STOCK MARKET WATCH, Tuesday February 23

Source: du

STOCK MARKET WATCH, Tuesday February 23, 2010

Bush Administration Officials Convicted = 2
Name(s): David Safavian, James Fondren

Bush Administration Officials Charged = 1
Name(s): Richard Lopez Razo

Financial Sector Officials Convicted since 1/20/09 = 11

AT THE CLOSING BELL ON February 22, 2010

Dow... 10,383.38 -18.97 (-0.18%)
Nasdaq... 2,242.03 -1.84 (-0.08%)
S&P 500... 1,108.01 -1.16 (-0.10%)
Gold future... 1,113 -9.00 (-0.80%)
10-Yr Bond... 3.80 +0.02 (+0.53%)
30-Year Bond 4.73 +0.03 (+0.55%)

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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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Handy Links - Market Data and News:
Economic Calendar    Marketwatch Data    Bloomberg Economic News    Yahoo! Finance
    Google Finance    Bank Tracker    Credit Union Tracker    Daily Job Cuts

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The Big Picture    Financial Sense    Calculated Risk    Naked Capitalism    Credit Writedowns
    Brad DeLong    Bonddad    Atrios    goldmansachs666    The Stand-Up Economist

Handy Links - Government Issues:
LegitGov    Open Government    Earmark Database    USA spending.gov

Handy Links - Videos:
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This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.

Read more: du

09:00 Case-Shiller 20-city Index Dec
Briefing.com -4.5%
Consensus -3.1%
Prior -5.3%

10:00 Consumer Confidence Feb
Briefing.com 56.5
Consensus 55.0
Prior 55.9

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

Numbers are in at 46...That's a 10 bit drop, and likely to leave a bit of a scar.

http://www.marketwatch.com/story/us-consumer-confidence-falls-11-points-2010-02-23



Great comment on another article at MarketWatch:

http://www.marketwatch.com/story/us-stocks-fall-along-with-consumer-sentiment-2010-02-23?siteid=trackedcomment#comment3632573

... or tuning in to the range of teabagger-type rebelliousness, better-informed sources on the left, or anything but the usual 'surprised economists' of the MSM (at long last)?

How about passing universal single payer health care, and seeing what happens to consumer confidence, the economy, and all things related?

Alan Greenspan has been judged the economist most responsible for causing the Global Financial Crisis. He and 2nd and 3rd place finishers Milton Friedman and Larry Summers have won the first–and hopefully last—Dynamite Prize in Economics.


In awarding the Prize, Edward Fullbrook, editor of the Real World Economics Review, noted that “They have been judged to be the three economists most responsible for the Global Financial Crisis. More figuratively, they are the three economists most responsible for blowing up the global economy.”

The prize was developed by the Real World Economics Review Blog in response to attempts by economists to evade responsibility for the crisis by calling it an unpredictable, “Black Swan” event. In reality, the public perception that economic theories and policies helped cause the crisis is correct.

The prize winners were determined by a poll in which over 7,500 people voted—most of whom were economists themselves from the 11,000 subscribers to the real-world economics review . Each voter could vote for a maximum of three economists. In total 18,531 votes were cast.

Fullbrook cautioned that not all economics and economists were bad. “Only ‘neoclassical’ economists caused the GFC. There are other approaches to economics that are more realistic—or at least less delusional—but these have been suppressed in universities and excluded from government policy making.”

“Some of these rebels also did what neoclassical economists falsely claimed was impossible: they foresaw the Global Financial Crisis and warned the public of its approach. In their honour, I now call for nominations for the inaugural Revere Award in Economics, named in honour of Paul Revere and his famous ride. It will be awarded to the 3 economists who saw the GFC coming, and whose work is most likely to prevent another GFC in the future.”

Dynamite Prize Citations


Alan Greenspan (5,061 votes): As Chairman of the Federal Reserve System from 1987 to 2006, Alan Greenspan both led the over expansion of money and credit that created the bubble that burst and aggressively promoted the view that financial markets are naturally efficient and in no need of regulation.

Milton Friedman (3,349 votes): Friedman propagated the delusion, through his misunderstanding of the scientific method, that an economy can be accurately modeled using counterfactual propositions about its nature. This, together with his simplistic model of money, encouraged the development of fantasy-based theories of economics and finance that facilitated the Global Financial Collapse.


Larry Summers (3,023 votes): As US Secretary of the Treasury (formerly an economist at Harvard and the World Bank), Summers worked successfully for the repeal of the Glass-Steagall Act, which since the Great Crash of 1929 had kept deposit banking separate from casino banking. He also helped Greenspan and Wall Street torpedo efforts to regulate derivatives.

In total 18,531 votes were cast. The vote totals for the other finalists were:

Fischer Black and Myron Scholes 2,016

Eugene Fama 1,668

Paul Samuelson 1,291

Robert Lucas 912

Richard Portes 433

Edward Prescott and Finn E. Kydland 403

Assar Lindbeck 375

The poll was conducted by PollDaddy. Cookies were used to prevent repeat voting.

http://www.theonion.com/content/news_briefs/geithner_refuses_to_come?utm_source=onion_rss_daily

Three days after a sulking Timothy Geithner climbed to the top of the U.S. Capitol dome, the treasury secretary remained steadfast Monday in his refusal to come down. "You all hate me," said Geithner, his arms crossed as he shouted at the crowd of onlookers gathered on the Capitol lawn below. "What do you care if I stay up here? You'll just make fun of me if I come down anyway. Well, I'm not coming down—not ever!" Federal security teams monitoring the situation said they believed Geithner might be planning an extended stay atop the dome, as evidenced by what appeared to be a burlap sack containing various snacks, a six-pack of root beer, and several copies of The Economist.

And so appropriate now that Geithner is mounting a charm offensive. It appears to be working. I am very offended by his attempt at charm.

How will he sing and dance...Perhaps Ambassadoress Gaga can talk him down.

:donut: and lurkers. Two Revere award winners that come to my mind are Brooksly Born and Elizabeth Warren. I hope they are nominated. I would also recommend this thread for best group prognostication-but they don't have that category.

I came to an important realization yesterday. You all know what a disaster our new superintendent is. Well I just realized something . He doesn't know he is in Houston yet. He thinks he is on Fantasy Island. Every time he opens his mouth I want to shout...De plane, de plane. All I am missing is the warm weather and my tropical drink:evilgrin: I swear, I may have to quit my job to save my liver-I find I need a drink at the end of the day anymore.

I miss reading the updates until the end of the evening. I find myself strictly clocking in and out on time-no more unpaid overtime for them. They have stolen my dignity and I refuse to let them steal anything else.

Happy hunting and watch out for the bears.

Chorus to "The Strong Woman Has a Bad Day Polka":

Whatever doesn't kill me makes me wish that I were dead!

to that gem. Is it similar to the movie (Hot)Flash Dance-what a feeling!

It's hard to get such things from indie-folk singers. I don't have the album, if it's on one. But Claudia is a Michigan girl...

I'm not a chocoholic, but I do love brownies.

They comfort me in times of stress.




Tansy Gold, beginning to see daylight at the end of the tunnel and hoping it's not (another) train

http://www.scientificamerican.com/article.cfm?id=the-economist-has-no-clothes


From the April 2008 Scientific American Magazine | 74 comments
The Economist Has No Clothes
Unscientific assumptions in economic theory are undermining efforts to solve environmental problems

By Robert Nadeau

he 19th-century creators of neoclassical economics—the theory that now serves as the basis for coordinating activities in the global market system—are credited with transforming their field into a scientific discipline. But what is not widely known is that these now legendary economists—William Stanley Jevons, Léon Walras, Maria Edgeworth and Vilfredo Pareto—developed their theories by adapting equations from 19th-century physics that eventually became obsolete. Unfortunately, it is clear that neoclassical economics has also become outdated. The theory is based on unscientific assumptions that are hindering the implementation of viable economic solutions for global warming and other menacing environmental problems.

The physical theory that the creators of neoclassical economics used as a template was conceived in response to the inability of Newtonian physics to account for the phenomena of heat, light and electricity. In 1847 German physicist Hermann von Helmholtz formulated the conservation of energy principle and postulated the existence of a field of conserved energy that fills all space and unifies these phenomena. Later in the century James Maxwell, Ludwig Boltzmann and other physicists devised better explanations for electromagnetism and thermodynamics, but in the meantime, the economists had borrowed and altered Helmholtz’s equations.

The strategy the economists used was as simple as it was absurd—they substituted economic variables for physical ones. Utility (a measure of economic well-being) took the place of energy; the sum of utility and expenditure replaced potential and kinetic energy. A number of well-known mathematicians and physicists told the economists that there was absolutely no basis for making these substitutions. But the economists ignored such criticisms and proceeded to claim that they had transformed their field of study into a rigorously mathematical scientific discipline.

Strangely enough, the origins of neoclassical economics in mid-19th century physics were forgotten. Subsequent generations of mainstream economists accepted the claim that this theory is scientific. These curious developments explain why the mathematical theories used by mainstream economists are predicated on the following unscientific assumptions:

* The market system is a closed circular flow between production and consumption, with no inlets or outlets.
* Natural resources exist in a domain that is separate and distinct from a closed market system, and the economic value of these resources can be determined only by the dynamics that operate within this system.
* The costs of damage to the external natural environment by economic activities must be treated as costs that lie outside the closed market system or as costs that cannot be included in the pricing mechanisms that operate within the system.
* The external resources of nature are largely inexhaustible, and those that are not can be replaced by other resources or by technologies that minimize the use of the exhaustible resources or that rely on other resources.
* There are no biophysical limits to the growth of market systems.

If the environmental crisis did not exist, the fact that neoclassical economic theory provides a coherent basis for managing economic activities in market systems could be viewed as sufficient justification for its widespread applications. But because the crisis does exist, this theory can no longer be regarded as useful even in pragmatic or utilitarian terms because it fails to meet what must now be viewed as a fundamental requirement of any economic theory—the extent to which this theory allows economic activities to be coordinated in environmentally responsible ways on a worldwide scale. Because neoclassical economics does not even acknowledge the costs of environmental problems and the limits to economic growth, it constitutes one of the greatest barriers to combating climate change and other threats to the planet. It is imperative that economists devise new theories that will take all the realities of our global system into account.

http://www.informationclearinghouse.info/article24831.htm

If you thought Wall Street’s debt crisis was traumatic, wait till you the see the consequences of Washington’s debt crisis!

Never before in history has a world power like the U.S. been so utterly buried in debt! And never before has that debt been financed so massively by foreign investors!

Nineteenth century Mexico, Spain, and Argentina accumulated so much debt, they were forced to default.

In the 20th century, a similar fate befell Germany (1932) … China (1939) … Turkey (1978) … Mexico again in 1982 … Brazil and the Philippines (1983) … South Africa in 1985 … plus Russia and Pakistan in 1998.

Argentina kicked off the 21st century with a default in 2001. And barring a euro zone rescue, Greece, Spain, and Portugal are prime candidates for debt defaults this year.

But in NONE of these examples did we — or do we — see the debt crisis striking a dominant world power! In ALL cases, the debts represent little more than a small fraction of the total debts outstanding worldwide.

Not so in our case today!

In the entire world, the United States government and its agencies have, by far, the largest pile-up of interest-bearing debts ($15.6 trillion), the largest accumulation of unsecured obligations (over $60 trillion), the largest yearly deficit ($1.6 trillion), and the greatest indebtedness to the rest of the world ($4.8 trillion).

In proportion to the size of its economy, one important country, Japan, does have more debt than the U.S. But unlike Washington’s debts, nearly all of Japan’s are financed by its own citizens — loyal, long-term savers who are far less likely to pull out in a storm.

Washington’s debt crisis represents a unique, unparalleled, and unimaginable convergence of circumstances. Because no one can answer this simple question being asked by former GAO chief David Walker:

Who will bail out America?

Not you, not me, and not 300 million Americans! Not China, not Japan, nor all the powers on Earth put together! They’re simply not big enough. They don’t have the money.

Yet, despite the utter gravity of our plight,
nothing is being done to change our course.

In recent weeks, Congress could not even agree to study the issue. They could not vote on a deficit commission.

The president has just appointed a separate commission. But even after moons of deliberation, it will have no authority to bring its recommendations to a vote in Congress — let alone get them passed.

The president says that the effort must be bipartisan, that all options must be on the table, and that no cows can be sacred.

And indeed, this song sounds good. But it’s more out of synch with political reality than rap rock at the Bolshoi Ballet:

* Democrats vow never to cut to Social Security or Medicare …


* Republicans vow never to accept tax hikes, and all the while …


* Economists swear that only a full-court, frontal attack on the deficit has any chance of making a dent.

Irving and Ike

My family and I — plus many others more illustrious than us — have been warning about this danger since 1960.

That was the year my father, J. Irving Weiss, founded our Sound Dollar Committee, organized a nationwide grassroots movement, and helped prompt 11 million telegrams, phone calls, and letters of protest to Capitol Hill.

That was the effort which persuaded Congress to vote for a balanced budget and helped give President Eisenhower a victory the likes of which has never been seen again.

In subsequent years, Dad and I nagged, cajoled, and testified before Congress so often I lost count.


I think we gathered more evidence and made more phone calls than a telethon phone bank.

But our warnings have typically been given little more than the time of day.

And always — ALWAYS — the so-called “solution” has been the same: more borrowing from Peter to pay Paul, more can-kicking down the road, more smoke and mirrors, more lies....MORE AT LINK

Throughout history wars have devastated and destroyed national treasuries. If not for the war in Afghanistan, the USSR might still be around today.

"The U.S. spends more for war annually than all state governments combined spend for the health, education, welfare, and safety of 308 million Americans.

Joseph Henchman, director of state projects for the Tax Foundation of Washington, D.C., says the states collected a total of $781 billion in taxes in 2008.

For a rough comparison, according to Wikipedia data, the total budget for what the Pentagon calls "defense" in fiscal year 2010 will be at least $880 billion and could possibly top $1 trillion. That's more than all the state governments collect."

http://www.inteldaily.com/news/173/ARTICLE/13219/2009-12-25.html

A very easy solution to the budget deficit is to stop the 2 or maybe 3 wars we are currently running.

And yet this article claiming an Armageddon, does not mention the US spending on wars or even the Pentagon budget. It's as if the authors can't see the elephant sitting on them.

That's what Al Qaeda is using as their plan for destroying America. In their Mujahideen incarnation, they believe they brought about the destruction of the Soviet Union, that they defeated a superpower, by bleeding their treasury fighting in Afghanistan. They believe they can do the same to us.

(Up a tiny amount. Debt seems to jump up big then drop slowly maybe up a little and down a little for days--repeat. Good day all.)

= Held by the Public + Intragovernmental(FICA)
= 7,893,756,033,843.68 + 4,508,298,801,745.00
UP 114,262,910.59 + UP 491,905,869.79

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 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.72, ABOUT TEN BUCKS for a 1B$ 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 10 seconds we net gain another American, so at the end of the workday of the report, there should be 308,780,958 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $40,164.57.
A family of three owes $120,493.71. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 23 reports in the last 30 to 31 days.
The average for the last 23 reports is 3,475,967,097.20.
The average for the last 30 days would be 2,664,908,107.86.
The average for the last 31 days would be 2,578,943,330.18.
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$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 96 reports in 142 days of FY2010 averaging 5.13B$ per report, 3.47B$/day.
Above line should be okay

PROJECTION:
There are 1,066 days remaining in this Obama 1st term.
By that time the debt could be between 13.9 and 17.9T$.
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)
02/19/2010 12,402,054,835,588.68 BHO (UP 1,775,177,786,675.60 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,492,225,832,076.90 ------------* * * * * * * * * * * * BHO
Endof10 +1,265,228,371,183.58 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
01/29/2010 -000,416,981,206.21 ---
02/01/2010 +090,319,223,365.33 ------------********** Mon
02/02/2010 -000,066,012,400.47 ----
02/03/2010 +000,334,538,130.44 ------------********
02/04/2010 -009,677,289,403.68 --
02/05/2010 -000,081,816,346.60 ----
02/08/2010 +000,119,837,978.11 ------------******** Mon
02/09/2010 +000,368,016,270.35 ------------********
02/10/2010 -000,056,577,287.25 ----
02/11/2010 +007,265,093,186.33 ------------*********
02/12/2010 -000,104,736,856.82 ---
02/16/2010 +030,097,605,306.92 ------------********** Tue
02/17/2010 +000,408,694,886.67 ------------********
02/18/2010 +015,224,901,067.79 ------------**********
02/19/2010 +000,114,262,910.59 ------------********

133,848,759,601.50 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(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=4278492&mesg_id=4278711

(Tiny moves. Debt seems to jump up big then drop slowly maybe up a little and down a little for days--repeat. Good day all.)

= Held by the Public + Intragovernmental(FICA)
= 7,893,549,784,639.46 + 4,509,477,395,015.75
DOWN 206,249,204.22 + UP 1,178,593,270.75

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 309-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.71, ABOUT TEN BUCKS for a 1B$ 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 10 seconds we net gain another American, so at the end of the workday of the report, there should be 308,806,878 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $40,164.35.
A family of three owes $120,493.05. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 21 reports in the last 30 to 31 days.
The average for the last 21 reports is 4,788,651,987.52.
The average for the last 30 days would be 3,352,056,391.26.
The average for the last 31 days would be 3,243,925,539.93.
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$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 97 reports in 145 days of FY2010 averaging 5.08B$ per report, 3.40B$/day.
Above line should be okay

PROJECTION:
There are 1,063 days remaining in this Obama 1st term.
By that time the debt could be between 13.9 and 17.9T$.
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)
02/22/2010 12,403,027,179,655.21 BHO (UP 1,776,150,130,742.13 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,493,198,176,143.50 ------------* * * * * * * * * * * * BHO
Endof10 +1,241,498,857,188.81 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
02/01/2010 +090,319,223,365.33 ------------********** Mon
02/02/2010 -000,066,012,400.47 ----
02/03/2010 +000,334,538,130.44 ------------********
02/04/2010 -009,677,289,403.68 --
02/05/2010 -000,081,816,346.60 ----
02/08/2010 +000,119,837,978.11 ------------******** Mon
02/09/2010 +000,368,016,270.35 ------------********
02/10/2010 -000,056,577,287.25 ----
02/11/2010 +007,265,093,186.33 ------------*********
02/12/2010 -000,104,736,856.82 ---
02/16/2010 +030,097,605,306.92 ------------********** Tue
02/17/2010 +000,408,694,886.67 ------------********
02/18/2010 +015,224,901,067.79 ------------**********
02/19/2010 +000,114,262,910.59 ------------********
02/22/2010 -000,206,249,204.22 --- Mon

134,059,491,603.49 Total of 15 above reports.

Heavy borrowing seems to start after 09/18/2008 while Bush was in power JUST BEFORE fiscal year end.
Bush admin borrowed $962,245,245,654.01 in those last 124 days in office crossing two fiscal years.
$360,093,093,653.42 in last 12 days of FY2008, and $602,152,152,000.59 in subsequent 112 days before leaving office.

For a prettier and more explanatory view of our nation's debt:
http://www.brillig.com/debt_clock
http://www.usdebtclock.org/
DUer primer on National debt

(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=4279641&mesg_id=4279650

http://www.ft.com/cms/s/0/8b16bb70-1fe6-11df-8deb-00144feab49a.html

The US Supreme Court on Monday rejected an appeal by Pimco, the world’s largest bond investment house, paving the way for a $600m lawsuit against the company to proceed.

A group of traders allege Pimco cornered the market in 10-year Treasury bonds issued in 2005, forcing those with short positions to choose between paying monopoly prices to close their positions or buying an expensive futures contract to offset them.

They are demanding more than $600m in damages over alleged misconduct, which Pimco denies.

Monday’s decision by the Supreme Court rejects Pimco’s attempt to disqualify plaintiffs that the company claimed benefited from higher prices for bonds. It has broader implications for companies defending class action suits as it allows people to join a class action without necessarily having to prove they were injured.

Jackie Cooper, a partner at Sidley Austin, the law firm, who filed a brief in support of the Pimco position because of the potential broader impact on corporate America, said the decision “increases the intimidation factor” by swelling the ranks of potential litigants.

In the Pimco case, plaintiffs claim the company loaded up on a particular Treasury note to corner the market, with the percentage of notes owned by Pimco jumping from 12 per cent to 42 per cent over two weeks.

Pimco had argued that some traders in the class action could have benefited from the increased price of the bonds because they had different long positions that made them net gainers.

The company unsuccessfully argued that the plaintiffs should not be certified as a class by a judge and anyone who gained an advantage from the change in price should be stripped out of the class action.

Rejecting the Pimco argument last year in a decision now backed by the Supreme Court, judges found that: “Although some of the class members probably were net gainers from the alleged manipulation, there is no reason at this stage to believe that many were.”

The judges added: “A short seller hopes the price of the security that he’s selling will fall ... And while it is true that short sellers may want to hedge part of the risk of a rise in the price of the security that they are selling short, they will not hedge the entire risk, as that would eliminate the prospect of speculative gains that motivates short selling.”

Pimco declined to comment. Christopher Lovell, a lawyer for the litigants, said he hoped the case would come to trial “within a year”.

http://www.ft.com/cms/s/0/d70409f4-1fdf-11df-8deb-00144feab49a.html

Morgan Stanley is nearing the sale of its stake in China International Capital Corp to two US private equity firms – Kohlberg Kravis Roberts and TPG – for about $1bn, ending a strained relationship.

A deal would produce a tidy profit for Morgan Stanley, which invested $37m in the Chinese investment bank almost 15 years ago, and free the company to pursue a new joint venture with China Fortune Securities, a Chinese brokerage.

Morgan Stanley wants to establish a new partnership to grant it the right to trade stocks and other securities on local Chinese markets.

The New York-based bank, which has chafed at the limitations of its passive investment in CICC, wants management control over such a venture.

KKR and TPG, which were among the several buy-out groups to emerge as bidders, had agreed to make a joint offer for the stake, people familiar with the matter said. Bain Capital, another private equity investor, had also pursued the deal.

Morgan Stanley’s 34.3 per cent interest in CICC presents the opportunity to capitalise on the development of China’s economy and capital markets.

The stake would also hand any buyer a stream of dividend income, an association with one of the country’s best-regarded and most powerful securities firms and possible co-investment opportunities.

Morgan Stanley needs to sell the CICC stake before local regulators entertain its plans for a new venture.

Morgan Stanley, KKR and TPG declined to comment.

Morgan Stanley first sought the sale of its CICC investment two years ago, before aborting the effort amid uncertain markets and disagreements with its Chinese partner.

The Chinese broker, which was founded in Beijing in 1995, was the first interna tional entity to win an investment banking licence in the country.

Morgan Stanley had hoped to use its initial stake in CICC as a springboard to build its own local securities firm.

However, its ambition was thwarted by China’s determination to ensure that CICC remained under local control.

http://www.ft.com/cms/s/0/f3296148-1fcf-11df-8deb-00144feab49a.html

Eric Daniels, chief executive of Lloyds Banking Group, yielded to growing pressure on Monday and waived his right to a £2.33m bonus for 2009.

However, the bank remains locked in fractious negotiations with investors over plans to increase the potential value of Mr Daniels’ long-term awards by more than a third.

According to shareholders, Sir Win Bischoff, Lloyds chairman, is seeking backing to increase the maximum value of Mr Daniels’ long-term incentive plan from a maximum 200 per cent of salary to 275 per cent, or £2.85m.

THE POOR DEAR! HOW CAN HE LIVE ON SUCH A PITTANCE? AN AMERICAN BANKSTER WOULD BE OUT SHIPPING HIS RESUME....

SINGAPORE – Oil prices retreated below $80 a barrel Tuesday in Asia as investors mulled whether sluggish U.S. crude demand justified a 14 percent rally over the last three weeks. ...

Oil has jumped from $69.59 a barrel on Feb. 5 on investor optimism that the global economy will rebound strongly from recession last year. Yet growing inventories of crude, gasoline and diesel fuel suggest demand in the U.S. remains weak.

Some analysts expect crude demand in the U.S. and Japan will gradually follow overall economic growth and lift prices. Goldman Sachs expects crude to trade between $85 and $95 for most of this year. ....

In other Nymex trading in March contracts, heating oil fell 0.2 cent to $2.077 a gallon while gasoline rose 0.1 cent to $2.1168 a gallon. Natural gas gained 2.4 cents to $4.919 per 1,000 cubic feet.

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

---

Goldman Sachs has its price target for the oil shares they trade. Again - we see an increase in prices due to rampant speculation.

They are crazy to think they can extort such sums for oil anymore.

Glad to hear this---I'm going to have to fill up today.

TOKYO (Reuters) – Toyota Motor Corp's woes deepened ahead of its testimony to Congress as it revealed it faces a U.S. criminal probe into the handling of its massive safety recalls, while Japan voiced concern over the economic impact of the automakers' problems.

New U.S. documents showed on Monday how the company beat back U.S. safety regulators' efforts for a wider probe in 2007 and disclosure of a U.S. Securities and Exchange Commission request for documents.

The news comes as Toyota's top executive prepared for a hearing on Capitol Hill over unintended acceleration problems that have been linked to at least five U.S. deaths, with 29 other fatality reports being examined. ....

Shares of Toyota fell 0.5 percent on Tuesday in Tokyo, matching the Nikkei 225's fall, suggesting little investor reaction to news of the criminal investigation and the plan for the additional brake override upgrade.

http://news.yahoo.com/s/nm/20100223/ts_nm/us_toyota

http://www.bloomberg.com/apps/news?pid=20601109&sid=ax3yON_uNe7I

SO NOW WE NOW WHAT THE BIG SECRET WAS...

When a congressional panel convened a hearing on the government rescue of American International Group Inc. in January, the public scolding of Treasury Secretary Timothy F. Geithner got the most attention.

Lawmakers said the former head of the New York Federal Reserve Bank had presided over a backdoor bailout of Wall Street firms and a coverup. Geithner countered that he had acted properly to avert the collapse of the financial system.

A potentially more important development slipped by with less notice, Bloomberg Markets reports in its April issue. Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.

These were the deals that pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released.

That lack of disclosure shows how the government has obstructed a proper accounting of what went wrong in the financial crisis, author and former investment banker William Cohan says. “This secrecy is one more example of how the whole bailout has been done in such a slithering manner,” says Cohan, who wrote “House of Cards” (Doubleday, 2009), about the unraveling of Bear Stearns Cos. “There’s been no accountability.”

CDOs Identified

The document Issa made public cuts to the heart of the controversy over the September 2008 AIG rescue by identifying specific securities, known as collateralized-debt obligations, that had been insured with the company. The banks holding the credit-default swaps, a type of derivative, collected collateral as the insurer was downgraded and the CDOs tumbled in value.

The public can now see for the first time how poorly the securities performed, with losses exceeding 75 percent of their notional value in some cases. Compounding this, the document and Bloomberg data demonstrate that the banks that bought the swaps from AIG are mostly the same firms that underwrote the CDOs in the first place.

The banks should have to explain how they managed to buy protection from AIG primarily on securities that fell so sharply in value, says Daniel Calacci, a former swaps trader and marketer who’s now a structured-finance consultant in Warren, New Jersey. In some cases, banks also owned mortgage lenders, and they should be challenged to explain whether they gained any insider knowledge about the quality of the loans bundled into the CDOs, he says.

‘Too Uncanny’

“It’s almost too uncanny,” Calacci says. “If these banks had insight into the underlying loans because they had relationships with banks, originators or servicers, that’s at the least unethical.”

The identification of securities in the document, known as Schedule A, and data compiled by Bloomberg show that Goldman Sachs underwrote $17.2 billion of the $62.1 billion in CDOs that AIG insured -- more than any other investment bank. Merrill Lynch & Co., now part of Bank of America Corp., created $13.2 billion of the CDOs, and Deutsche Bank AG underwrote $9.5 billion.

These tallies suggest a possible reason why the New York Fed kept so much under wraps, Professor James Cox of Duke University School of Law says: “They may have been trying to shield Goldman -- for Goldman’s sake or out of macro concerns that another investment bank would be at risk.”

Poor Performers

Goldman Sachs spokesman Michael DuVally declined to comment.

Schedule A also makes possible a more complete examination of why AIG collapsed. Joseph Cassano, the former president of the AIG Financial Products unit that sold the swaps, said on a December 2007 conference call that his firm pulled back from selling swaps on U.S. subprime residential CDOs in late 2005. The list shows that the $21.2 billion in CDOs minted after 2005, mostly based on prime and commercial mortgages, performed as badly as or worse than the earlier subprime vintages.

A lawyer for Cassano declined to comment.

As details of the coverup emerge, so does anger at the perceived conflicts. Philip Angelides, chairman of the Financial Crisis Inquiry Commission, at a hearing held by his panel on Jan. 13, questioned how banks could underwrite poisonous securities and then bet against them. “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars,” he said.

‘Part of the Coverup’

Janet Tavakoli, founder of Tavakoli Structured Finance Inc., a Chicago-based consulting firm, says the New York Fed’s secrecy has helped hide who’s responsible for the worst of the disaster. “The suppression of the details in the list of counterparties was part of the coverup,” she says.

E-mails between Fed and AIG officials that Issa released in January show that the efforts to keep Schedule A under wraps came from the New York Fed. Revelation of the messages contributed to the heated atmosphere at the House hearing.

“What date did you know there was a coverup?” Republican Congressman Brian Bilbray of California demanded of Geithner. Lawmakers used the word coverup more than a dozen times as they peppered Geithner with questions.

Geithner said that he wasn’t involved in matters of disclosure and that his former colleagues did the best they could. In a Jan. 19 statement, the New York Fed said, “AIG at all times remained responsible for complying with its disclosure requirements under the securities laws.”

The government has committed more than $182 billion to AIG and owns almost 80 percent of the company.

Document Withheld

In late November 2008, the insurer was planning to include Schedule A in a regulatory filing -- until a lawyer for the Fed said it wasn’t necessary, according to the e-mails. The document was an attachment to the agreement between AIG and Maiden Lane III, the fund that the Fed established in November 2008 to hold the CDOs after the swap contracts were settled.

AIG paid its counter­parties -- the banks -- the full value of the contracts, after accounting for any collateral that had been posted, and took the devalued CDOs in exchange. As requested by the New York Fed, AIG kept the bank names out of the Dec. 24 filing and edited out a sentence that said they got full payment.

The New York Fed’s January 2010 statement said the sentence was deleted because AIG technically paid slightly less than 100 cents on the dollar.

Paid in Full

Before the New York Fed ordered AIG to pay the banks in full, the company was trying to negotiate to pay off the credit- default swaps at a discount or “haircut.”

By March 2009, responding to a request from Christopher Dodd, chairman of the Senate Committee on Banking, Housing and Urban Affairs, AIG released the names of the counterparty banks. In a filing later that month, AIG included Schedule A, showing bank names while withholding all identification of the underlying CDOs and the amounts of collateral each bank had collected. The document had more than 800 redactions.

In May 2009, AIG again filed Schedule A, this time with about 400 redactions. It revealed that Paris-based Societe Generale got the biggest payout from AIG, or $16.5 billion, followed by Goldman Sachs, which got $14 billion, and then Deutsche Bank and Merrill Lynch. It still kept secret the CDOs’ identification and information that would show performance.

‘Right to Know’

“This is something that belongs in the public domain because it was done with public money,” Issa says. “The public has the right to know what was done with their money and who benefited from it.” Now, thanks to Issa, the list is out, and specific information about AIG’s unraveling can be learned from it.

At the Jan. 27 hearing, the New York Fed was still arguing that the contents of Schedule A shouldn’t be fully disclosed. Thomas Baxter, the New York Fed’s general counsel, testified that divulging the names of the CDOs could erode their value: “We will be hurt because traders in the market will know what we’re holding.”

Tavakoli calls that wrong. With many CDOs, providing more information to the market will give the manager a greater chance of fetching a realistic price, she says.

Jack Gutt, a spokesman for the New York Fed, declined to comment, as did AIG’s Mark Herr.

Bad to Worse

Tavakoli also says that the poor performance of the underlying securities (which are actually specific slices or tranches of CDOs) shows they were toxic in the first place and were probably replenished with bundles of mortgages that were particularly troubled. Managers who oversee CDOs after they are created have discretion in choosing the mortgage bonds used to replenish them.

“The original CDO deals were bad enough,” Tavakoli says. “For some that allow reinvesting or substitution, any reasonable professional would ask why these assets were being traded into the portfolio. The Schedule A shows that we should be investigating these deals.”

Among the CDOs on Schedule A with notional values of more than $1 billion, the worst performer was a tranche identified as Davis Square Funding Ltd.’s DVSQ 2006-6A CP. It was held by Societe Generale, underwritten by Goldman Sachs and managed by TCW Group Inc., a Los Angeles-based unit of SocGen, according to Bloomberg data. It lost 77.7 percent of its value -- though it isn’t in default and continues to pay.

SocGen spokesman James Galvin and TCW spokeswoman Erin Freeman declined to comment.

Documentation Needed

Ed Grebeck, CEO of Tempus Advisors, a global debt market strategy firm in Stamford, Connecticut, agrees that more digging is necessary. “You need all the documentation and more than that, all the e-mails,” he says. “That would allow us to understand what went wrong and how to fix it going forward.”

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, who delivered a report on the AIG bailout in November, says he’s not finished. He has begun a probe of why his office wasn’t provided all of the 250,000 pages of documents, including e-mails and phone logs, that Issa’s committee received from the New York Fed.

Schedule A provides some answers -- and raises questions that need to be tackled to avoid the next expensive bailout.

WASHINGTON (Reuters) – Nearly 20 percent of the U.S. workforce lacked adequate employment in January and struggled to make ends meet with reduced resources and bleak job prospects, according to a Gallup poll released on Tuesday.

In findings that appear to paint a darker employment picture than official U.S. data, Gallup estimated that about 30 million Americans are underemployed, meaning either jobless or able to find only part-time work. ....

Gallup surveyed more than 20,000 U.S. adults from January 2 to 31. The results have a 1 percentage point margin of error. ...

The poll's estimate of U.S. underemployment is higher than official statistics. The Labor Department says 16.5 percent of American workers were without employment or worked part-time for economic reasons in January against Gallup's 19.9 percent.

http://news.yahoo.com/s/nm/20100223/ts_nm/us_usa_economy_jobs_poll

http://www.nytimes.com/2010/02/21/weekinreview/21prime.html


345: The average amount, in millions of dollars, earned by the 400 highest-earning households in the United States in 2007, according to Internal Revenue Service data reported by Tax.com. The number is up from $263 million in the previous year, an increase of 31 percent. Each of the top-earning 400 households paid an average tax rate of 16.6 percent, the lowest since the I.R.S. began tracking the data in 1992. The top 400 earned a total of $138 billion in 2007, up from $105.3 billion a year earlier.

http://www.informationclearinghouse.info/article24822.htm

The incomes of the very rich in the US grew phenomenally between 1992 and 2007, while their tax rates plummeted, according to recently uncovered IRS statistics:

DETAILS AT LINK

And they provided us with great new products like credit default swaps that enabled the economy to prosper.....uh...never mind,

Does that need a few more exclamation points? I'm not sure people know how thrilled I am about the news.


http://tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692?OpenDocument

http://www.wsws.org/articles/2010/feb2010/medi-f20.shtml

US states are imposing major cuts to Medicaid, the health insurance program for low income Americans jointly funded with the federal government. The cuts are being enacted in response to huge budget deficits in states throughout the country and a sharp increase in enrollment fuelled by the unemployment crisis.

Cuts in Medicaid services are a critical component of the attempts by the US corporate and financial elite, led by the Obama administration, to slash government health care costs and reduce care. On Thursday, Obama established a bipartisan panel whose central purpose will be to find ways to decrease spending on government health care and pension programs, including Medicaid (See, “Obama appoints panel to slash social programs”)

Some versions of the Democrats’ health care overhaul proposals include an expansion of Medicaid eligibility, but without full support for state governments. This will translate into further cuts to services and ensure that larger numbers of Americans have access only to the most limited and inadequate health care coverage, while the wealthy continue to enjoy the best care money can buy.

Enrollment in Medicaid increased by 3.3 million between June 2008 and June 2009 to nearly 47 million cases, according to a study released Thursday by the Kaiser Family Foundation. Caseloads increased in every US state. In thirteen states, enrollment shot up by more than 10 percent. According to a new study by Families USA, for every 1 percentage point rise in the US unemployment rate, 1 million people become eligible for Medicaid and related programs.

With Medicaid already consuming about a fifth of most state budgets—the same as the average outlay for education—both Democrat and Republican governors and lawmakers throughout the country are insisting on deep cuts in the services provided to Medicaid recipients.

Medicaid typically provides insurance to those who fall below the official poverty level, but only within certain categories: children, pregnant women, parents of young children, the disabled, and the elderly who require nursing home care. The program’s reach varies among the states, but the majority of Americans living in poverty—three out of five according to one estimate—are not covered by Medicaid.

Because emergency federal stimulus funding for Medicaid bars states from narrowing eligibility requirements, states have instead targeted medical services and payments to doctors for cuts. In recent years the federal government paid between 50 percent and 75 percent of a state’s Medicaid costs—the poorer the state, the higher the federal proportion—but the stimulus package increased this share to between 61 percent and 85 percent, at a cost of $87 billion. These funds are set to expire at the end of December unless Congress approves a $25 billion extension.

The additional federal funds have been grossly inadequate, and every state faced Medicaid funding shortfalls in the current fiscal year, according to the Kaiser Foundation study. In response, a number of states are curtailing currently covered “non-essential” services...DENTAL, VISION, HEARING AIDS,..

MORE AT LINK

http://www.wsws.org/articles/2010/feb2010/pers-f19.shtml

President Barack Obama’s establishment by executive order of a bipartisan commission on deficits on Thursday is the latest step in his administration’s attack on health care and retirement programs upon which millions of Americans depend.

The 18-member panel will propose measures to slash government spending on Medicare, Medicaid and Social Security. It will also consider a series of regressive taxes, including a consumption or value added tax, to force the working class to pay for the budget deficit. Its aim, according to the White House, will be to reduce the deficit from its current level of over 10 percent of gross domestic product to 3 percent by 2015.

Speaking on Thursday, Obama repeated a theme that has been a constant refrain of his administration—that partisan divisions between Democrats and Republicans are blocking the implementation of policies deemed necessary by the financial and corporate elite. “For far too long, Washington has avoided the tough choices necessary to solve our fiscal crisis,” he said. “Everything is on the table,” he added.

Obama’s selection of the panel chairs—Republican Alan Simpson and Democrat Erskine Bowles—is an indication of the far-reaching attack that is being prepared.

As a senator from Wyoming between 1979 and 1997, Simpson served as the top Republican on the Senate Finance Committee’s Subcommittee on Social Security. He was among the most fervent advocates of cutting Social Security benefits by reducing their annual growth rate. His position was often to the right of Reagan administration, which he criticized for not moving quickly enough to cut social programs.

In an interview with the Washington Post on Tuesday, Simpson made clear his opposition to the very idea that retired workers should have guaranteed pension benefits. “How did we get to a point in America where you get to a certain age in life, regardless of net worth or income, and you’re ‘entitled’? The word itself is killing us.”

As chief of staff under Bill Clinton in 1997-1998, Erskine Bowles was involved in discussions between the White House and the Republican congressional leadership—particularly House Speaker Newt Gingrich—on budgetary issues. Toward the end of Clinton’s presidency, Bowles reportedly reached agreement with Gingrich on plans to partially privatize Social Security and increase the retirement age. These proposals were not implemented at the time, and Bowles left the White House declaring that the most important unresolved problem was “dealing with the long-term problems of Medicare and Social Security.”

Obama’s choice of Bowles is a deliberate affront to popular anger over bank bonuses. Bowles sits on the compensation committee of the board of directors of Morgan Stanley, one of the top Wall Street investment banks and a recipient of government bailout cash. Morgan Stanley recently paid out billions of dollars in 2009 bonuses to its top traders and executives.

The establishment of the commission further exposes what has been the central aim of Obama’s health care overhaul from the beginning—the imposition of major cuts in government spending through the reduction of health care services for tens of millions of Americans.

The Obama administration has been called on to carry out long-standing aims of the American ruling class. The economic crisis that erupted in September 2008 was seized on as an opportunity to implement an agenda of slashing so-called entitlement programs as part of a vast redistribution of wealth from working people to the financial elite. The coffers of the state have been opened for looting by the banks, to be paid for through the gutting of social programs.

In the run-up to the 2008 election, particularly after the eruption of the financial crisis in September of that year, a consensus emerged within the ruling class that Obama would be better able than his Republican opponent, John McCain, to implement major attacks on the working class. Well aware of popular hatred for Bush and a general discrediting of the Republicans, leading factions of the financial and corporate elite calculated that a Democrat and the first African-American president would be able to exploit popular illusions to politically disorient and disarm the population.

Obama, moreover, could count on various middle-class “left” organizations, which campaigned for his election largely on the basis of identity politics, to continue to promote him as a “progressive” proponent of social reform. It has not taken long for the cynicism of this operation to be exposed.

As part of his ever more open march to the right, Obama has expanded his calls for bipartisan compromise, a refrain of his administration from the outset. His incessant appeals for Republican support in the aftermath of the Democratic debacle in January’s Massachusetts Senate election reflect the ruling class consensus that the class-war measures being prepared can best be implemented by establishing a political framework based on the unity of major sections of the two big business parties.

In seeking Republican support, Obama has chided the opposition party for placing short-term political calculations over the need for united action to carry out “tough” policies.

The 2008 elections have been exposed as a complete fraud. Running on slogans of “hope” and “change,” and appealing to popular hatred of the Bush administration, Obama came to power to continue and expand the right-wing policies of his predecessor. The experience of the Obama administration has underscored the impossibility of defending the interests of working people and effecting any positive change within the framework of the two-party system.

The capitalist crisis that erupted in 2008 is far from over. Despite talk of a recovery, the restructuring of class relations has only begun, in the United States and internationally. The continuation of the capitalist system—the domination of the financial and corporate elite over all aspects of social and political life—means endless war and continual attacks on the working class, including on social programs once considered untouchable.

Popular opposition—outside of and directed against the existing political framework—is not only necessary, it is inevitable. The critical question is the development of socialist consciousness and the construction of a revolutionary leadership capable of uniting the working class and establishing its political independence from all sections of the ruling elite. The Socialist Equality Party and the World Socialist Web Site urge all workers and young people who agree with the need for a socialist alternative to register to attend the Emergency Conference on the Social Crisis & War, to be held in Ann Arbor, Michigan, April 17-18. For more information, click here:

http://www.socialequality.com/conference

A very easy solution to our budget problem is to stop the 2 or 3 wars we currently have running and stop funding the Pentagon; stop paying defense contractors 2 or 3 times the cost of doing military functions in house, stop funding secret operations and black ops. These expenditures along with the bank/Wall Street/insurance corporation bailouts are the cause of our budget problems.

And yet...Not one word about how those wars of choice have funneled off trillions of our tax dollars and continue to do so today. Not one word from the Obama administration about charging 30% interest on the money we gave on the bailouts.

Instead they want to wipe out Social Security. Let's balance the budget on the backs of our elderly, orphaned and handicapped.

A society is not judged on how well they keep their kings, but on how they treat the weakest among them.

Specifically, we find that current taxes are well below the historic norms for the US, in the 17% of GDP range, well within the 20% historic average, and that an immediate 20% hike across the board would bring it up to that average. In addition, we find that doubling or a little better the taxes on business would restore them to their position as a % of taxes. Overall, this would result in at least another trillion in tax collections. That's close to balancing the current budget. Increase some excise taxes, import duties, and you have a case of accumulating no new debt. That's the first step in actually paying debt down.

No use arguing that higher business taxes will be passed along as higher prices to consumers, either. They can't be. If companies could charge more, they would already, and the mere fact that costs are higher does not mean people will be willing to pay higher prices. There would be no incentive to cost control if all costs could be marked up and passed down the line. Only in cost plus defense contracting, which brings us to the last piece of the puzzle. Reduce military budgets by stopping the wars and closing most overseas bases; this would give you an additional $400 billion or so per year to actually start paying down the debt.

Those who are nervous about our ability to repay would get a strong signal from actual repayments; the extra interest we pay now for the uncertainty would be eliminated as more investors find Treasuries more attractive and secure than before, bringing interest rates down, further helping to reduce debt, and as a side effect, lower interest rates across the board, making it more possible for businesses to borrow for needs and for consumers to buy goods at a more reasonable repayment rate, taking pressure off foreclosures and defaults and trending upwards toward more employment.

The losers in this? The folks who now rake huge "bonuses" from their companies and pocket them, rather than investing in their companies or providing shareholder dividends. That's a plus for me, but I've got a mean streak toward greedy jackasses. :)

Nothing more need be said.

From my experience as a teacher and recollections from the last presidential election - a huge number of Obama and, otherwise, Democratic supporters will be hurt through this move.

Specifically referring to my teaching experience: This will endanger the health and academic performance of many low income students. This is just horrible that people too young to vote and too poor to exert political leverage are suffering at a time when institutions like Goldman Sachs get whatever the hell they want.

How did we become a nation hell=bent on destroying our own people, as well as the rest of the world's population?

NEW YORK – Your next credit card statement is going to contain an ugly truth: how much that card really costs to use.

Now, thanks to a long-awaited law that goes into effect Monday, you'll know that if you pay the minimum on a $3,000 balance with a 14 percent interest rate, it could take you 10 years to pay off. ...

That's not all that will make them queasy.

During the past nine months, credit card companies jacked up interest rates, created new fees and cut credit lines. They also closed down millions of accounts. So a law hailed as the most sweeping piece of consumer legislation in decades has helped make it more difficult for millions of Americans to get credit, and made that credit more expensive.

It wasn't supposed to be this way. The law that President Barack Obama signed last May shields card users from sudden interest rate hikes, excessive fees and other gimmicks that card companies have used to drive up profits. Consumers will save at least $10 billion a year from curbs on interest rate increases alone, according to the Pew Charitable Trust, which tracks credit card issues.

But there was a catch. Card companies had nine months to prepare while certain rules were clarified by the Federal Reserve. They used that time to take actions that ended up hurting the same customers who were supposed to be helped.

http://news.yahoo.com/s/ap/20100222/ap_on_bi_ge/us_credit_cards_new_law

Free to act in your own best interests

http://www.ft.com/cms/s/0/ba370018-1f19-11df-9584-00144feab49a.html

Saudi Arabia’s oil exports to the US last year sank below 1m barrels a day for the first time in two decades just as China’s purchases climbed above that level, highlighting a shift in the geopolitics of oil from west to east.

The drop in US demand for oil from the kingdom, traditionally one of its primary sources, is the result of overall lower energy consumption but also greater reliance on imports from Canada and Africa...

http://www.ft.com/cms/s/2/1700ab46-1dbc-11df-9e98-00144feab49a.html?ftcamp=rss

Public trust in science as a whole has suffered from recent attacks on climate research, the head of the senior US scientific body admitted at the weekend.

“There is evidence that the corrosion in the public attitude to climate science has spread over to other areas of science,” said Ralph Cicerone, president of the National Academy of Sciences, citing public opinion surveys in the US and elsewhere.

Speaking at the annual meeting of the American Association for the Advancement of Science (AAAS) in San Diego, Prof Cicerone and other research leaders said scientists must work to regain public trust by being more open about their findings. “We need to be more transparent and provide more access to our research data,” he said.

In the “climategate” scandal at University of East Anglia in the UK, emails showed researchers at the Climatic Research Unit refusing to release data to sceptics who were critical of their conclusions.

But access requests need to be reasonable, Prof Cicerone said: “Some scientists are receiving requests bordering on harassment.”

Jerry North, a senior climate change scientist at Texas A&M University, agreed. “It seems that vilifying a scientist has become popular entertainment in the US,” he said.

Speakers at the AAAS conference said that neither the allegations of data suppression at UEA nor errors discovered in assessments by the UN Intergovernmental Panel on Climate Change had changed scientists’ minds about global warming.

“For many people who were not close to the science, questions arose about whether the robustness of the underlying science should be called into question,” said James McCarthy of Harvard University, who is chairman of the AAAS.

“Within the scientific community the answer is No,” he said. “If you took all the UEA data out of the package and removed the erroneous IPCC statements, it would not change the underlying science.”

Jane Lubchenco, head of the National Oceanic and Atmospheric Administration , the federal agency responsible for climate science, said the IPCC “had a wakeup call and is taking steps to address the mistakes that were made and to ensure that they don't happen again.”

“Scientists that are currently working on the next IPCC have had very intense, serious discussions about how to improve the process,” she added.

Prof McCarthy was critical of the way the media had joined sceptics in attacking the idea of manmade climate change – as for example when they pointed to this winter’s heavy snow on the US East Coast as evidence that the world was not warming.

In fact the snowfall was consistent with climate change, he said, because global warming meant there was more moisture in the air – and therefore heavier snow – than there would otherwise have been. “What limits snowfall in most parts of the world where it’s cold enough to snow is lack of moisture,” he said.

Prof Cicerone added that cold and snow in one part of the world were balanced by warmth in another – as the current lack of snow for the Winter Olympics in Vancouver is demonstrating.

THERE IS SO MUCH WRONG WITH THIS, THAT I DON'T KNOW WHICH END TO GRAB FIRST

Can't have that in this country. It overtaxes the average American's drug-addled, TV-blurred, sound-bite infested, brain.
When we have college students who can't determine 25% of 60 without a calculator (true story), what do we expect?
Science?? What else can I take instead?
I think that this sad phenomenon was quite accurately illustrated by the GB administration - here was a nation's leader who was unabashedly anti-science - and he had a significant following.
It all comes together on every aspect of our current troubles: financial/economic, environmental, political, and social. The masses - at least the noisy ones (what's that saying about empty barrels?) - will not think these issues through. They can't. Instead it's knee-jerk, bumper sticker, solutions for matters that require a evolved intellectual response.
Where is all this leading - or devolving - to?
Jeez, even a caveman.....

If they don't know, how the heck should I know....

http://www.dispatch.com/live/content/science/stories/2010/02/21/sci_curling.ART_ART_02-21-10_G3_4JGKCGD.html?sid=101

Stranger than friction
No one -- athletes or physicists -- can agree on why the curling stone does what it does on the ice

http://www.ft.com/cms/s/0/87f5a690-1f19-11df-9584-00144feab49a.html

Most of Kuwait’s multibillion-dollar investment company industry could be wiped out by debt repayments on the finance houses’ leveraged investments made before the recession, senior bankers have warned.

Spurred by cheap credit, abundant liquidity and few other opportunities in the government-dominated economy, Kuwaitis have set up scores of investment houses to bet on international and regional real estate, private equity and stocks. At its peak, the industry had assets of more than $50bn.

However, much of the spree was financed by short-term loans, and the financial crisis hit the local investment houses like a tsunami, said one analyst.

While bankers said the investment company woes were largely contained in Kuwait and should not spread, they could lead to distressed sales of overseas assets and were weighing on the exposed local banking sector.

Two of the largest investment companies defaulted on international loans last year. While no other finance house has publicly collapsed, bankers and analysts said almost all were struggling to meet debt repayments in the face of crippling losses – some of them on investments in Dubai, the troubled Gulf emirate. There were 100 investment houses in Kuwait but “you will not see half of them still operating in 2011”, said Jasem Al-Sadoun, chairman of Alshall Investment.

Many investment companies were in effect insolvent but were allowed to totter on by local banks reluctant to push them into bankruptcy – preferring to reschedule or renegotiate loans to avoid writedowns, said international bankers.

Furthermore, while international banks such as HSBC, Credit Suisse and UBS are helping restructure some houses, consolidation is not on the cards as most shareholders were unwilling to sell out to “rival” merchant families or companies.

“They’re now just waiting for markets to recover but they won’t,” said Majdi Gharzeddeene, head of research at Kamco, the asset management arm of Kipco, an investment company controlled by the Kuwaiti royal family.

Worries about many investment houses have shaved about KD8bn ($27bn) off the market capitalisation of listed investment companies, or about 70 per cent from the market peak, according to Kamco.

The industry’s woes were having knock-on effects on Kuwaiti banks, which were reluctant to lend while they faced delayed payments or losses on loans to investment companies.

Kuwait’s economy is dominated by the government, which does not need financing, so bank lending has been primarily to consumers, real estate, construction and investment companies, according to Moody’s, which has a negative outlook for the country’s bank sector.

http://www.nytimes.com/2010/02/22/business/22imf.html?ref=business

The International Monetary Fund has long preached the virtues of keeping inflation low and allowing money to flow freely across international boundaries. But two recent research papers by economists at the fund have questioned the soundness of that advice, arguing that slightly higher inflation and restrictions on capital flows can sometimes help buffer countries from financial turmoil.

One paper has received particular attention for suggesting that central banks should set their target inflation rate much higher — at 4 percent, rather than the 2 percent that is the most widely held standard. As aggregate demand fell across the world in 2008, central banks, including the Federal Reserve, lowered short-term interest rates to nearly zero, where they have largely remained.

While the two papers do not represent a formal shift in the fund’s positions, they suggest that the I.M.F. is re-examining some of its long-established orthodoxies as part of its response to the global economic crisis that began in 2007.

The significant drop in the volatility of output and inflation since the mid-1980s — a period known as the Great Moderation — helped lull “macroeconomists and policy makers alike in the belief that we knew how to conduct macroeconomic policy,” the fund’s chief economist, Olivier Blanchard, wrote in one of the papers. “The crisis clearly forces us to question that assessment.”

That paper examines how, in hindsight, higher rates would have helped in the current crisis.

“Higher average inflation, and thus higher nominal interest rates to start with, would have made it possible to cut interest rates more, thereby probably reducing the drop in output and the deterioration of fiscal positions,” Mr. Blanchard and two other authors wrote in the paper, released Feb. 12.

The other paper, released Friday, said that in the aftermath of the crisis, officials were “reconsidering the view that unfettered capital flows are a fundamentally benign phenomenon.”

“Concerns that foreign investors may be subject to herd behavior, and suffer from excessive optimism, have grown stronger; and even when flows are fundamentally sound, it is recognized that they may contribute to collateral damage, including bubbles and asset booms and busts,” the fund’s deputy director of research, Jonathan D. Ostry, wrote, along with five other authors.

Both papers contained important caveats.

Mr. Blanchard’s said that fiscal policy — like decisions to tax, spend and borrow — had been as important in responding to the crisis as monetary policy, or control of the supply of credit. It argued that governments that had relatively lower debts to begin with had more flexibility to respond to the crisis.

And it asserted that regulatory measures — like requiring higher capital and liquidity ratios, lower loan-to-value ratios for home mortgages, and increased margin requirements for stock purchases — would be more effective than higher inflation targets in curbing excessive risk-taking.

Similarly, Mr. Ostry’s report said capital controls would be effective only if the flows “are likely to be transitory” and the economy is already operating near potential, with reserves at an adequate level and an exchange rate that is not undervalued.

The report also found that “the jury is still out” on whether capital controls had worked in practice. Evidence from countries like Chile and Colombia, it said, suggests that controls have been more effective at curbing exchange-rate pressures and the risk associated with capital inflows than in reducing the net influx of money.

In separate interviews, three former I.M.F. chief economists said the recommendations were significant but raised questions about the feasibility of carrying them out in today’s situation.

Raghuram G. Rajan, of the Booth School of Business at the University of Chicago, said the I.M.F.’s suggestion for allowing higher inflation might not be well received. “With bond markets worried that governments may inflate their way out of their debt obligations, this is probably not a good time for central banks to start debating their inflation targets,” he said.

Mr. Rajan said he was concerned that the nuances regarding capital controls would be overlooked. “The pressure within emerging markets to set up capital controls, with many countries not meeting the careful conditions laid out by the fund’s paper, will increase,” he predicted.

Kenneth S. Rogoff of Harvard noted that he had urged that the Fed and the European Central Bank consider slightly higher inflation targets after the 2001 recession in the United States. But he added, “Having spent the past two decades convincing the public that 2 percent inflation was magical, it might be both difficult and confusing for central banks to suddenly announce they have changed their minds.”

He said Mr. Ostry’s report was only the latest step in the fund’s reassessment of its “dogma on capital controls” that began with the Asian financial crisis in the late 1990s. “Today, it is patently obvious that the U.S. and Europe’s near-zero-policy interest rates are fueling a surge of international capital into Asia and Latin America that will end in tears if not properly managed.”

Simon Johnson, of the Sloan School of Management at M.I.T., said it would be “a very hard sell” to persuade central banks to raise their inflation targets “just because the financial sector is badly run and hard to reform.”

But he praised the emphasis on regulation. “The I.M.F. is trying to redefine what is and what is not responsible financial policy after the crisis,” he said. “They are commendably aware of the need for greater regulation and the ways to synchronize that around the world.”

http://www.webofdebt.com/articles/campaigning_state-owned_banks.php

While bank bailouts fatten Wall Street, states continue to battle the credit crisis. In the search for innovative solutions, some political candidates are proposing that states generate their own credit by setting up their own banks.

State budgets for 2010 face the largest shortfalls on record, totaling $194 billion or 28 percent of state budgets; and 2011 is expected to be worse. Unemployment has already officially hit 10 percent, and many economists expect it to rise higher. Continued high unemployment will keep state income tax receipts at low levels and increase demand for Medicaid and other essential services states provide. The existing alternatives are spending cuts or tax increases, but both will just serve to make the downturn deeper. When states cut spending, they lay off employees, cancel contracts with vendors, eliminate or lower payments to businesses and nonprofit organizations that provide direct services, and cut benefit payments to individuals. The result is a reduction in overall demand. Tax increases also remove demand, by reducing the amount of money people have to spend.

Amanda Paulson, writing in The Christian Science Monitor, quotes Arturo Pérez, fiscal analyst with the National Conference of State Legislatures, which released its survey of state budget situations in December:

“Unless you’re North Dakota, you’re probably a state that has had some degree of difficulty or crisis involving finances. It’s the worst situation states have faced in decades, perhaps going as far back as the Great Depression in some states.”

“Unless you’re North Dakota” – a state with a sizeable budget surplus, and the only state that is adding jobs when other states are losing them. A poll reported on February 13 ranked that weather-challenged state first in the country for citizen satisfaction with their standard of living. North Dakota’s affluence has been attributed to oil, but other states with oil are in deep financial trouble. The big drop in oil and natural gas prices propelled Oklahoma into a budget gap that is 18.5% of its general-fund budget. California is also resource-rich, with a $2 trillion economy; yet it has a worse credit rating than Greece. So what is so special about North Dakota? The answer seems to be that it is the only state in the union that owns its own bank. It doesn’t have to rely on a recalcitrant Wall Street for credit. It makes its own.
Candidates Across the Political Spectrum Pick Up on the Public Bank Model

In the quest to find ways to divorce the well-being of their states from the financial sector, a growing number of candidates are picking up on the public bank alternative. Florida, Illinois, Oregon, Massachusetts, Idaho and California all have candidates whose platforms contain this proposed solution to the credit crisis.

A publicly-owned bank has also been proposed on the federal level. Nationalizing the Federal Reserve (which is not actually federal but is owned by a consortium of private banks) was advocated by 2008 Presidential candidates Dennis Kucinich, a Democrat, and Cynthia McKinney, the Green Party candidate. In 2009, Nobel laureate Joseph Stiglitz said the government would have been better off funding a federally-owned bank than doling out trillions of dollars to private investment banks and CEOs who speculated their way into bankruptcy. Speaking at the New York Society for Ethical Culture on March 6, 2009, he said:

“If we had used the $700 billion to create a new financial institution, allowed it to lever 10 to 1, which is very modest compared to the 30 to 1 that we were doing, 10 to 1 would have generated $7 trillion of new lending capacity, far in excess of what our country needs. So the issue here is not about lending. It’s really about saving the bankers. And what we confused was saving the banks versus saving the bankers and their shareholders.”

But nationalizing the Federal Reserve faces powerful opponents in Congress. Meanwhile, on the state level the public bank concept is gaining ground, attracting proponents across the political spectrum, including Democrats, Republicans and Greens. The issue transcends party lines. In North Dakota, a Republican state, the state-owned bank was inaugurated by a political party appropriately called the “Non-Partisan League.”

THE FOLLOWING STATES' EFFORTS ARE NOTED: OREGON, IDAHO, ILLINOIS, FLORIDA, CALIFORNIA, MASSACHUSETTS, VIRGINIA; IN THE REST OF THE ARTICLE

How much of North Dakota's financial well being can be attributed to the fact that for every dollar they send to Washington they get two dollars back? They are at or near the top of the list in so called "welfare states" on a continuous basis. Congressman Earl Pomeroy used the stats in campaign commercials.

If they are so flush with cash, perhaps they can fund their own flood fight this year. The Red River flood has turned into almost an annual event and yet the petty politics of where will we build the diversions and how much is Uncle Sam gonna kick is the story.

I would LOVE to shut down the Empty Quarter--eliminate their Corporate Senators and Reps, turn the entire thing into PrairieLand--a national wildlife refuge (and available to native Americans if they wish) and put their "pork" to use in the economy.

And end the leasing for a penny gig.

http://mondediplo.com/2010/02/11wishing

Author Barbara Ehrenreich keeps questioning US business, social and psychological orthodoxies, especially in her latest book on the power of positive thinking: she doesn’t believe it has any power and tells us why

by George Miller

A few odd facts: George W Bush was head football cheerleader in his senior year at prep school. The total US market for “self-improvement products” in 2005 was estimated at $9.6bn (1). The most popular course offered by Harvard University in 2006 was positive psychology. Last month, during the Haitian earthquake, the top international story on happynews.com (which publishes only good news) was “Prince William attracts crowd in New Zealand”. There are at least four different species of breast cancer awareness teddy bears. Sales of the self-help book The Secret (“the secret gives you anything you want: happiness, health and wealth”) by former Melbourne TV producer Rhonda Byrne, published in 2006, exceed seven million.

In isolation, each of these facts may cause no more than mild disquiet, a sense that the harsher realities of life are being brushed aside. In fact, as US journalist and campaigner Barbara Ehrenreich has discovered, they are all manifestations of the ubiquity of positive thinking in the United States. When she began to put the pieces together, they revealed a nation in the grip of a collective delusion that does damage to people’s lives all the way from corporate boardrooms to those struggling with house repossessions and poverty.

...positive thinking has duped America into a collective delusion and is now spreading its pernicious tentacles around the world. It’s an argument that Ehrenreich sets out wittily and compellingly in her latest book, Brightsided: How the Relentless Promotion of Positive Thinking has Undermined America, her 17th in a writing career spanning more than four decades.

Positive can be negative

Many people furrow their brows when they encounter her thesis that positive thinking has bad effects. How can being positive be negative? Ehrenreich herself admits that it took her some time to see the connections between positive thinking and America’s ills. In her case, it was the experience of breast cancer that was the catalyst. After her diagnosis in 2000, she became increasingly shocked at the orthodox view that you had to be positive about your cancer, view it as a rite of passage rather than something to rail at. In its most extreme form, the view was even that cancer was a gift, a chance for “creative self-transformation”.

Ehrenreich, who has a long-standing interest in health politics, and in particular the health system’s treatment of women, was especially troubled by two aspects of this. First, the attitude seemed to be mandatory. When she posted some angry thoughts about her treatment and “sappy pink ribbons” on a cancer sufferers’ online message board, she received a chorus of rebukes from fellow sufferers – dissent wasn’t welcome. And second, by thrusting responsibility for the outcome of the disease squarely at the patient, a host of other problems are consigned to the background, such as “why we have an epidemic of a disease and we don’t even know what causes it; why the treatments are so ineffective and barbaric and debilitating”. Ehrenreich has no time for claims (which have gained widespread credence) that a positive attitude can affect the outcome of cancer: “I felt very vindicated when studies came out in the last two years really throwing this out, showing there didn’t seem to be any effect of attitude on cancer survival rates”. She likewise believes that claims for other health benefits of going through life as an irrepressible sunbeam, such as greater life expectancy, are highly dubious and often based on methodologically flawed studies.

The problem with positive thinking is not so much that it’s positive as that it is merely thinking. As The Secret explains: “Everything that’s coming into your life you are attracting into your life… It’s what you are thinking.” The “secret” is the law of attraction, supposedly a cosmic, sempiternal law. It promulgates a view of a universe in which you can have whatever you want as long as you want it badly enough. Even God can be pressed into service in order for you to achieve your desires. As televangelist Joyce Meyer put it: “I believe God wants to give us nice things” (3). For positive thinkers, the universe resembles a big mail-order department. Submit your order clearly, and it’ll be fulfilled.

All this may seem like no more than harmless self-deluded nonsense, but implicit political assumptions underlie the positive thinking creed. If your thoughts determine your fortunes, then it follows that those who find themselves in poverty are simply not trying hard enough. Positive people get jobs. Negative people get fired. In the words of one motivational speaker, “Negative People SUCK!” Positive thinking is an expression of the most strident individualism and wants no truck with the common good or collective endeavour. If bad things happen to you, too bad – it’s your own fault.

Perhaps the most eye-opening chapter in Ehrenreich’s book is the one in which she reveals how positive thinking gained a foothold in the corporate world. She charts the shift from management as a dull, quasi-scientific discipline to the new messianic, anti-rational brand of leadership, in which business leaders are pumped up with confidence in their own ability to take the right decision based on hunches and intuitions. She quotes business guru Tom Peters in the 1990s: “Things are moving too fast for us to sort out logically what’s going on.” And in that atmosphere of ebullient self-confidence, Ehrenreich argues, were sown the seeds of the financial meltdown. Anyone who was critical or unable to “get with the plan”, was got rid of, until there were no canaries left in the mine.
Mystical currents

Where did the positive thinking movement come from? Ehrenreich traces it back to the mid-19th century and sees it as a reaction to the oppressive weight of Calvinism’s “socially imposed depression”. Proponents of the so-called New Thought, a heady brew of eastern and western mystical currents, fought their way free of the confinement of dour, deterministic Calvinism and championed a belief in the ability of individuals to influence the world around them purely through the power of thought...

Making a difference

She says her main aim in writing these books is to effect change. Following Bait and Switch, she co-founded United Professionals, a support and advocacy group that campaigns for health reform and unemployment benefits (4). In the case of Brightsided, it seems that her questioning the ethos of positive thinking in public has come as a relief to many: “So many people have written and said more or less ‘Thank God! I thought I was crazy’. They describe how they lost a job because they were ‘negative’, how they watched a spouse die while desperately trying to improve their attitude so that they would live. The book seems to affirm a lot of people, so that’s good – that’s step one. My biggest message in life is ‘It’s not your fault’.”

She was asked in Bristol if the election campaign for Obama was not a vindication for the power of positive thinking. She riposted: “We weren’t sure he would win. We were determined. When the founding fathers of America, signed the declaration of independence, they had no reason to think that they could beat England. They knew furthermore that by signing the declaration each of them became potentially guilty of treason against the crown and punishable by execution. But they didn’t just sit there and say we must beam out independence-style thoughts into the universe until it comes to us. ‘Yes we can’ is very different from ‘yes I can’.”

http://www.nakedcapitalism.com/2010/02/german-paper-says-aig-may-have-sold-cds-on-greece.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

In the larger scheme of things, this example shows how AIG could have, and probably did, serve to channel funds from the public at large to speculators.

London investment bankers name AIG as a further CDS-seller. That company had to be nationalized during the financial crisis due to its having written insolvency insurance on American mortgages. This debt-load would have led to the collapse of the world’s biggest insurer. Prior to the financial crisis AIG is said to have widely held State credit-risk. If yet-larger insurance positions on Greece exist, then the American government would have a strong interest in preventing that country’s insolvency.

Even if these are mere rumors about the Greek banks and AIG, this example makes clear the weakness of CDS markets. This protection is sold by banks or insurers who themselves have access only to limited capital resources. They have as a rule clearly lesser credit-worthiness than the states for which they are selling insolvency protection. Insurance by CDS could turn out to be just a bubble.

http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/

http://www.nakedcapitalism.com/2010/02/das-mark-to-make-believe-%E2%80%93-still-toxic-after-all-these-years.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

In 2007, as the credit crisis commenced, paradoxically, nobody actually defaulted. Outside of sub-prime delinquencies, corporate defaults were at a record low. Instead, investors in high quality (AAA or AA) rated securities, that are unlikely to suffer real losses if held to maturity, faced paper – mark-to-market (“MtM”) – losses.

In modern financial markets, market values drive asset values, profits and losses, risk calculations and the value of collateral supporting loans. Accounting standards, both in the U.S.A. and internationally, are now based on theoretically sound market values that are problematic in practice. The standards emerged from the past financial crisis where the use of “historic cost” accounting meant that losses on loans remained undisclosed because they continued to be carried at face value. The standards also reflect the fact that many modern financial instruments (such as derivatives) can only be accounted for in MtM framework.

MtM accounting itself is flawed. There are difficulties in establishing real values of many instruments. It creates volatility in earnings attributable to inefficiencies in markets rather than real changes in financial position.

Alan Greenspan once noted that: “It has been my experience that competency in mathematics, both in numerical manipulations and in understanding its conceptual foundations, enhances a person’s ability to handle the more ambiguous and qualitative relationships that dominate our day-to-day financial decision-making.” He may be the only one qualified to understand modern financial statements.

MtM accounting falls well short of its objective – the provision of accurate, reasonably objective and meaningful information about financial position. In the present crisis, it has heightened uncertainty and confusion about the position of banks and investors.

MtM accounting requires financial instruments to be valued at current market prices. This assumes a market and a price. As Michael Milken (the progenitor of “junk bonds” at Drexel Burnham Lambert) once noted: “Liquidity is an illusion. It is always there when you don’t need it and rarely there when you do.”

In volatile times, liquidity becomes concentrated in government bonds, large well known stocks and listed derivatives. For anything that is not liquid, MtM means mark-to-model. This assumes universally accepted pricing methodologies with verifiable inputs. Valuation for all but the simplest instruments today requires a higher degree in a quantitative discipline, a super computer and a vivid imagination. For complex structured securities and exotic derivatives, the only available price is from the bank that originally sold the security to the investor. Prices available from the purveyor of the instrument (a concept known as mark-to-myself) strain reasonable concepts of independence and objectivity.

A current market price of 85% for a AAA security does not actually mean that you will lose 15% of the face value. It is only an estimate of likely losses. It may reflect the opportunity loss of being able to invest in the same or similar security at the time of valuation. In volatile markets, excessive uncertainty or risk aversion means that values deviate significantly from actually cash values.

MtM prices may be prone to manipulation. An often neglected element of the Enron scandal was the company’s ability to convince its auditors and the U.S. Securities and Exchange Commission (“SEC’) to allow MtM accounting to be used in the natural gas industry allowing the company to record current earnings based on the future value of long term contracts.

In dealings with hedge funds and structured investment vehicles (“SIVs”), banks have an incentive to mark positions at high prices thereby preventing complex and illiquid securities being sold at a discount and pushing down prices in the market. If these securities actually traded then the lower market price would have to be used to value positions increasing losses and margin calls on already cash strapped investors.

A lower price can be used to force margin calls and selling that may allow a dealer to buy the assets cheaply. Long Term Capital Management (“LTCM”) believed that the dealers brought about their downfall by moving the market values against their positions. In the current credit crisis, at one time markets resorted to barter – you exchange what you want to sell for something else – to avoid recording low prices for securities.

MtM prices, no matter how dubious, drive real investment and credit decisions. Holders of AAA rated securities may be forced to sell securities showing losses because MtM losses reach “stop loss” levels. Where investors have borrowed against these securities, the falling MtM value supporting the borrowing means finding money to top up the collateral or selling the securities thus realizing the loss. In the case of SIVs, the MtM losses trigger breaches of tests that require selling securities to liquidate the structure.

MtM values are used to establish current portfolio values and allow investors to invest or withdraw funds. Errors in pricing lead to transfers in wealth between incoming and outgoing investors; for example, a low value punishes a redeeming investor but rewards the new investor. In 2007, difficulties in establishing MtM values caused some funds to suspend redemptions. Sound investments may be sold off to prevent further losses or realize earnings to cover other losses even where the market does not fairly value the asset penalizing investors.

In the global financial crisis, with the capital markets virtually frozen, the extent of losses on bank inventories of hard-to-value products and commitments (structured debt and leveraged loans) was difficult to establish.

Financial Accounting Standard Board (“FASB”) Standard 157 (“FAS157”), which became effective for fiscal years after November 2007, is designed to provide “clarity” to the issue of fair valuation of assets and liabilities.

The centerpiece of FAS157 is the three level hierarchy of valuation (better referred to as the “three levels of enlightenment”).

The Fair Value Hierarchy prioritizes the valuation inputs used to determine fair value into:

Level 1 – this requires observable inputs that reflect quoted prices for identical assets or liabilities in active markets and assumes that the entity can access the markets at the measurement date (known as Mark-To-Market). In practice, this means a liquid asset or instrument that is actively traded; for example, where two-way prices are readily available.

Level 2 – this requires inputs other than quoted market prices included within Level 1 that are observable either directly or indirectly (known as Mark-To-Model). In practice, this means instruments that cannot be priced based on trade prices but are valued using observable inputs; for example, comparable assets or instruments or using interest rates/ curves, volatility, correlation, credit spreads etc that can be put through an accepted model to establish values.

Level 3 – this relates to unobservable inputs reflecting the reporting entity’s own assumptions used in pricing an asset or liability (known as Mark-To-Make Believe or Mark-to-Myself). In practice, this means that the asset or liability cannot be priced using observable inputs and requires the use of modeling techniques and substantially subjective assumptions.

FAS157 valuations should be based on the exit price (the price at which it would be sold) regardless of whether the entity plans to hold or sell the asset. FAS157 emphasises that fair value is market-based rather than entity-specific.

FAS157’s fair value hierarchy ranks the quality and reliability of information used to determine fair values – market prices are regarded as reliable valuation inputs, whereas model values that include unobservable inputs are regarded less reliable. The lowest level of significant input drives placement in the hierarchy and the level within the hierarchy drives financial statement disclosures.

The objectives of FAS157 are laudable and unobjectionable. Unfortunately, the standard provides significant discretion to companies in determining the values of assets and liabilities, although detailed disclosure is required. It also may create significant uncertainty in the values of assets and liabilities and financial condition of the reporting entity. This is especially true of Level 3 assets. It is also relevant to the valuation of Level 2 assets.

The problem is compounded by the fact that many major global financial institutions have increased their holdings of Level 3 assets in recent years. Major areas of valuation concern include:

1. Structured finance securities such securitised mortgages including subprime mortgages, securitised credit card obligations, asset backed commercial paper and collateralised debt obligations (“CDOs”).

2. Leveraged and private equity loans.

3. Distressed debt.

4. Principal investments by financial institutions in private equity, unlisted securities or physical assets for which there are no true market.

5. Complex derivative contracts including exotic options.

Level 3 assets of the leading 20 U.S. banks as at 31 March 2009 were reported to be $657.5 billion (as reported by the Congressional Oversight Panel in its Oversight Report dated 11 August 2009 “The Continued Risk Of Troubled Assets”). This represented a 14.3 % increase in Level 3 assets compared to three months prior (December 31, 2008). Bank of America, PNC Financial, and Bank of New York Mellon had twice as many assets (in terms of dollars) classified as Level 3 in the first quarter of 2009 compared to year-end 2008. Morgan Stanley had more than ten percent of their total assets categorized as Level 3.

The panel noted that: “The risks troubled assets continue to pose for the banking system depend on how many troubled assets there are. But no one appears to know for certain….It is impossible to ever arrive at an exact dollar amount of troubled assets, but even the challenges of making a reliable estimate are formidable.”

The key issue is that a relatively small change in the values of these Level 3 assets has the potential to reduce the capital base of the entity significantly.

The valuation of Level 2 assets may be more problematic than generally assumed especially under condition of market stress. This reflects the impact of model risk and lack of disclosure of the instruments treated as Level 2. Importantly, if market conditions deteriorate then some of these assets classified as Level 2 may need to be reassessed and treated as Level 3 assets.

It is not clear where in the Fair Value Hierarchy specific instruments are currently being valued. The correlation between disclosed bank write-offs and Level 3 assets is imperfect. This may be because individual institutions are classifying assets within the three level hierarchy using different criteria. It may also mean that there is actually no correlation between the classification and “real” losses. The lack of correlation may also reflect behavior, such as new chief executives wishing to write-off assets to be able to “blame” previous management.

Level 3 securities and derivatives cannot be valued using observable prices in liquid public markets. Market values must be based on models and estimates. Where losses are reduced (substantially) by MtM “hedging” gains, the exact nature of the hedges is not disclosed. Some banks and hedge funds have indicated that some losses resulted from hedges that did not function as intended. The hedge counterparty is undisclosed. As the gains are unrealized, if the counterparty (a thinly capitalized hedge fund) is unable to perform, then the hedge gains would be illusory. The lack of disclosure around the value of the hedges, their nature and hedge counterparties makes it difficult to gauge whether they are truly effective in reducing losses.

There are other oddities in current MtM accounting, such as the fair valuation of an entity’s own liabilities. FAS157 and Statement 159 (“Fair Value Option for Financial Assets and Financial Liabilities” issued in February 2007 by the FASB) allows the entity’s own credit risk to be used in establishing the value of its liabilities.

Changes in the entity’s credit standing are therefore reflected as changes in fair value. This results in gains for credit downgrades and losses for credit upgrades. For example, if a bank has $100 million of bonds that are subject to mark-to-market accounting and the market price drops to $80 (80%) then, it records a “gain”. As credit spreads increased, U.S. banks have taken substantial profits to earnings from revaluing their own liabilities. These MtM profits on liabilities have helped banks offset recent write-downs. But the revaluation of a bank’s liabilities is problematic. The face value of the liability must still be repaid. The gain from a higher credit spread is unlikely to result in cash profits. It is only if the entity can re-purchase its debt that the “theoretical” gain can be realised.

The Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision objected to Statement 159 prior to its passage. They argued that would the MtM of a bank’s liabilities in this way would “have the contrary effect” of increasing a bank’s net worth at the same time its “financial condition is deteriorating.”

The revaluation of a bank’s liabilities may also create volatility of earnings. Major financial institutions have recently been forced to issue substantial amounts of debt to finance “involuntary asset growth” as assets returned onto their balance sheets. This debt has been issued at relatively high credit spreads reflecting current debt market conditions. This means that if the market conditions improve, these institutions may record the mark-to-market losses on their liabilities even as their credit condition improves.

The International Accounting Standards Board (“IASB”) is understood to be considering the issue. Under proposals being considered, gains on falls in the value of an issuer’s own debt my no longer be allowed to be recognised. This would remove one of the most controversial elements of MtM accounting.

http://www.econbrowser.com/archives/2010/02/the_feds_discou.html

The Federal Reserve Board announced on Thursday that it is raising the interest rate at which banks borrow from the Fed's discount window to 0.75%, a 25-basis-point increase, and intends to return discount lending primarily to the traditional overnight loans. "The rate hike cycle begins," declared 24/7 Wall St, and Business Week reported:



But I don't believe that's what the discount rate hike means at all.

The Fed sometimes has used discount rate changes as a signal of its intentions for interest rates more broadly. But the Fed press release accompanying the move stated flatly that's not the case this time:



The same message was emphatically repeated in statements by Fed Governor Elizabeth Duke and Federal Reserve Bank of New York President William Dudley. Maybe you have a theory that the way the Fed communicates that it intends to raise rates is by denying that it intends to raise rates. If so, I can't help you.

The Fed described its true intentions in the minutes of the Jan 26-27 FOMC meeting:



All of which the Fed has now implemented. The FOMC minutes also indicated that the purpose of a discount rate hike would be



The Fed does not want to be lending to financial institutions on a permanent basis, and for this reason has been winding down the TAF and other lending facilities.



Subset of Federal Reserve assets, in billions of dollars, seasonally unadjusted, from Jan 1, 2007 to February 10, 2010. Wednesday values, from Federal Reserve H41 release. swaps: central bank liquidity swaps; MMIFL: net portfolio holdings of LLCs funded through the Money Market Investor Funding Facility; CPLF: net portfolio holdings of LLCs funded through the Commercial Paper Funding Facility; TALF: loans extended through Term Asset-Backed Securities Loan Facility plus net portfolio holdings of TALF LLC; ABCP: loans extended to Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility; PDCF: loans extended to primary dealer and other broker-dealer credit; discount: sum of primary credit, secondary credit, and seasonal credit; TAC: term auction credit; RP: repurchase agreements;
fed_asset_facil_feb_10.gif

The Fed clearly sees winding down the level of discount window lending as part of the same process. Raising the discount rate and returning to one-day loans are the ways it intends to finish doing that.



Discount window lending by the Federal Reserve (sum of primary credit, secondary credit, and seasonal credit), in billions of dollars, seasonally unadjusted, from Jan 1, 2007 to February 10, 2010. Wednesday values, from Federal Reserve H41 release.
fed_discount_feb_10.gif

As I noted last week, despite phasing out various facilities, the Fed intends to allow its massive MBS holdings-- an alternative form of long-term lending by the Fed-- to decline only gradually. Choosing to sell off some of these would be an important signal that the Fed's assessment of the economy and near-term plans have changed.

Raising the discount rate would not.



Mortgage-backed securities held outright by the Federal Reserve, seasonally unadjusted, from Jan 1, 2007 to February 10, 2010. Wednesday values, from Federal Reserve H41 release.
fed_mbs_feb_10.gif

THE COMMENTS THAT FOLLOW ARE ENLIGHTENING, AS WELL

http://www.commondreams.org/



(news blurb over at Commondreams - that's it, in its entirety - but then, what else needs to be said?)

:puke:

When, they'd come down for visits (her parents live next door), he and I would talk about politics and legislative practices. From what he's told me about the Missouri Legislature, incest would be an understatement.

http://alephblog.com/2010/02/20/how-long-to-the-point-of-no-return/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheAlephBlog+%28The+Aleph+Blog%29

We have had a blessed period post-WWII, where there have been no defaults of major nations. But that is not normal. Nations default on their debts if they get too large, or they repudiate through inflation, or they raise taxes on a docile public.

The main point of the paper is that we are past the point of no return in most major nations, without significant changes that would diminish living standards for some time. Add the implicit obligations to the explicit debt, and there is quite a mountain to climb. Defaults are coming, the only question is what nations will default.

I often think that economists need to get out of the math ghetto, and study history. Math is not capable of capturing nuances. I write this as one who uses advanced statistical analyses regularly. History is more robust than mathematical analyses. Math occludes understanding in economics because it forces a numerical simplification of matters that have more dimensions than are admitted in the analysis.

Are there doubts about this? Here are some simple tests: How well do macroeconomic models forecast, particularly at turning points? On microeconomics, what kind of R-squared are they getting when they test the general equilibrium neoclassical model? Are many of the testable hypotheses are not rejected? When last I looked, R-squareds were in the percentage single digits, and most testable hypotheses were rejected.

So why do we think that developed nations could not default on their debts? The book "This Time is Different" should disabuse such notions. Major nations have often defaulted on their debts. It is regrettable, sinful, but normal.

Personally, I think that all of the developed nations as a group have gotten lazy, and also do not realize the degree to which they are interconnected, particularly through their banks. This is not a call for governments to reach out and help one another, but a yellow flag to say, “Don’t bail out other nations. Focus on the effects on your own country; if you must do bailouts at all, focus on your local financial institutions, and then create risk-based capital rules that penalize foreign lending, and encourage diversification in what foreign lending is done. This is logical in a credit-based system, because you only regulate one side of the transaction.

I am not arguing for isolationism in investing, but there is a tendency in the bull phase of the credit cycle to assume that nations don’t default, and so lending to sovereign credits that are weak becomes the trade of the moment. Good regulation of financials limits the ability of those regulated to be yield hogs, particularly in the bull phase of the credit cycle.

-==-=-=–=-=-=-==-=–=

Nations are mortal. They don’t last forever, historically, if they last 200 years, that is significant. Even with nations that last so long, they can repudiate debts multiple times in their lives, though there is a cost — being shut out of the bond market for a time, until lenders forget.

So, what is the calculus on national default? It is an option, but what influences the choice?

* Willingness of public to accept more taxes.
* Willingness of the public to accept reductions in services.
* Strength of the economy.
* Willingness of foreign creditors to buy more debt.
* Willingness of locals to save through buying national debt.

Default happens when a nation gives up; they conclude that there is no way that they can pay off the debts incurred.

Nations have not given up so far, but unless economic growth increases significantly, there will be defaults in many places eventually.
----------------------------------

I CAN'T SAY THAT I AGREE WITH THIS ARTICLE. GIVEN A CHOICE BETWEEN LOSING A NATION AND LOSING A BANK, I'D SACRIFICE THE BANKSTER EVERY TIME....

THE NATIONS ARE NOT LOST, THEIR PEOPLE ARE IMPOVERISHED BY BANKSTERS. THAT IS WHAT GLASS-STEAGAL PREVENTED FOR 60 YEARS. AND IT DID SO GLOBALLY.

http://ftalphaville.ft.com/blog/2010/02/17/150521/the-us-is-not-a-viable-concern-anymore-duncan/

FT Alphaville spoke with Richard Duncan, partner at Blackhorse Asset Management and author of The Dollar Crisis on Tuesday, regarding his new book The Corruption of Capitalism. And while he is pretty pessimistic on the US, Duncan says there is a way out if policymakers make bold decisions.

But first some background. In the Dollar Crisis, published in 2003, Duncan explained how the collapse of the Bretton Woods system in 1973 was always going to lead to a global financial crisis due to the trade imbalances it encouraged and created. Based on the premise, Duncan successfully predicted the subprime problem, the downfall of government sponsored agencies as well as the banking crisis (and related bailouts) we’ve all — seven years on — come to know and love.

Simply put, according to Duncan, the breakdown of the gold standard allowed too much paper-money to be created in the US. This de facto funded the US deficit, which respectively fuelled a savings glut in Asia. That inevitably drove dollar inflows back into the US — which themselves, over the course of a four-decade period, fueled a global credit bubble of simply gargantuan proportion.

In Duncan’s words, the collapse of Bretton Woods represented the moment “capitalism became corrupted by government debt”. From that point on “US policymakers abandoned the core principles of economic orthodoxy: balanced government budgets and sound money”.

One chart reflecting the situation well according to the author is this one:



In Duncan’s eyes it clearly shows the breaking of the global financial system’s imbalanced back.

To his frustration, though, it’s not a point that’s been grasped by policymakers yet. Policy response if anything has been ill-fitting, meaning the world’s economy is on life support — at best. As he explained to FT Alphaville:

Last year the US economy shrank by 2.4 per cent. But the budget deficit was 10 per cent of GDP. Without that deficit spending, the economy would have shrunk by at least 12 per cent, i.e. -2 per cent plus -10 per cent. Even after that deficit spending, the unemployment rate is 10 per cent, interest rates are zero, and central banks around the world are printing enormous amounts of paper money to prevent economic collapse. This policy response is supporting the global economy but it has not even targeted the structural flaws responsible for the crisis.

The point being: the world’s largest economy and engine of global economic growth — the United States — is simply not a viable concern any more. As Duncan explained it:

The country is de-industrializing because wages in the US are up to 40 times higher than those in developing countries like China. Therefore, the United States makes very little that the rest of the world cannot buy somewhere else much more cheaply.

And so, like any troubled company, the US too must restructure itself if it is to remain operational, says Duncan. How it goes about it, though, will be crucial to its success. The best policy according to the author would be heavy government investment in so-called ‘future’ industries — everything from solar, biotech, nano-technology and so on. Trouble is, a move like that would take more government spending not less.

Duncan estimates some $3,000bn or so on top of the $10,000bn already estimated in deficit spending over the next 10 years would be needed to put the US back on top of the global industrial game in this way.

The worst-case scenario, meanwhile, would be America turning into Japan while it attempted to do just that. On the flip side, it’s from Japan’s experience that valuable lessons could also be drawn. As Duncan explained (our emphasis):

When Japan’s bubble popped in 1990, the Japanese government’s debt to GDP was 60 per cent. The Japanese economy has been on government life support since then and government debt to GDP is now more than 200 per cent.

During the bubble years of the 1980s, a great deal of profit was made in Japan. That money was available to finance the expansion of government debt after the bubble popped. If it had not invested in government bonds it would have been destroyed, because there are no viable investment opportunities in a post-bubble economy. So the private sector has financed the expansion of government debt in Japan, and it has done so on concessionary terms.

The 10-year Japanese government bond yield is only 1.3 per cent. Now that the US bubble has popped, the US government will also be able to greatly expand its debt. But the lesson the US must learn from Japan is not to waste that money building bridges to nowhere, but instead to use the money wisely to restructure the economy to restore its viability. This global crisis will not end until the United States restructures its economy and restores its long-term viability.

The consequences of a scenario where the US failed to respond effectively, meanwhile, would be grave indeed. Not only would the US slip into irreparable decline, according to the author, globalization would break down and export-oriented Asian economies could collapse....

BUT WAIT, THERE'S MORE! SEE LINK

---------------------------------------------------------------------

ACTUALLY, THE US REACHED NON-VIABILITY WHEN IT LET THE CORPORATIONS WALK ALL OVER IT, STARTING WITH THE CIVIL WAR, AND ACCELERATING WITH THE ALL-OUT RAID ON THE TREASURY THROUGH TAX CUTS TO THE RICH AND THE CORPORATIONS AND THE GUTTING OF MANUFACTURING IN THE PREVIOUS 50 YEARS.

IT WASN'T THAT PAPER MONEY DROWNED THE US--IT WAS THAT REAGAN'S GOVERNMENT SUBSTITUTED DEBT FOR REVENUE, WHILE GIVING AWAY THE STORE TO THE OBSCENELY WEALTHY. AND "W" CONTINUED THE POLICY, UNDOING ALL THE WORK VOLCKER AND CLINTON DID TO RIGHT THE SHIP OF STATE.

THE COLONIAL US SHOWED THAT PROPERLY HANDLED, FIAT MONEY WORKS. WHICH IS WHY THE EUROPEAN BANKSTERS TRIED TO SHUT IT DOWN AND FINALLY SUCCEEDED WITH THE MIDNIGHT PASSAGE OF THE FEDERAL RESERVE ACT IN 1913.

GOLD (HARD CURRENCY) IS NOT A GREAT WAY TO PREVENT SUCH CHICANERY (THERE ISN'T ENOUGH OF IT FOR CIRCULATION AND IT'S HELL TO MOVE AROUND AND KEEPING TRACK ELECTRONICALLY INVITES HACKING FRAUD), BUT IT MAY BE THE ONLY WAY IF PEOPLE IN GOVERNMENT AND BANKING INSIST ON BEING CRIMINALS.

there won't be any defaults.

But even the U.S. can't print enough to keep this global financial Ponzi going, and eventually it will implode.

http://www.prospect.org/csnc/blogs/beat_the_press

Thomas Friedman told readers that: "But now it feels as if we are entering a new era, 'where the great task of government and of leadership is going to be about taking things away from people,' said the Johns Hopkins University foreign policy expert Michael Mandelbaum."

Unfortunately, Mr. Friedman apparently doesn't talk to anyone who has ever taken any economics. There are no serious forecasts that do not project that productivity will continue to grow for the indefinite future, and many project that productivity will grow at a more rapid pace than it did in the years from 1973-1995. This means that there is no reason, except incompetent economic management and/or the continuing upward redistribution of income, why the vast majority of the population should not experience improvements in living standards. This would mean an increase in both public and private services.

--Dean Baker

ANOTHER BLOG FROM SAME

While tens of millions of ordinary workers pay taxes at a 25 percent marginal rate, many of Wall Street's highest paid dealmakers get to pay tax at just a 15 percent rate. They get this lower rate because of the special treatment of "carried interest," also known as the fund managers' tax break.

The Washington Post has a piece about how the populists of the left and right can't seem to get the Senate to take away this special break for many of the richest of the rich. While the Post piece is useful in calling attention to the absurdity, that at this time of intense populist anger, this huge handout to the rich continues unchallenged, it implies that there is some rationale for the tax break.

The basic logic of "carried interest" is extremely. Most fund managers get much of their pay on commission. In addition to getting a flat percentage of the funds being managed (typically 1-2 percent annually), they usually get paid a share of the fund's earnings, typically 15-20 percent. This latter payment is the "carried interest." As a result of the fund managers' tax break, this carried interest is taxed at the 15 percent capital gains tax rate rather than being treated as normal wage income.

The Post errs by presenting the utter nonsense given by the tax break's defenders without challenge. There is no logical distinction between carried interest and the commission payments that a shoe salesman or a realtor receives. This commission payments are taxed as normal wage income. There is no reason, other than the power of Wall Street lobbyists, to treat the commissions of fund managers differently. The Post should have included someone who made this point.



--Dean Baker

The NYT has an analysis this morning of the Fed's "exit strategy" from its quantitative easing policy that was designed to support the economy after the collapse of the housing bubble. It seems that the Fed is pursuing an exit strategy, so it is reasonable for the NYT to report on the policy.

However, this implies the Fed is also violating the law that governs its operation. The law requires it to pursue the goals of price stability and high employment, which is defined as 4.0 percent unemployment. The Fed's own projections show the unemployment rate remaining above 5.0 percent for the next 5 years. With no serious threat to price stability on the horizon (the core inflation rate has been falling), there is no obvious justification for the Fed's failure to more aggressively pursue expansionary policy.

The NYT and the rest of the media should be running stories on the Fed's blatant violation of the law.

--Dean Baker

Hungary, Which Was Saved by Not Being in the Euro, Lectures Greece on the Virtues of the Euro, and the NYT Doesn't Notice

Our greatest economic minds were too out to lunch to notice an $8 trillion housing bubble and it just keeps getting worse. The NYT tells us how Hungary is giving lectures to Greece about how it should just suck it up, cut its spending, and then celebrate the wonders of the euro, offering its own experience as a model.

The headline of this piece should have been something like "Hungarian Premier Doesn't Understand Economics." While the euro may give Greeks or Hungarians the sense of security claimed by Gordon Bajnai, Hungary's prime minister, this sense of security is currently coming at a very great cost to Greece.

Because Hungary was not on the euro, it was able to devalue its currency when the financial crisis hit in 2008. As a result, its current deficit fell from 8.4 percent of GDP in 2008 to 3.0 percent of GDP in 2009. This shift of 5 percentage points of GDP gave an enormous boost to Hungary's economy. It would be the equivalent of a $900 billion annual stimulus package in the United States, roughly three times the size of the stimulus package approved by Congress last year.

The boost provided by the improvement in the current account deficit meant that Hungary could cut government spending without simply deepening the downturn. However, since Greece is tied to the euro, it cannot count on an improvement in its trade balance to offset the contractionary impact of its budget cuts.

This article should have properly been devoted to ridiculing Mr. Bajnai. If what it claims is accurate, he obviously has no understanding of the factors that saved Hungary from a steeper downturn. Instead, the article implies that he has some substantial does of wisdom to pass along to his Greek counterpart.

--Dean Baker

BAKER'S BEEN HOT LATELY

http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=02&year=2010&base_name=ap_starts_running_editorials_o#118453

AP broke with standard news practices by circulating what can only be considered an opinion piece on the deficit as a news story. The article exclusively presents the views of deficit hawks and misrepresents many fundamental issues about the budget.

After noting the Greek budget crisis, the second sentence tells readers: "In the world's largest economic and military power, there's a far more serious debt dilemma."

The piece continues:

"For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario — a full recovery and a return to prerecession employment levels.

The government already has made so many promises to so many expanding "mandatory" programs. Just keeping these commitments, without major changes in taxing and spending, will lead to deficits that cannot be sustained.

Take Social Security, Medicare and other benefits. Add in interest payments on a national debt that now exceeds $12.3 trillion. It all will gobble up 80 percent of all federal revenues by 2020, government economists project."

Actually, if there is a full economic recovery, there is absolutely nothing in the next decade that suggests that the deficit will not be sustainable. The United States has experienced higher debt to GDP ratios in the past and other countries, like Japan and Italy, already have higher debt to GDP ratios. There is no one cited in the article who makes the assertion that the debt to GDP ratio will be unsustainable in the short-term. In other words, this strong assertion is entirely the invention of AP.

The article implies that there is something especially troubling about Social Security, Medicare and other entitlement programs, plus interest, taking up 80 percent of tax revenue. These programs involve the vast majority of what the government does. It's sort of like car sales taking up the bulk of Ford's revenue. Ford is a car company. In the United States we have chosen to run a retirement program (Social Security), a retiree health program (Medicare), a low-income health program (Medicaid), along with unemployment insurance and several other items through the government. Most other areas have been left to the private sector. The article apparently disapproves of this decision, but that doesn't make it a crisis.

The article also includes the statement: "The Social Security system, the biggest social spending program, has begun paying out more in benefits than it collects in payroll taxes. For the past quarter-century, Social Security had produced a surplus that helped finance the rest of the government."

There is nothing problematic about Social Security paying out more in benefits than it collects in taxes, this was exactly the point of building up the Social Security trust fund. The tax rate was deliberately set at a level higher than necessary to pay current benefits to help defray the cost of the baby boomers retirement. This means that the program would at some point start paying out more in benefits than it collects in taxes. The alternative case would imply that we raised the dedicated Social Security tax to finance the defense budget. No public figure has claimed that this was the point of the 1983 increase in Social Security taxes.

The article also implies that the $1.3 trillion 2010 deficit is due to profligate spending rather than an economic crisis caused by the collapse of the housing bubble:

"The budget he submitted to Congress this month proposes record spending of $3.8 trillion for 2011. Taxes in next year's budget will support only $2.5 trillion of that spending, leaving $1.3 trillion to be borrowed.

The president's budget is a best-case outlook, from the administration's vantage point.

It doesn't take into account future liabilities from the growth of entitlement benefits and is based on projected economic growth that depends on a solid recovery."

In fact, given the weakness of the economy, there would be no point in trying to reduce the deficit from the levels projected for 2011. This would lead to higher unemployment. Also, contrary to the article's assertion, the baseline growth projection for 2010 and 2011 is extremely weak, around 2.5 percent. Usually, when the economy has a severe downturn the economy grows very rapidly in the recovery -- around 6 -8 percent. So, this is absolutely not a "best-case outlook."

Finally, the piece confuses the budget deficit and trade deficit, telling readers: "The U.S. debt crisis also raises the question of how long the world's leading power can remain its largest borrower." The U.S. is the world's largest borrower because it has an over-valued dollar. The budget deficit has no direct impact on how much the government borrows internationally. Remarkably, the over-valued dollar is not mentioned once in this article.

Given the over-valuation of the dollar, the United States must have either a large budget deficit or very-low private savings, or extremely high unemployment. This is an accounting identity. People who report on the economy for AP should know this.

--Dean Baker

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

Last trade 80.610 Change +0.103 (+0.13%)

Daily Sound Bites 02.23

http://www.dailyfx.com/forex/fundamental/article/daily_sound_bites/2010-02-23-1306-Daily_Sound_Bites_02_23.html



...more...

USD Graphic Rewind 02.23

http://www.dailyfx.com/forex/fundamental/article/usd_graphic_rewind/2010-02-23-0732-USD_Graphic_Rewind_02_23.html



...more...

I wish I understood the import of this--perhaps I'm too nationalistic. I haven't been out of the country since----1988, I think. Not even Canada, since I see no value in $100+ passport just to visit my neighbor 40 minutes away.

why - exactly - the dollar is important. Mostly, it's the currency that's in your wallet - it's the one you take to the store and exchange for goods or services.

It's the one that crashed the market in 1987 when Japan dumped it.

It's the one that was worth 120 on the basket when Dimson took over. It really is a leading indicator of what is coming down the pipe at you (or me) and watching it is a habit that I developed so long ago that the exact date escapes me.

so ... I watch it. If you want to keep an eye on it with me, welcome! If not, well - that's okay by me, too.

I think ... just mho ... that the dollar will wave or flag and be the thing that might tell us when it is actually a recovery or when the day of reckoning has arrived.

:grouphug:

:hi:

well, that would be useful to watch and know. Thanks!

Is that why Japan is in such bad shape--revenge for dumping the dollar? They don't dare go outside for help and have no friends....

I thought it was more that all of a sudden, Japan's bubble burst, and they had to bail out of everything...they didn't want to dump the dollar, they had to liquidate.

It was several lifetimes ago, for me. I suppose maybe someone wrote a book or two of analysis--or maybe not. That was the height of know-nothingness, when America was dazzled by the Morning as decreed by St. Ronnie...

it's times like this that I miss 54anickel's input - she was such a wizard at knowing which meeting (Louvre - Geneva III - etc) that what was decided...

but here's a little background on the Plaza

http://en.wikipedia.org/wiki/Plaza_Accord



but then I think that James A. Baker, III was involved in the backdrop on this and wiki is not giving the whole picture

I did some googling, and just a cursory search has yielded a whole can of snakes. It was horrible, and we are still suffering from it.

Why this escaped my attention then? Well, that was the Divorce Zone of my life...

Nobody reasonably expects profits to go up, because profits were inflated by fraud and concealed borrowing and cutting bone and muscle out of companies and consumers alike. Expectations of profits were even more inflated, beyond any reasonable expectation, by irrational business models and unmeetable goals set by bean counters and MBAS and Investment Bankers, Vultures and other speculators.

Now there's far too much capacity, and far too little discretionary spending to soak up the products that Capacity produces. (There would still be Demand, if anyone could afford to pay.)

There are Huge Heaps of Obscene Wealth, festering like toxic garbage dumps in GS et al. accounts instead of circulating through the economy, providing goods, services and jobs to the mass of humanity inhabiting the globe.

Unless and until responsible tax levies are restored to suck up that excess, toxic wealth and put it back in the Real economy, where people are, instead of siphoning it off into the Unreal economy of Profiteers, the situation will not improve.

Here endeth the sermon.

we'll never see that change.

We need politicians that are willing to do the right thing (and tell Corporate America to Fuck The Hell Off) and not worry about the ramifications come re-election time. We might have to stack candidates up one after another like rows of shark teeth.

They will not be allowed to collapse under the 2nd coming of the Hoover admin.. Pure corruption and crime now rule, not that it wasn't warned of. The criminals will stay here until threatened by another administration, at which point the markets will collapse. The following "witch hunt" will be history repeating itself, the only question is who will be the targets this time.

The Supreme Court Just Decided Where Your Principal Place Of Business Is
http://www.businessinsider.com/legally-your-business-is-where-your-executives-are-2010-2

The Supreme Court ruled unanimously today that a corporation's "principal place of business is where a corporation’s high level officers direct, control, and coordinate the corporation’s activities."

In other words, for diversity purposes, a corporation is a "citizen" where it's incorporated (likely Delaware) and where it's executives lay their pretty little heads -- and nowhere else.

In Hertz v. Friend, the 9th Circuit held that the rental car companies principal place of business was California, where most of its operations take place, rather than New Jersey, where its headquarters are. The Supreme Court disagreed.

. . .

What does his mean? That the discussion over removing a case to federal court just got a whole lot simpler. Arguments and calculations regarding what is built where or much activity is in a particular state. Bottom line -- a whole lot of cases will be removed to federal court in big states where a company does a lot of business but does not have its headquarters.

This really is a huge shift, as there was a major difference in how the different circuits handled the issue. It can also be considered a big victory for corporations in general -- they almost always prefer to be in the more formal federal court system whereas plaintiffs prefer state courts.


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Fed judges are almost all corporate friendly judges.

No wonder the Feds consider us to be consumers and not citizens. Appears Big Corps are the citizens of choice in the Feds eyes.

http://www.guardian.co.uk/business/2010/feb/23/protesters-blockade-greek-stock-exchange

Militant trade unionists blockaded the entrance to the Athens stock exchange today as millions of striking Greek workers prepared to pour on to the streets to protest against austerity measures aimed at ending a debt crisis that has sent tremors through the eurozone.

The demonstration, by protesters affiliated to the communist party, came on the eve of a 24-hour general strike that is expected to bring Greece to a standstill.

Unions described it as yet another sign of the labour unrest the socialist government can expect from spending cuts they fear will deepen the country's recession.

"The measures call for low-income Greeks to carry the burden and no one else," said Giorgos Perros, one of the protest leaders. "We believe that stock market indices – gauges of wealth – should halt for a day."

The action coincided with a further blow for the Greek economy as the credit agency Fitch downgraded the ratings of the nation's four largest banks a notch from BBB+ to BBB.

more . . .


Nationwide strike on Wed.
http://www.ana-mpa.gr/anaweb/user/showplain?maindoc=8454561&maindocimg=8452797&service=98

A 24-hour nationwide labour strike called for Wednesday is expected to generate problems with mass transports and bring the wider public sector to a standstill for most transactions with the public.

A statement issued by ADEDY, the civil servants' union, called on its members to participate in the strike together with the private sector unions, underlining that civil servants have become targets, being accused for Greece's double-digit budget deficit and the country's public debt.

Additionally, Athens News Agency-Macedonian Press Agency (ANA-MPA) services will not be available on Wednesday due to a 24-hour strike action.

The media strike is from 6 a.m. Wednesday to 6 a.m. Thursday.

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Unions prepare to paralyse Greece
http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=344764&version=1&template_id=39&parent_id=21


A nationwide strike is expected to paralyse Greece today, when more than 3mn public and private sector workers embark on a 24-hour walkout in response to austerity measures announced by the government.

Employees in government ministries, municipal offices, hospitals, schools, universities, banks, courts and factory workers are among those set to participate in the strike.

Rail, road, sea and air transport across the country will be affected. With journalists expected to join the strike, a virtual news blackout is anticipated.

The Athens metro and bus service are to operate a skeleton service to allow striking workers to get to the demonstrations that will be held in the city centre.

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Of course little or no word of any of this mentioned in US news.