The Debts of the Lenders: American Creditors Convene For Shanghai Cooperation Organization

The BRIC (Brazil, Russia, India, and China) nations are convening in Yakaterinburg, Russia for the next few days to decide what to do about the dollar trap at the latest SCO meeting. The Shanghai Cooperation Organization is a regional multi-lateral organization that is nearly unknown to Western media.

I won't blame readers for being unaware. The group is deliberately low key and has traditionally focused on regional security talks and other boring stuff that only catches the attention of policy wonks in Washington DC. The SCO was originally founded as a security initiative in the mid- 1990s to resolve border disputes in Central Asia.

Basically, the SCO is a group of all the nations that were spurned at the G8 meeting (w/the exception of Russia) and who feel that they need a bigger voice in world trade independent of Euro-centric and American interests.*

Since I am not privy to the exact events at the meeting, all I can tell readers is what information has been made publicly available. India, Brazil, and other emerging market nations are calling for stricter financial and trade reforms. Naturally, Chinese and Russian representatives are on hand to remind attendees that they are available to push for reforms in Western dominated multi-lateral institutions (such as the UN) . . . for a price.


Source:

http://www.chinadaily.com.cn/china/2009sco/index.html

*For those interested, the SCO originally made waves in Western media starting in late 2006 when China inked a series of border deals w/Central Asian nations for oil and gas pipelines. The SCO also made some noise when China and Russia objected to US military bases bordering Afghanistan in Uzbekistan. Their representatives were able to successfully press local govts to close these bases.

The Debts of the Lenders: Russia Talks Up the Dollar But Shows Its Hand in TIC Data

Apparently, the G8 DID do something this weekend. They decided to back the dollar. At least verbally. But actions speak louder than words.

Russia's Finance Minister Kudrin verbally supported the dollar w/such calming statements as "it’s too early to speak of an alternate [currency]” and said the dollar "is in good shape."

However, let's take a look at what foreign central banks have been doing in the long term end of the Treasury curve.

The TIC data was: 11.2 Billion (actual) vs 58.1 B (forecast)

Here are the hard figures:

http://www.ustreas.gov/tic/mfh.txt

US analysts were hoping that foreign central banks would continue buying longer term treasuries. Instead, they mostly just sat on their hands. You can look at this as dollar positive in that there was no major selling. But foreigners dont need to sell to put renewed downward pressure on bonds. All they have to do is stop buying or slow down their rate of buying.

And judging by the 2 - 30 spread (still historically high), few are willing to lend money to the US govt for 30 years for single digit returns - and payable in the borrower's own currency.

The Debts of the Spenders: US Retail Import Volume Remains Low

Retailers start placing their Christmas orders right about now. Of course, most of them source overseas in East Asia (overwhelmingly in China).

Read the complete article here. I can't even post part of the story b/c of copyright issues.

http://logisticstoday.com/global_markets/
us-retail-import-volumes-still-low-0615/

The Debts of the Spenders: Interdisciplinary Approach to the Credit Crisis

Wednesday, July 15, 2009

6:00 p.m. to 9:00 p.m.

New York City Bar Center for CLE

42 West 44th Street New York, NY 10036

This program will explore the recent credit crisis and how it is affecting the practice of securities, bankruptcy and criminal law. A panel of speakers across the range of practices areas will discuss the intersection of these areas within the market over the last year. The speakers will focus on past events and how they see the likely development of various litigations and investigations currently underway. Issues to be explored include:

· SEC investigations in market manipulation with respect to trading in credit default swaps and short selling practices of numerous hedge funds

· Various criminal investigations being conducted in and around Lehman Brothers Holdings, Fannie Mae, Freddie Mac and AIG

· How bankruptcy practitioners are positioning themselves to best litigate these issues within the bankruptcy court or near-bankruptcy situations

https://www.nycbar.org/CLE/
show_course.php?cnameid=2074

The Debts of the Spenders: Inflation or Deflation? A Closer Look at the Monetary Base

Inflation or deflation? Despite what goldbugs say about money printing, the Fed has yet to increase the money supply. Instead, all that debt monetization has gone into bank reserves. Here, you can see the effects of the Fed's quantitative easing:


Unfortunately, this data only goes up till January of this year. If you want to see more timely data, I encourage you to visit Accrued Interest's web site which has a great series called "Inflation/Deflation Smackdown."

*Let us not get into an argument about whether or not the Fed's figures are "real." For all intents and purposes they are. Especially when we are here to talk about the market (which is the most important opinion). Of course, foreigners and foreign central banks have every right to be concerned about the safety of their US based assets. But so far, they are taking GREAT pains to slowly and quietly (key word) diversify themselves of dollars and bonds. Remember, foreign central banks do not buy treasuries to make a profit but to make export based policy.

Source:
research.stlouisfed.org/publications/review/09/03/Gavin.pdf

The Debts of the Spenders: Forward Shipping Rates Warn of Potential Mass Deflation

Shipping rates remain in contango.

From the New York Times:

Richard S. Elman, the chief executive of the Noble Group, Asia’s largest diversified commodities trading company, bounced up from the conference table in his office here when asked about freight rates during an interview on Tuesday morning. He walked over to his desk, dominated by three computer screens that partly obscure a perfect view of Hong Kong’s harbor, and quickly punched up on one screen a list of daily charter rates for large bulk carrier freighters.

The list showed ship owners charging $58,000 a day now but just $24,000 a day for charters next year or in 2011 — an indication that there will be more ships than cargoes in the years ahead, particularly with shipyards still finishing vessels ordered during the recent boom. [emphasis my own].

Pointing to the rates for the next two years, he said, “That’s the real market” for ships.

Source:

http://www.nytimes.com/2009/06/11/
business/economy/11commodity.html

The Debts of the Spenders: Banks Pay To Raze Homes in California

Victorville is almost 3 hours from L.A. and is situated in what is called the "Inland Empire." W/such a long commute, the prospects for long term increases in housing values look increasingly grim. Which is why lenders decided it is cheaper to raze new houses than maintain them (remember this is California - epicenter of the house flipping craze and deficit timebomb).

Watch the video.

http://www.creditwritedowns.com/2009/05/
inventory-glut-tearing-down-new-homes-in-victorville.html

There is also an associated post on nakedcapitalism:

http://www.nakedcapitalism.com/2009/06/
low-interest-rates-lead-to-overbuilding.html