EconoMonitor

Nouriel Roubini's Global EconoMonitor

RGE Monitor – Europe Economic Outlook: Q2 2009 Update

Coinciding with this week’s release of RGE Monitor’s updated 2009/10 Global Economic Outlook, here we present an overview of our European Economic Outlook, including the Nordics, the Baltics and Central and Eastern Europe. Previous newsletters addressed RGE’s U.S. outlook, the outlook for China, and Japan.

The full version of the European outlook, available to subscribers, includes the following sections:

–          Is the Worst Over? Clues from Industrial Production and World Trade

–          Potential Output, Potential Growth and Output Gap

–          Inflation or Deflation?

–          Fiscal Policy

–          Credit Market Conditions

–          The European Banking Sector

–          Sovereign Risk Watch: Ireland

–          Sovereign Risk Watch: Greece

–          Private Consumption and Labor Markets

–          Power Shift Back to Nation States?

 

European Monetary Union

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RGE Monitor expects the cyclical recovery in the eurozone–led by Germany and France–to lag recovery in the U.S., the BRICs and non-Central and Eastern Europe (CEE) emerging markets. Among the main factors muting Europe’s recovery in 2010 are a permanent decline in potential output; unwinding pressures of large internal imbalances leading to deflationary pressures; a more restricted monetary and fiscal policy response compared to the U.S. and especially to China; a leveraged financial sector with too-big-to-fail institutions and too-big-to-save features; and a strong reliance on bank funding by the corporate sector subject to a larger financing gap than that seen in the U.S.

In order not to impair the banking sector’s lending ability permanently, a quick disposal of bad assets is warranted. Lending to the private sector is slowing quickly, and for small and medium sized enterprises with no access to capital markets, bank credit lines represent the only recourse for liquidity. Based on IMF and ECB estimates, total bank losses in the eurozone will amount to between $650 billion and $900 billion, implying substantial additional recapitalization costs.

Germany’s specialization in cyclical industrial goods, and its export-led growth model, exposed it heavily to the synchronized global downturn. Going forward, RGE cautions that given the likely reticence of the U.S. consumer in the medium term future, an exclusive reliance on export-led growth is not advisable. France’s more balanced domestic demand-led growth model has served it relatively better. Italy is grappling with a structural and long-term decline in its relative living standard–a situation that requires a radical overhaul of structural impediments in product and labor markets. Spain’s challenge lies in an expected 20% unemployment rate and deflationary pressures to restore relative price competitiveness. Ireland is among the developed countries hit hardest by the crisis and its large banking sector (relative to GDP) represents a contingent liability despite the country’s commendable ‘bad bank’ scheme.

United Kingdom

The UK’s mainstay is its financial sector, which has accordingly received substantial government support. The country’s strained fiscal position puts more radical solutions for unviable banking institutions on the table for regulators, who are openly discussing options like splitting banks that are too-big-to-fail. The lending environment is equally important for the housing market, which is fundamental to the British economy.

Central and Eastern Europe

Among emerging market regions, CEE economies are experiencing the steepest roller-coaster ride in terms of growth. After exceeding global growth averages for the last decade, regional growth is plummeting in 2009 and is expected to underperform both emerging Asia and Latin America. All EU newcomers in the region are either in or headed for recession. A dangerous combination of falling exports and slowing capital inflows is behind the bleak growth picture. The hardest-hit economies have tended to be very open, with wide current account deficits in recent years and high levels of foreign currency borrowing.

Not all CEE economies are in the same boat. The Czech Republic and Poland, for example, are considered relatively healthy and are expected to experience relatively mild contractions in 2009. Those in more dire straits–Estonia, Latvia, Lithuania–are facing double-digit contractions. Hungary, Latvia, Romania and Serbia have already turned to the IMF for financial assistance, and more are likely to follow in their wake.

RGE Monitor points to the following as possible downside risks to regional growth:

Risk of regional financial contagion (e.g. the possibility of spillover effects in the event of a Latvian devaluation)

Potential for a cross-border banking crisis

Rising political instability

Repeat of January gas crisis

Given the strong financial and trade linkages with Western Europe, a recovery in Eastern Europe will not come until its western neighbors’ economies improve. That means the region’s recovery will lag behind that of Western Europe. Meanwhile, the downside risks described above could further delay recovery. And even when recovery comes, RGE expects sluggish positive growth in the medium-term, rather than a return to the soaring growth rates seen earlier this decade.

Nordics

After strong growth earlier this decade, all five Nordic economies are now in the midst of recessions. These are small, open economies that have been hit hard by slumping external demand for their exports.  Given their strong public finances, Nordic economies, with the exception of Iceland, have resources available to cushion their contractions. Ultimately, however, economic recovery in the region hinges on a global recovery.

Norway’s economy will experience the mildest GDP contraction in the region in 2009, while Iceland will see the sharpest contraction.  Norway is the best placed for a quick rebound to positive growth given its sizeable buildup of oil revenues and its large maneuver room on fiscal and monetary policy. Recovery in Finland and Sweden is tied to a revival in demand for their export products. The global production slump has been particularly bad news for Finland and Sweden given the large share of capital goods in the makeup of their exports. Not surprisingly, these economies are facing the region’s sharpest contractions in 2009 behind Iceland. Stress in the Swedish banking sector could result in a more protracted recovery there.

413 Responses to “RGE Monitor – Europe Economic Outlook: Q2 2009 Update”

GJuly 29th, 2009 at 1:16 pm

Did I actually hear someone say “altruism is evil”?Altruism is not evil.But woes forever come to the society that relies on charity to do the work only justice can do.

The AlarmistJuly 29th, 2009 at 2:25 pm

Yep, you heard it from me … altruism is evil. Apointlessly idealistic destruction of human potential.But hey, congratulations on being first … being first is good. Costs me little to say it, so let me be altruistic in that way.

blindman , and not the first timeJuly 29th, 2009 at 2:46 pm

a,why confess your evil? altruism being good or evilis dependent on the environment and circumstances,conditions present in that environment. it can be either.i consider the question does the whole containsomething which is greater than the sum of the partsin some circumstances? if so, and that emergentis a benefit to all, then altruism is good, but, is that just enlightened self sacrifice for an interest in an emergent quality or condition?i agree self sacrifice for an emergent that isa net disability is evil.if you saw a child wounded on railroad tracksin the dark of night would you remove that childfrom those tracks? what if you heard a somewhat distant whistle and a closer but weaker moan?where is the evil?

11b40August 1st, 2009 at 7:51 am

@ The Alarmist.I wanted to get back to our little exchange from the last thread in a timelier manner, but it has been a busy week. Here is the recap of how this started:”Either you get it, or you don’t, Alarmist.Altruism may not get much press, but it does exist.Independent ContractorBy 11B40 on 2009-07-29 07:58:18IC, I can infinitely more good for mankind by prospering and then sharing (either forced by taxes or voluntarily by giving) than I can by denying to myself and my future beneficiaries. Altruism is evil.By The Alarmist on 2009-07-29 08:27:30″You certainly do have an exalted view of yourself, and the potential of your “future beneficiaries” (progeny?).This view of Altruism is in tune with that of Ayn Rand, Nietzsche, and others who, in my opinion, take the extreme view of a simple concept.I would agree that forced altruism is evil. My concept of altruism comes from within the individual and is likely tied to a sense of spirituality. It is not ordinary charity, nor is it enlightened self-interest. It is self-sacrifice for the greater good, and I go back to my previous statement – you either get it, or you don’t. Which view would you rather share a foxhole with?Gordon Gecko’s quote from the movie Wall Street set the tone of the 80’s and forward – “greed is good”.Perhaps “altruism is evil” is appropriate for the new century. It sure does feel that way.Independent Contractor

The AlarmistAugust 3rd, 2009 at 2:22 am

Gee, I really miss the ’80s … back then greed really was good, because back then it trickled down 😉

blindman , and not the first timeJuly 29th, 2009 at 2:30 pm

g,that is insightful, pregnant in a manner ofspeaking. a hint of a breeze in the otherwisedead calm doldrums. you have earned yourrightful place as First, with the big G and i herebyaltruistically relinquish my claim, below, to youand do declare you FIRST, if you don’t mind.

The AlarmistJuly 29th, 2009 at 2:30 pm

OK, this is somewhat depressing. I have been on the ground in Germany, UK, and the US in the last couple of weeks, and by far the most optimistic scene has been that in Germany (go figure), so if that recovery is going to lag, and if the opinion is that Helicopter Ben should keep his job (I don’t think he should keep it, but I don’t relish him actually losing it), then I have to reconsider the weight I give to RGE.

GuestJuly 29th, 2009 at 3:21 pm

Firing workers and other cost cutting measures have helped the bottom line, plus there are many who believe we have already hit the bottom and things will only get better. Who knows.

The AlarmistJuly 29th, 2009 at 5:31 pm

As soon as we’ve fired and laid off everyone still on non-public payrolls, we’ll be able to get back to getting this economy on track, right?

AnonymousAugust 7th, 2009 at 9:15 am

The manipulators, speculators and potential large investors are or should be concerned with one item only, will the approx US$180 trillion and worldwide another approx US$420 trillion of derivatives implode? Simply put if the US$600 trillion of derivatives implodes to any meaningful level the stock, commodity and various markets will collapse. There are not enough dollar bills including those that are currently being manufactured 24/7 to plug the holes as they appear in the IS$600 billion dam.The rest is mere commentary.

GuestJuly 29th, 2009 at 2:52 pm

http://www.oftwominds.com/blogjuly09/healthcare07-09.htmlHere are the costs of childbirth as of 1952 at one of the finest hospitals on the West Coast, The Santa Monica Hospital:…Having a baby cost $30, which is today’s dollars is $244. A private deluxe room cost $23 or $187 in today’s dollars. According to the Bureau of Labor Statistic’s inflation calculator, $1 in 1952 is $8.14 in 2009 dollars.What does it cost to have a baby now? $10,000? Or is it $25,000? Who even knows?

The AlarmistJuly 29th, 2009 at 3:13 pm

Back then you had to pay out of pocket, so you had a handle on how much things cost. Nowadays your financial intermediary (single-payer, anyone?) handles the details for you. Well, that plus the Trial Lawyer industry was still in its infancy.

blindmanJuly 29th, 2009 at 3:44 pm

a,i agree. the direction is to get the insurance, legal professionand drug manufacturers and their lobbies out of the way of therelationship between the patient and medical practitioners / healers.the only way is through government. sadly, this is what it has come to.the fight will be long and that is because the government is all aboutmoney and very little about “we the people”. in fact, everything is aboutmoney now! so obviously the only thing to do is print more! all problemssolved. representation, the environment, medical treatment, medication,legal services, war and peace etc.. money, just money. we have forgotten,all of us, that we are alive. let’s put insurance salesmen in a cagewith drug manufacturers and bureaucrats and have a televised fight to thedeath and have the survivor dictate medical treatments for the ailing.”lost at the bottom of the world”as all of our entertainment, communication and education seems to have been reduced to a version of professional wrestling whether it be in the kitchen,the bedroom, the political office, the boardroom or the internationalsphere. we are approaching darkness…the darkest hour. and then comeslight. me hopes.

GuestJuly 29th, 2009 at 4:26 pm

Lee Rogers, KSFO Morning Show anchor, said that while spending a large amount of time recently in the hospital he was told by the nursing staff there that he was the only one on the floor paying full price for his medical bills.That is the difference between 1952 America and now.Market and political intervention have caused the failure of America’s health care system, driving out any cost-reducing competition. At the same time, the courts have ruled that Americans must pick up the costs of millions of indigent people crossing the borders.Now Democrats are seeking even more free health care for additonal millions of illegals and other preferred minorities. At the same time, they are following the Republican lead that gave Wall Street, the pharmaceuticals, the AMA, AARP, and the insurance industry everything they wanted. Everything, of course, at the expense of fewer and fewer taxpayers, and for more and more free-care receivers.And now the Democrats have a new plan. It’s called affirmative-action Obama care:But, fear not. Washington’s incestuous relations with the trial lawyers and monopolistic health care providers will continue along side intensified racial profiling. Have you looked into the ACORN/SEIU/White House connections?Frankly, I think I’d rather die than stand elbow to elbow amongst hundreds of the teeming masses in one big cattle-pen waiting gymnasium–counting the hours until my Obama care.

GuestJuly 29th, 2009 at 5:36 pm

“Frankly, I think I’d rather die than stand elbow to elbow amongst hundreds of the teeming masses in one big cattle-pen waiting gymnasium–counting the hours until my Obama care.”LOL! You’re tempting me.On behalf of the ‘teeming masses’, your sacrifice won’t be in in vain.

GuestJuly 29th, 2009 at 9:06 pm

Yes, I meant teeming masses, ochlocracy, the rule of government by a mob, the crush of humanity in a government waiting-hole, the dole queues of communism, the teeming masses in the street – the loss of individuality and identity–all corralled together with a number on our backs, ruled by the whip hand of the State. That’s Obama’s New America. But in reality it’s older than time.Someone using modern parlance summed it up quite well for me: “We have a government bubble… We will see the downside of democracy that some of our forefathers warned us about, as politicians are forced to play to the mob.”Our Founders bequeathed us the makings of an American Dream; we made it real in the invigorating air of freedom. We shared its high living standards with the world. It was about individualism and opportunity, without interference from the State. It was about being a human being. Now you and your grublike friends have stolen it; you, the scavengers of human souls.Yes, I will fight to the death (LOL) before I will succumb willingly to your mobocracy, to the whims of people such as yourself and Obama, whose knee-jerk racism sees victim-hood in every word uttered, and use the ignorance of the mob to demonize and silence in the name of the State.You and yours are “the metaphysical killers, waiting for an opportunity to become physical ones.” You and yours are the ones who think that man must live for the state. I and mine are the defiant ones.

GuestJuly 29th, 2009 at 8:41 pm

This is a key concept dear readers. Regardless of what the government tells you, the value of products and services are constant!The only thing changing is the money we are using. Regardless of the what the BLS says about inflation, the real answer is in front of our collective noses.Having a baby “costs” the same in sliver or gold coinage today as it did in 1952. (Silver or gold coinage is an example of past legal tender, but made from a tangible product — the amount of silver or gold that matched the coin’s face value at the time of coinage.)A $20 gold Saint-Gauden Double Eagle , for example, sold for ~$35.00 in 1952. Today the same coin sells for ~$1,200.00. Thus, if the average cost of birthing was two Saint-Gauden Double Eagles in 1952, then it’s $2,400 today.If this seems low to you, then the difference is in the amount of products and services (labor) provided in today’s birthing versus a typical 1952 birthing.

GuestJuly 29th, 2009 at 9:45 pm

Here is a perfect example of the constant-dollar misconception; a 1996 article by Paul Krugman The Gold Bug Variations http://www.slate.com/id/1912/His position is unwavering – the price of this silly gold metal buffeted by forces too strong for it to be considered as a reference. He sees the dollar as the constant. He says “… a gold standard would have all the disadvantages of any system of rigidly fixed exchange rates–and even economists who are enthusiastic about a common European currency generally think that fixing the European currency to the dollar or yen would be going too far.”Too far? In 2008 we have a shadow banking system with credit creation of over $1 quadrillion, now that’s too far. The role of a gold standard is not to suppress credit creation, but to make it visible. The fact that there have been credit bubbles with gold-based monetary systems in the past demonstrates how credit creation is independent of the measure of the money supply.My point is that the only thing special about gold (or silver) is that it’s past use as legal tender provides a concrete marker showing how the value of the dollar has been manipulated.If this true, then why is a 1964 silver half-dollar worth about 10 times its face value, but a 1933 Saint-Gauden Double Eagle is worth 60 times it’s face value? The answer has nothing to due with the difference in value between the two metals, but rather the last year of that metal’s coinage. We have seen a factor of 10 inflation since 1964 and a factor of 60 inflation since 1933.

GuestJuly 29th, 2009 at 3:04 pm

Continuing discussion at end of previous thread on—Nathan’s Economic Edge Morning Update/July 29:Equity futures are down this morning…Bond and dollar futures are both higher. Higher during a week that they are issuing $235 billion??? Now here’s my question…how do we finance $235 billion of bond auctions in one week—WHERE DOES THE MONEY COME FROM? Well, if we look at the bid results, we find that the Primary Dealers (PDs) are doing more and more buying each week. And when we look at the TIC data, we find that international buyers are doing more selling that buying. So, if the money to buy such massive issuances is coming from the PDs, then they have to be using their own cash or equivalent to buy them—correct?So, let’s go and look at the balance sheets of the biggest Primary Dealers and see how much cash they possess… Let’s start with JPM… It (the balance sheet) shows roughly $27 billion in immediate cash.Now let’s look at the balance sheet of Goldman Sachs: Here we find $35.4 billion of cash and cash equivalents. Hmmm… Okay, let’s say that the 5 biggest each have that amount – 5 times 35.4 = $177 billion. Of course they can’t place 100% of their cash and equivalents in long term bonds, so I would assume that only a fraction of that money would actually be available to buy at auctions. Of course there are their “trading assets” which we have no idea how they are used. But my premise is that week after week of $100 billion or now $200+billion auctions cannot be supported by the money that the Primary Dealers possess.So again, WHERE’S THE MONEY COMING FROM? Since I can’t see where the money is coming from, I’m going to throw a wild guess out there and say that the government and PDs are simply printing it as they go! How much? WAY, WAY more than the announced use of Bernanke’s $300 billion. Sound like a conspiracy theory? It is, and I invite the Fed, the Treasury, and the Primary Dealers to open their books and prove me wrong! I want to see a paper trail leading to the purchase of those bonds and treasuries!The is a vitally important question to have answered for the future of our country–CRITICAL.http://economicedge.blogspot.com/Hide reply Reply to this comment By Guest on 2009-07-29 12:55:46________________________________________________________________Agreed,guest. I am fascinated about London Banker’s Daisy Chain theory. As I have little economics/banking training, I’m afraid I’ll need the Reader’s Digest or Chris Martenson version to understand it better.On one hand, so much “cash” sloshing around world wide and yet no place to put it, except stock market and Treasury debt. If money being printed, then even the most naive investor would demand higher interest than the current “bidded” rate as a hedge against inflation.Reply to this comment By Hubbs on 2009-07-29 13:51:13

GuestJuly 29th, 2009 at 3:07 pm

And interesting, isn’t it, that Goldman Sachs and JPM have a monopoly on the capital markets both in information and trade execution, just as they have on money creation at the Fed and in the treasury. Jamie Dimon of JP MorganChase just held the first meeting of his board in the nation’s capital on Monday, July 20, with special guest White House chief of staff, Rahm Emanuel.Emanuel’s appearance underscores the pull of Dimon and the big banks. Robert Wenzel on EconomicPolicyJournal.com, alleges that Dimon “who amid the disgrace of his industry, has emerged as President Obama’s favorite banker.”And, lest we forget, it was JP MorganChase, who’s now “less impaired” than the rest of us, that was gifted Bear Stearns and Washington Mutual, not counting its other multibillion dollar “gifts”.“Who wants to be a trillionaire? I do…”

Wolf in the WildsJuly 29th, 2009 at 9:14 pm

Guest,I agree the issue of “where the cash is coming from?” has me somewhat perplexed as well. But looking at the tic data as well as the balance sheet of the banks and the Federal Reserve, I can venture a guess as to where most of the liquidity is coming from: the bank reserves held at the Fed. What I have observed is a steadily declining reserve position held at the Fed over the last few months. As at July 23, the balances stood at US$752b. This is down from US$850b from the beginning of the year. Also, a lot of the issuance is refinancing issuance to replace maturing debt. However, you are correct in thinking that at some point the needs of the Treasury will draw cash away from other investments. The only reason why there wasn’t a bigger impact is that the Federal Reserve monetised Agency paper in the first quarter of 09, to the tune of US$1.5trn. This is because liquidity was being drawn from the agency market to the US Treasury bond market (source: Federal Reserve flow of funds report). This is already INDIRECTLY MONETISING the federal deficit. Clearly it cannot continue. If the Federal Reserve decides to do this one more time, expect a very sharp response from USD reserve holders. Reckless monetisation of deficits can only lead to disaster.

Turtle49July 30th, 2009 at 6:50 am

Only wingnuts, birthers, and other assorted kooks are concerned about Ben the Wizard of Oz and his magic money computer. Printing the paper money is so last century. Everything is wonderful and no one needs jobs. Believe and it shall be.

GuestJuly 30th, 2009 at 10:13 am

Jobs bring needless costs to corporations. Eliminate those jobs and the savings goes right to the bottom line. Any doubts look at the stock market rally. Never mind the lower revenue thing. It’s inconsequential.

kilgoresJuly 29th, 2009 at 3:14 pm

@0067:On the previous thread, in response to your request, I provided some links to some sources which I believe tend to support my assertions about the adverse impacts to a society of excessive disparity in income distribution.SWK

GuestJuly 29th, 2009 at 3:17 pm

Here’s a tremendous case for the prosecution presented by Miss America at the tail of the previous thread. Debate was just beginning…________________________________________________Hey there LB…I’ve already stated my opinion on Bernake some time ago, but I don’t mind throwing out the simple reminder from my “trick or treat article”http://www.rgemonitor.com/globalmacro-monitor/254214/trick_or_treatBen BernakeIt pains me to say this since I actually believe Mr Bernake is a good man, but he is the # 1 person that needs to be held accountable for the media’s inability to warn the public in advance of the current crisis. I don’t believe Mr Bernake had malicious intentions, but none the less, he has failed us. He inherited a bad situation. (The government, Greenspan, etc created this mess… but it unfolded under his watch!) As an academic whose expertise was on the great depression I am left with 3 theories on why I feel you should be held accountable for your statements such as “well contained” and should be fired immediately:#1 You believed what you said! (If that’s the case, let me reiterate: This crisis is arguably “THE WORST FINANCIAL CRISIS IN THE HISTORY OF MODERN CIVILIZATION!!!” …and you didn’t see it coming or you chose to ignore it.)#2 You understood the size and scope of the problem, and chose to mislead the public because of the fear that: ‘Exposing the truth would have a large negative affect on the market.’#3 You understood the size and scope of the problem, and chose to mislead the public because you though it could be manipulated/fixed.If it’s #1, you are incompetent, and should tender your resignation or be fired.If it’s #2, you should be fired and prosecuted.If it’s #3, you should be fired and labeled incompetent.Either way, you lacked competency or faith in the American people and their resilience/ability to cope with crisis and adjust.”When these people like Bernake represent our country, our financial economy or the US public, there is a certain level of competency and trust that the MUST meet. In no way has Ben Bernake proven competent or trustworthy. His resolutions to date have been to reinflate a popped balloon. His theory of blowing air/liquidity into this bubble society concept is either a failure to realize that a systemic change is needed or that his hands are tied. (I could almost accept that concept as a mean to “buy time” for us to transition to a change from bubble society, but I see nothing to prove that to be the case.)If it’s a failure to see that that a systemic change is needed…That shows lack of competency!If it’s because his hands are tied, then that shows lack of trust. (because if his actions are in any way based on influence from those who tie his hands, then he is not acting in the best faith of the American people, but rather in the best interest of crony capitalism!If we’re interested in just re-inflating this bubble, my vote is we fire Bernake and just re-hire Greenspan! He’s proven he knows how to create the biggest bubbles of all time. If he’s not available, I’d take Greenspan’s dead dog. Anyone or thing will just about due, so long as it’s not Paulson or someone willing to get down on their knees for Paulson, like Bendover Bernake did!Miss AmericaHide reply Reply to this comment By MA on 2009-07-29 12:24:08____________________________________________________Well, there’s still Volker, but he is getting a bit long in the tooth.But I tell you, if we lose Ben, there’s no telling what kind of political hack we will get for a replacement.Hide reply Reply to this comment By The Alarmist on 2009-07-29 14:18:26___________________________________________________________Never fear, Goldman Sachs and the NewYork Fed will make the decision and let Obama know

ChignosJuly 29th, 2009 at 10:43 pm

Miss America,There is a fourth possibility. Bernanke may have known that the crisis was coming, and he welcomed it. Not only that, his solutions to the crisis are to make it worse intentionally. The consequence: worldwide lost confidence in the USD.Study the Depression as, we hear, Bernanke does. When all the Ponzi schemes collapsed in 1929 (asset deflation), the first thing the Brits wanted, despite all their protestations to the contrary, was to devalue the pound sterling even further. Thus, their economy could sell more British exports, altogether benefitting their PTBs.Bernanke will stoke this crisis ’til the rest of the world demands a new world currency reorientation. In that new world order USD denominated assets will be worth less and less. Other consequences: loss of US sovereignty, reduction in US standard of living.Bernanke thinks he can manage the crisis. In 1930, so did the Brits. If a long period of economic stagnation ensues, then we’ll be able to say that history has repeated itself, and Bernanke failed.Secrecy of the Fed’s balance sheet, while the worlds’ central banks are holding large gold reserves, it doesn’t sound at all good or ethical. It sounds like we’re in for a severe currency manipulation.

ChignosJuly 30th, 2009 at 7:47 am

Miss America,There is a fourth possibility. Bernanke may have known that the crisis was coming, and he welcomed it. Not only that, his solutions to the crisis are to make it worse intentionally. The consequence: worldwide lost confidence in the USD.Study the Depression as, we hear, Bernanke does. When all the Ponzi schemes collapsed in 1929 (asset deflation), the first thing the Brits wanted, despite all their protestations to the contrary, was to devalue the pound sterling even further. Thus, their economy could sell more British exports, altogether benefitting their PTBs.Bernanke will stoke this crisis ’til the rest of the world demands a new world currency reorientation. In that new world order USD denominated assets will be worth less and less. Other consequences: loss of US sovereignty, reduction in US standard of living.Bernanke thinks he can manage the crisis. In 1930, so did the Brits. If a long period of economic stagnation ensues, then we’ll be able to say that history has repeated itself, and Bernanke failed.Secrecy of the Fed’s balance sheet, while the worlds’ central banks are holding large gold reserves, it doesn’t sound at all good or ethical. It sounds like we’re in for a severe currency manipulation.

ChignosJuly 30th, 2009 at 8:12 am

Miss America,There is a fourth possibility. Bernanke may have known that the crisis was coming, and he welcomed it. Not only that, his solutions to the crisis are to make it worse intentionally. The consequence: worldwide lost confidence in the USD.Study the Depression as, we hear, Bernanke does. When all the Ponzi schemes collapsed in 1929 (asset deflation), the first thing the Brits wanted, despite all their protestations to the contrary, was to devalue the pound sterling even further. Thus, their economy could sell more British exports, altogether benefitting their PTBs.Bernanke will stoke this crisis ’til the rest of the world demands a new world currency reorientation. In that new world order USD denominated assets will be worth less and less. Other consequences: loss of US sovereignty, reduction in US standard of living.Bernanke thinks he can manage the crisis. In 1930, so did the Brits. If a long period of economic stagnation ensues, then we’ll be able to say that history has repeated itself, and Bernanke failed.Secrecy of the Fed’s balance sheet, while the worlds’ central banks are holding large gold reserves, it doesn’t sound at all good or ethical. It sounds like we’re in for a severe currency manipulation.

ChignosJuly 30th, 2009 at 8:12 am

Miss America,There is a fourth possibility. Bernanke may have known that the crisis was coming, and he welcomed it. Not only that, his solutions to the crisis are to make it worse intentionally. The consequence: worldwide lost confidence in the USD.Study the Depression as, we hear, Bernanke does. When all the Ponzi schemes collapsed in 1929 (asset deflation), the first thing the Brits wanted, despite all their protestations to the contrary, was to devalue the pound sterling even further. Thus, their economy could sell more British exports, altogether benefitting their PTBs.Bernanke will stoke this crisis ’til the rest of the world demands a new world currency reorientation. In that new world order USD denominated assets will be worth less and less. Other consequences: loss of US sovereignty, reduction in US standard of living.Bernanke thinks he can manage the crisis. In 1930, so did the Brits. If a long period of economic stagnation ensues, then we’ll be able to say that history has repeated itself, and Bernanke failed.Secrecy of the Fed’s balance sheet, while the worlds’ central banks are holding large gold reserves, it doesn’t sound at all good or ethical. It sounds like we’re in for a severe currency manipulation.

MAJuly 30th, 2009 at 11:02 am

@ Chingos…I do have a hard time believing that Ben Bernake could do that. Like I said, I don’t think he’s a bad man. (I’ve never met him and don’t know him from a hole in the wall) …but I just have a hard time thinking someone would/could be so dastardly evil….but ya never know.

DisasterUSJuly 30th, 2009 at 4:38 pm

Chignos’s 4th reason sounds like the same “dastardly evil” mindset employed in New Orleans and ultimately Katrina.

PeterJBJuly 29th, 2009 at 5:18 pm

Miss AmericaI would like to repeat my position here as I do have some insights.That Mr Benanke is a good man is not of question.That Mr Benanke is competent in practical applied economics is another issue:Comment: As I have said previously, there are so many economic theories, all of which are based on a faith based system, it is nigh impossible on a peer to peer foundation, to judge Mr Benanke.He could however be judged on the unpopular and out-of-fashion old school Austrian system but there are few true believers with enough influence to climb into the box to give credible evidence.That Mr Benanke failed to see, along with the whole World which includes every professional experts and academic within the near space of the whole solar system.Comment: Yes, agreed, in this the FedRes failed and this is due to the fact that there were a few other institutional economists (there was a list of eleven published) and numerous amateurs like myself, etc., that did make warning noises. All were ignored. This is unforgiveable and the real source of the problem – see my comments on the seven sins on the previous post.Yes, one would expect of the powerful and resource rich organization that is the FedRes to be sentient and insightful and further, reside in an uncorforatble position with the state of the “economic theory” du jour. that the FedRes and Benanke et al, were asleep at the wheel is unforgiveable as well as their blind acceptance of the status of the ruling and dominant religious cult called economic theory.Unfortunately, this is human life; we progress from disaster to disaster – another subject for another day.That Mr Benanke be sacked!Comment: a ludicrous and emotionally insane proposal.Mr Benanke may be guilty of naivety, which I believe is the case and I have no doubt that almost every powerful and influential arsehole with a personal agenda is banging on his office door, telephone, home, etc., in order to browbeat Mr Benanke into steering the future to their personal agenda, rather than to do his job. This is Mr Benanke’s problem as well as those corrupt layabouts taking great delight in imposing their mostly stupid question under oath on the Hill. This of course, includes the big financial players, and governments, and lots of scum bag politicians; we can’t afford politicians; we need statesmen…What I have suggested before, that is that the FedRes will be given global ultimate powers appears to be the trend and I don’t expect that Mr Benanke will like the role of Pope so I believe that the next political appointee to be Grand Master of the Catholic (centre of the Universe) FedRes, will be the most dangerous man on the planet.Life goes on, and one should get on with life; go fishing, explore, read, enquire, etc, all those things that make us human.The real problem is that the major forces oppose change and hence herein lies the pain; a pain that must be experience because we fail to think and to remain sentient; we just all want to become trillionaires.You Americans are always trying to tell us that you export democracy, so reflect on this your democratic system and try to understand, yes understand, that what is happening is democratically driven; your democracy is your Cause.Now: about anger!Comment: anger arise out of good and justice and therefore you should seek the source of your anger as that source, upon analysis, will show you the way.Oh, by the way: Physics is the living and learning from life; it is a process!Ho hum

BobJuly 29th, 2009 at 6:03 pm

Peter, you are stating that we should keep Bernanke. Are you making this statment from his performance or your concern that there is no one else that may fill his shoes?If from his performance let’s hear what he has done right!

GuestJuly 29th, 2009 at 7:54 pm

b,if i may interject, he is not saying we “should” do anything.he is saying that sacking b.b. is “a ludicrous and emotionally insane proposal.”independent of what one might believe to be the best or appropriatecourse.think reality, flow and cause/effect. not argumentation etc…

blindmanJuly 29th, 2009 at 8:24 pm

correction: he did suggest, using the word “should”, we discover the source of our anger. that was a very good suggestionusing the word “should”, a word i am usually very wary of butnot in this particular context.mho and apologies.

GuestJuly 30th, 2009 at 12:25 am

Perhaps GSM’s post from previous thread would be beneficial here (reposted without permission):RE: The Fed.I can see from many commenters that there are a lot of “Stockholmers” on this blog- captured by the notion of the Fed as their great financial protector. Sadly this defies all common logic.The US Fed is the perpetrator of the crime, not the system that offers protection from it.Try to rationalize this; How can it be remotely possible that a secretive private entity, omnipotent and unauditable, can effectively regulate it’s Masters in an open and just manner? Trillions of dollars in liquid Govt backed debt instruments have been tranferred directly from the Fed to it’s Masters (in exchange for worthless crap)without any approval of Congress, in such ad-hoc fashion that the Fed cannot account for hundreds of Billions of it. This is taxpeyers money btw. This is oversight, this is accountability? It’s laughable. It’s also terminal.”Stockholmers” don’t see a problem with this, captured as they are.For them the Fed is a principled and sound organisation. I’m pleased LB weighed in with his professional take to put paid to any fanciful notion that the Fed acts with the interests of “the greater good”.It’s not easy to awaken to the understanding that it’s all been rigged , that you have been born into a scam designed to fleece you all of your life.And now that the Ponzi US financial system is in the process of it’s terminal decline, that collapsing facade is exposing how truly obcene the obfuscation of US citizens has been since 1913.The Founding Fathers gifted a great nation to it’s citizens. Generations later, the citizens are looking on as it is all #&%! away in an orgy of theft under the very noses of their elected officials. I’m wondering at what point, at what level of pain will the real push back begin. I suspect when U6 unemployment reaches 25%+ we will start seeing real and serious social disconnects.At that point even J6P will see that the host is dead, then look out.GSM

MAJuly 30th, 2009 at 10:55 am

This is what still bugs me…Every bailout dollar should’ve come with conditions. This is not rocket science. There were tons of people screaming for this. I for one ranted it over and over.Bernake was in a position to make up rules as he went along. AND HE/THEY DID!!! Unfortunately, they didn’t choose to make up any rules when it came to punitive actions. How or why was 100% cronyism!So Bernake can “be mad or sickened” by doing what he had to do in bailing out the Too Big To Fail institutions, and he can be sickened by the people who ran these companies so recklessly…. …..BUT WHAT THE F**K HAS HE DONE TO PUNISH THE WICKED?!?!?! We all know there is no court case coming up. We all know that this “financial reckless endangerment” is not prosecutable. With Wall Street’s feet to the flames, there should’ve been massive turnover DEMANDED!!! (For people not to realize how CEO’s can be extremely replicable, just take a look at Robert Nardelli, as he jumps from 1 industry to another. What a success story of failure!!! C’mon people!!!) Most of these current CEO’s are just crony’s with well connected friends and families. It’s nepotism being rewarded to the highest degree!There should’ve been conditions on layoffs being scaled by salary brackets. (rather then giving companies incentive to layoff mass sectors, thus leading to further problems) There should’ve been REAL salary restrictions that are tied to a set ratio versus internal salaries. The list went/goes on and on…Bernake’s running a dog and pony show, as he recapitalizes his Wall St cronies, and reinforces their behavior, as he has done NOTHING to stop this charade. He’s keeping “zombie banks alive” (as NR used to be against???), and his reluctance to acknowledge or understand 70% of his economy and 95% of his population is just plane “sickening”! His actions are based on what is best for the economy he knows. Not the economy of the average Joe. …and no matter how he spins it, at the end of the day, he rewarded the reckless elite. Yes!!! REWARDED THEM! With no punitive action it is a reward reward reward!…and for those defenders who believe he “got us out of the woods”… let’s face it, it’s not like Bernake possesses some 6th sense or super human intellect. We are giving him credit for putting into place actions that many economists had postulated. (only, many of these economists were able to come to these conclusions without the aid of having the information and resources he had available to him.) If we had ANY living being in Bernake’s position, and they were as willing to ride out Wall Street’s best wishes, we would’ve came to right where we are! Kermit the Frog could’ve done 100% the same thing, and at least the public would be spared the lie of the Fed not being run by a muppet.So with Bernake, we have a list of things he didn’t do (like see the biggest financial crisis coming), and we have a list of credible things he could’ve done and didn’t… I fear what he will do next, or what his current actions will lead to. Every person, for the most pat, is replaceable! I don’t see any reason why this man isn’t!All the best,Miss America

Free TibetJuly 30th, 2009 at 1:57 pm

God love ya. Bernanke held his nose as he kissed WS’s ___. Doesn’t cut it with me either.The question of his reappointment should be a consideration of the skills, the temperament, the understanding that we need of someone in that position going forward. Not as compensation for a mixed record of the past. Mixed I say, given our Professor’s contention that although late to develop the correct understandings he eventually acted properly in breaking the freefall. Which might not have happened at all if it had not been for the similar lack of understandings of those in that position before him.We shall see. That latter remains to be proven. This isn’t over yet. Nothing has been fixed. The global economy contains the same imbalances now as before. Perhaps worse. This patient may be stabilized, for the moment, but there has been no cure.Since it is clear that no political appointee can be independent. And therefore the FED cannot be independent either. It is my feeling that a Keynesian student of the Depression is the wrong man for that job going forward. If we’ve learned anything by looking at the past we should be very suspicious of anybody who holds that monetary policy alone can produce continual growth and stability. And we should position ourselves to suffer contraction without the need to refer to it as deflation. This is not a Keynesian concept. It is not of Economics. It is not of Economists. The systems are complex and interconnected. Economists and their models are as incapable of describing those relationships as meteorologists are incapable of predicting the weather. We don’t need that at the FED. Not now. We need mechanics. More Harry Truman. Less nose holding.

GuestJuly 29th, 2009 at 8:04 pm

Topics of John Williams’ Latest Commentaries available to Shadow Government Statistics (SGS) subscribers:Flash Update July 28th, 2009 • Depression Data Distortions Fuel Recovery Mania • Statistically Insignificant Monthly Changes amidst Severe Bottom Bouncing • Foreclosures Warp New and Existing Home Sales • Shy of a Political Fix, Second-Quarter GDP Consensus Is Too Optimistic More …Newsletter (Issue No. 51) July 20th, 2009 • Current Recession Now Longest Since Great Depression • June U-6 Unemployment Rate Topped 20% (25% SGS) in Michigan, Oregon, Nevada, California, South Carolina and Rhode Island • Pressures Will Mount for New Stimulus and Bailouts • Spreading Depression Creates Its Own Statistical Distortions • Inflation Signs Begin to Surface • U.S. Dollar Remains the Key to the Markets and Inflation • The U.S. economic and systemic solvency crises show no signs of abating, despite the happy hype out of Washington and Wall Street. While the pending second-quarter GDP estimate likely will show a narrowing quarterly contraction, such will be against a deepening annual downturn and revisions that should show the recession to have been not only longer and deeper than previously reported, but also the most severe recession since the shutdown of war production after World War II. Irrespective of media excitement around the fluttering of often statistically-insignificant or seasonally-warped monthly numbers, annual growth rates in key series have been holding at or pushing to new historic or post-war lows. More …http://www.shadowstats.com/

GuestJuly 29th, 2009 at 9:23 pm

this may have been overlooked too..Darryl Schoon:DIVIDE AND CONQUER THE TWO-PARTY DANCE OF DISASTERInstead of helping to solve society’s problems, the democratic process has been diverted by powerful and well-organized special interest groups. This diversion is accomplished by exploiting the conservative and liberal tendencies of the electorate, a diversion that enables special interests to maintain control no matter what party wins.By exacerbating the natural tensions existing within society, special interests use politicians and the media to control the political dialogue, emphasizing issues that divide and inflame the electorate thereby diverting attention away from the destabilizing, dangerous and self-serving aims of special interests.After every election, either conservatives or liberals will feel that victory has been achieved, their ideological opponents temporarily vanquished, their political ends accomplished; but nothing could be further from the truth as both conservatives and liberals have been duped in the process, a process best described as political pornography—as the aftermath is always somehow unfulfilling, no matter how exciting the initial attraction and foreplay.In the end, very little gets solved, problems persist and proliferate, and the electorate becomes increasingly disillusioned—that is, until a new candidate is found by the special interests to again raise the hopes of both conservatives and liberals that this time it will be different.SPECIAL INTEREST GROUPS AND THE RISE AND FALL OF NATIONSThe ability of special interest groups to dominate democracies is surprising only because democracies are relatively new; notwithstanding the Greek city-states and the earliest reports of democracy in ancient India—and my parody of an earlier imagined attempt, http://www.drschoon.com/articles/DemocracyInTheMadhouse.pdf .Special interest groups far predate the modern democratic state. According to American economist, Mancur Olsen (1932-1988), author of The Rise And Decline Of Nations: Economic Growth, Stagflation, And Social Rigidities, 1982, Yale University Press, special interest groups arise in all nations and it is their presence and power that ultimately destroys the nations they dominate.Mancur Olsen’s theory, the Logic Of Collective Action, posits the longer a nation is stable, the more likely special interest groups will rise and dominate that nation’s affairs and economy, making that nation less efficient and less productive and by so doing contribute to its ultimate downfall.In a paper at Cornell University, Chia-chen Chou sheds light on Olsen’s Logic of Collective Action as follows:Special interest organizations and collisions (distributional coalitions) reduce efficiency and make political life more divisive. Distributional coalitions struggle to maximize their own self-interests, that is, share of the national income rather than finding ways of increasing this income. [bold mine]:Thus, special interest groups attempting to get a bigger slice of the pie will lead to decreased societal production…The underlying logic of collective action and its implications provide a general explanation for the economic growth and decline of states. The longer the period of stable government, the more special interest groups will form to rob the economy. [bold mine]:Olsen’s Logic of Collective Action explains the increasing divisiveness of American politics, Wall Street’s successful robbery of America’s wealth, and the military-industrial complex’s role in America’s demise as a world power; and now that these issues have been resolved, the question remains, what’s next?Reply to this comment By FAMC on 2009-07-28 22:09:34

Athur's ghostJuly 29th, 2009 at 9:23 pm

Very sad. The people who lost so much in the crash have become followers of RGE because they wished that Nouriel had saved them and now they are missing out on the recovery in the stock market because Nouriel knows next to nothing about the stock market and he is still preaching doom and gloom.Of course there is worrying news about the economy. That is the “wall of worry” that investors in a new bull market must climb. When the worries about the economy cease, that will be the time when the next crash happens.

GuestJuly 29th, 2009 at 10:01 pm

Very happy. The people who gained so much by avoiding the crash have become followers of RGE because they wished that Nouriel will saved them again and now they are not seduced by a faux recovery in the stock market because Nouriel knows about fundamentals and he is still preaching doom and gloom.Of course there is worrying news about the economy. That is the “wall of worry” that high-risk adrenalin-junkies in a new bull market must ignore. When the worries about the economy cease, that will be the time when the next recovery happens.

Arthur's ghostJuly 29th, 2009 at 11:37 pm

Nouriel is “preaching” doom and gloom for the next six months and then a slow recovery. The stock market looks 6-9 months ahead to Nouriel’s predicted slow recovery and investors like me are making money hand over fist because the market is pricing in Nouriel’s recovery. It is a new bull market. It may be slow going from here on, but five years from now you will wish that you had ignored RGB and put your faith in the “equity risk premium” instead. Google that phrase and see why you should be invested NOW!- Don’t forget: Nouriel’s 401K is 100% invested in stocks right NOW! Only his cash is out of the market. For his own retirement he is betting on stocks even while he tells you to keep out of the market!!!!! Follow Nouriel Roubini and buy stocks now while they are cheap.

AnonymousJuly 29th, 2009 at 9:42 pm

ya’ll know it will come down to this aightMilitary Poised to Help FEMA Battle Swine Flu Outbreak (or something else much more important)http://www.foxnews.com/politics/2009/07/29/military-poised-help-fema-battle-swine-flu-outbreak/excerpt:-As a first step, military leaders have asked Gates to authorize planning for the potential assistance.Orders to deploy actual forces would be reviewed later, depending on how much of a health threat the flu poses this fall, the officials said.

AnonymousJuly 29th, 2009 at 9:45 pm

makes you wonder, before the outbreak of the flu,FEMA camps was “growing” like mushroomhhhhmmmmmmmm

PeterJBJuly 29th, 2009 at 9:55 pm

@ Bob and blindmanThe good ship lollipop is shooting down the rapids at trillions of miles per hour and some want to change the tiller man just when he is fully sensitized and has just finished a crash course in human behaviour – at the predator and vampire levels?Of course, I am in favour of greater accountability and transparency but these are not my recommended priorities, which are getting science into economics and stop the applied holy rolling of eyes and hallelujah stuff.Mr Benanke, I must assume, has all the resources to analyse fully the stuff that is going down and is in the box seat and from what I have read in the public domain he has realized to his shock and disgust, the practises of the predator banks and fascist practises that the regulators have allowed to ensue; but, okay, he didn’t realize – so he is not perfect, but I think that if he is half the man I think he is, he will give it a go to do it straight – for the country/world.The alternative is to put a neocon barbarian cannibal in who will sell the World to the highest bidder just to get his “idealism” wet dream – and there are plenty of them still lurking – or, how about some of those from those getting all the bucks. Methinks not as Mr Benanke is an academic and independent, it seems to me, of commercial interests. Saying, this, he may also be pressured to obey the demands of the majority of his BoD and shareholders and this may be a problem – but then, nobody knows what China is going to do and the World needs a Captain highly conversant with what is going on and one that is scared to death with no time to fill his boots with plunder like that lot doing the questioning always do, a priori.I question Mr Benanke’s theory as well as his lack of foresight and failed job undertaking but today, I believe that he is the best person to hold the tiller. After all, if he fails, you American’s can hang him, cowboy style.Anyway, it doesn’t mean much except damage control that is to say, his tenure does not solve the problem.I see the problem as small numbers have become large numbers and our “leadership” have been left behind and fail to gather the competence for the change. And, while “leadership” has increasingly become to wallow in the gutter, the bureaucracy has followed suit which in turn, permitted imperceptibly, the total corruption of the socio-economic structures of the World.The next 20 years are going to demand sentience and integrity but what we are going to possibly get, unless we can over-ride it, is a repeat of governmental impositions and clampdowns. I hope not. In fact I hope the large producing corporates can thoroughly overcome the crasse political base because, they need customers whereas politicians only need money, ego and power.But I have faith despite getting angry from time to time.Ho hum

GuestJuly 29th, 2009 at 10:28 pm

With your information and your insight and your logic, PeterJB, and how you’ve thought all along, to be wrong on this is to be wrong on everything. To find the burglar, to find the thief and the master mind and, then, with your commitment and your logic, to walk up and put a hero button on the master mind of the robbery makes me think that everything you’ve ever written is a lie.Is this really PeterJB?

PeterJBJuly 29th, 2009 at 11:02 pm

It is me and allow me to say this: (thanking you for your comment)I am not suggesting putting a hero button on Mr Benanke at all, as he has failed and failed miserably. That which I am saying is that you leave Mr Benanke on the trapdoor with his hand on the rope that opens that door which will ensure that 1. he doesn’t get away and 2. he will prioritize all that is necessary to keep that door closed. which means he will steer the boat to the best of his ability, until that time that you perhaps desire to hang him.But more importantly, there is a socio-economic system to upgrade or better re-structure, re-design, re-build and real-economist and statesmen should be getting on with that and Mr Benanke should not be permitted to play a role in these affairs and nor should the FedRes and all that it contains and hangs off it. And, just in case you didn’t get the point, you Americans already have those foundations in your Constitution and accompanying documentation.It’s time to go past the anger and become socially serious and responsible because, simply put: the situation will become worse; far worse. Your mileage will vary.Ho hum

BobJuly 30th, 2009 at 11:19 am

Peter, thanks for the response.Simple question – When do we start holding the people who caused this mess responsible?Let’s just take one example of what Bernanke has done. He has bought $1 trillion worth of toxic assets! How and why is that the responsiblity of the Fed? It became his responsibility when both administrations recognized that there was no way they could get TARP 2 passed to buy them. Who’s going to pay for them?He is a man of knowledge regarding the great depression. However, he does not have the backbone to fight for what’s right for his country. Intellegent, yes … so what?If you have children, as I do, here in this country and you make decissions that cripple them in their generation … what kind of person are you?Sorry, but he does not deserve his position or power.

GuestJuly 29th, 2009 at 10:50 pm

By Guest on 2009-07-29 21:59:24″Thanks. I needed that. It was a real mood lightener: I really did laugh out loud.Rebel”We can all ‘laugh’, but that doesn’t mean that everything is funny.

GuestJuly 31st, 2009 at 12:52 pm

The insanity that finds the largest percentage of the population battling left and right in an up and down war. This is a class war, not a political one, and Buffet has it right – his class is winning.

GuestJuly 29th, 2009 at 11:18 pm

meh … that’s nothin’ new. We’re only human for fuks’ sake. I just wish that we understood that, PJB.

GuestJuly 30th, 2009 at 12:02 am

FYI: the last four grafsAgain, this is not necessarily so. Just ask Nouriel Roubini of New York University, who has a reputation as the most pessimistic economist in academe. He deserves it. His most recent paper, published last week, is entitled: “Can the Fed and Policy Makers Avoid a Systemic Financial Meltdown? Most Likely Not.”Nobody is more aware of the gravity of the financial situation, and nobody has done more to point out the risks of a systemic crisis.So how are Roubini’s own funds invested? They are 100 per cent in equities. In the long run stocks do best and he is not yet close to retirement, so he keeps putting more money into index funds each month.Fully aware of the gravity of the financial situation, he is also aware of the futility of trying to take action or to time the market. Those tempted to make the investing equivalent of a goalkeeper’s depairing dive should take [email protected]

ChignosJuly 31st, 2009 at 10:45 pm

Hey folks, you oughtta concentrate on where Greenspan and Bernanke have their money invested. Last I heard Greenspan is with John Paulson shorting the hell outta the market…….just a coincidence, I’m sure. As for Bernanke……anyone know?

GuestJuly 29th, 2009 at 11:58 pm

From Too much! by Major Yield | The Bond StrategistPerhaps, you have your arms around all that is happening in the US, or the World?I do not.Too much!Not only has the “definition of terms” changed, so has the basic meaning of words in finance.The New Beltway Boys with their New Economics in a New Era of “Change” have already rewritten “take over” “Economy” ownership, Free Enterprise etc .Nothing looks the same. General Motors (GM) is now Government Motors (GM).AIG is now, All Insured (by) Government.Many Big Banks are Government owned. They just don’t know it.The US Treasury Department has become one of the free market’s biggest competitors.There is not enough space on this page to express opinion about them all and they keep coming everyday.Too much!What’s happening today was predicted by Milton Friedman in his book Money Mischief.From the deficits, money supply, Treasury buying the debt, to government officials’ actions and denial of inflation worries, right up to massive inflation. A must read.That said, I can not intellectually make a forecast for “all” the credit market professional out there.Where does the market go from here? What should we do?You answer the Question(s) and send it in by e-mail and we will put it on the page for all to read. If words are EC – editor correct.My Gut, says that the T Curve will have put most portfolios back in the “lost in asset value column” as interest rates rise…. Buy a 30-yr to at a 4-4.50 % recently and see 8 % sooner than you may think.My gut says, (as Obama said to the Los Angeles folks, “You ain’t seen nothing yet!”)My gut says you can eat an elephant, one bite at a time- and – It will be eaten.The unbelievable government spending, the huge, huge deficits, the assaults on Wall Street folks, the assault on the leaders of important industries and their CEO’s, the assault on private enterprise, the destruction of home values, 401k’s, need I go on????Will take many life times for the taxpayer to eat this elephant.Just Too Much!!!!!For Fixed Income Portfolio Management:Credit – Governments – with a printing press.Maturity: shortYield: Not too much!Pain: Too much!http://bondheads.com/

Wolf in the WildsJuly 30th, 2009 at 2:49 am

AG,I don’t think NR is a market caller. He is an Economist. He tells you what the world is like. Its up to investors to decide what to do with their money given the economic reality. You will be surprised but traders don’t care about what the world is like. Traders are focussed on the short term. It doesn’t matter if a company made 50% less profit than the previous year, as long as it beats “expectations”. The market is focussed on these things, not the big picture. HOWEVER, eventually, the big picture will impose itself on the markets. It is inevitable. And more unfortunately, it also inevitable that investors always confuse the market with reality, and get hurt by it. Do what you want, but at the end of the day, reality will impose itself and the illusions that the market wants to believe in. And when it does, the pendulum will swing once more, to the other extreme.

Arthur's ghostJuly 30th, 2009 at 5:42 am

Nouriel called the March rally, (which turned out to be the largest rally in history) a “sucker’s rally”. Yet he was 100% invested in the “suckers rally”.What does that teach us?Answers on a postcard please.

GuestJuly 30th, 2009 at 6:43 am

Chart reading is a bunch of b.s. I can draw lines on charts after the fact to show trends, false breaks, distributions, pennants, and the other assorted nonsense that “chartists” think they see.As for whether this is a bear market rally or not, time will tell. Do you think the economy is good?

GuestJuly 30th, 2009 at 12:44 am

Highly touted stimulus jobs may not provide lasting work | The (Eugene, Oregon) Register-GuardLawmakers’ estimates of 3,236 new jobs in Oregon may include very short-term employment(AP) July 29, 2009–PORTLAND — How much are politicians straining to convince people that the government is stimulating the economy? In Oregon, where lawmakers are spending $176 million to supplement the federal stimulus, Democrats are taking credit for a remarkable feat: creating 3,236 new jobs in the program’s first three months.But those jobs lasted on average only 35 hours, or about one work week. After that, those workers were effectively back unemployed, according to an analysis of state spending and hiring data. By the state’s accounting, a job is a job, whether it lasts three hours, three days, three months, or a lifetime…With the economy in tatters and unemployment rising, Oregon’s inventive math underscores the urgency for politicians across the country to show that spending programs designed to stimulate the economy are working — even if that means stretching the facts.At the federal level, President Obama has said the federal stimulus has created 150,000 jobs, a number based on a misused formula and which is so murky it can’t be verified…Oregon’s accounting practices would not be allowed as part of the $787 billion federal stimulus. While the White House has made the unverifiable promise that 3.5 million jobs will be saved or created by the end of next year, when accountants actually begin taking head counts this fall, there are rules intended to guard against exactly what Oregon is doing.The White House requires states to report numbers in terms of full-time, yearlong jobs. That means a part-time mechanic counts as half a job. A full-time construction worker who has a three-month paving contract counts as one-fourth of a job. Using that method, the Associated Press analysis of figures in Oregon shows the program so far has created the equivalent of 215 full-time jobs that will last three months…http://www.registerguard.com/csp/cms/sites/web/business/17832963-41/story.csp

GuestJuly 30th, 2009 at 1:10 am

Bernanke May Have to Sacrifice Lending Powers or IndependenceJuly 29 (Bloomberg) — The financial-overhaul plan before Congress leaves the Federal Reserve in the business of lending to everyone from General Electric Co. to investors in student loans. That makes it harder for Chairman Ben S. Bernanke to keep Congress from second-guessing what he does.Bernanke is trying to deflect a bill, co-sponsored by 276 members of the House of Representatives, that would require audits of central bank operations, including monetary policy decisions, by the Government Accountability Office. Audits wouldn’t be “consistent with independence,” Bernanke said at a Kansas City town hall meeting July 26. “I don’t think the American people want Congress running monetary policy.”Unless the Fed retreats from unlimited lending, Bernanke can expect such a result, said Marvin Goodfriend, an economist at Carnegie Mellon University in Pittsburgh. The more the Fed invades the domain of Congress by supplying credit to businesses and markets outside the banking system, the more Congress will seek a hand in monetary policy, said Goodfriend, a former adviser to the Richmond Fed…The 88-page financial-overhaul plan the Obama administration submitted to Congress, written by the Treasury with input from the Fed, doesn’t limit whom the central bank can lend to or for how long, beyond the Fed’s own definition of “unusual and exigent circumstances.” …‘Vast Power’“The Fed clearly cherishes its vast power to create and spend trillions of dollars,” Texas Republican Representative Ron Paul, who wrote the House bill on Fed audits, said on his Web site. “The only accountability the Federal Reserve has is ultimately to Congress.” …Congress has stepped up pressure on the Fed partly in reaction to proposals from the Obama administration to give the central bank more authority to regulate risk across the financial system. Lawmakers in both parties have expressed wariness about giving the Fed even more power…http://www.bloomberg.com/apps/news?pid=20601068&sid=atdHeCJ1_K0U

GuestJuly 30th, 2009 at 8:50 am

Goldman Sachs: Gambling With Your Money?Huffpost – Goldman Sachs: Gambling With YourSachs is using its new taxpayer-subsidized status to bring increased risk to the financial system, a group of House members charged Monday. They want to know why the Federal Reserve is allowing it.The group on Monday sent a letter to the Fed asking for an explanation of why Goldman Sachs is being allowed to speculate wildly even while officially redesignating itself a bank holding company, which theoretically means stricter regulation. The bank designation gives Goldman access to dirt-cheap Federal Reserve loans.Goldman initially applied for the new designation last fall, so that it could access bailout funds (since paid back). Because bank holding companies, unlike investment banks, have access to a host of valuable taxpayer subsidies, they are required to reduce the risk associated with their investment activity. But Goldman then applied to the Federal Reserve for an exemption to the rules, saying that it takes time to alter a business model. The exemption was granted in February — and Goldman went on to take even greater risks. Its Value-at-Risk model, a widely used measure of the risk of loss, recently showed potential trading losses at $245 million a day; in May 2008, it was $184 million a day.The bets paid off in the most recent quarter as the market rose and Goldman posted stellar earnings. Morgan Stanley, meanwhile, was similarly given an exemption by the Fed but did what it said it would do and reduced its risk. The company lost money, largely as a result of that decision.The likely result: Other players on Wall Street will follow Goldman back toward the cliff they dangled over just months ago. In announcing its lousy earnings, Morgan Stanley assured that it will increase the risk it takes in the future. Citigroup is racing to increase its exposure, too, handing another billion dollars worth of chips to its riskiest traders, bringing its hedge fund operations to close to $2 billion. On the brink of collapse, it had scaled such investing down to around $800 million.Lucas van Praag, a Goldman spokesman, declined to respond directly to the charges in the letter, but said that the firm is working to reduce its exposure.”We’re very cognizant of risks inherent in risk taking. We have one of the highest capitalizations of any bank,” said van Praag. He said that the Value-at-Risk numbers, while the only publicly released measure of risk, are only one metric and that internal measures show the bank has reduced its exposure over the past year.He also took a dig at other Wall Street players who have avoided using mark-to-market accounting in an effort to fluff their balance sheets. Earlier this spring, banks lobbied Congress and the Financial Accounting Standards Board to soften mark-to-market rules. The new rule allowed banks to inflate their balance sheets by claiming that an asset was worth more than it could fetch on the market because the market was frozen. Goldman Sach, said van Praag, doesn’t use that slight of hand, so its balance sheet is an honest reflection of its exposure.Story continues below”We have dramatically reduced our leverage and as a mark-to-market firm–we aggressively mark our assets to market–our leverage ratio is a true reflection of risk,” said van Praag.Nevertheless, as Wall Street follows Goldman, overall systemic risk is ramped up. Meanwhile, Congress is debating whether to give the Fed authority to regulate systemic risk throughout the economy. The congressional letter puts the Fed on the spot, demanding that it explain why it’s allowing Goldman to use taxpayer dollars to increase systemic risk.”The only difference between Goldman Sachs today and Goldman Sachs last year is that today, the company is officially gambling with government money. This is the very definition of ‘heads we win, tails the taxpayers lose,'” reads the letter.Read the full letter:Dear Chairman Bernanke:In the fall, Goldman Sachs secured access to government funding by converting from an investment bank into an ordinary bank. Despite this shift, the CFO of the company, David Viniar, said last week that the company is continuing to operate as if it were still a high-risk investment bank: “Our model really never changed,” he noted in a quote to Bloomberg. “We’ve said very consistently that our business model remained the same.”This statement seems accurate. Earlier this year, the Federal Reserve granted a temporary exemption to Goldman Sachs from standard bank holding company Market Risk Rules, allowing the company to continue operating as if it were an investment bank. The company and its employees have taken full advantage of its new government subsidies, and the retained ability to bet big. In its most recent quarter, Goldman Sachs earned high profits of $2.7 billion on revenues of $13.76 billion, with 78 percent of this revenue derived from high-risk trading and principal investments. It paid out much of this revenue in compensation, setting aside a record $772,858 for each employee at an annualized rate. The company’s own measurement of risk, its Value-at-Risk model, recently showed potential trading losses at $245 million a day, up from $184 million last May.Despite its exemption from bank holding company regulations, Goldman Sachs has access to taxpayer subsidies, including FDIC-backed bonds, TARP money (since repaid), counterparty payments funneled through AIG, and an implicit backstop from the taxpayer that allowed a public equity offering in a queasy market. The only difference between Goldman Sachs today and Goldman Sachs last year is that today, the company is officially gambling with government money. This is the very definition of “heads we win, tails the taxpayers lose.”It is worth noting that there sometimes might be good reasons to grant temporary regulatory exemptions, considering that companies cannot instantly change their business model. Still, given Goldman Sachs’s last quarter results and public statements that it is not changing its business model, we are worried that the company is using its regulatory freedom to evade capital requirements and take outsized risks with taxpayers on the hook for losses.With this in mind, our questions are as follows:1) In the letter granting a regulatory exemption to Goldman Sachs, you stated that the SEC-approved VaR models it is now using are sufficiently conservative for the transition period to bank holding company. Please justify this statement.2) If Goldman Sachs were required to adhere to standard Market Risk Rules imposed by the Federal Reserve on ordinary bank holding companies, how would its capital requirements differ from the current regulatory regime?3) What is the difference in exposure to the taxpayer between these two regulatory regimes?4) What is the difference in total risk to the portfolio between these two regulatory regimes?5) Goldman Sachs stated that “As of June 26, 2009, total capital was $254.05 billion, consisting of $62.81 billion in total shareholders’ equity (common shareholders’ equity of $55.86 billion and preferred stock of $6.96 billion) and $191.24 billion in unsecured long-term borrowings.” As a percentage of capital, that’s a lot of long-term unsecured debt. Is any of this coming from the Government? In this last quarter, how much capital has Goldman Sachs received from the Federal Reserve and other government facilities such as FDIC-guaranteed debt, either directly or indirectly?6) Many risk-management experts, most notably best-selling author Nassim Taleb, note that VaR models can dramatically understate risk. What is your overall view of Taleb’s argument, and of the utility of Value-at-Risk models as regulatory tools?As we work through legislative conversations regarding systemic risk, these questions are taking on increased significance. We appreciate your time and the efforts you are making to explain the actions of the Federal Reserve to Congress, and to taxpayers.Sincerely,Alan Grayson (D-Fla.)Brad Miller (D-N.C.)Dan Lipinski (D-Ill.)Elijah Cummings (D-Md.)Ron Paul (R-Texas)Tom Perriello (D-Va.)Maxine Waters (D-Calif.)Jackie Speier (D-Calif.)Maurice Hinchey (D-N.Y.)Walter Jones (R-N.C.)

GSMJuly 30th, 2009 at 10:25 pm

Bitching about GS is a waste of time. They will do whatever THEY ARE ALLOWED TO DO.(Emphasis on ALLOWED).To put an end to the greatest theft of all time (which is continueing btw), you will need to change the mechanism by which it propagates. That is; the US Federal Reserve. Change the Fed and you change everything. Stop ALLOWING the US Fed transferring US taxpayer treasure to the Banksters. This is being ALLOWED under the umbrella of “Fed independance”. So, stop it. Remove the Fed’s ability to loot the future of US citizens.Staring all googly eyed at simple Ben on PBS, playing the benevelent Lord Protector of all things Financial won’t do that. Contrary to what some commenters here believe, Bernanke’s real world does not go beyond that of his Masters at the Fed’s shareholder Banks. That’s it, the limits, the end of his scope of reference.Not that he matters in any case. No matter who is there as Fed Chairman, his job will be to bail out the Fed Masters of their casino bets using taxpayer money. Change the SYSTEM , not the incumbent.

The AlarmistJuly 31st, 2009 at 4:07 am

A waste of time unless you count the value of catharsis … bitch on if it makes you feel better. After all, isn’t it about how you feel that is really important to the Big O and his crowd?

Pecos BankerAugust 1st, 2009 at 11:59 am

We should applaud Godman’s success. The huge bonuses that they pay will eventually trickle down and stimulate a real recovery. This is an illustrious theory of economics that was responsible for the resounding success of the Reagan era.

GuestJuly 30th, 2009 at 8:53 am

July 28, 2009 3:01 PMPrepare for more foreclosures … many moreThe deluge of home foreclosures swamping New York is nowhere near over, a report from the U.S. Government Accountability Office shows.The GAO study released Tuesday predicts that the number of foreclosures on homes backed by subprime or low-documentation mortgages could easily double in the coming months or years, which could put tremendous pressure on housing prices throughout the city and suburbs.Residents who took out subprime or low-doc loans to buy homes earlier this decade had defaulted or were delinquent on 53,000 loans in New York state through March 31, the GAO said. That dwarfs the 33,000 subprime or low-doc borrowers who had already completed foreclosure proceedings by the spring. At the time, banks had begun the foreclosure process on 28,000 homes backed by subprime or low-doc loans.The bleak data are part of a national survey of “nonprime” mortgages prepared for Congress by the GAO. The study shows just how sloppy mortgage originators became during the housing boom. Of the 14.4 million mortgages provided between 2000 and 2007 to U.S. consumers with tarnished or poorly documented credit histories, 1.6 million had been foreclosed as of March 31, another 600,000 were in foreclosure proceedings and another 1.3 million were “seriously delinquent,” the GAO said.Of course, some other states, such as California and Florida, face even worse problems than New York does. In Florida, the fourth-most-populous state, the proportion of subprime or low-doc mortgages in the foreclosure process is six times higher than New York’s.But that will be of little comfort to New York City residents trying to sell their homes in areas already riddled with foreclosures, with more to come. The city’s eastern precincts, already pounded by foreclosures, seem likely to suffer the most. For example, in both the 6th Congressional District, which stretches from Jamaica, Queens, to JFK International Airport, and the 10th Congressional District, which goes east from downtown Brooklyn to Bedford-Stuyvesant and Canarsie, 35% of all active subprime or low-doc loans are deemed seriously delinquent.http://www.crainsnewyork.com/article/20090728/FREE/907289972

GuestJuly 30th, 2009 at 9:19 am

another green Shoot…lolU.S. Initial Jobless Claims Rise by 25,000 to 584,000By Courtney SchlissermanJuly 30 (Bloomberg) — The number of Americans filing claims for jobless benefits last week held below levels seen in late June, before auto-related distortions set in, indicating firings are slowing as the economy stabilizes.Applications rose by 25,000 to 584,000 in the week ended July 25, higher than forecast, figures from the Labor Department showed today in Washington. More than 600,000 claims were filed every week last month. The number of people collecting unemployment insurance decreased for a third week.

SoftwarengineerJuly 30th, 2009 at 9:44 am

GETTING BACK TO DR ROUBINI’S TOPICDid you bloggers know that European Countries dominated the top ten slots for IT technological innovation, as of the last Global Economic Forum rankings [last done in 2007]. The dinky country of Denmark was #1 [LOL].America was #1 in 2006, but dropped to #7 in 2007….my guess is America isn’t even in the top ten anymore. Japan’s #19, India’s #44, Mexico’s #49 and China’s #59 in the 2007 rankings.

GuestJuly 30th, 2009 at 9:54 am

From David Rosenberg:”The government has its hands in 40% of the economy and when public sector officials can influence how banks can value their assets, how mortgage servicers should be doing their business, who shall fail in the financial industry and who shall not; and when we have a central bank that is not just the lender but the market of last resort, even for RVs, and a government willing to run up its deficit to levels that would have made FDR blush, then perhaps we can end up seeing a recovery occur sooner than we had thought.”http://www.zerohedge.com/article/david-rosenberg-todays-straight-line-ramp-1000

GuestJuly 30th, 2009 at 10:00 am

U.S. States Face Ongoing Deficits, Rockefeller Institute SaysJuly 29 (Bloomberg) — U.S. states have identified more than $51 billion in revenue deficits for the next fiscal year less than a month after wrapping up their annual budgets, the Nelson A. Rockefeller Institute of Government reported.Among the worst projections for fiscal 2011 are California at $15 billion, New Jersey at $6 billion and Florida at $5 billion. In the current fiscal year, U.S. states totaled $160 billion in budget gaps, the report said.“States push large parts of fiscal problems into later years,” Donald J. Boyd, senior fellow at the institute, told a Governmental Research Association convention in Washington, D.C., July 27. “It can take three or four years before finances recover, even if economic recovery comes sooner.”After the 2000 recession, employment needed 14 quarters to achieve pre-recession levels; real wages took 11 quarters, and business income needed 13 quarters, according to the report.The deficits are opening despite current-year budget fixes that included $23.9 billion in tax increases, the largest one- year increase of its kind since at least 1979, the report said.Future budgets must also address a drop-off in federal stimulus funds, which steered $96.9 billion to state and local governments this budget year and are scheduled to provide $50.6 billion next year, Boyd told the association, which is based at Samford University in Birmingham, Alabama. The stimulus package is currently designed to phase out in 2012.Revenue PlummetsState budget gaps opened this year as revenue declined by 11.7 percent in the first quarter, the worst revenue drop in 50 years, the Albany, New York-based Rockefeller Institute reported.That was followed by April income tax collections, which fell by 33 percent compared with 2008. Boyd said this “will lead to midyear cuts and a new round of very difficult revenue and spending decisions in January-June of 2010.” …http://www.bloomberg.com/apps/news?pid=20601015&sid=aq6Aa9OufeBI

MorbidJuly 30th, 2009 at 11:32 am

Obi’s proposal is a politically slick way of handing off the economic problem to the FED. SMART politics. Awful governance – that looking out for the best interest of the citizens.

GuestJuly 30th, 2009 at 10:49 am

Nathan Martin of Nathan’s Economic Edge yesterday came down hard on Paulson and the Fed. Here are his comments regarding “Kucinich – The Federal Reserve is paying banks NOT to make loans…”:In yet another “no-duh” moment, the politicians who are paid by you to supposedly work for you are finally waking up to yet another central bank scam. I wrote about this in real time as it was happening last year, no one paid attention.Criminal Traitor, and former Secretary Treasurer of the United States, Hank Paulson, pushed for and received the right to PAY BANKS FOR THE MONEY THEY HOLD IN RESERVE. (see charted line rocket straight to the moon in 2008-9 from 0 to $840 billions on “Excess Reserves of Depository Institutions”: Source Fed BoG)Can you guess when they started paying money for reserves?Now, let’s set the record straight…it’s a huge advantage to the banks to be able to use their ‘fractional reserved system’ in the first place. In fact, it’s actually one giant Ponzi scheme, but let’s ignore that. Banks, by charter, are granted the right to lend out more money than they possess—that is how they make their money, and it’s also how most of the money (credit money) is made.Along comes the financial crisis and Paulson begins lobbying to PAY THE BANKS FOR THE MONEY THEY ARE REQUIRED TO HOLD IN RESERVE. This is a concept that is JUST CRIMINAL! Again, banks make plenty of money (too much w/o usury laws) simply by lending money they don’t have—that’s a right only a chartered bank has, you and I don’t have that ability. Yet, all of a sudden it makes sense to use OUR MONEY to pay them interest on the money they hold so that they can loan US money at usurious rates? HUH???At any rate, the appropriate palms were lubed and this SCAM made it past the politicians who are now complaining about it.Naturally, the banks didn’t want to HOLD MONEY without interest because they know what they and the Federal Reserve are doing to devalue our money. So, there they were holding massive NEGATIVE RESERVES for the first time in history (the charts and definitions were changed during this timeframe by the Fed). Along comes paying for reserves and what was massive negative reserves turns into an instant historic surplus!The banks are REQUIRED to hold reserves as a premise of their ability to be a bank! They do not and should not ever be paid to hold reserves, much less at a higher rate of interest than they can receive elsewhere.Again, watch Paulson’s personal investments and see who profits. I repeat – Criminal and TraitorPS – Why is it that the “EXCESS RESERVES’ totals more than $750 billion, but the “NON-BORROWED RESERVES” only total $150 billion? Could it be that there is over $600 billion in BORROWED RESERVES? Of course, that’s what all the government bank bailout loans are for. Yet, we are paying them money for the reserves on which they borrowed from us so they can lend it back to us at a higher rate??? Did you follow that? Ludicrous!http://economicedge.blogspot.com/

GuestJuly 30th, 2009 at 11:31 am

Why the stock market keeps going up — June 20, 2003Americans are out of work. Factory orders are sluggish. The economic news is grim yet the U.S. stock market keeps going up. Can this be consistent? Sure! It is possible to believe simultaneously that the American people are getting poorer and that the largest American corporations are going to get ever richer. How could this happen? Group A and Group B can get richer if they work together to grow the pie. Alternatively, Group B can get richer by transferring wealth from Group AWe’ve discussed this already in this blog in the context of airline CEOs who managed to take $billions in taxpayer money and transfer quite a bit of it into their personal checking accounts as salaries, bonuses, guaranteed pensions, etc. But there are more subtle ways in which corporations can acquire property formerly held by the public.For example, movie studios (notably Disney) and other corporate copyright holders recently purchased a federal law that extended copyright out to 100 years (the Founders had it at 14; it was 75 years until recently). There was no way for them to argue that this law would provide an incentive to authors because it applied to works that were created in the 1920s, i.e., whose authors had been dead for half a century or more. The effect of this law was to transfer public average-Joe property (public-domain works) into the hands of large corporations, i.e., the companies whose shares are going up.Disney figures in another corporate property transfer. Ever since the dawn of aviation it has been held that airspace belongs to the public and is to be regulated for the benefit of all by the FAA. This is what, for example, prevents the owner of a farm in Missouri from demanding that Delta Airlines pay him a tax every time they fly over his farm. In May of this year that changed for the first time. Disney essentially now owns the airspace over Disneyworld and Disneyland and they can exclude anyone from overflying. They’d been trying for years to exclude planes towing advertising banners but Sept. 11th gave them a security rationale (though neither the TSA or the FAA felt there was a security risk or wanted to transfer the airspace into private hands). Background story: http://www.aero-news.net/news/sport.cfm?ContentBlockID=9601Let’s hope the comments section will fill up with other examples of this trend. But the bottom line is that the time seems ripe to invest in the S&P 500. Look around you at stuff that you believe to be public property. Very likely it will soon be given away to America’s largest corporations and consequently their stock will go up even if they don’t innovatehttp://blogs.law.harvard.edu/philg/2003/06/20/why-the-stock-market-keeps-going-up/

GuestJuly 30th, 2009 at 11:43 am

This is the sort of stuff that makes my stomach churn. Was it inevitable? Why are Americans allowing this to happen?

GuestJuly 30th, 2009 at 6:28 pm

Because most people, and I include myself here, do not know what to do to stop acts like these.

Pecos BankerJuly 30th, 2009 at 10:01 pm

This sort of thing is precisely what Naomi Klein talked about in her book “The Shock Doctrine”: First there is economic collapse with the concomitant state of shock of the public (thereby unable to reason coherently enough to act), then there are the privatisations.

GuestJuly 30th, 2009 at 10:43 pm

True enough. ‘Disaster Capitalism’ indeed. Seems that we’re absolutely powerless.At one time I thought that Klein was a little over the top with her theories, but as this nightmare unfolds, I’m beginning to think that she was spot on.Incredible!

The AlarmistJuly 31st, 2009 at 4:11 am

The thing about the airspace over Disney is sadly true. It also makes one wonder if TSA is in cahoots with Big-Kiosk and Big Airport-Restaurant-and-Lounge, since you can no longer take your own beverages through security.

GuestJuly 30th, 2009 at 12:31 pm

California fiscal crisis | Philip Greenspun’s Weblog July 17, 2009Californians are scratching their heads trying to figure out why their government has run out of cash. Some blame the constitution. Some blame the governor. Some blame the lobbyists. Let’s run a few numbers.The median wage of a California state employee is $66,000 (source). The median wage among all Californians (including those state workers) is just over $36,000. The state employee can retire with a full pension in his or her late 40s or early 50s, which essentially means that the taxpayers have to pay for double the number of state workers that are required to provide current services. In addition to salaries that are much higher than private sector equivalents, the state employee has health care and other benefits that by themselves may exceed the total compensation of a full-time private sector employee. The reasonable question to ask is not “How did they run out of cash?” but “How was this ever supposed to work?”The picture is worse than the numbers would suggest. A lot of new Californians are working illegally. Their wages, which may be paid in cash, are less than $36,000 per year, and are not reflected in official statistics. Yet an immigrant who arrives to take a $10 per hour job still requires teachers for his children, policemen and firemen for his neighborhood, etc.California has a tax burden of 10.5 percent of its citizens’ income, higher than the U.S. average of 9.7 percent (source). Due to the fact that California government has grown so much in the past few decades, its pension and health care payment obligations for retired state workers are going to skyrocket in the next 20-30 years. (The inefficient states of the Eastern U.S. were more or less equally inefficient in 1980 and had roughly the same population and size of government workforce.)California could become solvent… if it can insure that everyone who moves to the state for the next 30 years is a medical doctor earning at least $150,000 per year from Medicare, Medicaid, and other out of state sources.[Related: This guy calculates that, adjusted for inflation, California government now spends 3.54X as much per citizen as it did in 1970. It seems hard to believe, but I don’t have enough data to contradict it.The federal government is not doing a whole lot better, according to this Congressional Budget Office posting. What keeps the Feds going is their ability to borrow and print money.]http://blogs.law.harvard.edu/philg/

GuestJuly 30th, 2009 at 1:07 pm

I just don’t understand why the market keeps going up. I have lost the opportunity for major gains the past few months.Bill Gross seems to concur with Roubini, but the masses don’t.I just don’t understand. I’m very disappointed.

GuestJuly 30th, 2009 at 1:20 pm

You are not a trader. You know the fundamentals. So why are you disappointed? Because it looks like a sure thing in hindsight? You want to gamble? Jump in now. Arther’s ghost says it going back to 13,000.Here is the real story, the bait is being dangled by others that control the show. It’s not a market any longer. Find something sane to invest in. For example, why not make micro-loans and make yourself feel better (http://www.kiva.org/) and leave the sharks to themselves.

Arthur's ghostJuly 31st, 2009 at 4:22 am

Blah, blah, blah. You missed out on the rally so you blame everyone but yourself. Stop whinging and come over to my place and help me count all the money that I have made in the market since March 2009. Be nice to me and I’ll tell you how to regain all the money that Roubini and his mates lost for you.

GuestJuly 30th, 2009 at 3:14 pm

And so it goes…Joe Saluzzi of Themis Trading, who is an institutional trader for large mutual funds and hedges and basically bearish, warns: “The volume that you see during the day right now, some days as high as 12 billion through all three exchanges, is fictitious. It’s not real… 60 to 70 percent of this volume…is done by what you call high frequency traders. These are machines. And the trick to the market here is that the high frequency guy does not add liquidity, he adds volume. There’s a big difference between liquidity and volume. Okay, volume is 12 billion shares. Who cares? Warns Saluzzi, if a contrary news event occurs that’s politically or economically climate changing, and there’s no liquidity, the trap door opens and no one’s left there to buy…“There’s a problem of structure in the equity markets that nobody wants to talk about,” says Saluzzi. “There’s intervention, there’s manipulation going on… And the real liquidity has been gone for a while.. People don’t understand. Liquidity’s not back…”And so it goes…The stock market is not going up on profit reports. The stock market is going up on manipulation and Fed money pumping and HFT. The stock market is rising on itself: the DOW is going up on itself. The FED has become the market of last resort; the government the whore of last resort. Wall Street’s leveraged risk takers have cost the government’s cuckold, John Q. Public, $23.7 in bailout money, not counting the billions (trillions) Bernanke hands his Goldman boys and their friends under the table.Companies are shells, running on bad news, that’s “better than expected.”Invest if you like: but be aware of timing and where you’re investing. Goldman’s profits come from somebody: make sure it isn’t you.“If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?” –Alice, in Wonderland.Goldman’s world.* Saluzzi quotes from YouTube interview on iTulip: “Liquidity Is Gone. Basically all machine volume…”http://www.itulip.com/forums/showthread.php?t=10883

Pecos BankerJuly 31st, 2009 at 11:16 pm

A needed post despite the claptrap from “Arthur’s Ghost”. The point that volume is not liquidity might explain why individuals that I read on blogs devoted to the market are unable to find shares for short selling on platforms such as Scottrade. This seems to be a recurrent problem for retail short sellers.

Arthur's ghostJuly 31st, 2009 at 4:17 am

You have been misled by Roubini. He preached doom and gloom and said that the spring rally was a sucker’s rally so that he could continue to make money from his brand of media doom mongering. Meanwhile his 401K was 100% invested in the market and he made a fortune out of the stock market rally.Bill Gross sells bonds, of course he is going to tell you that stocks are not going up.Sorry mate, but you have been conned.

GuestJuly 30th, 2009 at 1:32 pm

CNBC Is Now Flagrantly Misrepresenting Reality | Tyler Durden 7/30/09 10:52 -0500As of 10 minutes ago, Larry Kudlow would like you to believe that Q2 earnings are so much better than Q1. That is a flat out lie. The chart below, straight out of Bloomberg which we demand all readers with a BBERG terminal replicate using SPX Index EA <go>, demonstrates that Q2 earnings are now in fact worse than Q1. While in Q1 the YoY EPS drop was -31.49%, as of right now the drop is -32.41%. And the drop in revenues is much worse.Larry Kudlow, please put this chart up on your show and advise people you are misrepresenting the truth.(By the way, there’s another Zero Hedge post today: CNBC Viewership Down 28%)http://www.zerohedge.com/article/cnbc-now-openly-misrepresenting-reality

Place your betsJuly 30th, 2009 at 1:41 pm

Coming this Christmastime: Banksters will pay themselves bigger bonuses than ever while Joe Workingman, sans his job or not, can’t buy his kids a gift = Jubilee asserts itself.What can’t be paid won’t be paid.

GJuly 30th, 2009 at 2:01 pm

just wanted to thank you for this, kilgores:Inordinate asymmetry in the distribution of wealth and income between socio-economic groups within our society impedes economic growth, because it results in insufficient labor income to fund consumption and excessive capital chasing too few investment opportunities.FACT: Income disparity in the U.S. is the highest it has been since the 1920s.http://www.cbsnews.com/stories/2004/08/13/national/main635936.shtmlhttp://money.cnn.com/2007/10/12/news/economy/income/http://www.lcurve.org/FACT: Income disparity can hurt economic growth.http://www.emeraldinsight.com/Insight/viewContentItem.do?contentType=Article&contentId=1505834http://www.terry.uga.edu/economics/docs/spatial_analysis.pdfhttp://www.shsu.edu/~eco_www/resources/documents/IncomeInequalityandEconomicGrowth.pdfhttp://www.econ.qmul.ac.uk/papers/doc/wp548.pdfMY COMMENT:The concentration of wealth in the hands of too few also fosters corruption of our government as the rich seek to retain, consolidate, and further aggrandize their already monumental pecuniary holdings, and thereby effectively serves to disenfranchise most of the electorate and shut out even hard-working citizens from making a decent life for themselves and their families.FACT: Income disparity contributes to a host of social ills.http://arjournals.annualreviews.org/doi/abs/10.1146/annurev-soc-070308-115926?cookieSet=1&journalCode=socFACT: Income disparity is linked to higher death rates worldwide.http://www.sciencedaily.com/releases/2007/10/071023095119.htmFACT: Income disparity adversely impacts food security.http://www.sciencedaily.com/releases/2009/06/090601102019.htmFACT: Income disparity causes a host of other adverse effects on families.http://www.washingtonpost.com/wp-dyn/articles/A34235-2004Sep19.htmlhttp://www.fcm.ca/CMFiles/falling1vfr-3272008-7169.pdfFACT: Income disparity can contribute to instability abroad and imact the U.S.http://www.afghanconflictmonitor.org/2009/01/income-disparity-plays-into-hands-of-taliban.htmlOTHER OPINIONS:http://finance.yahoo.com/expert/article/economist/19750http://www.federalreserve.gov/newsevents/speech/Bernanke20070206a.htmhttp://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1029&context=hrpubsMY COMMENT:The imbalance in wealth and income that developed in the 1920s under insufficiently progressive tax policies and the social, economic, and political conditions arising from this imbalance contributed significantly to the depth, breadth, and length of the Great Depression.I CITE ROBERT REICH (QUOTING MARRINER S. ECCLES):http://robertreich.blogspot.com/2008/03/are-we-heading-for-another-great.html%5BEccles was supported by economists Waddill Catchings and William T. Foster as to his theory that the Great Depression was caused by income inequality – that there was too much money chasing too few goods, services, and investments]I STAND BY MY CONCLUSION:It is in the interests of all of us, then, to ensure that extreme disparities in income are adequately modulated by effective and adequately progressive tax policies.SWKBy kilgores on 2009-07-29 15:06:52I doubt 67 will even read any of it, but it’s so good of you to present the info, k. Thanks again.

kilgoresJuly 30th, 2009 at 3:08 pm

Oh, 0067 might well read this stuff. He seems like a good fellow. I’m sure he’s just been unable to check in for the past couple of days.I do thank you, however, for reposting this and for your kind words. Ordinarily, G, I don’t go to great lengths to pull sources together just to prove the facts I assert in a post, but this is an important issue, and sometimes it’s the best way to counter dubious arguments based on nothing but generic, unsupported platitudes and fanatical hyperbole (I do not mean to infer that 0067 was doing so, of course).SWK

0067July 31st, 2009 at 7:22 am

@SWKThank you for posting those links. I’ve downloaded them to a file and will slowly make my way through them. I’m glad G reposted them because I have been away for a couple of days and had lost track of which thread our exchange had [email protected] do thank you for reposting SWK’s response because I am prepared to be swayed by rational argument. But your are one arrogant bastard G. “I doubt 67 will even read any of it…”. You know nothing about me, except that we appear to hold diametrically opposed political opinions.

GJuly 31st, 2009 at 10:00 am

You mistake arrogance for strategy. Good.(And G is for Girl, btw.)Can’t wait to hear you start to relentlessly express your deep devotion to ridding ourselves of inequality after you read what is actually but a tiny fraction of the mountain of evidence proving that economic inequality is unnecessarily destroying quality of life on this round rock for everyone, rich and poor alike.I’m sure you’ll be back after your careful, unbiased reading – to tell us all how blind you had been to reality and causality.

GirafJuly 31st, 2009 at 10:40 am

You have a fast mind “G for girl”. What a pity it’s filled with socialist clap trap. I will diligently work through SWK’s list but it will take me some time as I’m busy working to create tax dollars to give to all your friends. Was it McArthur who said “I shall return”?Have a good day, G.

kilgoresJuly 31st, 2009 at 11:54 am

For the record, I don’t consider myself a socialist either, as I’ve repeatedly stated.SWK

GJuly 31st, 2009 at 1:49 pm

Isn’t anybody gonna point out that I made a mistake and reversed the words arrogance and strategy above? Aw, you guys disappoint.kilgores, it’s quite clear to me that since all voices urging us toward equality draw the immediate label of socialist, even though many of these voices have repeatedly stated explicitly we are not for socialism – – it isn’t socialism at all these guys are against – it is, in fact, and just as CG says, equality they oppose. They equate the 2 you see…socialism and equality…and they are social darwinists to the bloody bitter end of the earth and everything on it. It’s a confession they are making – that they KNOW capitalism as practiced is FOR inequality – guarantees inequality – that is its very PURPOSE and only possible outcome. They behave in a reactionary manner every time, all the while proclaiming they do no such thing and believe no such thing, they shed disgusting crocodile tears for the workingman’s plight while the policies and ideology they’re married to, continue the starving to starve and work efficiently to centimate the workingman’s (and everybody’s) quality of life! Yes, they hate the very word socialism BECAUSE – to them – that’s what equality means.Just look at how they feel compelled to show concern over some poster’s arrogance on the internet – and see how they rage against what they deride as “collectivism” – but do they show their undying concern about the kinds of collectivism in place that have given and do give us wars and profits uber alles? Hell no! These people don’t believe as they say they do…they just selectively choose to support the collectivism that makes inequality grow. Suggest a use of collectivism to reverse that river of wealth flowing from poor to rich, and they cry, scream, and throw their crayons across the floor…and scream “you’re a socialist”. Their perverted version of the USAmercian dream is just that: perverted beyond recognition. “You’re a socialist” is how they try to induce fear so they can keep the working people down.They’re killing my planet with their ruthless horseshit – and it’s whaa whaa whaa from them when I fight back. They imagine they have some kind of legitimate complaint because I take them to task for their unacceptable indecent inhuman agenda.I’ve said it before and I’ll say it again – I am THROUGH suffering these fools gladly! Their ideology is despotic, and despotism needs to be hurled to the dustbin of history and it can’t happen soon enough!By the way boys, I’m not arrogant at all.I’m just in love with how smart and wonderful I am.

kilgoresJuly 31st, 2009 at 10:52 pm

G:I noticed the interchange of words, but I knew what you meant and it didn’t seem important enough to point out. I frequently transpose words and letters, make other typographical errors, use words redundantly, split infinitives, and so forth, although I try my best not to do so.Mislabeling the opponent with hot-button words like ‘socialist’ is a good way to cloud the real issues in any discussion. Likewise, spurious forms of “argument” limited to meaningless sound bites and platitudes merely serves to blur the full spectrum of opinion between black and white. What does it mean when someone says they are “for” something like “life” or “liberty” or “free markets” or “holding criminals accountable” or “less government” or “more personal responsibility?” These are nothing more than words: abstract, generic, unformed ideas; not formulated thoughts or opinions based on reflection and reasoning. It is the language of the demagogue, not of an engaged and well-informed American citizen.Then there are those who embrace the technique of the Große Lüge — the Big Lie — an expression Adolf Hitler first used in Mein Kampf to describe a lie huge that nobody could imagine someone “could have the impudence to distort the truth so infamously”. Obama isn’t an American-born citizen, and no matter how much credible evidence is produced to refute this lie, it is never enough evidence and never believable-enough evidence.I’ve come to believe that by and large, the best way to combat folks who do these things, whatever their political orientation may be, is to refute their assertions calmly and politely with facts. Remaining silent in the face of disinformation is not an option for a civically minded person.SWK

ChignosJuly 31st, 2009 at 10:56 pm

What G and SWK want is “equality” in outcomes at all times, whereas what Americans have long since decided is that all anyone deserves is “equality” of opportunity. Hence “All men are CREATED equal” ………. not “All men should be SUSTAINED equal by the elites who know best how to do that, of which G and SWK wish to be a part, …..a big part.””I’m not a socialist.” Right, and I’m not typing this, so don’t read it.

GAugust 1st, 2009 at 2:07 am

Chignos, You just told a lie, and furthermore, you knew you were lying when you said it. Which makes you a liar.I am 100% for equal pay for equal sacrifice, not for “equality of outcome” – although equal pay for equal sacrifice, if allowed/practiced, would indeed mean a far, far, far more equal outcome than we have now, since the work that alone produces wealth is spread far, far, far more equally than the wealth the work produces is currently spread.kilgores – as he has said over and over – is for a reduction of harmful (harmful to a democratic, civil society’s goals) extremes of wealth via progressive taxation: he has never endorsed – not even once – “equality of outcomes”. You knew this well before you typed your lies.Also, neither kilgores or I desire to be elites – that’s another bald-faced lie. Also, you miserably fail to comprehend that “all are created equal” means all are created with inalienable equal rights in spite of varying degrees of gifts people obviously get born with.As for your irrational and hilarious assertion that “the elites know best” how to… do anything but engorge themselves and fatten their own wallets at the expense of everybody else’s work – well, Precious Angel, you are totally in fantasyland.Like I said, you lied on purpose in what is a transparent attempt to misrepresent the actual views of both myself and kilgores.Shame on you, Chignos.

Missing LinkJuly 30th, 2009 at 2:11 pm

Marc Faber says: July 30, 2009:“I am 100 per cent sure the US will go into hyperinflation. Buy a US$100 bond and frame it to teach your children about inflation by watching the US bond value diminish to almost nothing over the next 20 years.” Marc Faberhttp://marcfaberblog.blogspot.com/

GuestJuly 30th, 2009 at 3:29 pm

Why do that when the reverse works as well. Buy them a 1964 Kennedy half dollar off of Ebay for $5-6. Give it to them and tell them you could buy a couple of gallons of gasoline or lunch in 1964. But, because of its silver content they can sell the coin for $5-6 and still buy a couple of gallons of gas or lunch!Tell them to hold onto the coin and see, regardless of inflation, that they can still use it to buy a couple of gallons of gas or lunch!

Missing LinkJuly 30th, 2009 at 9:34 pm

Good point and way practical! Faber is a professional Doom and Gloomer (although onea with uncanny accuracy) that, IMHO, was simply making a sarcastic statement which reflected his true view of the world.

GuestJuly 30th, 2009 at 3:32 pm

Calculated Risk, “And from the News-press.com: Downtown Fort Myers condo has 32 stories, and one lonely tale…Victor Vangelakos lives in a luxury condominium tower on the Caloosahatchee River. He never has to worry about the neighbors making too much noise.There are no neighbors.http://www.calculatedriskblog.com/

Octavio RichettaJuly 30th, 2009 at 4:00 pm

Greetings from Italy. We are enyoing our last week with relatives before our return to Venezuela for two months.Those of you who have read my posts in the past, know well my views on how the economy and markets relate to each other. They are closely related but they are not the same thing.Well, IMHO, a significant shift has taken place in that the market is not caring as much about negative economic news as it did earlier in the year. Why is this so?With fears of a deep financial crisis that might have resulted in a depression now gone, the market is giving very little weight to the prospect of low long term economic gorwth (e.g., read Hussman, Shilling, Gross) and focusing on the “upside risk” the recovery brings (see, e.g., the comments from ECRI on the WLI and other LEIs).I have been tempted to sell my long positions but have held steady as, IMO, it will be some time before the market realizes how weak this recovery will be. My YTD return is 5.9% while the S&P500 YTD is close to 7%, so the market is ahead of me this year (last year it was 12.3% for me vs -38% for Mr. Market). However, it is worth pointing out that my portfolio has risk exposure (equities and commodities) under 25% which is reflected on a lowest YTD return for me of close to -15% sometime in March while the market’s was double that. As for the peak return this year, mine was 7% sometime in June; while for the market it is where it is right now at around 7%.I am not planing to do any trading in the near future but my tendency is to go somewhere close to 0% at risk sometime before the year is over.

kilgoresJuly 30th, 2009 at 7:36 pm

Hey, OR:Without any real improvement in fundamentals, that sounds like a smart move. It’s hard to believe the upswing since March can really be sustained for any length of time…Good to hear from you.SWK

GuestJuly 30th, 2009 at 4:36 pm

75% Favor Auditing The Fed | Rasmussen ReportsJuly 29, 2009–So much for the ongoing secrecy of the nation’s independent central banking system. A new Rasmussen Reports national telephone survey finds that 75% of Americans favor auditing the Federal Reserve and making the results available to the public.Just nine percent (9%) of adults think that’s a bad idea and oppose it. Fifteen percent (15%) aren’t sure.Over half the members of the House now support a bill giving the Government Accounting Office, Congress’ investigative agency, the authorization to audit the books of the Federal Reserve Board.Support for the bill has grown now that the Obama administration is proposing to give the Fed greater economic regulatory power…The new survey finds that an overwhelming majority of Americans in every demographic category – including age, gender, political affiliation, race and income – disagree with Bernanke and favor auditing the Fed to make its secretive deliberations public.http://www.rasmussenreports.com/public_content/business/general_business/july_2009/75_favor_auditing_the_fed

kilgoresJuly 30th, 2009 at 7:43 pm

The last couple of nights on The New Hour on PBS, Jim Lehrer moderated a question-and-answer session with Chairman Bernanke in Kansas. I don’t know if they have posted this segment to their online site, but if so, it would be worth watching. Mr. Bernanke made the point that while it SOUNDS like auditing books, which SEEMS on its face like a good thing, the proposal really would allow the GAO to audit the basis for monetary policy decisions by the FOMC. This would really eviscerate the independence of the Fed, which, I believe, would be colossally bad for the U.S. and its economy.I would be interested to hear Dr. Roubini’s views on Ron Paul’s proposed bill. I imagine he, and most economists, would not think highly of politicizing monetary policy in that way.SWK

GirafJuly 30th, 2009 at 9:54 pm

SWK, I’ve refrained from being involved in the Fed bashing that goes on on this blog, with the exception of trading to encourage debates among Guests about how they would have done the Fed’s job differently over the last 18 months to two years. I’ve also refrained from getting involved in the “hate Goldman” debate.I think we need central banks but for you to believe that the Fed is independent, i think, is naive. The Chairman and the Governors are appointed by the President. True, most Presidents get to inherit a board from their predecessors but there is still room for influence. How much weekly, or for that matter, daily communication goes on between the Fed Chairman and the Treasury Secretary? I suspect for the last 18 months they have spoken with each other many times daily. So where is the independence? They are working hand in glove. Same thing in Canada and the U.K., the other systems I know quite well. The respective Governors (equivalent of Fed Chairman) are supposedly independent but they really serve at the pleasure of the Minister of Finance in Canada and the Chancellor in the U.K. They aren’t truly independent.An audit of the Fed should be an audit of monetary policy and the thinking behind it. As many of this site point out, billions, perhaps trillions, of dollars have been spent on the bailout of the financial community. I think the public needs to know why Bear Stearns was allowed to quasi fail. Why Lehman Brothers was allowed to fail but why AIG was saved. The public deserves to know why Goldman was bailed out and kept whole from their CDS position with AIG. As risk takers, they should have taken some hit on their exposure. I think the public deserves to know why Goldman got exception from standard bank capital rules and since that decision has ramped up is VaR, rather than winding it down to more “bank like” levels. After all their conversion to a bank effectively saved them as it did Morgan Stanley. The investment bank model failed after Lehman’s collapse and without the ability to access the discount window, GS and MS would have either gone the same route as Lehman or been forced into a commercial banks hands, a la Merrill and BoA. They would have been toast because nobody would have provided financing of their gargantuan inventories. The public deserves to know why senior banking heads have not rolled following the serious mistakes of Citigroup and BoA as an example. An “audit” would maybe reveal all this stuff.The veils of secrecy need to come off. It may in fact enhance monetary policy going forward. Mr. Bernanke and Mr. Geithner maybe think they are smart guys. But they are no match for the minds of Goldman Sachs and the like. This needs to be exposed.

Free TibetJuly 31st, 2009 at 7:43 am

The better question that you ask concerns an audit. I think what we need is not an audit, but a review of monetary policy that questions our assumptions not only of the roll of the FED, but of Keynesian economics in general, the idea that a little bit of inflation is always and everywhere a good thing, that growth is always and everywhere necessary, that contraction (which Keynesians term “deflation”), cannot be tolerated, and the staffing and roll of the FED should be overhauled to accommodate it. And I would take it from there to review the entire financial / capital markets infrastructure to see what could be done to pry the funds out of the hands of the parasites and assure that capital would be allocated to productive forward looking uses as opposed to trading in the same, tired, overbought S&P AAA securities.And I don’t know what to do about the secrecy & backroom deals, but it would seem that one could isolate the FED so as that it would not be a problem there. No more FED/GS meetings – at all. Establish a chain of command such that GS had access only through their congressman? That could work.

kilgoresJuly 31st, 2009 at 8:00 am

Giraf:I didn’t mean to suggest that the Fed is perfectly independent or is never swayed by politics or personal relationships or anything else. I only meant to voice the opinion that the Fed would be EVEN LESS independent and MORE politicized than it is now were the GAO to be empowered to audit its monetary policy decisions. I’m not naïve…really.SWK

kilgoresAugust 1st, 2009 at 10:03 am

The move to audit the Fed is not about finding out “where Bernanke has his money,” but about further politicizing monetary policy, which is a bad, bad, bad idea. It’s already politicized enough.SWK

ChignosJuly 31st, 2009 at 11:02 pm

Maybe we could get to an audit of the Fed a little quicker if we all started demanding to know where Bernanke has his money. We know he’s feeling the heat. Maybe we oughtta turn it up a notch and start demanding a little transparency into his personal finances……….just to make sure he isn’t inadvertently or accidentally conflicted, you know.

GAugust 1st, 2009 at 6:11 am

Hey, Chignos, not to interrupt, but we’re still waiting for you to name for us just one minimalist-government paradise…and waiting…and waiting…

ChignosAugust 1st, 2009 at 6:44 pm

G,I’m having trouble understanding your expressions, like “far, far, far more equal outcome” and “minimalist government paradise.” If being in favor of progressive taxation isn’t being in favor of equal outcomes, we can’t have a discussion because we can’t agree on the certain meanings in the English language.Either a equals b or a does not equal b. The notion that anything is far, far, far, more equal than anything else is an oxymoron cubed. Let me put it to you another way. If you’re for equal pay for equal wealth production, fine. But when you posit that unequal distribution of wealth is the source of all our problems, those of us who actually do produce wealth hear someone who has no idea what wealth production is, but who wants to control the rest of us who do; i.e., an elitist pay czar.Wealth has its own worth, regardless of who produces it. If whoever pays you doesn’t think your worth what they pay me, that’s your problem, it shouldn’t be my problem. Progressive taxation to make an equality of outcome in income–that’s what you’re advocating– is an idea promulgated by an intellectual elite who no longer have to work. These tyrants who advocate progressive taxation do so to maintain their position at the top of the totem pole. They feel threatened (rightly so) by someone who knows better, who might topple them from their position of power because they are smarter and more energetic.”Minimalist government paradise” is more like a double oxymoron with a full twist and a one and a half gainer! “Minimalist government” and “government paradise” just don’t compute. You’ll never find utopia on this planet. But notice how many opinions there are about how “government” ought to be conducted. All these opinions about how much better it would be if only this or that…..are motivated by the mistaken notion that if only they would do it my way, “paradise” would appear!Since this is an economics blog, let’s talk about “minimalist” in terms of organized systems of thought (a government, if you will) that has cost the least and been the most successful on this earth; i.e., a “minimalist government.” Well……you’re talking about Christianity. Christianity, which has flourished on a whole lot less than the tithe (nominally 10% of your income, but certainly not more than that) for over 2000 years.Let’s see now………the US Government can’t get by without requiring 20-25% of my income (and they still run a deficit) but the Christian Church survives on less than 10%. The USG is about to go belly up financially after only 200 years or thereabouts. Christianity is likely to survive another 2000 years, well past the time we’ll all be or not be in “paradise.”The inspiration I get from Christianity reflects my idea of a “minimalist government paradise.” I don’t see why our own US government needs more than 10% of my income.Thanks for your comments. Did that clear it up a little?

kingsley nigeriaJuly 30th, 2009 at 5:48 pm

I took my troubles down to Madame RueYou know that gypsy with the gold-capped toothShe’s got a pad down on 34th and VineSellin’ little bottles of – Love Potion #9– Love Potion #9, Circa 1959I’ve never known any gold-capped tooth money managers, but without squinting very hard there is undoubtedly a strong resemblance between all of us “managers” and the infamous Madame Rue selling Potion #9. Instead of love, though, we sell “hope,” but very few are able to seal the deal with performance anywhere close to compensating for the generous fees we command. Hope has a legitimate price, of course, even if its promises are never fulfilled. It is the reason we put a five spot into the collection plate on Sunday mornings and why we risk a 25-dollar chip at the blackjack table. In the former case we usually rationalize it as “insurance,” and with the latter as “entertainment.” Whatever – I’ve already alienated all of you with strong faith in the hereafter or the ones who actually believe they’re going to win on their next trip to Las Vegas. But my point is that those who sell investment “potions” must wrap their product with an extra large ribbon because history is not on their side. Common sense would dictate that the industry as a whole cannot outperform the market because they are the market, and long-term statistics revealing negative alpha for the class of active managers confirms it. Yet, what a price investors are willing to pay! A recent Barron’s article pointed out that stock funds extract an average 99 basis points or virtually 1% a year in fees from an investor’s portfolio. Bond managers are more benevolent (or less pretentious) at 75 basis points, and many money market funds manage to subsist at a miserly 38. Still, those 38 basis points are as deceptive as the pea that disappears beneath the shell of a street-side con game. Since money market funds barely earn 38 basis points these days, much of the return winds up in the hands of investment managers. A mighty expensive potion indeed. While some index and ETF proponents avoid this extreme absurdity with lower fees, roughly 90% of the $1.5 trillion in 401(k) and other defined contribution assets in mutual funds are in actively managed offerings with expenses close to 1%. Paying for those potions during an era of asset appreciation with double-digit returns may have been tolerable, but if investment returns gravitate close to 6% as envisaged in PIMCO’s “new normal,” then 15% of your income will be extracted based on the beguiling promise of Madame Rue. The solution, of course, is to compare long-term performance with fees and approach 34th & Vine with informed confidence, as opposed to Pollyannaish hope that you’ll get your money’s worth. Down the hatch and good luck!Investors looking for love potions or successful investment strategies in this new normal economy dominated by deleveraging and reregulation must focus on some very macro-oriented ingredients as opposed to typical news-dominated minutiae. The latest quarterly earnings report from Goldman Sachs may be an indicator that the financial sector is getting some color in its cheeks, but it doesn’t really let you know what needs to happen in order for the real economy to stabilize as well. My last month’s Investment Outlook commentary on the significance of wage and employment trends remains the key focus. Common sense tells us that consumer spending growth comes from highly employed, well-compensated labor, and we are far-far from even approaching that elemental condition. The fact is that near double-digit unemployment has resulted from numerous business models that are now broken: autos, home construction, commercial real estate development, finance, and retail sales. Construction of a new Humpty Dumpty capitalistic “oeuf” will be a herculean task.Potion hunters, however, should also understand the following macro concept that will dominate the indefinite future, one which I will humbly try to explain in the next few pages in 500 words or less: Reflating nominal GDP by inflating asset prices is the fundamental, yet infrequently acknowledged, goal of policymakers. If they can do that, then employment and economic stability may ultimately follow.To explain:A country’s GDP or Gross Domestic Product is really just an annual total of the goods and services that have been produced by its existing stock of investment (capital in the form of plant, equipment, software and certain intangibles) and labor (people working). Over the last 15 years or so in the U.S. that annual production (GDP) has increased in nominal (real growth and inflation) terms of 5-7% as shown in Chart 1. Not every year, certainly not in boom or recessionary years, but pretty steadily over longer timeframes, and consistently enough to signal to capitalists that 5% was the number they could count on to justify employment hiring, investment spending plans, and which would serve as well as a close proxy for the return on capital that they should expect. Nominal GDP is in fact a decent proxy for a national economy’s return on capital. If each and every year we grew by 5%, then that would be sort of like a stock whose earnings grew by the same amount. Companies and investors then would be able to estimate the present value of those cash flows, and price investment and related assets accordingly – a capital asset pricing model or CAPM based on nominal GDP expectations.While objectively hard to prove, logic dictates that that is exactly what has happened over the past several decades. Businesses expanded with a developing certainty that demand, expenses, and return on the economy’s capital would mimic this 5% consistency. Debt was issued with yields that reflected the ability to service those payments through 5% growth in both real and inflationary terms, and stocks were issued and priced as well with the same foundation. Pension obligations and similar liabilities were legitimized on comparable logic, as were government spending programs forecasting tax revenues and benefits. Both real economy and financial markets then, were geared to and, in fact, mesmerized by this 5%, GDP/CAPM, “model.”Now, however, things have changed, and it is apparent that there is massive overcapacity in the U.S. and indeed the global economy. As reflexive delevering has unveiled the ugly stepsister of the “great 5% moderation,” nominal GDP has not only sunk below 5%, but turned at least temporarily negative. If allowed to continue – and this is my critical point – a portion of the U.S. production capacity and labor market will have to be permanently laid off. Nominal GDP has to grow close to 5% in order for the economy’s long-term balance to be maintained. Otherwise, employment levels become unsustainable, retail shopping centers unserviceable, automobile production facilities unprofitable, and the economy itself heads towards a new normal where unemployment averages 8 instead of 5%, housing starts total 1.5 instead of 2 million, and domestic auto sales 12, instead of 16 million annual units. Critically in the readjustment process, debts are haircutted via corporate defaults and home foreclosures, and equity P/Es are cut based upon increased risk and substantially lower growth expectations. A virtuous circle of expansion turns into a vicious cycle of recession or low-growth stagnation. Label it what you will, but a modern capitalistic economy based on levered financing and asset appreciation cannot thrive if its “return on capital” or nominal GDP suffers such a significant shock.Policymakers/government to the rescue –we hope. 0% interest rates, quantitative easing, $1.5 trillion deficits, trillions more in FDIC or explicit government guarantees, a trillion plus in MBS and Treasury bond purchases, TALF, TARP – I could, but I need not go on. Can they do it? In other words, can they successfully reflate to 5% nominal GDP and recreate an “old” normal economy? Not likely. The substitution of government-backed vs. private-leverage is one strong argument against the possibility. Despite the attractive financing rates incorporated with the TALF, TLGP and other government-subsidized financing programs, they come with quality constraints (larger collateral haircuts and mortgage down payments, to name a few) that inhibit the “new normal” lenders from approaching the standards of the 5% nominal-based shadow banking system. Just last week, President Obama proposed new “transaction fees” for “far out transactions” undertaken by financial companies. “If you guys want to do them,” he said, “put something into the kitty.” In turn, there are internal Washington Beltway/external Main Street USA, politically imposed limits which will thwart policy expansion beyond the current stasis. Most of the politicos and even ordinary citizens are screaming for limits on monetary/fiscal expansion: “No TARP II! 1.5 trillion dollar deficits are enough! The Fed must have an exit plan!” etc. If there are such future political constraints or caps (both domestically and from abroad), then one should recognize that most of the ammunition has been spent stabilizing the financial system, and very little directed towards the real economy in terms of job loss prevention. Where is the political will or wallet now to grant corporate tax breaks for private sector job creation or to even hire new government workers, aside from a minor positive push with military enlistment? In brief, the “new normal” nominal GDP, the future return on our stock of labor and capital investment, will likely be centered closer to 3%, for at least a few years once a recovery is in place beginning in this year’s second half. Diminished capitalistic risk taking and constrained policymaker releveraging will lead to that likely conclusion.Investment conclusions? A 3% nominal GDP “new normal” means lower profit growth, permanently higher unemployment, capped consumer spending growth rates and an increasing involvement of the government sector, which substantially changes the character of the American capitalistic model. High risk bonds, commercial real estate, and even lower quality municipal bonds may suffer more than cyclical defaults if not government supported. Stock P/Es will rest at lower historical norms, and higher stock prices will ultimately depend on tangible earnings growth in the form of increased dividends, not green shoots hope. An investor should remember that a journey to 3% nominal GDP means default/haircuts for assets on the upper end of the risk spectrum, as well as extremely low yielding returns for government and government-guaranteed assets at the bottom end. There is no investment potion for this new environment other than steady income-producing bond and equity investments in companies with strong balance sheets and high dividend yields, as well as selectively chosen emerging market commitments where nominal GDP growth prospects are tilted upward as opposed to gravitating to new lower norms. Madame Rue has met her match.William H. GrossManaging Director

MM CAJuly 30th, 2009 at 7:04 pm

Lets hear tonight some input on what tommorrow’s GDP number will be.. I say – neg 1.7% gowth rate. However I truly believe any number less than neg 5% is bogus. fundamentals just dont show any recovery. any number less then -5% is nothing more than the trillions of bailouts and liquidity that has pumped into the system. All money supposedly that has to be paid back?…Oh and its a great day when only 580 thousand jobs will be the July number… By my count that is filling the follwoing Baseball stadiums with maximum capacity and announcing of the PA system you all have been notified you have NO MORE JOBS!Dodger Stadium 56000 Los AngelesYankee Stadium 52325 New YorkChase Field 49033 PhoenixSafeco Field 47116 SeattleBusch Stadium 46861 St. LouisProgressive Field 43863 ClevelandCitizens Bank Park 43500 PhiladelphiaNationals Park 41888 WashingtonAT&T Park 41503 San FranciscoWrigley Field 41160 ChicagoComerica Park 40950 DetroitU.S. Cellular Field 40615 ChicagoPNC Park 38496 Pittsburgh

GuestJuly 30th, 2009 at 8:58 pm

“If they have no bread, let them eat cake!” (“S’ils n’ont plus de pain, qu’ils mangent de la brioche.”) — Marie Antoinette. In that Marie Antoinette actually did not say this, I hereby attribute it to Goldman Sachs.

Pecos BankerJuly 30th, 2009 at 10:31 pm

Brioche, which has been translated to cake is actually the French equivalent of American bread. By that I mean Wonderbread and it’s equivalent. That’s what Americans have been eating for years, although the upper classes have enjoyed what the French consider to be bread. So Americans have been eating Marie Antoinette’s cake at least since the creation of the Federal Reserve. Of course the kind of bread offered to the public by GS et al is the monetary equivalent of Wonderbread.

kilgoresAugust 2nd, 2009 at 8:46 am

Yes, PB, the point, in my mind, is that there are a lot of folks at the top of the food chain who remain substantially out of touch with the “quality of life” that average Americans experience daily. I always think back to the story of President George H.W. Bush being asked about the price of a loaf of bread, a fact with which he was, at the time, woefully out of touch.SWK

kilgoresJuly 30th, 2009 at 7:46 pm

Excellent way to illustrate the impact of a single month’s job losses, my friend! You’ve come up with a very creative means of making an impression on those who have a hard time assimilating the raw numbers.SWK

PeterJBJuly 30th, 2009 at 8:50 pm

@ Bob”Peter, thanks for the response.Simple question – When do we start holding the people who caused this mess responsible?”Mr Benanke has achieved ultimate failure of the global type and scale, something that I believe is an unique achievement and while he considered taking up his current office, I questioned as to why he would accept the job (on this blob) as the ship was already caught in the rapids thanks to Greenspan, Congress and a long line of the guilty and influential lobbies cum elite. Notwithstanding he sat on the pot and he certainly did his job (figuratively speaking); that it is time to flush is undoubtedly.However, my idea is that we get the women and children ashore to safety first and then allow legal recourse take its place after all, the USA is a Republic isn’t it?And, if it is revenge you want please remember this: most of the people in the USA and globally up to late 2006 ridiculed those that foresaw this mess and attempted to make warning. Revenge, if that is what you want, is best served cold. I do not concern myself here.The problem now comes from those that did not see it coming and are in positions of power, who are desperately attempting to steady the ship while taking credit for their efforts which also should fall under the gaze of the Goddess of Justice, but that only assures me that this ship is in grave danger as I have no faith in their competence or capacities not even to mention their integrity which has always been absent and will only get far worse (read: horribly worser – mileage will vary)But, that the system must be reorganized is beyond question and it would be far more logical and within reason to effect this rebuild while some semblance of stability remains in place and when, it is put into play, the scaffolding, together with all the rats, can be dumped into the punitive waters.We must focus, a priori, on the rebuilding while leaving the guilty to the established Law mind you, reintroducing the Constitution and its originating aims and intent would be a giant step forward whereas this undertaking will need time and money and must not be left to those of associations. A new era approaches and the circumstance and conditions of our environment (milieu) have commenced irreversibly change; there is no going back and we must accept and embrace this change while throwing out the bath water. Revenge can wait but keep in mind, ‘forgive them for they know not what they do’ and allow your established Law to provide Justice.Bankruptcy Law provides the way ahead and it needs to be utilized otherwise Rome will burn (it is already on fire).Ho hum

GuestJuly 30th, 2009 at 8:51 pm

“America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.” — Abraham Lincoln________________________________PROLETARIANS OF THE WORLD, UNITE!LONG LIVE THE DICTATORSHIP OF THE PROLETARIAT!WHO IS NOT WITH US—IS AGAINST US!BEWARE OF CHOLERA. DO NOT DRINK RAW WATERLICE SPREAD DISEASE! CITIZENS UNITE ON THE ANTI-TYPHUS FRONT!PROVISION CENTERWHO DOES NOT TOIL, WILL NOT EAT!COMRADE PEASANTS, CRUSH THE HOARDERS IN YOUR MIDST!THE PROLETARIAT HAS STAMPED ITS MIGHTY BOOT ON THE THROAT OF DEPRAVED ARISTOCRATS!WE ARE THE BUILDERS OF A NEW HUMANITY!OUR POWER IS IN THE TIGHT WELDING OF THE COLLECTIVETHE UNION OF SOCIALISTS IS THE KERNAL FOR THE FUTURE GROWTH OF A WORLD STATECOMRADE PEASANTS, CRUSH THE MOTORISTS IN YOUR MIDST!MOTORISTS TO PAY £250 TAX FOR PARKING AT WORK: Telegraph.co.ukMotorists who drive to work face having to pay a £250 “parking tax” under a scheme to be announced by ministers on Friday.July 30, 2009–The country’s first “workplace parking levy” will come into force in Nottingham in 2012 and is likely to be adopted by other councils.Under the scheme, any firm with 11 or more staff parking spaces will be charged £250 a year for each. That cost could rise to £350 within two years.Employers would be free to pass the cost on to their staff. An estimated 40,000 commuters in Nottingham drive to work and some businesses have threatened to leave the area if the scheme is introduced.Business associations oppose the extra cost, which has been put at more than £3 billion if it were rolled out nationwide. About 10 million people in Britain drive to work every day.Councils in Milton Keynes, Exeter, Cambridge and Oxford have expressed interest in the scheme.The Core Cities Group, which represents Birmingham, Manchester, Bristol, Leeds, Liverpool, Newcastle and Sheffield, has also expressed interest, identifying the levy’s “congestion-busting” potential.The scheme will be endorsed by Sadiq Khan, the transport minister (Human Rights Solicitor who stood for the left-wing Socialist Alliance in Hornsey and Wood Green in the 2001 general election), during a visit to Nottingham on Friday…to cut urban traffic…pollution… and carbon emissions.http://www.telegraph.co.uk/motoring/5942306/Motorists-to-pay-250-tax-for-parking-at-work.html“In the 21st century, nations as we know them will be obsolete;all states will recognize a single, global authority. Nationalsovereignty wasn’t such a great idea after all.”- Strobe Talbot, President Clinton’s Deputy Secretary of State,as quoted in Time Magazine, July 20th, l992.THE COMMUNIST PARTY SPARES NO VICTIMS IN ITS FIGHT FOR THE FREEDOM OF MANKINDGoldman Sachs spares no victims in its trillion dollar mandate as sole overlord of mankind’s air, Obama’s Cap and Trade.It begins…

GuestJuly 31st, 2009 at 12:01 am

BERNANKE’S COLLECTIVISMby Michael S. Rozeff, EconomistJuy 31, 2009–Mr. Bernanke is the world’s premier central banker. He is a very smart man with a stellar academic record. He has carried the ways of the seminar into the FED. He thinks about central banking a great deal, and he lets us know what he thinks.But, in the end, his thought is collectivist, and his political beliefs override economic facts. And I think that this is a very serious matter, because this collectivism entails the power to impose a monetary policy on all of us who have been deprived of a free market in money and banking. We are the losers. We are losing and have lost big time.Ben Bernanke advocates price stability in no uncertain terms. In his speech in 2006, “The Benefits of Price Stability,” he extols the virtues of price stability. I will come back to that later. But first, let us keep our thinking as clear as possible. Let us examine the record of price stability in the United States. We have all seen this before, but I set it down before you again so that we know precisely what we are talking about.I am going to assume that we can measure the price level. Otherwise, we cannot talk about it. I know all the problems involved in this measurement. But I think we all know that things generally cost more today than 50 years ago. We know that somehow we measure the price level and that the concept of the price level has meaning for us.There is an inflation calculator here that will serve our purposes. And it uses standard data between 1800 and 2008. It’s easy to use. I insert $100 as a basic amount of money in every calculation, and the question is how much money it takes to buy the same goods at a later time.Here are some results for different periods. I choose these periods a priori. I divide the period 1800–2008 into four nearly equal sub-periods. The first three are 52 years each; the last is 49 years. Why do I do that? I do that because I want long-term major facts. I do that to remove short-term effects of all kinds. I believe that in economic matters there are often lags that take time to work out, and I want to overcome any such lags. The results come out as follows:1800–1852 100 becomes 48.891853–1905 100 becomes 108.061906–1958 100 becomes 321.311959–2008 100 becomes 730.73This means that in 1852 it took $48.89 to buy what cost $100 in 1800. The price level fell. Between 1853 and 1905, the price level rose very slightly from 100 to 108.06. The next two sub-periods show very substantial increases in the price level. Since 1959, the price level has gone up seven hundred and thirty percent.Now, I bring to bear the following knowledge:1. The national banking system began in 1863. I can define an era between 1800–1862 as “sort of free banking” or call it any other name that you want to. There was some central banking in this first era, and there was government action in money and banking; but it was also a time of various regulated forms of free banking.Individual banks issued bank notes. There was no FED and no single national money.2. I can define 1863–1913 as the national banking era. This system was by a national statute, and it ended with the start of the FED.3. I can define 1914–1971 as another era: the FED + central bank international gold settlement.4. I can define 1971–present as yet another era: the FED + no central bank gold settlement.Let us again look at price level changes or price inflation.1800–1862 100 becomes 58.641863–1913 100 becomes 80.361914–1971 100 becomes 403.901972–2008 100 becomes 509.17Next, I observe that these periods have unequal lengths. To make them comparable, I convert to continuously compounded annual growth. I take the natural log of end value/start value and divide by the era’s number of years. This gives1800–1862 ln (58.64/100) x 1/62 = –0.0086 per annum or –0.86 percent per year1863–1913 ln (80.36/100) x 1/50 = –0.0044 per annum or –0.44 percent per year1914–1971 ln (403.9/100) x 1/57 = 0.0245 per annum or 2.45 percent per year1971–2008 ln (509.17/100) x 1/37 = 0.0440 per annum or 4.4 percent per yearFor our purposes, it’s not worth sub-dividing any further on the basis of other things, such as Volcker vs. Greenspan, or wars and depressions, and so on. I want us to be able to see the big picture about the price level.It’s clear that there is a remarkable difference pre-1913 (the FED’s beginning) and after 1913.Before and after 1913, we have two big eras. Before 1913, there is no institutional central bank with teeth to speak of. After 1913, we get a modern central bank with all sorts of powers. At the same time, pre-1913 there is lots of metal (gold and silver) being used for money and banking. After 1913, the use of metal diminishes, and the FED can do open-market operations. We get other non-metal monies.In these two eras, we find1800–1913 100 becomes 58.10. –0.0048 per year or –0.48% a year1914–2008 100 becomes 2124.41. 0.0325 per year or 3.25% a yearIn which era is there more price stability? This is obvious. Before there is a central bank and when metals are being used in the money and banking system, there is greater price stability. There is no contest. Pre-1913, the price level falls gently each year on the average by less than ½ of one percent. After 1913, the price level rises each year by 6.8 times as much as it used to decline before 1913 (in absolute value.) And we know that since gold disappeared from central banking settlements altogether, from 1971 onwards, that the price level increase even went up further, to 4.4 percent a year in the U.S.It is entirely reasonable to conclude that discretionary central banking with open market operations and without gold playing an essential constraining role is the cause of greater price instability and price inflation. Central banking with discretionary open market operations and without the constraint of gold is what helps defines central banking; that and the fact that its notes are legal tender by law. If open market operations were taken away and if the central bank had to redeem its currency in gold, we would no longer have central banking as we know it now and as we have known it since 1913. For this reason, it is reasonable simply to say that central banking is the cause of greater price instability. To achieve price stability, we need only get rid of central banking. If we do that by stripping it of various powers like open market operations and by making it redeem in gold, all the while retaining the shell institution, we are essentially getting rid of central banking.We can reach these conclusions if we look at the record. They are not conclusions that depend on being a libertarian, a socialist, a democrat, a republican, a collectivist, or anything else. And if we go into the matter more deeply and examine the theory of how the monetary systems operate before and after 1913, we will affirm these conclusions again. I will do this only briefly, but enough to convey the basic idea. Banks before 1913 could not inflate in any serious way because if they did, there would be a run on the bank. The depositors would demand redemption in gold, and that would cut short the bank’s inflation. So banks had to be careful about making too many loans. After 1913, the FED essentially had the power to inflate without having to worry about gold redemption. At first it did this for special reasons like wars and depression; and gold actually flowed into the U.S. because of problems overseas. But eventually, the government simply stopped redeeming in gold altogether, so that the FED could inflate without gold as a constraint. And so, no matter what our political beliefs are, we have to conclude that sensible theory also tells us that central banking causes price instability.Let’s see what Ben Bernanke says about price stability.”In particular, I will argue for what I believe has become the consensus view, that the mandated goals of price stability and maximum employment are almost entirely complementary. Central bankers, economists, and other knowledgeable observers around the world agree that price stability both contributes importantly to the economy’s growth and employment prospects in the longer term and moderates the variability of output and employment in the short to medium term.”My goodness, he believes that price stability contributes to economic growth and to lower variability of output and employment. He should favor getting rid of the FED in that case, for the evidence is overwhelming that the FED has de-stabilized the price level.He says, “Price stability plays a dual role in modern central banking: It is both an end and a means of monetary policy.”If price stability is a goal of monetary policy, then executing monetary policy via the FED is a darn poor way to achieve it. We could achieve it better by going back to the pre-FED system. In the 1800–1863 free banking era, the price level fell by less than 1 percent a year.Bernanke really believes in price stability:”Fundamentally, price stability preserves the integrity and purchasing power of the nation’s money. When prices are stable, people can hold money for transactions and other purposes without having to worry that inflation will eat away at the real value of their money balances. Equally important, stable prices allow people to rely on the dollar as a measure of value when making long-term contracts, engaging in long-term planning, or borrowing or lending for long periods. As economist Martin Feldstein has frequently pointed out, price stability also permits tax laws, accounting rules, and the like to be expressed in dollar terms without being subject to distortions arising from fluctuations in the value of money. Economists like to argue that money belongs in the same class as the wheel and the inclined plane among ancient inventions of great social utility. Price stability allows that invention to work with minimal friction.”And if you read this speech in full, you will find even more reasons he gives why price stability is a good thing. He just goes on and on and on about how wonderful price stability is.I myself am not affirming that price stability is a good thing. I personally believe that we should have free markets (which in my mind includes ethical and legal practices that aim at personal responsibility, no theft, and no fraud) and let the price level chips fall where they may. We should not have a body that is measuring the price level and attempting to manipulate it.My point is that if Bernanke believes all this about price stability, then he should advocate getting rid of central banking. Why doesn’t he do that? The answer goes beyond economics. It goes to social and political theory. The answer is that he does not believe in a free market or free banking. He believes in collectivism. His personal political beliefs override the facts of economics.What is collectivism? There are some decent quotes here that give the sense of the idea. Ayn Rand’s statement is a good one:”Collectivism means the subjugation of the individual to a group – whether to a race, class or state does not matter. Collectivism holds that man must be chained to collective action and collective thought for the sake of what is called ‘the common good’.”Bernanke thinks that individual actions that add up to overall monetary outcomes (which is a kind of spontaneous free market policy) are inferior to centralized monetary policy imposed at the discretion of an elite run by him and other central bankers. He simply does not believe in liberty and free markets.It is a clear fact that monetary policy affects the price level. Bernanke believes this. But Bernanke believes that the FED should control the price level through monetary policy, although such control is associated with price level and economic instability. He does not believe in liberty. He is a collectivist, and his collectivism overrules and biases his views of the economics of the matter. He blinds himself to the fact that a system of no central banking and decentralized free banking stabilizes the price level better than a central banking system unattached to gold.I could try to persuade him that when the FED attempts to control the price level, it introduces price instability and economic problems. I don’t think he will accept that. He happens to believe that the FED under Greenspan did a marvelous job:”Most striking, Greenspan’s tenure aligns closely with the Great Moderation, the reduction in economic volatility I mentioned earlier, as well as with a strong revival in U.S. productivity growth – developments that had many sources, no doubt, but that were supported, in my view, by monetary stability.”Written in 2006, he did not understand that, despite a seemingly low rate of price inflation, the central banking system still was causing serious problems that would show up the very next year. He cannot see these things because of his political belief in collectivist monetary policy.Bernanke believes that inflation targeting is the way to go for the FED:”What I find particularly appealing about constrained discretion, which is the heart of the inflation-targeting approach, is the possibility of using it to get better results in terms of both inflation and employment. Personally, I subscribe unreservedly to the Humphrey-Hawkins dual mandate, and I would not be interested in the inflation-targeting approach if I didn’t think it was the best available technology for achieving both sets of policy objectives.”Bernanke’s collectivism is on full display in his endorsement of the Humphrey-Hawkins Full Employment Act which I have taken apart piece by piece here.I think that even if we were able to explain the drawbacks of any central banking regime to Bernanke, even one that engaged in inflation-targeting, he would not back down from his belief in central banking. His belief in central banking is that firmly anchored:”I have always taken it to be a bedrock principle that when the stability or very functioning of financial markets is threatened, as during the October 1987 stock market crash or the September 11 terrorist attacks, that the Federal Reserve would take a leadership role in protecting the integrity of the system.”In point of fact, markets respond to information about problems in the economic system, and that includes the international currency system. As I wrote a few years back:”Crashes and price movements in general are notoriously hard to explain, but in this case [1987] the evidence points clearly to concerns about the international currency system. The latter was one of the basic causes at work in 1929 and again in 1972–74. After several such experiences and others in the nineteenth century, we have every reason to believe that monetary concerns are often central to bear markets. This important fact is not as widely known or appreciated as it should be.”What we are dealing with in someone like Bernanke is ingrained beliefs and prejudices. No matter how many arguments one may come up with, a smart person like him will come up with new rationales, new facts, and new interpretations so as to deflect the arguments. He will defend his economic position adamantly because he holds a political opinion that he will not abandon.We do not have here a simple matter of differences in opinion between some economists and others, with Bernanke interpreting economic matters one way and some of us interpreting them another way. Yes, that sometimes goes on; but it is hard to see in this case that one can deny that price stability was achieved in the 19th century without the FED and that there are good reasons why it was achieved without the FED. Collectivists like Bernanke who pass and laud measures like the Humphrey-Hawkins Act do not accept economic facts and theories that may be true. They resolve conflicts between truth and their beliefs by sticking to their collectivist beliefs.People who stubbornly believe things that are false are no great problem to the rest of us as long as they don’t have the power to make us go along with their prejudices.This is not the case in our political system. We have a very serious problem. The collectivists are running the entire society and they are wrecking it. Ben Bernanke is one of them. Replacing him with another collectivist won’t do any good. The institutions we have are collectivist, and they attract collectivists to run them.http://www.lewrockwell.com/rozeff/rozeff307.html

The AlarmistJuly 31st, 2009 at 8:07 am

Nice, but he overloóks that concept that stability can still have direction — as in the case of a longitudinal wave, the price level has been rather stable in the fact that it has, since 1913, been increasing almost constantly. So the Fed has been doing its job quite well.

DisasterUSJuly 31st, 2009 at 11:17 am

From Rozeff:”I myself am not affirming that price stability is a good thing. I personally believe that we should have free markets (which in my mind includes ethical and legal practices that aim at personal responsibility, no theft, and no fraud) and let the price level chips fall where they may. We should not have a body that is measuring the price level and attempting to manipulate it.”Rozeff was merely using the notion of Price Stability, as he clearly defines it above, to ultimately make clear the message that the FED should be abolished, summarily. (see his last 2-paragraphs.)

ChignosJuly 31st, 2009 at 12:49 pm

Excellent article. I notice the Fed-Bernanke apologists on this blog have suddenly become silent. Perhaps they did read this……perhaps they can do math……study history……but then again maybe not.

GSMJuly 31st, 2009 at 12:30 am

This is how GS take advantage of the mandated system of US taxpayer theft;http://www.zerohedge.com/article/former-goldman-managing-director-how-you-finance-goldman-sachs%E2%80%99-profitsIf you think this is accidental or simply a by- product- one of those “price we have to pay for a sound financial system” situations then I am afraid you are delusional. This IS the main game. This IS what it is all about .The Fed’s role is that of enabler or facilitator. Q:Enable what? A:The transfer of wealth into the coffers of it’s Masters.Mainly by promoting inflation and steady debasement the currency. But now that the Fed’s Masters have really blown it with their casino imploding and find themselves drowning in toxic debts/impairments (which severely hampers their ability to award themselves big bonuses), it becomes clear where the Fed’s allegiances lay. And it is most certainly NOT with the US taxpayer. No. The Fed has made available to it’s Masters the biggest credit line in the world. The US public purse. It’s empty at the moment of course but no worries! With the help of Treasury , a few more Trillions in Bonds get printed off for which the Fed prints new that money to pay. So it’ debt being transferred onto taxpayer balance sheet – it includes the INTEREST. So , while the Bankster Masters get their cash (so as to pay themselves their bonuses) , the taxpayer is shafted for the interest on top the debt it had no say in incurring.How is that for an enabling mechanism?Gentle Ben on PBS is portraying to the adoring doe eyed believing sheeple (Stockholmers) that he is their great Protector, their Benevolent Lord. Obviously there are those that believe this nonsense. When in fact, all along Ben is the benign public face of the greatest, most efficient Organised Crime Syndicate ever known to man.So forget about GS and the Bankster antics for a minute and focus on their Achilles Heal – the US Federal Reserve. Who protects err regulates the operations of Banksters? Who facilitates their very existence with the transfer of public wealth into their coffers? Who facilitates then enforces (not!) rules and regulations that generate massive amounts in fees and tythe to the Banksters? Through the manipulation of Interest, who in large part controls the wealth of US citizen’s balance sheets? Who protects err regulates the conditions of lending , credit and debt- the source of all Bankster power.The most important Bill to be considered by the US Congress and the US people in decades is the Fed audit proposal. It far and away will determine what the future holds for all the citizens of the US. IF it passes there may develop a possibility that The US Fed will be forced to change as an entity and have the most detestable of it’s powers curtailed or removed. If the people of the US really want to see true change- here and now is a way in which they can have it. IF they are prepared to get off their backsides and demand it.Maybe it is time for the common man to pull down the curtain and see for himself what is behind it that makes his life one of such misery.

GuestJuly 31st, 2009 at 1:21 am

Cartoon:Frank and Ernest are working in the U.S. mint. Says Frank, “I think we deserve a raise, our productivity is certainly up.”

GuestJuly 31st, 2009 at 3:23 am

I wonder if those who refuse to testify by invoking the Fifth Amendment, will now claim their right to Fed independence?

GuestJuly 31st, 2009 at 1:26 am

Robert Scheer’s ColumnsThe Chinese Come Calling/Jul 28, 2009What a hoot. The Chinese Communists invaded Washington on Monday demanding not that we sacrifice our freedoms but rather that we balance our budget. Creditors get to make that kind of call. And the Marxists of Beijing, who have turned out to be the world’s most prudent bankers, are worried about their assets invested in our banana republic.“China has a huge amount of investment in the United States, mainly in the form of Treasury bonds. We are concerned about the security of our financial assets” was the way China’s assistant finance minister put it. Briefing reporters at the U.S.-China Strategic and Economic Dialogue, he added, “We sincerely hope the U.S. fiscal deficit will be reduced, year after year.” Quite sincerely, one suspects, given a U.S. budget shortfall this year that is slated to reach $1.85 trillion.Suddenly, it was U.S. officials who were promising deep reform to their disgraced economic system rather than demanding it from incompetent foreigners. President Barack Obama’s economic team of Clinton-era holdovers, who a decade ago had hectored China on the virtues of fiscal responsibility, now were falling over themselves to reassure the Chinese that their $1.5 trillion stake in U.S. government-issued securities is safe, and that they should buy more at this week’s $200 billion Treasury auction. If they don’t, we’re in big trouble.U.S. Treasury Secretary Timothy Geithner promised to behave, saying the U.S. is “committed to taking the necessary measures to bring our fiscal deficits down to a more sustainable level once recovery is firmly established.” Now let’s hope that the Chinese Communists and their natural allies among congressional deficit hawks will be able to keep him to his word.And don’t blame any of this on peacenik liberals. The new conciliatory—nay, deferential—tone toward China precedes the Obama administration, having begun in bilateral talks during the last years of the Bush administration as the U.S. economy began its ignominious downfall. It was George W. Bush’s treasury secretary, Henry Paulson, who set the course when the former Goldman Sachs chairman realized how dependent were his Wall Street buddies on Chinese goodwill.But from all of this adversity may come something good: recognition that the United States is not the repository of all wisdom. Maybe the Chinese have found a model different from ours that also works? Might there not be an Arab, Latin or Indian one that also qualifies and need not be overthrown?The tone of this week’s talks, ironically held at the Reagan Building and co-chaired by Geithner and Secretary of State Hillary Clinton, finally signaled the end of the Cold War assumption that regimes with labels like communist and capitalist could not form profitable partnerships. On the contrary, as Secretary Clinton noted, it is time to move from “a multipolar world to a multipartner world.” And President Obama in opening the conference made clear that the partnership between China and the U.S. is decisive: “The relationship between the United States and China will shape the 21st century, which makes it as important as any bilateral relationship in the world.”Mark it as a historic Rip van Winkle moment. For those who recall the rhetoric of the Cold War, the idea that we would someday be cooperating with Chinese Communists because they had humbled us economically rather than militarily is a startling turnabout. How did they get to be better capitalists than us, and being that they are good capitalists, why are we still spending hundreds of billions a year on high-tech military weapons to counter a potential Chinese military threat when the weapons they are using are all market-driven deployments?A recognition that our tension with China is not military in nature came at this week’s conference in an announcement by Adm. Timothy Keating, commander of the U.S. Pacific Command, that agreement had been reached with his Chinese counterparts on improving relations: “A statement was made by a Chinese delegation official yesterday [Monday] that no country can develop sound policy if they try and do so in isolation. And I think that’s a great way of addressing the sense that all of us feel, the desire, to get back together again and discuss exercises, discuss personnel exchanges, discuss responses to humanitarian assistance crises and the provision of disaster relief.”Not bad for a start, and maybe we can help solve our economic problems by selling our latest high-tech weapons to China as we do to the rest of the world. Or better yet, we could do some serious damage to our deficits, and our dependence on the Chinese, by sharply cutting expensive weapons programs now that the Cold War is finally over.http://www.truthdig.com/report/item/20090729_the_chinese_come_calling/

GuestJuly 31st, 2009 at 1:37 am

Posted by Karl Denninger in Macro Economics at 11:18Unemployment Report FAR Weaker Than ClaimedJuly 30, 2009–“Initial Claims” were 584,000 today, scream the headlines, and the pumpers all claim this is “better than expected” when looking at continuing claims, which declined slightly to 6.416 million on a 4-week rolling basis.But those numbers don’t include the people who rolled off the original 13 week unemployment rolls and onto the extended programs (which go out to 52 weeks in many cases), and as such the number is being dramatically underreported.That’s a problem – see, there are 2,656,879 people in that bin, an increase of 24,518 from the prior week, and worse, 352,482 people rolled off the 13 week program last week!So the real increase was about 50,000 people, not 24,000 in the current week, because you have to add back in those that have been removed from the count but are still unemployed!Again: 352,483 people, or well over half of the newly-filed claims, rolled off the original 13 week benefits onto extended benefits. This is where the “decrease” in the 4-week moving average came from. This little machination means that there was not actual decrease in the 4-week moving average of people on unemployment; to the contrary those on unemployment increased, not decreased!”Extended benefits” are people who cannot find work within three months of being laid off, and are being forced onto the expanded benefit programs. Until the moving average change drops to close to zero including extended benefits the labor market is not slowing its rate of contraction!Worse, we’re going to start losing people off the “extended” benefits soon (next month) which will make it nearly impossible to count the real number of unemployed, and those who drop off extended benefits will have no income whatsoever, which means they won’t be paying taxes – or spending.The total count of people on both 13 week and extended benefits (raw numbers, not seasonally adjusted) is 8.718 million, another new record.Don’t believe the “green shoot” callers – this report was horrendous and shows continued dramatic contraction in the workforce and economy.http://market-ticker.denninger.net/archives/1272-Unemployment-Report-FAR-Weaker-Than-Claimed.html

GuestJuly 31st, 2009 at 1:40 am

Murray Rothbard on the Evils of Bailouts“Subsidies…prolong the life of inefficient firms at the expense of efficient ones, distort the productive system, and hamper the mobility of factors [of production] from less to more value-productive locations. They injure the market greatly and prevent the full satisfaction of consumer wants…The greater the extent of government subsidy in the economy, therefore, the more the market is prevented from working, and the more inefficient will the market be in catering to consumer wants. Hence, the greater the government subsidy, the lower will be the standard of living of everyone, of all the consumers.”–Murray Rothbard, Man, Economy and State with Power and Market (Mises Institute), 2nd ed., p. 1255

GuestJuly 31st, 2009 at 1:48 am

calling it Price Fixing 101For those who don’t know, the Financial Stability Oversight Board (FINSOB) is supposed to be the fraud cop that oversees the $700 billion Troubled Assets Relief Program – you know the TARP TARP TARP that is your wealth that has been moved directly into the coffers of Humungous Bank & Broker (HB&B), ensuring their continued profitability and misleading guidance that all is well in America.http://caracommunity.com/content/caras-commentary-community-chat-thursday-jul-30-2009

GSMJuly 31st, 2009 at 1:49 am

“(1)How did they get to be better capitalists than us, and being that they are good capitalists, (2)why are we still spending hundreds of billions a year on high-tech military weapons to counter a potential Chinese military threat when the weapons they are using are all market-driven deployments?1. Because they SAVE more than they spend. Because they can EXPORT there excess in manufacturing. Because they manage their debts rather than allowing their banks to impoverish their society. Because, because , because…..2)Because the US has developed a robust portfolio of enemies. Because defence expenditure is now necessary to protect sources of (relatively)cheap (and accessible) energy. Because after the hollowing out of US manufacturing, the dominant military industrial complex holds sway in manufacturing employment so bigger military = job placement programs. Because the US has been outwitted, outflanked and outmanouveered by having their greed exploited by Banksters, The Fed and their Govt.Momentous changes indeed. We witness the passing of the batton. Not with a bang, but a subservient whimper.

GuestJuly 31st, 2009 at 3:06 am

I really didn’t understand that article by Scheer. I assumed it was tongue in cheek. But there were several replies in the comment section similar to the one below, which I didn’t understand either (?). That said, China really isn’t a capitalist state. The fruits of American capitalism, including our patents, were gifted that regime. America’s production base, once the envy of the world, and her jobs, once the envy of the world, were commandeered by CEOs-of-the-world financed by international central-bankers-of-the-world and out sourced, where?—why to China, a communist dictatorship in violation of human rights. Our U.S. Congressmen and Secretary of State Hillary Clinton and as you see above, our military under Adm. Keating, now serve the world. To them, one country is as good as another. That, of course, is treason. And, of course, when the tyrants take over, they’ll be the first to go. Anyway, the following remark in Scheer’s comment section is remarkable, to say the least:By Folktruther, July 30 at 11:53 am #No, prole, the class war isn’t over, but it is being combined with the war against nationalism. Classical marxism orginally focused on the capitalism of the West, where socialism was to be established. Since that time it has spread to the whole world and the world has only the snycranism of marxist-leninism to think about it. The destruction of our traditional climate and thermonuclear war have since become real possiblities, and economic ineequality and domination has become much more intertwined between nations as well and within nations, more than they were in the past.China is a class society like the US, and will presumably become worse as it develops, as the monstrous economic inequality of the US has done. But now its coercion is being used to urbanize the country, getting people from the farms to the cities. This will only take a few more decades. It is being done in a mure humane and effcient fashion than other capitalism. And it is helping other developing countries do so, especially in Asia, but in Africa and Latin America as well, where most people live.This has been the problem of siege socialism, getting people into cities while capitalism was threating to invade, bomb and otherwise terrorize them. It is not possible historically to go from a peasant society to a socialist society until one first has an urban capitalist society. Now the whole world is being urbanized, and China and East and South Asia, where half the world’s people live, are leading and becoming the historically dominant economiic poliies.It is now world socialism that is on the agenda AFTER this process is well underway. Instead of socialism being initiated in one country at a time, or a number of countries of Europe, as marx enivisioned a century and a half ago, a world socialist movement is possible within the newly industrialized countries, an earthperson socialism.But this involves a different ideological worldview than classical marxism. It is necessary to destroy the excessive nationalism of ruling classes as a world ruling class develops, and attack the world ruling class from a number of homelands. This will be done primarily by the non-White people of the world, a transformation of the initial socialist movments begun in the White West.Since historically the US has been very racist, the US White ruling class allying with the White population against Af-Americans, Latinos, Asians, and AmerIndians to rule, in forming a world socialist movment it is necessary to emphasize racism more than when socialism was envisioned as a European pheneomena. And therefore national homelands more, since it is conceivable that these may not be national homelands.It is necessary to combat nationalism as well as class in a new movement, because socialism has been nationalized because capitalism didn’t develop enough.but this can’t be done effectively until the world has enough to eat and a minimum economic security under capitalism. therefore world socialism is a post-Chinese phenomena, although of course it must be fought for now. But the major world problems now are pollution, war and hunger. the US being the main national agent fostering all three. And, despite American media comments, China is combating all three. These problems must be solved before a civlized world culture can evolve, and the people of the earth shake off the nightmare of history.And this is the agendea of the 21st century.

GuestJuly 31st, 2009 at 7:00 pm

The key to Scheer’s article is in his first couple of paragraphs. It’s not his best column in that he mixes in his feelings for disarmament and peace, which are priority with him. He should just come out and say what he means. But the maximum thrust of the article is that the U.S. financial systems is failing, whether Scheer calls it capitalism–or whatever it’s called with Goldman Sachs and the bankers running it.America’s financial system is failing and it is taking the taxpayers’ money to bail itself out and reinvent itself. Scheer is well documented on all these points; he’s traced the Summers/ Rubin/Paulson/Geithner/NYFed/ Goldman connection all along. Their system has failed and now they are down on their knees begging that we work with themHe tried to talk in code and it didn’t work.I like Scheer. He is courageous. He put his job on the line for his beliefs when Sam Zell took over the L.A. Times. But he has this unworkable philosophy that some of the progressives have, that “we should all just get along.” He doesn’t understand evil, that if you don’t have a strong defense, you’re done.Admiral Keating’s comments in Scheer’s article above may have sounded treasonous, but he was told to say what he said so that Wall Street could still get its money from China. He didn’t say it on own volition: it was a sort of “we’ve got to be nice and work with the Chinese or else they won’t give us the money.”Scheer’s last line is tongue and check. Congress, Republicans and Democrats, and Bush and Obama sold, and are selling, weapons to the rest of world. Says Scheer, we shouldn’t be selling any.

GuestJuly 31st, 2009 at 2:42 am

New York details big bonuses at bailed-out banksNew York: Citigroup, which got $45 billion in govt. money, paid over $5 billion in bonusesJuly 30, 2009–NEW YORK (AP) — Citigroup Inc., one of the biggest recipients of U.S. government bailout money, gave employees $5.33 billion in bonuses for 2008, New York’s attorney general said Thursday in a report detailing the payouts by nine big banks.The report from Attorney General Andrew Cuomo’s office focused on 2008 bonuses paid to the initial nine banks that received loans under the government’s Troubled Asset Relief Program (TARP) last fall. Cuomo has joined other government officials in criticizing the banks for paying out big bonuses while accepting taxpayer money…Cuomo’s office found that the companies, which also included Bank of America Corp., Merrill Lynch & Co., JPMorgan Chase & Co. and Goldman Sachs Group Inc., awarded nearly 4,800 million-dollar-plus bonuses, with much of the money going to Wall Street investment bankers.Citigroup, which is now one-third owned by the government as a result of the bailout, gave 738 of its employees bonuses of at least $1 million, even after it lost $18.7 billion during the year, Cuomo’s office said. The bank’s top four recipients received a combined $43.7 million.The New York-based bank received $45 billion in government money and guarantees to protect it against hundreds of billions of dollars on potential losses from risky investments.”There is no clear rhyme or reason to the way banks compensate and reward their employees,” Cuomo said in the report, noting banks have not in recent years actually tied pay to performance as they claim when describing their compensation programs. Cuomo added that when banks’ performance deteriorated significantly, “they were bailed out by taxpayers and their employees were still paid well.”Bank of America, which also received $45 billion in TARP money, paid $3.3 billion in bonuses, with 172 employees receiving at least $1 million and the top four recipients receiving a combined $64 million. Merrill Lynch, which Charlotte, North Carolina-based Bank of America acquired during the credit crisis, paid out $3.6 billion, including a combined $121 million to four top employees.Bank of America earned $2.56 billion in 2008, while Merrill lost $30.48 billion. Cuomo’s office said Merrill Lynch doled out 696 bonuses of at least $1 million for 2008…Banks have said they needed to pay their top performing employees to prevent them from defecting to competitors…President Barack Obama last month named Kenneth Feinberg to oversee compensation given to the 100 highest-paid employees at banks and other firms that received the largest government bailouts, including Citigroup and Bank of America…Asked about the attorney general’s report, White House press secretary Robert Gibbs said he had not seen it.”I think the president continues to believe that the American people don’t begrudge people making money for what they do as long as … we’re not basically incentivizing wild risk-taking that somebody else picks up the tab for,” Gibbs said.Goldman gave 953 workers bonuses of at least $1 million, with its four most highly compensated employees receiving a combined total of nearly $46 million. JPMorgan gave 1,626 employees at least $1 million, and its top four recipients received a combined $74.8 million. The two banks each gave more than 200 employees bonuses in excess of $3 million….Wells Fargo…paid out $977.5 million in bonuses.http://finance.yahoo.com/news/New-York-details-big-bonuses-apf-477571682.html?x=0

FEDupJuly 31st, 2009 at 8:10 am

LET’S FACE REALITY-Our elected employees, the govt are NOT going to make any significant changes in the salary structure, the dominance, the transparency or the regulation of the big banks so we need to sidestep them and do the following: pull out all cash or investments with these institutions and do not patronize those who do business with them. Use local community banks, credit unions, etc. If Walmart for example is giving their investment business to them, then don’t do business with Walmart as well. The lifeblood of the banks is OUR money, either remove it from them or they will continue to suck as dry!

Free TibetJuly 31st, 2009 at 6:30 am

From Bloomberg:

July 31 (Bloomberg) — The U.S. government’s $1 billion “cash for clunkers” program to spur new car sales ran through the money six days after it began, Senator Debbie Stabenow said. …. “Any doubt that the CARS program would jump-start auto sales is completely erased,” said Greg Martin, a General Motors Co. spokesman. “More than 200,000 cleaner, more fuel-efficient cars are on the road and a vital industry gets a needed boost. We hope there’s a will and way to keep the CARS program going a little bit longer.”…….The National Highway Traffic Safety Administration, which is running the program, said yesterday that 22,782 vehicles worth $95.9 million had been sold.

Now you might be asking yourself how the US Govt. could run through $1B in a week in a brand new program that hasn’t had time to gear up?. (Sorry.) Or, how the US Govt. could run through $1B selling $96MM in vehicles? Or how much NEW business was generated with $1B? Or whether, like former auto industry rebate incentives, it, at most, brings future sales forward. Or why these numbers don’t seem to add up in Bloomberg’s story? Well, I don’t know.Full story hereSee also:Calculated Risk: Auto: Cash-for-Clunkers to be Suspended

Уряд СШАJuly 31st, 2009 at 6:53 am

Липень 31 (Bloomberg) – Уряд США в $ 1 млрд “готівкою за clunkers” програма для стимулювання продажів нових автомобілів побіг через гроші через шість днів після його початку, сенатор сказав Деббі Stabenow. …. “Будь-які сумніви в тому, що автомобілі будуть стрибати програму запуску автоматичної продажу повністю стерто,” сказав Грег Мартін, а General Motors до прес. “Більше, ніж 200,000 чистих, більш економні автомобілі на дорозі, а життєво важливі галузі отримує необхідну імпульс. Ми сподіваємося на те є воля і спосіб зберегти автомобілі програма буде трохи довше. … …. Національна адміністрація безпеки дорожнього руху, у якому запущена програма, заявив учора, що 22782 транспортних засобів на загальну суму $ 95,9 млн було продано

The AlarmistJuly 31st, 2009 at 8:18 am

The way I read it elsewhere, they have to stop because there is a huge backlog of repayments to dealers, which implies they may have lost track of where they actually stand and that they might have no ideally how much is really committed.If they, as a single payor, can’t keep track of $1B in payables, how can they be trusted as a single payor for $1.7T of healthcare payments?Raging sucess.

ChignosJuly 31st, 2009 at 1:10 pm

Obama apologists…..silent again. Imagine this: the one program instigated by this nitwit Congress-Obama that is successful……and it’s a TAX INCENTIVE. Even a blind squirrel can find a nut once in a while.

SoftwarengineerJuly 31st, 2009 at 2:32 pm

FOREIGN AUTO MAKING HEADQUARTERS MUST BE LAUGHING THEIR HEADS OFF AT US AMERICANS#1 For even initiating American tax credits during a massive deficit that benefit foreign countries.Remember the “hoopla” over “Buy American” on the stimulus money?I hear China put a “Buy Chinese” on their stimulus money; did Canada, Japan and Europe call China the evil protectionist country for that?I’m sorry, I’m against all tax credits, even that $8000 first time home buyer one; when our government is like bringing in 50% of the IRS revenue it brought in in 2007. When will we wake up and smell the coffee?Besides, its only the rich buying Prius and Cadillacs anyway; the poor drive old throw aways….its all they can afford.

ОбамаJuly 31st, 2009 at 6:50 am

Обама кризис семьи “, напиток” пожарныхПиво в Белом доме, президент США Барак Обама (справа), вице-президента Байден (второй слева) расслабленной и счастливой, черный, профессор Гейтс (слева), белые полицейские более柯劳利относительной обязательными.ReutersБелый Дом “Пиво” на 30-й вечер на краю двора в Розовый сад дебют, первый афро-американский президент Обама, по 16 в этом месяце на арест известного профессора Гарвардского африканского происхождения Гейтс потрясений, вызванных расовой дискриминации, белые полицейские柯劳Ли и Гейтсу, таблицу питья пива, в чате на 40 минут.Расистских инцидентов с обеими сторонами президента Обаму в Магнолия дерево, пить пиво вокруг круглого стола чат, единственная сцена без предварительного уведомления является вице-президентом Биден. Ворота и柯劳利надеть костюм и галстук для участия в заседании, Обаму и Байдена, и только белую рубашку рукавами подкатил.Обама позже оценил переговоры “, атмосферу дружбы и заботы:” Я надеюсь, что вы узнали урок из этого инцидента, так что все дело закончилось. Он сказал: “Я всегда считал, что, давайте объединять силы, большей, чем власть разделить нас.” Солидарность со старым другом Обама Ворота, Ворота имеет в виду арест белые полицейские “действуя глупо”, участвующие в этой бури , и позднее он признал, что дефект в формулировках.Ответ СМИ вопросов после柯劳利сказал: “Мы все согласны с тем, что последние должны иметь возможность делать. Я думаю, что мы оба договорились о конкретной теме мнения. Я не думаю, что мы тратим слишком много времени на разговоры о прошлом, мы потратили много Время для обсуждения будущего “.Гейтс выступил с заявлением, в должность, надеемся, что этот инцидент вдохновил образования вместо того, чтобы опровергнуть, встречных обвинений. Он сказал, что он и柯劳利теперь несет ответственность за принятие этой возможностью для того, чтобы содействовать пониманию общественностью полицейских на дежурстве, когда сталкиваются с опасностью, но некоторые люди слишком боятся расовой эмпатии.Гиббсовские ранее представитель Белого дома, сообщил СМИ, что совещание не должно быть передано как “Саммит пива”, потому что Обама не будет выносить рекомендации по этому инциденту и не будет говорить о расовой дискриминации. Пиво будет только метров с десяток или около того журналистами в кратком фотографии, не разрешается вопрос.

ओबामाJuly 31st, 2009 at 6:51 am

ओबामा परिवार संकट, “पी” फ़ायरमैनबीयर व्हाइट हाउस में अमेरिकी राष्ट्रपति Barack ओबामा (सही), उपाध्यक्ष Biden (बाएँ से) दूसरे तनावमुक्त और खुश, प्रोफेसर गेट्स काले () छोड़ दिया, सफेद पुलिस अधिकारियों से अधिक柯劳利रिश्तेदार बाध्यकारी.रायटर्सव्हाइट हाउस “बियर” की 30. शाम को गुलाब बाग शुरुआत के आंगन के किनारे पर, पहले अफ्रीकी अमेरिकी राष्ट्रपति ओबामा, इस महीने की 16 वीं पर अफ्रीकी वंश गेट्स उथलपुथल सफेद पुलिस अधिकारियों柯劳द्वारा नस्लीय भेदभाव के कारण के प्रसिद्ध हार्वर्ड प्रोफेसर की गिरफ्तारी ली और गेट्स, सारणी बियर पीता है, 40 मिनट के लिए बातें.इस Magnolia पेड़ में राष्ट्रपति ओबामा के दो दलों के साथ जातिवाद घटनाओं, एक गोल मेज के चारों ओर चैट बीयर पीने, नहीं पूर्व घोषणा के साथ ही एक दृश्य में उपराष्ट्रपति Biden है. गेट्स और柯劳利एक सूट पहनते हैं और इस बैठक, ओबामा और Biden में भाग लेने के लिए टाई, और केवल सफेद कमीज आस्तीन ऊपर लुढ़का.बाद में ओबामा ने वार्ता की प्रशंसा की, ‘दोस्ती और देखभाल की मैं तुम्हें इस घटना ताकि पूरे मामले पर था से सबक सीखा आशा है कि एक वातावरण, “. उसने कहा: “मैं हमेशा यह है कि हमें, शक्ति हमें विभाजित करने के लिए एक से अधिक बल देना माना है.” एकजुटता ओबामा गेट्स की एक पुरानी दोस्त के साथ, गेट्स ने सफेद पुलिस अधिकारियों “अभिनय की गिरफ्तारी की बात कर रहा है बेवकूफ”, इस तूफान में शामिल , और बाद में शब्दों में कहा कि वह दोष भर्ती कराया.मीडिया के सवालों के जवाब के बाद柯劳利कहा: “हम सभी जानते हैं कि पिछले करने के लिए अनुमति दी जानी चाहिए सहमत हूँ. मुझे लगता है कि हम दोनों की राय एक विशिष्ट विषय पर सहमति व्यक्त की है. मुझे लगता है कि हमें अतीत के बारे में बात कर बहुत ज्यादा समय बिताना नहीं लगता है, हम की एक बहुत खर्च भविष्य के बारे में बात करने का समय है. “गेट्स के बाद में एक बयान, उम्मीद है कि इस घटना के बजाय शिक्षा प्रेरित, काउंटर खंडन करने के आरोप भी जारी किए हैं. उन्होंने कहा कि वह और柯劳利अब, लेकिन कुछ लोगों के लिए भी जातीय समानुभूति का डर इस अवसर ड्यूटी पर पुलिस की सार्वजनिक समझ को बढ़ावा देने के लिए जब खतरे का सामना करने के लिए जिम्मेदारी है.गिब्स से पहले व्हाइट हाउस के प्रवक्ता, क्योंकि ओबामा सिफारिश नहीं करूँगा कि इस बैठक के लिए बियर के “शिखर सम्मेलन के रूप में,” इस घटना के लिए और संदर्भित नहीं होना चाहिए बात नहीं करेंगे नस्लीय भेदभाव के बारे में मीडिया से कहा था. एक संक्षिप्त फोटोग्राफी में बीयर केवल मीटर दूर हो जाएगा एक दर्जन या तो पत्रकारों, सवाल करने की अनुमति नहीं है.

FEDupJuly 31st, 2009 at 7:49 am

Classic market manipulation: Today at 8:30am EST, notice as GDP was released, there was a 126 point swing in the DOW futures in 1 MINUTE! This type of move can only be done by the professional market manipulators as individuals do not have the speed or volume to effect such a move.

GuestJuly 31st, 2009 at 8:25 am

Town halls gone wild

Alex Isenstadt Alex Isenstadt – Fri Jul 31, 5:30 am ETScreaming constituents, protesters dragged out by the cops, congressmen fearful for their safety — welcome to the new town-hall-style meeting, the once-staid forum that is rapidly turning into a house of horrors for members of Congress.

About time.

The AlarmistJuly 31st, 2009 at 8:32 am

It just warms me to the cockels to hear my poor former colleagues no longer have to deny themselves the simple pleasures in life. To paraphrase the old PSA you would hear on WPIX, “Do you know where your tax dollars are?”It’s later than you think …Delmonico’s Reports the Green Shoots Are Not Just Asparagus By Allison Abell SchwartzJuly 31 (Bloomberg) — Dennis Turcinovic, managing partner of Delmonico’s steakhouse, said he knew things were looking up when a table of Wall Streeters ordered a $4,000 bottle of Far Niente Cabernet Sauvignon last month. It was the first he had sold since January.“We’re seeing the old times coming back,” said Turcinovic. “People are starting to spend a little money again.” The restaurant, which used to sell about 10 four-figure bottles a week before last September, has sold that many since June, he said.With investment banks reporting profits again — and record earnings at Goldman Sachs Group Inc. — there are signs of recovery among the businesses their executives patronize. Revenue at the restaurants, car services and headhunting firms that cater to Wall Street slumped as much as 60 percent after the collapse of Lehman Brothers Holdings Inc. in September. According to the New York State Department of Labor, about 37,500 jobs in the financial industry were lost between last August and May 2009.Delmonico’s, a 172-year-old Manhattan steak house which gets 60 percent of its business from Wall Street firms, said revenue has increased about 5 percent since June.Passenger traffic at US Helicopter, which carries executives between Manhattan and John F. Kennedy International Airport and New Jersey’s Newark International Airport, has increased since May, according to Donal McSullivan, chief marketing officer.‘It’s Real’The company, which had cut the number of trips it offered by 10 percent to 15 percent starting last September, has started adding flights to its schedule to keep up with demand, said McSullivan. It now runs 44 trips a day from two heliports along the East River, one downtown near Broad Street and the other near East 34th Street. Price of a one-way 8-minute flight: $159.“It’s gradual, but it’s real,” McSullivan said in a telephone interview. “We’re seeing a trending in the direction that pleases us.”The New York State Comptroller’s Office estimates that every securities-industry job created tends to create three additional jobs, two in the city and one in the suburbs, according to spokesman Robert Whalen.“We’re seeing some things that are positive and encouraging,” Whalen said in a telephone interview. “If you see the business owners and restaurants telling you they are starting to see more business, maybe that’s a sign of confidence coming back.”‘Slowly Trickling Back’Headhunter John Warren, president of New York’s A-List Associates Inc., said his business has improved by about 30 percent in the last two months, based on the number of job openings his customers are looking to fill. That’s the first improvement since March 2008. About 90 percent of his customers are from the financial sector, Warren said.“I see a lift,” Warren said in a telephone interview. “The light at the end of this tunnel is slowly trickling back, but it’s slow.”Cipriani Wall Street, a catering and events company that gets about 15 percent of its business from banks, is seeing an increase in bookings for holiday parties compared with last year, said Rachel Adler, a company spokeswoman.The dining room at SHO Shaun Hergatt, a seven-week-old Asian-French restaurant on Broad Street in the financial district, has gotten busier over the last two weeks and the eatery is taking reservations for private catering and events later in the year, according to Shaun Hergatt, the chef and owner.Complimentary CookiesFresco on the Go, a restaurant and catering company with a location on Pearl Street about a three-minute walk from Goldman’s offices, this month had its best

see.clayJuly 31st, 2009 at 8:44 am

yeah, for the fat cats – try getting a loan! I know several big money guys that invest in real estate – “You must be buying like crazy”…”I would love to, I cant get any money”Just a widening of the gap between the haves and have nots.

Grapes of WrathJuly 31st, 2009 at 9:14 am

I can’t tell you how pleased I am to see that my tax dollars are paying for $4,000 bottles of wine for Wall Street. Does the IRS allow such extravagances as a tax deductible business expense? If so, that would be a second slap in the face.

The AlarmistJuly 31st, 2009 at 8:34 am

It just warms me to the cockels to hear my poor former colleagues no longer have to deny themselves the simple pleasures in life. To paraphrase the old PSA you would hear on WPIX, “Do you know where your tax dollars are?”It’s later than you think …Delmonico’s Reports the Green Shoots Are Not Just Asparagus By Allison Abell SchwartzJuly 31 (Bloomberg) — Dennis Turcinovic, managing partner of Delmonico’s steakhouse, said he knew things were looking up when a table of Wall Streeters ordered a $4,000 bottle of Far Niente Cabernet Sauvignon last month. It was the first he had sold since January.“We’re seeing the old times coming back,” said Turcinovic. “People are starting to spend a little money again.” The restaurant, which used to sell about 10 four-figure bottles a week before last September, has sold that many since June, he said.With investment banks reporting profits again — and record earnings at Goldman Sachs Group Inc. — there are signs of recovery among the businesses their executives patronize. Revenue at the restaurants, car services and headhunting firms that cater to Wall Street slumped as much as 60 percent after the collapse of Lehman Brothers Holdings Inc. in September. According to the New York State Department of Labor, about 37,500 jobs in the financial industry were lost between last August and May 2009.Delmonico’s, a 172-year-old Manhattan steak house which gets 60 percent of its business from Wall Street firms, said revenue has increased about 5 percent since June.Passenger traffic at US Helicopter, which carries executives between Manhattan and John F. Kennedy International Airport and New Jersey’s Newark International Airport, has increased since May, according to Donal McSullivan, chief marketing officer.‘It’s Real’The company, which had cut the number of trips it offered by 10 percent to 15 percent starting last September, has started adding flights to its schedule to keep up with demand, said McSullivan. It now runs 44 trips a day from two heliports along the East River, one downtown near Broad Street and the other near East 34th Street. Price of a one-way 8-minute flight: $159.“It’s gradual, but it’s real,” McSullivan said in a telephone interview. “We’re seeing a trending in the direction that pleases us.”The New York State Comptroller’s Office estimates that every securities-industry job created tends to create three additional jobs, two in the city and one in the suburbs, according to spokesman Robert Whalen.“We’re seeing some things that are positive and encouraging,” Whalen said in a telephone interview. “If you see the business owners and restaurants telling you they are starting to see more business, maybe that’s a sign of confidence coming back.”‘Slowly Trickling Back’Headhunter John Warren, president of New York’s A-List Associates Inc., said his business has improved by about 30 percent in the last two months, based on the number of job openings his customers are looking to fill. That’s the first improvement since March 2008. About 90 percent of his customers are from the financial sector, Warren said.“I see a lift,” Warren said in a telephone interview. “The light at the end of this tunnel is slowly trickling back, but it’s slow.”Cipriani Wall Street, a catering and events company that gets about 15 percent of its business from banks, is seeing an increase in bookings for holiday parties compared with last year, said Rachel Adler, a company spokeswoman.The dining room at SHO Shaun Hergatt, a seven-week-old Asian-French restaurant on Broad Street in the financial district, has gotten busier over the last two weeks and the eatery is taking reservations for private catering and events later in the year, according to Shaun Hergatt, the chef and owner.Complimentary CookiesFresco on the Go, a restaurant and catering company with a location on Pearl Street about a three-minute walk from Goldman’s offices, this month had its best two weeks since it opened last summer, according to Elaina Scotto, one of the owners. Fresco on the Go’s catering business has picked up, including a recent dinner for 50 people at Goldman.Goldman’s record earnings in the second quarter came as revenue from trading and stock underwriting reached all-time highs less than a year after the firm took $10 billion in U.S. rescue funds.“People are very cautious,” Scotto said in a telephone interview. “Even if they are ordering the catering, we will do it in a way that works in their favor. We work with budgets, we’ll do a complimentary cookie or dessert tray.”Alex Chertakovsky, owner of Summit Express Car & Limousine Service Inc., said his New Providence, New Jersey-based business is down about 15 percent compared with a year ago. While 40 percent of his revenue is from firms including Goldman, Barclays Plc, Deutsche Bank AG and Citigroup Inc. — that used to be more like 60 percent — he said he is getting an increase in patronage from smaller financial companies.“They’re traveling, they’re entertaining, they’re going out,” Chertakovsky said in a telephone interview. “They’re actually doing more business with us than big firms. They’ve been doing very well.”To contact the reporter on this story: Allison Abell Schwartz in New York at [email protected] Updated: July 31, 2009 00:01 EDT

Little SaverJuly 31st, 2009 at 8:55 am

So, now we know where the rescue money went to.Representative for the rest of the country?Don’t think that a few $4,000 bottles of Far Niente Cabernet Sauvignon is.

GuestJuly 31st, 2009 at 8:35 am

Does anyone beleive the market has hit bottom yet? Prices have fallen pretty fall and although there may still be some wiggle room for prices to fall a little bit further, I believe that even if you buy now, you will not take much of a hit if prices continue to slide a bit more. Wishful thinking? Perhaps, but remember that chances of you buying at the absolute bottom of the market are slim. Chances are that prices will begin to climb before you decide to jump in. Actually I beleive once the “bottom” is reached and prices begin to climb again, that they will raise somewhat rapidly at least initially, as people realize they missed the bottom and if they don’t buy today, it will cost more tommorrow. I don’t expect the kinds of run ups as we had during the housing bubble years, but there will be an initial surge of 20 to 30% increase in prices as people scramble to get a house while prices are still low. While 30% seems high, you have to remember housing prices are down alot. If a house cost 100k and prices dropped 30%, the house price is now 70k. If that house raises in value by 30%, the price increase is 21k, not the original 30k it lost when it dropped 30% in value. A better examble would be a 400k Las Vegas house that lost 50% in value, a 200k lost, making the price of the house 200k now. Even if the housing market dramatically increases and house increase 50% in value, they only regain 100k in lost value, making it 300k.

GuestJuly 31st, 2009 at 8:42 am

July 29, 2009Dead Banks WalkingBy John BrowneIn recent weeks, the financial world has been dazzled by strikingly high earnings reported by our leading investment banks… or at least what we used to call investment banks. The numbers are reminiscent of another era – the one that came to a crashing end last September. Today’s euphoria was keyed to the record $3.44 billion 2nd quarter profit announced by that branch office of the Treasury Department also known as Goldman Sachs. Wells Fargo, JP Morgan Chase, and State Street also chipped in with strong numbers.The seeming health of these institutions, which are often referred to as the “backbone” of the U.S. economy, is currently being cited as strong proof that economic recovery is at hand. This conclusion is based on selective memory and dubious logic.The more immediate question hinges on whether this rise in bank and corporate earnings can be sustained in the face of increased commercial real estate mortgage defaults, rising unemployment, and increased savings? Would it then be likely that the broad stock market can continue to rally while the financial sector sputters? If not, a serious correction in U.S. equity prices is a foregone conclusion.In the early years of this century, major money-center banks and shadow banks incurred irrational risks and paid themselves unimaginably large bonuses. They were termed “gambling casinos” and deservedly drew fire when their bets went south. But instead of forcing these irresponsible firms to pay for their bad behavior, the federal government forced the general public to rescue them.The Treasury and Fed instituted four key measures intended to boost the banks’ earnings, which in turn, would boost their share prices, improve their capital ratios and force their share prices upward.First, Congress was pressured into giving instant approval to the $750,000,000,000 Troubled Asset Relief Program (TARP). This massive sum of public money was designed to buy toxic assets from the banks. However, the government soon realized that buying some toxic assets would create a real price and thereby threaten the inflated value of other toxic assets held by financial institutions worldwide. The initial TARP plan was dropped in favor of injecting billions of dollars into certain banks, leaving the toxic assets on their books. Meanwhile, the true values of these toxic assets were officially camouflaged by the initiation of “exceptional” accounting changes.The injection of free TARP funds enabled the recipient banks to enter a charred landscape that was, nevertheless, bristling with easy profits. For example, $10 billion of TARP funds enabled Goldman Sachs to make leveraged trades during the bear market rally of the last four months. Though this is the same activity that caused its downfall, Goldman now assumes a government guarantee on its risk-taking. With no limits on their appetite for risk, record profits are theirs for the taking.Second, some of the shadow banks, such as Goldman Sachs and Morgan Stanley, were allowed to become bank holding companies. This change allowed them access to the Fed Window to borrow at zero percent interest. This greatly increased the profit margins of the banks day-to-day lending operations.Third, the reduction of Fed rates to below one percent has steepened the yield curve, enabling banks to take six to eight percent plus spreads in lending to boost earnings.Fourth, for the first time, the Fed is paying interest on bank reserves. This meant that all banks can borrow at zero and lend back to the Fed at an interest rate spread of some three percent, thus boosting earnings further. The downside is that banks are discouraged to lend to risky companies and individuals while they can lend at no risk to the Fed. Therefore, despite political pressure for banks to lend, credit remains tight.With the great privileges listed above, and with the competitive landscape improved by the disappearance of Lehman Brothers and the absorption of Bear Stearns and Merrill, it is little wonder that the surviving banks earned more. A firm like Goldman Sachs, with its stellar earnings, is now effectively a hedge fund subsidized by taxpayers.However, toxic assets remain on the books of the banks. In addition, problems in the commercial property and consumer lending field loom menacingly.The Fed has also acknowledged that, eventually, it will need to sharply increase interest rates to “mop up” all the liquidity its pouring into the world economy. This action alone, if the Fed ever has the nerve to execute it, could bankrupt every financial firm that survived the initial crisis.Should earnings falter and banks stumble for a second time in the face of a looming $3.4 trillion commercial mortgage problem, the entire U.S. stock market could follow suit.That would be the crisis we’ve been predicting. Better be prepared.

MM CAJuly 31st, 2009 at 8:51 am

May-June joblessness up in 90% of metro areasWHERE ARE THE JOBS?WASHINGTON — More than 90% of the nation’s largest metropolitan areas saw their unemployment rates climb in June from the previous month.Some of the biggest increases hit college towns, where the annual summertime exodus of students causes bars, restaurants and other businesses to cut staff. The Detroit area, hit hard by manufacturing layoffs tied to the beleaguered auto industry, also got stung in June.Unemployment rates rose from May to June in 348 of more than 370 metro areas, according to an Associated Press analysis of Labor Department data released Wednesday.The figures aren’t adjusted to account for seasonal trends, such as lifeguards hired during summer or retail clerks let go after the holiday shopping season. So they tend to be volatile from month to month.The Labor Department does not provide seasonally adjusted metro area unemployment data. It does adjust the national unemployment rate for seasonal factors. The U.S. jobless rate, which hit 9.5% in June, is expected to rise to 9.7% when the department reports the July rate next week.FIND MORE STORIES IN: AlabamaTuscaloosa, Ala., home to the University of Alabama, suffered the biggest monthly increase in unemployment from May to June. Its jobless rate jumped to 12.5% in June, up 3.8 percentage points.Michigan’s metro area of Detroit-Warren-Livonia posted the second-biggest monthly gain. The unemployment rate there climbed to 17.1%, a gain of 2.2 percentage points.Pocatello, site of Idaho State University, saw the third-biggest monthly rise. The metro area’s unemployment rate rose to 7.8% in June, up 2 percentage points from May.Next were Laredo, Texas, home of Laredo Community College, with a June jobless rate of 9.4%; Lafayette, Ind., which includes Purdue University, with a rate of 10.5%; and McAllen-Edinburg-Mission, Texas, at 11.1%. Each saw its unemployment rate rise 1.7 percentage points from May.When the unemployment data is seasonally adjusted and viewed over the past year, all 372 of the largest metro areas saw their unemployment rates move higher in June for the sixth month in a row, the Labor Department said.Kokomo, Ind., suffered the biggest over-the-year gain in unemployment. Its rate rose to 19.2% in June, an increase of 11.8 percentage points from June 2008. Elkhart-Goshen had the second-largest gain. Its jobless rate of 16.8% was up 10 percentage points from last year. Monroe, Mich., the third-biggest gainer, registered an unemployment rate of 17.1% in June, up 8.6 percentage points from a year ago.Other big over-the-month gainers were: Gadsden, Ala., which includes Gadsden State Community College among other schools. The unemployment rate there rose to 11.1% in June.Alexandria, La., saw its unemployment rate rise 7.5%. And the jobless rate in College Station-Bryan, Texas, home to Texas A&M, rose to 6.5%. All three areas suffered month-to-month increases of 1.6 percentage points.Seven metro areas saw their jobless rates hold steady from May to June. One of them was Yuma, Ariz., whose steady unemployment rate was probably cold comfort: It remained at 23.1%, second-highest in the country.Other metro areas whose unemployment rates didn’t budge last month: Portsmouth, N.H., at 5.7%; Asheville, N.C., at 9.2; Cleveland-Elyria-Mentor in Ohio, at 10.1%; Sioux Fall, S.D., at 4.7% (tied for the fourth-lowest in the nation); Danville, Va., at 12.8%; and Spokane, Wash., at 8.9%.And 18 metro areas saw their unemployment rates drop from May. One was El Centro, Calif., which still laid claim to the highest unemployment rate in the country in June: 27.5%. That was down from 28.7% in May. (Unemployment there is notoriously high because of many seasonal farm workers without jobs.)Another: Indiana’s Elkhart-Goshen, which has been pounded by layoffs in the RV industry. Its jobless rate dropped to 16.8% in June, from 17.5% in May. The unemployment rate in Wenatchee-East Wenatchee, Wash., fell to 7.7%, and in Yakima, it dropped to 8.2%.http://www.usatoday.com/money/economy/employment/2009-07-29-joblessness-up-in-90-percent-of-metros_N.htm

GuestJuly 31st, 2009 at 8:55 am

Ben Bernanke Was Incredibly, Uncannily WrongWritten by LiburneWednesday, 29 July 2009 18:29Ludwig von Mises InstituteWe now have the diametrical opposite of the famous “Peter Schiff Was Right” video (a compilation of 2006 and 2007 clips in which Schiff, a financial expert who subscribes to Austrian economics, predicted the deep recession that would follow the bursting of the housing bubble).The new, opposite video is a compilation of the 2005-2007 prognostications of Federal Reserve Chairman Ben Bernanke. In it, Bernanke is shown to have been just as embarrassingly wrong as Schiff was uncannily right.Bernanke Was Horribly WrongCould their differences in economic understanding have anything to do with this remarkable dichotomy? I have transcribed most of the video, and offer my own comments interspersed with it.July 2005INTERVIEWER: Ben, there’s been a lot of talk about a housing bubble, particularly, you know [inaudible] from all sorts of places. Can you give us your view as to whether or not there is a housing bubble out there?BERNANKE: Well, unquestionably, housing prices are up quite a bit; I think it’s important to note that fundamentals are also very strong. We’ve got a growing economy, jobs, incomes. We’ve got very low mortgage rates. We’ve got demographics supporting housing growth. We’ve got restricted supply in some places. So it’s certainly understandable that prices would go up some. I don’t know whether prices are exactly where they should be, but I think it’s fair to say that much of what’s happened is supported by the strength of the economy.This is not only wrong in hindsight; it’s a complete misunderstanding of the issue. Bernanke said that the housing boom was fine because it was supported by, among other things, growth in jobs, incomes, and in the economy in general. But that very growth itself was supported by the housing boom! For example, most of the job growth was in the housing sector. Witness Bernanke’s amazing levitating economy: its housing sector is held up by economic growth, which is held up by its housing sector. And it’s just as ridiculous that he denied the existence of a housing bubble by pointing to low mortgage rates. The low rates were a chief cause of the housing bubble, and were a direct result of his actions as Federal Reserve chairman.July 2005INTERVIEWER: Tell me, what is the worst-case scenario? Sir, we have so many economists coming on our air and saying, “Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.” Some say it could even cause a recession at some point. What is the worst-case scenario, if in fact we were to see prices come down substantially across the country?BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don’t think it’s going to drive the economy too far from its full employment path, though.As Peter Schiff pointed out in his speech “Why the Meltdown Should Have Surprised No One,” while it is true that up until the housing crash, house prices hadn’t gone down on a nationwide basis, it’s also true that they had never risen so precipitously before either. Bernanke’s argument is akin to getting someone drunk for the first time, putting them in a car, and then saying, “He’ll be fine; he’s never been in a car accident before.”That interview continued:INTERVIEWER: So would you agree with Alan Greenspan’s comments recently that we’ve got some areas of that country that are seeing froth, not necessarily a national situation, but certainly froth in some areas?BERNANKE: You can see some types of speculation: investors turning over condos quickly. Those sorts of things you see in some local areas. I’m hopeful – I’m confident, in fact, that the bank regulators will pay close attention to the kinds of loans that are being made, and make sure that underwriting is done right. But I do think this is mostly a localized problem, and not something that’s going to affect the national economy.Bernanke’s Fed itself created the false signals that led to vast disruptions in the housing market. Speculators try to see through those disruptions and anticipate how prices will change as valuation mistakes are corrected in order to profit from them. In fact, their speculation is part of the correction process. If their speculation is on the mark, it speeds up the price-correction process. If it’s wrong, then the consequences are on their heads. Speculation is nothing but high-uncertainty entrepreneurship; and entrepreneurship is how optimal prices are found and markets clear. It was the Fed under Bernanke himself, and his predecessor Alan Greenspan, that created the price disruption and high uncertainty that made speculation profitable in the first place.November 2006BERNANKE: This scenario envisions that consumer spending, supported by rising incomes and the recent decline in energy prices, will continue to grow near its trend rate and that the drag on the economy from the [inaudible] housing sector will gradually diminish. The motor vehicles sector may already be showing signs of strengthening. After having cut production significantly in recent months, in response to the rise in inventory of unsold vehicles, automakers appear to have boosted the assembly rate a bit in November, and they have scheduled further increases for December. The effects of the housing correction on real economic activity are likely to persist into next year, as I’ve already noted. But the rate of decline in home construction should slow as the inventory of unsold new homes is gradually worked down.Here we have the Keynesian fallacy (which I have written about here) that consumer spending, in and of itself, creates general increases in wealth. And note the irony in Bernanke applauding the boost in automotive production: the products accumulated during that boost turned out just to be more malinvestment to be liquidated or bailed out when Chrysler and GM collapsed.February 2007BERNANKE: We expect moderate growth going forward. We believe that if the housing sector begins to stabilize, and if some of the inventory corrections still going on in manufacturing begin to be completed, that there’s a reasonable possibility that we’ll see some strengthening in the economy sometime during the middle of the new year.Our assessment is that there’s not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy. And the lending side of that still seems to be healthy.For Bernanke, healthy lending is the same thing as “a lot of lending.” This dovetails with his statement in the first interview, hailing low mortgage rates as a self-evidently good thing. He has no conception of an equilibrium interest rate determined by society’s average time preference, so bubbles will always surprise him. For more on this calamitous gap in Bernanke’s understanding, see “Manipulating the Interest Rate: a Recipe for Disaster” by Thorsten Polleit.July 2007BERNANKE: The pace of home sales seems likely to remain sluggish for a time, partly as a result of some tightening in lending standards, and the recent increase in mortgage interest rates. Sales should ultimately be supported by growth in income and employment, as well as by mortgage rates that, despite the recent increase, remain fairly low relative to historical norms. However, even if demand stabilizes as we expect, the pace of construction will probably fall somewhat further, as builders work down the stocks of unsold new homes. Thus, declines in residential construction will likely continue to weigh on economic growth in coming quarters, although the magnitude of the drag on growth should diminish over time. The global economy continues to be strong, supported by solid economic growth abroad. U.S. exports should expand further in coming quarters. Overall, the U.S. economy seems likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy’s underlying trend.Strengthening in 2008? Perhaps the biggest confirmation ever of Rockwell’s Law: always believe the opposite of what government officials tell you.Bernanke’s own words, in light of how the crisis developed, are a testament to much more than his own personal failings as a forecaster and policy maker. They demonstrate the complete inadequacy of mainstream macroeconomics in its present state, devoid as it is of the essential insights of the Austrian School. They also reveal the folly of the very idea of giving a single man and his institution the power to centrally plan the most important price in the economy: the rate of interest. Make no mistake: the present economic crisis was brought on by central planning. It is unsettling to think that the fellow in the new video who so badly misread an economy on the brink is arguably the most powerful central planner in the world.But even the most powerful and sequestered bureaucrat is not completely invulnerable. The Federal Reserve Transparency Act and the End the Fed movement have ruffled the Fed’s feathers enough that Bernanke actually felt the need to address the public in a “townhall forum” to be broadcast on the News Hour. According to NPR,after the forum was over, a Fed employee passed out souvenirs, an unintended metaphor perhaps for what some fear Bernanke’s aggressive policies may eventually do to the currency: shredded cash.The Fed employee, who apparently suffers from a defective sense of irony, was even recorded saying, “Here, you want money?” and, “Here’s some free shred folks, thanks for coming by, we appreciate it,”No, no, thank you and your boss, Mr. Fed employee. Within the space of days, we’ve been provided, courtesy of the Fed itself, with footage that perfectly distills the complete failure of Fed forecasting and planning, and audio that encapsulates splendidly the only thing that the Fed actually accomplishes: the destruction of money.

FEDupJuly 31st, 2009 at 9:14 am

Bernanke’s “townhall forum” was simply a PR campaign to convince us that he is “very concerned about the recovery and mad at the bankers” while ignoring the fact that his dept has control over monetary policy and bank regulation! Could no one ask the question “how in the world was it possible considering you have access to unlimited resources in managing the economy that this catastrophe occurred right under your and your predecessor’s nose! This is like a doctor checking a person’s ears while they are having a heart attack. The only conclusion one can draw is they wanted this to occur or they are the most incompetent people on the planet.

MM CAJuly 31st, 2009 at 11:28 am

It’s Obvious reading this timeline of Bernanke’s thinking that he has no clue. His predictions/thoughts for the most part are proved wrong within a year or two. How can anyone trust what they say? It may be also that all of it is so complex that no one can figure it out. And that an approach of “lets see if this works” is how they proceed. I’ll never forget what Greenspan said last year, and the was ” the brightest and best economists will always be 60% wrong on any economic subject or strategy”.

GuestJuly 31st, 2009 at 12:27 pm

Greenspan ought to know! However, I can’t help but think that his public display of fallibility and humility, simply hid a more sinister agenda. And that isn’t meant to suggest that I completely agree with the FED bashing that comes from the political right.Am I being too cynical?

GuestJuly 31st, 2009 at 1:58 pm

The problem with Greenspan was not that he didn’t know what he was doing. The problem was he knew what he was doing and he did it anyway.And nothing has changed since Greenspan.

Ungrateful Peon aka GuestJuly 31st, 2009 at 2:38 pm

That’s the way that I see it. Consequently my cynicism isn’t completely misplaced.

ChignosJuly 31st, 2009 at 11:11 pm

Right ……. and remember, Greenspan is John Paulson’s adviser—-it’s Greenspan’s only current employment. John Paulson’s hedge fund has made $huge shorting this market the last few years.Houston, we have a problem.

ChignosJuly 31st, 2009 at 11:14 pm

Oh, and I forgot ……. Greenspan has additional support from his wife, still employed ……..”Andrea Mitchell, NBC News…..”

GirafJuly 31st, 2009 at 8:57 am

I just did a bit of math on the back of an envelope. The combination of a -6.4% A/R (the revised number)in the first quarter and -1.0% A/R in the second quarter I believe equates to -5.4% (the original number) in 1Q09 and a decline of 1.9% in 2Q09.Wonder if any fudging was done to make 2Q look better?

The AlarmistJuly 31st, 2009 at 9:16 am

Isn’t the revised combo (-6.4% & -1.0%) worse overall? If they would fudge, they’d at least hold the overall figure for H1 constant, or am I giving them too much credit.

GirafJuly 31st, 2009 at 9:54 am

I created the -1.9% number by establishing what was needed to have an end GDP number the same as the outcome of -6.4% and -1% combo. I made an error in my post though. THe previous estimate for 1Q was -5.5% not -5.4%.

The AlarmistJuly 31st, 2009 at 11:45 am

Mea Culpa, since I accepted your numbers without independent verification. Guess that qualifies me to be a journalist.

MM CAJuly 31st, 2009 at 11:36 am

Every economic trend on any segment is down 10-30%. Every number put anywhere has been negative. CC delinquinies up to 10%, House values down 30-50%, Unemployment up to 10% or more. Auto sales down 35%, housing starts down 70%, Stock market down 37% still, Foreclusres rising, Income and sales tax revenues down 10-30% depending on state, Same with FED/IRS, it goes on and on. Without the stimulus money, bailout money for Banks, autos, etc and the Fed printing- GDP would be down at least 10% or more. It’s all smoke and mirrors. They also went back in this quarters GDP number and revised the calculation used to determine GDP going back over 10 years. i wonder it the math changes were done to make GDP goign forward look better as number, especially after the realistic number of neg 6.4% came out for first quarter.Btoom line as our economy shrinks, they will tell us it is growing!

GuestJuly 31st, 2009 at 9:23 am

NATIONAL INCOME AND PRODUCT ACCOUNTSGROSS DOMESTIC PRODUCT: SECOND QUARTER 2009 (ADVANCE ESTIMATE)COMPREHENSIVE REVISION: 1929 THROUGH FIRST QUARTER 2009Real gross domestic product — the output of goods and services produced by labor and propertylocated in the United States — decreased at an annual rate of 1.0 percent in the second quarter of 2009,(that is, from the first quarter to the second), according to the “advance” estimate released by the Bureauof Economic Analysis. In the first quarter, real GDP decreased 6.4 percent.The Bureau emphasized that the second-quarter advance estimate released today is based onsource data that are incomplete or subject to further revision by the source agency (see the box on page3). The “second” estimate for the second quarter, based on more complete data, will be released onAugust 27, 2009.______________The decrease in real GDP in the second quarter primarily reflected negative contributions fromnonresidential fixed investment, personal consumption expenditures (PCE), residential fixed investment,private inventory investment, and exports that were partly offset by positive contributions from federalgovernment spending and state and local government spending. Imports, which are a subtraction in thecalculation of GDP, decreased.The much smaller decrease in real GDP in the second quarter than in the first primarily reflectedmuch smaller decreases in nonresidential fixed investment, in exports, and in private inventoryinvestment, upturns in federal government spending and in state and local government spending, and asmaller decrease in residential fixed investment that were partly offset by a much smaller decrease inimports and a downturn in PCE.Motor vehicle output added 0.20 percentage point to the second-quarter change in real GDP aftersubtracting 1.69 percentage points from the first-quarter change. Final sales of computers subtracted0.04 percentage point from the second-quarter change in real GDP after adding 0.06 percentage point tothe first-quarter change.The price index for gross domestic purchases, which measures prices paid by U.S. residents,increased 0.7 percent in the second quarter, in contrast to a decrease of 1.4 percent in the first.Excluding food and energy prices, the price index for gross domestic purchases increased 1.1 percent inthe second quarter, compared with an increase of 0.2 percent in the first.Real personal consumption expenditures decreased 1.2 percent in the second quarter, in contrastto an increase of 0.6 percent in the first. Durable goods decreased 7.1 percent, in contrast to an increaseof 3.9 percent. Nondurable goods decreased 2.5 percent, in contrast to an increase of 1.9 percent.Services increased 0.1 percent, in contrast to a decrease of 0.3 percent.Real nonresidential fixed investment decreased 8.9 percent in the second quarter, compared witha decrease of 39.2 percent in the first. Nonresidential structures decreased 8.9 percent, compared with adecrease of 43.6 percent. Equipment and software decreased 9.0 percent, compared with a decrease of36.4 percent. Real residential fixed investment decreased 29.3 percent, compared with a decrease of38.2 percent.Real exports of goods and services decreased 7.0 percent in the second quarter, compared with adecrease of 29.9 percent in the first. Real imports of goods and services decreased 15.1 percent,compared with a decrease of 36.4 percent.Real federal government consumption expenditures and gross investment increased 10.9 percentin the second quarter, in contrast to a decrease of 4.3 percent in the first. National defense increased13.3 percent, in contrast to a decrease of 5.1 percent. Nondefense increased 6.0 percent, in contrast to adecrease of 2.5 percent. Real state and local government consumption expenditures and grossinvestment increased 2.4 percent, in contrast to a decrease of 1.5 percent.The change in real private inventories subtracted 0.83 percentage point from the second-quarterchange in real GDP after subtracting 2.36 percentage points from the first-quarter change. Privatebusinesses decreased inventories $141.1 billion in the second quarter, following decreases of $113.9billion in the first quarter and of $37.4 billion in the fourth.Real final sales of domestic product — GDP less change in private inventories — decreased 0.2percent in the second quarter, compared with a decrease of 4.1 percent in the first.Gross domestic purchasesReal gross domestic purchases — purchases by U.S. residents of goods and services whereverproduced — decreased 2.3 percent in the second quarter, compared with a decrease of 8.6 percent in thefirst.Disposition of personal incomeCurrent-dollar personal income increased $8.0 billion (0.3 percent) in the second quarter, incontrast to a decrease of $251.7 billion (8.0 percent) in the first.Personal current taxes decreased $113.1 billion in the second quarter, compared with a decreaseof $241.7 billion in the first.Disposable personal income increased $121.1 billion (4.6 percent) in the second quarter, incontrast to a decrease of $9.9 billion (0.4 percent) in the first. Real disposable personal incomeincreased 3.2 percent, compared with an increase of 1.1 percent.Personal outlays decreased $18.1 billion (0.7 percent) in the second quarter, compared with adecrease of $27.6 billion (1.1 percent) in the first. Personal saving — disposable personal income lesspersonal outlays — was $566.0 billion in the second quarter, compared with $426.9 billion in the first.The personal saving rate — saving as a percentage of disposable personal income — was 5.2 percent inthe second quarter, compared with 4.0 percent in the first. For a comparison of personal saving inBEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flowof funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-Frb.asp.Current-dollar GDPCurrent-dollar GDP — the market value of the nation’s output of goods and services — decreased0.8 percent, or $28.2 billion, in the second quarter to a level of $14,149.8 billion. In the first quarter,current-dollar GDP decreased 4.6 percent, or $169.3 billion.

MM CAJuly 31st, 2009 at 11:38 am

Every economic trend on any segment is down 10-30%. Every number put anywhere has been negative. CC delinquinies up to 10%, House values down 30-50%, Unemployment up to 10% or more. Auto sales down 35%, housing starts down 70%, Stock market down 37% still, Foreclusres rising, Income and sales tax revenues down 10-30% depending on state, Same with FED/IRS, it goes on and on. Without the stimulus money, bailout money for Banks, autos, etc and the Fed printing- GDP would be down at least 10% or more. It’s all smoke and mirrors. They also went back in this quarters GDP number and revised the calculation used to determine GDP going back over 10 years. I wonder it the math changes were done to make GDP goign forward look better as number, especially after the realistic number of neg 6.4% came out for first quarter.Bottom line as our economy shrinks, they will tell us it is growing!

wethepeepsJuly 31st, 2009 at 10:43 am

Federal spending up 11%! Hey where’d they get the money? From us that’s who, since they don’t have any. And guess what?…It is debt, that we have to pay back with interest…who gets the interest? How long can we fool ourselves?

Mother of GodJuly 31st, 2009 at 11:29 am

This machine called unlimited personal fortunes capitalism is building pressure (needle already well into the red and still rising) and no installation of the required relief valve is even being talked about. The pressure will increase until the machine blows. Machine blows = our children will bear the brunt of the pressure until finally they cannot but repudiate the debt bequeathed to them as actually always having been completely without legitimacy.

FEDupJuly 31st, 2009 at 12:35 pm

agree. They have been planning every imaginable untapped method to squeeze more money out of us in the form of fees, taxes, tolls, etc.Any normal private business would have been bankrupt and replaced years ago but not our irresponsible govt leaders; they just keep printing money and find more creative ways to pass on the debt. People must take action!

Ignatz HerrimanJuly 31st, 2009 at 10:55 am

Two articles in today’s NY Times front page caught my attention. The juxtaposition is shocking to me. What kind of society do we really live in?Bankers Reaped Lavish Bonuses During Bailoutshttp://www.nytimes.com/2009/07/31/business/31pay.html?_r=1&hp“At Goldman Sachs, for example, bonuses of more than $1 million went to 953 traders and bankers, and Morgan Stanley awarded seven-figure bonuses to 428 employees. Even at weaker banks like Citigroup and Bank of America, million-dollar awards were distributed to hundreds of workers.”“The report suggests that those roughly 5,000 people — a small subset of the industry — accounted for more than $5 billion in bonuses. At Goldman, just 200 people collectively were paid nearly $1 billion in total, and at Morgan Stanley, $577 million was shared by 101 people.All told, the bonus pools at the nine banks that received bailout money was $32.6 billion, while those banks lost $81 billion.”What exactly is it that these people MAKE, produce that is worth this kind of money?Living in Tents, and by the Rules, Under a Bridgehttp://www.nytimes.com/2009/07/31/us/31land.html?hpw”80 or so people living in tents on a spit of state land beside the dusky Providence River: Camp Runamuck, no certain address, downtown Providence.”

GuestJuly 31st, 2009 at 1:06 pm

How ‘ya gonna deep ’em down on the farm, after they’ve seen New York?… A one-way ticket out?Staten Island Real-Time NewsBreaking local news from Staten Island, NYNew York City offers free airfare to homeless to leave city by Associated PressJuly 29, 2009NEW YORK — Paris? Orlando? San Juan? New York City is buying one-way plane tickets for homeless families to leave the city.It’s part of a Bloomberg administration program to keep the homeless out of the expensive shelter system, which costs $36,000 a year per family. More than 550 families have left the city since 2007. All it takes is for a relative to agree to take them in.The city employs a travel agency to book one-way tickets for domestic travel and the Department of Homeless Services handles all international travel.City officials say there are no limits on where a family can be sent and families can reject the offer and stay in city shelters.So far, families have been sent to 24 states and 5 continents, mostly to Puerto Rico, Florida, Georgia, and the Carolinas.City officials say none of the relocated families have returned to city shelters…http://www.silive.com/news/index.ssf/2009/07/new_york_city_offers_free_airf.htmlSing it again, Nora…”How Ya Gonna Keep ‘Em Down on the Farm (After They’ve Seen Paree)?” (Nora Bayes, 1919)http://www.youtube.com/watch?v=UgqVCJpRqWQReuben, Reuben, I’ve been thinkingSaid his wifey dearNow that all is peaceful and calmThe boys will soon be back on the farmMister Reuben started winking and slowly rubbed his chinHe pulled his chair up close to motherAnd he asked her with a grinHow ya gonna keep ’em down on the farmAfter they’ve seen Paree’How ya gonna keep ’em away from BroadwayJazzin around and paintin’ the townHow ya gonna keep ’em away from harm, that’s a mysteryThey’ll never want to see a rake or plowAnd who the deuce can parleyvous a cow?How ya gonna keep ’em down on the farmAfter they’ve seen Paree’Rueben, Rueben, you’re mistakenSaid his wifey dearOnce a farmer, always a jayAnd farmers always stick to the hayMother Reuben, I’m not fakinTho you may think it strangeBut wine and women play the mischiefWith a boy who’s loose with changeHow ya gonna keep ’em down on the farmAfter they’ve seen Paree’How ya gonna keep ’em away from BroadwayJazzin around and paintin’ the townHow ya gonna keep ’em away from harm, that’s a mysteryImagine Reuben when he meets his PaHe’ll kiss his cheek and holler “OO-LA-LA!How ya gonna keep ’em down on the farmAfter they’ve seen Paree’?

GuestJuly 31st, 2009 at 11:37 am

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS – FLASH UPDATE – July 31, 2009GDP Shows Most Severe Recession Since Great DepressionSecond-Quarter GDP Annual Contraction Was Worst EverRecession Is Not EndingAnnual Durable Goods Plunge Continued In Great Depression TerritoryBroad Money Growth Still Slowing – Nouriel, you been calling deflation for a year now and it’s looking like it even though Williams still thinks inflation, it may end up deflation!Here are the numbers for 2009 so far:Estimates of ongoing M3 monthly level.(e) Estimated. (r) Revised. Monthly Average Level $ Trillions, Seasonally AdjustedYear____ Month____ M1 (r)____ M2 (r)____ M3 (r, e)2009____Jan____ 1.576____ 8.236____ 14.5092009____ Feb____ 1.560____ 8.263____ 14.5222009____ Mar____ 1.563____ 8.335____ 14.532009____ Apr____ 1.593____ 8.282____ 14.512009____ May____ 1.597____ 8.345____ 14.6692009____ Jun____ 1.650____ 8.370____ 14.680

GuestJuly 31st, 2009 at 2:07 pm

Grow up. You’re an unhelpful one-sided recording. Just as true if not more is that republicans lay waste to lives and countries by refusing to collect equitable taxes from the richest – even while waging optional, unnecessary wars that cost trillions.

GuestJuly 31st, 2009 at 2:40 pm

you are a moron and grow up. when GOP was in control/waste money, then i criticize them. now Democrats is in control/waste money, then i criticize democrats. grow up, democrats is in control now and should be fiscally responsible.

farnorth5July 31st, 2009 at 9:19 pm

Sorry,but it,s not mathematicely possible for the Feds to be fiscally responsible,no matter who is in Office.The Reasons? Two Mainly :1/ The costs of two wars,not budgeted for.2/ The increased Interest on the National Debt, run up first by the Republicans this past 8 years and now by the Democrats because of the negative outcome from the lack of Debt Management this past 10 Years ,the resulting “DEBT CRASH”,plus requiring huge bailouts of the Economy and the Banks.There is NO PARTY or individual who would dare suggest a balanced Federal Budget for 2010..

GuestJuly 31st, 2009 at 3:08 pm

I know you love Rush Limbaugh, Sweetie, I can just tell, so let me pass along his latest economic tidbit (paraphrased)::As the Media rings in recovery, as Obama officially presides over the death of recession, as GDP declines but one percent, as all the Fed’s whistles and bells signal green shoots ahead, it all boils down to this: Things are getting worse, better than expected!That’s happy days are here again or my name’s not Turnip. Your man’s in Sweetie. Be happy!!!

GuestJuly 31st, 2009 at 3:27 pm

15:08, if you’re talking to 14:07, See the writings of Larry Pinkney at Blackcommentator dot com if you want to know what I ACTually think of Obama – as opposed to what you baselessly assERT about me.

GuestJuly 31st, 2009 at 4:32 pm

Well, I agree with the BC article on Israel’s capability to do the militarily “unthinkable,” such as attacking Iran, but, I confess, I wholeheartedly disagree with the conclusion that the negative reactions of “these white Senators” who questioned Sotomayer’s “wise Latina woman” statement “reveal much about them and the inequitable racial status quo they represent and of which they are guardians,” in “White Men Can Jump–to Conclusion,” written by the Rev. William E. Alberts, PhD. And I question the fairness of the quote:“She dared to compare “a wise Latina woman” favorably with “a white male.”Or the quote:“I know I got it made while the masses of black people are catchin’ hell, but as long as they aren’t free, I’m not free.” –Muhammad Ali.Ali’s quote seems to correlate with Michelle Obama’s as she walked into the White House hand-in-hand with Barack, the former U.S. Senator from Illinois, after leaving her $300,000 a year pr job, and with her two beautiful children dancing by her side:“For the first time in my adult life I am proud of my country.”And then there was the quote:“Theses malcontents yearn for the day when people of color were relegated to captive labor, or migrant labor, out of sight and out of mind and nothing more”…in the article “Color of Law: Blacks and Latinos Hit Harder in Hard Times” by Dr. David A. Love, JD?That’s as far as I got today with BlackCommentator.com. But it looks as if America is in for hard times ahead, whatever one’s party affiliation. And I take it back, happy days aren’t here again, and may never be again.Thanks for sharing.

GuestJuly 31st, 2009 at 2:32 pm

obama is dropping like a rock, from a two-foot pedestal>>>Conservatives Now Outnumber Liberals Almost Two to One in America, According to Washington Post PollFriday, July 24, 2009By Terence P. Jeffrey, Editor-in-ChiefCNSNews.com) – Americans who consider themselves conservatives now outnumber Americans who consider themselves liberal by almost two to one, according to a new poll by the Washington Post and ABC News.In the poll of 1,001 adults conducted between July 15-18, respondents were asked: “Would you say your views on most political matters are liberal, moderate, or conservative?”Thirty-eight percent said they were conservative, while only 20% said they were liberal. Thirty-nine percent, meanwhile, said they were moderate.The percentage of self-described conservatives has increased since President Barack Obama was inaugurated in January and the percentage of self-described liberals has diminished. A Washington Post poll conducted in mid-January, shortly before the inauguration, showed 32% saying they were conservative, 24% saying they were liberal and 42% saying they were moderates.http://www.cnsnews.com/public/content/article.aspx?RsrcID=51551

FEDupJuly 31st, 2009 at 3:36 pm

Both Dems and Reps are responsible for selling out the country to lobbyists and corporate interests while letting the Federal Reserve and regulators go into a deep sleep or coma while they rape and pillage hard working Americans and future generations. We have taken their bait of accepting a 2 party system that plays good guy/bad guy each election cycle and allowed them to divide and now conquer us. Wake up the system is corrupt!

GuestJuly 31st, 2009 at 7:25 pm

but i thought Obama is our Savior? He cant be corrupted and wasting taxpayer money and lying to American people?

The AlarmistAugust 3rd, 2009 at 2:36 am

You are kidding, right? Big Auto finally met its match in this crew, and is being taken apart piece by piece and fed to the union and environmental interests.

John BAugust 1st, 2009 at 8:25 pm

Your post is nonsense.The person who published the chart wrote: “I believe this (2009) is a unique event that will likely correlate closely to none of our past recessions.”

blindmanJuly 31st, 2009 at 4:08 pm

Clap Hands LyricsArtist(Band):Tom WaitsReview The Song (0).Sane, sane, they’re all insane,fireman’s blind, the conductor is lameA Cincinnati jacket and a sad-luck dameHanging out the window with a bottle full of rainClap hands, clap hands, clap hands, clap handsSaid roar, roar, the thunder and the roarSon of a bitch is never coming back here no moreThe moon in the window and a bird on the poleWe can always find a millionaire to shovel all the coalClap hands, clap hands, clap hands, clap handsSaid steam, steam, a hundred bad dreamsGoing up to Harlem with a pistol in his jeansA fifty-dollar bill inside a palladin’s hatAnd nobody’s sure where Mr. Knickerbocker’s atRoar, roar, the thunder and the roarSon of a bitch is never coming back here no moreMoon in the window and a bird on the poleCan always find a millionaire to shovel all the coalClap hands, clap hands, clap hands, clap handsI said steam, steam, a hundred bad dreamsGoing up to Harlem with a pistol in his jeansA fifty-dollar bill inside a palladin’s hatAnd nobody’s sure where Mr. Knickerbocker’s atShine, shine, a Roosevelt dimeAll the way to Baltimore and running out of timeSalvation Army seemed to wind up in the holeThey all went to heaven in a little row boatClap hands, clap hands, clap hands, clap handsClap hands, clap hands, clap hands, clap handsClap hands, clap hands, clap hands, clap hands.http://www.casttv.com/video/9emd7e/clap-hands-tom-waits-video.at the bar, barbara once said to camille … “you dance with him,i’ll get the money.” she wuz just jokin’ but you get the point.

GuestJuly 31st, 2009 at 4:49 pm

Now this is ECON 2010…THE “MONEY ON THE SIDELINES” Fallacy | Tyler Durden | Zero Hedge 07/31/2009It seems these days any time a pundit is cornered by facts indicating the deplorable state of the economy, the traditional fall back is “…but the tons of money on the sidelines is just waiting for a 0.003% pullback to pour back in.”It makes sense to consider this argument.I present Exhibit A: a chart of the Net Wealth of US Households. This is defined as the total amount outstanding in U.S. money market Funds and the total market cap of U.S. listed stock. All else being equal, one can see why the administration is so concerned with the market decline impact on the psychology of the U.S. consumer: confidence is the name of the game. Net Wealth declined from a peak of $22 trillion to just under $12 trillion in early March, and now, compliments of the bear market rally, has bounced higher to $15.4 trillion, a 30% decline from the peak.Of course, and much more troubling, is that “all else” is nowhere close to being equal. When considering consumer wealth, one also has to look at the right side of the balance sheet, and as the Fed’s Flow of Funds Report indicates, consumer debt has not budged, and has stayed essentially flat as the equity market: the key component of consumer wealth has gotten decimated.(Exhibit B: Total Household Debt:)Alas it does not follow the chart in Exhibit A, not even closely. So the question is: what has been the bottom line impact on household “equity”: i.e., taking the debt component of balance sheet and superimposing it vis-a-vis net wealth. The result is scary.(Exhibit C: Household Equity.)From the end of 2007 through Q1 of 2009, household equity has declined by 94%. Is it surprising that today’s GDP number would have been a complete debacle if the consumer had been left alone to prop the U.S. economy, on whom 70% of the economy is reliant? Obama pulled a Hail Mary with the stimulus: without it there would be no debate America is in a depression right now. The only remaining question is how long can Congress and Senate extend such Subsidy programs as Cash for Clunkers before the rest of the world throws up in America’s protectionist face.But back to the money on the sidelines.(Exhibit D indicates the historical progression of the market cap of U.S. listed stocks versus money held in Money Market accounts)…What becomes immediately obvious is that the positive correlation between equities and money markets was purely driven as a result of cheap leverage. As households used up their rapidly “appreciating” homes as HELOC-based piggy banks, they invested in the market, only to see that capital get destroyed while putting more and more cash away in safe (well, safe only until a global run on money market accounts occurs, such as the one that was barely avoided on September 19th of 2008) places such as money markets. Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts!Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount. Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer who net equity was almost negative on March 31, could have some semblance of confidence back and would go ahead and max out his credit card.Alas, as one can see in the money multiplier and velocity of money metrics, U.S. consumers couldn’t care less about leveraging themselves any more.The truth is that money market accounts, which currently hold about $3.6 trillion dollars, will not decline much more, as this is the only perceived safe haven for U.S. household capital. The U.S. consumer has seen how volatile the equity market is and is unwilling to transfer substantial amounts of capital from safe to risky investment vehicles. The fact that household equity has declined by 94% is also a very critical concern. And, even if Money Market accounts get depleted and all capital moves to stocks, it is obvious that without Federal backing the market will never even get back to 2007 levels purely as a function of capital flows.The only motive the households would have to invest more freely in the markets is if their underlying debt were to decline. And as the Z.1 indicates it has been flat at $13 trillion for over 2 years now. Of course, banks would have no interest in taking impairments on household debt as that would mean their balance sheets are solidly capitalized – a lie that is being perpetuated by the likes of the GAAP, the FDIC, the regulators and the Federal Reserve. So while U.S. consumers and U.S. banks are stuck in this vicious loop, it is foolish to make any judgments that the money on the sidelines will spark any additional rallies.If pundits wish to find out where any new equity buying interest will come from, they need to look at the same place that was responsible for the market move over the past 4 months – the New York Federal Reserve.http://www.zerohedge.com/article/money-sidelines-fallacy

GuestJuly 31st, 2009 at 5:18 pm

Congress gets tough! After helping Hank and Larry and Ben, and Timmy and Jimmy, and Greenberg and Friedman steal the bacon, Congress discovers Crime. When does this farce end? (As if Congress ever read any letters, anyway–or answered the phone.)FIRM FORGED LETTERS TO LAWMAKER ON CLIMATE BILL:Firm forged letters from NAACP, Latino group to lawmaker on climate billJuly 31, 2009 — A Washington grassroots lobbying firm has acknowledged forging anti-climate bill letters purporting to be from a local NAACP chapter and a Latino advocacy group to a Virginia lawmaker, and a congressional committee said it was launching an investigation.The office of freshman Democratic Rep. Tom Perriello discovered that a half-dozen letters it received had nearly identical language signed by a made-up person at Creciendo Juntos, the Latino group, and five fake members of the Albemarle-Charlottesville branch of the NAACP. The lobbying firm, Bonner & Associates, apologized to the groups.The firm blamed the faked letters on a temporary employee who, it says, has been fired.But one of the climate bill’s primary sponsors, Rep. Ed Markey, D-Mass., said Friday that his Select Committee on Energy Independence and Global Warming would investigate the matter.”This fraud on Congress shows that some opponents of clean energy have resorted to forgery and theft to block progress,” Markey said in a statement, calling it “an appalling abuse.”The letters, which were sent before the House narrowly passed the legislation last month, say, “please don’t vote to force cost increases on us, especially in this volatile economy,” and urge Perriello to make pro-consumer changes to the bill “to protect minorities” from energy cost increases. Perriello voted for the bill, and Republicans have been hammering him for it ever since…In an e-mail to The Associated Press Friday, Bonner & Associates’

ChignosJuly 31st, 2009 at 11:38 pm

Well, I guess it’s tit-for-tat. Markey foists the global warming hoax on Congress and a tiny little employee of the NAACP forges anti-climate letters. Another proof-positive that the world has excess capacity.

GuestJuly 31st, 2009 at 10:26 pm

Well, it’s clear Dr. Roubini accidentally has left us “at home alone” again to fend for ourselves this weekend and is off the trodden track scouting for economic numbers somewhere in Nauru or Andora, having left his cell phone back at camp with the St. Bernard.. .So, next best thing, I ran across these references to him in random comments today regarding David’s Market and Data Musings. It’s sort of like being at a Friday night party at the Tribeca Grill. (No mutterings please.) Hope Zero Hedge doesn’t mind the gatecrashing…_____________________________________________“The 700x P/E Bull Market” | Zero Hedge | Tyler Durden/ 7/31/02Much was made of Rosenberg “turning the corner” on the recession. Alas, like in the Roubini case, somewhat misunderstood. From Rosie’ morning piece: “It is amazing that anyone would go long an equity market with a reported P/E multiple of 700x but that is indeed what we have on our hands.”From David’s Market and Data Musings this morning:”It is amazing that anyone would go long an equity market with a reported P/E multiple of 700x but that is indeed what we have on our hands. The end of the recession and the onset of a sustainable recovery, as we saw in 2002, are not the same thing. So this could still end badly but we will await confirmation signs that this is more than a very flashy bear market rally before shifting gears. As we said in our Tea session yesterday, the cost of missing out on the first leg of a bull market, between the lows in the major averages and the lows in employment, is 20% — the price to pay to sleep at night. If we are late, and we do not intend on being too late or staying excessively bearish, we will know once the most important component of the business cycle, the engine that keeps the motor turned on, otherwise known as employment, begins to turn around on a discernible basis. We shall wait for that event, then make up our minds, and if this is the real deal, which at this time seems unlikely in the context of an ongoing credit contraction, then we will at least have 80% of the bull market to participate in … that is, if historical experience can be used as a guide.”Show me the dividend!”The dividend yield on the S&P 500 has declined nearly 100 basis points since March, to 2¾%. At one time, the yield was at a premium to the 10-year Treasury note, but no longer. Not only that, but what is depressing the dividend yield isn’t just due to the market price appreciation but also owing to the fact that S&P 500 dividend payments have plunged 32% from a year ago (according to Howard Silverblatt at S&P) — the worst July since 2002. So far this year S&P 500 dividend payouts have declined $29.5 billion and on track to drop $61.5 billion for the year.”Sundry comments:_______________by Anonymouson Fri, 07/31/2009 – 10:43#20649the issue, as with Roubini, is that Rosie too missed this rally – to suggest now that things are now overdone offers little solace to the few/many who bought into their ongoing bearish predictions throughout March, April, May, June and July.____________________________________________by Ags Nightmareon Fri, 07/31/2009 – 10:54#20662Don’t forget to justify the 700 PE the market is “discounting” GDP growth of 10 % for eternity, full employment for everyone, a cash for clunkers eternal extension, making homes less affordable programs opening up to Goldman executives, and a corporate repreive for reporting the truth for the unforeseable future.To think IP and Alcoa were 5 bucks four months ago. What the heck was the market “discounting’ at 666 ?Now cnbs is dangling the carrot in front of joe six pack who sold at the lows to put whats left of their decimated account balances from March into the Tony Dow Jones so the now exclusive Wall Street mafia families can unload the bloated stocks and get short.________________________________________________________by Ags Nightmareon Fri, 07/31/2009 – 11:07#20681Anon, I don’t think there are many bears left. Several bears I have followed for years have flipped and gone to the bull camp months ago because of the money printing and those who are bearish can see this is the same bubble pattern as the prior two. We are in the “F you pay me” mode where they are forcing the sheeple to buy high. We have 30 minute bear markets.When the Fed chair pins short term rates at zero and says they ain’t moving any time soon and joe six pack is getting negative returns in cash while their hair dresser just made 40 % in two weeks in CAT they are enticing the greater fools to buy a 50% rally into a horrific economic backdrop.The devil channel actually said they are “waiting” for the retail “investors” to get back in. Same old sheet and its gonna end badly once again. This market is more dysfunctional then the Osbourne’s.____________by speculatoron Fri, 07/31/2009 – 11:38#20743Exactly. All that matters is the bottom line. Charlie Munger says that whenever you hear “operating earnings” you should translate that in your mind to “bullshit earnings.”When you read about bear market PEs well under 10 in the 1930s and 1970s, that was on net earnings (as reported). You can also bet that accounting was a little tougher in those days, so those were real earnings. The propagandists want you to compare today’s operating earnings multiple to those old figures.______________________by cougar_won Fri, 07/31/2009 – 12:02#20789Reading Roubini, he always says the same thing: The economy is a mess, fundamentals are hosed, the recovery will be late in coming and slow when it arrives. That said, yes you can find sound investments in such an economy. You can find sound investments in the middle of a global catastrophe, too. That’s not the point. The point is, the economy is cooked. Investing is not about the economy, it’s not what feeds people, it’s not what pours tax revenues into the treasury. Investing does not maintain the peace.Everyone is all in a twist about their investments. Well guess what, your global economy is imploded. The last time this happened on any scale we entered a 20 year period of global conflict that bracketed the near oibliteration of European industry and culture and introduced the world to Facism.So yeah, may be a good time to worry what’s coming 18 months down the road, but I’m not worried about the yield as much as the scale of the violence.Cougar______________________________________________________by Anonymouson Fri, 07/31/2009 – 12:36#20827They wisely are keeping their eyes on the big picture and not worrying about a forced short covering bear market bounce in the dying days of America.I suggest you do the same.The few/many who bought into the truth are always going to appreciate the truth, and if they feel like daytrading this bounce or just sitting aside then so be it.___________________________________________________by Anonymouson Fri, 07/31/2009 – 13:28#20886Some really good posts. Cougar_W and Speculator are correct about Roubini, he is not a trader. Roubini is actually just predicting what the data posted on Calculated Risk shows is coming our way. GDP can be manipulated by government spending. But when railroad traffic is down 18% and truck traffic is down by 18% then the actual economic activity ( business) that pays for the way we live is really closer to being down 18% also. The government does not have enough money to prop up the economy much longer. Roubini has said that he thinks we are in danger of a double dip W recession in 2010 or 2011. Robert Prechter and Glen Neeley have predicted another big leg down in the second half of 2009. So it is just like the bubble that burst in late 2007, we know what is coming, but predicting the exact time is not possible. Too many people in the government using too much of our money to forestall the inevitable to be able to predict exactly I think.___________________________by Anonymouson Fri, 07/31/2009 – 13:35#20895not traders agreed – I think someone (Roubini) once said something to the effect that an economic forecast without a market forecast was for amateur hour — in other words why do we read / watch them??__________________http://www.zerohedge.com/article/700x-pe-bull-marketThat’s all folks. This was just a trailer.

GuestAugust 1st, 2009 at 12:32 am

Obama, Pelosi, and Democrats no moral or ethic or integrity or character. plus lie/steal from hard working America people via taxation. they are no different from BUSH.http://globaleconomicanalysis.blogspot.com/2009/07/free-money-runs-out-congress-authorizes.html“I have noticed that dealers uped their prices to account for the $4,500. I know this since I went down to a Dodge Challenger dealers with my old old pontiac to see what would happen. I would get the clunker money but had to pay list and they low-balled any trade in on my junk (which internet research put at $2,500 or better). “

GuestAugust 1st, 2009 at 6:51 am

Of course. Did you really think you were going to get the entire $4,500? I would bet most people are lucky to walk away with $500 of the subsidy after all the smoke-and-mirrors tricks of the car dealers.

kilgoresAugust 1st, 2009 at 10:09 am

Taxation is not theft. It is part of your civic duty to pay taxes so that everyone can enjoy the benefits of public works and public services. There is no government in the world that does not require revenues to function. If we’re going to have a government, we all have to pay for it. Personally, I am not in favor of anarchy.SWK

GSMAugust 1st, 2009 at 2:58 am

It’s important to join the dots. Here are a few.1)This rally has seen the biggest ratios of Insider Selling since 2001.2)Many S&P companies already reported have beat (ridiculously low )earnings estimates fueling this bear market rally. This was achieved through massive cost cutting, more than anticipated.3) Mass Layoffs.http://www.examiner.com/x-6012-State-of-the-World-Examiner~y2009m7d28-Massive-Layoffs?cid=examiner-emailMASS LAYOFFS”The Bureau of Labor Statistics publishes another statistic: mass layoffs. A mass layoff is defined as one company that fires 50 or more people at one time.A mass layoff indicates panic in senior management. This means doing without a lot of workers. It is not a normal occurrence. Here is the BLS report for July 23: “Mass Layoffs in June 2009.”Employers took 2,763 mass layoff actions in June that resulted in the separation of 279,231 workers, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Each action involved at least 50 persons from a single employer. . . .Over the year, the number of mass layoff events increased by 1,046, and associated initial claims increased by 104,483.That means that a year ago, the number of mass layoffs was at 1,717. It rose to 2,763.The report also provided information regarding the extent of these mass layoffs since the official beginning of the recession in December 2007.During the 19 months from December 2007 through June 2009, the total number of mass layoff events (seasonally adjusted) was 39,822, and the number of initial claims filed (seasonally adjusted) in those events was 4,090,538. (December 2007 was designated as the start of a recession by the National Bureau of Economic Research.)If we divide the total number of mass layoff events of 39,822 by 19 months, we get an average monthly figure of 2,095. June’s was 2,763. The media tend not to report on this figure. It is limited to large firms. Most firms cannot fire 50 people. They do not employ 50 people.Most new jobs are created by small businesses. Large firms employ lots of people, but these are long-term jobs. So, when people lose their jobs at large, established firms, they are forced to look for work in comparable firms if they want to keep their pay level. The problem is, mass layoffs are hitting in unprecedented numbers. The comparable jobs are not available.The job-seeker must set his sights lower. He aims lower in terms of pay and seniority, because he will be entering the labor market in the “just getting started” segment. These jobs are not secure. They tend not to pay as well as established jobs in large companies.Mass layoffs are career-disrupting. People who had hoped to keep a job in an established company that offers health care benefits and a retirement program now find that they have lost their health care insurance, and their pension money is insufficient to offer them any hope for retirement.”This last dot is not what the MSM and our Ministry of Truth officials would have us connect. So Its important that we do.

MM CAAugust 1st, 2009 at 9:28 am

The largest 5000 companies account for 17% of the jobs. Gov’t and state jobs account for about 13% of the jobs. the other 70% of jobs are created by SMALL business. AS GSM states SMALL business is almost never required to file WARN notices, they just go away overnight. Small business feeds the the large companies wiht what they need to make thier obscene profits. As small business goes away, so too will the larger Companies,albiet slowly and hanging on to every last cent of profit. Just yesterday it was reported that 1% of the tax returns that are filed are over over 400K. This is not 1% of the population (3Million) it is 1% of those that tax returns a numbser far less than 3 Million. Most small business file taxes on thier personal returns. One could conclude that with where all the money has gone (big banks and large companies)that a lot more SMALL business will continue to go away. SMALL business cannot borrow anything these days. Personal Credit lines have been shut down or greatly reduced, the Big financials are not lending to SMALL buisness, Home equity lines and Buisness lines of credit which SMALL business rely on have dried up. They PTB have set it up where they are wringing every last penny from 99% of AVERGAGE JOE AMERICANS and if you do want anything or do need anyhting you are going to ahve to figure out how pay for it and pay a big price for it. another words work harder, work longer and do it for less just to keep what you have.Folks, the engine of what has been our economy, which is manufacturing and making things has been outsourced or dismantled. All that is left are service type of jobs for 10.00 an hour for most AVERAGE JOE AMERICANS. Even the govt and STATE jobs are now going through dramatic WAGE REDUCTIONS and bebefit losses that will last forever.If you think working for Walmart at 8-13.00 an hour and where they give you some sort of crap health plan that you have to contribute 2-3.00 an hour of your wages to, is a solution for prosperity for anyone and thier family, think again. If they Shut walmart tommorrow, there would be tremndous small business growth and job creation and it would be a start to fixing things.Everyone (PTP, Economists, Obama, etc.) the past 6 months as blown smoke at AVERAGE JOE AMERICAN and thinks and may even have some AJM, convinced that the unemployment numbers should’nt matter or that things will and are getting better in spite of it. Even economists like Roubini are spewing that message. They are ignoring the JOB DESTRUCTION that has occured and that is still occuring and will continue to occur. And the sad thing is people are beliving it, at least those still working.It is simialr to when someone knows they have to deal with a problem, like the unfunded liabilty of 50 Trillion for medicare, that they delay and delay and dont worry about it now and enjoy the good times now, totally naive or uncaring to the fact the clock is ticking and the piper will have to get paid at some time. That time is coming faster than any of the PTB and Wall Street care to admit or acknowledge. What are they goign to do when 35 million are U6 at end of 2010, 40 million are U6 at end of 2011, 50 million are U6 in 2014. That is what is coming. They have no clue and for right now will take and hoard as much as they can until then and then hope they can buy the protection they need.It’s all about making and manufacuring goods and JOBS. And right now there are NO JOBS and there will be millions more with NO JOBS!

GuestAugust 1st, 2009 at 9:34 am

News from Reggie Middleton’s Boom Bust BlogNewsletterCredit shrinkage will continue throughout the recession and into the recovery (by Reggie Middleton, published Friday, 31 July 2009 00:00)The credit bust will be long lasting, and will harshly effect companies without strong business models – which is a lot more companies than many think due to the fact that a credit bubble has kept so many on life support. See Marginal companies with marginal business models are going to crack for my take on this.Last month’s BIS Annual Report states “Aggregate statistics show a sharp slowdown in the growth of credit to the private sector starting late in the first stage of the crisis.” The delay in credit restriction was misleading to many and masks the full effect or credit restriction. The time lag stemmed from 1) forced balance sheet expansion due to off-balance sheet vehicle re-intermediation; 2) draw down of existing credit lines at favorable conditions by borrowers (these favorable conditions, and as a matter of fact the actual credit lines, are no longer availabe). The mounting and prospective losses that I have detailed in The Re-Release of the Open Source Mortgage Default Model and Green Shoots are Being Fertilized by Brown Turds in the Mortgage Markets outline (just in residential real estate lending, notwithstanding all other classes of lending) just how much more restrictive credit can get.

GuestAugust 1st, 2009 at 3:02 pm

How do Wal-Mart policies differ from Target’s or Big K-Mart’s, MM CA? According to a NY Times article, Wal-Mart’s average hourly rate for full-time employees was $10.83 in January: “Wal-Mart says that its average wage, $10.83 an hour for full-time workers, are competitive in the retailing industry, and that its health plans are accessible to a wider range of workers than those of some of its rivals.”http://www.nytimes.com/2009/01/25/business/25walmart.html?_r=2&pagewanted=3&hpWikiAnswers.com says: At Target, at least in my store, the Team Members start off at $7.50. Specialists make $8.50 and Team Leaders make $10.50.http://wiki.answers.com/Q/Target_pay_rateAlso, Wal-Mart currently pays more for employee health benefits than Target, according to a spokesman at CATO Institute.Looking through NEWSMEAT’s Campaign Contribution Search, Robert Ulrich, who retired from Target in January after 12 years as CEO, made the following political contributions starting in 1986 to 4/28/09:$222,053… Republican$8,140… Democrat$2,100… Independent$78,246… special interesttotal: $310,539His “Power Rank” is 379 in Newsmeat’s Hall of Fame for Business Executives.As to the retail giant’s selection of 52-year-old CEO Gregg Steinhafel to replace Ulrich, Forbes says, “a straight-talking, fair-haired Midwesterner who grew up in retail – his family owns Steinhafel’s Furniture in Milwaukee – hardly a surprise choice. The two have worked together since 1984, when Ulrich came to Target and Steinhafel was a toy merchant there. Target watchers say he has been groomed for the job for years; a $6 million restricted stock grant in 2006 hinted at what was coming. “We’ve worked together for such a long time that we almost can finish each other’s sentences,” Steinhafel says.http://money.cnn.com/2008/01/09/news/companies/target.fortune/index.htmssAccording to Forbes, Steinhafel’s latest total compensation was $12.93 mil. based on Aprl. 10, 2008 stock prices. He ranks #136 on the Forbes CEO Compensation list.Incidentally, Mervyns was acquired by the Dayton Hudson Corporation (now Target Corporation) in 1978 and sold in 2004. . Mervyns sued its former owner Target and the private-equity firms the retailer sold the chain to for more than $1 billion in 2008. Mervyn’s management claims that the complicated deal gave those firms its owned real estate, which was then sold and leased back to the retailer at higher rates, forcing bankruptcy.globestcounterculture.wordpress.com/…/is-mervyn’-fate-target’s-fault/All this to say, MM CA, I don’t know why you say “Walmart is the most predatory company in the US.” If it is, surely Target and K-Mart are close on its heels.

MM CAAugust 2nd, 2009 at 9:47 am

@Guest- They dont differ much. But Walmart sets the palying rules and eveyrone either follows them or Walmart crsuhes them. Target and Sears/Kmart are hanging on by a thread, esepcially Sears. Sears used to be a good company, they had no issue with small mom and pop local business, like hardware and appliance stores. Target tried selling better products but could’nt compete with the imported crap Walmart sells. I’ve dealt with Walmart in real buisness and they well beat you to a pulp about pricing. if you do business with them youa re sure to end up out fo business eventually. We walked away when we wouldnt meet their price.Target, Macys, Sears, Bst buy, etc… they are all needed and i wish they had a chance to survive long term. they dont run thier Business like Walmart. Walmart has a big fat Bulls Eye on Best Buy.See below why walmart has so much power. their revenue is more than every other retail chain combined in the Fortune 500. The rest are living off the scaps Walmart lets them eat- for now!first number is revenue in Billions. Second number is profit in BillionsWal-Mart Stores 405,607/ 13,400Target 64,948/ 2,214Sears Holdings 46,770/ 53

MM CAAugust 1st, 2009 at 9:44 am

July 31, 2009Not one mention of the dollar by Schiff, just the facts and pure reality.Happy Days Aren’t Here AgainBy Peter SchiffHave you heard the great news? The recession is over! It’s true; I saw it on TV. Why fret about growing unemployment lines when banks are paying big-time bonuses again?Proof of the turn was apparently revealed by the 2nd quarter GDP figures that showed that the economy declined by only 1%. After four consecutive quarters of negative GDP, the green shoots now assume that growth will resume over the summer. But before we pop the corks, it may be worthwhile to ask, “what really has changed, and what is responsible for our new lease on life?”In truth, because of the continued profligacy of the government and Federal Reserve, the imbalances that caused the current recession have actually worsened. We are now in an even deeper hole than when the crisis began. Rather than wrapping up a recession, we are actually sinking into a depression. If things look better now, it’s just because we are in the eye of the storm.We must remember that recessions inevitably follow periods of artificial growth. During these booms, malinvestments are made which ultimately must be liquidated during the ensuing busts. In short, mistakes made during booms are corrected during busts – and in the recent boom we made some real whoppers. We borrowed and spent too much money, bought goods we couldn’t afford, built houses we couldn’t carry, and developed a service sector economy completely dependent on consumer credit and rising asset prices. All the while, we allowed our industrial base to crumble and our infrastructure to decay.In order to lay the foundation for real and lasting recovery, market forces must be allowed to repair the damage. However, current policy is counterproductive to this end. Trillions in stimulus dollars have kept the party going, but now what? How does deficit spending by the government address the problems that brought about the crash? It doesn’t; it just delays and worsens the hangover – and we have to hope we don’t die of alcohol poisoning.By interfering with the unpleasant forces of the recession, we simply trade short-term gain for long-term pain. By propping up inefficient companies that should fail, we deprive more effective companies of the capital they need to grow. By holding up over-valued asset prices, we prevent the prudent or less well-off from snatching them up and, in doing so, creating a new price equilibrium based upon reality. By maintaining artificially low interest rates, we discourage the very savings that are so critical to capital formation and future economic growth. In addition, the false economic signals the Fed sends the market prevent a more efficient re-allocation of resources from taking place and leads to even more bad economic decision being made. By running such huge deficits, we further crowd-out private enterprise by making it harder for businesses to invest or hire.The recently passed “cash for clunkers” program (currently on-hold, as it ran out of funding in one week) is a perfect example of how government policy can make the economy worse. By incentivizing Americans to destroy fully paid-for cars so they can go deeper into debt buying brand new ones, the government weakens an already crippled economy. The last thing we want to do is subsidize Americans to go deeper into debt by buying more stuff. Don’t they realize that is precisely the behavior that got us into this mess?Think about it this way. If your friend were in trouble because he had too much debt, would you encourage him to take on even more? Wouldn’t a real sign of progress be a reduction of debt, even if he had to cut back on his everyday expenses? What is true for an individual is also true for a collection of individuals, even if they call themselves a ‘government.’ If, as a country, we are even deeper into debt now than we were before, we are worse off. Period. The fact that the additional debt enabled better short-term GDP numbers is a long-term negative.Since we have learned nothing from past mistakes, we are condemned to repeat them. As if we have not already suffered enough as a consequence of the Bush/Greenspan stimulus, Obama/Bernanke are giving ever larger doses, which will prove lethal to any recovery. The recession is over; long live the depression!

SoftwarengineerAugust 1st, 2009 at 4:19 pm

ITS LIKE THAT MOVIE ABOUT THE CRUISE SHIP THAT CAP-SIZEDMSM told most passengers to go down to the top of the ship; so that when it righted itself again, they’d be saved.A few smart survivors ignored MSM and went up instead, to the ship’s bottom hull, where rescuers torched a hole and they were saved. Then the ship sank to the bottom without righting itself and destroyed those who listened to MSM, the depression.

MM CAAugust 1st, 2009 at 9:48 am

and who really thinks this is not spreading everywhere?California’s Mortgage default rate soars to 9.5%Delinquencies in June are up sharply from a year ago, when 6% of borrowers were behind on their loans.By Peter Y. HongJuly 31, 2009About 1 in 10 Californians with a home loan is now in default, and there’s growing evidence that the mortgage meltdown is spreading to commercial real estate.The home mortgage delinquency rate — the percentage of borrowers who have missed several payments and are in the first stage of foreclosure — climbed in June to 9.5% in California and 9.9% in Los Angeles County, according to First American CoreLogic.The staggering number of home mortgage defaults probably will lead to large numbers of foreclosures through at least this year, housing experts say.”It’s probably a given we’ll see a high number of foreclosures in the next couple of quarters due to the level of defaults plus the recession and jobs lost. There’s plenty more pain to come,” said Andrew LePage, an analyst for real estate research firm MDA DataQuick of San Diego.Mortgage defaults are more likely to result in foreclosure when borrowers owe more on their homes than they are currently worth — commonly called being “upside down” or “underwater” in industry lingo.That’s the case for many in California who bought homes during the real estate bubble, often with little or even no money down.When distressed borrowers have equity, they often can sell the property to cover the outstanding mortgage. For upside-down borrowers, that’s usually not an option.In recent months, about 60% of California mortgages in default ended up foreclosed, LePage said.Foreclosures should pick up even more now that various government moratoriums and voluntary foreclosure freezes by lenders have expired.But LePage said the rate of foreclosures may not reach the record level set last year if lenders increase loan modifications or approve more “short sales,” in which homes are sold for less than their mortgage amounts.The mortgage delinquency rate in June was up sharply from a year ago, when 6% of California mortgages were delinquent and 5.2% in Los Angeles County were in default.In May 2009, the state default rate was 9.2% and the Los Angeles County rate was 9.5%, according to First American CoreLogic.At the same time, the California Mortgage Bankers Assn. reported a surge in the number of commercial real estate loans in default. The total number of delinquent commercial loans remains small — only 14 of 6,497 loans in the statewide survey — but industry analysts say more defaults are on the way.Low interest rates are enabling many commercial borrowers to stay current on loans, but that’s certain to change if rates rise, and a high percentage of office, retail and apartment buildings are already underwater.”There’s no question we’re going to see more commercial properties end up in restructuring; the question is how much,” said Dan Fasulo, managing director of Real Capital Analytics, a New York research firm.Fasulo said lenders are trying to avoid foreclosures on commercial properties partly because they don’t want to take on properties they would have trouble selling.”They’re saying, ‘If we foreclose now, what are we going to do with it?’ This is the worst market to sell property in modern times.”Lenders have been making allowances to upside-down borrowers, hoping to keep from foreclosing long enough for commercial real estate values to recover, Fasulo said. There’s now a popular street term for the practice, he said: “extend and pretend”http://www.reuters.com/article/businessNews/idUSTRE56U14F20090731?feedType=RSS&feedName=businessNews

MM CAAugust 1st, 2009 at 9:56 am

you are the president you and your advisors are suppsoed to know.. It is toal BS to say you didnt know. If I and other knew what was happening, what is coming how can you not. Stop playing AVERAGE JOE AMERICAN with all your fancy rhetoric and use of of words like “it was deeper than we thought before we took office”. stop blaming the past. you are not going to limp into the 2012 electiosn still blaming the problems on Bush or anyone. It’s your f..king problem now and right now your fixes are BS and not working. They are in fact making things worse. So Mr. Obama where exactly are the JOBS going to come from? There are NO JOBS That I can see?Obama Says U.S. Has ‘Many More Months’ Before Full RecoveryBy Nicholas JohnstonAug. 1 (Bloomberg) — President Barack Obama said it will take “many more months” for the U.S. to fully recover from the recession as employers continue to shed jobs.The president said in his weekly address on the radio and the Internet that yesterday’s government report on the gross domestic product showed the recession was “even deeper than anyone thought” when he took office in January. The stimulus legislation passed by Congress in February and measures to stem home foreclosures have helped stem the slide, he said.“Important steps that we have taken over the last six months have helped put the brakes on this recession,” Obama said. “But history shows that you need to have economic growth before you have job growth.”Obama is putting the economy back at the forefront of his remarks to the public as polls show it remains the top concern of Americans. Next week he’s heading to Elkhart, Indiana, for an event focused on his economic policies. Obama said earlier this week that the U.S. “may be seeing the beginning of the end of the recession.”The Commerce Department reported yesterday that the gross domestic product shrank at a 1 percent annual pace in the second quarter, less than forecast, after a 6.4 percent drop in the first three months of the year. The economy has lost 6.5 million jobs since the recession began in December 2007, and economists surveyed by Bloomberg this month forecast the jobless rate will exceed 10 percent by early 2010. The Labor Department is scheduled to release the July unemployment rate Aug. 7. The June rate was 9.5 percent.Jobs and Recovery“As far as I’m concerned, we will not have a recovery as long as we keep losing jobs,” Obama said. “And I won’t rest until every American who wants a job can find one.”The GDP report is a “an important sign that we’re headed in the right direction” as business investment stabilizes, which may lead to more hiring.“That’s when it will really feel like a recovery to the American people,” he said.The revised government data showed that GDP has tumbled 3.9 percent since the second quarter of last year — the biggest drop since quarterly records began in 1947. GDP has fallen four straight quarters, the longest ever.“I know that there are countless families and businesses struggling to just hang on until this storm passes,” Obama said. “But I also know that if we do the things we know we must, this storm will pass. And it will yield to a brighter day.”In a July 24-28 poll by the New York Times and CBS News, 36 percent of Americans said the economy was the most important problem facing the country. Twelve percent cited health care.Republican AddressIn the Republican address, South Dakota Senator John Thune said the party is committed to an overhaul of the U.S. health- care system while criticizing Democratic proposals for being “government-run” and too expensive.“The Democrats who control Congress have been spending money and racking up debt at an unprecedented pace,” Thune said. “Their plan for government-run health care would only make things worse.”Thune said the proposals being considered in the House and Senate would cost more then $2 trillion. The Congressional Budget Offices has estimated the Congressional proposals will cost around $1 trillion.The Republican alternative, Thune said, would let small businesses join together to buy health insurance plans for their employees, protect hospitals and doctors from lawsuits and extend tax benefits to people who don’t get insurance through their jobs.“These and other commonsense solutions would provide real reform for our health-care system rather than the dangerous and costly experiment that Democrats are proposing,” he said.

MM CAAugust 1st, 2009 at 10:00 am

The largest 5000 companies account for 17% of the jobs. Gov’t and state jobs account for about 13% of the jobs. the other 70% of jobs are created by SMALL business. AS GSM states SMALL business is almost never required to file WARN notices, they just go away overnight. Small business feeds the the large companies with what they need to make thier obscene profits. As small business goes away, so too will the larger Companies, albiet slowly and hanging on to every last cent of profit. Just yesterday it was reported that 1% of the tax returns that are filed are over over 400K. This is not 1% of the population (3Million) it is 1% of those that file tax returns, a numbser far less than 3 Million. Most small business file taxes on thier personal returns. One could conclude that with where all the money has gone (big banks and large companies)that a lot more SMALL business will continue to go away. SMALL business cannot borrow anything these days. Personal Credit lines have been shut down or greatly reduced, the Big financials/Banks are not lending to SMALL buisness, Home equity lines and Buisness lines of credit which SMALL business rely on have dried up or been shut down/cut. They PTB have set it up where they are wringing every last penny from 99% of AVERGAGE JOE AMERICANS and if you do want anything or do need anyhting you are going to ahve to figure out how pay for it and pay a big price for it. Another words work harder, work longer and do it for less just to keep what you have.Folks, the engine of what has been our economy, which is manufacturing and making things has been outsourced or dismantled. All that is left are service type of jobs for 10.00 an hour for most AVERAGE JOE AMERICANS. Even the Govt and STATE jobs are now going through dramatic WAGE REDUCTIONS and benefit losses that will last forever.If you think working for Walmart at 8-13.00 an hour and where they give you some sort of crap health plan that you have to contribute 2-3.00 an hour of your wages to, is a solution for prosperity for anyone and thier family, think again. If they Shut walmart tommorrow, there would be tremndous small business growth and job creation and it would be a start to fixing things.Everyone (PTP, Economists, Obama, etc.) the past 6 months have blown smoke at AVERAGE JOE AMERICAN and thinks and may even have some AJM, convinced, that the unemployment numbers should’nt matter or that things will and are getting better in spite of it. Even economists like Roubini are spewing that message. They are ignoring the JOB DESTRUCTION that has occured and that is still occuring and will continue to occur. And the sad thing is people are beliving it, at least those still working.It is simialr to when someone knows they have to deal with a problem, like the unfunded liabilty of 50 Trillion for medicare, that they delay and delay and dont worry about it now and enjoy the good times now, totally naive or uncaring to the fact the clock is ticking and the piper will have to get paid at some time. That time is coming faster than any of the PTB and Wall Street care to admit or acknowledge. What are they goign to do when 35 million are U6 at end of 2010, 40 million are U6 at end of 2011, 50 million are U6 in 2014. That is what is coming. They have no clue and for right now will take and hoard as much as they can until then and then hope they can buy the protection they need.It’s all about making and manufacuring goods and JOBS. And right now there are NO JOBS and there will be millions more with NO JOBS!

MM CAAugust 1st, 2009 at 10:06 am

You had better be like Walmart and back my Health insurance fix or the below is what will happen to you. Even the Banks wont f..k with Walmart…so if you are a small Biz you too better back my health care plan!Default Increase Curbs Bankruptcy Lending as Recoveries DwindleBy Richard BravoJuly 31 (Bloomberg) — Companies on the verge of bankruptcy are finding it harder and more expensive than ever to get loans to help nurse them back to health.With corporate defaults at a six-year high, so-called debtor-in-possession financings dropped to about 23 percent of businesses failing to make debt payments so far this year, the lowest since at least 2003, according to a strategist at Bank of America Merrill Lynch. Lenders are charging those entering Chapter 11 reorganization a record 7.25 percentage points over benchmark interest rates, on average, even with borrowing costs for issuers of junk-rated bonds the cheapest since September.DIP loans provide funds to continue operating normally while in Chapter 11. Less available financing will give fewer companies this option and drive more into liquidation, said Darin Schmalz, a director on the Fitch Ratings leveraged finance team in Chicago.“The playbook is changing,” said Steven Smith, global head of leveraged finance and restructuring at UBS AG in New York. “Very little new capital is flowing into restructuring and Chapter 11 reorganization right now, which is potentially a huge problem. It’s very hard to reorganize companies without new capital.”The number of businesses filing for liquidation under Chapter 7 of the bankruptcy code rose 60 percent to 30,035 last year, the most since at least 2000, according to the U.S. Courts Web site.Retailers Linens ‘n Things Inc. and Mervyns LLC said last year that they would liquidate rather than reorganize. Richmond, Virginia-based Circuit City Stores Inc. announced it would go out of business in January after seeking court protection in 2008.Leveraged LoansThe worst credit squeeze since the Great Depression has helped increase U.S. companies’ default rate on bonds to 13.2 percent for the last 12 months, the highest since it reached 16.4 percent in 2002, according to Fitch.In the leveraged loan market, the trailing 12-month U.S. default rate rose to 8.2 percent at the end of the second quarter, from 2.1 percent a year earlier, according to New York- based Moody’s Investors Service.DIP financing helps companies to move through Chapter 11 more successfully, according to a 2000 study written by Sandeep Dahiya of Georgetown University; Kose John of New York University’s Stern School of Business; Manju Puri, now at Duke University’s Fuqua School of Business in Durham, North Carolina; and Gabriel Ramirez, now with Kennesaw State University’s Coles College of Business in Georgia. Those receiving loans are likely to exit reorganization more quickly, they found.Delphi AuctionCreditors of Delphi Corp., the former General Motors Corp. car-parts unit that filed for Chapter 11 in 2005, won an auction for some of the company’s assets by bidding the value of the DIP loans they were owed. On July 30, a court approved the sale of the Troy, Michigan-based company’s assets to the lenders and the automaker.Elliott Management Corp. of New York and Greenwich, Connecticut-based Silver Point Capital LP were among investors making the so-called credit bid. Delphi owed about $3.3 billion on the three classes of its bankruptcy loan as of July 21, according to a regulatory filing.The two firms will lead a $750 million financing that will be offered through syndication to other lenders, said John Butler Jr., Delphi’s lead bankruptcy lawyer.Scott Tagliarino, a spokesman for Elliott, and Silver Point spokesman Todd Fogarty both declined to comment.CIT LoansThe DIP market may also be tested by New York-based CIT Group Inc., which received a $3 billion loan this month to stave off insolvency. The 101-year-old commercial-finance firm has $1 billion in notes maturing in August. CreditSights Inc., a New York-based debt researcher, said July 28 that the company “remains at risk” for filing bankruptcy even if a tender for the debt succeeds.The offer is “intended to provide CIT with liquidity necessary to ensure that its important base of small and middle market customers continues to have access to credit,” the company said in a July 20 statement.CIT asked owners of the notes to agree to take a loss through a debt tender. If the offer is accepted, the company may start debt-for-equity exchanges, according to a person familiar with the matter.Providers of emergency credit to the company include Boston-based hedge fund Baupost Group LLC and Pacific Investment Management Co., which oversees $842 billion in Newport Beach, California.Eaton VanceThe money managers’ decision to lend to CIT at an annual interest rate of at least 13 percent may help protect their investment in its bonds. Businesses such as Eaton Vance Corp. are competing with traditional DIP lenders, including New York- based JPMorgan Chase & Co. and Bank of America Corp. of Charlotte, North Carolina, after financial companies worldwide ran up more than $1.5 trillion in writedowns and credit losses since the start of 2007.Boston-based Eaton Vance, the largest manager of investments designed to minimize taxes, is raising $1 billion to invest in DIP loans, the firm said in May. Aladdin Capital Holdings LLC of Stamford, Connecticut, a hedge fund overseeing $15 billion, said in February that it began offering bankruptcy credit to take advantage of “massive dislocation” in the market.“You’re seeing disparate groups of hedge funds putting up competing proposals,” said UBS’s Smith. “You’re seeing more interest and a little bit more competition, which is having the impact of improving terms to the debtor.”The head of Eaton Vance’s bank-loan group, Scott Page, didn’t return a telephone call for comment. Aladdin’s vice chairman, Neal Neilinger, declined to comment.Pre-CrunchIncreased competition isn’t pushing bankruptcy-financing costs down to pre-credit crunch levels, even after yields on speculative-grade bonds relative to benchmarks fell to below “distressed” levels, or 10 percentage points, on July 23.The decline marked the narrowest spread since Sept. 25, when the collapse of Lehman Brothers Holdings Inc. led credit markets to freeze, according to Merrill Lynch & Co.’s U.S. High- Yield Master II Index. The gap was 9.33 percentage points as of yesterday.The difference between the average cost of DIP loans and benchmark interest rates so far this year compares with 5.3 percentage points in 2008, according to the Bank of America Merrill Lynch report. It never exceeded 4 percentage points before last year.Roll-UpsWhile DIP financings have reached a record $16.2 billion this year, many are so-called roll-ups of borrowings that existed before the bankruptcy filings, according to the Bank of America Merrill Lynch report by strategist Jeffrey Rosenberg.Roll-ups now account for 64 percent of total bankruptcy loans, up from 36 percent in 2008, Rosenberg wrote. Before last year, the proportion of rolled-up loans never exceeded 10 percent.Lenders seek the feature to improve their standing relative to creditors who don’t participate in a debtor-in-possession transaction, Smith said. Doing so gives them a higher priority for getting repaid, creating a new set of “winners and losers.”Lyondell Chemical Co., which filed for Chapter 11 on Jan. 6, received a record $8 billion in loans at an interest rate of 10 percentage points over the benchmark after the DIP market had “ceased to operate,” a lawyer representing the Houston-based company, Mark Ellenberg of Cadwalader, Wickersham & Taft LLP, said during a Jan. 7 bankruptcy hearing in New York, according to a transcript.40 PercentRoll-ups, including commitments from borrowers, made up about 40 percent of the bankruptcy credit, according to Mark Cohen, head of restructuring at Deutsche Bank AG in New York.Last week, Lyondell’s DIP roll-up was trading at 83.5 cents on the dollar. The portion of the DIP that wasn’t rolled up was trading at 42 cents on the dollar.Susan Moore, a spokeswoman for Lyondell, declined to comment.DIP financing may recover as credit markets begin to heal, Cohen said.Eddie Bauer Inc., a unit of the Bellevue, Washington-based retailer that filed for Chapter 11 last month, received a $100 million loan costing 4 percentage points more than the London interbank offered rate, the common benchmark for such credits, according to Bloomberg data. Banc of America Securities LLC was the lead arranger of the deal.Recovery Rates“Market pricing is coming down; new investors are coming in,” Cohen said.Still, shrinking bankruptcy financing and rising defaults pushed 12-month recovery rates, or the amount of face value an investor can expect to receive from a loan after default, to 43.9 percent in June, down from 65 percent a year earlier, according to Moody’s. The level is lower than any annual average since the ratings company began compiling the data in 1990.“Recovery values tend to drop as bank lending standards tighten,” said John Lonski, chief economist at Moody’s in New York. “If you’re a creditor and you see the value of collateral falling, you are going to tighten credit.”

GuestAugust 1st, 2009 at 6:13 pm

What? More attacks on Wal-Mart using four-letter words? Perhaps one reason Wal-Mart has become so hated in general is its refusal to directly fund abortion, as Target does.For example Wal-Mart was sued in 2006 by three women and abortion rights groups who claimed Wal-Mart denied then the abortion-causing Plan B morning contraceptive. Wal-Mart was allowing its pharmacists the right to conscientious objection to dispense the baby abortifacient and to refer customers to other pharmacies that would fill prescriptions for Plan-B.Wal-Mart subsequently changed it policy in 2007 “due to Planned Parenthood’s legal hit squads.”Now it looks as if Obama healthcare will dispense with the abortion provider problem. Obama said in a CBS evening news interview on July 21: “Let’s not get distracted” over taxpayer-funded abortion coverage in healthcare.According to LifeSiteNews yesterday, a “House pro-abortion health amendment has passed in the Energy and Commerce Committee: Passage in the Committee is the final hurdle before the bill faces scrutiny by the full House.http://www.lifesitenews.com/ldn/2009/jul/09073103.htmlWASHINGTON, D.C., July 31, 2009 (LifeSiteNews.com) – A pro-abortion amendment proposed as a “common ground” amendment was voted into the House version of President Obama’s healthcare overhaul by the Energy and Commerce Committee late Thursday, while a pro-life amendment achieved brief approval before it was struck down again hours later.“A vote change by Blue Dog Democrat Rep. Bart Gordon of Tennessee caused the amendment to fail 29-30. Conservative Democrat Rep. Zack Space of Ohio also voted “no” after abstaining for the first vote…”California Democrat Lois Capps, whose voting record was rated 100% pro-abortion by NARAL, introduced the faux “common ground” amendment that, while appearing to prohibit the abortion mandate in the healthcare overhaul, actually calls for the public plan to cover abortions and mandates that at least one abortion-covering plan be available in every U.S. region. The amendment was passed 30-28…The vote leaves the Capps “compromise” amendment to dictate the bill’s requirements on abortion funding and coverage…(Target is described as a “major donor to Planned Parenthood for many years.”)

GuestAugust 2nd, 2009 at 12:11 pm

Abortion is one of the most divisive political issues in the country, even though it’s often pushed below the radar by politicians who don’t want to have to take a stand. Its relation to business is immense because of the boycotting by family groups of businesses that are abortion sympathizers and by the support from feminist groups.The target Wal-Mart friction has increased in recent years over family value disputes concerning videos, abortion funding, and most notably, the celebration of Christmas. Target unwisely ordered Salvation Army kettles off its property, following Macy’s lead in pretending we all celebrate the December holiday as a “Believe” in Santa Claus movement.Perhaps as a family value decision but also as a tremendous business decision, Wal-Mart stepped into the breach with Christmas trees, and a “Merry Christmas” greeting from cashiers who wished to give it. At last count, Macy’s grudgingly surrendered its ban and started mentioning Christmas, albeit in small print.Bottom line, family values, including positions on pornography and abortion and Christmas, pro and con, are major business decisions.

GuestAugust 1st, 2009 at 6:27 pm

but crazy Obama said we dont need manufacture jobs. he said we need green energy and high paid job like doctors and nurses and higher paid education paid job by merit. seems to me, he is saying, if you lost job and want future better paid jobs, then get into those fields. are you saying Obama, Pelosi, and rest of Democrats are lying to American people?

GuestAugust 1st, 2009 at 6:05 pm

Obama said “The GDP report is a ‘an important sign that we’re headed in the right direction'”? this crazy Obama lie like Bush (Bush says economy “basically sound”). GDP shows private spending is decimated and Obama’s NEW DEAL is expanding wasteful spending, future debt, and future tax rate.

The AlarmistAugust 3rd, 2009 at 2:50 am

The economy was “basically sound” until they scared the crap out of everyone last year just before the election, and then everyone stopped borrowing and spending, and so of course it all unwinds. We could have gone on a few more years (til 2017) before most people noticed there was a real problem in the economy, which is what we would be facing in any event once the boomers started downsizing their houses and cashing in their 401k’s to fund their golden years.Everyone loves a Ponzi scheme until they actually try to realise their gains.

FEDupAugust 1st, 2009 at 10:46 am

A SOLUTION to the real problem:Too often people blame our problems on one party over another. Yet it seems we have been arguing about healthcare, social security, taxes, jobs, corporate influence, etc. forever. The only major beneficiary no matter which party is in control has been the financial elite: their purchasing power and quality of life has increased exponentially while mainstream Americans have been left in the dust. Yet our govt leaders can’t seem to get it right no matter who is President or which party controls the House or Senate. Essentially what we have is 2 giant good ole boy’s club who simply pander to the interests of lobbyists, while making false promises to Americans by keeping them off balance and confused. What other explanation is there when my dear sister who has similar values as I do votes for the opposing party? We can’t both be wrong or both be idiots, can we? My answer is YES, we are both wrong and we are both idiots because who or what we vote for is NEVER what it appears to be: there are always loopholes and special clauses which allow those “in the know” to exploit. Both party’s main purpose is to put on an academy award winning performance to convince the public they are working for us so they can remain in office until they grab as much wealth and power as they can. So….how we stop it? What we really need to do is to bring FULL transparency, accountability and control over our leaders. One way of doing this which has been suggested before would be to run 50 experiments in democracy (1 in each state) instead of 1 experiment every 4-8 years. Each state should be allowed to “start from scratch” and re-design it’s own system with one caveat: decisions are made via every person’s vote without lobbyists or corporate funding. Scientists run 1000’s of experiments to find the best solutions to problems: why do we persist in following such an irrational approach when it comes to our rights, freedoms and liberties?

GuestAugust 1st, 2009 at 11:08 am

We must understand that it is the objective of the financial elite in both parties to keep our eyes away from the real issues and parroting party slogans. The population is polarized and totally confused. This allows the lobbyists to divide the spoils of both deregulation and government expenditures.The fruits of the corruption of government have become the most lucrative business in the world.This has an immediate collateral effect of creating innefficiency. Corruption and Innefficiency are now the result of this game.Some will parrot the Republican line and some will parrot the Democratic line. This is exactly where they want us. DIVIDE, CONQUER AND PROFIT.Democracy that is financed by political contributions can reach a toxic level of corruption that may be irreversible, because the corporate media is bought and paid for. We are slowly creeping towards a condition where destitution will be so pervasive that violence will ensue. What comes out of such disgusting scenario is not good for anybody. Break away from party politics and slogans. Join with people with polar oppossite views and try to find a common denominator that is creating the dystopian present we are living. Use the potential of true participatory democracy, and try to understand all views. Love your neighbor as you love yourself. Our society has to be more introspective about what is good for society as a whole.

Ungrateful PeonAugust 1st, 2009 at 1:59 pm

Well said!Peons either collectively figure out what is in their own collective best interest and participate in the process of reclaiming civility and general financial well-being, or the financial industry / Corporate America will continue looting real economies and concentrating power.

GuestAugust 1st, 2009 at 7:48 pm

Speaking of beneficiaries…!Obama heathcare is an economic issue. It will have a huge impact on both Wall Street and Main Street–for corporations, for providers of care and insurance and pharmaceuticals, for small businesses, and of course, for users and the taxpayers who have to foot the bill.There are more people involved here than just a doctor, a nurse and a patient. And all of them are in there with their elbows on the table. Compassion, when using someone else’s money, knows no bounds in Congress. They ask about the elderly, they ask about the indigent, they ask about the uninsured with preconditions, the illegals, the psychotic, the disparities… Well, what about the taxpayer? Do they ask about him? No! If you have a job you’re going to be paying for all this stuff.This is economics!Talk about central planning. There is a two-year recession going on, and Obama is planning to spend (tax) big time. Big healthcare is a huge economic decision, and all the pressure groups have arrived to use healthcare for their own social target.This is what goes wrong when the government handles the economy, when other people and politicians manage your economic life for you. They bring in their own biases, their own social targets. When you let a Goldman Sachs make your decisions for you, they make decisions that will benefit them, that they care about. That’s what’s wrong with having someone else handle your life for you, particularly when they not only are not smart, but are self-serving, working for their own ends, not yours.Adam Smith in “The Wealth of Nations” used the metaphor of the Invisible Hand to explain that if each consumer is allowed to choose freely what he wants to buy and each producer is allowed to choose freely what he wants to sell and how to produce it, then the market will settle on a product distribution and prices that are beneficial to all the individual members of a community, and hence to the community as a whole, to quote Wikipedia.Said Smith: “”It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”That’s what built America’s economy.But Smith also said: “”I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents.”And economist Joseph Stiglitz said: “Whenever there are “externalities”—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well.And that is what is destroying America.“”The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money,” said Smith. And may I add to that, “and until the day that pressure groups control the hand that feeds them, the U.S. Congress.”

GuestAugust 1st, 2009 at 4:58 pm

come to think of, if you let those too big to fail to fail and then break them up into smaller pieces, then we will not have to deal with too big to fail again. but Obama, Pelosi, Geithner, and Bernanke did the opposite, they made too big to fail even bigger to fail, oh boy.

GuestAugust 1st, 2009 at 5:00 pm

if these too bigger to fail step into risk spectrum and screw up again, then we will be back to square one again -> creating much bigger to fail.

GuestAugust 1st, 2009 at 5:09 pm

solution is not more Obama+Cracy regulation. the solution is you need to let the company fail when their risky bet destroy themselves regardless of the size.

DisasterUSAugust 1st, 2009 at 10:21 pm

What seems obvious to you and me never occurs in the minds of the “elite” realm of politics & finance.

GuestAugust 1st, 2009 at 10:15 pm

You know, maybe middle class Americans are not so dumb after all…Patrick Wojtowicz’s family decided to transform their lives when his paycheck began to shrink last year. A truck driver, he was spending more time on the road, paying his own expenses while waiting for loads. He disliked being away from home for weeks at a time and worried about losing his job. Melissa Wojtowicz is self-employed and works from home.Their dual paychecks allowed them to live comfortably, but they weren’t satisfied, Patrick says. “We would basically buy stuff to feel good,” he says. “When that stuff stopped filling the voids we had, we started analyzing what it was that we were really missing. We were missing being around each other.”The Wojtowiczes made a list of the things they could give up if Patrick quit his job and they relied on Melissa’s income. They already lived in a house on property Patrick inherited from his father a few years ago.Gabrielle “put up enough resistance to qualify as being a teenager,” Patrick says, but soon she was reminding her parents to turn off lights to save electricity.Steps such as that, and keeping the thermostat set on 63 degrees this winter, cut monthly electric bills from $300 to $150, Patrick says. He hunts deer and turkeys. Instead of buying books and going to movies, they visit the library weekly. For Christmas, they got canning gear so they can preserve the food they grow.“The earn, spend, earn era has come to an end for us,” he says on truenorthfound.blogspot.com, their blog. “The idea of living a fuller, more satisfying life seems simple to us now. … Money, cash, credit, maybe they don’t matter. Maybe, just maybe, it is those things that impede our ability to be truly happy.”Whatever happens to the economy, the Wojtowicz family hopes to remain self-sufficient. Instead of spending their tax refund, as they usually did, they used it to pay down debt. They stopped using credit cards and they’re trying to build up savings. “I’m working harder than ever,” Patrick says, “but it’s more satisfying work and … it’s much easier to sleep at night.”http://www.usatoday.com/news/offbeat/2009-04-14-survivalistsinside14_N.htm

GuestAugust 1st, 2009 at 10:27 pm

Well, we have to make some sacrifice in our standard of living for Goldman Sachs. We wouldn’t want them to suffer, you know, keep their thermostat at 63 degrees or get canning gear in their silk stockings for Christmas.

GuestAugust 1st, 2009 at 10:30 pm

Unruly town meetings leave Rep. Tim Bishop (D-N.Y.), Rep. Allen Boyd (D-Fla.), Rep. Thomas Perriello (D-Va.), Rep. Bruce Braley (D-Iowa), and Rep. Dan Maffei (D-N.Y.) in fear of their safety.Tim Bishop was confronted by boiling anger and rising incivility. Within an hour of the disruption, police were called in to escort the 59-year-old Democrat — who has held more than 100 town hall meetings since he was elected in 2002 — to his car safely.“I had felt they [more town meetings] would be pointless,” Rep. Tim Bishop (D-N.Y.) told POLITICO, referring to his recent decision to temporarily suspend the events in his Long Island district. “There is no point in meeting with my constituents and [to] listen to them and have them listen to you if what is basically an unruly mob prevents you from having an intelligent conversation.”Is this not delicious! Run the scallywags out of town on a pole. Ha!http://news.yahoo.com/s/politico/20090731/pl_politico/25646

GuestAugust 1st, 2009 at 11:15 pm

Sounds like the constituency has found a new way to get the attention of their “elected reps.” All those ignored phone calls and letters and past dialogues at town meetings tend to rile a fella…

GuestAugust 1st, 2009 at 11:07 pm

OBAMA’S SECRET POLICE | Government Spies Infiltrate Antiwar Movement (edited down)by Justin Raimondo | Antiwar.com July 31, 2009Well, we can relax, because the bad old days of the Bush administration, when government agencies routinely spied on the antiwar movement and other dissidents, are over — right?Wrong – very wrong.The indispensable Amy Goodman has the scoop: The Seattle Port Militarization Resistance (SPMR) group in Washington state thought their listserv coordinator, who went by the name “John Jacob,” was one of them: a dedicated antiwar activist and self-described anarchist. They trusted him, they put him in a key position, they befriended him – and then they found out that he was a government informant.His real name: John Towery. He claimed to be a civilian employee at Washington state’s Ft. Lewis: in reality, he was and is a functionary of the force protection unit, i.e. military personnel. His job: spying on the antiwar movement.Towery was “outed” when one of SPMR’s members filed a public records request in the city of Olympia for any documents, including emails, in the city’s possession that referenced communications between the city police and the military…”anything on anarchists, anarchy, anarchism, Students for a Democratic Society or the Industrial Workers of the World,” as local antiwar activist Brendan Maslauskas Dunn described it to Amy Goodman on her “Democracy Now” program. The results were startling: “I got back hundreds of documents from the city.”It was in going through this material that he and his fellow activists discovered the truth about “John Jacob”: that he was a spy sent in to keep track of antiwar activity in the area, and a member of the Force Protection Service at Ft. Lewis…[T]his incident throws the spotlight on a shadowy national network of domestic spies – in effect, Obama’s political police, who infiltrate dissident groups of whatever sort and send the information back to what are called “fusion centers,” part of the new “integrated” approach to fighting our eternal “war on terrorism” — a war that isn’t only being fought on the battlefields of Afghanistan…The national hysteria over the alleged threat of “homegrown” terrorism is being stoked to a fever pitch by the latest FBI “catch,” a rural North Carolina “terrorist cell” supposedly headed by the proprietor of the local drywall contractor — a former “soldier of fortune” who allegedly fought in Afghanistan against the Soviets by the name of Daniel Patrick Boyd (“also known as Mohammed”), and a good old boy if there ever was one…The antiwar movement is not a collection of “terrorist cells,” and yet that is precisely how the US government is dealing with them: infiltrating and spying on our organizations, planning “raids” on activist gathering places and homes, and no doubt engaging in further disruptive activities yet to be revealed. How is this possible in the land of the free?It’s possible – and, indeed, inevitable – due to the post-9/11 national security industry that grew up in the wake of 9/11. A vast bureaucracy sprang up… No expense was spared, no contractor was left behind – and the money spigot has only been opened wider now that Obama and his Keynesian advisors have decreed we must spend our way out of the economic recession…The “fusion centers” are the product of…the burgeoning Homeland Security bureaucracy in the post-9/11 era, an approach that integrates the personnel and facilities of various government agencies and pools them in designated “fusion centers.” Fusing the civilian and the military, the local cop on the beat and the national security bureaucracy…to broaden the definitional limits of the “terrorist” label to include an ever-widening array of “suspicious” activities. The antiwar movement soon came into their purview, and the rest, as they say, is history…It can’t happen here? It has happened here…President Obama is presiding over an even wider war than George W. Bush ever dreamed of, and because of that the antiwar movement is a natural target for his spy agencies…One wonders what it will take for what passes for the “left” these days to wake up…http://original.antiwar.com/justin/2009/07/30/obamas-secret-police/

GuestAugust 1st, 2009 at 11:37 pm

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS DEPRESSION SPECIAL REPORT – Number 52 – August 1, 2009Current Economic Downturn To Date Is Worst Since Great DepressionRecession Started a Year Earlier Than Official ReckoningBusiness Contraction Triggered Systemic Solvency Crisis Not the Other Way Around

GuestAugust 2nd, 2009 at 12:37 am

Although I am not a subscriber (but planning to become one) and therefore cannot read the report, this introductory comment was most enticing:Depression Special Report August 1st, 2009• The U.S. economy is in a multiple-dip depression. The grand benchmark revision of the national income accounts on July 31, 2009 confirmed that the U.S. economy is in its worst economic contraction since the first downleg of the Great Depression, which was a double-dip depression. The current economic downturn increasingly will be referred to as a depression, and it is far from over. There will be intermittent blips of new activity, such as the current cash-for-clunkers automobile giveaway program that appears to be generating a one-time spike in auto sales. Yet, this downturn will continue to deteriorate, proving to be extremely protracted, extremely deep and particularly nonresponsive to traditional stimuli.http://www.shadowstats.com/P.S. By the way, thanks.

GuestAugust 2nd, 2009 at 10:46 am

Here is the rest of the intro (by permission)…As discussed in recent writings, the economy suffers from underlying structural problems tied to consumer income, where households cannot keep up with inflation and no longer can rely on excessive debt expansion for meeting short-falls in maintaining living standards. The structural issues are not being addressed meaningfully and cannot be addressed without a significant shift in government economic and trade policies, which under the best of circumstances still would drag out economic woes for many years.The current depression likely will show multiple dips in business activity, as was seen during the Great Depression and in the double-dip recession of the early-1980s. I shall argue that the current downturn started at least a year earlier than the December 2007 onset proclaimed by the National Bureau of Economic Research (NBER), official arbiter of U.S. recessions. The current depression is the second dip in a multiple-dip downturn that started back in 1999, and it preceded and in fact was the proximal trigger for the systemic solvency crisis that rose to public view in August 2007. The ensuing systemic problems did not cause the slowdown in business activity, but they exacerbated it significantly.While the current circumstance should become recognized as a “depression,” worse lies ahead as the U.S. government’s long-range insolvency and current efforts at debasing the U.S. dollar trigger a hyperinflation in the next five years. Risks for the onset of a hyperinflation in the United States are particularly high during the next year. As will be discussed in the soon-to-be-updated Hyperinflation Special Report (see the existing April 2008 version for basic background), the United States would be particularly hard hit by such a circumstance. Unlike Zimbabwe, which has been able to maintain some level of functioning commerce during its hyperinflation, due to the backstop of an active black market in U.S. dollars, the United States has no such backstop. Accordingly, a U.S. hyperinflation likely would force cessation of regular commerce, triggering a great depression of a magnitude never before seen in the United States.

GuestAugust 2nd, 2009 at 11:57 am

Roubini is not so caught up in the world of entertaiment that he would not be honest enuogh to warn and tell us if the economy will fall into depression.recession is almost over and growth will come even if slow.

The AlarmistAugust 3rd, 2009 at 3:19 am

Yep, and the Great Depression was over in ’33 for those living in 1933 who were fortunate to still have their jobs or to not be living in the dust bowl. That didn’t save them from 1937.

Guest tooAugust 1st, 2009 at 11:57 pm

so this came up and i guess the “household” has changedsince 1955 but “some things never change”. tell me if thisdoesn’t sound like a fairly accurate description of the mentalityof one segment of the population in this country toward another moredominant one..The Good Wife’s Guide from 1955.Much like our Women in the Workplace article a few months back, this 1955 article from Housekeeping Monthly reveals just how much has changed in the household over the past few decades. Some of my personal favorites:* “Be a little gay”* “Show your sincerity in your desire to please him”* “A good wife always knows her place”http://www.yesbutnobutyes.com/archives/2009/02/the_good_wifes.html* Have dinner ready. Plan ahead, even the night before, to have a delicious meal ready, on time for his return. This is a way of letting him know that you have been thinking about him and are concerned about his needs. Most men are hungry when they come home and the prospect of a good meal (especially his favourite dish) is part of the warm welcome needed.* Prepare yourself. Take 15 minutes to rest so you’ll be refreshed when he arrives. Touch up your make-up, put a ribbon in your hair and be fresh-looking. He has just been with a lot of work-weary people.* Be a little gay and a little more interesting for him. His boring day may need a lift and one of your duties is to provide it.* Clear away the clutter. Make one last trip through the main part of the house just before your husband arrives.* Gather up schoolbooks, toys, paper etc… and then run a dustcloth over the tables.* Over the cooler months of the year you should prepare and light a fire for him to unwind by. Your husband will feel he has reached a haven of rest and order, and it will give you a lift too. After all, catering for his comfort will provide you with immense personal satisfaction.* Prepare the children. Take a few minutes to wash the children’s hands and faces (if they are small), comb their hair and, if necessary, change their clothes. They are little treasures and he would like to see them playing the part. Minimise all noise. At the time of his arrival, eliminate all noise of the washer, dryer, or vacuum. Try to encourage the children to be quiet.* Be happy to see him.* Greet him with a warm smile and show sincerity in your desire to please him.* Listen to him. You may have a dozen important things to tell him, but the moment of his arrival is not the time. Let him talk first – remember, his topics of conversation are more important than yours.* Make the evening his. Never complain if he comes home late or goes out to dinner, or other places of entertainment without you. Instead, try to understand his world of strain and pressure and his very real need to be at home and relax.* Your goal: Try to make sure your home is a place of peace, order and tranquility where your husband can renew himself in body and spirit.* Don’t greet him with complaints and problems.* Don’t complain if he’s late home for dinner or even if he stays out all night. Count this as minor compared to what he might have gone through that day.* Make him comfortable. Have him lean back in a comfortable chair or have him lie down in the bedroom. Have a cool or warm drink ready for him.* Arrange his pillow and offer to take off his shoes. Speak in a low, soothing and pleasant voice.* Don’t ask him questions about his actions or question his judgment or integrity. Remember, he is the master of the house and as such will always exercise his will with fairness and truthfulness. You have no right to question him.* A good wife always knows her place..my comment: charming yet…what were the authors of this smoking in 1955?

The AlarmistAugust 3rd, 2009 at 3:21 am

Lucky Strikes, of course. LSMFT … Lucky Strikes Means Fine Tobacco, or Luck Strikes Mo****er F****ng Tobacco, depending on your mood.

GuestAugust 2nd, 2009 at 12:02 am

Unparalleled Continuing Claims (Mish Shedlock)On a percentage of population basis this recession is unparalleled.Making matters worse, the US consumer was nowhere near as leveraged to real estate in 1980 or 1982 as now. Also note that boomers are heading into retirement now, undercapitalized and looking for jobs, in effect competing against their kids and grandkids for jobs.Look at the average age of baggers in grocery stores or greeters at Walmart. These people are not working because they want to; they are working because they have to. Demand for jobs is at an all time high while the number of available jobs and the pay scales of those jobs have both collapsed. The employment situation is not only an unmitigated disaster, things are about to get worse with pending state cutbacks.Because of expiring claims, continuing claims data will soon start looking better. The reality however, is things will get worse for another year as unemployment soars into double digits. My forecast in January was 10.8% in 2010 while the Fed’s was 8.5%. I see no reason to change mine, but the Fed upped theirs.The implications for housing and especially commercial real estate are ominous.Mike “Mish” Shedlockhttp://globaleconomicanalysis.blogspot.com

GuestAugust 2nd, 2009 at 12:24 am

Naked Capitalism Guest Post: WHERE IS THE PUBLIC OUTRAGE OVER PENSIONS? 08/01/09Submitted by Leo Kolivakis, publisher of Pension Pulse.You might be reading my blog wondering where is public outrage over pensions? For example, how can PSP Investments lose billions and still pay their top officers bonuses, allowing them to get extremely well compensated in a terrible year?And it’s not just PSP. The same is happening in many other large public Canadian pension funds, including CPPIB where top officers got millions with their bonuses after losing a whopping $24 billion in FY 2009.So where is the outrage? I just came back from Greece where if even a fraction of this came out in the media, there would be riots in the streets. The same can be said about other European countries, especially in France.But “civilized’ Canadians seem to be sleepwalking while their pensions are dwindling. The unions are keeping silent too. Why? Maybe because they know that the federal and provincial governments are on the hook to pay out pension benefits even if the public pension plans are severely underfunded. Why make a fuss when you know the government will come in and shore up the plan?Of course taxpayers might want to pay closer attention to what is happening at public pension funds. Because when it comes time to foot the bill, they are going to be on the hook to shore up these plans. I wonder if the Canadian Taxpayers Federation is aware of all the nonsense going around in our large Canadian public pension funds. If not, they are ignoring the most pressing public policy issue of the next few decade.Am I exaggerating? Perhaps, but if you look at what is going on right now in California, you are getting a glimpse of what will happen across most of the developed world. In California, public pensions are drawing scrutiny amid its crisis:California’s rapid economic decline has prompted Gov. Arnold Schwarzenegger to propose what once was unthinkable — rolling back generous pensions in a state heavily influenced by public employee unions.The Republican governor said he’s motivated by the need to save money. California has at least $63 billion in unfunded pension liabilities, an amount equal to roughly two-thirds of all annual general fund spending.The concern is shared across the country, as local and state governments wrestle with hundreds of billions of dollars in unfunded public employee pension and retiree health care costs.New Mexico this year approved longer work requirements — from 25 years to 30 years — for state employees starting in 2010.New Jersey last year raised the minimum age to qualify for benefits from 60 to 62.Kentucky now requires new police hires to contribute 1 percent of their pay to help cover retiree health benefits.And Georgia has started a hybrid plan for new state hires that blends a defined-benefit pension — with set payments based on salaries — and a 401(k).In California, Schwarzenegger dropped long-term pension reform from negotiations with lawmakers to close the state’s $24 billion budget deficit. He said this week that he would press for pension reform now the state has enacted revised spending plan.”Again, everyone understands we are running out of money,” he told reporters. “We cannot continue promising people things that we cannot deliver on.”His proposal would not change the pension system for current workers, but would lower benefits for new employees. His office said such changes would save the state some $95 billion over 30 years.His administration has estimated that unfunded pension liabilities — money the state has promised to pay without earmarking where the funds will come from — could be as high as $300 billion if current investments fail to generate the projected returns.But the reform proposal met with quick resistance in a state where large public employee unions contribute heavily to Democrats, the state’s majority party.The potential for reduced retirement benefits adds to concern that California will not be able to attract qualified employees, said Christopher Voight, executive director for the California Association of Professional Scientists.For example, he said, the state needs microbiologists to test for swine flu, but has a hard time keeping them because they tend to leave for better pay at private labs.Schwarzenegger wants to start by undoing a retirement package passed by California lawmakers in 1999 and signed by then-Gov. Gray Davis, a Democrat.Most state workers can retire as early as age 55. Their pension is based on 2 percent of their final salary multiplied by the number of years they worked. The payments rise with inflation.For example, a civil servant with 30 years in state government who made $70,000 a year could take early retirement at 55 with an annual pension of $42,000. Under Schwarzenegger’s proposed reform, they couldn’t retire until age 60.Employees in high-risk jobs — such as firefighters — can receive up to 90 percent of their salaries if they retire at age 50. Under Schwarzenegger’s plan, they couldn’t retire until age 55.Retirees also are promised health care coverage for themselves and their families, a benefit that can cost the state $1,100 a month per retiree, according to the California Public Employees’ Retirement System. Schwarzenegger’s proposal doesn’t tackle health care.To reformers, changing the state’s retirement system is as much a matter of fairness as one of cost.The Center for Retirement Research at Boston College found that while 43 percent of private employers offered some type of retirement plan in 2006, they tended not to be as generous as public employee packages. Private-sector workers also rarely receive retiree health care coverage, meaning most have to work until they can start drawing Social Security and Medicare at age 65. Workers born after 1960 will not be eligible to retire until 67.”People are upset,” said Schwarzenegger’s economic adviser, David Crane. “They don’t have a defined benefit plan and ask, ‘Why am I paying for someone else to have one?'”Public employees do shoulder a portion of the commitment, contributing to their retirements through payroll deductions.Ed Hass, 54, said private companies need to do more. He found a job with the Department of Corrections in 2007 in large part because of the guaranteed pension.”You’ve heard of Enron, right?” he said. “Not only did (employees) all lose their jobs, they lost all their retirement tied to Enron’s stock.”Government workers and their union representatives often say the more generous pensions offset lower pay.But the latest U.S. Census survey, from 2007, shows the average annual salary of California state government employees was $53,958, compared with $40,991 for the average private-sector worker.”The pension benefits for public employees in California are extravagant and they are going to bankrupt cities and counties, along with the state,” said Keith Richman, a former state assemblyman who said he plans to launch an initiative campaign to change state employee pension benefits.The case above is just another example of pensions apartheid. My father always tells me no matter how much money you make, if you spend more than you make, you’ll always be in a hole. There is a rationale for deficit spending in bad economic times, but the public will not want to pay generous pension benefits to public servants when their own RRSPs or 401Ks got clobbered and they face pension poverty.So while unions of Canadian public civil servants keep quiet on what is going on at their public pension funds, maybe they should look at what is going on in California because as Canadian public pension fund managers collect huge compensation for delivering mediocre performances, their members’ pension benefits risk being scaled back in the future.And if the unions keep quiet, then Canadian taxpayers should start hammering away at this issue. They are ultimately on the hook for all these public pension deficits.http://www.nakedcapitalism.com/2009/08/guest-post-where-is-public-outrage-over.html

GuestAugust 2nd, 2009 at 1:00 am

Good grief. He did it. He solved Stonehenge. What no one else could do, with rocks, wood, ropes and sand, “using only himself, gravity, and his incredible ingenuity.” And driven by absolute passion for his “work” of course. Incredible. Will the pyramids be next? A view into mankind’s capabilties and past inventiveness. I’m saving this video, to put to good use. For one thing, I’ve got a big, stone fountain to move. And now I can do it, thanks to you, and Wally.

dream-onAugust 2nd, 2009 at 9:30 am

gee, I guy without a PHD solving a problem that has plagued “the experts” for generations. Perhaps all of our country’s problems could be solved by a few people with no ulterior motives who believe in freedom, equality and justice for all!

GuestAugust 2nd, 2009 at 11:16 am

Here is W.T. Wallington’s Forgotten Technology Official Websitehttp://www.theforgottentechnology.com/

Guest tooAugust 2nd, 2009 at 8:07 am

lateral thinking for a better tomorrow?.http://en.wikipedia.org/wiki/Lateral_thinking.Lateral thinking is a term coined by Edward de Bono, for the solution of problems through an indirect and creative approach. Lateral thinking is about reasoning that is not immediately obvious and about ideas that may not be obtainable by using only traditional step-by-step logic.The term first appeared in the title of de Bono’s book New Think: The Use of Lateral Thinking, published in 1967.* 1 Methodso 1.1 Idea generating tools* 2 Lateral thinking and problem solvingMethodsCritical thinking is primarily concerned with judging the truth value of statements and seeking errors. Lateral thinking is more concerned with the movement value of statements and ideas. A person would use lateral thinking when they want to move from one known idea to creating new ideas.There are four types of “thinking tools” defined in Edward de Bono’s Lateral Thinking: The Power of Provocation manual:[1]* Idea generating tools that are designed to break current thinking patterns – routine patterns, the status quo* Focus tools that are designed to broaden where to search for new ideas* Harvest tools that are designed to ensure more value is received from idea generating output* Treatment tools that are designed to consider real-world constraints, resources, and support…….Provocation Idea Generating Tool: choose to use any of the provocation techniques – wishful thinking, exaggeration, reversal, escape, or arising. Create a list of provocations and then use the most outlandish ones to move your thinking forward to new ideas……

Ungrateful PeonAugust 2nd, 2009 at 8:57 am

Too true.Forget about everything that you ‘think’ that you knew. We’re in the midst of a major paradigm shift. Old labels and ideas won’t be useful for dealing with the changes currently unfolding.Wishful thinking and escape aren’t gonna cut it, that’s for darn sure.Outlandish ideas: organized collective outrage, community building and home-grown local economies / an underground economy.

farnorth5August 3rd, 2009 at 4:48 pm

Additional Outlandish idea :Three levels of Government that adopt balanced budgets each year,including Budgeted Principal Payments on Debt taken on for Specific Capital Projects.(No Balanced Budget means NO serious priorization of expenditures and NO efficiency in the end product.)

kilgoresAugust 2nd, 2009 at 8:37 am

Here is an interesting piece by Eliot Spitzer from Slate (which was reprinted in the New York Times today) regarding how the middle class has lost ground for more than 20 years to the most wealthy:http://www.slate.com/id/2223734/From the article:”The single most frequently used measure to gauge income distribution is the Gini coefficient, which ranges from zero to one, with zero representing perfect equality (that is, everyone has the same level of income) and one representing perfect inequality (that is, one person has all the income).U.S. Gini Coefficient1967 0.3971977 0.4021987 0.4261997 0.4592007 0.463″As a point of reference, the Gini coefficient for Canada is 0.326, for the United Kingdom it is 0.36, for Norway it is 0.258, and for Germany it is 0.283. In fact, the U.S. Gini coefficient is significantly higher than that for any Western European nation.”More textured are the data showing the percentage of total income garnered by each quintile of the population over a particular time frame.Percentage of Total Income by Population QuintileLowest Quintile Middle Quintile Highest Quintile1967 4.0 17.3 43.61977 4.2 16.9 44.01987 3.8 16.1 46.21997 3.6 15.0 49.42007 3.4 14.8 49.7″The top 1 percent of all income earners garnered 21.8 percent of all income in 2005, up from 8.9 percent in 1976.”Of course, it can be argued that these pure distributional percentages are less meaningful if everybody’s absolute income grew substantially over the period of time measured. But that is not the case. In fact, the gap here is quite remarkable:Mean Household IncomeLowest Quintile Middle Quintile Highest Quintile1967 $8,683 $38,415 $96,7251977 $10,394 $45,323 $110,5791987 $10,706 $45,492 $130,7681997 $11,385 $47,886 $158,1282007 $11,551 $49,968 $167,971″Before 1987, it might have been reasonable to argue that overall income growth was softening the effects of rising inequality. But since then, the rate of overall growth for all but the top quintile has slowed dramatically, with the lowest quintile seeing its income grow by only 7.8 percent in the last two decades, while income for the top quintile grew by 28 percent. And looking at after-tax income, which factors in the impact of favorable tax policy for the rich, the numbers are even starker: Between 1979 and 2004, the top 1 percent of all earners saw their income grow by an astounding 176 percent.”___Contrary to accusations from some, I do not advocate that we strive to achieve perfecct equality — a Gini coefficient of 1 — but rather, to return to something closer to what we had in terms of income distribution between the mid-1940s and the mid-1960s, because more working Americans would have a chance of sharing in our national prosperity and of participating meaningfully in political discourse.SWK

Ungrateful PeonAugust 2nd, 2009 at 9:18 am

I agree with you SWK, but the forces that designed and encouraged this shift in wealth have essentially destroyed the economy and disempowered the majority through of wage stagnation and job insecurity. I fear that we’ve passed a tipping point and don’t see much hope of correcting this imbalance.I may be too pessimistic.

FEDupAugust 2nd, 2009 at 9:20 am

nice post-unfortunately, so many Americans I talk to prefer to live “paycheck to paycheck” rather than save as they either can’t understand the concept of “delayed gratification” (saving for retirement) or are addicted to consuming. The advertisers and glorification of the wealthy by the media have changed the value system that our parents had: “a penny saved is a penny earned”!

Ungrateful PeonAugust 2nd, 2009 at 9:34 am

I’d argue that I know as many Americans who have had no choice but to live ‘paycheck to paycheck’ in an economic system that feeds on debt. And I ask myself who does this arrangement serve?The financial sector has enjoyed enormous prosperity over the last 2 decades.

GuestAugust 2nd, 2009 at 10:04 am

higher tax on saver + FED letting out of inflation genie will not encourage saving. Spend it now before your money is taxed away or eaten up by inflation.

Ungrateful PeonAugust 2nd, 2009 at 10:26 am

The financial industry and their government lobbyists have spend decades influencing and changing legislation so as to make ‘saving’ the least inviting option for average citizens. Seems that they wanted consumers either spending or investing in the market, and consequently, built an entire economy on that foundation.Again, I ask myself, who did this arrangement serve? Not the average working stiff, that’s for damn sure.Lower taxes justified wage stagnation and put more money into the pockets of Corporate Welfare Queens.We’ve been (speaking for the working poor / middle class) screwed in every imaginable way possible.

GuestAugust 2nd, 2009 at 10:11 am

future saving rate will only drop because of tax and inflation hit. as Obama+Cracy administration, FED, and Treasury rack up wasteful gov spending and debt and issuing ballooning ARM Treasury, American people will be hit by higher tax and higher inflation the most in this decade. American people living standard and consumption will go down because of higher tax, higher inflation, dollar losing value, less import from abroad for cheap dollar.

MM CAAugust 2nd, 2009 at 10:10 am

So for the last 30 years, effectivley 90% or so of Average Joe American have not gotten a riase? It’s indeed true. My Dad worked for Old MA Bell, and when he retired around 1993 his top salary as a Craft Technician in Switching was 54K. Same for installers, splicers, repairmen, etc. Top pay now for the same jobs is 45-50K and with no pension anymore, higher health cost contributions. He was at top pay for over 15 years. In My company, a large fortune 50, We have driven down Salaries for our Computer Engineers from around 55-60K in 2000 to 35-42k in 2009. I’ve watched it happen right before on my own eyes, in fact was part of making it happen and not becaus I agreed with it. Also watched our share of benefit contributions rise from approx 750.00 a year in 2000 to over 7k in 2009, for basically the same benefits.So in effect, while everyone, including me is focused on NO JOBS and rising unemployment, I’ve come to think that WAGE DESTRUCTION may be an even bigger issue.Walmart’s revenues are equivilent to 20% of our deficit this year. Last year, 2008, they were 40%, in 2007 they were 75% of that years deficit. Walmart is elading the way in showing how you can become bigger while destorying jobs and wages.

GuestAugust 2nd, 2009 at 10:14 am

tell your engineers to switch to gov jobs (seriously average fed/state salary is at least 50k, when your private sector job go below 50k, find a fed/state job which is less stressful and greatest pay/pension/benefits). salary can only go up + greatest pension plan int the planet. we can always raise tax on engineers working in private sector. cheers.

GuestAugust 2nd, 2009 at 10:18 am

Largest US employersWal-Mart Stores 2,100,000U.S. Postal Service 765,088United Parcel Service 426,000McDonald’s 400,000IBM 398,455Compass Group 388,181Target 351,000HSBC Holdings 331,458Kroger 326,000Citigroup 324,850Sears Holdings 324,000General Electric 323,000Hewlett-Packard 321,000AT&T 302,660Nestlé 283,000Wells Fargo 281,000Home Depot 265,650FedEx 254,142

MM CAAugust 2nd, 2009 at 10:29 am

Nice List! so lets see Walmart accounts for about 1.7% of all US JOBS. One can easily see why thier is WAGE DESTRUCTION by looking at these numbers. Besides IBM, GE, AT&T, Nestle, FED EX, UPS, Post Office most of the rest of those jobs are making 20-30K annually. Most of the bank jobs are tellers and such. sure all the companies on that list have emoloyees who make a a lot more than 30k, but pct wise its not a lot.I know the arguement that Walmart serves a purpose, escpecially in times like this I suppose, but everythign they sell is crap. shoot with 2.1 million workers thier employers are a major part of thier customer base, is’nt that funny or is it in fact just a shame.

Ungrateful PeonAugust 2nd, 2009 at 10:42 am

Walmart has definitely been the model that Corporate America has adopted, including off-shoring to capitalize on cheap labor and substandard safety and environmental laws.Unfortunately, it has destroyed the American economy. And now I’m wondering if that was actually part of the business plan.Multinationals have no loyalty to a nation or its citizens. They’re chasing profits.

MM CAAugust 2nd, 2009 at 12:02 pm

@UP – Walmart sets the palying rules and eveyrone either follows them or Walmart crsuhes them. Target and Sears/Kmart are hanging on by a thread, esepcially Sears. Sears used to be a good company, they had no issue with small mom and pop local business, like hardware and appliance stores. Target tried selling better products but could’nt compete with the imported crap Walmart sells. I’ve dealt with Walmart in real buisness and they well beat you to a pulp about pricing. if you do business with them youa re sure to end up out fo business eventually. We walked away when we wouldnt meet their price.Target, Macys, Sears, Bst buy, etc… they are all needed and i wish they had a chance to survive long term. they dont run thier Business like Walmart. Walmart has a big fat Bulls Eye on Best Buy.See below why walmart has so much power. their revenue is more than every other retail chain combined in the Fortune 500. The rest are living off the scaps Walmart lets them eat- for now!first number is revenue in Billions. Second number is profit in BillionsWal-Mart Stores 405,607/ 13,400Target 64,948/ 2,214Sears Holdings 46,770/ 53

Ungrateful PeonAugust 2nd, 2009 at 12:31 pm

I agree, and admit that I probably didn’t express myself properly. That aside, there is a name for the methods that Walmart has used to facilitate its success and that’s what unnerves me.The consolation of power and influence that entities like Walmart and Goldman Sachs (to name just two) have achieved in just over a decade should make us all sit up and pay attention.

GuestAugust 2nd, 2009 at 9:11 am

the next shoe to drop -> ARM Treasury (aka T-Bill). Everyone is crowd into ARM Treasury thinking it is a safehaven, while Obama+Cracy gov, FED, and Treasury is racking up debt in ARM Treasury (which they know they cant pay back). This can only mean two things, much higher tax for everyone or FED start printing dollar to pay off these ARM Treasury -> dollar devaluation. ARM Treasury is next subprime gov origination by shadow Obama gov.

GuestAugust 2nd, 2009 at 9:29 am

all those ARM Treasury holders is really gonna get seriously violated for their money in toxic ARM Treasury. China’s reserve is gonna take serious hit unless they diversify off ARM Treasury and dollar. ARM Treasury and dollar NOT SAFEHAVEN AT ALL.

GAugust 2nd, 2009 at 9:16 am

from above”G,I’m having trouble understanding your expressions, like “far, far, far more equal outcome” and “minimalist government paradise.” If being in favor of progressive taxation isn’t being in favor of equal outcomes, we can’t have a discussion because we can’t agree on the certain meanings in the English language.Either a equals b or a does not equal b. The notion that anything is far, far, far, more equal than anything else is an oxymoron cubed. Let me put it to you another way. If you’re for equal pay for equal wealth production, fine. But when you posit that unequal distribution of wealth is the source of all our problems, those of us who actually do produce wealth hear someone who has no idea what wealth production is, but who wants to control the rest of us who do; i.e., an elitist pay czar.Wealth has its own worth, regardless of who produces it. If whoever pays you doesn’t think your worth what they pay me, that’s your problem, it shouldn’t be my problem. Progressive taxation to make an equality of outcome in income–that’s what you’re advocating– is an idea promulgated by an intellectual elite who no longer have to work. These tyrants who advocate progressive taxation do so to maintain their position at the top of the totem pole. They feel threatened (rightly so) by someone who knows better, who might topple them from their position of power because they are smarter and more energetic.”Minimalist government paradise” is more like a double oxymoron with a full twist and a one and a half gainer! “Minimalist government” and “government paradise” just don’t compute. You’ll never find utopia on this planet. But notice how many opinions there are about how “government” ought to be conducted. All these opinions about how much better it would be if only this or that…..are motivated by the mistaken notion that if only they would do it my way, “paradise” would appear!Since this is an economics blog, let’s talk about “minimalist” in terms of organized systems of thought (a government, if you will) that has cost the least and been the most successful on this earth; i.e., a “minimalist government.” Well……you’re talking about Christianity. Christianity, which has flourished on a whole lot less than the tithe (nominally 10% of your income, but certainly not more than that) for over 2000 years.Let’s see now………the US Government can’t get by without requiring 20-25% of my income (and they still run a deficit) but the Christian Church survives on less than 10%. The USG is about to go belly up financially after only 200 years or thereabouts. Christianity is likely to survive another 2000 years, well past the time we’ll all be or not be in “paradise.”The inspiration I get from Christianity reflects my idea of a “minimalist government paradise.” I don’t see why our own US government needs more than 10% of my income.Thanks for your comments. Did that clear it up a little?By Chignos on 2009-08-01 18:44:53″I just want to make sure the community here didn’t miss that.

Ungrateful PeonAugust 2nd, 2009 at 9:23 am

I didn’t miss it, G, and I’m probably as stunned as you.However, having said that, diversity does make the world go ’round.

GuestAugust 2nd, 2009 at 12:34 pm

Now I a fourfold vision see And a fourfold vision is given to me Tis fourfold in my supreme delight And three fold in soft Beulahs night And twofold Always. May God us keep From Single vision & Newtons sleep.Blake is objecting to the literalism of the Newtonian mindset. He would have us see multiple significances in everything.

kilgoresAugust 2nd, 2009 at 11:11 am

I will say this for Chingos: he doesn’t mince words and isn’t afraid to say what he really thinks. I will continue to disagree with him, but at least I can respect him for his candor. As an Episcopalian, I do my level best to try to see some spark of the Divine in every other human being (which is a pretty big challenge in some cases!).SWK

GAugust 2nd, 2009 at 11:46 am

1. Chignos’ head is full of no-think.2. The three-year-old I babysat yesterday had full grasp of the meaning of the word ‘more’.3. That not just a spark but the Whole of the Divine is fully present in every human being is a given for me. I’d like to make that much clear as a bell…whether I say more or not.

kilgoresAugust 2nd, 2009 at 1:27 pm

Namaste, G. I understand you perfectly. I assume you’ve done a good bit of reading in religion and philosophy.SWK

Guest tooAugust 2nd, 2009 at 11:47 am

g,i almost missed it but caught it just before you reposted it.a few thoughts…. from recent posts that have found a placein my pea little brain.last thread guest said ” if contradiction and irony had market-value we would all be rich “.(something like that) i agree and believe we are. and it remindsme of a line from john prine ” come back to us barbara lewis hari krishnabeauregard” , i believe was the title and the line is..” if heartaches were commercials we would all be on t.v. “.says something about the media and man in just a few words,and now being irresponsible with credit and money qualifies one forsome sort of bailout, but only if it’s done at some cosmic levelof insanity. hahahhahhahahahhahahahahahhahahahahahahhahahahahhaha.but. another point that deserves consideration is the scale abilityof individual consciousness, as it is the fundamental unit contributingto a groups consciousness and we all recognize the importance of that.what are the dynamics associated with this scaling, communication.?.u.peon. said..just above a bit”Wishful thinking and escape aren’t gonna cut it, that’s for darn sure.Outlandish ideas: organized collective outrage, community building and home-grown local economies / an underground economy.”.consider individual consciousness scaled to group consciousness and thecommunication within ones own mind and among minds. perhaps there is alwaysa place for wishful thinking and escape too, as long as it is recognizedfor what it is and the potential power it offers.?.re: the church, christian, and the characterization as an example of minimalist governance. no comment. grounds..controversial, all heat, no light potential,controversial, they don’t fund public infrastructure, controversial, they don’tpay tax, controversial, they don’t do law enforcement (hopefully) and might i addthe subject is too controversial.what they do do is recognize the scale ability of the individuals consciousness, to a debatable degree and i think that this is intriguing.anyway.. speaking of contradiction and such here is a link to a pagepreviously posted by pjb…http://www.holoscience.com/news.php?article=ep8d37ws….Contradiction upon Contradiction…i am not surprised or stunned by the comment. we are all on life’sbig learning curve, wave, swimming for our lives and trying toget into the right part of the wave. (maybe an inappropriate metaphor)the thing is to clear up the knowledge base so that we know directionand the nature of the environment thereby being capable of applyingourselves/energy productively or safely if that is required..what we can never comprehend is the impact of what we say or do. theenergy goes out and is then we don’t know what will happen butyou may notice sometimes it comes back to you directly, sometimes delayedand sometimes you just don’t know. what you can know is the source ofyour energy and then …..we will see.

ChignosAugust 2nd, 2009 at 6:52 pm

Guest,Sorry, but you lost whatever audience was reading this thread.SWK,Thanks for the sort-of compliment. Here’s a simple challenge, a little investment advice, or maybe it’s a lot of advice, depending on how much you have. Trundle on down to your Episcopal Church and put the largest bill you have right now in your pocket in the collection plate. Pray to God to bless it and to give you a special blessing from it. Report back next week.This is the most improbable, outrageous, radical and best investment you’ll ever experience.Chignos

kilgoresAugust 2nd, 2009 at 7:20 pm

Sorry, I’m not superstitious, and when I make a Sunday offering, it is just that: an offering to God Almighty, the discharge of a duty without expectation of recompense from Him. While I generally believe in the law of consequences — that what goes around, comes around — I don’t go in for all this New Age hocus pocus about asking the Lord for specific personal blessings or favors or wealth (and I think there are too many Christian communities that get wrapped up in such distractions). If I could get some spiritual favor by simply dropping a fifty dollar bill in the collection plate, I might as well become an animist and do a rain dance when I want a thunderstorm to come on a hot day. Instead, I just try to live my life with honesty and integrity to the best of my ability, and set an example for others (“Let your light so shine among men that they may see your good works, and glorify your Father which is in heaven.”).Glad you accepted my comment regarding your honesty in the way I intended it. I do believe your ideas are utterly misguided and just plain wrong, but you can’t have an honest dialogue with someone who isn’t truthful about what they really believe, and I am certainly willing to give you that much credit, Chingos.SWK

ChignosAugust 2nd, 2009 at 11:24 pm

SWK,I don’t go for any of the New Age stuff either, certainly not the superstitious stuff. I go for the old stuff, the tried and true stuff. And there is quite a difference between the tithe, as strictly interpreted one-tenth of your income, and an offering, which is over and above the tenth.I was writing about an offering. I wasn’t suggesting you pray any more specifically than for God’s blessing, both for the use of the offering, and for the giver. After all, most of the time we humans don’t even know what we really want. Case in point: no one knows what to do about the current financial crisis. What we really need is something so good it is beyond our ability to imagine……Americans need to dust off their faith and start living like they are not going to live forever. Concerns about money, justice, the economy, retirement, investments are ok, but when it all and the 401K goes to a handbasket……….one starts to refocus on things of eternal value.I was just encouraging you SWK, how to let your light and your fifty bucks shine a little brighter.

farnorth5August 2nd, 2009 at 7:11 pm

The reason they need more than 10% of your income is in the Federal Budget Process.1/ To fight “WARS”,that are not budgeted for and2/ To pay Interest on the National Debt.Until we see a Federal Balanced Budget for 4 years straight ,this is just wishful thinking.Until everyone understands that all Federal Politicians around the world have to Volunteer to adopt Balanced Budgets and Volunteer to make a Principal Payment on same , nothing will change.The reality is that the National Debt of every country is a revolving line of credit and legally can be used or abused.Do you really think they will volunteer to stop spending every tax dollar you send and at the same time give up spending all that lovely artificial debt money they get elseware ? Not bloody likely ,when this gets them reelected and makes them”POPULAR”…

The AlarmistAugust 3rd, 2009 at 3:30 am

To Chigno’s point, the Christian Church occasionally prays for the wisdom to know that which they cannot change and then stop at that, which is why they only ask for 10%. The Church of Government professes to be able to change anything, and will act to do so at any cost.

MorbidAugust 2nd, 2009 at 11:55 am

Geithner Won’t Rule Out Taxing 95% Of Citizens

To get the economy back on track, will President Barack Obama have to break his pledge not to raise taxes on 95 percent of Americans? In a “This Week” exclusive, Treasury Secretary Tim Geithner told me, “We’re going to have to do what’s necessary.”

Socalize the losses, socalize the losses,… The ObamaNation of Desolation Rules. All such wet dreams to come true. I say “THROW THE BUMS OUT!”

GuestAugust 2nd, 2009 at 3:39 pm

well, you know this is coming when Geithner is going to extend unemployment benefits forever. we got to raise tax on those who is still working hard to pay for those who is using unemployment benefits money for premium coffee in starbuck, organic food in whole food, and lunch & dinner in the casual restaurants. everyone has to do his part, not-working people get money from gov to spend, and you hard working American pay tax. This is NEW DEAL by Obama, Geithner, and Pelosi Co. and they gonna extend free ObamaCare to not-working people. well more tax then.

GuestAugust 2nd, 2009 at 3:46 pm

Obama and Democrat message: We will never keep our tax promises. We will tax all you until ANGELS SCREAM AND THE DEVIL CRY.

GuestAugust 2nd, 2009 at 4:35 pm

Why are you TOTALLY blind to the fact that the only people who get unemployment benefits are people who HAVE BEEN WORKING AND PAYING TAXES UNTIL THEIR JOB WAS TAKEN AWAY NO FAULT OF THEIR OWN??????

GuestAugust 2nd, 2009 at 1:00 pm

http://www.clusterflock.org/2006/05/single-vision-and-newtons-sleep.html.May 17, 2006Single Vision and Newton’s SleepAt the beginning of the Industrial Age, William Blake penned these words,Now I a fourfold vision see,And a fourfold vision is given to me;‘Tis fourfold in my supreme delightAnd threefold in soft Beulah’s nightAnd twofold Always. May God us keepFrom Single vision & Newton’s Sleep!More than thirty years ago (1972), Theodore Roszak wrote a breakthrough book based upon William Blake’s visionary poetry and prophetic voice, which foretold where, as a society, he felt certain we were heading. We are either there now, or dangerously close. In Where the Wasteland Ends Roszak warned that society (American society, in particular) was moving in a direction in which some “Single Vision” might overtake and so dominate us that it would begin to ruthlessly stamp out any other way of seeing or being, destroying all pluralism and the rich diversity that makes life itself possible, and crushing any real creativity.Whether natural, scientific, political, or religious, we see evidence everywhere of the fulfillment of the double warnings (Blake’s and Roszak’s), and the rise of Blake’s “Single Vision and Newton’s sleep.” We live, it seems, in a world where tolerance toward diversity and pluralism is suspect and in danger of being crushed out by various forms of fundamentalism. Fundamentalist forces (the Single Vision) have joined together to assert themselves. This is particularly true in the current marriage of religion and politics so prominent today in American culture.At the hands of Neo-conservatism, religious Fundamentalism, Scientism, Capitalism, and all the other “—isms” that stalk our social landscape, we are at risk of succumbing to the Single Vision that Blake so feared. Beginning in the Greco-Roman world as the religious agenda of imperial Christianity under the auspices of the Emperor Constantine, uniformity and conformity became the hallmark of western society. This “psychology of single vision” was carried forward by Christian civilization in the West into the Scientific Revolution, says Roszak, and, alienating natural philosophy, it achieved cultural supremacy in the modern world, betraying its brightest ideals (107). So, Roszak wrote his critique in which he says,… I will be calling the orthodox consciousness of urban-industrialism by the name William Blake gave it—single vision. It was his term for the narrowing of the sensibilities we often refer to as “alienation” today. My main interest is in the cultural transformations from which this psychic style stems and the force it exerts upon our politics (76).

Ungrateful PeonAugust 2nd, 2009 at 1:31 pm

I think that after possibly 40 years of deep slumber, North Americans are about to be rudely awakened by economic turmoil. It’s bound to inspire new creativity and richness.I’m speculating, of course, but based on history, my money is on the side of a positive cultural transformation.I like to believe that we can’t regress much further, but I’ve been wrong before.

GAugust 2nd, 2009 at 1:59 pm

You mean to see we have been hadding a sound night’s sleep?You may so.It is just, it is just about to, it is just about to rolywholyover.Of all the stranger things that ever not even in the hundrund and badst pageans of unthowsent and wonst nice…to be have happened!The untireties of livesliving being the one substrance of a streamsbecoming.Totalled in toldteld and telltold in tittletell tattle.Why?Because, graced be Gad and all giddy gadgets, in whose words were the beginnings, there are two signs to turn to, the yest and the ist, the wright side and the wronged side, feeling aslip and wauking up, so an, so farth.Why?It is a sot of a swigswag, systomy dystomy, which everabody you ever anywhere at all doze.Why?Such me.Where did thots come from?It is infinitesimally fevers, resty fever, risy fever, a coranto of aria, sleeper awakening, in the smalls of one’s back presentiment,…a flash from a future of maybe mahamayability through the windr of a wondr in a wildr is a weltr as a wirbl of a warbl is a world.Tom.It is perfect degrees excelsius.Anemone activescent the torporature is returning to mornal.Humid nature is feeling itself freely at ease with the all fresco.(James Joyce will forgive me for taking license to edit the above bits from Finnegans Wake…because I have a neverending love affair going with JJ.)”Soft morning, city! Lsp! I am leafy speafing. Lpf! Folty and folty all the nights have falled on to long my hair. Not a sound, falling. Lispin! No wind no word. Only a leaf, just a leaf and then leaves.”

BrianAugust 2nd, 2009 at 2:52 pm

The Problem with the Stimulus *or* Why the Economy is Still Heading to DepressionThe Cash for Clunkers program is a perfect program to illustrate the fallacy of the economic stimulus coming out of world governments.It’s a simple argument: it is impossible to stimulate consumption directly, because by it’s nature, consumption is consumed! The only effect of efforts to stimulate consumption directly is to move the consumption from the future into the present – thus creating a deficit in future consumption.Cash for Clunkers essentially gives consumers cash if they agree to make a purchase today. That’s great for the economy today. In fact, if the government simply gave every American $4,500 and told them they had to spend it this weekend, the economic growth would be stratospheric! The economy this weekend would look like the best economy in history. After the money was spent, you would have a great economy for a while as every business in the world restocked its inventory.And then you would be left with a huge bill in the form of massive debt and zero consumption. After all, everyone just spent $4,500 buying everything that they wanted to buy. Certainly, it would be impossible to argue that this would stimulate spending in any kind of permanent way.It just doesn’t make sense. How can giving a bunch of people a new car stimulate the buying of new cars into the future? By what mechanism would that work? The only effect of giving a bunch of people a new car now, is that those people will NOT purchase another new car any time soon (after all, they held onto their last car until it was a “Clunker”; and too, they were probably the consumers who were most inclined to buy a new car soon since they rushed out to cash in on the program – indicating that their current car was unacceptable, and all they needed was some incentive. They were the one’s thinking about buying a car soon anyway!)So, there is a short-term bump in the economy, as this inventory is replaced; and then there is a long-term effect of owning more debt and having borrowed consumption from the future so that the recession starts to cut deeper.If this was isolated to just a $3 Billion dollar program (JUST, by the way. When did that happen?, but anyway) if it was just a $3 Billion dollar program, that would be one thing, but almost the entire stimulus is the same smoke-and-mirrors. It’s why I’ve been such a doomsayer about the economy, and why I maintain that the Greater Depression has not been avoided – it’s been postponed and it’s going to be worse than it would otherwise have been.Why the stimulus program is so bogus is that almost all of the money, and all of the measures of success are driven by the same misunderstanding that consumption can somehow be stimulated directly. That once someone buys something, that they are then MORE LIKELY to buy it again – once they have spent money, they will be more inclined to spend more money.The only way a stimulus program can actually succeed is if it produces a self-sustaining perpetual stream of value. Buying a car is a one-time stimulation. Building a bridge is a self-sustaining perpetual stream of value (presuming that the bridge improves efficiency of the local area infrastructure).The effects of a stimulus, thus, can have short-term distorting effects, and long term effects. Let’s look at building an important bridge as a simple example. While building the bridge, construction jobs get created. Those workers increase the local area’s consumption, and there is a ripple-effect on employment and consumption; however, all of this is temporary, since the bridge will eventually be completed, and all the direct and indirect effects then must disappear. What remains is a bridge, and some debt.Judging the “success” of the stimulus based on these short-term effects is simply deceitful. Jobs get created and then they get lost. There is no long-term stimulation from this activity. In fact, there is a long-term harm, which is that capital resources get spent to build up supporting structures for temporary projects (companies invest in equipment that allows them to build bridges. If more bridges aren’t built, those capital investments are basically wasted).The real measure of whether the stimulus succeeded is to determine if the value of the bridge to the economy is greater than the amount of debt incurred to build it. If so, then the stimulus has succeeded. Otherwise, the economy is worse off in the long-term as you have a negative equity AND capital was consumed to create the means to support the false economy of consumption for the temporary employees.And so it is with almost all aspects of the stimulus. Providing tax refunds and increased or extended benefits simulates for exactly as long as the benefits are provided; after-which, the economy must painfully retract back, and there is residual debt. Examples include: Providing a credit for homebuyers will cause sales volumes of homes to be increased for as long as the credits are provided – providing the strongest incentive for people who were most inclined to purchase a home in the near future. Of course, motivating someone to buy one home does not make them more likely to buy another one, so again, the effect of the stimulus on consumption is for the duration of the stimulus and once ended, the economy is left with fewer home buyers and a lot of additional debt.The same logic holds true for artificially low interest rates and quantitative easing policies. Easy money allows profits to be made as long as the easy money is being created. The cost for homes and cars and equipment is artificially low because the cost to borrow money is artificially low. Thus, people and companies purchase and consume. They are buying things that will last long into the future, and simply moving future purchases to the present. As soon as cheap money policies reverse, however, sales trends reverse – and we pay the piper.If the purpose of the US stimulus is, as Geithner implied this morning, to allow the private sector to lead a recovery strong enough to allow the government to reduce deficit spending dramatically, then by that measure, it is a failure. The purpose is simply not consistent with the effects of the program as designed. There is no way for a program that stimulates consumption today at the expense of consumption in the future, and that provides stimulus only for as long as government dollars continue to subsidize private expenditures to create a self-sustaining improvement in the private sector.As I stated at the outset, to achieve Geithner’s objective, a stimulus program would need to produce a self-sustaining, perpetual stream of value. Geithner is obviously concerned that the US cannot continue to finance it’s deficit at these levels into the future. The stimulus program will have to end soon, and since it was not a valid program, it will not have produced the necessary effect on the economy to permit a recovery.(Geithner also miss-understands one other important fact. He said that “I think that really everybody understands that we cannot have our financial system go back to the practices that brought this economy to the brink of collapse.” In fact, the “brink of collapse” was brought on because consumers ran out of credit and could no longer finance their excessive consumption by using their houses as ATM machines. Since that situation has not changed, and since overall debt continues to grow, things are actually worse now then they were when Geithner and Bernanke brought the economy back from the “brink of collapse.” What a joke. That these guys actually believe that the economy is just the financial institutions is so frightening that it’s almost comical…)This is why the Greater Depression has not been averted. Debt is still growing, and although the stimulated economy is responding as expected and perking up, it is all at the expense of the very near term economic future. Cheap money and direct stimulation of consumption are simply not a long-term solution to the fundamental problems that beset the world’s economy, and believing that the worst is behind us because of the current observed effects is naive in the extreme.–Brian

MM CAAugust 2nd, 2009 at 7:22 pm

Nice post Brain… i agree Cash for Clunkers is doing nothign to help. We are telling people who have cars that are totally paid for to go borrow money for a new car. Adding debt at this time is not in the best interests of most. Also anyone taking advantage of buying a car under this program most likely were going to buy a a car anyhow. so as far as increasing buying activity for cars there may be some increase but it will be marginal at best. We are still selling current run rate of 800K cars a month (down from 1.3M a month in 2006) and all we have done is give them all a tax credit. it does nothing to increase jobs, those 700K cars were in the production line anyhow. Its all smoke and mirrors and to make everyone believe they are doing something good.I’m waiting for the GM IPO next spring, along with the other wiped out GM shareholders…. lol… NOT

farnorth5August 2nd, 2009 at 7:36 pm

Well said Brian .You have it correct. The stimulus is a temporary DEFERRAL, hopefully good enough that the Political Incumbents get re elected. It is Politics at its finest.Only TIME will allow a new SAVING ETHIC to slowly grow over ten years to permit a reduction in personal debt ,to the point the consumer can realistically purchase items that are within their personal budget.All this is on the assumption that the Financial Legislation is changed enough to modify the currentlack of control of financial risk and reward.We will go into a second “W” down for sure if no concrete action is taken.It really is a DEBT MANAGEMENT DEPRESSION,similar to the 1930,s. and will take a similar amount of time to remedy.Anything else is just nonsense.

GuestAugust 2nd, 2009 at 8:02 pm

@ Brian: ” What a joke. That these guys actually believe that the economy is just the financial institutions is so frightening that it’s almost comical…”Exactly. Every move Bernanke makes is for the financial sector. He does nothing for the economy. Bernanke is playing games with the GNP, with the whole ball of wax. He’s destroying the currency in the midst of an economic recession, that is culminating in the destruction of America’s value and her economy. America’s economic problems are not about paper notes, or deflation or inflation—they’re about value, making something of value in the country, getting value for the work a man produces so he can buy things.Recovery on credit? When you have a Congress and a President who lie to you every time they talk, how can you trust the bureaucrats, the BLSs, when they tell you anything? You can’t.Americans are going to find out the hard way about central planning. Central planning won’t work; it will crash and burn. We’re seeing the cracks now.America already has lost her automobile industry—an industry that once paid “the highest wages in the world, and among the very highest even in America. Yet (until about 1960),” says Henry Hazlitt, “American motorcar makers could undersell the rest of the world, because their unit cost was lower. And the secret was that the capital (the tools of production) used in making American automobiles was greater per worker and per car than anywhere else in the world.“And yet there are people who think we have reached the end of this process (the stagnationists and Galbraithians), and still others who think that even if we haven’t, the world is foolish to go on saving and adding to its stock of capital.”Said Hazlitt: “It is true that the U.S. has been losing its world economic leadership in recent years, but because of our anticapitalist governmental policies, not because of “economic maturity.”Hazlitt wrote that in “Economics in One Lesson” in 1976.He concluded: “The outlook is dark, but it is not entirely without hope…More and more people are becoming aware that government has nothing to give them without first taking it away from somebody else—or from themselves. Increased handouts to selected groups mean merely increased taxes. And inflation, in the end, misdirects and disorganizes production…“Keynesians and New Dealers seem to be in a slow retreat…defenders of free enterprise are becoming more outspoken and more articulate… There is a real promise that public policy may be reversed before the damage…has become irreparable.”“Turn up the lights–I don’t want to go home in the dark.”—O. Henry.Oh, Henry! Oh, Henry! Oh!

The AlarmistAugust 3rd, 2009 at 3:34 am

Next programme will no doubt be cash for guns. Can’t screw with the economy like this very long while you have an armed citizenry.

GuestAugust 2nd, 2009 at 3:07 pm

Sam Walton, founder of Walmart, came up with an original concept in marketing and died in 1992 the world’s second wealthiest man, behind Bill Gates. He was a Cyrus McCormick, a Henry Ford. An innovator. That’s fair play.The founders of Home Depot and Costco, on the other hand, came up with shady schemes, breaking fuzzy laws that gave them exclusive advantage based on illegal price fixing and/or faux wholesaling, backed by billions in bank financing. Home Depot co-founders Bernard Marcus and Arthur M. Blank, by their own admission, figuratively “sat on the sidewalk in front of the bank” until they were bankrolled in the billions. They literally then steam rolled the competition, undercutting small businessmen and tradesmen by colluding on prices with big suppliers.Yes, Walmart is a tough negotiator. Yes, it uses strong-armed tactics. And, yes, it buys from China, and yes, it is big.But Walton’s basic philosophy that everybody studied was inventory control. In other words, have everything people want to buy on the shelf and nothing else, and have it there all the time; and never run out. Control the inventory and then buy that inventory on contract for the lowest possible price. Basically, it was a matter of efficiency, using computer innovation and inventory. Walton’s idea was customer-driven; he was there to give the customer what he wanted. And he hired good people, and Walmart still does.Home Depot, on the other hand, first knocked out all the plumbers and brick masons and shutter and floor shops and everybody else in town. Then it hired them back, utilized their expertise until it built up its business, and then fired them and cut down on the number of employees.. If it hadn’t been for competition from Lowe’s with more experienced people and cleaner and nicer store and more employees cutting into HD’s market share, HD wouldn’t be trying to be more friendly.Big Bankers Oppose WalmartOne of Walmart’s biggest enemies, of course, is the central bankers. Walmart is the largest retail operation in the world. And the bankers want their share. When Walmart tried to form its own bank, the bankers came down on Walmart with everything they could muster. If Walmart could operate its own banks, like ADM, Walmart could set its own pace for raising money.Bankers, as the primary financiers of the entertainment industry, oppose Walmart for two reasons: 1) it restricts adult rated materials (a nude girl, some pictures and you’ve got instant profit). Walmart is moral because it is catering to a wide, family clientele. 2) Walmart makes its own deals; it doesn’t need to go through entertainment industry brokers for its videos, audios, records… It deals direct, say, with Garth Brooks. That’s very upsetting to the bankrolled entertainment monopoly. It doesn’t want single player competition, either in finance or entertainment. And of course the big drug companies like the volume that Walmart sells but they don’t like the screws Walmart attaches to them.Target Second BestTarget, more than 100 years old, tried to follow and copy the merchandising of Sam Walton and came out second best. And Sears has made so many bad decisions it can hardly keep up with them; it even managed to destroy its Craftsman line.Even today, you can walk into Walmart, stand there for a second and find what you want just by looking up at the aisle signs. Incredible! And when you check out, and you have 100s of items stacked to the ceiling, and the cashier’s starting to run them through hitting the numbers, and as fast as you can bag, she’s running them out. And just when you get the last candy bar into the bag, she hands you the receipt. Nobody can match that. Go through Safeway’s check out; it’s forever.With my devalued Fed notes, I’ve switched to Walmart. If you want to compete businesswise with Walmart locally, find a niche that Walmart doesn’t have. In short, take up the slack: sell boot jeans instead of relaxed fit.And the NYTimes dares call James Sinegal’s and Jeffrey Brotman’s Costco “the anti-Walmart.”

Ungrateful PeonAugust 2nd, 2009 at 3:45 pm

Whatever Walmart might have been, it has morphed into an un-American, tyrannical international enterprise (monopoly wouldn’t be a stretch) that sub-contracts slave labor through its clients by essentially forcing them to find the lowest possible price. It destroyed small / local businesses and paved the way for the off-shoring of decent paying American jobs.Where’s the fair play?

GuestAugust 2nd, 2009 at 4:37 pm

Fair play? Do you think you’d be better off if Target and its policies were top dog? Many Americans simply join in the undercurrent that the bankers and promoters are stirring up against Walmart for their own ends. They probably even hire people to propagandize against Walmart, as Target does.And it wasn’t Walmart that “paved” the way for the off shoring of America: it was the bankers and CEOs that orchestrated the hostile acquisitions and mergers of America’s manufacturing base in the 70s and 80s that did that. And, as Jeffrey Blankfort points out in “The Israel Lobby and the Left”: “Jews played a central role in American finance during the 1980s, and they were the chief beneficiaries of that decade’s corporate mergers and reorganizations.”Richard J. Herrnstein and Charles Murray, authors of “The Bell Curve,” published in 1994, wrote: “The proportion of CEOs who came from wealthy families had dropped from almost half in 1900 and a third in 1950 to 5.5 percent by 1976. The CEO of 1976 was still disproportionately likely to be Episcopalian but much less so than in 1900—and by 1976 he was also disproportionately likely to be Jewish…”I do not see how anyone can attribute the off shoring of America to Walmart. Walmart isn’t a manufacturer. Walmart is a retailer.

Ungrateful PeonAugust 2nd, 2009 at 7:18 pm

If encouraging the off-shoring of slavery, driving down the wages of productive workers, crushing the democratic voice of unions and the entrepreneurial spirit of local businesses, is ethical, then I’ll eat my hat.Give me the pornography! At least I know what I’m getting.Walmart is indeed a retailer, and, I suspect, a front for one the most ingenious forms of marketing a plantation mentality in the 21st Century.

Ungrateful PeonAugust 2nd, 2009 at 9:11 pm

@ MM CA “Sue me! Walmart is Bad for this country. period! They have destoyed main street and small business. If truth be told, if one looks hard enough you can find better products at comparbale prices than Walmart sells thier junk for. China and other countries love Walmart, its thier big tie to the american consumer. Walmart is nothing more than a glorified dollar store. As matter of fact the Dollar stores are doing great financially and Walmart hates them. The stuff they sell is comparble with the crap Walmart sells, albeit a much smaller variance of crap.WALMART=CRAP JOBS and WAGE DESTRUCTION!”Sue me too! I absolutely agree with you.

MM CAAugust 2nd, 2009 at 7:40 pm

Target and sears are irrevelant, they jsut try to surive year to year. there is nothign wrong with who they serve and the market they serve. They are not big enough to hurt the eceonomy, unliek walmart. I have been saying for 10 years Walmart is bad for this country and I still believe it. I’m not sure latley who is worse, Walmart or Wall Street firms like GS and the banks. All I will say is get rid of GS, Merril, Citi, BOA and Walmart and then we can get some real economic fixes going. Let free capitism replace them. all they do is manipualte the “free capitalsim” most people think they are a part of, but in reality are not.

GuestAugust 2nd, 2009 at 8:29 pm

Some people compare apples to oranges and it doesn’t work out. In comparing Wal-Mart to Wall Street, you’ve compared apples to rat poison.Wal-Mart is a highly successful, capitalistic, free enterprise, consumer-oriented retail establishment that competes on the same anti-American economic field that Congress designed to appease the internationalists. Wall Street and Goldman Sachs and the central bankers are a criminal cartel. And if I were Walmart I would sue for libel.As for Sears/K Mart (the marriage from hell), and Target, I am not for affirmative action for retail establishments. And do they need your sympathy? Sears Holdings Corporation is the eighth largest retailer in the United States, trailing behind Wal-Mart, The Home Depot, Costco, Target, CVS Caremark, Walgreens, and Kroger.

Ungrateful PeonAugust 2nd, 2009 at 8:37 pm

Free market capitalism is a fallacy in my opinion – a ruse that constantly sucks in victims. It assumes that everyone can know everything at all times and has access to all the information that they need to prosper (the ‘invisible hand’). Impossible! 600 billion people aren’t going to sacrifice themselves for a fantasy.That’s where libertarian, free-market capitalism fails. Same shit, new century and common folks have stopped buying it.

MM CAAugust 2nd, 2009 at 8:42 pm

Sue me! Walmart is Bad for this country. period! They have destoyed main street and small business. If truth be told, if one looks hard enough you can find better products at comparbale prices than Walmart sells thier junk for. China and other countries love Walmart, its thier big tie to the american consumer. Walmart is nothing more than a glorified dollar store. As matter of fact the Dollar stores are doing great financially and Walmart hates them. The stuff they sell is comparble with the crap Walmart sells, albeit a much smaller variance of crap.WALMART=CRAP JOBS and WAGE DESTRUCTION!

ChignosAugust 2nd, 2009 at 11:29 pm

You guys keep yelling “sue me!” and by golly some greedy enterprising American’s gonna do just that.

GuestAugust 2nd, 2009 at 3:33 pm

Obama NEW DEAL doctrine: dont work hard for your money, or we the gov, will slap you with higher tax. in fact, if you like, quit your job, we will extend unemployment benefits over and over for everyone, we will never not let anyone fail. Obama, the savior for mankind, and Pelosi. 🙂

GuestAugust 2nd, 2009 at 4:39 pm

You do not get unemployment benefits if you quit your job, dumdum. You obviously didn’t concult any facts before you decided to talk about what you know nothing about.

GuestAugust 2nd, 2009 at 10:04 pm

doesnt matter, with Obama and Pelosi NEW DEAL WELFARE NATION YES WE CAN, no document, no proof, no nothing, fast-track qualification to unlimited unemployment benefit. it will be like originating toxic social welfare program. just look at CASH FOR CLUNKER program.

GuestAugust 2nd, 2009 at 5:48 pm

Hey MM CA,I suggest another aspect to your NO JOBS and WAGE DESTRUCTION mantra — Baby Boomer Competition! (Medic has refered to this in the past, but I suggest folding it into your mime.)With the TPTB (big five banks, financial industry) continuing to plunder pension funds, there will be no retirement for baby boomers. This is creating a mini-crisis in its own way. The 20 and 30 year olds do not seem to recognize this as a problem at the moment, but eventually there will be a backlash of youth vs old and making room for the youth in the job market.On the other hand, many boomers have 20 somethings are living at home or off-the-dole of parents. So this population will want their parents to keep working!

GuestAugust 2nd, 2009 at 6:48 pm

Notice in AARP’s reasons for America’s growing employment and lowering standard of living there is no reference to the real reason: The Fed is plundering the U.S. economy and the American taxpayer in its domination through monopolization of the nation’s social credit all the basic creative activities of the nation, destroying the civilization into which it has been introduced:AARPBulletintoday | Economic Fears Make Retirement a Dream DeferredBut retirees looking for work find fewer jobs, fierce competition | July 14, 2009Excerpt[T]he unemployment rate for Americans over 55 is at a record level. Thousands of older Americans are losing their jobs, and many others want to either keep working or get back in the job market as their financial insecurity soars.Sara Rix, a policy analyst for AARP, said the organization’s recent research shows that workers are pushing back their expected retirement because of market losses. Many who once expected to retire at 62 now expect to work until at least 65.A survey by the Conference Board, a nonprofit research group, shows that Americans over 55 have had their confidence in the economy shaken. In January 2008, its index measuring how confident Americans over the age of 55 felt about the future stood at 84.6. By last February, that figure had plummeted to 22.1, although it has since recovered some ground.This sense of insecurity is making older Americans willing to work longer. In March 2001, before the first signs of the collapse of the Internet stock bubble, 32.8 percent of Americans above the age of 55 considered themselves part of the labor force—either working or seeking work. Today the comparable rate is 40.2 percent.Over-55 unemployment rate upBut the figures also bring more discouraging news. The Labor Department reported this month that the unemployment rate for people 55 and over in June was 7 percent, more than twice what it was a year ago. For men in that age group the jobless rate leaped to 7.7 percent, up from 7 percent the previous month; for women it was 6.4 percent, a sharp rise from May’s 5.8 percent.Older Americans are not only losing jobs, but also finding it harder to get new ones. People ages 55 to 64 needed an average of 30.3 weeks to find a new job, longer than any other age group, according to the June employment report.Yet even as older Americans increasingly scour the marketplace for jobs, economists have been surprised by the rapid pace at which employers have sliced the labor force. Many economists expect the national unemployment rate to soon top 10 percent.What’s behind the surge in unemployment?Gad Levanon, senior economist at the Conference Board, cites these factors for the dramatic rise in joblessness:• Increases in productivity allow employers to cut the number of workers more swiftly.• There’s a growing trend of hiring temporary employees, who easily can be laid off or furloughed.• The “cultural barrier” to layoffs is much lower than it used to be.Economist Mark Zandi of Moody’s Economy.com notes that massive layoffs began last fall when, in the midst of a financial panic, many U.S. firms feared their companies would go bankrupt. “Literally, they felt it was a matter of survival,” he says.Another reason unemployment has proved so stubborn is that companies tend not to hire new workers until they see clear evidence the economy is turning around. And the evidence for a strong recovery is not yet obvious.“Employment is always slow to catch up with what is happening when we come out of the recession,” said John Challenger, CEO of Challenger, Gray and Christmas, a Chicago-based outplacement firm.However, Challenger notes that in the current recession “there really seem to be many, many people over the age of 50 who are stuck right now in the category of ‘long-term unemployed’—without work for more than 27 weeks. They really are struggling to find their way back into work right now, and the jobs just don’t seem to be there.”http://bulletin.aarp.org/yourmoney/work/articles/economic_fears_make_retirementa_dream_deferred.html

MM CAAugust 2nd, 2009 at 7:33 pm

I’ve written before abotu the impending pension bubble. last i checked its about a 1 trillion dollar shortfall… Somone is goign to take the hit and guess who that will be, Thsoe hoping to retire and those already retired and not dead yet. look at what has happened to airline pensions, auto pensions and many other pensions the past 5-8 yars or so and then it wasnt a big deal, because the eceonomy was “ok”. i expect the pension bubble to hit hard and furious sometime by end of 2011 and Fortune 5000’s earnign will be deavasted by trying to fix it. i work for one such company that has over 250k pension particpants and the plan is underfunded by over 7 Billion and growing by the day. IRS and Gov are going to have to force Companyes to take the hit in fixing it. I guess the gov’t could try a bailout, but… And if stocks go back down to 5000-7000 range what the pensions fund go under faster then the Banks have been. It’s one of the reasons i beleive the Gov’t/FED/Treasury ahve been propping up the stock market the past 4-6 months, they cannot deal with the pension problem and obligations.As for 20-30 somethings i agree, a lot, not all, seem oblivious and count on mom and dad more than ever to help them. problem is mom and dad are deep shit now too…Maybe someone else on here can do the pesnion bubble research… and report

farnorth5August 2nd, 2009 at 8:22 pm

Good Points MMCAThe fact that the pensions were mostly involved in Share Values,and people behind the scenes knew:A/ The massive amountsB/ The fact the fundamental notion of Stability rests with a pension fund being totally Diversified(Stocks /Bonds /Real Estate etc.) ,( Originally 30 years ago.in some cases ,investments in stocks where limited to only 15% of the total for the sake of long term stability.)People in charge were really in a dream world,between the Company not being able to keep up its contributions and the funds that existed being malinvested.The END was quite predictable.All you required was the plan to invest either in 100% Company shares OR 85% Stock Market plays.Either way the Grade 6 math didnt work when the market tanked or the Company failed.The fundamental principal of DIVERSIFICATION was ignored in most cases…

The AlarmistAugust 3rd, 2009 at 3:39 am

You know, in the good old days people had the sense to fall apart in their late fifties, retire in their early to mid sixties, and die before they were seventy, thus sparing themselves and society the tremendous burden and troubles of being old and expensive. If only people would return to the old wisdom, but it is hard to do that when cigarettes and smoking are out of fashion and being actively discouraged.

GuestAugust 2nd, 2009 at 6:01 pm

Yesterday the website WikiLeaks* published TOP SECRET information about loans made by Kaupthing bank just before the Big Meltdown last October. The info is a 209-page inside document containing slides used at a meeting of the bank’s loans committee on September 25 last year.Rumours had been circulating about large-scale money transfers from the bank during the days preceding the bank collapse last fall. The leaked document shows definitively that massive loans were made to a select few during that time, most notably the largest shareholders in the bank and associated parties.http://icelandweatherreport.com/2009/08/kaupthings-loan-book-exposed-and-an-injunction-ordered-against-ruv.htmlWikileakshttp://wikileaks.org/wiki/Financial_collapse:_Confidential_exposure_analysis_of_205_companies_each_owing_above_€45M_to_Icelandic_bank_Kaupthing%2C_26_Sep_2008The report…http://88.80.16.63/leak/kaupthing-bank-before-crash-2008.pdf

MM CAAugust 2nd, 2009 at 7:44 pm

CASH FOR CLUNKERS : $4500 tax incentive, no money down, No interest and if you lose your job no payments or turn your car back in. Now how is that helping anyone? Are’nt those all the same things that caused some of the problems with debt in thsi country.I dont get the buisness plan for autos in this country as it pertains to them amking money and the lenders making money. Makes no sense..How the President of the United States can hold a press conference (the other day) soley on Cash for Clunkers and claim eceonomic victory is beyond me. Does he think Every Average Joe american is stupid?What am i missing?

GuestAugust 2nd, 2009 at 8:10 pm

You are not missing anything. I guess when the GDP blips because of this program we’ll hear more from our elected officials about how it was a success and the recessions over thanks to programs like this. Never mind about the interest bill to the taxpayer that goes on ad infinitum to pay for this program.

HayesAugust 2nd, 2009 at 9:09 pm

and then there is this:WASHINGTON, Aug. 2, 2009White House Adviser Won’t Say No To Tax Increasehttp://www.cbsnews.com/stories/2009/08/02/ap/politics/main5205019.shtml

GuestAugust 2nd, 2009 at 9:55 pm

well Obama and Pelosi putted their feet down and backstop AUTO industry. “CASH FOR CLUNKERS” is really cash to bailout auto industry.

GuestAugust 2nd, 2009 at 11:38 pm

Pelosi, Obama , Reid they all make Bush and his idiots look smart. And Bush and his cronies were the dumbest ever…. Pelosi, how did she get where she is…

Ungrateful PeonAugust 2nd, 2009 at 9:32 pm

@ Guest on 2009-08-02 20:30:33″I know why your mother named you Ungrateful Peon.”Ouch! That hurt. Who’s your mother?

GuestAugust 2nd, 2009 at 10:20 pm

is it me or people are blind to inflation trend. go to supermarket. goods are either priced up or size has shrink down. it means dollar in our hand is losing purchasing power as FED target 0% rate, price of good will go up or our life standard will go down. and higher tax on all American will guarantee lower living standard for everyone.

GuestAugust 3rd, 2009 at 3:40 am

I just got an ice cream cone at a local farm market. It was $3.00, $0.50 (20%) higher than a few months ago. I’m noticing increases like that on food in supermarkets and warehouse clubs. We may have asset deflation, but we have food inflation.

GuestAugust 2nd, 2009 at 10:42 pm

Catastrophic shortfalls threaten economic recovery, says world’s top energy economistBut the first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, has found that most of the biggest fields have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. On top of this, there is a problem of chronic under-investment by oil-producing countries, a feature that is set to result in an “oil crunch” within the next five years which will jeopardise any hope of a recovery from the present global economic recession, he said….the market power of the very few oil-producing countries that hold substantial reserves of oil – mostly in the Middle East – would increase rapidly as the oil crisis begins to grip after 2010.http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html

Ungrateful PeonAugust 2nd, 2009 at 11:56 pm

@ Chignos on 2009-08-02 23:29:16 “You guys keep yelling “sue me!” and by golly some greedy enterprising American’s gonna do just that.”pfffffft … I’m shaking in my boots.The parasitic class has nothing left to feed on. They’ve managed destroy the source of their own unproductive wealth, and, I suspect, that us peons will manage just fine without them.Speculation, of course.

MM CAAugust 3rd, 2009 at 12:00 am

More on Pensions, of course Calif has to be at the top of the problem. looks like they may have a 300 Billion dollar problem.Public pensions draw scrutiny amid Calif. crisisSACRAMENTO, Calif. – California’s rapid economic decline has prompted Gov. Arnold Schwarzenegger to propose what once was unthinkable — rolling back generous pensions in a state heavily influenced by public employee unions.The Republican governor said he’s motivated by the need to save money. California has at least $63 billion in unfunded pension liabilities, an amount equal to roughly two-thirds of all annual general fund spending.The concern is shared across the country, as local and state governments wrestle with hundreds of billions of dollars in unfunded public employee pension and retiree health care costs.New Mexico this year approved longer work requirements — from 25 years to 30 years — for state employees starting in 2010.New Jersey last year raised the minimum age to qualify for benefits from 60 to 62.Kentucky now requires new police hires to contribute 1 percent of their pay to help cover retiree health benefits.And Georgia has started a hybrid plan for new state hires that blends a defined-benefit pension — with set payments based on salaries — and a 401(k).In California, Schwarzenegger dropped long-term pension reform from negotiations with lawmakers to close the state’s $24 billion budget deficit. He said this week that he would press for pension reform now the state has enacted revised spending plan.”Again, everyone understands we are running out of money,” he told reporters. “We cannot continue promising people things that we cannot deliver on.”His proposal would not change the pension system for current workers, but would lower benefits for new employees. His office said such changes would save the state some $95 billion over 30 years.His administration has estimated that unfunded pension liabilities — money the state has promised to pay without earmarking where the funds will come from — could be as high as $300 billion if current investments fail to generate the projected returns.But the reform proposal met with quick resistance in a state where large public employee unions contribute heavily to Democrats, the state’s majority party.The potential for reduced retirement benefits adds to concern that California will not be able to attract qualified employees, said Christopher Voight, executive director for the California Association of Professional Scientists.For example, he said, the state needs microbiologists to test for swine flu, but has a hard time keeping them because they tend to leave for better pay at private labs.Schwarzenegger wants to start by undoing a retirement package passed by California lawmakers in 1999 and signed by then-Gov. Gray Davis, a Democrat.Most state workers can retire as early as age 55. Their pension is based on 2 percent of their final salary multiplied by the number of years they worked. The payments rise with inflation.For example, a civil servant with 30 years in state government who made $70,000 a year could take early retirement at 55 with an annual pension of $42,000. Under Schwarzenegger’s proposed reform, they couldn’t retire until age 60.Employees in high-risk jobs — such as firefighters — can receive up to 90 percent of their salaries if they retire at age 50. Under Schwarzenegger’s plan, they couldn’t retire until age 55.Retirees also are promised health care coverage for themselves and their families, a benefit that can cost the state $1,100 a month per retiree, according to the California Public Employees’ Retirement System. Schwarzenegger’s proposal doesn’t tackle health care.To reformers, changing the state’s retirement system is as much a matter of fairness as one of cost.The Center for Retirement Research at Boston College found that while 43 percent of private employers offered some type of retirement plan in 2006, they tended not to be as generous as public employee packages. Private-sector workers also rarely receive retiree health care coverage, meaning most have to work until they can start drawing Social Security and Medicare at age 65. Workers born after 1960 will not be eligible to retire until 67.”People are upset,” said Schwarzenegger’s economic adviser, David Crane. “They don’t have a defined benefit plan and ask, ‘Why am I paying for someone else to have one?'”Public employees do shoulder a portion of the commitment, contributing to their retirements through payroll deductions.Ed Hass, 54, said private companies need to do more. He found a job with the Department of Corrections in 2007 in large part because of the guaranteed pension.”You’ve heard of Enron, right?” he said. “Not only did (employees) all lose their jobs, they lost all their retirement tied to Enron’s stock.”Government workers and their union representatives often say the more generous pensions offset lower pay.But the latest U.S. Census survey, from 2007, shows the average annual salary of California state government employees was $53,958, compared with $40,991 for the average private-sector worker.”The pension benefits for public employees in California are extravagant and they are going to bankrupt cities and counties, along with the state,” said Keith Richman, a former state assemblyman who said he plans to launch an initiative campaign to change state employee pension benefits.

MM CAAugust 3rd, 2009 at 12:04 am

Intersting Article… Good read.Confidence is liquidityhttp://theautomaticearth.blogspot.com/2009/08/august-1-2009-confidence-is-liquidity.htmlIlargi: As we see ever more or less credible voices join the imminent everlasting recovery choir, this looks like a good moment in time to once again paint the picture of why we at the Automatic Earth will not sing along.Nothing has been done to cleanse the financial system of its afflictions, open wounds and ailments, nothing has been achieved but the application of insanely expensive bandages, courtesy of you, designed to hide the lethally infected debt sores.The longer the bandages stay on, the more people will say: “Looking good, there, boyo!” In fact, you look so good, how could you possibly be dying, or even be sick at all to begin with?And if you die anyway, we’ll all sing -and unashamedly lie through our teeth-, along with the President, who managed to claim today that the recession was ”even deeper than anyone thought” when he took office. Yeah, anyone at all. Sure. That is a bold faced lie, sir. Tell me, my American friends, what does a nation do when it finds its newly elected president lying? What do you think it should do?Our dear friend Sharon Astyk asked us a few days ago how we see events developing over the coming months. That’s a task, of course, for Stoneleigh (just got to find the nearest phonebooth). Here’s her response to Sharon:Stoneleigh: People have often asked us what event we see precipitating the next phase of the decline once this rally is over. In short, there is no need for a precipitating event as market moves are essentially endogenous.I have no doubt that something will be rationalized as the cause after the fact, but it will not actually be causal. It is closer to reality to say that causation runs the other way – that market moves make the news than that the news moves the markets – although it is actually social mood that drives both.As confidence ebbs and flows, people behave differently and perceive reality differently, and they do so collectively without being consciously aware of doing so. The exact same events can be rationalized totally differently depending on whether the prevailing mood is pessimistic or optimistic.Social mood is extremely ‘catching’ (see mirror neurons), and is the foundation of herding behaviour, of which markets moves are but one manifestation. Market timing involves probabilistic predictions based on herding behaviour. For this to be possible without foreknowledge of specific future events, about which foreknowledge is impossible, those events must not be causal to market moves.Anyone can guess at what may happen that will end up being described as the precipitating event after the fact. It could be an attack on Iran, an outbreak of a more virulent form of swine flu, a terrorist attack, a flare up of violence in one of the world’s many powder keg regions, a rapidly escalating trade war, a high-profile assassination or any one of hundreds of possible events.Such specifics are not predictable, and the rally will eventually end with or without them, once the most aggressive speculator has made his bet and the biggest sucker has been fleeced. The concern is that whatever happens could (and probably will) be used by the unscrupulous to channel the fear and anger of the herd in the direction of simplistic blame.This fall is a reasonable possibility for the resumption of the decline, following a late summer recovery high. This is, however, not cast in stone. As a trend progresses, more and more people buy into it, until it begins to win over even the skeptics.The more hold-outs who capitulate to the trend, the closer it is to a reversal. Already we are seeing some notable bears sounding uncharacteristically optimistic. They may not yet be accepting the recovery mantra, but they are seeing the rally lasting for a long time.The more bears switch sides, the more bearish the message, as it is evidence that the herd is moving towards an extreme. When received wisdom, in this case as to recovery, is almost unanimous, then the trend will have gone about as far as it can, and the stage will be set for a sharp reversal. I think we are already seeing many clues that we are getting late in the trend.Once the decline resumes, liquidity should dry up again very quickly. The rally has seen liquidity return with tentatively increasing confidence, which has made covering up the toxic mess very much easier, but that will prove to be very temporary. As liquidity disappears again, the intractable problems will be laid bare again, leading to a logjam in the financial system and rapidly increasing pressure for it to burst in a market cascade.In a very real way, confidence IS liquidity. A firesale of assets could originate almost anywhere, which would reprice asset classes across the board. The CDS market in particular is a powder keg with a short fuse.I expect the coming decline to be longer and much stronger than the downward phase, so next year should be an almost unmitigated disaster from start to finish. If you are still waiting to cash out then I would not wait much longer.

The AlarmistAugust 3rd, 2009 at 3:49 am

I’m a permabear and I announced I was bullish week before last, so the end must really be nigh, which is why I then shorted everything.

Arthur's ghostAugust 3rd, 2009 at 12:43 am

“As the global economy goes toward growth as opposed to a recession, you are going to see further increases in commodity prices especially next year,” Roubini said today at the Diggers and Dealers mining conference in Kalgoorlie, Western Australia. “There is now potentially light at the end of the tunnel.”- Why can’t he be honest with us and say “I was wrong. I stuffed up. I misled you all and caused you to lose out on the recovery rally. I was a pratt. Sorry about that but I was on a mad ego trip. I’ll now keep my big mouth closed and go back to teaching kids in university.”

Arthur's ghostAugust 3rd, 2009 at 12:48 am

And another thing: Why does he keep wearing the same tie and suit? He must be making a fortune with all his gigs. Why doesn’t he tart up his crumpled jet-lagged image? At this rate the recovery will be over before he buys a new tie.

The AlarmistAugust 3rd, 2009 at 3:53 am

The Rumpled Professor look is part of the marketing schtick … . You would treat his prognostications as snake oil if he dressed like a banker.You will also see commodity prices climb as the currency is further debased, but I don’t hear much of that being bantered about.

Little SaverAugust 3rd, 2009 at 4:43 am

Some more green paint scraped off:An enormous number of banks are holding loans at or close to “par” that really aren’t. They’re holding mortgages at massively-inflated values, even on defaulted properties, and this is why you are not seeing more foreclosure sales – that is, why inventory is being held back. If they sell it the accountants will force recognition of the loss, which will render them instantly insolvent, but so long as they “extend and pretend” they are marking these loans way, way above recovery value. The upshot of this is that these firms’ balance sheet claims on asset values are massively inflated, regulators know it, and they’re intentionally ignoring it.I have been sounding the alarm on this for more than a year; it has in fact been the focus of multiple petitions to Congress and the cause of thousands of dollars of personal expense faxing letters and Tickers to members warning them of the danger of letting this sort of accounting misdirection continue.The claim of banking sector health and “successful rescue by Treasury and The Fed” is in fact false. No such thing has occurred. What’s going on here is nothing more or less than intentional false claims of asset “valuation”, which is repeatedly exposed when the FDIC is finally forced to seize institutions, exposing the lies. Then, suddenly, 20, 30, even 40% losses on alleged “asset books” come out into the light and the taxpayer eats them.http://market-ticker.denninger.net/

FEDupAugust 3rd, 2009 at 11:17 am

good points! Our President and Congress has joined Wall Street and the FED in this “con game” of false claims of asset valuation in order to bring back confidence to the American people and world economies in the desperate hope that they will not stop spending and buying our debt.

SoftwarengineerAugust 3rd, 2009 at 11:44 am

MANUFACTURING NOT CONTRACTING AS FAST? STOCKS SHOOT UPWhen did optimism get rated on the rate of degradation?If they said manufacturing is still contracting, IMO its like a hopeless patient in ICU getting worse, but at a slower pace.Then they said residential building was supposed to contract 0.5% for June [is this an after-the-fact allegation and if it was an official estimate for June 2009, where’s the written analyst proof/study referenced in the MSM story?] but it went up an unknown amount. [0.000001% LOL]….or more likely it actually contracted -1%, but the historical unreliable statistics in MSM on the economic forcasts are so COMPLETELY wrong the last few decades, it was likely tweaked optimistically, for the support of the anomalous news story, driving hungry stock buyers into the market in error today? Why does it take a month to get June data too, they need time to massage the story?Today’s MSM “ALLEGATIONS” in part:“…The Institute for Supply Management said that while manufacturing activity slowed during July, it did so at the slowest pace in nearly a year. The private trade group said its manufacturing index rose to a better-than-expected 48.9 from 44.8 in June. A reading above 50 indicates growth.And the Commerce Department reported a jump in residential building during June that lifted overall construction spending for the second time in three months. Analysts had expected a 0.5 percent drop. The report provided new evidence that the housing sector may be recovering….”The rest of the URL:http://finance.yahoo.com/news/Stocks-extend-gains-after-apf-12879424.html?x=0

GuestAugust 3rd, 2009 at 11:23 am

Survey shows Goldman’s reputation damaged – FTNEW YORK, Aug 2 (Reuters) – Investment bank Goldman Sachs’ (GS.N) reputation among both the general public and financially sophisticated Americans has been damaged by the events of the past year, the Financial Times reported on Sunday, citing research conducted for the paper.The paper said a survey of 17,000 Americans by Brand Asset Consulting found that Goldman’s stature had suffered in 2008 and 2009.While long-time rival Morgan Stanley (MS.N) also suffered a decline in stature in the survey, respondents liked and respected Morgan Stanley more than Goldman, the paper said.The biggest U.S. investment bank has faced a torrent of unwanted publicity including an unflattering spread in Rolling Stone magazine, which accused the bank of having a key role in various market bubbles stretching back to the 1920s.Goldman was not immediately available for comment.http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN0248722420090803

Ungrateful PeonAugust 3rd, 2009 at 12:31 pm

Congratulations to Matt Taibbi! Real journalistic reporting rises to the surface in a sea of corporate media swill and obfuscation.Keepin’ it real for us peasants.Bravo!

AnonymousAugust 3rd, 2009 at 11:56 am

Military vs. Non-Military Durable Goodshttp://globaleconomicanalysis.blogspot.com/“Sometimes a chart is nearly all you need to understand the story. This is one of those times.” MishMilitary vs. Non-Military Durable GoodsDURABLE GOODS SHIPMENTS AND ORDERS/ PERCENTAGE CHANGE FIRST HALF ’08 TO FIRST HALF ‘09MILITARY/SHIPMENTS/ ORDERSAircraft +23/+18Other Military +10/-6TOTAL MILITARY +15/+3NONMILITARY/SHIPMENTS/ORDERSPrimary metals -40/-44Fabricate metals -12/-18Machinery –18/-29Computers –18/-20Communication equipment –33/-18Semiconductors –33/naElectrical equip. & appliances –20/-26Motor vehicles & parts –30/-31Aircraft –7%/-65%TOTAL NONMILITARY -20/-27Source: Census Bureau via Haver Analytics (See link for complete chart showing Durable Goods Shipments Percentage Change from 2000 Average—it’s a dandy.)

SoftwarengineerAugust 3rd, 2009 at 12:13 pm

WHO’S DOING A LION’S SHARE OF THE STOCK BUYING LATELY? AND DIDN’T THEY PUT MARTHA STEWART IN PRISON FOR INSIDE TRADING?The FT article in part states:”….The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party….””…However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price….”The rest of the URL:http://www.ft.com/cms/s/0/e84383dc-7f8c-11de-85dc-00144feabdc0.html?nclick_check=1

GuestAugust 3rd, 2009 at 12:39 pm

AIG selects Robert Benmosche….source:Aug. 3 (Bloomberg) — American International Group Inc., the insurer bailed out by the U.S., has selected former MetLife Inc. Chief Executive Officer Robert Benmosche as the company’s fifth leader since 2005, the Wall Street Journal said, citing unidentified people familiar with the matter.http://www.bloomberg.com/apps/news?pid=20601087&sid=aKaM0.GLMaSkIn 1998, Benmosche succeeded Harry P. Kamen at MetLife as the insurance giant’s chairman and chief executive officer. MetLife had $1.7 trillion worth of insurance in force in the U.S at the time., more than any other insurer in the nation

GuestAugust 3rd, 2009 at 1:23 pm

Zero Hedge Guest Post on 08/03/2009: Dr. Blankfein, Or: How I Learned To Stop Worrying And Love Goldman Sachs by Max KeiserThe Financial Crisis was a Hoax. The global casino is open again.No worries! You actually believed there was a problem when Paulson and Bernanke threatened Congress last year with Martial Law; to blast the U.S. economy back to the 16th century; to crash the market unless ransom was paid requiring each American to fork over $100,000, give or take, dollars in impossible-to-payback future loans today to add to the hundreds of thousands each American already owes forever.HAHAHA. It’s all good, bro. Goldman Sachs and the other cruel sisters of syphilitic lending are reporting huge profits and bonuses. Analysts are begging Wall St. to raise their debt ratios and risk profiles to increase leverage to thousands of times equity back to where it was before their competition Bear Stearns and Lehman Brothers were murdered. The bubble machine is whipping up cash like cotton candy machines at the end of an endless pier stretched over an ocean of easy credit, pay check loans and Cash for Clunkers.All efforts to remove the investment banking tapeworm from our collective colon have failed, but that’s a good thing. We poked the monster at 85 Broad St. and made it angrier and greedier in ways never thought possible and daddy’s feeling fine. Ain’t no audit going on at the Fed, bud. I’m so happy I could just plotz. You’re gonna LOVE what happens next. Insatiable greed meets infinite moral hazard when Goldman eats the Fed.We’re on the cusp of another financial eclipse. The Shadow of Wall St.’s banking pyramid is covering the U.S. dollar in a blanket of Chinese sell orders.Embrace the moment. While Wall St. has been off-loading last year’s crooked schemes; CDO’s, High Frequency Trading, and Ponzi profits engineered by pilot-less computers firing a million trades a second into the heart of capitalism a whole new generation is waiting in the wings to get cold-called from Wall St. and sold a few thousand shares of today’s hot IPO:NEW YORK (Reuters) – “PennyMac Mortgage Investment Trust (PMT.N), which buys distressed home loans and is run by several former Countrywide Financial Corp executives, on Wednesday raised $320 million from an initial public offering, $80 million less than planned.”The Calabasas, California-based company sold 16 million shares at $20 each. It had on July 16 projected an offering of 20 million shares at $20 each. The company had also said it hoped to raise $400 million from the offering. The company plans to operate as a real estate investment trust. Its shares are expected to begin trading on Thursday on the New York Stock Exchange under the symbol ‘PMT.’ Bank of America Merrill Lynch, Credit Suisse and Deutsche Bank Securities Inc arranged the IPO.”Your neighbor will be ‘making a killing’ as re-re-re-repackaged sub-sub-sub-prime debts bought from the government – who bought them from Goldman – who bought them from the government before skyrocketing from $20 to $2,000 while you relax aboard the Virgin Gallatic to outer space.The CCX (Chicago Climate Exchange) owned in part by the same double dealing banks that have been rigging the game in New York, Beijing, Tokyo, Moscow and all points in between invites you to play in the carbon futures market. In the UK, DTQ’s (Domestic Trade Quotients) give homeless people a swipe card that will top up with credits as a result of having relatively minuscule carbon ‘foot prints.’ Greed and good will finally be trading side-by-side 24/7 and anyone looking to hedge their wickedness can go long altruism for pennies on the dollar.Political futures will become much bigger as state economies fail and gambling becomes legalized. Sites like InTrade that offer ways for punters to make political bets, as some bet that Obama would be President when his chances were less than 5% did, and make a bundle. The McCain camp tried to manipulate that market remember, but you knew that. That’s why you shorted McCain at the top!Hollywood futures will be much bigger. Look for studios to sabotage each other’s projects by short selling and ‘naked’ short selling competing projects on the Cantor Exchange to drive the perception of a film’s popularity down before it’s released. No problem, just spend more on marketing. More money will be made trading box office futures than at the box office. Inside information will become legal. Milton Friedman will rise from the dead and advise the Honduran government. Brat Pitt will star.High Frequency Trading (HFT) aka ‘flash trading’ will continue to grow exponentially. Trading will become so fast, time itself will have a public offering after Microsoft secures a patent on it and trading time futures will catapult traders backwards and forwards through time until they need bailouts on debts they have not yet incurred. Tim Geitner will sell his house in Larchmont.Cloning time traders will get Congressional approval confusing the boundary between time and money further causing Warren Buffet to pass a kidney stone that looks exactly like Larry Ellison. Time Bandits will steal the DNA of time trading clones and sell the proprietary code to a Japanese housewife who will use it to crash the Icelandic Krona (again) because she thinks she’s over paying for a plate of sushi in Reykjavik.People will start taking themselves public on new Citizen Exchanges created by Obama; commit public sex acts to boost their stock price then short themselves before committing suicide to cash in out-of-the-money puts they bought on themselves. As a result, the porn industry will need a bailout.Babies will abort themselves to avoid declaring bankruptcy on charges racked up on in vitro credit cards force-sold to them by Visa through their Verizon owned umbilical cords.Facebook and Twitter will go public and will each have market caps bigger than Google causing the NASDAQ to shoot to all time new highs. Users will tweat and blog for insider stock. Perez Hilton will become a billionaire. The more you look in the mirror the more you get paid. Narcissism will get monetized by the Feds with some help by Nassim Taleb.Thanks Lloyd Blankfein, current CEO of Goldman Sachs and future President of the United States.https://www.magicformulainvesting.com/marketing/servlet/forms/MFI/Marketing/forms/WelcomeForm

GuestAugust 3rd, 2009 at 1:41 pm

Barclays Analysts: House Prices Still Fallingby CalculatedRisk on 8/03/2009From Bloomberg: Mortgage-Bond Rally May End on Housing Reality, Barclays Says (ht James)While an S&P/Case-Shiller index for May showed the first month-over-month price increase since 2006 and a 2 percent seasonally adjusted annualized drop, a more-accurate reading probably would have been an annualized decline of 10 percent to 15 percent, [Barclays’ analysts Ajay Rajadhyaksha and Glenn Boyd] wrote…. seasonally adjusted home-price data has been skewed higher during the spring months of this year and last year by an “amplified” version of typical patterns, according to the analysts. More homeowners sell their properties during those months, cutting the share of foreclosed homes being offloaded at distressed prices, as new buyers focus on “desirable neighborhoods” where values hold up better, they said….Data reflecting a reversal of the seasonal benefit, as well as “a tide of new foreclosure sales” as a moratorium on the seizing of homes put in place by banks subsides, will lead to “renewed weakness” in the fall, they said….They project that U.S. home prices will fall an additional 11 percent on average before bottoming next year, bringing the total decline to 40 percent from their peak.This is similar to the argument Mark Hanson made last week (See: Housing Bottom? No, the Mother of All Head Fakes). I think we will see further price declines in the mid-to-high end bubble areas where the prices have still been sticky.http://www.calculatedriskblog.com/

GuestAugust 3rd, 2009 at 1:53 pm

“DEAD BANKS WALKING” | Financial Senseby John Browne, Senior Market Strategist, Euro Pacific Capital | July 29, 2009ExcerptIn the early years of this century, major money-center banks and shadow banks incurred irrational risks and paid themselves unimaginably large bonuses. They were termed “gambling casinos” and deservedly drew fire when their bets went south. But instead of forcing these irresponsible firms to pay for their bad behavior, the federal government forced the general public to rescue them.The Treasury and Fed instituted four key measures intended to boost the banks’ earnings, which in turn, would boost their share prices, improve their capital ratios and force their share prices upward.First, Congress was pressured into giving instant approval to the $750,000,000,000 Troubled Asset Relief Program (TARP). This massive sum of public money was designed to buy toxic assets from the banks.However, the government soon realized that buying some toxic assets would create a real price and thereby threaten the inflated value of other toxic assets held by financial institutions worldwide. The initial TARP plan was dropped in favor of injecting billions of dollars into certain banks, leaving the toxic assets on their books. Meanwhile, the true values of these toxic assets were officially camouflaged by the initiation of “exceptional” accounting changes.The injection of free TARP funds enabled the recipient banks to enter a charred landscape that was, nevertheless, bristling with easy profits. For example, $10 billion of TARP funds enabled Goldman Sachs to make leveraged trades during the bear market rally of the last four months. Though this is the same activity that caused its downfall, Goldman now assumes a government guarantee on its risk-taking. With no limits on their appetite for risk, record profits are theirs for the taking.Second, some of the shadow banks, such as Goldman Sachs and Morgan Stanley, were allowed to become bank holding companies. This change allowed them access to the Fed Window to borrow at zero percent interest. This greatly increased the profit margins of the banks day-to-day lending operations.Third, the reduction of Fed rates to below one percent has steepened the yield curve, enabling banks to take six to eight percent plus spreads in lending to boost earnings.Fourth, for the first time, the Fed is paying interest on bank reserves. This meant that all banks can borrow at zero and lend back to the Fed at an interest rate spread of some three percent, thus boosting earnings further. The downside is that banks are discouraged to lend to risky companies and individuals while they can lend at no risk to the Fed. Therefore, despite political pressure for banks to lend, credit remains tight.With the great privileges listed above, and with the competitive landscape improved by the disappearance of Lehman Brothers and the absorption of Bear Stearns and Merrill, it is little wonder that the surviving banks earned more. A firm like Goldman Sachs, with its stellar earnings, is now effectively a hedge fund subsidized by taxpayers.However, toxic assets remain on the books of the banks. In addition, problems in the commercial property and consumer lending field loom menacingly.The Fed has also acknowledged that, eventually, it will need to sharply increase interest rates to “mop up” all the liquidity its pouring into the world economy. This action alone, if the Fed ever has the nerve to execute it, could bankrupt every financial firm that survived the initial crisis.Should earnings falter and banks stumble for a second time in the face of a looming $3.4 trillion commercial mortgage problem, the entire U.S. stock market could follow suit.That would be the crisis we’ve been predicting. Better be prepared.http://www.financialsense.com/fsu/editorials/schiff/2009/0729.html

ChignosAugust 3rd, 2009 at 6:25 pm

Tarp, Talf, the Stimulus, Public Option, the Obamas’ expense accounts……..it’s all cash for clunkers.

GuestAugust 4th, 2009 at 6:48 pm

Bernanke said in public, no rate increase until end of 2011. “it will need to sharply increase interest rates to ‘mop up’ all the liquidity” after end of 2011. wow that is 2 or 3 years from now.

PeterJBAugust 3rd, 2009 at 9:14 pm

Time perhaps to review the reign of Didius of Rome for similaries to current events; they appear almost identical in principle.Ho hum

GuestAugust 4th, 2009 at 8:38 am

pjb,all that research for nothing? i was beginning to see thesimilarities with didius!still laughing concerning “keep him in the job sohe doesn’t get away.” going on 3 days now.peas

SoftwarengineerAugust 10th, 2009 at 4:17 pm

Even Obama knows the tripe, bad statistics and false rosy predictions won’t work anymore, to justify an amnesty overpopulation economy. Especially as his upper 5% of household incomes running/managing the Democrat party start experiencing the same horrifying depression level unemployment [with underemployed, giveups and not counted included] as the other 95% of household incomes. He’s lost his mouth piece.Read the following excerpt from my website, it came from a book author named Pete:”…The biggest obstacle we face in changing attitudes toward overpopulation is economists. Since the field of economics was branded “the dismal science” after Malthus’ theory, economists have been adamant that they would never again consider the subject of overpopulation and continue to insist that man is ingenious enough to overcome any obstacle to further growth. This is why world leaders continue to ignore population growth in the face of mounting challenges like peak oil, global warming and a whole host of other environmental and resource issues. They believe we’ll always find technological solutions that allow more growth.But because they are blind to population growth, there’s one obstacle they haven’t considered: the finiteness of space available on earth. The very act of using space more efficiently creates a problem for which there is no solution: it inevitably begins to drive down per capita consumption and, consequently, per capita employment, leading to rising unemployment and poverty….”

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