Well it’s not often that I find myself in agreement with Summers and Geithner … nor with the Fed. But lately a couple of things have happened that almost seem encouraging. Well, almost. We’ll see what happens.First, Washington DC has turned down California for a bailout. We’ll see if this decision sticks (politicians are such weasels), but for now it’s a very encouraging sign. The legislators in California need to be forced to get their heads on straight. So this is a step in the right direction. One of the financial commentators – I think it was Mish (Mike Shedlock) – recently pointed out that California could effectively re-balance its budget if they simply stepped back in time. In other words, if they went back to the budget that was in force when Gov Schwarzenegger was first elected, that would generate a tremendous amount of $$ savings. Yep … apparently that’s how much CA spending has exploded in recent years. So all these cries from Sacramento that they are in terrible trouble are really nothing more than the yelps of a teenager whose excessive allowance has suddenly been cut off by the parents. Kudos to Washington for holding these state legislators with their feet to the fire.And as for the Fed, I came across these interesting comments from Donald Kohn while reading a recent commentary by Gary Dorsch.”But on May 24th, Fed deputy Donald Kohn tried to calm jittery Treasury bond investors, arguing that expectations of a V-shaped recovery are far-fetched. “The US-economy is only now beginning to show signs that it might be stabilizing, and the upturn, when it begins, is likely to be gradual amid the balance sheet repair of financial intermediaries and households. As a consequence, it probably will be some time before the Fed begins to raise its target for the federal funds rate.”The link to the full article is here:Gary Dorsch and The Yield CurveNote the comment … the upturn when it begins. That’s a far cry from the “green shoots” theory being pumped by Wall Street. So apparently someone inside the Fed is looking at theUS economy from a more realistic set of expectations (or differently than what is normally admitted in the Fed’s public statements).PeteCA

As I have noted in other threads – CA spending spree increased $40 billion in 4 years alone since Arnold… Roll things back to then has been my solution as well.Obi and company hope the Dems in CA will be able to raise taxes to close the budget gap so that further unemployment numbers are not racked up. They lack six seats for a super majority so it will be close. It’s Obi’s ground breaking ceremony, canary in the coal mine, floating a trial balloon approach to their eventual raising of taxes on the Fed side of the equation in order to close their budget deficits. I wonder if CA is not able to pass a further increase in taxes if the Fed will step in.Does anyone else perceive, sense – a coming tax hike for all citizens – in the claim that its a national emergency and we must all share the burden. This spend and tax culture has got to go.

Pete and I more often than not are on the same page… Any hint of raising taxes in california will be the worst thing they can do. it will be the final nail in the coffin for the state and the US economy. California is already the highest tax state in the country taking into account all types of taxes and asking for more blood from us rocks that dont have it will spell doom. They need to make the painful cuts. unfortunately, those painful cuts will lead to the loss of many more jobs…. so its sort of pick your poisen out here… what gets me is that FED,Giethner and Obama have given trillions to Wall street and the banks. why not pump in about 400 billion for all the states and stop all this bleeding by States. i knwo tis another bailout, but most people would have been for this instead of wall street. Human services and Education are about to take a mortal blow in all the states without help and what good is that going to for all Americans. just more pain and suffering and a “more Uneducated poplulation”. Maybe thats ther ened game, dumb us all up so we people cannot challenge them…

increasing taxes in California will kill the state and its people… they cannot get blood of a rock… already all tax revenues are down… they could increase the taxes, but if people are not spending, not working and real estate values continue to drop, they are swimming up stream. they will only increase the loss of jobs, forecloures and decrease consumer spending by rasing taxes. they need to cut period.

Pete, first comment … if Calif legislators couldn’t see the explosion in housing coming why would we even consider that they could collectively get us out of the mess they put us in? Morons … all of them! Remember, they were also giddy about the dot.com era!Secondly, I would suggest that the legacy costs is the major issue. We have already seen what Obama has done with union workers in the auto industry. Why would you believe they would treat CA state employees any different? Turbo Tax Timmy and Summers simply deflected but will cave in due time!Finally, with all do respect to Mish, the budget problems are deeper than a 30% total hair cut when this depression gets finished. When realestate gets done falling here it will most likely have values from the early 80′s. Can you imagine the OC or silicon valley at a buck a foot average? What’s that do to revenues for the state?

MM,It would be interesting to also have the data for the price of a barrel of oil on those same dates. My hunch is that we are being ripped off at a higher level this time around.I wish Obi would take some of these vital commodities off the Casino table. He seems intent on running more and more aspects of the economy so why not this?

Spot on, MM. You can’t raise taxes on an already over-indebted populace without prolonging and exacerbating the recession.

I agree- massive cuts, even though it will hurt millions in California, especially the kids and education, but the it has to stop somewhere. Borrowing or raising taxes will jsut delay the problem and increase the magnitude of the collapse when it finally happens.

I was in public school back in the late 50′s when they did an early and late session in elementary school. Early started around 7am and finished by noon. Late went 1PM to 6pm. The education seemed to work just fine. Twice as many kids taught at one place.How about stopping all summer school. You don’t pass do the grade over. Or year round school. How about teacher days done during summer rather than during the school year?Bottom line … lots of waste in education, imo. Highly over-rated! You happy with the cost to performance level in Calif?

U.S. Dollar: the Good, the Bad and the UglyAxel Merk, June 16, 2009“Russian President Medvedev suggests the dollar is on its way out; Russian Finance minister Kudrin says there is no substitute for the dollar. The Chinese see a need to diversify out of the dollar; the Japanese say their trust in the dollar is unshakable. Let’s look at this puzzle and make some sense of it.”"We have had a lot of talk of “green shoots”, but once one looks deeper, most negative news one hears are facts, whereas most positive news appears to be subjective forecasts and expectations of policy makers. Dark clouds on the horizon include sharply rising mortgage rates (in progress); major trouble in the commercial real estate sector; a continued dislocation in the housing market where home prices cannot be sustained by income; a big wave of foreclosures yet to come as many of those who bought their houses at the peak of the market in 2007 are likely to see big challenges in the summer of 2010 as their mortgages begin to reset. In the banking sector, problems have been brushed away by easing accounting rules. In Europe, a catastrophe in Baltic countries may only be a matter of time; while the IMF and central banks around the world may ride to the rescue, does this sound like the beginning of the exit strategy? Not to us.”Add to that the amount of debt that needs to be raised by the U.S. government. According to our calculations, at least US$15 billion may need to be issued every single business day until the end of the year. This will require a substantial ramp up from the pace seen in recent weeks, a pace that saw bond prices plunge (long term interest rates rise) due to the increased supply of government bonds in the market. When considering that summer months tend to be slower months for governments to issue debt (it’s vacation time around the world), we believe long-term interest rates may have to rise substantially later this year to attract buyers. The U.S. government will be able to finance its deficits, the question will be at what cost. Interest rates are one issue; the other is whether government activities will crowd out private sector borrowers. Corporate America also needs to finance its operations, not just the government, and where is that money going to come from? What about all the other countries that are issuing record amounts of debt? Just ask Latvia – a recent government bond auction yielded zero bidders. But even established countries, say Ireland, have seen the cost of its borrowing surge.That’s when the bad may turn to ugly: how will central banks, notably the Federal Reserve (Fed) in the U.S. react should interest rates soar? Will they allow it to happen as they currently posture? It looks to us that we risk a collapse of economic growth if the cost of financing soars. There is still too much leverage in the U.S. economy, at the consumer level in particular. At this stage, a broken system has been propped up; the housing market is seen as key to an economic recovery – and all that money printing will have been in vain if market forces overwhelm the Fed by pushing interest rates higher. Naturally, the Fed puts up a brave face. Ultimately, this may be a game of chicken where Fed talk aims to keep interest rates low. However, we believe the Fed may blink first, and increase its financing activities of the U.S. deficit; by printing the money to finance government debt, the Fed may jeopardize the U.S. dollar, in particular if the Fed, as we believe, will be “more efficient” at printing money than other central banks around the world.”The whole article can be read head here, also includes video interview links.http://www.merkfund.com/merk-perspective/insights/2009-06-16.htmlhlowe

Prolonging the recession?Mortgage applications are falling, retail sales are falling along with tax receipts from virtually every source. Credit card defaults are rising.States have little choice but to lay off workers and shut down spending.Corporations are raising money by diluting their existing stock values by issuing more and more shares. Sort of like what the federal government is doing to our currency.Consumer deleveraging is neither adequate nor is it doing what needs to be done as indicated by retail sales, lower taxes paid and still rising defaults. Besides, most of it is just refinance onto the backs of those who still work and spend. So in reality it is at best a zero sum gain for the economy yet a huge benefit for those who receive the bailout money.The green shoots analysts are seeing are just new weeds not new real or productive economic activity. Weeds eat up the nitrogen in the soil and gives back no benefit. That is what most of the government borrowing is doing.I just can’t see where the recovery people are talking about will come from. Not from Consumers which are still in aggregate, a long long ways from having excess income to spend. Not from most corporations which are also over their heads in debt and laying people off or shortening their hours… Not from state, county or city governments as they are also laying off and cutting back.. So is the recovery coming solely from the federal spending of borrowed and or printed money? That seems to be the only source I can come up with…And what is happening with the money they are borrowing/printing? Running up the cost of oil and other commodities? Which has just the opposite affect they are touting as rising energy cost act just the same as a tax but on both consumption and production. It acts like a tax on almost all forms of a economic activity…So again > Where is this recovery coming from? … Not exports as they are actually still falling… Debt has a funny consequence in that it dilutes its own value when used to service itself. It can not make the insolvent solvent again. All it can do is transfer wealth from those with no connections to those that have them.See the pictures from Iran. That is what the US streets will look like in a year or two. Timing is always difficult!

PeteCA – Is California systemically important in some way, to the rest of the USA, as well as the world given the size of its economy?

What I learned from FRONT LINE episode “Breaking the Bank” which aired last night (Tue, 16-June-09)1. Due to their heroic actions in Q4-08, Paulson & Bernanke rescued and “saved” the USA and Global economy from their own forecasts of certain and immediate extinction.2. They were able to do this by not “saving” Lehman Brothers, but by hoping that they could “announce before markets opened” on that fateful day last October, that Merrill Lynch (the alleged next IB to fall) would be purchased by an appropriate suitor.3. It turns out, according to FRONT LINE, that a few months after the announcement of the the marriage of B of A & Merrill that supposedly saved the domestic and global financial system – was a match made in hell, and that merging these 2-entities would break B of A, previously touted as a juggernaut of the financial world. (Thus the title of the episode, “Breaking the Bank.”)4. In December, when Lewis threatened to invoke the Material Adverse Consequences (MAC) Clause in the merger agreement to call off the deal, Paulson & Bernanke would not allow it, but in order to facilitate the merger given Lewis’s epiphany, the FED & Treasury secretly added terms (which were not disclosed to the public until 15-Jan-09)that would support B of A given the MAC that had developed.Any takers on what the hell FRONT LINE was trying to achieve last night?

The latest report is out from LEAP2020. Take it for what its worth-

Another good one:”[T]he same people, media and institutions, considered everything was for the best in the best of worlds 3 years ago, that there was no risk of a severe crisis 2 years ago, and that the crisis was under control a year ago. Their opinion is therefore highly reliable!”

Bob – no question that even if the state legislature actually solved the current (massive) budget problem, it’s still going to get worse next year.PeteCA

This might be a day late and dollar short, but in case anyone missed this article by Eric Janszen in Harper’s March issue:http://www.harpers.org/archive/2008/02/0081908I thought it was pretty good.

Simple. Create another bubble through unleashed easy monetary policy, achieve 80% public participation as confidence soars via the wealth effect, perceived wealth gets spent as consumers buy crap they don’t need from exporting countries, exporting countries try furiously to recycle those dollars by buying our treasuries in order to avoid domestic inflation, wash, rinse, repeat. It’s been happening for decades.

Under estimation. It will be closer to US$3trn.

Speaking of future events and prophesies:I said previously on these pages of the RGE Blog:1. The systemic collapse of the socio-economic system will bring a Dark Age upon us where, mileage will vary,2. The Cause of this collapse is borne out of Leadership in Hanlon’s Razor, ie, incompetence and stupidity,3. The collapse of the US dollar will come prior to end July 2009,4. That the “fix” is no more that a cash grab by the faithful guard and a power grab by the USFederal Reserve – a private, secretive stealth organization of deceptive practice.5. That Tim Geithner will become the most dangerous man in the USA.Now,Upon hearing last night of the confirmation of the Federal Reserve being given sweeping powers to directly manage and enforce economic, monetary, financial, commercial, corporate and merchantile affairs of the World,I now predict that this single action will launch, that which has been building since Bush I (and before),revolution and civil unrest, not only in the USA, but Worldwide. Anchored in such unrest, hyperinflation and instabilities, a series of major World wars will unfold between the USA and other Nations.I explain:The Federal Reserve under Benanke must now become much larger in order to confront its function and as I have said previously, will eventually absorb control over the IMF, Word Bank and the IBS. At the same time every Central Bank throughout the allied Western framework will be requested to pay full tribute to the FedRes. It is easy to accept that eventually the whole of all the other United Nations organizations willalso be placed under direct control of the FedRes.War will come as the FedRes necessarily switches its focus from saving the defunct and bankrupt banking system, on behalf of the USA, initially, to building itself and more importantly, surviving the total global socio-economic collapse that is definitely at hand.All the FedRes’s actioning in priority will be focused on survival, which will require the full obedience and compliance by all the global members of the central banking alliance. Political leadership in many countries will eventually pressure their FedRes central banker counter-parties to not be so obedient and forthright and this alonewill cause much irritation to the USA (as well as the FedRes). As a direct consequence, these disobedient countries will feel the imposition (war) of the USA at the direction of the FedRes.Prior to this, I believe that Benanke will retire (resign) and he will be replaced IMO by Tim Geithner, who,if so, will become the most dangerous man on the Planet.Greenspan had no trouble being totally active and open in promoting the invasion of Iraq, even at cocktail parties and I doubt if Geithner will either, although next time around, I wouldn’t too visibly laugh at Tiny Tim when he gets on top; this is a man to be feared.I also say that upon Obama FedRes Act getting Senate Approval (they appear to approve anything bad, like Congress) that the US dollar is done as the reserve currency. Once this Act is approved as Law, the US dollar will be propped up to give the impression that it has value which at present it doesn’t have any.PS. I have no real internet connection any more unless you call 39kbps Internet and any d/l +u/l cost around A$20 per Gb – so I will not be really visible but I feel this opinion is important to consider. Fascism is alive and well in Australia.Ho hum

Nonsense … massive spending hasn’t done anything to really improve the average child’s education. Cut your losses already.

WolfThe currency crisis that you foresee, will it be worse than the present one? what would be the implications and you said that “There will be repurcussions” could you please elaborate on that? what possiblly reserve holders can do?

I predicted 1997 and 2000/01 and this crisis; the latter is on my Blog and appears to be in hindsight, a perfect pick. I think a lot and have read quite a bit – but I think that exercising one’s neurologies gets some credit.History tells us much and used comparitively with physics, tells us much more; it’s all about Universal Principles which are consistent – more or less – in parochial environments.So, my sources are experiential so they are unique – but, er, shouldn’t be. Knowing a fair bit about temporal signatures helps too.Ho hum

There are few possible scenarios of varying degrees of severity. Protectionism will increase. Trade wars will ensue. For certain, the USD will be dropped as the reserve currency, and to make it worse, it will probably lose its status as a TRANSACTIONAL currency. In such a scenario, trade could potentially revert back to barter, or markets could revert back to gold-based transactions (a form of barter). WTO will collapse. Global economic activity will shrink further. These are the economic repurcussions.Before we get there, we will probably have war. Remember, if the US$ is no longer used as a transactional currency, the US is effectively bankrupt. It will be similar to Thailand or Argentina, who had no foreign reserves to purchase goods. And the US will most likely use their joker in tha pack when it get to that stage: the military card.Conversely, the rest of the world could capitulate and pay for America’s sins but somehow, I don’t see that happening.

I wonder if anyone on this site is subscribed to LEAP2020.I would appreciate, if you are a subscriber, if you would give me your opinion on the publication. Has it been worthwhile for you? Do you recommend it?I am considering paying subscription but would like to get a second opinion.Thanks

3. The collapse of the US dollar will come prior to end July 2009,

hmmmm…it’s not too far to that then…

I agree with you, Wolf in the Wilds, and others about that we will soon have a Second Dark Ages upon us. In fact even “darker” than the original so-called Dark Ages (which actually was not really that “dark”).And I agree with you that there will be more international economical controls. The exact specifics of ‘how we get there’ I am not so sure of. Neither am I sure of the ‘form’ in which these controls will be administered.

There are so many predictions of doom on here. I still believe Roubini though, slow growth for some years to come with a possible w. I am a poor person financially so I ask people on here who do seem like that are extremely knowledgeable this question. It maybe a simple question and may even appear dumb but here it goes.WHAT WOULD YOU SUGGEST. SPEND A FEW DOLLARS I HAVE AT THE MOMENT ON A CAMPING TRIP FOR ME AND THE KIDS OR SPEND THE VERY FEW DOLLARS LOADING UP ON FOOD FROM THE BOX STORES ????I ask because of all the talk of collapsing dollar before the year ends which if anything like that did happen it would be the end of people wanting to hire trades people.

Hey Peter,where can I find your blog?

OK Gang, dissect the improving existing unemployment numbers today. Are those whose unemployment benefits have run out presumed to be “employed” again or some other accounting adjustment?

NO JOBS… the reason people collecting benefits dropped is because they lost thier benefits because they reached the maximum. they now get added to the U6 number which is speeding past 16% unemployed americans. As the runrate below says we could get 12.5% by end of 2009. I highly doubt the govt will let the number get that high and will manipulate so as not to be much above 10%. They will probaly get cuaght doing so to. I suspect we a reasonable number we will hit is 11.5% by end of 2009. either way NO JOBS means this economy is spiraling downward and as everyone is asking these days, Where are jobs going to come from. No one in charge from Govt to private Business to the fortune 5000 seem interested in creating any….If you want a job you can find one for 10.00 an hour on the books or 10.00 off the books… problem is if you are not illegal most americans dont want those jobs…http://theautomaticearth.blogspot.com/2009/06/june-16-2009-double-or-nothing-moment.htmlThe monthly US unemployment rate, following from numbers published by the BLS so far in 2009, as measured using the increasingly contested U3 method, reads as follows:Jan 7.6%Feb 8.1%Mar 8.5%Apr 8.9%May 9.4%The trend is very clear, to say the least.Graphically, this is what unemployment looks like over the past ten years:And this is the picture over the past 60 years:NOTE: graph stops in 2008The May number, obviously, is very close to being the highest since World War II. And, for all we know, perhaps longer.Today, president Obama predicted that at the end of 2009, the 1982/83 record will have been broken. He says (U3) unemployment will reach 10%.But if we go back to the trend established so far this year, that number doesn’t just look unlikely, it looks outright unbelievable. I would venture that Obama is playing a risky game with his credibility. And I can’t help wondering why he would want to do that at this phase in the “game”. There are increasingly voices out there who quote the president’s “audacity of hope” in a less than positive fashion. So perhaps this is the spinmeister team’s double or nothing moment. Lift him over the summer and hope for the best?!Realistically, though, even if the rate of growth were to come down, it doesn’t seem possible to halt it at 10%. If it grows at 0.45% per month, as it has done to date, U3 will end the year at 12.55%. If it would grow at 0.1% per month, which seems highly improbable, it would still surpass Obama’s 10%. You can all do any and all of the alternate scenarios yourself. Most likely, the rate will be well over 0.1% per month through the summer, in which case we’d have to see actual job growth in the fall?! From where, from what?A number of items from today’s news are waiting in the wings to influence the final unemployment tally for this year. First from yesterday:Lending by rescued US banks is still down.Corporate bond sales are failing in Europe; no doubt they will do so in the US as well as we go along.Compared to the same period last year, US housing starts are down 45.2%.

Worst Housing Number in Decades: What Is the Wall Street Media Smoking?http://seekingalpha.com/article/143696-worst-housing-number-in-decades-what-is-the-wall-street-media-smokingThe housing numbers are as bad as they could possibly be. They show year-over- year housing starts to be down by 45.2% from May 2008. I cannot recall the numbers, but, if memory serves me, this decline is of the same magnitude as the housing decline which occured during the Great Depression of the 1930s.Housing sales always are greater in April than in February. Furthermore, people almost always buy more houses in May than in April. The fact that they repeated that pattern in 2009 is not surprising. It’s been happening since the days of the Roman Republic.The real news is that housing starts are deeply down year over year. On top of that, we must consider that fact that 2008′s numbers are way down from 2007, and 2007′s numbers were way down from 2006. Housing starts in May, 2006 were running at a seasonally adjusted annual rate of 1,957,000 (www.census.gov/const/newresconst_200605.pdf). In other words, since the height of the housing market, housing starts have fallen so deeply that they amount to only 27% of what they were 4 years ago. That is very bad news and it justifies a deeply downward move on the stock market. Frankly, it is surprising that the DOW and S&P 500 didn’t fall a lot lower than they did.However, forget about all the doom and gloom of reality! Enter the Wall Street spinmeisters. Don’t bother them with reality. Here is the fantasy…Bloomberg writes: “Housing starts jumped 17.2% to a seasonally adjusted annual rate of 532,000 units in May, up from April’s figure of 454,000…”[i]Marketwatch wrote:“Housing starts bounced back with a vengeance in May, rising 17.2% to a rate of 532,000 on a seasonally adjusted annual basis”[ii]No, I am not making that up. I’ve given you the citation and you can read it for yourself. As ridiculously stupid as that is, they really did write “…bounced back with a vengeance…”.But, no one beats Wall Street’s big bank analysts at the exceptional skill of being out of touch with reality.Zach Pandl at Nomura Securities in New York, for example, explained: “This (housing) starts report is actually very encouraging…”[iii]What kind of weed are these people smoking?This is a horrible economic news week so far. To add to the bad housing numbers, the Federal Reserve reported that industrial production fell 1.1% in May from April and, in an unusual twist, admitted that this news was “worse than expected.” Six Flags, which owes billions of dollars to its creditors, has filed bankruptcy. Extended Stay Motel chain, which owes billions more, joined them in bankruptcy court.The most frightening thing is that this is probably only a first taste of things to come. The green shoots are becoming impossible to find, if there ever were any.

Housing has 2 more years of price declines to go…New York Home Prices Forecast to Drop 40%What’s it feel like to survive one hurricane only to be told that another is on the way? New York City–area homeowners are in just that spot. After the region suffered the brunt of financial-industry cutbacks, the next big wave of woe could be a nor’easter of collapsing home prices. That’s the forecast of an extensive new report on residential real estate by Deutsche Bank, which calls for home prices in metropolitan New York City (which includes Westchester, northern New Jersey and other nearby areas) to fall 40.6% from the prices that prevailed in March.Housing Prices Keep Dropping. And They’re Not Done YetIronically, that dire forecast is wrapped in an improving forecast for nationwide home prices. Back in March, Deutsche Bank analysts had expected national home prices to decline 16.5%; now they foresee just a 14% decline. That mildly upbeat news does not hold true for the New York City area, however, which is expected to see a 40.6% drop. While that is also a slight improvement from the March forecast, it is dire nonetheless.To arrive at their forecasts, the Deutsche Bank analysts, led by Karen Weaver, assessed several leading variables, with affordability being a key driver. The pronounced decline in home prices across the nation, coupled with a downward drift in interest rates, has greatly improved nationwide affordability, the report noted. Indeed, in some famously overpriced regions that have since corrected, such as Los Angeles and the Riverside–San Bernardino areas of California, affordability is as good now as it has been in decades. That’s a big reason that many California areas may see prices fall only an additional 10% or so, despite the state’s deepening financial crisis.New York City’s big problem is not so much the financial-industry meltdown as it is an intense lack of affordability. As the report notes, metropolitan-area New York home prices peaked in the second quarter of 2007 at $552,000. By the first quarter of 2009, the median price had dropped 19%, to $446,000, but the market swoon was less than half the drop recorded in many other areas of the country. Today among the 10 biggest metropolitan areas, New York ranks as the least affordable.http://www.time.com/time/business/article/0,8599,1905085,00.html

As i have been saying for a few weeeks… look at the destructuion in State Revenues. This does not show Sales tax revenue which is juwst as bad. Lower Income tax revenue equates to mounting indivdual lost jobs and decelining productivity/sales revenue by employers. Sales tax revenue equates to consumer spending. so if all these are trending down like they are, let alone they are horrific, what does that mean for GDP? Neg 3, 6, 9 ,12%?Read the rock pdf report… it has all the data/numbers…States in Deep Trouble Over Plunging Income Tax RevenuesStates in Deep Trouble Over Plunging Income Tax RevenuesThe Nelson A. Rockefeller Institute of Government has issued a State Revenue Flash Report discussing an across the board enormous drop in personal income tax revenues.Total personal income tax collections in January-April 2009 were 26 percent, or about $28.8 billion below the level of a year ago in states for which we have data. In April 2009 alone (April being the month when many states receive the bulk of their balance due or final payments), personal income tax receipts fell by 36.5 percent, or $18.2 billion.Personal income tax receipts in the first four months of calendar year 2009 were greater than in 2008 in only three states — Alabama, North Dakota, and Utah.In FY 2008, personal income tax revenue made up over 50 percent of total tax collections in six states — Colorado, Connecticut, Massachusetts, New York, Oregon, and Virginia. Personal income tax revenue declined dramatically in all six of these states for the months of January-April of 2009 compared to the same period of 2008. Among all 37 early-reporting states, the largest decline was in Arizona, where collections declined by nearly 55 percent.In the month of April alone, 37 early reporting states collected about $18.2 billion less in personal income tax revenues compared to the same month of 2008.This $18.2 billion is close to the $20 billion shortfall that states experienced in overall tax revenue collections in the first quarter of calendar year 2009. This is particularly bad news for the states that rely most heavily on personal income tax.Given the ominous picture of personal income tax collections, deeper overall revenue shortfalls and further deterioration in states’ fiscal conditions are likely on the way for most states for the April-June quarter of calendar year 2009.What a Bad April Does to State Budget ProcessesAn April income tax shortfall comes at the worst time of year for two reasons. First, by the time it is recognized in late April or mid-May, it is just 6-10 weeks before the end of the fiscal year for 46 states. For states without large cash balances, this can create a cash flow crunch or even a cash flow crisis. There is not enough time to enact and implement new legislation cutting spending, laying off workers, raising taxes, or otherwise obtaining resources sufficient to offset the lost revenue before the June 30 end of the fiscal year. As a result, a state without sufficient cash on hand to pay bills must resort to stopgap measures to “roll” the problem into the future.Second, the increased budget problems caused by an April income tax shortfall come late in the fiscal year and late in the budget process — often as states are supposed to wrap up their budget negotiations.The new bad news for elected officials can unsettle carefully balanced gap-closing plans already tentatively negotiated. Since the budget actions included in these tentative plans presumably were the most attractive options available to them, almost by definition actions to close new budget gaps will be much more difficult.All of this makes it hard for budget negotiators to reach agreements that will fully close the new budget gaps. It raises the risk that the newly adopted budget will take an optimistic view of the year ahead and may unravel as the year progresses, requiring midyear cuts. And because those solutions that are adopted may be nonrecurring in nature, it raises the risk that states will face larger gaps for 2010-11 when such nonrecurring resources go away.There are numerous tables in the report worth a look. In fact, the entire 9 page PDF is worth reading in entirety.States most dependent on Personal Income Taxes68.5% of Oregon’s Tax Revenue from PIT. Collections off 27.0%57.2% of Massachusetts’ Tax Revenue from PIT. Collections off 28.5%55.9% of New York’s Tax Revenue from PIT. Collections off 31.8%47.5% of California’s’ Tax Revenue from PIT. Collections off 33.8%52.4% of Connecticut’s Tax Revenue from PIT. Collections off 25.9%52.7% of Colorado’s Tax Revenue from PIT. Collections off 25.4%Arizona’s collections were down a whopping 54.9% depending 25.3% on Personal Income Taxes. South Carolina, Michigan, Vermont, Rhode Island, New Jersey, Idaho, and Ohio are also in deep trouble.20 states depending on personal incomes taxes for > 25% of total taxes were down 20% or more on collections.This is a very grim report on state finances.The Nelson A. Rockefeller Institute of Government has issued a State Revenue Flash Report discussing an across the board enormous drop in personal income tax revenues.Total personal income tax collections in January-April 2009 were 26 percent, or about $28.8 billion below the level of a year ago in states for which we have data. In April 2009 alone (April being the month when many states receive the bulk of their balance due or final payments), personal income tax receipts fell by 36.5 percent, or $18.2 billion.Personal income tax receipts in the first four months of calendar year 2009 were greater than in 2008 in only three states — Alabama, North Dakota, and Utah.In FY 2008, personal income tax revenue made up over 50 percent of total tax collections in six states — Colorado, Connecticut, Massachusetts, New York, Oregon, and Virginia. Personal income tax revenue declined dramatically in all six of these states for the months of January-April of 2009 compared to the same period of 2008. Among all 37 early-reporting states, the largest decline was in Arizona, where collections declined by nearly 55 percent.In the month of April alone, 37 early reporting states collected about $18.2 billion less in personal income tax revenues compared to the same month of 2008.This $18.2 billion is close to the $20 billion shortfall that states experienced in overall tax revenue collections in the first quarter of calendar year 2009. This is particularly bad news for the states that rely most heavily on personal income tax.Given the ominous picture of personal income tax collections, deeper overall revenue shortfalls and further deterioration in states’ fiscal conditions are likely on the way for most states for the April-June quarter of calendar year 2009.What a Bad April Does to State Budget ProcessesAn April income tax shortfall comes at the worst time of year for two reasons. First, by the time it is recognized in late April or mid-May, it is just 6-10 weeks before the end of the fiscal year for 46 states. For states without large cash balances, this can create a cash flow crunch or even a cash flow crisis. There is not enough time to enact and implement new legislation cutting spending, laying off workers, raising taxes, or otherwise obtaining resources sufficient to offset the lost revenue before the June 30 end of the fiscal year. As a result, a state without sufficient cash on hand to pay bills must resort to stopgap measures to “roll” the problem into the future.Second, the increased budget problems caused by an April income tax shortfall come late in the fiscal year and late in the budget process — often as states are supposed to wrap up their budget negotiations.The new bad news for elected officials can unsettle carefully balanced gap-closing plans already tentatively negotiated. Since the budget actions included in these tentative plans presumably were the most attractive options available to them, almost by definition actions to close new budget gaps will be much more difficult.All of this makes it hard for budget negotiators to reach agreements that will fully close the new budget gaps. It raises the risk that the newly adopted budget will take an optimistic view of the year ahead and may unravel as the year progresses, requiring midyear cuts. And because those solutions that are adopted may be nonrecurring in nature, it raises the risk that states will face larger gaps for 2010-11 when such nonrecurring resources go away.There are numerous tables in the report worth a look. In fact, the entire 9 page PDF is worth reading in entirety.States most dependent on Personal Income Taxes68.5% of Oregon’s Tax Revenue from PIT. Collections off 27.0%57.2% of Massachusetts’ Tax Revenue from PIT. Collections off 28.5%55.9% of New York’s Tax Revenue from PIT. Collections off 31.8%47.5% of California’s’ Tax Revenue from PIT. Collections off 33.8%52.4% of Connecticut’s Tax Revenue from PIT. Collections off 25.9%52.7% of Colorado’s Tax Revenue from PIT. Collections off 25.4%Arizona’s collections were down a whopping 54.9% depending 25.3% on Personal Income Taxes. South Carolina, Michigan, Vermont, Rhode Island, New Jersey, Idaho, and Ohio are also in deep trouble.20 states depending on personal incomes taxes for > 25% of total taxes were down 20% or more on collections.This is a very grim report on state finances.

Ecominor, good points.What I believe we are seeing… is forced inflation! (or at least their attempt at it) The government and all, can do little to stop deflation. Deflation becomes cyclical, and in our current state of debt, where our insolvency runs the risk of being systemically exposed, there is little defense against a death spiral of debt. (we are always “at the moment” insolvent. Our system of finance always works off of repayment of more money at a future date. There is never enough existing money to pay down the current overall debt. This is modern finance/economics. …and it has a history of working. …but not when we’ve overleveraged and fractionally margined ourselves this far!!!)To put the breaks on this death spiral, inflation needs to take hold. Cash has been infused, but not nearly at the pace that debt was destroyed, thus leaving the velocity of credit/debt (and growth) at a snails pace. From a Government reporting standpoint… nothing effects the inflation/deflation equation like OIL. (and gas)I suspect that the hope is that costs of shipping increase, thus forcing the cost of goods to reflect that cost. …and thus FORCING those who can’t currently afford it, to work more or borrow more to pay the difference.Ultimately, if the consumer is forced to borrow more, then the banks, credit cards, etc… will be forced to lend more, and thus get the gears of that old broken model going again. (those lenders, whose balance sheets where abysmal, have been largely replenished with fresh clean sheets)It’s a horrible idea… but it’s our horrible idea. It’s not a “solution”, since there is no solution to the horrible idea that is so entrenched in our modern day financial system. It’s just a means to getting back to the good old days… and once they can get us back (or should I say “if” they can get us back) …it comes with the “promise” of tighter controls and “stricter” regulations.Yeah… it’s pretty comical.Comical that we can rebuild a broken system. (because it worked for so many people, for so long, and made those in power very wealthy)Comical that “promises” of tighter controls would mean anything, since they look to control historic crimes, rather then stay ahead of tomorrow’s crime. (That’s what happens when loopholes, and financial evolution outpace a system that is not geared to fully understand it’s evolution prior to allowing its infusion into allowable practice)Comical that “strict” would mean anything, when we still have not done nothing to prosecute those who have recklessly endangered our economy for financial gain.Comical that we not only didn’t prosecute these elite, but instead, bailed them out with our tax dollars, and then positively reinforced them by leaving them in their elite positions.At some point, you do have to laugh.All the best,Miss America

All players in the market will be buying the treasuries.Plain and simple. The balance sheets have been cleaned. Now with new TPMG rules going into effect, and with derivative traders being forced to collateralize their trades… the new “cash” on the street is US T’s. They will be everyone’s collateral… and based on the TPMG rules, those T’s will be forced to move.Like the dollar is the world’s reserve currency, The US T is establishing a more dominant role as the world’s collateral. (It already is, but this is becoming a jugular stranglehold.)All the best,Miss America

WiW…I wouldn’t be so quick to make that call…. I can’t see it happening without the aid of some sort of “catastrophic event” or “terroract”. Without a trigger, the status quo is too easily obtained or maintained. those with the wealth have the guns, power, etc…The masses will not up rise until forced into a starvation corner. …and we just aren’t there yet. (and I suspect, TPTB will do everything they can not to get to that point, even if it takes compounding a lie 100x over)With that said, the US reserve currency is always up for debate. What you have to figure in are the alternatives. Gold… ??? Who owns the most? (and by a REDICULOUSLY LARGE MARGIN??? Would that be the US?) Trade… ??? Food… Our plains are still bountiful, and our livestock well fed. Oil… ??? Well it seems we are pretty well situated there, and the region seems to have married our economic philosophy.I can go on and on…Without a trigger, this seems to be a pretty far off assertion.All the best,Miss America

THE GREEN SHOOT FERTILIZER IS MORE “UNCONTROLLED GROWTH DEBT” ACID THAT CAUSED THE ECONOMIC MESS IN THE FIRST PLACEEven when unemployment recipients’ numbers decrease a small bit that’s not good either; it generally means a chunk of them had their benefits run out and are now desparate for work.Even when the rate of joblessness decreases a bit, that’s not good new either; JOBLESSNESS IS WORSENING. Its like a house infested with termites, if 25% of the house is eaten, but the rate of the last 75% of the house standing is now being eaten a bit slower….that’s TOTALLY HORRIFYING.More wake up and smell the no need for debt growth coffee:Today’s “recession/depression/stagflation or whatever the Hades you call it” is because home prices and the banks’ ability to keep up with uncontrolled overpopulation growth collapsed. The solution is obvious: we need a direction that’s the same as what got us in trouble in the first place, more uncontrolled debt/growth…LOLI see the 2009 COLA to date is -3.2%. Yes bloggers it’s depression style deflation. It’s not a guess or a horror for the fed to prevent anymore, it’s reality.News article in part:“….As of today, the amount of an increase that federal retirees will receive is: 0%. Inflation is much less this year and the consumer price index used to calculate the retiree COLA shows a decline in the inflation rate so far in 2009. That could change but as of today the COLA figure stands at -3.2%….”The rest of the URL:http://www.fedsmith.com/article/1972/pay-parity-your-2010-pay-raise.htmlAnd America needs more uncontrolled debt growth?

Take your kids camping. It will be valuable expeience for their future quality of life.

Every American seems to believe that one thing is for sure, nationalisation would be a disaster (at least those I can observe on Bloom). But could a governement run bank have done worse than the “private” variety? Besides, as any large bank has an implicit State guarantee whatever they do… the taxpayer should have representation

Remember when ice cream used to come in a half gallon? sigh.

Using the standard definition of inflation as too many dollars chasing too few goods, the Fed’s meddling not withstanding, how can anyone come to the conclusion that inflation will be a problem in the near future? What we have, now, is the exact opposite scenario, an over-indebted consumer who needs to cut back and get his balance sheet in order and a corporate sector that needs to empty its shelves of inventory as to maintain profitability.

Is it possible that you were imposing your own knowledge on what you were watching? Imagine for a moment, that you knew virtually nothing about what FRONT LINE was reporting on that night and were just taking it straight from them.I think that if you were viewing with that blank slate you might have seen it for it was.And the point is there were plenty of people watching who did not know what you did going into it, and therefore had nothing with which to color their viewing of it – therein lies the revision and manipulation.

I think history shows that when you increase tax rates, tax revenues decline. People find a way to hide stuff. Cut tax rates and revenues miraculously increase.

Fish,Bees,Now BatsCould it be that Earth is healing/resetting herself.. maybe humans didnt get the MemoPeterJB whats your take?http://www.voanews.com/english/2009-06-12-voa28.cfmNearly A Million Bats Dead from Mysterious DiseaseHundreds of thousands of bats have died in the northeastern region of the United States. According to some experts, the death toll is close to a million. The bats are succumbing to a disease called White Nose Syndrome, with a white fungus appearing on the nose, ears and wings of the bats

Washington State’s revenue forecast was revised downward over $600 million from the budget just passed a couple of months ago. We don’t have personal income tax, most revenue is from sales tax and excise taxes on real estate and gross business receipts. Nevertheless, it is surprising that the forecast can be down that much in such a short period of time.State revenues are one of the few things that the spin jockeys can’t manipulate easily. They are telling the real story of what is going on.

Well, I’d say the Regions Financial execs get it if they chose Scotland golf over the other destinations chosen by the other bank heads.

w,the reciprocal question that one might ask is”could an other than bank run government do much worse?”we should perform this experiment as soon as possible.i do not subscribe to the idea that we have done so wellfor so long thanks to corruption and usury. i think thesethings destroy the potential and strength of people. wewill see. big changes are in order and, always, for the good.doors, windows,,,,, skylights even, are swinging open.imho.

The trigger is there: incessant monetisation of deficits. This endangers all savers in USD. And it is somewhat presumptious to say that these savers will not react. If the value of the USD is no longer trusted, it doesn’t matter if there is no other currency choice. Hard assets will have to serve as reserves. And that too could be a trigger for military conflict.As for whether there really are gold reserves in the US, one only needs to look at how much the banks have shorted in the gold markets. There may be some, but it is by no means as high as you think it is. As a country, the US gold reserves could well be depleted. The good thing about the US is the ability to produce food. That could be their reserves. Regardless, it is clear that the USD’s days as a reserve and a transactional currency are numbered. It is also clear that unless the world finds another way to trade, trade itself will suffer.Barter could well be the way forward, but its efficiency is limited. Economic activity will decline.It is now a game of beggar thy neighbour. The only question is who will act first: the savers (reserve holders) or the debtors (US of A).

there’s a lotta talk out there about how we finally got out of the great depression after the second world war. note i said AFTER the war, NOT BECAUSE OF the war. that’s because the truth is that none of the government programs got the us out of the depression, nor did the war. the depression ended when americans came home with the sense that they had a future, and decided to work hard to build it.nowadays no american feels that way. why? because government leaders are seen as corrupt tax cheats or liars. if you’re looking for a recovery, you can just forget it as long as geithner is the treasury secretary, bernanke is the head of the fed, or obama is president (unless obama turns away from his present course destined for failure–he may…not everyone has written him off yet, but he doesn’t have much left).when truman said something like “the buck stops here,” americans knew they could take it to the bank. that’s a far cry from obama’s “we inherited this mess, it’s not our fault” (didn’t bart simpson invent that line?) truman became vice president because of his reputation for honesty–because he exposed waste and fraud in military government spending. currently americans are unified in opposing wasteful government spending, but do you hear leaders in washington forcefully speaking out about that?hell no, they’re all about spending as much as possible as fast as possible and damn the torpedoes, we need the stimulus, who cares what it costs….there are a few solid voices—sen. tom coburn from oklahoma comes to mind–but the media is only giving him a little exposure.this blog is about figuring out how to promote ideas that will lead to economic recovery. and my idea is that no such recovery has any chance of beginning until the leadership of this country starts to behave in a fiscally responsible manner. so far, i don’t see any such green shoots. it’s all ragweed.

Chignos…it ended when the ROTW production capacity was obliteratedGermany… dustUK… fallen empireJapan… dustRussia… dustFrench… thought they were an empireItaly… empire wanna bePeople turn to US, the 20th Century Rome was annointedand we wonder why US was really keen on Day bombing on ze Germansand we wonder why the French was so annoyed with the USFurthermore US back then was the World’s No 1 producer/Supplier of oil….then came the 70′s oil shock (predicted by POilers)lack of oil meant US have to moved their production of goods Overseas (lowering cost),backed by the “worlds reserve currency” US ought to Rule the worldBut i guess that plan failed

entropy

Do people demand a really just system? Well, we’ll arrange it so that they’ll be satisfied with one that’s a little less unjust … They want a revolution, and we’ll give them reforms — lots of reforms; we’ll drown them in reforms. Or rather, we’ll drown them in promises of reforms, because we’ll never give them real ones either!!- DARIO FO, Accidental Death of an Anarchist

better short treasury into this bounce.

Perhaps the drop in continuing unemployment claims is because of benefits expiration and they are still unemployed. Government statistics can’t be trusted.

There have been a series of blog posts about the Fed’s timeline of public statements. When assembled together is it clear that they have obfuscated, misdirected, mislead the American public.If Bernanke and Paulson were doctors, and our economy was the patient, they would be in jail for malpractice. If they were graded for their performance in public, they would have failed, if they had a private sector job, they would have been fired. If they were attached to a lie detector with 500 volt biofeedback, they would have been electrocuted!February 28, 2007 – Dow Jones @ 12,268March 13th, 2007 – Henry Paulson: “the fallout in subprime mortgages is “going to be painful to some lenders, but it is largely contained.” A total lack of understanding of what caused this problem. It was never subprime, it was a dearth of underwritng prudence, which means that the losses will appear everywhere a loan was underwritten (or not underwritten). That is any loan, anywhere. A lot of loans in a lot of places. I think we are figuring this out by now, but my blog readers knew this back in 2007, and profited from it. See the Asset Sercuritization Crisis links at the bottom of the post.March 28th, 2007 – Ben Bernanke: “At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,” Same problem as aboveMarch 30, 2007 – Dow Jones @ 12,354April 20th, 2007 – Paulson: “I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained.” , “All the signs I look at” show “the housing market is at or near the bottom,” Same problem as aboveApril 30, 2007 – Dow Jones @ 13,063May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.” Same problem as aboveMay 31, 2007 – Dow Jones @ 13,627June 20th, 2007 – Bernanke: (the subprime fallout) “will not affect the economy overall.” Same problem as aboveJuly 12th, 2007 – Paulson: “This is far and away the strongest global economy I’ve seen in my business lifetime.” This goes to show you the quality of Paulson’s business lifetime!August 1st, 2007 – Paulson: “I see the underlying economy as being very healthy,” He was probably just lying!October 15th, 2007 – Bernanke: “It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.” He is right. To be honest, he was probably hamstrung between a rock and a hard place, but it really looks bad to have this thrown in your face in public, doesn’t it???December 31, 2007 – Dow Jones @ 13,265January 31, 2008 – Dow Jones @ 12,650February 14th, 2008 – Paulson: (the economy) “is fundamentally strong, diverse and resilient.” Well, if you look at it from a conceptual perspective…February 28th, 2008 – Paulson: “I’m seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street.” Right, everything is going according to plan…February 29th, 2008 – Bernanke: “I expect there will be some failures. I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.” Ignorance right here. He really should have been reading my blog. I told him Bear Stearns was going to fail and Lehman had issues the month before – Is this the Breaking of the Bear? Sunday, 27 January 2008March 16th, 2008 – Paulson: “We’ve got strong financial institutions . . . Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”March 18th, 2008 – Bear Stearns Bailout Announced – I told you so, right on schedule…May 7, 2008 – Paulson: ‘The worst is likely to be behind us,” Need I comment???May 16th, 2008 – Paulson: “In my judgment, we are closer to the end of the market turmoil than the beginning,” he said. That’s what anybody who relies on his judgement espoused in public deserves. I know a few people who are enamored with Fed and Treasury pronouncements… What a shame.May 30, 2008 – Dow Jones @ 12,638June 9th, 2008 – Bernanke: Despite a recent spike in the nation’s unemployment rate, the danger that the economy has fallen into a “substantial downturn” appears to have waned, Okay, if you say so…July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm”, “… in no danger of failing.”,”…adequately capitalized” The ultimate contrarian indicator…July 20th, 2008 – Paulson: “it’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.” And to think, some people dismiss me because I had bad quarter….July 31, 2008 – Dow Jones @ 11,378August 10th, 2008 – Paulson: “We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac) That reminds me of the joke where the bill collector calls and asks when he can expect payment. The guy on the other end of the phone says, “You can EXPECT payment whenever you damn well please!”September 8th, 2008 – Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 – 1.5 trillion dollars. Over 5 trillion is added to the nation’s balance sheet. Whoa!September 16th, 2008 – $85 Billion AIG Bailout “Loan” Whoa! again.September 19th, 2008 – $700 Billion Bailout Plan Announced Whoa! cubed…September 19th, 2008 – Paulson: “We’re talking hundreds of billions of dollars – this needs to be big enough to make a real difference and get at the heart of the problem,” he said. “This is the way we stabilize the system.” The mathematically challenged Treasury Secretary and ex-Goldman CEO, or does he think we are mathematially challenged?September 19th, 2008 – Bernanke: “most severe financial crisis” in the post-World War II era. Investment banks are seeing “tremendous runs on their cash,” Bernanke said. “Without action, they will fail soon.” There it goes. Should we expect a similar reversal on the Green Shoots Theorem as well?September 21st, 2008 – Paulson: “The credit markets are still very fragile right now and frozen”, “We need to deal with this and deal with it quickly.”, “The financial security of all Americans … depends on our ability to restore our financial institutions to a sound footing.” I really shouldn’t comment any further…September 23rd, 2008 – Paulson: “We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial well-being, the viability of businesses, both small and large, and the very health of our economy,” Whoa! to the fourth degreeSeptember 23rd, 2008 – Bernanke: “My interest is solely for the strength and recovery of the U.S. economy,” Why doesn’t the Fed and the Treasury spend some of that TARP money to spring for a subscription to my blog?October 31, 2008 – Dow Jones @ 9,337March 31, 2009 – Dow Jones @ 7,609http://boombustblog.com/200906181011/I-ve-always-said-that-the-Bernanke-and-Paulson-lack-credibility-accuracy-and-quite-possibly-veraci.htmlhttp://austrianfilter.blogspot.com/2009_04_01_archive.htmlhttp://cafe.comebackalive.com/viewtopic.php?f=1&t=39471

Oh, and about the Dark Ages … as long as the G-8, G-20, whatever are still relatively organised, I doubt we are going to slip back into a world lit by fire with roving bands of marauders pillaging and plundering the country-side … Oh, wait. I forgot that gangs had alread branched out of the inner cities of the US and into the burbs.Never mind, Dark Ages already seem to be upon us.

Well, actually it seems like they do get it … they’ve got it, and they’re using it, while the rest of you eat your hearts out.Suckers. If you can’t beat them, join them.

The American Empire Is Bankrupthttp://www.truthdig.com/report/item/20090614_the_american_empire_is_bankrupt/Posted on Jun 14, 2009By Chris HedgesThis week marks the end of the dollar’s reign as the world’s reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That’s over. It is not coming back. And what is to come will be very, very painful.Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America’s imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, “the most important meeting of the 21st century so far.”It is the first formal step by our major trading partners to replace the dollar as the world’s reserve currency. If they succeed, the dollar will dramatically plummet in value, the cost of imports, including oil, will skyrocket, interest rates will climb and jobs will hemorrhage at a rate that will make the last few months look like boom times. State and federal services will be reduced or shut down for lack of funds. The United States will begin to resemble the Weimar Republic or Zimbabwe. Obama, endowed by many with the qualities of a savior, will suddenly look pitiful, inept and weak. And the rage that has kindled a handful of shootings and hate crimes in the past few weeks will engulf vast segments of a disenfranchised and bewildered working and middle class. The people of this class will demand vengeance, radical change, order and moral renewal, which an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on Fox News, will assure the country they will impose.I called Hudson, who has an article in Monday’s Financial Times called “The Yekaterinburg Turning Point: De-Dollarization and the Ending of America’s Financial-Military Hegemony.” “Yekaterinburg,” Hudson writes, “may become known not only as the death place of the czars but of the American empire as well.” His article is worth reading, along with John Lanchester’s disturbing exposé of the world’s banking system, titled “It’s Finished,” which appeared in the May 28 issue of the London Review of Books.“This means the end of the dollar,” Hudson told me. “It means China, Russia, India, Pakistan, Iran are forming an official financial and military area to get America out of Eurasia. The balance-of-payments deficit is mainly military in nature. Half of America’s discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don’t have any choice but to recycle the money to buy U.S. government debt. The Asian countries have been financing their own military encirclement. They have been forced to accept dollars that have no chance of being repaid. They are paying for America’s military aggression against them. They want to get rid of this.”China, as Hudson points out, has already struck bilateral trade deals with Brazil and Malaysia to denominate their trade in China’s yuan rather than the dollar, pound or euro. Russia promises to begin trading in the ruble and local currencies. The governor of China’s central bank has openly called for the abandonment of the dollar as reserve currency, suggesting in its place the use of the International Monetary Fund’s Special Drawing Rights. What the new system will be remains unclear, but the flight from the dollar has clearly begun. The goal, in the words of the Russian president, is to build a “multipolar world order” which will break the economic and, by extension, military domination by the United States. China is frantically spending its dollar reserves to buy factories and property around the globe so it can unload its U.S. currency. This is why Aluminum Corp. of China made so many major concessions in the failed attempt to salvage its $19.5 billion alliance with the Rio Tinto mining concern in Australia. It desperately needs to shed its dollars.“China is trying to get rid of all the dollars they can in a trash-for-resource deal,” Hudson said. “They will give the dollars to countries willing to sell off their resources since America refuses to sell any of its high-tech industries, even Unocal, to the yellow peril. It realizes these dollars are going to be worthless pretty quickly.”The architects of this new global exchange realize that if they break the dollar they also break America’s military domination. Our military spending cannot be sustained without this cycle of heavy borrowing. The official U.S. defense budget for fiscal year 2008 is $623 billion, before we add on things like nuclear research. The next closest national military budget is China’s, at $65 billion, according to the Central Intelligence Agency.There are three categories of the balance-of-payment deficits. America imports more than it exports. This is trade. Wall Street and American corporations buy up foreign companies. This is capital movement. The third and most important balance-of-payment deficit for the past 50 years has been Pentagon spending abroad. It is primarily military spending that has been responsible for the balance-of-payments deficit for the last five decades. Look at table five in the Balance of Payments Report, published in the Survey of Current Business quarterly, and check under military spending. There you can see the deficit.To fund our permanent war economy, we have been flooding the world with dollars. The foreign recipients turn the dollars over to their central banks for local currency. The central banks then have a problem. If a central bank does not spend the money in the United States then the exchange rate against the dollar will go up. This will penalize exporters. This has allowed America to print money without restraint to buy imports and foreign companies, fund our military expansion and ensure that foreign nations like China continue to buy our treasury bonds. This cycle appears now to be over. Once the dollar cannot flood central banks and no one buys our treasury bonds, our empire collapses. The profligate spending on the military, some $1 trillion when everything is counted, will be unsustainable.“We will have to finance our own military spending,” Hudson warned, “and the only way to do this will be to sharply cut back wage rates. The class war is back in business. Wall Street understands that. This is why it had Bush and Obama give it $10 trillion in a huge rip-off so it can have enough money to survive.”The desperate effort to borrow our way out of financial collapse has promoted a level of state intervention unseen since World War II. It has also led us into uncharted territory.“We have in effect had to declare war to get us out of the hole created by our economic system,” Lanchester wrote in the London Review of Books. “There is no model or precedent for this, and no way to argue that it’s all right really, because under such-and-such a model of capitalism … there is no such model. It isn’t supposed to work like this, and there is no road-map for what’s happened.”The cost of daily living, from buying food to getting medical care, will become difficult for all but a few as the dollar plunges. States and cities will see their pension funds drained and finally shut down. The government will be forced to sell off infrastructure, including roads and transport, to private corporations. We will be increasingly charged by privatized utilities—think Enron—for what was once regulated and subsidized. Commercial and private real estate will be worth less than half its current value. The negative equity that already plagues 25 percent of American homes will expand to include nearly all property owners. It will be difficult to borrow and impossible to sell real estate unless we accept massive losses. There will be block after block of empty stores and boarded-up houses. Foreclosures will be epidemic. There will be long lines at soup kitchens and many, many homeless. Our corporate-controlled media, already banal and trivial, will work overtime to anesthetize us with useless gossip, spectacles, sex, gratuitous violence, fear and tawdry junk politics. America will be composed of a large dispossessed underclass and a tiny empowered oligarchy that will run a ruthless and brutal system of neo-feudalism from secure compounds. Those who resist will be silenced, many by force. We will pay a terrible price, and we will pay this price soon, for the gross malfeasance of our power elite.

The Central valley of California looks the heart has been ripped out of it. It should be declared an economic disaster zone from sacramneto to bakersfield. Empty stores, houses, 20% unemployment, not enough water for farming crops, etc… Houses in modesto and Fresno for 25k-50k – decent ones too…Housing inventory increase expectedA wave of foreclosures is expected to hit Las Vegas as banks lift a voluntary moratorium that was extended from March to the end of May, though nobody has an accurate estimate of how many bank-owned homes will be added to an already bulging inventory.The total number of homes for sale in Las Vegas declined to 16,202 in April, compared with 21,338 in the same month a year ago, Las Vegas-based SalesTraq reported.Real estate-owned, or bank-owned inventory stood at 14,722, up from 11,628 a year ago, but down from the previous two months.Housing analyst Larry Murphy of SalesTraq said he’s heard there could be an inventory of unreleased bank-owned homes ranging from 20,000 to 30,000. It’s an impossible number for anyone to “get their arms around,” he said.”This thing is like a cloud of mystery out there. We can all hypothesize,” Murphy said.Bank-owned inventory came down in March and April, and Murphy said he’s waiting to see May’s data to draw any conclusions.The country is still in the “middle innings” of the bursting of the great housing bubble, said Whitney Tilson, principal of New York investment firm T2 Partners. He recently published a 75-page report that said there’s more pain to come.It takes an average of 15 months from the first missed mortgage payment to a trustee sale of the home, usually by auction, he said. The subprime loans that defaulted in early 2007 led to the wave of foreclosures in 2008.”We predicted in early 2008 that it would get so bad that it would require large-scale government intervention, which has occurred, and we’re not finished yet,” Tilson said.Given that other types of loans with longer reset dates are now starting to default at catastrophic rates, the “sober implications” are for foreclosures and auctions to extend into 2009 and beyond, driving home prices down further, he said.More than $200 billion in option ARMs are still outstanding, including $29 billion that will reset by the end of this year and another $67 billion that will reset in 2010, according to Washington, D.C.-based Zuckerman Spaeder. The average borrower’s mortgage payment of $1,672 will increase by $1,053.Alexis McGee of Sacramento, Calif.-based Foreclosures.com said there’s a “phantom” inventory of repossessed properties not showing up for sale on the Multiple Listing Service. Only about 30 percent of them are listed on the market, McGee said.Foreclosures.com counted 18,505 real estate-owned homes in Clark County through April, compared with 7,251 a year ago. Preforeclosures rose to 33,917 in the first four months, up from 20,363 a year ago.The foreclosure inventory in Las Vegas has dried up for now, Earl Crouse of Better Homes Realty said. He expects it to stay that way until the fourth quarter.Banks are “stepping up” to comply with the Obama administration’s guidelines to keep people in their homes, Crouse said. Some banks are renting homes back to previous owners.”They know they’re stabilizing the market by pulling back (on bank-owned inventory) and getting multiple cash offers for anything $125,000 to $200,000,” he said. “Banks are going to lose anyway, but it’s less they’re going to lose.”Tim Kelly Kiernan of ReMax Brodkin Group said the current foreclosure inventory is “being picked over pretty good” with lots of cash deals. Lenders are being more flexible in negotiations, he said.His research indicates that banks are indeed holding back hundreds of thousands of properties nationwide. There were nearly 500 notices of default filed in Las Vegas on June 8, he said.”That is just one day, so if we just do the math, more foreclosures are coming and fast,” Kiernan said. “Unless the Obama administration does something to stop this, home values will continue to fall.”Murphy of SalesTraq said he agrees with most of the conclusions in T2 Partners’ report from a national standpoint.However, Las Vegas has been on the leading edge of everything that’s happened in the housing market, from skyrocketing appreciation and home sales to the subprime mortgage crisis and foreclosure problems.”I think things happening nationally are six months behind what’s happening in Las Vegas and Sacramento,” Murphy said. “I think we’ve already gone through most of the pain in Las Vegas.”Both Las Vegas and Sacramento have reported significant increases in resales over the past 12 months. Prices are still slipping, but not as much. The Greater Las Vegas Association of Realtors showed a 1.8 percent decline in the median price for May, or about $1,700, compared with monthly declines of $10,000 in previous months.http://www.lvrj.com/business/48421767.html

“China is frantically spending its dollar reserves to buy factories and property around the globe so it can unload its U.S. currency.”This makes a lot of sense to me. Wouldn’t you do the same?

Yes it make sense.How long will it take for them to spend all that they must in order to sustain themselves against a US$ collapse? [The article quoted leads one to believe that US$ collapse is imminent.]Also, what will the US$ be worth in terms of Euro, Yen, Yuan, Canadian dollar at the collapsed level?

excellent post! I hope people take 5 minutes to hear this. Until full transparency and disclosure is required by all government agencies as well as the mega corporations, the public will remain un or mis informed and will have to blindly trust our politicians to make the right choices for the American people: LOL!

Demise of the dollar not so swift?”We can conclude that the first BRIC summit was a much-needed first step in a journey that could well overhaul global economic architecture in decades to come. However, as things stand now, internal dissent within that group, the lack of common interests and any vision towards achieving longer-term sustainable growth implies that future meetings could easily descend into the farce in which the first one ended.”Chan Akya Asia Times

How low do you propose tax rates should be? Why not make them zero? Is there any reasonable tax rate?

You know those “overly pessimistic” soothsayers everyone talks about in a recession / depression? You’re it!

Raise taxes or raise the cost of goods and services, it is has the same effect on the consumer. Less available money to spend on disposable goods, which is the mainstay of the economy.What’s the diff?Only who gets the benefit..So rather than the people getting any benefit, it will be just those with connection that get them….UNTIL Humpty Dumpty falls off the wall for good… And I have been unable to derive a plan yet that will save HD.

Second that. Why even get out of bed in the morning if you think this way?

http://www.chartoftheday.com/20090619.htm?Tdeflation my ass, sure DOW is being deflated by weakening dollar due to FED’s QE.

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