The true collapse of US currency and economy

DISTRIBUTION CHANNELS INTERRUPTED

Big disruptive events are occurring in the distribution system. Letters of credit are routinely being refused by export nations who distrust US sources. A fall of 10% to 20% in shipping traffic to western US ports has been reported. Ships are empty at Asian ports, some even loaded but interrupted on their voyage to US ports and European ports. Many details are given in the October Hat Trick Letter reports. Even manufacturers of shipping vessels are being severely affected, as credit has interrupted construction projects. Indian suppliers are often demanding 100% upfront on costs to east coast retailers, again showing the distrust. Almost total attention has been given to banks and credit markets and stock markets. The US Economy is moving from recession toward something different from depression. The current interruption could actually be more like disintegration. Short-term credit is soon to interfere greatly with truckers and railways in distribution channels on the domestic side, much like letters of credit are wrecking havoc on the overseas shipper side.

The next big shoe to drop is credit cards. Bank of America has announced plans, not yet fully implemented, to cut back on credit cards to lower FICO scorers. The lower 60%-ile of credit score recipients will find themselves without credit cards at all. One friend told me that he used to own 10 credit cards. Recently, all but four were simply discontinued, but a few were not used. Other friends said most of their credit limits were slashed. Changes are coming. Then the next big shoe to drop will be commercial mortgage default. No reprieve, rest, or respite for US bankers. Changes are coming. It will force defaults in most every conceivable financial corner.
DISHONOR AMONG BANKERS

The system is breaking down. Just when the heart attack signals are actually improving, although only slightly, the US Economy is falling off a cliff, as unprecedented decay is occurring. Some improvement has been seen with the short-term LIBOR rate, the money market funding, TED spreads, and mortgage bond spreads. But bankers and financial subsidiaries are in focus for dishonour.

The following message came yesterday to my desk. It pertains to General Electric. It involved dishonoured Letters of Credit (L/C). The US banks not only distrust each other, they are engaging in criminal activity, like contract fraud. If big enough, or connected well enough to the power center, it is permitted. Again, no solutions, only proliferation of chaos.

“Try this one on. One of our clients did a bond early last year (underwritten by RBC/Dain Rauscher) backed up by a General Electric Letter of Credit. There is a tag end of $1 million. The deal was the sale and lease back of 13 bank branches. One remains. The tenant is a regional bank. RBC cannot remarket the bond now because the market is still frozen. So the client, per the documents, called on the L/C for performance (as allowed in the L/C, which extends to 2021). GE has reneged on the L/C and will not pay unless the two principals come up with $1M in cash. The client has said no way, the L/C has no such provision. GE has said, too bad, if you don't like it, talk to our attorney. We're not paying.” Stories like this are probably surfacing all over the North American landscape. US banks are defending themselves by dishonouring contracts.

link to opinion article

It begins with some trivial issues linked together, and suddenly the snowball is rolling downhill, this is the end, and we will be there with front row seats.

Little by little the info trickles, it is already too late, but it comes as a warning to those that are able to hear it.

Thanks for the info OP

So basically GE is breaking the law by not honoring the LC. This should be very interesting if it goes to court. Due to the current situation will the law side with the law...or will it side with the behemoth company GE?

And how widespread do you think this is? Is the article your source or do you have knowledge of this firsthand besides the one you mention?

I've been wondering why the Dollar has been so strong amidst this 'crisis' and the link you provided had this observation:

www.marketoracle.co.uk...

"What is pushing the US Dollar up cannot be construed as anything remotely resembling healthy factors. In no way whatsoever does it resemble investment. It is more like paid off death contracts, paid off death investments, paid off transfers from toxic US bonds into what are falsely regarded as safer US bonds with a guarantee from a crippled USGovt. Foreign financial entities are liquidating on massive scale. They need a tremendous amount of US Dollars in order to complete transactions. Also, a tremendous amount of US Dollars are needed for CDSwap payout's as defaulted bonds are resolved. Almost all CDSwap and other credit derivatives are paid out in US Dollars..."

Sobering analysis, I do not really wish to admit that I think he may be spot-on.

Thanks habu71, that's a good read.

[edit on 29-10-2008 by FewWorldOrder]

I thought I read in one of these posts, a linked article explaining how the hedge funds were going to do a massive sell-off at the end of this week, or beginning of next week.

Does anybody have any updated information regarding this thought?

The banks of today are resorting to old tactics, distrust and dishonor has lead us into a corner which no bailout plan can fix. like another user said, the snowball has been set in motion and were here to watch it grow until it smashes. so what currency should you have? personally i say: gold, diamonds, guns, bullets, and lots of gas anyways it should be interesting to see where this goes, the public is so focused on the election (im not even bothering with a vote) that they aren't watching there money or how our government is using it. Good luck to us all.