Saturday, June 5, 2010

World Financial Report, June 4, 2010

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Desperate Financial Situation, Biggest Debt Bubble in World History: Fifty Statistics About The U.S. Economy

Most Americans know that the U.S. economy is in bad shape, but what most Americans don't know is how truly desperate the financial situation of the United States really is. The truth is that what we are experiencing is not simply a "downturn" or a "recession". What we are witnessing is the beginning of the end for the greatest economic machine that the world has ever seen. Our greed and our debt are literally eating our economy alive. Total government, corporate and personal debt has now reached 360 percent of GDP, which is far higher than it ever reached during the Great Depression era. We have nearly totally dismantled our once colossal manufacturing base, we have shipped millions upon millions of middle class jobs overseas, we have lived far beyond our means for decades and we have created the biggest debt bubble in the history of the world. A great day of financial reckoning is fast approaching, and the vast majority of Americans are totally oblivious.

But the truth is that you cannot defy the financial laws of the universe forever. What goes up must come down. The borrower is the servant of the lender. Cutting corners always catches up with you in the end.

Sometimes it takes cold, hard numbers for many of us to fully realize the situation that we are facing.

So, the following are 50 very revealing statistics about the U.S. economy that are almost too crazy to believe.... (more)

Interview: Jim Rogers on Currencies and Inflation

Hera Research Newsletter (HRN): Thank you for speaking with us today. Let’s start with the world reserve currency. What do you think about the International Monetary Fund (IMF) replacing the US dollar as the world reserve currency with Special Drawing Rights (SDRs)?

Jim Rogers: The world didn’t have an IMF for a few thousand years. The IMF was founded after the Second World War to take care of any short-term currency needs that countries might have. It turned out pretty quickly that they didn’t have very many as the world recovered from the war, so the IMF found other things to do. They now have thousands of employees and have manufactured jobs for themselves. They’ve not had much success, if you look back over the past 60 years. Nearly everything they’ve done was wrong. Why do we need the IMF? It’s not 1945 anymore.

HRN: Rather than using a national currency as the world reserve currency, what about a global central bank? (more)

Morgan Stanley: Euro Will Plunge Until Zone Disbands

Morgan Stanley analyst Stephen Hull says the euro has much farther to fall, but the dollar should strengthen in 2010 and the euro zone may very well disband.

“Having reached our 1.24 target in EUR/USD, we now expect a decline to 1.16 by year-end and for the euro to trade at a discount to fair value (1.17) in early 2011," reaching a trough around 1.12 before recovering later in the year, Hull writes in a note to investors.

Friday, the euro dropped below $1.20 for the first time in more than four years as a Hungarian official's warning about the state of his country's economy underlined fears about Europe's prospects.

The 16-nation currency traded as low as $1.1973 — its weakest level since it bought $1.1920 in March 2006 and well below the $1.2182 it bought in New York late Thursday. (more)

The Economist - 05 June 2010

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A billionaire's investment strategy

BEST OF BNN: Mutual fund king, Michael Lee-Chin, executive chairman, Portland Investment Counsel, and Portland Holdings, discusses his investment philosophy and whether it still holds up in today's turbulent markets.

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Money Manager: Gold to Remain Best Safe Haven in Next Decade

While the dollar may be the major beneficiary of Europe’s debt crisis for now, gold will remain the top safe haven in the long run, says Jerry Castellini, president of CastleArk Management.

That’s because loose fiscal and monetary policy will hurt both the dollar and the euro, he maintains.

“Over the next five to 10 years, the likelihood of currency debasement in the United States, Europe and other places is much higher than it has been at any time over the last 30 years,” he told CNBC. (more)

The Root of the Housing Bubble Remains Unchanged

Banks and Wall Street profited immensely from millions of unqualified home buyers reaching out for the simulacrum of middle class "ownership."

The fundamental root of the housing bubble--the collusion of the Central State and banks to extend home ownership to millions of citizens who did not qualify for that burden-- remains firmly in place.

The Federal government continues to pour tens of billions of dollars into this "home ownership should be for everyone" project via subsidies to Fannie Mae, Freddie Mac and FHA. Mortgage lenders have been delighted to write mortgages in our completely nationalized market in which the government backs literally 99% of all mortgages and the Federal Reserve bought $1.2 trillion in mortgages that no sane private investor would touch. (more)

Bloomberg Businessweek - 07-13 June 2010

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Stock tumble as disappointing U.S. jobs data deepens pessimism about recovery

The Toronto stock market tumbled Friday as a fifth-straight month of job creation in Canada was trumped by a U.S. employment report that widely missed expectations and made it clear that the economic recovery isn't picking up the momentum that investors have been counting on.

The S&P/TSX composite index fell 242.27 points to 11,569.61, while the TSX Venture Exchange lost 18.25 points to 1,464.92.

Statistics Canada reported that 24,700 jobs were created in May. Economists had expected a modest increase of 15,000 after almost 109,000 jobs were created in April. (more)

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