And Now the Saudis

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Argentine meltdown, here we come. The Saudis are showing signs of disinterest in going down the economic tubes with their friend George.

Saudi Arabia has refused to cut interest rates in lockstep with the USFederal Reserve for the first time, signalling that the oil-rich Gulfkingdom is preparing to break the dollar currency peg in a move thatrisks setting off a stampede out of the dollar across the Middle East.

"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.

"SaudiArabia has $800bn (£400bn) in their future generation fund, and theentire region has $3,500bn under management. They face an inflationarythreat and do not want to import an interest rate policy set for therecessionary conditions in the United States," he said.

TheSaudi central bank said today that it would take "appropriate measures"to halt huge capital inflows into the country, but analysts say thispolicy is unsustainable and will inevitably lead to the collapse of thedollar peg.

As a close ally of the US, Riyadh has so far tried to stick to the peg, but the link is now destabilising its own economy. [my emphasis]

As Susie points out, one of the goals of the Iraq invasion was to punish Iraq for pegging Read more →

$1.40

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Atrios points out that the Euro has just pushed past $1.40.

140

Let’s see. In the last two days, the Fed has cut interest rates by half a point, making what is probably a futile attempt to staunch the subprime crisis. And yesterday, Henry Paulson asked Congress to raise the debt limit before we once again hit our debt limit on October 1–which will make the fifth time Bush has had to ask his creditors to increase his credit card balance.

Is anyone surprised the dollar is at record lows? Good thing my brother-in-law’s wife is having a baby in South Carolina, which means the Irish in-laws will visit the states more frequently. Because Europe is going to be much too expensive for people from banana republics like the Bush-era USA.

Update: Oh jeebus. As Lurcher points out, the Canadian dollar is hovering around parity with the US dollar.

Remember that Bankruptcy Bill We Passed…

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To bail out those poor, helpless little credit card companies? Well, it’s time to revoke it:

As subprime borrowers began to default on their mortgages in rapidlygrowing numbers this year, credit card issuers increased their effortsto sign up such customers with tarnished financial histories, accordingto a market research firm.

Direct mail credit card offers to subprime customers in the UnitedStates jumped 41 percent in the first half of this year, compared withthe first half in 2006, according to Mintel International Group. Directmail offers targeted at customers with the best credit fell more than13 percent.

Yet, during this same period, defaults on subprimemortgages, which charge higher interest rates because the borrowers’blemished credit makes them bigger risks, rose significantly. In June,nearly 1 in 5 subprime mortgages were at least 60 days past due, andmore than 1 in 20 were in foreclosure, according to First AmericanLoanPerformance, a San Francisco firm that collects and analyzesmortgage data.

These are people already on the verge of bankruptcy. But credit card companies are targeting them selectively, luring them with yet another promise that they can get what they don’t–and can’t–pay for. And the credit card companies claim they’re doing these borrowers a favor, giving the cash to … what? Acquire tens Read more →

This Time, We’ll Bail Out the S&Ls without a Congressional Debate

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The former econ professor notes that we’re already bailing out big money:

Fed to the rescue.

Aug. 10 (Bloomberg) — The Federal Reserve added $19billion in temporary funds to the banking system through the purchaseof mortgage-backed securities to help meet demand for cash amid a routin bonds backed by home loans to riskier borrowers.

The Fed accepted only mortgage-backed debt as collateral for thismorning’s weekend repurchase agreement. Losses in U.S. subprimemortgage investments have been rippling through global credit markets,driving interest rates higher and sinking share prices. The Fed alsoadded $24 billion yesterday, the most since April, as demand for cashincreased.

The New York Fed’s additions lowered the Federal funds rate to 5.375percent, according to ICAP Plc, after it began trading at 6 percent,the highest opening rate since January 2001. The Fed’s benchmarkovernight rate is currently 5.25 percent.

Nothing wrong with putting money into the system to lower the federalfunds rate, but this is bailing out investors in a certain kind ofspecific and troubled asset.[my emphasis]

I’ll add just a few things to this: One, by bailing out investors without a Congressional debate, BushCo allows us to avoid any discussion about the practices that got us into this mess–and the implementation of efforts to make Read more →

Globalization and Terror and More Obstruction at DOJ

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Kudos to Congressman Bill Delahunt. He seems to be on a lonely crusade to get the US Government to treat all kinds of terrorism the same. He has been criticizing DOJ for its sloppy treatment of the terrorist Luis Posada Carriles; DOJ botched its case of immigration violations and Posada effectively went free. And now Delahunt’s leading a small group of Congressman pressuring DOJ to crack down on US corporate support of Columbian terrorist groups. The LAT provides two articles today on the reasons for concern. The first article outlines DOJ’s obstruction and conflicts of interest on the Chiquita case; the second describes the other US companies alleged to be supporting terror in Columbia.

Chiquita and DOJ

Given all the stories about the conflicts of interest in the Bush DOJ, the Chiquita story is real cause for concern. Chiquita just settled with DOJ, agreeing to pay a $25 million fine over five years–not exactly a punishment that will dent its profits. Yet Chiquita first admitted paying off terrorists in 2000, and DOJ prosecutors were trying to bring charges in 2004. So how did Chiquita get off with a fine three years later? Well, political appointee David Nahmias (who is now the USA in Atlanta–though he was approved via the quaint Senate approval channel) intervened:

Loonies and BRICs

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As most of you know, I live in SE Michigan, night clubs drive distance (if that’s your thing) from Canada. I didn’t go to my favorite Canadian ultimate tournament this year, so haven’t been in Canada for a while. So I was pretty darn shocked to hear this news:

The Canadian dollar breached 94 U.S. cents forthe first time in 30 years on Friday and analysts are speculating itwill be worth as much as the struggling U.S. greenback by year end.

Knownas the loonie because of the loon pictured on the one-dollar coin, theCanadian dollar closed at 94.22 cents in Friday trading — the highestit has been since July 1977.

It hit an all-time low of 61.79 cents on Jan. 21, 2002.

The latest surge comes after CIBCWorld Markets economists predicted the Canadian dollar will be worth asmuch as the greenback by the end of the year. That last happened inNovember 1976.

The Canadian dollar–the Loonie–has long been a kind of vacation time bonus for Americans. No longer, I guess. I’ll actually have to pay my way the next trip I make through Canada.

And then there’s this news (via Chris at AmericaBlog):

Cheney’s “Policies”

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The third installment in the WaPo’s Cheney series is a bit of a hodgepodge. It includes items that appear to have been thrown into this installment as part of a generic domestic policy article. But what the article is really about is how Cheney has pushed trickle down policies that have been proven failures in the past, once again by serving as a gatekeeper for advice that gets to the President, and pressuring the President on the few occasions when he disagrees.

But let me take a step back to contextualize this one. In my Sources post, I asserted that this series is largely an attempt on the part of Chief of Staff Bolten to reel Cheney in. How telling, then, that this article includes a direct link a scan of what appears to be an original memo (note the blue ink) Bolten wrote as Director of OMB, his position immediately prior to his current one. The memo describes the intent of the board–fiscal discpline–yet is placed after a paragraph describing how Cheney used the board as yet another gatekeeping device to direct Bush to make the choices Cheney supports.

The vice president chairs a budget review board, a panel the Bushadministration created to set spending priorities and serve as arbiterwhen Cabinet members appeal decisions by White House budget officials.The White House has portrayed the board as a device to keep Bush fromwasting time on petty disagreements, but previous administrations haveseldom seen Cabinet-level disputes in that light. Cheney’s leadershipof the panel gives him direct and indirect power over the federalbudget — and over those who must live within it.

It’s a curious touch, a subtle way of displaying Bolten’s attempt to maintain fiscal sanity against the background of Cheney making economic decisions that have really screwed the American economy. This stuff, I get the feeling, is personal for former OMB Director Bolten.

Lamont's "Single Issue" Voters

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The Q-Poll shows that 44% of Lamont’s supporters support him mainly because of Lieberman’s stance on the Iraq war. And Markos anticipates a bunch of pundits frowning on the large number of "Single Issue" voters.

For a pundit to suggest the Iraq war is a "Single Issue" simply betrays their ignorance of the impact that war has and will continue to have on this country and the rest of the world.

Some are opposed to the war because they’re opposed to 2,500 Americans dead, 18,000 Americans wounded, perhaps 100,000 Iraqis dead, untold wounded. Some oppose the war simply because it uses violence to solve problems that should be solved using other means.

Some are opposed to the war because it has ruined our military. Two-thirds of our active army and three-quarters of our National Guard face readiness problems because it needs to replace equipment used in Iraq. Extended deployments and lowered recruiting standards are having bad effects on the military, their families, and our mission. The Iraq war–sold as a way to make our country safer–has only exposed it defensively.

Some are opposed to the war because it has thoroughly destabilized Iraq, and threatens to destabilize the entire region. By almost every standard, Iraqi quality of life is worse today than it was under Saddam.

Some are opposed to the war because it has created precisely the problem that it was cynically sold as a way to prevent. Iraq is creating terrorists, at a time when the threat of terrorism remains very real.

Some are opposed to the war because it has turned us into an international pariah. Some countries no longer trust us. Others want nothing to do with our aggressive ways.