STOCK MARKET WATCH, Monday January 4

[ozymandius]

Source: du

STOCK MARKET WATCH, Monday January 4, 2009

Bush Administration Officials Convicted = 1
Name(s): David Safavian

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

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

AT THE CLOSING BELL ON December 31, 2009

Dow... 10,428.05 -120.46 (-1.16%)
Nasdaq... 2,269.15 -22.13 (-0.97%)
S&P 500... 1,115.10 -11.32 (-1.00%)
Gold future... 1,097 +4.00 (+0.37%)
10-Yr Bond... 3.83 +0.05 (+1.27%)
30-Year Bond 4.63 +0.02 (+0.43%)

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

Market Conditions During Trading Hours

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

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

Read more: du

[ozymandius]

1. Market Observation

What a Year
BY JAIME E. CARRASCO

What a year the investment markets have had. This time last year most capital markets were hopelessly looking like it was all over and today it all looks rosy. Throughout it, we were bombarded with all kinds of contradicting opinions and outlooks, and in this kind of environment investment decisions become very hard. Proper decisions in times like these are important because they will make a big difference in the long term returns of a portfolio, especially when there is so much fear in the system. As an advisor I also have an opinion, because after all my opinions are at the core of my investment strategy. However I also understand that opinions could be wrong and therefore I have learned not to be espoused to my opinions and to be ready to take action. This is important because even though my long and mid term outlook might be correct, on a short term basis markets do not tend to move in a linear fashion. Therefore, I must be ready to adjust my portfolio accordingly. However, I have learned that the best performance of a portfolio comes from maintaining an adequate balance between the different asset classes depending on the current investment climate, and this is called asset allocation. In this piece I will review the asset allocation of my portfolio throughout the last two years so that you can gain a better understanding of the money management process.

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

This posting is not particularly profound - just basic investment info.

[ozymandius]

2. Today's Reports

10:00 Construction Spending Nov
Briefing.com -0.1%
Consensus -0.5%
Prior 0.0%

10:00 ISM Index Dec
Briefing.com 55.3
Consensus 54.0
Prior 53.6

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

[ozymandius]

3. Oil above $80 on US economy, demand optimism

SINGAPORE – Oil prices rose above $80 a barrel Monday in Asia on optimism a gradual U.S. economic recovery in 2010 will boost demand for crude.
.....

Oil has flirted with the $80 level the last two trading days after jumping from $69 a barrel last month on signs the U.S. economy may be improving. The unemployment rate fell to 10 percent in November from 10.2 percent in October, and the government is scheduled to announced December's results later this week
.....

In other Nymex trading in February contracts, heating oil rose 2.31 cents to $2.14 a gallon and gasoline gained 2.38 cents to $2.08 a gallon.

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

[FarCenter]

38. Spot price for Tapis in SE Asia is $83.39 / barrel at the moment

For spot prices of oils in markets around the world, see http://www.upstreamonline.com/marketdata/markets_crude.htm

[ozymandius]

4. Mortgage foreclosures still swamping federal efforts to help

WASHINGTON — Banks and other lenders are still foreclosing on Americans' homes at a rate that's outpacing the Obama administration's main effort to stem the crisis.

In fact, while the Treasury Department's Home Affordable Modification Program, or HAMP, has started the mortgage modification process on almost 760,000 homeowners who are at risk of losing their homes, less than 5 percent of those workouts have become permanent, government data show.
.....

More than 5 million mortgages have been caught in foreclosure proceedings since the economy began slipping in 2007, and an estimated 8 million to 13 million more could follow in the next five years. The Treasury's goal is to help modify 3 million to 4 million mortgages in three years, but only about 1 percent of that number have completed the process.

The Treasury program could spend as much as $75 billion helping homeowners avoid foreclosure. The program seeks to pay three parties — the company that services a loan, the bank or investor that owns the loan and the homeowner — if they rearrange the mortgage so the homeowner's monthly payment is more manageable.

http://news.yahoo.com/s/mcclatchy/20100103/pl_mcclatchy/3389006

[ozymandius]

6. Fed economist calls for US government MBS guarantees

ATLANTA, Jan 3 (Reuters) - A U.S. Federal Reserve economist called on Sunday for the creation of a new federal institution to backstop losses on asset-backed securities to prevent any future collapse of mortgage finance giants Fannie Mae (FNM.N) and Freddie Mac (FRE.N).

The government had to take over the mortgage finance companies in 2008 as a devastating financial crisis worsened. The two had been shareholder owned, but their congressional charters and Treasury lines of credit lent their debt securities a status just short of U.S. Treasuries in the eyes of investors.
....

Passmore and Fed economist Diana Hancock argued for the creation of an agency that would guarantee all forms of asset-backed securities. It would be capitalized by insurance premiums charged to financial institutions, much like the current Federal Deposit Insurance Corp system, Passmore said.

http://www.reuters.com/article/idUSN0320287220100103?type=marketsNews

[ozymandius]

9. Bernanke Still Does Not Understand Credit Crisis

“When historical relationships are taken into account, it is difficult to ascribe the house price bubble either to monetary policy or to the broader macroeconomic environment.”

-Chairman Ben S. Bernanke, Federal Reserve

....

The buzz this morning seems to be all about Bernanke’s speech yesterday, defending Greenspan’s ultra-low rates, and lamenting the lack of regulation and poor supervision over mortgages:

-several story links here-

What Bernanake seems to be overlooking in his exoneration of ultra-low rates was the impact they had on the world’s Bond managers — especially pension funds, large trusts and foundations. Subsequently, there was an enormous cascading effect of 1% Fed Funds rate on the demand for higher yielding instruments, like securitized mortgages...

An honest assessment of the crisis’ causation (and timeline) would look something like the following:

1. Ultra low interest rates led to a scramble for yield by fund managers;

2. Not coincidentally, there was a massive push into subprime lending by unregulated NONBANKS who existed solely to sell these mortgages to securitizers;

3. Since they were writing mortgages for sale (and had them only briefly) these nonbank lenders collapsed their lending standards in order to write more mortgages;

4. These poorly underwritten loans — essentially junk paper — was sold to Wall Street for securitization in huge numbers.

5. Massive ratings fraud of these securities by Fitch, Moody’s and S&P led to a rating of this junk as TripleAAA.

More at The Big Picture.

[Tansy_Gold]

17. .

:rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl::rofl: :rofl: :rofl:



Tansy Gold ain't so stupid, is she, Ben!

[ozymandius]

5. Goldman's offshore deals deepened global financial crisis

NEW YORK — When financial titan Goldman Sachs joined some of its Wall Street rivals in late 2005 in secretly packaging a new breed of offshore securities, it gave prospective investors little hint that many of the deals were so risky that they could end up losing hundreds of millions of dollars on them.

McClatchy has obtained previously undisclosed documents that provide a closer look at the shadowy $1.3 trillion market since 2002 for complex offshore deals, which Chicago financial consultant and frequent Goldman critic Janet Tavakoli said at times met "every definition of a Ponzi scheme."

The documents include the offering circulars for 40 of Goldman's estimated 148 deals in the Cayman Islands over a seven-year period, including a dozen of its more exotic transactions tied to mortgages and consumer loans that it marketed in 2006 and 2007, at the crest of the booming market for subprime mortgages to marginally qualified borrowers.
.....

These Cayman Islands deals, which Goldman assembled through the British territory in the Caribbean, a haven from U.S. taxes and regulation, became key links in a chain of exotic insurance-like bets called credit-default swaps that worsened the global economic collapse by enabling major financial institutions to take bigger and bigger risks without counting them on their balance sheets.

http://www.mcclatchydc.com/329/story/81465.html

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This deserves making the leap into the new year.

[rfranklin]

7. Low rates didn't cause bubble, Bernanke says

Jan. 3, 2010, 11:00 a.m. EST

Low rates didn't cause bubble, Bernanke says
Lax supervision of toxic mortgages was bigger cause, Fed chief

By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) - The Federal Reserve had a role in inflating the housing bubble, but it wasn't low interest rates in the U.S. that fueled speculation in housing around the globe, Fed Chairman Ben Bernanke said Sunday.

Rather, it was lax supervision of toxic mortgages by the Fed and other bank regulators -- along with excessive flows of capital around the globe -- that inflated the bubble, setting up the world economy for what may have been the worst economic crisis in modern history, Bernanke said.

In twin speeches at the annual meeting of the American Economic Association in Atlanta, Ga., Bernanke and his vice chairman, Donald Kohn, responded to critics who suggest that the Fed's policy of very low interest rates from 2001 to 2005 was the major cause of the housing bubble....


http://www.marketwatch.com/story//low-rates-didnt-cause-bubble-bernanke-says-2010-01-03


Sure, whatever you say, Ben.

[Po_d Mainiac]

8. Phew! Glad we now know the cause.

So if we follow the lead of a country that has gotten itself out of a similar problem (like Japan), problem solved!

Chopper really deserves the :FRSP:

[ozymandius]

10. See my post #9. I love Ritholtz's response.

I get the impression that Ritholtz would not hire Bernanke to wipe his nose. He's just that incompetent as Federal Reserve chief.

[Roland99]

12. Um, Ben? Is it even remotely possible it was, oh, I dunno.... BOTH?!?

In the words of Super Dave Osborne:

What a putz.

[Tansy_Gold]

15. Okay, let's see if I have this straight, Ben, old bean --

The Fed kept interest rates low, thus presenting the banks with a good reason to keep borrowing more and more and more, and the only justification for borrowing more and more and more was if they were lending it.

So in order to lend it, they had to create something for people to buy. What better than houses! But most people -- real people that is, not the folks in your particular kind of bubble, Ben -- only need one house, so the banks went after groups on two ends of that demographic curve. They went after the ones who could afford one house but not two, and those who couldn't even afford one.

The fact that the housing markets are tanking in Florida and Arizona and Nevada ought to tell you something, Ben. Second homes in the prime retirement areas were sold to a whole lotta people who got over-extended. I'm seeing it right here in Arizona, as people who were at or near retirement in Wisconsin, Minnesota, Illinois, Montana, etc., bought winter homes here when the boom was going great, and when they lost their jobs or half their retirement 401k savings, they could no longer afford two mortgages. Or they planned to sell the "cold country" house once they retired and didn't need to work any more, but then the housing market crashed and they couldn't sell it for what they needed to get out of it.

Arizona, Nevada, and Florida also have economies heavily vested in service jobs which tend to be low wage. Therefore you have a large population that couldn't previously afford to buy a home. With developers -- who also got low-interest loans to build all those developments like the huge, sprawling Sundance in Buckeye, Arizona -- putting up houses like mushrooms, someone needed to sell all those little boxes made of ticky tacky, so along came the mortgage brokers to push the paper. They got their commissions, the banks got their mortgages, the developers got their money IN FULL, and the game was rolling along nicely.

The point is, Ben, someone somewhere knew this was not a good idea. I'm not saying it was you, but someone knew it. That's why all those toxis mortgages were bundled together and sliced like salamis into tranches and then sold off to other suckers. Was it someone at Goldman Sachs? Huh, Ben? Was it? Did they know exactly how toxic the mortgages were and how toxic the tranches were and how suckered all the "investors" were, and so they covered their bet with AIG insurance right from the start?

Follow the money, as Hal Holbrooke told Robert Redford, but follow it backwards. Follow it to the source, and that source is the Fed, Ben.

Teh Fed fueled the bubble, blew it up and blew it up and blew it up until. . . . well, you know what happens when bubbles get too big.

Have I got that right, Ben? Have I?





Tansy Gold

[DemReadingDU]

32. Not only did they know the mortgages were bad, they bet on them, and won!

They = Goldman Sachs (and others)

12/24/09 Banks Bundled Bad Debt, Bet Against It and Won by Gretchen Morgenson

In late October 2007, as the financial markets were starting to come unglued, a Goldman Sachs trader, Jonathan M. Egol, received very good news. At 37, he was named a managing director at the firm. Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits.

Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm.

Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner.
more...
http://www.nytimes.com/2009/12/24/business/24trading.html?_r=3&pagewanted=1&hp

DU post by Bozita...
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x505038

[JNelson6563]

40. That about sums it up my dear!

Succinctly put. :toast:

[ozymandius]

11. Aughts were a lost decade for U.S. economy, workers

....
The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity that is leading economists and policymakers to fundamentally rethink the underpinnings of the nation's growth.

It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.

There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well....

Capital was funneled to build mini-mansions in Sun Belt suburbs, many of which now sit empty, rather than toward industrial machines or other business investment that might generate economic output and jobs for years to come.

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/01/AR2010010101196.html

---

I have been doing a good bit of reading lately that focuses on a review of credit crises, American labor history and law. IMO the past decade will be remembered as the years when we forgot over one hundred years of basic economics.

[UpInArms]

21. is this not proof enough that the STUPID GOP supply side

free market trickle down economics are

WRONG?

[ozymandius]

22. If this Supply Side bullshit were my daily commuter -

I would push it over a cliff and shoot at it on the way down. Can we consider this idea buried now? Is there anyone, anywhere who still thinks that "trickle down" works for the betterment of all?

[UpInArms]

24. my "daily commuter" almost wouldn't start

this a.m.

Did you know that 10-40 oil freezes at 20 below zero?

:scared:

[ozymandius]

26. Ow!

That hurts. And, no, I did not know that.

[Tansy_Gold]

27. Should you have had 10-W-40?

Tansy Gold is NOT an auto mechanic, but she lived in cold country for many years and always used 10-W-40.



Tansy Gold is not exactly sure what oil is in her car right now, but it's not going to get to -20 in Central Arizona any time soon.

[AnneD]

34. Morning Marketeers......

:donut: and lurkers. And if I am not mistaken-gas freezes at certain temps too with diesel freezing at a lower temp than gas. That is why they reformulate gas around October in many parts of the country and why we have periodic shortages in the fall while the refineries switch over to make the winter blend.

Good to see everyone and I hope everyone takes precautions and prepares for a freeze. I am happy to report that I made it to my daughter's apartment in time and delivered her beloved pooch. It was an eventful trip. The economic down turn has been very uneven but every place has been affected. My cost to travel was moderate. I never paid more than $54 per night-even in California. Most stays were under that. I was surprised at the discounts I got just for asking. Gas went up in price the further west I went with the honors for the most expensive gas going again to California at $2.99.

On the day I was to leave my daughter's, I had an acute attack of pain in my right flank and shortness of breath-landing me in the ER. I got to experience first hand what mandated Nurse/patient ratios can mean to patient care. IT MAKES ALL THE DIFFERENCE IN THE WORLD. I had some nice long chats with my Nurses and as colleagues, they dished the dirt. Nurses for years have tried to get ratio laws passed but we have been fighting Ins Cos and Hospital interests.
Laws on ratios and shift limits will need to be passed otherwise health care is doomed to be the sorry mess it is now. We never got a clear answer why I was having problems but we have some suspicions. I am doing better but the delay in leaving caused me to cut short my time in Arizona with Mom. My sincerest apologies to my running mate, Tansy. At this point I am just happy to be safely home.

I wish all a happy New Year, happy hunting and watch out for the bears.

[Tansy_Gold]

35. If you hadn't posted, Anne, I was gonna call you.

I was worried about you.

Glad to have you back among the living in SMWland!


Tansy

[AnneD]

48. I went to California...

and all I got was a lousy pt ID band. My wireless was touchy the last few days so I had to come to work to post.

It was a miserable trip back. Once I got the drugs out of my system I felt better. I made an unexpected stop over in Blythe I was so weak at the start of the return trip. I think I was detoxing from the Morphine. While it did help ease the pain, it really made me sick. I wonder if it was a combo of my reaction to the Lipitor and the confinement to the car due to driving. Since I stopped the Lipitor, I feel better. I was afraid to travel back home and did not know the source of the pain. Since it increased to the point of hurting when I took deep breathes-I decided an ER visit was prudent while I was in California. You go long stretches of desert and I would have hated to have a medical emergency. There is a reason the speed limit is 80 mph along that stretch of I10. I can safely say I am almost fully recovered. I think that 3 days that I couldn't eat is part of why I didn't gain any weight during the holiday. I couldn't eat anything while I was detoxing and started from drinking tea with lemon and honey to dry toast and apple sauce to scrambled eggs. When I could hold down the eggs-I knew I was better. I hate to see my phone bill-mom made me call her or called me all the way back home she was worried so.

Thanks for the concern and well wishes. It is good to be back home or to paraphrase Dorthy....There's no place like home.There's no place like home.There's no place like home.

[DemReadingDU]

60. Glad you are feeling better

Sounds like a trip you'll always remember, in an odd sort of way.
Take care.

[JNelson6563]

41. Glad you're safe home too Anne!

Yeah, sounds pretty eventful, as you said. Glad you made it.

Happy New Year backatcha! :toast:

Julie

[ozymandius]

42. AnneD!

:hug: I am sorry that you had trouble while on your journey. So good to see you back here!

[Loge23]

57. Nurse - patient ratios

Most nurses will tell you that 1:4-5 is a safe ratio for most wards - with the notable exception of ICU and trauma cases (1:1-2).
So why does HCA have nurses working 1 to 9 ratios?? Yes, this routinely occurs in SE HCA hospitals.
This is dangerous, unsafe practice that is, IMO, ultimately designed to erode the role of nurses in health care by destroying a critical and unique element of nursing - caring. Nurses have become mere drug dispensers in these hospitals - drugs that are frequently ill-prescribed or just plain dangerous to the patient. It becomes the nurse's responsibilty to manage the drugs and question (God forbid!) the orders from the physicians.
Please find a link from the intrepid group at California Nurses Association which effectively counters the lies being perpretrated by HCA and the AMA in regard to Nursing ratio safety.

http://www.calnurses.org/assets/pdf/ratios/ratios_booklet.pdf


edited because one of my ratios became an emoticon!

[AnneD]

66. At every opportunity....

I have fought for ratios. Nursing without ratios amounts to nothing more than pill pushing. I watched CNA successfully fight for this and am very active in Texas through my union-Houston Federation of Teachers and American Federation of Teachers. We are currently trying to make School Nurse positions mandatory and have a 1:750 ration. We also want to have the positions funded.

The upside of my illness was to experience the 1:4 in the ER. It should be 1:1-2 in ICU and 1:1 in L&D and 1:4-6 in Med Surg. Anything greater than that is accountants making money off the backs of Nurses. I refuse to work floor Nursing any more because of the unsafe ratios and I am not the only Nurse that does so. Don't buy the bull shit line 'but there is a Nursing Shortage'. They won't hire enough staff so they can run short and cut their perceived overhead.

[hamerfan]

30. 5W-30

Is best for those temps. It helps the engine a lot.

[Demeter]

44. Where ARE You, For God's Sake? Minnesota?

Want to come down to Ann Arbor, where it's a balmy +19F?

[boomerbust]

45. Larry Kudlow

And all his CNBC minions.:evilgrin:

[ozymandius]

13. Stocks Rally on China Manufacturing as Cold Snap Boosts Oil

Jan. 4 (Bloomberg) -- Stocks and commodities rose on the first trading day of 2010 as China’s manufacturing expanded at the fastest pace in more than five years and the outlook for American job losses improved. Oil gained after freezing weather hit the U.S.

The MSCI World Index of 23 developed nations’ stocks advanced 0.5 percent at 12:40 p.m. in London and futures on the Standard & Poor’s 500 Index gained 0.6 percent. The MSCI Emerging Markets Index added 0.8 percent to a 17-month high. Natural gas for February delivery gained as much as 4.6 percent and crude oil rose for an eighth day, exceeding $80 a barrel.

Manufacturing in China, which led the recovery from the first global recession since World War II, expanded by the most in five years last month, an industry report showed. The U.S. will report Jan. 8 that payrolls fell in December by the smallest amount since the recession began two years ago, according to the median forecast in a Bloomberg News survey....

U.S. Stocks

The advance in U.S. futures indicated that the S&P 500 may rise after a 1 percent decline on Dec. 31. A report due at 10 a.m. New York time may show U.S. manufacturing expanded at a faster pace in December. The Institute for Supply Management’s factory index rose to 54 from 53.6 in November, according to the median forecast of 57 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion.

Payrolls probably fell by 1,000 workers last month, the fewest since the recession began in December 2007, according to a Bloomberg News survey ahead of the Labor Department report on Jan 8.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a7Z95HKPsk1A&pos=1

---

See? Less Bad is the New Good. If you read any good news about job expansion - please send me a Screaming Telegram.

[ozymandius]

18. Japan Return to ’91 GDP Gives Market Mega Risk Crisis

Jan. 4 (Bloomberg) -- Japan’s Prime Minister, Yukio Hatoyama, swept to power by a public seeking an end to economic and political stagnation, is failing to arrest the nation’s decline.

Japanese gross domestic product shrank to an annualized 471 trillion yen ($5 trillion) in the third quarter, without accounting for changes in prices, the lowest level since 1991. The tumble is unprecedented among the biggest economies since the 1930s, according to Paul Sheard, global chief economist at Nomura Securities International Inc. in New York. As a result of the contraction, the Finance Ministry projects tax revenue this year will drop to a quarter-century low.

Hatoyama’s 2010 budget, released Dec. 25, does nothing to rein in record deficits that threaten Japan’s Aa2 rating, said Carl Weinberg, chief economist at High Frequency Economics. It avoided consumption-tax increases or deregulation to boost productivity; without policy changes, deflation and a shrinking population risk eroding the savings pool restraining Japan’s bond yields.....

Auction difficulties may begin in the next fiscal year, which starts April 1, Fujimaki said. The “tipping point” for Japan’s bond market will come later, in about five years, said Atsushi Nakajima, chief economist in Tokyo at Mizuho Research Institute, a unit of the nation’s biggest bank.

For now, investors are signaling confidence in Japan’s ability to pay its $8.96 trillion of government bonds, or JGBs - - a total that exceeds the $8.78 trillion of U.S. federal debt, according to June figures from the Bank for International Settlements in Basel, Switzerland, which serves as a bank for central banks.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aiRSfPGoldN4&pos=15

[Demeter]

46. Screaming Telegram? Don't You Mean Howler?

I'll go thaw out an Owl.

[ozymandius]

14. No Good Deed Goes Unpunished as Banks Seek Profits From Bailout

Jan. 4 (Bloomberg) -- To understand the meaning of no good deed goes unpunished, Treasury Secretary Timothy F. Geithner can look no further than Wall Street where the banks that received the biggest taxpayer bailouts are seeking to reap trading profits from securities rescued by the government.

Only months after it was started, the U.S. program designed to purge debts of no immediate discernable value from the balance sheets of troubled banks has helped transform the frozen debt into a money-maker as the bonds have rallied. Bank of America Corp. and Citigroup Inc., who received 22 percent of the $418.7 billion American taxpayers loaned to troubled financial institutions, boosted holdings on their trading books of home- loan bonds that lack government guarantees while investors were raising cash for the program, according to Federal Reserve data.....

The Public-Private Investment Program was introduced in March by Geithner as a means of helping struggling banks by reviving the market for unpackaged loans and mortgage securities that aren’t backed by government-supported institutions, such as Fannie Mae or Freddie Mac. Under the program, asset managers were supposed to raise money from investors and, with additional capital and loans from taxpayers, buy as much as $1 trillion in toxic assets from U.S. banks, freeing up money for lending.

It’s “absolutely ridiculous” that banks, which were expected to reduce their holding of such volatile mortgage securities, bought them before the government program was running and may now profit, said Michael Schlachter, managing director of Wilshire Associates, the Santa Monica, California- based investment-consulting firm. “Some of them created this mess, and they are making a killing undoing it.”
.....

Prices for some of the securities that the funds were supposed to buy have almost doubled since March. The rally was fueled in part by traders jumping in before PPIP funds could get off the ground, said Steve Kuhn, who helps oversee about $440 million of mortgage-bond investments for Pine River Capital Management LLC in Minnetonka, Minnesota.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aOU4QAVClHXI&pos=11

---

This is what happens when irretrievably stupid Treasury Secretaries put a price floor under Big Shitpile™.

[ozymandius]

16. This line speaks volumes.

Under accounting rules, securities in these categories are usually held for longer than those designated as trading investments, helping to avoid writedowns.

Truly amazing and sickening how pretend value was established.

[Po_d Mainiac]

37. Sounds vaguely familiar

The rally was boosted further by investors seeking riskier fixed-income assets to offset record low yields on Treasuries and by the stabilization of the housing market, he said.

http://www.businessweek.com/news/2010-01-04/no-good-deed-goes-unpunished-as-banks-seek-profits-from-bailout.html

If/When this trash blows up, will Chopper again deny the connection?

[ozymandius]

19. More Brokers Flee Big Firms, Taking Investors With Them

Independent financial advisers are gaining ground from Wall Street brokers in the competition to manage more than $5 trillion in Americans' savings.

The ranks of brokers at major Wall Street firms have been shrinking, along with those firms' share of the retail-investing market. At the same time, independent advisers are growing in number and market share.

The financial turmoil of the past 18 months is fueling the shift. Shaken by the collapse of some Wall Street firms and the tarnished reputations of others, more big-firm brokers are breaking away to manage money on their own, taking clients with them.

http://online.wsj.com/article/SB126256739671014281.html?mod=WSJ_hpp_MIDDLETopStories

Rupert Murdoch wants money for us to read more of this story.

[UpInArms]

20. dollar watch

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

Last trade 77.540 Change -0.406 (-0.52%)

Daily Sound Bites

http://www.dailyfx.com/forex/fundamental/article/daily_sound_bites/2010-01-04-1338-Daily_Sound_Bites.html



...more...

Oil Poised to Advance, Metals Threatened on US ISM Data

http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2010-01-04-0924-Oil_Poised_to_Advance__Metals.html

Oil is set to push deeper above the $80/barrel level on cold weather, a supply disruption to Belarus, and US ISM manufacturing data. Gold the silver look vulnerable as firming signs of US recovery boost the interest rate outlook for the Federal Reserve.

Commodities – Energy
Oil to Extend Gains on US ISM, Cold Weather, Belarus Disruption

Crude Oil (WTI)       $80.62       +$1.26       +1.59%

Oil prices have continued to edge higher, tightly hugging the upper boundary of a broken rising channel set from December’s swing low below the $70 level. From here, the bulls look poised to test resistance in the $80.33 – $81.06 congestion region. Fundamental catalysts for further gains are plentiful. The Financial Times has reported that a spat between Russia and Belarus over oil prices has seen the former country stop crude shipments to its smaller neighbor. The FT has said that flows to Europe have been unaffected for now, but the total implications from the disruption remain unclear. Forecasts calling for below-average temperatures in the US are also supportive, boosting heating fuel demand in the world’s largest oil-consuming market. Finally, the outlook for US economic recovery looks to be firming as a Credit Suisse gauge tracking the market’s priced-in interest rate expectations rose to the highest since October to show traders now expect the US Federal Reserve to add 108 basis points to borrowing costs over the next 12 months. Offering further help in this regard, the US ISM Manufacturing PMI figure is set to rise to 54.1 in December, showing the industrial sector expanded at the fastest pace since April 2006.



Commodities – Metals
Gold, Silver Advance But US ISM Data May Stall Rebound

Gold       $1110.75       +$13.43       +1.22%

Gold have broken above the upper boundary of a falling channel that had guided prices lower for much of December. Near-term resistance lines up at $1114.45 from here. The metal retains a strong inverse correlation with the outlook for US monetary policy (as expressed by the spread between Dec’2010 and Mar’2010 fed funds futures), which hints that tomorrow’s release of December’s ISM figure may prove to be a hurdle for continued bullish momentum.

Silver       $17.14       +$0.25       +1.45%

Prices have extended a rebound from support at the bottom of a falling channel established earlier this month, moving back above the $17.00 handle. As with gold, a significant inverse correlation with the 2010 fed funds futures spread will mean that US ISM figures may check the bulls in the near-term.



...more...

[UpInArms]

23. Credit Suisse sued for $24 billion over resorts

http://www.reuters.com/article/idUSN0423358220100104

NEW YORK, Jan 4 (Reuters) - Credit Suisse Group AG (CSGN.VX) has been sued for $24 billion by property owners who said the Swiss bank schemed to defraud investors in several resort communities, including the bankrupted Yellowstone Club.

In a lawsuit filed Sunday in federal court in Idaho, the plaintiffs said Credit Suisse colluded with real estate firm and co-defendant Cushman & Wakefield in a "loan to own" scheme to artificially inflate the value of resort projects.

It said this scheme was designed to burden resorts and purchasers of property in resorts with too much debt, while winning Credit Suisse "enormous fees" and letting the bank foreclose on or take control of resorts at well below market value.

"The scheme has been a financial heist for Credit Suisse with no risk," the 81-page complaint said.

A Credit Suisse representative in Zurich declined immediate comment. Cushman & Wakefield did not immediately return a call seeking comment.

The lawsuit alleges losses related to Yellowstone, a private club for millionaires in Montana, as well as to Lake Las Vegas in Nevada, the Tamarack resort in Idaho, and Ginn Sur Mer on Grand Bahama Island.

...more...

[ozymandius]

25. Ambrose Evans-Pritchard: Apocalypse 2010

from Naked Capitalism:

Ambrose Evans-Pritchard is nothing if not decisive in his views, and has a undisguised fondness for the bearish perspective. But he was correct on the 2008 inflation/commodities headfake, saying repeatedly that deflationary forces would prevail when that was decidedly a minority view. He is also a Euro-skeptic, and I’m less comfortable with that position. The EU is due to come under strain, but that does not mean it will shatter (in fact, for any country to exit is probably more difficult and traumatic than for the powers that be to come up with a muddle-through. But the period while fixes are being devised could be fraught indeed (and that seems to be his current position, BTW).

If things work out badly (and I see the odds of that as reasonably high; China is looking more and more like late 1980s Japan), they will work out very badly, markets are highly connected and if the right dominoes fall, many others go down in fast sequence. So the idea that the amplitude on the downside is likely to be extreme is very plausible. But he has also made a timing as well as a depth call, and sees things unravelling pretty soon. That could prove to be correct, but one thing shorts know all too well is that obvious-seeming outcomes can take much longer to come to pass than they ever thought.

Some of his observations seem spot on, in particular, that the Fed will lose its nerve and abandon its efforts to withdraw from quantitative easing, despite noises now to the contrary, that the dollar will rally near-term, and the yen will break.

http://www.nakedcapitalism.com/2010/01/ambrose-evans-pritchard-apocalypse-2010.html

[Robbien]

28. This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied

ZeroHedge
http://www.zerohedge.com/article/government-your-legal-right-redeem-your-money-market-account-has-been-denied

<snip>

the primary purpose of money markets is to provide virtually instantaneous access to a portfolio of practically risk-free investment alternatives: a typical investor in a money market seeks minute investment risk, no volatility, and instantaneous liquidity, or redeemability. These are the three pillars upon which the entire $3.3 trillion money market industry is based.

Yet new regulations proposed by the administration, and specifically by the ever-incompetent Securities and Exchange Commission, seek to pull one of these three core pillars from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to "suspend redemptions to allow for the orderly liquidation of fund assets."

You read that right: this does not refer to the charter of procyclical, leveraged, risk-ridden, transsexual (allegedly) portfolio manager-infested hedge funds like SAC, Citadel, Glenview or even Bridgewater (which in light of ADIA's latest batch of problems, may well be wishing this was in fact the case), but the heart of heretofore assumed safest and most liquid of investment options: Money Market funds, which account for nearly 40% of all investment company assets. The next time there is a market crash, and you try to withdraw what you thought was "absolutely" safe money, a back office person will get back to you saying, "Sorry - your money is now frozen. Bank runs have become illegal."

This is precisely the regulation now proposed by the administration. In essence, the entire US capital market is now a hedge fund, where even presumably the safest investment tranche can be locked out from within your control when the ubiquitous "extraordinary circumstances" arise. The second the game of constant offer-lifting ends, and money markets are exposed for the ponzi investment proxies they are, courtesy of their massive holdings of Treasury Bills, Reverse Repos, Commercial Paper, Agency Paper, CD, finance company MTNs and, of course, other money markets, and you decide to take your money out, well - sorry, you are out of luck. It's the law.


more . . .

[ozymandius]

31. Here's part of the summary from the SEC.

SUMMARY: The Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) is proposing amendments to certain rules that govern money market funds under the Investment Company Act. The amendments would: Tighten the risk-limiting conditions of rule 2a–7 by, among other things, requiring funds to maintain a portion of their portfolios in instruments that can be readily converted to cash, reducing the weighted average maturity of portfolio holdings, and limiting funds to investing in the highest quality portfolio securities; require money market funds to report their portfolio holdings monthly to the Commission; and permit a money market fund that has ‘‘broken the buck’’ (i.e., re-priced its securities below $1.00 per share) to suspend redemptions to allow for the orderly liquidation of fund assets. In addition, the Commission is seeking comment on other potential changes in our regulation of money market funds, including whether money market funds should, like other types of mutual funds, effect shareholder transactions at the market-based net asset value, i.e., whether they should have ‘‘floating’’ rather than stabilized net asset values. The proposed amendments are designed to make money market funds more resilient to certain short-term market risks, and to provide greater protections for investors in a money market fund that is unable to maintain a stable net asset value per share.

http://www.sec.gov/rules/proposed/2009/ic-28807fr.pdf

[Robbien]

36. Their words lead one to think they are trying to protect the people

who put their money in money market funds. But reading carefully, they are really saying they are protecting the investors in a money market fund, or in other words the shareholders of the fund. The owners of the fund, not the people who deposit their money in them.

Right?

[DemReadingDU]

61. It sounds to me

We people who have Money Market Funds may some day find we are unable to withdraw our money from MMF, or maybe only withdraw a limited amount.

[ozymandius]

29. You are just a consumer fodder unit: Corporate Profits Trump Public Safety.

I have pulled some of Yves Smith's most pointed comments that are interspersed among quotes from the Times' articles.

Reader Crocodile Chuck pointed out a set of articles at the New York Times that illustrates how skewed priorities in America have become. They also reveal how little public ire there is in the face of large-scale abuses that affect the average Joe. If corporate prerogatives cannot be reined in when personal safety is at stake, how will they be curbed when the chicanery and looting is harder to pin down? The public just isn’t exercised about it.

The object lesson is America’s addiction to hamburgers versus E coli. E coli gets into the food chain when feces get into the meat. Period. It’s a very straightforward contamination mechanism. And in this case, the party fighting for the right to eat contaminated food is Cargill, and one of its major suppliers in its burger business, a company called Beef Products...

Do the math. Seven million pounds a week. Assume a half a pound a burger. That is 14 million burger equivalents (remember this product gets mixed in with other beef scraps). McDonalds has been a buyer of Beef Products’ “product” since 2004.

Now we get to the curious part. The Times had an article yesterday about that very same dubious feces removal process, and does not connect the dots back to the earlier article, and in particular, the connections to Cargill...

Cargill admits to having had salmonella problems with Beef Products, but argues that it isn’t an E coli problem, backing the company’s claims that its ammonia washing process is effective, when there is ample evidence that it isn’t.

So why is Cargill defending Beef Products? The October story had the goods. Beef Products provided 10% of the “meat” in the burger that ruined Stephanie Smith’s health. Beef Products is a very significant supplier to Cargill overall. Its “product” is 5/6 the cost of ground beef. So if we assume that that 10% is representative across all of Cargill’s hamburger products (a big if; my bet is, given Beef Products’ huge weekly output, it is a higher percent of Cargill’s typical burger), then Cargill is defending a dubious producer and process that saves it 1.6% of a typical burger. While that is a big number in a thin margin business like food, why are we discussing tradeoffs like this at all? That sort of calculus was deemed completely unacceptable with the Pinto, a car that would turn into a fireball on a rear-end impact. What indicted Ford, its manufacturer, in the court of public opinion when Mother Jones Magazine obtained a memo that showed that Ford was aware of the problem, and decided it was not worth its while to incur an extra $11 per vehicle in costs to prevent an expected 180 deaths per year.

Yes, meat inspection in the US is a horrorshow (a much bigger topic) but the Cargill/Beef Products case is straightforward. This sort of contamination has been illegal since 1994. Yet (outside the school lunch program), greedy companies who have and continue to hurt consumers to bolster their bottom lines get their regulators to give them a free pass. And unless consumers take action that hits the companies’ bottom lines directly, like boycotting mass produced burgers, these dangerous practices are certain to continue.

http://www.nakedcapitalism.com/2010/01/tainted-burgers-shows-that-corporate-profits-trump-public-safety-cargill-and-mcdonalds-edition.html

---

I have a copy of Upton Sinclair's "The Jungle" right next to me. This book had a profound impact on Teddy Roosevelt - so much that he pulled mighty levers in getting the nation's food supply under some kind of quality control. What would it take to affect some change like that today? And who would mount a response if a modern version of "The Jungle" were to be passed into the right hands?

[CatholicEdHead]

43. Today it would have even higher hurdles

as the clean food message would have to compete with the Rush, Fox, Hannity, Beck, et al noise machine. I can see the talking points now: "Rat Droppings and Maggots are just protein enriched food for your diet". :puke:

[ozymandius]

33. Markets are open for bidness.

9:42
Dow 10,533.55 14.96 (0.14%)
Nasdaq 2,300.89 31.74 (1.40%)
S&P 500 1,127.17 12.07 (1.08%)
10-Yr Bond 38.33% 0.10
NYSE Volume 385,202,875
Nasdaq Volume 168,375,515.625

09:16 am : S&P futures vs fair value: +8.40. Nasdaq futures vs fair value: +23.30. Stock futures recently pushed to fresh morning highs in the few minutes that remain ahead of the opening bell. Oil prices also added to their already-strong morning gains, but have since eased back a bit. Still, they remain 2.5% higher at $81.35 per barrel. The recent run up in both stock futures and oil prices came as the dollar extended its early slide to a 0.7% loss against competing currencies. Strong, broad-based gains in overseas stock markets had already helped put into place this morning a rather bullish bias; Europe's major bourses continue to sport handsome gains and Japan's Nikkei already closed firmly higher. The Hang Seng and Shanghai Composite both logged losses in the face of a strong manufacturing index, though. The latest U.S. ISM Manufacturing Index is due at 10:00 AM ET and will quite possibly act as a trading catalyst for market participants. Construction spending figures are also due at 10:00 AM ET.

[Robbien]

39. Last week Time Warner came to an agreement to pay Fox more money

Today Time Warner's website has this notice:
http://www.timewarnercable.com/nynj/learn/bundles/details/ratechanges.html

Important Rate Change Information



Effective January 1, 2010


Due to increases in programming and other operating costs, we have modified our rates. You may be receiving a separate letter detailing any exceptions that apply to you.


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

[Robbien]

47. Luxury Property Owners Sue Credit Suisse for $24 Billion

Property owners at four Western luxury ski and golf resorts are suing Credit Suisse Group AG for $24 billion, accusing the Swiss bank of running a "predatory" loan-to-own scheme that loaded the developments with debt so it could foreclose on their assets.

L.J. Gibson and Beau Blixseth filed the class action lawsuit Sunday in a U.S District Court in Idaho, court papers show, accusing Credit Suisse and related corporations of wire and mail fraud, racketeering, money laundering, conspiracy and other charges.

The lawsuit was filed on behalf of home owners, property owners and other investors who claim they've "lost billions of dollars" at Ginn Sur Mer Resort in the Bahamas, the Lake Las Vegas resort in Nevada, Tamarack Resort in Idaho and the Yellowstone Club in Montana. Mr. Gibson owns property at Tamarack and Ginn Sur Mer, while Mr. Blixseth owns land at the Yellowstone Club, which his parents founded.

. . .

In the lawsuit, the property owners allege that the bank engaged in a scheme to artificially inflate the values of the resort so it could make massive loans and charge the resorts "tens of millions of dollars of exorbitant loan fees." They allege that Credit Suisse knew the resorts wouldn't be able to perform under the loans, which would allow the bank to take the reins to the debt-saddled resorts cheaply.

The property owners are seeking a $600 million fund to be split among creditors, laborers and small businesses who the owners say were harmed by Credit Suisse.

The property owners aren't the first to take issue with Credit Suisse's role in the resorts' troubles. U.S. Bankruptcy Court Judge Ralph B. Kirscher, who oversaw Yellowstone's bankruptcy case, said Credit Suisse devised a "predatory" loan scheme that encouraged developers of several high-end resorts throughout the country to borrow large sums without regard for their ability to repay.

"Numerous entities that received Credit Suisse's syndicated loan product have failed financially, including Tamarack Resort, Promontory, Lake Las Vegas, Turtle Bay and Ginn," Mr. Kirscher said in an interim order in May. "If the foregoing developments were anything like this case, they were doomed to failure once they received their loans from Credit Suisse."

http://online.wsj.com/article/SB10001424052748703580904574638052691063912.html


This predatory Standard Operating Procedure of the rich elite doesn't go over so well when the people being hurt are other rich guys.

[Demeter]

49. Cannibalism Among the Elite

It's the only hope for "real people".

[Demeter]

50. I Fell Behind In Mike Whitney-Watching, So Here Goes:

The Audacity of Failure: The 4-year presidency of Barack Hoover Obama

http://www.informationclearinghouse.info/article23976.htm

November 15, 2009 "Information Clearing House" -- Barack Obama is on his way to becoming a one-term president. According to Politico:

"President Barack Obama plans to announce in next year’s State of the Union address that he wants to focus extensively on cutting the federal deficit in 2010 – and will downplay other new domestic spending beyond jobs programs, according to top aides involved in the planning.

The president’s plan, which the officials said was under discussion before this month’s Democratic election setbacks, represents both a practical and a political calculation by this White House." (politico.com)

Er, now who exactly is telling Obama that raising taxes or cutting spending in the middle of a severe economic contraction is a good idea?

This clip from Politico tells us more about the people surrounding Obama, than it tells us about Obama himself. Clearly, his chief lieutenants are just as committed to savaging Medicare, Medicaid and Social Security as their GOP counterparts. This is obvious by the way they've handled the fiscal stimulus. Where are the jobs programs, the boost to Green Technology, the massive infrastructure rebuild?

Nowhere. Because the industry-reps and bank lobbyists who fill out the Obama roster adhere to the same pro-business credo as the members of Team Bush, that is, that all public assets and resources should be strip-mined from their rightful owners and transferred to the robber barons at the top of the economic food-chain. There's no way that Geithner, Summers and the rest of the Wall Street insiders would ever dream of rebuilding the public safety net they've been trying to destroy for the last decade or more. That's not in their interests at all.

The administration's announcement is tantamount to a stealth-attack on Social Security in the name of "fiscal responsibility". It's another public relations ploy intended to enrich the parasite class by stealing crusts of bread from penniless retirees. Surely, there must have been a quid pro quo between the two-year Illinois senator and his political backers about how they planned to deal with "entitlements problem". In other words, Obama must have given the green light to the party bosses who wanted to purloin the last few farthings in the Social Security trust fund.

So, how will Obama'a attack on Social Security etc. effect the so-called "jobless recovery"?

For one thing, it makes a double-dip recession unavoidable. After all, (according to Goldman Sachs) last quarter's surge in GDP to 3.5% was entirely a result of government stimulus. Take away the stimulus, and the economy slips right back into to recession. Is that what Obama wants, another stretch of negative growth, plunging economic activity, lower demand and higher unemployment? Why? To satisfy the GOP "deficit hawks"?


All the handwringing over deficits is just more gibberish from the same people who brought us the Iraq War. The deficits are about as big a problem as the fictional WMD, maybe less. Here's a clip from an article by Marshall Auerback which sheds a bit of light on the deficit fiasco:

"Large deficits are not the problem....Let’s all take a deep breath here: Whilst the dollar index has fallen some 15% from the high sustained earlier this year, it is still above the lows sustained at the height of the credit crisis reached about a year ago. Secondly, there seems to be a fear that the current fall in the dollar could well engender inflation, and create a panicked response from policy makers where the Fed actually does raise rates and the Treasury begins to reduce government spending. Given high prevailing debt levels and the weak state of the consumer’s personal balance sheet, this would be an unmitigated disaster.

It is true that excessive government deficit spending can be inflationary, and could therefore cause some impact on exchange value of dollar. But this can’t be viewed in some sort of vacuum. The size of the deficit is irrelevant in itself. There is no meaning in the terms ‘large deficit’ or ’small deficit.’ You have to relate them to the extent of labor and capital underutilization, which is a human measure of the aggregate demand deficiency. The fact that labor underutilization is now in excess of 16 per cent in the US (combined unemployment, underemployment and hidden unemployment) and capacity utilization is in the 60-65 per cent range rather than 90 per cent range sends one very clear message - the deficit is not large enough.

So the correct policy response is to spend until we get to full employment. That is the only consequence of excessive deficits — insolvency is not possible. Your social security check will never bounce in a country issuing debt in its own freely floating non-convertible currency." ( "The US Dollar - Don’t just do something, stand there!" Marshall Auerback, newdeal2.0)


Get it? The best way to restore economic well-being is to increase the fiscal stimulus, expand the deficits and put the country back to work. There's no chance of inflation until unemployment drops to roughly 5%, which could be a decade away. And don't believe the doomsayers about the dollar either. It's a bunch of malarkey. Check this out:

"As I have shown in two recent papers, even very large currency depreciations in developed economies have no effect on inflation unless they are caused by policies that attempt to hold an economy’s unemployment rate below its equilibrium level. With US unemployment currently at 10 percent, there is no chance that inflation will rise in the near term. Whether inflation rises in the longer run will depend on whether US monetary and fiscal policy stimulus is withdrawn appropriately as the economy recovers (and tighter macroeconomic policies would tend to support the dollar)." ("Who's Afraid of a Falling Dollar", Joseph Gagnon, Baseline Scenario)

The dollar is dropping because the Fed is doing everything in its power to push it downwards. "It's the policy, stupid." A falling dollar increases exports and speeds up recovery. But once the Fed stops printing money via quantitative easing, (which is set for the end of 1st Q 2010) watch out. The dollar will rebound. Here's an excerpt from an article in the Economist:

"This dollar declinism is overblown. It exaggerates the scale of the slide and misunderstands its cause. Much of the recent weakness simply reverses the earlier safe-haven flight to dollars, a sign of investors’ optimism about riskier assets rather than their fears about America’s currency. On a trade-weighted basis the dollar today is close to where it was before Lehman failed. Yields on Treasuries have not risen and spreads on riskier dollar assets continue to shrink. If investors were growing leerier of dollars, the opposite should have occurred." ("The Diminishing Dollar", The Economist)

When the financial crisis broke out two years ago, investors around the world flocked to the dollar for safety. Now that the crisis has (somewhat) abated, those same investors are less risk-adverse, which means they are putting that money in other assets (stocks, bonds, commodities) Naturally, that is weakening the dollar, but it is not a sign of impending collapse. And while it is true that the greenback faces stiff headwinds in the long-term--due to the US's deteriorating fiscal situation--the dollar is in no immediate danger of losing its position as the world's reserve currency. That will take a decade or more.


The growing fear about the dollar and the deficits is understandable given the amount of money that is being hurled at the financial system. But that shouldn't dissuade reasonable people from doing what needs to be done. The dollar and the deficits are NOT the issue. The issue is jobs, jobs, jobs. Here's an excerpt from an article by Henry Liu which sums it up perfectly:

"An economy that has collapsed under the burden of excessive debt cannot recover until such debt has been extinguished. And debt can only be extinguished by wealth creation, not by creating more debt with easy credit. And wealth can only be created by employment and not by financial manipulation." (Federal Reserve Power Unsupported by Credibility; part 1 "No Exit" Henry Liu)

Bingo. The Fed is bailing out unproductive speculators, while tossing the "creators of the nation's wealth", the workers, a few table scraps. That's why we need a different policy which focuses on jobs programs, fiscal stimulus, and more deficit spending so households can rebuild their tattered balance sheets and the "engine of global growth" (the US middle class) can be re-energized. We don't need more belt-tightening, as Obama seems to think. That is precisely the wrong approach.

Henry Liu again:

"Thus we have financial profit inflation with price deflation in a shrinking economy. What we will have going forward is not Weimar Republic type price hyperinflation, but a financial profit inflation in which zombie financial institutions turning nominally profitable in a collapsing economy."

Right again. The soaring stocks and commodities prices prove that central bank policies can create asset bubbles even during periods of severe deflation. (like now) Fed chair Ben Bernanke's policies have had no material effect on households, consumers or workers. This is why credit contraction is in its 8th straight month and jobless claims continue to mushroom.

Bernanke--a disciple of Milton Friedman--has taken the monetarist "trickle down" approach throughout, which is why stocks are surging even though the broader economy is still flat on its back. The Fed chief is doing what he's always done, stimulate demand by creating more bubbles. Only this time it's not working because liquidity is unable to flow through the clogged credit system. The administration needs to bypass the credit system altogether and provide direct relief via state aid, tax cuts and jobs programs to jump-start the economy and reduce the widening output gap. What's needed is more stimulus and an aggressive reform agenda aimed at putting the country back to work. Here's Paul Krugman:

"It’s truly amazing, and depressing, how completely deficit-phobia has swept the field in Washington. The economy remains in deeply dire straits....Yet the respectable thing, all of a sudden, is to claim that we can’t possibly afford to spend any more money on job creation.

History says differently...Other advanced countries have been substantially deeper in debt without either defaulting or having runaway inflation....

I’d be a little more forgiving of the nonsense if all the people screaming about the deficit were sincere. And some are. But many, if not most, are perfectly happy to incur huge unfunded liabilities for the wars they want to fight, and/or to eliminate inheritance taxes for the heirs of multimillionaires. It’s only deficits incurred to help working Americans that get them all moralistic.

The point is that the economy desperately needs more help — and yes, we can afford to provide it." ("Fiscal Perspective" The conscience of a liberal, Paul Krugman, New York Times)

Yes, we can afford it. We just need to shrug off the deficit hawks and the dollar demagogues and provide the necessary resources to get the job done. It's that simple.

Here's more from Marshall Auerback:

"The Administration ... must free themselves from the discredited dogmas of neo-liberalism and channel the spirit of FDR's bold experimentation. We need less deficit terrorism. Fiscal policy must be much more oriented to personal balance sheets, not bank balance sheets. We need to turn around the private sector and begin to produce more tax revenue, so that the large deficits would be short-lived.

If we continue down the current path, we slow recovery and court large budget deficits for many years to come. Far better to spend now to create jobs and get the private sector growing again.("New Agenda for America: How to Start Anew", Marshall Auerback, newdeal 2.0)

Economists know what it will take to put the country back to work; debt relief, loan modifications, wage growth and full employment. But it will require a fundamental shift in ideology; a rejection of neoliberalism and a strong commitment to rebuild the middle class. Obama can either help in that process or follow the beggarly path to early retirement. So far, there's no reason to be hopeful.

[Demeter]

51. Obama's China Junket: "We're Opening Doors for Wall Street and Nothing More" By Mike Whitney

http://www.informationclearinghouse.info/article23999.htm

November 17, 2009 "Information Clearing House" -- Barack Obama took Hu Jintao to task this morning, scolding the dejected-looking Chinese leader at a press conference held in Beijing. Obama delivered one ferocious jab after another, claiming that China's dollar-peg has cost the US millions of high-paying manufacturing jobs while creating gigantic trade imbalances which have destabilized the global economy and thrust the world into severe economic contraction. Obama demanded that the Chinese government convert to market-oriented exchange rates immediately to preserve jobs in America and to end the de facto tariff that China applies to US goods through its persistent currency manipulation. Obama's sharply-worded prepared statement left the Chinese President gasping for air while the assembled members of the western media snapped to their feet in raucous applause.

Hard to believe, isn't it? Hard to believe that an American president would stand up for his own people and act in the national interest.

The aforementioned press conference never took place. It's a fairy tale. Barack Obama made a few innocuous comments about repricing the renimbi, but it was all just meaningless blather concocted for the American audience. US policymakers have no intention of rocking-the-boat and upsetting their Chinese benefactors. The system works just fine as it is...for the Big money guys, that is.

Do you know the real reason that Obama is in China?

Obama is carrying on the work of George W. Bush and Henry Paulson. He's trying to pry open Chinese markets to US financial services. That's right, the lavish executive junket doesn't have anything to do with human rights, climate change, or dollar/yuan rebalancing. That's all just public relations mumbo-jumbo. 100% bunkum.

True, China's dollar-peg creates an unfair advantage for China's manufactured goods, but so what? The Congress could change that in a minute by applying trade sanctions. But they won't. Because Congress is owned by Wall Street, and Wall Street thrives on the current system. Here's how it works: China sells the US cheap lead-based widgets, and then recycles the dollars into US Treasurys and "complex and utterly worthless" financial products. This provides the gargantuan investment banks with an endless flow of cheap capital to goose stocks and fatten the bottom line. Of course, the process does have its shortcomings, like the fact that it crushes the domestic work-force, but that's how it was designed to work anyway. What economists call "unsustainable imbalances" are praised at the big brokerage houses as "windfall profits". The total destruction of the US labor movement is just an added perk for these well-heeled, flag-waving, uber-patriots.

And here's another item that might be of interest curious readers. This is an excerpt from an interview with Morgan Stanley's Stephen Roach:

Question: How big are China-based multinational corporations now and how do they factor into this issue of global imbalances?

Stephen Roach: "They're a big deal. Over 60 percent of export growth over the past twelve years has come from growth by Chinese subsidiaries of Western multinationals, but again the problem I have is that too many in the United States, especially the Congress but also Washington, focus on the bilateral trade imbalance between the United States and China. That's just a fundamental economic mistake that's being made." http://www.cfr.org/publication/20486/avoiding_a_uschina_trade_showdown.html
peter Roach

Hmmm. So, a large portion of China's industrial capacity is actually "China-based multinational corporations". Now that's interesting. So US workers are actually competing with US industries that are using sweatshop labor to enrich themselves while savaging the American middle class. Great. I wonder how many of these "industry leaders" affix the stars-n-stripes to their lapel each morning before they trundle off to work?

This just proves that the outsourcing of jobs, the off-shoring of businesses, and the "free trade" laws are mainly the work of cutthroat American corporatists not the "rascally Chinese" as the media would like everyone to believe. China is not destroying America; blue-blooded, brandy-guzzling, Harvard-educated Americans are. It's just good-old-fashioned class warfare....and our class is losing.

For those who want to know what Obama's trip is really all about; ignore Obama altogether and read Treasury Secretary Timothy Geithner's article in the Wall Street Journal, "The Road Ahead for Asia's Economies." It tells the whole story. Geithner candidly admits that US markets will remain stagnant for years to come and that other emerging nations (ie China) will have to develop their own domestic markets so that Wall Street speculators can attach themselves parasitically to a more succulent host.

Timothy Geithner: "As U.S. households save more and the U.S. reduces its fiscal deficit, others must spur greater growth of private demand in their own economies......We also must keep our sights on maximizing the potential of global markets. Both exports and imports remain critical stimulate the flow of knowledge and innovation that is enabling emerging economies to catch up with developed-world living standards....To achieve durable growth, all of our economies must have flexible labor markets."

In other words, more lowering of trade barriers, more lost jobs at home, more unemployment.

Geithner again: "Each of us has recognized the importance of strong financial regulation and fiscal balance, and is pursuing these goals in ways that reflect our own circumstances but complement each others' efforts."

Check.

The article concludes with a spirited appeal from Geithner to China to open its markets to the gaggle of financial pirates and bank-vermin who just blew up the global system and are looking for new prey.

Geithner again: "Among other things, emerging economies must strengthen their social safety nets through sustainable health and retirement-benefit schemes,(re: Wall Street) thus reducing the need for high precautionary saving that contributes to global imbalances. Regulatory frameworks conducive to competitive markets will support private enterprise, investment and innovation. (re: MBS, CDOs, CDS and other debt-backed exotica) In the emerging economies, deeper and more efficient financial markets will enable better intermediation of savings and enhance investment productivity.(re: "Please, let G-Sax and JPM hang their shingles in Tienanmen Square. We promise we won't blow up your financial system like we did ours.")

Reforms are also necessary to promote cross-border private investments, while ensuring an institutional capacity and prudent regulatory framework to enable markets to absorb capital flows ... finance ministers of our respective countries, we are keenly aware that our future prosperity will be founded on a continued commitment to globalization." (Timothy Geithner, Wall Street Journal, "The Road Ahead for Asia's Economies")

Blah, blah, blah.

Summary: Geithner and Co. see the US economy languishing in a low-grade Depression for the foreseeable future, therefore, Wall Street must progressively move its base-of-operations eastward.

This is the real reason behind Obama's trip to China. There's no truth to the rumor that US policymakers care about "currency manipulation" or the ongoing looting of the American middle class. That's rubbish. China's "dollar-peg" essentially serves the interests of the giant multinational corporations and Wall Street speculators who own the media, the courts, the congress, the White House and most of the country.

[Demeter]

52. Soaring Unemployment and Double-dip Recession? Blame N.W.O. Larry By Mike Whitney

http://www.informationclearinghouse.info/article24068.htm

November 26, 2009 "Information Clearing House" -- Barack Obama's chief economic advisor, Lawrence Summers, is determined to sabotage a second round of stimulus. And, he's getting plenty of help, too. Congressional Democrats are dragging their feet because they're worried about the political backlash and midterm elections, the GOP deficit hawks are looking for a way they can derail the Obama agenda and reestablish their bone fides as fiscal conservatives, and the bailout-traumatized American people are simply opposed to anything that generates more red ink. Even Obama has joined the fray and started badmouthing stimulus stressing the importance of living within our means and trimming the deficits. So it looks like a done-deal; no more stimulus. There's only one problem, without another blast of stimulus the economy is headed for the skids.

Summers knows this because he is an extremely bright and competent economist. With Summers, the issue is loyalty, not intelligence. To prove this point, consider Summers comments in a Washington Post editorial (September of 2008) where he explains what needs to be done to put the economy back on track:

"Indeed, in the current circumstances the case for fiscal stimulus -- policy actions that increase short-term deficits -- is stronger than ever before in my professional lifetime. Unemployment is almost certain to increase -- probably to the highest levels in a generation. Monetary policy has little scope to stimulate the economy given how low interest rates already are and the problems in the financial system. Global experience with economic downturns caused by financial distress suggests that while they are of uncertain depth, they are almost always of long duration.

The economic point here can be made straightforwardly: The more people who are unemployed, the more desirable it is that government takes steps to put them back to work by investing in infrastructure or energy or simply by providing tax cuts that allow families to avoid cutting back on their spending. ("A Bailout Is Just a Start", Lawrence Summers, Washington Post)

To repeat: "Monetary policy has little scope to stimulate the economy given how low interest rates already are and the problems in the financial system."

Bingo. Zero-percent rates don't get any traction in a liquidity trap. That's why economists push for fiscal stimulus; jobs programs, state aid, and extended unemployment benefits. That's the only way to narrow the output gap and rev up economic activity. Summers doesn't even challenge the idea, in fact, he makes the case for fiscal stimulus. Of course, that was then, and now is, well, now. Here's another clip of Summers stirring up the masses at the Brookings Institute with his thundering Fidel Castro impersonation:

"Between 2000 and 2007 – a period of solid aggregate economic growth – the typical working-age household saw their income decline by nearly $2000. The decline in middle-class incomes even as the incomes of the top 1% skyrocketed has a number of causes, but one of them is surely rising asset prices and the fact that financial sector profits exploded to the point to where they represented 40% of all corporate profits in 2006.

Confidence today will be enhanced if we put measures in place that assure that the coming expansion will be more sustainable and fair in the distribution of benefits than its predecessor."

Larry Summers carrying-on about "distribution of benefits"? Huh? So how does the Redistributionist-in-Chief feel about stimulus now? Here's a clip from Thursday's Wall Street Journal:

"The White House is lukewarm about proposals by congressional Democrats to introduce broad legislation to create jobs, instead favoring targeted measures that would be less likely to inflate the deficit, administration officials said.

Mr. Obama is keen to avoid any measures suggestive of a second, big-ticket stimulus. With about half of the February stimulus spending spoken for, the measure has created about 640,000 jobs, fewer than the number of jobs lost in January alone.

"There is no discussion of a package like a second stimulus, but we are working closely with Congress and consulting with outside experts to determine the right policies and the right steps," said White House deputy press secretary Jennifer Psaki. ("Weighing Jobs and Deficits", Elizabeth Williamson, Wall Street Journal)

Apparently, Summers has had time to rethink his populism and do a 180. Team Obama plans to create jobs by initiating tax credits and lending to small businesses. Sound familiar? In other words, the only way that millions of dejected workers will get any relief is if private industry can be enriched in the process. That's why "there is no discussion of a second stimulus." Because Summers is an industry rep who primary task is to ensure the smooth transfer of public wealth to corporate plutocrats. He even opposed the extension of unemployment benefits believing that greater hardship would push wages down even further. Here's an excerpt from Arianna Huffington at Huffington Post:

"The problem for the White House and for the Democratic Party -- and, most importantly, for the country -- is that the administration's response on jobs is being led by Summers, who actually opposed the extension of unemployment benefits Obama just signed. At this point you have to wonder what Obama's attachment to Summers and Geithner is.....

Back in February, when the $787 billion economic stimulus bill was signed, Summers and company promised that it would keep the unemployment rate from going any higher than 8.5 percent. With another 3.4 million jobs lost since then -- and the official unemployment rate at 10.2 and rising -- what does Summers say now?

"I think we got the Recovery Act right." ("Will the unemployment disaster be Obama's Katrina?", Arianna Huffington, huffingtonpost.com)

Indeed, from Summers point of view, the America Rescue and Recovery Act has worked out just dandy. The unions are getting walloped, 8 million people are out of work, the labor market is in the worst shape it's been since the Great Depression, and the blood-flow of stimulus is about to get choked-off sometime in the next two quarters. Hey, it's morning in America!

But, as we noted earlier, Summers is a superb economist, so maybe there is an economic reason for his opposition to more stimulus. Could it have to do with the output gap? Since Lehman Bros collapsed, the output gap (which is the difference between an economy’s actual output and its potential output) has been at record lows. That means that there is not sufficient demand to take up the slack in the economy. The only way to resolve that problem (when the Fed is in a liquidity trap and consumers are slashing spending) is to get money into the hands of people who will spend it. That means more government spending, thus, more stimulus. But how much more?

Here's economist Robert Skidelsky with an answer:

"But how large must such a stimulus be? The United States Congressional Budget Office (CBO) estimates that American output will be roughly 7% below its potential in the next two years, making this the worst recession since World War II. American unemployment is projected to peak at 9.4% towards the end of 2009 or the beginning of 2010, and is expected to remain above 7% at least until the end of 2011.

The US government has pledged $787 billion in economic stimulus, or about 7% of GDP. Superficially this looks about right to close the output gap – if it is spent this year . But it is in fact a three year-program. Some $584 billion is allocated for 2009-2010, leaving perhaps $300 billion of extra money for this year. Even so, it is not clear how much of that will be spent.

....A double round of stimulus packages is needed to counteract the real prospect of a double-dip recession.

The time to start worrying about inflation is when the recovery is entrenched. To pay back the debt without strain, we need a booming economy. Talk of government spending cuts is premature. ‘A boom not a slump is the right time for austerity at the Treasury’ said Keynes. He was right." ("Is Stimulus Still Necessary?" Robert Skidelsky. Project Syndicate)

Surely, Summers made the same calculations as Skidelsky, but decided to go with a smaller stimulus package for political reasons. Fair enough. He was probably afraid that a larger bill wouldn't get through congress. That's reasonable, but it doesn't change the fact that more stimulus is needed now. The White House should be preparing itself for a major public relations campaign spearheaded by President Persuasion, the charismatic orator who could charm a hungry dog off a meat-wagon. But there's no PR campaign on the drawing board at all; just more blabber about cutting deficits and reducing long-term government spending. (nb...an attack on Social Security) So as soon as this stimulus-injection wears off, the economy will slip into a coma once again. Here's Paul Krugman breaking it all down:

"Second estimate of third-quarter GDP out; growth rate marked down to 2.8%.
This is really quite grim. At this growth rate it’s far from clear that we’re doing anything to reduce the output gap — the gap between what the economy could produce and what it’s actually producing. Correspondingly, there’s no reason now for even a bit of optimism on unemployment.

When the 3.5% advance number came out, I took to warning people that even if the economy continued to grow at that rate, we wouldn’t see anything like full employment until late in Sarah Palin’s second term. Given the latest number, the date at which we can expect to see a return to full employment is … never.

And that’s if growth continues at this rate. The odds are good that growth will slow down next year: the stimulus has already had its peak effect on growth and will turn into a net drag in the second half, the inventory bounce — which was a major factor in 3rd quarter growth, such as it was — will fade out. Basically, we may be in a technical recovery, but we’re not recovering. (Paul Krugman, "Gee, that’s De Pressing" The Conscience of a Liberal, New York Times)

There's no recovery. Figure it out. Bank profits went up last quarter, but lending went down significantly. Now, that's a neat trick. How did they manage that?

They did it with the money they're getting from the Fed. Bernanke has provided broken banks and other financial institutions with trillions of dollars that are being diverted into high-risk assets, carry trades (with the zero-rate dollar as the funding currency) and speculative derivatives bets. The same bubble that just blew up a year ago has been reflated thanks to Bernanke's largesse and gigantic re-leveraging. Main Street is in a Depression, but Wall Street is doin' just fine.

Even so, there is no sign of inflation anywhere and the government is able to borrow capital at record low costs. Last week 3-month Treasuries went negative while the 2-year T-bill has fallen off a cliff. Why? Because Bernanke ended the guarantee on money markets so investors are fleeing to safety again. Ordinary retail investors who can't do bigtime cross-border currency transactions or High Frequency Trading, need a place to hide. Hence, USTs. They're forking over their money to Uncle Sam for under 1 percent interest. It's highway robbery. At the same time, consumer credit is shrinking, bank lending is down, and 1 out of 4 homeowners is upside-down. Money is not moving and the economy is on a ventilator. We need more stimulus.

But there won't be another round of stimulus because Summers and his sniveling companion Geithner won't allow it. They have other plans. Oh yeah, Wall Street and the banking Goliaths will still get as much monetary stimulus as they need (under the phony moniker of "quantitative easing", liquidity swaps, or excess reserves) But as for the working slob---nada, zippo, zilch.

Summers assignment is to bring the broader economy to its knees; to crush big labor by keeping unemployment high, to force state and local and governments to privatize more public assets and services, and to generate as much human misery as possible. In short, Summers is laying the groundwork for structural adjustment within the US, a policy which reflects his ongoing commitment to multinational corporations and neoliberalism. It's the shock doctrine redux. These people are monsters.

[Demeter]

54. Bernanke's Faux Recovery By Mike Whitney

http://www.informationclearinghouse.info/article24162.htm

December 11, 2009 "Information Clearing House" -- -"Economic recovery" is a term that has no fixed meaning. But it's worth mulling-over to determine whether aggregate demand is strong enough to keep the economy from tipping back into recession. In normal times, the Fed slashes interest rates to increase the flow of capital to the markets and to consumers via lending at the banks. That's the traditional method of "jump starting" the economy. The Fed has never initiated policies which provide unlimited guarantees for underwater financial institutions. Nor has it ever poured more than a trillion dollars directly into the financial system by creating excess reserves at the banks and direct purchases of long-term assets. (Quantitative Easing) All of this is new. Naturally, this ocean of liquidity has produced price distortions which have been confused with real recovery. The S&P has soared more than 60 percent in the last 9 months, even though the yield on short-term Treasurys are at historic lows. What does it mean? It means that investors are still fearfully shoving money into safe/conservative bonds, while speculators--who have access to the Fed's zero-rate capital--are loading up on high-risk assets and pushing stocks into the stratosphere. This doesn't tell us anything about organic growth in the economy or whether consumers--who make up 70 percent of GDP--will be able to sustain demand going forward. It's mostly just hype.

On Thursday, Gallup released a new report titled "Upper-Income Spending Reverts to New Normal". Here's a clip:

"In a sign that the new normal in consumer spending continues unabated, upper-income Americans' self-reported average daily spending in stores, restaurants, gas stations, and online fell 14% in November, reverting to its relatively tight ($107 to $121) pre-October 2009 average monthly range. Middle- and lower-income consumer discretionary spending increased by 7% last month but remained in its tight 2009 average monthly range of $52 to $61. Still, consumer spending by both income groups continues to trail year-ago levels by 20%, even as those comparables have gotten easier to match -- possibly dashing hopes that upscale retailers and big-ticket-item sales will do better this year." (Gallup)

The bottom line: Self-reported spending is still down across all age groups, all regions and all genders. Surely, high unemployment and job insecurity feature large in the Gallup report, but reduced spending can also be attributed to the "wealth effect" and the shocking loss of household equity ($12 trillion) since the beginning of the crisis. For households and consumers, the Bernanke's experiment in monetary easing has largely been a failure. Here's David Rosenberg with a bit of cold water:

"The credit collapse and the accompanying deflation and overcapacity are going to drive the economy and financial markets in 2010. We have said repeatedly that this recession is really a depression because the recessions of the post-WWII experience were merely small backward steps in an inventory cycle but in the context of expanding credit. Whereas now, we are in a prolonged period of credit contraction, especially as it relates to households and small businesses ...The defining characteristic of this asset deflation and credit contraction has been the implosion of the largest balance sheet in the world — the U.S. household sector. Even with the bear market rally in equities and the tenuous recovery in housing in 2009, the reality is that household net worth has contracted nearly 20% over the past year-and-a-half, or an epic $12 trillion of lost net worth, a degree of trauma we have never seen before. (David Rosenberg, "Breakfast With Dave", Gluskin Sheff)

Rosenberg correctly assumes that "frugality is the new fashion" and that baby boomers who are unprepared for retirement will continue to cut back on discretionary spending and increase savings in the years ahead. This will put more downward pressure on demand resulting in a "slow growth" sluggish economy. This week's Flow of Funds report from the Fed, reaffirms that, while the Fed has had some luck reflating "household net worth" by an estimated $2.7 trillion; all of the gains are directly attributable to the uptick in the stock market which reflects the Fed's blatant market manipulation. Our question is whether positive growth (2.8 percent GDP) is an accurate measure of "economic recovery" if it is produced by printing presses and parlor tricks?

The Fed's monetary intervention has created a bifurcated market. Stocks rise on an ocean of central bank liquidity while the real economy continues to languish in a small "d" depression. The disparity between financial markets and the underlying "productive" economy has never been greater. Nor has the "wealth gap", the gross inequality exacerbated by decades of "monetarist" supply side policies. Bernanke simply has no other choice but to try to inflate another gigantic bubble that will lift the economy from the doldrums on a speculative wave of zero-rate liquidity. The problem is, according to Bernanke himself, the strategy is not working. Here's an excerpt form Bernanke's speech this week to Economic Club of New York:

"The flow of credit remains constrained, economic activity weak, and unemployment much too high.... (We face) some important headwinds--in particular, constrained bank lending and a weak job market--likely will prevent the expansion from being as robust as we would hope.

The ultimate purpose of financial stabilization, of course, was to restore the normal flow of credit, which had been severely disrupted....However, access to credit remains strained for borrowers who are particularly dependent on banks, such as households and small businesses. Bank lending has contracted sharply this year, and the Federal Reserve's Senior Loan Officers Opinion Survey shows that banks continue to tighten the terms on which they extend credit for most kinds of loans...The fraction of small businesses reporting difficulty in obtaining credit is near a record high, and many of these businesses expect credit conditions to tighten further.

...securitization markets remain impaired... Unfortunately, reduced bank lending may well slow the recovery by damping consumer spending...and by restricting the ability of some firms to finance their operations." (Bernanke speech, Reuters)

No one makes a better case against the Fed, than Bernanke himself. Reread his comments to appreciate the magnitude of the failure. As he admits, "The ultimate purpose of financial stabilization was to restore the normal flow of credit." That says it all.

Now the economy is flatlining even while equities are still climbing. Consumer spending is flagging, credit lines are being cut, and unemployment has leveled off at 10 percent; still much too high for any meaningful rebound. Monetary stimulus has not been effective, because it doesn't get to the people who can generate the most activity. The Fed's increase in excess bank reserves keeps long-term interest rates low, (because the money is recycled into government debt) which keeps Wall Street flush with low interest capital. But it does nothing for households, consumers or workers who find it harder and harder to get a loan. The broken banks have created a credit bottleneck that is choking off the recovery. Without a direct lifeline to consumers (Jobs programs, state aid, extended unemployment benefits) the situation will only get worse. Here's a short clip from the Balestra Bulletin:

"We are no longer in a golden age. We are in trouble. The correction of economic and social distortions that have built up over the past twenty years is underway. It is creating serious ongoing economic and social problems, and despite the reassurances of central bankers and investment pundits, there is no easy way to deal with it. The Fed’s standard remedy for treating recessions by lowering interest rates and boosting liquidity has been seriously abused since 1982. The normal clearing function of recessions was aborted by an over-reactive monetary intervention in every case, while fiscal irresponsibility at all levels of government mounted unimpeded, and regulators were curtailed, reviled, or fired. These policies are not a template for remediation.... We suggest that the experts change their playbook and look for guidance at the U.S. from the late 1920s through the 1930s, or more recently, Japan’s ongoing tortuous financial struggle, which has its roots in the excesses of the 1980s." (Balestra Bulletin, Balesta Capital)

Good point. Unfortunately, Balstra's advice conflicts with the Fed's institutional bias and the 30 year-long "trickle down" ideology which pervades elite circles. Bernanke has pulled the economy back from the brink only to ensure that it experiences a more prolonged and excruciating death by suffocation.

The economy is sinking and the remedies are politically unpalatable. Obama's fiscal stimulus has reached its maximum impact. When the stimulus runs out, and the Fed ends its Quantitative Easing program (which is scheduled to wind-down by March 30, 2010) liquidity will drain from the system and the economy will tumble back into recession. Here's investment guru John P. Hussman in and interview with best selling author John Mauldin:

"In my estimation, there is still close to an 80% probability (Bayes’ Rule) that a second market plunge and economic downturn will unfold during the coming year. This is not certainty, but the evidence that we’ve observed in the equity market, labor market, and credit markets to-date is simply much more consistent with the recent advance being a component of a more drawn-out and painful deleveraging cycle. Meanwhile, valuations are clearly unfavorable here, and even under the "typical post-war recovery" scenario, we are observing an increasing number of internal divergences and non-confirmations in market action."

Financial system stability is largely an illusion created by explicit government guarantees on money markets, commercial paper, TBTF institutions, and toxic assets. (whose real value is still unknown) This is the scaffolding which holds the so-called "free market" upright. (In less PR-oriented societies; it's called “central planning”) Financial markets have become a ward of the state. It's not the integrity of US markets that attracts foreign investors, but the resources of the American taxpayer who has become the de facto guarantor of all Wall Street's speculative bets.

By usurping powers not granted under its charter, the Fed has resuscitated insolvent institutions and helped them continue the transfer of wealth from one class to another. We would argue that the propping up of failed financial institutions (which use a deeply-flawed business model that breaks-down under normal market conditions) so that more wealth can be extracted from working people, does not in-and-of-itself constitute "economic recovery". Of course, we could be wrong.

[Demeter]

53. Crisis in Dubai: The Nightmare Scenario By Mike Whitney

http://www.informationclearinghouse.info/article24090.htm

November 30, 2009 "Information Clearing House" -- The default in Dubai is not the beginning of Financial Meltdown 2. Don't look for dominoes here. Yes, it does raise serious questions about the vast debt-overhang in emerging economies--particularly East Europe. But, this is not a "sovereign default" in the strict sense, nor is there any great risk of contagion. Oil-rich Abu Dhabi is loaded with liquid assets, possibly as much as $800 billion. They could pay off Dubai World's measly $60 billion debt without batting an eye. But Abu Dhabi wants to send its wastrel younger brother a wake-up-call by forcing Dubai to restructure its debt. That means that banks, bondholders and contractors will have to take a haircut, which is not surprising given the abysmal condition of the commercial real estate market.

Dubai World owners were caught up in the same heady debt-fueled commercial construction-binge that swept across the United States. The problem can be traced back to lax lending standards and low interest rates. Now demand has fallen off a cliff and credit is getting tighter. Dubai World can't roll over its debt or meet its obligations. That's what typically happens when credit bubbles bursts.

On Thursday, Bank of America analysts issued a statement: “One cannot rule out — as a tail-risk — a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s.”

This is nonsense. There will be no sovereign default. Abu Dhabi is not going to send global markets into a nosedive to save a few billion dollars. B of A is blowing smoke. Oil has already slipped $3 per barrel since the crisis began. There will probably be a tentative resolution by the time the markets open on Monday. That doesn't mean that there aren't important lessons to be learned from this latest financial calamity. There are.

First, it illustrates that the financial crisis is not over---households, businesses and countries are still deleveraging. This ongoing process will slow spending and increase defaults, bankruptcies and foreclosures. Government guarantees and stimulus programs will not reverse prevailing trends. More incidents like Dubai World should be expected. These "credit events" will disrupt the recovery and spur greater risk-aversion which will push stocks downward.

Arnab Das of RGE Monitor sums it up like this: "We’re bound to see a rise in risk aversion. The Dubai situation signifies that although the major central banks around the world have stabilized the financial system, they can’t make all the excesses simply disappear. We still have to work out those balance sheet stresses. The recovery is proceeding, but significant challenges still lie ahead.” (Bloomberg News)

Second, when these incidents take place, there's likely to considerable collateral damage from the unregulated insurance policies (credit default swaps) which underwrite the bonds. These CDS derivatives are not sold on a public exchange so no one knows who holds them, in what amount, or whether the issuer has sufficient capital reserves to pay off claims. We should expect a repeat of AIG over and over again (although smaller) until the system is either regulated or CDS are banned. The bottom line, is that the current financial architecture is not designed to work; it is designed to make a handful of speculators very rich. These speculators own congress, the White House and the financial media, which is why there has been no meaningful change in regulations.

Dubai is not Argentina. There will be a resolution and contractors will get paid, although not "in full." There will be losses. Big losses. But no contagion.

News of Dubai's payment "standstill" roiled global markets where investor confidence was already thin. The dollar and yen strengthened and US Treasurys surged. The "flight to safety" is making it doubly hard for the Fed to reflate asset prices. Dubai-like credit events make investors jittery and they pull in their horns. That extends the slump and deepens the recession.

If the Dubai crisis drags on, the dollar will get stronger and the flourishing carry trade will crash. That means that the maxed-out banks (which are heavily invested in high-risk positions) will get clobbered once again. That's the nightmare scenario.

The Fed has wrapped its arms around the financial system and provided unlimited guarantees on trillions of dollars of dodgy collateral. Even so, that might not be enough.

[AnneD]

55. Whack a Banker....

popular arcade game in England.

http://articles.moneycentral.msn.com/video/default-ap.aspx?cp-documentid=0f2cd7db-1f1f-4015-8310-cda07dfdea89%26tab=Today%20Show

I see potential in this country. I loved the part about the mallets wearing out.

[Demeter]

56. I heard about that on NPR

Fortunately, I wasn't driving at the time, or there might have been a crash.

[tclambert]

62. Here's a youtube link for whack a banker.

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

The reporter says, "The game is so popular, the mallets keep wearing out."

[Robbien]

58. Goldman Director Bill George: Bankers Are Like Movie Stars And Deserve To Be Paid Like Them

Bill George, Professor of Management at Harvard Business School and a Goldman boardmember responded to a couple of Big Think's questions about banker pay recently.

Scroll to 2:40 of the video below. George compares bank talent to movie stars.

"The shareholder value is made up in people and you need the people there to do the job.

"If you don’t pay them for their performance, you’ll lose them. It's much like professional athletes and movie stars."

http://www.businessinsider.com/bill-george-defends-banker-pay-2010-1

[Tansy_Gold]

59. We another new icon

One with a shovel and a pile of _____.


So that makes, what, three new ones?

:FRSP:
:ESAD:
and
:shovel:

[tclambert]

63. Dow closes above 10578.24

Today's close: 10,583.96

Why care? 10578.24 may look familiar to SMW denizens because . . . that was the Jan. 22,2001 number, the day George W. Bush took office.

So we are officially back to where we started 9 years ago.

Everybody check under your sofa cushions! I think I lost a decade.

[Festivito]

64. Debt: 12/30/2009 12,144,893,016,570.46 (UP 44,674,537,294.30) (Wed)

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

= Held by the Public + Intragovernmental(FICA)
= 7,727,177,503,757.64 + 4,417,715,512,812.82
UP 7,596,599,767.56 + UP 37,077,937,526.74

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

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 308-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.73, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 10 seconds we net gain another American, so at the end of the workday of the report, there should be 308,340,318 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $39,387.95.
A family of three owes $118,163.85. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 22 reports in the last 30 days.
The average for the last 22 reports is 1,447,521,747.95.
The average for the last 30 days would be 1,061,515,948.50.

There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 62 reports in 91 days of FY2010 averaging 3.79B$ per report, 2.58B$/day.
Above line should be okay

PROJECTION:
There are 1,117 days remaining in this Obama 1st term.
By that time the debt could be between 13.3 and 17.9T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
12/30/2009 12,144,893,016,570.46 BHO (UP 1,518,015,967,657.38 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,235,064,013,058.70 ------------* * * * * BHO
Endof10 +0,942,839,173,257.43 ------------* * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
12/09/2009 +000,189,524,372.49 ------------********
12/10/2009 +012,264,233,958.36 ------------**********
12/11/2009 +000,041,027,768.14 ------------*******
12/14/2009 -012,123,818,214.95 - Mon
12/15/2009 +058,799,676,220.27 ------------**********
12/16/2009 +000,348,253,057.33 ------------********
12/17/2009 -036,492,539,788.22 -
12/18/2009 +000,710,260,980.35 ------------********
12/21/2009 -000,155,813,757.66 --- Mon
12/22/2009 +002,618,578,973.78 ------------*********
12/23/2009 +000,459,596,007.01 ------------********
12/24/2009 -001,979,240,244.32 --
12/28/2009 +000,088,095,190.64 ------------******* Mon
12/29/2009 -015,034,724,927.64 -
12/30/2009 +007,596,599,767.56 ------------*********

17,329,709,363.14 Total of 15 above reports.

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

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

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4205433&mesg_id=4205518

[Festivito]

65. Debt: 12/31/2009 12,311,349,677,512.03 (UP 166,456,660,941.57) (Thu)

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

= Held by the Public + Intragovernmental(FICA)
= 7,811,008,785,487.30 + 4,500,340,892,024.73
UP 83,831,281,729.66 + UP 82,625,379,211.91

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

THINKING IN BILLIONS: Think 3 or 4 dollars per billion in a 308-Million person America.
If every American, man, woman and child puts in $3.24 each THAT'S 1B$.
A family of three: Mom, Dad, Child: $9.73, ABOUT TEN BUCKS for a 1B$ federal program.
I hope that is clear. However, I'd suggest using $3 per 1B$ to underestimate it.
Use $4 per 1B$ to overestimate the cost when thinking: Is the federal program worth it?
Aid to Dependant Children: 2B$/yr =$8/yr(a movie a year) Family of 3: $24/yr(an hour of bowling)

PERSONALIZED DEBT:
Every 10 seconds we net gain another American, so at the end of the workday of the report, there should be 308,348,958 people in America.
http://www.census.gov/population/www/popclockus.html ON 11/07/2009 08:19 -> 307,879,272
Currently, each of these Americans owe $39,926.68.
A family of three owes $119,780.04. (And that is IN ADDITION to their mortgage.)

ANALYSIS:
There were 22 reports in the last 30 days.
The average for the last 22 reports is 10,096,509,630.43.
The average for the last 30 days would be 7,404,107,062.32.

There were 252 reports in 365 days of FY2007 averaging 1.99B$ per report, 1.37B$/day.
There were 253 reports in 366 days of FY2008 averaging 4.02B$ per report, 2.78B$/day.
There were 75 reports in 112 days of GWB's part of FY2009 averaging 8.03B$ per report, 5.38B$/day.
There were 174 reports in 253 days of Obama's part of FY2009 averaging 7.33B$ per report, 5.07B$/day so far.
There were 249 reports in 365 days of FY2009 averaging 7.57B$ per report, 5.16B$/day.
There were 63 reports in 92 days of FY2010 averaging 6.37B$ per report, 4.36B$/day.
Above line should be okay

PROJECTION:
There are 1,116 days remaining in this Obama 1st term.
By that time the debt could be between 13.8 and 20.6T$.
It could be higher. It could be lower.

HISTORICAL:
President's term begins and ends on Jan 20.
(Guess who might want to hide the Reagan Bush years. Jan 20 data is missing before 1993.)
01/20/1993 _4,188,092,107,183.60 WJC Inaugural
01/22/2001 _5,728,195,796,181.57 WJC (UP 1,540,103,688,997.97)
01/20/2009 10,626,877,048,913.08 GWB (UP 4,898,681,252,731.43)
12/31/2009 12,311,349,677,512.03 BHO (UP 1,684,472,628,598.95 so far since Obama took office.)

FISCAL YEAR DEBT CHANGE, Sep 30 prior year to Sep 30 named year:
(One "* " for each 40B$ reached)
FY1994 +0,281,261,026,873.94 ------------* * * * * * * WJC
FY1995 +0,281,232,990,696.07 ------------* * * * * * * WJC
FY1996 +0,250,828,038,426.34 ------------* * * * * * WJC
FY1997 +0,188,335,072,261.61 ------------* * * * WJC
FY1998 +0,113,046,997,500.28 ------------* * WJC
FY1999 +0,130,077,892,735.81 ------------* * * WJC
FY2000 +0,017,907,308,253.43 ------------WJC
FY2001 +0,133,285,202,313.20 ------------* * * C&B
01-WJC +0,053,598,528,417.78 ------------* WJC 31% of FY, 40% of FY-Debt
01-GWB +0,079,686,673,895.42 ------------* GWB 69% of FY, 60% of FY-Debt
FY2002 +0,420,772,553,397.10 ------------* * * * * * * * * * GWB
FY2003 +0,554,995,097,146.46 ------------* * * * * * * * * * * * * GWB
FY2004 +0,595,821,633,586.70 ------------* * * * * * * * * * * * * * GWB
FY2005 +0,553,656,965,393.18 ------------* * * * * * * * * * * * * GWB
FY2006 +0,574,264,237,491.73 ------------* * * * * * * * * * * * * * GWB
FY2007 +0,500,679,473,047.25 ------------* * * * * * * * * * * * GWB
FY2008 +1,017,071,524,649.92 ------------* * * * * * * * * * * * * * * * * * * * * * * * * GWB
FY2009 +1,885,104,106,599.30 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B&O
09GWB +0,602,152,152,000.60 ------------* * * * * * * * * * * * * * * GWB 31% of FY, 32% of FY-Debt
09-BHO +1,282,951,954,598.70 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * BHO 69% of FY, 68% of FY-Debt
FY2010 +0,401,520,674,000.30 ------------* * * * * * * * * * BHO
Endof10 +1,592,989,630,544.67 ------------* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Linear Projection

LAST FIFTEEN REPORTS OF ADDITIONS TO PUBLIC DEBT(NOT FICA):
12/10/2009 +012,264,233,958.36 ------------**********
12/11/2009 +000,041,027,768.14 ------------*******
12/14/2009 -012,123,818,214.95 - Mon
12/15/2009 +058,799,676,220.27 ------------**********
12/16/2009 +000,348,253,057.33 ------------********
12/17/2009 -036,492,539,788.22 -
12/18/2009 +000,710,260,980.35 ------------********
12/21/2009 -000,155,813,757.66 --- Mon
12/22/2009 +002,618,578,973.78 ------------*********
12/23/2009 +000,459,596,007.01 ------------********
12/24/2009 -001,979,240,244.32 --
12/28/2009 +000,088,095,190.64 ------------******* Mon
12/29/2009 -015,034,724,927.64 -
12/30/2009 +007,596,599,767.56 ------------*********
12/31/2009 +083,831,281,729.66 ------------**********

100,971,466,720.31 Total of 15 above reports.

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

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

(Debt to the penny keeps changing. Stuff is missing. Best to keep our own history.) LAST REPORT:
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4209440&mesg_id=4210249