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RGE Monitor – U.S. Economic Outlook: Q2 2009 Update

Greetings from RGE Monitor!

The first half of 2009 has ended and we at RGE Monitor are in the process of updating our quarterly Global Economic Outlook.  Below you will find a preview of our views on the short-to-medium term prospects for the U.S. economy.  The full version of the RGE U.S. economic outlook (available for RGE Premium subscribers) will include analysis on:

  • U.S. Consumer Comeback?
  • Is the U.S. Housing Sector Stabilizing? 
  • U.S. Commercial Real Estate the Next Shoe to Drop?
  • U.S. Industrial Production and Investment in a Severe Downturn
  • U.S. Exports Under Pressure
  • U.S. Labor Market Pain Continues
  • Fiscal Stimulus Provides Inadequate Stimulus
  • Ballooning U.S. Fiscal Deficit Raises Concerns
  • Fed Too Soon to Exit Easing Mode, but Time to Talk About It
  • Inflation Pressures Not in Sight Quite Yet
  • U.S. Treasuries
  • U.S. Dollar
  • Structural Weaknesses Will Constrain the U.S. Economic Recovery

The RGE Monitor Global Economic Outlook presents analysis on over 70 countries and several global crucial issues.  Specifically, in this Q2 update, our analysts cover trade and protectionism, risks of rising fiscal deficits around the world, global imbalances and climate change, among other issues.  The RGE Monitor Global Economic Outlook will be available soon to RGE Premium subscribers.

Now back to our U.S. preview.

The United States is in the 20th month of a recession that has been by far the longest and most severe of the post-war period.  While comparisons with the Great Depression are frequent and appropriate (especially if we look at the pace of contraction in industrial production), the aggressiveness of policy measures has significantly reduced the probability of a near-depression.  Economic activity fell off a cliff in Q4 2008 and Q1 2009, with two consecutive quarters of sharp contraction – by 6.3% and 5.5% respectively – in line with our previous forecasts.  The general consensus is that this recession will end sometime in the second half of 2009.  While RGE Monitor expects more quarters of negative real GDP growth in 2009, we also expect the pace of contraction of economic activity to slow significantly.  We forecast negative real GDP growth in Q2 2009 and Q3 2009, and for real GDP to remain flat in Q4.  After the sharp contraction in economic activity in 2009, growth will reenter positive territory only in 2010, and then at a very sluggish rate, well below potential.

Even if economic activity stops contracting by the end of 2009, that might not mark the official end of this recession.  Recessions are not measured exclusively by GDP contractions.  Unemployment, industrial production, real manufacturing, wholesale retail trade sales and real personal income (less transfer) are all considered when it is time for the National Bureau of Economic Research (NBER) to put dates around recession periods.  As reported by the NBER, this recession started in December 2007, and all the above indicators peaked between November 2007 and June 2008.  U.S. real GDP will stop contracting at the end of 2009, but it is likely that many of the above indicators will not bottom out (or peak, in the case of unemployment) before mid-2010.

Improvements in real economic activity are present and visible in the reduction of the pace of job losses, in the improvement in indicators of manufacturing activity, in the stabilization of housing starts and in the improvement of financial conditions.  However, RGE Monitor does not yet see signs of a strong and sustainable recovery.

Lingering Concerns:

Labor market conditions are still quite dire, more than 3.4 million jobs have been lost in 2009 and about 6.5 million have been lost since the beginning of the recession.  Compare this with the 2.5 million jobs lost in the recession of 2001; 1.5 million lost in the recession of the early 1990s; 3 million in the one of the early 1980s; 2.2 million in the one of the 1970s.  The pace of job losses has fallen from the 600K plus per month registered between December and March 2009 to about 350K in May and 467K in June; the average monthly job losses in this recession is now at about 360K.  While the recent slowing of losses is a positive development, we have to put this in perspective: in previous post-war recessions, average monthly job losses have ranged between 150 thousand and 260 thousand.  Moreover, average weekly hours in private nonfarm payrolls are at the lowest since 1964, as employers have cut employees’ hours.  Job openings and turnover openings continue to fall and are at the lowest levels since 2000, indicating continued weakness in the economy.

The U.S. consumer is still the engine of U.S. growth, and contributes to over 70% of aggregate demand.  While saving rates are headed for the high single digits and high oil prices together with long-term rates keep putting a dent in personal consumption, the over-leveraged consumer is finding some support in the tax breaks of the fiscal stimulus package.  Yet the over-indebted U.S. consumer – whose deleveraging process yet has to start – will likely continue to put the brakes on consumption, while the savings rate continues to creep up.  While this will encourage a rebalancing in the U.S. and global economy, in the medium-term it isn’t likely to support strong U.S. and global growth.

Housing starts appear to have stabilized and will likely move sideways for quite some time.  However, housing demand is not yet improving at a pace that can guarantee that the lingering inventory overhang will dissipate.  This implies that home prices will continue to fall.  RGE Monitor expects home prices to continue to fall through mid-2010.

U.S. industrial production has been contracting for 17 months in a row – with a short break in October 2008.  Industrial production usually finds a bottom shortly after the ISM manufacturing index does.  While the index probably found its bottom back in December 2008–at depression levels of 32.9–industrial production remains in a mode of contraction that started in January 2008.

Financial conditions are showing some improvement.  Banks are borrowing at zero interest rates and higher net interest margin can definitely help rebuild capital.  Regulatory forbearance, changes in FASB (Financial Accounting Standards Board) rules and under-provisioning might enable banks to post better than expected results for a few quarters.  However, relaxation of mark-to-market rules reduces the banks’ incentives to participate in the Public-Private Investment Program (PPIP) and therefore reduces the likelihood that the program will succeed in clearing toxic assets from banks’ balance sheets.  The muddle-through approach might be successful in a scenario in which the U.S. and global economy recover soon and go back to potential growth during 2010, but according to RGE’s forecasts, this is highly unlikely. While we might have positive surprises coming from the banking system in the next couple of quarters, the situation could turn around again after that, jarring confidence in financial markets in a way that would spill into the real economy.  Increases in the unemployment rate, well beyond the rates envisioned by the adverse scenario of the recent bank stress tests, imply that recapitalization needs are larger than what the too-lenient stress test prescribed. The U.S financial system – in spite of the massive policy backstop – thus remains severely damaged, and the credit crunch remains unlikely to ease very fast.

A sharp rise in public debt burden – the U.S. Congressional Budget Office estimates that the public-debt-to-GDP ratio will rise from 40% to 80% (in the next decade), or about $9 trillion – will also put a dent on growth.  If long-term rates were to increase to 5%, the resulting increase in the interest rate bill alone would be about $450 billion, or 3% of GDP.  The implication is that the fiscal primary surplus will have to be permanently increased by 3% of GDP, which could constitute further pressure on the disposable income of the U.S. consumer.

Not only does the U.S. economy face downward risks to growth in the medium-term, but potential growth might fall as well.  The U.S. population is aging. With employment still falling – and another jobless recovery on the horizon – the rate of human capital accumulation will fall.  Moreover, workers who remain unemployed for a long period of time lose skills, while young workers that enter the workforce, but don’t find a job, don’t acquire on-the-job skills.  Reduced investments in worker training and education, coupled with lower capital expenditure, are a recipe for lower productivity ahead.

Deflationary pressures are still present in the U.S. economy.  Demand is falling relative to supply and excess capacity is still promoting slack in the goods markets.  Moreover, the rising slack in labor markets, which is pushing down wages and labor costs, implies that deflationary pressures are going to be dominant this year and next year.  This implies that the Fed will keep monetary policy loose for a while longer.  However, discussion of an exit strategy has to start now as investors’ concerns about the Fed’s ballooning balance sheet and expectations of inflation both mount.

There are also signs that a double-dip recession could materialize toward the second half of next year, or in 2011.  If oil prices rise too much, too fast, too soon, that’s going to have a negative effect in terms of trade and real disposable income in oil-importing countries.  Also, concerns about unsustainable budget deficits are high and are pushing long-term interest rates higher.  If these budget deficits are going to continue to be monetized, eventually, toward the end of next year, there is a risk of a sharp increase in expected inflation that could push interest rates even higher.  Together with higher oil prices, driven up in part by this wall of liquidity rather than fundamentals alone, this could be a double whammy that would push the economy into a double-dip or W-shaped recession by late 2010 or 2011.

In conclusion, the outlook for the U.S. economy remains very weak.  The recent rally in global equities, commodities and credit may soon fizzle out as worse-than-expected earnings and financial news take their toll on this rally, which has gotten ahead of improvements in actual macroeconomic data.

78 Responses to “RGE Monitor – U.S. Economic Outlook: Q2 2009 Update”

paul94611July 10th, 2009 at 4:38 am

I cannot but think that Mr. Altman may be incorrect to call this moment President Obama’s Gettysburg. I suspect that as the rebellion on Main Street grows the president may well be forced to do what Lincoln did after the battle of Fredricksberg. Here is a copy of President Lincoln’s letter to the Army of the Potomac, December 1862.”Executive Mansion,WashingtonDecember 22, 1862.To the Army of the Potomac:I have just read your commanding general’s report of the battle of Fredericksburg. Although you were not successful, the attempt was not an error, nor the failure other than accident. The courage with which you, in an open field, maintained the contest against an intrenched foe, and the consummate skill and success with which you crossed and recrossed the river, in the face of the enemy, show that you possess all the qualities of a great army, which will yet give victory to the cause of the country and of popular government.Condoling with the mourners for the dead, and sympathizing with the severely wounded, I congratulate you that the number of both is comparatively so small.I tender to you, officers and soldiers, the thanks of the nation.A. Lincoln.”In this it may turn out that some of Professor Roubini’s best associates in government may well end up in the role played by Union Army General Burnside in 1862.We’ll see. As Mr. Altman notes, the court of public opinion is changing rapidly on this one.

GuestJuly 10th, 2009 at 2:07 pm

Or, as the government would say, Why not? Why should it matter to spendthrift ol’ Unk Sam that they’d be taxed twice? Your down-at-the-heels uncle taxes savings twice.Guest 17:55:01 should be careful about being facetious. The whiskies in government don’t understand sarcasm.

AnonymousJuly 9th, 2009 at 8:09 pm

Morbid i think you’ll love this oneGoldman Sach.. Eat your heart out, you can keep all the money in the world for all i carehttp://www2.nict.go.jp/y/y223/simulation/realtime/normally the color is blue, now its burning white..outcome???that’s pretty intense pressureMaybe the Mayans knew something we dont

Jason BJuly 10th, 2009 at 6:05 am

We caught a coronal mass ejection square on. Happens sometimes. The magnetic field can take it. If you are far north of south you may have seen the Aurora Borealis.Thank chance for the spinning ball of molten iron at the earths core, that creates our magnetic field.

MorbidJuly 10th, 2009 at 7:25 am

A,I guess your 2012 Mayan apocalypse relative to sunspot activity comes in here because in 2012 our sun is expected to be near Solar Maximum. Thus, a chance for unusually strong flares directed towards Earth.Who knows for sure how that threat will play out.

JasaJuly 9th, 2009 at 10:03 pm

Interesting words …”but potential growth might fall as well. The U.S. population is aging. With employment still falling – and another jobless recovery on the horizon – the rate of human capital accumulation will fall. Moreover, workers who remain unemployed for a long period of time lose skills, while young workers that enter the workforce, but don’t find a job, don’t acquire on-the-job skills”.The zealots of free market economy believe that the freedom of business to impulsively hiring and laying off is the most efficient way for the economy to grow. When will the economists start quantifying the real impact on economy growth of the skilled workers that lose their job and need retraining or get into low-skill, lower paid jobs? I work in semiconductor technology development. Should I lose my job I would probably try to start a small restaurant. How do you account for the waste of time and money for my training both at school and on the job? Also who says that some new engineer in India can do what I do now? Even five or ten of them? It’s time that economics stop focusing just on capital and the return on it. What will be the real cost on the whole economy of pouring money into zombie banks and let skilled workers starve?

GuestmikeAugust 2nd, 2009 at 12:17 pm

It seems to me that our only hope of any real long term recovery is to put a lot more money into basic and translational research. We graduate 60,000 engineers a year. China graduates 600,000. We spend 50 billion a year at NIH. This is of the same order of magnitude as what the agriculture dept or the transportation dept loses, can not account for , and noone cares. The NIH spending is the only thing that will really improve our health care. Our educational system could be better.The unemployment rate of PhDs in their field of expertise is 70%. If we payed them well and used them effectively, we could solve the employment problem of the less well trained and skilled which they displace. Obame raised research spending but he could go a lot farther with very little money compared to what we are spending on other things.

Guest blind xxx decapitated fish head.July 9th, 2009 at 11:40 pm

p,@”Awesome”.question. where mind and cultural norm are centralto societal function, given a bubble in populationand all associated manifest bubbles (economic, energetic etc. ), and then cascading collapse of those bubbles in the field of global energetic interaction, exploitation and abstractdevaluation, revaluation and fraud ; what mechanism/s would best conceal or eliminate from view, of the next generation, the psychological manipulations usedto exploit the collapsing boomer, bubble, generationwithout threatening or forewarning the next generationof “sucker / zombies”? the possibilities are endless. no?…..he wondered and then passed out. ( not entirelydue to drink or what some have called “bad hooch”.).ps. i always wanted to use that term, “bad hooch”.psss. no “e” on the “hooch”, as in not “hooche”.somehow i think that is altogether different and most likely inappropriate and not what i am suggesting though the language is rich with thesekind of out your back door innuendos.anyway..as always..peas..pssss. it is one thing to take viagra with somecandy in the a.m. but another to take intravenousplasma while being drained of your vital forcewith vlad the impaler’s sucking mouth partspermanently affixed to your jugular..it is just different.

GuestJuly 9th, 2009 at 11:03 pm

July 8, 2009Dead Cat BounceBy John BrowneIn economics, as in many other “soft sciences,” facts are often overshadowed by theories. The dominant economic theory currently in vogue is that the massive government stimuli orchestrated by the Bush and Obama administrations would produce an economic recovery by the end of this year.Thus, it is no surprise that media cheerleaders have seized on the recent steep, but thinly traded, rally to find the facts that appear to fit the theory. From where do these talking heads draw this conclusion?In recent months, we have allowed for the probability that a bear market rally, driven by seemingly low price-earnings multiples, would take hold for the first half of 2009. Months ago, I had stated that the rally would reasonably last into the summer and that the Dow could reach 10,000 before the next major downturn begins.In the depths of the stock market crash of 2008/9, buying opportunities certainly arose. By March 2009, stock markets appeared to have been oversold. Certainly price-earnings multiples on many stocks had been compressed to generational lows. Ignoring the fact that these low multiples were underpinned by pre-recession earnings data, investors declared a bottom.However, as is the tendency with sudden declines, bargain hunters entered the market too aggressively. On relatively thin trading levels, this led to a steep rise in stock prices which, in turn, drew in investors who feared being left behind. A steep bear market rally was in place. This mirrored the pattern of the Great Depression, when the initial crash was followed by a 68 percent rally in 1930. But after that rally had fizzled, stocks then declined by an astounding 86 percent over the two subsequent years.While we urged caution in this rally by highlighting, among other indicators, a 38 percent decline in corporate earnings, speculative traders made enormous profits as stock markets rose by over 40 percent. But as dismal economic statistics continue to rain on everyone’s parade, the cheers are beginning to subside. Last week, the unemployment figures were released and the Dow slid by some 223 points.Now, even speculative traders are preparing for a drop. The new-found concern is due to three basic indicators:First, the U.S. dollar, linchpin of all American (and most global) transactions, is appearing increasingly weak. 10-year Treasury yields, as low as 2.1 percent post-crash, and continuing to stay below 4 percent, indicate a persistent bubble in “safe” U.S. bonds and cash.Certainly, the fiscal situation of the United States government doesn’t warrant the confidence placed in its debt. The U.S. will soon have to choose between outright default and hyperinflation. The BRIC countries are already preparing themselves for the latter eventuality by seeking alternatives to the dollar.Second, there has been a realization that the low multiples of March 2009 were largely illusory. With corporate earnings falling faster than share prices, price-earnings ratios are still high and historically expensive for an economy in an official recession.Third, employment figures have been so bleak that the financial spin-doctors have been suggesting a “jobless recovery”! Reading between the lines, that means even the most deluded forecasters cannot find an argument for hiring to resume.Despite the enormous stimulus packages, there are now roughly 15 million Americans unemployed, the highest total for some 26 years. Worse still, the official figures do not include the long-term unemployed or those who have been forced to accept part-time employment. If these “unofficial” unemployed figures were included, the total would be nearer to 20 percent than the official 9.6 percent. Furthermore, annualized figures show Americans earning less for each hour worked.There can be little wonder that consumers are hoarding cash, increasing their savings and not buying on Main Street. American consumers are in a state of financial shock. The U.S. economy is heading deeper into severe recession, even depression.The facts are universally bearish for the American stock markets. As for the pundits’ sentiments, you can measure their value by how much you personally pay for CNBC (very little) versus your cost if they’re wrong (very much). Now, there’s a statistic!

GuestJuly 9th, 2009 at 11:05 pm

The New York Stock Exchange quietly announced last week that it would end its practice of requiring companies to report all their program trading — a move that helps shield large investment banks, particularly Goldman Sachs, from public scrutiny.The new rule means the public will no longer be able to tell if large investment banks are manipulating the stock market for their own gain, says Matt Taibbi, the journalist whose Rolling Stone article on Goldman Sachs’ role in asset bubbles over the past century has rocked the financial world.According to previous NYSE rules, any company that carried out program trading — essentially, large computer-automated trades worth more than $1 million — had to report the trades to the NYSE, which then made the information publicly available…Taibbi argues that the move is designed to protect investment banks from bloggers who are exposing the companies’ stock market manipulations. Goldman Sachs is singled out because the investment bank’s share of principal NYSE trading has gone from 27 percent at the end of 2008 to fully 50 percent of trades in recent months.Blogs such as Zero Hedge have been using NYSE data to argue that Goldman Sachs now has an almost unfettered ability to control stock prices….http://rawstory.com/08/news/2009/07/…goldman-sachs/

GuestJuly 9th, 2009 at 11:16 pm

Dude – you had better confirm what you have just posted. I think you need to issue a retraction.

GuestJuly 10th, 2009 at 12:52 am

NYSE Halts TransparencyIn a move set to infuriate and send many Zero Hedge readers over the top, the NYSE has taken action to make sure that nobody will henceforth be able to keep track of the complete dominance that Goldman Sachs exerts over the New York Stock Exchange. This basically ends our weekly Program Trading updates disclosed every Thursday indicating that Goldman has singlehandedly captured all of NYSE’s program trading.In an information memorandum released on June 24 (09-31), the NYSE Regulation team has announced the Decommissioning of the Daily Program Trading Report (DPTR).http://zerohedge.blogspot.com/2009/06/nyse-halts-transparency-feels-goldman.htmlHow can the NYSE do this? Wouldn’t this be illegal?? What can be done about it?Hide reply Reply to this comment By Rudy on 2009-07-06 15:02:20

GuestJuly 10th, 2009 at 12:56 am

Wednesday, July 08, 2009Goldman Sachs and NYSE Transparencyby Dollars and SenseShareThisMore on the brewing Goldman Sachs scandal we posted on a couple of days ago. This is a post from Prison Planet with some details from Matt Taibbi’s article in the current issue of Rolling Stone.Taibbi: NYSE ends transparency to protect Goldman SachsDaniel TencerRaw StorySunday, July 5, 2009The New York Stock Exchange quietly announced last week that it would end its practice of requiring companies to report all their program trading—a move that helps shield large investment banks, particularly Goldman Sachs, from public scrutiny.The new rule means the public will no longer be able to tell if large investment banks are manipulating the stock market for their own gain, says Matt Taibbi, the journalist whose Rolling Stone article on Goldman Sachs’ role in asset bubbles over the past century has rocked the financial world.According to previous NYSE rules, any company that carried out program trading—essentially, large computer-automated trades worth more than $1 million—had to report the trades to the NYSE, which then made the information publicly available.But, under new regulations (PDF) published last week, that requirement has been removed.”The NYSE announced that it will no longer be releasing its weekly program trading data,” Taibbi wrote in a blog posting. “This is quiet obviously a move designed to make it even more impossible to track what’s going on in the NYSE and shield, in particular, Goldman Sachs.”Taibbi argues that the move is designed to protect investment banks from bloggers who are exposing the companies’ stock market manipulations. Goldman Sachs is singled out because the investment bank’s share of principal NYSE trading has gone from 27 percent at the end of 2008 to fully 50 percent of trades in recent months.Blogs such as Zero Hedge have been using NYSE data to argue that Goldman Sachs now has an almost unfettered ability to control stock prices.Responding last week to news of the NYSE’s rule change, Zero Hedge argued:The NYSE has taken action to make sure that nobody will henceforth be able to keep track of the complete dominance that Goldman Sachs exerts over the New York Stock Exchange. This basically ends our weekly Program Trading updates disclosed every Thursday indicating that Goldman has singlehandedly captured all of NYSE’s program trading.Taibbi’s article on Goldman Sachs’ long history of involvement in asset bubbles and crashes can be found here.http://www.dollarsandsense.org/blog/2009/07/goldman-sachs-and-nyse-transparency.html

George HarterJuly 15th, 2009 at 3:21 am

Hey, finally someone from GOLDMAN is in the conversation, DUDE. Actually, GOLDMAN, >IS ABOVE THE LAW<. The only way to stop their criminality may be to end the existence of the firm. But the law MAKERS are bought, this situation may need an EXTRA-LEGAL solution.

BelieveButVerifyJuly 9th, 2009 at 11:24 pm

Source: Matt Taibbi’s Bloghttp://www.smirkingchimp.com/thread/22617==Program trading disclosureMatt –I’m in PR for the New York Stock Exchange and wanted to let you know that NYSE has not and will not eliminate the weekly report; we’re just changing the source of the data. Zero Hedge ran my response to its original post; I quoted from our memo to our member firms on the subject:“The Exchange further notes that it will use the existing account type indicator data – which captures program trade information for those orders sent to and executed on the Exchange – to report to the Commission on a weekly basis the program trading statistics for portions of program trades executed on the Exchange. Accordingly, beginning on July 23, 2009, the Exchange will provide the Commission with its weekly statistics on program trading based on account type indicator data rather than DPTR [daily program trading report] data. Similarly, at the same time, the weekly statistics regarding program trades that the Exchange provides to media outlets will also be derived from account type indicator data rather than the DPTR.”Thanks. – Ray PellecchiaSubmitted by RayPellecchia on July 5, 2009 – 10:38pm.==

GuestJuly 10th, 2009 at 1:31 am

Monday, July 6, 2009NEW YORK STOCK EXCHANGE: “WE SCREWED UP”Posted by Tyler Durden at 12:59 PMThe story of Goldman’s missing PT data has now entered the twilight zone. Matt Goldstein at Reuters reports that Goldman spokesman Michael Duvally notified him that Goldman did in fact not only perform its usual NYSE SLP domination, but also reported of this, as it does every week:“According to the data Goldman Sachs submitted, we are certain we were among the top firms in terms of program trading volume for the week ending June 26.”And guess who is taking the blame: our old friend Ray Pellecchia over at the NYSE:“Due to an error on our part, the program trading report needs to be revised and we will have a revised list out later this week. It was a system error on our part.”Ray…just what system does the NYSE use that mysteriously drops the top Program Trading participant: is there a [if shares traded>1 billion; AND; NYSE vows to Zero Hedge infinite transparency, do “Report o”] line somewhere in that particular system? Our debugging skills are a little rusty but we would be happy to go through the code line by line and find all other comparable possible systemic errors. In fact, we would make it a crowdsourced event and allow all our readers to participate in that endeavor. Imagine just how bug free the NYSE system would be as a result of this voluntary venture. Of course, this would also prevent such dramas at 15 extra minutes of trading tacked on during the lowest volume day of the year, due to the NYSE’s inability to clear and process this “abnormally low” trade volume.Of course, Zero Hedge will gladly report the “adjusted” week PT data to the millions of people who have all of a sudden found a great interest in the NYSE’s PT reporting. Furthermore, all those millions have somehow found their way to our new website, which unfortunately is still in the process of transferring over to its new much faster servers, and as a result of the unexpected explosion in traffic, has been either down or painfully slow all day. We appreciate readers’ patience as we address this unprecedented traffic spike.http://zerohedge.blogspot.com/2009/07/new-york-stock-exchange-we-screwed-up.html

Pecos BankerJuly 10th, 2009 at 4:50 am

Some idea, perhaps, of what Goldman’s program can do. This from a commenter on Zerohedge named Bruce 34. Go tohttp://zerohedge.blogspot.com/2009/07/sergio-posts-bond-as-toxic-code.html”Goldmans program gives a 4 second window to front run orders over X amount.Its not every order which is place.The way it works is it automatically puts a 30% order of the value order by which the original order is place.There for it doesnt manipulate markets what it does is front run the client by which it is most of the time combined into one order so the client doesnt notice the difference should they investigate.The real money is made when the stop losses are place and the spillage is where GS make the spike.Which cant be detected. Its a full proof system.To some this would be hard to accept but to those who understand what I’m taking about very simple.Hope this assists the discussion.”I don’t really understand this, but I do understand what front-running is. Elsewhere, I saw a figure that said this is worth on the order of $100 million per day. Can’t substantiate that. Could be just a rumor. From a purely intellectual point of view, all of this stuff is fascinating to read about, though from a moral point of view, I suppose I should be outraged, but I’m beyond that (Beyond Good and Evil-Nietzsche). We’re too far gone, folks. Let’s just salute our leaders up there on the Kremlin wall and admire the fancy missles in the parade.

GuestJuly 10th, 2009 at 12:01 am

China Demands Currency Reform, France Backs Debatehttp://www.cnbc.com/id/31838115China called on Thursday for reform of the reserve currency system at a meeting of world leaders in one of its most direct attacks on the dollar’s global dominance.Chinese State Councilor Dai Bingguo did not specifically name the dollar at talks between the Group of Eight rich nations and G5 emerging powers, but he was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates.France also unexpectedly called for a currency discussion and moving toward a “multimonetary” system, though Britain warned any debate should be reserved for the long term to avoid destabilizing markets in the midst of a global recession.China’s ideas for changing the system had previously been mentioned in reports by its central bank, but had never been voiced in a speech by such a high-ranking political leader. <Cont>

GuestJuly 10th, 2009 at 12:30 am

http://www.silverbearcafe.com/private/07.09/cnbc.htmlIt's always fun to watch when one of the so-called experts on CNBC breaks ranks and goes Jackie Chan in front of a live audience. This time it was Larry Levin’s turn. Watch resident CNBC cheerleader Steve Leeson’s face darken as the topic turns from the “green shoots” script to the horrifying truth that the market is rigged. Levin is no professional “gloom n doomer” like Marc Farber or so many of the Armageddon throng. He’s a professional futures trader who has hung around the pits for 20 years at the Chicago Mercantile Exchange (CME)Here’s a blurp from the interview:Larry Levin: “….this market continues to be propped up by government intervention and manipulation and unfortunately as that continues to happen this market can go higher the government has been doing a good job of keeping it that way no matter what the real underlying current is. …Question CNBC anchor: “What happens when we go into the second half? Is reality going to hit in a bad way?”Levin: “If the government can keep putting out all these IOUs and printing money, I guess not. Many professional traders would have told you that this market should not continue to move up as it has; move up 4 months in a row basically months ago, … You’re gonna have to pin it on Obama and his staff that they’ve kept this market propped up the way they have……They’re doing a good job Every single day we have some backstop from the government These are NOT free markets anymore. “Wilbur Ross (fund manager) adds his 2 cents: “We’re facing an environment where Washington is the new Wall Street. It seems like no capital transactions get doe at all without some kind of intervention from washington. And it makes me wonder; How do we ever get off those vitamin pills?…all we are doing is transferring liabilities from private to public sectors.”The truth pops up so infrequently on CNBC, that it’s worth noting before the video vanishes from the archive and Levin is dragged off to the sanatorium in leg-irons.www.smirkingchimp.com

GuestJuly 10th, 2009 at 1:51 am

El-Erian! Another Ozymandias bites the dust. If you don’t agree, look at “Geithner Plan II” –http://www.youtube.com/watch?v=n-arbfLTCtIposted by Guest on previous thread, with this comment:”Obama, Geithner, and Bernanke’s trying to dupe American taxpayer into Trillion+ dollars of LOSS in PPIP. Mark my word, these crooks will not stop there, they will throw more Ponzi Scheme to dupe American taxpayer into more Trillion+ dollars of LOSS. Obama, what a dissapointment.”And El-Erian gives these birds an “A” for effort? For what, I might ask? Burglary? God help us!_____________________________________________El-Erian Says Geithner Shares an ’A’ With Bernanke for EffortJuly 10 (Bloomberg) — Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., gives Timothy Geithner and Ben S. Bernanke an “A” for their efforts to revive credit markets.Geithner, the U.S. Treasury secretary, and Bernanke, the Federal Reserve chairman, deserve just a “B” for results because “it’s very difficult to get it right,” El-Erian, 50, said in an interview from Pimco’s headquarters in Newport Beach, California. “They’ve been imaginative, they’ve been bold, they’ve been willing to take risks. On outcome it’s a ‘B.’”http://www.bloomberg.com/apps/news?pid=20601087&sid=aSZEJZbgxBG0

AnonymousJuly 10th, 2009 at 2:50 am

With obama continuing to wage wars in AF-PAK, Iraq…US MNCs will earn lots of money from these war exploits…US will have booming growth just like post WW-II…More mayhem…more potential growth in future…probably wall street is already keeping a tab on such MNCs

MorbidJuly 10th, 2009 at 7:18 am

California, as you know, has begun issuing IOU’s because it has run out of money.Our next door neighbor has rentals and one of them is rented by a family of five – the father works for CFD (California Fire Department) and was just paid with an IOU! Thus, he cannot afford to pay his rent. I don’t know how they will eat. My neighbor will let them stay until things sort out again – in October it seems.The renter told my neighbor that some are selling their IOU’s for 0.75 cents on the dollar – because they need the money! I guess others are using credit cards and will have to pay that usury interest of 19% or more.On the backs of the worker again!

George HarterJuly 15th, 2009 at 3:28 am

WHY NOT YOU??? The vampire elite dies when the sheep and cows die. You foolish person

GuestJuly 10th, 2009 at 9:46 am

The heat is slowly getting turned up.From ZeroHedge:GOLD ANTI-TRUST ACTION COMMITTEE INC.7 Villa Louisa Road, Manchester, Connecticut 06043-7541July 7, 2009Gary Gensler,Chairman U.S. Commodity Futures Trading Commission 3 Lafayette Centre 1155 21st St., N.W. Washington, D.C. 20581Mary L. Schapiro, Chairman U.S. Securities and Exchange Commission 100 F St. N.E. Washington, D.C. 20549Dear Chairman Gensler / Dear Chairman Schapiro:I’m enclosing a copy of a report distributed July 6 by Bloomberg News Service about the U.S. government’s prosecution of a former employee of Goldman Sachs Group Inc. involving the purported theft of a Goldman Sachs computer trading program. The report quotes Assistant U.S. Attorney Joseph Faccipointi as saying in U.S. District Court in New York City: “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”If the report quotes the assistant U.S. attorney correctly, and if he was characterizing Goldman Sachs’ position correctly, then Goldman Sachs claims to have possession of a computer trading program that can manipulate markets. The assistant U.S. attorney’s comment can be construed to suggest Goldman Sachs considers its own manipulation of markets to be fair, while such manipulation by others would be unfair.The court proceeding described in the Bloomberg News story would seem to impugn all markets in which Goldman Sachs trades. On behalf of the Gold Anti-Trust Action Committee Inc., I ask your commission to investigate Goldman Sachs’ trading program urgently and report its findings publicly.Thanks for your consideration.With good wishes.CHRIS POWELL Secretary/Treasurer

GuestJuly 10th, 2009 at 1:39 pm

A fantastic letter and fantastic phraseology. Example: “The assistant U.S. attorney’s comment can be construed to suggest Goldman Sachs considers its own manipulation of markets to be fair, while such manipulation by others would be unfair.”

MM CAJuly 10th, 2009 at 9:50 am

Only in america. Most Average joe americans cant even get a court date for months to file. Where is the analysis on who took the losses besides the 401k’s mutual funds, pension funds, bond holders. That $$$ is gone forever.Everyone should sign up for the IPO in 2010 – Not. Go buy a 32k Camaro, that is now thier marketing flagship car… lolAnd the same managment stays in place- only in america…There are NO JOBS and there is NO CHANGE (Stop BS us Oabma)July 10 (Bloomberg) — General Motors Co., a new company majority-owned by the U.S. government, emerged from the remains of bankrupt General Motors Corp. by taking over the best assets of the biggest U.S. automaker

GuestJuly 10th, 2009 at 10:04 am

Obama’s Jobless Safety Net Torn by Rebecca AlvarezBy Rich MillerJuly 10 (Bloomberg) — Rebecca Alvarez says she’s “barely hanging on.”Without a job for seven months, the 48-year-old computer- network administrator said she’s stopped dining out, cut back cable-television services and put off paying a photography class bill from her 14-year-old son’s school in Monrovia, California. She is among more than 4 million Americans who have been looking for work for more than 26 weeks, representing 29 percent of the unemployed, the most since records began in 1948.Hundreds of thousands of lost jobs in industries such as autos and construction haven’t been replaced with new ones, shrinking payrolls by 6.5 million since the recession began in 2007, Labor Department figures show. The June jobless rate reached 9.5 percent, the highest since 1983.“We are going to have a huge pool of unemployed, second only to the Great Depression,” said Allen Sinai, chief economist at Decision Economics in New York. “It will be a big public-policy problem.”The Standard & Poor’s 500 Index has slumped about 4 percent since government figures published July 2 showed a 467,000 drop in June payrolls, more than economists had forecast. Ten-year Treasury yields have fallen, as investors bet the sluggish job market will lead the Federal Reserve to keep interest rates near zero.President Barack Obama tried to tackle prolonged joblessness in the $787 billion stimulus package Congress passed in February by lengthening and expanding aid to the unemployed.Benefits Run OutAs many as 650,000 workers may exhaust even their extended benefits within three months, said Maurice Emsellem, policy co- director for the National Employment Law Project, a nonprofit advocacy group headquartered in New York.That means Obama may need to aim directly at reducing joblessness, said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania. Among options: enhanced job training, tax credits for businesses that take on new employees or a temporary cut in payroll taxes.The U.S. traditionally hasn’t had to deal with long-term joblessness. During the last 30 years, Americans who were thrown out of work took an average 15.8 weeks to find new positions. In June, the average duration of unemployment was 24.5 weeks, the longest since records began in 1948. The number of people collecting unemployment benefits reached a record 6.88 million in the week ended June 27.Peak UnemploymentWhile unemployment will peak between 10.5 percent and 11 percent in the U.S., it will remain high and stay above 7 percent, said Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., manager of the world’s largest bond fund.“The United States right now is in transition,” El-Erian said in an interview from Pimco headquarters in Newport Beach, California. “It’s coming out of one regime. It’s on this bumpy and painful journey to what we’ve called here the new normal.”Alan Blinder, the former Fed vice chairman who is now an economics professor at Princeton University, isn’t as pessimistic as El-Erian about the economic outlook. He says he sees the jobless rate peaking at 10 percent or a little higher in the first half of next year, then gradually coming down.The proportion of unemployed workers who have permanently lost their jobs — as opposed to those on temporary layoff — reached a record 53.5 percent in June, government figures show. About six people are seeking work for every job opening, the most since the government began keeping such records in 2000. A year ago, the ratio was a little more than two-to-one.‘Plain Depressing’“Being out of work for three weeks is very different from being out of work for 30 weeks,” said Dirk van Dijk, director of research for Zacks Investment Research Inc. in Chicago. “It is a very scary prospect. Economically it further depresses your spending and psychologically it is just plain depressing.”A measure of consumer sentiment fell in July to the lowest level since March, as mounting job losses undermined confidence. The Reuters/University of Michigan index slid to 64.6, less than forecast, from 70.8 in June, a report today showed.The average American is ill-prepared for a lengthy spell of unemployment, said van Dijk. Households reduced their savings in the last expansion — putting aside less than 1 percent of disposable income in 2005-2006, compared with an average 6 percent the previous 30 years — and thus didn’t have much in reserve.Savings Gone“I don’t have any more savings,” said Alvarez, who is drawing jobless benefits and “trying to avoid” taking other government assistance. “I’m down to living on $200 a week.”Home-equity borrowing is no longer an option for many families. House prices are down about 25 percent from their 2006 peak, according to the National Association of Realtors in Washington. And banks, stung by $1.5 trillion of writedowns and credit losses since 2007, are getting stingier. The Federal Reserve’s latest quarterly survey of senior loan officers showed about 65 percent of banks lowered credit-card limits.Even the highly educated are finding it tough to get work. Washington resident Alexandra Moller, 34, who holds a law degree and two master’s degrees, has been unemployed since September. She’s searching for a position with the federal government or a nonprofit organization.The most frustrating part is “the constant refrain that it’s such a hard time to find something,” she said. “It adds to a certain resignation that it’s going to take a long time.”Lowered ExpectationsThe surfeit of job seekers is forcing people to lower their salary expectations. Liz Mandel, who lost her job in January as a senior clinical-data manager at a biopharmaceutical company, said she has had to look for positions that pay about $15 less an hour than what she earned before.“I absolutely, definitely feel anxious,” said the 42- year-old San Francisco resident.Earnings per hour for production workers climbed at a 0.7 percent annual pace in the second quarter, the least since records began in 1964, according to government figures.That’s putting a squeeze on spending, even for essentials. A national poll of unemployed workers conducted in November by Peter D. Hart Research Associates in Washington for the National Employment Law Project found that more than two-thirds had cut back on food expenditures.Long-term joblessness is also a “profound problem” for housing, said Paul Willen, senior economist at the Boston Fed.“If a person becomes unemployed, they’re going to start missing mortgage payments,” he said. “The main exit strategy for a troubled borrower is another job. At this time, it’s extremely hard to find one.”Mortgage DelinquenciesMortgage delinquencies rose to a record in the first quarter, and about one in every eight Americans is now late on a payment or already in foreclosure, according to the Washington- based Mortgage Bankers Association.Unemployment also has “immense social costs,” said JoAnn Prause, senior lecturer at the University of California in Irvine’s Department of Psychology and Social Behavior. “Bouts of unemployment have been associated with increases in depression, reduced self-esteem, and increases in alcohol abuse,” she said.That’s prompting calls for added stimulus.“We’re going to need more medicine,” Warren Buffett, chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc., said in a June 24 interview. “We’re going to have more unemployment.”Worker TrainingBesides beefing up jobless benefits, economists are calling for more training and education programs, tax changes and government support for corporate investment.Obama’s original stimulus package provided $3.95 billion for training, including $750 million in grants to prepare and place workers in jobs in high-growth and emerging industries.Senators Sherrod Brown, an Ohio Democrat, and Olympia Snowe, a Maine Republican, proposed legislation to pair companies offering new jobs with workers seeking specialized skills.The bill would “allow local people to come up with what they need to train workers,” Brown told a New America Foundation conference in Washington on June 24.Sinai, of Decision Economics, wants Obama to reconsider providing tax credits to companies that take on more workers. Before becoming president, Obama proposed offering a $3,000 tax credit for each new-hire.Douglas Holtz-Eakin, an economic adviser to Arizona Republican Senator John McCain’s presidential campaign, said a temporary payroll-tax cut would do more to create jobs.Support for InvestmentGovernment support for investment is the preferred option of Nobel Prize-winning economist Edmund Phelps. One possibility, the Columbia University professor said, is a government- sponsored financing program for industry akin to that available to farmers through the Federal Farm Credit Banks.General Electric Co. Chief Executive Officer Jeffrey Immelt urges more focus on manufacturing.“We should set a national goal to create high-value-added jobs and have manufacturing jobs be no less than 20 percent of total employment, about twice what it is today,” Immelt said in a June 26 speech. Fairfield, Connecticut-based GE is the world’s biggest maker of turbines for power plants, jet engines and locomotives.Zandi and Holtz-Eakin said the U.S. hasn’t thought through how to attack the problem of long-term joblessness.“We as a nation have not intellectually addressed this,” said Zandi, of Economy.com. “We don’t have a policy answer for it. And I’m pessimistic we’ll get one.”

Guest 67July 10th, 2009 at 12:39 pm

Interesting comments from Immelt. But wasn’t it he and his coporate CEO colleagues that made the decision to move production offshore and are responsible for many of the job losses in recent years?Methinks he speak with forked tongue!

The AlarmistJuly 13th, 2009 at 2:20 am

Jeff will tell you he was just trying to please Jack when he sent all those jobs to India, etc.

MM CAJuly 10th, 2009 at 10:11 am

“The wave of corporate defaults is going to be massive,” Roubini said. “We’re not out of the woods.”July 10 (Bloomberg) — The worst recession in half a century may be prolonged because consumers see few signs job losses and declines in home prices are ending, economists Nouriel Roubini and Robert Shiller said.Roubini also has new video interview on bloomber with schiller.http://www.bloomberg.com/apps/news?pid=20601109&sid=aERlD846h2XY

GuestJuly 10th, 2009 at 10:18 am

On Thursday, the industry posted a 4.9 percent sales decline in June, in contrast to a 1.9 percent increase a year ago, according to Thomson Reuters, which said the decline capped the longest negative streak on record.Frugality among consumers has been hurting retailers for months, and in June sales were also reduced by incessant rain and grim jobs reports. Mall stores said deep discounting was rampant. And to make matters worse, retailers faced challenging year-over-year sales comparisons because this June there were no tax rebate checks to help bolster shopping.(Wal-Mart, which has been performing well all year, used to help lift the total industry number, but in April it stopped reporting monthly sales figures.)Sales at stores open at least a year, a measure of retail health known in the industry as same-store sales, fell at Abercrombie & Fitch (down 32 percent compared with the period a year ago); Zumiez (down 19.3 percent); Children’s Place and Limited Brands (both down 12 percent); Wet Seal (down 11.1 percent); American Eagle Outfitters (down 11 percent); Gap (down 10 percent) and Hot Topic (down 7.9 percent).“That doesn’t set us up well as we head into back to school,” said Ken Perkins, president of Retail Metrics, a research company.The back-to-school period is considered one of the most important shopping seasons, and an early indictor of the health of the critical Christmas shopping period. Still, back-to-school is weeks away and analysts typically assess the season based on August and September retail sales. June and July tend to be clearance months.Analysts expected weak June sales. And in July they are prepared for more of the same, especially since stimulus checks were also doled out last July. They think things will get better, though, after that.“June for many retailers was the most difficult comparison for the year,” said Bob Drbul, a retailing analyst with Barclays Capital.The International Council of Shopping Centers, an industry group, estimated that in July sales at stores open at least a year would decline about 5 percent.All department stores that reported June sales posted declines. In the specialty retail stores segment of Neiman Marcus, which includes Neiman Marcus and Bergdorf Goodman stores, sales fell 20.8 percent.Sales at Nordstrom declined 10 percent.Saks fared better than its high-end competitors, posting a 4.4 percent decline that was in part the result of shifting a designer sale into June.Sales declined 14 percent at Dillard’s; 8.9 percent at Macy’s; 8.2 percent at J. C. Penney; 8 percent at Bon-Ton and Stein Mart; and 5.6 percent at Kohl’s.T. J. Maxx and Ross Stores performed much better, posting 4 percent and 1 percent sales increases, respectively.Over all, teenage retailing was among the worst performing sectors, declining 13.5 percent, according to Thomson Reuters.The most notable exceptions were, as expected, Buckle and Aéropostale, the affordably priced niche teenage apparel chains that have been doing well all year.Buckle’s sales rose 9.6 percent.Aéropostale said it had record June sales, posting a 12 percent increase.And there were some other sprinklings of good news. J. C. Penney, for instance, raised its second-quarter earnings guidance to a loss of 8 to 12 cents a share from a loss of 15 to 25 cents.Bill Dreher, senior retailing analyst at Deutsche Bank Securities, said J. C. Penney — along with Kohl’s, Macy’s and Saks — is positioned to take market share.Still, the over all picture was uninspiring. The Goldman Sachs retail composite index, which looks at a different sampling of retailers than Thomson Reuters, declined 6.7 percent, in contrast to a 3.9 percent increase for the period a year ago.Even discount chains struggled. At Costco, which was hurt by lower gasoline prices and foreign exchange rates, sales fell 6 percent. The chain said in a recorded telephone message for investors that food and sundries were its best sellers.Sales of nonfood, discretionary items were soft, including cameras, navigation devices and cellphones. Even summer staples proved disappointing: cooler June temperatures hurt sales of air-conditioners.In yet another sign that consumers are hiding out at home, televisions were the big exception in the discretionary category, with unit sales up 50 percent year-over-year.BJ’s Wholesale Club, also hurt by lower fuel prices, reported a 7.5 percent decline.Sales at Target fell 6.2 percent.Housing values are still depressed and credit remains tight. A report by Thomson Reuters on Thursday said the biggest threat to retail sales was not the weather or last year’s rebate checks, but the unemployment rate.“If consumers feel this number will be in the double digits, as is being speculated,” an analyst, Jharonne Martis, wrote in the report, “consumer spending will continue to deteriorate.”

GuestJuly 10th, 2009 at 10:46 am

U.S. Michigan Consumer Sentiment Index Falls to 64.6July 10 (Bloomberg) — Confidence among U.S. consumers fell more than forecast this month, reflecting unemployment approaching 10 percent and higher gasoline prices.The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 64.6, the lowest since March, from 70.8 in June. During the expansion that began in late 2001 and ended in December 2007, the index averaged 89.2…A gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, fell to 70.4 from 73.2.The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, plunged to 60.9, the biggest drop since October, from 69.2…June sales at stores open at least a year declined more than analysts forecast for clothing retailers Gap Inc. and Abercrombie & Fitch Co., reports showed yesterday.http://www.bloomberg.com/apps/news?pid=20601068&sid=aiPnRs_NOF.g

GeustJuly 10th, 2009 at 11:07 am

http://bilbo.economicoutlook.net/blog/?p=3145 (can’t get that link to work for me, but it is reposted at http://www.prorev.com)WHAT CALIFORNIA COULD HAVE DONE WITH ITS IOUsEconomic Outlook – The State of California, the worlds 8th largest economy plans to begin issuing IOUs – formally known as registered warrants – to the tune of $3 billion, to fund its commitments to various suppliers and contractors to government; university students; and welfare and pension recipients.The IOU terms (interest rate, etc) will be determined by the Pooled Money Investment Board which will meet on July. The IOUs will mature on October 1, 2009. . .This will be the second time in recent history that the Californian Government has issued IOUs. In 1992, when the economy recessed badly it was forced to do the same. See the graphs above to see the correspondence of labor market conditions then and now.While two of the major banks that operate in California – the Bank of America and Wells Fargo – have said they are uncertain as to whether they will accept the state-issued IOUs in return for cash, they have an incentive to do so because they can then earn the interest payable once the redemption date is up.Who will get the IOUs? The most disadvantaged . . . No other group would tolerate being treated in this way.The State Controllers Office has some analysis of how the IOU system will work and who will be provided with them in lieu of cash. they also provide a FAQ page for the warrants system. We learn that the largest proportion of the IOUs will go to the aged ($590 million), the unemployed ($495 million), and the disabled ($363 million).There are two interesting points to note from FAQ page. First, there is no guarantee of convertibility into cash. I say this even though the state will (if it has enough cash) accept them on October 1 for cash. But there is no stipulation that they can be traded in the meantime as if they were cash.Second, there is no provision that a Californian resident can pay their state taxes using the warrants as contra payments. In other words, the warrants are not currency.If the State of California, announced that it would accept these IOU vouchers (their face value in $US) as legitimate vehicles to liquidate one’s tax obligations to the State then the situation changes dramatically. To circulate the vouchers, all State employees would receive some (or all) of their pay in the IOUs (bits of paper or via electronic transfer into special voucher banks), which they could then use to pay their taxes. If all Californian citizens could similarly extinguish their tax obligations using these vouchers then there would be a generalized demand for them, which means that state employees would be able to spend the IOUs in shops as they would the $US.The State of California would have no financial constraint in the IOU vouchers. It would simply spend them (pay its workers) and collect the taxes later as people handed them back to satisfy their legal obligations. Imposing the tax obligation (in vouchers) creates a demand for them and allows them to circulate as a “currency”.Soon enough, the banking system would develop IOU Voucher Accounts and related products. In this way, the State of California could more easily maintain its level of services without imposing huge costs on the disadvantaged which they are forcing to accept the IOUs. The State could also expand public employment to attenuate the labour market impacts of the recession. . .If the state had have decreed that any resident could extinguish their tax obligations using the warrants then they would become more broadly accepted as an alternative currency in California and the disadvantage that those citizens face who will be forced to accept them in lieu of cash payments would be considerably reduced (or eliminated entirely).

GuestJuly 13th, 2009 at 2:22 am

Overtaxed state runs out of money after wasting billions on social-welfare programmes for poor and minorities … poor and minorities hardest hit.

MorbidJuly 10th, 2009 at 11:14 am

Just 96 months to save world

Capitalism and consumerism have brought the world to the brink of economic and environmental collapse… we have just 96 months left to save the world.…in a searing indictment on capitalist society, Charles said we can no longer afford consumerism and that the “age of convenience” was over.We face the dual challenges of a world view and an economic system that seem to have enormous shortcomings, together with an environmental crisis – including that of climate change – which threatens to engulf us all.

GuestJuly 10th, 2009 at 1:31 pm

Consumerism, capitalism, and gangsterism.The supporters of gangsterism and the appeasers of gangsterism and the recipients of gangsterism are constantly blaming one of the best economically producing systems of all time, capitalism, which they are corrupting and stealing. These Wall Street gangs are no different from any gang that profits by promoting or protecting by force or inside control some illegal activity, such as bootlegging or gambling…or manipulated markets.One of the wonderful advantages and results of an economic market system such as American capitalism was that the means of production were individually owned, with each individual working lawfully in his own best interests, and producing world consumerism. Yet people of Charles’ ilk say consumerism, albeit, currently currency- and government-corrupted, is at fault here, that it is somehow wrong for people to barter-trade what they have producedCapitalism is an economic system that allows the individual to develop and profit from his own labors. Consumerism is an outcome of that system. Government protection and taxpayer-paid bailouts of corporations and bankers that manipulate currencies, markets, natural resources, labor and policy around the world, using them all for their own benefit, is not capitalism, it’s big government racketeering.As Ludwig von Mises points out, “The market economy or capitalism, as it is usually called, and the socialist economy preclude one another…there is no such thing as a mixed economy, a system that would be in part capitalistic and in part socialistic. Production is directed by the market or by the decrees of a production tsar or a committee of production tsars.”The same came be said of fascism, as in its current form, gangsterism.

GuestJuly 10th, 2009 at 11:39 am

Home Sellers in U.S. Cut Prices by $27 Billion, Trulia SaysJuly 10 (Bloomberg) — U.S. home sellers cut the prices of their properties by a total of $27.1 billion as the recession and rising foreclosures curtailed demand, Trulia Inc. said.One quarter of sellers with homes on the market as of July 1 reduced their price by an average of 10 percent, the San Francisco-based real estate data provider said today. Properties listed for more than $1 million had the biggest cuts, with owners taking about 13 percent off the asking price.Prices of existing U.S. homes dropped 17 percent in May from a year earlier, according to the most recent data from the Chicago-based National Association of Realtors. The decline helped boost purchases 2.4 percent to an annual rate of 4.77 million sales, NAR said.“Sellers just have to discount their prices to reflect what’s going on,” Pete Flint, chief executive officer of Trulia, said in an interview. “Price reductions will stabilize the market, but I think we’re still some way off.”The average discount on homes priced for less than $1 million was 9 percent, Trulia said.In 2007 and 2008, “the lower end of the market was clearly cratering with subprime,” Flint said. “Now you’re seeing the top end of the market with price reductions.”Among the 50 largest U.S. cities, Jacksonville, Florida, had the biggest percentage of discounts, according to Trulia. Sellers there slashed prices on 39 percent of homes for sale. Boston was second at 35 percent, followed by Minneapolis at 33 percent.Florida, NevadaAmong cities hurt worst by the U.S. housing slump, Las Vegas and Los Angeles both had price cuts above the national average, Trulia said. The average reduction was 16 percent in Las Vegas and 12 percent in Los Angeles…http://www.bloomberg.com/apps/news?pid=20601213&sid=agq0NRuqLW38

PeteCAJuly 10th, 2009 at 12:05 pm

We need a new securitization vehicle … to handle IOU’s from states like California. Package them up, give them a new name, and re-sell them.Surely there’s a sucker out there somewhere!:-) 🙂 🙂 🙂 :-)PeteCA

MM CAJuly 10th, 2009 at 12:14 pm

probaly already being done Pete – ads all over Ebay and Craigslist too… state employees are now getting them liu of paychecks. most small biz and indviduals cannot wait until october. BTW all state tax refunds are being paid now with theseOnly in California!!!!!California IOU’s – Paying $0.90 on the dollar (City of San Francisco)——————————————————————————–Reply to: sale-9mzw8-1262762978@craigslist.org [Errors when replying to ads?]Date: 2009-07-10, 7:13AM PDTGot a State of CA IOU and NEED CASH NOW?I am paying 90 cents on the dollar for any / all California issued IOU’s. All transactions will be in person at my bank and you will be required to show a state issued ID. I will work with individuals or businesses who have been issued IOU’s directly from the State of California. If we can establish a trusted relationship, I am willing and able to purchase these IOU’s on an ongoing basis. Cash is immediately available!Example: I will pay you $900 for a $1000 warrant.Please reply with the following information:NamePhone numberAmount of IOUReason IOU was issued

GuestJuly 10th, 2009 at 12:18 pm

here ya go Pete…SEC may put California IOUs under fraud-protection rules12:37 PM, July 9, 2009The Securities and Exchange Commission soon may step into the fray over the IOUs California is issuing to pay certain debts.The SEC could decide today that the IOUs are securities, according to a source familiar with the matter. The Municipal Securities Rulemaking Board, which regulates trading in muni bond debt, was leaning in that direction earlier this week.A move by the SEC would be an attempt to provide some fraud protection for recipients of the IOUs. Any person or firm offering to make a market in the IOUs — bringing buyers and sellers together — would have to register as a broker-dealer and would be subject to federal anti-fraud rules.Recipients of the IOUs still would be free to sell them or cash them anywhere they’d like. The SEC would be trying to ensure that some orderly markets develop for the scrip, given that major banks, including Bank of America and Wells Fargo, say they won’t cash the IOUs after Friday.The state says it intends to pay off the IOUs on Oct. 2, with interest. The IOUs are earning a 3.75% annualized interest return, which is exempt from federal and state income tax.The Associated Press reports today that SecondMarket, which creates markets for illiquid assets, has received “decent interest” from hedge funds, municipal bond investors and distressed asset investors as potential buyers of the IOUs, according to Jeremy Smith, the New York company’s chief strategy officer.

ChignosJuly 10th, 2009 at 12:20 pm

Don’t forget the credit default swaps to “insure” the whole securitization. I need to get ahold of some of those.

GirafJuly 10th, 2009 at 12:48 pm

Pete, I have the name for the vehicle:Secured High Interest Term Securities.People just love acronyms, don’t they?

George HarterJuly 15th, 2009 at 3:45 am

Sad to Say, the criminal in me LIKES THE IDEA!! Why Not? This whole financial disaster, criminals and us dummies, is Surreal and Absurd with a Fool for a King. Why not buy 50M face value lots of IOUs, wholesale. I am sure a 50% offer or even less might fly. But you don’t pay cash!!! You exchange a fractional share of the IDE when it is called. The same thing with food stamps. They are also used as currency in liquor stores, for buys of cigarettes, dope etc. Food stamps go for about 50% face in the “hood” less in larger quantities. HECK maybe there will be a number of Govt Issue pseudo-currencies!!! WOW this will be a totally nightmarish conclusion to the history of the USA.

ex VRWCJuly 10th, 2009 at 12:20 pm

The ‘New’ GMAfter recieving tens of billions in taxpayer money, and having contracts ripped to shreds by a bankruptcy judge to the detriment of pension funds, investors, bondholders, dealers, and suppliers, GM exits bankruptcy today. The announcement was accompanied by news of 20,000 more job cuts in the US.Meanwhile, GM management are trumpeting their new poster child, the retro-styled Camaro. The Camaro, built in Ottowa, boasts V6 and V8 engine choices and 22MPG at it’s best. The Camaro is supposed to represent the resurgence of GM as it exits bankruptcy.Overall, GM’s overseas operations, escpecially in China, are viewed as its most healthy business units. GM’s US operations have been on a steady decline, hence the number of plant closings, dealer closings, and US job cuts.So we have this situation. a ‘U.S’ company, with its most profitable factories and operations in Asia, recieves American taxpayer money in order to supposedly save U.S. jobs and retool for a future green economy. Meanwhile, it cuts US plants, dealers, and jobs, and trumpets its new model, a fuel inefficient muscle car, built in Canada.Can anybody tell me how this makes any sense at all? Have we collectively lost our ability to employ logic or reason?

GirafJuly 10th, 2009 at 1:12 pm

That should be Oshawa, Ontario not Ottowa (actually Ottawa).You should be aware that the government of Canada and the Province of Ontario, or rather their beleaguered taxpayers, also contributed billions of dollars to the GM and Chrysler bankruptcy solutions. In addition,those tax payers have been ripped off unmercifully by the car companies over the years, receiving billions of dollars of grants for job creation (that’s a joke isn’t it?)and low interest rate, very long term loans (which also became worthless). Further, we pay about $20,000 more for a high end truck up here than you pay in the States, even though those vehicles were built in Canada.Given all that, it’s entirely reasonable for GM to give us a car to build that clearly has no apparent demand. Didn’t the muscle car fad die years ago?

ex VRWCJuly 10th, 2009 at 1:18 pm

Nothing against Canada, its just that we aren’t thinking about the goals of all this bailout and stimulus, we’re just spending the money and piling up the debt…

GirafJuly 10th, 2009 at 7:20 pm

No offense taken. Unfortunately we are in the same boat, our rulers (lets call our “governments” what they are) pissing money down a very dark hole.

GuestJuly 10th, 2009 at 12:29 pm

Yes. Until its budget is balanced, California’s state government is paying employees and others in IOU’s that can be redeemed at maturity in October. Big banks had been accepting the IOU’s at full value but have started ending the practice beginning today.California Bankers Association spokeswoman Beth Mills suggests that IOU recipients in dire straits to pay bills talk to the banker about solutions “such as short-term borrowing, or extension of line of credit.”Superbanks, just like Superman, always ready to help the distressed! The IOU’s will pay 3.75 percent at maturity…why would JP Morgan Chase, BofA, Wells Fargo and Citibank and the rest of the Super Heroes being made whole by the taxpayers want to fool around with 3.75 percent? Once you know where the cookie jar is, it doesn’t make sense to pay for the cookies.By the way, some small banks and credit unions will still except IOUs for existing customers. Who says, Big is better? Too big to fail, too big to serve.

GuestJuly 10th, 2009 at 1:51 pm

Joe, Joe! AT LAST. It’s good to here from ya’! But Joe, I wouldn’t be signing in as Joe12Pack. Better make it Joe2Pack. Inflation, Joe, you know how it is.

GuestJuly 13th, 2009 at 2:26 am

The banks are not stupid … there’s no assurance CA will actually be able to redeem these things with real currency in October.

AnonymousJuly 11th, 2009 at 3:13 pm

When will someone factor in the massive sales tax, property tax, corp and personal income tax, fees (ala NY) – not to mention the post retirement health benefits rapidly coming due and increased pension costs – that all levels of government will be heaping on society and the effects on this recession? We’re screwed!

GuestJuly 11th, 2009 at 8:08 pm

Why are you still worried about irrelevant issues? US government is facing a 500-1500 billion shortfall as calculated by Hayman Capital. And now Japan is also joining the world with a tin cup in hand. Where are we really heading?