NightBlogger

The Guardian
George Osborne…dismissed criticism that he lacked judgment in predicting a run on the pound, insisting it was his job to tell “the truth about the British economy”. “My job as shadow chancellor is to tell the British people the truth about the British economy. The truth that it is the worst prepared economy in the world for recession…The truth that we have got the highest personal debt in the world. The truth that the pound has fallen by a record amount against other currencies. I am telling the public the truth and that is the job of elected politicians, particularly opposition politicians, in difficult times.” Osborne added: “We are warning the country that Gordon Brown is abandoning fiscal responsibility and when a government does that it stacks up debt for future generations and stacks up tax rises for future generations as well.” More

George Washington Blog — Political insider and veteran reporter Kevin Phillips has documented that every major empire over the past several hundred years has undergone a predictable cycle of collapse, usually within 10 to 20 years of its peak power.

The indications are always the same:
- The financialization of the economy,
moving from manufacturing to speculation;
- Very high levels of debt;
- Extreme economic inequality;
- And costly military overreaching.

Bottom line, the collapse of the American empire appears to be irreversible, even with a new president, because the root causes of the collapse are not being addressed. More

Euan Mearns
The Oil Drum
When my talk to the Royal Society of Chemists was first arranged this summer, oil cost over $130 per barrel, and we wondered where the price would be in October. Since then much has happened. The credit expansion bubble was pricked in part by inflation stemming from high energy prices, and the global banking system is teetering on the brink of collapse, reprieved only by the spread of social ownership throughout the OECD. National governments and their agencies still seem to be sublimely ignorant of the causes of this year’s energy crisis, and there is little sign of action being taken to mitigate the problems that underlay it. Unless these issues are addressed, the energy crisis will shortly re-emerge to dominate events. In fact, this past week, a cold snap in the UK and Europe sent day ahead natural gas prices up by 50% in a day, and these are still up 65% compared with a year ago.

I have been deliberately controversial in the subjects covered in this post because I believe it is high time we had a decent debate about certain aspects of energy policy that we have tended to skirt around for too long. In particular, it is my opinion that UK and EU energy policies that are focussed upon CO2 emissions instead of energy efficiency are dragging us along the path towards Olduvai at an unnecessarily alarming rate. This is a post in pictures. Each slide is numbered below left. If you wish to leave a comment then please refer to the slide numbers. Click on slides for a larger image. I have added notes to clarify certain points. More

Independent
Germans freeze £21bn property funds
Nearly €30bn of German property funds were frozen between Tuesday and Friday last week in what industry experts fear could foreshadow a UK commercial real estate collapse. A series of “open-ended” – meaning that investors can withdraw their money whenever they choose – property funds were temporarily shut down, including those run in Germany by AXA, UBS and Morgan Stanley. The 11 funds involved suffered from a string of major investors pulling their cash to raise liquidity. In order to redeem the money, the funds have to sell assets in their property portfolios, which is costly as the real estate market is in freefall. The funds responded by not allowing redemptions for three to six months.

According to data provided by the BVI, which represents the German investment fund industry, 10 of the funds asset values were worth €27bn combined as of 30 September. The remaining fund, run by Catella Property Group, is worth €390m. The move is significant for the UK, as German funds have been among the most active in snapping up City of London and West End properties this year. A leading financial restructuring expert said that similar problems are likely to hit UK property funds. “Commercial real estate is going to be the really big sector for our line of work in 2009,” he said.

A commercial property analyst said: “German funds are big buyers of London offices. They were forced to sell assets, and the funds would have closed down, had they not implemented the freeze.” Stefan Seip, director general at the BVI, said this was the worst week for fund closures he could recall. “We have never had a situation comparable to this,” he said: But he denied the German market was in long-lasting trouble: “To a lesser extent, losses in equity and bond investments led to an over-allocation in real estate and the need for rebalancing these portfolios. In this way, the open-ended real estate investment funds became a victim of the crisis.”

DEGI, a part of the London-quoted Aberdeen Asset Management, was the last of the 11 funds to close, late on Friday afternoon, when it froze two of its four German-based funds: DEGI Europa and International, worth €4.3bn combined. In a statement, DEGI said: “Many investors started to meet their liquidity needs by redeeming their shares in, then as now, profitable and stable investment vehicles, which include open-ended property funds. For this reason, open-ended property funds have been experiencing above-average unit redemptions, and in consequence a shrinking of their liquidity.”

DEGI has suspended redemptions for three months, “for the time being”. Catella said it had suspended redemptions “for the protection of its investors”, stating the freeze was a response to temporary closures, which were a result of a loss of confidence in such property funds. Catella’s fund, “Focus Nordic Cities”, for example, had “registered an unusually high number of redemption requests, which the fund management found impossible to meet with the available cash on hand”.

Times Online
The world is on the brink of financial meltdown, the head of the International Monetary Fund (IMF) said last night. His bleak warning came as finance ministers tried to calm the frenzy in markets that saw share prices crash by more than 20% last week. Separately, the IMF’s chief economist predicted that shares could slump by another 20% before stabilising. Dominique Strauss-Kahn, the head of the IMF, warned that the measures so far “have not yet achieved the goal of stabilising markets and bolstering confidence”. He said: “Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.” Countries would need to take further measures, including interest rate cuts and steps to bolster the banks. Olivier Blanchard, his chief economist, said stock markets had further to fall. “At the worst, the governments will need another few weeks to make the right assessment and the stock exchanges could fall by another 20%; then there will be a turnaround,” he said. More

Darryl_R_Schoon
To most, the appearance and severity of the current crisis is unexpected. To Professor David Hackett Fisher, author of The Great Wave, Price Revolutions and the Rhythm of History (Oxford University Press 1996) the crisis and its severity was both expected and understood. According to Professor Fisher, waves of rising prices have interrupted long periods of stability throughout history. These great waves are often accompanied by unexpected disasters, extreme social upheaval and always end in economic collapse. Such great waves last from 80 to 120 years and their appearance spells the end of epochs and eras. Great waves marked the end of the feudal era, as it did the end of the renaissance and the enlightenment; and soon, the current great wave that began in 1896 will end the era of “Victorian equilibrium”, an era that began with the reign of England’s Queen Victoria.

This era, however, could be called “the era of debt-based paper money and credit” for debt-based paper money and credit was the foundation of Queen Victoria ’s British Empire , an empire now in its final stages of dissolution and collapse. The current great wave of rising prices began in 1896. Lasting from 80 to 120 years and always culminating in economic collapse, this great wave will collapse between now and 2016. But, according to Fisher, this great wave differs from preceding waves.

Professor Fisher writes in the preface to his book:

…Every period of the past has been a time of change. The world is always changing—but not always in the same way. We shall find empirical evidence of distinct “change-regimes” in the past that were often highly dynamic, but stable in their dynamism. Sooner or later, even the strongest of these change-regimes broke down in moments of what might be called “deep change”. When it did so, one system of change yielded to another. Deep change may be understood as a change in the structure of change itself. In the language of mathematics, deep change is the second derivative. It may be calculated as a rate of change in rates of change.

We have been living through a period of “deep change,” when one “change regime” yields to another…In periods of deep change, understanding lags behind the movement of events…In the United States problems of economic understanding have been compounded by the effects of economic prosperity…The Greeks called it hubris, and thought that it always ended in the intervention of the goddess Nemesis. That lady makes her appearance when wave-riders begin to believe that they are wave-makers, at the moment when the great wave breaks and begins to gather its energy again.

Economic misunderstandings exacerbated by recent economic prosperity have left those in the US , Asia and Europe particularly ill-equipped to deal with what is now about to occur. Nonetheless, the past is proof that misunderstandings are no defense against future occurrence, no matter how many are ignorant of its coming While the whiff of hubris is still evident in the optimistic outlook of economic hucksters and those who job it is to keep us ignorant and complacent, it is clear that the goddess Nemesis is now about to take center stage. The great wave has broken. More

Richard C. Cook
With the economic news of the week of July 14—the continuing crisis among mortgage lenders, the onset of bank failures, the announced downsizing of General Motors, the slide of the Dow-Jones below 11,000—we are seeing the ongoing collapse of the U.S. economy. Even the super-rich are becoming nervous as cries for an emergency suspension of short selling ring out. What is really taking place, however, is that the producing economy of working men and women is being crushed by the overall debt burden on households, businesses, and governments that could reach $70 trillion by 2010. The financial system, including mortgage giants Fannie Mae and Freddie Mac, is bankrupt, as the debts it is based on cannot be repaid.

This is because the producing economy of people who work for a living simply can no longer generate enough purchasing power for people either to pay their debts or allow them to purchase what is being sold in the marketplace. In turn it is the debt burden and the loss of societal purchasing power that are crashing the stock market. Thus the collapse of the financial economy has started to destroy the producing economy as well. It’s a “perfect storm,” the result of a 200-year-old financial system where money is largely created by bank lending and where since 1980 our industry and jobs have been increasingly outsourced abroad to cheap labor markets. Thus domestic incomes have stagnated while the nation’s GDP has not been able to keep up with the exponential growth of debt. More

Dr. Lee Warren on USA Economic Disaster

Dr. Lee Warren Part 2

According to this recent debate in the House, since 1825 there has been three secret sessions. The last one before the one on March 13 took place in 1983.

These audio clips are from a broadcast of the Michael Herzong show and explores what Herzong claims is the true nature of the secret meeting: Martial Law and the imminent collapse of the American economy in late 2008.

Nouriel Roubini, global macro Uber-Bear, has posted an interesting commentary on his blog - “The delusional complacency that the “worst is behind us” is rapidly melting away…and the risk of another run against systemically important broker dealers“ which I am excerpting below with my comments in red:

The deleveraging process for the financial system has barely started as most of the writedowns have been for subprime mortgages; the writedowns and/or provisioning for the additional losses have barely started. Thus, hundreds of banks in the U.S. are at risk of collapse. The typical small U.S. Bank (with assets less of $4 billion has 67% of its assets related to real estate; for large banks the figure is 48%. Thus, hundreds of small banks will go belly up as the typical local bank financed the housing, the commercial real estate, the retail boom, the office building of communities where housing is now going bust. Even large regional banks massively exposed to real estate in California, Arizona, Nevada, Florida and other states with a housing boom and now bust will go belly up.

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Source: (MarketWatch) The incipient collapse of Freddie Mac will in all likelihood dump an additional $5 trillion in debt onto the national books by making explicit the companies’ dependence on the American taxpayer as their ultimate backstop. No glib politician, let alone Treasury Secretary Henry Paulson, will be able to talk their way out of this one. And the world’s leading sources of capital, China and the Gulf oil states aren’t about to sign on to support the political priorities of Washington, D.C. politicians looking to subsidize home ownership and get themselves re-elected. Instead, America is just going to have to work its way through this mess on its own.

It will not be a pleasant process. Wall Street will cherry-pick the productive mortgages, and the rest will be dumped on everyone else’s doorstep. People who didn’t borrow cheap money they couldn’t afford and who paid their mortgages on time, will nonetheless have to pony up more taxes to cover the losses incurred by their profligate fellow citizens at the prodding of an elected class that sought to extend homeownership to every American capable of casting a vote. Maybe, just maybe, the political class will finally have to own up to making some difficult choices: eliminating a couple of aircraft carriers for a start, and that $100 billion a year they spend on the department of education.

It might be a good idea to scrap that new air tanker contract too, given that they can’t seem to get it awarded anyway. If they had any real guts, they’d use this occasion to get rid of the mortgage interest deduction. After all, given that Congress’ popularity rating is in single digits already, why not take advantage of the opportunity? And if the Iraqis can’t use their oil wealth to outsource their internal security needs with oil pushing $150 a barrel, they’re never going to be able to. A high school teacher of mine used to say it didn’t matter how much money the government borrowed because it was a measure of how much faith Americans had in their future. We’re about to find out.

MIAMI (Reuters) - Florida’s tomato industry is in “complete collapse” and $40 million worth of tomatoes will rot unless federal regulators quickly trace the source of a salmonella outbreak and clear the state’s produce, an industry official said on Tuesday. “We probably have $40 million worth of product we can’t sell. We’ve had to stop packing, stop picking,” said Reggie Brown, executive vice president of the Florida Tomato Growers Exchange.
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China Earthquake Footage of collapse from inside building

WSJ’s Adam Najberg talks with writer Kate Kelly about covering the Bear Stearns’ collapse

KATE KELLY: Bear Stearns investors took their lumps, if not as painful as Mr. Paulson had envisioned. The Fed got stability in the markets, but at a risk of tens of billions of dollars and by setting an uncomfortable precedent. And J.P. Morgan picked up prized clients, talented Bear Stearns employees and a sleek new building at a bargain price, but now faces at least $9 billion in liabilities and the chore of integrating two wildly different cultures.