Late post reposted:The article posted by economicminor, “Substituting Debt for Savings and Productive Investment,” by Comstock Special Report January 7, 2009, is a blockbuster and answers many of the questions asked frequently on this blog. Its premise is that the U.S. economy is dependent upon DEBT, and has reached the debt limit!!It predicts that “deflation will dominate the global economic environment in 2009 [and be] very painful for world economies and world equity markets. And that “the bailouts and easy money will be global in nature and will probably someday cause a massive inflation.”The charts are invaluable as investment tools. I culled some statements out to emphasis the value of reading this lengthy article in its entirety:[Ned Davis from NDR Research] measures the changes in debt for each decade in relationship to the changes in GDP and concludes…that it took $1.35 to generate $1 or debt in the 1950s, $1.50 in the 1960s, $1.70 in the 1970s, $2.90 in the 1980s, $3.20 in the 1990s, and $5.40 in the latest decade with one more year to go.Over 90% of the total debt was created since 1980, 75% of the total debt was created since 1990, and over 61% since 1997. We expect the only debt sector to grow in the near future will be the Government debt…This debt cycle really started in the early 1980′s when the U.S. savings rate peaked at over 10% and continued downward until this year when it troughed at a negative savings rate.During the 1990s and first six years of the new millennium the Democrats, with the Republicans’ blessing, did everything possible to get every American into a home whether they could afford it or not.It was in the late 1990s, specifically 1997, when the stock market, using enormous leverage (margin debt grew from $27 billion in 1991 to $280 billion in 2000), went on a tear. This became the greatest financial mania of all times and drove equity valuations to double what they were at previous market peaks (P/E ratios were around 20 at previous market peaks and the P/E in 2000 reached 40).On top of all of this is the incredible situation of lowering taxes (mostly for the wealthy) just before entering a very costly war.After the stock market’s dot com bubble burst in 2000…Greenspan decided to lower rates to encourage more borrowing. In fact, in 2003 rates declined to 1%… This started the housing bubble which drove the price of homes from the prior peak of just under 3 times household median income to 5 times…During this same period of time the consumer also largely contributed to the debt mania by going on a credit card buying binge not just domestically, but especially and more importantly, buying imports… U.S. consumers have been the main support for the world economy…In 2004 the largest investment banks accelerated the debt process by asking the SEC for permission to increase their leverage from the 12 to 1 restriction to up to 40 to 1. The SEC said, “No problem”.The reason it takes more and more debt to generate the same amount of GDP is because over the long-term there are onerous restrictions on growth due to the servicing of the debt (the interest paid to accommodate it)…We believe the market will trade at around 10 times (or lower) the trendline “reported earnings” of the S&P 500. We believe this because… However, with all that said there is more fear of missing the next bull market than fear of losing more money. This could easily drive the S&P 500 up another 100 or 200 points and if that takes place it will be a very good selling opportunity before we resume the secular bear market that started in 2000.http://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&category=SpecialReport&newsletterid=1432&menugroup=Home

Quotes in reponse to Wild Bill’s narrative of man’s fateful destiny to war: “Once upon a time, there was a powerful army…” That ended, “The conquered lands were quickly repopulated with their former inhabitants and began to thrive. They became wealthy enough to support standing armies. The leaders of these lands began to look over their borders to the lands of their neighbors. They began to speculate about how much better they could do if only they owned that land too. The armies swelled in size and slowly began to move toward each other…” 2009-01-09 07:24:45″What’s mine is my own; what’s my brother’s is his and mine.” Thomas Fuller 1732and…”Those who ignore history are destined to repeat it.” George Santayanabut…”I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones.” Albert Einsteinat the same time…“Some well respected economists believe the cost of the Iraq War could reach $2-3 trillion with the ongoing cost of health care for the returning servicemen (and they sure deserve it). This is a war that we entered without an exit strategy and no explanation of what would be considered a WIN (spreading Democracy?)!” Comstockfunds.com

Peter Schiff, president of Euro Pacific Capital, an investment firm specializing in overseas investments, wrote in a research note the stimulus debate has not done enough to focus on the cost to taxpayers that will come from the programs.”The truth is that the only way out of this mess is less government, more savings, and increased production,” Schiff wrote. “Obama’s plan is a recipe for economic ruin.”http://money.cnn.com/2009/01/08/news/economy/case_against_stimulus/index.htm?postversion=2009010817

First!!!!!!!!!. Happy Saturday! g. 00:09:09

Suicide: The only road to absolute certainty.

My first line use “blow up” instead of “go up”

* THE INTELLIGENT INVESTOR* JANUARY 10, 2009Where Ezra Merkin Lost His Wayhttp://online.wsj.com/article/SB123154725747869771.htmlLast fall, the celebrated money manager J. Ezra Merkin told a room full of value investors that he was “in the business of buying broken promises.” Now, some clients are accusing him of selling broken promises.Mr. Merkin, who runs Gabriel Capital Group in New York, is sometimes called “Ezra the Wise” after the Biblical prophet. He has been revered for his ability to ferret out value in the bombed-out stocks and distressed bonds that only a follower of the great Benjamin Graham could love. He contributed an insightful chapter on bankruptcy investing to the new edition of Mr. Graham and David Dodd’s classic 1940 book, “Security Analysis.”So value investors were stunned when Mr. Merkin revealed a month ago that he had lost $2.4 billion in the alleged Ponzi scheme run by Bernard L. Madoff. “How the h- an incredibly intelligent guy like Ezra got hornswoggled into this is utterly beyond me,” says Bruce Greenwald, a professor at Columbia Business School.”In retrospect,” says Mr. Merkin’s attorney, Andrew Levander, “Madoff brazenly fooled Mr. Merkin and many others. The experience has been a source of terrible consternation and sadness for Mr. Merkin, and obviously for his investors, too.”At a panel sponsored by Columbia last fall, Mr. Merkin expounded on the value in complex mortgage securities, the ups and downs of auto loans, and the pitfalls of commercial real estate and credit-card securities. “Since we’ve had the mother of all parties,” he joked, “we might have the mother of all cleanups.” Mr. Merkin sounded like someone who still spent every waking hour ransacking the markets for bargains.Indeed, the offering document for Mr. Merkin’s Ascot Partners LP states that he “intends…to adopt a selective approach in evaluating potential investment situations, generally concentrating on relatively fewer transactions that he can follow more closely. [Mr. Merkin] is expected to engage in hedging and short sales.” That sounds like just what a great value investor should do: Scour the markets for reward and avoid risk.Instead, it seems, Mr. Merkin was earning a lot of money for doing very little. According to a letter he sent clients on Dec. 11, Mr. Merkin delegated “substantially all” of Ascot’s $1.8 billion to Bernie Madoff. Roughly 25% of the assets in Mr. Merkin’s Ariel Fund Ltd. and Gabriel Capital LP were also meted out to Madoff. (Ariel Fund Ltd. has no connection to the Ariel mutual funds of Chicago.)How did Mr. Merkin end up in this mess? Some think that as an honest person himself, Mr. Merkin simply believed that Bernie Madoff was equally trustworthy. Paul Isaac of Cadogan Management, a hedge-fund research firm, cites “Hotel California risk” — the danger that years of profits can trap a manager in a position even if he wants out. Or Mr. Merkin’s success may have gone to his head, dulling his eye for detail.Or, perhaps, the money itself went to Mr. Merkin’s head. After all, Mr. Merkin still collected full fees on the assets he had given to Bernie Madoff. In Ascot alone, Mr. Merkin’s deferred fees (which he is now unlikely to receive) exceeded $320 million by the end of 2007.Mr. Merkin also charged full freight as a philanthropist.The UJA/Federation of New York had put $10.5 million of its endowment in Mr. Merkin’s Ariel fund before he joined the UJA investment committee in 1999. After the committee waived a conflict-of-interest rule, the money stayed in Ariel (earning fees for Mr. Merkin) until 2005, when UJA revisited the rule and sold the fund.As chairman of the investment committee at Yeshiva University, Mr. Merkin put about $15 million of the school’s endowment into Ascot. He thus captured a 1.5% annual fee for himself, even though Yeshiva could have given its money directly to Bernie Madoff — who was later treasurer of the university’s board — for nothing. Although Mr. Merkin was also a donor to Yeshiva, the arrangement strikes many as highly unusual.”What was in his mind to charge that fee?” asks a financier familiar with the Yeshiva investment. ” How in the world could he justify that?”Now, sadly, Mr. Merkin seems to have become the latest testament to the emotional struggle even the greatest investors must undertake to resist temptation. Of all the seductions that can lead a value investor to stray from the true path, perhaps the worst is simply making too much money.

A look at how some of the greatest intellects in history handled their investments reveals that brain power alone, offers no immunity from getting fleeced. Einstein, Newton and Mark Twain either lost a lot of money, or drew very erroneous conclusions about economics. They provide us with material for a valuable exercise in humility.As a scholar of the Great Depression, Bernanke should be aware of the relationship a of science and its impact on the nation’s economics. In the Jan. 3-9, 2009 issue of the British publication New Scientist, Terrence Kealey writes of Einstein’s attributing job losses to science.http://www.newscientist.com/article/mg20126884.600-essay-a-new-deal-for-the-white-house.html.In act, if we are to learn from history,the impact of Obama’s stimulus package will depend heavily on how the money is targeted. There is little doubt that infrastructure projects, especially those involved with energy distribution and light rail transportation (and not with automobile highways and bridges) will result in real gains for our economy. The other areas that will produce the best results will be in alternative energy and education. Less obvious, and requiring more faith if we ignore history, is the return we can expect from investments in basic science research. Here is where temendous innovations that will redound to unimaginable value lie. History shows us that this is where most “White Swans” abide.The last eight years have been characterized by medieval, ham-fisted interference in climate research, stem cell research and short-sighted “pragmatic approaches to research,geared to produce either quick profits or more death dealing capabilities.The 1930′s were characterized by ever inceasing investments in research and development that resulted in Nylon,Teflon, and the DC-3 aircraft, to name a few. The ability to create lasting wealth during recessionary times will depend heavily on government funded basic research. It is there that we will find answers to the problems of energy production, climate change,potable drinking water, world hunger, treatments for AIDS, cancer and many of the other plagues that haunt us now.It is critical that pork barrel spending or make work projects be rejected in favor of intelligent spending on basic research and education. This is where we have a lasting impact on our economic future

I agree with you. Here’s the “but”. The economy is now destroying jobs at a rate of 6 million jobs per annum since the shit hit the fan in September. That meanns if nothing is done, we are at risk of seeing 12 million jobs destroyed in 2009/2010. Obama plans to spend ca $800 billion in those two years to create 3 million jobs instead of 12 million destroyed. Net 15 million. $800billion /15million gives $26K/job/year. you don’t do research, development and education at that price, now do you ?Obama will need at least three times as much to achieve his goal. Can we afford it, when the institutional machine already has more than $40 trillion of liabilities hanging on every American’s shoulders ?

I agree with you. Here’s the “but”. The economy is now destroying jobs at a rate of 6 million jobs per annum since the shit hit the fan in September. That meanns if nothing is done, we are at risk of seeing 12 million jobs destroyed in 2009/2010. Obama plans to spend ca $800 billion in those two years to create 3 million jobs instead of 12 million destroyed. Net 15 million. $800billion /15million gives $26K/job/year. you don’t do research, development and education at that price, now do you ?Obama will need at least three times as much to achieve his goal. Can we afford it, when the institutional machine already has more than $40 trillion of liabilities hanging on every American’s shoulders ?I really wonder what Keynes would have said. Can the largest debtor nation in the world afford itself the largest Keynesian stimulus in the world ?Methinks this can only lead to a long and protracted period of stagflation, with high inflation(15%+), quasi zero growth, and rapid dollar depreciation for at least a decade. That’s the ONLY possible outcome. How else can you take care of the $40 trillion mega-debt ? Is there any other way ? Increasing taxes to pay back the debt ? You’d have to raise all taxes by 80% to reduce the debt to an acceptable level of 70% of GDP within 20 years. Politically impossible. Growth ? The only growth we’ve known for the last quarter century has been achieved by growing the total debt from $5 trillion to $54 trillion, of which $40 trillion instituional and $14 trillion private. So is there any other way known to man to artifically reduce that massive debt than high inflation and dollar depreciation ?

Sorry, I screwed up, I wanted to continue as a reply to your comment. Added more stuff. Let me know what you think.

Preview of coming attractions post-Iraq: Afghanistan is Stalingrad.

collaboration?…confidence and trust doesn’t seem to be working at the local (u.s.) model how does it work at a distance? (china)”WASHINGTON — In an unusually blunt letter, a group of federal scientists is complaining to the Obama transition team of widespread managerial misconduct in a division of the Food and Drug Administration…”Currently, there is an atmosphere at FDA in which the honest employee fears the dishonest employee, and not the other way around,” the scientists wrote.”http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090109/fda_corruption_090109/20090109?hub=Health15% of the food we eat in the United States, and it is increasing every year,” Acheson told USA Today. “It’s much easier if we can build the collaboration at a local level rather than trying to do it from 8,000 miles away,” he added.According to USA Today, Acheson was talking at a ribbon cutting ceremony also attended by U.S. Health and Human Services Secretary Mike Leavitt. According to USA Today, Leavitt said that—in addition to the new office with eight American employees “with expertise in food, medicine, and medical devices”—the FDA will open offices in Shanghai and Guangzhou this week; in India next month; and in Latin America, Europe, and the Middle East next year.Collaboration is a recursive process where two or more people or organizations work together toward an intersection of common goals — for example, an intellectual endeavor[1] [2] that is creative in nature[3]—by sharing knowledge, learning and building consensus. Collaboration does not require leadership and can sometimes bring better results through decentralization and egalitarianism.[4] In particular, teams that work collaboratively can obtain greater resources, recognition and reward when facing competition for finite resources.[5]wiki

ok so how about more savings AND AT THE SAME TIME a bit more consumption than currently…this would require higher salaries, however…which the capitalists would surely complain about…

picture a juggler tossing up more and more ballssooner or later one will drop but that’s okay, he goes right on juggling awayuntil he gets too tired and misses another balland so on——-things are inevitably coming downpsychology of too many people has become: save … don’t spend …many optimistic young people will forget to stop spendingbut overall, most sane people will not spend/invest us back into prosperitythis a.m. heard Suze Orman advise: worry about your job..save…don’t spendgood advice for individuals, bad for “recovery”plus, every economist (heard on TV) expects 5-6% inflationwhen we had “2%” inflation real inflation was 10%+so will “5%” inflation mean real inflation of 15-20-30%+Nouriel expects higher interest rates due to more moneyor higher interest on US debtif the economists are correct, then we’ll see more money, and more inflationwith low rates on US debtmaybe we’ll see the juggler toss inflation up a little higher, and then thehigher rate on US debt ball higher – a juggling acta stable financial world system is now a juggling actwhich is really not for real-the entire act, juggler and balls, is created by mirrors and smoke

ok fellow consumers – listen watch and learnhttp://www.youtube.com/watch?v=LPaQWQKj5I4&feature=PlayList&p=93CE1CCFB20F0810&index=7http://www.cbc.ca/marketplace/

WB, you have to read my Robin Hood post in the previous thread.

C. LakeComing up with a method to pay down debt other than inflation and dollar depreciation is a rather tall order, especially when you consider the magnitude of debt that you so accurately described. I would mean generating enough innovative, wealth-creating ideas to eventually pay down the debt. While I don’t like the odds of that happening at the moment, I can see no other way out so I must hitch my wagon to that particular star. It’s either that, or I will be forced to pull my wagon myself.

so,i was lying in bed and attempting to explain this story to my lovely, warm wife but when i got to the “lost 0″ part she told me that if i believed that i must have spent too much time swimming with the morons. she went on to tell me that those people pay their taxes,etc. with that non existent money. and suddenly i was alone on the couch with the dog passing wind beneath my nose..what say ye?.Madoff and the folly of blind faithBy Julian Delasantellis.http://www.atimes.com/atimes/Global_Economy/JL23Dj07.html.In July, 2007, Citigroup chief executive Charles “Chuck” Prince, noting how the flood of liquidity was driving asset prices to record and unsustainable highs, made this observation that may very well turn out to be the epitaph of the rise and fall of the capitalist world in this first decade of the millennium, and is equally applicable to Madoff.”When the music stops,” Prince said, “in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Probably right up until last call late in the night on December 10, up on Park Avenue, and all the places to where its alleged wealth flowed, the frenetic dancing went on and on. It’s the hangover the next day that’s the killer.But it’s not like I don’t have any good news regarding the Madoff collapse.Both the press and, undoubtedly, the federal investigators, are trying to answer two big remaining questions regarding Madoff – what was the total amount of losses, and where did the money go? Did Madoff manage to squirrel away $20 billion or $30 billion to some secretive Third World banking redoubt, whether it be Barbados, the Bahamas, Bermuda, Bimini or Basrah?Since I am fully aware that, while I’m still sleeping in Seattle, the first thing that those party animals over there at the J Edgar Hoover FBI headquarters in Washington DC do is to check Asia Times Online, I’ll first tell where all the money went – check Google Maps for the address of “Cloud Cuckoo Land”.And what was the total amount of the Madoff fraud? Not $50 billion, $75 billion or a zillion billion trillion dollars, it was exactly $00.00. The reason you can’t find the Madoff money is that it never really existed.In reality, not one of the Madoff victims are one red cent poorer today than they were on December 10. They just think they are. But in real money terms, nothing has changed. Here, like in most of the recent past’s economic circumstances that so bedevil us today, that perception translates into a powerful reality.Just like the homeowner who felt himself wealthy when he saw what the houses in his neighborhood were going for and so went out and bought a Bentley, and now pulls back on spending when he sees local house values contracting, in the Madoff affair, much like in the general economy itself, money was this strange, almost ethereal construct, not dime-store play money, and not an ever-steady and never-changing storehouse and measure of wealth, but something much more nebulous and vaporous, ever-existing and amorphous in the nether regions in between those two polar opposites.I told my wife about the Chuck Prince quote about dancing while the music plays. She told me that, when she was a teenager, dances, called “mixers”, would be organized by the local parish, and then aggressively chaperoned by the nuns and priests. If a couple were dancing too close, a chaperone would come over advising that they must “leave some room for the holy ghost”. It’s unfortunate that, in recent times, when the world capitalist system in general, and Bernie Madoff in particular, danced, so little room was left for the truth.

c,you are on it, imo.

a very cool research / general interest tool Search and access The Economist magazine from 1843 to present (free for now)

Dear Octavio,I’ll have you know that I scrolled down all the previous threads posts twice before I found it. I like your idea very much but I fear it would produce a Robespiere-like reign of terror. On second thought, maybe that’s not such a bad thing. As Gilbert and Sullivan sang: “Let the punishment fit the crime.”

Merrill Lynch and the “investment bankers” certainly were “optimistic,” leveraging Credit Default Swaps and mortgages at 40:1. Now that their optimistic and criminally reckless gamble has lost, Merrill and the rest of the “investment” bankers are on trillion dollar welfare to be worked off by ol’ Joe, while Benny inflates away the returns of Joe’s wages, social security, Medicare, pensions, savings, 401ks, children’s education fund… Dumb ol’ Joe, pay into social security with a 1975 dollar and receive back a worthless 2017.Optimism and pessimism, OR, refer to two sets of opinions and two sets of circumstances. After the masked men halt the stagecoach, force you and the other passengers to stand down on the ground, take your watch and your wallet and the USA money bags, and ride to the hills, it wouldn’t be too effective, IMO, to try to raise everyone’s spirits by relating your story of Merrill Lynch.

f,surely you are speculating. if not, that would mean you are already dead..then again, the only certainty in life is change, which can be seen as a death. the death of the moment and the birth of a new moment ad infin….so we are all dying and being reborn, on going.changing. loss of this insight results in illusion and ignorance and infinite speculation.

Wise words. We all need to be reminded of that from time to time.SWK

AMAR BHIDE should know that there’s no point in being an optimist, nor a pessimist, but simply to try to be as realist as possible.The size of the Internet bubble was orders of magnitude smaller than the size of the asset bubble that has bursted. There is just no comparison, to even suggest that its bursting would have similar effects is beyond ridiculous.Prof. Roubini is a realist, he understands and analyses the complete macro-economic and financial big picture with impecable precision, refuses the caveats of ideologies and dogmas, and the stupidity of technical analysis.Of course, those pathological optimists who can only think in terms of free-market ideology might think he is a pessimist. 2009 will prove them wrong once again, as 2008 already did.

Guest, great post. I used Bhide’s quote from the Professor’s post above (which by the way is about as stupid a line as anyone can think of) because Professor Bhide’s (or should we just refer to him as “the McKinsey Cub”) ‘shirt loosing’ remark about the tech bubble seems to refer to the long side and I thought it is ironic that I lost close to seven figures during the bubble but on the short side; courtesy of AG whose actions starting the fall of 98, including the LTCM bailout, resulted in a parabolic rise in the stock market and changed the course if history. Yours truly’s assessment of the situation at the time was that AG actions would not work and stayed short a lot longer than I should. I have learned my lesson, I no longer “fight” the market.In retrospect, and thanks to your post, I can now see that understanding the real reason behind my posting of precisely the most stupid remark in the Professor’s post was not an easy thing.

Thx. Great read.

sorry, screwed up my html tag, the comment was supposed to be :There’s a commodity index rebalancing ahead,http://ftalphaville.ft.com/blog/2009/01/05/50769/beware-commodity-index-rebalancing-ahead/

How will China deal with the US adjustment?January 9, 2009 FT By Michael Pettis

The post-1997 global balance is breaking down, and the world is lurching drunkenly to find a stable new balance. Until now, Chinese overproduction has balanced US overconsumption, leading to China’s massive trade surplus and capital account deficit. Inevitably, however, a reduction in US overconsumption, a necessary consequence of the financial crisis, must force a corresponding reduction in overproduction elsewhere, and China, like it or not, will have to bear the brunt of the adjustment. The US and Europe must design their fiscal and monetary policies in part to ease China’s adjustment, which will otherwise be extremely difficult.For most of the past 60 years US household savings rates have varied between 6 per cent and 10 per cent of gross domestic product. In the early 1990s the savings rate began declining, virtually collapsing after 1997 to well under 2 per cent of GDP. If American households rebuild balance sheets by raising household savings rates only to the historical mid-point, their savings must rise by roughly 6 per cent of US GDP. Read more

Even lemmings live in the moment after they’ve jumped off the cliff.I suggest that a little foresight helps – it’s called intrinsic value. You can start with life insurance.Best,P1AQL.

and from 1932 there is this: comments on Glass-Steagall prior to its implementation

Hi everyone! Back from my long vacation…I’d like to thank the person who previously posted this great piece:Substituting Debt for Savings and Productivehttp://www.comstockfunds.com/index.cfm?act=Newsletter.cfm&category=SpecialReport&newsletterid=1432&menugroup=HomeIMHO it’s still too optimistic though. I’d like to offer this as one of the best accountings of how we’ve gotten to where we are:The Financial Tsunami: The Financial Foundations of the American Centuryhttp://www.warandpeace.ru/en/article/view/19062/Mark

Take all of the responsible crooks in govt and the private sector and put them to work in minimum wage jobs for the next 10 years in lieu of prison. Since they are all quite intelligent, they can be quickly trained to fill these positions thus reducing the need for immigration and the high costs to small businesses. Their cheap skilled labor will add trememdous value to what’s left of our economy!

http://www.atimes.com/atimes/Global_Economy/KA08Dj02.html.The illusion of changeBy Walden Bello/…/Obama has a talent for rhetorically bridging different political discourses. He is also a “blank slate” when it comes to economics. Like US president Franklin Delano Roosevelt, he is not bound to the formulas of the ancient regime. He is a pragmatist whose key criterion is success at social management. As such, he is uniquely positioned to lead this ambitious reformist enterprise.Reveille for progressivesWhile progressives were engaged in full-scale war against neo-liberalism, reformist thinking was percolating in critical establishment circles. This thinking is now about to become policy, and progressives must work double time to engage it.It is not just a matter of moving from criticism to prescription. The challenge is to overcome the limits to the progressive political imagination imposed by the aggressiveness of the neo-liberal challenge in the 1980s combined with the collapse of the bureaucratic socialist regimes in the early 1990s. Progressives should boldly aspire once again to paradigms of social organization that unabashedly aim for equality and participatory democratic control of both the national economy and the global economy as prerequisites for collective and individual liberation.Like the old post-war Keynesian regime, GSD is about social management. In contrast, the progressive perspective is about social liberation.

January 10, 2009, 7:25 amRomer and Bernstein on stimulushttp://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdfand Krugman’s perspectivehttp://krugman.blogs.nytimes.com/2009/01/10/romer-and-bernstein-on-stimulus/”Christina Romer and Jared Bernstein have put out the official (?) Obama estimates of what the American Recovery and Reinvestment Plan would accomplish.”

Not only that, I know more about Italian cooking thanneurosurgery.

There seems to have been a very negative consensus on this blog for several months now.Knowing what you all know; can anyone come up with a (slightly-)plausible scenario whereby everything is back to *normal* 9 months from now. (F.eks; that V shaped recession people used to talk about).

lord,i hope you don’t mind if i call you that.we do not know what “normal” is. last years normal looks like insanity now so it is not viable as a projection. abnormal will become the new normal and we will have to find a way to accept that and make it work. the possibilities are many.it seems we are in that rock and a hard place conundrum and we need an epiphany and the will to follow it. institutions and their minions do not offer this so i look to the people. women and children. but then again, i don’t even know what normal is.

would it be ok to come up with a scenario where everything starts being back to *normal* within 18 months? ok it would still have to come from someone else than myself, but I thought that perhaps 9 months is a bit too little time?

I think the negative sentiment is not just in the comments on this blog, and furthermore not just on this blog but also on many sites quoted on this blog.Perhaps we need to start a positive sentiment movement? There are 2 reasons why this would not be ridiculous even if the current facts look gloomy:1. no one can foretell the future 1-2 years ahead anyway, so we can talk positive about it just the same as negative2. coming with negative descriptions about the future will just fuel a negative sentiment

In my opinion, the previous ‘normal’ consisted of a suspension of reality (ignoring common sense & responsibility in favor of greed & consumption, more or less). As long as the illusion is maintained, then you have ‘normalcy’. Once the illusion is shattered, the system that supported it can no longer function.Either a way must be found to restore the illusion (which didn’t work in the case of Humpty Dumpty), or the illusion must be allowed to shatter completely along with its supportive system, and a new system must be developed that will support the new (actual, non-illusive) reality.No matter how I look at it (and I admit, economics and finance are not remotely my forte), I don’t see a short-term recovery, whether it consists of an illusory fix or a complete system demolition and re-creation.

Merely throwing more money at our dysfunctional educational system is not going to cause any improvements. Most of our elementary and secondary schools are merely day care facilities that field sports teams and sponsor dances. Consequently, higher education is forced into having to offer extensive arrays of remedial courses, and also field sports teams. The research performed also has some major problems. I have seen this in both electrical engineering and the social sciences. How to achieve the necessary fundamental reforms is a neglected and difficult problem. It goes far beyond mere funding levels.

Not sure if this video has been posted.Financial METH labs…http://www.clipsyndicate.com/publish/video/801852/lessons_from_warren_buffett_fixing_the_economyJanet Tavakoli’s new book should open a few eyes and get the prosecutors moving.There will be NO bottom to this mess, until Worldwide credibility is re-established. The perps involved in creating this disaster must go to jail.

Send a message to President Elect Obama.Buy Tavakoli’s book, Dear Mr. Buffet, read it, write your message to the President on the cover, and mail it to the White House.A few million of these books laying on the White House steps may send a powerful message.

m,found it.

Is the bulk of this post your own compilation of information, or is it a copy/pasted article? If it’s the latter, do you have a link to it? I did a few google searches, but found nothing. Thanks..

Maybe the official market price of gold is not jumping simply because deflation is lurking big time.

Interesting.Maybe I can’t think that big? You mean because foreigners hold the notes on so much of our debt? Why wouldn’t they have to take the same losses as any other note holder? Or because they would confiscate other US assets? Or is it the Treasury Notes you are thinking about.I know no one knows the whole story or can see the whole picture so what am I missing.

Here’s the counter take to the Keynes School from the Austrian School ~“How This Happened” by Llewellyn H. Rockwell, Jr.For years, many of us puzzled about how something so stupid and destructive as the New Deal could have happened. The stock market crashed because it was over-inflated. That’s nothing new. History is filled with credit-filled bubbles that pop. Resources are reallocated to reflect economic reality and we move on.The New Deal was different. It actually began under Hoover, who initiated new spending programs and jobs programs, and tried to inflate the money supply and bail out the banks. He was blasted by FDR for his big government policies, and FDR won the election. Once in power, FDR went nuts, instituting a program of central planning that combined features of the Soviet and Fascist models.It was one idiotic program after another. They tried to raise wages when they should have fallen. They tried to save banks that should have collapsed. They destroyed resources when they were most needed. They encouraged spending when people should have been saving. They smashed the dollar at a time when it needed to be shored up. They cartelized business when competition was most necessary.What were the results? Economic growth went nowhere between 1933 and 1939, with real gross domestic product per adult still 27 percent below trend at the end. Per capita GDP was lower in 1939 than in 1929. Unemployment was at 17.2 percent in 1939. This was actually higher than it was in 1931. This is despite 100 percent increases in monetary expansion. Taxes had tripled. Employing people became ever more expensive due to unions and national income guarantees.Every time the economy would bottom out and genuine recovery would begin, policy would knock it back down again. Other seeming upturns were entirely artificial: make work instead of real work, for example. Regimentation was everywhere, so that business couldn’t compete, farmers were destroying livestock and crops on command, and dissidents were being ferreted out through police-state tactics.In other words, the whole project was a massive dud. It turned what might have been a short downturn into a decade-long national calamity, the biggest cost of which was freedom itself. And then as a cover-up for the calamity, there was war. At last FDR found some use for those unemployed workers: send them to kill and be killed at taxpayer expense. As for wartime price controls and nationalization, it was the New Deal by other means.Was it some sort of national insanity?No, it was a power grab, and the current political moment shows precisely how this happens. A small group of elites, cut off from the broader reality, decide to finagle the system to serve themselves and their friends in the short term while forgetting the big picture and the long term…Now that we are living amidst this, it is easier to come to terms with how the New Deal came about. It makes those in the know feel completely helpless. We look at what is happening to bank reserves and we know what is coming. When the economy recovers – even if only cosmetically – and lending starts again, the internal dynamic of the fractional-reserve system will come into operation. We could be facing inflation at 10 percent or 20 percent or even much higher, depending on how spending psychology plays itself out.Then we listen to speeches by the president-elect, who is going on about the great stimulus package he is going to push through Congress. It’s like listening to one quack doctor propose bleeding the patient even as the last quack doctor who bled the patient is packing his bags to leave. You want to shout: is there a real doctor in the house? But it seems like no one is listening…Meanwhile, the Obama clique hopes to recreate the FDR disaster by following his plan detail by detail, even though the plan was stupid and didn’t work.To watch all this happening is like watching a slow-moving train headed over a cliff. The problem is that the engineers have earplugs in and blinders on.Will this go on for ten years like the last time? Will it end in World War III, as if following some historical script? Is it possible that we will go the way of Germany in the 1920s, straight into the abyss of hyperinflation and into the hands of a ghastly dictator? It is unwise to rule it out.And yet, I’m not that pessimistic. It is extremely crucial to realize that there is a difference this time. In the 1930s, technological limits put severe restrictions on information delivery. Government propaganda easily dominated the culture. All of that has changed. Despite everything, people simply do not trust the government as they once did. Obama will enjoy a short honeymoon but it will be over by summer.What is missing today so far is the critical thing: a culture-wide love of liberty that is capable of intimidating and beating back the rogue regime. The conditions are right for this to actually happen, and to reverse the direction of politics today.But it will require all our efforts. Fortunately everyone has the opportunity today to make a difference…Llewellyn H. Rockwell, Jr is founder and president of the Ludwig von Mises Institute.http://www.lewrockwell.com/rockwell/how-this-happened.html

What if there was voluntary National Public Service for anybody?As long as you were performing your assigned job, you’d get a voucher for housing and meals, and a uniform (clothing)to wear. Put people up in foreclosed/excess homes, or use vouchers to pay for rent. Food vouchers could work at any grocery or convenience store or even restaurants.Cities, towns, states and the Federal Government could post Work Projects Available (WPA!)and select from the ranks of available volunteers. Extra help for schools, hospitals, parks, community gardens & farms…lots of services could be done by volunteers.For every year you volunteer, you get a one year scholarship at any community/state college or certified vocational school. Four years service = four years education.People with skills could be utilized appropriately. People without skills could go to “boot camp” for a couple of months so they can be sorted for apptitude/ability, much like what presently happens in the military.Once your voluntary service was over, it would be hoped that employers would give hiring preference to you, as often happens to those who have served in the military.Workers could also be rewarded for their service with future tax credits, US savings bonds, etc, if they didn’t want the educational benefit.This would occupy a lot of people locally, in their hometowns, working on projects that would benefit all, that cannot presently be paid for without printing or borrowing trillions more dollars.What do you think?

e.roubini seems to see a big chunk of the picture and he is on board with reflation with stipulations that are being avoided, triage for one. but this may take time and timing as it might be very ugly or politically impossible but economically necessary.?.i was thinking confiscation due to bargains created by asset devaluation in dollars. fiat currencies?part of the deflationary nightmare, i suspect, is the possibility of national fire sale. parity coordination would offer protection? how can it be accomplished, i don’t know..also reduction in asset value would make for tremendous bargains to those foreign holders of petro and trade imbalance dollars..also it would significantly strengthen those petro etc. dollars, accentuating bargain hunting. scrap all english language text book time? is it true that most of m1 is outside the national borders?.check marks post below and the financial meth lab video below. the foul smelling excrement is intersecting the trajectory of the oscillating mechanical device. this is one overwhelming saturday for me.

“Justice” is a code word used by lefty tyrant wannabes who yell a lot. “Geez” is slang for Jesus. Pilate asked “What is truth?” Jesus said, “If you will know the truth, the truth will set you free.” The chance of cleaning up the “perps” in the US House of Representatives is about as likely as reblowing up Barney Frank’s housing bubble.

I can only hope that it’s finally a good time to be a farmer! Anybody who actually PRODUCES more than they CONSUME should be a national hero.

Why can’t we do away with mortgages and any lending in this country?A home should be worth what supply and demand allows it to be worth…. not based on how much one can borrow.The price of college should be based on supply and demand….not based on how much one can borrow.Car dealers tell customers, “we do not want your cash…we want your financing”When will sheople in USA get this? How isn’t anyone seeing this?

Chignos, I couldn’t agree more.One of the saddest days of my life was when I finally, and at great expense, learned that all those annoying old chestnuts were true.No free lunches, no even breaks for suckers, damned whether you do or don’t.Tuition is expensive at the school of hard knocks.At least I was young enough to benefit greatly from the lesson.

C. Lake … great posts. Your thoughts are fresh and original and right on in my opinion. Have followed Roubini for a long time and almost always think he’s right on. Lately I feel he’s less pessimistic than he should be, like he’s trying to kiss Obama’s ass or something. No way he really thinks we only have 20% downside on the S&P right now. Not a chance in hell. But I do think his handlers are keeping him put together a little better now for interviews, he looked like a homeless person with a mic for a couple months there. Bottom line, houses are still way overpriced and need to drop 20% and the gov’t should step out of the way and let it happen. Keep propping up the financial institutions so system doesn’t collapse, but let the economic organism constrict like it needs to, but in an orderly way. Let the autos go bankrupt in March and come out consolidated as one smaller company that continues to get crushed by Toyota and Honda until everyone forgets about it completely. The big trick down the road will be how to eliminate this massive debt we have without printing money. About the only option I’ve heard that makes sense is to place a 15 year moratorium on wealth transfer at death, 100% goes to the gov’t to pay off the debt that that generation is responsible for. And in the future, enact legislation that restricts the ability of any American to amass debt beyond a fixed % of their income and net worth. Granted, none of these have a snowballs chance as they run contrary to the self interests of those pulling the strings of our elected officials. Perhaps after we sell CA and TX on ebay in 2012 to simply roll our debt over we’ll have the stomach to explore sustained accountability and control. Until then I fear it will be a painful ride for many who have come to define themselves by the things they neither need nor can afford. If you’re the manager of the sovereign wealth fund that buys TX and are looking to create a society with integrity and old fashioned values make sure to post it here. My family and I are in.

BTW, just saw a ticker fly by APOL 85 and change. Oh boy! Am I glad I covered that puppy at a small gain (close to 2%):-)

I just don’t see how it’s possible that the S&P500 bottoms at a higher level than the 450-550 range.Earnings for 2008 are going to be in the 50$+-Earnings for 2009 will be very similar : on the plus side, less inventories and less labour costs, on the minus side lower prices, less demand, others stable. SO I think it will balance out and we should take a base case for 2009 equal to 2008 earnings. That’s the only sensible thing to do with so much uncertainty. Currently the $83 estimates from the top down analysts are simply not credible. Not after Intel, Walmart, Jobs destruction, etc of this week.P/E in this economic climate ? Historically deep recession, even if stimulus work and ends at the end of 2009 (best case) will be followed with a long period of stagflation because of the enormity of the total debt which has obiously reached its Minsky moment, so quasi no growth. Debt will have to decrease. You don’t solve a $54 trillion deleveraging problem in a year, nor in two, nor in three, it will take a decade. This will also serve as much needed transition time to a more resilient networked economy. SO my best guess is in the 6 to 12 range, but with a more likely 9 to 11.Multiply the two, and I really don’t see how anything above the range above mentionned isn’t overpriced. Until then, it will be Sell, no Long positions and high volatility. It might take 6 months, 12 months, 18 months, I don’t care, but it will happen.

LEW : a lot of ideology, very little evidence

Painter, what’s an erudite guy like you doing on a crummy blog like this? We are just a bunch of old men and few ladies trying to preserve our savings by ranting against a rigged system.

if lending would stop it would indeed reduce prices…but is anyone willing to deal with such a situation now…Besides you should ask whether those in power in USA get it…the sheeple do not really have much power so even if they ‘got it’, it would not make much difference.

a positive sentiment movement does not mean that everything we write is positive. The writing can also be neutral, that should be just fine. Or a little bit negative. But it should not be extremely gloomy…it is pointless to claim to see a total disaster in the future when we cannot really see the future at all.It is sort of like the striving (in America and some other western countries) to ‘be happy’ and then people start popping pills because they seem to think that they are not happy unless they are practically euphoric. But on one hand the human brain cannot continually feel any one single emotion, it would drain the person emotionally. On another hand people should strive for being content, satisfied, rather than happy. Happyness has its place in life but just as sadness that place should not last very long. People should look toward those things in life that help them to be content and satisfied. Changing ones expectations is one thing that helps with this; changing how one looks at the rest of ones life is another.

one of the more prolific and insightful contributors/posters on other blogs, NDK, has started their ownhere is the link and an excerpt from their first offering:The US Can’t Unilaterally Inflate

Many people are either worried that all the excessive money creation and bailouts will create inflation, or hope that the Fed will create the necessary inflation to gradually reduce the burden debtors face.There is little chance either will come to pass right now.The US can’t create or sustain moderate inflation without a little help from its friends. This insight falls more into the category of “accounting identity” than “brilliant reasoning”. Read more from NDKNotepad.blogspot.com

Gents and Ma’ams,Been reading numerous posts in the blogosphere over the past few months, and have become part of the not so happy reading crowd. Eventually this will all play out with a little thrift from our part. Been thinking off course ofcourse, and contemplating this world-wide debt issue we have.What would be the mathematical consequences of the worldwide doubling of all wages, prices (including commodities) rents and interest payments on debt, savings and assets of all sorts, while maintaining principals and current valuations of asset classes (RE) which have debt attached ? In essence a worldwide inflation of 100% instantly. Cash and asset valuations would halve, but the doubled interest payments on this debt, cash or bonds (which is the primary motive for investments anyway) would make up for the write-off in assets and principals, which is going to happen regardless.Debtholders would benefit from the artifially reduced principals, and asset holders would still receive the same return on investment after the adjustment, albeit that their assets would have halved in value….and ofcourse would only maintain their value if any changes would be reinvested in the same asset class.No economist whatsoever here, but just playing with a thought….it’s all just relativity, isn’t it ?Bassie

I believe that has been the plan all along, just going slower than TPTB had intended.

Anyone ever see the film Zabriski Point? The final scene is when the ultra bourgeois home is blown up sky high (with no one in it). The slow motion filmic ballet of tv sets, couches, faucets, stuff, clothing, cars, tables, lamps is nothing but a metaphor for the ragged clowns we are who cling to plastic, metal, granite tops and furs. Perhaps with our wealth and incredible intelligence we could devise a way out of this mess that includes feeding and clothing and caring for our fellow travelers has more value than Escalades and Chanel originals.

Abomination of DesolationThe ObamaNation leads the way. What a furthering of the existing disaster. I am of the opinion that it would be better to just let the debt flush out of the system – as mentioned just above by PTM. This business of bail, always bail is a real disaster in the long run. There are so many degrees of freedom in the global economy – it is such a non-linear system – who can possibly predict what all these new interventions are going to unleash?

Is it true that less than 1 percent of the population owns more than 99 percent of the wealth? Can anyone comment on the drain on our economy of off shore tax shelters for the priveleged corporations?Is there anyone out there who knows what sort of mad weaponry and spy technology is being made today with our tax money? How many atom bombs and weapons do we really need? Is this weaponry making us safer? What is the war machines percentage of our national budget? Is it over 50 percent? How much money is spent on biological weapons and chemical death machines? What is the purpose of these biological killers? Wouldnt it be better to funnel that money into soup kitchens and housing and health care for the poorest amongst us? Would anyone besides myself like to see a moratorium on weapons construction for a few years? Anyone out there who says enough vats of bio weapons and tactical nuclear weapons has already been built that instead of death perhaps investing in heart beats and breathing would reap better returns?

What makes you think it’d stop at 10%+ ? Any evidence ?Unemployment is now growing at the rate of 4% per annum since the shit hit the fan early September and Lehman was left to go bankrupt (another genius idea of Laissez-faire). So why not 11% by end 2009, 15% end 2010, 19% end 2011…The only similar situation we know of when an asset bubble of such proportions deflated (and this one is even bigger in relation to GDP) was in 1929.Unemployment was at 3% back then.It didn’t stop growing at 10%+ (no, magic didn’t work back then, neither crossing fingers) but at 25% when the new FDR administration actually started doing something about it.What makes you think it’s different now ?

Virtually every store in our country is stocked with goods from China almost exclusively. This includes upscale stores such as Williams-Sonoma. Since the Baltic Dry Index is down so catastrophically, this means the stores haven’t been getting as much shipments from China.

In 2004, the wealthiest 25% of US households owned 87% ($43.6 trillion) of the country’s wealth, while the bottom quartile held no net wealth at all. [2] The middle 50% of the country held 13% or $6.5 trillion of the total household net wealth.http://en.wikipedia.org/wiki/Wealth_in_the_United_States

It wasn’t me who said that, my good friend painter – honest, it wasn’t me.(IMO, that came from a mind far superior to my own.)

This picture is misleading, as it doesn’t account for the $15 trillion of Federal/state/municipal debt + $25 trillion of unfunded liabilities.If you’d substract these from each and every household (why wouldn’t you, who is going to assume these liabilities but each and every American household in the future ?), you’d find that the real net worth of American households is not $57 trillion, but $17 trillion, and almost entirely owned by the top 10% of the population.

Since you can’t define “justice” (except with with a bunch of questions, which is no definition at all), my answer to you is yes that is all it means to me–just a code word used by left wing wannabe tyrants. God is not mocked. The older I get the more I am convinced. Pay attention to the consequences of all this ridiculous debt binge, especially the unintended ones, and remember: what goes around comes around.

They are planning to close 117 of their stores over the next few years, but otherwise are still in business.

Chck ECRI news:http://www.businesscycle.com/news/WLI growth rate still in dismal territory and it will go down next week due to lower stock prices and th jobs report. FIG is at a 50 year low.

It’s a Ponzi, Painter. Obama isn’t in the Oval just for 2 weeks to give lots of money and then ride out. Whatever the Obama plan may be with his huge stimulus package fix-all, from hand-out day onward the economy belongs to him in terms of fixing it. If he were able just to turn Tim the Fox loose in spreading the manna all over the landscape and fix it, it’d be just fine: in 2 weeks he could go back to Chicago. But the truth is, he’s going to have to sit there while the unions poke their fingers in his face and ask, What are you going to do about our pension funds? We walked the precincts for you!Obama’s got a big problem on his hands; a Ponzi. And the debt is going deeper and deeper, first impoverishing the people, then borrowing from the children, and now from the grandchildren, at usury costs.The bottom line is that Obama is probably not going to be as socialistic as the weekenders here think. He can’t! There isn’t enough value to cover the Ponzi. What’s the limit after he spends 300% of the GNP, without revolution from the ‘painters” from whom he’s taking the “stimulus.” There’s a line that a “representative” government can’t cross: a point when the public begins to balk — tired of languishing in a perpetual depression with mass unemployment in vital capital goods and service industries, lingering on in chronic disease.The government either backs off and lets the market adjustment process do its work, or neither you nor I will ever work in this economy again as free individuals. No government stimulus package, no artificial credit expansion, containing stolen wealth tribute can make it happen. The economy has to grow back the value based on real savings and investment in expanding technology and production.

Bloomberg’s Top Editors’ Video Pick: “Orlando Says Rubin May Be Leaving Citi for Obama Team.”http://www.bloomberg.com/index.html?Intro=intro3

c,” what goes around comes around”. is that your definition of justice?and i ask if something went around but did not then come around would that be injustice?

Speculation, IMO. He’s leaving Citi because he looks like a convict.

we’ll try that link again The Rubin connection

What makes you think it can be prevented?

This is partly why we got into this mess. The way data is manipulated to prove a portion of a truth that only shows one small piece of a much bigger picture. That way you can’t call the presenter a lair. Smart, but Orwellian manipulation of data has been going on for a couple decades. The ones that benefit are those who control the wealth. Inflation is an insidious tax on production to benefit those who control the money and assets. They do not want people to see that they own most of the assets already.This is also why the emphasis is on bail outs. Because those who really have the most to lose are those with the most. Some will probably even be wiped out before the re-balancing is done as I think at this point of debt, that there is really nothing positive they can accomplish with lots more debt transferred to the workers.

e,the fed has expertly orchestrated a globalist structure that has rendered us part of their walking dead. that is our problem as we allowed it..we crawled into the crack, hard place, location willingly while microwaving jello and watching reruns of i love lucy while the bently with a broken grill stands on the front lawn as a symbol of the future of white trash. but i wax poetic.but not too poetic as i have seen these things and laughed because it is not only sad but is hilarious.yes, you are correct, these fool, the fed and the banks, should see no more credit or money as they have proved their incompetence going on 100 years. i meant to say the collapse should be orderly so as when the financial system collapses, self imposed, it does not destroy the country, if that is possible.http://www.economist.com/finance/displaystory.cfm?story_id=11639442.what is the deal with HOT MONEY? and does the fed just print this stuff? also in iraq. ?.http://online.wsj.com/article/SB118736585456901047.html.the minsky point.

More questions, questions.I’ll give you an example of “what goes around comes around.” No sane person would use taxpayer money to buy votes. That’s exactly what Barney Frank’s FNMA is. But it’s even worse than that. It’s financed by deficit spending. Most people are so irritated by the mess–70-90% of the people were against the Wall Street bailout.Now follow the money. All of a sudden everyone’s asking, “where’s my bailout?”Barney Frank wants money, power, and adulation. But the house of cards is collapsing, and not only is there no power and no money, he can’t get no respect (what a revolting development!). His little left wing tyrant scheme to buy votes “to rectify social injustice,” has resulted in single digit approval ratings. Barney appears depressed and unhappy.Achieving Justice is beyond our ability; however, what goes around comes around.

Leading economist fears decade of weakness in US

One of the world’s leading economists has given warning that the United States is facing a decade of financial misery, with the number of unemployed Americans set to continue to rise for years.Robert Shiller, Professor of Economics at Yale University, who predicted the end of the internet bubble seven years ago, said: “We could have many years of a very weak economy. Big recessions are followed by years of weakness and typically unemployment keeps rising.“To say that this will last years is not a dramatic statement. What is happening now is much worse than 1990. We could be facing a decade of real weakness.“This is no ordinary recession. There are signs that people see this as a different story. People are talking about a depression, something that we haven’t seen previously.” Read More

Citigroup May Book $10 Billion Gain From Morgan Stanley Deallinktaxpayers to be repaid once deal closesya right

MoG,I responded to a lengthy numbered post of yours back around 12/14, but then was away from 12/19 until a short time ago. I never saw where you responded–can you direct me to your response, perhaps a date, so that I can search through previous comments?Here was my post:—————Well, I admit that it was a bit beyond my attention span (especially given that my cat appears to have had another stroke a short time ago, and my son informs me that it’s dinner time).The points that I was going to make were as follows:1. Even if everyone who frequents this board were to respond to your post in agreement, how would that help to further your cause?2. How do you propose that these ideas be implemented? I mean, specifically–not just “pay needs to be equal”, but “a series of pay scales would be developed in terms of all currencies, including straight-across trading, like milk for butter”. I mean, I guess my brain simply isn’t sophisticated enough to be able to envision this sort of thing in this day & age. I appreciate philosophy, but you seem to be frustrated that nobody appears willing to translate your ideas into a working real-life model, and I don’t know that it’s so much that people aren’t willing, as that they cannot conceive how to achieve such a thing (especially when few others, if any, are on board).3. I was once married to someone who felt that everything was his due, that he was entitled to whatever anyone else had, regardless of the amount of or lack of work/effort he had put into achieving the same results in his own life. He despised work, he only liked others for what they were willing to give to him or do for him, and as far as he was concerned, everything ‘bad’ that ever happened to him was the fault of other people. Nothing was ever his fault. Pay justice is not going to make much of a difference to people like him. Is that to say we shouldn’t try? No. Only that pay justice is not the one & only key to happiness, although it certainly would go a long ways towards it.Thanks for posting, though. You have a lot of well-thought-out points, and I will be coming back again to read them in more depth when I have more time to devote.By Guest on 2008-12-14 20:10:23

I remember your post, Guest, and remember writing a reply, but don’t remember if i finished and posted it – maybe not. (it may have got very long, as you hit on several points that need illuminating.) Give me some time to rummage around in some jumbly documents and find it…or to try to rewrite.

This kind of ‘packing the deal’ has been around for decades. I remember buying a portable CD player as far back as 1980 and they started pushing that fancy earphone to go along. The difference today, especially with flat panel TV is – the manufacturers and industry technical organizations deliberately designed their products to be incomplete, inadequate, but has tons of ‘standardized’ connectors to accept add-ons to make them complete.The biggest ripoff example is the HDMI cable which sells for a whopping $150 or more for a few feet. The cable itself is simple enough (probably cost a mere $1.50 to make by automated machines, but designed to be impossible to make by consumers (unlike RCA audio and various video cables). The TV industry refused to accept an existing cable that has been connecting very high-speed data extremely well – your RJ45 local area network cable (Ethernet). The RJ45, running at 1 Gbps, far exceeds HDTV requirements. Instead the flat panel makers created their own profit baby, the HDMI cable, and made it fabricateable only by fancy machinery and only under license with fat royalty payment. Thus we have this obscene ‘$150 for 8 feet’ super ripoff. Oh yes, the RJ45 LAN cable sells for $1/ft and anybody can make one with a simple crimping tool.

you speak in riddlesyes I think Minsky was rightand I too hope, pray, that in the dawning years of the Age of Aquarius we will finally be enlightened!

Very good post. I used to argue political points with passion. Then one day for kicks I decided to just give in and consent to whatever the opposition wanted….and you know what happened? Absolutely nothing. The world did not end. The sky did not fall. Economic injustice still reigns supreme.That was years ago. Now I’m older and nothing’s changed. We can’t seem to cleanse the human genome of murderers despite eons of the death penalty. We still have the same percentage of the population below the poverty line despite spending trillions on the general welfare. And now our fiat currency is about to be worth nothing……or at least, not what it’s cracked up to be.None of this surprises the reader of history; it’s always been this way. Jesus said, “You will always have the poor, but you will not always have me.” Mother of God blogs all the moral high ground, but misses a closer point.

Interesting, My wife tells me that they have expanded the mac-n-cheese/raman noodles section of the grocery store to a full isle!I wander what they took out?

Anybody else who would pretty please either address the questions I asked above or else present *reason* why economic justice is NOT what the solution to this mess is all about?I’m not asking for money. Is it too much to ask for some honesty and seriousness and thoughtfulness, when the stakes are so very high?Am I the only one uninterested and unwilling to go back to normal, when normal is a wealthpower inequity/injustice factor in the billions?

money burner … you seem to be holding on a little too tight. And the anger you have is misplaced. That money you have there isn’t going to be worth crap when our gov’t prints an extra $50T to bail itself out over the next two decades. I don’t like it any more than you do. There are those of us who have worked, saved, and built … and those who have sat back, borrowed, and lived far beyond their means. Sounds like you are in the first camp as well. If only the majority of our country and its leaders were.But the last I checked we have all decided to stick around and call this place our home. So its problems are our problems and even though we had no part in creating it the mess is in our lap. Next week when I file for my CA tax refund I don’t expect to see the $10K they owe me for a couple years since our state, like the federal gov’t, hasn’t the ability to control its spending and as a result has run out of cash. I don’t blame any specific group, I blame all of them. It’s not a policy problem, it’s a psychology issue. The gov’t sets laws that limit the federal deficit but then change the laws whenever it needs more money. Just like the regulations on GMAC to become a bank, if it comes up short, we’ll just change the rules. The people are the problem, and they suck because the majority of our country lives the same way and votes to keep it going and holds no one accountable. Don’t count on that changing until we’re forced to. Just like an out of control child, our country needs discipline, and it will be our creditors who eventually cut us off and force it upon us. The sooner the better in my opinion.So about our children. Would love to hear what thoughts you have to avoid the calamity that is being laid at their feet???? Back in the 40′s they raised the tax on the rich to 80% to climb out of the same type of hole … yep, you’d think it would take a ski mask to pull that off right? Don’t hold your breath. When the gov’t can no longer borrow from other countries, it only has two options: either more heavily tax those people who have money or print more money, either way the people with money like you and me or our children are the ones most hosed. It’s 100% unavoidable. Outrageous? Yeah, the Du Pont and J.P. Morgan families thought so too, even tried to get a coupe going to oust the president. http://www.hyperhistory.com/online_n2/connections_n2/great_depression.htmlDoesn’t mean I like it, not for a second. But also not about to move out or advocate violence. At the end of the day we just have to reset our expectations that this country isn’t as great as we may have thought it was and continue to do our best to educate, protect, and love our children and enjoy life as much as possible. And to blow off steam we can continue to fax our representatives in Congress or post to boards like this … both of which have zero chance of changing things.

Justice? Sounds good but how are you going to get it? Planning to start a revolution just by yourself? Changing the system that much as you are talking about would require a large amount of people working together for a long while. And these people would need to be able to put effective pressure on those who have the power. How are you planning to accomplish this?

Agreed. If guys like Rubin and Paulson have a lick of sense they’ll retire from public view for a good long time. What good could Rubin possibly do Obama?

nice, thank you

Yeah, but this was food too – canned peas, peanut butter, packaged bread. These dont come from China.Just an observation.

Thank you serious thanks for responding, subgenius, guest, and jason b. Am at work answering all of you, in addition to answering other guest from above. back soon as can. (have read the good Wallerstein, subg – thanks and will have comment – i still think it quite possible to save capitalism by marrying it to justice)quickly: Pay justice is: equal pay for equal sacrifice, pay only for what creates wealth, no pay for non-work things since only work creates the wealth in the first place.Good morning, everyone – from a good old-fashioned blizzard in Iowa this morning!

Sure, it’s hypothetical. Most of that net worth is not in tangible assets but in financial paper (or nowadays, bytes of data). Now obviously that “paper” is supposed to represent real worth (eg future cash flows of businesses, etc…) but this crisis shows more than anything else that those estimates aren’t that resilient. So when we say $XX trillion or whatever, it could be worth much less within 6 months. Having said this you do need to make transparent realistic estimates AT TIME T, otherwise nobody knows where we are going. However people shouldn’t fool themselves and realise that, as you say rightfully, it’s a hypothetical value. When I said “real”, I meant “real” compared to those estimates that do not include our Government’s debt or unfunded liabilities, which are really completely “fake” illusions of mega-surpluses.

One can’t help to notice that the US has reached the tipping point, where fewer than 50% actually pay income taxes and the majority know that they have the power to take as they please. You know how this is going to play out in the next few years, with higher taxes on the those stupid enough to still be paying them and a desperate Fed creating money to fill the remaining gaps.Citigroup saw the light, which is why they now support cram-downs. Larry Flynt and his ilk may only be making a cynical play, but it is emblemmatic of where things are headed.It may take a few decades to play out, but the American era has, unfortunately for the world, run its course.

Autoworkers hold protesthttp://www.freep.com/article/20090112/BUSINESS03/901120364…The workers and retirees are fighting mandatory wage and benefit concessions that came attached to a $17.4-billion auto industry loan from the federal government….Rally organizer Wendy Thompson, retired former president of UAW Local 235, said the workers staged the peaceful protest on the first news media day of the Detroit auto show because the rank and file feel left out.”They’ve been demonized in this,” she said.Frank Warren, 49, who works for General Motors Powertrain in Warren, said he’s angry that people think autoworkers make $72 an hour and need a pay cut.”I think that’s been promoted by elected individuals to destroy the union,” said Warren, who figures he makes $35 an hour including benefits….What is especially sad about this is the typical US-style bullshit to include every conceivable benefit in a calculation and then make a statement saying “Autoworkers make N dollars”. That sort of statements, by the way, show how economists are. In America, at least. The dude quoted in the article is quoted as “figuring” that he makes $35 an hour including benefits. Well it is obvious that he would not be able to give an exact amount on that, as how often do you really need to calculate the monetary cost of your benefits? In case you are planning to emigrate to America, then you would have to.But in any case it is idiotic to make statements such as “autoworkers make N dollars” – with the sort of calculations that the Auto manufacturers use – and then imply that they can afford a salary cut. The reason this is idiotic (and it is sad that this even needs to be explained) is that the workers TAKE-HOME-PAY IS NOT THE INDICATED AMOUNT. It is the take-home-pay that should be used to determine how much a person can afford or not afford. In the case of above dude, his take-home-pay could be something like $20/hour (this ignores the cost of the benefits, of course).

Looking at the extreme globalocal emergency we’re in, if I had any money I was needing to protect, I’d invest in a boatload of John Jameson and Sons plus a boxcar of good Kentucky bourbon. Best combination barter item plus antiseptic i can think of…and I’m not joking.

As far as the right to bear arms. I lived in Colorado for 6 years. Unless in a city that specifically prohibits it, everyone has the right to bear arms as long as it is worn in plane sight. In rural Colorado, most men a had a gun on their hip. In the grocery store, in line at the bank, at a resturant. People were very polite. Crime was unthinkable in that environment.

In fact with this in mind, USA is coming to an important point in its life with a populace that is growing weary of existing wars and, at the same time, an inability to afford further conventional conflicts. How does this tie with the seeming need to feed its populace the idea of governmental goodness and superior morality…

Bank CEO Requests No Bonushttp://www.theonion.com/content/amvo/bank_ceo_requests_no_bonus

Ok, I’ll try :1. Is justice/injustice important, do you think? How important? – YES, very important2. How relevant to people’s quality of life is justice/injustice? Is it vital? – Yes, VITAL3. Are our lives happiest when we feel we enjoy maximum justice? – Necessary, but not sufficient, for happiness4. How unhappy does it make us, to feel we have not received justice – by what factor or percentage is our happiness and quality of life reduced when an injustice is done to us? – Depends on the level of the injustice, in some cases it can lead to 100% reduction in quality of life or happiness5. And what will people do about it? Can we see simple examples in roadrage? Is that someone retaliating injustice, either perceived or real? – very subjective, depends on the person, propensity to violence and risk taking vary greatly amongst humans. Two extremes : some people are non violent and unwilling to take risks, others will reply with violence and will be willing to take immense risks. Retaliation to injustice will depend on the level of injustice (subjective) and the person’s risk/violence profile.6. Is injustice injury – does it injure the person who suffered the injustice? – Yes7. Do people just lie down like doormats and receive a perceptible injustice like a punch in the nose from an unprovoked stranger, and it doesn’t enter their mind to retaliate the injustice, the injury? – cf answer to 5.8. Can you think of one example of an injustice done to a person that leaves the person unaffected – without the desire to right the injustice? – No, but the desire to right the injustice and the way to respond will vary greatly depending on the injustice and each person’s character

A must read from Yves at NCWhy So Little Self-Recrimination Among Economists?

Why is it that economics is a Teflon discipline, seemingly unable to admit or recognize its errors?Economic policies in the US and most advanced economies are to a significant degree devised by economists. They also serve as policy advocates, and are regularly quoted in the business and political media and contribute regularly to op-ed pages.We have just witnessed them make a massive failure in diagnosis. Despite the fact that there was rampant evidence of trouble on various fronts – a housing bubble in many countries (the Economist had a major story on it in June 2005 and as readers well know, prices rose at an accelerating pace), rising levels of consumer debt, stagnant average worker wages, lack of corporate investment, a gaping US trade deficit, insanely low spreads for risky credits – the authorities took the “everything is for the best in this best of all possible worlds” posture until Read More

And on offshoring and tax heavens, did you read my comment 2009-01-12/03:49:07 just above ?Have read various articles from David Cay Johnston. I’m in agreement with most of his views on tax evasion and offshore accounts. Last I remember, he suggested to give them a few years to repatriate funds, I think this should be a matter of months.This should be priority #1 right now, get the funds back, have them pay the just taxes, and help our economy in dire needs of liquidity. Before it’s too late and the whole machine implodes.

If everyone is so very polite and crime is unthinkable, why are they carrying guns?

Our old canary in the coalmine (Countrywide) is singing again, this time dragging down Bank of America:Bank of America may have cumulative losses of $165 billion between 2008 and 2011, Horowitz said in a note today. “So far about 33 percent have been taken either through loan loss provision or purchase accounting marks,” he said.Countrywide LossesAbout a third of the expected losses, or $57 billion, are likely from credit-card lending, with about $29 billion from home loans made by Countrywide Financial Corp., Horowitz wrote. Bank of America became the largest U.S. home lender with its acquisition last year of Countrywide.http://www.bloomberg.com/apps/news?pid=20601087&sid=aECyuafHGx_s&refer=home

wyes and freedom is at the core of life itself and the human self. nothing animated is conceivable without it and it will never be extinguished or denied. i don’t care who says otherwise.you can call it by any name but it is what it is and you can’t lose it like money, or a watch, or even a memory. it is like a weed with deep and undetectable roots and hardly needs water or sunlight.thank you.

Many ask that question. The real point is the impossibility of trying to do it. Unchecked deflation in the 21st century would look a lot different than the 1930′s – society has changed so much since then. I think people look at the possible consequences, such as interrupted energy supplies, unclean water, lawlessness and shantytowns, etc, and react with fear.What many advocate is a managed process whereby we allow deflation, but in a way that protects these basic services and critical credit. The government’s resources, however, are directed toward the balancing act, not cushioning the deflation collapse. Hence, they increase the danger of an unchecked collapse.

Bank of England to get money-printing secrecyReform Plan Raises Fears of Bank secrecyBy Edmund ConwayThe Telegraph, LondonSaturday, January 10, 2009http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4214232/…The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.The Government is set to throw out the 165-year-old law that obliges the Bank to publish a weekly account of its balance sheet — a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel’s Government in 1844 that originally granted the Bank the sole right to print UK money.The ostensible reason for the reform, which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy, is to allow the Bank more power to overhaul troubled financial institutions in the future, under its Special Resolution Authority.However, some have warned that it means “there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses.”It comes after the Bank’s Monetary Policy Committee cut interest rates by half a percentage point, leaving them at the lowest level since the bank’s foundation in 1694.With the Bank rate now at 1.5 percent, most economists suspect that the Government and Bank will soon be forced to start quantitative easing — directly increasing the quantity of money in the economy — in a drastic attempt to prevent a recession of unprecedented depth.Although the amount of easing is likely to be limited, news of this increased secrecy will spark comparisons with Weimar Germany and Zimbabwe, where uncontrolled use of the central banks’ printing presses ultimately caused hyperinflation.The Bank said it will still publish details of its balance sheet, but, significantly, the data — the main indicator of the extent of quantitative easing — will not be presented until more than a month has elapsed. For instance, under the new terms of the law, if the Bank were to have embarked on a policy of quantitative easing last month, the figures on this would not be published until the end of this month.The reforms, which are likely to be implemented later this year, will make the Bank of England by far the most secretive major central in the world, experts said.In the US, where the Federal Reserve has already cut rates to close to zero and started quantitative easing, the main way to track its purchases of securities and the expansion of its balance sheet is through precisely these same weekly accounts.”Quite why the Bank has to keep its operations so shrouded in secrecy is a mystery to me,” said Simon Ward, economist at New Star. “This will make it much more difficult to track what the Bank is doing.”Among the details which will no longer be published are those revealing the extent to which London’s banks are using the Bank’s deposit facilities — a yardstick of pressure in the financial system.Debating the issue in the House of Lords recently, Lord James of Blackheath, a Conservative peer, said: “Remove [this] control and there is nothing to stop an unreported and unmonitored flooding of the money market by the undisciplined use of the printing presses.”If we went down that path we would be following a road which starts in Weimar, goes on through Harare, and must not end in Westminster and London. That is the great fear that the abolition of that section will bring about — but the Bill abolishes it.”

A head-on crash. I think the bankers are jumping off the train with as much loot as possible before the engine pulling this economy hits the wall.

@ economicminor: “The world has been playing financial wars with currencies and trade for years. I understand triage. But what is the point in expending limited resources on the walking dead? Especially to the point where we are using our limited resources to resupply the opposing armies?”Wish I’d said that.

Their is little activity developing chemical, biological or nuclear weapons by the US military at this time. Cannot speak for others.The US military is building things like unmanned vehicle technology, command and control, individual technology for soldiers fighting in urban environments, better sensors. They are looking at technology for missile defense, even for small low-flying missiles.Imagine for instance you could shoot down the rockets and missiles Hamas is launching with a ‘virtual fence’ composed of anti rocket/missile defense systems. Wouldn’t that change the game there?

Beat the drums…War against realism, our enemy that’s infiltrating our country!

From my perspective, the super wealthy not only control the government but have so much of their personal wealth on the line that the only option for them are the bail outs of the financial institutions and stimulus plans.Some of the leaders are awake for the first time in 30 or more years.It is no wonder that there is little interest in the US for restricting the operations of the off shore entities. There is little interest in fixing the non transparency in futures trading or hedge funds or off balance sheet holdings or naked shorting by the big financial institutions or really fixing any of the issues that caused all this.

“Imagine for instance you could shoot down the rockets and missiles Hamas is launching”With all do respect exVRWC I remember back in the 80′s where the same thing was said by Reagan. Star Wars. It didn’t work and it cost us 100′s of billions. I deplore violence by anyone Palestinian or Israeli but it doesn’t take much imagination to see the results of Israel shooting high tech weapons. They were pictured in all the press. Dead children. No shield will work but the ones we must shed from our hearts.”It is militarism alone that is the cause of most of our economic woes.”- I said that.ex said-”Their is little activity developing chemical, biological or nuclear weapons by the US military at this time”I don’t know where you get your info. I have heard from someone who works in a weapons lab that we can’t imagine what is being developed by our military, and the sick minds that create this horror. I do know that depleted uranium is being left to litter Iraq. Also I do know that Our bravest, our soldiers are coming home with cancers created by this devils product. We are manufacturing tons of this crap.http://www.bandepleteduranium.org/en/a/217.html

g and e,no riddle.in a global economic structure dependent parts of the structure must realize that their own survival is based on the well being of the whole. in this framework systemic survival is a priority and the bailouts of the banks is needed even if only to maintain solvency until such time that orderly triage can take place.note. we work with a fiat currency among fiat currencies. the yuan is pegged to the dollar. the chinees have a trillion dollars, for example.if the u.s. were to independently, not globally coordinated, devalue assets, real estate etc. due to financial , big banks, insolvency the chinees and others would/could walk in and buy the country one acre and one building and one city at a time. perhaps. so caution is needed due to unforeseeable consequences.this is how the fed has taken the u.s. into the between a rock and a hard place conundrum. this is why i agree that u.s. citizens need to have local survival relationships and mechanisms in place to sustain themselves should the global structure utterly fail them, which it likely will to one degree or another.if the fed was abolished and the u.s. had it’s own government central bank we would be having an entirely, possibly, different discussion. at least then we would have transparency, perhaps. as it is there is non.one more thing, the one thing the rich know that the rest don’t take to heart is that the money that everyone bases all their decisions on, admires, lusts after, drools over, enjoys a good night sleep with, and pays there taxes with is really just pretty paper. it is the psychological effect that money has on people that is valuable, not the money itself.for some reason however the three “lawyers, guns and money” have become a new world trinity. o.k.,that is somewhat of a riddle.

All of the Bank of America’s around here are switching their signs. Their new logo has an all-red background. Both logos are visible on this Wiki page.I guess they needed a way to use all that red ink.

A must see! You gotta watch this. Great reporting by 60 Minutes!60 Minutes on oil price manipulation pt 160 Minutes on oil price manipulation pt 2A key point is that there has been no regulatory changes nor laws preventing more Enrons happening since it collapsed. There is no transparency in the futures markets. No paper trail to any US regulators at all. JP Morgan and GS plus AIG and Lehman, BS and others were running the prices up for theirs and their clients benefits along with grain and other commodities.So the taxpayers had to bail out their losses! ?So I ask, what are they going to do with the money we gave them? They can’t lend it because there is little demand from truly qualified borrowers, at least no enough to keep their cash flow, bennies and bonuses.Probably use it to run up some market in the hopes of winning back what they lost? At our expense!

there is another way out, partnership with other nations- not unlike the EU a north American Union perhaps??? Or maybe even a whole new global economic system. You have to think outside the box, yeah others have thought the same thoughts outside the box- you know global governance, global ecomomy etc… seems to me that giving up sovereignty will happen one way or another either through capitualtion or slow death.

The first line is great. Unfortunately there isn’t any law at that level of corruption.The theme is that the laws don’t cover what has been happening. You can ask why all you want but that won’t bring those who caused and are still causing many American’s financial losses, job losses or even the loss of faith we had in our way of life from returning.At a minimum, any institution needing money from the government in any way because of insolvency should under go a complete change of executives and NO bonuses or golden parachutes.Financial scoundrels have little to fear from the law

Michael Hiltzik L.A. Times BusinessJanuary 12, 2009″Justice? You get justice in the next world, in this world you have the law.”That opening line of one of my favorite novels, William Gaddis’ 1994 legal satire “A Frolic of His Own,” comes back to me every time I hear someone call for packing the rich malefactors behind the great financial meltdown of 2008 off to jail.Having watched 40% of our 401(k)s go up in smoke and jobs vanish by the millions, it’s natural to want to see the guilty subjected to divine justice. There’s no dearth of suspects.There are heads of banks and mortgage companies who invested their capital and made loans without the most cursory due diligence — Angelo Mozilo of Countrywide Financial and Charles Prince of Citigroup come to mind. Richard Fuld and James Cayne, the bosses of Lehman Bros. and Bear Stearns, who presided over the extinction of their fine old firms. Maurice R. “Hank” Greenberg of AIG, whom I saw last year on CNBC saying that a government bailout of that irresponsible company ($150 billion at last count) was in the “national interest.”These execs collected otherworldly salaries and bonuses for years on the grounds that their institutions could scarcely survive a week absent their wisdom and judgment. We know better now, but they haven’t given the money back.Is America’s legal system up to the task of delivering the justice they deserve? Experience suggests we’re bound to be disappointed. “Before you can punish anybody, you have to determine if there’s a crime, and I’m not sure much of this activity is criminal,” Clifford Hyatt, a former SEC enforcement lawyer now at Pillsbury Winthrop Shaw Pittman in Los Angeles, told me.As Gaddis understood, the law (in this world) is preoccupied with discrete misdeeds more than with elemental depravity. Kenneth Lay perpetrated the Enron scheme, but he was indicted for such mundane felonies as lying to employees about the firm’s health. Criminal cases involving what’s often excused as bad “business judgment” are notoriously difficult and complex, and who wants to see a guilty CEO skate on a technicality?Let’s not forget that much of what passes for justice in the public arena is theater. No one appreciates a good perp walk more than I do (except maybe Nancy Grace). Yet the first frisson of excitement never produces lasting nourishment.No. 1 on the perp walk hit parade of 1987, for instance, was the arrest of three Wall Street traders allegedly involved in the big insider trading scandal of the moment. As news cameras rolled, one was led tearfully from his trading floor and handcuffed by agents of Rudolph Giuliani, then the federal prosecutor in Manhattan.The charges against all three were dropped four months later. Who was the net beneficiary of this stunt? Only Giuliani, who gained a political platform that enabled him to infest our national politics for the next 20 years.And what about those who don’t lie or commit outright fraud, but set the stage for disaster? Consider former SEC Chairman Arthur Levitt, who lately has been swanking around lecturing congressmen and the media about the need for rigorous regulation.Levitt deserves credit for his activism at the SEC on behalf of shareholders. But he led a regulatory hit squad in 1998 that killed an effort to reel in credit default swaps and other derivatives. These fancy unregulated instruments helped bring the international financial system to its knees 10 years later. By the way, Levitt was SEC chief from 1993 to 2001, when Bernard Madoff’s alleged fraud was almost certainly already in full cry, and his agency never laid a finger on the man.How should we punish him for his dereliction of duty? Indict? Stop giving him airtime? Bill him for his SEC salary?It’s hard to find a provision of the penal law that would cover Levitt, former Federal Reserve Chairman Alan Greenspan or former Treasury secretaries Lawrence Summers and Robert Rubin, each of whom played an important role in cooking up the financial meringue that has cost America, and the world, so much. Rubin resigned Friday as an executive of Citigroup, but Summers has been nominated as head of the National Economic Council in the Obama White House.They all portray the meltdown as something they couldn’t have foreseen. “I’m astounded that no one has said, ‘I’m sorry,’ ” said Tamar Frankel, a law professor at Boston University who writes extensively on business morality. She says expressions of shame, guilt and empathy with the victims would go far to restore public confidence in the markets.But Depression history does give us a template for a public shaming: the so-called Pecora hearings into the 1929 stock market crash. (They were named after the Senate Banking Committee’s indefatigable chief counsel, Ferdinand Pecora.)Pecora had no patience for bankers and financiers such as J.P. Morgan, who swore they’d had only the public’s interest at heart when they inflated the stock market bubble. He laid out for the world how America’s financial institutions, which had stood for “safety, strength, prudence, and high-mindedness” and were supposedly led by men “possessing almost mythical business genius and foresight” had relied instead on “legal technicians and the complaisance of governmental authorities” to cheat the average investor and foment the Great Crash. (The quotations are from his impassioned 1939 book, “Wall Street Under Oath.”)Pecora’s chief target was Charles E. Mitchell, chairman of the National City Bank — precursor of Citigroup, one of the least prudent banks in the current mess. Mitchell was never criminally indicted for his role in the crash, but Pecora made sure his reputation for probity was exposed as a complete sham. National City fired him shortly after the hearings.An inquisition such as Pecora’s is the minimum we should have, short of indictment and trial.It will be said that many big financial perps are getting their comeuppance today via the destruction of their personal fortunes, as though being pared back to a seven-digit net from nine digits is tougher on them than three to five in San Quentin would be to a kid from the projects.

Isn’t this a confession that the Fed’s member banks can manipulate the market when they see fit?”Pecora had no patience for bankers and financiers such as J.P. Morgan, who swore they’d had only the public’s interest at heart when they inflated the stock market bubble”.

Drunk,You can get an HDMI cable for less that $10 if you know what sites to visit (monoprice). Big stores use the cables as the profit generator.

Does Berny Madoff have pictures of this judge with a sheep or somthing?? Geeez, what’s it gonna take for him to go to jail?”Judge rules Bernard Madoff can stay in his luxury home despite mailing $1M in gems to family”

OH MY!!!4:08 p.m.[AA] Alcoa Q4 net loss $1.49 a share vs profit of 75c

OUCH! POWEEEE! SOCKO!!!! SMACK!!!4:08 p.m.[AA] Alcoa Q4 rev $5.69 bln vs $7.03 bln

Sorry, I do remember the post but not that you wrote it.I don’t think Congress can be woke up. Look at Frank and Dodd for examples. And Pelosi. Every time I hear one of them speak I know why we are in such a mess. They really don’t have the basic understanding of finance or justice. It is sad.Obama is smart as a politician but not in financial issues. Look at who advises him. Buffet who got into GS, one of the corrupt, just before the bail outs (no insider knowledge?). Rubin, not much positive to say there. Summers? Geithner? TPTB all like these people. What does that say? All of the same cloth as those who have been taking from the, old folks, widows and infants funds IMO.The citizens in the country have almost no clue. There is little financial literacy among the populous nor those who work in finance. It is a shame but the bail outs and transfers will continue until we really have a broken system. That is what I think. And then what? Chaos, Martial Law, pitchforks? (if anyone had any) In the US it will be fires and guns and violence, just like Watts and Rodney King and the recent riots about the kid shot by the Bart cop, except everywhere.I just don’t see the dots being connected or any corrections being made. The picks of Obama do not impress me as being those who will push the envelope for change so that we have a more fair and balanced system with transparency and justice for all. It just looks like more of the same with different faces. At this point we need firebrands for the Cabinet and not milktoasts. We need the Bobby Kennedy types and not the get along types.Good luck to Obama and all of us with his brand of bring everybody together and crafting bills that eveyone can buy into actually fixing anything. Might as well sing Kum ba yah while asking all the workers to give up their future income so the wealthiest can keep their mansions and their limos.

4:21 p.m.[JPM] JP Morgan pushes up earnings release to Thursday

Maybe he promised the judge to mail him back his savings…

Diz is no good. I guess the gazillion trillion dollars derivative positions are starting to hurt Jamie.

g,are the existing raiders structurally empowered by law to raid and can this be structurally (legally) corrected? or should this be tolerated and enjoined?

Please stop using anarchists in a derogatory manner. Anarchists are not out to screw people!The term you’re looking for is “fascists”!

Ups! It is th other way around:-)http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20090112006403&newsLang=enNEW YORK–(BUSINESS WIRE)–JPMorgan Chase & Co. (NYSE: JPM) —JPMorgan Chase announced it will be ready to issue fourth-quarter 2008 earnings on Thursday, January 15, 2009 at 6:30 a.m. (Eastern), rather than on Wednesday, January 21, the previously scheduled date. The company will host an investor conference call at 7:45 a.m. (Eastern) on January 15 to discuss the results.The general public can access the conference call by dialing the following numbers: (866) 541-2724 or (877) 368-8360 in the U.S. and Canada; (706) 634-7246 for international callers. Please dial in 10 minutes prior to the start of call. The live audio webcast and presentation slides will be available on http://www.jpmorganchase.com under Investor Relations, Investor Presentations.A replay of the conference call will be available beginning at approximately 11:00 a.m. on January 15 through midnight, Friday, January 30 by telephone at (800) 642-1687 (U.S. and Canada) or (706) 645-9291 (International). The replay will also be available via webcast on http://www.jpmorganchase.com under Investor Relations, Investor Presentations.JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.3 trillion and operations in more than 60 countries. The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management, and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan, Chase, and WaMu brands. Information about JPMorgan Chase & Co. is available at http://www.jpmorganchase.com.

g,the illusion is that inflation and investment have anything to do with the world going round. the earth is a oblong ate spheroid moving in time and space relative to other similar and dissimilar astronomic objects. as long as this is the case won’t nothin’ be on the level. that said, here on earth we must have a yard stick and an approximation of level.

Yielding to noneJan 8th 2009From The Economist print editionThe dilemma facing investors in government bondsIllustration by S. KambayashiTHE most striking thing about financial markets at the start of 2009 is neither the level nor the valuation of stockmarkets, which are well within historical norms. Nor is it oil prices. Had investors been told two years ago that crude would cost around $50 a barrel, their flabbers would not have been gasted, as Frankie Howerd, a comedian, used to say. What is remarkable is the level of nominal government-bond yields.Two-year Treasury bonds yield less than 1%. The 30-year bond was, as recently as January 2nd, yielding less than 3%. James Montier of Société Générale cites figures showing that ten-year Treasury yields have averaged just over 4.5% since 1798. Today they offer just 2.5%.When commentators say that some assets look cheap, they tend to use low government-bond yields as their benchmark. Corporate-bond yields are not that high in historical terms. It is the spread they offer relative to government bonds that is extraordinary. And at 3.3%, the dividend yield on the American stockmarket hardly seems mouthwatering, but it is higher than the long-term Treasury-bond yield for the first time since the 1950s.All this is occurring when Western governments are conducting an immense economic experiment, with vast fiscal stimuli accompanied by monetary expansion. In the medium term, a sharp rise in inflation is a distinct possibility. Government bonds may be offering “return-free risk”, in the neat phrase of Jim Grant, a veteran newsletter publisher.One warning sign is that real bond yields (as measured by the inflation-linked market) have risen. Some believe this move has been driven by expectations of low inflation (or deflation) in coming years. But it may also suggest investors think the long-term fiscal position of many governments is not sustainable.Indeed, nominal bond yields have also moved higher in recent days. Ominously, an auction by the German government of ten-year bonds on January 7th failed to attract sufficient buyers to raise the full amount targeted. The auction was the second-worst on record.In the near term, bond yields are constrained because they reflect expectations of the future level of short-term interest rates. The Federal Reserve has pegged official rates at 0-0.25% and vowed to keep them low. The Fed has also talked about intervening directly by buying Treasury bonds to hold yields down.Nor is there any immediate inflationary danger. In both America and Britain there is a chance the headline rate will go negative later this year. Many developed economies are in recession and the consensus expects 2009 to see falling output in America, the euro zone, Britain and Japan.“Global bond yields are sure to be much higher in five years than they are today, but this does not imply that the market currently is in a bubble,” says Martin Barnes of Bank Credit Analyst, a research group. “The economic backdrop will remain bond-friendly for at least the next six months.”This leaves investors with a dilemma. In the short term, they may like government bonds for the security they offer. Treasury bonds outperformed the S&P 500 index by an incredible 53 percentage points last year. But if yields are heading back to 4-5% (or even higher) by 2011 or 2012, at what point do they sell? The rational investor would want to get out of the asset class before the herd decides to do so. The logical extension of that argument (assuming most investors are rational) is to sell now.But what if Japan provides the template? Many people thought Japanese bonds were overpriced when yields fell to 1-2% in the late 1990s. They have stayed around that level for the past decade, despite a vast amount of issuance (at $8.7 trillion, according to Bloomberg, the Japanese government-bond market is the biggest in the world). Even the expected $2 trillion of American issuance this year will leave its debt well below Japan’s.The crucial difference, however, is that Japan has been running current-account surpluses, not deficits. The Japanese owe the money to themselves whereas the Americans are in debt to foreigners. Such investors could lose twice over: yields could rise and the dollar could depreciate.For the moment, the balance is maintained by what Nick Carn of Odey, a hedge-fund group, calls “mutually assured destruction”. If overseas investors seek to sell their bonds, they will not only ruin the American economy but the value of their existing portfolios as well.It is a precarious balance. It may well hold through 2009 and even 2010. But at some point, government bonds will surely suffer a horrendous bear market.http://www.economist.com/finance/PrinterFriendly.cfm?story_id=12906397

I suspect they are moving their earnings to before the weekend so the feds can pull another ‘emergency meeting’ over the weekend with the goal of giving more of the national treasure away to the banks in back door deals. This is all tied to them trying to get the next TARP chunk released.If we hadn’t seen this script before, I would call myself a tin-foil-hat conspiracy theorist. Unfortunately, we have seen this script before and its all too familiar now.

“I suspect they are moving their earnings to before the weekend so the feds can pull another ‘emergency meeting’ over the weekend with the goal of giving more of the national treasure away to the banks in back door deals.”And still under the old watch under which they will get more favorable terms…

Financials came down real hard today DJ US Financials Index -5.24% http://online.wsj.com/public/npage/industry_focus.html?rnd=5795&bcind_ind=8000&ind_sid=171533Fasten your seat-belts for the last rough patch of the Bush presidency. As ex VRWC writes above, we may be in for another bailout weekend!

From the point of view of an average Jane6pack, it appears to me that much of the past/current raiding is “legal” (see repeal Glass Stegal, Congress rolling over for Paulson/Goldman Sachs alliance etc), but also that the powers that be are willing to look the other way and cut legal corners (see SEC ignoring Madoff warnings, no action on Frank/Dodd et al).We are losing the most precious commodity that we have as a country-TRUST between citizens/citizens and citizens/government. Where a man’s word is his bond, where you meet your obligations, where cheating is wrong and where cheaters are punished.Too far down the “no trust” road lies Somalia and Zimbabwe.I REALLY don’t want to go there, so in my opinion we have no choice but to have good rules (as few as possible) and to enforce said rules vigorously and fairly.If not, then it’s time for the John Galt option.

Just want to add: there is no law if these general (yet quite clear and specific) provisions are read as if they are window dressing or nice sounding words.They are laws. They CAN be enforced. Those with the duty to enforce them should do so, and judges should have an open mind about actually enforcing these laws.

This is FULL OF POWER, i.e., power full.

Innocent until proven guilty. Anybody, even the judge, can see Madoff’s innocent.”…how high has been the character, how lofty the sentiments, and how worthy of admiration the life of most swindlers of note — before they are found out.! A high reputation is the first necessity of a swindler’s stock in trade.” From Agatha Christie’s “Death in the Clouds”And, now, Madoff’s whirlwind of “friends” has simply vanished in smoke…“With the scandal swirling around Madoff, he was unable to find co-signers of his bail package. The judge modified the bail package, and gave lawyers until next Monday to come up with additional paperwork… Free on $10 million bail, Madoff now has a curfew and an ankle-bracelet to monitor his movements…” (December 17, 2008)http://news.yahoo.com/s/ap/20081217/ap_on_bi_ge/madoff_scandal

Moratorium on wealth transfer at death so 100% goes to the government to pay off debt. No thanks. That just taking wealth from families that worked hard and sacrificed to pay off debt caused by overreaching, self-entitled people who bought houses they couldn’t afford and lived the high life on credit cards, and by arrogant overpaid executives.

I have been thinking all weekend of the Professor’s words that “when the best minds of the country are all going to Wall Street, there is a distortion of the allocation of human capital…”I remember about 10 years back when a retired industrialist told me that the electrical engineer is the most vital component of an industrial and technological society. For it is the electrial engineer who envisions the entire system, not just its separate parts, and makes it run.Yet, it was just a year or two ago that students at MIT were told flatly not to go into the field of electrical engineering because there would be no jobs for them in America. America has either outsourced her opportunities or imported lower-wage competition.Professor Roubini is that rare animal — a macroeconomics engineer — who sees the entire system and doesn’t like what he sees.

Willem Buiter warns of massive dollar collapsehttp://www.telegraph.co.uk/finance/4125947/Willem-Buiter-warns-of-massive-dollar-collapse.html

Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.The long-held assumption that US assets – particularly government bonds – are a safe haven will soon be overturned as investors lose their patience with the world’s biggest economy, according to Willem Buiter.

“The fall in the pound means Britain’s economy is now significantly smaller than France’s and could soon be overtaken by Italy.”UK now has smaller economy than Francehttp://www.telegraph.co.uk/finance/financetopics/financialcrisis/3270043/UK-now-has-smaller-economy-than-France.html

The Bloomberg story below — “Gross Bets on Washington After Housing Collapse Wager” — is riddled with glaring clues as to what ails America’s “planned economy,” versus the impartiality of a laissez-faire unhampered market society.And, please, as Ludwig von Mises said, don’t argue that: “Laissez faire is said to mean: Let the evils last, do not try to improve the lot of mankind by reasonable action.“This is utterly fallacious talk. The argument advanced for planning is entirely derived from an impermissible interpretation of a metaphor…the connotations implied in ‘automatic’…[which] means ‘not subject to the control of will…performed without active thought and without conscious intention or direction.’“What a trump for the champion of planning to play this trump card!” Mises said.“The truth is that the alternative is not between a dead mechanism or a rigid automatism on one hand and conscious planning on the other hand. The alternative is not plan or no plan. The question is whose planning? Should each member of society plan for himself, or should a benevolent government alone plan for them all? …“It is freedom versus government omnipotence…Planning means: Let the government alone choose and enforce its rulings by the apparatus of coercion and compulsion.”Or, bringing Mises to the current scene: Let the Bill Grosses who run with the dictators, the supermen, manipulate and benefit from government largess such as the housing-bailout bill as we, the inferior men, are forced to yield. Read this, and weep:———————————————-Jan. 12 (Bloomberg) — The collapse of the U.S. housing market helped Bill Gross outperform 99 percent of his fund- manager peers over the past five years. Now he’s betting on securities that may benefit from rescue efforts in Washington.The 64-year-old co-chief investment officer at Pacific Investment Management Co. is urging investors to anticipate which assets will benefit as the government struggles to boost the economy. Last week he recommended municipal bonds, inflation- protected Treasuries and debt the U.S. government plans to buy. In the past six months, Gross bought senior bank debt, agency mortgage securities and preferred shares in financial companies, all before the government did the same.Gross, who keeps the attention of investors through a combination of performance, monthly commentaries and television appearances, navigated through the worst credit crisis since the Great Depression, said Lawrence Jones, a senior mutual fund analyst with Morningstar Inc. Gross’s $128 billion Total Return Fund, the world’s largest bond fund, returned an average 5.4 percent annually over the past five years, in part by avoiding riskier debt and asset-backed securities as early as 2005.“If you are beating the competition, some people will idolize you,” said Jones, who is based in Chicago. “And some people will hate you and envy you. That’s a natural thing.” Morningstar named Gross manager of the year three times, including for 2007.Gross OutperformsNewport Beach, California-based Pimco’s Total Return Fund rose 4.8 percent in 2008, while corporate and government bond funds tracked by Morningstar declined an average 8.1 percent, according to data compiled by Bloomberg. The $128 billion fund’s five-year return was better than 99 percent of its peers.Gross, a yoga enthusiast, credits a brainstorm that emerged while meditating with helping him steer clear of the credit market debacle that sent returns on high-risk, high-yield bonds down 26 percent in 2008. Gross wasn’t available for comment, Pimco spokesman Mark Porterfield wrote in an e-mail.Now, Gross says debt sold by cities and states and some investment-grade companies is attractive. In early 2008, he started buying securities of New York-based JPMorgan Chase & Co. and Charlotte, North Carolina-based Bank of America Corp., viewing them as getting protection from the Federal Reserve.“It was a bold move,” Jones said. “Now we’re seeing a rebound in various risky assets. Pimco is placing its bets by sticking to companies at the top of the economy’s capital structure…”http://www.bloomberg.com/apps/news?pid=20601109&sid=aAjQ10boNvSo&refer=home

“lose their patience with the world’s biggest economy”?Worlds biggest economy is probably China or Japan at this stage…of course nobody wants to say it out loud, not even China or Japan…sort of like the title of “World’s Biggest Car Company” which used to be GM…

How many physicians accidentally shoot someone every year? I think we may be on to something here.

Gross’ performance is a bit deceiving as it came crammed up in the last couple of weeks of the year up until early December his PTTRX was clocking in near flat return. Then, the FED finally yielded to his lobbying and e made it safely to port. The articles also talk about his misses which you didn’t quote but they missed talking about the biggest Gross blunder last year: Selling AIG CDSs which with he lost close to a billion USD.

Correction Alert:Buddhists ask: “If the only certainty in life is death, but the time of death is uncertain, what, then, should we do?”@ P&L on 2009-01-10 02:10:08Death is NOT a certainty, merely a fashion statement.Ho hum

You can find the answer in our history and also what the solution was back then.It has not changed until today.-Abraham LincolnThe Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.Historyhttp://video.google.com/videoplay?docid=-515319560256183936Solution – Monetary Reform Acthttp://www.themoneymasters.com/printable-mra.htm

Wow MA, this is the most apocalyptic post I have ever seen from you. From you, this tone is new and chilling. You are not a survivalist ‘Long Emergency’ type. What happened?

Is Bush Tanking Stocks to Grab the Remaining $350 Billion TARP?from NC – and reflects what ex VRWC has suggested abovehttp://www.nakedcapitalism.com/2009/01/is-bush-tanking-stocks-to-grab.html

Didn’t Iacocca’s crappy company get bailed out?I agree with most of his assessments, but clearly he doesn’t understand that this is an issue of insolvency by the entire country. There is NO turning around Chrysler or any of the other formerly ‘Big Three.’As Daniel Quinn states, our problem has been a lack of negative feedback. As Barbara Ehrenreich states in the following article, we can’t wish this all away, positive thinking is what got us in this mess:How Positive Thinking Wrecked the Economyhttp://www.alternet.org/module/printversion/100396Mark

g,correct.

A free market you mean the kind where businesses grow to such mammoth size that they effectively run the country control the government and instead of selling their wares it’s more like they tax the poor who have no choice to buy from them. Is that the kind of free market Ron Paul B.S. you’re talking about?That Austrian nonsense are for people who have a mid sized brain they can see the depths of the water only half way; they ignore anything else that doesn’t fit their belief system.

The 1/2 billion infielder will get fired for poor to good preformance. No severance or bonus.The public corporation executive that runs the company into the ground will get a 3 year severance package or retention bonus.You’re complaining about the wrong group.One group gets great pay for only for great results. The other group gets extreme pay for any results.