Nouriel Roubini's Global EconoMonitor

Latin America Economic Outlook

This week we are offering another preview of our global economic outlook for Q4, which will be released to RGE’s clients later this month. The following is a sample of our analysis on Latin America. The full version of the outlook goes into greater detail and includes RGE’s country-by-country projections for economic growth and several major indicators.

RGE maintains the position we took in our July outlook: Latin America will recover in 2010, but its expansion will likely be below potential. Given aggressive foreign and domestic policy responses in Latin American countries, the region is stabilizing in H2 2009 after having contracted severely in H1 2009. Although global and regional economic and financial conditions will likely improve in 2010, RGE expects the pace of external and local demand revival to be measured. Commodity prices will stay on hold in the middle ground between record highs and recent lows, mainly because of below-potential recovery in the U.S. and advanced economies, as well as in China. Though global liquidity will remain elevated in the upcoming quarters, favoring LatAm asset classes, market anxiety about the timing of exit strategies around the world represents a significant risk. Miscalculations in exit strategies and disappointing economic results pose the main risks to LatAm market dynamics in 2010.

Regional Growth Outlook

Latin America is stabilizing in H2 2009, benefiting from massive global fiscal and monetary policy stimulus programs, while domestic countercyclical efforts soothed local confidence and eased downside pressures on labor markets. Furthermore, strong fundamentals contained the free-fall in internal demand, while global inventory restocking, which had tapered off, picked up again in Q3 2009. However, recovery of external and domestic demand will likely be limited, keeping LatAm’s recovery below potential in 2010. Against this backdrop, RGE has revised up its regional GDP forecast to a contraction of 2.6% y/y from 3% y/y in 2009, and we now project growth of 3.3% y/y in 2010, up from our prior projection of 3.0%. The main driver of our shifting forecast is an improved economic outlook in Brazil. But it should also be noted that LatAm’s regional growth outlook in 2010 remains well below the 2003-2008 trend of around 4.5% y/y on average.

Price Pressures

Inflationary pressures will likely be contained in 2010, and the disinflationary trend should continue through the rest of 2009 due to slow closing of the output gap, stable if not strong currencies, temperate commodity prices and measured domestic demand. Central banks will most likely achieve their inflation targets but will likely start moving away from an accommodating monetary stance toward a neutral one in 2010 in order to temper medium-term inflation expectations once the recovery has gained momentum. The central banks that acted first and most aggressively in the cycle of monetary accommodation will lead the way (such as Chile), while the ones who lagged in responding will have to wait longer for a more sustained recovery (such as Mexico).

External Accounts and Budgets

The current account deficits of Latin American countries will likely widen in 2010 after having shrunk in 2009, but strong capital flows should cover the gap. While imports have fallen at a faster pace than exports so far this year, RGE anticipates a reverse of these dynamics in 2010, mainly because we expect domestic demand to rebound at a stronger rate than external demand, putting widening pressures on current accounts. Meanwhile, significantly improved global financial conditions and risk appetite, elevated global liquidity, and LatAm’s relatively palatable rebound will mean that capital flows to the region will likely improve, thus keeping balance-of-payments risks contained. Risks associated with worse-than-anticipated global and regional growth, higher global benchmark yields and a failure to implement reforms could potentially cap capital inflows.

Balancing fiscal accounts will likely remain a major challenge for Latin American countries in 2010, much as it was in 2009. Since RGE anticipates a gradual global and regional upturn, fiscal revenues will recover slowly, but the political cycle, rising social pressures and structural fiscal rigidities will place constraints on the opportunity to enact meaningful spending cuts.

RGE maintains the view that LatAm currencies will be supported by a weak U.S. dollar and solid commodity prices, as well as higher potential growth and wider interest rate differentials.  However, verbal interventions or administrative measures by the central banks to contain financial flows, together with risks associated with disappointing economic numbers (globally and locally), and policy actions to restore the stock of international reserves, could emerge as a counterbalance. Moreover, as advance economies approach their exit strategies, upward pressures on LatAm currencies should subside.

Regional Politics

The political cycle in several LatAm countries starts at the end of 2009. In Chile, most polls suggest that the right-wing opposition candidate, Sebastian Pinera, leads the race in the country’s December 2009 presidential election. Pinera is followed by the candidate for the ruling Concertacion party, former president Eduardo Frei, and independent candidate Marco Enriquez Ominami is not far behind. Regardless who wins, market-friendly policies and sound macroeconomic management will likely continue, and the institutional framework will be reinforced. 

In Colombia, presidential elections will be held in May 2010. Although it is not clear yet whether the current president, Alvaro Uribe, will run for a third term, the country’s next president will likely maintain Colombia’s current domestic-security policy and market-oriented policies. In Brazil, although presidential elections are still a year away, polls indicate interesting dynamics: the latest Datafohla poll from September 2009 shows that Sao Paulo State Governor Jose Serra, from the Social Democratic Party (PSDB), leads the race with 37% support, followed by President Lula’s chief of staff Dilma Rousseff, from the Workers Party (PT), with 16%.  Overall, RGE maintains that regardless of who takes power, Brazil’s current achievements in economic policy are most likely to be maintained. Market watchers should keep a close eye on fiscal dynamics and the likelihood of the incoming government taking action to consolidate the fiscal accounts.

309 Responses to “Latin America Economic Outlook”

PeteCAOctober 14th, 2009 at 9:23 am

It must be a Wednesday.There’s a storm in So. California, so lots of rain today. Our family van has a flat tire – what fun for me. And checking the sig alerts, I see that practically every LA freeway has red painted all over its computer map – meaning that Californians can’t drive in rain and the freeways are all stalled with vehicle crashes.Two things that Californians seem to be totally incapable of handling … budget deficits and driving in the rain. Sometimes I wonder if the rest of America is just going to vote this state out of the union – and give it back to Mexico.PeteCA

MM CAOctober 14th, 2009 at 10:40 am

Same up north… No clue on how to drive…. you woudl think after 6 months of nto one drop of rain, people would learn the roads are a little slick with oil… moved here from east coast 13 years ago or so and have never seen so many rear end accidents ever… Californians just dont pay attention…. Just like the Govenors wife, they are all BS’ting on the phone still, eating, fixing thier makeup, speeding, taligating… quite funny because sometimes you can see someone who is going to get in accident or get caught speeding…

NoviceOctober 15th, 2009 at 9:17 am

What a bunch of sissies- I live near Buffalo- try driving in a raging snow storm. Of course since Buffalo is a dead city- we don’t have traffic to speak of which really helps when you can only see two feet in front of you. Supposed to see a bit of that white stuff today possibly- it’s too soon for my liking. California dreaming……

CaponeOctober 14th, 2009 at 11:05 am

“Gold”en OpportunitiesIf you had 1,000 US dollars, would you invest it in Goldman Sachs, an ounce of gold or the S&P 500?If you had 1 ounce of gold would you use it to acquire Goldman Sachs shares, S&P 500 or keep the ounce of gold.Despite Goldman’s 400% rise from the lows that is 4x in 7 months, I still find it hard to believe the best place for $1,000 is NOT in an ounce of gold…having said that, i fully understand the leader of the financial dictatorship of the US is Goldman.heck, if you can:a)get accounting rules changedb)transfer bad loans off your pals and perhaps your own books to the governmentc)acquire several 100 billion in government bailoutsd)control the market on a daily basise)continue to ‘earn’ and pay out billions to yourself throughoutall this while 17% are unemployed, inflation is starving millions on Earth and families are living in tents YOU could be king too.all hail, King Goldman financial dictators of the world (for now)BTW – IMHO sell GS buy goldProverbs 7:22 He goeth after her straightway, as an ox goeth to the slaughter, or as a fool to the correction of the stocks;it is absolutely amazing to me that they are about to “”cash out”” again in bonuses after all that has happened

MorbidOctober 14th, 2009 at 1:07 pm

The Welfare State

General consciousness in the Western world have become ensnared by an idealistic and naive form of morality. Conscious moral standards are today predicated on an unconscious collective complex which can be characterized as a grand mother-myth. Central to current political consciousness is the paragon of a world-encompassing benign community, including notions such as democracy, welfare, and market economy for all the world’s inhabitants. A future global society is envisioned as a good mother and a safe garden for its children. Accordingly, all people of the earth have the right to the boons of the welfare state. The other side of existence, the dark forces of unconscious nature, including the unpredictable “power of the divine”, have today been shut out from collective consciousness. It is being replaced by material goods and chattels, especially. Accordingly, people have become very materialistic, very focused on material welfare, rather than spiritual growth. This is the expression of a resurgent mother complex.

The AlarmistOctober 15th, 2009 at 2:19 am

If you invest $1000 in Goldman Sachs, you might still end up owning that ounce of gold, and in a few years the S&P 500 itself 😉

BentelyOctober 14th, 2009 at 11:46 am

GS will be the first to know when to get into or out of Gold or anything else, and will therefor out perform gold.

GuestOctober 15th, 2009 at 6:15 am

Gold was here before GS and it will be here long after GS. GS is a blip on civilization’s radar screen, an ugly one, but a mere blip nonetheless.

GuestOctober 14th, 2009 at 1:10 pm

NOT A CHANCE IN HELLIn honor of Dow 10,000 I need to remind myself:1. Massive debt (Debt/GDP > 350%, much higher than even before the Great Depression).2. Insolvent banking system-accounting system broken3. $100 trillion in unfunded Medicare and Social Security liabilities4. Trillion dollar + annual deficits for at least the next 10 years.5. Huge unsold housing inventories will continue to depress housing prices.6. $800 trillion in unregulated credit default swaps.7. Chinese ponzi economy (unbelieveably much worse than ours).8. Trillions in unfunded pension liabilities.9. Increasing taxes coming.10. Protectionsim.11. Full scale Japanese economic disaster.12. Massive financial industry coupNow I feel better about having “missed” this rally

The AlarmistOctober 15th, 2009 at 2:49 am

Hmmm. Let’s see. That would be an increase of +53% from the 9 March 09 low of 6547. Now that would appear to be impressive. From my perspective in Euros it would still be +29%, which is still not shabby. But if I had taken a euro index like the much unloved DAX, I would have had +58%, and if you had taken it you would have had +87%, over the same period.OK, I don’t feel so good after that. Now you have to add the rest of this crap to the mix. I’m still glad I caught some of this rally, but I think it might be wiser to use the gains to buy some more land, gold, and guns.

economicminorOctober 15th, 2009 at 8:49 am

Does # 12 include that the largest banks are making their record profits from their trading units. In other words, those with access to tax payer money are gaining by gaming the system….Is this a healthy economy?And isn’t the assumption about Latin America based on a US stabilization? As we are the major consumers in the world… Who is going to purchase the goods from expanding Latin economies?Question about the Rio Olympics; What is going to happen to the large Favila above Ipanema Beach?

GuestOctober 14th, 2009 at 1:56 pm

7-Regarding the Chinese fiasco see analysis in summer free issue from Grant’s Interest Rate observer. Basically the Chinese are flooding their lending markets with money with orders to lend, regardless of circumstance and indefinitely suspending foreclosing on nonperforming loans (the scale is FAR greater than in the US)11-Regarding the Japanese fiasco-1.Collapsed exports 2.Debt/GDP now > 200% coupled with aging population now heavily entering retirement which is now redeeming rather than buying government debt =shortly coming sovreign debt implosion12-See Simon Johnson’s Blog

MM CAOctober 14th, 2009 at 1:43 pm

Sorry, no jobs. This is CaliforniaTue Oct 13, 2009 4:49pm EDTSAN FRANCISCO (Reuters) – If you’re looking for work, don’t look in California.The world’s eighth largest economy is still finding its feet after suffering multiple economic shocks, including a housing slump, mortgage crisis and recession.Employers in California, the most populous U.S. state, are expected to keep cutting staff in 2010 as the wider U.S. jobs market recovers.As industries in other U.S. states prepare to rehire on signs of recovery, firms in California are still waiting for their economy to rebound.The state has 12.2 percent unemployment, above the national U.S. level of 9.8 percent, and at odds with California’s image as an oasis of opportunity in hard times.California’s economic engines — Silicon Valley, Hollywood and gateway ports to Asia — remain the envy of other U.S. regions but seem incapable of reducing Rust Belt-like unemployment rates.That is largely because of the Golden State’s housing and home building crisis.In the 12 months through August, California’s construction industry shed 142,000 jobs, or 18.5 percent of its work force, marking the largest decline on a percentage basis over the period of surveyed industry groups.Those workers are struggling to find new jobs in construction or other trades, according to analysts.House prices soared higher in California than in most other U.S. states earlier this decade and have crashed harder amid the credit crunch.Developers are trying to unload unsold new homes and real estate agents are relying on selling foreclosures for a large share of business.Tight credit and steep job losses have slimmed ranks of prospective home buyers, with many waiting for prices to drop further. At the same time, a number of other states are beginning to see home prices stabilize.Tumbling personal, corporate and property tax revenues have put the brakes on government hiring as manufacturers wait for consumer spending to pick up before adding jobs.”We’re calling for a jobless recovery,” said Jack Kyser, founding economist of the Kyser Center for Economic Research at the Los Angeles County Economic Development Corp.SURVIVAL MODECalifornia is not poised for relief from double-digit unemployment like the broader U.S. jobs market, which is expected to see joblessness peak at 10 percent in early 2010 and ease to 9.5 percent by the end of next year, according to the National Association of Business Economics.Analysts expect California’s jobless rate to climb well into next year even as other measures of the state’s economy regain some of their luster.Comerica Bank last week reported its California Economic Activity Index extended gains since March by rising to a reading of 101 in August and marking a “welcoming strengthening” of the state’s economy, said Dana Johnson, the bank’s chief economist.”The key missing ingredient to a sustained and healthy rebound continues to be job growth,” Johnson said. “It is the only component of our index that has not contributed positively since it bottomed five months ago.”Similarly, California purchasing managers expect manufacturing to grow this quarter — without new jobs.Chapman University’s index tracking their views rose to 54.5 this quarter from 53.8 in the third quarter, a return to late-2007 levels and the second consecutive quarter of readings above 50, indicating expansion.Job seekers, however, won’t benefit. Chapman University’s index report said output and new orders are projected to increase in the fourth quarter, but employment and inventories of purchased materials are expected to decline at a faster rate compared to the third quarter.Manufacturers are reluctant to hire without definitive signs the recession is letting up, said Raymond Sfeir of the university’s Anderson Center for Economic Research.”They’re trying to survive with as few workers as possible,” Sfeir said. “They’re not going to commit until they’re more certain.”Small- to medium-sized companies need more than economic cues to boost payrolls, Kyser said: “They’re having trouble accessing bank lending and are concerned about health-care reform and about environmental regulations out of Sacramento.”They’re also waiting on consumers who have been stashing cash and paying off debt in a hurry instead of fueling job growth at shops, distribution centers, offices and factories.”About every two weeks I do a ‘mall crawl’ to regional malls to see how many people are there and carrying bags,” Kyser said. “They’re out strolling around, getting out of the house. But they’re not spending.”That doesn’t bode well for Los Angeles County, California’s most populous county. Kyser sees its jobless rate next year averaging 12.8 percent — or worse. “That may be a conservative forecast because it’s already at 12.3 percent,” he said.(Editing by Andrew Hay)

GuestOctober 14th, 2009 at 1:58 pm

Yes, all of the unemployed are cheering ponzi Dow 10,000. yippee, it’s just like 1999 all over again!!

PeteCAOctober 14th, 2009 at 7:10 pm

You are looking at a Bull Trap – it’s staring you in the face. Trouble is, before this is over this market will probably takes all the bears’ riches too.PeteCA

It's Coming... Duck!!October 14th, 2009 at 9:30 pm

Really??? Pull your head out of your — or sand whatever the case maybe. Stay tuned in within 6 to 9 months you’ll be saying “What Happened”

The AlarmistOctober 15th, 2009 at 2:52 am

You are so insensitive to MM CA’s need to work through the issues of being a Californian.We used to have a saying … “___ by birth, Californian by choice.” MM CA, have you considered exercising your right to choose?

GuestOctober 14th, 2009 at 1:45 pm

Andy Xie: For Economic Stimuli, a Revolving Exit Door10-12 12:00 CaijingCan interest rate adjustments, currency devaluation and zigzag policymaking help unwind economic stimuli? It depends.By Andy Xie, guest economist to Caijing and a board member of Rosetta Stone Advisors Ltd.(Caijing Magazine) Australia recently raised its policy interest rate 25 bps, becoming the first major economy to do so since the financial crisis a year ago prompted all major economies to rapidly cut interest rates to historical lows.Financial markets had been chattering about economic stimuli exits for about a month before Canberra’s move. The consensus was that central banks would keep rates extremely low through 2010, and possibly beyond, on grounds that the economic recovery is still shaky.Central banks also have been discussing the subject. Their messages are, first, that they know how to exit and will exit before inflation becomes a problem and, second, that they don’t see the need to exit anytime soon. They try to assure bond inventors not to worry about their holdings, despite low bond yields, while trying to persuade stock investors they need not worry about high stock prices, as liquidity will remain strong for the foreseeable future. So far, central banks have made both groups happy. But Australia’s action is likely to raise concern among financial investors who hold expensive stocks and bonds.Each economy will exit at its own pace, according to local conditions. First, the United States and Britain, where property bubbles have burst and could not be revived through low interest rates, will increase rates next year at a pace in line with the speed of inflation expectation. Their goal is to keep real interest rates as low as possible to support financial institutions still sitting on mountains of bad assets. They don’t want to stop inflation, but want to limit the pace of its increase. Through low real interest rates, their economies could decrease debt leverage. I think the Fed would raise interest rate by 100 bps in 2010, 150 bps in 2011, and 200 bps in 2012. The United States could be stuck with an inflation rate of 4 to 5 percent by 2012 – and for years to come.Second, China’s stimulus program will zigzag mainly through its lending policy. China’s currency will be pegged to the U.S. dollar for the foreseeable future, which determines the end point for China’s monetary policy. Its inflation and interest rates will likely be similar to those in the United States.Third, due to their strong currencies, countries in the euro zone and Japan will have higher real interest rates, lower nominal interest rates, and lower real economic growth rates. They will raise interest rates more slowly than the United States, and will have lower inflation rates as well.My central point is that the global economy is cruising toward mild stagflation with a 2 percent growth rate and 4 percent inflation rate. This scenario is the best that the central banks can hope to achieve; it combines an acceptable combination of financial stability, growth and inflation. But this equilibrium is balanced on a pinhead. It requires central banks to constantly manage expectations. The world could easily fall into hyperinflation or deflation if one major central bank makes a significant mistake.In modern economics, monetary stimulus is considered an effective tool to soften the economic cycle. While there are many theories about why monetary policy works, the dirty little secret is that it works by inflating asset markets. By inflating risk asset valuation, it leads to more demand for debt that turns into demand growth. In other words, monetary policy works by creating asset bubbles.It is difficult to reverse this kind of stimulus. A complete reversal requires that household, business and government sectors decrease debts to pre-stimulus levels. This is why national ratios of indebtedness-debt to GDP have been rising over the past three decades while central bankers smoothed economic cycles through monetary policy. It led to a massive debt bubble that burst, leading to the ongoing slump.The current stimulus round is different in terms of its effects. Despite low interest rates, household and business sectors in developed economies have not been increasing indebtedness; falling property and stock prices have diminished their equity capital for supporting debt. The public sectors have rapidly ramped up debt to support failing financial institutions and increase government spending to cushion the economic downturn. Neither is easy to unwind.By some estimates, US$ 9 trillion has been spent to shore up failing financial institutions. A big chunk of that money was borrowed against illiquid and problematic assets on bank balance sheets. As the debt market refused to accept that collateral, governments and central banks stepped in. Today, it is impossible for banks to liquidate such assets without huge paper losses. Hence, if central banks call the loans, they are likely to go bankrupt.Of course, central banks can suck in money from elsewhere to substitute money that’s tied up in non-performing loans. They are unlikely to do so, however, as it would depress a good part of the economy in order to support the bad. And that could easily lead to another recession.The bottom line is that, regardless what central banks say and do, the world will be awash in a lot more money after the crisis than before — money that will lead to inflation. Even though all central banks talk about being tough on inflation now, they are unlikely to act tough. After a debt bubble bursts, there are two effective options for deleveraging: bankruptcy or inflation. Government actions over the past year show they cannot accept the first option. The second is likely.Hyperinflation was used in Germany in the 1920s and Russia in late 1990s to wipe slates clean. The technique was essentially mass default by debtors. But robbing savers en masse has serious political consequences. Existing governments, at least, will fall. Most governments would rather find another way out. Mild stagflation is probably the best one can hope for after a debt bubble. A benefit is that stagflation can spread the pain over many years. A downside is that the pain lingers.If a central bank can keep real interest rates at zero, and real growth rates at 2.5 percent, leverage could be decreased 22 percent in a decade. If real interest rates can be kept at minus 1 percent, leverage could drop 30 percent in a decade. The cost is probably a 5 percent inflation rate. It works, but slowly.If stagflation is the goal, why might central banks such as the Fed talk tough about inflation now? The purpose is to persuade bondholders to accept low bond yields. The Fed is effectively influencing mortgage interest rates by buying Fannie Mae bonds. This is the most important aspect of the Fed’s stimulus policy. It effectively limits Treasury yields, too. The Fed would be in no position to buy if all Treasury holders decide to sell, and high Treasury yields would push down the property market once again.The Fed hopes to fool bondholders or lock them in by quickly devaluing the dollar. Foreign bondholders have already realized losses. The dollar index is down 37 percent from its 2002 peak. A significant portion of this devaluation is a down payment for future inflation.I think Britain is pursuing devaluation for the same reason. Among all major economies, Britain’s is the most dependent on global finance. It benefited greatly during the global financial boom that began in the mid-1990s. The British currency and property values appreciated dramatically, pricing out other economic activities. But now that the global financial bubble has burst, its economic pillar is gone. Other economic activities cannot be brought back to Britain without major cost cuts. But it can’t cut taxes to improve competitiveness, as fiscal revenues depend on the financial sector and already face a major shortfall. Another option is to let property prices fall, as they have in Japan. But that choice might sink Britain’s entire banking sector. Hence, devaluing the pound is probably the only available option for stabilizing the British economy.Some may argue that Britain is not expensive anymore. The problem is that being less expensive is not good enough. Prices have to be low enough to attract non-financial economic activities despite a rising tax burden. The pound’s value must be very low to achieve that goal. Five years ago, I predicted the pound and euro would reach parity. It seems the day is finally here. But I’m not sure parity would be enough; the pound may have to be cheaper.Of course, the euro zone is a mess, too. With high unemployment rates, a stagnant economy and imploding property markets in southern Europe, shouldn’t the euro’s value decline, too? Yes, it should. But it won’t. The European Central Bank was structured solely to maintain price stability. With so many governments and one central bank, ECB is unlikely to change anytime soon. Hence, it won’t respond to a strong euro quickly. A strong euro and low inflation could form a self-generating spiral, as we see in Japan. Even as interest rates in other economies rise, the euro zone’s real interest rate could be higher still, supporting a strong euro.At some point, euro zone monetary policy may change. It would require governments in the zone’s major economies come together and change the ECB. That may come in three years, but not now. The trigger could be one country threatening to exit the euro. Italy and Spain come to mind.Meanwhile, Japan is an enigma. It has been locked in a vicious cycle of economic decline with a strong yen and deflation. Most Japanese people have a strong yen psychology. Politicians and central bank leaders reflect this popular sentiment, which is based on an aging population. Wealth is concentrated among voting pensioners for whom a strong yen and deflation theoretically improve their purchasing power. But I think various theories that explain Japan’s behavior are not good enough. The best explanation is that Japan is run by incompetents, and some are downright stupid. They have locked Japan in an icebox and refuse to come out.Japan is a giant debt bubble. Its zero interest rate, supported by a strong yen and deflation, has turned the debt bubble into an iceberg. You don’t have to worry — until it melts. Unfortunately, when the temperature reaches a critical point, the iceberg will melt suddenly, all at once. That turning point will come when Japan begins to run a significant current account deficit. The day may be near.For Japan to avoid calamity, it should deal with deflation and skyrocketing government debt now. The only way forward is for the central bank to monetize Japanese Government Bonds. That would lead to yen devaluation and inflation. Pensioners will complain, but it’s better than a complete meltdown later.Japan’s new ruling party DPJ has no vision like that. It doesn’t have the guts to go against popular preference for a strong yen. Without a growing economy, though, the DPJ has little to play with. The whole country has sworn to debt, led by a government with a massive fiscal deficit. The DPJ may only reallocate some spending, which would make no difference for the economy. It seems Japan will remain in the icebox until the day of reckoning.These snapshots of Britain, the euro zone and Japan suggest everyone needs a weak currency. Those that don’t have one simply don’t know yet. They’ll come around eventually. One outcome could be rotating devaluations and high inflation for the global economy.Developing countries with healthy banks have a different problem on their hands. By responding to falling imports with stimuli, they inflated their property markets. China, India, South Korea and Hong Kong have inflated property bubbles in spite of slower economic growth rates. The contradictions between a property bubble and a weak economy can lead to zigzags in policymaking.As China is one-third of the emerging economy bloc — and exerts a great deal of influence over commodity prices that other emerging economies depend upon — its monetary policy has a big impact on global financial markets. Its monetary stimulus in the first half of 2009 went disproportionately into property, stock and commodity markets. As profitability for the businesses that serve the real economy remain weak, little monetary stimulus went into private sector capital formation.The state sector ramped up investment somewhat for policy, not profit, concerns. Thus, China is experiencing a relatively weak real economy and red hot asset markets. Government policy is being pushed by both concerns. Cooling the asset bubble would cool the economy further. Not to cool the bubble could lead to a catastrophe later. Monetary policy zigzags, shifting according to concerns that arise, has the up hand.It seems limiting credit growth is the current policy focus. But if the economy shows further signs of weakness in the fourth quarter 2009 and first quarter 2010, the policy may revert to loose bank lending again. The zigzagging will stop when China’s loan deposit ratio is high enough, i.e. when increased lending increases interest rates. As the yuan is pegged to the dollar, China’s monetary policy would become much less flexible after excess liquidity in the banking system is gone.I think Australia is raising interest rates ahead of others for a unique set of concerns. Australia has been experiencing property and household debt bubbles similar to those in the United States and Britain. Its bubbles are probably larger than America’s. But because its commodity exports have performed well, its economy has fared better than others. Hence, its property market has seen less of an adjustment. A relatively good economy could embolden Australia’s household sector to borrow more and continue the game. This is why it needs to increase interest rates — to prevent the bubble from re-inflating. The United States and Britain don’t have this problem; their household sectors are convinced that the game is finished and they must change.A review of unique factors and institutional biases around the world shows that exiting a stimulus would be quite different in different economies. The United States and Britain, the euro zone and Japan, and China and India are three blocs that face varying challenges and will handle stimuli exits in different ways.Most analysts think a benchmark for exiting a stimulus is robust economic recovery. That’s not so. Loose monetary policy cannot bring back a strong economy due to the supply-demand mismatch formed during the bubble. Re-matching takes time, and no stimulus can bring a quick solution.The main purpose of monetary policy ahead is facilitating the deleveraging process, either through negative real interest rates and-or income growth. Preventing runaway inflation expectation is a key constraint on monetary policy. One key variable to watch is the price of oil, with its major impact on inflation expectation. If oil prices take off again, the Fed could be pushed to raise interest rates sooner and higher than expected.

economicminorOctober 15th, 2009 at 10:32 am

Andy writes well and has a lot of good insight and points but he and in fact no one so far has answered my main question and that is “What about all the existing debt?”More inflation or the effects on rising prices coupled with the down turn in housing not only in the US but in Europe and England and Australia and other places caused by Zero Hour dynamics just exacerbates the debt collapse.What am I missing here? Or is it that most financial writers do not see the debt collapse because it is a remote event to those who still have good incomes? Something like, its a recession when your neighbor loses his job but a depression when you lose yours affect?There seems to be a general impression from many that because stocks and GDP have rebounded that the economy will soon follow. How can this happen with out either massive wage inflation or massive debt deflation? The general conception seems to be that debt doesn’t matter… To whom? It certainly matters to all those who can’t afford to make their payments on mortgages, student loans, cars and credit cards. It is starting to matter to the states who are finding their budgets squeezed by lower tax receipts and the cost of previous borrowing. All of this is affecting spending and that rebounds in lower economic activity and lower tax receipts. All because of to much existing debt.Why are the banks going to resume lending to dead beat borrowers who already can’t afford the credit that has been extended to them? Or to businesses that sell to them? How are we going to have a recovery when so many can neither borrow or spend?I know I’m slow but not that slow. When a line of bull shit smells to high heavens, I just assume it is bull shit. Just because JPM made billions from stocks going up, doesn’t mean to me that their business plan is viable or will continue and it has nothing IMO to do with the underlying economy…

FEDupOctober 16th, 2009 at 6:43 am

agree. All we have heard about for decades is “unsustainable deficits and debt” and in the last 2 years, courtesy of our illustrious leaders, we have multiplied that by 2-10 fold depending on which measures are used. Has the “new laws of economics” suddenly changed to allow these astronomical debt increases without any dire consequences? Let’s get real! Our govt has guaranteed trillions in toxic investments, lent billions to the banks at 0%, changed accounting methods and pumped up the stock market to help the financials and the largest investors recover losses and stay solvent while continuing record expenditures on wars, health care and upcoming cap and trade. There is a reason the expression “buried in debt” is a universal truth. No amount of money printing, protectionism or denial will solve this crisis. They are simply “kicking the can down the road as far as they possibly can” hoping they can convince the majority of people before the next election(s) that this will be a “V or a “U” rather than an “L” shaped recession. Truth, transparency and compentency appear to be just meaningless words to our leaders as they foolishly lay the goundwork for the next bigger bubble bust.

economicminorOctober 16th, 2009 at 10:09 am

From my perspective, it won’t be an L but a lightening strike.Next bigger bubble is just a retracement rally and nothing more.. one of the zees on the lightning strike.

GuestOctober 14th, 2009 at 2:02 pm

ALRIGHT boys and girls, ready to kill USA bond market!! Let drive up yield and drive down bond price. Yahoo!!

GuestOctober 14th, 2009 at 2:28 pm

The dollar’s share of global reserves is steadily falling. Private industry and central banks are shedding dollars to avoid painful adjustments in the future. Last week, South Korea, Taiwan, Thailand, and the Philippines launched currency market interventions to keep the dollar from plummeting. The situation is grave. The Fed’s monetization and liquidity programs have made dollar-holders jittery. The central banks actions are the first sign of a disorderly unwind. The prospect of a dollar crash is now real.Surprisingly, there is also a good chance that the dollar will strengthen short-term and that the misinformation about the dollar’s future is being used to achieve the Fed’s objectives. Fed chair Ben Bernanke is already monetizing the debt (via quantitative easing) and has slashed interest rates to zero. What else can he do? The only way to weaken the dollar further is through asymmetrical warfare, a disinformation campaign aimed at triggering a sell-off before the dollar strengthens when the stock market corrects and credit tightens even more. Is that what Bernanke has in mind?

GuestOctober 14th, 2009 at 2:41 pm

hehe, it is not just dollar is in trouble, soon USA treasury market. wuaHAHA, knifing USA treasury market orgy has begun.

GuestOctober 16th, 2009 at 7:52 am

think ? Or thank ?Here’s the moron again who can’t seem to understand that all American administrations have followed the same policies with regards to the dollar, credit hyper growth, current account deficits.

GuestOctober 14th, 2009 at 3:21 pm

Government debt is fundamentally inflationary. For a generation, the U.S. dollar has been inflating at an increasing rate, with the economy being kept in a growth posture by selling our debt instruments abroad or allowing foreigners holding dollars to purchase property and other assets on our own soil. The website reports that in 2007, the most recent year for which data are available, “foreign entities spent $267.8 billion to acquire or establish U.S. businesses.” are spending their dollars as fast as possible, because they are now plummeting in value. It’s increasingly clear that sooner rather than later, the dollar will be dumped by foreign purchasers of bonds, particularly China, and possibly even the oil-producing nations.These nations know full well that bonds denominated in dollars can never be completely repaid, even if the bonds can be rolled over into fresh debt. It’s this dynamic that is dragging the U.S. economy to the cliff, because real economic growth stopped long ago when our manufacturing jobs were exported. This is because most of the growth since Ronald Reagan was elected president in 1980 has been only on paper through financial bubbles. This included the bubble of the Clinton years that blew up in 2000-2001.Now, after the Treasury bond bubble of 2009, there is nothing left in America to inflate. With so many jobs gone, the American family home was the last thing of value we owned.So the air is going out of the tires. Americans who are struggling to work for a living are passive spectators as their jobs, savings, health insurance, pensions, and homes continue to erode in value or even disappear. Last Sunday the Washington Post reported a massive crisis in state and local government pensions. Reporter David Cho wrote, “The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees.”So what, if anything, can be done about it?

The AlarmistOctober 15th, 2009 at 3:03 am

And consider for a moment the export of capital in the form of interest on the debt. The official stats have foreign ownership at roughly 28%, so we are coughing up a huge nut to cover that.When I was growing up, I was always told that the debt is ok because we are repaying ourselves. That was based on the original fantasy of the Social Security trust fund (Remember Al Gore’s famous ‘Lock Box’ ?). Well, that is certainly less than 50% of the total debt since the official stats have all Fed and Inter-governmental holdings at only 49.7%. Even if we were still largely funding our public pensions, do we really have a credible backer there? With the public debt skyrocketing to cover current political exigencies, we aren’t just beggaring our children but also ourselves.

GuestOctober 18th, 2009 at 4:37 am

2/3 of the worlds’ population lives on $3/day or less, which means that, debt or no debt, we’re negatively impacting children now!

GuestOctober 14th, 2009 at 3:43 pm

So what, if anything, can be done about it?Well, the first thing an intelligent physician does is diagnose the disease. Thomas Greco, in his new book The End of Money and the Future of Civilization (Chelsea Green: 2009) , outlines the increasingly familiar story of how things got so bad, and he tells it as well as anyone has ever done. His style is precise and sometimes academic. Behind it, though, is a passion for truth and the type of rock-solid integrity that refuses to sugar-coat a very bitter pill.More than that, Greco writes about how to change what has gone wrong. His credentials as an engineer, college professor, author, and consultant are impeccable. His book is among the most important written in this decade. It is truly a book that can alter the world and, if taken seriously, give large numbers of people a practical way to survive the gathering catastrophe.But unlike most commentators, what Greco offers is not another phony prescription for what the financiers and government should do for us, whether through “restarting” lending or another round of stimulus spending. Rather it’s what we should do for ourselves, and could do much better, if we understood what to do and if big banking and big government just got out of the way.As I said, at the root is the monetary system, whose failure cannot be understood without a history lesson. So Greco writes about the struggle between banking and democracy that took place in the 1790s when the ink on our new national constitution was barely dry.It was Alexander Hamilton, the first secretary of the treasury, who compromised the new nation, through what he admitted was “corruption,” by giving the wealthy speculators in Revolutionary War bonds the benefit of federally-sponsored redemption and then by establishing the First Bank of the United States. This early drift toward elitist rule was opposed by Thomas Jefferson, James Madison, and others who figured in the creation of what later became the Democratic Party.Greco writes: “While Jefferson favored a stronger union than that which emerged under the Articles of Confederation, he was vehemently opposed to the reconstruction of monarchic government on the American continent.” Hamilton had said frankly that the British monarchy was the best system of government known to man. Part of the monarchic system was the Bank of England, which Hamilton copied when setting up the First Bank.But Jefferson, who repudiated Hamilton’s elitist platform, was elected president in what was then called “The Revolution of 1800.” Congress refused to renew the Bank’s charter by a single vote when it was up for renewal in 1811.But the Second Bank of the United States was chartered in 1816 due to the government debt left behind from the War of 1812 against Great Britain. Thus was set up what became known as the “Bank War.”It was President Andrew Jackson who dethroned the bankers from power by pulling government funds out of the Second Bank in 1833. Greco writes that in Jackson’s view: “The ‘Bank War’ was a contest for rulership—would the United States be governed by the people through their elected president and representatives, or by an unelected financial elite through their central bank instrument?”The modern takeover began in earnest during the Civil War when Congress passed the National Banking Acts in 1863-64 which mandated use of government bonds as bank lending reserves, thereby creating a direct linkage between bank profits and the debt the government was starting to load on the shoulders of taxpayers.The nation’s fate was sealed with the passage of the Federal Reserve Act in 1913. The deal was that the bankers would control the currency, and thereby the nation’s economy, while the government would be provided with an unlimited amount of inflated dollars to fight its wars.The bookkeeper’s trick of creating money out of thin air, charging interest for its use, then forcing it down the throats of weaker nations by threat of violence, is what has allowed the Anglo-American empire, since the founding of the Bank of England in 1696, gradually to conquer the world. Though President Woodrow Wilson signed the Federal Reserve Act into law, he saw what that action meant. Greco cites Wilson as writing: “There has come about an extraordinary and very sinister concentration in the control of business in the country… The great monopoly in this country is the monopoly of big credits.”Among other ill effects, the system has ruined the value of the currency. The inflation caused by large issues of bank-created loans is seized upon by the government which goes along because inflation reduces the cost of its deficits. Investors buy Treasury bonds denominated in Federal Reserve Notes then watch their value evaporate over time. In fact Federal Reserve Notes have lost over 95 percent of their value since they were first introduced.Moreover, it’s additional inflation caused by bank-generated interest that drives up the costs of goods and services, forcing everyone in the economy to try to defend themselves by raising their prices to the max. Greco spells this out too, which almost every economist in the world, with the exception perhaps of Australia’s James Cumes, overlooks.Bank interest has other tragic effects. It was high interest rates, for instance, that destroyed the Idaho potato industry. A farmer from that region told me at a conference a few years ago that when interest rates skyrocketed in the early 1980s, he asked the president of one of the Federal Reserve Banks why they did it. The answer was they were “ordered” to raise interest rates by the international banking system.Make no mistake, it’s the banking system, facilitated by the Fed, not unwary borrowers, who brought on the collapse of 2008.Now, in 2009, the bankers, mainly those in the U.S., have so shattered the world economy by debt mounted on debt that there may be no reprieve except the creation of a slave society based on rule by the rich over the masses of whatever peons should happen to survive the downturn and its tragic effects on employment, health, the food and water supply, and even our ability to cope with climate change.The political establishment, expressing itself in pronouncements by organizations like the Council on Foreign Relations, see a future, not of economic democracy or increased financial pluralism, but consolidation of world currencies into a small number overseen at the top by the world’s financial oligarchy. Citing the writings of Benn Steil, the CFR’s Director of International Economics, Greco writes: “The ostensible plan is to reduce global exchange media to three—one each for Europe, the Americas, and Asia. One might reasonably suppose that at a later stage, those three would be combined into one currency also under the control of the global banking elite.”Greco concludes: “The New World Order is upon us.”With ample justification, he even goes apocalyptic, citing The Book of Revelation in demonstrating the import on a spiritual plane of the elitist takeover: And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand or in their foreheads: And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name. (Revelation 13: 16-17)But is it really the end, or is there a new world waiting to be born? Greco thinks so. He speaks of the end of an era when unlimited economic growth fed by massive influxes of debt-based money is no longer sustainable. He writes: “That our global civilization cannot continue on its current path seems evident… But I think our collective consciousness is beginning to change. We are becoming aware of limits and are reaching that part of our evolutionary program that says, ‘Stop!’”Part of the awareness of how to stop must focus on the institutions responsible for the crisis. Greco praises Ron Paul for calling out the Federal Reserve in the 2008 presidential campaign. He cites a statement Paul made to Federal Reserve Chairman Alan Greenspan in a 2004 hearing where Paul told Greenspan that the power of the Fed “challenges the whole concept of freedom and liberty and sound money.” Thus Paul and other monetary reformers, though largely ignored by the mainstream media and political establishment, have made it clear that change must start with what really lies at the bottom of elite control: how money is made and who makes it.Unfortunately, few progressive economists, including Paul Krugman, Joseph Stiglitz, and Robert Reich comprehend the monetary causes of today’s disasters. Instead of demanding reforms that would make money the proper servant of a sustainable economy, most call for more stimulus spending; i.e., more government debt, along with “reform” of a financial system that is corrupt down to its very DNA.So do we really need the bankers’ fake currency, today backed by nothing but a federal deficit of $12 trillion and growing by the day?Greco says we don’t, and this is what his book about. But it’s not about doing without the necessities of life, or heading for the hills with a gun and backpack. Nor is it about important efforts at macro-level monetary reform like those of the American Monetary Institute, Congressman Dennis Kucinich, or advocates for a basic income guarantee. Rather it’s about individuals, groups, and communities taking control of the monetary system at the grassroots level and creating an entirely new basis for trade than bank-owed debt.Greco writes about “a new paradigm approach to the exchange function.” The solution, he says, “is to provide interest-free credit to producers within the process of mutual credit clearing. That is the process of offsetting purchases against sales within an association of merchants, manufacturers, and workers. It will eventually include everyone who buys and sells, or makes and receives disbursements of any kind.”Greco is one of the world’s leading experts in describing alternative or complementary currencies. These are self-regulating systems that facilitate “reciprocal exchange,” not using government legal tender but which are still allowed under the currency laws so long as taxes are not evaded.Greco discusses the large and growing worldwide “LETS” movement—Local Exchange Trading Systems, like the Ithaca HOURS system in Ithaca, New York. He describes the Swiss WIR Bank, the longest-running credit clearing system in the world, with over 70,000 members. He writes about the national and international barter exchanges that involve over 400,000 businesses trading at an annual level of $10 billion.Greco also describes the world-famous Mondragon Cooperatives from the Basque region of Northern Spain. Started by a Roman Catholic priest in 1941, the Mondragon system, he says, is “the hub of what is probably the most successful and progressive social cooperative economy in modern history.”He also tells the inspiring story of the Argentine trading clubs—the trueques—which, when used with “provincial bonds” issued by regional governments, rescued that country during the 2001 economic collapse brought on by the collusion between the Argentine government and the International Monetary Fund.Credit clearing is not new. Greco traces it to the medieval European fairs. These exchanges are like banking clearing houses. The world’s largest is the automated clearing house—ACH—operated by the Federal Reserve.But as Greco points out: “The clearing process need not be restricted to banks; it can be applied directly to transactions between buyers and sellers of goods and services. The LETS systems that have proliferated in communities around the world use the credit clearing process, as do commercial trade exchanges. Credit clearing systems are, in essence, clearing houses—but their members are businesses and individuals instead of banks.”Alternative currency and trading systems, says Greco, are the wave of the future. Even though most only mount up to partial local successes, they show what can be done. Greco likens these efforts to the Wright Brothers’ first flight that covered 120 feet. They show, he says, that the potential exists for local, regional, then national and international money-free exchanges that eventually could be joined by a single web-based trading platform. This could eventually get rid of the corruption of debt-money altogether.Chapter 16 of the book is about “A Regional Economic Development Plan Based on Credit Clearing” that shows the potential. Greco writes, “The credit clearing exchange is the key element that enables a community to develop a sustainable economy under local control and to maintain a high standard of living and quality of life.”This would be a real revolution. What can governments do to help? Perhaps only by removing, as Greco recommends, the privileged position of bank debt-money as legal tender. Instead, let bank money compete with market-based alternative currencies and credit exchanges, if it can.Greco’s book is a how-to-do-it manual that updates and expands on his previous books, Money and Debt: A Solution to the Global Crisis, New Money for Healthy Communities, and Money: Understanding and Creating Alternatives to Legal Tender. Greco also operates a website that offers advice and support to worthwhile community initiatives. Click HereMy own view is that no one should wait to see who takes the lead in creating the monetary and credit-clearing systems of the future. The time is now. There is no more reason to delay. If the people of the world do not join together in this kind of action, they can likely kiss their economic future and perhaps their livelihoods good-bye. The controllers of the world, those with the big money, the ones who run the banking systems, who own the global corporations, and who finance politicians like Obama, the Bushes, and the Clintons, are now poised in their blindness to extinguish the light of democracy on the planet for good.Greco is implying that the power of the elite is not only dated but illusory. Thus the way to proceed is not just to oppose them. If they are opposed, they’ll do what they always do, which is to roll out the SWAT teams, the military in the streets, the tear gas, the sound cannon, the concentration camps, the Patriot Acts, the torture chambers, because that is all they know, and it’s what they do best.The money monopoly translates into a monopoly on violence on an ascending scale. We know that the U.S. sells more weapons abroad than any other nation, and we know that it is war above all that makes the bankers rich.So let them have their weapons and wars. With all due respect to those brave enough to protest, it’s time for people simply to walk away and set up their own economic and monetary systems as a prelude to a rebirth of humanity as ethical beings in sustainable communities of choice.The keys, says Greco, are simple: “Promote the establishment of private complementary exchange systems—and use them. Buy from your friends and neighbors wherever possible. Contribute your time, energy, and money to whatever moves things in the right direction.”Greco also recommends that the unit of exchange for alternative currencies be based on the value of commodities—not necessarily gold or silver, which bankers and governments manipulate, but those commodities readily available within a trading system. State and local governments should do everything possible to protect, encourage, nourish, and participate in these systems.The irony is that what may appear on the surface to be technical changes in how the exchange of goods and services takes place can have such profound effects. The answer is that systems of exchange reflect entirely different perceptions of the world. Bank-money exchange reflects and creates a system of elite control and human slavery. Reciprocal credit exchange reflects and creates a democratic system on a level monetary playing field.The difference points to the fact that such reform is, above all, a spiritual endeavor. Thomas Greco has devoted decades to this quest and is one of its foremost visionaries. In an Epilogue he writes: “We will either learn to put aside sectarian differences, to recognize all life as one life, to cooperate in sharing earth’s bounty, and yield control to a higher power—or we will find ourselves embroiled in ever-more destructive conflicts that will leave the planet in ruins and avail only the meanest form of existence for the few, if any, who survive.”It’s a visi we can all strive to embrace.

GuestOctober 14th, 2009 at 9:33 pm

Seriously??? He’s our Savior thank God we have him. Again pull your head out of your ass!! Check the market in 6 to 9 months……. wa wa wa what happened??? CRASH!!!!

MAOctober 14th, 2009 at 4:20 pm

Pay no attention to the 140 behind the curtain!Yes Folks, It’s time to dust off those party hats… It’s DOW 10,000 time !Pay no attention to anything else folks. Especially not the S&P 500 P/E ratio…As of Oct 7, The S&P P/E Ratio is140.82Yep, 140!!! This isn’t my data; this is directly from the New York Fed. Here’s the link:, remember that little thing called Remember all that irrational exuberance that was “the bubble”, where the P/E basic fundamentals went from the 15 range, and shot all the way up to 47…Well now, WE’RE AT 140! The funny thing is, it doesn’t even fit on the Fed’s chart. (Look for yourself) The line goes to the top, and then there is text telling you that the P/E is at 140. It is absolutely comical.There are no fundamentals, just fake money floating around, created from thin air, looking for a place to land. (note to the FED, when you create money, it needs to be dispersed! It doesn’t just need to be spun around the fractional reserve system of the debt, creating greed whores who will cash out bonuses of false profits from stimulus floatation. …or, you get what we have today, fundamentals that fall completely out of whack!!!)Pricing the S&P at 140 falls into what I call unattainable true price discovery. I discuss this at length in my “Evaporflation Theory” as true price discovery (even for stocks) will soon become unattainable. You can’t mess with the economic forces of nature. Much like Mother Nature, you don’t know how this force will punch back! An S&P P/E of 140 will likely lead to missed expectations on earning. (Hmmmm does that sound good for all the massive pension funds that are looking to capitalize on this fake bull run, in order to recoup losses from there soon to come shortfalls???)The bulls will argue against me, saying: look at the financials… their numbers aren’t bad, they’re recovering!Let’s face it folks, when your financial institutions refinance all their debt at anywhere from 0.5% to 0.015% via the government/taxpayer loans/bailouts, and then re-loan that money out to taxpayers at 5% or don’t refinance existing taxpayers loans from their 6-10% it becomes a built in profit that borders on criminal. Until the public realizes that this simple concept: I owe the bank money. I’m now going to take money from other parts of my paycheck, and give it to the government, so the government can loan it to the bank I owe at a reeeeeaaally cheap rate… Just so that the bank I owe, can make a larger profit margin on the money I still owe them. …and after they make a larger profit, they can give themselves a bonus above and beyond the addition profits they made by cutting costs through layoffs.All the Best,Miss Americap.s. To me, I’ve lost so much interest in economics and finance in the last year. When the financial world started to resemble something as comical as the “professional wrestling” it gets hard to take yourself serious as an analyst of that venue. For me, (or the pros like Nouriel, Krugman, Schiff) or anyone else to sit here and make realistic prognostications on what will or should happen is as ridiculous as talking about whether Hulk Hogan was really better then Andre the Giant. It’s all fake people. Whether we are fundamentally right, momentum can irrationally go another way. Even if we are wrong, governments can intervene, “manipulate/correct” or “save” the economy for whatever reason.

PeteCAOctober 14th, 2009 at 7:07 pm

MA … amazing isn’t it ?!!!Suddenly it becomes a total embarassment to be part of this financial morass called America today. It’s one thing to know that your country is headed towards becoming a banana republic, but it’s another thing when the charts actually confirm it.PeteCA

The AlarmistOctober 15th, 2009 at 3:09 am

It’s even more painful when you sit abroad with a number of colleagues who ask you why your country insists on shooting itself in the foot over and over and over.

GcrgordonOctober 14th, 2009 at 7:11 pm

Well stated. And, the disappointment is shared. The world really seems a bit upside down. Lessons are being taught but nothing is being learned. Financial institutions play an insider’s game and then pay out hundreds of billions of dollars in the form of bonuses with rigged earnings scammed from the honest but witless taxpayers. Shameless. Yet few in government have clean hands to protest and the voice of the people is compromised by the false god of markets up, all is good. Best to leave emotions aside for the sake of sanity. Maybe this is all really a dream.

blindmanOctober 14th, 2009 at 7:50 pm

g, solution to winning the war on consciousness is for us to RECOGNIZE the nature of the war we are in, which can only happen through the agency of our consciousness. Realizing that the true war we are in is an assault on our own minds is the expansion of consciousness which is itself simultaneously the solution. From a deeper, more expansive perspective, the war on consciousness is itself the very catalyst and instrument for consciousness to awaken to itself.

Ungrateful PeonOctober 17th, 2009 at 12:02 am

Death is on my doorstep and that’s cool. But Tom Waits and you make it all worthwhile.My thanks.

MAOctober 15th, 2009 at 8:56 am

Why so serious????140!140!!140!!!Take a moment to understand that number, and you will realize that “fundamentally” stock prices went off the deep end of rational pricing. It’s as if the stock market is fighting its most basic rule. To draw a rational comparrison, I would like you to try something.Jump up as high as you can… Once in the air, fight against gravity…’s it going?Are you defying gravity. Or did basic laws take over?I understand the Dollar has crashed back down to where it was last year just before the crash, and I understand that all this monopoly money needs to land somewhere. (….and needs to chase larger return then what the fixed income market can offer right now) …but there has to be an enormous danger to this new unreal earnings expectation. (ESPECIALLY IN THE FACE OF A RECESSION.)All the best,Miss Americap.s. The Ultimate Warrior was HORRIBLE!!! No skills. All he could do was run in, shake the ropes, and then a close line followed by a back breaker. He was lame. I was more of an NWA fan at the time. Flair, and the Steiners. Now that stuff was real!!! wink wink.

FEDupOctober 16th, 2009 at 6:53 am

agree! Truth, transparency and competency no longer apply to the thoughts or actions of our elected leaders-sad, so sad…

blindmanOctober 14th, 2009 at 6:06 pm

Frozen ScandalBy Mark Danner December 04, 2008………..………..1..I thought, “My God, she’s not going to get away with this.” But you have got away with it….—Gethsemane[1].Scandal is our growth industry. Revelation of wrongdoing leads not to definitive investigation, punishment, and expiation but to more scandal. Permanent scandal. Frozen scandal. The weapons of……….2.Something’s wrong…. Something’s deeply wrong. I can’t say if your government is the symptom, or if it’s the fucking problem. Whichever it is, it’s ugly….—Gethsemane…..Those documents—many hundreds of pages, which told in great and precise detail the story of how United States officials, from the President on down, came in the wake of the September 11 attacks to order Americans to torture—were quickly published by journalists and writers, myself included, who no doubt expected that the investigative committees, the televised hearings, and the prison sentences would quickly follow.[2]In the event, the investigations did come, a dozen or more of them, and their very proliferation was the means by which the story was converted from shocking crime into perpetual news, then minor story, and then, at last, “key issue.” But for a handful of hapless soldiers—the smallest of small fish —there were no real prosecutions, no images of high officials in handcuffs. The leakers, who had risked their careers to make the documents public, must have been profoundly disappointed. For it was they, as it happened, who had com-mitted one of the era’s signal crimes: unguarded idealism. At Guantánamo, at the “dark sites,” at various venues around the world, known and unknown, torture continued, even as it was studied and passed by due legislative oversight into the law of the land. Only the courts seemed, intermittently, to have a different idea. And all the while the torture story was well reported, mostly in the newspapers—for after that initial rush of photographs, which quickly became cliché, there followed nothing juicy enough to raise the story to the golden level of the televisual—and it continued to be reported even as it made its way through the complicated and mysterious transformational process by which a war crime becomes a “key issue.”All the while, it must be said, the public, that repository of right, showed relatively little interest. Neither, following the lead of their constituents, did the politicians. John Kerry, running for president in the immediate wake of Abu Ghraib—and perhaps remembering his own unrecompensed temerity in calling attention, as a young returning vet, to war crimes in Vietnam—hardly mentioned it. (In this sense Barack Obama’s acknowledging of the “key issue,” however offhand, represents a distinct advance.)…3.That’s why, these days, it’s so interesting being a politician. Sorry, but you have to trust us. You have no choice.—GethsemaneWhat notes on scandal could be complete without mention of the presiding master-scandal of our age, The War. One uses capitals to denote not a set of discrete events—a set of particular people being cut down or blown apart by particular violent actions at particular times—but a state of mind. Threat becomes not only a political shield but what is in the end much more dangerous: a source of bottomless self-justification. What is dangerous is not only that our leaders have endlessly maintained that they are right but that they believe they are. George Bush, as he declared to the world in a proudly emphatic phrase, had been reborn as a “war president.”George Orwell has long since surveyed this ground, most famously in 1984, in his perpetual war between Eastasia, Eurasia, and Oceania, a never-ending, shape-shifting struggle that, if we judge it by the standards of previous wars, is merely an imposture. It is like the battles between certain ruminant animals whose horns are set at such an angle that they are incapable of hurting one another. But though it is unreal it is not meaningless…. It helps to preserve the special mental atmosphere that a hierarchical society needs.Wars are immensely valuable to those who sit atop “hierarchical societies” because they supply an overarching rationale for power and its expansion while choking off questions, not least by increasingly limiting the information on which those questions must be based. The War on Terror, of course, has been far from bloodless, embodying itself in at least two “real” wars—one of which, in Afghanistan, was launched to respond directly to attack; the other, in Iraq, to achieve less specific, more grandiose goals—as well as in a great number of secret operations of varying ambition carried out “on the dark side.” Still, unbounded as it is in space and time, serving as it has as a handy and near-inexhaustible rationale for accruing centralized power, the War on Terror has approached as close as we have yet come in reality to Orwell’s imagined perpetual war, accruing to those in control the increased power that comes with war but without the endless costs. Or it would have, had the war not brought in its train its own frozen scandal.4.There’s a general sense of weirdness—wars which last for ever and are going nowhere, and policies which are nothing but rhetoric… they bear no relation to the facts….—GethsemaneHow will history choose to explain a war launched in the cause of ridding the world of weapons of mass destruction that turned out not to exist? It is a tantalizing question. Will the Iraq War take its place as a historical curiosity, alongside the Guano War of the nineteenth century or the Soccer War of the twentieth? And how interested will our descendants be in the response of our democratic polity: the investigations that, like dinosaurs slowly rousing themselves from the mudhole, ever so slowly got under way and then, after years of lumbering effort—hundreds of hours of testimony, thousands of documents examined—finally discovered…what? In the end, there was, alas, no “smoking gun.”Another legacy of Watergate, that image, made for a simpler time, when as devious a man as Richard Nixon could insouciantly tape-record every word he uttered. In our own less happy day, we can pore over the ever so explicit Downing Street Memo and scores of similar documents leaked fast and furiously from within the bureaucracy but find them, according to the rules of the scandal game, all too large and obvious to be taken to mean what to any normal person they precisely do mean, which is that those in power—wanting war, not diplomacy, and working hard to “wrong-foot Saddam” into war, as the Downing Street memoranda make explicitly clear—lied us into war. And now they have got us a war that has managed to be at once unnecessary and unending.Of course the Law of the Smoking Gun tells us that this case, however evident the truth of it is to all, can never (failing the discovery of a tape recording in which the American president or the British prime minister can be heard chortling demonically about the grand charade they are about to perpetrate on their respective publics) be taken as definitively proved. The Law of Frozen Scandal means the case must remain forever open. Forever “alleged.” Fodder still for a thousand investigative reports and a thousand revelations that reveal only what is already known. Can you not hear the wheels of scandal spinning? It is the music of our age..

PeteCAOctober 14th, 2009 at 7:19 pm

Oil is sitting at $75/BL today … which puts it right at the 200-day MAV. See $WTIC on http://www.stockcharts.comIt will be interesting to see if oil pushes steadily up to $80/Bl, which seems quite likely if the dollar continues its current decline. That would give oil a breakout through the 200-day MAV level and no doubt attract a lot more hot money into the oil market.I gotta’ say that gas prices at the pump are starting to creep back up to “Ouch!” levels here in So. California. It’s all biting the US consumer in the proverbial butt.PeteCA

blindmanOctober 14th, 2009 at 7:36 pm

“Stripping Bare the Body: Politics, Violence, War”: Groundbreaking Journalist Mark Danner on Haiti, the Balkans, Iraq and Torture.……..AMY GOODMAN: Iraq—fit Iraq into this story, as you do in Stripping Bare the Body, talking about it, as many do now, in the past, although the US has a full presence there right now.MARK DANNER: Yes.AMY GOODMAN: A war is being waged.MARK DANNER: Well, it’s an amazing American proclivity, I think, to, you know, look at a particular place, direct its imperial gaze there, the elite learns all about the country, we debate what’s going on in Mosul and Karbala and so on, the knowledge and the argument is furious for a few years, and then suddenly the gaze shifts elsewhere. It’s like a spotlight that goes now to Afghanistan and leaves Iraq, formerly brightly lit, in darkness. And we tend to leave ruins behind. And Iraq, I think, is a very good example of that, that suddenly it’s gone.We can define it, if we want to, as a success. That is the way it’s talked about very often in the national press, one way or another. And in fact, of course, it remains an extremely violent place. The insurgency still exists. The United States essentially tamped it down for a time by renting the insurgency, by dividing it and hiring a good many of what we seem to refer to as the tribes—a very odd expression—but Sunni organizations in the center of the country. It is, as I say—there is still a very significant level of violence there. But for reasons having to do, I think, with Obama’s ascension, mainly, and the current political struggle over Afghanistan, what will be done there, we don’t talk about it anymore. It’s just left the national scene.AMY GOODMAN: And what do you think needs to be said about it right now?MARK DANNER: Well, I think one of the things I would like to say about it is that it is somewhat a lesson in how we make decisions and our national evangelism, our conviction, that seems to be ignited from time to time, that the United States, “with all its great power”—I put that in quotes—can alter, for its own good, a society that’s distant, complex, difficult to understand, and that has its own particular political strengths and dysfunctions.We tend—I’m always astonished by how we talk about other countries. We’re doing it now with Afghanistan, that, you know, actually it’s a political problem. We have to nation-build. There was a piece on the front page of the New York Times in the last few days that talked about nation-building going too slowly in Afghanistan. And it always leaves me a bit breathless to look at this idea that—I mean, if you’ve ever seen foreign aid actually at work on the ground, you can’t do these things. You can’t change societies on this scale, particularly since US intervention—you know, it’s like trying to fix a watch in your own shadow, because you have the shadow of nationalism, which is to say, every US—bit of US forces that actually are on the ground cause their own very often extreme political reaction. So it’s impossible. It’s kind of an indeterminacy principle. You cannot intervene without a strong reaction, and very often a very strong reaction. And both of these societies, the Iraqi and the Afghani, have in common the fact that they’re strongly nationalistic and react very powerfully to outside intervention.And the fact that we saw this in spades in Iraq seems not to be recalled in any way during the debate about Afghanistan, which is being carried on, it seems to me, largely because of domestic political reasons that stem in large part from decisions the Obama campaign made, while he was trying to become president, to balance out the fact that he was a dove on Iraq. He made very strong statements about the good war, the right war, Afghanistan and so on. And also, his original speech about Iraq, of course, said, “I’m not against all wars. I’m against dumb wars,” he said in 2002. And under that description, Iraq was—or Afghanistan, excuse me, was originally described or understood as the smart war. So here we are with a debate that, it seems to me, has a barely concealed, but absolutely determinate, domestic political component, that has very—relatively little to do with Afghanistan at all.So, what would I take from Iraq? I would take that lesson, that when we seem to be talking about somewhere else, somewhere else that we’re going to affect very materially with our own power, we actually very often are talking about ourselves. And it’s something that we seem to repeat, and yet never learn…ANJALI KAMAT: And Mark, I want you to expand on your notion of the “frozen scandal.” We’ve all known that this country has been torturing.MARK DANNER: Mm-hmm.ANJALI KAMAT: For over four years now, these revelations came out, starting with Abu Ghraib. But you talk about this as a frozen scandal, where each time there’s a new revelation, there’s a new round of shock. But then, what happens next?MARK DANNER: Well, it’s true, as you say, that we’ve known about these things for a long time. The first major press report on stress and duress techniques, as it was called then, was on the front page of the Washington Post in December 2002. The New York Times reported on waterboarding in 2004 in May. There was a rush of documents that came out, as you point out, in the wake of Abu Ghraib. I published a book on this in October 2004, which is about 600 pages. It was called Torture and Truth. And two-thirds of it were government documents that describe this stuff in great detail.So, we like to think that our scandals are about revelation, which is to say, once you hear about something, my god, the society jolts to attention, the judicial and congressional machinery leaps into action, there are investigations, there’s punishment and so on. And that has not happened.Actually, there’s been revelation. There have been gestures toward investigation. In the case of Abu Ghraib, a few lower-level soldiers have been imprisoned, prosecuted and imprisoned. But the actual policymakers, whose decisions we know about in great detail—we have these memos that Department of Justice officials wrote. We have an immense amount of material, thousands and thousands of pages, describing in great detail how the decisions were made to use torture. We have the Red Cross report, which I published last spring, which describes these techniques in great detail, how they were used, what sequence they were used in. We have the Justice Department and CIA document describing how they were used. All this stuff is out there.And we like to think what prevents action is lack of information, but in fact it’s not information, it’s politics. And politics, at this point, have determined that we, in effect, as a society, decided not only to torture, but to live with torture. That has been our decision up to now. And I think we tend to console ourselves that this is a continuing scandal, and there’s a controversy about it. But in fact, though we talk about it a lot, the decisions on the part of the government have been made and, in a real sense, unchallenged. None of the people who made the policies have been prosecuted and even investigated. And the decisions have not been formally renounced. Though Obama has said he will not use these anymore, and I believe him, they are—torture in fact has gone from being an anathema, something forbidden and illegal under US law and international conventions, to being a policy choice. In effect, for example, if there’s another attack, the government can go back to using it. I mean, it’s essentially been defined as legal under the Convention Against Torture and under US law.AMY GOODMAN: Iraq—fit Iraq into this story, as you do in Stripping Bare the Body, talking about it, as many do now, in the past, although the US has a full presence there right now.MARK DANNER: Yes.AMY GOODMAN: A war is being waged.MARK DANNER: Well, it’s an amazing American proclivity, I think, to, you know, look at a particular place, direct its imperial gaze there, the elite learns all about the country, we debate what’s going on in Mosul and Karbala and so on, the knowledge and the argument is furious for a few years, and then suddenly the gaze shifts elsewhere. It’s like a spotlight that goes now to Afghanistan and leaves Iraq, formerly brightly lit, in darkness. And we tend to leave ruins behind. And Iraq, I think, is a very good example of that, that suddenly it’s gone.We can define it, if we want to, as a success. That is the way it’s talked about very often in the national press, one way or another. And in fact, of course, it remains an extremely violent place. The insurgency still exists. The United States essentially tamped it down for a time by renting the insurgency, by dividing it and hiring a good many of what we seem to refer to as the tribes—a very odd expression—but Sunni organizations in the center of the country. It is, as I say—there is still a very significant level of violence there. But for reasons having to do, I think, with Obama’s ascension, mainly, and the current political struggle over Afghanistan, what will be done there, we don’t talk about it anymore. It’s just left the national scene.AMY GOODMAN: And what do you think needs to be said about it right now?MARK DANNER: Well, I think one of the things I would like to say about it is that it is somewhat a lesson in how we make decisions and our national evangelism, our conviction, that seems to be ignited from time to time, that the United States, “with all its great power”—I put that in quotes—can alter, for its own good, a society that’s distant, complex, difficult to understand, and that has its own particular political strengths and dysfunctions.We tend—I’m always astonished by how we talk about other countries. We’re doing it now with Afghanistan, that, you know, actually it’s a political problem. We have to nation-build. There was a piece on the front page of the New York Times in the last few days that talked about nation-building going too slowly in Afghanistan. And it always leaves me a bit breathless to look at this idea that—I mean, if you’ve ever seen foreign aid actually at work on the ground, you can’t do these things. You can’t change societies on this scale, particularly since US intervention—you know, it’s like trying to fix a watch in your own shadow, because you have the shadow of nationalism, which is to say, every US—bit of US forces that actually are on the ground cause their own very often extreme political reaction. So it’s impossible. It’s kind of an indeterminacy principle. You cannot intervene without a strong reaction, and very often a very strong reaction. And both of these societies, the Iraqi and the Afghani, have in common the fact that they’re strongly nationalistic and react very powerfully to outside intervention.And the fact that we saw this in spades in Iraq seems not to be recalled in any way during the debate about Afghanistan, which is being carried on, it seems to me, largely because of domestic political reasons that stem in large part from decisions the Obama campaign made, while he was trying to become president, to balance out the fact that he was a dove on Iraq. He made very strong statements about the good war, the right war, Afghanistan and so on. And also, his original speech about Iraq, of course, said, “I’m not against all wars. I’m against dumb wars,” he said in 2002. And under that description, Iraq was—or Afghanistan, excuse me, was originally described or understood as the smart war. So here we are with a debate that, it seems to me, has a barely concealed, but absolutely determinate, domestic political component, that has very—relatively little to do with Afghanistan at all.So, what would I take from Iraq? I would take that lesson, that when we seem to be talking about somewhere else, somewhere else that we’re going to affect very materially with our own power, we actually very often are talking about ourselves. And it’s something that we seem to repeat, and yet never learn.

Guest42October 14th, 2009 at 11:19 pm

It’s the other side of the issue that blindman referenced, about how there’s ongoing scandal that’s never adequately resolved. These things are never adequately resolved because so few are willing to step up and accept responsibility, even shared responsibility, for anything. Occasionally, some will own up to something, but then negate the whole thing with a ‘but’: Of course, I should have looked into this firm and questioned things more closely, ‘but’ it’s the SEC’s responsibility to make sure that I don’t have to do that, so ultimately it’s their fault that I lost my money.This happens all the time. Our society has sunk into a sickening mix of desire and denial, entitlement and enabling, fear and greed. When did standing up for and doing the right thing, even if all it means is taking full responsibility for your own actions or inactions, become so politically incorrect? And we wonder why the youth of today do the things they do and say the things they say. We need only to look in the mirror for the answer. Everyone keeps looking for others to change, others to fix things, others to make things better, others to get us out of whatever jams we’ve gotten ourselves into. And that’s exactly why things continue to worsen.

CitizenOctober 15th, 2009 at 12:04 am

US retail sales fell in September by the largest amount in 2009, driven by car sales plummeting at the end of the country’s scrappage scheme.The Commerce Department said sales slid 1.5%, not as bad as expected, but the biggest drop since December last year.Car sales dropped by 10.4% but when vehicles were stripped out, retail sales actually rose by 0.5%, better than the 0.2% which had been forecast.Consumer spending makes up more than two thirds of US economic activity.A late Labor Day holiday helped retailers last month because consumers purchased some items in September that they would normally have bought in August, analysts said.’Expected’The 1.5% drop in September’s retail sales followed a 2.2% rise in August, which was revised down from an earlier estimate of 2.7%.That came as demand for new cars surged in August as buyers took advantage of the final month of the government’s incentives of up to $4,500 to trade in old models for more fuel-efficient cars.The Commerce Department figures showed that sales in furniture stores jumped 1.4%, reflecting the rebound in the housing industry. Meanwhile, sales at general merchandise stores such as Wal-Mart and Target, rose 0.9%.”Certainly the numbers were better than expected,” said Scott Brown, chief economist at Raymond James Associates.”You did see a big drop in vehicle sales as cash for clunkers expired, which was in line with expectations.”

CitizenOctober 15th, 2009 at 1:02 am

Oct. 15 (Bloomberg) — Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., bought government debt last month and cut mortgage bond holdings to the lowest level since 2005 after he warned this year that the U.S. recession will lead to a period of less-than-average growth.Gross boosted the $185.7 billion Total Return Fund’s investment in Treasuries, so-called agency debt and other government-linked bonds to 48 percent of assets in September from 44 percent in August, according to Pimco’s Web site. The holdings are the most since August 2004.“We’ve exchanged our mortgages for the government’s check,” Gross, who is based in Newport Beach, California, said in an interview last month. He said he was buying longer- maturity Treasuries because of deflation concerns.Treasuries rose in July, August and September, offering their first three-month gain in a year, Merrill Lynch & Co. indexes show, as optimism waned about the pace of economic recovery. Federal Reserve Vice Chairman Donald Kohn said this week inflation and growth will probably stay below the central bank’s objectives for some time, warranting very low interest rates for an “extended period.”Deflation, a general drop in prices, enhances the value of a bond’s fixed payments.Real YieldsTen-year Treasuries offer a real yield, or what investors get after accounting for the cost of living, of 4.91 percent. The figure was 5.95 percent in August, versus the five-year average of 1.42 percent. U.S. consumer prices rose 0.2 percent in September, half of August’s pace, according to the median forecast in a Bloomberg News survey of economists before the Labor Department reports the figure today.The Total Return fund cut mortgage debt to 22 percent, the lowest level since February 2005, from 38 percent, according to the Web site.Treasuries returned 2.1 percent in the third quarter, after posting a 4.5 percent loss in the first half, according to Merrill Lynch’s Treasury Master index. Merrill’s Mortgage Master index rose 2.3 percent in the three months ended Sept. 30, the fifth straight quarter of gains.Mark Porterfield, a Pimco spokesman, has said the company doesn’t comment on fund holdings.The 10-year note yield rose two basis points to 3.42 percent as of 1:32 p.m. in Tokyo, according to BGCantor Market Data. The 3.625 percent debt due August 2019 fell 1/8, or $1.25 per $1,000 face amount, to 101 21/32. Ten-year yields climbed to 3.44 percent yesterday, the highest level since Sept. 24.Slow GrowthGross has said the U.S. economy may grow at half the pace it has over the past 25 years. He expects real growth of about 1.5 percent and nominal growth of 3 percent to 4 percent. The jobless rate rose to a 26-year high last month of 9.8 percent, the Labor Department said on Oct. 2.The Total Return Fund returned almost 20 percent in the past year, beating 73 percent of its peers, according to data compiled by Bloomberg. The one-month return is 1.08 percent, lagging behind 55 percent of competitors. Pimco is a unit of Munich-based insurer Allianz SE.Pimco’s government-related debt category can include conventional and inflation-linked Treasuries, agency debt, interest-rate derivatives and bank debt backed by the Federal Deposit Insurance Corp., according to the Web site.Cash HoldingsCash and equivalent securities comprised 2 percent of holdings in September, rising from negative 10 percent. These assets can include commercial paper, short-term government and mortgage-backed securities, short-term company bonds and money market derivatives, according the fund’s quarterly investment report on Sept. 30.The fund can have a so-called negative position by using derivatives, futures or by shorting.Derivatives are financial obligations whose value is derived from an underlying asset such as debt, stocks or commodities. Futures are agreements to buy or sell assets at a later specific price and date.Shorting is borrowing and selling an asset in anticipation of making a profit by buying it back after its price has fallen.To contact the reporter on this story: Wes Goodman in Singapore at; Susanne Walker in New York at

CitizenOctober 15th, 2009 at 7:24 am

Goldman Net Beats Estimates on Trading, Investments (Update1)Share | Email | Print | A A ABy Christine HarperOct. 15 (Bloomberg) — Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, reported third-quarter earnings that exceeded analysts’ estimates on trading gains and investments with the company’s own money.Net income more than doubled to $3.19 billion, or $5.25 per share, in the three months ended Sept. 25, from $845 million, or $1.81 a share, in last year’s third quarter, the New York-based company said today in a statement. The average estimate of 22 analysts surveyed by Bloomberg was for $4.18 a share, with forecasts ranging from $3.48 to $4.75.Lloyd Blankfein, Goldman Sachs’s chairman and chief executive officer, stuck with the firm’s focus on advising, trading and investing after converting to a bank last year to win the Federal Reserve’s backing. Increased risk-taking paid off, and the company’s stock climbed 128 percent this year, the best performance among the 15 biggest U.S. banks.“Fundamentally everything’s fine and is probably going to remain strong into next spring,” Jon Fisher, a fund manager at Fifth Third Asset Management in Minneapolis, which has more than $19 billion under management including Goldman Sachs stock, said before the results. “The risk really is just on the sentiment side: political fallout or just expectations getting too bullish in the short term.”Earnings declined 7.2 percent from the second quarter’s record $3.44 billion. Shares of the company fell to $188.49 in New York at 7:28 a.m., from $192.28 at the close yesterday.Compensation CostsCompensation, the company’s biggest single expense, accounted for 43 percent of revenue to total $5.35 billion in the quarter. So far this year, Goldman Sachs has set aside $16.7 billion to pay employees, compared with $11.4 billion after the first three quarters of last year.The prospect of record year-end bonus payments at Goldman Sachs this year has sparked criticism from lawmakers even after the firm repaid $10 billion it received from the U.S. Treasury last year plus dividends. The company has also benefited from Federal Reserve support, government backing on about $30 billion of debt, and was one of the largest recipients of funds from the U.S. bailout of American International Group Inc.Goldman Sachs’s “biggest challenge and the thing that seems to get the most press is how much they put aside for comp expense,” said Michael Hecht, an analyst at JMP Securities LLC in New York, who rates the stock “market outperform.” “A year ago we were talking about whether they would survive and now they just have too much damn money.”JPMorgan, CitigroupGoldman Sachs’s results come a day after JPMorgan Chase & Co., the second-biggest U.S. bank by assets, said its profit surged sevenfold, to $3.59 billion, on higher investment-banking revenue. Citigroup Inc. will report earnings later this morning. Eighteen analysts surveyed by Bloomberg News estimated a loss of 29 cents a share.“Although the world continues to face serious economic challenges, we are seeing improving conditions and evidence of stabilization, even growth, across a number of sectors,” Blankfein, 55, said in the statement.Third-quarter revenue at Goldman Sachs doubled to $12.4 billion from $6.04 billion last year. Value-at-risk, a measure of how much the firm estimates it could lose in a single day of trading, fell to $208 million from a record $245 million in the second quarter.Revenue from fixed-income, currency and commodity trading, or FICC, surged to $5.99 billion from $1.60 billion in last year’s third quarter. Equities revenue rose to $2.78 billion from $1.56 billion.Making Money“A lot of us struggle with just the size of the FICC line and understanding exactly how they make as much money as they do,” said JMP Securities’ Hecht.Principal investments, which includes the firm’s stakes in companies such as Industrial & Commercial Bank of China Ltd., recorded a gain of $1.26 billion, compared with a $453 million net loss a year earlier.Goldman Sachs advised on $33.8 billion of takeovers completed during the quarter, compared with $232.9 billion in last year’s third quarter, Bloomberg data show. The firm managed $11.7 billion of equity and equity-linked offerings in the period, compared with $10.2 billion last year, the data show.Investment-banking revenue, which includes fees from advising on takeovers and underwriting stocks and bonds, fell to $899 million from $1.29 billion in the third quarter of last year. The company, which has held the top spot among advisers on announced mergers and acquisitions for each of the last eight years, ranks second this year after Morgan Stanley, according to data compiled by Bloomberg.IPOs, M&ARevenue from initial public offerings and from mergers and acquisitions will probably continue to climb in coming months after stock market gains this year, said Fifth Third’s Fisher.“The market’s going to finish the year pretty high so the IPO pace of things should pick up gradually into next year and M&A activity I think is going to pick up into next year,” Fisher said.Goldman Sachs’s annualized return on common equity, a measure of how well the firm reinvests earnings, was 21.4 percent in the quarter compared with 7.7 percent in the third quarter of 2008. Book value per share grew to $110.75 from $106.41 at the end of June.“What seems to drive the stock is growth of book value,” said JMP Securities’ Hecht. “The stock’s going to continue to drift higher especially because I think their results are going to look pretty good, relative to others.”Goldman Sachs’s third quarter ended on Aug. 29 last year because the company’s fiscal year finished in November. The company changed its fiscal year-end to December after becoming a bank holding company.GOLDMAN SACHS- THE POWERS BEHIND THE THRONE

GuestOctober 15th, 2009 at 7:25 am

FED raise interest rate doesnt matter. raise rate will not help dollar. as long as Obama, Pelosi, and Democrats crooks continue borrow and spend socialist free-lunch for all welfare, government debt will continued to be sponsored by FED & Treasury covert monetizing debt operation even at a higher rate. God forbid Democrats start a responsible fiscal budget & cutting deficit. DOLLAR DIE JUST DIE WILL YA? wuaHAHA!!!

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CitizenOctober 15th, 2009 at 7:32 am

U.S. Foreclosure Filings Jump 23% to Record in Third QuarterShare | Email | Print | A A ABy Dan LevyOct. 15 (Bloomberg) — U.S. foreclosure filings climbed to a record in the third quarter as lenders seized more properties from delinquent borrowers, according to RealtyTrac Inc.A total of 937,840 homes received a default or auction notice or were repossessed by banks, a 23 percent increase from a year earlier, the Irvine, California-based seller of default data said today in a report. One out of every 136 U.S. households received a filing, the highest quarterly rate in records dating to January 2005.“The problem is prime loans going into foreclosure and people being underwater and losing their jobs,” Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles, said in an interview. “It’s a really bad number.”Mounting foreclosures mean U.S. home prices probably will resume falling, analysts from Amherst Securities Group LP in New York said Sept. 23. A “shadow inventory” of 7 million properties are in the foreclosure process or likely to be seized, up from 1.27 million in 2005, they said.The pace of prime and so-called alt-A loan defaults is accelerating as subprime defaults slow, Standard & Poor’s analysts led by Diane Westerback said yesterday in a report. Prime loans are those made to borrowers with the best credit records while alt-A loans are considered riskier because they were often granted without documenting the borrower’s income.Securities LossesMore than $400 billion in U.S. home mortgages that were packaged into securities and sold by companies other than government-supported Fannie Mae and Freddie Mac are in default and may be foreclosed on, S&P said. Those defaults may depress home prices for years, the analysts said.The delinquency rate for prime loans rose to 6.41 percent in the second quarter from 6.06 percent, the Washington-based Mortgage Bankers Association said Aug. 20. The share of prime loans in foreclosure increased to 3 percent from 2.49 percent, the MBA said.“The number of people who can’t pay their mortgages, we haven’t seen the peak of that,” David Lowman, head of JPMorgan Chase & Co.’s mortgage unit, said this week. “That’s going to weigh on us for some time to come.”Home foreclosures will climb through late 2010, peaking after the unemployment rate reaches 10.2 percent in the second quarter, the mortgage bankers said in an Oct. 13 forecast.RealtyTrac reported that 343,638 properties received foreclosure filings in September alone, the third-highest monthly total behind July and August of this year. The September number fell 4 percent from the previous month, though it climbed 29 percent from a year earlier.Few ExceptionsBank seizures rose 21 percent from the previous quarter and increased in every state except two and the District of Columbia, RealtyTrac said.Nevada had the highest foreclosure rate: one in every 23 households, or almost six times the national average. A total of 47,925 Nevada homes got filings, up 10 percent from the previous quarter and 59 percent from a year earlier, RealtyTrac said.In both Arizona and California, one in 53 households received filings. They were followed by Florida, at one in 56, and Idaho, at one in 97. Utah, Georgia, Michigan, Colorado and Illinois rounded out the top 10 highest rates.New Jersey had the 15th highest rate. Connecticut was 25th and New York was 39th.Six states accounted for more than 60 percent of total filings in the U.S., led by California’s 250,054. Filings in the most populous state rose 19 percent from the third quarter of 2008. Bank seizures jumped 12 percent from the previous quarter.Florida RepossessionsFlorida had the next highest total, with 156,924 filings, up 23 percent from a year earlier. Bank seizures rose 16 percent from the previous quarter.Arizona had 50,342 filings, up 25 percent from the same period a year earlier. Nevada had 47,925, up 59 percent. Illinois had 37,270, a gain of 30 percent; and Michigan had 37,026, an increase of 22 percent.Georgia, Texas, Ohio and New Jersey rounded out the top 10 states with the most filings, RealtyTrac said.The company collects data from more than 2,200 counties representing 90 percent of the U.S. population.To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.netYIPEE!! THE DOW CROSSED 10,000, HELICOPTER BEN SAYS THE RECESSION IS OVER. THIS GUYS DON’T CARE ABOUT MAIN STREET, WALL STREET IS ENJOYING IT’S PHONEY STIMULUS BACKED RECOVERY AND SORRY THE REST OF AMERICA CAN GO TO F..KING BLAZES

The AlarmistOctober 15th, 2009 at 8:15 am

Dan obviously didn’t get the Administration’s talking points.Recession is over, recovery is under way.Millions remain in their homes due to various bailouts.All of this will cost you middle class folks nothing.

Winston SmithOctober 15th, 2009 at 9:34 am

NEW YORK – Goldman Sachs Group Inc.’s third-quarter earnings rose 73 percent from the depths of the financial crisis as income from the company’s trading operations offset a drop in its investment banking business.Goldman’s stock fell 3 percent early Thursday as investors reacted to the slide in investment banking revenue, the result of a general slowness in takeover activity. Goldman also had $5.35 billion in compensation expenses during the July-September period.

economicminorOctober 15th, 2009 at 11:06 am

Here I go again…..broken record > What about all the debt? This seems to show what is going to happen to it… it is going to be repudiated.And then repudiated again and again until it is wiped out… The opposite side of the growth of debt forever cycle….The only chance the gubbermint has in stopping this is to send all ts citizens a couple hundred grand each and we can start the inflation of assets all over….Giving the elite banks money to run up commodities is counter productive and will only exacerbate the down turn in the long run.

CitizenOctober 15th, 2009 at 7:51 am

Harrods to sell gold bullion for first timeIt is renowned for its glitzy clientele and upmarket Knightsbridge location, but shoppers at department store Harrods will from today be able to buy the ultimate luxury accessory – gold bars.By James Hall, Retail EditorPublished: 12:01AM BST 15 Oct 2009From this morning, Harrods will start selling gold bullion and coins over the counter.In a sign that the credit crisis has left his gilded customer base largely untouched, Harrods owner Mohamed Fayed has teamed up with Produits Artistiques Métaux Précieux (PAMP), the Swiss refiner, to sell gold in the store.Aimed at private investors, the gold will be sold at the Harrods Bank branch on the lower ground floor of the West London store.Poor interest rates and falling property prices have left wealthy investors looking for alternative asset classes to put their money into. A weak dollar yesterday pushed the gold price to a record high of $1,072 an ounce.Chris Hall, head of Harrods Gold Bullion, said: “The financial environment has kindled a new demand for physical gold among private investors in Britain. For many people this is a new and unfamiliar asset class that demands absolute trust. Until now London has had no well-recognised name serving this market.””Harrods saw the opportunity to help individuals buy physical gold in a prudent manner.”Mehdi Bakhordar, managing director of PAMP, said: “Harrods stock our full range and are now the only location in London where investors can purchase a 12.5kg gold bar ‘off the shelf’.”Harrods, famed for its gold and green livery, has never sold bullion beforeRelated ArticlesGold and shares are booming, so is it time to sell?Gold price ‘set to double in four years”Gold is a poor hedge against major inflations’Royal Mint doubles production of gold coins’Gold To Go’ vending machines could be coming to BritainGold parties: the new way to turn your unwanted jewellery into cash

CitizenOctober 15th, 2009 at 7:55 am

Goldman Sachs sets aside £10bn for pay and bonusesBy Holly Williams, Press AssociationThursday, 15 October 2009Investment banking giant Goldman Sachs said today it had set aside a mammoth $16.7bn (£10.3bn) so far this year in pay and bonuses as it revealed a 278 per cent leap in profits.The group, which employs around 5,500 staff in London, revealed a 46 per cent hike in the compensation and benefits pool for the first nine months of the year.The e-mails: ‘I’ve washed a 30-year career down the drain’The bumper rewards news comes after Goldman made net earnings of $3.19bn (£1.96bn) between July and September, up from $845m (£519.8m) in the third quarter of last year.Goldman earmarked $5.35bn (£3.29bn) in pay and benefits – including redundancy costs – for the third quarter alone after reaping profits from a resurgent investment banking sector.Fellow US group JP Morgan Chase yesterday kicked off the third quarter reporting season with a bigger-than-expected surge in profits to $3.6bn (£2.3bn) as banks return to health less than a year after the financial crisis.Today’s bonus news from Goldman is likely to fuel concern over a return to the sector’s pre-meltdown culture of excessive rewards, having tipped the world into global recession and resulting in billions of pounds in taxpayer bail-outs.The Treasury announced yesterday that the bank was one of a number with UK operations to agree to tougher international rules on pay and bonuses.Officials said 11 banks including Bank of America and JP Morgan had signed up to the G20 recommendations drawn up last month. These include so-called clawback clauses and to spread out bonuses over three years or more.Banks are being boosted by a bounce-back to stellar returns in their investment banking divisions, amid resurgent market conditions and the demise of certain competitors.Goldman said fixed income, commodities and currency trading buoyed its profits for the second quarter running.It stunned the market in the summer with news of a 65 per cent leap in second quarter profits, to $3.44bn (£2.12bn).The group, which employs 31,000 staff globally, has been seen as one of the strongest banks throughout the financial crisis.It had less exposure to toxic mortgage-backed securities than other companies and has been more aggressive in its trading.The current market conditions have also been helping bank profits rebound.Investment banks trade everything from government and company bonds to currencies, shares, commodities and complex derivatives.As well as advising on takeovers and mergers, they help clients raise funds through issuing debt in the form of bonds, or equity – through the issue of new shares in a rights issue for example – and promise to buy up any left over through a process known as underwriting.The huge push for financing by cash-strapped companies needing to trade through the recession has led to a surge in commission fees for the banks.There is also less competition for investment banking work in the aftermath of the financial crisis, which has claimed a number of scalps – the biggest of which was Lehman Brothers last autumn.Lloyd Blankfein, chairman and chief executive of Goldman Sachs, said: “Although the world continues to to face serious economic challenges, we are seeing improving conditions and evidence of stabilisation, even growth, across a number of sectors.”A raft of other major US banks are due to report third quarter earnings over the next two days that are expected to confirm the improving conditions and stoke concerns over pay practices.

CitizenOctober 15th, 2009 at 7:59 am

The people vs Wall StreetBear Stearns bankers on trial in first criminal case of the credit crunchBy Stephen Foley in New YorkThursday, 15 October 2009Amidst the economic wreckage, after 7 million job losses and approaching 2 million home foreclosures in the US alone, with businesses and consumers around the world still struggling to get finance after the long credit crunch, Wall Street is finally on trial. A little piece of Wall Street, at least.In the first major case against bankers at the heart of the financial meltdown, a jury of 12 mainly working-class New Yorkers will decide the fate of the two Bear Stearns managers whose hedge funds imploded in 2007, signalling the start of the crisis. Ralph Cioffi, 53, and Matt Tannin, 48, pocketed millions of dollars in pay during the boom years, but the events of 2007 left their investors nursing losses of $1.6bn (£1bn) and ruined forever the reputation of Bear Stearns, one of the oldest investment banks on Wall Street.Dressed as if for a funeral, the pair sat impassively in the brightly lit courtroom in downtown Brooklyn yesterday as assistant US attorney Patrick Sinclair recounted what he said was a litany of lies that they told to investors. The two men were desperate to stop investors deserting their funds when the sub-prime mortgage market began to plunge, Mr Sinclair said. Mr Cioffi alone was paid $32m in the two years before the funds collapsed.They “violated a special relationship of trust” between fund managers and investors, he added. “They lied to investors to save their multimillion dollar bonuses. In the US, that is a crime, a serious crime. It’s called securities fraud.” The prosecution plans to lean heavily on private emails written by the men which suggest they knew much earlier that the sub-prime market was – in a word used by Mr Tannin – “toast”. Yet the men glossed over the situation and deceived investors in two ways, it is alleged.First, Mr Tannin said he was putting more of his own money into the funds, when in fact he did not invest a single cent of the $1m that was available in his bank account. Mr Cioffi, meanwhile, secretly withdrew $2m of his money. Second, Mr Cioffi denied any major investor was planning to pull out, when he had already received a major redemption request. More than a dozen friends and family crammed in to the few public benches, and more spilled into an overflow room as the trial got under way. While the prosecution aimed to distil the case for jurors into a handful of straightforward lies, it was clear yesterday that the defence will portray the events of 2007 as much more nuanced – and highly complicated. In an idiosyncratic opening statement, Mr Cioffi’s lawyer, Dane Butswinkas, launched into an educational session on high finance. At one point, he used waste-paper baskets in an attempt to explain how hedge funds worked.The prosecution is unfairly “cherry-picking from thousands and thousands of emails”, Mr Butswinkas complained. “It is easier to call the right play on Monday morning after the game on Sunday, and it is always easier to pick the right investment strategy after the fact. Hindsight is 20-20.”Mr Cioffi was described by Mr Butswinkas as a man who reached a high level on Wall Street through talent and hard work. He came to New York in the late Seventies “with $200 in a slightly worn-out pouch” and “with hopes of being a banker”. Mr Tannin’s defence team will give their opening arguments this morning.The trial promises to be a bitter fight between prosecutors, who accuse the pair of lying and manipulating evidence, and defence lawyers, who say the men are being made scapegoats for a financial crisis that was not of their making. The outcome could also be a harbinger of things to come, as the US Justice Department considers bringing cases against even bigger fish on Wall Street.”This is not a revenge opportunity,” the 75-year-old judge, Frederic Block, had told prospective jurors. Neither Mr Cioffi nor Mr Tannin is charged with “causing” the credit crisis. They are charged with behaving dishonestly when the crisis began to break. The pair were traders in mortgage securities, curators of two hedge funds that invested in debt which is now known to have been toxic but which had seemed to promise great riches. They worked at the long end of the chain that stretched from overheated housing markets in the south and west of the US, where millions of buyers were tempted into taking on mortgages they could not afford. Those mortgages were sliced and diced by Wall Street and turned into securities which could be bought and sold as if they were shares. Credit rating agencies had certified the Bear Stearns funds’ mortgage derivative portfolio as super-safe; the defendants’ superiors at Bear Stearns and the funds’ outside investors believed they were taking little risk. The question is when the two managers realised this was far from true.Messrs Cioffi and Tannin face 20 years in jail if they are found guilty of the securities fraud. Mr Cioffi is additionally charged with insider dealing.A TYPICAL DAY ON WALL STREET GONE SOUR, HOWEVER THINGS CAN NEVER CHANGE BUT ONLY GET WORSE ON THE STEADY MARCH TO FINANCIAL ANARCHY

CitizenOctober 15th, 2009 at 8:26 am

suspecting some kind of upcoming correction, last hurrah for metals suppression, fed doesnt want to show you what really goes on, Fed secret keeping may be soon at an end, Stocks up but economy down, Debasement on the dollar, a call for global rules on the trading of derivatives to protect the world economyOur view is that the elitists are currently buying time for the dollar, and stalling the rally in precious metals, by weakening other currencies until they are ready for the big stock takedown/correction. This process of supporting the dollar is becoming extremely expensive and difficult, so they had to take the Dow down 200 points on Thursday to start some stock contagion in Asia and Europe to flush some money into dollars and treasuries. The FTSE, Nikkei and Hang Seng were all down big in the aftermath of Thursday’s US market takedown. We believe that the Illuminati will probably try to punish all the stock shorts in mid October on options expiration day by having one final round of short-covering before taking the markets down for the big correction to start a dollar rally just as the precious metals seasonal rally goes into full swing. This yellow fever crash is just a repeat of last year’s strategy, but it will not be as severe for purely political reasons. In this manner, they will flush everyone else out of their short positions so that only they can make any money when the boom gets lowered and there will be many put options that expire worthless in yet another round of total criminality reminiscent of what they just did to the gold and silver call options this month. They will make money on the big rise from short-covering, and then will reverse course to profit from the big takedown, all through the unregulated dark pools of liquidity so no one can see what is happening. This will be their last hurrah when it comes to suppressing precious metals, and gold and silver will come roaring back as any and all confidence is lost in the stock markets and the economy, and as the elitists are forced to start driving the markets back up again to avoid revolution. The dollar rally will quickly fizzle, and the elitists will start ratcheting the dollar back down again, this time toward the 71 area on the USDX, and who knows where from there.The Illuminists, who own the Federal Reserve, are terrified that the Fed will be audited by the passage of HR1207 and SB604. They are now contemplating naming their borrowers. Our guess is guidelines and provision will be established for disclosure, but only to the Treasury Department.Currently monetary-policy-operations regarding loans to banks and interest rate decisions are hidden from the General Accounting Office by law. The Fed, of course, doesn’t want you to see what they are up too. HR1207 would change that.The opportunity to present a case for audit and investigation was created by the arrogance of the Fed when it refused to identify the recipients of trillions of dollars in emerging loans, and what was being accepted as collateral and what was its real value. In addition, the Fed loaned funds that didn’t require congressional approval and many wanted to see the extent and details of such lending. In this particular case Bloomberg News, which got a court order to do so was told by the Fed that it was a state secret. The Fed simply defied the court order and nothing has been done to force them to comply. We know $700 billion was lent through the TARP program and $500 billion in the currency swap program, but what about the rest of the loans? We have no idea where the money went or what if anything was pledged in return.The bottom line is our government and the American people have a need to know who gets loans, what the collateral is, what secret deals the Fed have with other central banks, what secret accounts they have offshore, what are their swap agreements, how much money they have created secretly that Congress knows nothing about and what inside information is the Fed passing along to their friends in banking and Wall Street.Treasury Secretary Geithner, under the FOIA release, made 80 contacts since taking his job, with Goldman Sacks, JP Morgan Chase, Citigroup and BlackRock. Some were by phone and some in person. Most calls were between Geithner and Goldman CEO Lloyd Blankenfeld. Can there be any doubt in your mind who controls our government?Why is the Fed so secretive and why must they rely on public ignorance?These actions are what we must be privy too. These are the kind of things that has sent the Fed into tantrums. Why is the Fed so secretive and why must they rely on public ignorance? No wonder 75% of those polled want an audit and an investigation. What astounds us is that so many people have come to understand that what the Fed does should not be secret. As an extension of that, if the people are successful, it will be a great victory for the populace. If this leads to the disbanding of the Fed, and its work’s taken over by our Treasury, we may be able to get our country back from the Illuminists. If we can bring about the end of the Fed, a monopoly, that has been looting and strangling our country and the seat of Illuminist power will be ended. Let’s all work together on this and make it happen. Contact every Senator and Representative and in a few lines let him or her know that you want the fed audited.Turning now to our government we find that its deficit now exceeds 40% of expenditures; or 40% or more is borrowed and not serviced by revenues. Historically this is the point at which hyperinflation begins. This situation is going to get progressively worse because there is not going to be a recovery and unemployment will worsen. The deficit is projected to increase by $1 trillion a year for the next nine years minimum. Even if 3% growth could be mustered in five years the national debt could reach $18 trillion, which is short-term debt, which would be 100% of GDP.That means funds would have to come from more taxes, increased savings or the Fed monetizes the debt. That means a falling dollar and hyperinflation. The Fed thus far has been able to get away with major monetization due to the major deflationary undertow. This de-leveraging process will go on for many years to come. That brings up the question how much money and credit has the Fed created and who has been given that money? A good part of it has gone to banks that are not lending it out.Government cannot continue to do what it is doing, nor can the Fed continue to print money endlessly. This is certainly a formula that cannot continue.We do not really know how much government debt the Fed has bought, because they won’t tell us. It is a state secret. Even if the Fed wanted to emulate what Paul Volker did in the early eighties they couldn’t. That should have been done long ago in 2001 and 2002. That was when the point of return was past. Now there is no way back.There is no hope of a deficit reduction and once the Fed has lost momentum bond yields in the real market are going to rise.In May inflation began to rise again. It will be far more noticeable next year.Wall Street and investors do not seem to understand that the budget and the budget deficit is too difficult to carry. If taxes are raised as they were in 1937, it will cut off any possible recovery and collect less taxes overall. Such a move could also boost non-filers up over 40%. We are about to find out you cannot print or borrow your way into prosperity.The cuts have to come from the federal government. This is far better than raising taxes, especially when federal workers make almost twice as much as workers in the private sector. There are many solutions available, but our Congress is unwilling to use them for political reasons. The longer the solutions are avoided the worse the problem is going to be.Banks, Wall Street and government choose to avoid the consequences of deep structural maladjustments that they were responsible for creating. They are trying to perpetuate a bubble rather than fix the problem. Is it any wonder the dollar continues to fall. Unprecedented stimulus, with more probably on the way, has not stabilized the economy. It hasn’t even stopped rising unemployment. The velocity of unemployment has declined, but the numbers are still rising. Every move by Wall Street, government and banking is for short-term performance and it is not working.What is needed is long-range planning, but, of course, that never entered their minds. Stocks may be up but the economy isn’t. The debasement continues and the dollar is taking the flack, because inflation cannot be avoided. The Illuminists suppressed gold and silver for years hoping investors and the public wouldn’t realize what was being done to the dollar. That doesn’t work anymore, because the government is out of gold and if they are not out they are close to it. Granted the dollar isn’t the only weak currency. For six years every world currency has fallen versus gold, but no one wants to talk about that. The dollar gets all the heat because gold is traded in dollars and it is the world’s reserve currency as well. Switching from one currency to another isn’t going to work. It is not the answer, only gold is.The lending bubble has been broken. Next is the bear market rally stock bubble. Deflation is snapping at our heels, as credit is no longer easily available. Bank lending is off 14% yoy. The game of de-leveraging is over except for banks and they are basically all already in dollars. That leaves even less flexibility for lenders. That means the Fed’s monetary policy has to be ever more expansive to be effective. In turn, this along with zero interest rates, these elements drive the dollar lower and gold higher.In the latest sign of weakness in Louisville-area employment, about 10,000 people applied over three days for 90 jobs building washing machines at General Electric for about $27,000 per year and hefty benefits.The jobs dangle medical, eye care, prescription and dental benefit packages, as well as pension, disability, tuition assistance and more, said GE spokeswoman Kim Freeman. And despite the recession, no union workers have been laid off from Appliance Park since the company negotiated lower wages with workers in 2005.“There are no jobs out there paying these kinds of wages that also offer these kind of benefits,” said Jerry Carney, president of IUE-CWA Local 761 at Appliance Park.Just four years ago, the same jobs paid $19 per hour. But that was before Local 761 approved wage cuts for new workers aimed at preventing the closure of Appliance Park.The average price of regular gasoline at U.S. filling stations slipped to $2.48 a gallon as inventories of gasoline and distillate fuel increased.Gasoline lost 4.5 cents in the two weeks ended Oct. 9, according to a survey of 5,000 filling stations nationwide by Trilby Lundberg, an independent gasoline analyst in Camarillo, California. Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two-quarter rout in almost two decades.Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations that report currency breakdowns put 63 percent of the new cash into euros and yen in April, May, and June, Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.World leaders are acting on threats to dump the dollar, while the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the US economy, as long as it doesn’t drive away creditors. The diversification signals the currency won’t rebound anytime soon, after losing 10.3 percent on a trade-weighted basis the past six months, the biggest drop since 1991.“Global central banks are getting more serious about diversification, whereas in the past they used to just talk about it,’’ said Steven Englander, chief US currency strategist at Barclays. “It looks like they are really backing away from the dollar.’’Large banks should be banned from trading derivatives including credit default swaps, said Joseph Stiglitz, the Nobel prize-winning economist.The CDS positions held by the five largest banks posed “significant risk” to the financial system, Stiglitz said at a press conference in Brussels. Big banks should have extra restrictions placed on them, including a ban on derivative trading, because of the risk that they would need government money if they fail, he said in a speech today.“We will have another armed robbery unless we prevent the banks, the banks that are too big to fail,” Stiglitz said. “We should say that if you’re too big to fail then you are too big to be. They need more restrictions, such as no derivative trading.”Derivative trading and excessive risk-taking are blamed for helping to spark the worst financial crisis since World War II. American International Group Inc., once the world’s largest insurer, needed about $180 billion of government money after its derivative trades faltered and pushed the company toward bankruptcy.Financial markets should be subject to taxes that will discourage “dysfunctional” trading and help pay for the effects that the global crisis had on poorer nations, Stiglitz said last week.U.S. and European regulators have pushed for tighter regulation of the $592 trillion over-the-counter derivatives market, amid concerns that it could create systemic failures in the financial system. Lawmakers have called for global rules covering derivatives to prevent financial institutions from exploiting jurisdictional differences in regulation.I DO NOT BELIEVE ALL THESE WILD CONSPIRACIES BUT LET US PUT SOME UP TO BROADEN OUR ECONOMIC KNOWLEDGE BASE AS WE ALL READ SCI-FI AND WATCH STAR TREK TOO

The AlarmistOctober 15th, 2009 at 5:49 pm

And to better process it, we might have a few martinis.The nice thing about buying into wild conspiracy theories is that they give us closure by giving us insight we might otherwise never have … We want to understand, we need to understand, but the truth would be too incomprehensible for us to accept.

CitizenOctober 15th, 2009 at 8:29 am

More signs of deterioration in unemployment indicators, devaluing to deal with debt, Treasury assumptions just too rosy, credit crisis widens the gap between rich and poor and crunches the middle class, state bills pile up, house valuations dropThe number of Americans filing first- time claims for unemployment benefits fell last week to the lowest since January, a sign the labor market is deteriorating more slowly as the economy emerges from the recession.Applications fell by 33,000 to 521,000, lower than forecast, in the week ended Oct. 3, from a revised 554,000 the week before, Labor Department data showed today in Washington. The total number of people collecting unemployment insurance dropped in the prior week to the least since March.While the figures indicate improvement, government data last week showed more job cuts than forecast for September and a rising jobless rate. President Barack Obama pledged to “explore any and all additional measures” to spur growth, as last week’s report underscored that gains in consumer spending may be hard to sustain once stimulus programs expire.“The pace of job losses has slowed,” Steven Wood, president of Insight Economics LLC in Danville, California, said before the report. Even so, he said, mounting unemployment will mean “sluggish economic growth over the next year.”Economists forecast weekly claims would drop to 540,000 from a previously reported 551,000, according to the median of 45 projections in a Bloomberg News survey. Estimates ranged from 530,000 to 560,000.Continuing claims dropped by 72,000 to 6.04 million in the week ended Sept. 26 from 6.11 million in the prior week.Nationwide, the number of long-term unemployed people hit a record 5.4 million in September, or 35.6% of the jobless.The U.S. House approved $82.8 billion for federal nutrition programs ranging from food stamps to school lunch on Wednesday, including a plan to compensate poor families for lunches missed during flu epidemics.The money is part of a $121 billion funding bill for the Agriculture Department and the Food and Drug Administration for the fiscal year that began Oct 1. Nutrition spending would rise by $6.6 billion from fiscal 2009, a reflection of the recession. [Pure socialism]Measured in euros, U.S. per capita GDP is down 25% since 2000. Bond buyer Bill Gross of the Pimco fund summed up the situation nicely in a recent CNBC interview. Asked whether low interest rates will weaken the dollar, the influential allocator of global capital said: “I think that’s part of the administration’s plan. It’s obviously not announced—the ‘strong dollar’ is always the policy, so to speak. One of the ways a country gets out from under its debt burden is to devalue.”Investors have been playing this weak-dollar trade for years, diverting more and more dollars into commodities, foreign currencies and foreign stock markets. This is the Third-World way of asset allocation.Corporations play this game for bigger stakes, borrowing billions in dollars to expand their foreign businesses. As the pound slid in the 1950s and ’60s and the British Empire crumbled, the corporations that prospered were the ones that borrowed pounds aggressively in order to expand abroad. Though British equities rose in pound terms, they generally underperformed gold and foreign equities. At the end of empire, the giant sucking sound was from British capital and jobs moving offshore as the pound sank.From the euro perspective, the S&P peaked at 1700 in 2000, finally re-attained 1100 in the 2007 bubble, fell below 600 in March and now stands at 700 (see nearby chart). With most of the market capitalization of U.S. stocks held by Americans, the dollar devaluation has caused a massive decline in the U.S. share of global wealth.The U.S. Commerce Department launched an investigation Wednesday into whether to impose antidumping and countervailing duties on imports of certain seamless steel pipes from China.The State of Illinois’ pile of unpaid bills has grown to a record-breaking $3 billion. The comptroller reported corporate income tax receipts down $77 million for July through September; sales tax receipts, down $244 million; personal income tax receipts, down $251 million.It appears destined for a taxpayer bailout in the next 24 to 36 months,” said Edward Pinto, a consultant who was chief credit officer from 1987 to 1989 for Fannie Mae.In a sign that more banks are under great pressure from the recession, 34 financial institutions did not pay their quarterly dividends in August to the Treasury on funds obtained under the Troubled Asset Relief Fund (TARP). The number almost doubled from 19 in May when payments were last made, and also raised questions about Treasury’s judgment in approving these banks as “healthy,” a necessary step for them to get TARP funding.”Perhaps the Treasury made assumptions that were a little bit too rosy,” says Walter Todd, who invests in banks at Greenwood Capital. “My question is also whether the Treasury is staffed adequately to handle this tremendous undertaking.”The U.S. government ended its 2009 fiscal year with a deficit of $1.4 trillion, the biggest since 1945, the Congressional Budget Office reported.The deficit amounted to 9.9 percent of the nation’s economy, triple the size of the shortfall for 2008.The nonpartisan CBO said yesterday the government was squeezed on both sides of the budget ledger in the fiscal year that ended Sept. 30. Tax revenue fell by $420 billion, or 17 percent, to the lowest level in more than 50 years.Individual income taxes, the biggest source of tax receipts, fell by 20 percent, the agency said. Corporate income taxes dropped by 54 percent, reflecting the slow economy. At the same time, federal spending rose by 18 percent, the CBO said. About half of the spending increase, $245 billion, was driven by the costs of bailing out the financial industry and taking over mortgage financiers Fannie Mae and Freddie Mac.The spending increases and tax cuts included in the economic stimulus package approved in February added almost $200 billion to the 2009 deficit, the CBO said.After three years of major increases in federal Pell grants for needy college students, President Obama aims to boost the aid further with $40 billion in funding over the next decade. But even that influx might not ensure that the grants will recover and sustain the purchasing power they once held.Experts agree on the reason: soaring college costs.In the late 1970s, the maximum Pell award covered more than two-thirds of tuition and fees for a public four-year university. In the 1980s, it covered roughly half of such expenses. In the last school year, it covered about a third.Used vehicle prices shot to an all-time high last month, spurred by falling inventories, according to a closely watched barometer of the second-hand car business.For those in the market for a used car, that’s not necessarily bad news, said Tom Webb, chief economist at Manheim Consulting, which produces the index of the used car market. That’s because the value of trade-in vehicles are fetching record prices, he said.But those buying their first car or who aren’t looking to trade in a vehicle will find themselves stuck paying the higher price, Webb said.The Manheim Used Vehicle Value Index rose 6.9% in September to a record high of 118.5. The index is adjusted for vehicle mix and seasonality. A value of 100 represents used vehicle prices in January 1995.The index reflects the wholesale, or trade-in, value of vehicles. But Webb said retail prices move “pretty much in lockstep” with wholesale values.The main driver behind higher used car prices is falling wholesale vehicle supply, Webb said. This summer’s wildly popular cash for clunkers program sent new vehicle sales soaring, taking dealers by surprise and clearing out inventories.Even though new car sales dropped off in September, auto factories struggled to catch up and inventories remained low.In addition, he blamed falling vehicle turnover from rental car companies, many of whom have taken a beating in the economic recession.Home sellers cut their asking prices by a total of $28.4 billion to attract buyers as the real estate recovery stalled, Trulia Inc. said.The average discount was 10 percent as of Oct. 1, the San Francisco-based real estate data provider said today. Homes listed for more than $2 million were cut the most, with owners taking an average of 14 percent off the original price. Luxury homes accounted for 25 percent of all of the reductions.Sales of existing U.S. homes unexpectedly fell in August for the first time since March, according to the National Association of Realtors, signaling the recovery will be slow to gain speed. The median price dropped 12.5 percent from August 2008.Consumers have to be slashing the prices of the homes they list,” Pete Flint, chief executive officer of Trulia, said in an interview. There’s a “significant inventory” of homes for sale. “You’re still going to see further price declines before the market stabilizes in 2010.Half of the 10 states with the highest percentage of discounted homes are in the Northeast: Massachusetts, Rhode Island, Connecticut, New Hampshire and New Jersey.A third of residences for sale in those states were reduced at least once, Trulia said. New York, California and Florida accounted for 35 percent of the total value of price cuts nationally. In Nevada, Idaho, Arizona, Wyoming, Hawaii, Utah and California, sellers have dropped an average of 13 percent off the original price, according to Trulia.Inventories at U.S. wholesalers dropped in August for a 12th consecutive month, clearing the way for a pickup in orders as sales improve.The 1.3 percent decrease in stockpiles was larger than anticipated and followed a revised 1.6 percent drop in July, figures from the Commerce Department showed today in Washington. Wholesale inventories have had the longest series of declines since records began in 1992. Sales climbed 1 percent, the biggest gain since June 2008.Distributors will likely increase bookings after companies drew down inventories at a record pace in the first half of the year. The gains may give the world’s largest economy a boost in the early stages of a recovery as American factories rev up assembly lines to prevent stockpiles from dwindling even more.[This is truly unbelievable, this is the same man that is extending the war in Afghanistan into Pakistan. It shows you how much control the Illuminati has. Next we will read the President’s dog has been made ambassador to Kenya.] U.S. President Barack Obama was named the recipient of the 2009 Nobel Peace Prize on Friday: “For his extraordinary efforts to strengthen international diplomacy and cooperation between peoples.”The announcement came early this morning, and comes as President Obama is considering how much to increase troop levels in the war in Afghanistan.As the sky hinted at dawn, U.S. soldiers went hunting for Taliban in the Arghandab Valley. They had satellite-linked monocles to display the locations of platoons. They could summon an aerial drone to buzz overhead with a surveillance camera. They could call on Kiowa helicopters for search-and-destroy missions.On this mission, however, one of their most valuable assets was an informant: a farmer with a taste for opium.”It all came down to one guy who said, ‘The Taliban stole my motorcycle.’ He was high, and he was pissed, and he give us the tip on where to find them,” said Sgt. Kenneth Rickman, 34, of Vandalia, Ill.The U.S. trade deficit unexpectedly narrowed in August as exports climbed to the highest level of the year and oil imports plunged.The gap fell 3.6 percent to $30.7 billion from a revised $31.9 billion in July, the Commerce Department said today in Washington. A rebound in auto making contributed to a jump in exports to Canada, while a drop in the number of barrels of petroleum bought abroad swamped an increase in fuel prices.More than $2 trillion in government stimulus programs are reviving demand from Asia to Europe, ensuring American factories benefit from growing sales overseas as the dollar falls. Gains in production and the need to replenish depleted inventories mean imports will probably also grow in coming months.”The credit crisis has forged an even larger gap between the rich and poor, though it might not last for long,” writes Ian Mathias in today’s issue of The 5. “The richest 10% of Americans made at least $138,000 each this year, according to Census data released last week. That’s a record high 11.4 times the average income for the opposite end of the spectrum: the poverty line around $12,000. Pre-crisis multiples were closer to 11.2.”The middle class is getting credit crunched too. The median household income has fallen $1,860 over the last year – wiping out a decade of slow gains – to $50,303.”But if history is any guide, this trend may be near its peak. At present, about a quarter of America’s total income is earned by 1% of its population (amazing, eh?). That level has only been attained once in US history – ironically, 1928, right around the start of the last economic depression. What followed then was a 50-year trend in the other direction.ANOTHER ONE FROM THEM NUTCASES

GuestOctober 15th, 2009 at 8:32 am“Goldman earnings don’t enthuse”. Ooops! Risk Aversion.Buy some dollars, sell the Australian Bonds. The dollar carry trade is a volatility machine. We better start producing something instead of a whole nation of day traders. Financialization has taken capitalism off the rails. Some of the geniuses on the Bloomberg Terminals could probably come up with solutions to our energy crisis. If we don’t get back on track to producing a real economy, we are going to find out that you cannot have a nation of gamblers and day traders. Somebody has to really work for a living, for the parasites to eat the fruits of their labor.

The AlarmistOctober 15th, 2009 at 5:51 pm

Easy there, Guest. Have you ever worked a Bloomberg box? It ain’t as easy as it might look to you outsiders. These boys and girls earn their bread.

GuestOctober 15th, 2009 at 8:32 am“Goldman earnings don’t enthuse”. Ooops! Risk Aversion.Buy some dollars, sell the Australian Bonds. The dollar carry trade is a volatility machine. We better start producing something instead of a whole nation of day traders. Financialization has taken capitalism off the rails. Some of the geniuses on the Bloomberg Terminals could probably come up with solutions to our energy crisis. If we don’t get back on track to producing a real economy, we are going to find out that you cannot have a nation of gamblers and day traders. Somebody has to really work for a living, for the parasites to eat the fruits of their labor.

PeteCAOctober 15th, 2009 at 8:43 am

“We better start producing something instead of a whole nation of day traders … somebody has to work for a living.”You got it, my friend. We no longer have Big Banks in the USA. We have Big Day Traders playing with the public money.This is one of the biggest mistakes that Obama has made so far – not putting an end to gambling charade at the Wall St. banks. Failure to rein in this huge problem will completey destroy all of Obama’s plans for a real recovery.Unfortunately, I don’t think that Obama is going to figure this out until near the end of his presidency – too late by that time.PeteCA

GuestOctober 16th, 2009 at 8:47 am

How else can he get rid of fanatical free-marketers, he’s got to let them finish the job and kill the system before he can help the people.

PeteCAOctober 15th, 2009 at 8:47 am

Anybody else notice that the RGE server is incredibly slow this morning. I can hardly get any responses when I hit the Enter key today.PeteCA

GuestOctober 15th, 2009 at 9:14 am

wuaHAHA, it is either DOLLAR DIE or TREASURY DIE. if Obama, Pelosi, and Democrats continue borrow and spend path, then BOTH DIE, BOTH JUST DIE WILL YA!! wuaHAHA

GuestOctober 16th, 2009 at 7:09 am

You seem to be very certain of this yet you do not tell us what would happen next. Perhaps you would like to make a wager on your prediction: if you are right, then you get paid in worthless dollars and if I’m right, I get paid in valuable dollars.

GuestOctober 16th, 2009 at 7:56 am

Yep, here’s the moron again…He’s got another ten similar useless comments on this one thread alone.Hey Guest, we’ve heard you, can’t you just move on ?

PeteCAOctober 15th, 2009 at 9:19 am

Chris Puplava has an interesting article today … “Decision Time”.Decsion TimeIn fact, both Chris and Ryan Puplava have been going a bit ballistic with their analyses in the last couple of weeks. But there’s no doubt about the basic point they are making … the markets are reaching a decision point.But I’ll go with an opinion offered in the title of this new article by John Browne.US Stock Markets Disconnected From RealityPeteCA

GuestOctober 15th, 2009 at 9:21 am

Paul KrugmanOctober 13, 2009 , 5:04 pmLeading indicators and the shape of the recoveryMichael Shedlock has an awesome takedown of ECRI’s claim that its indicators (a) have successfully predicted turning points in the past (b) point to a sold recovery now. I’d add that this is a really, really bad time to be relying on conventional indicators.Why? Basically, because in a zero-interest rate world — the three-month rate was .066% last I looked — especially one that’s suffered from a collapse of the shadow banking system, conventional indicators don’t mean what they usually mean. Increases in the monetary base aren’t especially expansionary. The yield curve more or less has to slope up, even if no recovery is expected. And so on.So historical correlations, to the extent that they exist — and as Shedlock points out, ECRI is claiming a much better record than it really has — can’t be counted on to prevail. There’s really no alternative to making fundamental analyses of the macro situation.

The AlarmistOctober 15th, 2009 at 5:59 pm

OK, that borders on incomprehensible. If the past cannot be relied upon to be a reasonable model for the future, then you can study the fundamentals til you are blue in the face but will be wasting ýour time trying to extrapolate them into a predictive model since the only way you can build a reasonable model is to base it on past experience.Let’s cut to the chase and simply throw darts at a lists of choices hung on the wall.

MM CAOctober 15th, 2009 at 9:32 am

So Goldman revenue tanks… revenues in Investment Banking were $899 million, 31% lower than the thirdquarter of 2008 and 38% lower than the second quarter of 2009. Yet Bonus’s for 2009 are expected to total over 18 BILLION for its employees… @008 they only got 11 BILLION. I dont know about anyone else, but how many people at goldman share that 18 BILLION.Meanwhile There are mounting NO JOBS, INSOLVENT BIG BANKS, Tanking consumer Spending, and MOUNTING FORECLOSRES, but is all good it seems for Goldman.I’m ashamed to be an American these days with all the misery going around like the 16 million totally unemployed, like the 40 plus millions people on food stamps, like millions who have been foreclosed, like the over 50 million without medical insurance, like hundreds of thousands small companies that have gone POOF…This country, albeit with many freedoms, sucks these days and all because of the idiotic, stupid and corrupt Politicians and Wall streeters and Corprate giants.Don’t Reinflate the Old BubblesBy Steven PearlsteinWednesday, October 14, 2009Analysts at Goldman Sachs suggested Tuesday that, despite a 50 percent run-up in stock prices that has left the Dow Jones industrial average just shy of 10,000 and the S&P 500 selling at 20 times earnings, stocks are still cheap. In fact, according to Goldman, stocks are so cheap that corporations are going to start using all that cash on their balance sheets not for product development or marketing or some other productivity-enhancing investment, but for acquiring other companies.In case you just fell off a turnip truck, you might think “Monetizing the M&A Revival” is serious research aimed at helping Goldman clients figure out how to profit from these uncertain times. The helpful analysts from Goldman even provided the names of companies they think are so underpriced that they are ripe for a takeover — companies like Devon Energy, AK Steel and Red Hat.But those with any memory at all will probably recognize this report for what it really is: a marketing brochure for Goldman’s investment bankers, who are just itching to begin cranking up the old M&A machine and generating those big fees again. With deal flow, of course, comes an equally lucrative flow of new stock and bond issues to pay for all those ill-advised and overpriced acquisitions, along with increased volume on Goldman’s trading desk from speculators hoping to cash in on the latest takeover rumors.Just because Goldman is recommending this to its clients, however, doesn’t mean Goldman is putting its own money behind the new bull market in mergers and acquisitions. Indeed, it is just as likely that Goldman is preparing to short the very takeover stocks it is touting to the public, just as it did in the late stages of the real estate and mortgage bubble. It’s all perfectly legal. And it is perfectly in keeping with what we know about Wall Street’s most successful firms, which is that if they stumble on a profitable trading strategy, the last person they are likely to share it with is you.What we’re witnessing here is pretty simple: another bubble in financial assets. All that “liquidity” created by the Federal Reserve and other central banks has accomplished its task and prevented a global financial meltdown. But unless they move now to begin sopping up that liquidity, the central bankers run a serious risk of reinflating many of the same bubbles that got us into this mess in the first place.Many analysts now look at the economy and conclude that unemployment is still way too high and the threat of inflation still way too low for the Fed to even think about beginning to raise interest rates again. By one calculation, the appropriate federal funds rate today would be something like negative 5 percent. Since that’s impossible, the Fed has signaled that it would not only stick by its zero-interest-rate policy for the indefinite future, but also will continue to inject additional money into the financial system by using freshly printed dollars to buy up the debt issued by government-owned Fannie Mae and Freddie Mac.The problem is that because we didn’t get into this recession in the normal way, the normal analysis and remedies are not appropriate. Slow growth and high unemployment are indeed going to be a big problem over the next several years, but they aren’t going to be solved by pumping out lots of cheap money that is used to speculate in stocks, bonds and commodities rather than be invested in the real economy. And if all this speculation has the effect of driving up the price of commodities and driving down the value of the dollars we use for imports, then it is perfectly possible to wind up with high inflation and high unemployment at the same time — as happened in the late 1970s.The right policy response is for the Fed to begin withdrawing some of this extraordinary monetary stimulus even as the rest of the government steps up its effort to stimulate the real economy. That means more money for extended unemployment benefits; more aid to the states so that they can maintain the most vital public services; and more money to expand mass transit, state college and university systems, efficient energy production and basic scientific research. The economist Paul Krugman estimates that for every dollar in extra debt that will be required to finance this fiscal stimulus, about 40 cents will be repaid almost immediately in the form of tax revenues from higher short-term economic growth. And if the money is invested wisely in quality projects with high returns, the other 60 cents could wind up being a boon to future generations, rather than a burden.What would surely not be good policy, by the way, is to extend and expand the current tax break for first-time home buyers that is set to expire at the end of the year, as many in Congress are now advocating. Home buyers are already getting a huge benefit from the dramatic drop in house prices, along with the lowest mortgage rates in a generation, thanks to massive government infusions into Fannie and Freddie. For the government to go beyond those efforts and try to induce home sales that otherwise wouldn’t have happened — at an estimated $75,000 a pop — would surely be cheered by home builders, real estate agents and the analysts at Goldman Sachs. But in truth it would be nothing more than a misguided attempt to reinflate another bubble.

ChignosOctober 16th, 2009 at 1:10 pm

“more money for extended unemployment benefits; more aid to the states so that they can maintain the most vital public services; and more money to expand mass transit, state college and university systems, efficient energy production and basic scientific research”…..sounds like keeping an already seeping bubble pumped up to me.

GuestOctober 17th, 2009 at 4:10 am

The economist Paul Krugman estimates that for every dollar in extra debt that will be required to finance this fiscal stimulus, about 40 cents will be repaid almost immediately in the form of tax revenues from higher short-term economic growth.And the interest on the other 60 cents? Nothing will be produced, so that 60 cents isn’t going to be paid back any time soon, which means LOTS of interest!Oh, and there’s Chignos again, frothing about anything that would be directly aimed at humans and not the capitalist god…

MM CAOctober 15th, 2009 at 9:35 am

October 14, 2009US Markets Disconnected from Reality- John BrowneEarlier this year, I predicted that the 2009 rally in U.S. stocks could bring the Dow Jones Index as high as 10,000. It looks like that level has been achieved. If, at this point, the index reverses course, I would have made a fairly good prediction.However, it is important to get beyond the charts and look at the fundamentals. The furious six-month rally in the stock market has certainly not been mirrored by the economy as a whole. Instead, the country remains in recession, with unemployment continuing to rise and corporate earnings continuing to decline. This has pushed up trading multiples to the point that where value is now a distant memory. How could the stock markets have recovered so strongly in the face of economic recession?First, this rally is mostly about the financial sector. The U.S. government decided that, no matter what the cost to the citizen, the major banks had to be saved. Bank losses were transferred to public books and unprecedented funds were showered on the banks to keep them solvent. Bank borrowing costs were reduced to near zero and, for the first time, interest was paid on reserves held at the Fed. Many of these banks were designated as ‘too big to fail,’ so they became a nearly risk-free bet.The result: bank profits skyrocketed. Just today, JP Morgan reported that profits surged sevenfold from the second to the third quarter of this year! In fact, over the past six months, stock performance of financial sector firms was 66% better than the S&P 500 as a whole.Second, the rally is mostly inevitable bounce. In the third quarter of 2008, in the face of collapsing stock and commodity markets, investors piled into cash instruments such as Treasuries. However, once the crisis appeared to pass, the same investors fled these zero-return ‘investments’ back into corporate debt, and then equities. Such massive fund flows have provided the tide upon which the current rally is based.Third, despite the fact that the economy is in recession and corporate earnings are falling, government officials have been furiously attempting to boost market sentiment. They have been strongly supported by Wall Street cheerleaders in the media, with statements such as “earnings came in ahead of estimates” and “we see recovery in the next quarter.”Finally, even shell-shocked private investors have been drawn into equities, seemingly desperate to make good their losses of the past year. Normally, such a surge in private investment would presage a fall in markets.All the while, despite extensive new government hiring, U.S. unemployment has risen to an official level of 9.8 percent, and retail sales have fallen. In fact, the real rate of unemployment has reached almost 20 percent!Meanwhile, the U. S. dollar continues to plunge, taking a large bite out of the true gains made by the surging Dow. U.S. interest rates are likely to rise, making bond and stock markets increasingly dangerous.In other words, to the extent that the rally persists, it appears to be growing longer in the tooth. But can as much be said for similar rallies happening around the world?The worrying economic and financial conditions in America are in stark contrast to those of countries such as Brazil, Russia, India and China (BRIC), and those such as Canada, Australia and New Zealand (CAN), who supply the BRIC countries with much of their raw materials.Some American investors have indeed increased their exposure to BRIC-CAN stock markets. However, in view of the real health and strength of these economies relative to those of the United States, it is surprising how under-weighted they remain in most Americans’ portfolios.It’s best to rebalance before this ‘rally’ is declared dead. Though troubling for their irrationality, situations like these can be very profitable for the fundamental-focused investor.

The AlarmistOctober 15th, 2009 at 6:03 pm

This is what happens when you don’t have a real economy in which you can invest. Yep, look abroad, and you will get the benefits of investing in real economic activity as well as a ride on the FX gains.

GuestOctober 17th, 2009 at 4:15 am

And while this looks like hoarding ill-gotten gains, I have to wonder whether the reality is that the markets are seeing that what is offered isn’t going to be of value in the future. If this is the case then are these functions NOT of long-term service?I don’t write this to be flip. Just wondering what the eventual big “correction” would look like. It’s highly possible that nothing comes to fore and that the accumulated wealth dies on the vine/in the vault as the system is unable to reflect the growing realities of increasing populations and dwindling resources. Anyone grounded in reality knows that this is an eventuality; it’s just a matter of When, whether that time is now dawning.

FEDupOctober 16th, 2009 at 11:25 am

This is a great starting point to begin to remove Wall Street from gambling away our entire financial system!

GuestOctober 17th, 2009 at 4:20 am

The Federal Reserve’s charts show that “base money” is rapidly expanding—meaning coins, paper money, and commercial banks’ reserves with the central bank. But the money isn’t getting where it needs to go to stimulate economic growth: into the bank accounts of American businesses and consumers.Great! Keep promoting growth as sustainable. Keep the consumer-as-life paradigm going.Same poor mindset, just scaled to the local level!

GuestOctober 15th, 2009 at 10:16 am

Why does no one care about the bankers? They are too busy watching TV.. 110 million: The number of households with a television set in 2006, upfrom 76 million households in 1980.. 98.2 percent: Percent of all households with a television set in 2005,which is unchanged since 1999.. 2.6: The average number of television sets per home in 2005, up from 1.7sets in1980.. 73.2 million: The number of households with cable television in 2006.Two-thirds of households with a TV have cable.. 1,704: The projected average number of hours an individual (12 and older)will spend watching television in 2008.That comes out to 4.7 hours of TV watching per day. In 2000, the averagenumber of hours spent watching TV was 1,502, or 4.1 hours per day.

The AlarmistOctober 15th, 2009 at 6:06 pm

It’s not that they are watching TV, but that they are watching things like Idol, Dances, Got Talent, Big Bro, Oprah, Dr. Phil and Judge Whoever.Actually, this is a good thing, because if the average American was as plugged in as we, there would no doubt be bloody revolution in the streets.

Little SaverOctober 15th, 2009 at 11:07 am

The whole market is a fiction at the moment, I guess. Pumped up by free money for those who wasted it over the past years. What went into exuberant housing markets is now going into exuberant stock markets. Courtesy Fed and its banking cartel.Its a mockery, wonder who’ll have the last laugh.

GuestOctober 15th, 2009 at 11:29 am

went to stock market? you pathetic bozo. went to bubblic Treasury market more like it. at least stock market is backed by earning and future earning. Treasury market is backed by what? -> print press.

The AlarmistOctober 15th, 2009 at 6:08 pm

Don’t worry, the earnings will take care of themselves. Maybe the markets are pricing in the earnings effect of hyperinflation?

Guest tooOctober 15th, 2009 at 10:38 am Foreclosures Hit All-Time High, Wall Street on Pace to Hand Out Record $140B in Employee BonusesThe Dow Jones Industrial Average has topped 10,000 for the first time in a year as JP Morgan Chase reported massive profits in the third quarter. Meanwhile the Wall Street Journal is reporting that major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year—a record high. But on Main Street, foreclosures have climb to a record high and unemployment is expected to top 10 percent.We speak to former bank regulator William Black, author of “The Best Way to Rob a Bank Is to Own One.”.Slovenian Philosopher Slavoj Zizek on Capitalism, Health Care, Latin American “Populism”, and the “Farcical” Financial CrisisDubbed by the National Review as “the most dangerous political philosopher in the West”, and the New York Times as “the Elvis of cultural theory”, Slovenian philosopher and public intellectual Slavoj Zizek has written over fifty books on philosophy, psychoanalysis, theology, history, and political theory. In his latest book, “First as Tragedy, Then As Farce”, Zizek analyzes how the United States has moved from the tragedy of 9/11 to what he calls the farce of the financial meltdown..transcripts ususally available in a few ‘democracy now transcripts’

MM CAOctober 15th, 2009 at 11:26 am

Pension bubble starting to pop….More Pain for State’s TaxpayersBy STU WOO and JIM CARLTONThe cost of shoring up Calpers, the troubled $200 billion pension fund for California public employees, will ultimately fall on the state’s 38 million residents, who are already dealing with tax increases and reduced public services.The state and local governments are contractually bound to increase their payments to Calpers to help it make up for its investment losses of more than $50 billion in the fiscal year ended June 30. Officials around the state are calling for more oversight of Calpers, which announced Wednesday it was investigating fees paid by its investment managers.Getty ImagesCalifornia Gov. Arnold Schwarzenegger, shown in Los Angeles Sept. 30, asked this summer for stricter oversight of public funds such as Calpers.Gov. Arnold Schwarzenegger’s office in July asked the Governmental Accounting Standards Board, which oversees public funds such as Calpers, for stricter oversight of the funds.David Crane, an economics adviser to Mr. Schwarzenegger, said the fund’s losses mean “there is less money for parks and recreation, less money for the University of California, less money for health and human services.”For the 2009-2010 fiscal year, Mr. Crane said the state had to spend an additional $3.3 billion from its general-fund budget to make up for Calpers’s poor performance. The state is expecting to cover further Calpers losses in the next fiscal year as well. Those expenses add to the financial troubles California has faced in the past year, including a $60 billion budget shortfall that lawmakers closed by increasing taxes, slashing spending and raiding the coffers of already cash-strapped cities and counties.In the Orange County city of Fullerton, officials said they were notified by Calpers in August that their city would have to pay a total of $5.5 million more in the four-year period beginning in 2011 to fully fund city employees’ retirements. The city, which passed a balanced budget in June that included a hiring freeze, has already dipped another $4 million into the red and now plans to cut employee pay by an as-yet-undetermined amount.”The bottom line from my point of view is that just about the time we will start to see a recovery in 2011, we are going to have this huge additional cost,” said Fullerton City Manager Chris Meyer.In Ontario, City Manager Greg Devereaux said Calpers’s woes could make it even more difficult for his Southern California city of 175,000 to provide essential services. Already, the city this year had to dip into a rainy-day fund and get its police and firefighters to waive pay raises to avoid a $13.8 million shortfall tied to a roughly 25% plunge in revenues from 2007.Ontario’s annual payments of $8.2 million to Calpers are expected to increase by another $6 million, or 75%, by 2015 to help cover the investment losses, Mr. Devereaux said. “If there’s a shortfall in Calpers, we’re the ones who have to pay for it. And any shortfall reduces the level of services we can provide,” he said.Other local officials said Calpers’s losses would ultimately have to be covered by the taxpayer. “I think the taxpayers are going to be footing the bill for years because of less-than-stellar decisions on investments,” said Brett Barbre, a director with the Municipal Water District of Orange County, whose employees’ pensions are with Calpers. “This is going to affect every city, county and special district that is in Calpers. They will have to cover all of the losses, as well as the ancillary issues that are being uncovered.”Many cities are held hostage by their pension-benefit costs incurred in past years, said Mike Parness, city manager for the Northern California city of Napa. During the 1990s, when Calpers was flush with cash and charging low rates, many cities like Napa increased employee benefits to compete for workers, he said.But now, some of those cities are finding themselves stuck with high pension costs at a time when the housing bust and recession have driven down revenues, Mr. Parness said. For example, he said that for some employees, pension benefits as a percentage of employee compensation have soared from 14% to 40% over the years. If the city tried to roll back benefits now, it would not be able to hire anyone, he said. And the city must divert any increase in revenue to pay for pension benefits instead of services. “We must change this system. It’s unsustainable,” Mr. Parness said.

GuestOctober 17th, 2009 at 4:28 am

“The bottom line from my point of view is that just about the time we will start to see a recovery in 2011, we are going to have this huge additional cost,”How does He know when any “recovery” is going to take place? That’s a pretty risky assessment. And if NO “recovery” happens?

11b40October 18th, 2009 at 1:56 pm

Hey, I just got a geat idea! Let’s privatize Social Security. If we all have control of OUR money, we can invest it and have lot’s more money to retire with. It’s easy to do. Just give it to a financial advisor and wait 30 years.Independent Contractor

SoftwarengineerOctober 15th, 2009 at 11:28 am

The 2009 GDP Decrease is a Horrifying 3+%But the recent Whitehouse economic data looks rosy for Q3, at a +2.2 [albeit Q1 was decreasing at 6+%]?The problem with massive shifts down in the GDP and minor shifts up in the GDP is perception. Assuming the massive downward shifts earlier this year were as most economists called, “inventory” burning with no new sales; then the minor “inventory” recovery doesn mean a return to the real estate bubble and using our homes as ATMs to over-consume, as before. The American Consumer is dead and inventory blips upward are almost completely meaningless with the approx 70% driver of our economy restored, the American Consumer.See my proof in the article in part:”….As Kevin hall at McClatchy newspapers argues, the consumer economy is dead, all starting in September 2008 when the US government seized Fannie Mae and Freddie Mac and Lehman Brothers filed for bankruptcy.Hall writes: “One year later, the easy-money system that financed the boom era from the 1980s until a year ago is smashed. Once-ravenous U.S. consumers are saving money and paying down debt. Banks are building reserves and hoarding cash. And governments are fashioning a new global financial order.”That means recovery will be anemic, economic growth will be around 2% and it would be five years until the economy generates enough jobs to make up for those that have been destroyed.It will be some time before the US economy becomes competitive again….”The rest of the URL:

GuestOctober 17th, 2009 at 4:32 am

That 2% “growth” isn’t going to happen.How does one come up with “five years until the economy generates enough jobs to make up for those that have been destroyed”? Seems to me that it would take a lot more than 2% “growth” to resolve this; and, all the while digging out from under all the massive debt, while not producing!

MM CAOctober 15th, 2009 at 11:29 am

Retired Average JOE Americans..No SS increase for you next year. Why? Becuase thier is no inflation they say. first time in 40 years. So Your Gas, energy, CC fees, Bank Fees, Medical costs did nto go up…Talk about sticking it furthur up where the sun does’nt shine… Bend over Sr. Average Joes… Make sure you vote for Obama in 2012, he’s countign on you…

MM CAOctober 15th, 2009 at 11:32 am

Maybe this will help… Lol… not…. 13 Billion dollar stimulus to 57M people hurting… What a joke… Goldman to pay out 19 Billion in bonuses this year… hows that Average Joe american…Obama calls for 57m to get $250 chequesBy Sarah O’Connor in WashingtonPublished: October 15 2009 00:02Barack Obama, US president, has asked Congress to stump up $13bn to extend a plank of the US stimulus package into next year in the form of cheques to veterans, retirees and the disabled.Some 55m people received $250 (€166, £156) “economic recovery payments” this year as part of the $787bn stimulus, and Mr Obama wants them to get another cheque next year. His administration is also pushing to extend the stimulus bill’s unemployment and health insurance benefits into 2010.EDITOR’S CHOICELex: ‘Saved’ US jobs – Sep-25New rules for recipients of US stimulus funds – Sep-23Jobless rates rise in 27 US states – Sep-18US stimulus tsar to unleash 1m inspector-generals – Aug-20“These payments will provide aid to more than 50m people in the coming year, relief that will not only make a difference for them but for our economy as a whole,” Mr Obama said yesterday of the $250 cheques.The administration says 57m people would benefit from the extension, including 49m who receive Social Security benefits and 2m on veterans’ benefits.While insisting that the stimulus package is working, the administration is mulling proposals to support demand and create more jobs as unemployment nears 10 per cent. However, it faces opposition from Republicans and fiscal hawks who say the US cannot afford to spend more money in light of its huge budget deficit.The administration has batted back suggestions that it is, in effect, planning a second stimulus.“We would not call it second stimulus at all,” a senior administration official said yesterday. “These are continuing a few elements of the Recovery Act … that are expiring and their purpose is clearly going to remain needed in the year 2010.”He added that the administration would not allow the $13bn price tag to damage the solvency of the Social Security fund, nor would it insist that Congress pay for it with a corresponding revenue in-crease or spending cut.“In this case we’re providing temporary essential help to people as an extension to the Recovery Act,” he said. “We plan to work with Congress to discuss financing, but the president is not going to go into those discussions insisting that this be paid for.”Mr Obama said “this additional assistance will be especially important in the coming months, as countless seniors and others have seen their retirement accounts and home values decline as a result of this economic crisis”.Subsidies that help laid-off workers keep health insurance are also set to expire at year end.Copyright The Financial Times Limited 2009. You may share using our article tools. Please don’t cut articles from and redistribute by email or post to the web

GuestOctober 15th, 2009 at 11:34 am

Obama, Pelosi, Democrats crooks demand QE pumping to keep funding their entitlement socialistic free-lunch welfare for next 4 years. Forget exit strategy. QE party continue forever, DOLLAR DIE JUST DIE WILL YA??

GuestOctober 16th, 2009 at 6:47 am

hey moron, you have anything more to say than “Dollar die” and “democrats socialists” ?Only right wing morons like you can’t even realise that there’s actually no difference between the policies of democrats and republicans with regards to the long term declining value of the dollar, budget deficits, and current account deficits…

The AlarmistOctober 19th, 2009 at 2:12 am

Wrong. Democrats will actually want to talk about Daddy being a drunk and a child molester, while Republicans will tell you to stop talking with food in your mouth.

GuestOctober 20th, 2009 at 2:25 am

WTF? Your anti-Dem froth is getting tiring… Grow up. (hint: it’s the same freaking coin, the same oligarchs, only with different shirts; if you’re trying to protect one set of shirts then you MUST be one of them!)

GuestOctober 15th, 2009 at 11:36 am

The Biggest Bust Will Follow the Biggest BubbleBy Bill Bonner 10/13/09 London, EnglandOur ‘Crash Alert’ flag goes back up the pole…October is almost half over. Will we get through the month without a major sell-off?Dear reader, if you think we know the answer to that you’ve got us mixed up with someone else. Someone who is crazy.No one with his wits about him thinks he knows what the stock market is going to do.Still, here at The Daily Reckoning, we have our hunches. We think it’s time for a major pull back. Frankly, we’ll be disappointed if we don’t get one soon. Because, once again stocks are too expensive.Too expensive for what? Too expensive for the circumstances.The Dow rose another 20 points yesterday to a new bounce record. Oil rose to over $73. Gold didn’t budge.Of course, everyone now knows that the recession is over. NABE interviewed 44 economic forecasters. Four-fifths of them said the recession was over.But we don’t care what they said. These are the same seers who missed the biggest single event in financial history. There are many banking crises, recessions, panics and defaults in the record books. But none were as great as the one that hit September a year ago. Most economists didn’t see it coming; why should we trust them to tell us when it is going?Besides they’ve got the whole thing wrong. It isn’t a recession; it’s a depression. There is no recovery from a depression; instead, the economy has to re-invent itself in another form. Things aren’t going ‘back to normal,’ in other words. Because the period leading up to the crisis was not ‘normal;’ it was a bubble. After a bubble explodes, you have a lot of debris to clean up. The bigger the bubble, the more damage it does when it blows up.“The force of a correction is equal and opposite to the deception that preceded it.”You’ve heard our dictum before. In fact, you’ve heard our explanations for all these points before.We just lived through the biggest bubble in history. Get ready for the biggest bust. Not just two years of falling stock prices and news-making bailouts. Not just 10% unemployment. Not just 100 bank failures and 30% off housing prices.Noooo… We’re talking about a worthy correction…a real correction…a noble and distinguished correction…a correction that can hold its head up in public.This is a correction that will take many years…one that will knock housing prices down for at least five years…and stock prices down to the point where people no longer want to buy them. It’s a correction that goes deep enough and continues long enough to do its work – wiping out the bad investments and mistakes of the Bubble Era, while allowing the survivors to pay down their debts and build up their savings.Now, here’s a confusing little item. Yesterday’s news tells us that consumer spending as a percentage of the entire economy has edged up to 71%. Now wait just one cotton-pickin’ minute. How could consumer spending be going up?Hold on, cupcake. It’s not going up. It’s going down. It’s just that the other components of the economy are going down even more.In the second quarter consumers spent $195 billion less than they did the year before – a 1.9% drop. In the 20 years before that, consumer spending increased at an average rate of 3.3%. So, you do the math… that’s an about-face of more than 5% of GDP – a loss to the economy of about $700 billion!Consumer credit is going down (we reported the figures earlier in the week)…unemployment is going up…consumer spending is going down……those are not the circumstances in which stocks sell for 27 times earnings…and move higher. Those are the circumstances in which stocks crash.David Rosenberg:“By some measures, the S&P 500 is already trading at valuation levels that would ordinarily be consistent with an economic expansion that is five-years old as opposed to a recovery that, at best, is in its infancy stages.“On an operating (‘scrubbed’) basis, the trailing P/E multiple on the S&P 500 has expanded a massive 10 points from the March lows, to stand at 27.6x. Historically, when the economy is taking the turn away from contraction towards expansion, which indeed was the case in Q3, the trailing P/E multiple is 15x or half what it is… While we will not belabor the point, when all the write-downs are included, the trailing P/E on ‘reported’ earnings just widened to its highest levels in recorded history of nearly 140x, which is three times the levels prevailing during the height of the tech bubble.”So, here goes…yes…today, we are officially running our “Crash Alert” flag up the pole here at the London headquarters of The Daily Reckoning. Cross Blackfriars Bridge and you might see if flapping in the wind, between the two huge gold balls on the roof.Our Crash Alert flag is out because stocks have become too expensive…and because this bounce should be reaching its apogee by now. Already, central banks are talking about cutting back on their efforts to sustain the bounce with easy credit. Australia led the way last week with a rate hike.It is also becoming clearer and clearer that the feds’ efforts aren’t really working. They can give money to their friends in the banking industry. They can give money to speculators who then make bets on the stock market, among other things. They can bailout major companies. But they can’t really get much money into the real economy.Au contraire; they take money OUT of the real economy. The feds will absorb $700 billion of private savings this year alone…to finance their deficit. They expect $1 trillion deficits at least for another 10 years. That won’t leave much money for the private sector.Naturally, Washington, DC, is doing well. While unemployment is near 10% in the rest of the nation, it’s only about 6% in the Washington area.But let’s face it… What’s good for Washington is bad for the rest of the nation. The feds have used this correction to increase their power…and add to their wealth. The average federal employee now earns twice as much as his counterpart in the private sector – if the fellow in the private sector has a job at all.A news item tells us that TARP recipients spent $114 million lobbying for their bailout money – most of it going into Washington, of course.And the feds now own major stakes in what used to be the private sector – insurance, automobiles, and banking industries.This has been a great period for government. Money, power…it is all floating down the Potomac like raw sewage…and coming to rest in the capitol city.Our advice to the feds: enjoy it while you can. When stocks fall again…and people figure out what a mess you’ve made of the economy…you’ll be lucky if you aren’t tarred, feathered and run out of town on a rail.

The AlarmistOctober 15th, 2009 at 6:14 pm

Now, now. Stay on theme:Recession is over, recovery is under way.Stimulus is working, so well in fact that we are thinking about doing another round.Millions remain in their homes due to various bailouts.All of this will cost you middle class folksnothing.

GuestOctober 15th, 2009 at 12:14 pm

AMY GOODMAN: On Capitol Hill, lawmakers have been slow to implement any meaningful reform to help protect consumers and to curb what’s been described as Wall Street’s casino.On Wednesday, the House Financial Services Committee began marking up a bill that would create a Consumer Financial Protection Agency and introduce the first regulation of the exotic financial instruments known as derivatives. The finance and business communities have been lobbying against both reform measures.To talk more about this, we’re joined by former bank regulator William Black. You might recognize him from Michael Moore’s film Capitalism: A Love Story. During the 1980s, Black helped expose the savings & loan scandal. He now teaches at the University of Missouri-Kansas City and is the author of the book The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry.Bill Black, welcome to Democracy Now! Your comment on just the latest figures? Dow Jones tops 10,000, Wall Street reports massive profits, executives receive record bonuses, and what? Foreclosures also at a record high.WILLIAM BLACK: It’s one of the proofs that the real economy and the finance world have been completely unhinged. Finance is supposed to exist for only one purpose: to make the real economy work better. But now finance simply works for finance, and in particular for the elites within finance. And they harm the real economy on a regular basis, and periodically, they come close to destroying the real economy.JUAN GONZALEZ: And William Black, where is the outrage? It seems to me, at this stage, with the—as the foreclosures continue to escalate in numbers, and yet we’re seeing these enormous profits less than a year after the financial crisis. There doesn’t seem to be the kind of outrage, even in Congress, that there was six months or eight months ago.WILLIAM BLACK: There’s no palpable outrage, certainly not in Congress. The reform efforts on derivatives, for example, are a scandal. They exempt virtually all of the problem derivatives, and they’re designed to exempt it. And that’s the bill that’s introduced, and of course it’s likely to get worse with additional lobbying from the special interests.Link the things that you’ve just been talking about. You talked about foreclosures reaching record highs. But in fact, foreclosures, relative to delinquencies, are quite low compared to historical ratios. In other words, banks have tons of folks who are not paying their mortgages on time, and they’re not foreclosing. And the reason they’re not foreclosing is, once you foreclose, you have to recognize losses under the accounting rules. And the banks gimmicked the accounting rules. They put pressure on Congress, and Congress put pressure on the accounting profession to gimmick the accounting rules now about a year ago. Now, these bonuses, of course, are paid compared to alleged profits. What happens if you understate your losses dramatically? You report much higher profits and much higher bonuses. So this is a web of fraud, in which they are getting as much as they can before the place goes to hell in a handbasket again.AMY GOODMAN: William Black, talk about Timothy Geithner. Talk about Lawrence Summers. Talk about Obama’s inner circle and what they have to gain from this.WILLIAM BLACK: Well, I mean, Summers, for example—you talked about Geithner’s aides and how much money they had made, and, of course, it’s absurdly large, and they’re making it typically for not doing much of anything.

CaponeOctober 15th, 2009 at 12:35 pm

I was shocked to see that PE number of 140 post earlier by Miss America. I see technical resistance close by above these levels as well… parallels to 29/30 etc etcHOWEVER, what does the stock market do when oil spikes while we are these ‘lofty’ levels in the overall market? CVX and XOM in the DOW may be doing ok then right?I am currently perplexed (perhaps due to a recent failing short attempt) by how this market will go down dramatically with oil potentially spiking due to the dollar declining? The market highs coincided with the oil spike before?Will the historically inverse relationship between commodities and stocks finally take effect with this rise in oil prices in US dollars?my brain hurts. we are going to have for the average folks a hyperinflationary high food / gas prices depression 20% unemployment wage downward pressure slow to negative real growth. however, a floor of some sort must be in place in regards to overall market index declines with dollar denominated oil prices rising correct?yesterday i said buy gold sell goldman maybe it is sell goldman buy oil as well…

CaponeOctober 15th, 2009 at 3:58 pm

f u _ _ !have not lost one in a while…long story short – sorry about this inaccurate post earlier. during the period when USO went from 60 – 120 before the SPX went from 1500 to 1200. both crashed together later…

GuestOctober 15th, 2009 at 12:41 pm

A really elaborate house of cards built by the banksters and their Federal government cronies. You got to admit, if aquiring personal financial wealth is the end game, and we all now it is, the banksters and their cronies win. Lot’s of good people in this world, but too few in the halls of financial fairness and justice. We should just expose it all and build a huge national statue depicting individual greed on WallStreet and the Congress. The audacity of it all is amazing and, not doubt, the tale will only get more demented. Think of the toys the big bonuses will buy the Wall Street tycones in these deflationary times when big ticket items are devalued. They gone a have a good time worshiping their priviledge lifestyles. Mean while, on Main Steet echos of “hey brother can you spare a dime” permeate the air.

The AlarmistOctober 15th, 2009 at 6:18 pm

Think of the banker bonuses as yet another troubled asset relief program. These boys and girls are going to buy up all of your troubled assets as you will need to sell them off to buy ever more expensive food, shelter, and heating for the long cold winter that is no doubt the result of global warming.

GuestOctober 17th, 2009 at 4:49 am

I’ve pointed it out in the past, time to repeat it:What exactly do these folks expect to win? Lots of worthless fiat dollars? Repo all the worthless SUVs, HDTVs, granite counter-top condos?As mentioned in the (great) Daily Reckoning article above, the only way out is to re-invent ourselves. The so-called wealthy, should they do as it appears, are not going down the right path. Ah, but Pet Rocks are so CHEAP now!

GuestOctober 15th, 2009 at 12:51 pm

Wall Street.Federal government bought and paid for.Great attorney’s up the wazoo to deflect criminal charges.Rationalizing the game they play so well by “the government allowed us to do it.”Egos in the stratosphere.Ravenous passion for power and wealth.IQs often boardering on genius.Collectively, we are all fools for not realizing this scam can and will devastate civilization. Incluiding the bankster elites! No much fun if you feel guilty of the wealth you have if families are starving, is there? Psychopaths excluded of course.

blindman tooOctober 15th, 2009 at 7:42 pm

r, correctand may i add… 1-10. i have stole my promise, forgiveme if you can but you knew that i it is the period of psychic chaos that we areexperiencing, like “fortunate children” who have yetto learn that we are wounded and children no more. the archetypal demons of centuries are manifestingand coming to the fore as the heroic refuses to”grow up” and embrace the consciousness and realityof this stage of maturation. insight, is it thatscary, are we that unprepared? are we just incapable of transmuting the sexual into the sublimeor have i gone off the rails?there is a direction to this evolution of consciousness. it has been told and stated repeatedly, historic and recent. we are at the precipice, so to speak, where the environment and our technology are frozen in an uninspiring deadlock? we have made the mistake of unconsciously joining our intimate archetypes, personal, with our social archetypes, institutional, and this has been donein a complex and evolving, accelerating, morphogenic environment. the demonic is not concerned and is careless, the heroic is hesitant, cautious to a fault and the result is chaos which demands attention, ultimately leading to consciousness of the moment and perhaps the foundation for new archetypes for a new age? new demons and new heroes? or just truth?.and now for something completely different butof course related..…”It may already be too late. Bin Laden has evolved into more of a symbol than an operator, some argue. Maulana Muhammad Alam, a radical preacher in the Dir valley, 80 miles above Peshawar, says: “Osama is not the name of an individual; it’s a movement … Osama is the right of every individual to fight and defend Islam.” And anyway, his deputy Ayman al-Zawahiri, is the true brains of the outfit. Scheuer disagrees. “This business that he’s the puppet and Zawahiri is the string-puller is completely wrong. Bin Laden is dangerous because he is talented. He is a genuinely historic personality.”But capture, even if possible, would also bring problems. If it happened in Pakistan, Musharraf would face colossal public protest. In the US, they would face the prospect of the world’s most potent media manipulator in a New York courtroom, on CNN, for possibly three years. “You only have to look at the trial of Saddam to see how that can go wrong,” says one diplomat. In that case, the only solution is assassination, even at the risk of creating a martyr – perhaps the only thing that Bin Laden himself agrees with. In speeches, he repeatedly stresses that his own survival – a “slave of Allah” – is unimportant. One rumour has it that his bed is surrounded by landmines hooked up to a trigger.”…talk about crazy-making! but this clears it up….?Black Wings(Tom Waits/K. Brennan)Take an eye for an eyeTake a tooth for a toothJust like they say in the BibleNever leave a trace or forget a faceOf any man at the tableAny man at the tableWhen the moon is a cold chiseled daggerSharp enough to draw blood from a stoneHe rides through your dreams on a coachAnd horses, and the fence postsIn the midnight look like bonesWell they’ve stopped trying to hold himWith mortar, stone and chainHe broke out of every prisonBoots mount the staircaseThe door is flung back openHe’s not there for he has risenHe’s not there for he has risenWell he once killed a man with a guitar stringHe’s been seen at the table with kingsWell he once saved a baby from drowningThere are those who say beneath his coat there are wingsSome say they fear himOthers admire himBecause he steals his promiseOne look in his eyeEveryone deniesEver having met himEver having met himHe can turn himself into a strangerWell they broke a lot of canes on his hidehe was born away in a cornfieldA fever beats in his head like a drum insideSome say they fear himOthers admire himBecause he steals his promiseOne look in his eyeEveryone deniesEver having met himEver having met him..

GuestOctober 17th, 2009 at 4:53 am

Assumption is that bin Laden is still alive. The fact that he was on the CIA’s payroll should make it doubly confusing as to what his real value is. (anyone asking questions about what records were in WTC #7? Or, why it was that the US really attacked Iraq?)

GuestOctober 15th, 2009 at 12:58 pm corrupted government. so who decide who should foreclose and who should be bailed out by TAX PAYER’s MONEY? dont need to repay loan as long as 2-3 years? this is sickening. What else this corrupted democrats controlled gov crooks gonna cook up? with tax payer’s money? when tax revenue going down accross the board? more like printing future TAX PAYER’s money. DIE DOLLAR DIE!!! DIE TREASURY DIE WILL YA??

GuestOctober 17th, 2009 at 4:55 am

OK buddy, lay it out. We want to know what exactly would be YOUR recommendation. And no, tossing out the Dems and putting (back in the) GOP in full power won’t be an acceptable answer.

PeteCAOctober 15th, 2009 at 1:04 pm

The following mindless blurb appeared today …————————–Bloomberg – By Courtney Schlisserman and Timothy R. HomanOct. 15 (Bloomberg) — The number of Americans filing first-time claims for unemployment benefits dropped last week to the lowest level in nine months, indicating the improving economy is leading to a slowdown in firings.Applications fell by 10,000 to 514,000 in the week ended Oct. 10, lower than forecast, from a revised 524,000 the week before, Labor Department data showed today in Washington. The total number of people collecting unemployment insurance also decreased.————————So let me see if I’ve got this straight.Jobless applications fell by a mere 10,000 people, while the total was still 514,000 applicants out of work.514,000 new job applicants out of work!!!And yet these two journalists have the nerve to lead out with a story title that says … “US Initial Jobless Claims Fall More Than Forecast.”What are we supposed to make of this???Have the IQ’s of financial correspondents dipped to negative numbers these days? Are the editors of major news sources simply pressuring their staff to print wildly positive interpretations of discouraging data? Or has the Wall St. bank complex simply bought off all the major news sources in America today?Where’s my barf bag?PeteCA

GuestOctober 15th, 2009 at 5:43 pm

dont worry they are on government unemployment payroll which can rollover forever by Treasury debt/fiscal budget monetization and dollar printing programs.

The AlarmistOctober 15th, 2009 at 6:21 pm

Ignoring the fact that a 10k variance on 500k is probably well within the margin of error, it still begs the point that losing a half million jobs in a week is hardly the sign of a recovering economy. I might buy ‘recovery’ with a loss of 200k, but half a million? Oh, that’s right, this one is a job-losing recovery.

wethepeepleOctober 16th, 2009 at 9:40 am

I think you mean ‘Federal Reserve Bank Complex’ (FRBC). The hoax on us all is the propaganda that the Federal Reserve is independent.

GuestOctober 17th, 2009 at 4:58 am

I would like to see this represented as a percentage.With a continued net loss of jobs it is certain that at some point in time one could say that we only experienced ONE application, which would be by the very last person employed!

GuestOctober 15th, 2009 at 1:24 pm

AMY GOODMAN: William Black, talk about Timothy Geithner. Talk about Lawrence Summers. Talk about Obama’s inner circle and what they have to gain from this.WILLIAM BLACK: Well, I mean, Summers, for example—you talked about Geithner’s aides and how much money they had made, and, of course, it’s absurdly large, and they’re making it typically for not doing much of anything. But they’re taking their cue from Summers, who got $5 million, roughly, for working one day a week in areas he had no expertise. So, you know, once you leave the federal service, then these interests that you were very helpful to find a way to make you spectacularly rich, and they know that that’s what’s coming in their future. That’s part of the problem.But the bigger part of the problem, in many ways, is that they have such an ideology about the market and its ability to deal with all problems that has no basis in reality, has been exposed in this crisis as completely fictional, and yet they can’t give it up. I mean, think of yourself as one of these professors who’s been trained in the Milton Friedmanish views, and you’re in your fifties, and you’ve been saying—you know, everything you’ve said in your career is wrong. Everything you’ve learned in your career is wrong. All of your areas of expertise are wrong. Are you going to admit that? “Hi, I’ve been misleading you, and I’m sorry I caused this disaster. And by the way, I have no meaningful skills or experience.”

GuestOctober 15th, 2009 at 1:31 pm moronic post by a seemly smart guy. i think he is missing the point. all Treasury stand to lose tons of money for their stupidity. you think Obama, Pelosi, and Democrats crooks will stop borrow and spend? You think Geithner and Bernanke will stop monetize debt and fiscal budget? wake up and quit being stupid. it is sickening to see how moronic some people are. you think China and Treasury holders have saying on the Treasury market? well, where is the action from them, LOL!!! move over morons, QE FOREVER!!!! DIE DOLLAR DIE. DIE TREASURY DIE!!!

GuestOctober 16th, 2009 at 6:57 am

here we go again… the same guest moron and his obsession with death.Do you have anything interesting to say apart from “die dollar die”?

GuestOctober 15th, 2009 at 1:38 pm

JUAN GONZALEZ: And William Black, what is your sense of the prospects now for stronger financial regulation, given the fact that—my understanding is now that the financial and securities firms have invested about $200 million in lobbying—in their lobbying efforts in Congress, and the halls of Congress are filled with the lobbyists now who are trying to influence the members of Congress on the new regulation of the financial system?WILLIAM BLACK: Well, the earliest effort is—should be a real wake-up call, because it’s horrible. Barney Frank has proposed legislation on financial derivatives that essentially exempts what are called over-the-counter derivatives from most regulation, and it is over-the-counter derivatives that have been a major cause of this crisis. So that’s utterly insane. There’s no conceivable justification for it. And he stacked the hearing. There were nine witnesses; eight of them were from the industry and, of course, testified that they were vital to the world. The ninth witness was the only person who was in the least bit skeptical, and he was promptly gaveled down, unlike the others, by the chair. So it’s not only a farce; they’re willing to have us see that it’s a farce. They are so little afraid of public opinion and outrage that they’re not even taking steps to cover up the cover-up.

GuestOctober 17th, 2009 at 5:01 am

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

MorbidOctober 15th, 2009 at 3:37 pm

Here is another lovely,The Collider, the Particle and a Theory About Fate

A pair of otherwise distinguished physicists have suggested that the hypothesized Higgs boson, which physicists hope to produce with the collider, might be so abhorrent to nature that its creation would ripple backward through time and stop the collider before it could make one, like a time traveler who goes back in time to kill his grandfather.Holger Bech Nielsen, of the Niels Bohr Institute in Copenhagen, and Masao Ninomiya of the Yukawa Institute for Theoretical Physics in Kyoto, Japan, put this idea forward in a series of papers with titles like “Test of Effect From Future in Large Hadron Collider: a Proposal” and “Search for Future Influence From LHC,” posted on the physics Web site in the last year and a half.“It must be our prediction that all Higgs producing machines shall have bad luck,” Dr. Nielsen said in an e-mail message. In an unpublished essay, Dr. Nielson said of the theory, “Well, one could even almost say that we have a model for God.” It is their guess, he went on, “that He rather hates Higgs particles, and attempts to avoid them.”

Further, Steven Hawkin does not believe the Higgs particle even exists.Peter Higgs launches attack against Nobel rival Stephen Hawking

Professor Hawking once placed a $100 bet that the particle does not exist and continues to argue that there are more interesting outcomes to be drawn from the LHC than the discovery of the Higgs boson.Professor Higgs, who first postulated the existence of the particle 44 years ago, reacted with visible irritation. “I have to confess I haven’t read the paper in which Stephen Hawking makes this claim,” he said. “But I have read one he wrote, which I think is the basis for the kind of calculation he does. And frankly I don’t think the way he does it is good enough.

GuestOctober 15th, 2009 at 5:40 pm guy, but sometime he just doesnt know what he is talking side: democrats congress will -> will be further restricted due to democrats congress bailout on people on default/foreclosure. gov will pay mortgage payment for you for next 2-3 years until you can show ability to pay.demand side: democrats congress will -> homebuyer tax credit will apply to everyone whether first time or not. and amount will quadruple.all will be funded by printed money.

SoftwarengineerOctober 16th, 2009 at 11:20 am

Don’t Count Your Mortgage Tax Credit Chickens as Earned Income Credit Until the 2009 Pubs Come OutMany of the recent rushed homebuyers [especially FHA with low FICO scores, who paid little income tax in 2009] may have a big unpaid tax credit [if their 2009 income tax paid is less than $8000?] bill in their stocking from Santa Obama this Christmas?Here’s the IRS take in part on the tax credit, with no reference to “Earned Income” type [a tax credit you get even if you paid no taxes]:”….Burke: There is an income limitation. So, the credit starts to phase out for people whose income is more than $75,000, or $150,000 if they’re married, filing jointly.Branscome: Mm-hmm. So, bottom line — what’s the difference between the 2008 credit and the 2009 credit?Burke: The 2008 credit is an interest-free loan. You have to pay it back. The 2009 credit is more, and you don’t have to pay it back. And you have a choice as whether to claim it on your 2009 return or go back and claim it on your 2008 tax return and get the refund now….”The rest of the URL:,,id=205928,00.html

SoftwarengineerOctober 16th, 2009 at 1:48 pm

The First Time Home Buyer Stimulus Is an Earned Income Type 2009 Tax Credit, In Writing TooI used the IRS websheet button I found above, states in part:“…First-time homebuyers may be able to take advantage of a tax credit for homes purchased in 2008 or 2009. The credit:Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.Applies only to homes used as a taxpayer’s principal residence.Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed….”The rest of the URL:,,id=204671,00.htmlA caveat though, 75K single and 150K married get their $8K phased out:Here’s the IRS take in part on the tax credit, with no reference to “Earned Income” type [a tax credit you get even if you paid no taxes]:“….Burke: There is an income limitation. So, the credit starts to phase out for people whose income is more than $75,000, or $150,000 if they’re married, filing jointly.Branscome: Mm-hmm. So, bottom line — what’s the difference between the 2008 credit and the 2009 credit?Burke: The 2008 credit is an interest-free loan. You have to pay it back. The 2009 credit is more, and you don’t have to pay it back. And you have a choice as whether to claim it on your 2009 return or go back and claim it on your 2008 tax return and get the refund now….”The rest of the URL:,,id=205928,00.html

Octavio RichettaOctober 15th, 2009 at 5:46 pm

Marginal (variable) contribution analysis applied to likely SP500 earnings in the next couple of quarters:We start by making the following observations:1. Fact: Companies that have increased/beaten profit forecasts have mainly done so by cost cutting on flat/declining revenues.2. Expectation: The market expectation follows from 1: At best, we will have more of the same. And, since many companies have no more room for cost cutting, profit improvement will stall/slowdown.3. The contrarian view: I believe the consensus will turn out to be wrong. If, unlike the market expects, revenue picks up (most likely increased volume on flat prices); then, it is very likely that the dumb WS analysis will get caught with their pants down with earnings estimates that were extremely conservative.Rationale: A revenue pick up is likely based on coming GDP numbers that are likely larger than expected. The extra kick to the profit line comes from what is known as variable cost analysis. If fixed costs stay fixed on the volume pickup(a robust assumption if the volume pickup is not extreme), then the [unexpected] before tax profit impact of the volume pickup is:revenue from the extra volume – variable costs for the extra volumeThis profit margin is based on variable costing and, believe me, this contribution will have an impact to the bottom line that would be a lot larger than most expect.Please note that in the contrarian proposition above there is an “if” associated with the “then”. The contrarian argument holds IF volume picks up. So, let’s assess the probability that volume will pick up:IMHO, it is very likely that volume will pick up as I believe the coming GDP numbers will surprise on the upside based on the ECRI forecast to which I attach a high level of confidence.Based on this rationale, I went up to 55% US equities earlier in the week. The increase from 40% to 55% was based entirely on the SP500. So now I have 40% in high yield US stocks (mainly utilities, and consumer staples), 15% in the SP500, and 45% in high yield 10 year CDs and the US bond index. As before, I remain a stubborn guy: 100% invested the USD. YTD, I am up 10%. Hopefully, with a decent shot at beating my last year’s 12.3% return.

Octavio RichettaOctober 15th, 2009 at 6:00 pm

Google results today are a good example of what I am talking about. a 27% profit increae on a 7% volume pickup. note that my observation is a broad one. Of course, there will be companies that miss revenue and profit targets but, on average, IMO, the surprise will be on the upside.Always remember this is free advice possibly worth that much:-)

GuestOctober 16th, 2009 at 3:32 am

Ähemm, excuse me but what about this tiny current S&P P/E ratio of 141?Okay, ignore it.It seems Ecri ignores it as well.

GuestOctober 17th, 2009 at 5:08 am

Still trying to plug for an upswing?Overly simplified argument. Doesn’t factor in increased taxes and cost of raw materials and transport, things that will be hit hard with a reversal of economies of scale (bending backward).Weren’t you calling for a big drop in gold many months ago?

Octavio RichettaOctober 17th, 2009 at 8:58 am

To the guys that point out PE in the Sp is now 140 and that I made a “gold going way down call”:I think saying I called for a big drop is a misrepresentation of what I said. I may have said that I sold around $1000 & that I own no gold/I am not interest in it right now as I don’t see significant upside potential while a return of slow grow may hit it hard.If you are a regular, you may remember my posts equating the cost of bail outs to truck loads of gold. I think I even ran a rough calculation of the value of all gold on earth mined and not=mined yet that my recollection is that the paper money being printed was a lot more. Thus, Paulson (the hedge fund guy, not the former treasurer) may have a point in piling up gold. I will have to look into this because the fact that there are many more paper dollars than the value of all the gold on earth doesn’t necessarily mean people will rush into gold. The FED fumbling the “exit strategy” could be a factor in support.On the PE ratio stuff above, you need to use smoothed earnings (i.e, Shiller’s way) he said in Bloomberg yesterday the PE is about 20. If you want to learn some cool PE stuff read the following series of teaching posts (see below) I published in April 2008.Some of you may also recall the exercise in which I calculated the market cap of financials in the SP last fall and came to the conclusion they were dirt cheap. Datz how I made my money last year. Then, of course I chickened out too early. But I don’t mind this. I still think getting out when the downside risk starts to get significant is a good strategy even if you leave some money on the table.Two calls I have gotten “egg on my face with” (commodity call leaps – OIl and Grains) and forecasting a stronger USD by now; gold was not one of them. I don’t regret so much staying in the USD as this is my base currency. IMO, One should keep a good chunk of one’s assets in the currency one uses to buy bread (assuming you are linked to one of the top world currencies)

MM CAOctober 15th, 2009 at 6:03 pm

NO JOBS increasing at alarming rates…There Are Six Unemployed For Every Job OpeningVincent Fernando|Oct. 15, 2009, 12:43 PMYes, there is a vital piece still missing from the recovery equation. The number of unemployed continues to grow faster than job vacancies. As of August data, there were about six unemployed for every potential position according to the Bureau of Labor Statistics.Macroblog: At the end of August there were estimated to be fewer than 2.4 million job openings, equal to only 1.8 percent of the total filled and unfilled positions—a new record low. This is an especially significant issue given the large number of people who are looking for work.As shown below, this ratio was well under 2x at the beginning of 2008, and peaked at just 2.8x during 2003. Thus 6x today is truly shocking. Bargaining power clearly rests with employers. Perhaps it’s a good time to start a business and try to become one.Note the years in the chart below are somewhat tricky to read.

GuestOctober 15th, 2009 at 6:50 pm

weak dollar will not attract skilled workers from abroad. and those who came to USA to study will not stick around to find pathetic employment in USA, all go back to their country that has stronger currency, better life, and be with their family. USA no a promise land for skilled workers anymore.

GuestOctober 15th, 2009 at 6:54 pm

Obama and Pelosi can continue the entitlement socialist fee-lunch welfare on borrow and spend policy to weak dollar and scare skilled workers away and further weaken innovation, creativity, and USA economy. USA if cant attract top talent is no differ from third world country.

SoftwarengineerOctober 16th, 2009 at 3:21 pm

LOL AlarmistOVERPOPULATION BEGETS UNEMPLOYMENTA three headed monster [reducing consumer spending], getting bigger and bigger everyday is an 85% spike in unemployment affecting college degreed professionals earlier this year alone:States in part:“…Electrical Engineers Experience Record Job LossesThe unemployment rage for electrical engineers doubled during the second quarter of 2009….”the rest of the URL: degreed unemployment news in part:“…The total number of unemployed increased by more than 50 percent from January 2008 through last month, but the number of jobless Americans 55 or older jumped 70 percent, according to new Labor Department numbers released Friday.And for people with college degrees, the number rose even more sharply, by nearly 85 percent.The numbers confirmed a trend that job cuts are moving up the age and educational ladders, said Andrew Stettner, deputy director of the National Employment Law Project….”the rest of the URL: about nursing? In part:“….More hospitals have recorded mass layoffs in 2008 than in any year in the past decade. More than 9,700 hospital employees will have filed initial claims for unemployment compensation in 2008 as a result of mass layoffs. That would be highest such number since 2005, which saw nearly 13,300 laid off, and 28% more than the 10-year average. The news comes despite the relative optimism in healthcare as compared to the rest of the economy, where most other major sectors of employment have posted net losses of jobs for the year….”The rest of the URL:’d add most of the layoffs are related to overpopulation and the surge in Uncompensated care, see surge chart in article above. The article above also states in part:“…Uncompensated care is defined as the overall measure of hospital care provided for which no payment was received from the patient or employer. It is the sum of a hospital’s “bad debt” and the charity care it provides. Uncompensated care excludes other unfunded costs of care, such as underpayment from Medicaid and Medicare…”How about teachers? See the California news and believe me, its coming to a theater near you too very soon:“….California law requires local school districts to inform teachers, counselors, nurses and other school employees by March 15 that they could be laid off at the end of the school semester. The across-the-board budget cuts have pushed districts to issue layoff notices to more than 26,000 teachers….”The rest of the URL:’d addetc, etc….

MM CAOctober 15th, 2009 at 6:05 pm

Can anyone tell me what these people are smoking? the ideas, fixes and reasoning these days is getting totally ridiculous!Deflation Could Cause First Minimum Wage Cut EverVincent Fernando|Oct. 15, 2009, 1:34 PMDeflationary forces might take their toll in a very tangible way for Colorado’s minimum wage earners.The state could be the first ever to adjust down minimum wage due to a falling consumer price index. While the minimum wage will only fall four cents per hour, if passed it will clearly be an extraordinary example of discipline.USA Today: Other states with adjustable minimum wages have seen their consumer price indexes fall, such as Ohio. But Colorado is one of the few states where the law is interpreted to mean the wage can fall. Other states are planning to keep wages flat.In Florida, deflation would reduce the minimum wage to $7.21, but the state’s minimum wage already matches the federal wage, so Florida workers’ paychecks won’t change.The change will be subject to a public hearing. If in the end Colorado’s wage adjustment gets shot down, then we’ll be reminded once again why it’s so much easier for governments to err on the side of inflation.And though this will be controversial, this is a good move on Colorado’s part. One reason, many economic historians believe, that the Great Depression was so damaging, and caused so much unemployment, is that while prices fell, labor costs could not adjust.

MM CAOctober 15th, 2009 at 6:07 pm

Gotta read the articel…. and report…We are SOL….GAO: Deficit Situation Growing More UrgentJoe Weisenthal|Oct. 15, 2009, 2:11 PM | 337 |1 GAO is out with its latest look at America’s fiscal health, and it’s really, really ugly.Weaknesses in the economy and financial markets–and the government’s response to them–have contributed to near-term increases in federal deficits, which reached a record level in fiscal year 2009. While a lot of attention has been given to the recent fiscal deterioration, the federal government faces even larger fiscal challenges that will persist long after the return of financial stability and economic growth. GAO’s simulations continue to show escalating levels of debt that illustrate that the long-term fiscal outlook remains unsustainable. In little over 10 years, debt held by the public as a percent of GDP under our Alternative simulation is projected to exceed the historical high reached in the aftermath of World War II and grow at a steady rate thereafter. These fiscal challenges are driven by health care cost growth and demographic trends. Absent reform, Social Security, Medicare, and Medicaid will account for a growing share of the economy in coming years. The longer action to deal with the nation’s long-term fiscal outlook is delayed, the larger the changes will need to be, increasing the likelihood that they will be disruptive and destabilizing.

MM CAOctober 15th, 2009 at 6:09 pm

Goldman Sachs Is Robbing Us Blind- NO SHIT!Dylan Ratigan|Oct. 15, 2009, 5:22 PMIn a world where real competition, modern technology and lack of special government standing means most American businesses have no choice but to adapt and innovate — Wall Streets wimps only apparent skill is rigging the game.In fact, on Wall Street there have always been only two basic ways to make money. The first and most difficult: Be a great investor — to the best investors go the profits, rewarding those who are best at picking winning businesses for America and punishing those who fail through the loss of their money. The second, and seemingly preferred method, exploit those who know less than you — and take their money, even if you have to change the laws to do so.Now, this second business was much easier to pull off prior to the internet and 24-hour exchanges etc. as technology is the enemy of any business that makes its living overcharging customers who don’t know better or are given no other choice.So bankers, facing an onslaught of web-driven transparency and reduced profitability during the last decade along with an increasingly educated customer-base became anxious to change the laws in 2000 and are even more anxious to protect those changes now.While things like stock and bond trading became a very low margin business because of modern information — the legalization in 2000 of a secretive market for crooked insurance with no transparency or accountability has been an absolute boon.They called it credit derivatives — where banks and insurers offer to effectively “insure” financial assets. For instance, they were used to insure much of the real estate and pension liabilities in America the past 10 years.To make money, the banks exploit two loopholes. The first — overcharge customers by depriving them of the type of competitive pricing only possible on an exchange like the New York Stock Exchange or Chicago Mercantile Exchange.And the second, exploit the lack of transparency to hide the fact that you are keeping little or no money to pay claims while selling insurance and collecting fees on every house and pension payment in America.The key to success here is that when there is a default or claim against that so-called credit insurance — the banks keep all the past payment — and the taxpayer under threat of collapse pays off the claims while getting nothing in return.This quite simply, is a brilliant way to steal our money.Now this method of “business” is only possible if the government continues to allow these crooked insurance contracts to be written in secret, allows them to hold little or no money in reserve for payment and allows them to sell enough coverage on enough vital national assets that if there is a default — the taxpayer has no choice but to pay.Needless to say, J.P. Morgan & Co. has never had more revenue and the Goldman Sachs bonus pool has never been bigger.Considering the $23.7 trillion of taxpayer money being used to support these Corporate Communists one would hope they could at least make a few billion in profits with it. In context, making a few billion risking a few trillion is a rather pathetic return after all.As we talked about last week – allowing these outdated banks to take control of our government and change the rules so they are protected from the natural competition and reward systems that have created so many innovations in our country, you not only steal from the citizens on behalf of the least worthy but you also doom them by trapping the capital that would have been used to generate new innovation and, most tangibly in our current situation, jobs.We don’t want a government commandeered by those in our banking system who have failed and been passed over by technological advancements, innovation and flat out smarts.The government’s job is to restore the rules of investment, not indulge those who want to unfairly sustain their wealth and power at our nation’s expense.What we want, is a Wall Street that would attract men and women who would seek to be the next Warren Buffett, or great venture capitalist. Men and women competing to analyze the countless ideas of our best and brightest – investing in those who will best be able to bring their innovations to America and the world.To tell your congressman, go to and heed the call.Read more at:

FAMCOctober 15th, 2009 at 9:20 pm

Very good post MM CA.Their secret is “To Change the Rules” for the “stupid people”Ah, but I am not sure if Buffett has not nice “information sources” as the article seems to mean.————————Conclusion:Spend your dollar on anything before collapse.

CaponeOctober 16th, 2009 at 2:01 pm

please keep these Ratigan articles and links coming.Dylan Ratigan for SenateDylan Ratigan for PresidentI can not believe this stuff is in the media. Look into the future. Look into a crystal ball and see Goldman spinning off their most profitable trading / thieving unit under a new company or “selling” it. I am afraid he is risking his life to send these messages…

The AlarmistOctober 16th, 2009 at 2:16 am

You know, when I think about it, if I had a choice I think I would rather prefer being exploited by deceipt rather than by brute force. With taxation it is rarely the former (though I must admit that the IRS goes way out of its way to make it difficult for me to assert a Tax Treaty right).So I think I dislike Goldman and the other bankers less than I dislike Big O and his gynormous tax and spend machine, since I have a choice to not play with Goldman and thier ilk, but I have no choice with Big O and his gang.But hey, don’t look where you should be looking and at which you should really show outrage. Look instead where Ratigan, that poster-child of elitist state-controlled media, is directing you. Nothing to see here where you are a serf … it’s all over there where you still have some freedom of choice.

Jason BOctober 16th, 2009 at 4:42 am

Goldman is a Fed owner, and the fed inflates the currency which is an invisible tax. The house always wins

GuestOctober 16th, 2009 at 7:16 am

yeah Obama and his gang will crush you with1>force invisible tax on you by inflating currency, remember NO EXIT STRATEGY FOREVER2>force sale, property, income, capital gain, dividend TAX AT ABSOLUTE HUGE % on you.yup Obama and his gang will rob middle-class silly and lie to you all it is for your benefits.

GuestOctober 16th, 2009 at 9:23 am

Pentagon Bans Photos of Afghan War DeadIn other Afghan war news, the Pentagon has imposed a new policy barring media from photographing US soldiers killed in combat. The rule change was introduced last month after the Associated Press published a photo of a mortally wounded US marine.

GuestOctober 17th, 2009 at 5:35 am

Like everything else, we mustn’t be exposed to the realities of the world, of what power is doing in OUR name.

PeteCAOctober 16th, 2009 at 9:54 am

To Misprice Or Not To Misprice – That Is The Question !You know, you’ve really got to love Ben Bernanke, Tim Geithener, Those Day-Trading Big Banks on Wall St, and all those Garden Gnomes who dwell at the US Treasury. I mean, when they come up with a plan to financially engineer the US economy and boost the Dow – do we all get a PLAN or what? Already the P/E ratio has shot up to 140, even though there’s scarcely a real earnings report to be found and the latest unemployment report still exceeds 500,000. It’s impressive, don’t you think, this financial engineering game? We’re not talking about jotting down a few schemes on a napkin – we’re talkin’ about scribbling some really BIG schemes on a really BIG napkin. :-)I bet right now, they are already trying to figure out how to get the Dow up above 11,000. Tweak a few more knobs, lower a few more earnings expectations, and it’s practically a done deal.But wait. Didn’t we all say … that any time the Gov’t gets involved in turning the monkey wrenches inside the economy, that assets tend to get mispriced? I mean, a P/E over 140 ?!!! Are we talking mispriced – or what baby?Nothing ever changes.Ha! Ha! Ha! Ha! Ha! Ha!PeteCA

GuestOctober 17th, 2009 at 5:38 am

Nothing ever changes.Until it collapses that is!Nassim Talib says that historical shifts have always been titanic. Perhaps this was really the meaning behind PNAC’s statement that it would take an event like a “new Pearl Harbor” to change things (funny how 9/11 occurred after this!). It’s never done under control.

GuestOctober 16th, 2009 at 10:25 am

MAX Keiser at his best

Winston SmithOctober 16th, 2009 at 12:14 pm

that was choice. Thankyou! I needed some well enunciated outrage. The opening lines by Kaiser were hilariously true in a dark way, that Americans are allowing themselves to become peasants.

crgordonOctober 16th, 2009 at 11:17 am

In the category “For What It Is Worth” – sitting here in Costa Rica the colon has made an abrupt change from daily decline against the dollar to a revaluation of a 1.5% gain against the dollar. More revaluation upward expected in next two days.

CaponeOctober 16th, 2009 at 12:55 pm

can somebody point me to an article describing the level 3 asset fiasco? FASB mark to market change – did that actually happen or was it just talked about?you know – those overpriced assets sitting on the balance sheets of the investment banks that are overvalued by billions? OUTSIDE of that, it was a great year – bonus time again baby!the accounting entry is very simple credit or decrease asset and debit or decrease the P/L. if that entry is recorded, several billions of bonuses ARE not paid out! each and every other person, each and every other company in the history of mankind on planet Earth adheres to these basic rules of recording their accounts.ShameShameShameDoctor, outside of the knife stuck in my throat, everything is just fine. I will just carry on as usual today…I tried to find the quote but can not – a trip to Alcatraz in San Francisco included a comment from Al Capone – loosely”what about those banksters who stole all of those poor people’s money. who is going to go after them”loosely end quotedNOBODY!

PeteCAOctober 16th, 2009 at 1:39 pm

Capone: You’ll have to dig around – but I don’t think the banksters are implementing FASB right now. That requirement was set aside … otherwise it could interfere with all the financial gimmicks going on.PeteCA

PeteCAOctober 16th, 2009 at 1:43 pm

And by the way … great quote from Al Capone. And that’s a big part of the problem – when our system of justice becomes a two-tier scale then ordinary Americans lose respect for the system. That creates an atmosphere of indifference about the law, and allows a big growth in criminal activities. Al Capone and people like him flourished because of that. Today – we risk creating a rejuvenation of organized crime in America for the same reasons.PeteCA

GuestOctober 16th, 2009 at 2:20 pm

More than loss of faith in the system. Gangsters like Capone were heroes to many. Today we have NO heroes!

CaponeOctober 16th, 2009 at 2:32 pm

Dylan Ratigan is a hero, patriot, statesman and a defender of the truth. May God speed his way and protect him

PeteCAOctober 16th, 2009 at 2:45 pm

Gold has held above the $1000/oz level and oil has broken above its 200-day MAV at $75/BL. Meanwhile the dollar ($USD) has shown a clear break below the resistance line at 76. No need to explain which assets are now taking on value as “surrogate currencies” as the US economy sinks into deeper debt – while the US dollar faces stronger rejection.PeteCA

GuestOctober 17th, 2009 at 6:02 am

Bush says he believes in strong dollar

Thu Feb 28, 2008 10:56am ESTWASHINGTON (Reuters) – President George W. Bush on Thursday said he believes in a strong dollar and that the U.S. economy is fundamentally sound.”We believe in a strong dollar policy and we believe, and I believe, that our economy has got the fundamentals in place for us to be, to grow and continue growing,” Bush said at a White House news conference.The U.S. dollar has been declining, raising inflation concerns even as it helps reduce the huge U.S. trade gap.

Now then, enough with your childish displays!

MorbidOctober 16th, 2009 at 3:03 pm

From the Amy Goodman interview with William Black.

William Black: I mean, think of yourself as one of these professors who’s been trained in the Milton Friedmanish views, and you’re in your fifties, and you’ve been saying—you know, everything you’ve said in your career is wrong. Everything you’ve learned in your career is wrong. All of your areas of expertise are wrong. Are you going to admit that? “Hi, I’ve been misleading you, and I’m sorry I caused this disaster. And by the way, I have no meaningful skills or experience.”

Question: Does this Ponzi scheme economic model that economists continue to support include NR in this criticism?

GuestOctober 17th, 2009 at 6:04 am

It’s all Ponzi-based, based on unlimited growth! Yes, anyone who cannot define “sustained economic growth” should be totally discounted, seen as perpetuating fraud.

gAntonOctober 16th, 2009 at 6:05 pm

The central issue of today’s “El Financiero” (Mexico’s most popular economic newspaper) is that the United States is going to soon suffer a severe recession, and that obviously this is going to have a very bad effect on the Mexican economy (of all the major LA economies, Mexico’s is probably doing the least well). What interested me most was there is no streak of optimism–no Ben Bernanke saying that the recession was probably over, or no Tim Geithner saying that the US economy is responding much better to government generated stimuli than he thought possible (really?). Of course it’s possible that the “Financiero” is slanting the news, but I don’t think so. It is always been well balanced, I’ve never detected any undue government influence on the content, and it is often critical of government actions and persons (especially the cartoons!). This is stark contrast to much of the US press and TV, which generally just parrots FED and Treasury propaganda (of course, there are exceptions).To deviate from the LA theme, I detect a significant general difference between US economic commentaries and those of other countries, and this applies even to US “pessimists”. For example, Dr. Roubini is talking about a six month downturn, whereas the Australian economist Steve Keen says that it took ten years and a world war to get out of the great depression, and that the current “recession” is really a depression, and is a greater depression than the great depression. He suggests that Dr. Roubini should relinquish the “Dr. Doom” title to him.Seriously, I think that Dr. Steve Keen’s analysis of the current economy is the best that I have seen. If you’re interested, take a look:

GuestOctober 17th, 2009 at 6:07 am

the United States is going to soon suffer a severe recessionOoh, now That’s a stretch!I guess that by default, it being “The Great Recession” and all, it could be stated as already being “severe!”

FAMCOctober 16th, 2009 at 6:23 pm

The problem with Economics is this:Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificantin, say, physics, mathematics or medicine-the special pleading of selfish interests. While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of allother groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interestin them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinkingon the subject becomes next to impossible.from Henry Hazlitt’s “Economics in One Lesson” book.

AnonymousOctober 16th, 2009 at 8:37 pm

Henry Hazlitt’s “Economics in One Lesson” book. (download it)

gAntonOctober 17th, 2009 at 5:36 pm

!Los Idiotas Vienen En Pares!What has been different here in the recent past (and not covered by the above) is that Wall Street’s great benefactors (a succession of FED presidents) have been so blinded by their own bigoted economic dogma that they fell completely out of all touch with reality. The end result of their misguided adventurism will be to very soon destroy the very banking system that they were trying to benefit (and most likely they will end up destroying the US monetary system as well). With “friends” like these, you’d be better off with your enemies in power.Ben Bernanke is a good example–the man is always wrong. For example, not long before the housing bubble burst (in October of 2005), Ben Bernanke told the congress that they didn’t have to worry about the housing bubble busting because the increases in housing prices were based on “very strong economic fundamentals”. How many times did he tell congress how good and strong the economy was? My favorite of his many off-the-wall reassurances is:”The Fed stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of the markets”.What “liquidity” and what “orderly functioning of the markets”? Their actions have been the cause of lack of liquidity and market disorder.The FED presidents have actually payed their wall street friends to borrow money (if you consider that the inflation rates were higher than the loan interest rates). Much of this money ended up in high risk “investments”. But now things are better. The banks are using their low interest public borrowings to buy government bonds!Doctor Keen states that the principal cause of our economic crisis and upcoming depression is uncontrolled debt. Where did all the debt come from? (Speak up, man!) Only the Bubblemaster knows.

AnonymousOctober 20th, 2009 at 6:23 pm

Now it’s come to my attention that the TRAP beneficiaries are using borrowed public funds to take monetary positions that are weakening the dollar! I think congress should pass a law prohibiting any bank that had accepted government emergency loans from investing in US securities or in monetary actions that do damage to the dollar,

PeteCAOctober 16th, 2009 at 8:47 pm

Next “Madoff” ArrestedNEW YORK (AP) — One of America’s wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case that authorities say generated more than $25 million in illegal profits and was a wake-up call for Wall Street.Raj Rajaratnam, a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to use insider information to trade securities in several publicly traded companies, including Google Inc.U.S. Magistrate Judge Douglas F. Eaton set bail at $100 million to be secured by $20 million in collateral despite a request by prosecutors to deny bail. He also ordered Rajaratnam, who has both U.S. and Sri Lankan citizenship, to stay within 110 miles of New York City.PeteCA

GuestOctober 17th, 2009 at 2:19 am

U.S. charges billionaire Rajaratnam with record insider tradingFri Oct 16, 2009 8:59pm EDT Email | Print | Share | Reprints | Single Page [-] Text [+]1 of 8Full SizeVIDEOInsider charges for billionairePlay VideoMore Video…RELATED NEWSScandal hits corporate role models IBM, McKinsey16 Oct 2009FACTBOX: Deals targeted in Galleon insider trading case16 Oct 2009FACTBOX: People charged in Galleon insider trading case16 Oct 2009FACTBOX: What they said: Quotes from the insider trading case16 Oct 2009By Grant McCool and Edith HonanNEW YORK (Reuters) – Billionaire hedge fund founder Raj Rajaratnam and executives from some of the most prestigious U.S. companies were charged on Friday with the largest hedge fund insider-trading scheme ever.Investigators said they used court-approved telephone wire taps for the first time in a Wall Street insider trading case, sending shivers through the hedge fund industry which has traditionally picked up and shared trading tips to make big profits.At the center of the case are Rajaratnam, his Galleon hedge fund and two executives from hedge fund New Castle, which was a unit of Bear Stearns Asset Management before Bears Stearns Cos collapsed in 2008, but is still in operation.Three executives from major American companies IBM, top consulting firm McKinsey & Co and the venture capital arm of chip giant Intel Corp are also facing criminal charges.”This is not a garden-variety insider trading case,” Preet Bharara, the U.S. Attorney for Manhattan, said at a news conference. He said the scheme made more than $20 million in illegal profits over several years. hereOne of the criminal complaints accuses Rajaratnam, 52, considered the richest Sri Lankan in the world, of conspiring with Intel Capital treasury department managing director Rajiv Goel and Anil Kumar, a director of McKinsey & Co. The alleged offenses took place over three years starting in January 2006.Galleon had as much as $7 billion under management, the complaint said.Early on Friday evening, a U.S. magistrate judge in New York said Rajaratnam may be released on a $100 million personal recognizance bond secured by $20 million in cash and property.In a brief appearance, Rajaratnam sat in court with his arms folded. The judge restricted his travel to a radius of 110 miles from Manhattan and Rajaratnam, a citizen of both Sri Lanka and the United States, surrendered travel documents.A prosecutor argued that Rajaratnam was a flight risk, but his lawyer Jim Walden said: “A court’s going to learn there’s a lot more to this case. There is no way that this man is going to flee.”A second criminal complaint accused three other people — New Castle portfolio manager Danielle Chiesi, New Castle general partner Mark Kurland and Robert Moffat, a senior vice president in the IBM technology group — of insider trading crimes and earning millions of dollars in illegal profits.”It shows that we are targeting white-collar insider trading rings with the same powerful investigative techniques that have worked so successfully against the mob and drug cartels,” Bharara said.All six were charged with securities fraud and conspiracy in two criminal complaints filed in U.S. District Court in Manhattan. Kumar was permitted to be released on a $5 million bond, Kurland on a $3 million bond, and Moffat and Chiesi on a $2 million bond. In California, Goel posted $300,000 cash for bail.The six were also charged in a separate civil complaint by the U.S. Securities and Exchange Commission (SEC). The SEC said the accused traded on insider information from 10 companies.

CitizenOctober 17th, 2009 at 2:22 am

Bailout Helps Fuel a New Era of Wall Street WealthBy GRAHAM BOWLEYPublished: October 16, 2009Even as the economy continues to struggle, much of Wall Street is minting money — and looking forward again to hefty bonuses.Many Americans wonder how this can possibly be. How can some banks be prospering so soon after a financial collapse, even as legions of people worry about losing their jobs and their homes?It may come as a surprise that one of the most powerful forces driving the resurgence on Wall Street is not the banks but Washington. Many of the steps that policy makers took last year to stabilize the financial system — reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts — helped set the stage for this new era of Wall Street wealth.Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year.So even as big banks fight efforts in Congress to subject their industry to greater regulation — and to impose some restrictions on executive pay — Wall Street has Washington to thank in part for its latest bonanza.“All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending,” said Gary Richardson, a research fellow at the National Bureau of Economic Research. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”Not all banks are doing so well. Giants like Citigroup and Bank of America, whose fortunes are tied to the ups-and-downs of ordinary consumers, are struggling to turn themselves around, as are many regional banks.But the decline of certain institutions, along with the outright collapse of once-vigorous competitors like Lehman Brothers, has consolidated the nation’s financial power in fewer hands. The strong are now able to wring more profits from the financial markets and charge higher fees for a wide range of banking services.“They are able to charge more for all kinds of services because companies need banks and investment banks more now, and there are fewer strong ones to help them,” said Douglas J. Elliott of the Brookings Institution.A year after the crisis struck, many of the industry’s behemoths — those institutions deemed too big to fail — are, in fact, getting bigger, not smaller. For many of them, it is business as usual. Over the last decade the financial sector was the fastest-growing part of the economy, with two-thirds of growth in gross domestic product attributable to incomes of workers in finance.Now, the industry has new tools at its disposal, courtesy of the government.With interest rates so low, banks can borrow money cheaply and put those funds to work in lucrative ways, whether using the money to make loans to companies at higher rates, or to speculate in the markets. Fixed-income trading — an area that includes bonds and currencies — has been particularly profitable.“Robust trading results led the way,” said Howard Chen, a banking analyst at Credit Suisse, describing the latest profits.To prevent a catastrophic financial collapse that would have sent shock waves through the economy, the government injected billions of dollars into banks. Some large institutions, like Goldman and Morgan, have since repaid their bailout money. But most of the industry still enjoys other forms of government support, which is helping to stoke profits.Goldman Sachs and its perennial rival Morgan Stanley were allowed to transform themselves into old-fashioned bank holding companies. That switch gave them access to cheap funding from the Federal Reserve, which had been unavailable to them.Those two banks and others like JPMorgan were also allowed to issue tens of billions of dollars of bonds that are guaranteed by the Federal Deposit Insurance Corporation, which insures bank deposits. With the F.D.I.C. standing behind them, the banks could borrow the money on highly advantageous terms. While some have since issued bonds on their own, they nonetheless enjoy the benefits of their cheap financing.Granted, banks are also benefiting from a stabilizing economy. The fear that gripped the markets earlier this year, when doomsayers predicted a second Great Depression, has largely dissipated. Stocks, corporate bonds, even risky corporate i.o.u.’s — have all rallied from their bear market lows, some spectacularly so. The Dow Jones industrial average has soared 50 percent this year, and touched 10,000 this week for the first time since the crisis.Banks that had marked down the value of the assets on their books during the dark days of the crisis are now enjoying a rebound in the value of many of those assets.“Confidence has returned,” said Shubh Saumya, a financial services specialist at the Boston Consulting Group. “Some of the assets that bankers wrote down last year in the midst of the crisis, now they have got some of that back.”As the number of banks has dwindled, the survivors are moving into the void left by rivals that are either dead or limping and unwilling to take risks.A big reason for Goldman Sachs’s blowout profits this year has been the willingness of its traders to take big risks — they have put more money on the line while other banks that suffered last year have reined in such moves. Executives say there are big strategic gaps opening up between banks on Wall Street that are taking on more risks, and those that are treading a safer path.Banks that have waded back into the markets have been able to exploit large gaps in the prices of various investments, a feature of the postcrisis financial markets. The so-called bid-ask spreads — the difference between the price at which banks are willing to buy things like bonds, and the price at which they are willing to sell — are roughly twice what they were two years ago.Still, the newfound success is largely limited to the big securities houses on Wall Street. This week, Citigroup and Bank of America reported losses from credit card delinquencies and mortgage defaults — a sign of the lingering pain on Main Street.

CitizenOctober 17th, 2009 at 2:30 am

U.S. budget gap hits record $1.4 trillionFri Oct 16, 2009 11:02pm EDT Email | Print | Share | Reprints | Single Page [-] Text [+]By Emily KaiserWASHINGTON (Reuters) – The U.S. budget deficit hit a record $1.4 trillion in the just-ended fiscal year, the government said on Friday, as the deep recession and a series of bank rescues cut a gaping hole in public finances.The tally was $162 billion smaller than the White House had forecast in August, but it still amounted to 10 percent of total U.S. economic output, the most for any budget shortfall since World War Two.President Barack Obama has pledged to rein in high budget deficits by addressing long-term challenges like health care and energy costs in a fiscally responsible way.But his critics argue that the healthcare reform efforts under consideration would add to the budget strain, and they pointed to the large deficit as cause for concern.”Democrats in Washington are now calling for adding yet another quarter-trillion dollars to the deficit on health care spending alone,” Senate Republican leader Mitch McConnell said. “Congress simply can’t continue acting like a teenager on a spending spree with their parent’s credit card with no regard to who pays the bill.”In August, the White House had forecast a $1.58 trillion deficit. The figure came in smaller than expected largely because of lower-than-expected spending out of the government’s $700 billion financial rescue fund.Still, it was more than three times as large as the $459 billion deficit racked up in the prior fiscal year.For September alone, the deficit came in at $46.6 — a record for the month that marked the first time ever the United States has seen 12 consecutive months of budgetary red ink. The government normally runs a surplus in September.TREASURY OUTSPENDS DEFENSERescuing the economy and some of the country’s biggest banks from the worst recession since the Great Depression took a toll on U.S. finances, and the White House has forecast deficits of more than $1 trillion through fiscal 2011.”Future deficits are too high, and the president is committed to working with Congress to bring them down to a sustainable level as the economy recovers,” Treasury Secretary Timothy Geithner said in a statement.The $787 billion stimulus package Congress passed in February and the financial rescue fund approved last year together accounted for 24 percent of the year’s deficit total.Outlays from the Treasury Department reached $703 billion, exceeding the $647 billion spent by the Defense Department. The Pentagon is typically by far the largest single budget item.In the short term, the state of the budget depends a great deal on the health of the economy.If the recovery is sluggish and unemployment stays high, as some forecasts predict, spending on jobless benefits will remain high and revenues could come in lower than the White House expects.

CitizenOctober 17th, 2009 at 2:37 am

$1.4 Trillion Deficit Complicates Stimulus PlansBy JACKIE CALMESPublished: October 16, 2009WASHINGTON — The Obama administration said Friday that the federal budget deficit for the fiscal year that just ended was $1.4 trillion, nearly a trillion dollars greater than the year before and the largest shortfall relative to the size of the economy since 1945.The number, while lower than forecast a few months ago, underscored the challenges ahead in shrinking the deficit even as the White House and Congress are considering more steps to stimulate an economy that is making a slow recovery. The political hurdles to finding a solution were evident on Friday as each political party immediately blamed the other for the growth of the deficit.The shortfall for the fiscal year 2009, which ended Sept. 30, translates to 10 percent of the economy, according to a joint statement from the Treasury secretary, Timothy F. Geithner, and the director of the Office of Management and Budget, Peter R. Orszag. For the 2008 fiscal year, the deficit of $459 billion was 3.2 percent of the economy, as measured by the gross domestic product.Economists generally agree that annual deficits should not exceed 3 percent of the G.D.P., and that is the level President Obama had vowed to reach by the end of his first term in 2013.But subsequent spending and tax cuts to stimulate the economy, and lower-than-expected revenues as the recession deepened before bottoming out, combined to push the administration’s deficit forecast to 4.6 percent of G.D.P. for the fiscal year 2013.At 10 percent of the gross domestic product, the 2009 deficit is the highest since the end of World War II, when it was 21.5 percent. At that level, it already has become a bigger economic and a political issue than any time since the late 1980s.Investors who are essential to financing the debt, including China and other foreign interests, are eager for signs that the government will eventually regain control over its budgets.And polls show that Americans are increasingly worried as well, raising concerns about Mr. Obama’s ambitious domestic agenda, including his signature health care overhaul, that Republicans are stoking. At the same time, many Americans are demanding further help, confronting forecasts that job losses will not peak until mid-2010.Mr. Orszag alluded to the administration’s fiscal quandary in a statement on Friday. “As we move from rescue to recovery, the president recognizes that we need to put the nation back on a fiscally sustainable path,” he said. He said proposals to help do that would be part of Mr. Obama’s next budget early next year, for fiscal 2011.The 2009 fiscal year began last October, just as President George W. Bush and Congress were contending with the near-collapse of the financial system and working to enact what became a $700 billion rescue plan. After Mr. Obama took office, administration officials calculated that the deficit would surpass $1.2 trillion. Mr. Geithner and Mr. Orszag recalled that forecast in their statement on Friday.The 2009 deficit, they said, “was largely the product of the spending and tax policies inherited from the previous administration, exacerbated by a severe recession and financial crisis that were under way as the current administration took office.”The economic recovery efforts, through the Troubled Asset Relief Program for financial institutions, known as Tarp, and the $787 billion, two-year stimulus package, accounted for just under a quarter of the deficit, they said.The administration’s calculation of a $1.4 trillion deficit tracks an estimate last week from the Congressional Budget Office that anticipated the data from the Treasury and the Office of Management and Budget. The actual deficit was slightly lower than each had expected in August, when the White House budget office projected a $1.8 trillion deficit and the Congressional office forecast $1.6 trillion.The decrease from the earlier projections largely reflected updated accounting, including, Mr. Geithner said, the fact that “we are managing to repair the financial system at a lower cost to taxpayers.”The Obama administration ultimately did not need additional billions it had budgeted for the effort. Also, several major institutions repaid their bailout money with interest, and other financial companies that have not are paying interest on their borrowings.While many financial institutions have recovered — and prospered, as this week’s eye-popping earnings reports for JPMorgan Chase and Goldman Sachs showed — the persistent high unemployment, home foreclosure rates and credit needs of small businesses are keeping the White House and Congress focused on stimulating the economy. This adds to the deficit, rather than reduces it.“It would be harmful to try to balance the budget at a time when the economy has not fully recovered and so many Americans are still struggling,” said Representative John M. Spratt Jr., Democrat of South Carolina and chairman of the House Budget Committee.But on Friday, the deficit was front and center. The overall national debt, which is the accumulation of annual deficits, is nearly $12 trillion, and projected deficits for the next decade will add an estimated $9 trillion more. Administration officials say two-thirds of that is due to Bush administration policies — chiefly tax cuts, wars and the Medicare prescription drug benefit — not paid for with other savings.“Today’s deficit announcement again highlights the fiscal mess handed to the Obama administration,” Senator Kent Conrad, Democrat of North Dakota and chairman of the Senate Budget Committee, said in a statement.Representative John A. Boehner of Ohio, the Republican minority leader in the House, rejected that position. “It is irresponsible for Democrats to continue spending taxpayers’ money we don’t have to fund an agenda that would destroy the jobs we need to get our economy moving again,” Mr. Boehner said.

GuestOctober 17th, 2009 at 6:13 am

everal major institutions repaid their bailout money with interest, and other financial companies that have not are paying interest on their borrowings.Did this reporter research this? Last I’d heard total repayment was something on the order of 10%, hardly much of a dent.

CitizenOctober 17th, 2009 at 2:39 am

OP-ED COLUMNISTA Hatchet Job So Bad It’s GoodSIGN IN TO RECOMMENDTWITTERCOMMENTS(234)SIGN IN TO E-MAILPRINTSHARECLOSEBy PAUL KRUGMANPublished: October 15, 2009In the past, the insurance industry’s power has been a major barrier to health-care reform. Most notably, the industry paid for the infamous “Harry and Louise” ads that helped kill the Clinton plan. But times have changed.Fred R. Conrad/The New York TimesPaul KrugmanGo to Columnist Page »Blog: The Conscience of a LiberalReaders’ CommentsReaders shared their thoughts on this article.Read All Comments (234) »Last weekend, the lobbying organization America’s Health Insurance Plans, or AHIP, released a report attacking the reform plan just passed by the Senate Finance Committee. Some news organizations gave the report prominent, uncritical coverage. But health-care experts quickly, and correctly, dismissed it as a hatchet job. And the end result of AHIP’s blunder may be a better bill than we would otherwise have had.For 2009, it turns out, is not 1993. Once again, Republicans have tried to kill reform with smears and scare stories. But all they seem to have killed with their cries of “socialism” and warnings about “death panels” is their own credibility. Some form of health-care reform is highly likely to pass.So it’s a different game than it was 16 years ago. And it’s a game that the insurance industry apparently doesn’t know how to play.The motivation for the AHIP report seems to have been the decision by the Finance Committee to weaken the penalties for individuals who don’t sign up for insurance, even as it retains regulations requiring that insurers offer the same policies to everyone, regardless of medical history. The industry worries that some people will game the system, remaining uninsured as long as they’re healthy, then signing up when they get sick.This is, believe it or not, a valid concern. Many health-care economists believe that a strong individual mandate, requiring that almost everyone sign up, will be needed to make health reform work. And the Finance Committee probably did weaken the mandate too much.But AHIP, apparently unable to help itself, didn’t stop there. Instead, the report threw every anti-reform argument the authors could think of at the wall, hoping that something would stick.One argument was particularly striking: the claim that attempts to limit Medicare spending would lead to higher insurance premiums. In fact, the report assumes that 100 percent of any reduction in Medicare payments to hospitals will translate into higher costs for patients with private insurance.The only way to justify this claim is to assume that all hospitals are purely charitable institutions, charging as little as they possibly can. Now, some hospitals may fit this description. But all of them?What’s more, this argument stands the usual logic of markets on its head: if you believe AHIP’s story, competition raises prices instead of reducing them. And it doesn’t matter where the competition comes from: anyone who gets a better deal, whether it’s Medicare or a private insurer, makes life worse for everyone else. I don’t believe that, and neither should you.Of course, the report doesn’t mention these implications. The only bad competition it talks about is competition from the government. Specifically, it claims that a public insurance option would be a bad thing — not because it would be inefficient, but because the public plan would negotiate better prices. Isn’t that an argument for, not against, such a plan?Which brings us to the ways in which AHIP may have done health reform a favor.As I said, the individual mandate probably should be stronger than it is in the Finance Committee’s bill. But there’s a reason the mandate was weakened: fear that too many people would balk at the cost of insurance, even with the subsidies provided to lower-income individuals and families. So why not address that cost?Aside from making the subsidies larger, which they should be, there are at least two changes to the legislation that would help limit costs. First, health exchanges — special, regulated markets in which individuals and small businesses can buy insurance — can be made stronger, in effect giving small buyers a better bargaining position. Second, the public option — missing from the Finance Committee’s bill — can be brought back in, giving private insurers some real competition.The insurance industry won’t like these changes, but that matters less than it did a week ago.There’s also another point, which House Speaker Nancy Pelosi has stressed. Part of the opposition to a strong individual mandate comes from the sense that Americans will be forced to buy policies from a greedy insurance industry. Giving people, literally, another option — the right to buy into a public plan instead — would defuse that opposition.Even with stronger exchanges and a public option, health reform would probably increase, not reduce, insurance industry profits. But the insurers wanted it all. The good news is that by overreaching, they may have ensured that they won’t get it.

PeterJBOctober 17th, 2009 at 4:35 am

Addressing the question as to who, that is, the individual, is that actually knows what is occurring in the macro-socio-economic state of the World, today(?):”Estulin further reported, “that some leading European bankers faced with the specter of their own financial mortality are extremely concerned, calling this high wire act ‘unsustainable,’ and saying that US budget and trade deficits could result in the demise of the dollar.” One Bilderberger said that, “the banks themselves don’t know the answer to when (the bottom will be hit).” Everyone appeared to agree, “that the level of capital needed for the American banks may be considerably higher than the US government suggested through their recent stress tests.” Further, “someone from the IMF pointed out that its own study on historical recessions suggests that the US is only a third of the way through this current one; therefore economies expecting to recover with resurgence in demand from the US will have a long wait.” One attendee stated that, “Equity losses in 2008 were worse than those of 1929,” and that, “The next phase of the economic decline will also be worse than the ’30s, mostly because the US economy carries about $20 trillion of excess debt. Until that debt is eliminated, the idea of a healthy boom is a mirage.”[19]” President Obama, not surprisingly, doesn’t have a clue, nor the interest, nor the competence; so who knows?Geithner – SOL – Benanke, hardly as this horse plods: so who?There are a few but they won’t be heard BUT…… it is vitally necessary, a priori, for this global socio-economic collapse to be survived by the general multitude of those of the unwashed as well as those others of more favourable conditions, or so they believe (to their own peril) that the Man releasing the necessary information to all those responsible for pushing the right buttons, must know of and have hold of the “big picture”.I propose that no one – in “LEADERSHIP” really knows anything of the “big picture” and all that is happening is applications AKA programs, manipulations, OPM funding, and new reporting conditions, etc., etc., for special interests of a very small part of the global few and even all of this is befuddled, confused, desperate, biased, deceitful and pray tell, dishonest and cowardly; such is the state of “leadership” (global). And, as such, disaster mounts, looming higher and higher – all while the trusting and stupid applaud, this rogue wave is going to bring nothing but pain.It is interesting that there is more or less, less confidence in the growth by the general populace these days and this appears proportional to the sheer dishonest machinations of the slicks, banks and taxation offices that are rising in a wall of fascist desperation – which only appears to me, to promise er, more pain.How can any Bank report a loss when it is given risk free cash and credit, free reign to report as they wish, and no regulations to do anything other that they wish except to report massive new profits? And as the tide backs off the shore, all is revealed; this dear friends is a tsunami and what comes next, will be hell – er, to most! (Mileage may vary)Today, only insanity now rules; we are in a state of advanced self-induced chaos.”God help us all”.Ho hum

GuestOctober 17th, 2009 at 6:20 am

I think that they know all too well what the big picture is. They’ve all been caught playing a Ponzi Scheme and are only trying to cover their tracks before things fall completely apart. 9/11; the appointment of Paul Wolfowitz as head of the World Bank…

FEDupOctober 17th, 2009 at 7:29 am

The financial elite machine has been crowned king, ironically by our own leaders and we, the peasants, only exist to serve it.

GuestOctober 17th, 2009 at 8:33 am

a not so flattering recognition for Roubini from Business InsiderStock Market Fools: 15 Gurus Shamed By The Rally Of The Century

Guest42October 17th, 2009 at 1:17 pm

In a way, yes, they are idiots for trying to play a fair game with cheaters. However, that makes us all idiots, because we’re all continuing to play with the very same cheaters, and allowing them to go on dealing us the cards in their stacked decks.

MorbidOctober 17th, 2009 at 1:42 pm

I’m not playing in the Ponzi Casino – I took all my money off the table – for GOOD! Let these POS play against themselves. Let them stack up not QUADRILLIONs in derivatives but ZILLIONs in derivatives against each other. They will drive each other crazy. Think about it. Where is all this headed?There is no investing going on in this environment. There are only those who are having fun playing in the Casio. Why not go to Vegas?

Guest42October 17th, 2009 at 2:40 pm

Yes, I include the markets in what I said, but I also refer to everything else. Like the major corporations, MSM, politicians, congress, government in general, and so forth. Pulling out of the Ponzi Casino is a great start, but the entire system is begging for a gargantuan shake-down. And I’ve only been to Vegas through the airport, but that was more than enough for me. If I never have to go there again, it would be too soon.

GuestOctober 17th, 2009 at 6:38 pm

whether you gonna play or not is irrelevant. this Ponzi Casino is funded by FED and Treasury (aka USA tax payer’s future money) because of that, you will be affected at absolute value of your money by this Ponzi game. hehe, any way you LOSE.

Octavio RichettaOctober 17th, 2009 at 9:05 am

As posted above. BTW, take a walk around ECRI’s news section. some great stuff there, including a response to PK that says a lot about what their index is and is not and can and cannot do. Don’t put your head under a rock. THE ECRI guys have a great chance of being right. IMO, these guys have nailed it better than most. BTW, I saw the coming upturn in early Feb, and of curse got punished by it. Still my timing was decent enough to put me were I am today: 12.3% return last year and 9.75% YTD with beta risk well under 0.5 the guys that point out PE in the SP is now 140 and that I made a “gold going way down call”:I think saying I called for a big drop is a misrepresentation of what I said. I may have said that I sold around $1000 & that I own no gold/I am not interest in it right now as I don’t see significant upside potential while a return of slow grow may hit it hard. (When? Iduno)If you are a regular, you may remember my posts equating the cost of bail outs to truck loads of gold. I think I even ran a rough calculation of the value of all gold on earth mined and not=mined yet that my recollection is that the paper money being printed was a lot more. Thus, Paulson (the hedge fund guy, not the former treasurer) may have a point in piling up gold. I will have to look into this because the fact that there are many more paper dollars than the value of all the gold on earth doesn’t necessarily mean people will rush into gold. The FED fumbling the “exit strategy” could be a factor in support.On the PE ratio stuff above, you need to use smoothed earnings (i.e, Shiller’s way) he said in Bloomberg yesterday the PE is about 20. If you want to learn some cool PE stuff read the following series of teaching posts (see below) I published in April 2008.Some of you may also recall the exercise in which I calculated the market cap of financials in the SP last fall and came to the conclusion they were dirt cheap. Datz how I made my money last year. Then, of course I chickened out too early. But I don’t mind this. I still think getting out when the downside risk starts to get significant is a good strategy even if you leave some money on the table.Two calls I have gotten “egg on my face with” (commodity call leaps – OIl and Grains) and forecasting a stronger USD by now; gold was not one of them. I don’t regret so much staying in the USD as this is my base currency. IMO, One should keep a good chunk of one’s assets in the currency one uses to buy bread (assuming you are linked to one of the top world currencies)

Octavio RichettaOctober 19th, 2009 at 7:06 am

From all the stuff I read over the weekend, I have confirmed that the key ideas in this post will set the tone for the next few weeks.Stocks Rally Around the World on Earnings Outlook; Australian Dollar Rises

Octavio RichettaOctober 17th, 2009 at 9:17 am

My posts from April 2008 on how the economy and the markets are related, market efficiency, and a few simple equity valuation tools. (High School Math needed. If you don’t havy duty – but very relevant – stuff, skip it)Lots of interesting stuff above. I was working on a long post along the lines of Gloomy’s latest post this morning and lost it, so I will give it a new try. The careful reader of the materials in this blog should have arrived to conclusions which are similar to what I present in this post. I will try to simplify things as much as possible so that a big picture emerges.Two “beasts” are of interest to visitors of this blog: 1. The economy and 2. The financial markets. As I’ve said many time, these two beasts are related but they are not one of the same.Since RE (mainly housing but soon CRE) and its connection to financials were the key ingredients in the latest and greatest “mother of all bubbles”, and the main reason for the economic slowdown we are currently in, we will further divide the economy into: 1.1 RE (private housing and commercial) 1.2 Financials (Banks, Brokers, Mortgage lenders, PDs, brokers, Hedge Funds etc.) 1.3 Everything else.Similarly, we will divide the financial markets into: 2.1 debt(i.e., fixed income) and 2.2 equity markets (derivatives can be classified into either one). Furthermore, in connection with 1.(i.e., the economy), we will split each financial market, 2.1 and 2.2., into RE, Financials, and Everything else. e.g.: 2.1.1 debt instruments related to RE, etc.So we have:1. The US economy (we will leave the world economy, decoupling, etc. to future posts)1.1 RE sector of the economy1.2 Financial sector of the economy1.3 Other sectors of the economy2. Financial Markets2.1 Debt markets2.1.1 RE debt instruments2.1.2 Financial debt instruments (there is overlap with the item above; e.g. CP was used to finance MBS: i.e., ABCP and kept in an SIV)2.1.3 Debt instruments for everything else2.2 Equity markets2.2.1 RE equity instruments2.2.2 Financial equity instruments2.1.3 Equity instruments for everything else.One last note before we get started. Many of you have heard about the efficient markets hypothesis (There are many versions of it weak, strong, etc.). A grosso modo, the mantra they teach kids and grownups alike in business schools is that financial markets (debt and equity) are efficient because prices reflect all available information about the future prospects of securities (stocks, bonds, and derivatives) as set by a bunch of super smart, cold blooded, investors. The implicit assumption is that markets are efficient in time (i.e., all the time) and space (i.e., across the board – all securities priced to perfection). IMO, unless you add appropriate disclaimers, this is a BIG LIE! This is where, IMO, my 2 cents come in:1. Markets are efficient in time and space over very long periods of time. Thus, an excellent long term investment strategy is indexing. So a guy/girl in his/her early 20s/30s should just do dollar cost averaging (i.e., invest low-sums at a steady pace, sometimes “buying high” and others low) into a diversified portfolio of asset classes; turn off the radio/TV, don’t read the paper, and put out of business a lot of brokers, financial advisers, economists, news guys etc. But this is no fun; plus it would put a lot of people in the unemployment line, driving the economy further down which we don’t want.So what is the other side of the story (i.e., Il Rovescio della Medaglia – not a literal translation, just felt like bringing in Italian Rock)?2. Markets are not efficient at all times, or equivalently, there are times/periods of time during which, broadly speaking, markets are inefficient.3. For any given point in time, markets are not efficient across space, or equivalently, at any given point in time there is a non-empty universe of securities that are priced inefficiently.Not many will tell you this in so many words, but 2. and 3. above are the main reasons behind active investment management [and the fees they charge!]. But the truth is that on average (i.e., in the long term) we need to go back to 1. at which point we see that active managers, perform at the level of index funds (before fees), and they lag index funds miserably after fees – there are not too many Buffets around)So a manager may have stellar returns for some time, due to either skill or luck or both; but like most humans will eventually make mistakes and get sub-par returns or vice-versa (i.e., reversion to the mean: Good managers eventually perform poorly and poor managers eventually perform well)So why do you need all this?You will see it in my next post (this one is getting too long + it is dinner time), in which I mix the “ingredients” outlined above to come up with what hopefully should be a good recipe.(if you don’t like reading long posts, good for you! You won’t get to this point and will most likely skip the next one as you will not understand it. However, this should be no reason for concern as this is free lecturing probably as much:-)Reply to this comment By Octavio Richetta on 2008-04-06 18:05:54This is a continuation of “Written by Octavio Richetta on 2008-04-06 18:05:54”. You will not understand this post without reading my previous post.1. A rough chronology of the housing bubble1.1 As early as 2004, visionaries such as Shilling (don’t pin me down either on the precise dates or who else should get credit) starting claiming that the US housing market was getting frothy.1.2 He soon followed (2005), with the assertion that subprime was becoming the key ingredient in keeping the housing ponzi scheme going.1.3 A very important observation is that the housing bubble didn’t only benefit buyers, builders, HD, furniture joints, etc. Perhaps the greatest beneficiaries of the housing bubble (and actually the intellectual perpetrators of the crime) were the financial intermediaries: i.e., mortgage lenders, banks of all kinds, security dealers, hedge funds, etc. You know the story all too well so I will not elaborate. If any one should pay the price, do some “jail time”, it is these last set of guys. however, what are we doing? We are bailing them out, starting with BSC “THE KINGS” o Subprime!1.4 Party Like It’s 1982 essentially went on with the FED doing nothing until very recently. However, in the fall of 2006 Some awareness that subprime may be a problem developed; however, the “talking heads” view was that it would be “well contained” not even affecting the rest of the housing market! Until that point in time, almost nobody saw subprime affecting the banks much less the economy. There was some concern about mortgage lenders, e.g., The Mortgage Lender Implode-O-Meter was created.So Let’s stop the time-line stuff in the Fall of 2006 and start using the framework introduced in the previous post; Roll-up our sleeves and get into some2. Economic forecasting and financial markets analysis:People like NR (since the summer of 06) started saying that subprime as part of 1.1 (RE portion of the economy) had been abused so much that it would affect 1. (the overall economy) and that it would also affect 2. (financial markets). Hardest hit would be: 2.1.1 2.2.1(RE-related debt and equity instruments) with 2.1.2 and 2.2.2 (Financial debt and equity instruments) following simultaneously or not too far behind.This is where we need to bring in our efficient market theory stuff: If financial markets were truly efficient there was plenty of evidence in the Fall of 2006 for RE and Financials equity and fixed income to start taking a hit. You all know this did not happen! Why?It didn’t happen because we were experiencing what I labeled 2. and 3. in my previous post (2. Markets are not efficient at all times; and, for any given point in time, markets are not efficient across space).Let’s FF to the summer of 2007 in our time line:1.5 The bust of two BSC funds heavy on subprime (A coincidence? The one deepest in sh*t goes down first – LEH is next) made people realize subprime was a serious problem.All of a sudden, the FED and everybody else saw this was serious and they started doing stuff, cut the discount rate, lowering the FFR (then and now this moves will prove to be too little too late).Financial and RE-related stocks suffered a lot that summer but the Goldilocks eternal optimists decided the FED had done enough and equity markets reached new highs in October! However, reality was starting to sink in: fixed income markets, RE-related instruments in particular (you know the whole alphabet soup) started a downward spiral from which they are yet to recover.So we see that it appears the efficient market stuff is working but with great lag. The instantaneous reflection of information in stock prices they taught you in BS (a most appropriate acronym) is exactly that pure BS.We are in Nov-Dec 2007, time for another break…Preview: Our analysis of the current situation is right. We are basically betting on how long will the efficient market hypothesis to work(If you find this boring, you probably didn’t read this far. If you did and suddenly now realize it is boring, you still have time to skip my next post:-)Reply to this comment By Octavio Richetta on 2008-04-06 19:25:04Written by sam on 2008-04-06 19:05:00Thanks for the compliment. Post 2 i s above. On pole dancers, I would Love to follow up on that but that is off-topic and could get me kicked out of the blog and we don’t want that:-).Post 3 will come tomorrow. A bit more preview: Another angle Goldilocks currently endorse is that the CC turmoil is well contained within fixed income markets. That is as stupid an assertion as “subprime is well contained”. Risk premia will go up across the board, not just fixed income, and equities (which are riskier than bonds) will also get hit.Equities will get hit from two sides: lower earnings and lower PE. Lower PE is actually a reflection of a higher risk premium.A simple model. For dividends in perpetuity D the present value PV is given by: PV=D/r where r is the risk adjusted discount rate. Assume you have a company that gives out its annual earnings, E, as dividends. If we call E=EPS and PV=P, the price of the stock we see that:P=E/r.If you divide both sides of the equation by E you get:P/E=1/r.Do you see what P/E is? it is just the PE ratio so we have shown that as the risk premium (r) goes up, the PE goes down.So don’t forget that one:PE=1/r as risk aversion goes up PE goes down.In the analysis above we need to iron a few wrinkles such as for example, taking into consideration the earnings growth rate g.Reply to this comment By Octavio Richetta on 2008-04-06 19:46:02Minor correction to post above:PE=1/r as risk aversion goes up,r goes up, and PE goes down.Reply to this comment By Octavio Richetta on 2008-04-06 19:47:02This is post #3 of the series I started above which ends withWritten by Octavio Richetta on 2008-04-06 19:46:02Successful active investing requires knowing what you are doing, knowing the workings of the economy and markets and how they relate to each other. Note that active investment management and day trading are not the same thing.Despite the bad name “models” have gotten in regards to the pricing of CDOs and other instruments, some understanding of the basic models in economics and finance is needed to stay the course. Otherwise, you are just a piece of cork in the stormy ocean. When the weather is bad, you need to be be in a seaworthy vessel with a sturdy rudder if you are to stay the course, and of course survive the storm.Simple models in economics and finance should be looked at the way one looks at simple models in Newtonian physics (e.g., frictionless motion models). If you understand those, then you can make sense of what happens when friction is thrown in.Models of market efficiency, or for example, the CAPM capital asset pricing model in finance (a linear model which states that the higher the risk the higher the return investors expect) are simplified abstractions of reality. But knowing them gives you a solid framework for understanding how the real system deviates or may deviate from them.CAPM has been proven empirically. One of problems is that the model is dynamic (i.e., time dependent) so the risk-return trade off changes with time. If we measure risk via the standard deviation (SD) of return (we will ignore Beta stuff here), the higher the SD the higher the return investors expect (We are dealing here with a linear plot of SD vs. return).In the recent past investors were very willing to take risks, so the return they demanded for each extra unit of risk was low (i.e., the slope of the line was small). Now as investors become more risk averse, they demand higher return for unit of risk (the slope of the line is going up), so if we let r be the return investors demand from stocks, we see that currently r i going up.Recall our model from yesterday, we saw that PE=1/r (PE is the price earnings ratio for stocks). So since r is increasing PE is decreasing, and stocks will get cheaper. Will it happen over night? No it won’t but we will eventually get there.Yesterday, I mentioned that I had ignored the fact that earnings grow over time. If we let g be the earnings grow rate for stocks (which in steady-state needs to be under r for feasibility – you can ignore this technicality if you do not understand), it turns out that the little PE formula becomes:PE=1/(r-g)This is a beautiful little formula! which allows you to see both the effect of risk aversion and of earnings grow rates in stock prices (i.e., recession/earnings recession). Play around with it! if you let for example r=0.08 (i.e., 8%) and g=0.03 (i.e. 3%) you get PE=1/(0.08-0.03)=1/0.05=20. This is a PE of 20.Let’s say now that investors become more risk averse so they now demand a 10% return from stocks, r=0.1, and that simultaneously earnings stop growing due to the recession so g=0. So we get PE=1/(0.1-0)=1/0.1=10. So the new PE is 10 which means in our extreme example stocks would be expected to drop 50%!What we will see in reality will not be as drastic as my example. For example, if r goes up to 9% and g goes down to 1.5% (earnings growth gets halved), both very reasonable assumptions; we see that PE=1/(0.09-0.015)=13.33 or a 33% decline in stocks!Will we get exactly 33%, will it happen this week? most likely not but this is where we are heading. Could we get to PE=30 before we see PE=13? We might; but, IMO, this is a very low probability outcome.Why doesn’t this happen TODAY, I am tired of wating!: Read my posts above. It has to do with aberrations of the efficient market hypothesis. In Goldilocks all this stuff we talk about is working but with a lag.Let’s go back to the Fall of 2006; investors had enough knowledge to start “taking down” RE and financial stocks, they didn’t! Even after the evidence was in front of their eyes the summer of 2007, they didn’t care! The stock market reached a new all time high in October!But reality eventually started to sink in. And here we are, not 30% down but down from the October highs.So what is going on? I want stuff to happen faster you will say. Well, it is still Goldilocks. The latest version is that CC is over, recession will be shallow, stocks beyond financials/RE won’t suffer much. If you believe this is incorrect, you position yourself appropriately, watch and wait. If you feel the Goldilocks view is correct, there isn’t much point in shorting the market. I am now close to 30% short. Which should mean nothing to you as I may just be a stupid shortie ready to get run over by a truck. But note the truck won’t kill me as a full 20% move against my position, assuming I do not dynamically adjust as this happens, means a 6% hit to my portfolio. Which I totally dislike (rule#1&2 do not loose money) but I will survive to see another day.Reply to this comment By Octavio Richetta on 2008-04-07 15:54:49

PeteCAOctober 17th, 2009 at 10:42 am

OctavioI think it goes deeper at this point. Here’s why:1. First, if you have not read Tony Cherniawsky’s latest weekly summary, then take a look at it. You can find it here:2. Commentator Brian (Contrary Investor) has been making a case lately that the Fed is stymied. He’s right – they are. None of the Fed’s massive injections of credit are really making it to US households. They are locked out of the system by the banks and the credit card companies – all of whom have been reducing consumer credit. Therefore, consumer spending is NOT undergoing a massive increase in the USA and the current market rally is not founded on real events in the US economy.3. Which brings me to the third – and very sad – comment. Recent P/E values are at huge levels, particularly if you use trailing earnings as your measure for the “E”. So what does this mean? It means that the financial world of the United Statest has separated completely from the real American economy. The Fed/Treasury/Banks are playing massive stimulus games and jiving the Dow, while the real economy is not responding at all.4. For this reason, any analysis which looks at trends in P/E values is probably not valid at the current time – because what’s going on in the financial world of the USA is out-and-out gimmickry. It’s a very sad and pathetic situation. I don’t doubt that it will resolve – probably badly.PeteCA

GuestOctober 17th, 2009 at 9:46 am

October 16, 2009Ignorance Is Bliss by Peter SchiffWhile all the talk at present is about economic corners turned and markets charging ahead, no one is paying much notice to an American economy deteriorating before our eyes. These myopic commentators seem to be simply moving past the now almost-universally held conclusion that before the crash of 2008, our economy was on an unsustainable course. If these imbalances had been corrected, then perhaps I too would be joining in the euphoria. But evidence abounds that we have not veered at all from that dangerous path.Last week, the Bureau of Economic Analysis reported that consumer spending as a percentage of U.S. GDP has risen to 71%, a post-World War II record. This level is notably higher than other wealthy industrialized countries, and vastly higher than the levels sustained by China and other emerging economies. At the same time, our industrial output is contracting, our trade deficit is expanding once again (after contracting earlier in the year), and our savings rate is plummeting (after an early year surge).The data confirms that government stimuli are worsening the structural imbalances underlying our economy. The recent ‘rebound’ in GDP is not resulting from increased economic output, but merely from the fact that we are borrowing more than ever. That is precisely how we got ourselves into this mess. An economy cannot grow indefinitely by borrowing more than it produces. Not only is such a course untenable, but the added debt ensures a deeper recession when the bills come due.This soon-to-be-called depression will not end until the pendulum of consumer spending habits swings violently in the other direction. This will be a jarring change, but it is the splash of cold water that we need to return our economy to viability. I believe that consumer spending as a share of GDP will need to temporarily contract to roughly 50% of GDP, before eventually moving toward its historic mean of 65%. Such a move would indicate a restoration of our personal savings, a decline in borrowing and trade deficits, and an increased industrial output. That would be a real recovery.In the meantime, the higher the spending percentage climbs, the more painful the ultimate decline becomes.Consumers and governments must spend less so their savings can be made available to businesses for capital investments. Businesses, in turn, will produce more products and employ more people – increasing domestic prosperity. However, rather than allowing a painful cure to return our economy to health, the government prefers to numb the voting public with a toxic saline-drip of deficit spending and cheap money.The primary factor that enables our government to peddle economic snake oil is the dollar’s unique role as the world’s reserve currency, and our creditors’ willingness to preserve its status. By buying up dollars and loaning them back to us through Treasury debt, productive countries give American politicians carte blanche to play Santa Claus.Ironically, as foreign governments finance our spending spree, they are simultaneously scolding us for our low savings rate. At the recent G20 meeting in Pittsburgh, all agreed – including President Obama – that resolving the global economic imbalances was a top priority. By definition, this would require Americans to spend less and save more. However, with foreign central banks continuing to buy our debt, the President has shown no political will to encourage this change.Normally, if politicians run up the government deficit, voters soon suffer the unpleasant consequences of higher inflation and rising interest rates. Yet, if foreign central banks keep supplying the funds, these consequences are indefinitely postponed. As a result, there is no need for American politicians to ever make the tough choices required to solve our problems.Instead, the burden may fall squarely on the citizens of those governments doing all the lending. The conflict is that within the creditor states, a vocal minority actually benefits from this subsidy (owners of Chinese exporters, for example) while the overwhelming majority fails to make the connection. Thus, foreign politicians have the same incentives as ours to keep playing the game.The bottom line is that foreign governments can lecture us all they want about the need for prudence but if they keep lending, we’ll keep spending. Any parent knows that if you give your child a curfew yet never impose any penalties when it’s violated, it will not be respected. My gut feeling is that foreign governments are tiring of our conduct and on the verge of finally imposing some discipline. That means the dollar’s days as the world’s reserve currency are numbered, and the days of American austerity are about to begin.

GuestOctober 17th, 2009 at 6:31 pm

moronic argument, shifting blame to foreign countries? we will spend regardless foreign countries buys our dollar or debt. we can print dollar to finance expanding fiscal budget and to monetize our debt. what is there to stop FED and Treasury from printing dollars? foreign countries stop buying our dollar or debt? LOL, plz stop your childish comment. reality check, foreign countries are powerless when USA political policy is devaluing and weak dollar policy. and that political policy trump everything else.

MM CAOctober 17th, 2009 at 9:54 am

there is no recovery… We are all being BS’ed to… numbers like these tell what is really going on…State Revenue Falls Most Since 1963 on Incomes, Sales (Update2)By Jerry Hart and William SelwayOct. 15 (Bloomberg) — U.S. state tax collections tumbled the most in almost half a century in the second quarter as the economic recession curbed levies on incomes and sales.The 16.6 percent plunge was the biggest since at least 1963, the Nelson A. Rockefeller Institute of Government said today. For the 12 months to June 30, the fiscal year for most states, revenue declined 8.2 percent, or $63 billion, about twice what states got from the $787 billion U.S. economic stimulus package, the institute said.State revenue has dwindled for two straight quarters and continued to decline in July and August, the Albany-based research organization said. Budgets for the year that began July 1 already face $26 billion of deficits, the Washington, D.C.- based Center on Budget and Policy Priorities said Aug. 12, forcing state lawmakers to confront additional spending cuts.“We’re looking at a multiyear problem hitting essentially every state,” Robert Ward, the institute’s deputy director, told reporters. “It has happened during recessions before, but the depth of this decline is unprecedented in modern times.”Collections dropped in 49 states in the second quarter as sales and personal-income taxes slid for the third consecutive period, the institute said. Income tax was down 27.5 percent and sales tax fell down 9.5 percent, its study said. Both categories fell by the most in 45 years.“Many economists believe that the national recession has ended and that a tepid recovery is now underway,” Rockefeller analysts Lucy Dadayan and Donald J. Boyd wrote. “Unfortunately for states, an emerging economic recovery does not spell instant budget relief.”‘Considerably More’Figures for July and August for 36 early-reporting states showed tax collections down 8 percent, the Rockefeller Institute said. At least 17 states have announced budget shortfalls since July, with “considerably more” expected, Boyd said.New York’s tax revenue from April 1 to Sept. 15 was $634.5 million below projections and $3.6 billion less than a year ago, Comptroller Thomas DiNapoli said yesterday. California reported last week that revenue trailed a forecast made less than three months earlier by $1.1 billion, or 5.3 percent.States are anticipating more cuts to current-year budgets, already pared once to bring them into balance. Mississippi Governor Haley Barbour told managers on Oct. 13 to cut spending 5 percent because tax collections in the first three months of fiscal 2010 were 7.7 percent below estimates. Florida Governor Charlie Crist told department heads on Oct. 12 not to request more money for next year, when the state faces a $2.6 billion deficit.“It’s clear that when governors propose their budgets in January, the vast preponderance will be looking for more spending cuts and tax increases,” Boyd said.Housing MarketThe main driver for the second-quarter decline was lower income-tax collections, Boyd said on a conference call, “most likely due to lower capital gains from market declines in 2008 and the bursting real estate bubble.”Payroll-tax withholding fell 4 percent from a year earlier and estimated-tax payments made in the quarter fell 32 percent in the median state, he said.“Real wages take 13 to 17 quarters to recover from the end of a recession,” he said. “It will take several years for states to bring spending into line with incomes.”The study’s retail-sales index showed an 11 percent decline since the start of the recession in December 2007, he said. The second quarter’s 9.5 percent decline in sales taxes followed an 8.3 percent decline in the first quarter, he said.Alaska’s tax income declined the most of any state, the study said, with an 86.5 percent drop because of lower oil prices. Vermont fared the best, with a 2.2 percent gain because of a one-time estate-tax settlement.Local tax collections declined by 2.8 percent in the second quarter, the Rockefeller study said. That’s less severe than the state slowdown because municipalities rely more on property taxes, which rose “a surprising” 3.1 percent in the quarter, the report said.Still, 88 percent of local finance officers said in a September poll by the National League of Cities that they’re less able to cover expenses than in the year before.

GuestOctober 17th, 2009 at 9:55 am

US foreclosures keep soaring as unemployment remains main cause of housing woesWASHINGTON (AP) — The number of U.S. households caught up in the foreclosure crisis rose more than 5 percent from summer to fall as a federal effort to assist struggling borrowers was overwhelmed by a flood of defaults among people who lost their jobs.The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report released Thursday by RealtyTrac Inc. That puts foreclosure-related filings on a pace to hit about 3.5 million this year, up from more than 2.3 million last year.Unemployment is the main reason homeowners are falling into trouble. While the economy is likely out of recession, the unemployment rate — now at a 26-year high of 9.8 percent — isn’t expected to peak until the middle of next year.Mortgage companies sometimes allow unemployed homeowners to defer three to six months of payments while they are looking for a job. But there’s little else they can do.”The sheer scale of the problem is preventing the loan modification programs from having the kind of impact we’d all like” said Rick Sharga, RealtyTrac’s senior vice president for marketing.Last week, the Obama administration hailed a milestone in its mortgage relief effort, reporting that 500,000 homeowners have received help since the program was launched in March. But new defaults are still exceeding the number of borrowers getting help.Mortgage companies have slowed down the pace of foreclosures as they evaluate whether borrowers qualify for the administration’s program. Analysts, however, forecast that many of those homeowners won’t qualify, and foresee a new wave of foreclosed properties hitting the market next year. That’s likely to further depress home prices.Some homeowners are in such a massive financial hole that it’s hard to design a modification that will actually provide lower payments. And some have avoided paying their monthly bills for a long time.According to the RealtyTrac report, there were nearly 344,000 foreclosure-related filings last month, down 4 percent from a month earlier but still the third-highest month since the report started in early 2005.It was the seventh-straight month in which more than 300,000 households receiving a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes.Banks repossessed nearly 88,000 homes in September, up from about 76,000 a month earlier.On a state-by-state basis, Nevada had the highest U.S. foreclosure rate in the July-September quarter. Arizona was No. 2, followed by California, Florida and Idaho.

GuestOctober 18th, 2009 at 5:26 am

While the economy is likely out of recessionBy repeating this several times do people believe that that alone will make it so?I could just as easily (and likely more factually) state: “While the economy is likely nearing depression”…But when you’re a cog in the wheel of the very system that’s collapsing it’s unlikely that you’re going to point that out.

GuestOctober 17th, 2009 at 9:58 am

Bailout Helps Fuel a New Era of Wall Street Wealth NY TIMESEven as the economy continues to struggle, much of Wall Street is minting money — and looking forward again to hefty bonuses.Many Americans wonder how this can possibly be. How can some banks be prospering so soon after a financial collapse, even as legions of people worry about losing their jobs and their homes?It may come as a surprise that one of the most powerful forces driving the resurgence on Wall Street is not the banks but Washington. Many of the steps that policy makers took last year to stabilize the financial system — reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts — helped set the stage for this new era of Wall Street wealth.Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money. They also are profiting by taking risks that weaker rivals are unable or unwilling to shoulder — a benefit of less competition after the failure of some investment firms last year.So even as big banks fight efforts in Congress to subject their industry to greater regulation — and to impose some restrictions on executive pay — Wall Street has Washington to thank in part for its latest bonanza.“All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending,” said Gary Richardson, a research fellow at the National Bureau of Economic Research. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”Not all banks are doing so well. Giants like Citigroup and Bank of America, whose fortunes are tied to the ups-and-downs of ordinary consumers, are struggling to turn themselves around, as are many regional banks.But the decline of certain institutions, along with the outright collapse of once-vigorous competitors like Lehman Brothers, has consolidated the nation’s financial power in fewer hands. The strong are now able to wring more profits from the financial markets and charge higher fees for a wide range of banking services.“They are able to charge more for all kinds of services because companies need banks and investment banks more now, and there are fewer strong ones to help them,” said Douglas J. Elliott of the Brookings Institution.A year after the crisis struck, many of the industry’s behemoths — those institutions deemed too big to fail — are, in fact, getting bigger, not smaller. For many of them, it is business as usual. Over the last decade the financial sector was the fastest-growing part of the economy, with two-thirds of growth in gross domestic product attributable to incomes of workers in finance.Now, the industry has new tools at its disposal, courtesy of the government.With interest rates so low, banks can borrow money cheaply and put those funds to work in lucrative ways, whether using the money to make loans to companies at higher rates, or to speculate in the markets. Fixed-income trading — an area that includes bonds and currencies — has been particularly profitable.“Robust trading results led the way,” said Howard Chen, a banking analyst at Credit Suisse, describing the latest profits.To prevent a catastrophic financial collapse that would have sent shock waves through the economy, the government injected billions of dollars into banks. Some large institutions, like Goldman and Morgan, have since repaid their bailout money. But most of the industry still enjoys other forms of government support, which is helping to stoke profits.Goldman Sachs and its perennial rival Morgan Stanley were allowed to transform themselves into old-fashioned bank holding companies. That switch gave them access to cheap funding from the Federal Reserve, which had been unavailable to them.Those two banks and others like JPMorgan were also allowed to issue tens of billions of dollars of bonds that are guaranteed by the Federal Deposit Insurance Corporation, which insures bank deposits. With the F.D.I.C. standing behind them, the banks could borrow the money on highly advantageous terms. While some have since issued bonds on their own, they nonetheless enjoy the benefits of their cheap financing.Granted, banks are also benefiting from a stabilizing economy. The fear that gripped the markets earlier this year, when doomsayers predicted a second Great Depression, has largely dissipated. Stocks, corporate bonds, even risky corporate i.o.u.’s — have all rallied from their bear market lows, some spectacularly so. The Dow Jones industrial average has soared 50 percent this year, and touched 10,000 this week for the first time since the crisis.Banks that had marked down the value of the assets on their books during the dark days of the crisis are now enjoying a rebound in the value of many of those assets.“Confidence has returned,” said Shubh Saumya, a financial services specialist at the Boston Consulting Group. “Some of the assets that bankers wrote down last year in the midst of the crisis, now they have got some of that back.”As the number of banks has dwindled, the survivors are moving into the void left by rivals that are either dead or limping and unwilling to take risks.A big reason for Goldman Sachs’s blowout profits this year has been the willingness of its traders to take big risks — they have put more money on the line while other banks that suffered last year have reined in such moves. Executives say there are big strategic gaps opening up between banks on Wall Street that are taking on more risks, and those that are treading a safer path.Banks that have waded back into the markets have been able to exploit large gaps in the prices of various investments, a feature of the postcrisis financial markets. The so-called bid-ask spreads — the difference between the price at which banks are willing to buy things like bonds, and the price at which they are willing to sell — are roughly twice what they were two years ago.Still, the newfound success is largely limited to the big securities houses on Wall Street. This week, Citigroup and Bank of America reported losses from credit card delinquencies and mortgage defaults — a sign of the lingering pain on Main Street.

MorbidOctober 17th, 2009 at 10:11 am

The Past Is The Best Predictor Of The FutureIn terms of spending or saving in human behavior – the psychological rules are:

The longer the past has been in place the more enduring will it be in the future.

The best predictor for changing behavior is “pain” – the more the better.

blindmanOctober 17th, 2009 at 5:35 pm…..• WITH OR WITHOUT PASSION •………What’s Wrong with Fundamentalism? – Part I………Slavoj Zizek..”At some point, Alcoholics Anonymous meet Pascal: “Fake it until you make it..” However, this causality of the habit is more complex than it may appear: far from offering an explanation of how beliefs emerge, it itself calls for an explanation. The first thing to specify is that Pascal’s “Kneel down and you will believe!” has to be understood as involving a kind of self-referential causality: “Kneel down and you will believe that you knelt down because you believed!” The second thing is that, in the “normal” cynical functioning of ideology, belief is displaced onto another, onto a “subject supposed to believe,” so that the true logic is: “Kneel down and you will thereby MAKE SOMEONE ELSE BELIEVE!” One has to take this literally and even risk a kind of inversion of Pascal’s formula: “You believe too much, too directly? You find your belief too oppressing in its raw immediacy? Then kneel down, act as if you believe, and YOU WILL GET RID OF YOUR BELIEF – you will no longer have to believe yourself, your belief will already ex-sist objectified in your act of praying!” That is to say, what if one kneels down and prays not so much to regain one’s own belief but, on the opposite, to GET RID of one’s belief, of its over-proximity, to acquire a breathing space of a minimal distance towards it? To believe – to believe “directly,” without the externalizing mediation of a ritual – is a heavy, oppressing, traumatic burden, which, through exerting a ritual, one has a chance of transferring it onto an Other…When Badiou emphasizes that double negation is not the same as affirmation, he thereby merely confirms the old Hegelian motto les non-dupes errent. Let us take the affirmation “I believe.” Its negation is: “I do not really believe, I just fake to believe.” However, its properly Hegelian negation of negation is not the return to direct belief, but the self-relating fake: “I fake to fake to believe,” which means: “I really believe without being aware of it.” Is, then, irony not the ultimate form of the critique of ideology today – irony in the precise Mozartean sense of taking the statements more seriously than the subjects who utter them themselves?In the case of so-called “fundamentalists,” this “normal” functioning of ideology in which the ideological belief is transposed onto the Other is disturbed by the violent return of the immediate belief – they “really believe it.” The first consequence of this is that the fundamentalist becomes the dupe of his fantasy (as Lacan put it apropos Marquis de Sade), immediately identifying himself with it. From my own youth, I remember a fantasy concerning the origin of children: after I learned how children are made, I still had no precise idea on insemination, so I thought one has to make love every day for the whole nine months: in woman’s belly, the child is gradually formed through sperm – each ejaculation is like adding an additional brick… One plays with such fantasies, not “taking them seriously,” it is in this way that they fulfill their function – and the fundamentalist lacks this minimal distance towards his fantasy.”….

GuestOctober 17th, 2009 at 6:52 pm, annual budget deficit of 1.5-2Trillion+ (and that is optimistic number) starting from now!!who is gonna buy those debt? Fed and Treasury will work seamlessly to print dollar to monetize those debt. can Treasury ever pay back the debt? No, and why should Treasury when Fed can just print dollar and expand its balance to accumulate these toxic gov debt waste?WUAHAHA

GuestOctober 17th, 2009 at 6:54 pm

Fed expand it balance sheet 1.5-2Trillion+ with toxic gov debt waste. Wow, that will be something neat to see. oh, dollar will die but who gives a damn. WUAHAHA.

GuestOctober 17th, 2009 at 6:57 pm

foreign countries holding how much USA dollar and debt? huh? what? o.O IRRELEVANT!!! they will not dictate USA dollar or debt policy. it is our political will that dictate dollar and debt policy by FED and Treasury.

PeterJBOctober 17th, 2009 at 7:23 pm

Speaking of a “Proud and Great Nation”:”Mary Brosnahan, longtime executive director of the Coalition for the Homeless used the city’s own data, and says homelessness has been increasing each of the last five years, and currently is at an all-time high. At the end of September, 10,494 homeless families lived in shelters, including 16,615 homeless children.” I have worked and lived in many countries but rarely have I seen the plite and welfare of children ignored by their fellow man with a total lack of compassion – while collecting pay cheques and bonuses that are perceived and the tribute of kings.America – you as a Nation are doomed – you have sold your souls and know not what you do; you have lost your “HUMANITY”.A “great Nation” raped and pillaged from within. Some Government: Give BILLIONS to a few rich bankers and just screw the tears from the eyes of your children.Do you Americans even understand the fundamental concepts of “governance”?There has never been in written and unwritten history a greater National cash grab by a small minority of individuals, posing as “leaders”, nor a greater and most rapid destruction of a once great Nation.The “Barbarians” are inside the gates where they have been all the time.totally disgusted.

GuestOctober 18th, 2009 at 7:59 am

Who would you prefer?Chavez?Castro?Mao?They ain’t gettin it done either. The more you give to the destitue, the more destitute they become. Santa Barbara had a food giveaway for awhile for the local poor. Actually was quite extravagant. Word got out and hundreds of people from miles around started to take advantage of this program and they shut it down. I think the word got out that America was the land of free handouts otherwise why come here ilegally?

GuestOctober 18th, 2009 at 4:32 pm

Ilegaly? I’am sure your forefathers came here legally Ha! Many of ones that come here from across the border are decendants of mayans , aztecs and other native tribes this was there land before you came here legally looking for a handout. I am sure you came here legally but how did you came on this planet?are you a bastard?(if you don’t know the meaning check dictionary) 🙂

GuestOctober 19th, 2009 at 2:08 am

But victory is only fleeting. Just as the land will reclaim all that we see, indigenous peoples will reclaim their rights to the land.

GuestOctober 19th, 2009 at 2:42 am

Why does there have to be ANYONE in CHARGE?The more you give to the destitue, the more destitute they become.It’s a net balance. And, clearly, a result of a decrease is due to a LOSS. So, what exactly has been LOST? POWER! People give up their POWER for trinkets offered by TPTB; they do so out of standardized belief that “someone HAS to be in power.” This could be because they are conditioned to not be responsible for themselves, which then allows others to control them.There’s a famous quote that goes something like this: The tall only appear tall because you are on your knees; rise up!

GuestOctober 18th, 2009 at 1:20 pm

I would love to see a photo montage of these 16000 children next to homes of a prominent wall street banker titled “16000 homeless american children,the homes of one wall street banker…Are you proud to be american?”

PeterJBOctober 17th, 2009 at 8:18 pm

Statement of the Day:“While there have been some positive signals of late, the financial system remains fragile and key trouble spots remain,” Tarullo, 56, said in remarks prepared for a hearing in Washington. He added that it will be some time before the banking industry will “fully recover and serve as a source of strength for the real economy.” source of strength will only come when these banks are downsized, put under professionally trained management and morphed into a solid utility structure with the mandate to distribute credit for productivity and future evolution of civilization. Banking is a utility and not a profession.Question: How do you build a Nation when “everybody” lies? A survey undertaken in the USA about 10 or so years ago found that ~96% of American believed that it was “okay” to lie.Ho hum

Little SaverOctober 18th, 2009 at 2:13 am

They happily continue to lie to each other until it is not okay anymore, and than they can start paying each other’s debt with money that already wasn’t there anymore (surprise, surprise).

PeterJBOctober 17th, 2009 at 8:48 pm

Speaking when your mouth is full:The major trends at work in the 4th and 5th phases of the global systemic crisis (the decanting phase and the global geopolitical dislocation phase) are unveiling every day (1). Everyone has now realized that the United States is being swept into an uncontrollable spiral involving widespread insolvency of the country and gross incompetence of the U.S. elite in implementing the necessary solutions. The foretold US default is well underway as exemplified by the falling dollar and the flight of capital from the country: only the name of the liquidator and the recognition of the bankruptcy are still missing, but it shouldn’t be long now. Following the example of its leader, the Western bloc (which Japan has undertaken to move away from, implementing completely new political, economic, financial and diplomatic policies (2)), is in total decay symbolized by NATO’s coalition in Afghanistan (3). “Now, that’s a mouthful of a utterance!!-Global-Systemic-Crisis-The-European-Union-at-a-crossroads-in-2010-an-accomplice-or-a-victim-of_a3885.htmlHo hum

ptmOctober 17th, 2009 at 10:41 pm

Update on M3 and Inflation as derived from Fed and 15-Oct-2009 Shadowstats.comYear – M3 money supply in $trillions1959 $00.299 % Increase Doubling Interval1960 $00.315 05.35% % Cumulative1961 $00.341 08.25% 013.61%1962 $00.371 08.80% 022.40%1963 $00.406 09.43% 031.84%1964 $00.422 03.94% 035.78%1965 $00.482 14.22% 050.00%1966 $00.505 04.77% 054.77%1967 $00.558 10.50% 065.26%1968 $00.607 08.78% 074.04% 9 Year Doubling1969 $00.616 01.48% 075.53% 1980 BLS Inflation Measure1970 $00.677 09.90% 085.43% 05.84%1971 $00.776 14.62% 100.05% 04.29%1972 $00.886 14.18% 114.23% 03.27%1973 $00.985 11.17% 125.40% 06.18%1974 $01.069 08.53% 133.93% 11.05%1975 $01.170 09.45% 143.38% 09.14% 7 Year Doubling1976 $01.310 11.97% 155.34% 05.74%1977 $01.470 12.21% 167.56% 06.50%1978 $01.645 11.90% 179.46% 07.63%1979 $01.809 09.97% 189.43% 11.25%1980 $01.996 10.34% 199.77% 13.55%1981 $02.255 12.98% 212.74% 10.33%1982 $02.461 09.14% 221.88% 06.13% 7 Year Doubling1983 $02.697 09.59% 231.47% 03.83%1984 $02.991 10.90% 242.37% 05.30%1985 $03.208 07.26% 249.63% 04.58%1986 $03.499 09.07% 258.70% 02.92%1987 $03.687 05.37% 264.07% 04.99%1988 $03.929 06.56% 270.63% 05.94%1989 $04.077 03.77% 274.40% 06.71%1990 $04.155 01.91% 276.31% 07.69%1991 $04.210 01.32% 277.64% 06.53%1992 $04.223 00.31% 277.95% 05.33%1993 $04.286 01.49% 279.44% 05.42%1994 $04.370 01.96% 281.40% 05.98%1995 $04.636 06.09% 287.48% 06.52%1996 $04.986 07.55% 295.03% 07.74% 14 Year Doubling1997 $05.461 09.53% 304.56% 08.03%1998 $06.052 10.82% 315.38% 07.79%1999 $06.552 08.26% 323.64% 08.47%2000 $07.117 08.62% 332.27% 09.74%2001 $08.035 12.90% 345.17% 09.12%2002 $08.568 06.63% 351.80% 07.85%2003 $08.872 03.55% 355.35% 08.55% 7 Year Doubling2004 $09.433 06.32% 361.67% 09.09%2005 $10.154 07.64% 369.31% 10.05%2006 $11.206 10.36% 379.68% 10.18%2007 $12.917 15.27% 394.94% 10.51%2008 $14.395 11.44% 406.39% 09.26%2009 $14.432 —– —— 06.11% Sept estimateAs you can see the broad measure of money is close to stalling or perhapswill be contracting!Nevertheless, the 1980 BLS method of inflation calculation reversed itsdownward trend in July of 5.44% and up ticked in August to 5.99% and againin September to 6.11%@ Free TibetDoes this mean inflation? I must admit that I have moved fromthere-will-be-strong-inflation camp to the it-could-go-either-way camp.Every day more debt is revealed and it is truly massive debt, maybe asmuch as a quadrillion dollars (but no body really knows). Let’s say theworldwide debt is on the low side of just $250 trillion. That number isway beyond any successful government intervention.My guess is that if the current government intervention continuesand the financial system crumbles slowly or in a non-linear function,then we will see even more “gubmint” intervention and lots of inflation.I assume that if there are series of unexpected “credit events” combinedwith domino counterparty risk failures, the system would crash quickly,then we should see across the board deflation.Since in the end we are going to the same place, does it matter if weget there via the inflation road or the deflation road?Probably not. – M3 and non-M2 components since 1959 – Definitions of M3, MZM, M2, M1, & M0

GuestOctober 18th, 2009 at 11:49 am

This is revealing. If the BLS numbers are NOT gimmicked, then whydid Obama call for $250 payments to seniors?He knows exactly what is going on. More slip-ups like this Barackand your true intentions will become public.President Barack Obama called on Congress Wednesday to approve $250 payments to more than 50 million seniors to make up for no increase in Social Security next year.

FEDupOctober 18th, 2009 at 8:18 am

IS THIS THE PLAN PROFESSOR?I asked myself a simple question last night and came up with a simple answer: If I owed people trillions of dollars (like our govt and bankers), would I want the dollar to increase or decrease in value? And the simple answer is: DECREASE! And then I wondered what would be the quickest and most efficient way to accomplish that? Well, if I had a printing press (like the US Treasury for example), I would print dollars like there is no tomorrow and create all sorts of methods to spend them such as wars, bailouts, cash for clunkers, new home subsidies, etc. But, if I didn’t want the public or rest of the world to catch on too quickly as to what my plan was then my spokespeople (our leaders) would be saying the exact opposite (we want a strong dollar); hence, a classic fake out. Yes, this is a simple explanation about a complex problem but is not the proof in the pudding which by the way now costs me 20% more than a year ago?

GuestOctober 18th, 2009 at 9:22 am

—the $— C. Fred Bergstein of the Peter G. Peterson Institute (a “think tank” that understands the problem and is dedicated to try to help before it’s too late)(their web-site is highly recommended)…

blindmanOctober 18th, 2009 at 9:27 am

Love amourJacques LacanSymbolicLacan argues that it is impossible to say anything meaningful or sensible about love.[1] Indeed, the moment one starts to speak about love, one descends into imbecility.[2] Given these views, it might seem surprising that Lacan himself dedicates a great deal of his seminar precisely to speaking about love. However, in doing so, Lacan is merely demonstrating what the analysand does in psychoanalytic treatment, for “the only thing that we do in the analytic discourse is speak about love.”[3]ImaginaryLove is located by Lacan as a purely imaginary phenomenon, although it has effects in the symbolic order.[4] Love is autoerotic, and has a fundamentally narcissistic structure since “it’s one’s own ego that one loves in love, one’s own ego made real on the imaginary level.”[5] The imaginary nature of love leads Lacan to oppose all those analysts who posit love as an ideal in psychoanalytic treatment.[6]Love involves an imaginary reciprocity, since “to love is, essentially, to wish to be loved.”[7] It is this reciprocity between “loving” and “being loved” that constitutes the illusion of love, and this is what distinguishes it from the order of the drives, in which there is no reciprocity, only pure activity.[8] Love is an illusory fantasy of fusion with the beloved which makes up for the absence of any sexual relationship.[9] This is especially clear in the asexual concept of courtly love.[10]Love is deceptive. “As a specular mirage, love is essentially deception.”[11] It is deceptive because it involves giving what one does not have (i.e. the phallus); to love is “to give what one does not have.”[12] Love is directed not at what the love-object has, but at what he lacks, at the nothing beyond him. The object is valued insofar as it comes in the place of that lack..comment: i’m reading this and thinking this is thesame as economics and monetary policy, i mean, yea,at different levels everything is connected or hasthe same structural components but this convergence ofmans musings on love and his applied religion of economicshave frightening implications when one considers the” Power of Love “, as it were. no? ( place zizek quotehere. ).”This invisible threat of the Enemy legitimizes the logic of the preemptive strike: precisely because the threat is virtual, it is too late to wait for its actualization, one has to strike in advance, before it will be too late… In other words, the omnipresent invisible threat of Terror legitimizes the all too visible protective measures of defense (which pose the only TRUE threat to democracy and human rights, of course)if the classic power functioned as the threat which was operative precisely by way of never actualizing itself, by way of remaining a threatening GESTURE (and this functioning reached its climax in the Cold War, with the the threat of the mutual nuclear destruction which HAD to remain a threat), with the war on terror, the invisible threat causes the incessant actualization – not of itself, but – of the measures against itself. The nuclear strike had to remain the threat of a strike, while the threat of the terrorist strike triggers the endless series of strikes against potential terrorists… The power which presents itself as being all the time under threat, living in mortal danger, and thus merely defending itself, is the most dangerous kind of power.”.• MOVE THE UNDERGROUND! •………What’s Wrong with Fundamentalism? – Part II………Slavoj Zizek. we need to be sane here. we can do it!i think the technique is mindfulness, insight andeffective communication in all it’s potential forms?

HayesOctober 18th, 2009 at 9:41 am

If only the professor was not so connected to the Administration and its policies – The following is Simon Johnson’s (MIT) latest:Who Is Carlos Slim

The US increasingly displays characteristics that we have seen many times in middle-income “emerging markets” – new dimensions of vast inequality, forms of financial instability that benefit the best connected, and consistently easy credit for the privileged. But this raises the question: who exactly is going to dominate our economic and political landscape moving forward?In most emerging markets, a major crisis means that some powerful people and their firms fall from grace. After the Asian Financial Crisis (1997-98), some of the biggest Korean chaebol disappeared or broke up, numerous Thai bankers lost their top positions, and there was a discreet reshuffle among the Malaysian business elite. Russian oligarchs rise and fall with the price of oil; the process in Ukraine is similar, although somewhat murkier.With every sharp turn of the cycle, new people rise to the front – taking advantage of low asset prices and the fact that most people struggle to borrow on reasonable terms. In Mexico, after the crisis of 1994-95, Carlos Slim consolidated his position in telecoms and used this as a launching pad to become one of the world’s richest people.Three sets of players look positioned to do the same in the US today, mostly based on the amazing set of “carry trades” available if you have access to large amounts of cheap short-term funding (e.g., along the yield curve, from dollars into other currencies, and – arguably – into equity in some parts of the world).First, obviously nothing can stop Goldman Sachs and JP Morgan. With unfettered access to the Federal Reserve and no effective controls on their ability to take risk, they are in the catbird seat. The weakness of other big banks is further icing on their cake. GS and JPM are symbols will loom large over the national and international economy for a long time to come, with the main threat (to them) coming from their rather too blatant market share in many products.Second, the surviving big hedge funds will do very well (partial list). They can move fast, they have no regard for anything other than profit, and they will not be effectively regulated. Their access to credit runs through the biggest banks and this can be a double-edged sword – expect more instability in the future from hedge fund-bank dynamics (as Morgan Stanley found out last fall).Third, foreign players with sovereign backing are also going to clean up. Their credit access comes not from the Fed (although our low rates help their funding costs), but from the fact that they control or are controlled by creditworthy government elites. These foreigners will be relatively diverse (European and Asian, with perhaps some others in the mix) and they have learned to be discreet within the United States. But a great deal of the speculative business to be had is cross-border, with a funding leg in the US and a high-risk asset piece in emerging markets; they are in great position to do this.Top people in the Obama administration now begin to understand what they have wrought. The body language becomes uncomfortable when you bring up this topic and they are eager to discuss alternative ways forward.But we are entering a new, more global era of state capture, and the US government (or, more precisely, its credit) was handed over – rather meekly – during the past 12 months.Many states have been taken over by bankers; there is no shame in fighting and losing against what Jefferson called the “monied aristocracy.” But few governments, even the weakest, have handed over the keys as quietly as we did. As Lloyd Blankfein said, to an aide, on their way to the greatest sales job in the history of the republic, “You’re getting out of a Mercedes to go to the New York Federal Reserve. You’re not getting out of a Higgins boat on Omaha beach.”The winners among our financial elite are very far from the Greatest Generation, but they are the Best Paid Generation for a reason.

Winston SmithOctober 18th, 2009 at 10:48 am

“our financial elite are very far from the Greatest Generation”vent on=they are the opposite. Look at the faces of Blankfein and Diamon and Geithner and Paulson. What I see, now I might be projecting here, but what I see, are cowards. these are the guys who as one writer said ‘run fastest when the bullets fly’. And we the bloggers and liberals and free thinkers and intellectuals are probably the greatest cowards for letting it happen in broad daylight, Today, right now!- vent off.If you haven’t read these, overview of the current economic situation for the average Jane and Joe.Atlantic Magazine, The Quiet Coup- Stone Magazine-Wall Street’s Naked Swindle-

blindmanOctober 18th, 2009 at 11:08 am

w,leave vent on set a low speed to conservevaluable energy yet keep the air circulating.very fine vent you have.

MM CAOctober 18th, 2009 at 11:03 am

is there anyone who doubts that The Big Banks are not INSOLVENT?How Goldman Sachs Made $3 Billion 12 Months After We Bailed Their Lucky Asses OutDylan Ratigan|Oct. 18, 2009, 11:38 AMHow did Goldman, Sachs & Co. — saved a year ago by the US taxpayer — magically make $3 billion in 3 months a year later?This as the US dollar collapses, unemployment soars and foreclosures hit a record?Here is the Goldman, Sachs & Co. revenue break down for the past 3 months:Financial Advisory-M/A: 325 million.Equity Underwriting: 363 million.Debt Underwriting: 211 million.Trading-Principal Investments: 10 billion.Notice that 10 billion is much bigger than two or three hundred million made from the traditional Wall Street businesses.That $10 billion is evidence of their magic trick. For we the taxpayer gave Goldman Sachs the following:$10 Billion in TARP$11 Billion from the Fed$30 Billion from the FDIC$13 Billion from AIGFor a grand total of almost $70 Billion (Goldman along with every other bank and AIG would have been defunct without this money).Goldman at the apex of the crisis is delivered this money — which they then use to borrow against at $20 or $30 for every $1. Which at 30x equals $2.1 trillion in available capital.As one of the only banks in the world with money at the time, Goldman Sachs was able to buy billions in distressed assets around the world at record low prices — only to watch $23.7 trillion in US taxpayer money be deployed during the past year to re-inflate the asset’s values that Goldman had purchased with our tax money.The question is not why did we bail out the banks.The question is why did we give the banks billions of our money so they could then buy assets by the trillions with our money and they keep the profits?The answer is Henry Paulson, former Goldman Sachs CEO who ran the US Treasury, and Tim Geithner, current Treasury Secretary who at the time ran the New York Federal Reserve, willingly delivered Goldman Sachs the $70 Billion — with no strings attached.So what can we do?We must demand the return of those investment gains made with America’s money – it was stolen from us and we can get it back. Demand Claw Backs – and not from the future but from the past – That is where our money is.We must have an exchange for all credit derivatives — the current version is riddled with loopholes that let banks avoid transparency by mobbing offshore and prohibiting government regulators from being able to force the use of the exchange by the banks.So how do you do it?Heed the Call!!!! Click Here:

FEDupOctober 18th, 2009 at 11:57 am

good post. agree with Dylan: spread the truth and demand clawbacks from GS! Evidently, there are no limits to the injustices our elected leaders are willing to allow in order to support the financial elite. Everyone, place your hand over your heart and repeat after me: “I pledge allegiance to the flag of the United States of America, and to the Oligarchy for which it stands, one Nation under Goldman Sachs, uncontrollable, with ecomonic slavery and injustice for all.”

GuestOctober 18th, 2009 at 12:38 pm

who gives a damn about “grand total of almost $70 Billion”? USA gov is already in defunct mode with current 1.5Trillion+ deficit and projected 1.5-2Trillion+ annual deficit. i think you missing the big picture.

GuestOctober 19th, 2009 at 3:00 am

This money that is supposed to be “ours” sprang into existence because of the banking industry. “We” wrote IOUs to the banks. The banks are now getting REAL money back via the government.The banks (which include the “investment” ones), especially the big ones, are part of an ugly system, a system that if we were to “fix,” to borrow the oft used phrase, would only be like putting lipstick on a pig.Garbage in, garbage out. It’s the system! As Max Keiser says, it’s all a Ponzi Scheme!

HayesOctober 18th, 2009 at 11:43 am

The latest from ZHBrokedown Palace: The Undermining of Property Rights in America

Zero Hedge recently highlighted the TPG raid on CDOs. This action puts into focus the alarming trend of the undermining of creditor rights. When even the Courts are in on the gang bang, what hope do we have?The battlefield: CDOs, mortgages, corporate debtThe players: hedge funds, management teams, elected officials, lobbyists, unionsThe weapons: loopholes, new precedents, bankruptcy court, political pressureThe Chrysler debacle was stink enough, but the trend of collateral tampering is an outright stench today. Property rights have allowed the U.S. to flourish. They are bedrock of our economy. They allow facilitate the spread of credit and economic growth that some other countries cannot match.In Chrysler we saw legal precedent created where a *secured creditor* received less on its contracted collateral than unsecured creditors. In one fell swoop, we saw fiduciaries abscond, “disinterested” advisors incented to rubber-stamp, and the Courts join in on the rubber stamping party (more on this later). Most importantly, we witnessed a government that not only sanctioned this egregious behavior but astonishingly pushed for it. The Government actually labeled those who filed objects to the deal as “terrorists” (you can’t make this up). The Government actually vetoed Chrysler’s offer to give secured creditors additional consideration. Our lawmakers were so involved that Chrysler’s own attorneys tried to block discovery of their communications with Washington (the attorney’s clients were Chrysler, not Washington). We must never forget Obama’s alleged threat of using the “White House Press Core” to …

blindmanOctober 18th, 2009 at 12:53 pm

@ w.s,.”If you haven’t read these, overview of the current economic situation for the average Jane and Joe.”…..”Our economy is so completely fucked, the rich are running out of things to steal.” matt taibi, rolling stone article 10/14/2009..Wall Street’s Naked see dear “leaders”, the world knows you are are now falling into the “grand trap” of having tosave “the country” to save “yourselves”. ages have thisdynamic where the changing of the age brings about theacceleration of historic implications and “one” no longerhas the luxury of behaving selfishly in the moment withthe abstract negative historic evaluation at a comfortabletemporal distance. ?me thinks. pressure is building inside the collapsingbubble. ……pressure, heat, light ..?

blindmanOctober 18th, 2009 at 2:00 pm

ps.the safe haven is integrity, honesty etc.. truth,should you need reminding/have forgotten.(seduced)that other shit doesn’t work. notice where we are now andhow we got here?

GuestOctober 18th, 2009 at 4:58 pm

BlindmanLeaders were engaged in lot of inhumane activities all over the globe for along long time. the wealth of the country was not created from thin air. The wealth of the planet is constant it never changes but changes hands. So lot of resources were brought from outside often from poor parts of the globe to enrich us over here. For all these years when this was going on nobody said anything every body turned a BLIND eye to the policies we were engaged in to extract resources. Seems to me all these big corporations cannot feed now outside and have turned canabilistic and started to eat that hand that feeds it.And this have opened the eyes of every one in this country. Where were all the see’ers people around the world were victimized and plundered?

blindmanOctober 18th, 2009 at 7:46 pm

g,i think you are right except wealth may be createdout of “thin air” ?(voice) and is perhaps not constant but can either be increased or destroyed, dependingon the capacities of mankind individually and incommon understanding and cooperation? (language withbasis in truth of the integration of feeling,thoughtself and community in environment)? the difficultyis tremendous but this is “our” problem. it isnot going away until we see it, accept it andsolve it.the see’ers people have been around some but,as now, they are ignored mostly for all the reasons being discussed. diversion, delusion, general distraction and ignor-ance, or maybe seems that it takes greater and greater suffering to inspire greater insight and maybe “growth”. it, suffering, could be avoided some or minimalized by application of greater insight but perhaps that is just not our current “nature”. or maybe the pain has to reach into a greater portion of the population to awaken the sleeping unconscious collective mind from it’s dreaming? as that mind carelessly dreams on, letting the real disaster proceed, more and more of the populations are brought into the realm of the suffering and are inspired to open their eyes or perish. ” it takes a village ” hillary c. ?or something like that?on a cynical note, given the state of american media, education, economy, culture etc. it is a miracle that we are able to get up in the morning, for those who continue to do so. the dysfunction is deep butnature has designed an amazing backup system basedin simplicity and truth and their efficacy.our main problem seems to be that our lies cannot sustain themselves. we need better lies to tell ourselves! or maybe some other alternative?

GuestOctober 19th, 2009 at 3:08 am

i think you are right except wealth may be created out of “thin air” I don’t agree, unless you’re talking about wealth as applies to the monopoly game. When it comes to the real world, NOTHING comes out of thin air (except air and solar energy). We’ve only taught ourselves, through the deceit of TPTB, that wealth can be created out of thin air: it’s the trick of TPTB, it’s the curtain protecting them from being exposed.

GuestOctober 19th, 2009 at 7:37 am

you guys blabla too much!!! one thing we know dollar and USA debt is created out of thin-air and becomming more and more bubblicious!! since most people equate money=wealth. YES, wealth is created out of thin-air while resources and commodities are not!!! unbelievable, we still have people blabla about this.

blindmanOctober 19th, 2009 at 9:12 am

g,the “voice” that speaks the words that containthe communication of knowledge, or the wordsthat impact the mind of the unknowing and influencethat mind to become a knowing mind, this comesout of “thin air”.sort of a pun or funny reference? but yea, solarand wind, gasses and other energy. there is quitea bit there in thin air, more than we appreciate.i’m sort of surprised it isn’t commodified andtraded on a market somewhere.consciousness thin air life breath…time comes out of thin air?thin air is undervalued.

MorbidOctober 18th, 2009 at 7:05 pm

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says

Oct. 15 (Bloomberg) — The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

Watch Out Below

GuestOctober 18th, 2009 at 7:13 pm

what a moronic analyst. if there is change to global currency system, then dollar will accelerate its down fall. wuaHAHAHA, what a moron.

PeteCAOctober 18th, 2009 at 8:55 pm

Notwithstanding what happens to the dollar after it loses reserve status, the above statement is still profound. A drop in the dollar to 50 yen is a huge currency move, esp. over a 12-14 mo. time period. The dollar is sitting at 90-yen now. This prediction, if true, would effectively represent a currency crash for the dollar. This is a strong statement coming from an analyst at a respected Japanese bank.PeteCA

blindmanOctober 18th, 2009 at 8:31 pm

Flirting with FascismJune 30, 2003 IssueNeocon theorist Michael Ledeen draws more from Italian fascism than from the American Right.…..”Ledeen has gained notoriety in recent months for the following paragraph in his latest book, The War Against the Terror Masters. In what reads like a prophetic approval of the policy of chaos now being visited on Iraq, Ledeen wrote,Creative destruction is our middle name, both within our own society and abroad. We tear down the old order every day, from business to science, literature, art, architecture, and cinema to politics and the law. Our enemies have always hated this whirlwind of energy and creativity, which menaces their traditions (whatever they may be) and shames them for their inability to keep pace. Seeing America undo traditional societies, they fear us, for they do not wish to be undone. They cannot feel secure so long as we are there, for our very existence—our existence, not our politics—threatens their legitimacy. They must attack us in order to survive, just as we must destroy them to advance our historic mission.This is not the first time Ledeen has written eloquently on his love for “the democratic revolution” and “creative destruction.” In 1996, he gave an extended account of his theory of revolution in his book, Freedom Betrayed — the title, one assumes, is a deliberate reference to Trotsky’s Revolution Betrayed. Ledeen explains that “America is a revolutionary force” because the American Revolution is the only revolution in history that has succeeded, the French and Russian revolutions having quickly collapsed into terror. Consequently, “[O]ur revolutionary values are part of our genetic make-up. … We drive the revolution because of what we represent: the most successful experiment in human freedom. … We are an ideological nation, and our most successful leaders are ideologues.” Denouncing Bill Clinton as a “counter-revolutionary” (!), Ledeen is especially eager to make one point: “Of all the myths that cloud our understanding, and therefore paralyze our will and action, the most pernicious is that only the Left has a legitimate claim to the revolutionary tradition.”Ledeen’s conviction that the Right is as revolutionary as the Left derives from his youthful interest in Italian fascism. In 1975, Ledeen published an interview, in book form, with the Italian historian Renzo de Felice, a man he greatly admires. It caused a great controversy in Italy. Ledeen later made clear that he relished the ire of the left-wing establishment precisely because “De Felice was challenging the conventional wisdom of Italian Marxist historiography, which had always insisted that fascism was a reactionary movement.” What de Felice showed, by contrast, was that Italian fascism was both right-wing and revolutionary. Ledeen had himself argued this very point in his book, Universal Fascism, published in 1972. That work starts with the assertion that it is a mistake to explain the support of fascism by millions of Europeans “solely because they had been hypnotized by the rhetoric of gifted orators and manipulated by skilful propagandists.” “It seems more plausible,” Ledeen argued, “to attempt to explain their enthusiasm by treating them as believers in the rightness of the fascist cause, which had a coherent ideological appeal to a great many people.” For Ledeen, as for the lifelong fascist theoretician and practitioner, Giuseppe Bottai, that appeal lay in the fact that fascism was “the Revolution of the 20th century.”

GuestOctober 19th, 2009 at 3:16 am

What a revolting thought–championing fascism. Here is a link to the Wikipedia article on Ledeen: comes off as at best a slippery character, even if you admire that sort of thing (stong-arm thuggery). Evidently he was regularly consulted by Karl Rove during the first eight years of the Bush-Cheney-Obama administration. There are plausible allegations that he was the lynchpin of the yellowcake controversy that led to the current Iraq war. All of this from the wiki article.The claim that he supports war and is indifferent to casualties in war is particularly unsettling. I have a feeling that many soldiers who actually serve in Iraq would regard him is another contemptable little pantywaist armchair general who is no more solicitous of our soldiers’ lives than he is of Iraqi lives. Nothing in the wiki article showing that he has actually served in the military.Can’t help but see the attitudinal similarities between now and the most decadent period of the Roman Empire. Perhaps it is time we reinstitute the coliseum with it’s gladitorial combats and throwing people to lions. Ave Caesar! Nos qui morituri sunt te salutamus! But wait! We must first reduce the plebs to grinding poverty before they can truly appreciate such spectacles. At least everything seems to be going according to the script so far as we slip into decadence and decline–Ausrottung der Beste.Please pardon my occasional apoplexy…

blindmanOctober 19th, 2009 at 8:51 am

g,i think ledeen’s “philosophy” is exactly what hasbecome the defacto paradigm of the currentu.s. regime. anti “philosophy” posing as alove of thought or the intellect. they see itas the only way to proceed given their limitationsand vested interests. if you watched the “new americancentury” you would see there preserved and exposedjust how ugly and inhumane we have become. i agree.i posted this piece because people are not awareof it’s existence or it’s relevance to where we arenow. imo.”seek and you will be disturbed”.all the isms seem to be regressive. a lust forinnocence and utopia where we are not yet awareor awake to our responsibilities. dreamy new beginnings where we can be young, strong and free. escapism. or all isms are a form of escapism. the basis for abureaucracy that will figure out what we shall doand once that has been determined it grows and spreads for it’s own justification and moral imperative?culture is the precursor to bureaucracy, family the precursor to culture, motherhood to family…and as ledeen says he and his “practical philosophers” want to create chaos out of all of it and then kill all competition, ie humanity.i see the effects of this everyday, internalized in the people i know and meet and it is not getting better but perhaps worse. i think you know what i’m trying to say.?

wethepeepleOctober 19th, 2009 at 8:37 am

This guy Ledeen is only one of a movement that is out of control. Neocons are drunk on their own propoganda of exceptionalism, who believe they are the untouchable, and above the law. Neoconservatism is an international criminal enterprise and a cancer to the ideals of democracy, and must be rejected.

GuestOctober 19th, 2009 at 3:34 am

I propose that the government itself is abolished. That way those that corrupted it will be deprived of their basis of their power!

Pecos BankerOctober 19th, 2009 at 3:31 am

Open letter to Joe BidenDear Joe,You have always seemed like a decent person to me. You live modestly and I believe you really care about the common people of this country and undoubtedly do not like what you see going on in the Obama administration at this point. We haven’t heard from you much these last few months. Have you been muzzled by those in charge?Being a man of principle, please speak out against what you see happening! Do not let your good name be tarnished by association with the festering corruption you see all around you. We need you, Joe, at this critical period in our nations history where all seems lost and beyond repair!

GuestOctober 19th, 2009 at 8:29 am

For those in the US who have access to TV, PBS’s Frontline is airing what looks like a pretty good piece.What 13 bankers were in Larry Summers’ office? I think that they should ALL be prosecuted!The Warning

FRONTLINE PresentsThe WarningTuesday, October 20, 2009, at 9 P.M. ET on”We didn’t truly know the dangers of the market, because it was a dark market,” says Brooksley Born, the head of an obscure federal regulatory agency — the Commodity Futures Trading Commission (CFTC) — who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country’s key economic powerbrokers to take actions that could have helped avert the crisis. “They were totally opposed to it,” Born says. “That puzzled me. What was it that was in this market that had to be hidden?”In The Warning, airing Tuesday, Oct. 20, 2009, at 9 P.M. ET on PBS (check local listings), veteran FRONTLINE producer Michael Kirk (Inside the Meltdown, Breaking the Bank) unearths the hidden history of the nation’s worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.”I didn’t know Brooksley Born,” says former SEC Chairman Arthur Levitt, a member of President Clinton’s powerful Working Group on Financial Markets. “I was told that she was irascible, difficult, stubborn, unreasonable.” Levitt explains how the other principals of the Working Group — former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin — convinced him that Born’s attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was “clearly a mistake.”Born’s battle behind closed doors was epic, Kirk finds. The members of the President’s Working Group vehemently opposed regulation — especially when proposed by a Washington outsider like Born.”I walk into Brooksley’s office one day; the blood has drained from her face,” says Michael Greenberger, a former top official at the CFTC who worked closely with Born. “She’s hanging up the telephone; she says to me: ‘That was [former Assistant Treasury Secretary] Larry Summers. He says, “You’re going to cause the worst financial crisis since the end of World War II.”… [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'”Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. “Born faced a formidable struggle pushing for regulation at a time when the stock market was booming,” Kirk says. “Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves.”Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.”It’ll happen again if we don’t take the appropriate steps,” Born warns. “There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience.”

FEDupOctober 19th, 2009 at 9:43 am

The PLAN is working-for now anyway! Just keep devaluing the dollar so the foreigners keep buying our debt!!! Oct. 19 (Bloomberg) — Investors can’t get enough Treasuries even as the U.S. budget deficit climbs beyond $1 trillion, the government sells a record amount of debt and the dollar declines to the weakest level since August 2008.Foreign buyers increased their holdings for a fourth consecutive month in August, to an all-time high of $3.45 trillion, according to Treasury Department data released Oct. 16. U.S. demand is being spurred by a rising savings rate and concern the economic recovery may falter. Fixed-income funds have attracted 18 times more money than stock funds this year, according to data compiled by Morningstar Inc. and Bloomberg.Bond investors see no reason to abandon Treasuries with the Federal Reserve likely to keep interest rates on hold until at least the second half of 2010. The 15 percent drop in Intercontinental Exchange Inc.’s U.S. Dollar Index from its high this year on March 4 means international investors can buy U.S. debt more cheaply without worrying that speculation about interest rates will boost volatility and erode returns.“The same yield is more attractive” to foreigners because of the weaker greenback, said Todd White, who oversees government debt trading in Minneapolis at RiverSource Investments, which manages $90 billion of bonds……

PeteCAOctober 19th, 2009 at 9:55 am

Doesn’t make anysense at all. I’m wondering if the data are being fudged, or foreign central banks are participating in a deliberate scheme to prop up US debt. See earlier comments about possible devaluation of US dollar down to level of 50 Japanese yen. Who in their right mind would hold any US assets during that kind of currency devaluation – let alone assets that provided minimal yields such as UST’s ??MORAL for the FED:You can jive some of the markets all of the timeAnd you can jive all of the markets some of the timeBUT … you can’t jive the entire global financial system all of the timePeteCA