SEPTEMBER 2007

Juncker: EU could give up right to nominate IMF chief

29.08.2007 - 09:28 CET | By Lucia Kubosova
The EU's nominee to be the next head of the International Monetary Fund may be the last European in the job, the eurozone's chief Jean-Claude Juncker has suggested.

He also indicated that support for the EU candidate this time round could see developing countries being the source of future IMF leaders. "The next director will certainly not be a European," Luxembourg's prime minister and the president of the group of eurozone finance ministers said in an interview with FT Deutschland, published on Wednesday (29 August).He argued that the bloc's finance ministers were aware that their candidate - former French socialist finance Dominique Strauss-Kahn - "will probably be the last European to become director of the IMF in the foreseeable future."

Mr Juncker's words are in reaction to the increasingly bitter debate between the West and developing countries – including rising economic giants China, Brazil and India – about who should head the international organisation.

Until now the nomination procedure has always followed the unwritten rule that European IMF chief and an American president of the World Bank.The rule came under the spotlight once again when the EU chose its candidate for the job in late July and then again last week when Russia unexpectedly threw in its own nominee, the Czech former central bank governor, Josef Tosovsky.

Moscow highlighted its candidate's recognised credit in reforming the Czech economy, but Mr Juncker pointed out that the French ex-finance minister is also a "well-known reformer" who would bring along his experience to improve the monetary fund.

"When Strauss-Kahn leaves the IMF one day, he will have adjusted the IMF firmly to the expectations and interests of developing countries," he said in the interview.He went on to criticise the UK's position in the debate, saying "They have criticised the selection process and have said that we should have talked to others as well. But we did talk to others as well." "Anglo-Saxon accusations that, by nominating Strauss-Kahn we were trying to cement the unwritten rule that Europeans provide the IMF's head, are missing the point," he added.

The Washington-based IMF provides loans and economic advice to its member states. It has been also criticised over the years for deepening economic crises in some countries through its reform ideas.
© 2007 EUobserver, All rights reserved

China threatens 'nuclear option' of dollar sales

By Ambrose Evans-Pritchard
08/08/2007

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials of leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Xia Bin, finance chief at the Development Research Centre (which has cabinet rank), kicked off what now appears to be government policy with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US.

"Of course, China doesn't want any undesirable phenomenon in the global financial order," he added.

He Fan, an official at the Chinese Academy of Social Sciences, went even further today, letting it be known that Beijing had the power to set off a dollar collapse if it choose to do so.

"China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency. Russia, Switzerland, and several other countries have reduced the their dollar holdings.

"China is unlikely to follow suit as long as the yuan's exchange rate is stable against the dollar. The Chinese central bank will be forced to sell dollars once the yuan appreciated dramatically, which might lead to a mass depreciation of the dollar," he told China Daily.

The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being "held hostage to economic decicions being made in Beijing, Shanghai, or Tokyo".

She said foreign control over 44pc of the US national debt had left America acutely vulnerable.

Simon Derrick, a currency strategist at the Bank of New York Mellon, said the comments were a message to the US Senate as Capitol Hill prepares legislation for the Autumn session.

"The words are alarming and unambiguous. This carries a clear political threat and could have very serious consequences at a time when the credit markets are already afraid of contagion from the subprime troubles," he said.

A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.

The yuan has appreciated 9pc against the dollar over the last two years under a crawling peg but it has failed to halt the rise of China's trade surplus, which reached $26.9bn in June.

Henry Paulson, the US Tresury Secretary, said any such sanctions would undermine American authority and "could trigger a global cycle of protectionist legislation".

Mr Paulson is a China expert from his days as head of Goldman Sachs. He has opted for a softer form of diplomacy, but appeared to win few concession from Beijing on a unscheduled trip to China last week aimed at calming the waters.

FOR MONTHS WE'VE ALL HEARD STORIES ABOUT THE POSSIBILITY THAT THE UNITED STATES, CANADA AND MEXICO WOULD BE "MERGED" INTO A NEW SOVEREIGN ENTITY CALLED THE "NORTH AMERICAN UNION" . . . . .GOVERNMENTS DENIED IT PUBLICLY AND OTHERS CALLED US "CONSPIRACY NUTS." WE FINALLY HAVE PROOF: THEY ARE COINING MONEY IN THE NAME OF THIS NEW ENTITY!!!!

"The Hal Turner Show" has received images of the new unit of currency they are planning. It is called "the Amero" which will replace the "Dollar" and the "peso" in all three countries once they are merged out of existence!

They are even coining "Ameros" in Collectable precious metals like Silver as the "Proof" coin shown below!!

More details are pending. One thing is absolutely clear: The governments of the USA, Canada & Mexico are engaged in a conspiracy to merge the three countries without the knowledge or consent of "The People."

In furtherance of this conspiracy, the government of the United States is intentionally spending the nation into absolute, unrecoverable Bankruptcy with the intention that the monetary system collapses.

When the U.S. currency collapses, it will take with it, both the Canadian dollar and Mexican Peso because both countries are so heavily invested in the U.S. dollar through trade with the US.

During such a collapse, when hundreds of millions of average citizens face absolute destitution because their currencies have been wiped out, these Conspirators will turn to 'The People" of each nation and say "your only hope is to merge all three countries and make a new start."

The thinking is that the populations will rush to embrace the merger and forget all about our individual history, rights and systems. In one fell swoop, the Conspirators will clobber us into absolute despotism and we will be helpless to do anything because our money will have become worthless!

While you're gasping for air at this, did you happen to notice the DATES on these coins? 2007

Gee whiz, this plan seems awfully far along. I guess this means the collapse will be this year? Maybe that's why the housing market was allowed to "tank?" Maybe that's why the Stock Markets are dropping hundreds of points per day lately? Maybe this is why oil has increased in price. . . . because the oil nations already know they're going to take a bath on the currency change when they have to exchange "Dollars" they're already holding which will be worth only "pennies" on the "Amero?"

Are you starting to grasp why so many things are going wrong lately? Does a lot of it start to make sense when put in the context of wiping out currencies in the name of globalization? It's the jew bankers, folks. Another jew banking scam designed to enrich the few at the utter devastation of the rest!

Top Swiss banker attacks US lending standards as 'unbelievable'

By Ambrose Evans-Pritchard and Yvette Essen
Last Updated: 12:15am BST 21/08/2007
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/20/bcnswiss20.xml

Switzerland's top banker has warned of massive losses from the unfolding credit crisis, describing the collapse in US lending standards as "unbelievable".

Jean-Pierre Roth, president of the Swiss National Bank, said market turmoil was far from over as tremors from the sub-prime debacle continued to rock the world.

"We're certainly not at the end of the story. There are question marks surrounding the development of the American economy," he said. "Something unbelievable happened. People who had neither income nor capital got credit with very attractive conditions. Now reality is striking back," he said.

In Germany, the state bank SachsenLB admitted that it had received a €17.3bn bail-out after its investment arm Ormond Quai racked up huge losses on US sub-prime debt. It had previously denied holding direct exposure to sub-prime.

The revelation came as traders braced themselves for another turbulent week, with mounting expectations that central banks may soon cut rates to prevent market mayhem leading to an economic downturn.

While the surprise half-point cut in the US discount rate to 5.75pc last Friday helped settle markets and launch a relief rally on Wall Street and European bourses, investors remain wary until it becomes clearer who is holding the main losses on US mortgage debt.

Stockmarket historian David Schwartz warned investors not be fooled by signs of recovery. "The truth is no-one knows how serious the financial problem in the US is, nor how it will unfold. We do know central banks are scared out of their minds," he said.

The scale of last week's sell-off sent shock waves through almost every asset class. Hedge funds liquidated yen "carry trade" positions to meet margin calls, toppling dominoes across Asia, Latin America, and Eastern Europe.

Both Goldman Sachs and Lehman Brothers predict two cuts in the US federal funds rate to 4.75pc by the end of the year as falling house prices dampen spending. Michigan's consumer confidence index slumped to 83.3 in August, down from 90.4 in July.

Markets are pricing in a 34pc chance that the European Central Bank will have to start cutting rates before the end of the year after growth faltered in the second quarter. The French and Spanish property booms have both stalled.

Jean Claude-Trichet, the ECB's president, last week reaffirmed a likely quarter point rate rise to 4.25pc in September, despite the bank's emergency actions in previous days. inside

The Great Financial Crisis or Who’s Got a Turd in his Briefcase?
JAMES PETRAS
http://www.petras.lahaine.org/articulo.php?p=1707&more=1&c=1

08.24.2007

All the major financial analysts claim the ongoing and deepening financial crisis is in large part the result of investor uncertainty. This is because the investment banks, derivatives and hedge funds placed high risk, sub-prime mortgages and junk bonds, along with other more reliable debt paper into packages and sold them to institutional and private bankers who in turn ‘retailed’ them around the world.

The rating agencies, who are paid by the sellers, all gave top billing (AA, AAA) to these hybrid securities, mortgages and junk bonds, encouraging investment advisers to push them on to risk-averse client looking for higher returns than Treasury notes. Most of the investors do not know whose and what paper they are holding, nor how much their hedge funds are losing or have lost. Those who can, have pulled out. The banks are reticent to loan to any applicant. Leverage funds are a dirty word among lenders. Hedge funds are either selling assets to pay loans or not telling what they own or owe. Derivatives have been deflowered. Central Banks in the US, Japan and the European Union have poured (and keep pouring) over $250 billion to the private banks hoping to create liquidity but the banks won’t lend – because, as one prominent banker in Palm Springs told me “Nobody knows who’s got a turd (worthless investments) in his brief case.”

Meanwhile, Goldman Sach, Bear Stearns and Lehman Brothers are all closing down bankrupt investment funds or trying to prop them up. The Fed props up all the worst speculators in the name of ‘saving the financial system’ - in a way that it would never prop up the failing American health system. The financial system has the ‘runs’ and infusions of Fed funds have failed to block the ‘run for cover’.

“Everybody for himself…and don’t look back’, is the watchword of leading equity bankers. The Democrats are calling for the usual inconsequential Congressional hearings about what went wrong. Congressmen Levin and Barney Frank will ask the wrong questions to the wrong people – going after the weakest fall guys – the rating agencies – for overrating the fraudulent deals, not the dealmakers themselves. The ‘turds’ in the briefcases are big and smelly but no one knows how big: $250 billion or $500 billion. There are a lot of bankers and hedge fund billionaires walking around with invisible clothespins on their noses.

Where is Greenspan, since he started the whole scam with his low interest, deregulated financial markets? The homely hero of all hedge-derivatives-innovative financial scamsters sanctioned, approved and promoted the pyramid swindles. He’s off advising Deutsch Bank and suckering the international bankers for $100,000 fees for his failed financial recipes. But for those speculators who made a bundle and left, Greenspan is not part of the emerging turd culture. For them he is still the financial genius who made their fortunes.

So unless the fund directors come clean, empty their brief cases and open their balance sheets we won’t know who are carrying the turds: The great unknowns include the unredeemable bonds, the worthless mortgages and the illiquid hedge funds. Without knowledge of the size and scope of the turds, the great uncertainty has frozen most investments and loans – it is paralyzing the financial system. Even Fannie Mae and Freddie Mac (the federally-funded mortgage companies) can’t come in and buy up the ‘turds’ (otherwise known as ‘bad debts’), no matter how many hundreds of billions of US taxpayers’ money they are willing to spend.

All the financial wizards, the super-smart scientific, mathematical, guaranteed 30% per year investment advisers have less credibility than a street corner con man. The most arrogant, pretentious, scientific speculators have been humbled; especially those oracles who practiced what is call among the insiders as ‘Quantitative investment’.

Quantitative investing (QI), the use of complex computer models in making investment decisions, was used and promoted by some of the reputedly smartest and highest regarded ‘gurus’ of Wall Street. For a decade the complex mathematical modeling produced extraordinary profits for Renaissance funds, Goldman Sachs and numerous other asset managers and hedge funds. With the massive sell-offs of assets to pay debts and the desperate drive for liquidity, all the assumptions of the QI went out the window. “The Model” cannot account for any crisis which calls into question ‘historical trends’. The best and the brightest are baffled. At first, the QI geniuses said the crisis was a localized problem for the sub-prime bottom-dwelling speculators. But as their own funds dropped they blamed hysterical investors who over-reacted. “A problem of perceptions”, they psychologized. But their funds continued to decline: the Market wasn’t acting as their ‘model’ dictated. Hearsay flourished, skeptics surged.

“What’s the problem: The Market or the Model?”, one QI practitioner asked his colleagues.

The answer from the Market: “It’s the model stupid: All the QI use historical models that extrapolated past patterns into the future as if capitalism is a crisis-free system which changed incrementally and in which investors borrowed rationally to leverage purchases in line with their capacity to pay back any losses. That’s Main-Street folklore for retail brokers and the daily fare of American Enterprise ideologues.”

Scientific mathematical modeling in the Great Casino predictably turned out to be as fallible as numerology spun by Shamans to explain the life cycle.

No one’s going out of the window of the upper stories of high rise offices – yet. What’s keeping the suicide rate down is precisely what’s keeping investors running: no one knows how many hundreds of billions in worthless paper is being held. With the demise of the mathematical modeling speculative science, we are now in the period of the Mystical Black Hole. The big investment houses and hedge funds are holding back on revelations, hoping that investment confidence will return if investors are kept in the dark about how much they lost. This is a step below Voodoo Economics. How can investor confidence return if they don’t know if the big turds are in the briefcase of the Renaissance Funds, Goldman Sachs, First Quadrant or any one or all of a thousand and one Ali Baba hedge funds?

Let them lose their pants, writes orthodox Market pundits like Marty Wolf in the Financial Times. “In order to value risk, they should lose properly. To bail them out”, they argue, “is a moral hazard.” Meaning of course, that if the hype and scam speculators are covered by a Federal Bank bail out, they lose nothing, and will repeat swindling in the future. Bailouts are a formula for financial scam recidivism. So much, alas, for the advice of orthodox market experts. European Central Banks and the US Federal Reserve know what class they represent: Real existing speculator plungers, not textbook risk-calculating value-oriented entrepreneurs, are their reference group. The risk of letting the bad boys sink is that there are too many of them, working in most of the most powerful investment houses, managing too many funds, for the most powerful financiers.

“There are no good financiers and bad speculators”, one philosophically inclined fund manager (who is likely carrying a turd) put it, “We are all in this together, if we sink so does the whole financial system.” Is this a self-interested plea for financial solidarity, a closet Marxist or a prophet of doom? Nobody knows till we delve into the Black Hole of the financial crisis. That won’t happen till the brief cases open.