first the third time. Gues who I am

look at gold, hyperinflation is here. forget deflation.

The Recession is OverAs long as 50% of Americans maintain their household income to 1999 levels, inflation adjusted.The rest of Americans don’t matter to the Democrats or Republicans when calling the economy, they can eat cake.After-all, $250K/yr household income elite is Middle Class [ask Clinton]. The 50k/yr average household income in America [which has been stagnant since 1999] can eat cake.This type of news is not found in economics textbooks or political bandwagon hype, it came from blogs; but it makes perfect common sense to me. Article in part:”…The press release also said:“More people were working, especially from households living in smaller flat types. The monthly household income of those living in 3-room HDB flats or smaller also grew by over $300 from $1,910 to $2,220. Even after factoring for inflation, this translated to a 3.5% per annum increase in real terms”.However, this increase in household income may be due to more people working per household rather than an actual increase in household income. What we need to know is the employed per household data – whether it has gone up – and the extent of it resulting in the 3.5% increase….”The rest of the URL:http://groups.yahoo.com/group/Sg_Review/message/5749?l=1As America’s phony unemployment count passes over the fact that one person is working two jobs to get by and/or there’s three people working per household so they can eat, rather than the old 1.4 average….the conundrum of a flat household income at $50K looks far worse today than 1999.LOL….yes the recession is over for the 50% of Americans that still ahven’t lost their good jobs…..that is, until they get butcher axed too.

unemployment as an indicator???i like to use this as my measuring stick67… 67 old dude offed himself with a shotgun!!he maybe have another 5-10 years to live, yet decideto go to dreamland..THIS IS NOT YOUR NORMAL EFFING RECESSION..http://www.bloomberg.com/apps/news?pid=20601087&sid=aXX9.46XaVU0Sept. 9 (Bloomberg) — Finn M.W. Caspersen, the former chairman and chief executive officer of Beneficial Corp., was found dead from an apparently self-inflicted gunshot wound to the head, authorities said. He was 67.Police, responding to a call to check on him, found Caspersen on Sept. 7 behind an office building in the Shelter Harbor community of Westerly, Rhode Island, where he owned a home, said spokesman Edward St. Clair. He died from a single gunshot wound, the medical examiner said.

The first third time first guest?

my bet is he wasnt selected as one of the “golden” ticket holder..sumthin is brewin…

there is no such thing as “exit strategy”.

yes, he knows the truth, but always told at the wrong time

Actually, that’s a pretty good issue to discuss, along the lines of “what constitutes ‘victory’ in Iraq?”It’s like removing heroin from a junkie and expecting the junkie to sill maintain his/her sense of euphoria- ain’t going to happen!So, what it’s really about is changing monetary policy, changing/reversing the direction. How about we all discuss what this means?

Another rally based on the banks? Seems that Citi has been the pump of late, lots of shares “traded.” Is it, and other financials, the primary contributors to the rise in the DOW?All this confidence yet gold is pushing $1,020/oz and oil is nearly $72.50/bbl. I think that these items represent reality, whereas the DOW, based on financials, is but an illusion.

hahahayou go live in denial. loser. watch gold, stock market go higher and higher. hahaha

The King Report: A Tale of Two Cities: Wall Street vs. Main Street; the stock market vs. the real economyBy Barry Ritholtz – September 16th, 2009, 10:00AM>Long-time readers know that for years we have inveighed that there is a huge, historic disconnect between the stock market and the economy due to funny money. Easy Al and now Benito have transformed the stock market and other markets from gauges of the economy to generators of economic activity via their deployment as asset bubbles.Ergo one must now be a technician to not only navigate and profit in the markets but to insure against a career-ending misadventure, either on the downside or upside.Yesterday Bernanke said the recession has probably ended. If the recession has ended shouldn’t the Fed at its meeting next week at least stop QE and the massive monetization of mortgages?Benito: “Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time”.Most everyone realizes that despite Bernanke’s assertion, there is no exit strategy for the Fed and US government so the implementation of an exit strategy is months into the futures.The problem is inflation is on the march. The usual suspects trumpeted the better than expected retail sales number but ignored the disturbing 1.7% surge in August PPI just as they have been ignoring the record surge in prices paid (inflation) in purchasing manager surveys.Traders and investors must contemplate what course of action the Fed will announce and enact after next week’s FOMC if ‘the recession is probably over’.If QE, which is due to expire, is renewed, stocks should rally but commodities, gold and inflation plays should rally far more. The dollar should tank. China should go apoplectic. Benito will look foolish for saying “the recession is likely over”. Bonds might rally initially but then look out below.If QE is not renewed, stocks and commodities should tank; the dollar should soar and bonds after initially declining should rally. China will be appeased. Benito will have validated his rhetoric with action.Given that the select few have been informed about coming policy before the non-connected, it is incumbent upon investors and traders to scrutinize the usual suspects for hints about Benito’s next ploy.

The Unsung Heroes of the Financial Crisis

And here is that link again to the article I mentioned …href=”http://mises.org/story/3663″>Financial Decline of Ancient RomePeteCA

It all depends-For the Goldman Sachs wives there wasn’t a recession, so there’s no recovery.If you live in Cleveland you’ve been in a recession for about 15 years, and there’s no recovery for you, either.If you pizza pies across the street from Morgan Stanley maybe there is a recovery for you.wdm223

Catalyst to meltdown:H1N1 going parabolic. The vaccine is too late. In a month shit will hit the fan as the economy shuts down as too few workers are available to keep small businesses running. This is going to be much bigger than regular seasonal flu.http://www.cdc.gov/h1n1flu/updates/us/#iligraph

Molly Brogan, spokeswoman for the National Small Business Association, said swine flu has the potential to do serious harm to some fragile small businesses that already have been pushed to the edge by the recession.”I think you’ll see a lot of business owners stretched to the max,” Brogan said. “You’ll see stores shut down a day or two. In this economy, you can’t afford that. Unfortunately, there aren’t a lot of other options.”http://www.washingtonpost.com/wp-dyn/content/article/2009/09/14/AR2009091403261_pf.html

There Better Be an Exit Strategy

An America in economic turmoil from uncontrolled growth debt with no end isn’t in the world food hunger aid mood. 1 billion huingry mouths depend on America getting back in the food aid business again and it hasn’t been this bad in 20 years. Reuters article in part:

“…Food aid is at a 20-year low despite the number of critically hungry people soaring this year to its highest level ever, the United Nations relief agency said Wednesday.

The number of hungry people will pass 1 billion this year for the first time, the U.N. World Food Program (WFP) said, adding that it is facing a serious budget shortfall…”

The rest of the URL:

http://tinyurl.com/kudcw4

g,well then load up on vitamin c, garlic andother phytochemical type, green, orange, blueetc. foods and stop eating flesh. that couldsave not only the business but the head and heart.and invert if possible. if not practice tillyou can. drains the legs and helps the lungswhich will become overcome by gravity, inactivityand fluid should the flu become lethal. head itoff at the pass.warning, this is not medical advice. it isobvious and simple and true. if requiredfind an expert who knows how to breath andrequest a lesson, or find the book that describesthe technique. funny, not funny, but dis easeis often a function of improper breathing.it is almost enough to make you want to be sick,this consideration.the flu is one thing. terminal debt is another.lets not confuse them though they may be connectedprobably at the level of breathing where ‘most everything is connected.

ITS SWINE FLU,ITS SWINE FLU,ITS SWINE FLU,ITS SWINE FLU,ITS SWINE FLU,ITS SWINE FLU,ITS SWINE FLU,ITS SWINE FLU,Right now. It’s the catalyst. It’s going to cause hundreds of billions of dollars of damage STARTING RIGHT NOW. It’s parbolic now. The vaccine is too late (even after you get it it takes weeks to build immunity). It’s going to take down this bubble stock market. SHORT EVERYTHING. DO IT NOW!!!!

Problems Posting to the Blog Have Been ResolvedI contacted technical support about the problems being able to post to the blog and told them they may be losing posters because of it. They say it has been fixed.I hope PeteCA and all others will begin to post more again.This was their response:”Thank you bringing this to our attention. There were indeed technicalproblems when posting new comments to blogs (replies were stillworking). This has been fixed. I apologize for the inconvenience thishas caused. Please let me know if there is anything else I can assistyou with today. Thanks!”

What’s the point of these comments …I would say that it’s really the old lesson of “learning from history or being doomed to repeat it”. What the lessons from the Romans teach us is that once an empire gets into a mode of being overcommitted in foreign policy, and drowning in debt, then very essential rights of the citizens are abrogated. Democracy gives way to political oppression, fair taxation gives way to increasing burdens of fees and penalities, currency is debased and never restored, laws promoting equality are replaced by a two-tier standard of justice. These are real dangers, and perhaps we should not be too comfortable in ignoring them.I found these comments about Rome interesting because I am a resident of California, and my own state is drowning in debt. Since they are unable to print money, and borrowing will likely become very expensive, I fully expect to see a spiralling tax burden.The comments above are not offered as a criticism of the Obama administration, but rather as a set of deeper concerns that affect everyone. I don’t see the points are being part of a Democrat vs. Repuiblican debate. I think they mark a series of dangers that could harm our great Republic if we don’t take them seriously. Once we allow our nation to become a slave to debt, we are at risk of no longer being free men or free women. It’s a not a process that will happen quickly, but rather a steady erosion of rights and privileges that eventually undermines our complete way of life.PeteCA

Gee, wasn’t raising taxes one of the factors that exacerbated the Great Depression? Seems we only paid attention to the bits we liked.

Do you seriously think the lower 95% will escape higher taxes? What do you think ‘mandatory’ health insurance premiums will be? That plus higher Soc Sec ‘contributions’ will be needed to fund both sets of entitlements. New gas taxes for ‘green’ purposes will also hit the poor disproportionately, and if they are driven into public transport, the ever increasing fares on those will also hit them hard.As for the the comment about ‘revenue that our government should have anyway,’ that statement is nonsense when juxtaposed against your plea for a system that values wealth creation.The only sensible solution is for the govt to go back to its constitutionally mandated roles and to get out of the business of wealth transfer, but that is unlikely to happen in our lifetimes. The teabaggers you disparage have rationally made a claim for sensible tax policy, but you don’t seem to be listening.

‘Hide replies’ in that sub thread will fix the problem, but … YOU BETTER NOT DO IT AGAIN!;o)

this as it relates to reflation, recouping loses,fulfilling peak price contracts, obligations..some will be reflated.. some will just sink. but,it is good to know the system is recovering… one memorable quote….”He taught me to think in points, not dollars, andhe always used to say, “It’s just points, it is not money.”He gave me an ongoing tutorial in disassociating oneselffrom the result of the trade, yet still having passion about it.”.Absolute Return + Alphahttp://www.absolutereturn-alpha.com/Article/1964187/Louis-Bacon.htmlLouis BaconJune 2008.Who has had the biggest influence on your career?My friend Paul Tudor Jones. We were both Southerners in the big city of New York. Paul got me my first job, with E.F. Hutton as a runner on the floor of the cotton exchange. That was many moons ago, but I would say that his real mentorship came when I started trading commodities and launched a CTA fund. I didn’t know that it would turn into a hedge fund, but when I started to raise money for a hedge fund, he was a big supporter with his investors.His approach to research and trading had a real impact too. He wasn’t worried about small stuff. He taught me to think in points, not dollars, and he always used to say, “It’s just points, it is not money.” He gave me an ongoing tutorial in disassociating oneself from the result of the trade, yet still having passion about it.Why do you live in London?Living here gives me broader perspective on a number of different countries. I find it ideal to be based in this time zone, and I use the time advantage to set up early for the U.S. markets.How do you decide where to invest?We tend to make top-down, interest-rate-driven investments. We’ve been pretty U.S.- and European-centric throughout most of Moore’s history, and we have been pretty closely focused on what happens with the interest rate cycle and the reactions that it drives around the world. But our focus is shifting now because micromarkets — and those can be anything from individual equities to commodities and emerging markets — are becoming more and more dominant.What accounts for Moore’s success?Hard work, patience, knowing when to hold ’em, fold ’em or go all in. We have a rigorous risk framework, and although I do not micromanage every position, my portfolio managers understand the risk format prior to joining the firm.Does the label “global macro” reflect your style?We kind of had the moniker “global macro” thrust upon us. We didn’t sign up for it. But I look at it as kind of the 007 license to do whatever we want, and we’re in a period now where globally there is no lack of opportunity: in fixed income and currencies and the distressed and credit markets. We don’t have to try and decide to make our money in any one instrument or strategy — we can invest in private equity, individual equities or arbitrage. We feel that we are versatile enough that we can move into a number of different strategies, and if doing that means that we’re global macro, then we’re not going to argue with the label.Are there historical precedents to the current turbulence?You can find similarities, but this situation is shaping up to be a long-term bear market — and it is corresponding with a secular decline in American financial power. You have to hark back to the ’70s to get an equivalent sense of loss of U.S. control. At that point in time, though, the U.S. had no natural economic rivals. Now there are a number of emerging markets, like the BRICs — Brazil, Russia, India and China — that are vying for power and showing economic leadership. They may, in time, rival U.S. global dominance.How worried are you? Especially about inflation.The U.S. has gotten out of a number of really difficult economic situations where inflation was a pressing issue, so there is an expectation that we’re going to get out of this crisis, too. But I’m very concerned, given the negative savings dynamic in the U.S. and the inability of our politicians and people to acknowledge that we have the financial structure of a third-world economy dependent on leverage and dissaving, coupled with an addiction to foreign goods and oil. Other competing economies are much more disciplined.What was your best trade?I’m lucky enough to have more than one. The first was a complete market malfunction. In the crash of ’87, I happened to be short Nikkei contracts, and as we were finishing up and closing the books late on that Monday night, the Nikkei futures opened at 4,000 — it had closed the night before at 28,000! I bought shares to close the short position between 8,000 and 18,000. It was incredible buying the second-largest stock market down by almost two thirds.Had I not been in the office during those 15 minutes after the market opened, I would have missed it. The lesson was that a good part of success is predicated on showing up and putting in time.The second great trade, or a great exit, was in the last week of the Nasdaq rally in March 2000. We were really worried about what the Fed was going to say, so we sold close to $2 billion of Nasdaq futures just before the bottom fell out. Now that sounds great, but I had told my head trader earlier in the week to get rid of all of our technology longs we had been riding for months. But he didn’t sell anything that week, so we ended up with a lot of dot-com equity on our balance sheet. Not executing the entire trade cost us dearly, however beneficial selling at the peak of the market. The lesson was, Don’t rely on others when you are really sure.The last one, last year, was probably where we made the most absolute money, and that was in subprime. We traded around the position very poorly and yet made a ton of money. The lesson was that picking the right investment will trump any lousy trading around it.Worst trade?I have probably blanked them out of my mind — not enough memory for them.What’s it like to work for you?We run a laissez-faire, entrepreneurial shop. I started my career in futures, and the rallying cry was always free markets for free men, so I’ve tried to create an open architecture here for traders to test their ideas and thrive. I think that we have a good understanding of risk, but we take a different approach to it. We prefer to see what our traders want to have as their individual risk profiles, and then we fit our assets around those to modify our net exposure.Should hedge fund managers give back?They should, and they do, probably more so than other pockets of wealth, perhaps because after mastering the markets on their wits, they believe their wealth is replicable. In 1992 we founded the Moore Charitable Foundation, which aims to conserve and protect our natural resources. Conservation remains underfunded relative to other charitable causes, and the organizations we support are working to slow the loss of Earth’s resources.What’s the most pressing issue facing the world?A Malthusian population explosion intersecting with globalization. We have encouraged all 7 billion of the world’s inhabitants to live like Westerners, and now that they have taken the bait, we are realizing it is impossible on this small Earth. The first big hit has been to the environment; the next, which we are witnessing, is to energy prices, and it is leading to food shortages and eventually more famines.Governments are only starting to address the problem, and the planet’s most inventive and powerful economy, America’s, is leading only from the rear, if at all, given our present administration.— Interview by Loch Adamson.http://registeredrep.com/advisorland/leisure/louis_moore_bacon_record/.Hedge-fund manager Louis Moore Bacon of Moore Capital Management, LLC, just set a new record for the highest price every paid for a piece of residential real estate in the U.S. For $175 million, Bacon purchased 171,400-acre Trinchera Ranch in Colorado from the Forbes Family. Bacon’s purchase trumped the previous record set by Wall Street veteran Ron Baron, who paid $103 million for property in the Hamptons..http://www.marketfolly.com/2008/07/hedge-fund-manager-interviews.html.http://www.forbes.com/global/2004/1220/072.html.http://www.nytimes.com/2009/06/09/business/09hedge.html.http://www.nytimes.com/2009/04/15/business/15indict.html?_r=1&fta=y

Here’s what our future looks like… No end in sight…CHART OF THE DAY: Are You Ready To Pay $31,000 For Health Insurance?If healthcare inflation continues at the same pace it has over the last 5 years, then you’ll be paying $31,000/year for health insurance for your family by the year 2019, according to the Kaiser Family Foundation.If we’re really lucky, and it’s only as bad as it was over the last 10 years, then you’ll only be paying $24,180 per year.What, you don’t pay for health insurance cause your employer pays for it? Get real. It’s just coming out of your salary.http://www.businessinsider.com/chart-of-the-day-projected-health-insurance-premiums-for-family-coverage-2009-9

What Was Your Worst Trade?I offer the following story for the purpose of shared wisdom … with a sense of humility and a sense of humor. There’s no losss to me to share these tips, so why not. The article immediately above stirred some memories of my “worst trade”.Very briefly, when I was trading commodities, I decided to diversify my trading book into agricultural products. I studied corn. I read books on corn. I stared endlessly at satellite maps of US weather, analyzed patterns of drought and rainfall, and read all about ethanol. My kids used to keep coming up to me and saying stuff like … “Hey Dad, don’t you live in the city? Why do you keep reading about corn???”. Actually, if I had any brains I would have realized that they had a point. But “trading” has a way of becoming a mind-altering experience In the end I convinced myself that there would not be enough corn in the current years crop – even if a bumper crop of 88-89 million acres was produced. So I went LONG corn. And I waited – like everybody else – for the all-encompassing crop report. Crop reports are BIG DEAL in ag commodities. You win – and lose – on them. I still remember reading that report with total shock. American farmers had planted 92 million acres of corn!!! Ahhhhh!!! Corn prices plunged. My trading position went into a serious loss, and to make matters worst I kept holding it because I figured it would turn around (it didn’t!).Here are the morals of the story (for those of you who are tempted to trade commodities):1) The futures market is a shark tank. Small speculators are just fishfood. If you’re reading a book on commodities trading then ask yourself one question – if the author is so great then how come he doesn’t just make money by trading? Good point.2) If you don’t believe item 1), then for goodness sake trade through a broker. Yes, trades through a broker cost an arma nd a leg, but the advice that he/she gives you might save you a very painful experience. I could tell you horror stories about “trading platform” software packages that are marketed to naive traders.3) Money management is MUCH more important than making brilliant trades. Someone who realy knows how to manage money and risk can do pretty well for themselves, even if they only have a few really good trades and a lot of mediocre ones. But this kind of experience comes only after painful lessons about hope, emotions, and hunches.4) Never underestimate the American farmer! Never. I swear, if news came out that cabbages were going to be the high-profit crop next year, farmers in this country would find a way to plant 100 million acres of cabbages!!!In spite of my horror story with corn, I made out well with other trades. And I took a well-earned break from the high-risk commodities markets so I could spend time with my family.Have fun. PeteCA

IT’S OVER……

paul’s son, u are black sheep.

i am the real god, follow me!

生平愛乃西打牌不碰西

Bravo, PeteCA! You hit every nail squarely on the head. I’m sure many readers identify with your experience. I would like to add that the same advice applies to stocks, and the current rage, gold. Anyone interested in investing in gold should have a time machine that will take them back to around 2002 when gold was $250 per ounce. Even if you don’t believe the conspiracy theories about gold being manipulated, gold is extremely difficult to trade and not for beginners (like myself!). It is as volatile as a penny mining stock, and if you do the sensible thing and use position sizing, you can count yourself lucky if you break even. It is a given that if you are a beginning trader, you must experience–as PeteCA illustrates–some shocking and horrendous losses before you really get the idea behind money management, even if you think you understand the concept. It is noteworthy that, although gold is increasing in dollars, it is going nowhere in euros. Ironic that the world’s “insurance policy against declining currencies” seems to be priced to fleece as many sheep as possible. In terms of fleecing sheep, better to buy an Irish jumper–at least it’s warm, helping to reduce fuel bills, and a pleasure to look at. Gold is cold and a pleasure to look at. The next gold coins to be minted should display a fleeced sheep.

To be or not to be, that is the gsrnmblotz.

According to LEAP2020 USA should have already collapsed by now What are the LEAP guys latest predictions?

Where is everyone? Am I the only one posting or is there a computer glich?Obama? Where’s Obama?

I’m not really big on the von Mises site in general, but this is an interesting lecture you posted. Thanks.SWK

There was a significant increase in the highest marginal tax rates on income in the 1930s, but I’m not sure this was a major factor in exacerbating the Great Depression, so much as were the premature tightening of monetary policy due to fears of inflation and a reversal in federal fiscal stimulus out of a misplaced concern about balancing the budget, which together led to the double-dip of 1937.SWK

Sacrifice the disabled veterans for the banksters. great policy doc.

NOT SOLVED !Just wrote a post, and if I hadn’t copied it first, it would have been lost.It seems as if there is a kind of “time out” : if you compose a lengthy post and don’t copy it to the clipboard, you will lose it.

does anyone seriously believe that this rally will reach new highs over 14000 on the Dow as would be expectedIF we are really in a BULL market? All we have seen so far is massive injections of cash into the markets by thegovt., massive insider selling, a banking sector near death, millions of foreclosures, job losses, etc.

Desperately seeking an exit.

Mish is wrong about dollar rebound. Dollar will fall below $70. no FED exit strategy -> QE party continues. YAHOO!!!

NO JOBS! so we just continue along the 500k-600l weekly NEW CLAIMS and all is good! by my math. Folks everyone is being lied to baout jsut how bad the NO JOBS problem is… They are using accounting trickery to manipulate the numbers. When you look at how much and how high the INSIDER selling is and has been and the amount of CEO’s and TOP 5 Officers of companies that are all RETIRING there is jsut one conclusion… THESE JOBS are goen Forever and Even the Top Dogs know there is a big problem coming for Corp america.We have over 30 Million out of work!!!! whos going to feed, house and provide their medical needs?New Jobless Claims Still Stubbornly HighA slight improvement in the jobs picture, but still very little for econ bulls to hang their hat on:MarketWatch: The number of people filing for state unemployment benefits for the first time fell 12,000 to a seasonally adjusted 545,000 last week, the lowest since mid-July, the U.S. Labor Department reported Thursday.Initial claims have been in a fairly narrow range for the past nine weeks, down about 125,000 from the peak in March, but well above levels typical of a healthy economy.The number is modestly better than expectations of 563,000, but we’re still talking about the same ballpark.

agree MM. I was in a Super Target the other day (Florida) and there were 2 out of 28 cashier lines open! Theplace looked like a ghost town. People who are informed or who have lost their job are only buyingessentials at this time. Of course, there are those who think we’ve hit the bottom of the real estatemarket and are buying homes (mostly short sales).

If debt transfers from the private balance sheet to the sovereign balance sheet, can you please explain to me why the PPIP program is in place? Is Blackrock and others not buying debt? Do you understand how TALF works?This is why most of you have missed the rally and didn’t find the many many stocks trading below book value.

Well, if you look at the first derivative, everything’s coming up roses since the rate of decline appears to be marginally slowing. But let’s see what’s going on here in real numbers:From August08-to-August09Total labor force -> – 490kChange in Unemployed -> + 4,804kChange in ‘Not in labor force’ -> + 2,471k————Implied number of jobs destroyed -> – 7,765kAnd gee, that’s just one year.As our friend says, NO JOBS!

The only “evidence” I have that this is just a bull chapter in an otherwise bear market is the rationale that I presented forward : the market assumes a growth model that is already broken.If somebody can please present forward a reasonable argument that explains how the 3.5% GDP growth pulled by 10% credit growth can continue in the years to come, I will be very interested. Leverage has of course a limit, with 350% debt over GDP, we have reached this limit, otherwise the data would show that private debt is continuing to grow, which it isn’t. Outstanding private debt, ie Consumer credit, mortgages, capex, etc is decreasing at a rate close to 10% per annum whereas in the past 30 years it grew at a rate superior to 10% per annum: GDP cannot grow at the 3.5% rate in this environment.This is a very straightforward rationale which seems to be missed by all neoclassical and neokeynesian economists, apart the few who studied the effect of leverage limits on growth such as Minsky.

If we consider as an/our asset, the credit (and creditworthiness) of the American people (taxpayers both current and future)is being extended unwillingly and unknowingly from the taxpayers to insolvent/fraudulent lending institutions via the Federal Reserve and to the Federal Government, what should we do to stop it? At what point, do our agents in Congress act as our fiduciaries and stewards to say enough! Our agent, Congress, has hired a double-agent the Federal Reserve that has stolen our credit card and is running up charges on it that can never be repaid. Unfortunately we cannot call visa or mastercard to report them. This is another reason to put the Federal Reserve under lock and key!Did anyone realize that the American people are referred to as “Pursuadeables” in a certain foreign government’s text “Global Dictionary 2009″? Please understand that all of the power of public relations is being currently directed at us to influence our behavior towards war, our monetary and banking systems, and our politics. There are masters of “creating circumstances and conditions” that are not in our best interest. Educate your self on these skills and those who master them to promote or defend current events.

WallMart in Beijing is now hiring. Americans are invited to work for minimum wage.OK, just joking PeteCA

You stated that you refuse to invest money based on short term speculation. What evidence do you have this is the case? I will only believe this is a speculative rally when the stocks I am holding finally reach well beyond 2x book or more. Currently, they aren’t even trading at book value. Amazing. These are profitable companies that have already suffered the worst, and now they have only recently been discovered by investors. Why would I sell now? Do you think we’ll suffer another collapse? No way, not now.We aren’t Rome, an isolated country issuing the only global fiat currency. Almost all countries issue fiat currency and adopting a gold standard would be highly deflationary. I think most posters on this board look way too far into the future and see possible negative outcomes, but things can change and change quickly and alter the trajectory of these outcomes. I prefer to look at what’s happening here and now, glancing briefly to the future for hints of what may be, knowing that as things change I too will alter my course.

All you have to do is enter a break in the URL so that it wraps to the next line. The URL will still work.

Guess what? I had planned to buy a new car before the clunker-stupidity program. My old car did not qualify for the rebate because of its fuel efficiency. In fact, you actually could purchase vehicles that were less fuel efficient than my old car and get a clunker credit. How’s that for a slap in the face to someone who made a wise choice. Plus, my tax dollars will now pay for a program that rewarded less responsible people. Is it any wonder people don’t make good choices when daddy is there to bail them out? I will still buy a new car, but I will wait. By my reckoning auto dealers will soon again become desperate.

Hey Novice….Let me make you feel better. In the City of Detroit you can drive 80 MPH, and you wont hit anyone, watch our for the junk though, and not get pulled over by a cop. You can also buy a house for $5,000 or less. Boarded up houses / office buildings abound. Most people who have a decent job / education live in the suburbs. But, in contrast, Buffalo sounds like a wonderfull place to live. It’s all relative. Cest la vie.

How many billions are you worth?

I will say this again and again… This time it is really different.. There is NO major economy in history that I am aware of that has had such leverage… Just the leverage on the books is approaching 400% of GDP but then there is all the leverage that is off the books…in the derivative contracts.No one, including AJ, who wrote the article that lead into this thread, is taking into account HOW we get to inflation when we already have so much debt. EVEN the Big Ben Helicopter Drop would only transfer it from one entity to another and TPTB have shown little regard for the already existing debt serfs. Their answer it to lend them some more money… What a joke!All 5 of PeteCA’s bullet points have already been met and are now deteriorating. Taxation was increased via fees and permits while the wealthy paid little of their gains to the system (as a percentage of their income compared to Main Street). Taxation on Main Street exceeds 60% of income and then add mandatory insurances, etc and there is little left for many families to exist on.. No! Any increase in taxation just exacerbates the debt collapse… AS will any increase in the costs of goods and services due to government interference and handing out favors to campaign supporters.And none of this includes the black swans of rogue waves or Swine Flue….

Stores shut down because they lack workers is probably the least of the hazard as people become afraid to go out in public and shopping centers are empty and Christmas is a total BUST!I know I have plenty of food and will not go out once the flue becomes evident here. Others who do go out will get the flue and they will spread it and it could be a real black swan event in economics as the modern day social shopping atmosphere that has so permeated America for the last couple decades is slammed by lack of income and fear.

NO SHIT!The Stimulus Didn’t WorkThe data show government transfers and rebates have not increased consumption at allFrom Wall Street JournalBy JOHN F. COGAN, JOHN B. TAYLOR AND VOLKER WIELANDIs the American Recovery and Reinvestment Act of 2009 working? At the time of the act’s passage last February, this question was hotly debated. Administration economists cited Keynesian models that predicted that the $787 billion stimulus package would increase GDP by enough to create 3.6 million jobs. Our own research showed that more modern macroeconomic models predicted only one-sixth of that GDP impact. Estimates by economist Robert Barro of Harvard predicted the impact would not be significantly different from zero.Now, six months after the act’s passage, we no longer have to rely solely on the predictions of models. We can look and see what actually happened.Consider first the part of the package that consists of government transfers and rebates. These include one-time payments of $250 to eligible individuals receiving Social Security, Supplemental Security Income, veterans benefits or railroad retirement benefits–and temporary reductions in income-tax withholding for a refundable tax credit of up to $400 for individuals and $800 for families with incomes below certain thresholds. These payments, which began in March of this year, were intended to increase consumption that would help jump-start the economy. Now that a good fraction of these actions have taken place, we can assess their impact.The nearby chart reviews income and consumption through July, the latest month this data is available for the U.S. economy as a whole.Consider first the part of the chart pertaining to the spring of this year and observe that disposable personal income (DPI)–the total amount of income people have left to spend after they pay taxes and receive transfers from the government–jumped. The increase is due to the transfer and rebate payments in the 2009 stimulus package. However, as the chart also shows, there was no noticeable impact on personal consumption expenditures. Because the boost to income is temporary, at best only a very small fraction was consumed.This is exactly what one would expect from “permanent income” or “life-cycle” theories of consumption, which argue that temporary changes in income have little effect on consumption. These theories were developed by Milton Friedman and Franco Modigliani 50 years ago, and have been empirically tested many times. They are much more accurate than simple Keynesian theories of consumption, so the lack of an impact should not be surprising.Indeed, one need not have looked any further than the Bush administration’s Economic Stimulus Act of 2008 to find plenty of evidence that temporary payments of this kind would not jump-start consumption. That package made one-time payments and rebates to people in the spring of 2008, but, as the chart shows, failed to stimulate consumption as had been hoped. Some argued that other factors such as high oil and gasoline prices caused consumption to fall during this period and that consumption would have been even lower without the stimulus, but no significant impact of these rebates is found even after controlling for oil prices.Consider next the government-spending part of the stimulus package. The Obama administration points to the sharp reduction in the decline in real GDP from the first to the second quarter of 2009 as evidence that the package is working. Economic growth was minus 6.4% in the first quarter and minus 1% in the second quarter, so the implied improvement of 5.4 percentage points is indeed big. But how much of that improved growth rate can be attributed to higher government spending due to the stimulus? If we rely on predictions of models, again we see disagreement and debate. According to our research with modern macroeconomic models, the increase in government spending would add less than a percentage point, a relatively small portion. The model predictions cited by the administration’s economists suggest a much larger portion: two to three percentage points. Prof. Barro’s model predicts zero.So let’s look at the data on the contributions of government spending and other components of GDP to the 5.4 percentage-point improvement. By far the largest positive contributor to the improvement was investment–which went from minus 9% to minus 3.2%, an improvement of 5.8% and more than enough to explain the improved GDP growth. Investment by private business firms in plant, equipment and inventories, rather than residential investment, were the major contributors to the investment improvement. In contrast, consumption was a negative contributor to the change in GDP growth, because consumption growth declined following the passage of the stimulus package.One is hard put to see what specific items in the stimulus act could have arrested the decline in business investment by such a magnitude. When one looks at monthly investment indicators–such as new orders for nondefense capital goods–one sees a flattening out starting early in the first quarter of 2009, well before the package went into operation. The free fall of investment orders caused by the financial panic last fall stabilized substantially by January, and investment has remained relatively stable since then. This created the residue of a very large negative growth rate from the fourth quarter of 2008 to the first quarter of 2009, and then moderation from the first quarter to the second of 2009. There is no plausible role for the fiscal stimulus here.View Full ImageAssociated PressDirect evidence of an impact by government spending can be found in 1.8 of the 5.4 percentage-point improvement from the first to second quarter of this year. However, more than half of this contribution was due to defense spending that was not part of the stimulus package. Of the entire $787 billion stimulus package, only $4.5 billion went to federal purchases and $17.7 billion to state and local purchases in the second quarter. The growth improvement in the second quarter must have been largely due to factors other than the stimulus package.Incoming data will reveal more in coming months, but the data available so far tell us that the government transfers and rebates have not stimulated consumption at all, and that the resilience of the private sector following the fall 2008 panic–not the fiscal stimulus program–deserves the lion’s share of the credit for the impressive growth improvement from the first to the second quarter. As the economic recovery takes hold, it is important to continue assessing the role played by the stimulus package and other factors. These assessments can be a valuable guide to future policy makers in designing effective policy responses to economic downturns.Mr. Cogan, a senior fellow at the Hoover Institution, was deputy director of the Office of Management and Budget under President Ronald Reagan. Mr. Taylor, an economics professor at Stanford and a Hoover senior fellow, is the author of “Getting Off Track: How Government Actions and Interventions Caused, Prolonged and Worsened the Financial Crisis” (Hoover Press, 2009). Mr. Wieland is a professor of monetary theory at Goethe University in Frankfurt, Germany.

For some very interesting comments on the GDP figures for the USA, take a look at the following link:http://financialsense.com/fsu/editorials/cnc/2009/0911.htmlhref = “http://financialsense.com/fsu/editorials/cnc/2009/0911.html”>Is the US GDP Being Manipulated?PeteCA

You have to wonder if the market is being set up for a major selloff in October. It would make sense, right? Buy the rumor … sell the news. They pump out stories about green shoots and an economic rebound until the start of October, then sell off the stocks and capture the profits.End result: More investor money transferred to Wall St banks to cover deterioration in crummy assets.PeteCA

The NEW ECONOMISTI see that the wise-ones in Sacramento are considering creating the Bank of California like the folks in North Dakota did in their state. This means that the criminal politicians could leverage their outlandish debt – pay ridiculously low interest on it and grow their way out of the criminal Camelot nightmare they find themselves in – well, at least for a few more years.The moral contagion continues to spread.Hey, perhaps each household could become a bank and leverage their holdings 10 to 1. Like this the “ball” could be dribbled down the road for who knows how long as the consumer ATM has been revived! I am surprised the criminal politicians in D.C. haven’t passed this in some legislation in order to “level the playing field”. Each household would also be free from the Mark to Marketing rule and buy derivative contracts to show “solvency” just like the big boys do.

Jasa,It is too mild. Not much damage will be done.But, there is always next year to look forward too.

Seems like “natural” population control to me.

As you have heard, corporate insiders are selling 30 shares to each one bought. But a trickle has turned into a flood.( DJ ) 09/17 12:39PM *WSJ: Toll Brothers Chmn Robert Toll Continuing To Sell Stk In Co( DJ ) 09/17 12:40PM *WSJ: Toll Brothers Chmn Sold 1.58M Shrs In Co Sept. 16http://www.zerohedge.com/article/bob-toll-once-again-joins-insiders-unprecedented-stock-selling-spreeSo this is how the parts of the Treasury’s Bank support money will leak into the economy?

More glimpses into the future:US cities may have to be bulldozed in order to surviveNext floor down…

Toll Brothers is housing. until they address the excess housing supply, theres no need for new homes. Home builders are just like Banks- they are dead men walking. anyone in the know in Corp America is getting out while the getting is good.

What kind of economy do we have?Can you use traditional methods of analysis?Do historical comparisons make sense?wdm223

Anyone in the know is shorting Wells. It’s big time shorted righ now.

The numbers keep getting uglier and scarier… Why is that this type of stuff is not hitting main street americans… it’s always buried on 8th page…. in simple terms these types of decling numbers would equal tanking US GDP. 70% of 13 trillion is 9.1 trillion. take, say 30% of that as gone away – thats 3 trillion gone form US GDP. and dont think for second that the other 30% of GDP is not getting hit. that is how we get to a GDP of 8-10 trillion. RESET in PROGRESS! Just that no one will admitt it…Nearly Half Of US Households Hit By Job Losses Or Pay CutsNearly half the country has had a pay cut or job loss in the last year, according to a new poll from the Washington Post and ABC News. A shocking 41 percent say that in the last year someone in their household has had their pay or work hours cut. Twenty-seven percent say someone in their home has been laid off or lost their job.Here’s the chart from ABC News and the Washington Post.http://www.businessinsider.com/john-carney-nearly-half-of-us-households-hit-by-job-losses-or-pay-cuts-2009-9

http://abcnews.go.com/PollingUnit/Politics/economic-crisis-abc-news-washington-post-poll/Story?id=8568179&page=1Year Two will be much worse!

one of the best links i have seen to insider Trading!Check out your favorite CEO, VP, President, CFO… lolhttp://www.finviz.com/insidertrading.ashx

PETECAWhy you think that major selloff will happen in october?Any logic or reasoning? Why you think bernanke would put his reputationon the line by declaring recession is over if your scenerio was to unfoldnext month?

Great article (from last week) by Satyajit Das. Love the Münchau quote!The Global Financial Crises’ Placebo Effects

Globally unbalancedReliance on Chinese foreign currency reserves is probably misplaced. Chinese reserves, a large proportion denominated in dollars, may have limited value. They cannot be effectively liquidated or mobilized without massive losses. Increasingly strident Chinese rhetoric about the safety of their dollar assets reflects increasing panic.In reality, China is trying desperately to switch its reserves into real assets – commodity or resource producers where foreign countries will allow. In the meantime, China continues to purchase more dollars and U.S. Treasury bond to preserve the value of existing holdings in a surreal logic. On the other side, the U.S. continues to seek to preserve the status of the dollar as the sole reserve currency in order to enable itself to finance itself. The intractable nature of this problem is evident in the frequently contradictory statements from various Chinese spokesmen regarding the official position on the dollar.No sustainable global recovery is likely without addressing the fundamental global imbalances that lie at the heart of the GFC (Global Financial Crisis).Placebo EffectsWolfgang Münchau, writing in the Financial Times on June 14, 2009, eloquently summed up developments. “Instead of solving the problems to generate a recovery, the political strategies have consisted of waiting for a recovery to solve the problem. The Europeans are relying on the Americans to generate growth. The Americans are relying on the Chinese, who in turn are waiting for the rest of the world.”The placebo effect is a pervasive phenomenon in medicine. A sham medical intervention may cause the patient to believe that the treatment will change his or her condition sometime causing the actual condition to improve. Conditioning, expectations and motivation all can play a role in placebo effect.In recent times, investors, markets and governments have all come to believe in the recovery, sometimes by selective interpretation of facts to support the conclusion that they need. As T.S. Eliot observed: “Mankind cannot take too much reality.”Given reluctance or inability to deal with the real problems, it is not entirely clear whether the GFC cures are real or inert treatments. It is also not clear whether current improvements in market and economic conditions are sustainable or merely a short-term placebo effect.

SWINE FLU IS GOING TO TAKE THE ECONOMY DOWN THIS FALL. SHORT THE MARKET NOW!!!~If the swine flu gathers force in the coming months, not only will city workplaces be on the front lines of the battle in terms of keeping the H1N1 virus from spreading, but employers could be coping with a decimated work force, between the sick and those afraid of infection.“It’s going to be a big problem,” says Dr. Marc Siegel, an associate professor at New York University School of Medicine and an expert on flu transmission. “In a worst-case scenario, this could paralyze the economy.”http://www.nypost.com/p/news/business/jobs/sick_daze_luQnp5YrLcudPWAY8d96aJ

Thinking about “decoupling”:Now that the intentions of the US FedRes plan as to the fate of the US Dollar, US Securities and the USA itself, appears to have been finally and visibly, er, clearly brought out of the ‘cave’ er, established, without much doubt, by the “leadership” of its own “democratic” sic, hand, for all to see – can we finally say that global “decoupling” (from the USA) has commenced?Will the US finally now rise to the challenge of repairing its own domestic affairs and interests of its citizens, that is to say, all those individuals that comprise the USA (and once made it the greatest Nation of all) by those elected to and responsible for its “governance”.Or, is the attraction of the quick, low risk, free, “let’s do lunch” buck too strong to bring sanity and the spirit of humanity to the fore? Reason? Accord? Logic? Honour?Or, does it take the full and final decoupling cum divorce by the rest of the World to indicate to the USA, that it is time to get its house in order?Keywords: Feeding-frenzy | insanity | decoupling | “leadership” | USA | doomed | governance | Constitution | Hello | physics | all-roll-your-eyes-now | “Oh Lordy” | kissy-kissy | desperateHo hum

I’m not Pete, but I’ll take a shot…1) October is THE historical month for markets to tank;2) We’ve had a build-up of highly over-bought stocks;3) Credit card and commercial real estate debt is starting to burst;4) Nothing has changed to reduce the likelihood of another blowout.

Casperson was apparently being investigated for tax evasion and suffering from cancer.http://www.nytimes.com/2009/09/16/business/16suicide.html?_r=1&scp=3&sq=finn%20casperson&st=cse

You know, the way the USD is going, RMB 9.60 per hour will no doubt start to look good to some people.

Tearing down old, unused and uninhabitable housing stock is not a bad idea. I hardly see this worthy of Armageddon thinking.

Wait a minute … the Gen X and Y slackers have been watching their parents work for years, so why will this change things now?

You are assumoing there will be enough people left in the back office to handle your order when you go to close out your short position. Your logic is flawed. Better you buy gold now and bury it in the back yard.

New infections by the pandemic H1N1 influenza virus rose 20% at colleges and universities last week as the nation edges closer to the normal flu season

Back in May, many other countries ordered swine flu vaccines that include boosters, called adjuvants, that reduce by half or more the amount of antigen (the imposter or inactivated infectious agent) a vaccine requires to be effective. The United States, however, ordered almost all of its doses in the nonadjuvant, or unboosted, form—an older model of vaccine, considered the U.S. standard, that uses more antigen but creates vaccines that are (at least theoretically) safer. That safety, however, comes at the cost of exhausting the precious antigen supplies much faster — and leaving hundreds of millions elsewhere unvaccinated.http://www.slate.com/id/2228700/

From Simon Johnson et al, 8-Sep-2009The Next Financial Crisis: It’s Coming—and We just Made It Worse

The price of socializing capitalism’s losses…

From today’s NY Times, Oliver Stone is making a sequel to his movie “Wall Street”, bringing Gordon “Greed is Good” Gekko back to the big screen. Of interest to us here? You go, big guy!”The movie will stretch from 2001 to 2008 and the financial crisis, the point at which “Wall Street 2” begins. Mr. Stone says Gekko “sees it coming, like the naysayers, the short-sellers; he’s sort of a Doctor Doom, like Nouriel Roubini.” (Mr. Roubini, a New York University economics professor, earned that nickname for his early predictions of a financial crisis; he has been offered a small role.)”http://dealbook.blogs.nytimes.com/2009/09/17/did-prison-rehabilitate-a-convicted-financier

http://mapper.nndb.com/start/?id=137450.here you type in a name and then get the bio,at the bottom of the page you click on thename and you see the graphic indicatingconnections or affiliations. etc. interactive.?snooper database in progress,not to change the subject. no average people.just the notorious, exceptional (some), infamousand famous types, living and not so much (passed).like i meant to say, a potential tool for research.

Stocking up on food and essentials would be better than buying gold in the event of a severe pandemic don’t ya think?Pandemic contingency plans are and have been in place since the H1N5 virus became a threat so operations can continue, however, the local grocery store may be closed.

ps. for example type in paul tudor jones andsee the links, for a billionaire he seems to have many more political links than financial links?.i’m so naive.and jones throws his hedgefund excess clientsto other billionaire managers of other funds.i’m so naive.and these guys are all getting bailed outby their clients who just happen to run thepolitical parties and the political mechanisms of governance.it’s like a ring, or a circle that will not be squared. it runs too efficiently just the wayit is. hahaahhahahahahhahaa hehe.only problem is nothing of value is created and nothing real is recognized, the entirety of itand the implementation of it requires psychological “disassociation” of self, sleep, to consequences. and we idolize, envy, admire and support this whenwe should not even tolerate it. the ring that willnot be squared, as we hang from a rope of sand.

Howdy, FT. A joy to see you here. I’ve been unable to post for over a week now but looks like things have been fixed.Agree wholeheartedly that the mortgage market is still a complete disaster along with the rest of the credit market. It makes me ill to think that the minute I plunk down my 20% downpayment to Wells Fargo my loan is already sold to Fannie or Freddie. While I’m still marginally “in the market” to buy a townhouse, I’m very averse to having the guv’mint owning my mortgage and let’s face it, they’re the only game in town nowadays. The banks are just killing us. Not to mention our dithering, corporate-sponsored Congress.Nothing gets fixed until we clean up the politicians. Nothing. Not health care, not the economy, nothing.

AJThis video is quite good.Almost the minute Oregonians adopted the Oregon Health plan a lawsuit was filed challenging it’s rationing features. Once the trial lawyers successfully sued to limit rationing the whole democratic effort that had been the Oregon Health Plan went down the drain.The chances of getting meaningful health reform in this country are directly proportional to the chances of getting this Democrat congress to enact true liability reform in the face of the most powerful influence in Washington, the trial lawyers………i.e., no chance.Makes me think that our true nature as a society really is as wild west cowboys. I may have to disagree a little with Gov. Kitzhaber as to whether or not our cowboy attitudes offer better upward mobility than other countries. I think the US is better at upward mobility. After all, if disease knows no class boundaries, any sick rich man can be replaced by a smart up and coming healthy man at any time.Sorry, but that’s the way life is.

Wolf, thanks for this excellent analysis. It occured to me in reading this that perhaps Roubini is wrong to think that there is a balancing act that the government can perform to get us out of this mess. From what I see you saying, although you seem to still have some hope in your last paragraph, it’s either depression or hyperinflation and there is no middle road at this point. This would be like a mathematical system that bifurcates.Our creditors, like the Chinese, do not want to see their dollar reserves plunge, but they don’t want to provoke a plunge in the dollar either. Therefore, it seems like the Fed and the Chinese are playing a game of chicken. Perhaps the Fed is trying to control the slope of the descent of the dollar-the first derivative-in such a way to keep the Chinese on board and the Chinese are trying to control the first derivative by grumbling about the dollar’s decline and making noises as well as policy moves-yuan denominated bonds in Hong Kong, international transactions in yuan such as with Brazil, etc. A first derivative game of chicken.You mention tipping points. I should read that book. I have already studied catastrophe theory à la René Thom and Christopher Zeeman, and I would like to see if that is mentioned in the book on tipping points. Although the public has latched onto the idea of tipping point, the theory developed by Thom is much richer. For instance, even if you have myriads of variables, such as in economics, catastrophe theory can model them and even isolate a single underlying variable that more or less controls the system or at least highlights the variable that allows you to predict when the tipping point will occur. For instance, and I do not wish to bore with mathematical discussions here, I can point to two great articles I read in applied catastrophe theory. The first involved an attempt to model bacteria populations using the famous predator-prey equations by Volterra, who originally used them to model fish populations in the Adriatic. To make a long story short, using catastrophe theory led to a realization that the amount of folic acid in the E Coli population was the controling variable. In another study on rioting in British prisons, catastrophe theory determined that the tell-tale variable to use in determining when a riot would break out was the number of visits to the prison infirmary in the weeks ahead of the riot. Fascinating stuff. As you can see, there is a lot more to be said than just realizing that there has to be a tipping point, even though that is the phenomenum that is studied in this theory. Perhaps our central bankers have some backroom boyz modeling things with catastrophe theory on their Cray supercomputers, and that is controlling their Plunge Protection Team actions. Bernanke undoubtedly has a direct feed from the boyz.Does anyone out there in Roubini land, where the sun never sets, know of efforts to apply either catastrophe theory or chaos theory (non-linear dynamics) to economics. This would be a useful counterpoint to the “informed intuition” of our leaders, like Larry Summers or Hank Paulson.

With respect, Chingos, if tort lawyers were that powerful, the insurance industry would not be sucking the life blood out of health care providers to feed its insatiable appetites for profits. Without the tort lawyers, there wouldn’t be any check on the power of the insurance industry to take money from physicians and others who are actually caring for patients and redistributing that money to the CEOs and shareholders of insurance companies.The video incorrectly states that under our tort system, physicians are held to “the highest standard of care.” That’s simply false. The standard is one of “ordinary skill, learning, and experience.”A physician is required to have and exercise the ordinary skill, learning, and experience of his profession generally at the time, in any locality with similar opportunities for experience. The issue in a malpractice case becomes whether the physician exercised the care and skill of the average qualified practitioner accounting for advances in the profession. A relevant circumstance from which a jury may make a distinction between facilities and opportunities for continuing education in rural and urban areas, for example, is the medical resources available to the practitioner. Since customary practice in certain geographic areas is not the only measure of the standard, then if an area lacks facilities or specialized expertise, it is incumbent upon a physician to advise a patient to seek qualified facilities for diagnosis and treatment.As I’ve said before, if a physician is delivering “unnecessary medical care,” as stated in the video, by allowing or directing patients to undergo diagnostic and treatment procedures in order to protect the physician from a potential lawsuit, especially where the patient is potentially harmed as a result (e.g., from radiation exposure to repeated and unnecessary X-rays, CT scans, etc., that physician is potentially committing battery or medical malpractice, or both, and is probably violating the Hippocratic Oath as well.SWK

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I wouldn’t spend money for that dictinary.

That is not what I have been hearing. Ron Paul has even gotten on this bandwagon, stating that these adjuvants are planned for use in the American vaccines, in particular, squalene.http://www.infowars.net/articles/january2008/230108Vaccines.htm

You know, we could actually try a free market where you are free to get whatever healthcare you are willing and able to pay for.If you can’t afford the healthcare you want, you can apply for a government grant … that would certainly be more honest than trying to cloak an obvious wealth transfer in the mantle of insurance.Oh, wait a minute. That is essentially how medicare works, which is why entire industries of supplemental insurance and lawyers who help seniors shield their assets exist.

I was a cold-calling broker in New York in that market, and it was no fun.

Soon, the view will consensually shift towards reality:http://www.globalresearch.ca/index.php?context=va&aid=15261Its like phenomenal ‘capacitors’ where they are all leaky – without exception. Now just what comes under the category of a capacitor?Ho hum

If you’re going to use ALLCAPS, please use correct punctuation as well:IT’S SWINE FLU;IT’S SWINE FLU;IT’S SWINE FLU;IT’S SWINE FLU;IT’S SWINE FLU;IT’S SWINE FLU;IT’S SWINE FLU;IT’S SWINE FLU!

There has been an effort to apply chaos theory and the successor complex adaptive theory to economics, led by the Santa Fe Institute.I took an interest in this about fifteen years ago. It never got far as complex adaptive theories proved to be too challenging to the orthodoxy of pure neo classical economists.

Gotta Read Reggies take on JPM… another Dead Bank walking that is INSOLVENT!. Download the pdf for the full picture… its freehttp://boombustblog.com/200909181143/An-Independent-Look-into-JP-Morgan.html

Gotta See Karl D at his best and on video… very interesting… GDP and Debt discussion…http://market-ticker.denninger.net/archives/1439-WARNING-Deflationary-Collapse-Dead-Ahead.html

By Mike WhitneySeptember 17, 2009 “Information Clearing House” — We keep hearing that “The worst is behind us”, but the spin doesn’t square with the facts. Sure the stock market has done well, but scratch the surface and you’ll find that things are not as what they seem. Zero hedge–which is quickly becoming the “go-to” market-update spot on the Internet–recently posted an eye-popping chart which traces the Fed’s monetization programs (Quantitative Easing) with the 6-month surge in the S&P 500. The $917 billion increase in securities held outright equals the Fed’s $1 trillion increase to its balance sheet. In other words, the liquidity from the Fed is following the exact same trajectory as stocks, a sure sign that the market is being manipulated. Surprisingly, traders seem to know that the Fed is goosing the market and have just shrugged it off as “business as usual”. Go figure? Perhaps it pays to take a philosophical approach to market rigging. Who needs the gray hair anyway? The result, however, has been that short-sellers (traders betting the market will go down) who have placed their bets according to (weak) fundamentals, have gotten clobbered. They appear to be the last holdouts who still place their faith in the unimpaired operation of the free market. (Right)Here’s how former hedge fund manager Andy Kessler sums it up in a recent Wall Street Journal article, “The Bernanke Market”. Here’s a clip:”By buying U.S. Treasuries and mortgages to increase the monetary base by $1 trillion, Fed Chairman Ben Bernanke didn’t put money directly into the stock market but he didn’t have to. With nowhere else to go, except maybe commodities, inflows into the stock market have been on a tear. Stock and bond funds saw net inflows of close to $150 billion since January. The dollars he cranked out didn’t go into the hard economy, but instead into tradable assets. In other words, Ben Bernanke has been the market.”So, the Fed has given a boost to stocks while keeping the bond market priced for deflation. That’s quite a trick. One market is flashing “recovery” while the other is signaling “contraction”. Bernanke has worked this miracle, by simply changing the definition of “indirect bidders” (which used to mean “foreign buyers” of US Treasuries) to mean just about anyone-anywhere. Here’s an explanation of this latest bit of chicanery from the Wall Street Journal in June:”The sudden increase in demand by foreign buyers for Treasurys, hailed as proof that the world’s central banks are still willing to help absorb the avalanche of supply, mightn’t be all that it seems.“When the government sells bonds, traders typically look at a group of buyers called indirect bidders, which includes foreign central banks, to divine overseas demand for U.S. debt. That demand has been rising recently, giving comfort to investors that foreign buyers will continue to finance the U.S.’s budget deficit.“But in a little-noticed switch on June 1, the Treasury changed the way it accounts for indirect bids, putting more buyers under that umbrella and boosting the portion of recent Treasury sales that the market perceived were being bought by foreigners.” (“Is foreign Demand as Solid as it Looks, Min zeng)Pretty clever, eh? So, if the Treasury doesn’t want dupes like us to know when foreign demand drops off a cliff, they just twist the definitions to meet their needs. My guess is that the Fed is building excess bank reserves (nearly $1 trillion in the last year alone) with the tacit understanding that the banks will return the favor by purchasing Uncle Sam’s sovereign debt. It’s all very confusing and circular, in keeping with Bernanke’s stated commitment to “transparency”. What a laugh. The good news is that the trillions in government paper probably won’t increase inflation until the economy begins to improve and the slack in capacity is reduced. Then we can expect to get walloped with hyperinflation. But that could be years off. For the foreseeable future, it’s all about deflation.No matter how you look at it, the economy is on the ropes. Yes, there should be a rebound in the next few quarters, but once the stimulus wears off, its back to the doldrums. According to David Rosenberg of Gluskin Sheff, “All the growth we are seeing globally this year is due to fiscal stimulus…. For 2010, the government’s share of global growth, by our estimates, will be 80%. In other words, there are still very few signs that organic private sector activity is stirring.”The question is, how long can the Obama administration write checks on an account that’s overdrawn by $11 trillion (The National debt) before the foreign appetite for US Treasuries wanes and we have a sovereign debt crisis? If the Fed is faking sales of Treasuries to conceal the damage–as I expect it is–we could see the dollar plunge to $2 per euro by the middle of 2010. Imagine pulling up to the gas pump and paying $6.50 per gallon. Ouch! That should be revive the economy.For the next year or so, the demon we face is deflation; a severe contraction exacerbated by household deleveraging and massive financial sector defaults. The Fed’s money-printing operations just can’t keep pace with capital-hole that continues to expand from delinquencies, foreclosures, and failed loans. Workers have seen their credit lines cut and their hours reduced, households are $3 trillion above trend in their debt-to-equity ratio, and unemployment is soaring. Industry analysts expect a $1.5 trillion cut-back in credit card spending. That’s why Bernanke is firehosing the whole financial system with low interest liquidity, to stimulate speculation and reverse the effects of a slumping economy.Here’s a clip from an article in the UK Telegraph’s:”Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation…Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an “epic” 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc.”For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew,” he said. (Ambrose Evans-Pritchard, “US credit shrinks at Great Depression rate prompting fears of double-dip recession”, UK Telegraph)The Fed has pumped up bank reserves, but the velocity of money has sputtered to a standstill. There won’t be an uptick in economic activity until consumers reduce their debt-load, rebalance their personal accounts and find jobs. That’s a long way off, which is why San Francisco Fed chief Janet Yellen sounded more like Nouriel Roubini in this week’s presentation “The Outlook for Recovery in the U.S. Economy” in S.F.:”With slack likely to persist for years, it seems likely that core inflation will move even lower, departing yet farther from our price stability objective. From a monetary policy point of view, the landscape will continue to present challenges. We face an economy with substantial slack, prospects for only moderate growth, and low and declining inflation. With our policy rate already as low as it can go, it’s no wonder that the FOMC’s last statement indicated that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” I can assure you that we will be ready, willing, and able to tighten policy when it’s necessary to maintain price stability. But, until that time comes, we need to defend our price stability goal on the low side and promote full employment.”That’s from the horse’s mouth. Recovery? What recovery?The consumer is maxed out, private sector activity is in the tank, and government stimulus is the only thing keeping the economy off the meat-wagon. Bernanke might not admit it, but the economy is sinking into post-bubble malaise.see zero hedge chart http://www.zerohedge.com/article/correlation-sp-500-performance-fed-monetization-activities-start-qe

As always, for those interested, I have a new post up at The Light Of Day:http://medic-thelightofday.blogspot.com/2009/09/on-fringes-by-choice.html

And for readability it’s:IT’S SWINE FLU; IT’S SWINE FLU; IT’S SWINE FLU; IT’S SWINE FLU; IT’S SWINE FLU; IT’S SWINE FLU; IT’S SWINE FLU; IT’S SWINE FLU!(space[s] after punctuation)

Chart of the Day has an interesting chart showing inflation-adjusted earnings for S&P500 companies. You can see it here:http://www.chartoftheday.com/20090918.htm?Thref=“http://www.chartoftheday.com/20090918.htm?T”>Earnings Of S&P500 Show That It’s Not Just Another RecessionClearly, the conclusion from this chart is that the downturn we have just experienced is anything BUT a normal recession. At least if you measure earnings against any year since 1935.As I said above on another post, the real question is whether this period of adjustment is over yet. There are very good arguments that it’s not.PeteCA

AJ -I will check out the video later today (I have not been on this blog much this week and did not see this until now).I’ll be in touch…..

The other piece of the insurance company suction pump is in the malpractice insurance. The trial lawyers get blamed for this but from what I know, few ever go to trial, most cases are settled or endlessly stalled until the claimant gives up or dies.My take is that the insurance companies are giant hedge funds which feed giant pension funds besides their overly paid management.Finance and insurance in this country are a finely woven cloth that is held together by a legal system which has little concern for justice. The concept of justice for all is as antiquated today as Of the People, by the People and FOR the people…. Which, other than in word, has perished from this earth.

More fodder for the Misery loves Company Bunch.

More Dead Companies walking….Add these to the Big 5 banks and GE.. take a look of the thier list in the report of companies that already went under this year…Audit Integrity Announces Results of Corporate Bankruptcy StudyIdentifies Companies Most Likely to Declare BankruptcyWed Sep 16, 2009 9:00am EDTFeatured Broker sponsored linkMedia and Transportation Sectors Have the Highest Number of Companies at RiskLOS ANGELES–(Business Wire)–In response to amplified concern in the market for risk related to corporateinsolvency, Audit Integrity, an independent financial research and risk modelingfirm, today released the results of its bankruptcy model research and hasidentified 20 corporations, with $1 billion or more in market capitalization,that have the highest probability of declaring bankruptcy in the next twelvemonths.According to the U.S. Bankruptcy Courts, the number of business bankruptcyfilings during the first six months of the year rose 64 percent over the firsthalf results in 2008. With the increased incidence of company failures,corporate stakeholders such as insurance companies, auditing professionals,procurement executives and regulators, find corporate survival to be a criticalrisk issue.Current approaches to determining bankruptcy risk generally fail to reactquickly to changes to the economic environment, and do not factor in thepotential for corporate fraud. By incorporating these risk factors into theAudit Integrity Business Risk Model, this new approach has been found to greatlyimprove the identification of companies at risk of bankruptcy. Against the mostwidely used bankruptcy model, the Altman Z-Score, the Audit Integrity bankruptcyRisk Model results have been more than 20 percentage points higher in predictingbankruptcy.The results from Audit Integrity`s bankruptcy research indicate that the mediaand transportation industries are especially vulnerable. Of the over 2,500 U.S.corporations receiving bankruptcy risk scores from Audit Integrity, TV andPublishing companies were found to be over four times as risky as othercompanies, while automobile and airline industries were just slightly lessrisky.The findings suggest that fraudulent accounting and poor governance impactbankruptcy risk in addition to more generally accepted factors such as measuresof liquidity, leverage and profitability.”Evidence shows that bankruptcy filings tend to lag after an economic downturnso its extremely important that investors and those concerned with the risksaround corporate failure mitigate their exposure to companies likely tocollapse,” said Jack Zwingli, CEO of Audit Integrity. “Market volatility andsudden downturns such as we have been experiencing must be factored intobankruptcy risk. Fraud also plays a part, especially when companies are facedwith survival decisions. These are the toughest companies to identify because,on paper, they appear solvent. Our model uncovers the underlying fraud that canbe behind seemingly healthy financial statements.”Audit Integrity has identified the following companies that have the highestprobability of declaring bankruptcy among publicly traded firms with more than$1 billion market capitalizations:* Advanced Micro Devices, Inc.* Amkor Technology, Inc.* AMR Corporation* Apartment Investment and Management Co.* CBS Corporation* Continental Airlines, Inc.* Federal-Mogul Corporation* Hertz Global Holdings, Inc.* Interpublic Group of Companies, Inc.* Las Vegas Sands Corp.* Liberty Media Corporation (Capital)* Macy’s, Inc.* Mylan Inc.* Oshkosh Corporation* Redwood Trust, Inc.* Rite Aid Corporation* Sirius XM Radio Inc.* Sprint Nextel Corporation* Textron Inc.* The Goodyear Tire & Rubber CompanyTo get the full list of companies Audit Integrity has identified, includingsmall-cap and mid-cap firms, please visit http://www.auditintegrity.com or call877-880-8820.http://www.auditintegrity.com/assets/files/research/2009/AI%202009-0917%20WP%20Bankruptcy.pdf

And yet rents continue to increase in the San Diego area.hlowe

MM, try to look up what percentage our education system costs in California. You will find it costs about 54% of the total budget. Colleges are about 12% of the 54%. The lostest it has been over a 40 year period was about 44%. Mostly in the low 50′s%. So we are spending about the same over this time period but the performance has dropped off tremendously!California is in severe trouble.

I’m with you, Novice.Remember the Godfather. Don Corleon advised his son Michael that after he died, the person who came to arrange a meeting of the families to iron out their differences (and determine who would succeed him as Godfather) was the traitor.That’s what we’ll see when the USD collapses–some “saviour” (Obi? Clinton?) will tell us that we need a new world currency, a new banking system to fix all the problems of runaway debt and insolvent financial systems. That person is the traitor.Just keep an eye out for him.

Pointing fingers is, well, pointless when it’s the SYSTEM that is at fault. Not a piece of it, but the WHOLE thing.Two links were recently provided (thanks to those posting them) that are essential for pointing this out:US Debt ClockThe Next Financial Crisis: It’s Coming—and We just Made It Worse

Or someone like Pat Robertson.

A very good article well worth reading with insightful remedies for problems caused by lax banking regulations. Obama should read this article.Obama? Where’s Obama?

Depends on your definition of collapse.It’s not a great LEAP to say that on many levels the collapse occurred a while ago and is still continuing.

Or, perhaps Tessio?

I’m not so certain that those at the top consider ‘no end to this crisis’ a failure. Wealth and power is consolidating to their advantage. Where’s the incentive to end it?

Or GW Bush. The entire American population, media included, fawned and capitulated in the face of his promises to protect them from the ‘Evil-doers’.What a joke.After that embarrassing display of American determination, it’s pretty obvious to me that the gullible herd will fall for anything.

Sorry, but this is REALITY. Pat Robertson isn’t fiction.

http://www.pbs.org/wgbh/pages/frontline/video/flv/generic.html?s=frow03s200bq745Corruption seems to flow at the topWhy is intergovernmental bribery not considered bribery?Bribery investigations focus on China’s richestChina is cracking down on corruption inside the country — and the super-rich are not immune. According to a report in the newspaper China Daily, nearly 30 of China’s wealthiest people are either under investigation or charged with bribery. The investigations span all kinds of industries — from power generation to medical devices to the flower business. But the motives for the most recent anti-corruption campaign may not be completely pure, writes New York Times reporter David Barboza, who cites several experts that see the recent investigations and arrests as symptom of the power struggle within the communist party.

In the US they just go after the little guy…

r,true.faced with the current dilemma, “assets” that needto be recycled, demolished, in light of their”value” being deemed critical to false andfunny accounting, we first must recognize theerrors. then we can proceed to demolition andrecycling of materials. we need to have theappropriate new design in hand so as to knowwhat infrastructure will be constructed andhow it will be constructed. it needs to befuturistic, holistic, historic and ecologicallyintegrated as it should/must support lifeas we K NOW it.there are two ways to proceed. intelligentlyvs chaotically.9/11/2001 is an example. studies were donein the 90′s to derive an estimate on the costof needed upgrade to the structures as deficiencies were detected and required correction. the estimates were large. largerthan reconstructing the towers, 1 and 2, fromscratch. what to do?so we have assets that are really not so much assets but are liabilities. what is the value?complex, but to simplify, lets say we have twochoices. “intelligent” renovation, reconstruction or demolition and reconstruction, but who will pay for this?second choice, chaotic demolition under theprotection of insurance, should such an eventoccur, and then reconstruction. ( credit defaultswaps)? the world was watching then too!the point is demolition is a creative act, itis all in the proper timing. chaotic demolitionis the historically preferred choice becauseit can be gamed by the “rightful owners” andthey can remove themselves to a safe distanceand collect the insurance etc.. whereas theresponsible choice would require they pay to fulfillobligations social and financial and they did notsign on for that.the third option is bankruptcy. walk away.sorry for the random nature of this response, if itis that. your comments were on the money.

Ha ha! That’s funny!Despite the fundamentals!And none of these morons think that having such a large percentage of the population unemployed, and crushed with debt, won’t stir any revolution? Yeah, right! There’s your “surprise!”There were cheerleaders espousing how great things were during the Great Depression, just before it took it’s double-back flip into the toilet. And the band played while the Titanic sank.

I had a best friend like Bob. He never had health insurance either. He paid for his own open heart surgery at one point. He told me he knew he’d saved a ton of money by never paying those premiums. He and his wife raised 4 kids. They used to take us waterskiing. He had the largest outboard motor made. He had an airplane, drove any of his 5 vehicles. He and his wife built multiple apartments with their own hands.Jack was a ball-turret gunner on a B-17 in WWII.One day they called me from the ER and all I could say was oh no, and sit down. Jack died at home in his bedroom doing pushups. He was 76. He was rich.

I have positioned my portfolio accordingly but with a cautiously optimistic-income oriented flavor. Datz what nearly 0% interest on cash does to people. It forces them search for income by taking some risk. As of today, my YTD return is 9.0%, lagging the S&P500 but, as you will see, at a much lower level of risk.A snapshot of my current portfolio is followed by some of the rationale behind it:cash 6%5+% 5-10 year CDs 37%Total cash like 43%US-bond market index 17%tips 5%total bonds 22%Total cash-like + bonds 65%High Yield stocks* 20%Utilities** 11%TIE 4%total stocks 35%Grand Total 100%* Consumer staples: PG, MO, PFE, KFT. This is NOT a diversified basket of stocks!** XLU and VPUPlease note that my stock holdings are low beta. So my 40-40 safety test applies: With up to 40% of one’s portfolio in equities, a 40% decline (about what we had last year) one would see a 16% decline in portfolio value. Something that doesn’t make me happy but I can live with without having to go back to work for a living. (my safety test for index equities is no more than 30% exposure since a 50% decline would result in a 15% decline in portfolio value.)Why high yield stocks and utilities? With a sideways market at least one collects a 3+% coupon vs. 0% for cash. Also, these are recession resistant in case of a double-dip.The long term CD positions I got into a while ago when I saw 0% interest rates coming. I wrote about diz extensively at the time.Bonds? You always need some of these to reduce volatility/generate income.Commodities? My commodities forecast mimics the Professor’s. I recently sold my oil and grains leap call positions at a significant loss.Currency diversification? None. with so many people expecting a weaker USD, it is time to play contrarian on this one. I am 100% with Shilling on this one even though he has gotten quite a bit of egg on his face with this one:-)Be aware the above is free advice likely worth as much as it costs:-)

The problem is that if you look at history, once the revolution starts, you often ultimately get a totalitarian regime even more oppressive than the previous.In Canada lawyers are paid by a tariff, not by the 30% lottery. Also, loser pays. One reason Canadians have justice if they are malpracticed upon is because it’s not that expensive to lose.Of course, adopting “loser pays tariffs for attorneys” would decimate not only US insurance company profits and end lawyers full-employment, it would empower government bureaucrats to make health care decisions.The current health care debate is not about the uninsured, bankruptcies over health care, or any other pseudo-morality argument. It’s all about whose ox will be gored.We ought to decide on a system that costs less, is therefore affordable, because the people who consume the health care dollar ought to pay that dollar. It’s their ox.

Yeah, it wouldn’t be good for your portfolio, so never mind…

what we have is liquidity bubble by FED. dont fight the FED, long gold and market.

Well, well, well. Right on target and right on time…MF Executive Board Approves Limited Sales of Gold to Finance the Fund’s New Income Model and to Boost Concessional Lending Capacityhttp://www.imf.org/external/np/sec/pr/2009/pr09310.htm”Participants in the recently renewed agreement announced ceilings on sales of 400 tons annually, and 2,000 tons in total during the five years starting on 27 September 2009, and noted that the Fund’s sales can be accommodated under these ceilings.”

Volcker is crazy. Restricting banks risk? while FED is keeping rate down to encourage risk taking and blowing liquidity bubble? Volcker is either crazy or phony. they are all liars.

another true american anthem.. this guy just seems to spit ‘em out…..All The Time : Tom Waits.You’re the treeThat you can’t eat the fruit from.I heard horses come to ride me awayI want shadeAnd a good place to shoot fromIf I’s a clockI’d be the end of the dayYou know you’re not the boss of meYou can lift your skirtYou can shake your hairBut I got all the time in the world.You’re the ditchIn the road where the wheels keep spinningYou’re the same dead catClawing it’s way back grinningYou knowYou got a bad reputationAnd you’re nine livesWay down the lineI got a jacket to put on and a hat to wearI wouldn’t waste a gallon on you out thereAnd I got all the time in the world.A bridge is only there for you to jump off ofAnd there ain’t no rain clouds that are blueI do declare my independenceBaby I shot off all my fireworks for youThe river’s burning and the trees are on fireThere’s lots of good rubber left on these tiresAnd I’ve got all the time in the world.Baby you’re the light that won’t change that I got stuck atYou’re the fan that won’t work at the motelThey were all out of red so I got me a blue oneBaby you’re always using mine why don’t you get you one?I know you won’t go very farYou left your blond wig in the carAnd I got all the time in the world……

http://www.atimes.com/atimes/Middle_East/KI18Ak02.html.some more questions. @ “continuing tragedy”….

The F.H.A. has become the government equivalent of Countrywide Financial, the hyper-aggressive private lender that crashed two years ago, Mr. Yardeni said. “If you lend money to people with a low probability of paying you back, you shouldn’t be surprised if they don’t,” he said.F.H.A. officials said Friday that rumors swirling around its reserve fund were untrue.http://www.nytimes.com/2009/09/19/business/economy/19bailout.html?partner=rss&emc=rss

Good point. I am not buying the recovery long term. I love ECRI for short/medium term forecasting but capital preservation is my “numero uno” goal. If you follow CR check his latest cautionary views on the economy. I agree with him 100%.

Diz is the CR post I refer to above.http://www.calculatedriskblog.com/2009/09/end-of-official-recession.html…Although I started the year looking for the sun, I remain concerned about the possibilities of a double dip recession – or at least a prolonged period of sluggish growth. And this means the unemployment rate will continue to rise well into 2010; I expect the unemployment rate to hit 10% in November (or so). See: When Will the Unemployment Rate hit 10%? .There is an old saying: “A recession is when your neighbor loses his job, a depression is when you lose your job.” Unfortunately 2010 will probably feel like a depression to a large number workers.More on NBER and double dip recessions:Here is the NBER dating procedure.Note that the trough of the 1980 recession was only 12 months before the beginning of the 1981 recession, but the short recovery was fairly robust with real GDP up 4.4%. Those two recessions are frequently called a “double dip” recession, but the NBER considers them as two separate recessions.So it looks like even if we have a DD recession I’ve bought myself my six months:-)And a decent one by Krugman:http://krugman.blogs.nytimes.com/2009/09/15/macro-situation-notes/

Lost productivity estimates due to illness.Did you know that the US economy loses $30,000,000 each year due to noseblowing on the job? Something to think about.

“The problem is that if you look at history, once the revolution starts, you often ultimately get a totalitarian regime even more oppressive than the previous.”No. The problem is, that ones’ concept of history is skewered ideology and consequently limited by the information that supports a particular outcome.Just sayin’ …

@Chignos on 2009-09-18 17:38:03You’re a-skaered of Pat Robertson?Hell yeah! Wall Street and politicians I can tackle on a legal / rational battlefield … spooks are a whole ‘nuther matter.

Public relations … gotta luv it!Buy on the dream, sell on the reality.

For the Tribute Rome had to and did pay them to withdraw!Ho hum

How can we have sustainable growth in the next decade when all the growth we’ve had in the last 30 years has been achieved by growing the overall credit outstanding at a rate 3 times faster than the GDP ?We won’t have sustainable growth as long as overall CREDIT hasn’t first decreased from 350% of GDP to max 200% of GDP. And it will take at least a decade to get there, especially if our leaders make such efforts to slow the process.WE are going to have to pay for the excesses of the past 30 years. The only thing that can be tried (what our leaders are trying now), is to postpone a bit longer that harsh reality and make the problem even bigger for the future.My understanding is that achieving sustainable growth and full employment is simply not possible in the next decade, and after this, we’ll have to seriously reconsider the fundament of our model of economic development, that is the very notions of MONEY and PROPERTY. Everything else will just be false illusions of an artificially pumped economy and the opposite of sustainable development.Why does a dentist need to OWN his dental chair ? We need to replace the notion of property with the notion of right to use. Everything else will not work.

On http://www.treas.gov/tic you have the “Estimated foreign holdings of U.S. Treasury marketable and non-marketable bills, bonds, and notes reported under the Treasury International Capital (TIC) reporting system are based on annual Surveys of Foreign Holdings of U.S. Securities and on monthly data.”China has increased their bond position (776 to 800 billion) Hong Kong (99 to 115) Japan (711 to 724)Does someone have the details about how these numbers are obtained?, i.e., is it possible foreigners to lie about these numbers to hide their bond liquidation?

@Grateful Guest:Thank you again for your kind comments, they really are appreciated.My motivation for posting here is to give a different perspective of what I see is happening which, as you stated, is often contrary to the masses. I had hoped more posters would have used this information to help recover losses and/or boost their portfolios because of my own selfish need of wanting to be helpful. Sounds crazy maybe, but that’s just my nature.So for you, Grateful Guest, here’s what I see going on right now:Commercial real estate will not be the next shoe to drop. The TALF program is rolling out in October and will be successful. REITS have been on a tear for one reason: TALF. This program will help stabilize CMBS and underlying bond prices have increased substantially in the past two weeks. Yes, some banks will fail because of commercial real estate losses, but I think we will see fewer bank failures than expected.Residential real estate prices are now regional. Job losses/gains by region will determine price levels. Don’t be fooled, some companies are actually hiring. More programs will be offered and current home buying programs will be extended to help absorb excess inventory. Lenders will become more aggressive in modifying mortgages and this will help stabilize home prices. I envision TPTB will apply pressure and/or incentivize lenders to accomplish this goal. Hence, fewer bank failures in this area as well.The stimulus package approved earlier this year favors certain sectors, I recommend spending time reading it so you can learn which industries may benefit, either via outright funding, tax credits, or political protection. Be careful here, though. I would only invest in sectors that are domestic and not influenced by geopolitical factors. I expect a mini-bubble in one sector, but am not willing to share this information with everyone, not because I don’t want people to take advantage of it, it’s just that I don’t know how many people read this blog and don’t want to be responsible for creating one.Contrary to some posters here that believe we’ll suffer another severe downturn this fall, I say BAH! No way, not now! People were and still are shell-shocked from last fall’s collapse, TPTB have the power to circumvent it, and the painful memories are still too fresh in everyone’s minds. Why would they allow a vicious downturn to happen right now and risk our economy plunging into a black abyss? They won’t. They can control it. Liquidity is and will be running freely until such time that other people’s money can replace government support, and then this liquidity will be slowly drained and virtually undetectable.I’m not foolish enough to believe we can never suffer another collapse sometime in the future, but with Bernanke at the helm, it will not happen. No way, not now. Rest assured TPTB will not allow last fall to repeat under their term as they refuse to be blindsided twice. I might start worrying again when terms expire and a rotation in power occurs.A good rule of thumb in investing: Always weigh downside risks against upside potential without exception. If the upside isn’t at least twice as high as the downside, don’t invest.I will continue to post from time to time when I’m in the mood for my regular thrashing. Good luck to you.

AJ -Thanks for the link. I thought it was very well done and very accurate. I will be placing a link to their site on my own blog.Those that fight reform the most are the ones with the most to lose……..

FED is pumping liquidity bubble with print press. next crisis is currency crisis.

Socialized housing turned over to private seems to have not produced what the interested parties thought.What is predatory equity?Predatory equity is a real estate investment scheme that operates as follows:1) The real estate firm identifies municipalities with underutilized real estate assets.2) The firm obtains equity from both private and public sources by promising a high return on investment (ROI). This equity is then typically leveraged with bank loans at values ranging from 60% to 80%. The returns are commonly referred to within the industry as opportunistic, an annual ROI > 13%. It should be noted that the annual ROI for the US stock market, when averaged over the past 90 years, is 10%; for the US bond market, 7%.3) After purchasing the property, the firm works to raise rental income. The firm and its partners often see income go down during the first few years due to expenditures on capital improvements. Capital improvements are frequently used as a public relations tool to defend the firm’s actions in the community.4) Rental units are recaptured from the local rent control ordinance and raised to fair market value using a two-pronged strategy. First, the firm engages in litigation against the local municipality and pertinent ordinances governing tenant-landlord relations in an effort to weaken their regulatory authority. Second, aggressive tactics are used to encourage pre-existing tenants to voluntarily vacate their units. Under a California law known as Costa-Hawkins, voluntarily vacated units may be brought to fair market value. Target turnover rates the first year for pre-existing tenants generally range from 20% to 30%, with a target of 10% for each year thereafter.5) The firm and its partners sell the portfolio in five to ten years time after achieving a substantial increase on the annual rental income for the portfolio by replacing low-income tenants with tenants capable of paying significantly higher rents. This increase in rental income translates directly into profit margin on the initial investment according to a standard cap rate calculation. The firm may also profit on the front end of the scheme through acquisition fees charged at the time the properties are acquired on behalf of investors.It is very important to note here that Page Mill’s business plan may differ from this model on one significant point. Rather than replacing tenants that have voluntarily vacated their units with tenants capable of paying higher rents, Page Mill may intend to demolish existing buildings or attempt to meet the threshold vacancy rate required for condominium conversions. A comparison of Page Mill’s portfolio wide vacancy rate of 24% with the 5-6% currently typical for the rest of the Bay Area rental housing market suggests this may indeed be the case. With 25% of all housing units in East Palo Alto under their ownership, Page Mill can easily meet the city wide threshold vacancy rate of 4.1% required for condo conversions under the local ordinance.For more information on this topic, please see Gretchen Morgenson’s May 9, 2008, New York Time’s article on predatory equity. Unfortunately, predatory equity schemes have become common practice across the country in recent years.What kinds of tactics are being used to recapture rental units?As noted above, rental units are recaptured from the local rent control ordinance using a combination of litigation against the local rent control ordinance and a variety of aggressive tactics with pre-existing tenants.On the litigation front, the company’s strategy is again two-fold. Page Mill has argued that rent increases allowed under East Palo Alto’s Rent Stabilization Ordinance (RSO) in previous years can be banked if prior owners did not exercise an increase in a given year. Second, Page Mill has distributed its holdings into a large number of shell LLCs in an attempt to qualify for an exemption in the RSO that applies to owners of four or fewer units.The aggressive tactics used to encourage pre-existing tenants to voluntarily vacate their rental units include rent increases in excess of the allowable increase set by the City’s RSO, premature pay or quit notices, lease terminations, lease non-renewals, insistence on substantive changes in terms of existing leases, excessive late fees, unheeded maintenance requests, etc. Together, these tactics constitute a pattern of systemic harassment designed to replace low-income tenants with tenants capable of paying significantly higher rents.http://epa-tenants.org/

Thank you. Very much appreciated.

Yeah, if China has an economic meltdown it’ll likely be the death-knell for the US: they will surely dump US treasuries.

“To summarize, there were no surprises in the Q2 2009 Flow of Funds. What I saw was confirmation of the Government Finance Bubble Thesis. “Uncle Sam Bets the House on Mortgages” was the headline for an insightful article in this morning’s Wall Street Journal (Peter Eavis). It would as well make a good title for recent Z.1 Flow of Funds reports. My bet is that this massive government intrusion into mortgage finance eventually backfires. It puts Washington on course for bankrupting the country, while doing little to direct financial and real resources in a manner to spur needed economic restructuring.”Doug NolandThe Credit Bubble Bulletin

Of course I’ll show up if my hypothesis is wrong, I am not so prideful that I will hide in shame if I’m not right, and I will count on you to be first to point out all my inaccuracies.There are times to be cautious and there are times to take risks, I just try to calculate where we are in the noise of it all.I too prefer “physical” over “virtual”, but won’t reject “virtual” just because it isn’t tangible. Face it, we live in a virtual society and this isn’t going to change unless we face Armageddon. You aren’t one of those, are you?

Guest, one more thing. Using a unique posting name holds me accountable but you use an anonymous Guest name, providing you with a shield from other posters just like you. You ask me to come back and receive lashings if I’m wrong, but how can I do the same to you? What’s wrong with this picture? Who’s the coward?

PB: 1) Retaliation for forced colonization of their own lands, 2) To take by force the goods and possessions of the rich in Rome. Those would be my guesses. The Romans occupied Europe for a long time, and forced a heavy system of fees and taxes. I don’t doubt that people resented the oppression.The recent article of the fall of Rome made an interesting point that hadn’t occured to me. Namely that by the time the barbarians took Rome, many of the common Roman citizens were so fed up with their own Gov’t that they were happy to welcome a change.PeteCA

there is no safety in “safe” investments, the safest of which are US equities/bondsnothing lasts foreverJim Rogers says “the US story is over”…just as the 19th century heard “Go West young man”"Go Asia and Australia” is being heard more and more

How long can you rip off the working people in society before they have nothing left to rip off? I suppose you can still get Ma and Pa Kettle’s television and their car, but they have negative equity in their house and their wages haven’t gone up in decades, so maybe you get their wedding rings, but most of the real value is already gone. The only game in town is for rich people to rip off other rich people. Sorry, but the working class has been sucked dry.Of all the stimulus and programs (TALFs, TARPs, MBS repurchases, T-Bill purchases by the Treasury, etc) only a tiny fraction has hit main street. Seriously, to the extent that Ma and Pa Kettle have seen any benefit, it is only by buying into the old scams. Buy a car with high interest that loses a quarter of its value on the way off of the dealership lot (cash for clunkers). Buy a house financed at relatively high interest in a market with an artificial floor propped by FHA loans (and house really aren’t investments are they?). Get a loan from the bank that gets it money for free, but you pay dearly for.What on earth did all of the bailouts do for Ma and Pa Kettle? They propped up a system that was designed to systematically rip them off. Each parent is gone from the home for 50 hours a week (minimum), and in return they get American Idol, oxycodone when their back goes out, and Superbowl Sunday. Face it, the current system is designed so that when Ma and Pa Kettle die they will be able to bequeath their children nothing, not one dime.The entire beltway/wallstreet establishment is waiting for the rip-off machine to start going full speed ahead again, but it is sputtering. They keep muttering about getting credit flowing again, and getting loans going again.The current system is designed to channel money to the top. I read an analogy (here?) about a pumpkin on a broomstick. Perfect.

@Chingos:I’m not trying to convince you of anything; I’m just espousing my views. I don’t think I have to be a physician to be qualified to discuss or debate health care issues with you. Just because you know how to care for a patient doesn’t mean you know how to run a medical practice well from a business standpoint, or that you understand how the insurance industry really works, or that you appreciate how the legal system operates. I don’t mean this as an attack against you personally, but I don’t believe you are looking at the issue with an objective eye, being a retired physician with an apparently morbid fear of lawyers, and accepting wholesale as you evidently do the insurance industry’s red herring that the threat of lawsuits is principally to blame for the high cost of health care.If by “meaningful reform” you mean deprivation of meaningful REDRESS against any physician who fails to exercise ordinary skill, learning, and experience in treating a patient under his or her care, then you’re right: lawyers won’t allow THAT, ever. Cap recovery for medical malpractice and we’ll still have HIGH health care costs but LOWER quality of care.SWK

Maybe Ma and Pa Kettle overspent, overconsumed, and were in fact part of the problem. If they have nothing left to bequeath to their children, maybe they shouldn’t have bought McMansions, SUV’s, big screen TV’s and leveraged themselves to the max. Most people did it to themselves, banks were more than willing to oblige.

Just quoting you. If you don’t like what is quoted then perhaps you shouldn’t write it in the first place?

Then post all of it, don’t pick and chose. Cherry-picking is deceitful, and you are not to be trusted.My quote from above:I’m not foolish enough to believe we can never suffer another collapse sometime in the future, but with Bernanke at the helm, it will not happen. No way, not now. Rest assured TPTB will not allow last fall to repeat under their term as they refuse to be blindsided twice. I might start worrying again when terms expire and a rotation in power occurs.

@ORThis is for you.http://online.wsj.com/article/SB10001424052970204518504574420811475582956.html#printMode

And I’ll bet my life your freezer or pantry contains something with our products in it, in fact, you’re probably munching on some right now.

No, the undertaking is financing itself quite well, thank you. Did you read what I posted? Some of OUR products are in you freezer or pantry, not other producers’ products. (Hint: We’re kinda large.)

Yes, I’d read before that you’re pro big AG (livestock). Good that you’re a food producer, but bad if you’re relying on conventional practices (given that that entails substantial petroleum).

Conventional is conventional. Doesn’t matter to what it is applied to, its future is very limited.I’m just the messenger.

Well, based on that, guess we’d better SELL SELL SELL all the ground, the sheds, the manufacturing plants and go homestead it somewhere on a plot of 5 acres. Hell, at the rate this world is going to hell in a hand basket, I think I’ll just end it all right here, right now. Why even try when everywhere we turn things look bleak.Enjoy the french fries, Baked Lays, Pringles, Campbells and Progresso Soups, frozen entrees, fresh asparagus, crisp apples….many many more while you still can, we’re closing up shop.

Do what you have to do. But I’d do it with a bit more humility (than you have demonstrated here on this forum).

Guest,You seem very confident that things are going to be bad, very bad, one may even wonder if you aren’t “rogue” if you know what I mean. What’s up?

With Bernanke at the helm it WILL NEVER HAPPEN. Oh, really? You can forecast the future? You’re the one, dear, who cannot be trusted. I’m not gambling on these markets, I’m not making money on them; therefore, I have no reason for any particular outcome, I’m not trying to sway anyone for my own personal gain. As I said, I’m only the messenger.

Being that you are posting anonymously, which in my estimation is cowardly, spewing fear and otherwise anti-American filth in every direction, I will assume you are rogue. Conspiring with a terrorist cell perhaps? I’ll call it like I see it. You are one bad apple.I refuse to respond to your negative comments here on out. I take MOG’s stance, no name, no reply.

Well good for you Michelle. I think that you need a rest, as it’s pretty clear that you are unable to continue defending your position.Unlike the MOG attacker (who I’ve defended MOG’s positions on), I’m in it for pure intellectual reasons.No matter, whether I like someone or not, if they post stupid stuff I’m going to jump all over them. And, I welcome anyone doing the same should they view my positions the same way.I still have this creepy feeling that you’re some right-wing plant, but that’s my issue…

ob,is the site realeconomy.org functioning?i have tried unsuccessfully to enter, from time to time,and have wondered. i’m still wondering.?

So I am trying to reconcile Grant’s view with Steve Keen’s:”In the immediate term, the stupendous size of the stimulus has worked, so that debt in total is still boosting aggregate demand. But what will happen when the government stops turbocharging the economy, and waits anxiously for the private system to once again splutter into life?”Seems to me that sooner than latter this testing of the private system will happen, and when it does-look out below! Does the current level of stimulus have enough back end loading to rev things up? Will Congress approve significant new programs with debt levels being such a charged issue and having felt a bit abused by Paulson? What do you think?

Have I got News for —–> You > :”He [Bush] paused for a minute. I could see him thinking maybe he shouldn’t say it, but he couldn’t resist. “If bullshit was currency,” he said straight-faced, “Joe Biden would be a billionaire.” Everyone in the room burst out laughing.”http://theinternationalforecaster.com/International_Forecaster_Weekly/Errant_Policy_Continues_to_Threaten_Market_StabilityThe News? Bullshit is THE global currency!Everything else is denial and deception.Ho hum

Gloomy, the key word is momentum. Even if the economic activity spurred by the government stimulus were to falter, that will take some time. Bottom line, momentum should get me the six months I talk about above.Remember, in the long run we are all dead; or very rich if you bought BRKA when Buffet took over and were patient enough to wait for the long run.

It is reasonable to accept the probability that that which we call the Universe is a leaky capacitor – just like almost everything in it – particularly phenomenal life – that is emergent phenomenon that has the capacity of self organization.Ho hum

There is a very good debate on Inflation/Deflation between Mike Shedlock and Daniel Amerman. Mish in covering his deflation argument brushes over the issue of debt but doesn’t really use it as the hammer I see it as. When so many consumers carry so much debt, unless inflation was contained to wage inflation, which I can not see as a remote possibility, then won’t any rising prices for commodities (what else is there that isn’t still in a bubble?) take money from consumption and debt repayment? Won’t both of these cause the real economy to contract even further?Maybe someone on this blog can post some link or give some explanation as to WHY the huge pyramid of debt isn’t the two ton gorilla in our financial jungle, devouring everything.In the end, there isn’t a lot of disagreement between Mish and Amerman except over interpretations of definitions. The main difference is that Mish says the debt will collapse further and Amerman says the government won’t let it. They also interpret what has been happening differently.Again interesting debate and for those interested in the Inflation/Deflation debate, it is worth listening to..For me, the only way I can see the government getting around the expansion of the money supply not causing costs to rise, which would in my pea brain cause defaults to continue or expand, is for them to send the money directly to our bank accounts and let us use it to pay down debts or speculate, vs. keep sending it to the banks to loan to us which hasn’t been working so well… Maybe due to debt revulsion.

I guess an important difference between your style and mine is that you try to capture more short term market movements, while I only focus on long term trends. Both approaches can be successful for sure. I came accross this interesting counterpoint to Grant. Food for thought-”To be sure, Mr. Grant rightfully acknowledges the folly of economic forecasting and is careful about pinpointing when we might expect to see his anticipated strong recovery.Yet by citing the work of the Economic Cycle Research Institute, which has recently been suggesting that a major upswing is on the cards, Mr. Grant seems to make it clear that now is the time for optimism.Unfortunately, his rationale is weak, if not totally wrong. For the most part, his argument rests on the premise that, historically at least, strong recoveries have followed severe contractions.Aside from discounting the fact that there are aspects to the current unraveling that are historically unique and extraordinarily unsettling (e.g., total credit market debt relative to gross domestic product is well beyond anything this country has ever witnessed), Mr. Grant makes a number of curious assertions.For one thing, he assumes that the current downturn is near its nadir, instead of a temporary floor built on a massive stimulus injection and a knee-jerk bout of inventory restocking. Among logicians, such an analytical approach might be described as “begging the question.”Mr. Grant also gives short shrift to the fact that in many ways — see “A Tale of Two Depressions” by Barry Eichengreen and Kevin H. O’Rourke for more on this subject — the economic episode that most closely parallels the current downturn is the one that occurred during the Great Depression, which lasted twice as long as the latest one has.Perhaps our economy will rebound sharply in 2011, but from what level? Should we really be preparing for the best right now — instead of the worst — given how many icebergs –like the accelerating meltdown in commercial real estate and the mortgage reset timebomb — are only just floating into view?History suggests that time is not on the side of the optimists when it comes to episodes like the one we are going through. As I’m sure Mr. Grant is aware, Professors Carmen M. Reinhart and Kenneth S. Rogoff have published a research paper, “The Aftermath of Financial Crises,” based on data going back more than a century, which concluded that post-crisis downturns tend to be “protracted affairs.”To bolster his allegedly contrarian argument, Mr. Grant points to the swollen ranks of pessimists preparing to meet the future from “inside of a bomb shelter.” But after decades of bubble-induced euphoria and an economy built on massive debt and unparalleled overconsumption, I wonder if he is engaging in a bit of dot-com era relativism — where the Nasdaq was “cheap” at 4,000 because it was down 20 percent from its peak (it is now 2,132).If savings rates, debt levels, and the share of the U.S. economy accounted for by consumer spending were to return to, say, pre-Greenspan era norms, then one bomb shelter might not be enough to handle the economic onslaught that is still headed our way.Finally, Mr. Grant makes the cardinal error of many ivory tower economists. He credits equity investors with the wisdom of crowds. Those are the same people who bid share prices to new all-time highs in the fall of 2007, just as credit markets were unraveling, home prices were collapsing, and the bottom was falling out of the real economy. Hmmm.That said, it is certainly not my intention to lump Jim Grant with all those clueless strategists, economists, and policymakers who failed to see things coming. In fact, I think he is a very smart guy and I’ve always enjoyed hearing what he has to say. But the fact is that bull and bear markets frequently have one thing in common: turning points marked by the public capitulation of one or more prominent contrarians.Given what Mr. Grant has just written, I can only ask: Did one of the world’s best known bears just ring the bell at the top of the great dead cat bounce?”http://www.financialarmageddon.com/2009/09/jim-grant-ringing-the-bell-at-the-top.html

These debates seem to loose sight of the root problem — fraud.Now the government has been sucked into the fraud game on behalf of the status quo.Economic “contraction” is a side-effect of fraud, but the government must continue the fraud (quantitative easing, new fed facilities, print mo’ money) to prevent defaltion.The best scenario is stagflation. The worst scenario is a collapse of the financial system brought about by factors out of the control of government such as “Chinese Revenge” blowback.Our future probably lies somewhere in between these two extremes with constant elevated inflation.

Now the academics have begun the back biting, in fighting, finger pointing, etc.If anything, this proves economics is indeed a miserable science.============How Did Paul Krugman Get It So Wrong?by John Cochrane, University of Chicago(Please don’t bother emailing me to tell me what a jerk I am.)Many friends and colleagues have asked me what I think of PaulKrugman’s New York Times Magazine article, “How did Economists get itso wrong?”Most of all, it’s sad. Imagine this weren’t economics for amoment. Imagine this were a respected scientist turned popular writer,who says, most basically, that everything everyone has done in hisfield since the mid 1960s is a complete waste of time. Everything thatfills its academic journals, is taught in its PhD programs, presentedat its conferences, summarized in its graduate textbooks, and rewardedwith the accolades a profession can bestow, including multiple Nobelprizes, is totally wrong. Instead, he calls for a return to theeternal verities of a rather convoluted book written in the 1930s, astaught to our author in his undergraduate introductory courses. If ascientist, he might be a global-warming skeptic, an AIDS-HIVdisbeliever, a creationist, a stalwart that maybe continents don’tmove after all.It gets worse. Krugman hints at dark conspiracies, claiming”dissenters are marginalized.” Most of the article is just acalumnious personal attack on an ever-growing enemies list, which nowincludes “new Keyenesians” such as Olivier Blanchard and Greg Mankiw.Rather than source professional writing, he plays gotcha without-of-context second-hand quotes from media interviews. He makesstuff up, boldly putting words in people’s mouths that run contrary totheir written opinions. Even this isn’t enough: he adds cartoons totry to make his “enemies” look silly, and puts them in false andembarrassing situations. He accuses us of adopting ideas for pay,selling out for “sabbaticals at the Hoover institution” and fat “Wallstreet paychecks.” It sounds a bit paranoid.It’s annoying to the victims, but we’re big boys and girls. It’s adisservice to New York Times readers. They depend on Krugman to readreal academic literature and digest it, and they get this attackinstead. And it’s ineffective. Any astute reader knows that personalattacks and innuendo mean the author has run out of ideas.That’s the biggest and saddest news of this piece: Paul Krugman has nointeresting ideas whatsoever about what caused our current financialand economic problems, what policies might have prevented it, or whatmight help us in the future, and he has no contact with people whodo. “Irrationality” and advice to spend like a drunken sailor arepretty superficial compared to all the fascinating things economistsare writing about it these days.How sad.That’s what I think, but I don’t expect you the reader to be convincedby my opinion or my reference to professional consensus. Maybe he isright. Occasionally sciences, especially social sciences, do take awrong turn for a decade or two. I thought Keynesian economics was sucha wrong turn. So let’s take a quick look at the ideas.Krugman’s attack has two goals. First, he thinks financial markets are”inefficient,” fundamentally due to “irrational” investors, and thusprey to excessive volatility which needs government control. Second,he likes the huge “fiscal stimulus” provided by multi-trillion dollardeficits.Efficiency.It’s fun to say we didn’t see the crisis coming, but the centralempirical prediction of the efficient markets hypothesis is preciselythat nobody can tell where markets are going – neither benevolentgovernment bureaucrats, nor crafty hedge-fund managers, norivory-tower academics. This is probably the best-tested proposition inall the social sciences. Krugman knows this, so all he can do is huffand puff about his dislike for a theory whose central prediction isthat nobody can be a reliable soothsayer. And of course it makes nosense whatsoever to try to discredit efficient-markets finance becauseits followers didn’t see the crash coming.Krugman writes as if the volatility of stock prices alone disprovesmarket efficiency, and efficient marketers just ignored it all theseyears. This is a canard that Paul knows better than to pass on, nomatter how rhetorically convenient. (I can overlook his mixing up theCAPM and Black-Scholes model, but not this.) There is nothing about”efficiency” that promises “stability.” “Stable” growth would in factbe a major violation of efficiency. Efficient markets did not need towait for “the memory of 1929 … gradually receding,” nor did we failto read the newspapers in 1987. Data from the great depression hasbeen included in practically all the tests. In fact, the great “equitypremium puzzle” is that if efficient, stock markets don’t seem riskyenough to deter more people from investing! Gene Fama’s PhD thesis wason “fat tails” in stock returns.It is true and very well documented that asset prices move more thanreasonable expectations of future cashflows. This might be becausepeople are prey to bursts of irrational optimism and pessimism. Itmight also be because people’s willingness to take on risk varies overtime, and is lower in bad economic times. As Gene Fama pointed out in1970, these are observationally equivalent explanations. Unless youare willing to elaborate your theory to the point that it canquantitatively describe how much and when risk premiums, or waves of”optimism” and “pessimism,” can vary, you know nothing. No theory isparticularly good at that right now.Crying “bubble” is empty unless you have an operational procedure foridentifying bubbles, distinguishing them from rationally low riskpremiums, and not crying wolf too many years in a row. Krugman rightlypraises Robert Shiller for his warnings over many years that houseprices might fall. But advice that we should listen to Shiller,because he got the last one right, is no more useful than previousadvice from many quarters to listen to Greenspan because he gotseveral ones right. Following the last mystic oracle until he getsone wrong, then casting him to the wolves, is not a good long-termstrategy for identifying bubbles. Krugman likes Shiller because headvocates behavioral ideas, but that’s no help either. People who callthemselves behavioral have just as wide a divergence of opinion asthose who don’t. Are markets irrationally exuberant or irrationallydepressed? It’s hard to tell.This difficulty is no surprise. It’s the central prediction offree-market economics, as crystallized by Hayek, that no academic,bureaucrat or regulator will ever be able to fully explain marketprice movements. Nobody knows what “fundamental” value is. If anyonecould tell what the price of tomatoes should be, let alone the priceof Microsoft stock, communism would have worked.More deeply, the economist’s job is not to “explain” marketfluctuations after the fact, to give a pleasant story on the eveningnews about why markets went up or down. Markets up? “A wave ofpositive sentiment.” Markets went down? “Irrational pessimism.” ( “Therisk premium must have increased” is just as empty.) Our ancestorscould do that. Really, is that an improvement on “Zeus had a fightwith Apollo?” Good serious behavioral economists know this, and theyare circumspect in their explanatory claims.But this argument takes us away from the main point. The case for freemarkets never was that markets are perfect. The case for free marketsis that government control of markets, especially asset markets, hasalways been much worse.Krugman at bottom is arguing that the government should massivelyintervene in financial markets, and take charge of the allocation ofcapital. He can’t quite come out and say this, but he does say”Keynes considered it a very bad idea to let such markets…dictateimportant business decisions,” and “finance economists believed thatwe should put the capital development of the nation in the hands ofwhat Keynes had called a ‘casino.’” Well, if markets can’t be trustedto allocate capital, we don’t have to connect too many dots to imaginewho Paul has in mind.To reach this conclusion, you need evidence, experience, or anyrealistic hope that the alternative will be better. Remember, the SECcouldn’t even find Bernie Madoff when he was handed to them on asilver platter. Think of the great job Fannie, Freddie, and Congressdid in the mortgage market. Is this system going to regulateCitigroup, guide financial markets to the right price, replace thestock market, and tell our society which new products are worthinvestment? As David Wessel’s excellent In Fed We Trust makesperfectly clear, government regulators failed just as abysmally asprivate investors and economists to see the storm coming. And not fromany lack of smarts.In fact, the behavioral view gives us a new and stronger argumentagainst regulation and control. Regulators are just as human andirrational as market participants. If bankers are, in Krugman’swords, “idiots,” then so must be the typical treasury secretary, fedchairman, and regulatory staff. They act alone or in committees,where behavioral biases are much better documented than in marketsettings. They are still easily captured by industries, and facepolitically distorted incentives.Careful behavioralists know this, and do not quickly run from “themarket got it wrong” to “the government can put it all right.” Even mymost behavioral colleagues Richard Thaler and Cass Sunstein in theirbook “Nudge” go only so far as a light libertarian paternalism,suggesting good default options on our 401(k) accounts. (And even herethey’re not very clear on how the Federal Nudging Agency is going tosteer clear of industry capture.) They don’t even think of jumpingfrom irrational markets, which they believe in deeply, to Federalcontrol of stock and house prices and allocation of capital.StimulusMost of all, Krugman likes fiscal stimulus. In this quest, he accusesus and the rest of the economics profession of “mistaking beauty fortruth.” He’s not clear on what the “beauty” is that we all fell inlove with, and why one should shun it, for good reason. The firstsiren of beauty is simple logical consistency. Paul’s Keynesianeconomics requires that people make logically inconsistent plans toconsume more, invest more, and pay more taxes with the sameincome. The second siren is plausible assumptions about how peoplebehave. Keynesian economics requires that the government is able tosystematically fool people again and again. It presumes that peopledon’t think about the future in making decisions today. Logicalconsistency and plausible foundations are indeed “beautiful” but to methey are also basic preconditions for “truth.”In economics, stimulus spending ran aground on Robert Barro’sRicardian equivalence theorem. This theorem says that debt-financedspending can’t have any effect because people, seeing the higherfuture taxes that must pay off the debt, will simply save more. Theywill buy the new government debt and leave all spending decisionsunaltered. Is this theorem true? It’s a logical connection from a setof “if” to a set of “therefore.” Not even Paul can object to theconnection.Therefore, we have to examine the “ifs.” And those ifs are, as usual,obviously not true. For example, the theorem presumes lump-sum taxes,not proportional income taxes. Alas, when you take this into accountwe are all made poorer by deficit spending, so the multiplier is mostlikely negative. The theorem (like most Keynesian economics) ignoresthe composition of output; but surely spending money on roads ratherthan cars can affect the overall level.Economists have spent a generation tossing and turning the Ricardianequivalence theorem, and assessing the likely effects of fiscalstimulus in its light, generalizing the “ifs” and figuring out thelikely “therefores.” This is exactly the right way to do things. Theimpact of Ricardian equivalence is not that this simple abstractbenchmark is literally true. The impact is that in its wake, if youwant to understand the effects of government spending, you have tospecify why it is false. Doing so does not lead you anywhere nearold-fashioned Keynesian economics. It leads you to consider distortingtaxes, how much people care about their children, how many peoplewould like to borrow more to finance today’s consumption and soon. And when you find “market failures” that might justify amultiplier, optimal-policy analysis suggests fixing the marketfailures, not their exploitation by fiscal multiplier. Most “NewKeynesian” analyses that add frictions don’t produce big multipliers.This is how real thinking about stimulus actually proceeds. Nobodyever “asserted that an increase in government spending cannot, underany circumstances, increase employment.” This is unsupportable by anyserious review of professional writings, and Krugman knows it. (My ownare perfectly clear on lots of possibilities for an answer that is notzero.) But thinking through this sort of thing and explaining it ismuch harder than just tarring your enemies with out-of-context quotes,ethical innuendo, or silly cartoons.In fact, I propose that Krugman himself doesn’t really believe theKeynesian logic for that stimulus. I doubt he would follow that logicto its inevitable conclusions. Stimulus must have some otherattraction to him.If you believe the Keynesian argument for stimulus, you should thinkBernie Madoff is a hero. He took money from people who were saving it,and gave it to people who most assuredly were going to spend it. Eachdollar so transferred, in Krugman’s world, generates an additionaldollar and a half of national income. The analogy is evencloser. Madoff didn’t just take money from his savers, he essentiallyborrowed it from them, giving them phony accounts with promises ofgreat profits to come. This looks a lot like government debt.If you believe the Keynesian argument for stimulus, you don’t care howthe money is spent. All this puffery about “infrastructure,”monitoring, wise investment, jobs “created” and so on ispointless. Keynes thought the government should pay people to digditches and fill them up.If you believe in Keynesian stimulus, you don’t even care if thegovernment spending money is stolen. Actually, that would bebetter. Thieves have notoriously high propensities to consume.The crash.Krugman’s article is supposedly about how the crash and recessionchanged our thinking, and what economics has to say about it. The mostamazing news in the whole article is that Paul Krugman has absolutelyno idea about what caused the crash, what policies might haveprevented it, and what policies we should adopt going forward. Heseems completely unaware of the large body of work by economists whoactually do know something about the banking and financial system, andhave been thinking about it productively for a generation.Here’s all he has to say: “Irrationality” caused markets to go up andthen down. “Spending” then declined, for unclear reasons, possibly”irrational” as well. The sum total of his policy recommendations isfor the Federal Government to spend like a drunken sailor after thefact.Paul, there was a financial crisis, a classic near-run on banks. Thecenterpiece of our crash was not the relatively free stock or realestate markets, it was the highly regulated commercial banks. Ageneration of economists has thought really hard about these kinds ofevents. Look up Diamond, Rajan, Gorton, Kashyap, Stein, and so on.They’ve thought about why there is so much short term debt, why banksrun, how deposit insurance and credit guarantees help, and how theygive incentives for excessive risk taking.If we want to think about events and policies, this seems like morethan a minor detail. The hard and central policy debate over the lastyear was how to manage this financial crisis. Now it is how to set upthe incentives of banks and other financial institutions so this messdoesn’t happen again. There’s lots of good and subtle economics herethat New York Times readers might like to know about. What doesKrugman have to say? Zero.Krugman doesn’t even have anything to say about the Fed. Ben Bernankedid a lot more last year than set the funds rate to zero and then gooff on vacation and wait for fiscal policy to do its magic. Leavingaside the string of bailouts, the Fed started term lending tosecurities dealers. Then, rather than buy treasuries in exchange forreserves, it essentially sold treasuries in exchange for privatedebt. Though the funds rate was near zero, the Fed noticed hugecommercial paper and securitized debt spreads, and intervened in thosemarkets. There is no “the” interest rate anymore, the Fed isattempting to manage them all. Recently the Fed has started buyingmassive quantities of mortgage-backed securities and long-termtreasury debt.Monetary policy now has little to do with “money” vs. “bonds” with allthe latter lumped together. Monetary policy has become wide-rangingfinancial policy. Does any of this work? What are the dangers? Canthe Fed stay independent in this new role? These are the questions ofour time. What does Krugman have to say? Nothing.Krugman is trying to say that a cabal of obvious crackpots bedazzledall of macroeconomics with the beauty of their mathematics, to thepoint of inducing policy paralysis. Alas, that won’t stick. The sadfact is that few in Washington pay the slightest attention to modernmacroeconomic research, in particular anything with a seriousintertemporal dimension. Paul’s simple Keynesianism has dominatedpolicy analysis for decades and continues to do so. From the CEA tothe Fed to the OMB and CBO, everyone just adds up consumer, investmentand government “demand” to forecast output and uses simple Phillipscurves to think about inflation. If a failure of ideas caused badpolicy, it’s a simpleminded Keynesianism that failed.The future of economics.How should economics change? Krugman argues for three incompatiblechanges.First, he argues for a future of economics that “recognizes flaws andfrictions,” and incorporates alternative assumptions about behavior,especially towards risk-taking. To which I say, “Hello, Paul, wherehave you been for the last 30 years?” Macroeconomists have not spent30 years admiring the eternal verities of Kydland and Prescott’s 1982paper. Pretty much all we have been doing for 30 years is introducingflaws, frictions and new behaviors, especially new models of attitudesto risk, and comparing the resulting models, quantitatively, to data.The long literature on financial crises and banking which Krugman doesnot mention has also been doing exactly the same.Second, Krugman argues that “a more or less Keynesian view is the onlyplausible game in town,” and “Keynesian economics remains the bestframework we have for making sense of recessions and depressions.” Onething is pretty clear by now, that when economics incorporates flawsand frictions, the result will not be to rehabilitate an 80-year-oldbook. As Paul bemoans, the “new Keynesians” who did just what he asks,putting Keynes inspired price-stickiness into logically coherentmodels, ended up with something that looked a lot more likemonetarism. (Actually, though this is the consensus, my own work findsthat new-Keynesian economics ended up with something much differentand more radical than monetarism.) A science that moves forward almostnever ends up back where it started. Einstein revises Newton, but doesnot send you back to Aristotle. At best you can play the fun game ofhunting for inspirational quotes, but that doesn’t mean that you couldhave known the same thing by just reading Keynes once more.Third, and most surprising, is Krugman’s Luddite attack onmathematics; “economists as a group, mistook beauty, clad inimpressive-looking mathematics, for truth.” Models are “gussied upwith fancy equations.” I’m old enough to remember when Krugman wasyoung, working out the interactions of game theory and increasingreturns in international trade for which he won the Nobel Prize, andthe old guard tut-tutted “nice recreational mathematics, but notreal-world at all.” He once wrote eloquently about how only math keepsyour ideas straight in economics. How quickly time passes.Again, what is the alternative? Does Krugman really think we can makeprogress on his – and my – agenda for economic and financial research– understanding frictions, imperfect markets, complex human behavior,institutional rigidities – by reverting to a literary style ofexposition, and abandoning the attempt to compare theoriesquantitatively against data? Against the worldwide tide ofquantification in all fields of human endeavor (read “Moneyball”) isthere any real hope that this will work in economics?No, the problem is that we don’t have enough math. Math in economicsserves to keep the logic straight, to make sure that the “then” reallydoes follow the “if,” which it so frequently does not if you justwrite prose. The challenge is how hard it is to write down explicitartificial economies with these ingredients, actually solve them, inorder to see what makes them tick. Frictions are just bloody hard withthe mathematical tools we have now.The insults.The level of personal attack in this article, and fudging of the factsto achieve it, is simply amazing.As one little example (ok, I’m a bit sensitive), take my quotationabout carpenters in Nevada. I didn’t write this. It’s a quote, takenout of context, from a bloomberg.com article, written by a reporterwho I spent about 10 hours with patiently trying to explain somebasics, and who also turned out only to be on a hunt for embarrassingquotes. (It’s the last time I’ll do that!) I was trying to explainhow sectoral shifts contribute to unemployment. Krugman follows it bya lie — I never asserted that “it take mass unemployment across thewhole nation to get carpenters to move out of Nevada.” You can’t evendredge up a quote for that monstrosity.What’s the point? I don’t think Paul disagrees that sectoral shiftsresult in some unemployment, so the quote actually makes sense aseconomics. The only point is to make me, personally, seem heartless –a pure, personal, calumnious attack, having nothing to do witheconomics.Bob Lucas has written extensively on Keynesian and monetaristeconomics, sensibly and even-handedly. Krugman chooses to quote ajoke, made back in 1980 at a lunch talk to some business schoolalumni. Really, this is on the level of the picture of Barack Obamawith Bill Ayres that Sean Hannity likes to show on Fox News.It goes on. Krugman asserts that I and others “believe” “that anincrease in government spending cannot, under any circumstances,increase employment,” or that we “argued that price fluctuations andshocks to demand actually had nothing to do with the business cycle.”These are just gross distortions, unsupported by any documentation,let alone professional writing. And Krugman knows better. All economicmodels are simplified to exhibit one point; we all understand the realworld is more complicated; and his job is supposed to be to explainthat to lay readers. It would be no different than if someone were tolook up Paul’s early work which assumed away transport costs and claim”Paul Krugman believes ocean shipping is free, how stupid” in the WallStreet Journal.The idea that any of us do what we do because we’re paid off by fancyWall Street salaries or cushy sabbaticals at Hoover is justridiculous. (If Krugman knew anything about hedge funds he’d know thatbelieving in efficient markets disqualifies you for employment. Nobodywants a guy who thinks you can’t make any money trading!) GivenKrugman’s speaking fees, it’s a surprising first stone for him tocast.Apparently, salacious prose, innuendo, calumny, and selectivequotation from media aren’t enough: Krugman added cartoons to try tomake opponents look silly. The Lucas-Blanchard-Bernanke conspiratorialcocktail party celebrating the end of recessions is a sillyfiction. So is their despondent gloom on reading “recession” in thepaper. Nobody at a conference looks like Dr. Pangloss with wild hairand a suit from the 1800s. (OK, Randy Wright has the hair, but not thesuit.) Keynes did not reappear at the NBER to be booed as an”outsider.” Why are you allowed to make things up in pictures thatwouldn’t pass even the Times’ weak fact-checking in words?Most of all, Krugman isn’t doing his job. He’s supposed to read,explain, and criticize things economists write, and real professionalwriting, not interviews, opeds and blog posts. At a minimum, thisstyle leads to the unavoidable conclusion that Krugman isn’t readingreal economics anymore.How did Krugman get it so wrong?So what is Krugman up to? Why become a denier, a skeptic, an apologistfor 70 year old ideas, replete with well-known logical fallacies, apariah? Why publish an essentially personal attack on an ever-growingenemies list that now includes practically every professionaleconomist? Why publish an incoherent vision for the future ofeconomics?The only explanation that makes sense to me is that Krugman isn’ttrying to be an economist, he is trying to be a partisan, politicalopinion writer. This is not an insult. I read George Will, CharlesKrauthnammer and Frank Rich with equal pleasure even when I disagreewith them. Krugman wants to be Rush Limbaugh of the Left.Alas, to Krugman, as to far too many ex-economists in partisandebates, economics is not a quest for understanding. It is a set ofdebating points to argue for policies that one has adopted forpartisan political purposes. “Stimulus” is just marketing to sellCongressmen and voters on a package of government spending prioritiesthat you want for political reasons. It’s not a proposition to beexplained, understood, taken seriously to its logical limits, orreflective of market failures that should be addressed directly.Why argue for a nonsensical future for economics? Well, again, if youdon’t regard economics as a science, a discipline that ought to resultin quantitative matches to data, a discipline that requirescrystal-clear logical connections between the “if” and the “then,” ifthe point of economics is merely to provide marketing and propagandafor politically-motivated policy, then his writing does make sense. Itmakes sense to appeal to some future economics – not yet worked out,even verbally – to disdain quantification and comparison to data, andto appeal to the authority of ancient books as interpreted you, theirlone remaining apostle.Most of all, this is the only reason I can come up with to understandwhy Krugman wants to write personal attacks on those who disagree withhim. I like it when people disagree with me, and take time to read mywork and criticize it. At worst I learn how to position it better. Atbest, I discover I was wrong and learn something. I send a politethank you note.Krugman wants people to swallow his arguments whole from hisauthority, without demanding logic, or evidence. Those who disagreewith him, alas, are pretty smart and have pretty good arguments if youbother to read them. So, he tries to discredit them with personalattacks.This is the political sphere, not the intellectual one. Don’t arguewith them, swift-boat them. Find some embarrassing quote from an oldinterview. Well, good luck, Paul. Let’s just not pretend this hasanything to do with economics, or actual truth about how the worldworks or could be made a better place.*University of Chicago Booth School of Business. Many colleagues andfriends helped, but I don’t want to name them for obviousreasons. Krugman fans: Please don’t bother emailing me to tell me whata jerk I am. I will update this occasionally, so please pass on thelink rather than the document,http://faculty.chicagobooth.edu/john.cochrane/research/Papers/#news

Well, I didn’t read Krugman’s piece, and I only skimmed about half of this one, but I am going to comment anyway.This quote is when I knew I wouldn’t be able to finish reading:”It’s fun to say we didn’t see the crisis coming, but the centralempirical prediction of the efficient markets hypothesis is preciselythat nobody can tell where markets are going – neither benevolentgovernment bureaucrats, nor crafty hedge-fund managers, norivory-tower academics.”Nobody can tell? Try looking at any Roubini post or its comments from 2007 through 2008. This is a supreme cop-out. According to the writer we must accept that markets are efficient and that imbalances are impossible to detect. In this world market manipulation could not exist.And after reading the next quote, I knew that the thrust of the piece was the classic conservative/libertarian position that capital should never have to suffer under any rules or regulations.”Remember, the SEC couldn’t even find Bernie Madoff when he was handed to them on a silver platter. Think of the great job Fannie, Freddie, and Congressdid in the mortgage market. Is this system going to regulate Citigroup, guide financial markets to the right price, replace the stock market, and tell our society which new products are worth investment? As David Wessel’s excellent In Fed We Trust makes perfectly clear, government regulators failed just as abysmally as private investors and economists to see the storm coming. And not from any lack of smarts.”At this point the writer ignores the fact that the SEC was systematically weakened in recent years. It ignores that many of the quality regulations were thrown to the bottom of the ocean (Glass-Steagall). Essentially, it ignores history. It asks us to take the fact that the SEC couldn’t nab Madoff as proof that the SEC was totally ineffective for its entire history.Again, I didn’t read Krugman’s piece, but I get the impression that he is arguing for a more robust approach to be taken by economists. Economists should not close their eyes to the behavior of people and firms. Economists should not select history to suit their needs and then ignore it when it doesn’t fit into their elegant theories.

Amen, Economists are just as guilty as the rest of the fraudsters for letting this happen with out a peep and staying in denial.

Well now, speaking about a new split in the holy church of economics; are we now hearing the rise of the Protestants? It is and has been IM Considered Opine of over 10 years that Krugman has the integrity of a vegetarian shark but this diatribe – including that wonderful “authoritative” attempt at the Papal Bull – er, “we have God’s ear” (inferred) that <@ armchair> extracts above (my choice as well) overlooking the fact that 11 ‘economists’ predicted < the list was published> this mess PLUS numerous others from outside this dubious, failed and flawed field of wasted endeavour – all that is being herein, er that wonderful ooze seemingly from the “University of Chicago Booth School of Business Program” (scratch that one off the list) – ‘marked to fantasy’ like the predator bank assets, while feeding at the public purse – at least Madoff had some style and standard :The bottom line is that “economics” is a matter of encapsulated emotionalized preferences concretized at any particular time and placed subject to the strength of your grouping and your momentary opportuned characterization of your political membership entrenched in ultimate possibility and blind energized pursuit of fantasy.Academic credentials are the intellectual invisible cloak, in most cases, for pushing ones wheelbarrow to the finishing line of reward and glory – Hallelujah!”Please don’t bother emailing me to tell me what a jerk I am.”Okay, no email. You are a jerk! Add to that, an irresponsible jerk and as per your ilk, a crafty jerk that uses his talents for matters that would be better served flushed.Ho hum

Hate to be so blunt, perhaps the best medicine for CA is to let it fail. CA is going to have to make some hard choices, but I ultimately see it becoming two or three states since there are problems that some regions simply do not want to put up with any more.Hope you are in one of the parts able to sustain itself. If not, you can always move.

But Vramer is actually entertaining. Sack him and they have nothing. Well, on CNBC Europe they still have Conan OBrien, I guess.

you mean Obama, Pelosi, Geithner are fraud right? entire Democrats and Repubicans are fraud too. fraud beating fraud, what a sight.

Leadership, schmeadership, we don’t need no stinking leader. Let those in Washington cook up a good casserole of nonsense and serve it to themselves with a boatload of Jim Beam. They can congratulate their honorable selves and have their honorable hangovers tomorrow. Meanwhile, we wise are buying gold.

@ ptmYou might be interested in this from ZH

Bloomberg today:”The Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said.”What’s more important..the independence of a private banking cartel or the independence of the American people?Congress did not create the Federal Reserve. The henchmen for the cartel of banks created the Federal Reserve and Congress rubber stamped it.Astonishingly, Geithner has called for more powers for the Federal Reserve before he gets a ‘look under the hood’? This guy is a joke. He should now support the Congressional effort to audit the Federal Reserve by GAO. This a key test on this guy’s loyalty…to the American people or his Federal Reserve cronies.

Thanks for the tip Free Tibet.Fits with what people here have been saying. I’ll comment more when I get a change to read in more detail.

They give good, general fits up to points of discontinuity. So you have to build in a rule that tells you when you might want to disregard the model. Therein lies the problem … how do you model uncertainty?

Remember the second “Taunting” scene from Monty Python’s Holy Grail when King Arthur demands to see the the Holy Grail, and end up having offal and other unpleasant matter dumped on them. Picture John Cleese saying, “Mind your own business!” That’s Ben Bernanke, and the construct of the Fed is about as explained as the French fort in that scene being in England.

Fraud > Yes there is fraud and the government should stop it because when there really are no rules or the rules are not enforced, there is NO justice. Then there is no way to have sound investment. Thus there will be no new jobs and the system will spin out of control into chaos.Unless we see change in the direction of at least tightening up the rules and regulations under which the TBTF institutions operate, so that they can not run rough shod over the American people, I fully expect chaos at some point in the future. We should put a modern version of Glass-Steagall back into place and repeal the harmful parts of the Commodity Futures Modernization Act.How ever the Inflation/Deflation scenario plays out is very important for those of us who are concerned with economic survival. With inflation, you want to own assets that will go up in value, with deflation, you want to stay in non depreciating assets or cash. You can’t sit on a fence when the swings are so violent and the outcomes so dramatic.I want to know IF expanding the money supply always leads to rising prices or can it do nothing because it is just trying to replace existing losses and prepare for future losses? Because to me, the size of the money supply in the banks is irrelevant, it is the purchasing power that means something to me. Will my purchasing power go up or down? How can I hedge that or protect it? Safely.. or is there anything such as safe in this topsy tervy world of lies, fraud and massive manipulation of money and the media?

ft.com July 17 2007 Market insight: Be bullish and watch the bears impale themselvesBy Ken Fisher”Headlines herald a US prime-time, subprime mortgage implosion leading to an upcoming credit-crunch crisis – destined to sink shares, raise interest rates and impale economies. But this is demonstrable nonsense.“Fisher really seems to not want to understand what too much debt does to an economy…

Lookie, lookie, gold went below $1,000/oz this morning. <sarcasm>What a surprise!<sarcasm>

you really think that is possible?I will believe in substantive change when I see it..Words by those in power are used to give hope and misdirect not to actually do anything positive.. At least that has been the story for the last 30 or 40 years. Why is that going to change?

It is a confidence game to them. They need confident consumers willing to believe in inflation and thus borrow money from them for their plans to work, so consumer expectations are extremely important!

Just like I said 2 months ago.September Car Sales Expected to Be Lowest Of The YearSeptember could produce the worst auto sales of the year, according to an analysis by Edmunds.com (Via Zero Hedge).The seasonally adjusted annual rate of sales (SAAR) for September will be 8.8 million units. Last year when the economy was unraveling September’s SAAR was 12.5 million. In February, “the darkest month of the recession,” SAAR was 9.1 million.Just as Cash-for-Clunkers goosed auto sales numbers in August, it’s crushing September’s sales numbers. Without that juicy government rebate, fewer people are interested in buying a car. While this is a mini trend, it’s a good reminder for the economy at large. Who knows what will happen to our supposed recovery when (or if) the government stimulus runs out, and the government takes banks off of life support.Edmunds also points out that in a post-Clunkers economy profits for dealers are slipping back to where they were. Dealers were able to charge more for cars during cash-for-clunkers, since people were so happy to get a big rebate check they didn’t really haggle much. After Clunkers, inventories were tight, so prices rose.

They give good fits because they are used by everybody – the model IS the market…sadly reality disagrees

liquidity bubble will not be allowed to deflated -> no exit strategy forever -> 0% interest rate forever. party just started.

After the Summer Hollidays, LEAP2020 returns reaffirming their scenaries of collapsing Dollar! And the tendencies of the Dollar Index, or Gold, or commodities, are not denying LEAP’s prediction. For the real economy their prediction is more authorized – the free fall in the world markets is flagrant! LEAP sees a possible recovery only at the end of 2010! For me this means an effetive star of a long, wise and strong depression! The world economy and the USA economy, particulary, don’t support an recession during until the second half 2010!All is in march just now, all is running! Those who are saying about recovery in course, about the end of the crisis, must prove that – very difficult work for them!Mis besos

There certainly nothing “free”about the markets-that rallying cry is used to defeat legislation adverse to certain corporate interestswhile other lobbyists argue on behalf of the same interests for legislation to create and sustain barriers to competition.wdm223

China”s GDP Growth claims are not matching thier ouput numbers. Like i said previously, thier growth is only thier Stimulus dollars too… They have no growth occuring and the numbers they put out are flat out lies.So where is the Recvovery in China? in the US? in the world?Answer: It doesnt exist…..

Sounds like the case for less gov.

I think most posters on this board look way too far into the future and see possible negative outcomesWTF is This supposed to mean? Should everyone be short-sighted? Yeah, that Seventh-Generation thingy was a bunch of hogwash…As to me coming back and stating that I’m wrong? You bet! I always start with the premise that I’m wrong (some work the other way). But, as I’d mentioned previously, I’m not speaking to gloat or to protect my assets, I’m merely the messenger… Hmm… maybe I should use “Messenger” as a “handle?”

Yeah, just think of all those “bargains!” (tongue-in-cheek)

Chair,I’ll take a stab at this. (great questions BTW!)If you were to design something and then sell it and later find out that it has a terrible defect which WILL become very apparent to all, what would you do?Product RecallWhat we’re seeing is, in essence, a big product recall. All the game pieces are being called in. TPTB are looking to restart the game. The pieces that are out in play are decreasing in value and are not likely of a lot of us in the future. As I’d mentioned previously, what good are all those 52″ TVs and monster SUVs when you are unemployed and without “disposable” energy?We’re winding down. Some will call this negative, it’s not. It’s necessary, it’s the constraints of the physical world starting to overtake the folly of the virtual.

He doesn’t care because it’s OUR kids who will be stuck with the bill (not likely HIS)!

Well ,yes there is a “Solution”When the Financial System becomes compatible with the new World of Science and Technology.When physical values are taken into consideration with the financial values in the necessary calculations.When you can under those circumstances, have both physical and financial stability and predictability.Right now the World,s Economists are trapped by their own obsolete methadologyThey are not in a position to accurately predict the future ,as the unit of measurement is designed to fluctate and therefore is not predicable.The best Economists can do is give reasons why things happened in the past.NOT the FUTURE.They woudnt DARE as it is a manipulated system and manipulated by those who have the most power and money.Nothing new here.

n short you will have a few very wealthy folks, and a much larger majority that will just not be needed for the most important things that the country needs to do.Actually, we’re looking at a lot less “wealthy” folks, as they either slip down the social ladder or are taken out by the angry unemployed (and starving) masses.I’d love to sit down and debate Mr. Williams. Of course he and others like him expect to be members of the surviving upper-crust.

Additionally, this over-simplified view fails to understand the dynamics of economies of scale. Keep in mind: all that junk mail powers the US postal service; the masses and their private auto subsidize the trucking industry (pay a lot of the tab for creating and maintaining roadways).

He’s absolutely right: I’d been asking where any “recovery” was going to come from. However, the notion that WWII pulled us out of the Great Depression has been sufficiently debunked: it was pent up demand being able to exercise itself after many years of being suppressed (in many cases forced suppression by the govt as it forced industry to manufacture for war goods).

I agree as to the endlessly repeated claim that WWII “ended” the Great Depression.SWK

Using a “handle” would be a start!Since you have no skin in the game you really don’t have any credibility, even a clock is right twice a day.Go ahead, place your bets today for something that may or may not happen, I don’t play “the game” that way, too many unknowns.Let me ask you, are you a woman hater? Would you like me better if I just showed up here as Arthur and stated I was a millionaire and everyone thinks he’s a god? C’mon, give me a break.

One of the interesting things about the current “Alice in Wonderland” economy – that place where financial markets do their own thing while the real economy sails on in the doldrums – is that people are driven to analyze almost anything. Like, for example, applying technical analysis to unusual sets of data.Take a look at the following chart:http://www.elliottwave.com/a.asp?url=features/default.aspx?cat=mw&dy=nth&cn=7dcBaltic Dry Index as a Market ToolIt’s by no means unusual for people to look at the Baltic Dry Index as a measure of global trade. But I do find it interesting when people start plotting trading channels on the data. After all … if the index plunges out of the “trading channel”, do YOU plan to go SHORT on Baltic Dry ???!!!!!! I’m kidding, of course. I think there’s a point when traders need to STOP – and realize it’s time to drink a cold Corona beer !!!PeteCA

http://onlinejournal.com/artman/publish/article_5147.shtml.Why propaganda trumps truthBy Paul Craig RobertsOnline Journal Contributing Writer.Sep 21, 2009, 00:20…….”As far as I can tell, most Americans have far greater confidence in the government than they do in the truth. During the Great Depression, the liberals with their New Deal succeeded in teaching Americans to trust the government as their protector. This took with the left and the right. Neither end of the political spectrum is capable of fundamental questioning of the government. This explains the ease with which our government routinely deceives the people.”….http://www.nytimes.com/2009/09/21/world/asia/21afghan.html.General Calls for More U.S. Troops to Avoid Afghan FailurePublished: September 20, 2009WASHINGTON — The top military commander in Afghanistan warns…..comment: truth.”"The greatest myth concerning American foreign policies is the deeply-held belief that no matter what the United States does abroad, no matter how bad it may look, no matter what horror may result, the American government means well. American leaders may make mistakes, they may blunder, they may even on the odd occasion cause more harm than good, but they do mean well. Their intentions are always honorable. Of that Americans are certain. They genuinely wonder why the rest of the world can’t see how kind and generous and self-sacrificing America has been.”William Blum.here, for us and obama, an opportunity to do the correct and right thingas the world cannot help but notice, the world that is not soblind. but there is this….”Since the late 1940s, the United States has been deliberately engaged in an imperial project, and anyone who would hold the office of the presidency has to be willing to serve that end. All presidents have to promote the national security state, both domestically and in American foreign policy, if they wish to attain and hold on to power.”Morris Berman.truth, where is it? has bullshit become the currency of the world, truly?is this the direction in which america will lead it’s people and the rest ofthe world?diplomacy and conflict resolution through mass murder, good luck withthat america. we haven’t even presented a credible case for entranceinto the country of Afghanistan. our presumed economic need tocontinue the armament industries and secure resource transportdo not suffice unless murderous tyrant is the description youwish to take to your grave. think about the potential in thismoment, the opportunity to lead in the direction that has beenwaiting for you. it is truly the moment we have been waiting for.but will we be present?

ps.http://www.youtube.com/watch?v=rLi3L83cTGY.desperately seeking an exit strategy?turn around and get out! first.take everyone by surprise. then starttelling the truth like you mean itand like there is no tomorrow becausethat is the truth. maybe then the worldwould listen to what you have to sayand conclude your currency might justhave a chance in hell of being worthsomething again. i know, i’m irrational.but that is, as you may have observed, life.we will probably need a global day of grievingand atonement either way.peas.

correction: in the last sentencethe word “we” should read “the survivors”..http://www.youtube.com/watch?v=gFxGM-semhQ&feature=fvw

http://www.webofdebt.com/articles/mers.phpHo hum

“WE can’t have leadership that has the country’s best interest at heart until the system of corporate campaign financing and lobbying is dismantled…”God love you! The oligarchy owns both sides of the isle and contribute to both. You are promised change. You are promised hope. Nothing changes until there is real choice. And there is no real choice as long as the oligarchy is able to finance campaigns. The alternative are Palins.

有趣，学校安排这次谈话。 什么手段它对我们？

missing from video above.. last verse…..bring a dollar with you babyin the cold cold groundcold cold groundtake a weather vane roosterthrow rocks at his headstop talking to the neighborstil we all go deadbeware of my temperand the dog that I’ve foundbreak all the windows in thecold cold groundcold cold ground .

No offense mate, but that pent up demand was largely caused by the war causing many people to postpone their lives and dreams while at the same time piling up their meager army and defense industry wages.The notion that WWII ended the depression is hardly debunked.

The main difference between the US and Japan is the mountains of personal/family debt in this country. Japan has a culture of savers. So add that into your calculations. We have to deleverage a lot of debt before we can even get to no growth.The other BIG unknown is the mountains of derivatives that didn’t exist when Japan had its economic melt down.Things really are different this time..

g,i agree now lets stop killing each other.

No, I meant whore. He’s not in charge – he’s just here to make us feel better. The banks and the Fed make decisions – he’s just the face we are allowed to see. And they tell us he’s working for US! It’s all a show and we pay money to the banks for it.Timmy hug me tight and tell me you love me.

Which in fact did happen after the first major recovery during the slide in the Great Depression (from 1929 onwards). Interestingly, John Hussman takes up the same point in his weekly commentary (this week) at http://www.hussmanfunds.com – and even notes the similarity between the recent activity on the Dow and the charts for the Depression. Prof Hussman is certainly not making any stong comments, just observing that investment risk may well exceed expected gains at this point.PeteCA

CAN SOMEONE BLOW THEM UP!Ratings Downgradeby James SurowieckiSeptember 28, 2009 Text Size:Small TextMedium TextLarge Text Print E-Mail Feeds KeywordsCredit-Rating Agencies; Economic Crisis; Financial Crisis; Regulatory Reform; Standard & Poor’s; Moody’s; Stock Market When Barack Obama went to Wall Street last week to make the case for meaningful financial regulation, he took well-deserved shots at some of the villains of the financial crisis: greedy bankers, reckless investors, and captive regulators. But to that list he could have added credit-rating agencies like Standard & Poor’s and Moody’s. By giving dubious mortgage-backed securities top ratings, and by dramatically underestimating the risk of default and foreclosure, the agencies played a key role in inflating the housing bubble. If we’re going to reform the system, fixing them should be high on the list.Unfortunately, that’s not an easy task, since over the years the government has made the agencies an increasingly important part of the financial system. Rating agencies have been around for a century, and their ratings have been used by regulators since the thirties. But in the seventies the S.E.C. dubbed the three biggest agencies—S. & P., Moody’s, and Fitch—Nationally Recognized Statistical Rating Organizations, effectively making them official arbiters of financial soundness. The decision had a certain logic: it was supposed to make it easier for investors to know that the money in their pension or money-market funds was going into safe and secure investments. But the new regulations also turned the agencies from opinion-givers into indispensable gatekeepers. If you want to sell a corporate bond, or package a bunch of mortgages together into a security, you pretty much need a rating from one of the agencies. And though the agencies are private companies, their opinions can effectively have the force of law. The ratings often dictate what institutions like banks, insurance companies, and money-market funds can and can’t do: money-market funds can’t have more than five per cent of their assets in low-rated commercial paper, there are limits on the percentage of non-investment-grade assets that banks can own, and so on.The conventional explanation of what’s wrong with the rating agencies focusses on the fact that most of them are paid by the very people whose financial products they rate. That problem needs to be fixed, and last week the S.E.C. proposed new rules to address conflicts of interest. But there’s a much bigger problem, which is that, even though nearly everyone knows that the agencies are compromised and exert too much influence, the system makes it impossible not to rely on them. In theory, of course, the mere fact that a rating agency says a particular bond is AAA (close to risk-free) doesn’t mean that investors have to buy it; the agencies’ opinions should be just one ingredient in any decision. In practice, the government’s seal of approval, coupled with those regulatory requirements, encourages investors to put far too much weight on the ratings. According to a recent paper on the subject by the academics Darren Kisgen and Philip Strahan, that’s true even when the agency doing the rating doesn’t have a long track record. During the housing bubble, investors put a huge amount of money into AAA-rated mortgage-backed securities—which would have been fine had the rating agencies’ judgments been sound. Needless to say, they weren’t. Despite subprime borrowers’ notoriously shaky finances, the agencies failed to allow for the possibility that housing prices might fall sharply.from the issuecartoon banke-mail thisThe rating agencies’ role in inflating the bubble is well known. Less obvious is their role in accelerating the crash. Agencies have typically resisted changing their ratings on a frequent basis, so changes, when they occur, tend to be belated, widespread, and big. In the space of just a few months between late 2007 and mid-2008 (after the housing bubble burst), the agencies collectively downgraded an astonishing $1.9 trillion in mortgage-backed securities: some securities that had carried a AAA rating one day were downgraded to CCC the next. Because many institutional investors are prohibited from owning too many low-rated securities, these downgrades necessarily led to forced selling, magnifying the panic, and prevented other investors from swooping in and buying the distressed debt cheaply. In effect, the current system pushes many big investors to buy high and sell low.Rating agencies existed long before they carried a government imprimatur, and, their recent dismal performance notwithstanding, they’ll exist in the future, if only because few investors have the patience to sort through all the bond offerings and structured-finance deals out there. But we need a divorce: the rating agencies shouldn’t be government-sanctioned and government-protected institutions and their judgments shouldn’t be part of the rules that govern how investors can act.Given how rarely real reform happens in Washington, that may sound like a hopeless goal. But last summer the S.E.C. seriously considered enacting a series of proposals that would have gone some way toward uncoupling the rating agencies from the regulatory system. The plan fizzled, however, thanks in part to pressure from a surprising source: big investors. Oddly, the ratings system, broken as it is, remains attractive to many investors who have been burned by it. For one thing, it provides an easily comprehensible standard: without it, we’d need to come up with new ways of measuring risk. More insidiously, the ratings system provides a ready-made excuse for failure: as long as you’re buying AAA-rated assets, you can say you’re being responsible. After the housing crash, though, we know how illusory those AAA ratings can be. It’s time for investors to face reality: working with a fake safety net is more dangerous than working without any net at all. ♦

JUST HOW are they gonna stimulate this economy???Continual extension of unemployment benefits, 0% interests rates (for the banks) indefinitely, more “cash for clunker” incentive programs in the works, more job cuts, less consumer spending, more govt spending with bailouts, healthcare, cap and trade, etc. Is some big event or change looming in the near future? I can’t even imagine what will happen if oil goes back to $100 per barrel.

NICE KNOWING YOU!Ten Big Companies That Are Veering Toward BankruptcyPosted Sep 18, 2009 12:21pm EDT by Vincent Fernando and Joe Weisenthal inFrom The Business Insider, Sept. 18, 2009:Despite a few green shoots in the economy and a rocketing stock market, many large companies are still struggling to avoid bankruptcy.A new report by Audit Integrity identifies some high-profile names “that have the highest probability of declaring bankruptcy among publicly traded firms.”Which companies appear the worst off? We took the list and removed any company with a market cap under $3 billion. We then ranked the remaining names by a simple measure of the market’s perceived bankruptcy risk – Market Cap (MC) divided by Enterprise Value (EV). The less MC vs. EV, the less residual shareholders’ value (above what debt holders can claim) the market is pricing-in for the company. Thus a lower MC/EV means the market thinks the company is more likely to go bankrupt.1. HertzWhen you have tons of debt financing your fleet of cars, falling rental demand really hurts.While the company raised new capital in May for some breathing room, Fitch and Moody’s actually cut their ratings for the company in July.Ignoring the downgrade, shares kept rallying and are now at over five times the March $2 low. Best of luck.Market Cap (MC)/Enterprise Value (EV) = 32%2. TextronWhat a tough time to be selling business jets.Textron wrote down $2.3 billion its backlog this year after it canceled a new jet design, and demand for its other aircraft-related offerings has plummeted.Shareholders may be heartened by the company’s ability to push back some debt maturities lately, but deteriorating credit quality at the company’s leasing arm makes the outlook uncertain at best.MC/EV=39%3. Sprint NextelSprint Nextel is bleeding customers, and could lose as many as 4.4 million net post-paid subscribers this year.This is a huge problem when you have large amounts of maturing debt over the next few years.A recent Deutsche Telekom acquisition rumor offered some hope, but that appears to have faded. Facing a difficult road ahead on its own, the company better keep its lawyers on speed-dial.MC/EV=41%4. Macy’sDoes anyone even shop at department stores anymore?Same store sales will likely keep falling at Macy’s right through 2009. With $2.4 billion of maturing debt over the next five years, the company is trying to cut costs, and has already reduced its dividend.Hopefully the US consumer will bounce back soon, and actually want to shop at Macy’s.MC/EV=47%5. MylanIn a classic case of management empire building, Mylan overpaid big time when it bought Merck’s generic business back in 2007 and is now stuck with $5 billion of long-term debt as a result.From 2007 – 2008, the company lost over $1.3 billion very much due to goodwill write-downs.While the company could earn $300 million this year, they’ll have to earn far more than that in the future to make their debt manageable.MC/EV=51%6. GoodyearDemand for Goodyear tires has sunk, and the company is saddled with massive debt and pension obligations.It doesn’t help that The United Steelworkers union prevents the company from proper cost control by forcing factories to stay open.Shareholders have to wonder how much value will be left of the company after bondholders and the union members have their way.MC/EV=53%7. CBSWeak advertising and falling license fees have sent CBS’s earnings off a cliff in 2009.If they remain depressed for too long, the company could have trouble refinancing $3.2 billion of debt coming due over the next five years.It will really come down to whether or not CBS’s earnings collapse is merely cyclical, or the result of structural trend whereby traditional TV is dying.As a business blog, we can’t help but feel partly guilty here.MC/EV=55%8. Advanced Micro DevicesWhen will AMD actually make money again? The question is becoming more important by the day since it carries over $5 billion in long-term debt.After losing almost $3 billion from 2007 – 2008, analysts expect the company to lose more money in 2009 and 2010.While the shares rallied from their February $2 low, they still appear stuck in a long-term down trend from $40 highs way back in 2006.MC/EV=55%9. Las Vegas SandsLas Vegas Sands over-expanded and over-levered in the last few years and now has over $10 billion in debt to deal with.Despite jumping 13 times from their March low, Las Vegas Sands shares still face an uphill battle.Conditions in Las Vegas are horrible, Asian expansion isn’t enough, and if this lasts too long then LVS will end up in bankruptcy court looking like it bit off more than it can chew.MC/EV=60%10. Interpublic GroupAs one of the largest advertising and marketing companies in the world, IPG was slammed by the global recession.As the company’s CEO said during recent second quarter results, the downturn “is proving steeper and more lasting than expected”.Revenues have fallen double digits and the company’s exposure to General Motors as its largest client hasn’t helped.MC/EV=80%

Exit strategy? Read the article below:————The Inflation ProcessSteve Saville1 September 2009In our 5th August commentary we explained that the central bank couldn’t simply withdraw monetary stimulus in order to avoid an inflation problem, because injecting new money doesn’t just alter the general price level; it also changes the STRUCTURE of the economy. In the world of economics there are few things of greater importance than the concept of how monetary inflation really works, and yet hardly anyone understands it. Of special relevance, the current Fed chairman appears to have absolutely no idea how monetary inflation affects the economy. We’ll therefore take another shot at explaining it; this time, for the sake of clarity and brevity, in point form.1. When the money supply is increased by, say, 10%, the result is NOT a 10% across-the-board increase in prices. This is because the new money is spent in specific areas and on specific projects, rather than spread evenly throughout the economy.2. Resources get drawn to the areas where the new money is spent, but no NEW resources were conjured into existence along with the new money. Consequently, existing resources get sucked away from some parts of the economy towards the initial beneficiaries of the monetary injection. For example, let’s assume that the government decides to spend a pile of new money on the construction of bridges. When it does so it bids away resources, including construction engineers and bridge-building materials, from other parts of the economy, which has the effect of increasing the operating costs of companies outside the bridge-building sector that also employ construction engineers and use similar materials. These companies will likely find themselves in financial difficulty due to the government’s decision to direct resources towards bridge building, and some will go out of business. For another example, let’s assume that ploughing new money into one segment of the economy causes the companies within that segment to consume more oil, leading to an increase in the oil price. This imposes an additional financial burden on all other oil consumers, curtailing some expansion plans and causing some businesses that would otherwise have been viable to go under.3. The idea that the government can target the spending of newly-created money towards so-called “idle” resources is a fantasy, but even if it were true it wouldn’t prevent monetary injections from changing the structure of the economy in an adverse and unsustainable way. This is because the act of spending the money that has been created out of nothing transfers existing purchasing power from the overall economy to the first recipients of the new money.4. In summary, when the central bank or the private banks inject new money into the economy the net result is that some businesses are helped, some businesses are hurt, resources are transferred, wastage occurs due to the less-efficient use of resources and the government’s take, and a new economic structure evolves based on monetary illusion.5. The distortions and the wastage caused by monetary inflation will be REVEALED after the flow of new money is constricted. When that happens, many of the activities that sprang up on the back of the money-supply expansion will collapse and the economy will be forced to reallocate resources based on sustainable consumption trends (as opposed to the consumption trends prompted by the monetary illusion). On the other hand, if the flow of new money is not constricted (if, instead, the central bank chooses to perpetuate the monetary inflation) then the end result will be hyperinflation.6. Analysis of the 1936-1939 period is instructive. Many people believe that the Fed erred by tapping on the monetary brake during 1936-1937, and that if policymakers had simply kept the money flowing, then the US economy would have avoided the 1937-1939 collapse (the depression within a depression). However, the collapse of 1937-1939 was the INEVITABLE consequence of the fact that the preceding economic rebound had no real foundation. The rebound was based on monetary inflation and increased government spending, rather than on increased private investment in projects that made economic sense. It was therefore a foregone conclusion that any slowdown in monetary and/or fiscal stimulus would soon be followed by a collapse. The only question was when. If the stimulus had been maintained for an additional year or two then the ensuing collapse would have been even more devastating; and if policymakers had attempted to make the stimulus never-ending then the US dollar would have been destroyed.7. Shortly after today’s policymakers slow the pace at which the economy is being “stimulated” by new money and increased government spending, the economic rebound will unravel with startling speed. Alternatively, if policymakers attempt to maintain the stimulus indefinitely then they will create hyperinflation.

Michelle at what point does the lack of jobs affect the earnings of the stock market? Now that the great upside to the market has occurred solely by the FED’s monetization the banks are still hemorrhaging losses on credit defaults in fact they are still on a rampant pace despite all of the stimulus. There are too many investors big and small with great concern over the underpinnings of our economy to allow for too much more bullishness, who’s to say the banks and large investors aren’t forced to begin shorting the market to prevent their own insolvencies which they of course will? They are desperate to save themselves and they know lending to a jobless economy won’t work so they speculate among themselves. If you really look at all the stimulus 90% of it has gone to save the banks very little has trickled down to main street. Further more what industry will allow for more job growth? You’ve got Green technology but that will only work if the government puts in trillions and with “free market” ideologues still in charge you can pretty much forget about the new Deal Era happening, so far it’s mostly been trickle down which of course is trickling down like an annoying dripping faucet. It seems the only way the stock market gets back to the golden days is if there is the political will to put money in the hands of the average Joe until then you’re just speculating which way the FED’s money will flow. The question I have for you is how and when will the FED’s money find its way into job creation? They’re attitude is first let us save our selves then will come out an save you guys, we’re in a never ending Ronald Reagan nightmare. I suppose if you’re smart you can keep following that money but you’re risking that common sense won’t prevail. When corporation have exhausted every cost cutting move and there are no more efficiencies to be had the fall is going to be steep.

forget exit strategy, dollar going down down down

forget that support. it is meaningless. FED and Bernanke has no exit strategy. 0% rate forever and no exit strategy for Obama, Pelosi, and Geithner company, unemployment benefits forever. die dollar die DIE DIE.

http://www.bloomberg.com/apps/news?pid=20601009&sid=aaC_Ea5egKD8infinite treasury and dollar printing. DIE DIE DOLLAR. treasury issuance forever!! 0% rate forever, DIE DIE DOLLAR”$112 billion of notes the nation is selling this week”"The government will auction $43 billion of two-year notes today, $40 billion of five-year debt tomorrow and $29 billion in seven-year securities on Sept. 24″

eveything’s under control

Michelle, I’m hardly a woman hater. No idea how you come up with This! (other than as a distraction from the original point of debate).Anyway, it’s amazing how this is diverting from actual discussion. I initially challenged you on how you could make the claims that there would be “NO way” that Bernanke was going to allow another collapse. I have yet to see you defend this position with any tangible facts. Mind you, I have never argued that Bernanke wouldn’t TRY, but to speak with such authority as you have as to his abilities, well, I will continue to assert that your absoluteness on this point reduces your credibility (which I once thought more of).You’re continuing to run around in circles and lash out. Defend your position, your original statement (or back off of it) or give up.

Will my purchasing power go up or down? How can I hedge that or protect it?I guess it all comes down to how valued the USD will be.Prices on staples will go up, rather, affordability will decrease due to scarcity. The primary mover will be the reversal of “economies of scale.”

GDP was already expanding well before the war began in 1939, and before U.S. entry in December 1941, with the exception of a brief double-dip in 1937. See graph:http://upload.wikimedia.org/wikipedia/commons/d/de/US_GDP_10-60.jpgSWK

I wasn’t implying otherwise, but your addition is clearly welcomed by me People couldn’t purchase because goods were made scarce. The build-up of “deferred maintenance” was unleashed once war production turned back to civilian production.

Reminds me of a great placard I once saw on someone’s desk, which read:I’d like to help you out, which way did you come in?

What a concept! LOL.

Gary Shilling was on Bloomberg stating that the USD would hold because it’s still better than others’ currencies. His argument is based on the notion that other countries are dependent upon export to the US, and that a loss of exports (US consumer tightening down) means a loss of value for Their currencies.I kind of believe what he’s saying makes sense. It’s all relative. Where else is anyone going to put their money when everyone’s currencies are being stomped? Many moons ago I asked the question of whether there could really be any inflation if everyone was inflating; now I’ve got to ask whether there’s any real deflation if everyone is deflating. I really do think that this is all part of a process to restructure global currencies/trade.I think that it’s going to be a long drawn out back and forth as it all winds down.

Obama is either a saint, or the anti-Christ. I haven’t figured out which yet. I see indications of both. I have to think about him when I am not listenening to him. When he speaks, I am easily mesmerized by him and can not think ill of him. I don’t like the way he dumps his friends with such facility. I wonder what he said to Patterson. Did he sacrifice him just like he turned his back on Wright and Jones, just to name two?

then suddenly … you realize that the real risk is in being surrounded by a populous of idiots, but the explosion has just occurred and it is to late to leave the Titanic …

Why should your recommendations for Geithner be limited to BOA?

Checkmate!

Appearance of POTUS on Letterman last night (for the entire show) … confirms this telegraph op/ed:President Barack Obama is beginning to look out of his depth … 20 SEP 2009By Edward Lucashttp://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/6210152/President-Barack-Obama-is-beginning-to-look-out-of-his-depth.html

It’s because there is no “fix!” See following post.

“Force is all the elite have left. – We have reached the terminal stage.”@ Guest on 2009-09-22 18:21:29In real physics, force is a “false Cause”, but nevertheless, a potential Cause indeed which implies that once force is utilized, an end point has been reached and a new beginning ‘may’ be the result. The question left remaining in this knowledge, is why the Cause is to be considered as ‘false”.Ho hum

Absolutely!Force is violent coercion. It never works as its wielders believe. And therein lies the trap- they have been programmed to believe that it works, and when they feel that their elevated levels of position are threatened they pull it out. Sooner or later they run out of bullets, and food! Why farmers always win in the end…

Van Eeden:Confidence and trustMay 16, 2008I was reading through the speech that Ben Bernanke gave this week on liquidity. It was fascinating because of his candid discussion of the nature of the banking system.Bernanke started off quoting from a book written in 1873 by Walter Bagehot called Lombard Street, in which Bagehot describes the role of a central bank during a financial crisis. According to Bernanke, this book is a classic among central bankers.Bagehot wrote that the basis of a successful credit system is confidence (note that our entire banking system is a credit system). “Credit means that a certain confidence is given, and a certain trust reposed. Is that trust justified? and is that confidence wise? These are the cardinal questions”. Indeed, they are. Bernanke did not divulge whether Bagehot answered those questions and I did not get the sense that Bernanke answered them either; perhaps they were meant to be rhetorical questions. My answer would be emphatically “No” while I suspect Bernanke, all bankers and a majority of the population would reply “Of course!”Confidence and trust are part of all commercial transactions, even part of all human interaction, but in the case of banks they are particularly relevant. That’s because banks are purposely set up to be insolvent and could not exist without the public’s confidence.A bank typically borrows money on a short term basis then turns around and lends the same money out on a longer term basis. The short term deposits that the bank takes are often demand deposits while the loans the bank makes with the money are not. Therefore, should the bank’s depositors demand their money the bank would quickly go bankrupt due to the insolvent nature of its business. That is why Bagehot wrote in his book that confidence is particularly important in banking: the lender’s own liabilities (customer deposits) are viewed as very liquid by its creditors (customers) while its assets (loans) are illiquid.Bernanke goes on to point out that meeting creditors’ demands for payment requires holding liquidity – cash, essentially, or close equivalents. But neither institutions, nor the private sector as a whole, can maintain enough cash on hand to meet a demand for the liquidation of all, or even a substantial fraction of, short-term liabilities, says Bernanke. He goes on to explain that “Doing so would be both unprofitable and socially undesirable. It would be unprofitable because cash pays a lower return than other investments. And it would be socially undesirable, because an excessive preference for liquid assets reduces society’s ability to fund longer-term investments that carry a high return but cannot be liquidated quickly.”Bernanke explains that if banks were to deal ethically with their clients and hold sufficient cash and short-term assets to meet potential liquidity demands, their potential profits would be reduced. Obviously, there is a great incentive for them to remain insolvent. The banks rely upon the public’s confidence in their ability to pay their creditors on demand rather than relying on good business practices, such as holding sufficient liquid assets. For this reason we can see that the answers to Bagehot’s questions are “no”: the trust is misplaced since the banks are, by design, insolvent and the confidence is therefore not warranted.Bernanke’s assertion that it is undesirable for banks to hold sufficient cash and liquid assets to meet creditors’ demands is true from the perspective of the banks, but not true from the perspective of the banks’ clients, or the population at large.Banks usually pay no interest on checking accounts and very little, if any, interest on other short term demand deposits. They then use those funds to make longer-term loans such as car loans, real estate mortgages, etc., on which they charge interest. The banks derive profit from the difference in the cost of their capital, which in a checking account for example, is zero, and the income from these longer-term loans. If banks had to forego making some of the longer-term loans in order to have sufficient cash on hand to meet creditor demands their profit margins would be reduced, and so we see why Bernanke says that it would be undesirable. But that is only from the bank’s perspective. Its customers, I am sure, would prefer that the bank keep sufficient liquid assets on hand to meet liquidity.As for it being socially undesirable for banks to keep sufficient liquidity to meet creditor demands, that is total hogwash. If banks had to better match the duration of their assets and liabilities they would have to pay higher rates of interest on longer-term savings deposits, for instance, to attract capital and match those liabilities with auto loans of a similar duration, for example. It’s not difficult to do, but it would eat into the profitability of the banks since they would have to pay more for the capital they are deploying.However, if banks were to better match the duration of their assets and liabilities it would be far more ethical, since their creditors (bank customers) would then have the choice of earning more income on longer-term deposits while foregoing liquidity. The capital would flow to such longer-term deposit accounts if the interest rates were sufficiently attractive. And if interest rates had to increase to attract the capital it would merely lead to higher interest rates on auto loans and real estate mortgages. These rates would then be set by the market and under such an environment the feedback system of the market would make capital more, or less, available depending on conditions.This letter is too short to detail all the ways that consumer demand for longer-term loans could be met. Suffice it to say that the crux of the matter is that banks do not want to forego, or share, the spread between the cost of short-term money and the income from longer-term loans.In the current system, which is totally dominated by the central bank and commercial banks that hold virtually no reserves, the supply of money is essentially infinite while interest rates are being kept artificially low. The net result is wild speculation on assets bought with borrowed money.What happens in today’s world is that depositors (the banks’ creditors) are leaving their money with the banks thinking that they can demand it at any time, while in reality the money does not exist. Should a bank face withdrawal demands it cannot meet, it can ask the central bank for help. In a fiat money system, the central bank can, in theory, create an infinite amount of money out of nothing and so there is no reason why any bank should go bankrupt. But here’s the problem: if the central bank creates more money to help ease liquidity demands the new money created reduces the value of all the money outstanding. This means that the bailout, in the form of inflation, is borne by the very same consumers and bank creditors whose capital was deployed in the first place but who did not get a return on their capital commensurate with the risk that was taken with it.The bottom line is that the banks use other people’s money to take leveraged risks without compensating their depositors (creditors) for the risk being taken with their money. And if something goes wrong, the same depositors (creditors) have to bear the cost of bailing out the banks.A far more ethical system would require banks to match the duration of their assets and liabilities, and it would by design necessitate that people be compensated for the use of their money commensurate with the duration and risk they are taking. Such a system would require substantially less intervention and bail-outs. The current system does indeed require an inordinate amount of confidence and trust.Bernanke, and in fact all central bankers, do not hide the fact that they are engaged in a confidence game — they pride themselves on it. A system that exists purely as a result of confidence is colloquially referred to as a con game and we are all being duped into giving our money to banks that speculate with it, keep the profits, and expect us to foot the bill when they make mistakes and need to be bailed out.

f,i see.

@ FAMCVery good analysis. Bagehot’s Lombard Street is the bible of fractional reserve banking, but like the bible it gets selectively quoted to support the interests and objectives of a particular sect.For example, Bagehot urges any central bank confronting a currency crisis and a liquidity crisis simultaneously (like the USA) to raise interest rates. Raising rates into the crisis will ensure foreign capital continues to be available to fund those banks that are solvent and creditworthy, while the central bank concentrates its reserves on those that are solvent but credit constrained and liquidates the banks that are insolvent.This, of course, is exactly the opposite of what Ben Bernanke and other central bankers have done. Their slashing of rates and backstopping asset liquidation with TALF, etc., has made it impossible for creditors to get a reasonable rate of return on investments in banks and also made it impossible to tell which banks are creditworthy and which are insolvent. As a result, the whole stinking mess has to be financed by the taxpayer through direct liability and inflationary quantitative easing.

pjb,in this context force representswaste, failure and premeditated cannibalism,as if the species was evolving mouth partsand digestive systems to consume itself.if this is the cause we are a trulyunique and doomed bunch, perhaps ourvery ownevolutionary experiment? i don’tthink so.

And this presented commentary @ FAMC is THE argument in favour of many many utilitarian Small Banks as opposed to a few Huge Banks – lathered up to a feeding frenzy.Basic rule for infrastructure (Banks in this context)is that profits are generated from value added attachments to that infrastructure – and R&M costs are generated from the infrastructure itself. The problem is that the goose has been put in the over to be eaten and o more longer to golden eggs appear.Ho hum

I told a couple of my European friends that I thought he was criminal, and they chided me with “Inexperienced, perhaps incompetant, but you shouldn’t go so far as criminal.”Regardless of who is right, it says volumes for what the world thinks of him these days, much less the country that elected him. They are laughing at us from Pyong Yang to Caracas and most points in between, and they are arming to the teeth.We should be very afraid.

If you are trying to control such a system, you of course want a very few “too big to fail” institutions to act as financial intermediaries. The much disparaged shadow financial system sprung up to arbitrage and profit from the cozy little game described above. The TBTF gang have ensured that enough of their ilk are positioned in places of control and regulation to ensure that it will be a long time before they are ever threatened by anything like the old shadow system.The first step in the return to power is to discredit the threatening opponent via media blame for causing the downfall, despite ample evidence that it was the TBTF banks themselves that rotted the system to its core. The next step is to destroy the threatening opponent using the hammer of regulation. Then comes the easy money once again. Then they will cement their power by consolidating all the small banks within them with the very blessings of the regulators who will shuttle to and from them lining their pockets along the way.

Just a thought; perhaps a question?:An old adage states that ‘money has no morality’ (correctly) so why would one expect the keepers and manipulators of money to have any morality; or ethics, for that matter?Ho hum

This is how you get to a Jubilee. Let the fun begin indeed!

digestion infers breakdown. Nothing can be nor created neither destroyed.

There are so many other reasons of why I don’t believe we will see another collapse anytime soon, but I hit the key points.Ok, first, I’m now seeing a more even minded Michelle By way of saying “I don’t believe,” you have, in my mind, stepped back from the abyss. This is much more rational position from a deeper thinking person than one of a flat-out “no way.” Yes, it might appear as a nit-pick, but it is, IMHO, key.I have not, nor will I ever, argue that TPTB aren’t trying everything that they can to resolve the economic crisis, which, I believe, we’re still in the midst of; and, I will not say that there’s no possibility. My counter to their efforts at containment is one of the old joke about the surgeon declaring that the surgery was a success but that the patient died. I’d add, however, that if this outcome keeps happening the surgeon will find him/herself out of a job.It is, I believe, merely a matter of time before we discover that the surgeon isn’t really able to save anyone. Right now there’s the appearance, as the surgery is going well, but the operation continues. And while the operation continues all those who have a big stake in it (hospital administrators, surgical assistants, medical suppliers etc.) function as though it’s successful (nothing wrong with projecting, as it helps provide the drive).My concern (argument) is that the patient, if he/she isn’t pronounced dead post surgery, will likely be too weak to rise and pay off his/her debts to the surgeon/hospital, which in turn places more downward pressure on the surgeon/hospital, causing staffing cuts and sloppy work…The fundamental that I operate with (sorry for the pun!) is that the System ONLY can work long-term if there’s growth: people can grow intellectually, socially and spiritually, but business needs more and more physical resources. If we are not yet at the peak extraction levels for many natural resources (energy/oil being of extreme importance), we soon will be. Extraction of natural resources is the feedstock of production, and without more inputs outputs won’t be increasing; gains from decreasing outputs, if even possible, are not likely to carry for very long.I can’t remember who it was (ChrisL? or some similar handle- a new person) who noted that we’d been issuing $3 of credit for every $1 increase in GDP. This, in addition to the fact that we’re trying to operate a $20/bbl oil economy/world in a $70/bbl oil one. Sure, oil prices can drop, but in the meantime decay to the existing infrastructure marches on, and by the time that we get out from under our debts (if ever) and are able to then spend on the infrastructure it’ll be so degraded that $20/bbl oil won’t be meaningful, it might as well be $150/bbl!In conclusion, the efforts by TPTB are real, but these efforts operate in the virtual sphere, which ultimately has to bow to the physical world. And, the physical world is one of declining physical resources. I’m certain that you don’t dispute this, and that you see, as I do, that it’s only a matter of time before it’s all too apparent that TPTB cannot make physical things materialize from the virtual world. I see this realization happening sooner rather than later.Please accept my apology for any harsh words.

Nailguns have no morality so why would one expect the keepers and manipulators of nailguns (carpenters) to have any morality or ethics, for that matter?Guns have no morality so why would one expect the keepers and manipulators of guns (gunsmiths) to have any morality or ethics, for that matter?Stones have no morality so why would one expect the keepers and manipulators of stones (masons) to have any morality or ethics, for that matter?Fires have no morality so why would one expect the keepers and manipulators of fire (firemen) to have any morality or ethics, for that matter?

Where is Nouriel?

my girlfriend looked very nice this past weekend. she was wearing a nice TOP.she was not quite a 10 more like a 9.91799

what is Nouriel?

listen to what one does not what one says. FED and Obama all lie.

she is very assuming. many others (too many?) were as well that she would be a 10. she still may be. possibly looking very nice even through the holidays. at the very most, she even breaks out of her top to say a 10.5 or less within 3 – 6 months. the year + or so from now will not be kind and she will certainly be below a 7. i should not speak about my lady like this…if this is not the case, i will probably need gold and silver coins here in the US to pay for very expensive dates and Christmas presents next holiday season. never hurts to have a few of those in your back pocketperhaps her decline will inspire her to become anxious, aggressive and less assuming. maybe she will carry mace and perhaps even a gun to the movie theatre. never hurts to have those either

A far more ethical system would require banks to match the duration of their assets and liabilities, and it would by design necessitate that people be compensated for the use of their money commensurate with the duration and risk they are taking.This function already exists in Money Market Funds and CDs. Different terms results in different returns. Of course, right now these returns are horribly pathetic; but, isn’t the aim really to discourage this, to force money out to circulate? (but clearly, because the banking system has to build up reserves, it’s not working)As long as the credit bubble was there the titans could feast. Now that it no longer exists we’re seeing the titans battle it out. As the smaller elements got pushed out it concentrated more (people) under fewer banners, and with this battle of last-man-standing continues the defeat of one titan means that it will wipe out a huge chunk of people. NOTE: One could just as readily present this as being two titans, one savings and the other consumerism- both are needed in order for the game to go on, but the resultant pressures have made it necessary to eliminate one of the titans: no longer is balance possible, not when the economy has been reduced to a two-state binary mode.

I would like to know what her BOTTOM looks like…

g,do you think that will save usor show us the way out?

thanks.doing all right.hope all is well with you too!

new thread

Perhaps rather than pay the ceo of the sponsor company 50 million plus, put the money in the company for the workers retirement.

Speaking of the double dip recession, there is one aspect which I would like to delve upon. The global economy is now showing signs of recovery with the OECD and BRIC nations showing signs of growth. However the recovery fails to convince me – it doesn’t seem to be steadfast.Here’s an example to drive my point: The US notional derivatives market today exceeds $200 trillion. The 5 largest banks in the US account for almost 96% of the total value of this $200 trillion pool. Although high notional values per se do not represent loss exposure, on an individual basis, each of the 5 banks had considerable market risk exposure. To hedge this market risk, these banks have hedged their market risk for counterparty risk, which is obviously among themselves. One slight disturbance, and all the banks crash like a stack of cards…. and when the US financial system crumbles, the world follows suit… This has been discussed in a detailed manner in this report at the link below:http://boombustblog.com/Reggie-Middleton/1143-An-Independent-Look-into-JP-Morgan.html

I missed something, sure!But, where are you Prof. Roubini?Your last statement was well done and you are, at this moment, irreplaceable!Big Bearish, return to the Battle!Mis besos