STOCK MARKET WATCH, Friday August 21

Source: du

STOCK MARKET WATCH, Friday August 21, 2009

Bush Administration Officials Under Indictment = 2
Financial Sector Officials In Prison = 6

AT THE CLOSING BELL ON August 20, 2009

Dow... 9,350.05 +70.89 (+0.76%)
Nasdaq... 1,989.22 +19.98 (+1.01%)
S&P 500... 1,007.37 +10.91 (+1.09%)
Gold future... 941.70 -3.10 (-0.33%)
10-Yr Bond... 3.43 -0.02 (-0.55%)
30-Year Bond 4.24 -0.04 (-1.00%)

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U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES..............................................S&P FUTURES

Market Conditions During Trading Hours

GOLD, EURO, YEN, Loonie, Silver and US$

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Read more: du

Gotta Wonder
BY MICHAEL PANZNER

This morning, the Conference Board reported that its index of U.S. leading indicators rose in July for a fourth straight month. Although the measure came in slightly short of estimates, optimists were quick to hail the recent trend as proof that “government efforts to stem the financial crisis and revive the economy are paying off,” according to Bloomberg. Being the cynic that I am, the first question that popped into my mind is which “government efforts” are they referring to? Do they mean the trillions in taxpayer funds being spent to bail out their friends on Wall Street (and elsewhere)? Or are they talking about the spinning and propagandizing that has been going on since the crisis began? Then again, maybe they are referring to something else -- like playing games with the numbers and the markets? How else, for instance, can one explain the mind-boggling divergence between current conditions and the outlook for the months ahead highlighted in the following graph?

-chart-

Of course, some data points seem far less suspect than others. It should come as no surprise that the latest quarterly National Delinquency Survey from the Mortgage Bankers Association contains grim news on the state of the mortgage market. According to the MBA, “the percentages of loans 90 days or more past due and loans in foreclosure both set new record highs, breaking records set last quarter.” The trade group added that the “combined percentage of loans in foreclosure and at least one payment past due was 13.16% on a non-seasonally adjusted basis, the highest ever recorded” -- and more than twice as high as the long-term median. So much for signs of life in the housing market.

.....

For those with an even more skeptical bend, the U.S. equity market’s intraday trading pattern since this last leg up began in July also seems rather interesting. To be sure, it is not unusual to see activity at the beginning and end of a trading session outpace that which occurs in the middle. However, I wonder if the same thing applies when it comes to a tendency for prices to move higher? Admittedly, it’s hard to draw any definitive conclusions from the data I’ve summarized below -- among other things, I haven’t gone very far and this sort of thing may be typical during bull runs. That said, it’s hard not to wonder whether those who might like to see the market send a message that all is well are concentrating their efforts during the times of the day when it might matter most.

http://www.financialsense.com/Market/wrapup.htm

10:00 Existing Home Sales Jul
Briefing.com 5.10M
Consensus 5.00M
Prior 4.89M

http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

So if you are drunk enough, the numbers look pretty good!

SINGAPORE – Oil prices hovered near $73 a barrel Friday in Asia as mixed economic data from the U.S. point to a slow recovery.

Benchmark crude for October delivery was down 31 cents to $72.60 a barrel by late afternoon in Singapore in electronic trading on the New York Mercantile Exchange. On Thursday, the contract fell 92 cents to settle at $72.91.

The September contract, which expired Thursday, advanced 12 cents to end at $72.54.

.....

"There are no real signs that consumption in the U.S. is picking up," said Ben Westmore, energy analyst with National Australia Bank in Melbourne. "Until we see that, investors won't be assured that the recovery is imminent."

.....

In other Nymex trading, gasoline for September delivery rose 0.89 cent to $1.99 a gallon and heating oil was steady at $1.88. Natural gas for September delivery held at $2.94 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

LONDON – European stock markets rose modestly Friday following a mixed performance in Asia as investors awaited key comments from U.S. Federal Reserve chairman Ben Bernanke.

The FTSE 100 index of leading British shares was up 20.69 points, or 0.4 percent, at 4,777.55, while Germany's DAX rose 31.46 points, or 0.6 percent, to 5,342.52. The CAC-40 in France was 6.52 points, or 0.2 percent, higher at 3,511.84.

Earlier in Asia, Japan's Nikkei 225 stock average fell 145.21 points, or 1.4 percent, to 10,238.20 and Hong Kong's Hang Seng dropped 129.84, or 0.6 percent, to 20,199.02. However, China's Shanghai Composite index rose for a second day — gaining 1.7 percent to 2,960.77 — after rattling investors worldwide when it tumbled earlier this week.

.....

Elsewhere in Asia, Australia's index retreated 2 percent after a government fund sold a big chunk of shares in the country's top telecommunications company Telstra. South Korea's Kospi rose 0.3 percent while India's Sensex was up 0.4 percent.

http://news.yahoo.com/s/ap/20090821/ap_on_bi_ge/world_markets

(Reuters) - Stock index futures pointed to a lower open on Wall Street on Friday, with futures for the S&P 500 down 0.12 percent, Dow Jones futures down 0.39 percent and Nasdaq 100 futures down 0.42 percent at 0730 GMT.

The Shanghai Composite Index <.SSEC> gained 1.7 percent, while Japan's Nikkei average <.N225> slipped 1.4 percent on Friday, hurt by the yen's advance against the dollar, while Toyota Motor <7203.T> and other automakers dropped on news that the United States will end its car rebate program soon. <.T>.

.....

Investors will scour U.S. Federal Reserve Chairman Ben Bernanke's speech before the Federal Reserve Bank of Kansas City Economic Symposium later in the day, for more insight on the outlook for the world's largest economy.

The market will also keep a close eye on U.S. existing home sales data, due at 1400 GMT. A Reuters survey of 61 economists predicted sales of previously owned homes climbed to a seasonally adjusted annual rate of 5 million in July, the briskest pace since 5.1 million units were sold in September and up from 4.89 million units in June.

http://www.nytimes.com/reuters/2009/08/21/business/business-us-markets-stocks.html

A survey found that one in eight U.S. households with mortgages was in foreclosure or behind on its mortgage payments during the second quarter, putting added pressure on programs aimed at preventing foreclosures.

While foreclosure starts have slowed on the subprime loans that ignited the mortgage and banking crisis, loans extended to borrowers with good credit are deteriorating at a faster clip as falling home prices and mounting job losses weigh on more households.

.....

Deteriorating prime loans are increasingly behind the steady rise in delinquencies and foreclosures. Among prime loans, 9% were past due or in foreclosure at the end of June, up from 5.35% one year ago. For subprime loans, those for borrowers with weak credit records or high debts relative to income, the rate was 39.5%, compared with 30% last year.

Prime loans, however, accounted for 58% of foreclosure starts, up from 44% last year. Meanwhile, subprime mortgages accounted for 33% of foreclosure starts, down from 49%. Prime fixed-rate mortgages, usually considered among the safest of all loan types, accounted for one in three foreclosure starts, up from one in five.

http://online.wsj.com/article/SB125082120504548471.html

Aug. 21 (Bloomberg) -- A.P. Moeller-Maersk A/S, owner of the world’s largest container line, posted a first-half loss as lower global consumption hurt freight volumes and cargo rates and it forecast similar results in the second half.

The net loss was 3.67 billion kroner ($700 million) compared with net income of 11.6 billion kroner a year earlier, the Copenhagen-based company said today in a statement. That was in line with the 3.7 billion-krone median estimated loss of a Bloomberg survey of five analysts. Sales fell 14 percent to 127.4 billion kroner.

.....

The container market will decline more than 10 percent this year as consumers rein in spending during the recession, the first year of contraction since the 1970 birth of containerization, according to a June forecast by London-based Drewry Shipping Consultants Ltd. Maersk said today that volumes dropped 7 percent in the first six months of the year.

http://www.bloomberg.com/apps/news?pid=20601085&sid=aGZYmy.iKsWI

Shares of Sears Holdings Corporation fell 12 percent on Thursday in Nasdaq trading after the retailer reported an unexpected second-quarter loss.

Excluding some items, the loss was 17 cents a share. Analysts had projected profit of 35 cents, the average of six estimates compiled by Bloomberg News.

Sales at Sears stores in the United States open at least 12 months declined 13 percent as consumers bought fewer washers, dryers, refrigerators and clothing, the company said in a statement. Same-store sales at Kmart, which is owned by Sears, fell 3.9 percent.

The retailer’s net loss was $94 million, or 79 cents a share, in contrast to a profit of $65 million, or 50 cents a share, a year earlier, the company said. Sales fell to $10.6 billion, from $11.76 billion in the year-ago quarter. The results were below the $10.7 billion average estimate of analysts.

http://www.nytimes.com/2009/08/21/business/21shop.html

by Robert Scheer

In recent days yet another wealthy private customer of the Swiss-based banking conglomerate UBS admitted to criminal fraud in a growing parade of perp walks that could extend into the thousands. It is a case that threatens to ensnare former Sen. Phil Gramm, the Texas Republican who is vice chairman of UBS' investment banking business. Given the widespread involvement of UBS in what the Justice Department alleges were systematic efforts to violate US tax laws, it must be asked: Did Gramm as a top executive have no inkling about what was going on?

Perhaps, but for Gramm this has to be a moment that at the very least tests his ideological commitment to the radical deregulation of banking that he championed during his twenty-four years in Congress. He joined UBS soon after the bank acquired Enron, a company that had gone bankrupt after jumping through the "Enron loophole" in the Commodity Futures Modernization Act, which Gramm had pushed though Congress. Gramm's wife, Wendy, had been an Enron board member and head of its audit committee but failed to sound the alarm before the Houston-based company collapsed. Then UBS itself ran into big trouble because of $37 billion in bad mortgage debt made possible by derivatives market deregulation engineered by then-Sen. Gramm. US taxpayers have had to pony up money to heal UBS' self-inflicted wound. But the bank's involvement with tens of thousands of secret accounts tied to allegations of tax evasion raises starker issues--of possible criminal fraud through practices that Gramm as a senator helped keep opaque.

.....

In agreeing in a US district court last week to plead guilty, Los Angeles businessman John McCarthy disclosed how UBS facilitated his defrauding of the US government through secret offshore accounts set up by the bank. "While banking with UBS Cayman Islands, the defendant was advised by UBS representatives that a lot of United States' clients don't report their income and just take it off the top," according to the court filing. Now that the Swiss-based bank has agreed to turn over the names of upward of 10,000 secret account holders, the arraignment of those charged with breaking US tax laws could extend very high into the ranks of the affluent.

.....

Was Gramm truly unaware of the widespread efforts at UBS to defraud the US Treasury? Did extreme ideologically driven naivete lead him to believe that the bank would never engage in such chicanery? In the past he was the first to deny any hint of business naivete and indeed defended his being hired by a bank that benefited from his legislation. Deflecting any suggestion of a conflict of interests, Gramm told a reporter: "You know, there is something to be said for not hiring people who just came in off a turnip truck. I have always believed that when I left the Senate that I would go into financial services as something that I know something about."

http://www.thenation.com/doc/20090831/scheer

I feel a bit faint!

AIG CEO Gives Uncle Sam (and Us) the Finger (Financial Services Industry Arrogance Watch)

Tim Duy pointed out this priceless remark from AIG's new CEO, Robert Benmosche:

Benmosche told employees that he “had the luxury to say to the government, I’m not going to rush to do this. I’m appalled at how much pressure has been put on all of you to just sell it no matter what, because the Fed wants out, or the Treasury wants out. If they want out in a hurry, they shouldn’t have come in in the first place.”

For anyone who followed the rescue, this is a staggering bit of hubris and revisionist history. First, the idea that the government "came in" implies that this was some sort of normal investment process, as opposed to AIG begging the Federal government for a rescue, even though states, not the national government, are the main regulators of insurance business (the AIG Financial Products business was overseen, if you can call it that, by the Office of Thrift Supervision. AIG structured its operation so as to get them as supervisor precisely because they were guaranteed to do next to nothing).

Next, the original deal called for AIG to pay back the money in two years. That inconvenient fact has been airbrushed out of the story Benmosche tells us. AIG made great assurances that the operating units were worth a lot of money and paying back the loans would be no problem. They accepted a high rate of interest give the riskiness of the loans and the desire of the Federal government to keep the heat on AIG. This original deal in theory fit Bagehot's rule: lend generously, at a penalty rate, against good collateral.

.....

The government owns 79.9% of AIG.

and ASAP.





TG

Good Morning Tansy! How are you today? I am positively giddy. This is the first day in a month I've been able to sleep 8 consecutive hours. The moonlighting is over!

a/c went out two days ago. roughly $500 to repair. whole hvac system will need replacement in a couple years, maybe sooner, but this bought some time.

other than that, I'm doin' fine. Glad to be home, not quite so glad to be back to work, but hey, it's a job and it keeps the puppies fed.

And I still can't figure out what bloody hell Obama thinks he's doing. It sure ain't leading. . . .or changing. . . . anything.


TG

Of course, this kind of talk could get us a good flaming here, but who cares?!
If the health care reform goes the way it's looking right now, it won't be too soon to start thinking about 2012.
Clearly, the opposition party has no credible candidate yet. So maybe we need one.
It's really sad, after so much optimism to see this.
I can't figure out why he's pandering to the pukes! What is that??

We're all pretty pragmatic here. Well, most of us anyway.

:hi:



TG

On the same day, to different audiences. I said 2 years ago, that I didn't see any "there", there. My opinion hasn't changed much. Out of 8 Dem candidates, he came in at 7th in my list of choices, just ahead of Clinton. He did move up to 6th, after I had a little chat with Dodd. Talk about dumb.

They let the 'pukes define and frame the debate, and riled up the yay-hoos, and the only thing you hear is their noise.

It's time to drag out H.R.676 and cram it down the insurance companies and the Republicans throats. Do what's right for a change.

OK, I can fantasize, can't I?

http://dailyreckoning.com/an-overdue-collapse-of-money/

The Economist magazine had the Buttonwood blog titled “Law of Easy Money”, which immediately gets your hopes up that there is such a thing as “easy money”, which actually exists (just ask Connecticut’s Senator Chris Dodd!), but unfortunately not for guys like you and me who don’t have the political power and grease to extort money and skim taxpayers, which is gratuitously rude and scandalous, I agree, but which only shows the depth of my contempt for the huge, huge, cancerously huge, ridiculously and dangerously incompetent, ignorant and stupid system of governments in America, as exemplified by the despicable Congress and the even more despicable Senator Dodd.

But it turns out that “Law of Easy Money” was just a clever play on words, and was the story of how John Law talked France’s king, Louis XIV, who had borrowed and spent France to bankruptcy, into letting him start a bank and force everyone to pay their taxes with a new kind of paper money that Mr. Law’s bank would create and, soon enough, loaning more gigantic supplies of paper money to finance the development of the king’s colonies in the New World, a fiasco now known as the Mississippi Bubble, an economic bubble where everybody got wiped out financially, the country was ruined and the aristocracy had their heads chopped off, which I am sure was not in the prospectus or brochure that the king got from Mr. Law.

However, the essay is not about how the French in the 18th century were a bunch of buttheads who didn’t know any better, or how we are a bigger bunch of buttheads who should have known better in the 20th century, or even about how we are going to suffer in the 21st century for knowing better but not acting better, but about, as the subhead says, “A 300-year-old example of quantitative easing.”

Of course, if you had to read A Tale of Two Cities in high school where all you learned was that it opens with the immortal line “It was the best of times, it was the worst of times”, or if you have ever seen a movie on TV about the French Revolution, you know it ends Very, Very Badly (VVB).

The blog admits that “the parallels with today are not exact”, which is true in that we seem to dress a lot worse in the ruffled-shirt and hat-with-feathery-plumes department, a grim sartorial fact which is not mentioned, but two differences which are mentioned are “Law’s system took just four years to collapse; today’s fiat money regime has been running for nearly 40 years”, and “the growth in money supply has been less excessive this time.”

Lest you take any cheer from that, beware that the summation says, “But one lesson from Law’s sorry tale endures: attempts to maintain asset prices above their fundamental value are eventually doomed to failure.”

And what big failures they are going to be, too, as I gather from The Wall Street Journal reporting that “Much to their dismay, Americans learned last year that they ‘owned’ Fannie Mae and Freddie Mac. Well, meet their cousin, Ginnie Mae or the Government National Mortgage Association, which will soon join them as a trillion-dollar packager of subprime mortgages.” Trillion-dollar!

In case you didn’t know, “Ginnie’s mission is to bundle, guarantee and then sell mortgages insured by the Federal Housing Administration, which is Uncle Sam’s home mortgage shop. Ginnie’s growth is a by-product of the FHA’s spectacular growth. The FHA now insures $560 billion of mortgages – quadruple the amount in 2006.”

Now, the scam has gotten so huge that “Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee”! Yikes! 90 percent of mortgages!

This probably explains why “Only last week, Ginnie announced that it issued a monthly record of $43 billion in mortgage-backed securities in June”, which is pretty astonishing when you multiply $43 billion in one month by 12 months in a year, and I suggest you not do it because the answer will scare you to death.

Not so astonishing, then, is the news that “Ginnie Mae’s mortgage exposure is expected to top $1 trillion by the end of next year – or far more than double the dollar amount of 2007.”

And all of this money, all these trillions and trillions in new money, must come, directly or indirectly, from the Federal Reserve creating it, which means that A Lot Of New Money (ALONM) is being jammed into the economy, which means (if you are a Junior Mogambo Ranger (JMR)) that the government is acting like irresponsible halfwit scumbags, and doubly so in letting the Federal Reserve do it, and that history has shown that the only thing that is going to save your proletariat butt in the inevitable collapse is gold.

History is not quite as convincing about armored bunkers in one’s backyard or the efficacy of sheer firepower against the sustained assault of hordes of desperate, angry, starving people in a decidedly “nothing to lose” mood who are outraged that they were betrayed when they trusted the value of the dollar and the Federal Reserve supposedly maintaining its purchasing power via monetary policy, and they trusted the Congress to handle fiscal policy wisely and who had the power to control the Federal Reserve’s handling of monetary policy, but we’ll soon see!

But at least we have the safety and security of gold!

I'm pressed for time this morning, but I have a feeling this is an article I need to read.

Something along the lines occurred to me when I saw the headline somewhere on DU about the "superwealthy" now feeling the pinch. Example was the McAfee of McAfee anti-virus and how he's gone from $100 million to a mere $4 million. I didn't get time to read all of htat article either, but I'm thinkin' there's got to be some connection between all that "lost" money and all the money that never really was. SOME of it is real money, siphoned off from us working folks who actually make stuff and do stuff, but I still think there's a lot of bogus bucks floating around somewhere and they've finally evaporated into the thin air they came from.

Maybe.



Back to work for


Tansy Gold

Aug. 20 (Bloomberg) -- Colonial BancGroup Inc.’s collapse and the prospect of mounting failures among regional lenders may prompt the Federal Deposit Insurance Corp. to impose a special fee as soon as next month to boost reserves by $5.6 billion.

The FDIC board might act sooner than expected after the Aug. 14 failure of Alabama-based Colonial cost the agency’s insurance fund $2.8 billion, and as banks such as Chicago-based Corus Bankshares Inc. report dwindling capital and Guaranty Financial Group Inc. of Austin, Texas, says it may fail. The fund fell to the lowest level since 1992 in the first quarter.

.....

The failure of 77 banks this year is draining the fund, prompting the agency in May to set an emergency fee of 5 cents for every $100 of assets, excluding Tier 1 capital, to raise $5.6 billion in the second quarter. The agency has authority to set fees in the third and fourth quarters, if needed, to prevent a decline in the fund from undermining public confidence.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aqxHLAHU_m2k

I begin to detect a pattern, here.

http://news.yahoo.com/s/ap/20090821/ap_on_bi_ge/us_cash_for_clunkers_37

WASHINGTON – Car shoppers have until Monday night to take advantage of lucrative Cash for Clunkers rebates from the government, and the Obama administration is hoping for a smooth ending to a program that has spurred auto sales but created headaches for many auto dealers.

The popular program will end at 8 p.m. EDT Monday after burning through much of its $3 billion in funding in just a month. All new deals will have to be completed and dealers must file their paperwork by the deadline in order to get repaid for the big incentives.

President Barack Obama and administration officials declared the program a success Thursday, saying it has revitalized the ailing auto industry and finally brought reluctant car buyers back to dealership lots.

SAY WHAT?

Originally a $1 billion program, Cash for Clunkers was boosted to $3 billion in early August after heavy customer demand nearly depleted its funds in just one week.

Transportation Secretary Ray LaHood said the program has been "a lifeline to the automobile industry, jump starting a major sector of the economy and putting people back to work." He said the department was "working toward an orderly wind down of this very popular program."

THEY REALLY BELIEVE THEIR OWN SPIN. BOY, ARE WE IN TROUBLE!!

But it has also created problems for dealers, many of whom have yet to be repaid for the clunker deals they have made. Under the program, dealers take rebates of $3,500 or $4,500 off the price of a new car in return for older, less fuel-efficient trade-ins that are sent to the scrap heap. They then must submit a 13-page application with proper documentation of the sale in order to get repaid.

That has left many dealers with unpaid claims worth hundreds of thousands of dollars.

"It has brought in some traffic that we would not have had, but if you don't get paid, it is all for naught," said Alton Owen Jr., sales manager at Owen Ford in Jarratt, Va. His dealership won't be offering the clunker deals this weekend because it has yet to be repaid for 21 sales.

Obama and LaHood pledged that dealers will get their money back. But government data shows that many claims are still outstanding. As of Thursday, 457,000 sales worth $1.9 billion had been received. About 40 percent of those claims have been reviewed, but only $140 million, or about 7 percent of the claims dealers submitted, have actually been paid.

Government officials said there were no plans to extend the program again. The Monday deadline was set to avoid surpassing the $3 billion funding level, given deals that may be made this weekend and those that are still in the pipeline for approval.

Applications for rebates will not be accepted after the Monday deadline, administration officials said. The Transportation Department cautioned dealers about making sales this weekend, advising them to make sales only where the buyer's paperwork is clearly in order and can be submitted immediately for repayment. Dealers will be able to resubmit rejected applications after the deadline.

John McEleney, chairman of the National Automobile Dealers Association, said he remained concerned that so few dealers had been reimbursed for Clunker deals. But he said the Monday deadline should give dealers time to get their paperwork in order.

"I think if we can get a clean cutoff Monday and get everything processed by then, it will have been a pretty darned successful program," he said.

But Mike Mahalak, who runs a Dodge, Chrysler and Jeep dealership in Winter Haven, Fla., said the Monday end date could lead to a similar rush that nearly crippled the federal government's computer systems that were set up to handle claims.

"That Web site will lock up again once everyone is cramming it again on Monday," Mahalak said. The administration has said it expanded the capacity of the computer network in an effort to improve the process for dealers.

Obama said in an interview Thursday that the program has been "successful beyond anybody's imagination" but dealers were overwhelmed by the response of consumers. He pledged that dealers "will get their money." The administration has said it has tripled the number of staffers sorting through the paperwork.

It remains unclear whether the Monday deadline will create a new rush of sales this weekend and if dealers will continue to make deals knowing their claims have to be filed in four days.

To help cash-strapped dealers, both Chrysler and General Motors said they would begin providing cash advances to help dealers cover any cash shortfalls related to the program. The automakers said they would provide the advances for up to 30 days to dealers who have already completed a sale and that they will be available as long as the program remains in effect.

The program provided at least a temporary boost for the beleaguered auto industry and dealers.

GM announced plans to rehire more than 1,300 workers and automakers have been paying overtime to ramp up production. Hyundai recalled 3,000 workers in Alabama. Many dealers have made hundreds of sales and reported that even customers who don't qualify for the program are visiting lots to buy new cars.

Jeremy Anwyl, CEO of the auto Web site Edmunds.com, said the government incentives could dry up sales in September and October, along with a tight vehicle inventory, higher prices for new models arriving in the fall and consumers who are focused on finding a good deal.

"It's been a nice party for a few weeks. The hangover, I don't think, is going to be anywhere near as much fun," Anwyl said.

SO, THE DEALERS ARE GOING TO GET STUCK HOLDING THE BAG. HOW TO KILL YOUR PARTY'S CHANCES FOR $5000 OR LESS....

8/20/09 Monetization of USTreasurys In Isolation

Every few months a chart comes along that needs almost no follow-on paragraphs to make the point of the issue. The chart provided by CIGA Eric covers several important types of US$-based bonds, their inflow and outflow, and the aggregate GrandNet. The financial data is publicly available from the USGovt TIC Reports. The messages are clear. Inflows of foreign funds are dwindling. In the case of USAgency Mortgage Bonds and USCorp Bonds, the nation is witnessing something unprecedented, the net outflow of funds. This is outright rejection. This chart exposes the isolation problem of the USDollar in the bond world, clearly the most important market beneath the currency market. The printing press is the last option.



The foreign creditors are moving away from the United States, plain and simple. The big bold red series shows the Grand Net US$-based bond reduction in net flow change from a high around $950 billion in early 2007 to a figure now approaching only $200 billion, thus a severe cut in net inflow. The greater alarm comes from the USCorporate Bonds in the yellow series, whose net flow change is down from a plus $600 billion high at the same time to a slight net outflow negative figure now. The USAgency Mortgage Bonds in chartreuse/mauve/pink have net flow change with peak of plus $300 billion at the same time to a net outflow of a frightening $150 billion now. Since the important peak for mortgage and corporate bonds, the USTreasurys in blue series have recovered from a $200 billion net positive inflow to a $400 billion net inflow. However, one should suspect that the USFed is purchasing the USTreasurys from convenient accounts bearing foreign names, using American funds, and laced with sinister motives founded in deception. Foreigners in all likelihood are not the primary purchasers.

The foreign purchase declines from peak levels two years ago have fallen off a cliff, much like that of Acapulco. The image of a brave diver is also quite vivid, as risk is determined by the shifting water (liquidity) level. The United States credit markets are losing their legitimate liquidity and increasingly are turning to the desperate reckless alternative, namely the dreaded MONETIZATION. Mortgages in the United States must maintain funding from the USFed and USGovt by direct purchase, no longer a market action. There are mainly sellers. The corporations in the US must maintain funding from a more desperate means. See the Samurai Bonds offered in Japanese Yen denomination, the ones growing in popularity. My view is that a good slice of USGovt Treasury Bonds will be denominated in foreign currency routinely within one year, if the US$ system survives in its current form that long. The conclusion is clear from the messages, both graphic and statistical, that THE US$-BASED BONDS OF ALL TYPES WILL RELY ON DIRECT MONETIZATION VERY SOON OR IMMEDIATELY.



more...
discussion of monetization of USTreasurys
http://www.financialsense.com/fsu/editorials/willie/2009/0820.html

8/21/09 Oh Oh.... Trouble Dead Ahead

While I disagree with pretty much everything Jim Willie writes when it comes to metals and such, every squirrel finds a nut once in a while: (edit: See Jim Willie's Article, post #17)

I'll just point out the important parts: foreigners are rejecting virtually all forms of US debt, most specifically corporate and agency (mortgages.)

The only place foreigners are "still buying" is in the Treasury market, and one wonders: for how much longer, and how much of that is really foreign buying?

Not that it matters. This debt is being rejected because foreigners have no faith in the future of its value. It is not just the risk of default any more - it is also the risk of currency translation going "the wrong way" to an extreme degree, potentially destroying the buyer's purchasing power even if a formal default does not occur.

This is the wall that I have written about for more than two years, and the risk of Bernanke's so-called "smarts" when it comes to "quantitative easing", otherwise known as "monetization" (which Bernanke said, under oath, he wouldn't do - but both was and is.)

Here's the issue, in a nutshell: Bernanke surmises that he wants long-term (and short-term) interest rates low to "spur borrowing" and thus attempt to kick the economy back into growth. This in turn "mandates" an extraordinarily loose monetary policy.

The math says this is idiotic: We are in this mess because of too loose a monetary policy for too long, which in turn engendered too much debt in the system for the economy's productive output. The economy got drunk on too much credit; you can't fix it with a bottle of whiskey.

more...
http://market-ticker.org/archives/1357-Oh-Oh....-Trouble-Dead-Ahead.html

All our corporate and governmental frauds, coming home to roost...

maybe, when there's no bigger fool left, all those too big to fail will finally be put out of our misery.

Edited to ask: When will the MSM bring this discussion to the public?

It will all implode, then they'll say: We couldn't have foreseen the downturn in the markets. Nobody knew it was this bad.

http://www.ft.com/cms/s/0/d9ac15e8-8c28-11de-b14f-00144feabdc0.html

"US regulators are starting to structure bank rescue deals so as to limit the potential gains of buyers, a strategy shift that could deflect political criticism of the cost of bank bail-outs."

BB&T got a deal, a discount, for purchasing the assets of failed regional bank Colonial:

"As in past rescues, BB&T, based in North Carolina, bought the assets at a discount while the FDIC agreed to absorb the bulk of potential losses. In this case, the FDIC agreed to reimburse BB&T for 80 per cent of the first $5bn (£bn) in losses and 95 per cent of further losses up to a ceiling of $14.3bn.

But if losses from the Colonial assets are less than $5bn, BB&T also has agreed to pay some money to the FDIC – on October 15 2019 – in a new feature for bank rescues."

The FDIC’s deposit insurance fund fell to $13bn at March 31, its lowest in more than 15 years. A similar claw-back scheme is sought for Guaranty Financial, the Texas regioal that is next in line to be sold off.

I believe this bank was actually sold to a Spanish bank---wonder if the FDIC got the claw-back in?

Maybe now we see why a Spanish bank, or any bank, would buy any of these cluckers. Cash for Clunkers lives--just not for ordinary people!

http://www.ft.com/cms/s/0/cc78145a-8d93-11de-93df-00144feabdc0.html

"Six of South Korea’s leading banks on Thursday signed a preliminary deal to set up a private bad bank, in an attempt to spark greater competition in a market for toxic assets that is monopolised by a state-run bad bank."

The state-run bank proving insufficient and unsatisfactory, the banks who created the problem think they can fix it better and faster, and more profitably, too, I bet.

http://quotes.ino.com/chart/?acs=NYBOT_DX&v=i

Last trade 77.976 Change -0.415 (-0.53%)

Euro Surges As German and French PMI Readings Cross into Expansion

http://www.dailyfx.com/story/bio1/Euro_Surges_As_German_and_1250849040244.html

The Euro spiked higher after German PMI figures showed the region’s largest economy experienced growth in its service sector. The PMI reading jumped to 54.1 from 48.1 which obliterated forecasts of 48.6. The print came on the heels of the French manufacturing PMI crossing the wires in expansion territory at 50.2. German manufacturing and French services also advanced which helped raise the composite Euro-Zone PMI to 50.0 as the region is on the brink of expansion.

The strength in both sectors validates the growth that France and Germany saw in the second quarter and provided evidence that it will be sustainable despite expectations from economists. There has been a prevailing view that the weakness in the rest of the region would limit the upside potential for its largest economies but the broader reading demonstrates that this may not be the case. Yet, forecasts remain that the ECB will keep rates on hold beyond the second half of 2010, despite the central bank being poised to tighten policy as soon as it is justified. Equity markets are looking to finish the week on a positive note which could also lend support for the single currency. However, if we see the expected light volume day lead to profit taking then a pullback in the Euro is a possibility.

The pound is being dragged higher by the increasing optimism after reaching as low as 1.6433 during Asian trading on waning risk appetite. It was reported that Chinese regulators are considering new rules that would tighten capital requirements and slow lending which has surged. An empty economic calendar has left sterling price action in the hands of the broader themes which may not be enough to break it from its current range. The GBPUSD continues to be stuck between the 20 and 50-Day SMA’s at 1.6466 and 1.6592 respectively.

The dollar has reversed earlier gains and come under pressure after strong European manufacturing and service figures punched a hole in the argument that the U.S. will be the first to emerge from the recession. An expected rise in existing home sales today to 5.0 from 4.89 million could add to dollar weakness if it fuels risk appetite. However, we are only seeing U.S. futures and European equity markets slightly in positive territory as risk sentiment could be playing a secondary role in greenback price action. Fed chairman Ben Bernanke will speak today at the Jackson Hole conference and if he presents a brighter outlook for the U.S. economy it could provide dollar support as it may raise interest rate expectations. However, don’t expect the central bank leader to talk specifically about interest rate policy which could limit the impact of his remarks.

...more...

Like the Markets, Risk Appetite Exudes Volatility but Lacks Direction

http://www.dailyfx.com/story/topheadline/Like_the_Markets__Risk_Appetite_1250809769756.html



• Like the Markets, Risk Appetite Exudes Volatility but Lacks Direction
• Growth Forecasts are Turning Positive, But How Optimistic Should We Be?
• Policy Officials Shouldn’t Treat Financial Markets as if Conditions are Back to Normal

Measuring volatility has been the primary occupation of traders and other market participants this past week. Currencies, equities, fixed income and nearly every other major asset class have experienced dramatic swings through a clearly low liquidity period; but the same subconscious questions are claiming responsibility for direction. What will the pace of the recovery be through the end of the year and beyond; and are financial markets healthy enough to support a sustained influx of capital while offering greater rates of return in the meantime. Considering the market’s progress this past week, confidence found yet another fundamental setback in its steady recovery through much of this year. For the equities market, price action was exceedingly volatile; but the world’s benchmark indices were struggling to make progress (whether it be further rallies or meaningful retracements). The S&P 500 has not ventured far from its 15 point range in nearly three weeks. This could be considered just another pause (like the one in early June); but a look at the steadily diminishing volume behind the this, and other indices’, advance suggest confidence in the sustainability of this market recovery is as fragile as that of the economy. For currencies, risk appetite was stalled and therefore so to was carry interest. With a break in the steady stream of moderately bullish data to support yield forecasts, long-term considerations were weighing on speculation. Taking a big-picture view of this deeply liquid market’s health, it is clear that while volatility readings and yields (risk and reward) are improving, they are far from pre-crisis ‘normal.’ What’s more, the drop in investment has lowered FX trade volumes by nearly a fifth through April.

It is the best time to take an unbiased assessment of the market’s health when conditions stabilize and speculative interests are not being pandered to. Volatility was extraordinarily high this past week; but the stalled market trends provided an opportunity to analyze the fundamentals behind risk premiums and optimistic forecasts. There were certainly promising signs. Offering few surprises; but supplying a welcomed confirmation, the IMF said the global economic recovery was indeed under way – adding its unique, international estimation to national politicians whose job it is to be a cheer-leader for their individual countries. Elsewhere, credit conditions continued their steady trend towards normalcy as the TED Spread (the difference between 3 month Libor rates and their government T-Bill counterparts used to measure credit risk) fell to its lowest levels since before the currency crisis began back in the middle of 2007. These are promising signs, no doubt; but they are not definite signs of the next aggressive period of expansion and bull market rally. Qualifications for economic improvement are based compared to the plunge into the severe recession of 2008/2009. The popular consensus among market participants, economists and policy officials is that growth will suffer a period of stagnation. The same is true of the markets. Liquidity may be ample for banks; but defaults are rising, wealth is shrinking and toxic debt is still out there.



...more...

Traders are looking at 77.52 cents as a support floor. Damn, we are close to that aren't we? If it breaks below that will the Fed defend our currency?

Raising interest rates would crash the system, but so would fuel prices as the dollar tanks.

MAJOR YUCK! YMMV

http://www.ft.com/cms/s/0/68ff05b2-8a9d-11de-ad08-00144feabdc0.html

"A new insurance service to protect workers against the possibility of a salary cut will be introduced in the UK next month, as the tough economic environment continues to create a market for innovative financial products.

Salisbury Underwriting Services is set to launch salary gap insurance, which will bridge the gap in wages of UK workers who are made redundant and re-employed in jobs that pay a lower annual income."

Heads, the insurance is a big scam. Tails, the insurance company goes broke and begs for bailout.

Oh, this gets better! It's a US scam out of a NC lawyer's brain!

"Mr Graham, a North Carolina-based lawyer, came up with the idea for salary gap insurance when a textile factory near his home closed and many of the workers struggled to keep up financial obligations as they were forced to take less well paid jobs.

Unlike redundancy insurance, the policy only starts once the holder has found new employment, when it pays out the difference between the old salary and the new.

Mr Graham said a benefit of the service was that it allowed redundant workers to reconsider what they might want to do, as the holder is not obliged to look for work of a similar nature, or even to re-enter full-time employment."

Definitely a scam. Bet only the well-heeled can afford the premiums, anyway.

http://www.ft.com/cms/s/0/5168e4ee-8c15-11de-b14f-00144feabdc0.html

Specific message to Congress--don't take away the bailouts!

:donut: and Lurkers.

OH THE SHAME AND HUMILIATION

As some of you may know, I gave up tv for Lent last year and just never picked it up again. I watch the odd snippet on You Tube and might watch a show when the tv is on in the clubhouse, but that is pretty much it. I really haven't missed much, UNTIL THIS WEEK.

Yesterday my union rep came in to tell me that cuz was to be on Dancing With The Stars. I immediately hung my head in shame. Then I get on DU SWT and realize it is true. I was happy to finally get back to some degree of anonymity (my political friends would still give me grief now and again) but most folks didn't know, care, or remember.

BUT NOW....Dancing With The Stars. Call it the American Idol Affect-but every Tom, Dick, and Harry watches it and REMEMBERS. I called Mom last night and was subjected to a barrage of all the late night talk show jokes (Tom is a good tap dancer but he isn't as good as Larry, He'll be dancing to MC Hammer, etc, etc). At the end she advised me to take hubby's last name...... Et tu Brutus! Think you can twist that knife just a little more for me. As they say in the back woods, you can pick your nose but you can't pick your relatives.


Damn, just when you think it's safe to go back in the water. Needless to say the theme from Jaws will be playing today in my head today.

Happy hunting and watch out for the bears...this hound will be under the front porch for a few days hanging her head and licking her wounds....

That's an excellent reason to keep on NOT watching TV, IMO.

I used to regret my relations, too. Now most of them are dead, and I miss them, sometimes. But then, their descendants are still around...

The trouble with the gene pool is there are no lifeguards.

hey you, yes you...outta the gene pool.:evilgrin:

I have to admit, I did get a chuckle out of the tap dancing joke.

Only saw DWTS, one time. That is when Helio Castroneves was on. And that was a few years ago. I told spouse yesterday, never will I ever watch DWTS again.

AnneD, you have my sympathy

It usually conflicts with Countdown or Maddow. But the wife watches it. When I told her your cuz was going to be on, she vowed to quit.

http://www.cnbc.com/id/32503886

But economists say — and data is beginning to show — that a significant change may in fact be under way. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon.

Amongst all this, now we're supposed to feel pity for Louis and Marie?

Seeing the media write this shit makes me regret I put ammo into my stomach this morning :puke:

Ready and waiting. . . . .

:hi:


TG

http://dailyreckoning.com/the-end-of-cheap-water/

08/20/09 Gaithersburg, Maryland The price of water is starting to rise in a big way, at least in China. I’ve expected this for a few years.

To set the table, water rates in China have been so far below the global average it’s ridiculous. Especially when you consider the severe water problems in China. The graphic below is from The Wall Street Journal (“China Cities Raise Water Price in Bid to Conserve” by Andrew Batson):SEE LINK

The Chinese are water-poor. They are sucking their aquifers dry. It is particularly bad in the north of China. The groundwater under the North China Plains is draining away quickly. By some estimates, China will exhaust this water supply in the next ten years.

You probably know that the city of Venice is sinking a fraction of an inch per year. But that’s nothing compared to what is going on in Beijing. Parts of Beijing are sinking 8 inches a year! According to Andrew Lees (The Right Game), it is the world’s largest cone of depression (an underground hole created by a depleted water table) at over 15,000 square miles. The second largest cone of depression is around Shanghai.

So finally, many cities are raising the price of water. The WSJ points out several places where water prices could rise 25-48%. Shanghai, for instance, raised water rates 25% in June and plans another 22% increase next year.

The second event that caught my eye was the collaboration between China and India to monitor the health of Himalayan glaciers. This area is very important to both countries. They fought a war over it in 1962. So, the fact that they are getting together on the Himalayan glaciers is meaningful.

Here is why it is so important: Seven of the world’s largest rivers, including the Ganges and the Yangtze, are fed by the glaciers of the Himalayas. They supply water to about 40 per cent of the world’s population.

Well, those glaciers are shrinking. The Indian Space Research Organization, using satellite images, has studied the changes in 466 glaciers. It found they had lost more than 20% of their size between 1962 and 2001.

This melting increases the water flow at first, but eventually slows dramatically as the glaciers either melt completely or reform. These observations have given rise to a kind of “Peak Himalaya” where people wonder if we have not seen the maximum water flow from the mountains.

We know the current run rate on demand is already well above what is sustainable given annual rainfall and river flows. That’s why you have those depressions. That explains the depleted aquifers and the rivers that don’t reach the sea. Now throw into that ugly brew a decline in water supply from the Himalayas. The situation is worse than it seems, if that is possible, because much of the existing fresh water in both countries is so polluted it is unfit for human consumption.

As if all of that weren’t bad enough, the demand for water is still rising rapidly in China and India. The water use per capita in China and India are still well below global averages. As these countries industrialize, they’ll consume exponentially more water. It takes water to make just about everything. For example, to make a 1 tonne passenger car takes more than 100,000 gallons of water. Just to make a cotton shirt takes over 1,000 gallons of water. And most of our water goes into making our food.

So, population growth by itself guarantees increased water demand. (Globally, water consumption increases at more than twice the rate of population growth.) These two countries already have big populations and both will get bigger. When you look at demographic trends, China and India alone will add close 600 million people over the next 30 years. That’s two present-day United States.

Fresh water, like oil, is getting a lot harder to find for 40% of the world’s population. It will get worse before it gets better. The days when we think of water as a cheap resource are coming to a close. That’s especially true for China and India.

Bottom line: We need to create more fresh water. You do that by finding new sources either through new supplies (drilling deeper, desalination, etc.) or by using existing supplies more efficiently (irrigation and other efficiency gains).

All of that takes time and energy. Desalination is energy intensive. Drilling deeper for water or going to more distant source requires energy to pump and move the water. Replacing older, less efficient plants and equipment takes time and energy again. (Detect a theme here?)

Countries, companies and people will find ways to make this transition. The companies that can solve these problems will do well.

BASED ON THIS, I WOULD THINK THAT THE WORRY THAT INDIA AND CHINA WILL DESTROY AMERICA IS SHORT-LIVED AND SHORT-TERM AND EASILY AVOIDABLE...

http://dailyreckoning.com/danger-for-the-dollar/

“The United States economy is now out of the emergency room and appears to be on a slow path to recovery.” --Warren Buffett

This is probably the view shared by most economists and most investors. It is not our view. From where we sit there is no recovery underway…and there never will be one. You can recover from a hangover. You can recover from a nasty divorce. You can even recover from an earthquake. But once a Depression begins, you can only endure it. Get on with it. Get it over. And then, you can begin rebuilding again. You will never recover the economy you had before the crisis. You must find a new economic model.

A headline from yesterday: “Reluctant shoppers hold back recovery.”

That’s one way to put it. Shoppers don’t have any money. They need to cut back. Most likely, they will cut back until their savings rates reach 10% of disposable income. That will take $1 trillion out of consumer spending. The economy cannot possibly recover under those conditions; it can’t return to its same old, consumer-led, credit-fuel self. Instead, it must go through a period of transition – in which output is depressed – until it finds a new personality, better suited to the new economic circumstances.

But Buffett is not worried about the depression. He’s worried about how the recovery is financed:

“…enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

Buffett does the math. This year, the US deficit will total $1.8 trillion. Since 1920, the largest peacetime deficit was 6% of GDP. This is 13% of GDP. The magnitude of it alone should be cause for alarm. But there’s more. Where does this money come from? Even if you could direct 100% of the net US trade deficit (about $400 billion, the money that ends up in foreigners’ hands as a result of American spending) and 100% of American’s savings (estimated to be about $500 billion), you’d still be $900 billion short.

Desperate borrowers should expect to pay high rates of interest. A borrower who doesn’t need the money can shop for the best rates and hold out for a good deal. But when a person needs to borrow, he takes what the market gives him.

Yet, one of the most curious things about the financial world circa 2009 is the yield on the 10-year Treasury note. It has fallen to under 3.5%. Despite record borrowing by the feds, lenders content themselves with the lowest yields in nearly half a century. Go figure.

The market seems to be anticipating a depression. Why else would bond yields be so low? If the economy sours…and the stock market sinks…the safe yields on Treasury bonds will seem like a good alternative. But Buffett believes the Treasury yields are not as safe as they appear. That other $900 billion has to come from somewhere. And the feds can’t allow interest rates to rise significantly; that would undermine all their stimulus efforts. High real interest rates depress economic activity. So, what can the feds do?

“Washington’s printing presses will need to work overtime,” says Buffett prophetically. Of the two ways of financing the deficit, one is a flimflam; the other is robbery. In the great credit expansion consumers borrowed so they could buy things such as automobiles. Now, the feds borrow and bribe the voters with money to buy automobiles.

No matter who does it, borrowing for consumption is merely taking from the future. Then, when the future comes…the account has to be settled. Result: no net gain. What was consumed in one year is not consumed in the next.

Of course, the feds don’t spend money the same way consumers did. Consumers wasted their money on frou-frou and watchamacallits of their own choosing. The government wastes money on different things – like turtle crossings and billion-dollar bailouts.

Not that we’re complaining about government spending. We’re just pointing out that it’s not the same as private spending. What makes goods good is that people choose them and buy them with their own money. They get what they’ve got coming. But the feds are spending other peoples’ money. If they get any goods at all it is practically an accident.

But what we’re talking about this morning is the dollar. According to Buffett, the dollar is in danger. He’s worried about the larceny, not the flim-flam. Printing up additional dollars robs savers. Each new dollar created to buy US debt makes each one already in existence – say, in a vault in the Bank of China – worth less than it was before. If that isn’t true, the whole body of economic thinking from Adam Smith to Irving Fisher is nothing but a fantasy. And the only way to protect the value of the dollars held by savers, theoretically, is to withdraw the stimulus money before inflation sends prices soaring.

Buffett is an optimistic fellow. He believes that responsible authorities will turn off their dollar-printing machines in order to protect the greenback. Here at The Daily Reckoning, we’re not so sure.

First, the depression is likely to be worse than people think. This will mask the effects of dollar printing. Plus, it will make the need for more dollars – more federal spending, more US debt – seem more urgent than ever. Instead of pulling the plug, they’ll turn up the speed.

Second, the feds are not really interested in the health of the real economy anyway. This is an insight, which while it may seem obvious, it only came to us recently. When the feds put in place absurd policies to delay and restrain the inevitable correction, they are making things worse, generally, for everyone. But the politicians are responding to their constituents’ demands. One campaign donor wants to keep his business alive. Another wants to keep his job. Still another promises the feds high paying jobs on Wall Street, after their term in Washington is over. Millions of others – more than enough to turn an election – want free pills and mortgage subsidies and so forth. When the feds try to bailout the economy, they are only doing their jobs! They’re not going to stop doing their jobs – especially in a depression – just to protect foreign dollar-holders.

http://dailyreckoning.com/learn-to-love-the-depression/

A V-shaped recovery?

A W-shaped recovery?

Forget it…there ain’t no letter in the alphabet that describes a “recovery” we’re likely to have.

We say that in the spirit of mischief as well as elucidation. Of course, the world won’t stay in a depression forever. And even depression ain’t so bad, once you get used to it. The world economy will probably drag around a bit on the bottom…with low, or negative, growth rates in most places…until it finds a new model. The old model is dead. The authorities can put on as much rouge and powder as they want. They could even give the corpse jolts of electricity to make it sit up. But they can’t revive it. It’s finished. Over. Kaput.

The old model involved lots of players playing lots of different roles. But the main protagonists were the USA. and China. Not to put too fine a point on it, but China was the maker; the United States was the taker. It was a relationship that seemed to serve both parties well…but one that actually enabled foolish and, ultimately, destructive behavior – especially on the part of the United States.

When we were growing up, China was a ‘Red Menace.’ It was full of mad people doing mad things. They humiliated people by making them wear dunce hats and march through town. The Chinese made steel in backyard barbecues. They built hidden palaces for Mao (the Great Helmsman)…wore odd outfits…and threw female babies onto trash piles. (We’re not making any of this up!)

But then came a period of sanity. Deng Xiaoping decided to turn the whole country in the direction of capitalism. At first, this was thought to be a great boon to the West. We had won! And suddenly, there were a billion more consumers in the world economy. Company executives went to sleep with sweet dreams: ‘If we can sell one refrigerator to just one out of every 1,000 Chinese…’

The dreams became nightmares. Instead of selling American-made refrigerators to the Chinese, the Chinese sold Chinese-made refrigerators…and toaster ovens…and tables…and every gadget, gizmo and whatchamacallit known to man…to Americans. Instead of being a consumer…China became a manufacturer – taking the ‘export route’ to prosperity, pioneered by Japan in the ’60s and ’70s…and perfected later by Korea and Taiwan. Instead of adding to the world’s demand for products made by the developed countries, China became the biggest supplier of stuff on the planet.

China made…China sold…China took its money, bought US Treasury paper, thereby helping to keep lending rates low in the United States, and made some more. It worked beautifully as long as Americans were willing and able to continue spending. But no camel’s back is infinitely strong. The final straw came in 2007 – with total debt equal to 370% of GDP.

And now the jig is up. The old formula won’t work – neither for Americans nor for the Chinese. Despite the urging of their government, Americans cannot be expected to take on more debt in order to continue consuming more stuff from China. Nor can the Chinese reasonably expect to work themselves out of an overcapacity problem by creating more of it.

But the officials in both countries seem equally benighted. They don’t seem to think very deeply, no matter what language they think in. On one side of the Pacific, the Americans think they can bring a recovery by encouraging consumers to borrow and consume more stuff. On the other, officials offer credit to entrepreneurs and industrialists – encouraging them to build more factories and add more capacity so they can make more stuff. Neither seems to realize that the real problem is THAT THE WORLD HAS TOO MUCH STUFF ALREADY.

In the United States, the private sector drags its feet; it’s had enough of debt. But along come the feds like Fred Astaire or Arthur Murray…ready to borrow and spend until the champagne runs out. When it comes to self-destruction, the feds are no slouches.

They’re borrowing and spending trillions – $8 trillion is to be added to US debt over the next 8 years. So far, this money has done nothing to relieve the underlying problem: the consumer has too much debt and too little income. The government can give him a tax rebate…or give him a check for a clunker. These giveaways will produce a temporary boost. But when the giveaways give way there is nothing left. Does the guy who bought a car with government cash in 2009 buy another one in 2010? Does the fellow who brought his mortgage up-to-date with a tax rebate in 2008 go out and buy a new house in 2009?

The problems are real…at the heart of the real economy. They are not problems that can be solved by monkeying with the money supply, interest rates, or even fiscal policy. They are problems that need to be solved by the real economy…in the real economy…by consumers, who need to pay off their debts, and by businessmen, who need to adjust to the realities of the real world – adapting their capacity so as to produce things for people who can actually afford to buy them. It’s a long process…with many bankruptcies and disappointments along the way…

That process has only just begun. It will deepen and get worse, as both consumers and businessmen realize that there will be no quick recovery…and no return to the old model – ever. Look for more layoffs…more foreclosures…more cutbacks and workouts…

Look for more depression, dear reader…

And learn to like it; it will be with us for a long time.

http://www.iiasa.ac.at/Research/POP/edu01/pyramids.html

Oooh! Shiny! Colors!

http://dailyreckoning.com/let-them-inflate/


I think that Paul Krugman is one of those absurd guys that has no idea what in the hell he is talking about and who owes his undeserved prominence to being a real butt-kissing sucker-upper to Alan Greenspan and his Federal Reserve, and now he's doing the same thing to the laughable Ben Bernanke and his disastrous Federal Reserve, although I will admit that I don't know why anybody listens to this guy.

I say this with such obvious disrespect because Mr. Krugman is on record has having advised the Bank of Japan to purposely cause inflation, as, "The way to make monetary policy effective is for the central bank to credibly promise to be irresponsible - to make a persuasive case that it will permit inflation to occur, thereby producing the negative real interest rates the economy needs", although he never actually says where he is going to find guys stupid enough to loan money at negative interest rates, or in what bizarre alternate universe he lives where high inflation in consumer prices, particularly sustained high inflation, is anything other than a total disaster, which is why most of economics is concerned with the problem of preventing inflation while fostering growth!

In fact, he thinks that a central bank trying to reflate a collapsing economy should announce a deliberate plan to raise the level of prices (such as the Consumer Price Index) from current low levels to some dramatically higher value (a so-called "price-level gap") that it would have theoretically reached if a "moderate" and constant amount of inflation in prices had, in fact, occurred! Gaaahhhh!

To make it more Theater of the Absurd, he then says to keep creating more inflation in prices! Gaaahhhh! This is insane! This is beyond insane!

This would be bad enough coming from just another egghead academic dork from Princeton, but a terrifying quote from Ben Bernanke, chairman of the Federal Reserve, shows that he agrees with this with nonsense!

In fact, Bernanke said, "A successful effort to eliminate the price- level gap would proceed, roughly, in two stages. During the first stage, the inflation rate would exceed the long-term desired inflation rate, as the price-level gap was eliminated and the effects of previous deflation undone. Call this the reflationary phase of policy. Second, once the price-level target was reached, or nearly so, the objective for policy would become a conventional inflation target or a price- level target that increases over time at the average desired rate of inflation."

This is so dangerously preposterous that one's hands shake in fear and paranoia at the calamity that awaits a nation that takes such ridiculous advice, and there is nothing to be done except to buy more gold, silver and oil, as the last 4,500 years of history have proven that these are the things that have lasting value, unlike the bitter disappointment and dismay of paper money and "true love."
"...inflation in prices is the worst thing that can happen to us, and which is exactly what is going to happen to us because the damnable Federal Reserve is creating unbelievable, staggering amounts of money and credit..."

Obviously, people do not have to be around me very long before they learn that I am perpetually scared, to one degree or another, of inflation in prices, such as the other day, for example, when I had saved up enough money to have dinner alone at a restaurant so that I could eat one lousy meal without the wife and kids all the time whining and complaining about how they need more money, and want more money, and how they want me to give it to them, and how I am a terrible person for not giving them more money, how I am too stupid to get a better job to make more money and how I am too lazy to get a second job with which to earn more money.

So instead of having to listen to them talk about how much they hate me, I am enjoying the peaceful qualities of the restaurant when a guy seated at the next table sees me eating my steak and asks me how I liked it.

So I told him, "I like it fine, except I wanted lobster! Rich, flakey lobster to dip into real melted butter so wickedly delicious that you can actually hear your arteries hardening from just looking at it; but I can't order lobster because inflation in prices caused by the Federal Reserve creating so much money and credit all these years has resulted in the ugly news that they now charge too much for lobster, and inflation is so bad that some crappy, weak iced tea is almost two bucks a lousy glassful, most of which is ice!"

Out of the corner of my eye, I can see the other people in the restaurant have stopped eating and they are all looking at me. Figuring that they want me to further enlighten them, I go on, "So don't you ask to me about how I like my steak, when you should be asking me how I like inflation in prices, which I don't! Not one little bit! And if you weren't so stupid, you would realize that inflation in prices is the worst thing that can happen to us, and which is exactly what is going to happen to us because the damnable Federal Reserve is creating unbelievable, staggering amounts of money and credit so that the federal government can borrow and spend it in an orgy of deficit- spending that will end badly!"

Well, pretty soon the manager comes over and tries to censor the Heroic And Brave Mogambo (HABM) by telling me to shut up and sit down, although he might have been interested in the actual inflation figures, which are pretty bad!

For instance, producer price inflation shot up 1.8% in June, and it seems especially interesting that the Labor Department figures that the Consumer Price Index rose 0.7% in June, and although 0.7% does not seem like that much in one month, it adds up to a lot over the course of time; like for instance, in a year, when this 0.7% per month inflation compounds to 8.7% per year inflation! Yow!

We have had unseasonably cool weather and drought throughout the spring and early summer. Most crops are behind. A huge circling weather system has been parked over this area extending into northern Canada for 2 days bringing extremely low lows and lots and lots of rain, destructive winds and a few tornadoes.

24 hour weather loop
http://www.nws.noaa.gov/sat_loop.php?image=ir&hours=24

There are hurricane warnings along the east coast and it looks like this storm will interact with that hurricane.



4 tornadoes touched down in Minneapolis on Wednesday. The first at 2:01pm there was no warning, and the weather service said because the clouds were so low, the winds so high and the rain in them was so heavy,there was nothing to even put out a watch until it hit.

The storm came in heading WNW at 30mph made a turn heading north right over the Twin Cities exiting at 40mph as it picked up intensity. You can see it swirling and bringing the rain we had all day yesterday. The storm at one time had 3 tornados one heading due east, one heading ENE and one heading NNE. Luckily they bounced rather than remained on the ground. No one was badly injured but lots of property damage.

August is when the corn, which is late this year because of the cool weather, finishes growing and starts drying out. The weather system brought the very cool air back down and we were in the upper 40's lower 50's, increasing the chance of an early frost. Tomatoes are just starting to come in in the last 10 days, very, very late.

The other storm brewing in Minneapolis ECLA conference.
http://www.philly.com/inquirer/world_us/20090821_Lutherans_vote_today_on_actively_gay_clergy.html

In Michigan, we've been luxuriating in the temperate summer. Hope the winter wheat came through big. It could be a long warm fall, though.

However, the crops are still good, so far.

Asparagus was phenomenal, but I still don't know the fate of later ripening crops like plums, apples and sweet corn.

The west is always cooler than you folks in A2, but it was almost too cool this year. Beach traffic is definitely down, but folks don't know if it is the cold water, the depression or some combo of both. FYI, we get lots of folks from Chicago as well as Detroit, and it looks like Chicago is in much better shape economically than dear ol' Daytwa.

who is investing with their cards up. Another words, we cannot tell you about anything else, but we can tell everyone this...

link: http://www.ft.com/cms/s/0/e84383dc-7f8c-11de-85dc-00144feabdc0.html?ftcamp=Late_headline3/NL/USAug2009/Vanilla_usbank/0/&nclick_check=1


Wall Street profits from trades with Fed

By Henny Sender in New York

Published: August 2 2009 23:04 | Last updated: August 2 2009 23:04

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise(sp?) the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.

Two words made into one, "BULLSHIT"

note: There appears to be spelling errors in this article.

Financial Times is printed in the UK.


England and America are two countries separated by a common language.

------- George Bernard Shaw

http://www.ft.com/cms/s/0/d021f97e-8e40-11de-87d0-00144feabdc0.html

"Clients of Lehman Brothers’ European operations face further delay in recovering up to $9bn of assets after an English judge decided he could not approve a scheme that would have helped expedite the winding-up of the collapsed bank’s complicated operations.

PwC, administrator of the defunct bank’s main European operations, had proposed a scheme of arrangement that would have divided more than 1,000 clients into three classes and allowed the administrators to deal with claims by class rather than individually..."


It's a mess! Oh what a tangled web we weave, when first we practice to deceive!

http://www.huffingtonpost.com/les-leopold/why-white-house-spokesman_b_261067.html

"A recent report from the New York attorney general's office said nine banks that received government aid paid bonuses of nearly $33 billion last year - including more than $1 million apiece to nearly 5,000 employees." (Wall Street Journal)

"CitiGroup told the U.S. Treasury Department that energy trader Andrew J. Hall, with a pay package of $98 million, and a second unidentified trader who was paid more than $30 million, were exempt from review." (Reuters)

"I don't think the American people begrudge that people make big salaries." White House Spokesman Robert Gibbs referring to Wall Street bonuses and salaries. (Wall Street Journal)

Speak for yourself Mr. Gibbs. I got a whole lot of begrudging in me and here's why. We basically own those nine large banks. Without the trillions of dollars of bailouts and loan guarantees we provided, they all would have gone belly-up -- each and every one of them. There would have been no profits, no bonuses, nada.

We saved their butts because at the time it seemed like the only way to stop another Great Depression. Even with the enormous bailouts and stimulus funds, presently over 25 million Americans are unemployed or forced into part time work because of the lack of full-time jobs. I wonder if they are or are not begrudging those "big salaries," which actually are nothing more than welfare checks.

I voted for Obama and hoped he would do the obvious: put a lid on Wall Street's excesses including its sense of entitlement and astronomical salaries. I was hoping against hope that he'd do something sensible like cap all Wall Street salaries at $500,000 at least until the unemployment rate came down to 5 percent. Such an effort would have been a sign of social solidarity. It would have been fair. It would have been just, since it was Wall Street's gluttonous embrace of baseless fantasy finance that set the stage for the recession in the first place. (For a guide to this history and the workings of the casino see The Looting of America .)

Here's what I'll never forget: During the three years leading up to the crash, nine of the largest commercial banks made a whopping $305 billion in profits. Approximately half of that was doled out in bonuses. Since the crash these same institutions lost all of that and more when the world discovered they were raking in profits by selling toxic assets. The bankers and traders, to be sure, didn't pay back any of their gains or make up for the enormous losses. Now that Wall Street is getting on its feet again and we forget that it is doing so because we are bailing it out each and every day. The bonus money they are earning right now is our money. Yes, Mr. Gibbs, I begrudge giving it to those who wrecked the economy. I would rather drop it from an airplane over Detroit.

So why the lack of nerve on the part of such able politicians? First of all, they seem to truly believe that Wall Street profits and high salaries are necessary for our economic survival. Here's how Treasury Secretary Tim Geithner put it: "The fact that the core parts of the U.S. financial system look like they're profitable is overwhelmingly good." It is "a necessary precondition to a stronger economy."

They believe that profitability leads to investor confidence, and the vibrant capital markets needed for a revived economy. But all this assumes that the "core parts of the financial system" don't again turn into a fantasy finance casino.

Second, they worry that the best talent will flee if they don't get the kind of rewards they are accustomed to - which means paying them what they "earned" when they were milking the fantasy finance casino. But the administration has itself to blame for this trap. Had they instituted a wage cap across the board, there would be no place to run to. That would have knocked the living crap out of reckless risk-taking because the rewards would have seemed paltry to our over-privileged bankers and traders.

Finally, the administration seems to believe that its tepid reforms can separate the high salaries earned for necessary banking functions from the high salaries earned for rapacious rip-offs. As Mr. Gibbs says, "The president continues to believe, as he has long before he got here, compensation has to be based ... not on reckless risk-taking , but on value that you're providing and doing so in a way that doesn't jeopardize your firm or taxpayers." That's like believing in the tooth fairy. Please someone tell me how an entire sector that is on taxpayer life-support is creating value that justifies high salaries and bonuses? I'd like Mr. Gibbs to explain to unemployed manufacturing workers how Mr. Allen's $100 million compensation package from Citigroup added value to the U.S. economy.

I too want to believe in the tooth fairy. I want to believe that all of this will work out - that the financial sector will revive, that compensation will be severed from reckless risk-taking, and most importantly, that there will be more than enough decent jobs for the 25 million who are suffering today due to no fault of their own. I want to believe all of this because I worry about a right wing populist revolt catching fire among all those who do begrudge these ridiculously high salaries. I can easily imagine a clever demagogue (or a not-so-clever one like Governor Sarah) going from unemployment office to unemployment office waving a copy of Mr. Allen's $100 million check: "Here's what Obama did for Wall Street. What did he do for you?"

But most of the time, instead of the tooth fairy, I believe in power. And the bankers are strutting their stuff. They're taking our tax dollars and using them to lobbying against all of Obama's reforms. They're selling synthetic derivatives again. They're making the pay Czar look like a wimp. They've even got Mr. Gibbs championing their cause for high salaries.

But Mr. Gibbs, you've got it wrong. The American public does indeed begrudge the bailouts and the lavish salaries going to those who milked the system at our expense. We've got every right to do so. We'd be crazy not to take exception to being ripped off so badly and baldly. It's high time the administration sided with legitimate populist anger rather than with the well-rewarded elites. Unless it does so it a hurry, all of its reforms will crumble at the hands of those with fewer scruples and more determination. We will lose health care reform. We will lose financial reforms. And we will lose the best chance we've had since the Great Depression to make the system work for working people.

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.



HERE ENDETH TODAY'S RANT. WE WILL NOW TAKE UP A COLLECTION FOR THE TOO BIG TO FAIL.

""I don't think the American people begrudge that people make big salaries." White House Spokesman Robert Gibbs referring to Wall Street bonuses and salaries. (Wall Street Journal)
"


WHO needs $NINETY EIGHT MILLION DOLLARS TO LIVE?

At least Scotty tried to apologize.

It's got to be rough being the W.H. press secretary. Try reconciling 2 opposing positions in the same question.

I tried it a couple of times, in congressional races. I described my job as "keeping him on a leash". I wrote the speeches. Prepped the debates. And pretty much wrote the policy positions. And it was still a nightmare.

White House secretary has to be much worse.

http://www.huffingtonpost.com/michael-d-intriligator-and-r-kyle-martin/the-rise-and-fall-of-arti_b_261392.html

THERE ARE ELEVEN LOVELY USEFUL GRAPHS IN THIS ARTICLE--SEE THE LINK!


The following seeks to expound further on a May 3, 2009 Huffington Post piece, "It Will Take Years Before The Current Recession Will End."

Overview:

Christina Romer, Chair of the White House Council of Economic Advisors, said she is "incredibly confident" the U.S. economy will recover within a year. We disagree.

The objectives of this paper are four-fold: 1) To discuss the economic growth associated with the rise in the temporary, hence, artificial wealth experienced by Americans from 2001 to 2006, 2) To discuss the economic contraction which we relate to the evaporation of this "nouveau" wealth, 3) To estimate the shape of the recovery curve for the U.S. economy as America rebuilds; this time with genuine wealth production, and, finally, 4) To provide suggestions that could speed the economic recovery while simultaneously enhancing the well-being of millions of Americans.

The projections presented in this paper estimate that the GDP of $14.26T achieved in 2008 will not be achieved again until 2013 on an inflation-adjusted basis and that unemployment will not fall back to a level of 6.25% until 2016. Our recommendations for speeding this recovery are presented in the conclusion.

The Rise in "Artificial" Wealth

Beginning in 2001 Alan Greenspan and the Fed began an aggressive campaign of lowering the target Federal Funds rate as shown in Figure 1. By June 25, 2003, they had lowered this rate to a remarkable 1%. This lower interest rate led to lower mortgage interest rates that resulted in both re-financing and housing booms; in retrospect creating a housing bubble. The lower monthly payments directly translated to a homeowner's ability to buy a more expensive property for a given monthly payment. For example, a person who was able to afford a $500K home in 2000 could now qualify for a loan to purchase a $750K home. This nouveau purchasing power drove a home-buying frenzy.

2009-08-17-figure1.jpg
Figure 1: The Target Federal Funds Rate

This buying frenzy pushed valuations to historical highs when compared with conventional valuations, creating a housing bubble. Case in point: the ratio of total residential real estate to GDP, had been in the range of 0.52 in 1945 to 1.13 in 1999. Beginning in 2000, however, this ratio began to escalate in an almost uncontrolled manner as shown in Figure 2. These data were extracted from the Z.1 Flow of Funds Accounts of the United States . By 2005 this ratio of GDP to Aggregate Housing Value peaked at a never before seen level of 1.72.

The key points that can be extracted from this ratio are that: 1) Housing values in aggregate became grossly overvalued by 2006 by a much larger margin than any time dating back to 1945 and 2) A correction in aggregate housing valuation had to take place, with declines back to "normal" levels

2009-08-17-figure2.jpg
Figure 2: Aggregate Residential Housing Values compared with GDP


In order to arrive at a quantitative measure of what constitutes reasonable real estate valuations, we divide the aggregate household real estate in the U.S. by the GDP for the corresponding year as shown in Figure 3 over the same time-frame; 1946 - 2008. In this plot we've also indicated the upper and lower bands of fair valuation (FVBs) (Fair Valuation Bands). Figure 3 below indicates that in no other time dating back to 1945 did real estate valuations get so over-inflated.

2009-08-17-figure3.jpg
Figure 3: The upper and lower bands for reasonable real estate valuations are determined by plotting the ratio of /GDP. Temporary Artificial Wealth was created when real estate valuations exceeded these historical norms.


The values used to generate this plot were extracted from the Federal Reserve's Balance Sheet of Household and Non-profit Organizations, Table B.100. Each report covers a ten-year time-span.

Not only escalating prices to over-inflated levels but also by over-building drove this over-valuation of aggregate housing valuation starting in 2000. It was, however, the over-inflated home values that drove the artificial wealth effect associated with housing depicted in Figure 4. It was this newfound wealth, which empowered homeowners with additional purchasing power. It was all these homeowners' new purchases that drove up corporate revenue and earnings and hence the overall stock market. For this reason, this paper focuses on the core problem that led to the situation this country is in right now; artificial wealth created by housing.

2009-08-17-figure4.jpg
Figure 4: The artificial wealth created by residential housing is depicted as the green area under the inflation-adjusted Home Price Index (HPI) curve and bounded on the bottom by the linearly regressed inflation-adjusted Home Price Index from 1970 to 1999 and extrapolated to 1999 (dashed). The blue curve indicates the Nominal (non-inflation adjusted) U.S. Home Price Index.

Therefore, it follows that to bring aggregate home valuations back in line with historical norms, the opposite must occur; specifically, home prices must continue to fall and less new homes must be built in order to allow the over-supply to be absorbed by the market. However, before we move on to the recovery phase, let's review how this artificial wealth changed the dynamics of the U.S. economy.

Artificial Wealth and the Dynamics of the Economy

Heading into the new century, Americans grew accustomed to spending almost everything they earned. Their savings rate as a percentage of disposable income typically hovered around 2 percent between 2000 to the end of 2004. At the peak of the real estate boom in 2005 and 2006, however, the savings rate had dropped even further; averaging less than 1 percent and even went negative in Q3 of 2005. These data are plotted in Figure 5.

2009-08-17-5.jpg
Figure 5: Personal Savings Rate as a percent of disposable personal income.

Coupled with escalating home values and looser credit policies, individuals were easily able to take on additional debt by opening up Home Equity Lines of Credit (HELOCs). These HELOCs enabled them to fix up their homes (e.g. kitchen remodels with granite counter-tops), buy new SUVs, flat-panel TVs and so on. Basically, Americans in aggregate went on a buying spree. To exacerbate the situation, homeowners were now able to refinance at low interest rates (e.g. 3.875% for a 5/1ARM). These lower interest rates lowered the monthly payments and put more disposable cash in the hands of consumers. This further fanned the flames of increased consumer demand. This inflated demand drove stock prices to new highs; e.g. the S&P 500 surpassed 1,500 on October 8, 2007.

American's 401Ks were doing very well; their home values were up; and they were flush with spending cash. So, life was good for America on average - that is until late October 2007 when the tide turned.
Americans' artificial real estate wealth started to vaporize as is shown in Figures 2, 3 and 4. The loss of value of residential real estate will now be estimated. The aggregate dollar value of U.S. residential real estate in Figure 6 was extracted from Line Item 4 of Table B.100 p. 102 - Balance Sheet of Households in the Federal Reserve Release Z-1 .

2009-08-17-figure6.jpg
Figure 6: Value of U.S. Household Real Estate in pre-inflation-adjusted dollars. Factoring in inflation translates to an even greater loss of "artificial wealth."


Using the data from Figure 5, in pre-inflation adjusted dollar terms, the lost wealth of household real estate between the peak in 2006 and Q1 2009 amounted to $4 Trillion ($21.883T-$17.870T). We can get a more accurate estimate of the loss of real estate wealth by accounting for the additional loss in value caused by the devaluation of the dollar caused by inflation. Building on the solid work of Daniel R. Amerman, CFA, the true lost wealth from residential real estate should account for the devaluation of the dollar due to inflation. Amerman's calculations show that between 2006 and Q1 2009 inflation wiped away another $2T of wealth. Thus, the loss of wealth associated with single family residences amounted to roughly $6T.

To get a good idea of the magnitude of real estate wealth lost by an average American homeowner, Figure 7 depicts the 20 City Composite Case-Schiller Home Index. The median home price dropped by $60,000, or 32%, from $185K to $125K.

2009-08-17-figure7.jpg
Figure 7: The Case-Schiller 20 City Composite Home Index for Q1 of each year since 1987


As Americans saw their real estate wealth evaporate, they cut back on their spending. This drop in consumption drove down corporate top-line revenue as well as earnings. This drop in corporate earnings negatively impacted stock prices. One year after the October 2007 peak, the S&P 500 dropped by 40% to 899 on October 6, 2008. Now Americans were confronted with two major sources of lost wealth; 1) Their residential real estate and 2) Their savings tied to the stock market; e.g. mutual funds in their IRAs and 401K plans. Therefore, the disintegration of this artificial wealth is really comprised of two primary components for the average American: 1) Loss of value in their personal real estate and 2) Loss of value of their financial investments. To further exacerbate the problem, the drop in home values has limited consumers' ability to obtain new HELOCs or request credit increases.

In certain instances HELOCs are either being frozen or the limits are being reduced. For example, after JP-Morgan Chase acquired WAMU (Washington Mutual), HELOC borrowers received letters requesting proof of income. For those individuals who lost their jobs, or experienced a major reduction in income, their HELOCs were frozen so that no further borrowing would be possible. Now that Americans' confidence in their ability to draw from their HELOCs has been eroded, they have become more aggressive in savings. This is both good and bad. The higher savings, hence, lower purchasing drive corporate revenues down. These lower revenues are being offset through cost cutting such as increased layoffs. America cannot rebuild its wealth on cost-cutting alone. We must create businesses that employ Americans.

A large percentage of the 76 million baby boomers born between 1946 and 1960 were not saving enough for retirement to begin with. On average they were saving even less when the were under the impression that their temporary artificial wealth was actually permanent. As they are heading down the home stretch towards retirement age, they will have no choice but to get more aggressive in their savings to make up for their portfolio losses and for the "loss" of their temporary real estate wealth. This upcoming phase of cash conservation will further put a damper on the economic recovery.

Many economists agree that full-employment corresponds to an unemployment rate of around 5%. So, let's use this as our target. To achieve this target let's look at where we stand today: The number of unemployed persons increased by 787,000 to 14.5 million in May 2009, then another 467,000 lost their jobs in June and another 381,000 in July bringing the unemployment rate to 9.5 percent . Since the start of the recession in December 2007, the number of unemployed persons has risen by over 7 million, and the unemployment rate has grown by 4.5 percentage points. This severity of this growth in unemployment is depicted in Figure 8:

2009-08-17-figure8.jpg
Figure 8: The growth in unemployment in the U.S.


By the last quarter of 2008, the recession rushed in with full force in the wake of the huge disintegration of artificial wealth. Individuals severely cut their discretionary spending which drove down corporate earnings and hence the S & P 500 as shown in Figure 9. The truth had clearly been revealed that much of this wealth that had been created over the previous five or six years was actually temporary and hence created an Artificial Wealth Effect (Jesus Huerta de Soto Financial Crisis: The Failure of Accounting Reform. Mises Daily. Posted on 2/4/2009).

One of the primary drivers of the explosion in artificial wealth was the loose credit policies. Individuals were able to obtain loans for which they could not maintain payments of the long-run. For example, they were able to obtain 5/1 ARMs (Adjustable Rate Mortgages) which were either interest-only or fully-amortized loans with low fixed rates for the first five years. When these rates adjusted upwards many homeowners couldn't afford the new payments which resulted in short-sales and foreclosures.

The banks got stuck holding the proverbial bag; specifically, hundreds of thousands of homes were returned to the banks' possession. This devaluation of the underlying real estate assets gave rise to toxic assets in the secondary market. Toxic assets are assets that becomes illiquid when its secondary market disappears. Toxic assets cannot be sold, as they are often guaranteed to lose money. The term "toxic asset" was coined in the financial crisis of 2008/09, in regards to mortgage-backed securities, collateralized debt obligations and credit default swaps, all of which could not be sold after they exposed their holders to massive losses where the amount owed on the mortgage was more than the value of the home - hence, toxic assets.

In a report released by RealtyTrac, a total of 1.53 million properties were in the foreclosure process in the first six months of the 2009. The "true" amount of toxic assets can be approximated by subtracting the value of the price the bank ultimately sells the home from the amount of the mortgage. The magnitude of this amount increases as the value of home prices declines.

2009-08-17-figure9.jpg
Figure 9: Plot of the S&P 500 Index from October 1, 2002 thru August 3, 2009.


The Recovery

Now that consumer spending appears to have stabilized at an anemic minimum level sufficient for day-to-day survival, we should now look to the future of the recovery. As a starting point we evaluate previous recoveries to see how long it has taken to regain full employment after levels of high unemployment. In Figure 10 presents the average unemployment rate for the civilian labor force 16 years and over. Unemployment peaked at 9.7 percent in 1982, and it took five years for unemployment to drop to 5.3 percent in 1989.

2009-08-17-figure10.jpg
Figure 10: U.S. Unemployment rate since 1960 for the civilian labor force 16 years and older.


However, in the 1980s, residential real estate was fairly valued when measured against GDP, so in the next section we take a critical look at how long the recovery will take.

Estimating the Shape of the Economic Recovery Curve

Since one can do a reasonably good job in quantifying the economic growth associated with this run-up in artificial wealth in both the real estate and equity markets, one could also estimate he shape of the recovery curve by understanding the dynamics of how the economy will be re-built in the wake of the vacuum left by the evaporation of this artificial wealth.

As a starting point, given that approximately 70% of the GDP is consumer spending, the shape of the recovery could be estimated by plotting the recovery forecast for each of the IBD 197 O'Neil industry groups and then aggregating these together to arrive at a total GDP and total employment rate. This obviously would be highly data intensive. However, by making a few simplifications we could start to get a good estimate of the shape of the recovery curve. The simplifications made in this paper entail analyzing several disparate key industry segments and then using these findings as a rough approximation for the aggregate US economy .

To start with, we will look at the largest sectors, which include construction, technology, financial services, health services, retail and so on. Within the 197 Industry groups, there are several groups that are essentially sub-categories of the larger segments. For example, the Building Wood Products category is essentially a sub-set of the overall construction industry.

So, let's start with the construction sector. In the U.S. Although the housing boom is long gone, government spending on infrastructure could rejuvenate this sector over the next year to eighteen months. Without any aggressive construction subsidies, the U.S. could look to Japan's lost decade of the 1990s. In the late 1980s Japan's real estate values skyrocketed. However, this was a bubble - it had to be - at one time the value of Japan's real estate surpassed that of the U.S. and Japan's land mass is only about the size of California. Once Japan's real estate bubble burst, it took another ten years for their economy to recover. Thus, if we assume that all of President Obama's shovel-ready programs kick into high gear quickly, it will still be another 18 months at least for the construction industry to get back to full employment. That's a good start. But, now let's take a closer look at the fallout from the residential real estate market. With the fall in demand for goods came unemployment. Those without jobs obviously have limited ability to spend. According to the American Banker's Association, the number of HELOCs which are delinquent by 30 days or more rose from 1.89% in Q1 of 2008 to 3.52% in Q1 of 2009. In parallel, the number of real estate foreclosures is rising. The bulk of Americans who are fortunate enough to be gainfully employed have dramatically cut their discretionary spending. Looking back to Figure 3, we see that America's savings rate hit a new ten-year high of over 4 percent in the first quarter of 2009. In order to end this recession, Americans must start spending. This will put others back to work to support the demand.

Looking at U.S. manufacturing production, it will take several years to get back to pre-recessionary production levels after drops of 3% in 2008 and 12% this year. The contraction in this sector is considerably worse than the recessions of 1980-1982 and 1974-1975. Kiplinger's estimates that of the 2 million manufacturing jobs lost since Jan. 2008, only about two-thirds will return by 2013 (Pg. 1 The Kiplinger Letter, July 10, 2009). Orders for big ticket items such as aircraft and farm and construction equipment from overseas are also being impacted by the worldwide recession and will take at least a couple of years to improve.

Let's continue the analysis by evaluating the consumer electronics goods sector. Americans need disposable cash before they will buy new gadgets. So, this market will be the proverbial tail (of discretionary spending) wagged by the dog (income). A rise in disposable cash must be tied to a rise in employment. Therefore, we must focus on identifying sectors of the economy where jobs will be created.

Next, let's look at the financial services industry. A large number of jobs lost in the financial service sector have vanished permanently. Even under a best-case scenario it will take 2 ½ years for those in the financial services sector to get back to full-employment. However, even then, many will be making significantly less money than during the boom years. Case in point: Mortgage brokers and loan officers. Even 2 ½ years out, the average income of those re-employed in the financial services industry will average at best 70% of what they were making during the boom years. Real Estate, both residential and commercial, is another industry in which incomes will remain significantly lower than during the boom years

On the bright side, there will certainly be solid growth in the health care industry as more and more baby boomers reach retirement age. The growth in employment in this sector is already occurring. So, this sector will help to offset a small portion of the unemployment.

In the automotive sector, new car sales just now appear to be bottoming out. Americans are holding on to their older cars longer and will buy new cars now only as they need them. Many want to wait until GM and Chrysler re-tool and come out with fuel-efficient vehicles. So, it may take this industry takes another four to five years to get back to healthy growth.

Now consider another sector - start-ups. Alarmingly, the liquidity crisis has put a damper on funds available to Venture Capital firms, which fund entrepreneurial start-ups. These start-ups would typically be an excellent source of employment. Even if the government made available billions of dollars to VC firms today, it would take at least a year for funders to develop concepts for companies and to raise this money. A year after that they would be up and running and beyond that they could be able to experience good growth. However, Mark Andreessen, the multi-millionaire founder of Netscape, predicts that hundreds of VC firms will fail over the next several years. Therefore, unless the government figures out a way to funnel capital into VC firms or sets up its own VC firms, new venture initiation will severely stagnate for years to come. Currently, many of the VC firms are staying away from new venture initiation and are channeling their energies on growing companies that are already quite mature. So, again, to experience significant employment by start-ups, we would be looking at 5 years out unless there is a major change of government policy.

After consolidating the bottoming out and growth prospects for each sector of the economy, one can see that the recovery defined in terms of both employment and GDP will be slow and painful. These recovery curves are projected out to 2015 in Figure 7 below.

2009-08-17-figure11.jpg
Figure11: Projections of the recovery curves for GDP and Employment through 2015.


These projections estimate that the GDP of $14.26T achieved in 2008 won't be achieved again on an inflation-adjusted basis until 2013. They also indicate that unemployment will slowly improve until it falls to 6.25% in 2016.

Conclusion and Suggestions that could speed the economic recovery

The problem with President Obama's approach to date is that he has been trying to fix the economic problems with a top-down approach. Obama has essentially continued the Bush - Paulson TARP approach, bailing out huge banks, insurance companies, brokerage houses and some major corporations. This approach is similar to President Reagan's "trickle down" economics that didn't work then and that is not working today. Implementing strategic "bottom-up" initiatives would directly address the problems at hand by creating more jobs and by putting more disposable cash in the hands of homeowners.
In this paper we propose two major bottom-up policy initiatives which would dramatically speed the recovery by focusing directly on benefiting millions of middle-class Americans as opposed to pumping billions of dollars of capital into large financial institutions and waiting for the trickle down benefits.

These programs are as follows:

i) In the short-term, Americans would have more ability to spend money if the Government would pass a bill that would give homeowners the opportunity to convert their current mortgages to interest-only for some duration of time, e.g. one, two, or three years. This could put several hundred dollars of disposable income back into the hands of consumers every month during the duration of the program. For example, for a $300,000 mortgage with a 5.5% interest rate, the total fully-amortized monthly payment would be $1,703 of which $328 is principal and $1,375 is interest in the first month. By allowing this borrower to pay interest only, the borrowers monthly payments would be reduced by $328 (or $3,396 per year) during the duration of the interest-only program. This would be a virtually no-cost government stimulus.

ii) The government could tremendously facilitate the creation of new jobs by participating in new venture initiation through matching investment in Venture Capital (VC) funded start-ups in the areas of high-technology, biotechnology, and alternative energy. There are many start-ups currently seeking to raise capital. They have interested investors, however, all they need is an entity to lead the round. If the government would take the lead on strategic investments, a multitude of companies would be created which would add wealth to America in the long term. These government investments would have huge long-term benefit to the U.S. as a whole and they would promote keeping the U.S. at the competitive forefront of the world.

A comprehensive and cohesive solution to the current economic crisis could be implemented by expanding the above recommendations to include the following: 1) Expanding student loan programs which would lead to a higher-skilled labor pool, 2) Augmenting unemployment insurance to include an option for individuals to borrow, 3) Augmenting health insurance by enabling a larger percentage of citizens to qualify at reasonable rates (e.g. much below the current HIPAA rates which keep escalating) , and 4) Greater support for small and medium size businesses that are the engines of employment, investment, and growth for the economy.
The implementation of these program would form a solid foundation upon which the U.S. could re-build its economy and ensure a sustainable economic future for the country. If the first two programs above are initiated aggressively, the economic recovery will accelerate. Otherwise, we are in for a long and painful recovery.


R. Kyle Martin held numerous executive level positions in the U.S. and Japan in the high- technology sector prior to focusing full-time on finance and economics. He is an accredited investor with a focus on high-technology stocks and real estate. His returns consistently meet or exceed those of the world's top analysts. He may be reached at kylemartinusa@att.net.

Michael D. Intriligator, Professor of Economics, Political Science, and Public Policy, UCLA and Senior Fellow, the Milken Institute.

and there WILL be a Weekend Economists Thread posted in Editorials forum. Our theme is: A big surprise!

Actually, I have no idea what it will be. I am open to suggestions!

I can't believe it's Friday again already...

I had a list of good relevant choices written up, but, I'm at a different computer today... and I can't remember a single one of them... :blush: Well, except for that fabulous doc-u-drama "Idiocracy". Which, I think we should save for a special long weekend edition of the WEE.

It's got to be soon, tho... I was walking past the refrigerated racks of a local Convenience/Gas Station and noticed they recently came out with a line of "BigAz" sandwiches! :rofl:

http://taibbi.rssoundingboard.com/health-care-reform-sick-and-wrong#

America’s disastrous health care system is responsible for incalculable amounts of illness, death, lost productivity and federal deficit — not to mention anxiety, anger and disgrace. And it’s not going to get fixed, writes Matt Taibbi in the new issue of Rolling Stone, because it’s encased in another failed system: the U.S. government. Rather than attempt to remedy the problem this summer, our government sat down and demonstrated its dizzying ineptitude. “We might look back on this summer someday and think of it as the moment when our government lost us for good,” writes Taibbi. “It was that bad.”

Taibbi breaks down the five steps Congress took to be sure no bill would pass — aiming low, gutting the public option, packing it with loopholes, providing no leadership and blowing the math — in his story, which is available on stands now. In a series of video interviews for RollingStone.com, Taibbi explores one of our system’s most severe flaws, explains how the government wedged itself into an awkwardly damning position, and looks at how the proposed bill would change the ordinary American’s life.

Perhaps the biggest flaw in the American health care system is that 31 percent of costs are associated with administration and paperwork. Here Taibbi examines the easiest way to eliminate the red tape:

SEE THE VIDEOS AT LINK!

http://www.prospect.org/cs/articles?article=insurance_fraud

...Before we start rethinking whether the insurance companies are as malevolent as they've been made out to be (spoiler alert – yes, they are), it's worth noting just how remarkable their relative absence from this debate has been. Whatever else you can say about them, they're not the ones whipping up fear of "death panels," or comparing Obama to Hitler, or screeching about "socialized medicine." In fact, if you didn't know about their history, you might think they've been desperately hoping for positive change.

When the industry does raise its head, it poses not just as an advocate for reform but as an opponent of its own abuses. Witness this television ad from America's Health Insurance Plans (AHIP), the insurance company lobby, which must surely stand as one of the most shamelessly hypocritical pieces of advertising in American political history:

"Illness doesn't care where you live," the narrator says sympathetically, "or if you're already sick, or if you lose your job. Your health insurance shouldn't either." The ad ends with the hope that "the words ‘pre-existing condition' a thing of the past." So say the people who won't insure you if you have a pre-existing condition and who will cut you off if you get a serious illness. It's kind of like a gang of home invaders expressing the fervent hope that people will get better alarm systems and stronger deadbolts.

What's going on? In simple terms, they cut a deal. It may not be written down on paper, but it goes like this: If the government imposes an individual mandate, forcing all Americans to buy health insurance – and thus guaranteeing us millions of new customers – we won't stand in the way of new regulations curbing some of our worst abuses. And this is their defense when those abuses are brought up. We've already agreed to those new regulations, they'll say, so why do we need to talk about it anymore? Let's just make sure there's no public option people can choose, because that would just be a step too far....

We have had protesters outside John Cornyn's office protesting FOR a public option and getting insurers out of the medical business. This has been going on for 3 days now. No publicity at all, not even local. Guess we need to put tea bags on our signs. Actually it should be sand bags 'cause that's what is happening.

Hence the total lack of sanity in the MSM. Crazy sells. And begets more craziness. Until we pull the plug.(on the MSM)

8/21/09 BLOGGER MAY HAVE A PAST

A 30-year-old New Yorker who was barred from the securities industry last year may be behind an increasingly popular financial blog known as Zerohedge.com, which is catching flack for its obsession with anonymity.

Daniel Ivandjiiski, whose most recently listed address is on the Upper East Side, was barred last September by the financial industry's self regulatory authority, FINRA, for insider trading.

Ivandjiiski is also suspected of being one of the founders of controversial financial blog Zerohedge.com, sources tell The Post.

Ivandjiiski didn't return requests for comment, but he recently told industry publication Hedge Fund Alert that while he writes for Zerohedge, he's not a founder.

"He denied that he was a founder. He said he was just a contributor," Hedge Fund Alert Managing Editor Howard Kapiloff told The Post.

Ivandjiiski told Kapiloff that he's one of several writers who contributes to the site under the pseudonym "Tyler Durden," the charismatic, psychopathic alter-ego of the main character in the book and movie "Fight Club."

Several bloggers on the site appear to have been inspired by the 1996 novel by Chuck Palahniuk, which was later adapted into movie starring Brad Pitt.

A man who answered the phone at Zerohedge declined to give his name or to comment. He offered vague statements like, "Zerohedge is not one person," and, "For us, its not about the messenger, its about the message."

A manifesto on the Web site suggests Zerohedge contributors are seeking to avoid the backlash their comments could unleash, saying anonymity protects "unpopular individuals from retaliation -- and their ideas from suppression -- at the hand of an intolerant society."

But its anonymity has also been a bit of a lightening rod, causing one commentator on CNBC to recently blast Zerohedge as residing in the "dark and cowardly corners of the blogosphere."

Still, the site has proven unusually popular since its launch in January, according to data from Web traffic data provider Alexa.com.

Alexa shows Zerohedge's Web traffic beating traffic from other, more established financial blog sites like Footnoted.org and Marketfolly.com and coming close to traffic from some of the most popular financial Web sites like Dealbreaker.com and Minyanville.com.

http://www.nypost.com/seven/08212009/business/blogger_may_have_a_past_185653.htm

Is it for people who are morbidly obese? Do they flagellate themselves with it to curb their appetites?

One does wonder about modern journalism these days...

Stocks jump as Bernanke says economy near recovery


ap
Stocks jump as Bernanke says economy near recovery
Stocks surge after Bernanke declares economy on verge of recovery, home sales jump

NEW YORK (AP) -- Federal Reserve Chairman Ben Bernanke has told investors what they wanted to hear: The economy is indeed on the verge of recovery.

Major stock indicators surged more than 1 percent in early afternoon trading Friday and hit new highs for the year. The Dow Jones industrial average briefly surpassed the 9,500 mark, a level it hasn't seen since Nov. 5.

Meanwhile, Treasury prices tumbled, pushing yields sharply higher, as investors no longer needed the safety of government debt. The stock market's gains were broad, reaching across all industries, but the biggest jumps came from energy, industrial and material stocks as oil and commodities prices soared. Bank stocks also rose sharply.

"The prospects for a return to growth in the near term appear good," Bernanke said at an annual Fed conference in Wyoming. He did warn, however, that lending is not back to normal, and that the difficulty consumers and businesses are having obtaining loans will be a challenge.

http://finance.yahoo.com/news/Stocks-jump-as-Bernanke-says-apf-1907490562.html?x=0&sec=topStories&pos=main&asset=&ccode=

Amusing excerpt:

In other signs of investors' growing confidence in the economy, oil prices touched their highest point of the year on hopes that energy demand will soon pick up. After briefly nearly $75, light, sweet crude for October delivery rose 98 cents to settle at $73.89 a barrel on the New York Mercantile Exchange.

Yes, you read that right. High Energy Prices that destroy Consumer Spending and Income are a sign of Economic Prosperity. :eyes:

More Salt In The Wound:

We saved the world from disaster, Fed's Bernanke says

Without strong action by central banks, recession would have been much worse

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) -- The global economy is now beginning to emerge from its worst crisis in generations, but the downturn might have been much worse if central banks hadn't acted so forcefully last fall, Federal Reserve Chairman Ben Bernanke said Friday.

In a speech at the Kansas City Fed's annual retreat in Jackson Hole, Wyo., Bernanke summarized a hellish year and explained modestly how he and his central bank colleagues saved the world from a bigger disaster. Read his full remarks.

"The world has been through the most severe financial crisis since the Great Depression," he said. "As severe as the economic impact has been, however, the outcome could have been decidedly worse."


If the Fed, other central banks and other government leaders hadn't acted in a coordinated and aggressive way in September and October of 2008, "the resulting global downturn could have been extraordinarily deep and protracted," Bernanke said.

Bernanke spoke to a selected group of top policy makers and economists. His speech, however, was aimed at a much wider audience: The president, the Congress and a public that's angry and confused.

Bernanke's term as chairman of the Fed runs out in January, and the financial world is watching to see if President Barack Obama reappoints Bernanke or hands to job to someone else.

http://www.marketwatch.com/story/we-saved-the-world-from-disaster-bernanke-says-2009-08-21-10100


Kids, I really don't know what to say at this point. No fiery diatribe or editorial from me today about these two stories. What's the point? The Public has been completely Propagandized into submission and Inaction, and if you dare try and speak out about the reality that continues to unfold, you are ostracized, mocked, and accused of "wanting the economy to fail", and all kinds of other Brown shirt bullying, both online and off.

I'm going to be completely frank about one thing.

I no longer believe this country has a future any more. At least one that any thinking, sane, reasonable, objective human being that can THINK AND REASON Objectively and Rationally would find viable and acceptable.

It has become obvious that just like an article I read this morning said, America is now a country of Serfs, run by Oligarchs. With both parties being corrupt beyond the point of redemption and return, save for one, maybe two representatives, and a Government that CLEARLY no longer represents the interests of We The People, I fear that as long as we continue to enslave ourselves within this fake political system that plays us all against each other, while serving NONE of us, there isn't going to be any Change PERIOD, that we can believe in or otherwise.

The Public for the most part is lost. While it is no surprise to see those on the right acting like scorpions holding true to their nature, it appears that OUR side has taken complete leave of it's senses as well.

Both sides seem hopelessly co-dependent in a Football Team Mentality, desperately looking to their "leaders" to fix things, and becoming more and more dependent and hypnotized by whatever nuggets of Propaganda they are fed to shape their opinions, lives, and way of thinking and living, instead of demanding accountability and holding the people who were duly elected to SERVE them to hard scrutiny and making them DO what they were HIRED TO DO.

Our Elected Representatives are supposed to SERVE US. SERVE Our INTERESTS. FOLLOW and OBEY The Rule Of Law, and the Constitution. Not SUBVERT it.

Not RULE US.

Not OWN Us.

Although I do not Deify the Forefathers, I can say with some confidence that if they were here with us today, standing before a Joint Session of Congress, Shoulder To Shoulder, either John Adams or Thomas Jefferson would pierce these cowardly, marginalized, compartmentalized twits that pass for leadership with steely eyes, slam his fist on the Podium and speak these words in a cold, stern voice that would freeze Fruit Trees in Florida:

"My Fellow Americans......THIS. Is. NOT. What. We. MEANT."

Take Care Marketeers.

I'm out of here for awhile.

Peace Be.

We need a lot more rants.

I had a moment yesterday morning. I went to the gym, as usual at about 9:00. As I walked in, I noticed that the TV in front of the elliptical machines, my first 40 minute stop, was tuned to Fox News. I asked the floor manager to please change it. He asked, "What do you want on"? I said "anything. I just want Fox off of it!" He said, "Well, maybe some people want Fox on". I got a little angry with him. And said a few things I shouldn't have. Then again, maybe I should have said it louder!

I agree that the whole country is now formally, and totally fucked.

I talked with a friend of mine in Cleveland yesterday. He retired last year as an International Vice-President of our union. He was talking about another VP, from the Canadian railroad division. He developed a rare form of cancer about 10 years ago. He told my friend, before he died, that had he been involved in the US healthcare system, he would have been bankrupt, and dead , seven years earlier. He didn't have to wait for anything. They covered it ALL!

If you go to a European country, it's pretty much free. Only the wealthiest families have to pay a few thousand dollars to attend Cambridge. And I'm talking VERY FEW thousands of dollars. In the mean time, we have thousands of students graduating with debt, in the hundreds of thousands of dollars. Is it any wonder that we've raised 2 generations of morons?

Stick around my friend. I don''t want to go crazy alone. I want to start a good fight!

and happily move along with the great Bernanke recovery of no jobs, losing a home and hyper-inflation. Don't forget that war doesn't matter anymore either, the illegal wars we're in are now legal! Presto!

Dow closed at 9505.96, higher than it's been since November 4, 2008.
Nadaq closed at 2020.90, higher than it's been since October 1, 2008.
S&P 500 closed at 1026.13, higher than it's been since October 6, 2008.

(Debt up seven tenths of a billion, FICA side down nine billion. Internet access finally found, thank goodness for the bar in town.)

= Held by the Public + Intragovernmental(FICA)
= 7,384,038,351,054.48 + 4,334,194,051,271.58
UP 703,521,737.77 + DOWN 9,065,873,759.66

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 307-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.77, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 12 seconds we net gain a another American, so at the end of the workday of the report, there should be 307,127,942 people in America.
http://www.census.gov/population/www/popclockus.html ON 05/25/2009 01:14 -> 306,504,012
Currently, each of these Americans owe $38,154.24.
A family of three owes $114,462.71. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 24 reports in the last 30 to 33 days.
The average for the last 24 reports is 4,906,007,318.45.
The average for the last 30 days would be 3,924,805,854.76.
The average for the last 33 days would be 3,568,005,322.51.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 146 reports in 211 days of Obama's part of FY2009 averaging 7.42B$ per report, 5.17B$/day so far.
There were 221 reports in 323 days of FY2009 averaging 7.66B$ per report, 5.24B$/day.

PROJECTION:
There are 1,250 days remaining in this Obama 1st term.
By that time the debt could be between 13.4 and 18.3T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
08/19/2009 11,718,232,402,326.06 BHO (UP 1,091,355,353,412.98 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,693,507,505,413.60 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
07/30/2009 -026,031,384,097.19 -
07/31/2009 +095,534,108,940.65 ------------**********
08/03/2009 -005,083,538,887.00 -- Mon
08/04/2009 -000,056,382,262.77 ----
08/05/2009 +000,017,974,078.47 ------------*******
08/06/2009 -000,578,106,269.92 ---
08/07/2009 +000,290,467,707.81 ------------********
08/10/2009 +000,222,135,743.03 ------------******** Mon
08/11/2009 +000,246,752,500.45 ------------********
08/12/2009 +000,081,638,592.29 ------------*******
08/13/2009 +004,096,319,823.99 ------------*********
08/14/2009 +000,017,806,259.60 ------------*******
08/17/2009 +012,224,191,599.44 ------------********** Mon
08/18/2009 +036,282,270,009.21 ------------**********
08/19/2009 +000,703,521,737.77 ------------********

117,967,775,475.83 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power.
Since then US borrowed $2,053,600,599,066.99 in last 335 days.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4023812&mesg_id=4024080

(Debt up a billion, FICA side up one and a half billion.)

= Held by the Public + Intragovernmental(FICA)
= 7,385,126,904,158.71 + 4,335,701,651,221.45
UP 1,088,553,104.23 + UP 1,507,599,949.87

Source: Debt to the penny:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 307-Million person America.
If every American, man, woman and child puts in $3.26 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.77, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 12 seconds we net gain a another American, so at the end of the workday of the report, there should be 307,135,142 people in America.
http://www.census.gov/population/www/popclockus.html ON 05/25/2009 01:14 -> 306,504,012
Currently, each of these Americans owe $38,161.8.
A family of three owes $114,485.39. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 24 reports in the last 30 to 31 days.
The average for the last 24 reports is 4,981,577,517.98.
The average for the last 30 days would be 3,985,262,014.38.
The average for the last 31 days would be 3,856,705,175.21.
There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 147 reports in 212 days of Obama's part of FY2009 averaging 7.39B$ per report, 5.16B$/day so far.
There were 222 reports in 324 days of FY2009 averaging 7.64B$ per report, 5.23B$/day.

PROJECTION:
There are 1,249 days remaining in this Obama 1st term.
By that time the debt could be between 13.4 and 18.3T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
08/20/2009 11,720,828,555,380.16 BHO (UP 1,093,951,506,467.08 so far since Obama took office.)

Fiscal Year ends: Sep 30
Borrowed in FY1993: (Maybe later.)
Borrowed in FY1994: 281,261,026,873.94
Borrowed in FY1995: 281,232,990,696.07
Borrowed in FY1996: 250,828,038,426.34
Borrowed in FY1997: 188,335,072,261.61
Borrowed in FY1998: 113,046,997,500.28
Borrowed in FY1999: 130,077,892,735.81
Borrowed in FY2000: _17,907,308,253.43 Bill alone
Borrowed in FY2001: 133,285,202,313.20 Bill and George
Borrowed in FY2002: 420,772,553,397.10 All George
Borrowed in FY2003: 554,995,097,146.46
Borrowed in FY2004: 595,821,633,586.70
Borrowed in FY2005: 553,656,965,393.18
Borrowed in FY2006: 574,264,237,491.73
Borrowed in FY2007: 500,679,473,047.25
Borrowed in FY2008: 1,017,071,524,650.01
Borrowed in FY2009: 1,696,103,658,467.70 so far this fiscal year.

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
07/31/2009 +095,534,108,940.65 ------------**********
08/03/2009 -005,083,538,887.00 -- Mon
08/04/2009 -000,056,382,262.77 ----
08/05/2009 +000,017,974,078.47 ------------*******
08/06/2009 -000,578,106,269.92 ---
08/07/2009 +000,290,467,707.81 ------------********
08/10/2009 +000,222,135,743.03 ------------******** Mon
08/11/2009 +000,246,752,500.45 ------------********
08/12/2009 +000,081,638,592.29 ------------*******
08/13/2009 +004,096,319,823.99 ------------*********
08/14/2009 +000,017,806,259.60 ------------*******
08/17/2009 +012,224,191,599.44 ------------********** Mon
08/18/2009 +036,282,270,009.21 ------------**********
08/19/2009 +000,703,521,737.77 ------------********
08/20/2009 +001,088,553,104.23 ------------*********

145,087,712,677.25 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power.
Since then US borrowed $2,056,196,752,121.09 in last 336 days.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4025421&mesg_id=4026826