This from Spiegel…

Deutsche Bank’s announcement that it is short €29 billion has Germans fretting. If the country’s biggest bank is in trouble, what does that mean for the others? Commentators think it could be bad news.

This from the New York Times….

The dollar remained at a low ebb today against major world currencies.

One euro traded at $1.4090 this afternoon, up from $1.4065 yesterday, the first time in the common European currency’s nine-year history that it has crossed the $1.40 mark. The British pound also rose, trading at $2.0202, after closing at about $2 yesterday.

And the American dollar remained at virtual parity with the Canadian dollar, the first time that the two currencies have traded that closely since late 1976. It was trading today at 1.0007.

This from the New York Times via Calculated Risk….

It is a measure of the continued confidence in the power and wisdom of central bankers that markets around the world rallied. Both moves showed that the bankers had grown more fearful of credit market contractions damaging economies, but investors initially chose to focus on the action rather than the fears.

By yesterday, however, the markets were moving in ways that cannot have made the Fed happy. The dollar fell — an expected result from cutting short-term interest rates — but long-term rates rose, and so did mortgage rates.

“Alan Greenspan’s conundrum is becoming Ben Bernanke’s calamity,” said Robert Barbera, the chief economist of ITG, recalling that when the Fed raised short-term rates under Mr. Greenspan, long-term rates did not follow. Now the opposite is happening, a fact that will make it that much harder to stimulate the economy.

Those wanting to understand the Fed’s reversal can profit from reading two papers by Fed officials, released this summer as the credit squeeze was worsening.

In total, they constitute an admission that the Fed was surprised by the housing and borrowing boom on the upside, and now fears it will be surprised on the downside.

This from Marco Man…

Macro Man has long been more favourably disposed to the buck than many. His disavowal of the “dollar must go down forever” thesis is one of the reasons that he (unfortunately) didn’t delta hedge his powerball strip. However, even his patience has its limits. A few weeks ago, he noted that any aggressive gesture from the Fed to bail out turd-holders and reflate asset markets would force him to turn structurally bearish.

That has now come to pass, and in what Dennis Gartman might refer to as a “Watershed” moment, Macro Man has lost faith in George Washington. Simply put, if the Fed doesn’t give a crap about protecting the purchasing power of the dollar, why should anyone hold it?

Meanwhile, Jeff Matthews mocks the Fed. And Saudi Arabia declines to follow the Fed off the cliff.

This from Bloomberg….

Crude oil climbed above $82 a barrel to a record in New York after the Federal Reserve reduced U.S. interest rates more than economists expected.

Sometimes the world is just so sick that even I can’t laugh at it. Though perhaps I am overly sensitive due to the fact that food is near and dear to my heart.

What ever the reason, I can find no humor in the fact that this country subsidizes the burning of food for fuel while at the same time slapping such heavy environmental regulations on fuel that farmers are facing shortages. This from Fox News…

NEW YORK — Fuel shortages in the U.S. Midwest are raising concerns corn farmers may have trouble harvesting their bumper crop this autumn.

Farmers planted the largest corn crop since 1944 last spring after prices hit a 10-year high of $4.37 a bushel in early 2007. The U.S. Department of Agriculture has estimated a record crop of more than 13 billion bushels.

But farmers said supplies of the ultra low sulfur diesel needed for harvesting equipment are running low, particularly in the corn-growing regions of Minnesota, Nebraska, and Iowa.

In Iowa, fuel shortages are anticipated as retailers report having only about 80 percent of their normal supply, said John Scott, a corn and soy farmer in west central Iowa.

“Worse case scenario is our crop stands in the field until we have fuel to harvest it,” said Scott, who has stored about one week’s supply of fuel in anticipation of shortages, but not enough to tide him over for the six-week harvest season.

Curt Watson, the President of the Minnesota Corn Growers Association, said the fuel terminal that usually supplies his area is dry. His supplier has to drive to another area, where long lines with a wait of four hours are not uncommon.

So according to this article, the checks that America Home Mortgage Investment Corp sends out to pay the property taxes are bouncing. That means that the people in those houses need to pay their bill themselves if they don’t want to lose their houses. So what has that to do with shooting government officials? Well read this….

Baltimore City received bad checks for 53 properties – a total of about $63,500. Baltimore County said American Home Mortgage checks bounced for 21 properties, totaling $41,000. Taxes are due at the end of the month.

Finance officials in the rest of the region – Anne Arundel, Carroll, Harford and Howard counties – reported no similar problems.

“This is just another chapter in what is a very difficult time for the mortgage industry,” said Donald I. Mohler III, a spokesman for Baltimore County, which no longer accepts checks from American Home Mortgage.

“It’s an unfortunate situation and we certainly hope these individuals will be able to work out some kind of agreement with their mortgage company,” Mohler said.

Anthony McCarthy, a spokesman for Mayor Sheila Dixon, said the city does not plan to notify the affected homeowners. They will get a notice in November along with all other delinquent taxpayers if the problem isn’t resolved by then.

Baltimore County said it has sent bills directly to the property owners to alert them.

Now Baltimore County is doing things right. I don’t feel any particular need to see them shot. But what excuse is there for the city of Baltimore? If the City alerted people like the county did, then people could avoid penalties.

I thought that government guaranteed deposits were supposed to stop bank runs. But apparently it does not work all that well. This from the Telegraph…..

About £1 billion was withdrawn by panicking Northern Rock customers on Friday, as fears for the bank’s future sent shock waves through the City and caused its shares to crash.

The company’s phone lines were jammed for most of the day, its website crashed and the 72 branches were besieged by thousands of worried customers after it admitted having to ask the Bank of England for emergency funding.

I have yet to read a good explanation for what Northern Rock’s problem is. But it is not going to be an independent company for long at any rate.

China is now learning why it unwise to subsidize your exporters with an artificially weak currency. Sure it makes your exports more competitive on the global market. But it also makes your imports more expensive.

As it happens, one of China’s most important imports is food. This from Macro Man….

As is generally the case, China marches to a somewhat different drumbeat to the rest of the world. So while the West has been snoozing, it’s been all action in China with the release of a (yet another) higher-than-expected CPI report and a 4.5% decline in equities. While the latter is but a blip, the former has now reached its highest level in more than ten years, and thus merits some attention.

As has been the case throughout the year, food prices account for the bulk of the rise in CPI. Non-food-price inflation remains fairly steady at around 1%, which has encouraged many China watchers to presume that the current bout of inflation need not be met with aggressive policy tightening. Just as Clara Peller asked “Where’s the beef?” in the 1980’s, the question here appears to be “Where’s the pass-though?”

Is that the right question, though? After all, a number of non-food items (energy, most conspicuously) fall under the aegis of price controls and thus should not be expected to show a price rise. And given the number of Chinese citizens living on a subsistence or quasi-subsistence basis, it is surely not in the best interests of a regime focused on stability to see food inflation (which has now hit 18.2%!) foment unrest in the hinterland.

Macro Man’s whole post is well worth reading.

This week at Acme I totally neglected the program to reduce shipping errors. I didn’t have any time for it. I was busy doing nothing.
Through no fault of my own, I got conscripted into a project to do nothing. The goal of the project was to see what kind of information transactions occurred during the Click Here to continue reading.

I always have mixed feeling when I read Martin Hutchinson. He is neither a starry eyed free marketer nor a bleeding heart liberal. Rather, he is a conservative in the original sense of the word. He does not like change.

Thus, you can usually count on him to argue that things were better in the good old days. Were markets more regulated 50 years ago? That was better then now according Mr. Hutchinson. Was there less welfare 50 years ago? That was better then now according Mr. Hutchinson.

I don’t have the same kind of uncritical appreciation for the past that Mr. Hutchinson has. But my biggest problem with him is his apparent belief that we can just change the laws back to what they use to be and society will follow meekly along back to the good old days. In reality though, culture changes law, law does not change culture.

All that is just to say that I fully support the central point of Mr. Hutchinson rant against Fannie Mae and Freddie Mac. But I have to disagree with his assertion that the modern day financial elites are just rent seekers who add no value.

Value is in the eye of the beholder. In the good old days, a community would save enough for its own mortgage needs through local financial institutions. That made capital cheaper in absolute terms. But that also required disciplinal and sacrifice on the part of the culture.

The value the current day financial elite provide is that they get the money for mortgage without anyone in this country needing to save. But for such magic to occur you need highly paid magicians. Plus, you have to make a deal with the devil.

But that is what the baby boomers wanted so no one should pretend that they are the unfortunate victims of the evil elites.