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jstan
climber
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Feb 17, 2010 - 08:23am PT
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A few months ago I suggested the bad securities sold abroad by the US would decrease the willingness of foreign investors to keep sending us money. A current investigation over whether Goldman concealed adverse information on a Greek bond issue that company floated does not help.
The last ten years good times in the US were made possible by foreign investors. It appears our unprincipled behavior these last years has poisoned that well. The long reported hope that the US's booming financial services industry would offset our decreasing income from high technology exports, may be lost.
The bills for our experiment with unregulated capitalism will be coming due for many years to come.
U.S. looks to reluctant foreign investors to help fund the housing market
By Howard Schneider
Washington Post Staff Writer
Tuesday, February 16, 2010; A01
As the U.S. housing market boomed in the past decade and fueled a bull market in mortgage investments, Norway's government-owned fund went along for the ride -- and the fall.
After that fund recorded its worst-ever year in 2008, managers cited investments backed by U.S. mortgages as a key culprit and began to cut back.
Now, U.S. officials are looking to foreign government funds again. The Federal Reserve is scheduled at the end of March to halt its purchases of mortgage-backed securities, a move that could drive up the low interest rates that have helped the housing market show new signs of life. The Fed is gambling that private investors will step in to buy the securities, helping to keep rates from spiking. Senior officials in the Obama administration and at the Fed say they are counting in part on foreigners to keep the housing market funded.
But financial analysts and advisers familiar with foreign government funds, known as sovereign wealth funds, predicted that the United States will get limited relief from abroad.
"I don't think it will be enough to fill the hole," said Ajay Rajadhyaksha, head of fixed-income strategy for the United States at Barclays Capital.
Nor is Norway's experience encouraging. Its government's holdings of securities issued by the mortgage financier Fannie Mae declined from a 2007 high of more than $15 billion, at current exchange rates, to just more than $5 billion as of Sept. 30, 2009, according to the fund's public reports. Contracts with external investment mangers were slashed, and the fund's guidelines were refocused toward individual stocks, real estate and other deals that the fund's staff had the expertise to vet.
Sovereign wealth funds are pools of money used by governments to make investments. The largest belong to big exporters such as China and the oil-rich monarchies of the Persian Gulf that accumulate trade surpluses.
These funds often set guidelines for the amount of money they are willing to put into bonds or other fixed-income investments, including mortgage-backed securities. Even if interest rates begin a modest rise, as he expects, Rajadhyaksha said he does not think it will be enough for sovereign wealth funds to direct large amounts of money away from alternatives, particularly U.S. Treasury notes, that are less risky and not associated with the mortgage crisis.
"A lot of sovereign wealth funds have a vested interest in seeing the U.S. stabilize," said R.P. Eddy, whose Ergo consulting firm advises foreign funds on U.S. and global economic issues. "But some wealth fund coming in to save the day? That is not going to happen."
The securities issued by government-sponsored enterprises such as Fannie Mae and Freddie Mac are not debts of the U.S. government but do carry an implicit guarantee that the companies will not default. In December, the government carried that a step further, saying it would not limit the amount of money made available to keep the firms solvent.
Senior U.S. officials said the goal was to reassure buyers of the companies' mortgage securities that they were safe. "That's particularly true for foreign investors," said Eric S. Rosengren, president of the Federal Reserve Bank of Boston.
The Fed's departure from the market for mortgage-backed securities is only one step being taken to wind down the emergency measures put in place by the U.S. government during the financial crisis. But it is one that could have a direct effect on homeowners and potential buyers and on the tentative recovery in the real estate market.
By packaging home mortgages into large bundles that are then sold to investors, Fannie Mae and Freddie Mac generate funds that allow banks and other lenders to provide more loans. Keeping that market liquid during the depths of the global credit crisis was a high priority -- enough so that the Federal Reserve is expected to own $1.25 trillion in mortgage-backed securities by the time the program ends.
If funding evaporates in the absence of federal support, that would mean higher interest rates -- making purchases more difficult for buyers and payments more expensive for those with adjustable-rate loans.
But some financial analysts said U.S. officials consider a healthy housing market so vital to an economic recovery that they would roll out new policies to keep mortgage rates low if sovereign wealth funds and other private investors fail to step in with enough funding.
"We recognize that a deep and liquid home mortgage market is an important U.S. policy priority," said Paul O'Brien, head of fixed-income strategy at the Abu Dhabi Investment Authority. He said U.S. officials would be sure to protect this market.
Like most sovereign wealth funds, the Abu Dhabi Investment Authority publishes only broad statements of strategy and does not disclose individual holdings. Norway's fund is an exception. But even those broad intentions hint at the degree to which sovereign wealth funds may be interested in mortgage-related securities in the United States.
Over the past two years, as the world economy cycled from crisis to an uncertain recovery, some sovereign wealth funds were forced to turn inward -- directed by their governments to provide capital to local companies, as in the case of Russia, or pulled back from troubled investments abroad, as in the case of Dubai.
Others signaled a new set of investment interests: commodity and natural resources companies, thought to be undervalued during the economic downturn, and emerging economies that are thought to hold better long-term growth potential than the developed markets of Europe and North America.
In recent publications and interviews, for example, executives at both the Abu Dhabi Investment Authority and Singapore's Temasek fund pointed to a focus on developing markets.
Asian wealth funds in particular are looking to tap into economic growth in their region as a broad new class of consumers emerges, offering fresh opportunities while consumption spending in the United States and Europe plateaus, said Jan Randolph, head of sovereign risk analysis at the IHS Global Insight consulting firm.
Not only is the United States seen as a slower-growth region, he said, but some funds are looking for non-dollar investments to guard against the currency's possible decline and are still hesitant about the U.S. mortgage industry.
"Put yourself in the position where you do have the capital to invest. A lot of it is heading to emerging markets and into equity," Randolph said. "The bigger uncertainties are still in the West."
© 2010 The Washington Post Company
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bookworm
Social climber
Falls Church, VA
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Feb 17, 2010 - 10:28am PT
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from vdh:
"Indeed, even as Obama damns Guantanamo and tribunals, he has massively increased the number of targeted assassinations of suspected terrorists — the rationale presumably being either that we are safer with fewer jihadists alive, or that we are warning would-be jihadists that they will end up buried amid the debris of a mud-brick compound, or that it is much easier to kill a suspected terrorist abroad than detain, question, and try a known one in the United States.
In any case, the president — immune from criticism from the hard Left, which is angrier about conservative presidents waterboarding known terrorists than liberal ones executing suspected ones — has concluded that one way to win in Afghanistan is to kill as many terrorists and insurgents as possible. And while the global public will praise his kinder, gentler outreach, privately he evidently thinks that we will be safer the more the U.S. marines shoot Taliban terrorists and the more Hellfire missiles blow up al-Qaeda planners.
Why otherwise would a Nobel Peace Prize laureate order such continued offensive missions?
Victory is most easily obtained by ending the enemy’s ability to resist — and by offering him an alternative future that might appear better than the past. We may not like to think all of that entails killing those who wish to kill us, but it does, always has, and tragically always will — until the nature of man himself changes."
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jstan
climber
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Feb 17, 2010 - 10:35am PT
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It has been a long time, but
Do you remember what it was like when people actually did what they said they were going to do?
http://latimesblogs.latimes.com/comments_blog/2009/02/iraq-august-20.html
Obama to withdraw most U.S. troops from Iraq by August 2010
February 27, 2009 | 10:04 am
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From Obama's prepared text:
As a candidate for President, I made clear my support for a timeline of 16 months to carry out this drawdown, while pledging to consult closely with our military commanders upon taking office to ensure that we preserve the gains we’ve made and protect our troops. Those consultations are now complete, and I have chosen a timeline that will remove our combat brigades over the next 18 months.??Let me say this as plainly as I can: by August 31, 2010, our combat mission in Iraq will end.??As we carry out this drawdown, my highest priority will be the safety and security of our troops and civilians in Iraq. We will proceed carefully, and I will consult closely with my military commanders on the ground and with the Iraqi government. There will surely be difficult periods and tactical adjustments. But our enemies should be left with no doubt: this plan gives our military the forces and the flexibility they need to support our Iraqi partners, and to succeed.
The withdrawal is of combat troops. Officials say there will still be 35,000 to 50,000 troops left in Iraq to help advise Iraqi military, and several other tasks.
http://latimesblogs.latimes.com/comments_blog/2009/02/iraq-august-20.html
U.S. troop strength in Iraq drops below 100,000 level
February 17, 2010
Baghdad - The American military says the number of its troops deployed in Iraq has dropped below 100,000 for the first time since the 2003 U.S.-led invasion.
There were 98,000 troops in Iraq as of Tuesday, said Army 1st Lt. Elizabeth Feste, a military spokeswoman. That's a significant drop from the 140,000 or so troops in the country a little more than a month after the invasion, and a decline of about 70,000 since the height of the 2007 buildup in which tens of thousands of additional troops were deployed to fight the insurgency.
The decrease signals that the U.S. is sticking to its plan to steadily reduce the number of troops in Iraq to 50,000 by the end of August.
The military expects to pull out of the country completely by the end of next year.
Copyright © 2010, The Los Angeles Times
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Norton
Social climber
the Wastelands
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Feb 17, 2010 - 10:39am PT
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February 17, 2010
Baghdad - The American military says the number of its troops deployed in Iraq has dropped below 100,000 for the first time since the 2003 U.S.-led invasion.
There were 98,000 troops in Iraq as of Tuesday, said Army 1st Lt. Elizabeth Feste, a military spokeswoman. That's a significant drop from the 140,000 or so troops in the country a little more than a month after the invasion, and a decline of about 70,000 since the height of the 2007 buildup in which tens of thousands of additional troops were deployed to fight the insurgency.
The decrease signals that the U.S. is sticking to its plan to steadily reduce the number of troops in Iraq to 50,000 by the end of August.
The military expects to pull out of the country completely by the end of next year.
jstan, above
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Captain...or Skully
Social climber
walkin' the road to nowhere
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Feb 17, 2010 - 11:39am PT
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It's "Animal Farm".
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Norton
Social climber
the Wastelands
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Feb 17, 2010 - 12:02pm PT
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Dumbass. Period. 100% DUMBASS.
And Jeff, you are somewhat ok.
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jstan
climber
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Feb 17, 2010 - 12:32pm PT
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Yes. We all knew China had to start dumping our debt. Interest rates are finally headed up, the recovery is going to be squeezed and how it all plays out as regards inflation/recession is yet to be determined.
I started looking at Krugman’s work on Japan to see if that is going to be a parallel to our future. We are going to have lower growth certainly and the current accounts deficit is not going to go away, given our refusal to admit the consequences long term. The dollar should continue weakening and the world’s economic center of mass will accelerate its move away from the US, arguably toward China. The question is what currency is better. Near term China will most likely be into inflation. When the dollar takes a decided shift down we will know someone big has made a bet as to where to go next.
As of 1999 Krugman says the only problem in Japan is that people won’t spend. I can see one reason why not. They went through a disaster in the forties and quite a few of those people still live. And I have to believe the Japanese no longer trust the US will defend them. They are not fools. There may be another reason, and it is a reason why the US may follow Japan, even though we spend like drunken sailors. RESOURCES.
Economic activity, other than services, has to involve making something and to make something you have to start with something. A resource. Now that our financial services are no longer trusted and used by other nations we are forced back on our resources more than we might otherwise have been. During the last nine years of unregulated capitalism we have kicked away an important option we had. Japan refused to cut its forests, forests they have worked so hard to keep since the 1500’s. In the last nine years we have cut most of ours already and also part of Canada’s. We are becoming resource poor. So poor we had to invade Iraq. If my resource supposition is valid all nations will move toward reduced economic activity as population continues unabated expansion. The horizon for everyone is poverty colored.
All of this suggests the next move that will set all prior calculations aside. China itself is resource poor and it needs to return to its earlier attempt at an alliance with Russia. Their land mass, Russia’s resources and proximity to the middle east would make them the new center of economic mass. The two countries have been exploring this already during the last two or three years.
So there it is. Why is Pauline never around when we need her?
http://www.latimes.com/business/la-fi-foreign-holdings17-2010feb17,0,1647739.story
China dumps $34.2 billion in U.S. debt in December
Japan increases its holdings by $11.5 billion to reclaim the title of largest owner of U.S. securities.
Associated Press
February 17, 2010
Washington
The government said Tuesday that foreign demand for U.S. Treasury securities fell by the largest amount on record in December, with China reducing its holdings by $34.2 billion.
The reductions in holdings, if they continue, could force the government to commit to higher interest payments at a time that it is running record deficits.
The Treasury Department reported that foreign holdings of U.S. Treasury securities fell by $53 billion in December, surpassing the previous record, a $44.5-billion drop in April 2009.
The big decrease in China's holdings meant that it lost the top spot in terms of foreign ownership of U.S. Treasuries, dropping to second place behind Japan.
Japan, meanwhile, increased its holdings of U.S. Treasuries to $768.8 billion in December, an $11.5-billion rise. China held $755.4 billion in U.S. debt.
The $53-billion decline in holdings of Treasury securities came primarily from a drop in official government holdings, which fell by $52.3 billion.
Overall, the Treasury Department said foreign net purchases of long-term securities -- government issues as well as corporate bonds -- totaled $63.3 billion in December, down from $126.4 billion in November.
Copyright © 2010, The Los Angeles Times
Norton:
Oh yeah. Jeff is OK. Just ignore those who do everything they can to cause everyone to ignore them. Let them have what they seek.
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jstan
climber
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Feb 17, 2010 - 02:26pm PT
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Jeff:
Agreed on the renminbi. To avoid broadcasting, the peg will be loosened gradually. As I said a couple of years ago I have been watching that exchange rate as a benchmark regarding Chinese intentions. To infer the existence of a policy change we will probably see a de-peg that is a little more than we would have expected PLUS a couple of reasons out there making it unclear why the change was made.
It will take two bits of information, at a minimum.
The Russian markets are fraught with unknowns but in their negotiations and positioning vis-a-vis China they will be able to make very good use of foreign investment. Ever since the god awful fight they put up against the sixth army I have thought them a truly amazing people. Their day could be coming, finally. Their experiment with unregulated communism was just as disastrous as was our experiment with unregulated capitalism.
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Norton
Social climber
the Wastelands
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Feb 17, 2010 - 02:48pm PT
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I would like to hear how you all personally feel about the "value"
of people alive today versus those alive "tomorrow".
I am referring to the premise that government spending to raise the
standard of living of the less well off should not be allowed because
such spending "might" result in a weak US dollar and rising interest
rates in the future.
We know for a fact that we can provide healthcare for everyone,
we also know that we can put more unemployed Americans to work
by government created projects, such as a massive "New Deal"
type spending.
We do NOT know, for sure, what impact raising out national debt
while we do this will have on our ability to sell our bond and bill
to finance this spending in the future. It is safe to assume that
the interest rates we will have to pay to encourage buying this
additional debt will likely go up.
Such a proposal to significantly reduce unemployment, provide healthcare
to all, will reduce human suffering right now in America.
Are the lives of "future" Americans who may have to pay higher interest
rates on home loans, car loans, business borrowing, etc MORE "important"
than the lives of present day Americans?
We know for a fact that the private sector "failed" and sent us
into Recession, and now 20 million of our fellow Americans have lost
their jobs as a result. The private sector is NOT creating new jobs
now and in fact we continue to lose more jobs each month.
Only a massive intervention by the government can mitigate the suffering
and misery of millions of Americans right now.
Which lives are MORE important: Today's or tomorrows?
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jstan
climber
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Feb 17, 2010 - 02:56pm PT
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Now you are asking a question from an American perspective.
We have not seen that viewpoint voiced in many years.
At the time of the bail out I argued it is actually necessary that we take the pain now and not later. Since we not asking the kids how they feel about it, it comes down to a question of integrity and of honor.
Not even a question of dollars.
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Norton
Social climber
the Wastelands
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Feb 17, 2010 - 03:25pm PT
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Ron, I could not agree more with you on this.
I own a business and my stores are within one mile of Wal-Mart.
They can sell the same service as I do cheaper because they are a
huge corporation that buys from their suppliers cheap.
They can pay someone eight dollars an hour to handle return and cash
paychecks.
They do not have the experience and ability to do what I and my
employees do, so they offer a lesser service at a lesser price.
I hate the big box stores and will not shop in one.
I greatly prefer to do business with small, privately owned shops.
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Norton
Social climber
the Wastelands
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Feb 17, 2010 - 03:54pm PT
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Ron, it is sickening to think of the thousands and thousands of small
business owners who had to close down because of WalMart, and Home Depot,
Lowes, all the big national corporate box stores.
All those small businesses employed many people in addition to
providing a living to the owners and their families.
Like you say, you can save a little money shopping there, but you
will not get anywhere near the level of personal service and the
satisfaction that your dollars spent at a locally owned business STAY
in that neighborhood.
All the money spent at the big stores goes straight into the bank
accounts in New York or elsewhere where the corporation is housed.
I can really, no sh#t Ron, feel your anger about this.
Ron, my guess is that you and me would agree on a whole lot on things,
so long as the political stereotyping and name calling were not included!
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jstan
climber
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Feb 17, 2010 - 03:59pm PT
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Great!.
Directly as a result of the invasion of Iraq I decided to feed as little money as I could to the oil companies. Admittedly I can't do much. That said, doing what I can, is ENOUGH. AM/PM is associated with BP so it, at least, is a smaller company. Whatever the cost I won't go to Exxon. We buy food at the farmer's market and we go to small stores wherever at all possible. The business ethics in the US are so poor I preferentially go to Euro owned stores - where I can determine this.
This is all we can do, and that ALONE makes it enough, and makes it something that I HAVE to do.
I also find the train more enjoyable. I don't have to deal with mindless people driving 80mph and swooping lane to lane. On the bicycle I really enjoy all the times I find myself passing stopped traffic.
(If I knew how to post in bold I could spare you the capital letters.)
Ron:
On global warming we are in the process of using a slow process, the scientific method, to discover the facts. It takes time and effort. I think the data so far makes it pretty clear we really need to expend whatever effort it takes to find out. As soon as possible.
PS:
Reportedly 70% of the US economy is consumer based. Most big corporations are so heavily burdened by debt from their efforts to squeeze out competitors I would guess if even one consumer in five were to take action we could pull things into line. The big corporations, oil companies excepted, are working on very small margin - after the CEO has been paid off.
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Norton
Social climber
the Wastelands
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Feb 17, 2010 - 06:02pm PT
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“When the Bush administration left office, it handed President Obama a $1.3 trillion deficit — and projected shortfalls of $8 trillion for the next decade,” Axelrod writes. “During eight years in office, the Bush administration passed two major tax cuts skewed to the wealthiest Americans, enacted a costly Medicare prescription-drug benefit and waged two wars, without paying for any of it.”
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Mighty Hiker
climber
Vancouver, B.C.
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Feb 17, 2010 - 06:07pm PT
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I also find the train more enjoyable. I don't have to deal with mindless people driving 80mph and swooping lane to lane. Is my driving that bad?
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Norton
Social climber
the Wastelands
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Feb 17, 2010 - 06:30pm PT
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Bob, remember that they voted to put Caribou Barbie one heartbeat away
from being Commander in Chief of the US Armed Forces.
That is how little they value "national security".
Knowing this, we can only conclude that they do not know how to click on a link.
Therefore, better to copy the salient point of article and paste it,
along with the link at the bottom.
Really, it is like dealing with fourth graders.
Cheers!
norton
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Bob D'A
Trad climber
Boulder, CO
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Feb 17, 2010 - 06:35pm PT
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Norton...skipt post is the is hilarious...a fat, far right wing white, christian WSJ writer making fun of far left wing progressive rabbi.
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Bob D'A
Trad climber
Boulder, CO
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Feb 17, 2010 - 06:41pm PT
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Fat...speaking of Palin...how many people of color belong to the teabaggers movement?
One...maybe two?? LOL
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