Chronicles Of Depression 2.0: #020

With everything that’s happening, I should think about a new Category: The End Of The Whole Frikkin World.

Three items in one post:

Oil: Oil prices approach record heights

Rice: Rice Jumps to Record on Philippine Imports, Curbs on Exports

April 8 (Bloomberg) — Rice climbed to a record for a fourth day as the Philippines, the biggest importer, announced plans to buy 1 million tons and some of the world’s largest exporters cut sales to ensure they can feed their own people.

Rice, the staple food for half the world, gained 2.4 percent to $21.50 per 100 pounds in Chicago, double the price a year ago. Philippine President Gloria Arroyo announced two rice tenders today and pledged to crack down on hoarding. Anyone found guilty of “stealing rice from the people” will be jailed, she said.

“We’re in for a tough time,” Roland Jansen, chief executive officer of Pfaffikon, Switzerland-based Mother Earth Investments AG, said in an interview with Bloomberg Television from Zurich today. Unless prices decline “you will have huge problems of daily nutrition for half the planet.” Mother Earth holds about 4 percent of its $100 million funds in the grain.

Emphasis added by me.

And:

Soaring prices could lead to increased unrest, such as in Haiti recently, the United Nations said in a report yesterday.

Four people died in two days of rioting last week over food prices in Haiti, the western hemisphere’s poorest country, the organization said on its Web site.

“What we see in Haiti is what we’re seeing in many of our operations around the world — rising prices that mean less food for the hungry,” the report said, citing the United Nations World Food Program’s executive director Josette Sheeran.

Burkina Faso, Cameroon, Egypt, Indonesia, Ivory Coast, Mauritania, Mozambique and Senegal have also experienced unrest in the last several weeks related to food and fuel prices, according to the report.

Emphasis added by me.

Finance: Citigroup, Wells Fargo May Loan Less After Downgrades (Update1)

April 8 (Bloomberg) — Bank holding companies including Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. have the thinnest safety cushion against losses in seven years.

The margin may erode further in coming weeks. Credit ratings on $704 billion of bonds have been cut this year following the collapse of the U.S. housing market. Sheila Bair, chairman of the Federal Deposit Insurance Corp., said last week that the downgrades may compromise bank capital ratios enough that some of the largest institutions will no longer be considered well capitalized.

Falling below a regulatory benchmark that is intended to maintain a minimum level of capital to protect depositors against losses would subject banks to more scrutiny from regulators than they have ever experienced.

“This is a nightmare for the country,” said William Isaac, who was chairman of the FDIC from 1981 to 1985. Banks will “raise what capital they can, then they’ll slow down their growth and stop lending, and what should be a mild recession becomes a much more serious one.”

The biggest danger to the economy is that to preserve their ratios, banks will cut off the flow of credit, causing a decline in loans to companies and consumers. Banks have already raised $136 billion in capital, based on data compiled by Bloomberg, and cut dividends. More stock sales and payout reductions are likely to follow, says analyst Meredith Whitney at Oppenheimer & Co.

Emphasis added by me.

The FDIC’s Bair said last week that ratings changes will probably lower bank capital ratios for some U.S. banks.

“It’s a big concern,” Bair said in an interview April 3. “We are dealing with an unprecedented situation.”

‘When Tide Goes Out’

How much commercial banks have already cut back on lending will be known in mid-April when most report earnings.

“All I know is the first-quarter reports are going to be pretty bad, and there’s a lot more to come,” said L. William Seidman, who was chairman of the FDIC from 1985 to 1991. “Our experience was that if the economy got in trouble, it took at least a year for the banks to get into trouble.”

Emphasis added by me.

Does it sink it yet? What I’ve emphasized are quotes from otherwise cautious, even somber, people: financial specialists. They are not given to panic-inducing statements.

Unless things are even worse than everyone is letting on.

Explore posts in the same categories: C.O.A.T. - Food, C.O.A.T. - Money, C.O.A.T. - Other, C.O.A.T. - Riots, Depression 2.0

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