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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for June 8th, 2009

BRICs Add $60 Billion Reserves as Zhou Derides Dollar

Posted by WARREN MOSLER on 8th June 2009

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They don’t like to buy dollars but they don’t want their currencies to appreciate and risk export market share.

And Bernanke, Geithner, and Obama want them to let their currencies appreciate to help our exports and ALSO want them to buy dollars and treasury securities because they think we need that to fund our deficit spending.

It is one confused and sorry state of affairs on our part.

On balance it looks like our exports won’t be going up nearly as fast as imports especially with crude prices higher. And a good chunk of domestic demand will be channeled towards imports (including those new fiats…). And with flattish GDP and rising unemployment and talk of spending cuts and tax increases it’s starting to look very grim again.

Not to mention no plan to cut imported energy bills anytime soon.

BRICs Add $60 Billion Reserves as Zhou Derides Dollar

by Shanthy Nambiar and Lilian Karunungan

June 8 (Bloomberg) — Reserves Reversal

Asian central banks, excluding China, ran down foreign-
exchange reserves by more than $300 billion in the 12 months
ended April 30, according to London-based HSBC Holdings Plc.
Russia’s slid by $213 billion in the eight months ended March 31,
central bank data show. Brazil’s reserves dropped $5.7 billion
in the six months ended Feb. 27.


Posted in China, Currencies, India, Russia | 10 Comments »

WestLB Was Close To Being Shut Down Over Weekend

Posted by WARREN MOSLER on 8th June 2009

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What seems to be happening is bank ‘funding needs’ are become funding needs of Germany itself.

While this adds to Germany’s funding pressures, this process can go on indefinitely unless/until germany cannot somehow fund itself.

Not long ago the finance ministers announced they had a contingency plan for that possibility but wouldn’t say what that plan was leaving open the possibility they were bluffing. The CDS markets could be the best leading indicators of real trouble. With the US ‘recovery’ hitting a ‘soft patch’ of very low and very flat gdp and unemployment rising with productivity gains, an export dependent Eurozone looks like it will continue to struggle.

It just dawned on me that the Bush recovery got help from the fraudulent sub prime lending while it lasted, as the Clinton expansion got an assist from the pie in the sky valuations of the dot com boom, as the Reagan boom was assisted by the fraudulent S and L lending while that lasted. Without that kind of supplemental dose of aggregate demand, the automatic stabilizers alone while braking the decline probably do not produce all that robust of a recovery.

And if we follow the lead of Japan and tighten fiscal with every green shoot we wind up with the same results.

DJ WestLB Was Close To Being Shut Down Over Weekend

June 8 (Dow Jones) — German state-controlled bank WestLB AG was
close to being shut down over the weekend, people familiar with the
situation told Dow Jones Newswires Monday.
Bundesbank President Axel Weber and President of Germany’s BaFin
financial regulator Jochen Sanio threatened to close down the state bank
at crisis talks held over the weekend, the people familiar with the
talks said. It was only after this threat that savings banks agreed to
raise the guarantee framework for the debt-laden bank, the people said.

Late Sunday, WestLB owners said they raised their guarantee
framework for the bank by another EUR4 billion. The people familiar with
the situation said the savings bank agreed to extend the guarantee
umbrella after it was ensured that a solution wouldn’t hamper the spin
off of toxic assets into a so-called “bad”
German bank.

Regional banking associations WLSGV and RSGV together hold more than
50% of the shares, while the state of North Rhine-Westphalia has a 17.5%
stake and NRW.BANK holds 31.1%. NRW.BANK’s owners are the state of North
Rhine-Westphalia with 64.7% and WLSGV and RSGV with 17.6% each.


Posted in Banking, Deficit, Germany, Government Spending, Housing, Japan | 9 Comments »