Friday, October 23, 2009

Quadrillion=10^15. Derivatives?


Remove "millions" from your immediate vocabulary. It’s outdated and no longer has use in political language. “Billions" can also be kept at arm-reach as "trillions" has become the new appropriate, politically-correct and common terminology. And, is there a new 800 lb gorilla about to enter the room - his name is "Quadrillion!" Surprised? Here's how it looks: 1,000,000,000,000,000. And, I don't even want to think of how many times that sum would stretch to the moon and back - let's just say many times and save that brain energy for pouring more coffee.

The current see-saw debate Congress is having over Obama's spending plan pales in comparison and is simply "political cover" for what is forthcoming. They are merely "throwing us a bone" to make it appear that they are "doing something" to help with American job losses. However, in reality it's just part of a larger scheme to soften our palpability to another gargantuan bank-bailout and a cushion for the gorilla about to plop his big, ugly self down. Recently, it was noted that US banks are still dramatically under-capitalized, facing more than $3.6 trillion in additional credit losses as the financial crisis broadens. You may have already heard sound bites indicating that there will be another "bailout bill" coming soon - this time likely trillions in another attempt to re-capitalize the failing banks. Think that's bad news? Well, it gets worse, far worse - the 800 lb gorilla still lies ahead.

There are over $600 trillion (careful, that's trillion, not billion) in credit derivatives steadily tanking as we speak, effectively draining world liquidity. Stumped yet? Derivatives (though I've never seen one) are basically "insurance policies" that cover large loans in case of default. But, it wasn't just the homeowner as we’ve been led to believe that was hedged to fail, it was the paper itself - bundled repeatedly, replicated and sold that became gargantuan. The heavier and deeper these derivatives grew the more volatile they became. Ultimately, they all default because no one, no one fund is solvent enough to cover these large losses. And, now we know why the Fed's money-printing presses have been working 24/7 - they can't print enough money fast enough to fill these default holes.

Consider for a moment that the "combined" world stock exchanges represented only a mere $62.5 trillion in the fall of 2007 (though it fell to $36.6 trillion in the fall 2008); we're talking small potatoes compared to the dark derivatives market that is sucking the US and the world dry. Federal Reserve Chairman Ben Bernanke knows this – he sits on the board of the Bank for International Settlements, a consortium of the world's central banks. $600 trillion in derivatives is what the consortium has estimated and claim is now maturing, emptying depositories and keeping credit markets clogged. Amidst the secrecy shroud, it’s my guess that it’s much bigger and we'll soon hear the term “quadrillion.”

We've been hoodwinked by every conceivable excuse for the financial crisis - from poor folks that should never have been given mortgages, to corrupt politicians like Barney Frank who couldn't balance his own checkbook much less comprehend the scale and scope of what's happening or do anything about it, to shady Wall St traders who were just trying to pay for their yachts and beach homes. Sure, it's all complicit, but none hold a candle to the dark dealings in derivatives, unregulated and obscure with a life and death of their own making.

What can be done? Clearly, it's going to take larger minds than out-of-work lawyers in Congress, or Presidential soothsayers and Chairman Bernanke’s team. Personally, I give them two chances of resolving this mess: slim and none. Certainly, nothing will be done quickly to stave off children’s hunger pains caused by laid-off parents. The stimulus plans have been noble, but they miss the mark. Now, with a job lost every 13 seconds, it seems unlikely that more obtuse spending will dissuade the crisis. The financial elite are fighting a beast they can't beat - their gorilla has slipped and busted it on a banana peel of epic proportions in a quintessential, wrecking slide of greed and corruption. Unfortunately, he has bruised more than his pride, leaving millions jobless, perhaps homeless and certainly hungry for answers.

Wednesday, October 21, 2009

China could displace US Dollar dominance

Is the US's last shoe falling?



3 of 3-Part Series on this page:

Last month Marconi’s article here in oil-price.net broke the news of how China was building its crude oil reserves, completing 102 million storage facilities and how the country had a big devaluating pile of dollars.

Well, trusted sources say that China has taken the next step to woo the Arab countries and establish closer relations.


Until now, the US dollar has been used as the sole oil trading currency around the globe. But last weeks rumors started to surface that a secret meeting took place between Gulf Arab oil producers and some oil importing states trying to decide on an alternative currency to dollar for transactions. Spearheaded by China, the meeting has proposed to trade oil in a basket of currency including, the Euro, Chinese Yuan, Japanese Yen, gold and a new currency to be planned by the GCC (The Gulf Cooperation Council-Saudi Arabia, Kuwait which already went off the US dollar two years ago, Qatar, and Abu Dhabi).

But why are Arab countries lending a kind ear to China? Look no further than the U.S, invasion of Iraq. With an estimated one million Arab deaths resulting from the US invasion, anger is simmering throughout the Arab world, not just Iraq. The bad publicity gained has helped an enthusiastic China in a big way. China is in need of huge amounts of oil and the Gulf States are happy to comply with China in exchange cheap imports, military technology transfer. This pushes the US further aside from the bargaining table and reduces its influence in the Middle-East.

This scenario is far removed from the Nixon Shock of 1971, if one were to walk the lanes of history. In 1971 the then U.S. President, Nixon, cancelled the direct convertibility of the dollar to gold. During the same period Oil production in the US peaked and the country ran out of capacity to increase the production. OPEC (The Organization of the Petroleum Exporting Countries) thus steps into the picture. Nixon’s move helped the US to print more dollars- as much as they needed- to buy oil from OPEC establishing direct nexus between the dollar and oil.

So, here’s the bigger picture: When this dollar dominance ends, as efforts are already visible, it could well be the last shoe to drop from the US economy.

Thursday, October 15, 2009

A slowboat from China

IMF chief renews call for currency reform  LINK

NOTE: I've included the link from the IMF to preface this blog. Interesting read.

A slowboat from China



2 of 3-Part Series on this page:

The Chinese will likely have the attitude, "If it ain't broke, don't fix it!" Controlling their currency's valuation, whatever they've done - apparently has worked for them. Huge trade surpluses, largest holder of foreign currencies, etc. Why would they change what they've been doing? I can only think of one thing - that is the world stops buying their cheap exports. Ain't happening. Are they going to increase the costs of their exports by allowing their currency to valuate? Not likely. At least not appreciably or quickly.

Of course the US is practicing a "benign support" of Chinese valuation to prolong, postpone and/or reduce debt payments. But, we're borrowing faster than we're paying! LOL. So, that "benign" support doesn't hold much water imo. The US is just trying to buy time and postpone the inevitable - a collapse of the dollar.

The Chinese are smarter than this and is not falling for de-valuation criticism and IMF and other pressures. Obviously, China is playing the game smartly. And, while they are continuing to buy short term Treasuries to keep the dollar and the US government effectively propped up, you can bet that they are also making otherwise good use of their dollar holdings and other fiscal strategic planning.

The IMF calling for rich countries to loan more to poor countries? Well, certainly he is not talking about the US - so broke it can't pay attention, much less loan money it doesn't have to poorer countries. (Though we are somehow still - go figure!) Is he talking about China loaning monies? Surely, that must be it. And, doesn't that sort of roll out the welcome mat for China's currency to be more the global standard? At least a key element in the much talked, new SDR's currency basket?

But, again - why would China want to do that? Well, they will play the game carefully; but, I see a couple of positive things for them:

1. Rigid devaluaton to continue keeping export costs down. Few other countries can produce so much for so little. You have to hand it to them - and we have. They run a lean ship, with a conserving, well-conditioned populace of 3,000,000,000 people. People who are likely happy just to eat - no sports cars, no MTV is needed there much. Moving 3 billion people to a consumer appetite won't happen quickly. Remember, they are conditioned to have little or want much. Otherwise, they may find themselves executed for rocking the applecart.

2. But, there could be some clear advantages for China with an SDR basket weighted with the Renminbi. Their currency could become more powerful, compared to the dollar. Global trade could become geared towards their currency away from the dollar. Imagine the ramifications if China became the lender of choice around the world? Instead of keeping the US's drunken consumer nation propped up, but rather helping emerging countries through loans and trade? Afterall, there is only 300 million folks in the US, right! That leaves roughly another 2 to 3 billion potential customers around the globe. And, slowly but surely, that's what China is doing - gathering new markets for which to export. A sweet spot in the IMF's new SDR basket and loans around the world and eventually dependence on US trade will wane.

For now, China will continue to move cautiously, at least until it has built adequate, sound international relationships for new outlets to support their economy as US consumption dwindles and as long as they are able to resolve or rid themselves of their plummeting dollar holdings.

It's a slow process, but one that is moving forward faster than many consider. Of course, there are other obstacles - producing quality products, energy to supply manufacturing - and along with that goes investment in R&D, infrastructure - all things which China is reportedly doing, but perhaps not full-throttle.

It's an old country - been around for an awful long time. It has its own way of doing things, slow and sure. As the dollar's value continues to plummet, oil prices will find a way to increase - despite the poor American contracting jobless economy. Somewhere there, in that mix, we'll see the SDR basket loaded with the Renminbi and some new world clout. Clout the US squandered.

...and the ol' Chinese slowboat is apt to stay at full sail - with or without the US.

Tuesday, October 13, 2009

Call it whatever - IT'S STILL A TAX!

Pennies for your thoughts, sweat or hard-earned dollars?



1 of 3-Part Series on this page:

We’re in troubled times. I don’t care what the MSM, White House, Capital Hill or the “Messiah-loving” pundits say. They’re wrong. I’ve long since surpassed the idea of partisan blame politics, akin to children in a snowball fight – it’s simply all of them. Those of you that have followed this blogger know that. Unfortunately, the looney liberals can’t see the forest for the trees – even to the point of hugging them. And, the ridiculous right is not terribly far behind.

But, let’s not play games. America, with all of its rich heritage and greatness is, albeit, in the tank. It is what it is – however, by whomever that got us here. We are trillions of dollars in debt with no ability to repay. Our wealth making machinery has all but vanished, having been outsourced to Latin America, India and China through self-defeating “free-trade” agreements – all to the point that we have, at last, truly reached the point of “unsustainability!”

From the CBO: Revenues fell by almost $420 billion (or 17 percent) below receipts in 2008. Total revenues in 2009 were about 15 percent of GDP, the lowest level in over 50 years. Conversely, outlays increased by over $530 billion (or 18 percent) in 2009, to nearly 25 percent of GDP, the highest level in over 50 years. (The rate of spending is growing faster than continuously declining revenues by 3 percent).



Revenue is in a steep decline while printing, borrowing and spending is going straight up! The 2009 annual deficit is over 3 TIMES that of George W. Bush’s last year in office, and it was a whopper in itself over previous years!

Here’s the kicker. Make no mistake. The word has been passed to us – shape up or else! When was the last time a Chinese delegation, numbering more than 200, came to the US? Can’t remember? I couldn’t. It hasn’t happened. Why? Because they wanted some assurances. They wanted to shop. They wanted to make sure they’re getting real assets at the same value of the dollar’s worth when that dollar was acquired – not down 17 percent, as the dollar has fallen just since March. Can you blame them? Hardly. And, they are not by themselves - anyone holding our currency – Japan, Europe or the Arab states, etc, have all expressed deep concerns about the dollar’s decline and openly and secretly have initiated a move to SDRs, a world-wide standard of assorted values to replace the dollar as the accepted world currency. With the dollar’s value declining upwards of about 20 percent this year alone, many countries are quickly and ever so cleverly are moving away from the dollar. How would you or I respond to a 20 percent cut in pay or assets? Substantially, I expect. They are no different.

And, then of course, there is the argument that’s made by some that a de-valued dollar actually lowers our debt. In other words if we owed a $100, and the dollar takes a 50 percent de-valuation, it reduces our debt effectively by half. What China could have bought with a $100, before de-valuation, would now take $200. And incidentally, China holds China 744.2 billion in US Treasuries and more than 1.3 trillion in reserve currency. Japan holds 661.9 billion.

Technically, the dollar has lost more than 50 percent of its purchasing power since 1980 alone. So, what does that mean? A great deal if you were making $10 an hour in 1980! One would have to be making more than $20 an hour to offset the difference in purchasing power. If you’re making $20 now, technically, you haven’t had a raise in about 30 years – and effectively, for all your efforts, purchasing power has actually decreased!



 And, the same applies to those countries that hold our currency - one should understand their concern over the dollar – the more they get, the less it’s worth! Now, who wants to be paid like that? But, because of the dollar’s lesser value, it similarly means that we actually owe less since the currency is worth less. Our problem is that we continue to borrow back these dollars exponentially without paying any principle on the debt and only partially paying the interest.

Eventually, unless we suddenly, magically pay off our debts (and we can’t), the road leads to default. And, it will cause a world currency crisis, a trading crisis, or perhaps worse since global trade is based on the US dollar. But, our problems are more serious than most realize. When one truly considers our current level of borrowing and spending compounded by the significant loss of tax revenue since this “Great Recession” started, it’s no wonder we’re in this awful state.

"But for now, as long as these countries trust the United States to keep its promises and protect its money, they continue to hold US dollar investments - notably, US Treasury bonds. But just wait until the United States loses their trust. In a matter of minutes, China could dump enough US dollars to set off alarms all over the world. All of a sudden, dollar holders would rush for the exits - each one trying to get out before the others. In minutes, the dollar market could collapse...taking down US Treasury bonds with it. " LINK

Government will have to make cuts – it is unavoidable; but, our government doesn’t “cut” too well – no matter which party or president is in power. It’s just not in their frame of reference, their mindset or perception of prudence. So, what will they do? Tax of course! They’ve no choice. If they don’t tax more, they have to borrow more. The more they borrow, the less the value of the currency which puts us in an even deeper hole than we already are now. Get the picture yet? We’re trying to fill a hole that can’t be filled – plain, simple.

So, our officials will tax. Oh, they’ll call it anything – something like HCR, green initiatives or even world peace. But, it will still be a tax. It is the only way to offset more borrowing. Consequently, American standards (working American’s first) of living have and will continue to decline. That’s evidenced by what has happened - lost jobs. There will be more taxation at every level. And, the FED is not the only entity facing severe revenue shortfalls. It is state budgets, county budgets and local governments, too. Have you checked you water bill lately? That is one resource that has been, traditionally, lopsidedly low compared to other household expenditures. It will likely go up considerably because it’s the easiest and quickest source to get a substantial increase over other services. But still, everything will go up as there are budget shortfalls everywhere. And, guess who it will  hurt the most - the American worker, the worker that carries more and more burden and whose numbers are becoming fewer and fewer.

We've reached the "unsustainability" point. How much more can we tax fewer? Not much. Certainly not enough to offset the gargantuan spending. So, we borrow. We borrow until the generosity of our creditors dries up and they no longer subject themselves to detrimental economic policies. When will that be? Not terribly far away. Perhaps soon. It is, however, inevitable.

It will seem like inflation has hit, but really, it's only more taxation. Unfortunately, that is only the beginning. The worst is still yet to come.


HCR? LOL, it’s a tax. Cap and Trade? 
IT'S A TAX!
 
It’s all a cleverly levied tax. And, government is trying to fill a hole that simply cannot be filled. 

Yes, tough times are straight ahead.

Monday, October 12, 2009

U.S. to house detained migrants in converted hotels, homes

NO JOE, but welcome to FREE HOTELS and HOUSING! 

PHOENIX (Reuters) - The United States, criticized for holding illegal immigrants in overcrowded and poorly run jails, on Tuesday announced plans to convert hotels to detain some noncriminal immigrants.

Homeland Security Secretary Janet Napolitano said illegal immigrants ranging from criminals to newly arrived asylum seekers would be held in different facilities according to the risk they pose.

"This is a system that encompasses many different types of detainees, not all of whom need to be held in prison-like circumstances," Napolitano told a conference call.

Referring to noncriminals such as newly arrived asylum seekers, Napolitano said, "We will begin efforts to house these populations near immigration service providers and pursue different options like converted hotels or residential facilities for their detention."

About 32,000 immigrants to the United States are held at any given time in about 350 local jails and private prisons, which have been criticized for providing poor medical care and oversight.

The Immigration and Customs Enforcement agency is part of the Department of Homeland Security.

We have a solution already in place!





 ....uuuhhhhhmmm, whatever happened to putting them on a plane and flying them back to the country of origin? 

Geesh, I mean, do they get room service, too?

Sunday, October 11, 2009

Lindsey Graham signs on to cap-and-tax; God save us from bipartisanship.

HCR - an apt distraction for the serupticious legislative undertow? With the collapse in revenues, does it leave little choice but to massively tax?


GOP Sen. Lindsey Graham has signed on to the Democrats’ massive green redistribution scheme masquerading as a planet-saving, national security-enhancing “energy independence” scheme.

Can John McCain and the rest of the Climate Change Republicans be far behind?



Now, the announcement of Graham’s alliance with Big Government Democrats. In the NYTimes, natch:

"…we refuse to accept the argument that the United States cannot lead the world in addressing global climate change. We are also convinced that we have found both a framework for climate legislation to pass Congress and the blueprint for a clean-energy future that will revitalize our economy, protect current jobs and create new ones, safeguard our national security and reduce pollution.

Our partnership represents a fresh attempt to find consensus that adheres to our core principles and leads to both a climate change solution and energy independence. It begins now, not months from now — with a road to 60 votes in the Senate.

It’s true that we come from different parts of the country and represent different constituencies and that we supported different presidential candidates in 2008. We even have different accents. But we speak with one voice in saying that the best way to make America stronger is to work together to address an urgent crisis facing the world.

This process requires honest give-and-take and genuine bipartisanship. In that spirit, we have come together to put forward proposals that address legitimate concerns among Democrats and Republicans and the other constituencies with stakes in this legislation. We’re looking for a new beginning, informed by the work of our colleagues and legislation that is already before Congress."





Kerry and Graham go on to argue that we must buy into their plan because the EPA regulatory power grab will be worse. It’s greenmail: Sign on or else the out-of-control bureaucrats (and the unaccountable energy czar Carol Browner, they fail to mention) will make life even more hellish for businesses and taxpayers:

Failure to act comes with another cost. If Congress does not pass legislation dealing with climate change, the administration will use the Environmental Protection Agency to impose new regulations. Imposed regulations are likely to be tougher and they certainly will not include the job protections and investment incentives we are proposing.

The message to those who have stalled for years is clear: killing a Senate bill is not success; indeed, given the threat of agency regulation, those who have been content to make the legislative process grind to a halt would later come running to Congress in a panic to secure the kinds of incentives and investments we can pass today. Industry needs the certainty that comes with Congressional action.

But who’s to say the EPA and Browner wouldn’t go further anyway even if the Senate bill passes?! Evidence and dissent haven’t stopped their job-destroying eco-crusade before.


(from Michelle Malkin's blog here



Doc Masters has nothing on Joe Bastardi! WTG, Joe!

Saturday, October 10, 2009

Economic news digest




34 banks, including AIG and CIT, miss their TARP payments – naked capitalism

Consumers deleveraging (1) Revolving credit balances down, but outstanding payments up – Felix Salmon

Consumers deleveraging (2) Non-revolving credit is up – naked capitalism

And, the US starts testing its exit strategy – FT

The dollar rose, in unusual circumstances. Big names in the Obama administration and at the Fed have recently shown support for a strong dollar as it has been falling (Bernanke; Summers and Geithner). But a greater lift came from the East, as traders reported Asian central banks buying the dollar, perhaps to redress their export positions versus dollar-pegged China.

The dollar’s fall has wiped out much of the recent rise in equities. Sadly the fall won’t help those owing dollars, if they are paid in dollars. The Federal Housing Administration – which insures lenders – has admitted to Congress that 20 per cent of its 2008 loans and 24 per cent of 2007 loans could face serious problems. A former Fannie Mae executive is more blunt, stating the FHA is destined for bailout. And if that sounds horribly familiar, consider banks struggling to make payments: 34 financial institutions, including AIG and CIT, failed to pay their TARP dividends in August. The number is almost double the rate at the last pay date in May, 19. This news comes just as the Fed starts testing its exit strategy.

(in part - Emma Saunders of FT. LINK in post header)

Israel to attack Iran if sanctions not in place by Christmas?

So much for the "Peace Prize!"


Iran's ambassador to UN demands Security Council take steps against comments made by Ephraim Sneh, who said Israel would attack Iran if sanctions weren't in place by Christmas

Iran's ambassador to the UN, Mohammad Khazaee, sent a letter of protest to UN Secretary-General Ban Ki-moonin which he wrote that "there is no explanation for Israel's continuing threats against Tehran".

He was referring to an interview given by former Deputy Defense Minister Ephraim Sneh to the Sunday Times in which he said that if Iran were not further sanctioned by this Christmas Israel would attack the country.

Friday, October 9, 2009

Resume' building for the POTUS

Well, I see that the NPP committee has awarded our pathological narcissist with the Peace Prize - the guy who refused to meet with the Dalai Lama. Very deserving! LOL. The man's empty accomplishments continue to astound! Meanwhile, more and more are losing jobs and the deficit triples to new heights, the dollar keeps plunging and American standards of living continue to tank.

Way to go! A very fitting award for "The Messiah!" SPOT-ON!

Thursday, October 8, 2009

Gibbs says 1000 troops cost $1,000,000,000 annually

He said we don't have unlimited money, that we don't have unlimited troops. Well, that's just terriffic leadership. If that's the case, let's give each of the families of those killed in service to this country $1,000,000. I mean if money is the deal, let's give families that $1,000,000 for their loss and bring the other ones home before they are killed too. Since this administration is not going to listen to the commanding general or the troops - and, would rather play fun and games with the Olympics - yup, let's give the deceased families a million and bring the others home.

I'm sure these folks can do math as well as Gibbs!

...somehow, I'm sure their loss is about more than money, Mr Press Secretary! 

Democrats vote to support TAX CHEAT Rangel




Two Mississippi Democrats join Republicans in support of removing Rangel from the powerful Way & Means Committee Chairmanship.

WASHINGTON -- Democrats defeated the latest effort by Republicans to remove Rep. Charles Rangel from his chairmanship of the influential Ways and Means Committee, but couldn't stop Democratic defections in what had been a united party front.

Two Mississippi Democrats, Reps. Gene Taylor and Travis Childers, joined Republicans in a procedural vote to prevent Democrats from killing the measure. The vote failed by 246-153, with six Republicans siding with Democrats. In the two previous votes, five Republicans crossed party lines and no Democrats.

The vote was the third effort by Republicans to remove Mr. Rangel from the helm of the tax-writing committee in the last year.

The practical implications of Wednesday's floor action were limited. The House did vote to refer a wide range of issues involving Mr. Rangel to the House Ethics Committee, but the panel has already been investigating Mr. Rangel for a year. The defections suggest the party's support for Mr. Rangel could be softening as Democrats prepare to enter what is expected to be a tough midterm election year.

"These votes show that support for the Democratic leaders' decision to sweep this matter under the rug is starting to crack," said Michael Steel, a spokesman for Minority Leader John Boehner (R., Ohio).

The dollar is dead, only awaits burial




It is only fitting on a day where the price of gold hit a new, nominal high that I should discuss the last days of the US dollar as a "reserve currency". An ounce of gold is what it is: the world's oldest and most widely-accepted money. It can never increase (or decrease) in value. Instead, it is the pseudo-money, the paper "fiat currencies" which are currently all plunging steadily downward in value -- with no currency able to keep up with the collapse of the US dollar.

Concurrent with the new nominal high for gold, the big 'news' of the day was a pair of news articles about global oil trade. One article out of London claims that a 'secret' agreement is being reached between Middle East oil-producers and the rising "BRIC" economies to work to exclude the US dollar in the future trade of crude oil -- phasing it out steadily over a 9-year period.

Zero Hour - Debt Fails To Add To GDP

This is a very interesting and detailed blog from our friend, Mish, today. Clearly, it shows that the economy is only falsely recovering, despite trillions in printing, borrowing and spending. It's worth the full read.

 

ZERO HOUR - Debt fails to add to GDP

Further illustrating the notion that it is taking record stimulus just to keep growth going is the YOY growth rate difference between the Monetary LEI and the Economic LEI, with the disparity between the two growth rates at the highest level in the last half century. 

  

The above charts simply illustrate that our economy is fundamentally weak and instead of allowing our economy to sober up after its debt binge, our monetary and governmental authorities are trying to keep the economy drunk and chugging along, using greater amounts of monetary alcohol than ever before.


I wrote this piece following the November election last year.

Here comes Obama: The "TRILLION DOLLAR MAN"

Never before in America’s history has a newly-inaugurated President been handed a trillion dollars to spend revitalizing an ominous economy. And, unlike the “Six Million Dollar Man’s” bionics wielded by Lee Majors in the popular mid-70’s TV series, this “Trillion Dollar Man’s” power will come from a virtually blank checkbook – an era of “Obamanomics” ushered in by a complicit Congress and hastened by a plethora of “free-traders” drunk with borrowing and spending.

Obama’s stimulus plan will only create temporary public-sector jobs, grow permanent government bureaucracy and continue to fuel the mass exodus of manufacturing and service jobs to foreign shores. America doesn’t need more FDR-like spending for national parks and monuments, or roads and bridges and other temporary, pseudo-real projects – we need real jobs, manufacturing jobs that grow permanent wealth. Our companies leave because we have the second-highest corporate tax rate in the world and through trade agreements, allowing them to take advantage of cheap resources and cheap (even child) labor to drive profits. Since NAFTA and other WTO agreements were initiated over fifteen years ago, America has lost nearly four million jobs and sold nearly 17,000 American companies to foreign interests. Unfortunately, Obama’s campaign pledge to renegotiate these agreements has waned, already altered and likely hoodwinked by the groping, drunken power of Washington bureaucracy, big-business and foreign lobby.

His plan thus far has no incentives for permanent wealth for a nation whose borrowing capacity is exceeded only by its larger appetite for spending. We now borrow trillions instead of billions with no real plan to reverse our dismal course. Our debt of $11 trillion is sky-rocketing and we no longer generate enough tax revenue to cover just the expense of Social Security and Medicare – forget funding for running the government, defense and other mandatory or discretionary spending. These foreign loans also subject us to their stipulations, limiting our action on democracy and freedom ideologies. We are debt-ridden, entirely dependent on loans to feed growing entitlements suffered by our cornerstone loss of wealth in manufacturing and support for entrepreneurship.

We must create new manufacturing protectionisms like our trading partners and set a true course for re-growing the nation’s wealth. We must renegotiate or do away with these trade agreements, implement import tariffs and limit the lobbying power in Washington. We’ve taken liberty for granted and if the course isn’t changed the nation "of the people" may likely exist only in history. We need to get involved in taking back our country - learn what's happening, take real action to preserve and endear it! Leaving things "up to someone else" has left us in the shape we're in now! Join a group (Campaign for Liberty), contact your congressmen and senators - demand these trade agreements be renegotiated or revoked and hold them accountable.

Obama can take the helm of this economically starved, consumer-drunken nation if he follows his campaign promises and bring America back to being the strongest nation in the world! And, his future legacy shouldn’t resemble that of FDR or of Lincoln, but rather as a “restorer” of our wealth and sovereignty. Otherwise, America will awaken from this “trillion-dollar, drunken-spending spree” with an empty bottle and a jobless hangover, powerless and stumbling around looking for handouts from the economically-prosperous, less apt than ever to lend us more hair of the dog that bit us.

Apparently, this right-wing extremist, racist, biggot, redneck (LOL) wasn't far off the mark! And, the real truth still lies invisible to those that still have their heads buried in the sand. Those that would still believe that this liberal, pathological narcissist liar with no real management or business experience is the savior of this country simply just don't have a clue! Oh, but I was wrong about one thing, it wound up being more than a trillion - TRY $1.4 trillion!!!

Monday, October 5, 2009

"The Messiah" orders federal government to cut emissions




WASHINGTON (Reuters) – President Barack Obama ordered federal agencies on Monday to set a goal within 90 days for cutting their greenhouse gas emissions by 2020, the White House said, aiming to "lead by example" in fighting climate change.

The new executive order, signed by the president, mandates agencies across the federal government to "measure, manage, and reduce greenhouse gas emissions toward agency-defined targets," the White House said in a statement.

Think the Federal government was inefficient and ineffective before or now? Just wait until this cranks up!

GOP To Draft Resolution Designed To Oust Rangel

Sources: Dems Discussing Plan To Have Embattled Harlem Congressman Resign So Gov. Paterson Can Run For His Seat


 NEW YORK (CBS) ―

Congressional Republicans are again demanding that Congressman Charles Rangel step down as chairman of the House tax writing committee, saying his ethics problems make him the poster boy for institutional arrogance.

Democratic support for embattled Rangel will get another test this week. Republicans will introduce a resolution calling for the Harlem Democrat to step down as chairman of the powerful House Ways and Means Committee until ethics probes -- which keep on growing -- are complete.

"These are all violations of the rules of the House," Rep. John Carter (R-Texas) told CBS 2 HD. "Some of them seem to be violations of the rules of the IRS and I don't think the top tax guy ought to be having those kinds of problems."

Carter, author of the "dump Rangel" resolution, said keeping Rangel in his position will be a headache for Democrats and will infuriate voters in next year's midterm elections.

"They don't think that it's fair. They think there's special treatment being given to Mr. Rangel because of his position," Carter said.


(...ya think?)

The demise of the dollar




In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars.

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years. READ MORE.

Should Congress Investigate?

A new Inspector General report about the first government bank bailout in 2008 finds that then-Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke and other officials were wrong in declaring that all nine banks receiving the first round of bailout support -- $125 billion -- were sound. Should Congress hold hearings to investigate these findings?

Should Congress hold hearings on the Inspector General's report?

- Yes. They deceived taxpayers and lawmakers, and we need to know more.
- No. The Office of Inspector General should expand its investigation, not Congress.
- No. It was an unprecedented situation in America's history and it's behind us now - move on.
- I'm not sure.

 VOTE HERE and SEE the results! 

Sunday, October 4, 2009

Risk of deflationary collapse greater now than in 2007.

Travakoli on deflation, collapse and derivatives

"Regarding the outlook, my analysis is grim. I am not a doomsayer, I follow the cash, and so far, I’ve been correct, and the government has been wrong. Here’s the situation. We are at greater risk of a total meltdown due to a deflationary collapse than we were in 2007. After the greatest Ponzi scheme in the history of the capital markets, we’ve seen history’s greatest fiscal and monetary expansion, but it hasn’t worked. Debt levels of consumers and business exceed the capacity to repay."  - Travakoli

Travakoli on deflation:

1. Our fundamental financial and economic problems, i.e. overleveraging, lack of transparency, have not been solved.
2. Since 2008, capacity utilization has plummeted; businesses have no pricing power; U.S. lost 6.7 million jobs but numbers are underreported; personal income tax receipts are down 21%; corporate tax receipts are down 58%; U.S. deficit will exceed $1.8 trillion; govt. spending is now 185% of tax receipts; 13% of mortgages are seriously delinquent and/or in foreclosure; huge decrease in personal net worth; 15 million mortgages exceed the home value. We’re on a massive debt spending spree.
3. Income on all levels is not sufficient to make debt payments.

Travakoli on the role of derivatives.





By the way, the reason we are worse off than in 2007 is because of the Fed's, response, the Treasury's response, the Obama Administration's response, and the Congressional response.

That's quite a lethal combination.

None of the structural problems regarding consumer debt, excess capacity, or malinvestments have been addressed. Instead the government's solution is to pile on more debt and bail out failed institutions at taxpayer expense.

One cannot cure a debt problem by going further in debt. It's as simple as that.

(NOTE: from Mish's "Trend Analysis")

Further evidence that the US needs a VAT

Shadow Inventory Bubble to burst in 2010

The following (from this LINK) paints a sorry picture of what we can expect in 2010 as foreclosures increase with housing prices likely to fall further. This is an excerpt and I suggest the full read on this one. Have a GR8 Sunday! :)


 The pent up inventory is getting ready to unleash in 2010. The gigantic bet made by the bankers and Wall Street was that somehow by allowing banks to fudge numbers since the crisis started that housing would find its footing and the market would stabilize. Sweep the collapse under the bailout rug. This perceived grounding was then going to allow banks to unload these properties and avoid realizing institutional ending losses. Yet 21 months into this painful recession and trillions handed out to the banking sector, housing prices are not spiking. The tiny uptick in home prices is a mirage brought on by three major factors. First, the $8,000 tax credit lured additional home buyers into the market. Next banks have held back on the shadow inventory thus artificially lowering the supply of homes on the market. Finally, the U.S. Treasury and Federal Reserve have artificially kept mortgage rates low by buying up some $1.25 trillion in mortgage backed securities. All this and housing prices have barely stabilized in some regions while foreclosures are at record breaking heights.

Yet the problem with operating in a crony banking system is that the tainted few are merely looking out for their own gain as they always do. They tried convincing the public that what they were doing was for the good of the average American yet behind the scenes, have shot down cram down legislation at every turn and have their hand out for every bailout. In reality, the current loan modifications are a joke and recent reports by the OCC and OTS show massive amounts of re-default rates.

 2010 will usher in the recast era of the Alt-A and option ARM tsunami. We’ve talked about this for well over a year. Like subprime, there isn’t much that can be done about this. There are only two scenarios out:

1 – Home prices skyrocket, the employment situation improves, and people can sell out of their problems. Given the 12.2 percent unemployment rate and 23 percent unemployment/underemployment rate in the state, this scenario is highly unlikely. People forget that now that we are back to more conventional lending standards, the easy leverage of the bubble days has caused home buyers to have less pull in buying homes (aka, can’t use other people’s money as easy).

2 – Home prices stagnant, drop in mid to upper tier, and employment remains in the doldrums. This is actually happening. This is our path. Why do you think Realtors are pushing hard for the tax credit to be extended? Why do you think the Fed is still buying up agency debt like an addict? The 30 year fixed mortgage is hovering around 5 percent. The 40 year historical rate for a 30 year fixed mortgage is more like 9 percent. Are they planning on buying agency debt forever? Only if they can convince the world and hold the charade up long enough.

If you haven’t noticed, we have chosen the Japanese option. For Ben Bernanke being an expert on the Great Depression, he is no expert on Japan or doesn’t care we are going to repeat their mistakes. Let us count the ways we are like Japan:

1 – Massive banking bailout and failure to recognize losses. Banks keep walking around like zombies continually eating up resources from the living sectors of the economy.

2 – Real Estate bubble bursting and slow recognition of real losses. Can you say shadow inventory?

3 – Central bank zero bound problems. We didn’t invent quantitative easing!

4 – Massive government spending. Trillions in government injections in Japan and all they got was a 20 year sideways moving market. Stock markets still massively down after two long decades.

You might want to read about the Heisei Bubble for more details. Clearly we are different than Japan in many ways but the above repetition is unmistakable. After 21 months there should be little doubt why our economy is still in a mess. We’ve put the economy on financial Valium and we are trying to pretend that our deep seated problems will go away. We either confront the issues face on or gear up for at least a lost decade for our country. The shadow inventory will depress real estate values for years to come. There are still a few that want the government to buy up all the option ARM and Alt-A junk. You know why that hasn’t happened? Because even the crony Wall Street bankers can’t convince the bailout happy government that these loans are any good. But let us assume we do buy all those toxic loans. Then what? The government will need to sell and face the losses at some point. In the end, price discovery needs to occur. You can’t maintain these bubble prices. Yes, prices in many areas of California are still in a bubble. The dam is going to break one way or another. You can listen to the same dubious folks that missed the biggest collapse since the Great Depression or spend a few minutes looking at the data above and putting two and two together. The path ahead is not good for housing values.

Pathetic POTUS

I turn on the NEWS channels this morning and the news is of "The Messiah" and the Olympics. UGH! We have an economy in shambles, millions out of work, our dollar at record lows, and soldiers losing life in two war theaters and this arrogant, pathological narcissist is courting a campaign for "games!"

...unbelievable!

Saturday, October 3, 2009

Regulators close banks in Colorado, Mich., Minn.- AP

Regulators have shut Warren Bank in Warren, Mich., and two small banks in Colorado and Minnesota, boosting the number of failed U.S. banks this year to 98 as loan defaults rise in the worst financial climate in decades.

More concerns about the US Dollar

This is an interesting article that takes a good, but basic look at the economic issues facing our country as related to the dollar's value and how it is effecting the global economy. There are clear statements made here by officials that put our plight in a more realistic perspective. I've highlighted some of the statements that are worthy of discernment and reflect many of the things we' ve been blogging about now for months.

Have a GR8 weekend, all! :)

G-7 finance ministers warn recovery 'fragile'



 ISTANBUL – Finance ministers from the Group of Seven rich countries warned the recovery remains "fragile" and tried to talk up the U.S. dollar amid fears it could fall farther and disrupt the global economy.

The officials said in their closing statement after meeting Saturday in Istanbul that decisive moves by governments had improved conditions for the world economy and financial markets.

But they warned against "complacency" since growth prospects remained "fragile" and unemployment continues to rise. Figures on Friday showed the U.S. economy shedding more jobs than expected in September, with unemployment at a 26-year high of 9.8 percent.

They agreed it was too soon to withdraw the stimulus measures such as government deficit spending and rock-bottom interest rates that have helped re-start growth.

U.S. Treasury Secretary Timothy Geithner said the United States will unwind the "extraordinary" policy measures it has taken only when conditions stabilize and growth strengthens.

"Planning for an eventual exit is the responsible and necessary thing to do, but we are not yet in the position where it would be prudent to withdraw fiscal and monetary policy support," Geithner said.

"Exit will not be like flipping a switch," he added.

The Federal Reserve has slashed its key interest rate to near zero percent and pumped over a trillion dollars into the markets to sustain liquidity and free up lending, while the Obama administration enacted a near $800 billion package of spending increases and tax cuts to prop up the economy.

Much of the rest of the world has done likewise and the result has been the faster than expected rebound in growth. Earlier this week, the International Monetary Fund raised its forecast for 2010 global growth to 3.1 percent from 2.5 percent just three months ago, largely because of these stimulus measures.

Though they refrained from mentioning the dollar's recent slide in their joint statement, the ministers sought to talk up the U.S. currency, which has been falling fast over recent weeks. The dollar hit an eight-month low against the yen earlier this week, while the euro clambered up toward year highs.

A weaker dollar boosts U.S. exports but could undermine recoveries in countries that sell to the United States. Policymakers have warned that a dollar crisis is the last thing the world economy needs right now as it looks to recover from its deepest recession since World War II.

Geithner and France's Christine Lagarde stressed the need for a strong dollar.

Geithner said it's "very important for the U.S. that we continue to have a strong dollar," while Lagarde said "we need to have a strong dollar ... volatility is not welcome."

The finance ministers' statement did not mention the dollar's role specifically but said that "excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability."
The ministers from the U.S., Japan, Germany, France, Britain, Canada and Italy met amid questions about the role of the G-7. It has been overshadowed recently by the Group of 20, which includes developing economic powerhouses such as China, India and Brazil.

Last week the leaders of the G-20 agreed that the bigger body would become the world's "premier" economic decision-making forum.
There was no reference to the future of the G-7 in the communique Saturday, but France's Lagarde dismissed talk of its death.
"The G-7's existence is fully justified," she said, though she confirmed future meetings may not yield a communique at their conclusion.

"It's still important for us to talk on issues of economy and finance," Lagarde said.


The only currency that was mentioned in the communique, as has become de rigeur in these statements, was the Chinese yuan, which is artificially set to the dollar by the Chinese authorities to keep exports cheap in U.S. markets.

Though the Chinese authorities have taken steps to allow their currency to rise against the dollar, it has not been far or fast enough for many.
The IMF has argued that it will be necessary for the yuan to rise as China will have to take up more of the slack left by the U.S., which has been living beyond its means for many years.

A higher yuan against the dollar is one way to make the Chinese consume more U.S. goods and for the U.S. to raise its exports, thereby bringing its massive current account deficit back toward balance. "We reaffirmed the necessity for the Chinese currency to be appreciating," said Lagarde.

Thursday, October 1, 2009

FDIC is bankrupt!




The FDIC is struggling mightily to stay solvent. Given that there are bank failures every Friday, it's no easy feat for the FDIC to stay ahead of the game.

Bank of America, Major Banks’ FDIC Premiums May Top $10 Billion.

The Federal Deposit Insurance Corp.’s plan to rebuild its reserves may cost Bank of America Corp. and three of the largest U.S. banks more than $10 billion. Bank of America, the biggest U.S. lender by deposits, may owe $3.5 billion under an FDIC proposal that banks prepay three years of premiums, based on the lowest assessment rate multiplied by the bank’s $900 billion in June 30 U.S. deposits.

“This seems like a very hefty amount,” said Tim Yeager, a finance professor at the University of Arkansas and former economist at the Federal Reserve Bank of St. Louis. “The FDIC’s projections of future losses are pretty severe, and they are trying everything they can to avoid tapping the Treasury.” Prepaid fees is yet another attempt to keep the game going. How much longer this can last is anyone's guess. Those prepaid fees are going to hurt bank earnings 100% guaranteed. The fees may even push some struggling banks into bankruptcy.

- Email (below) from a Bank Owner, who as been in the business 30 years, regarding FDIC and Under-Capitalized Banks writes:

"This will certainly mark the end of the banking model using wholesale funding and aggressive deposits to fund commercial real estate projects. In other words this is going to come down hard on the FIRE economy. I have been in banking for over 30 years and from my perspective this is much worse than anything I have seen. God help us if cap and trade passes!"

At times, I have been extremely hard on Shelia Bair. She has said many things that I strongly disagree with. However, I have to commend her for two things.

1) Shelia Bair stood up to Geithner regarding the PPIP and banks being allowed to bid on their own assets. Clearly she recognized banks bidding on their own assets at taxpayer risk was outright fraud. Of course, I think the whole PPIP proposal was (and still is) fraud, but in retrospect I have to wonder if her stance caused this ridiculous program to go on the back burner. If so, Bair deserves a salute. Note that PPIP is still not up and running.

2) Shelia Bair is now refusing to borrow money from the treasury (taxpayers) to shore up FDIC. Instead, she has been raising fees and now is proposing pre-paid fees. In other words, she strives to make the riskiest banks pony up for their mistakes, as opposed to dumping the risk on taxpayers. The easy way out for Shelia would have been to simply take money from the Treasury. However, she is taking a much tougher stance, at least for now.

Perhaps, like many of the rest of us she simply cannot stand Geithner. However, regardless of motivation, she is now doing the right thing by making risky banks pay for the risk they undertook.

Is the system fair? Of course not. Citigroup and Bank of America received debt guarantees from the Treasury making their debt appear to be less risky, and their FDIC insurance payments less than they should be. Wells Fargo was the beneficiary of huge tax breaks. However, those items are not Bair's doing, so she should not take the blame. The scorecard of Geithner and Paulson is a big fat zero. Yet, this is now the second thing major thing Bair has gotten correct.

MORE: You know the banking system is unsound when...


(NOTE: Please be sure to click link(s) in the header and body for authorship, etc.)

Unemployment Claims Rise to 551,000



Seasonally adjusted initial claims were 551,000 in the week ending September 26, recording an increase of 17,000 from the previous week’s revised figure of 534,000, a report by the U.S. Department of Labor showed today. The four-week moving average, a better gauge of initial claims, estimated a decline of 6,250 to 548,000.

Initial claims were below expectations for the fourth week of September as analysts had expected the number around the 530,000 range.

A key component of the report edged lower albeit remaining at record highs. During the week ending September 19 a decrease of 70,000 was reported with the figure falling closer to the 6.0 million mark at 6,090,000.

The largest increases in initial claims for the week ending September 19 were in California, Texas, Florida, Iowa, and Illinois, while the largest decreases were in Kansas, Wisconsin, Oregon, Ohio, and New York.

Green shoots? Recovery? No way with these kind of jobs still being lost!

Pied Pipers of Debt

Investors are celebrating an incipient “recovery,” but the interventions that were responsible for it are sowing the seeds of a more violent contraction down the road. The problem, quite simply, is debt. We’ve accumulated record amounts, yet many economists tell us we need more.

Leading the charge is Paul Krugman. He exhorts us to borrow our way back to prosperity, but he doesn’t acknowledge that his brand of Keynesian economics ignores the consequences of debt. Krugman dismisses deficit “hysteria,” arguing that we can grow our way out of debt. “We did it during the Clinton administration,” he told me when he visited Reuters last week.

But we didn’t. While Clinton balanced the federal budget, Americans plowed through their savings. We kept growing because, in the aggregate, we were still accumulating debt. Today, private debt is a suffocating 300 percent of GDP, making more public debt that much harder to pay down.

As Krugman warned in 2003: “My prediction is that politicians will eventually be tempted to resolve the (fiscal) crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt. And as that temptation becomes obvious, interest rates will soar.”
Still More Paul Krugman, Then and How

Please consider Paul Krugman: "Deficits Saved The World"
Dateline August 27, 2009
Paul Krugman: "Deficits Saved The World"

Dateline November 3, 2004
Paul Krugman: "[The Budget Deficit] is comparable to the worst we've ever seen in this country. It's bigge[r] than Argentina in 2001."
Whether or not budget deficits are irresponsible seems to depend on whether a Democrat or a Republican is in the White House. Such is the "Conscience of a Liberal".


Meanwhile, the treasury market and bank lending are both flashing huge warning signals.

Are you paying attention?