If the government’s stress test is anything like Creditsights’s stress test, then Wells Fargo will need another $119 billion; BofA, $99 billion; JPMorgan, $124 billion; Citi, $101 billion; Goldman Sachs, $47 billion; and Morgan Stanley, $34 billion. That’s over half a trillion dollars right there, for those of you counting along at home.
More than three million people are having to help their parents financially as the savings crisis engulfs a generation of Britons, research has revealed.
A Daily Telegraph survey – the first of its kind since the recession began – highlights the heavy toll being taken on Britain’s so-called “Babygloomers”.
Almost one in ten adults are having to contribute to their parents’ upkeep, the research found. The Norwich Union research suggests more than 1.3 million adults aged between 17 and 65 are paying their parents more than £250 each month, with some paying up to £1,000.
Many pensioners have found themselves struggling as their income from savings has virtually disappeared following the drop in interest rates. As a result, they have been forced to turn to their children for help.
If the UK is anything like America, I would bet that there are more parents helping their adult kids than there are kids helping their parents.
Still, this demonstrates the costs of trying to lower interest rates in order to stimulate the economy. This is one of the reasons why lowering the interest rates can actually increase the savings rate as I explained in this post.
China should seek guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank.
The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of U.S. government debt.
Benchmark 10-year Treasury yields climbed above 3 percent this week on speculation the government will increase borrowing as President Barack Obama pushes his $838 billion stimulus package through Congress. Premier Wen Jiabao said last month his government’s strategy for investing would focus on safeguarding the value of China’s $1.95 trillion foreign reserves.
You think maybe they are worrying about this?
The Obama Administration laid out plans yesterday to marshal an extraordinary $3 trillion to stabilise America’s stricken banking sector and revive its collapsing economy. US shares dropped sharply despite an unprecedented few hours of emergency government action.
The CIA has already spent 18 months developing a network of agents in Britain to combat al-Qaeda, unprecedented in size within the borders of such a close ally, according to intelligence sources in both London and Washington.
And why are they doing this? From later on in the article….
Jonathan Evans, the director general of MI5, admitted in January that the Security Service alone does not have the resources to maintain surveillance on all its targets. “We don’t have anything approaching comprehensive coverage,” he said.
In other words, America is sending spooks to its historical ally because they can’t handle their own internal threats.
But America is getting crazy enough on its own. From the Common Room….
I just came back from my local thrift store with tears in my eyes! I watched as boxes and boxes of childrens books were thrown into the garbage! Today was the deadline and I just cant believe it! Every book they had on the shelves peior to 1985 was destroyed!
The reason the books are being destroyed is that they can no longer be sold without being tested for lead first because of a law called CPSIA. We already covered this insane law earlier so hopefully you all are familiar with it. If not just go over to the Common Room and you will learn more then you ever wanted to about the law.
And speaking of insane, there is also this from Bloomberg….
Fannie Mae and Freddie Mac, the mortgage-finance companies seized by regulators, may need more than the $200 billion in funding pledged by the U.S. government if the housing market continues to deteriorate, Federal Housing Finance Agency Director James Lockhart said.
The companies’ needs will depend largely on the direction of home prices, Lockhart said in an interview in Las Vegas yesterday. His comments followed statements from Fannie Mae in November and Freddie Mac Chairman John Koskinen last week that the government’s funding commitment through 2009 may fall short of what the companies need to make good on their obligations.
This is hardly surprising and that is what is so insane. Not to long ago, the idea that 200 billion dollars might not be enough would have been front page news. Now it is hardly news worthy.
Kanjorski: “The Treasury opened its window to help. They pumped a hundred and five billion dollars into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts, and announce a guarantee of $250,000 per account so there wouldn’t be further panic and there. And that’s what actually happened. If they had not done that their estimation was that by two o’clock that afternoon, five-and-a-half trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed.”
The government it still able to prevent these things from occurring because people still have faith in the Government. What happens when people lose that faith?
The European Central Bank’s refusal to follow the lead of the US, Japan, Britain, Canada, Switzerland and Sweden in slashing rates shows how destructive Europe’s monetary union has become. German orders fells 25pc year-on-year in December. French house prices collapsed 9.9pc in the fourth quarter, the steepest since data began in 1936. “We’re dealing with truly appalling data, the likes of which have never been seen before in post-War Europe,” said Julian Callow, Europe economist at Barclays Capital.
Spain’s unemployment has jumped to 3.3m – or 14.4pc – and will hit 19pc next year, on Brussels data. The labour minister said yesterday that Spain’s economy could not “tolerate” immigrants any longer after suffering “hurricane devastation”. You can see where this is going.
Ireland lost 36,500 jobs in January – equal to a monthly loss of 2.3m in the US. As the budget deficit surges to 12pc of GDP, Dublin is cutting wages, disguised as a pension levy. It has announced “Rooseveltian measures” to rescue the foundering companies.
The ECB’s obduracy has nothing to do with economics. It fears zero rates as a vampire fears daylight, because that brings the purchase of eurozone bonds ever closer into play. Any such action would usher in an EMU “debt union” by the back door, leaving Germany’s taxpayers on the hook for Club Med liabilties. This is Europe’s taboo.
This is why I don’t think the EU will survive the current economic crisis intact. The various economic interests are just too divergent. It is possible that northern Europe will hang together. But there is no way they will be willing to hang with Club Med in the long term.
The clip from showcasing Milton Friedman beating up on Phil Donahue demonstrates the best and the worst of Friedman. The worst is the beginning of the clip where Friedman idolizes the free market. The best is the latter part of the clip where Friedman challenges Donahue’s own idols.
The Roving Cavaliers of Credit by Steve Keen is this week’s essay of the week. It provides a good critique of the ideas underlying the neo-classical ideal. Its failure is that it implicitly falls into the fallacy (made more explicit in Steven Keen’s other writings) that since the emperor has no clothes, the pretender must therefore be well dressed. The one does not follow from the other.
California Governor Arnold Schwarzenegger can order thousands of state workers to take two unpaid days off a month to cut $1.4 billion from the budget, a judge ruled.
Superior Court Judge Patrick Marlette in Sacramento, California, today ruled in favor of Schwarzenegger in a lawsuit brought by employee unions seeking to block the furloughs. Schwarzenegger said yesterday that he would lay off workers to achieve the savings if he lost in court.
California counties are throwing another wrinkle into the state’s cash crisis as Gov. Arnold Schwarzenegger and legislative leaders try to agree on a way to erase a $42 billion budget deficit.
Several counties are considering some form of tax revolt—either filing lawsuits or delaying tax payments to the state—because the governor has proposed withholding payments to them for as long as seven months in a move to preserve cash.
Local governments already are missing out because the state has imposed a 30-day payment delay to counties. That was part of a move by the state controller to delay refunds to taxpayers, money for college tuition-assistance programs and payments to state vendors.
The Riverside County Board of Supervisors authorized staff to file a lawsuit, while elected officials in Colusa County decided to impose a 30-day delay on sending any taxes and fees it collects to the state.
The difference lies in the way growth is measured. Beijing uses a method that compares growth in one quarter with a full year earlier and says its economy expanded by a healthy 6.8 percent in the final quarter of 2008.
But experts say that compared to the previous three months — the system used by most other major countries — China’s growth fell to as low as 1 percent or possibly zero.
“The recent weakness is much worse than the long-term trend,” said JP Morgan economist Frank F.X. Gong. Merrill Lynch economist Ting Lu said fourth-quarter growth from the previous three months was “close to zero.”
The lower quarter-on-quarter growth figure would be in line with other indicators that show exports and manufacturing falling and weakness in investment and consumer spending.
Basically, they are saying the only reason that China is showing economic growth is because there was growth earlier in 2007.
Edit: It should be noted that the US is not a lot better when it comes to statistics. This from Dean Baker….
That may be hard to believe, but the economy almost certainly lost more jobs in January than the 597,000 job loss reported by the Bureau of Labor Statistics (BLS). The reason is that BLS imputes jobs for new firms that are not included in its sample.
The formula used for calculating this imputation is backward looking, meaning that it depends on growth in prior quarters. When the economy takes a sharp turn in either direction, as it did last fall, the imputation is likely to be too high or too low, depending on the direction of change.