Lead

Oct 8 13 9:16 AM

Tags : :

 Economic Catastrophe in the Making? Banks Stockpiling Cash, Dollar Value Sinkingby END TIME HEADLINES
imageJim Rogers: An 'even worse catastrophe’ is comingJim Rogers has a two-word message for U.S. investors: "Be careful." "The U.S. is the largest debtor nation in the history of the world," Rogers told CNBC.com Wednesday night by phone from Singapore. "We may well have a big, big rally in the U.S. stock market, but it's not based on reality. I would encourage investors to know you're in a fool's paradise, be careful, and when people start singing praises, say, 'I've been to this party before, and I know know it's time to leave.'" For Rogers, the author of "Street Smarts: Adventures on the Road and in the Markets," it is only a matter of time until the U.S. stock market runs into devastating problems due to the Fed's quantitative easing program and the prevalence of similar stimulative programs around the world. "First of all, throughout American history, we've always had slowdowns every four to six years. That means that sometime in the next couple of years—three years, maximum—we are going to have problems again, caused by whatever reason," Rogers said. "For instance, there was 2001 and 2002, and then 2007 and 2009 was much worse. Well, the next time it's going to be worse still, because the level of debt is so, so, so much higher. Every country is increasing its debt at the same time." More   imageFirst a default, then a depression? Some think so - Damage from a U.S. credit default would be more than bad public relations—it could affect everyone from bankers to pensioners to holders of supposedly sacrosanct money market funds. In a research note analyzing the various consequences of a debt default, banking analyst Dick Bove pointed to a variety of areas: Money market funds, which would "break the buck" and deliver negative returns; banks, which would not be able to lend because of the plunging value of the debt securities they own; and Social Security recipients and pensioners, for whom there would be a shrinking pool of funds, also because of the declining value of Treasurys, which are heavily owned by SS funds and institutional retirement plans. Indeed, dismissal of the government shutdown as a threat to markets has turned to dismay over the potential of a debt default that could have far worse consequences. More  imageUS government shutdown: banks stockpiling cash - America’s biggest banks are stockpiling extra cash in their ATMs, amid fears that the government shutdown and the threat of a US default will induce a sudden panic among their customers.  Major banks have increased the amount of funds by around a third, and are holding daily meetings in sealed rooms to map out their contingency plans, according to well-placed sources. In some cases, they are discussing the possibility of extending free credit to customers who do not receive the Social Security payments they would normally rely on, because of the ongoing services blackout. The US government shut down on Tuesday, after the White House and the Republicans failed to come to an agreement over a stop-gap budget needed to keep scores of services running. Up to 800,000 public sector workers have been put on unpaid leave, and around 1m more are being asked to work for free, in what is the first shutdown for 17 years. Tensions are now mounting that the faultlines exposed by the shutdown will also affect negotiations over America’s self-imposed $16.7 trillion borrowing limit. Congress has until October 17 to agree a deal to extend the debt ceiling, or face an unprecented default on US sovereign debt, which could in turn trigger another global recession. More