Primeiro

The question that flummoxed the great orator guardian.co.uk April 3, 2009Nick Robinson: “A question for you both, if I may. The prime minister has repeatedly blamed the United States of America for causing this crisis. France and Germany both blame Britain and America for causing this crisis. Who is right? And isn’t the debate about that at the heart of the debate about what to do now?”…

One of our readers (MM CA) was kind enough to post the following link, which has some excellent charts on the build-up of debt in the US system. These charts complement a previous chart from data compiled at Morgan Stanley. Let’s take a look:Charts on US Debt by SectorAnd here were my comments on these charts (from the last thread):Another nice set of charts! Stories like these are the best way of understanding the current problem. And what’s going on.Note the following things from these charts:1. Financial debt (as a % of total debt) absolutely exploded since 1995. Is there any wonder, then, why we are seeing constant bailouts for the banks and financial sector?2. After financial debt, the next biggest explosion was household debt. American families are now struggling to pay this off – the so-called household deleveraging process. BUT, and I do say BUT, all the Gov’t stimulus programs have probably benefited Main Street by 5 cents on the dollar (or less). Meaning that all the stimulus went to the banks. So it follows that Americans are basically on their own, as they struggle with credit overload, lower wages, and unemployment. What fun!3. During the 1929-1933 depression the debt sector that was hit the hardest was corporate debt. We’re headed there again now. Corporate debt will shrink enormously, taking a lot of jobs and capital spending with it. Government debt will grow ever larger.4. Unlike the 1929-1933 process, the world didn’t walk away on America. This time they will. The dollar will get dumped as the global currency, interest rates and inflation will soar to horrible levels. And the rest of the world will bypass us – once they find an alternative form of financial security to T-Bills and UST’s.Please note that these comments do not necessarily imply that the ongoing downturn will take exactly the same form as the 1929-1933 episode. Very likely it won’t. Commentator Chris Puplava has emphasized recently that this is “a process”. Indeed, it is a “D-process” where some people mean the “D” to mean deleveraging and unwinding from a huge bubble in credit.But it is more than likely also a depression process. It will have UP’s and DOWN’s, but the whole world economy needs to restructure and make permanent changes. For one, I continue to be amazed at how poorly the transition is being managed by central banks, many economists, and world leaders. Almost no-one is looking forward and trying to make judgments about where things should go in the new economy – and how to get there. Nearly everyone seems to be caught up in asset preservation and “beggar thy neighbor” policies (as Wolf-in-the-Wild called it on this blog).PeteCA

re: The Roubini Portfolio, March 16, 2009Dear Roubini: hat’s off to you. now i can forward this to my money manager and let him eat his words as i do mine by typing this. thank you for clearing this up because by misinterpretation and/or misstatements i waited for a definitive answer from you.and though i asked the question re: portfolio several times here (never qualifying that you would be 100% invested in anything specific) and though you may not be referencing me specifically when you wrote the above “grossly incorrect assumptions” i have just made the effort to finally locate the source of my questioning:”Despite his prescience, he’s suffered just like the rest of us: he’s remained fully invested in stock index funds through the market downturn, causing his portfolio to plummet.”The above quote excerpted from:For Dr. Doom, a Crash Worthy of His WarningsBy Daniel McGinn | NEWSWEEK 12.23.08

@Free TibetIn response to your question about Mason claiming raging inflation because of a tripling of the monetary base…It seems to me that Mason is over reacting by comparing the ratio of the $0.795 billion stimulus to M0 (monetary base). Most economists do not even chart M0 when discussing the money supply. Instead, they use M1, M2, & M3 descriptors. As you know, I agree with Williams’ that money velocity cannot be accurately gauged and that M3 can be a practical substitute for estimating inflation.I have dug up seasonally adjusted M3 values from 1959. (Note that the Fed stopped reporting M3 in 2006, but continue to report components that allow M3 to be computed if one wants to take the trouble.) The table below shows the money supply in $trillions followed by the percent increase from the previous year, followed by the cumulative percent increase from 1959. The last column is the inflation for that year using the non-gimmicked 1980 BLS method.Year – M3 money supply in $trillions1959 $00.299 % Increase ========== Doubling Interval1960 $00.315 05.35% % Cumulative1961 $00.341 08.25% 013.61%1962 $00.371 08.80% 022.40%1963 $00.406 09.43% 031.84%1964 $00.422 03.94% 035.78%1965 $00.482 14.22% 050.00%1966 $00.505 04.77% 054.77%1967 $00.558 10.50% 065.26%1968 $00.607 08.78% 074.04% ====== 9 Year Doubling1969 $00.616 01.48% 075.53% 1980 BLS Inflation Measure1970 $00.677 09.90% 085.43% 05.84%1971 $00.776 14.62% 100.05% 04.29%1972 $00.886 14.18% 114.23% 03.27%1973 $00.985 11.17% 125.40% 06.18%1974 $01.069 08.53% 133.93% 11.05%1975 $01.170 09.45% 143.38% 09.14% 7 Year Doubling1976 $01.310 11.97% 155.34% 05.74%1977 $01.470 12.21% 167.56% 06.50%1978 $01.645 11.90% 179.46% 07.63%1979 $01.809 09.97% 189.43% 11.25%1980 $01.996 10.34% 199.77% 13.55%1981 $02.255 12.98% 212.74% 10.33%1982 $02.461 09.14% 221.88% 06.13% 7 Year Doubling1983 $02.697 09.59% 231.47% 03.83%1984 $02.991 10.90% 242.37% 05.30%1985 $03.208 07.26% 249.63% 04.58%1986 $03.499 09.07% 258.70% 02.92%1987 $03.687 05.37% 264.07% 04.99%1988 $03.929 06.56% 270.63% 05.94%1989 $04.077 03.77% 274.40% 06.71%1990 $04.155 01.91% 276.31% 07.69%1991 $04.210 01.32% 277.64% 06.53%1992 $04.223 00.31% 277.95% 05.33%1993 $04.286 01.49% 279.44% 05.42%1994 $04.370 01.96% 281.40% 05.98%1995 $04.636 06.09% 287.48% 06.52%1996 $04.986 07.55% 295.03% 07.74% 14 Year Doubling1997 $05.461 09.53% 304.56% 08.03%1998 $06.052 10.82% 315.38% 07.79%1999 $06.552 08.26% 323.64% 08.47%2000 $07.117 08.62% 332.27% 09.74%2001 $08.035 12.90% 345.17% 09.12%2002 $08.568 06.63% 351.80% 07.85%2003 $08.872 03.55% 355.35% 08.55% 7 Year Doubling2004 $09.433 06.32% 361.67% 09.09%2005 $10.154 07.64% 369.31% 10.05%2006 $11.206 10.36% 379.68% 10.18%2007 $12.917 15.27% 394.94% 10.51%2008 $14.395 11.44% 406.39% 09.26%2009 $14.629 01.63% 408.01% (For Jan & Feb)20?? $17.000 ? year DoublingAs you can see from the above table, the $0.795 billion stimulus package that Mason is concerned about is but a drop in the M3 money supply bucket. M3 has been doubling approximately every seven years (except during the 1980s) and has grown by 10%/year since 2005.Comparing year-to-year change in inflation (in the last column) to year-to-year change in M3 growth (in the second column), I do not see a long-term consistent relationship. In the early 1970s, growth in M3 far exceeded increases in inflation, while in recent years inflation and M3 appear to be roughly matched.What’s the likely inflation number for 2009? If the recent trend holds and M3 jumps up as expected, then it would seem probable for 15-20% inflation.http://www.rgemonitor.com/financemarkets-monitor/256235/inflation_expectations_and_failed_debt_auctionshttp://en.wikipedia.org/wiki/Money_Supplyhttp://www.federalreserve.gov/releases/h6/hist/h6hista.txthttp://www.shadowstats.com/alternate_data

Hi, I am now in Caracas using a slow dial-in phone modem at my Mom’s house.Right or wrong, if you wanna see a “little guy’s” investment portfolio I have posted mine here several times. A move I am hesitant to repeat as I don’t see any real advantage in doing so for people who don’t know what they are doing in the markets nor those who do. I may actually be doing more harm than good to those whho do not know what they are doing in diz markets.Since the last posting of my portfolio, I have traded exactly as I have posted. YTD, I am up 2%, and I do not anticipate any significant trading in the near future. However, this can change in no time if my analysis of the economic situation changes significantly (Despite my holding through the latest market dip, WB rules #1 and 2 of investing still stand very high up in my book).In any event, those of you who follow my investing, or should I say speculating, moves; do not wait for any posts on this area from me as there won’t be any more of those. From now on, I will limit myself strictly to comments on the economy and markets with no reference to my investing.BTW, WLI numbers are improving. Diz piece of news coming, [I brag about], I anticipated by more than a handful of weeks thanks to all the reading I do; which, unfortunately (or should I say fortunately) I won’t be able to do in the coming 6 months as I will be away from the Internet in Morrocoy National Park.http://www.businesscycle.com/news/press/1379/WLI Edges UpReutersApril 03, 2009(Reuters) – NEW YORK, April 3 (Reuters) – A measure of future U.S. economic growth edged up and its annualized growth rate reached a 23-week high though it was still in negative territory, suggesting clearer signs of economic recovery, a research group said on Friday.The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index climbed to 106.7 for the week ending March 27 from 106.2 in the previous week, which was revised down from 106.3.The index’s annualized growth rate resumed its recent upswing and was at negative 22.2 percent, up from the prior week’s rate of negative 23.2 percent. The growth rate was at its highest reading since mid-October.”With WLI growth rising to a 23-week high, an upturn in the U.S. growth rate cycle is now in clear sight,” said Lakshman Achuthan, managing director at ECRI.The weekly index rose due to higher stock prices and stronger housing activity, and was partly offset by higher interest rates and claims for state jobless benefits, Achuthansaid.

Word.

Heed Roubini: he walks his talk. Unemployment and loss of jobs has been increasing since ‘07 and two-thirds of the jobs lost have been lost in the past five months. How does that signal a worldwide recovery? Since when do plant closings and job losses mean it’s time to invest?This from Alan Abelson today in “The Bailout Goes Global” – Barron’s:VAMPIRES AND PEOPLE-CHEWING monsters are all the cinematic and video rage among the younger set, or so a lot of our tut-tutting and purportedly adult friends complain these days. So far as we’re concerned, there’s nothing like a blood-curling DVD to pass the time on a dark and stormy night.So we have no compunction in offering some gratuitous advice to the guys and gals at the Bureau of Labor Statistics: If you’re hungering for fame and fortune (especially fortune), try your hand at working up a scary script for Hollywood or even an indie. Gosh knows, you’ve a wealth of experience, churning out those chilling horrors that pass for monthly employment reports.For working stiffs, as we got official confirmation on Friday, March was a lousy month, extending the long string of lugubrious months that preceded it. Payrolls shrank by 663,000 jobs — and the total further swells if you toss in the 86,000 jobs missed in the initial count for January and February and the 114,000 additions conjured up out of the thin air by the BLS with the aid of its magical birth/death model.The unemployment rate shot up to 8.5%, from 8.1% in February, the highest in more than a quarter of a century. Moreover, if you include folks working part time because they can’t find full-time jobs, along with those miserable, discouraged souls who gave up even looking for a slot, the percentage mounts to a formidable 15.6%, a new high since the bureau began keeping track in 1994.Since the onset of recession in December ’07, 5.1 million jobs have gone up in smoke, nearly two-thirds of them in the past five months alone. There are now more than 13 million workers involuntarily idled, while another nine million are part-time because they’ve either had their hours slashed or can’t land a full-time spot. Obviously, we’re talking big numbers here.The pink slips handed out last month were prominent throughout the broad sweep of commerce and industry. Construction continued to take some painful lumps, as 126,000 jobs were lost in the building trades. And, note Philippa Dunne and Doug Henwood of the Liscio Report, nonresidential construction took a bigger hit than its residential counterpart. Manufacturing, despite all the murmurings to the contrary on Wall Street, continues very much on the rocks, as evidenced by the 161,000 layoffs in that amorphous sector.Even someone with a job might have reason for rue, Philippa and Doug observe, as the slack labor market shows up in the truncating of the work week to an all-time low and in the feeble uptick in average hourly earnings. And they add that “it wouldn’t surprise us at all to see wage gains erode further in the coming months.”On that score, Sung Won Sohn, at Cal State’s Smith School of Business, expects that humongous stimulus being injected into the economy and the Fed’s open spigot to provide a lift to the economy (how could they not?). But, he cautions, that won’t prevent businesses from continuing to slash jobs in an effort to weather the still-harsh going likely ahead. And by his reckoning, that blessed day when corporations begin to hire instead of fire won’t dawn until sometime next year.In sum, keep those hatches battened down.HTTP://ONLINE.BARRONS.COM/ARTICLE/SB123879920957188299.HTML

and on this web page carefully put understandable info like the moyers interview to more explain how we have been…… no politics and far left or right just the naked truth

In cash. Most of mine is parked there but I abhor the current interest rates on CDs. I suppose I should shut up and enjoy the fact THAT money hasn’t evaporated.

Interview #2 is not yet posted on their site – when it is I will transcribe

ORDo you base an opinion on an index that rose due to higher stock prices, given the reasons/lack of reasons of said rise? Or do you believe these stock moves are reasonable? I acknowledge your positive feeling about the market have been borne out as of recent, but are you confident we won’t see retesting of the lows?hlowe

Speaking of a lone man on a horse, far away, yet unfound:http://www.globalresearch.ca/index.php?context=va&aid=13049Ho hum

About a possibility to avoid financial institutions for payments. This will be an open source for peer-to-peer electronic cash transactions, completely decentralized, no server, relying only on each single user’s computer. Question to the experts, can this have leg, what are the benefit, and if it becomes mainstream, what will be the legal battle of financial institutions to take it down? The creativity of men will never cease to surprise me, and it will be the only way out of the slavery they are trying to push us into.http://www.bitcoin.org/

Sorry…”poses” not “pose.”SWK

DOW 3000 WILL NOT BE DENIEDWell, even if Roubini thinks all will be sunshine and roses by next year, at least some of the intelligensia seem to see reality-we are falling off the cliff and there is no way this depression will stop next year. Dow 3000 will not be denied.Krugman on Crisisby CalculatedRisk on 4/04/2009 07:36:00 PM“I never imagined that these days I’d get to the epicenter, the place, the heart of the problem, by a commuter train on New Jersey Transit. But here it is. It’s the crisis of our lifetime.”Paul Krugman, April 3, 2009From the Desert Sun: Nobel Prize winner Krugman shares harsh view on economic woes (ht Jonathan)… “This is terrifying,” [Paul Krugman] said. “I did not imagine in my worst expectations that this would be this hard. I thought that we could sit down and sketch out the kinds of things, in principle, you could do to offset this type of global slump. But I never thought it would be this hard, in practice, to implement.”…Krugman said, the lesson from Japan is that countries facing a similar fate should be “very aggressive and cut interest rates early.”And though the United States did – “unfortunately, it didn’t turn out to be enough,” he said.“Once you’re in a world where there’s just not enough demand out there and you’re cutting interest rates down to zero, then you’re in a world where the rules of economics go into reverse – much like ‘Alice in Wonderland,’” he said.Jon Lansner at the O.C. Register has more: Krugman: ‘Maybe we need a new bubble to invest in!’ (excerpts from a Twitter transcript)How did this happen? We forgot the Great Depression! We exposed ourselves 2 a repeat. May not be a repeat BUT close.Debt levels before this crash approached pre-Depression levels. And we had “the mother of all housing bubbles.”By one professor’s math interest rates should be at minus-8% based on the economy’s plightBig banks are in trouble. Some insolvent. “Socialist” bank seizures in US every week. But giant holding companies?Are we doing enough? If you think this ends soon, then “Yes!” But if this runs on then “No!” This looks inadequate.Stock rally on good news? Not good news just things not getting much worse!We are not clueless. We have not done enough. I am terrified. Hope we find the audacity to fix it.

Today’s worthless change makes me angry because it’s so difficult to carry a load in your pocket large enough to buy anything. So I always pay with a dollar(s) and empty all the loose change from my pockets into drawers and desk corners and receptacles and seat cushions and wherever (another major problem in itself).The blow-away feel of today’s cheap US coins just emphasizes their worthlessness. What you’re saying makes sense, which means that within two years, when a dollar’s worth about a penny or nickel, I’ll probably be getting back paper pennies for paper dollars.My question: where has all the silver gone? In that Ben Bernanke runs the US Mint, maybe he’ll let Congress know. And, then again, maybe he won’t.

I tend to agree with you, Gloomy. I fail to understand how any market rallies can be sustained until corporate profits recover, which won’t happen until demand recovers, which doesn’t look like it’s going to happen for a while with so many folks losing their jobs and so many businesses folding due to a lack of available credit. Until the banks are nationalized and their balance sheets cleaned up, credit will remain tight, demand will remain tepid, and corporate profits will remain depressed.SWK

Schiff:Global economy sound,USA economy brokeUS Dollar to drop like a stone and all currencies will also dropGold is going to heavenhttp://www.youtube.com/watch?v=S8HRRQ6JkCw&eurl=http%3A%2F%2Fwww.campaignforliberty.com%2Fblog.php&feature=player_embeddedHo hum

Are you sure it hasn’t ?

WSJ APRIL 4, 2009Obama Wants to Control the BanksThere’s a reason he refuses to accept repayment of TARP money.I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn’t much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street’s black hole. So why no cheering as the cash comes back?My answer: The government wants to control the banks, …http://online.wsj.com/article/SB123879833094588163.html

Besides, of course the banks within the Franco-German faction benefited from the US lack of lending standards and oversight. Thus the situation was likely fueled by those institutions to one degree or another.

SWK: what does it mean in real terms?It means you are slowly slipping in earnings. It means that the money you earn, on average, is worth 10%/year less or about 40% less in the last four years. It means you cannot “keep up” by charging 10% per year more for your services. (Maybe the grocery store can keep up, but if you pace your legal fees to the true cost of living, you will be too expensive compared to other legal service providers.)It means that the banks get to spend the money at “face value” and by the time your litigation case is settled 12-24-48 months later, the settlement is worth 10%-20%-30% less that when you began.I’m sorry if I gave the impression that I have more of a clue than anyone else, I do not. Williams puts his prediction eggs in the M3 basket, and as I have just demonstrated, it’s not a long-term relationship. It does seem to hold for the recent past however. So all I am saying is that if we see another 15%-20% rise in M3 (which seems reasonable), then 1980 BLS inflation measure will probably match it.As for your prediction of 15-20% inflation this year, this doesn’t make sense to meFine, it’s just my opinion. Nevertheless we see 1.63% in two months X 6 = 9.78% M3 growth for 2009 plus a total government commitment for $12.8 Trillion! http://www.bloomberg.com/apps/news?pid=newsarchive&sid=armOzfkwtCA4 Let’s see, that is $15 trillion plus $13 trillion = $28 trillion M3 in the next year or so. Yeah, could be deflation coming.Frankly, I remain more concerned about price and wage deflation than the hyperinflationary scenario…I personally do not see hyperinfation unless we cross some tripwire such as a massive sell off Treasuries.If we use history to predict the future, then in 1933-38 FDR inflated. In 1971-73 Nixon not only inflated, but froze wages, created price controls, and the 55 mph speed limit.So I am perplexed by your dogged attachment to a deflationary future without historical precedent and a government pig-headedly determined not to lose control of the economy through deflation.

So, the big question is why NR has turned so bullish.

Would to god there were more folks like you, small town! But the fundamental problem that’s been exposed by recent events (and is totally confirmed by Obama’s appointment of Geithner and Summers) is this: Free market capitalism is good for cheaters and bad for everyone else.

I have tried considering the overarching importance of finance in our economy, and to me its importance is way overstated: at its giddy high of 40% of market profits it collapsed the economy. I think I’d prefer an importance of, say, about 5%. I have seen the Dalbar studies on mutual fund returns for holders going back to 1982, and you are right, they scrape the bottom of the barrel.

Free market capitalism is run by market supply and demand. Goldman Sachs capitalism is run by the Fed.

“Nearly everyone seems to be caught up in asset preservation and ‘beggar thy neighbor’ policies” because the rats are jumping ship and grabbing everything they can hold onto before the economy sinks, IMHO.These are the boys who finagled multimillion salaries and bonuses for themselves to out-earn producers 500 to 1, hired immigration attorneys to fight the Sanders-Grassley proposal that would stop them from firing American workers in this downturn only to rehire back with cheap foreign workers, dismantled and off shored America’s manufacturing base to profit from slave labor, hid their earnings in the Cayman Islands forcing taxpayers to foot military protection for their foreign-based operations, arranged hostile takeovers of viable US companies to suck them dry for short term gain, paid Washington’s 42,000 lobbyists to siphon off taxpayer money and garner special privilege, partnered with bankers and the people’s representatives to use America as their private resource pool…Hopefully, when they do jump ship there won’t be enough life preservers to go around. America would be a better and wealthier place without them.They and the financial banksters of whom you speak are the reasons, IMO, for your point 4: “Unlike the 1929-1933 process, the world didn’t walk away on America. This time they will. The dollar will get dumped as the global currency, interest rates and inflation will soar to horrible levels. And the rest of the world will bypass us – once they find an alternative form of financial security to T-Bills and UST’s.”And we who love this country can get back to rebuilding her values and culture.By the way, good post PeteCA.

Unfortunately, we seem to have come to a state in everyday business affairs where dishonesty and corruption is the norm. It’s not possible for an honest person or business to effectively compete in such an arena. Even in schools cheaters are being given a pass.

Just a quick reply to all above:Hayes: Once again, you have proven U Da’ Man!The world is an uncertain place. I have this “dream” that by reading as much as I possibly can I can somehow reduce uncertainty, but that is, of course, a fallacy. Some risk reduction can be achieved via intelligent use of information but there is a limit to it. In terms of investing, the certain way to reduce uncertainty is primarily by reducing holdings in risky asset classes, and secondarily via diversification among asset classes which has not worked at all lately (e.g., in 2008 ALL risky asset classes, except long treasuries*, dropped like a rock:-)* The risk in long treasuries comes from the long duration: i.e., inflation and interest rate risk which as you know go toghether. It is inflation and not the Fed that dictates interest rates. The Fed, of course, tries to keep inflation in check and control long rates that way but lately this has gotten out of whack too. And the “long” affair [over two decades] with low inflation may be over; not tomorrow, but sometime in the near future (within a year, almost certainly, before two years. Unless PK’s BK happens which, IMHO, is the low probability event. More on this later)Hlowe,The key margin of safety I saw in stocks priced at the beast number: 666 (I, of course, do not believe in those things), is that I started to see BG’s so called safety-net:http://www.buffettsecrets.com/margin-of-safety.htmWhere do I think the market is going short term?I don’t have the slightest idea. MY gut felling is that after the heavy duty run up, there may be some correction. But you have heard Da’ man LA: The “proven” sequence is in place for an up trend in the economy and less so than historically in stocks as the recovery will be a weak one but stock prices are still, IMO, low for current fundamentals (for me, anything under 900 is fair value). If you want to feel more confident about LA’s “system” (i.e., ECRI’s system), read their little book. It is less than 20 bucks.On closing, I have given PK quite a bit of bashing lately but I respect Da’ man. I have to research his latest views (see Gloomy’s post below). But I trust guys who perform more serious systematic analysis, such as Kasriel (who, BTW, is “moving” along the lines of ECRI and in his system you can look “under the hood”, just don’t be lazy and put the time to read Da’ man’s free research at the NT website carefully) and Shilling, whose April newsletter which I am anxiously waiting (should be out Monday), a lot more weight that PK’s rants. I shall say, that Shilling has been steadily bearish on the US and World stock markets but he is clearly not in the “World Economy Armageddon” camp.Going back to PK, it looks the Nobel prize may have gone up to his head a little and he know believes he possesses an invincible gut feeling which exempts him from having to do the heavy duty lifting. PK ahs work hard in the past and him more than any one should know that no pain no gain.To Da’ NPW Professor @ PNJ, may I remind the economy and markets frequently humble careless (as well as careful) forecasters in nasty ways:-)

One on One with Lakshman Achuthan, Managing Director, Economic Cycle ResearchThursday, August 30, 2007I came across this transcript from a 2007 interview with Lakshman — (3 months before the official start of the recession in December 2007)

ACHUTHAN: Well, you know, without giving a specific policy pronouncement, there are two big concerns that the Fed traditionally has. One is keeping inflation under control and the other is avoiding a recession. And on both counts, we don’t see a lot of trouble in the near term. Inflation is not spiraling out of control. So they have leeway to cut if they wanted to. It wouldn’t be irresponsible in terms of being an inflation steward. On the other hand, the economy is not about to tip into recession. We had some revised GDP numbers out today, 4 percent growth in GDP. This is well above trend. I mean I was looking into the numbers. You had over 27 percent growth in nonresidential construction. That’s — that’s business spending. That is big, booming activity.And so it doesn’t seem like the economy is on the verge of stalling out, even though we have some of these credit problems. So we get down to this relationship between the Federal Reserve monetary policy and the target Fed funds rate, and the market and what they want. And certainly the market has made it clear they would like a cut and the Fed would like to hold. We have a little bit of a game of chicken going on here. I suspect it really boils down to what happens in these credit markets that we’ve been watching and if they can become more liquid as we go into September. If they do, the Fed may disappoint Wall Street again.GHARIB: Another big question about the economy and whether or not we need a rate cut is all about the American consumer. What kind of shape is the American consumer in and what is going to be the future of consumer spending which is such an engine of growth for the economy. What is your analysis on that?ACHUTHAN: Well, certainly, look, the consumer — people have written off the consumer more times than I can count. The consumer, American consumer has come through in various ways to continue buying. And we see that again in some of the latest data. They are not accelerating growth quickly but they’re certainly not pulling back so sharply as to cause or precipitate a recession. Home prices being weak and — and not rising is putting some pressure on consumers. The stock market volatility is also putting some pressure on consumers. This is for the time being offset by a pretty healthy jobs market. Non-financial services which is where most of us work, over 60 percent of us work there, is still growing healthily. Manufacturing sector which had been bleeding jobs earlier is now less of a drag if not adding some jobs. As I mentioned nonresidential construction is quite strong. So this economy isn’t stalling out right here. Having said that, we do need to see these credit issues resolved.

http://seekingalpha.com/article/129511-ecri-signs-of-economic-improvement

well, Obamanomic, Geithernomic, Coumounomic, or Mob-nomic dictate if you receive TARP money, you will be subject to congress, white house, mob-oriented regulation. make sense if Obama wants to control any institution, that institution will be forced to take TARP or taxpayer cash infusion. PPIP will be used to trap hedge fund, pension fund, mutual fund, and private money into Obama, congress, and mob rules.

April 3http://www.businesscycle.com/news/press/1380/more of Achuthan on Fox Business:here are some quotes:February was a little less bad and that’s how a recovery startsway forward LLI turn first not the stock market – then the stock market turns in its wake and it looks like the stock market has bottomedAchuthan do you agree we are going to 10% unemployment?I am not sure we get to that level – if we have a stronger than expected recovery and there are a number of objective reasons to believe that is possible then those are job creating recoveries, they are not like the 2002 recovery which was a job loss recovery – what we see here is the Leading Indicators are starting to turn up – if all this stimulus that hasn’t hit yet piles on top of indicators that are going up you get a sharper recovery, the other thing is the sharper the recession the more pain now the more pent up demand and you get a sharper recovery you see that over many decadesWhat about a stock play Achuthan, Apollo Group for example one of the stocks that focuses on private education?Achuthan: Oh absolutely education and health care are much more stable so those hold up – but those cyclical ones manufacturing and construction – no one believed it when they turned down and no one will believe it when they turn up.

and here is the CNN interview with Achuthan:http://www.businesscycle.com/news/press/1381/the updated job numbers are telling us this is a horrible recession but to understand where we are headed – our longest leading indicator which anticipated this recession bottomed in November – shorter indicators bottomed in December they are now at a 23 week high and the stock market looks like it bottomed in March.The sequence is very telling. We don’t see that unless there is a growth rate cycle upturn.Achuthan are you ready to make a call that we have seen the bottom?no no no no the bottom hasn’t happened yet, it’s in the next few months but the point is that once you see this sequence occur you’re going to have the worst of the recession occur shortly thereafter and that precedes a business cycle recovery somewhere between the next 2 or 3 months after that – so there’s a business cycle recovery in 2009 that’s a big deal.Achuthan what about unemployment demographics?typical – the blue collar worker gets the worst of it such as constructionin this cycle what has been unusual is the white collar worker also being impacted.

Right on commnets Pete- Took the words out of my mouth… Thabnks for follwing up

OR: A long time ago you brought up the question – so let me answer you now. Check Chinese shares.PeteCA

Read Keynes’ General Theory for the banks’ gampeplan. When they say we are all Keynesians, they aren’t kidding.The oft stated goal of the Fed is full employment. In a command economy, you get that by setting a price for labor which puts supply and demand in “equilibrium.” Now, that is all fine and dandy, but that only helps the lowly worker get a job – so what. What good does it do for a bank to allow wages to drop? It doesn’t. How are the workers going to pay off all the claims on their productivity (supplied by the banks of course for “very low interest”) when their wages have dropped? They can’t, even if they have a job. It doesn’t matter.So – Keynes says it so many times in his book it is ridiculous – instead, how about we concentrate on real wages. We drop real wages by raising the nominal price of all other goods. We (banks and politicians) do this by creating huge sums of money. We will obviously get access to this new money first. Politicians can use it to buy votes by passing out “stimulus” jobs, and banks can use the new money to lay claim to all sorts of assets at old prices prior to anyone else. Eventually, real labor rates will drop low enough relative to other goods that unemployment will drop, the Fed and Pols will be hailed as “Maestros,” and most are too obtuse – due to the time lag involved – to put the cause and effect together.The hourly wage earner can go back to sports and the like, working like mad to pay back his debts, and the folks who created all the new money can go back to life as before, and all is well.How long can this go on with current debt levels around the world? I don’t know, but I don’t think much longer. Keynes wasn’t a fool, quite the contrary. His ideas are a perfect salespitch for the banking cartel. Can people no longer determine what is a salespitch and what is based on logic and reason?Read his book. That guy could have sold $20 turd sandwiches for $100 and had people writing reviews claiming they were the best hamburgers they ever had. Nothing short of brilliance.

Unemployed Lose Fallback OptionsLEWISTOWN, Pa. — The growing ranks of unemployed Americans are turning to the traditional fallbacks — retail, restaurants, customer service — to ride out a rough economy. The bad news is job openings there are growing scarce, too…http://online.wsj.com/article/SB123870904496284141.html#mod=todays_us_page_one

Mandelson MomentBy Simon Johnson”If you want an unusual insight into our potential future, take a look at Channel 4’s interview on Thursday with Peter Mandelson (UK’s Business Secretary, very close to Gordon Brown and a key person around the G20 summit).I have no idea if Mandelson knew this could happen, but Jon Snow (the anchor) goes back to him and asks if he agrees with me that the UK could borrow from the IMF.”http://baselinescenario.com/2009/04/05/mandelson-moment/

Operative words … “on the fly”.PeteCA

You’re right. We do need to get past this circus in Washington and Wall Street and get back to re-building. The future of tbis country belongs to our kids … not to the Wall Street bankers.PeteCA

As starters:Paul Krugman: “What we want is a system in which banks own the downs as well as the ups. And the road to that system runs through nationalization.” (Paul Krugman: Nationalize the Banks, The New York Times, February 24, 2009From Krugman’s New York Times article, “Depression Economics Returns,” 11/2008:“a state of affairs like that of the 1930s in which the usual tools of economic policy—above all, the Federal Reserve’s ability to pump up the economy by cutting interest rates—have lost all traction. When depression economics prevails, the USUAL RULES OF ECONOMIC POLICY NO LONGER APPLY: virtue becomes vice, caution is risky and prudence is folly.”Vs Murray Rothbard in “America’s Great Depression”:“Advocacy of any governmental policy must rest, in the final analysis, on a system of ethical principles … Those who wish to prolong a depression, for whatever reason, will, of course, enthusiastically support … government interventions, as will those whose prime aim is the accretion of power in the hands of the state.”The Krugman solution:“to provide economic stimulus in the form of higher spending and greater aid to those in distress—and the [$700 billion economic] stimulus plan won’t come soon enough or be strong enough unless politicians and economic officials are able to transcend several conventional prejudices.”The Rothbard solution:”In sum, the proper governmental policy in a depression is strict laissez-faire, including stringent budget slashing, and coupled perhaps with positive encouragement for credit contraction. For decades such a program has been labeled ‘ignorant,’ ‘reactionary,’ or ‘Neanderthal’ by conventional economists. On the contrary, it is the policy clearly dictated by economic science to those who wish to end the depression as quickly and as cleanly as possible.”Chris Brown, lecturer at the Australian Graduate School of Entrepreneurship, on Krugman 11/25/08:“Krugman hopes Obama will, instead of giving in to “conventional notions of prudence,” be daring enough to live up to Krugman’s back-of-the-envelope calculations of an additional $600 billion stimulus. Again, in this paradoxical world called “depression economics,” Krugman says we should not worry about budget deficits until the “crisis is past.” If the budget were to be balanced, this could prevent Krugman’s New Deal II from coming to pass. It is for this reason, he says, that we should throw caution out the window. In these conditions, “it’s much better to err on the side of doing too much than on the side of doing too little.” And, he claims, inflation can always be cured by the Federal Reserve raising the interest rate.”Since Krugman has given a dose of further poison to the already diseased economy, perhaps, by following the exact opposite of Krugman’s recommendations, we can arrive at a true “Austrian” cure which will lead to a quicker recovery of the economy. By doing so, we will use a derogatory label given by conventional, Krugmanesque economists to the Austrian School: “Neanderthal economics.”http://mises.org/story/3221Krugman is a Keynesian-Socialist economist. His slogan is FDR’s slogan: Tax Tax Tax! Spend Spend Spend! Vote Vote Vote! If those are your beliefs and standards, so be it. Invest on it. After all, the proof is in the pudding, n’est-ce pas?

http://www.leap2020.eu/GEAB-N-28-is-available!-Global-systemic-crisis-Alert-Summer-2009-The-US-government-defaults-on-its-debt_a2250.html“In this 28th edition of the GEAB, LEAP/E2020 has decided to launch a new global systemic crisis alert. Indeed our researchers anticipate that, before next summer 2009, the US government will default and be prevented to pay back its creditors (holders of US Treasury Bonds, of Fanny May and Freddy Mac shares, etc.). ..”Very scary. Only few months left. Comments please.

Well … if you get a tax refund check from the Federal Govt’, then you better go cash it as soon as possible. Better safe than sorry. PetecA

News …”WASHINGTON – In the coming weeks and months, hundreds of thousands of jobless Americans will exhaust their unemployment benefits, just when it’s never been harder to find a job.Congress extended unemployment aid twice last year, allowing people to draw a total of up to 59 weeks of benefits. Now, as the recession drags on, a rolling wave of people who were laid off early last year will lose them.”Not a good sign for those who lost their jobs in 2008.PetecA

And who gave him the power to gamble the entire house on 400-1 leveraged risk, no questions asked, no strings attached, all winnings to the banks, all losses to the people? Congress. It was Congress–a bunch of traitorous sycophants living off the earnings of the people and bribes from the elitists–that handed this private cabal of money monopolists sole power over all the assets of this nation’s people for a bowl of gruel.

Poor Keynes, always the scapegoat, but I guess he couldn’t care less about the opinions of the 99.9999999999999999999999999999999% of the population who are more stupid than him.

look at util and transportation, waiting for util to go above 50DMA to confirm oil trade and commodity trade. intermediate bullish unless failure in 50DMA.

The Soft Panic of 2009 Has Just Begun – http://www.q1publishing.com/index.php?&content_id=245

Earlier this week, Broadway Partners defaulted on the Hancock Tower payments. The building had to be auctioned off. In a two minute auction (using the term “auction” loosely – there was only one bid) the Hancock sold for a $20.1 million and the assumption of $640.5 million in debt. That works out to a total price of about $660 million. That’s almost half of the $1.3 billion paid for the building back in 2006. More importantly, it shows just how far commercial real estate (CRE) values have fallen.

Hancock Tower Image

Devils Advocate, thanks very much for the link to GEAB, that’ a great resource! This is certainly one of the great benefits of this forum.Am I correct in remembering that throughout 2008 Roubini himself was frequently posting comments about the US as not only debt-deleveraging but “empire-deleveraging”? I believe he repeatedly made the point that, like Spain, the Dutch, and the British, we were witnessing the effects of an empire ending.Do these original posts by NR exist or I am mis-remembering?

Fuck Bernanke and the horse he rode in on…Something I learned from watching the movie “Changeling” and works here.The red horse of the apocalypse has been unleashed and its rider will set to killing throughout the land. S&P = 666=’s MOM =’s the beginning of – the mother of all disasters – check your phone pad for the 666 translation if you don’t believe me.It is just a matter of when we get the worst of all possible outcomes – for the criminal politicians, banksters, news media and Nobel Price’s have unleashed a reflation that will gain traction IMHO. However, IMHO, it will spiral out of control and launch us into the worst of all possible outcomes, i.e., aHyperinflationary Depression

Sunday, April 5, 2009Exposing The Utter Hypocrisy Of The FDIC, And How Andy Beal Is Making A Killing Off ItFor all those who feel like punching their monitor or TV every time the administration says that the legacy loan program is fair and equitable at a transaction price in the 80-90 cent ballpark, we have some news for you (that will likely make the half life of said monitor or TV even shorter).But first, there has been a …http://zerohedge.blogspot.com/2009/04/exposing-utter-hypocrisy-of-fdic-and.html

This is a time when all Americans need to be asking serious questions about the Fed, incl. how it came into being, what power it has (and should have), and whether it should even exist in the future.PeteCA

Did Larry Summers fire derivatives whistleblower at Harvard”I am sure you realize by now that I believe Larry Summers is soft on derivatives, soft on regulation and soft on banking executives. He exemplifies the self-regulatory zeal of the previous boom. Given his indifference to responsible regulatory oversight of derivatives and other markets, the following account, now public does seem to fit a pattern….”http://www.creditwritedowns.com/2009/04/did-larry-summers-fire-derivatives-whistleblower-at-harvard.html

Geithner’s Plan: Loopholes GaloreHere are five ways hedge funds and investment banks may exploit Treasury’s toxic-assets planhttp://www.businessweek.com/magazine/content/09_15/b4126020226641.htm?campaign_id=rss_daily

These are all excellent points made above particularly the idea that our myopic leaders think their actions will prevent a depression similar to the 30′s; but as we all know; “shit never hits the fan the same way every time” and we very likely will enter some kind of a depression perhaps where the consumer reverts to a cash only system and avoids credit leading to a long (possibly permanent) sustained, large drop in GDP and unemployment or lower waged jobs. And kudos to the guest above who raises the key questions of “who gave him the power to gamble the entire house….It was Congress…” This is in no shape or form actions of a true democracy! How dare our govt toss unlimited amounts of taxpayer money at any institution they deem TBTF-yes it’soutrageous! And Pete sums it up nicely by going right to the heart of the matter in stating: “this is a time when all Americans need to be asking serious questions about the FED…..” We see what’s happening but need to enlighten others and then plan an efficient and effective way to deal with it before it’s too late.

Your post is getting close to the home of yours truly. My best client to whom I usually give at least 30 to 40 hours a week (of a 60 hour or more work week) gave notice this week that it is laying off professional staff and cutting me down to one day a week starting in July as we wrap up. Of my large professional circle in a properous area, about 1 in 4 either are unemployed, cut back or on the way.

and too mix a little hal lindsay and nostradamus , 7 years of bush wars and then the second comes with lots of fixes but to only bring collapse after 3 1/2 yrs.

Good because left to their own devices we’re all doomed

More reasons to short Wells Fargo or at least gather in front of their headquarters with pitchforksFrom the San Francisco Business Times”[Wells Fargo Chairman] Kovacevich said that requiring Wells to take the TARP money shut the bank out of the private capital markets. As a result the bank had to slash it dividend… Kovacevich reiterated his confidence that the bank’s Wachovia purchase will be a home run once measures are completed to overcome that bank’s disatrous forays into risky mortgages… Kovacevich said the government’s plans to stress test… is an “asinine” way to try to boost confidence in big banks.”He is also on record saying that Wells did not need the TARP money and was required to take it. He apparently is saying that the capital markets are populated by unsophisticated players who were duped into thinking Wells is weak by the evil government. He is also admitting that Wells has been shut out of the private capital markets. I realize company chairmen have to be boosters of their own firms, but they should also be reality based.It also tells you something about the audience – Stanford’s Institute for Economic Policy Research – that he is reported to have received applause.What scares me is the following:After criticizing the government for the TARP program, he said he was “optimistic for the future, especially with central bankers and government leaders willing to do whatever it takes… for those who are still pessimistic, Kovecevich said he has just three words for them to ponder, “whatever it takes.”"

Long ago Henry Hazlitt exposed Keynesianism, its reliance on deficit spending and artifically produced low interest rates, and delineated its sour effects.In “And They Call It Change,” Vin Suprynowicz, assistant editorial page editor of the daily Las Vegas Review-Journal, writes (with charts):In Keynesian policy, unemployment is never to be corrected by any reduction of money-wage-rates,” Mr. Hazlitt summarizes. “Keynes recommends two main remedies. One is deficit spending (sometimes euphemistically called government ‘investment’). How good is this remedy? It was tried in the United States (partly because of Keynes’ recommendations) for a full decade. What were the results?”Figures charted from official sources show:“The central and decisive fact is that heavy deficits were accompanied by mass unemployment.“ The other main Keynesian remedy for unemployment is low interest rates, artificially produced by ‘the Monetary Authority.’ Keynes incidentally admits … that such artificially low interest rates can only be produced by printing more money, i.e., by deliberate inflation. But we may let this pass for a moment. The question immediately before us is: Did low interest rates prevent mass unemployment?”…A chart measuring the commercial paper rate against the unemployment rate for the years 1920 through 1940 shows:“In sum, over this period of a dozen years low interest rates did NOT eliminate unemployment. On the contrary, unemployment actually INCREASED as interest rates went down. In the seven-year period from 1934 to 1940, when the cheap money policy was pushed to an average infra-low rate below 1 percent (.77 of 1 per cent) an average of more than 17 in every 100 persons in the labor force were unemployed.”Hazlitt proceeds to demonstrate that from 1949 to 1958, when the same policy of artificially pushing down interest rates was tried, “the relationship of unemployment to interest rates is almost the exact opposite of that suggested by Keynesian theory.How could Keynes have gotten it so wrong?Easy. Hazlitt shows again and again that Keynes pronounced his theories “ex cathedra,” without substantial statistics to back them up. Then, if actual statistics were produced that seemed to show results opposite to what his theories had predicted, he simply challenged the statistics…In comparison: “America had zero inflation from 1787 to 1912 – private investments with returns as low as 2 percent would actually increase your wealth and buying power (a far cry from today), because the Congress was doing its job as stipulated in the Constitution, “To coin Money (and) regulate the Value thereof,” fixing the dollar at a set weight of silver or gold, instead of turning over the whole show to a private banking consortium which now prints “dollar notes” redeemable in precisely nothing…”[H]ow desperate this gang are to keep the same desperate, crooked – Keynesian – crew in charge of our sinking economic ship, rather than bring in some outsider who might run an audit, throw open the door to the empty vault, and spill the beans.http://www.lewrockwell.com/suprynowicz/suprynowicz120.html

Just a moment – let’s not be too hasty:”1) First Merrill Lynch/BofA gets clients to subscribe to a massively diluting equity offering (105 million new shares out of 271 million pre-offering shares, or 39% dilution). The offering prices at $7.10/share, a 6% discount to the previous day closing price of $7.49. In the process Merrill pockets an underwriting fee likely equal to 3% of the offering or around $20 million.”http://www.nakedcapitalism.com/2009/04/guest-post-wall-street-back-to-its.htmlBusiness as usual…Ho hum

CNBC ASIA live feed (free)David Roach of Independent Strategy co-host — good stuff

http://www.sacbee.com/topstories/story/1756261.htmlBillionaire Buffett benefits from bailout he promotedBy Charles Pillercpiller@sacbee.com“A Bee examination of regulatory records shows that Buffett, the world’s second-wealthiest person, also quietly has become a top beneficiary of the banking bailout he so vigorously advocated.”"Just 28 companies received more than 90 percent of the funds so far disbursed to financial firms by the $700 billion Troubled Asset Relief Program, or TARP.”"Buffett’s holding company, Berkshire Hathaway Inc., did not directly receive any of that aid. But Berkshire is the largest shareholder of San Francisco-based Wells Fargo & Co., which got $25 billion – 91 percent of TARP funds invested in institutions headquartered in California.”……………….Simon Johnson, an MIT professor and former chief economist for the International Monetary Fund, said that despite the banking collapse, financial leaders such as Buffett have retained surprising control over the government.”There’s this general presumption that Wall Street knows best. But they may not know best for the taxpayer,” Johnson said. “We’ve gotten into the habit of deferring to them a little too much – including Warren Buffet.”]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]http://www.huffingtonpost.com/raymond-j-learsy/gaming-the-bailout-how-wa_b_182779.html”As the situation at Fannie and Freddie worsened, investors in Fannie and Freddie reasonably expected a subordinated debt wipeout, or at the very least, a massive restructuring tantamount to a significant haircut. Yet PIMCO piled in, loading up on the subordinated debt for pennies on the dollar. Certainly the beaten down status of Fannie and Freddie sub debt was far outside the purview of their broadcast purchase parameters limited to high quality product. Why? Well, perhaps the following played a role:-PIMCO’s Bill Gross had almost unlimited access to CNBC, where he could lecture listeners and those in government about the systemic dangers of a Fannie and Freddie collapse, scaring us to the point of hiding under the covers. And never before the rescue”]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]]I thought it was just a little Moody-JPMorgan-AIG-CITI- Goldman-Indymac Ponzi schemeBut it’s apparently an ongoing ripoff that never ends.

So it took an MIT Professor to figure it out, Wow. Keep it simple is the only way to play this thing, Walk as slow as you can past those who are hell bent on believing the most unreasonable sales pitches from the banks, government Etc. Take a good long look at those poor pathetic losers and understand they haven’t a clue. Then go have coffee and bet on you basic knowledge of this situation. Up is Up and Down is really down if your told otherwise by 100 smart people then you’re the only smart one in the room.

And just how are are things going to turn “up?”Just because the negative numbers (unemployment) aren’t quite so negative doesn’t mean that they are positive! Further, there’s still a trend (most of the job losses have occurred during the last 5 months); but, it’s still negative, and if you’re in a hole and your digging only just slows down you’re still digging in a hole! Not until you’re actually ADDING a positive balance of jobs can you claim any rebound OUT of the hole!Is it just me, or could just about any of us here make these people look like total fools in 5 minutes or less?Mark

Henry Hazlitt was a journalist, not an economist. His views of economics were tainted by his axiomatic libertarian view that any government regulation of economic activity whatsoever was a bad thing. Many reputable economists embrace Keynesianism; by contrast, Mr. Hazlitt’s name seems to be invoked only by non-economist libertarians.When I want medical advice, I go to an M.D. When I want accounting advice, I go to a C.P.A. When I want economic advice, I’ll stick to real economists.SWK

A lower corporate tax is going to do what exactly?In effect, the financial sector HAS had this luxury, and look where That led!Businesses AREN’T going to be hiring because the money supply is being sucked up in the financial vortex.Besides, it’s a matter of increasing higher-level jobs, not lower-level ones. In order to correct our debt problems we have to EXPORT stuff: ain’t going to be exporting retail, restaurant and customer service jobs (oh, wait, Those, customer service jobs, have already been exported!).The previous administration, give me a break. Ditto-heads!Mark

I like this comment in the comments section by Economic Darwinism:That was a good interview. However, what I heard was something along the lines of: Now that the IMF has a big enough budget, we can take some of the stigma out of going to the IMF by lowering the punitive nature of any loans.My concern is that it almost sounds like promoting lax underwriting standards and easy credit, which we all know was the main culprit that sparked the crisis in the first place. But it is worse, the easy credit is now being extended on a country scale. Any loans made by the IMF should contain a punitive element or else they will encourage countries to borrow even more. Countries acting like hedge funds is not the way to get us out of the crisis.Countries, just like corporations, that behaved irresponsibly should suffer the consequences. I think we have all had enough with bailouts. Instead of making countries suffer, we are now extending bailouts at even larger scales.Please IMF, do not become an enabler of the behavior that created the crisis. Tough love is needed. Don’t let the IMF become another AIG. The last thing we need is an “IMF put”.And if the IMF is bailing everyone out, then where are ITS funds going to come from?It’s getting more frantic by the day…Mark

Do you think that we could remove them one piece at a time, say, start with just removing their heads?Mark

A beautifully constructed and I would add – very leveraged house of mirrors with smoke rising from the floor of the stock exchange, who would not believe this wonderful creation of myths and mystical powers that America has. Americans really can see thru walls, So the time of truth is approaching and we the people will be unable to change our surroundings. I here what your saying Pete , Bernanke is standing on the pier facing Katrina holding out his staff with his right hand all the while trying to remember the exact words quoted by Moses only to find he is in the Gulf of Mexico and not on the banks of the red sea. But it looks and sounds great from a safe distance.

When the ship is sinking the captain can be very generous with the food and water as it will soon be wet.Food and water will always buy a little more time.

Even if that’s true, so what? That is no refutation of my point. The U.S. dollar is the world’s reserve currency, and our debts are in dollars. Why should the U.S. default on its debt when it can simply “print” more dollars to pay off those debts?SWK

Henry Hazlitt was a journalist, not an economist. His views of economics were tainted by his axiomatic libertarian view that any government regulation of economic activity whatsoever was a bad thing. Many reputable economists embrace Keynesianism; by contrast, Mr. Hazlitt’s name seems to be invoked only by non-economist libertarians.The entire so-called “Austrian school” is suspect because its assertions are not borne out empirically. As both monetarist Milton Friedman and neo-Keynesian Paul Krugman have pointed out, for example, the available evidence contradicts the Hayek-Mises explanation of the business cycle. The Austrian school may present to libertarians an attractive theory of economics, but if it’s not provable, then it’s just that: a pretty theory and nothing more.When I want medical advice, I go to an M.D. When I want accounting advice, I go to a C.P.A. Everyone’s welcome to their own beliefs, but when I want economic advice, I’ll stick to real, mainstream economists.SWK

Whooohooo!! Gold is on sale again! Thanks to whatever idiots or where ever are selling this evening. Wheels are coming off the economic bus, and people are selling their only insurance.

Ho Hum

Only the PIMP makes the real money, if the girls misbehave they get slapped around and brought back in line, sounds right. If you want to be in the world game of banking you want to be at the table while the rules are being drafted.

59 weeks of benefits, wow more than a year benefits? sweet.

The G20 convinced the IMF to accelerate its gold sales. Any time that central bankers sell gold – it usually indicates that their policies are failing and they are planning to expand the money supply (by selling gold they hope to mask the fact that much greater inflation will be coming). Yes, this is a good time to get a lower price. But the real mistake of the G20 is that a lot more fast money will now start piling into commodities as well.PeteCA

Thanks Pete. You are one of my favorite guys here in telling it like it is. I have been reading here now for about 1 1/2 years, and always find good info and discussion. I, like many others, are getting tired of this con game, as governments print to infinity. Keep up the great work.

You say, SWK, that “Henry Hazlitt was…not an economist. His views of economics were tainted by his axiomatic libertarian view… ” You say, “As both monetarist Milton Friedman and neo-Keynesian Paul Krugman have pointed out…available evidence contradicts the Hayek-Mises explanation of the business cycle…”And you continue, “When I want medical advice, I go to an M.D. When I want accounting advice, I go to a C.P.A… when I want economic advice, I’ll stick to real, mainstream economists.”And to continue in Keynesian cadence for you: And when I want economic advice I go to Krugman: Krugman is no journalist; Krugman is no libertarian; Krugman is no Austrian philosopher. Krugman is a Keynesian! And once more, Krugman is alive! Krugman is the economist of record (The New York Times!); the socialist administration’s leading sage. Krugman bears no fake degrees. He’s got a real job, as an economist, at Princeton. He wears the purple of the Nobel Prize. When I want economic advice, I go to nobility!Ah, yes, SWK, but we lesser folk must abide in the hard cruel world of real economics and can only glimpse the hems of your ivory tower masters. We must survive, you see: we are the Hazlitts. It is we who have created today’s hot demand for Hazlitt’s books all over the economic spectrum…It is we who’ve made Henry Hazlitt’s “Economics in One Lesson” the most widely used economics textbook in the world. To be sure, it’s been around since 1946, with eight translations by the time of my 1979 edition and numerous paperback editions since, and still going strong, but God willing, maybe it yet will succeed.Wrote Nobel Laureate in Economic Science F.A. Hayek in 1974 of Hazlitt’s Econ One, “It is a brilliant performance. It says precisely the things which need most saying and says them with a rare courage and integrity. I know of no other modern book from which the intelligent layman can learn so much about the basic truths of economics in so short a time.”And John W. Hanes, former Undersecretary of the Treasury: “If there were a Nobel Prize for clear economic thinking, Mr Hazlitt’s book would be a worthy recipient…like a surgeon’s scalpel, it cuts through, objectively and impartially, much of the economic nonsense that has been written in recent years about our economic ailments.”And Mr. H.L. Mencken: “He is one of the few economists in human history who could really write.”And, oh, yes, SWK, just one further word from Mr. Hazlitt: Public works means taxes…“There is no more persistent and influential faith in the world today than the faith in government spending. Everywhere government spending is presented as a panacea for all our economic ills…the mother fallacy.“Everything we get, outside of the free gifts of nature, must in some way be paid for. The world is full of so-called economists who in turn are full of schemes for getting something for nothing. They tell us government can spend and spend without taxing at all; that it can continue to pile up debt without ever paying it off, because ‘we owe it to ourselves’ … such pleasant dreams in the past have always been shattered by national insolvency or runaway inflation… [A]ll government expenditures must eventually be paid out of the proceeds of taxation; inflation itself is merely a form, and a particularly vicious form, of taxation.”…Hazlitt acknowledges a certain amount of public spending necessary to perform essential government functions and public works to supply essential public services… His concern is public works considered as a means of “providing employment” or adding wealth to the community it would not otherwise have:“A bridge is built. If it is built to meet an insistent public demand….more necessary to the taxpayers collectively than the things for which they would have individually spent their money…there can be no objection. But a bridge built primarily ‘to provide employment’ is a different kind of bridge…projects have to be invented…plausible reasons why…it soon becomes absolutely essential… it will provide, say, 500 jobs for a year…the implication being jobs that would not otherwise have come into existence…“But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself.“It is true that a particular group of bridge workers may receive more employment than otherwise. But the bridge has to be paid out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $10 million the taxpayers will lose $10 million. They will have that much taken away from them which they would otherwise have spent on the things they needed most.“Therefore, for every public job created by the bridge project a private job has been destroyed on the bridge.” But, the government spenders say, “The bridge exists…the country would have been just that much poorer.”But the ones who can “see in the eye of the imagination” will see the possibilities that have never been allowed…the unbuilt homes, the unmade cars and washing machines, the unmade dresses and coats, perhaps the ungrown and unsold foodstuffs.“To see these uncreated things requires a kind of imagination that not many people have.”

Hard Truth: Hazlitt”But no one will ever properly understand any of these specialized fields unless he has first of all acquired a firm grasp of basic economic principles and the complex interrelationship of all economic factors and forces.”Aye; heed this sage advice…Ho hum

Et tu, Peter?SWK

Merideth Whitney interview with Steve Forbes.. http://www.forbes.com/2009/04/05/meredith-whitney-transcript-intelligent-investing-credit.html?partner=yahootix

Report finds U.S. mortgage problems increasinghttp://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/03/BUU716RR4Q.DTL&ref=patrick.netI’ll say it again- nothing is working….Aid to Borrowers Not Preventing Rising DelinquencyMore Help but More Defaults, Report Says http://www.washingtonpost.com/wp-dyn/content/article/2009/04/03/AR2009040300813.html?referrer=emailarticle&ref=patrick.net

Mayo Says Loan Losses Will Exceed Depression Levelshttp://www.bloomberg.com/apps/news?pid=20601103&sid=aA1duSgTFJm4&refer=newsApril 6 (Bloomberg) — Mike Mayo, who left Deutsche Bank AG to join Calyon Securities, assigned an “underweight” rating to banks on expectations that loan losses will exceed levels from the Great Depression.“While certain mortgage problems are farther along, other areas are likely to accelerate, reflecting a rolling recession by asset class,” Mayo wrote in a report today. “New government actions might not help as much as expected, especially given that loans have been marked down to only 98 cents on the dollar, on average.”The 46-year-old Mayo gained a reputation for independence at Deutsche Bank for his willingness to put a “sell” rating on banks and to criticize investors and companies for trying to curb objective analysis. At Deutsche, Mayo had “sell” or “hold” ratings on all 18 companies he covered, according to data compiled by Bloomberg.Mayo said in the report that he expects loan losses to increase to 3.5 percent by the end of 2010. Mortgage-related losses are about halfway to their peak, while credit card and consumer losses are only one-third of way to their expected highest levels, Mayo wrote.The changes to mark-to-market accounting rules will impact banks’ balance sheets by one-third or less and will have no impact on the economics of bank troubles, Mayo wrote. Banks committed the “seven deadly sins” of banking in trying to compensate for lower natural growth rates and will now feel the costs of those actions, Mayo wrote.Mayo gave “sell” ratings to BB&T Corp., Fifth Third Bancorp, KeyCorp, SunTrust Banks Inc. and U.S. Bancorp, while “underperform” ratings were assigned to Bank of America Corp., Citigroup Inc., Comerica Inc., JPMorgan Chase & Co., PNC Financial Services Group Inc. and Wells Fargo & Co.Last Updated: April 6, 2009 08:30 EDT

Let’s extract a key piece of information from the preceding post by Mike Mayo …”Mayo said in the report that he expects loan losses to increase to 3.5 percent by the end of 2010. Mortgage-related losses are about halfway to their peak, while credit card and consumer losses are only one-third of way to their expected highest levels, Mayo wrote.”So direct translation is that … we’re still fairly early in this whole process of unwinding debt in America. Mortgage losses still have quite a way to go – which is consistent with the fact that a whole new wave of re-sets on Alt-A and adjustable-rate mortgages is coming pretty soon (starting in mid-2009). Credit card losses are still relatively young, reflecting the fact that US households built up a lot of debt, and that paying this down is proving to be a lot harder than expected. Despite what Gov’t figures say, food prices and the overall cost of living remain stubbornly high in the USA.A lot of factors that are not measured by economists still eat away at the budgets of American families, such as higher school costs (now that states are cutting their contributions), telephone costs (all sorts of cell phone fees), property taxes (not always revised downwards as they should be), insurance costs, registations etc.PeteCA

John Hussman has written one of his best articles in recent times at the following link:Great Piece of Hussman CommentaryPlease note especially the following comments towards the end of the article …”Again, we won’t fight a broad improvement if it continues sufficiently, but if I were to make a guess, it would be that the potential downside in the S&P 500 from these levels could approach 30-40%. That is not a typo, and it is not a possibility that should be ruled out. “Thanks Prof Hussman. We appreciate your personal battle against US policies that defraud the taxpayer and enrich the bondholders of Wall Street banks.PeteCA

BLS figures calculated as they were prior to the Clinton-era would show the U.S. already deep into Great Depression unemployment territory, as do the Williams’ stats. Williams is peering down Orwell’s Memory Hole to count the bodies piled up as forgotten collateral damage in this Financial War against the American people.Unemployment from 1928 onward ranged from 17 percent in 1931 to 25 percent in 1933 to 17 percent in 1938.Here are the figures (gauged from a chart line): 3.5% in ’28, 5.2% in ’29, 9% in ’30, 17% in 31, 23% in ’32, 25% in ’33, 22% in ’34, 20% in ’35, 17.5% in ’36, 15% in ’37, 17% in ’38, 16% in ’39, 14% in ’40. (Source: Michael R. Darby, ‘Three-and-a-half Million Employees Have Been Mislaid, Or an Explanation of Unemployment, 1934-1941,’ Journal of Political Economy, February 1976, p. 8)Reports Robert S. McElvaine in “The Great Depression”: In 1939, a full decade after the crash, 9.4 million Americans remained unemployed…17.2 percent of the work force.Both crashes can be laid at the mercenary feet of the Fed banking cabal. When the Federal Reserve Banks were opened for business on November 16, 1914, Paul Warburg said:”This date may be considered as the Fourth of July in the economic history of the United States.”

I agree with your distillation PeteCA. There is so much financial noise and distortion, numbers, figures etc that economists and money managers have taken their eyes off the most salient features of our current situation, described above.In fact, so much info that I have had to scan through many of the posts and references. However, saw a quick blurb on CNBC about Cuomo alleging fraud by a money manager who was claiming to be actively managing funds, when in fact he was just turning his clients’ money over to Uncle Bernie. Not only was Bernie always making a profit and thus making his feeder fund managers looking good, but they didn’t even have to do any work to earn their management fees. I suspect they knew that Bernie’s “magic” was too good be honest, but liked the convenience of having guaranteed returns. The money managers probably had no other communication (left no criminal trail) other than investing with Bernie with the Sgt. Schultz mind set.I wonder how much this type of “pseudo-accomplice” fraud will be uncovered?

Well, i gotta tell you, whatever they’ve got going, it’s air: they’re pumping air. One little puncture, and if it looks like we’re in a bear market, these people will jump like frogs.

Petethe real HIGH cost of living was and is still being way underestimatedthe real 10%+ inflation rate – not only mortgages/too much debt load -led to the Great Fallmy insurance rate is still going up 10-20%!my Medicare premium is still going up 10-20%!lower oil has lowered some food prices but everything still costs too much!

I believe that the official unemployment rate of 8.5% is double or 17%(between the unemployed not counted, and the short-houred employed)and when the official # is 10%, ir will really be 20% and so on…if the unemployment benefits are indefinitely extended, will they then stopcounting those collecting after one year?

Absolutely. And in the name of poetic justice, the economy is going to destroy the money people because the economy is not money; it is labor, management, resources and the buildup of value. The economy is people who are working so that their lives will be better. The money people’s appparent objecive is to deface the currency for personal gain. They go to work every day in a white shirt and tie to knock the currency down.The packed lanes of traffic on the Santa Monica Freeway are filled with cars of people going to work; and the reason they’re doing that is for opportunity to get economic meaning in their lives, to provide for their families and to develop plans for their futures. Anyone who thinks that in the end the bankers are going to be able to take that away from them is wrong. They’re going to fight. They won’t go to work if there’s no future in it.

S&P 500 Can’t See Enough Money to Feed Stocks’ RallyApril 6 (Bloomberg) — Investors are depending on banks more than at any time in at least 60 years to lead the U.S. out of the longest earnings slump since the Great Depression.American companies will end more than two years of declining income by the fourth quarter, according to analyst forecasts compiled by Bloomberg. Banks will be responsible for all of the 76 percent rebound in the final three months of the year, because without financial companies, the gain turns into a 4.5 percent decline, the data show.Rathbone Brothers Plc, MFS Investment Management and TD Ameritrade Holding Corp. say the reliance on banks is making them increasingly concerned that the 25 percent gain by the Standard & Poor’s 500 Index since March 9, the steepest rally since 1938, will dissipate. While rising home sales and durable- goods orders show the economy may be bottoming, unemployment and consumer debt as well as prospects that banks will be forced to write down more loans may halt the gain in equities.“People should not get carried away,” said Julian Chillingworth, the London-based chief investment officer at Rathbone Brothers, which had more than $14.6 billion in assets under management at the end of last year. “We first need to see genuine signs of economic recovery.” …The S&P 500 fell 1 percent to 833.99 as of 9:36 a.m. in New York after Mike Mayo, the New York-based analyst who left Deutsche Bank AG to join Calyon Securities, recommended selling banks because of his forecast that loan losses will exceed levels from the Great Depression…‘A Little Tougher’For S&P 500 companies, profits will probably fall 37 percent, according to estimates from more than 1,700 securities analysts compiled by Bloomberg. Earnings may drop 31 percent in the second quarter and 18 percent in the next before gaining in the last three months of the year, they predict. The 76 percent jump would be the biggest quarterly increase in earnings in more than two decades, based on Bloomberg and S&P data.Getting there will depend on financial companies. Bank of America Corp. and New York-based JPMorgan Chase & Co., the two largest U.S. banks, are already saying business wasn’t as strong in March as the first two months of the year.Kenneth Lewis, chief executive officer at Charlotte, North Carolina-based Bank of America, said on March 12 that the lender was profitable in January and February. On March 27, he said “the trading book was not as good” in March.JPMorgan CEO Jamie Dimon told CNBC on March 27 that the month had been “a little tougher” than in January and February. Dimon had said on the bank’s Feb. 23 conference call with investors and analysts that the lender was “solidly profitable quarter to date.”Bank of AmericaBank of America may bounce back from an adjusted $1.59 billion fourth-quarter loss a year ago to earn $1.92 billion in the last three months of the year, analyst estimates show. JPMorgan, whose profit plunged 76 percent in the fourth quarter of 2008, may report gains of 317 percent and 222 percent in the third and fourth quarters.Analysts overestimated bank profits for at least six consecutive quarters, data compiled by Bloomberg show. Earnings may not materialize this time either because of declines in commercial real-estate values, which have yet to fully reflect the economic slowdown, according to Arlington, Virginia-based Friedman Billings Ramsey Group Inc.“Clearly, vacancy rates are going up,” said Larry Adam, Baltimore-based chief investment strategist at Deutsche Bank Private Wealth Management, which has $232 billion in client assets. “I don’t think it’s just close your eyes and buy. The economy isn’t as good as some people are saying.”Real EstateCommercial property loans in default or foreclosure jumped 43 percent in the first quarter as the contraction reduced occupancies and the credit crisis stymied refinancing, data from New York-based research firm Real Capital Analytics Inc. show. Commercial real estate values have fallen at least 30 percent since the 2007 peak and may drop 11 percent more this year, Frankfurt-based Deutsche Bank AG’s real-estate unit said in a March 25 report.The decline may force banks to increase loan-loss provisions and write down the value of commercial property loans, which Citigroup, Bank of America and JPMorgan are all carrying at 100 percent of face value, according to estimates in a March 24 report by Richard Ramsden, an analyst at New York- based Goldman Sachs Group Inc.After losing more than half its value, the S&P 500 took 19 trading days to rally 25 percent starting March 9, the sharpest since President Franklin D. Roosevelt’s New Deal policies helped pull the U.S. out of the Great Depression.Obama, BushIn the past month, the S&P 500 has bounced back from a 12- year low as confidence increased that $12.8 trillion pledged by the administrations of Barack Obama and George W. Bush and the Federal Reserve to rescue the financial system will end the recession. The S&P 500 climbed 3.3 percent to 842.50 last week.Stocks gained as Treasury Secretary Timothy Geithner unveiled a plan on March 23 to finance as much as $1 trillion in purchases of banks’ distressed assets to end the 20-month freeze in the credit markets.Economic reports in the past month persuaded some investors the worst of the recession was over. Sales of new and existing homes unexpectedly rose in February, according to the Commerce Department and the National Association of Realtors, while durable-goods orders increased.“I’d be a buyer before I’d be a seller,” said Leo Grohowski, chief investment officer at Bank of New York Mellon Wealth Management, which oversees $139 billion in New York. “This is more than an oversold bounce. We are seeing some very, very early signs that the economy may be bottoming.”Consumer SpendingStephanie Giroux, chief investment strategist for TD Ameritrade, the Omaha, Nebraska-based online brokerage with $210 billion in client assets, isn’t convinced.The government’s plans to kick-start growth don’t guarantee a rebound in earnings and stock prices because consumer spending, which accounts for about 70 percent of the U.S. economy, will stagnate for years as Americans pay debts and businesses cut jobs, she said.The unemployment rate may rise to 9.4 percent by year end, according to economists’ estimates compiled by Bloomberg, as companies from Detroit-based General Motors Corp. to Microsoft and DuPont fire workers to cope with plummeting demand.A controlled bankruptcy by GM would squeeze production and may help eliminate about a third of the 3 million jobs in the auto industry, Joseph LaVorgna, the New York-based chief U.S. economist at Deutsche Bank, wrote in a report on March 30.Proxy for GrowthAmericans’ debts have remained near all-time highs even as they reduced spending, because people thrown out of work are depleting savings and tapping credit cards. U.S. household borrowing, which has ballooned almost 11-fold since 1980, equaled $13.8 trillion at the end of 2008, or 0.5 percent less than the record reached earlier in the year, according to data compiled by Bloomberg.“You’ve taken a big engine of growth out of the system for a while,” TD Ameritrade’s Giroux said in an interview. “We are going to be confronted with sub-par growth as we dig out of this hole. The consumer has really driven growth in the economy, and the stock market is a proxy for that growth.”Software makers and chemical producers are also being hit by diminishing sales.Microsoft, the world’s largest software supplier, said in January it would cut as many as 5,000 workers in the first companywide firings in its 34-year history. Sales and profit will probably drop as the recession reduces demand, the Redmond, Washington-based company said. Analysts project Microsoft’s profit fell 22 percent in the three months ended in March and will slip 17 percent this quarter, versus year-earlier periods.8,000 Jobs CutDuPont, the third-biggest U.S. chemical maker, lowered its full-year profit forecast in January and eliminated 8,000 contractor jobs as global demand deteriorated and sales to the automobile and homebuilding industries declined. Wilmington, Delaware-based DuPont’s earnings dropped 58 percent in the first quarter and will tumble 42 percent in the current period, estimates compiled by Bloomberg show.“The market doesn’t have any evidence now that it’s not getting worse,” said James Swanson, Boston-based chief investment strategist at MFS, which oversees $134 billion. “We still are dealing with much worse unemployment and much worse housing numbers. This stock-market rally that we’re seeing, people need to be cautious about it.”http://www.bloomberg.com/apps/news?pid=20601087&sid=atxaGagbioZA

Divorced father of two – obviosuly displayed great judgement building a family. I wonder if his kids think he’s a great dad. How can anyone consider themselves successful if they deprive 2 kids of a traditional family?

The first sentence here points out the fly in the ointment really well …”April 6 (Bloomberg) — Investors are depending on banks more than at any time in at least 60 years to lead the U.S. out of the longest earnings slump since the Great Depression.”Does anyone really believe that the finance and banking sector in the USA will ever be restored to its former “glory” (if that’s what you can call it)? Biran Pretti at Contrary Investor has made some excellent points over the years. And one of them is this … when a bubble bursts, the economy does NOT go back to the same behavior that happened before the bubble. They cannot resurrect the enormous excesses that happened with these Wall Street banks.Personally, I think that major banking activity in the world is probably going to be exported to Asia, and maybe (maybe!) some banks in Europe. Isn’t it more likely that these high-power bankers will just jump the ship, and take up new offices in Shanghai, Hong Kong, Mumbai, Singapore etc. ???So anybody who’s counting on $BKX to lead the way to a resurrection for the $SPX is hoping for an awful lot. That’s not to say that some good deals might not exist on a case-by-case basis. But C’mon.PeteCA

I am in NYC… but spread pretty thin these days.I doubt I’d have the time.Thanks for thinking of me though.Miss America

Deflation, deflation, deflation… It is not the other.Miss AmericaCountries are trying as hard as they can to inflate… but they can not. The G20 voiced how they would even combat the attempt.

In case you missed it, this is a fabulous post:http://www.nakedcapitalism.com/2009/04/guest-post-fdics-insurance-commitments.html

Key phrases:”In point of fact, our fractional reserve financial system is just a gigantic Ponzi scheme. It can only survive as long as it expands, which is to say, as long as new debt is flushed through the system to finance old debt. But like all Ponzi schemes, the larger it grows the more unstable it becomes. Eventually, it too will collapse of its own weight.”"What does this have to do with Ponzis? When Bernie Madoff’s scheme collapsed, he owed somewhere north of $50 billion to his investors but had only a tiny fraction left in the bank. FDIC’s potential liabilities as of Q4 were $6.35 trillion. It has but a tiny fraction of that amount—$19 billion—in the Deposit Insurance Fund. Readers might argue that comparing the two is unfair; FDIC has an open line of credit on the U.S. Treasury. So FDIC’s credit is as good as Uncle Sam’s.”"At the end of the day, after borrowing and money printing have been maxed out, the federal government’s credit is limited by the taxes it can collect from the American people. No way no how can Americans pay for all of the above. It would cost every one of us hundreds of thousands of dollars today. Yet society still feeds the collective delusion that government liabilities are “risk-free” because it has a printing press. But printing is just default by another name: inflation. And the more we come to rely on government guarantees, the more unstable they become…”FDIC deposit insurance is an even more insidious guarantee, the “crack cocaine of American finance” as Martin Mayer put it in his definitive book on the S&L crisis. He showed how deposit insurance was to blame for that episode as risky bankers leveraged FDIC insurance to attract funding to finance ill-conceived investments”"This guarantee shell game continues only because Uncle Sam has borrowing capacity to keep it going. That capacity derives not from balance sheet strength (again, no reserves) but from the dearth of investors’ options. Everyone worldwide knows Uncle Sam is broke. But government-insured accounts remain the last refuge for their accumulated paper wealth, which—in a fractional reserve banking system—is largely an illusion to begin with. In such a system, paper wealth exists only to the degree that debts are serviced. And debts are serviced only to the degree that credit continues to expand. Remember, it’s just one giant Ponzi scheme.”"The vast majority of the economy’s wealth exists only on pieces of paper that record the accumulated funds stored in financial accounts. Contemplate your own bank statement for a moment: what does the balance figure at the bottom represent? Money that you previously gave the bank that it has since shoveled out the door to borrowers. In other words, your paper wealth only “exists” to the extent that bank borrowers pay back their debts. Money and debt are mirror images of each other: your money is someone else’s debt.”"The longer the government leaves its various guarantees in place, the more capital will flow to protected investments, much as it did to Fannie and Freddie. The Ponzi will continue to expand until confidence in Uncle Sam’s balance sheet is itself destroyed. At that point, the unwind will be far uglier that if we had paid down the national debt while executing a proper bank recapitalization, i.e. wiping out shareholders and forcing losses onto creditors”

Let me add to this topic, Al Bartlett, teaching us about arithmetic, population and energy:http://video.google.com/videosearch?q=al+bartlett&rls=com.microsoft:sv:IE-SearchBox&oe=UTF-8&sourceid=ie7&rlz=1I7IBMA&um=1&ie=UTF-8&ei=BG3aSeTOII6V-gbDkPHHCQ&sa=X&oi=video_result_group&resnum=4&ct=title#Funny, it is so easy to understand that the fractional reserve banking system, based upon continuous growth is not sustainable. And yet, so few people get it or ignore it.

@guestDo you know what Socialism is? How can you call this bailout of the financial sector, Socialism? It is a giveaway and a wealth transfer from the producers to a parasitical class of financiers.You demonstrate quite clearly that you don’t know what you’re talking about. You need to read a few more books before you run your mouth.

You’re a delightful contrarian. Always a pleasure to read your cryptic comments.Ho humbug. SWK

Meredith Whitney was one of the most credible analysts but then she set up her own company. I wonder who she advises.March 10 – “Banks are not investible” (note that was the point banks were at historic lows they have since doubled and even tripled in value)http://www.cnbc.com/id/15840232?video=1058189231&play=1March 17 “mark-to-market will not really help banks”http://www.cnbc.com/id/15840232?video=1063364117&play=1April 6 – “Banks’ 1st-Quarter Results May Show Improvement … banks should be seeing some benefits from the revised mark-to market rules in the first quarter… I like State Street, Bank of New York etc…”http://www.cnbc.com/id/30073339

Saw that, Gloomy and it is fabulous.

On NBC Nightly News – they did a piece on Summers and the millions he has received for consulting and speeches during the past 12 months from hedge funds, Goldman, Citi etc. and even his role in dismantling regulation back in the 90′s. They concluded the segment stating that Summers is a bit prickly and independent in style and is now interested in implementing regulations quoting the administration that Summers is uniquely qualified to help fix the economy.

Robert Merton says crisis caused by lack of understanding of risk models:http://www.cliffkule.com/2009/04/who-understands-risk-models.html(MIT presentation)

TROUBLE IN PARADISEMr. Bernanke may get a little lesson, ala the Hunt Brothers:”With so much money creation at national and international levels, investors are now so worried about the medium and long-term outlook for inflation that they are rushing to sell unwanted government debt back to the central banks . In fact, they want to sell more than the central bank wants to buy.But with the rest of the market a seller-over, bond prices have started to soften, and yields rise. The problem with all this yield curve manipulation, in both the United States and the United Kingdom, is that by creating an artificially high price the central bank risks becoming the ONLY buyer for government bonds, as everyone else rushes to offload increasingly risky paper. Like the Hunt Brothers, the Tin Council, and a host of other market participants who thought they could control prices, the Bank of England, and the Fed, are about to get a sharp lesson in the problem of market management.”http://ftalphaville.ft.com/blog/2009/04/06/54516/fixing-the-gilt-market/

And the critical problem is this … both the US and the UK markets will become totally dependent on the central bank to make these artificial infusions and keep interest rates abnormally low. Meaning that the terminally-ill patient (i.e. the economy) will require larger and larger doses of the QE drug to keep breathing. And then if the central banks try to remove the stimulus – the patient will start gasping for air.That’s the real risk that the Fed is taking right now.[And to explain for some readers ... QE = quantitative easing = money injected by Fed to buy back US treasuries and bonds that are not purchased by domestic or foreign buyers].PeteCA

He may be a crook, but he’s our crook…

oh my god, on CNBC, there is talk about Geithner going back on his word and plan to do mob-style oust CEO of some financial institutions. I mean, how much distrust is Geithner planing to show to private investors? you cant trust Geithner and Obama. you cant afford to keep TARP or you will be ousted. you cant make profit out of PPIP or you will be made example of out slain sheep. ask yourself, can you trust Geithner who cheated on his tax? this guy got no credibility.

Ha! Now everybody’s getting paranoid: the haves, the have nots, and those in between. The Obama Administration speaks out of so many sides of their mouths, no one has any idea what they really stand for, what they mean, or what they plan to do. My best guess: they themselves have no clue. Time for some grownups to regain control of this country, very, very soon.

no, Obama sings American Idol feel-good song. And this feel-good song does fundamentally nothing to move the nation forward. nothing is changed. ponzi game continues. It is sickening to see Geithner’s arrogant face with his lets dupe taxpayer PPIP program.

When we say that US economy is 14+ T$ does that include tangible assets?

Keep some of your assets in pure cocaïne bought wholesale (a bit risky ok), now that it seems the next dreamwar of the Pentagon is to fight the Mexican drug lords (equipped with weapons bought in the US, of course, what else) on Mexican territory, the price could rise significantly.