2009: Year of the train wrecks


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Britain Trending Towards Bankruptcy and Hyper-inflation  “Whilst both are now obvious given the economic data and government actions however what is missing from the headlines is that under the weight of the exploding public sector debt mountain, deflation will fast turn towards hyper-inflation as the government literally prints money in ever more panic measures aimed at turning the economy around.  Market Oracle  11/28/08

Russian analyst predicts decline and breakup of U.S.  “Professor Igor Panarin said in an interview with the respected daily Izvestia published on Monday: “The dollar is not secured by anything. The country’s foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse… He predicted that the U.S. will break up into six parts – the Pacific coast, with its growing Chinese population; the South, with its Hispanics; Texas, where independence movements are on the rise; the Atlantic coast, with its distinct and separate mentality; five of the poorer central states with their large Native American populations; and the northern states, where the influence from Canada is strong.”   Russian news and Information Agency  11/24/08

Click here for map of Central Asia

Economic Distress and Geopolitical Risks  “The hardship and turmoil which impacted the world during the Great Depression provided fertile ground for the rise of fascist, expansionist regimes in Germany, Italy and Japan. Hard times also precluded the Western democracies from a more muscular response in the face of growing belligerence from these countries. The United States largely turned inward during the difficult years of the 1930s. The end result was a global war of a size and scale never seen by man either before or since. Economic hardship is distracting. It can cause nations to turn their focus inward with little or no regard for rising global threats that inevitably build in tumultuous times. Authoritarian regimes invariably look for scapegoats to blame for the hardship affecting their populace. This enables them to project the anger of their citizenry away from the regime itself and onto another race, country, ideology, etc.”  Ockham Research  11/18/08

Global Economic Tremors  “(1) The Debt Crisis: It’s far too big to control. Based on Fed Flow of Funds figures, “there are now $52 trillion in interest-bearing debts in the US.” According to US Government Accountability Office estimates, add another $60 trillion in contingency debts and obligations – for Social Security, Medicare, Medicaid, and other pensions. In addition, the Bank of International Settlements (BIS) earlier cited a staggering global debt total, including derivatives, of $1 quadrillion, or 1000 trillion. In a separate report, it says $596 trillion, but even this number is unimaginable and unmanageable.”  Atlantic Free Press  11/14/08 

 Central Asia: Kyrgystan, Tajikistan and Uzbekistan Confront Financial Disaster    “The Kyrgyz Prime Minister, Igor Chudinov, Economic Minister, Akylbek Japarov, and the chairperson of the Kyrgyz State Committee for Migration and Employment, Aygul Ryskulova, have already sounded alarms. “Our government is, in real terms, on the threshold of a financial crisis. A decline in Kyrgyzstan’s economic situation is quite possible by February or March 2009,” Japarov said in early November, citing falling remittances and slowing Russian and Kazakh economies as key factors.”  EurasiaNet  11/10/08

Ploice Get Orders to Crush Crisis Unrest

Will Russia revert to totalitarianism?

“The mounting consequences of the world financial crisis could well have an unpredictable effect,” he said. “Anti-crisis groups have been set up in the regions … to intercept any early indications of destabilization… Analysts say the financial crisis poses no political threat to the Kremlin for the time being because opposition parties are too weak and divided to mount a serious challenge. Garry Kasparov, a Kremlin opponent and former world chess champion, predicted last week that the crisis would bring new recruits to the opposition.”  Moscow Times  11/11/08

The Coming Crunch “The global credit crunch has now hit emerging economies, including those in Asia, which many had hoped or expected to be able to “decouple” from developed economies. There will be no escape, and even worse, the super typhoon that is now battering emerging markets will in turn deepen the global recession… The global credit contraction will affect emerging markets in several ways. First, their exports and imports (of raw materials) will fall as excess demand is eliminated in the over-leveraged rich economies of Europe and North America. There will also be a reduction in capital flows to developing economies in all forms (credit, portfolio investment and foreign direct investment) as a result of deleveraging. At the same time, household and corporate wealth will be destroyed as a result of falling liquidity supply from both domestic and foreign sources. Those emerging economies with large foreign-currency bank loans and liabilities face debt deflation, while many corporations in Asia will find it difficult to grow because they are unable to roll over their excessive foreign loans and bonds.”  Wall Street Journal Online  11/10/08

China faces unrest as economy sours  “When Chong Yik Toy Co. went bankrupt, the bosses fled without meeting their payroll and angry workers took to the streets in protest. Less than 72 hours later, the local government came to the rescue.  Armed with bags full of cash totaling half a million dollars, accountants began distributing the money so the 900 former employees would have something to get by on. The Chinese officials who made the emergency payments on Oct. 21 called it an “advance,” part of a “back-pay insurance fund.  But the reality was obvious to everyone: It was a government bailout.”  Washington Post  11/05/08

Emerging Europe fears grow, Hungary hikes rates to protect forint  “Hungary has always been next in line after Iceland, with similar, if slighter, economic imbalances,” said Maya Bhandari, an economist at Lombard Street Research. “It is now lurching headlong into financial crisis – and this morning’s frantic interest rate rise, as in Iceland, is unlikely to avert it.”  MarketWatch 10/22/08

Emerging Markets-Stocks sink, crises spread  “Emerging stocks have lost almost 55 percent of their value since May. Problems in the western banking sector and fears of contagion have shattered investors’ confidence and risk appetite, and made them worried they might not be able to pull money out later.”  Reuters  10/17/08

Yen Carry Trade Unwinds – Thursday 16th October 2008 Thanks to historically high oil prices, sovereign wealth funds belonging to Persian Gulf states like Kuwait, Qatar, Saudi Arabia and the United Arab Emirates amassed $1.5 trillion by the end of last year. Yet that’s only one-fourth the size of assets held overseas by Japanese investors, making the “yen carry” trade one of the most feared weapons of mass destruction in global currency, commodity and stock markets today.”  Gold News 10/16/08

Pakistan President Zardari arrives in Beijing for a trip aimed at securing aid and building economic ties between the two countries.

Funds, Pakistan Turns to ‘Strong’ Ally China  “Pakistan’s president Asif Ali Zardari began a four-day state visit to China on Tuesday, seeking aid for his near-bankrupt nation from an increasingly powerful ally…. The decades-long friendship between China and Pakistan is grounded in arms sales, energy assistance and an all-weather geopolitical alliance. China has sold conventional weapons and missile technology, and is suspected of helping Pakistan develop nuclear weapons. In 2006, China and Pakistan signed a pledge to increase bilateral trade to $15 billion a year by 2011….Pakistan’s ties with the U.S. remain fraught with tensions. Mr. Zardari has reached out to U.S. leaders, but in doing so has faced criticism at home, particularly because of repeated U.S. missile strikes inside Pakistani territory targeting Islamist militants near the Afghanistan border. An economic collapse would only further undermine the battle against Islamic militants, experts warn.”  Wall Street Journal  10/15/08

 Global Stock Sell-Off Stirs New Fears of Recession  “One of the things I discovered in looking at the Depression was the destruction that Roosevelt wrought when he torpedoed the London Monetary Conference, very similar event, spring of 1933. He said, “I don’t care. I’m a populist. I will turn to the farmers.” And that let Europe go in the way, you know, Europe was slipping into fascism, so there are political ramifications, as well as economic ones.” PBS Newhour  10/10/08

After banks and nations, Iceland close to bankruptcy  “”We have been forced to take decisive action to save the country,” Prime Minister Geir H. Haarde said of those sweeping new powers that allow the government to take over companies, limit the authority of boards, and call shareholder meetings.”  Times of India   10/8/08

The Bailout and  Beyond:  Citi’s Vikram Pandit and Others on What’s Next in the Global Crisis  “The financial sector’s performance over the last month had Wall Street and Main Street alike fretting over the near collapse of several large financial institutions and the ongoing debate in Washington over how the government should react. After rescuing Fannie Mae, Freddie Mac and insurance giant AIG, one solution is the Bush administration’s proposed $700 billion plan to buy the troubled securities that are clogging the credit markets — with potentially devastating results to the global economy.”  Knowlege @ Wharton, University of Pennsylvania  10/1/08

Iran’s Ahmadinejad: US ’empire’ nears collapse – “Ahmadinejad accused “a small but deceitful number of people called Zionists ... (of) dominating an important portion of the financial and monetary centers as well as the political decision-making centers of some European countries and the U.S.”  Bloomberg  9/23/08

Brown to Address World leaders on Financial Crisis – “The financial rollercoaster of the last week has forced a dramatic realigning of priorities for leaders gathering in New York this week to discuss issues from the effort to lift Africa out of poverty to the threats posed by a resurgent Russia and the continued nuclear ambitions of Iran. ”  Times Online UK  9/22/08

ECONOMY: Geopolitics of finance —Harold  – ” Worried investors and policymakers are becoming obsessed with Great Depression analogies. But the lesson of 1931 is only in part financial or economic. The 1931 crisis was so big and so destructive because it was a financial drama that played out on a geo-political stage.”  — The Daily Times, Pakistan  9/21/08

What Does Russia Want?  How Do We Respond?  – “Seven years ago today, al-Qaeda launched attacks against New York and Washington, and caused a fundamental change in how the United States views threats to its national security.  Just a little over one month ago, Russian tanks rolled into Georgia and reminded us that, while confronting the threat posed by international terrorism, we cannot overlook the more traditional challenges to American security interests.”  – Gather News  9/15/08

Chinese missile tests over Taiwan 1996

Financial Crisis:  How the Countries Are Doing – “The Communist Party’s publicity department is understood to have ordered websites to remove all negative comments and reports about the state of the markets. Anger is rising among ordinary Chinese savers and investors over the failure of the government to protect them from the effects of the global financial meltdown. The Shanghai Composite Index, China’s equivalent of the FTSE 100, has plunged by almost 70 per cent over the past year, as a result of the slumping American economy and rising inflation at home. Over the same period many Chinese have seen the value of their pensions and savings plummet.” – Telegraph, UK  9/20/08

The Financial World Reels – “This is the first truly global financial crisis as no market in the world has been spared. The credit crisis has worsened when the global economy is weakening and the recovery may take longer.” – The Information Company   9/18/08 

Creditanstalt note October 1933

Creditanstalt note October 1933


The World in Depression 1929-1939: Creditanstalt Bank, Austria 

“Just as in May of 1873 and July 1914, with tension growing among Germany, France, and Britain, the crack, when it came, appeared in Austria.  In the early Spring of 1931, a Dutch bank wrote a polite lettter to the Creditanstalt in Vienna saying that it was obliged to raise the charge on its acceptance credits from 0.25 percent a month to 0.375 percent.  It was a timorous letter, says Beren, not a prescient one, and the bank was somewhat surprised when Creditanstalt chose to pay off the loan rather than renew at the higher rate.  Three months later the Creditanstalt could have used the money.”  Google Books


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