Saudis Defy Bernanke Cut
(Conspiracy Nation, 09/23/07) – Saudi Arabia, reports Ambrose Evans-Pritchard, “has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.” (“Fears of dollar collapse as Saudis take fright,” London Telegraph, September 21, 2007. http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/19/bcnsaudi119.xml&CMP=ILC-mostviewedbox)
Ben Bernanke, chief of the so-called “Federal” Reserve, had dramatically lowered a key rate last week by half a percent. But according to Evans-Pritchard, widely respected for his reports on the Arkansocracy during the 1990s, the Saudis have refused to go along with the rate cut.
If the Saudis are offering a higher rate, this means dollars will travel by camel to the oil fiefdom. Danger reportedly is also growing that investors will move away from U.S. bonds. If the Euro, for example, offers a higher return, then why park any cash in Treasury bills? This past week, following the Bernanke cut, there has been “a collapse in purchases of US bonds.” (Evans-Pritchard, op. cit.)
Money fleeing U.S. bonds means the yields offered must rise significantly to attract capital. That, in turn, would raise most mortgage rates – a disaster for an already troubled housing market.
On August 10th, coincident with panic on Wall Street, He Fan, a Chinese official, had thinly warned that Beijing had the power to set off a dollar collapse if it chose to do so. China holds billions of dollars of U.S. debt. At any time, the Red Giant can “nuke” the greenback if it dumps that debt onto the market. This may explain why the FBI dares not probe too deeply into the Norman Hsu matter. (For background, see “Hsu May Be Patsy,” http://www.shout.net/~bigred/HsuPatsy.html)
In an ironic statement, given that Hillary Clinton had been benefiting from Hsu's boatloads of cash, the New York junior senator has warned that foreign control over 44 percent of the US national debt had left America acutely vulnerable. (“China threatens 'nuclear option' of dollar sales,” by Ambrose Evans-Pritchard. London Telegraph, August 10, 2007).
Norman Hsu (pronounced “Shoo”) may in fact be innocent of any crime. And Hillary Clinton may not secretly have been receiving, via Hsu, huge “campaign contributions” from Red China. But at this point things look mighty suspicious.
On top of all this, the “Slugs Window” might close. The U.S. Treasury is about to stop sales of state and local government series securities (SLGS). By law, the U.S. debt limit is now mandated at $8.965 trillion. That milestone is about to be reached. Congress is being pressured to quickly raise the limit by $850 billion. The Treasury said it will stop accepting subscriptions for new slugs after 3 p.m. EDT (1900 GMT) on Sept. 27. (“US Treasury to halt state, local securities sales,” Reuters, September 21, 2007)
If the “debt ceiling” is not raised by October 1, 2007, “the government would be unable to pay interest on existing bonds and notes and borrow additional funds,” according to an editorial in the Washington Times newspaper. (“Curb the spending,” September 23, 2007)
All in all, it is “most perplexing,” writes Jack, of “Jack's Forecasts.” Trends are “highly contradictory and there may be far more volatility than many can stand.” (http://www.rumormillnews.com/cgi-bin/forum.cgi?read=110251)
It has now been exactly 100 years since The Panic Of 1907. By October 1, 1907, a liquidity strain had triggered a sale of U.S. securities. By mid-October 1907, United Copper had “broke amid wild scenes.” This led to “falling dominoes.” Otto Heinze & Co. collapsed. The State Savings Bank of Butte, Montana shut its doors, amazingly adding to the panic. Copper King Augustus Heinze owned the small Montana bank, and repercussions rippled through correspondent bank Mercantile National in New York. “Never has there been such wild scenes,” exclaimed the Wall Street Journal on October 17, 1907. (Bruner, Robert F. & Carr, Sean D. The Panic Of 1907. Wiley & Sons, 2007)
Well, break out the Walter Scott books. It looks bad. (Skip Ivanhoe, not Scott's best.) Jack, of “Jack's Forecasts” advises “go to the golf course,” but who can afford that?
“To mute
and to material things
New life revolving summer brings;
The
genial call dead nature hears,
And in her glory reappears.
But
oh! my country's wintry state
What second spring shall
renovate?"
("Marmion" by Sir Walter Scott)
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