Double Dip Recession is looming, The evidence is piling up that all year we've been living in a dreamland

After publicly doubting recovery all through the summer and early fall, the housing bears are definitely getting their moment, after two key numbers (mortgages and starts) came in particularly weak yesterday.


Today the WSJ adds some further evidence that the much-feared "double dip" is happening.
On Wednesday Pulte Homes Inc., the nation's largest home builder, warned investors of a grim outlook. "As we look out to 2010, we are expecting difficult conditions to continue," said chief executive Richard Dugas.

Meanwhile, more Americans who bought homes during the boom are falling into mortgage limbo. About 3.4% of U.S. households -- or about 1.9 million homeowners -- are 120 days or more overdue on their payments, but not yet in foreclosure, according to LPS Applied Analytics, a research firm in Denver. That is up from 1.5% a year earlier.
Many of these people are likely to lose their homes over the next few years. That means more bank-owned homes will hit a market already suffering from oversupply.
The housing-supply picture is tricky to read. The number of homes listed for sale was 3.63 million in September, down 15% from a year earlier, according to the National Association of Realtors. That is enough to last about eight months at the current rate of sales. Anything above about six months is considered a buyer's market, in which prices may come under downward pressure.

China reduced buying US Bonds, raising its own currency

China has sent the clearest signal yet that it may be about to scale back lending to the United States. On Wednesday, the Chinese Central Bank indicated that it would consider allowing the dollar to fall against the yuan. The change in policy—at a time when America is running the largest deficits in world history—could have major ramifications for the U.S.


The People’s Bank of China’s most recent policy report contained some interesting new language. Instead of repeating the typical rhetoric about keeping the yuan “basically stable at a reasonable and balanced level,” it hinted at a move away from the dollar peg (the mechanism by which it keeps the exchange rate of the yuan stable to the dollar).

The new policy language said that the bank will “improve the yuan exchange-rate formation mechanism,” based upon principles of “initiative, controllability and gradualism.” Analysts are interpreting this to mean that China may be about to allow the dollar to fall against the yuan.

“I think the wording change … shows that it is an irresistible trend for China to resume yuan appreciation,” said Xing Ziqiang, an economist at Beijing-based China International Capital Corp.

One of the ways China intervenes to keep the yuan pegged to the U.S. dollar is by purchasing dollar assets—like U.S. treasuries—in international currency markets. This increased demand for dollar assets, along with the subsequent increased supply of yuan, helps prop up the value of the dollar against the Chinese currency. However, if this relationship is about to change, and China is going to allow the dollar to fall in relation to the yuan, it means that China’s central bank will probably have to reduce its purchases of dollar assets.

If China curtails its treasury purchases, America may find itself in a pickle. China is America’s most important creditor. Over the past decade, China has willingly lent money to the U.S. government (by purchasing treasuries), so that the yuan would be artificially pegged at a low rate to the dollar. China did this to give an advantage to its exporters and encourage U.S. businesses to relocate to China. The advantage for America was that both the government and consumers had an easy source of borrowed money, and interest rates were kept low. This allowed both the public and private sectors of the U.S. economy over the past few years to embark on what was probably the biggest spending binge in history.

However, the downside to this arrangement may now be about to be felt. American society is addicted to debt. China’s announcement that it will let the dollar fall against the yuan is a warning that Chinese money might not be quite so easy to get. For the U.S. government, it means that it may need to find an additional source of foreign lenders—not an easy task when you are already the world’s largest borrower and you are running world-record deficits.

The U.S. is auctioning off another $81 billion in treasuries this week. This total is lower than other recent auctions, but it is still gargantuan compared to pre-economic-crisis days. This auction may not fail, but the probability that one will fail someday soon just got a whole lot more likely.

And if an auction were to fail? Interest rates could soar. For an economy addicted to debt at all levels—federal, state, municipal, corporate, personal—higher interest rates could be a killer.

The Orchestra Continues To Play As The Titanic Is Sinking

In 1912 nobody could have fathomed that the RMS Titanic, a purported unsinkable luxury liner, could have met its demise in an iceberg. As the Olympic-class passenger vessel descended into the sub-zero waters, the orchestra remained calm as they continued playing.

Today, like the oblivious orchestra players, most Americans remain blissfully unaware of how emaciated our economy has become. We continue to live under the fallacy that the United States is still a superpower. Now burdened by stifling debt, stymied by an obsolete industrial infrastructure and invaded by economic predators, we have somehow developed the same blinders the orchestra possessed, prohibiting us from seeing our imminent demise as we sit idly by, playing.

Americans are overlooking the rapid sell-off of our best wealth-producing companies; over 16,613 U.S. companies have been siphoned off by foreigners since 1978 alone. Many of these enterprises took over 100 years to develop, and everyday foreign acquirers spend over $200 million scooping up U.S. companies and landmarks.

We have already lost a huge percentage of our producing capabilities and our wealth generating companies in the midst of the Great American sell-off. Within the past five years alone, the U.S. has most notably lost Anheuser-Busch to Belgian-based InBev for $52 billion; Alcon, the world leader in eye care was usurped by Swiss pharmaceutical maker Novartis’ for $39 billion and KeySpan Corp. was bought out by British energy distributor National Grid for $11.8 billion.

The U.S. is currently fighting and losing an economic war that is prohibiting us from producing enough to support ourselves. We are being forced to live on imports and debt.

In June 2009, our own government will stop publishing a key report tracking foreign direct investments (FDI) into the U.S., essentially burying the problematic fact that America is for sale. Through the discontinuation of the Bureau of Economic Analysis’ (BEA) “New Investment Series,” the U.S. government and the American public will no longer be able to distinguish between FDI used to acquire existing U.S. assets from FDI used to establish new U.S. businesses. With the U.S. hiding the foreign money trail, the American public will no longer have the ability to track the rapid sell-off of the America’s best companies to foreign interests.

The U.S. is indebted more than $9.4 trillion. With each passing minute, the debt grows by almost $1 million or $1.4 billion a day. The top-four foreign holders of U.S. debt are Japan, China, Britain and Saudi Arabia. Together, these four nations hold around $2.3 trillion of national debt; Japan holds $517.2 billion while China holds nearly $405.5 billion. These numbers speak for themselves. Independence will be lost forever unless America becomes a productive exporting nation, backed by a strong industrial and manufacturing base.

Our foreign competitors have acquired much of their burgeoning wealth through our “free trade” policies. These countries have become our bankers. Now we can only afford to maintain our standard of living through the good graces of Japan, China, Britain and Saudi Arabia. Our foreign servitude has allowed us to live under the façade that we are wealthy. But it should be obvious that our former paradise has become a fool’s paradise as we produce less each year and watch as our best companies are ripped from our grasps. We currently sit on a massive pile of debt and imports. Our past glory days are distant memories, as the orchestra continues to play.

Bye bye dollar, Saudis nail it

Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.

The decision by the world’s biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world’s most heavily traded oil futures contract. It is the main contract traded on Nymex.

The move reveals the growing discontent of Riyadh and its US refinery customers with WTI after the price of the price of the benchmark became separatedfrom the global oil market this year.

The surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America’s pipeline system, depressed the value of the WTI against other global benchmarks, throwing the global oil market into disarray.

In January, WTI, which usually trades at a premium of $1-$2 a barrel to Brent, fell sharply, leaving it at a discount of almost $12 – a record gap. This dislocation in the market continued well into the summer.

From January, Saudi Arabia will base the price of oil for its US customers on a new index developed by Argus, the London-based oil pricing company.

The Argus Sour Crude Index will track the price in the physical market of a basket of US Gulf Coast crudes, including Mars, Poseidon and Southern Green Canyon.

Argus said the change in policy reflected the “increased importance of the US Gulf coast sour crude market, in which both production and trading activity was rising sharply”.

Paul Horsnell, head of commodities research at Barclays Capital in London, said Saudi Arabia’s decision was likely to reflect a “wider discontent” from its customers in the US about WTI performance.

ExxonMobil, Marathon and Valero are among the US’s biggest buyers of Saudi crude oil.

Edward Morse, chief economist at LCM Commodities in New York, said: “It is a recognition by large players that WTI sometimes does not reflect the true value of crude oil in the waterborne market.”

Saudi Arabia has priced its oil using WTI since 1994.

The price was based on quotes from the physical market which were compiled by Platt’s, a unit of McGraw-Hill.

Oil companies then covered their exposure to WTI using the futures market on Nymex.

Bob Levin, managing director of market research at the CME Group-owned Nymex, said the exchange was ready to move with the market.

“We plan to introduce a cash-settled futures contract tracking the new Argus index,” he said.

Mike Vinciquerra, equity research analyst at BMO Capital Markets, said the new Argus index would not replace WTI. “It’s more a supplement,” he said

Not Peter Shiff, It is Karl Marx Right again

Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism.

Karl Marx, Das Kapital, 1867

The great October fall of the US dollar is turning into an avalanche. On Tuesday, the American currency lost nine kopeks in Russia and reached a new minimum mark this year - 29.5 rubles per dollar. Within six months (April through September) the dollar lost over 10 percent at the world foreign exchange trading, which marked the sharpest decline since 1991. Some experts believe that the American currency is close to collapse, which may lead to a new financial crisis.

The tendency of the US dollar devaluation has been observed for a few years, but the current rate of decline is unprecedented. Some jokesters even rushed to re-read the letters of Karl Marx to Friedrich Engels written during the US financial panic of 1857 discussing the collapse of America. It would have been funny if it wasn’t so serious.

The chief economist of HSBC Bank Stephen King believes that if the US officials fail to stop the fall of American currency, it may provoke another financial crisis. “A dollar collapse would be a disaster all round… It would leave the international monetary system short of stability and long of fear. It would unleash economic upheavals on a similar scale to those seen in the 1970,” King wrote for The Independent.

American officials don’t seem to be overly concerned since nothing is being done about it. The US hasn’t done anything to support the currency since 1955. But is a collapse inevitable? From the viewpoint of macroeconomic indicators, the US state of affairs is, indeed, scary: record budget deficit of $1.4 trillion, record state debt that now exceeds $11.9 trillion, high unemployment and weak currency. Huge inflows of capital into the economy that Obama is proud of haven’t yet shown results.

But on the other hand, weak currency may be good for the US.

“The economy is supported by industrial orders based on the current weak dollar and higher prices in the future. Key players in the market are ready to support their manufacturers by weakening the currency,” says Alexander Kuptsikevich, FxPro financial analyst.

If the state debt is growing, it means that the US continues to obtain loans.

“Market participants prefer to borrow money in dollars, and dollar loans are relatively affordable. They invest into more active instruments denominated in currencies of developing countries,’ explains Yevgeny Nadorshin, chief economist of Trust Investment Bank.

This causes growth of stock index. For example, Russian Trading System increased by 34 percent within two and a half months.

World center banks, who used to be trusted American partners, also turn their backs to dollar. They reduced investments into assets denominated in American currency. According to Barclays Capital , in April, May, and June, the banks invested 63% of their gains in euro or yen. If it continues, this may lead to further devaluation of dollar.

However, central banks of the countries that depend on export try not to let it happen. For example, last week a group of Asian central banks carried out unprecedented intervention in the financial markets by actively buying American currency. Bank of Russia was not a passive observer either. According to experts’ evaluations, the bank purchased over three billion dollars.

The good thing about it is that it helped Russian manufacturers to maintain competitiveness and bank reserves. The question is whether we would have to spend much more when investors change their minds and flee the Russian market changing their rubles into dollars. Last year we paid a high price for it.

“I’m not afraid that the events of the last year will repeat. The circumstances now are different. The world touched the bottom of the crisis and revival began, so there won’t be sharp moves,” says profile manager of Pilgrim Asset Management Olga Izyumova.

Yevgeniy Nadorshin agrees with her. He also thinks that dollar will continue weakening. But many experts think that as soon as the US announces the raise of interest rates, American currency will stop falling and even start growing. When is it going to happen?

Ben Bernanke, the Chairman of the United States Federal Reserve evades the answer. All he says is that this will happen when the US is sure of stable growth. On Tuesday investors discussed information obtained from the US official sources that the Federal Reserve will start raising interest rates no earlier than the second half of the next year.

Next Great Bubble is about to bust - NYC Commercial Real Estate

This one's been in trouble for awhile, and now WSJ is reporting that the epic NYC apartment complex Stuyvesant Town is just months away from implosion.

The 56-building, 11,000 unit complex was acquired at the peak of the bubble for $5.4 billion by Tishman Speyer and BlackRock, with investors ranging from CALPERS (naturally) to the Church of England (not as obvious).

Here's the deal:

• The property is now thought to be worth just $2.1 billion.
• The buyers originally projected income would triple to $336 million in 2011, but right now it's only at $139 million.
• They've got just $33 million cash on hand from its interest reserves to cover its debt, and a burn rate of $16 million.

So basically: they're screwed.

Meanwhile, this sad state of affairs explains why StuyTown is so eager to advertise on subways and magazines, in a desperate bid to gain tenants? Perhaps you want to help them out and live in converted public housing (which is what it is).

Global trade still in deep recession - Cargo Ships aren't moving anywhere

Off the coast of Singapore is a collection of ships larger than the U.S. and English navies just sitting idle, waiting out the recession. It's a spectacular image, capturing our bruised global economy better than any we've see thus far.

The Daily Mail has pictures of the idled fleet, and the full story about the decline in the world's trade business.

At this time last year one of the massive cargo ships carrying 80,000 tons of cargo would cost $50,000 a day. Now it's just $5,500. To send a 40 foot steel container of goods from China to the UK cost $300,000 in the summer of 2008. Now it costs just $10,000. The world could have 25% of its ships sitting idle in the next two years.

While the President says the economy has been pulled from the brink, and economists say the recession has ended, these ships floating in Asian seas are big reminder that we're still far off from recovery.

Simon Parry of the Daily Mail: The tropical waters that lap the jungle shores of southern Malaysia could not be described as a paradisical shimmering turquoise. They are more of a dark, soupy green. They also carry a suspicious smell. Not that this is of any concern to the lone Indian face that has just peeped anxiously down at me from the rusting deck of a towering container ship; he is more disturbed by the fact that I may be a pirate, which, right now, on top of everything else, is the last thing he needs.

His appearance, in a peaked cap and uniform, seems rather odd; an officer without a crew. But there is something slightly odder about the vast distance between my jolly boat and his lofty position, which I can't immediately put my finger on.

Then I have it - his 750ft-long merchant vessel is standing absurdly high in the water. The low waves don't even bother the lowest mark on its Plimsoll line. It's the same with all the ships parked here, and there are a lot of them. Close to 500. An armada of freighters with no cargo, no crew, and without a destination between them. Continue>

China is playing game - Derivative issue may go wild

There was a not insubstantial sell-off in commodity prices from light sweet crude to copper on Monday:


Much of it came down to a story put out by China’s Caijing magazine, which suggested the country’s state-owned Assets Supervision and Administration Commission (SASAC) might consider reneging on commodity derivative contracts that were now relatively deeply out of the money.

It said:

China’s state-owned enterprises may unilaterally terminate commodities contracts as they try to cut massive losses from financial derivatives, an industry source told Caijing on August 28. According to the source, China’s State-owned Assets Supervision and Administration Commission (SASAC) has sent notice to six foreign financial institutions informing them that several state-owned enterprise will reserve the right to default on commodities contracts signed with those institutions.

Keith Noyes, an official with the International Swaps and Derivatives Association, a trade organization, confirmed that he is aware of the matter, but provided no further comment. Foreign brokerages usually work through their Hong Kong operations to sign over-the-counter derivative hedging contracts, according to an investment banker whose firm is involved in the business. Hong Kong and Singapore usually serve as venues for arbitration over such transactions.

Most investment banks may “just swallow” any losses arising from canceled contracts, the executive said, adding that any losses are usually made up for with compensating trades. Investment banks “just earn less” from such transactions, he said. But any such move would be a major blow to investment banks which service massive commodities hedging operations for Chinese SOEs on the international market, said the executive.

Chinese SOEs have suffered massive losses from hedging contracts since the onset of the global financial crisis. SASAC and the National Auditing Office has been investigating derivatives positions trading since the beginning of the year. A source from a state-owned company told Caijing that most of China’s SOEs engaging in foreign exchange and international trade have participated in derivatives trading, involving capital topping 1 trillion yuan.

That reportedly also contributedto a 7 per cent sell-off in the Shanghai Composite on the day.

Now, considering China’s commodity purchases have helped support the global rebound to a large degree this year, there are some important implications not only for the six banks involved in outstanding contracts, but also for all current and prospective counterparties, to say nothing of the health of the global economy in general.

What’s more if the SASAC reneges there’s no telling what sort of precedent that would set for other Chinese companies.

This is not 10 years ago, after all. China has grown to become a critical trading partner for many western institutions, with many respective counterparties clearly under the impression that the days of contract “u-turns” were largely behind the country.

As for the losses themselves, it seems many in the market do believe the sums involved could be pretty substantial.

Could this, we wonder, be one of the reasons Chinese companies were so busy stocking up on cheap commodities in the first half of the year?

World buying Gold like crazy! death of the dollar begin

Reports suggest that China's main sovereign wealth fund and other state entities are under pressure to invest in strategic Western assets as the country tries to offload its dollars for firmer-based wealth including gold and oil.

Several reports are coming out of China that there is pressure on state-controlled organisations - notably the country's main sovereign wealth fund, China Investment Corporation (CIC) to rapidly build investment in non-Chinese enterprises. While the CIC itself, with apparent access to some $300 billion in funds - and the possibility of more from the government - may be concentrating on hedge funds and other investment entities, there is another sector for Chinese state-owned companies looking at major investment in commodities. Indeed with the funds available as China seems to be dumping its US dollars in favour of more concrete assets, virtually no minerals sector is safe from Chinese participation.

While CIC was set up only two years ago, funded with $200 billion in initial capital, a report to the U.S. Congress noted that according to top Chinese officials, it was created to improve the rate of return on China's $1.5 trillion in foreign exchange reserves and to soak up some of the nation's excess financial liquidity. Depending on its performance with the initial allotment of $200 billion, the CIC might be allocated more of China's growing stock of foreign exchange reserves - and this has already proved to be the case.

Probably the most interesting of the recent reports of what is happening with Chinese sovereign wealth fund investment outside China has come from Paul Mylchreest's Thunder Road Report where an ex-U.S. intelligence service member is quoted. He reports that he has a friend who is in the Chinese Sovereign Wealth fund sector who says - hearsay I know and it wouldn't stand up in court - indicated that the wealth fund analysts were working all hours of the day and night trying to put investment deals together - particularly in the oil and precious metals sectors. The conclusion is that China recognises that the U.S. dollar is going to tank and it wants to convert as much of its trillions of dollars of holdings into strategic assets as possible before the collapse really takes hold.
The trouble is there is too much money available chasing too few assets - and too little time available - or such is the conclusion. As a result the Chinese government seems to be doing its utmost in trying to persuade the Chinese public to buy gold and silver by relaxing the restrictions - it's now easier to buy precious metals in China than in the U.S. - and by pushing gold and silver investment on state-owned television. If this continues the likelihood is that China will permanently overtake India as the world's biggest buyer of gold and silver, while the country's store of wealth will help shield it against further western economic collapse.
If this is indeed the case then it must be likely that the country is also building its own gold reserves - perhaps surreptitiously - through creative accounting by buying by a state entity, but not through the Central Bank itself where such sales would need to be reported. Positive for gold looking forward.
Returning to the Sovereign Wealth Funds angle though, CIC's chairman, Lou Jiwei, is reported by the WSJ as saying that investment in CIC's global portfolio for "one month this year equalled that of the whole of last year" and that given that the fund is expecting a positive return on its investments this year it may well ask the government for additional funding. Where it is going to place additional funding, who knows but there seems little doubt that China is using the western recession to buy up assets on the cheap and the funds available to do this are virtually unlimited by Western standards. But the Chinese won't buy up any old rubbish. They'll be looking for the crème de la crème.
Already CIC has bought 17% of Canada's last real remaining diversified miner - Teck Corporation - smartly buying when the latter was only just beginning to recover from last year's collapse and it has to be likely that more minerals-strategic investments are on the cards or being negotiated, either by CIC or other state organisations. Chinalco's ultimately thwarted move into Rio Tinto would have been another such instance and the Chinese investments and takeovers of Australian miners and promises of huge funding for minerals rich African countries are other examples.
Some reckon that China will be the world's second biggest economy, overtaking Japan, within the next couple of years and will overtake the U.S. by 2030. If it continues the way it is going and the U.S. continues the way it is going, this could happen much sooner. Communism, Chinese style, is winning the war of economic dominance and soon the world will no longer rely on the dollar as its reserve currency, but the renminbi!
In an interesting, but perhaps disturbing footnote to the Thunder Road Report mentioned above, Paul Mylchreest comments that in Latin America, where he has been living for 25 years, for the first time he can remember, locals are now preferring their own currency to U.S. dollars. He goes on to finish with this comment: "If a fellow with no education, a poor diet, and inadequate medical treatment living at 3,500 metres above sea level can figure out that the US dollar is undesirable as a store of wealth, how much longer do you think it can last as the world's reserve currency."
Your point to ponder for the day!

Congratulation - World just got New Currency!

At First here is the link to convert your currency to new SDR

YET ANOTHER BIG MOMENT IN HISTORY. THE SDR(Special Drawing Rights at the IMF or International Monetary Fund) is being made convertable into other currencies and the IMF beefing up their ability to service this type of request. If the article is even close to being right, the IMF is looking to increase their ability to leverage by a factor of 15 or more.. Going from gold reserves of 33bln to 283bln is HUGE and should be shouted from the rooftops if true..

In a new article on kitco, analyst Paul Nathan cites a report in Bloomberg that the IMF and representatives from China, Russia and Brazil voted to make the SDR (special drawing right) convertable to any currency. The first reserve of SDR's was created out of nothing at that vote, and is now availble to act as a neutral medium to move international currencies through. Anyone with a large horde of cash can now move it around the world at will, as long as the IMF give the say so. As I see it, this act cocks the gun for a bullet of massive, nation destroying inflation. Here's what Nathan says...

Late on a Friday in August, when most people around the world were not looking, the international monetary system, in an unprecedented move, evolved. We were notified by the IMF of the following:

Aug. 28 (Bloomberg) -- The International Monetary Fund said it today pumped about $250 billion into foreign-exchange reserves worldwide, acting on an April call from leaders of the Group of 20 nations to boost global liquidity.

Countries will be able to convert the money, to come from so-called Special Drawing Rights, into hard currencies through “voluntary trading arrangements” with other members, the IMF said on its Web site today. The SDRs are the institution’s unit of account based on a basket of currencies.

The allocation, approved by the IMF’s board of governors earlier this month, will not increase the fund’s pool of money available for lending, the IMF said. “It will, however, provide members with an additional method to obtain hard currencies.”

Another smaller reserves allocation of about $33 billion will take place Sept. 9 and will be limited to members that joined the lender after 1981, such as countries from the former Soviet bloc, the IMF said.

About $110 billion of the total allocation will go to emerging-market and developing countries and $20 billion to low- income nations.

“A number of members with sufficiently strong external positions” have already said they are ready to set up or expand existing arrangements enabling the sale or purchase of SDR's, the IMF said. The lender typically acts as a broker and arranges transactions between parties at no cost. (End News Release)

What this means is that for the first time in history we have a world central bank capable of creating money out of thin air. No longer does the IMF need to borrow money with a vote of all members plus the consent of the US congress. It can simply create whatever amount of money it needs through the creation of SDRs. Not for itself, mind you, but for the world. The SDR has been around since 1967, but never as a convertible asset. That changed Friday, August 28th, 2009. The SDR has quietly mutated.

The decision was made August 7th, in an IMF vote. According to the IMF "global reserves will increase from just USD33bn to USD283bn or about 4% of global reserves excluding gold. In addition, the IMF will start issuing SDR notes later this year (China, Brazil and Russia will be the main buyers). These SDR notes can be counted as part of currency reserves and hence SDR assets could reach 5% of total reserve assets later in 2009 and possibly surpass GBP, JPY and CHF in importance as reserve assets." This is a foot in the door.

The prospect of this happening was covered in my article, The Making Of An International Monetary Crisis:

"The spectacle of billions of inconvertible dollars frozen in the vaults of central banks has brought on cries of condemnation over the dollar’s credibility as a reserve currency. The Policy Maker’s theory of a stable yet artificially ever-expanding reserve currency has failed.
The "solution" to the problem (if the Policy Maker remains consistent) will be to evolve the international monetary system from a system in which an ever-expanding reserve currency provided the world with credit and liquidity, to a system in which an ever-expanding reserve "asset" will fill that role. Like the dollar, this reserve "asset" will amount to circulating debt, i.e. something owed rather than something owned. It will be a non-market instrument, deriving its acceptability from government cooperation and decree, "immune from the laws of the free market and outside the reach of greedy speculators."

Where will this "asset" come from? Under the Bretton Woods system, dollar reserves were furnished by the U.S. central bank. Both the bank and the "asset" failed to provide sufficient stability. The next step is to create a world bank (a larger bank of last resort) controlled by an international organization (the IMF) with the power to create a new "asset," independent of any single government’s monetary policy.

As a supplement to gold and like the dollar before it, this "asset" should be a credit instrument. Unlike the dollar, it would have the backing of an entire world of central banks. The "asset" should be ever-expanding and should provide both liquidity and stability." That asset is the SDR and the potential became a reality this weekend. (For a further discussion of creating international reserves and the SDR, see my articles The Making Of An International Monetary Crisis and Bretton Woods 1944-1971, under "Other articles" by Paul Nathan).

As of this weekend, the world is 250 billion dollars "richer". No products were produced. No taxes were raised. Not even one cent was borrowed. The IMF simply created a bookkeeping entry on behalf of those countries it felt worthy of receiving additional reserves. The reserves, SDRs, are a claim to "hard currency". The hard currency will be provided by those with "sufficiently strong external positions”, in other words, surplus nations.

There is no reason for surplus nations to part with hard currency, save two, that I can think of: Altruism or Power. And in my opinion they are having a go at the latter. My read on this is that the surplus nations have just made an end run around the United States and the US Congress who have veto power over IMF decisions. Surplus nations can now provide “voluntary trading arrangements” with non-surplus (importing) nations with the IMF as "broker". This sounds like a mechanism for the surplus nations to provide buying power to importing nations at the expense of us all.

The ability to inflate has now been augmented. It has transcended national boundaries from national central banks to a world central bank. This "new" bank now has the power to create money. Inflation is no longer limited to one currency but will affect all paper currencies in the world. We now have the prospect of a synchronized international inflation. It's not enough that citizens throughout the world had to keep a keen eye on their nations central bank, now we all need to keep an eye on the IMF.

The "IMF's Board Of Governors", a group never elected to office, unknown to most, and accountable to no one, has now gained the power to create new claims on production without legal limits or oversight from any regulatory body. All it need do is vote for more SDRs.

Given the "announcement in the dead of night" tactics just employed, I suggest we all sharpen our eyesight. This development doesn't change the inflation outlook for the next month or even for the next year. But make no mistake -- the "powers that be" just took the fiat system and the inflation threat to a new level.

CNBC September Calling - Get ready for a bumpy ride

The US recovery could be bumpy, but haven't we passed the point where credit markets threaten to completely freeze-up? Art Cashin of UBS trading appears to believe the worst is behind us.



"Now we've gotten back to basically pre-Lehman levels. The Lehman scare is out of the market."



So we're back to pre-Lehman, but markets are still below pre-Lehman. More ammo for those who believe stocks are too cheap relative to where we are today.

New Banking Strategy - Micro financing vs Too big to fail

Despite the economic downturn, microfinance pioneer Grameen Bank continues to report nearly 100% payback rates for its loans to the very poor.

This bank, started by Nobel Prizer winner Muhammad Yunus, lends to people with zero credit, no collateral, and extremely low levels of income.

Aren't the poorest mass-defaulting due to recent economic hardship? Not at all.

AP: "We have now shown that the poorest of the poor can be creditworthy," he said in an interview with The Associated Press during a recent trip to Bangkok. "Our loan repayments are as high as ever."

One part of Grameen's success is that it involves many members of the same social group when approving and monitoring loans, increasing the social cost of default for the borrower. It also turns many borrowers into shareholders.

A group of five prospective borrowers from similar social and economic positions come together to determine an appropriate loan for each.The request then goes before a larger council of borrowers, who are also shareholders in the bank, and finally to the bank for approval."

Furthermore, the bank focuses on lending for productive assets, rather than for mere consumption or asset speculation. How amazingly obvious this bank's principles sound in retrospect.

Grameen also has been successful because it's grounded in what he calls "the real economy," rather than "fantasy economy" of ever-climbing asset prices. A loan for a goat, for example, produces tangible benefits that can support a family. "The closer you are to the real economy, the safer you are," he said.

While not everything could be scaled-up and applied to large traditional banks -- in doing so, you'd likely lose a lot of what makes this work -- the underlying concepts should be taken to heart.

Bailout Just failed - Peter Boettke

The long run inflationary consequences of the bailouts of our financial system has sent us on a path of national ruin, famed economist Peter Boettke argues.

Despite the short term gains in the stock market and what looks like the start of an economic recovery, the cycle of debt, deficits and government expansion will be economically crippling, he says

From Boettke:

If what the bailout and shift in both the traditional role of the Fed and Treasury perform have done is unleash this cycle of deficits, debt and debasement rather than constrain it (as it obviously has done!), then we have sent our national economic policies on a path of ruin that may well set us back for decades…
Government activism isn't the cure for the crisis, it is the cause.

Boettke says the Fed’s quantitative easing is a mistake because it is preventing market adjustments guided by relative pricing. What’s more, the government’s actions were predicated on the idea that we were experiencing a liquidity crisis when what we were really going through a solvency crisis. And the ad-hoc way the policies were created led to "regime uncertainty" as markets tried to guess what the government would do.

Here's how Boettke puts it:

Basic data presented by the Minn Fed, as well as discussed by Bob Higgs as well as Jeff Miron, Casey Mulligan and John Cochrane on issues related to liquidity, regime uncertainty, unemplyment composition, problems of moral hazard, effectiveness of fiscal policy, etc. have all at various times seemed to call into question the entire policy rationale used by economists and government officials. I am willing to be convinced that these empirical points are indeed wrong, but I have not been presented with such counter-claims on the data. Instead of critical engagement of the contending positions, we often just get in the blogosphere the separate claims presented. And in the instances where "debate" has in fact been encouraged --- such as the discussion between Brad de Long and Luigi Zingales, I found Zingales the more convincing presentation of economic argument.

Bottom-line, I don't believe we have seen a crisis of confidence, but instead a crisis of insolvency compounded by regime uncertainty caused by government's activism. In other words, we didn't have a credit lock-up a year ago due to liquidity issues, we had a credit lock-up due to regime uncertainty brought on by government decisions on who to bailout and who not to bailout for their bad decisions. Resources needed to be reallocated guided by price adjustment to bring production plans into alignment with consumption demands. Bailouts prevent the needed adjustments.

So not only am I dubious that the monetary policy the Fed has engaged in over the past year has been productive, I am extremely dubious that its expanded role beyond monetary policy in the economy. In fact, the dangers for the economy are significant, and as even discussed recently on both Tyler and my blog, the lack of a credible exit strategy makes it even more troublesome (remember those long-run consequences).

US Postal service stop using dollar for its international transactions

The U.S. Postal Service is valuing its international transactions no longer in the U.S. dollar but in the accepted "currency" of the International Monetary Fund, Special Drawing Rights (SDRs). China, Russia, Brazil and India are calling for a new world currency due to our rising debt and falling dollar. Russian President Dmitry Medvedev pulled the newly minted gold Euro-dollar (valued at $3,900) from his pocket at the G-8 summit in July declaring it the future world currency.
here is link to usps website explaining SDR
Have we, the people, considered what the consequences to our economy will be if we are no longer able to print money to pay our debts but instead have to buy the accepted world currency? Let's add $1.2 trillion in health care costs to our debt. Let's keep spending. That ought to take care of it. Wake up, America.

Here is yesterdays Reuters article summarizes the agenda for next month G-20 meeting in London where Russia as third largest reserve currency holder still chanting the need for Global single currency.

as per Reuters

China and Russia -- which hold, respectively, the worlds first and third biggest reserves -- have suggested that a new global currency could be based on the International Monetary Fund's Special Drawing Rights (SDRs).

IMF officials have said that in theory such a move could be possible, but it would take a long time. The SDRs are the IMF's unit of account, their value is based on a basket of currencies including the dollar, Japanese yen, British pound and euro.

Major emerging market economies, such as Russia, would like to see the SDR basket widened to include their national currencies and possibly other assets such as gold.

Canada's Looming Banking crisis - Bank of Montreal may be gone

Dan Amos - who called the crash of Lehman and other giants beforehand - says that a major bank is lying about its ability to pay shareholder dividends, has been gaming its books, and is about to crash.

Amos doesn't say which bank he's talking about, but gives the following hint:


[It has] a 192 year old history and 37,000 employees . . .


A quick Google search reveals that this can only be the Bank of Montreal, also known as BMO Financial Group.

Stock Gum Shoe - a website devoted to guessing at the companies hinted at in stock tips - confirms that Amos was talking about Bank of Montreal.


This is newsworthy because the Canadian banks have widely been seen as the world's safest and most stable banks. Indeed, the Bank of Montreal was listed as the 33rd safest bank in the world by Global Finance.

Amos says that the Bank of Montreal won't be able to pay the promised $1.5 billion dividend scheduled later this year, which will precipitate a crash in BMO's stock by December.

washingtonsblog

Great American Sell off - Companies that aren't American anymore

Between 01/01/08 and 07/24/09 total 615 companies sold to foregn entity, below list of few names


List Of American Companies Sold To Foreign Interests
--------------------------------------------------------------------------------

Millennium Pharmaceuticals Inc
Foreign Acquiror: Mahogany Acquisition Corp [Takeda Pharmaceutical Co Ltd]
Foreign Acquiring Country:: Japan
US Dollar Amount of Acquisition: $8,734,094,727
Date Acquired: 05/14/08
State of US Company: Massachusetts
US Company Business Description: Biopharma co
US Company Industry: Drugs


--------------------------------------------------------------------------------

Commerce Bancorp,New Jersey
Foreign Acquiror: Toronto-Dominion Bank
Foreign Acquiring Country:: Canada
US Dollar Amount of Acquisition: $8,638,206,055
Date Acquired: 03/31/08
State of US Company: New Jersey
US Company Business Description: Coml bank
US Company Industry: Commercial Banks, Bank Holding Companies


--------------------------------------------------------------------------------

NAVTEQ Corp
Foreign Acquiror: Nokia Oyj
Foreign Acquiring Country:: Finland
US Dollar Amount of Acquisition: $7,953,590,820
Date Acquired: 07/10/08
State of US Company: Illinois
US Company Business Description: Dvlp digital mapping software
US Company Industry: Prepackaged Software


--------------------------------------------------------------------------------

MidCon Corp [Knight Holdco LLC]
Foreign Acquiror: Investor Group
Foreign Acquiring Country:: Australia
US Dollar Amount of Acquisition: $6,575,000,000
Date Acquired: 02/18/08
State of US Company: Illinois
US Company Business Description: Pvd gas transmission svcs
US Company Industry: Electric, Gas, and Water Distribution


--------------------------------------------------------------------------------

Business Objects SA
Foreign Acquiror: SAP AG
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $5,510,991,211
Date Acquired: 01/15/08
State of US Company: California
US Company Business Description: Dvlp software
US Company Industry: Prepackaged Software


--------------------------------------------------------------------------------

Respironics Inc
Foreign Acquiror: Koninklijke Philips Electronic
Foreign Acquiring Country:: Netherlands
US Dollar Amount of Acquisition: $5,349,126,953
Date Acquired: 03/14/08
State of US Company: Pennsylvania
US Company Business Description: Mnfr,whl med equip
US Company Industry: Measuring, Medical, Photo Equipment; Clocks


--------------------------------------------------------------------------------

Ventana Medical Systems Inc
Foreign Acquiror: Roche Holding AG
Foreign Acquiring Country:: Switzerland
US Dollar Amount of Acquisition: $3,665,414,062
Date Acquired: 02/19/08
State of US Company: Arizona
US Company Business Description: Mnfr,whl surgical,med equip
US Company Industry: Measuring, Medical, Photo Equipment; Clocks


--------------------------------------------------------------------------------

MGI PHARMA Inc
Foreign Acquiror: Jaguar Acquisition Corp [Eisai Co Ltd]
Foreign Acquiring Country:: Japan
US Dollar Amount of Acquisition: $3,557,320,068
Date Acquired: 01/25/08
State of US Company: Minnesota
US Company Business Description: Mnfr pharm
US Company Industry: Drugs


--------------------------------------------------------------------------------

Genlyte Group Inc
Foreign Acquiror: Philips Holding USA Inc [Koninklijke Philips Electronic]
Foreign Acquiring Country:: Netherlands
US Dollar Amount of Acquisition: $2,810,249,023
Date Acquired: 01/28/08
State of US Company: Kentucky
US Company Business Description: Mnfr,whl lighting fixtures
US Company Industry: Electronic and Electrical Equipment


--------------------------------------------------------------------------------

Alcoa Inc-Packaging & Consumer [Alcoa Inc]
Foreign Acquiror: Rank Group Ltd
Foreign Acquiring Country:: New Zealand
US Dollar Amount of Acquisition: $2,700,000,000


UAP Holding Corp
Foreign Acquiror: Agrium Inc
Foreign Acquiring Country:: Canada
US Dollar Amount of Acquisition: $2,624,266,113


--------------------------------------------------------------------------------

Molson Coors Brewing Co-US & [Molson Coors Brewing Co]
Foreign Acquiror: SABMiller PLC-US & Puerto Rico [SABMiller PLC]
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $2,600,000,000


--------------------------------------------------------------------------------

Combined Ins Co of America [Aon Corp]
Foreign Acquiror: ACE Ltd
Foreign Acquiring Country:: Bermuda
US Dollar Amount of Acquisition: $2,400,000,000


--------------------------------------------------------------------------------

SunCom Wireless Holdings Inc
Foreign Acquiror: T-Mobile USA Inc [Deutsche Telekom AG]
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $2,399,177,979


--------------------------------------------------------------------------------

Commerce Group Inc
Foreign Acquiror: Corporacion Mapfre SA
Foreign Acquiring Country:: Spain
US Dollar Amount of Acquisition: $2,316,628,906


--------------------------------------------------------------------------------

Adams Respiratory Therapeutics
Foreign Acquiror: Reckitt Benckiser PLC
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $2,267,159,912


--------------------------------------------------------------------------------

Quanex Corp
Foreign Acquiror: Gerdau SA
Foreign Acquiring Country:: Brazil
US Dollar Amount of Acquisition: $1,749,206,055


--------------------------------------------------------------------------------

TimberStar-900,000 Acre Port [iStar Financial Inc]
Foreign Acquiror: Hancock Timber Resource Grp [Manulife Financial Corp]
Foreign Acquiring Country:: Canada
US Dollar Amount of Acquisition: $1,710,000,000


--------------------------------------------------------------------------------

Alabama Natl BanCorp,AL
Foreign Acquiror: RBC Centura Banks Inc [Royal Bank of Canada]
Foreign Acquiring Country:: Canada
US Dollar Amount of Acquisition: $1,641,642,944


--------------------------------------------------------------------------------

Metal Management Inc
Foreign Acquiror: Sims Group Ltd
Foreign Acquiring Country:: Australia
US Dollar Amount of Acquisition: $1,514,666,992


TAP Pharmaceutical Products [Abbott Laboratories Inc]
Foreign Acquiror: Takeda Pharmaceutical Co Ltd
Foreign Acquiring Country:: Japan
US Dollar Amount of Acquisition: $1,500,000,000


--------------------------------------------------------------------------------

Consolidated Edison-Gen Proj [Consolidated Edison Inc]
Foreign Acquiror: North American Energy Alliance [Allco Finance Group Ltd]
Foreign Acquiring Country:: Australia
US Dollar Amount of Acquisition: $1,477,000,000


--------------------------------------------------------------------------------

Sempra Commodities [Sempra Energy Inc]
Foreign Acquiror: RBS
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $1,350,000,000


--------------------------------------------------------------------------------

Midland Co
Foreign Acquiror: Munich Re
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $1,324,656,006


--------------------------------------------------------------------------------

Intel Corp-NOR Assets [Intel Corp]
Foreign Acquiror: STMicroelectronics NV-Flash [STMicroelectronics NV]
Foreign Acquiring Country:: Switzerland
US Dollar Amount of Acquisition: $1,073,810,059


--------------------------------------------------------------------------------

General Chemical Industrial [Harbert Management Corp]
Foreign Acquiror: Tata Chemicals Ltd
Foreign Acquiring Country:: India
US Dollar Amount of Acquisition: $1,005,000,000


--------------------------------------------------------------------------------

American Stock Transfer
Foreign Acquiror: Pacific Equity Partners
Foreign Acquiring Country:: Australia
US Dollar Amount of Acquisition: $1,000,000,000


--------------------------------------------------------------------------------

CitiStreet LLC [Citigroup Inc]
Foreign Acquiror: ING Groep NV
Foreign Acquiring Country:: Netherlands
US Dollar Amount of Acquisition: $900,000,000


--------------------------------------------------------------------------------

Robertson's Ready Mix Ltd
Foreign Acquiror: MCC Development Corp [Mitsubishi Materials Corp]
Foreign Acquiring Country:: Japan
US Dollar Amount of Acquisition: $900,000,000


--------------------------------------------------------------------------------

Godiva Chocolatier Inc [Campbell Soup Co]
Foreign Acquiror: Yildiz Holding AS
Foreign Acquiring Country:: Turkey
US Dollar Amount of Acquisition: $850,000,000


Citigroup Inc-Loan Portfolio [Citigroup Inc]
Foreign Acquiror: Undisclosed Acquiror
Foreign Acquiring Country:: Unknown
US Dollar Amount of Acquisition: $840,000,000


--------------------------------------------------------------------------------

American Express Bank Ltd [American Express Co]
Foreign Acquiror: Standard Chartered PLC
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $823,000,000


--------------------------------------------------------------------------------

Grant PrideCo Inc-Tubular Buss [Grant PrideCo Inc]
Foreign Acquiror: Vallourec SA
Foreign Acquiring Country:: France
US Dollar Amount of Acquisition: $800,000,000
Date Acquired: 05/05/08
State of US Company: Texas
US Company Business Description: Mnfr,whl oil drilling mach
US Company Industry: Machinery


--------------------------------------------------------------------------------

Great Western Bancorp,Omaha,NE
Foreign Acquiror: National Australia Bank Ltd
Foreign Acquiring Country:: Australia
US Dollar Amount of Acquisition: $798,000,000
Date Acquired: 06/04/08
State of US Company: Nebraska
US Company Business Description: Comml bk hldg co
US Company Industry: Commercial Banks, Bank Holding Companies


--------------------------------------------------------------------------------

Savvian LLC
Foreign Acquiror: GCA Holdings Corp [GCA Savvian Group Corp]
Foreign Acquiring Country:: Japan
US Dollar Amount of Acquisition: $780,000,000
Date Acquired: 03/03/08
State of US Company: California
US Company Business Description: Pvd invest advisory svcs
US Company Industry: Investment & Commodity Firms,Dealers,Exchanges


--------------------------------------------------------------------------------

El Paso Expl & Prodn Co- [El Paso Corp]
Foreign Acquiror: Undisclosed Acquiror
Foreign Acquiring Country:: Unknown
US Dollar Amount of Acquisition: $752,000,000
Date Acquired: 03/25/08
State of US Company: Texas
US Company Business Description: Oil,gas expl,prodn
US Company Industry: Oil and Gas; Petroleum Refining


--------------------------------------------------------------------------------

Boston Scientific-Surgery Bus [Boston Scientific Corp]
Foreign Acquiror: Getinge AB
Foreign Acquiring Country:: Sweden
US Dollar Amount of Acquisition: $750,000,000
Date Acquired: 01/07/08
State of US Company: Delaware
US Company Business Description: Mnfr,whl med devices
US Company Industry: Measuring, Medical, Photo Equipment; Clocks


--------------------------------------------------------------------------------

Sirtris Pharmaceuticals Inc
Foreign Acquiror: GlaxoSmithKline PLC
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $715,583,984
Date Acquired: 06/02/08
State of US Company: Massachusetts
US Company Business Description: Biopharmaceutical co
US Company Industry: Drugs


--------------------------------------------------------------------------------

LS Power Grp-Power Plant,TX [LS Power Group]
Foreign Acquiror: Arcapita Inc [Arcapita Bank BSC]
Foreign Acquiring Country:: Bahrain
US Dollar Amount of Acquisition: $695,000,000
Date Acquired: 01/30/08
State of US Company: Texas
US Company Business Description: Electric utility
US Company Industry: Electric, Gas, and Water Distribution


--------------------------------------------------------------------------------

Lighthouse Investment Partners
Foreign Acquiror: HFA Holdings Ltd [Suncorp-Metway Ltd]
Foreign Acquiring Country:: Australia
US Dollar Amount of Acquisition: $624,567,017
Date Acquired: 01/03/08
State of US Company: Colorado
US Company Business Description: RE invest firm
US Company Industry: Investment & Commodity Firms,Dealers,Exchanges


Developers Diversified Realty- [Developers Diversified Realty]
Foreign Acquiror: Undisclosed Acquiror
Foreign Acquiring Country:: Unknown
US Dollar Amount of Acquisition: $603,000,000
Date Acquired: 05/15/08
State of US Company: Colorado
US Company Business Description: Own,op shopping centers
US Company Industry: Real Estate; Mortgage Bankers and Brokers


--------------------------------------------------------------------------------

Oglebay Norton Co
Foreign Acquiror: Carmeuse North America [LVI Holding Corp]
Foreign Acquiring Country:: Netherlands
US Dollar Amount of Acquisition: $520,299,988
Date Acquired: 02/14/08
State of US Company: Ohio
US Company Business Description: Limestone mining co
US Company Industry: Mining


--------------------------------------------------------------------------------

Reliant Energy Inc-Channelview [Reliant Energy Inc]
Foreign Acquiror: GIM Channelview Cogeneration
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $500,000,000
Date Acquired: 07/09/08
State of US Company: Texas
US Company Business Description: Cogeneration facility
US Company Industry: Electric, Gas, and Water Distribution


--------------------------------------------------------------------------------

Excelerate Energy LLC
Foreign Acquiror: RWE AG
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $500,000,000
Date Acquired: 06/02/08
State of US Company: Texas
US Company Business Description: Pvd LNG distn svcs
US Company Industry: Electric, Gas, and Water Distribution


--------------------------------------------------------------------------------

American Home-Mtg Bus [American Home Mortgage Invest]
Foreign Acquiror: AH Mortgage Acquisition Co [Invesco PLC]
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $500,000,000
Date Acquired: 04/11/08
State of US Company: New York
US Company Business Description: Mortgage servicing business
US Company Industry: Real Estate; Mortgage Bankers and Brokers


--------------------------------------------------------------------------------

Little River Golf & Resort,NC
Foreign Acquiror: Oceanico Group
Foreign Acquiring Country:: Portugal
US Dollar Amount of Acquisition: $500,000,000
Date Acquired: 01/03/08
State of US Company: North Carolina
US Company Business Description: Own,op hotels
US Company Industry: Hotels and Casinos


--------------------------------------------------------------------------------

Sauer-Danfoss Inc
Foreign Acquiror: Danfoss A/S
Foreign Acquiring Country:: Denmark
US Dollar Amount of Acquisition: $493,046,997
Date Acquired: 07/11/08
State of US Company: Iowa
US Company Business Description: Mnfr fluid power pumps,motors
US Company Industry: Machinery


--------------------------------------------------------------------------------

Business Objects SA
Foreign Acquiror: SAP AG
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $487,924,011
Date Acquired: 01/29/08
State of US Company: California
US Company Business Description: Dvlp software
US Company Industry: Prepackaged Software


--------------------------------------------------------------------------------

Valero Energy Corp-Krotz [Valero Energy Corp]
Foreign Acquiror: Alon USA Energy Inc [Dor Alon Energy In Israel]
Foreign Acquiring Country:: Israel
US Dollar Amount of Acquisition: $433,000,000
Date Acquired: 07/07/08
State of US Company: Louisiana
US Company Business Description: Mnfr,whl petro prod
US Company Industry: Oil and Gas; Petroleum Refining


--------------------------------------------------------------------------------

Visicu Inc
Foreign Acquiror: Koninklijke Philips Electronic
Foreign Acquiring Country:: Netherlands
US Dollar Amount of Acquisition: $431,364,990
Date Acquired: 02/20/08
State of US Company: Maryland
US Company Business Description: Dvlp software
US Company Industry: Prepackaged Software


CollaGenex Pharmaceuticals Inc
Foreign Acquiror: Galderma Laboratories LP [Nestle SA]
Foreign Acquiring Country:: Switzerland
US Dollar Amount of Acquisition: $419,557,007
Date Acquired: 04/11/08
State of US Company: Pennsylvania
US Company Business Description: Mnfr pharm
US Company Industry: Drugs


--------------------------------------------------------------------------------

SPARTA Inc
Foreign Acquiror: Cobham PLC
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $416,000,000
Date Acquired: 06/04/08
State of US Company: Alabama
US Company Business Description: Pvd engineering svcs
US Company Industry: Business Services


--------------------------------------------------------------------------------

Claymont Steel Holdings Inc
Foreign Acquiror: Evraz Group SA
Foreign Acquiring Country:: Russian Fed
US Dollar Amount of Acquisition: $413,510,986
Date Acquired: 01/16/08
State of US Company: Delaware
US Company Business Description: Mnfr,whl steel plate
US Company Industry: Metal and Metal Products


--------------------------------------------------------------------------------

CoGenesys Inc
Foreign Acquiror: Teva Pharma Inds Ltd
Foreign Acquiring Country:: Israel
US Dollar Amount of Acquisition: $400,000,000
Date Acquired: 02/21/08
State of US Company: Maryland
US Company Business Description: Mnfr pharm
US Company Industry: Drugs


--------------------------------------------------------------------------------

Fontainebleau Resorts LLC
Foreign Acquiror: Nakheel Co PJSC [United Arab Emirates]
Foreign Acquiring Country:: Utd Arab Em
US Dollar Amount of Acquisition: $375,000,000
Date Acquired: 04/09/08
State of US Company: Florida
US Company Business Description: Own,op beach resort,hotel
US Company Industry: Hotels and Casinos


--------------------------------------------------------------------------------

WCI Steel Inc
Foreign Acquiror: OAO SeverStal
Foreign Acquiring Country:: Russian Fed
US Dollar Amount of Acquisition: $369,825,012
Date Acquired: 07/07/08
State of US Company: Ohio
US Company Business Description: Mnfr custom steel prod
US Company Industry: Metal and Metal Products


--------------------------------------------------------------------------------

MTC Technologies Inc
Foreign Acquiror: BAE Systems Inc [BAE Systems PLC]
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $364,088,013
Date Acquired: 06/09/08
State of US Company: Ohio
US Company Business Description: Pvd sys engineering svcs
US Company Industry: Business Services


--------------------------------------------------------------------------------

Possis Medical Inc
Foreign Acquiror: Medrad Inc [Bayer AG]
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $359,351,013
Date Acquired: 04/02/08
State of US Company: Minnesota
US Company Business Description: Mnfr med devices
US Company Industry: Measuring, Medical, Photo Equipment; Clocks


--------------------------------------------------------------------------------

Bentley Pharmaceuticals Inc
Foreign Acquiror: Teva Pharma Inds Ltd
Foreign Acquiring Country:: Israel
US Dollar Amount of Acquisition: $352,058,990
Date Acquired: 07/22/08
State of US Company: New Hampshire
US Company Business Description: Mnfr,whl pharm
US Company Industry: Drugs


--------------------------------------------------------------------------------

Sterling Life Insurance Co [Aon Corp]
Foreign Acquiror: Munich Re
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $352,000,000
Date Acquired: 04/01/08
State of US Company: Washington
US Company Business Description: Pvd ins,medicare svcs
US Company Industry: Insurance


GMH Military Housing [GMH Communities Trust]
Foreign Acquiror: Balfour Beatty PLC
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $350,500,000
Date Acquired: 04/30/08
State of US Company: Pennsylvania
US Company Business Description: Pvd housing svcs
US Company Industry: Construction Firms


--------------------------------------------------------------------------------

PlantCML [Golden Gate Capital]
Foreign Acquiror: EADS North America [EADS NV]
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $350,000,000
Date Acquired: 04/22/08
State of US Company: California
US Company Business Description: Pvd software dvlp svcs
US Company Industry: Prepackaged Software


--------------------------------------------------------------------------------

Analog Devices Inc-Cellular [Analog Devices Inc]
Foreign Acquiror: MediaTek Inc
Foreign Acquiring Country:: Taiwan
US Dollar Amount of Acquisition: $350,000,000
Date Acquired: 01/11/08
State of US Company: Massachusetts
US Company Business Description: Mnfr semiconductors
US Company Industry: Electronic and Electrical Equipment


--------------------------------------------------------------------------------

Bradley Pharmaceuticals Inc
Foreign Acquiror: Nycomed US Inc [Nycomed Intl Mgmt GmbH]
Foreign Acquiring Country:: Switzerland
US Dollar Amount of Acquisition: $349,420,990
Date Acquired: 02/21/08
State of US Company: New Jersey
US Company Business Description: Mnfr,whl pharm
US Company Industry: Drugs


--------------------------------------------------------------------------------

Genesis Microchip Inc
Foreign Acquiror: STMicroelectronics NV
Foreign Acquiring Country:: Switzerland
US Dollar Amount of Acquisition: $324,130,005
Date Acquired: 01/28/08
State of US Company: California
US Company Business Description: Mnfr,whl integrated circuits
US Company Industry: Electronic and Electrical Equipment


--------------------------------------------------------------------------------

Nonnis Food Co [Wind Point Partners]
Foreign Acquiror: Vivartia SA
Foreign Acquiring Country:: Greece
US Dollar Amount of Acquisition: $320,000,000
Date Acquired: 04/02/08
State of US Company: Oklahoma
US Company Business Description: Produce,ret biscuits
US Company Industry: Food and Kindred Products


--------------------------------------------------------------------------------

Strategic Energy LLC [Great Plains Energy Inc]
Foreign Acquiror: Direct Energy Marketing Ltd [Centrica PLC]
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $300,000,000
Date Acquired: 06/02/08
State of US Company: Pennsylvania
US Company Business Description: Whl,ret elec solutions
US Company Industry: Wholesale Trade-Durable Goods


--------------------------------------------------------------------------------

US Zinc Corp [TPG Capital LP]
Foreign Acquiror: Votorantim Metais Ltda [Grupo Votorantim]
Foreign Acquiring Country:: Brazil
US Dollar Amount of Acquisition: $295,000,000
Date Acquired: 01/11/08
State of US Company: Texas
US Company Business Description: Mnfr zinc oxide,dust
US Company Industry: Metal and Metal Products


--------------------------------------------------------------------------------

Business Objects SA
Foreign Acquiror: SAP AG
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $277,671,997
Date Acquired: 02/18/08
State of US Company: California
US Company Business Description: Dvlp software
US Company Industry: Prepackaged Software


--------------------------------------------------------------------------------

Air Products Polymers LP [Air Products & Chems Inc]
Foreign Acquiror: Wacker Chemie AG
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $265,000,000
Date Acquired: 02/01/08
State of US Company: Pennsylvania
US Company Business Description: Mnfr latex ploymers
US Company Industry: Chemicals and Allied Products


Gracenote Inc
Foreign Acquiror: Sony Corp of America [Sony Corp]
Foreign Acquiring Country:: Japan
US Dollar Amount of Acquisition: $260,000,000
Date Acquired: 06/02/08
State of US Company: California
US Company Business Description: Pvd embedded tech svcs
US Company Industry: Business Services


--------------------------------------------------------------------------------

PDL Biopharma Inc-Antibody [PDL Biopharma Inc]
Foreign Acquiror: Genmab AS
Foreign Acquiring Country:: Denmark
US Dollar Amount of Acquisition: $240,000,000
Date Acquired: 03/13/08
State of US Company: Minnesota
US Company Business Description: Mnfr pharm
US Company Industry: Drugs


--------------------------------------------------------------------------------

E-Z-EM Inc
Foreign Acquiror: Bracco Diagnostics Inc [Bracco SpA]
Foreign Acquiring Country:: Italy
US Dollar Amount of Acquisition: $230,507,996
Date Acquired: 04/01/08
State of US Company: New York
US Company Business Description: Mnfr med imaging prod
US Company Industry: Measuring, Medical, Photo Equipment; Clocks


--------------------------------------------------------------------------------

Davy Crockett Gas Co LLC
Foreign Acquiror: Emvelco Corp [Koninklijke KPN NV]
Foreign Acquiring Country:: Netherlands
US Dollar Amount of Acquisition: $225,000,000
Date Acquired: 05/01/08
State of US Company: Delaware
US Company Business Description: Oil,gas expl
US Company Industry: Oil and Gas; Petroleum Refining


--------------------------------------------------------------------------------

NiSource Inc-Eenergy Plant [NiSource Inc]
Foreign Acquiror: BP Alternative Energy Ltd [BP PLC]
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $210,000,000
Date Acquired: 07/01/08
State of US Company: Indiana
US Company Business Description: Elec,gas,water utility
US Company Industry: Electric, Gas, and Water Distribution


--------------------------------------------------------------------------------

Datascope Corp-Patient Monitor [Datascope Corp]
Foreign Acquiror: Mindray Medical Intl Ltd
Foreign Acquiring Country:: China
US Dollar Amount of Acquisition: $209,000,000
Date Acquired: 05/15/08
State of US Company: New Jersey
US Company Business Description: Mnfr surgical,med instr
US Company Industry: Measuring, Medical, Photo Equipment; Clocks


--------------------------------------------------------------------------------

Blackstone Group LP-Hotels(4) [Blackstone Group LP]
Foreign Acquiror: Undisclosed Joint Venture [Harte Holdings]
Foreign Acquiring Country:: Ireland-Rep
US Dollar Amount of Acquisition: $207,800,003
Date Acquired: 02/06/08
State of US Company: Pennsylvania
US Company Business Description: Own,op hotels
US Company Industry: Hotels and Casinos


--------------------------------------------------------------------------------

PDL Biopharma Inc-IV Busulfex [PDL Biopharma Inc]
Foreign Acquiror: Otsuka Pharmaceutical Co Ltd
Foreign Acquiring Country:: Japan
US Dollar Amount of Acquisition: $200,000,000
Date Acquired: 03/10/08
State of US Company: California
US Company Business Description: IV Busulfex asts
US Company Industry: Business Services


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Reveille Productions
Foreign Acquiror: Shine Group
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $200,000,000
Date Acquired: 02/14/08
State of US Company: California
US Company Business Description: Pvd tv,motion picture prodn
US Company Industry: Amusement and Recreation Services


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Cannondale Bicycle Corp [Pegasus Partners II LP]
Foreign Acquiror: Dorel Industries Inc
Foreign Acquiring Country:: Canada
US Dollar Amount of Acquisition: $200,000,000
Date Acquired: 02/04/08
State of US Company: Connecticut
US Company Business Description: Mnfr bicycles,accessories
US Company Industry: Transportation Equipment


Ozaukee Bank,Cedarburg,WI
Foreign Acquiror: Bank of Montreal,Ontario,CA
Foreign Acquiring Country:: Canada
US Dollar Amount of Acquisition: $198,360,001
Date Acquired: 03/03/08
State of US Company: Wisconsin
US Company Business Description: Coml bk
US Company Industry: Commercial Banks, Bank Holding Companies


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Entrada Oil Field [Callon Petroleum Co]
Foreign Acquiror: CIECO Energy (US) Ltd [ITOCHU Corp]
Foreign Acquiring Country:: Japan
US Dollar Amount of Acquisition: $195,000,000
Date Acquired: 04/08/08
State of US Company: Texas
US Company Business Description: Oil,gas field
US Company Industry: Oil and Gas; Petroleum Refining


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GFI Oil & Gas Corp
Foreign Acquiror: Salamander Energy PLC
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $186,938,995
Date Acquired: 03/17/08
State of US Company: Texas
US Company Business Description: Oil,gas expl,prodn
US Company Industry: Oil and Gas; Petroleum Refining


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Denbury Resources Inc-Gas Asts [Denbury Resources Inc]
Foreign Acquiror: Undisclosed Acquiror
Foreign Acquiring Country:: Unknown
US Dollar Amount of Acquisition: $180,000,000
Date Acquired: 02/21/08
State of US Company: Louisiana
US Company Business Description: Natural gas asts
US Company Industry: Oil and Gas; Petroleum Refining


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Quadra Realty Trust Inc
Foreign Acquiror: Hypo Real Estate Capital Corp [Hypo Real Estate Holding AG]
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $178,912,003
Date Acquired: 03/13/08
State of US Company: New York
US Company Business Description: Re invest tr
US Company Industry: Investment & Commodity Firms,Dealers,Exchanges


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Ritz-Carlton Huntington Hotel
Foreign Acquiror: Great Eagle Holdings Ltd
Foreign Acquiring Country:: Hong Kong
US Dollar Amount of Acquisition: $170,000,000
Date Acquired: 01/08/08
State of US Company: California
US Company Business Description: Own,op hotel
US Company Industry: Hotels and Casinos


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AppTec Laboratory Services Inc
Foreign Acquiror: WuXi PharmaTech(Cayman)Inc
Foreign Acquiring Country:: China
US Dollar Amount of Acquisition: $162,699,997
Date Acquired: 01/31/08
State of US Company: Minnesota
US Company Business Description: Pvd lab testing svcs
US Company Industry: Health Services


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Alto Dairy Cooperative
Foreign Acquiror: Saputo Inc
Foreign Acquiring Country:: Canada
US Dollar Amount of Acquisition: $160,000,000
Date Acquired: 04/01/08
State of US Company: Wisconsin
US Company Business Description: Produce,whl dairy prod
US Company Industry: Retail Trade-Food Stores


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Chesapeake Publishing-Asts(22) [Chesapeake Publishing Corp]
Foreign Acquiror: American Consolidated Media [Macquarie Media Group]
Foreign Acquiring Country:: Australia
US Dollar Amount of Acquisition: $159,500,000
Date Acquired: 01/09/08
State of US Company: Maryland
US Company Business Description: Publishing asts
US Company Industry: Printing, Publishing, and Allied Services


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Adema Technologies Inc
Foreign Acquiror: Investor Group
Foreign Acquiring Country:: Taiwan
US Dollar Amount of Acquisition: $155,432,007
Date Acquired: 01/23/08
State of US Company: California
US Company Business Description: Mnfr ingots,wafers
US Company Industry: Electronic and Electrical Equipment


Univision Music Group [Umbrella Holdings LLC]
Foreign Acquiror: Universal Music Group [Vivendi SA]
Foreign Acquiring Country:: France
US Dollar Amount of Acquisition: $153,000,000
Date Acquired: 05/05/08
State of US Company: California
US Company Business Description: Pvd music recording svcs
US Company Industry: Business Services


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Tysons Dulles Plaza Office [Vornado Realty Trust]
Foreign Acquiror: Undisclosed Acquiror
Foreign Acquiring Country:: Unknown
US Dollar Amount of Acquisition: $152,800,003
Date Acquired: 06/10/08
State of US Company: Virginia
US Company Business Description: Own,op office bldg
US Company Industry: Real Estate; Mortgage Bankers and Brokers


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Century Steel Inc
Foreign Acquiror: Pacific Coast Steel [Gerdau SA]
Foreign Acquiring Country:: Brazil
US Dollar Amount of Acquisition: $151,500,000
Date Acquired: 04/02/08
State of US Company: Nevada
US Company Business Description: Mnfr structural steel prod
US Company Industry: Metal and Metal Products


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American Radiology Svcs Inc [Advent International Corp]
Foreign Acquiror: CML HealthCare Income Fund
Foreign Acquiring Country:: Canada
US Dollar Amount of Acquisition: $151,000,000
Date Acquired: 03/01/08
State of US Company: Maryland
US Company Business Description: Pvd diagnostic imaging svcs
US Company Industry: Health Services


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Compete Inc [Perficient Inc]
Foreign Acquiror: Taylor Nelson Sofres PLC
Foreign Acquiring Country:: United Kingdom
US Dollar Amount of Acquisition: $150,000,000
Date Acquired: 03/07/08
State of US Company: Massachusetts
US Company Business Description: Pvd online mktg svcs
US Company Industry: Business Services


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North Pointe Holdings Corp
Foreign Acquiror: QBE the Americas [QBE Insurance Group Ltd]
Foreign Acquiring Country:: Australia
US Dollar Amount of Acquisition: $144,740,997
Date Acquired: 04/30/08
State of US Company: Michigan
US Company Business Description: Pvd ppty,casualty ins svcs
US Company Industry: Insurance


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Renovis Inc
Foreign Acquiror: Evotec AG
Foreign Acquiring Country:: Germany
US Dollar Amount of Acquisition: $141,445,999
Date Acquired: 05/02/08
State of US Company: California
US Company Business Description: Mnfr pharm
US Company Industry: Drugs


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Merchants,Mnfr Bancorp Inc,WI
Foreign Acquiror: Harris NA [Bank of Montreal,Ontario,CA]
Foreign Acquiring Country:: Canada
US Dollar Amount of Acquisition: $137,279,007
Date Acquired: 03/03/08
State of US Company: Wisconsin
US Company Business Description: Bk hldg co
US Company Industry: Commercial Banks, Bank Holding Companies


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Pacific Energy Resources-Asts [Pacific Energy Resources Ltd]
Foreign Acquiror: Undisclosed Acquiror
Foreign Acquiring Country:: Unknown
US Dollar Amount of Acquisition: $135,000,000
Date Acquired: 05/01/08
State of US Company: California
US Company Business Description: Oil,gas expl,prodn
US Company Industry: Oil and Gas; Petroleum Refining


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Liberty Travel Inc
Foreign Acquiror: Flight Centre Ltd
Foreign Acquiring Country:: Australia
US Dollar Amount of Acquisition: $135,000,000
Date Acquired: 02/01/08
State of US Company: New Jersey
US Company Business Description: Pvd travel agency svcs
US Company Industry: Transportation and Shipping (except air)

China aggressively reducing us debt - Sign of things to come

The United States needs to borrow nearly $10 trillion over the next decade, including about $1.6 trillion this year.

Where's it going to come from?

This is critical question, because resistance on the part of creditors will drive up interest rates, clobbering the housing market and demolishing the value of whatever cash savings Americans have left. The other answer--our government lending the money to itself--will destroy the value of the dollar, and that wouldn't help too many people, either (except debtors--it would help debtors because they will be able to repay nominal debts with toilet-paper dollars.

For now, the money we're borrowing is coming from somewhere, thankfully. But it's not coming from China, which has funded our spending for most of the past decade. As you can see in the chart above from the NYT, China's absolute purchases of Treasury debt continued to rise through last year, but the percentage of our borrowing that China is funding is shrinking fast.

Here's Floyd Norris in the NYT:

China reduced its holdings of Treasury securities by $25 billion in June, the most China had ever sold in a month...

China and Hong Kong, which is reported separately but is combined under China in the accompanying graphic, together covered more than half of the increase in the amount of Treasuries sold to the public — that is, to buyers other than United States governme nt agencies like the Federal Reserve or Social Security — in 2006.

That share had fallen to 22 percent last year, when the government increased its public debt by a record $1.2 trillion. In the first half of 2009, China and Hong Kong acquired only 9 percent of the more than $800 billion worth of Treasuries that were sold.

Another Sellout to Foreigner - Spanish bank acquires Guaranty bank

BBVA, the Spanish bank, on Friday succeeded in its acquisition of Guaranty Financial, a struggling Texas bank with $13.5bn in assets, the Federal Deposit Insurance Corporation said.

The move makes Guaranty the 81st US bank to fail this year. BBVA agreed to buy $12bn of Guaranty’s assets, with the FDIC retaining the remaining $1.5bn. Spain’s second biggest bank will also assume Guaranty’s $12bn in deposits.


“BBVA Compass’s acquisition of all the deposits was the ‘least costly’ resolution for the FDIC’s deposit insurance fund compared to alternatives,” the FDIC said in a statement.

The Office of Thrift Supervision said on Friday that Guaranty bank was, “in an unsafe and unsound condition because of the deteriorating quality of its loan portfolio, critically deficient earnings, capital insolvency and strained liquidity position”.

The latest bank failure will cost the FDIC $3bn in insurance funds. Through the agreement, the FDIC and BBVA will share in the losses of a, $11bn pool of Guaranty’s assets.

People close to the matter said previously that Toronto Dominion and JPMorgan had also expressed interest in Guaranty, which garnered interest from other regional banks due to its presence in Texas. US Bancorp, the Minneapolis-based parent of US Bank, which has $266bn in assets, had been considered by people involved in the auction to be one of the other strong candidates.

BBVA had reason to be aggressive in attempting to buy banking assets in the southern US. The Spanish bank bought Compass Bancshares, which is based in Alabama, in 2007 for nearly $9.6bn and has since sought to expand its presence.

“Right now, it’s banking as usual,” Manolo Sánchez, BBVA Compass’ chief executive, told Guaranty customers on its website.

Guaranty had 103 branches in Texas and 59 in California. BBVA has 750 branches across seven states in the US and now has 421 in Texas.

Three smaller US banks also failed on Friday. Regulators shuttered Atlanta’s ebank; First Coweta, of Newman, Georgia; and CapitalSouth Bank in Alabama.

Guaranty’s fate has become intertwined in recent weeks with that of Colonial Bank, an Alabama-based bank that was forcibly closed last Friday and largely sold to BB&T, another regional bank, in an FDIC-backed deal.