http://biz.yahoo.com/ap/070907/greenspan_remarks.html?.v=2
Report: Greenspan Says Turmoil Like '98
Friday September 7, 12:03 am ET
Report: Former Federal Reserve Chairman Alan Greenspan Says Market Turmoil Like 1998, 1987
NEW YORK (AP) -- "The human race has never found a way to confront bubbles," former Federal Reserve Chairman Alan Greenspan said Thursday in reference to the euphoria that can precede contractions, or reactions, like the current market turmoil, according to a published report.
Greenspan, speaking to economists in Washington, D.C., compared the turmoil to that of 1987 and in 1998, when the giant hedge fund Long-Term Capital Management nearly collapsed, The Wall Street Journal reported on its Web site. "The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly the bank panic of 3/8 1907," Greenspan said at the event organized by the Brookings Papers on Economic Activity, according to the Journal.
Greenspan, now a private consultant, said euphoria takes over when the economy is expanding and leads to bubbles, "and these bubbles cannot be defused until the fever breaks," the Journal said. Bubbles can't be defused through incremental adjustments in interest rates, he suggested, the paper reported. The Fed doubled interest rates in 1994-95, and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred."
Replies
57
Beach Fanatic
"I remember well the "Reagan economic miracle."
No, your memory fails you. You can thank the peanut farmer president for your early 80's malaise.;-)
No, your memory fails you. You can thank the peanut farmer president for your early 80's malaise.;-)
Beach Fanatic
Greenspan is becoming like Charlie Brown's teacher.
Beach Fanatic
"...How much in student loans and credit card debt were you carrying at the time?..."
No debt. Momma paid for part, and I worked.
I worked for a year out of high school as a deckhand on towboats
on the Mississippi River & Gulf Intracoastal.
Went back out on the boats every summer break and every winter
break (when everyone else was home for Christmas or what-ever, I
was battleing ice on the illinois River.)
Always had a job during school: washed dishes at a country club,
washed dishes in the university cafeteria. Even was a model in the
art dept for a while.
By the way, the country club was Hickory Hills country club in Springfield,
MO. I learned later that at the time I was washing dishes inside, a guy
about my age was playing golf out on the course outside with his daddy.
He turned pro and made a lot of money until he took a trip in a Lear jet
with pressurization problems.
If you don't count credit card balances which are paid in full at each statement, I have only borrowed money one time in my life.
No debt. Momma paid for part, and I worked.
I worked for a year out of high school as a deckhand on towboats
on the Mississippi River & Gulf Intracoastal.
Went back out on the boats every summer break and every winter
break (when everyone else was home for Christmas or what-ever, I
was battleing ice on the illinois River.)
Always had a job during school: washed dishes at a country club,
washed dishes in the university cafeteria. Even was a model in the
art dept for a while.
By the way, the country club was Hickory Hills country club in Springfield,
MO. I learned later that at the time I was washing dishes inside, a guy
about my age was playing golf out on the course outside with his daddy.
He turned pro and made a lot of money until he took a trip in a Lear jet
with pressurization problems.
If you don't count credit card balances which are paid in full at each statement, I have only borrowed money one time in my life.
Beach Fanatic
"I remember well the "Reagan economic miracle."
No, your memory fails you. You can thank the peanut farmer president for your early 80's malaise.;-)
You a Bush supporter, 'eh ?
Listening to a little Rush are you?
I have about had my fill of Carter complaints.
By the way, you need to go back further; to Nixon and Ford
You forgot the 90 day wage and price freezes
And "WIN" buttons.
Carter inherited the last republican mess
Just like a Democrat will inherit the latest republican mess
P.S. Reagan was not GOD: he just played one on TV
SoWal Insider
"...How much in student loans and credit card debt were you carrying at the time?..."
No debt. Momma paid for part, and I worked.
I worked for a year out of high school as a deckhand on towboats
on the Mississippi River & Gulf Intracoastal.
If you don't count credit card balances which are paid in full at each statement, I have only borrowed money one time in my life.
So your little run-in with Volkernomics was a good thing.
Some of these folks addicted to credit-crack could certainly use a little tough-love Fed tightening.
Tomorrow we'll see what Ben and crew are made of....if they cut, (which I think they will) the economy is in worse shape than anyone is letting on at this point.
.
.
SoWal Insider
After watching Mr. G on 60 Minutes last night...I must say I have a little crush.
So you're a Fed groupie now?
....and I bet you think Ben Bernanke is one delectable piece of "Man Candy."
.
Beach Comber
Sorry to disappoint, but I too, believe that Carter is an inept bungler at best and more probably, is the worst President ever!!! He should have stayed on the farm. I remember VIVIDLY the unemployment, the gas lines, school sclosing because we couldn't pay to heat them for the students, the fury over him being such a "wuss" and leaving our kidnapped Americans sit there while he did nothing to retrieve them.
Now, "Mr. Peace-nik" has the audacity to open his yapper and speak when he couldn't do the job well when it was his to do...I cannot abide fools! Personally, I think he just needs to sit on the sidlines and stop trying to rewrite his legacy...which is what all of his yapping and positioning is really about.
He has done a great job with Habitat for Humanity and he should leave it at that. His is not and never was a big enough dog to run in the high weeds - everything was over his head and still is. That said, though I am personally fond of "W", I don't think he is the most capable President either - least you think I am one-sided in my views. Have a blessed and prosperous day! ;-)
Now, "Mr. Peace-nik" has the audacity to open his yapper and speak when he couldn't do the job well when it was his to do...I cannot abide fools! Personally, I think he just needs to sit on the sidlines and stop trying to rewrite his legacy...which is what all of his yapping and positioning is really about.
He has done a great job with Habitat for Humanity and he should leave it at that. His is not and never was a big enough dog to run in the high weeds - everything was over his head and still is. That said, though I am personally fond of "W", I don't think he is the most capable President either - least you think I am one-sided in my views. Have a blessed and prosperous day! ;-)
Beach Fanatic
"....Sorry to disappoint, but I too, believe that Carter is an inept bungler at best and more probably, is the worst President ever!!! He should have stayed on the farm. I remember VIVIDLY the unemployment, the gas lines, school sclosing because we couldn't pay to heat them for the students, the fury over him being such a "wuss" and leaving our kidnapped Americans sit there while he did nothing to retrieve them...."
This all started with Nixon, bub.
Try studying history instead of listening to Rush.
As for doing nothing to retreive hostages, I seem to
remember that a rescue attempt was launched.
Instead of reaching back (3) decades to critized
someone in the past, how about defending your
current presidential choice, "W"
Talk about an incompetent.
This all started with Nixon, bub.
Try studying history instead of listening to Rush.
As for doing nothing to retreive hostages, I seem to
remember that a rescue attempt was launched.
Instead of reaching back (3) decades to critized
someone in the past, how about defending your
current presidential choice, "W"
Talk about an incompetent.
Beach Fanatic
"...Tomorrow we'll see what Ben and crew are made of....if they cut, (which I think they will) the economy is in worse shape than anyone is letting on at this point...."
Considering the size of the cut, it is logical to assume that the "news"
is worse than has been revealed.
Considering the size of the cut, it is logical to assume that the "news"
is worse than has been revealed.
Beach Comber
Capricious,
Thanks for sharing your thoughts - though you really ought not call me "bub" - when you don't even know me, that is kind of tacky... As for studying history... since you do not know anything about me, commenting on where I get my information, what I know about history, or who I voted for, or what media I regularly indulge in, is at best a guess on your part and most importantly, wrong. Sorry, but you are wrong.
If someday we meet and we do have the ability for intellectual discourse and friendly debate, I will be happy to go head-to-head with you on history, voting choices, left vs right and whatever other topics you choose, if I have the capacity to discuss them. That is the beauty of the ability to debate in our beautiful land of freedom.
Until then, be wise and don't make assumptions about others when you are in the dark... you might bump your head or fall down the stairs bumbling around in the unseen realms!
As for defending our President, I will continue to do what I have done for every President since I was old enough to vote - PRAY... they take on unbelievable responsibilities that we will never have to bear the burden of. They age dramatically while serving the public, they are paid little for their sacrifices (Carter too) and generally are underappreciated no matter what they attempt to do.
My beef with Carter is that he uses the moniker of "Christian" when it suits him and then behaves like a pitiful fool as history begins to shed light upon his failed Presidency. Either he is comfortable with who he is and what he accomplished or not... Apprently, he is not... me thinks that his finger-pointing is an attempt to get out of the "Worst President ever box" by trying to stuff "W" in it instead.
I am perfectly comfortable allowing history to speak for itself. Just look at how shamefully it has treated the Tesla in comparison to Edison... the truth however, is finally coming forth and Marconi and Edison's scientific prowess pales in comparison to Tesla's and people are beginning to know this as truth...but it took over 50 years for a correction to surface. History is a fascinating thing and usually the truth will surface one way or the other. So, I don't sweat it...
Have a peaceful, beautiful and fun-filled afternoon!!!
Thanks for sharing your thoughts - though you really ought not call me "bub" - when you don't even know me, that is kind of tacky... As for studying history... since you do not know anything about me, commenting on where I get my information, what I know about history, or who I voted for, or what media I regularly indulge in, is at best a guess on your part and most importantly, wrong. Sorry, but you are wrong.
If someday we meet and we do have the ability for intellectual discourse and friendly debate, I will be happy to go head-to-head with you on history, voting choices, left vs right and whatever other topics you choose, if I have the capacity to discuss them. That is the beauty of the ability to debate in our beautiful land of freedom.
Until then, be wise and don't make assumptions about others when you are in the dark... you might bump your head or fall down the stairs bumbling around in the unseen realms!
As for defending our President, I will continue to do what I have done for every President since I was old enough to vote - PRAY... they take on unbelievable responsibilities that we will never have to bear the burden of. They age dramatically while serving the public, they are paid little for their sacrifices (Carter too) and generally are underappreciated no matter what they attempt to do.
My beef with Carter is that he uses the moniker of "Christian" when it suits him and then behaves like a pitiful fool as history begins to shed light upon his failed Presidency. Either he is comfortable with who he is and what he accomplished or not... Apprently, he is not... me thinks that his finger-pointing is an attempt to get out of the "Worst President ever box" by trying to stuff "W" in it instead.
I am perfectly comfortable allowing history to speak for itself. Just look at how shamefully it has treated the Tesla in comparison to Edison... the truth however, is finally coming forth and Marconi and Edison's scientific prowess pales in comparison to Tesla's and people are beginning to know this as truth...but it took over 50 years for a correction to surface. History is a fascinating thing and usually the truth will surface one way or the other. So, I don't sweat it...
Have a peaceful, beautiful and fun-filled afternoon!!!
Beach Fanatic
Capricious,
Thanks for sharing your thoughts - though you really ought not call me "bub" - when you don't even know me, that is kind of tacky...
"wuss"
"Mr. Peace-nik"
Now WHO is being "tacky?"
"...As for defending our President, I will continue to do what I have done for every President since I was old enough to vote - PRAY... they take on unbelievable responsibilities that we will never have to bear the burden of. They age dramatically while serving the public, they are paid little for their sacrifices (Carter too) and generally are underappreciated no matter what they attempt to do..."
All of a sudden you are respectful of Carter, the "Wuss",
"Mr Peace-nik"?? Give me a break.
By the way, what did W sacrifice to become president?
Other than my tax money and the lives and limbs of thousands
of U.S soldiers and tens of thousands of iraqis?
You voted for him yet now only offer tepid support for the
president that you helped place in office.
'...I am perfectly comfortable allowing history to speak for itself..."
Yes, and it appears that you are comfortable letting history
repeat itself as well.
I am done discussing this with you, here or elsewhere.
Good day
Beach Comber
Yes, Capricious, it is a good day...
A sunny and life-filled and wonderful day...
A day to live and let live.
A day for loving life.
Good day to you as well.
;-)
A sunny and life-filled and wonderful day...
A day to live and let live.
A day for loving life.
Good day to you as well.
;-)
Beach Lover
This might have something to do with the problem:
http://www.cnsnews.com/ViewNation.asp?Page=\Nation\archive\200511/NAT20051104b.html
Basically says that the Bush administration has borrowed more than all previous Presidents since 1776, COMBINED. (My bias: I am a constitutional conservative)
The Fed IS the problem: http://www.lewrockwell.com/murphy/murphy113.html
Bernanke admitted that the Fed at the very least, contributed to the cause of the Great Depression:
http://www.financialsense.com/fsu/editorials/schiff/2005/1208.html
http://www.hoover.org/publications/policyreview/3476271.html
The Fed is neither "federal" nor is there a "reserve". It is a private, central bank that creates money out of thin air. So next time you hear on the new that the Fed is "pumping money into the system", realize that the dollars in your purse or wallet are now worth a little less.
http://www.cnsnews.com/ViewNation.asp?Page=\Nation\archive\200511/NAT20051104b.html
Basically says that the Bush administration has borrowed more than all previous Presidents since 1776, COMBINED. (My bias: I am a constitutional conservative)
The Fed IS the problem: http://www.lewrockwell.com/murphy/murphy113.html
Bernanke admitted that the Fed at the very least, contributed to the cause of the Great Depression:
http://www.financialsense.com/fsu/editorials/schiff/2005/1208.html
http://www.hoover.org/publications/policyreview/3476271.html
The Fed is neither "federal" nor is there a "reserve". It is a private, central bank that creates money out of thin air. So next time you hear on the new that the Fed is "pumping money into the system", realize that the dollars in your purse or wallet are now worth a little less.
SoWal Insider
In celebration of Helicopter Ben's generous "bailout," I'll post this entertaining diddy (albeit a 45-minute diddy) entitled "Money as Debt"
Here's the short 2 minute "Teaser" [ame="http://www.youtube.com/watch?v=3t1m4r-IB1U"]YouTube - What's a US Dollar Worth? : The Fed, Money as Debt[/ame]
For the entire video Click on link, scroll down to the viewing screen, and click on the start (>) under the viewer screen to start the movie--it will go to black screen and start in about 15 seconds. Even after 5-10 minutes of your time, you'll know more than 99.9% of Americans about how money is "created."
[ame="http://www.itulip.com/forums/showthread.php?t=1139"]Money as Debt - iTulip.com[/ame]
/
Here's the short 2 minute "Teaser" [ame="http://www.youtube.com/watch?v=3t1m4r-IB1U"]YouTube - What's a US Dollar Worth? : The Fed, Money as Debt[/ame]
For the entire video Click on link, scroll down to the viewing screen, and click on the start (>) under the viewer screen to start the movie--it will go to black screen and start in about 15 seconds. Even after 5-10 minutes of your time, you'll know more than 99.9% of Americans about how money is "created."
[ame="http://www.itulip.com/forums/showthread.php?t=1139"]Money as Debt - iTulip.com[/ame]
/
Edited
Beach Comber
Just watched the teaser - thank you much for the ongoing education... I for the life of me, though I have tried for many years, haven't been able to get my hands around what has happened to keep things floating since the gold was siphoned out of our nation's coffers years ago. I know that the Fed is a private bank and that the founding fathers saw such a centralized banking system as unconstitutional. Based on the copious amount of materials I have read, I suspect, but have no concrete proof, that the banking kings helped orchestrate the 1929 collapse. Still, I have not been able to see what is really going behind what we see and discuss current day...
As usual Shelly, your posts are a treasure trove of information and very much appreciated. The humor of late has been priceless and I am hoping not to be too terribly discouraged once I get more information on what is really happening. The goal is to gain understanding about all of this after watching the entire thing later this evening! You Rock!!!
As usual Shelly, your posts are a treasure trove of information and very much appreciated. The humor of late has been priceless and I am hoping not to be too terribly discouraged once I get more information on what is really happening. The goal is to gain understanding about all of this after watching the entire thing later this evening! You Rock!!!
Beach Lover
Just watched the teaser - thank you much for the ongoing education... I for the life of me, though I have tried for many years, haven't been able to get my hands around what has happened to keep things floating since the gold was siphoned out of our nation's coffers years ago. I know that the Fed is a private bank and that the founding fathers saw such a centralized banking system as unconstitutional. Based on the copious amount of materials I have read, I suspect, but have no concrete proof, that the banking kings helped orchestrate the 1929 collapse. Still, I have not been able to see what is really going behind what we see and discuss current day...
As usual Shelly, your posts are a treasure trove of information and very much appreciated. The humor of late has been priceless and I am hoping not to be too terribly discouraged once I get more information on what is really happening. The goal is to gain understanding about all of this after watching the entire thing later this evening! You Rock!!!
What has kept things(the dollar) afloat is confidence that the dollar you take in.....that same dollar will be able to be spent....consumer confidence. The other thing keeping it afloat is that most Amercians don't understand our money system.
The world, however, is getting less and less confident in the dollar. The euro keeps gaining on the dollar. Up until very recently, the only currency the world could use to purchase oil was dollars. This is changing:
[ame]http://en.wikipedia.org/wiki/Iranian_Oil_Bourse[/ame]
http://www.energybulletin.net/12125.html
Could the recent events related to the Iranian Oil Bourse be why the U.S. is now threatening to invade Iran? Do your homework. You won't see this in the Main Stream Media.
Beach Fanatic
"...The other thing keeping it afloat is that most Amercians don't understand our money system...."
An understatement if there ever was one.
The average U.S citizen is clueless when it comes to
money. Witness the current crop of subprime borrowers,
"flippers," automobile leasers, etc. etc.
"...why the U.S. is now threatening to invade Iran?..."
We can "threaten," but our utter failures in Iraq and
Afghanistan have erased the deterent factor of U.S.
military intervention, and have depleted the resources
of our military forces, so it is little more than an idle
threat and the rest of the world knows it.
An understatement if there ever was one.
The average U.S citizen is clueless when it comes to
money. Witness the current crop of subprime borrowers,
"flippers," automobile leasers, etc. etc.
"...why the U.S. is now threatening to invade Iran?..."
We can "threaten," but our utter failures in Iraq and
Afghanistan have erased the deterent factor of U.S.
military intervention, and have depleted the resources
of our military forces, so it is little more than an idle
threat and the rest of the world knows it.
Beach Fanatic
Just watched the teaser - thank you much for the ongoing education... I for the life of me, though I have tried for many years, haven't been able to get my hands around what has happened to keep things floating since the gold was siphoned out of our nation's coffers years ago. I know that the Fed is a private bank and that the founding fathers saw such a centralized banking system as unconstitutional. Based on the copious amount of materials I have read, I suspect, but have no concrete proof, that the banking kings helped orchestrate the 1929 collapse. Still, I have not been able to see what is really going behind what we see and discuss current day...What intrinsic value does gold have? What intrinsic value does the Dollar have? Any type of Money simply facilitates trade.
As usual Shelly, your posts are a treasure trove of information and very much appreciated. The humor of late has been priceless and I am hoping not to be too terribly discouraged once I get more information on what is really happening. The goal is to gain understanding about all of this after watching the entire thing later this evening! You Rock!!!
SoWal Insider
Sorry to disappoint, but I too, believe that Carter is an inept bungler at best and more probably, is the worst President ever!!! He should have stayed on the farm. I remember VIVIDLY the unemployment, the gas lines, school sclosing because we couldn't pay to heat them for the students, the fury over him being such a "wuss" and leaving our kidnapped Americans sit there while he did nothing to retrieve them.The problems were caused by OPEC and Nixon's price controls. Guess what? OPEC is back! Who warned us about our dependence on foreign oil 30 years ago? That's right the "Peanut Farmer". Regarding your peacenik comment, what can you say. Grab an M-16 and go get it on with a big ole rebel yell. Maybe if you kill everyone in the Middle East, oil will be cheap again. The big dog's gotta eat. I'm also fond of GW. I'll be very fond of him when he leaves office with his jeans on fire....Federal government and private sector tapped out, economy in full blown recession, dollar worthless, military stuck in Iraq forever. Now that's a legacy that's worth remembering.
Now, "Mr. Peace-nik" has the audacity to open his yapper and speak when he couldn't do the job well when it was his to do...I cannot abide fools! Personally, I think he just needs to sit on the sidlines and stop trying to rewrite his legacy...which is what all of his yapping and positioning is really about.
He has done a great job with Habitat for Humanity and he should leave it at that. His is not and never was a big enough dog to run in the high weeds - everything was over his head and still is. That said, though I am personally fond of "W", I don't think he is the most capable President either - least you think I am one-sided in my views. Have a blessed and prosperous day! ;-)
SoWal Insider
What intrinsic value does gold have? What intrinsic value does the Dollar have? Any type of Money simply facilitates trade.
I'd say that gold is intrinsicly more valuable (vs the US dollar) than what it was at the beginning of the week and at a 27-year high (vs the US dollar). Does that mean the value of gold going up....or the "promises" that are behind the "value" of the dollar are going down?
Dollar VS Gold
Dollar VS Major World Currencies
.
Let's just say if the US is going to continue stumbling along its present economic path, as the world's leading manufacturer of debtors, expect more of the same.
.
.
Edited
Beach ComberAuthor
Fears of dollar collapse as Saudis take fright
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 8:39am BST 20/09/2007
Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.
Ben Bernanke has placed the dollar in a dangerous situation, say analysts
"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.
"Saudi Arabia has $800bn (?400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.
The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.
As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy.
The Fed's dramatic half point cut to 4.75pc yesterday has already caused a plunge in the world dollar index to a fifteen year low, touching with weakest level ever against the mighty euro at just under $1.40.
There is now a growing danger that global investors will start to shun the US bond markets. The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.
The danger is that this could now accelerate as the yield gap between the United States and the rest of the world narrows rapidly, leaving America starved of foreign capital flows needed to cover its current account deficit - expected to reach $850bn this year, or 6.5pc of GDP.
Mr Redeker said foreign investors have been gradually pulling out of the long-term US debt markets, leaving the dollar dependent on short-term funding. Foreigners have funded 25pc to 30pc of America's credit and short-term paper markets over the last two years.
"They were willing to provide the money when rates were paying nicely, but why bear the risk in these dramatically changed circumstances? We think that a fall in dollar to $1.50 against the euro is not out of the question at all by the first quarter of 2008," he said.
"This is nothing like the situation in 1998 when the crisis was in Asia, but the US was booming. This time the US itself is the problem," he said.
Mr Redeker said the biggest danger for the dollar is that falling US rates will at some point trigger a reversal yen "carry trade", causing massive flows from the US back to Japan.
Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.
The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.
"If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems," he said.
The Federal Reserve, however, clearly calculates the risk of a sudden downturn is now so great that the it outweighs dangers of a dollar slide.
Former Fed chief Alan Greenspan said this week that house prices may fall by "double digits" as the subprime crisis bites harder, prompting households to cut back sharply on spending.
For Saudi Arabia, the dollar peg has clearly become a liability. Inflation has risen to 4pc and the M3 broad money supply is surging at 22pc.
The pressures are even worse in other parts of the Gulf. The United Arab Emirates now faces inflation of 9.3pc, a 20-year high. In Qatar it has reached 13pc.
Kuwait became the first of the oil sheikhdoms to break its dollar peg in May, a move that has begun to rein in rampant money supply growth.
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 8:39am BST 20/09/2007
Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.
Ben Bernanke has placed the dollar in a dangerous situation, say analysts"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.
"Saudi Arabia has $800bn (?400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.
The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.
As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy.
The Fed's dramatic half point cut to 4.75pc yesterday has already caused a plunge in the world dollar index to a fifteen year low, touching with weakest level ever against the mighty euro at just under $1.40.
There is now a growing danger that global investors will start to shun the US bond markets. The latest US government data on foreign holdings released this week show a collapse in purchases of US bonds from $97bn to just $19bn in July, with outright net sales of US Treasuries.
The danger is that this could now accelerate as the yield gap between the United States and the rest of the world narrows rapidly, leaving America starved of foreign capital flows needed to cover its current account deficit - expected to reach $850bn this year, or 6.5pc of GDP.
Mr Redeker said foreign investors have been gradually pulling out of the long-term US debt markets, leaving the dollar dependent on short-term funding. Foreigners have funded 25pc to 30pc of America's credit and short-term paper markets over the last two years.
"They were willing to provide the money when rates were paying nicely, but why bear the risk in these dramatically changed circumstances? We think that a fall in dollar to $1.50 against the euro is not out of the question at all by the first quarter of 2008," he said.
"This is nothing like the situation in 1998 when the crisis was in Asia, but the US was booming. This time the US itself is the problem," he said.
Mr Redeker said the biggest danger for the dollar is that falling US rates will at some point trigger a reversal yen "carry trade", causing massive flows from the US back to Japan.
Jim Rogers, the commodity king and former partner of George Soros, said the Federal Reserve was playing with fire by cutting rates so aggressively at a time when the dollar was already under pressure.
The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.
"If Ben Bernanke starts running those printing presses even faster than he's already doing, we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems," he said.
The Federal Reserve, however, clearly calculates the risk of a sudden downturn is now so great that the it outweighs dangers of a dollar slide.
Former Fed chief Alan Greenspan said this week that house prices may fall by "double digits" as the subprime crisis bites harder, prompting households to cut back sharply on spending.
For Saudi Arabia, the dollar peg has clearly become a liability. Inflation has risen to 4pc and the M3 broad money supply is surging at 22pc.
The pressures are even worse in other parts of the Gulf. The United Arab Emirates now faces inflation of 9.3pc, a 20-year high. In Qatar it has reached 13pc.
Kuwait became the first of the oil sheikhdoms to break its dollar peg in May, a move that has begun to rein in rampant money supply growth.
Beach ComberAuthor
This guy just needs to quit talking ...
Reuters
House prices to drop much lower: Greenspan
Friday September 21, 3:25 am ET
VIENNA (Reuters) - A big overhang of property will bring U.S. house prices down further, but it is too early to say if the economy will plunge into recession, former Federal Reserve chief Alan Greenspan was quoted as saying on Friday.
Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control.
"It's a difficult situation, there is an enormous overhang on the real estate market," Greenspan was quoted as saying. "Many buildings which just have been finished can't be sold ..."
"So far, prices have dropped only slightly. But it was enough to cause alarm around the world," he said. "Prices are going to fall much lower yet."
"However, it is too early to answer the question about a recession. We simply don't know yet. It depends on how flexibly the economy can react," he said.
Greenspan said deregulation and the introduction of market economies in the former Communist bloc after the Berlin Wall fell in 1989 had caused a global boom and a worldwide reduction of interest rates, which both helped fuel the property bubble.
"There is no doubt about the fact that low interest rates for long-term government bonds have caused the real estate bubble in the United States," he said.
"The Federal Reserve began a series of interest rate increases in 2004. We were hoping to bring the speculative excesses in the real estate sector under control. We failed. We tried it again in 2005. Failure," he said.
"Nobody could do anything about it, neither us nor the European Central Bank. We were powerless," he said.
Reuters
House prices to drop much lower: Greenspan
Friday September 21, 3:25 am ET
VIENNA (Reuters) - A big overhang of property will bring U.S. house prices down further, but it is too early to say if the economy will plunge into recession, former Federal Reserve chief Alan Greenspan was quoted as saying on Friday.
Greenspan said in an interview with Austrian magazine Format that low interest rates in the past 15 years were to blame for the house price bubble, but that central banks were powerless when they tried to bring it under control.
"It's a difficult situation, there is an enormous overhang on the real estate market," Greenspan was quoted as saying. "Many buildings which just have been finished can't be sold ..."
"So far, prices have dropped only slightly. But it was enough to cause alarm around the world," he said. "Prices are going to fall much lower yet."
"However, it is too early to answer the question about a recession. We simply don't know yet. It depends on how flexibly the economy can react," he said.
Greenspan said deregulation and the introduction of market economies in the former Communist bloc after the Berlin Wall fell in 1989 had caused a global boom and a worldwide reduction of interest rates, which both helped fuel the property bubble.
"There is no doubt about the fact that low interest rates for long-term government bonds have caused the real estate bubble in the United States," he said.
"The Federal Reserve began a series of interest rate increases in 2004. We were hoping to bring the speculative excesses in the real estate sector under control. We failed. We tried it again in 2005. Failure," he said.
"Nobody could do anything about it, neither us nor the European Central Bank. We were powerless," he said.
Beach Comber
"Could the recent events related to the Iranian Oil Bourse be why the U.S. is now threatening to invade Iran? Do your homework. You won't see this in the Main Stream Media."
Happy Camper -
Tha tis for sure...I read the info contained in the links you shared...WHEW! Between that and Shelly's information... seems too sobering to think about, yet makes sense and begins to fill in the pieces of the puzzle that have seemed to be missing for me.
I enjoy learning from all of you , and I confess that sometimes all of this boggles my mind as I watch the rest of everyone else I seem to know as they walk around oblivious, buying and spending and spending and buying. It is comforting, somehow, to know that even when we have disagreements on this blog, there is a shared understanding that everything is not what it seems. In real life, I feel like most folks are unconscious and thinking about this stuff is like "Debbie Downer" on SNL.
But it is happening and it is real and though there may not be much that can be done about it, at least I know that I am not alone in the awareness of it all. So, thanks everybody for being willing to share - even when it reality is unpleasant and hard to swallow!!!
I hope each of you has a blessed and peaceful weekend and that the weather is beautiful (in spite of the TD that may be headed that way), and that all of your days are sweet.
Happy Camper -
Tha tis for sure...I read the info contained in the links you shared...WHEW! Between that and Shelly's information... seems too sobering to think about, yet makes sense and begins to fill in the pieces of the puzzle that have seemed to be missing for me.
I enjoy learning from all of you , and I confess that sometimes all of this boggles my mind as I watch the rest of everyone else I seem to know as they walk around oblivious, buying and spending and spending and buying. It is comforting, somehow, to know that even when we have disagreements on this blog, there is a shared understanding that everything is not what it seems. In real life, I feel like most folks are unconscious and thinking about this stuff is like "Debbie Downer" on SNL.
But it is happening and it is real and though there may not be much that can be done about it, at least I know that I am not alone in the awareness of it all. So, thanks everybody for being willing to share - even when it reality is unpleasant and hard to swallow!!!I hope each of you has a blessed and peaceful weekend and that the weather is beautiful (in spite of the TD that may be headed that way), and that all of your days are sweet.
Beach Lover
And now a recent exchange (9/20/2007) between Congressman Ron Paul and Federal Reserve Chairman Ben Bernanke. This happened at the most recent Financial Services Committee's meeting. Ron Paul asks "Is there any moral justification for devaluing our currency?"
Listen to Bernanke's voice. "Everything will be OK..."
[nomedia]http://www.youtube.com/watch?v=LhglwvE50cg[/nomedia]
http://www.house.gov/paul/congrec/congrec2007/cr092007h.htm
http://www.minyanville.com/articles...mony-wall-street-america-dollar/index/a/14185
Listen to Bernanke's voice. "Everything will be OK..."
[nomedia]http://www.youtube.com/watch?v=LhglwvE50cg[/nomedia]
http://www.house.gov/paul/congrec/congrec2007/cr092007h.htm
http://www.minyanville.com/articles...mony-wall-street-america-dollar/index/a/14185
Beach Comber
I read this earlier and am having trouble figuring out what this means for us - really... can anyone of you shed some interpretive light? Thanks
Khaleej Times Online >> News >> THE U.A.E
Borse Dubai, Nasdaq and OMX in deal
By Lucia Dore (Assistant Editor, Business)
21 September 2007
DUBAI ? Borse Dubai, the US electronic stock exchange Nasdaq, and the Nordic stock exchange operator, OMX AB, yesterday announced a deal to create a global exchange platform spanning the US, Europe, the Middle East and other strategic markets.
Speaking to Khaleej Times, Borse Dubai vice-chairman Soud Ba?alawy said the deal was a ?win-win? for all parties and would establish a gateway for accessing the Middle East?s excess liquidity, estimated to be in the region of $2.3 trillion. ?It is one of the greatest opportunities in terms of developing the region?s capital markets,? he said.
Through a complex set of transactions, Borse Dubai will become a shareholder in Nasdaq and Nasdaq will become a strategic shareholder in the Dubai International Financial Exchange (DIFX). Steps will be taken to allow DIFX to be rebranded with the Nasdaq name. Borse Dubai will purchase a 28 per cent stake in the London Stock Exchange (LSE) from Nasdaq and Nasdaq will win control of OMX, given that all the necessary regulatory conditions are met.
Borse Dubai will retain 19.99 per cent of Nasdaq?s share capital, amounting to 42.6 million shares, and hold 18 million shares, or 8.4 per cent of share capital, in trust, to be eventually sold. For regulatory reasons, Borse Duba?s voting rights in Nasdaq will be restricted to 5 per cent.
Borse Dubai will continue with its bid for OMX AB, for which it offered $4 billion all-cash offer in August, topping the $3.7 billion bid Nasdaq made in May. Borse Dubai holds a 4.9 per cent stake in OMX along with option agreements for another 23.5 per cent share of the exchange.
Given that this deal wins regulatory approval, Borse Dubai will sell its 28 per cent stake in OMX to Nasdaq and buy Nasdaq?s 28 per cent stake in LSE, for 14.14 pounds a share. Nasdaq will retain its remaining 3.5 per cent of shares. Ba?alawy described the acquisition of LSE shares as a ?strategic long-term investment?.
A statement outlining the terms of the deal said that the parties expect the necessary conditions to be fulfilled in January 2008 and that Borse Dubai?s tender offer for OMX?s shares will open for acceptances at that time.
Meanwhile a Reuters report says, Nasdaq will take a 33 per cent stake in the DIFX, and will invest a further $50 million in the exchange as well as allowing the DIFX to use the Nasdaq name across MENA and South Asia.
Borse Dubai chairman, Essa Kazim, also told the news agency that Borse Dubai would have a separate joint venture agreement in China.
The announcement ends weeks of wrangling between Nasdaq and Borse Dubai, the holding company for the Dubai government?s stakes in the Dubai Financial Market (DFM) and the DIFX to wrest ownership of OMX.
The agreement means the DFM will become Dubai?s domestic exchange and the rebranded Nasdaq-DIFX exchange the region?s international one, Ba?alawy said in a telephone interview.
But as Borse Dubai was looking to seal its 28 per cent stake in LSE, the Qatar Investment Authority (QIA) was buying 20 per cent of LSE shares in a deal worth about $1.2 billion, according to Bloomberg.
Only two days earlier the QIA, Qatar?s sovereign wealth fund, was expected to close a $5.6 billion offer for Nasdaq?s 31 per cent stake. The QIA has also reportedly told shareholders to take no action on the Borse Dubai/Nasdaq offer pending a further statement.
The QIA has said it has bought a stake in LSE as part of a plan to ?build long-term investments in high quality businesses,? and doesn?t plan to make a takeover bid, in a statement made available to Bloomberg.
The fund, however, ?reserves its position in the event that a third party announces a firm intention to make an offer,? it said.
In a further complication, late yesterday the QIA had bought a 9.98 per cent stake in OMX, through Citigroup, paying 260 kronor ($39) per share. Borse Dubai is paying 230 kronor ($35) per share.
Khaleej Times Online >> News >> THE U.A.E
Borse Dubai, Nasdaq and OMX in deal
By Lucia Dore (Assistant Editor, Business)
21 September 2007
DUBAI ? Borse Dubai, the US electronic stock exchange Nasdaq, and the Nordic stock exchange operator, OMX AB, yesterday announced a deal to create a global exchange platform spanning the US, Europe, the Middle East and other strategic markets.
Speaking to Khaleej Times, Borse Dubai vice-chairman Soud Ba?alawy said the deal was a ?win-win? for all parties and would establish a gateway for accessing the Middle East?s excess liquidity, estimated to be in the region of $2.3 trillion. ?It is one of the greatest opportunities in terms of developing the region?s capital markets,? he said.
Through a complex set of transactions, Borse Dubai will become a shareholder in Nasdaq and Nasdaq will become a strategic shareholder in the Dubai International Financial Exchange (DIFX). Steps will be taken to allow DIFX to be rebranded with the Nasdaq name. Borse Dubai will purchase a 28 per cent stake in the London Stock Exchange (LSE) from Nasdaq and Nasdaq will win control of OMX, given that all the necessary regulatory conditions are met.
Borse Dubai will retain 19.99 per cent of Nasdaq?s share capital, amounting to 42.6 million shares, and hold 18 million shares, or 8.4 per cent of share capital, in trust, to be eventually sold. For regulatory reasons, Borse Duba?s voting rights in Nasdaq will be restricted to 5 per cent.
Borse Dubai will continue with its bid for OMX AB, for which it offered $4 billion all-cash offer in August, topping the $3.7 billion bid Nasdaq made in May. Borse Dubai holds a 4.9 per cent stake in OMX along with option agreements for another 23.5 per cent share of the exchange.
Given that this deal wins regulatory approval, Borse Dubai will sell its 28 per cent stake in OMX to Nasdaq and buy Nasdaq?s 28 per cent stake in LSE, for 14.14 pounds a share. Nasdaq will retain its remaining 3.5 per cent of shares. Ba?alawy described the acquisition of LSE shares as a ?strategic long-term investment?.
A statement outlining the terms of the deal said that the parties expect the necessary conditions to be fulfilled in January 2008 and that Borse Dubai?s tender offer for OMX?s shares will open for acceptances at that time.
Meanwhile a Reuters report says, Nasdaq will take a 33 per cent stake in the DIFX, and will invest a further $50 million in the exchange as well as allowing the DIFX to use the Nasdaq name across MENA and South Asia.
Borse Dubai chairman, Essa Kazim, also told the news agency that Borse Dubai would have a separate joint venture agreement in China.
The announcement ends weeks of wrangling between Nasdaq and Borse Dubai, the holding company for the Dubai government?s stakes in the Dubai Financial Market (DFM) and the DIFX to wrest ownership of OMX.
The agreement means the DFM will become Dubai?s domestic exchange and the rebranded Nasdaq-DIFX exchange the region?s international one, Ba?alawy said in a telephone interview.
But as Borse Dubai was looking to seal its 28 per cent stake in LSE, the Qatar Investment Authority (QIA) was buying 20 per cent of LSE shares in a deal worth about $1.2 billion, according to Bloomberg.
Only two days earlier the QIA, Qatar?s sovereign wealth fund, was expected to close a $5.6 billion offer for Nasdaq?s 31 per cent stake. The QIA has also reportedly told shareholders to take no action on the Borse Dubai/Nasdaq offer pending a further statement.
The QIA has said it has bought a stake in LSE as part of a plan to ?build long-term investments in high quality businesses,? and doesn?t plan to make a takeover bid, in a statement made available to Bloomberg.
The fund, however, ?reserves its position in the event that a third party announces a firm intention to make an offer,? it said.
In a further complication, late yesterday the QIA had bought a 9.98 per cent stake in OMX, through Citigroup, paying 260 kronor ($39) per share. Borse Dubai is paying 230 kronor ($35) per share.
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