Weather Report: The Economy — U.S. Banks & A Miner’s Canary?

THE ECONOMY–U.S. BANKS: Two articles impressed themselves upon us today: #1, regarding the current financial status of U.S. banks and #2, the future of U.S. banks.

1. “Roubini: U.S. Bank Losses Total $3.6 Trillion”, from moneynews.newsmax.com, by Dan Weil. This article quotes Nouriel Roubini, the “uber bear” NYU economist, as saying, “I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” and “If that’s true, it means the U.S. banking system is effectively insolvent, because it starts with a capital of $1.4 trillion.” Professor Roubini continues by noting that, “This is a systemic banking crisis.”
2. “Levitt: Banks Will Be Nationalized”, from money news.newsmax.com. This piece comments on some of Arthur Leavitt‘s, a former SEC chairman, pronouncements that U.S. banks will be nationalized. Mr. Levitt is quoted: “The whole question of ringing banks, of having good banks and bad banks doesn’t make sense. Clearly we’re moving toward nationalizing banks,” Leavitt, a senior advisor to private equity firm Carlyle Group, told Bloomberg TV.

The article notes that the government has to choose between winners and losers among the banks and Levitt says, “ Nothing less will work.”

THE ECONOMY– A MINER’S CANARY?: “Pound Slumps to Record Versus Yen; Rogers Says U.K. Finished” notes a Bloomberg.com article of 1/21/09 by Paul Gordon and Candice Zachariahs.

The article remarks on the pounds drop to a record low versus the yen and the U.S. dollar as the British economy slips into its worst recession since the Second World War.

The piece continues by quoting Jim Rogers, Chairman of Singapore-based Rogers Holdings, as saying the “U.K. is finished” and that investors should sell the currency.

In another interview, PrudentHome has observed Mr. Rogers saying that what has saved the U.K. over the last 26 years has been the sale of North Sea oil and that will run out within 10 years leaving the U.K. a net importer of oil.

The question the U.K.’s current recession and looming dependence on foreign oil raises to us here at PrudentHome is, “Does the U.K. represent a miners canary-type of warning of possible collapse among other western industrialized nations given their deepening recessions and increasing fossil fuel dependence ?

Until a little later then, keep your eyes on the horizon.