The Weekend Economists Pan the 3 Stooges on Flag Day: June 12-14, 2009

So, let's run it up the flagpole and see who salutes it!

There's nothing more American than our Golden Age of Comedy which ran from the introduction of radio through the election of Ronald Reagan, when irony died and we became a lot more like the USSR before perestroika: black humor, whispered by small groups of cognoscenti as the majority of the population walked around stoned on St. Ronnie; contraband publications run off on mimeograph machines; "Doonesbury" hidden on editorial pages so as to not pollute the eyes of the comics-reading public, or banned altogether if the topic of the day was deemed too risque (politically, not sexually). The backlash against intelligence, progressiveness, social equality, and so forth was anything but funny, and is only now lifting like the smog after the Clean Air Act went into effect...

And right there, in syndication if not real time, educating millions of Baby Boomers while they were impressionable, were the 3 Stooges: Larry, Moe, Curly, or sometimes Shemp filling in for Curly. Classic slapstick, with a touch of ethics and social awareness, teaching us what it meant to be Americans in modern America, or something like that.

Yes, even highbrows like Yours Truly enjoyed the vaudevillians--although not to the extent of my colleague of 35 years ago, who had EVERYTHING about them and every one of their routines memorized. Where are you now, Jason Anjoorian? I sure could use the help of your capacious knowledge! Jason wasn't alone, either. Before Star Trek, there were the Stooges.

Hulu has some clips and TV stuff:

http://www.hulu.com/three-stooges-collection

http://www.hulu.com/search?query=three+stooges+movies

and you are welcome to add your reminisces to this thread, as well as any economic news or commentary, if that's what makes you laugh.

Nowadays, the Trio is making a comeback, but in updated, 21st century form. Now we have Larry (Summers), Moe (Geithner) and Curly (Bernanke) with Shemp (Paulson) as alternate, pulling pranks on the world stage, messing with nothing less than the global economy. And what a farce that is!

Come join in while we track the antics of the "Fab Four". (And yes, we WILL do the Beetles some weekend to come. Also Abbott and Costello. I haven't forgotten!)

Meanwhile, do contemplate the significance of Flag Day for yourself, versus for the nutcases who profane the flag by wrapping their hatred and madness in it...and have a lovely weekend.

I'm doing an ice cream social for the Condo residents this Sunday. If you are in town, drop in! We even offer chocolate malts and Boston Coolers! Talk about Retro! No Black Cows, though. I didn't buy any root beer.

but the night is young.

http://widgets.dilbert.com/o/4782b1ae641c3eb6/4a32d3cb44de5129/478cf2052d7472a1/148f1429"

"If sunbeams were weapons of war, we would have had solar energy a long time ago." -- George Porter (1920 -) British chemist.

The Observer, 'Sayings of the Week,' 26, Aug. 1973.

http://www.ft.com/cms/s/0/524d50da-56ae-11de-9a1c-00144feabdc0.html

By Javier Blas in London



The United Nation’s World Food Programme is cutting food aid rations and shutting down some operations as donor countries that face a fiscal crunch at home slash contributions to its funding.

In recent weeks the WFP has quietly started reducing rations and closing down distribution operations to conserve cash. It reduced emergency food aid rations in Rwanda, for example, from 420 grammes to 320g of cereals per person a day.

The UN agency also suspended food distribution to 600,000 people in northern Uganda as the result of its lack of funding, and has reduced its operations in Ethiopia and North Korea. It is also on the verge of cutting rations to 3.5m drought victims in Kenya.

The agency, the world’s leading hunger fighter, had less than $1.5bn (€1.1bn, £907m) at the end of last week, out of a required budget of $6.4bn. With almost half the year gone, officials in donor countries said, it was unlikely that the WFP would receive the money it says it needs to prevent hunger in many poor countries.

The WFP avoided a similar problem last year after it successfully launched an extraordinary appeal to raise funds to fight the food crisis. The plea secured about $2bn in extra funds, including a single donation from Saudi Arabia of $500m, which became the second largest donor to the programme, after the US.

The crisis this year seems more acute, however. Donors, with spiralling fiscal deficits at home, have told the WFP to scale back its reach, while the agency is facing extra calls from countries seeking food aid, as the economic crisis brings unemployment and a drop in remittances. Meanwhile, food prices continue to rise. The cost of food commodities such as corn and soyabean has surged this week to levels not seen since the start of the food crisis in late 2007...

http://www.ft.com/cms/s/0/148b4b6a-56bf-11de-9a1c-00144feabdc0.html

When Barack Obama’s administration first circulated its proposals to reform Wall Street regulation, at their core was a plan to consolidate Washington’s Balkan map of overlapping regulatory agencies. That idea underestimated the power of entrenched interests on Capitol Hill.

Tim "Moe" Geithner, the Treasury secretary, will next week unveil revised plans, which are likely to include the creation of two new structures on top of the existing alphabet soup of agencies. These will include a “council of regulators” – likely to comprise the heads of the largest agencies – which will oversee the ­Federal Reserve’s new uber-regulatory role of overseeing systemic risk.

There is also likely to be a new agency to regulate consumer products, such as mortgages and credit cards. Far from simplifying Washington’s inefficient system of regulation, many fear the envisaged reforms will “Balkanise the Balkans”, as one financial lobbyist put it.

The reforms are similar to those Hank "Shemp" Paulson, George W. Bush’s last Treasury ­secretary, mooted in 2008. Even Republicans, who ­generally oppose tightening regulation, and who are likely to oppose the Treasury secretary’s proposal to increase the Fed’s formidable powers, are surprised by their minimalist nature.

“There are powerful forces at work that want to preserve the existing system,” Richard Shelby, the senior Republican member of the Senate banking committee, told the Financial Times. “They want to do everything they can to keep things the way they are.”

Among the winners are the heads of the main committees on Capitol Hill, which will preserve their oversight of the various agencies. The Wall Street lobby groups, which have drastically stepped up their spending in Washington, are also breathing more easily. The more complex the system of regulation, the more their members can shop between regulators.

Scott Talbott, a senior figure at the Financial Services Roundtable, which played a key role in eviscerating a recent bankruptcy bill that would have given judges the power to write down mortgages, said the financial sector was mostly happy with the proposals.

Its principal objection was to the creation of a consumer regulatory agency since that would separate regulation of the product from the institution. “We are supportive of regulatory reforms to modernise the system to prevent this kind of crisis from ever happening again,” Mr Talbott said.

At the heart of Mr Geithner’s package will be the creation of a council of regulators to oversee the Fed. This represents a compromise between those who wanted the Fed to be the sole authority overseeing systemic risk and those who believed the Fed failed in its basic regulatory duties over the past decade....

Which, alas, they'll probably get.

Now, OTOH, they are more than willing to lobby to keep the rest of us from getting a Single Payer Health-care system.

Man, is stuff screwed up or what?

You get the prize for today: the Stooge of your choice!

http://www.youtube.com/watch?v=sQti6nrQbU4

Shemp tries to reform the others...

SOMEBODY DONE SOMEBODY WRONG SONG!

http://www.ft.com/cms/s/0/ea8e69b8-56d8-11de-9a1c-00144feabdc0.html

By Andrew England

It has been a week when Maan al-Sanea’s fortunes have dipped to new lows. For one of Saudi Arabia’s most powerful businessmen, having his personal bank accounts frozen by the Saudi central bank and acknowledging liquidity problems with his Saad Group must have been bad enough.

But this week, it is understood the billionaire’s woes have caused some international banks to close credit lines to him and his businesses. To make matters worse, the United Arab Emirates’ central bank sent a circular to banks enabling them to offset exposure to him and one of his companies against available assets, while ordering banks in that Gulf state to “not allow any new facilities” to them.

The predicament of the Saudi, who is described as a hard negotiator, has shocked investors in the Gulf and beyond.

“From my point of view it is sad,” says Tony Pidgley, the co-founder of The Berkeley Group, a UK housebuilder and long-term business associate of Mr Sanea. “It’s a shock because I always thought he was a well-balanced, cautious man.”

Mr Pidgley first met Mr Sanea some 20 years ago. Then Mr Sanea, 54, was little known inside or outside the Gulf kingdom. But he arrived at Berkeley’s office with a team of English analysts, ensured they were satisfied with the management and took a stake in the British company.

In the years since, Mr Sanea’s holding in Berkeley grew to slightly less than 29 per cent, while his profile soared both internationally and domestically to new heights – most notably when the Saudi acquired a 3 per cent stake in HSBC two years ago.

Today, however, the unexplained action by the Saudi central bank appears to have triggered a chain reaction that is threatening his empire. At least 20m of Mr Sanea’s 32m shares in Berkeley have been placed by Citigroup and Credit Suisse this week, Mr Pidgley says. More shares have been sold in 3i infrastructure, while his stake in HSBC has also fallen to below 2 per cent since the beginning of the year.

Mr Pidgley says his company is largely unaffected, although two real estate joint ventures in London with a total value of about £20m between Berkeley and Mr Sanea’s may have to be unwound.

The saga is the latest chapter in the life of a man born into an average Saudi family living in neighbouring Kuwait. He trained as a fighter pilot before entering the business world and building a multibillion dollar fortune. This year, he was listed on Forbes’ world billionaires list with a personal net worth of $7bn, and his group has subsidiaries as far afield as the Cayman Islands, Geneva and Bahrain.

People who know the businessman trace his rise through to his connections to the Algosaibi family, regarded as one of the most respected of Saudi Arabia’s merchant families, but which is now facing its own travails.

Not only did he work for the family, but he married the daughter of Abdelaziz Algosaibi, one of the founders of Ahmad Hamad Algosaibi & Brothers.

Mr Algosaibi apparently took him under his wing and it is thought he helped finance Saad Group, which Mr Sanea founded in the 1980s. Upon Mr Algosaibi’s death in 2003, Mr Sanea’s wife is believed to have inherited a large sum of money, which is thought to have enabled Saad Group to accelerate its expansion.

By the end of 2008, Saad Group, which is named after Mr Sanea’s son who was killed in an accident, had seen its assets increase to $30.6bn, according to rating agencies.

Still, a regional banker says Mr Sanea, a keen fisherman who bases himself in Saudi Arabia’s oil-rich eastern province, was always classified as a bit of an outsider in the kingdom because he did not come “from blue-blooded stock of merchants”.

Mr Pidgley remembers a man who was on hand to help in him in the past – not least during the 1990s UK property crash when Mr Sanea was on hand to provide funding to a joint venture. “It would be easy to say he has not behaved properly but from our perspective over about 20 years, we have always enjoyed ” Mr Pidgley says. “He’s tough, you would expect a man like that to be tough.”

http://www.myfoxny.com/dpp/news/scitech/Saudi_Killer_Chip_Implant_Would_Track_Eliminate_Undesirables_83264879

SO IT'S FOX NEWS--MAYBE IT'S COMEDY, MAYBE IT'S FACT. SO SUE ME!



It could be the ultimate in political control — but it won't be patented in Germany.

German media outlets reported last week that a Saudi inventor's application to patent a "killer chip," as the Swiss tabloids put it, had been denied.

The basic model would consist of a tiny GPS transceiver placed in a capsule and inserted under a person's skin, so that authorities could track him easily.

Model B would have an extra function — a dose of cyanide to remotely kill the wearer without muss or fuss if authorities deemed he'd become a public threat.

The inventor said the chip could be used to track terrorists, criminals, fugitives, illegal immigrants, political dissidents, domestic servants and foreigners overstaying their visas.

"The invention will probably be found to violate paragraph two of the German Patent Law — which does not allow inventions that transgress public order or good morals," German Patent and Trademark Office spokeswoman Stephanie Krüger told the English-language German-news Web site The Local.

http://haaretz.com/hasen/spages/1090732.html


By Haaretz Service


The United States should cut off its aid to Israel if the country does not end its occupation of Arab land, Saudi Arabia's foreign minister told Newsweek in comments published Friday.

In response to a question on whether the U.S. should carry out the move, Prince Saud al-Faisal said: "Why not? If you give aid to someone and they indiscriminately occupy other people's lands, you bear some responsibility."

The interview with the foreign minister, which is for the magazine's June 15 issue, was published a day after Obama vowed in a speech in Cairo Thursday to personally pursue a two-state solution to the Palestinian-Israeli conflict.

Faisal added: "The United States has the means to persuade the Israelis to work for a peaceful settlement. It needs to tell them that if it is going to continue to help them, they must be reasonable and make reasonable concessions."

He went on to say that that the normalization of ties between Israel and the Arab world can only come after Israel leaves occupied land.

"If we put that before the return of Arab land we are giving away the only chip in the hands of Arab countries," the foreign minister said.

Faisal also praised Obama's speech in Egypt to the Muslim world, saying that the U.S. "is not the same America" under his administration.

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

June 10 (Bloomberg) -- Russia may switch some of its reserves from U.S. Treasuries to International Monetary Fund bonds, the central bank said WEDNESDAY. The comment drove Treasuries and the dollar lower.

Alexei Ulyukayev, first deputy chairman of Russia’s central bank, said some reserves may be moved from Treasuries into IMF debt, reiterating comments made last month by Finance Minister Alexei Kudrin. Ulyukayev’s remarks were confirmed by a Bank Rossii official who declined to be named, citing bank policy.

Treasuries fell, pushing 10-year yields toward the highest level in seven months, in response to Ulyukayev’s statement. The dollar fell against the euro on speculation that Russia will reduce its holdings of U.S. debt.

About 30 percent of Russia’s international reserves, which stood at $401.1 billion on May 29, are currently held in Treasuries, Ulyukayev said. Kudrin said on May 26 that Russia planned to buy $10 billion of IMF bonds using money from its foreign reserves.

The IMF securities would give countries a different way to contribute to the fund and are unlike traditional bonds because they pay an interest rate pegged to the IMF’s basket of currencies, known as Special Drawing Rights.

China is expected to buy as much as $50 billion of the bonds, IMF Managing Director Dominique Strauss-Kahn said yesterday.

The IMF, which has rescued economies from Pakistan to Iceland in the past year, has never issued bonds before and is seeking more cash to finance loans and aid to member countries during the worst economic slump in the fund’s 64-year history.

The head of China's second-largest bank has said the United States government should start issuing bonds in yuan, rather than dollars, in the latest indication of the increasing importance of the Chinese currency.


By Malcolm Moore in Shanghai

Zhou Xiaochuan, head of the People's Bank of China, has published a personal paper proposing to replace the dollar as the international reserve currency.
Zhou Xiaochuan, head of the People's Bank of China, has published a personal paper proposing to replace the dollar as the international reserve currency.
US Treasury Secretary Timothy Geithner delivers his speech at the National School of Development of Beijing University on June 1, 2009.

US Treasury Secretary Timothy Geithner deliverED his speech at the National School of Development of Beijing University on June 1, 2009.

Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), also said he is exploring the possibility of issuing loans to trading companies in yuan, allowing Chinese and foreign companies to settle their bills in yuan rather than in dollars.

Mr Guo said the issuing of yuan bonds in Hong Kong and Shanghai would help to develop the debt markets in China and promote the yuan as a major international currency.

It was the first time the head of a major Chinese bank has called for the wider use of the yuan, although a chorus of senior government officials have already voiced their concerns about the stability of the dollar and have said the yuan should be used more widely.

"I think the US government and the World Bank can consider the issuing of renminbi bonds," he said, asking for a "mutual cooperation" between the US and China to promote Chinese financial services. He said bond issuance could be relatively small, at between 1bn and 3bn yuan (£100m to £300m).

HSBC and Standard Chartered have both said they are preparing to issue bonds denominated in yuan.

Mr Guo is a former head of China's foreign-exchange administration, which manages the country's $1.9 trillion foreign exchange reserves. He said he was confident the yuan would become a major currency in the medium-to-long term.

Two months ago, before the G20 meeting in London, Zhou Xiaochuan, the head of the People's Bank of China, the central bank, published a personal paper proposing to replace the dollar as the international reserve currency. His call came after Wen Jiabao, the Chinese premier, asked the US to guarantee the safety of China's huge pile of US debt.

In April, the Chinese government said traders in Shanghai, Shenzhen, Guangzhou, Zhuhai, Dongguan, Hong Kong, Macau, Yunan and Guangxi could start to settle their bills in yuan, rather than dollars, paving the way for the currency to become more fully convertible.



http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5473491/Top-Chinese-banker-Guo-Shuqing-calls-for-wider-use-of-yuan.html

http://informationclearinghouse.info/article22786.htm

June 08, 2009 "Information Clearing House" -- - I remember the hullaballoo in January 1953 when GM CEO Charles Wilson, President Eisenhower's nominee for Secretary of Defense, was popularly quoted as saying that "What's good for General Motors is good for the country."

GM was the world’s largest car manufacturer. The United States was the world's unchallenged industrial powerhouse. For Americans, Honda, Toyota and Suburu might as well have been exotic Oriental dishes.

Today General Motors is undergoing the second-largest industrial bankruptcy in history. It's closing fourteen more assembly plants and slashing 21,000 family-supporting jobs. GM will have fewer than 40,000 workers building cars in the United States, one-tenth of its workforce of 400,000 in the 1970s.

Fears that this bankruptcy will lead to cascading business failures are spreading throughout GM's vast chain of suppliers and dealers. Large plants that stamp metal parts or build engines will be shuttered, including one in Massena, New York.

GM will reduce 6,000 dealerships to 3,600. Dealership closings will cut an additional 100,000 jobs. These layoffs come after a nationwide loss of 741,000 jobs in January alone--the most since 1949.

GM will no longer make Saturn, Pontiac, and Saab and will shift production of its remaining lines to new facilities in foreign countries. According to Ralph Nader, shipping production to China has long been GM's strategy.

Despite GM's bankruptcy, the Obama Administration government-orchestrated shrinkage has already cost taxpayers $50 billion. The Wall Street Journal estimates "the rescue of the car industry could cost taxpayers close to $100 billion."

Nader asks: "Why are we using tax dollars to facilitate the export of whole plants and jobs to communist dictatorships in China and to oligarchic, authoritarian regimes in Mexico who have turned workers into serfs and denied them independent unions and other rights that workers should have in any country that we have trade dealings with?"

Today what's good for General Motors is good only for Communist China and transnational corporations that benefit from cheap labor.

GM's bankruptcy and Obama's shortsighted response exemplify the self-destruction of our country's economy over my lifetime. Before I retired as a teacher, I warned my students about several dangerous economic trends that have accelerated over the last two decades.

The United States has degenerated from a world power based on industrial production to an overextended military empire based on debt and consumption. Our citizens have gone from well-paid industrial workers with comfortable savings accounts to cash-starved consumers with staggering credit card payments.

According to the Federal Reserve Bank, we Americans owe $971 billion in credit card debt. That's $3,184 per person or $8,299 per household. Consumer loans for automobile, furniture and consumer electronics total $1.617 trillion-- $5,298 per person or $13,821 per household (November 2007 report).

As bottom-line obsessed CEOs moved good jobs overseas, factory workers became Wal-Mart clerks selling Chinese products. For decades real wages have stagnated as prices continued to rise. Fifty years ago a man was able to support a family on a union member's wages while his wife stayed at home to care for the children. Now almost half of private sector workers subsist on the minimum wage.

Both mothers and fathers have to work to feed their families--sometimes two jobs or more! According to one estimate only three out of ten children today have stay-at-home moms! Who has time to read, to think, to become an informed citizen, or to understand what's happening to us?

Is there any wonder that so many of us are deeply in debt? How can we afford new cars? How do we find time to take political action for our common good?

Corporations that outsource jobs and use off-shore tax havens have prospered, while working folks have watched the American dream turn into a nightmare. Our savings evaporated with the 401(k) speculators' scam and now our last nest egg--the value of our homes-- is disappearing because of the mortgage fraudsters. In the last year US households' net worth has declined abruptly by $13 trillion!

In just fifty years--under both Democratic and Republican administrations-- the United States has gone from the world's major creditor to the greatest debtor. Tax payers spend $2 billion a day just to service the national debt. Over a trillion dollars of that amount is held by Japanese and Chinese bankers. Obama’s administration has pushed the nation’s debt to an unprecedented $6.36 trillion.

Who profits from this earth-shaking debt? Financiers and the transnational corporations driven by short-sighted greed.

Financial capital has squeezed out industrial capital and largely controls both the executive and legislative branches in Washington. I recall the outcry when George W. Bush raised $25 million for his 2000 presidential campaign from financiers, war makers, and big oil. In 2008 Barack Obama raised $150 million from the same contributors. He who pays the piper calls the tune.

How else can we explain Obama's choice of Wall Street executives to deal with the economic crisis that they created? Why was AIG Insurance too big to fail, but General Motors allowed to collapse? Obama's Wall Street approach to the GM bailout typifies his bankers' priorities. GM's restructuring is being directed by financiers who've never seen an assembly line and are looking for a fast return rather than a long range solution to America's desperate energy and transportation crisis.

If Obama really believed in the change he promised, he'd immediately initiate a national dialog on re-industrializing America. He'd ship the bankers to China and tax their ill-gotten gains to fund committees of workers, engineers and visionaries in each factory that GM plans to close.

Locally and nationally, these folks can dramatically increase jobs through conversion to production of mass transit vehicles, hybrid or all-electric cars, and alternative energy devices such as windmills and solar panels. Why wait for Obama? Before it is too late GM and Chrysler's eager and skilled workforce must gear up for this nation-saving mission.

Not enough time? In Flint in 1942, GM halted all car production and immediately converted the assembly lines to build planes, tanks and machine guns for the war effort. Re-industrialization is change we can believe in—but we will have to make it ourselves!

Irving Wesley Hall has taught English, political science, philosophy, economics and history at a number of California and New York colleges, most recently at the State University of New York at Morrisville (Norwich campus). Hall is the author of the political satire, The Einstein Sisters Bag the Flying the Flying Monkeys, and executive producer of the documentary, Onward, Christian Zionists. Visit www.notinkansas.us for details. This article was partly inspired by his Memorial Day address to the Norwich Tea Party chapter.

http://www.latimes.com/business/la-fi-cheaphomes10-2009jun10,0,7772530,full.story

John Beatrice, with daughter Emily, bought his house in Lancaster in 1989 for $120,000. In April, a slightly larger home two doors away sold for $66,500.
Properties in several areas are selling for less than they did 20 years ago, and that's not including inflation. Some first-time buyers are nabbing houses for less than what their parents paid.

In parts of Southern California, the housing crash has upended a basic tenet of the American dream: that home values always increase over the long term.

Properties in several areas are selling for less than they did 20 years ago, and that's not even counting the effects of inflation.

The reversal is a bonanza for some first-time buyers. They're nabbing houses for less than what their parents paid in the late 1980s, jumping into a real estate market that has become a kind of economic time machine.

To return to the past, take a stroll down Mulberry Avenue in Lancaster. John A. Beatrice, 55, bought his spacious two-story Spanish-style house there brand-new for $120,000 in 1989. It was a price he could comfortably afford, and he planned on staying through retirement, so he wasn't worried about price swings.

"I always knew real estate goes like this," said the aerospace engineer, moving his hand in an undulating motion like bell curves on a graph.

But he never imagined his neighborhood would drop off the charts. In April, a slightly larger home two doors away sold for $66,500. That's just over half the $130,000 it went for new in 1992. In 2005, that house sold for $330,000.

Beatrice's 29-year-old daughter is now shopping for Lancaster houses priced lower than when she was a kid.

Home prices across most of Southern California have not fallen nearly as far. The median price in the six-county area was $247,000 in April, about what it was in 2002.

But in 14 Southland ZIP Codes, mainly desert communities in the Antelope Valley and Inland Empire, median prices have fallen below levels recorded in April 1989, according to MDA DataQuick, a San Diego real estate information service.

That means thousands of homes in those neighborhoods -- even houses barely 20 years old and in decent shape -- have lost every dime of their appreciation, giving back not just the gains of the recent bubble but steady increases logged over a generation.

The April median price in Beatrice's Lancaster ZIP Code of 93535, for example, was $87,000. That's down 74% from a $334,500 peak price in 2007. Even worse was the 92410 ZIP Code in the city of San Bernardino, which covers several older neighborhoods. Its $61,000 April median represents an 84% drop from the peak of $370,000 in 2007.

Prices also tumbled below 1989 levels in neighborhoods in Palmdale, Hemet, Barstow, Desert Hot Springs, Victorville, Highland, Santa Ana and Oxnard, according to DataQuick. Several other inland communities, including parts of Moreno Valley, Banning and Rialto, had median prices that were only slightly above 1989 levels and below the April 1990 median.

The median price is the point at which half the homes sell for more and half for less.

Losing two decades' worth of gains in a single downturn "has never happened," said UCLA economist Edward Leamer, who has studied local areas during booms and busts. "You're seeing something that's abnormal."

What's abnormal this time, Leamer and other analysts said, is the easy credit that pumped up demand and inflated home prices in those communities to unprecedented highs.

Armed with risky subprime mortgages and fearful of being priced out of the market forever, buyers flocked to the outer reaches of the Antelope Valley and Victor Valley. Those distant suburbs became the only option when areas closer to job centers soared out of reach, said John Husing, an economist who specializes in the Inland Empire.

"The families who were buying out there were the ones who couldn't get in anywhere else," Husing said. "They were paying stupid prices."

They were among the first to default when the economy crumbled, bringing real estate prices crashing down. Demand for those far-flung houses vanished when prices dropped for homes closer to workplaces. Riverside and San Bernardino counties have registered more defaults and foreclosures per capita during this downturn than other Southern California counties, according to ForeclosureRadar, an online seller of default data.

These foreclosures, sold at cut-rate prices by banks eager to be rid of them, represent the bulk of the sales activity in some communities.

In the 1990s housing bust, "you had a foreclosure here, a foreclosure there. You did not have almost entire neighborhoods being foreclosed," UCLA's Leamer said.

The fire sales have stoked demand. In April, 237 homes sold in Beatrice's ZIP Code, more than in any other area in Southern California. Most of those properties were foreclosed.

Stable homeowners such as Patricia Hynes have watched their hard-won equity rise and fall, leaving them roughly where they started a generation ago.

Hynes bought her three-bedroom home in Lancaster brand-new for $119,000 in 1989, when Milli Vanilli was riding high on the charts. The poplar, willow and ash saplings she planted in front now tower over the lawn, shading her home from the desert sun.

"It's my little oasis," said Hynes, a 62-year-old public health nurse.

Her home is an island in a sea of repos. Houses on both sides have fallen into foreclosure; one is priced $10,000 less than the amount she paid 20 years ago.

Nearby, a four-bedroom, 2,100-square-foot home sold in May for $89,000. That's less than the construction costs of $100 to $125 a square foot, according to Patrick S. Duffy, principal of Metrointelligence Real Estate Advisors in Los Angeles.

The retro prices are attracting a new wave of speculators. In April, investors bought nearly 1 in 5 homes purchased in Southern California, according to DataQuick. That figure is around 30% in some inland communities.

Mohammed Hafeez, 52, a Culver City electrician, has bought four houses in Lancaster since January.

Hafeez said he paid $49,000 for the least expensive house and $70,000 for the priciest of his investments. He's now renting them for $1,000 to $1,300 a month, and all four houses are occupied and generating positive cash flow, he said.

Still, he's holding off on more purchases. Rents are falling along with home prices as investors like him snap up foreclosures and turn them into rentals.

"I don't know how much or how far down it will go," he said.

He has reason to worry. Another tsunami of foreclosures is threatening to swamp an already saturated market. In Palmdale and Lancaster, 903 homes were sold in April, but according to ForeclosureRadar, more than 7,500 are in some stage of foreclosure.

Some buyers who thought they were getting bargains didn't. In Lancaster, Beatrice's eldest son, Daniel, bought a house near his father's for $175,000 in April 2008; comparable properties are now selling for about $95,000.

To home buyer Al Rossi, timing isn't everything. The 59-year-old bought his first house in February in Lancaster for $140,000. An administrator at the Los Angeles Mission downtown, he wanted a roomy place where he could live with his son-in-law and two grandsons. His mortgage payment on the four-bedroom house is $1,050, just slightly above the $900 a month he was paying for a one-bedroom apartment in Norwalk...

An article on the shenanigans of "Curly" Bernanke by Mike Whitney.

Bernanke's Next Parlor Trick
By Mike Whitney

June 12, 2009 "Information Clearing House" -- Ben Bernanke is getting ready to pull another rabbit out of his hat and he's hoping no one figures out what he's up to. Here's the scoop; the Fed chief needs to "borrow up to $3.25 trillion in the fiscal year ending Sept. 30" (Bloomberg) without triggering a run on the dollar. But, how? If the stock market keeps surging, investors will turn their backs on low-yielding US Treasuries and move into riskier securities hoping for better returns. The only way to attract more buyers to US debt is by raising interest rates which will kill the "green shoots" of recovery and make it harder for people to buy homes and cars. It's a conundrum.

Link: http://informationclearinghouse.info/article22817.htm

It appears as though the Three Stooges are a very appropriate theme for the Weekend Economist!

How did you know?

Even my horoscope said so--instead of the usual doom and gloom!

And Top of the Evening to You!

I resemble that post! (Was going to put it up myself next...)

WHITNEY'S ARTICLE IS A "MUST READ"!!!

Congress swallowed it hook, line and sinker, and weeks later funds were allocated for the Troubled Asset Relief Program (TARP) Of course, no one in the financial media noticed that the storm in the credit markets was NOT caused by "troubled assets" at all (for which TARP funds have NEVER been used) but by skyrocketing LIBOR and TED spreads and other indicators of market stress. Market Ticker's Karl Denninger was the only blogger on the Internet who figured out that Bernanke had deliberately caused the crisis by draining over $100 billion from the banking system just 10 days after Lehman defaulted. Here are Denninger's comments on September 24, 2008 along with the damning chart which proves the Fed was scuttling the ship to extort money from congress: ( chart )

Market Ticker: "Note that this is an intentional drain of "slosh", or liquidity, from the banking system. $125 billion in the last four days drained? ("Congress must Excise the Bernanke Cancer", Market Ticker)
"It appears to me that he (Bernanke) both orchestrated the crash of the market in the fall of 2008 as a leverage tool to force the passage of the EESA/TARP and may have been responsible for Washington Mutual's collapse and forced dismemberment.

Let us remember that on September 20th, four days prior to Bernanke's action, Henry Paulson pitched TARP (along with Bernanke) to Congress." (Market Ticker)

As soon as Paulson and Bernanke had pulled off their multi-billion dollar heist, the Fed chief created lending facilities (completely unrelated to the TARP) which provided government guarantees on money markets and commercial paper. This lowered LIBOR and TED spreads immediately and relieved the stress in the credit markets. The crisis had nothing to do with toxic assets; it was a cheap parlor trick by a professional charlatan. To this day, none of the junk securities have been purchased from the banks under the TARP program. $700 billion has vanished in a puff of smoke. Poof!

http://informationclearinghouse.info/article22817.htm


Edit: That's cool, I had no idea that chart would also be posted.

:P

Will there ever be an adequate investigation?

until some doctoral candidate uses it for a thesis.

http://money.cnn.com/2009/06/05/retirement/next_crisis_americas_debt.fortune/index.htm


At this rate, your share of the load will be $155,000 in a decade. How chronic deficits are putting the country on a path to fiscal collapse.


(Fortune Magazine) -- Normally Paul Krugman, the liberal pundit and Nobel laureate in economics, and Paul Ryan, a conservative Republican congressman from Wisconsin, share little in common except their first names and a scorching passion for views they champion from opposite political poles. So when the two combatants agree on a fundamental threat to the U.S. economy, Americans should heed this alarm as the real thing. What's worrying both Krugman and Ryan is the rapid increase in the federal debt - not so much the stimulus-driven rise to mountainous levels in the next few years, but the huge structural deficits that, under all projections, keep building the burden far into the future to unsustainable, ruinous heights. "The long-term outlook remains worrying," warned Krugman in his New York Times column. Krugman strongly supports President Obama's spending plans but bemoans the shortfall in taxes to pay for them.

Ryan flays the administration for piling new spending on top of already enormous deficits. "This isn't a temporary stimulus but a ramp-up in debt followed by a greater explosion in spending and debt," he told Fortune, predicting a day when America's creditors will start viewing the U.S. Treasury as a risky bet. "The bond markets will come after us with a vengeance. We're playing with fire." Krugman favors far higher taxes, while Ryan wants to curb spending, but for now what's so big and so dangerous that it distresses such diverse types as Krugman and Ryan - and should scare all Americans - is the Great Debt Threat.

The bill is far too big for only the rich to pick up. There aren't enough of them. America will have to lean on citizens far below the $250,000 income threshold: nurses, electricians, secretaries, and factory workers.
TALK ABOUT YOUR RIGHT-WING FANTASY--THERE AREN'T ANY OF THOSE LEFT--EMPLOYED, THAT IS, TO PAY FOR ANYTHING...

Within a decade the average household that pays income tax will owe the equivalent of $155,000 in federal debt, about $90,000 more than last year. What the Obama administration isn't telling Americans is that the only practical solution is a giant tax increase aimed squarely at the middle class. The alternative, big cuts in spending, aren't part of the President's agenda. To keep the debt from wrecking the economy, the U.S. would need to raise annual federal income taxes an average of $11,000 in 2019 for all families that pay them, an increase of about 55%. "The revenues needed are far too big to raise from high earners," says Alan Auerbach, an economist at the University of California at Berkeley. "The government will have to go where the money is, to the middle class." The most likely levy: a European-style value-added tax (VAT) that would substantially raise the price of everything from autos to restaurant meals.

The growing debt will burden Americans not just with heavier taxes but also with higher interest rates and slower economic growth. On June 3, Fed chairman Ben Bernanke warned Congress that heavy borrowing is one of the factors driving up rates. The trend is just beginning, according to Allan Meltzer, the distinguished monetarist at Carnegie Mellon. "Rates can only stay low if foreign investors keep buying our debt," he warns. "I predict far higher rates over the next few years." The risk that the U.S. will follow Britain, which was warned recently that it could lose its triple-A bond rating, has risen from virtually nil to a real possibility, judging by the sevenfold jump in the cost of insuring Treasury debt in the past year. The big borrowing is already spooking the bond markets. This year rates on 10-year Treasuries have jumped from 2.2% to 3.7%. A further increase in rates would aggravate the situation, raising the interest costs on the debt and increasing its size even more.

As Krugman and Ryan point out, the problem isn't so much the big budget gaps for this year and next, though their scale is shocking. It's the policies that will allow the trend to become far worse in the future. After the stimulus spending winds down and the economy recovers, our spending will still far exceed our revenues. In 2009 the U.S. will post a deficit of $1.8 trillion, or 13.1% of GDP, according to the nonpartisan Congressional Budget Office, twice the post-World War II record of 6% in 1983 under Ronald Reagan. Now let's look forward to 2019, the final year for the budget projections for the administration and the CBO. Even in a scenario that assumes healthy economic growth, the CBO puts the 2019 deficit at $1.2 trillion, or 5.7% of GDP. "That wouldn't be a huge number for an economic downturn, but it's extremely high in a full-employment period," says William Gale, an economist at the centrist Brookings Institution. It gets worse from there. Around 2020 the cost of the big entitlements, Social Security and Medicare, soar as the peak wave of baby boomers retire.

It can't go on forever, and it won't. What will shock America into action is the prospect of fiscal collapse, which will grow more vivid each year. In 2008 federal borrowing accounted for 41% of GDP, about the postwar average. By 2019 the burden will double to 82% by the CBO's reckoning, reaching $17.3 trillion, nearly triple last year's level. By that point $1 of every six the U.S. spends will go to interest, compared with one in 12 last year. The U.S. trajectory points to the area that medieval maps labeled "Here Lie Dragons." After 2019 the debt rises with no ceiling in sight, according to all major forecasts, driven by the growth of interest and entitlements. The Government Accountability Office estimates that if current policies continue, interest will absorb 30% of all revenues by 2040 and entitlements will consume the rest, leaving nothing for defense, education, or veterans' benefits.

To understand why a massive tax increase, probably a VAT, is the mostly likely outcome, it's crucial to look at what's driving the long-term, widening gap between revenues and spending. Put simply, spending is following a steep upward curve, while revenues are basically fixed as a portion of GDP. Why? Because future spending is driven mostly by entitlements, which are programmed to rise far faster than national income, while revenues depend heavily on the personal income tax, which yields receipts that typically rise or fall with GDP. Under George W. Bush, the U.S. experienced a prelude to the crisis before us: Spending rose rapidly, while revenues remained reasonably flat. Bush created an expensive new entitlement, the Medicare drug benefit (cost this year: $63 billion), and let spending on domestic programs from education to veterans' benefits run wild. Over seven years the wars in Afghanistan and Iraq added a total of some $900 billion to the budget. All told, Bush raised spending from 18.5% to 21% of GDP, setting in motion a chronic budget gap by piling on new spending without paying for it.

Under Obama the Bush trend keeps going, but this time on steroids. It's important to see the Obama budget projections as two phases, the crisis period of astronomical spending in 2009 and 2010, and the normal phase, from 2011 to 2019. Most of his stimulus and other big programs are designed to give the economy a jolt in 2009 and 2010 and then largely disappear or be offset by tax increases - at least that's the plan. Then the surge in outlays comes from two forces that would wreak budget havoc for any President: the relentless rise in entitlements and the surge in debt interest.

Making the challenge far greater: Obama's budget is packed with a wish list of expensive new programs, led by a giant health-care-reform plan. He promises to pay for them mainly with higher taxes. But if extra revenues don't materialize - and most that he's proposed now look unlikely - will he abandon many of his cherished priorities or push them through without full funding, substantially deepening the debt crisis? The answer could determine how fast America reaches the hour of reckoning that could usher in a VAT.

Let's divide Obama's budget projections into the plausible, the impossible, and the questionable. First, the plausible: It's optimistic but highly possible that spending on Fannie Mae, Freddie Mac, and the Troubled Assets Relief Program (TARP) will fall from more than $500 billion this year to around $20 billion in 2010, and keep declining from there. It's also plausible that the costs of the wars in Afghanistan and Iraq will fall to around $50 billion a year....

MORE BILGEWATER FANTASY AT LINK

http://www.reuters.com/article/email/idUSTRE55468F20090605?sp=true

Fri Jun 5, 2009 3:22pm EDT

By Jennifer Ablan - Analysis

NEW YORK (Reuters) - Investors have been blindsided by one financial catastrophe after another over the last 18 months, but throughout the tumult, the government bond market has been their friend.

Until now.

A brutal drop in long-dated Treasury prices has caught even the best money managers off guard -- in some cases wiping out as much as 60 percent of the gains they booked in last year's huge rally in U.S. Treasuries.

The Vanguard Group, Fidelity Investments, T. Rowe Price and Hoisington Investment Management have seen their government funds down anywhere between 10 percent and 30 percent, as record amounts of debt flood the market to pay for the swelling budget deficit.

What's stunning about the portfolio declines is the swift plunge in Treasury prices within a short period of time despite the Federal Reserve's buyback purchases intended to hold down interest rates. Benchmark 10-year Treasury yields have surged to levels not seen in more than six months, resulting in meaningful losses for many portfolios.

The 10-year T-note and 30-year Treasury bond are down 8.58 percent and 24 percent, respectively, in terms of price for the year to date.

"If I were clairvoyant and knew we were going to have a sell-off of this magnitude, I would've been all in cash, but I'm not," said Van Hoisington, whose flagship Wasatch-Hoisington U.S. Treasury Fund is down more than 20 percent.

To be fair, not all Treasury-oriented funds like Hoisington's represent an expression of a firm's macro view of economic growth or lackthereof. Some bond funds, such as the Vanguard Extended Duration Treasury Index Institutional, hold Treasuries for actuarial reasons.

SOME BULLS SMILE THROUGH THE PAIN

Even so, the losses are massive. Some of the rise in yields and slide in Treasury prices is due to investors' appetite for riskier fare like stocks, junk bonds and corporate debt, which have been performing well on signs the recession is easing.

Indeed, for much of 2008 and earlier this year, investors piled into U.S. government debt during the credit crisis, sending yields to historic lows and triggering talk of a bubble similar to that of the Nasdaq's Internet-led bubble, which expanded in the late 1990s and burst in March 2000.

But there also have been concerns about America's long-term financial health, which has set in motion a huge domino effect -- leading money managers such as Hoisington to stay bullish on Treasuries.

"We ain't seen nothing yet in terms of the gazillion amount of Treasuries coming to fund our stimulus programs," said Dan Fuss, vice chairman of Loomis Sayles, which oversees more than $107.7 billion in assets.

UNITED STATES' AAA VULNERABLE

On May 21, Moody's Investors Service said while it is comfortable with America's AAA debt rating, it is not guaranteed forever against the backdrop of its deteriorating fiscal position. That helped exacerbate market fears that the United States remains ever more vulnerable to lose its coveted triple-A rating with its need to borrow $2 trillion -- or 14 percent of the country's total economic output and more than twice the record of 6 percent set in 1983.

That also has set off a chain reaction, notably with the so-called "bond vigilantes." Veteran Wall Street strategist Ed Yardeni coined the term "bond vigilantes" to describe the huge appetite for yield of investors in the 1980s, who got burned in the '70s; these investors demanded higher yields to compensate for perceived risks of inflation and budget deficits.

The phenomenon seems premature to some investors in Treasuries.

"If zero growth is gonna result in inflation, it's a new economic paradigm as far as I'm concerned," Hoisington said.

His fund was up an astounding 37.77 percent in 2008.

"We do not have a forecast of runaway growth, nor does the Fed," added Brian Brennan, manager of the T. Rowe Price U.S. Treasury Long-Term bond fund, which is down nearly 11 percent. Conversely, his fund was up more than 23 percent last year.

The standout of the crowd, however, is Vanguard. Its Extended Duration fund, which is down over 33 percent so far this year, "is not an expression of our macro call," Ken Volpert, head of the Taxable Bond Group at The Vanguard Group, where he oversees about $200 billion in assets, told Reuters.

Volpert said the fund, which was up 55.52 percent in 2008, is primarily intended for pension plans and other institutional investors that want to closely match long-term liabilities with a portfolio of U.S. Treasury securities of similar long-term duration. He added that credit conditions have improved dramatically and confidence has come back into the markets and economy to feed the belief in recovery.

Even so, "somebody lost their shirt ... 33 percent is no small chunk of change," said Jeff Tjornehoj, research manager at Lipper Inc, a funds research firm owned by Thomson Reuters.

(Reporting by Jennifer Ablan; Editing by Jan Paschal)

http://www.msnbc.msn.com/id/31193659/ns/business-us_business/


Check which banks reported the most troubled loans, in the Bank Tracker from msnbc.com and American University's Investigative Reporting Workshop.


At the end of the first quarter, six out of every 10 banks in the U.S. were less well prepared to withstand their potential loan losses than they had been at the end of 2008, according to a new analysis by msnbc.com and the Investigative Reporting Workshop at American University in Washington. Overall, bad loans rose another 22 percent in the quarter as the recession continued.

Msnbc.com is publishing information on the nation's 400 largest banks as well as all banks with high ratios of troubled loans to assets. Information on the financial health of more than 8,000 banks nationwide is available at the updated BankTracker site published by the American University group.

The analysis relies on information reported through March 31 to the Federal Deposit Insurance Corp., calculating each bank's troubled asset ratio, which compares troubled loans against the bank's capital and loan loss reserves. A similar ratio, known as a Texas Ratio, is commonly used by bank analysts as a snapshot of a bank's financial health, though it can't capture all the nuances of a bank's condition.

Although much attention has been focused on surprising profits at U.S. banks in the first quarter of 2009, under the surface lurks an industry still suffering from the recession. If you set aside the 10 largest banks, the rest of the industry lost money in the quarter, primarily because of very large losses at a few banks.

While the 10 largest banks reported $10.2 billion in earnings for the quarter, the remaining 8,245 banks together lost $2.6 billion, according to the analysis.

One in five banks lost money in the quarter, and several lost big, weighing down the rest.

Four large banks account for more than $5 billion in losses. Huntington National Bank of Columbus, Ohio, lost $2.46 billion. FIA Card Services of Wilmington, Del., lost $1.47 billion. SunTrust Bank of Atlanta lost $783 million. Sovereign Bank of Wyomissing, Pa., lost $764 million...

MUCH MORE AT LINK

http://mises.org/story/3507

It's widely acknowledged that hundreds if not thousands of banks are on the ropes and just waiting for regulators to wrap them in yellow tape some Friday evening. However, fewer than forty US banks have been seized this year. The Federal Deposit Insurance Corporation (FDIC) list of problem banks grew to 305 in the first quarter, the highest number since 1994, but of course the names of those banks are not released so that depositors can be forewarned.

The assets of those troubled banks total $220 billion, while the FDIC's deposit-insurance fund has fallen to $13 billion. Not to fear: the Treasury Department tripled the FDIC's line of credit to $100 billion in preparation for more losses. So, including the line of credit from taxpayers, the FDIC has just over two cents of reserves to cover each dollar it is insuring.

Sure, the FDIC is not yet staffed up to close down the sick banks as fast as they would like to, but how do these banks remain liquid enough to keep operating? After all, savvy customers surely must study bank balance sheets and income statements to know where to safely place their funds. Doesn't the average bank depositor know the loan portfolio concentrations and past-due loan balances of their friendly neighborhood bank, only placing their funds in the safest of banks, leaving the worst banks to quickly run out of money and fail? Perhaps the most naive believe that.

Bernard Condon's "The Reverse Bank Run" article on Forbes.com explains that with increased FDIC deposit-insurance limits in place (up to $250,000 for interest-bearing deposit accounts),

Americans seeking high yields on their money are causing deposits at struggling banks to mount in seeming lockstep with their troubles. The result is that banks that should fail are sticking around longer, making the cleanup when they do more costly.

There is no incentive for bank depositors to go to the trouble of determining a bank's soundness if the government is going to guarantee deposits. Not to mention that most folks aren't equipped for the job anyway. On the other hand, if a legitimate banking system were in place, it would be based upon honoring property rights. Customers making a deposit in a bank expect the bank to guard, protect, and return their money — at a moment's notice in the case of demand deposits. After all, that person has not traded a present good for a future good. The depositors believe the bank is warehousing the money for them and that it is available to them at any time. This deposit is not a loan — there is no fixed term, which would be required in the case of a loan — and availability hasn't transferred.

However, we don't have legitimate deposit banking but a fractionalized banking system that combines deposit banking with loan banking. Those that sympathize with fractionalized banking will contend that time certificate of deposit accounts are in essence loans from depositors, entitling the bankers to use the funds at their discretion for the term of the CD — just as long as the banker has the money ready when the CD matures. But if the money is lent secured by illiquid assets such as real estate, the banker is clearly not counting on those loans to satisfy expiring CDs and must count on attracting new CD money to pay off the old.
"There is no incentive for bank depositors to go to the trouble of determining a bank's soundness if the government is going to guarantee deposits."

Bankers, pressured to earn returns for shareholders and protected from bank runs by FDIC insurance, have over time lent not only more of their deposits but advanced the money for riskier projects. James Grant in a recent Grant's Interest Rate Observer reminisced about National City Bank, which back in 1954 had only lent out 41 percent of its deposits, with less than one percent of the portfolio being real-estate loans.

By the end of last year, the total loan-to-deposit ratio for all US banks and thrifts was 87 percent, and 60 percent of all loans were classified as real-estate secured.

Instead of guarding the safety of deposits, banks embezzle the deposits and lend them out. The recently failed Silverton Bank in Atlanta lent its deposits on construction projects that turned out to be duds. Yet, as the bank was spiraling toward failure, its brokered deposits, described by Forbes's Condon as "money pooled from rich folks then shopped around for higher rates," quadrupled.

The Forbes article cites three banks whose brokered deposits doubled or tripled in the months leading up to their seizure by banking authorities. Problem banks desperately need deposits to stay afloat and thus they pay the highest rates, "and many people apparently either don't know about the troubles or, more likely, don't care," Condon writes, because the FDIC has committed to covering deposits within its insurance limits.

RBC Capital's Gerald Cassidy, who is predicting that there will be over 1,000 bank failures, half-jokingly says that he scans Bankrate.com to identify the highest rate payers to determine which banks will fail next, according to Condon.

High on this list is Chicago-based Corus Bankshares, which is paying a half a percentage point higher for deposits than its competitors. During the boom, Corus was an aggressive high-rise-condo-construction lender and reportedly nearly half its loan portfolio is now nonperforming.

Condon also mentions the Federal Home Loan Banks that have provided funding during the property mania, when deposits were scarce or expensive. "The FHLB is a welfare-state institution to the bone," wrote John Paul Koning in his Mises Daily article entitled "The Federal Home Loan Banks to the Rescue!" in late 2007.

As Koning explained, the FHL Banks raise money by issuing bonds at low rates because "investors assume the FHLBank debt has a federal government guaranty," as was the case with Fannie Mae and Freddie Mac. This cheap money is then lent to the banks, providing banks and thrifts "with a steady and hassle-free flow of credit at subsidized rates."

So while an aggressive FHLB helped fuel the real-estate boom, Koning puts his finger on another factor that's making current bank failures costly to the FDIC fund: when FHL Banks make loans to banks, they take a lien on many of the banks' loans. Thus, when a bank fails, the FHLB will take possession of those loans that collateralized their advance, making them unavailable to the FDIC to sell in order to make depositors whole when it liquidates a failed bank. "This makes it more likely that, in the case of multiple bank failures, FDIC will not get a large enough slice of the pie to pay off insured depositors," Koning explains.

It is no wonder that the losses from recently failed banks equal a third of seized assets, which Condon points out is double the level from the 1990s banking crises. These losses lead Bud Conrad with Casey Research to the conclusion that the FDIC is in trouble. And that the deposit insurer and bank regulator will be bailed out with hundreds of billions in new funding from the taxpayer or the central bank. "Another bale of straw on the camel's back," Conrad writes, "and another reason to be concerned about holding paper dollars for the long term."

To keep today's zombie banks alive, massive amounts of government intervention have been required. In last fall's panic, the Fed wheeled out the Money Market Investor Funding Facility and the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. It raised the ceiling on insured deposits from $100,000 to $250,000; guaranteed new debt issuance of banks, thrifts, and holding companies, providing full insurance for any and all noninterest bearing deposits; and the Treasury issued a blanket guarantee of money-market fund liabilities. Ultimately the government took equity stakes in a number of larger banks.

$50 $35

Jesus Huerta de Soto explains in his book Money, Bank Credit, and Economic Cycles that, ultimately, fractional reserves cannot survive economically on their own and must be supported by government force in the form of a central bank that institutes the regulations and supplies the liquidity necessary at all times to prevent the entire apparatus from collapsing.

Although ostensibly it is dodgy real-estate loans that are bringing the banks down, it is really the fraudulent nature of the fractionalized banking system, described by Murray Rothbard in The Mystery of Banking as "the pernicious and inflationary domination of the state," that is the real culprit.

When loans without the backing of real savings "foster the foolish investment of resources and give rise to unwisely invested business assets which are either worthless or of limited value and therefore incapable of balancing the corresponding deposit accounts on bank balance sheets," Huerta de Soto writes, bank insolvencies tend to occur. Bank regulators accuse failing banks of operating in an "unsafe and unsound" manner. But what is "unsafe and unsound" is fractionalized banking, the lending out of embezzled deposits with the state's permission.

Douglas French is president of the Mises Institute and author of Early Speculative Bubbles & Increases in the Money Supply.

http://www.voxeu.org/index.php?q=node/3421&ref=patrick.net

LOTS OF GRAPHIC DETAIL

http://informationclearinghouse.info/article22804.htm

Half of the personnel the US has working on its wars in Iraq and Afghanistan are private contractors. A new report reveals how much of a rip-off this system has been to US taxpayers.

By Jeremy Scahill

June 10, 2009 "RebelReports" -- At a hearing in Washington today, the federal Commission on Wartime Contracting in Iraq and Afghanistan is releasing a 111-page report that represents its “initial investigations of the nation’s heavy reliance on contractors.” According to a release on the hearing:

More than 240,000 contractor employees, about 80 percent of them foreign nationals, are working in Iraq and Afghanistan to support operations and projects of the U.S. military, the Department of State, and the U.S. Agency for International Development. Contractor employees outnumber U.S. troops in the region. While contractors provide vital services, the Commission believes their use has also entailed billions of dollars lost to waste, fraud, and abuse due to inadequate planning, poor contract drafting, limited competition, understaffed oversight functions, and other problems.

These statistics support a recent DoD report on the extent of the US reliance on contractors. That report also found that there has been a 23% increase in the number of “Private Security Contractors” working for the Department of Defense in Iraq in the second quarter of 2009 and a 29% increase in Afghanistan, which “correlates to the build up of forces” in the country. In Iraq, the Pentagon attributes the increase to better accounting. There are currently more private contractors (counting both armed and unarmed) in Afghanistan (68,197) than US troops (40,000). In Iraq, the number of contractors (132,610) is basically equal to the number of US troops.

(NOTE: I recently discussed this issue on Bill Moyers Journal)

The single greatest beneficiary of the US wars in Iraq and Afghanistan is KBR, the former Halliburton subsidiary. KBR has been paid nearly $32 billion since 2001. In May, April Stephenson, director of the Defense Contract Audit Agency, testified that KBR was linked to “the vast majority” of war-zone fraud cases and a majority of the $13 billion in “questioned” or “unsupported” costs. According to Agency, it sent the inspector general “a total of 32 cases of suspected overbilling, bribery and other violations since 2004.”

MUCH MORE AT LINK

the war effort. From Marketwatch:

NEW YORK (MarketWatch) -- Swindlers, con men, and thieves could siphon off as much as $50 billion of the government's planned stimulus package as the money begins flooding the economy in coming months, according to David Williams, who runs Deloitte Financial Services Advisory and counsels clients on fraud prevention.

/snip/

"The rule of thumb typically is that of the about $500 billion worth of money that's going to run through the procurement process, somewhere between 5% and 10% of that usually finds it way into potential problems," Williams said. "That's sort of the benchmark that I use."

Link: http://www.marketwatch.com/story/stimulus-fraud-could-hit-50-billion

I guess it gives new meaning to spreading the wealth around.

6/12/09 "A Perfect Storm for Disaster" Brewing With Washington's "Unprecedented" Shadow Army by Jeremy Scahill

As US troops and private contractors surge in Afghanistan, a new report reveals a system rife with abuse. Also, why is an executive of a major war contractor on the commission investigating contractors?
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While the new report reveals some critical details about issues of waste and abuse, the general tone is very pro-contractor, which is not surprising. However, I find it disturbing that one of the members of the Commission, Dov Zakheim, is, according to his Commission bio, a current vice-president of Booz Allen Hamilton, a major defense, homeland security and intelligence contractor with a direct stake in US policy on contractors.

Booze is now majority owned by The Carlyle Group, which has deep political connections. In an Op-ed in The Washington Post last year, Zakheim campaigned against “More regulations and bureaucratic restrictions on contractors” and advocated for “a larger, more diversified base of prime contractors and suppliers.” Zakheim, who was a foreign policy advisor to Bush and part of the circle of the Vulcans, is now a key member of the primary body that is responsible for investigating the industry and making formal recommendations on US policy. While the Commission is made up of appointees from both political parties, (Zakheim was appointed by President Bush) Zakheim’s corporate stake on these matters should be cause for a review of his position on the Commission.
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more...
http://rebelreports.com/post/122453587/a-perfect-storm-for-disaster-brewing-with

http://hosted.ap.org/dynamic/stories/U/US_WARTIME_CONTRACTING_REPORT?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2009-06-07-15-16-13

WASHINGTON (AP) -- This is one Christmas gift U.S. taxpayers don't need.

Construction of a $30 million dining facility at a U.S. base in Iraq is scheduled to be completed Dec. 25. But the decision to build it was based on bad planning and botched paperwork. The project is too far along to stop, making the mess hall a future monument to the waste and inefficiency plaguing the war effort, according to an independent panel investigating contracting in Iraq and Afghanistan.

In its first report to Congress, the Wartime Contracting Commission presents a bleak assessment of how tens of billions of dollars have been spent since 2001. The 111-page report, obtained by The Associated Press, documents poor management, weak oversight, and a failure to learn from past mistakes as recurring themes in wartime contracting.

The report is scheduled to be made public Wednesday at a hearing held by the House Oversight and Government Reform's national security subcommittee.

U.S. reliance on contractors has grown to "unprecedented proportions," says the bipartisan commission, established by Congress last year. More than 240,000 private sector employees are supporting military operations in Iraq and Afghanistan. Thousands more work for the State Department and U.S. Agency for International Development.

But the government has no central data base of who all these contractors are, what services they provide, and how much they're paid. The Pentagon has failed to provide enough trained staff to watch over them, creating conditions for waste and corruption, the commission says.

In Iraq, the panel worries that as U.S. troops depart in larger numbers, there will be too few government eyes on the contractors left to oversee the closing of hundreds of bases and disposal of mountains of federal property.

At Rustamiyah, a seven-acre forward operating base turned over to the Iraqis in March, the military population plunged from 1,490 to 62 in just three months. During the same period, the contractor population dropped from 928 to 338, leaving more than five contractors for every service member.

In Afghanistan, where President Barack Obama has ordered a large increase of U.S. troops, existing bases will have to expand and new ones will be built - without proper oversight unless the Pentagon rapidly changes course.

One commander in Afghanistan told the commission he had no idea how many contractors were on and off his base on a daily basis. Another officer said he had property all over his installation but didn't know who owned it or what kind of shape it was in.

There are questionable construction projects in Afghanistan, too. The commission visited the New Kabul Compound, a building intended to serve as headquarters for U.S. forces in Afghanistan. But members saw cracks in the structure, broken and leaking pipes, sinking sidewalks and other defects.

"The Army should not have accepted a building in such condition," the report says.

The commission cites concerns with a massive support contract known as "LOGCAP" that provides troops with essential services, including housing, meals, mail delivery and laundry.

Despite the huge size and importance of the contract, the main program office managing the work for both Afghanistan and Iraq has only 13 government employees. For administrative help, it must rely on a contractor.

KBR Inc., the primary LOGCAP contractor in Iraq, has been paid nearly $32 billion since 2001. The commission says billions of dollars of that amount ended up wasted due to poorly defined work orders, inadequate oversight and contractor inefficiencies.

In one example, defense auditors challenged KBR after it billed the government for $100 million in costs for private security even though the contract prohibited the use of for-hire guards.

KBR has defended its performance and criticized the commission for making "biased" statements against the company.

"As we look back on what we've done, we're real proud of being able to go into a war theater like that as a private contractor and support 200,000 troops," William P. Utt, chairman of the Houston-based KBR, said in May interview with AP reporters and editors.

KBR is also linked to the dining hall construction snafu, although the commission faults the military's planning and not the contractor. With American forces scheduled to be out of Iraq by the end of 2011, the U.S. will use the new facility for two years at most.

In July 2008, the Army said a new dining facility was badly needed at the Camp Delta forward operating base because the existing one was too small, had a saggy ceiling, poor lighting and an unsanitary wooden floor.

KBR was awarded a contract in September. Work began in late October as American and Iraqi officials were negotiating the agreement setting the dates for the U.S. troop withdrawal

But during an April visit to Camp Delta, the commission learned that the existing mess hall had just been renovated. The $3.36 million job was done by KBR and completed in June 2008. Commission staff toured the renovated hall "without seeing or hearing of any problems or shortfalls," the report says.

The decision to push ahead with the new hall was based on paperwork that was never updated and a failure to review the need for the project after the security agreement was signed. Most of the materials have been ordered and construction is well under way. That means canceling the project would save little money because KBR would have a legitimate claim for payment based on the investment it has already made.

The commission urges commanders in Iraq to review thoroughly all ongoing construction and improvement projects and only continue those essential to the life, health and safety of U.S. troops.

---

http://www.upi.com/Top_News/2009/06/06/Pakistan-asks-US-debt-forgiveness/UPI-65951244288006/


A meeting between U.S. envoy Richard Holbrooke and Pakistani Prime Minister Yousuf Raza Gilani included a plea for debt forgiveness, officials said.

Gilani asked Holbrooke during their Friday meeting to help Islamabad's struggle against Taliban militants by writing off $1.35 billion it owes to the United States, Pakistan's English language newspaper Dawn reported.

Holbrooke told Gilani he would look into the matter, Minister of State for Finance and Economic Affairs Hina Khar told Dawn.

Also during the meeting, Gilani reportedly urged the White House to persuade Congress to put requests for substantial increases in military aid to Pakistan on a fast track while it battles Taliban militants in the North West Frontier Province.

Dawn said Gilani acknowledged that the United States had funneled $300 million in humanitarian aid to Islamabad in its efforts to help millions of refugees in Swat and other war-torn northwestern districts.

But I need to eat and swim. Carry on, Weekenders!

Enjoy the weekend!

:hi:

Italian Police Ask SEC to Authenticate Seized U.S. Treasuries
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Italian Police ask SEC to authenticate....
By Sonia Sirletti and John Glover
http://www.bloomberg.com/apps/news?pid=20601101&sid=afJXAA1ahZyo

June 12 (Bloomberg) -- Italy’s financial police said they asked the U.S. Securities and Exchange Commission to authenticate U.S. government bonds found in the false bottom of a suitcase carried by two Japanese travelers attempting to cross into Switzerland.

The bonds, with a face value of more than $134 billion, are probably forgeries, Colonel Rodolfo Mecarelli of the Guardia di Finanza in Como, Italy, said today. If the notes are genuine, the pair would be the U.S. government’s fourth-biggest creditor, ahead of the U.K. with $128 billion of U.S. debt and just behind Russia, which is owed $138 billion.

The seized notes include 249 securities with a face value of $500 million each and 10 additional bonds with a value of more than $1 billion, the police force said on its Web site. Such high denominations would not have existed in 1934, the purported issue date of the notes, Mecarelli said. Moreover, the “Kennedy” classification of the bonds doesn’t appear to exist, he said.

The bonds were seized in Chiasso, Italy. Mecarelli said he expects a determination from the SEC “within a few days.”

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x65894

The High Cost of Debt: Very-High-Denomination Treasury Notes and U.S. Treasury Debt Management, 1955-1969


A Paper for Presentation at the 2005 Annual Conference of the Economic History Society at the University of Leicester, 8-10 April 2005


By Dr. Franklin Noll


Introduction

For most of their history after World War II, Treasury notes have been issued with denominations never rising above a high of $1 million. Yet, from 1955 to 1969, the Treasury issued Treasury notes with the added denominations of $100 million and $500 million. The purpose of this study is to determine why the Treasury issued these very-high-denomination Treasury notes and why it stopped doing so.

Excellent finds, kickysnana. My thanks.

Just when you think things can't get any more bizzare....T Bills at the border. Of Switzerland, no less.

Point five! Definitely.

One hundred and thirty four... POINT FIVE Billion!

Definitely, point five... Is it time for Wapner, yet? It's almost time for Wapner! Where's Wapner!?!?! :panic:

Ah, here it is! :whew:

(Sorry to go all Rainman on y'all, but, $500,000,000.00 is $500,000,000.00! If you handed a Dollar to every citizen of the US you would hand out $300,000,000.00 and with $500,000,000.00 you could go back and give 200,000,000 of your BFF another Dollar. Just 'cuz!)

http://online.wsj.com/article/SB123828522318566241.html

WASHINGTON -- The Treasury Department said it has about $134.5 billion left in its financial-rescue fund, giving the Obama administration a cushion as it implements expensive programs aimed at unlocking credit markets and boosting ailing industries.

http://cynicuseconomicus.blogspot.com/2009/06/japan-secretly-selling-smuggled-us.html

blah, blah, blah...

"The significance of this story is that it highlights the very topical importance of retaining investor faith in a fiat currency; if the supply of money is suddenly perceived to be vastly higher than believed, whether as a result of policy or widespread fraud, confidence can be badly shaken. If this was another crazy North Korean forgery scheme, it gets close to a casus belli on top of the relentless provocation of the US in recent months. If, in the less likely but possible case that an Asian country were genuinely but secretly attempting to dump dollar paper for other assets, the implications are very disturbing for international markets."

http://www.globalpost.com/webblog/commerce/who-was-smuggling-134bn-us-bonds-switzerland

Thanks for the updates, kickysnana.

I wonder if all that saber rattling by NK has somebody looking for a safe place (Read: far away) to stash their loot.

As, far as it being a coincidence with being the same amount as remains in the TARP... Well, I would imagine such a concurrence with numbers as large as these is highly unlikely. It's not like we're noticing that Bill and Bob both have $5 in their wallets. Oddly enough, the amount reported is also in the same ballpark as amounts typical for Supplemental Funding for the Iraqi-stan Wars. We shall have to wait and see, tho.

Is the Mass Media still silent on this?

http://cynicuseconomicus.blogspot.com/2009/06/japan-secretly-selling-smuggled-us.html

If the bonds are genuine (unconfirmed), the big question is who might have such a large sum? The only logical answer is a nation state, and with the individuals being Japanese, that would suggest Japan.

The second question is why they are smuggling them?

I have been speculating on this subject and have come up with some wild scenarios. I would like to emphasise that these are 'wild'.

However, the best answer that I could find is that the Japanese government wants to dump US bonds on the quiet. As such, they sought to transfer them to Switzerland, where they could then sell them, and disguise the point of origin of the selling.

In doing so they would avoid spooking the markets by making a Japanese sell-off of US bonds visible. As a large holder of US debt, any significant sell-off would potentially commence a $US rout.

This might make sense, but why would the smugglers go via Italy?

This is all wild, wild speculation, and it is still unconfirmed that the bonds are genuine.

However, if the bonds are genuine, I can see no other logical explanation. In the (unlikely) event that such speculation were correct, it really would be the start of the end of the $US.

I had picked up the article about the smuggling in my regular trawl through the financial news. A short while after writing the comment, I found an article reporting on the G8 meeting.....which is located in Italy.

This means that senior Japanese financial officials are in Italy, and these are the very people who might wish to undertake the quiet dumping of bonds. I was unable to find out who was attending from Japan, but it is a certainty that it would include all the necessary key players necessary for this kind of undertaking.

Regarding the matter of whether the bonds are genuine, this from the Asia News:

Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.

What caught the policemen’s attention were the billion dollar securities. Such a large denomination is not available in regular financial and banking markets. Only states handle such amounts of money.

Please note that these size of securities are only used in state to state transactions. The problem then arises as to why any counterfeiter might forge such instruments? It is not like forging a $US 100 bill, where it might pass off in a shop. In this case, if you try to use this kind of forgery, then whoever accepts it is going to want to know 100% for certain that it is genuine. They will certainly want to know a lot about it, and no forgery is therefore likely to be of any value whatsoever. As such, why forge such an instrument?

In the meantime, the Japanese have suddenly started talking up the prospects for the $US:

June 12 (Bloomberg) -- Japanese Finance Minister Kaoru Yosano said his government is confident about the outlook for U.S. Treasuries, signaling the second-biggest foreign holder of the securities will keep buying them amid record sales.

“We have complete trust in the fact that the U.S. views its strong-dollar policy as fundamental,” Yosano, 70, said in an interview in Tokyo on June 10 before attending a Group of Eight meeting of finance ministers starting today in Italy. “So our trust in U.S. Treasuries is absolutely unshakable.”

It could be argued that this public statement contradicts any secret selling of US bonds. However, if you are about to dump a large amount of US bonds into the market, the best way to cushion the impact might be to boost the value by suggesting that there is a strong buyer in the market. The fact that the alleged buyer is in fact a seller will not be known until much later. In the meantime, Japan gets brownie points from the US administration.

In all of this, it should be remembered that Japan is the world's second largest holder of US treasuries. Any public selling by Japan would therefore result in a $US crash, and would wipe out the value of much of the value of Japanese reserves. Back in January, I was discussing the $US dilemma for the major creditors of the US as follows:

The trouble is that, with so many countries holding these $US reserves, most of whom have their own economic problems, it is likely that everyone is having the same thoughts, and confronting similar problems. What you have is a situation in which there is something like a Mexican stand-off. As soon as one starts selling, then everybody must start selling. They are all, at the same time, terrified of selling, because in doing so, they destroy the value of what they are selling. It is a time bomb just waiting to go off.

Selling the bonds without appearing to sell them would be an excellent solution to the standoff. On the one hand you can sound positive, continue to make purchases, reassure the market, and meanwhile offload ever more of the dangerous (toxic) assets through the back door.....

.....In short, whether the bonds are genuine or not, I would be very surprised to see that this story goes much further.

The underlying story, if this wild speculation were to be true, is that the Japanese are dumping the $US. If this were the case, then the $US is finished, and we can expect to see it collapse in the very, very near future.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x5842722


Especially see post #3 this thread, Demeter. :evilgrin:




TG

If anyone is interested, I have some forged Zimbabwe Bonds for sale. They're worth more than the real ones.

Well, the state, at least.

Well, this gets curiouser and curiouser.....

Thing is, can you believe anything the officials say any more? Even if someone is convicted and imprisoned, do you trust the process? No wonder people buy gold, it's the only thing that cannot be faked (too easily detectable).

And this is why I get a bit peeved with the "invest in gold" advice sometimes, apart from teh fact that you can't eat it.

There are a lot of people who are very easily suckered when it comes to gold. I have a friend who flaunts her "gold" jewelry to everyone and sundry, insisting that her late husband bought it for her years ago and therefore it's "good gold" and I haven't had the heart to tell her it's cheap plated brass crap, that the "sapphire" (big as her thumbnail) is glass. I see this shit at craft shows and art fairs and flea markets (www.mesamarket.com) all the time. The suckors claim it's 14kt (and the "gold filled" is in .5 pt type) and the suckees think it's a good investment. It's not. It's shit.


Your other post about the elites and the lofts in the former factories is spot on. The spelling flub is thereby forgiven. :hug:

If they have a modicum of education.

That's a big if, I know.

Thank you for the forgiveness. I don't know what came over me. Spellcheck, probably.

But, I'm a victim of circumstance.

Sorry I haven't checked in earlier. The stepson flew down from Cleveland, and we've all been swimming and drinking margarita's. A few burgers. He'll be here until Tuesday. My niece is flying in from St. Louis tomorrow, with her Republican lobbyist husband. He's not a bad guy, and he comes around to our side privately, but his livelihood depends on otherwise.

Her parents, who live next door are another story. Nice people, but stone, right-wing fanatics. They irritate me at times, but they always keep plenty of Stoli on hand. I've got a feeling that I'll be murdalizing somebody after the liquor starts flowing tomorrow. Nyuk nyuk nyuk.

Owwwww! Oh, oh, oh, look.

Woo, woo, woo woo.

"The Beetles" /sic/

:evilgrin:


:hi:



Tansy Gold, who has never seen a single episode of The Three Stooges and therefore has nothing to say this week-end

;(


DEMETER! :o

I have got to stop typing in the dark after a hard day's night.

Maybe I'll be cashiered out. Sob. Who will take over?

Three Stooges: Curly's Sweater

The boys do Auto maintenance. (The WEE is a team effort.)

http://www.youtube.com/watch?v=k3s8sEYzHWQ

Thank god. I can't bear to watch!

There's over 4000 clips on youtube:

http://www.youtube.com/results?search_type=&search_query=three+stooges&aq=f

Amazingly, the recent rally in the Nikkei Dow means it now over 10,000 — down from 40,000 in 1989. It has lost 75% of its value since 1989.

Congratulations to the Japanese for their outstanding zombie banks, fiscal and monetary policies. We enjoy them so much we are trying to do the exact same thing!

http://www.ritholtz.com/blog/2009/06/nikkei-do-75-off/

Japan went crazy in the 80's. All those profits selling the Americans cars and electronics went to their heads, and they bought everything for inflated prices.

Rising long-term interest rates are making it more expensive for home buyers, corporations and the U.S. government to borrow money, threatening to further stifle an already weak economy.

In just the past two weeks, the rate on a 30-year, fixed-rate mortgage has risen to 5.6 percent from 4.9 percent, ending a boom in refinancing and working against a budding recovery in the housing market. Rates on corporate borrowing have also risen, making it more expensive for companies to expand. And the government has been forced to pay more to finance its deficit.

Since the beginning of the year, historically low mortgage rates have had a twin benefit for the economy: They have allowed homeowners to refinance about $1.5 trillion worth of mortgages, thus lowering monthly payments and leaving people with more money to spend on goods and services. Low rates have also created greater incentive for people to buy homes, despite continuing troubles in the housing market.

The abrupt rise in rates has removed that key stimulant for the economy.

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/11/AR2009061104297.html

even if those jobs don't require extra training, and actually involve manufacturing or customer service. Tsk, tsk, tsk. What will be next, taxing the obscenely wealthy?

http://www.themoneytimes.com/featured/20090606/unemployment-rate-highest-1983-id-1070911.html

Many economic indicators, like the consumer confidence index, the sales in the housing industry, point to that fact that the recession is bottoming out. The decline in the unemployment rate is the latest in a series of signs that the economy is ready to bounce back

Ray of hope
Amid all this gloomy data revealed by the Labor Department Friday, there is a silver lining. The 345,000 jobs that were shed in May were the least since the September of 2008. The figure is also half the average number of jobs hacked in the previous six months.

So, while millions of Americans rendered unemployed by the unrelenting recession continue to seethe in pain, there is a glimmer of hope. The pace of job loss in the U.S has significantly slowed in May, reinforcing hopes that the worst is behind us.

Housing sales are up and so is the consumer confidence. The stock markets have bounced back after hitting a 12-year low in March. All these factors indicate that the economy is starting to turn around.

"The pace of the recession finally seems to be slowing," declared Andrew Stettner, deputy director of the National Employment Law Project.

Sung Won Sohn, an economist at Cal State Channel Islands, said of the optimism about the future, “The psychology has improved significantly because of the massive economic stimulus program. That's one of the reasons why layoffs are slowing down."

Recovery not so soon
Experts opine that even as the recession wanes, more job losses may be on the anvil. In fact, the rate of unemployment may be amongst the last indicators to improve even as recovery creeps in, they opine.

Stettner added, "But with the unemployment rate climbing, it should be abundantly clear that the job market is in a hole that could take years to climb out of."

Labor Secretary Hilda Solis observed that dislocated employees have a tough time getting back into the labor force. She said, “It's not going to turn around as quick as you and I would like to see it."

http://money.cnn.com/2009/06/08/pf/credit_card_delinquency/index.htm?postversion=2009060810

Reporting agency says 11% increase could be an indication that tax refund checks are being used to cover daily living expenses.

NEW YORK (CNNMoney.com) -- Credit card delinquency rates jumped 11% in the first quarter, possibly indicating that consumers are using tax refunds to pay day-to-day expenses, according to a credit reporting agency report released Monday.

The delinquency rate -- which is the ratio of borrowers 90 days or more delinquent on one or more of their credit cards -- increased to 1.32% in the first quarter of 2009.

That's up 9.1% over the previous quarter, and 11% over the previous year, according to the report from credit reporting agency TransUnion.

The average borrower debt rose 4.09% from the previous year to $5,729, TransUnion said. The agency uses data from 27 million anonymous, individual credit files.

"This increase could be an indication that tax refund checks, typically used to pay down balances in during the first quarter in years past, are now being used to cover daily living expenses," said Ezra Becker, of TransUnion's financial services group, in a written statement.

The economy is losing jobs by the thousands, and mass layoffs and pay cuts have continued the credit crunch. Banks have tightened lending standards because of a heightened default risk, providing less credit to consumers.
0:00 /2:12Don't be fooled by teaser rates

State by state: Delinquency rates were highest in Nevada, at 2.44%; Florida, with 1.9%; and Arizona, 1.68%.

Rates were lowest in North Dakota, at 0.73%; South Dakota, at 0.77%; and Alaska, at 0.77%.

Alaska has the highest average bankcard debt, at $7,476, while the lowest is West Virginia with $4,640.

Outlook: TransUnion said it expects the 90-day delinquency rate will continue rising, nearing 1.7% by the end of 2009.

Depending on the effects of stimulus programs and unemployment, the rate's upward climb could hit a peak in late 2010 or early 2011, the report said.

TransUnion expects Nevada will have the highest delinquency rate by the end of 2009, at 2.95%, while Alaska will have the lowest at 0.96%.

But outside influences could have unforeseen effects, the report cautioned.

"The impact the changes to credit card regulations and associated legislation, and the response of card lenders to those changes, will have on consumer behavior and hence delinquency rates is still unknown," the report said.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a7pUfRPFjS7Q&refer=us

June 9 (Bloomberg) -- The default rate on commercial mortgages held by U.S. banks may rise to the highest in 17 years in the fourth quarter as debt for refinancing remains scarce and the recession drags down rents.

The rate is likely to reach 4.1 percent by year-end, Real Estate Econometrics LLC, a New York-based property research firm, said in a report today.

“The dramatic decline in real economic activity and labor markets since last September has undercut property fundamentals,” wrote Sam Chandan, chief economist of Real Estate Econometrics. The decline puts an increasing number of loans “at risk,” he said.

The projection implies defaults on about $44.3 billion of commercial mortgages, based on the $1.08 trillion of such loans held by U.S. banks in the first quarter, according to Chandan and Bloomberg calculations. Commercial defaults already are at a 15-year high after climbing to 2.3 percent in the first quarter, or $3 billion, from 1.6 percent at the end of 2008, according to the firm’s analysis of Federal Deposit Insurance Corp. data.

A default occurs when a loan is 90 or more days past due. A loan is considered delinquent when it’s 30 to 89 days late.

The projection for this year would match the 4.1 percent rate seen in 1993 and be the highest since defaults reached 4.6 percent in 1992 during the savings and loan crisis, when the U.S. created the Resolution Trust Corp. to deal with bad loans, according to Real Estate Econometrics.

The first-quarter rate was the highest since 1994, when 2.7 percent of commercial mortgages defaulted, the company said.

2010-11 Projections

Default rates likely will increase next year and in 2011 as five-year loans made in 2005 and later start to come due, Real Estate Econometrics said. Those mortgages were based on overly optimistic forecasts of income growth and inflated property values.

The company projects the default rate on commercial mortgages will reach 5.2 percent by the end of 2010 and peak at 5.3 percent in 2011 before starting to decline.

“Mortgages originated in 2006 and 2007 are experiencing the most significant shortfalls in current cash flow relative to current debt-service obligations,” the report said.

Commercial mortgages are defined in the report as loans on non-farm, non-residential buildings such as offices, retail centers and warehouses. They exclude apartment complexes.

The report makes a separate forecast for apartment buildings of five dwelling units or more. Multifamily defaults will rise to 4.5 percent by the end of this year from 2.5 percent in the first quarter, according to Real Estate Econometrics.

Multifamily defaults will peak at 5.5 percent in 2010, the firm estimated.

http://moneynews.com/economy/senior_foreclosures/2009/06/08/222669.html?s=al&promo_code=811A-1


More than 600,000 seniors are delinquent in their mortgage payments or already in foreclosure, USA Today reports.

Unlike younger people, many are on fixed incomes and lack the money or job opportunities to catch up on payments when they fall behind.

"I've got a lot of seniors who have just been nailed," mortgage specialist Dean Wegner told the newspaper.

"They're upside down (owing more on their mortgage than their homes are worth), they can't refinance and they're on a fixed income."

Conventional wisdom holds that most seniors have paid off their mortgages or have significant equity in their homes. But the reality is, hundreds of thousands of older homeowners are suffering in the housing crisis.

A recent report from AARP showed that 25.5 million seniors ages 50 and older have a mortgage — and that older Americans with subprime first mortgages are nearly 17 times more likely to be in foreclosure than Americans of the same age with prime loans.

Senior mortgage woes are creating challenges for retirement communities and assisted-living centers, which are finding that new members can't move in because they are saddled with homes they can't sell because people usually sell their homes to finance the entry fees.

Worse yet, a study done by the Employee Benefit Research Institute found that 36 percent of workers ages 55 and over have less that $25,000 in savings and investments aside from the values of their homes.

The National Delinquency Survey from the Mortgage Bankers Association found foreclosure activity was at an all time high in the first quarter of 2009, when the delinquency rate — which excludes homes already in the foreclosure process — hit 9.12 percent.

http://www.bloomberg.com/apps/news?pid=20601087&sid=awnY4WwTlTlA

June 5 (Bloomberg) -- Alabama’s most populous county is preparing to stop road maintenance, close courthouses and shutter services for the elderly after a court struck down taxes that pay for about 35 percent of its budget.

Jefferson County, which includes Birmingham, released a plan to cut $52 million from its budget as it appeals the ruling against its business and occupational taxes to the Alabama Supreme Court. Without that revenue, the county has said it is at risk of running out of money as soon as this month.

The loss of the tax money was another blow to a county that has been struggling to avoid bankruptcy since last year, when Wall Street’s financial crisis caused its interest bills to soar on more than $3 billion of bonds.

The proposed cuts, released today by county Commission President Bettye Fine Collins, would slash deeply into the government’s services and also include closing a nursing home for the indigent, declaring a moratorium on enforcing zoning and littering laws, and scrapping local development contracts.

http://informationclearinghouse.info/article22796.htm

June 09, 2009 "Information Clearing House" -- The Republicans are convinced that hyperinflation is just around the corner, but don't believe it. The real enemy is deflation, which is why Fed chief Bernanke has taken such extraordinary steps to pump liquidity into the system. The economy is flat on its back and hemorrhaging a half a million jobs per month. The housing market is crashing, retail sales are in a funk, manufacturing is down, exports are falling, and consumers have started saving for the first time in decades. There's excess capacity everywhere and aggregate demand has dropped off a cliff. If it wasn't for the Fed's monetary stimulus and myriad lending facilities, the economy would be stretched out on a marble slab right now. So, where's the inflation? Here's Paul Krugman with part of the answer:

"It's important to realize that there's no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger....

Is there a risk that we'll have inflation after the economy recovers? That's the claim of those who look at projections that federal debt may rise to more than 100 percent of G.D.P. and say that America will eventually have to inflate away that debt - that is, drive up prices so that the real value of the debt is reduced....Such things have happened in the past....

Some economists have argued for moderate inflation as a deliberate policy, as a way to encourage lending and reduce private debt burdens (but)... there's no sign it's getting traction with U.S. policy makers now." ("The Big Inflation Scare" Paul Krugman New York Times)

Krugman believes that conservatives have conjured up the inflation hobgoblin for political purposes to knock Obama's recovery plan off-course. But even he's mistaken, there's little chance that inflation will flare up anytime soon because the economy is still contracting, albeit at a slower pace than before. A good chunk of the Fed's liquidity is sitting idle in bank vaults instead of churning through the system WHERE it could do some good. According to Econbrowser, excess bank reserves have bolted from $96.5 billion in August 2008 to $949.6 billion by April 2009. Bernanke hoped the extra reserves would help jump-start the economy, but he was wrong. The people who need credit, can't get it; while the people who qualify, don't want it. It's just more proof that the slowdown is spreading.

That doesn't mean that the dollar won't tumble in the next year or so when the trillion dollar deficits begin to pile up. It probably will. Foreign investors have already scaled back on their dollar-based investments, and central banks are limiting themselves to short-term notes, mostly 3 month Treasuries. If Bernanke steps up his quantitative easing (QE) and continues to monetize the debt, there's a good chance that central bankers will jettison their T-Bills and head for the exits. That means that if Bernanke keeps printing money like he has been, there's going to be a run on the dollar.

Now that the stock market is showing signs of life again, investors are moving out of risk-free Treasuries and into equities. That's pushing up yields on long-term notes which could potentially short-circuit Bernanke's plans for reviving the economy. Mortgage rates are set off the 10 year Treasury, which shot up to 3.90% by market's close on Friday. The bottom line is that if rates keep rising, housing prices will plummet and the economy will tank. This week's auctions will be a good test of how much interest there really is in US debt.

At some point in the next year, the dollar will lose ground and commodities will surge, causing uneven inflation. But for how long? That depends on the state of the economy. Dollar weakness and speculation can drive up the price of oil, (oil is up 100% in the last two and a half months, from $34. to $68.) but falling demand will eventually bring prices back to earth. Presently, there's a bigger glut of oil sitting in tankers offshore than anytime in the last 15 years. Which brings us back to the original question; how bad is the economy?

The answer is, really bad! Here's a short blurb from economist Dean Baker in an article in the UK Guardian:

"The decline in house prices since the peak in 2006 has cost homeowners close to $6 trillion in lost housing equity. In 2009 alone, falling house prices have destroyed almost $2 trillion in equity. People were spending at an incredible rate in 2004-2007 based on the wealth they had in their homes. This wealth has now vanished.

Housing is weak and falling, consumption is weak and falling, new orders for capital goods in April, the main measure for investment demand, is down 35.6 percent from its year ago level. And, state and local governments across the country, led by California, are laying off workers and cutting back services.

If there is evidence of a recovery in this story it is very hard to find. The more obvious story is one of a downward spiral as more layoffs and further cuts in hours continue to reduce workers' purchasing power. Furthermore, the weakness in the labor market is putting downward pressure on wages, reducing workers' purchasing power through a second channel. (Dean Baker "Cheerleading the Economy" UK Guardian)


Don't be fooled by the cheery news in the media. The economy is hanging by a thread and recovery is still a long way off. The only way to dig out of this mess is to address the underlying problems head-on. That means removing the toxic assets from the banks, revamping the credit system, and rebuilding battered household balance sheets. If these issues aren't resolved, the problems will drag on for years to come. And even if they are fixed, the economy is still facing a long period of deleveraging and retrenching followed by an anemic recovery. Obama's fiscal stimulus might give GDP a jolt in the third quarter, but without help from the government checkbook, economic activity will stay in the doldrums.

Last month, personal savings increased to nearly 6 percent while consumer credit fell by $15.7 billion, the second largest decline in debt on record. According to Brad Setser of the Council on Foreign Relations, "Total borrowing by households and firms fell from over 15% of GDP in late 2007 to a negative 1% of GDP in q4 2008." How can these losses to GDP be made up when private borrowing has vanished without a trace? Consumers have shut their wallets, locked their purses and are refusing to take on any more debt. Despite government efforts to restart the credit markets by backing up loans for 0% financing on auto sales and $8,000 tax credit on the purchase of a new home, (which is tantamount to subprime lending) consumers are digging in their heels. All the hype about inflation hasn't sent them racing back to the shopping malls or the auto showrooms. Consumers have reached their saturation point and they are not budging. It's the end of an era.

The unemployment picture is getting bleaker and bleaker. Last week's report from the Bureau of Labor Statistics concealed the real magnitude of the job losses by using the discredited "Birth-Death" model which exaggerates the number of people reentering the workforce. Here's what former Merrill Lynch chief economist David Rosenberg had to say about Friday's BLS report:

"The headline nonfarm payroll figure came in above expectations at -345,000 in May - the consensus was looking for something closer to -525,000. The markets are treating this as yet another in the line-up of 'green shoots' because the decline was less severe than it was in April (-504,000), March (-652,000), February (-681,000) and January (-741,000). However, let's not forget that the fairy tale Birth-Death model from the Bureau of Labour Statistics (BLS) added 220,000 to the headline - so adjusting for that, we would have actually seen a 565,000 headline job decline."

The BLS figures have been denounced by every econo-blogger on the Internet. The figures are another example of the government's determination to airbrush any unpleasant news about the recession. Here's a better summary of the unemployment numbers from Edward Harrison at credit writedowns:

The Business Birth-Death Model added 220,000 jobs to the headline seasonally-adjusted number. Without this number, we are looking at a loss of 565,000 jobs....The number of jobs lost in the last 12 months increased from 5.34 million in April to 5.51 million in May....Other indicators suggest that the shadow supply of discouraged workers not counted in the numbers will now return to the labor force, pushing up the unemployment number. For example, the U-6 unemployment number was a gargantuan 16.4 %, the highest ever."(Edward Harrison credit writedowns)

Unemployment now stands at 9.4% (16.4%?) and will continue to rise whether there's an uptick in economic activity or not. Businesses are shedding jobs at record pace, and slashing hours at the same time. The average workweek slipped to 33.1 hours (down 2 hours from April) a new low. It goes without saying, that unemployment is highly deflationary because jobless people have to cut out all unnecessary spending. Beyond the 500,000 layoffs per month; wages and benefits are also under pressure, making a rebound in consumer spending even less probable. This is from Brian Pretti's article "Place Your Wagers":

"The year over year change in the Employment Cost Index (ECI) is the lowest number in the history of the data.... in the absence of household credit acceleration... aggregate demand (will fall)

The year over year change in wages has never been this low in the records of the data. .. Wages and salaries.... are all in negative rate of change territory. They are ALL contracting year over year.

Absent household balance sheet reacceleration in leverage it sure seems a good bet forward corporate earnings are now as dependent on household wages, salaries and broader personal income as at any time in recent memory. And corporations to protect margins and nominal profits are pressuring wages and salaries downward." ("Place Your Wagers" Brian Pretti, Financial Sense Observations)


From a workers point of view, things have never been worse. Demand is falling, employers are slashing inventory and handing out pink slips, and entire industries are being boarded up and shut down or shipped overseas. Economists Barry Eichengreen and Kevin O'Rourke make the case that, in many respects, conditions are deteriorating faster now than they did in the 1930s. Here's what they found:

1--World industrial production continues to track closely the 1930s fall, with no clear signs of 'green shoots'.

2--World stock markets have rebounded a bit since March, and world trade has stabilized, but these are still following paths far below the ones they followed in the Great Depression.

3--The North Americans (US & Canada) continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turn around. (A Tale of Two Depressions" Barry Eichengreen and Kevin O'Rourke VOX) http://www.voxeu.org/index.php?q=node/3421

Their conclusion: "Today's crisis is at least as bad as the Great Depression."

Yeah, times are tough, but what happens when housing prices stabilize and the jobs market begins to pick up; won't that put the Fed's trillions of dollars into circulation and create Wiemar-type hyperinflation?

Many people think so, but Edward Harrison anticipates a completely different scenario. The author takes into account the psychological effects of a deep recession and shows how trauma can have a lasting effect on consumer habits, thus, minimizing the chance of inflation. It's a persuasive thesis. Here's what he says:

"Richard Koo goes further in his book "The Holy Grail of Macro Economics". Here, he argues that the unwind of great bubbles suffers from what he labels a 'balance sheet recession.' In essence, companies go from maximizing profits, as they had done in normal times, to a post-bubble concern of reducing debt. Regardless of how much priming of the pump monetary authorities do, the psychology of debt reduction will limit the effectiveness of monetary policy as a policy tool.

In my view, the catalyst for this change of psychology is the 'debt revulsion' that ushers in the panic phase of an asset bubble collapse. (Charles Kindleberger highlights the various stages of a bubble and its implosion in his seminal book "Manias, Panics and Crashes". In this particular bubble, debt revulsion began post-Lehman Brothers. What we have seen, therefore, is a reduction in leverage and debt as the most leveraged players have gone to the wall. But, more than that, the household sector has gotten religion about debt reduction as the savings rate has increased dramatically since Lehman. In fact, I would argue that companies learned their lesson about debt from the aftermath of the tech bubble. It is the household sector in the U.S. (and the U.K.) which is heavily indebted. Therefore, if the psychology of a balance sheet recession does take form, it will be the household sector leading the charge.

In sum, the psychology after a major bubble is very different than the psychology before its collapse. The post-bubble emphasis becomes debt reduction and savings, making monetary policy ineffective, not because financial institutions are unwilling lenders but because companies and individuals are unwilling borrowers. These are forces to be reckoned with for some to come." (Edward Harrison, "Central banks will face a Scylla and Charybdis flation challenge for years" Credit Writedowns)

Seductive interest rates, lax lending standards and nonstop public relations campaigns persuaded millions of people that they could live beyond their means by simply filling out a credit app. or fudging a few numbers on a mortgage loan. These are the real victims of Wall Street's speculative bubble-scam. For many of them, the agony of losing their home, or their job, or filing for personal bankruptcy will be felt for years to come. At the same time, the experience will keep many of them from getting in over their heads again. The same phenomenon occurred during the Great Depression. The pain of losing everything shapes behavior for a lifetime, which is why the savings rate has spiked so dramatically in the last few months. There's been a tectonic shift in attitudes towards consumption and there's no going back to the pre-bubble era.

If Harrison is right, our decades-long spending-spree is over and people will be looking for ways to live more modestly, pay-as-they-go and avoid red ink. This is good news for the economy's long-term strength, but bad for short-term recovery. Deflation will persist even while savings grow and consumption comes more into line with personal income. The dollar will fall hard if Bernanke continues to load up on Treasuries, but with a few slight adjustments, he should be able to avoid a full-blown currency crisis. Thus, Zimbabwe-type hyperinflation is unlikely; the ongoing slowdown should keep inflation in check.

I keep hearing this, but, I quite frankly don't see it.

Also, there is all this 'saving' talk... Don't see that either.

http://news.xinhuanet.com/english/2009-06/02/content_11471749.htm


WASHINGTON, June 1 (Xinhua) -- Economic activity in the U.S. manufacturing sector failed to grow in May for the 16th consecutive month but at a slower pace, the Institute for Supply Management (ISM) reported Monday.

The Tempe, Arizona-based trade group said its manufacturing index, which reflects the opinions of purchasing managers at factories, plants and utilities, registered 42.8 last month, slightly better than the 40.1 reading in April.

A reading above 50 indicates growth while a reading below 50 indicates contraction. Analysts had been expecting a reading of 42.3 for May.

Last month, the ISM's production index registered 46.0, up from40.4 in April. The index for new orders rose to 51.1 from 47.2. But the employment index edged down to 34.3 from 34.4.

Five of the 18 manufacturing industries reported growth last month and 13 reported contraction, according to the ISM.

While the sector continued to contract in May, "there are signs of improvement," Norbert Ore, chair of the ISM manufacturing business survey committee, said while releasing the report.

"May is the first month of growth in the new orders index since November 2007, with nine of 18 industries reporting growth," Ore said. "New orders are considered a leading indicator, and the index has risen rapidly after bottoming at 23.1 in December 2008."

The ISM, a trade association representing approximately 40,000 supply management professionals, also said that the overall economy grew for the first time following seven months of decline in May.

http://informationclearinghouse.info/article22801.htm
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June 09, 2009 "Global Research" -- One of the most notable characteristics of 21st century Havana is what is not there: obvious and visible destitution. The begging and aggressive peddling prevalent in so many poor Latin capitals (and in most US cities) is entirely absent in Havana. There are no homeless people sleeping under bridges or hidden in doorways, no stumbling addicts crashed on park lawns, nor frantic children hawking candy and crafts. The sidewalks are crowded with workers and students and bureaucrats, rushing in every direction, often at a frenetic pace, but at no point is a visitor likely to encounter robbery or assault, or begging.

I recently spent a week in Cuba on a research tour, organized through the Canadian organization, Cuba Education Tours, with a group made up primarily of Canadian and American attorneys, union members, and researchers. It was an extraordinary experience, dispelling much of what I thought I knew about Cuba, and ultimately revealing more about the US than I had anticipated.

Two prevailing American misconceptions about Cuba were dispelled very early in our trip. One is the notion that the island is a society “closed” to the outside world, a stubborn throwback to another ideological moment. But this is typical American myopia, conjuring a country frozen in 1959, when the popular uprising displaced the American playground that was pre-Revolutionary Cuba. To be sure, the US economic blockade has had, and continues to have, a huge impact on the island’s economy, reflected most dramatically in the poor housing stock and lack of industrial development, but Cuba is hardly isolated from the world. Today, Havana is crawling with Canadian, Mexican, European, African, and East Asian tourists, students, and businessmen, and even a fair share of American backpackers and adventurers stealthily defying the US State Department.

The other common, but more complicated, American misconception is that Cuban society is less “free” than American society. We Americans still like to think we live in the Free World, if not the center of it, despite our massive surveillance state, a prison system unparalleled in its size and ferocity, and our militarized borders and restrictive immigration policies. But Cubans, our government and media tell us, are forced to live under a repressive, colorless, and undemocratic police state. This characterization comes as a surprise to most Cubans, who have minimal interactions with police (far less visible in Havana than in, say, Guatemala City or New York), engage in a lively electoral process every 2-1/2 years, and who seem to be among the most engaging and politically astute people I have ever encountered.

In the days following President Obama’s limited overtures to Cuba after the OAS meeting in April, the Administration’s point person on Cuba policy was not the Secretary of State, but Obama’s Economic Advisor, Lawrence Summers. According to Summers, “Cuba's known what it needs to do for a very long time and it's up to them in terms of their policies, their democratization and all the steps they can take and we'll have to see what happens down the road." President Obama himself echoed this line, lecturing Cubans that “if you take significant steps toward democracy, beginning with the freeing of all political prisoners, we will take steps to begin normalizing relations.”

This is extraordinary stuff at a time when the US is enduring international rebukes over its publicly-admitted widespread use of torture and the detention of thousands of foreigners and even US citizens without due process of law. According to the oppositional Cuban Commission for Human Rights and National Reconciliation (CCDHRN), there are currently 232 “political prisoners” in Cuba, not an insignificant number, but slightly fewer than the number of “enemy combatants” currently held in Guantanamo Bay. How could it be that 232 alleged political prisoners – some of whom are leftist opponents of the Castro government and hardly pro-American-– represent the political basis for American hostility to the Cuban Revolution?

These 232 political prisoners have about as much relevance to the US blockade of Cuba as Saddam Hussein’s non-existent “weapons of mass destruction” had to the decision to invade Iraq. The selection of Summers as a spokesman on US-Cuba policy, a man whose misogynistic and anti-democratic tendencies were on full display during his short tenure at Harvard, would be odd if the policy issues truly involved democratic freedoms. But of course, the real problem is not with the Cuban political system but with its economic system.

In Cuba, 85 percent of the population owns their own homes, mortgage-free. They have unrestricted access to high quality health care and a guarantee of a free public education through the university level. Teachers and community organizations have pivotal roles in determining educational priorities and curricula, ensuring the accessibility and relevance of the educational system. Every Cuban is guaranteed a basic income, and a job if they can work. One could go on about the percentage of female medical doctors (62 percent) or universal literacy (99.4 percent) or the number of incarcerated juveniles (zero), but in the US, such basic values have nothing to do with democracy or freedom. “Freedom” is reserved for markets and capital flow.

May Day 2009

My own trip to Cuba coincided with the 50th May Day celebration since the Cuban Revolution. For many Americans, the notion of International Workers Day might seem passé, a strange cousin to our own Labor Day celebrations of barbeque and the end of summer. Particularly in 2009, as American workers watch their hopes for long-term job security, health care, college educations, and a stable retirement dissolve in the face of economic meltdown, the notion of working class power feels highly theoretical.

But in Havana, May Day is not “Labor Day.” It is both an act of defiance and a celebration of the survival of Cuban socialism. The 2009 May Day march was more than a million strong – ten percent of the entire population of the island marches - with unionists and community organizations from across the island massed for the festive occasion. The teachers union led off the march this year, with their block-wide banner, “Education is a Labor of Infinite Love,” followed by a three-hour jubilant parade of teachers, doctors, construction workers, dancers and artists, taxi drivers, students, and even scientists and engineers marching past the official reviewing stand. Their hand-made signs declare “We Are A Free Country” and “We Defend Our Socialism,” and of course hundreds of portraits of Che.

One sign in particular caught my eye, and seemed to explain the key role of Larry Summers in the debate over “freedom” and “democracy” in Cuba.

Somewhat poorly translated, the sign reads: “In capitalism in crisis, they impose unemployment on thousands and they close industries. How the working class suffers! Under socialism it is completely different. They create factories and industries, They provide jobs and guarantee work for those affected. We want socialism! Long live Fidel!”

Yes, this is a country that has been led by one man for most of the last fifty years, one of the most successful personality cults in world history. It is a country where travel abroad is difficult for most, and restricted for others, where political parties are banned and the official, monotonous state media allows little room for dissenting views. And most importantly, it is a country where resources are scarce and life can be very difficult for the mass of people.

But it is also a country without health insurance companies, home mortgages, or a usurious banking industry, and not accidentally, a country without unemployment or homelessness. It is a place where laid off sugar cane workers can go to school at state expense to become social workers or organic farmers, where masses of people from all strata of society participate in decisions about the economy and social development. Cubans do not depend on stock market gambles to provide for their retirement (at age 55) nor do they lose health insurance if they quit their jobs. Compare the aftermath of Hurricane Katrina in 2005, from which New Orleans may never recover, with the devastating hurricanes that hit Cuba during the summer of 2008. In Cuba, there were no casualties, and the storms resulted in not even a single missed school day as teachers moved to makeshift classrooms, and friends and neighbors provided emergency housing.

The American demand that Cuba “change” in order to normalize relations with the United States is in fact anti-democratic, calling for a reversal of the current and overwhelmingly popular economic status quo. In return for an end to US hostility, Cubans must accept multinational corporate domination and privatized education and health care. They must allow the importation of consumer goods, the crushing of domestic industry and agriculture, and, most importantly, unfettered access for international finance. Only then, when Cuba begins to resemble Guatemala or Haiti or Mexico, will the Americans agree to “normal” relations and end nearly 50 years of terror. Only then will Cuba resemble the kind of American-style “democracy” supported by Barack Obama and Larry Summers.

But what became apparent to me as a first-time traveler to Cuba is that the official calls for “democracy in Cuba” are strictly for American consumption. The US blockade of Cuba, and restrictions on American travel there, must continue until there is no longer a Cuban Revolution. Otherwise, Americans might begin to envision a world where health care, education, and pensions are truly rights of residency; where industry is developed to support human needs, not scrapped for the benefit of creditors; and where egalitarianism is a realizable goal, not a utopian fantasy. Americans must never be permitted to see that, even in a flawed socialist economy in a tiny island country, there is no homelessness or starvation or unemployment or illiteracy. It might give us dangerous ideas about “Change We Can Believe In.”

Philip Fornaci is a prisoners’ rights attorney based in Washington, DC.

First the meters were hurriedly sold off through Daley's arm twisting of the city council.
Then we find out that it was sold off for pennies on the dollar of what they are worth.
Then we find out that the firm we sold them to was a hurriedly put together company wholly owned by Morgan Stanley
Then we find out that in exchange for the contract Morgan Stanley hired Daley's nephew.
Then when the parking meters were turned over, Morgan Stanley wasn't ready to service the meters where most of them don't work and people were being ticketed left and right. This is still happening.
Of course under privatization the parking rates went up four times the old meter amounts.


Now one finds out that parking meter rates will increase to as high as $6.50 per hour beginning in 2013.

And the contract also is protecting Morgan Stanley's profits by banning 'Competing Public Parking Facilities' from providing parking within a mile of the Morgan Stanley investors' turf for anything less than 3x the metered rates. (that would be $19.50 an hour)

Those last two points are from
http://slashdot.org/submission/1013497/Chicago-Pols-Pass-Law-Requiring-468-a-Day-Parking


This is one stinker of a deal.

This is nucking futz.

Then again, this is Chicago.




Tansy Gold, formerly of the Windy City. . . . . many long years ago. . . .

not credit cards, but special meter cards that one charges with one's credit card, somewhere. We are supposed to have those here in Ann Arbor, I just don't park at meters....don't drive downtown either (such as it is). Downtown is for tourists and the Google "Elite" who are foolish enough to buy into the loft condos that used to be real factories that employed people and made useful goods for home and abroad...

the Kid and I are just back from seeing "Angels and Demons". I highly recommend it--and unless you like mindless machine on machine violence, skip the latest Terminator flick. Thank god the writer's strike ended. Last year there was nothing to see.

Still waiting to see Harry Potter--I ought to set up a countdown clock....in exactly 5 weeks!!!!

http://news.yahoo.com/s/nm/20090613/bs_nm/us_g8_usa_geithner_2


Geithner: Too soon to withdraw economic stimulus


By David Lawder David Lawder Sat Jun 13, 1:24 pm ET

LECCE, Italy (Reuters) – U.S. Treasury Secretary Timothy Geithner said on Saturday it was too early to start withdrawing stimulus for the world's top economies, but governments should pledge a return to more sustainable fiscal policies in the future.

"Growth should remain the principal focus of policy among the G8 and broader G20 economies," Geithner told a news conference after finance ministers from the Group of Eight economies finished a two-day meeting here.

He said recovery has not yet arrived, and governments need to keep reinforcing recent improvements in global demand.

"It is too early to shift toward policy restraint," Geithner said. "Economic and financial recovery, however, will be stronger and more sustainable if we make clear today how we get back to fiscal sustainability when the storm has fully passed."

For that reason, he said the United States was committed to bringing down its fiscal deficits quickly to a sustainable level, starting in 2011, and would work to reduce long-term health care costs that are adding to deficits.

Geithner's remarks partly echoed the G8 finance ministers' communique issued after the meeting, which mentioned the need to prepare appropriate "exit strategies" for efforts to boost growth, and tasked the International Monetary Fund with analysis work to aid the process.

While Geithner said the "force of the economic storm is receding" he told the BBC in Lecce that he wanted recovery firmly in place before withdrawing stimulus.

"We don't have a world economy that's growing anywhere close to potential yet. We want to see recovery firmly established before we start to get on to the next challenge," he said in the interview.

LOW PROFILE, LOW-KEY

Geithner's comments were his first at the meeting in Lecce, where differences were aired on the timing of stimulus withdrawals and on tests to determine the health of banks. He kept a low profile and played down rifts on these issues, preferring to talk about broad consensus for continued work to boost growth and efforts to coordinate financial regulatory reforms.

The United States has emphasized the success of its publishing of stress tests on its 19 largest banks in May, which helped restore confidence in the sector and helped these institutions to sell about $65 billion in new equity. European countries have not published the results of their bank health checks.

In his news conference, Geithner referred to stress test discussions as part of "the usual stock taking" on the financial front, but acknowledged differences in the BBC interview.

"The Europeans are taking a slightly different approach to their banking system," he said.

"What matters of course is what works. And I think our basic approach is to try to make sure we're all committed to keeping at it till we're confident we have a recovery in place and a financial system that is working again."

Although concerns about rising U.S. debt levels have hurt the dollar and pushed up bond yields, Geithner said the G8 ministers had no "significant discussions" about this issue.

The Obama administration will unveil regulatory reform proposals next Wednesday, and Geithner said it was important for these to be coordinated with similar efforts in other countries to eliminate the potential for regulatory "arbitrage" -- choosing the country with the weakest oversight. But he said the United States did not plan to make any joint regulatory proposals with other countries

A U.S. Treasury official in Lecce later said that the proposals also would not include any future disposition for Fannie Mae (FNM.N) and Freddie Mac (FNM.N), the two mortgage finance companies that the Treasury seized control of last September. The administration is just starting to consider their future as part of a larger review of the government's role in the U.S. housing sector, the official said.

IF I WERE HIM, I'D KEEP A LOW PROFILE TOO, TO AVOID THE FLYING CREAM PIES!

AND I'D BANG MY HEAD ON THE NEAREST BRICK WALL, BECAUSE IT WILL FEEL SO GOOD WHEN I STOP.

The new animation,
Submitted by admin on Thu, 2009-06-11 00:38.
The new animation, "Stimulate This, Bro!" is up and running. Can you guess my favorite scene?
-MF


OK, Mark, I'll play... There
Submitted by Anonymous on Thu, 2009-06-11 19:35.
OK, Mark, I'll play...
There is a 99.3% chance that I'll get the answer to the question wrong, but I'll take the position of the deliberately naive respondent. Otherwise, it should be widely known that your sarcasm and parody are both multi-facted. Therefore, to take a literal approach is naive. (grins)
I guess that the Alan Greenspan lifeguard was your favorite part, for these reasons:
1. He's about the only example (other than the narrating teenager) who says something.
2. What he says is funny.
3. Finally, it's funny to see an elderly gent of his (um) slooped stature shirtless as a lifeguard.
OK, now is it time yet for you to tell us what your favorite part really was? -lagooncrow


You nailed it! (For all
Submitted by admin on Thu, 2009-06-11 22:37.
You nailed it! (For all those reasons you mentioned:-)
Thank you for playing.
-MF


http://www.markfiore.com/political/stimulate-bro

G8 finance ministers see crisis easing

By Guy Dinmore in Lecce, Italy

http://www.ft.com/cms/s/0/24e2969a-5808-11de-8cbb-00144feabdc0.html

Finance ministers from the G8 on Saturday signalled their cautious belief that the worst of the global financial crisis might be over and began for the first time to discuss “exit strategies” to counter the growing threat of inflation.

Stress tests for banks were also discussed, aides said, but divisions over the issue – with France and Germany resisting calls for more transparency over publication of results – kept an explicit mention of tests out of the final communique.

“There are signs of stabilisation in our economies, including a recovery of stock markets, a decline in interest rate spreads, improved business and consumer confidence, but the situation remains uncertain and significant risks remain to economic and financial stability,” the communique said after a weekend of talks in the southern Italian city of Lecce.

An official said the reference to “significant risks” – absent in the draft – was inserted at the request of the UK. An earlier mention of “encouraging figures in the manufacturing sector” was deleted from the draft after eurozone industrial production data for April, released on Friday, showed an annual drop of more than 21 per cent.

Ministers also warned that unemployment might continue to increase even after economies start growing again.

For the first time G8 ministers tackled growing market concerns over unsustainable levels of public debt and budget deficits that have weighed on US Treasury bonds and the dollar.

“We discussed the need to prepare appropriate strategies for unwinding the extraordinary policy measures taken to respond to the crisis,” the statement said. “These ‘exit strategies’, which may vary from country to country, are essential to promote a sustainable recovery over the long term.”

The ministers – from Canada, France, Germany, Italy, Japan, Russia, the UK and US – asked the IMF to prepare an exit strategy analysis.

THE 8 BLIND MEN AND THE ELEPHANT IN THE LIVING ROOM, WITH THE CANDLESTICK

Of course, after the litany of insoluble horrors listed above, some might say that's a good thing.

Get Out Old Glory Tomorrow! Show the Freepers how it's done!

6/13/09 The Fed Might Have Painted Itself into a Corner by Frank Shostak

A growing concern for Fed policy makers is a weakening in the US dollar against major currencies. The price of the euro in US-dollar terms climbed from a low of $1.27 in November last year to around $1.41 in May and $1.43 in early June – an increase of 12.6% from November. The major currencies dollar index fell to 78.89 in May from 82.3 in April – a fall of 4.1%. If the declining trend in the US dollar were to consolidate, this could cause foreign holders of US-dollar assets to divest into non-dollar-denominated assets and precious metals. This in turn could spark another financial crisis.
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There is almost complete agreement among various commentators that the massive monetary pumping by the Fed since September last year was necessary to prevent a plunge in aggregate demand.

As a result, it is held, the Fed has prevented the economy from falling into a severe recession. According to this way of thinking, the increase in money supply strengthens the demand for goods and services, which in turn strengthens the economy. A stronger economy in turn feeds back into the demand and this strengthens the economy further.
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What most commentators and Fed policy makers don't tell us is that monetary pumping has given rise to various bubble activities. These bubble activities are supported by real savings that have been diverted from wealth generators by means of pumped money. Also note that the pumped money has prevented the removal of various old bubble activities. Hence, contrary to popular thinking, the massive money pumping has actually weakened the economy's bottom line.

If the Fed were to start taking some of the newly pumped money from the economy, i.e., to curb the money-supply rate of growth, this would hurt various old and new bubble activities. It would set in motion an economic bust. (Remember, bubble activities are not self-funded; they require money "out of thin air," which is employed to divert real savings to them from wealth generators.)

Summary and Conclusions

A major concern for Fed policy makers is a visible weakening in the US dollar against major currencies. If the Fed were to allow the dollar to fall further, the US central bank runs the risk that major holders of US-dollar assets will divest to nondollar assets. This could push long-term rates and mortgage rates higher, thereby igniting another crisis. If, in order to defend the dollar, the Fed were to start taking some of the newly pumped money from the economy, i.e., to curb the money supply rate of growth, this will hurt various old and new bubble activities and set in motion an economic bust. Even if the Fed were to decide to tighten its stance just slightly, given the current strengthening in the growth momentum of economic activity, this could visibly weaken the growth momentum of monetary liquidity, thus posing a threat to the stock market. It seems that the Fed might have painted itself into a corner.

http://www.lewrockwell.com/shostak/shostak10.html

getting themselves stuck on the horns of a dilemma. In fact, I believe painting themselves into a corner was a stock gag....

http://news.yahoo.com/s/ap/20090614/ap_on_go_pr_wh/us_meltdown_overhaul_4

WASHINGTON – President Barack Obama is ready to roll out an overhaul of the intricate rules and systems that govern America's troubled financial institutions, proposing the most ambitious revision since the Great Depression.

The goal is to prevent a recurrence of the economic crisis that erupted in the United States and exploded last fall with devastating consequences still reverberating around the world.

Unlike the government's temporary ownership stake in automakers and major financial companies, the regulatory changes set to be announced Wednesday are designed to be permanent. They could result in a major realignment of power and authority among government agencies that set the rules for banking, lending and investing and touch American lives through daily transactions, from credit cards to mortgages and mutual funds.

The proposals already are the source of a spirited debate in Congress over whether Obama's measures will prove too timid or place too heavy a hand on the levers of capitalism.

At issue is a 21st century system of high-stakes swaps and trades, bets and losses where trillions of dollars worth of investment products have grown too intricate for a 20th century regulatory structure.

In devising new regulations and oversight, the administration is looking to address four perceived weaknesses in the current system:

_The need for an all-seeing government entity to detect institutional stresses that threaten the entire financial system. Think of the mortgage-backed securities that are still weighing down bank balance sheets.

_The inability to step in and unwind large and complex institutions before they fail and become the thread that unravels the fabric of the system.

_The undercapitalization of large financial institutions. Heading into the financial crisis, too many banks were leveraged with significantly more debt than equity.

_Consumers and lenders whose unwitting or reckless credit and borrowing decisions placed families under staggering debts and contributed to the instability of the financial system. Obama is likely to recommend creation a financial services consumer protection body with oversight powers over mortgages and credit cards and other consumer financial products.

GEE, NO RETURN TO REGULATION? NO ENFORCEMENT OF PROSECUTION FOR FRAUD? IS THIS JUST MORE OF THE SAME INVISIBLE HAND CRAP?

forget it. Nothing less will have the slightest effect on the heirs to Dewey, Cheatem, and Howe.

6/12/09 US cities may have to be bulldozed in order to survive by Tom Leonard

Dozens of US cities may have entire neighbourhoods bulldozed as part of drastic "shrink to survive" proposals being considered by the Obama administration to tackle economic decline.

Dozens of US cities may have entire neighbourhoods bulldozed as part of drastic "shrink to survive" proposals being considered by the Obama administration to tackle economic decline. The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature. Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area.

The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint. Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country. Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes. Most are former industrial cities in the "rust belt" of America's Mid-West and North East. They include Detroit, Philadelphia, Pittsburgh, Baltimore and Memphis.

In Detroit, shattered by the woes of the US car industry, there are already plans to split it into a collection of small urban centres separated from each other by countryside. "The real question is not whether these cities shrink – we're all shrinking – but whether we let it happen in a destructive or sustainable way," said Mr Kildee. "Decline is a fact of life in Flint. Resisting it is like resisting gravity." Karina Pallagst, director of the Shrinking Cities in a Global Perspective programme at the University of California, Berkeley, said there was "both a cultural and political taboo" about admitting decline in America. "Places like Flint have hit rock bottom. They're at the point where it's better to start knocking a lot of buildings down," she said.

Flint, sixty miles north of Detroit, was the original home of General Motors. The car giant once employed 79,000 local people but that figure has shrunk to around 8,000. Unemployment is now approaching 20 per cent and the total population has almost halved to 110,000. The exodus – particularly of young people – coupled with the consequent collapse in property prices, has left street after street in sections of the city almost entirely abandoned.
In the city centre, the once grand Durant Hotel – named after William Durant, GM's founder – is a symbol of the city's decline, said Mr Kildee. The large building has been empty since 1973, roughly when Flint's decline began. Regarded as a model city in the motor industry's boom years, Flint may once again be emulated, though for very different reasons.

But Mr Kildee, who has lived there nearly all his life, said he had first to overcome a deeply ingrained American cultural mindset that "big is good" and that cities should sprawl – Flint covers 34 square miles. He said: "The obsession with growth is sadly a very American thing. Across the US, there's an assumption that all development is good, that if communities are growing they are successful. If they're shrinking, they're failing." But some Flint dustcarts are collecting just one rubbish bag a week, roads are decaying, police are very understaffed and there were simply too few people to pay for services, he said. If the city didn't downsize it will eventually go bankrupt, he added.

Flint's recovery efforts have been helped by a new state law passed a few years ago which allowed local governments to buy up empty properties very cheaply. They could then knock them down or sell them on to owners who will occupy them. The city wants to specialise in health and education services, both areas which cannot easily be relocated abroad. The local authority has restored the city's attractive but formerly deserted centre but has pulled down 1,100 abandoned homes in outlying areas. Mr Kildee estimated another 3,000 needed to be demolished, although the city boundaries will remain the same. Already, some streets peter out into woods or meadows, no trace remaining of the homes that once stood there. Choosing which areas to knock down will be delicate but many of them were already obvious, he said.

The city is buying up houses in more affluent areas to offer people in neighbourhoods it wants to demolish. Nobody will be forced to move, said Mr Kildee. "Much of the land will be given back to nature. People will enjoy living near a forest or meadow," he said. Mr Kildee acknowledged that some fellow Americans considered his solution "defeatist" but he insisted it was "no more defeatist than pruning an overgrown tree so it can bear fruit again".

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5516536/US-cities-may-have-to-be-bulldozed-in-order-to-survive.html


Dan Kildee responds in the comments...
For those of you who would like to learn more about this effort, please feel free to e-mail me directly (see below).

Please keep in mind a couple of points:

One, we do not "buy" these properties, they come into our ownership through tax foreclosure - the owners have stopped paying property taxes and they come into our ownership after two years. Two, nobody is ever forced to leave their home -ever. In fact, my program has actually saved almost 3000 homeowners from foreclosure. Finally, I am not "anti-growth" as some seem to think. It is the unfettered growth in LAND USE that is irrational. I am all for economic growth - so don't confuse the two.

Our goal is to reuse the properties that come to us more rationally by returning much of the land to a natural state, rather than sell these uninhabitable buildings to infomercial-watching speculators. That experiment was tried for 30 years, and failed miserably.

Thanks for your interest. The debate is needed.

Dan Kildee
dkildee@sbcglobal.net

but we can't all make a living providing those same services to one another.

People need food, clothing and shelter. A person can't do everything for himself nor for the family. Even a family can't do everything, you need supplies from somewhere. A small community of people working together might be doable.

6/12/09 Velocity of Money Comes to a Standstill by Mr Practical

Gross Domestic Product is the standard measure, in dollars, of the level of production in the economy. Production is essential, as it's wealth creation (when measured properly); more efficient production creates wealth and raises the standard of living. Every other economic variable is only important as it relates to production. For example, we only care about price inflation insofar as it affects our wealth. Lower prices can actually be the result of more efficient production; our Federal Reserve tries to convince us that lower prices are bad only when an economy is over-levered, as any good central bank left alone will eventually accomplish.

The objective of capitalism is to ruthlessly increase production. The objective of socialism is to take the current standard of living and spread it equally among an economy's population. GDP is the sum of consumption, investment, government spending, and net exports. in valuing assets such as stocks, we need to understand not just whether or not the economy is currently expanding, as indicated by GDP, but how and why. Current GDP has been shrinking and is currently $11.5 trillion.

Current consumption, which at $8.2 trillion is around 70% of GDP, has fallen $150 billion from last year. If you exclude gasoline purchases from today’s numbers, retail sales fell by a record amount over last year. Consumers are spending more of their disposable income on non-discretionary goods and trying to save more money: the savings rate bottomed last year and has been rising. It will continue to rise as consumers must mend their balance sheets. If you take consumer debt divided by disposable income, it's still 130% (reported today), an all-time high. Consumers are in shabby shape.

Investment, which represents things like building factories, is $1.3 trillion or 11% of GDP, and down 23.3% from last year. We all know the status of net exports, which is and has been negative to the current tune of $350 billion a year or a drag of 3% on GDP. In order to compensate, the government has stepped in with massive spending of $2.2 trillion or almost 20% of GDP. Where they get the “money” for this I've discussed many times. Our public debt could one day soon surpass those kings of inflation -- the Japanese. In addition to stimulus, the government has also “borrowed” to bailout directly or indirectly the financial system. This adds nothing to GDP but probably saves it from nose-diving via consumption and investment. Not many people know that if you add up all the bailouts, direct and indirect, it comes to $30 trillion. Truly mind-boggling numbers.

Government spending becoming such a large part of GDP is not good because it is the least productive of the other processes that drive production. The other processes are based on capitalism that have several stages where production is made more efficient. When a computer is made it is the culmination of many processes and parts, all of which are produced by specialists who make their processes the most efficient possible. They're rewarded with profit for doing so. The government doesn't have specialists and spends money mostly based on political considerations.

The "capital" it spends is very inefficient towards production. Government taking over the economy will lower productivity dramatically. Berries (bureaucrats) don’t seem to understand this. It takes more and more government spending to marginally grow GDP; thus the huge sums being “spent” to merely slow down the decline. We are fast reaching the point, because of immense debt levels that take capital away from productive uses (crowding out), where infinite spending by government is not adding to GDP.

All this massive spending has “stabilized” the economy and with some natural and base level of economy, people have perceived this to be the beginning of improvement. This is flawed logic. Getting worse at a declining rate is natural. Some are buying stocks because they fear inflation. Inflation is a falling dollar. When the dollar falls it tends to drive prices up. But we can see that prices of necessities are going up while prices of discretionary things are going down. This is natural as disposable income falls and the savings rate rises. Additionally, I think they don't quite understand how "inflation" is created. To "inflate" or devalue the dollar precipitously, you need a fractional banking system to lend money and consumers to borrow it. Without that you have no multiplier effect.

With mortgage rates up 100 basis points in 2 weeks (as a result of trying desperately to print enough money to reflate), and with a now required 20% down, few people can afford a mortgage given their negative equity and high debt. The money "supply" is egregious (the government bailing out banks and stuffing them with cash), but the velocity of money has come to a standstill (people aren't in any shape to borrow it). I heard a Fed official say that a jobless recovery is possible. I suppose it is, but I will tell you it can only occur if productivity is rising. So while not lying, he isn't telling the truth, or he doesn’t understand it. Berries call productivity higher when it is driven by leverage.

For example, a company can make more money per employee if they lever their balance sheet, at least temporarily. But leverage creates risk -- or haven’t we learned that lesson yet? Real productivity is driven by technology and system advancement, not by more leverage. That may or may not come but it is not a function of leverage and government spending, which in fact tends to reduce, not increase it. The US economy has a serious problem, one which I've talked about many times: too much debt. The government is merely trying to shift financial debt (forget consumer debt) to public debt. They're merely shifting the costs from us to our children. Today’s politician seeks short-term solutions at the expense of the long term. Shouldn’t it be the other way around? Risk is very high.

http://www.minyanville.com/articles/GDP-Fed-debt-inflation-Japan/index/a/23064/p/1

Maybe the government should go back to school, get retrained in basic real world economics outside of the cost of attaining public office...or maybe they should all get thrown out of office, and if appropriate, locked up for white collar and war crimes.

This is very interesting


6/12/09 NYSE Halts Trading In Several Hundred Stocks Due To "Connectivity Issues"

Developing story: Among the affected stocks are GE, Merck and Exxon - the reason cited for the halt is "connectivity issues."


http://3.bp.blogspot.com/_FM71j6-VkNE/SjJ8ghIMknI/AAAAAAAADQE/tIkHxeXrRLI/s400/NYSE+alert.jpg


Full list of affected stocks:

ABG, ABVT, ACE, ACO, AEE, AFL, AHC, AHR, AIG, AIG PRA, AIQ, AMT, AMX, APC, ATR, ATW, AVA, AWK, AXP, BAC, BBD, BDK, BGC, BHI, BJS, BLC, BLK, BW, BWP, BYI, CB, CBR, CCI, CJA, CJB, CPN, CPX, CRI, CRK, CRL, CTB, CVG, CXW, CZZ, DEP, DOV, DPS, DRC, DSW, DVN, DY, DYN, EBR, EBR B, EEP, EEQ, EFX, EIX, EPD, EPE, ESL, ETE, ETN, ETP, EVC, FGP, FNA, FNM, FPL, FSC, FST, GBX, GE, GET, GIL, GJJ, GR, GY, HCF, HEW, HHS, HJJ, HJL, HLX, HP, HYL, ICE, ICO, IDA, IEP, IO, IPG, ISH, ISM, JCI, JCI PRZ, JZC, KBR, KCP, KEX, KMT, KSP, KWK, LEG, LTM, LUB, LVS, MCD, MDR, MDU, MEG, MET, MGM, MHP, MIR, MIR WSA, MIR WSB, MPX, MRK, MS, MTW, MYE, NEM, NFG, NLY, NOC, NPO, NRG, NSH, NTG, NU, NUE, OB, OKS, ORB, ORI, OSG, OSK, OSP, PAA, PAC, PBR, PBR A, PDA, PGI, PHH, PLL, PLT, PMI, PNC, PNC PRC, PNC PRD, PNK, PNM, POM, POR, PPL, PRO, PVD, PXP, QTM, R, RES, RGA, RGA, PRA, RRI, RT, RTI, RTN, RTN WS, RVI, SAB, SCI, SE, SEP, SGP, SGP PRB, SHG, SID, SJM, SLE, SLM, SNA, SNS, SPH, SRZ, SUG, SUP, SWX, SY, SYX, T, TAL, TC, TCI, TDC, TDW, TEX, TG, TGI, THC, TNK, TOD, TOO, TPP, TRH, TRN, TRR, TRW, TTO, TWC, TWX, TYG, TYN, TYY, UBA, UBP, UNF, URI, URS, USU, V, VALE, VALE P, VIA, VIA B, VMC, VZ, WEC, WLP, WMB, WMZ, WPZ, WTR, WTU, WW, WWE, XL, XL PRY, XOM, ZAP, ZLC


*************

Response from inthemoney: "Now tell us what really happened. I work in IT, I want to know. And no, I don't believe it could be a "connectivity" issue for an hour. They must have disaster recovery servers on stand by ready to take over at any minute. It is NYSE, after all, not some make-shift internet cafe in Africa."

Response from agrotera: "No worries, just a little break in the action to set up a very private and exclusive new system for the ppt named "the17thfloor" ( in honor of bernie) to handle the necessary paperwork (or lack of) for the nakedshorts that the ppt will start implementing when the time is JUST right."

http://zerohedge.blogspot.com/2009/06/nyse-halts-trading-in-several-stocks.html

Dr. Frederick Frankenstein: Now that brain that you gave me. Was it Hans Delbruck's?

Igor: No.

Dr. Frederick Frankenstein: Ah! Very good. Would you mind telling me whose brain I DID put in?

Igor: Then you won't be angry?

Dr. Frederick Frankenstein: I will NOT be angry.

Igor: Abby Someone.


Dr. Frederick Frankenstein: Abby Someone. Abby who?

Igor: Abby Normal.

Dr. Frederick Frankenstein: Abby Normal?

Igor: I'm almost sure that was the name.

Dr. Frederick Frankenstein: Are you saying that I put an abnormal brain into a seven and a half foot long, fifty-four inch wide GORILLA?




The pundits on CNBC who appear every morning proclaim that things are returning to normal. It amazes me that such supposedly intelligent people have no idea what normal means. Since 80% of the people interviewed on CNBC manage other people’s money, I’m guessing they are just trying to stay in business by lying to the average investor. If they were honest, they would say they have no idea what the future holds. If they were outspokenly honest, they would say that a Frankenstein’s Monster is loose in the countryside and will wreak havoc on the American economy for years.


Definition of Normal: Being approximately average or within certain limits; typical

Definition of Abnormal: Not typical, usual, or regular; not normal; deviant

Which definition is the best represents our economic situation today?







I would contend that Dr. Bernanke (Curly), Dr. Geithner (Larry), and Dr. Obama (Moe) have placed an abnormal brain into the seven and a half foot, fifty-four inch wide GORILLA that is the American economy. Only stooges would expect the same borrow and spend policies that ruined our economic system in the 1st place to fix the problem. The housing and debt crisis needs the attention of reality based, blunt, straight shooting doers. Not a 3 Stooges solution.

more...
http://theburningplatform.com/economy/abby-normal

I am both appalled and pleased...a very unsettling combination.

I think I need another shower now...
































and some good alchohol...WITH pills...

If you think this is bad, you should see the Stock Market Watch during business hours in LBN forum...