EconoMonitor

Nouriel Roubini's Global EconoMonitor

Obama Tours Asia with a Full Agenda

This week’s note is excerpted from a longer analysis piece RGE has just published examining U.S. President Barack Obama’s current trip to East and Southeast Asia. The full piece, which includes analysis of U.S.-North Korea relations, the U.S.-South Korea free trade deal, APEC’s integration process and looming questions about Myanmar, is available to RGE’s premium clientele here: “Obama Tours Asia with a Full Agenda” (login required).

President Obama embarked on his highly-anticipated maiden visit to Asia last week, furthering his efforts at global outreach. The trip comes as global leaders are reckoning with an unsynchronized exit from economic policies that have helped end the worst recession of the post-war era. Policy changes in Asia, particularly among major U.S. creditors, will be essential to rebalance global growth: APEC members (including those in the Americas) absorb 55% of U.S. goods exports and provide a major market for U.S. service exports, while Asia depends on U.S. consumers and foreign direct investment (FDI) to drive economic growth. With the trip, Obama aims to renew U.S. political and economic influence in a region that analysts claim was ignored by the previous administration, addressing key issues like economic cooperation, climate change, free trade and the regional balance of power. By spending nine days abroad as domestic issues like health care and unemployment vie for his attention, the president acknowledges the growing importance of the U.S. relationship with a rising Asia.

Obama’s first stop was Japan, a key U.S. ally and the host of a large (and increasingly contested) U.S. military concentration. Next, Obama stopped in Singapore, where he attended the APEC meeting. Obama, whose cap-and-trade legislation is stalled in Congress, was among the world leaders who accepted that a binding carbon emissions deal was unrealistic, saying the best that could be hoped for was a “politically binding” deal. On the sidelines of the APEC meeting, Obama met Russian President Dmitry Medvedev to discuss U.S.-Russia ties, the new arms control treaty and possible sanctions on Iran and North Korea. While in Singapore, Obama attended the first U.S.-Association of Southeast Asian Nations (ASEAN) summit, which was also attended by Myanmar’s leader, before arriving in China. His final stop will be South Korea, where talks of disarming North Korea may overshadow discussions on the U.S.-South Korea trade agreement.

Tensions and Reassurance in China

Ahead of Obama’s visit to China, U.S. officials have focused on a new goal of “strategic reassurance” that China will seek to maintain global stability as the country’s influence grows. A bilateral deal on climate change would have sent a powerful signal on this accord. Although U.S. and Chinese leaders signed several agreements on clean energy initiatives, in part because of job creation goals, neither side was ready to make any binding commitments on carbon reduction.

Similarly, the U.S. sought Chinese support on Afghanistan, Iran and North Korea, but no meaningful cooperative agreements have been aired publically. Over the past year, however, Chinese and U.S. leaders have been meeting more often than they have during past U.S. administrations, and linkages at all levels of governments have increased.

Trade and currency issues dominated the U.S.-China meetings, as they have in past meetings, though the relevant discussions were brief. The U.S. claimed a weak renminbi (RMB) would prevent the correction of global imbalances that both sides seek, but China put the blame on U.S. debt levels. This visit comes as market actors are increasingly pricing in a renewed gradual appreciation of the RMB over the next six months, as detailed in the recent RGE Analysis What Is China’s Exit Strategy? by Adam Wolfe and Rachel Ziemba.

Just before Obama’s arrival, a senior Chinese official criticized the loose U.S. monetary policy for the first time. As in their trade meeting in Hangzhou last month, China and the U.S. pledged to work together to avoid a trade war as pressure builds in both countries’ export sectors. As the global economy has begun to stabilize, the number of anti-dumping complaints has grown. Calm heads may prevail in the end, but, again, no strong commitments came from Obama’s visit or the meeting of trade leaders on October 29.

China sent a political message by skipping some of the goodwill gestures that usually accompany a U.S. presidential visit. Ahead of the visit, Chinese dissidents were reportedly rounded up, a striking contrast to the token prisoner releases that tended to precede visits from Presidents Clinton and Bush. Likewise, Obama’s “town hall” meeting in Shanghai was not televised live across China as past U.S. presidential speeches were. In addition to asserting China’s desire to level the political playing field, the moves may reflect insecurity on the part of China’s leadership, stemming in part from concern that the domestic economic recovery remains “unstable, unbalanced and not yet solid.” Even if it is better positioned to resist U.S. pressures, China still has a limited ability to alter policy in Washington, in part because China’s pursuit of macroeconomic stability from the dollar peg constrains other policies, including reserve diversification. U.S. Secretary of Commerce Gary Locke has bluntly defended the designation of China as a “nonmarket economy” for antidumping cases.

153 Responses to “Obama Tours Asia with a Full Agenda”

MedicNovember 18th, 2009 at 10:53 am

You go Pete!I’m going to stop trying my shameless self promotion this AM – clearly it is not working out well as each of the last 2 threads ended as soon as I linked my blog.I am the Kiss of Death…..

PeteCANovember 18th, 2009 at 4:11 pm

Actually … I did not post that first message. Apparently it was the ghost of “PeteCA”. Little does this person know the heavy weight of responsibility that falls upon his/her shoulders! 🙂

MedicNovember 19th, 2009 at 8:16 am

Wow. We have a PeteCa imposter among us. I will not sleep well from here on out.Just kiddin’! I haven’t slept well in a few years now……..

Nicole FencelNovember 19th, 2009 at 10:09 am

The U.S. cannot expect China to change its currency policy when it holds the upper hand. Until the U.S. finds a way to repay some of its debt and regaining its financial stability, China has no reason or incentive to appreciate the renminbi.

GuestNovember 18th, 2009 at 12:21 pm

On Friday, October 30, 2009, George Soros delivered the fifth of “The CEU Lectures,” on “The Way Ahead.”“We are at a moment in time in which the range of uncertainties is unusually wide” stated at the beginning of his fifth a final lecture George Soros. “We have just passed through the worst financial crisis since World War Two, and this crisis is quantitatively much larger and qualitatively different from other financial crises, ” he added.“In fact, the magnitude of the credit and leverage problem we face today is even greater than in the 1930s, ” observed Soros. In 1929, total credit outstanding in the United States was 160% of GDP. It rose to 250% by 1932; in 2008 we started at 365% – and this calculation does not take into account the pervasive use of derivatives which was absent in the 1930s.“I regret to tell you that the recovery is liable to run out of steam and may even be followed by a “double dip” although I am not sure whether it will occur in 2010 or 2011,” said George Soros.“The confusion is not confined to the financial sphere; it extends to the entire international arena,” he noted. “To put it bluntly, the United States stands to lose the most and China is poised to emerge as the greatest winner of the recent crisis, ” he further argued. “The two forms of economic organization, the state capitalism of China and international capitalism are in competition with each other,” he said. Soros went on to say that the process of changing the system needs to be initiated by the United States, but China and other developing countries ought to participate in it as equals.http://www.ceu.hu/news/2009-11-02/the-ceu-lectures-lecture-five-george-soros-on-the-way-aheadLecture here http://www.ft.com/cms/s/668e074a-bf24-11de-a696-00144feab49a.htmlhlowe

economicminorNovember 18th, 2009 at 1:12 pm

While Soros is a great capitalist, he is disconnected to the real world of Main Street USA and I believe China too. We have issues here that go way beyond the essence of capitalism. We have institution upon institution that are no longer viable due to decades of polarization causing them to be on the verge of being totally dysfunctional. Education, health care, pensions, courts and prisons, transportation, mail delivery all come to mind with out a lot of thought. State and local government funding is another one.In China there are different issues mostly over the size of the population. In order for China to change, it has created a chaotic system that is displacing hundreds of millions of people. There is really no social structure in place for this transition. If they do not develop employment for the masses moving in from the rural areas, there is going to be trouble. The Chinese government knows this. They are dependent upon the US consumer to buy the products made in China to facilitate the changes. Yet the US consumer is almost tapped out. If you really balanced the obligations and the income, well, on aggregate, the US consumer is bankrupt. Nobody want to do the math as it is just to scary. Leaving both the US and China up a creek with out a paddle, heading towards a huge waterfall. We are going to drag Europe and Japan over with us. Australia too most likely.The US was unique in a situation. We had a lot of room, lots of resources, an educated population. After WWII we had not only pent up demand at home but in the rest of the world. We had the only real production facilities left standing. Our prosperity came from this period and expanded until a new elite class developed in the US and started working towards the consolidation of capital and power.After that the middle class stopped expanding, except where certain groups through their unions maintained enough power to continue their income expansion or maintenance. These were mainly very large powerful unions like the Teamsters and Public Employee Unions. So the middle class became bifurcated while the elites kept up their relentless push for more consolidation and control.Well, in the end we have ended up here. The average middle class is over their heads in debt and those in power have no clue what its like to live on Main Street.George Soros may know in his technical charts that the recovery is very limited but I really doubt that he has any idea of how deep the next leg down is going to be. For him and his fellows at the top, they’ll only notice that their networth has been diminished but they will still live like the Princes and Princesses of the Empire. While it lasts.

GuestNovember 18th, 2009 at 7:38 pm

Dead-on about China! I’ve been forecasting a big, exploding bubble for a while now: that’s where the US’s inflation is, where it got exported to, and you better believe that there’s a tsunami’s worth of it!Soros is wrong when he says that the range of uncertainties is greater than ever before. No, the range of uncertainties is SMALLER than ever before. It’s certain that growth is dead; it’s certain that energy has peaked; it’s certain that many jobs are gone forever.

11b40November 19th, 2009 at 1:05 pm

Spot on, em!I have been ranting for years about China and “Free Trade”. How, in God’s name, can any American manufacturer compete with a government? That has been the fallacy of “Free Trade” from the beginning. Our trading ‘partners’ have been cheating all along, and our ‘leadership’ has turned a blind eye as our jobs have dwindled year after year.China’s problems are as you describe, and more. They suffer from the same problem we do – a lack of demand. Factories there are turning out washing machines and other consumer products that are rusting in storage. Yet, they continue to build more an more factories and infrastructure. The Chinese in aggregate just don’t have a consummerism mentality. They are wiser than we are in that regard.It’s kind of like here in the U.S., when I see the cheerleading Bozo’s on TV talking about needing more capital so small business and consumers can start borrowing again. Borrow for what? Demand has gone over a cliff, and much of it is simply not coming back. The kind of borrowing needed is not the kind your local banker is likely to support. You know, like “could I borrow $5K to catch up on my payments and stock the freezer?”The whole “supply-side” economics idea was bogus from the start. Anybody want to argue with that? Trickle down is about as smart as trying to build a house from the roof down. I was taught in B’school (many moons ago) that supply was a function of demand, not the other way around. Of course, back then inventory was on the asset side of the ledger, too.Independent Contractor

GuestNovember 18th, 2009 at 6:25 pm

“State Capitalism”… sounds like the condoning and sugar coating of a repressive dictatorship and the insinuation that the U.S. should follow in it’s foot steps in order to compete…. Can you say evil!

GuestNovember 18th, 2009 at 12:52 pm

Chinese financial institutions may buy US banksCash-rich Chinese banks have been scouring the world for investment targets.Chinese and US regulators have started to negotiate on how to allow Chinese financial institutions to buy into small and medium-sized banks in the United States.A pact may be decided between the US and Chinese governments after Chinese bankers complained it had been difficult for them to set up branches or invest in banks in US, partly due to strict approval processes for financial deals.Industrial and Commercial Bank of China is now the world’s biggest bank by market value, while Citigroup Inc in the US, is now only worth as much as a second-rung commercial bank in China.Chinese investment bankers and financial advisers may be invited to look at several potential investments in US banks, especially those that are mostly in financial trouble.A Sino-U.S. Memorandum of Understanding to encourage Chinese banks to invest in US lenders is being formulated by the Obama administration, which has found it needs more capital to take over troubled lenders.http://www.laosnews.net/story/566607

GuestNovember 19th, 2009 at 8:20 pm

When we talk about leadership, is this the “government,” or the business community? I wonder whom is really wagging whom. Given that it was private debt that really blew up, and it’s been government that’s been trying to fill the gap, I’d have to believe that it’s been the business community that’s responsible for this pooch screwing.In the end it probably doesn’t matter, as they both are staunch advocates of grow-or-die, which, as we know, cannot be sustained.BTW – Excellent couple of posts (above)!

11b40November 19th, 2009 at 9:17 pm

We are talking about the government because they have both the responsibility and the authority to keep this country safe and secure.Instead, the poor leadership we have chosen, is, in reality, owned and directed by a select bunch of special interest groups.Both parties are essentially the same – they just have some diferent ‘favorites’ around the fringes. The mainline special interests win regardless of party in power.As far as someone getting wagged…we have met the wagee, and he is us.Independent Contractor

GuestNovember 18th, 2009 at 12:54 pm

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS – COMMENTARY NUMBER 259 – November 18, 2009Formal Deflation Has Run Its CourseCPI-U. The BLS reported this morning (November 18th) that the seasonally-adjusted October CPI-U rose by 0.28% (up by 0.10% unadjusted) +/- 0.12% for the month, after rising by 0.17% (up by 0.06% unadjusted) in September.CPI-W. The BLS reported that the narrower, seasonally-adjusted October CPI-W rose by 0.33% (up by 0.11% unadjusted), following an increase of 0.18% in September.C-CPI-U. Year-to-year or annual inflation for the Chain-Weighted CPI-U — fell by 0.46% in September, versus a 1.37% drop in September.Using the 1980’s BLS measure (before gimmicks) inflation rose to about 7.1% (7.13% for those using the extra digit) in October, versus 6.1% in September.Inflation Measures 101The Consumer Price Index (CPI) is the broadest inflation measure published by U.S. Government, through the Bureau of Labor Statistics (BLS), Department of Labor:The CPI-U (Consumer Price Index for All Urban Consumers) is the monthly headline inflation number (seasonally adjusted) and is the broadest in its coverage, representing the buying patterns of all urban consumers. Its standard measure is not seasonally adjusted, and it never is revised on that basis except for outright errors,The CPI-W (CPI for Urban Wage Earners and Clerical Workers) covers the more-narrow universe of urban wage earners and clerical workers and is used in determining cost of living adjustments in government programs such as Social Security. Otherwise its background is the same as the CPI-U.The C-CPI-U (Chain-Weighted CPI-U) is an experimental measure, where the weighting of components is fully substitution based. It generally shows lower annual inflation rate than the CPI-U and CPI-W. The latter two measures once had fixed weightings — so as to measure the cost of living of maintaining a constant standard of living — but now are quasi-substitution-based.The 1980’s BLS method SGS Alternative CPI-U measures are attempts at adjusting reported CPI-U inflation for the impact of methodological change of recent decades. The SGS-Alternate Consumer Inflation Measure reveals, on an additive basis, the cumulative impact on annual inflation rate of various methodological changes made by the BLS.Over the decades, the BLS has altered the meaning of the CPI from being a measure of the cost of living needed to maintain a constant standard of living, to something that no longer reflects the constant-standard-of-living concept. Roughly five percentage points of the additive SGS adjustment reflect the BLS’s formal estimate of the impact of methodological changes; roughly two percentage points reflect changes by the BLS, where SGS has estimated the impact, not otherwise published by the BLS.Current BLS numbers track a minimum of 7% below real inflation.

The AlarmistNovember 18th, 2009 at 3:27 pm

Yeah, I’ve been looking all around for that deflation the Prof was talking about … meanwhile, everything I buy here and in Europe seems to be 7 to 10% more expensive year over year.

economicminorNovember 18th, 2009 at 4:47 pm

That is because so much money via bail outs and dollar carry trade has gone to the TBTE black box trading companies who have *invested* in hard assets. This has kept prices up or caused them to rise.On the other side of the equation is collapsing debts which has not been adequately accounted for in the gubbermints figures. We have lots of debt collapsing or in default. We also have rents in both residential and commercial declining.My conclusion is that we have high or rising prices in food and commodities while we have lowering prices in houses and commercial real estate. For the average person, this is bad and worse.In the end, I believe deflation will win out as high or rising commodity prices harm the consumer’s balance sheet and thus will continue the downward pressure on debt.It is difficult for the gubbermint to get money into circulation. The most common way is thru the creation of additional debt. This isn’t working so well with the job losses and the high and rising commodity prices hindering both disposable incomes and job creation.So the ability of the gubbermint to create inflation in housing or create an environment through which jobs are created is extremely limited. All other inflation will just cause the system to collapse faster and thus debt to collapse faster. Sort of a race to the bottom.

GuestNovember 18th, 2009 at 7:42 pm

Deflation will scrub the dead wood, stuff that’s not going to serve us in the future (SUVs, granite counter-top McMansions, marketing jobs, real estate jobs [most], “investment” banking and so forth).Inflation will appear in the critical things: energy, food (water) to name the key ones.

GuestNovember 19th, 2009 at 9:25 am

The whole thing is going to go under world wide, China cannot sustain itself and once things get bad enough countries will start nationalizing resources including China’s assets, there will be invasions /wars, governments and regimes will be replaced and there will be no safe haven. The inevitable outcome to all this is the end of capitalism and the beginning of more localized economies and self-sustainable practices.

economicminorNovember 19th, 2009 at 9:51 am

I have a hard time projecting as far ahead as you see. The outcome of economic chaos is not clear to me. History suggests to me that after assets deflate sufficiently and many of those on the top are removed that the pieces will be picked up and we will eventually rise to new heights. Different heights to be sure.I don’t see the basis for localized economies. We are nor an agrarian society any longer. Technology allows mass production but also cost enormously to develop. Security is best done on a large scale rather than by local governments. As much as many do not like the idea but larger government entities such as the European Pact and the large Asian pact and most likely an American pact of some sort are more likely as resources become less available and more strategic.Going to localized economies suggest to me a Mad Max type of total melt down. Localized economies suggest less free trade and less access to food and other resources. The electricity in the NW is produced in Idaho and Montana. Will the communities around those power plants control the sale and then what about the distribution? Who controls that? I really think we have moved waaaay beyond the possibility of localized anything unless we have a total economic melt down and if that happens, we will all be MUCH POORER in so many ways. I sure hope that isn’t the outcome.

Pecos BankerNovember 19th, 2009 at 11:10 am

Does anyone get the idea that we seem to be heading for socialism? We have the state taking over Fanny and Freddie and AIG and GM, bailing out banks which may eventually lead to taking them over, a big new national health program which may include a public option, etc. Granted, things are terrible right now, but cumulatively, this could be a step in the right direction. It’s hard to see how we can continue with capitalism in a resource scarce environment. I remember when I was in China, a tour guide proudly pointed out the new single family homes being built outside of Xian and contrasted that with the multifamily blocks nearby which admittedly looked pretty dismal. There were also about four or five brand new US style hotels nearby. Whatever else you can say, I was struck by this new “socialism with Chinese characteristics”–ie, capitalism–was relatively wasteful of resources. Rather than imitating all that’s wasteful in the west such as golf courses on formerly agricultural land, I felt the Chinese should have simply been building nicer apartment buildings rather than trying to imitate the movie set of ET. It is tragic to see so much pain inflicted in countries like the US by this economic crisis, but if it eventually leads to socialism, it would be a good thing for the people and the environment. Now for the ranting and raving, bring it on!

economicminorNovember 19th, 2009 at 11:48 am

The Socialism that is being initiated in the US is more like Fascism.So far, my take on the health care reform is that it appears to benefit the insurance industry at the expense of small business and individuals. Mandatory insurance sounds good when you are one of those who are in the top 5% income earners in the country but I doubt it sounds good to a struggling small business.I am unimpressed with the Christian ethics or morals of those at the top of our corporate society. Their idea of socialism is for them to benefit and the working class to pay. Not to different from the leaders in China, Brazil or Russia.So if what we are seeing in the US is Socialism, I’d really rather pass on it and go back to regulated Capitalism controlled by a government that represents the people.

GuestNovember 19th, 2009 at 8:51 pm

Econ,To help you see further, might I recommend the following:Temporary Recession or the End of Growth?Oil Production is Reaching its Limit: The Basics of What This MeansFrom the first article:

During the past century growth has become institutionalized in the very sinews of our economic system. Every city and business wants to grow. This is understandable merely in terms of human nature: nearly everyone wants a competitive advantage over someone else, and growth provides the opportunity to achieve it. But there is also a financial survival motive at work: without growth, businesses and governments are unable to service their debt. And debt has become endemic to the industrial system. During the past couple of decades, the financial services industry has grown faster than any other sector of the American economy, even outpacing the rise in health care expenditures, accounting for a third of all growth in the U.S. economy. From 1990 to the present, the ratio of debt-to-GDP expanded from 165 percent to over 350 percent. In essence, the present welfare of the economy rests on debt, and the collateral for that debt consists of a wager that next year’s levels of production and consumption will be higher than this year’s.Given that growth cannot continue on a finite planet, this wager, and its embodiment in the institutions of finance, can be said to constitute history’s greatest Ponzi scheme. We have justified present borrowing with the irrational belief that perpetual growth is possible, necessary, and inevitable. In effect we have borrowed from future generations so that we could gamble away their capital today.

The AlarmistNovember 18th, 2009 at 3:25 pm

Just came back from a day of shopping and lunch. There must be a recession, because things were flying off the shelves at Macy’s, though I must admit that the markdowns at their One Day Sale (which was stretched over two days) were pretty good, especially today’s early-bird pre 1pm specials on a number of things. But the gourmet deli in the mall was also packed … almost couldn’t get a table. Of course the most interesting thing is that most of those around us were senior citizens (who else has time to shop on a weekday?).Maybe Grandma and Grandpa realize it is only a matter of time before the Death Panels get them. In my case, it is only a matter of time before the new tax code comes to get me, so better to shop and have some discretion in where my money goes.Two economies indeed.

GuestNovember 18th, 2009 at 3:29 pm

huh? food court packed???? things flying off the shelves at lightning speed??? you mean people are spending spending money???? spending is recession??? LOL

Crash866November 18th, 2009 at 7:24 pm

Seriously go watch MSNBC and stay off this website. You have a rude awaking coming if you this everything is better and Obama is saving the day. 2010 is gonna be bad!! You won’t be LOL then.

Crash866November 18th, 2009 at 7:26 pm

Seriously go watch MSNBC and stay off this website. You have a rude awakening coming if you this everything is better and Obama is saving the day. 2010 is gonna be bad!! You won’t be LOL then

GuestNovember 18th, 2009 at 7:26 pm

Seriously go watch MSNBC and stay off this website. You have a rude awaking coming if you this everything is better and Obama is saving the day. 2010 is gonna be bad!! You won’t be LOL then

GuestNovember 18th, 2009 at 7:27 pm

Seriously go watch MSNBC and stay off this website. You have a rude awaking coming if you this everything is better and Obama is saving the day. 2010 is gonna be bad!! You won’t be LOL then

SoftwarengineerNovember 19th, 2009 at 4:06 pm

I Visited Macy’s A Week AgoThere were some people walking around the store that day, but I saw practically no bags in their hands, “Marked Macys” or any other mall store for that manner.BTW, I went through the store that day and found practically nothing on sale….perhaps that’s why nothing was being sold?Oh what a robust economy when the only things that sell are Black Friday lost leaders likely sold for a loss. I hear Burger King owners are suing the franchise because that $1 double cheese burger costs $1.10 to make and they’re losing money. Go out and buy some $1 lost leaders at Burger King and exclaim how rosy the economy is….LOL

The AlarmistNovember 19th, 2009 at 6:10 pm

Yeah, what he said. So much for that deflation everyone keeps talking about.I didn’t say everything is coming up roses, but it is not yet as dire as the permabears here make it sound.That is not to say that you all are wrong. I had a presentation from GMO a couple months back where they proudly told us that they were right, but that unfortunately they were right roughly 8 years earlier, and had therefore missed most of the up moves in the markets through 2007.

GuestNovember 19th, 2009 at 9:07 pm

And at what point will it dawn on you, looking back, that it WAS bad?Other than some playful(?) anecdotals, there’s nothing coming from you that supports your position that things are not on the cusp.And for a “world traveler,” wouldn’t it be essentially hard to take that things are and will turn out far worse than you imagine?

Crash866November 23rd, 2009 at 6:47 pm

Thanks for the reality check. I am sure it will all turn out Sunshine & Lollipops. Strap yourself in. At some point the Bulls or the disconnected will see how bad it truely is and will be.

11b40November 19th, 2009 at 5:49 pm

The list contains some of the usual suspects, but most are not that well known. Either way, they are doing a swell job for their bosses. Er, scratch that. I mean their sponsors. No, no. I meant to say benefacors. No, um, um Contributors. Yeah, that’s the ticket. Contributors.Independent Contractor

PeterJBNovember 19th, 2009 at 6:08 am

Do you really believe that perceptions are the key to socio-economics or, “economics:, as “leadership” appear to believe? If so, then, prepare yourself to be re-educated:World economy ‘heads for growth’ (God help us)and,…talking about Goldman Sucks: In an interview with London’s Sunday Times newspaper, Lloyd Blankfein also said he believed big profits and bonuses at banks were a sign that the world economy was recovering. banks serve a social purpose and are doing “God’s work”.”Another positive factor is 96% of gold experts are bearish and 88% of market pundits are bullish. As you know, when almost all the market experts agree, they are almost always wrong. if you take just a quick look at what government and the Fed are doing you have to conclude that economic, financial, fiscal and monetary policy is worsening, not getting better. We are facing major inflation and the dollar continues its trip downward.”Applied stupidity is still stupidity, and too late for the bouncing ball…Ho hum

ChrisLNovember 19th, 2009 at 10:03 am

Oh great, the OECD comes up with its outlook for 2010 :”Recovery in developed economies will accelerate next year due to “substantial improvements” in financial markets and fast-growing Asian countries, but is likely to remain fragile, the Organization for Economic Cooperation and Development said Thursday as it doubled its 2010 growth forecast.”FYI, this was the OECD’s outlook for 2008 published June 2007 :“a soft landing in the US.a strong and sustained recovery in Europea solid trajectory in Japanand buoyant activity in China and IndiaIn line with recent trends, sustained growth in OECD economies would be underpinned by strong job creation and falling unemployment”.– E P I C F A I L ! -So, IMHO, the OECD’s outlook has no value at all, or maybe just as a contrarian indicator.Normal, they are just a bunch of incompetent neoclassical economists who have absolutely ZERO understanding of the influence deflating credit. None of them has any clue, same for all other institutions, IMF, World Bank, Fed, Treasury, ECB, BoE, BoJ,…They should read Minsky, maybe they’ll learn something.

11b40November 19th, 2009 at 1:31 pm

Don’t mistake a bubble for a recovery. If you think you have done well in this market and have some nice gains, you might want to put some tight stops in place.Quick question. If the market rises 30% and the dollar drops 30%, how much have you made?Independent Contractor

MichelleNovember 19th, 2009 at 9:23 pm

11b40 asks: If the market rises 30% and the dollar drops 30%, how much have you made?It depends. Which market?Heard that on CNBC this morning, nobody answered the question and they all looked dumbfounded.Seems like a silly question as there are too many variables, but the assumption is they were referring to the U.S. stock market and the USD.Also depends on how those dollars are being spent or invested.

11b40November 20th, 2009 at 8:03 am

The point is, it’s a shill game built for the masters. You can win some if you are fast, nimble, and with a little luck. If you play a buy & hold game….you are the mark. Your wealth will be drained over time, one way or another ;~)Independent Contractor

FEDupNovember 19th, 2009 at 7:36 am

Bulletin: Initial jobless claims unchanged at 505,000. Time for jubilee and consumers to spend more than they have again.

SoftwarengineerNovember 21st, 2009 at 3:01 pm

Nice IdeaBut Citi Bank just announced its present in the Christmas Stocking….minimum 22.9% credit card interest rate.Consumers will flock to stores now at those rates. LOL

AnonymousNovember 19th, 2009 at 7:37 am

:)UCLA near riots over 32% tuition inflationhttp://www.youtube.com/watch?v=33UU6MKuWSE&feature=player_embeddedstarting??let them eat Mcdonalds??Dr/Prof Pete CA, how bout your college?? are they raisin fees too??

MM CANovember 19th, 2009 at 7:51 am

California’s UC College system has a 565 Million dollar budget shortfall. All happened in the past 2 years. Take look at who sits on the UC Board, nothign but Politicians, ex politicians and those connected to politicians. They couldnt manage AVerage Joe Americnas Household budget let alone this system. So much for Obama Campaign promise to Edcucate America and make College affordable for all. This is a disaster in the making and many young Adults are being completely shut out form a decent education. This impact will be flet for decades with millions of young adults unable to start a decent career and provide for thier future families. California is Fiscal Trainwreck that is about to fall over a Cliff. And what happens in California will eventually happen everywhere in the US.UC Tuition increases are being proposed at 30-35% system wide. I beleive there are 10 separate Universitys educating almost 200,000 students each year.What a shame!!!!!!!! with U6 unemployment at 19.6% presenstly and expected to gorw to well over 25%, this State is a Disaster for young adults?Why does’nt Goldman Sachs just cut the check for 750 million and fix the probelm? Why, Because they could give a Rats A.s about Young America….http://en.wikipedia.org/wiki/University_of_California

BobNovember 19th, 2009 at 9:55 am

You’re right! Asking anyone to inflate their cost by 16% per year for two years is outrageous! But rather than have someone else hand them a check … how about cutting costs first? That includes salaries (i know state workers) but someone needs face reality here.Can you imagine the state raising taxes at that rate? You think it would only be the students protesting?I went through the UC system … probably longer ago than I want to admit but tuition just 35 years ago was under $800 per year! The California educational system (all grades) has been broken for many years. As has the state of California!Back in our days … we would show them a protest! It’s time for this generation to step up!

MM CANovember 19th, 2009 at 10:07 am

My daughter just graduated from the CA UC system.. she did it in 4 years (almost unheard of these days) Cost was about 7K a year in tuition, fees, books on avg. throw in another 15K a year for living and housing (yes i know it couldve been a little cheaper in a dorm). There is almsot no way any young adult graduates in 4 years or even 6 these days if they have to work while going to college. So total cost was about 90K for past 4 years. I’m and she is lucky I suppose, but 90% of her freinds and my sons friends (also completed a few yrs ago) have not gone to college and cannto afford to do so. It’s total BS Rhetoric form Obama and the Gov’t, as well as Bush and his policies that they want college for all!!!!!!!!1

Winston SmithNovember 19th, 2009 at 2:47 pm

“Back in our days … we would show them a protest! It’s time for this generation to step up!”They might want to look at this quote from Mario Savio who was a student at UC to inspire them-“There is a time when the operation of the machine becomes so odious, makes you so sick at heart, that you can’t take part; you can’t even passively take part, and you’ve got to put your bodies upon the gears and upon the wheels, upon the levers, upon all the apparatus, and you’ve got to make it stop. And you’ve got to indicate to the people who run it, to the people who own it, that unless you’re free, the machine will be prevented from working at all!”

economicminorNovember 19th, 2009 at 10:10 am

This is about systems failure.The US has built unsustainable systems based on borrowing from the future to pay for yesterday’s expenditures.This is not unique to the California Universities but extends to the fire fighters pensions and the police pensions and the state parks and national parks and post office and the buried gas lines and electric grid and the courts and prisons systems and so much more.We allowed accounting gimmicks to assume totally unrealistic outcomes. Ever listen to the Australian economist Steve Keen’s My Per Capita Talk on Debt?Of course it has been impossible to rectify the imbalances. Minsky was right in his analysis of how and why. No one wanted to listen to him because he wrote during the expansion phase of the cycle he discussed.We have built a society based on not only ignoring financial risk but planning/betting on our ability to take on larger and larger risks with larger and larger gains with absolutely no negative consequences. Well, welcome to the real world of consequences.

GuestNovember 19th, 2009 at 9:24 pm

Exactly!The fundamental source of error is that the system is grow-or-die. On a finite planet, regardless of WHAT system is in place, if the strategy is that of the common yeast then, well, there shouldn’t be any surprise as to the outcome!My state, Washington State, appears as screwed as all the rest. A $2.6 billion budget gap for next year is projected. According to the governor, even if all the prisons were closed, funding for higher education curtailed and health services nixed, the budget probably couldn’t be squared. NOTE: I think that it was all of these together, or just a combination of some, can’t recall (from printed paper that I don’t have access to- the on-line version appears to have dropped this info).Someone posted some articles showing that only two states were not hemorrhaging.Yeah, everything’s looking bright for a big turnaround…

GuestNovember 19th, 2009 at 10:20 am

If one compares the cost of labor from the 1960’s to the presentto the “appreciation” in precious metal (PM) you see one-to-one relationship.Most everyone agrees the increased cost of PM is driven by inflation,ipso facto the increased cost of labor is driven by inflation.The two most labor intensive industries are health and education,therefore, it is these two industries that are the bellwether ofinflation.Increased tuition is not leading inflation; it reveals the exact amountof inflation.

PeteCANovember 19th, 2009 at 12:18 pm

I am a worker like many of you out there on this forum. Regrettably – I don’t enjoy the academic lifestyle.However, I do teach a graduate class at a local private college. I must say that I’m stunned by the tuition fess that the students are required to pay these days. These fees seem enormous to me! I don’t know how their parents can afford such money, to be honest.PeteCA

SoftwarengineerNovember 19th, 2009 at 4:12 pm

Don’t Worry, Mom and Dad Can Co-sign the Massive Student LoanThen make the payments when junior finishes college, unemployed and broke, and moves back home with mom and dad.

GuestNovember 20th, 2009 at 8:44 am

I laugh at all the college kids and professors who in the most snobbish way turned a blind eye to manufacturing jobs as they were cruelly being outsourced, now the only life sustaining jobs available are government jobs and the politicians are desperately trying to hold on to their standard of living – they deserve all the hell they get. Californians in particular sold out Detroit – paybacks are a you know what! Reap what you sow.

MM CANovember 19th, 2009 at 7:38 am

Solve for CaliforniaNovember 18, 2009The next BLS release of unemployment data for California comes this Friday, and its bracing to think what the numbers might be. Currently, the broad measure of unemployment for California–or U6- is running at 19.9% and the more conservative measure, which will be updated this this week, is at 12.2%. I’ve written quite alot on the subject of California this year. So, I watch the macroeconomic newsflow that emerges from the state each week, and most of it is pretty awful.This Summer I spent a little time on television making the case to both MSNBC and BNN in Toronto that California was extremely overleveraged to the automobile, and should probably think seriously about building out it’s rail system. At that time the machinations over California’s budget were in full swing, and a number of observers thought the budget agreement would put the state on the right path for at least another year. I was doubtful, and said so at the time. Moreover, I tried to draw the two points together: California was now suffering diminishing returns from its vast automobile and highway system, and it was unlikely to crawl forward again as an economy unless petrol became very cheap again (unlikely), or got serious about transition.This month’s Gregor.us Monthly, published 31 October, is titled Solve for California, and it attempts to lay out the backstory to the Golden State’s current predicament. Meanwhile, I see that Sacramento via the Strategic Growth Council has comissioned a new study, Vision California, and hired Calthorpe Associates of Berkeley to come up with reference scenarios to both spur and define future economic growth in California. Sounds good. But one question I have is as follows: of all the consultancies hired both in the past, and now, do any attempt to quantify for Sacramento the cost of maintaining the automobile system in an era of structurally higher oil prices?The most recent news on California’s financial crisis emerged this week, when Sacramento reported that the state’s budget gap has already blown out again to 6 billion in the current year, with more shortfalls to come next year. Meanwhile, Washington has actually started to make smoke signals about fiscal discipline and the growth of federal debt, which raises the question again: how would California raise the capital for new energy power generation and new transport, when the Federal Government itself is in so much trouble and tax revenues continue to decline?Herewith I will re-cap some of the points from my newsletter:• Build light rail, commuter rail, and high speed rail on an emergency basis, by-passing much of the public review process. Recognize that community concerns about noise, construction, eminent domain, and changes to the status quo are all subordinate concerns to the problem of California’s dysfunctional over-leverage to the automobile.• Cease all new investment in roads and highways. This shouldn’t be much of a problem in the current situation because it’s unlikely anyone will be developing either commercial or residential real estate on any scale for many years to come. Existing roads, highways, and bridges will have to be repaired and maintained. However, a plan should be formed to remove some of these, especially getting them out of downtown areas. Alot of new studies show, globally, that removing highways from urban areas can be economically revitalizing.• Drill offshore, and onshore, for oil and devote every penny to the construction and maintenance of new Rail and new Solar and Wind power. There should be a public Energy for Rail agency (and website) that would be a kind of transparency project itself, that would educate Californians –showing them that this was essentially a conversion policy of domestic energy to public transport. Equally, it is no longer rational to avoid the extraction of State oil and gas in the name of the environment, when nothing could be more destructive to the California environment than its present vehicle fleet, which spews out 6000 tons per day of CO2. In fact, any policy which does not attempt to radically dislocate California’s automobile-based transport system now has to be regarded as the most environmentally destructive policy of all.• Adopt a policy similar to the new resource and economic policy coming out of Brazil. Thus, demand that drilling rigs be built in California ports. Demand that rail cars, electronics for the new rail, and other manufactured goods for the new rail system be built in California. Favor oil companies that make their tax home either in California or at least the United States with drilling and production contracts. California needs to operate much more like a sovereign state, in this regard. The entire focus should be to extract energy, then recycle the wealth into the State in the form of productive capacity (new rail, new manufacturing, new power generation).• Build out massive new Wind and Solar, again, on an emergency basis and by-pass much of the public review process. The new extraction of California’s oil and gas would have as its single purpose the creation of capital, not energy, with which to fund the transition to a more sustainable energy system. California should also lobby to increase Natural Gas production from the new, NG shale plays.In the same way that I disagree that the United States can solve either its energy dilemma or make progress on carbon-emissions reduction by focus on the power grid, while continuing to preserve and protect the automobile, I don’t see that California can accomplish much through this route either. Today’s ruling on energy fficiency standards for TVs, for example is part of the state’s laudible record of achievement in electricity demand reduction, but, that has neither solved the state’s over-reliance on power imports, nor is it comforting in the light of Jevon’s Paradox or the Khazzoom-Brookes Postulate–showing that efficiency gains are most often arbitraged away into greater energy demand.My greatest concern, however, is that recent models which articulate the scale of transition to renewable power are a warning. A warning that the energy required to fund that transition is absolutely massive, in quantity. My call is that the construction fuel for a global buildout of Power Grid 2.0 will be oil. But, the longer we wait the more expensive that oil will become.-Gregorhttp://gregor.us/california/solve-for-california/

MM CANovember 19th, 2009 at 8:00 am

We are in Big F..king Trouble when Nancy (idiot) Pelosi and Harry (Sh.t for brains) Reid are going to help solve and architecht a solutuion for Obama on the NO JOBS problem. Correct me if I’m wrong but are’nt both these useless leaders from 2 of the Worst States with unemployment and forecleosures…?

GuestNovember 19th, 2009 at 9:42 pm

Still missing the picture! We already have TOO much transportation!THE problem is that we’ve built things such that people have to travel to work. This model fails! Rather than make it more efficient to move people, of which only smaller and smaller numbers will transport for work anyway (and as costs keep going up it’ll be more so), we need to move manufacturing/business/work, whatever, OUT to the people!I’d be happy to debate “Gregor,” or anyone else on this. As a matter of fact, years ago I suggested that the only really viable mechanism, esp politically, would be to redirect road construction/expansion $$s back to businesses in the form of credits for hiring local people- massive commute trip reduction. The majority of businesses are small businesses, and their owners are a mixed group politically, so it seems that they would be rather easy to get on board backing such a measure: and they would be the biggest gainers.But I agree, our current transportation paradigm is horribly flawed and is leading to/has led to our (rapid) demise: I actually think that this was THE strategy for killing communist China- get them to adopt a horrible system like ours!A problem with massive spending on alternative transportation is that this sucks out precious $$s from productive businesses, which is the ONLY way that we can correct our external debts (trade surplus). Spending yet more internally and telling our creditors that we’re remodeling the house just ain’t going to cut it, doesn’t make sense.

GuestNovember 20th, 2009 at 8:53 am

The world will no longer tolerate the U.S. becoming a net exporter those day are over for the simple reason that it’s an unjust way of thinking for someone to be an exporter someone else must be a net importer, it implies someone losing elsewhere for us to win – this is very bad logic and can no longer work. The older people will resist this idea and coming change and hide behind “free trade” demagoguery but it will be like fighting gravity. The planet is forcing the worlds population to live locally and in a self-sustainable manner.

MM CANovember 19th, 2009 at 8:14 am

More Yellow Weeds!Wednesday, November 18, 2009Housing Leads the Economy, Existing Home Sales are Irrelevantby CalculatedRisk on 11/18/2009 03:30:00 PMAfter reading some of the commentary regarding the housing starts report this morning, it might be useful to reiterate these three points:•Residential investment is the best leading indicator for the economy.•Residential investment will not recover rapidly because of the large overhang of existing vacant housing units.•Existing home sales are largely irrelevant for the economy.Residential investment is reported quarterly by the Bureau of Economic Analysis (BEA) as part of the GDP report. We can also use monthly housing starts and new home sales as indicators of residential investment. I’ve written extensively about how residential investment is an excellent leading indicator for the economy (also see Dr. Leamer’s paper: Housing and the Business Cycle)This morning several commentators suggested that housing starts were depressed in October because of the expiration of the tax credit (new home buyers had to close by Nov 30th to get the tax credit), and also because of the weather. Probably. But the key point is that housing starts will not increase rapidly because of the large overhang of existing vacant housing units (see 2nd graph here). And that suggests that the economy will not recover quickly either.Another key point is that existing home sales are largely irrelevant for the economy. This is an important point to remember next week when the NAR announces that existing home sales surged to 5.8 million units or so in October (seasonally adjusted annual rate). Some reporters and analysts will jump on the existing home sales report as evidence of a housing recovery. Others will point to it as showing that the first-time home buyer tax credit is helping the economy.Both points are wrong.The only contribution from existing home sales to the economy are some commissions and fees. That is good news for real estate agents and mortgage brokers, but not for the overall economy.The good news is the level of inventory for new and existing homes is declining. The bad news is the inventory of rental units is at record levels – as is the combined inventory of vacant single family homes and rental units. Residential investment will not increase significantly until this overhang is reduced.The key to reducing the overall inventory is new household formation (encouraging renters to become owners accomplishes nothing in reducing the overall housing inventory). And the key to new household formation is jobs. And usually the best leading indicator for jobs is residential investment. Somewhat of a circular trap.And that suggests the recovery will be sluggish and unemployment will stay high for some time.

SoftwarengineerNovember 21st, 2009 at 2:52 pm

Pick Up a Copy of “Five Short Blasts”, By Pete MurphyGreat Read….reviews are all 5 stars….It shows with graphic and numeric economic proof that as population density [BTW, NE America’s population density is about the same as Japan/China/India already, its documented in the book] increases wages must concurrently fall as per capita consumption horrifyingly plummets. Unemployment will continue to spiral upward too, as population density increases.We may not like it, but it is what it is.

MM CANovember 19th, 2009 at 8:28 am

November 18, 2009Country at a Crossroads by John BrowneThe U.S. economy is in uncertain times. Analysts are split between those seeing recovery and those fearing a second downturn. This confusion is being echoed in the highest levels of government as President Obama simultaneously speaks about the need for more federal spending and warns of the dangers of increased debt. As the volatile markets indicate, investors are not only confused – they are seriously concerned.The country appears to be going through a period of buyer’s remorse over the election of Barack Obama. The majority cobbled together by the President one year ago included the Democratic base, independents hoping for “change,” and many disaffected Republicans betrayed by the Bush Administration’s big-government neoconservatism. It is unlikely that most of these voters favored an overt push toward socialism; however, this is what they have received. As the ‘tea parties’ illustrate, voters are not only confused – they are seriously concerned.These concerns are justified. The Administration’s hard-left turn was evident from the outset. Ignoring expert advice to spend on job-creating infrastructure, Obama spent wildly on entitlements. Now, with rising grassroots discontent, a falling currency, and threats to America’s AAA credit rating, there is some evidence that the Administration is trying to hedge its bets through tough talk. Yet, they still have not taken any tough action. As their gold stockpiling highlights, foreign governments are not only confused – they are seriously concerned.Over at the Federal Reserve, no such soul-searching appears to be underway. Its chairman, Ben Bernanke, is clearly intent on avoiding deleveraging. He has charted a course of massive liquidity injections, financed by hitherto unimaginable levels of monetary inflation. He has even attempted to coordinate these expansionary policies on an international basis.For the moment, the cheap liquidity has saved Wall Street. To the delight of the Goldman Sachs, et al., the Fed has created a boom in financial assets, including equities, bonds and commodities. These rallies have stimulated a nearly universal belief that the worst has past. This feel-good attitude could be clearly seen on a recent cover of The Economist that read: “After the Storm – How to Make the Best of the Recovery.”But, to many people, life looks increasingly desperate. Official U.S. figures admit to some 15 million unemployed. Despite the massive stimulus packages, American consumers are still in shock and not spending as they once did. Already, the fall in consumer demand is larger than that of the early 1930’s. The authorities now face a moment of truth: admit that they don’t have the power to bring the consumer back to life or redouble their efforts, consequences be damned.The whole world awaits the decision, which could indicate a wild inflation, a major recession or the worst of both.Should the Administration accept, or even be forced to accept, an ultimately healthy deleveraging, a deep recession would ensue. Entitlements would have to be dramatically reduced while taxes remain unreasonably high. Otherwise, the federal government could face outright default. Barring a popular revolt, this course would lead to a sustainable recovery.On the other hand, if the government continues to run the printing presses, as seems far more likely, hyperinflation will become a distinct possibility. While this may create the appearance of recovery, with rising stocks and less short-term unemployment, average citizens will notice a sharp decline in their standard of living. It will get harder and harder to ‘make ends meet’ as wages increase less than the cost of everyday goods.The hyperinflation scenario will likely buy the Administration a little more time, but would eventually give way to the worst of all possible worlds: hyperinflationary depression. Here, America would feel a deep recession concurrent with rising prices – similar to what we’re seeing right now with gold. This is truly a devastating outcome and should be avoided at all costs.America is at a crossroads. It is important in these times to have leaders we can trust to make the right decisions, even if they are unpopular. Obama, Bernanke, Reid, Dodd, Pelosi, Frank… These are not names that are trusted to make wise choices over expedient ones. The markets know it; the voters know it; and, judging by the price of gold, the rest of the world knows it too.

GuestNovember 19th, 2009 at 9:47 am

No amount of money printing could equal the bad loans and subsequent shrinking supply of money, globalization is what’s on the chopping block try as the corporate leaders and politicians will to save globalization it will be useless. Inflation /deflation arguments are trivial what’s really at issue is the unsustainability of unlimited growth/capitalism. As people awaken to this undeniable reality we all stand to be far better off. For those who think China will be the next great consumer to continue the party of the elite and capitalist are delusional-too many mouths too feed with a bureaucratic centrally located style of power. We are ultimately witnessing the demise of corporate and political ownership on a large scale. Even the internet is threatening TPTB grip on power, once western banks go so will the massive governments and corporations of the world, everything will be forced to downscale and reinvent itself.

GuestNovember 19th, 2009 at 9:47 am

No amount of money printing could equal the bad loans and subsequent shrinking supply of money, globalization is what’s on the chopping block try as the corporate leaders and politicians will to save globalization it will be useless. Inflation /deflation arguments are trivial what’s really at issue is the unsustainability of unlimited growth/capitalism. As people awaken to this undeniable reality we all stand to be far better off. For those who think China will be the next great consumer to continue the party of the elite and capitalist are delusional-too many mouths too feed with a bureaucratic centrally located style of power. We are ultimately witnessing the demise of corporate and political ownership on a large scale. Even the internet is threatening TPTB grip on power, once western banks go so will the massive governments and corporations of the world, everything will be forced to downscale and reinvent itself.

GuestNovember 19th, 2009 at 10:20 pm

Geez, it’s like reading my own posts :-)Thanks for sparing my fingers from more typing :-)And, it’s good to see others that can see what lies ahead.

Pecos BankerNovember 20th, 2009 at 2:21 am

Maybe Bernanke’s printing is his best effort to save capitalism. Didn’t the US have a short-lived flirtation with socialism in the 1930″s? Keep up the appearance of a functioning economy, keep the majority of people employed, however tenuously, and try to avoid a scenario that leads to socialist thinking by the disaffected and margialized. As Barbara Ehrenreich pointed out in her book “Falling from the Middle Class”, each person who loses a job or home regards it as their personal failure and not a failure of the system. That person is more likely to notice those who continue to have jobs and live in security, rather than those like himself. Our system favors the kind of thinking that says that a person’s fate is solely their own responsibility–you can’t blame society or government. As long as things can keep moving along to give support to this false sense of personal responsibility (with respect to the present crisis, not necessarily when there is no crisis), a varient on Marx’s “false consciousness”, capitalist ideology will remain the dominant ideology. That is until the system becomes too unstable to save, which may arise for who knows what reason, but will inevitably arise when resources become scarce.Some half-hearted patchwork around the edges has already moved in the direction of forestalling discontent, such as the recent law enacted for credit cards and the attempt to reduce the number of people not covered by health insurance.

GuestNovember 19th, 2009 at 8:44 am

This morning Trans Union, the big credit bureau, released its quarterly report on mortgage delinquencies, and it was not pretty. Nationwide, 6.25% of all residential mortgages were at least 60 days past due in the third quarter, up from 5.81% in the second quarter and 3.96% a year ago. This was the 11th straight quarter that delinquencies increased.Mortgage delinquencies are the first step in a house eventually going into foreclosure, so look for those to start heading up again. Foreclosures have been held down by trial modifications under the HEMP program, but very few of those have gotten to the stage of being final modifications. And even when mortgages are modified, there is a strong tendency for those people to again find themselves in financial trouble. Clearly people not paying on their mortgages is not good news for the big banks like Bank of America (BAC) and Wells Fargo (WFC) that lent them the money.If there is a silver lining in the data, it is that the rate of increase seems to be slowing. The third quarter increase was “only” 7.6%, which is down from an 11.3% increase in the second quarter and a 14.0% increase in the first quarter. Of course, as the base increases, each additional percentage of increase means a bigger absolute number of delinquent mortgages.There are huge regional disparities in the rate of mortgage delinquencies. The former bubble states continue to suffer mind-bogglingly high rates of delinquencies — 14.5% of all mortgages in Nevada and 13.3% of all homeowners in Florida are at least two months behind on their mortgages. That is almost one in seven in Nevada and about two in every fifteen in Florida.In contrast, states where very few people live are experiencing very low rates of delinquencies. North Dakota is holding up best, as it is on a number of economic indicators with a rate of only 1.7%. South Dakota is not faring all that much worse at 2.3% and in Vermont the rate is only 2.6%.However, the gap is starting to close, and not in a good way. The fastest growth in delinquencies is now coming from areas where there was no real housing bubble. The biggest jump came in Wyoming where delinquencies jumped by 17.9% in the quarter, followed by Kansas at 17.4% and North Dakota at 16.0%. Still, it would take a long time for North Dakota to catch up to Nevada.There are two key forces that are leading to people not paying their mortgages. One goes to a lack of desire to do so, and the other goes to lack of ability to do so. If your house is substantially underwater, i.e. your mortgage is for a lot more than the house is worth, it is not economically rational to continue to pay your mortgage. After all, most mortgages are non-recourse, which means that the worst thing that happens is that the house gets foreclosed on and you go rent.At one point, there was a huge social stigma to being foreclosed upon, but as it becomes more common, the stigma diminishes. There are, of course, some non-economic costs associated with not paying and just living rent- or mortgage-payment-free for awhile, and in many areas of the country that can now be well over a year. Your kids might be upset with you since they would have to change schools and leave all their friends if you can’t rent in the same school district. People also develop emotional attachments to their houses. Those factors might be worth a $5,000 or $10,000. However, if the house is underwater by $100,000, most people will just tell little Billy that he will make new friends at his new school.The second reason for rising delinquencies is unemployment. Quite simply, with no paycheck, it is harder to write the mortgage check. It is not a coincidence that states like Nevada, Florida and California, which have very high delinquency rates, also rank near the top in terms of unemployment — and the Dakotas and Vermont have unemployment rates that are well below the national average. For the delinquency rate to start to fall significantly, we will need to see progress on both the employment front and on the housing price front.The government has been doing everything in its power to re-inflate the value of houses. It is throwing money at homebuyers in the form of tax credits. Under the recent extension, you don’t even have to be a first-time home buyer to benefit from Uncle Sam’s generosity. Of course, giving money away to move up buyers does not even reduce the inventory of unsold homes, since for each one bought, another one goes on the market.The Fed has been artificially depressing mortgage rates by buying up $1.25 trillion of mortgage-backed securities. In the absence of that program, rates on a 30-year fixed rate mortgage would probably be at least a full percentage point higher. The Federal government has also assumed the role of subprime mortgage lender through the FHA, which is offering mortgage loans with only 3.5% down, and the tax credit can be used for the down payment. That is exactly the same sort of behavior that got New Century Financial and Washington Mutual into trouble. It just goes to prove the power of a good lobby over economic rationality.This gift to the realtors of the country is eventually going to come back and bite the country on the behind, resulting in a massive — think Fannie Mae (FNM)- and Freddie Mac (FRE)-sized bailout — of the FHA.The massive actions have had some effect, and the Case Schiller index has shown some improvement in housing prices over the last few months. Also, housing prices are much closer to normal, relative to incomes and rents, than they were a few years ago at the peak of the bubble.Notice that I said “closer to normal,” not “below normal.” In the absence of this extraordinary government support, there is still room for housing prices to fall without them becoming undervalued based on historical relationships. The fact that incomes are not growing much due to high unemployment, and rents are falling due to record high vacancy rates, does not help the situation.This poses a bit of a dilemma, since new housing starts typically lead changes in unemployment. This can be seen in the first graph below (from http://www.calculatedriskblog.com/). In the graph, the unemployment rate is inverted to better show the relationship between it and the rate of housing starts, as well as the lag involved. The dot.com crash-induced recession of 2001 is the one case where the relationship does not seem to hold.The good news is that it looks like we have seen the bottom for housing starts this cycle back in January. Based on the historical relationship, that means we might start to see some improvement in the unemployment rate by this coming spring.The bad news, though, is that new housing right now is a classic case of mal-investment. With lots of vacant housing, the last thing we need as a country is more housing units. The second graph below (also from http://www.calculatedriskblog.com/) shows that the dramatic decline in housing starts has not yet begun to make a dent in the number of houses and apartments that are sitting vacant. Thus it seems unlikely that we will see housing starts return to anything like the 1.1 million a year that has historically been about normal for the country.More likely the rebound will stall out around the levels that marked the bottom for new housing starts in past cycles of around 600,000 a year. Yes, that is a nice percentage gain from the lows of under a 400,000 rate, but it does not suggest a robust recovery.http://www.benzinga.com/42813/mortgage-delinquencies-still-rising-analyst-blog?ref=patrick.net

MM CANovember 19th, 2009 at 9:39 am

Just as I predicted 3 months ago. I said it would be 20-30 Billion. All due to massive declines in state revenues from sales tax, real estate taxes and Buisness taxes. and this is on top of raising the state income tax rate, increasing the sales tax rate and many other fees. There is no recovery happening and things are gettign worse. many other states are finally relaizing they are quickly joining the California sinking ship.

FEDupNovember 19th, 2009 at 9:35 am

L shaped recession still a reasonable probability:no SIGNIFICANT improvement in unemployment, consumer spending or housing resulting in negligible growth caught in a spider’sweb of record debt, rising costs and taxes.For many Americans “Yes we can” has become “I don’t think so”!

MedicNovember 19th, 2009 at 9:45 am

I think the “Yes We Can” has instead turned into, “Holy Shit, This Is Bigger Than We Ever Imagined!”Refusing to believe the situational reality does not change that reality.The tide will continue to rise against the lower and middle class – at some point it will be followed by the people as they perceive that they have nothing left to lose.

AnonymousNovember 19th, 2009 at 9:56 am

Isn’t this just another fantastic American success story: a company built from the ground up by Steve Case with dedicated, creative Americans and now billionaire Steve and his investors need to cut another 2500 jobs to increase profits!

MM CANovember 19th, 2009 at 10:17 am

It’s funny watching Giethner gettign Grilled by congress…. He’s oen arrogant and ingnorant person! Plus he’s clueless..Can Obama be more surrounded by a Bigger Cast of Idiots Than Giethner, Pelosi, Reid, et al…

GuestNovember 19th, 2009 at 10:23 pm

No, he’s not clueless. He’s there to deceive (those who would really like to crush the US, as well as the average person, whom he and his handlers need to crush).

MedicNovember 19th, 2009 at 1:29 pm

Thanks for the link MM CA – I had not been on ZH yet today.It is worth noting that SG points out that their “worst case scenario” is not what they believe is most likely – but it is what they recommend to customers who think the worst is yet to come.Some good thinking in there – but if it all comes un-hinged, all bets are off.For the time being, I can tell how the market will play out for the day by watching the gold charts for Asia and Europe prior to the opening bell on Wall Street. The Dow rises and falls in tandem with gold for now…….(This is not investment advice – play in the casino at your own risk)

tutterfrutNovember 19th, 2009 at 12:03 pm

Now Europe has its puppet President. Elected in some back chamber by other puppets. He’s from my little country. His name is Herman(Van Rompuy)…

GuestNovember 19th, 2009 at 12:20 pm

6-10 Million New Foreclosures coming our way over next 24 months. 6 million if Gov’t steps in and rescues the other 4 million, other wise 10 Million.

GuestNovember 19th, 2009 at 3:23 pm

The Mortgage Bankers Association released a grim report today revealing that nearly one in seven households with mortgages is behind on payments or already in foreclosure.Last year, only one in 10 were behind. Two years ago, the number was just 7.3%.We’re now in what is clearly the second leg downward of the mortgage mess. While the early days of the mortgage crisis were driven largely by people saddled with complex mortgages they couldn’t afford to pay, now even homeowners with relatively sane mortgages are running into trouble as unemployment soars into the double digits.In a rising housing market, joblessness doesn’t necessarily trigger defaults. In those situations, jobless homeowners can sell their homes and pay off the mortgage. But with the home market still ailing and prices still falling in many areas, jobless homeowners are forced into short-sales and defaults.

GuestNovember 19th, 2009 at 12:41 pm

Still bearish, Nouriel Roubini predicts a slow recovery.In an email to Roubini Global Economic’s clients, he predicts that the economy will recover in a U-Shape. His forecast is in line with Goldman Sachs, who also recently predicted that “gradually is the watch word and a V-shaped recovery remains unlikely.”A V-shape recovery might be visible in Q3 private consumption rates, which grew a healthy 3.4%, in line with consumption rates before the crisis. But this was just a head-fake, according to Roubini, thanks to cash-for-clunker type programs and home buyer tax credits. He thinks consumption will now slow, growing at just 1.8% in 2010.Predictions of a slowing recovery could weaken the dollar and spur inflation, but Roubini doesn’t think that is necessarily a bad thing. If inflation is controlled, it could help us pay back our foreign debt obligations faster. So a gradual, U-shape recovery with mild inflation could benefit the U.S.’s bottom line.RGE’s 10 Reasons Why We Will See A U-Shape Recovery:1. A U-Shaped U.S. Consumer. Roubini argues against a “V-Shaped” recovery, which he says puts too much confidence in this year’s strong equity rally. 80% of the population reacts to home prices, not equity prices, and he forecasts that home prices will fall further.2. Difficult Labor Market Conditions. Expect a strong second half of 2009 and a sluggish 2010 with growth below potential and continued job losses.3. Balance Sheet Recession Caused By Over-leverage And Debt Accumulation. There are signs of a massive re-leveraging in the public sector. The cost of maintaining this level of debt will be very high and a drag on the economy.4. Investment Usually Is A Strong Recovery Component. But investment will not recover while one third of current capacity is not utilized.5. A Damaged Financial System And The Related Credit Crunch. Only half of the estimated $3 trillion global credit losses (IMF recently lowered their estimates) have been recognized so far. Expect more to come, especially in Europe.6. Home Prices Said To Fall Further And Commercial Real Estate Bust Continuing.7. Exit Strategy: Damned If You Do And Damned If You Don’t. Removing fiscal accommodation will constrain a recovery that still appears weak. It has already been determined that it is too early to remove fiscal accommodation, but if it continues it will fuel persistent large budget deficits and lead to inflation.8. Fall In Potential GDP Levels and Possibly In Potential Growth9. Global Imbalances: Over-Spenders Retrench While Over-Savers Don’t Compensate. Fall in demand from countries that tend to be over-spenders (US, UK) has not been neutralized by countries that tend to be over-savers (Japan, Germany).10. Emerging Markets Fared Better But Can’t Close The Consumption Gap. Can China/India be the engine of global growth? No. Can EMs decouple from anemic growth in G3? No. Is the policy response of China/Asia appropriate and sustainable? No. There are not the necessary social safety nets in EM countries, so the motive to save high. Private demand has to take over and drive growth.

HubbsNovember 19th, 2009 at 1:23 pm

Hello Gold my old friendIt’s Not the Market, It’sThe Underlying CurrencyDearHow do you measure the stock market?For most of us living in the US, the stock marketlooks like it’s been on an absolute tear. After all,the S&P 500 is up over 50% while the Nasdaqis up 70%.S&P 500The only problem is, this rally is denominatedin US Dollars (a currency that has lost morethan 16% of its value since March). What happenswhen we price this rally in gold (a currency thatisn’t becoming worth less and less)?S&P 500 in Gold—————————————————Are You Prepared for the Coming Crises?I’ve put together a 20-page Special Reportdetailing what’s to come and how toprepare your portfolio for it.In fact, we’ve already opened four tradesand we’ve got another five “on deck”for what the REAL fireworks begin.Looking at the charts, they could startat any minute.Karl, are you ready for the Crash?Click here to learn more—————————————————As you can see, priced in Gold, the S&P 500peaked back in August and has since fallen 10%.Put another way, stocks outperformed Gold upuntil August at which point Gold has dramaticallyoutperformed stocks. This trend (gold outperformingthan stocks) is now at a critical line of support. If itbreaks below this, then whatever gains stocksproduce will be entirely based on Dollar devaluationand not real wealth generation.To see just how badly stocks have performed in Gold(hint REAL bad)… as well as definitive proof that stocksare NOT in a new bull market… Please Click here.OmniSans Publishing LLC2786 Timber LaneCharlottesville, VA22911US

GuestNovember 19th, 2009 at 1:48 pm

so true, like i said over and over again. it is not equity gone expensive. it is currency has gone cheapen by FED’s Quantitative Easing that target 0% forever and federal/state/local government blowing and blowing its debt bubble. Double whammy to both this country’s currency and debt problem.

11b40November 19th, 2009 at 5:20 pm

Yep. As mentioned earlier, if your stocks are rising, but your currency is dropping, are you really winning?Independent Contractor

Pecos BankerNovember 20th, 2009 at 2:39 am

Is it certain that QE cheapens the dollar? It doesn’t appear that the Yen was harmed by Japan’s QE, so why should that be the case with the US? Nor has Japan suffered inflation due to QE. They continue to have deflation.

GuestNovember 20th, 2009 at 6:30 am

Gee, but then again USA is no Japan. USA has set of problems not exists in Japan. So is QE cheapen the dollar that enjoyed “World Reserve Currency”? Is world trade all started to settle in global local currency hurting the dollar? Is mounting debt hurting the dollar? Is the fact that USA has no manufacturing base hurting the dollar? Is Democrats tax and SPEND MORE than gov can afford hurting the dollar and debt rating? You tell me? And there is no change, no improvement, no smart leadership in sight from Democrats policy, but just relying on QE at 0% forever? So you tell me why shouldnt perception of QE cheapen dollar???

GuestNovember 20th, 2009 at 6:34 am

$100+Billion a week Treasury auction. 7 weeks = $700+Billion TARP. Couple of 7 weeks => couple of TARP money goes to where? Government Spending that contribute to nothing??? And we can just repeat man 7 weeks $700+Billion TARP money forever at 0% rate policy. That doesnt cheapen dollar??? Well, we will see Xx7weeks down the road if QE at 0% will or not cheapen dollar.

Pecos BankerNovember 20th, 2009 at 7:02 am

Dollar strengthening slightly at this moment. The burden is on you to state why the dollar should collapse due to QE. All you have done is show that there’s a lot of printing going on. Certainly, in a normal environment that would cause inflation and lead to depreciation of the dollar. However, there is a good chance that as the dollar carry trade coming to an end, money could easily flow back into dollars. The lessons from Japan suggest that it might not decline due to QE. See Steve Keen on all of this as cited earlier in “The Roving Cavaliers of Debt” and a recent video of him on Zerohedge.

11b40November 19th, 2009 at 1:43 pm

November 18, 2009House Financial Services Committee2129 Rayburn House Office BuildingWashington, D.C. 20515Dear Chairman Frank, Ranking Member Bachus, and Members of the Committee,During the past two years, the Federal Reserve dramatically changed its operating procedures. Instead of simply setting interest rates to influence macroeconomic conditions, it rapidly acquired a wide variety of private assets and extended massive secret bailouts to major financial institutions.There are still many questions about the Fed’s behavior in these new activities, including potential cronyism and favoritism in its distribution of many trillions of dollars. As the Special Inspector General for the Troubled Assets Relief Program recently wrote about their bailout of AIG, the Fed’s “strategy to pursue concessions from counterparties offered little opportunity for success, even in light of the willingness of one counterparty to agree to concessions.”The Federal Reserve balance sheet expanded to more than $2 trillion, along with implied and explicit backstops to Wall Street firms that could cost even more. Who received the money? Against what collateral? On what terms and conditions? The only way to find out is through a complete audit of the Federal Reserve. That’s why we support the Paul-Grayson amendment requiring a complete audit.The Watt amendment does not repeal the existing provisions that prohibit a GAO audit of the Federal Reserve. In fact, it adds entirely new additional categories of restrictions. Instead of opening up the Fed’s secretive activities to public inspection, the Watt amendment cloaks it in further secrecy.A vote for the Watt amendment is a vote for more secret bailouts. We urge you to support Paul-Grayson instead.Sincerely,Dean Baker, Economist, Center for Economic Policy ResearchWilliam Black, Professor of Economics and LawTyler Durden, Blogger, Zero HedgeThomas Ferguson, Professor of Political Science, University of Massachusetts, BostonJames K. Galbraith, Economist, University of TexasLeo Gerard, President, United Steelworkers UnionJane Hamsher, Blogger, Firedoglake.comRob Johnson, EconomistNaomi Klein, Author, No Logo and The Shock DoctrineYves Smith, Blogger, Naked CapitalismAndrew Stern, President, SEIURichard Trumka, President, AFL-CIOL. Randall Wray, Professor of Economics, Center for Full Employment and Price StabilityIf you would like to sign on and add your own comments:http://action.firedoglake.com/page/s/fedrejectwatt?source=fdlemail111909%20Independent Contractor

11b40November 19th, 2009 at 3:16 pm

This just in from Micro-Cap Press:”China Pays Polite Lip Service to President’s Economic AgendaOn September 18th, the Micro Cap Press published an article that surprisingly didn’t stir up a strong debate. The premise of the article was simply that the investment gambles on China’s personal consumers (as opposed to industries and institutions) were far too optimistic – China’s consumers are in no real position to pull the globe all the way out of its financial rut.A few of the key data points we posted at the time included:China’s unemployment was at 30 year highsLending in China was up 28% in the first half of the yearCredit card delinquencies (late by two or more months) were up 133% in the first half of the yearAbout 1/3 of China’s recent college grads can’t find workIn the meantime we learned credit card issuance in China was up 32%, while total credit card debt had increased by 130% for the same timeframe.Though the spending spree (even if on credit) points to greater personal consumption, the worry is clear… consumers can’t spend more than they can afford forever. That was our concern then – that China’s consumers weren’t going to be able to deliver on the hope offered by all the ‘growing consumer class’ buzz.Now fast forward to today, while the market is still digesting the results of President Obama’s visit with Jiabao.All Bark, No BiteChina’s Premier verbally acknowledged that he sought the same trade balance the U.S. sought, since (in President Obama’s words) “We can’t go back to the era where the Chinese … are selling everything to us.” And, the President’s right – U.S. consumption of Chinese goods sent an unhealthy amount of U.S. currency overseas.Of course, one of the ways – perhaps the only meaningful way – to achieve that balance is for China to de-peg the value of the yuan to the U.S. dollar.See, though the value of the dollar has weakened, the yaun has followed it every step of the way. That’s why the trade balanced (relatively) has remain unchanged. By letting the yuan appreciate to its actual value rather than leave it at a dollar-based benchmark, the Chinese have greater buying power for U.S. goods, and U.S. consumers have less buying power for Chinese goods. As said above, that what both country’s leaders just agreed they wanted. And, the maneuver will let/force China to fuel the bulk of its own growth with internal consumer demands rather than rely on exports to do so…. a proverbial win/win.The problem? Premier Jiabao has much to gain by not following through, and much to lose if he does follow through; China is not going to switch economic gears, and likely won’t even discuss de-pegging the yuan to the U.S. dollar once Air Force One lands in the United States again.Why? While the idea of growing China’s personal consumption is nice, statistics show only about 8% of its population has any meaningful discretionary income (earns more than $5000 per year). Other estimates suggest that 200 million of the country’s 1.3 billion citizens are ‘affluent’, which works out to be about 15%. You get the idea either way though….. China’s stores, shops, and malls may be packed, but the vast majority of the Chinese are staying away in droves.Catch 22On the surface, the solution is more and better jobs. If unemployment moves lower, and wages rise, consumer spending may go up at least noticeably. The inherent problem with such a solution is brought to light with one question… what jobs? The country has spent the last several decades creating a massive amount of capacity for industrial production and export business. You could put the millions of unemployed people back to work, but the jobs would be in the industrial and export arenas. To keep those workers busy, industrial consumption and exports would have to increase – a step in the wrong direction, and a difficult trap to get out of.To put it all in simpler terms, though the U.S. can and does, China can’t support itself with its own consumers. You can tweak either discretionary figure proportion you want (8% or 15%) … it still won’t make a dent. That’s why 2/3 of China’s industry is centered around exports, and only about 1/3 on personal consumption.Though things can and do change in time, expecting Premier Jiabao to want or even be able to change that level of internal consumption in China is just naive, despite what he publicly said yesterday. There are way too many growing pains involved, particularly when the global economy is this fragile.Bottom LineAs for what this means to investors, there are three take-aways:We reiterate our September 18th point that Chinese consumers can’t save the world’s economy. Their growth and spending habits aren’t even sustainable at current levels.We don’t expect the yuan to start trading freely; it will remain weak with the dollar as long as U.S. consumers (and its close trade partners) buy Chinese goods.China will not be able to turn away from its export-oriented nature and become a consumer-oriented entity for several reasons, the biggest of which is that the bulk of the current infrastructure and political arrangements support export businesses.”This article is in line with what I know about China and the Chinese mentality. There will be no meaningful currency revaluations & the affluent Chinese consumer is visible in pockets, but not widespread. Their production is heavily subsidized and controlled (in several ways) and geared toward export. Without a strong U.S. & Europe, their economy will decline. When it does, watch out. No safety nets for the population – and much of that population has been displaced to the cities and manufacturing centers. No jobs. It is bad enough here, but will be horrible there, and very dangerous for the country’s leaders.Independent Contractor

FEDupNovember 19th, 2009 at 3:35 pm

agree. China, Europe and the U.S. have no room to move and are interlocked in a new lower growth level with higher unemployment and taxes, lower wages and purchasing power for many years ahead. As the jingle goes: “Watcha gonna do, watcha gonna do when they come for you-Mr. Obama?”

economicminorNovember 19th, 2009 at 5:21 pm

BO has made mistakes but this entire set up was none of his doing. YES there were decisions that he could have made differently but he is not even an economist, he is an attorney and community activist and a teacher.The beginnings of this mess go back at least 30 years but possibly as far back as President Johnson who started the guns and butter deficit spending. Nothing has really been rectified since then. Lots of laws and regulations have been re-written since then to allow unfettered market capitalism to become the dominant driving force in the world’s economy.These are cycles as Minsky wrote about and this one was driven to the stars. Yet still withing the reach of gravity… What goes up, must come down. Irrational exuberance and ignorance of risk have consequences and they are not the fault of our current President. Thank you!

MorbidNovember 19th, 2009 at 5:28 pm

Psalm 2009….gotta’ love it.FIRST BOOK OF GOVERNMENT ..Obama is the shepherd I did not want.He leadeth me beside the still factories.He restoreth my faith in the Republican party.He guideth me in the path of unemployment for his party’s sake.Yea, though I walk through the valley of the bread line,I shall fear no hunger, for his bailouts are with me.He has anointed my income with taxes,My expenses runneth over.Surely, poverty and hard living will follow me all the days of my life,And I will live in a mortgaged home forever.I am glad I am American,I am glad that I am free.But I wish I were a dog …And Obama were a tree.Brings a tear to your eye, doesn’t it?I guess that the Repugs. came up with this one. I’m independent but will not be voting for Palin.Surely there has to be another Ross Perot in this world that will actually follow through. Maybe Pat Buchanan will run again but as an independent.

GuestNovember 19th, 2009 at 10:40 pm

There’s no “savior” on this planet, anyone following mainstream religions (myself not one of them) should understand this.Our salvation will ONLY come when we face up to the fundamental fact that growth is NOT sustainable. Because all the power players stay in positions of power because of growth, it’s highly unlikely that they will espouse no/negative growth.It’s not so much a crisis of leadership so much as the crisis IS leadership! (people not being responsible for their own lives)

bNovember 19th, 2009 at 9:30 pm

steve keen is saying that the fed is guilty of violating it’s own bylaws by participating ina lottery which is monetary policy. if creditprecedes money creation and money creation is a response to existing credit then money is nothing more than a support mechanism for a “lottery”..see steve keen. “cavaliers of credit”.?as has been said… fraud. explicitly prohibited..all nominal values of financial relationships, pricesetc. have been established based on varying degreesof fraud perpetrated by the shadow banking system,aka “cavaliers of credit” (steve keen, marx).fiat money is created in response to the failure offictive private capital, credit and debt, when realvalue refuses to accept payment in promises. ponzi.by way of analogy…the real economy is like a community in a terrarium.the “humans” are outside the tank controlling the amount of oxygen and sunlight,(money and credit) monitoring the growth in anticipation of a harvest.the system is entirely dependent on ignorance of reality and acceptance of bullshit and image assupreme truth.he has shown that the monetary system is run byprivate forces. the governments and central banksmerely tow the line when these forces requireadditional assistance regarding their balances,as in need more money to experiment in the tank.back to the fish we go…

GuestNovember 19th, 2009 at 10:02 pm

Democrats is blowing Healthcare Cost BUBBLE!!! And the Healthcare bill cost will only grow BIGGER!!! Just look at how Democrats voted not to cut Healthcare cost, how the hell you able to keep healthcare bill cost down and not blow it BIGGER like Bernanke’s Quantitative Easing!!! Democrats stop ruin this country!!!!

GuestNovember 19th, 2009 at 10:03 pm

“The Democratic-controlled House voted Thursday to add more than $200 billion to the deficit to prevent steep Medicare payment cuts to doctors”WTF!!!!!!!!!!

GuestNovember 19th, 2009 at 11:18 pm

You’ve never had ANY substantive contribution other than to play games here. Bashing the Dems, who I will not argue do not reserve it, is meaningless, as YOU PROVIDE NO ALTERNATE VIEW/SOLUTION!It’s the behavior of a pathetic little troll unable to convey any of his/her own personal views (just blather the same meaningless childish rants).

GuestNovember 20th, 2009 at 6:20 am

you are “pathetic little troll”. to post comment here, i must “convey” my personal view??? and you dont think my rant doesnt convey my view to the matter? and i must also provide a “SOLUTION”? Says who???? Take a hike pal!!! you dont like my comment, then dont reply, MORON!!!!!

GuestNovember 20th, 2009 at 6:21 am

you are “pathetic little troll”. to post comment here, i must “convey” my personal view??? and you dont think my rant doesnt convey my view to the matter? and i must also provide a “SOLUTION”? Says who???? Take a hike pal!!! you dont like my comment, then dont reply, MORON!!!!!

GuestNovember 19th, 2009 at 11:22 pm

I posted this link and a snippet above, but will provide some more for consideration/reading. NOTE: not healthy reading for small-minded trolls!Temporary Recession or the End of Growth?

How Do We Know Which Diagnosis Is Correct?If the patient is an individual human and the cause of distress is uncertain, more diagnostic tests can be prescribed. But to what sorts of blood tests, x-rays, and CAT scans can we subject the national or global economy?In a sense, the tests have already been done. During the past few decades thousands of scientific surveys of natural resources, biodiversity, and ecosystems have showed increasing rates of depletion and decline. (20) The continuing increase in human population, pollution, and consumption are likewise well documented. This information formed the basis for the Limits to Growth studies, previously mentioned, which use computer modeling to show how current trends are likely play out—and most resulting scenarios show them leading to an end of economic growth and a collapse of industrial output some time in the early 21st century.Why are the results of such diagnostic tests not universally accepted as a challenge to expectations of continued growth? Primarily because their conclusion runs counter to the beliefs and proclamations of most economists, who maintain that there are no practical limits to growth. They deny that resource constraints provide an eventual cap on production and consumption. And so their diagnostic efforts tend to ignore environmental factors in favor of easily measured internal features of the human economy such as money supply, consumer confidence, interest rates, and price indices.Ecologist Charles Hall, among many others, has argued that the discipline of economics, as currently practiced, does not constitute a science, since it proceeds primarily on the basis of correlative logic rather than through the building of knowledge by a continuous, rigorous process of proposing and testing hypotheses. (21) While economics uses complex terminology and mathematics, as science does, its basic assertions about the world—such as the principle of infinite substitutability, which holds that for any resource that becomes scarce, the market will find a substitute—are not subjected to careful experimental examination. (It is worth noting that Hall and others have made the effort to lay the conceptual foundations for a new economics based on scientific principles and methods, which they call “biophysical economics.” (22)Moreover, mainstream economists failed on the whole to foresee the current crash. There was no consistent or concerted effort on the part of Secretaries of the Treasury, Federal Reserve Chairmen, or “Nobel” prize-winning economists to warn policy makers or the general public that, sometime in the early 21st century, the global economy would begin to come apart at the seams. (23) One might think that this predictive failure—the inability to foresee so historically significant an event as the rapid contraction of nearly the entire global economy, entailing the failure of some of the world’s largest banks and manufacturing companies—would cause mainstream economists to stop and re-examine their fundamental premises. But there is little evidence to suggest that this is occurring.At the risk of repetition: physical scientists from several disciplines have indeed foreseen an end to economic growth in the early 21st century, and have warned policy makers and the general public on many occasions.

economicminorNovember 20th, 2009 at 10:13 am

So…..You and I are believers but what does that mean?This is like yeast. And there will be severe consequences but there is really nothing that can be done.Why? Politics and religion come to mind plus greed and denial.Over population and consumption is running its natural course while almost every religion and political group preaches more babies so that their philosophy and way of life can be dominant. Look at Congress and its Stooge Amendment. People who don’t want to have a baby are being forced by Congress to have them. Enlightenment? Not hardly! Adherence to past beliefs in the face of overwhelming evidence? YES!You can understand it and complain about it and do what every you personally can to avert the consequences and I wish you all the luck there is in the world but so far I can find no period of time when the world population shrank due to individual choice. Only by wars, famine and disease.I live in a smallish home and am conscience of the miles I drive. We have high mileage vehicles, recycle, repair and use as fully as possible what we buy. I have a large garden and try and be a good steward of the land I live on but way to many others don’t live like I do. We had 2 kids, not 12. Many people are wasteful and energy hogs. I still see Hummers around and lots of BIG pickem up trucks with no loads going down the road. Often with only the driver.What is your solution, take away their freedom? Put them in camps where they can’t be bad citizens of the earth… And what about those religions who still preach large families? Do you propose to do what China did and limit the births per person… And across the entire planet? Great, a one world government with unlimited powers. No Thanks!NO! ? Nothing like that can be done and the planet will survive.. Probably mankind will survive. Steve Keen shows in his videos that the constant growth model is not only flawed but outrageously impossible. That doesn’t account for human nature… After all we are just very intelligent animals and all those animal instincts are still with us.If you want to do something meaningful for the future, get somewhere you can survive what’s coming and pass on your knowledge to the people who survive.

PeterJBNovember 20th, 2009 at 3:49 am

Speaking of “God’s Work”:@ PeterJB “Lloyd Blankfein also said he believed big profits and bonuses at banks were a sign that the world economy was recovering. banks serve a social purpose and are doing “God’s work”.”@ blindman “… the system is entirely dependent on ignorance of reality and acceptance of bullshit and image as supreme truth.he has shown that the monetary system is run byprivate forces. the governments and central banksmerely tow the line when these forces requireadditional assistance regarding their balances,as in need more money to experiment in the tank.back to the fish we go…””It’s not so much a crisis of leadership so much as the crisis IS leadership!”@ Guest on 2009-11-19 22:40:12Personally I don’t see God as being stupid; at least not as stupid as his/her creation (read: man) and for that reason I doubt that man has much to do with that which is going on except, perhaps being the Cause; which, probably rang a bell and the cyclic flood kicked in so as to rectify the affairs d’Homme.So perhaps Mr Blankfein is correct and he is being jerked around making himself look like a right moron (which he is doing a fine job of, I dare say) but it really is God that is holding his chain.You can never convince an ignoramus of what he is, whereas a Man of intellect or attainment where it counts qualitatively in terms of values, realizes himself just how little he knows and is always willing to acknowledge his ignorance.Ho hum

GuestNovember 23rd, 2009 at 12:01 pm

To those who believe that “God” exists: is he/she active or passive? He/she is either controlling everything or is controlling nothing.

GuestNovember 20th, 2009 at 6:48 am

Japan: Deflation Is Roaring Again, A Double-Dip Back On The TableJoe Weisenthal|Nov. 20, 2009, 5:43 AM | 240 |1Honestly, we’re not sure how an economy that’s been in a near-constant deflationary slide since the early 90s can ever have a double-dip recession. Octuple-dip sounds more like it.But, Japanese leaders are out with a fresh warning that deflation is still causing new problems, and that despite some recent good economic growth (though we flagged it for being deflationary, mainly) a backslide is still possible.WSJ: Weak domestic demand has caused the world’s second largest economy to enter “a mild deflationary phase”, the government said in its November monthly economic report released Friday.This is the first time since mid-2006 that the authorities said Japan is beset by persistent price falls, which can hurt the economy by pushing down corporate profits, increasing firms’ debt burdens, and prompting company managers to reduce workforce and hold off on new investments. The declaration in its official report suggests Tokyo is worried about whether the price downturn will lead to a double-dip recession.The government also said it needs to watch whether the economy is depressed by a further worsening of the jobs market, concern over a slowdown in overseas economies, and damage from deflation and volatility in markets.

GuestNovember 20th, 2009 at 6:51 am

Obama Must Create Jobs… Or Else!Joe Weisenthal|Nov. 20, 2009, 7:39 AM | 36 |As long as American perceive the economy to be weak, Obama will keep getting poll readings below 50%. It’s as simple as that.

economicminorNovember 20th, 2009 at 10:35 am

Jobs?What’s wrong with people just doing work?Everyone wants to be taken care of and have someone give them a job.I guess the gubbermint can just print up a bunch of money and hire a bunch more TSA or pay people to sweep the streets with brooms… Oh! couldn’t do that because of the Sanitation Workers Unions….The trouble is that all real value comes from value added productive endeavors. Reagan was right about government being in the way of lots of that. DEA, DEQ, OSHA, the franchise tax boards, the zoning laws and the department of transportation all make it hard to add value and come out with a profit. So our way of life has been to just leverage assets… Until we ran out of them to leverage and now the deleveraging is going on.We can’t compete with China when they have almost no rules and no restrictions and extremely cheap labor and they peg their currency to ours.So even if Obama said, put all our millions of unemployed back to work, at what? Making solar panels? When the same panels, including shipping cost 1/10 or less made in China? Or we’ll just re-wire America… To what goal?And the big projects, like new rail lines or NG lines, need all the front work done before we could put people to work and that means right of ways and eminent domain suits. None of that is going on as far as I know…So what is it that you want these people to do?Don’t say take back our industrial jobs as we can’t even afford the tires made in China and we surely couldn’t afford them made by American workers…At some point we can hope that those at the top start to realize all this and start the movement towards a sustainable future. Not growth for ever but something that is more sustainable and humane.It won’t be with this Congress.. So we will have to wait to see it the next one is any smarter… After a few more years of economic collapse.

GuestNovember 23rd, 2009 at 12:03 pm

No, it’s ultimately about how you can feed people doing “work.” More people NOT producing food and consuming it means trouble…

MM CANovember 20th, 2009 at 6:54 am

Like the post above said- 6-10 million more foreclosures coming soon to a neighborhood by you…Another wave of foreclosures loomsBy Stephanie Armour, USA TODAYA second wave of foreclosures is poised to hit the market, potentially undermining housing recovery efforts as more homes add to the glut of inventory and drive down prices.These homes largely represent loans that are delinquent but have not yet resulted in foreclosure sales.About 7 million properties are destined to go into foreclosure, according to a September study by Amherst Securities Group, compared with 1.27 million properties in early 2005.”There’s a huge supply out there,” says Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. “The foreclosure process can take a long time. When it comes to (the housing recovery), we’re not home free.”There is often a long lag time between a borrower going delinquent and the bank taking the home. Here’s why:•Moratoriums. New state laws imposing short-term moratoriums have slowed the timeline from delinquency to foreclosure.•Overwhelmed lenders. Banks dealing with a surge in refinancing, mortgage modifications and defaults are overwhelmed with demand, so it can take longer to initiate a foreclosure sale.•Modifications. Many loans now are first examined to see if they might qualify for a modification. This drags out the timeline and means it is taking longer for homes to go into foreclosure.•Asset write-downs. Banks may in part be waiting to liquidate homes through foreclosure because they don’t want to write down the value of the asset. Lenders can keep homes on the books at a higher value until they are sold at foreclosure.”There is a lot of foreclosed property in the pipeline that will hit the market and depress prices,” says Mark Zandi at Moody’s Economy.com. Foreclosed homes often sell at prices below those on the market and can therefore drag down overall home values.

MM CANovember 20th, 2009 at 6:58 am

Another nail in the coffin of small business, which by the way accoutns for over 70% of ALL JOBS in the US. More taxes on small Buisness… anyone get the feeling the PTB are scraping the bottom of the barrel… Most states are out of money…Unemployment compensation tax will surge for employersThe state’s trust fund for unemployment benefits is depleted, and employers will have to pay much higher taxes to refill it.TOMOHIRO OHSUMI / BLOOMBERG NEWSPhoto BY SCOTT ANDRONsandron@MiamiHerald.comFlorida employers will soon be asked to pay more — a lot more — to cover the cost of unemployment compensation, adding yet another thorn in the side of businesses struggling to recover from the economic downturn.For employers now paying the lowest rate, the tax will jump from $8.40 per employee to $100.30, the state Revenue Department said Wednesday.“That sounds like a 1,000 percent increase,” Kevin Rusk, owner of the Titanic Brewery and Restaurant in Coral Gables, said after hearing the news. “That’s absurd.”For his company, the increase works out to around $2,700 total for his 30 employees.“All this does is eat away at profits,” he said. “I can’t just raise prices based on this. Unfortunately, there’s nothing you can do other than eat it. That’s the most frustrating part of it.”The problem comes down to this: 667,000 of the state’s one million unemployed people are now receiving benefits, and the state needs to come up with more money. The most any one employee can receive is $300 per week, but that stacks up when multiplied by almost 700,000.This time last year, the state had $1.3 billion saved in a “trust fund” to cover unemployment benefits. But with the unemployment rate up to 11 percent, the fund is now empty. Since August, the state has been borrowing from the federal government to continue paying benefits. The current rate of borrowing is $300 million per month.Under state law, the deficit will trigger an automatic tax increase for next year. Employers with a history of extensive firings will continue to pay an even higher rate, with the maximum tax going from $378 to $459 per employee.Those figures include the effects of a law passed last year increasing the amount on which the tax is based from the first $7,000 of an employee’s pay to the first $8,500. The figures do not include an additional unemployment tax charged by the federal government.STIFLING RECOVERYBut employers aren’t happy about the increase, calling it just another burden that will affect their ability to add more workers and spur economic growth.“When you’re getting attacked as a small business by all these various agencies adding their portion to everything collectively, it adds up and starts to impact your decision in hiring people,” said Mary Frandsen, president of OTB Architectural Elements in Hollywood. The firm makes architectural accents from resin.COBRA COVERAGEAs an example, she said, new rules under the federal stimulus program require business owners to pay a portion of former workers’ health insurance fees under COBRA. OTB used to offer health insurance within a month of employment; now it can no longer afford to do that.“I don’t want to get stuck paying COBRA on someone who didn’t work out for us,” said Frandsen, who has four employees.Restaurateur Rodrigo Martinez said he can see the need for unemployment compensation, but adds, “It’s difficult for me to accept that there’s no other entity that can absorb this but me and all the other business owners.”Martinez has 40 employees at Timo, an Italian restaurant in Sunny Isles Beach.After news of the tax hike surfaced, at least two state Democratic leaders issued statements calling on the Legislature to accept some stimulus money aimed at helping pay for unemployment compensation.Congress had offered the state an extra $444 million in stimulus money for unemployment benefits if the state agreed to make more people eligible, but House Republicans rejected the plan, saying it could actually make matters worse.“Our state has left critical stimulus dollars on the table in Washington, D.C., and these hard-to-come-by funds are desperately needed to help Florida’s families,” U.S. Rep. Kendrick Meek, a Miami Democrat who is running for the U.S. Senate, said in a statement.

FEDupNovember 20th, 2009 at 9:00 am

I live in Florida and for the last 2 years I have witnessed a continual erosion of small businesses. They have cut full-timers to part-timers, cut inventories, cut prices, cut advertising, cut hours open, etc. They are ALREADY at the breaking point. Any further taxes will push them over the edge leading to further layoffs and more foreclosures. Dark clouds of unsustainable debt will cover the “Sunshine state” quickly changing it into the the “doom and gloom state”.

SoftwarengineerNovember 21st, 2009 at 3:11 pm

Both Your States Have the Same Chronically Worsening ProblemsA population density increase causing per capita spending to decrease as people use less to live, and the subsequent spiral up of unemployment with no end as less are needed per company and employers can easily pay slave wages with the glut of employees….it just gets worse and worse, with no end in population growth for California and Florida.Solution? Move to another state.

GuestNovember 23rd, 2009 at 12:08 pm

Florida has a history of real estate bubbles. Such bubbles inflate all other businesses.While I’m sympathetic to the small businessman, I don’t see that it would be prudent to “save” them if they represent overcapacity. NOTE: much of small business is in retail and service; next group would probably be construction-related and automotive-related- all jobs whose underlying sectors are in decline (due to an inability to sustain the growth in them).

MM CANovember 20th, 2009 at 7:00 am

Does anyone ever read the fine print or the Bills that they pass…. How can members of Congress be so stupid and unimformed?A million jobless are about to lose their benefitsBy ERIK ECKHOLM New York TimesNov. 18, 2009, 10:20PMShare Print Share Del.icio.usDiggTwitterYahoo! BuzzFacebookStumbleUponAbout 1 million laid-off workers will see their unemployment benefits end in January unless Congress acts quickly to renew existing federally paid extensions, according to a new survey and legislators and state officials.The record extension of emergency benefits that was signed into law on Nov. 6 was widely praised as a lifeline for hundreds of thousands of Americans who had spent a year or more in fruitless searches for jobs.The new law provided up to 14 weeks of federally paid aid to unemployed people who had exhausted existing state and federal limits, benefits that already lasted up to 79 weeks in many states. And for the majority of states with particularly high unemployment, it added six more weeks of payments, bringing the potential total to 99 weeks.Renewal processBut many legislators, state aid officials and struggling workers apparently failed to read the fine print.The added federal benefits were built on a series of previous extensions that are slated to end on Dec. 31, unless Congress renews these programs. People who lost their jobs after July 1 of this year, for example, would receive no federal extensions once their customary six months of state aid ran out.No specific proposalWhile discussions have started, Congress is not yet considering a specific proposal. And unless it acts before the Christmas break, officials warn, the extensions will end. If Congress, now caught up in the health care overhaul, delays action until next year, millions would face gaps in aid that many thought would be automatic.“There are six people looking for every available job, and these payments are enabling people to pay their mortgages and put food on the table,” said Rep. Jim McDermott, D-Wash., who championed the Nov. 6 law and hopes to light a new fire under Congress.“It’s a horribly complicated system, and most people didn’t pay attention,” McDermott said.He and congressional staff members said that while they believed an extension would eventually pass with broad support, action in the next few weeks is by no means certain. Renewing all federally paid extended benefits for 2010 would cost about $80 billion, McDermott said.Nancy Dunphy, deputy commissioner for employment security with the New York State Department of Labor, said that officials in New York and other states “were taken by surprise by this.”

MM CANovember 20th, 2009 at 7:03 am

Big Reason why NO JOBS matters! Nice article!http://themessthatgreenspanmade.blogspot.com/2009/11/jobless-rate-interest-rate-conundrum.html?ref=patrick.netThe jobless rate-interest rate conundrumThursday, November 19, 2009Just about everywhere you look these days in the financial media, when the topic of discussion turns to the plunging U.S. dollar, you’ll hear someone saying something like, “Unless the Fed raises interest rates, the dollar’s got nowhere to go but down”.And then someone invariably says, “But the central bank can’t raise interest rates. Not with the unemployment rate at over ten percent!”What’s a central banker to do?

GuestNovember 20th, 2009 at 7:08 am

Fri Nov 20 2009Honolulu house list prices drop (starbulletin.com)SoCal rent costs fall, 1st dip in 14 years (lansner.freedomblogging.com)Colorado foreclosures hit record in third quarter (aspentimes.com)Ohio Borrowers Behind in Mortgage Payments (wcpn.org)N.J. troubled mortgages grow to 14.5% (northjersey.com)Despite Government Aid, Foreclosure Crisis is Not Improving (cnbc.com)Prime Borrowers Are Latest “Victims” Of Their Own Borrowing (huffingtonpost.com)Mortgage delinquencies hit record high (msnbc.msn.com)One in 7 U.S. mortgages foreclosing or delinquent (reuters.com)MBA Forecasts Foreclosures to Peak in 2011 (calculatedriskblog.com)Walking Away from Mortgage More Common Among Twenty-Somethings (blogs.wsj.com)Foreclosure, delinquency rates spike amid growing unemployment (washingtonpost.com)Housing Starts “Green Shoots” Wither On Vine (Mish)Banks start foreclosure on 2,100 mortgages (mortgage.freedomblogging.com)The Great Disconnect Between Stocks and Jobs (robertreich.blogspot.com)The jobless rate-interest rate conundrum (themessthatgreenspanmade.blogspot.com)Risk versus the US dollar (theautomaticearth.blogspot.com)FHA-Backed Lending Is a Train Wreck (bloomberg.com)Online government auctions deceive newbie foreclosure buyers (heraldtribune.com)How to prepare for ‘global collapse’ (telegraph.co.uk)http://patrick.net/housing/crash.html

GuestNovember 20th, 2009 at 8:59 am

Reply to Pecos Banker,Oh no, dollar did a short term inch up and the burden is on me??? LOL, you call yourself banker, pathetic.

MorbidNovember 20th, 2009 at 9:01 am

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

MorbidNovember 20th, 2009 at 9:19 am

The ‘DEATH’ SpiralMayors Sound Alarm Over Drop in City Revenues

The mayors said deep budget gaps have forced them to make cuts to basic services including police and fire protection, that the financial crisis has turned cities and states against each other and that fiscal strains emphasize the need for money-saving changes to pension and health benefits in the heavily unionized public sector. “Change has to come and this moment of crisis is going to force it,” said Michael Nutter, mayor of Philadelphia.While federal stimulus funds have helped states close budget gaps and preserved jobs for many state and school-board employees, the mayors said federal money hasn’t done much to ease their day-to-day budget problems. “The stimulus is going to special things,” said Chuck Reed, mayor of San Jose.Beyond budget and services cuts, the mayors discussed new ways to raise revenue at a time when incomes are stagnant and the national unemployment rate is at 10.2%. Philadelphia, for instance, has temporarily increased its sales tax while Mesa has levied a property tax for the first time.I hope CA deals with their outrageous pension and union wage scales. Well, knowing the liberal agenda in CA – it seems MORE TAXES ARE FORTHCOMING. Ladies fasten your seatbelts and men put on your cups – it’s going to be a bumpy ride.

MM CANovember 20th, 2009 at 9:38 am

Most major cities Budgets are imploding… San Jose has 100 million shortfall….California is Insolvnet right now!S.F. home value drop, jobless drain city budgetHeather Knight, Chronicle Staff WriterTuesday, November 17, 2009San Francisco’s lowered home values and high unemployment rates have created another unwelcome side effect: far less revenue coming into city coffers than expected.A report released Monday by the controller’s office shows that property tax revenues will likely be $35 million less than anticipated in the 2009-10 fiscal year that began July 1. Payroll tax revenues will probably be $24.8 million less than expected, the report said.To make matters worse, some city departments are going over budget, including shortfalls of $5.1 million in the Fire Department, $4 million in the Sheriff’s Department and $3.2 million in Superior Court.This year’s $6.6 billion budget bridged a $438 million gap and included a $25 million cushion for unexpected revenue loss. But that’s proving not enough to make up for the missing dollars, meaning San Francisco is now expected to be in the red by an additional $28.1 million over the course of this year.”I don’t even know if I have words to describe how bad this is,” said Steve Kawa, Mayor Gavin Newsom’s chief of staff.Kawa said the mayor’s office will send out letters to department heads today outlining how much spending will need to be cut to balance this year’s budget. Another round of letters will go out to department heads Thursday describing how much more will have to be cut for the 2010-11 year. City officials will formally begin discussing next year’s budget in the next few months.Gloomier next yearNext year’s budget deficit is likely to top $400 million, Kawa said. That forecast could get even worse with federal stimulus money coming to an end next year and the state likely to help balance its own budget woes by cutting money sent to cities and counties.”It may be the perfect financial storm,” Kawa said. “It’s going to be incredibly difficult to find a way to balance next year’s budget without some severe impacts.”In the near term, the fight over midyear cuts could get ugly. Already, several supervisors are at odds with the mayor over the supervisors’ plan to approve spending $7 million to rescind more than 500 layoff notices going into effect this week for city and school district workers.Seven supervisors voted to approve the plan last Tuesday, falling one vote short of the eight votes required – and sending the plan back to committee for further discussion.Report criticizedSupervisor John Avalos, a proponent of the $7 million bailout and chairman of the board’s budget committee, said the controller’s report is disingenuous because it includes the $7 million in its $28.1 million shortfall estimate as if the money had been spent. But at the same time, the controller says he will block the spending of the money even if the supervisors eventually approve it.Avalos said the controller’s report also failed to account for $34 million expected to come into the city from the state later this year that is linked to new hospital fees and Medicaid reimbursements.”It’s a little bit cooked,” Avalos said of the report. “They’ve painted the picture a little darker than it really is.”Avalos added the $35 million in decreased property tax revenue is an estimate based on 4,000 appeals by property owners to have their property tax assessments lowered. Avalos said there’s no telling whether those appeals will be approved by the assessor’s office.Supervisor Sean Elsbernd said he expects the $35 million figure to wind up being conservative. He said 350 property owners had filed appeals by this time two years ago, and their properties were worth a total of $2 billion. This year, the 4,000 property owners represent property totaling $25 billion.Elsbernd said that’s why the board needs to get serious about major fiscal reform, including employee health benefits and retirement systems.”These numbers are dramatic,” he said. “We need to go after the big money now. A clip here, a clip there doesn’t get it done.”New budget deficitsOakland$19 millionshortfall after the first fiscal quarterSan Francisco$28.1 millionshortfall forecast for entire yearS.F. budget by the numbers$6.6 billion: Total budget for 2009-10 fiscal year$438 million: Deficit already bridged with layoffs, service reductions, fee increases, etc.$35 million: New expected shortfall in property taxes$24.8 million: New expected shortfall in payroll taxes$28.1 million: New expected shortfall overall (after factoring in a $25 million cushion in this year’s budget and a variety of other budgetary factors)$400 million: Expected deficit for the 2010-11 fiscal yearRead more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/11/17/MN001ALO7J.DTL&tsp=1#ixzz0XEG3I6Ky

GuestNovember 23rd, 2009 at 12:42 pm

I would agree with Soros that this financial debacle we are involved in is much worse than people can imagine. The perspective he provided, that credit made up 365% of GDP in 2008, was astounding. I would agree that there is a strong likelihood of a double dip followed by stagant and anemic growth for the next 5-7 years until the structural weaknesses of our economy are addressed. More regulation on derivatives is absolutely necessary. In addition more creative ideas to spur entrepreneurship and business, the engine of our economy, should help us get out of this mess sooner, though.

Regan LinDecember 3rd, 2009 at 10:21 pm

From Obama’s trip, we can see that Chinese’s attitude toward the American President was not as benign as it used too. It may be signalling a powerful message to the investors. If US is not trying to deal with its growing external debt, the Chinese may take on actions to derail the US economy.Recently, The Maersk Shipliner report massive loss from its container shipping business. It is just yet another evidence of the weakening global economy. Besides the global glut of ships, the reduction in trade is hurting the intermediaries, namely the transportation sector.