Federal Reservations

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the Fed’s interest rate announcement, the divided cultural experiences of America’s upper and lower class, and whether or not “the American way of life” still exists.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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Originally from Big Government

Brazilian and Mexican stocks edge higher, clinging to gains after a U.S. Federal Reserve survey of economic conditions indicates improvement. But global growth worries are still in the spotlight with updates from Mexico, Germany and Spain.

Originally from MarketWatch

Brazilian and Mexican stocks edge higher, clinging to gains after a U.S. Federal Reserve survey of economic conditions indicates improvement. But global growth worries are still in the spotlight with updates from Mexico, Germany and Spain.

Originally from MarketWatch

'Nominal GDP targeting' is a way of raising the Fed's inflation target without admitting to it explicitly. Nominal GDP means that one can meet their growth target simply by inflating the money supply to make up the difference between 'real growth' and 'headline growth.'

Originally from The Market Oracle

Mexican and Brazilian stocks finish lower Wednesday after the U.S. Federal Reserve unveiled a bond-swap program aimed at improving sluggish economic conditions in the world’s largest economy.

Originally from MarketWatch

It's rare to see theft described so directly:

Proposals made in July by the Basel Committee on Banking Supervision should be redrafted to allow banks to use so-called contingent capital to meet the obligations, the European Banking Federation said in a letter seen by Bloomberg News. They should also be changed so lenders that can’t meet the requirements don’t immediately face restrictions on their ability to pay dividends and bonuses, the EBF said.

Stringing up a few EBF bankers is seeming more and more like a calm, rational approach to solving their issues. Especially when even investors are calling out their lies:

"European banks are in the deepest hole of all. Over the past five years, the European financial sector has shed 900 billion euros in capitalisation and two thirds of its value," said Jacques Chahine, chairman of European investment firm J.Chahine Capital.

"Although the sector has raised 450 billion euros in capital over the same period, this has clearly been inadequate to cover increased risk on sovereign debt. We believe banks will have to be recapitalised by an additional 450 billion euros to cover that risk," he said.

The response from the European Banking Authority is less than encouraging:

"The stress test recently conducted by the EBA showed that EU banks have significantly strengthened their capital positions and are able to withstand adverse macroeconomic scenarios, a view not changed by the additional disclosure of sovereign exposures," it said....

"The main EU banks have significantly strengthened their liquidity buffers, lengthened the maturity profile of their liabilities and covered most of their funding needs for 2011. However, going forward it will be important that normal access to medium and long-term funding markets is restored," the EBA said. [emphasis mine]

Well, so long as it's not an immediate crisis, everything is hunky-dory. Ignore that woman running the IMF.

Lest you think I'm only bashing Europeans—a role usually left to Rebecca, who uses their data, not their words—let's also look at the glories of U.S. corporations. I'm taking the more delicate quotes here, just so you don't think I've gone all Mish:

Central bank and Commerce Department data reveal that gross domestic debts of nonfinancial corporations now amount to 50% of GDP. That's a postwar record. In 1945, it was just 20%. Even at the credit-bubble peaks in the late 1980s and 2005-06, it was only around 45%.

The Fed data "underline the poor state of the U.S. private sector's balance sheets," reports financial analyst Andrew Smithers, who's also the author of "Wall Street Revalued: Imperfect Markets and Inept Central Bankers," and chairman of Smithers & Co. in London.

"While this is generally recognized for households," he said, "it is often denied with regard to corporations. These denials are without merit and depend on looking at cash assets and ignoring liabilities. Cash assets have risen recently, in response to the fall in inventories, but nonfinancials' corporate debt, whether measured gross or after netting off bank deposits and other interest-bearing assets, is at peak levels."

By Smithers' analysis, net leverage is nearly 50% of corporate net worth, a modern record. [emphasis mine]

This should come as no surprise. The lie coming out of KocherlakotaLand in early 2008 was that since companies drawing down on previously-unneeded-and-therefore-unused lines of credit was evidence that we were not in a recession [warning: PDF the reading of which will damage your brain; superstitious Christians should note the Working Paper Number].

Now, those same borrowings, along with capital market moves, are being used to show that companies have "record cash holdings."

Borrowing money without having a use for it is good in two circumstances: (1) if you are paying down higher-cost debt [oops, that's a use] and (2) if the carry is positive (that is, if you can earn more than you are being charged in interest--oops, that's a use, too).

If families worked like European banks, we would all be taking vacations and spending like there is no tomorrow. If they worked like American corporations, they would be borrowing money and boasting about how much cash they have on hand.

Can we now stuff the sh*t about how "governments have to work like families"? Corporations—and most especially financial services intermediaries—certainly do not.

Originally from Angry Bear

Latin American markets finish higher as U.S. stocks get a boost from better-than-expected July consumer spending figures and an optimistic outlook on the U.S. economy from Federal Reserve Chairman Ben Bernanke last week.

Originally from MarketWatch

Latin American markets strengthen as U.S. stocks get a boost from better-than-expected July consumer spending figures and an optimistic outlook on the U.S. economy from Federal Reserve Chairman Ben Bernanke last week.

Originally from MarketWatch

Latin American markets strengthen as U.S. stocks get a boost from better-than-expected July consumer spending figures and an optimistic outlook on the U.S. economy from Federal Reserve Chairman Ben Bernanke last week.

Originally from MarketWatch

Federal authorities entered the warehouse brandishing automatic weapons. Employees were separated and interrogated. The Fed seized over half a million dollars of product.

What was the Obama Administration after? Weapons grade plutonium? Heroin? No…something much more sinister.

Guitar fingerboards.

In apparent effort to lose the musician vote, the Obama Administration has launched not one but TWO Kafkaesque raids on one of America’s iconic brands – Gibson Guitars, makers of such classis insturments as the Les Paul, SG, ES-335 and the brand new Firebird X.

Listen to my exclusive with Gibson CEO Henry E. Juszkiewicz

Here’s Gibson’s official press release…

The Justice department bullies Gibson without filing charges

The Federal Department of Justice in Washington, D.C. has suggested that the use of wood from India that is not finished by Indian workers is illegal, not because of U.S. law, but because it is the Justice Department’s interpretation of a law in India. (If the same wood from the same tree was finished by Indian workers, the material would be legal.) This action was taken without the support and consent of the government in India.

On August 24, 2011, around 8:45 a.m. CDT, agents for the federal government executed four search warrants on Gibson’s facilities in Nashville and Memphis and seized several pallets of wood, electronic files and guitars. Gibson had to cease its manufacturing operations and send workers home for the day, while armed agents executed the search warrants. Gibson has fully cooperated with the execution of the search warrants.

• Raid shut down Gibson factories and cost company money
This is the second time that federal agents have raided Gibson facilities and disrupted production – this time causing lost productivity and sales.
• Wood seized was Forest Stewardship Council Controlled
The wood the Government seized on August 24 is from a Forest Stewardship Council certified supplier and is FSC Controlled, meaning that the wood complies with the standards of the Forest Stewardship Council, which is an industry-recognized and independent, not-for-profit organization established to promote responsible management of the world’s forests. FSC Controlled Wood standards require, among other things, that the wood not be illegally harvested and not be harvested in violation of traditional and civil rights. See www.fsc.org for more information. Gibson has a long history of supporting sustainable and responsible sources of wood and has worked diligently with entities such as the Rainforest Alliance and Greenpeace to secure FSC certified supplies. The wood seized on August 24 satisfied FSC standards.
• Nearly two years later, no charges have been filed
In 2009, more than a dozen agents with automatic weapons invaded the Gibson factory in Nashville. The Government seized guitars and a substantial amount of ebony fingerboard blanks from Madagascar. To date, 1 year and 9 months later, criminal charges have NOT been filed, yet the Government still holds Gibson’s property. Gibson has obtained sworn statements and documents from the Madagascar government and these materials, which have been filed in federal court, show that the wood seized in 2009 was legally exported under Madagascar law and that no law has been violated. Gibson is attempting to have its property returned in a civil proceeding that is pending in federal court.
The Justice Department has asked the judge to stop the court case indefinitely.

• Information sought in raid was already made available
Since 2009, Gibson has fully cooperated with the Government’s investigation of wood and has provided substantial documentation regarding Gibson’s wood-buying activities over the years. Yet, the Federal Government raided Gibson’s facilities on August 24, 2011, without warning or communication of any kind. Had the Government simply communicated with Gibson, Gibson would have cooperated without having to stop its production and send workers home.

• Not about illegal logging, not about conservation, not about the environment
The U.S. Lacey Act does not directly address conservation issues but is about obeying all laws of the countries from which wood products are procured. This law reads that you are guilty if you did not observe a law even though you had no knowledge of that law in a foreign country. The U.S. Lacey Act is only applicable when a foreign law has been violated

• Gibson is innocent and will fight to protect its rights
Gibson has complied with foreign laws and believes it is innocent of ANY wrong doing. We will fight aggressively to prove our innocence.

Originally from Big Government