EconoMonitor

Nouriel Roubini's Global EconoMonitor

Formula For Fiscal Fitness

The instant he takes office, President Obama’s imme diate priority must be to fix the economy, which is spiraling downward rapidly in the worst financial crisis since the 1930s. The clear answer is a combination of government spending (the “stimulus package”) and financial restructuring – and the latter is the more important.

The stimulus package is neither a bad idea nor the complete solution. Government spending could very well help to offset the free fall in private consumption and investment. And a sign of strong leadership might raise business and consumer confidence.

But don’t expect too much. It’s extremely hard to spend large amounts of money in a way that creates good value for society. Most of the spending should go for public infrastructure, with demonstrable long-term social benefits.

And how much GDP will the new government spending create? The administration estimates that each added dollar will boost GDP by $1.57. Even with this best-case estimate, $800 billion over two years is barely enough to reverse the GDP drop we’ll see from the mid-2008 to mid-’09.

The most important issue is the financial system. You don’t install new lighting until you’ve fixed the wiring, and the economy’s wiring is the financial system.

Japan’s no-growth decade is the classic example. After equity and house prices collapsed in 1989, the Japanese government spent trillions on infrastructure but failed to fix the effectively bankrupt banking system. The result: no growth for 10 years.

There’s some merit to arguments against giving more money to the people who created this mess, and the bailouts to date should’ve had terms less friendly to banks. But it’s critical that we focus on the future and create a well-capitalized financial system that supports the growth our economy is capable of generating.

Painful as it is, we must continue to recapitalize the banking system. Right now, several of our largest institutions are effectively bankrupt or close. Billions more are needed – but this time, we must do it in a way that isolates the banks’ accumulated bad assets from their ongoing operations. And high-risk borrowers must pay higher rates than others.

We also need to address borrowers’ concerns. Who was the source of the problem is less important now than guaranteeing an orderly process to resolve massive foreclosures on residential mortgages. The best policy will give incentives for mortgage servicers to restructure loans, probably via some combination of reduced face value and shared appreciation. Whatever the details, it’s essential that the process be quick and transparent.

Finally, we must reform the financial system. Reform will be complex but should:

* Address risk-taking incentives at financial institutions, e.g., changing the ways bankers and traders are compensated.

* Charge realistic prices for government guarantees like deposit insurance and bailouts.

* Increase the transparency of both individual contracts and financial institutions.

* Focus on the systemic, rather than individual, risk of too-big-to-fail financial institutions. We need to do what we can to reduce the chances of another crisis.

What should the new president do next week?

Pump more money into the financial system – in a way that strengthens viable banks and quickly disposes of those already bankrupt. Reinstate the original idea of the Treasury’s TARP program – namely, to use government money to buy distressed assets. Restructure troubled mortgages. Enact a government-stimulus program.

We wish President Obama and his team the best of luck. All of us have a stake in the outcome.


Originally published at the New York Post and reproduced here with the authors’ permission.

360 Responses to “Formula For Fiscal Fitness”

Wild BillJanuary 17th, 2009 at 9:42 am

To create a bank whose sole purpose is to ingest toxic waste is reminiscent of the sin-eater concept, where a pathetic individual of low social status was summoned to eat food off a newly deceased body. The sins of the deceased would be absorbed into the food and vanish into the sin eater as he ate. The deceased sole could then travel unencumbered into the next world.This bank would function simarly to the allantois of a developing bird embryo, where toxic metabolic waste is isolated from the developing bird and then discarded after hatching.If the toxic waste bank can isolate all that bad debt from the rest of the banking system long enough for the rebirth of the economy, it just might work. I think it’s worth a try because right now, the developing embryo is being steadily poisoned.

GuestJanuary 17th, 2009 at 9:50 am

Never mind those who committed the crimes are still in charge – that’s not important?In which universe could this be true?Bar-ache Obama is getting ready to use this crisis as excuse to kill off social security and medicare, too.That money will go to the Pentagon.You’re having smoke blown up your skirts, America!

aerial viewJanuary 17th, 2009 at 10:00 am

Unless transparency, standardized accounting procedures, honest regulation, accountability and penalties are instituted, we have simply said to the corporate elites “go on dreaming up new ways to take excessive risk and abuse the system and the govt will be there to bail you out”! Additionally, if companies have become “too big to fail” then they should never have been allowed to become so big in the first place!!!

economicminorJanuary 17th, 2009 at 10:02 am

Change is difficult because of entrenched interests. No one wants to be the ones who have to change so the system works toward keeping everything as it was.BUTChange is the only constant.Systems go on and on, becoming less relevant and less viable until they finally break down. What has happened in the US is that we have pushed many of our systems way beyond viability for decades because change is just to difficult. Unions have been blamed but they are just one piece of the no change efforts. Big oil didn’t want change, big government didn’t want change. The Big educational system has prevented change for decades and we all know change was needed. Health care is in a rut because of nurses unions but mostly because of lawyers and insurance companies and business models that just don’t work. Some change has snuck in but it came in not because it fixed anything but because there were opportunities for some to parasite off a system. The changes that have happened in finance are an example of this…What we have is a whole bunch of systems that no longer work properly and yet have blocked all meaningful change. We are now in a crisis and change is going to come. The US can either embrace change and get in there and allow these systems to fail so that we can rebuild them or they will fail and we waste all our resources trying to prop them back up because we want to resist the change that is inevitable.This is a list of my major issues and some possible fixes (I know I have missed many but this is off the cuff)1/ CORPORATE STRUCTURE the stock holders need to be put back in charge. Stock holders today have little to no power.2/ TRANSPORTATION. I see our transportation grid as antiquated and reliant upon a depleting resource. Rebuilding this system or upgrading it is a misappropriation of resources IMO. Without the heavy truck traffic, many of our roads would last another 100 years. We need to move the inefficient trucks tonnage onto trains. High speed electric trains would make much more sense. But like I was pointing out previously, it is difficult to change when so many interests benefit from the way things are. An efficient transportation system would save this country probably enough money to pay off the deficits. It would give people lots more freedom to work and travel. Goods and people could be cheaply moved. We could decongest our roads. Air transportation is very inefficient compared to high speed rail besides it uses portable fuel (petroleum based) where as high speed electric trains would be smart and efficient. I am not advocating doing away with air transportation but we need efficiency not arrogance or protecting entrenched interests in the coming years.3/ ENERGY We have to have reasonably priced energy for our complex existence. At this point, the cheapest is nuclear. The Europeans deal with their waste by reprocessing it and reusing it. It is possible to deal with it, we just haven’t had the will. Solar is a nice idea but at this point it is to expensive and has storage issues.Wind has potential. So does Ocean wave technology and so do other ideas, like solar water heating but they take time and at are not yet cost effective. And can not provide enough. We need CHEAP power, not the feel good power. Obama is correct about revamping and upgrading our electrical grid system.4/ EDUCATION is to expensive and not working. It is inefficient. With computers, video and the Internet it could be streamlined. Other issues are trying to educate to many different and complex fields with a one size fits all system. Another costly issue is trying to educate everyone at the same level. Everyone isn’t the same and some have lots of potential in one area and none in others. Our system needs to be cheap, flexible and easy. I believe that a fairly simple certification process that allowed people to use what ever education works for them and to be tested for competence rather than going somewhere and getting a certificate from a school. The existing system just doesn’t work as it is inefficient. What we should care about is that a person knows something, not whether he spent $10,000 going to class at a school to learn it. This should apply for most trades. In some instances, people really need hands on experience but the system today is to rigid. It is more about access and money than allowing people to learn and then advance.5/ MEDIA We need to have a free press. This means that the consolidation of media ownership and control needs to be undone. When the major media is tainted and able to twist the facts with impunity, then the public has no chance to make good decision about their own future. Truth in reporting should be mandatory. The media does have a fiduciary duty to the public. Swift boating should be illegal. This has dire affects on elections and policy but also on personal decisions concerning spending vs savings. There should be a line between fantasy and news. In another issue, I would suggest a licensing requirement for each media to have to provide x amount of free time for not only public service announcements but for all viable candidates during elections for all licensed media.6/ FINANCE repeal Gramm-Leach-Bliley, force the break up of institutions that are to big to fail. Force the break up of institutions whose different parts have high potential conflicts of interest. There is no reason a bank needs to be the title company, the insurance company, the brokerage, the underwriters, the rating agency and expect them to not do what is best for themselves not their clients or the public. We should enforce fiduciary. Make it a criminal act.7/ POLITICS needs real campaign finance reform > possibly public financing > enforce conflicts of interest. Make it illegal to go to work for any business you voted on a bill that benefit that business. Never! No campaign quid pro quo for votes. Another issue that because of the media and the money that controls it, we do not get to hear the total picture or have access to all potential candidates. We have a one party system that has two factions and both factions are privately held corporations. This has to change!8/ LEGAL AND ENFORCEMENT We already have laws on the books but the system isn’t enforcing many of them. To much political influence in the judicial system. To much legal influence in the political system. To much conflict of interests. To much emphasis on controlling the poor and almost no emphasis on controlling the rich and powerful. This has to change. Drug addiction is a disease. It should be treated as such. We have prisons full of drug addicts at around $42,000 per addict. Surely we can treat them or deal with them is some other manner much cheaper. Then we allow the corruption in our financial system to go on unabated. This has to change.9/ HEALTH CARE Big one… We should have national health care. Everyone should be treated the same. This is a civil rights issue. We all have the same rights to good health. If the political system allows an environmental hazard, everyone should have access to treatment. The entire system is to integrated to think that x doesn’t affect y and that y doesn’t affect A or B… At what ever level we can afford, everyone should be treated the same. This would eliminate many law suits and much craziness over liability and insurance. This whole area wastes so much time so many resources. It is just a mess. We spend tens of thousands educating people and then let them be disabled or die because they we don’t want to provide them with efficient health care? We do not provide overall preventative care at a great cost to all of us? Why? What a stupid waste of resources. All because of special interests who benefit from how things are and the media is not doing its job. The legal system and insurance lobbyist are in the way of good health care.All of these are tied together. Special interests have prevented forward movement or change in all these areas. All of them are broken and are failing the country and the people yet there is little recognition or movement towards meaningful change in any of these areas.The world is a sphere and no matter where you see it from, you can only see what you are looking at. People tend to only look at their own circumstances work to preserve the systems they have come to rely on. Even when they are broken or the cost to the whole is way out of proportion to the benefit. This is very complex and it would be well to keep that in mind.Change will be painful and people who though that if they did their best would be taken care of. Change will mean that we need to figure out how to facilitate meaningful change with as little harm as possible.Change will happen and it could easily mean violence because the powerful are in such denial or unaware of the direction we are heading. I hope and pray that the change that is coming can be peacefully done to the benefit of all Americans and then the world.. As the world is watching.

MM CAJanuary 17th, 2009 at 10:05 am

This was just today. By my count I have almost 1 million job losses indicated to be happening from Jan 1 to Feb 15. We will hit 1M a month by spring. BTW, I called the Circuit city failure 4 months ago and Nortel 2 months ago. GE and Dell sometime this year, probably later in the year. Many, many other retailers are toast too. GM and Chrysler will be in bankruptcy sometime this year. Chrysler for sure will go away. Also Tech companies are in deep trouble across the board. I suspect we will see 30-50% reduction in ALL IT spending this 2009-2010 period, products and services. private equity and VC activity in Silicon Valley is completely dead now. Angel investors are almost universally turning down any private equity opportunities in favor of grabbing safe investments like Apartment REITs and Treasury’s with their money. There is no appetite for risk or creation of new enterprise in Silicon Valley. Americas few remaining engines of innovation and technology creation are slowly grinding to a complete halt. Note all of the high tech layoffs in the list below. Green related technologies, including Solar are tanking because they have no faith in Obama beating down the Oil companies.It would’ve only taken a 2-3 billion loan to Circuit city to save their company and 35,000 jobs. But no, we gave BOA 140 Billion at 1 am this morning; Citi will be getting another 25-50 billion…. This is totally out of control, saving the banks and financial companies that should not be saved.Obama’s stimulus plan is a total joke. You heard it here, it WILL NOT WORK. In my opinion he will need 2.5-3 trillion (and he/we don’t have that much unless they print and risk further devaluing the US dollar) and he has to target it directly at small and medium size business, at least 60% of that number. He has to let some of badly managed companies bite the dust, mostly banks and finance companies.Do not pay attention to the stock market- it is totally irrevalent as an indicator of what is going on. Total value of all US stocks in existence is approx 8.5 Trillion (Dow, NasDaq, S&P, OTC) We have already spent that in the past 9 months fighting this problem. They could’ve bought the whole stock market already. Actually a lot of the bailout money that has gone to Banks and financial firms has been used to buy stocks (people have no idea that this happening) to keep the stupid market propped up. Goldman Sachs and any and everyone who ever worked for them, including most of the Govt officials on Obama’s team like Giethner, as well as Paulson and all the current ones working for Bush are all trying to save their friends. Google the term “plunge protection team” and read up on it. It will describe how the Gov’t by law and regulation is manipulating the market.I suspect No later than end of Feb/march we will see Obama on national TV at night telling us we are in deep crap. Rationing and wage/price controls will be coming. I hope I am wrong. It is possible they could limp along like they are for another year or so and not tell us how bad things are, but sooner or later Obama will have to come clean.Layoffs Picking Up Speed—Is Your Firm On the List?Topics:Employment | Economy (Global) | Economy (U.S.)Companies:Hertz Global Holdings, Inc | Wellpoint Inc | Halliburton Co | Schlumberger Ltd | ALCOA Inc | Cigna Corp | Boeing Co | Walgreen Co | Lexmark International Inc | Cummins Inc | Visteon Corp | Oracle Corporation | ING Group, N.V. | Barclays PLC | Pfizer Inc | Barnes & Noble, Inc. | Ecolab Inc | Seagate Technology Holdings | Google Inc | MeadWestvaco Corp | Motorola Inc | Marshall & Ilsley Corp | Autodesk IncBy: CNBC.com with Wires | 16 Jan 2009 | 03:44 PM ETText SizeThe pace of corporate layoffs has picked up sharply since the beginning of the year, reflecting the worsening US recession.APOn Friday alone, companies as diverse as General Electric, Pfizer, Advanced Micro Devices, Wellpoint and Hertz announced big cuts in staffing.Motorola announced earlier this week it will cut an additional 4,000 employees as it faced weaker-than-expected handset sales. And software company Autodesk said it is cutting 750 jobs, or about 10 percent of its employees, as it prepares to report a loss in the fourth quarter.The Labor Department reported Thursday that first-time requests for unemployment insurance jumped to a seasonally adjusted 524,000 in the week ending Jan. 10, from an upwardly revised figure of 470,000 the previous week. Analysts had expected 500,000 new claims.The jump in last week’s numbers, combined with a slew of layoffs announced this week, signal that jobless claims will continue to rise.Slideshows On the Job Front …· Highest Paying Jobs· Jobs Most at Risk· Hardest Jobs to Fill· What Jobs Can be Outsourced“The experience of previous deep recessions suggests claims are nowhere near their peak, and we doubt that peak will be reached before the fall of this year,” said Ian Shepherdson, chief U.S. economist for consulting firm High Frequency Economics.Shepherdson said in a research note that weekly jobless claims could reach 750,000 later this year.Here is a rundown of corporate job cuts announced so far this year.Pfizer [PFE 17.50 0.11 (+0.63%) ] plans to lay off as many as 2,400 sales staff this quarter in a continuing reorganization. The drugmaker has already cut about 15,000 jobs in the past two years, including 800 research jobs earlier this week, to downsize before the company’s $12 billion-a-year.General Electric’s [GE 13.96 0.19 (+1.37%) ] GE Capital unit will cut between 7,000 and 11,000 jobs. GE had said it would reduce costs at GE Capital by about $2 billion this year, according to the report.· Advanced Micro Devices [AMD 2.29 0.03 (+1.28%) ] plans to cut 1,100 jobs, 9 percent of its global staff, and slash the remaining employees’ pay as the chip maker hopes its third round of layoffs in a year can help it get through a brutal market for computer sales.Insurance company WellPoint [WLP 37.89 0.04 (+0.11%) ] said that it would eliminate about 1,500 positions, or about 3.5 percent of its workforce, to reduce administrative costs.Rental car company Hertz Global [HTZ 5.27 -0.12 (-2.23%) ] said Friday it will eliminate more than 4,000 jobs worldwide as it further cuts costs amid slowing demand.· Delta Air Lines [DAL 11.43 0.46 (+4.19%) ] , which took over rival Northwest Airlines last year, said it expects about 2,000 staff to opt for an early retirement program as it aims to trim capacity as much as 8 percent this year.Autodesk [ADSK 16.14 0.66 (+4.26%) ] is cutting 750 jobs, or about 10 percent of its work force to cut expenses and expects to report a loss rather than a profit for the fourth quarter.Marshall & Ilsley [MI 7.62 -0.31 (-3.91%) ] is cutting 830 jobs, or 8 percent of the total. It said 80 percent of the cuts had already been made. It also began a program to reduce costs by $100 million a year, and said no executive officers will receive bonuses for 2008.Hybrid electric and electric powertrain maker Azure Dynamics said it would reduce its workforce by about 25 percent as part of a cost-reduction plan.Motorola [MOT 4.54 0.11 (+2.48%) ] said it would cut another 4,000 jobs, as it forecast a fourth-quarter loss and weaker-than-expected handset sales. The company had previously announced a plan to cut 3,000 jobs in October 2008.MeadWestvaco [MWV 11.78 0.23 (+1.99%) ] , which makes paper and plastic products, said it will cut some 2,000 employees, or about 10 percent of its work force, as it accelerates cost savingsGoogle [GOOG 299.67 0.68 (+0.23%) ] said it was closing three engineering offices and cutting 100 recruiters as the recession dampens hiring. Computer equipment maker Seagate Technology also said it will eliminate 2,950 jobs, or 6 percent of its work force.Seagate Technology [STX 4.39 0.06 (+1.39%) ] is cutting thousands of jobs and slashing some employees’ salaries by as much as 25 percent, a surprise move coming just a few days after the company changed chief executives and announced it was cutting 800 U.S.-based workers.St. Paul-based sanitizer and detergent maker Ecolab [ECL 36.60 1.08 (+3.04%) ] laid off 1,000 workers in response to the economy that has dramatically affected the company’s restaurant and hotel customers.RELATED LINKSCurrent DateTime: 12:56:24 16 Jan 2009LinksList Documentid: 28696143· GE Capital to Slash Up to 11,000· Pfizer to Cut Up to 2,400 Jobs· AMD to Lay Off 1,000· WellPoint to Lay Off 1,500· Hertz to Cut More than 4,000 Jobs· Motorola to Slash 4,000 More Jobs· Google to Cut 100 Recruiter Positions· Seagate Cutting 6% of Workforce· Barnes & Noble Slashes 100 Jobs· Oracle Cuts Several Hundred Jobs· Boeing to Cut 4,500 Jobs· Cigna to Slash About 1,100 JobsThe nation’s largest book store chain Barnes & Noble [BKS 17.88 0.69 (+4.01%) ] said it would cut nearly 100 jobs at its corporate headquarters in New York, due mostly to reduced store openings and consolidated operations at its retail and online segments. The company said it would provide affected employees with an enhanced severance plan and healthcare benefits for the next 12 months, as well as job placement counseling and transition seminars.Barclays [BCS 7.25 -1.15 (-13.69%) ] was the latest major banking institution to announce big layoffs, revealing its plans to cut 2,100 jobs in its retail and commercial banking units, adding to redundancies of the same size in its investment banking arms announced earlier in the year.Dutch financial services group ING [ING 9.33 0.24 (+2.64%) ] said it will cut 750 U.S. jobs as part of a global program to cope with the economic slowdown.Software giant Oracle [ORCL 16.91 0.38 (+2.3%) ] announced it will cut around 500 positions in its North American sales and consulting business. However, this is not as much as some people had speculated.Visteon [VS 0.885 — UNCH (0) ] said it cut salaries for about 2,000 white-collar employees by 20 percent at its facilities in Michigan and adopted a four-day workweek there for the month of January. Visteon will also suspend matching payments for 401K employee retirement plans and reduce new hiring, it said.U.S. manufacturer Cummins [CMI 26.32 0.22 (+0.84%) ] it would cut its global white-collar workforce by at least 800 and reduce its top executives’ pay by 10 percent next year to save money during the deepening recession.Lexmark International [LXK 25.45 -0.36 (-1.39%) ] announced that its fourth-quarter sales came in worse than expected,prompting a decision to cut 250 jobs and transfer roughly 125 more to lower-cost countries in the coming months.Drugstore operator Walgreen [WAG 26.91 0.01 (+0.04%) ] said it will cut 1,000 jobs by mid-year, or about 9 percent of corporate management, through a combination of voluntary buyouts and layoffs.Boeing [BA 42.46 1.50 (+3.66%) ] , the world’s second-largest airplane maker, plans to cut about 3 percent, or about 4,500 positisons, of its work force as a weakening global economy lowers demand for jetliners. Many of the cuts will be in areas not directly associated with aircraft production. This will be the company’s second round of layoffs after cutting 800 workers in November 2008.Cigna [CI 15.27 0.55 (+3.74%) ] said it will cut about 1,100 jobs and consolidate some offices because of the flagging economy and won’t give pay raises to salaried employees this year.Alcoa [AA 9.43 0.06 (+0.64%) ] said it will eliminate 13,500 jobs, or 13 percent of its work force, in order to conserve cash and cut costs in the face of the global economic downturn.Schlumberger [SLB 39.90 -0.28 (-0.7%) ] , the world’s largest oilfield services provider, plans to shed 5 percent of its North American workforce, or 1,000 jobs, and is looking at cuts elsewhere, a spokesman said on Thursday.Oilfield service company Halliburton [HAL 17.74 0.32 (+1.84%) ] also confirmed it will begin laying off workers but hasn’t said how many or when.

Kaj JohanssonJanuary 17th, 2009 at 10:08 am

Economists are a peculiar species at least in the eyes of lay-men. What can allow a company or a country to make ends meet if they in the long run produce less than they consume? Living off your savings for a while, yes,butjust printing money seems a different affair.

GuestJanuary 17th, 2009 at 10:09 am

Excellent post!!!!! And if we dont start thinking this wasy the below will happen and more. I wrote this a month ago and some of them are already happening. We are totally out of control fiscally, emotionally and morally as a country. By we I mean TPTB (Govt and Wall street and the rich and greedy).1. 1500 banks go away- in progress- Citi in trouble- BOFA too2. 200,000 store closings – in progress- Gottshcalks Bankrupt3. Dow at 5000 possibly 4000 -stays propped up by continued Govt purchases of shares and preferred shares- do not use as gauge of how economy is doing- http://www.guardian.co.uk/business/feedarticle/82601014. S&P at 500 possibly 400- http://www.guardian.co.uk/business/feedarticle/82601015. Mortgage rates for new homes go to 3% and resale’s/refi’s at 3.75% – pushed by Obama6. Tax credit of at least 25k for home buyers7. Chrysler is gone by March.8. GM goes under by Sept.9. GE files bankruptcy – http://clusterstock.alleyinsider.com/2009/1/gm-gm-we-still-cant-rule-out-bankruptcy10. Calf state budget deficit hits 50 Billion- presently 41B11. All states and local gov’ts approach 300 billion deficits combined12. Massive state and local gov’t layoffs nationwide13. official unemployment hits 13%, unofficial unemployment hits 25% – current: http://clusterstock.alleyinsider.com/2009/1/jobs-numbers-much-worse-than-you-think14. Gas prices hover around 1.50 gallon unless there is major Mideast/Pakistani/Indian crisis then it goes to 5.00 quickly15. GDP shrinks at 6-8% for 200916. Deflation takes strong hold until sept 2009, at which point hyperinflation is roaring by dec 2009. – http://clusterstock.alleyinsider.com/2009/1/full-text-of-bernankes-speech17. US Dollar continues slow decline against Yen, Euro, Pound and Yuan – losses 50% by Dec 200918. 2009 Federal deficit hits 2 Trillion – Update: 1st qtr almost 500 Billion19. total Bailout and govt assistance programs approach 15 trillion from when it started in summer of 2008- currently at 8 trillion – http://www.bloomberg.com/apps/news?pid=20601087&sid=at6cYfv8wFJw&refer=home20. Total US liability approaches 60 Trillion by 200921. bond market collapses22. US treasuries become almost worthless23. China pulls the trigger and demands we pay back what we owe or they stop shipping goods to us or cut prices dramtically -(LONDON, Jan 15 (Reuters) – Societe Generale said on Thursday that the United States’ economy looks likely to enter a depression and China’s could implode.In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout.He predicted that the S&P 500 index of U.S. stocks could be set for a fall of nearly 70 percent from recent levels.Edwards also raised the danger of a global trade war with China.”While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere,” Edwards wrote.”It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression.”Edwards has long been one of the most bearish analysts in London, first with Dresdner Kleinwort and then with SocGen.But he called in October for clients to increase their exposure to equities, which he said were due a rebound.”We believe that the market is (now) set to quickly slide sharply towards our 500 target for the S&P,” he said.The S&P 500 <.SPX> stock index is currently at 842, up about 14 percent since hitting a low in November.)24. Housing values decline another 15-25% from Nov 2008 levels- Calif, Fla, AZ, Nevada see even steeper declines – http://www.housingwire.com/2009/01/14/foreclosure-activity-fires-back-up-in-california-report/25. States and local govts raise taxes on everything, unless Federal govt gives them help… this is going to be ugly26. Obama starts giving states and companies relief on Medical insurance premiums and costs.. possible full nationalization of Health care system gets underway in 200927. Fed possibly nationalizes entire banking system28. More Madoffs and ponzi scams totaling 1 trillion may happen, unless they hide the losses29. approx 2 Trillion in more bad Res mortgages/losses to be absorbed by banks and govt – http://www.bloomberg.com/apps/news?pid=20601213&sid=aTtVEJqx_S2w&refer=home30. 1 in 3or4 mortgages fail. Prime and Alt A pool problem is actually worse and larger than sub prime problem – http://www.housingwire.com/2009/01/14/foreclosure-activity-fires-back-up-in-california-report/31. commercial real estate and rents fall off a cliff, 50% drop in values and 1.5 Trillion in losses.32. Obama polls on effectiveness of handling job fall to Bush levels by end of 2009 – not his fault.33. US possibly gets involved in much larger ground war somewhere to stimulate economy and jobs and deal with crisis in mid east/India/Pakistan/Russia/Korea34. Credit card Debt approaches 2 trillion in losses for banks and lenders35. the Yankees with their new 3 players they paid 1/2 billion dollars to, win the world Series, but Yankee Revenue and profit implodes and Team gets in finaiancial trouble.36. 5-10 or more major sports teams go bankrupt in 200937. something happens in later part of year to unite the country… could be good or bad..38. Govt deals with civil unrest in parts of the country…..39. people will think things are better for 1-2 months at times during the year, only to be hit over the head with more bad economic news and problems40. these problems will last until at least 2012 as Americas struggle with all the resetting going on in the economy, from wages, to housing, to buying, to energy, to living simpler… – http://clusterstock.alleyinsider.com/2009/1/depression-odds-above-5041. Entire Govt and private Corp pension system is underwater by at least 2 trillion dollars and will be huge issue for Govt to deal with in 2009 – http://www.bloomberg.com/apps/news?pid=20601087&sid=aw9HrY21Ynno&refer=home another good link: http://blogs.reuters.com/great-debate/2009/01/14/pension-assumptions-hitting-the-wall/42. NorTel goes bankrupt- I called this one in Nov.

aerial viewJanuary 17th, 2009 at 10:20 am

alot of good suggestions EM! I would like to see a guaranteed interest on savings between 5-10% depending on inflation: this would have helped me and countless others I know save most of our hard earned income and invest a much smaller amount in equities, real estate, etc and overall, help create a much more healthy and stable economic environment in this country.

ptmJanuary 17th, 2009 at 10:22 am

Nice thought. The way to regulate corporate growth is to ask “Will the failure of this company cause so much disruption to the economy that it requires government subsidy?” If the answer is yes, then start spinning off divisions (creating new jobs and more competition) until the answer is no.Rather we now have the too-big-to-fail banks using their goverment subsidies to buy even more banks!

economicminorJanuary 17th, 2009 at 10:25 am

One more area of change is the taxing system. We all know how broken it is and unfair to everyone. We should get rid of the IRS and go to a flat tax or a VAT but the system is broken and because of entrenched interests, it just keeps getting worse.

economicminorJanuary 17th, 2009 at 10:28 am

In a system where the FED isn’t trying to take over the world, interest rates would be according to risk. They should be a reasonable rate of return for having saved, plus inflation, plus what ever risk is truly involved. So you can’t really fix interest rates but we need to get the monetary system under control. Get rid of the FED in its present form.

economicminorJanuary 17th, 2009 at 10:31 am

Don’t blame the economists. Blame us all for not really being involved in or really paying attention to what our political system has done to us. Inflation is the chosen way politicians pay for benefits they give out for votes vs. taxing to pay for them.

GuestJanuary 17th, 2009 at 10:37 am

3/ ENERGY … Solar is a nice idea but at this point it is to expensive and has storage issues.Solar is coming along nicely. At the moment there is over production of solar panels and tax credits coming. It used to be that a typical 7 kw installation would pay for itself in six years and last for 20 years. That was almost a factor of three ROI.Now we will probably see paybacks as short as three year range or a factor of six ROI.

economicminorJanuary 17th, 2009 at 10:38 am

Change is happening.Systems tend to go on and on, way beyond their viability, until at some point they break down.Similar to Minsky’s stability leads to instability or Kondratieff’s wave theory.We are witnessing a grand cycle event and for anyone who studise socioeconomics, this is an amazing opportunity. How will we deal with this as a nation? Will we rise to the occasion as we tell ourselves how great we are OR will we fall from glory.I think this we will rise to the occasion but first we have to get past DENIAL.

HayesJanuary 17th, 2009 at 10:38 am

(from the prior thread)another excellent article by Michael Pettis – and some related links from Sester and from NC some current China articles:Monetary conditions might exacerbate the Chinese adjustment

“Jan. 15 (Pettis)…The US experience in the Great Depression suggests that among the things we should be most worried about in China is underlying monetary conditions. If hot money outflows accelerate and, as is likely to happen, the trade and FDI surpluses drop sharply, we could start to see some large monthly net outflows, and it shouldn’t come as a surprise if large outflows increase the perception of risk and so encourage further large outflows. Remember that outflows mean dollars sold by the PBoC in exchange for RMB, which represents a contraction in the base money supply. If China is forced to experience a sharp monetary contraction on top of its economic adjustment, things could easily get out of hand.”

A few quick words on the November TIC data

“Jan. 16 (Setser) – China sold $9.2 billion of long-term Treasuries. But it also bought $38.2b of short-term Treasuries. China’s total Treasury holdings are up by $29.1b. By contrast it sold $3.1b of long-term Agencies and also reduced its short-term holdings by about $5 billion. China reallocated its US portfolio, but it hasn’t cut back on its dollar purchases.”

Secrets of SAFE: A sharp slowdown in reserve growth and large “hot” outflows in q4 (Setser)

“Jan. 13 (Setser) – China’s formal foreign exchange reserves rose by about $40 billion in the fourth quarter, rising from $1906 billion to $1946 billion. Adjusted for valuation changes, that works to a $55 billion or so increase. But appearances can be deceiving.”

Will China lead the world into depression? (Telegraph)

“Jan. 16 (Telegraph) – Oh no! Albert Edwards at Societe Generale has issued another terror alert: Sell everything. Hide in a bunker with plenty of whisky. The S&P 500 index of US shares is about to crash through its half-century support line to 500.”

Super bear warns on US, China risks

“Jan. 16 (Australian) – THE US economy is likely to enter into a depression and the implosion” of the Chinese economy will cause disastrous consequences for the whole world, Societe Generale strategist Albert Edwards said.”

China’s Economy Faces 2009 ‘Hard Landing,’ Fitch Says

“Jan. 16 (Bloomberg) — China faces an economic “hard landing” and the risk of social unrest with growth slowing to 6 percent or less this year, the weakest pace since 1990, Fitch Ratings said.”

economicminorJanuary 17th, 2009 at 10:44 am

Who produces a solar system that will pay for itself in six years? I had an estimate for a system here in Southern Oregon where there are good tax credits. The costs wouldn’t pay for themeslves in 25 years and all that money was unable to be used for other purposes, meaning it collected no interest nor growth. When that was factored in OR the money was borrowed, it was much further out.I would buy one today that had a six year pay back!

subgeniusJanuary 17th, 2009 at 10:50 am

The energy issue is not an easy fix. The only solution in the longer term is to reduce energy usage considerably.It is not enough just to try to replace one (or multiple) current sources with other forms of generation. Unfortunately I am currently pressed for time and don’t have the time to produce the in-depth analysis that it would take to elucidate this but rest assured that it is the case.

GuestJanuary 17th, 2009 at 10:54 am

Excuse me but SOME of us do NOT fall under your “Blame us all” blanket. Those of us who have been all too excruciatingly awake “to what our political system has done to us” and have BEEN being REALLY involved in – oh, you could say SHOUTING IT FROM THE ROOFTOPS – have every right and duty to lay plenty of blame on the economists – half of whom don’t know what they’re doing and the other half know what they’re doing and they’re doing it anyway!If we blasted every economist except Stephen Zarlenga (and maybe Dean Baker) into space, I’m telling you the planet would be safer and happier in a matter of weeks – because the planet’s worst and most lethal criminals would have nobody giving them cover anymore!Why does society bother going after any criminals at all when it hands an eternal pass to the kings of crime doing almost all the damage!?

aerial viewJanuary 17th, 2009 at 11:00 am

you make a good point; they are all interrelated and those who helped direct these leveraged financial time bombs should be held accountable!

economicminorJanuary 17th, 2009 at 11:02 am

That is why I suggested high speed electric rail as transportation uses the most and reducing in this area would have the most effect in the short and long term.We can produce electricity in many ways, wave, wind, solar, coal, nuclear, NG and maybe others I haven’t thought of but we have a real hard time with liquid fuels without depleting our food sources.

Octavio RichettaJanuary 17th, 2009 at 11:03 am

Wow! What a impressive pseudo rocket science display! This opening post for this thread is 100% cliché. Gloomy, why dontcha step to the plate and hit a homer?

GuestJanuary 17th, 2009 at 11:04 am

And, of course, Wild Bill, the sin-eater myth is a fantasy and didn’t work, and this won’t either. Except for one similarity — it allowed the sinners to go on sinning. And just as sin continues to run rampant, so does bank fraud.And, oh my, how Bloomberg and the Banker Boys do dress it up: “Regulators are advocating a government-backed “bad” or “aggregator” bank to acquire hundreds of billions of dollars of troubled securities now held by lenders…”This is sheer unadulterated nation-killing power – a refuse deposit bank (backed by the people’s labors) where the guaranteed winners of all the money can go to discard all their 40 to 1 losing longshots—for a perfect win-win. It’s a F.D.I.C. for the cartel’s private money making casino — the Federal Reserve System where the banking house always wins.The pocket book question: Whose bank debts are they insuring, yours or theirs? Whose pocket book is insuring them? Yours or theirs? Who’s the guaranteed loser? You or they?

GuestJanuary 17th, 2009 at 11:10 am

GOVERNMENT-BACKED! GOVERNMEN-BACKED!! GOVERNMENT BACKED?They’re using up the power. The power was that people trusted the government. And when you use it up, eventually, there won’t be any.

subgeniusJanuary 17th, 2009 at 11:11 am

Much more is needed – smaller houses, good insulation, designing to conditions (passive solar/passive cooling), reduction in gadgets (see the UK’s possible banning of plasma TVs), eating locally-sourced produce, yada yada yada…There is, however, a massive problem with the current housing stock: much too large, cheap low grade construction that is difficult and expensive to retrofit, and built according to possibly the most inefficient urban planning yet devised by mankind. This last is a real sticking point – rail only makes sense when you have much tighter clusters of population.On the subject of rail, high speed rail is a wasteful strategy. Instead a low speed but high efficiency network would make far more sense – though likely hard to stomach for a population that has no patience…

Octavio RichettaJanuary 17th, 2009 at 11:12 am

Hayes, Ur post above doesn’t take a reply. It bounces you to the RGE home page.If China manages to come out of diz one unscathed; That would mean US capitalism is a bunch of crap China’s lemmin-style comunist/central planing system is best and the whole world should aim to emulate it. Where can I buy my cheap gray polyester suit?My own view: China is gonna be a big *U%)@! mess.

subgeniusJanuary 17th, 2009 at 11:15 am

…and don’t forget that massive resource use is required to build and fuel nukes, that the high-grade deposits of uranium and fossil fuels are depleted and the remainder is thus much more energy-intensive to process – tending to EROEI of unity (or worse…)Reprocessing nuclear waste never made sense either economically or energetically – it was purely a source of weapons-grade material for the military. Plus the waste stream is made orders of magnitude more difficult/dangerous to deal with.

economicminorJanuary 17th, 2009 at 11:21 am

This is exactly why, because every special interest group wants to defend themselves to infinity. All sides are parts of the problems of keeping real meaningful change from happening. I suppose you are a nurse and have good health insurance and do not really want your benefits changed downward, even if that positively effects the whole.You also have pension benefits that the union has negotiated for you, yet you probably aren’t in charge of this money. So it has been hijackable by the financial industry..I am not against unions, it is just that entrenched positions keep change from happening and unions are part of that entrenchment and control that is breaking down our systems.

GuestJanuary 17th, 2009 at 11:21 am

“On the subject of rail, high speed rail is a wasteful strategy. Instead a low speed but high efficiency network would make far more sense – “I couldn’t agree more!

GuestJanuary 17th, 2009 at 11:26 am

You suppose exactly wrongly, and you appear to know little of the true struggle of organized labor…and how you have benefitted by sacrifices made by others – up to and including the ultimate sacrifice.

GuestJanuary 17th, 2009 at 11:35 am

Yes. The government gives itself inflation-based wage increases to protect itself from its own petard. Why not a similar protection for people’s set-aside savings? Incidentally, savings income was never taxed until the Kennedy Administration. For a government to tax its people’s nest egg income first via a wage tax, then an interest income tax and, lastly, a constant inflation tax is stealing, pure and simple.

Jason BJanuary 17th, 2009 at 11:54 am

OR -This is all a big mess. There will be no winners, only losers. The US will never be the same, and neither will China. Both of our economies are collapsing. We rose together, and will fall together in dance of death.

GuestJanuary 17th, 2009 at 12:15 pm

I understand where economicminor is coming from but your post is a blockbuster!!! And I know he appreciates it. We must not allow the criminals to shift the blame–to accuse us for what they do.

AnonymousJanuary 17th, 2009 at 12:47 pm

@economicminor, et al, etc., et al, etc…….To summarize everything from everyone that’s ever been said here or will be said there about this crisis it can be put down to this one metaphorical picture:”Everyone is fighting to hold onto to their little slice of the economic pie and as this is going on the pie is being forcefully left in the oven on high while also getting cooked to cinders. Whatever edible pieces of the slices that are left determines the winners. Unfortunately the winners cannot subsist comfortably on even what little they kept. This is what we are seeing and will be seeing until a new pie is prepared, mixed, formed, and finally, properly cooked.”Until then, Bon Appetit.AM

GuestJanuary 17th, 2009 at 1:17 pm

China won’t come out unscathed. The United States (whoever that is these days) entered into a “political partnership with a bloody, totalitarian regime,” as Robert Ringer put it in 1979. It is the outsourced fruits of capitalism that’s fueling China’s opportunism.”Playing the China card was a disgrace to every freedom-loving American. For Leonard Woodcock, chief of the U.S. liaison ofice in Peking, to refer to it as marking ‘a new era in our relations that will contribute to the well-being of both countries and of all mankind’ is shameless doublespeak even for a politician.”Hogwash. It marked a new era that will contribute to the coffers of Coca-Cola…and all the other American companies who began a wild stampede for their share of the 900-million-people pie (1970s) of China. I am in favor of complete freedom of trade between companies and people throughout the world, but not under the umbrella of political partnerships between government.”Make that a partnership between criminals and Hayes’ post:A few quick words on the November TIC data”Jan. 16 (Setser) – China sold $9.2 billion of long-term Treasuries. But it also bought $38.2b of short-term Treasuries. China’s total Treasury holdings are up by $29.1b. By contrast it sold $3.1b of long-term Agencies and also reduced its short-term holdings by about $5 billion. China reallocated its US portfolio, but it hasn’t cut back on its dollar purchases.”makes sense. Mix in blackmail, trading in bondage for bondage, international banker profiteering and negotiation between hardcore convicts and you’ll begin to understand what happened to capitalism and how China’s brand of communism made it to first base.Either WE restore the American Dream or We create a World Nightmare.

HayesJanuary 17th, 2009 at 1:32 pm

From the article above:

“The most important issue is the financial system. You don’t install new lighting until you’ve fixed the wiring, and the economy’s wiring is the financial system….There’s some merit to arguments against giving more money to the people who created this mess, and the bailouts to date should’ve had terms less friendly to banks. But it’s critical that we focus on the future and create a well-capitalized financial system that supports the growth our economy is capable of generating. Painful as it is, we must continue to recapitalize the banking system. Right now, several of our largest institutions are effectively bankrupt or close…What should the new president do next week?Pump more money into the financial system – in a way that strengthens viable banks and quickly disposes of those already bankrupt. Reinstate the original idea of the Treasury’s TARP program – namely, to use government money to buy distressed assets. “

So next week we will have a Treasury Secretary, who either was unable to complete his personal taxes correctly or who chose not to pay what was owing (there’s a more pejorative description available), pumping money into institutions that are effectively bankrupt and managed by the very people who were responsible for their demise.Seems to me that the wiring is still a bit hazardous … to mix the metaphors I think someone once said something about putting new wine into old wineskins. (Lk 5:37-39)

MinnItManJanuary 17th, 2009 at 1:40 pm

Everybody is so smart. If only we could listen to each other!Me, I’ll be getting my guns out of storage.

GuestJanuary 17th, 2009 at 1:43 pm

Bizar, Roubini also thinks MONYPRINTING will do the trick.I think US dislocated it’s moneyreation from real economic growth long time ago and that is the real problem. China and US has together built a system which has made US into a big crazy consumer.In the end you can only consume as much as you produce.Roubini watch out for mr hyperinflation because I cant se any other outcome of your so called solution.US has to monetize it’s debt to get money to recapitalize it’s bankingsystem.

GuestJanuary 17th, 2009 at 1:46 pm

As I believe Thomas Jefferson said: “when the people fear their government, there is TYRANNY, when the government fears the people, there is LIBERTY”!

MinnItManJanuary 17th, 2009 at 1:58 pm

Actually, a large part of our political problems is attributable to a variation of Jefferson’s statement. We’ll see if government can stomach the transition from analog broadcasting to digital. If this doesn’t happen on schedule, we’re are deeply screwed. If this is an issue at all, I would not be optimistic about our leadership. It’s a good test issue, insofar as we will know that, even on a low-stakes issue, our leaders are afraid of even minor public pain.I would say there is mutual fear between the People and the Government.

GuestJanuary 17th, 2009 at 2:04 pm

rethink that location location location attitudeand how school vouchers promoted an unequal distribution of brains.

GuestJanuary 17th, 2009 at 2:50 pm

“the Federal Reserve System where the banking house always wins” – of course! It simply CANNOT be any other way! Remember, The Federal Reserve System is owned neither by you, the taxpayer, nor by your elected government, but by THE MEMBER-BANKS! Yes, their only reason to exist is to print money and give it to their owners, THE BANKS!Just look who sits on the Fed banks’ boards, look at the Board of Fed. bank of NY, the most important of them all, the one that writes the bailout checks: “class A directors, representing the banking industry – all execs, including Dimon and, until recently Fuld.” But wait, there’s more: “Class B directors – representing public – Jeff Immelt, GE CEO, and Indra Nooyi, Pepsico’s CEO.”Think about it: GE and PepsiCO CEO represent THE PUBLIC? Sure, if “the public” is 500 Fortune-500 CEOs. They don’t represent me. Never did and never will. 2 Billionaires representing 300million people with avg. income of $35K/year. The hypocrisy of this is simply stunning.

joeJanuary 17th, 2009 at 3:05 pm

When, in all of this financial debt, will the US recognize that it MUST reduce military spending significantly?This should be number one, unfortunately, it did not even make it to a list of your top 9 priorities… after all it is where the big expenditures are negatively affecting our balane sheet.

RanManJanuary 17th, 2009 at 3:12 pm

Found this on the calculated risk site. This guy from Vermont is spot on!dan w writes:I’m glad I live in rural Vermont. I’ll tell you why: Because when it all comes crashing down, at least I’ll be far enough away from the epicenters of hell that I’ll be able to turn off the radio, sit around with my kids, and pretend the whole thing is just a bad dream. Look folks, we’ve either got to stop these thieves from destroying our world, or we have to get busy planning how we’re going to survive the coming economic ice age.The newest idea—that of creating “bad banks”, government institutions that simply buy up everyone’s bad assets—signals the beginning of the end. We have moved from the regime of the delusional into the regime of the completely insane. No, not simply insane: Criminally Insane. Ben Bernanke will pursue his White Whale without any care for the lives of his crew, US!Bernanke’s “bad banks” will spend trillions upon trillions of dollars to buy up all of the toxic assets that are secretly housed in the vaults and on the hard drives of the nation’s banks. Once all of these institutions have balance sheets that appear healthy, Bernanke and his Friedmanite friends assume that commerce and trading and lending and borrowing will recover and our economy will begin to grow anew. But it won’t—unless of course the federal government holds a gun to the heads of everyone involved—banks and citizens alike—and tells us all to lend and borrow and spend, or else. And even then it will take a helluva lot of guns to make even a teeny weeny dent in the situation. But they’ll try nonetheless, because saving the system is simply more important to them then are the lives of the millions who will perish during this the most grand coercion in the history of history. It reminds me of the scene in the movie JAWS, in which the mayor of Amity Island forces citizens to swim in shark-infested waters because, if they don’t he argues, the economy will suffer. And as we all know, as few legless swimmers and dead kids is a small price to pay for economic growth.But why, you ask, won’t the economy begin to grow once the banks and other financials have their balance sheets cured of the toxicity that currently poisons the corpus? Here’s why:1. A nuclear explosion of global unemployment will leave most folks unable to service any new debt.2. Tens of trillions of dollars in bailouts will leave the USA with deficits that no amount of taxation could come close to paying off. As such, the plug will eventually be pulled on the American debt machine as countries like China and Japan will refuse to buy up our debt—unless of course we use gunboat diplomacy to compel such action, which would of course be suicidal.3. These “bad banks” are going to have to spend literally TENS of trillions of dollars to accomplish the goal of buying up all of the toxic assets held by these banks, because for every billion in toilet paper reported by these institutions, there’s another 50 billion hidden away from public view. How do I know this, you ask? Well, just take a look at Citi and BofA. How much have we spent to BEGIN the process of saving just two institutions??? Let’s conservatively say 500 BILLION dollars. Now multiply that number by, we’ll say, FIVE (a VERY conservative estimate): Five being the multiplier that accounts for ALL of BofA and Citi’s debt. Now multiply THAT number by ONE HUNDRED (again, conservatively), a multiplier that represents the proportion of total debt held by Citi and BofA in relationship to the nation’s other financials. The total: Roughly 25 TRILLION dollars. At what point do the “bad banks” (The Government!!) implode under the weight of this debt glacier??4. Trust in the system is all but dead. The criminals have been exposed, and saving the banks only serves to further entrench the masses in their abject mistrust in the system that brought them this calamity. AND, once civil unrest comes to the streets of the USA, which, if history is any guide, it will—AND, unlike back during the 1930s, cell phone video clips and YouTube will spread the news of riots and repression at light speed—once rioting occurs here in the USA, what does the government do? (Of course more repression, which is the only logical course of action. Repression probably won’t restore much trust. Just a hunch.)5. Nothing is being produced! All that is happening is that debt is being paid off with more debt. ANY goods that might be produced and purchased by the American consumer are still being produced overseas. REAL growth of GNP is not happening. At best, the illusion of growth is being conjured by massive governmental spending and printing.6. And what about the THEORY that once the economy begins moving again, Ben Bernanke will remove liquidity from the system by raising interest rates and slowing lending and borrowing? Hogwash!! First of all, banks and insurance companies and any and ALL financial institutions will continue to sit on capital in an effort to maintain their own solvency. In the coming regime, the profit motive has been stripped away as banks realize that there is very little to be made on too much risk: better to hold all of the money being provided by the FED—I mean, by the American taxpayer—and maintain a position of relative solvency then risk investment in a fetid lending environment. In addition, the monetary policies currently being proffered by the FED assume–based solely upon theory, not upon the realities on the ground—that eventually the credit crisis will ease because liquidity and “solvency” will resuscitate the system. WRONG AGAIN! Imagine a scenario in which an individual is given a 500 Volt shock every time he engages in economic activity that places him further into debt: credit card debt, mortgage debt, whatever. At some point the guy is going to be like, “screw this!”. Well, we’re there and then some.7. Our political and economic leaders live in a bubble, in the ultimate Ivory Tower. They have no idea what our lives are like, how we suffer. And I don’t simply mean physically. I mean the angst that we experience because we do not know where our next meal is coming from, or if in fact we’ll be able to take our sick children to a doctor, or whether or not the water that we’re drinking will make us sick. Our leaders think they understand, but they cannot because they haven’t felt the fear that we feel, every day. And so their theories are but the fantasies and intellectual games of the elite. For them it really is just a game. We are the game pieces, and they are the players. And when they lose a game, they can just use new pieces. But what these folks don’t get is that we are coming to understand this game. Bad news for the return of “trust” in the system.Time is running out.

RanManJanuary 17th, 2009 at 3:19 pm

Wild Bill is right! It is totally insane to think a government “bank” is going to be able to buy up all the toxic crap on the bank’s balance sheets and once that’s done, they’ll get back to loaning $$ again!Sometimes I read this stuff and wonder if I’m in a bad dream! You can’t think this stuff up!When did we get so complacent to vote in the group of imbeciles running this country!The only way to get their attention is to march on Washington in large numbers, hold rallies and protests in key places like the treasury and the FED! Maybe, maybe, then the elected officials will have the balls to do what their constituencies tell them to do instead of what the PACs say.Let the banks o broke! Abolish the FED. (sign the petition on MIsh’s website!). Take back control of the money supply from the money changers!

blindmanJanuary 17th, 2009 at 3:51 pm

e,great ideas. thanks for posting them. i hope to hear these circulate and take root in the minds of the people. good things come from good ideas. i think it’s that simple. but the ideas? that takes work. thanks again.

PeterJBJanuary 17th, 2009 at 3:58 pm

Carried over from the previous thread:”Dear Peter JB,Why should extra-terrestrial save us? Because we are integral parts of the critical mass of life force necessary to perpetuate ever evolving life in our universe and because you and I are nice guys.”@ Wild Bill on 2009-01-17 09:48:28May I request Sir, that you speak only for yourself on such matters :] and may I add, that your position may be so, as you state but, such a position, above all, is merely opinion, albeit yours; compelling as it is.Therefore I remind you that the life game (autopoiesis) plays by the rules of conservation where convention prioritizes redundancy and economic frugality/efficiency/effectiveness; and, a delightful game it is; apart from those times, such as now, when we need witness the results of those crasse acts of applied ignorance.This jail in which we are in, is of our own making and real freedom is for us to grant, er, to ourselves. We just rid ourselves of the feral which we call “leadership” and take up that role ourselves.However, this “suffering” is our lesson; our picking the cat up by the tail.All the important attributes of alien species are within you / us – we don’t need intervention; we need to try to understand (the Laws of Physics) and stop being so damned arrogant.I am however, most optimistic.Ho hum

GuestJanuary 17th, 2009 at 4:07 pm

Excellent. This private banking cartel it turns out is the nucleus of our current crisis and in the more than 90 years of its life it has never been exposed in its full infamy as it has in recent weeks. Your brief and profound description is among the best. If I ever need a public advocate, I want you!

HayesJanuary 17th, 2009 at 4:11 pm

They seem optimistic:growth returns to positive in 2H09the S&P 500 should anticipate this rebound and move higher…three to seven months prior to the end of the recession. Year-End Target Range: 990 – 1040and here’s their “Global economic outlook for 2008” (published in Feb 2008)for their (formerly) wealthy clients (some good predictions but also some questionable ones such as:Slowdown but no recessionEmerging markets: Superior performance to continueEquity markets look cheap even as profits fallhttps://www.dws-investments.com/EN/docs/market-insight/PROD0000000000221110.pdf

GuestJanuary 17th, 2009 at 4:11 pm

Dr. Bob is certainly optimistic about where the U.S. economy is headed. It sounds more than a little too good to be true, but who knows. I sure hope he is right, but I doubt it.

PeterJBJanuary 17th, 2009 at 4:12 pm

Good try Wild Bill but your analogy is flawed; that is to say, we are in an evolving state and not a state of new birth; imo the situation demands an analogy build of the snake shedding its old skin.Whatever happens, our natures will remain the same but we can shed our quantitative bent in favour of a qualitative bias entrenched in values; after all, we were here before.Ho hum

GuestJanuary 17th, 2009 at 4:23 pm

America could survive without the banks, but it can’t survive without justice.Freedom, justice and individual enterprise is the foundation of America, not the banking system. And it seems that when we’re talking about several trillions of dollars that are taken unjustly directly from Americans, then we are talking about endangerment of the foundations which built America: honesty and justice, not banking and thievery.

GuestJanuary 17th, 2009 at 4:45 pm

The elite were paying themselves all the profits of the nation which of course led to financial collapse as it always does and now they say there’s even more of a reason they can’t pay people. Look for reasons, come up with specifics but it’s always the same , greed by the people in control leads to eventual weakness or collapse.

GuestJanuary 17th, 2009 at 4:47 pm

dance of death……. of death….Victory! Victory!On with the dance!Back to the jungleThe new beasts prance!God, how the dead menGrin by the wall,Watching the funOf the Victory Ball…Noyes

GuestJanuary 17th, 2009 at 4:53 pm

It’s genius, a dictatorship with an enslaved society but with some partial incentive to start businesses and work hard. It’s exactly what western capitalists would like to see happen over here.

GloomyJanuary 17th, 2009 at 5:08 pm

Nouriel,You have foreseen the end of BW 2. Look closely and you will see that it is here and now. No country can self-finance its own liabilities. Therefore the collapse of the dollar and the treasury market will happen this year. This is the story you must chronicle this year. Stop wasting your time on last year’s story.

HayesJanuary 17th, 2009 at 5:18 pm

I am sure there is an explanation but the final comment of the above article states:”Reinstate the original idea of the Treasury’s TARP program – namely, to use government money to buy distressed assets”I recalled reading NR’s article back on Sept 28 with the rather long title:”Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks” link It is also interesting in that September article how NR described some of the actors:”Thus, the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer…This is again a case of privatizing the gains and socializing the losses; a bailout and socialism for the rich, the well-connected and Wall Street. And it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners.”Not to be a smart-ass, but I think Geithner and Rubin would be included in that group.

Wild BillJanuary 17th, 2009 at 5:49 pm

I concede your point. Of the two of us, I’m sure you are the nice guy. I am suspect. The life game (autopoiiesis) is also subject on occasion to dumb luck. Even though black swans do occasionally fly over, I too am optimistic when I am not terrified over the prospect of war. On the whole Peter JB we agree. I can not be complacent even though I too, believe we have all been here before.

HayesJanuary 17th, 2009 at 5:57 pm

Setser in a response he gave to a comment in his own blog suggested an interesting (and what he calls unlikely) possiblity:

The printing press is a powerful technology. But I suspect the cost of using it to print money to pay off maturing external debt is rather high. American as well as foreign investors would anticipate a big fall in the dollar, and no longer want to hold dollar denominated claims. An expected surge in inflation would tend to push up US interest rates. Both would tend to push down us financial asset values, with predictable results. Home prices, for example, might fall further …Now it is possible that the US could just jump to a new equilibrium level of the dollar and the inflationary implications would be modest as everyone would realize that there is a one off change in price levels but not sustained inflation — and in that circumstances interest rates might remain low. But I wouldn’t want to bet on it link to page where comment was made

GuestJanuary 17th, 2009 at 6:12 pm

It doesn’t disturb the lives of the richest when you protest in front of a public or business building – therefore it doesn’t affect the decisions they make. Hold your NOISY protests ON THEIR FRONT LAWNS.

Young EconomistJanuary 17th, 2009 at 6:14 pm

My biggest concern is the intervention without fair pricing that generates the huge debts for the next generation. Now we have FED and FDIC intervene every financial assets without fair pricing consideration in all facilities, benefit of TARP equity injection on equity and warrant lower than private investors, CITI and Bank of America loss guarantee, and no one knows how much FED and FDIC is going to get loss from intervention that is financed by public by more tax or more interest rate or more currency depreciation in case of monetization. Now We could expect to see the very steep curve (may go to 500 bps) of the long term rate and the short term rate because of the uncertainty of the future public debt (from FED, FDIC and Fannie) and the credibility of FED to utilize the financial tools and how FED finance the loss from intervention.The suitable system under is needed to solve the problem with fair pricing. Now the government intervention is doubted to give the fair pricing whatever it uses the bad bank policy to leverage public money from Congress that would cause more gigantic debts from the loss of the leverage policy or the old method of FED and FDIC intervention.The best way now the public should focus on FED and FDIC whether they intervene at fair pricing or not and should focus how much the expected loss from those intervention that no one knows.Bad bank is good idea on the expansion of intervention size without Congress and public awareness that the leverage is not public debt but it actually is, but if there is no fair pricing, it will create the unexpected mountainous loss that will cause the calamity in the financial and economic systems.We could expect to see the leverage bad bank idea to be used by other countries in EU and Japan, so we should not be the concern too much about currency devaluation.

GuestJanuary 17th, 2009 at 6:23 pm

Well now, lock that Guest up and throw away the key – for using the subversive word ‘justice’ on an economics professor’s website! Or the next thing you know we’ll be tossing around that dangerous word ‘equality’!The American Dream was always about FREEDOM FROM TYRANNY OF THE MONEY POWERS. It was NEVER about the freedom to screw over the working people who built this country! What a novel idea: that this country was built by THE LABORING CLASSES – NOT the leisure class!

GuestJanuary 17th, 2009 at 6:36 pm

Sorry for the confusion, Anon: it’s his own words that tell you he’s going after social security and medicare, and he’s going to use this crisis as the excuse. “gotta get those bad old entitlements under control”, doncha know – cuz granny is still eating – and never mind the trillions going down that rathole called the pentagon!

Free TibetJanuary 17th, 2009 at 7:23 pm

You’ve done it again. Things that I’ve been thinking for weeks – even months – you’ve put into one paragraph.”NO COUNTRY CAN SELF-FINANCE ITS OWN LIABILITIES.”If anyone reading this has any doubts about our future try to understand just this single concept.Thanks, Gloomy. It’s perfect.

GuestJanuary 17th, 2009 at 7:30 pm

Question: are countries also dependent on credit available in the world, and if so:A. is it mainly those countries that do not export enough?B. is the current situation also affecting the money that is available for countries to borrow?Thanks for any advise in this.

kilgoresJanuary 17th, 2009 at 7:31 pm

Meaningful reform of entitlements does not necessarily imply the decimation of social safety nets. Mr. Obama recognizes that nobody can count on an entitlement system that is in danger of becoming insolvent (if you don’t think that’s a problem, I suggest you read Peter J. Peterson’s book, Running on Empty, or visit the website for the non-partisan Peterson Institute for International Economics at http://www.iie.com/ and read up on the problem).As part of a bipartisan plan that would be phased in over many years, according to the Obama campaign website, he intends to require those making over $250,000 to contribute more to Social Security to keep it sound, in the range of 2 to 4 percent more in total (combined employer and employee). According to yesterday’s (01.16.09) article in the Washington Post, Mr. Obama said “his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.”Seems to me the “new bargain” on entitlements he is seeking is merely to take the difficult steps necessary to make social security, medicare, and similar programs fiscally responsible by restructuring the way they are funded to require the wealthiest Americans to pay a greater share to ensure the viability of entitlements, but only AFTER the economy begins to come back (which means it could be quite a while before his plan can even begin to be implemented — he’s not going to be increasing taxes on anyone while the economy is still faltering). There is no evidence that he plans to curtail entitlements substantially or eliminate them altogether.SWK

GuestJanuary 17th, 2009 at 7:35 pm

Why does it seem that Obama’s decisions are not so different from what Bush might have done? Does he use advisers that have ties to the Bush-Cheney regime? Or is there another reason such as bare necessity? Or am I seeing patterns where none are present?

blindmanJanuary 17th, 2009 at 7:36 pm

w,excuse it? i love it!.i think you found the only known case ofa deceased sole not being a deceased soul ? as i am among the minority that believe fish have a spirit, sole’s have a soul, however i do eat fish, sole if available, but would “never” eat a soul and would like to never do any harm to one. in this prohibition i would like to think i am back into the camp of the majority.all this reminds me of the story of the Essex, the whaling ship that was sunk by the great whale.the true story that inspired the novel moby dick.the crew went into the rafts a thousand miles out in the pacific. when they ran out of sole only the hunger remained and it was a human tragedy.the captain, john chase, later explained to his sister in law, i think, what had happened to her son, his nephew. chase later hung himself inguilt and grief. even in that tragedy there was an “orderliness” to it’s execution, no pun intended.i hope this has nothing whatsoever to do with your original post besides serving as a bad analogy of a worst case scenario. the sole vs soul thing set me off.?

YveJanuary 17th, 2009 at 7:42 pm

The abomination embryo will hatch, soil the nest and fly away with your money, probably south to somewhere very warm and comfortable, leaving us with the soiled nest and not much else. Maybe a little of the toxic yolk sac on our collective faces.

Octavio RichettaJanuary 17th, 2009 at 7:45 pm

Hayes, Ur comments on the DB ppt: Ur right. Ii didn’t buy everything I read in the presentation but I found some nice ideas that reiterated my thoguths in things like grains.

kilgoresJanuary 17th, 2009 at 7:46 pm

>8/LEGAL AND ENFORCEMENT…>To[o] much legal influence in the political system.I’m not sure I agree with you on that. To the contrary, I think a lot of our current problems stem from politics that are not well-grounded in the law and ill-conceived policies by elected officials and appointees who have a dearth of legal training but are wholly unaware of the extent of their own ignorance in the law and the adverse impact it has on their decision-making. The court system then gets blamed when those bad laws, borne of politics driven by money and blind ideology, are enforced.When the President of the United States refers to the Constitution as a “just a goddamned piece of paper,” nobody should have any confidence that they are being governed wisely or justly. We need to bring back respect for the Rule of Law, and I am confident the new administration will go a long way towards accomplishing that goal.SWK

kilgoresJanuary 17th, 2009 at 7:49 pm

What happens when the people start to fear one another? Some of the folks on this blog make me a lot more nervous than the government. ;-)SWK

GuestJanuary 17th, 2009 at 7:55 pm

“How to Steal Billions in Plain View: Bernanke’s Robber Banks”by Michael S. RozeffThe Federal Reserve is living up to its purpose, which is to enrich bankers at the expense of everyone else. Ben Bernanke, who chairs the Federal Reserve Board, is to be congratulated for his open call for the banks under his tutelage to receive billions more of our tribute.Let us understand the matter clearly. We have exited a significant boom period. During the boom, the bankers made large and very large profits. The managements took home very large pay and bonuses. The stockholders (including officers and managers of the banks) had, for a time, very large wealth in the stocks they held. The bondholders of the banks had, for a time, very secure debts.But the bankers over-reached for business in several ways. They extended a slew of bad loans during the lately departed boom. The stocks and bonds fell in price, reflecting the lower worth of the bank assets, these bad loans.And now that the boom is over, the bankers, led by Mr. Bernanke, want us to eat their losses.Bernanke urges Congress to absorb the bad loans. The details of his three alternative plans are secondary to the fact that they all ask that others pay for the losses that the bankers caused, or else they involve the government in a variety of complicated maneuvers by which the government ends up shoring up these banks and bankers while taking on various risks of owning portfolios of bad loans. The idea is for the bankers to offload their mistakes onto taxpayers.One plan has the government buy the bad loans. Why? Why don’t the bankers reveal what these loans are and sell them in the market? Such sales will reveal that their assets are worth even less than what the market now thinks. The insolvency of the banks will not only be revealed but it will trigger legal ramifications. The banks will have to be re-organized. This will mean breaking them up. It will mean that the holders of the securities of the banks will face large losses, even larger than are now being reflected in the current market prices.A government bailout does the following. It preserves the bank organization. It preserves the current bank management. It transfers taxpayer wealth to the security holders of the bank (bondholders, preferred stockholders, and stockholders). It transfers wealth to counterparties to other contracts that the bankers entered into…Citibank or Citigroup is emblematic of the whole tawdry affair. Why in the world should we be saving Citibank…?Promoting overcapacity and singling out inefficient banks for the grace of taxpayer dollars does not promote a lasting recovery and it surely does not strengthen the financial system. Shifting the assets of Citibank, such as they are, to higher-valued uses through re-organization is a sound way to promote recovery and strengthen the economy. But this path would require that a lot of Bernanke’s favorites would bear losses. It would mean a rather different banking system might emerge that influential members of the Fed, who apparently shape its recommendations and bailouts, do not want.What cheek! What effrontery! What brazen thievery! How disgusting…!It is obvious to all but those in government that the markets are attempting to mark prices down to realistic values and that this will facilitate recovery. The markets are attempting to weed out inefficient firms. It is obvious that there is overcapacity in some lines of production and some asset classes, and this capital must be priced out at market and brought into uses that are economic at the new and lower prices. It is obvious that the capital structures supporting many of these investments likewise have to be marked down in price and a good deal of it must disappear altogether. This is what deleveraging means. It is evident that there are losses to be borne by those who invested in these assets and those who hold this capital.The government’s attempts to stem these adjustments are futile and counter-productive. Its wealth transfers, which are nothing more than theft, resolve nothing…Michael S. Rozeff [send him mail] is a retired Professor of Financehttp://www.lewrockwell.com/rozeff/rozeff257.html

GuestJanuary 17th, 2009 at 8:24 pm

If the banks are forced to reveal the nature and extent of their toxic assets before the plan is fully and finally in place to take them off their books, their insolvency will be obvious and the public run on the banks will begin with a flurry.

GuestJanuary 17th, 2009 at 8:56 pm

This is what I exactly mean Professor. Even with the New deal, Roosvelt made sure thatthe instutitions that were bankrupt were allowed to fail. A banking holiday was called and only the sound banks were allowed to open again. This removed uncertainty and restored confidence in the market. What is the point of putting more money in firms then their market value. They are staring into a abyss and not swallowing the hard pill which can restore the system. Secondly, if the changed mortgages fail, the root of the crisis, housing, will only “drag” along. They might end up failing 5-6 months later, so whether that would be the right policy remains to be seen. Stimulus package is the only thing all right, however throwing money after every bank is insane.

GuestJanuary 17th, 2009 at 9:18 pm

Young Economist, your concerns are well taken: your consequences spot on, if, as you say, government intervention foregoes fair pricing as the basis of “bad” bank policy for leveraging public money, causing “more gigantic debt” and “calamity…”Hopefully, there will be no “bad” bank. But if there is, I can assure you there will be no fair pricing — the banks will not book the extent of their losses and Bernanke will never disclose any information as to where he has distributed the trillions. They are above the law. It’s clearly a transfer of the nation’s wealth to the investment bankers: their government-backed “bad” bank is just a place for them to exchange their insolvency for billions more in stolen wealth, taken by force from the soon-to-be extinct American “taxpayer.”This is the money power that killed Great Britain: it is the same money power that will kill the United States.The central bankers, whether in the EU or Japan or the US, are interconnected in a giant spider web of finance – so, yes, there’ll be “bad” banks there, too, where they can dump their waste on the people’s heads.And one day, we’ll all be merged into one big government on the basis of “equality” with one big bank and John Maynard Keynes’ proposed Bancor as our one monetary unit – backed by banker ownership of all the world’s resources.

kilgoresJanuary 17th, 2009 at 9:27 pm

Here, here! I concur. Good positive assessment. We can deal with any problem as long as we’re willing to acknowledge the problem and face it headlong.SWK

aerial viewJanuary 17th, 2009 at 9:30 pm

OK BRAINIACS WHAT DO YOU THINK: Would the U.S. be in this possibly fatal financial mess if we had not gone down the road to mass globalization and by that I mean shipping most of our manufacturing and technology sector oversees and relying on foreign countries such as China, Japan, Saudi Arabia, etc to endlessly lend us money?

GuestJanuary 17th, 2009 at 9:43 pm

From the announcement of sales, you won’t be alone. Even ammo is scarce, one sporting goods store worker in New Mexico announcing (Nov. 15) gun sales and ammunition sales up at least 200% since the elections.How did one blogger put it? “Barack Obama: Best gun salesman, ever.

PeterJBJanuary 17th, 2009 at 10:06 pm

Eventually Yes, but it would have taken move time. You have to remember most of these major World Banks were technically bankrupt in the early ’90’s.It was just a matter of time and that conjures up some interesting questions.Ho hum

GuestJanuary 17th, 2009 at 10:06 pm

Hopefully the pie will be a recipe of labor and management, supply and demand, capital goods and markets, savings and investments, resources and stewardship, profit and loss, property rights and education, stable currency and social justice, equality under the law and fair wage, open competition and regulation, a free press and freedom of religion, good will and contract, and happiness and representative government — with just a smidgen of banking, fiat-free – baked in a thick crust of liberty.

GuestJanuary 17th, 2009 at 10:34 pm

Blindman, what ARE you doing up at this hour? Don’t you know that it’s way past your bedtime? (And NOW you have awakened me with your mirth and merriment. You’ve made me laugh and laugh and laugh!! But, in that “a merry heart doeth good like a medicine,” you can stay up a little longer.) Mom

AfAJanuary 17th, 2009 at 10:46 pm

Formula For Fiscal Fatness:Institute outsized stimulus package.”The most important issue is the financial system. You don’t install new lighting until you’ve fixed the wiring, and the economy’s wiring is the financial system.” Well, that, unless you build a wireless or hybrid economy.”Japan’s no-growth decade is the classic example. After equity and house prices collapsed in 1989, the Japanese government spent trillions on infrastructure but failed to fix the effectively bankrupt banking system.” In all cases, that’s much better than just saying “… US government spent trillions on infrastructure and banking recapitalization but FAILED – full stop”.”The result: no growth for 10 years.” In our case, let’s cross our fingers.”Painful as it is, we must continue to recapitalize the banking system. Right now, several of our largest institutions are effectively bankrupt or close.” If most of the banking system is bankrupt, how can we recapitalize it without bankrupting the whole country? It is not painful, it is suicidal. Any recapitalization before quarantining then forcing out all bad debt and purifying balance sheets is akin to vampirism. Or akin to a anti-cholesterol diet administered to a diabetic.

blindmanJanuary 17th, 2009 at 11:07 pm

thanks mom.it makes me laugh too, knowing somebody appreciates my gallows jokes. but, if you think about it, it is really not so funny, but then again, it is.??ps. i might just stay up a bit longer, ok?

marc weinerJanuary 17th, 2009 at 11:11 pm

nouriel I think your analysis is correct but your suggestions for problem solving are inept. Grow Up!! A bad investment is a bad investment. Whether a factory to build Hummers, a McMansion in Riverside Cal., or another mall to sell some teenager her 40th pair of jeans, throwing money at these investments will not make them good. You suffer from CNBC-itis. The markets are down–“the world is coming to an end.” The market is up a hundred points ?oh? “the world is not coming to an end.” A trillion for the the guys who wrote derivatives and can’t make good-no problem. A trillion for the bankers who paid themselves real money out of illusionary profits –no problem. Pass a law. All debts canceled. Send every one a check for a million dollars. Every one is wealthy and no one has to work. Its just as absurd as your solution. The difference is you suggest sending the checks to some and not to all.

PeterJBJanuary 17th, 2009 at 11:12 pm

Quarantining these centres is the only way to approach the problem but…But, firstly we must have a thorough comprehension of what the phenomena is with which we are dealing and then… difficult for the ones in place…we must have a comprehensive plan in place, and then… impossible for the incumbents…we must have integrity and no political interference, that is to say, a full blown mandate so that the slicks and the sleese cannot scam and scalp the process… will not happen…The wiring is already in place and is now a minor consideration except in terms of security.Painful? Difficult?We humans excel on the edge! But there is a formula.Ho hum

anton kleinschmidtJanuary 17th, 2009 at 11:45 pm

There is no doubt that the global banking system lies at the heart of the present crisis and much is being written about what needs to be done. The remedies include:• Reform• Improved regulation• Recapitalisation where needed• Improved accounting standards• Transparency in reporting• Better risk management systems• More appropriate reward structures• More severe penalties for transgressionsAll these proposals are valid but nobody is talking about the most important element in sorting out this mess……PEOPLE.From the most senior executive to the most junior marketing types, many of the world’s banks are staffed by people who simply cannot do their jobs properly. This is not about to change without focused intervention.Everything was fine when global financial markets were booming and fundamental incompetence was masked by runaway market growth. With the escalating crisis many of today’s bankers are simply way out of their depth and this is the most pressing of all the problems requiring attention.

PeterJBJanuary 18th, 2009 at 12:08 am

There is no doubt about this at all; it is called Hanlon’s Razor and it is pervasive throughout our whole global society today; we have bred the current crisis situation through Policy at the hands of “leadership”; note the way it has evolved.When George W Bush was inaugurated as President of the USA, it was then obvious that we placed the World’s most stupid man as President of the World’s most powerful Nation.And, he destroyed it inside a few years.Ho hum

GSMJanuary 18th, 2009 at 12:16 am

But do not underestimate the US arrogance to TRY, to attempt to dupe creditors and bluff others into acceptance of this.

PeterJBJanuary 18th, 2009 at 12:19 am

Luck is merely time and position and,complacency gets you dead.Thanks, I think that I’m a nice guy but there are many who disagree mainly because I am ever sentient and skeptical and trust no human (I like dogs though) so, Yes, we tend to agreekindest

blindmanJanuary 18th, 2009 at 12:21 am

a,a couple of related ideas..this bubble of crazy financial instruments must have taken many people many hours to create, handle, selletc. and it all amounts to bullshit. who wouldn’t be out of their league in that environment. any sane person would be? so that will be gone freeing up energy better utilized elsewhere..the business of production of technology is outpacing mans capacity to constructively utilize the products. so it is being misused and is actually making people less efficient and productive. i realize this is blatantly not true in many instances but it is true in many others.it might even be universally true that every time man creates a technology it is massively misused for a period, causing waste of energy, resources etc. learning curve. and the problem intersects not only the work place but the technology market for the technology has to be sold at a profit? volume, but overproduction seems to rule the day, did rule the day, speculation again.and acceleration of development and advances again mess up the market with systems becoming obsolete? before the equipment is even warm. yet volume seems to be necessary to maintain profitability. the model seems problematic..so the thing is some of the problems we recognize now that existed on the way up in the inflation of the bubble might self correct or become irrelevant as the deleveraging changes the dynamics and presents new problems that will require more immediate correction.

GSMJanuary 18th, 2009 at 12:25 am

The US people better wake up to what is happening soon. Because these crooks are hell bent on robbing the palace before the populace breaches the defences. By the time they et in, it will all have been looted.

GSMJanuary 18th, 2009 at 12:25 am

The US people better wake up to what is happening soon. Because these crooks are hell bent on robbing the palace before the populace breaches the defences. By the time they et in, it will all have been looted.

AnonymousJanuary 18th, 2009 at 12:29 am

I have been reading these blogs for some time as well, and I have to say and agree that the statement, “No country can self-finance its own liabilities” is probably the most profound statement summing up the scenario as it has been and will continue to unfold. Bravo.

GSMJanuary 18th, 2009 at 12:35 am

This catastrophe could not have occurred without several critical enablers;1)Repeal of the Glass-Seagel act by Clintons Administration in 1999- sponsored by Larry Summers with the parasite Rubin calling shots from behind the Citi curtains. For benefit of the Wall St Banksters by enabling retail banks to gamble deposits .2)Accountancy Laws changing to allow off balance sheet assest to grow and in an enclosed and opaque environment- unseen and un auditted- a pure recipe for greed corruption and collusion.3) A ratings system that at its core is inept and corrupt- creating FALSE reliance on worthless and misleading paper.4) Economically and mathematically uneducated masses. Glued to their flat screens watching opera soothed by a compliant and largely vested interest media.Join the dots people, they are present in every aspect of this disater. You can do it if you try hard enough.

YveJanuary 18th, 2009 at 12:38 am

Point # 7 very succinctly sums up how 80% of the rest of the world lives every day & have we cared? Not in the least, as long as we could gorge ourselves on cheap crap from Walmart and entertain ourselves on vacuous television shows, while the crooks robbed the coffers. I always wondered what the world would be like if the shoe was ever on the other foot. Most of us find the idea that we could ever find ourselves living in 3rd world conditions utterly unthinkable, yet it’s been absolutely okay to leave the vast majority of humanity to wallow in a morass of abject & inescapable poverty. If the dire predictions from the post above come to pass, maybe we’ll be able to get a nice family somewhere to sponsor us “for only pennies a day” to keep us from starving; alive enough to make more disposable crap for them to enjoy.

GuestJanuary 18th, 2009 at 12:40 am

It now appears to be the consensus that this is very much bigger than a housing crisis — i.e., at its core, this is a global banking crisis. There is some logic to the theory that the global economy may quickly collapse if a few of the bigger players in the world banking system suddenly collapse. Even assuming that this theory is correct, however, it does not necessarily follow that the global economy will collapse if those unhealthy big global banks are unwound in a calm, transparent, orderly, ethical and economical fashion. It seems to me, however, that this option is for reasons that escape me off the table. It’s not even up for discussion. What’s the explanation for this?

blindmanJanuary 18th, 2009 at 1:46 am

pjb,i take it as a clear message from the human MIND, beware institutional consensus masqueradingas leadership / intelligence. if people learn that we might have a silver lining.i have observed individual humans are lovely creatures but institutional creatures can become ignorance loving monsters. it is a strange evolution but not uncommon. rarer is the development of the realized free man / woman..again, i always anticipate reading your work.

GuestJanuary 18th, 2009 at 1:56 am

g,i didn’t mean to dismiss all the other stuff that has been mentioned. just trying to put another perspective on the beast. the real economy problems aren’t going to be fixed even if the financial abomination is corrected.

GuestJanuary 18th, 2009 at 2:18 am

g,the rich and powerful do not want to become merely wealthy and retired or worse, indicted and then imprisoned.? rather a bailout, systemic collapse or both. he who frames the argument wins.

PeterJBJanuary 18th, 2009 at 3:13 am

@ blindman – you see well; well indeed.The collective that is to say, the source of the ‘institutional consensus’ is a physical Universal Principle and when found in the human state it takes on its own personality; the human members all/each one, must, a priori, sacrifice their own integrity to this beast which we find in corporations, clubs, governments, Party’s, teams, families, etc., etc. Each member sacrifices his/her own belief system, just a fraction perhaps, and /or more and then represents the collective; it is so demanded of the collective.Normally sane and intelligent men obey the demands of the collective, unaware that they do so to their own eventual detriment and human death. They have no inkling what they do, hence “Forgive them for they know not what they do”.Eric Hoffer’s, The True Believer and his many other works, are a wonderful source of reference material to this end.To me now not so strange as I have recognized this fact for many years now – peoples of the collective will kill for the collective (if properly conditioned) against their own natures and beliefs.It is not very well know that there are almost as many neurological receptors in the human stomach as there are in the human brain; maybe more and in ancient times, people were call ed by sages, stomachs. One could arrive at the conclusion that evolution of man is the journey from being a stomach (intelligence) to becoming a Mind (intellect)?Even the most staunch believer in self, can be corrupted under the quiet and subtle conditions of the collective – if not always sentient and skeptical.Most rare is the free man who amounts to, in potential, exactly 5% of the total population at all times. Here the human appears to be unique although the principle is found in wolf packs of the wild. Perhaps other species as well but I have not studied that many.Consider please that man behaves in exactly the same way as Plasma in space (and the laboratory).Anything that comes from the mouth of the collective beast, cannot ever be trusted nor considered, intellectually found.kindest

AnonymousJanuary 18th, 2009 at 3:26 am

It just dawned on me that out there right now there are undoubtedly those which are happy even when they have relatively little during this crisis as compared to us titans of industrious accumulation – they being essentially blissfully ignorant of our tormented travails – yet they content having grown their own food on their own land satisfied with full stomachs and realistic dreams, while we pace here immersed in all this ‘commerce’, sweating and fretting all hours of any given day, as to whether our rightful comfort zones will remain the same or flat-out will go away forever under the whims of our benevolent leaders.Perhaps this is what was meant about ultimately whatever happens in this world be it by kings or knights, ‘the meek shall indeed inherit the earth’?AM

PeterJBJanuary 18th, 2009 at 3:31 am

@ blindmanconsider this as the final source of entering the final cyclic state of fascism before collapse and it bears a lesson which we must grasp.I believe that the manufacturing numbers are correct in theory, but distribution, which means multi-layers of bureaucratic complexity, delays, and all constraint things collective, screw up the realization of profits in the respective windows of opportunity and hence blow the system.Making stuff out of dirt seems a mite primitive to me when I believe that we could easily manufacturer the basic materials at atomic levels.Now that ought to make you sit up in your chair :-]Good point blindman

GuestJanuary 18th, 2009 at 3:49 am

Many suggest that artificially low interestrates set by the FED is then main reason behind all this. Then if this is true Roubini has to ad higher/market interestrates on his reform list for the financial system. (There are many countries with huge housebubbles that have not had any subprime lending.)If the recapitalized banks start to give 25 years mortages with an interestrate at 3-4% they will be in trouble later on. (They finance short and lend long). Roubini himself has said that we in due could expect some inflation pressure and thus higher interesrates.Finally a counry has to produce as much as it consumes as the opposite is also true. You have to consume as much as you produce.

GuestJanuary 18th, 2009 at 4:31 am

Very good post MM CA.However, I don’t think there will be rationing or anything of the sort.This crisis is one of massive overproduction/oversupply and oversaturation of markets – we have too much of everything (goods and services), and not enough buyers because of stagnant incomes and wages along with the fact that many Americans already have all of the plastic Chinese widgets and consumer electronics which they need.Capitalism is suffering under the weight of its own success, and it is stagnating BIG TIME – it’s just too bad that the success of capitalism in providing a huge amount of goods/services has come at the expense of the workers themselves.

PhysiocratJanuary 18th, 2009 at 5:00 am

“5. Nothing is being produced!”Not true – America produces plenty; in fact, like all other hypercapitalist societies the current crisis is one of oversupply, overproduction, and oversaturation. In other words, we are smothering under the weight of our own abundance.America grows or raises more than enough food to feed all American citizens (and more…America exports A LOT of food all around the world). There is also enough water in America for everyone (though that will eventually change if America keeps getting flooded by millions of immigrants every year).America produces more than enough housing for its people, as shown by the massive oversupply at present.America produces enough autos for everyone, as shown by the current oversupply. America lacks oil, but alternative technologies will arrive within a decade or so which will wean America and other mostly off of it. We are coal and nuclear secure – America has enough electricity found in coal-power to last centuries – alternative technologies also coming like solar, wind, water, etc.America obviously produces enough clothing to clothe all of its citizens, and more – much has been outsourced for the profit of greedy corporations (i.e., paying a poor laborer in Vietnam 1 dollar an hour to produce shirts they sell here for 50 dollars), but it could easily be insourced again.America produces enough medical care for its citizens by a long shot. SHHHHHHH, the medical industry doesn’t want you to know that the reason you are massively overcharged for medical care is that hospitals, doctors, and surgeons have TOO FEW PATIENTS because of the oversupply and overbuilding of doctors and hospitals and so they must overcharge just to make a decent profit.—That covers the basics – food/water, shelter, clothing, transportation, & medical care. The cheap Chinese widgets, billions of DVDs, and dizzying array of consumer electronics are not necessities and don’t matter much…put people back to work in local and sustainable/green industries which focus on the aforementioned basic industries (especially agriculture) and everything will balance itself out.+ Physiocrat

Jason BJanuary 18th, 2009 at 5:43 am

Happiness is a feeling that comes from inside. Certainly being in pain or hungry or worried about the next meal for your loved ones makes it hard to feel happy. But absent that, many of us get conditioned that we have to do something to feel happy. If you believe that buying a thing will make you happy, and you get it, you will feel happy. Or you can skip the buying and just be happy.A wise frend once told me that we soon tire of the works of man, but the works of god are a source of joy forever. I am not a believer in god, but I find that the newest purchase of a gadget or knick nack soon loses its attraction, but a sunrise or a bird song brings me happiness every time.

GuestJanuary 18th, 2009 at 5:50 am

H.I feel silly for asking, but unless this blog is mere thought experimentation, how do you explain the professor’s apparent change of heart on TARP 1. Am I misreading something?Also, why did the banksters change there minds about buying toxic assets in TARP 1? Was it as simple as not having the wits to play pick-up sticks with a limp pile of spaghetti?Lastly, this one really challenges me: how does changing one entity (good bank) into two, (‘good’ and ‘bad’) change the quantity needing de-leveraging?Forgive my naivety. Perhaps I should retreat to my tattered copy of ‘1984’…at least I can delude myself that it is thought experiment.

GuestJanuary 18th, 2009 at 7:53 am

In the rear section of Japan’s most famous rock garden is a fountain with the following (translated) proverb:”Only he who knows the limits of desire, can be truly happy”PKB

HayesJanuary 18th, 2009 at 8:49 am

RPT-China toddler infected with bird flu – Xinhuahttp://www.alertnet.org/thenews/newsdesk/PEK268662.htm

HayesJanuary 18th, 2009 at 9:13 am

Yves’ take on TARPhref=”http://www.nakedcapitalism.com/2009/01/how-to-waste-350-billion.html”> How to Waste $350 Billion”As readers may recall, we have been skeptical of the TARP from the get-go. As the program ricocheted from one high concept to another, one had to wonder: were Paulson and the Treasury truly that incompetent, or was the seeming cluelessness, as some have suggested, a cover for a program to transfer funds to the financial sector, sort of a Hailiburton in Iraq version 2.0?The damning Congressional Oversight Panel report on the TARP’s activities to date, and the lame Treasury response, are instructive. And we have plenty of troubling incidents along the way: the Treasury strong-arming nine banks to take a total of $125 billion among them when some were obviously in greater need than others (by all accounts, JP Morgan’s Jamie Dimon was furious over the move).Now one can legitimately argue that having banks maintain or expand their bubble-era level of lending is a mistake. Putting that aside, the TARP was created with the notion that supporting the banks would lead to more lending, so one must measure its success against that goal.Tonight’s New York Times article, “Bailout Is a Windfall to Banks, if Not to Borrowers,” not only indicates that banks are using the government largess for pretty much anything but lending, but even worse, the fund has provided money to banks in no need of government assistance.”

wdm, nyJanuary 18th, 2009 at 9:23 am

there is no hope-“solutions” prolong the disease and spread the infection.Economists who offer solutions are no different from witch doctors,except for those who offer “solutions” to perpetuate and/or increase the unequal distribution of wealth.The goal is wrong: “increase production”…why? what? who? where?

GuestJanuary 18th, 2009 at 9:31 am

This is from prorev.comFLOTSAM & JETSAM: OBAMA JOINS WAR AGAINST SOCIAL SECURITY & MEDICARESam SmithMeeting with fellow critics of Social Security and Medicare at the Washington Post, Barack Obama has given his strongest indication yet that he will soon be cutting both programs:|||| President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare “bargain” with the American people, saying that the nation’s long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs. That discussion will begin next month, Obama said, when he convenes a “fiscal responsibility summit” before delivering his first budget to Congress. He said his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.”What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further,” he said. “We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.”Five days before taking office, Obama was careful not to outline specific fixes for Social Security and Medicare, refusing to endorse either a new blue-ribbon commission or the concept of submitting an overhaul plan to Congress that would be subject only to an up-or-down vote, similar to the one used to reach agreement on the closure of military bases.But the president-elect exuded confidence that his economic team will succeed where others have not. “Social Security, we can solve,” he said, waving his left hand. “The big problem is Medicare, which is unsustainable. . . . We can’t solve Medicare in isolation from the broader problems of the health-care system.” |||||Obama is joining a war on Social Security and Medicare that has long been underway from the right, including by Wall Street interests that have backed the new president so strongly.One of the few journalists who steadily challenged this attempt to dismantle two of the best programs of the past century has been Dean Baker, who wrote recently in the Guardian:|||| The classic definition of “chutzpah” is the kid who kills both of his parents and then begs for mercy because he is an orphan. The Wall Street crew are out to top this. After wrecking the economy with their convoluted finances, and tapping the US Treasury for trillions in bail-out bucks, they now want to cut Social Security and Medicare because we don’t have the money. . .Unlike Robert Rubin’s Citigroup, Social Security is solidly funded long into the future. According to the latest report from the Congressional Budget Office, it can pay all promised benefits through the year 2049, with no changes whatsoever. Even after that date it will always be able to pay benefits that are far higher than what current retirees receive.So, the claim that Social Security is going broke is inaccurate, or in less polite circles, a lie. Workers in their 40s 50s, and 60s have already paid for their Social Security benefits. . .Although Social Security is paid for long into the future, Medicare does face problems due to the explosion of private sector healthcare costs. The way to address Medicare’s shortfall is to fix the private healthcare system, as Barack Obama has pledged to do. If healthcare costs are contained, so that they only grow due to the aging of the population, and otherwise move in line with per capita income, then Medicare will be an affordable program. The problem is not the aging of the population. The problem is a broken healthcare system.Every other wealthy country in the world has managed to contain its healthcare costs and provide care to its population that is as good or better than what people in the US receive. If it were not for the political power of the pharmaceutical, insurance and doctors’ lobbies, we would have fixed healthcare long ago. If Congress cannot stand up to these special interest groups, then why not just let retirees take advantage of the healthcare systems in countries with less corrupt political systems.The latest round of attacks on Social Security and Medicare are especially pernicious because they come at a time when the baby boom cohorts have just seen much of their wealth disappear due to the collapse of the housing bubble and the stock market plunge. Tens of millions of baby boomers who thought they were well-prepared for retirement two years ago, now find themselves with little or no home equity and very little left in their retirement funds. As a result, they will be almost totally dependent on Social Security and Medicare.The attacks are made even worse by the fact that the attackers, people like Robert Rubin and Peter Peterson, promoted policies that led to this collapse and personally profited to the tune of tens or even hundreds of millions of dollars. In other words, after pushing the economy into a severe recession and destroying the life’s savings of tens of millions of working families, the Wall Street crew now wants to take away their Social Security and Medicare. This can almost make killing your parents look like a petty offence. ||||There are other signs that Social Security and Medicare would be in trouble under Obama. His healthcare plan offers no meaningful challenge to the private interests that are driving costs up. He has named a budget director who wants to cut Social Security benefits for those under 60. And he has named a “special watchdog” to cut government costs, with Social Security and Medicare prominently mentioned in the AP account:|||| Pointing with concern to “red ink as far as the eye can see,” President-elect Barack Obama pledged to tackle out-of-control Social Security and Medicare spending and named a special watchdog to clamp down on other federal programs – even as he campaigned anew to spend the largest pile of taxpayer money in history to revive the sinking economy. . . He said Wednesday, without details, that his initial budget proposal next month will include “some very specific outlines” of how he plans to tackle spending. That extends to the ballooning and so-far unsolvable fiscal problem presented by the Social Security and Medicare programs, which Obama promised would be “a central part” of his deficit-reduction plan. ||||Similarly, in the New York Times:|||| President-elect Barack Obama said that overhauling Social Security and Medicare would be “a central part” of his administration’s efforts to contain federal spending, signaling for the first time that he would wade into the thorny politics of entitlement programs. . .Speaking at a news conference in Washington, he provided no details of his approach to rein in Social Security and Medicare, which are projected to consume a growing share of government spending as the baby boom generation ages into retirement over the next two decades. . .Mr. Obama also promised a more intensive effort to weed inefficient and bloated programs out of the federal budget in the short run, creating a White House position to “scour this budget, line by line, eliminating what we don’t need, or what doesn’t work, and improving the things that do.” He named Nancy Killefer to the post, called chief performance officer. ||||If Obama is successful he will have damaged two of the most successful programs ever devised by the Democratic Party. He will receive plaudits from the corporate media such as the NY Times, Washington Post and Wall Street Journal and from his major backers on Wall Street. But for other Americans it will be a continuation of the decay of social democracy that flourished under FDR and LBJ and has been collapsing (along with our economy and world standing) under Reagan, the Bushes and Clinton.On the other hand, the game is a little different than when the Pete Petersons and others started their war on Social Security. Then it was possible to play the young against the old, blaming the latter for the former’s difficulties. But the fiscal collapse has changed all that, and many more younger Americans may realize that its not senior citizens who are the problem, but senior officials and their campaign contributors.

GuestJanuary 18th, 2009 at 9:35 am

A well said voice of calm and proper perspective. Too many people seem to be freaking out. Unless we collectively lose our wits, we can get this thing back on track, at least enough so that most of the U.S. can provide themselves and their families with the most important things in life and, just maybe, in the process, it might just bring us all a little closer together again.

The clue phone is ringing - pick it upJanuary 18th, 2009 at 9:38 am

And here is Obama’s choice for inaugural preacher, fully exposed:Bruce Wilson, Huffington Post – On April 17, 2005, at the southern California Anaheim Angels sports stadium thirty thousand Saddleback Church members, more than ever gathered in one spot, assembled to celebrate Saddleback’s 25th anniversary and listened as Rick Warren announced his vision for the next 25 years of the church: the P.E.A.C.E. Plan.Towards the close of his nearly one hour speech, Pastor Warren asked his followers to be as committed to Jesus as the young Nazi men and women who spelled out in mass formation with their bodies the words “Hitler, we are yours,” in 1939 at the Munich Stadium, were committed to the Fuhrer of the Third Reich, a major instigator of a World War that claimed 55 million lives. Rick Warren has exhorted Christians towards Nazi-like dedication in at least several public speeches and also during a one hour video recording of a talk by Warren, explaining his P.E.A.C.E. Plan. . .By calling on his church members to follow Jesus with the fanatical dedication with which the Nazis, or Hitler Youth, gave to Adolf Hitler, Rick Warren appeared to be in effect asking his Saddleback members to be fanatically dedicated to Warren’s own leadership, given his role in divining God’s intent for the Saddleback church flock. During his speech, Rick Warren also explained that God had personally instructed him to seek, for the good of the world, more influence, power and fame.Warren moved on, from his celebration of Nazi dedication to purpose, and held up Lenin, and Chinese Red Guard efforts during the Cultural Revolution, as behavioral examples for his Saddleback flock, whom Warren called on to carry out a “revolution”.Concluding his motivational speech, the Saddleback Church founder instructed his ranks in the stadium to hold up signs, from their official programs, with the preprinted message “whatever it takes”. Warren then introduced, as leader of the first nation on Earth in which the P.E.A.C.E. Plan would be implemented, Rwandan President Paul Kagame.In 1998 under Kagame’s leadership Rwanda, along with the now officially “Purpose Driven” nation of Uganda, invaded the Democratic Republic of The Congo, touching off a conflict that has claimed more civilian lives than any since World War Two. On December 12, 2008, the United Nations accused Rwanda of aiding Congolese warlord Laurent Nkunda, accused of massacres and human rights violations and whose recent offensive has created several hundred thousand Congolese refugees.In March 2008, Rick Warren’s Saddleback launched an official national “Purpose Driven Living” program in Uganda, a country which was indicted in 2005 by the International Criminal Court for perpetrating “massive” human rights violations by invading and looting the natural riches of the Congo. . .”Stop dreaming and start doing,” the Purpose Driven Life author told his Anaheim Stadium crowd. Warren described a global Christian movement to bring the message of Jesus Christ to every man, woman and child on Earth. “It’s going to cover the planet,” he proclaimed, “and then the end is going to come.”. . .Though Warren’s speech was in the idiom of Christianity, he did not seek to inspire his Saddleback audience with examples of great religious leaders who have changed history through persuasion or other nonviolent approaches. Rick Warren looked to 20th century exemplars of vision and dedication but not to Mohatma Gandhi, Martin Luther King, or any other religious leaders.With more than a hint of admiration in his voice, pastor Warren described how in 1939 in a packed Munich Stadium before the leader of the Third Reich, young brown-shirted men and women spelled out in formation, with their bodies, words in German which read “Hitler, we are yours.””And they nearly took the world, ” pastor Rick told the stadium crowd. He moved on to quote another inspirational example from the 20th Century, Lenin, who said ‘give me 100 committed, totally committed men and I’ll change the world.’ Once again Warren observed, “They nearly did.”

GuestJanuary 18th, 2009 at 10:00 am

The deep-seeded primal urge to belong to the tribe is too powerful to resist for most. For those who try, it is often a long and lonely journey with many stops and starts and it creates a constant inner battle to turn around and go home. If 5% make it, I find that very surpising. Yet, I think there are those amongst us who tried and turned around and while in one sense they failed, they do return to the tribe with much to teach to those who never attempted the journey.

villagerJanuary 18th, 2009 at 10:11 am

Dr. Roubini, I think being fiscally fit is a necessary condition for a healthy economy but it is not a sufficient condition; consequently, your recipe needs to be expanded. The mistaken belief has been that the financial sector is the engine of the economy. The financial sector is important but only as an enabler. It can enable other things but those seem to be dying (eg. the US Big 3 automakers). As many posters here suggest or imply, America needs to rethink its economic and social future. It is not a matter for leadership alone. American society needs to be included if only because the solutions come from within. The new Administration and Congress needs to create a process by which creative resurgency can occur. This means that cronys must stand aside, even if forced aside. LondonBanker had a good grasp of the grassroot action that needs to occur for charting a new economic course.

GuestJanuary 18th, 2009 at 10:14 am

As I have said before, the banks are waiting for bare bones fire sale prices. Then they are going to buy on the cheap and then allow inflation to run its course. This will shore up their balance sheets. The problem will then become: is there anyone left for these revitalized banks to lend to?

C.LakeJanuary 18th, 2009 at 10:16 am

Still think the Swedish method (which they tried succesfully in 1992) is the only one which has any chances of working with those “too-big-to-fail-financial-institutions”, and will save huge amounts to American tax payers :1. temporarily nationalize them, guaranteeing the continuation of vital operations, and wiping out equity holders (afterall, if they’re bankrupt, they’re bankrupt)2. cut them into pieces, triage of all the assets3. once fully recapitalized and cleaned from all the worthless assets, auction the valuable pieces to the highest bidders, and liquidate the worthless piecesThis is what Lewis and Einhorn wrote in their seminal piece in the New York Times “How to repair a broken financial world” on Jan.3, 2008, and this remains, so far I’ve read, the only recapitalization process that makes sense to me.

HayesJanuary 18th, 2009 at 10:25 am

The following suggests a Goldman alumnus will replace Geithner – moreover it highlights that the Fed has only two”experienced” Governors. Warsh to Remain at Fed Board as Successor Sought for Geithner Jan. 18 (Bloomberg) — Federal Reserve Governor Kevin Warsh, once a leading contender to succeed Timothy Geithner as president of the New York Fed, is no longer in the running.Warsh, 38, will remain Chairman Ben S. Bernanke’s chief liaison with the Treasury Department and other regulators as the central bank prepares to roll out billions of dollars in new programs to revive lending, said a person familiar with the matter. Warsh’s withdrawal leaves William Dudley, 56, the New York Fed’s top markets official and a former Goldman Sachs Group Inc. economist, as the leading internal candidate for the job.“Bill is an economist who spent most of his career following the Fed and monetary policy,” said Robert Eisenbeis, a former research director at the Atlanta Fed, who worked with Dudley when both were at the Fed Board in the 1980s. “He also knows the market side.”Warsh’s departure would have left Bernanke and Fed Vice Chairman Donald Kohn as the only experienced governors in the midst of the biggest expansion of the central bank’s role in the economy since the Great Depression. The newest governor, Elizabeth Duke, has been in her position since August, and there are still two vacancies at the Board in Washington…”

GuestJanuary 18th, 2009 at 10:30 am

What hasn’t worked in man’s history is government intervention — tyranny and dictatorship. Sadly, the blueprint for the foundations laid by our early generations was amended and changed by the Federal Reserve Act with its “key to inflation and the treasury,” the Sixteenth Amendment with its key to our income, the New Deal that gave a key to the majority to vote themselves the treasury, and the Great Society finale ending in corruption and profligate bankruptcy.Yet, I have faith that many people here are in the vanguard that will take back America. – holding open the door for a free people to pursue their own happiness for a better life without the collective state barring the way.For as Ruth Wilder Lane said in “The Discovery of Freedom: Man’s Struggle Against Authority”:“American Government is not an Authority; it has no control over individuals and no responsibility for their affairs. American Government is a permission which free individuals grant to certain men to use force in certain necessary and strictly limited ways; a permission which Americans can always withdraw from American Government.”

GuestJanuary 18th, 2009 at 10:39 am

“The necessity of pursuing true happiness (is) the foundation of our liberty.” ~ John Locke: An Essay Concerning Human Understanding, 1690.

aerial viewJanuary 18th, 2009 at 11:06 am

agree. put them through an Obama “vegomatic” and slice them and dice them discarding the unviable parts, constraining their size so that they will never again fall into the category “too big to fail” and implement full transparency, honest regulation and standardized accounting procedures.

HayesJanuary 18th, 2009 at 11:17 am

I’m generally suspect of most things published via Huffington and its clone DailyKos – and I would probably want to see the full text of Warren’s speech to understand the context – But what is ironic about the above article is what will soon be identified as Obama’s secret weapon – which, should be to no one’s surprise, his ability to organize. It would appear he is going to bring his brilliant campaign strategy and tactics to his administration with an initiative called “Organizing for America” – I heard an interview of one of his campaign workers recently and that person certainly seemed to share some of the dedication that the article above references especially when it comes to orgnanizing. Anyway this is the link to Obama’s new initiative – and my guess is it will be an incredibly powerful tool (some might suggest dangerous) to leverage his agenda: Obama Announces “Organizing for America”

President-elect Barack Obama announced the formation of a new group known as “Organizing for America” that aims to continue the grassroots advocacy that the former Illinois Senator began in his presidential campaign.”Washington Post – Jan. 17 – As President, I will need the help of all Americans to meet the challenges that lie ahead,” Obama said in a video message e-mailed to supporters (and reporters) this morning. “That’s why I’m asking people like you who fought for change during the campaign to continue fighting for change in your communities.”The new group will be the flagship of “Obama 2.0” as many people have taken to calling the transformation of the political organization created during the 2008 campaign.

GuestJanuary 18th, 2009 at 11:20 am

“A cartel is a group of independent businesses which join together to coordinate the production, pricing, or marketing of their members. The purpose of a cartel is to reduce competition and thereby increase profitability. This is accomplished through a shared monopoly over their industry which forces the public to pay higher prices for their goods or services than would be otherwise required under free-enterprise competition,” says Fed historian G. Edward Griffin.“Here [meeting on Jekyll Island off Georgia to establish the Federal Reserve System] were representatives of the world’s leading banking consortia: Morgan, Rockefeller, Rothschild, Warburg, and Kuhn-Loeb…“A method had to be devised to enable them to continue to make more promises to pay-on-demand than they could keep… By making it appear to be a problem of the national economy rather than of private banking practice, the door then could be opened for the use of tax money rather than their own funds for paying off the losses…”

A friend is one who warns youJanuary 18th, 2009 at 11:27 am

No. We haven’t ALL been asleep and uncaring. Here. Stop riding hard on the last legs of every lie and go lose your last illusions:http://antifascist-calling.blogspot.com/2009/01/nuclear-proliferation-terrorism-and.htmlRead it and be vastly better-informed. Read it with your jaw on the floor. Read it and be safer for knowing the reality you are up against. Read it and discover just how unaware you have been kept. Read it because: What you don’t know can’t hurt them.

Octavio RichettaJanuary 18th, 2009 at 11:42 am

Haven’t read much on the Geithner tax issue. IMO, that should be more than enough to block his appointment unless Obama and congress are totally crazy which I wouldn’t rule out. A tax cheat cannot head the treasury.

Andrew G. Bernhardt, St. LouisJanuary 18th, 2009 at 11:45 am

I’m really sorry to doubt these statistics… how does the Government spending of 1 dollar increase GDP by 1.57— that’s just stupid and foolish to me. Each dollar does not even increase GDP by a full dollar because wherever the Gov spends it, it’s taxed, and then that takes it down to about 0.70… Furthermore, when the Gov spends, it borrows the funds… this means that the borrowed funds cost money, otherwise known as interest on the debt or debt servicing, so each 1 dollar of spending in that sense costs 1.04 or so on average per year! I’m really sorry but Gov. spending of 1 dollar does not magically increase GDP by more than a dollar, on any basis at all. Only economists like Larry Kudlow, that have done cocaine, would say such a thing!~ Andrew G. Bernhardt See this for more of my comments: ” site:www.rgemonitor.com Bernhardt, RGE “

GuestJanuary 18th, 2009 at 11:55 am

vices cause misery, virtues cause happiness. justice is a virtue essential to true happiness. maximum happiness = no enemies, only smiles to live amongst. level ground, pacific sea – ease and time to play. not possible to have if you allow the injury of economic unjustice to happen to anybody, thus stacking everybody in a crush-and-be-crushed, climb-and-be-climbed pyramid.the price for having a game of all people robbing all people is too high to pay.justice is equal pay for equal sacrifice.the work is spread, the wealth must be spread.a small part of justice is not Justice. a small part of justice is Notjustice.how much would you like to be happy in a happy world? enough to campaign for pay justice? pay justice is maximum liberty to be happy in a happy world. safety requires pay justice. no safety = no true happy.

JLCJanuary 18th, 2009 at 12:13 pm

I went to circuit city yesterday. Most of the markdowns were 10% off of items that were already 25% overpriced. They have a long way to go. I did get a nice deal on an ergonomic keyboard, but the good stuff was still too expensive.I will keep going back over the coming days in order to familiarize myself with the liquidation process. As the economy continues its descent into hell, you’ll see the greatest fire sale in 80 years. I’m working on a wishlist. At the top of it, of course, is “Stay Employed.”

GuestJanuary 18th, 2009 at 12:38 pm

President-Elect Obama’s charisma and oratorial skills, along with his ability to (in almost a spiritual sense) inspire many people to support a cause, is a special set of attributes that we have perhaps not seen in a U.S. president since JFK. It has the potential to do enormous good, not only in this country, but across the globe. It also, if misdirected or abused, has the potential for enourmous harm. I am willing to suspend disbelief and allow myself a quiet little corner of hope and optimism and give PE Obama the benefit of the doubt and some time to set the tone for his as-yet-to-be-well-defined administration. That does not mean I am going to let down my guard and embrace his movement. I will remain vigilant and skeptical in the healthiest sense of the word. However, I hope that there may come a time when I can proudly tell my as-yet-unborn grandchildren about the times when the nation’s first African-American president inspired the people to dig deep and turn around an economic crisis that threatened the stability of the entire world. While it may not happen, it could. And that’s a whole lot more than we had with President Bush.

C.LakeJanuary 18th, 2009 at 12:40 pm

You can find here all the groovy details in the report by Christina Romer and Jared Bernstein (Obama and Biden’s chief economists) that explain how they arrive at this 1.57 multiplier :http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdfNote in the Appendix 1 that the top multiplier of 1.57 is only valid from the 8th quarter of Government spending (starting at 1.05), and is not valid for tax cuts (0.99 after 8th quarter, starting with 0.00).So, if they plan $300 mill. in tax cuts and $500 mill. in infrastructure spending, the multiplier will only be 1.37 (best case), and this only after 2 years !You can find Krugman’s critique of this report here :http://krugman.blogs.nytimes.com/2009/01/11/more-on-romerbernstein/All of this is based on Okun’s law, you can find an introduction on wikipedia :http://en.wikipedia.org/wiki/Okun's_Law

GuestJanuary 18th, 2009 at 12:54 pm

w,there must always be hope. there is always hope, it just need be allowed to express itself by you.i see what you’re saying though, we need not save the disease, let it die. we must differentiate the disease from the good structure and that is what a good witchdoctor can do. what you can do.

HayesJanuary 18th, 2009 at 1:02 pm

the media coverage that there is, is based on the talking points distributed from Obi’s HQ – an “honest mistake” – for example this from Bloomberg just in the past couple of hours:Geithner Tax Spat Doesn’t Erode Openness, Aides Say Jan. 18 (Bloomberg) — President-elect Barack Obama’s decision not to immediately tell the public about Treasury secretary-designate Timothy Geithner’s tax problems wasn’t a lapse in transparency, Obama adviser David Axelrod said.The Senate Finance Committee was told about Geithner’s underpayment of taxes in December while the public wasn’t informed until this month. Axelrod was asked in an interview on CNN whether this contradicted Obama’s pledge to make Washington more transparent.“It was very clear that it was going to be discussed in open hearings for the American people to watch and formulate their own judgments,” Axelrod said. “So I won’t say it’s a transparency issue.”Senate Republicans moved last week to delay Geithner’s confirmation as Treasury secretary, pushing Obama to defend his nominee’s failure to pay some taxes as “innocent.”“He made a mistake on his taxes. It was related to his service overseas,” Axelrod said today. “Most accountants say this is a fairly common mistake. When it was discovered, he redressed it.”http://www.bloomberg.com/apps/news?pid=20601103&sid=a9QJQZmN074Y&refer=usor this from Reuters in the past few minutesObama backs Treasury pick “absolutely”: aideWASHINGTON (Reuters) – President-elect Barack Obama “absolutely” stands behind Timothy Geithner, his choice for Treasury secretary, despite “a big mistake” involving his failure to pay some taxes, the incoming White House chief of staff said on Sunday.Geithner made a “big mistake,” Rahm Emanuel, the incoming chief of staff, said in a interview on NBC television’s “Meet the Press.” “But he’s the right guy for this job,” and Obama backs him “absolutely.”Obama, who is to be sworn in as president on Tuesday, said last week that Geithner, who as treasury secretary would oversee the tax-collecting Internal Revenue Service, had made an “innocent mistake.”A senior adviser to Obama, David Axelrod, said he was confident Geithner, who as president of the New York Federal Reserve Bank played a big role in efforts to calm roiled financial markets, would be confirmed by the Senate.”He is precisely the kind of person we need in the Treasury right now.The only critical press seems to be coming from far right sources such as the article I posted yesterdayWhy Geithner and Rangel MatterWhile working for the International Monetary Fund, Geithner failed to pay taxes even though the IMF “grossed up” his pay to actually give him the money with which to pay his taxes. They also attached a stub that showed exactly what his pay was including how much had been grossed uphttp://www.americanthinker.com/2009/01/why_geithner_and_rangel_matter.htmlTo me what is even more amazing is that when the IRS audited him and called him out on two years of not paying his taxes – he did not offer up the fact he had done the same thing in the prior two years – he only came clean on that a few days before his nomination….

GuestJanuary 18th, 2009 at 1:06 pm

govt spending can supposedly increase GDP because the multiplier effect kicks in. Secondly, if they were to borrow from the chinese at a hypothetical 2-3 percent, then after the crisis is over and the inflation goes to a hypothetical 7-8 percent, the real value the chinese would be losing is 5 percent. It is a decreasing cost of debt in a way…why would the chinese finance it is something I don’t understand though…

GuestJanuary 18th, 2009 at 1:06 pm

Quote from the above powerful compilation:”There are other signs that Social Security and Medicare would be in trouble under Obama. His healthcare plan offers no meaningful challenge to the private interests that are driving costs up.“He has named a budget director who wants to cut Social Security benefits for those under 60.“And he has named a “special watchdog” to cut government costs, with Social Security and Medicare prominently mentioned in the AP account…”What a farcical hypocrite Obama is. According to the NY Times on January 14, “With enthusiastic support from President-elect Barack Obama, the House on Wednesday passed a bill to expand the Children’s Health Insurance Program… [providing] $32.3 billion over four and a half years to continue coverage for seven million children who now rely on the program and to EXTEND coverage to more than four million who are uninsured.”So, already, Obama is set to transfer more of Americans’ paid-up social security and Medicare funds to subsidize the low wages corporations pay their imported Mexican and illegal immigrant work force, i.e., their unfair labor competition.Frankly, the only people I see these days on street corners asking for handouts are the workers displaced by the incoming, cut-rate labor force.And, frankly, I don’t know what Obama’s going to do: he’ll say anything. But I do know there is a limit to what he can do: he’s backed up against it.He’s facing FDR’s dilemma during the sharp depression that came along in 1937-1938: FDR came in with all these idealistic programs in ’33 but by ‘37 and ‘38 the economy was deep in recession again. FDR was forced to cut spending because the debt load was too large, proof that government can’t spend its way out of recession and sop up the excess later. He couldn’t cover it. One could say that at that point, Roosevelt’s presidency was a total domestic failure.Obama is coming into office, not in ‘33 but in ‘37, when the economy is not at the bottom, but starting to fall. He’s going to have FDR’s ‘38 problem, And regardless of what Sweden’s Nobel Prize Laureate Krugman hypothesizes as he contemplates his navel, Obama can’t just wave a magic paper dollar and put Humpty Dumpty back together again.

HayesJanuary 18th, 2009 at 1:06 pm

also this article from the LA Times – don’t blame Geithner, blame the tax codeBroken tax code snagged Obama’s Treasury pickJanuary 18, 2009Add yet another thing to President-elect Barack Obama’s to-do list: Tax reform.If Timothy Geithner — the guy Obama wants to run the Treasury Department — could make $34,000 worth of mistakes on recent federal tax returns, then clearly this is a system so bloated and complex as to be incomprehensible to all but the most pointy-headed accountants.

economicminorJanuary 18th, 2009 at 1:12 pm

Thanks for all the comments. I was gone all day yesterday shortly after I posted.Most understood my points. Change is happening due to system failure on a grand scale. I really just wanted to bring out something people already know but maybe haven’t put together.I do understand the benefits provided by unions. I have a brother in law that was a union negotiator for many years until he recently retired. That doesn’t mean that they still aren’t part of the problem. Systems tend to go on and on, way beyond their viability until they finally break down. All entities involved in the process of preventing change are a part of the cause. Any entity that goes along with a broken system because they have personal beneficial interests are part of the problem. This doesn’t mean that the unions are responsible for the system failure. They are just part of the system and part of the reason for failure. Not their fault any more than any other entity. This is just how things are. In a practical sense, gravity causes things to fall towards earth. Should we blame gravity because things fall. Yet gravity is why things fall. Systems fail after time. You might as well argue against the adaptability of many viruses as to argue against change and system failure.Nurses are wonderful people. I am married to one. It isn’t the nurses fault that patients do not get the best care. It is the broken system which does not promote preventative care over catastrophic care. It is an inefficient system that has attorneys and insurance companies and COEs who are the beneficiaries rather than the patients as a general rule. Of course unless you have lots of money or influence which buys you the best of care. Unfortunately this is the few and not the majority.As for housing, I have made the some of the same comments in the past. Houses are not where they should be, they are built to big to be heated, cooled, maintained when the total picture is looked at. They look good but are not of lasting quality. Why use wood in areas where there is lots of rot and termites? Why build homes that cost so much to purchase that there is no way these homes can be maintained under the current incomes of their inhabitants. Why build subdivision 100 miles from the jobs? All because of profits and marketing under a system where loan creation was more important than any other consideration. We had a system where actual costs are transferred or hidden or postponed. Unfortunately, Zero Hour was hit and now we have to deal with all these imbalances.I see no liquidity issues, just people who can’t qualify now that the financial institutions can’t pawn off bad loans on unsuspected others. My real estate office is still selling houses where as the lenders are still providing pretty much 100% financing… 3% down is not a down payment. Now that the lenders have to be responsible, the numbers of loans are much fewer. I see the issue as everyone either has a house or has been recently foreclosed on or are currently in default. There are few left to qualify for really NEW financing. What I see is a lack of buyers and way to many sellers. The other issue is price. Prices are still way to high. There are other responsibilities that everyone has besides a mortgage. We can’t defer costs to someone else any longer as we have recently started to discover. There are just to many costly responsibilities, to many houses and they are to expensive for the existing household’s real incomes. You can no longer qualify with a low wage income for a home that costs 5 or more times after tax incomes. You never should have been able to.Incomes across the country are going to drop even for protected industries like health care. Incomes are insufficient because someone has to pay and those some ones have to pay for other things or just don’t have enough income themselves. Layoffs were announced this week at our regional hospital. We will have cut backs in teachers and probably most services in the next few years. When you borrow from Peter to pay Paul and Peter can no longer pay, Paul doesn’t get paid either. There is just no place left to transfer the liabilities to. No huge savings sources left to tap into. They have all been used up for previous consumption.I still see this as an insolvency problem and not liquidity or credit. People just can’t afford all we have promised ourselves. We can’t pay for the schools, the health care, homeland security, fixing the infrastructure and all the people who are being supported by the system as disabled or pensioned or as a government employees. It isn’t about Welfare. It never was. It was always about blaming someone, those with the least. There are just to few left actually doing value added productive work and to many being supported by them. And for government to get out of the way means a lot of change, including zoning laws and environmental laws and tax laws that inhibit job creation and innovation. It can’t just hire every one themselves. That is ludicrous. What do they think, Russia and its central planning was successful?As for the issue SWK brought up. We have a lot of legal influence in government both in the fact that there are more trained in the law in office than any other segment of influence. The health care system is broken partly due to litigation issues which supports the huge insurance lobbyists because of legal influence on the political system. This is not right or fair or even cost effective. The legal system and the insurance system are parasitic and use fear and influence to maintain their positions. Not everyone can have the biggest piece of the pie and still have enough left for others. This to will change. Probably right before it strangles the system to death.The legal system and the industrial prison complex have filled up and expanded the prison population with the poor and disenfranchised (most underlying issues are drug and alcohol related) while mostly ignoring the real criminals, those who prey upon the productive resources of the country and benefit from a continuation of these practices.Attorneys are trained to not deal with what is right but to win for their client. When corporate America controls the political system, corporate America is the interest that is promoted and laws are ignored or removed that would keep the public safe from them. Just look at what has happened with the financial system and the real lack of accountability. This is because of legal influence in the political system. Laws don’t apply to these people, only the poor.You can argue that this is political and not legal but I have a hard time drawing the line. It seems that the lines are grey or non existent. Yet the solutions are political.

Andrew G. BernhardtJanuary 18th, 2009 at 1:15 pm

I simply don’t care where the figures are. 1 dollar of Government spending is not more than a dollar of benefit. There are taxes due on their spending reducing the benefit. Also, to the Government itself, there is debt service due, so each dollar costs money and each year. This means that 1 dollar of spending is a cost of 1.04 (if yields, the cost of borrowing is 4%)— this means that each 1 dollar of spending is 0.96 dollars, or 96 cents!

GuestJanuary 18th, 2009 at 1:16 pm

Brown to announce bank bail-outPrime Minister Gordon Brown has said he will announce a new banks rescue package on Monday aimed at encouraging them to restart lending.Speaking in Egypt, at a summit on the Gaza crisis, Mr Brown said he hoped the move would make it easier for firms and households to obtain credit.What the government wanted was to get “the resumption of lending” he added.A raft of measures is thought to include a bank insurance scheme to cover banks against future bad loanhttp://news.bbc.co.uk/2/hi/business/7836259.stm

MorbidJanuary 18th, 2009 at 1:17 pm

It Was Paul Volker Who First Raided Social Security To Balance the BudgetDuring President Johnston’s years as I recall! And now look who is going to help fix this bullshit.

economicminorJanuary 18th, 2009 at 1:22 pm

You are right of course, it wasn’t us as many of us have been talking and writing about these issues for a long time. I meant us collectively as the people of the USA who went along for personal gain, lack of understanding and some for just laziness.As for US, I think that as a group, the people who post here are the best thinkers I have come across and I am grateful that I am allowed to participate.The first step in solving any problem is defining and understanding it. This group is a long way down that path. Now all we have to do is get others to understand.

Andrew G. BernhardtJanuary 18th, 2009 at 1:27 pm

Ok… what’s the opposite… protectionism?! We have competitive advantages to various goods, so do foreigners sometimes. Increased trade increases our overall benefit and GDP. For example, I trade with my grocer. I run a huge trade deficit with them, I buy food and beverages from them, and they never buy things from me, what a deficit! This is possible because I run a capital account surplus elsewhere. Also, this allows me to do other things, rather than grow food, and raise farm animals for eating later. Gee, look what globalization and trade can do! American is an importing country because it is more affluent and wealthy versus its foreign counterparts. Also, hiring foreigners to do various things, that is to produce various goods and services, costs less, their income is less, than the american counterpart that works here. This means that we, as consumers, save money by having the foreigners produce various goods and services, and ship them here. Gee, we have them produce whatever we can have them produce more cheeply than their american counterparts (shipping costs included). International trade is good, protectionism is not. Do not always buy american. I noticed that American does not have oil the way the foreigners in Saudi Arabia, Kuwait, and other OPEC nations does… should we just stop purchasing it from them?! Maybe the USA should create some hydrogen fuel cell conversion stations directly adjacent to some nuclear power plants in e.g. africa or something, and then make fuel cell powered vehicles of all kinds, planes, trains, automobiles, and all department of defense vehicles too. Imagine that! We’d no longer be dependent on OPEC. Wow!Bailing out general motors was totaly foolish and stupid. That corporation has never made money over the past 30 years, they just can not compete with foreign car & truck makers. The foreign cars and trucks are cheeper, more reliable, and its therefore better to buy them… especially if american automobile manufactureres can not produce anything at an economic gain. Why they (GM) was allowed to operate annually at a loss for over 30 years literally (including this year too) is and was total foolishness to me! General Motors should have gone bankrupt a long time ago!

Average JaneJanuary 18th, 2009 at 1:29 pm

You know, if I hear the word “entitlement” modifying the words “social security” and “medicare” one more time, I am going to start projectile vomiting.I have yet to meet one elderly, poor or disabled person living on social security and medicare who doesn’t actually need it in order to simply have a roof over his or her head and food in the cupboard.Please someone, tell me what purpose it serves to have the 70% of our elderly and disabled and poor, who depend solely, and I do mean solely, upon these funds, to have them out in the street? How does that serve our society? How?Do you honestly think these folks waste that money? Do you honestly think so?The word “entitlement” means to me something gained that was not earned.Oh, please. Where do I start? How many of these thieves in the financial system were “entitled” to $20 million bonuses?Let’s re-think that word, shall we?

Andrew G. BernhardtJanuary 18th, 2009 at 1:29 pm

Here’s why we’re on the brink of a total financial catastrophe and economic collapse of the United States of America (and other countries), and what I describe as a global Greater Depression…A) The Executive Branch, George Bush, he wrote 750 billion dollar deficits per year (taking the federal gov. debt outstanding from 4.8 trillion to 10.6 trillion; which still excludes state, county, municipal, metropolitan, city, and local debt, corporate, agency, and private sector debt too). This crowded out investment, crowded out borrowing, and incited a credit crunch, and diverted money away from the real estate markets, both residentially and commercially. Oh, and if you include 5.4 trillion dollars of debt the US Gov. has assumed of the failed GSEs then the total debt is now 16 trillion, up 11.2 trillion over the Bush Administration (from 4.8 trillion to 16 trillion)!!! If you calculate it this way, including the GSE failure (government sponsored enterprise failure), then 1.4 trillion was borrowed annually during the 8 years of the Bush Administration. Doesn’t this crowd out investment and borrowing?!?!?!B) The totally financial negligent Congress, (all 435 imbeciles, senators, and representatives) they validated, ratified, and approved of Bush’s massive deficit spending spree— for a war against a terrorist, Osama Bin Laden, hiding in a cave of the mountains of afghanastan, and also the sovereign state of iraq.C) Eventually, with the severe crowding out of borrowing, this diverted enough money away from the securities markets, CDSs, CMOs, the US dollar, stock markets, and especially real estate. And on a global basis!D) The negligent Congress also created a new rule change, and allowed the banks to lend zero percent down style. Lame. Anyone that could take their thumb out of you-know-where, and if they could point at a house, they could have it, zero percent down! Why didn’t anyone decide (but only of course if they had, no income, no job, and no assets) to purchase zero percent down style, 5th Avenue, 6th Avenue, and 7th avenue for example, in downtown lower Manhattan??E) With real estate depreciating rapidly now, banks were smashed across the board, because they collateralized the mortgage risk, and traded it, from themselves to each other, and with their losses materializing rapidly, their income statements, balance sheets, and cash flow statements turned sour rather rapidly. Investors, panicking that the vast majority of all banks globally would fail (after seeing the materialization of their disgusting income statements, and balance sheets after Q1 of 2008), panicked and liquidated their stock holdings, dragging down the stock indices globally, at rates not seen in a very very long time! Volatility also increased rather rapidly to highs never before seen. The losses have been, are, and will be enormous!F) The Congress now pretends that borrowing more money in Economic Stimulus Packages, T.A.R.P. (troubled asset recovery program) funs, bailouts, capital infusions, capital injections, etc. will somehow be good, and also will amount to more than $1 dollar of GDP growth for each $1 of Gov spending! Stupid! Each dollar costs money, its borrowed funds, if borrowed at 4%, on 0.96 per year of GDP is really there at best! The gov. spending is spent and taxed also, taking it from 1.00 to maybe 0.70, where or how do they claim that each dollar is 1.57 e.g. of GDP growth!?!?!? Regardless these rather hasty government reckless spending sprees, they merely crowd out investment, and crowd out borrowing even more, exacerbating the problem further.The Government is to blame— no one else is! There is on one else to blame literally. George Bush, his budgets, and the entire Congress, and their inability to discourage the President from writing huge deficits (over the past eight years) was the entire source of the economic mayhem we’re currently experiencing globally. Duh, deficits matter folks! It’s (always) the economy stupid! Deficits matter, inflation matters, real gdp, and nominal gdp growth matters, interest rates matter too, and numerous labor force figures matter also.I would even claim that the fertility rate, birth rate, and age of first marriage matters— and no one else really cares. Weird to me. The family unit has deteriorated over the past 30 years, with the popularity of intra-uterine-devices and birth controls widespread usage among the younger age stratum. Another thing I have noticed is that apparently the department of education has failed again. Just look at how idiotic, imbecile like, and moronic the entire Congress (judicial branch and executive branch too) is— with their advanced degrees from, ha, ha, the world’s most prestigious educational institutions! Also, the cost of an education is enormous… if people only didn’t go to college, if they saved it, lets say 80k of tuition and living expenses (rent and food, and tuition over just four years!), and if they were plumbers or historians or laid the concrete for the federal highway, at a salary of $56,000 of earned income, then think of the savings they’d have!!! They’d sure be better off!! They’d be much more well off than their college graduate counterparts. Apparently, the benefits of a so called education are seemingly so costly, I wonder a lot how much time it takes the average individual to catch-up and actually reap the benefit of getting their degrees. If they attend graduate school, law school, or graduate school for an MBA, or PhD, or for medical school, the opportunity cost of such a decision is even more enormous!!! The cost is further complicated, more complex, and more costly if e.g. recessions strike and investment results are negative (as they have intensely been as of late). Sure makes the case for Treasuries— and I like TIPS best, treasury inflation protected securities; with principal that’s adjusted to the CPI-U, and the real yield is then applied to the adjusted principal, making for increased principal over time and even increasing coupons over time, assuming inflation over the long run, which historically since 1929 to the present has been approximately +3.26%, or historically from 1950 to the present has been approximately +3.88%.Total Default here we come, a default not only of the US Dollar, but also of the US Debt (the USA’s government bills, notes, and bonds), and soon! All the banks, brokerages, insurance, and reinsurance companies will fail miserably— bringing about the failure of everything else, as economic activity grinds rapidly to a total and complete halt! We’re in for a doozy of a recession, bartering, maybe some riots, a dramatic increase in the crime rates, a civil war, maybe a revolution, and a global financial catastrophe— bringing about a global depression, famine, starvation, and dehydration. Eventually, maybe we’ll be invaded by the Mexicans, the Canadians and peacefully, to keep the peace, deliver food and water, in a huge humanitarian effort for all 300 million poor Americans.Americans were in the past among some of the highest per capita GDP in the world, but not because they know how to make money, no no, no no, they are only good at borrowing money (from Japan, UK, Caymond Islands, Luxemberg, and China) and schlooshing it around, from themselves to each other!I guess we (the entire world’s people we) can literally just thank George Bush, for basically, borrowing too much money (from foreigners- Japan, the UK, Caymond Islands, Luxemberg, and China) for bad causes— and for creating this economic and financial and market chaos. Bush was basically, up to no good! Seems as though George Bush, republicans, and maybe even MBAs (since George W. Bush has an MBA), maybe they all want to practice socialism, and to socialize everything, and make it state run and/or government run, rather than free market capitalism. How lame! I much prefer free market capitalism. Perhaps, Republicans have always just stood for war, regress, and recession, and reckless spending sprees, and for doing the wrong thing? Perhaps, the Republicans want to ruin everything possible that’s important and then coincidentally the government feels as though it has to “take it over” rather than let it fail— also a mistake. I say let it (risk takers, banks, other ailed corporations) fail!!! Merging a bunch of failing corporations is not good either, it is bad, it does not bring about competition, and competition is good, mergers brings about monopolies, which I think are bad sometimes. I like spin-offs, divestitures, not mergers and acquisitions. Otherwise, we should all get Government Bailouts! Just kidding, I have a major laissez-faire approach! This government taking over everything in a bail-out mindset is practically communism, and totally financially negligent to me! The government with its bailouts, is fostering the conditions which have created the next Great Depression, what I call the Greater Depression.What will become of the fallout of the Bush administration?! Will there be malicious maniac heads of state abroad, in foreign countries, that rise to power, in the near future, in tough economic times, going through this economic depression (I call it “the Greater Depression”)? Will World War III begin? I fear for out future.~ Andrew G. Bernhardt, St. Louis, MO… See this for more of my comments:http://www.google.com/search?hl=en&safe=off&q=site%3Awww.rgemonitor.com+Bernhardt%2C+RGE

MorbidJanuary 18th, 2009 at 1:32 pm

And Don’t Forget…The massive resource use required to support a human being. Why don’t we have population control spending. China has taken measures in this regard. We all need to live more consciously. This business of breeding like flies has got to be dealt with as well.

MorbidJanuary 18th, 2009 at 1:39 pm

The PFWMDOh, I forgot to mention the effect of this Population Financial Weapon of Mass Destruction effect on the Global Economy – that stupid belief in an economics model that is only sustainable if there is ever increasing population. Talk about a Ponzi Scheme. And Nobel Prices are given out for this kind of bankrupt thinking.I am surprised ObamaNation isn’t handing out fertility pills to insure future consumption in our 70% GDP economy.

economicminorJanuary 18th, 2009 at 1:47 pm

yes because systems grow old and fail. Jefferson thought 200 years would be about right for our government to fail us and he was pretty close.It took almost 80 years before our financial system again failed on a major scale.This is what Kondratieff discovered when he studied Capitalism for Lenin or was it Stalin? Doesn’t matter. Cost him his freedom and a life of toil in Siberia for his research.I actually though it wouldn’t have taken this long.

MorbidJanuary 18th, 2009 at 1:55 pm

The PFWMD Problem That Needs To Be FacedThere is a Population Financial Weapon of Mass Destruction effect on the Global Economy – that stupid belief in the current economics model that is being used – something that is only sustainable if there is ever increasing population. Talk about a Ponzi Scheme. And Nobel Prices are given out for this kind of bankrupt thinking. As you know the self-actualization of a human being requires considerable resources and rightly so. What is the carrying capacity of the Earth that has finite resources. Continuing to breed like flies is not an option. We must all live more consciously.Did you know that the Native American always was sensitive to what Nature could support. So if a birth occurred in hard times the mother would steal out into the night and abandon the child to the Great Spirit – thanking it for the abundance – but an abundance that they could not sustain. In this manner left the child for the wild animals to eat. This is where we are heading – but not very consciously.I am surprised ObamaNation economic team isn’t recommending handing out fertility pills in order to insure future consumption in our 70% GDP consumer driven economy.

subgeniusJanuary 18th, 2009 at 1:58 pm

Housing: If you haven’t already, I suggest looking into Earthships (see http://www.earthship.net/) and cob building (see http://www.cobcottage.com/), earthbag and ceramic building (see http://www.calearth.org/, and of course strawbale (the most common…everywhere).I have experience with earthship, cob and strawbale; personally I dislike the intensive nature of earthship building (involves packing waste car tires with earth – very hard work, the average takes around 3000 car tires…), but Mike Reynolds’ development of the “systems package” is a work of genius. My preference is for hybrid cob and strawbale – it goes up fast and is fun, and the sculptural quality possible with the hand (and foot) powered construction of cob buildings a la Ianto Evans and Linda Smiley of the Cob Cottage Company in Oregon is beautiful. There are other forms of building (often referred to as “tractor cob”, but the process damages the land (heavy machinery used compresses the earth and it takes a long time for it to recover.The skills to build these buildings are easy to develop – especially cob, which can be done by kids!Bill Mollinson’s Permaculture work is a good starting point for developing a site as a small farm and the way he ties nature into the process of farming is another work of genius.Other forms of housing worth looking into are Yurts and the modern (more hitech) version of the idea by Pacific Domes (see http://www.pacificdomes.com/.Hope this is of interest…

Andrew G. BernhardtJanuary 18th, 2009 at 2:32 pm

I would like to know also, why anyone, lives in the USA. The crime rate is off the wall. The violent crime rates are off the wll, murder, honicide, armed criminal action, bank robbery, etc.— all off the wall! Probably, a constitutional issue, and I think its in dire need of revision! The Constitution, the foundation of the USA, is totally outdated, lame, pathetic, and it is lies! The right to bear arms is just another reason the USA is incoherent as a society anymore. People are seemingly austistic too. The age of consent is too high, especially when compared to foreign nations, and informed consent rules are also totally lame. The divorce rate is too high also, and they’re probably linked to too high of an age of consent. America also taxes the hell out of savings and investment, pathetic, the UK and other nations do not do this! American does not provide for its people free healthcare or free education either! The nation is burried under a mountain of debt, and it never even provided any real goods or services of any value to its own people!!! Pathetic!

economicminorJanuary 18th, 2009 at 2:34 pm

The populous was watching Gladiator sports, just like in Rome.They were to busy being occupied by their base instincts to notice that they were being robbed.

Andrew G. BernhardtJanuary 18th, 2009 at 2:35 pm

back in teh day too, indian days, people actually lived literally under “survival of the fittest” conditions. Today, even the totally weak and lame survive and live to adulthood. No one is challenged by health or wellness. Modern medicice has made everyone ridiculous, I think sometimes.

Andrew G. BernhardtJanuary 18th, 2009 at 2:41 pm

don’t forget the birth rate, fertility rate, age of first marriage, and other statistics are making the family unit disappear. Young women everywhere are in desperate pursuit of higher education it seems, at the expense of delaying or forgetting about marriage, having few children, having the childen they may have later in life, and the divorce rate is too high. Young women joke that when they’re 90 years old they will make their guys take viagra, levitra, and cialias— pathetic! I’m sure the 90 year old men, will maybe take those pills, and run off to the whore house, or strip clubs, and see escorts, and/or dancers. I think american women are totally asexual, and disinterested, because they had to wait until age 18 e.g. in California to screw. No wonder the divorce rate is so high, and no one can get along with the opposite sex anymore. Oh, and back to the medical care issues… healcare… doctors in the USA are paid something like 77% more their foreign doctor counterparts, but americans themselves are die-ing sooner than their foreign couterparts, despire, “better educational and training for american doctors,” and even more spending on healthcare versus the foreigners. What is wrong with American and Americans?! Maybe everything!!!

Andrew G. BernhardtJanuary 18th, 2009 at 2:43 pm

Why does anyone live in the United States?! There are 20,000 to 30,000 murder per year there! It’s a war zone! At war, against themselves! No free education, no universal free healthcare, and capital gains, and streaming income tax… all of this sure is a high contrast to the United Kingdom!!!

economicminorJanuary 18th, 2009 at 2:49 pm

I wish people would take on some moniker so that everyone can be distinguished and we can respond to them individually.Early on in this current discussion some guest said.

Solar is coming along nicely. At the moment there is over production of solar panels and tax credits coming. It used to be that a typical 7 kw installation would pay for itself in six years and last for 20 years.

I would like to know of the company that produces kw of solar power this cheap as I would like to purchase from them and or invest in them. And any that are in the process of cutting this in half….If there is over production, it isn’t reflected in the retail prices as far as I can tell. If there is an oversupply somewhere, please let me know. economicminor@gmail.comThanks

HayesJanuary 18th, 2009 at 2:51 pm

Looks like we’re going to get ourselves a rally when the markets reopen Tuesday — (FYI On Monday it is possible to play the S&P 500(IVV), Russel 2000(IWM) or the MSCI EAFE (EFA) via ishares Canadian division (ishares.ca). Symbols are (XSP), (XSU) and (XIN) respectively but a word of caution on liquidity as these are much lower volume and in C$.)U.K. to Announce Mortgage, Loan Guarantees to Encourage Lending Jan. 18 (Bloomberg) — The U.K. will underwrite mortgages and corporate loans to spur lending in a plan drawn up with Britain’s biggest banks, three people with knowledge of the situation said.Chancellor of the Exchequer Alistair Darling is also working on an insurance plan that would underwrite toxic assets held by lenders, a person with knowledge of the plans said.In a separate measure, the government will offer to swap its preference shares for ordinary shares to give the banks more cash, according to the Sunday Telegraph. This may lead to the government increasing its holding to 70 percent in Royal Bank of Scotland Group Plc and 50 percent in Lloyds Banking Group, the newspaper said.

blindmanJanuary 18th, 2009 at 2:53 pm

pjb,on this point, a few more surveys of verbewarp are called for and in order. see you there! god bless.

softwarengineerJanuary 18th, 2009 at 3:12 pm

BETTER GET COMFORTABLE FOR A LONG WHILE, IF YOU’RE RENTINGThe quickly resolved “V” shaped pink pony recession theories always point at recent bank bailouts possibly saving house price decreases; yet we all know the bail outs haven’t stopped foreclosures [or price decreases], nor should they in my opinion.Home buyers are not America, either are rentors hoping to buy in th future; they both are. Is it fair to just give an unqualified/naive home buyer say $100-300K on their principle, so they can possibly qualify to keep their home out of foreclosure to possibly mitigate home price decreases, albeit not give the same amount of bailout cash to the rentors and qualified buyers? Hades no.I know, the pink pony politics will tell you an increased foreclosed homes base makes all the other homes’ price decreases even worse. “So what “, I say, “when the Big Three almost go bankrupt, the foreign cars don’t sell either; is that a reason to bail out the Big Three?”No, the bailout money is going to B and A and Citi; not directly to foreclosed homeowners. I may not like that either, because the shyster banks have no accountability of the freebies…..irrespective, don’t expect the banks to just give it to distressed property owners….right now, they’re stashing it in their cash cans.What can Obama do? Not much, this whole home price conundrum is unsolvable with just bail outs in my book. We just don’t have the ethics, backbone and/or accountability to proceed as pink pony economists like Paulson envisioned.When will home prices go up? When/if the stock market recovers and job butcher axing recovers. When will that be? My guess is when we develop an industrial base and deal with the $1.7 Trillion infrastructure destruction [schools, water, hospitals, etc, etc, etc] that uncontrolled population mostly caused since 1990 and the bailouts don’t even address.I’m thinking with depopulation implemented, say by 2050, if we work at it ASAP, we may see a rebound in wages and home prices by then, if we’re lucky. Good luck President Obama [and if you want a smoke, go ahead].

economicminorJanuary 18th, 2009 at 3:13 pm

I actually got this from Mish’s site. But it goes to some of my contentions about the future of unions and pensions.To many systems are to inter related and as one starts to fail, it puts pressure on others and the dance goes on and on

State employees stunned by request for $250 million in concessionsCOLUMBUS — The state has asked workers in its largest labor union to accept a 5 percent across-the-board pay cut, a shorter work week and unpaid holidays to help balance the state’s troubled budget, according to a document obtained by The Plain Dealer.The list of cuts and changes Gov. Ted Strickland’s administration has asked the workers to accept, which also includes mandatory furloughs and paying more for their health insurance, would amount to $250 million in concessions, according to a members-only e-mail from Ohio Civil Service Employees Association president Eddie L. Parks.In the e-mail updating members on bargaining, dated Thursday, Parks said that the union expected to have to fight to keep its wages and health care agreements intact. But the union’s negotiating team nonetheless was “aghast at the scope of the concessions the state proposed.”Parks said “the union has also been told that even if concessions are made, there will be no guarantee that layoffs won’t happen.”

This is the first but will not be the last. Before this mess is over, anyone not facing cuts will be lucky if general anger isn’t directed towards them. We really are in this together whether we want to be or not.

GuestJanuary 18th, 2009 at 3:16 pm

Don’t be taken in by the government’s “mysterious-multiplier” concept, Guest. It’s a sham for socialism.As Robert Ringer explained it: This is the curious notion that the laws of mathematics, economics and common sense somehow change when one goes from small to large transactions… that, as society becomes larger and more complex, problems are too difficult for individuals to solve, while, in truth, it’s the opposite.“In reality, the more complex problems become, the better they can be solved by individuals.”The idea is that “needs and desires acquire moral validity if one thinks in terms of large numbers of people” and thus it validates Majority Rule: “If 3 million people vote to steal from 1 million people, proclaiming that the theft is justified because it is ‘their’ opinion that they need the money for a worthy cause, one is supposed to accept their action as moral.”To demonstrate the absurdity of this, Ringer says, eliminate six zeroes from each figure: “If a group of 3 people gets together and decides to rob 1 person, insisting that they are a ‘society’ and that what they are doing is in society’s (their) best interest, virtually everyone would agree that their claim in ludicrous.”As for the Chinese, they are the big winners, IMO. Look what the bankers have traded them for use of their capital at low interest — our nation’s patents and industrial base and economic future. And it was Congress that gave the bankers the go ahead.

C.LakeJanuary 18th, 2009 at 3:25 pm

If somebody (govt or private entreprise) spends money (borrowed or not) to hire labour, one can expect that their work will produce an output which will be worth more (not less), than the money spent. Okun’s law predicts that unemployment above the Non-Accelerating Inflation Rate of Unemployment (NAIRU, 5 to 6% in the USA) reduces GDP below potential output, and for every 1% excess of NAIRU, a 2% to 3% reduction in GDP is predicted. The reverse is also true, if Govt spends money to reduce unemployment rate towards NAIRU, this will correspond to an increase in GDP in the same approximate proportions.Taxes are irrelevant, and the cost of borrowing simply reduces the net output by the corresponding amount.Of course, the key issue here is the borrowing capacity of the govt. Beyond a certain limit of debt (apparently not yet reached!), one might expect that potential creditors start losing confidence in the US govt’s solvency or in the particular debt instruments’ valuation, reducing greatly the govt’s borrowing capacity.I don’t think anybody knows when we are going to reach this point, but it might well be not very far from now.

ptmJanuary 18th, 2009 at 3:54 pm

Sorry EM, sometimes I’m too lazy to own up to my own postings. A friend said that the Sunpower (SPR-225-BLK-U) panels were one of the better ones on the market.The case study below and others do not consider an in-home battery backup. Although that would add $5 k to the cost, it could give the home hours of backup power and a DC power source if the electrical grid goes down for extended periods.ptm===========Here is a detailed case study of a 7 kw solar panel array with no local storage. All excess is fed back into the electrical grid. $37 k with six year projected break even point.May 27, 2008 -By Loyd CaseGoing Solar: The Installhttp://www.extremetech.com/article2/0,2845,2308674,00.aspJuly 21, 2008 -By Loyd CaseGoing Solar Power: One Month Laterhttp://www.extremetech.com/article2/0,2845,2326042,00.aspJanuary 13, 2009 -By Loyd CaseGoing Solar: Six Month Updatehttp://www.extremetech.com/article2/0,2845,2338834,00.asp=======================Prices for rooftop solar systems fall as supply growsIn California, which accounts for nearly 70% of the U.S. solar market, a typical 4-kilowatt, $32,000 solar energy system cost a homeowner about $23,000 last year after state and federal incentives. This year, if prices sink as expected, that system is likely to cost $10,000 to $12,000.http://www.usatoday.com/money/industries/energy/environment/2009-01-12-solar-panels-glut_N.htm

C.LakeJanuary 18th, 2009 at 4:01 pm

Gee, another person who uses the term “socialism” in complete ignorance of what it actually means.Okun’s law (which is behind all of this), was proposed by US economist A.Okun, who was the last Chairman of the Council of Economic Advisors under L.B.Johnson. Ben Bernanke (yes, him) revised Okun’s estimates in 2005.Okun and Bernanke, two famous socialists ?

ptmJanuary 18th, 2009 at 4:17 pm

I just went back and read that earlier post. I had not realized there were more follow ups. I live in the sunny south and that case study is from southern CA so I did not think about the cloudy north. I see you are from southern OR so the numbers are going to be different given your higher number of cloudy days; and you may be right that it will not work for you.

GuestJanuary 18th, 2009 at 5:32 pm

is it ever going to occur to you to simply take back the trillions in legal theft that the billionaires are allowed to possess?is it just so much easier to suggest unionized working people must take less and less of their earned share for always?how can anyone look at this 3 minutes and keep suggesting unions – or any labor at all – are part of the problem?????http://www.youtube.com/watch?v=woIkIph5xcUget real. get un-blind.

Jason BJanuary 18th, 2009 at 5:46 pm

AJ-We need a means test for SS to ensure that only those needy that you refer to receive it.And no earnings cap on income for SS tax either.

GuestJanuary 18th, 2009 at 5:50 pm

Oh yeah, keep it up Dr. Nouriel Roubini (and other bears)… doom and gloom just around the corner! Recessions, utter and complete chaos, terriorism, less mortgage equity withdrawl by the trillions, declining house and commercial property prices, nuclear bombs exploding on the north and south pole, everyone swimming, stock market crashes, extreme weather, weak US Dollar and stronger foreign currencies, interest rates surging, GDP collapsing, inflation surging, huge trade deficits, bigger federal budget deficits, unemployment rising, declining labor force participation rates, and birth control becoming even more popular making the fertility rate and the brith rate drop further— straining Social Security even more as babies never born don’t ever grow up to reach the labor force to be taxed at the payrolls level, and “The Greator Depression” just ahead around the bend! HA!!! GIVE ME A BREAK!Reply to this comment By Andrew G. Bernhardt, ST.Louis on 2007-10-05 17:12:58

GuestJanuary 18th, 2009 at 5:52 pm

you’re missing it:http://antifascist-calling.blogspot.com/2009/01/nuclear-proliferation-terrorism-and.htmlyou will never fix anything as long as you keep telling yourselves and each other that you’re a well-informed group when you haven’t a clue what you’re really up against. what’s the matter – too much effort required to keep your planet intact for your children?you people are hilarious – lost in your blind egos.after you willfully ignore your reality in the above link, you can continue by ignoring this one, too:http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=103&topic_id=66773maybe the children care…since the supposed adults don’t.

GuestJanuary 18th, 2009 at 6:03 pm

you just keep blaming and blaming the working people, economicminor. too frightened to take on the real perps, i guess. sad. pathetic. blind. wrong.

economicminorJanuary 18th, 2009 at 6:09 pm

We have strawbale homes and cob homes in my area and I have been in some of them. Not for everyone but I agree they are energy efficient. There is also a very efficient systems called Rastor I think, it is a huge foam and concrete block made from old milk cartons and very lightweight concrete. They are extremely energy efficient. There is one up our road.My basic point about housing is not only its maintenance and energy efficiency but its location. It takes a lot of liquid fuels at this point to get people to and from their dwellings and oil production is declining, bio fuels take up food, water and natural gas to process. This is insane to have done to ourselves.Housing in America has become a ball and chain and not a benefit for many families.

GuestJanuary 18th, 2009 at 6:10 pm

this group is no where near defining and understanding the reality. you’re dreaming, and lost in the pleasure principle. you think you have some right to just keep on seeking agreement to answers to all the wrong questions. your incessant self-congratulations are going to get you dead.

GuestJanuary 18th, 2009 at 6:18 pm

I cannot decide if it’s your razor’s-edge conspiratorial logic or your eloquent appeal to my basic motivations that draws me to your post? Let’s see:1. Fear-of-Harm or Desire-for-Care – 70% importance to all personality types – Check2. Fairness/Reciprocity – 30% to all personality types – Nope3. Desire for Group-Membership/Group-Loyalty. (More appealing toconservatives.) – Nope4. Appeal to Authority/Respect. (More appealing to conservatives.) – Nope5. Appeal to Purity/Sanctity. – NopeGuess you will have to work a little harder on your argument.

GuestJanuary 18th, 2009 at 6:25 pm

Multiplying the government money over and over comes out zero because the government doesn’t have any money. For the multiplier to work, the government first has to get the money from me. In my pocket book of definitions, that’s socialism.Why not let me spend the money and be the multiplier effect to create GDP?I stand corrected, however, as Wikipedia explains that “the use of Okun’s law … describes an inverse relationship between the change in the rate of unemployment and the difference between actual and potential real GDP,” and as, according to the article,“There are several reasons why GDP may increase or decrease more rapidly than unemployment decreases or increases,” because “As unemployment increases there is: 1) a reduction in the multiplier effect created by the circulation of money from employees…” but, in that,In “fractional-reserve banking,” according to wikipedia, “the most common mechanism used to measure this increase in the money supply is typically called the money multiplier,” which “calculates the maximum amount of money that an initial deposit can be expanded to with a given reserve ratio,” and that,“The reserve requirements are intended to prevent banks from: 1) generating too much money by making too many loans against the narrow money deposit base; and 2) having a shortage of cash when large deposits are withdrawn,” then,It stands up to scrutiny that Benny the Bailer has somehow overreached the mark with Okay Okun’s multiplier affect and shot the economy straight to the heart.Under these conditions, I surrender. :)>http://en.wikipedia.org/wiki/Multiplier_effect#Money_multiplier

GuestJanuary 18th, 2009 at 6:39 pm

you would rather die than think. you would rather kill the messenger than confront reality. the train is going to hit you even though you refuse to look at it coming. forget me. think about YOUR SURVIVAL CHANCES.

GuestJanuary 18th, 2009 at 6:43 pm

you’re welcome. use them to wake others, please. the danger is as real as real gets. the criminals are more corrupt and powerful and in control than people are even imagining.all the evil you CAN see is but the tip of the iceberg.

GuestJanuary 18th, 2009 at 6:54 pm

God forbid we allow the people who chose to be weak and lame to survive to adulthood, eh? Those spongers have a proper duty to us healthier types to drop dead! It’s not like we believe people are born with equal rights to exist or anything. how we gonna keep creating billionaires to rule over us if we have to spend that money on the weak and lame surviving into adulthood?ahem.Go read up on the Iroquois League to lose your confusion about “teh indian days”. Look for a book called Forgotten Founders. See how “teh indians” actually governed their societies.

HayesJanuary 18th, 2009 at 7:15 pm

Obama’s ‘strong message’ to bankers: Start lending 01/18/09Barack Obama’s administration will “send a strong message to bankers,” pushing them to resume lending and jump start the economy, a senior adviser to the president-elected said Sunday. Read moreWith the president-elect just 48 hours away from being sworn in, senior adviser David Axelrod said on “This Week with George Stephanopoulos” that Obama wants “to see credit flowing again.”The Senate this week approved to release to

GuestJanuary 18th, 2009 at 7:16 pm

And, just in case a few of the frugal forewent all the great pleasures of life and have a bit left and stuffed away in a sock somewhere when they die, don’t forget state and federal inheritance taxes — sure to increase soon. Which, all told, makes savings a bit of a sucker’s game.

jugglingcdosJanuary 18th, 2009 at 7:20 pm

they were waiting for 2012 to come,the economic collapse will go well with the mayans predictions, planetary allignments, a new solar cycle (maunder minimum) and owh yeahRoland Emmerich’s new film “2012”it’s just a Hollywood thing..the arrival of “Klaatu” will make it perfect(i know that would be Peter JB’s wet dream :D)

kilgoresJanuary 18th, 2009 at 7:41 pm

I’m not sure that’s correct. Dr. Volker joined the U.S. Treasury Department in 1962 — during the Kennedy Administration — as director of financial analysis, and in 1963 became deputy under-secretary for monetary affairs. He returned to the private sector in 1965 as VP and Director of Planning for Chase Manhattan National Bank. I’m not sure he was ever in a position to “raid” social security “to balance the budget.”SWK

kilgoresJanuary 18th, 2009 at 7:59 pm

As I understand it, under 42 U.S.C. §401(a), social security taxes are paid into the Federal Old-Age and Survivors Insurance Trust Fund overseen by the U.S. Treasury Department. In 1965 — the year Dr. Volker returned to the private sector — funds from the Trust Fund began to be withdrawn and put into the General Fund to supplement congressional revenues. To the extent that annual Social Security revenues exceed current annual expenditures — which is the case most years — the surplus is put into non-marketable U.S. Treasury Bonds, which effectively allows the surpluses to be used to finance indirectly general purpose deficit spending by the federal government. I’m not sure how this constitutes a “raid” on social security — the surplus has to go somewhere — and in any event, it is not at all clear to me that Dr. Volker had any meaningful role in the decision to divert monies from the Trust Fund into the General Fund, although he might have had some role in carrying out that policy. That would hardly make him a bad guy, or an untrustworthy member on the Obama Administration’s economic team.SWK

Andrew G. BernhardtJanuary 18th, 2009 at 8:19 pm

and also don’t forget, that when the birth rate declines, and when fertility declines, Social Security is strained and become less solvent. This is because it’s a “direct transfer, from the working to the retired.” So, basically, women need to get married at an earlier age, and have more children then they are having now, and sooner rather than later in life. Women need to stop acting like they will delay marriage and babies until age 90, when they jokingly claim that they will ask their guy to take Viagra, Levetra, and Cialis— these pharmaceutical companies need to be taxed the G.D.-effing hell out of for apparently making women think they can delay the baby making process. It’s a matter of economic security, to save social security.

GuestJanuary 18th, 2009 at 9:00 pm

Start to think Ponzi by Madoff is nothing comparing to Ponzi by Fed/Treasury Bailout and Obama Stimulus. They are all criminals like Madoff. Madoff is tiny potato comparing to them.

Octavio RichettaJanuary 18th, 2009 at 9:24 pm

So, I will have a real easy test to check whether the Obama presidency is going to be any different from Bush’s:I will just sit back and watch how they handle the Geither multiple tax cheating adventures. It is not a matter of the issue not being sold by paying te back taxes. It is a matter of him being in charge of the Treasury. This is like having a reformed child molester as head of a day care center.Unlike TARP, this is one in which we can probably do something.http://www.suntimes.com/news/otherviews/1383614,CST-EDT-simon18.articleGeithner's failure to pay taxes just an ‘honest mistake’?January 17, 2009BY ROGER SIMONWould it be OK if I stopped paying my taxes until Barack Obama names me to be his secretary of the Treasury?That is a deal I would like to get. That is the deal financial wizard Timothy Geithner got.He didn’t pay all of his federal taxes for years. Then, after Obama decided to name him Treasury secretary, the president-elect’s vetting team discovered Geithner’s little oversight.Not paying your taxes is considered serious for some people. But not for Geithner, a Wall Street “wonder boy” — he is 47 — who is president of the Federal Reserve Bank of New York and was instrumental in putting together the recent Wall Street bailout package.You would think a guy like this would know about paying taxes, but no. Mistakes were made.Geithner failed to pay the proper self-employment taxes for 2001, 2002, 2003 and 2004, even though he was sent documents telling him he had to do so.But in 2006, Geithner got a document he couldn’t ignore. The Internal Revenue Service sent Geithner a notice saying he had not paid his taxes for 2003 and 2004, and Geithner paid up.But he did not pay up for 2001 and 2002, even though he must have known that he skipped taxes for those years, too.He didn’t pay those taxes until Obama decided he wanted Geithner to head the Treasury and sent vetters to look into Geithner’s past.The vetters discovered Geithner’s little tax error in November and told Geithner. Then Geithner paid up, with interest. The vetters also told Obama, of course.According to an article by Politico’s Craig Gordon and Amie Parnes, Obama “decided to push ahead with the nomination anyway because he ‘still wanted him.'”At the end of the day, a source said, “Barack decided that he was the best person for a really important job.”OK, I get it.The economy is teetering on the brink, and we need to cut corners a little. We can’t be all that scrupulous and nitpicky when the future of the nation is at stake.So in November, Team Obama announced that Geithner had this little problem and was paying his back taxes with interest and that it was all an honest mistake and no big deal, right?Wrong. They decided to keep it a secret. But the Wall Street Journal discovered it and blew the whistle Tuesday.The Senate Finance Committee has been looking into Geithner — it has to vote on his appointment — and discovered something else.According to Gordon and Parnes: “In addition, Geithner included payments to overnight camps in calculating his dependent child care credit in 2001, 2004 and 2005.His accountant informed him in 2006 that the camps were not allowable expenses. The committee notes that Geithner did not file amended returns to fix the mistake.”Can I get this deal? Can I ignore my accountant? He is always telling me that my trips to Vegas are not allowable under “necessary mental health expenses,” and fool that I am, I keep listening to him.The Geithner foul-up is different from the Bill Richardson foul-up. The Obama vetters were unable to get Richardson to give them all of the background information they needed, but Obama went ahead and appointed Richardson to the Cabinet anyway. Then that blew up, and Richardson withdrew his name.With Geithner, the vetters found the bad stuff — yay! — but everybody thought they could sweep it under the rug. Boo.Now Republicans are forcing a delay on the Geithner hearing until after Obama is inaugurated.Team Obama says Geithner made “honest mistakes.”OK. I’ll buy that. But as secretary of the Treasury, Geithner would be in charge of the Internal Revenue Service. And we will see how easy he is on other people when they say they made “honest mistakes.”

AnonymousJanuary 18th, 2009 at 9:39 pm

try to find a legal bill saying youre obliged/entitled to pay your taxesgoogle it up, you’ll be very very surprisedThere’s nothing wrong what Geithner was (un)doing….people dont realized that this issue has more to it…

Octavio RichettaJanuary 18th, 2009 at 10:09 pm

http://www.nytimes.com/2009/01/14/opinion/14dowd.html?scp=8&sq=geithner&st=cseOp-Ed ColumnistTim Geithner! Why Are Rich People So Cheap?By MAUREEN DOWDPublished: January 13, 2009WASHINGTONSmart is the new cool.So said Arne Duncan, the Chicago schools’ chief, at his Senate confirmation hearing Tuesday to be Barack Obama’s education secretary.Obama’s brainy ways and political posse of “hot nerds,” as one admiring reporter dubbed them, could inspire schoolchildren to aspire.When Duncan spends a little more time in Washington, he will learn something strange: Politics is a place where really smart people often get caught doing really dumb things.Take Tim Geithner, the hot nerd tapped by Obama to fix the colossal mess left by W. and Henry Paulson, a man who played with live snakes and dead-on-arrival ideas.How does a guy on the fast track to be Treasury secretary fail to pay $34,000 worth of federal taxes ($43,200, including interest), or forget to check on the immigration status of a house cleaner — the same sort of upstairs-downstairs slip-up that has tripped up other top-drawer prospects on their way to top jobs here? Americans expect the man who’s in charge of the I.R.S. to pay his own taxes.Geithner’s transgressions may seem petty given the kind of transgressions that have taken place in the Bush administration, and given the dire warnings of Obama’s choice for budget director, Peter Orszag, that the end may be nigh if the U.S. continues to spend beyond its means.But Obama has proselytized about a shiny new kind of politics, and it’s déjà vu all over again with the smart being dumb, the rich being greedy, the powerful being sketchy.This brings us to the Clintons.Hillary aced her Senate hearing on Tuesday, performing as the A-student she is. As one of her former campaign aides said, whatever else you say about her, she is always prepared.With Chelsea sitting protectively behind in a plum dress and glam ’40s hairdo — Bill was watching on TV with his mother-in-law — Hillary showed the reasons she could be a star at state and queen of Obama’s hot nerds.She was on top of all the issues, no matter how obscure. She batted around our “stale” arctic policy — who knew? — with Alaska’s Lisa Murkowski, who doesn’t seem to realize we’re sick of Alaska.She was up to date on the inevitable Law of the Sea Treaty.She ladled up the broth of flattery expected in the Senate with a chef’s finesse. Even after Senator Dick Lugar, the ranking Republican on the panel that was questioning her, tut-tutted that her links to Bill Clinton’s foundation carry the “risk” of foreign governments “and entities” trying to curry favor with Madam Secretary by donating money to her husband, she deftly buttered up Lugar.“Your leadership and inspiration with respect to arms control and especially nonproliferation and the efforts to contain and destroy loose nukes and other materiel, and now moving into the pathogen area, which is particularly dangerous, is a great example to me of what we should be doing,” she told a beaming Senator Lugar.Not many women can talk about “the pathogen area” with such authority and yet femininity.After enduring endless pompous lecturing from John Kerry on what she should read and think — a thinly veiled attempt to show the world that he would have made a better secretary of state, and indeed, thinks he was promised it by Obama — Hillary slathered on the oleo.After his windy discourse on how scientists had “revised the levels of supportable greenhouse gas emissions from 550 parts per million to 450 to now 350,” Hillary replied: “You are eloquent in describing it, and you’ve been a leader in trying to sound the alarm on it for many years.”That seemed to calm Kerry down a bit.The only one who attempted to joust with her about Bill’s unappetizing gravy train was David Vitter, the Louisiana Republican who was caught messing about with the notorious D.C. Madam in 2007, and he wasn’t the right messenger.Hillary swatted him away.She will easily intimidate the world’s dictators, just as she often intimidated Obama in the primaries. But it remains to be seen whether she can put aside her tendency to see disagreement as disloyalty. Can she work at the State Department with those who deserted her to support the usurper Obama? Can she manage Foggy Bottom better than she managed her foggy campaign?Obama and Hillary continue to be engaged in an intense tango.The new president is confident enough to think he can do what has never been done. He thinks he can pull out — like a diamond from carbon — the sparkling side of the Clintons that can make them exceptional public servants, extracting it from the gray side of the Clintons that can make them tacky, greedy, opportunistic and ethically shady.Cleaning out the Augean stables was nothing compared to this task, with Obama trying to bend Hillary and Bill to his will, while they try to bend him to theirs.

Octavio RichettaJanuary 18th, 2009 at 10:16 pm

Now a get it: Geithner is so important to the US economy that being a tax cheat does not matter. As the article says, if he were a bank, he would be too big to fail. What kind of a nation are we becoming? Reminds me of the late Roman Empire.http://www.nytimes.com/2009/01/15/us/politics/15geithner.html?_r=1&scp=4&sq=geithner&st=cseGeithner’s Skill May Trump Tax IssueBy JACKIE CALMESPublished: January 14, 2009WASHINGTON — If Timothy F. Geithner were a bank, he might well be considered “too big to fail.”In better economic times, Mr. Geithner’s confirmation to be President-elect Barack Obama’s Treasury secretary might be in danger after the disclosure this week that he had paid more than $48,000 in delinquent taxes and interest. But with the economy so fragile, many senators are loath to rattle financial markets by rejecting someone with Mr. Geithner’s qualifications and international respect. By late Wednesday, Republicans as well as Democrats were predicting he would survive the controversy and be confirmed next week.Mr. Geithner has broad experience in global economics, financial regulation, currency and monetary policy. And lately, as president of the Federal Reserve Bank of New York, he has been at the center of the government’s efforts to manage the financial chaos, sharing some criticism for its mixed record but not blame.“These are not the times to think in small political terms,” said Senator Lindsey Graham, Republican of South Carolina, who just returned from Afghanistan and Pakistan with Vice President-elect Joseph R. Biden Jr., and briefly met with reporters on Wednesday alongside Mr. Obama. “I think he is the right guy.”Mr. Graham thereby validated what the president-elect had just said: That Mr. Geithner, by bipartisan agreement, is “uniquely qualified.”“Look, is this an embarrassment for him? Yes. He said so himself,” Mr. Obama said, referring to Mr. Geithner’s remarks in a private meeting with the Senate Finance Committee the day before. But Mr. Obama said Mr. Geithner had made a common mistake and corrected it.The committee chairman, Senator Max Baucus, Democrat of Montana, early Wednesday postponed Mr. Geithner’s confirmation hearing from Friday to the day after the inauguration. Senators said the delay was unrelated to the tax issue, but at least for a time it will leave Mr. Obama without a Treasury secretary.The panel’s senior Republican, Senator Charles E. Grassley of Iowa, declined for a second day to take a position on Mr. Geithner’s nomination. In an interview with Iowa reporters, Mr. Grassley reiterated his concern about having a Treasury secretary, with responsibility for the Internal Revenue Service, who had been delinquent on taxes. But he said Mr. Geithner had been “very sincere” in accounting for his violations.He added: “I don’t believe there’s any doubt about his qualifications. For a partisan person like Obama, appointing a relative political independent as Geithner is, I think that that’s a plus.”Mr. Geithner called other senators to discuss the controversy, if they wanted, as well as his views on the big issues that otherwise had been expected to dominate his confirmation hearing: an emerging $800 billion economic recovery blueprint, plans for the remaining half of a $700 billion financial bailout fund, and ideas for rewriting regulations for the nation’s financial system to avoid another collapse.The controversy over his taxes, as it happens, goes to the one area where Mr. Geithner has the least experience, despite serving 13 years at the Treasury Department: domestic tax policy.Mr. Geithner, 47, rose from a lower-level civil servant at the department at the end of Ronald Reagan’s presidency to under secretary for international affairs under President Bill Clinton, then was a director of the International Monetary Fund before becoming president of the New York Fed in late 2003.Mr. Obama chose Mr. Geithner on Nov. 24, despite knowing of the tax issue.“Life’s about choices” is a favorite saying of Mr. Geithner’s, according to associates. Lately he has said it so often that he gets laughs even from the professorial Federal Reserve chairman, Ben S. Bernanke, breaking up the unfunny times that the two men — with current Treasury Secretary Henry M. Paulson Jr. — have had in past months making difficult choices about which institutions to bail out and which to let fail.Mr. Obama’s hard choice was between Mr. Geithner and Lawrence H. Summers, who had been Mr. Geithner’s mentor and boss at the Treasury Department in the 1990s, served as Mr. Clinton’s final Treasury secretary and wanted another turn. In a first meeting with Mr. Obama three weeks before the election, Mr. Geithner, in characteristic self-effacement, told him, “Larry would be great as Treasury secretary,” according to someone familiar with the meeting.But Mr. Summers had drawbacks in the Obama camp’s eyes. He had clear Clinton connections when the “change” campaign was trying to limit those ties. Mr. Summers also was known to have a sometimes difficult personality, and his troubled tenure as president of Harvard University had left some women’s and minority groups bitter and posed potential confirmation problems.On Oct. 17, at a New York hotel, Mr. Obama and Mr. Geithner met for an hour and talked about policy and personal matters, according to accounts of the session. Mr. Obama, who spent four childhood years with his mother in Indonesia, asked Mr. Geithner about his own early years in India and then Thailand as his father oversaw Asia development programs for the Ford Foundation.What neither man knew at the time, but the foundation has confirmed, is that Mr. Geithner’s father, Peter F. Geithner, oversaw a program that Mr. Obama’s mother, Stanley Ann Dunham Soetoro, had worked on. The two may even have met in Jakarta.Obama advisers say the candidate “fell in love” with Mr. Geithner, in the words of one, while a Geithner associate said Mr. Geithner reported being “smitten” with Mr. Obama. “They both have that kind of quiet confidence in their demeanor,” the associate said.When an Obama adviser asked Mr. Geithner if he wanted to be considered for the Treasury job, he said he had to first consult his family — his wife, Carole Sonnenfeld Geithner, a grief counselor for poor New York children whom he had met as an undergraduate at Dartmouth College, and two teenagers, Elise, 17, and Benjamin, 14. The job would also pay less than half of the $411,200 he made last year at the Fed. The family acquiesced, and Mr. Geithner turned over reams of records — including the years of tax returns.When Mr. Obama announced the nomination, he also named Mr. Summers as director of the National Economic Council, to coordinate policy from the West Wing. Ever since, the biggest question among associates is how well the two men will get along, what with Mr. Geithner, the onetime underling, now “the chief economic spokesman for my administration,” in Mr. Obama’s words, and Mr. Summers, the former Treasury secretary, enjoying proximity to the Oval Office.The morning of the announcement, Mr. Geithner and Mr. Summers had breakfast together in the Chicago Hilton. Since the Treasury years, they have continued to consult each other, friends say, and play tennis at economic gatherings. Mr. Geithner told others that he regretted that the weeks of media speculation had focused so much on Mr. Summers’ reputed arrogance. He joked at his own expense that the news media’s story line amounted to, “Larry is arrogant and smart; Geithner’s not so smart but he’s very humble.”In truth, Mr. Geithner is known as exceptionally smart and unafraid to speak up — traits that drew Mr. Summers’s attention at the Treasury Department 16 years ago.“I might worry if I didn’t know it was Tim on the other end of the phone or across the street from Larry,” said a former Treasury Department colleague of both men who did not want to be quoted because of the sensitivity of the confirmation process. “Because I’ve seen them, I’ve seen them clash, I’ve seen them have real, real serious different perspectives on an issue, and I’ve never seen them damage that relationship. And you can’t say that about many people.”

Octavio RichettaJanuary 18th, 2009 at 10:24 pm

http://www.nytimes.com/2009/01/15/opinion/15thu1.html?scp=3&sq=&st=nytEditorialMore Questions for Mr. GeithnerPublished: January 14, 2009President-elect Barack Obama’s team reacted predictably to the disclosure that Timothy Geithner, the nominee for Treasury secretary, failed to pay a chunk of his federal taxes over several recent years. The script gets played out, with slight variations, whenever a presidential nominee gets in that kind of trouble.Skip to next paragraphThe Board BlogThe BoardAdditional commentary, background information and other items by Times editorial writers.Go to The Board »RelatedTimes Topics: Timothy F. GeithnerOn Tuesday, when Mr. Geithner’s failures were first reported by The Wall Street Journal, the Obama transition office issued a statement calling his underpayment of taxes “honest mistakes.” On Wednesday, Mr. Obama himself said it was “innocent.” Those themes have been echoed by several of the senators who will conduct Mr. Geithner’s confirmation hearing, which is now scheduled for next Wednesday.As much as Mr. Obama and his team may wish it, however, the disclosures cannot be dismissed so easily, or papered over. The just-the-facts report of Mr. Geithner’s tax transgressions, compiled and released by the Senate Finance Committee, paints a picture of noncompliance that is considerably more disturbing than his supporters are acknowledging.Mr. Geithner must be questioned forcefully about these matters at the hearing next week, and his explanations must be credible. Even in the best of economic times, it would be hard to accept a Treasury secretary — who, after all, is in charge of the Internal Revenue Service — with a cavalier attitude toward paying his taxes. Today, in a time of economic peril, the nation cannot afford a Treasury secretary with a tainted ability to command respect and instill confidence.According to the report, when Mr. Geithner’s tax returns for 2003 and 2004 were audited by the I.R.S. in 2006, the auditors found that he had failed to pay self-employment tax in those years. To make good, he paid the back taxes, plus interest — $16,732.Obama officials say Mr. Geithner, who worked for the International Monetary Fund, had made a common error among international employees in Washington. But as The Journal reported on Wednesday, failing to pay the self-employment tax is not necessarily common among sophisticated I.M.F employees. Rather, one of the reasons such noncompliance is widespread is that it includes household embassy workers and other lower- level contractors. And regardless, the Finance Committee found that Mr. Geithner had signed paperwork at the I.M.F. that acknowledged his self-employment tax obligation.The story does not stop there. Mr. Geithner also failed to pay the self-employment tax in 2001 and 2002. Those returns, which the report says Mr. Geithner prepared himself, were not audited and so the I.R.S. did not order him to pay up — which raises the question of why he did not voluntarily amend those returns and pay the taxes and interest at the time of the 2006 audit. Instead, he waited until after vetting by the Obama team late last year revealed the shortfall — $19,176 in taxes and $6,794 in interest.A similar lapse occurred on another tax issue. On returns for 2001, 2004 and 2005, Mr. Geithner wrongly claimed expenses for sleep-away camps in calculating his dependent care tax credit. The accountant who prepared his 2006 return informed him that payments to overnight camps were not allowable expenses, but again, he did not file amended returns for the previous years at that time. The report does not break out the taxes and interest on that item alone, but along with other adjustments, Mr. Geithner owed an additional tax of $4,334 and interest of $1,232.Many people find taxes baffling, but before his job at the I.M.F, Mr. Geithner was a senior official in the Treasury Department under President Clinton, and for the past five years he has been the president of the Federal Reserve Bank of New York. With that professional profile, tax transgressions are tough to excuse.

GuestJanuary 18th, 2009 at 10:39 pm

Did you know that the Native American always was sensitive to what Nature could support. So if a birth occurred in hard times the mother would steal out into the night and abandon the child to the Great Spirit – thanking it for the abundance – but an abundance that they could not sustain. In this manner left the child for the wild animals to eat. Which tribes specifically practiced this?And why is it that whenever depopulationists start going on, they always go after the children? Wouldn’t setting a maximum age limit be just as effective? Go out while you’re still riding high and let the next generation have a go. Isn’t that just as fair as requiring women to leave their babies out for wild animals to eat?

kilgoresJanuary 18th, 2009 at 10:56 pm

>As for the issue SWK brought up. We have a lot of legal influence in government both in the fact that there are more trained in the law in office than any other segment of influence.This may well be true, but any such concentration of lawyers in the body politic does not establish that their collective influence is in any way pernicious. We are, after all, a nation of laws, and lawyers of necessity have been instrumental in creating and maintaining the very framework of our government. Of the 56 signatories to the Declaration of Independence, for instance, 24 — nearly half — were lawyers and jurists, and of the 55 delegates that attended the Constitutional Convention, some 34 were lawyers or trained in the law. Many of our most esteemed leaders, including 26 of our 43 presidents, were lawyers before entering office, including John Adams, Thomas Jefferson, James Monroe, John Quincy Adams, Abraham Lincoln, and Franklin D. Roosevelt, among others. In the 110th Congress, 174 out of 535 or 40% of representatives are lawyers, while 59 out of 100 or 59% of senators are lawyers. Unless you’re going to take the position that the United States has been fatally flawed from the beginning due to the overarching influence of lawyers in its establishment and development, you’ll have to explain why a concentration of lawyers in government today is any different that it was 100 or 150 or 200 or more years ago.>The health care system is broken partly due to litigation issues which supports the huge insurance lobbyists because of legal influence on the political system. This is not right or fair or even cost effective. The legal system and the insurance system are parasitic and use fear and influence to maintain their positions. Not everyone can have the biggest piece of the pie and still have enough left for others. This to will change. Probably right before it strangles the system to death.Your reference to unspecified “litigation issues” that “supports [sic] the huge insurance lobbyists because of legal influence on the political system” just comes across as so much gobbledygook. What “litigation issues” are you talking about? How do these litigation issues support insurance lobbyists through “legal influence?” In what ways is the legal system “parasitic?” In what ways does it “use fear and influence to maintain” its position? There’s a lot of vague hyperbole and an undercurrent of resentment here that typically betrays a dearth of understanding of the legal system. Kill all the lawyers à la Dick the Butcher (from Shakespeare’s Henry VI) if you want to, but don’t expect this to eliminate problems in the health care system or anywhere else.>The legal system and the industrial prison complex have filled up and expanded the prison population with the poor and disenfranchised (most underlying issues are drug and alcohol related) while mostly ignoring the real criminals, those who prey upon the productive resources of the country and benefit from a continuation of these practices.You can’t blame fairly judges and lawyers for enforcing laws that result in any inordinate number of poor and disenfranchised citizens going to prison any more than you can blame a police officer for giving out tickets for speeding, or arresting people caught with marijuana. Our prison population, perhaps the highest per capita in the world, has its genesis in ever more severe legislation, in particular, that involving mandatory minimum sentences, which arise as legislators — frequently non-lawyers with only a passing understanding of the criminal justice system — whip up and exploit for their own political aggrandizement the fears of the electorate through an appeal to being tougher on crime than their opponents.>Attorneys are trained to not deal with what is right but to win for their client.This statement belies a complete ignorance of lawyers and their duties under the law. In our legal system, it is the role of a factfinder, whether judge or jury, to determine the outcome of disputes, whether between private parties or between a person and the government, based on an adversarial process in which each lawyer representing a party, within the bounds of the law, presents the facts in a light most favorable to the party so represented. The system would not function properly, and parties to a dispute would be justified in objecting, if their lawyers took it upon themselves to decide whether that party was “right” or should prevail in a contested case. Lawyers are not trained to “win” cases for their clients, but to represent their clients zealously within the bounds of the law. Sometimes they win, and sometimes they lose, but they must always adhere to this standard lest they violate their oath.>When corporate America controls the political system, corporate America is the interest that is promoted and laws are ignored or removed that would keep the public safe from them. Just look at what has happened with the financial system and the real lack of accountability. This is because of legal influence in the political system. Laws don’t apply to these people, only the poor.Again, your blame is misplaced. The problem is undue corporate influence on politics and the legislation this produces, not on the legal system that resolves disputes under that legislation. It is concentrated wealth which corrupts political motives and results in the enactment of bad law and policy.>You can argue that this is political and not legal but I have a hard time drawing the line. It seems that the lines are grey or non existent. Yet the solutions are political.I hope my comments have made that line a bit clearer and brighter. I share many of your frustrations, but if you’re targeting lawyers, judges, and the legal system generally as a root cause of the problems you have identified, I think your aim is off. We’re not dealing with a problem of legal influence, but with the problem of a lack of political integrity borne of monied interests and, occasionally, outright corruption.SWK

blindmanJanuary 18th, 2009 at 11:03 pm

o,without the support of tens of millions of angry americans behind him obama will likely be absorbed by these people like water into a sponge. america is praying for a miracle on this, but prayer is not the generally recognized effective strategy when if comes to having your political voice heard. we live in interesting times, unfortunately.

GuestJanuary 19th, 2009 at 12:50 am

IMO the first, and easiest thing for Obama to do is to institute means testing for SS recipients. Got a private pension? Income from investments? You’ll be required to forgo SS benefits until your net worth or income reaches, what? $100,000? $50,000? Nothing? It’ll be just like Medicaid, where your assets must be completely depleted before your nursing home care will be covered.It will be presented as the patriotic duty of Americans who are more fortunate to give up a benefit they don’t really need for the sake of stabilizing the financial structure of SS for future generations.It will be immensely popular with the majority of voters who have no assets.

YveJanuary 19th, 2009 at 1:23 am

We have to step up to the plate and help solve this crisis one baby at a time ladies. Any takers out there to have his babies? Anyone? That’s what I thought. Oh right, you’re all totally asexual anyway, sorry.

GuestJanuary 19th, 2009 at 3:27 am

U.S.A. is in a military quagmire in Iraq, and an economical quagmire at home.Most nations have pulled away from Iraq, now they would probably love to pull away from the economical quagmire.

C.LakeJanuary 19th, 2009 at 3:31 am

Sorry Guest, Govt getting money from you(ie taxation) has absolutely nothing to do with socialism. You’d do well to read about socialism first, and update your “pocket book of definitions”.

Why not let me spend the money and be the multiplier effect to create GDP?

Because tax cuts have a multiplier that is always inferior to 1 (unlike Govt spending in infrastructure and job creation, which is superior to 1).Why ? Simply because you might spend only part of that money, and save the other part, and the part that you might spend will have a share of imported goods or services which will not increase the nation’s output.As I’ve said elsewhere, the key problem with this type of Keynesian stimulus (Obama Plan), is not in the assumptions on the multiplier, nor the need to focus on Govt spending in infrastructure and job creation, BUT the fundamental question whether a Govt that is already highly indebted can afford to borrow even more to finance such a huge stimulus. In the 1930s, when FDR launched his New Deal, the US was the largest creditor nation in the world and could afford it. Nowadays, the situation is reverse, the US is the largest debtor nation in the world, and I think over-borrowing from the Govt could lead its economy into a vicious inflationary and dollar depreciation spiral.

GuestJanuary 19th, 2009 at 3:33 am

well look for example at this comment further up on this same page

also this article from the LA Times – don’t blame Geithner, blame the tax codeBroken tax code snagged Obama’s Treasury pickJanuary 18, 2009

The article title refers to a tax code. Code = law.

GuestJanuary 19th, 2009 at 3:37 am

Then we also need a political quagmire and a religious quagmire. Then all leaders:-military-business-politics-religious…would be in a quagmire. Hope I did not miss any ‘group’ here?

C.LakeJanuary 19th, 2009 at 4:18 am

Crisis of confidence, is it a myth ?If Geithner doesn’t withdraw, if Obama only listens to the senate finance committee (which will probably stand behind Geithner), and continues to ignore us, the people, and sing us songs of “honest mistake”, our new President can rest assured that the crisis of confidence will just grow a bit more in significance. Will he get the message, he better !Let’s see how this goes, but I suspect Geithner will eventually have to withdraw.

GSMJanuary 19th, 2009 at 5:02 am

WAKE UP AMERICA!!Geithner was put there ,warts and all by those who really call the shots in the US. He is the gatekeeper, in position to keep out the uncouth unruly hordes from enterin the sanctified realm of those that are looting the US blind. His job will be to ensure that nothing substantial gets in the way of the Pigmen havin full access to the public trough. Summers is in the wings to take over the other part of the looting machine- the Fed.This tax thing is an unfortunate oversight that is already being minimised by the compliant and totally subservient US MSM.Game over folks….. you are hooked and bagged.

GuestJanuary 19th, 2009 at 5:50 am

And immensely unpopular with the ones who do, read, the ones who have the ways and means to make political contributions.

Jason BJanuary 19th, 2009 at 5:59 am

26 U.S.C. sections 1,61,63,6012,6151, 6072http://docs.law.gwu.edu/facweb/jsiegel/Personal/taxes/JustNoLaw.htm

GuestJanuary 19th, 2009 at 6:12 am

Hey if this guy**- Joseph R. (Joe) Banister, a former IRS Criminal Investigation Division Special Agent who learned of serious constitutional questions relating to the federal income tax and the federal banking and monetary systems. Mr. Banister’s expertise in the fields of accounting, finance, taxation, and law enforcement enabled him to not only understand these issues but realize that he could play a role in bringing the issues into the public arena for analysis and debate.**- from the IRS says so, it must be with some truth to ithttp://www.truthusa.org/articles/irs/irs2004.htm

HayesJanuary 19th, 2009 at 7:19 am

Geithner’s risky oversight of Citigroup

As president of the New York Federal Reserve Bank, Timothy Geithner often preached that gargantuan financial firms like Citigroup should be held to the highest regulatory standards to make sure they couldn’t take on too much risk.But when it came to supervising Citigroup in recent years, the record shows that the New York Fed eased the reins as the company blew billions on subprime mortgages and other risky deals that ultimately forced the biggest bank rescue in U.S. history.Now, the 47-year-old Geithner heads to the Senate in coming days as President-elect Barack Obama’s nominee for Treasury secretary. He’s won accolades for his expertise and work ethic, but there’s been little attention to his record as a Fed watchdog.Geithner’s tenure at the New York Fed – which bore the major responsibility for supervising Citigroup – covers a tumultuous span in which the sprawling conglomerate spiraled from the country’s biggest banking company to one of its largest welfare cases.Now under much closer government supervision Read more

HayesJanuary 19th, 2009 at 7:26 am

Familiar Trio at Heart of Citi BailoutWashington Post November 25Treasury Secretary Henry M. Paulson Jr.; Citigroup board member Robert E. Rubin; and Timothy F. Geithner, the president of the Federal Reserve Bank of New York, have for years followed one another in and out of jobs in government and industry. Their close relationships helped pave the way for one of the largest and most dramatic government interventions to date in the financial crisis….

HayesJanuary 19th, 2009 at 7:45 am

looks like the bailout rally courtesy of the Gordon Brown re-bailout lasted all of five hours — with most Euro indexes 1% or so — US futures also negative —

MorbidJanuary 19th, 2009 at 7:46 am

New Limits to Growth Revive Malthusian Fears

The power of population is so superior to the power of the Earth to produce subsistence for man, that premature death must in some shape or other visit the human race. Thomas Malthus, 1798. (Or 210 years ago)

WSJ article of 24 March 2008.

MorbidJanuary 19th, 2009 at 8:21 am

Rome Is Burning – Yet…Obi is not like Lincoln – he may talk-the-talk – but he doesn’t walk-the-walk.There was no great inaugural for Abe – the country was in too much trouble.But in this day and age Hog-Riding is in so let’s blow $150 million and have yet another party. Now that is REAL CHANGE. That really sets the tone for – sacrifice! Yeah, the bell tolls alright, and you know on whose sorry asses the sacrifice will land. What a mixed message, naive, process is about to unfold.

GuestJanuary 19th, 2009 at 8:33 am

the moneypowers manufacture the problem, then cook up a solution that further concentrates the wealth into their hands. you lose coming and going, they increase their possession of wealth coming and going:UAW accepts government ban on strikes15 January 2009It has come to light that the federal bailout of General Motors and Chrysler approved last month by the Bush administration with the support of the incoming Obama administration includes a stipulation that effectively bans strikes or work stoppages by autoworkers.The clause, which was revealed in a Security and Exchange Commission filing by GM last week, coincides with government demands that the 139,000 workers at Detroit’s auto companies agree by February 17 to accept mass layoffs, plant closures and sweeping wage and benefit concessions.According to the SEC filing, the Treasury Department could declare GM and Chrysler in default and revoke $17.4 billion in loans, throwing the automakers into bankruptcy, if “any labor union or collective bargaining unit shall engage in a strike or other work stoppage.”The effect of this provision is to revoke the legal right to strike, an achievement won by the American working class in bitter struggles against “criminal conspiracy” laws used against striking workers in the 19th century. It was only with the 1935 passage, in the depths of the Great Depression, of the National Labor Relations Act that federal law recognized the right of workers to strike. This concession to the working class was not some freely given gift of the Roosevelt administration. It followed general strikes that erupted in 1934 in Toledo, Minneapolis and San Francisco. Without the strike weapon, workers are reduced to the status of industrial slaves, legally compelled to accept the most brutal conditions of exploitation without any recourse to collective resistance.Several commentators have questioned the legality of the anti-strike provision in the auto bailout bill. Nevertheless, under the terms of the bailout, the strike ban remains in effect as long as the auto companies have outstanding loans from the government, setting the stage for contract negotiations in 2011 in which workers would not have the slightest leverage to reject demands for even more draconian givebacks.This confirms the warnings by the World Socialist Web Site that the crisis of the US auto industry is being exploited by the American ruling elite to throw the working class back to conditions not seen since before the UAW and the other mass industrial unions were built in the 1930s.Just as the 1980 Chrysler bailout and the smashing of the PATCO air traffic controllers’ strike in 1981 initiated a wave of wage-cutting and union-busting in the 1980s and 1990s, the current attack on autoworkers is being used to spearhead a fundamental change in class relations in the US and internationally, under conditions of a global breakdown of the capitalist system.The organization that ostensibly represents GM and Chrysler workers, the United Auto Workers union, campaigned for the government bailout of the Big Three companies, accepting its stipulations for tens of thousands of layoffs and wage and benefit cuts to bring unionized workers down to the level of non-union workers. It has not uttered a word of protest over the provision banning strikes and work stoppages.Far from opposing this attack on the democratic rights of autoworkers, the UAW bureaucracy welcomes the ban on strikes as a means of crushing rank-and-file resistance to its collaboration with the auto bosses and the incoming Obama administration.In a joint appearance at the Detroit auto show with General Motors CEO Rick Wagoner last Thursday, UAW President Ron Gettelfinger told the host of NBC-TV’s “Today Show” that the union was committed to making the companies “more competitive” by “modifying” the current union contracts in talks with the Detroit automakers that began this week. The UAW president boasted that the union had already accepted wage cuts and work rule changes that made UAW workers more competitive than non-union workers at US plants operated by Toyota.For his part, Wagoner praised the UAW, saying he was “confident that we’ll come together and get the kind of changes that we need.” In exchange for further concessions, the UAW bureaucracy is reportedly seeking a seat on GM’s board of directors and an increase in the number of GM shares it presently owns.An organization that accepts a government ban on the most elementary form of workers’ resistance demonstrates thereby its fundamental opposition to the interests of the working class. The UAW’s complicity in the so-called “bailout” of the auto companies, with its provisions for impoverishing the workers and stripping them of their right to strike, is the inevitable outcome of the entire policy of the UAW and the American trade unions as a whole and the culmination of their trajectory over many decades. To argue, under these conditions, that the UAW bureaucracy presides over a genuine workers’ organization is to engage in self-delusion or deliberate deception.rest of article at http://www.wsws.org

GuestJanuary 19th, 2009 at 8:45 am

Our imbecilic bovine acceptance of the false statements that overpopulation is, was, or ever will be a problem may very well be what ushers in the wet-dreams of the elites: a world cleansed of “too many useless eaters.”Kill this reprehensible, psuedo-scientific, incorrect propaganda meme before it kills you!

GuestJanuary 19th, 2009 at 8:51 am

I’ll take that bet. He will be confirmed…just like all the incoming megacrooks and liars Mr. hope and change is shoving down your throats with the complicity of a criminal congress.

GuestJanuary 19th, 2009 at 8:55 am

Are we really going to fall for the outrageous notion that the earth, the world, is – or can be – insolvent?For PITYSAKE no such thing is true! ALL we have is a distribution problem!!How can we BE this gullible?!

HalJanuary 19th, 2009 at 8:58 am

You don’t install the wiring until you decide where the outlets and lights are going to go.Ass backwards — again.

Octavio RichettaJanuary 19th, 2009 at 9:10 am

A am afraid you will be proved right. Every time he comes out to speak people will think here comes the IRS chief tax cheat!

HayesJanuary 19th, 2009 at 9:33 am

The republicans and dems alike won’t dare challenge the ascension of Timmy with anything more than lip service and empty bluster – something to do with what ‘pots call kettles’…What’s more this Organization for America] that Obama is rolling out will ensure that he will get what and who he wants going forward – this will make the influence by the so called ‘religious right’ of the Bush years look like amateur hour

Andrew HeldJanuary 19th, 2009 at 10:03 am

This toxic bank idea seems to be gaining traction.From Mover Mike:”This could be great news. The Obama team is considering setting up a national bank. Instead of a cartel of banks that print our money and charge us interest for this bargain, we could have a national bank that would earn interest for Americans. Right now the national bank idea may be used to buy up bad assets “clogging the financial system”.”Next step is to do away with the FED!

GuestJanuary 19th, 2009 at 10:07 am

So everyone pays SS taxes, but only those dumb enough not to have saved up anything themselves get anything back? Talk about rewarding failure and punishing those sensible enough to plan ahead. Mind you, it fits in well with the whole bailout ethos – make the strong pay for the weak until the strong too become weak.

Little SaverJanuary 19th, 2009 at 10:20 am

I don’t see how a man who ‘forgets’ to pay his taxes wouldn’t ‘forget’ to do what’s best for the US Treasury.

GuestJanuary 19th, 2009 at 10:23 am

The beggining of the end was the downward harmonization of wages due to globalization of unregulated capital without a plan to maintain wages at levels that would allow consumption of the results of the production. We are now reaping the harvest of greed that allowed us to fill in DEBT to substitute for wages. We were willing to exploit the asians with near slave labor wages and we are now going to suffer the consequences. The DEBT levels have reached astronomical levels and defaults on debt will cause a deflationary spiral. The governments will try to defy financial gravity, but it won’t work. We are all responsible for allowing this to happen. All of us!We could have let our voices be heard, but we were caught up in the rat race of self absorption. The debt levels generated by the derivatives market arehuge and unmanageable. We could have foreseen thisand instituted global treaties to protect the levelof wages. You cannot have rampant global capital andrampant near slave labor and have a good result!

economicminorJanuary 19th, 2009 at 10:31 am

You have missed the point that these systems are failed and your arguments emphasize this. Everyone has some good points as to why it is not their fault and why they shouldn’t change. I may blame only one part of the failure, which is only one part. All parts may be right (have justified arguments in favor of their positions) but in combination they cause a failure.I am not going to defend each point. These are how an outsider sees the problems. It really doesn’t matter that I am perfectly correct in my view as I only see one side of the sphere, one spot. What matter is that these systems are all broken in one way or another and in combination, they are breaking down our entire system of life style support.I would add to those I already listed the way the pensions systems in the country are structured and how some people have very unequal access to retirement funding over others who worked just as hard in situations that were just as tough.

blindmanJanuary 19th, 2009 at 10:32 am

g,insolvency is nothing more than a distribution problem. yes! that seems correct. blindly driven by the need to satisfy accounting problems of our own, there own, creation, we have arrived at this point of great imbalance, some real some fictive. but the distribution imbalance is the result of the flawed structure and ignorant adherence to it. we know better.and another thing… do you see, in this troubled imbalanced time, how the msm or cm is presenting this inauguration event as an apolitical, entertainment laden, spirit lifting, feel good, magic dream, we have overcome party.you would think there might be a protest or two out there but all we see is waving flags and signs in support of the dream of change.you would think the people would be doing something other than partying and celebrating, with two warsand gaza and a failed financial system.? mounting unemployment and education in crisis.america.”my country ’tis of thee, sweet land of liberty.of thee i sing….”again, the position and historic moment dictating an irrational disconnect from reality. clearly you can see, feel, the emotional energy. when people are emotionally engaged in this way judgment is suspended. i think the condition lasts for 20 minutes, hormonally. then what do we do?do it again. right.

economicminorJanuary 19th, 2009 at 10:58 am

I really do understand how the legal system works. That doesn’t mean it is not broken. And yes, it can’t fix itself. The fixes are political yet the culture is supportive of how things are currently structured.As for health care. Insurance companies say it is the cost of litigation that drives up their costs not the cost of care. I’m sure that some of that is not true but doctors say the cost of mal practice insurance has driven up their cost dramatically… This all revolves around the legal/insurance systems that have entrenched interests in their incomes and profits. You can defend the patients rights to suit but that is part of why the system is dysfunctional, entrenched interest which all have valid positions yet in combination all the valid positions add up to a system that is dysfunctional, is breaking down and not cost effective.When you have one system that is not cost effective, it can be absorbed by the rest but when most major systems are not cost effective, there is no one left to absorb the over the top costs and our entire system starts to collapse.I contend that if anyone can detach themselves enough to stand back and look at what is happening in the advanced countries, the US especially, you will see this.This is not about me blaming you or what you do. It is just what happens. Minsky predicted it. Kondratieff documented it. The Mises Institute has paper after paper showing how economic systems cycle thru change. If you do not believe in change or cycles then you will not believe in what is happening and will be run over by it. Sorry. I’m only a messenger.

GuestJanuary 19th, 2009 at 11:01 am

Here’s a little accuracy tip. Write this down so you know clearly where to pin the blame.The THIEVES are the ones with all the MONEY, Honey.The SOLUTION is counter-measures to correct for all the LEGAL THEFT in our system.You’re dreaming if you think you can piecemeal remove the myriad legal thefts at this stage. You’ll never catch up with the rate at which new legal thefts are being manufactured by those who have the influence to do so.And you’re really in la-la land if you still think Obama is even going to try.

blindmanJanuary 19th, 2009 at 11:14 am

g,in a nut shell, yea.for this to happen the majority of the population needs to be blind, sleeping, anesthetized, undereducated, miss educated, beaten down, imprisoned, drunk, enter de tained, or otherwise intellectually castrated. it begins in the home and is reinforced in all the institutions that lay claim to the hearts and minds of men and women.simply demand of yourself that you will be, are, free. absolutely free. start by practicing this for a few minutes a day. build up to say an hour a day, then it becomes permanent. and then you know that you are by the same truth responsible.after all, it is only the truth you are telling yourself that makes any difference in your life or the lives of those around you.without this freedom you cannot really think clearly and without that you cannot communicated effectively and without that you become isolated in a crowded world. politically powerless. ignorant.just a thought.

economicminorJanuary 19th, 2009 at 11:17 am

Quit defending the masses who don’t want to pay attention to their own economic well being. They are the ones that believed they could have their cake and eat it too. Compounding interest is real. Spending tomorrow’s income on yesterday’s consumption does have consequences. This is not only about those at the top because those at the bottom were gladly eating up all the BS.Until the Average Joe/Jane starts getting mad, there will be no change. As long as they keep their heads in the sand, they have exposed themselves to ill treatment.

blindmanJanuary 19th, 2009 at 11:20 am

g,i moved from la la land and now reside in tee doe land.you are correct , at this point the ones with the money are the ones who pulled the heist and take note, they have left the country with the money.ELVIS has left the building.everyone go home.ELVIS has left the building.

GuestJanuary 19th, 2009 at 11:24 am

So, if I read this correctly, in that Geithner the Chief Tax Cheat did not pay his income taxes, and in that his backers, including tomorrow’s president, assert that his was not an illegal but an “honest mistake,” and in that Geithner is to be official head of the IRS as Secretary of the Treasury and, therefore, ultimate Tax Exemplar, then, in the name of “honest mistake,” established law and the Obama presidency, the citizens of these United States are hereby allowed to be completely flexible with their “honest” tax payments.It stands to reason that “Mr. Obama chose Mr. Geithner on Nov. 24, despite knowing of the tax issue,” because that’s the way they do it in Axelrod’s Chicago. The sins of Geithner, of course, go far beyond any trivial tax cheating; we’re talking the appointment of a bailout czar of satanic proportions. We’re talking Goldman Sachs.

GuestJanuary 19th, 2009 at 11:29 am

Hayes, I cannot tell you how much I appreciate your investigative reporting…and the power of it. Thank you.

MarkarJanuary 19th, 2009 at 11:29 am

This $150 mill inaugural spectacle is truly obscene in light of the dire circumstances we find ourselves. I don’t know what is worse-the fact it is funded by Wall St. to a great extent or the propaganda it dispenses to the sheeple that “help is just around the corner

economicminorJanuary 19th, 2009 at 11:31 am

It is irrelevant that you don’t like the word *entitlement* used.We have a system that has so many people entitled to so much that we have been forced to borrow against our future to the point where we can NO longer make the payments NOR is borrowing more actually an option.You and most others do not seem to understand borrowing and compound interest. It is paid either thru direct interest payments or thru inflated values of products. There is NO free lunch.There is a limit to our largess as a country and that limit is based on the actual productive capacity.We have not only exceeded that but by miles and miles… NOW we have to do something about it. We have reached the limits of debt to income.I do not know the caring capacity of this country. I would hope that we can support all those who are unable to support themselves. At the present, I see the government deciding that those at the top are more important to support than those at the bottom. It will take a tremendous amount of ? anger? pushing? shoving? or something for those others of us to change this.

ex VRWCJanuary 19th, 2009 at 11:37 am

Each hit is shorter.Europe is in serious trouble. I recall being castigated here for having a pessimistic view of Europe and the Eurozone. But events are moving quickly, spreads are increasing, downgrades are coming fast and furious now. Some are actively starting to ask is someone will leave the EMU. Look at Roubini’s spotlight today on the subject. At a minimum there is major stress and several countries in what amounts to a depression in Europe already. In many ways, look to the UK for a glimpse of our future right now.

ex VRWCJanuary 19th, 2009 at 11:48 am

Lindsay Graham is a clown who prostituted himself in defense of the indefensible McCain campaign.Spineless Republicans of this ilk is why I took the moniker of ex VRWC.However I expect better of Obama.

economicminorJanuary 19th, 2009 at 11:48 am

You many think you have assessed blame but it is more like documenting events. The blame is that change happens all the time. As it happens, it is resisted. As it is resisted over time it builds up stresses. As the stresses build up bad things happen. GWB’s administration was one of those bad things. It was just the result of a long list of fixes to problems that really didn’t fix anything. Now we have a situation where the fixes won’t work. This sort of like patching a bad tire. There is a point where you just have to replace it.The systems we have grown use are breaking down and are going to be replaced. The mechanism is yet to be determined. The quality is yet to be determined. The new structure is yet to be determined.We do know or I do know that change is upon us all and things will be much different in a few years. I just hope we all love it vs the other alternative.

GuestJanuary 19th, 2009 at 11:50 am

@ Maureen Dodd above: “Smart is the new cool…. So said Arne Duncan, the Chicago schools’ chief, at his Senate confirmation hearing Tuesday to be Barack Obama’s education secretary…. Obama’s brainy ways and political posse of “hot nerds,” as one admiring reporter dubbed them, could inspire schoolchildren to aspire.”Listening to these people who are backed by the media is a far cry from what the country believes and where we’re going to end up. Let them dream on, spout on – i.e., this is the beginning of an Era, free apple pie for everybody, we’ll never have to worry again, about anything…Need I remind anybody that the guy Obama defeated was McCain? These “hot nerds” don’t have all this full support they’re yammering about, to do “something.” Those of us with a little more perception than the common herd realize Obama doesn’t have a “team of rivals,” he has a team of crooks, and more and more people are going to see it, real fast.

blindmanJanuary 19th, 2009 at 12:01 pm

m,it is a consent manufacturing media event of historicand hysterical proportion. we will see if any realityfinds it’s way in to the festivities. i cynically expect to see reality profanely ignored in favor of a presentation of a veil; it being stitched together from the shroud of a truly great mans dream.happy birthday , martin luther king.

economicminorJanuary 19th, 2009 at 12:03 pm

thank youFrom what I understand, the clouds do diminish the production some what but the real factor is the time. In the winter we have fewer hours but in the summer we have more than you.As for grid vs storage, as far as I know, the difference is the type of inverter system and a storage system. The panels are the same. You can have a system that does both. It just cost more… So depending upon your outlook on the future, whether you spend the extra is dependent upon your view of it as a good insurance risk/investment or a waste of resources.I am interested in solar as most of the people on this blog should be as it is presented as one of the future electrical supplies for all of us.But with all investments, is it cost effective. Will future costs of electricity make it so? Will waiting be better as the technology improves?As a value investor, I have been waiting until it makes more sense. Although my future plans do include some solar w/ grid plus storage as insurance against the worst happening.

aerial viewJanuary 19th, 2009 at 12:05 pm

you’ve got it right! the poor don’t understand, the middle class is too busy living from paycheck to paycheck and the elite continue to support any policy that will reduce labor to slave wages while our politicians keeping selling off the country piece by piece under the guise of “globalism will create more jobs” for Americans. I submit one of the main reasons the govt is slow to figure out anything is because a large amount of profit by U.S. corporations is made oversees and they are not as vulnerable as exclusively U.S. companies, particularly, small business. This makes them oblivious to the plight of the average American. And of course, this is one of the primary goals of globalization: to insulate the profits of the corporate elites from failing economies in one part of the world as long as they can continue their pilaging in another. Only this time, the greed was leveraged beyond everyone’s imagination, and, indeed, “the chickens have come home to roost”!

economicminorJanuary 19th, 2009 at 12:16 pm

Thank you, I have seen the video before and have passed it along.What you do not seem to realize is that most of their wealth is in debt assets…When everything is leveraged beyond the systems capacity to service all that debt, the debt collapse (deflationary spiral) wipes out most all the debts and the wealth of those on the 3 foot line too.This is a once is a hundred or once in a thousand year event that is coming down. Most of the systems we rely upon are stressed to the breaking point or are already broken. SS, Medicare, corporate structure, finance structure, education, transportation, pension system and on and on..The real value was used up, leveraged, borrowed against, by a society that thought it could spend tomorrow’s income on yesterday’s consumption forever and ever… We ignored our infrastructures and ignored reality and now we are facing the consequences of years and years of denial.It isn’t there, except on phony books. Mark to market all the debts to real incomes and the uber wealthy are jumping in front of trains and off the roofs.You are witnessing events that are remarkable. Events that will go down in world history as the biggest blunders of mankind.We, the US, could come out of this as a wonderful country in the end but the pain is going to be severe and it will take a decade before we are there.Fasten your seat belt and give up on taxing the rich as a way out. It isn’t going to happen and in the end, they won’t be much better off than the rest of us.

economicminorJanuary 19th, 2009 at 12:29 pm

To me insolvency is the inability to pay the debt incurred.It may be an accounting problem but it is a real problem when Hal owes Jim and Jim receives his income from Sam and Sam had to spend all his income on consumables like food and energy and has no money to pay Jim who then can’t pay Hal…When the cost of housing is inflated beyond the incomes of those who need it for shelter due to government’s and financial system’s use of the fractional reserve system to create money out of thin air and the aggregated debt exceeds the income from real productive endeavors….. insolvency leads to default leading to debt collapse.The increased money supply beyond the real production also lead to price increases in commodities and other asset classes. The debt phenomenon was really quite spectacular and so will the consequences be.

GuestJanuary 19th, 2009 at 12:31 pm

I don’t expect better of Obama any more. Now we see the real Obama, or more importantly, the real face of what we’re going to get in this administration. It’s not personal after all, it’s about the country.Geithner is a banker buddy. If Obama doesn’t get rid of him, that’s what Obama is too.

GuestJanuary 19th, 2009 at 12:45 pm

While the right of working people to collective strike is stripped off them by new, premeditated law which will be enforced at state authorized gunpoint, the bankers whose coordinated strike is ongoing are threatened that someday soon they’re going to get a “strong message to lend” pointed at them.We suffer these fools not because we have to, but because we acquiesce. We acquiesce not because we’re bad, but because we have been driven far from our own good sense by the sophisticated, calculated manipulations of wealthpower tyrants.The USA government has been totally devoured by superwealth. You will be much better off when you “hopers” finally realize how very true this is. You are not, until you realize how totally betrayed you’ve been, going to realize that a grassroots campaign to get pay justice is your only route to safety. Until you accept that the only players in your government the Kings of wealthpower can’t control by influence or else severely marginalize, they do away with, you are as ever-vulnerable as innocent, naïve children. There is NOTHING Obama is going to do for you that will in any way threaten the continuation of the dystem that is eating us all alive. Come to grips with this, or the things you say will obfuscate the facts and enable and provide cover for the perps. Every misguided swipe you take at human nature or “greedy sheeple” or immigrants or petty thieves or homeless or feeble or common man or any working underpaid person at all – every swipe you take – every support you give to the memes of overpopulation, scarcity, “we are incorrigible predators” – all this hands further power to keep society confused and unfocused to the titans of influence. We should know by now in our DNA to distrust the hoarding monopolist who cries scarcity or “innate baseness of man” as causes that maintain and “justify” having a house of have and a house of have-not in perpetuity. I am certain the wealthpowerful ones laugh at our gullibility – rejoicing in their luck that people don’t STOP AND THINK.It is truly hilarious – even while it’s oh so tragic – that, with no proof whatever and going on just the memes floated by the monopolists, a huge proportion of humanity has succumbed to viral memes like scarcity and overpopulation…and that those who ask hard questions are just “bonkers conspiracy nuts”. There exists no proof that we have reached this supposed “carrying capacity” the die-offers promote. Human nature is not preventing us from doing justice. Immigrants didn’t trash your bill of rights. It isn’t the poor man stealing your dough – the crooks are the ones with all the money, Honey! We have been trained from birth in everything that isn’t so in America. We are within the frame, and just can’t see the picture that is our government today.You fell for Obama like Charlie Brown falls for Lucy’s football. You haven’t the faintest clue how deeply institutionalized and systemic and interconnected the villany is, you’re ignorant of who, where, and how many are involved in giga-powerful moves that most certainly do affect your every living hour. You have accepted climbing the fundamentally misconceived ladder of human hierarchy. You don’t even question if it is reject-worthy. You aren’t skeptical, you join right up with the psy-ops and memes being dished out to you as a constant propaganda, you are so innocent you can’t really even imagine the horrifying lengths being gone to by wealthpower giants to remain both above the law and beneficiaries of writing it – pity poor humanity! so blind, so innocent, so suffering!They have talked you away from even loving yourselves strongly! they’ve made you believe there are too many of you – some will just HAVE to go, tragic but necessary. oh god it’s so not true! they own the land is why so many don’t have any land: it’s not too many of us, it’s all the wealth and power in a few hands. Population is going to peak well below the earth’s capacity to sustain us all – and we can move the peak number down by stopping inequality preventing people becoming educated. It’s the elites with their media propaganda ministry that deliver you up to these scarcity and inevitability memes. Blow away this fog! Everyone on earth could stand close together in one city in Florida for heavensake. and so what that mono-cropping couldn’t feed them all – so what? Small, diverse farms are 30 times more efficient anyway! Every mouth born is born with these handy things called opposable thumbs that allow each mouth to produce MORE food than it can consume. A financial crisis has not changed this fact. How many buildings are one-story and could have another story added to double housing space? We can build up – we don’t have to spread endlessly over land needed to grow food. And we’re learning to suck energy out of river flow. Stonedust can remineralize the earth and absorb carbon to boot. Alternatives abound. It’s the elites who propagate “we have no other choice”. Elite Left, Right, Dems, Repubs – they are all members of the rich boy’s club first and last. There’s no other choice is their mainstay argument for many things that serve to keep the cheap labor slaving away for them. They don’t want you to see the alternatives that would not enrich them – they oppose any progress that might decrease their consummated influence, control, overpower, overwealth. They’re crazy to do this because their overwealthoverpower is actually super-harmful to their real happiness, but they may be the last to see how bad economic inequity is for all living things.The only alternative we DON’T have, is keeping economic inequality injustice. THIS, we will not survive – and I have the rational proofs of that.We need miracles, but we MAKE miracles. There are miracles of technology out there working right now. While we’re terrorizing ourselves with an economic inequality injustice gigadanger gigaviolence factor in the billions, how can anyone claim any issue is more the heart and core origin of all our troubles than is inequality of wealthpower?If you DON’T fix pay injustice – if you DON’T start paying everyone according to principles of justice, then no matter how you tinker with regulation, transparency, leadership, taxes, money-printing rights, (put your personal precious pet “root cause” here) – you will NOT have prevented the extreme inequality from re-growing because – wait for it – money makes money! Which means people get richer for doing no work. Which means the work that created the wealth didn’t make (get paid) the money, and since the pool of wealth is always finite, that means a robbery has occurred, and every theft comes with an angry person attached. We are manufacturing for ourselves this most violent environment we find ourselves in. We have accomplished a colossal destruction of our basic birthright happiness. NOT because we’re BAD, just because we’re so wrong about being soft on injustice and because we stubbornly and stupidly reject the one idea that has the power to save us: equality of man despite inequality of gifts won in the birth lottery.99% of our suffering is 100% UNNECESSARY, and it is caused by our failing attempts to continue to skirt the Golden Rule.An economist cannot be unaware of the super-extreme wealthgap we go to bed with every night. An economist who speaks not of injustice and inequality is lost not only to the purpose of an economist but to the very purpose of life itself. The purpose of life is TO BE HAPPY, and any economist who doesn’t clearly understand that extreme maldistribution of material wealth is the very surest way to have frightening unhappiness for all – should check his pulse.The primed and ready planet-freezing nuclear bomb under every chair, bed, and movieseat on this planet constitutes the ONLY real Democracy on earth. Concentration of wealthpower makes Democratic government impossible by definition. STOP deluding yourself that Democracy is possible with a wealthpower gap in the billions. You have tyranny-slavery – that’s what you live under.If you’re not OUTRAGED, you’re not paying ATTENTION. And if you’re blaming ANYTHING but our insane, super-mega-lethal extreme extreme economic inequality as the origin of this nightmare, well, you need to hear it again and again until it sinks in, that OVERPAYUNDERPAY is the thing that is murdering your happiness and safety – and the non-negotiable price of survival is JUSTICE. PAY JUSTICE. ECONOMIC, REAL MATERIAL WEALTH JUSTICE.YOU have 2 choices: choose pay justice and get a Golden Age, or choose to remain soft on economic justice and the nightmare escalates automatically to extinction of every species.Don’t be a geno-sadist.And for the sake of your own survival, start aiming the blame gun where it belongs, and not at the false-target threats you’ve been duped into aiming it at.

GuestJanuary 19th, 2009 at 12:47 pm

Tim Geithner the tax evader as Treasury Secretary.I see no change from Obama but a continuation of the Bush and Clinton lack of principles in government.Character flaws like this come back again and again toundermine public trust and progress.

Andrew G. BernhardtJanuary 19th, 2009 at 12:48 pm

This “multiplier effect,” it’s more like a “disintegration effect” to me! Each dollar that is transferred from one entity to another as spending in the private sector is taxed as one of the parties income. So spending from entity A to entity B, entity B is taxed on that $1 dollar, and thus entity B has to hoard some of that income from entity A, that it has as income, for Uncle Sam, the IRS. Then if entity B spends the remainder (after hoarding some for Mr. Tax Man) then entity C gets it as income. Then entity C has to hoard some of it for taxes too, before spending it. So lets assume this is big spending! From A to B, B is taxed at 30%, so the dollar is reduced from 1.00 to 0.70 (entity B must hoard 0.30 for taxes), then it spends the 0.70 dollars, and entity C has to keep 30% for taxes due too, so the 0.70 is further reduced to 0.49 dollars. Entity C then spends this 49 cents after hoarding the tax liability, to entity D, … See what I mean! There is no dumb as hell multiplier effect… the Government taxes income, it taxes spending as sales tax too! Then it even taxes the G.D.F-ing hell out of savings and investment in capital gains and streaming income tax. Then the USA does not even give universal free healthcare to it’s people, nor does it pay for higher education!!! Pathetic. So how does the dollar grow to 1.57?! It’s just one big g-d-effing lie of the Government. Those dirty rotten scoundrels.~ Andrew G. Bernhardt, St. Louis, Mo.

Andrew G. BernhardtJanuary 19th, 2009 at 12:57 pm

Overall health and wellness may be linked to the age of consent also… high blood pressure, chlosterol, triglycerides, hypertension, diabetes, retinopathy, pancreitis, obesity, overweight… all of this may be linked to the age of consent. Why? Because there are fat obese slobs everywhere in the USA and age of consent, set by the state, is either 16, 17, or 18, making everyone not interested in themselves or eachother. In Japan, the age of consent is 11, so from a young age they are interested in themselves and eachother! And I noticed that the Japanese are not as fat and obese as their American counterparts. They’re also quite healthier as a result!

Octavio RichettaJanuary 19th, 2009 at 12:59 pm

To me some things cannot be but back and white. Tim Geithner is a guy who worked for the IMF for years and is now the head of the NY FED. He eats financial statements and tax related issues for breakfast, lunch and dinner. Thus, if there is ANYONE who can and should do his taxes correctly his name is Tim Gegeithner!Instead,he has consistently decided to screw uncle Sam with his taxes in several occasions, despite having te opportunity to do things well:1. The IMF warned him about his tax liability given his US citizen status. US citizens pay taxes on worldwide income regardless of where you live (I do) (Diz is why guys like Mobious from Templeton changed their citinzenships.)2. I understand the IMF specifically told him they had “grossed up” his salary (i.e. pay him more for the position than if he was, e.g., from Nigeria) so that he could pay this taxes.3. When they caught him on the 2003, 2004 mistakes, he didn’t go back and did the right thing by voluntarily correcting similar mistakes he made in 2001 and 2002. He just sat there and waited taking a gamble on the fact that after three years the IRS cannot come after you.It is probably OK for a plain folk to game the system this way but when you have worked hard in a career that aims at being the head of the treasury this strategy makes no sense.4. There is another example related to some child day-camp expenses that were not tax deductible and he took as a wrong deduction. Once again, when given an opportunity this guy chose the lower path. he didn’t go back a filled an amended return.So to me it is crystal clear that this guy should not get the appointment. The “Hillary stretch” is where the Obama administration should draw the line.I wonder what Obama supporters are blogging on this topic.To me, if it is true that we are going to start conducting business properly under Obama, this guy should not get the job.There are many jobs a “reformed(?)” child offender can take but being the head of a childcare center should not be an option open to him.Below, I will post the latest I find on this issue.

Octavio RichettaJanuary 19th, 2009 at 1:00 pm

Should Congress let Obama’s Treasury pick slide on taxes?Posted Jan 19th 2009 12:37PM by Jonathan BerrFiled under: Scandals, Economic data, Recessionhttp://www.bloggingstocks.com/2009/01/19/should-congress-let-obamas-treasury-pick-slide-on-taxes/

Octavio RichettaJanuary 19th, 2009 at 1:03 pm

from link above:…Congress also knows the economy is in a big hole. Even Republicans are tip-toeing around the issue of Treasury Secretary nominee Timothy Geithner’s failure to pay self-employment taxes when he worked at the International Monetary Fund even though his employer apparently told him he was obligated to do so. An Obama spokesman described the errors as “embarrassing” and media reports indicate that he is likely to be confirmed. The nominee recently wrote a check for more than $41,000 in back taxes and penalties.That’s a pity.While Geithner is an eminently qualified economist, he showed a lack of judgment that is disturbing to say the least. Also, putting someone in charge of the IRS who failed to pay his taxes strikes some as wrong. Its almost as bad as the traffic court judge in Philadelphia whose license is suspended because of $11,000 in traffic-related fines.But for now, Congress seems willing to let Geithner slide since he has paid the taxes he owed. It’s unlikely that the government would be so generous with other tax delinquents. Congress, though, is not counting on them to prevent the second Great Depression.

Octavio RichettaJanuary 19th, 2009 at 1:07 pm

Obama Must Act on Domestic, Foreign ChallengesJan. 19, 2009Bill Stewart–The Santa Fe New Mexicanhttp://www.hispanicbusiness.com/politics/2009/1/19/obama_must_act_on_domestic_foreign.htmFrom the article:His Cabinet, despite recent hiccups, is broadly centrist, strong on talent, experience and competence, winning support from all sides.Secretary of the Treasury designate Timothy Geithner is a case in point. Geithner was found to have been delinquent in paying his payroll taxes (not his income taxes) when he worked a few years ago as a senior official in the International Monetary Fund. Those taxes have since been paid, though a little late.The IMF, as an international organization, does not withhold those taxes, leaving it up to its American employees to pay their own.Americans are not accustomed to this practice, and sometimes those taxes are overlooked, deliberately or innocently. But as the economy is in such crisis, and Geithner is considered by both parties to be such an invaluable official, it seems that both Democrats and Republicans have decided not to let the perfect be the enemy of the good. Unless damning evidence is found, Geithner should be confirmed shortly after Obama’s inauguration.

Octavio RichettaJanuary 19th, 2009 at 1:14 pm

If this ain’t the profile of a guy who cheats on his taxes then I don’t know what is:http://www.mcclatchydc.com/homepage/story/59703.htmlWASHINGTON — Tax errors that embattled Treasury Secretary-designee Timothy Geithner has admitted range from the complicated to the comical. Here are some answers to questions about his missteps:Q: So Geithner underpaid taxes and was forced to pay back taxes with interest. He paid them, so what’s the problem?A: The circumstances raise eyebrows. From 2001 to 2004, when he was mainly employed by the International Monetary Fund, taxes for Social Security and Medicare weren’t deducted from his pay. Geithner signed a document saying that he was aware this was the case, but he never paid them until it was called to his attention later. Americans who work at the IMF are treated as self-employed for tax purposes, and Geithner was given a guidebook on how to address this tax matter.Q: How does he explain this?A: He hasn’t explained publicly, but in private, apparently his pitch is simply that the tax code is complex, especially for the self-employed. His backers say that these were simply honest mistakes.”This is an example of the average taxpayer doing his own return. Using software does not guarantee an accurate return,” said Milton Baker, a retired certified public accountant and blogger in Westland, Mich.Geithner filed amended tax returns for 2001 and 2002 after Barack Obama nominated him. Earlier he did so for 2003, 2004, 2005 and 2006 after an IRS audit in 2006. He did his own taxes in 2000, 2001, 2002 and 2005.Q: Aren’t there some other mistakes, too?A: One of the more egregious errors was that Geithner, over three different tax years, claimed that expenses for the summer camps he’d sent his children to qualified for the child and dependent-care tax credit. This credit is for working parents with children younger than 13 who send them to preschool or after-school care. IRS documents and commercially available tax software clearly define what qualifies.”That’s one anyone who has kids and has filled out that form knows that it’s wrong. That’s really odd,” said Paul Caron, a prominent tax-law expert and associate dean at the University of Cincinnati College of Law.Q: Aren’t Geithner’s problems evidence of complexity in the tax code?A: The self-employment tax perhaps, but millions of Americans claim the child care credit without problems.Documents that the Senate Finance Committee released suggest that Geithner also failed to pay a penalty tax for withdrawing money early from a federal retirement account.There’s a 10 percent penalty for doing that, and it’s advertised up front for tax-deferred retirement accounts. This is as basic as it gets in the world of personal finance.”I don’t understand how the 10 percent withdrawal penalty could have fallen through the cracks. That’s just a red flag,” said Peter Sepp, spokesman for the National Taxpayers Union, a group that lobbies for simplifying the U.S. tax code.Q: What about the immigrant housekeeper? A similar foul-up forced Zoe Baird to withdraw her nomination to be attorney general in 1993, so isn’t this a double standard?A: Baird withdrew after revelations that she hadn’t paid federal taxes on an illegal alien in her employ. Geithner admits to a three-month period in which a foreign-born domestic employee’s immigration documents had expired without his knowledge. He did pay her wage taxes, however.Q: That’s it?A: No. Geithner acknowledged that he didn’t acquire the required I-9 forms for verification of employment eligibility status from three domestic employees. He said that he did write down the document information and identification numbers. He said he verified the employees’ immigration status but retained no hard proof. Over a decade, he also failed on numerous occasions to pay their Social Security or Medicare taxes until letters from the federal government reminded him.Q: Is there any upside to this?A: If Geithner is confirmed, yes, according to Sepp of the National Taxpayers Union.”Maybe this ordeal will convince him to move tax simplification to the top of the priority list,” he said.What a brilliant closing!

Octavio RichettaJanuary 19th, 2009 at 1:42 pm

Gimme a break! if after having worked at the treasury, imf, and now as a chief of the NY fed, Timmy made a mistake because the tax code is so tough to figure out. Then, he is a total dummy and imbecile that will do more harm than good if appointed as treasury chief.For god’s sake! is a tax cheat the only qualified man to run the US treasury? Do I smell depression?

Octavio RichettaJanuary 19th, 2009 at 1:45 pm

LETTERSJANUARY 16, 2009, 10:25 P.M. ETGeithner’s ‘Mistake’ Was Not Coming Clean in 2006egarding your editorial “A Geithner Tax Amnesty” (Jan. 15): Timothy Geithner did not pay the self-employment taxes for 2001 through 2004, but of even greater concern is the fact that he did not correct 2001 and 2002 returns when his 2003 and 2004 returns were audited in 2006. At that point, he could certainly no longer feign ignorance. He did not correct his “honest mistake” until after his nomination to serve as Treasury secretary, thus negating any possible argument that he was “not aware” that he owed self-employment taxes for 2001 and 2002, since he had already been audited on that exact point.Regardless of his experience and ability to serve as Treasury secretary, I firmly believe that this failure to pay self-employment taxes, even after the audit when there was no doubt of his awareness of his legal obligation to do so, should eliminate him from consideration. To allow him to continue as the nominee under these circumstances is a slap in the face to all Americans who honestly report their income and pay the tax due.Terry L. Jones, CPAFalls Church, Va.The Senate should reject the nomination of Timothy Geithner for Treasury secretary. Especially now, the lead financial officer in the cabinet must be a person of demonstrated integrity. Mr. Geithner’s blatant disregard for a citizen’s taxpaying responsibility disqualifies him.The confirmation vote will be a test of the Senate: Will our senators stand for integrity?Duane AckerAtlantic, IowaThis tax controversy obscures the more basic issue of competence. Tim Geithner has been a disaster as president of the Federal Reserve Bank of New York. Just as we seem still to be in denial about the true nature of the economic crisis, so too the Congress mistakes Mr. Geithner for a financial expert.Christopher WhalenCroton-on-Hudson, N.Y.If the current president of the New York Federal Reserve Bank, and apparently our next Treasury secretary, cannot figure out how to comply with our tax system, what chance does the average citizen have in complying with the massively complex set of rules? Hopefully President-elect Barack Obama will do us a real public service and not only overhaul the financial regulatory system as he has said he would, but the tax code as well.Craig A. JunkinsChesterfield, Mo.The International Monetary Fund bent over backwards to explain the self-employment tax issues to independent consultants such as Mr. Geithner, and went so far as to reimburse him for those taxes. And he wants to be America’s CFO?Peter FordTierra Verde, Fla.The Republican response to Tim Geithner’s self-employment tax mistake suggests that the key lessons of their 2006 and 2008 election defeats have been lost already. It appears that Republicans are willing to compromise principles in order to dance with a centrist nominee that they like, rather than take the chance of dancing with a replacement nominee who steps further to the left.Democrats never cut any slack for Bush administration appointees.L.C. GrantNorwalk, Conn.

Octavio RichettaJanuary 19th, 2009 at 1:53 pm

http://online.wsj.com/article/SB123203968188886129.html

* BEST OF THE WEB TODAY* JANUARY 15, 2009Now You SE Him, Now You Don’tWill Geithner’s tax problems sink his nomination after all?By JAMES TARANTOWill Timothy Geithner’s nomination as Treasury secretary survive? Intrade still puts the likelihood at about 94%, but if we owned those contracts, we think we’d sell. The Wall Street Journal reports that his confirmation hearing has been delayed until next Wednesday, the day after President-elect Obama’s inauguration–and the paper’s account of the nominee’s tax troubles when he worked for the International Monetary Fund makes it more difficult to understand how it could be an honest error:An IMF booklet on taxes, which Mr. Geithner told the Senate panel he received, instructed employees that “you pay the employee’s share of U.S. Social Security taxes.”Mr. Geithner’s quarterly tax-allowance payments also included a statement of what the money was to be used for, and had an entry for “SE tax”–meaning “self-employment” taxes. In a wrinkle in U.S. tax law, U.S. citizens at the IMF pay Social Security and Medicare taxes as if they were self-employed. Current and former IMF officials said that U.S. officials widely understood “SE tax” to mean payroll taxes.Mr. Geithner “filled out, signed and submitted an annual tax allowance request worksheet with the IMF that states, ‘I wish to apply for tax allowance of U.S. federal and state income taxes and the difference between the “self-employed” and “employed” obligation of the U.S. Social Security tax which I will pay on my Fund income,’ ” the Finance Committee reported.In other words, as National Review’s Byron York puts it, “he accepted payment from the IMF as restitution for taxes that he had not, in fact, paid.” That seems worse than merely overlooking the tax obligation.To be sure, as the Journal points out, “even trained preparers sometimes miss the subtleties involved in taxation of employees of international organizations”:The IRS in late 2006 launched a settlement initiative aimed at noncompliant employees of foreign embassies, as well as international organizations such as the IMF. At the time, the IRS said as many as half of affected employees were out of compliance with tax rules in one way or another.One could argue, however, that if a new president wanted to select a Treasury secretary who formerly worked for an international organization, he would be better served to choose from among the half who were in compliance.Given all the attention the media gave the tax woes of “Joe the Plumber” back in the campaign, it’s hard to see how Geithner can get a free pass here. In an editorial, the Seattle Post-Intelligencer accuses itself of employing a double standard:Obama’s staff told senators about the tax problems on Dec. 5. We should have been clued in, say, Dec. 6. It should not come up hours before a Senate confirmation hearing–not when it’s clear that transparency is supposed to be the standard for this new administration. We can only imagine what we would have said had Geithner been a Bush appointee.Should this news derail the nomination? Probably not.And it may not. Although Sen. Charles Grassley, the Finance Committee’s ranking Republican, has not said if he’ll support Geithner’s confirmation, the New York Times quotes him as saying, “I don’t believe there’s any doubt about his qualifications. For a partisan person like Obama, appointing a relative political independent as Geithner is, I think that that’s a plus.” The Times also points out that domestic tax policy is “the one area where Mr. Geithner has the least experience.”Obama is also standing behind Geithner, with whom, according to the Times, he has a strong personal rapport:Obama advisers say the candidate “fell in love” with Mr. Geithner, in the words of one, while a Geithner associate said Mr. Geithner reported being “smitten” with Mr. Obama.That ought to make up for Rick Warren, anyway

GuestJanuary 19th, 2009 at 1:53 pm

Don’t make a simple problem complex or argue moral issues that are both immoral; to reduce population legislate a progressively higher tax on having children based on net worth and income.

kilgoresJanuary 19th, 2009 at 2:12 pm

No offense intended on this end, and none taken. You have made some astute observations.I understand full well that all of our systems — political, legal, economic, health care, education, etc. — are not presently achieving the results we are right to demand of them. While it’s easy to identify the things we don’t like about how things are, figuring out how to bring about effective change to complex but flawed systems, such as the legal system, is difficult. At some point, one can imagine that the size and complexity of these systems — measured, perhaps, by their cyclical nature — becomes such that reform occurs only at the periphery, and the core problems appear intractable.Still, I’m not ready to give up, and I will continue to strive to seek incremental improvements, regardless of how insignificant they may seem in the larger scope of things, where the opportunity arises. None of us can waive a magic wand and make the world a perfect place, but we can all take small steps to make better that little corner of the world in which our own lives directly intersect.Peace, my friend.SWK

ex VRWCJanuary 19th, 2009 at 2:13 pm

From John Maudlin’s latest ‘The Endgame’..snip…

Pushing On A StringThe economy clearly let leverage run to an irrational level. You’ve seen the graphs. US debt to GDP is now over 300% and has risen precipitously in the last ten and especially the last five years. Leverage and debt fueled the growth of the economy, but debt growth hit a wall and now the deleveraging process is the painful result. This brings us to the worst-case scenario: that all the efforts of the Fed will go for naught and that we are in a liquidity trap.A liquidity trap is a situation in monetary economics in which a country’s nominal interest rate has been lowered nearly or equal to zero to avoid a recession, but the liquidity in the market created by these low interest rates does not stimulate the economy. In these situations, borrowers prefer to keep assets in short-term cash bank accounts rather than making long-term investments. This makes a recession even more severe, and can contribute to deflation. (Wikipedia)And there is no question, at least in my mind, that the economy, if left to its own devices, would fall into a soft deflationary depression, which would take years to climb out of. The contention of those who believe that we are headed for such a state of affairs is that no matter what the Fed does, excesses on the part of consumers and unrestrained government deficit spending is going to create a Perfect Storm. First of deflation and then, because the Fed is going to try to re-inflate the economy by printing money, we will see a resurgence in inflation and a collapse or, at the very least, a serious drop in the value of the dollar. Further, to expect foreign governments to continue to buy depreciating dollars and allow the dollar to continue to be the world’s reserve currency is not realistic. And of course, there are those who think we will eventually see hyperinflation as the Fed is forced to monetize the national deficits, with gold going to $3,000 (or higher!). And Obama, with his talk of trillion-dollar deficits for an extended period, certainly adds fuel to that fire.If, and it is a big but possible if, the Fed is indeed pushing on a string, then we are likely to see 15% unemployment, yet another lost decade for the stock market, and a real calamity in the pension, endowment, and insurance worlds, which are planning on 8% long-term portfolio returns to meet their obligations…snip…

This is the main problem with arguments that seek to ‘restart lending’. As pointed our here a blog or two ago, Deflation is not really price reduction. It is demand destruction. Price reductions are the result of demand destruction.So, trying to ‘restart credit’ in the face of demand destruction is like trying to turn up the hose to make more water flow when the bucket already full. The velocity of water in the bucket will not change except for some agitation at the top where the hose enters. Most of the water will just slosh out.

MarkarJanuary 19th, 2009 at 2:16 pm

Let’s face it. All the grandstanding over Geithner’s unpaid taxes is just that. He is TPTB’s chosen one–the ultimate insider, groomed to protect the interests of the Fed and its banking cartel. He knows where the derivative time bombs are and how to “manage” them. He will be appointed. It is clear the American people don’t understand the implications of all this, and that is what the gov’t. is consistently counting on. I can’t help but wonder whether Obama’s inexperience has pushed him into the orbits of these recycled “experts”, or whether he has been their hand chosen puppet all along.

tutterfrutJanuary 19th, 2009 at 2:41 pm

English is not my mother tongue, so can someone explain to me what it means:I made ‘an honest mistake’Does it mean:I honestly made a mistakeI made a mistake without being dishonestI am honest about just having made a mistakeI made an honest take, which went wrong

slfJanuary 19th, 2009 at 2:52 pm

In my opinion, it is essentially doublespeak. The “honest” is redundant. It would be the opposite of a “dishonest mistake”, which wouldn’t be considered a mistake at all, as dishonesty implies that it was done with purposeful knowledge. Therefore, a mistake is just a mistake, and the ‘honesty’ would be implied. Saying that something is an “honest mistake” is simply someone trying to put a more innocent spin on a story.It’s similar to hearing someone testify in court, after swearing to tell the truth, starting their sentences with “Well, your honor, to be honest..blah-blah-blah”. It’s unnecessary and self-serving, and actually has the opposite effect on me. I tend to question honesty when someone has to figuratively beat me over the head with how ‘honest’ they’re being.

HayesJanuary 19th, 2009 at 2:57 pm

From Jay Leno’s monologue last week”Barack Obama also says he wants to bring a sense of accountability to Washington. I’ve got a better idea. Why don’t you bring some accountants to Washington, O.K.? Tell us where the hell our $750 billion went!Speaking of that, the new Treasury secretary nominee, Timothy Geithner, has come up with a plan to lower taxes. Don’t pay them!In a last-minute complication to what looked like an otherwise smooth path to confirmation, Timothy Geithner, President-elect Obama’s nominee for the secretary of Treasury admitted that from 2001 to 2004 he failed to pay $34,000 in Federal tax. Fortunately for him, this is not his field of expertise. You know, he’s just nominee for Secretary of the Treasury!A Democratic spokesman called the issue today “an honest mistake.” How come, in Washington, the only time anyone is honest is when they make a mistake?Well, you ever notice this? Whenever politicians don’t pay their taxes, “Oh, it’s an honest mistake.” Huh? You know what they call it when you and I don’t pay our taxes? “Exhibit A for the prosecution.” link

blindmanJanuary 19th, 2009 at 3:05 pm

e,isn’t it interesting how the bastion of financial wisdom and true believers in free market capitalism have lined up for “free” capital after having destroyed their own biased system and credibility, leaving the lot of choked off, cut off consumers without access to this same “free” capital. they want us to borrow and we know we should not. not now. plus, they really can’t even afford to lend. they do not want to distribute loans, or a working wage, or access to property? and still slave labor is termed “impoverished”.! while they set about changing the rules of the game.? default contagion ensues. had the wealth been distributed to labor the debts of the masses would be less, a step in the right direction. but. the concept of wealth based on counting dollars is delusional anyway. a source of poverty..mog is right. it is a distributions problem and a redistribution problem. and it is just a game with bad rules. or a bad game with no real rules that have to be obeyed by all members. another distribution problem, all the rules have been followed by only a segment of the participating players.insolvency is a distribution problem and a real problem. it is structurally dictated but merely conceptually founded and it indicates dysfunction. the accounting of which is opaque and currently incalculable but under review!.it is a game and there are rules and there are real deadly results. if you don’t like the results you are free to change the rules or the game. in fact, in america, it has been argued that it is your duty to do that. that is the greatness of this country. freedom and responsibility. for all.lets say there are 100 people on an island with one river. you “own” the river and have arrangements with the others. i want a drink.so you want payment from me for exploiting your resource but i don’t have any money. i become a “charity” case but which one of us has received the charity? or you chase me off into the ocean?or i conspire with some of the others who don’t appreciate your pricing and you hire a band of security guards etc… all over a drink of water..a game with rules. a distribution of ownership problem resulting in insolvency on my part and i didn’t even have to introduce the concept of fiat currency, the distribution of which could be argued to be arbitrary and as someone said, and forgive me if i misuse the term, a “signature of poverty”..ps. thanks again for all your posts. i think you are definitely on the right track. ( i agree with most of your positions ).pss. sorry if i’m rambling.the idea is that frequently what appears to be great wealth is really just a great injustice, the result of impoverishment , or “the signature of poverty”. maintaining it just perpetuates it. some people have abundance and are dying from being smothered by it while others starve. i don’t care what the numbers say, who has more chits or beans, it is and remains a distribution problem of spiritual proportion.

Andrew BernhardtJanuary 19th, 2009 at 3:09 pm

This “multiplier effect,” it’s more like a “disintegration effect” to me! Each dollar that is transferred from one entity to another as spending in the private sector is taxed as one of the parties income. So spending from entity A to entity B, entity B is taxed on that $1 dollar, and thus entity B has to hoard some of that income from entity A, that it has as income, for Uncle Sam, the IRS. Then if entity B spends the remainder (after hoarding some for Mr. Tax Man) then entity C gets it as income. Then entity C has to hoard some of it for taxes too, before spending it. So lets assume this is big spending! From A to B, B is taxed at 30%, so the dollar is reduced from 1.00 to 0.70 (entity B must hoard 0.30 for taxes), then it spends the 0.70 dollars, and entity C has to keep 30% for taxes due too, so the 0.70 is further reduced to 0.49 dollars. Entity C then spends this 49 cents after hoarding the tax liability, to entity D, … See what I mean! There is no dumb as hell multiplier effect… the Government taxes income, it taxes spending as sales tax too! Then it even taxes the G.D.F-ing hell out of savings and investment in capital gains and streaming income tax. Then the USA does not even give universal free healthcare to it’s people, nor does it pay for higher education!!! Pathetic. So how does the dollar grow to 1.57?! It’s just one big g-d-effing lie of the Government. Those dirty rotten scoundrels.~ Andrew G. Bernhardt, St. Louis, Mo.

GuestJanuary 19th, 2009 at 3:16 pm

YES! YES YES YES YES YES YES YES! from Sam:Can Passing a Law Narrow the ‘Class Divide’?The British Labor Party came to power a dozen years ago with a commitment to attack poverty — and a willingness to leave rich people alone. Britain’s rich proceeded to make the most of that opportunity. By 2007, the UK’s top 1,000 had nearly quadrupled their collective fortune.The poor would not be so fortunate. In 2007, child poverty in the UK increased — by 100,000 kids. Brits born in 1970 have less chance of overcoming a lowly economic start in life than Brits born in the 1950s. Among major developed nations, only the United States displays as little social mobility as Britain.What to do? Last week, in an official “white paper” entitled New opportunities: Fair chances for the future, the Labor Party government offered a surprisingly novel — and rather remarkable — proposal.The absence of real opportunity in the UK, this white paper posits, demands an outright mandate for economic equality: a new law that would make the narrowing of the gap between rich and poor a binding obligation on every level of British government.“We have already legislated to require public authorities to tackle the inequality that arises from race, gender, or disability,” the white paper explains. “But we know that inequality does not just come from your gender or ethnicity, your sexual orientation, or your disability. Co-existing and interwoven with these specific inequalities lies the persistent inequality of social class.”Given this reality, the white paper continues, “tackling socio-economic disadvantage and narrowing gaps in outcomes for people from different backgrounds” needs to become a new “core function” of UK government.The champion of this new mandate, Labor Party chair and UK equalities minister Harriet Harman, last week spoke in bold strokes to defend her proposal.“It is our task in government to play our part in fashioning a new social order with fairness and equality at its heart,” Harman pronounced. “We want to do more than just provide ‘escape routes’ out of poverty for a talented few. We want to tackle the class divide.”What exactly would that tackling entail?With a mandate to narrow Britain’s economic divide in effect, class bias might become grounds for government action against discrimination. Police patrols might be reallocated from wealthy neighborhoods to crime-plagued poor ones. Public sector wages might be raised first, and most significantly, at the lower job grades.Would Harman’s proposed mandate, if enacted into law, also mean an open confrontation with the grand accumulations of private wealth at the summit of the UK economy?Some government insiders, after the white paper’s release Tuesday, pooh-poohed the notion that Harman’s proposal would up the pressure for an offensive to level down the British rich.“This isn’t about taking from one group of people and giving to another, more deprived set,” one of these insiders insisted to the Daily Mail. “It is about leveling up, improving life for everybody.”But other observers of the UK economic scene are noting that any obligation on government to narrow “gaps in outcomes for people from different backgrounds” would inevitably, if taken seriously, have to confront wealth at the top. The dollars needed for fully funding early childhood programs, after all, have to come from somewhere.Polly Toynbee, one of the UK’s most widely read progressive commentators, added another reason in a Guardian column last week that hailed Harman’s class mandate as “legislation of extraordinary radicalism.”If all children truly have equal opportunity, Toynbee’s analysis explained, then the children of the affluent will face more competition for the limited number of places at institutions like top law firms and medical schools.“Social mobility,” as Toynbee put it, “means some must fall as others rise.”Naturally, Toynbee continued, the affluent will “fight hard to hold their own.” But the fury of that fight will always depend on the level of a society’s inequality. The greater the gap between rich and poor, the farther the potential distance to fall, the greater the fury of a society’s affluents against government “equal opportunity” policies that threaten their privileged place.By the same token, the more equal a society, the shorter the distance to fall, the less the affluent will rage.“The falling hurts less,” points out Toynbee, “when lifestyle, status, and pay are less cruelly divided and penalties for failure less punishing.”“For everyone to have an equal chance of success,” agreed last week Britain’s top trade union leader, Brendan Barber, “there needs to be a much smaller gap between rich and poor in the first place.”“All the evidence,” Barber added Saturday, “shows that societies that are genuinely socially mobile are far more equal than the UK is today – even after the many worthwhile initiatives since 1997.”Barber went on to call for a new resolve to close the enormously large loopholes in the UK tax code. In 2006, he noted, Britain’s 54 billionaires paid just 0.1 percent of their combined £126 billion — $186 billion — fortune in tax.Harriet Harman’s proposal for a narrow-the-class-divide mandate, Barber’s remarks left plain, just might give a boost to the UK’s tax-the-rich advocates.That may be why British right-wingers have let loose at Harman and her mandate. One UK Conservative Party leader, Theresa May, is calling Harman’s proposal a return to “class war.” Harriet Harman, adds a Daily Telegraph commentator, “is preparing to knit in front of the guillotine while she watches the heads of the high and mighty roll.”This could get interesting. Americans — and the rest of the world, too — should be paying attention.THE DAWN IS BREAKING THIS LONG NIGHT! YES!

GuestJanuary 19th, 2009 at 3:19 pm

“War is peace; freedom is slavery; ignorance is strength; cheating is honesty.” What classic media “doublethink” the media uses to push the people into believing the opposite of what is true in face of the damning facts:The never-to-be-forgotten downside to Geithner is that he was schooled by Goldman Sachs, the biggest and most powerful rogue’s gallery of cheaters known to mankind: he’s their man in the Treasury, ready to pick up the torch from Olympic Goldman cheater, Hank Paulson, second only to Rubin.Geithner’s loyalty lies with the bank tribe, not with America and the American taxpayer. Let a president who chooses to ignore ignominious behavior in his picks suffer the public consequences.“Facts,” said Ayn Rand, “cannot be altered by a wish, but they can destroy the wisher.”

Wild BillJanuary 19th, 2009 at 3:27 pm

To tell you the truth, I think you are right on. Frankly, I honestly believe it was not an honest mistake. Truth be told, he tried to get away with something and got caught. truthfully, he should not be appointed due to his flawed character. I sincerely think the truth will always out. A bad tree can not bear good fruit. I honestly believe that.

ex VRWCJanuary 19th, 2009 at 3:34 pm

This from your link – obviously a biased view from a dissident, but still interesting: Chinese threatened with instability The disparity the author quotes between rich and poor in China is real, as is the description of the self-serving bureaucratic class that is also in cahoots with big business.

GuestJanuary 19th, 2009 at 3:38 pm

slf, I was reading from the bottom up, an occasional indulgence, and essentially repeated your great post in my post at 15:19:56. My apologies. May I add this to your reply to tutterfrut’s fabulously imaginary inquiry?:“Thou . . . by evasions thy crime uncoverest more.” –Milton.

Wild BillJanuary 19th, 2009 at 3:47 pm

I am a self employed businessman. I suffer from debilitating depression that prevents me from running my business competently. In order to restore my ability to function, I employed a sexual surrogate and charged the expense to my business. The surrogate does not function well unless I provide her with expensive jewelry, which I also charged as a business expense. She has a mother and a sister who lived in Russia and wanted to come to the U.S. I payed their way here and charged that also.Every month, I receive a box of frozen filet mignons in the mail. I keep some for myself and send some to my best clients. I forgot to subtract the amount I ate myself. It was an honest mistake! Well, you know what happened next. That’s right. I got audited last year. The IRS said I owed $17,000 for unallowed deductions. I promptly paid them. Then they said I knowingly hired the sexual surrogate without determining her immigration status. I assumed she was legal since all her other qualifications were exceptional.Now they are going back to prior returns. They’re telling me I can’t deduct my cocaine expenses even though all my associates deduct their single malt scotch. Next they tell me I can’t deduct the new wine cellar I installed in my basement. And they call this the land of the free!

GuestJanuary 19th, 2009 at 3:48 pm

if you don’t have money saved up it’s because you’re dumb, and if you do have money saved up it means you’re sensible.WhatCompleteDrivel.Whatutterdenialof reality.

GuestJanuary 19th, 2009 at 3:54 pm

Thanks for highlighting that bit, too, ex VRWC. I wanted to put up the whole newletter this week…China could lead the world if only they hadn’t followed down the inequality path.

GuestJanuary 19th, 2009 at 4:02 pm

The bottom line is there are nowhere near enough people in the world with enough money to buy anywhere near the enormous amount of “stuff” the global economy is producing, after they have paid for their food, clothing, shelter, healthcare, transportation, and other essential basic needs. As long as the $ are as concentrated as they are in the hands of such a small number of very wealthy people, this glaring demand problem is not really ever going to go away and I don’t see how this severe economic downturn is going to turn around, at least not without another bubble of some sort that acts as another short-term bandaid.

tutterfrutJanuary 19th, 2009 at 4:04 pm

If you swap me the sister for a couple of boxes of the finest Bordeaux wines on which I have already paid VAT in Europe, will either of us still owe some taxes on this transaction before, during or after consumption?

Andrew BernhardtJanuary 19th, 2009 at 4:05 pm

Oh, so when does everyone think all (or I mean the vast majority of them) the banks will fail?? I’m expecting some bank runs, bank failures, etc. soon!

Wild BillJanuary 19th, 2009 at 4:23 pm

Oh, how I wish Mark Twain was alive today. We’ve always had corruption and rascals but when I think of what Mark Twain could do with today’s events, it would make “The Man Who Corrupted Hadleyburg” seem like a study of virtue.

GuestJanuary 19th, 2009 at 5:05 pm

Why don’t we just take your job and ship it off to the lowest wage, lowest benefit country on the face of the planet and see how you are affected? If you happen to be an academic, why don’t we just end tenure and hire some hack in the 3rd world for a lot less fiat money to teach your classes via the internet? If you are a shill for globalization, then perhaps there is someone somewhere else who will work for less. Bridges to sleep under are our specialty.

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