When the public debt rubber meets the investors’ anxiety asphalt
With the recent significant rise in US government long term bond yields and steepening of the US yield curve concerns about the medium term debt sustainability of the US fiscal policies – as well as the risk of an eventual downgrade of the US public debt AAA rating – are rising.
These risks were recently addressed in the “Green Shoots or Yellow Weeds?” piece I published last week.
Here are the relevant passages of that piece (emphasis added to relevant sentences) and some additional observations on unsustainability of current US fiscal and debt policies and the crowding out of private spending and growth that the ensuing steepening of the yield curve will entail:
Let us discuss in detail the many structural factors and vulnerabilities that will cause mediocre – below potential – economic growth over the medium term even once this severe global recession is over. We will also discuss the factors that may actually lead to a fall in the potential growth rate of many economies and thus further depress economic growth over the longer term. We can identify at least ten such risks and vulnerabilities to medium term global growth.
First, and more importantly, an incorrect interpretation of the causes of this crisis has led to a partially mistaken policy response to it that does not resolve the fundamental causes of this crisis. The right way to think of this crisis is as being caused by excessive over-borrowing and over-spending by households, excessive and risky borrowing and lending by financial institutions and excessive leverage of even a fat tail of the corporate sector in a global economy where housing, asset and credit bubbles got out of hand and eventually went bust. So this is a crisis of debt, credit and solvency, not just illiquidity. The alternative interpretation is that this is a crisis of confidence (an animal spirits driven self-fulfilling recession) that has led to a collapse of liquidity – as counterparties don’t trust each other – and a collapse of aggregate demand as concerned households and firm cut consumption and investment in ways that can turn a regular business cycle recession into a near depression. Note that even those who believe that this a crisis of over-leverage and over-spending do agree that a severe recession triggered by the bust of asset and credit bubbles can turn into a near depression if the collapse of liquidity and credit in financial markets and concerns about survival by households and firms lead them to cut spending even more than justified by those weak financial fundamentals. Thus, even those who believe in an excessive debt & spending view agree that aggressive monetary and fiscal easing is necessary to prevent a severe and unavoidable recession triggered by such excesses from turning into a near depression. I.e. animal spirits, self-fulfilling expectations, coordination failure that lead agent to focalize on bad equilibria, and crises of confidence and trust can lead an unavoidable serious recession into a real depression.
But while monetary and fiscal easing are necessary to avoid the global economy from falling from the cliff into a depression abyss the ability of these over-levered economies to resume lending, borrowing, spending, investment and growth fundamentally depends on the resolution of the real and financial excesses that causes the economic and financial crisis in the first place. And if this was a crisis of excessive leverage the current rhetoric about the deleveraging process is based on fantasy rather than data. In reality, true deleveraging by households, corporate firms and financial institutions has not really even started as private losses and debts of households, financial institutions and even corporations are being socialized and put on the back of the balance sheet of governments. Thus, the lack of true deleveraging – or appropriate debt restructuring – will lead to a corrosive debt deflation and limit the ability of households to spend, of firms to invest and of banks and other financial institutions to lend. In other terms if this is a crisis of credit and solvency rather than just illiquidity and confidence much more is needed than easy money and massive fiscal stimulus to resume high economic growth. Worse, the socialization of private losses – while private debts and leverage are barely reduced – implies that the process of re-leveraging continues with the public sector levering up to pick up the losses of the private sector. So, this policy solution creates – down the line – another dangerous debt and solvency problem, this time for the sovereign, with risks of a more severe financial crisis down the line once a refinancing crisis occurs and/or the ability by the sovereign to borrow more is curtailed. So, this fundamental misinterpretation of the causes of the crisis leads to a partially incorrect policy solution that exacerbates the debt problems of households, financial firms, corporate firms and governments in ways that are discussed in more detail below. The right way to resolve a problem of excessive debt relative to equity capital for households, firms and financial institutions is to reduce such debt and convert it into equity. Corporate debt should be converted into equity; financial sector unsecured liabilities should be converted into equity; and even households debts can be converted into equity by reducing the principal value of such mortgages and providing an equity upside to the mortgage creditor in the form of a warrant. If there is too much debt and too little equity in an economy a sector by sector conversion of debt (unsecured claims of creditors and bondholders) into equity is the right and efficient solution that allows agents buried under a debt overhang to start spend and invest again. Instead of this efficient debt conversion we are socializing the private losses and putting them on the balance sheet of governments and increasing public debts, thus increasing the overall leverage of the economy rather than reduce it and risking to create a sovereign debt problem while not reducing private leverage. This is not the proper growth-inducing way to resolve a problem of excessive debt and leverage…
Fifth, as discussed above the socialization of private losses and debts implies a sharp rise in public debt burdens. In the US alone the CBO estimates that the net public debt to GDP ratio will rise from 40% to 80%, or about 9 trillion dollar. If long term rates will then increase to 5%, the resulting increase in the interest rate bill alone would be about $450 billion or 3% of GDP. I.e. the fiscal primary surplus will have to be permanently increased by 3% of GDP (via an increase in taxes or cut in government spending) to prevent an unsustainable Ponzi increase in the stock of public debt as a share of GDP. The burden of trillions of dollars of additional public debt in the US and other advanced economies will be a medium term drag on growth. High debt levels may be financed only with default (an option that advanced economies have not followed in recent decades), a capital levy on wealth, the use of the inflation tax to wipe out the real value of public debt or a painful increase in regular taxes or reduction in government spending. All these options are costly as they imply distortions on the supply of labor and/or the returns to saving and investing.
And over time rising debt ratios of government will eventually lead to increases of real interest rates that may crowd out private spending and may even lead to sovereign refinancing/default risk. Indeed, sovereign risk that was until recently limited to emerging market economies is now on the rise in advanced economies, especially those in the Eurozone: rise of sovereign spreads relative to safer German Bunds or US Treasuries, downgrades by rating agencies, risks of failed government auction, risk of a refinancing crisis, less ability/willingness to monetize fiscal deficits (especially in a Eurozone where the ECB is hawkish on inflation) are becoming pervasive in many advanced economies; and eventually even the US may face a downgrade of its AAA rating. Sovereign risk is especially serious and rising in the periphery of the Eurozone where you have countries with large budget deficits, large public debt to GDP ratios and banking systems that are both too-big-to-fail and too-big-to-be-saved, i.e. financial systems whose liabilities are so large relative to the resources of the sovereign that the government could not bail out such financial systems unless there is cross border burden sharing (i.e. unless the German and French taxpayer bails out Greece, Ireland and possibly other weak Eurozone members).
If one rules out defaults and the inflation tax as options as their costs in advanced economies would be serious a painful process of increases in taxes and reduction in government spending may reduce the rate of economic growth over the medium term (2010 and beyond); such fiscal adjustment may be necessary to ensure medium term debt sustainability but it immediate effect would lead to a reduction in private and public aggregate demand. So it will be a drag on economic growth over the medium term.
Sixth, the rapid and massive monetization of fiscal deficits – that has been pursued by central banks this year – is not yet inflationary in the short run as there are massive deflationary forces in the world given the slack in goods markets and labor markets; also the collapse in the velocity of money implies that the excess liquidity has been so far hoarded by banks in the form of excess reserves. But if central banks don’t find a clear exit strategy from very easy monetary policies – that have led to the doubling or tripling of monetary base in the US alone – eventually either goods prices inflation and/or another dangerous asset and credit bubble will ensue when the global economy gets out of this severe recession. And some of the recent rise in equity prices, commodity prices and other risky assets prices is already clearly liquidity driven rather than being fully justified by the improving economic fundamentals.
Inflation may indeed become the path of least resistance for policy makers as it is easier to run the printing presses and cause inflation rather than pass politically difficult tax increases or spending cuts in Congress or other legislative bodies. But inflation is not a cheap solution to high public debts and the debt deflation problems of the private sector. If central banks were to allow the inflation genie out of the bottle allowing expected inflation and actual inflation to rise from low single digits to high single digits to double digits at some point a painful Volcker-style recessionary disinflation policy (like the one in 1980-82) would have to be implemented to break the back of inflation expectations and bring back the inflation genie expectation into the bottle. Thus, central banks destroying a quarter of century of achievement of price expectation stability and low inflation credibility to reduce the real value of public and private debts would be a costly solution to these debt problems. And high and variable inflation close to double digits would then lead to much higher real interest rates for government bonds, mortgages and other long term fixed interest rate debts of the public and private sector as investors will have to be rewarded with a high risk premium for high and volatile inflation. So the result would be another dismal low growth decade like the 1970s of high inflation and high and volatile real interest rates…
The risks of a double-dip W-shaped contraction
Finally, we have so far discussed why yellow weeds – rather than green shoot – will cause the global economy to bottom out and get out of its recession later than the optimistic consensus; and why structural weaknesses may led to lower actual and potential growth over the medium term once we are out of this severe economic downturn. But there is a third risk that has to be kept in mind. Once the global economy bottoms out there may be a couple of quarters of faster GDP growth as production is increased to rebuild inventories and as the effects of the policy stimulus reach their peak. But that recovery will be constrained by two factors: first, the medium term vulnerabilities and constraints to robust growth discussed before. Second, the risk of a double dip W-shaped recession as the wings of a tentative recovery of growth in 2010 could be clipped towards the end of that year or in 2011 by a perfect storm of rising oil prices, rising taxes and rising nominal and real interest rates on the public debt of many advanced economies.
First, oil and energy and commodity prices could spike as soon as there are tentative signs of a global recovery if the elasticity of supply of such commodities is inelastic to the price because of limited excess capacity of commodities after years of underinvestment in commodities and especially oil and energy. The resulting spike in commodity prices would be first inflationary but, more importantly, a sharp negative terms of trade effect on commodity importers that will reduce their real income and lead to further demand slowdown.
Second, by the end of 2010 many US tax cuts (on incomes, capital gains, dividends, estates) will expire and will be partially reversed; and the likely introduction of cap & trade will represent an additional tax increase (however necessary to control greenhouse emissions). This incipient tax increase may lead to a slowdown of consumption and investment spending.
Third, concerns about medium term fiscal sustainability and about the risk that monetization of fiscal deficits will eventually lead to inflationary pressures after two years of deflationary pressures could lead to increases in nominal and real interest rate on government bonds thus crowding out consumption, capex spending and a tentative recovery of housing.
Conclusion: significant triple risks to global economic recovery.
In conclusion, there are three major sources of downside risk to early and sustained global economic recovery. First, in the short run the evidence suggests that rather than green shoots there are plenty of yellow weeds. So this severe global recession may not end in the middle of 2009 – as the optimists claim – but rather towards the end of 2009 or some time in 2010. Second, global recovery after this recession may not be V-shaped (as the optimists claim) with rapid return to potential growth. Structural vulnerabilities and the legacy of over-leverage of households, corporate firms, financial institutions and now governments may lead to several year of below potential growth with additional real risks that even potential growth may fall in advanced economies. Third, the wings of global recovery could be clipped towards the end of 2010 or 2011 – and result in a double dip W-shaped recession – if rising oil and commodity prices, rising tax burdens and rising concerns about medium term fiscal sustainability and inflation lead to an early crowding out of private consumption, capex spending and residential investment.
The outlook for the global economy may turn out to be better than the one described in this analysis if appropriate policies – to be discussed in a separate note – are adopted to limit these short term and medium term risks and vulnerabilities. And as discussed above one cannot rule out a couple of quarters of rapid growth as the effects of the massive policy stimulus take hold and as firms that have sharply destocked inventories start to ramp up production once final sales start to bottom out and recover. But such short run recovery risks to be warped by the medium term structural vulnerabilities that will lead to low actual and potential growth in 2010-2011. And the risk of a double dip W-shaped recession towards 2011 cannot be ruled out either. Thus, the detailed analysis in this paper suggests that downside risks to sustained global growth recovery appear to be greater than to the upside risks.
A few additional remarks need to be made a week after I wrote the arguments above: maybe I was just a bit too optimistic about the timing of the risks deriving from large and growing fiscal deficits and debts. Given the market concerns in the last week and the rise in long rates such risks may emerge even sooner than expected. As I pointed out in my piece debt sustainability – or avoiding a Ponzi game on public debt – requires that the US would at least increase taxes or reduce government spending in an amount equal to the additional interest burden on the additional public debt; that primary adjustment may be of the order of $450 billion or about 3% of current GDP. This is a significant amount of primary adjustment especially in a country where talk of tax increases or spending cuts is becoming politically increasingly difficult.
Another way to consider fiscal sustainability is to estimate the permanent primary balance (as a share of GDP) necessary to stabilize the public debt to GDP ratio at 82% (the estimated level of such ratio by the CBO in 2018), i.e. we need to estimate what the US primary gap is. If average public debt rates were to average 5% (over time as long rates go higher and short rates are eventually normalized) and if the inflation rate is 2% and if the potential growth rate of the US slows to 2% (as discussed in my Yellow Weeds column), you need a primary balance of 0.8% of GDP to stabilize the debt ratio at 82% and avoid an unsustainable increase in that ratio. The primary balance this year is likely to be over 8% of GDP (but this is not a cyclically adjusted figure). If one measures the structural permanent primary balance (i.e. the one that is cyclically adjusted) then the estimate of it is between -2% and -3% of GDP depending on assumptions about long term growth and trends in revenues and spending. Thus, the permanent primary gap (i.e. the difference between the primary balance needed to stabilize the public debt ratio and the structural permanent primary balance) could range between 2.8% of GDP and 3.8% of GDP.
These are very large figures that suggest that, even after the US reduces its current large fiscal deficit once the recession is over and the recovery to potential growth is achieved, there will be a very large primary gaps that will take between about 3% and 4% of GDP to close to stabilize the public debt ratio at very high levels. Thus, the issue of medium term debt sustainability is quite serious for the US. Of course, higher potential growth rates for the US economy and lower real interest rates on the public debt would shrink this primary gap. But even in the unlikely scenario that the real interest rate – growth differential were to be zero the primary gap would still be between 2% and 3% of GDP. And these estimates of the primary gap do not even include the long term liabilities that the US faces from unfunded public sector liabilities (Social Security, Medicare and other health care costs).
Indeed, as pointed out above, the US is not yet at the stage where rating agencies will downgrade its rating from the current AAA, even if – by some parameters – this downgrade will be warranted in the next year or so. But over time the continuation of unsustainable fiscal deficit may lead to such downgrade. Rating agencies may delay such downgrade as their oligopoly power derives from the special and official regulatory role that the US and other governments have provided them; thus, the same conflicts of interest that led the rating agencies to mis-rate toxic assets may lead them to postpone for a long time the necessary downgrade of the US public debt. But investors should start doing their own homework – and assess the medium term unsustainability of current US fiscal policy rather than rely on rating agencies that are always doing “too little too late” and whose ratings are biased by the US government being the effective and official source of their rating power. This US government has already effectively bullied rating agencies in being lenient on US state and local government ratings in spite of the sharp deterioration of their fiscal balances. So one cannot expect rating agencies – that are effectively captured by their political masters – to provide unbiased ratings of the US public debt.
339 Responses to “When the public debt rubber meets the investors’ anxiety asphalt”
Guest • May 28th, 2009 at 5:03 am
first?
Hayes • May 28th, 2009 at 6:27 am
This headline says it all:Japan May Scrap 50 Trillion-Yen Plan to Prop Up Stock Market (Bloomberg)
Guest • May 28th, 2009 at 6:50 am
Basic rules:1. You cannot fight the market, the market always win. There has to be a correction for the excess of debt both at the private and government level. When the correction is complete we start again. The question is will it be opportunity for the individual or what is dictated by central planning.Example – billions to the automakers to avoid bankruptcy, after months and billions of dollars Chrysler in bankruptcy soon to be followed by GM. The difference between then and now is the Federal government controls the outcome verses rule of law, I believe it is called Tyranny!2. Government does not create wealth.3. Private individuals create the wealth.
Young Economist • May 28th, 2009 at 6:58 am
Privatizing gain and socializing loss is the way to turn all risks to sovereign and those risks will have the negative effect on the overall economy. I agree that the biggest concern is the hyperinflation expectation. FED can control yield spread but FED cannot control the inflation expectation. This is the beginning of the great instability and the great volatility in the history. FED and government prefer to solve the problem by using the method to instability rather than the method to stability. It is like the severe disease that takes one months to cure but the doctors (FED and Treasury Secretary) use the morphine to cure the patient in one day. That is not going to solve the problem but that will create the addiction and once the patient get more addicted, the disease cannot be cured and only way kill the patient with morphine.Morphine killGovernment social loss and privatize gain and FED build expectation to print money to monetize the public debt. This will create the rising hyperinflation. The rising bond yield comes from the higher inflation expectation and the intervention of FED on the long-term bond will also cause the expectation of the higher inflation, meaning that after FED intervention, the long-term bond yields will move much higher. Someone may think this is the good sign of the recovery of economy like Secretary of Treasury thinks, but this rising bond yield comes from the hyperinflation expectation because we know that 1) Public debt cannot be controlled because the concept of Privatizing gain and socializing loss. 2) FED is ready to monetize the public debt and this will cause the higher inflation in the future.We could see the higher bond yield to have the crowding out effect to economy and the more FED prints money, the more long-term bond yields are. The rising bond yield will cause the rising mortgage cost, corporate cost and even the international funding cost around the world that is tightening liquidity by itself.If FED print money more to intervene the market, it will create higher inflation expectation and it will show the incredibility of FED policy, meaning the hyperinflation occur in the long run.Right pillFED and government should build the long term economic policy for sustainability. In stead printing money to monetize the public debt, government should use the increase in tax for the Rich and transferring wealth policy. For example, we have the failure in financial sector, we see FDIC increase the insurance fee for the survival. This will help banks to control their risks by themselves. GAM failure is burden of taxpayers but who get benefit of the car businesses. IT is oil businesses, why don’t we tax the oil company to help the economy go on. That is not the burden of taxpayers but it is the policy to transfer the wealth to solve the failure.At end the deleverage is needed. Government cannot have the higher debt to help some privates because it will cause the rising funding cost for every private and it will deter the long term growth. American need saving and need investment not dissaving and consuming. One way to increase investment is to create the higher rate of return on investment. It should not come from inflation because it will cause the lower volume growth but it should come from the volume growth, surely the low and stable inflation is needed to sustain the growth.
Hayes • May 28th, 2009 at 6:58 am
Is the professor suggesting that the game is rigged and that the government uses its influence (manipulation/coercion) to control perceptions / markets?”Indeed, as pointed out above, the US is not yet at the stage where rating agencies will downgrade its rating from the current AAA, even if – by some parameters – this downgrade will be warranted in the next year or so… Rating agencies may delay such downgrade as their oligopoly power derives from the special and official regulatory role that the US and other governments have provided them; thus, the same conflicts of interest that led the rating agencies to mis-rate toxic assets may lead them to postpone for a long time the necessary downgrade of the US public debt.”If that is the case (and maybe the markets are seeing that) then how can there be confidence? I go back to an article he wrote on March 11 and the statement:”Americans, let us look at ourselves in the mirror: Madoff is us and Mr. Ponzi is us!”
Guest • May 28th, 2009 at 7:10 am
“As I pointed out in my piece debt sustainability – or avoiding a Ponzi game on public debt – requires that the US would at least increase taxes or reduce government spending in an amount equal to the additional interest burden on the additional public debt…”How do you reduce government spending when you are spending to stimulate the economy?
ReturnFreeRisk • May 28th, 2009 at 8:43 am
Bernanke will now find out what the downside of his inane policies (and I mean those going back to his early years as a Fed governor) is. As I see it there are the following forces in play:1) Supply of Treasuries – enough said.2) Waning Demand from foreigners – Here Bernanake CAN make it worse by continued inflationist policies. He is in the process of blowing the second commodity bubble since the crisis began in 2007 (not to mention the others before). The inflation fears/devaluation of the dollar kills demand for treasuries, especially among foreigners who get hit from both sides.3) Growing savings in the US – The external deficit is closing fast (as it should in country that has been living beyond its means for far too long and is now undergoing deleveraging and ridding itself of bad debt). This also means people will save and will probably chose to put their money into government bonds instead of unsafe banks, ponzi stock market (which has underperformed govies now for 40 yrs) and an overvalued real estate market. In theory, this should provide a source (the right source) for the bulk of government financing – this is how the Japanese financed their government debt after their bubbles burst.Bernanke is hell bent on making the supply worse, killing foreign demand (through inflation/deval), and doing everything possible to prevent the US private sector from saving. Spend spend spend remains the mantra in Washington and at the Fed. It is conceivable that number 3 above can finance the over spending by the government. However, the line is fine and the govt and Fed’s policies are forcing the private sector to invest its savings into risky assets and inflation protection (gold etc) and spend so that the economy does not fall. They have prevented a banking crisis (for now). But they are getting closer to creating a dollar/inflation/balance of payments crisis. And if they do – destroy the value of our money – all their earlier efforts will have been in vain.It takes resolve and fortitude to solve a crisis such as this. Tighten our belt, work, save and pay off our debts. The only difference between what Korea or Japan or Sweden faced and the current crisis is the scale. Bernanke et al are behaving as if they are different and the medicine they propose is therefore the opposite to what they (Bernanke/Summers etc) were prescribing to the Asians/Japanese/Mexicans during their crises. Meanwhile economists (including those at the Fed) are openly talking about devaluing the debt through inflation. So it is deliberate. you better believe it. This is not going to end well. The treasury yields rocketing up is the logical next step in the process. The dollar will go next and then inflation.
Guest • May 28th, 2009 at 9:22 am
Very well said Hayes!I see the problem in a visual! The excess leverage and artificial rates have led us up a mountain and the bankster government will keep taking us up the mountain until we reach a cliff of no confidence in the system. This falling off the cliff would not have been so bad had we taken the plunge at a lower elevation. The Mt Everest type elevation of funny money will definitely create chaos!
TfT • May 28th, 2009 at 9:31 am
I don’t think the rating agencies *dare* to downgrade US rating BEFOREHAND unless they plan to close their doors soon. They will only do it AFTER everyone on the planet realize/rate US’s creditworthness to zzz. Most time, these rating agengies act after the fact, rarely before.
Little Saver • May 28th, 2009 at 9:37 am
Green shoot:Initial Unemployment Claims in U.S. Decreased to 623,000 Last Week (Bloomberg)Yellow weed:Initial unemployment claims increased with 623,000 last week.
tutterfrut • May 28th, 2009 at 9:46 am
Yellow-Green Snot:The increase of the decrease of Initial Unemployment Claims was more than less expected…
Anonymous • May 28th, 2009 at 9:56 am
You suggest deleveraging the economy through debt for equity swaps. Please could you run through a macro view of this.If, for instance, one assumes that total debt needs to fall back from 350%+ of GDP to the approx 250%level of the mid 90s, then approximiately $14 trillion of debt needs to be swapped for equity.This does not sound conceivable to me. So how much debt could be swapped for equity in your view? And what would the consequences be for the creditors (including banks stuggling to restabilize) who would end up owning equity that they did not want in exchange for a msssive loss of interest income?
generalKurtz • May 28th, 2009 at 10:13 am
another thing which will make life tougher for US is the loss of jobs because of outsourcing. This will reduce the income in time as well. So future shows serious increase of debt but not so much of income…
Softwarengineer • May 28th, 2009 at 10:26 am
EVERYTHING IS FINE, THE MESS WILL ALL GO AWAY BY YEAR’S ENDOh I forgot, unemployment, untracked unemployment and severe underemployment probably affects about half of America’s workers now….but so what, aren’t China and India living with a 50% have-not percentage too, yet their economic growth is positive, economists tell us.That’s the problem with the economists that are lapdogs to the banksters, they don’t get it. Overpopulation and resource shortage isn’t in their vocabulary. They just look at percentages and numbers?Besides, as “Dicken’s Bankster Scrooge” said, just throw the excess overpopulation into poor houses or simply let them starve. The top half of the economy is all that matters. Ask China and India.
Guest • May 28th, 2009 at 10:32 am
This is the whole idea! The Banksters are thrilled with the idea of a world full of near-chinese cheap labor. The crisis will defund the economic stabilizers in all the advanced economies, and we will go back to slave wages and no pension system.We are heading towards China as a model. They count on having enough economist intellectual fire power to justify this result. The deception must be well orchestrated to be implemented with the CONSENT OF THE VICTIMS. Think about this!!!With the consent of the HOPIUM VICTIMS!!!!
Guest • May 28th, 2009 at 10:36 am
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRvUvwote3.8&refer=homeORWELLIAN HOPIUM!!!!
Anonymous • May 28th, 2009 at 10:48 am
Having been to India many times over the last 40 years, I have not seen any change in the living conditions of people that are in the lower rung of the society (500 million+). All these economic numbers and predictions dont mean a dime to these people. What we need in the world is “less consumption” and feeling for others.
Guest • May 28th, 2009 at 10:50 am
God bless your sentiment Anonymous!
FEDup • May 28th, 2009 at 10:53 am
good points! Keep telling Americans to become over educated so we can have more brilliant people willing to work for less and tell the public that as long as the popular economic indicators look good (even though they are highly manipulated-including the markets); then all is well! It’s like looking at an egg from the outside thinking it’s fine and not realizing that it is rotten on the inside. It now appears in the name of TBTF, the elites will recover while the rest of Americans will carry the burden of their misdeeds for at least the next generation with the underlying, unsaid message: “just be grateful you have a fulltime job even with your PHD and get used to a lower standard of living”! Globalization sure has worked out well for the elites!
Guest • May 28th, 2009 at 11:32 am
For myself, I have been looking in the mirror, the rearview mirror, and I see the Ponzis and the bankers following me everywhere I go. I’ve done my best to avoid them, but like a radar-equipped Black Maria, they won’t leave me along. I drive the speed limit–obey the rules, pay my taxes, pay my credit card on time, service my debt and watch my spending limits. There is no legitimate reason for me to be overtaken by a banker police van.I’m a little uncomfortable with the theory that safe drivers have to be pulled aside and forced to make bail for reckless budget profligates, corrupt banksters, welfare queens, and congressional prostitutes. But no matter what I do, no matter how careful I am, they are on relentless pursuit, intent on any excuse to pull me in.
Guest • May 28th, 2009 at 11:52 am
yea I don’t know what could even be done about India. I think the change has to come from Indias own government as well…after all they are the ones with power to do something in that country. In fact looks like China is changing lot faster than India, both culturally and in creating domestic jobs.I think one thing that makes a difference between the countries is that one is deeply steeped in religion, the other officially atheistic. For India lot of the culture comes from religion so it may not change as fast(?)
Guest • May 28th, 2009 at 11:53 am
Californians talk back to Paul Krugman—in today’s San Jose Mercury.GIVE PROP. 13 ARGUMENT A RESTPaul Krugman (Opinion, May 27) repeats two old shibboleths that “as California goes, so goes the nation,” and that all of California’s problems “began 30 years ago when voters overwhelmingly passed Proposition 13.” He then launches into his analysis of the national fiscal crisis by saying that “the problems that plague California politics apply at the national level too.” Sorry, Mr. Krugman, that straw man just won’t fly, for those of us who voted for Prop. 13 30 years ago remember runaway taxation by unrestrained government. Unless we’ve missed something, there’s been no national Proposition 13 to blame for the national financial disaster.Mary ThompsonCampbell*****PROP 13 STAVED OFF FISCAL DISASTERPaul Krugman (Opinion, May 27) has it right about the dangers of California’s profligate spending combined with an ideological stalemate in our Legislature. However, he is wrong about the etiology of the problem and like too many he wants to use California’s Proposition 13 tax revolt as the whipping boy.It makes no sense to decry the doubling of the state’s debt under Gov. Arnold Schwarzenegger and criticize a 1978 voter initiative that cut property taxes in California by more than 60 percent. Related voter initiatives have, as Krugman points out, required a two-thirds vote by the people to impose or increase almost any tax. And still California state spending increases under Democrats and Republicans alike as if they were drunken sailors.Without Proposition 13 and its progeny, California’s current financial disaster would have been upon us 20 or 25 years ago.Jeffrey A. SchwartzSaratogahttp://www.mercurynews.com/opinion/ci_12462432
JGU • May 28th, 2009 at 11:53 am
Talking about downgrading US treasury is laughable. US downgrades itself? No way! Who trusts those laughable rating agencies anyway? Downgrade or upgrade, it is not up to the rating agencies, it is up to China and other creditors! Wake up and do not pretend the rating agencies matter anymore, they are garbage.Now is this still a bear market rally?
Guest • May 28th, 2009 at 11:55 am
It’s always nice to hear from our high schoolers.
krb • May 28th, 2009 at 11:58 am
Dr Roubini,For several weeks you have been hedging yourself against the terrible medium and long term consequences of your short term “solutions”. Your forecasting going back 3 years or more has been truly brilliant, but your proposed solutions, which have with only small differences generally mimicked the print and spend policies of the past and current administrations, are much more questionable.Your govt’s Keynesian solutions have now created the ultimate circular disaster…….if govt reduces spending or raises taxes to the degree necessary to prevent the medium and long term inflations they’ve created it will throw the economy back into severe recession…..at which time you and fellow Keynesians will cheer lead for even more stimulus……and we go on and on and on…. Not to mention the fact that if the govt ever took the steps you propose in your new hedge articles it would be the first time in history. You are truly hoping for a miracle!Please do a thoughtful analysis of what would happen if….1. we reverse the Rubin/Gramm decision to remove Glass Steagall and…2. we withdraw govt interference, bailouts, selective ethics (GAAP standards, etc), and law breaking (Sarbox, contract law, lien holder rights, etc), and……..simply let the markets reallocate misallocated capital…..companies and executives that make bad decisions lose everything…..hey, there’s a novel concept…..and I bet risk management returns to company management!You and others continue to claim govt interference is “necessary”, arguing that things would be worse otherwise. But I have not read anyplace where anyone has provided proof of that. I guess “stimulus” spending and govt interference is a pretty safe political position to take……show voters you’re trying to do something and whether you make the damage worse or not can’t be proved…..no wonder govt chooses this path every time…….to the great detriment of my kids future! How pathetic!Someone out there please provide a thoughtful analysis of what would happen following Mises school theory instead of Keynesian school theory……please!
CLake • May 28th, 2009 at 12:08 pm
The big picture :a)over the last 30 years, our elites have built so called “advanced economies” where :- we are incapable of growing our GDP (3.5%p.a) without growing our debt much faster (10%p.a)- we are incapable of providing full employement without this growth- we are incapable of growing our GDP without growing at the same rate our critical resources consumptionWe have turned 4 generations of humans addited to consumption and debt. And now the developing world is following our model.It’s an evidence that we can’t continue with this any longer : we need to enter a new phase in human development for the 21st century, the next decade at least will be required for finding a new adaptation during which we will have to decrease our debt, will generate zero growth, will educate the new generation to fulfill their lives without measuring success by the amount they consume.Our corporate and political elites will need to change, as the existing ones are incapable of guiding us through this process. They don’t want to understand anything else than growing a new debt bubble to stimulate consumption and the accelerated depletion of our most critical resources. They are fools.Stock market valuation need to reflect this next decade which will be very difficult, not the hopes of few monthsof recovery by the end of the year.So, that’s where we are now, we’re on the brink of destruction, but it’s only on the brink that people find the will to change, only at the precipice do we evolve.
Guest • May 28th, 2009 at 12:23 pm
Please do not lump Keynes with solutions to solely benefit the Banksters. The professor as I recall was very concerned about debt overhang and the Banksters are concerned about profiting from debt peonage. There is nothing Keynesian about theft of the Treasury to solely benefit banksters. The market innefiencies have been maximized by having the banksters use the Congress to prevent regulation. Market innefiencies are the greatest source of speculative profits. Once the banksters gamed the system to its crisis, there is a need to help the people through Keynesian fiscal stimulus, BUT THIS IS NOT WHAT HAS TRANSPIRED. What has transpired is PIRACY BY THE BANKSTERS. PIRACY IS NOT A KEYNESIAN CONCEPT. The situation does not lend itself to left/right ,Keynesian/Austrian,labels. The situation is a highjacking of the government by very well prepared banking pirates.The banking pirates need decentralized, unregulated markets. They despise nation state sovereignty because it limits them. The ideal World Pirate Regime would have a Global Federal Reserve, and the American Federal Reserve as the only Regulator of our financial system. The WTOIMF, and World Bank would place restrictions on sovereign countries in financial regulation. Hot pirate money would circulate around the World taking unearned income from true Capitalist endeavors that create value added products and services. The labor pool would be downward harmonized to enough money to subsist and procreate. The Elite financial pirates flying the Crossbones would rule the world through finance.In an age of computer digital financial transactions, this is now within their grasp.
Anonymous • May 28th, 2009 at 12:24 pm
Professor Yunus’s Social Business idea:http://muhammadyunus.org/content/view/56/83/lang,en/
MM CA • May 28th, 2009 at 12:29 pm
NO JOBS! Check the chart out… This is not a normal recession…. Spin it anyway you want folks and pundits, but this is Depression levels we are seeing in all segments of our economy. the only reason we are not seeing shortages, rationing, food lines, etc… is because of the 12 Trillion injected by the FED to keep the country afloat. There are no jobs and millions more are facing losing thier jobs.CHART OF THE DAY: The Stunning Jobs Collapsehttp://www.businessinsider.com/chart-of-the-day-decline-from-peak-employment-2009-5Everything from the housing market to credit card defaults to retail sales hinges on the ability of Americans to find jobs. As much as we hear about green shoots, the jobs market just keeps getting worse. As today’s chart from Whitney Tilson’s More Mortgage Meltdown shows, the severity of the jobs collapse blows away what we’ve seen in the recessions of the past 40 years.And since so many of our jobs during the boom came from the housing and finance sectors, where do the new jobs come from? Government?
Guest • May 28th, 2009 at 12:30 pm
God bless you too! Remember! But for the grace of God, you could be in slum. If reflection on the problems of those in need is high school, I plead guilty!
MM CA • May 28th, 2009 at 12:38 pm
There is a direct correlation between NO JOBS and the Continuing Housing meltdown. the worst is yet to come as more and more Americans lose thier jobs and thier ability to pay thier Housing costs. If the banks and the FED think they have toxic balance sheets now, they must be shaking in thier boots on what is coming at them over the next 2 years.the only people buying housing these days are the same speculator/banks hoping for a recovery and to turn a quick profit. The same idiots that caused a big part of this housing mess. And the sad part is the Gov’t and the regulators are still allowing the same things to happen that got us in this mess.The Housing Crisis Is Getting Worsehttp://www.businessinsider.com/newsflash-the-housing-crisis-is-getting-worse-2009-5You could make a very strong argument that the economy isn’t stabilizing, it’s getting worse. At least along some measures. Sure, we stepped back from the precipice of total collapse courtesy of massive government intervention, but some of the most basic indicators are only getting worse.Bloomberg: Americans fell behind on their mortgages and banks seized homes at a record pace in the fourth quarter as unemployment rose to a 15-year high and real estate values tumbled.Mortgage delinquencies increased to a seasonally adjusted 7.88 percent of all loans, the highest in records going back to 1972, the Mortgage Bankers Association said today. Loans in foreclosure rose to 3.30 percent, also an all-time high.Meanwhile, it’s officially no longer a subprime crisis anymore. For the first time, prime delinquencies have surpassed subprime delinquencies.As for new homes sales, April saw a modest .3% increased, but the March numbers were revised down from .6% to -3.0%, a huge change. As we noted yesterday, these revisions are significant because they indicate that the current data estimates are behind the curve on how bad things are. Watch for this month’s .3% number to be downgraded soon as well.Oy. And then just think of what happens with that big mortgage rate spike we’re seeing.
DesiLurker • May 28th, 2009 at 12:57 pm
This ( http://www.theoildrum.com/node/5431 ) post on theoildrum reflects a similar thinking. What I cannot see from here is how does this unwinds, namely, do they inflate the heck out of GDP numbers (via hyper-inflation) or we see the depression of a lifetime. Or the most plausible scenario seems like we will see some combination of both as in a dis-inflation. where we see the GDP/wages/large assets(houses namely) decline in value while the rest of consumables (food/energy/etc) inflate away leading to a considerably tighter household balance sheet.Either way i think we are pretty close to the ‘moment of truth’ now.
redleg • May 28th, 2009 at 1:12 pm
Amen, guest!I’d add to that that slavery and theft is the ultimate end member in free markets.
PeteCA • May 28th, 2009 at 1:20 pm
Actually MM CA, we’re nearing the turnaround point where long term interest rates on US debt start rising.Let’s look at how things might develop …1. It is no longer possible for the US Gov’t to keep manipulating interest rates on US debt to lower and lower levels. Instead, interest rates turn around and start rising.2. Rising interest rates put a burden on states in the USA, causing them difficulty with bond issuance and hence no way to balance their budgets. As a result, more layoffs of state workers occur.3. Rising interest rates, combined with high fiscal deficits for the federal Gov’t, cast serious doubt about the ability of the US Gov’t to ever repay its obligations. Hence the credit rating of the USA is downgraded.4. This then causes the interest rates for the USA to increase even further.5. At that point the US Gov’t becomes trapped in a budget nightmare where income collected from taxes is decreasing (high unemployment in the private sector, plus layoffs of state employees), and at the same time payments on Gov’t debt are exploding.6. The Gov’t has no choice but to make massive cuts in its federal spending – which means that federal employment starts to reduce significantly.7. This causes an even further increase in US unemployment.This is a “nightmare scenario”. But quite plausible under the current economic conditions of the USA. The key economic indicator in this scenario is the unemployment figure for the USA – which would no longer be a lagging indicator, but rather a leading indicator.Obviously, the US Gov’t is hoping currently that they can muddle through the current recesionary mess – by stimulating consumer spending with various incentive packages.But the real question is … has the US industrial & manufacturing base been gutted (esp. with the demise of the US auto industry) to the point that the private sector cannot generate a real recovery again.In which case … this current situation may NOT be like all previous recessions.PeteCA
Guest • May 28th, 2009 at 1:27 pm
MARKET RALLY: It just loves the bad numbers today!
son of the paul • May 28th, 2009 at 1:31 pm
you never learn!
Guest • May 28th, 2009 at 1:36 pm
Might be off topic, but it was and is my bone to pick with CPI calculations. For all that say we have deflation due to housing values going down where was the huge inflation in the 2000-2007 when home prices were sky rocketing? That’s right, it was not calculated ,instead, rent was used. If the CPI calculated the housing prices early on, CPI would have reflected this, hence the FED would have had to increase rates and would have put the brakes on housing before getting out of control.There are 8 major categories of items considered in the CPIFOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, service meals and snacks)HOUSING (rent of primary residence, owners’ equivalent rent, fuel oil, bedroom furniture)APPAREL (men’s shirts and sweaters, women’s dresses, jewelry)TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)MEDICAL CARE (prescription drugs and medical supplies, physicians’ services, eyeglasses and eye care, hospital services)RECREATION (televisions, pets and pet products, sports equipment, admissions)EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories)OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses)
Hayes • May 28th, 2009 at 1:37 pm
Bernanke was in buying treasuries today.
TiredBear • May 28th, 2009 at 1:53 pm
David Rosenberg, says it correctly when he says that an economic forecast without an accompanying market forecast is useless.Dr. Roubini has called this a bear market rally since at least March 17th. I’d like to ask Dr. Roubini does he still feel this way and if he expect S&P to go up or down in the next few months.The past two months have been brutal for bears. I suspect many of the readers of this blog are either short or on the sidelines. Any thoughts on the direction of the market along with the economic prognosis would be welcome.
Buble Alan • May 28th, 2009 at 2:01 pm
why?
Guest • May 28th, 2009 at 2:01 pm
Who will Stand Up To America and Israel? By Paul Craig RobertsMay 27, 2009 — “Obama Calls on World to ‘Stand Up To’ North Korea” read the headline. The United States, Obama said, was determined to protect “the peace and security of the world.”Shades of doublespeak, doublethink, 1984.North Korea is a small place. China alone could snuff it out in a few minutes. Yet, the president of the US thinks that nothing less than the entire world is a match for North Korea.We are witnessing the Washington gangsters construct yet another threat like Slobodan Milosevic, Osama bin Laden, Saddam Hussein, John Walker Lindh, Hamdi, Padilla, Sami Al-Arian, Hamas, Mahkmoud Ahmadinejad, and the hapless detainees demonized by the US Secretary of Defense Rumsfeld as “the 700 most dangerous terrorists on the face of the earth,” who were tortured for six years at Gitmo only to be quietly released. Just another mistake, sorry.The military/security complex that rules America, together with the Israel Lobby and the financial banksters, needs a long list of dangerous enemies to keep the taxpayers’ money flowing into its coffers.The Homeland Security lobby is dependent on endless threats to convince Americans that they must forego civil liberty in order to be safe and secure.The real question is who is going to stand up to the American and Israeli governments?Who is going to protect Americans’ and Israelis’ civil liberties, especially those of Israeli dissenters and Israel’s Arab citizens?Who is going to protect Palestinians, Iraqis, Afghans, Lebanese, Iranians, and Syrians from Americans and Israelis?Not Obama, and not the right-wing brownshirts that today rule Israel.Obama’s notion that it takes the entire world to stand up to N. Korea is mind-boggling, but this mind-boggling idea pales in comparison to Obama’s guarantee that America will protect “the peace and security of the world.”Is this the same America that bombed Serbia, including Chinese diplomatic offices and civilian passenger trains, and pried Kosovo loose from Serbia and gave it to a gang of Muslin drug lords, lending them NATO troops to protect their operation?Is this the same America that is responsible for approximately one million dead Iraqis, leaving orphans and widows everywhere and making refugees out of one-firth of the Iraqi population?Is this the same America that blocked the rest of the world from condemning Israel for its murderous attack on Lebanese civilians in 2006 and on Gazans most recently, the same America that has covered up for Israel’s theft of Palestine over the past 60 years, a theft that has produced four million Palestinian refugees driven by Israeli violence and terror from their homes and villages?Is this the same America that is conducting military exercises in former constituent parts of Russia and ringing Russia with missile bases?Is this the same America that has bombed Afghanistan into rubble with massive civilian casualties?Is this the same America that has started a horrific new war in Pakistan, a war that in its first few days has produced one million refugees?”The peace and security of the world”? Whose world?On his return from his consultation with Obama in Washington, the brownshirted Israeli prime minister Benjamin Netanyahu declared that it was Israel’s responsibility to “eliminate” the “nuclear threat” from Iran.What nuclear threat? The US intelligence agencies are unanimous in their conclusion that Iran has had no nuclear weapons program since 2003. The inspectors of the International Atomic Energy Agency report that there is no sign of a nuclear weapons program in Iran.Who is Iran bombing? How many refugees is Iran sending fleeing for their lives?Who is North Korea bombing?The two great murderous, refugee-producing countries are the US and Israel. Between them, they have murdered and dislocated millions of people who were a threat to no one.No countries on earth rival the US and Israel for barbaric murderous violence.But Obama gives assurances that the US will protect “the peace and security of the world.” And the brownshirt Netanyahu assures the world that Israel will save it from the “Iranian threat.”Where is the media?Why aren’t people laughing their heads off?http://www.vdare.com/roberts/090527_stand_up.htm
Brett in Manhattan • May 28th, 2009 at 2:03 pm
Just another piece of anecdotal evidence. I was talking to a kid in my building who just got back from college. He said that, last year, he and his classmates were all able to get summer jobs. This year, hardly any of them have been able to do so.
Guest • May 28th, 2009 at 2:05 pm
This is a schizophrenic economic system we are now running. We are setting up a bailout bubble for the banks that will give a short lift to markets, but the long term economic prognostications are totally divergent from the financial market bubble. Thanks to Hayes! I just read a piece on the Motley Fool that says Bernanke has upped his estimate of purchasing long term bonds from 300 billion to one Trillion. If they fail to keep the 10 year Treasuries down and the Mortgage Market gets nailed, the economy will hurt. Please keep in mind that 3.25 trillion in government bonds will be sold between now and September 30. Cansomebody smarter that I tell me who is going to buy???? Need Bond Trader co-counsel!!
Brett in Manhattan • May 28th, 2009 at 2:10 pm
Yeah, we’ve basically reached the end of the first leg of the problem, subprime, and will shortly enter phase two: Alt A.The subprime people were those who had no business buying a house in the first place. The Alt A are those who had no business moving into a more expensive house.
Guest • May 28th, 2009 at 2:13 pm
http://www.fool.com/investing/value/2009/05/28/does-this-mean-the-end-is-near.aspxSorry! Forgot to post the Motley Fool piece!
Brett in Manhattan • May 28th, 2009 at 2:18 pm
Not that I’m smarter, but, this seems like a case of serving two masters. Ben, Tim et al want to flood the market with debt but at the same time keep interest rates low. So, you have this ridiculous rearranging of Titanic deck chairs viz the Fed being the Treasury’s buyer of only resort.
tutterfrut • May 28th, 2009 at 2:22 pm
Even a Fed chief has to do some bargain shopping from time to time…
Turtle • May 28th, 2009 at 2:46 pm
If the Federal Reserve buys Treasuries at an auction using an agent (sometimes known as a front company), without disclosing the substance of the transaction and thus rigging the market, does that constitute fraud — or just another good old boy way to deceive the public?
PhilT • May 28th, 2009 at 3:00 pm
… despite the universal agreement that no one wants any more such failures once this one has passed, there is a troubling lack of attention to reforms that might prevent such a crisis from recurring… As in past financial declines, what is sorely missing in this discussion is attention to what function the financial system is supposed to perform in the economy and how well it has been doing it. Today attention is mostly focused on banks’ and other investors’ losses from buying mortgage-backed securities at inflated prices. What is neglected is the consequence…
The Failure of the Economy & the Economists, by Benjamin M. Friedman
Gloomy • May 28th, 2009 at 3:03 pm
COMMODITIES AS CURRENCYCommodity prices have historically been related to supply/demand changes with periods of interspersed speculation. But something new is afoot. With many governments around the world racking up massive debts and engaging in quantitative easing, the fear of hyperinflation has become widespread. More and more investment advisors are recommending allocating a portion of investments to commodities, not as a speculation, but rather in the same way cash equivalents have been used in the past-as a secure bedrock to portfolios. More and more commodities are being used as an alternative currency. This change is different from speculative investments in commodities seen in the past and is an important driver of commodity prices. And higher commodity prices may just send the economic ship down for good.
tutterfrut • May 28th, 2009 at 3:06 pm
Ask that to that woman, chief regulator person of the Fed. But you might have to be patient. She is now probably working on the 1.3 trillion£ question.http://www.youtube.com/watch?v=uUreWxKGOkY
tutterfrut • May 28th, 2009 at 3:08 pm
I ment $ not £. Not that it matters, it has all become monopoly paper(or digits) to me
Guest • May 28th, 2009 at 3:11 pm
If the government calls, let me know who it is.And lest we forget, it’s Goldman Sachs. And it’s well to review again the history of “our” government. Here’s a revisit to Scheer’s May 5 column:CASHING IN ON ‘GOVERNMENT SACHS’ by Robert ScheerWe are so inured to tales of business corruption that even a devastating exposé in The Wall Street Journal no longer shocks us. The fact that the chairman of the New York Federal Reserve Bank made millions off his secret purchase of Goldman Sachs stock, “in violation of Federal Reserve policy,” as the WSJ put it, at a time when the N.Y. Fed was ostensibly overseeing the antics of the Wall Street firm, has barely registered a blip of outrage.When N.Y. Fed Chairman Stephen Friedman bought stock in the company that he once headed, and where he still serves as a director, he was already in violation of Federal Reserve policy and was hoping for a waiver to permit him to hold his existing multi-million-dollar stock stash and to remain on the Goldman board. The waiver was requested last October by Timothy Geithner, then the president of the N.Y. Fed and now Treasury secretary. Yet, without having received that waiver, Friedman went ahead in December and purchased 37,300 additional shares. With shares he added in January, after the waiver was granted, he ended up with 98,600 shares in Goldman Sachs, worth a total of $13,330,720 at the close of trading on Tuesday.Friedman was in violation of the Fed’s policy because, thanks in part to the urging of Geithner and the N.Y. Fed, Goldman Sachs was allowed to become a bank holding company, making it eligible for government bailout funds (an option that Geithner had denied to Goldman rival Lehman Brothers). But that shift also put Goldman under more rigorous banking regulations that required Friedman as Class C director of the N.Y. Fed, a position in which he ostensibly represents the public instead of the banks who dominate the board, to step down as a Goldman director and divest his holdings. Instead, he stayed on the Goldman board and added additional shares while waiting for the Fed waiver. Nor did he inform the Federal Reserve of his additional purchases last December, and the lawyers for the N.Y. Fed didn’t know about that purchase until the WSJ raised questions in April. Friedman has made a profit of about $3 million on the additional shares.The significance of this conflict of interest was summarized by the lead of the WSJ story: “The Federal Reserve Bank of New York shaped Washington’s response to the financial crisis late last year, which buoyed Goldman Sachs Group Inc. and other Wall Street firms. Goldman received speedy approval to become a bank holding company in September and a $10 billion capital injection soon after.”In addition to that capital injection, which at least carries some expectation of being repaid, Goldman received an additional $8.1 billion that will not have to be returned to taxpayers. This is a result of the bailout engineered by then-N.Y. Fed president Geithner of AIG, which listed Goldman as its top insured credit-swap customer. As Jerry Jordan, former president of the Fed Bank in Cleveland, told the Journal in reference to Friedman’s obvious conflict of interest, “He should have resigned.”Unfortunately, this was not the view during the reign of Geithner, who argued that Friedman needed to remain chairman of the N.Y. Fed board to find a suitable replacement for Geithner as he moved on to be secretary of the Treasury. Friedman chose a fellow former Goldman Sachs exec for the job.All of which calls into question the unique power of Goldman Sachs over the U.S. government, as described in another important, but largely ignored, article from The New York Times last October headlined “The Guys From ‘Government Sachs.’ ” Their power is vast, no matter which party controls the White House. As the Times noted, two leaders of Goldman Sachs—Robert Rubin, who co-chaired Goldman with Friedman, and Henry Paulson—had become secretaries of the Treasury in the Clinton and Bush administrations, respectively.Under Paulson, the bailout of Wall Street was dominated by Goldman Sachs alums, and as the Times noted, “Indeed, Goldman’s presence in the (Treasury) department and around the federal response to the financial bailout is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.”That power continues unabated in the Obama administration. Geithner is a protégé of former Goldman Sachs chairman Rubin. And it was therefore not surprising when he picked Mark Patterson, a registered lobbyist for Goldman Sachs, to be his chief of staff at the Treasury Department. That appointment was made on the same day that Geithner announced new rules for limiting the influence of registered lobbyists. Need more be said?http://www.truthdig.com/report/item/20090506_cashing_in_on_government_sachs/And also, lest we forget, former Treasury Secretary Lawrence Summers, now Director of the White House National Economic Council ( Obama’s chief economic adviser), has strong ties with Goldman Sachs, particularly in the 1990s Russian money-laundering scheme run through U.S. banks by a ruthless class of gangster billionaires that bankrupted that nation.Among expert witnesses testifying before the House Banking Committee was noted Russia expert, journalist, and author, Anne Williamson, whose 1998 book “How America Built the Russian Oligarchy” reveals, inter alia, how then Treasury Secretary Larry Summers, chief economist at the World Bank in 1990, passed the Russian “cookie plate to Goldman Sachs,” and how Harvard economists created the new Russian kleptocracy. For a review of that story, “U.S. Taxpayers’ Backed IMF Loans Go Into Pockets Of Clinton Cronies” see link below:http://www.apfn.org/APFN/taxpayer.htm
Guest • May 28th, 2009 at 3:13 pm
I agree with you Anonymous. To be poor in America is still rich by much of the world’s standards.
Brian • May 28th, 2009 at 3:16 pm
PeteCA,I don’t see this scenario unfolding. The Fed will monetize to infinity to prevent bond auction failures. It will buy long-end, and, as the yield curve steepens, it will buy mid and short term, too.The consequence of the Fed failing to do this is the rapid onset of the “nightmare scenario” that you outline above. The issue is that this scenario would unfold quickly.The consequence of the Fed monetizing is a much more destructive scenario of hyperinflation leading to total US dollar value collapse, leading to total global economic collapse as equities valued in USD (indeed, all holdings worldwide valued in US dollars – which is basically the entire worlds equity as USD is the world reserve currency). HOWEVER, this scenario unfolds more slowly. It is more incremental, until the dam bursts and destruction happens too rapidly for the Fed to react.So, as policymakers and bureaucrats, the Fed must choose to monetize.
Guest • May 28th, 2009 at 3:17 pm
And just think what higher interest rates will do to home values, resulting in more bank loss, resulting in…hlowe
CLake • May 28th, 2009 at 3:52 pm
A 7% inflation over the next decade would halve the debt/GDP ratio, provided the debt doesn’t increase in nominal terms more than the GDP in real terms(which by the way we seem incapable of achieving).This level of inflation seems to be the new goal for the fed. Problem is, if creditors realize that their savings are going to be divided by 2 over the next decade, they’re going to want to be compensated with much higher interest rates which will cause the debt to increase faster as I doubt the Government can raise taxes much further, otherwise these creditors will dump their dollar assets and we’ll end up with the Weimar republic situation and hyperinflation instead of 7% inflation.I don’t see how this can work.
Guest • May 28th, 2009 at 4:24 pm
Going even further, the caveat to this CPI mix is the subjective, bureaucractic varying of substitutes back and forth for specific items, such as meat, that are switched purposely to lower the CPI, and the abuse in the hedonic adjustments used to manipulate the CPI… Says the BLS:“For each of the more than 200 item categories, using scientific statistical procedures, the Bureau has chosen samples of several hundred specific items within selected business establishments frequented by consumers to represent the thousands of varieties available in the marketplace. For example, in a given supermarket, the Bureau may choose a plastic bag of golden delicious apples, U.S. extra fancy grade, weighing 4.4 pounds to represent the Apples category.”http://www.bls.gov/cpi/cpifaq.htm#Question_7On September 10, 2008, John Williams of ShadowStats.com gave a powerful and common sense rebuttal, entitled “Response to BLS Article on CPI Misconceptions,” to a BLS published article by John S. Greenlees and Robert B. McClelland that attempted to debunk “a number of longstanding myths regarding the Consumer Price Index [CPI],” addressing those issues directly tied to his writing and research.Williams, under the contention that “The Traditional CPI Concept Has Been Politically Mauled,” says: “At the heart of the differences over CPI reporting is the way CPI is viewed or defined. My basic approach to looking at CPI inflation is from the standpoint of common experience and traditional expectations that the CPI measures the cost of maintaining a constant standard of living, that reflects costs out of pocket to get a products or services in hand, not some nebulous benefits estimated by the BLS of having to pay for an expensive new gasoline additive when filling a gas tank…“I contend that most people view inflation as being much higher than currently reported by the BLS, due largely to those methodological changes over the decades that have moved CPI inflation away from basic, traditional reporting. Changes tied particularly to quality, weighting and definitional issues have moved reported inflation ever further from broad, common experience, with resulting reporting biases in the CPI that usually are to the downside. Consumers have a pretty good sense of where basic inflation stands, and whether or not they are able to make ends meet, let alone maintain a constant standard of living…“Here are the issues raised in the BLS article that I feel need to be touched upon…”http://www.shadowstats.com/article/special-comment
CLake • May 28th, 2009 at 4:40 pm
Looks like sideways in a tight range around 880 is going to be the name of the game for a while. At least until the fed stops making their regular purchases to prop it up at that level, when Obama will need a market collapse to justify a new $ 800 billion stimulus tranche, and when it will be clear to most investors that the green shoots have turned into yellow weeds : probably by September.
Guest • May 28th, 2009 at 5:25 pm
MA, are big banks presently manipulating oil and other commodities? Do you have this visibility? I know they made huge profits last qtr and expect them to again this qtr.
paul94611 • May 28th, 2009 at 5:29 pm
I recently posted a longer version of the following.What we may well be faced with is the prospect of deflation is asset values and inflation in the debt markets. The time will soon be upon us when the fed will find itself in the position of having lost any sense of control over interest rates, regardless of their efforts at QE and will be held powerless as the markets take over.This is more true today then when I posted it a couple of weeks ago and it will be even more true when the 30 year is +6% in a few months time. Summers and Geithner are indeed chasing the wrong path in the attempt to reinflate the debt fueled economy of yesteryear with yet more debt rather than accepting that the world economy is undergoing a fundamental shift. A shift predicated upon the simple truth that any structure cannot bear more weight and external force that it is designed to. The world economy cannot sustain a structure predicated upon continued growth beyond the carrying capacity of the sum total of those encompassed by the system and their total economic output X velocity.Simple fact of life.While we watch Summers and Geithner waste the capacity of the United States to act while they are off chasing the dragon as directed by their superiors in the financial services oligarchies, the ultimate price tag increases relentlessly as the probability of timely success declines.
Guest • May 28th, 2009 at 5:31 pm
What, I wonder, is the factor of error in all these statistics issued? It seems a .3% increase is a mighty fine line to ascertain–and I question central planners in the government who always stand to gain one way or the other from the statistics they issue, particularly when an upside would show their planning is working out just fine, thank you. I’ve often wondered if they’re sometimes calculated to make me doubt my sanity.Government statistics remind me of the on-going political squabble over the FCC’s changeover to Arbitron’s Portable People Meter (PPM) for its stats to determine its radio license market areas. The PPM is worn by consumers like a mobile phone and literally picks up via encoded signals the radio broadcasts to which the participant is listening. How’s that for accuracy of radio audience?But wait. A half-dozen minority broadcast advocacy group are complaining. The PPM would replace Arbitron’s old diary system, in which participants write down what stations they listen to during the day. But blacks and Hispanics didn’t fill out the diaries, so they estimated how many were listening, and now it’s going to be accurate, and that’s not good—for the PPM. Even the FCC’s own Advisory Committee on Diversity has become a Critic of the PPM.Who says statistics aren’t political?“FCC opens up inquiry on Arbitron radio ratings gadget”:http://arstechnica.com/tech-policy/news/2009/05/fcc-opens-up-inquiry-on-arbitron-ratings-gadget.ars
Guest • May 28th, 2009 at 5:37 pm
Not true : Government can create wealth, but a Government that works for the people, not one in the hands of the financial/industrial lobbies…Fundamental research, education, national defense, adequate regulations that take into account our “animal spirits”, environmental standards : these all create long term wealth and prosperity and only a government for the people must be responsible for them, absent of lobbies.The problem is not government per se, it’s what it’s what it has become, a corrupt instrument in the hands of the very few.
Guest • May 28th, 2009 at 5:44 pm
Brian, how do you see mortgage dept being affected by $ collaps.hlowe
TfT • May 28th, 2009 at 5:46 pm
Brian,May I ask if you were a foreign holder of US Treasuries, agencies debts and other USD-denominated instruments, what would you do to minimize the negative impacts? Is it possible to minimize the negative impacts? If not, why not the major holders just take the loss now and start over again?Thanks much for your opinion in advance.
Guest • May 28th, 2009 at 6:04 pm
Exploding debt threatens AmericaJohn Taylorhttp://www.ft.com/cms/s/0/71520770-4a2c-11de-8e7e-00144feabdc0.html?nclick_check=1———China stuck in ‘dollar trap’By Jamil Anderlini in Beijinghttp://www.ft.com/cms/s/0/5b47c8f8-488c-11de-8870-00144feabdc0.html?nclick_check=1hlowe
Guest • May 28th, 2009 at 6:09 pm
And one must go back to our first colonies and our Founders to find out what made America rich, and what made much of the Third World not so rich. It was not sentiment that made America great. It was not feelings that raised her standard of living to the greatest miracle in the world and prompted her to share that standard with others. It was not atheism that transformed men from beasts of burden to astronauts to the moon. For those who wonder why America was rich, she was rich because her people were good. It was Christianity that was the guiding light to this city on a hill. As for classifying all religions as one, ye shall know them by their fruits…This is what made America great:America the BeautifulO beautiful for spacious skies,For amber waves of grain,For purple mountain majestiesAbove the fruited plain!America! America!God shed his grace on theeAnd crown thy good with brotherhoodFrom sea to shining sea!O beautiful for pilgrim feetWhose stern impassioned stressA thoroughfare of freedom beatAcross the wilderness!America! America!God mend thine every flaw,Confirm thy soul in self-control,Thy liberty in law!O beautiful for heroes provedIn liberating strife.Who more than self their country lovedAnd mercy more than life!America! America!May God thy gold refineTill all success be noblenessAnd every gain divine!O beautiful for patriot dreamThat sees beyond the yearsThine alabaster cities gleamUndimmed by human tears!America! America!God shed his grace on theeAnd crown thy good with brotherhoodFrom sea to shining sea!O beautiful for halcyon skies,For amber waves of grain,For purple mountain majestiesAbove the enameled plain!America! America!God shed his grace on theeTill souls wax fair as earth and airAnd music-hearted sea!O beautiful for pilgrims feet,Whose stem impassioned stressA thoroughfare for freedom beatAcross the wilderness!America! America!God shed his grace on theeTill paths be wrought throughwilds of thoughtBy pilgrim foot and knee!O beautiful for glory-taleOf liberating strifeWhen once and twice,for man’s availMen lavished precious life!America! America!God shed his grace on theeTill selfish gain no longer stainThe banner of the free!O beautiful for patriot dreamThat sees beyond the yearsThine alabaster cities gleamUndimmed by human tears!America! America!God shed his grace on theeTill nobler men keep once againThy whiter jubilee!It is for this we will fight, in the end, to regain.
Guest • May 28th, 2009 at 6:12 pm
Hey MA hows the green energy investigation going for you? Check this out.A Taste Of Things To Come5/28/2009by John Rubinohttp://www.greenstockinvesting.com/news/view.asp?ID=76hlowe
Guest • May 28th, 2009 at 6:54 pm
Definition of wealth per Merrian-webster’s collegiate Dictionary –abundance of valuable material possessions or resources, all property that has a money value or an exchange value, the stock of useful goods having economic value in existence at any one time.Not sure how one can say “Fundamental research, education, national defense, adequate regulations that take into account our “animal spirits”, environmental standards” falls in to the definition of wealth but I can understand where some of the above can be a aid in wealth creation but if not done correctly can be a hindrance.
Pecos Banker • May 28th, 2009 at 7:06 pm
I’m sure the Americans who were here first would echo your sentiments.
Anonymous • May 28th, 2009 at 7:11 pm
As Marc Faber has said — this rally is tied to central bank printing of money. The markets in my opinion will not go back to earlier lows, no matter what NR says.
Anonymous • May 28th, 2009 at 7:12 pm
Israel is the biggest threat to peace in middle-east.
PeteCA • May 28th, 2009 at 7:23 pm
Brian … see further comments below.PeteCA
PeteCA • May 28th, 2009 at 7:48 pm
Picking up from an earlier discussion above …———————–I said …Actually MM CA, we’re nearing the turnaround point where long term interest rates on US debt start rising.Let’s look at how things might develop …1. It is no longer possible for the US Gov’t to keep manipulating interest rates on US debt to lower and lower levels. Instead, interest rates turn around and start rising.2. Rising interest rates put a burden on states in the USA, causing them difficulty with bond issuance and hence no way to balance their budgets. As a result, more layoffs of state workers occur.3. Rising interest rates, combined with high fiscal deficits for the federal Gov’t, cast serious doubt about the ability of the US Gov’t to ever repay its obligations. Hence the credit rating of the USA is downgraded.4. This then causes the interest rates for the USA to increase even further.5. At that point the US Gov’t becomes trapped in a budget nightmare where income collected from taxes is decreasing (high unemployment in the private sector, plus layoffs of state employees), and at the same time payments on Gov’t debt are exploding.6. The Gov’t has no choice but to make massive cuts in its federal spending – which means that federal employment starts to reduce significantly.7. This causes an even further increase in US unemployment.This is a “nightmare scenario”. But quite plausible under the current economic conditions of the USA. The key economic indicator in this scenario is the unemployment figure for the USA – which would no longer be a lagging indicator, but rather a leading indicator.Obviously, the US Gov’t is hoping currently that they can muddle through the current recesionary mess – by stimulating consumer spending with various incentive packages.But the real question is … has the US industrial & manufacturing base been gutted (esp. with the demise of the US auto industry) to the point that the private sector cannot generate a real recovery again.In which case … this current situation may NOT be like all previous recessions.—————————–Then Brian replied …I don’t see this scenario unfolding. The Fed will monetize to infinity to prevent bond auction failures. It will buy long-end, and, as the yield curve steepens, it will buy mid and short term, too.The consequence of the Fed failing to do this is the rapid onset of the “nightmare scenario” that you outline above. The issue is that this scenario would unfold quickly.The consequence of the Fed monetizing is a much more destructive scenario of hyperinflation leading to total US dollar value collapse, leading to total global economic collapse as equities valued in USD (indeed, all holdings worldwide valued in US dollars – which is basically the entire worlds equity as USD is the world reserve currency). HOWEVER, this scenario unfolds more slowly. It is more incremental, until the dam bursts and destruction happens too rapidly for the Fed to react.So, as policymakers and bureaucrats, the Fed must choose to monetize.————————My further comments …Brian – I’m not sure that we disagree about the endgame. I didn’t explain my hypothetical sequence of steps through to final death of the economy.Since interest rate movements tend to be a very slow process, I would guess that when the interest rate rose to some critical level of concern – that the Fed would become alarmed and jump in with a large step of monetization. This in turn would cause great worry amongst bond investors, who would begin dumping US debt em masse. So we would see a crash in the US dollar, and very possibly the hyperinflationary currency scenario that you have in mind. Hence the final endgame to the scenario I mentioned could still end in a mass exodus from dollar-demominated assets.Originally I thought the Fed had set specific goals for interest rates on the yield curve. i.e. they were going to engineer the yield curve. But this is prohibitively expensive! So apparently this is not true – since they have allowed the yields to jump substantially during the past couple of weeks. So it appears that the Fed’s strategy is to try to control the growth in interest rates (i.e. hold them to a slow level of growth), but not necessarily to fixed targets. At least right now. In other words – they seem to be trying to achieve their goals on a fixed budget (300 billion dollars per year for monetization). If that’s the case, then it’s still possible for the Fed to lose control to market forces – if enough investors decide to reject US debt (at current yields). Hence the general direction of interest rates would turn around (now or soon). Then it’s possible the Fed might give up and go “all in” (i.e. a very big monetization step) if things reach the panic stage.Right now it appears that the Fed cannot control unemployment in America. Our manufacturing base is eroding pretty significantly. And the massive amount of Gov’t debt that is being issued this year is drowning out the ability of the private sector to borrow (I think you have argued that same point). I seriously doubt that consumers will go back to former household debt levels – because interest rates on consumer credit have become very vicious. So the US economy remains in a quagmire, and efforts to reinflate the enormous debt bubble will fail.PeteCA
BoatCalc • May 28th, 2009 at 7:56 pm
Yes of course the ratings agencies have bias but they still matter because they are the only rating agencies. Agreed the recovery will be slow but I think it’s a little premature to be talking recovery. There is still plenty of pain to come, many economies that had real estate bubble are only now beginning to turn… I think a more pertinent question is are we even half way or a quarter of the way down yet?hull speed calculator
NFrazier • May 28th, 2009 at 8:01 pm
The initial contractionary policies of the great depression probably shed too much capacity that would have had to have been built back during the economic recovery (even without WWII). In addition to causing unnecessary pain, this was wasteful in and of itself.Now consider something like the great depression occurring at the end of a nation’s economic primacy – i.e. when all of its sectors have been fully developed and currently existing technologies efficiently implemented into them. Typically a nation will deregulate finance, begin running unsustainable deficits, and devalue its currency around this time. The UK, Germany, and France are historical examples of this phenomenon. Japan may be as well (except its household savings rate is so high that it may represent an untapped source of fiscal reserves that are even outpacing its deficit spending). Ultimately, without another robust round of CAPEX to develop the next sector (in contrast to the US which implemented technologies developed during the depression and WWII – in addition to expanding its services sector), the capacity of the capital formation sectors and their related CAPEX induced multiplier effects needed to be shed. This ultimately meant that financial markets needed to be regulated, fiscal profligacy needed to return to balance, and the soundness of the currency needed to be shored up as well. Finally, it meant that the resulting unemployed needed to be managed via shortening the work-week and/or compression of tax brackets. This not only explains the EU’s response to full development – but why it is the correct one as well.This is why I worry about framing current US (and even Japanese) macro-policy debate solely in terms of the great depression. Doing so seems to result in a wasteful burning down of savings to maintain capacity that may need to ultimately be shed if there are no new sufficiently substantial CAPEX booms on the horizon of full development. This policy debate needs to incorporate everything we know about economics – not just the lessons of the great depression.
NFrazier • May 28th, 2009 at 8:07 pm
OK – thanks (to Professor DeLong) for the reference article – now I can see the argument for Keynesian stimulus more clearly. I’ll respond to a few key points below.“In their April 26, 1932 memorandum to Congressman Pettengill, the twelve Chicago economists2_including Knight, Simons, Viner-argued strongly in favor of “fiscal inflation” as the means of checking depression and initiating recovery [10, pp. 524-27]. These economists were quick to dismiss recovery by automatic adjustments. Reliance on the automatic process involved “tremendous losses, in wastage of productive capacity, and in acute suffering” [10, p. 524].”Yup – this is precisely the problem at hand.”The balancing of budgets should be regarded as a series of long-term operations in which deficits will be incurred and debts increased during years of economic adversity while Treasury surpluses and the rapid retirement of the public debt will be planned for during years of prosperity”Now this is the assumption that does not always hold near full economic development. If the real interest rate at which the government borrows is less than or equal to the real return on investment (aka – government expenditure), then there is no loss of wealth. But at full development, the real return on investment stays low not only during the depression – but usually for quite a while afterwards (i.e. – until a new technology or export market is developed). In other words, no wealth is being created – only debt.If aggregate savings outpaces deficit spending and taxes are raised, this represents a transfer of wealth from productive economic activity to unproductive economic activity. In real terms, one might as well just compress tax brackets and spend on social services.If aggregate savings does not outpace deficit spending and taxes are raised, then the debt must be partially inflated away or be defaulted on. In real terms, in addition to compressing tax brackets, one might as well tax bondholders by an additional amount.But there is another way of transferring wealth to the unemployed. It is shortening the workweek. What the high wage earners loose in income, they at least get back in free time.One might argue that this could also trigger a lot of private defaults and represents another tax on creditors – but it is one that they should have seen coming in their analysis of risk in exchange for reward. Had they seen it coming, the boom-bust cycle would not have occurred in the first place. Furthermore, the loss of leverage of bad investors bodes well for the efficiency of capital allocation and growth in the future (which will probably be overseas and in the export sector of their own now aged economy). In actuality though, the total number of person-work-hours per year should remain unchanged under this adjustment and so therefore should aggregate output (approximately) and the default rate.So ultimately, the US government needs to spend in ways that produce returns on investment that are higher than its borrowing costs. Otherwise (even assuming full regulatory compensation to correct for cases of foul play), it is likely to find its policy makers trying to figure out how to transfer wealth in ways that may cause significant political upheaval – and may ultimately cause a run on its bond market.Given the likelihood of the latter scenarios in light of the cases of the economically aged Japan, Germany, the UK, France, and others, the US may want to consider tempering its Keynesian policies not only with an emphasis on R&D spending (in case there is another round of efficient CAPEX spending on the near horizon) – but also with a shortening of the workweek (for the next few years until people find work in services, export manufacturing, efficient use of commodity resources, or otherwise scale into other non-capital formation sectors of the economy), preparing for more defaults and bank closures, and compressing of tax brackets. This should prevent wasted effort on Sisyphusian economic activity, the pain of a run on the bond market, and the opportunity costs of foregoing a more egalitarian and leisurely society.Lastly, to make such a policy fully sustainable, the current account deficit also needs to be shored up. This could be done by emphasizing a shorter work-week over compression of tax brackets (after the budget defict is brought back to surplus…). Alternatively, the US could pressure surplus countries to compress their own tax brackets more or adopt equivalent measures.
Guest • May 28th, 2009 at 8:51 pm
Big Ben and Tiny Tim have replaced Houdini as the greatest illusionists of all time!
Hayes • May 28th, 2009 at 8:57 pm
I thought these kindly bankers went before Congress and indicated they were working for nothing (or close to it)Goldman Shareholders Suffered as Blankfein Earned $43 Million
May 28 (Bloomberg) — Citigroup Inc. Chief Executive Officer Vikram Pandit weathered almost six hours of grilling from shareholders at the bank’s annual meeting on April 21. He had a lot of explaining to do: The company lost $27.7 billion in 2008 and stayed afloat only with help from a $45 billion government bailout.Even as his bank was floundering, Pandit in 2008 earned $38 million in salary and stock, No. 3 among the best-paid CEOs of the top 50 U.S.-based financial companies, according to data compiled by Bloomberg. In February, Pandit told a congressional committee that, starting in 2009, he would take just $1 in annual salary until the bank is profitable again. “I get the new reality,” he said.In the question-and-answer session at the annual meeting, one investor joked, “If you come work for me, I’ll double your salary.” Pandit, 52, standing onstage with Citigroup Chairman Richard Parsons at the Hilton New York, bristled. “I don’t want to work for you,” he said and changed the subject.Never has pay been a more sensitive topic for the chiefs of large financial institutions. The global economic crisis, last year’s series of taxpayer-supported bailouts and a series of tense congressional hearings have made executive compensation a daily focus of the network news.“This attack on executive pay is more severe than previous ones,” says Samuel Hayes, professor emeritus of investment banking at Harvard Business School. “The severe economic decline is being blamed squarely on Wall Street, and the huge pay packages are seen as an outrage.”Blankfein No. 1Lloyd Blankfein, CEO of New York-based Goldman Sachs Group Inc., was No. 1 in the ranking after earning $42.95 million in salary and stock awards. The ranking includes CEOs who held their jobs for at least 10 months in 2008 (How We Crunched the Numbers). Kenneth Chenault, CEO and chairman of American Express Co., was No. 2, with total pay of $42.75 million. Chenault’s pay package included $8.57 million in salary and other direct compensation, with the rest paid in stock options and restricted shares.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aOqGBzGEkJbg&refer=home
Guest • May 28th, 2009 at 9:02 pm
Pandit: “I get the new reality.”He sure does.
Guest • May 28th, 2009 at 9:29 pm
I’ve liked your posts in the past and I want to understand. This post, America the Beautiful, and these sentiments and the nation that was built on these sentiments, am I to understand this is not your song, you do not believe this, you think it is abhorrent, that this is something we should not embrace?If this country means no more than political correctness or opportunity of wealth to you, then let Samuel Adams’ words of 1776 speak out for me:“If you love wealth (from this country) better than liberty, the tranquility of servitude better than the animating contest of freedom, go home (to wherever that may be) from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you (in whatever land that may be). May your chains (in whatever land that may be) set lightly upon you, and may posterity forget that ye were our countryman (if ever you were)…“Our contest is not only whether we ourselves shall be free, but whether there shall be left to mankind an asylum on earth for civil and religious liberty.”If your sentiments are simply a matter of racism, it was the Clinton Administration that had the Bureau of Reclamation find an urgent need to cover over the site of the Kennewick Man, found alongside the Columbia River in Kennewick, Washington, in 1996—nontypical of modern American Indians but rather “Cacasoid” or “Polynesian” in features and Carbon Dated around 9,300 years ago–with hundreds of tons of earth, in the name of erosion control.It could not be allowed that White Men were in North America before the Indian. And so scientists were refused permission to do further analysis and Bruce Babbitt and the Clinton Administration made the decision to turn the remains over to local tribes for re-burial. The outrage of the Politically Correct thus was assuaged, to continue on onward in its vested interest in the victim status of the American Indian.http://www.zianet.com/web/kennewic.htmDoes the freedom you enjoy rest on cheapness such as this? If so, I fear you fail to understand our forefathers who fought and died for true liberty—for all. They saw it differently.
Vladimir • May 28th, 2009 at 9:55 pm
Nope, only labor creates surplus value. When private capitalists expropriate this surplus it becomes their private wealth. And only by taxing the bastard the state can socialize a part of the stolen wealth. The only REAL way out of this Depression, is to expropriate the bastards and establish the power of workers’ soviets.
Guest • May 28th, 2009 at 10:01 pm
And the “rest,” the megamillions, to be taxed at 15% capital gains, while most Joe 6Paks pay 25-35% Federal income tax on their meager 2.25% interest “earned” from savings for the year—Citibank’s latest advertised big CD offer. And even at that, all Blankfein and Chenault had to pay in 2008 on their salaried multimillions, if they paid at all, was 35%, the same as the guy who made $357,700, or just 2% more than the guy who made $164,550.2008 IRS Tax BracketsTax Rate Single… Married Filing Jointly10%—- Not over $8,025… Not over $16,05015%—- $8,025 – $32,550… $16,050 – $65,10025%—- $32,550 – $78,850… $65,100 – $131,45028%—- $78,850 – $164,550… $131,450 – $200,30033%—- $164,550 – $357,700… $200,300 – $357,70035%—- Over $357,700… Over $357,700http://www.bargaineering.com/articles/2008-federal-income-tax-brackets-official-irs-figures.htmlLAW:A thousand starve, a few are fed,Legions of robbers rack the poor,The rich man steals the widow’s bread,And Lazarus dies at Dives’ door;The Lawyer and the Priest adjustThe claims of Luxury and LustTo seize the earth and hold the soil,To store the grain they never reap;Under their heels the white slaves toil,While children wail and women weep!ROBERT BUCHANAN: The New Rome
Guest • May 28th, 2009 at 10:09 pm
From: “Part of Public Private Investment Partnership Plan Looks Dead on Arrival” | Yves Smith, Naked Capitalism:As readers may recall, we had been skeptical (and critical) of the Public Private Investment Partnership from the outset. It was the third effort at a program that had failed twice under Hank Paulson, namely, to have banks get dud assets off their balance sheets by selling them to a sucker.That’s why this program has never gotten airborne. It requires a bagholder.The problem isn’t, contrary to PR designed to mislead the public, that the assets are hard to value. That holds only for an itty bitty percentage of the total. The real problem is that the banks are carrying them at above market values, and above any reasonable long term value too (their protests to the contrary). The problem is not the saleabilty of said assets, it’s that they don’t like the prices. Selling them at below the marked value leads to losses, which in turn would reduce their equity at a time when they have been told, in no uncertain terms, to get more.So the only way the plan works is if someone overpays. The only party that might have reason to is Uncle Sam. The whole point of the “public private investment” part of this is to disquise the overpayment. So the plan is an opaque subsidy to the banks…
Mark • May 28th, 2009 at 10:15 pm
I’d say that the greatest loss of jobs is due to jobs that were producing things that we don’t need.Mark
Guest • May 28th, 2009 at 10:16 pm
Lee Rogers’ KSFO radio call-ins on inflation guesstimates are now running 6% to 25%.
Mark • May 28th, 2009 at 10:18 pm
But, as we’re finding out, low wages cannot purchase the goods/services that are being produced. Exports will NOT increase, so that won’t work.The future will be all about maintaining the greatest standard of living using the least amount of resources.Mark
Mark • May 28th, 2009 at 10:29 pm
Geez, Guest, you’re all over the map!THE issue is how one has created one’s fortunes.EVERY nation has claimed divine inspiration. It helps justify the killings of natives.In the end, your/anyone’s god, will not save you from what will become. And that’s that we will revert back to a level that more closely resembles past native civilizations than current ones. Our national cultures are empty; they are disconnected from the physical world and will therefore fail us in the future (as our once abundant resources dwindle).Humankind has not woven the web of life.We are but one thread within it.Whatever we do to the web, we do to ourselves.All things are bound together.All things connected.- Chief Seattle, 1855Mark
Mark • May 29th, 2009 at 12:03 am
Ah, a shift toward (something grounded in) reality!Mark
Mark • May 29th, 2009 at 12:10 am
I agree!During the GD the US was yet to become a world leader in manufacturing (a big capture of the market) and in oil exports. This occurred on top of no foreign deficits (correct me if I’m wrong on this point).This time around the US has major manufacturing competition, so much so that it finds that it’s no longer a leader.And oil? Now imports roughly 2/3rds of its oil! Oil imports account for roughly 1/2 of the US’s foreign trade deficit.No, we could only hope that it’s like the GD!Mark
Mark • May 29th, 2009 at 12:17 am
Rebound? No way!http://www.organicconsumers.org/articles/article_18068.cfmMark
Guest • May 29th, 2009 at 1:59 am
I haven’t seen anything like this before. Driving through 34th street from 2nd avenue in manhatten to Lincoln Tunnel, every block has at least 1 retail space available for rent. These spaces are evenly distributed through all the avenues, and can be more than 2,3 per block. This is just the beginning of the collapse of the commercial real-estate bubble. If this can happen on 34th street in manhatten, then absolutely no place is immune.
Guest • May 29th, 2009 at 4:34 am
Most modern inventions (electricity, transistor, antibiotics, radio-communications, satellites… etc) exist only because of fundamental research that enabled their discovery. These created entire industries and enormous wealth.Education : how do you create wealth without a properly educated population ?National defense : how do you create wealth if your country is not secure and your democracy stable ?Adeauate regulations : it’s because we didn’t have the appropriate regulations in place that the banksters destroyed so much wealth with their ridiculous lending practices that were only looking for short term profits.Environmental standards : how do you create long term wealth if you deplete the resources of the earth with no limitation and no consideration of global warming ?I wrote : CREATE LONG TERM WEALTH AND PROSPERITY,and I stick to it.A corrupt government in the hands of the banksters and corporate lobbies does not create long term wealth because it only focusses on the short term interests of a few. It seems many americans have a binge with Government intervention, but they are confusing the issue. The problem is not government interventon when it is necessary, but the interventions of a CORRUPT Government, as we have had for too long in America, republicans and democrats alike. This confusion is the source of the nonsensical livertarian dogma that government interventions ia always bad and the markets are always right.This has become ridiculous beyond belief. Joseph Stiglitz won a nobel prize demonstrating that there exists so many externalities which the markets never take into account and lead to huge problems when one apllies the laissez faire doctrines of the austrian economists.
CLake • May 29th, 2009 at 4:47 am
You might be right that in dollars the market might not go back to the low of 666 seen early March. But by then, the dollar will have lost another 20% of its value at least against the Euro or Gold…And this won’t get any better if Bernanke keeps having to print money to prop up the market.I do believe however that there is going to come a time this fall when this will end and the fed will stop the artificial life line because Obama will have to go back to ask for more fiscal stimulus and they will need to see a market drop to justify it.
Sourabh • May 29th, 2009 at 4:57 am
Stop using italics for large parageaphs.This entire article is in Italics. Would prefer it to be in a more readable straight font.
Sourabh • May 29th, 2009 at 4:58 am
I meant Paragraphs… (apologize for the typo)
Guest • May 29th, 2009 at 5:32 am
In india 500 Million people below poverty line and India spends untold millions on their space programe i think they plan to grow food on moon to feed their hungary people. I think india have made some progress but most of it is hype. Indian govmt have to prioritise their spending.
Hayes • May 29th, 2009 at 7:18 am
The following is an excerpt from David Rosenberg’s latest missive – for those who wish to follow him he publishes almost every day but registration is required. (I suspect that this free “service” will not be offered in the long term but while it is available you all should take full advantage of it.) For those who don’t know, Rosenberg was chief economist at Merrill until a few weeks ago – he has now hung his shingle(he’s a Canadian) at a Canadian wealth management company called Gluskin+Sheff. Rosenberg was as prescient as Roubini about this crisis but also gets into market specifics. To subscribe visit https://ems.gluskinsheff.net/index.ncl.htmlexcerpt from his May 28 newsletter
Here is what we know:1. The last time we had a condition like this was from October 8 to October15 of last year — the 10-year T-note yield spiked from 3.4% to 4.1%. Amonth later, it was sitting at 3.6% — three-quarters of the selloff wasreversed.2. The Fed has conducted 24 bond sales covering $130 billion. That leaves$170 billion left in its arsenal and it notified us at the last meeting that itcould well boost its quantitative easing program3. And why wouldn’t it? It’s one thing to have a Treasury yield backup whenmortgage rates are still declining, but that is no longer the case. The yieldon the 30-year fixed-rate is already up 20 basis points from the lows; 1-year ARMs have jumped 17bps. This is not what the Fed wants to see.4. There is no evidence from the custodial data at the Fed that centralbanks are cutting back on their exposure to Treasury securities.5. The inflation rate is now -0.7% YoY and set to approach -2.0% during thesummer for the first time in six decades. A near 6% real yield potentiallooks pretty attractive — we haven’t seen that in a good 25 years.6. The yield curve (2s/10s) has massively steepened to 275bps. This isunsustainable and is going to flatten but the question is how? Will it beby the Fed raising rates and taking away the carry? With theunemployment rate heading above 10%, hardly likely. The output gap isso big that the funds rate, in theory, should be closer to -5% than 0%. Sowhich entity is going to be the one that starts to take advantage of thismassive ‘carry trade’?The banks, that’s who. They are the ones with the cash — over $1 trillion onthe balance sheet, which is not only a record but more than triple what wasconsidered a normal level in the past. At the same time, even with privatesector borrowing on the decline, the commercial banks have not addedanything — nada — to their cache of Treasury securities this year. But, it’s one thing to have the curve at 170bps as it was four months ago and the huge275bps spread the market is offering today. The banks have never beforehad so much cash to be put to work in the most attractive carry trade inTreasuries in recorded history.Also note that the last time the yield curve was this steep (again, 2s/10s) wasback in August 2003 — the difference, of course, is that the recession wasalready over and done with for nearly two years; and we were on the precipice of a 4%+ real GDP growth trajectory over the ensuing year. Even so, the curve was not sustainable back then any more than it is today; the Fed was on hold for another 10 months; and guess what, the 10-year note yield rallied 70bps to3.9% the very next month.We think that this sharp correction in Treasuries (4.5% loss so far this year)started off as a flight-out-of-safety when the Obama economics team put a floorunder the financials, then the second stage were the ‘green shoots’, followed by recurring asset mix rebalancing, and then by talk and technicals — the exactstage when the blowoff occurs; and the blowoff is what provides the opportunity.Let’s not forget what the upcoming round of data releases are going to looklike after GM declares bankruptcy — jobless claims are likely going to test theold highs, ISM the old lows, and the boom in consumer confidence is going toseem like a distant memory by Labour Day.WHAT ABOUT THE EQUITY MARKET?Well, we have a sneaking suspicion that the nearby peak was May 8 when theyield on the 10-year T-note was 3.29%. That was the tipping point for thestock market, which has only done backing and filling ever since; and somewild swings (three triple-digit up Dow sessions; four triple-digit down days).We would have to think that a 4.63% yield compares quite favourably with a2.6% S&P 500 dividend yield — the spread hasn’t been that wide in at leasteight months. Not only that, but the stock market has become increasingly“less cheap” — over the last six months, 2009 consensus earnings estimateshave been pared from +30% growth expectations to a mere +9%. The S&P500 is trading at multiples of around 17-18x, which is no bargain in our view.Keep in mind that the S&P 500 and the Dow are back to January 12th levels.At that time, the bond market offered very little in the way of any seriouscompetition as the 10-year T-note yield was sitting at 2.3%. Now the samelevels of the stock market are competing with a 3.72% yield.NO GREENERY IN THE HOUSING MARKETThat 2.9% MoM rise in existing home sales in April to 4.68 million units(annual rate) was a tad flattering seeing as March was revised down, but thisfollowed a 3.4% decline, which followed a 4.9% February surge which, in turn,followed a 5.3% slide in January. Like the stock market, lots of backing andfilling and what we are left with is a flat trend. Maybe that is a good sign that sales are forming a bottom, but wouldn’t one expect a lot more than thatconsidering where mortgage rates are, not to mention the $8,000 tax creditfor first-time home buyers.Not only that, but distressed sales made up 45% of the sales tally last month,so the underlying pace is actually much softer than the headline suggests.But the only figure that matters for us — from a pricing standpoint — is theinventory number; and the news here was not good — rising to 10.2 months’supply from 9.6 in March, not to mention the high-water mark of the year. Theunsold condo supply is north of 15 months’ supply — this is very deflationaryfor the sector (prices in this sector have deflated 18.5% YoY and there issurely more to come).
CLake • May 29th, 2009 at 8:08 am
From now on, interests are on the rise, WHATEVER tricks Bernanke and Geithner use.The 10Y has risen by 1.2% in the last 3 months, we´ll see it at 5% before this fall.Bernanke would have to monetize the whole shitload of new debt issuance (more than 3 trillion in the next 4 months) in order to keep interests low.Who on earth is going to accept 3% interest on the 10Y when inflation expectations for the next decade are way above that % and the dollar index is falling by 10% every 3 months ?THERE AREN’T GOING TO BE THAT MANY FOOLISH INVESTORS LEFT ON THIS PLANET !This will be thedemonstration that QE was a foolish strategy, only a short term relief that will fade away very soon. Bernanke with all his tricks can’t beat the market forces. When he will realize this, it will already be too late.
Guest • May 29th, 2009 at 8:45 am
Another market rally on good news (tongue in cheek): GDP (economy) only shrank at 5.7% in first quarter
TfT • May 29th, 2009 at 8:49 am
Hayes,Thanks for the info. You are really a data/information guru. I checked it out. On the page, it does say.
“To obtain your free trial subscription to Gluskin Sheff’s reports, please complete the form below.”
Don’t know how long the trial period is though.
Guest • May 29th, 2009 at 8:53 am
Excellent point Guest! We must wake up to the fact we have a KLEPTOCRACY that may surpass the garbage kleptocracy in Russia.
Guest • May 29th, 2009 at 9:23 am
http://economistsview.typepad.com/timduy/2009/05/a-return-to-a-nasty-external-dynamic.htmlPlease notice the quote by Alan Blinder on the need for a steep yield curve to increase bank profits. I am getting a sense that the central bankers have not idea where this debacle is heading and they are using all avenues to give the megabanks all possible lifeboats. The banks will get all the policy benefits TO THE EXCLUSION OF ALL OTHERS IN SOCIETY. The megabanks get the lifeboats and we better swim or sink. How else do you explain all the policy actions that we have seen that exhibit a tunnel vision preference for the megabanks?
Guest • May 29th, 2009 at 9:29 am
“MARKETS SET TO PLUNGE AGAIN, SAYS JIM ROGERS” | Business Intelligence Middle East | May 27, 2009INTERNATIONAL. Investment gurus Jim Rogers and Marc Faber agree on one thing. They see a major correction looming in equity markets with a currency effect for the US, since the current rally has been mostly based on printed money, a kind of ‘reverse Robin Hood policy’ of governments, to steal from the peasants to give to the rich.As with Faber, Rogers is mostly to be seen being interviewed on CNBC Asia or Europe, since their views are to put it mildly, somewhat negative on the US Dollar and the prospects for green shoots in the US economy.Legendary investor Jim Rogers told CNBC on Wednesday he is not short or hedged in anything at the moment, but buying Japanese Yen. The next crisis in his eyes is in currencies which makes sense since sovereign states have taken much of the bad debt from the banks and piled them onto their own balance sheets.The stock market may hit new lows this year or the next as the current rally has been largely caused by the money printed by central banks and fundamental problems remain unsolved, he said.His views echo those of renowned bear Marc Faber, who told CNBC last week that the rises in share prices did not mean the world was embarking on a path of sustainable economic growth.”I’m not buying shares if that’s what you mean. Not at all,” Rogers told Squawk Box Asia.Governments have not solved the essential problems that caused the crisis but instead they “flooded the world with money,” according to Rogers. Trying to solve the problem of too much consumption and too much debt with more consumption “defies belief” and will not work, he said.The price of oil is also likely to remain high despite the fact that the recession is taking its toll on demand, he said.”You know supplies worldwide are declining at the rate of anywhere from 4% to 6% a year, yes, demand is down at the moment but in longer term, unless somebody discovers a lot of oil very quickly, the surprise is going to be how high the price of oil stays, and how high it eventually goes,” Rogers added.The next financial meltdown will be in the currency markets, as central banks around the world have been printing money, giving the appearance of massive government intervention to weaken their currencies, legendary investor Jim Rogers, Chairman, Rogers Holdings, told CNBC on Wednesday.”At the moment I have virtually no hedges, I suspect it is going to be the next problem, big crisis will be in the currency markets, I’m trying to figure out what to do there,” Rogers said.”If I am right, you’re going to see a lot of currency problems in the next decade or two,” Rogers said.Governments around the world are doing their best to destroy currencies, many currencies in fact. And people need to understand that; if they don’t understand it now, they’re going to find out, they’re going to find out the hard way,” he added.Marc Faber agrees that we will see a correction unfold in the equity markets. Faber said: “In general, the markets were very oversold on 6 March 2009 and there were some favourable technical divergences [which resulted in the subsequent rally].”“When the S&P made a new low, many markets and stocks were higher than they were in October-November. That means many stocks had entered bull markets including Asian stock markets,” said Faber, pointing out that now, most stocks were up by more than 100%. ““A number of stocks above the 50-day moving average reached 90% the other day, which signals an overbought position in US. I expect a correction to unfold. If the correction is a resumption of the bear market where we will make new lows or is still a correction, that still remains to be seen,” he said.http://www.bi-me.com/main.php?id=37049&t=1&c=33&cg=4&mset=
Guest • May 29th, 2009 at 9:37 am
Still don;t understand your gripe … go to the gym !
Guest • May 29th, 2009 at 10:20 am
Hayes has been kind enough to provide the Rosenberg perspective that Banks can really profit from the Treasury Carry Trade and the Steep Yield Curve. Are rates going to stay up???
PeteCA • May 29th, 2009 at 10:31 am
With the US economy shrinking by 5.7% in the Q1 of 2009 – we are clearly not at a turnaround in terms of contraction. It’s pretty amazing that a slight drop in the rate of contraction (from -6.1% last quarter to -5.7% now) could suddenly be construed as “green shoots”.Adding in a few extra facts:* 1 in every 8 Americans who pay mortgages is now behind on a payment, or in more serious trouble meeting mortgage obligations.* Over 20% of all the houses in America are upside down in terms of equity – people owe more on them than they are worth.* A fairly significant percentage of delinquencies on mortgages are now coming from prime mortgages … not just from subprime. That is a real concern.We are now headed into the second major peak of mortgage rate resets – that will especially affect adjustable rate mortgages, liars loans and option-ARM’s. Although LIBOR rates are not that bad right now, if you dig into the details of how these payments work … you discover that some people will see their monthly mortgage payments double (and others will get hefty increases, even if it’s not that large). These resets will happen all the way through the rest of 2009 and all of 2010 (and some of 2011).Therefore, it’s fair to expect more trouble in the housing industry, more writedowns on assets at Wall Street banks, and more bailouts. At best, we’re only halfway through this mess. The next phase may not be quite as serious in terms of the financial “shock value”, but it’s coming on the heels of a very hard recession already.So does anyone realistically expect a major bounce in consumer spending at this stage?And what about states like California (or Florida, Arizona and Nevada) that are the epicenters of this mortgage debacle? California still has come nowhere close to dealing with its spiraling budget problems. There is no way that state politicians can bluff their way through this downturn, without having to face the painful realities. Which means further major cuts in services and state jobs. And increased taxes at the local level.What we’ve seen in the Dow was a pretty good sized bear market rally. Reality hurts.PeteCA
Guest • May 29th, 2009 at 10:33 am
You have found the red-hot core of this economic meltdown. Whenever I hear the resounding echoes of ‘Recovery!” “Recovery!” about me, I look around and I ask, “Where?” I look to manufacturing—I do not see it; I look to the IT industry—I do not see it; to engineering and research and development; to construction and housing; to recreation and airline travel; to small businesses who craft cabinets and doors and sell glass and repair cars and paint houses and upholster furniture and plan tours and keep books and provide public relations and publish trade magazines…and I do not see it. I only see slowdown…blamed on “insufficient consumer spending.”I only see a government that has nothing to give except what it takes away from somebody else, taking more. I only see increased government handouts to select groups, such as investment bankers and government-subsidized corporate labor insourced to undercut the wages of America’s faithful blue-collar workers. I only see increased taxes and increased deficits and increasing inflation.And I see Big Government misdirecting and disorganizing real production into massive healthcare programs, massive redistribution-of-wealth welfare schemes, organizing into bigger and meaner city, state and federal employees unions, growing unwieldy off the diminishing fat of the land. I only see more granting of special privileges and immunities to law to the too big to fail. I only see the biggest swindle of a hard-working people by a chronic printer of depreciating paper currency that this nation has ever known.I see what Jim Rogers sees; that this government has looked for no real remedies to cure America’s economic ills, it has only looked for more ways to take more. It looks to Keynesians and Yes-We-Can New Dealers to justify wilder and wilder spending schemes to further damage, perhaps irreparably, America’s once vibrant system of free enterprise—that golden goose that fed and clothed us and served us so well.And when I look to the hills from whence the echoes of recovery rebound, I see growing chaos—chaos in the darkening clouds of depreciating money descending upon the economies of the world, wreaking havoc, and suffering, in the lives of millions.
Guest • May 29th, 2009 at 10:39 am
obama went madhttp://news.yahoo.com/s/ap/20090529/ap_on_go_pr_wh/us_obama_cyber_strugglespretty soon, we gonna have czar for each sectors, industries, and professions.
Guest • May 29th, 2009 at 10:57 am
The elite have been slowly creeping towards your New Rome under the cover of successive market bubbles that lulled the underpaid population into thinking they were prospering. The regressive tax rates that benefit passive income and punish productive income are part of this process. All of the fundamental framework for debt peonage was implemented during the bubble years. The elite now believe that the framework cannot be dismantled, since the sheer fact of dismantling this monstrosity is economically disruptive. We have a de-factoformalized neo-feudal debt peonage system and we are dared not to like it.
GMeli • May 29th, 2009 at 11:12 am
Perhaps Bernanke and Geithner want treasury yields to rise so that inflation will cause foreigners to buy US equities. After all, consumer confidence is directly related to equities. Higher equities means more spending.In the meantime, lets monetize some debt here or there
Guest • May 29th, 2009 at 11:30 am
Add this to the category: “Enough Said.”National Public Radio today, signaling Jay Leno’s retirement tonight from the Tonight Show after 17 years, played a couple of highlights of past shows. Continuing in Johnny Carson’s practice of asking obvious questions of young people on-the-street, Jay asked a young girl what the two animals are that are represented in the stock market.Quickly, the bright young voice replied, A snake and a mouse.Jay, never missing a beat, replied, Ah, a snake and a mouse. What situation are we in now?The mouse, she said.
Guest • May 29th, 2009 at 11:46 am
Dear Mark:Since history now shows that Chief Seattle never existed and his name and reputation were made up, I think it’s fair to assume that his quotation was made up.Guest
Mark • May 29th, 2009 at 12:20 pm
OK, Guest, drop the name reference if you prefer. The message still holds.Wave your flags and guns. In the end you cannot eat either.Mark
Guest • May 29th, 2009 at 1:21 pm
Why complain about it? Copy & paste it into notepad or word.Presto–no italics anymore!
Toby • May 29th, 2009 at 1:24 pm
Operating vs As Reported (top down vs bottom up) varriance enormus; out of the woods or the Island has moved…As Rpt EPS for 12 Mo Sep,’09 estimated to be negative ($-3.09 EPS) – first time in index historyhttp://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS/Toby
Toby • May 29th, 2009 at 1:24 pm
Operating vs As Reported (top down vs bottom up) varriance enormus; out of the woods or the Island has moved…As Rpt EPS for 12 Mo Sep,’09 estimated to be negative ($-3.09 EPS) – first time in index historyhttp://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS/Toby
Guest • May 29th, 2009 at 1:50 pm
Calculated Risk –“More on S&P and Possible CMBS Downgrades”[R]ents are falling for all property types. Of course existing tenants will keep paying their current rent – or will they? From Bloomberg: Starbucks Pushing Landlords for 25% Cut in Cafe Rents.”Starbucks Corp., the world’s largest coffee-shop operator, is pushing some U.S. landlords for as much as a 25 percent reduction in lease rates, taking advantage of a declining real estate market to save on rent.”http://www.calculatedriskblog.com/2009/05/more-on-s-and-possible-cmbs-downgrades.html
Guest • May 29th, 2009 at 1:52 pm
More from Calculated Risk –From HotelNewsNow.com: STR posts US results for 17-23 May 2009In year-over-year measurements, the industry’s occupancy fell 11.1 percent to end the week at 59.4 percent. Average daily rate dropped 9.3 percent to finish the week at US$98.31. Revenue per available room for the week decreased 19.4 percent to finish at US$58.39.
Guest • May 29th, 2009 at 1:53 pm
Debt Negotiators May Give Little Relief to ConsumersBy Jamie McGeeMay 29 (Bloomberg) — Ulish Hopkins, a former bus- dispatcher from Chicago, turned to a debt-settlement company last year after piling up about $30,000 in credit-card bills. Seven months later, he owed close to $40,000.Hopkins says the company told him it could reduce his bills by about 50 percent through negotiations with lenders. He was told to stop paying creditors and to put monthly payments in an escrow account, which the firm used to cover its fees. Instead of reducing his bills, interest and late fees raised his indebtedness and damaged his credit score.“They never told me that the money I was paying wasn’t going to my debt, it was going to them,” said Hopkins, 59, who quit work in January 2008 after a brain tumor led to surgery. He now receives $1,539 a month in disability checks. “You are better on your own.”Credit-card delinquencies are at record highs, according to Fitch Ratings, and the U.S. unemployment rate of 8.9 percent is the highest since 1983. As more consumers fall behind on bills, settlement companies often end up adding to the debt burden rather than offering a cost-saving solution, said Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling in Silver Spring, Maryland.“There has been significant growth in the debt-settlement industry based on the economic decline,” Cunningham said. “People are financially distressed and when that happens, the unscrupulous among us seem to come out in droves.”http://www.bloomberg.com/apps/news?pid=20601110&sid=aGxuVt3lKLhY
Guest • May 29th, 2009 at 1:58 pm
Much more apropos than a Bull and Bear. Goldman Sachs and JP Morgan are the snakes and we are the mice.
JLarkin • May 29th, 2009 at 2:44 pm
Why don’t they name the scam company like 60 Minutes would do?
Guest • May 29th, 2009 at 3:56 pm
HAHAHA, told you all not to bet against FED. FED’s QE is driving FEAR into bears and shorts. Stock market will rally, rally, AND RALLY!!!!HAHAHAHA, eye on bears and shorts, BAM, BAM, BAM. none left.
Guest • May 29th, 2009 at 3:58 pm
bears and shorts hunted by FED and Geithner. Go hide in the cave. Go hide in Treasury, oh look, we crucify you… HAHAHAHAHAHA.
Guest • May 29th, 2009 at 4:05 pm
A story like this shows the need for better financial literacy of the populace. The average person is so intimidated and confused by his finances that he makes easy prey for unscrupulous companies.
blind de milo • May 29th, 2009 at 4:12 pm
speaking of the beggining and ending of”bond” markets… here, for johnny.http://usgovinfo.about.com/od/uscongress/a/greatcomp.htmThe Great Compromise of 1787.By Robert Longley,* great compromise of 1787* u.s. congress* constitutional convention* structure of congress.Perhaps the greatest debate undertaken by the delegates to the Constitutional Convention in 1787 centered on how many representatives each state should have in the new government’s lawmaking branch, the U.S. Congress. As is often the case in government and politics, resolving a great debate, required a Great Compromise.Early in the Constitutional Convention, delegates envisioned a Congress consisting of only a single chamber with a certain number of representatives from each state. The burning question was, how many representatives from each state? Delegates from the larger, more populous states favored the Virginia Plan, which called for each state to have a different number of representatives based on the state’s population. Delegates from smaller states supported the New Jersey plan, under which each state would send the same number of representatives to Congress.Connecticut delegate Roger Sherman is credited with proposing the alternative of a “bicameral,” or two-chambered Congress, made up of a Senate and a House of Representatives. Each state, suggested Sherman, would send an equal number of representatives to the Senate, and one representative to the House for each 30,000 residents of the state.At the time, all the states except Pennsylvania had bicameral legislatures, so the delegates were familiar with the structure of Congress proposed by Sherman.Sherman’s plan pleased delegates from both the large and small states and became known as the Connecticut Compromise of 1787, or the Great Compromise.The structure and powers of the new U.S. Congress, as proposed by the delegates of the Constitutional Convention, were explained to the people by Alexander Hamilton and James Madison in the Federalist Papers 52-66.Today, each state is represented in Congress by two Senators and a variable number of members of the House of Representatives based on the state’s population as reported in the most recent decennial census. The process of fairly determining the number of members of the House from each state is called “apportionment.”The first census in 1790 counted 4 million Americans. Based on that count, the total number of members elected to the House of Representatives grew from the original 65 to 106. The current House membership of 435 was set by Congress in 1911……………………………………John Prine, Great Compromise Lyrics.I knew a girl who was almost a ladyShe had a way with all the men in her lifeEvery inch of her blossomed in beautyShe was born on the fourth of JulyWell she lived in an aluminum house trailerAnd she worked in a juke box saloonAnd she spent all the money I give herJust to see the old man in the moonChorus:I used to sleep at the foot of Old GloryAnd awake to dawn’s early lightBut much to my surpriseWhen I opened my eyesI was a victim of the great compromiseWell we’d go out on Saturday eveningsTo the drive-in on Route 41And it was there that I first suspectedThat she was doin’ what she’d already done.She said “Johnny won’t you get me some popcorn”And she knew I had to walk pretty farAnd as soon as I passed through the moonlightShe hopped into a foreign sports car(Repeat chorus)Well you know I could have beat up that fella’But it was her that had hopped into his carMany times I’d fought to protect herBut this time she was goin’ too far.Now some folks they call me a coward’Cause I left her at the drive-in that nightBut I’d druther have names thrown at meThan to fight for a thing that ain’t right(Repeat chorus)Now she writes all the fellas love lettersSaying “Greetings, come and see me real soon”And they go and line up in the barroomAnd spend the night in that sick woman’s room.But sometimes I get awful lonesomeAnd I wish she was my girl insteadBut she won’t let me live with herAnd she makes me live in my head(Repeat chorus)I used to sleep….
Guest • May 29th, 2009 at 4:23 pm
And they won’t be the last tenant to negotiate a rent reduction. Think of all the retail real estate sold in the last few years with valuations predicated on high and ever-increasing rents, not to mention vacant space being sucked up in short order, low credit losses, and ultra-low cap rates used to boost value. I think the average historical cap rate is 9%, whereas cap rates of sub 6% were common in the boom years, with California having some retail space valued with sub 3% rates.
blind de milo • May 29th, 2009 at 4:29 pm
http://www.militaryindustrialcomplex.com/.SO FAR since 10/30/06MilitaryIndustrialComplex.com has recorded a total of 8,717 publicly-reported defense contracts. To date, that is an average of $2,237 for each member of the US citizenry (306,334,502 – Census.gov – 05/01/09).RECENT updated M-F after 5PM ETThere were 15 publicly-reported Defense Contracts listed [ TODAY ] totaling $259,805,098.DAY PRIORThere were 16 publicly-reported Defense Contract listed [ YESTERDAY ] totaling $592,430,630.THIS WEEK38 publicly-reported Defense Contracts are listed This Week totaling $995,432,786…John Prine, Please Don’t Bury Me Lyrics.Song: Please Don’t Bury MeAlbum: Great Days: The John Prine Anthology.Woke up this morningPut on my slippersWalked in the kitchen and diedAnd oh what a feeling!When my soulWent thru the ceilingAnd on up into heaven I did rideWhen I got there they did sayJohn, it happened this wayYou slipped upon the floorAnd hit your headAnd all the angels sayJust before you passed awayThese were the very last wordsThat you said:Chorus:Please don’t bury meDown in that cold cold groundNo, I’d druther have “em” cut me upAnd pass me all aroundThrow my brain in a hurricaneAnd the blind can have my eyesAnd the deaf can take both of my earsIf they don’t mind the size.Give my stomach to MilwaukeeIf they run out of beerPut my socks in a cedar boxJust get “em” out of hereVenus de Milo can have my armsLook out! I’ve got your noseSell my heart to the junkmanAnd give my love to RoseRepeat ChorusGive my feet to the footlooseCareless, fancy freeGive my knees to the needyDon’t pull that stuff on meHand me down my walking caneIt’s a sin to tell a lieSend my mouth way down southAnd kiss my ass goodbyeRepeat ChorusPlease don’t bury me ………
Guest investor • May 29th, 2009 at 4:37 pm
g,there is only one weapon worthy of your heart!
Guest • May 29th, 2009 at 4:40 pm
say it again..g,there is only one weapon worthy of your heart!
Guest • May 29th, 2009 at 4:46 pm
“The media serve the interests of state and corporate power, which are closely interlinked, framing their reporting and analysis in a manner supportive of established privilege and limiting debate and discussion accordingly.”Noam Chomsky.http://www.thirdworldtraveler.com/index.html
Morbid • May 29th, 2009 at 5:42 pm
Banning Budget Deficits – GermanyNow there is a new role model!
Mark • May 29th, 2009 at 5:46 pm
Once again PeteCA presents a spot-on, sharp analysis!Mark
Guest • May 29th, 2009 at 5:48 pm
soon $VIX will go to 10!!!! with FED’s QE, what is there to worry? FED and Geithner are determined to blow equity, housing, commodity, and dollar quantity bubble again.
PeteCA • May 29th, 2009 at 5:48 pm
While the stock market is having fun today, the banks are not … news on 5/29/09.Remember – this is happening now. Not last year.No chance of high interest rates coming down for American consumers while this sort of stuff is going on.————————————————–Overall loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation.The report highlighted that even as the government and major banks have scrambled to deal with the impaired securities the banks own, the institutions have been plagued by an unprecedented volume of old-fashioned loans going bad.Of the entire book of loans and leases at all banks — totaling $7.7 trillion at the end of March — 7.75 percent were showing some sign of distress, the F.D.I.C. reported. That was up from 6.9 percent at the end of 2008 and from 4.1 percent a year earlier. It also exceeded the previous high of 7.26 percent set in 1990 and 1991, during the last crisis in American banking.—————————————————–PeteCA
Guest • May 29th, 2009 at 5:50 pm
Reserve Inflation and Commodity Inflation:How Exporting the US Credit Crunch Will Lead to Global Systemic BreakdownWith the crisis-induced fall in the value of labor and the accompanying crisis in capital investment, it was foreseen that the Fed’s policy of expanding bank reserves would create a blip in the most inflation-sensitive commodities – even as the economy was contracting. This has happened.Yet the perception among certain interested parties is that the downward progression of the economy has been stopped. And more fundamentally, key indicators of credit congestion such as credit spreads are substantially easing, flashing a “go” signal.However, as credit expands again in the Homeland, though, it is tightening once again in the periphery: Asia, Latin America, Eastern Europe. For the rise in gold, oil, industrial metals, and foodstuffs will in short order mean that American inflation – confined so far to the financial market in the home country – is going to hit the rest of the world with rising costs in general and of credit in particular.In circular fashion the poisoned chalice will come back to the USA in the form of rising costs for current and prospective industrial activity as well as higher food and fuel costs – even as aggregate demand is slack.The cost of food largely determines the cost of labor. The cost of fuel and industrial raw materials determine the profitability of investment. Thus the stabilization of the American economy through reserve inflation is having tangible results, all bad: lower living standards, higher credit costs, and production cuts overseas; higher living costs and lower prospective returns on investment at home.Thus even as fiscal and monetary stimulus appear to make credit easier to obtain and boost a few of the more credit-sensitive indicators, the stress level on the global system is increasing. These stresses were already evident this week in the spike of interest rates and the yield curve.The “stabilization” did not fool the currency markets, and another dollar crisis is well underway. When it reaches a suitable extreme and a renewed, systemic dollar crunchproduces global panic, how will the monetary authorities respond? By creating fresh reserves?The circle is vicious, and at this point unstoppable. The time frame for the denouement can be measured in weeks now.
Guest • May 29th, 2009 at 6:26 pm
I think what you’re saying is that when the Fed creates money, the tendency is for the dollar to fall. For payment surplus countries, this lowers the value of their reserves andcontracts the money base; interest rates rise. For payment deficit countries, when the dollar falls the cost of imported items like oil rises. Their currency falls, they can’t finance their imports, and want to borrow more dollars to cover their deficit. So whilethe credit seems to have loosened in the USA it has tightened everywhere else. And even though credit may seem looser here, the expected return on new investment goes down.Therefore, for a dollar of newly created money reserves the effect on both global and domestic GDP is negative.
g Anton • May 29th, 2009 at 6:53 pm
Incredible–Liars AllBefore his retirement, an US Army General did an investigation of US war crimes in the military shadow penal system. He surreptitiously took pictures of war crimes in progress, some of which reportedly showed political prisoners being homosexually or heterosexually assaulted by US soldiers.Several British newspapers ran stories about the sexual assault episode photos. President Obama responded bitterly to these articles, and claimed that the newspapers “didn’t have their facts straight”. Of course, the President refused to refute the charges by releasing all the photos (so much for transparency in government). The newspapers went to the General, who assured them that indeed they did have their facts straight.So whom do you believe–the President, or the General?Of course the above has nothing to do with economics. Or does it? If the President adamantly lies about a difficult and important situation such as this, will he not lie or suppress information about the economy when it is convenient for him to do so? Of course he will.And what about his associates and underlings (“all the President’s men”)–can we believe what they tell us and have faith in the data that they give use? For my answer to this question, I steal a line from the demigod English poet Chaucer (may my poor reader forgive me for my prosaic and inept translation of the line into modern English). The Chaucerian line is as follows:”A sh**ty shepherd does not a clean flock keep”.
Guest • May 29th, 2009 at 7:59 pm
You mean like this award to ADSI, to assist in “Operation Iraqi Freedom, as reported by “Your Defense News.” Ain’t freedom in “opaque armor siding” lucrative…equipped with the latest in “combat locks”? How fortunes are made. Your government at work… Perhaps coming soon to your neighborhood, compliments of Mama Napolitano’s Homeland Security–the hand that rocks the cradle.“ADSI Awarded $9.9 Million Contract From U.S. Marine Corps to Add Crew Protection Kits to Terex MAC-50 Cranes”Friday, May 22, 2009HICKSVILLE, NY, May 21, 2009 (MARKETWIRE via COMTEX) — American Defense Systems, Inc. (“ADSI”) (AMEX: EAG), a leading provider of advanced transparent and opaque armor, architectural hardening and security products for Defense and Homeland Security, was awarded a three-year, $9.9 million, indefinitely delivery/indefinite quantity, sole source contract by the U.S. Marine Corps Systems Command to install Crew Protection Kits (CPKs) on Terex MAC-50 cranes, as well as supply spare parts and field service representatives (FSRs).The 50-ton all-terrain cranes will be fitted with ADSI CPKs on both the large driver cab and on the smaller side cab for the crane operator. ADSI plans to begin fulfilling an initial $4.5 million delivery order for CPKs in the current calendar quarter and complete it before the end of the year. Approximately $2.5 million of the award will fund FSRs over the term of the contract.More information about the award (#M67854-09-D-5038) can be found on the DoD DefenseLINK website: http://www.defenselink.mil/contracts/contract.aspx?contractid=4030.”This award continues our recent increase in orders from the U.S. military to provide protective technology to construction vehicles in support of our brave military service personnel in Iraq and Afghanistan,” said ADSI’s chief executive officer, Anthony J. Piscitelli. “This is one of our largest single orders to date and is part of the contract expansion we were anticipating in 2009.”"As these orders continue to come in, we believe ADSI is increasingly becoming the U.S. Military standard for CPKs,” continued Piscitelli. “The growing use and installation of our CPKs strongly positions us to secure long-term recurring revenue through ongoing support, maintenance, repair, spare parts and reconditioning opportunities over the life of these vehicles. We are naturally very proud to have this responsibility of protecting our military service personnel with our state-of-the-art CPKs, which have already saved many lives and protected our brave men and women from serious injury.”This U.S. Marines Corps contract builds upon several recent U.S. Military-related awards and orders received by ADSI over the last six months, which combined are valued at more than $54 million. This includes an order representing approximately one-third of a $10 million revenue expectation from JCB Construction Equipment for CPKs through 2010.About ADSI Crew Protection KitsADSI CPKs are custom designed and fitted to offer a maximum amount of security for the operator. They feature windows of fully transparent armor, opaque armor siding (ATC Aberdeen-tested and approved to meet all Operation Iraqi Freedom requirements), a patent-pending combat lock, tool-less emergency egress windows, fortified door hinges and an integrated crew comfort system. The CPKs are modular and…http://www.yourdefencenews.com/adsi+awarded+$9.9+million+contract+from+u.s.+marine+corps+to+add+crew+protection+kits+to+terex+mac-50+cranes_33072.html
Guest • May 29th, 2009 at 8:50 pm
It says that a suspect cannot be forced to incriminate himself or to yield evidence against himself. Perhaps Obama just wanted to keep the photos with his birth certificate.
Guest • May 29th, 2009 at 8:58 pm
Krugman: Let’s Have it Both Ways on InflationPosted by Bill Anderson at May 29, 2009 06:32 AMIn today’s column, Paul Krugman now insists that not only should we not fear inflation, but we don’t even have to worry about it at all, at least in the short term. As is his style, Krugman wraps a Big Lie around a tiny kernel of truth.First, the self-pronounced Great One claims that anyone who even says the “I-word” is engaging in scare talk. Banks might be flush with reserves, he notes, but lending is way down. (Funny how that happens when government demonizes the healthy firms and props up the sick ones.)Second, Krugman forgets that there is another inflation card to be played, and that is the Federal Reserve purchasing bonds directly from the Treasury and the Treasury spending the money from there. In fact, Krugman has endorsed the use of inflation as a way to give the economy “traction.”In his book, The Return of Depression Economics, Krugman states that most economic problems can be “solved” by governments printing more money. To Krugman, money is nothing more than a governmental creation that can — and should — be manipulated by the state whenever Great Minds like Krugman declare it.Here is someone who attacks gold as money, not simply because governments cannot manufacture new gold to give an economy “traction,” but also because things like gold (or any monetary standard) come with expectations of honesty, integrity, and holding to promises. That, according to Krugman, is silly:”I’ve just reread Eichengreen and Temin, The Gold Standard and the Great Depression, which does a great job of showing how the ‘gold mentality’ — what they call mentalite, with an accent — paralyzed policymakers. (The longer-form version, with more personal color, is Liaquat Ahamad’s Lords of Finance.)”What E&T show is that circa 1930 key decision-makers had spent so many years equating adherence to gold not just with prosperity, but with morality, decency, civilization itself, that they couldn’t even contemplate breaking with that orthodoxy — even in the face of total catastrophe.”I think we’re more flexible now. But my sense is that the mystique of finance is playing a somewhat similar role.”One cannot minimize what he is saying, for it goes to the heart of Krugman’s view of economics. In that view, people and their choices are to be manipulated and coerced whenever the government declares it. Now, Krugman seems to believe that only governments can prevent economic disaster.Others, like me, hold that governments generally are the cause of economic disaster, and that certainly holds true in the current crisis.http://www.lewrockwell.com/blog/lewrw/archives/026980.html#more
Hayes • May 29th, 2009 at 9:36 pm
Some interesting articles via DrudgeAmerican capitalism gone with a whimperhttp://english.pravda.ru/opinion/columnists/107459-0/The Incredible Shrinking Clintonshttp://thehill.com/dick-morris/the-incredible-shrinking-clintons-2009-05-26.htmlSotomayor – Ruled teen’s blog post created a created “foreseeable risk of substantial disruption”http://www.nbcconnecticut.com/news/local/Critics-unhappy-with-Sotomayors-role-in-CT-free-speech-case.html
Chignos • May 29th, 2009 at 9:47 pm
You’re either nuts or a propagandist for socialism. Did you forget how the “soviets’ went belly up? It’s not just labor that creates wealth–it’s also (and very much more so) BRAINS. The current economic and financial problems (note I have them in their correct priority) won’t be solved by labor, they require BRAINS. And society’s problem now is that anyone with the smarts to know what’s needed is now so pissed off at the bad behavior society is tolerating…….the BRAINS have just decided to let them all go to hell……and maybe for quite a long time.
Chignos • May 29th, 2009 at 9:57 pm
Oh oh, Mark, you look bad and lost this argument.
Chignos • May 29th, 2009 at 10:07 pm
The notion that piracy/robbery is just part of doing business as usual leads to a failed society/economy like Mexico-Afganistan. At the same time there needs to be enough flux in the laws adhered to by a society to allow the flow of wealth from one individual to another when one “builds a better mousetrap” or just flat outsmarts the doper-dummy. If you bail out the failures it fractures the law’s fairness. If pirates run wild it fractures the society’s fairness. The trick is to protect/revere/perpetuate a system that allows fair opportunity for all. If you lose that……you get a revolution.
Chignos • May 29th, 2009 at 10:11 pm
That sounds prescient to me.
kilgores • May 29th, 2009 at 10:16 pm
When did Dr. Krugman ever refer to himself as the ‘Great One?’ He doesn’t strike me as a bombastic academic.I happen to be in Dr. Krugman’s camp on this one, Guest, although I would suggest that governments may both take actions to prevent AND to contribute to economic disaster. Furthermore, I would point out (as I have in previous threads on this blog, and as Dr. Krugman noted in this NY Times piece) that the empirical evidence from the Japanese crisis that began in the early 1990s supports the conclusion that massive liquidity injections in the face of a deflationary threat simply do not lead to sustained or substantial inflation.Liaquat Ahamed’s “Lords of Finance” is a great read, by the way. He makes a good case for why blind adherence to the notion of a currency based on a single commodity, such as gold, is problematic.SWK
Chignos • May 29th, 2009 at 10:19 pm
Pete/Mark,Don’t you think the Fed’s end game now is to control interest rates at just below hyperinflation levels….to avoid panic? That way the dollar remains the world’s reserve currency, and when all the smoke clears (it may take 2-3 years) Bernanke looks like a genius. The real question remains: how to grow your assets…….and it ain’t in Treasuries.
Mark • May 29th, 2009 at 10:20 pm
Anyone who thinks that the GD was lessened by some magic incantations by government (or other) fails to grasp the BIG Picture. What eventually got the US out of the depression was OIL. Riches of empire have always by way of harnessing “slaves:” up until the petroleum age the “slaves” were actual people, during it it has been invisible “slaves,” which, it appears, escape the likes of Krugman (and the likes of Rockwell to a degree as well).Mark
Chignos • May 29th, 2009 at 10:23 pm
Dummy. Think again. Even the people now on welfare have cell phones. They live better than your grandparents did in the 50s. Progressive taxation isn’t moral, it’s just class warfare and petty jealousy.
kilgores • May 29th, 2009 at 10:24 pm
What do you mean, Mark? How do you figure oil got the U.S. out of the Great Depression? By what mechanism?SWK
Chignos • May 29th, 2009 at 10:30 pm
Ah, but you forgot one thing: the Federal Reserve has the exclusive right to control the medium of exchange for the world==the USD.
blind de milo • May 29th, 2009 at 10:33 pm
g,yes, just like that. it makes you wonder what kind of securitywill be required for the final construction that warrantsthis level of protection for the construction equipment itself.we are into a whole other league of “gone mad”. of course thereare those who don’t see it that way and to many it makes perfectsense.”operation iraqi freedom requirements”. i could not finda direct description of this but, safety first in a self made warzone, occupied territory, would seem respectably prudent and ahumane investment but the logic is twisted. there is anorganic or inherent contradiction afoot when construction equipmentneeds to be armored. no? it has scam, large and small, written on it;not unlike the system that makes it possible.and mama rocks the cradle.ps.i would guess the perfect weapon to defeat this armor iscontracted for production, perhaps on the west coast or oversees,and will become available to anyone at the right price..and mama ,,,…. it’s the beat. pump and dump.”operation iraqi freedom requirements”. a new universal law?
Chignos • May 29th, 2009 at 10:43 pm
Pete,A while ago I asked you what you thought would be money after all the dust settles (assuming it ever does) on the financial debacle. You responded with many gracious comments/insights. I’ve thought about it for a while since then, and agree that gold/silver/commodities are a good play…..but not the best play. The best play is to stay liquid enough to jump through a closing vortex/hole of opportunity once it presents sometime in the near future (who knows what that may be? or how to describe it otherwise?). Waiting for that opportunity…… requires patience, attention, courage, smarts, and wisdom—something like what you exhibit daily on this blog. All my best to you. Pete CA. Keep up the good words.
Chignos • May 29th, 2009 at 10:47 pm
Pete,The thinking fault lies in the fact that you can’t really increase [your] wealth by manipulating numbers/symbols on a keyboard.
Guest too blindly • May 29th, 2009 at 11:02 pm
http://www.dodig.mil/audit/reports/fy08/08-078.pdf.operation iraqi freedom.the requirements..it’s all about training (no training)and equipment(disposable, planned obsolecene).it is the economy to nowhere.the ultimate exponential, self defeating,squandering of resourcesfor no particular good reason and we call itcivilization..and good luck with that.
Mark • May 29th, 2009 at 11:04 pm
OIL = ENERGY = WORK. The 1930s marked the peak in US oil discovery and, nearly, the peak in exports.Oil was essentially FREE. Huge profit margins.http://tonto.eia.doe.gov/dnav/pet/hist/mcrexus1a.htmThose who fail to understand the importance that oil has played in the past 100 or so years is missing the biggest part of the puzzle.Mark
Mark • May 29th, 2009 at 11:09 pm
Krugman and others are so far out of touch with reality that they think that freaking paper makes things work!It’s WORK (mostly recently fossil fuels) and resources that MAKE things.Mark
Mark • May 29th, 2009 at 11:29 pm
Yeah, too bad about McCain, huh?Mark
Mark • May 29th, 2009 at 11:32 pm
BINGO! That’s my argument below regarding Krugman’s babblings!Mark
kilgores • May 29th, 2009 at 11:39 pm
If you’re suggesting that U.S. exports of a single commodity such as oil alone ended the Great Depression, that makes no sense to me. Is there even one economist who espouses such a view?SWK
Mark • May 30th, 2009 at 12:16 am
Is there even one economist who espouses such a view?LOL! The same (class of) people who fail to recognize that sustained growth is impossible?Yeah, I guess you’re right. How stupid of me to think that… I guess oil exports have had little impact on exporting countries’ economies…Mark
Guest too blindly.. • May 30th, 2009 at 12:38 am
Obama to create White House cybersecurity postFri May 29, 2009 6:37pm EDT.http://www.reuters.com/article/topNews/idUSN2943836920090529By Diane BartzWASHINGTON (Reuters) – President Barack Obama said he will name a White House-level czar to coordinate government efforts to fight an epidemic of cybercrime, which even touched his presidential campaign.”Cyberspace is real and so are the risks that come with it,” said Obama in remarks Friday at the White House in which he discussed threats to the nation’s digital infrastructure from organized crime, industrial spies and international espionage.Obama said he would name an official to coordinate cybersecurity policies across the government and organize a response to any major cyber attack.”I’m creating a new office here at the White House that will be led by the cybersecurity coordinator. Because of the critical importance of this work, I will personally select this official,” said Obama. “This official will have my full support and regular access to me.”Obama said his administration would not dictate cybersecurity standards for private companies but would strengthen public-private partnerships and invest in research to develop better ways to secure information infrastructure.He also stressed the importance of privacy. “Our pursuit of cybersecurity will not — I repeat, will not — include monitoring private sector networks or Internet traffic.”Holes in U.S. cybersecurity defenses have allowed major incidents of thefts of personal identity, money, intellectual property and corporate secrets. They also allowed a penetration of Obama’s campaign.”…….my comment ; “cyberspace is real”? o.k., why not? and so is the shadow banking system and the shadow economy.and so are my nightmares and the millions of personal delusions that drive the economies of the world..and this one…”Holes in U.S. cybersecurity defenses have allowed major incidents of thefts of personal identity, money ….”. well, yea. major incidents of theft of money? hmmm? why does that sound so familiar?it wasn’t due to a lack of cyber security though. it was legal yet fraudulent asset backed securitization withcredit default swap protection for insider trading to the the unknown tune of how many hundreds of unknowntrillions of dollars aka all the worlds currencies. ? we’ll see.but his campaign was penetrated. ouch. now that hurts.
Guest • May 30th, 2009 at 3:07 am
The claim that exporting oil helped to end the Great Depression goes against the sentiment of those who want to uphold warfare as providing an end to the Great Depression.
CLake • May 30th, 2009 at 4:11 am
Krugman’s argument that the fed’s actions aren’t going to be inflationary in the mid terms rests on the following point :
The Bank of Japan, faced with economic difficulties not too different from those we face today, purchased debt on a huge scale between 1997 and 2003. What happened to consumer prices? They fell.
Would it be ok to ask Mr Krugman the following questions :1. Japan had a huge trade surplus during these years, is that the case for the USA today ? Nope2. Japanese were large savers during that period. Government debt was high, but private debt was low in Japan. Why does My Krugman not see that it’s the TOTAL debt and especially the huge amount of private debt in the USA that is the problem and causing this crisis.3. Japan was a rather lone case during that period, how was the rest of the world economy doing ? The situation today is entirely different, all major economies are fiscally stimulating at the same time , does he realize this ?Krugman seems to be completely out of his mind, a clear case of comparing apples and oranges.
Morbid • May 30th, 2009 at 6:53 am
As I noted on a previous thread, Krugman is a left of center elitist and public mouth piece for Obi. Him telling CA voters (I live in CA) that they need to rescind Prop 13 and get with the liberal tax and spend agenda really said it all for me about this guy. His ego is as big as the failure going on in CA and with that ego-centric view of the world he is already laying down a paper trail that will document his own stupidity. I will hang my hat on Marc Faber any day of the week compared to this NYT liberal criminal complicit media spin machine hoping to advance the great liberal wet dream of Bamelot.
DueLeiNoMouldHeight • May 30th, 2009 at 7:14 am
【僑報訊】 據周四公布的一份報告顯示，美國第一季度抵押貸款違約率和住房抵押品贖回權喪失率均創下了有史以來的最高水平，原因是失業人數的增多導致更多美國人無力支付其住房貸款。向信譽度最高的借款人所提供的優質固息抵押貸款在新喪失抵押品贖回權的抵押貸款中所占比例最高，接近三成。 據美國抵押銀行家協會(Mortgage Bankers Association，以下簡稱“MBA”)28日公布報告稱，第一季度美國經季節調整後的抵押貸款違約率上升至9.12%，已喪失抵押品贖回權的貸款比例則上升至1.37%，均創下自MBA從1972年開始追蹤這兩項數據以來的最高水平。 MBA的首席經濟學家傑‧布林克曼(Jay Brinkmann)在接受採訪時稱：“人們無法在沒有薪水可拿的情況下支付其抵押貸款。經濟衰退所延續的時間越長，就會有越多的人耗盡儲蓄，從而導致抵押貸款違約率和抵押品贖回權喪失率繼續上升。” MBA稱，向信譽度最高的借款人所提供的優質固息抵押貸款在新喪失抵押品贖回權的抵押貸款中所占比例最高，為29%，表明失業人數的增加正在對住房所有人造成損害。 優質可調利率抵押貸款所占比例為24%，表明抵押貸款市場危機已經從次級貸款轉移到了優質貸款；次級可調利率抵押貸款所占比例為27%，低于去年同期的39%。 報告顯示，受失業人數增加的影響，目前每八個美國人中就有一人滯付其抵押貸款，或已經進入喪失抵押品贖回權的某個階段。 與此同時，美國抵押貸款融資巨頭房地美發表聲明稱，30年期固息住房抵押貸款的平均利率從上一周的4.82%上升至4.91%，且本周早些時候抵押貸款債券收益率的上升表明這一利率可能繼續上升，原因是美國政府為遏止住房市場滑坡形勢所採取的措施已經失去了動力。
Guest • May 30th, 2009 at 7:15 am
金海格』乃【家路酒店】之附屬按摩場，位於「開城大道」，面對「瀟洒理髮」，於 5月22日開業，深圳式管理，一間正宗水療按摩場，也是『淡水』唯一的星級骨場。按摩分中式（RMB68）、泰式（RMB88）及日式（RMB128），全部90分鐘，送背面推油。但日式技師正陪訓中，尚未提供服務。場新整潔、無須簽小費、Locker仔熱誠款待、技師有水準（姿色及技術），實為舒筋活骼之好去處。以上看似廣告，但因親身試過，故專誠介紹給各師兄。《 要知當地的改革；不如先去金海格！》
Guest • May 30th, 2009 at 7:18 am
yes.大件事–深圳電視台都市頻道第一現場報導桑拿拉人!!!—有片睇小弟長居深圳,頭先睇緊深圳電視台第一現場,突然有一個好驚嚇震撼畫面,深圳有一間桑拿昨夜被查封(講得太快聽唔到邊間),成個KO踼門拉人過程映晒出黎,重打晒格仔啲女無著衫,成袋玩具放晒係牀,男的踎晒係地,拉左兩大車人(用巴士拉走),各位師兄小心,等陣11:00會重播,各位師兄可上網睇下,我再睇清楚邊間桑拿high野再同大家播導!!去片–http://video.sznews.com/content/2009-05/27/content_3800516.htm
Guest • May 30th, 2009 at 7:22 am
no!四個人一齊返大陸玩早兩曰同兩個同事一男(亞平)一女(亞華)一齊返大陸玩後來加多一個朋友亞儀參加(一共四個人)公司希望員工增值所以出錢安排我同亞平亞華參加課程亞儀係同學亞儀原本係亞華小組活動拍擋後來當然因利成便而識左亞儀亞儀樣貌中上身型偏瘦不過身材好好亦係吸引我既原因個日早上我地去東莞係東莞經過一個溜冰場亞華提議入去玩原來亞儀吾識玩我即時打蛇隨棍上主動話教佢教亞儀溜冰小不免有些小身體接觸食左佢兩次波餅之後我下體出現生理反應硬起因為有些小身體接觸所以亞儀亦感覺到令到大家都有小小尷尬下午我地去買完野返酒店食飯沖涼再去唱k唱k個時成晚同亞儀玩到攬頭攬勁加上飲左酒令我下體又出現生理反應中途亞平同亞華話去洗手間得返我同亞儀係k房個時我忍吾住從後攬住亞儀起勢亞儀對波左幾十鈔亞儀特然轉身面向我主動伸手入我條波褲摸我下體我起勢向亞儀上下其手正當我想伸手入亞儀底褲入面亞儀特然拉住我隻手話(過左底線啦)我只好放棄亞平同亞華返黎之後我同亞儀入左男格入面我繼續向亞儀上下其手亞儀就幫我打飛機完事個晚返到酒店我地再無下文第二日一早返香港
Guest • May 30th, 2009 at 7:29 am
ஆஸ்திரேலியாவில் இந்திய மாணவர்களுக்கு எதிரான இனவெறித் தாக்குதலுக்கு எதிர்ப்பு தெரிவிக்கும் வகையில், அந்த நாட்டு பல்கலைக்கழகம் தனக்கு வழங்க முன்வந்த கவுரவ டாக்டர் பட்டத்தை நிராகரித்தார் பாலிவுட் நடிகர் அமிதாப் பச்சன்.பிரிஸ்பேனில் உள்ள குயின்ஸ்லேண்ட் தொழில்நுட்பப் பல்கலைக்கழகம் சார்பில் அமிதாப்பின் சினிமா உலக பங்களிப்பை கவுரவிக்கும் வகையில் டாக்டர் பட்டம் அளிக்க விருப்பம் தெரிவித்திருந்தது.இதற்கு ஏற்கனவே அமிதாப் இசைவு தெரிவித்திருந்தார்.வரும் ஜூலை மாதம் இதற்கான விழா நடைபெறுவதாக இருந்தது. அதன் ஒருபகுதியாக அமிதாப் நடித்த படங்களும் பிரிஸ்பேனில் திரையிடப்பட இருந்தது.இந்நிலையில் பிரிஸ்பேன் பல்கலைக்கழகம் அளிக்கும் டாக்டர் பட்டத்தை நிராகரித்து விட்டதாக தமது சொந்த வலைத்தளத்தில் அமிதாப் குறிப்பிட்டுள்ளார்.இந்திய மாணவர்களுக்கு எதிரான தாக்குதல்களை தொலைக்காட்சிகள் மூலம் அறிந்து தாம் மிகுந்த அதிர்ச்சி அடைந்ததாகக் குறிப்பிட்டுள்ளார்.அதற்காக தாம் அந்த பல்கலைக்கழகத்தை அவமதிப்பதாக அர்த்தமாகாது; எனது சொந்த நாட்டு குடிமக்கள் மனிதாபிமானமற்ற தாக்குதலுக்கு ஆளாக நேரிடும் தற்போதைய சூழ்நிலையில் தமது உள்மனது பல்கலைக்கழகத்தின் கவுரவத்தை ஏற்றுக்கொள்ளாது என்றும் அமிதாப் கூறியுள்ளார்.
Guest • May 30th, 2009 at 7:33 am
남양주 지역의 경우 쾌적한 주거환경과 함께 서울지역과 인접해있어 접근성 좋음에도 불구하고 대중교통 인프라 미약으로 인해 주거 선호도 높지 않았던 지역입니다. 그러나 서울지역과 접근성을 개선시켜 주는 경춘선 등의 교통 인프라 구축과 택지지구 개발로 인해 빠른 시세 상승력을 보였습니다.남양주 오남리의 경우 대규모 택지지구인 진접지구와 인접해 있는 지역으로 진접지구 개발에 따른 후광효과블 보실 수 있습니다. 진접지구의 경우 47번 국도 퇴계원 ~ 진접 대체 우회도로가 2011년에 개통될 예정이며 내각 ~ 오남간 신설도로도 완공될 예정으로 교통량 분산에 기여할 것으로 판단됩니다.또한 아직 확정된 사항은 아니지만 지하철 4호선 연장에 대한 긍정적인 타당성 검토가 이루어지고 있는 상황으로 개통이 시행된다면 대중 교통 인프라 구축은 물론 서울 접근성을 획기적으로 개선시켜 주기 때문에 이에 따른 발전 가능성 높습니다.오남리 진주 아파트의 경우 52㎡ ~ 82㎡ 소형 면적 구성된 2,281세대의 초대형 단지입니다. 1990년 7월에 지어진 노후단지로서 대지지분이 넓고 용적률이 낮은 만큼 동간 거리가 넒어 소형 면적임에도 불구하고 주거환경이 매우 쾌적할 것으로 판단됩니다.그러나 경기도의 재건축 추진연한은 20 + (준공연도 -1983) x 2로서 진주 아파트의 재건축 연한은 2024년에 채워지게 되는 상황으로 재건축에 따른 메리트만으로 접근하시는 것은 무리가 있습니다.진접지구 개발에 따른 수혜효과를 받을 수는 있지만 이에 따른 상승력은 이미 시세에 일정부분 반영된 상태이며 주거 인프라가 아직까지 미약한 편이고 경춘선과는 거리가 있어 4호선 연장도 불확실한 상태로 대중교통도 다소 미약한 만큼 투자적 목적으로만 접근하시기 보다는 실거주 차원으로 접근하식 바랍니다.부동산써브 투자자문팀 (www.serve.co.kr)
Guest • May 30th, 2009 at 7:35 am
「長年恨みがあった」３人刺殺容疑者…大家と店子の間に何が5月30日15時12分配信 読売新聞 「大家に恨みがあった」－－。川崎市幸区で３０日、アパートの大家と弟夫妻の３人が刺殺された事件。逮捕された入居者の津田寿美年容疑者（５７）は大家への積年の恨みを供述し、大家らへの不満を周囲に漏らしていたという。 神奈川県では昨年、猫の餌やりを注意された入居者に大家が殺害される事件も起きた。 大家と入居者の間に何があったのか、県警は動機を詳しく調べる。 事件があったアパート「幸栄荘」は、殺害された大家の柴田昭仁さん（７３）の自宅がある敷地に立っており、いずれも殺害された弟の嘉晃さん（７１）が１０２号室、嘉晃さんの妻敏子さん（６８）が１０４号室に住んでいた。津田容疑者は２００４年５月から嘉晃さんの隣室の１０３号室に入っていた。嘉晃さんが以前アルバイトをしていた近所の青果店経営の男性（６３）は「嘉晃さん夫妻は逮捕された男と隣人だったが、男がよく店で『隣にいつも文句を言っている』と話すのを聞いた。今朝は７時頃、サイレンの音で目が覚めて外に出たら、嘉晃さんが担架で運ばれていたのでびっくりした」と話した。 津田容疑者は昨晩、近くのスナックでも大家への不満を口にしていたという。近所の人は、「津田容疑者が嘉晃さん夫妻の洗濯機の音への不満を口にするのを聞いた」と話した。 幸署幹部によると、津田容疑者は逮捕時、酒に酔っていたが、「俺が刺した。大家に長年恨みがあった」と供述している。殺害された敏子さんや津田容疑者が来ていた居酒屋経営者の男性（５２）は、「敏子さんは明るくて気さくな人だった」と言葉を詰まらせた。 川崎市川崎区のアパートでは昨年６月、野良猫への餌やりなどを注意されていた住人の無職男（７０）が大家の男性（当時７６歳）をナイフで刺して殺害。今月２５日、横浜地裁川崎支部は男に懲役２２年の実刑判決を言い渡した。伊勢原市でも昨年７月、借家の老朽化を理由に退去を迫られた男（７３）が、大家の男性（当時６１歳）を刺殺する事件もあり、同地裁小田原支部で公判中。 最終更新:5月30日15時12分
SantaClaus • May 30th, 2009 at 7:38 am
A question to our American readers.Sometimes one can read about a person being called of being “leftist” and a “liberal” at the same time.In my experience (NW EU), however, the “left of center” people were not usually very liberal but conservative (i.e. they wanted to retain status quo) while U.S.A. was (in NW EU) often viewed as “anti-conservative” (meaning wanting to “lead” by coming out with some important changes ahead of others) while EU countries were sticking to their “old ways”.So I am just wondering if a person can be a leftist and a liberal at the same time, or are these terms sometimes bundled together because in the American mindset they are the worst things a person can be accused of?Also, and perhaps more importantly, why are those people who do nothing about the huge military spending in USA, never called “tax and spend liberals”? After all a person who would like to provide health care for all Americans would likely be accused of being that.Does this difference stem from that “guaranteeing” health care for all (in EU fashion, lets say) would require a large scale “system”, a so-called “apparatus”, and that this system would be viewed as being a near-certain failure because of the scale of its “commitment” (health care for all)? If that is the case then a person or someone else who wants to keep spending hundreds of billions of dollars to keep America prepared to fight which-ever war(s) is funneling cash into a commitment with a far larger scope.
Armchair • May 30th, 2009 at 12:38 pm
The language of political dialog in the U.S. is a disaster. It makes it very difficult to have a conversation.For example, many commentators on this site think ‘government’ is always rotten, no matter what. I suppose that makes them anarchists. However, I doubt any of those commentators would admit to being an anarchist. Most of them probably want certain aspects of government, but not others. For example, they want to be able to call the police if there is a burglar in their house and their gun has jammed. However, most of these commentators prefer to wallow in a dishonest cognitively dissonant conversation.What you have is essentially a contorted view of what government is. These days government is Social Security, and teachers, and public housing, and public health, and these type of things. However, government is not corporations (even ones existing on money printed by the FED), not the military, and not corporation or banks.The problem is that government is a neutral concept, but it is not used that way. If the banks control legislation, and can meet with the executive branch anytime they want, and get the FED to print money anytime they want, then they are functionally the government. If trillions of dollars of tax money goes to prop up banks and military, and it dwarfs social spending, then the government is a machine of war and oligarchic finance.The confusion and debasement of language keeps us from having an honest discussion.
PeteCA • May 30th, 2009 at 1:35 pm
I heard some comment from Obama on TV about suppressing certain photographs (or info) – but I didn’t know what he was specifically talking about. For some reason this item has not had high visibility in media coverage before the US public.I can tell you, though, that Americans are both frustrated and disgusted by stories or abuse, neglect and torture by security forces acting “on our behalf”. The former Republicans lost all credibility over these kinds of behaviors, and complicity obviously went all the way to the top of the Government (despite denials).Here’s the deal (IMHO). Pres Obama has taken a big forward step by ruling out torture. I’m pretty sure he will also oppose other forms of criminal abuse and neglect for detainees. If he decides to halt the release of certain photo’s, then he needs to also STEP UP to the plate and strictly enforce a ban on abuse of prisoners. He can come forth and make this policy crystal clear. It needs to be CLEAR and UNEQUIVOCAL. It’s very essential that his administration take this kind of step, or they will wind up in the same moral quagmire as the Bush administration.PeteCA
PeteCA • May 30th, 2009 at 1:55 pm
Earlier Comment:”Pete/Mark,Don’t you think the Fed’s end game now is to control interest rates at just below hyperinflation levels….to avoid panic? That way the dollar remains the world’s reserve currency, and when all the smoke clears (it may take 2-3 years) Bernanke looks like a genius. The real question remains: how to grow your assets…….and it ain’t in Treasuries.”Just my opinions …There is a very BIG problem looming in the US credit markets. It is real and imminent. The US Gov’t now faces the step of trying to sell enormous amounts of debt to global investors. Other countries are also trying to do the same (sell their bonds). It seems highly unlikely that the world credit markets can generate anywhere near the volume of demand to meet this situation. This is SERIOUS. Is the Fed trying to “tiptoe” through this situation. I guess you could say yes, but the prime dealers for the Gov’t probably don’t feel like the relationship stops with just a sweet kiss. Remember that the Gov’t has got these guys by the cahones, because they have all accepted huge bailouts just to survive. Now the brokers face an impossible situation of trying to sell a mountain of US bonds and treasuries to a half-hearted audience. It’s a NO-GO.However … the credit markets are IT. They are the tail that wags the dog. Whatever the credit markets do, the stock markets have to respond to. If there’s not enough money to buy up this debt in America, then the stock market is going to have to cough up some of the difference. Meaning that optimistic stock investors could see their gains go down in flames. The market plunges, people pile back into bonds, and presto (new customers).People are confusing “high inflation” and “hyperinflation”. Neither is good, but the latter is a disaster. We could get the latter, as Brian has explained on this forum, if the world dumps US assets in droves. If they just say “to heck with it, we are dumping all US assets” then that’s where we wind up. The risk is real. It’s not what the Fed wants, but the credit markets really could choke here. Or alternatively, Ben Bernanke pulls out all the stops and dumps a boatload of freshly printed dollars into his monetization bucket. And in that case the market for $USD will sense it, and you will see the dollar fall through the floor.Watch and see how it goes.But this is all relatively imminent.It’s crunch time for the credit markets in 2009.It’s like the python that tried to swallow an elephant.PeteCA
Anonymous • May 30th, 2009 at 1:55 pm
This is a link to the speech that surrounds the controversy of President Obama’s selection for the Supreme Court. The following is the controversial section (page 5)
Whether born from experience or inherent physiological or cultural differences, a possibility I abhor less or discount less than my colleague Judge Cedarbaum, our gender and national origins may and will make a difference in our judging. Justice O’Connor has often been cited as saying that a wise old man and wise old woman will reach the same conclusion in deciding cases. I am not so sure Justice O’Connor is the author of that line since Professor Resnik attributes that line to Supreme Court Justice Coyle. I am also not so sure that I agree with the statement. First, as Professor Martha Minnow has noted, there can never be a universal definition of wise. Second, I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn’t lived that life.
link Didn’t Larry Summers make some controversial statements on gender and ethnicity that ultimately contributed to his resignation as president of Harvard?
link to full text of Summer’s 2005 speech
Anonymous • May 30th, 2009 at 2:02 pm
and this is the text of Summer’s speech that caused the controversy:
It is after all not the case that the role of women in science is the only example of a group that is significantly under represented in an important activity and whose under representation contributes to a shortage of role models for others who are considering being in that group…. There are three broad hypotheses about the sources of the very substantial disparities that this conference’s papers document and have been documented before with respect to the presence of women in high-end scientific professions. … the first is what I call the high-powered job hypothesis. The second is what I would call different availability of aptitude at the high end, and the third is what I would call different socialization and patterns of discrimination in a search. And in my own view, their importance probably ranks in exactly the order that I just described….it does appear that on many, many different human attributes-height, weight, propensity for criminality, overall IQ, mathematical ability, scientific ability — there is relatively clear evidence that whatever the difference in means — which can be debated — there is a difference in the standard deviation, and variability of a male and a female population. And that is true with respect to attributes that are and are not plausibly, culturally determined.
Farnorth5 • May 30th, 2009 at 2:33 pm
Well said Armchair.Not only is there no honest discussion,but there is no honest research.You mentioned Health Care,with any suggestion of “Public Health”,requiring a firestorm of protest.The truth though of many other countries “system”,is that it is not necessarily a Federal Govt Monopoly.Notwithstanding all the comments,when you actually examine the Canadian system it is not a federal system.From the beginning in 1947,each Canadian State(Province )entered into a Private/Public Contract with the State Medical Association whereby the Doctors remained Private Sector and provided service to the public ,based on a State Health care card which has the same negotiated rates as the private Health Care companies.The “Catch “is the hospitals are state owned but the Doctors have the legal right to use same for their patients.Most of the other hospital staff are private sector contractors (Food prep/Cleaning/Security etc.So a true mixture of Private /Public.I would not recomend same as there are at least 12 other countries that have a better more efficient combination.As to costs they average about $520 per month in each Canadian State.and are indirectly collected through Gas/Diesel taxes rather than off a paycheck..In any event I dont know how you can come to functional Policy changes when the base information is incorrect to start with…..
Farnorth5 • May 30th, 2009 at 2:40 pm
Well said Pete.When the next Country is only one quarter the economic size,it truly can be a Grade 6 Math question.How many Bonds can that much smaller Country purchase in the long run,before it,s own finances are totally distorted ????
Guest • May 30th, 2009 at 2:52 pm
EXCELLENT ! NOW OBAMA NEEDS TO PICK 3 MORE JUST LIKE HER
kilgores • May 30th, 2009 at 2:53 pm
I can see you have some very strong opinions, Morbid.SWK
kilgores • May 30th, 2009 at 2:56 pm
Thank you for that post, Armchair. I agree with Farnorth5: well said.SWK
blind de milo • May 30th, 2009 at 3:14 pm
a,agreed. the terms are loaded and don’t mean anything in particular,double speak. after all the left and right are two wings of the samebird and it takes two to fly. the problem is the bird is more avulture that feeds on the many for the very few.but why are we talking of birds and flying anyway? themasters, men, of finance are orchestrating the financialenslavement of the majority of the population. electronicmeans of capturing the value of the labor of mankind, at adistance.government is just formal social organization, highlycorruptible and corrupted. i think this is why so manypeople speak cynically about it. can we live withoutsocial organization? i would say no. does it needto be so corrupted to survive or function? no.can we ignore it when it becomes blatantly biasedagainst the peoples interest in favor ofan elites criminal greed? you tell me?it seems the financial system is attempting/has captured thementality and identified economically significant resourcesof mankind. where does this leave humanity. born intoslavery, by design of the “leaders”. not by natural law.by the perverted laws of rather arbitrary and classbased finance. i don’t speak from the left or right, whateverthat means. i speak from my observation of the implicationsof participating in the market place of goods, services andcredit-debt, observations concerning resource exploitationand the effect on populations and ecosystems, environmentsand the effects these facts have on the capacity of peopleto remain/become human or sentient. it seems, today, life couldbe defined as an infinite universe of wasted opportunityand resources and language may not be enough to fix it, we needcorrective action by great numbers of enlightened souls.imo.peas.
Morbid • May 30th, 2009 at 3:24 pm
Correction – these are not opinions – they are my convictions. I refuse to be a part of a great machine telling me how to live, how I should spend my money. There is a certain amount of social dues one has to pay in any society – but not to the degree these folks like. As I said before on another thread – the danger is that one can become over civilized and like this one-sided – losing touch with the dark side of the force. This is typical of a savior complex that seems to run rampant amongst liberals in their social agenda and amongst conservatives in their defending freedom agendas.Obi is in for a real surprise – given that his choice of muse is Lincoln – for suffering will eventually be his lot just like it was for Abe. It is an omen.
Morbid • May 30th, 2009 at 3:34 pm
I like your formulation – but how to become more enlightened? Is there a source of absolute knowledge one can tap into?
Guest • May 30th, 2009 at 4:16 pm
Translation of American political terms:right-wing anarchists call themselves libertarians.traditional anarchists bring to mind Wobblies, Emma Goldman, Muury Bookchin etc.govenrment may call terrorists anarchistsTo me anarchist means: voluntary cooperation for mutual aid, like Native Americans in my part of Southern California used to practiceBut anarchism only works in small communities, unfortunatley. For large societes the Chinese figured out long ago the most equitabla and workable social organization (though very annoying) is bureaucracy
Guest • May 30th, 2009 at 4:23 pm
Chinese, Japanese, Korean, Tamil (?). Can anyone translate these posts into English?
Guest • May 30th, 2009 at 4:30 pm
anarchist also = libraries (as originally started), food co-ops, Sunkist etc.
Guest • May 30th, 2009 at 4:36 pm
They aren’t certainly the worst things one can be accused of, but socialism doesn’t work as capital is misallocated into unproductive resources. This sparks a negative cycle where the govt tends to make use of those unproductive resources by taxing foreign competitors, subsidizing local commodities, and the like. Unfortunately, the recent bail-outs and govt packages to wall street are a reflection of the communitarian dream that we will solve each and every problem as a community, the govt deciding what is best for whom and how much. It is even more obvious in the case of GM, Chrysler because the president is now going to decide what cars they will produce, how much, and whether they will ever have the ability to fail or not.This is why the key was to avoid the very first bail-out as it set the precedent for all the exciting bail-outs and schemes that the govt had to offer thereafter. The debt/GDP ratio and the like are secondary problems, the major problem is that when capital is distributed into unproductive items, the revenue (GDP) and its growth are bound to be affected for decades. Recession is a very natural phenomenon which takes out capital from unproductive resources and puts it into productive resources (that is capital would have eventually transferred from unsound banks to sound banks which made prudent decisions). Bussinesses which are failing end up failing, and the available (monetary and human) capital is reorganized into productive resources. The govt has tried to confuse the hell out of people by throwing around capital and concealing which banks have failed to not allow this reorganization of capital to take place. Lets see what happens, but the after effects in increased socialism, poor allocation of capital and stunted growth, and the like will be felt for decades. By printing money and providing it to everyone, no-one actually got richer. The govt just confused the hell out of everyone, at the expense of everyone.
blind de milo • May 30th, 2009 at 5:40 pm
m,yes, you already know! it’s your own rational mind and yourown heart and your own eyes and ears. i am of the persuasionthat we are created and grow with time to be enlightened byexperience and interaction. we just need to shed the b.s.and the blatant lies and attitudes that some use to manipulateour thinking and behavior. they have their motives. we haveour freedom. natural law. here is an interesting quote fromone of our friends…..” Creation is a constant and all creation is effected through complicity, that is where complicity is a vital energetic impulsed interaction of two or more complex systems in a feedback arrangement which leads to a behavior that is not present in either system on its own.”.http://verbewarp.blogspot.com/2005/09/thrice-white-goddess-mitosis.html.only your mind, indeed your whole self, our mind, can see the meaning of the statement here, the implications.one thing we neglect to tell children is that the we, the adults, look tothem for inspiration and the truth.”absolute knowledge”, sounds like it might be a trick question? but it makes mewonder about time….
Guest • May 30th, 2009 at 6:14 pm
I think they are trying to make the point that East Asia will dominate the west in the near future. The idea being, “Get used to it buddy!”
Guest • May 30th, 2009 at 6:23 pm
Economist Paul Krugman in his recent book, “The Return of DEPRESSION ECONOMICS and the Crisis of 2008” says: “Depression economics…is the study of situations where there is a free lunch, if we can only figure out how to get our hands on it…”But the late Henry Hazlitt’s analysis of the Great Depression refutes Krugman and his Keynesian camp in Vin Suprynowicz’s review, “And They Call It ‘Change.’” Hazlitt, of course, was not some obscure gadfly. Says Suprynowicz, “He was arguably the nation’s best-known and best-respected financial writer and commentator, regularly holding forth in the mainstream – even left-of-center – New York Times and (from 1946 to 1966) every week in Newsweek.’Writes Suprynowicz:[W]riting in the Christian Science Monitor, Ludwig von Mises himself said of Henry Hazlitt’s “The Failure of the “New Economics,” 1959, reprinted 1973, “Hazlitt has entirely demolished the Keynesian misconceptions…”The book does precisely what they say it does.In brief, Keynesianism – as set forth by John Maynard Keynes 73 years ago in his “General Theory of Employment, Interest and Money” – holds that the twin answers to unemployment and economic downturns are massive government deficit spending and “cheap money” – the artificial driving down of interest rates to “free up more credit.”This is relevant because this precisely describes the massive and inherently inflationary market interventions that have been brewed up in Washington since the middle of last year, sponsored as enthusiastically by Republicrats as Demopublicans – despite the fact that Mr. Hazlitt, way back in 1959, demonstrated not only that these Keynesian remedies did not work, but that they often had precisely the OPPOSITE effect of that intended!To “remedy” high unemployment, business failures and other symptoms of economic maladjustment, Keynes prescribed massive government deficit spending designed to keep wages and prices high, and the propping up of enterprises that would otherwise collapse in a heap of dust.It’s never worked…[W]e cite here just the most succinct of Mr. Hazlitt’s conclusions:“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? Here are the deficit in the Federal budget, the numbers of unemployed, and the percentage of unemployed to the total labor force, year by year in that decade. All the figures are from official sources:” (Chart follows.) …“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… The question immediately before us is: Did low interest rates prevent mass unemployment? …” (Another chart, measuring the commercial paper rate against the unemployment rate for the years 1920 through 1940, follows.)“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!(Suprynowicz is assistant editorial page editor of the daily Las Vegas Review-Journal and author of The Black Arrow. His article appeared on LewRockwell.com.)http://www.lewrockwell.com/suprynowicz/suprynowicz120.html
Pecos Banker • May 30th, 2009 at 6:29 pm
Very interesting post, PeteCA. One would think both scenarios you outline could occur simultaneously. Foreigners become reluctant to buy our debt and start doing non-dollar-based transactions with their trading partners like the Chinese have recently done with Brazil. However, at the same time they don’t want the dollar to collapse, so they still buy some of our debt, but not enough, so the stock market collapses as in your second scenario. So it could be a little bit of both, I would think, and maybe we’re not quite there yet in terms of crunch time.
g Anton • May 30th, 2009 at 6:32 pm
I didn’t want to get into this, but what we are talking about here is a complete disregard of and lack of respect for law and order–of international law, US law, and the law of many other countries–a piecemeal Holocaust. People have died under torture, probably some absolutely innocent, and most if not all of the others presumably innocent in that they were never tried and convicted in a legal court. Nobody has been charged with murder, kidnapping, sexual assault, illegal detention, etc.; no formal investigations have been made; and all information regarding the above has been suppressed.President Obama took an oath to uphold the law, but he has not done do, and does not intend to do so. He doesn’t enforce the law, he’s just an expert at cover-ups. I would characterize his behavior as making him an accessory after the fact to all these crimes.
Guest also • May 30th, 2009 at 6:34 pm
g,i like this one best. very pretty. is it a language and ifso from which part of the world and how is it referred toin english? thanks in advance.ps. how are your people doing?
kilgores • May 30th, 2009 at 6:46 pm
Morbid, you obviously consider yourself to be an independent thinker. Could you describe just exactly what sort of government and economy would you consider most acceptable?Also, by “Obi” I assume you mean Obama. Why do you use that shorthand? Given what I take to be some sort of “Star Wars” symbology you’re employing, are you likening Obama to Obi-Wan Kenobi? If so, why?SWK
kilgores • May 30th, 2009 at 7:02 pm
The only folks who seem to take seriously the economic views of Henry Hazlitt — from what I have seen, most of those who bother to talk about him hold him up on a pedestal, describing him in nearly worshipful terms — are libertarians. Mr. Hazlitt was first and foremost a libertarian. He was never an economist.One brief but interesting critique of Hazlitt’s book “demonstrating” the error of Keynesian thought can be found here:http://robertvienneau.blogspot.com/2006/07/can-one-respect-henry-hazlitt.htmlKrugman is a Nobel Laureate in Economics because he is a well-respected, knowledgeable, trained economist, not a libertarian pretending to understand more than he knows.SWK
Mark • May 30th, 2009 at 8:05 pm
Brains without resources means squat to “wealth.”In the end all that we see and all that we’ve done will vanish. Wealth is an illusion, fleeting.Vladimir is right to the degree that large imbalances require large corrections. The status-quo won’t hold. How it is to change doesn’t take much of an imagination. And no, I’m not an apologist for socialism (or any other “ism” except, perhaps, anarchism).Mark
Guest • May 30th, 2009 at 8:20 pm
Jesper Koll, president and CEO of Tantallon Research, in a panel discussion on “Stocks Bear Market Rally or Real Bull Market Rebound?” by William R Thomson, posted on “The Market Oracle,” tells how some get their “free lunch.” Joe Sixpack has to pay.Here are excerpts from Koll’s comments below: “It will be a golden age for entrepreneurs, but the overall economy will suffer because the public sector will have to start the payback for the massive intervention,” and “Clearspeak – until now, it was the banks’ balance sheets that had to get cleaned up. From now, it is the consumer balance sheet that needs to show real improvement. Only when ‘Joe Sixpack’ has paid back debt and brought liabilities back in line with assets and future income stream, will we see growth in the stock of mortgage credit and consumer credit.”Note: The government had to tax Joe’s income to pay for the bankers’ free lunch and the gala entrepreneurs’ Golden Age; now ol’ Joe has to bend his dirty little nose a little closer to the grindstone if he wants lunch or a place to lay his tired old head.Anthony: On which side of the divide (bullish views and a resumption of sustainable growth in the global economy) do you stand, Jesper?Jesper Koll: The global economy started a cyclical recovery around March-April 2009. Three factors are at work. First, the cumulative effects of the unprecedented mobilisation of public resources is starting to bite and is now sufficient to counter the negative pull of private demand. Second, the drop in global energy and commodity prices brings a very welcome boost to the terms of trade for industrial countries. And finally, corporate managers are seeing positive results of their very dramatic cost-cutting and restructuring actions taken since last fall – inventories are back under control and breakeven points have been cut. The last point is key because this is why business confidence is beginning to improve. Last autumn, corporate managers did not know what hit them, the shock was unprecedented. Now, they are back in control.Excess debt, excess capacity and excess jobs have been cut. The question now is whether anybody in the private sector will step-up to actually raise investment, build new factories, new call-centres, new supermarkets. Bold entrepreneurs will be much better off buying distressed assets, distressed companies on the cheap, rather than building new facilities from scratch. I expect a boom in mergers and acquisitions, massive industry consolidation, be it steel, shipbuilding, refrigerators or flat panel screens. In other words, the private sector will get ‘leaner and meaner’, rather than adding new capacity. It will be a golden age for entrepreneurs, but the overall economy will suffer because the public sector will have to start the payback for the massive intervention. Everywhere, from China to America, taxes will go up, interest rates will go down.Anthony: How soon is recovery likely to translate into improved corporate earnings and thus higher stock prices – or has the market rally fully discounted improved prospects?Jesper: Bank credit growth is accelerating smartly and the balance sheet constraints are largely an issue of the past. Whether borrowers are credit worthy is really the only constraint we have now. Now, bankers are back to being traditional bankers and, whether you like it or not, a significant part of US households simply do not qualify for a long-term mortgage or loan. Clearspeak – until now, it was the banks’ balance sheets that had to get cleaned up. From now, it is the consumer balance sheet that needs to show real improvement.Only when ‘Joe Sixpack’ has paid back debt and brought liabilities back in line with assets and future income stream, will we see growth in the stock of mortgage credit and consumer credit. Probably, this balance sheet clean-up will take at least another 12-18 months. In the meantime, a big opportunity for banks will be the coming wave of privatisation – the massive purchases of credit by governments and central banks will start to be sold back to private investors. In my view, the valuations of these coming deals will be key to future financial performance.Moderator: Anthony Rowley, BT’s Tokyo correspondent. Other Panelists:Eisuke Sakakibara, professor at Waseda University and formerly Japan’s vice-finance minister for international affairs; Mark Mobius, executive chairman, Templeton Asset Management; and William Thomson, chairman, Private Capital Ltd, senior adviser to Axiom Funds and Director, Finavestment Ltd.[And I say, if Joe goes down, so do the bankers. And nobody gets lunch.]The panel discussion made Market Oracle’s “Best of the Week,” although it didn’t make the “Most Popular” list. No. 1 in that category was Mike Whitney’s “Financial Markets and Economics Crash, the Next Leg Down Will be Worse.” Second was: “Bilderberg Plan for Remaking the Global Political Economy” by Andrew G. Marshall.http://www.marketoracle.co.uk/Article10970.html
Mark • May 30th, 2009 at 9:01 pm
Chignos, I think that I’m quite handsome, thank you 
But just because you wish that I would lose this argument (and any others, whatever your problem is with this I do not know) doesn’t mean that I did.Let’s tear into YOUR position, how about it? I’d be glad to go toe to toe with you. Too bad we couldn’t wager.Mark
Mark • May 30th, 2009 at 9:03 pm
Apparently you missed that our system is inherently NOT fair. It’s a stacked deck.Yes, a revolution is coming; however, it’s not one that you (or most people) recognize. And for those who don’t know what it is I leave them to their blindness, for it is such people that would seek to foil the needed revolution.Mark
Mark • May 30th, 2009 at 9:09 pm
Well sure they’d LIKE to do this. That’s the whole point, to keep things in (their) control. But the market is the market, in the end it cannot be controlled.The Fed/government-based fiat money systems are a violation of the market.Lest anyone think that I’ve found religion in the markets, no I have not. If the markets were left to their own we would, hopefully before trashing the heck out of the planet, find an “economic” system that’s more in tune with nature. When we recognize nature and appreciated for it providing the only real things that matter for life then, and only then, will we have arrived at where we need to be.Mark
Anonymous • May 30th, 2009 at 9:13 pm
Saturday, May 30, 2009Roubini On The Failure To Predict Financial Criseshttp://zerohedge.blogspot.com/2009/05/roubini-on-failure-to-predict-financial.html
Mark • May 30th, 2009 at 9:15 pm
But this supposes that the USD continues to be recognized as the medium of exchange. With the rumblings from China this once-held position isn’t quite as rock-solid as was once thought. The greater the printing the less likely this will all hold. And herein lies the real activity that’s occurring: the US is trying to get everyone else to inflate before it has to; this would be the only way that the USD would continue to reign. All of the various programs and games are only smokescreens covering this fact up: the US is trying to buy time, to be the “last man standing,” if you will.Mark
PeteCA • May 30th, 2009 at 9:15 pm
I think what needs to be clarified is when these abuses took place. How do you know the photo’s were not taken during the period of the Bush administration. Also, if they were taken recently, how do you know that Obama approved such actions? I don’t blame you for being upset by what happened. But it’s a leap to accuse the new administration of direct involvement in this. If the Bush officials tacitly allowed such behavior, it is likely to spin over unchecked. Until Obama takes direct action to rule it out, it could be continuing without his knowledge. That’s why I think it’s much more important to know what actions Obama took – after becoming aware of the photo’s.PeteCA
Mark • May 30th, 2009 at 9:18 pm
But isn’t this like timing tops and bottoms? And, when will you know it if you see it? The ONLY real way to get close is to follow the big fish; unfortunately, the big fish are all trying to just survive, and many will fail- which big fish to follow?The ONLY sure bet is that which provides what is necessary: food, shelter and water.Mark
Mark • May 30th, 2009 at 9:21 pm
If it’s complicated then stay away from it. Had more people adhered to this they wouldn’t be in this situation. Complexity kill societies; it doesnt’ appear that we’re doing anything to rectify this path.And remember this: many “literate” people, even some who have been awarded Nobel prizes in economics, have gotten things totally wrong!Mark
Mark • May 30th, 2009 at 9:23 pm
Blind one, just wanted to thank you for being here.Here’s something that you might appreciate:http://www.counterpunch.org/chellis05292009.htmlMark
Mark • May 30th, 2009 at 9:35 pm
Obama knows. And therein lies the big problem, why he can’t do the right thing- prosecute violators of the law.What have we become when we do not hold rapists and those who authorize rape accountable?As Paul Craig Roberts writes:If the Obama regime does not hold the Bush regime accountable for violating US and international law, then the Obama regime is complicit in the Bush regime’s crimes. If the American people permit Obama to look the other way in order “to move on,” the American people are also complicit in the crimes.And to tie (pardon the pun) torture and economics together:Waterboard the FedMark
Mark • May 30th, 2009 at 9:38 pm
Oops, forgot to include this from the wolf article, as to Obama’s complicity:These photos go to exactly why Obama is burning what is left of the shreds of the Constitution by calling for pre-emptive detention for about 100 detainees. It ain’t because they are “too dangerous,” his pathetic justification. It is because their bodies are crime scenes. It is because the torture, including possibly the sexual assault, they experienced is likely to be so horrific that if they were ever to have their day in court it is others whom Obama needs who would be incriminated.Mark
Guest • May 30th, 2009 at 9:39 pm
Agreed.“Justice is the great standing policy of civil society; and any eminent departure from it, under any circumstances, lies under the suspicion of being no policy at all.” Edmund Burke, 1790
Farnorth5 • May 30th, 2009 at 9:49 pm
Well my Grandparents in 1950 had a tiny 960 Sq ft home that was paid for as well as a 1939 Dodge,also paid for .Yes the average pay was only $1.20 per hour (Current Equivalent $12.00) BUT where I come from a single persons welfare is $620.00 per month OR $3.65 per hour based on a 40 Hour work week.No I would not agree they live better ,notwithstanding some of the truly dumb things they do with the funds they receive….
Guest • May 30th, 2009 at 9:58 pm
Here’s some interesting reading for a slow Saturday night–in response to some of the comments from ZeroHedge.bloggers regarding market manipulation and “Roubini on the Failure to Predict Financial Crises” posted by Anonymous above:THE FIX IS IN:Manipulation: How Markets Really Work | Baltimore Chronicle & Sentinel |by Stephen LendmanMay 29, 2009 –The government’s visible hand and insiders control markets and manipulate them up or down for profit – all of them, including stocks, bonds, commodities and currencies.Wall Street’s mantra is that markets move randomly and reflect the collective wisdom of investors. The truth is quite opposite. The government’s visible hand and insiders control markets and manipulate them up or down for profit – all of them, including stocks, bonds, commodities and currencies.It’s financial fraud or what former high-level Wall Street insider and former Assistant HUD Secretary Catherine Austin Fitts calls “pump and dump,” defined as “artificially inflating the price of a stock or other security through promotion, in order to sell at the inflated price,” then profit more on the downside by short-selling. “This practice is illegal under securities law, yet it is particularly common,” and in today’s volatile markets likely ongoing daily.Why? Because the profits are enormous, in good and bad times, and when carried to extremes like now, Fitts calls it “pump(ing) and dump(ing) of the entire American economy,” duping the public, fleecing trillions from them, and it’s more than just “a process designed to wipe out the middle class. This is genocide (by other means) – a much more subtle and lethal version than ever before perpetrated by the scoundrels of our history texts.”Fitts explains that much more than market manipulation goes on. She describes a “financial coup d’etat, including fraudulent housing (and other bubbles), pump and dump schemes, naked short selling, precious metals price suppression, and active intervention in the markets by the government and central bank” along with insiders. It’s a government-business partnership for enormous profits through “legislation, contracts, regulation (or lack of it), financing, (and) subsidies.” More still overall by rigging the game for the powerful, while at the same time harming the public so cleverly that few understand what’s happening.Market Rigging Mechanisms – The Plunge Protection TeamOn March 18, 1989, Ronald Reagan’s Executive Order 12631 created the Working Group on Financial Markets (WGFM) commonly known as the Plunge Protection Team (PPT). It consisted of the following officials or their designees:· the President;· the Treasury Secretary as chairman;· the Fed chairman;· the SEC chairman; and· the Commodity Futures Trading Commission chairman.Under Sec. 2, its “Purposes and Functions” were stated as follows:(2) “Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation’s financial markets and maintaining investor confidence, the Working Group shall identify and consider:1. the major issues raised by the numerous studies on the events (pertaining to the) October 19, 1987 (market crash and consider) recommendations that have the potential to achieve the goals noted above; and2. ….governmental (and other) actions under existing laws and regulations….that are appropriate to carry out these recommendations.”In August 2005, Canada-based Sprott Asset Management (SAM) principals John Embry and Andrew Hepburn headlined their report on the US government’s “surreptitious” market interventions: “Move Over, Adam Smith – The Visible Hand of Uncle Sam” to prevent “destabilizing stock market declines. Comprising key government agencies, stock exchanges and large Wall Street firms,” this group “is significant because the government has never admitted to private-sector membership in the Working Group,” nor is it hinting that manipulation works both ways – to stop or create panic.”Current mythology holds that (equity) prices rise and fall on the basis of market forces alone. Such sentiments appear to be seriously mistaken….And as official rhetoric continues to toe the free market line, manipulation has become increasingly apparent….with the active participation of selected investment banks and brokerage houses” – the Wall Street giants.In 2004, Texas Hedge Report principals Steven McIntyre and Todd Stein said “Almost every floor trader on the NYSE, NYMEX, CBOT and CME will admit to having seen the PPT in action in one form or another over the years” – violating the traditional notion that markets move randomly and reflect popular sentiment.Worse still, according to SAM principals Embry and Hepburn, “the government’s unwillingness to disclose its activities has rendered it very difficult to have a debate on the merits of such a policy,” if there are any.Further, “virtually no one ever mentions government intervention publicly….Our primary concern is that what apparently started as a stopgap measure may have morphed into a serious moral hazard situation.”Worst of all, if government and Wall Street collude to pump and dump markets, individuals and small investment firms can get trampled, and that’s exactly what happened in late 2008 and early 2009, with much more to come as the greatest economic crisis since the Great Depression plays out over many more months.That said, the PPT might more aptly be called the PPDT – The Plunge Protection/Destruction Team, depending on which way it moves markets at any time. Investors beware.Manipulating markets is commonplace and as old as investing. Only the tools are more sophisticated and amounts involved greater. In her book, “Morgan: American Financier,” Jean Strouse explained his role in the Panic of 1907, the result of stock market and real estate speculation that caused a market crash, bank runs, and hysteria. To restore confidence, JP Morgan and the Treasury Secretary organized a group of financiers to transfer funds to troubled banks and buy stocks. At the time, rumors were rampant that they orchestrated the panic for speculative profits and their main goals:· the 1908 National Monetary Commission to stabilize financial markets as a precursor to the Federal Reserve; and· the 1910 Jekyll Island meeting where powerful financial figures met in secret for nine days and created the private banking cartel Federal Reserve System, later congressionally established on December 23, 1913 and signed into law by Woodrow Wilson.Morgan died early that year but profited hugely from the 1907 Panic. It let him expand his steel empire by buying the Tennessee Coal and Iron Company for about $45 million, an asset thought to be worth around $700 million. Today, similar schemes are more than ever common in the wake of the global economic crisis creating opportunities to buy assets cheap by bankers flush with bailout cash. Aided by PPT market rigging, it’s simpler than ever.Wharton Professor Itay Goldstein and Said Business School and Lincoln College, Oxford University Professor Alexander Guembel discussed price manipulation in their paper titled “Manipulation and the Allocational Role of Prices.” They showed how traders effect prices on the downside through “bear raids,” and concluded:”We basically describe a theory of how bear raid manipulation works….What we show here is that by selling (a stock or more effectively short-selling it), you have a real effect on the firm. The connection with real value is the new thing….This is the crucial element,” but they claim the process only works on the downside, not driving shares up.In fact, high-volume program trading, analyst recommendations, positive or negative media reports, and other devices do it both ways.Also key is that a company’s stock price and true worth can be highly divergent. In other words, healthy or sick firms may be way-over or under-valued depending on market and economic conditions and how manipulative traders wish to price them, short or longer term.The idea that equity prices reflect true value or that markets move randomly (up or down) is rubbish. They never have and more than ever don’t now.The Exchange Stabilization Fund (ESF)The 1934 Gold Reserve Act created the US Treasury’s ESF. Section 7 of the 1944 Bretton Woods Agreements made its operations permanent. As originally established, the Treasury ran the Fund outside of congressional oversight “to keep sharp swings in the dollar’s exchange rate from (disrupting) financial markets” through manipulation. Its operations now include stabilizing foreign currencies, extending credit lines to foreign governments, and last September to guaranteeing money market funds against losses for up to $50 billion.In 1995, the Clinton administration used the fund to provide Mexico a $20 billion credit line to stabilize the peso at a time of economic crisis, and earlier administrations extended loans or credit lines to China, Brazil, Ecuador, Iceland and Liberia. The Treasury’s web site also states that:”By law, the Secretary has considerable discretion in the use of ESF resources. The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s….the Secretary (per) approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities.”In other words, ESF is a slush fund for whatever purposes the Treasury wishes, including ones it may not wish to disclose, such as manipulating markets, directing funds to the IMF and providing them with strings to borrowers as the Treasury’s site explains:”….Treasury has often linked the availability of ESF financing to a borrower’s use of the credit facilities of the IMF, both to support the IMF’s role and to strengthen assurances that there will be timely repayment of ESF financing.”The Counterparty Risk Management Policy Group (CRMPG)Established in 1999 in the wake of the Long Term Capital Management (LTCM) crisis, it manipulates markets to benefit giant Wall Street firms and high-level insiders. According to one account, it was to curb future crises by:· letting giant financial institutions collude through large-scale program trading to move markets up or down as they wish;· bailing out its members in financial trouble; and· manipulating markets short or longer-term with government approval at the expense of small investors none the wiser and often getting trampled.In August 2008, CRMPG III issued a report titled “Containing Systemic Risk: The Road to Reform.”It was deceptive on its face in stating that CRMPG “was designed to focus its primary attention on the steps that must be taken by the private sector to reduce the frequency and/or severity of future financial shocks while recognizing that such future shocks are inevitable, in part because it is literally impossible to anticipate the specific timing and triggers of such events.”In fact, the “private sector” creates “financial shocks” to open markets, remove competition, and consolidate for greater power by buying damaged assets cheap. Financial history has numerous examples of preying on the weak, crushing competition, socializing risks, privatizing profits, redistributing wealth upward to a financial oligarchy, creating “tollbooth economies” in debt bondage according to Michael Hudson, and overall getting a “free lunch” at the public’s expense.CRMPG explains financial excesses and crises this way:”At the end of the day, (their) root cause….on both the upside and the downside of the cycle is collective human behavior: unbridled optimism on the upside and fear on the downside, all in a setting in which it is literally impossible to anticipate when optimism gives rise to fear or fear gives rise to optimism….”"What is needed, therefore, is a form of private initiative that will complement official oversight in encouraging industry-wide practices that will help mitigate systemic risk. The recommendations of the Report have been framed with that objective in mind.”In other words, let foxes guard the henhouse to keep inventing new ways to extract gains (a “free lunch”) in increasingly larger amounts – “in the interest of helping to contain systemic risk factors and promote greater stability.”Or as Orwell might have said: instability is stability, creating systemic risk is containing it, sloping playing fields are level ones, extracting the greatest profit is sharing it, and what benefits the few helps everyone.Michel Chossudovsky explains that: “triggering market collapse(s) can be a very profitable undertaking. (Evidence suggests) that the Security and Exchange Commission (SEC) regulators have created an environment which supports speculative transactions (through) futures, options, index funds, derivative securities (and short-selling), etc. (that) make money when the stock market crumbles….foreknowledge and inside information (create golden profit opportunities for) powerful speculators” able to move markets up or down with the public none the wiser.As a result, concentrated wealth and “financial power resulting from market manipulation is unprecedented” with small investors’ savings, IRAs, pensions, 401ks, and futures being decimated from it.Deconstructing So-Called “Green Shoots”Daily the corporate media trumpet them to lull the unwary into believing the global economic crisis is ebbing and recovery is on the way. Not according to longtime market analyst Bob Chapman who calls green shoots “Poison Ivy” and economist Nouriel Roubini saying they’re “yellow weeds” at a time there’s lots more pain ahead.For many months and in a recent commentary he refers to “the worst financial crisis, economic crisis and recession since the Great Depression….the consensus is now becoming optimistic again and says that we are going to go from minus 6 percent growth to positive growth in the second half of the year….my views are much more bearish….The problems of the financial system are severe. Many banks are still insolvent.”We’re “piling public debt on top of private debt to socialize the losses; and at some point the back of (the) government(‘s) balance sheet is going to break, and if that happens, it’s going to be a disaster.” Short of that, he, Chapman, and others see the risks going forward as daunting. As for the recent stock market rise, they both call it a “sucker’s rally” that will reverse as the US economy keeps contracting and the financial system suffers unexpected or manipulated shocks.Highly respected market analyst Louise Yamada agrees. As Randall Forsyth reported in the May 25 issue of Barron’s Up and Down Wall Street column:”It is almost uncanny the degree to which 2002-08 has tracked 1932-38, ‘Yamada writes in her latest note to clients.’ ” Her “Alternate Hypothesis” compares this structural bear market to 1929-42:· “the dot-com collapse parallels the Great Crash and its aftermath,” followed by the 2003-07 recovery, similar to 1933-37;· then the late 2008 – early March 2009 collapse tracks a similar 1937-38 trajectory, after which a strong rally followed much like today;· then in November 1938, the market dropped 22% followed by a 26% rise and a series of further ups and downs – down 28%, up 23%, down 16%, up 13%, and a final 29% decline ending in 1942;· from the 1938 high (“analogous to where we are now,” she says), stock prices fell 41% to a final bottom.Are we at one today as market touts claim? No according to Yamada – top-ranked among her peers in 2001, 2002, 2003 and 2004 when she worked at Citigroup’s Smith Barney division. Since 2005, she’s headed her own independent research company.She says structural bear markets typically last 13 – 16 years so this one has a long way to go before “complet(ing) the repair process.” She calls the current rebound “a bungee jump,” very typical of bear markets. Numerous ones occurred during the Great Depression, 8 alone from 1929 – 1932, some deceptively strong.Expect market manipulators today to produce similar price action going forward – to enrich themselves while trampling on the unwary, well-advised to protect their dollars from becoming quarters or dimes.Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago.http://baltimorechronicle.com/2009/052909Lendman.shtml
Guest • May 30th, 2009 at 10:04 pm
#%&8@, 8&%4#00. ###!! (not too good)
Guest • May 30th, 2009 at 10:13 pm
When Rooosevelt, Krugman and Keynes are used in one sentence—then we know somebody’s out for wealth transfer.
Mark • May 30th, 2009 at 10:17 pm
Does Morbid HAVE to provide some solution in order to criticize? No, I do not believe so. That said, however, I do tire of the tossing of meaningless labels: but the core is correct; just don’t like anything that conjures up the choir (jackboots or whatever; I see the same stupid minds operating on both side of the political isle).Mark
Mark • May 30th, 2009 at 10:22 pm
For example, many commentators on this site think ‘government’ is always rotten, no matter what. I suppose that makes them anarchists.Ugh! No, it does not. As someone with anarchist leanings I can tell you that anarchism’s only SINGLE true principle is NO CONCENTRATION OF POWER. It says nothing about not accepting a “government.” Note that “government” isn’t necessarily some monolithic thing such as currently exists in the US (and many/most other countries).Mark
Mark • May 30th, 2009 at 10:39 pm
I mostly agree, except that who is to check power? Capital concentrates, and concentration means power, and a concentration of power…Like it or not, there has to be (somehow) a universal understanding that protects from over-exploitation. I hardly think that socialism was the cause of the destruction of Haiti, or that capitalism would have been its savior: compare this to the Dominican Republic, which, oddly, was actually saved from a similar fate by non-capitalist actions: well, I guess that once could say that Trujillo was the ultimate capitalist in that he had near control over much of the Dominican Republic’s resources).Mark
Guest • May 30th, 2009 at 10:39 pm
The caliber of comments on this blog, such as yours, never ceases to amaze me. Thanks for the insight.
PhilT • May 30th, 2009 at 10:40 pm
…It is a brave or foolhardy man who picks a fight with Mr Krugman, the most recent recipient of the Nobel Prize for Economics. Yet a cat may look at a king, and sometimes a historian can challenge an economist…
Ferguson nails Krugman in the FT ==> How economists can misunderstand the crisis
Mark • May 30th, 2009 at 10:50 pm
Only when ‘Joe Sixpack’ has paid back debt and brought liabilities back in line with assets and future income stream, will we see growth in the stock of mortgage credit and consumer credit.That’s a wave of a magic wand! If no one has any assets of real value (from defaulting on loans, dumping assets in distress) and has no savings (because of paying off/continuing to pay off) debt and had NO job, how on earth can it be expected that there will be new factories and supermarkets to cater to these people?These folks are no different than the people that they are criticizing. The whole bloody lot of elitists are just wanting to continue to play this game so that they don’t have to work (and can stay on top of the heap).Mark
Mark • May 30th, 2009 at 10:58 pm
ANYONE managing wealth engages in manipulating markets to some degree.* If you have a lot of something then your shifting of that thing will have a greater impact. Yes, foul play is absolutely at work, but we mustn’t think that every action is based on foul play.* What’s that rule/theorem whereby action of close study of something affects the very thing being studied?Mark
Mark • May 30th, 2009 at 11:09 pm
I’m thinking that it’s rather premature to proclaim, as Ferguson does, that we averted a depression. Perhaps we merely staved it off, but I have to wonder about anyone who states in such a conclusive manner that we have avoided one during this recent time period (cycle?).Mark
Chignos • May 31st, 2009 at 12:05 am
But…you would agree that they’re nowadays a lot fatter, wouldn’t you?
Chignos • May 31st, 2009 at 12:05 am
But…you would agree that they’re nowadays a lot fatter, wouldn’t you?
Chignos • May 31st, 2009 at 12:25 am
Visualize whirled piss.
Chignos • May 31st, 2009 at 12:25 am
Visualize whirled piss.
Chignos • May 31st, 2009 at 12:25 am
Visualize whirled piss.
Guest • May 31st, 2009 at 12:48 am
I think the world’s central bankers are in constant collusion to monitize their debt such that a maximum number of “soft landings” for the richest economies occur. And who’s to say that Germany won’t bid on UK’s bonds so UK can bid on US Treasuries, etc. and so on around the world. When all the world’s fiat currencies are inflated simultaneously, sooner or later an $880 billion bailout (TARP) won’t seem like such a big deal. I’ll bet they’ve already developed a computer program to handle these bond sales worldwide. This would eventuate in commodity inflation. Then the question for an investor becomes how much of which commodity can I invest in, and have a realistic expectation that the government won’t confiscate the capital gain (“windfall profits”).
Chignos • May 31st, 2009 at 12:50 am
The Heisenberg uncertainty principle.
blind de milo • May 31st, 2009 at 3:48 am
@m ABOVEi thank you also.materialism and technology are irresistiblebut not essential in a sense, depending onthe working definitions. as the hand, or thegarments we wear are technology.etc. essential?so our beings are intimately technological andour environments and we dictate the acceptability ofthem as they may manifest. our environments,urban , suburban, rural are also technologicbased, man made. but….they were designed in the dark mostly by peoplewho gave little thought to this day of consequences,apparently content to export the consequences of theirown days also.the day of expensive oil and petroleum products,portable concentrated fuelfor the internal combustion engine is here. has beendisguised as globalization and fiat u.s. currency,or in the cases (auto industry, oil industry) with disregardfor the day when fuel would become expensive or scarce,in anticipation of peak profits and cartel monopoly..so we have an abundance of legacy or junk technology now. surplussupply of stuff people don’t want. stuff people died to producethat was energetically costly to produce, that peoplewent into debt to produce and posses and now, no one really wantsor needs or can afford. (inventories, housing, etc.) we have heard this story..and we have a defense department that runs on its fuel tanksand it likes to run all over the globe; ready to defend at amoments notice, just about anything with the exception of nativepopulations residing atop resource and oil deposits..now we have to figure out the problems they ignoredor refused to consider. that is where architecture and science comein. the real science that observes the whole experienceof humanity, the global perspective and the localimplementation. the integration of material energy scienceand the science of distribution. a science of consumptionand the global implications. they are internal to the consciousnessof humanity and external to the ecology and environments.the ludites saw this clearly.informed global vision and implementation at thelocal level. this may be impossible ifthe constraint is adherence to fiat finance controlledby wall street etc..( another questionable technology ).or this may be just impossible but… it will happen..also as the ludites point out, the existing technologycurrently has an effect on our idea of community, orcommunity as we imagine it to have been. it is interestingto say the least.in deflation all the “ancillary” cultural memes crash into each other,or collapse, evaporate, sublimate or expire? collapsing culture?(cognitive dissonance here we come)as they do when some fundamental energy source for yourculture becomes unpredictable.imagine what would happen if the sun were taken away fora time ( not the cyclic evening to night! ) we might beinclined to pay someone who said they could bring it back.it might eclipse our better judgment!imagine if you could control the distribution of sunlight, or moonlight,on a population. wall street.? the fed? crazy thought?.it becomes a time ofsoul searching and should be accompanied by seriousdebate and brainstorming, practical analysis andpreparation for contingencies. i think we are seeingsome of this at different levels although it is not beingarticulated sufficiently to reassure the population.or maybe it is just not being done.oil companies vs solar and lithium struggles may kill us.?.i think the ludites have a sound message with a blind spot.(why they lost the historic debate per se)that is you can only successfully argue from a position oflogic and clarity and consistency with observation. it soundsto me that…..they failed to properly define/understand “technology” andphysical man himself and his survival needs as “technology”.they may have misidentified the enemy and then became their own.they admit to as much! revealing.and then they did not properly or fully differentiate scienceas commonly exploited vs science as an adaptive creative activityof the mind of man. (i trust you know where to find that link.).them’s my thoughts for now, as fragmented they might be.again, thanks for the links, thoughts and thespirit. stay dynamically well!.http://www.planetark.com/dailynewsstory.cfm/newsid/50782/story.htm.http://www.precaution.org/lib/prn_bolivias_lithium.090203.htm.“There are salt lakes in Chile and Argentina, and a promising lithium deposit in Tibet, but the prize is clearly in Bolivia,” Oji Baba, an executive in Mitsubishi’s Base Metals Unit, said in La Paz. “If we want to be a force in the next wave of automobiles and the batteries that power them, then we must be here.”"Mitsubishi is not alone in planning to produce cars using lithium-ion batteries. Ailing automakers in the United States are pinning their hopes on lithium. One of them is General Motors, which next year plans to roll out its Volt, a car using a lithium-ion battery along with a gas engine. Nissan, Ford and BMW, among other carmakers, have similar projects.”
iknowmarkisapeakist • May 31st, 2009 at 3:53 am
ROEI / ROENothing is comparable to Black Gold or its brothers/sisterwill Lithium Batteries solve our power generating problems??your e.g above are solution for cars (only)
Guest • May 31st, 2009 at 4:24 am
c,3 times or just once?
Guest too • May 31st, 2009 at 4:39 am
i,mark is a thinker first, conclusions come second.solar in combo with lithium in combo with geothermalin combo with wind etc.. ?and what about environmental electric as inlightning and things we have yet to imagine…you know, the real future.not to mention the tremendous savings availableshould conservation be taken seriously.pricing should take care of a big chunk.but oil is oil, no doubt, and it is inour cultural dna.
Guest • May 31st, 2009 at 5:56 am
@PeteCA”Here’s the deal (IMHO). Pres Obama has taken a big forward step by ruling out torture.” You are wrong PeteCA. Before bush all the torture took place in other countires like egypt. Us persons of interest were flown (rendition) to these torture induce countries. Bush decided to go one step further by ordering it to be done by amercans themselves becasue bush adm wanted to connect terrorism with Iraq to find justification for the Iraq war for that they couldnt rely on foriegners to do this for them( for obvious reasons). Now obama have banned torture by americans and have gone back to same clinton policy of having the torture done by others (Rendition). Do some reading and you will findout.
Guest • May 31st, 2009 at 6:35 am
How about some manners? Please stop using italics…
g Anton • May 31st, 2009 at 9:21 am
Thank you Mark, I sincerely appreciate your help, and you give me an opportunity to emphasize my main point.For Obama to ignore what happened is hypocritical, cowardly, sinful, and verges on malfeasance of office.To cover it up is criminal.
Guest • May 31st, 2009 at 9:33 am
“Max Baucus Should Not Be Deciding Health Care for America” –“The ‘Senator for K Street’ is Putting Campaign Donor Profits Ahead of the Basic Needs of the People” by Kevin Zeese31 May 2009 — Why aren’t single payer advocates allowed to testify before Baucus’ committee? Follow the money.Senator Max Baucus and the Senate Finance Committee are too corrupted by corporate health industry profiteers donations to give America the health care policy it needs.Health care is 15% of the U.S. gross domestic product. U.S. health care expenditures, which have been rising rapidly for several years, surpassed $2.4 trillion in 2007, more than three times the $714 billion spent in 1990. The cost of health care is projected to reach $4.4 trillion by 2018. There is a lot of room for corporate profiteering in the increasing cost of health care. The millions the health care industry has invested in Baucus and the Senate Finance Committee could therefore turn out to be very profitable.It is evident that any bill that comes out of the Senate Finance Committee will be a pro-industry bill that will ensure trillions in profits for the health insurance industry, HMOs and the pharmaceutical industry.Baucus has held two hearings so far and has refused to allow advocates for the most popular reform—a single payer national health policy—to even testify. Single payer “improved Medicare for all” is favored by more than 60% of Americans as well as majorities of doctors, nurses and economists. It is the most cost-effective and efficient way to provide health care to all Americans from cradle to grave.Why aren’t single payer advocates allowed to testify before Baucus’ committee? Follow the money. Campaign donations explain why, and demonstrate that the Senate Finance Committee should not be in charge of health care. Senator Reid should remove the health care reform bill from Baucus and start all over before the Health Committee in the Senate.Here’s why Baucus is not doing the people’s business:According to OpenSecrets.org, over his career he has taken donations from:· The Insurance Industry: $1,170,313· Health Professionals: $1,016,276· Pharmaceuticals/Health Products Industry: $734,605· Hospitals/Nursing Homes: $541,891· Health Services/HMOs: $439,700Baucus has shown his bias and should be removed from leading the health care reform effort by the Democratic Party leadership.That is a grand total of $3,902,785. Can we trust Baucus to put aside the profits of the industries that have kept him in the Senate? Will he put the people’s necessities ahead of the profits of his contributors? Baucus has shown his bias and should be removed from leading the health care reform effort by the Democratic Party leadership.In 2008 Baucus had virtually no challenger in Montana. A little-known Republican was on the ballot, and Baucus won with 73% of the vote. But, Baucus sought big donations from big business anyway. He used his connections to corporations with business before his committee to raise an immense campaign fund of more than $11 million. In 2008, 91% of his donations come from individuals living outside of Montana, which is why he is more the “Senator for K Street” then the Senator for Montana. Corporate health profiteers who invested in Baucus will now benefit from his stewardship over health care reform. His 2008 donations from health care profiteers included:· Insurance: $592,185· Health Professionals: $537,141· Pharmaceuticals/Health Products: $524,813· Health Services/HMOs: $364,500· Hospitals/Nursing Homes: $332,826That is $1,826,652 Baucus took from these industries, and now he can reward them by deforming health care reform.The health care profiteers knew that Baucus would determine their fate and ponied up. Now the only thing standing between them and their payback is a single payer national health care plan. Yet single payer, which would end private insurance and control the cost of pharmaceutical drugs, is not being considered—not even allowed to participate in the conversation before Baucus.It is not just the chairman of the committee who has received massive donations. The full Finance Committee is a gluttonous embarrassment of campaign pay-offs. In 2008 the committee members received a total of $13,263,986 from industries affected by health care reform. Can we trust this committee to put the interests of the people before their donors?The donations to the Finance Committee in 2008 included:· Insurance: $5,103,900· Pharmaceuticals/Health Products: $3,308,831· Hospitals/Nursing Homes: $2,809,353· Health Services/HMOs: $2,041,902These industries expect to be rewarded with billions, even trillions, in profits and hundreds of millions in corporate welfare. Senator Baucus’s behavior shows they have made a good investment—they’ve bought themselves a senator who should be called Chairman Blagojevich. He is doing his best to make sure the single payer message is not heard because he knows it is the fairest, most efficient and cost-effective way to ensure health care access for all Americans—but he can’t let that be implemented because it would put some of his donors out of business and control the profits of others.It is time to remove Baucus from the leadership of health care reform. It is time to move the critically important priority of reforming America’s health care system from the Finance Committee and put it before the Senate Health, Education, Labor and Pensions Committee. At least their mission is health care, not money.Kevin Zeese is the executive director of the FreshAirCleanPolitics.net, which is urging a single payer national health care system as part of its ProsperityAgenda.US project. Along with seven others, Zeese was arrested when he testified from the audience of a recent Senate Finance Committee meeting on health care. See the video on YouTube.http://baltimorechronicle.com/2009/053109Zeese.shtml
Guest • May 31st, 2009 at 10:01 am
Police Raid Food Bank Fundraiser……. Say Eat This!!!!(May 30, 2009) BUXTON, Maine — Buxton police raided a building where people were trying to raise money to give free food to the needy.It happened at the Narragansett Pythian Sisters Temple on Route 22 where people were playing the card game Texas Hold’em to benefit the Buxton Community Food Co-op. But state police said the game was illegal.That’s because whenever a gambling tournament is held to raise money for a group and takes place at its headquarters, a permit is needed and the co-op didn’t have one.So, state police seized cards, poker chips and $500 in cash — money the food co-op desperately neededA member of the co-op, Joann Groder, said she is very, very sad about what happened. “We’ve had a lot of people who come here — people who are out of work, people who have cancer. We have a lot of people…”But state police are standing by what was done. The money from the co-op’s card game is currently being held as evidence… Reference:www.wmtw.com/news/19607069/detail.html – 53k
Guest • May 31st, 2009 at 10:13 am
“as gm goes, so goes the nation”: bill gross | posted by jk on itulip.com forumi thought it was worth revisiting a prescient column by bill gross, written 3 years ago, in may, ’06.http://www.pimco.com/LeftNav/Feature…O+May+2006.htma few highlights [emphasis added]:”… General Motors is a canary in this country’s economic coal mine; a forerunner for what’s to come for the broader economy. Their mistakes have resembled this nation’s mistakes; their problems will be our future problems. GM commands the headlines today, but as General Motors goes, so goes the nation. Following their progress over the next few months and years will be like getting a 2010 Wall Street Journal in June of 2006…. If the U.S. and General Motors have similar flaws and indeed symbiotic fates, they appear to be conjoined primarily by the uncompetitiveness of their existing labor cost structures and the onerous burden of their future healthcare and pension liabilities. That is not to say that other automobile manufacturers or countries don’t share similar characteristics: they do – but GM and the U.S. are compared here because of their historical dominance and therefore the influence that they will have on investment markets as they struggle to adjust. If GM is a canary, let’s hope for the canary’s long life, but be mindful of its chirping deep in the mineshaft of future events that speak to broader implications for the U.S. economy.Because diminished labor cost competitiveness and excessive future unreserved liabilities are descriptive of both GM and the U.S. economy, GM’s efforts to survive and ultimately prosper should be our own as well.”and”The current attempt on the part of GM to address the high cost of its labor draws a comparison to potential future U.S. efforts to do so via currency devaluation. While a company must deal directly with its employees and or its unions in order to lower wage/benefit expenses, a country – certainly a capitalistic oriented one – goes about it in another way. By depreciating the dollar, U.S. Treasury or Federal Reserve policies aimed in that direction explicitly do the same thing.”and”Perhaps the most significant comparison between GM and the U.S. economy lies in the recognition of enormous unfunded liabilities in healthcare and pensions. Reportedly $1500 of every GM car sold in dealer showrooms goes to pay for current and future health benefits of existing and retired workers, a sum totaling nearly $60 billion. The total future healthcare liability for all U.S. citizens can be measured in the tens of trillions.”and”Owners of these liabilities (either existing/future debt holders, or tax paying corporations/citizens) will likely be the sacrificial lambs of the future. Investors, therefore, should factor in an increasing propensity for higher inflation in future years as debt principal is eroded much like the shaved edges of a Roman coin. Higher taxes, as well, are just around the corner. Finally, currency devaluation effected through a low Fed Funds policy vs. competitor nations and/or global policy coordination should apply the coup de grace for foreign holders of U.S. liabilities. Chinese, Japanese, OPEC, and other substantive holders of U.S. Treasuries will have two ways to lose in future years: they will watch U.S. inflation erode their principal and on top of that the real dollar value of their global purchasing power will decline as the dollar sinks. Actually, the same applies to U.S. citizens although the decline in global purchasing power can be masked by domestic asset appreciation in the short-term (houses, stocks).” [or not-jk]http://www.itulip.com/forums/showthread.php?t=10151
Guest • May 31st, 2009 at 10:28 am
“[Steve Lendman] and Brown believe that credit should be a public utility under a nationalized banking system, creating its own money at the federal level and with deposits into state-run banks – to serve people, not predator bankers. It would be the most equitable, sustainable, efficient and democratic system, free from parasitic lenders, and it would work equally well at the federal, state and community levels with local branches of government banks serving municipalities, their businesses, and residents at affordable costs.”From his blogspot.How could this happen?
idunno • May 31st, 2009 at 10:57 am
Your keen observation is noted as many less qualified than even Ferguson have acknowledged that parts of the economy are technically in depression.Perhaps the article’s editor would have been wise to wordsmith that statement from ,”Credit for averting a second Great Depression should principally go to Fed chairman Ben Bernanke…” into something like, “Credit for averting a total collapse of the [shadow] financial system should principally go to …”The entire premise for the article is one of petty, elitist mud-slinging.
Guest • May 31st, 2009 at 11:04 am
Spreading Lies | by Sudden DebtI discussed the treasury yield curve steepness (10-year minus 2-year) in a recent post titled How Steep Is My Valley. Today, some additional detail. (Hellasious)_______________________________________________________May 28, 2009 — Long-term interest rates are jumping, with yields on 10-year treasuries now up to 3.73%. Apart from the significant impact on the real economy (e.g. higher mortgage rates ), this development is also placing into doubt the validity of a long-standing leading indicator, i.e. the yield spread between 10-year and 2-year treasury bonds ( chart ).Economists and market analysts commonly use this spread as a predictor of future economic activity and, thus, the direction of corporate profits; and from there, the prospects for the stock market. Indeed, it is one of the components of the official Leading Economic Index calculated by the Conference Board.Right now the spread stands at 273 basis points (2.73%), the widest ever. Many analysts, therefore, are predicting the economy will turn around in short order and start growing smartly once more (the V- Gang). Ditto for corporate profits and, predictably enough, for share prices. which have been discounting exactly such a possibility for the last three months. To judge from the shop-talk in the various dealing rooms I contact on a regular basis, the 10-2 spread is the single most fashionable indicator right now.I think this to be a grave mistake. I believe that, unlike other instances, the spread is widening because of two developments unprecedented in the history of the US (though common enough in other, less developed countries, in the past).1. On the short end, the Fed is engaged in massive monetary operations (quantitative easing) and is keeping short rates near zero.2. On the long end, the Treasury is bailing out financial and other corporations by promising to inject trillions of dollars it does not have and has to borrow. This massive supply of new Treasury bonds – present and upcoming – is putting upward pressure on long rates and placing the country’s AAA credit rating in serious jeopardy.Clearly, therefore, the widening of the spread is not due to fundamental economic strength. Instead, it is indicative of the rising risk premium that investors are demanding for lending the US government money for longer period of time.For a better appreciation of this fact, look at he chart below: it’s the 10-2 spread divided by the yield of the 2-year treasury, i.e. the spread as a percentage of the 2-year yield (today, 273 bp/97 bp = 2.81= 281 bp).The premium demanded for lending long is at a very significant new record high, when measured relative to short-term rates. In my opinion, then, to interpret the 10-2 spread as a harbinger of an imminent V-shaped recovery is tantamount to “spreading lies”…..and P.S.Durable goods orders were announced today, up “more than expected” at +1.9% for the month. Here’s the crucial detail: defence goods were up a whopping +23.2%. Without them the increase would have been +0.6%. Now.. do you suspect that some DOD orders were placed ahh.. shall we say.. opportunely? Nah…http://suddendebt.blogspot.com/
Cow Boy the Tim • May 31st, 2009 at 12:02 pm
““No one is going to be more concerned about future deficits than we are,” Geithner told reporters on the way to two days of meetings that start today in China’s capital. “Joke!
Guest • May 31st, 2009 at 12:08 pm
who are the players of CDS of GM?
Guest • May 31st, 2009 at 12:11 pm
Is it true that David Fry said someone hit the market with a bunch of buy orders right at 3:30PM. on Friday?
Guest • May 31st, 2009 at 12:16 pm
JPM
Guest • May 31st, 2009 at 12:20 pm
no idea.
Brett in Manhattan • May 31st, 2009 at 1:03 pm
Maybe so, but, his point is spot on. Anyway you slice it, having the treasury print bonds only to be bought by the fed IS printing money.I also take exception to the idea that falling bond prices is a sign of recovery because investors are looking to take bigger risks.Could it be that these investors see 10yr t-bonds as a big risk and, therefore, are demanding a higher return?
Guest • May 31st, 2009 at 1:07 pm
why?
FEDup • May 31st, 2009 at 1:07 pm
good points: another classic example of how corrupt politicians put their welfare at the top of the list while putting the public’s at the bottom. I have spoken with hundreds of professional health care givers including, doctors, nurses, CNAs, medical billing services, etc and all agree a single payer system is the most cost effective, efficient and fair system. It also gives the public complete choice of medical provider without being restricted by the deliberately designed barriers to limit one’s selections.
11B40 • May 31st, 2009 at 1:41 pm
We get it! Please stop hyping your teeny bopper web site here!
FEDup • May 31st, 2009 at 1:44 pm
Manipulation of markets and economic data appears to be at an all time high helped by the mainsteam media spin doctors. However, if you speak to friends and neighbors, there appears to be 3 distinct almost equal groups of opinion on the economy and hence their spending habits: Group 1 is either retired or receiving passive income from other sources and has cut back maybe 20%. Group 2 includes government workers (local, state) and military who for the most part, don’t seem too concerned about the chances of losing their job and have cut back maybe 10%. Group 3 includes those who have lost their job and are either partially employed at a much lower income or unemployed and may be facing foreclosure and/or bankruptcy. This group is only spending on the bare necessities for survival and have cut back on the average of 60%. The average spending reduction of all 3 groups (10,20,60) is 30%. If Group 2 (govt workers) become affected to the same degree as the private sector, this will be the straw that breaks the camel’s back and GDP and will remain negative for a long time and maybe, then there will be enough public outrage to seriously correct the injustices of the system; otherwise, the vast majority of govt employees (including military) are not going to join the rest of us in demanding transparency, fair regulation and accountability for fear of biting the hand that feeds them!
idunno • May 31st, 2009 at 1:45 pm
To your question – I think you have it right.I am no expert in the bond market, but from my perch it appears that unless they are discounting reality, not very many investors, institutional or otherwise, are willing to go on the hook for US Treasuries for any period longer than a few years, especially given the real threat of hyperinflation.
11B40 • May 31st, 2009 at 1:52 pm
So, if the E in P/E = negative, what does that portend for the market?Is ‘short’ the new ‘long’?I forgot who said it in a recent post, but it struck me as profound and prescient – unemployment numbers have flipped, and are now leading indicators instead of lagging indicators. No jobs = no growth.
11B40 • May 31st, 2009 at 2:00 pm
I have a great idea! Let’s create a way for ‘average’ Americans to control their own retirement accounts and investment vehicles. Just think, they could invest in the markets and get that 10% growth rate that history says is so certain. Eventually, retirees would become rich! Just buy a bunch of blue chip stocks like GM & BAC and put it on auto-pilot.Oh, wait! I think we already tried that.
Guest • May 31st, 2009 at 2:04 pm
11100101010101010101010101010101010000000101000010111110111101001000001010000001111111100111110011100001100001010000100101000001010001010101101101111111100001111000001011111001010010101000101010100000101010100010010100000101Take that!
11B40 • May 31st, 2009 at 2:04 pm
This guy is just pumping his web site.
Softwarengineer • May 31st, 2009 at 3:03 pm
PENDING SALES ARE NOT CLOSED SALESI hear pending sales through normal banks [80% of sales that aren't government backed insanity, called FHA to 500-600 and even lower credit ratings] are taking like 5 months to close….many get disapproved anyway. Housing sales figures today aren’t a guess, they’re a wild donkey guess…and you all know the definition of ASSume [makes a donkey of you and me].
CLake • May 31st, 2009 at 3:39 pm
For how long will the dollar remain the world’s reserve currency ?Bilderberg Plan for Remaking the Global Political Economy 2009
On May 21, the Macedonian International News Agency reported that, “A new Kremlin report on the shadowy Bilderberg Group, who this past week held their annual meeting in Greece, states that the West’s financial, political and corporate elite emerged from their conclave after coming to an agreement that in order to continue their drive towards a New World Order dominated by the Western Powers, the US Dollar has to be ‘totally’ destroyed.” Further, the same Kremlin report apparently stated that, “most of the West’s wealthiest elite convened at an unprecedented secret meeting in New York called for and led by” David Rockefeller, “to plot the demise of the US Dollar.”
…
Recent reports have also indicated that the IMF’s role in issuing SDRs goes hand in hand with the Bilderberg discussion on the potential collapse of the US dollar, and, “Transforming the dollar standard into an SDR-based system would be a major break with a policy that has lasted more than 60 years.” It was reported that, “There are two ways in which the dollar’s role in the international monetary system can be reduced. One possibility is a gradual, market-determined erosion of the dollar as a reserve currency in favor of the euro. But, while the euro’s international role – especially its use in financial markets – has increased since its inception, it is hard to envisage it overtaking the dollar as the dominant reserve currency in the foreseeable future.” However, “With the dollar’s hegemony unlikely to be seriously undermined by market forces, at least in the short and medium-term, the only way to bring about a major reduction in its role as a reserve currency is by international agreement.” This is where the SDRs come into play, as “One way to make the SDR the major reserve currency relatively soon would be to create and allocate a massive amount of new SDRs to the IMF’s members.”[18] This is, interestingly, exactly what is happening with Africa and the IMF now.
Also worth reading:Towards New Global Currency, New Financial World OrderI don’t know how serious all this information is, it might be mere speculation. But in anycase, wouldn’t surprise me that our business/political elites are thinking in terms of even more centralization and concentration of powers rather than building a resilient networked decentralized truly democratic economy. It’s “strange” that they chose to move opposite ways from what nature and biological systems teach us is the most robust and efficient form of organisational architecture.Why am I not surprised ? It’s the mechanistic machine thinking that dominates our elites, they can’t think of anything else.
CLake • May 31st, 2009 at 3:42 pm
Sorry, the links weren’t working in previous post :Bilderberg Plan for Remaking the Global Political Economy 2009http://www.marketoracle.co.uk/Article10903.htmlTowards New Global Currency, New Financial World Orderhttp://www.marketoracle.co.uk/Article9922.html
PeteCA • May 31st, 2009 at 4:14 pm
That’s a big problem if it’s true. I haven’t checked that part of their policy. Allowing torture by proxy is still support for torture in my book. We’re either against it – or we’re not. Although we cannot control what other countries do, it’s a problem if we deliberately take advantage of their lack of human rights to suit our purposes. Again. the Obama administration really needs to clarify on this issue with a clear and unequivocal statement. There’s too much dirty laundry still left over from the Bush administration at this stage.PeteCA
Guest • May 31st, 2009 at 4:19 pm
What is the real cause of the excess consumer debt? Consumers were trying to preserve their level of consumption at the same time as their salaries were stagnating and going down in real terms. The American salaries will keep going down and it is not going to be only in manufacturing. There is no real reason why a software engineer in India or Russia should make ten times less than in America. They have the same productivity. Therefore, they should make the same money. And this is happening. The only way to preserve jobs in America and revive not only the industry but the entire economy is to equalize the wages. Currency debasement is the way to accomplish this and it is the only way America can get back to be a competitive producer and exporter of goods and services. This is a bitter medicine but we have to swallow it.
TfT • May 31st, 2009 at 4:32 pm
No. It is an outright L-I-E!
11B40 • May 31st, 2009 at 4:37 pm
Well I can think of a few reasons that an American software engineer should be paid more here. Too bad our politicians have been bought off, or they may be able to think of a few, too. After all, they passed the laws that dictate the reasons. Can you say Social Security? Medicare? How about great roadways, clean air, safe work places, and on and on and on. All these things cost money, folks, and if we want to be able to keep them, we damn well better figure out how to pay for them….and it won’t be by reducing our wage scales by 80%.
Guest • May 31st, 2009 at 5:00 pm
Which supports David Fry’s May 28, 2009 commentary, don’t you think, in:Friday Outlook: End of Month Tape Painting?“The Rules of the Game”The current rules are simple:1. Use light volume to push your book and the financial media. (Bill Gross)2. Use government money to trade. (TARP)3. Paint the tape at the end of the month. (Business as usual)4. Ignore any bad news. (All the downward revisions to previous data today)5. Little guys should stay out of the way. (You and me?)Okay, one day down and one more to go before the end of the month. Bulls got in a “relief rally” that bonds didn’t collapse after another auction. It’s a little too comical that Bill Gross comes on the airwaves to talk up his book that bonds were good value now. It’s laughably transparent.If bulls can bust it out of this range we’ve been in bully for them. Then the “sell in May and go away” maxim will be forgotten. Or, a “June Swoon”?Volume did pick up some today but it’s still relatively light while breadth was positive.http://seekingalpha.com/article/111105-friday-outlook-end-of-month-tape-painting
Guest • May 31st, 2009 at 5:02 pm
Under executive orders issued by Obama recently, the CIA still has authority to carry out what are known as renditions, secret abductions and transfers of prisoners to countries that cooperate with the United States.Current and former U.S. intelligence officials said that the rendition program might be poised to play an expanded role going forward because it was the main remaining mechanism — aside from Predator missile strikes — for taking suspected terrorists off the street.The rendition program became a source of embarrassment for the CIA, and a target of international scorn, as details emerged in recent years of botched captures, mistaken identities and allegations that prisoners were turned over to countries where they were tortured.The European Parliament condemned renditions as “an illegal instrument used by the United States.” Prisoners swept up in the program have sued the CIA as well as a Boeing Co. subsidiary accused of working with the agency on dozens of rendition flights.But the Obama administration appears to have determined that the rendition program was one component of the Bush administration’s war on terrorism that it could not afford to discard.The decision underscores the fact that the battle with Al Qaeda and other terrorist groups is far from over and that even if the United States is shutting down the prisons, it is not done taking prisoners.”Obviously you need to preserve some tools, you still have to go after the bad guys,” said an Obama administration official, speaking on condition of anonymity when discussing the legal reasoning. “The legal advisors working on this looked at rendition. It is controversial in some circles and kicked up a big storm in Europe. But if done within certain parameters, it is an acceptable practice.”http://articles.latimes.com/2009/feb/01/nation/na-rendition1
Guest • May 31st, 2009 at 5:43 pm
I agree. Another country should not have a low cost advantage because they treat their workers like slaves or fail to invest in infrastructure or adequate social programs. We need “wage tariffs” to level the playing field.
Guest • May 31st, 2009 at 5:43 pm
More Auto Bankruptcies (Karen DeCoster – May 29)Two large suppliers, Visteon and Metaldyne, filed for bankruptcy yesterday.Visteon once had 3,000 workers milling about nine buildings at Visteon Village. Now there are 1,600 and more than a third of the building space is vacant.In Plymouth Township, Metaldyne once had three buildings but now is consolidating into one, said Township Supervisor Richard Reaume.I suspect that American Axle (GM is its key customer) and Lear (which drew 42 percent of its 2008 revenue from GM and Chrysler) may be the next big ones to topple.http://www.lewrockwell.com/blog/
ToothFairy • May 31st, 2009 at 5:45 pm
Children, childrenPlay nicely with each other
Guest • May 31st, 2009 at 5:45 pm
This is not central planning, it’s central stealing.
Guest • May 31st, 2009 at 5:54 pm
Agree on the increase in tax, especially on the banksters who have robbed of taxpayer’s money. Their assets that were gained by fraud should be confiscated sooner or later and their acts should be tried at the courts of the United States for treason
Guest • May 31st, 2009 at 5:56 pm
might this help?GM bankruptcy plan clears bondholder hurdle | New York TimesAgreement over debt swap clears final obstacle to orderly bankruptcyBy Nick Bunkleyupdated 3:05 a.m. ET May 31, 2009DETROIT – General Motors’ bondholders finished voting Saturday on the company’s plan to exchange their debt for an ownership stake as high as 25 percent in G.M., the final obstacle to an orderly bankruptcy for the ailing carmaker.Bondholders with slightly more than 50 percent of G.M.’s $27.2 billion in bond debt agreed to support the plan by the deadline of 5 p.m., according to people briefed on the matter. Among the backers was a committee of large investors holding about 20 percent of G.M.’s outstanding bonds.G.M. offered the bondholders the opportunity to take a larger stake in the company after they had overwhelmingly rejected a previous exchange offer.Having at least half of them agree to support the swap would allow G.M. to file for bankruptcy protection on Monday and expect an easier restructuring.Under the restructuring plan, the United Automobile Workers union, through its retiree health care fund, would receive a 17.5 percent stake in the new G.M. and warrants to buy an additional 2.5 percent.Bondholders would initially get a 10 percent stake, along with warrants for 15 percent.The Treasury Department, which has lent G.M. about $20 billion since December, required the company to make deals with the union and bondholders to cut debt and expenses by June 1. But the deals are not seen as enough to prevent a bankruptcy. After the restructuring, the federal government could own as much as 70 percent of the company…
Guest • May 31st, 2009 at 6:17 pm
Secured Bank Lenders to GM to Get Full Recovery (i.e. biggest–jpmorgan chase & co, citigroup inc., credit suisse)U.S. Aims to Reduce Auto Maker’s Debt to $12 Billion or Less; Plans to Take Larger Stake in ReturnMay 26, 2009 — Secured bank lenders to General Motors Corp. would get a full recovery on $6 billion in loans made to the auto maker, under the bankruptcy plan being finalized this week by the U.S. Treasury, two people familiar with the matter said.The Treasury plans to inject a fresh $50 billion in various financings to back a GM workout, these people said, most of which would take the form of company equity.The hope is that a reorganized GM would have only about $10 billion to $12 billion in debt once it emerges from bankruptcy, said these people. Previously the government had considered letting GM exit bankruptcy with up to $40 billion in debt, but it determined earlier this month that GM could not handle that amount.GM currently has about $88 billion in debts and future commitments, including $35 billion in post-employment benefit costs and $20 billion already lent by the U.S. Treasury.To trim GM’s ongoing debt load, the government decided to take on a bigger stake in a reorganized GM — 70% instead of the previously anticipated 50% — while also forcing sharper concessions on the United Auto Workers union than had been projected.GM’s largest lenders include banks like J.P. Morgan Chase & Co. and Citigroup Inc. and Credit Suisse. GM has a $4.5 billion revolving line of credit that comes due in 2011 and a $1.5 billion term loan due in 2013.GM lenders will be getting much better treatment than did lenders to Chrysler LLC, which eventually received about 29 cents on the dollar for the $6.9 billion they were owed that automaker.http://online.wsj.com/article/SB124338322763456581.html
kilgores • May 31st, 2009 at 6:27 pm
Mr. Ferguson couldn’t “nail” Dr. Krugman with a railroad spike and a sledgehammer.SWK
g Anton • May 31st, 2009 at 6:39 pm
I did a Gogol search on “Obama sex photos crime ” and got the following:” Resultados 1 – 10 de aproximadamente 80,400,000 de Obama sex photos crime”.Eighty million plus instances? Well, I guess Obama and his brother have been very busy lately. That a-boy, Presidente! Let it all hang out!I wonder if he knows how to play the dozens.
Guest • May 31st, 2009 at 6:42 pm
At least here’s some light on the subject from King Harvest (which I am sure you don’t need since you were intelligent enough to ask the question: I have to admit credit default swaps are beyond my attention span—sort of like untangling wet knots):“GM Bankruptcy and Labor: From Sit Down Strikes to Credit Default Swaps”by Stephen DiamondMay 12, 2009 — The United Auto Workers gave organized labor a beachhead in the American economy with the great sit down strikes of 1937. Some seven decades later organized capital is looking to expel what remains of the UAW from GM and at the same time complete the isolation of the trade union to low wage immigrant labor based segments of the economy and the public sector. A labor movement that does not have leverage in the most productive center of an economy cannot hope to influence national social policy or progressive politics.Unlike the bloody Battle of the Overpass pictured above, however, today’s attack on labor is being wielded with complex financial instruments, instruments of fictitious capital. At GM, bond holders who hold credit default swaps have disrupted the ordinary incentive structure in a corporation entering the so-called “zone of bankruptcy”.Traditionally, holders of bonds were deserving of protection as the company approached bankruptcy because insiders could be tempted to use their control over corporate resources to loot the firm and leave less for those who had a higher priority for repayment in bankruptcy. Thus, courts have held recently that as a company like GM looked more likely to need the protection of bankruptcy its board of directors would have a legal obligation to shift its ordinary fiduciary duty to protect shareholders to the bond holders.But the emergence of derivative instruments like credit default swaps (CDS) has twisted our ordinary understanding of incentives in corporate governance. Credit default swaps are speculative instruments created to offer a way for investors to bet on the value of bonds that ordinarily would not be open for speculation. The purchaser of credit default swap “protection” pays an annual premium that amounts to several percentage points of the value of the underlying bond (perhaps 2% on a $10 million investment which translates into $200,000 in annual premiums to the “seller” of the protection). If a “default” event were to occur on the bond – such as the failure by the issuer of the bond to make an interest payment or in extreme circumstances outright default on the bond – then the seller of the CDS protection must pay the buyer of the protection a certain amount (typically the difference between the par value and the current (depressed) market value of the bond).Hence, the term CDS: the credit is the original bond, the default is the event that triggers payoff, and the swap refers to the fact that by putting a CDS in place, the risk of owning the bond has shifted from the bondholder to the seller of protection. One huge seller of protection on bonds was AIG and it sold a huge amount of CDS protection on sub prime mortgage bonds that have now turned out to be worthless. That has obligated AIG to make good on its promises – which they are doing with taxpayer money.At GM, it turns out that one default event that will trigger repayment to bondholders is the filing of bankruptcy itself. So investors who bought GM bonds at par, e.g., valued at 100 cents on the dollar now hold bonds that are valued at far less, perhaps 20 cents on the dollar. If GM files for bankruptcy then the seller of CDS protection to a GM bondholder would owe the bondholder at least 80 cents on the dollar, if not more as the bond fell in price. So on $10 mn of GM bonds the payoff would be $8 mn plus the $2 mn that the bondholder could get by selling the bonds. If the bonds fell to zero in price, the holders could get the full $10 mn.That is just a simple example and there are lots of complexities in this situation. In fact, for example, GM bonds are trading at a different price points – somewhere between 6 and 12 cents on the dollar. There is a net exposure for sellers of CDS protection of about 2.4 billion dollars on a total of 34 billion dollars of outstanding CDS positions (sellers of CDS protection sometimes buy CDS protection themselves to hedge against events such as this, but unlike regulated insurers they do not have to have any actual cash reserves to use to pay off in case of such a catastrophic event.) CDS protection also requires an upfront payment that increases as the bond falls in value, so at GM it costs $5 mn a year to protect $10 mn in bonds today (4.5 mn upfront and then a payment of 5% a year or $500,000). Of course, that makes the bonds illiquid today or at least uninsurable.But here is the key point: GM under US government pressure has offered current bond holders the “opportunity” to exchange their current bonds for common stock in a restructured GM. The bond holders would end up with 10 percent of the equity with the government owning 50% and the UAW’s VEBA owning 39%. Current shareholders would end up with one percent. Apparently, though, bond holders with CDS protection believe that their CDS payoff if GM files for bankruptcy is worth more than the eventual value of the 10 percent common stock position.Now look at this deal from the viewpoint of current GM managers. If the bond holders turn down the exchange offer, GM files for bankruptcy which leaves the managers in control (they become in bankruptcy parlance a “debtor in possession”) and they get several months to put together a plan of reorganization. That may lead to the wipe out of the bond holders anyway but they won’t care because they will have received their CDS payout! But here is the magic:the payout to bond holders is not made by GM or GM managers – it will be made by the sellers of the CDS protection, perhaps AIG or JPMorgan, and perhaps with taxpayer dollars! Thus, GM is freed of its bond obligations paid off with “other people’s money” and they remain in control of the company now free to use the power of a federal judge to tear up the UAW contract and their remaining obligations to pay billions into the healthcare VEBA.And once they have cleared their books of the bonds, the VEBA and the UAW, they are free to ramp up offshore production to India and China, as they have been planning for several years.By the way, GM bondholders were warned of bankruptcy risk at GM when they bought their bonds. They got the benefits of mandatory disclosure of risk factors affecting GM when the bonds were first issued. But the rank and file members of the UAW who “bought” the proposed multi-billion dollar VEBA to manage their health care plan were told by UAW President Ron Gettelfinger that their health care would be safe from GM bankuptcy “for 80 years.” So no CDS protection was purchased by the UAW to protect its payment obligations from GM.The Financial Times has more on this issue here. There is some interesting discussion of the issue on the blog Naked Capitalism here. And here is a video of an investor explaining how CDS protection is wreaking havoc in another bankrupt company.http://02ce1ab.netsolhost.com/KingHarvest/?p=1029
Mark • May 31st, 2009 at 6:55 pm
THANK YOU THANK YOU THANK YOU Chignos! I’ve got this dead spot in my brain that just can’t seem to hang on to this! (of course, many will argue that the dead spot is much bigger…)Mark
Guest • May 31st, 2009 at 7:04 pm
A quote from Alan Abelson today in “Read All About It,” his weekly column in the June 1 Barron’s, Up & Down Wall Street:“Thus, there were some hosannas and chirping galore about the end of the slump in manufacturing when a 1.9% increase was reported for new durable-goods in April. What seemed to have escaped general recognition among the gushing reporters was that the March numbers were sharply reduced from a decline of 0.8% to a drop of 2.1%–which might just have had something to do with April’s unexpected jump.”
GSM • May 31st, 2009 at 8:13 pm
Is the USD crisis showing up at the short end of the yield curve?http://blogs.cfr.org/setser/2009/05/29/record-demand-record-angst/Read this. It makes absolute sense. Big US debt holders are in a “dollar trap”. They need time to extricate themselves from that. Short dates Treasuries are part of that plan;Note the comments of WSTroupe;”China and its partners are working to keep the dollar from crashing until they have set in place new measures aimed at protecting themselves from a crash. Thus, they keep buying dollars, but as noted here in this blog, only at the short end of the Treasury asset curve. At present, they absolutely cannot afford to let the dollar go into crisis. And they cannot yet afford to let their own currencies appreciate against the dollar – they need to keep leveraging the U.S. market for their export-based economies until they can achieve a significant measure of decoupling from the U.S.”"As Brad points out, this piling into the short end of the yield curve for Treasuries is increasingly worrisome for the U.S. and also for them, too. In the virulent risk aversion that this global crisis created, we saw global investors piling into short-dated Treasuries en mass. Now we’re also seeing CBs do the same as they move out of riskier U.S. assets into the best U.S. assets, ones that have the deepest and most liquid market – short-dated Treasuries. These CBs know they aren’t going to let the dollar fail anytime soon, if they can possibly help it. They’ll keep propping it up by buying short-dated Treasuries. Thus they’ll put de facto pressure upon the Fed and domestic U.S. citizens to buy up the longer-dated Treasuries – so the CBs are smart – they’re forcing the Fed and domestic U.S. savers to act as their proxies to do the dirty work of buying the skanky longer-dated Treasuries. “Now, how does that reconcile with the Fed and Treasury spruiking about recovery? Could it be that Geithner’s real reason for the visit to China is to convince them that loading up at the short end of the yield curve is creating real problems for the Treasury in selling long term debt – and making a problem for China too?One thing is certain, if what Troupe is saying is accurate then holding things together is Geithner’s #1 prority right now. If China is in fact moving more of it’s USD assets to the shorter end of the yield curve, long term rates have MUCH higher to go.
Mark • May 31st, 2009 at 8:32 pm
But, as Marx pointed out (as did Henry Ford, but I wanted to make a more stark figure), unless you pay your employees well you’re not going to be able to actually sell what you make.Everything worked while there was significant growth. And this requires substantial income via exports. The US’s exports have nearly vanished, with the exception of the USD. US consumption of oil has been what made things work: a flood of USD means that those USDs have to be recycled back: this recycling has increasingly been to purchase UST. At some point people will realize that they cannot eat either USDs or USTs.But back to the immediate topic: boosting US jobs. Unless others in the world can afford what is produced, which will mean that production costs will have to be substantially lower than by other countries, US good (and services) will not be consumed.In many ways, such as pointed out in this article, funneling money at the US auto sector is a bigger mistake than just dumping the money into people’s pockets.Mark
Pecos Banker • May 31st, 2009 at 9:03 pm
Bill Moyers had a good program on this last week. When asked why the single payer was not even on the table, he simply replied that it would be a waste of time since it had no possibility of passing. Who could argue with that logic?
Anonymous • May 31st, 2009 at 9:45 pm
What is ironic is that the Bilderberg thing was for years relegated to the fringe conspiracy genre. I guess one of the positives of instant information is the revelation that such groups do indeed exist. So the spin now moves to manage the perception of their sphere of influence:(note because of the stigma I post anonymously)http://www.theglobeandmail.com/report-on-business/article1133085.ecehttp://www.guardian.co.uk/world/2009/may/18/bilderberg-charlie-skelton-dispatchhttp://www.timesonline.co.uk/tol/news/world/europe/article6283373.ecehttp://www.stripes.com/article.asp?section=104&article=62737http://news.bbc.co.uk/1/hi/magazine/3773019.stmhttp://www.boston.com/news/world/europe/articles/2009/05/16/greek_nationalists_protest_bilderberg_club_meeting_1242501607/http://pqasb.pqarchiver.com/chicagotribune/access/582582072.html?dids=582582072:582582072&FMT=ABS&FMTS=ABS:AI&date=Oct+07%2C+1965&author=&pub=Chicago+Tribune&desc=FORD+ADMITS+HE+FELL+INTO+SECRET+GROUP&pqatl=googlehttp://www.sfgate.com/n/a/2009/05/16/international/i121835D27.DTLhttp://www3.signonsandiego.com/stories/2009/may/16/eu-greece-bilderberg-club-051609/http://www.pittsburghlive.com/x/pittsburghtrib/opinion/s_627355.htmlhttp://news.yahoo.com/s/ap/20090516/ap_on_re_eu/eu_greece_bilderberg_clubhttp://74.125.95.132/search?q=cache:rjwftX5nsesJ:www.palmbeachpost.com/shared-gen/content/shared-gen/ap/Europe/EU_Greece_Bilderberg_Club.html+ATHENS,+Greece+(AP)+%E2%80%94+Police+heavily+guarded+a+luxury+resort+in+Greece+on+Saturday+where+a+secretive+annual+rendezvous+of+top+politicians&cd=8&hl=en&ct=clnk&gl=ca
Anonymous • May 31st, 2009 at 9:54 pm
Fry is one of the good guys who is very very credible. Zerohedge has been for weeks been showing his readers the data that suggests (demonstrates) significant market manipulation.The MSM has been hinting at such shenanigans by the PTB. It is interesting to note that consumer sentiment and market behavior are strongly correlated.Tim and Ben with their puppet master Summers supported by a cast of thousands of “journalists” are using the only weapon left in their arsenal – PR or stated more accurately in its pejorative form, propaganda.
Nostradamus • May 31st, 2009 at 10:42 pm
Servitus MonetariiWhen the mass of securitiesHas grown to the extentThat the expected debt service underlying those securitiesExceeds the sum total of the heavenly constellationsMultiplied by the number of grains of sand on all the beachesThen the President will double the number of stars by decreeAnd by statistical refinementAvert a universal crisis of repayment.When the mass of securitiesHas grown to the extentThat the expected debt service underlying those securitiesExceeds the sum total of the heavenly constellationsMultiplied by the number of grains of sand on all the beachesThe President will double the number of stars, by decreeAnd by statistical refinementavert a universal crisis of repayment.
Mandarin • May 31st, 2009 at 10:54 pm
If this is the current Chinese strategy, then it seems that foreign CB’s will let the long end of the curve spike, the chips can fall where they may. If the result is crunch and further deflation here, then so be it. At least the dollar will not depreciate. This is a value-preservation strategy for their main foreign reserve. It’s short term thinking. But looking longer term, if the deflation is severe enough here to threaten default on Treasury debt, then the outcome will clearly be a new global currency and payment regime – with IMF type austerity, this time imposed on the US. It’s not pretty, but that’s just what time it is.
Crito • May 31st, 2009 at 11:14 pm
While I don’t have much sympathy for conspiracy theories – how can ‘they’ be so smart as to exert their fiendish control over every event, while the rest of humanity is so dumb – I can join with you in lamenting the trend. At best, the New Order can ensure a modicum of stability in the world, a greater or lesser semblence of law. That’s not all bad. But sure, it’s not going to be the Athenian Golden Age. Civilizations rise and fall, I doubt at the direction of one man or a small group. A lot of uncontrollable trends, pushed by human need and only slightly tempered by reason, are leading to this outcome. If you wish, by all means organize the revolution that guarantee freedom. In the meantime, I’ll focus on preserving and extending my humanity.
Softwarengineer • May 31st, 2009 at 11:23 pm
IF YOU THINK ITS GOING TO STOP WITH GM, YOU HAVE NO FORESIGHTI see Toyota/VW next, probably banrupt or severely mitigated by 2010/2011. Expect foreigners to close American plants first, it always works that way. GM did it to Mexico and Canada too.With America’s private sector tax/job base butcher-axed and foreigners’ dire need for America to buy their products, who’s going to save Toyota/VW? China and India? LOLIronically, in my opinion, the health of Toyota/VW was kept going by Americans buying American cars and keeping that money in the local economy to buy foreign. Its gone now.
GSM • May 31st, 2009 at 11:52 pm
This and the recent gold surge seem to correlate one another.
Mark • June 1st, 2009 at 12:30 am
I’m still thinking, and I’m still working on a conclusion, though I don’t really think that there is anything such as a conclusion.Lithium or any other repository is just that, a repository, not an energy source per se. While more efficient storage could be viewed as beneficial, one only need look at what the application of MORE energy (directed by man’s hands) is likely to do. Energy means work, and more work means the manipulation (a strong argument is possible for “destruction”) of the environment. With increases in population there becomes more urgency for more food, which means that more land and energy will have to be applied to making food available. Unfortunately, with man’s influence, our climate/environment isn’t as predictable as it once was, thus causing a greater instability to current food production schemes.Yes, we can harness more energy, but then what? We’ve had really cheap and powerful sources of energy for over a hundred years. Nature hasn’t benefited; and, before too long, we will find that mankind really hasn’t benefited either (not when viewed in the frame of perpetuating our species).Mark
Mark • June 1st, 2009 at 12:34 am
Spot on!And apply this to everything!I’m really pissed, as someone who intelligently didn’t purchase a Hummer, that in some way I’m now responsible for supporting the company that makes/made them!Mark
Michelle • June 1st, 2009 at 1:36 am
Absolutely the world’s central banks are in collusion with each other, case in point, currency swaps. All these economies are suffering the same demise and they understand that together they can, at least in the short term, mitigate a disaster. The level of inflation must continue in order for us to see “prosperity”, but we all know the truth, that we have reached the upper limit, and it’s just a matter of time before we burn out with not so much as a whimper.Isn’t it interesting that my first mortgage had a 13% interest rate, my second carried a 9%, my third was 6.5%, and my fourth is currently just over 5% over a span of just 25 years? These lower rates must continue in order to achieve “growth”. But we all know that these lower rates became necessary in order to sustain higher asset prices which have been very inflationary, contradictory to the government’s bogus CPI. If rates were to hit 13% again, who in the world can afford a $250k home? Based on this analogy, interest rates are inverse to asset prices. Maybe we should welcome rising interest rates and price risk as it should be, rather than trying to prime the pump with all this cheap credit. Cheap credit leads to speculation and higher prices, and we’ve seen plenty of this already. Why not accept a healthy dose of deflation and get prices back to where Joe Sixpack can afford a home on minimum wage without his spouse working? Because we’ve created a monster so immense that not just the Fed but many central banks must coordinate a rescue plan, as faulty as it is. I say pull out all the stops and let it collapse as it should and rebuild from ground zero. If not now, when?
Anonymous • June 1st, 2009 at 2:43 am
DelistedBankruptMkt cheersGoebel must be happyGeneral Motors Corporation (GM) (NYSE: GM), is a global automaker founded in 1908 with headquarters in Detroit, Michigan. It is the world’s second-largest automaker after Toyota, ranked by 2008 global unit sales.[3] GM was the global sales leader for 77 consecutive calendar years from 1931 to 2007. It manufactures cars and trucks in 34 countries. GM employs 244,500 people around the world, and sells and services vehicles in some 140 countries. In 2008, 8.35 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling.[4]
Rcoutme • June 1st, 2009 at 5:09 am
Yeah, because Communism worked so well, right? Give me a break! Private capitalists are the instrument for creating wealth, not those employed by them.
Guest • June 1st, 2009 at 5:26 am
Its likely that Geithner is going to China to offer them a dealChina gets a seat at the table at global institutions, IMF, World Bank, etc. in exchange they will need to support the dollar and let the Yuan continue its previous appreciation
Wolf in the Wilds • June 1st, 2009 at 6:01 am
Hahah but you should note that the last 2 months the number was revised DOWN 2% in March and February. The durable good order in Feb was $165.6b and US$161.5 in April. Tha is a decline of 2.5% for the months from Feb to April. I don’t think that is even close to good news don’t you think?
Wolf in the Wilds • June 1st, 2009 at 6:07 am
Sorry I take this back. Its worse! They revised the March numbers down to $161.8b! I wonder if ANYONE bothers to look at the data anymore.
Dan • June 1st, 2009 at 6:16 am
I am sure that I am not the only one on this blog questioning myself if the general negative spirit presented here is so wrong considering the markets euphoria around the world. Although I cannot find good reasons for such optimism, I am starting to believe that so few of us cannot be right and so many of them are wrong.I am confused…please help me and shed some light for me!
Brett in Manhattan • June 1st, 2009 at 6:47 am
Another person in need of a dose of the late, great Richard Ney circa 1975:”In times of recession, common stocks can advance more dramatically than in more properous economic periods. This is because the tendency of the public is to assume that stock prices only advance to the accompaniment of good earnings.Specialists capitalize on this myth by advancing prices stock prices when conditions are at their worst and dropping prices when conditions are booming.”It’s a testament to the coercive power of the financial media that so few people really know how the market works.
Michelle • June 1st, 2009 at 6:57 am
Dan,Plain and simple, retail investors, i.e. you and me, are not driving the markets’ euphoria, rather it is a combination of excess liquidity and a coordinated effort led by the world’s central banks to prop up the markets. A theory exists that declining stock markets cause recessions and rising markets increase optimism. Sure, it’s just a theory, but it seems to be playing itself out as we speak.Japan last week openly disclosed their plan to inject billions into their stock market and if they are willing to publicly disclose their intentions, what countries are and have been doing it of late and haven’t publicly disclosed this fact? Think about it.
RED • June 1st, 2009 at 7:02 am
Dan,The best performing stock market over the last ten years (in nominal terms) was in Zimbabwe. Inflating the money supply and devaluing your currency has some great effects on investment. Earnings from companies from overseas operations go up. Exports become more competitive. If the US government successfully devalues the USD, then you would expect the stock market to respond positively. However, what you gain in nominal terms you lose in real terms because everything will cost more, and you can’t go on any overseas trips.
Morbid • June 1st, 2009 at 7:15 am
M,I like what you say. It seems to agree with the following article someone posted recently on another thread. As a retiree I know that inflation will not be good for that growing segment of the population – it will put all like us in the poor house.The Harms of Inflation versus the Benefits of Deflation (2007)
When it comes to monetary policy, politicians, economic planners at the Federal Reserve, and public opinion are afraid of entirely the wrong scenario. They pursue a deliberate gradual inflation of the money supply for fear that the opposite tendency – a great deflation might take hold. They allege that deflation is a great calamity, and that mild inflation is a lesser evil or even a preferable policy to follow. The Keynesians among them contend that inflation encourages investment in business enterprises and provides an economic stimulus.And yet the conventional wisdom has it all wrong. The politicians in fact favor the devil they know – inflation – over the angel they don’t know – deflation. Indeed, deflation has historically been an economic blessing, while inflation has wreaked nothing but havoc in individual finances and in entire societies.
Guest • June 1st, 2009 at 7:19 am
Grand Theft Auto: How Stevie the Rat bankrupted GMby Greg PalastMonday, June 1, 2009Screw the autoworkers.They may be crying about General Motors’ bankruptcy today. But dumping 40,000 of the last 60,000 union jobs into a mass grave won’t spoil Jamie Dimon’s day.Dimon is the CEO of JP Morgan Chase bank. While GM workers are losing their retirement health benefits, their jobs, their life savings; while shareholders are getting zilch and many creditors getting hosed, a few privileged GM lenders – led by Morgan and Citibank – expect to get back 100% of their loans to GM, a stunning $6 billion.The way these banks are getting their $6 billion bonanza is stone cold illegal.I smell a rat.Stevie the Rat, to be precise. Steven Rattner, Barack Obama’s ‘Car Czar’ – the man who essentially ordered GM into bankruptcy this morning.When a company goes bankrupt, everyone takes a hit: fair or not, workers lose some contract wages, stockholders get wiped out and creditors get fragments of what’s left. That’s the law. What workers don’t lose are their pensions (including old-age health funds) already taken from their wages and held in their name.But not this time. Stevie the Rat has a different plan for GM: grab the pension funds to pay off Morgan and Citi.Here’s the scheme: Rattner is demanding the bankruptcy court simply wipe away the money GM owes workers for their retirement health insurance. Cash in the insurance fund would be replace by GM stock. The percentage may be 17% of GM’s stock – or 25%. Whatever, 17% or 25% is worth, well … just try paying for your dialysis with 50 shares of bankrupt auto stock.Yet Citibank and Morgan, says Rattner, should get their whole enchilada – $6 billion right now and in cash – from a company that can’t pay for auto parts or worker eye exams.Preventive Detention for PensionsSo what’s wrong with seizing workers’ pension fund money in a bankruptcy? The answer, Mr. Obama, Mr. Law Professor, is that it’s illegal.In 1974, after a series of scandalous take-downs of pension and retirement funds during the Nixon era, Congress passed the Employee Retirement Income Security Act. ERISA says you can’t seize workers’ pension funds (whether monthly payments or health insurance) any more than you can seize their private bank accounts. And that’s because they are the same thing: workers give up wages in return for retirement benefits.The law is darn explicit that grabbing pension money is a no-no. Company executives must hold these retirement funds as “fiduciaries.” Here’s the law, Professor Obama, as described on the government’s own web site under the heading, “Health Plans and Benefits.”"The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits.”Every business in America that runs short of cash would love to dip into retirement kitties, but it’s not their money any more than a banker can seize your account when the bank’s a little short. A plan’s assets are for the plan’s members only, not for Mr. Dimon nor Mr. Rubin.Yet, in effect, the Obama Administration is demanding that money for an elderly auto worker’s spleen should be siphoned off to feed the TARP babies. Workers go without lung transplants so Dimon and Rubin can pimp out their ride. This is another “Guantanamo” moment for the Obama Administration – channeling Nixon to endorse the preventive detention of retiree health insurance.Filching GM’s pension assets doesn’t become legal because the cash due the fund is replaced with GM stock. Congress saw through that switch-a-roo by requiring that companies, as fiduciaries, must”…act prudently and must diversify the plan’s investments in order to minimize the risk of large losses.”By “diversify” for safety, the law does not mean put 100% of worker funds into a single busted company’s stock.This is dangerous business: The Rattner plan opens the floodgate to every politically-connected or down-on-their-luck company seeking to drain health care retirement funds.House of RubinPensions are wiped away and two connected banks don’t even get a haircut? How come Citi and Morgan aren’t asked, like workers and other creditors, to take stock in GM?As Butch said to Sundance, who ARE these guys? You remember Morgan and Citi. These are the corporate Welfare Queens who’ve already sucked up over a third of a trillion dollars in aid from the US Treasury and Federal Reserve. Not coincidentally, Citi, the big winner, has paid over $100 million to Robert Rubin, the former US Treasury Secretary. Rubin was Obama’s point-man in winning banks’ endorsement and campaign donations (by far, his largest source of his corporate funding).With GM’s last dying dimes about to fall into one pocket, and the Obama Treasury in his other pocket, Morgan’s Jamie Dimon is correct in saying that the last twelve months will prove to be the bank’s “finest year ever.”Which leaves us to ask the question: is the forced bankruptcy of GM, the elimination of tens of thousands of jobs, just a collection action for favored financiers?And it’s been a good year for Señor Rattner. While the Obama Administration made a big deal out of Rattner’s youth spent working for the Steelworkers Union, they tried to sweep under the chassis that Rattner was one of the privileged, select group of investors in Cerberus Capital, the owners of Chrysler. “Owning” is a loose term. Cerberus “owned” Chrysler the way a cannibal “hosts” you for dinner. Cerberus paid nothing for Chrysler – indeed, they were paid billions by Germany’s Daimler Corporation to haul it away. Cerberus kept the cash, then dumped Chrysler’s bankrupt corpse on the US taxpayer.(“Cerberus,” by the way, named itself after the Roman’s mythical three-headed dog guarding the gates Hell. Subtle these guys are not.)While Stevie the Rat sold his interest in the Dog from Hell when he became Car Czar, he never relinquished his post at the shop of vultures called Quadrangle Hedge Fund. Rattner’s personal net worth stands at roughly half a billion dollars. This is Obama’s working class hero.If you ran a business and played fast and loose with your workers’ funds, you could land in prison. Stevie the Rat’s plan is nothing less than Grand Theft Auto Pension.It doesn’t make it any less of a crime if the President drives the getaway car.******Economist and journalist Greg Palast, a former trade union contract negotiator, is author of the New York Times bestsellers The Best Democracy Money Can Buy and Armed Madhouse. He is a GM bondholder and card-carrying member of United Automobile Workers Local 1981.Palast’s latest reports for BBC Television and Democracy Now! are collected on the newly released DVD, “Palast Investigates: from 8-Mile to the Amazon – on the trail of the financial marauders.”
Guest • June 1st, 2009 at 7:28 am
Taleb long inflation:http://link.ft.com/r/WDI4RR/CGT98/YGKIA/KV7TP/L7G6R/UP/h
Morbid • June 1st, 2009 at 7:38 am
So, in the end, how many of the 3 million jobs were saved?Only $50 billion needed? That seems low. I guess they don’t count the socialized subsidized tax breaks that will be needed to induce enough to want to buy a VOLT which the WSJ said late last year would be about $45,000. Compare that to a Prius @ $22,000. This puppy will be in AIG bail-in/bail-out territory before it is over.
Morbid • June 1st, 2009 at 7:41 am
Michelle, (from above a ways – on Inflation vs Deflation)I like what you say. It seems to agree with the following article someone posted recently on another thread. As a retiree I know that inflation will not be good for that growing segment of the population I am in – it will put all like us in the poor house.The Harms of Inflation versus the Benefits of Deflation (2007)
When it comes to monetary policy, politicians, economic planners at the Federal Reserve, and public opinion are afraid of entirely the wrong scenario. They pursue a deliberate gradual inflation of the money supply for fear that the opposite tendency – a great deflation might take hold. They allege that deflation is a great calamity, and that mild inflation is a lesser evil or even a preferable policy to follow. The Keynesians among them contend that inflation encourages investment in business enterprises and provides an economic stimulus.And yet the conventional wisdom has it all wrong. The politicians in fact favor the devil they know – inflation – over the angel they don’t know – deflation. Indeed, deflation has historically been an economic blessing, while inflation has wreaked nothing but havoc in individual finances and in entire societies.
Morbid • June 1st, 2009 at 7:48 am
This is about the size of it. Hyperinflation.It seems the end is near after all.I wonder if the powers-at-be will regulate the commodity markets next.
Anonymous • June 1st, 2009 at 8:21 am
I think NR never covered this part in his write-ups. I believe he still maintains this is ‘bear market rally’.
Guest • June 1st, 2009 at 8:25 am
ALL IS WELL AGAIN: Cisco to replace GM and Travelers to replace Citigroup in DJIA. Throw out the dogs and put in some new winners-until they need replacing! This should keep the DOW going up, up and away!
Anonymous • June 1st, 2009 at 8:26 am
If all central banks around the world are printing money like mad, why is USD falling against other currencies? And why against Euro? aren’t they printing as much money if not more?
dan • June 1st, 2009 at 8:28 am
Thanks Brett and REDWouldn’t that mean that the market has decided that the inflation and possibly hyper-inflation is in the cards? Therefore keeping your money in the “safe” investments (saving accounts, bonds, money markets…) would guarantee the big losses in the actual value of your holdings.I guess that is the big question: inflation or deflation? It seems that the majority has decided that it will be inflation after all.
Dan • June 1st, 2009 at 8:37 am
If there is a world wide coordinated effort by Central banks to prop-up the markets, they will not stop half way. They will go all the way until we all “feel good” and we start spending at our individual paces. The intention is possibly to break the fear factor that has been part of everyday life for the past year (or so).If they persist in the “feel good” money printing effort, the inflation or hyper-inflation must be the more probable result.
Guest • June 1st, 2009 at 8:58 am
The banks will feed off the carcass of the real economy, and all will suffer!Pure Kleptocracy!!!
Michelle • June 1st, 2009 at 9:15 am
I believe the old paradigm of fundamentals no longer exists, so explaining exactly why global currencies fluctuate in the manner in which they do has more to do with speculative behavior, namely that of U.S-based investment banks.Does anybody really think about why global stock markets tanked and its cause? The roots can be traced to our endless supply of money printing, namely through securitization and it’s layered derivative instruments and we know how this leverage created a ton of speculation, hence $147/bbl oil.Now that the securization model is dead and the potential for depressionary levels of deflation are upon us, the central banks must, I repeat, must support the markets at all costs, and unfortunately that money is moving into speculation again.I see on this blog too frequently that everyone gets caught up in the fundamental reasons why things happen. I say that fundamentals don’t fly when the we have too much intervention in the markets and the governments are trying to avert a depression and will stop at nothing.I myself have been taking advantage of all this government support – my stock trading account is up almost 300% so far this year. Of course, my 401(k) is just even as I jumped into stocks on March 4th and then transferred everything back to money market after I became emotional over a decision made by Obama that I totally disagreed with. I have since moved some money back into stocks realizing that there is no way TPTB will let the stock market plunge any time soon.
Hubbs • June 1st, 2009 at 9:44 am
Depends how much money the govt has slipped to the financials, i.e., keeping them stoked so they can inflate the stock and commodities market,and draw in sidelined cash.Meanwhile, that lightweight preppie Geithner off to China to tell them to buy more long term treasuries to keep the spreads under control. Isn’t this about as pathetic as when Paulson went there to convince them to buy more of our “financial instruments”?Menawhile, reporting at the likes of CNBC goes on much like a telethon fund raiser.
Guest • June 1st, 2009 at 9:58 am
recession? No way!comeon.. give me a break please.
Guest • June 1st, 2009 at 9:58 am
recession? No way!comeon.. give me a break please.
PeteCA • June 1st, 2009 at 10:03 am
If there is a global conspiracy by the central banks to pump the markets – it will eventually backfire. The money is more likely to wind up in commodities, precious metals, and hard assets. Just my opinion.Fortunately, investors in the credit markets can’t be easily duped. The siutation in the USA with spiralling debts speaks for itself. No concrete action to arrest this situation (other than direct money printing) is a signal that credit market investors and currency investors can’t ignore.The Fed should have made a massive behind-the-scenes effort to deleverage the major investment banks on Wall Street and get them out of all these derivatives trades. The derivatives should have been scaled back by at least a factor of 10. This situation will come back to bite the Fed in a really major way in my opinion. My guess is that at least one of these banks will wind up taking huge losses on derivatives trades. Then the Fed will have to bail them out.PeteCA
Bubble Alan • June 1st, 2009 at 10:13 am
is a uptrend of 10 Year Treasury Yield really helpful to a “bull” market?
Guest • June 1st, 2009 at 10:16 am
I think this is a worse drubbing for the bears and gloom+doomers than the drubbings of Bulls in the market crash last year.There has been NO correction at all for bears to get out. There were plenty of days Sep-Nov for bulls to get out. Bears have been trapped and getting killed slowly and surely.The fools are still holding out, but they will soon give up. S&P is surely going back up to 1200 by year-end.
Michelle • June 1st, 2009 at 10:18 am
Morbid,Deflation has a way of bringing prices back in line but certainly isn’t popular with the politicians as the above article states. I am hopeful that in the medium term deflation will be allowed to happen, interest rates realigned to more closely reflect risk, and that the financial system is rebuilt on bedrock rather than quicksand. I sound optimistic but deep down I fear high inflation same as you.The deflationary pressures are fierce and it will be interesting to see going forward whether inflation really can take hold or not. If commodity prices become unrealistically high again as they did last summer, I seriously doubt politicians will continue to support ongoing money printing as consumers can’t take that kind of hit, and a Zimbabwe strategy has few winners.
Michelle • June 1st, 2009 at 10:33 am
“Fortunately, investors in the credit markets can’t be easily duped.”PeteCA, how can you say that? Investors HAVE been duped, that’s why we’ve seen massive deleveraging. Once burned, twice shy. The treasury market seems to smell a rat NOW, but none of these investors were concerned about anything until 18 months ago and by then it was too late.As you know, AIG held the largest pool of derivatives, and you know already who bailed them out. Hedge funds are still sitting on a bunch, which is why we saw a huge wave of redemptions last fall and early this spring. It’s unfortunate that we as taxpayers have to backstop all these derivative trades, but if you think about what’s happening with the Dow shooting up 200 points on a day the largest corporate bankruptcy in history is filed, who’s profiting? Hedge funds! They are sitting on a cesspool of these WMD, and need to have profitable trades or the stock market will begin plunging again. So the Fed injects liquidity to support the markets on the premise that taxpayers don’t get soaked on these bets gone bad.
Guest • June 1st, 2009 at 10:46 am
╭∩╮（﹌___﹋）╭∩╮i think if i am right, maybe you are not corrrect
Guest • June 1st, 2009 at 11:06 am
Why stop at 1200? Since the US can print an unlimited amount of money, skew all data in the direction they desire, raise consumer confidence in the midst of the country’s largest bankruptcies in history, then S&P should surely make new highs; maybe it’s a good time to buy some 2010 options for S&P 1500!
Guest • June 1st, 2009 at 11:18 am
hey stupid, i cashed out everyday by shorting and making plenty of profit. try catch me if you can, and don’t forget buying more into a deep hole!
Guest • June 1st, 2009 at 11:20 am
all ammunition the bulls got are from the cheap money flooded by the fed. unfortunately that is coming to an end – when treasuries are crashing, the fed pump is choking, baby!
TfT • June 1st, 2009 at 11:21 am
NEW THREAD
Guest • June 1st, 2009 at 11:28 am
stupid people tend to think a short period of time is equivalent of forever. that’s an illusion.yes, the rally has been going longer than 12 weeks, so that makes you think it will last forever? if you keep thinking this way, your fortune will depart from you faster than lightening.
thimma • June 1st, 2009 at 12:33 pm
Price decrease is just one side of deflation. The other side is wage decrease and unemployment. For a retired person deflation maybe a good thing, but not for the working population.Deflation is BAD. Unemployment is BAD. Fed and Timmy’s duty is to avoid deflation and unemployment and as I have said before they will first use threat of inflation and then inflation itself to fight it. They are just doing their duty.Also, having a large number of retired boomers may not be liked by the powers that be. It is better to keep them busy – a retired boomer is a devil’s workshop. Maybe this whole credit boom and bust was designed to prevent the boomers from retiring.
Guest • June 1st, 2009 at 1:26 pm
Darn right….there are a lot of people with cash on the sidelines wanting to invest greedily to make up what they lost. Human nature…chase the illusion of wealth attainment. There is plenty of pent up demand for bullish investments. The next Bernie Madoff is lurking in the invesment waters…sharp suit, grandpa trusting looks, talk and all… CHOMP!
RED • June 1st, 2009 at 5:25 pm
I’m still not convinced on either inflation or deflation. What you really need to think about is devaluation and how that will effect you personally. ie higher oil prices, higher prices for imports. Investment opportunities should be prevalent in precious metals, and alternative energy, ie as oil prices go up, the returns from investing capital in alternative energy projects become much better
Mark • June 1st, 2009 at 7:44 pm
I don’t agree that fundamentals can be totally hidden/squashed.While money printing and other shenanigans have been going on, they are not the CAUSE of the distress. They are only in response to it, and, lacking a proper understanding of fundamentals of the courage to face them, they are trying to paper over the real problems: Infinite growth on a finite planet. Massive injections of demand from China and India have thrust us from the tipping point: the globalists, anti-everything except capitalism, sought to overcharge capitalism to defeat and take over; well, capitalism is so efficient it has done just what it was always going to do- process the earth faster than anything else could.I see that there’s now a new thread. I’ll post a link to a recent Paul Hawken speech, which speaks to the real fundamentals.Mark
Anonymous • June 2nd, 2009 at 10:38 am
It’s in Japanese, and it’s just a news article about a crime, totally unrelated to the topic at hand.
Incredible Truth • June 2nd, 2009 at 1:59 pm
NOT!
economicminor • June 3rd, 2009 at 8:40 am
As the problem with debt is that it needs to be serviced. The servicing costs act as a tax on the economy…. So all those who decry higher taxes should understand that there are more than one kind of tax. Inflation is a tax on production as is servicing debt…A company or a family with little debt is much leaner and more nimble than a company or family with loads of debt. If you are paying 20% or more of your income for debt servicing, you need 20% more income than the person who has no debt.Debt is the reason this country can not compete in the international market place, not that our workers are to expensive, except that our workers are to expensive because they have debt, the company has debt, the government has debt and all that debt is a tax on production making us uncompetitive.So how do we become competitive again? Get rid of the debts… What are we doing instead, refinancing institutional debt onto the backs of overly indebted taxpayers? How does this fix anything?The only good debt is the kind that is invested in something that repays itself and has a profit left over. All other debt is destructive and most of America’s debt is destructive, spent on consumption and not invested.
economicminor • June 3rd, 2009 at 9:12 am
Three additional reasons:1/ tax or cost of servicing to much unproductive debt2/ tax or cost of inflation3/ peg of US$ to Chinese yuanall three of these make us much less competitive and are underlying reasons for shipping our jobs off shore. Companies and workers in the US has to make a lot more to pay servicing costs of debts incurred for previous consumption. Then the government has to create debts that have servicing costs to pay for what can not be collected from overly indebted citizens and corporations thus creating inflationary pressure. All make us less competitive and as we have all noticed, this syndrome went parabolic in the last decade.Answer is to write down or write off unproductive debts… NR suggests to convert debt to equity but I have no clue how unproductive/unsecured consumer debts can be converted.. Anyone have any clue what he is writing about? Even property debts? How do you convert that debt to equity? Seems to me this just has to be written off????
economicminor • June 3rd, 2009 at 9:14 am
This is a fine concept but what about the millions who are already homeless and the millions that will be before this is over?No jobs and no credit and no money to deal with them or their issues….Are we getting set up to look more like India?
