Workers of the World, Unite! Part 2 of August 4-7, 2009 Weekend Economists

Yup! Still going strong. We didn't want to have to go through 100+ posts every time, so here is Part 2.

Do you know how Labor Day got started? Well, first there was International Workers' Day.

International Workers' Day is the commemoration of the Haymarket Massacre in Chicago in 1886, when Chicago police fired on workers during a general strike for the eight hour day, killing a dozen demonstrators. In 1889, the first congress of the Second International, meeting in Paris for the centennial of the French Revolution and the Exposition Universelle, following a proposal by Raymond Lavigne, called for international demonstrations on the 1890 anniversary of the Chicago protests. These were so successful that May Day was formally recognized as an annual event at the International's second congress in 1891. The May Day Riots of 1894 and May Day Riots of 1919 occurred subsequently. In 1904, the International Socialist Conference meeting in Amsterdam called on "all Social Democratic Party organizations and trade unions of all countries to demonstrate energetically on May First for the legal establishment of the 8-hour day, for the class demands of the proletariat, and for universal peace." As the most effective way of demonstrating was by striking, the congress made it "mandatory upon the proletarian organizations of all countries to stop work on May 1, wherever it is possible without injury to the workers."<1>

Through all this turmoil in the northern hemisphere, the Stonemasons Society in the then colony of Victoria, now the State of Victoria in Australia led the battle for the 8 Hour Day, the most dramatic achievement of the early trade Union Movement. By 1856, Australian workers were benefiting from the results of a decision by the Collingwood Branch of the Stonemasons Society of Victoria. The same year it was recognized in New South Wales, followed by Queensland in 1858 and South Australia in 1873. A memorial statue with the numerals 888, representing 8 hours of work, 8 hours of recreation, and 8 hours of rest, sits on the corner of Lygon Street and Victoria Parade in Melbourne, Australia to this day.

May Day has long been a focal point for demonstrations by various socialist, communist, and anarchist groups. In some circles, bonfires are lit in commemoration of the Haymarket martyrs, usually right as the first day of May begins.<2> It has also seen right-wing massacres of participants as in the Taksim Square massacre of 1977 in Turkey.

Due to its status as a celebration of the efforts of workers and the socialist movement, May Day is an important official holiday in Communist countries such as the People's Republic of China, Cuba, and the former Soviet Union. May Day celebrations typically feature elaborate popular and military parades in these countries.

In countries other than the United States and Canada, resident working classes sought to make May Day an official holiday and their efforts largely succeeded. For this reason, in most of the world today, May Day is marked by massive street rallies led by workers, their trade unions, anarchists and various communist and socialist parties.

In the United States, however, the official Federal holiday for the "working man" is Labor Day in September. This day was promoted by the Central Labor Union and the Knights of Labor organized the first parade in New York City. The first Labor Day celebration was held on September 5, 1882, and was organized by the Knights of Labor. The Knights began holding it every year and called for it to be a national holiday, but this was opposed by other labor unions who wanted it held on May Day (as it is everywhere else in the world). After the Haymarket Square riot in May, 1886, President Cleveland feared that commemorating Labor Day on May 1 could become an opportunity to commemorate the riots. Thus he moved in 1887 to support the Labor Day that the Knights supported. <1>

May Day celebrations around the World

May 1 is a national holiday in Albania, Armenia, Argentina, Aruba, Austria, Bangladesh, Belarus, Belgium, Bolivia, Bosnia and Herzegovina, Brazil, Bulgaria, Cameroon, Chile, Colombia, Costa Rica, China, Croatia, Cuba, Cyprus, Czech Republic, Dominican Republic, Ecuador, Egypt, El Salvador, France, Germany, Greece, Guatemala, Haiti, Honduras, Hong Kong, Hungary, Iceland, India, Iraq, Italy, Ivory Coast, Jordan, Kenya, Latvia, Lithuania, Lebanon, Luxembourg, Macedonia, Malaysia, Malta, Mauritius, Mexico, Morocco, Myanmar (Burma), Nepal, Nigeria, North Korea, Norway, Pakistan, Panama, Paraguay, Peru, Poland, the Philippines, Portugal, Romania, Russian Federation, Singapore, Slovakia, Slovenia, South Korea, South Africa, Spain, Sri Lanka, Serbia, Sweden, Syria, Thailand, Turkey, Ukraine, Uruguay, Venezuela, Vietnam, Zambia, and Zimbabwe.

http://en.wikipedia.org/wiki/International_Workers%27_Day

Yes, almost any other nation celebrates Labor's role in society on May Day, but that didn't sit well with Business. May Day was for the Commies and Socialists. Big Business didn't want to give Labor any ideas, nor look like it was endorsing anything anti-capitalist.

"The first Labor Day in the United States was celebrated on September 5, 1882 in New York City.<1> In the aftermath of the deaths of a number of workers at the hands of the US military and US Marshals during the 1894 Pullman Strike, President Grover Cleveland put reconciliation with Labor as a top political priority. Fearing further conflict, legislation making Labor Day a national holiday was rushed through Congress unanimously and signed into law a mere six days after the end of the strike.<2> Cleveland was also concerned that aligning a US labor holiday with existing international May Day celebrations would stir up negative emotions linked to the Haymarket Affair.<3> All 50 U.S. states have made Labor Day a state holiday."

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


The Official Song of the World Labor Movement--the Internationale

http://www.youtube.com/watch?v=fPFlyrvEb8M

http://www.youtube.com/watch?v=suVB3YGIUk0&feature=related French

http://www.youtube.com/watch?v=fCFibtD3H_k&feature=related Russian

http://www.youtube.com/watch?v=Z4N_07o0PJU&feature=related English

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x477725


have a good night's sleep, and we'll meet back here in the morning on Sunday!

As much as Henry Ford hated unions he was smart enough to realize that if he paid workers a good wage and gave them some time off...they would by the cars he made and drive then. He made the connection between wages and the economy, unlike some of these modern day captains of industry that have never gotten dirt under their nails.

and why it is fallacious.

It's no longer August. I know September's a bummer. Who wants to think about the end of summer? According to my Ukrainian friends, summer has already ended. Just one of the cultural things...

Well, I'm really not feeling well--and typing in the dark with my sinuses in agony, so I guess we'll just take it as read--I'm flaky when sick.

I did it right on Friday----

We can still wear summer shoes... For a couple of days! :bounce:

Almost never ends.

:hi:



Tansy Gold, who's still wearin' her sandals in February thankyouverymuch

http://robertreich.blogspot.com/2009/09/real-news-about-jobs-and-wages-ode-to.html


Why aren't we hearing more about the worst job and wage situation since the Great Depression?

The latest employment figures (released this morning) show job losses continuing to grow. According to the payroll survey, job losses are increasing more slowly than in previous months. According to the household survey, they're accelerating -- from 9.4 percent of the workforce in July to 9.7 percent in August. Bottom line: almost one out of six Americans who need a full-time job either can't find one or is working part-time. Meanwhile, wage growth among people who have jobs has just about stopped. The Economic Policy Institute reports that between 2006 and 2008, wages grew at an annualized rate of 4.0%; by contrast, over the past three months annual wage growth has plummeted to just 0.7%. At the same time, furloughs -- requiring workers to take unpaid vacations -- are on the rise: recent surveys show 17% of companies imposing them. More than 20% of companies have suspended their contributions to 401(k)s and similar pension plans.

So why isn't the media screaming? Partly because these job and wage losses are not, for the most part, falling on the segment of our population most visible to the media. They're falling overwhelmingly on the middle class and the poor. Unemployment among those who have been in the top 10 percent of earnings is closer to 5 percent, and their earnings continue to climb -- although, to be sure, much more slowly than before the meltdown. It's much the same with health-care and pension benefits. Among people under 65 who are in the bottom 20% of incomes, only 21.9% have employer-sponsored health insurance -- if they have a job at all. Half of all people nearing retirement age have a 401(k) balance of less than $40,000.

I keep hearing that the economic meltdown has taken a huge toll on the stock portfolios of the rich. That's true. But the rich haven't lost nearly as much of their assets, proportionately, as everyone else. According to a report from the Bank of America Merrill Lynch ("The Myth of the Overleveraged Consumer"), analyzing data from the Federal Reserve, the bottom 90 percent of Americans hold 50 percent of more of their assets in residential real estate, which has taken a far bigger beating than stocks and bonds. The top 10 percent of Americans have only a quarter of their assets in housing; most of their assets are in stocks and bonds. And although the stock market is still a bit tipsy, it has rallied considerably since it hit bottom earlier this year. Home values, on the other hand, are down by an average of a third across the country, and are still falling.

What does all this mean for the economy as a whole? It raises the fundamental question of where demand will come from to get us out of this hole. If so many Americans are losing their jobs and wages, you have to wonder who will be returning to the malls.

That same Bank of America Merrill Lynch report notes cheerfully that 42 percent of consumer spending before the meltdown came from the top-earning 10 percent of Americans (not too surprising given that the top 10 percent was raking in half of total earnings) and the top 10 percent continues to do relatively well. So, says Bank of America Merrill, we can rely on the spending of the top 10 percent to get the economy moving again. Indeed, they conclude, Congress and the White House should be careful not to raise taxes on the top 10 percent, lest the consuming ardor of these most privileged members of our society be dampened.

This logic is morally and economically indefensible. If we've learned anything from the Great Recession-Mini Depression of the last 18 months, it's that the skewing of income and wealth to the top has made our economy far less stable. When the majority of middle-class and poor Americans are either losing their jobs or feel threatened by job loss, and when those who still have jobs are experiencing flat or declining wages, there's simply no way to get the economy back on track. The track we were on -- featuring stagnant median wages, widening inequality, and job insecurity -- got us into this mess in the first place.

http://www.nakedcapitalism.com/2009/09/food-stamp-use-rising-even-among-wage-earners.html

As much as commentators are trying to put a happy face on recent data releases showing that job losses are slowing, it still means that fewer people are working. Moreover, one element of the poor jobs environment that it not getting enough play is the way wages are deteriorating. Some who have full-time work have been asked to take pay cuts to preserve jobs; those who work part time are seeing their hours cut.

A sign of how difficult things are for some: food stamps users are increasingly employed. From the Financial Times:

The number of working Americans turning to free government food stamps has surged as their hours and wages erode…

While the increase in take-up is often attributed to the sharp rise in unemployment – which on Friday hit 9.7 per cent – the Financial Times has learnt that some 40 per cent of the families now on food stamps have “earned income”, up from 25 per cent two years ago.

The agriculture department, which runs the programme, attributes this rise to workers having their hours cut back.

“I’m sort of stunned, it seems like a dire warning . . . that even the jobs people are retaining in this recession aren’t at the wage level and hours level that they need to provide for their families,” said Heidi Shierholz, economist at the Economic Policy Institute….

Less attention has been paid to those still in the workforce, whose incomes are also being squeezed. The average working week is now about 33 hours, the lowest on record, while the number forced to work part-time because they cannot find full-time work has risen more than 50 per cent in the past year to a record 8.8m. Wages and benefits have decelerated.

The food stamp data suggest that “the labour market problems are more significant than you would expect, given just the unemployment rate”, said John Silvia, chief economist at Wells Fargo. “For me it suggests the consumer is not going to rebound or contribute to economic growth for the next year, as the consumer would in a traditional economic recovery.”

Another implication is that when the economy recovers, employers will first return staff whose hours have ben cut back to full time before hiring new staff, so improvements in unemployment will be slow in coming.

Now that's motivation?

//www.youtube.com/watch?v=pIBbYLos9-c&feature=related

http://www.nakedcapitalism.com/2009/09/solar-crisis-set-to-hit-in-2010.html

The solar industry is already suffering from significant overcapacity, yet incumbents are adding still more manufacturing to try to secure a cost competitive position after the shakeout. This chart, prepared by Digitimes using data from The Information Network (hat tip reader Michael), sums up the yawning gap between demand and capacity:

SEE LINK FOR GRAPH

The Information Network forecasts that as many as 50% of the producers could fail in 2010 as prices plunge:

A key reason is increased supply from China, which added an additional 1GW of capacity. The price per watt has now dropped to US$1.80 for polysilicon-based products, which is lower than the US$1.85 level ….By way of comparison, the average selling price in the third quarter of 2008 was US$4.05 per watt.

The Information Network doesn’t expect other industry players to back down from increased competition from China. Other makers are expected to increase their capacities despite the low utilization rates in order to reach economies of scale and better compete against the Chinese…

Average selling prices could drop below US$1 per watt in 2010 and US$0.50 in 2011. As many as 50% of the more than 200 solar manufacturers, mired in red ink with current selling prices above US$2.00 per watt, may not survive.


Looks like it's time to get the Condo Association planning to go solar!

http://trueslant.com/matttaibbi/2009/09/01/bailout-propaganda-begins/

"Nearly a year after the federal rescue of the nation’s biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again."

via "As Biggest Banks Repay Bailout Money, the U.S. Sees a Profit" – NYTimes.com.

It was inevitable that the same people who pushed through the multi-trillion-dollar bailout of Wall Street would come out later on and tell us what a great idea theirs turned out to be, in retrospect and under the light of evidentiary examination. And we’re getting that now, with a pair of reports, the above one in the New York Times and another in the Financial Times, telling us the bailout is working because the government has made some money on TARP. They came to this conclusion by quoting Fed officials, who apparently calculated how much interest the Fed earned on TARP investments above what it would have earned on T-bills. The amount so far, according to these worthy gentlemen: $14 billion.

This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme — more on that in a moment — the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven’t retired their obligations yet, it’s crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless.

The other reason for that is that it’s only a tiny sliver of the whole bailout picture. The real burden carried by the government and the Fed comes from the various anonymous bailout facilities — the TALF, the PPIP, the Maiden Lanes, and so on. The losses from the Fed’s purchase of distressed/crap Bear Stearns assets (Maiden Lane I) and AIG assets (MaidenLanes II and III) alone were as recently as late July calculated in the $8.6 billion range, and even that number is very conservative. Then there’s the trillion or so dollars that the Fed used on buying up mortgage-backed securities and Treasuries; we don’t know what their market value is now. And there are untold trillions more the Fed has loaned out in the last 18 months and which we are not likely to find out much about, unless the recent court ruling green-lighting Bloomberg’s FOIA request for those records actually goes through.

In light of all this, the Fed’s decision to brag publicly about a few loans that are actually performing is sort of scary — it speaks to a level of intellectual desperation and magical-thinking unusual even for a banker in the subprime/MBS era. Don’t be surprised if you hear more of this sort of thing in the coming years.

http://tpmdc.talkingpointsmemo.com/2009/09/bartiromo-asks-44-year-old-congressman-if-medicares-so-good-why-arent-you-on-it.php?ref=fpblg


And you wonder why people are confused about the health care debate.

http://www.youtube.com/watch?v=nfv_KeKRsBo&eurl=http%3A%2F%2Ftpmdc.talkingpointsmemo.com%2F2009%2F09%2Fbartiromo-asks-44-year-old-congressman-if-medicares-so-good-why-arent-you-on-it.php%3Fr&feature=player_embedded

What's particularly striking about this exchange is that, when offered the most clear and concise possible explanation for why 44-year old Anthony Weiner isn't on a government plan that's only open to people aged 65 and over, she just whoops it up as if she's caught him in some sort of damning contradiction.

Obviously, the real punchline is that many of the people criticizing the Democrats' health care plan don't have the foggiest idea how any of it works. And Bartiromo in particular reveals--however inadvertently--that she thinks elements of the proposal make perfect sense. Yes, she's wrong to assume Weiner could buy into Medicare, and she's wrong to assume that he chooses not to because the coverage is sub-par. But ironically, the idea that Weiner should be able to buy into Medicare seems totally uncontroversial to her. And that, of course, is the whole point of the public option.

http://blogs.abc.net.au/offair/2009/09/lies-damned-lies-and-health-care.html


...In the American system, you’re all right in theory if you’ve got a steady job, because your employer sponsors your health insurance.

But what many Americans don’t know is the limitation of that insurance in case of long-term illness.

After 90 days off work, the employer ceases to have any obligation to pay for your insurance. Under an Act called COBRA, you can extend the insurance (at your own considerable expense), but only for 18 months. After that, as I understand it, you are no longer covered by health insurance at all. Nor can you take out a new policy, because insurance companies won’t cover those with ‘prior conditions’.

Small wonder, then, that 62 per cent of bankruptcies in the USA are linked to medical bills.

And small wonder, as Nick Kristof of the New York Times wrote this week, that the American system is wreaking heartbreak on families faced with the choice of health care or poverty.



The USA spends more than 15 per cent of its GDP on health care. Australia and Britain spend just over 8 per cent, When it comes to looking after the seriously and chronically ill, I think I know which nations get better value. Britain’s NHS and Australia’s Medicare are not perfect – far from it. But they’re not the Orwellian monsters of American myth either.

ethics violations pickles Bartiromo has been in, they'd be reporting on rush hour traffic somewhere in the aleutian islands.

Nary a word that most of the problems with Medicare are due to Insurance Industry Lobbyists meddling in the operations of Medicare... (Something which would NOT be present under a Medicare Single Payer scenario.)

http://yro.slashdot.org/article.pl?sid=09/05/05/1734238


"Law prof Eugene Volokh blogs about a US House of Representatives bill proposed by Rep. Linda T. Sanchez and 14 others that could make it a federal felony to use your blog, social media like MySpace and Facebook, or any other Web media 'to cause substantial emotional distress through "severe, repeated, and hostile" speech.' Rep. Sanchez and colleagues want to make it easier to prosecute any objectionable speech through a breathtakingly broad bill that would criminalize a wide range of speech protected by the First Amendment. The bill is called The Megan Meier Cyberbullying Prevention Act, and if passed into law (and if it survives constitutional challenge) it looks almost certain to be misused."

I didn't see anyone posting this yet - probably because it's pablum for the savvy marketeers here, who've pointed all of this out long ago in WE & SMW. But I think it makes a nice, comprehensible quick summary, especially if anyone new drops by. Among the most concisely intersting bits, I thought:

http://www.alternet.org/workplace/142267/%27american_casino%27%3A_how_our_nation%27s_financial_sector_became_a_massive_and_unregulated_gambling_operation/?page=entire



As I read through this, two things came to mind. Way back last fall sometime, a bunch of us usual suspects (labor and community activists) were out in the street waving signs like "No Bail-Out for Banksters" and "Bail-Out for Wall St. - Bankrupt for Main St." This was well before there was any deep coverage of this, around the time, I think, of "THANK GOD IT PASSED" here? Anyway, we didn't know any of the details, but we were exactly right. Another example, for me, of ordinary people's ability to KNOW when they are being screwed - at least people who've somehow avoided the capitalist corn-syrup they feed us from the time we're toddlers watching the commercials on kids TV (something a sane society would prohibit).

And the other was a stunning reminder of the degree to which Obama has sold us out by "saving" these crooks: those of us saying he should Nationalize the banks, at the very least as a temporary measure, were absolutely correct.

In another example of the wisdom of the ordinary, the song has it exactly right: "You'll either be a union man or a thug for JH Blair." There really are only two sides, and it is a tragedy that Obama has chosen JH - protecting the Banksters and the war in Afghanistan have already poisoned his Presidency, probably beyond recovery.

http://wallstreetexaminer.com/2009/08/31/forbes-polls-the-wackosphere-and-gets-an-earful/

The editors of Forbes have asked me to give them my economic forecast for the next year (cough, cough, guffaw). Don’t be impressed. They sent the same email to the whole financial wackosphere. I assume that their purpose, as with the entire financial infomercial media, is to poke fun at us wackos so as to minimize their own horrendous shortcomings as financial journalists.

OK, so I’ll give them an answer since they were nice enough to ask. But let me preface this for those of you who don’t know me by saying that I’m not an economist, thank goodness. What an embarrassment that would be. My educational background is in accounting (undergrad) and psychology (grad ). My professional career over the past 22 years has been spent mostly in real estate and financial market analytics. So I’ve had some exposure to the real economy and the financial economy.

I’ve had a particular interest throughout my life in manias and their aftermath. I’m a self taught technical analyst (aren’t we all), having first become interested in the art of TA at the ripe old age of 13 when I was introduced to point and figure charting. What I have learned about liquidity analysis, an area in which I specialize, has been through independent research, observation and study. My ideas are not polluted by the shibboleths of formal education. My interest in manias brought me back to my current job as an independent self-employed professional analyst and web publisher in 2000 when I founded Capitalstool.com. I founded The Wall Street Examiner in 2004.

In my late 20s I worked for several years as a sell side technical analyst for a couple of institutional boutique firms on Wall Street. Let’s just say that the Street and I did not mix.

I had morals.

While working on the Street in the early 1980s, thanks to reading people like Joe Granville, Richard Ney (The Wall Street Jungle), and Charles Mackay (Extraordinary Popular Delusions, etc.) I realized that the financial media was nothing more than the marketing arm of the Wall Street retail distribution network. Wall Street’s job is to distribute paper and transfer wealth from the many to the few, including, most importantly, itself. The media’s job is to transmit the sales pitch.

The financial infomercial media plays a crucial and integral role in that system, providing a platform for Wall Street’s professional shills to reach the masses. It is the greatest manipulative system in the world since Goebbels, mastering the art of repeating the Big Lie to perfection. When a shill comes on CNBC and says buy XYZ, his in house traders are the ones doing the selling.

One of the Big Lies is that the stock market discounts the future. We’ve had a big rally, so the economy must be about to get a lot better, so the story goes. But the truth is that the stock market is nothing more than a liquidity meter. It measures a very particular type of liquidity. It mostly measures how much cash is burning a hole in the pockets of the dealer community.

Right now, thanks to the Fed, the dealer community, particularly the Fed’s Primary Dealers who dominate not only the Treasury market but the stock market as well, are rolling in oceans of cash, pumped directly to them by the Fed. They are using most of it to pay down debt by selling much of their questionable assets to the Fed, particularly mortgage debt and corporate debt, but they are using some of it to manipulate stocks higher. They do that because, one, it’s easy for them to do it, and two, because it’s much easier to get the suckers, oops, I mean the buy side institutions, to take the other side of the trade when prices are rising.

So as long as the Fed pumps this cash to them, stock prices will go up. It has nothing to do with the economy. It has nothing to do with discounting the future. The idea that stock prices discount the future is ridiculous. Stock markets are comprised of people, or at least the people who wrote the computer programs that do most of the millisecond trading that dominates price action. People, by and large, are not very good at predicting the future. That’s especially true of economists, pundits, and most of all, portfolio managers, whose only real interest is in not doing anything different than what the majority of portfolio managers are doing. How in the world can a portfolio manager properly manage money when one of the mandates of the industry is to stay fully invested. The best they can hope for is to do better than their peers. They can do nothing to protect your assets in the event of systemic collapse, such as we are now facing.

In continuing to spread the lies this time around, the media helps to insure that for the foreseeable future there will be no recovery from this economic and financial mess. The media continues to feature the same people telling the same idiotic stories, pursuing the same tried and true practices of distributing insider stock, especially their own, at high prices to the masses. The cash goes right from our pockets to the pockets of the financiers, with the media getting a huge cut in the process. They are co conspirators in a massive criminal scheme, some of it legal, some of it not, to separate people from their money.

This time they did it a little too well, and therein lies a problem for the economy. Few have any money left to transfer. The Fed and Treasury have set up a scam over the past year to make it look as if there’s still money, but what they have actually done is to transfer risk from the private sector to the public sector, in other words us, current and future generations of US taxpayers. In the process they’ve pumped a couple of trillion of new government debt into the economy and the markets over the past couple of months making it look as though everything is gonna be all right.

All right.

All ri-i-ight.

But it’s not gonna be all right. In fact, things are getting worse as we speak, and they will continue to get worse for the short term, the intermediate term, and the long term– for as long as the same people are in charge who caused this mess in the first place; for as long as the media continues to give a platform to those same people who were responsible for all the–let’s call them what the are–crimes– that put us where we are. For as long as those in power in Washington give those same people the same power they have always had, rather than punishing them for their “mistakes”, we are going to be in this mess.

So now we have transferred trillions of bad debt, some of it completely worthless paper, on to the books of the Fed and the Federal Government. What can the outcome possibly be? Ultimately default? Devaluation? Hyperinflation? Slow motion economic collapse such as that which is currently under way? Even finally the collapse of government and society? Anything is possible, given how insane these policies are and how clueless our policy makers have been and continue to be.

For example, the government has committed to take on $1.45 trillion of mortgage debt in various forms. In most cases the equity has been wiped out. There’s no margin of safety in those mortgages. The government will lose countless billions on its investments. We, the people, will somehow have to pay for that. Meanwhile, the financiers in the middle of the mess in the first place are still there. If they’re not still running the show, they’ve run off somewhere with the billions that they have skimmed and scammed off the top.

Now the media reports that, gee! the government is actually making money from the investments it has made in bailing out the banks. But the Fed and the Government are just playing the same game the banks played, reporting the “operating profit” while not reporting the mushrooming mountain of bad debt on their books. This is the very same garbage that got us here in the first place, except now the government is taking a page from the banks and financial institutions that mastered the art of hiding bad debt. It’s sickening, but no one in the mainstream media questions it.

Where are the real journalists? Not working for the mainstream media, that’s for sure. They’re still giving a free pass to the power brokers.
..................................

One of the problems is that zero interest rates forces both people and businesses to liquidate principle in order to pay the bills. So the capital pie shrinks. A shrinking capital base means shrinking income. Shrinking income means that people will need to liquidate even more capital. The system collapses in a chain reaction.

Government programs have done nothing to change that. They’ve masked the degenerative process for a time with all that spending, but they’ve done it only by adding more debt to the government’s balance sheet. At the same time, debt in the private sector, and hence money, is being destroyed. We see it in all manner of lending statistics, from bank loans, to mortgage credit, to commercial paper. And we see it in the rising tide of mortgage defaults. People can’t pay or won’t pay. So they don’t. This is what’s backing our “money”.

Meanwhile lending institutions and now the government pretend that the losses don’t exist, reporting unbelievably, that the money supply hasn’t collapsed along with everything else. They have no choice. They have to keep the con going, lest there be one final, fatal run on the banks and/or the money market funds.

The Fed’s zero interest rate policy is causing the very contraction it is seeking to avoid because it does not allow anyone to earn a fair and reasonable return on their investments. In order to pay the bills people and business must liquidate assets. At the same time, they are desperately trying to pay off debt. So the pie shrinks and money disappears.

The media is fond of saying that no one in the mainstream saw this coming except Roubini. How stupid is this? The media is the sole decision maker about who we get to pay attention to. If they feature only liars and fools, then of course it will seem that no one saw this coming. And they feature almost entirely liars, fools, and criminal manipulators.

Let’s consider who got this right in addition to Roubini. How about Professors Case and Shiller, and Niall Ferguson. How about Nassim Taleb. What about Warren Buffet’s warnings about derivatives? How about George Soros? Jimmy Rodgers?

What about Ron Paul, whose warnings fell on deaf ears for years. Congressional hearings? Ron Paul? Oops, time to cut to a commercial!

What about Doug Noland of the Prudent Bear Funds’ Credit Bubble Bulletin who has correctly been chronicling and forecasting this mess for a decade. What about Bill Fleckenstein and David Tice, and Peter Shiff? What about John Hussman? What about Robert Prechter? Bill Bonner of the Daily Reckoning? Mark Faber? What about Martin Weiss? There were many more like them. Why did we almost never see these guys on the tube or in print. And why, when we did see them, was the usual purpose to ridicule and harass them?

Because the media was and is a co-conspirator, witting or unwitting, with the Wall Street criminal distribution machine. The media is populated by conformist morons, too fat and lazy, too coddled by their Wall Street sponsors to be bothered by anything so mundane as to search for the truth. I mean, it’s not like it was hard to find.

What about all those guys in the wackosphere like my colleague Russ Winter, or Mike Shedlock, or even me for goodness sakes? I know I don’t count because only a few thousand people have ever heard of me, and half of them only know me as Dr. Stepan N. Stool. But there were dozens, if not hundreds, of bloggers who saw this coming for years. I was far from alone.

What about all the thousands of ordinary people who have participated on our message boards down through the years? They knew. But again, the media decides what the public gets to see and hear. The media decided that the “Cassandras” were only to be featured on occasion as objects of ridicule. And now that the economic data has stopped going down for a couple of months and the stock market has been going up, they are once again the subject of scorn.
Consumer Confidence Versus Real Estate and Stocks


Then there’s the 5,000 people surveyed by the Conference Board every month. Look at how many of them had soured on things in 2006 and 2007, versus their level of optimism in 1999 and 2000.

A whole lot of ordinary people “got it.” Only the mainstream infomercial media didn’t get it, because they are, after all, on the payroll of the Wall Street Mob.

The fact is that the economy is not getting better. It is not healing. Nothing goes down in a straight line, especially when a government throws a couple trillion in debt at it. But those trillions are not endless. The kindness of strangers, namely foreign central banks who buy that debt, is not without limit. The time will come when the government will not be able to float more debt to pay off the existing debt, when the burden of paying back these wildly reckless bets will fall directly on the back of the US taxpayer.

We are facing a crisis much greater than any we have faced so far. The Fed will not continue to pump cash into the pockets of the Primary Dealers indefinitely as they have been doing since March. When that cash gusher stops, or even slows, the stock market will again collapse. It simply cannot be sustained at these levels without that subsidy.

As for the economy, over the next year, it will get worse, for all the reasons enumerated above. How much worse, I have no clue. I’m not an economist, thank goodness. What an embarrassment that would be. Obviously they have no clue either. They pretend. That’s all. They missed the biggest collapse in the last 75 years. Knowing what’s likely to happen is not their job. Their job is to talk a good game so that Wall Street can continue its game.

Ripping off the rest of us.

So Good Night, and Good Luck.

You’re going to need it.

SEE GRAPHS AT LINK

http://www.vanityfair.com/politics/features/2009/10/henry-paulson200910

Also spotlights Nancy Pelosi, gastric distress, and nausea

http://robertreich.blogspot.com/2009/08/guns-of-august-and-why-republican-right_31.html

What we learned in August is something we've long known but keep forgetting: The most important difference between America's Democratic left and Republican right is that the left has ideas and the right has discipline. Obama and progressive supporters of health care were outmaneuvered in August -- not because the right had any better idea for solving the health care mess but because the rights' attack on the Democrats' idea was far more disciplined than was the Democrats' ability to sell it.

I say the Democrats' "idea" but in fact there was no single idea. Obama never sent any detailed plan to Congress. Meanwhile, congressional Dems were so creative and undisciplined before the August recess they came up with a kaleidoscope of health-care plans. The resulting incoherence served as an open invitation to the Republican right to focus with great precision on convincing the public of their own demonic version of what the Democrats were up to -- that it would take away their Medicare, require "death panels," raise their taxes, and lead to a government takeover of medicine, and so on. The Obama White House -- a veritable idea factory brimming with ingenuity -- thereafter proved unable to come up with a single, convincing narrative to counteract this right-wing hokum. Whatever discipline Obama had mustered during the campaign somehow disappeared.

This is just the latest chapter of a long saga. Over the last twenty years, as progressives have gushed new ideas, the right has became ever more organized and mobilized in resistance -- capable of executing increasingly consistent and focused attacks, moving in ever more perfect lockstep, imposing an exact discipline often extending even to the phrases and words used repeatedly by Hate Radio, Fox News, and the oped pages of The Wall Street Journal ("death tax," "weapons of mass destruction," "government takeover of health care.") I saw it in 1993 and 1994 as the Clinton healthcare plan -- as creatively and wildly convuluted as any policy proposal before or since -- was defeated both by a Democratic majority in congress incapable of coming together around any single bill and a Republican right dedicated to Clinton's destruction. Newt Gingrich's subsequent "contract with America" recaptured Congress for the Republicans not because it contained a single new idea but because Republicans unflinchingly rallied around it while Democrats flailed.

You want to know why the left has ideas and the right has discipline? Because people who like ideas and dislike authority tend to identify with the Democratic left, while people who feel threatened by new ideas and more comfortable in a disciplined and ordered world tend to identify with the Republican right. Democrats and progressives let a thousand flowers bloom. Republicans and the right issue directives. This has been the yin and yang of American politics and culture. But it means that the Democratic left's new ideas often fall victim to its own notorious lack of organization and to the right's highly-organized fear mongering.

I suppose I'm as guilty as anyone. A few weeks ago I casually mentioned in a web conversation on Politico's web page that if supporters of universal health care and a "public option" felt their voices were not being heard in our nation's capital they should march on Washington. A few moments later, when someone wrote in asking when, I glanced at a calendar and in a burst of unreflective enthusiasm offered September 13. I didn't check with anyone, didn't strategize with progressive groups that have been working on health care for years, barely checked in with myself.

I was deluged with emails. Many people said they were planning to march. Someone put up a web page, another a Facebook page, a member of Congress announced his support. But most people said they couldn't manage September 13. It was too soon. It conflicted with other events. It followed too closely behind a right-wing march against health care reform already scheduled for September 12. It was a day AFL leaders were out of town, so couldn't lend their support. Many who emailed me wanted another day -- September 20, or the 27th, or early October. Others said they'd rather march on their state capital, in order that local media cover it. When I finally checked in with the heads of several progressive groups and unions in Washington -- all with big mailing lists and the resources to organize a big march -- they said they were already planning a march, for October. But they still haven't given me a date. (I will pass it on as soon as I hear.)

August is coming to a close, and congressional recess is about over. History is not destiny, and Democrats and progressives can yet enact meaningful health care reform -- with a public option. But to do so, we'll need to be far more disciplined about it. All of us, from Obama on down.

The Financial Times Joins Fed Flattery Parade: “Fed makes $14bn profit on crisis loans”

http://www.nakedcapitalism.com/2009/08/the-financial-times-joins-fed-flattery-parade-fed-makes-14bn-profit-on-crisis-loans.html

More Bogus Bailout Reporting: “As Big Banks Repay Bailout Money, U.S. Sees a Profit”

http://www.nakedcapitalism.com/2009/08/more-bogus-bailout-reporting-as-big-banks-repay-bailout-money-us-sees-a-profit.html


READ THEM AND WEEP

http://www.nakedcapitalism.com/2009/08/guest-post-el-dollardo-economics.html

From derivatives expert Satyajit Das of Traders, Guns & Money fame:

In the 1980s, the Japanese were taking over the world. In the 1990s, it was going to be an ‘Asian’ century. These days the pundits are betting on the ‘Chinese Age’. Like all such glib predictions, despite their superficial appeal, they mask complex undercurrents and issues that require careful study.
Michael Schuman, a business journalist, in ‘The Miracle: The Epic Story of Asia’s Quest for Wealth’ tries to describe the transformation that has taken place in Asia over the last 30 years. Schuman covers the post-war reconstruction built on electronics and heavy industry through to the age of outsourcing. The story is personalised and ‘The Miracle’ is at its best when recounting rich anecdotes about the politicians, such as Deng Xiaoping and Park Chung Hee, and business leaders, such as Sony’s Akio Morita and Wipro’ Azim Premji. Schuman’s snappy journalistic style adds colour and insight to the stories.

The Miracle traces the importance of globalisation of trade and capital flows as well as the role of America in the development of Asia. It perhaps understates the less than benign role played by the state in fostering economic development. The Book also is very forgiving of the political repression, social in-equalities and environmental degradation that underpin Asian development.

The defence would probably be that there are always costs to dragging millions out of poverty. In truth, the average business book reader would not be particularly concerned about those issues.

Paul Midler’s ‘Poorly Made in China’ offers a different perspective that is loquaciously captured in the lengthy sub-title ‘An Insider’s Account of the Tactics Behind China’s Production Game’ (obviously a Twitter marketing ploy!). A businessman who has worked in numerous factories in China, Midler provides interesting and, at times, scarily funny insights into a system that produces products that fail basic safety and manufacturing standards.

Midler identifies the process by which buyer demand for cheap products and the Chinese manufacturers willingness to meet the requirements lead to what he characterises in the chilling anodyne term – ‘quality fade’. This is the process by which manufacturers take increasing liberties with quality to eke out profits from unprofitable contracts. This entails cheaper components, altering chemicals, lower hygiene standards and, in general, lower everything.

Midler describes the process whereby manufacturers compete to gain unprofitable contracts to make sought after products. The sole reason is that access enables Chinese manufacturers to gain access to intellectual property allowing the manufacture of lucrative ‘knock-offs’ in places where patents and trademarks cannot be enforced.

Midler acutely records the tensions between buyer and manufacturers and the entire flawed system where ultimately the only true product control and testing is by the final consumer, sometimes, as in the case of the melamine contaminated milk, with tragic consequences

‘Poorly Made in China’ provides an interesting alternative to the hagiographic view of globalisation and trade much favoured by the Thomas Friedman’s of the world.

Underlying both ‘The Miracle’ and ‘Poorly Made in China’ is a view of the emerging world best captured by the term ‘Orientalism’, associated with Edward Said. A Palestinian academic, Said’s writings on colonialism explored the caricatures, cliches and pre-conceptions that shaped Western perception and therefore relationships with Eastern nations. Said’s argument was that the West’s view of the East was shaped by political power and unequal commercial exchange.

Said’s work built on George Orwell’s criticism of colonialism. Writing in 1939, Orwell provided a vivid and stark view of the developing world that has rarely been equalled: “When you walk through a town like this – two hundred thousand inhabitants, of whom at least twenty thousand own literally nothing except the rags they stand up in – when you see how the people live, and still more, how easily they die, it is always difficult to believe that you are walking among human beings. All colonial empires are in reality founded upon the fact. The people have brown faces – besides they have so many of them. Are they really the same flesh as yourself? Do they even have names? Or are they merely a kind of undifferentiated brown stuff, about as individual as bees as coral insects? They arise out of the earth, they sweat and starve for a few years, and then they sink back into the nameless mounds of the graveyard and nobody notices that they are gone. And the graves themselves soon fade back into the soil.”

The unwritten sub-text is that the East is there as a resource for the West. Developments are read and interpreted through the cultural lens of Western literary and economic tradition. ‘The Miracle’ and ‘Poorly Made in China’ are books in the ‘Orientalist’ tradition, which sees Asia as little more that a vast market, a cheap manufacturing base, (recently) a source of money and an opportunity for developed nations. The books never quite see the world from the point of view of the nations and people that they describe.

‘Prisoner of the State’, the secret journal of former Chinese Premier Zhao Ziyang, provides something of an antidote to a Western view of East Asia.

Remembered now mostly for his disastrous role in the Tiananmen Square student protests and subsequent massacre, Zhao Ziyang was Premier of the People’s Republic of China from 1980-1987, and General Secretary of the Communist Party from 1987-1989. He was involved, with Deng Xiaopeng, in the economic reform of China. Produced from smuggled tapes during his house arrest after being removed from power as a result of his role and handling of the Tiananmen Square protests, Zhao produced a memoir covering details of the crackdown, the intricate manouverings of China’s leadership, and the economic reform program.

While the focus around the book has been on the sensational events around the protests and subsequent crackdown, ‘Prisoner of the State’ provides interesting insights into the rationale behind China’s economic reforms.

Anecdotes of Zhao’ overseas trips, where he begins to gain exposure to the glittering riches of overseas economies, provides a vivid backdrop to the changes in economic policy. The interest in reforms appears driven entirely by pragmatic rather than ideological concerns, such as declining living standards, concern about food security, observed inefficiencies in productivity and fear that economic failure would mean political ruination.

Zhao’s notes were clearly predicated on ‘his’ version of history. His commentary on leadership struggles and the complex interplay of different individuals and camps are difficult to verify to those without a deep understanding of the inner workings of China. His views on the weaknesses of the system, especially the issue of corruption and the sheer difficult of political and economic management of vast complex country, are extremely relevant. They show the difficulties of making simple predictions about the evolution of China.

The book is illuminated by the hidden tragic sub-text that this is ultimately the story of a man who finds himself a victim of a system that he entirely understands and helped create. In the end, Zhao does not quite understand this irony.

Unlike other books on Asia, ‘Prisoner of the State’, despite its flaws, provides insights not found in traditional perspectives on emerging nations grounded in the simplistic world of ‘El-dollardo Economics’.

http://www.nakedcapitalism.com/2009/08/aig-gives-uncle-sam-and-us-finger.html

Tim Duy pointed out this priceless remark from AIG’s new CEO, Robert Benmosch:

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

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

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

But AIG fooled itself, or maybe just everyone else. Those supposed crown jewels were worth a lot less than AIG thought.Once they had established they would not be permitted to fail, they started retrading the deal. When AIG realized it couldn’t sell some operating units, pronto, suddenly it started complaining the interest rate (I think Libor plus 8 1/2%, forgive me for working from memory) was too high. Oh, and they happened to need more money too, a wee oversight in their initial demand. So the deal was reworked to give them better terms, a bigger commitment, and NOTHING ADDITIONAL was obtained. This was a free concession, a very bad move in deal land.

The government owns 79.9% of AIG. Any private sector owner who had an overwhelming majority interest and got that kind of attitude from a CEO would fire him immediately. But no, we live in a world where arrogant members of the financial services industry engage in looting, dictate terms to the government, and try to rewrite history to make baldfaced lies seem plausible. Why shoudn’t the government pressure AIG? The idea that owners don’t pressure companies (the subtext of this remark) is an absurd misrepresentation. Go talk to the management of any underperforming company owned by a PE or venture capital firm. For the most part, they do not play nice, and would never tolerate Benmoshe’s posturing, and he knows that. He is simply playing the media and the public for fools.

Ah, but that leads to an idea that might be inspired. Steven Feinberg of Cerberus, who is generally known as the biggest SOB one of the most toughminded private equity guys around, is licking his wounds a bit after his Chrysler fiasco. Unfortunately, his interests seem only to be mercenary, but if someone could persuade him to do some public service as a way to burnish his image, he’d be my choice to rein in Benmosche, They are meant for each other.

for the peons-not as good as a bonus, but a nice parting gift.

www.youtube.com/watch?v=M3jUl7KPpL4&feature=related

WHAT DO YOU KNOW? SOMEBODY MIGHT ACTUALLY DO SOMETHING!

http://www.reuters.com/article/GCA-Oil/idUSTRE57Q4BL20090827

By Joshua Schneyer - Analysis

NEW YORK (Reuters) - A debate is emerging over how curbs on energy market speculation may impact oil prices, with at least one major bank boldly expecting the new rules will trigger a 30-percent price plunge.

The outcome holds wide-ranging implications for G20 developed nations collectively spending as much as $4.8 trillion to stimulate their economies through the worst global recession in decades.

"Regulators don't and shouldn't talk about trying to influence prices," said John Brodman, a former Deputy Assistant Secretary at the U.S. Department of Energy. "But there's a growing political imperative out there. An oil price rise of $30 a barrel would offset 40 percent of the stimulus spending. That's not what these countries are looking for."

The U.S. Commodity Futures Trading Commission is moving to tighten regulation, working with more than a dozen overseas regulators to apply rules on exchanges where commodities trade. The CFTC is expected to impose federal position limits in oil and natural gas markets soon.

The new rules may end exemptions that allow banks, funds and retail investor groups to build large positions unchecked.

So far, the CFTC push hasn't kept most analysts from forecasting oil prices will rise, spurred by higher fuel demand as the world's biggest economies regain steam.

"Overall, we think that it is way premature to call a market collapse due to potential limits in energy markets," said Olivier Jakob at consultants Petromatrix in Switzerland.

But some believe the new rules could hit oil prices hard.

"It's a bold view," said Eugen Weinberg, head of commodities at Germany's Commerzbank. "But we're convinced that regulation is coming and markets will react."

Commerzbank reduced its oil price forecast 27 percent, predicting oil may fall from more than $70 a barrel now, to $50 by the end of the year, and an average $55 in 2010.

Commerzbank's outlook is uncommon. A Reuters poll of 30 analysts this week showed the consensus oil price forecast rose for a fifth straight month, with barrels expected to fetch $73 in 2010.

U.S. bank Goldman Sachs (GS.N), a giant oil trader itself, sees oil rising unfettered to $92 a barrel over the next 12 months.

Analysts aren't sure how regulation will affect trading volume, or whether lower volumes would affect prices at all. But some believe prices are bound to fall when speculators, or noncommercial traders, get squeezed by the new rules.

"The writing is on the wall now. If real position limits are put in place, the price of commodities will fall," said Michael Greenberger, a University of Maryland law professor and former director at the CFTC.

Noncommercial traders have come to dominate oil trading on New York Mercantile Exchange, or NYMEX (CME.O). As of April 2008, three months before oil rose to a record $147 a barrel, they accounted for 71 percent of buying, up from 34 percent in 2000, according to a 2008 CFTC report.

About 50 percent of traders in the U.S. oil futures market today are speculators, up from around 20 percent before 2002, according to a Rice University study published on Thursday.

Exemptions have let operators like the U.S. Natural Gas Fund (UNG.P) -- an exchange-traded fund (ETF) that allows retail investors bet on rising natural gas prices -- to control the majority of buying in some key NYMEX gas contracts.

But UNG said recently it would scale back its position in natural gas contracts to comply with looming regulation. UNG's announcement came days ahead of a rout in natural gas prices, which fell to new seven-year lows.

"New, tighter volume limits have a far greater chance of pushing prices sharply to the downside," said one veteran oil market consultant in Connecticut, who requested anonymity.

LCM Commodities managing director Ed Morse said if CFTC rules do limit liquidity, less trading volume could make bearish fundamentals harder to ignore. A recent rise in Saudi Arabia's oil output capacity may help keep oil prices in the $40 to $75 a barrel range, Morse wrote recently.

Most analysts warn it's impossible to draw clear oil price implications from CFTC's moves so far.

"Obviously if the (CFTC) actions are large and misguided, you can have a knee-jerk reaction, but one really needs to wait for the details," said Amrita Sen of Barclays Capital.

Policymakers have made clear the push to oversee oil trading isn't going away, after the G20 this year approved a combined $4.8 trillion in stimulus spending through 2010.

Leaders of the G8 economies asked international bodies to study ways of intervening in oil markets when they met in Italy in July. Finance ministers and central banks may revisit the issue when they gather in London September 4-5.

http://piggington.com/more_foreclosures_than_home_sales_again

as with every month so far in 2009, more existing San Diego homes went into foreclosure than were sold. Just barely, though -- the ratio of home sales to default notices (the initial stage of foreclosure) was just gnat's eyelash below one-to-one. The ratio was .997, to be exact. That's the best sales-per-default ratio all year.

But it's still terrible. The following graph shows that while the sales-per-default ratio is above the lows set earlier in this downturn, it's still well lower than it was at any time during the two decades or so that preceded the current housing crash....

MORE AT LINK

http://brucekrasting.blogspot.com/2009/08/swiss-black-accounts-trillion-dollar.html


The case against UBS is over. The Justice Department appears to have won this one. A total of 4,450 out of a total of 52,000 names will be divulged to either DOJ or IRS. Based on what has been presented it would appear that the other 48,000 names that were not disclosed either had the money sent back to a bank in the Sates (equivalent of full disclosure) or they had hired a lawyer and confessed their sins to the IRS.

According to the DOJ the 52,000 names had a total of $15 billion in their black accounts. A sizable amount of money. The question that has been hanging in the air is how much money is still in Swiss black accounts that has not been flushed out at this point? How many other Americans have accounts that were not with UBS? How many accounts are there from non-US names? What is an estimate as to the size of this problem?

The August edition of Swiss Review provides some insight. While Swiss Review is not the end all source of information on this topic their writing is not independent of the Swiss Government who provides a portion of the operating budget. With that in mind I was shocked to find the following in the August edition of SR:

“Switzerland has become a paradise for foreign capital on which tax is not paid. The uproar from foreign governments is understandable.” These are not the words of a critic of the banks, but of private banker Konrad Hummler. He says that around 30%, or CHF 1,000 billion, of the CHF 2,800 billion or so of foreign assets in Swiss banks is untaxed “black money”.

Mr. Hummler probably knows as much about the topic of black accounts in Switzerland as anyone. His Bio:

Konrad Hummler is managing partner of Wegelin & Co., private bankers, and has acted for many years as personal advisor to the chairman of the board of directors of the Union Bank of Switzerland (UBS). He serves as a colonel in the general staff of the Swiss Army.

Mr. Hummler has put a number of nearly 1 Trillion dollars on the problem. This is much higher than any estimate that I have seen before. I thought it could be as high as $500b. It appears that I was understating things by a factor of 2. Some perspective based on the comments by Mr. Hummler:

-The $15 billion owned by the 52,000 American names represents 1.5% of the total.

-The average US account balance at UBS was $300,000. ($15b/52k). Extrapolating from that number one gets an estimate on the total number of black accounts at 3.3 million. Based on this calculation a range of estimates on the total number would be between 2 and 4 million.

Mr. Hummler’s comments are unlikely to go unnoticed by the global taxing authorities. The idea that there is this much money waiting to be claimed by the host countries makes it certain that the attacks against Swiss banks will continue far into the future. Everyone will want their share of $1 Trillion.

I believe that the trees are shaking and the leaves falling on this issue as I write. I recently reviewed a letter from a large Swiss private bank (not Wegelin & Co) that was sent to a US client it reads, in part, as follows:

“To ensure transparency toward the IRS, we would ask you to sign the enclosed form W-9 and return it to us by 30 September 2009. We will then forward form W-9 to our US depository, which will in turn disclose your holdings to the IRS.”

While this letter may not represent the thinking and action of other Swiss banks it is likely that they will be forced to follow suit in the not too distant future. Mr. Rolf Ribi the author of the story in Swiss Review states in his lead in, Banking confidentiality is facing, “the beginning of the end”. I would disagree with Mr. Ribi. We are far from the beginning of this process. The end will come much sooner than is expected. Black accounts in Switzerland are a thing of the past.

http://www.slate.com/id/2226518/

READ IT AND WEEP

http://www.nakedcapitalism.com/2009/08/is-china-japan-circa-1989.html

with digs at Japan and the US.

Lots of retrospective articles this week--where are we, and how did we get here? seems to be the theme.

America's deepening inferiority complex begins to bite Russia

http://russiatoday.com/Politics/2009-08-29/americas-deepening-inferiority-complex.html

http://debtsofanation.blogspot.com/2009/08/debts-of-spenders-dollar-carry-trade.html

The Debts of the Spenders: The Dollar Carry Trade - Cheaper to Borrow than Yen

The Wall Street Journal reports that the dollar is now more cheaper to borrow than the yen for the first time in 16 years. LIBOR rates have fallen dramatically during the past year as central banks the world over have flooded the systems with liquidity.

There are 2 stories going on here: 1) liquidity 2) solvency.

LIQUIDITY

This deluge of cheap credit has several important effects, namely a dramatic increase in prices for nearly ALL asset classes - equities, debt, and even credit (agriculture being a sore exception). The intended beneficiaries, multi-national banks, have put this cheap credit (courtesy of the taxpayers) to good use speculating. After all, it's easy to gamble with other people's money and reward yourself even for losing bets.

And even where LIBOR isn't available, banks still have access to quantitative easing measures such as the unconventional TALF, POMO, TOMO, and European equivalents.

In such an environment, it is nearly suicidal to short any asset class favored by the large bank trading desks (agriculture again being an exception . . .I guess watching corn reports isn't as sexy as trading naked CDS instruments and gunning ES futures).

SOLVENCY

However, keep in mind that this government largesse is only available to large banks and financial institutions. Smaller, less politically connected institutions do not have access to quantitative easing measures (e.g. access to Fed discount window) and sometimes have to use the LIBOR market. When they do, these smaller banks have to pay a premium above the going LIBOR rate b/c of their smaller status. I cannot speak for other banks but in the US at least, commercial banks are required to maintain adequate capital ratios.

In the past, this requirement was met by holding shares of preferred stock in GSEs like Fannie Mae and Freddie Mac. Some banks also bulked up their portfolios w/more exotic asset classes like auction rate securities (whose value and return was determined in periodic auctions) that later proved to be less than liquid. The result has been for the FDIC to shut down 3-4 banks every weekend for the past year since these holdings are often not enough to satisfy regulatory requirements.

Ah, but what about the multi-national banks? Aren't they also suffering from a solvency crisis? Yes and no. There are 2 sets of rules: 1 for the big boys and another for everyone else. But you already knew that, right?

http://sbk.online.wsj.com/article/SB125131560834161423.html

MORE AT LINK

Several reports are coming out of China that there is pressure on state-controlled organisations - notably the country's main sovereign wealth fund, China Investment Corporation (CIC) to rapidly build investment in non-Chinese enterprises. While the CIC itself, with apparent access to some $300 billion in funds - and the possibility of more from the government - may be concentrating on hedge funds and other investment entities, there is another sector for Chinese state-owned companies looking at major investment in commodities. Indeed with the funds available as China seems to be dumping its US dollars in favour of more concrete assets, virtually no minerals sector is safe from Chinese participation.

While CIC was set up only two years ago, funded with $200 billion in initial capital, a report to the U.S. Congress noted that according to top Chinese officials, it was created to improve the rate of return on China's $1.5 trillion in foreign exchange reserves and to soak up some of the nation's excess financial liquidity. Depending on its performance with the initial allotment of $200 billion, the CIC might be allocated more of China's growing stock of foreign exchange reserves - and this has already proved to be the case.

Probably the most interesting of the recent reports of what is happening with Chinese sovereign wealth fund investment outside China has come from Paul Mylchreest's Thunder Road Report where an ex-U.S. intelligence service member is quoted. He reports that he has a friend who is in the Chinese Sovereign Wealth fund sector who says - hearsay I know and it wouldn't stand up in court - indicated that the wealth fund analysts were working all hours of the day and night trying to put investment deals together - particularly in the oil and precious metals sectors. The conclusion is that China recognises that the U.S. dollar is going to tank and it wants to convert as much of its trillions of dollars of holdings into strategic assets as possible before the collapse really takes hold.

/... http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=88400&sn=Detail

http://www.nakedcapitalism.com/2009/08/lehman-uk-to-sue-parent-for-100-billion.html

Even if you don’t get a thrill from looking at spectacular car wrecks, one reason to take interest in the Lehman bankruptcy is that it may get at issues that regulators seem remarkable loath to address, namely, how did a company that reported positive net worth and not a single big firm equity analyst ever dreamed was insolvent wind up showing $130 billion of losses? The US administrator, which aspires to coordinate the entire international BK, has blamed the size of the black hole (on a $640 billlionish balance sheet) on the disorderly bankruptcy.

I’m sorry, losses of that magnitude are simply not plausible, particularly when you have to add back the $20 plus billion of book equity prior to the collapse. Yes, much of it may indeed have been the result of a sudden implosion, but the fact set strongly suggests accounting fraud was also a factor (for instance, Lehman had some notoriously aggressive marks on some high profile Inland Empire white elephants, namely Archstone and SunCal. If they had to put valuations like that on deals that were certain to raise eyebrows, what must one assume about positions that would be impenetrable?

But the bankruptcy jousting does have its perverse charms. The move by Alvarez & Marsal to expand its role in an unprecedented fashion by coming up with a “global plan” seems more than a bit peculiar, given the fact that bankruptcies are subject to governing law in the relevant jurisdictions, and is not well suited to coordination. In fact, one hat to wonder whether this move is simply an attempt to co-opt counsel in other countries.

The UK liquidator, PriceWaterhouseCoopers, took a dim view of this notion from the outset, perhaps in part because it was clear that the UK units would be seeking redress from the US operation. Lehman raided the UK brokerage operation of $8 billion in its waning days, something that would be impermissible under US regulations.

The latest update comes via the Times Online:

Administrators of the London arm of Lehman Brothers…are preparing a $100 billion (£61.5 billion) claim against its former parent company in America…. It will mark an acrimonious new stage in the international battles by creditors to recover billions still tied up in the largest corporate collapse in history….

John Suckow, president of Lehman Brothers Holdings — the remains of the US parent company — and a managing director at liquidator Alvarez & Marsal, is braced for a deluge of claims. The one from the London arm, which was the largest operation outside America, is likely to be the biggest.

Tony Lomas, one of the partners at PWC leading the case, said he will file on behalf of “more than 100” Lehman units that fall under the London umbrella. “On the face of it guaranteed most of the obligations of other subsidiaries so we’re going to be filing claims in the many tens of billions. It will be close to $100 billion,” he said.

The London claim will add to tensions between American and British administrators. Earlier this month, Alvarez & Marsal brokered an agreement with 13 other Lehman liquidators around the world.

The deal sets a protocol to share information on claims and assets with the hope of speeding up the reconciliation process and avoiding litigation. PWC declined to participate.

“Why you’d enter into an agreement with a bunch of other parties that you’ll probably end up litigating against is beyond conception,” said Steve Pearson, another PWC partner working on the case.

“We’re talking about billions of dollars. To sit in a room and say, ‘we’re all going to be nice to each other’, is almost certainly the wrong thing to do.”…

As the ultimate guarantor of the deals they did, including billions on inter-company loans and share trades, the former Lehman businesses will argue that the US parent should pay.

At the time of its collapse, Lehman had $639 billion in assets on its books. These included everything from real estate to office equipment. The most tangled element is the more than 1.7m “hung trades” to which Lehman was a party — transactions in shares or instruments such as derivatives that were frozen when the company collapsed.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aILl4YnFAR1U

Profits for U.S. farmers will plunge more than expected this year, dropping 38 percent from 2008 as the recession erodes demand for crops, livestock and dairy products, the government said...The price of corn, the biggest U.S. crop, has plunged 46 percent in the past year, hog farmers lost an estimated $4.5 billion since September 2007, and dairy herds are being culled because of a milk surplus. Profits have declined for grain processors including Cargill Inc. and makers of farm equipment such as Deere & Co. and Agco Corp.

“Hogs were devastated by the H1N1 flu, and dairy isn’t getting off the mat,” said Bruce Babcock, the director of the Center for Agricultural and Rural Development at Iowa State University in Ames. “The outlook for crops is rosier.”

Falling Crop Values

Crop receipts will decline 9.8 percent to $164.7 billion, and livestock revenue will fall 15 percent to $118 billion, as input costs fall 6.4 percent, the USDA said.

The total value of farm production for 2009, which includes rent, government aid and other benefits from agricultural operations, is projected at $322 billion, down 12 percent from last year, the department said.

MORE AT LINK

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKkxmq34nT3E

Nicely timed follow up on the post in the first half of this WEE about the vacant stately homes of Mayfair...

http://www.spiegel.de/international/europe/0,1518,druck-645375,00.html

The German company Tutogen's business in body parts is as secretive as it is lucrative. It extracts bones from corpses in Ukraine to manufacture medical products, as part of a global market worth billions that is centered in the United States.

SSE WHOLE STORY AT LINK

http://newsjunkiepost.com/2009/08/28/senate-hearing-on-brain-cancer-risks-from-cell-phone-use-nears-as-new-study-is-released/

I don't know, folks. I just don't see this as reasonable...

The fortunes of the PBGC rise and fall in concert with the broader economy: When it hits a rough spot and company bankruptcies increase, the pension agency is forced to take over more retirement plans. And as companies start failing, their pension plans usually worsen.

Companies' pension-fund deficits "get worse, sometimes dramatically worse, in the last year or two before they go bankrupt," Elliott said. Companies may stop paying into the plan, shift assets into riskier investments, or, as in the case of United Airlines, promise larger pension benefits to some workers in exchange for pay freezes.

By the time the PBGC steps in, the promised benefits of a plan usually far exceed its funds. Of course, the PBGC doesn't always pay what the company has promised.

The maximum PBGC benefit payout for a 65-year-old is $54,000 in 2009 (the maximum generally changes annually). That should be of particular concern to auto workers. PBGC estimates that it guarantees just $42 billion of the $77 billion in unfunded pension liabilities at auto-industry companies.

"Participants in auto-sector pension plans and the other stakeholders of the pension insurance program are at substantial risk of loss if these plans are terminated," said Vincent Snowbarger, the PBGC's acting director, in testimony to lawmakers in May. See related story on what to expect if PBGC takes over your pension.

www.marketwatch.com/story/pension-crisis-likely-to-hit-taxpayers-eventually-2009-09-03?pagenumber=2

That pay out should just about cover the cost of Kentucky Jelly.

We still have not turned the employment corner yet.

http://www.startribune.com/57443652.html?elr=KArksDyycyUtyycyUiD3aPc:_Yyc:aUU

ST. CLOUD - It was just five months ago that Vice President Joe Biden made the New Flyer bus factory here a symbol of the stimulus. With several Cabinet secretaries in tow, he held a town-hall-style meeting at the Minnesota factory, where he praised the company as "an example of the future" and said that it stood to get more orders for its hybrid electric buses thanks to the $8.4 billion that the stimulus law devotes to mass transit.

But in August, the company that administration officials had pictured as a stimulus success story began laying off 320 people, or 13 percent of its workforce, having discovered how cutbacks at the state level can dampen the boost provided by the federal stimulus money.

The Chicago Transit Authority did use some of its stimulus money to buy 58 new hybrid buses from New Flyer. But Chicago had to shelve plans to order another 140 buses from them after the state money that it had hoped to use to pay for them failed to materialize. The delayed order scrambled New Flyer's production schedule for the rest of the year, and led to the layoffs.

The layoffs at New Flyer are a vivid illustration of the way that some of the economic impact of the $787 billion federal stimulus law is being diluted by the actions that state and local governments are taking to weather the recession.

LONDON (Reuters) - Investors jumped into equities on Monday, sending world stocks close to their highest level for the year, while the dollar weakened across the board as demand for riskier assets took hold.

A weekend agreement by the G20 to keep economic stimuli running helped drive risk appetite. The meeting bolstered the view that interest rates will remain low, sending two-year euro zone government bond yields to historic lows.

The MSCI's all-country world stock index (^MIWD00000PUS - News), a benchmark for professional investors, rebounded 1 percent after a rare week of losses, and is only a few points off a year high reached in late August.

The pan-European FTSEurofirst 300 index (^FTEU3 - News) added 1.4 percent, reversing losses from the previous week, on expectations of mergers and acquisitions after Kraft (NYSE:KFT - News) made a $16.7 billion bid for Cadbury (LSE:CBRY.L - News).

Japan's Nikkei (Osaka:^N225 - News) closed 1.3 percent higher while emerging market equities (^MSCIEF - News) were up about the same. Wall Street was closed for the Labor day holiday.

"The current equity rally has further to go," Morgan Stanley said in a note. "A growth cycle is starting, we intend to buy on weakness."

...

Some degree of risk aversion -- and a weaker dollar -- was evident on the gold market.

Spot gold gained 4 percent last week and is currently trading around $995 an ounce.

...

The dollar and yen were generally weaker with the former down 0.2 percent against a basket of major currencies (^DXY - News).

The Australian dollar hit its strongest level against the dollar in a year as shares gained after a G20 pledge to keep economic stimulus packages in place.

"The G20 was positive for risk appetite, you can see that from the yen and dollar's performance. At the same time people are still a bit cautious as we are approaching the end of this policy cycle," said Geoffrey Yu, a currency strategist at UBS.

Against the yen, the dollar was flat to slightly stronger at 93.00 yen.

The euro gained 0.3 percent to $1.4336, near a one week high but still below August's eight-month high at $1.4448.

/.. http://finance.yahoo.com/news/Global-stocks-up-on-G20-rb-1787442785.html?x=0&.v=9

Mon, Sep 7 2009, 15:00 GMT
http://www.fxstreet.com

FXstreet.com (Buenos Aires) – Dollar remains under pressure as Wall Street futures remain strongly up despite U.S. holidays. S&P reached 1022.15, while DJIA futures reached 9484, both approaching to the year high. Majors remain trading in a tight range, as volume remains extremely low, and likely to extend until next Asian session opening.

EUR/USD quotes around 1.4335, trapped between 1.4320/1.4360 range; GBP/USD failed to regain the upside and turned slightly bearish after breaking under 1.6400; Swiss Franc continues hovering around 1.0600 area, and despite the bearish tone, more falls seem still limited in the pair. USD/JPY consolidates at 93.00 after breaking a daily descendant channel, yet needs to move above the 93.40 area, to extend the rally and gain some upside strength.

/.. http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=7fe205a4-f5c3-4c64-8e6c-dd3398d0011d

For watching this for us. Got some good food on the Barbie for you....and I think I can dig up beer or Sangria:toast:

("Espadilla" - fishmonger himself said he wasn't sure what that was. But it was good. No bones.),

Accompanied by too many, probably, beers,

and checking out working-class history as applicable to today, right now.

Jeez, and they haven't thrown me out of here yet.

Saludos
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4048411
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x6484171#6486647



:toast:


Edit: Ah, also: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x6469345

Got up at 2 AM to throw the NYTimes for a buddy who is flying home to his ailing mother in Korea, ate breakfast for the first time in weeks, worked for two hours at my other job, napped for an hour, ran a BBQ for maybe 40 people and it didn't rain until it was all cleaned up and I was home.

Now I'm going to bed, to get up at Midnight, when I get to throw NYTimes and the WSJ, for the buddy.

Some day I must give up this mad, carefree existence....Snoopy


Hope your holiday was good, or at least good enough. See you all next week, if the creek don't rise!

Demeter

Thanks for your busy weekend!