THE US trade gap widened in January to $44.45bn (£29.53bn) from December’s figure of $38.14bn, the US Commerce Department has reported.
Much of the rise in imports came from a 12% increase in imports of oil.
This bad news came in advance of today’s release of the non-farm payroll figures for February. These are expected to show an increase in unemployment, that is expected to grow rapidly as a result of the $85bn cuts that Obama has just imposed after his failure to reach a tax-cutting deal with the Republican party.
As the Federal government closes down and sacks non-essential workers, the jobless figures are set to mount sharply, as will the number of people losing their homes.
As this crisis breaks, the US Federal Reserve has alleged that the US banks now have enough capital to withstand ‘a severe economic downturn’.
It announced that 17 out of 18 major banks passed its annual stress tests. It said that the government-owned Ally Financial, the rescued former finance arm of General Motors, was the only bank to fail the test of capital strength.
Wall Street giants Morgan Stanley, at 5.7%, and Goldman Sachs, at 5.8%, were the next two lowest.
The Federal Reserve statement said: ‘The nation’s largest bank holding companies have continued to improve their ability to withstand an extremely adverse hypothetical economic scenario and are collectively in a much stronger capital position than before the financial crisis.’
Under the ‘testing’ scenario, unemployment peaks at 12.1%, with share prices dropping by more than 50%, house prices falling by 20% and the largest trading firms suffering a market collapse. The verdict of the Federal Reserve was: ‘Under this scenario, projected losses at the 18 bank holding companies would total $462bn (£308bn) during the nine quarters of the hypothetical stress scenario.’
The assets held in reserve as a buffer against complete financial collapse would fall from an actual 11.1% in the third quarter of 2012 to 7.7% in the fourth quarter of 2014. The minimum tier-one capital ratio needed to pass the test is 5%. At 1.5%, Ally Financial was the only one to miss the Fed’s target under this scenario.
The reality, however, is that as the US economic and political storm develops, the vast $16 trillion of US debt will come to the fore, call the tune, and prove to be decisive, as giant runs develop on the banks that are now too big for the government to control.
This real relationship between the US government and the US banks has been brought out into the open by US Attorney General Eric Holder. He said that megabanks in the United States have become ‘so large’ that they are laws unto themselves.
Holder was responding to Republican Senator Charles E Grassley, who questioned the US Department of Justice (DoJ) on Wednesday over the issue of criminal charges, or the lack of them, against the HSBC banking and financial services company and its employees over allegations of money-laundering for the murderous Mexican drug cartels.
Grassley commented: ‘After hearing today’s testimony, big bankers know that if they commit financial crimes, they can expect a passive response from the Justice Department. This is worrisome for the fair application of justice in our country.’
Holder responded: ‘It does become difficult for us to prosecute when we are hit with indications that if we do…bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.’ He was alluding to blackmail by the banks on a massive, worldwide scale!
These banks will act with enormous ruthlessness in the days ahead to save themselves at the expense of everybody else.
The United States of America is going to have to go socialist, or go under with American capitalism.
