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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
June 24, 2008
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US Banks have suffered $US 391 Billion of losses and write-downs from mortgage- related securities since the start of 2007, according to the data compiled by Bloomberg. US banks could lose another $US 300 Billion on real estate loans during the year ahead. Such losses could jeopardise balance sheets because the US banking system had only $US 1,350 Billion of equity capital - as of April 1 this year.

Behind the front lines lies contractual commitments which the US banks have already made. Citigroup Inc analysts have said that the banks are concerned that companies may draw on $US 6 TRILLION of loan commitments made before the credit crunch hit, adding to pressure on their balance sheets.

On June 19, Moody's followed Fitch and Standard & Poor's in downgrading the credit rating of Ambac, one of the two big "monolines" (insurers) in the US. The downgrade was from Aaa to Aa3. This could be the last straw, at risk being more capital destruction in the $US 2.6 TRILLION municipal bond market.

The Privateer could continue with similar items for a long time. But the sum of it all is that the entire US banking and financial system is so threadbare, fragile and short of capital that a collapse or crash in one place could knock the underpinnings out from under several other US financial sectors which would take even more down with them. A systemic crash - at any time - is today a distinct possibility.

The Leverage:

The financial leverage across the main US investment banks is stupendous. Goldman's balance sheet brought its gross leverage ratio - the amount of assets held compared with its shareholder equity - to 24.3 from 27.9 at the end of the first quarter. What this means is that for each Dollar Goldman's has in play, it has borrowed another $US 24.30 simply to increase its bets. Looking down the line of the main US investment banks, one finds the following leverages. Lehman's leverage ratio - total assets compared with its own equity - fell to 25 from 32 at the end of the first quarter. That compares with 34 at Bear Stearns, 33 at Morgan Stanley, and the 24.3 at Goldman Sachs, the biggest US securities firm by market value, based on data compiled by Bloomberg. What this also shows is that were they all to take losses in the market to the tune of 4 percent or so, none of them would have any capital left over.

The US Federal Fiscal Position:

The much vaunted US tax rebates have gone out to millions of Americans. It is now very clear how they were funded. The US Treasury borrowed the money. The federal government ran a monthly budget deficit of $US 165.93 Billion in May, the Treasury Department has said. This was a record for the month of May. For the first eight months of fiscal 2008, the budget deficit totalled $US 319.40 Billion, 115 percent larger than the $US 148.45 Billion budget deficit in the same period during fiscal 2007.

The US Global Trade Deficit:

US export sales totalled $US 155.5 Billion in April, up 3.3 percent. But this increase was swamped by a 4.5 percent rise in imports, which also set a record at $US 216.4 Billion. The US trade deficit through the first four months of this year is running at an annual rate of $US 707.5 Billion, up slightly from last year's deficit of $US 700.3 Billion. US imports now exceed US industrial production! Repeat, US imports now exceed US industrial production! That bluntly means that the US cannot export its way out of trouble.

The US Consumer Is FLAT Broke:

The torn apart balance sheets and high debt ratios of the US household sector show that even near record low US interest rates cannot revive the US consumer sector where debts are now up to almost 140 percent of disposable income. The US banks are near insolvent, the US Treasury is broke, so are most Americans.

Ó 2008 – The Privateer

(reproduced with permission)


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