Debt Rattle, June 6 2008: Dams a-burstin'

Pablo Picasso Weeping Woman 1937

Ilargi: I’m off for a while, and leaving you in Stoneleigh’s able hands.


Crude rockets to new record, over $137

Oil prices surged up by almost $10 (U.S.) to new record high above $137 a barrel after a Morgan Stanley analyst predicted prices could hit $150 by the Fourth of July. A falling U.S. dollar and growing tensions in the Middle East are also pushing prices higher.

Light sweet crude for July delivery traded as high as $137.70 a barrel, up $9.91, on the New York Mercantile Exchange. This easily topped the previous intraday record of $135.09 a barrel on May 22.

This latest surge is building on a $5.49 gain Thursday, which was the biggest single-day price increase in the history of the Nymex crude contract. That spike came as the U.S. dollar fell in response to comments by the European Central Bank suggesting the bank could raise interest rates.

Prices pushed sharply higher Friday after Morgan Stanley analyst Ole Slorer said he expected strong demand in Asia that could drive prices to $150 by July 4. Shipments from the Middle East are mimicking patterns seen in the third quarter last year, when Morgan Stanley based its “oil price spike” predictions on Atlantic Basin draws, he said.

“We made the same call using the same parameters, but now we are starting from much lower inventory levels,” Mr. Slorer said Friday. “Asia is taking an unprecedented share” of Middle East exports to build up stocks, Mr. Slorer wrote in his report.

Meanwhile, U.S. gas prices at the pump continued to hover just shy of an average $4 a gallon, easing only 0.3 cent from Thursday's record. American drivers are now paying an average of $3.99 for a gallon of regular gas nationwide, according to AAA and the Oil Price Information Service; in many parts of the country, consumers are already paying well over $4.

Pump prices are bound to rise even further if oil sustains its advance. Retail diesel slipped a penny overnight to $4.76.
The dramatic reversal in what had been a weakening oil market began Thursday after ECB President Jean-Claude Trichet suggested the bank could raise interest rates and the euro climbed against the dollar. When interest rates rise in Europe, or fall in the U.S., the dollar tends to weaken against the euro.

Many investors tend to buy commodities such as oil as a hedge against inflation when the dollar is falling. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies, and analysts believe the dollar's protracted decline has been a major reason why oil prices have nearly doubled in the past year. The euro strengthened against the greenback Friday.

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Jobless rate soars to 5.5% in May

Biggest rise in unemployment in 33 years

The U.S. unemployment rate jumped by half a percentage point in May -- to 5.5%, the highest since October 2004 -- on the biggest increase in seasonally adjusted unemployment in 33 years, government data showed Friday.

Nonfarm payrolls fell by 49,000 last month, the Labor Department reported, marking the fifth consecutive decrease and in line with expectations of economists. The economy thus has lost 324,000 jobs this year, according to the government's survey of some 400,000 work sites. Job losses in March and April were revised lower by 15,000.

Unemployment rose by 861,000 in May to a total of 8.5 million, according to a separate survey of about 60,000 households. It was the biggest one-month increase in unemployment since January 1975. The 0.5-percentage-point increase in the jobless rate was a shock, as economists expected a much smaller gain to 5.1%. It was the biggest percentage-point gain in unemployment since 1986.

The very weak report undercuts the argument put forth by some analysts who had rejected the theory that the economy is in a recession because the unemployment rate had remained so low. The employment participation rate rose to 66.2% from 66%, indicating that more people wanted jobs in the month. The employment-to-population ratio dipped to 62.6%, off from 62.7%.

The employment report is likely to have little impact on the Federal Open Market Committee, however. The panel of Federal Reserve policymakers meets in three weeks. Analysts expect no change in the 2% federal funds target rate in the near future. Fed officials have said they believe the economy and the job market are likely to worsen in coming months before bouncing back by the end of the year.

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IEA Says World Needs $45 Trillion 'Energy Revolution'

The International Energy Agency said the world needs $45 trillion in additional investment to develop clean technologies in a bid to cut annual emissions of gases blamed for global warming by half before 2050.

Carbon-dioxide emissions will rise by 130 percent and oil demand will climb 70 percent by 2050 if governments don't change current policies, Nobuo Tanaka, IEA's executive director, said in a statement distributed in Tokyo today. The total investment equals 1.1 percent of projected global gross domestic product over the period.

The IEA estimates are meant to guide the Group of Eight industrialized nations' efforts to develop clean technologies to reduce global warming. Tanaka will join a meeting of G-8 energy ministers starting tomorrow in Japan's northern prefecture of Aomori. "A global energy technology revolution is both necessary and achievable, but it will be a tough challenge," Tanaka said in the statement. "

The world faces the daunting combination of surging energy demand, rising greenhouse gas emissions and tightening resources." The world needs to build 32 new nuclear power plants and 17,500 wind-power turbines each year to halve emissions by 2050, according to the Paris-based energy adviser. G-8 environment ministers last month pledged to achieve such a reduction.

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Monoline Downgrade Soup: Fitch Hits MGIC, PMI Group

So now you can add MGIC and PMI Group to the pile (thanks to Fitch):

Fitch Ratings on Thursday downgraded MGIC Investment Corp. and PMI Group, noting it has become much more pessimistic on its outlook for the mortgage insurance sector. Fitch lowered Mortgage Guaranty Insurance Corp.'s insurer financial strength to A+ from AA and MGIC Investment's long-term issuer rating to BBB+ from A. The ratings will remain on rating watch negative, indicating that further downgrades may be in the offing. Fitch also cut PMI Mortgage Insurance's rating to A+ from AA and PMI Group's long-term issuer rating to BBB+ from A. The outlook on PMI and PMI Mortgage Insurance is negative.

S&P downgraded Ambak and MBI earlier. Not bad for one day. Interestingly, Ambak and MBI had already been downgraded by Fitch about a month ago, which means that presumably many folks out there holding securities rated by the two largest monolines have broken the magic "2 out of 3 ratings agencies must approve" covenant.

We may see considerable forced selling from here (though its likely many stodgy holders of these monoline-insured securities have already sold them to more speculative parties). Further, MBIA and Ambac are showing signs of fatigue from fighting to keep their Aaa's from Moody's, in response to that company's negative remarks yesterday:

The world's largest bond insurers, which have raised $4.1 billion combined in the past six months, said they won't seek more capital after New York-based Moody's yesterday said the most likely result of its examination would be a downgrade of the companies' top insurance financial strength rankings.
...
Moody's decision is "liberating" for Ambac, and may enable it to consider more options such as returning capital to shareholders, Doug Renfield-Miller, an executive vice president at the company, said at an investor conference.
MBIA may start a new insurance business with $900 million it raised in February, Brown said. Ambac shareholders have suggested the company stop writing new business and enter a "run off," where it winds down as policies mature, Renfield-Miller said.

It seems only yesterday Fitch was the only company with the cojones to downgrade the monolines -- with MBIA frantically asking them to please stop doing so (Fitch decided to continue rating them for free). Almost makes us nostalgic.

Interestingly, MBIA and Ambac insiders have been spotted buying shares, possibly explaining some of the levity in the face of the bad news. Is this an attempt to rescue their stocks, or a genuine show of good faith and belief in positive prospects?

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May see bigger U.S. bank failures in future: FDIC

Future U.S. bank failures linked to the downturn in the real estate market may include "institutions of greater size" than in the recent past, Federal Deposit Insurance Corp Chairman Sheila Bair said on Thursday.

In testimony prepared for a Senate Banking Committee hearing on the state of the banking industry, Bair said an increasing number of problem banks face high exposure to commercial real estate and construction lending.

"There is also the possibility that future failures could include institutions of greater size than we have seen in the recent past," Bair said. "Uncertainties in today's economic environment continue to pose significant challenges for the banking industry, households, and bank regulators."

The FDIC, which has about $52.8 billion in its deposit insurance fund, has launched a review of its risk-assessment rates for larger banks to determine if they reflect current conditions, she said. "The agency plans to examine, among other issues, whether changes in how long-term debt issuer ratings are used to determine premium rates can improve the assessment system's effectiveness in capturing risks posed by large institutions."

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Regulators give bleak forecast for banks

Several top banking regulators warned lawmakers Thursday of more troubles ahead for the industry, including additional writedowns and the possibility that bigger banks could fail. Speaking before the Senate Banking Committee, officials said most U.S. banking institutions are in relatively good health but remain challenged by continued woes in the housing market and the broader economy.

"We clearly are not out of the woods," said John Dugan, who heads the Office of the Comptroller of the Currency, which oversees banks with a nationwide footprint. One shortcoming, argued Federal Reserve Vice Chairman Donald Kohn, is that banks have not allocated enough money to keep up with the growth of their problem assets. As a result, they may have to boost their skyrocketing loan loss reserves even further.

Banks insured by the Federal Deposit Insurance Corporation set aside $37.1 billion in loan-loss provisions in the first quarter of this year - four times more than the $9.2 billion in the first quarter of 2007, the FDIC reported last week in its quarterly review of the industry. Regulators added that they were bracing for an uptick in the number of bank failures, at least in the near term.

So far this year, just four banks have collapsed, including the most recent downfall of the Staples, Minn.-based First Integrity Bank, which shuttered its doors last Friday. While most of the failures have so far been smaller community banks, FDIC Chairwoman Sheila Bair said her staff was preparing for the possibility of a large failure as a precaution. "I don't see that happening," she said. "But we have to be prepared for all contingencies."

Kohn and Dugan added that many institutions will require additional capital injections in the months ahead and may have to go so far as to cut their dividends. In early March, many of these regulators met with lawmakers to discuss the state of the banking industry. But the dramatic collapse of Bear Stearns and the Federal Reserve's controversial rescue of the Wall Street firm since then have raised new fears about the industry.

Now, rumors are swirling about the health of other large financial institutions, most notably Lehman Brothers. During the hearing, Sen. Richard Shelby R-AL., asked about the likelihood of another investment bank needing to be bailed out. Kohn declined to comment on the health of specific companies but said that Wall Street firms have learned a great deal from Bear Stearns and have reduced leverage and built up their liquidity. "I think we have a stronger set of investment banks than we had a month-and-a-half ago," said Kohn. 

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European Central Bank set for a bare knuckle fight on interest rates

So the European Central Bank has set the cat among the pigeons by becoming the first of the major blocs to indicate that, far from wishing to protect growth with rate cuts, they are more inclined to fight inflation.

President Jean Claude Trichet's hawkish comments yesterday afternoon sent the euro into a frenzy with a two cent move versus the dollar as traders bought into the higher yield story. Until Trichet's statement, the markets had been somnolent over both the BOE and ECB rate announcements (unchanged as expected) with the general trend actually towards a fading Euro.

His effective guarantee of a rate hike in July truly was a surprise and flies in the face of recent central bank policy of trying to float intentions via less outright methods. What the weaker economies in the Euro bloc must be thinking at the moment is probably unprintable, as the ECB once again focuses solely on events in France and Germany and ignores the struggling satellite nations.

Italy, Spain, Portugal, Ireland and Greece (the unflatteringly names PIGS) are seriously struggling with massive economic problems which are not being helped by either the strong currency or the high interest rates. Mr Berlusconi in particular, never a fan of the EC experiment, must be seriously tempted to publicly voice disapproval with ECB policy and to once again shake the weapon of disengagement from the whole project.

Of course the mechanics of such a desperate measure are difficult to contemplate and therefore any threat along these lines will probably be pretty much ignored as being practicably unworkable (can you imagine the effort required in turning all bank accounts back into Lire, recalling Euro notes to issue less valuable local currency etc).

But, below the surface, there is plenty of dissatisfaction with the way that the central banks seem to concentrate on the major bloc partners. If this is truly building into the worst economic crisis since the nineteen thirties (an oft mentioned comparison that, frankly, seems very unlikely) then the stresses on the Euroland financial system are going to get a lot worse.

In the ECB's defence they are, like the BOE, solely charged with an inflation fighting mandate and the Germans, of course, have historical experience of a hyperinflation disaster. Unfortunately for policy makers, the independence of the central bank is now working to undermine the whole stability of the Union itself.

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City stunned by European Central Bank's warning on eurozone rates

There were fears yesterday that the Bank of England could raise interest rates after the European Central Bank issued a surprise warning that surging inflation could force it to lift eurozone rates as early as next month. The ECB's abrupt move to a state of high alert over inflation stunned markets and triggered a scramble by the City to reassess the outlook for interest rates on both sides of the Channel.

Both the Bank and the ECB held rates yesterday despite worsening economic prospects, spurning pleas for action to buoy growth as they continued their fight to quell rising inflation. The hardline decision from the Bank came as the clamour for rate cuts was fuelled by news that Britain's housing slump was gathering pace. Figures from Halifax showed that house prices are plunging at twice the rate of the property market's drastic downturn in the early Nineties.

The Bank's tough verdict was widely expected after its clear signals that inflationary pressures ruled out rate cuts for several months, at least. However, markets were caught off guard by the ECB's sudden shift to a far more aggressive stance. A warning from Jean-Claude Trichet, the President of the ECB, that eurozone rates could rise by next month ignited City betting that the Bank of England's next move might also be a rate increase. Markets are pricing in an 80 per cent chance that UK base rates will be increased by December.

Traders and economists said that they were stunned by Mr Trichet's warning. He said that the ECB had debated raising rates yesterday in response to inflation that had “risen significantly since the autumn of last year”. He implied that a potential quarter-point rise in eurozone rates could be expected at its next meeting. The comments surprised bond markets, igniting fears over inflationary dangers. Inflation-sensitive gilt-edged stocks tumbled, sending their yields soaring to seven-month highs. The pound also fell sharply against the euro as traders bet on a eurozone rate rise.

The euro jumped by almost a penny to 79.48p, within striking distance of the 80.98p record set in April. The emerging threat that the Bank may raise base rates this year will cause worries for families that are struggling with the rising cost of living and declining house prices. These sank by a further 2.4 per cent last month, extending losses that have left them down by 6.6 per cent since January, wiping £13,000 off the value of the average home.

House Prices have fallen twice as fast in the past five months as in the same period in 1992, during the most recent property crash, when they fell by only 3.3 per cent, based on Halifax figures. The decline in prices this year is the biggest five-month fall since records began in 1991. If the deterioration in house prices continues at its present pace, the value of a home will slump by more in six months this year than in the whole of 1992, when prices fell by a total of 7.2 per cent. Some economists forecast that prices could fall by up to 12 per cent this year, followed by further declines next year.

The threat that a brutal housing crash could be more severe if the Bank raised rates is certain to sound alarm bells at the Treasury. Bradford & Bingley will aggravate the pain today, when the troubled lender increases rates on all of its home-loan products, although it has not said by how much.

The grim news came as the Chancellor battled to fend off Conservative attacks over Britain's deepening economic plight. Alistair Darling was thrown on the defensive as George Osborne, the Shadow Chancellor, accused the Government of acting like a rabbit in the headlights. The Chancellor insisted, however, that the economy was strong and resilient.

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Ilargi: Rebellion at the Fed? No, Mish doesn’t understand what happens. Which is that the lower ranks are used to bring home the bad news, because Bernanke can’t and won’t. That the regional heads speak out all the time, is a sign that Bernanke holds the reins firmly, not the opposite.

Fed Governors Openly Question Bernanke's Competence

Open dissent at the Fed continues. Today Lacker Says Fed Loans to Wall Street Risk More Crises.

Richmond Federal Reserve Bank President Jeffrey Lacker said the lending to securities firms that the central bank introduced in March may lay the seeds of further financial crises. "The danger is that the effect of the recent credit extension on the incentives of financial-market participants might induce greater risk taking," Lacker said in a speech to the European Economics and Financial Centre in London. That "in turn could give rise to more frequent crises," he said.

Lacker urged that the central bank now "clearly" set boundaries for its help to financial markets. In an interview yesterday on the themes of his speech, Lacker said even those new boundaries may not be believed by investors unless a financial firm fails "in a costly way." The remarks are the strongest warning by an official about the consequences of the Fed's aid to securities dealers, the first lending to nonbanks since the Great Depression. While other regulators have focused on tightening investment-bank oversight in exchange for the lending, Lacker said there's a case for "scaling back" the new programs.

Philadelphia Fed President Charles Plosser urged in a separate speech today that officials specify the conditions "under which the central bank will lend" to firms. He told reporters in New York afterwards that "we run the risk of sowing the seeds of the next crisis." Thomas Hoenig of Kansas City said last month the Fed's actions were "likely to weaken market discipline," while Minneapolis's Gary Stern in April worried about "adequate incentives to contain" an expansion in the Fed's safety net.

The central bank has introduced three programs since December to help counter the credit crisis. Along with the Primary Dealer Credit Facility, the Fed lends Treasuries to dealers in exchange for mortgage and asset-backed debt through the Term Securities Lending Facility. The Term Auction Facility offers cash loans to banks. Lacker indicated skepticism about the value of the programs. "It isn't clear what kind of market failure is being addressed" with the TAF, he said. Central bankers should be wary "that they can substitute their own judgment about the fundamental value of financial instruments," he said.

The seeds of this crisis were sewn by the loosey goosey policies of Greenspan for which there was never a dissent from Bernanke, or that matter anyone else (at least in public). And what started as a minor revolt has now turned into a major question of confidence regarding the anything goes policies of Bernanke. That Congress is holding up votes on Fed nominees is also not helping Bernanke any. If various Fed governors continue openly questioning Bernanke's decisions, he is not going to last long as Fed chairman.

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Primed for Trouble: Pace of Mortgage Distress Shifts to Prime Borrowers

While foreclosure activity hit an all-time record in the first quarter, according to statistics released Thursday morning by the Mortgage Bankers Association, a shift of the mortgage mess towards prime borrowers appears to be taking place as well — signaling that the credit crunch that began among those with less-than-perfect credit may now be marching onward towards borrowers usually deemed better credit risks.

It shouldn’t surprise anyone at this point to learn that first quarter foreclosure activity was the highest since 1979, the first year MBA’s data on foreclosure activity is available. The percentage of loans in the foreclosure process was 2.47 percent at the end of the first quarter, the MBA said, an increase of 43 basis points from the fourth quarter of 2007 and 119 basis points from one year ago.

The percent of loans on which foreclosure actions were started during the quarter was 0.99 percent on a seasonally-adjusted basis, 16 basis points higher than the previous quarter and up 41 basis points from one year ago, the MBA said. And while the overall numbers for the first quarter show that the majority of troubled borrowers are in the subprime credit category, the pace at which prime borrowers are running into a wall now strongly outstrips anything being seen in the subprime arena.

Among subprime borrowers, severe delinquencies — a measure that includes 90+ day delinquencies and foreclosures — increased from 14.44 percent of loans in the fourth quarter to 16.42 percent in Q1. In contrast, just 1.99 percent of all prime borrowers were severely delinquent at the end of Q1, compared to 1.67 percent at the end of last year, numbers that illustrate the relatively greater distress felt by subprime borrowers.

But it’s the velocity of these changes that’s most worth noting from an investor’s perspective — the Q4 to Q1 change in severe delinquencies strongly favors prime borrowers, for example, with severe DQs increasing by 19.2 percent for prime and 13.7 percent for subprime borrowers.

By splitting out fixed-rate and adjustable-rate DQs, the increasing distress now being felt by prime borrowers becomes even more evident: prime ARMs showed the highest velocity of change of any major loan category in nearly every measure of distress published by the MBA. Severe delinquences increased a whopping 28.71 percent among prime ARMs during Q1, while in comparison, subprime ARMs saw severe DQs jump 18 percent.

It’s a pattern repeated outside of ARMs, too. The velocity of severe delinquencies among prime, fixed-rate borrowers actually came close to doubling that recorded by subprime FRMs during the first quarter. Prime FRMs saw severe DQs increase 12.1 percent in the first quarter, while subprime FRMs posted a 6.7 percent increase in severe delinquencies over the same time frame.

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1.1 million homes in foreclosure, millions more in early stages

More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that number will continue to climb.

The Mortgage Bankers Association's first quarter report showed that a record 2.5% of all loans being serviced by its members are now in foreclosure, which works out to about 1.1 million homes. That's up from the 2% of loans, or about 938,000 homes, that were in foreclosure at the end of 2007.

The report also showed that 448,000 homes, or about 1% of loans being serviced, began the foreclosure process during the first quarter. That's up from about 382,000 homes, or 0.83%, that entered foreclosure in the last three months of 2007.

The seasonally-adjusted rate of homeowners behind on their mortgage payments also hit a record high. Nearly 3 million home loans, or 6.4%, have missed at least one payment, while about 737,000 are at least three months past due, but not yet in foreclosure.

"The figures aren't surprising, but they're pretty ugly nonetheless," said Michael Larson, real estate analyst with Weiss Research. "We're talking higher delinquencies and foreclosures pretty much across the board." And he doubts that there's much reason to expect the foreclosure crisis to abate until next year at the earliest, adding that it could be a couple of years or more before foreclosure rates retreat to more normal historical averages.

"It's the same story we've been seeing for a while now - we had too much reckless lending, and buyers who got over-extended," he said. "We've had an unprecedented decline in home prices on a nationwide basis, which is public enemy number one for mortgage loans. And now you've got an overall economy that has slowed adding to this toxic stew."

Much of the problem lies with subprime loans given to borrowers with weaker credit records, especially those loans that had adjustable rates. Nearly four out of ten subprime ARM loans are a month or more late, or in foreclosure. And subprime ARMs account for 39% of the loans that fell into foreclosure during the quarter.

Prime fixed-rate loans, which are considered very low risk, have also seen sharp increases in their delinquency and foreclosure rates, although they are performing far better than the riskier loans on the market. There are 431,000 prime loans in foreclosure, a seasonally adjusted rate of 1.2% that is more than double the 0.5% rate a year ago.

The report showed about 1.2 million prime mortgages are now a month or more past due, a seasonably adjusted rate of 3.7% of those loans. That's up from a rate of 2.6% a year ago. According to Jay Brinkman, MBA's vice president for research and economics, the prime loan segment was hurt by so-called Alt-A loans, which didn't require income verification for buyers with good credit.

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Nearly 1 in 10 Homeowners Face Loan Problems

Nearly 1 in 10 American homeowners with a mortgage faced foreclosure or fell behind in their payments in the first three months of the year, according to a report released Thursday, a figure that offers a look into the toll caused by the collapse of the housing market.

The period from January to March marked the worst quarter for American homeowners in nearly a quarter-century, according to a widely watched report put out by the Mortgage Bankers Association, a trade group. Both the rate of new foreclosures and late payments surged to the highest levels since 1979. (The delinquency rate includes Americans who are more than a month past due on their home loans.)

A breakdown of the statistics showed problems at nearly every level of the mortgage industry. Of the 45 million home loans included in the survey, 6.35 percent were at least one payment past due, up from 5.82 percent for the fourth quarter of 2007. (All figures are adjusted for seasonal factors.) Foreclosure proceedings began on 0.99 percent of loans, up from 0.83 percent in the previous quarter.

Over all, the percentage of loans being foreclosed on reached 2.47 percent in the first quarter, rising from 2.04 percent at the end of December 2007. The drop in home prices, which has affected a broad swath of the nation’s housing market, has left many homeowners paying mortgages worth more than their own homes. The housing slump is the worst of its kind since the recession of the early 1990s.

The mortgage problems were worst for homeowners who took out subprime loans, which are usually issued to applicants with less-than-pristine credit histories. But even borrowers with solid credit records have not been immune. “While the foreclosure start rates were up for all types of mortgages, a reflection of the decline in home prices, the magnitude of the national increases is clearly driven by certain loan types and certain states,” said Jay Brinkmann, the group’s vice president for research and economics.

For example, he said, subprime adjustable rate mortgages represent 6 percent of the loans outstanding but 39 percent of the foreclosures in the quarter. Prime adjusted loans represented 15 percent of the loans, but 23 percent of the foreclosures started.
“Out of the approximately 516,000 foreclosures started during the first quarter,” Mr. Brinkmann said “subprime ARM loans accounted for about 195,000 and prime ARM loans 117,000.”

Four states — Arizona, California, Florida and Nevada — accounted for about 89 percent of the foreclosures, a disproportionately high amount of the newly reported figures. Those regions have suffered the sharpest price drops.

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Americans $1.7 trillion poorer

Americans saw their net worth decline by $1.7 trillion in the first quarter - the biggest drop since 2002 - as declines in home values and the stock market ravaged their holdings.Meanwhile, the amount of equity people have in their homes fell to 46.2%, the lowest level on record.

The net worth of U.S. households fell 3% to $56 trillion at the end of March, according to the Federal Reserve's flow of funds report, which was released Thursday. The value of real estate assets owned by households and non-profits declined by $305 billion, while financial assets fell by $1.3 trillion, led mainly by a $556 billion drop in stocks and a $400 billion decline in mutual funds.

The first quarter's decline follows a $530 billion drop in wealth in the fourth quarter of 2007. Until then, net worth had been rising steadily since 2003, climbing nearly 31% over those five years. During the bear market of 2000 through 2002, household's net worth dropped 6.2%.

The recent declines, however, may not affect consumer spending, said Michael Englund, senior economist with Action Economics. Americans have actually spent more in recent months, particularly at the gas pump as fuel prices soared. Americans "are spending everything in their wallet and borrowing more," Englund said. "But because the pump takes so much more of their dollars, they are buying fewer T-shirts."

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SEC reportedly probing AIG's swaps

American International Group Inc. is being investigated by federal regulators about whether the beleaguered insurance giant overstated the value of credit default swaps linked to subprime mortgages, The Wall Street Journal reported Friday.

The paper cited unnamed people familiar with the matter. The Justice Department in Washington and the U.S. Attorney's office in Brooklyn have requested that the Securities and Exchange Commission turn over any information gleaned from the investigation into AIG, signaling that a criminal inquiry could follow, the newspaper said.

Credit default swaps, which insure against the default of securities, were sold to investors on a large scale via complex investment products know as collateralized-debt obligations, or CDOs. Credit default swaps allowed investors to protect the underlying debt packaged in these CDOs in the event of default on the underlying debt.

The SEC and federal regulators are now interested in how those CDOs were valued, which would affect both the value of the swaps themselves and how much collateral AIG could be on the hook for if the buyer of the swap collected in order to offset their risk, the Journal said.

The newspaper estimated that AIG had increased its collateral related to such swaps to $9.7 billion as of April 30, a jump from $5.3 billion only two months earlier. AIG has been beset by a rash of legal and regulatory troubles lately, with several former executives convicted in federal court of illegally inflating the company's stock price.

Former CEO Maurice "Hank" Greenberg is also the target of a separate, civil investigation by the SEC into whether he had colluded with that conspiracy.The company also paid out $1.6 billion in 2006 to settle allegations of accounting improprieties and other regulatory missteps. .

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Ilargi: ”When crop prices are climbing, holding inventory for future sale can yield higher profits than selling to meet current demand.”

I’ve said this before as well: If you make basic human needs into common comodities, you make people dispensable.

Food Is Gold, So Billions Invested in Farming

Huge investment funds have already poured hundreds of billions of dollars into booming financial markets for commodities like wheat, corn and soybeans. But a few big private investors are starting to make bolder and longer-term bets that the world’s need for food will greatly increase — by buying farmland, fertilizer, grain elevators and shipping equipment.

One has bought several ethanol plants, Canadian farmland and enough storage space in the Midwest to hold millions of bushels of grain. Another is buying more than five dozen grain elevators, nearly that many fertilizer distribution outlets and a fleet of barges and ships.

And three institutional investors, including the giant BlackRock fund group in New York, are separately planning to invest hundreds of millions of dollars in agriculture, chiefly farmland, from sub-Saharan Africa to the English countryside. “It’s going on big time,” said Brad Cole, president of Cole Partners Asset Management in Chicago, which runs a fund of hedge funds focused on natural resources.

“There is considerable interest in what we call ‘owning structure’ — like United States farmland, Argentine farmland, English farmland — wherever the profit picture is improving.” These new bets by big investors could bolster food production at a time when the world needs more of it.

The investors plan to consolidate small plots of land into more productive large ones, to introduce new technology and to provide capital to modernize and maintain grain elevators and fertilizer supply depots. But the long-term implications are less clear. Some traditional players in the farm economy, and others who study and shape agriculture policy, say they are concerned these newcomers will focus on profits above all else, and not share the industry’s commitment to farming through good times and bad.

“Farmland can be a bubble just like Florida real estate,” said Jeffrey Hainline, president of Advance Trading, a 28-year-old commodity brokerage firm and consulting service in Bloomington, Ill. “The cycle of getting in and out would be very volatile and disruptive.”

By owning land and other parts of the agricultural business, these new investors are freed from rules aimed at curbing the number of speculative bets that they and other financial investors can make in commodity markets. “I just wonder if they need some sheep’s clothing to put on,” Mr. Hainline said.

Mark Lapolla, an adviser to institutional investors, is also a bit wary of the potential disruption this new money could cause. “It is important to ask whether these financial investors want to actually operate the means of production — or simply want to have a direct link into the physical supply of commodities and thereby reduce the risk of their speculation,” he said.

Grain elevators, especially, could give these investors new ways to make money, because they can buy or sell the actual bushels of corn or soybeans, rather than buying and selling financial derivatives that are linked to those commodities. When crop prices are climbing, holding inventory for future sale can yield higher profits than selling to meet current demand, for example. Or if prices diverge in different parts of the world, inventory can be shipped to the more profitable market.

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Bank of America wins approval to buy Countrywide

The Federal Reserve on Thursday approved Bank of America Corp.'s purchase of distressed mortgage lender Countrywide Financial Corp. In a statement, the federal regulatory said it considered many comments for and against the company buyout and "has considered carefully the financial factors of the proposal."

Charlotte-based Bank of America, which announced its $4 billion acquisition of the Calabasas, Calif.-based mortgage lender in January, has faced much criticism for Countrywide's large exposure to subprime home loans that were offered to borrowers despite their shaky credit. Countrywide lost about $1.6 billion in the last six months of 2007, and the company faces numerous investigations and lawsuits related to its lending practices.

Bank of America has said it will tighten those lending standards. "This transaction represents a rare opportunity for Bank of America to significantly gain market share in the mortgage business, allowing it to expand in a cornerstone financial product," Bank of America Chairman and Chief Executive Officer Ken Lewis said in a statement commenting on the Fed decision.

In its order, the Fed board said that after the proposed deal Bank of America would remain the largest depository institution in the country, controlling approximately $773.4 billion in deposits, which represent 10.9 percent of total insured bank deposits in the country. When the deal was first announced, Bank of America said it would pay about $4 billion in an all-stock deal for Countrywide, exchanging 0.1822 shares of Bank of America for each share of Countrywide outstanding.

In recent months, some analysts have speculated that the deal may be completed at a lower price because of further deterioration in the mortgage market and a continued rise in mortgage delinquencies and defaults. Experts have said that the deterioration of the mortgage market and Countrywide's loan portfolio could lead to costly write-downs and create a drag on Bank of America's earnings.

But on Monday, Lewis told analysts on a conference call that he believed buying Countrywide was still a good deal even though the housing market had continued to falter since the deal was announced. Lewis said he believed that housing conditions would improve by early next year. He said that Countrywide and its professional sales force would give the bank a boost as it pushes to increase market share in the mortgage sector.

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Home equity slips further below fifty percent

The percentage of equity Americans have in their homes slipped again during the first quarter, according to the Fed’s U.S. Flow of Funds Accounts report released today. Homeowner’s percentage of equity fell to 46.2 percent during the first quarter, down from 47.5 percent in the fourth quarter and 49.9 percent a year earlier.

Since 2001, home equity has fallen steadily by about 10 percent from levels around 57 percent, and is now at a position not seen since the 1940s. The total value of homeowner equity slipped to $9.12 trillion, down from $9.52 trillion in the fourth quarter and $10 trillion a year earlier.

And home equity in American homes is sure to keep falling, so long as home prices continue to fall back to earth. A surge in cash-out refinances in recent years, coupled with low to no down payments on new purchases and negative amortization loans, have left millions across the nation with negative equity.

In fact, a recent report from Zillow found that negative equity, in which borrowers owe more on their mortgage than the present value of their home, was as high as 95 percent in some areas (Stockton, CA). That same report noted that roughly half of those who purchased a home when prices peaked in 2006 are now underwater, while 45 of those who bought a home last year are now upside down.

The Fed report said the growth of home mortgage debt slowed to an annual rate of three percent in the first quarter, more than 50 percent below the pace in 2007.

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UBS may divulge client names in US tax inquiry

UBS is considering whether to reveal the names of up to 20,000 wealthy American clients as US authorities step up their investigation of alleged tax irregularities at the Swiss wealth manager, according to reports. US investigators believe private bankers at UBS may have helped US clients hide as much as $20 billion in offshore accounts to avoid paying tax, the New York Times reports, citing people close to the inquiry.

The US believes the alleged scam may have cost up to $300 million in lost taxes, according to a Government official. A spokesman for UBS declined to comment on the report and said the bank’s position on the US investigation had not changed. In May, the bank revealed that the Department of Justice and the Securities and Exchange Commission were examining UBS's conduct in relation to Swiss-based advisers to US clients over a seven year period from 2000 to 2007.

"UBS is however treating these investigations with the utmost seriousness and has committed substantial resources. UBS intends to appropriately and responsibly address and correct any issues raised in the investigations," it said last month. The Swiss bank has been under intense pressure since the tax inquiry began last month and has already had one of its most senior private bankers detained in the US.

Martin Liechti, head of the bank’s North and South American wealth management operations, was arrested as a material witness last month. He was released without charge the same day.

Bradley Birkenfield, 43, a former director in UBS’ wealth management division, has already been charged with helping a US client evade taxes. Mr Birkenfield, a US citizen who worked for UBS in Switzerland, has indicated that he intends to plead guilty to a single charge of conspiring to defraud the United States.

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Crisis trade talks in Paris as protectionism looms

The world's top economic powers have launched a last-ditch effort in Paris to save a deal on global trade as the public mood turns increasingly protectionist in both rich and poor societies.

Negotiators from the G6 group - the EU, the US, Brazil, Japan, China, and India - failed to break the deadlock over both industrial and farm tariffs at crisis talks yesterday. They agreed to keep the process alive into next week but experts warned that the seven-year drive for trade liberalisation known as the Doha Round is close to collapse.

Yesterday's mini-summit followed rare drama in Geneva this week when the chair of the World Trade Organisation working-group on industry suspended all further meetings, saying the talks had gone backwards and that key parties were no longer even trying to reach a deal. It is widely felt that a Doha accord will be impossible after June.

Peter Mandelson, the EU trade commissioner, said the door was slamming shut on hopes for an accord as the US moves into election mode. He warned of a slide back towards a closed trading system, and accused populists of whipping up a frenzy against globalisation and trying to undermine the authority of the WTO.

"The public is anxious. They are looking for scapegoats. If this pressure helps to torpedo a WTO trade deal, we will have no insurance policy against protectionist pressures," he said. "Our options are running out. The political calendar is against us. Those who are playing it long are playing for failure."

Peter Sutherland, the chairman of BP and a former world trade chief, said the globe's half century drive for free markets was on the brink of reversal, with profound implications.He said: "People are always moaning about a spiral into protectionism, but this time we really are running into a crisis. Doha faces failure within a month. "We're hearing an increased decibel level of negativism from the US elections, but there are no saints anywhere. Everybody is the victim of a political agenda in their own country."

John Sweeney, the head of the AFL-CIO labour lobby in the US, has demanded a Doha clause on work standards to enable the US to block imports from countries that use child labour or repress trade unions. "We are implacably opposed to a trade deal that does not include a clause that ensures workers be given basic labour rights. If this is protectionism, so be it," he said.

Barack Obama, the Democratic nominee, went along with this kind of rhetoric during the bitter fight with Hillary Clinton, but leaked documents from his own campaign suggest that he would be careful once in office. In Geneva, diplomats said India and Brazil (representing the developing countries) were reneging on pledges to open their markets to industrial goods, while Washington was happy to let the talks die since Doha would force the US to dismantle the great nexus of subsidies passed under the Farm Bill.

Washington sees farm subsidies as a way to foster the biofuel industry to help break dependence on oil imports. The strategic imperative has begun to clash with free trade. The EU has agreed to cut its farm tariffs by 54pc, but retains various 'stealth tariffs' and uses anti-dumping policy as a disguised form of protection. Pascal Lamy, the WTO chief, issued an urgent call yesterday to get the talks back on track. "We have a lot to do, and little time to do it. But I remain convinced this is doable," he said.

Charlene Barshefsky, the former US Trade Representative, told a panel in London that the outsourcing revolution this decade has begun to threaten middle-class jobs in the US and sap support for globalisation. "Everybody understood in the Golden Nineties that we would shed blue-collar jobs, but now white-collar jobs are going too, and that makes the politics more volatile," she said.

She said that every US candidate has to sound like a protectionist during the campaign, but invariably changes tack in the White House. "The first rule is to get elected. Will the US under Obama or McCain do something absolutely outrageous? No, because we're a debtor nation. The world funds our deficits, and buys our T Bills," she said.
Dr Razeen Sally, a trade expert at the London School of Economics, said the post-war global order was slowly unravelling.

"The end of the 'goldilocks' global economy has exposed the visible cracks around the world. Countries are resorting to beggar-thy-neighbour policies on food and fuel. In Asia we are seeing a noodle-bowl of restrictive arrangements. I think the WTO has become disconnected from the political reality of the 21st Century."

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UK housing market falling faster than last recession

The housing market is deteriorating at a much faster rate than it did during the recession of the early 1990s, Bellway said, as expectancy grew in the City that some UK housebuilders could be forced to raise capital to shore up their balance sheets.

Bellway said that the spring season - traditionally a strong sales period for housebuilders - failed to take off and a restricted supply of mortgages was exacerbating the problem. It now expects volumes to fall by 10pc-15pc this year. Alistair Leitch, Bellway's finance director said: "I went through the 1989/90 slowdown with the company and it was drip, drip, drip then. Now the rapidity is striking."

Despite the downbeat outlook shares in Bellway rose 5.5pc to 626.5p yesterday because its trading update was not as bad as some analysts had feared. Chris Millington, analyst at Numis Securities, said Bellway was "doing a lot better than most" adding that it was his key pick in the sector.

The company is not as highly geared as other housebuilders, and therefore does not need to raise extra capital. Mr Leitch said: "We have absolutely no need to raise capital through a rights issue or anything else." While rival housebuilders are pulling out of the land buying market to preserve cash levels, Bellway is taking advantage of the falling land values and buying up sites on a "highly selective basis."

Bellway has built up its landbank by buying plots rather than acquiring another housebuilder, and Mr Leitch said it was those companies involved in consolidation which were now being hit by the dual problem of a large debt mountain and a tumbling share price. Speculation is mounting in the City that some of the more highly geared housebuilders like Barratt Developments and Taylor Wimpey, will be forced to follow in the footsteps of the banks and raise capital, possibly through a rights issue, in order to strengthen their balance sheets.

Redrow is also being watched by analysts, but is considered to be far less vulnerable. "We see no positive catalysts with risk of capital raisings coming on the agenda," said Mark Stockdale, an analyst at UBS, referring to the housing sector. Barratt and Taylor Wimpey, whose debt is now greater than their market value, declined to comment yesterday.

Barratt has about £1.7bn of debt following its acquisition of Wilson Bowden, while its market value is now around £519m after an 86pc fall in share price over the last year. One analyst said that the gulf between those numbers meant that a traditional discounted rights issue would not solve Barratt's problem because it was unlikely to raise sufficient money. It would have to look at other alternatives, like a debt for equity swap, he said.

Taylor Wimpey - created from a merger between Taylor Woodrow and George Wimpey - has £1.4bn of debt with a market value of about £873m. Its shares have fallen 81pc over the last year. Bellway is better placed with a market value of £720m and forecast debt of £250m by the end of the year, according to analysts, but its shares have been hit along with the rest of the sector, falling 55pc in the last year.

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Containerized horror

There seem to be plenty of lamebrains that think that the federal government sending out US$168 billion in "tax rebate economic stimulus" checks to various people, for no reason at all, is some hot idea that is going to somehow magically save the American economy.

Instead of calling these people names like "moron", "stupid moron" or "big, dumb, poopie-head moron" like they deserve, I merely motion to Boris Sobolev of ResourceStockGuide.com to tell you that "the worst in the economy is not yet over, especially if one recalls just a couple of important facts from a very long list of economic headwinds: (1) Gasoline and heating oil prices are at their all-time-highs, while (2) household debt is 85% higher than it was in 2001, the year we received our first rebate checks from the government." Yikes! 85% higher debt in seven years!

And it is not just energy that is costing more, but Ambrose Evans-Pritchard at Telegraph.co.uk writes that everything is costing more, everywhere, and "Argentina has inflation that is running at about 25%, even though the official Consumer Price Index (CPI) is 8.9%", which is plenty bad enough, but that he goes on "Among the CPI rates - if you believe them - are: Ukraine (30%), Venezuela (29%), Vietnam (25%), Kazakhstan (19%), Latvia (18%), Qatar (17%), Pakistan (17%), Egypt (16%), Bulgaria (15%), Russia (14%), the Emirates (11%), Estonia (11p%), Turkey (9.7%), Indonesia (9%), Saudi Arabia (9.6%), Romania (8.6%), China (8.5%) and India (7.6%)."

I am staggered by all of this inflation, and in desperation I turn to Jeff Rubin of CIBC World Markets, who says that their new report says, "Exploding transport costs may soon remove the single most important brake on inflation over the last decade - wage arbitrage with China."

How "exploding" are these transport costs? Well, the report finds that "the cost of shipping a standard 40-foot container from East Asia to the North American east coast has already tripled since 2000 and will double again as oil prices head towards US$200 per barrel." Double!

The report notes that "it currently costs US$8,000 to ship a standard 40-foot container from Shanghai to the North American east coast, including in-land transportation. That's up from just US$3,000 in 2000 when oil was US$20 per barrel. At US$200 per barrel of oil, the cost to ship the same container is likely to reach US $15,000."

To see how this is reflected in prices, Mr Rubin says, "To put things in perspective, today's extra shipping cost from East Asia is the equivalent of imposing a 9% tariff on East Asian goods entering North America. And at oil prices at US$200 per barrel, the tariff equivalent rate will rise to 15%."

I know what you are thinking. You want to know how in the hell you can afford to buy anything if prices are raised another 15% just for transportation costs, and if things are as bad as I say, why aren't people screaming mad, barricading themselves in their homes, putting "no trespassing" signs all over the yards and buying gold and silver?

Well, as to the first question, I rudely reply that I don't expect you to buy anything since I can't afford to buy anything, either, you greedy, self-absorbed little snot; and furthermore I am (now that you mention it) screaming mad; I'm barricaded in my house; there are a zillion "Trespassers will be shot!" signs all over the yard; and I am buying gold and silver with every dime I can steal from my wife's purse or the kids' piggy banks.

And some others are apparently catching onto that gold idea, too, as GoldenSextant.com reports, "Another intriguing development of the past few months is the resumed outflow of foreign earmarked gold from the United States. From the end of 2003 through January of this year, there was virtually no change in the total amount of gold held under earmark at the New York Fed for foreign and international accounts, mostly foreign central banks.

However, from February through September, the latest month for which figures are available, these accounts are down by a net 169 tonnes, from $8,967 to $8,737 million at $42.22/ounce, or from 6,606 to 6,437 tonnes."

But excitingly, if you like the idea that there has to be a lot of buying of gold in the future, even as the amount of Federal Reserve gold is going down, that the derivatives industry have made a monster that will devour them, as "The reported figures indicate that the mountain of gold options now almost certainly exceeds 30,000 tonnes - an amount roughly equal to the world's total claimed official gold reserves."

So all the gold in the world is owned twice over? Hahaha! I smell a short squeeze a-coming, which will be wonderful for those holding real gold! Whee!

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Lenders can’t find their borrowers

As home foreclosure cases piled up in his court, Miami-Dade Circuit Judge David C. Miller began to notice more affidavits from mortgage lenders stating they couldn’t locate the borrowers. “The ones that caught my attention very early on were the ones that said they didn’t have driver’s license information or they didn’t have employment information for the borrower,” the judge said in an interview.

“Did someone just walk in off the street and say, ‘Gimme money?’ ” the judge asked sarcastically. “I don’t think that’s possible.” Increasingly, banks are struggling to locate defendants to serve them with formal notices. Whether the banks are performing their due diligence to find the defendants or whether the defendants are being evasive is anyone’s guess. But the judge has begun to appoint guardians ad litem in some foreclosure cases to help the lenders locate the borrowers.

Miller started contacting attorneys such as Houck & Anderson shareholder Raul Chacon in Miami late last year to canvass people with receivership experience to act as guardians ad litem in foreclosure cases. Guardians ad litem generally are appointed to represent incompetent parties or minors. But as foreclosures pile up in the state court system, judges such as Miller are seeking quality help to deal with mounting piles of cases.

Miller “just wanted to ensure that a proper search was done on certain cases,” Chacon said. “He was concerned there wasn’t enough effort on the part of the lender” to locate borrowers. In a multilingual, international city like Miami, not contacting a borrower about the foreclosure of their homes can have a dramatic effect on a household. But as Miami Beach solo practitioner David Alschuler points out, such foreclosures fall into two categories.

“There’s probably two types of foreclosure cases: the person who took out a good faith mortgage and because of some tragic situation caused the property to go into foreclosure. “Then you probably have people who took out $600,000 mortgages to buy property worth $350,000,” he said. He’s one of the attorneys serving as a guardian ad litem in Miller’s court. “My guess is most of the people who cannot be located took out fraudulent mortgages.”

Alschuler said in one case he worked, he located a woman in Colombia by telephone and talked to her with the help of a translator. He also described a case where a due diligence affidavit stated there was no driver’s license on file, even though the driver’s license was part of the defendant’s loan application. “I don’t think there’s any intent to not find people. But I’m sure due to the large number of foreclosure actions, these investigative agencies are overburdened,” Alschuler said.

“The quality of these investigations is directly proportionate.” The guardians are paid a fee by the court and write investigative reports that make determinations about what occurred or should have occurred during the foreclosure action.

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Ilargi: UK business writer Ambrose Evans-Pritchard is out of his league on climate, and accepts that. Some good data.

A 50-50 chance that climate change will destroy civilisation this century?

I doubt it.

Lord Stern and Lord Giddens frightened the wits out of a Goldman Sachs audience I attended this week on the risks of a global water, food, and energy crisis. Without wishing to take a stand one way or the other on the bitterly polarized issue of climate change, I pass on some of their remarks so readers can judge for themselves.

Nicholas Stern -- the author of the Government’s Stern Report on the economic effects of climate change, and former chief economist at the World Bank -- said we have a one in two chance of destroying civilization within the life-span of people already born, unless drastic action is taken to slow CO2 emissions.

“If we let go, if we carry on with business as usual, there is a 50pc chance that global temperatures will be 5 degrees centigrade higher by the end of century than it was in pre-industrial times. The last time that happened, the world was a swamp and there were alligators up to the North Pole,” he said. “We have had a rise of 0.8 degrees so far, and already South West Africa and parts of Spain are drying out.”

“We can draw the risk down to 3pc if we cut emissions by 50pc by 2050. That means will have to cut from 6 tonnes of carbon per capita to 2 tonnes. This insurance policy would amount to a one-off cost 1.5pc to 2pc of world GDP”. (At the moment, use per capita is roughly 20 tonnes in the US, 12 in Europe, and 5 in China. Goldman’s Abby Cohen, who hosted the panel, said Russia uses 8 times as much energy as the US or Europe to produce an equivalent amount of GDP, while China uses four times as much.)

Lord Stern said this would entail an 80pc cut in emissions for the rich world. “Gordon Brown has already declared for 80pc, and both McCain and Obama in the US are near that figure.” He said it was politically ‘doable’. Anthony Giddens -- a Professor at the London School of Economics, and Tony Blair’s “Third Way” guru -- said the leading nations would have to relearn the forgotten art of long-term planning.

“Leaving this to the market is not a possible solution. There is no technology even close to solving this crisis. All it can do is to nibble away”. ie, mass rationing of energy.

Lord Giddens said there are three main schools of thought. The deniers (he singled out former Chancellor Nigel Lawson, author of `An Appeal to Reason: A Cool Look at Global Warming’), the mainstream consensus around the Intergovernmental Panel on Climate Change (IPCC) that views the world as a fragile creature, and those that fear the IPCC is far too optimistic (they see the planet as an angry beast that lashes out when prodded).

Lord Giddens is -- I suspect -- in group three. “This could be even more dangerous than we think. We know there are threshold effects. Dramatic climate change can happen in less than ten years,” he said. “Malthus who was so constantly dismissed as sitting in a corner smirking. We’re in a new phase of human social evolution,” he said.

Peter Sutherland, BP Chairman and former head of GATT, said the only answer to the crisis is the creation of a supranational body like the European Commission or the World Trade Organization with the powers to enforce global action with the backing of an independent court.

Such are the debates are going on inside the elite banks in the City. There was very little dissent. Not a single member of the high-powered audience questioned the Stern assumptions. The chit-chat was purely about the best instruments for cutting CO2 emissions. (Lots of disagreement on carbon trading). I make no judgment on these views (though I confess to having read Fred Pearce’s “Last Generation”, twice, and found it quite arresting).

I certainly cannot vouch for the data, or the accuracy of climate models used by the IPCC. My own view is that technology and human creativity will come up trumps in the end -- perhaps sooner that we suspect -- but that is idle speculation. The climate debate has the feel of the Lutheran-Calvinist- Counter Reformation disputes of the 16th Century. At least we are not yet burning heretics/martyrs, though perhaps we will before this is all over.

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