Nouriel Roubini's Global EconoMonitor

Eastern Europe: Out of the Danger Zone?

Fears of a full-fledged regional financial crisis across Eastern Europe have eased, calmed by a strong IMF presence, hefty external assistance to those in need, and a general improvement in global risk appetite. Nevertheless, the region is not out of the woods. The specter of a Latvian devaluation still looms, banking stress continues, and rising political risk in several countries with IMF programs is a concern.

The Good: Bright Spots Have Emerged

Risks may linger, but bright spots have emerged. The second quarter upturns (q/q) in France and Germany—key export markets and important sources of foreign capital for Central and Eastern Europe—are a positive sign, but the jury is still out on the strength of the recovery. Meanwhile, the improvement in global risk appetite cannot be underestimated. As the saying goes, “A rising tide lifts all boats.” For now, investor appetite for Eastern European sovereign debt has picked up compared to earlier this year, which has alleviated external financing risks.

The Improved: Contagion Effects from a Latvian Devaluation Likely To Be Limited

While devaluation is not imminent in Latvia, the risk that it will happen next year remains high. The potential for contagion into other CEE economies, however, is more limited now than it was this summer. Temporary ripples throughout the region’s currency and stock markets are likely in the event of devaluation, but the effects, for the most part, should not be lasting. Investors have had time to digest the risk and policymakers have had time to prepare. A recent IMF paper by Prakash Kannan and Fritzi Köhler-Geib shows that the degree of anticipation of a crisis is an important determinant of whether contagion occurs.

The risk of spillover effects is also limited by the fact that CEE economies have increasingly differentiated themselves from each other. Poland, for example, stands out as the only EU economy to have averted recession. Central European economies, like the Czech Republic and Poland, are widely seen as fundamentally healthy and should largely be insulated from long-term ill effects.

Nevertheless, RGE continues to believe that a Latvian devaluation could shake confidence in other currency pegs in the region. That means Estonia, Lithuania and Bulgaria, which all have fixed exchange rates to the euro, could experience the most severe aftershocks if Latvia abandons its peg.

The Bad: Banking Stresses Remain

Eastern European banking systems have come under stress as the number of non-performing loans (NPLs) on their balance sheets has spiked amid sharp economic contractions. The peak is not expected until early 2010, as NPLs typically lag the business cycle by several months. Deutsche Bank forecasts NPLs will jump to 5-10% of total loans in the CEE-3 (Czech Republic, Hungary, Poland), 15-25% in the Baltics, 15-20% in South East Europe and 30-45% in Ukraine.

Foreign-owned (primarily Western European) parent banks operate in the region via subsidiaries and account for 60% to 90% of total bank assets in most CEE countries, and the fear has been that rising NPLs could test these parent banks’ commitment to the region.

RGE expects parent banks to stay the course, but the possibility of a complete pullout (while highly unlikely) cannot be completely discarded. A week ago, Swedbank—a top Swedish bank and Latvia’s largest lender—raised the threat of withdrawing from Latvia if lawmakers there pushed through a controversial mortgage bill. “If this runs through we need to reconsider our operations in Latvia,” said Thomas Backteman, vice president of corporate communications for Swedbank, according to Reuters.

In recent months, foreign parent banks in some of the worst-hit economies—Hungary, Romania, Serbia—have collectively pledged to support their subsidiaries as needed, making a pullout highly unlikely. The bigger concern is further tightening of lending, which will cut into the region’s growth prospects and delay recovery.

The Ugly: Political Uncertainty Threatens IMF Programs

There is no doubt that IMF programs in some of the region’s most vulnerable economies—Bosnia, Hungary, Latvia, Romania, Serbia, Ukraine—have played an important role in calming fears of a regional financial crisis.

Even with IMF programs in place, however, these economies are not immune to crisis. Of particular concern are the difficulties these governments might face in meeting loan conditions as they try to balance electoral ambitions against economic realities. Will they adhere to their IMF programs? If they don’t, will the IMF keep lending anyway? There are no easy answers to these questions. If financing is halted, these countries could again be facing full-blown capital account crises.

Compared to practices during the Asian Crisis, the IMF has shown a newfound flexibility and leniency in dealing with program countries. The Fund dropped its request for land reform in Ukraine and approved wider budget deficit targets than originally agreed in Romania, Hungary, Latvia, Serbia and Ukraine. However, the lender’s flexibility is not boundless.

So far, the spotlight has focused on Latvia’s government, which is struggling to cut spending and keep its currency peg. Latvia’s lack of adherence to loan program targets resulted in a delay in the IMF’s disbursement of a €0.2 billion loan tranche, originally due in March but not paid out until August. Ukraine is another problem country where authorities have failed to meet program targets—with January presidential elections looming, the government has stonewalled on targets of energy reform and raising household gas prices. In November, the IMF will decide whether to disburse a $3.8 billion tranche to Ukraine.

Romania has emerged as the latest hotspot and could put the IMF in a difficult position. The abrupt collapse of the government in October has left a political vacuum and raised fears over the country’s ability to adhere to its €20 billion loan agreement. The conclusion of the second review of the IMF program is scheduled for December and involves a €1.5 billion disbursement. Some analysts expect that payment to be delayed. The concern is that Romania’s uncertain political situation could affect the viability of the entire program.

99 Responses to “Eastern Europe: Out of the Danger Zone?”

PeteCAOctober 21st, 2009 at 2:06 pm

There are two very good articles that talk about the social impact to our country (USA) from the on-going economic debacle. I think it’s fair to describe these current events as a “debacle” – since neither Wall St nor Washington DC have implemented any real reforms (“reforms with teeth”) that change the underlying structural problems with the US economy.Here is a new article by Jim Quinn:Another American Revolution Coming Soon?and here is a very interesting piece about generational changes in the USA that was highlighted by the folks at Casey Research. It is based on a recently released book (on my reading list).Generations and Crises In American HistoryI was quite encouraged to see that Peter Schiff has decided to run for a Senate seat. I honestly don’t know what his chances are, but he deserves support if you are unhappy with the current status quo in our political system. I’m not optimistic that a few independent thinkers like Ron Paul and Peter Schiff will be enough to turn the tide in Washington DC.Instead I have the uneasy feeling that major economic and political turmoil is bearing down on the USA in the next 5-10 years. Our system of government – and our entire social structure – is incapable of “reinventing itself from scratch” in such a short time.And mostly – I just really wonder to myself as an American parent how I am ever going to get my kids ready for the future they face. It’s not easy. They are lost in a world of Facebook, MySpace, Instant Messaging, Skateboards, Techno, Scene Hairsyles and Body Piercings. I’ve got no problem with change. But these kids are a long way from being able to survive in a society that’s facing a collapse in its living standards.PeteCA

CaponeOctober 21st, 2009 at 2:22 pm

PeteCA, I am not a parent. So let me offer parenting thoughts?!? One thing I have been forced to learn recently is to wake up every day and be grateful for every single last detail of every positive thing I have. For many, many months I read that list every morning and still should do so. There is a positive in each and every situation. To the extreme, if you were in prison you could be grateful in your mind for the food on your plate at meal time for example. Teach them gratitude constantly. Teach them to serve and see the many who are less fortunate – soup kitchens and food pantries. You can not be miserable in your own situation if you are busy helping others…Whether in a boom, recession, deep recession, an A-Z shaped recession, depression or severe nuclear economic cataclysmic Hyperinflationary Depression, the opportunity to serve is constant. It has been and always will be there regardless of any situation.It would be neat if our leaders and the handful of families who control the banking system could grasp these concepts and actually change the reality before us.that is my $.02or become Pete(and family)Canada ? 🙂

MAOctober 21st, 2009 at 3:09 pm

My advice… Teach you kids to lie, cheat and steal, but do it within the legal boundries of grey areas of law. Teach your kids how to beat the system and play the angles.Hopefully they will become good enough at it to achieve great success within our current system.Are there any cases of good, honest, hard work that have resulted in grand success stories? I haven’t heard of too many recently. (I wish that was a joke)The counter argument is, you can save your soul…. Jibberish!Once you achieve success through angling, use your newfound power and wealth to do some good things for others. That system/style of philanthrapy seems to have cemented itself into our modern society as a justifyiable means to an end.All the best,Miss America

FEDupOctober 21st, 2009 at 2:32 pm

Drastic change is necessary to rebalance the ever widening gap between the elites and the rest of us. And yes, this new generation has a tougher battle ahead of them; I sometimes tell myself they subconsiously already know this as I deflect such acidic responses such as “whatever”, “talk to the hand”, “leave me alone, you don’t know anything” from my 18 yr old. This generation could end up being called Generation “R” for renew and restore democracy or Generation “L” for lost and low payed.

The AlarmistOctober 22nd, 2009 at 2:04 am

You could teach your kids to shoot and to keep their heads down when being shot at, because the most reliable way out of this mess is hyperinflation, and the next is outright war with someone, and you can bet the latter will almost always follw the former in such a heavily armed country.You could also teach them to grow and preserve their own food. That is also useful.But hey, Facebook, etc. are easy. Your kinds will have to learn to fend for themselves.

TobyOctober 22nd, 2009 at 8:02 am

Pete,have a look at generational Dynamics, there you have all predictions already analyzed and as well what was predicted years ago.Generational Dynamics is a historical methodology that analyzes historical events through the flow of generations, and uses the analysis to forecast future events by comparing today’s generational attitudes to those of the past.

GuestOctober 23rd, 2009 at 8:18 am

“We’re pro American” sigh, I’m sure there’s all kinds of racist crap built into this. Anyway, it’s not rocket science, the flow is as easy as this to predict:From bondage to spiritual faith;From spiritual faith to great courage;From courage to liberty;From liberty to abundance;From abundance to selfishness;From selfishness to complacency;From complacency to apathy;From apathy to dependency;From dependency back again to bondage.

Pecos BankerOctober 21st, 2009 at 2:47 pm

Spent a lot of time over at Fabius Maximus. I recommend it highly. I remember remarking that it would nice to have a geopolitical perspective on things, which would give some context for our economic discussions. Well, this is a good site to go to for that. Just google Fabius Maximus blog and you will be there. Also some very interesting discussions on climate change. I also checked out some of his listed blogs and found Spengler, published by the Asia Times the most interesting.Relating to PeteCA’s post above. Yes, that’s it. It is troubling to think about the future for my children. So far they are doing very well, but I worry what is happening to this country. Things could get horrendous so quickly. There doesn’t seem to be anyone captaining this ship. So far all we have seen is a replay of the Titanic. It’s amazing how prophetic that movie was!

PeteCAOctober 21st, 2009 at 3:37 pm

PB: By the way – I noticed your open letter to Joe Biden on one of the previous threads at RGE. You made some good points. But we all have to wonder – what on earth has happened to Joe Biden??? It’s like the man has completely disappeared … no-one ever says anything about him.PeteCA

GuestOctober 21st, 2009 at 5:04 pm

Ihave just seen in german tv, that these asshat is in poland to inform the polish about the mighty presidential military plans.They are lucky about the plan to station american troops and missiles in their land.After this he is goin to romania and the chezs.I wonder what the russians think about that.

Pecos BankerOctober 21st, 2009 at 8:44 pm

For what it’s worth, PeteCA, Joe did come out and say it’s a depression after I posted that. See the following: first saw this on Zerohedge, but they seem to have removed the item. I scanned their articles going back to the 17th and it was nowhere to be found. Is ZH knuckling under to state censorship or did I just look in the wrong place on their site. Disquieting, to say the least. One of the posters had written a witty dialogue between Rahm Emmanuel and Joe in the comments section of that Zerohedge item.

blindmanOctober 21st, 2009 at 5:54 pm

@ prior thread. repeat and…..yes, this was the essence of what happened. Born who was head of the CFTC raised red flags back in 1998-99 about the potential lethal effect of the OTC derivative market because of no transparency, no regulation and no accounting of the number of derivative deals. She was sternly warned by Greenspan, Rubin and Summers (let’s call them GRS) to leave things alone and not interfere with the free markets. Shortly thereafter, Longterm Capital Management (LTCM) started to implode which led GRS to order the 14 largest financial institutions to all contribute hundreds of millions to stop the crisis. Again, Born tried to introduce legislation to regulate the derivative market and this time, GRS along with our illustrious Congress shut her down completely by severely limiting the power of the CFTC. The bank lobbyists had won again! Born finished out her term and resigned. Next comes the current financial meltdown of 2008. Born says this was no surprise and these huge crises will continue until we learn the lessons from the past. Only Greenspan has since acknowledged thathis “world view of self correcting markets for the past 40 years was wrong”; yet current proposed regulations of the OTC derivative market are being strongly opposed by Wall Street. There’s more, but those were the main points of the show.Hide reply Reply to this comment By FEDup on 2009-10-21 07:12:34f,also, fraud is a market tool, not criminal. that isbizzare. i don’t think everyone has consciously realized this, the implications. maybe we are closeto the realization.and a. lewis, sec. ” i could have made a difference “.he did, but as another champion of free fraud fraud.Reply to this comment By b on 2009-10-21 08:24:38.think about this for a while. the shadow economy,or financial sector accepts fraud as a viableeconomic tool. fraud has value? it is like amagic bullet. like heroin. it solves your problem.there is no threat of prosecution, no criminality.only negotiated settlements between co inspiredparties. no law, only deals. fine. fraud the real economy things are different. actuallythe real economy is financed by this othersuper-real economy with magic bullets and heroin.but the real economy isrequired to play by the rules established inservice of the financial sector and it’s addictions and requirements. the real economy pays taxes, it is regulated, it suffers prosecution when regulations are violated. it must pay or hit the street whereasit’s master is fraudulently financed by the taxpayerhimself, ie. the guy on the street with no magic bullets and no legitimate free heroin.this seems to me to be a moral hazard, lettingfraud be worked out in the market place for somebut not for others. let us all become scumbags, aye?what is next? homicide decriminalization for thefinancial sector, shadow system. right, it hasalready been done. so what is left? and what is next? we need to pick god up off his ass?.…. How did it happen?I think it happened because there was no oversight of a very, very big, dynamic, growing market. Market participants don’t look out for the public interest. Traditionally, government has had to protect the public interest by overseeing the marketplace and keeping the extreme behavior under some check.We had no regulation. No federal or state public official had any idea what was going on in those markets, so enormous leverage was permitted, enormous borrowing. There was also little or no capital being put up as collateral for the transactions. All the players in the marketplace were participants and counterparties to one another’s contracts. This market had gotten to be over $680 trillion in notional value as of June 2008 when it topped up. I think that was the peak. And that is an enormous market. That’s more than 10 times the gross national product of all the countries in the world…..comment: and homicide which is unregulated tothis day. tell your children this is their world.the one we are thankful for and love! embracefraud as a means of survival in the financial sphere? are you kidding or what?now i know, slavery is freedom. clarity is insanity.homicide is love. good morning america.

blindman assOctober 21st, 2009 at 6:42 pm

We’ve talked to people … who say you worried a lot, a sleepless kind of worry. How accurate are those descriptions of how potent this felt to you?I was extremely concerned, and because of the way our statute was written, it was the CFTC who had regulatory responsibility for these markets. I felt that responsibility very heavily, which was why I felt that it was extremely important for me to stick to my guns and repeat to Congress and the other regulators the reasons that I thought something needed to be done to close the regulatory gap that existed.There are many people I’ve talked to, reporters and others, who say they can’t remember such fierce fire ever being directed at somebody as was directed at you during those times. How did you withstand it?I felt it was my public duty. I felt that I was doing my job.Hard to do?No. When I took the job, I knew that it was my responsibility in that position to look out for the interests of all of us, not just for the interests of some of the regulated parties like the over-the-counter derivatives dealers. And I felt as long as I was in that position, that’s what I should do.Now, once Congress created the moratorium, I felt that Congress and the administration, by passing the statute, had relieved the commission of the responsibility. I did continue to speak, I think, after that, about how important it was to address the issue. But I no longer thought it was my duty as chair of the CFTC to make sure that something bad didn’t happen in the market.You really thought something bad could happen, would happen?Yes. LTCM was the sort of thing that I was concerned about. I did not foresee then the kind of pervasive and enormous collapse that we’ve experienced in the last year, partly because the market wasn’t that big yet, partly because I didn’t realize until LTCM happened how pervasive the contagion could be.And how pervasive could it be?I think it could include thousands of financial services industry participants and other large institutions all over the world. And I think that’s what happened. As the market continued to grow, with even less oversight and regulation, until it reached more than $680 trillion in notional value, an enormous potential for disaster had grown.What happened after I left the agency in June 1999 was the President’s Working Group did come out with an over-the-counter derivatives report (PDF) to Congress that strongly suggested that … there was no need for regulation.And as a result of that report, a statute was passed in 2000 called the Commodity Futures Modernization Act [CFMA] that took away all jurisdiction over over-the-counter derivatives from the CFTC. It also took away any potential jurisdiction on the part of the SEC, and in fact, forbids state regulators from interfering with the over-the-counter derivatives markets. In other words, it exempted it from all government oversight, all oversight on behalf of the public interest. And that’s been the situation since 2000.

FEDupOctober 21st, 2009 at 7:05 pm

thanks for supplementing other key issues, especially the mindset of “fraud is ok” from the Frontline program.

MM CAOctober 21st, 2009 at 7:26 pm

where is the outrage… They are totally squeezing every last drop of blood out of everyone. Most people are so f..ked and they dont even have a clue…Here’s What To Do If Your Credit Card Company Is Screwing You OverVince Veneziani|Oct. 21, 2009, 4:38 PM | 1,033 |11Earlier today, we spoke with Bill Hardekopf, CEO of credit card into site on the subject of Citi (C) and its infatuation with raising interest rates and shutting down credit cards. Bill then shot us an email detailing why he thinks Citi is making its customers deal with 29.99% rate hikes and why you should use your credit card reward points before it’s too late:In the past week, Citi has increased the interest rate on a number of theircardholders to 29.99% and cancelled the accounts of customers holdingsome of their gas partner co-branded cards. Bank of America notifiedsome of their cardholders that it will begin charging an annual feeranging from $29 to $99 on their cards beginning in February 2010.These actions follow last week’s earnings reports that revealed that banksand credit card issuers are still losing millions of dollars due to creditcard defaults and delinquencies. Issuers and analyst expect this to continueinto next year.Credit card issuers are desperately trying to rebound after the collapse ofthe economy and consumer lending, but unemployment, the CARD Act and thepossibility of new regulations are restricting traditional areas revenue.Issuers must make changes, even if it angers Congress and their cardholders.”Credit card issuers warned there would be changes if Congress passed newrules regulating them. They have already proved many times that they werenot bluffing,” says Bill Hardekopf, CEO of and author ofThe Credit Card Guidebook.Here are the latest changes that have taken place and some consumer tips forresponding to the changes:* Citi is notifying a number of cardholders of APR increases up to 29.99%.To make matters worse, this is a variable rate that can escalate once theprime rate increases.”We are hearing from customers with good credit histories that their ratehas been increased to 29.99% for no apparent reason,” says Hardekopf.”29.99% sends a message that Citi doesn’t want you to use that card. It is astrong motivation to close your account.”If your rate increases and you carry a balance, call and ask them to reducethe rate. If that doesn’t work, you now have a right to opt out of the rateincrease by the deadline outlined in your notice. By opting-out, you can payoff the balance at the current interest rate for up to five years, but youcannot make any further charges on the account. Opt-out and pay off thebalance as soon as possible. But before you opt-out, redeem your rewards.You may forfeit the rewards once you have opted-out.This rate increase comes at the beginning of the holiday season. If yourrate is 29.99% and you keep the card, do not use this card during theholiday season unless you are sure you can pay off the balance immediately.* Last week, Citi cancelled a substantial number of their MasterCardaccounts, most of which were gas partner co-branded cards. Citi said thatthese account closings include credit cards affiliated with Shell, Citgo,ExxonMobil and Phillips 66-Conoco.Some customers have complained that they did not receive notice of this. Butissuers do not have to give customers advance notice of an accountcancellation. Issuers have the right to close credit lines immediately, socancellation notices can be sent after the card is cancelled. Even the CARDAct only requires that issuers give advance notice of rate increases.Citi is also shutting down the Home Depot credit card effective at the endof October. Rewards will be honored through February 2010.Customers should use their accumulated rewards very soon or they could losethem. If the cancelled card is a rewards card, the issuer may give adeadline for redeeming the rewards. However, if you don’t see thenotification in the mail or forget the deadline, you lose your rewards. Insome cases, the rewards are lost when the account is closed, even if theissuer is the one who closed it.Cardholders should be on the lookout for changes and notices from theirissuers. This is a good time to use your reward points for holiday travel orearly holiday shopping.* Last week, Bank of America notified a limited group of cardholders that itwill start charging an annual fee on their credit cards beginning inFebruary 2010. The fee will range from $29 to $99 and will be applied to theselected accounts based on risk and profitability.This action came only one week after Bank of America received attention andpraise for promising to put a freeze on credit card rates.”Nearly 80% of the credit cards in America do not have annual fees,” saidHardekopf. “You can certainly find a comparable card without an annual feeif you shop around. Just make sure to analyze the terms and conditions ofeach card and if they are similar, choose the one without this yearly fee.”Actions like these are rarely singular events. One issuer takes a new stepand the others likely follow. Issuers are trying everything they can toreduce risk and increase revenue, especially since regulations are limitingtheir options,” says Hardekopf. “Consumers have to pay attention to theirbill and the notices they receive in the mail.”Cardholders should take note that if they are in deliquency, their frequent flyer miles can be withheld by Citi:Randy Petersen: One final note on canceling your Citi card: The safety of your AAdvantage miles is dependent upon you making sure that the final balance is paid. Citi can and does withhold miles when an account becomes delinquent. Miles are also deducted if you choose to return a product that you charged with your Citi card. But if your balance is clear, and you are set on closing the card and willing to take a credit score hit, then go ahead and cancel.

The AlarmistOctober 22nd, 2009 at 2:10 am

Gee, they kind of knew that all that mathematical modelling of defaults was kind of going off the rails more than two years ago, but they were still issuing cards somewhat liberally well into 2008. Now they complain because of CARD, etc.Let’s face it, the politicos have realised that credit card ‘earnings’ have become an important part of many people’s lives, and the politicos are going to do whatever it takes to turn credit cards into yet another entitlement.How long is it before someone says that having a credit line is a human right, like the financing of healthcare?

GuestOctober 22nd, 2009 at 4:48 am

The city i live in (deep south) have now installed cameras on signal lights and these cameras not only ticket motorists for runing red lights but also for speeding and making a right turn on red light without comming to a complete stop before making the turn. Moreover local police have employed unmarked vehicles with cameras installed on these vehicles, they park these vehicles on any street and these cameras catch unsuspecting motrists speeding. I think citys are now trying to raise money by adopting unfair means to cope with declining tax revenues. Is this stuff happening in other parts of the nation too?

GuestOctober 22nd, 2009 at 6:50 am

Deep South? Well, it can’t be Arkansas or Louisiana.The State of Mississippi has banned such red-light cameras.Maybe Alabama? And since Georgia has Atlanta, it that can’t be deep.

GuestOctober 22nd, 2009 at 4:27 pm

Mississippi makes red-light cameras illegalMississippi is bucking this trend on a state level. There are only a handful of cameras actually in use in that state—in the cities of Jackson and Columbus—but it’s better to deal with the problem now, before the red-light cameras become entrenched and cities begin relying on them for critical revenue. Jackson and Columbus have until October 1 to uninstall the cameras, and Jackson is already uninstalling their system.

HubbsOctober 22nd, 2009 at 8:51 am

Surecst way to raise revenue: Fine motorists who are talking on cell phone while driving.PS: What in hell do they talk about all day long on their cell phones while driving?

The AlarmistOctober 22nd, 2009 at 9:39 am

Gee, I guess we could make a law requiring law enforcement to hunt us down and catch us in the act, but that just opens us all up to more ‘Rodney King’ type incidents. I’m sure the local govts will tell us to count our blessings that they have taken the easy way out.

GuestOctober 22nd, 2009 at 1:28 pm

What is unfair about giving tickets to people who break the law? I’m sick and tired of drivers who roll through stop signs, don’t use turn signals, don’t turn into the near lane, don’t slow down in school zones, etc. It’s becoming like a go cart track out there. I say the more tickets and fines the better! Yes, and I am over 50.

The AlarmistOctober 22nd, 2009 at 5:30 pm

Those things should be purely advisory for a thinking adult with a modicum of judgment, but instead of developing us to the best of our abilities, or allowing Darwinian selection to weed out those less able to make a reasonable judgment, the authorities insist on regulating us down to the lowest common denominator.The Germans are proud of their quest for efficiency, especially in the area of energy savings, but you will find very few opportunities to make a right turn on red in Germany because controlling the people is more important than saving precious resources, including the people’s time.Coming to an intersection near you.Live free or die!

markkOctober 23rd, 2009 at 2:32 am

Photo radar dies a quick death in just about every community it’s installed. People want enforcement, but not too much of it. Hmmm…why does that sound familiar?

The AlarmistOctober 22nd, 2009 at 9:41 am

I hear two stories from the east. Business is still good in some parts, but you can see it going off the rails. I suspect, however, that this is already factored into the equation and that a major failure, i.e. Romania or one of the Balts, won’t take down the major European Banks, unless of course they can’t collect on the CDS’s they took out. We should be grateful then that AIG was bailed out?

ChrisLOctober 22nd, 2009 at 9:43 am

Well worth the read :…”Because of the taxpayer bailout of these big banks, some of them, namely JPM and GS are now enjoying record profits and will enjoy record bonuses this season. The irony is overwhelming that this is happening in 2009. Because of the failure of the financial system, more than 7 million middle class jobs have been lost, and the US economy is confronting double digit unemployment for the first time since 1982. Without taxpayer dollars, these record profits and record bonuses in 2009 would not even be possible for the big banks. Hell, without taxpayer dollars zombifying them with congressional and White House sanctioning, they’d have gone the way of the dinosaurs, the way of the buggy whips. That is the way history should have gone. But no, that is counterfactual now. There is something very wrong in America, the very way it is being run by government, and run over by the big banks. It is high time for middle class America to push back, precisely because our elected officials have not only failed to do so, but have legislated all of this to make it happen. Our government has become an active agent in the gutting of the middle class.”…

MM CAOctober 22nd, 2009 at 9:53 am

Goldman should be allowed to failBy John GapperPublished: October 21 2009 22:09 | Last updated: October 21 2009 22:09A decade ago, when Goldman Sachs was a private partnership, it had $6.5bn in equity and its 220 partners, most of whose money was tied up in the firm until they retired, took good care of their pot of gold.The bank’s trading and principal investing division – the part that took the most risks with partners’ capital – was balanced with its fee-based investment banking and asset management divisions. Trading contributed about a third of its revenues in the two years leading up to its 1999 initial public offering.After it sold shares in the IPO to outside investors – pension and mutual funds hold about 80 per cent of its equity – it steadily increased its appetite for risk. Its fixed income and currency division has become dominant, bringing in two-thirds of Goldman’s revenues in 2006 and 2007 (and 78 per cent in the first nine months of this year).In last year’s crisis, the US government made clear that it stands behind Goldman and other big investment banks. It received a $10bn (€6.7bn, £6.0bn) capital injection from the Treasury (since returned) and $21bn of its debt is backed by the Federal Deposit Insurance Corporation. It is now a financial holding company whose regulator and lender of last resort is the Federal Reserve.JOHN GAPPER’S BLOG:Read and post comments about this column onlineSo, if Goldman Sachs took on more risk when its equity was held by outsiders than with its partners’ own money, what can we expect now that the government implicitly accepts that it is “too big to fail”? Goldman has an even bigger incentive to risk other people’s money.This is the problem I identified last week, with the most powerful broker-dealer on Wall Street having the same privileges as the most mundane commercial bank. Not only does the fact that it may pay $23bn in bonuses this year upset people, but also its incentives are skewed.Solving this requires two things to be addressed. First, Goldman’s intention to operate as a institutional Wall Street firm – complete with its own hedge and private equity funds – while having government and Fed support. Second, its tradition of setting aside half its revenues each year for employees.On the first point, Goldman’s status strikes me as untenable. It may be better regulated by the Fed than the Securities and Exchange Commission but counting it as just another bank, with the same privileges and obligations as retail banks and credit card companies, makes little sense.This is not to accuse it of being reckless, or insouciant about how it operates. It navigated the crisis best of all the investment banks and does not run itself as if it is bound to get bailed out. It is well capitalised and holds $170bn of cash and liquid assets to hand, just in case.Nor is it merely a giant hedge fund. Its pure proprietary activities make up about 10 per cent of its revenues. Market-making in bonds and equities, now its main business, serves companies and investors, although it is a capital-intensive and sometimes risky activity.But its business is different from the banks for which the discount window – the Fed facility that allows its regulated banks to borrow cash in exchange for securities in extremis – was invented. Until recently, no one would have suggested that Goldman deserved a place with them.Mervyn King, governor of the Bank of England, put it well this week. The “utility aspects of banking where we all have a common interest in ensuring continuity of service are quite different in nature from some of the riskier activities that banks undertake, such as proprietary trading”.One possibility is for Goldman to spin off its activities that come under the latter heading: the hedge funds and private equity investments in which it risks capital. That would leave its market-making activities and investment banking divisions as a high-class financial utility.Even then, it should not be treated by the Fed like a retail bank which has its deposits guaranteed and is, as Mr King phrases it, “too important to fail”. Goldman must be structured and regulated in such a way that it could safely be allowed to fail in any future financial crisis.This would address some of the justifiable public anger about Wall Street firms having been bailed out by taxpayers, but what about the second point: Wall Street’s lavish rewards to its senior employees?The bonus problem in investment banking is not the absolute size of the rewards (although shareholders ought to ask themselves if the employees really are worth it) but the incentives they create.Goldman probably has one of the most partner-like pay structures for its managing directors. About two-thirds of bonuses are in restricted stock that vests over four years and its most senior partners have to hold 75 or even 90 per cent of the stock until after they retire.That is one reason Goldman has navigated the financial crisis better than others, but it could still learn from its past. By returning to the system of locking up all (or 90 per cent) of its managing directors’ bonuses until they retire, it would make them even more careful.If taxpayers could see not only that Goldman’s bonuses were a form of equity partnership, but also that the bank would be allowed to founder in any future crisis, it might sap some simmering resentment.Alternatively, Goldman could keep its old riches and newfound official status, keep on taking more financial risk, and try to square the circle by convincing people that it is a utility that operates in the public interest. That might be a struggle

MorbidOctober 22nd, 2009 at 2:01 pm

I hope the sage in Omaha, Warren Buffet, get a real good hair cut because of his involvement in GS. Two thumbs down on criminal GS and the criminal elite that protects them.

PeteCAOctober 22nd, 2009 at 2:21 pm

So … now we understand why GS must be bailed out at any cost. If Goldman went bankrupt, its directors would lose a significant portion of all their long-term bonuses … which are locked up until they retire.Hey – why should these guys take a dive … just because the rest of America is unemployed? Where’s the justice in that? Ha! Ha! Ha! Ha! Ha!!! :-;PeteCA

AnonymousOctober 22nd, 2009 at 5:28 pm

The solution to preventing GS and JPM from getting kid glove treatment is to enact legislation that says that Obama will not be allowed to go to work for them after his presidency.”Damn, Michelle, that Pecos Banker fella figured out my game plan! Thank goodness all those Senators and Congressmen don’t read economics blogs!””That’s how they get elected, honey dumplings–they’re just ordinary folks that identify with the folks back home who don’t read anything other than TV Guide.”

MM CAOctober 22nd, 2009 at 9:58 am

NO JOBS continues while corporate profits go up. only reason there are any corporate profits at most companies is because of MASSIVE JOB CUTS. Once those are done watch Corp profits tank.Like I have been saying, the past 6 months has been nothing more that smoke and mirrors, Full of BS green shoots. We are headed for a depression unlike anything we can imagine.Ouch: Jobless Claims Shoot Up AgainJoe Weisenthal|Oct. 22, 2009, 8:37 AMAfter two-straight declines, the weekly new jobless claims number shot up again.MarketWatch: The number of initial claims in the week ending Oct. 17 rose 11,000 to 531,000. It’s the highest level since the week ended Sept. 26. Claims had fallen 34,000 in the prior two weeks. Most economists had expected an up-tick in claims. Claims in the previous week were revised to a decrease of 11,000 to 520,000 compared with the initial estimate of a decrease of 10,000 to 514,000.Here’s the full announcement from the Department of Labor:In the week ending Oct. 17, the advance figure for seasonally adjusted initial claims was 531,000, an increase of 11,000 from the previous week’s revised figure of 520,000. The 4-week moving average was 532,250, a decrease of 750 from the previous week’s revised average of 533,000.The advance seasonally adjusted insured unemployment rate was 4.5 percent for the week ending Oct. 10, a decrease of 0.1 percentage point from the prior week’s revised rate of 4.6 percent.The advance number for seasonally adjusted insured unemployment during the week ending Oct. 10 was 5,923,000, a decrease of 98,000 from the preceding week’s revised level of 6,021,000. The 4-week moving average was 6,030,750, a decrease of 59,250 from the preceding week’s revised average of 6,090,000.UNADJUSTED DATAThe advance number of actual initial claims under state programs, unadjusted, totaled 460,449 in the week ending Oct. 17, a decrease of 49,113 from the previous week. There were 416,111 initial claims in the comparable week in 2008.The advance unadjusted insured unemployment rate was 3.7 percent during the week ending Oct. 10, unchanged from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 4,898,174, a decrease of 44,913 from the preceding week. A year earlier, the rate was 2.3 percent and the volume was 3,134,390.Extended benefits were available in Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington, West Virginia, and Wisconsin during the week ending Oct. 3.Initial claims for UI benefits by former Federal civilian employees totaled 2,243 in the week ending Oct. 10, an increase of 352 from the prior week. There were 2,656 initial claims by newly discharged veterans, an increase of 162 from the preceding week.There were 19,969 former Federal civilian employees claiming UI benefits for the week ending Oct. 3, a decrease of 728 from the previous week. Newly discharged veterans claiming benefits totaled 30,437, a decrease of 1,438 from the prior week.States reported 3,390,622 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending Oct. 3, an increase of 40,716 from the prior week. There were 1,173,367 claimants in the comparable week in 2008. EUC weekly claims include both first and second tier activity.The highest insured unemployment rates in the week ending Oct. 3 were in Puerto Rico (6.6 percent), Oregon (5.3), Nevada (5.2), Pennsylvania (4.9), California (4.8), Michigan (4.7), Wisconsin (4.7), North Carolina (4.6), South Carolina (4.5), and Washington (4.5).The largest increases in initial claims for the week ending Oct. 10 were in Florida (+9,976), New York (+5,411), Wisconsin (+4,999), Indiana (+4,977), and Arkansas (+4,704), while the largest decreases were in California (-7,062), Tennessee (-294), Maine (-140), and Nebraska (-34).

SoftwarengineerOctober 22nd, 2009 at 11:58 am

Its Not Getting Worse, Its Getting BetterThe stimulus plan is working. LOLThe stimulus plan is like paying to have your car’s transmission over-hauled, then getting it back after a $5000 repair bill and its still broke.

Pecos BankerOctober 22nd, 2009 at 5:13 pm

But that’s just normal, everyday capitalism, Softwareengineer. It’s always a roll of the dice when you take your car to a mechanic. The car companies need to install a signal light on the dashboard that indicates, using Ford as an example, “Time to buy another Ford!” after, say 60,000 miles of use. Kind of like what’s in place already for our financial system, “Time to bail out another too big to fail financial leviathan.”

wethepeepleOctober 22nd, 2009 at 10:25 am

Excerpt from Garet Garrett’s “The People’s Pottage: The Revolution Was” p. 23.on how U.S. Sovereign Individuals were robbed by our domestic and foreign owned corporate-owned Federal Government via a silent intellectual revolution called the New Deal.”Then from the point of view of scientific revolutionarytechnic what would the problems be?They set themselves down in sequence as follows:The first, naturally, would be to capture the seat ofgovernment.The second would be to seize economic power.The third would be to mobilize by propaganda theforces of hatred.The fourth would be to reconcile and then attach tothe revolution the two great classes whose adherenceis indispensable but whose interests are economicallyantagonistic, namely, the industrial wage earners andthe farmers, called in Europe workers and peasants.The fifth would be what to do with business—whether to liquidate or shackle it.(These five would have a certain imperative order intime and require immediate decisions because they belongto the program of conquest. That would not be theend. What would then ensue? A program of consolidation.Under that head the problems continue.)The sixth, in Burckhardt’s devastating phrase,would be “the domestication of individuality”—by anymeans that would make the individual more dependentupon government.The seventh would be the systematic reduction of allforms of rival authority.p. 24 THE PEOPLE’S POTTAGEThe eighth would be to sustain popular faith in anunlimited public debt, for if that faith should break thegovernment would be unable to borrow, if it could notborrow it could not spend, and the revolution must beable to borrow and spend the wealth of the rich or elseit will be bankrupt.The ninth would be to make the government itselfthe great capitalist and enterpriser, so that the ultimatepower in initiative would pass from the hands ofprivate enterprise to the all-powerful state.Each one of these problems would have two sides,one the obverse and one the reverse, like a coin. Oneside only would represent the revolutionary intention.The other side in each case would represent Recovery—and that was the side the New Deal constantly held upto view. Nearly everything it did was in the name ofRecovery. But in no case was it true that for the endsof economic recovery alone one solution or one courseand one only was feasible. In each case there was analternative and therefore a choice to make.What we shall see is that in every case the choice wasone that could not fail:(a) To ramify the authority and power of executivegovernment—its power, that is, to rule by decrees andrules and regulations of its own making;(b) To strengthen its hold upon the economic lifeof the nation;(c) To extend its power over the individual;(d) To degrade the parliamentary principle;(e) To impair the great American tradition of anindependent, Constitutional judicial power;(f) To weaken all other powers—the power ofprivate enterprise, the power of private finance, thepower of state and local government.THE REVOLUTION WAS p. 25(g) To exalt the leader principle.There was endless controversy as to whether the actsof the New Deal did actually move recovery or retard it,and nothing final could ever come of that bitter debatebecause it is forever impossible to prove what mighthave happened in place of what did. But a positiveresult is obtained if you ask:Where was the New Deal going?The answer to that question is too obvious to be debated.Every choice it made, whether it was one thatmoved recovery or not, was a choice unerringly true tothe essential design of totalitarian government, neverof course called by that name either here or anywhereelse.”Welcome to the New-New Deal.

Pecos BankerOctober 22nd, 2009 at 5:01 pm

So that just means our Nikes, Uggs, and Pumas will be more expensive, guest. Does that make you happy?

Harley QuinnOctober 22nd, 2009 at 6:34 pm

Instead of whining about how we’ve all been screwed, I suggest you come up with some action plans to reform the system and insure a fair shake for all. In order to start the ball rolling, I offer the following:I’ve been retired for almost three years now. I thought I’d have difficulty filling all my leisure time, but I found it’s not the case. I don’t have any leisure time. I‘ve worked the equivalent of two jobs for my entire working life. It would seem to be a rational conclusion that when I stopped doing that, I would have free time equal in duration to the time I used to work. It isn’t so and I’ll tell you why. I’m being attacked by larcenists as evil as all the bad guys in the annals of criminal justice combined.They don’t come up to you on the street with a gun or a knife. They don’t break into your home and steal your valuables. Oh no! They work completely within the law as they ply their reprehensible trade. They’ve made a pact with the inhaler of mephitic vapors that gives them immunity from all but the most divine retribution.In a word, they steal the very stuff of your life. They steal your time and give you absolutely nothing in return. Of all the forms this thievery takes, the most common is Voice-Mail. They fire a receptionist and force you to buy a telephone with buttons so you can route your own call through a series of options that may or may not pertain to your business with that institution. You are doing the work of the fired employee and not being compensated for it. The institution’s bottom line is increased by the value of the time stolen from you. If your business with them isn’t addressed by one of their options, they continue to route you in a circle until you get hungry or have to use the bathroom. They have it all figured out scientifically. They compute in your caloric requirements and the volume of your bladder, and give you messages that are meaningless to you, but are of the perfect physiological duration.Oil companies’ windfall profits are now common knowledge and taken for granted. The Arabs tighten the spigot, the Seven Sisters all cheer and raise their prices at the pump, and you stand there like a moron, pumping your own gas and wiping your own windshield. You check your own oil and work very efficiently so the next car in line doesn’t have to wait too long. Have you received a check from Exxon lately?The message that is most characteristic of the technical support time bandits, is the one that says:” All our operators are currently busy servicing other customers. Your call is very important to us. Please hang on and the next available operator will take your call.” While you wait, they play nice music, but your call is the least important thing on their corporate mind. Your call for technical support won’t generate a nickel for the corporation so if you suffered a massive coronary attack, it would be just fine with them. They don’t tell you that there is only one operator and he’s at lunch and if you call the number for sales, there are twenty operators and your call will be answered immediately. They save on rent for a waiting room. They use your home and utilities at your expense, and of course, they steal your time.They also fired the poor bank teller. The one who would greet you warmly, carefully count your deposit and stamp your passbook and cheerfully tell you your account balance. The bank now relies on you to carry out all those transactions. They’ve made an idiot-proof machine and you operate it for them at no compensation. Not only do you work for them without getting paid, but you have to pay them! They also have created countless opportunities for muggers in the process.If you are injured while performing any of these tasks, don’t expect anyone to report it to O.S.H.A. Don’t think you will be eligible for Workman’s compensation. You are not an employee! You simply work for these corporations for no money.One of the worst time thieves is your physician. He operates under the following assumption: “I broke my ass and got into Med school. I studied for ten years. You need me more than I need you. I have been given the power to make life and death decisions about you. My time on this earth is much more valuable than yours. Therefore, you wait!”Then, his receptionist books three people for the same time slot. They all wait in little rooms for long periods of time, shivering in tiny paper gowns, waiting for the exalted one to grace them with his presence. If you listen carefully, you can hear him on the phone in the hallway, putting together a deal with other doctors to build some condos in Florida. Then he comes into the examination room with your chart in his hand, mumbling something about an emergency. This method of dealing with sick people is the result of a time motion study designed to make most efficient use of your doctor’s time, while completely taking your time for granted, giving it zero value.If a car lubrication facility promises to change your oil in twenty minutes, and then takes forty-five, they just stole twenty-five minutes of your life. If an airline says a flight will depart in one hour and there is a two hour delay, they just ripped two hours from your allotted time on this earth. Do you have so much time that you can give it away to corporations so cavalierly?Now we come to the remedy. First, we must organize into a formidable economic force so we can bring down any corporation we target. Second, we must all determine an hourly rate for our time on earth. To compute this, take your life expectancy times the total income you can expect to generate, plus the cost of the services you can not perform because you are waiting for the next available operator or whatever, plus a heaping dose of pain and suffering from psychological trauma, throw in a few bucks for punitive damage and aggravation, and finally, a fee for legal bribery which would be like a consulting fee or points on a mortgage. Next, purchase a meter and enter your hourly rate in it.When you get to the doctor’s office at the appointed time, let them know the meter is running and they can expect a bill. Likewise for the telephone company, Visa, America On Line or whoever else is making you wait. Determine fair compensation for pumping gas, operating an ATM or being your own receptionist. Tell the airlines that this flight is on them because they have delayed you more time than the fare for the flight. These methods will only work if victims of time bandits remain organized and cohesive. If you follow my suggestions to the letter, all the money and time that has been stolen from you, will be returned one hundred fold, and all you’ll have to do is figure out what you will do with all that time and money.

GuestOctober 22nd, 2009 at 8:08 pm

Harley, who are you going to charge for the time it took for you to write this essay? Nouriel Roubini or RGE?

GuestOctober 22nd, 2009 at 8:21 pm

Harley, you owe me $6.50 for reading an essay without paragraphs or section headings. Takes extra time Harley; try to be a little more thoughtful next time 😉

Harley QuinnOctober 23rd, 2009 at 9:14 am

To all of you who justifiably are claiming I owe you money for my rant about the Time Bandits, I am having a little cash flow problem right now. I sent out bills to all who robbed me of my prescious life minutes, but the thieves are notoriously slow to pay.As soon as they do, I will forward the money to you, or you can take it out in trade. I will donate my ever diminishing store of time to whatever cause you come up with. Right now, I’m out of time so it’s time to go.

MorbidOctober 23rd, 2009 at 6:28 am

Look within Harley – it is the only way out of the collective soup herd mentality in which you find yourself mired.

CitizenOctober 22nd, 2009 at 7:03 pm

U.S. Stocks Advance on Better-Than-Estimated Earnings ReportsBy Rita NazarethOct. 22 (Bloomberg) — U.S. stocks advanced for the first time in three days as better-than-estimated earnings at companies from Travelers Cos. to McDonald’s Corp. boosted speculation that the worst recession since the 1930s is over.Travelers jumped 7.7 percent and McDonald’s climbed 2 percent to help lead the Dow Jones Industrial Average higher, while New York Times Co. and PNC Financial Services Group Inc. also rallied on better-than-estimated results. American Express Co. climbed 3.8 percent to a one-year high after Moody’s Investors Service said credit-card defaults declined.“I do feel optimistic that profit growth is real and will spur a broader recovery,” said Jeffrey Davis, who oversees $4.6 billion as chief investment officer at Lee Munder Capital Group in Boston. “You have a ton of liquidity, economic fundamentals are in place and that should be supportive for stocks.”The S&P 500 increased 1.1 percent to 1,092.91 at 4:10 p.m. in New York, recouping more than half of its retreat over the previous two days. The Dow rallied 131.95 points, or 1.3 percent, to 10,081.31. The Nasdaq Composite Index rose 0.7 percent to 2,165.29 as declines in EBay Inc. and Amgen Inc. limited gains.Benchmark indexes retreated in early trading after a Labor Department report showed initial applications for jobless benefits rose to 531,000 last week, topping the average analyst estimate by 16,000. A separate report showed home prices unexpectedly fell, while the index of leading economic indicators advanced for a sixth straight month.‘Forced Move’The S&P 500 is trading at its highest valuation in five years after climbing 62 percent from a 12-year low in March as the government lent, spent or guaranteed $11.6 trillion to combat the recession. The index is valued at almost 21 times the reported operating profits of its companies, more than twice its price-to-earnings ratio on March 6.“We’re setting up for a really good market in November and December, a year-end rally where you’re getting a forced move into the market by those that have lagged behind,” Steve Leuthold, whose Leuthold Core Investment Fund beat 95 percent of rivals in the past five years, told Bloomberg Television. Stocks will benefit from “capitulation on the part of people who have been cautious,” he said.Leuthold, who manages $4 billion, reiterated his prediction from an October 1 interview that the S&P 500 will gain through year-end and may rise to 1,350 in 2010 as profits improve.Dow LeadersTravelers rallied 7.7 percent to $51.70, its biggest gain this year and the steepest advance in the Dow. The insurer boosted its dividend and said quarterly net income quadrupled to $935 million. Operating income, which excludes some investment results, was $1.61 a share, beating the $1.29 average estimate of analysts in a survey. Travelers benefited from a decrease in storms after hurricanes Ike, Gustav and Dolly contributed to $1 billion in catastrophe expenses in the year-earlier quarter.Insurance companies in the S&P 500 added 3.9 percent as a group, the second biggest advance among 24 groups after banks, which rallied 4.7 percent.McDonald’s rose 2 percent to $59.50. Earnings were $1.15 a share. The average analyst estimate in a Bloomberg survey was $1.11 a share. Sales at restaurants open at least 13 months increased 3.8 percent, the Oak Brook, Illinois-based company said in a statement. Analysts projected a rise of 2.9 percent.AT&T Inc. added 0.6 percent to $26.10. Third-quarter profit excluding some items was 53 cents a share, beating the average analyst estimate by 3 cents.New York Times Co. had the biggest gain in the S&P 500, surging 23 percent to a one-year high of $10.72. The publisher said third-quarter profit excluding some items rose to 16 cents a share after cutting wages and production costs. Analysts predicted a loss of 1 cent, on average.Financials JumpPNC Financial Services, Fifth Third Bancorp and SunTrust Banks Inc. said lending was becoming more profitable as they paid less on customers’ deposits and other borrowing costs declined.PNC surged 13 percent to $50.65, its steepest advance since May, after the Pittsburgh-based bank said profit more than doubled in the third quarter and its net interest margin, the difference between what it charges for loans and pays on deposits, widened to 3.76 percent from 3.60 percent in the second quarter.Fifth Third added 6.8 percent to $10.80, while SunTrust advanced 5.3 percent to $21.85.Financial shares extended gains after Treasury Secretary Timothy Geithner said in a statement that his goal is for bailed-out firms to repay the government “as soon as possible.”‘Road to Repair’“We’re on the road to repair,” said Art Hogan, the New York-based chief market analyst at Jefferies & Co. “Geithner’s comments are very positive for the perception of investors about the financial industry. That’s giving support for banks and the overall market rally.”American Express rose 3.8 percent to $36.44. U.S. credit- card defaults fell in September from a record high as five of the nation’s six biggest card lenders posted monthly declines, Moody’s said.Profits have topped estimates at 79 percent of the companies in the S&P 500 that have released results, according to Bloomberg data. That would mark the highest proportion in data going back to 1993. Earnings fell for a ninth straight quarter in the July-September period, according to estimates compiled by Bloomberg, and are projected to return to growth in the final three months of the year.Crude oil for December delivery fell 0.2 percent to $81.20 a barrel. Futures touched $82 yesterday, the highest since Oct. 14, 2008.EBay, AmgenEBay sank 4.2 percent to $23.97. The owner of the most- visited e-commerce Web site forecast fourth-quarter profit that missed some analysts’ estimates after shifting into faster growing, less-lucrative businesses.Amgen, the world’s largest biotechnology company, dropped 4.3 percent to $56.85 on lower third-quarter sales.Stocks in Europe and Asia retreated on speculation that China may consider withdrawing stimulus measures after economic growth accelerated. Europe’s Dow Jones Stoxx 600 Index slid 1.2 percent, while the MSCI Asia-Pacific Index lost 1.1 percent.China’s economy expanded at the fastest pace in a year as stimulus spending and record lending growth helped the nation lead the world out of recession.China StimulusThe acceleration in growth spurred concerns policy makers may consider withdrawing fiscal and monetary measures in coming quarters. Gross domestic product rose 8.9 percent in the third quarter from a year earlier.U.S. stocks dropped in the final hour of trading yesterday after analyst Dick Bove downgraded Wells Fargo & Co., erasing a rally spurred by better-than-estimated results at Morgan Stanley and Yahoo! Inc.Treasuries fell for a second day, sending the yield on 10- year notes up four basis points to 3.43 percent, as the U.S. announced plans to sell a record $123 billion of notes and inflation-protected debt next week.The S&P 500 may drop at least 7.5 percent based on a “bearish ascending wedge” pattern, according to Tom McNally, a money manager at Wilbanks, Smith & Thomas.Drawing a so-called “bottom trend line” from the S&P 500’s 12-year low on March 9 and a “top trend line” from its close on May 8, at the time a four-month high, creates a nearly complete bearish ascending wedge, McNally said. The pattern usually signals stocks are about to retreat and hasn’t preceded a rally in at least five years, he said.“If this one breaks, I think it’s going to be another bear rally where we’re going to go back to at least 1,000 or so,” McNally, who helps oversees $1.3 billion in Norfolk, Virginia, and allocates assets based on technical indicators, said in a telephone interview. “For me, I’m starting to lighten up on the equities in my account.”To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.netWHO CARES ABOUT JOBS WHEN WE CAN MAKE MORE BILLIONS FROM OUTSOURCING?BUT WAIT A MINUTE I THOUGHT 70% OF OUR GDP WAS FROM CONSUMER SPENDING FROM NOW JOBLESS AMERICANS, WE ALL KNOW THAT THESE IMPROVED EARNINGS ARE FROM COST CUTTING AND DOWNSIZING AND BY EARLY NEXT YEAR THE TRUE PICTURE WILL BE UNRAVELLED………SIT TIGHTOR LIKE JOE BIDEN—–METHINKS WE ARE IN A DEPRESSION LOL

Average JaneOctober 22nd, 2009 at 7:08 pm

Eureka:”Capitalism might or might not work only if and when you could keep corporations out of the government.”The above quote courtesy of Ilargi at’ve got it all backwards. It’s not that the guv’mint needs to stay out of corporations, it’s the corporations that need to stay out of the guv’mint.Brilliant.

GuestOctober 23rd, 2009 at 8:40 am

Been saying that for a LONG time now…Corporations derive their power from the government. Without government they’d be smallish, productive, well-behaving businesses. AND, government would be much smaller, just like all the right-wing folks (many stock the corporations) want.

CitizenOctober 22nd, 2009 at 7:35 pm

Barack Obama sees worst poll rating drop in 50 yearsThe decline in Barack Obama’s popularity since July has been the steepest of any president at the same stage of his first term for more than 50 years.By Toby Harnden in WashingtonPublished: 7:38PM BST 22 Oct 2009Gallup recorded an average daily approval rating of 53 per cent for Mr Obama for the third quarter of the year, a sharp drop from the 62 per cent he recorded from April.His current approval rating – hovering just above the level that would make re-election an uphill struggle – is close to the bottom for newly-elected president. Mr Obama entered the White House with a soaring 78 per cent approval rating.The bad polling news came as Mr Obama returned to the campaign trail to prevent his Democratic party losing two governorships next month in states in which he defeated Senator John McCain in last November’s election.Jeffrey Jones of Gallup explained: “The dominant political focus for Obama in the third quarter was the push for health care reform, including his nationally televised address to Congress in early September.”Obama hoped that Congress would vote on health care legislation before its August recess, but that goal was missed, and some members of Congress faced angry constituents at town hall meetings to discuss health care reform. Meanwhile, unemployment continued to climb near 10 per cent.”Governor Jon Corzine of New Jersey is in severe danger of defeat while Democrats are fast losing hope that Creigh Deeds can beat his Republican opponent in Virginia. Twin Democratic losses would be a major blow to Mr Obama’s prestige.Campaigning for Mr Corzine in Hackensack on Wednesday night, Mr Obama delivered a plea that almost seemed as much for himself as the local candidate: “I’m here today to urge you to cast aside the cynics and the sceptics, and prove to all Americans that leaders who do what’s right and who do what’s hard will be rewarded and not rejected.”Mr Corzine, a former Goldman Sachs executive and multi-millionaire, is currently running even in New Jersey, which is normally comfortably Democratic, while Mr Deeds is trailing badly in Virginia, a swing state that was key to Mr Obama’s 2008 victory.Mr Obama is also facing widespread criticism for his drawn-out decision-making process over what to do next in Afghanistan.Republicans sense Mr Obama is in a vulnerable position and this week saw the return to the public stage of his perhaps most vehement opponent – Vice-President Dick Cheney.In a blistering speech on Wednesday night, he accused Mr Obama of failing to give Americans troops on the ground a clear mission or defined goals and of being seemingly “afraid to make a decision” about Afghanistan “The White House must stop dithering while America’s armed forces are in danger,” Cheney said at the Center for Security Policy in Washington.”Make no mistake, signals of indecision out of Washington hurt our allies and embolden our adversaries.”He hit out at Obama aides who suggested that the Bush administration had failed to weigh up conditions in Afghanistan properly before committing troops.”Now they seem to be pulling back and blaming others for their failure to implement the strategy they embraced. It’s time for President Obama to do what it takes to win a war he has repeatedly and rightly called a war of necessity.”

MorbidOctober 23rd, 2009 at 6:32 am

The deeper the crisis the more embolden neurotics become for they redouble their effort to make the world over into the illusion (Bamelot’s wet dream) that drives them. What a worldview.

CitizenOctober 22nd, 2009 at 7:40 pm

Goldman Says Slow Recovery AheadMichael Maiello, 10.22.09, 11:20 AM EDTAward-winning Goldman Sachs economist Jan Hatzius says the recovery will be tepid.On Wednesday evening, Jan Hatzius, chief U.S. economist for Goldman Sachs, accepted the prestigious Lawrence R. Klein Award for Blue Chip Forecast Accuracy in a ceremony at Manhattan’s University Club. Klein and his team, Ed McKelvey and Andrew Tilton, also gave their forecast for 2010: slow growth with little chance of inflation.Hatzius believes that GDP growth will be slower in 2010 than it was in the second half of 2009, as about 4 percentage points of stimulus will be removed from the economy as inventories grow to meet expected demand and some government stimulus programs peter out. Without the extension of some stimulus programs such as the first time home-buyer credit, GDP growth might even slip into negative territory for a quarter, though Hatzius and his team don’t expect that the government will allow that to happen.This phase of the recovery will exhibit “a dichotomy between large and small businesses,” he said. Though the Institute For Supply Management Index, which measures the output of big firms, has rebounded from severe recession levels to levels that would suggest robust growth, the National Federation of Independent Business survey, which measures sentiment among smaller business owners, is still describing recession-era doldrums. Usually, the two indexes rise and fall together.Banks are the problem here. While big businesses have been able to raise money through bond offerings underwritten by JPMorgan Chase ( JPM – news – people ), Barclays ( BCS – news – people ) and Goldman Sachs ( GS – news – people ), and have been able to access the commercial paper market, small businesses have been effectively shut out. Most small businesses use lines of credit or even the founder’s credit card to borrow and those lines, says Hatzius, are being tightened by banks who may still have years of unrecognized balance sheet losses to work through.The big/small divide means that the small business job creation engine has stalled. Unemployment will remain well above its 5% long-term average, depressing consumer demand and also potential wage inflation. That lack of demand and confidence will further keep a lid on the housing market, which already suffers from over-supply. It could also drive rents down. The same lack of demand will mean that the U.S. will use just 75% of its manufacturing capacity, rather than the usual 90%. All that slack spells no inflation despite the weakening dollar and potential rising commodities prices.Also, says the Hatzius team, the recession probably ended in June and since World War II, there has never been substantial inflation in the first 18 months of an economic recovery. That means that the Federal Reserve won’t raise interest rates until at least 2011.Many small businesses will be killed in this year and next. People do not buy much of anything other than food. To get us out of these deficits, government must tax on the thin air we breath…The Goldman team thinks that the U.S. deficits, which went from 3.2% of GDP in 2008 to 11% of GDP in 2009, will remain at elevated levels but won’t cause near-term problems. It becomes an issue after 2011. First, the Fed will withdraw monetary stimulus from the system but then the federal government will have to restrain economic activity. This might not be because there’s robust growth but rather because the private credit market starts growing again. Governments want to avoid competing with private industry for credit.The Lawrence R. Klein Award annually recognizes the most accurate of the 50 economic teams that contribute to the Blue Chip Economic Indicators newsletter and is sponsored by the W.P. Carey School of Business at Arizona State University. Nobel laureate Lawrence Klein of the University of Pennsylvania and known as the father of macroeconomic modeling presented the award.ADVIVE FROM THE MASTERS AT GOLDMAN-SMALL BUSINESSES WILL BE PUMMELLED, NO INTEREST RATE HIKES TILL 2011= NO GREEN SHOOTS FOR NOW…PERIOD.

ptmOctober 22nd, 2009 at 9:40 pm

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS – COMMENTARY NUMBER 250 – General Outlook and Trade Data Update – October 9, 2009Stated Federal Deficit versus the REAL DEFICITOr Why The USA is BankruptFor 2009, the Congressional Budget Office estimated the fiscal year 2009 budget deficit as being $1.2 trillionon a cash basis, before taking into consideration the full cost of the Iraq and Afghanistan wars, before factoringthe cost of the nearly $800 billion Obama economic stimulus plan, or factoring the cost of the second $350 billiontranche in TARP funds, and not factoring current bailouts being contemplated by the U.S. Treasury and Federal Reserve.The 2009 budget deficit will exceed $2 trillion on a cash basis and the full amount must be funded by Treasury borrowing.Social Security and Medicare funds were moved into the general fund in the 1970s and subsequently spent. Therefore thereare no funds held in reserve today for the Social Security and Medicare obligations that grow each year.The Generally Accepted Accounting Principles (GAAP) tabulated negative net worth of the federal governmenthas increased from $65.5 trillion in fiscal 2008 to $74.6 trillion in fiscal 2009.______________________________U.S. Government Alternate Fiscal Deficit and Debt_________________________________________Reported by U.S. Treasury___________________________Sources: U.S. Treasury, Shadow Government Statistics_________________________________________________________________GAAP_______________________Total(1)______________Formal____________GAAP_____________GAAP_________Federal_________Gross__________Federal_____________Cash-Based______Ex-SS Etc._____With SS Etc.________Negative_______Federal______ObligationsFiscal__________Deficit_________Deficit__________Deficit_______Net Worth__________Debt___________(GAAP)Year(2)____($Trillions)____($Trillions)_____($Trillions)____($Trillions)__($Trillions)_____($Trillions)2009(3)_______ $1.409__________ $2.8_____________$8.8____________$68.1_________$11.9____________$74.62008___________$0.454___________$1.0_____________$5.1____________$59.3_________$10.0____________$65.52007___________$0.162___________$0.275___________$1.2(4)_________$54.3__________$9.0____________$59.82006___________$0.248___________$0.449___________$4.6____________$53.1__________$8.5____________$58.22005___________$0.318___________$0.760___________$3.5____________$48.5__________$7.9____________$53.32004___________$0.412___________$0.615__________$11.0(5)_________$45.0__________$7.4____________$49.52003___________$0.374___________$0.667___________$3.0____________$34.0__________$6.8____________$39.12002___________$0.157___________$0.364___________$1.5____________$31.0__________$6.2____________$35.4(1) Includes gross federal debt, not just “public” debt. While the non-public debt is debt the governmentowes to itself for Social Security, etc., the obligations there are counted as “funded” and as suchare part of total government obligations.(2) Fiscal year ending September 30th.(3) Except for the formal cash-based deficit (preliminary) and for the gross federal debt, which aregovernment estimates, fiscal 2009 data are estimated by SGS (Net Worth corrected). Please note thatmid-year accounting redefinitions for TARP knocked off roughly $500 billion from the reported formalcash-based estimate.(4) On a consistent reporting basis, net of one-time changes in actuarial assumptions and accounting,SGS still estimates that the GAAP-based deficit for 2007 topped $4 trillion, with negative net worthof $57.1 trillion and total obligations of $59.8. So as to maintain consistency with the officialGAAP statements, the “official” numbers are shown.(5) SGS estimates $3.4 trillion, excluding one-time unfunded setup costs of the Medicare PrescriptionDrug, Improvement, and Modernization Act of 2003 (enacted December 2003). Again, in order to maintainconsistency with the official GAAP statements, the “official” numbers are shown in the table for 2004.The 2009 GAAP statement is due for release in mid-December 2009.Link to the 2008 statements: federal government is truly bankrupt. In a post-Enron world, if the federal government were a corporation such as General Motors, the president and senior Treasury officers would be in federal penitentiary.PS: These numbers assume the pending health bill will be budget neutral.

MorbidOctober 23rd, 2009 at 7:20 am

Yeah, budget neutral health care “bill”…Health Costs and HistoryWSJ 20 Oct. 2009Washington has just run a $1.4 trillion budget deficit for fiscal 2009, even as we are told a new health-care entitlement will reduce red ink by $81 billion over 10 years. To believe that fantastic claim, you have to ignore everything we know about Washington and the history of government health-care programs. For the record, we decided to take a look at how previous federal forecasts matched what later happened. It isn’t pretty.Let’s start with the claim that a more pervasive federal role will restrain costs and thus make health care more affordable. We know that over the past four decades precisely the opposite has occurred. Prior to the creation of Medicare and Medicaid in 1965, health-care inflation ran slightly faster than overall inflation. In the years since, medical inflation has climbed 2.3 times faster than cost increases elsewhere in the economy. Much of this reflects advances in technology and expensive treatments, but the contrast does contradict the claim of government as a benign cost saver.Uncle Sam’s Cost Overruns…………………………………………………………Predicted………..Actual……………………………………..YEAR…………Annual Cost…..Annual CostMedicare……………………….1965…………$12 billion………$110 billionMedicare Hospital…………1965…………….9……………………..67Medicaid Hospitalization1987……………..1……………………..17Medicare Home Care……1988…………….4……………………..10Schip……………………………..1997…………….5.4…………………..6.8Medicare Presc. Drug……2003…………..49……………………..41Next let’s examine the record of Congressional forecasters in predicting costs. Start with Medicaid, the joint state-federal program for the poor. The House Ways and Means Committee estimated that its first-year costs would be $238 million. Instead it hit more than $1 billion, and costs have kept climbing.Thanks in part to expansions promoted by California’s Henry Waxman, a principal author of the current House bill, Medicaid now costs 37 times more than it did when it was launched—after adjusting for inflation. Its current cost is $251 billion, up 24.7% or $50 billion in fiscal 2009 alone, and that’s before the health-care bill covers millions of new beneficiaries.Medicare has a similar record. In 1965, Congressional budgeters said that it would cost $12 billion in 1990. Its actual cost that year was $90 billion. Whoops. The hospitalization program alone was supposed to cost $9 billion but wound up costing $67 billion. These aren’t small forecasting errors. The rate of increase in Medicare spending has outpaced overall inflation in nearly every year (up 9.8% in 2009), so a program that began at $4 billion now costs $428 billion.The Medicare program for renal disease was originally estimated in 1973 to cover 11,000 participants. Today it covers 395,000, at a cost of $22 billion. The 1988 Medicare home-care benefit was supposed to cost $4 billion by 1993, but the actual cost was $10 billion, because many more people participated than expected. This is nearly always the case with government programs because their entitlement nature—accepting everyone who meets the age or income limits—means there’s no fixed annual budget.One of the few health-care entitlements that has come in well below the original estimate is the 2003 Medicare prescription drug bill. Those costs are now about one-third below the original projections, according to the Medicare actuaries. Part of the reason is lower than expected participation by seniors and savings from generic drugs.But as White House budget director Peter Orszag told Congress when he ran the Congressional Budget Office, the “primary cause” of these cost savings is that “the pricing is coming in better than anticipated, and that is likely a reflection of the competition that’s occurring in the private market.” The Centers for Medicare and Medicaid Services agrees, stating that “the drug plans competing for Medicare beneficiaries have been able to establish greater than expected savings from aggressive price negotiation.” It adds that when given choices “beneficiaries have overwhelmingly selected less costly drug plans.”Yet liberal Democrats fought that private-competition model (preferring government drug price controls), just as they are trying to prevent private health plans from competing across state borders now.The lesson here is that spending on nearly all federal benefit programs grows relentlessly once they are established. This history won’t stop Democrats bent on ramming their entitlement into law. But every Member who votes for it is guaranteeing larger deficits and higher taxes far into the future. Count on it.Can you say, “OUT OF CONTROL!”

Winston SmithOctober 22nd, 2009 at 11:34 pm

“There is no money to provide the uninsured with health care, but Pentagon officials have told the Defense Appropriations Subcommittee in the House that every gallon of gasoline delivered to US troops in Afghanistan costs American taxpayers $400….According to reports, the US Marines in Afghanistan use 800,000 gallons of gasoline per day. At $400 per gallon, that comes to a $320,000,000 daily fuel bill for the Marines alone. Only a country totally out of control would squander resources in this way.”

MorbidOctober 23rd, 2009 at 7:30 am

We went into Afganistan because of 9/11. If you look at it from the point of view of appropriate response or pushback – does it not seem over-the-top? Now we are into nation building besides trying to win the war on terrorism (which BTW is unwinable)! It is outrageous what our government continues to do. The military industrial complex needs more and more wars to feed its growing infrastructure.Time – long overdue – to close our 820 oversea bases and bring the troops home and take care of our own way of life instead of trying to get the rest of the world to be like us and paying for it besides. At the end of a decade or two let’s see what the two outcomes look like. One civilized and the other stoneage? Whatever.

The AlarmistOctober 23rd, 2009 at 2:46 am

Gee, here’s a shocker …New Jersey Pays Goldman Sachs for Swaps on Nonexistent Bonds “I’m sure there’s an explanation,” Corzine, 62, said during a brief interview as he left a contractors’ convention in New Brunswick, New Jersey, on Oct. 14. “They don’t just send money out.”The governor declined further comment on the transaction according to his spokesman, Steve Sigmund. To be fair to Bloomberg, they do mention that Corzine is a former Chairman of Goldman, as such …… Goldman’s former chairman who was a U.S. senator when the contract was signed ….further noting that this was anagreement made during the administration of former Governor James E. McGreevey in 2003.OK, I’ll play along for a minute or two. I’m sure Jon Boy has disposed of his various GS interests in the four years or so from the GS IPO and the signing of this deal.Seriously, I believe he really had no idea his former Co was still reaping this benefit … what is surprising me at the moment where he is struggling in his re-election is that this master politico is not now insisting that the money for the period the bonds no longer existed be returned ASAP.Funny, but GS and former GS people never seem to insist that money flow back from GS to wherever when that might be the appropriate thing to do.

The AlarmistOctober 23rd, 2009 at 2:58 am

And, here’s an interesting thought piece …Goldman Sachs Is Too Big to Tell It Straight: Jonathan WeilIt was against this backdrop that Goldman’s chief financial officer, David Viniar, got on a conference call with reporters last week and said Goldman enjoys no government guarantee. Not even an implicit one, he said.“We’ve heard many people say that, but we certainly don’t operate the company that way,” Viniar said. “We operate as an independent financial institution that stands on our own two feet.” He didn’t stop there.“If we felt that we had an implicit guarantee, we would not be holding nearly $170 billion of cash on our balance sheet. We would not have reduced our balance sheet by $400 billion.” (Actually, the “cash” figure he cited also included certain securities that Goldman considers to be highly liquid.)After Duke pressed him further, Viniar turned emphatic. “I don’t believe any of our bondholders think that we have a guarantee, and we don’t think we have a guarantee,”To be fair to Bloomberg, this was a hard-hitting opinion piece, but it ended kind of weakly for something in a financial news setting:… True, Goldman passed the test, and in June it returned the $10 billion it received last year under the Treasury Department’s Troubled Asset Relief Program. Yet the point remains: Goldman had a federal safety net. It’s just about impossible to imagine the government wouldn’t provide another lifeline if needed ….How it should have ended:”Hey, GS had an unconstrained call on the full faith and credit of We the People. In the financial world such Options have real value, and people like GS make people like the rest of us pay for those options. The $10B GS repaid the US was repayment of the loan without the option … Based on the capital at risk and the implied volatility of GS at the time the option was extended, they still owe us $200B for the call option they had for the period of the loan.””We’ll take that in Gold, please.”

FEDupOctober 23rd, 2009 at 8:03 am

COINCIDENCE or NOT-GS not subject to new Obama pay caps. Gee, I wonder if GS had any advanced warning about the proposed “pay cap on exec compensation” from their alumni who are all in key govt positions. They always seem to “luck out” by remaining one step ahead of our policy makers. I sure wish the rest of us had that kind of “luck”: but then, that would be called “insider information” which as we all know is highly illegal!!

CitizenOctober 23rd, 2009 at 4:24 am

Britain is still in recession: decline continuesBritain hopes of escaping recession were dashed today after figures showed that the economy is stuck in its worst recession on record.Published: 9:38AM BST 23 Oct 2009The economy unexpectedly shrank 0.4pc in the third quarter, defying expectations in the City that it would have grown for the first time since the start of last year. Its contraction for six straight quarters is now the worst in modern history.Sterling, which has risen sharply in the past few days, tumbled nearly 2 cents against the dollar to $1.6503 on the figures from the Office for Natonal Statistics.The figures are “very disappointing” said Stephen King, the chief economist at HSBC. “The recovery people were hoping to see is not coming through.”The news is a major blow to Gordon Brown who has pumped billions of pounds of life support given the economy since the financial crisis plunged it into recession.Alistair Darling, the Chancellor, today said he stands by his forecast that the economy will start growing again by the end of the year.Britain’s services sector and industrial production both shrank in the period. The economy is still mired in the downturn despite a blitz of measures designed to prevent it tipping into depression that began with the injection of £47bn into Royal Bank of Scotland and Lloyds Banking Group in October last year.The recent uptick in houses prices and the return to profits of many City institutions had been treated with caution by many experts who remain sceptical about the prospect of a robust recovery. The Bank of England warned earlier this month that the strength of a rebound remains ‘highly uncertain’ given the strains still facing banks, businesses and consumers.Britain had hoped to join France, Germany and Japan in emerging from the first global slump since World War II. China’s economy grew 8.9pc in the third quarter compared with a year earlier and most believe that the US, the world’s biggest economy, is out of recession although official confirmation has yet to arrive.In Britain, the services sector, which stretches from banks to hotel and accounts for the lion’s share of the economy, has stabilised. The manufacturing sector too, helped by the fall in sterling, has also brightened recently after the dramatic decline in orders that followed the collapse of Lehman Brothers.Although the FTSE 100 index has surged 48pc since reaching its low for the year in March, most reckon there are several obstacles to establishing a secure recovery.The latest retail sales figures released on Thursday showed a surprise stagnation on the high street as consumers focused on cutting their debts and increasing their savings. Some of Britain’s biggest business leaders, including Tesco chief executive Sir Terry Leahy, have warned that rising unemployment represents the biggest threat to an economic rebound.”There will be retrenchment as households pay down debt,” said James Shugg, an economist at Westpac. “The economy still needs quite a lot of support.”The attention of the Government and the Bank of England has turned to how swiftly the billions of pounds of stimulus should be withdrawn. Alistair Darling, the Chancellor, said this week that the economy ‘s ‘not out of the woods yet’ and that it would be ‘dangerous’ to remove the support.LET THE CURRENCY WARS START IN EANEST LET US SEE WHO IS SWIMMING NAKED, THE CHINESE AT 8.9% GROWTH WHILE BRITAIN IS STAGNATING SOON TO BE FOLLOWED BY THE EUROZONE WITH THE STRONG EURO. LET US ALL DEVALUE AND SEE IF THE CHINESE WILL NOT NUKE THEMSELVES WITH MASSIVE SOCIAL UPHEAVALS. WHY IS THE WEST SO DOCILE??

FEDupOctober 23rd, 2009 at 7:40 am

Bloomberg: “UK Economy Unexpectedly Shrinks in Longest Slump”- GDP unexpectedly dropped in the third quarter as enduring slumps in services, manufacturing and construction dept the economy mired in its longest recession on record. The pound tumbled….. Well, surprise, surprise-obviously their leaders have also been smoking too much HOPIUM and now join the US leaders as the last people on the planet to rely on for common sense nevermind critical thinking!

MM CAOctober 23rd, 2009 at 9:17 am

This kind of belief and statement truly shows what the PTB think of Average Joe Americans. I ask who is stupid Bernanke/the PTB or Average Joes? Bernanke has to be one the biggest idiots ever with all his stupid statements over the past 5 years. the man has gotten nothing right? Research all his outlooks, they have all been wrong…Bernanke: Speeding up credit card rules could hurt consumersBy Sean Lengell / The Washington TimesThursday, October 22, 2009 – Added 23h agoFederal Reserve Chairman Ben S. Bernanke warned Congress this week about efforts to move up the effective date of tough new rules for credit card companies, saying such action could hurt consumers as much or more than help them.Mr. Bernanke’s comments may pose difficulties to the House Financial Services Committee as it anticipates marking up a bill this week that would move up enactment of credit card protection regulations to Dec. 1 — weeks earlier than scheduled.While the new deadline could benefit consumers by providing protections earlier than scheduled, it also would force the Federal Reserve to implement the new rules without giving the public and the credit card industry time for comment, “which could lead to unintended consequences.”Mr. Bernanke’s comments were included in a letter dated Tuesday to the House Financial Services Committee’s top Republican, Rep. Spencer Bachus of Alabama, who had written to the chairman earlier this month asking for his input on moving up the enforcement date of the credit card rules.Congress in May passed sweeping credit card reform legislation to significantly limit the industry’s powers that curbs credit card companies’ ability to increase interest rates and assess fees and penalties on consumers. The bill easily passed both chambers with significant bipartisan support, and quickly was signed into law by President Obama.House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, upset that some credit card companies pushed through rate increases ahead of the new rules — many of which are slated to take effect Feb. 22 — has introduced legislation to move up the date to Dec. 1.But Mr. Bernanke in his letter — released Wednesday — said such a move could lead to credit card companies having troubles implementing the new protections.”Creditors must make extensive changes to their systems and business models in order to comply” with the new rules, Mr. Bernanke said.Opponents of moving the date to Dec. 1 fear that credit card companies would push the costs of complying the laws earlier than expected on to consumers.Mr. Bernanke said that the Federal Reserve can’t predict how speeding up the effective date would affect the availability of credit and rates on credit cards.But he added that although a Dec. 1 effective date “could provide benefits for consumers, the 1/8Fed3/8 continues to believe that, given the breadth of the changes required by the 1/8law], card issuers must be afforded sufficient time for implementation to allow for an orderly transition.”Mr. Bachus, who argues the effective date shouldn’t be changed, said Mr. Bernanke’s letter will make it more difficult for Democrats to support the legislation.”Obviously the rational thing to do is to support the position of the financial regulators,” Mr. Bachus said.But Sen. Charles E. Schumer, New York Democrat, said Wednesday that if Mr. Bernanke won’t act to speed up the effective date of the credit card reforms, “we should quickly pass legislation in both the House and Senate to do so.”To see more of The Washington Times or to subscribe to the newspaper, go to

MM CAOctober 23rd, 2009 at 9:20 am

Bend over Average Joe American… They are not even close to done on Sticking it to you… They continue to destroy your Jobs, Take your money, take your homes, raise your taxes and on and on… 300 million will have to squel like a pig before they change thier ways!Now Chase Is Jacking Up Credit Card Fees (JPM)Vince Veneziani|Oct. 22, 2009, 4:36 PM | 656 |5The outrage continues over Citi increasing interest rates on its credit cards, but now consumers have a new scapegoat to blame: Chase. The bank has also raised interest rates but it’s too early to tell how much they’ve increased. One Chase credit card holder provides some insight:AMNY: “They’re trying to be creative in the ways they can raise revenue,” said Ben Woolsey, director of marketing for, an online research firm. “They’re either raising the fees or setting slightly more sensitive triggers for incurring fees.”That’s exactly what happened to Geraldine Salvayon, 66, of Jackson Heights, whose rate on her Chase card nearly doubled, from 9 percent to 16 percent.

GuestOctober 23rd, 2009 at 9:27 am

More Black Swans In Store For The US EconomyThe Pragmatic Capitalist|Oct. 23, 2009, 6:46 AM | 1,201 |4 guest post originally appeared at the author’s blog)Central Banks and governments around the world have thrown everything they can muster at the financial crisis. And up until now, it appears as though they have succeeded. Equity markets are up 60%+ around the globe and investors are beginning to party like its 1999. But a look underneath the hood shows that shiny Cadillac might just be a clunker (don’t worry, the government will take out a loan so you can take out a loan to turn in your clunker for a new car you never needed to begin with). Unfortunately, as we’ve learned over the course of the Fed’s 20 year boom/bust experiment, sound economic growth cannot be built on the back of a printing press. This is most evident in three segments of the economy:HousingJobsConsumersLet’s begin with the housing market. At a recent presentation to investors Whitney Tilson makes a very strong case for continued weakness in housing. As regular readers are well aware, this is a position I share. Although I never expected the record stimulus and wasteful home buyers tax credit I still firmly believe that there is nothing the government can do to counteract the laws of supply and demand. As we learned with Japan, such government programs do not actually solve problems, but simply prolong the inevitable.Today, we are in an unprecedented housing environment. 2 years after the majority of Wall Street and analysts proclaimed (and built their business models on the idea) that housing prices could never decline they are now calling the bottom 30% later. The recent seasonal jump in prices has many analysts calling the all clear. Our problems have not passed.While the majority of the subprime problems have passed there is another mountain of resets ahead that will wreak havoc on the housing market. Tilson argues that two waves have passed, but three lie directly ahead. These three waves include prime loans, jumbo prime loans and commercial real estate.Tilson believes this is the “mother of all head fakes” for 7 reasons:Ultra-low interest ratesThe $8,000 tax credit for first-time homebuyersMore middle- and upper-end homes are being sold (either voluntarily or via foreclosure), which has the effect of raising the price at which the average home is sold – but more defaults of higher priced homes is very bad news for mortgage holdersA decline in resetsA reduction in the inventory of foreclosed homeThe FHA is providing massive support to the housing market, in part by doing extremely risky lendingHome sales and prices are seasonally strong in April-July due to tax refunds and the spring selling seasonWe are literally in the eye of the reset storm:Coming into 2009 I predicted that housing would stabilize and rebound primarily due to seasonal trends and low interest rates (I also predicted an 18% jump in the equity markets for those that believe I am permabear). As recent data has shown, the seasonal downturn in housing is beginning to take hold.Despite seasonality and government stimulus the laws of supply and demand always rule the long-term price trend in any market. While demand has stabilized somewhat the supply side of the equation remains very lopsided. The current housing overhang is 7 million homes. The new housing inventory glut is at 12.9 months. With over 8 months of total supply on the market and a massive shadow inventory it is highly unlikely that these problems will fix themselves in short order.Housing isn’t the only weak spot. The current jobs market is the worst of the post-war era. Jobs are the lifeblood of any economy. In an economy where 70% of GDP comes from consumers its practically impossible to have a sustainable recovery if those consumers don’t have an income source from which to spend. There is certainly no recovery on Main Street despite what we read about bank bonuses and earnings on Wall Street.A recent Wall Street Journal piece predicts that the job market likely won’t recovery for over 5 years:Those who are curious as to why this recession is different from past recessions need look no further than the following chart. You’ll notice that consumer credit is falling at a rate that has never been seen before. In fact, consumer credit declined marginally during the 1991 recession and actually climbed throughout the 2001 recession. Why is this important? An economy that is based on a fractional reserve banking system has trouble expanding if the debt in the system does not continually expand. Consumers are still deleveraging and that means a robust and sustainable recovery is unlikely to occur. The Fed can take this horse to water, but they can’t make them borrow.Perhaps most important is the need to deleverage. Household liabilities as a percentage of income remain abnormally high at 129% vs the peak of 138%. The biggest risk in such an environment is not whether the consumer recovers – the consumer needs to deleverage and clean up their balance sheet – but whether the government continues to pummel the currency and rack up massive debts as they try to dig our way out of the debt hole. These are the same mistakes Japan made in the 90’s. Let’s hope we wise up and stop the printing presses before they cause another black swan….A black swan that their printing press absolutely will not be able to predict or stop.

PeteCAOctober 23rd, 2009 at 9:34 am

These’s still a school of thought out there – that says the minimum value of the Dow will be around 5,000. That’s in inflation-adjusted dollars. Please see the following chart …Inflation-Adjusted DowThanks to the folks at Chart of the Day for posting this data.This is probably a scenario that Ben Bernanke and Obama don’t really want to hear about. Come to think about it – Prof. Roubini doesn’t seem too fond of this potential outcome either. But it can’t be dismissed out of hand.PeteCA

HubbsOctober 23rd, 2009 at 10:04 am

This is a very important point, which begs the questions:Inflation adjusted Dow/S&P vs:1.)Gold/Silver/Platinum?2.)Oil/Natural Gas/Coal/ ?3.)Corn/Wheat/Soybean/Rice?

GuestOctober 23rd, 2009 at 10:47 am

No, ignorance is the source of “evil!” Ignorance in understanding how growth works (and, ultimately won’t work): it’s the big driver in the greed equation.

Elizabeth KrupaOctober 27th, 2009 at 11:44 am

It is actually not surprising that many Eastern European countries are not being hit hard at all in this global recession, some, like Poland, not even at all. I believe that teh reason for this is that countries like the Czech Republic and Poland, although global players, really have had almost no participation in the global bankikng industry in the past. Countries like the ones mentioned previously are primarily export countries of raw material and countries like the Czech Republic also depend on tourism for boosts to its GDP. This is most likely why investor are attracted to Eastern European sovereign debt now. It seems to be the least risky and volatile compared to Western European countries. Now that countries like Poland have emerges as more stable and unaffected by the recession than others, perhaps investor interest now will make them stronger global players in the future.

Regan LinNovember 6th, 2009 at 8:34 pm

Deutsche Bank forecasts NPLs will jump to 5-10% of total loans in the CEE-3 (Czech Republic, Hungary, Poland), 15-25% in the Baltics, 15-20% in South East Europe and 30-45% in Ukraine. Even though, the Eastern Europe paints a bleak picture, I still believe in the prospect of the region. My optimism is based on two reasons.The first reason is its price differential to the Euro Zone. The Eastern Europe has a similar situation with the Euro Zone as China to the US. Because of the low wage, Eastern Europe is enojoying a great influx of FDI to build factory in the region to supply the Euro Zone.Secondly, Eastern Europe is positioned strategically between Russia and the Euro Zone. Most of the natural resources have to come through these regions. So with its natural competitiveness in geography, Eastern Europe will only be a growing region of investment.

Letha NimonJune 10th, 2011 at 8:44 pm

I’d be inclined to give carte blanche with you one this subject. Which is not something I typically do! I really like reading a post that will make people think. Also, thanks for allowing me to speak my mind!