As I read this, oil has fallen to $92.75 (Nymex), and the stock market is experiencing a little mini-boom (Dow is up $244 so far today). But it's ironic, given a lot of bad news. Wells Fargo Bank (one of the best-managed US banks) today reports that it is taking a $1.4 billion write-off because of subprime losses.

UPDATE 3-Wells Fargo to take $1.4 bln charge for bad loans

Meanwhile, Citibank looks like it is selling itself to Abu Dhabi:

Citigroup-Abu Dhabi deal: A sign of the times

This is something I've long predicted - insolvent US banks will be looking for "white knights", and the only people with the cash who are foolish enough to buy these liabilities are Middle East countries flush with petrodollars. Whether or not this will be enough to save the rotting US banking system is an open question. I think in the long run, it's probably a doomed exercise, but insolvent America has little choice but to sell the family jewels.

I think December will be a wild roller coaster ride for the US stockmarket, but ultimately I think it will end in tears.

A couple of more stories of interest:

Recipe for a meltdown

Beware our shadow banking system

We live in interesting times.

regards,
Oz

For several years running I read constantly that the booming real estate market was holding up the U.S. economy - fueling financial markets and consumer spending. Now the real estate market is in a record-breaking slump - a buyer's market without any buyers. Combine this with the credit crisis, since in any case they can't really be separated, and I wonder if there's anyone out there who really believes a recession next year isn't inevitable.

If China removes the restriction from the yuan currency peg to the U.S. dollar, then it's lights out for the U.S. economy. It is already failing, obviously, but that would be the final fatal blow. Meanwhile, Russia, Norway, and OPEC are drowning in U.S. dollars.
My favorite recent quote from Kunstler: "...the world's 'reserve currency' becomes the world's reserve toilet paper." LOVE IT!

That's a big if, though. China has to be very careful about letting its currency float. It's not going to happen anytime soon.

China has amassed $1.7 trillion (Euro 1.2 trillion) in cash as a result of the peg. Largest most powerful army and navy in the world. The rich and the powerful all make a pilgrimage to China to show their respect. Huge influence in Africa, Latin America, most of North America, Persia, North Korea, Pakistan. Expanding influence in the Middle East.

Neighbors Vietnam, Thailand, Russia, India, Japan cowed and subdued.
Why let the Yuan float?

Navy???

Their submarines cannot be detected by the American, Russian or any other tin can Navy in this world. And they proved it recently against the USS Kitty Hawk.

chinese subs undetectable?

huh?

if by navy you mean a flotilla of wooden junks- then yes, certainly. 'paper' navy is a more apt term.

boy we are in for interesting times if policy makers in the world's most populous nation think anything like the above statement.

I think what you mean was 'delectable'. I'm sure the U.S navy would more than happily correct you. When I was learning english I sometimes made mistakes too. It happens.

You have no idea what you are talking about.

The subs that China has are complete targets. They are loud, the crew are poorly trained, and they suffer from crap target processing software.

A submarine is absolutely made by its crew. The US Navy is so far in front everyone else on crew quality it isn't even funny. The Australians are quiet good, they and the Norse are about the only ones close to US Navy quality. There is a reason for that. Those two nations are utterly devoted to having a top flight submarine force..... They are the premier arm of those two countries Navys.

The 2nd tier can be dangerous but a LA/Virginia class is going to sweep them from the sea 75-90% of the time. (Usually because someone drops a wrench or lets the toliet seat fall.... I'm NOT kidding. Good friend of mine was a Sonar man on an Improved LA boat)

2nd Tier:
Royal Navy
USSR (some officers were as good or better than the USA, their boats simply don't get out enough anymore for their crew to be sharp)
Kriegsmarine
France (good at sinking Green Peace... untested against people that shoot back)

Pretty much anyone in Nato that operates boats does so at an acceptable level. Can they kill a CVN? Sure they can. Can they kill a CVN out at sea during General Quarters? I'm not betting on it if the CVBG has an Improved LA/Seawolf/Virginia escorting it. But hey, even a blind pig finds an acorn sometime. The 3rd tier may have some dangerous boats but unless some Admiral decides to do donuts in Shanghai harbor the odds of a Kilo or Tango sinking a CVN are about 1000-1.

You could give the Chinese a AIP boat from Germany and I still wouldn't bet on them nailing a CVN. They simply don't have the crews...... yet.

If China WANTED a real blue water sub force, they could do it. They have a long way to go though. It is unlikely they could make the structural changes in their naval program that would be required to train the crews in the expertise and flexibility that is needed. The problems are in many ways political.

No more talking about things you have no clue about. You are on probation from the ignorance patrol.

Their submarines cannot be detected by the American, Russian or any other tin can Navy in this world.

And neither can the Russian or American subs be detected by others. It's not that hard to hide a sub, especially during peacetime, and it's kind of silly to say that's what defines "the most powerful navy in the world". Fact of the matter is that China has very little blue-water (long-range) navy, and the subs are pretty much defensive assets against the US's overwhelming naval superiority, especially in terms of force projection.

Regardless of whether people like it or not, the US's navy gives it utterly unmatched force projection ability. As incompetently as its Iraq endeavour is being handled, few other countries would even be able to attempt it, and none would have had a hope of conducting the original bombing campaign that destroyed Iraq's military and military infrastructure. Of the world's carrier-borne aircraft, the US has twice as many has every other nation combined. No navy in the world can match the US's.

None of that is America-boosting; it's just fact. That no military in the world is anywhere near the US's should hardly be surprising, though - no military spending in the world is anywhere near the US's; the next-highest country spends about 10% of what the US does.

in response to Why let Yuan float? I mentioned Michael Gomez of Pimco excellent article on China, the Yuan etc in my earlier post to read in full you can visit Pimco.Com in his article he talks about the contiuing massive growth of their economy and WHY it may be in China's own intersest to now let the Yuan float(an excerpt):

"From an economic perspective, a stronger CNY would help reduce the trade surplus, ease pressure on inflation, mitigate speculative purchases of onshore assets, help the central bank gain monetary credibility, foster proper allocation of investments, stimulate domestic demand, rebalance the economy, and disarm protectionist tensions with the U.S. and Europe (the latter a growing concern, given that EU is now China’s number-one trading partner and the CNY has significantly depreciated against the euro over the last year). At the same time, the sterilization costs of heavy currency intervention will grow as interest rates in China rise, while those in the U.S. fall4. Finally, any concerns of a growth slowdown from the stronger CNY easily could be offset by expansionary fiscal policies, particularly targeted infrastructure and social investment."------as it relates to what i was talking about in my earlier post this will add substantial upward pressure to Crude Oil/Gasoline both in the short term and the long haul------Patrick Kerr of OilGasFutures.Com

I remember, during the Carter administration people actually started to conserve energy. The electric companies had to raise their prices to protect their profits, as did other energy companies. I think, that the great fear of all energy suppliers, including the Arab companies is that Common Americans will suddenly wake up and discover they can save money by simply going to bed at sunset, turning down the temp on the hot-water heater and staying home on the weekends.

Most of the people I associate with are starting to walk to work, replace all their incandescent bulbs with fluorescents, (as I have done months ago), and quit using their cars or doubling up. We are all staying home on the weekends, only using our cars when we have to. I think the magic price of gas that promotes this phenomenon is $3.00 and above.

I believe that the oil companies know that if prices were to rise above this mark, it will cause a trend to set in the minds of most Americans and they (the oil companies) will be caught on the tail-end of a conservative revolution that will erode their profits and inflict fear in the minds of most energy suppliers. If I'm right, gas prices should continue to fall back below $3.00 a gallon as the oil companies try to get people back on the road.

After the Carter days, one of the first things they tried to do in every state was lobby to get rid of the 55 mph speed limit. There was a tremendous promotion to get people to move away from the conservative, alternative energy mindset. They tried really hard to bury this mindset. And, they were successful.

I think we all know the direction we need to go and one day, it will happen and that is what will bring down the economy. The transition to alternative energy, if it is even possible , will be a sudden shift in the mindset of the people. This is the fear in the minds of all energy suppliers. If it sticks, it will be their end, even before their oil supply tanks are moving towards empty.

Another thing people fail to realize is that they have tow options when reducing energy consumption, both equally effective. They can 1) Cut down by doing less (50% less driving, 50% less time lights are on, etc.) or 2) Become 50% more efficient (fluorescent vs. incandescent, hybrid vs. conventional IC, etc. etc.). As our friend Kunslter points out, however, it may be that we have to completely revamp our car culture and stop blowing green smoke up people's asses with hybrids, plug-ins, which realistically will never attain > 25-30% of the U.S. automobile fleet even with soaring gas prices.

"Meanwhile, Citibank looks like it is selling itself to Abu Dhabi"

It will be interesting to see how the islam-haters react if the family jewels suddenly start doing islamic banking!