't pay back in seven decades. And ... aagh!! Wake up! Wake up!!

SPEAKING FREELY
The Gulf's currency solution
The declining value of the US dollar, and with it the wealth of all countries linked to it, has prompted oil states such as Kuwait, Qatar and the United Arab Emirates to consider ending their US dollar currency pegs. The history of the region holds the answer to their quest for an alternative. - Nathan Lewis (May 8, '08)

Dollar Danger Is Not Over Yet - Editorial, Financial Times

Definition of a Recession - Editorial, Washington Times

Keep up the good work, Snuf ...

It's appreciated ...

Maybe it's politically un-correct ...

But who really gives a damn about politically un-correct, anyway ...

And so ...

Food Riots are Coming to the U.S.

"I don't want to alarm anybody, but maybe it's time for Americans to start stockpiling food. No this is not a drill."

--Brett Arends

Global food prices have gone through the roof, terrifying the 3 billion or so people who live off less than $2 a day. This should terrify everybody else. In November, the UN Food and Agricultural Organization reported that food prices had suffered a 18 percent inflation in China, 13 percent in Indonesia and Pakistan, and 10 percent or more in Latin America, Russia and India. The devil in the detail is even more distressing: a doubling in the price of wheat, a twenty percent increase in the price of rice, an increase by half in maize prices.

Finger pointing is not always instructive. In this case, it may be. The US and various European countries are moving food crops into the bio-fuel business, itself an environmentally unsound business. This, in addition to encouraging developing countries to not merely 'liberalize' their agricultural sectors, but specialize in exporting specific cash crops (cotton, cocoa), has done wonders to precipitate the shortages. Consumption in developing economies, added to the vicissitudes of climate change, water availability, and rising fertilizer costs, are others.

Political stability is being undermined. Food shortages are proving endemic. Food riots are becoming common. Riots have been sparked in Cameroon, Egypt, Burkina Faso, Uzbekistan and Yemen. There have been riots over spiraling grain prices in Mauritania and Senegal. In Mexico City, mass protests were sparked by a price hike in tortillas. In Haiti, biscuits are being made from a mud compound. The Somali capital Mogadishu bore witness to the deaths of five people.

Governments, indifferent and incautious to the demands of a hungry public, have already fallen victim to the food crisis. Prime Minister Jacques Edouard Alexis was dismissed by a senate vote in Haiti after skirmishes between UN forces and protesters. The UN commander Major General Carlos Alberto Dos Santos Cruz urged calm amidst the carnage. 'It is important for the people to have a peaceful life in Haiti,' he claimed in April 2008. The message then: be peaceful on an empty stomach.

The Bush administration, so often in arrears on the relief front, has earmarked some 770 million dollars or so in funds dealing with the problem. There is one glaring hitch: the money would only start flowing in 2009. 'There is definitely a lag time when it comes to assistance,' states the senior manager of the Foreign Aid Reform Project at the Brookings Institute, Noam Unger.

More troubling is the critique offered of the crisis by officials within the administration. US Secretary of State Condoleezza Rice, at the Peace Corps conference held at the end of April, targeted various culprits. The audience barely stirred at some of the explanations: distribution, oil prices, and the 'alternate fuels effort'. They duly woke up when Rice moved on to targeting the export strategies of various countries – India and China foremost amongst them. 'We obviously have to look at places where production seems to be declining and declining to the point that people are actually putting export caps on the amount of food.'

The problem, for Rice, is rising food consumption. Improved diets within China and India are bothering free market fundamentalists who insist that export caps stifle trade. According to this rationale, Indians are far better off buying the rice from the global market than eating their own in times of crisis. How silly of them to ensure a domestic supply first before shipping off the rest for the global market. Rice is crying foul at such protectionist deviancy, will 'have a look at it' and take the matter to the World Trade Organization.

Members of the American public are not so sure. A narrative of catastrophe is gradually building – stockpile or perish. The Wall Street Journal (April 25) was one of the first to issue the clarion call: 'Start Hoarding Food Americans!' The paper had various suggestions. Stock up on some products – dried pasta, rice, cereals, canned products. Buy them all in bulk to save. Sit the children down give them a good talking to – no, not about the birds and the bees, but about 'how our generation and the two behind it, screwed their world into a death spiral through greed and predatory capitalism.'

Solutions suggested by such economists as Jeffrey Sachs, somewhat patchy yet desperately needed, are forthcoming: allow easier access for sub-Saharan African farmers to fertilizers; reduce the amount of crops going into bio-fuel development; shore-up climate change policies.

Sachs, in his work Common Wealth, also advocates the abolition of states in the face of a crowded planet. But it was state regimes besotted by neoliberal economics that brought us here. They can take us back and remedy the damage. Abolishing them would simply absolve their regimes.

In the meantime, the US and some countries in the West may have to brace themselves for a starving army guided by the morality of the stomach. The food riots are coming.

Binoy Kampmark was a Commonwealth Scholar at Selwyn College, University of Cambridge. He can be reached at: bkampmark@gmail.com

[email="bkampmark@gmail.com"]http://www.counterpunch.org/kampmark05082008.html
[/email]

MF Sells Gold Reserves - 403 tons

Growing Deficits Threaten Pensions

CREDIT BUBBLE BULLETIN
A new inflationary epoch
The world is awash in excess funds, large amounts of these in the form of foreign currency reserves, available to bid up prices of critical tradable resources. A key question is how much will China, India, Russia and others be willing to pay to procure adequate supplies of food and energy for their populations and economies?
Doug Noland reviews the previous week's events each Monday.

Stranger than fictional balance sheets
The US Federal Reserve is taking a whole lot of potentially dodgy assets from banks as security against Treasury bonds. So far so horrible. Now, Standard & Poor's has cut assumptions for how much will be recovered after defaults on some of those assets. So where does that leave the value of the Fed's "security"? Or put another way, how big is the hole in the Fed's balance sheet now?

Mortgage Crisis Hits Prime Loansusatoday.com — About 2.3% of prime loans were 60 days past due in February, the highest level in at least a decade. That's up from 1.4% a year ago. The figures remain relatively small so far. But if they rise further, delinquencies on prime loans — given only to those with good credit — could prolong the housing crisis.

Economy Still Weakening marketwatch.com — Consumer spending, industrial output and homebuilding are all expected to weaken further, pushing the economy deeper into recession territory. Consumer prices are expected to show the steady and discomforting increases that will keep the Federal Reserve from cutting interest rates again soon.

Good Economic News a Mirage hosted.ap.org — The unemployment rate drops. Productivity grows. The trade deficit shrinks. Sounds great, right? Not so fast. Some seemingly good economic numbers can be something of a mirage masking weaknesses in the national economy

The global slump of 2008-09 has begun as poison spreads


A California Couple's Descent Into Bankruptcy


April retail sales barely budged


California man losing nine homes in mortgage mess


Workers who depend on tips feel economy's slump


Britain is now in a full-blown 'housing crash'

Mortgage losses could total $531bn: Goldman

A Fear of Big Demand for Corporate Loans

Barely surviving on credit cards

The house-price bust has a long way to go

Sears: From majesty
to hedge-fund dust
The life and near death of one store charts the rise and decline of the American economy, from frontier innovation to the present crisis of overconsumption. The great US money-creation machine of the past few years has shut down. As the dust settles, we see that very little of real worth remains. - Julian Delasantellis

THE BEAR'S LAIR
Productivity's poisoned legacy
The Wall Street welcome to improved US labor productivity may be short-lived, with the prospects far less positive. Among other factors, capital will probably become more expensive in the years ahead, trade protectionism will intensify and more regulation will burden manufacturing. The next US president will not be responsible, but will take the blame. - Martin Hutchinson

Hedge Fund Titans Are Treating Us Like Pawns in Their Economic Chess Games

By Scott Thill, AlterNet

Corporate Accountability and WorkPlace: Hedge funds exploited the misfortunes of those caught beneath currency, housing and internet bubbles, and got paid by the boatload.

THE MOGAMBO GURU
'Unemployed' now a valid job description
Not only are close to a quarter of a million more people on the US government payroll than a year ago, the number on that payroll is more than the folk out there making real things - not even counting the thousands so utterly jobless they have signed up to government programs. And don't even think about that "hospitality" headcount. This is inflation hell!
CREDIT BUBBLE BULLETIN
A new inflationary epoch
The world is awash in excess funds, large amounts of these in the form of foreign currency reserves, available to bid up prices of critical tradable resources. A key question is how much will China, India, Russia and others be willing to pay to procure adequate supplies of food and energy for their populations and economies? (May 12, '08)
Doug Noland reviews the previous week's events each Monday.

THE MOGAMBO GURU
Stranger than fictional balance sheets
The US Federal Reserve is taking a whole lot of potentially dodgy assets from banks as security against Treasury bonds. So far so horrible. Now, Standard & Poor's has cut assumptions for how much will be recovered after defaults on some of those assets. So where does that leave the value of the Fed's "security"? Or put another way, how big is the hole in the Fed's balance sheet now? (May 12, '08)

Bernanke Says Markets Remain Unsettled, Fed Is Ready to Increase Auctions Federal Reserve Chairman Ben S. Bernanke said financial markets remain unsettled and the central bank will increase its auctions of cash to banks as needed.

Hewlett-Packard Buys EDS for $13.9 Billion; Profit, Sales Outlooks Boosted Hewlett-Packard Co. agreed to buy Electronic Data Systems Corp. for $13.9 billion to take on International Business Machines in computer services. The company said full-year profit and sales will top its earlier goals.

Most U.S. Stocks Retreat as Lower Commodity Prices Damp Retail-Sales Data U.S. stocks fell, led by banks and commodity producers, after Oppenheimer & Co.'s Meredith Whitney cut profit projections for Wall Street's biggest securities firms and metal and oil prices retreated.

Bank of America Increases Home-Equity Loss Forecast on Consumer `Stress' Bank of America Corp., the second- biggest U.S. bank, widened its forecast of home-equity loan losses beyond projections offered last month, adding to evidence that more consumers are falling behind on the debts.

Home Prices Decline in Two-Thirds of U.S. Cities as Foreclosures Increase Housing prices fell in two-thirds of U.S. cities in the first three months of the year as a rise in foreclosures depressed property values and home sales tumbled 22 percent, the National Association of Realtors said.

Wal-Mart Net Rises on Discounts; Second-Quarter Profit May Trail Estimates Wal-Mart Stores Inc., the world's largest retailer and a benchmark for the U.S. economy, reported higher quarterly profit and said earnings may trail analysts' estimates after record gasoline prices buffeted consumers.

BIGGEST GOVERNMENT EVER: Treasury revenue, spending at record highs in April...

Hornberger's Blog
http://fff.org/blog/index.asp
Rising Prices and a Falling Dollar
by Jacob G. Hornberger

It seems that the mainstream media might finally be coming to realize that the soaring prices of commodities is not so much due to reduced supplies or increases in demand but instead to the enormous fall in the value of the dollar.

In an article in Sunday’s New York Times entitled “A Peek Behind the Price at the Pump,” Nelson D. Schwartz hit the nail on the head when he wrote, “But even as the presidential candidates debate whether to cut federal taxes this summer and legislators look at other ways to ease prices at the pump, a harder-to-control factor is emerging as a main reason behind the increase in energy costs: the sinking dollar.”

Welcome to Empire 101: What They Don’t Teach You in High School Civics and College Economics.

Since items sold in the United States [and elsewhere around the world] are priced in dollars, the price must inevitably reflect supply and demand for both the item and the currency.

If the value of a currency goes down because of an increase in supply of the currency or a decrease in demand for the currency, the only way that can be reflected is through an increase in the price of things that the currency buys.

As most every American should know by now, ever since 9/11 the dollar has been cratering in international markets. What many Americans are just now discovering, however, is that that phenomenon is a direct result of out-of-control federal spending, the type of spending that has characterized the federal government for the last seven years. Do the imperial adventures in Iraq and Afghanistan come to mind?

Unfortunately, many in the mainstream press still don’t get it. For example, in an editorial yesterday the New York Times, the same paper that published the Schwartz piece, lamented the high financial costs of Iraq and Afghanistan, especially medical costs for soldiers.

So, does the Times call for an immediate withdrawal from these imperial adventures? No. Instead, it declares:“Fortunately, the solutions are clear — more money for mental health services....”

As Americans are now discovering, empires are not cheap. As people continue to pay ever-increasing prices at the pump, in the grocery store, and elsewhere, it’s important that we keep the reason in mind: out-of-control spending by federal officials. Such spending not only pays for ever-rising welfare at home, and not only for such wasteful and destructive things as the war on drugs, but it also pays for deadly and expensive imperial projects abroad.

Mr. Hornberger is founder and president of The Future of Freedom Foundation.

Bernanke: Markets Still Out of Whack marketwatch.com — Despite some signs of improvement, financial markets remain severely stressed, Federal Reserve Chairman Ben Bernanke said in a speech for conference on financial markets. The U.S. central bank's innovative efforts to provide cash to financial markets have helped, Bernanke said, citing a lessening of pressure on brokerage firms, but "at this stage conditions in financial markets are still far from normal."

JPMorgan Chase CEO: Recession Just Beginning: JPMorgan Chase & Co.'s chief executive said Monday that while the crisis in the credit markets appears to be three-quarters over, he believes a U.S. recession is just beginning.