Sunday Night Special - Keynesian Economics & the Crisis... Lance Taylor discusses explanations that Keynes provides on the causes & evolution of the crisis...1 hour

4 Tips to Beat the NEXT Crisis... Sean Brodrick emphasizes that politicians say the economy is recovering, but problems continue to mount - debt, energy, lost jobs, unbalanced budgets... "After over 18 months of recession, world oil consumption is roaring back to its pre-crash peak... Starting in 2011, we'll see a production drop of over 4 million barrels per day from the fields that are currently producing about 85 million barrels a day"... http://www.howestreet.com/articles/index.php?article_id=12699 (3*)

The Emerging Markets Guru - Mark Mobius...6 min

China Ready To End US$ Peg?... China's central bank is giving the strongest signal yet that China will move away from pegging its currency to the US$ but changes will be gradual... "If we are to exit from irregular policies and return to ordinary economic policies, we must be extremely prudent about our choice of timing... This also includes the [yuan] exchange rate policy."... http://www.telegraph.co.uk/finance/7386391/China-ready-to-end-dollar-peg.html (3*)

Cyber War on American Businesses?...

"It’s going to end in a complete disaster... & when everything becomes very bad & you have simultaneous recession/depression… unemployment goes higher; higher than 10%, say maybe 15%...when that doesn’t improve, they’ll go to war...& nobody can pay for the war so you print more & more money, & you have hyperinflation, & then the system goes... you ought to own some land & you ought to own some stocks & you ought to own some gold or a lot of gold & other precious metals. "
- Marc Faber

Economy Begins to Look Nice & Boring... NY Times article explores a return to normalcy in the economy & markets... "Now, both economic and market indicators have returned to what Warren G. Harding called 'normalcy' when he was elected president in 1920, after the end of World War I and a subsequent recession."... click on charts above to enlarge... http://www.nytimes.com/2010/03/06/business/economy/06charts.html (3*)

"What strikes me now, looking back, is how nothing was changed: no lessons were applied. Even though the lessons were obvious, in 1998. LTCM used fatally flawed VaR risk models. LTCM used too much leverage. LTCM transacted in unregulated over-the-counter derivatives instead of exchange traded derivatives. So risk models needed to be changed, or abandoned. Leverage had to be slashed. Derivatives had to be traded on exchanges or cleared through clearinghouses. Regulatory oversight needed to be ramped up... The government did just the opposite. Glass-Steagall was repealed in 1999, so that banks could become hedge funds. The U.S., in effect stared near-catastrophe in the eye, with LTCM, and decided to double down."
- Jim Rickards
the story of Long Term Capital Management (LTCM): http://en.wikipedia.org/wiki/Long-Term_Capital_Management

Courtesy of Tom Toles

"Definite Risk" in US Economy... says Robert Shiller... "The more plausible, bad scenario is not a double dip but just a very slow recovery... [where] the unemployment rate comes down but only over years... I think there is a definite risk of a turn down again in home prices"...

In Defense of Deficits... James Kenneth Galbraith writes that budget deficits are necessary... "You don't have to like budget deficits to realize that we must have them, on whatever scale necessary to restore growth & jobs. We will need them not just now but for a long while, until we've shaped a strategic program for investment, energy & the environment, financed in part by a reformed, restored & disciplined financial sector."... http://www.thenation.com/doc/20100322/galbraith (4*)

The Oracle's Tips for the Rest of Us... WSJ article featuring Warren Buffett's words of wisdom... Stay liquid... Buy when everyone else is selling... Don't buy when everyone else is buying... Value, value, value... Don't get suckered by big growth stories... Understand what you own... Defense beats offense... http://online.wsj.com/article/SB10001424052748704089904575093603081648166.html?mod=WSJ_PersonalFinance_PF5 (4*)

No Bubble in Bonds... says bond fund manager John Lekas... emphasizes investors to stick with high quality short-term debt, which mitigates the risks of higher interest rates...

Goldman Sachs Report on Devaluation... "The potential appreciation in the Chinese currency, the CNY or RMB, has moved to the forefront of many client discussions since the start of 2010 and has accelerated following recent policy tightening in China... A gradual or one-off appreciation in the CNY would be broadly supportive of risky assets and globally-exposed US equities, in our view. We would view a revaluation as a positive move from a sentiment perspective. It would likely be interpreted as sign of confidence on the part of the Chinese government and as the next step in what has to-date been a somewhat opaque and sporadic tightening process"... report courtesy of Commodity Alert...

Goldman Sachs Report on Yuan Revaluation -

Elizabeth Warren on Charlie Rose... Warren is the chair of the Congressional Oversight Panel created to oversee the US banking bailout, formally known as the Troubled Assets Relief Program... discusses legislation on financial reform, debate on the powers of a new consumer protection agency... click on image above to activate... about 22 min video...

Stock Prices & The Real Economy - Linked ?
St Louis Fed paper "Monetary Policy & Stock Market Booms & Busts in the 20th Century"...
St Louis Fed Paper

(postings will re-begin at approximately 7pm EST Saturday 6 March)An Austerity Budget? A Govt Horror Show?... is this the end-game for the sovereign debt crisis? - the Irish govt is doing it, the Greek govt is beginning to do it, will the US do it?... click on scream image above to activate slideshow - courtesy of The Business Insider...

Courtesy of Lisa Benson

The Dominos of Default... John Browne writes "Now that investors have come face-to-face with the reality of sovereign default in the developed world, greater scrutiny will befall those countries with fiscal conditions similar to Greece. The United Kingdom is a cause of great concern, with a debt ratio rapidly approaching Greek levels."... thinks that the UK will come before the US along the "dark and dangerous shaft of excessive debt"... points out it is one thing to bail out relatively smaller countries like Greece but if the UK or the US goes, it would drag the whole world into depression... "Once a key domino falls, collapse can be devastatingly sudden"... http://www.321gold.com/editorials/browne/browne030510.html (4*)

Russia to Buy IMF Gold?... Bloomberg reports that Russia’s central bank wants to increase the share of gold in its international reserves, First Deputy Chairman Alexei Ulyukayev said in an interview published in Izvestia today - his comments were confirmed by a Bank Rossii official... data courtesy of http://www.coinexpert.com/... http://www.bloomberg.com/apps/news?pid=20601116&sid=aM4e4g7MSw.o (3*)

"The founders of the Federal Reserve understood that placing the printing press with the power to spend was a formula for fiscal and financial disaster." - Kansas City Fed President Hoenig

Why We Can't Inflate Our Way Out... Morgan Stanley's Richard Berner writes that "inflation is not the solution. It's tempting to think that the US can inflate its way out of its fiscal problems. A faster, sustained increase in prices would erode the real value of past debt, and higher future inflation would - other things equal - reduce the real resources needed to service and pay back the promises we are making today"... Berner points out inflation won't work because nearly 1/2 of federal outlays are now linked to inflation, "meaning that increments to debt would [also] rise with inflation"... http://www.morganstanley.com/views/gef/archive/2010/20100223-Tue.html (5*)

Charlie Rose with Joseph Stiglitz.. click on image above to activate - 35 min video... discusses the recovery & its challenges..

Taylor Rule - Fed to Raise Rates?... John Taylor's rule is a guideline for where the Fed funds rate should be set - it should be set higher with higher inflation... here is the formula for you nerds out there - the idea is to use the inflation rate & the gap in GDP growth from its potential growth rate: Fed Rate = 1.5 X inflation % + 0.5 X (real GDP gap %) + 1%... Casey Research provides the chart below that shows what the Fed fund rate is compared to what it should be (by the Taylor Rule)...
"It shows how the Fed kept rates too low in 2004, fueling the housing bubble. That was Taylor’s major point and is documented in his latest book... the end of the chart seems to indicate that the appropriate rate has already moved up to 4%" - means the Fed funds rate should be set much higher from 0% now... http://www.caseyresearch.com/displayCdd.php?id=362 (4*)

"What is past is prologue" said William Shakespeare (above)... Hedge Fund manager Seth Klarman details 20 lessons learned from the financial crisis that were either never learned or else were immediately forgotten by most market participants... "When excesses such as lax lending standards become widespread and persist for some time, people are lulled into a false sense of security, creating an even more dangerous situation... The government can always rescue the markets or interfere with contract law whenever it deems convenient with little or no apparent cost."... Klarman also details 10 false lessons learned from 2009... http://myinvestingnotebook.blogspot.com/2010/03/klarman-forgotten-lessons-of-2008.html (4*)

Courtesy of Paresh Nath

Natural Gas A No-Brainer... Boone Pickens discusses the low-cost potential of natural gas as a long-term energy source... says the US should first put the 8 million trucks on natural gas - would cut OPEC purchases by 50%... about 4 min video

"I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments." - Friedrich August von Hayek (1899-1992)

Fed Fights Deflationary Demons... Forbes article exploring how the Fed fears deflation the most in a credit collapse & that it must create a bit of inflation to counteract the deflation... "the much bigger concern is deflation, not inflation"... http://www.forbes.com/2010/03/04/deflation-inflation-bernanke-intelligent-investing-federal-reserve.html?feed=rss_home (3*)

Things Are Ugly & Absurd... between Greece & Germany:
Greece's statutory pension age is 61 whereas Germany's is 67 - Germans question why they bailout Greece to help them retire comfortably earlier than they do... The German magazine Focus ran an issue with a picture (see above) of Venus de Milo giving the middle finger to Greece... a majority of Germans indicate they do not want Germany to bailout Greece... also in a poll of banks, no German bank wants to make any further investments in Greek debt...

The Greek administration blamed Germany for Greece's economic & financial problems because of gold taken in World War II ! Greece’s Federation of Greek Consumers referred to Germany’s war record & also the magazine article in calling for Greeks to boycott all German products - “The distortion of a Greek historical statue of beauty & civilization, from a time when [the Germans] were eating bananas in the trees, is unacceptable & inexcusable" The Greek prime minister said that in the eurozone’s first big test, Greece had become “a laboratory animal in the battle between Europe & the markets”.
Sources: Safehaven, Dow Jones, Zero Hedge, John Mauldin

Marc Faber on the Markets, Gold, Debt Crisis... on Greece: "I don't think it will work out... The pain of the austerity will be very burdensome on Greece. I would recommend people buy some gold every month for ever"... on gold: "Gold is not a liability of someone else, its quantity can not be increased at the same rate as you can print money (which will eventually again weaken the US $). I am not saying that the $ will go straight down, but eventually the purchasing power of money will lose."

10 Brewing Stories You Must

Start Paying Attention To

(click on image above to activate slideshow)

Courtesy of The Business Insider

Courtesy of Patrick Chappatte

On IMF Assistance to Greece: "it would not be appropriate to have the introduction of the IMF as a supplier of help... The IMF technical assistance is very important, very appreciated... The fact is that the conditionality inside the euro area has to be decided by the peers, according to the Stability & Growth Pact & the European framework as it stands."
- Jean Claude Trichet, European Central Bank

Lessons for Greece from Newfoundland?... David Hale relates the story of Newfoundland, now a Canadian province but at one time was independent... they ran into fiscal problems & eventually decided to dissolve its government, thereby defaulting on its debt... "The European Union could follow this example by asking the Greek government to suspend its parliament and turn over the powers of government to a commission of six bureaucrats, three from Athens and three from Brussels. The commission would guarantee Greece’s debt and rule the country until it regained solvency. There would probably be more protests against the loss of democracy in Greece than in Newfoundland, but it could set the stage for the radical economic restructuring that Greece needs. Greece could return to democracy in 2015 with the highest growth rate in Europe"...
http://www.ft.com/cms/s/0/2b786e40-2700-11df-8c08-00144feabdc0.html (3*)

US Stimulus $ Going Overseas?... 6 min video...

Visit msnbc.com for breaking news, world news, and news about the economy

"Did you know that the structural deficit-to-GDP ratio is actually higher in the U.S. (7.8%) and the U.K. (7.6%) than it is in Greece (6.1%) and Spain (5.8%)?"
- David Rosenberg

German Politicians Want Greece to Sell Islands... Christian Democratic Union's Josef Schlarmann: “A bankrupt party must use everything he has to make money and serve his creditors... Greece owns buildings, companies and several uninhabited islands, which can now be used to repay debt.”... http://www.bloomberg.com/apps/news?pid=20601100&sid=ak9aZm.fSPsA (2*)

Emotional Investing?... Vanguard provides interactive charts to show that investment decisions based on emotional reactions rarely end well.. "By the time you've jumped on (or off) an investment bandwagon, chances are you've already missed out on whatever advantage you might have gained. Instead of trying to time the market, look at the big picture and think long-term."... click on link below or image above to activate...
https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-emotion (4*)

What Hyperinflation Looks Like

Weimar Germany 1921-1923

(click to enlarge)

The Case for Bonds... Randall Forsyth emphasizes bonds are not as risky as their critics make them out to be... "You can't pick up a financial publication these days that doesn't ominously warn of rising interest rates and how they will decimate the fixed-income investments to which individual investors have been flocking."... http://online.barrons.com/article/SB126756452820554659.html?mod=BOL_hpp_dc (4*)

Lessons From Hedge Fund Manager Bill Ackman... emphasizes he does lots of research, spends alot on consultants... prefers risk management as "Can you sleep at night" rather than through using a value-at-risk (VAR) statistical analysis approach... "You shouldn't invest in something unless you've done a lot of research and are completely comfortable with it. I think most investors overdiversify because they're lazy. They haven't done enough research into any of their companies. If they've got 200 positions, do you think they know what's going on at any one of those companies at this moment? As a result of overdiversification, their returns get watered down. Diversification covers up ignorance. We do extensive research and then feel totally comfortable with our eight or 10 positions. That's our risk management."... http://www.thestreet.com/story/10693022/2/lessons-from-pershing-squares-ackman.html (4*)

Asia to Lead... Puru Saxena emphasizes Asian economic leadership, likes China, India & Vietnam... thinks there will be selloff in base metals, prefers precious metals...

Deny, Default or Deleverage - the drag of government debt... Avery Shenfeld & Meny Grauman explore the history...

Deny-Default-or-Deleverage- -

"In theory there is no difference between theory and practice. In practice there is." - Yogi Berra

Energy Shock Caused the Crisis... Jeff Rubin ponders what will happen to the economy & markets in the future when triple-digit oil prices come back again... "That’s because we mistook an energy shock for a financial crisis and bailed out everyone under the sun. But we are soon going to find out that today’s bailouts are tomorrow’s spending cuts.... The enormity of the government cutbacks that lie ahead is yet to be appreciated."... http://www.theglobeandmail.com/blogs/jeff-rubins-smaller-world/were-all-pigs-now/article1486794/ (4*)

UK Debt Crisis of Greek Proportions... Citigroup Fixed Income Strategist: “If you really want a fiscal problem, look at the UK... In Europe, the average deficit is about 6 percent of G.D.P. and in the U.K. it’s 12 percent. It is only just beginning."... http://www.nytimes.com/2010/03/03/business/global/03pound.html?em (3*)

Rogoff & Reinhart Wrong Conclusions? - "Although the historical data which Rogoff and Reinhart amass — 8 centuries and all — sound very impressive, it is hard to see what sort of relevance a country operating under, say, an 18th century gold standard, has in regard to a country operating under a 21st century fiat currency system... A sovereign government is never hostage to the dictates of financial capital because it no longer faces the external constraint that was always present under a gold standard regime... Whether its debt is held internally or externally, it faces neither insolvency risk, nor “structural” growth shortfalls which Rogoff/Reinhart allege when public debt levels get too high."
- Marshall Auerback
http://www.newdeal20.org/?p=8682

Embrace Inflation - how to profit... Arun Motianey: "Deflation is a very serious risk [but] inflation is a greater likelihood... I'm expecting the central banks of the world to embrace inflation"...

How the Fed Works - in 9 minute video...
Courtesy of The Cleveland Fed... http://www.clevelandfed.org/About_Us/who_we_are/about_the_system/index.cfm

Is the Sprott gold fund buying 10 Tonnes?... "something is powering the spot price of gold higher in the past few days" - could it be due to the new IPO of the Physical Gold Trust fund initiated Friday by Sprott Asset Management?... "If the trust has sold all its units listed as outstanding, they are in a cash position of approximately $390 million. Are the underwriters still holding any of this inventory? Their prospectus commits them to holding 97% of their assets in gold bars. No certificates or derivatives. And they are only listing $15 million in current gold assets... the Sprott trust needs to buy about 10 tonnes of gold, the size of most small central bank purchases"... http://jessescrossroadscafe.blogspot.com/2010/03/is-sprott-in-market-trying-to-buy-12.html (3*)

On Too Big To Fail: "Enacting a credible bankruptcy process to solve the too-big-to-fail problem, clarifying the Fed's umbrella supervision and financial stability roles, and enhancing market discipline are steps we must take to lower the probability of a future crisis. We could simplify the entire financial regulatory legislative initiative by focusing on these three key elements. We do not need huge new bureaucracies, or a complete restructuring of our regulatory agencies."
- Charles Plosser, President & CEO of the Fed Philadelphia

Napping at Singapore Changi Airport (above)

Napping at New York Laguardia Airport (below)

A Word from the Wise... Thomas Friedman laments the declining state of infrastructure & competitiveness in America... "I was traveling via Los Angeles International Airport — LAX — last week. Walking through its faded, cramped domestic terminal, I got the feeling of a place that once thought of itself as modern but has had one too many face-lifts and simply can’t hide the wrinkles anymore. In some ways, LAX is us. We are the United States of Deferred Maintenance. China is the People’s Republic of Deferred Gratification. They save, invest and build. We spend, borrow and patch... And this contrast is playing out in the worst way — just slowly enough so the crisis never seems acute enough to take urgent action. But, eventually, infrastructure, education and innovation policies matter. Businesses prefer to invest with the Jetsons more than the Flintstones"...
http://www.nytimes.com/2010/03/03/opinion/03friedman.html?partner=rss&emc=rss (4*)

Courtesy of Gary Varvel

UK - Bigger Debt Problem Than the PIIGS?
(PIIGS = Portugal Italy Ireland Greece Spain)

"You’re not going to go a decade without having a bump in the business cycle... We would learn just how important China is when that happens. It would cause a recession everywhere surrounding China... Their response to the latest financial crisis clearly raised the risk that they have a debt-fueled bubble in the economy."
- Kenneth Rogoff

Gold Going Higher In Most Currencies,

Courtesy of Plexus Asset Management & I-Net Bridge

$1 trillion of adjustable mortgage resets STILL... Credit Suisse points out the above chart: "Option ARM resets are still pending. … Nothing much has happened yet because rates were so low that resets were pushed back"... if the Fed increases interest rates, this will make the problem even bigger & likely cause more foreclosures & defaults... "If you look at it, there's almost probably 5 million borrowers sitting there in some sort of delinquency right now who have yet to be foreclosed upon. So if you say [the Home Affordable Modification Program] is going to save only a small fraction of that, the rest of them have to go through in some form of foreclosure or distressed sale... So it's definitely not over by any means." ... http://www.snl.com/interactivex/article.aspx?CDID=A-10770380-12086 (4*)

Fed Should Raise Rates Sooner?... Thomas Hoenig, president and CEO of the Fed Kansas City: "I think we shouldn't be guaranteeing the markets a zero rate for an extended period. I think the crisis of a year ago has passed. We're in recovery... We can't predict the future and therefore we should not be giving guarantees. I think it'll help the market actually adjust if they know that rates can't be at zero forever — and shouldn't be."... about 8 min video

"We are going to reduce spending at the state level. And we are going to continue to reduce it because we have no choice but to do so... You know, at some point there has to be parity. There has to be parity between what is happening in the real world, and what is happening in the public sector world. The money does not grow on trees outside this building or outside your municipal building. It comes from the hard working people of our communities who are suffering and are hurting right now."
- New Jersey Governor Chris Christie

10 Debt-Laden States Quickly Becoming The Next California - New Jersey is 1 of the them... is Texas another?... - click on Texas cheerleader to activate...

Battle for Oil Between UK & Argentina?... The Oil Price & The Guardian report the revival of the dispute over the Falkland Islands between the United Kingdom & Argentina... this time there is the oil factor... Cliff Note: with the UK in desperate need of cash from its current economic & fiscal crisis, this situation could get ugly...
1. http://www.oilprice.com/article-renewed-battle-for-the-falkland-islands-suits-the-embattled-british-argentine-leaders-and-others.html (3*)
2. http://www.guardian.co.uk/uk/2010/feb/25/argentina-united-nations-falklands (3*)

Click image to activate slideshow,

Courtesy of CNBC