Today Bloomberg quoted Romano Prodi, the former European Commission President and the former Italian prime minister:
“For Greece, the problem is completely over.”
“I don’t see any other case now in Europe. I don’t think there is any reason to think the euro system will collapse or will suffer greatly because of Greece.”
So yesterday everyone was concerned about the huge soverign debt of Greece, Portugal, Spain, Italy etc, and today the problem is gone? I advise you, dear reader, to read between the line and consider this as Orwellian doublespeak. This is what Jim Sinclair calls MOPE, Management of Perception Economics. This statement is to me the best evidence to date of the seriousness of the Greek cricis.
As expected for a long time now, CIT filed for bankruptcy yesterday. This is huge for small and medium sized businesses in USA as Reuters reports “CIT failure to leave small businesses floundering”:
The company’s long-term prospects are uncertain and the bankruptcy could leave more than one million small and medium-sized businesses looking for another source of funding, lawyers said.
“This could have a devastating effect,” said Jerry Reisman, a partner at law firm Reisman Peirez & Reisman in Garden City, New York, who has been working with many of CIT’s factoring clients.
These clients — about 2,000 small companies — are in a particular bind when it comes to finding alternative financing since CIT is by far the biggest provider of factoring services.
CIT’s factoring business, worth about $42 billion in 2008, is estimated to be at least five times the size of its closest competitor, Wells Fargo & Co (WFC.N), followed by other smaller companies such as GMAC Inc and Rosenthal & Rosenthal. It is not clear if these rivals have enough capacity to take on all of CIT’s existing customers.
Since the Commercial Real Estate Mortgage bubble has begun to pop with the bankruptcy of Capmark that I wrote about yesterday I thought I’d give you some background to the events unfolding before our very eyes beginning now. These mortgages are given by lenders to companies building and operating commercial buildings such as malls, offices, hotels etc. With a declining economy these companies find it increasingly difficult to pay interest on their loans as income from rents keep falling. Consider these statistics from this month of October 2009 reported by facilitiesnet.com:
U.S. Office Vacancy Rates Continue Climb, But Are Slowing
“The office vacancy rate increased, by 60 basis points (bps), to 16.1 percent, at the end of the third quarter. Although this was the eighth consecutive quarter of rising vacancy rates, it was lower than the 80-bps increase in 2Q 2009 and was the slowest pace of increase since 4Q 2008.
The national industrial availability rate increased 50 bps to 13.5 percent in 3Q 2009. This result marks the 8th consecutive quarter of rising availability. The vast majority of industrial markets experienced rising availability, with 56 out of 61 major markets showing increases from the previous quarter.”
This video post is almost a month old by now, but the content is timeless. Canadian economist professor Michel Chossudovsky is the author of “The Globalization of Poverty” and “America’s ‘War on Terrorism’”. He is also the Director of the Centre for Research on Globalization. In this video he sits down with The Corbett Report to discuss the real meaning of the “bank bailouts”. A very well summarized overview in just under 8 minutes.
The FDIC stands for ”Federal Deposit Insurance Corporation” and is the United States government corporation in charge of deposit insurance. If you have your money in the bank and your bank fail, the FDIC insures that you get your money back. There are equivalents to the FDIC in almost all countries at least in the western world.
“The Federal Deposit Insurance Corp. proposed asking banks to prepay three years of premiums to replenish reserves dented by a rash of bank failures that the agency said will cost $100 billion through 2013. The insurance fund will run a deficit as of tomorrow after 120 banks failed in the past two years, the agency said today.”
- Bloomberg.com
Listen carefully to the last statement… Also consider the “depends on you perspective” statement. This is key: Jim Sinclair calls it MOPE: Management of Perspective Economics…
Johnny Mellgren is a Swedish entrepreneur with a keen interest in macro economics and macro politics. This is his web site where he blogs about the economic collapse of our time, what to do about it and the economic future we create together. Contact Johnny Mellgren.
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I provide advice on investment portfolios for private and corporate clients. I also hold lectures in the history of money and the current economic collapse and how to protect your wealth in a time of transition.
