CHRIS WHALEN: "PAPER ASSETS ARE HEADED TO ZERO" 7-6-2010

Link from: http://www.newzzcafe.com/

This is what happens when the truth about the Federal Reserve Note heading to 'Zero" is told on CNBC.

Above is the video of Chris Whalen of Institutional Risk Analytics, Nouriel Roubini and Ian Bremmer of the Eurasia Group giving their assessment of the financial system and the overall economy. The group was on CNBC earlier this week talking about the impact of the financial reform bill on the financial sector and the overall economy. It was mostly Whalen making calls during this video.

It was interesting to see Chris Whalen doing macro because he comes at this from a banking perspective. He sees a double dip because of a lack of good earning assets for bankers to lend against and continued balance sheet pressure at lending institutions. His view is that the reform bill and its increased capital requirements will be negative for credit growth going forward. He also thinks that bringing all of the shadow banks under the fed's regulatory umbrella will also be negative for credit growth because of shadow banks' inexperience in dealing with regulators. He uses GE as an example.

Whalen notes that a senior Fed official told him there have been very few quarters over the past 15 years when the financial sector hasn't benefitted from extraordinary fiscal stimulus or extraordinary actions by the central bank. We are in one of those quarters right now -- and Whalen believes this bodes ill for economic growth in the real economy.

More than that, Whalen thinks the Federal Reserve is in a policy cul-de-sac of its own making and suggests increasing rates now because the time value of money has skewed investing decisions away from 'real collateral.' Whalen also indicates he believes that there is a lack of political and financial leadership in this crisis. He says we have run out of ideas. his contacts inside the Fed are "as depressed and lacking in leadership" as he has ever seen them.

Pretty strong words which Roubini and Bremmer take issue with -- both in terms of the global leadership and increasing interest rates because of the negative impact higher rates could have on the overall economy. Whalen's view is that although we have a the steep yield curve now, lenders are soon going to be in a world of hurt as many loans are now rolling over. The new lower interest rates will reduce net interest margins at lenders and hurt earnings -- therefore reducing credit.

Watch the last minute for comments on how the bill deals with too big to fail.

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[MX3516]

There is very little manufacturing base for consumer products left in the US, no industry that creates "value added" by processing raw material into finished products. What high-dollar manufacturing is left is largely supporting the military market, the several expensive wars we are fighting simultaneously.

[1976donzi]

The "Whale", as us banksters call him, is huge. Super smart and usually right on the mark. But he is taking Newt cock up his fat ass today on ZH, and is losing credibility by the minute. Can't trust him anymore, a shame

[MarcusCMarcellus]

Whalen is the real thing. He towers over the vast majority of analysts because he actually says concrete things; quotes actual balance sheets or laws. Notice how Roubini rarely commits to anything except huge generalizations and platitudes.

[jackgoldman1]

We are harvesting the bad decisions since debasement began in 1971. Real price of the Dow in 1963 silver money is $375, not $11,000. It's all currency debasement. Bankers, owners, government wins. Families, children, renters, employees lose when currency is debased. This is history 101. No currency has survived debasement in history. We need massive debasement to cleanse the system. Paper money was 18% in 1980 with a 1:1 Dow Gold ration. Now rates are Zero? $4,000 Dow, $4,000 gold by 2020.

[TheMirdoc]

chris whalen thank you, people are hungry for the real truth, not the crap that they feed the masses on CNBC & Bloomberg

[drumsmetalheavy11]

man, that crhis whalen really hits the nail on the head. he's dead on right about monetary and fiscal policy in this country.

[lordkoos]

@TheIndoctriNATION

One company that sells freeze-dried food is totally back ordered.

[marinello6]

@playon51 Agreed! I have listened to him often...he is very bright and insightful but speaks like a regular guy. He does not have to lie...he only answers to himself.

[smujismuj]

ABOLISH THE "FED"

ABOLISH CORPORATIONS

ABOLISH THE INCOME TAX

[pretorious700]

Nouriel Roubini has been wrong more than right. Chris Whalen is brutally honest, and is telling the truth. The rest of these idiots are clueless.