Beware of Fresh Fruit

What ever you do, do not put the lime in the coconut:

A chef was stunned to find she was almost banned from buying two limes from a supermarket - because they could be classed as a weapon.

Marisa Zoccolan, 31, popped into the new Asda supermarket close to her home in Wallsend, North Tyneside, to pick up some groceries, including the citrus fruits.

But when she tried to pay for them at the self-service checkout, the message 'amount exceeded, authorisation required' flashed up.

An assistant then came over and told her that more than one lime was deemed a weapon - because the citric acid could be squirted in someone's eye.

While this is humorous, it seems clear that this is a simple case of a product being mislabeled in the computer. The worker was having a little joke I am sure. 

But we do need to remember the dangers of fresh fruit, Monty Python makes this danger clear for us. 

Max Keiser Reports

I like Max Keiser. He seems to understand things that elude most commentators. 

Are You A Terrorist?

Senate Bill 1867 is deeply desturbing. While the bill is the subject of a degree of alarmism, it is also clear that the bill, as written, allows the government to take any US Citizen and hold them indefinitely if the "powers that be" decide, without any court approval, that they are a terrorist. Hopefully the amendment advoacted by Rand Paul in the video is approved. (Update: Alas. the amendment was defeated, and the bill passed.) 

Euro Collapse?

This current news reminds me of an old Paul McCartney song. "The Pound is Sinking." Now it is the Euro:

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

But it gets worse:

Recent Foreign and Commonwealth Office instructions to embassies and consulates request contingency planning for extreme scenarios including rioting and social unrest.

Greece has seen several outbreaks of civil disorder as its government struggles with its huge debts. British officials think similar scenes cannot be ruled out in other nations if the euro collapses.

Why is this happening? 

The balance sheets of European banks are piled high with legacy assets -- mortgages, real-estate, and other loans--that are tying up precious capital and constricting the banks' ability to make new, more productive loans.

At the same time, the banks' traditional sources of funding--other banks and institutional investors--have begun drying up as the European crisis intensifies.

This leaves the banks desperately needing to raise cash to survive.

The first plan was to sell off the crap assets.

The Banks are surprised when no one wants the "crap assets" at a price that will keep the banks solvent. 

How many banks are at risk? No one knows. Here is a list of european banks that are probably already bankrupt. 

20 - Royal Bank of Scotland Group (UK)

• PIIGS Exposure as % of Common Equity: 175%

19 - Landesbank Berlin (Germany)

• PIIGS Exposure as % of Common Equity: 179%

18 - Barclays (UK)

• PIIGS Exposure as % of Common Equity: 189%

17 - Landesbank Baden-Württemberg (Germany)

• PIIGS Exposure as % of Common Equity: 230%

16 - DZ Bank (Germany)

PIIGS Exposure as % of Common Equity: 239%

15 - KBC Bank (Belgium)

• PIIGS Exposure as % of Equity: 247%

14 - Credit Agricole (France)

• PIIGS Exposure as % of Common Equity: 293%

13 - Deutsche Bank (Germany)

• PIIGS Exposure as % of Common Equity: 327%

12 - BNP Paribas (France)

• PIIGS Exposure as % of Common Equity: 358%

11 - Commerzbank (Germany)

• PIIGS Exposure as % of Common Equity: 462%

10 - Dexia (Belgium)

• PIIGS Exposure as % of Common Equity: 552%

9 - Banco Santander (Spain)

• PIIGS Exposure as % of Common Equity: 953%

8 - Unicredit (Italy)

• PIIGS Exposure as % of Common Equity: 1,070%

7 - Bank of Ireland (Ireland)

• PIIGS Exposure as % of Common Equity: 1,385%

6 - BBVA (Spain)

• PIIGS Exposure as % of Common Equity: 1,566%

5 - EFG Eurobank Ergasias (Greece)

• PIIGS Exposure as % of Common Equity: 1,601%

4 - Intesa Sanpaolo Group (Italy)

• PIIGS Exposure as % of Common Equity: 1,638%

3 - Banco Popular Español (Spain)

• PIIGS Exposure as % of Common Equity: 1,927%

2 - Banca MPS (Italy)

• PIIGS Exposure as % of Common Equity: 4,666%

1 - Allied Irish Banks (Ireland)

 PIIGS Exposure as % of Common Equity: 33,352 

What these figures mean is that it will not take much of a "haircut" to bankrupt many European banks. No doubt the countries in which these banks are doing business will make sure that they will stay afloat. Oh, wait, these countries are basket cases too. 

Bubble, Bubble, Toil and Trouble

The "powers that be" are like the witches in MacBeth, stewing a nasty concoction for us all to drink. I see Bernanke, Geithner et all, wearing the stereotypical witch's costume, stirring their monetary cauldron, and cackling away incoherently. Everyone is going to drink, no matter what country you live in. 

China is a good case in point. I have an acquaintance who is moving there. His grandfather and my father were good buddies back in the day. No doubt there are many opportunities there. However, they are economically a basket case. (I am well aware that this is not the usual view.) 

Hedge fund investor  Jim Chanos has this to say about China: 

“The Chinese banking system is built on quicksand and that’s the one thing a lot of people don’t realize,” said Chanos, who is shorting the shares of Agricultural Bank of China. “Everybody seems to think it is a free and clear open checkbook. It’s not. The banking system in China is extremely fragile.”

Bloomberg provides us with reasons Chanos might be right:

China spent 3.5 trillion yuan ($550 billion), equal to a fifth of its 2005 gross domestic product, bailing out and recapitalizing state-owned banks since 1998 as their lending to unprofitable state-owned businesses turned sour, according to an estimate by Moody’s Investors Service in 2007. Since September 2008, Chinese banks doled out $3.8 trillion in new loans to offset the impact of the global financial crisis, according to the International Monetary Fund.

Hedge fund investors, or business pundits like Bloomberg have been wrong before. What do the notoriously tight lipped Chinese say? 

China’s economy has a reputation for being strong and prosperous, but according to a well-known Chinese television personality the country’s Gross Domestic Product is going in reverse.

Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that he didn’t think was being recorded that the Chinese regime is in a serious economic crisis—on the brink of bankruptcy. He coined the phrase: “In China, every province is a Greece.”

The restrictions Lang placed on the Oct. 22 speech in Shenyang City, in northern China’s Liaoning Province, included no audio or video recording, and no media. He can be heard saying that people should not post his speech online, or “everyone will look bad,” in the audio that is now on Youtube.

How exactly will China crumble? Lang offers these weaknesses:

Firstly, that the regime’s debt sits at about 36 trillion yuan (US$5.68 trillion). This calculation is arrived at by adding up Chinese local government debt (between 16 trillion and 19.5 trillion yuan, or US$2.5 trillion and US$3 trillion), and the debt owed by state-owned enterprises (another 16 trillion, he said). But with interest of two trillion per year, he thinks things will unravel quickly.

Secondly, that the regime’s officially published inflation rate of 6.2 percent is fabricated. The real inflation rate is 16 percent, according to Lang.

Thirdly, that there is serious excess capacity in the economy, and that private consumption is only 30 percent of economic activity. Lang said that beginning this July, the Purchasing Managers Index, a measure of the manufacturing industry, plunged to a new low of 50.7. This is an indication, in his view, that China’s economy is in recession.

Fourthly, that the regime’s officially published GDP of 9 percent is also fabricated. According to Lang’s data, China’s GDP has decreased 10 percent. He said that the bloated figures come from the dramatic increase in infrastructure construction, including real estate development, railways, and highways each year (accounting for up to 70 percent of GDP in 2010).

Fifthly, that taxes are too high. Last year, the taxes on Chinese businesses (including direct and indirect taxes) were at 70 percent of earnings. The individual tax rate sits at 51.6 percent, Lang said.

Once the “economic tsunami” starts, the regime will lose credibility and China will become the poorest country in the world, Lang said.

I am not sure I would want to be a foreigner in China, or anywhere else, when the coming crisis finally hits.