“We’re going through uncharted territory now”.

international | anti-capitalism | news report

Tuesday January 22, 2008 14:35

by S.Cat

Us Federal Reserve makes shock announcement as Wall St opens.

At around lunchtime in Europe, when we're grabbing sandwiches or sitting down to plates of pasta or green salads (or skulling pints in the Stag's Head) the financial markets in Wall Street open. Usually they react to the morning's trading in the European markets, and so US traders seeing falling prices as a buying opportunity can offset a downward trend. Yesterday however, the holiday for Martin Luther King meant the falls on the global markets went from bad, to worse, to unbelievably bad, while in America the boys in the sharp suits were at home celebrating racial diversity and civil rights.

India’s stock index sank by 7.4 percent yesterday, the greatest one-day fall ever. Tokyo's Nikkei 225 index slid by 3.9 per cent. In Toronto, the S&P/TSX composite index fell 4.8 percent. Brazilian stocks plunged 6.6 percent on the main index of the Bovespa exchange, and the Argentinian Merval index fell 6.3 percent. In London the FTSE-100 fell 5.5 percent, in Paris the CAC-40 Index went down 6.8 percent, and in Germany DAX 30 fell 7.2 percent.

In Hong Kong, the Hang Seng index was down 5.5 percent, its biggest percentage drop since somebody flew some planes into some buildings in New York and Washington six or seven years ago.

These figures are very bad for the markets. They mean that the value of companies is diminishing, so what they can borrow is less than they thought. So then they might run in to cash flow problems, and can't expand or take risks. So then people don’t want to invest in them, so the cycle turns in a vicious circle.

Of course, from an environmental or anti-capitalist point of view, these are all good things, since the companies like Cement Roadstone (down by 98 cents per share yesterday) which are getting hit, do not have the best interests of anyone but their shareholders at heart, so the less damage they can do (to us, and the ecosphere) the better.

The whole capitalist money market system on based on a belief that there is a never-ending supply of market, resources, consumers, products and money. But everyone knows that there have to be losers as well as winners, and everything runs out eventually. So the market falls, people lose their shirts, there are more poor people than rich people in the world, but generally the people with the money are good at getting more of it, so whatever happens they come out alright. Some lose their second homes or yachts, some end up jumping out the window, but the strongest (meaning the richest in this system) survive.

Usually there is a balance in these things, where slack can be picked up and bargains can be had. In recent years however, the decline in trust between banks and the general disdain felt for the traders since the back office boys realised that they no longer really understood what is actually going on in the trades (the recent "credit crunch" meant that a lot of senior people were found to have not figured that they were actually buying mortgages held by poor Americans in housing estates in places like Chicago, at rates which depended on housing increasing in value forever to infinity). Banks no longer trust each other and in lots of cases, they don't even trust their own people. When trust leaves the financial markets, the price of borrowing goes up. When money becomes scarce, prices drop to attract whatever is available to invest. In this case it's share prices that are dropping. Within the last hour or so, the US Federal Reserve has suddenly raised interest rates in an effort to attract money back.

So what does this mean for us?

In the short term, people in Ireland may lose their jobs because the American companies, which employ them, will not be able to borrow cheaply. The Irish tax take will fall (they won't be paying tax on money they are not making) and public spending will be hit. A sharp slowdown will affect house prices. Mortgages that can't be repaid will result in negative equity (people living in houses that they can't pay for but can't sell without going into more debt). Ministers will make noises about tightening belts while making sure their own pensions are okay.

In the long term, no one knows what will happen.

In a news report of the market falls yesterday, Robert Lutz, chief investment officer for Salem’s Cabot Money Management Inc., was asked what he thought was going to happen in Wall St today, but in his answer he could have been talking about the future for the whole global capitalist experiment:

“I think you’re going to have a very volatile day,” he said. “We’re going through uncharted territory now”.

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Comments (15 of 15)

The markets will recover

by Underwhelmed

Tue Jan 22, 2008 15:16

They always do.

You may be right it recover this time but

by Finbar

Tue Jan 22, 2008 16:34

But what about the millions of working class people who will suffer because of this due to layoffs or banks reclaiming loans. Are they just some unfortunate detail?

How the Dollar has retained it's world currency position.

by Terence

Tue Jan 22, 2008 16:39

For those of you interested in financial related matters and central to all of this, how the dollar has retained it's world currency status from that of a creditor nation to a debtor nation, then the book by Michael Hudson originally written in 1977 but 2nd ed in 2003 is well worth reading. It is available in PDF format for free online.

In particular the last 3 chapters give an good insight into the very heart of the problem today which is basically since the currency departed from the gold standard back in 1971, the dollar has become a fiat currency and all other currencies are really just ranked relative to it and so themselves are in some sense fiat currencies too.

In effect what has happened since the 1970s other countries have financed US spending, growth and deficits and while by the early 1970s foreign countries had a few 10s of billions of US bonds or debt, it has now grown to ludicrous levels of 100s of billions. But countries got used to this in the 1980s and 1990s, but now the problem is that it is plain for all to see that with absolutely no regulation of the financial market it is obvious it is completely corrupt and outright criminal and the market can no longer ignore this fact. Thus the crisis in the dollar, except there is nowhere to turn really as there aren't enough Euros around to replace it.

The TOC from the book for the last 3 chapters are:

CHAPTER 13: PERFECTING EMPIRE THROUGH MONETARY CRISIS, 1970-1972
AMERICA’S ILLEGAL TEXTILE QUOTAS SPUR FOREIGN RETALIATION
EUROPE’S THREATS OF FINANCIAL AND TRADE RETALIATION

THE SUMMER 1971 DOLLAR CRISIS FORCES UP EUROPE’S EXCHANGE RATES
AUGUST 15 AND ITS AFTERMATH
EUROPE’S AUTUMN 1971 COLLAPSE

CHAPTER 14: THE MONETARY OFFENSIVE OF SPRING 1973
U.S.-SOVIET CONDOMINIUM?

CHAPTER 15: MONETARY IMPERIALISM
U.S. “FOOD IMPERIALISM” VS. A NEW INTERNATIONAL ECONOMIC ORDER
THE MONETARY IMPERIALISM IMPLICIT IN THE U.S. TREASURY-BILL STANDARD

EPILOGUE

Michael Hudson

by Miriam

Tue Jan 22, 2008 20:55

Here's a reelly, reelly good interview with Michael Hudson on KPFA in which he describes very clearly exactly how the US got itself - and others - into this mess:

http://www.kpfa.org/archives/index.php?arch=21767

It'd be tempting to think that those who are most responsible for this will be the most hurt by it - and sure enough some of them will loose a lot. But of course they will make us pay. Like they always do.

I don't think we're going through uncharted territory, language used is the worst about crashes

by ($=€)

Wed Jan 23, 2008 13:06

In the last months that scintilating forum of opinion offered by the Irish Times to readers posited a potential crash in real estate & allied slump in the Irish economy. I almost choked on my meusli reading how Irish investors were considering "going to the lifeboats", "tightening their belts", "bailing out" & all these jewels of irrational disassociation came in the first person plural. It is certain that the Irish economy is one of the most reliant of the EU member states on the US markets & attitude of US investors. But of course that's historical, Ireland is closer to the New York Stock Exchange than Berlin by about minus 3,800 kilometres. [ Dublin - Berlin 1,315km : Dublin - NY 5,122km]
Elsewhere across Europe state ministries of finance & the much more powerful financiers have been preparing for a US crash for months if not years. It's ridiculous to suggest no-one saw this coming nor no-one knows how to play it to their best advantage or put another way - that there are not those who want it become worse in the short term for their long term advantage. It might be timely to look at similar occurences in the past & examples of men & women were flakey skin & patchy CV's who made a billion or two on one of the last occasions. Enter Mr honorable Doctor George Soros. The BBC haven't forgotten how he almost singlehandly bankrupted the UK. (which is a bit of joke - all he did was use a phone to tell tower blocks of direct or indirect employees what to do)

Soros in an interview with the BBC has declared the decision by the Federal Reserve yesterday was correct ( c/f http://www.federalreserve.gov/newsevents/press/monetary...b.htm ) & that he's pretty pumpkin pie sure we're doing a crash.
http://news.bbc.co.uk/2/hi/business/7204159.stm

So now I'd like you to wonder why William Poole was the only man on the board of the Federal Reserve to vote no to the cut & why Frederic S. Mishkin didn't even bother making the meeting.
Of course many of you will have darned your wellington boots & jumped ship already, in which case I suggest investing in Tesco subtley. Don't spark panic buying at the tinned conserves, spread your options & take advantage of cheaper oil to drive your SUV around a few Tesco branches.

now that the markets are settling, let's widen our list of suspects beyond good old Soros.

Sun Jan 27, 2008 00:09

4.9 billion euro = 7.15 billion dollars.
it's a lot of money & to be quite honest the "=" equal sign should be more of an equation sigma formula thing. You don't just go into AIB with 4.9 billion and walk out with 7.15 billion less a 3.50 handling charge even though they give you a complimentary van and case complete with handcuff.
it is of course the amount of money which 31-year-old Jerome Kerviel is being blamed on losing in the largest financial scandal of its kind ever.......ever........ever........, or is it?

he's in police custody.
http://afp.google.com/article/ALeqM5iwrxotb2Fur4zcHaQ3_...SwNKg
the silly question could one man cause global market meltdown has been asked by the BBC who of course know the answer - yes. http://news.bbc.co.uk/2/hi/business/7208947.stm
But.............. to do that many other people would have been tipped off before hand. So.......... hands up who knew 7.15 billion was missing! More will be added on this thread & we see market adjustment to a level of blue chip and hedge funds comfortable for the emergent middle class investor who joined the game at least 4 years ago. I'd say that will be about wednesday next. depending on how south carolina goes. Oh but I forget this isn't a finance orientated site. We do anti-capitalism without understanding money. don't we?

possibly one of the most splendid & unwitting anti-capitalists of the century.

Am I the only one....

by StayOffTheMushrooms

Mon Jan 28, 2008 00:39

that doesn't know what the fuck you are on about iosaf!!

http://en.wikipedia.org/wiki/William_Poole

The cryptic hinting style gets a bit wearing after a while. If you have some information to impart then I would appreciate it if you imparted it clearly.

ok i'll make it simple.

Mon Jan 28, 2008 22:10

The bank which employed yer man in the photo admitted losses of about 5 billion last week. Only last night did they admit the loss had been 50 billion when they noticed it. That's well over the Irish state budget by the way. So what I was trying to remind people is that it is very simple for one person as billionaire currency speculator (George Soros) to undermine world markets (he did it before) [c/f http://en.wikipedia.org/wiki/Black_Wednesday ] as much as the mere hint that France's second largest bank had lost anything even remotely close to 50 billion would undermine world markets too. Add to that my conviction that the inflated real estate & banking stock (the most hit by the slump last Monday) will by late Spring return to their average value if not volume of approx four years ago. It's really simple. Honestly it is. But if you still have difficulty understanding my explanation & don't understand that contrary to the article title & cut & punch /& thrust of so many well paid financial journalists last week - we are in fact in very familiar territory - here's the wiki :-
http://en.wikipedia.org/wiki/Kerviel

There was not really a "stock market crash".
The US Fed didn't need to cut interest rates & it was probably a bad idea in the long term to do so.

good follow up examination from the FT
............"there are two central questions in the case of Jérôme Kerviel and Société Générale. What was the precise nature of his position? And does it explain the sharp decline in European equities between January 21 and 23? The best assessment is as follows. Mr Kerviel’s supposed job was to arbitrage small discrepancies between equity derivatives and cash equity prices. However, starting on January 7, Mr Kerviel made a series of bets that Germany’s Dax index, the French Cac40, and the Euro Stoxx 50 would rise. He bought futures contracts, as normal, but did not hedge against market falls. (Hedging would usually involve selling the underlying shares, or over-the-counter derivative contracts with clients.) Eleven days later, internal controls finally identified suspicious activity. By then the Euro Stoxx 50 had fallen by a cumulative 7 per cent, and the position had generated, SocGen has indicated, a loss of between €1.5bn and €2bn. This implies Mr Kerviel had taken a notional long exposure of €21-€29bn. The margin payments on this position might have been more than €1bn. This sounds too big to avoid detection, but may have seemed normal given the desk’s legitimate activity of very high volume and low- risk trades. On Monday, a shaken SocGen began to liquidate the position over three days, bringing its total loss to €4.9bn. Did it move the market? Over the period the total value of trading in index futures and the cash market for the Euro Stoxx 50 was €544bn. That suggests the unwinding of Mr Kerviel’s rogue position accounted for 5 per cent or less of activity. Clearly a determined seller does not go unnoticed by traders in a jittery market.
http://www.ft.com/cms/s/1/13e0c5b0-cb28-11dc-97ff-00007....html

btw if u ever need expert financial advise I only charge 0.003% on standard private banking accounts :-)

Much better!

by MushroomFree

Tue Jan 29, 2008 01:43

Clarity becomes you. I think you should stick with it :)
Still not sure where the bare fisted pugilist fits into the scheme of things though.

:-) I'm encouraged to continue covering the familiar "insider trading" story.

Tue Jan 29, 2008 15:10

The first legal challenge has been made. A lawyer5 acting on behalf of a group of small shareholders has filed for possible insider trading. ".......Societe Generale said Tuesday that an American investor who sold euro140 million (US$206 million) worth of the French bank's shares earlier this month had no "inside information" about suspicious trades that later cost the bank billions. Societe Generale is fending off mounting questions about how it handled what it called massive fraud blamed on a single young futures trader. A lawyer for a group of small shareholders filed a complaint into possible insider trading Monday after France's market regulator published routine stock sale declarations by board member Robert Day, an investment manager with U.S.-based Trust Company of the West, or TCW.
French regulators reported that Day and his family's trusts and charitable foundations sold shares in Societe Generale on Jan. 9, Jan. 10 and Jan. 18..........."

Now if you're in the biz of banking you notice when a member of the board dumps 206,000,000 dollars of his own stock. You don't even need to know he's rated as the 754th richest person in the world.

c/f (french language) http://www.liberation.fr/actualite/economie_terre/30676...R.php http://www.liberation.fr/actualite/reuters/reuters_fran...R.php

Naturally the bank is denying everything. Neither Mr Day nor his family (or to be more precise the holdings companies which have his family name on them) knew anything about yer man in the photo just up the page who till now has been either the bad rogue bastard or if you believe his defence lawyer who got him out on bail the unlucky Scapegoat . Defence lawyer Christian Charriere-Bournazel has said that Mr Bouton the Managing director of SG ......"held this unfortunate man up for public vilification, threw him to the dogs... and there was no substance to it....." (no substance means no pit-pat proof has been presented yet "French stock market officials warned Societe Generale about alleged rogue trader Jerome Kerviel late last year, a Paris prosecutor has said. With Mr Kerviel now released on bail, the prosecutor's comments increase the pressure on the bank to explain why his trades were not discovered earlier.
Mr Kerviel is being investigated for breach of trust, falsifying documents and breaching computer security. Societe Generale says his actions cost it 4.9bn euros ($7bn; £3.7bn)...." http://news.bbc.co.uk/2/hi/business/7214716.stm )............

Meanwhile just to show you were in familiar territory & hoping you now see the characters - the bad rogue bastard, the really rich insider trader, the unlucky scapegoat - it's time to introduce the next ones :- the predator & the head hunters. .

Accordingly the French state has just decided it will shore up SG :- ",,,,,,,French Prime Minister Francois Fillon has said his government will defend stricken bank Societe Generale against any hostile takeover bids from rivals. He added that the government was also "very attentive" against any attempt to destabilise Societe Generale. Speculation that the bank could be a takeover target sent its shares up 9%. "The government will not let Societe Generale become the object of hostile raids from other banks," said Mr Fallon..........." http://news.bbc.co.uk/2/hi/business/7215534.stm
Of course shoring up SG will cost the French state a lot of money & perhaps take their public imagination off of Ryanair being sued for using an image of Carla Bruni & Sarko on their latest advertising campaign. But it won't mean that people in SG feel safe, secure or needed in their jobs. That' s where the headhunters come in.

Watch out for people wearing cufflinks,speaking with strong French accents & chewing gum round your housing estate - they could be of the ilk.

after the "€G8" meeting in London, the $tate of the union speech - a little update.

Wed Jan 30, 2008 21:42

(I'm sort of letting you know where we're going with all this)

First off I don't really have any special background in banking or high finance or stock marketing. My CV includes such jewels as being one of the first crusty muppets on the scene when Mr Pemberton-Leigh closed the Bank of England in the late 20th century as a security precaution facing what I & many other muppets had called a "carnival against capitalism", but the thrust & preparation of that RTS! gig had really been the future trade exchange market of the LIFFE centre. I never really did a night course or anything even approaching Leaving Cert "commerce" or an MBA before hand. I as many of ye went & still go on "gut instinct" when it comes to the world of banking, insider trading, rogue trading, currency hedging, paying attention to predators like George Soros or watching indices go up & down. Sure of course a few years after I found myself doing a weekly English conversation class with one of the national directors of one of the most powerful Swiss banks. But beyond a certain vocabulary & chance to observe those of the ilk I'm not really qualified.

So to recap - up the page I said the stock market jitters aren't as much a result of an impending US centred recession as your daily newspaper hacks would like you to think. I've also mentioned one of the most famous predators, & in the last few bdays mentioned "private banking". So the quarterly figures published by UBS today (the largest private bank in the world) which in the last five years went from position 7 to position 2 in global banking portfolios were of course going to be "well interesting".
Especially considered in tandem with the last state of the union (USA) speech by GW Bush which naturally had to touch on the issue of the real estate crash their & so-called "garbage mortgage" thing. & not forgetting yesterday's "mini-summit" of the 4 EU members of the G8 in London which saw Mr Prodi represent Italy despite he resigning the job of prime minister a week ago.

We are all surprised at how much money UBS has lost. It's like only a 4billion write off, just over halfd of what yerman in the photo up the page fucked - not much in global terms - but for UBS it's so uncharacteristic. They've always been so much safer.., You'd swear they'd done a deal with divil in the last years as they moved forever ahead in multiple markets (especially to my attention those of South America venture capital) & began to leave behind their reputation for "conservative helvation gnome caution". The figures published today caused the London Financial Times to look back to a decision made in mid January (when I maintain without any sparkling proof but you know "gut instinct" most filthy rich bankers knew SG was fucked) to adjust their privacy account privileges for Americans (note I mentioned private bank accounts in my penultimate comment). Oh yes. Without any "sparking proof" but lots of "gut instinct" - I'm telling you a bunch of Yankees have been offloading stock in Europe not to make up for losses on the "garbage mortgage" small bank problems of the USA but coz alarm bells were ringing this side of the Atlantic.

You'll be wanting a new factor in this mystery to chart yourself like good pirates through these waters.

Financial jitters will help elect a Democrat President of the USA.

c/f
http://www.ubs.com/1/e/about/news.html?newsId=135568
http://www.ft.com/cms/s/0/08d80174-c475-11dc-a474-00007....html
http://www.ft.com/cms/s/0/08d80174-c475-11dc-a474-00007....html

Which brings us to the €U G8 meeting yesterday in Mr Brown's Lopdon. There was Merckel saying nothing much, Prodi wondering when they'll let him retire with dignity & Sarkozy whose pals & enemies are not too far away from the Clearstream scandal of another day's story & currently 2.8 trillion missing dollars promoting capitalism with transparency . In Sarko's words they wanted the capitalism of entrepeneurs & not speculators.

Fighting words.

His government have little choice but to shore up the second largest financial institution in their state & post imperial empire.

So here are the 4 options for the future of Europe's current capitalist problem as explained by "Liberation" the left-wing daily most vehemently opposed to Sarkozy & of course maintained by the Rothschild clan (for those who like to think of geopolitics or world banking as a clan thing..... which it mostly is....) :-

1 : do nothing. (laissez faire)

2: encourage friendly take-over with public funds by friendly state - candidates up for this challenge are - the Italian "Unicredit", the German "Deutsche Bank", the English "Barclays," the Dutch "Fortis"… jolly good European money bags ye scream!!! Oh yes, but if you did that then HSBC would completely in its rights to use its Hong Kong Shanghai (as its name implies) weight to call foul. Bingo - Chinese capitalism would move into the prime position in European banking........... & you thought it was just cheap novelty goods & spring rolls..,

3: fuse the SG mess with the BNP before the little person in the street notices it's really gone down the shitter. BNP (banque national de Paris not the British national party) fusing with SG would be rather like the Bank of Ireland joining AIB.

4: Just take it apart & ensure that yerman in the street's money & the money his supermarket & utility companies & kiddies education needs is seperated from the money yerman in the photo up the page just fucked. This of course is a far left option & if it worked for SG it would work for Africa...

______________________

I must admit I'm enjoying this.

Saint Patrick's day massacre

by Bear Grills

Mon Mar 17, 2008 13:43

Crisis in US stocks

Some Dublin stockbroking companies called staff into work today to cope with crisis associated with the emergency sale of the US investment bank Bear Stearns. No one believed that the problems of Bear Stearns would turn out this bad, and people are now adjusting to the fall out from the sale of the fifth largest US investment bank for $2 per share.

To put the situation in context, the building that Bear Stearns use as a HQ in New York is now worth a lot more than the company. There is a huge crisis in coonfidence in US markets, with one commentator saying that he did not believe anything that anyone said now.

"This is not the kind of help you want to see. Bear Stearns getting sold at $2 is alarming," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York. "When you see the Fed relying on tools that haven't been used since the Depression, it's alarming."

Gold is at 1000 dollars an ounce, and oil is at 112 dollars a barrel.

Alan Greenspan, in a Financial Times article this morning, called this the worst crisis in markets since the end of the second world war.

This is no longer just uncharted terrority now, we may have found the edge of the world.

The New York exchanege is just opening now.

Wish I was a cartoonist

by Maura

Mon Mar 17, 2008 14:10

As this thread continues, George W. is being prepped on his lines in a desperate attempt to stop the greenbacks going down the Swanee ... all hell breaking loose all round ... meanwhile, there's a galumphin', garbled gobshite wanderin' around with a bowl of greenstuff ...

Wish I could draw!

St Patrick's Day massacre

by news junkie

Tue Mar 18, 2008 13:01

All the mainstream media are copying the "St Patricks; Day massacre" headline used in Indymedia.ie.

http://news.google.com/news?hl=en&resnum=0&q=%22st+patrick's'+day+massacre%22&um=1&ie=UTF-8&sa=N&tab=wn

great prediction

by z

Thu Oct 22, 2009 21:08

Look at this from January 2008:

"In the short term, people in Ireland may lose their jobs because the American companies, which employ them, will not be able to borrow cheaply. The Irish tax take will fall (they won't be paying tax on money they are not making) and public spending will be hit. A sharp slowdown will affect house prices. Mortgages that can't be repaid will result in negative equity (people living in houses that they can't pay for but can't sell without going into more debt). Ministers will make noises about tightening belts while making sure their own pensions are okay."

Pretty good analysis there from indymedia way before anyone else.

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“We’re going through uncharted territory now”.

Comments (15 of 15)