Nouriel Roubini's Global EconoMonitor

RGE Monitor – Weekly Roundup

Check out all the great contributions that were published during the past week on RGE’s Nouriel Roubini’s Global EconoMonitor, RGE Analyst’s EconoMonitor, Finance & Markets Monitor, Peterson Institute for International Economics Monitor, Global Macro EconoMonitor, U.S. EconoMonitor, Emerging Markets Monitor, Asia EconoMonitor, Latin America EconoMonitor and Europe EconoMonitor.

On Nouriel Roubini’s Global EconoMonitor, Nouriel discusses the seriousness of global imbalances, which raise the risks considerably of future financial crises and asset bubbles.  While this financial crisis has temporarily reduced the magnitude of the global imbalances, it would be a mistake to assume that rebalancing is taking place naturally.  Please read A Balanced Global Diet.

In U.S. Real GDP Growth: Should We Really Get Excited? Nouriel Roubini and Christian Menegatti react to the Q3 U.S. GDP report and analyze the shape of the recovery and the outlook for the U.S. consumer.

As Investors worldwide are borrowing dollars to buy assets including equities and commodities, Nouriel warns that we have “the mother of all carry trades.”  See Bloomberg’s Reporting of my Remarks…

Nouriel also discusses the state of the economy, the dollar’s weakness, the prospect of gold, and fixing the banks at My Morning Interviews/Videos with CNBC’s Squawk Box.

Also see Bloomberg Reports Roubini in Good Company as Investor with Most Wisdom.


On the RGE Analyst’s EconoMonitor, RGE Analysts take a closer look at which countries are most likely to implement capital controls following Brazil’s actions on October 20.  The article points out that capital controls and other forms of intervention are ineffective at reverting appreciative forces on the currencies, but they can ease the pace.  Please read Are Capital Controls in Fashion Again?

In Pakistan’s Surging Violence: How Big a Risk?  Kavitha Cherian and Arpitha Bykere throw light on the political and security vulnerabilities Pakistan faces in the wake of recent terrorist attacks. Instability in Pakistan has broad ramifications on regional security given Pakistan’s nuclear arsenal and has increased pressure on the fragile civilian government. Additionally the sustained military operations have weighed on Pakistan’s economic growth during 2008-09 and slowed policy implementation putting Pakistan’s balance of payments at risk.

In If Infrastructure Investment is Hot, Why Can’t Funds Raise Money? Monika Brown notes that business boomed over the past decade for unlisted infrastructure funds as private investment, mostly by pension funds, in infrastructure projects grew.  However, fund raising by unlisted infrastructure funds slowed to a relative trickle in 2009, despite no change in allocation to these investments by pension funds. What’s the reason for the sudden change of interest in the infrastructure funds?


On the Finance & Markets Monitor, Joseph Mason sheds light on the complexities of the corporate governance industry, which was believed to be related to firm performance.  The depths of this recession has elicited a call for financial regulation and a restructuring of financial instruments, but the risks of “getting it wrong” are serious and could affect U.S. economic performance and competitiveness.  Don’t miss What if Regulating Executive Pay Doesn’t Work? A Brief Primer on the Limits to Knowledge in Corporate Governance Research.

In The Next Step in the Bank Explosion Cycle??? Reggie Middleton expounds on the currency risk of the “mother of all carry trades” as some of the largest and most respected banks in the world are heavily leveraged into this trade in one way or another.

In trying to answer Why Do Bankers Make So Much Money? Rick Bookstaber considers whether banks operate in a competitive market and whether workers get paid commensurately with their talent.

Also on the Finance & Markets Monitor:

Why Wall Street Reform is Stuck in Reverse by Robert Reich

Richard Berstein: Once a Huge Market Bear, Now a Bull by Edward Harrison

Too Big to Fail: Why The Big Banks Should Be Broken Up, But Why The White House and Congress Don’t Want To by Robert Reich

The Private-Sector Solution to the Bonus Problem by Models & Agents

What a Tangled Web Mortgage Securitizers Weave… by Barry Ritholtz

Gold Market – Accident Waiting to Happen or Crime Scene? by Prieur du Plessis

Patchwork Fixes, Conflicting Motives, And Other Things To Avoid: Some Lessons From the Regulated Non-Financial Sectors by Simon Johnson

Jeremy Grantham: The Market is 25% Overvalued; 15% Correction Coming by Edward Harrison


On the Peterson Institute for International Economics Monitor, Gary Clyde Hufbauer and Jisun Kim examine the nexus of the WTO and climate change.  Please read The World Trade Organization and Climate Change: Challenges and Options


On the Global Macro EconoMonitor, Yves Smith presents a piece by Richard Alford that speaks to the fact that the G20 and Bernanke do not appear to have established anything in the current or promised policy mix that will actually address the global imbalance issue, and therefore a return to unstable global imbalances seems inevitable.  See Guest Post: Global Rebalancing: The G20 and Bernanke Versions,

In Reserve Accumulation and Easy Money Helped to Cause the Subprime Crisis, Mark Thoma presents interesting analysis from Guillermo Calvo who sketches an outline of a theoretical framework to explain the crisis and presents the real sector impact as well as policy implications.


On the U.S. EconoMonitor, James Hamilton argues that regardless of your interpretation of how this financial crisis arose, it would have made far more sense to address these problems with proper regulatory supervision prior to the crisis instead of targeted liquidity operations after the crisis unfolds, and asserts that such unconventional operations should not be part of the central bank’s arsenal of tools in the future.  Please read Evaluating the New Tool of Monetary Policy.

In Tax Credits, Screwdrivers, and Supply and Demand Curves, James Kwak uncovers who the homebuyer tax credit is really helping.

David E. Altig makes a compelling argument for The Growing Case for a Jobless Recovery.

Also on the U.S. EconoMonitor:

Why State and Local Governments Need More Stimulus Funds by Mark Thoma

Breakdown of Single Family Homes by Price by Barry Ritholtz

Case Shiller: Home Prices Fall More Slowly by Barry Ritholtz

Searching for the Ghost of Tom Joad Amidst the Financial Crisis by J Clinton Hill

Has the US Financial System been Nationalized? by Fabius Maximus


On the Emerging Markets Monitor, Heiko Hesse and Tigran Poghosyan provide the first empirical evidence linking oil prices to bank performance in oil-exporting economies, which suggests that easily observed oil prices could inform macro-prudential regulation in these countries and mitigate pro-cyclical bank lending.  See Oil Prices and Bank Profitability: Evidence from Major Oil-Exporting Countries in the Middle East and North Africa.


On the Asia EconoMonitor, Rumi Malott Morales discusses the turf war on the field of ASEAN between Japan and Australia about the role of the U.S. in the region, while China is focusing its energy on winning friends through investment and infrastructure development in Asia and is prepared to assume the regional leadership mantle currently abandoned by the U.S.  Please read The Dragon in the Alphabet Soup.

In Chinese Railways and Speculating Pig Farmers, despite last week’s excellent economic numbers and the subsequent cheerleading by many, Michael Pettis continues to stress his concerns over investment that doesn’t make economic sense, unemployment for college grads, currency intervention between trade surplus countries, and the potential for asset bubbles.


On the Latin America EconoMonitor, Nicolas Eyzaguirre discusses the benefits of having “fiscal space” and highlights the value of strengthening fiscal policy frameworks in the future, so that all countries can be better prepared for future episodes of unfavorable conditions.  Read Latin America and the Caribbean: Finding Space for Countercyclical Fiscal Policy.


On the Europe EconoMonitor, Edward Harrison puts forward an answer for why London housing prices can be on the rise while the rest of the economy is surprisingly contracting.  See If the UK Economy is Still in Recession, why are London House Prices Hitting New Records?

Don’t miss Edward Hugh’s in-depth analysis of the economic data out of France, Germany, and Spain in the following:

The French Rebound Continues In October While Germany Moves Sideways

Beyond the Consensus on European Bank Credit

118 Responses to “RGE Monitor – Weekly Roundup”

PeteCAOctober 30th, 2009 at 9:34 am

Wolf in the Wilds said: “On liquidity, the Federal Reserve has ended the UST buying program. Will it be restarted at a later stage?”Quite honestly, I just don’t see how the Fed can possibly stop buying back US bonds at this stage. Their official program may have ended, but they will re-start the activity in one form or another. Foreign and domestic demand cannot possibly keep up with the amount of debt that must be issued by America. I believe that the Ggovernment will strive to maintain the illusion that interest rates on US debt are low – up until the whole ship actually sinks and goes under water.PeteCA

GuestOctober 30th, 2009 at 11:04 am

The Fed may create new facilities, new Maiden Lane’s,new primary dealers, etc. Whatever it takes. In theend it’s a shell game that buys back USTs.There is an old story in a small southern town where aprominent merchant saw the Civil War coming in 1860. Sohe sold his assets and bought gold. Then he and hisslave buried the gold on the merchant’s property in thedark of night. Years later, when the Union soldierslined up the townsmen to ask about valuables, themerchant pointed to his looted and burned out store andsaid that’s my valuables. After the end of the war, themerchant dug up his gold and sold it to rebuild his store.Today, it’s the prominent store on the town square.But guess what? His great-great grandchildren are buyinggold…

MM CAOctober 30th, 2009 at 10:00 am

So if in USA (or is it only in California) we have this situation that sales tax receipts are down a lot while retail sales are down just a little…Perhaps this is because of following factors:-the recession a considerably heavier in USA than in other industrialized countries-U.S. retail prices are considerably lower than prices in other industrialized countries-a lot of the sales receipts is for sales over the internetHide reply Reply to this comment By Guest on 2009-10-29 23:03:21how about the state and the fed are not sycing up on thier lies with all the data…. lowers tax receipts equals lower demand, supply, gdp, jobs, car sales, house sales, everything…BTW – when you buy $109.00 of Chineses made crap at a Best Buy for instance, you pay 10.00 in sales tax out here… Talk about hurt…buy at 21,000 car pay 2,000 in sales taxbuy a 32,000 car pay 3000.00 in sales taxCalifornia is a fiscal nightmare and its economy is in total free fall and it will drag the rest of the US with it…

MorbidOctober 30th, 2009 at 10:42 am

In the northern area of CA where I live the county tax assessor is, to my surprise, rapidly lowering assessment values by around 50%. A $96K lot in 2006 is now assessed at $40K. A $630K home is now $350K. On and on like this – hurting the operating budgets not only of the big spenders in Sacramento but also local governments and schools who take a slice of the pie.CA is imploding under the 30 plus years of the liberal tax and spend agenda. What is it with this kind of psyche trying to create Utopia? Life is tough and greasing the skids only sets things up for a Humpty Dumpty experience.

Winston SmithOctober 30th, 2009 at 5:00 pm

some people say liberal tax and spend some people say Prop 13 depriving the public sector of funds. it depends on your outlook i supposeArnold, Milton, and the California NightmareNaomi Klein on The Shock Doctrine, California styleby Rebecca BoweSpeaking at the University of California at Berkeley yesterday evening, award-winning journalist and author Naomi Klein lamented the sweeping budgetary cuts to education, women’s shelters, and a host of critical social services that have rocked California in recent months.“When these cuts are imposed, it’s constantly portrayed in the media as if it’s an unfortunate and painful necessity,” she said. On the contrary, she argued, the gutting of the public sector in California is no coincidence.During the federal bank bailout last fall, there was a lot of talk about pending disaster and burning houses to justify saddling taxpayers with such an extraordinary sum, Klein noted. “You really know how houses were on fire in California — but these were metaphorical houses.” She also mentioned that Goldman Sachs handed out $23 billion in bonuses this year. “That is the same size as California’s budget shortfall,” she pointed out.“A private sector debt crisis was turned into a public sector debt crisis,” Klein said. “And the bills are coming due.”Speaking directly to UC Berkeley students who will be affected by pending tuition increases, Klein characterized the impact on the public university system as “a physical embodiment of a great injustice that you are being asked to pay for.” She urged the students to fight it.“Maybe there could be strategy where all of the people who are under attack can intermingle and converge,” Klein said, “so you actually become too big to fail.”

The AlarmistOctober 30th, 2009 at 10:24 am

I don’t know about you, but I am really excited about the recent uptick in GDP … I especially can’t wait to see what the revised number will be.Happy days are here again.

economicminorOctober 30th, 2009 at 11:16 am

reply to RL from previous thread who thinks that the economy is getting better and that some of us just can’t be happy.The problem is debt. Debt that is impossible to repay.Ever hear of Blind Faith?We have surpassed Zero Hour but rather than cutting expenses and tightening our belts and getting back to the real work of value added productive endeavors we just go out and start to dilute our currency.Why? Because there is only one school of economics taught in this country and one set of business organizational design and that is around more and more debt.When people are trained to either follow orders or trained in a discipline, like a religion, FEW question. Faith is easier than thought. It is a human nature and a downfall. Mob rule and religion and patriotism are all a part of having faith. Academian discipline is mostly just another form of faith. Even new scientific discoveries are disbelieved at first until the evidence is overwhelming. In economics, when only one faith is taught, there is little disagreement.I think that MOST of the government and most of the Banksters actually believe in the discipline that they have been taught. Most are trained to not think for themselves and to follow the rules. Whistle blowers are shunned and ostracized. Contrarians and real risk managers are disposed of. We have a culture of Positive Thinking. It is in our nature. Government use to set limits on overly optimistic crazy risk taking but during Clinton and then with Bush, all restraints were removed.Our universities only teach ONE branch of economic theory. Under which the economy can be controlled by monetary policy. Under which, debt is good as it allows ALL assets to be *used* or devalued. Under the NEW bastardized modified Keynesian Economic theory, savings are destroyed by forcing all savings to be leveraged against rising asset values. Risk is non existent by turning it into a commodity to be sold. Nothing is really about production in the NEW Keynesian Theory that most all of today’s economists believe in. So in reality, there is really nothing except betting on future trends and off shoring production to those who are still willing to work.. After all, no one has to work under the New Keynesian Economic System. And those who don’t play the game are marginalized and frowned upon and eventually forced into poverty and servitude.This is the model of American Capitalism we currently have. Under the terms of the New Keynesian Economic Model, you are right, growth by debt is good and great news. In the real world there are limits to the amount of debt because it has to be serviced. When those who are responsible for servicing the debt are over burdened with expenses, in the real world, they start defaulting on their debt obligations. No additional amount of debt, spent on additional consumption can solve this long term. So when a government relies on the solution of more and more debt over and over for decades, there comes a point where the carrying capacity of this debt burden is exceeded. The result is deflation and debt revulsion. When you can only create new debt by bribing the debtors with cash for clunkers or cash for foreclosures this should be a sign to everyone that we have exceeded a climax for debt..But those who are in charge believe in a system and beliefs are hard to change. This is all they and maybe you know so the gobbermint will continue down this path until overwhelming evidence, probably in the form of a depression, will cause them to lose faith.So just prepare for this because there is really little alternative. We are living a form of insanity and it will run its course. There is no altering Blind Faith by reason, only by dealing with the consequences will people learn and change.Then as Minsky said, it will happen again in the future after a new period of stability. But first we have to reset the game and start again. We are just starting to reset and the new GDP numbers are not real or part of it. What is happening to more and more people is. The revulsion of debt and the growing frugality is.

GuestOctober 30th, 2009 at 11:26 am

And this from Dave Lindorff’s recent article Happy Talk Amid the Wreckage:

Meanwhile it’s worth noting an oddity about this “recovery” being trumpeted in government and media. The relationship between the dollar and the stock market has become very strange. If you look back at stories on these two things to 2007, before the financial crisis hit, and earlier, you’ll see myriad articles explaining that the dollar and the US stock market tend to move in tandem. This was always explained as being because as the dollar strengthens, foreign investors want to put their money into dollar-denominated assets. Similarly, if the dollar weakened, analysts would write confidently that the stock market would be hurt as investors pulled their money out of US equities to invest in markets denominated in appreciating currencies.Now, the analysts say that as equities strengthen, the dollar will fall, but if equities fall, the dollar will appreciate. The reason for this new inverse relationship should be cause for considerable alarm. Why? In fact, it turns out that the last eight months of a rising equities market has been largely the direct result of a shrinking dollar. This is because so much of the sales and earnings of companies in the S&P 500 and the much narrower Dow Index are earned overseas, denominated in foreign currencies, but accounted for on the books of these US-incorporated firms in dollars, that as the dollar declines in value, corporate sales and earnings appear to be growing. Reportedly, as much as 80 percent of the appreciation in the S&P Index since last March 9 when the market hit bottom can be attributed to the dollar’s fall against major world currencies.Financial writers and reporters on TV don’t mention this tectonic shift. They just report the new relationship (Stocks up, dollar down, stocks down, dollar up) as though that’s they way it’s always been. But actually, this is a phenomenon has normally ben characteristic of Third World, so-called “developing” economies. That since the end of 2008 it has become characteristic of the US economy should be cause for concern.So don’t be conned by the happy talk salesmen at the Fed and Treasury and in the White House, or by their propagandists in the newsmedia, who are trumpeting the latest GDP growth figure as a sign that the recession is over, apparently in the hopes that people will run out to the mall and start spending (in those remaining stores that don’t have their windows taped or covered in plywood). What we’ve seen was a blip on the chart, engineered by a couple of “going out of business” sales by the car and housing industry.Real unemployment—measured the honest way it used to be 30 years ago, to include those who have given up looking for work or who are working part time involuntarily—is hitting 20% (for those who are bad at math, that’s one out of five working-age Americans). Foreclosures are hitting a record. Half of laid-off workers are cashing out their 401(k)s in order to buy food. State and local governments, both major employers, are hitting a wall as tax collections plummet and federal stimulus funds run out. This is not the foundation for a renewal of economic growth; it is the precondition for a renewed or prolonged recession.And if the dollar continues its slide, which is likely given the US’s huge budget deficits and trade deficits, as well as the Federal Reserve’s inability to raise interest rates (a move that could strengthen the dollar but which would crush the economy), all those things that Americans buy abroad which are no longer made at home, as well as the oil that is imported, will cost that much more, driving consumers further into the hole. And remember, 70% of US GDP is consumer spending, a result of our decimation of our industrial base.Recession ending? Don’t bet on it.

economicminorOctober 30th, 2009 at 11:30 am

I would also like to say that not only the growth in government is astounding but the fact that the growth has been mostly meaningless. We don’t have people to go after Medicare fraud, or investigate mortgage fraud, or insider trading, or…. inspect our food and educate our children adequately in most communities but the size and scope of government is constantly growing as are the taxes and fees and fines.No one in charge seems to get it. Whether it is a tax on health care or a cap and trade tax or cameras and radar on signals or increased filing fees for any permits, the cost to the working class is not going down as it should with prosperity but is on a continual march upward.Every dime that is taken from the working class just subtracts from what they have left for discretionary spending. As these taxes, fees and fines continue to rise, the real income of the working class declines.What don’t they get? The working class was forced to borrow to maintain their standard of living over the last decade while wages remained stagnant even though the take of government continued to climb. Now people are increasingly insolvent and foreclosures and bankruptcies and short sales are prevalent and growing as is unemployment. These are all signs that the monetary policies of the last decade and more have been a failure… YET the answer to our situation is to increase taxes, fees, fines and increase the size of government and our military budget?Blind Faith in a broken system is insane and the consequences are far from being fully recognized.

GuestOctober 30th, 2009 at 1:52 pm

YET the answer to our situation is to increase taxes, fees, fines and increase the size of government and our military budget?Well, that’s at the Federal level, not exactly the case at local levels: fees and fines going up, and to some degree taxes, but the size of government is shrinking.

economicminorOctober 30th, 2009 at 2:56 pm

Yes but overall government has been growing, even if at the local level it has been shrinking. And when it doesn’t shrink as fast locally, that is due to federal subsidies to the state and local governments. Local governments are raising fees and fines and wish they could raise taxes but the federal government is talking about raising lots of taxes with Cap and Tax and none of the health care bills are revenue neutral, all require someone to pay more for some future undefined benefit.So there are two negatives going on, increases in revenue enhancement and diluting the existing dollars.. Neither of these are positive for the average citizens.In an overly indebted system, both are huge negatives and IMO will lead to more defaults, foreclosures and bankruptcies.

GuestOctober 31st, 2009 at 1:35 pm

Yes, as I was careful to note, it’s at LOCAL levels where government is shrinking. At the federal level the Pentagon continues to bloat away…

GuestNovember 1st, 2009 at 2:36 pm

I assure you that I’m firmly based in reality. The county that I live in has been shedding jobs for over a year now and there’s no end in sight.Those that understand how government structures in the US work will know that it is mandated that state, county and municipal governments MUST balance their budgets on a yearly basis (not so with the Federal government). If tax receipts go down then these governments MUST reduce their expenditures (or, and it can only be temporary, reach into their “rainy day” buckets).

GuestOctober 30th, 2009 at 11:30 am

I love this -From U.S. Economy: Consumer Spending, Confidence Fall on Job Worries:

“Manufacturing growth is going to be robust and broad- based,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Consumers are waiting to see whether the job market will improve before confidence takes another big leg up. That’s coming, but it’ll be a gradual process.”

People NEED jobs before they can spend, moron! You can root for more an more crap to be manufactured (through communist programs like Cash for Crap), but eventually you’ll end up with a huge inventory going nowhere!

MM CAOctober 30th, 2009 at 12:12 pm

NO JOBS! I’ve read numbers and storied lately that over 50 MILLION people have lost jobs, or can only find part time work or Have taken big pay cuts to keep thier job. 50 MILLION people… all in the past 18 months…. Obama barely got 50 million votes, i wonder how many of those 50 MILLION job affected voters will vote for him in 2012 when they all relaize they still have not recovered!We are headed for 20 million people who had decent jobs 18 months ago to those 20 Million with NO JOBS! Prenetly we are almost 16 million. And 20 Million could easliy go to 25-30 million if they dont start really fixing things.Remember they dont really count you anymore when you fall off unemployment insurance.

GuestOctober 30th, 2009 at 12:23 pm

to add furthur to this, I work for a large Fortune 50 company. We have been in cutback mode for over 2 years, I have personally laid off over 75 long term workers. We are now in the next phase of slashing salaries. Yesterday i told 7 people they could keep their jobs if they took 15% pay cuts. No raises for 2 years, none coming this year or next. My personnal compensation is done over 20% over 2 years ago. They want everyone to work harder, work longer and work cheaper. I can say that Sr. managment is not taking this beating.

economicminorOctober 30th, 2009 at 12:47 pm

Blind Faith in a failed system!The only things they think the public needs is more confidence and more debt.The last time things got this unbalanced, not even this unbalanced, was in the late 1920’s and early 1930’s.I really doubt that we will see enlightenment from the Faithful. I know we won’t from those who are beneficiaries of this model. The only hope is that enough intelligent people wake up and start enlightening others. When enough people understand the dilemma and the consequences of the current actions maybe it can be turned around.. but I doubt either. Enlightenment will come near the bottom of this cycle and all most people can do is figure out how to endure it.At this point, I think most people are afraid but still deep in denial. If they weren’t, the biggest selling books would be on gardening.

GuestOctober 30th, 2009 at 1:55 pm

At this point, I think most people are afraid but still deep in denial. If they weren’t, the biggest selling books would be on gardening.Seed companies are doing big business these days. And I’m talking about the vegetable kind, not the Monsanto kind (though they are working DC as hard as they can to kill all competition to ensure that their disease spreads).

11b40October 30th, 2009 at 5:19 pm

“The only hope is that enough intelligent people wake up and start enlightening others.”Good luck with that. When you try to enlighten others, their eyes tend to glaze over and if you don’t change the subject, they look at you like you have 2 heads. Or, if they are semi-enlightened and interested, they probably have another ‘opinion’ that is the equivelent of talking points from their favorite political party, trade union or industry association. Arguments break out and go nowhere.People wake up after the fact. Experience is the teacher, and there is a boatload of it headed our way….and all this talk today about Blind Faith. After I leave the office, I will drive across a ‘Sea of Joy’ and see if I ‘Can’t Find My Way Back Home’. When I get there, I will dig out a CD and crank up ‘In the Presence of The Lord’. Eric Clapton, Ginger Baker, Stevie Winwood, and Ric Grech. Blind Faith you can really get into!Independent Contractor

economicminorOctober 31st, 2009 at 12:20 pm

I sure know that one! It is hard to find people to discuss current economic events with. That is one of the reasons I come to this blog. Having people to interact with that actually understand the bigger picture. Even if many of us see it somewhat differently. The majority of citizens are in Denial. I have enlightened some though. A few of them work at enlightening others. Most take years to realize that the system they believed in has been taken over and corrupted. I have people come up to me and tell me how they finally realize that what I had been saying for years has happened. Unfortunately many of them have lots of debt and are buried. They are realizing how right I was now that it is most likely to late for them to get out in front of this tsunami that is sweeping the country.Blind Faith in failing institutions has threatened their security and future and many are angry and afraid. I have known for more than a decade that this was coming. Doesn’t mean I am prepared either. It is really impossible to prepare for CHAOS!During the last event in this country’s history that is similar to this with debt levels, speculation instead of investment and corruption, most people still lived on the land. This time, things will be radically different. I can only guess how ugly this can get. It is very unfortunate for this country that the leadership has Blind Faith in an economic philosophy that has failed. With our backs up against the wall, they believe that doing more of what failed will somehow make things better. Insane! Yes but that is what Blind Faith does for you.Don’t get me wrong, this is not a failure of Capitalism. This is what Minsky wrote about gone to extremes. This is more likely a Kondratieff cycle.

11b40November 1st, 2009 at 1:10 pm

Thanks, Guest. I look forward to the expanded coverage and the documentary. Ginger Baker created his own reality and seems to have stayed there.Independent Contractor

GuestOctober 30th, 2009 at 12:38 pm

What’s Wrong With Consumer Confidence?Submitted by thetechnicaltake on 10/30/2009 10:58This is an interesting video taken from CNBC’s “Squawk On The Street” and seen earlier in the week here on ZeroHedge.The show’s host, Mark Haines, is incredulous that Tuesday’s consumer confidence number came in lower than expected. Haines mutters: “What the heck is that all about?” As Haines goes onto explain, housing is higher in most major markets and corporate profits are better. The only thing missing was the next statement out of his mouth, and I will fill in the blanks: “What do people want?”It just goes to show how divorced Wall Street is from Main Street.The show’s talking heads or those people in the boxes suggest that the real angst Americans have is rising gas prices at the pump, increasing health care costs, and an uncertain labor market. This is all true, but I don’t think that it is the real source of America’s angst.The real source of America’s angst is a sense that something is terribly wrong. What that something is isn’t tangible -like higher gas prices – but it is palpable. Maybe it is the lack of leadership in Washington or the inability of that leadership to do anything but put our problems off for another day.There is no collective purpose to the actions coming out of Washington. There has been no sacrifice for the greater good. Bailouts and government programs, like “cash for clunkers”, have perpetuated the same old thing. The bailouts have favored the connected or those who where irresponsible in the first place. Is this the American way?This is not the change that Americans wanted. They voted for it, but this is not the change that Americans wanted.So what kind of change did Americans want?For this we need to go back to September, 2001 and the War on Terror. With the attack on America, President Bush was handed a golden opportunity to galvanize Americans towards the purpose of sacrificing for the greater good, but instead all he asked of his fellow countrymen was to go to the malls and continue shopping. The soldier in combat made the sacrifice, but this is what they do. Their sacrifice was unconditional, and this was understood and accepted by all. But where was the sacrifice asked of the ordinary American here at home? At the very least, shouldn’t we have been asked to cut back on our consumption of large cars and oil to decrease our reliance on those very same foreigners who were at war with America? I am sure my fellow citizens would have been willing to act for the greater good, but they were never asked. This was President Bush’s biggest failing.Now we come to President Obama. His crisis isn’t the War on Terror, but a generational economic crisis. President Obama did come to the electorate and say “we need to change the way we do business” referring to the grid lock and bipartisanship in Washington. I think the President was sincere. From an idealogical perspective, Republicans and Democrats need to work together to solve the problems this country faces.But for President Obama it isn’t so much what he has done (i.e., wasted a lot of money) but what he has failed to do (i.e, galvanize the country for the greater good) that is so discouraging. Even if the other guy (Senator McCain) was elected, he probably would have done the same thing – thrown good money after bad – as this was what was being recommended by the economic of this country. Oh, these were the same economic leaders who missed the crisis in the first place.But like his predecessor, President Obama is missing what kind of change Americans really want and why there continues to be so much dissatisfaction. Americans are willing and ready to make that sacrifice to improve their nation and the future of this nation for their children – provided that burden is shared by all. The only problem is that no one has asked them to make that sacrifice, and the window of opportunity for the Obama administration to come to the American people to make such a sacrifice has closed or is closing quickly.As measures to resuscitate the economy begin to peter out, the fragile underpinnings of the economy will begin to be exposed yet once again. The likelihood of throwing more money after the problem – in front of a mid term election – is becoming increasingly diminished. With no real economic catalyst to sustainable growth and with very little fixed after this crisis, one really needs to ask what does the Obama economic team do next?One thing is for sure: the time to ask the American people to make a sacrifice passed long ago when the President first took office. This was the one option that has been squandered, and this is why Americans remain so dissatisfied.

The AlarmistOctober 30th, 2009 at 1:34 pm

One really gets tired of hearing that the American people need to sacrifice while at the same time its elected officials give themselves raises, give more and more money to the special interests that get them elected, build ever-increasing laws and security apparati (literal and figurative, like TSA and PATRIOT Act) that do not apply to them or their direct supporters, and toss trillions of the working public’s money to cross-sections of society whose only function seems to be to provide the votes that put them over the top (face it, either party can only reliably deliver 43% to 45% of the vote and they need to buy the rest).Sacrifice needs to start being made in the halls of Congress, on K Street, and in organizations like ACORN.If they don’t learn to leave the rest of us alone, we might just get angry enough to take our country back from them, and then they won’t have any money or toys to play with.

GuestOctober 30th, 2009 at 2:03 pm

All was well and good until you pulled the strawman -ACORN- out. Git a frigging grip Righty, ACORN has received but peanuts over many years, and the recent right-wing setup gag was all show and no go- none of the schmoozing got past the initial levels (and there will likely never be any convictions BECAUSE NO CRIMES MANGED TO BE COMMITTED!).No mention of Defense industry fraud? We have companies who have been caught and convicted of stealing billions yet they are still having billions (trillions) passed to them! Figures, the holier-than-thou Right will always go after the poor guy (in order to distract from their ACTUAL high crimes)!

The AlarmistOctober 30th, 2009 at 2:26 pm

At risk of APPEARING to defend defense industry fraud, at least national defense is a valid constitutional purpose for the Federal Government. Social-welfare programs are dubious at best, every bit as wasteful, and worst of all have the effect of eroding the self-reliance and character of a once free people.Did you ever see the meme where the Red states (boy was that an unfortunate split of colors) cut loose the Blue states? It won’t happen, because the Blues know they have no one to provide the funds or to operate the defense that keeps the Blues free to make their obnoxious demands.Grab a clue, lefty.

The AlarmistOctober 30th, 2009 at 2:31 pm

Oh, and there are plenty of current and ongoing prosecutions of ACORN staff or auxiliaries for cases of voter fraud, among other things. Talk about get out the vote? The right were so afraid of being called racist that plenty of obvious fraud in the last election went unchallenged until well after the damage became irreversible.

GuestOctober 30th, 2009 at 3:55 pm

Yeah, keep believing the propaganda, Righty!BTW – I’m not a “Leftie,” but keep distracting from the real issues as it makes things better for me 🙂

GuestOctober 30th, 2009 at 4:00 pm

One other comment-Your response is SO typical of right-wingers- excuse the massive fraud/crime by the rich elite!Corporate criminals running loose and you and your ilk whining about some low-level crap.Don’t look now, but it’s your beloved right-wing crack-heads who are really screwing up your precious system… Ha ha!

GuestOctober 30th, 2009 at 1:04 pm

All this is capitalism, pure and simple. Keynes or no Keynes, no capitalist whining (especially whiny on this list) can change the laws of capitalist development: concentration, monopolization, the declining rate of profit, and the relative impoverishment of the working class. American capitalists killed industrial production in this country because in order to resist the declining rate of profit they needed the labor of colored people, paid 1-10% of the US blue collar wages. This is the fundamental cause of the United States going down the tubes, and Western capitalism along with it. Asian capitalism, the “emergent-markets” capitalism. It will implode in due time because of the same laws. But not before a global imperialist apocalypsis buries billions. It’s time to pay, gentlemen, for destroying socialism, for your greed, inhumanity, Nazism, the Cold war – for everything you did to destroy the only hope mankind had for salvation. It’s time to pay.

PeteCAOctober 30th, 2009 at 1:48 pm

I think your statement is a little strong. No-one said that capitalism should ever be completely “free and unfettered”. Is any human activity without some form or rules and regulations? It’s always the case that we need to set some boundaries on human activities – and that certainly applies to finance and investment.The current egregious behavior by Wall Street (which is still going on!!!) was largely due to the removal of appropriate regulations that limited banking activities. Those regulations were implemented after the disastrous Great Depression and they were specifically intended to stop outrageous behavior in the banking industry. However, those regulations were removed by recent politicians (both Republicans and Dems) who acted under the “legal corruption” of bribes provided by Wall Street banks. Our system doesn’t call these campaign contributions as “bribes”, but that’s what they are. No more, no less. The outrageous financial behavior that has occurred since those regulations were lifted has allowed an elite class of bankers to steal the money belonging to several generations of Americans (present and future). That grand-scale larceny is still underway as we speak.However, the Soviet Union did not do so well under socialism (or communism). They also suffered under a ruling elite class – although such a thing was not supposed to exist in their society. And their system ultimately collapsed as well. It is almost impossible for a human-planned economy (i.e. centrally planned) to properly decide the correct values of assets and to allocate them in the most efficient manner.My great objection to the wholesale financial manipulation that is going on under Geithner and Bernanke is that is shows complete disregard for the “free market”. In fact, at this stage it almost shows general contempt for free market principles – which have been the cornernstone of the American economy since it was founded. The issue is not some deep philosophical debate about exactly what is “free”. The issue is that a free market is the best structure that we have devised to efficiently allocate prices. So any attempt to “financially engineer” the economy is guaranteed to produce price structures that simply don’t make any sense. As a result, a major economic dislocation is likely to occur sooner or later, when the market ultimately collapses and begins to restore proper asset pricing. We are seeing these dislocations play out in the US economy as we speak – right now.It is the ultimate irony that the “small minded men” who currently run our country should believe they are trying to “save the system”, while at the same time they are destroying the free market economy on a daily basis. There is no good hope that can come out of this.PeteCA

FEDupOctober 30th, 2009 at 2:19 pm

PeteCA: Please recount exactly what you ate for breakfast, how much coffee you drank today and how many hours sleep you had last night as these activities have led you to write a clear, concise, exceptionally fine summation of what went wrong with American capitalism. Kudos to you!

MM CAOctober 30th, 2009 at 2:35 pm

small minded or outright evil? uncaring of thier fellow Americans…. you either have wealth in the US or you dont now and if you dont your future and your families futures and your future families are doomed for nothing but heatache and distress…. this small population of the “Wealthy” could care less still… they have not been made to feel the pain…. im not adovating violence at all, but demonstration and all avialable ways to make them feel liek the rest of us 300 million should be brought to bear upon them!

GuestOctober 30th, 2009 at 3:28 pm

Pete, it’s not just the current crop of bad apples. And, I’d add that it’s not capitalism, socialism, communism or any other ism that’s necessarily to blame. THE problem lies with concentrations of power. Whenever you have a pool of power you will have elitists and power-mongers chasing after it. It is the shifting of power that is our bane. The current “rulers” keep this knowledge tucked away, out of our classrooms; they demonize anything that warns about power.Capitalism is, however, very effectively using up the planet’s concentration of resources. This will be the end…

MorbidOctober 31st, 2009 at 7:37 am

Riveting. USA’s serf slave crony capitalism IMPORTS; gulp =’s human and environmental costs for China’s EXPORTS.Is This Sustainable?

Pecos BankerOctober 31st, 2009 at 10:14 am

It is clear that there is a direct link between pollution and mistreatment of human beings. The same people who are willing to pollute don’t give a damn about how they destroy the people around them. And those who are indifferent to human suffering are also quite happy to ruin the earth. There is a new film by Nicolas Hulot “Le Syndrome du Titanic” in France which claims to be a eco-film. At first I had my doubts about thinking of it that way, because the emphasis was on the degeneracy of rich westerners versus the abject suffering in poor countries. However, now I see that it can just as well be regarded as ecological given the tight link between wasting human lifes and polluting the enviroment. These photos also show that capitalism has not changed its stripes since its 19th century beginnings. The difference is that we in rich countries are not confronted with the destruction caused in the countries that ship us cheap products. We benefit directly from human suffering and pollution.Americans are cutting back on consumption. Perhaps that will force some of these third world polluters out of business.

GuestOctober 31st, 2009 at 1:44 pm

Against Prometheus : An Interview with Derrick Jensen on Science and Technology

The fundamental religion of this culture is that of human dominion, and it does not matter so much whether one self-identifies as a Christian, a Capitalist, a Scientist, or just a regular member of this culture, one’s actions will be to promulgate this fundamentalist religion of unbridled entitlement and exploitation. This religion permeates every aspect of this culture….Thousands of years of inculcation and ideology all aimed at driving us out of our minds and bodies, away from any realistic sense of self-defense, real land stewarding, have gotten us to identify not with our bodies and our landbases, but with our abusers, governments, and civilization. Break this identification, and one’s course of action becomes much clearer. Love yourself and love the land, and each other, and you will act in the best interest of, and defend, your beloved. The material world is primary. This doesn’t mean that the spirit does not exist, nor that the material world is all there is. It means that spirit mixes with flesh. It also means that real world actions have real world consequences. It means this mess really is a mess, and we have to face this mess ourselves; that for the time we are here on Earth – whether or not we end up somewhere else after we die, and whether we are condemned or privileged to live here – the Earth is the point. It is primary. It is our home and it is everything. It’s silly to think or act or be as though this world is not real and primary. It is very silly to not live our lives as though our lives are real.

MichelleOctober 30th, 2009 at 6:28 pm

Released today:The Federal Deposit Insurance Corporation (FDIC), in coordination with the other member Agencies of the Federal Financial Institutions Examination Council (FFIEC), adopted a policy statement today supporting prudent commercial real estate (CRE) loan workouts. This policy statement stresses that performing loans, including those that have been renewed or restructured on reasonable modified terms, made to creditworthy borrowers will not be subject to adverse classification solely because the value of the underlying collateral declined.This policy statement provides guidance to examiners, and financial institutions that are working with CRE borrowers who are experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties. It also recognizes that during these difficult economic circumstances, continued credit availability to businesses, especially small businesses, is challenging, even where borrower performance has been acceptable. This policy statement reflects the appropriate balance of prudent credit practices and meeting legitimate credit needs.The FFIEC Agencies recognize that prudent loan workouts are often in the best interest of both financial institutions and borrowers, particularly during difficult economic conditions. This policy statement details risk-management practices for loan workouts that support prudent and pragmatic credit and business decisionmaking within the framework of financial accuracy, transparency, and timely loss recognition. Financial institutions that implement prudent loan workout arrangements after performing comprehensive reviews of borrowers’ financial conditions will not be subject to criticism for engaging in these efforts, even if the restructured loans have weaknesses that result in adverse credit classifications.The policy statement includes examples of CRE loan workouts. The examples, provided for illustrative purposes only, reflect examiners’ analytical processes for credit classifications and assessments of institutions’ accounting and reporting treatments for restructured loans. The policy statement reiterates existing guidance that examiners are expected to take a balanced approach in assessing institutions’ risk-management practices for loan workout activities.The member Agencies of the FFIEC include the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the FFIEC State Liaison Committee. The FDIC currently chairs the FFIEC

GuestOctober 31st, 2009 at 6:48 am

All of a sudden, FDIC will support “prudent CRE loan workouts”; wow, the govt’s actions sure has helped stem the millions of foreclosures-NOT!

GuestOctober 30th, 2009 at 5:45 pm

American’s often talk about “liberals” taxing and spending. I wonder whether these liberals are Leftys or Rightys?Anyway…if there is one place where America has liberally taxed and spent, it is in the Defense Industry. U.S. could easily cut the defense spending by 50% and still spend more per capita (or per GDP, or how-ever-you-now-may-want-to-compare) on it than other countries.

FEDupOctober 30th, 2009 at 8:13 pm

DON’T MISS: James K. Galbraith on Bill Moyers fielding all questions about the economy, financial crisis, Obama, solutions, etc.

GSMOctober 31st, 2009 at 9:15 am

All this talk about a collapsing dollar is a non event. The US has MUCH more to fear from a ramped stronger dollar. It signals the start of the next wave of the GFC, the massive credit contraction that will decimate demand and collpase asset values much lower.And it is highly likely that dollar rally has already begun.

GuestOctober 31st, 2009 at 11:45 am

Gold bugs win either way since gold holds its value even more in deflation (strong dollar) than it does in inflation (weak dollar).

GuestOctober 31st, 2009 at 11:01 am

Anthem Details Premium Increases It Says Would Result From Health ReformWellpoint, based in Indianapolis, reported Thursday that the health care overhaul as currently constructed could more than double the cost of some individual insurance plans in Connecticut. (Associated Press)Insurance By KENNETH R. GOSSELINThe Hartford CourantOctober 30, 2009E-mail Print Text SizeAs health care reform gains traction in Congress, a major insurer in Connecticut is warning that premiums in individual and small-employer plans could skyrocket if there isn’t a strong mandate for getting coverage for all Americans.WellPoint Inc., which owns Anthem Blue Cross and Blue Shield in Connecticut, has issued a report that says proposed changes to the health care system could more than double monthly premiums on some individual plans in Connecticut.Anthem is the first insurer to detail specific price changes in Connecticut and other states that it says would result from reform, a claim made generally by the industry.Critics say the arguments are scare tactics. But David R. Fusco, president of Anthem in Connecticut, said that the penalties contemplated by reform measures aren’t strict enough to ensure that all people seek out coverage — driving up the cost of coverage for those who have it.”The reality is that the penalty could be less than the cost of participating,” Fusco said. “Young individuals may make the decision to pay the penalty rather than participate in the program.”Insurance company critics say that the WellPoint report, the third in recent weeks from the insurance industry, is designed to derail reform and protect profits. It also ignores caps on premium increases written into proposed legislation, they say, as well as grandfathering that prohibits stiff increases if a person doesn’t change policies.Anthem, they say, has come under fire for seeking large rate increases, notably in Connecticut this summer.”This is the third phony bought-and-paid-for ‘study’ the defenders of the status quo have trotted out in an attempt to protect their profits. Three strikes — and they’re out,” said Bryan DeAngelis, a spokesman for U.S. Sen. Christopher Dodd.Kevin Lembo, Connecticut’s health care advocate, said he views the report as an attempt to subvert a public option plan.”Any reading of the document should occur with that as a backdrop,” Lembo said.Fusco defended the report, saying that it used actual underwriting standards and real-life scenarios. Anthem’s strong market share in Connecticut and 13 other states covered by the study paints an accurate picture, he said.”We wanted to move this discussion beyond averages and broad projections,” Fusco said.In the study, health insurance premiums for the young and healthy in individual plans would get hit especially hard in Connecticut.One proposed change would prevent insurers from setting premiums based on how frequently certain groups seek medical care. That, Fusco said, would shift more premium costs to those who are younger.Combined with other factors, a younger, healthier, 25-year-old man in Hartford in an individual plan could see his monthly premium rise from $166 to $350, a 111 percent increase.But that doesn’t necessarily mean older and less healthy people would get a break, the report said. Guaranteeing coverage without a strong mandate would help push up the monthly premium for a 60-year-old, less healthy couple in an individual plan by as much as 61 percent, to $2,013 a month — although a small firm with older workers could see an increase of just 2 percent.Fusco said that a public option and rising medical costs could raise premiums even more, but that subsidies would lower the burden on some low- and modest-income people.Copyright © 2009, The Hartford Courant

GuestOctober 31st, 2009 at 1:46 pm

Yeah, they Would say that, wouldn’t they?Meanwhile, back in the REAL world, other countries prove this as wrong.

GuestOctober 31st, 2009 at 11:05 am

MaierhoferOct 27, 2009Over the past few months, every attempt by the bears to depress prices has been met with renewed buying pressure, resulting in even higher prices. What goes up, however, has to come down and some subtle signs are indicating that this decline might be more than a simple correction, much more.It was after midnight on April 15th, 1912 when the unsinkable did the unthinkable. Built and labeled as unsinkable, the Titanic was the most advanced and largest passenger steamship of its time.Even though the Titanic’s crew was aware of the fact that the waters were iceberg-infested, the ship was heading full-steam for a destination it would never reach.Being aware of danger is one thing; acting prudently for protection is another.Today, investors find themselves in an environment that is infested with symbolic icebergs. For savvy investors willing to pay attention and heed warnings, this doesn’t necessarily translate into a financial shipwreck, while others might soon be reminded of the Titanic when they look at their account balance.Iceberg cluster #1: Lack of leadershipThroughout the financial meltdown financials, real estate, and homebuilders fell harder and faster than broad market indexes a la S&P 500 (SNP: ^GSPC) and Dow Jones (DJI: ^DJI). Beginning with the miraculous March revival (more about that in a moment), the broad market rose while financials, real estate, and homebuilders soared.Those three sectors led the decline and led the subsequent (mock) recovery. Since it is reasonable to assume that those sectors will continue to lead the market throughout this economic cycle, it behooves investors to watch such leading sectors closely.The S&P 500 (NYSEArca: SPY) recorded a closing high on October 19th at 1,097. The Financial Select Sector SPDRs (NYSEArca: XLF) reached their closing high a few days earlier on October 15th. Since their respective closing highs, the S&P 500 has dropped 2.82%, while XLF has already shed 5.64%.A more pronounced performance slump is visible in the home builders sector. The SPDR S&P Homebuilders ETF (NYSEArca: XHB) peaked on September 16th and has fallen 9.97% since. Keep in mind that XHB’s lackluster performance comes on the heels of the biggest monthly increase in total home sales in ten years.Even though the inventory of existing homes fell 7.5% month-over month in September (to 3.6 million units), the shadow inventory of 3.5 million foreclosed homes is probably weighing heavily on home builders. Shadow inventory represents foreclosed homes that are vacant, still included on bank’s balance sheets, but have not hit the market yet. 3.5 million homes equal about 1 – 2 years worth of supply.Iceberg cluster #2: Non-confirmation in the technology sectorApple, Wall Street’s new darling, reported block buster earnings and rallied over 10% to new all-time highs. Microsoft reported better than expected numbers and spiked 7.4%. Investors loved Amazon’s outlook so much that they bid up the stock by over 33%. Combined, the three companies account for nearly 24% of the Nasdaq (Nasdaq: ^IXIC), yet the Nasdaq is traded lower today than before earnings season on October 14th. The same is true for the Technology Select Sector SPDRs (NYSEArca: XLK).If 24% of the Nasdaq’s components rallied between 7 and 33%, without lifting the index, a lot of tech companies must be hurting. In fact, the Nasdaq’s (Nasdaq: QQQQ) performance is masking the decline IBM, Intel, and many other once high-flying tech companies have seen over the past 1-2 weeks.Iceberg cluster #3: Earnings are a lagging – not leading – indicatorEven though expectations were low to begin with (beating earnings forecasts was likened to an A student asked to achieve only a C), there is no arguing that this quarter’s reports were much better than last quarters.Many view this as a sign that the economy had hit rock-bottom back in March. In fact, 80% of economists now believe that the recession is over (probably the same 80% that didn’t see the recession coming in 2007). However, as the chart below shows, earnings per share (EPS) are directly linked to the stock market’s performance at best and a lagging indicator at worst.Alcoa, one of the biggest components of the hottest sector – materials (NYSEArca: XLB), surprised investors with a positive third quarter. Year-to-date, however, Alcoa lost $0.75 per share. This compares to a profit of $2.95 per share in 2007. At this point, Alcoa does not even have a P/E ratio, since Alcoa has no “E” – earnings.Considering the relationship between stocks and earnings, it would be interesting to know what caused the March bottom.Throughout February and March, Wall Street was covered by a veil of uncertainty and worry that the country would slip into another depression. Ever since the Great Depression, there’ve never been as many articles referring to the Great Depression as in March.It is exactly that kind of pessimism that foreshadows market bottoms of some significance. Such pessimism rids the market of weak stock holders and opens the door for buyers to bid up prices. That’s exactly what the ETF Profit Strategy Newsletter predicted via the March 2nd Trend Change Alert.Below is a brief excerpt taken from the Trend Change Alert: “A multi-month rally, the biggest rally since the October 2007 all-time highs, should lift the indexes by some 30-40%. Tuesday’s (2-23-09) 4% spike may be an indication of the initial intensity of the rally. Beaten down sectors like financials (NYSEArca: VFH), industrials (NYSEArca: XLI), materials (NYSEArca: IYM) and consumer discretionaries (NYSEArca: XLY) are likely to see the biggest percentage gains over the next few months.” Many of the recommended ETFs gained triple digits in the upcoming months.This rise in stock prices and consumer sentiment, along with serious cost-cutting by publicly held corporations, shrank corporate losses and even created profits for some corporations. But once again, it was rising stock prices that resulted in better than expected profits, not vice verse.Iceberg cluster #4: No demand for productsIt seems like companies have boosted their production. The key question is whether this uptick is merely due to an effort to restock inventories, or actual demand by the consumer. Fortunately for investors, there’s an easy way to find out.If there is real demand by consumers, it will be reflected by shipping and transport companies. Products in demand need to be shipped from the manufacturer to the consumer or wholesaler. A look at the transportation/shipping sector providers, therefore, an easy and logical answer.UPS shipments fell for the sevenths consecutive quarter. UPS’ profits fell 43% year over year due to lower demand for packaged deliveries. Burlington Northern, the biggest component of the Dow Jones Transportation Average (NYSEArca: IYT), reported that its freight revenue dropped 27% year over year.This is exactly the opposite of what you’d expect to happen in a new, sound bull market.Iceberg cluster #5: (Over) valuationWould you buy the Dow Jones at 10,000? It probably depends on where you see the Dow trade a week, a month, or a year from today. Many investors and Wall Street gurus are advocating to buy the Dow at current levels.Let me ask you this: Did you buy the Dow at 7,000? If you didn’t buy the Dow a few months ago at 7,000, why would you buy it today at 10,000? Today’s Dow is 50% more expensive than it was seven months ago, yet more people are willing to buy now than in March. Aside from the stock market, there is no other “salesman” able to sell a product for a 50% premium.Bait-and switch at its finestHow can the stock market get away with this? The only difference between March 2009 and today is perception. Even though it defies logic, stocks are perceived to be a better deal today than in March.Imagine what will happen when the perception changes. Once investors start believing that they can buy stocks later at a lower price they will wait, buyers will dry up, and stocks will plummet.It’s no stretch to expect lower prices. Even though prices have come off multi-decade lows, earnings are lower than any other time since the Great Depression. The S&P 500’s P/E ratio (stock price divided by annual earnings), based on actual reported earnings have sky-rocketed to all-time highs.Anybody buying the S&P 500 at current prices is paying 138 times as much as reported earnings. In other words, based on this year’s earnings, it would take 138 years of profits to repay your investment.Would you buy a Subway franchise at 138 times its annual profit if you knew that 15 – 20 is the historical average? 15 – 20 is the average P/E ratio over the past 100 years. Anybody buying now will have to be prepared for significantly lower prices.Some things never changeHistory teaches us that overvalued markets can’t last forever. History also teaches us how far the market will have to drop to reach fair values. The bear markets of the 1930s, 1940s, 1950s, 1970s and 1980s have provided us with a valuation reset template.Every bear market bottom has seen P/E ratios drop to historically low levels. Investors, however, don’t have to rely on P/E ratios alone. Dividend yields, mutual fund cash levels, and the Dow measured in the only true currency – gold (NYSEArca: GLD) provide another window into the future – a nearly fail-proof composite indictor.The October issue of the ETF Profit Strategy Newsletter plots the historic performance of the stock market against P/E ratios, dividend yields, mutual fund cash reserves, and the Dow measured in gold, along with target levels for the ultimate market bottom. A picture paints a thousand words and those charts speak volumes about the market’s future.Did you know that the Titanic received an iceberg warning less than two hours before an iceberg brushed the ship’s starboard side, buckling the hull in several places? An angry communications officer responded: “Shut up, shut up, I am busy; I am working.” There are plenty of indicators warning investors today. Will you heed the warning and avoid financial shipwreck?

GuestOctober 31st, 2009 at 11:15 am

8 0f the 30 are from california… No wonder California is in a depression already!House Ethics Committee InvestigationsDozens in Congress under ethics inquiryHouse ethics investigators have been scrutinizing the activities of more than 30 lawmakers and several aides in inquiries about issues including defense lobbying and corporate influence peddling, according to a confidential House ethics committee report prepared in July.Profiles of key congressmen named in reportRep. Barton (R-Tex.)Rep. Bishop (D-Ga.)Rep. Christian-Christensen (D-Virgin Islands)Rep. Dicks (D-Wash.)Rep. Engel (D-N.Y.)Rep. Graves (R-Mo.)Rep. Harman (D-Calif.)Rep. Jackson (D-Ill.)Rep. Kaptur (D-Ohio)Rep. Kilpatrick (D-Mich.)Rep. Mack (R-Fla.)Rep. Matsui (D-Calif.)Rep. Miller (R-Calif.)Rep. Moran (D-Va.)Rep. Murtha (D-Pa.)Rep. Payne (D-N.J)Rep. Rangel (D-N.Y.)Rep. Reyes (D-Tex.)Rep. Richardson (D-Calif.)Rep. Linda T. Sanchez (D-Calif.)Rep. Loretta Sanchez (D-Calif.)Rep. Shuler (D-N.C.)Rep. Stark (D-Calif.)Rep. Tiahrt (R-Kan.)Rep. Thompson (D-Miss.)Rep. Towns (D-N.Y.)Rep. Visclosky (D-Ind.)Rep. Waters (D-Calif.)Rep. Young (R-Fla.)

blindmanOctober 31st, 2009 at 12:17 pm

Jailed New York City’s former police chief Bernard Kerik is in a psychiatric unit and on suicide watchPosted: Oct 30th, 2009.…..”Kerik is the first police chief in New York City’s history to be thrown into jail.In a hearing in White Plains, New York, Judge Stephen Robinson said he was revoking the $500,000 bail granted to Kerik, 54, who led the police under the previous administration of then-mayor Rudolph Giuliani.The judge said that the former police chief displayed a “toxic combination of self-minded focus and arrogance”. He added: “I fear that confidence leads him to believe that the ends justify the means, that the rules that apply to all don’t necessarily apply to him in the same way.”….comment: why would he be led tobelieve that the rules don’t apply to him?the world should know what he knowsbefore he doesn’t know it anymore. i wish himwell.

11b40November 1st, 2009 at 1:21 pm

” why would he be led tobelieve that the rules don’t apply to him?”He was within the gravatational orbit of the Bush administration. That’s why. Everyone else was cashing in and getting away with it.Independent Contractor

blindmanOctober 31st, 2009 at 12:29 pm

money is god? almighty dollar?. of Deityby John Henrik ClarkeTo hold a people in oppression you have to convince them first that they are supposed to be oppressed.When the European comes to a country, the first thing he does is to laugh at your God and your God concept. And the next thing is to make you laugh at your own God concept. Then he don’t have to build no jails for you , cause he’s got you in a jail more binding than iron can ever put you.Anytime you turn on your own concept of God, you are no longer a free man. No one needs to put chains on your body, because the chains are on your mind….Anytime someone say’s your God is ugly and you release your God and join their God, there is no hope for your freedom until you once more believe in your own concept of the “deity.”And that’s how we’re trapped. We have been educated into believing someone else’s concept of the deity, and someone else’s standard of beauty. You have the right to practice any religion and politics in a way that best suits your freedom, your dignity, and your understanding. And once you do that, you don’t apologize.Nothing the European mind ever devised was meant to do anything but to facilitate the European’s control over the world. Anything that you get from Europe that you are going to use for yourself, remake it to suit yourself.Where did we go wrong educationally? After the Civil War, the period called reconstruction, a period of pseudo-democracy, we began to have our own institutions, our own schools. We had no role model for a school, … our own role model. So we began to imitate White schools.Our church was an imitation of the White church. All we did is to modify the old trap. We didn’t change the images, we became more comfortable within the trap. We didn’t change the images, we changed some of the concepts of the images, but the images remained the same. So the mis-education that gave us a slave mentality had been altered. But it remained basically the same.”

blindmanOctober 31st, 2009 at 12:39 pm

In Our Imageby John Henrik Clarke (September 1989)Because what we see about ourselves often influences what we do about ourselves, the role of images and the question of how they control our minds are more important now, in our media-saturated society, than ever before. For the last 500 years, the history of African people throughout the world has been told through the slavery experience—only a short period in our life, considering that we are the oldest of the world’s peoples.There is a need now to look behind the slavery curtain in order to see what African people achieved as an independent people, before slavery. Because this independence existed for thousands of years before Europe itself existed, we should examine the far-reaching power of a European-created media over the minds of the world. Prior to the slave trade and European colonialism, which began in the fifteenth century, most of the peoples of the world had a concept of God shaped by their own culture and their own understanding of spirituality. They generally saw God, or any deity, as a figure resembling themselves. The expanding presence of the European made them consider not only a new God but a new image of God as well.Because the Europeans did not have enough manpower to control the vast territories and populations they were taking over in Africa and Asia, they began to use the media as a form of mind control, colonizing people around the world, just as they also colonized information about the world. Today the mass media includes every visual object that influences the mind—billboard advertisements, commercials and more, but especially movies and television.Since we don’t usually think of school textbooks as an aspect of the mass media, we don’t fully understand that both Black and white children have a misconception about the role their respective peoples have played in the development of civilization. Because of the exaggeration of the lives and achievements of Western heroes, especially Christopher Columbus, school children in general are of the opinion that most of the world’s explorations and discoveries were made by Europeans. They also believe that Europeans went on discovery missions to other countries in order to spread Christianity and civilization. The contrary is true in many cases. In their expansion into Africa, Asia, the Caribbean islands and the Americas, the Europeans destroyed many old and well-functioning societies, usually for political or economic gain. The mass media has given us another picture of this phenomenon in history, and we have forgotten a recurring fact of history—that is, powerful people never have to prove anything to anyone. And by extension, powerful people never apologize to powerless people for the actions they take in order to remain in power.Because of the prevailing one-dimensional view of history that generally favors white people, who control the textbook industry, African American students throughout the country began in the 1960’s to call for Black-studies programs to correct come misconceptions about African people in world history. Twenty-one years ago (i.e. 1968, editor), I and others with similar concerns established the African Heritage Studies Association. Its purpose was to bring together scholars of African descent who would dedicate themselves to the preservation, interpretation and academic presentation of the historical and cultural heritage of African peoples, both on the ancestral soil of Africa and in the diaspora in the Americas and throughout the world.I have no illusions about the role of the mass media in mind control, and I know that we will have to be more aggressive in calling for change and that we must develop the personnel and the funds that will give us some control over at least part of the mass media. We can start by developing programs, textbooks and newspapers that cater to the African people of the world and will also be of interest to others. We need to seriously question and challenge the educational system that gives direction to our children. We also need to establish an independent educational system, starting in our homes.We will have taken one giant step forward when we face this reality: Powerful people never teach powerless people how to take their power away from them. Education is one of the most sensitive arenas in the life of a people. Its role is to be honest and true: to tell a people where they have been and what they have been, where they are and what they are. Most important, though, the role of education is to tell a people where they still must go and what they still must be.

blindmanOctober 31st, 2009 at 12:51 pm

Too Big to Fail: Why The Big Banks Should Be Broken Up, But Why The White House and Congress Don’t Want ToOctober 25, 2009, 10:33AM. now there are five — five Wall Street behemoths, bigger than they were before the Great Meltdown, paying fatter salaries and bonuses to retain their so-called”talent,” and raking in huge profits. The biggest difference between now and last October is these biggies didn’t know then that they were too big to fail and the government would bail them out if they got into trouble. Now they do. And like a giant, gawking adolescent who’s just discovered he can crash the Lexus convertible his rich dad gave him and the next morning have a new one waiting in his driveway courtesy of a dad who can’t say no, the biggies will drive even faster now, taking even bigger risks.What to do? Two ideas are floating around Washington, but only one is supported by the Treasury and the White House. Unfortunately, it’s the wrong one……Congress is cooking up a variation on the “resolution” idea that would give the Federal Deposit Insurance Corporation authority to trigger and handle the winding-down of big banks in trouble, without Treasury involvement, and without an escape hatch.Needless to say, Wall Street favors the Administration’s approach — which is why the Administration chose it to begin with. If I were less charitable I’d say Geithner and Summers continue to bend over bankwards to make Wall Street happy, and in doing so continue to risk the credibility of the President, as well as the long-term financial stability of the system.Wall Street could live with the slightly less delectable variation that Congress is coming up with. But Congress won’t go as far as to unleash the antitrust laws on the big banks or resurrect the Glass-Steagall Act. After all, the Street is a major benefactor of Congress and the Street’s lobbyists and lackeys are all over Capitol Hill.The Street obviously detests the notion that its behemoths should be broken up. That’s why the idea isn’t even on the table. But it should be. No important public interest is served by allowing giant banks to grow too big to fail. Winding them down after they get into trouble is no answer. By then the damage will already have been done.Whether it’s using the antitrust laws or enacting a new Glass-Steagall Act, the Wall Street giants should be split up — and soon..comment: “talent” is a relative and historicallycontextual dependent term as in what was considereda facility or skill at one time can becomereferred to as a disability or crime or justan odd behavioral or cognitive tick. the determination of particular”talents” evolves with the consciousness of man and his accepted and usefullyintegrated technology. or .. i like that the author put the word talent in quotes. it was not talent.that would be double speak. it was fraud.the white house and wall street do not see whateveryone else can see which leads me to wonderwhether they are really interested in insult here… obama is a headfakingbasketball player impersonating a slick used carsalesman grandstanding at flag draped coffins inthe face of high tech precision genocide or….he will be a LEADER and embrace his heritage andsee that there is a chasm of a divide betweenthe right thing and the wrong thing. and here iswhere faith works. when you do the uncomfortable,perhaps difficult, perhaps painful right thingthat is consistent with humanity and the principles universal, the forces of the universe do conspire in your favor. when you ignore them you stumble in the dark and suffer every one of the thousand small cuts. no head fake or solemn dedication, no voice or prayer can save you until you do the right thing. the civilized option. civil = peaceful. j.h. clarke. if we do not embrace this non violent approach which requires a re-cognition of ourtrue reality we are truly doomed even if we do survive, we are like the living unborn or thewalking dead. soul less. unconscious.imo.. point in history, crossroads.we can either all become slaves or all become free but where there is slavery no one is free. it seems obama represents this or personifies this moment. perhaps man’s eternal moment?and here is another thing, speaking of technology and information. the average blogger is more able to honestly discern the nature of the world and it’s ailments than any available authority is capable of publicly articulating. we have repeatedly discussed the reasons that this is so, last year it was, and earlier this year. institutional man wears institutional blinders for institutional agendas that only partially recognize reality and as has been said few embrace cognitive dissonance even when it is ubiquitous and unavoidable. or in a word…let your children play / work in the dirt.. it is good for their development, cognitive and immunologic.psss.too big to fail is a red herring. too big to failis failure. by definition sustainable only byfraud and frankly murder. it is inhumane, unnaturaland ruinous. only the criminally insane wouldsupport it.imo.

blindmanOctober 31st, 2009 at 1:55 pm

psssss.ask bernard kerik before he becomesunresponsive, he was way too big to fail.he was the law, or so he thought, and hewas not alone..October 2, 2008Moral hazardRewarding peoplefor their mistakes guaranteesmany more mistakes..haiku pundit..this problem will take generations to to sortout or we can do the right thing and fix it.the only thing obstructing progress is adherenceto the established authority of historicprecedent. ie special interests everywhereblocking practical common sense solutions.creating insolvable problems where there isreally no problem once the special interest isremoved. authority maintaining crisis for profit,unconsciously or intentionally. human… back to the little demons at the doorbegging, with threats of unknown tricks, fortreats. little con artist in their rediculouscostumes. their parents put them up to it, theyshould all be ashamed of themselves. littlezombies but it didn’t and doesn’t have to bethis way. i try to tell them but they seem tohave little interest in anything other than freecandy, or money.”happy halloween”, i tell the kids at the door that,or sometimes i just say “merry christmas”. theydon’t care, they just want the candy, or money.anyway, happy holidays, and that goes for bernardas well.

ChrisLNovember 1st, 2009 at 10:55 am

The last time the $VIX grew quickly (50% in less than 2 weeks) from the low 20s to the low 30s, was early September last year.We all remember what happened in the month after that :. The $VIX grew 300%. The S&P500 fell by more than 30%Is Novemeber 2009 going to be the same ?Who knows ?But just the idea that it could be the same, such a huuuge risk in equities… makes me want to be as far away from investing money right now in the stock market !It’s just nearly impossible to hedge against such a risk.

HayesOctober 31st, 2009 at 6:28 pm

Federal Reserve Policy Audit Legislation ‘Gutted,’ Paul Says

Oct. 30 (Bloomberg) — Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been “gutted” while moving toward a possible vote in the Democratic-controlled House.The bill, with 308 co-sponsors, has been stripped of provisions that would remove Fed exemptions from audits of transactions with foreign central banks, monetary policy deliberations, transactions made under the direction of the Federal Open Market Committee and communications between the Board, the reserve banks and staff, Paul said today.“There’s nothing left, it’s been gutted,” he said in a telephone interview. “This is not a partisan issue. People all over the country want to know what the Fed is up to, and this legislation was supposed to help them do that.”The Fed, led by Chairman Ben S. Bernanke, has come under greater congressional scrutiny while attempting to end the financial crisis by bailing out financial firms and more than doubling its balance sheet to $2.16 trillion in the past year. The central bank is also buying $1.25 trillion of securities tied to home loans.Paul, a member of the House Financial Services Committee, said Mel Watt, a Democrat from North Carolina, has eliminated “just about everything” while preparing the legislation for formal consideration. Watt is chairman of the panel’s domestic monetary policy and technology subcommittee.Keith Kelly, a spokesman for Watt, declined to comment and said Watt wasn’t immediately available for an interview. Watt’s district includes Charlotte, headquarters of Bank of America Corp., the biggest U.S. lender.Original LanguagePaul said he intends to introduce an amendment to the bill when it comes to the House floor for a vote restoring the legislation’s original language.Representative Barney Frank, a Democrat from Massachusetts and chairman of the committee, said in interview that he intends to ensure legislation would provide a time lag between FOMC actions and the reporting of them.Such a provision would “lessen the market impact,” he said on Oct. 20. “The importance is to see that there are no abuses and to judge what they did.”The legislation will probably be included in a broader Democratic package of financial-regulation changes in the House, Frank said.

(contact info for Congressman Watt

GuestNovember 1st, 2009 at 9:02 am

“Democratic package of financial-regulation changes”??? LOL, it is only for show and PR if FED cant be audited and result show to public.

blindmanOctober 31st, 2009 at 8:24 pm Financial Services Committee111th Congress (2008 cycle): OverviewRep. Barney Frank (D-Mass.), ChairmanRep. Spencer Bachus (R-Ala.), Ranking RepublicanThis committee, formerly known as the Banking Committee, has long been considered a “big money” panel, with jurisdiction over commercial banks and savings and loans that traditionally have been very generous with their campaign contributions to committee members. That trend has continued with the addition of two cash-rich industries to the committee’s portfolio: insurance and securities. Look for the giant financial sector, which includes banks, insurance companies, and securities firms, to continue its robust giving to committee members.Sectors Contributing to Membersof this Committee, 2008 Election CycleFROM PACS FROM INDIVIDUALSAgribusinessCommunic/ElectronicsConstructionDefenseEnergy/Nat Resource.Finance/Insur/RealEst: roughly 14 mil. pac / 10 mil. private..HealthLawyers & LobbyistsTransportationMisc BusinessLaborIdeology/Single-IssueOther(Move your cursor over the chart to see dollar amounts)……………………………………………PAC Contributions to Federal CandidatesElection cycle:Total Amount: $17,646,229Total to Democrats: $9,784,039 (55%)Total to Republicans: $7,848,390 (44%)Number of PACs making contributions:Accountants: $1,900,879graphgraph45% to Dems / 55% to RepubsCommercial Banks: $2,443,812graphgraph52% to Dems / 48% to RepubsCredit Unions: $867,325graphgraph61% to Dems / 39% to RepubsFinance/Credit Companies: $969,127graphgraph56% to Dems / 44% to RepubsInsurance: $6,478,263graphgraph57% to Dems / 43% to RepubsMisc Finance: $608,789graphgraph48% to Dems / 52% to RepubsReal Estate: $1,913,499graphgraph56% to Dems / 44% to RepubsSavings & Loans: $10,900graphgraph83% to Dems / 17% to RepubsSecurities & Investment: $2,453,635graphgraph63% to Dems / 36% to RepubsBased on data released by the FEC on October 25, 2009..”the road goes on forever and the party never ends”.joe ely..but look here how financially tragic 2008 wasfor our representatives, talk about instantcognitive dissonance. the politicians are bailing out their own personal reelection campaigns and thenquite a bit more. they are well paid front men,snake oil salesmen and puppets and this is is what they are paid to do and they accept it.and so do the american people. oh my god, its da’systemmmm……..

blindmanOctober 31st, 2009 at 8:49 pm luther ‘mel’ watt. nc.Current Office: U.S. HouseCurrent District: 12First Elected: 1992Last Elected: 11/04/2008Next Election: 2010Party: Democratic.SummaryElection Cycle 2008Total Income $680,471Total Spent $646,075Cash On Hand $94,029Debt $0Source OpenSecrets.orgUpdated 12/31/2008..Representative Barney Frank (MA).Current Office: U.S. HouseCurrent District: 4First Elected: 11/04/1980Last Elected: 11/04/2008Next Election: 2010Party: DemocraticSummaryElection Cycle 2008Total Income $2,202,677Total Spent $2,858,741Cash On Hand $173,441Debt $0Source OpenSecrets.orgUpdated 12/31/’ll notice none of these guys have any debt(sic)to service. they are very much different thanthe average citizen. hmmmm….well, they have a debt but it is not listed as suchbut they have to payback in some way, obviously.

PeteCAOctober 31st, 2009 at 10:12 pm

HALLOWEEN PRIZE TO BERNANKE AND GEITHNERWell … I guess Ben Bernanke and Tim Geithner win the special Halloween prize this year. It’s not everyday that someone goes all out to breathe life into a zombie economy!!!PeteCA

PeterJBOctober 31st, 2009 at 10:13 pm

Oops” (from the previous thread):I. Speaking of the coming Dark Age:Apparently Ron Paul’s bill to audit the FedRes is dead through the rotten offices of the “pimps” of Congress -refer to Naked Capitalism – and thereby guaranteeing the appointment of the new Pope, Saint Bernard the Moron, to be quickly followed by Timmy the Terrible.Obviously, they know not what they do, and in particular, the Effects of the Causes that they have put into action, with their names on the package.Karma baby; it’s pure karma.Enjoy the celebrations of the “recovery”. LOLII. And, also talking about that belief that those that you voted for, actually represented your interests: Hah move your (our) trusted and empowered “leadership” makes, has made, will make things far, far worse, er, for you and better for them (or so they believe) where the result is an increasing acceleration of the greater and rapidly growing “WORSITY” (i just developed this term).This “leadership” rabble just have no idea of that which they do: It’s Karma baby; just pure dynamic karma. SOL / LOL Insanity laughs the loudest.III. Speaking of karma, the result of the work of “pimps” er, “leadership”, Debt and more Debt and what it is going to do for ————-> YOU, the return of Gold as the preferred currency, which infers, implies, translates to, a strong motion of ‘no faith’ in ‘erectiled’ “leadership” and ‘give us reality or we will hang you’ sic, and all of things of trends with integrity: Now if you were a few among over 1 trillion and were telling the trillion to buy Gold and Silver, would you dare do a Benanke, and pull the rug out from under the bullion price? Answer: No!Oh, I almost forgot to mention collapsing banks… doesn’t all this good news just give you warms and tinglies all over… LOLDid anyone mention the collapsed / collapsing; going, going and damned near gone state of commercial real estate prices?And, BoA being loaded with Toxic Assets and targeted for an early bankruptcy??? (Bob Chapman).Ho hum

PeterJBOctober 31st, 2009 at 11:58 pm

LOLNothing ever is as it appears to be er, or stated by government as being. The evidence ‘on the ground’ implies that the trends are all bad and the opposite of that which one finds being “announced”. Mind you trends are always open to interpretation where facts remains facts, even if one chooses to ignore them.My grandfather taught me to never trust government and bankers. He has been proven right many times.I watch the US (and the rest of the World) as Australia will follow suit into the abyss after the USA finally collapses. No original thought hereabouts. And its about watching the bouncing ball and do not observe that which is really happening.Thanks for the linkHo hum

Harley QuinnNovember 1st, 2009 at 7:09 am

I went to B.J.’s Wholesaler today(Sat.,Oct. 31st). The place was packed. I asked the manager how business was. He said they couldn’t keep up with the volume of sales. Large screen TV’s were flying off the shelf at $500 a clip. Is the demise of the working class and middle class consumer greatly exagerrated?

PeteCANovember 1st, 2009 at 11:02 am

Debt addiction is a real problem.It really is an addiction.It is learned and fostered over a very long time period.It is a true behavior problem.You can see it clearly with the US Government. The steps necessary to remedy the problem are obvious. Major cuts in budgets need to be made. Now. Taxes may need to get hiked. That’s the stark reality. But instead we see spineless politicians who keep believing they can get themselves out of trouble – even it means literally printing dollars out of thin air.Likewise, we also have American consumers who are debt addicted. The use – and the misuse – of credit cards has been perpetuated over successive generations. It’s not going to go away easily. Only with a great deal of pain to households.Here are some simple ways you can distinguish whether this is a real economic recovery – or just signs of late-term debt addiction in America.1. Think about those consumers who are buying $500 flat screen TV’s. How many are paying with cash? That tells you something important.2. Check the data on credit card delinquencies, and charge-offs at banks due to failures on personal consumer loans. Is the “bad credit” problem getting better, or worse? How could we possibly have a strong economic recovery, if credit ratings are getting worse? Our whole system runs on credit.3. Check the interest rates that credit card companies and banks are charging to consumers. Are they going up or down? And take a look at maximum credit limits on cards? Are they increasing, or are the companies tightening the thumbscrews on available credit?Consumer stupidity … is stupidity. If people spend when they should be saving, they will pay a high price in the long term.Government stupidity … is stupidity. If politicians put off important decisions until they erupt into enormous crises, then they should not be surprised if they get tossed out of Washington DC.Things really are different this time.PeteCA

FEDupNovember 1st, 2009 at 7:41 pm

agree and the “latest and greatest” TV is the most important item next to food for the sheeple. It mesmerizes them so they don’t have to think while the remote gives them ultimate control without having to move-except of course to get more food. It stifles critical thinking and more importantly, critical actions. Yes, most of us have become slaves to our new Master-HDTV and will continue to consume 99% of what we don’t need until there is a more serious “intervention”- either job loss or credit cancellation; until then, expect the addiction to continue to dictate people’s irrational consumption.

blindmanNovember 1st, 2009 at 11:19 am

h,i respond to your question with more questions.what hasn’t been exaggerated?.do people know any other way, other than exaggerationor some variation, to fit into their own skin?.and ..were t.v.s really flying off the shelves? surelyyou were exaggerating. -) ..isn’t exaggeration how we got into this entirefinancial bubble to finance and “justify” war,conquest and control paradigm?.speaking of t.v. flat screens. i think it isvery odd that people will pay to buy these, andthen pay to watch them with their time and moneywhen the end result is that they just get dumberand poorer in the process, yet there is comfortin it somehow? that may not last.i was recently in a shop that had a t.v. for theclientele. at the time it was broadcasting thespecial coverage of the great balloon hoax out ofcolorado. special report, live coverage and all.the tension and urgency was palpable. remember that?the boy was in a box in the attic? anyway, with noexaggeration i tell you on that flat screen t.v. werelike seven (7) dynamic fields of changing information.the main drama, a scroll at the bottomfor other urgentbreaking news, o few boxes to the right with latesthorse race results, some garment advertisements,a solicitation to join the armed forces and beall you can be, i think one box had highlights ofa baseball game that was played earlier somewhere in the world?i thought to myself, i get it. there is no hopefor the people who watch this mess. there is onlythis mess and more of it coming. attention deficitby training delivered directly to your flat i exaggerating? i’m so used to doing it that ican’t even tell anymore but its o.k., i just moveon to the next thing.

11b40November 1st, 2009 at 1:57 pm

There are numerous divergent economies.If you have a job, and your wages have not been affected, you find yourself in a ratehr interesting position. Everything is on sale, and you have plenty of credit or cash. Why not continue on as normal?The problem is that warehouse clubs are the lowest margin operators in the brick & mortar retail universe. Main Street merchants cannot compete, and they are being driven out of business in droves. Once again, it is the story of the highly effecient predator eliminating competition. It may give the illusion that all is well with the consumer when that one store’s parking lot is full, but what about all those empty strip centers and other buildings you pass on the way there?Independent Contractor

GuestNovember 1st, 2009 at 3:35 pm

Well said as usual.Also worth noting, unemployment has doubled over the last few years (not counting part time and those who have given up), yet it seems to me, many act as though employment has been reduced by 50%. My point is most people are still working and our citizens continue to shop, now at a reduced number of outlets. With cash out refinancing mostly gone, all “things” related to home improvement, new cars and vacations should continue to stay depressed.hlowe

GuestNovember 1st, 2009 at 3:37 pm

Well said as usual.Also worth noting, unemployment has doubled over the last few years (not counting part time and those who have given up), yet it seems to me, many act as though employment has been reduced by 50%. My point is most people are still working and our citizens continue to shop, now at a reduced number of outlets. With cash out refinancing mostly gone, all “things” related to home improvement, new cars and vacations should continue to stay depressed.hlowe

ChrisLNovember 1st, 2009 at 11:04 am

PeteCA noticed (up in the thread):Just a note that the volatility index ($VIX) is starting to move upwards again.I commented :The last time the $VIX grew quickly (50% in less than 2 weeks) from the low 20s to the low 30s, was early September last year.We all remember what happened in the month after that :. The $VIX grew 300%. The S&P500 fell by more than 30%This raises 3 questions :1. Is Novemeber 2009 going to be the same ?2 . Who knows ?But just the idea that it could be the same, such a huuuge risk in equities… makes me want to be as far away from investing money right now in the stock market !3. Does anybody think it is possible to hedge against such a risk ?My answers to those 3 questions are :1. Don’t know, but there’s a significant risk that it could2. Nobody3. Not me, but if someone does, I’d be glad to hear how…

PeteCANovember 1st, 2009 at 2:45 pm

ChrisStandard methods of heding should be available – if that’s what you want to do.1. Use PUT options in the futures market e.g. PUT’s on the S&P5002. Invest more money in an inverse ETFI had heard a rumor that some methods of short selling of stocks had been curtailed, and that this may have affected inverse ETF’s. But I really don’t know the details.An increased level of volatility usually is a pretty good indicator that the market sentiment is unsettled. Keep an eye on the $VIX.PeteCA

MichelleNovember 1st, 2009 at 4:35 pm

I won’t buy a put, a call, or any other derivative, otherwise I’m no better than the banksters. Either I’m a buyer or a seller, but never a hedger. Either I’m right or I’m wrong, but to hedge by buying a derivative product is a complete and utter contradiction of everything I’ve read on this board. We wonder why derivatives are approaching $1 quadrillion, but then we don’t question how we ourselves benefit from them?

11b40November 1st, 2009 at 9:41 pm

Let me get this straight.You went long based on a belief that the FED injected liquidity would drive the market up, right? You recently started cashing out, right? Did you think about the morality or the gaming of the system as you gained financially as the FED debased the currency, diluting the value of everything the rest of us owned? Now, you are getting nervous and taking the money while you can.Well, good on ya! But please, a little less sanctimony. The game is the game. Either you are in, or you or out. Only a fool would “trade” either the red OR the black.Let me ask a fundamental question. Do you believe we are in a secular bull market? If the answer is no, it will be be a tough time to invest on the long side.Independent Contractor

MichelleNovember 2nd, 2009 at 7:43 am

I’m merely pointing out that the use of derivatives, of which I and many others here detest, is part of the casino problem we have. I was also pointing out that because I won’t use them, I’d better always get it right with the trend. How can I complain about derivatives if I use them? Seems contradictory if you ask me. My post above wasn’t necessarily intended to be an ethical retort, but maybe we should all look within ourselves and ask how we, too, are contributing to the problem.

MichelleNovember 2nd, 2009 at 10:18 am

11b40 said: “diluting the value of everything the rest of us owned?”Shorting stocks is ethical? Is this action devaluing 401k’s? Right back at ya.

GuestNovember 1st, 2009 at 9:45 pm

Why not do away with life insurance, too? Either you die with money or you die without money, but your family shouldn’t get money simply because you hedged your bet on the length of your life.

ChrisLNovember 2nd, 2009 at 3:51 am

I’d like to offer a calculation, but my guess is that the cost to hedge one’s investment in equities with the relevant derivatives against such a huge downside risk would make the total investment not more interesting than buying treasuries…This is especially true when the upside potential (15% max in the next 3 months) is much smaller than the downside risk (30% in the next 3 months).

throw 'em in the slammer for a spell til we sort this sh.t outNovember 1st, 2009 at 12:08 pm Eye Opener: Friday, October 30Published by Dave Levinthal on October 30, 2009 10:00 AMYour daily dose of news and tidbits from the world of money in politics:USING FEDERAL BAILOUT MONEY TO SECURE … MORE BAILOUT MONEY? Financial services giant GMAC is effectively broke. Twice it’s asked the federal government for taxpayer-subsidized help. Twice it’s received it, to the tune of about, oh, $12.5 billion. Now, reports Eric Dash of the New York Times, GMAC is asking for more. Third time’s a charm, right? Federal officials — and taxpayers — may be interested to learn, however, that GMAC has spent nearly $1 million during the first three quarters of this year to lobby the very federal government it’s begging for our greenbacks, a Center for Responsive Politics analysis finds. That’s on top of the $5.46 million it spent on federal lobbying efforts in 2008, shortly after it peeled away from former parent company General Motors — itself formerly bankrupt, bailed out by taxpayers and still on quite a federal lobbying clip. The U.S. House, U.S. Senate, Treasury Department, Government Accountability Office and Federal Deposit Insurance Commission are among the governmental agencies and entities GMAC has this year lobbied.DOZENS OF CONGRESSIONAL MEMBERS FACE ETHICS INQUIRY: More than 30 members of Congress, plus several aides, are under scrutiny by House ethics investigators concerning issues about defense contracting and influence peddling, the Washington Post’s Ellen Nakashima and Paul Kane report in this morning’s edition. The information came to light after someone discovered what was supposed to be a secret investigation document on a public computer network, the Post notes. While details on the investigation are limited, and ethics inquiries aren’t uncommon, the article names a number of lawmakers, including embattled Rep. Charles Rangel (D-N.Y.), who’ve been investigated or interviewed. In a sidebar to the Post’s main article, Carol D. Leonnig writes that “nearly half the members of a powerful House subcommittee in control of Pentagon spending are under scrutiny by ethics investigators in Congress.”SEN. EVAN BAYH, HIS WIFE’S INSURANCE INDUSTRY RICHES AND THE PUBLIC HEALTH CARE OPTION: While it’s hardly news that Sen. Evan Bayh (D-Ind.) is married to a wealthy insurance company honcho, The Street and Talking Points Memo plow new ground on the topic now that Bayh has suggested he may oppose a public health care option most fellow Democrats support as part of sweeping health care reform legislation expected before the full Senate within a few weeks. Many insurance companies argue that a public health care option would unfairly compete with them, affecting their bottom line and potentially making health care insurance less affordable.

ChrisLNovember 1st, 2009 at 12:19 pm

I voted for Obama.I had hoped that he might turn out a strong democrat, someone who really manages to get through the changes that he campaigned for. Someone who really goes against the interests of the Wall Street lobby that controls the government, for the benefit of the people.Turns out Obama is going to be more weaky washy. A Wall Street puppet. Things will continue to get worse for the people; and better for Wall Street.The risk now is that Obama doesn’t make it to a second term, and that the next president will be a republican who campaigns for small government but really thinks the most efficient way to get us out of this depression is a real big war and a real huge government expenditure:A real big war that enables him to declare a state of emmergency and to mobilise a few million army personel and the declining American manufacturing industry in order to manufature and operate the systems needed to destroy some parts of the earth (preferably outside the US), and to reconstruct and colonise those same parts later on.But nobody who will go against the Wall Street lobby.

blindmanNovember 1st, 2009 at 2:10 pm

c,worry is a waste. take heart and trust that.stay young, open and aware of the moment.( truth and reality ). know yourself and trust may be the last sentient human life formwithin miles of your location..the only way to know is to observe and listen tothose around you in relation to what you is an ongoing journey driving us toward greaterconsciousness of the truth, whatever that may be orbecome. a grand learning process that does notconform to or allow us to control or dictate it’sunfolding.very exciting and horrible as many are just blindthoughtless and careless but this can change.what we are trying to do is develop a sustainablestructure in the the mind dimension. it is abstract andthere are no rules and no boundaries but it isunderway, regardless. it is about transition.we are here and must leave here / change. some wouldrather stay here though we know we can’t. we alsodo not know / agree on what the vision of there /the future is. so we are in transition, but not transiting.we are stuck in a collapse phase of consciousness,being depressed rather than open and changing, vital.generally speaking.this is the looming confrontation that i suspect willtake place well before 2012. entirely manageableand negotiable in fact and truth and reality butnot in the realm of ideology and desperation.imoremember things change, the only constant, andsomeone has to be conscious to see it and respondintelligently. maybe simple?

blindmanNovember 1st, 2009 at 3:56 pm

new thread? or new threat?1,thanks for the ely link, nice. sherry=wall st., sonny=main of my favoritesof his is “fools fall in love”. such is life….we are in, perhaps, the middle of what may beseen from a future perspective as the firstglobal intellectual revolution? it makessense that the internet should have this kindof fundamental impact on humanity. entirely disorienting driving mankind back into his reptilianskin but hopefully ready to crawl out anew.recapitulating our cultural phylogeny butat an accelerated pace rushing toward the presentmoment.i guess everything needs to be torn to piecesfirst, symbolically. then re-cognized. at concern is that it be done honestly andnon-violently. my perception, right or wrong, is that what thefed/res and wall st. have done to the currencyis criminal and they may have picked the wrongdemographic, retiring boomers (actually everyone), to fleece? maybe not? maybe we will all just go off and die for their profit and pleasure?i was not implying that the death of the consumer is being exaggerated, just that exaggeration itself has become a fundamental part of communication today as it is so important to get attention just to be heard. as in we like the shinny things, the luster, implyingor inferring quality and integrity. verbally or rhetorically exaggeration, if unnoticed, can provide that, so to speak. to the point, it seems obvious that if we were in a bubble of asset pricing, which i think is pretty much obvious, prices have to come down.we cannot pass off every stupid mistake, unserviceabledebt to the working poor, the dying and the unborn.the people have yet to speak on the issues at handand if their representatives ignore them for much longer i suspect they, the representatives, may besurprised by what they are confronted with.that is just my feeling. the population is quietand knows to play stupid but the politicians shouldnot take this act seriously. granted some of it isn’tan act but increasingly the lack of transparency oropacity is becoming transparent and as the systemdegenerates the combination of pain, suffering andblatant injustice and arrogance, i think, willhave noticeable effects..”fools fall in love” j. ely

GuestNovember 1st, 2009 at 5:48 pm

Oops! My bad. I somehow found myself in article about Shelia Bair on the site and thought it was new Roubini, but it was one of the RGE analysts.Sorry for the false alarm.Ah, yes, bm, the boomers. Me and my g.g.g.g.generation. I am right at the forefront and have pondered the mess we have made for some long time now. We had it all, and many still do. Given a little more time, and we may have seen a blossoming of the promise of the boomers. Had it all held together, our retiring class might have plunged deeply in volunteering in pursuit of those great liberal principles we espoused.Unfortunately, so many of the 7 deadly sins got in the way & the s**t is hitting the fan.So, what will the boomers do when enough really do wake up? I agree with you that our leadership is assumes the people will remain passive at their own risk, and have no idea how this all plays out, but I saw something interesting in this vein this morning.Parade Magazine is about as middle-America as a publication could be. In this Sunday morning’s paper, they published fresh survey results on how this recession is re-shaping our attitudes and perceptions. Here are some of the results:79% have felt the impact of the financial downturn.66% say it has had a big impact on their lives.69% have either lost a job, had pay reduced, or know someone who has.Almost half have either struggled to pay the mortgage or rent, or know someone who has.80% say they have been forced to do more with less.73% have had to make unexpected changes.19% have sought some form of govt. assistance.27% have pursued extra work.42% delayed or cancelled vacations.34% put off purchase of a major appliance.29% postponed or cancelled home renovations.28% elected not to buy a new car.87% are worried about the future of the nation.61% feel that they did everything right and still lost.65% can’t believe this has happened to us today in America.70% don’t believe our leaders have dealt well with the economy.71% feel betrayed by the government.76% say they will never trust investments the way the used to.65% feel anger toward Wall St.44% have adjusted portfolios to reduce risk.71% are paying more attention to news about the economy.74% say they are more politically aware now.83% are re-considering what they actually need in life.68% say that “creating a meaningful life” and “giving back” have become more important to them.43% are devoting more time learning new skills.30% report volunteering more.43% are exercising more.58% are reading more for pleasure.63% are becoming more “do it yourself” oriented.59% are getting more work done around the house.46% are connecting more with old friends.35% are re-discovering community or religious groups.52% are forming stronger relationships with spouses.It is also noteworthy that large numbers think that the ‘consumer’ society distorted the meaning of America, but now – 67% say the true meaning is about the opportunity to achieve through hard work and education, and 60% say it is about the liberty to do what one wants.68% say the American Dream is still within their grasp, and that of their children.89% are still proud to be Americans.89% feel we can overcome whatever the challenges may be, “as long as we come together to support one another.”Middle America is waking up.Independent Contractor

blindmanNovember 1st, 2009 at 7:16 pm

1,yes they/ we can wake up. but not with abunch of prepackaged recycled political tripein our heads. the forces are out trying toharness the energy into some version of previouslyfailed hogwash. ie. rush on fox this am.. obviouslytrying to feed the beast with fresh meat as usual.he is a well paid shepherd but has no compunctionconcerning the slaughter of his sheep. sara palinis presidential material he says. hmmm. anyway.the way i see it is there is one spiritual questionthat america / every american has to ask itselfand i see this as THE time, the moment, for it to beasked and then answered. then everything willchange with a force behind it that will pave theway with…integrity. something new. it is nota religious question. it is of the spirit andwe all know it, both the question and the answer.when you stand for something your silence hasmeaning and you do not have to say anything.this is our opportunity to stand for peace.

Winston SmithNovember 1st, 2009 at 3:27 pm

This just inCommercial lending giant CIT files bankruptcyGovernment to likely lose $2.3 billion it spent to prop company up last year this august forum please comment on this news item .what are the reprecussions of this?

MorbidNovember 1st, 2009 at 3:45 pm

It means we are beating a dead horse with all our comments and tracking of the unfolding of the stupidities wrought by greed. In other words nothing is going to change except “change itself” which will have nothing to do with the policies of Obi and company who are totally clueless.Look Out Below.

11b40November 1st, 2009 at 5:59 pm

CIT has been a suppler of capital for multitudes of small businesses.This is not helpful – not price cost of money, not for availability of money.That’s the short version.Independent Contractor

PeterJBNovember 1st, 2009 at 3:57 pm

Speaking of familiar thoughts and issues er, concerns and un fait accompli: LOLIn other words – as I have repeatedly written – the administration’s talk of reform is just talk … the boys are just trying to restore the status quo.The Federal Reserve, in particular, knew that the dam was cracking. Alan Greenspan, I think, almost surely knew this, and chose to wait until it had washed away.The ownership society, all that was a scam, basically, designed to lure people who could never afford these mortgages into accepting them. And yes, I think they, any rational person, certainly people in the industry, knew that this was not going to last. There was a little industry code, I’ve learned, IBGYBG. “I’ll be gone. You’ll be gone.”The Great Crash of 1929 taught us that a modern monetary market economy is governed by confidence. As John Maynard Keynes put it, monetary relations and, more precisely, asset values, are held up by one’s belief in the future. Without it, the whole credit-driven economic system comes to a halt and economic agents scramble for cover by seeking to acquire liquidity.While in a non commodity-based monetary system a central bank can quite easily supply liquidity in its role as lender of last resort, a central bank cannot single-handedly instill confidence in the future. When confidence is lost, monetary policy is impotent in building up asset values, which can only be sustained if people believe in future revenue arising from future production. The economy remains trapped in a state of paralysis in which everyone is seeking to remain liquid. History tells the tale: Excessive optimism prior to the Great Crash turned to hopelessness during the early 1930s.Without a thorough investigation like the Pecora Commission, and without prosecuting those who are guilty, confidence and hope in the future will not be restored, consumer confidence will remain depressed, and we will remain in an economic slump. you don’t wash it it will stink and after washing it, you need to hang it out to dry:Keywords: hang | stink | confidenceHo hum

PeterJBNovember 1st, 2009 at 4:09 pm

Speaking of whores, whankers (note the ‘h’) and pimps, er politicians, you know —>> “leadership”:Real whores, after all, personally supply the services their customers seek. Prostitutes do not steal; their customers pay them voluntarily. And their customers pay only with money belonging to these customers.In contrast, members of Congress routinely truck and barter with other people’s property…Members of Congress are less like whores than they are like pimps for persons unwillingly conscripted to perform unpleasant services. hum

blindmanNovember 1st, 2009 at 6:44 pm of the sex trade here the list of the topjohns and their organizations. $50,000 or morefor federal influence/campaigns. some organizationsjust can’t seem to get enough “good thing”.what do i know from spelling nearly exclusively “english”slurs? i’m not even sure what it means and refuseto look it up, maybe later, i just thought it soundedfunny in that context? no offense meant to the”British people” being offered “a new sightseeing”.the phrase is growing on me, so to speak.anyway.. check out the big brain on this guy….if youhaven’t already… ( from naked..source sited above ) comments.Kevin de Bruxelles says:November 1, 2009 at 5:43 pmOne only needs to consult Hobbes to see where the answer lies.In Leviathan, Hobbes contrasts two states for human society. The first being a state of nature which is described as perpetual war between individuals. The moral logic of the state of nature is that there is no right or wrong: “To this war of every man against every man, this is also consequent, that nothing can be unjust. The notion of right or wrong, justice and injustice have no place. Where there is no common power, there is no law: where there is no law, no injustices. Force and fraud, are in war the two cardinal virtues.” (13.13) And then Hobbes goes on to describe the moral logic of the state of nature: “And because the condition of man is a condition of war of every one against every one; in which case every one is governed by his own reason; and there is nothing he can make use of, that may not be a help unto him, in preserving his life against his enemies, it followeth, that in such a condition, every man has a right to every thing, even to another’s body. (14.4)In order to transcend the state of nature, men accede to a social contract with each other to submit to a sovereign and in the process establish a civil society. To Hobbes (later diminished by Locke) the sovereign is almost all powerful. His job is to keep the peace, to install laws and justice, and to coerce the population to live within the limits he sets. But the one of the few limiting factors on his subject’s duty to submit to the sovereign is “The obligation of subjects to the sovereign, is understood to last as long, and no longer, that the power lasteth, by which he is able to protect them. For the right men have by nature to protect themselves, when none else can protect them, can by no covenant be relinquished.” (21.21)What is clear is that in the United States, where the sovereign is the elected government, an elite segment of society, namely bankers and other extremely wealthy individuals, are playing by the old rules, the rules of the state of nature, and they are grabbing as much of the pie as they can. All this while the sovereign has at best lost the ability to resist this crime, or at worst, is actively complicit. But the vast majority of citizens are sitting by idly still thinking they live in a commonwealth with laws and justice.There are two ways out of this mess. Either the sovereign must start playing his role and start enforcing the law and justice for all, or alternatively the citizens must stop submitting to this sovereign, overthrow this system government, and start all over again to find a sovereign since living in a state of nature is not an option.Something along these lines should have been Galbraith’s answer but he didn’t have the courage to face the bleak reality we find ourselves thanks for reminding me about the laundry, i almost forgotabout that load. ?

GuestNovember 2nd, 2009 at 2:17 am

do u do own laundry? my impression was that most people on this blog had sombody to do their laundry for them 🙂

GuestNovember 2nd, 2009 at 7:50 am

The Financial Times piece by the Professor is magnificent. Our friend is back from the wilderness. Jeremiah is back. “Mother of all carry trades faces an inevitable bust”.Found it on Naked Capitalism(must give credit).The professor lays it out so incredibly cogent and makes the point we have all been seeing. The banksters have created the mother of all dollar carry trade which combinedwith real negative interest is creating an unsustainable METABUBBLE. We ignore the professor’s forecast at our peril. We must become active in bringing sanity to this country or what Kenneth Galbraith said on Bill Moyer’s Journal will come to pass.There will be negative destruction if there is no reform. We need to head off any breakdown in the civil order by regaining our courage to speak on behalf of the PUBLIC INTEREST AND THE COMMON GOOD. Unless we all partially relinquish our self interest for the PUBLIC INTEREST, there will be a breakdown in the civil order and you never know what maniacs come out of that event. We need preemptive rational reform action to prevent a breakdown of the civil order. We have a choice. We eitheruse all our energy to call for REFORM, or we will be witness to things we never expected nor foresaw.

GuestNovember 2nd, 2009 at 7:57 am is the piece by Yves Smith.I now want you to look deep within yourself and see if you are living the reality that is within you or the reality that society has made you conform to. If the reality in your subconscious has been suppressed, let it our or you will not really be alive.Anybody who is truly alive can see that the Public Interest and the Common Good are being sacrificed and we all need to make our voices heard. Our self interest is the common public interest. We have just lost our way.

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