reality is only those delusions that we have in common...

Saturday, August 22, 2009

week ending Aug 22

Fed’s Net MBS Purchases Top $741bn: Barclays - The Fed has purchased nearly $1.1trn and sold more than $356bn MBS since the beginning of 2009 in its effort to “provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets”

A Look Inside Fed's Balance Sheet — 8/20/09 Update - WSJ - interactive graphic - The Fed’s balance sheet expanded back above $2 trillion in the latest week. The majority of the increase came from some $67 billion purchases of mortgage backed securities... Central-bank liquidity swaps declined again, as overseas demand for dollars continues to abate.

How fast can the economy grow? - macroblog - "We at the Atlanta Fed see a meaningful output gap developing, but in our view it is smaller than would normally be associated with the weak pace of growth we expect over the next couple of years...

Running low on ammo - On Monday the Fed announced it had purchased another $7 billion worth of Treasuries under its quantitative easing last week’s FOMC statement, the Fed said it was maintaining its total purchase commitment of $300 billion. After today’s $7 billion purchase, the Fed has just $40 billion left. To date, purchases have averaged over $12 billion per week.

Growth Accounting, Potential Output, and the Current Recession - SF Fed - This Economic Letter looks at potential output from the perspective of growth accounting, which assesses some of the key supply-side factors determining sustainable, noninflationary potential output. Perhaps most importantly, we find that the underlying pace of efficiency improvements—“technological progress,” broadly construed—has remained strong during the recession.

One Of Three Down; Is The FDIC Still Solvent? - A 40% loss on this one would, if my math is right, kill the rest of their insurance fund plus quite a bit and put the FDIC in the position of immediately needing to go hit up Treasury for more money. That ought to be good for confidence, right?

Big banks still hold FDIC captive
Sheila Bair has moved with impressive alacrity to shutter failed small and medium-sized banks. But she is still held hostage by the too-big-to-fail four. The biggest banks are far too big for her to resolve. One way to measure this is deposits in failed banks as a percentage of GDP...

Loss Rates for FDIC higher than during S&L Crisis From the WSJ: Failed Banks Weighing on FDIC - For the 102 banks that have collapsed in the past two years, the FDIC's estimated cost averaged 34%, higher than the 24% rate between 1989 and 1995...

The FDIC Is Broke - Now What? - complete analysis & breakdown With the most recent bank failures, the FDIC is out of funds.
The FDIC is levying a one-time fee on member banks to cover the shortfall, but it will not be enough and it punishes the prudent.
The FDIC has been suspiciously slow at shutting down banks that have admittedly already failed.

No Denying This Reality There's no doubt that hubris, greed, and recklessness helped bring about the worst financial crisis this century. But other factors have also played a major role, including ignorance and denial. In fact, it is hard to think of a circumstance where a failure to acknowledge reality was more evident than in regard to Fannie Mae and Freddie Mac..

The US doesn’t need foreigners to finance the fiscal deficit? Who knew? - The market for Treasury bonds is now more reliant on U.S. buyers — including the Federal Reserve after its recent buying spree — than the Chinese.
-- America’s new love affair with Treasury bonds - From Q1, US households held $643.9 billion in Treasury debt and that is up from $256.6 billion in Q4 2008. Households bought an astounding 84% of new US Treasury issuances in Q1

so who's selling? China cuts holding of U.S. Treasury securities - if foreign agents sell their securities, interest rates in America should increase as demand for US public debt evaporates.
Now comes evidence that China is indeed selling. The BBC reports: "China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury." Meltdown 101: Foreign Investments in US Debt

Oh Oh.... Trouble Dead Ahead - You can read the original article at this link, or I'll just point out the important parts: foreigners are rejecting virtually all forms of US debt, most specifically corporate and agency (mortgages.) The only place foreigners are "still buying" is in the Treasury market, and one wonders: for how much longer, and how much of that is really foreign buying?

Wall Street Journal Wants To Add $5 Trillion To The Federal Debt With Nonsensical Accounting - Following the Journal’s proposal would be like assuming that the government will have to pay out every single deposit insured by the FDIC.

Why Budget Deficits Matter: Government at a $1.26 Trillion Budget Deficit for the 2009 Fiscal Year. Three Times as Large as Last Year and we still have Two More Months of Data.

Foreigners’ Cumulative 12-Month Net Purchases-Sales of U.S. Assets (chart)

Fears of Inflation - check here for the Federal Reserve’s most recent reporting on nominal and real interest rates on 20-year government bonds. The former is 4.37% and the latter is 2.24%. So the market is expecting a long-term inflation rate around 2%.

Monetary Policy in the Aftermath: The Case for a 5% Inflation Target - where will this investment come from? The most plausible answer to me seems to be lower real interest rates. Of course we have a problem. We are currently experiencing deflation and short term interest rates are zero. This puts obvious limits on the ability of the Fed to generate lower real rates.

Fed Says Banks Tightened Lending in Second Quarter (Bloomberg) -- U.S. banks tightened standards on all types of loans in the second quarter and said they expect to maintain strict criteria on lending until at least the second half of 2010, a Federal Reserve report showed today.

From the Fed: The July 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices: "Demand for loans continued to weaken across all major categories except for prime residential mortgages."

Hoenig: Let Big U.S. Banks Fail - Kansas City Fed President Thomas Hoenig, the host for the annual Jackson Hole Fed confab, is utterly against bailouts, and thinks “Too Big To Fail” is a losing strategy.

Bernanke’s Speech: The Quick Version - WSJ Staff - In case you don’t want to read the entire Ben Bernanke speech at the Federal Reserve’s summer retreat at Jackson Hole, Wyo., this is a summary...

Orwellian Madness "Bernanke Saved The World" - Mish - In a speech at the Kansas City Fed's annual retreat in Jackson Hole, Wyo., Bernanke summarized a hellish year and explained modestly how he and his central bank colleagues saved the world from a bigger disaster. The MarketWatch Headline Bernanke: We Saved The World is the height of Orwellian madness.

Thanks to Ben Bernanke, Ben Bernanke Doesn't Need to be Reappointed as Fed Chair - a reality-based critique of the bailouts allows them to be both effective at saving the world and unconscionable screw-jobs that kept an array of bad actors from paying for their greed and incompetence...

Bernanke: He Didn't Just Miss the Housing Bubble
The NYT reports that Fed Chairman Ben Bernanke seems to be cruising to reappointment in spite of having missed the largest financial bubble in the history of the world, giving us the worst downturn since the Great Depression.

The roots of the "clean up after bubbles" approach - The Economist - via Bernanke (the 29 crash & depression were caused by trying to head off a bubble)
The Weird Cult of Ben Bernanke - ever since some time last year when it become absolutely undeniable that Ben Bernanke was had been completely wrong about “The Great Moderation”, Bernanke has done an admirable job of trying to clean up the mess created by the errors of the school of thought to which he adhered...

John Berry: Time for the Fed to stand up to its critics
Many members of Congress want to clip the Fed’s wings for failing to prevent the crisis and for its actions since the meltdown began two years ago. Angry as they may be at the central bank right now, members of Congress would surely rue the day they had to deal directly with raising interest rates — a step that will inevitably be needed at some point to curb inflation and keep the economy on an even keel.

The Fed goes multimedia - Cleveland Fed on YouTube (What to Do about Systemically Important Financial Institutions)

Bank Exposure to Commercial Real Estate - Cleveland Fed - (analysis w/ charts) -The economic downturn has hit bank CRE loan portfolios particularly hard....unlike the residential mortgage market (where a majority of lending has been done by a few large banks), the array of banks holding large concentrations of commercial mortgage debt is broad and diverse. This distribution means tremors in this market can affect banks of all sizes heavily, both nationally and in the District.

U.S. Banking crisis just BEGINNING - Thanks to the U.S. accounting 'watch-dog' – the FASB – legalizing fraudulent accounting (see “FASB strong-armed into mark-to-fantasy accounting”), the “solution” which the bankster oligarchs have come up with to the mass-insolvency of U.S. banks is to simply hide a lot more bad loans....fraudulent accounting has become a way of life for the U.S.

Grayson On Banks: We Should Have Liquidated The Assets And Liquidated The Management »
"I don’t believe taxpayer money belongs in the pockets of private interests." (includes video of interview)

The deleveraging process is inevitable - "My sense is that in the US, even if intervention on the order of magnitude required was feasible (and I doubt it), the political will, financial resources, and economic wisdom to intervene to offset the assets and wealth losses are simply not there"

America’s Japanese banks - A banking system loaded down with hundreds of billions of dollars worth of unrecognized bad debt — Japan in the 1990s? No, it’s the United States today. And where are American banks hiding their losses? In loan portfolios.

SEVERELY delinquent loans crippling U.S. banks - Writing about how “non-performing” loans are ravaging the U.S. financial sector may sound like “old news”. However, data released in a Bloomberg article indicates that the number of delinquent loans is literally only half the story here. The average length of delinquency on these loans – for the entire U.S. financial sector – was 90 days.

Problem Banks - unofficial list - "The list is compiled from regulator press releases or from public news sources (see Enforcement Action Type link for source). "

Emerging market debts: Why don’t investment banks pay attention? - VoxEU - How would financial markets assess complicated structured products in the absence of ratings agencies? This column uses the history of emerging economies’ government debt to argue that investment banks used to win market share by building a reputation for quality products. It says that ratings agencies insulated investment banks from reputational rewards and freed them to deal in junk.

The Billion Dollar Gram _ PWA - look at the full-size chart from Information Is Beautiful - The graph is dominated by $7.8 trillion supposedly spent by the US government on bailouts in the present financial crisis.

“Too Big to Fail” Must Die - "If we continue to subsidize irresponsible risk-taking, we’ll just get more of it."

New Claims Day - New claims for unemployment insurance rose 15K last week from 561K to 576K. This is not going well. This is the second week in a row that we have seen a rise and its beginning to flatten the overall trajectory. Staying anywhere in the 500Ks makes for a terrible economy.

1.5 Million to Exhaust Benefits by End of ‘09 - It is clear we are coming up on a tidal wave of need for more extensions and help from the federal government. (state-by-state breakdown attached)

Structurally High Unemployment For A Decade - Mish, regards the July 2009 Opinion Survey on Bank Lending Practices and the article on it from Calculated Risk: Lending Standards Tighten, Loan Demand Weakens

*The Week in Charts – Buckle the Heck Up! - I’m going to show you the week in charts courtesy of the St. Louis Fed. This week, however, I’m issuing a WARNING. The evidence in these charts points to the beginning of a DEFLATIONARY SPIRAL...

Can The World Avoid The Deflation Trap? "The most important investment decision you will have to make this year and possibly for years to come is whether to structure your portfolio for deflation or inflation."

More Evidence of Deflation - From the BLS: From July 2008 to July 2009, prices for finished goods fell 6.8 percent, the index for intermediate goods decreased 15.1 percent, and crude goods prices dropped 44.8 percent, all of which are record 12 month declines. Federal tax receipts on corporate income is down 40+% year over year; not since 1930 has the collapse been this great.

The Greenback Effect - Warren Buffett - "Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt."

Pimco Says Dollar to Weaken as Reserve Status Erodes - PWA - the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy. The dollar will drop the most against emerging-market counterparts...

How Will We Know when the Economy Turns the Corner? - Thoma - "In order to be convinced that the economy is on solid footing and headed to better times, I will want to see several things."

Discerning a fake, technical, statistical, or partial recovery - a recovery is still likely to come. It will be a fake recovery, a technical recovery, a statistical recovery, a partial recovery, not a real recovery. Let me explain...

The shape of things to come is probably not ‘V’ - So say Bank of America Merrill Lynch economists — and it’s all because of those debt-ridden US consumers. consumers are expected to deleverage significantly in the coming months. In ‘The deleveraging playbook’, BofA-ML economists consider how much debt needs to be removed from balance sheets to get back to more sustainable levels...

A Phantom Economic Recovery - Roubini - "for a number of reasons, growth in the advanced economies is likely to remain anaemic and well below trend for at least a couple of years"

“Just because the conventional economists are drinking the Kool-Aid doesn’t mean you have to” – FT Alphaville - David Rosenberg spins another tale of doom...

Economists – not the best recovery forecasters - economists have a long and repeated history of underestimating the strength of recoveries

Sunday Lesson: Why "Normal" WILL NOT Return -William Black video - "this is a long presentation, lasting more than an hour and a half, but is in fact essential to understanding both what happened and more importantly why the economy cannot recover on a durable basis."

Systemic Risk: Is it Black Swans or Market Innovations? - Many popular explanations of recent financial crises cite "Black Swan" events; extreme, unexpected, "surprise" price movements, as the causes of the calamity. However, in looking at our crisis wracked markets, we might consider that the Black Swan hypothesis doesn't fit the facts...

Home Prices: There's No Quick Recovery Ahead - WSJ - Prices may -- may -- be nearing the bottom in many markets. But beyond the headlines, there are plenty of reasons to stay cautious. There may even be fresh dangers just ahead.And even if prices have stopped falling, it may be years before they start rising sharply again.

House Prices Gain 3% in June: Radar Logic - "The stabilization and subsequent uptick in home prices in the first half of 2009 indicates a return of demand on the part of buyers, and the shift in the mix of sales toward more expensive neighborhoods sheds some light on who the buyers are”

Fed: Delinquency Rates Surged in Q2 2009 Residential real estate, 8.8%. Commercial real estate, 7.9%. Credit cards, 6.7%. Residential real estate charge-offs are up 30% to 2.3%, credit cards up 25% to 9.5%.

Mortgage delinquency rate hits all time high in 2Q
Delinquent U.S. mortgages break record AGAIN - U.S. “delinquent mortgages” increased by 65% in the 2nd quarter of this year from the total of a year ago, according to a report from credit reporting agency Transunion...a Transunion representative said that the “good news” was that delinquent mortgages “only” increased by 11.3% from the 1st quarter. An 11.3% quarter-over-quarter increase works out to a 50% rise on an annualized basis – and this is being called “good news”.

Nine Notes on Residential Real Estate - accumulated observations & links

Strong Gain in Existing-Home Sales Maintains Uptrend “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,”

1 in 8 US Mortgages Falling Behind - This is an astonishing number:“A survey found that one in eight U.S. households with mortgages was in foreclosure or behind on its mortgage payments during the second quarter, putting added pressure on programs aimed at preventing foreclosures.”

Vermont, Texas, and Subprime Loans - (w/ links to other analysis) The Wall Street Journal has a story about Vermont and subprime loans: Vermont’s strict mortgage-lending laws largely prevented the state’s residents from signing the types of dubious home loans written in other markets across the country.

The Demand for Housing When it comes to no-money-down liars loans; if someone offers you a giant mortgage, and the upside that your new house may become worth a lot more, and the downside is that you got to live in a nicer house than normal for a year or two, that’s a perfectly rational bet. But that’s not the experience on the ground, where people hang onto their house, fighting, often desperately at times, to keep them. Houses aren’t dumped like underperforming stocks by the overwhelming majority of consumers.

Tax Bills Put Pressure on Struggling Homeowners - NYTimes - Hard times are causing more homeowners to fall behind on their property taxes. But in thousands of cases, they are not responsible to their local governments, but to private debt-collection companies that charge double-digit interest and thousands of dollars in service fees.

Brace for a Wave of Foreclosures, the Dam is About to Break - Mish - 32-37% Of All Mortgage Holders Are Stuck, Unable To Sell

MBA: Record 13.2 Percent of Mortgage Loans in Foreclosure or Delinquent in Q2 - From the Mortgage Bankers Association (MBA): The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans...The percentage of loans in the foreclosure process at the end of the second quarter was 4.30 percent, an increase of 45 basis points from the first quarter of 2009...

MBA Forecasts Foreclosures to Peak at End of 2010 - The MBA data shows about 5.8 million loans delinquent or in the foreclosure process nationwide.... the MBA surveys covers close to 90% of the mortgage market. Many of these loans will cure, but the foreclosure pipeline is still building.

U.S. Mortgage Market and Seriously Delinquent Loans by Type (pie charts)

Has Mortgage Modification failed? - Obama’s mortgage modification plan, HAMP (Home Afforable Modification Program), isn’t working very well. Is it likely to work in the future? My guess is no. Let’s discuss some reasons why. (article also includes links to other analysis)

The Treacherous Path for Housing - 42 Percent of California Mortgages with Negative Equity: $1 Trillion in Mortgages Submerged Underwater in California. $3 Trillion in U.S. Mortgages Underwater and Risking Foreclosure.

California Housing Bottom Callers and the Foreclosure Clones of 2008: Notice of Default Wave Part Two Gearing up for Q4 of 2009 and 2010. U-6 Unemployment and Underemployment Rate for California now at 21 Percent.

Mortgage Armageddon - if the government steps in and somehow socializes such large and pervasive losses in some districts, how does it sell such a colossal bailout to the voters in many states where borrowers and lenders were prudent rather than profligate and almost everyone remains solvent?

The New American Dream: Renting - It's time to accept that home ownership is not a realistic goal for many people and to curtail the enormous government programs fueling this ambition.

Credit Slips: Show Me the Original Note and I Will Show You the Money
as the number of foreclosures increase each quarter, the “new mantra” of many pro-se and represented consumers is to demand that the mortgage servicer “prove up the original note.” Is this just some new and creative gimmick? I submit that there is really something to it.

China to Buy $2 Billion Worth of US Mortgages - China Investment Corp, the country's $200 billion sovereign wealth fund, is set to pour up to $2 billion soon into the U.S. mortgage system by hiring mandates under the U.S. Treasury-backed Public-Private Investment Plan (PPIP), sources told Reuters.

Why is the US taxpayer subsidizing Chinese participation in PPIP ?
the Treasury matches whatever a private investor puts up, then credits 6X as much capital. So if the Chinese are buying $2 billion, the US puts up $2 billion, and then the PPIP allows the purchase of $24 billion of distressed assets in the open market.

‘Jingle Mail’ Comes to Hotels . . .an increasing number of hotel owners in the U.S. market are simply walking away from money-losing properties and forfeiting them to lenders.

CRE: ABI and Nonresidential Structure Investment - The (AIA) releases the Architecture Billings Index (ABI) monthly, and there is an "approximate nine to twelve month lag time between architecture billings and construction spending." It suggests that nonresidential structure investment will decline through most of 2010, with no bottom in sight...

Commercial Real Estate: There Goes the (Entire) Bubble (Chart on page)

Q2 2009 Corporate Defaults More Than Double 2008 Total - The second quarter of 2009 set a new record for the number of corporate defaults, with 82 non-financial events of default, consisting of 16 names in media and entertainment, 15 in autos and 15 in natural resources, according to a new report published by S&P. The total amount of defaulted debt was $254 billion, far larger than the $102 billion spread among 69 defaults in all of 2008...

Reforming Wall Street, and Why Early Indications Aren’t Hopeful - like the healthcare industry, Wall Street has platoons of lobbyists and an almost unlimited war chest to protect its interests and prevent change...

Filling the Financial Regulatory Void "The administration’s proposal appears to portray the financial crisis as nothing more than an accident of reasoning. Because financial regulation in our country evolved in a fragmented manner, regulators’ perceptions of risk were determined by their respective niches".
counterpoint: An Inside Perspective on Regulatory Capture: "Filling the Financial Regulatory Void” provided insight into human deficiencies in the current financial regulatory system. But it overplays the human failings of regulators and concludes with a proposed solution that, in all likelihood, would turn out worse than the current situation"
which, in turn, provoked the following response

Derivatives Proposal Is Too Soft, Regulator Says - Agency Chief Concerned About Rule Exemptions - warning that the administration's new vision of market regulation could contain loopholes...

Rogoff: We Need to Regulate Banks - Kenneth Rogoff warns us not to believe those who argue that the crisis was largely due to government failure, and hence that regulating the financial sector is counterproductive and unnecessary: Why we need to regulate the banks sooner, not later, by Kenneth Rogoff, Commentary, Financial Times: When in doubt, bail it out,” is the policy mantra...

U.S. Companies Increasing Short-Term Incentives In Pay Packages - a study of changes made in pay practices by 191 of the nation’s largest companies this year shows that where pay is concerned, enlightenment remains a long way off: “If you were going to encourage long-term thinking and behavior, you would reduce short-term pay, but companies have in fact reduced the long-term programs,”

"Pay Czar" Refusing to Back Down Over Possible $100 Million Citi Bonus - Yves Smith - Feinberg is now claiming broader authority to claw back funds under the TARP. This is certainly not what was provided for in the legislation, at least not as generally reported.

Wall Street ponders pay czar's move on clawbacks - Reuters - Wall Street is warily watching the Obama administration's pay czar and wondering if he will flex his muscle to "claw back" past bonuses paid to some of the biggest players in high finance.

Citigroup’s Asset Guarantees to Be Audited by TARP (Bloomberg) -- Citigroup Inc.’s $301 billion of federal asset guarantees, extended by the U.S. last year to help save the bank from collapse, will be audited to calculate losses and determine whether taxpayers got a fair deal.

Citi CFO Resigned After Bank Signed Secret Pact With Government - The FT quotes from the agreement: “Citigroup will (decide whether) the CFO for Citigroup...can be more effectively utilised in other Citigroup responsibilities, and if so, on replacements by a person...with relevant financial, accounting or other experience acceptable...(Apparently Kelly resigned on hearing of the agreement.)

WSJ Back to the Backdating Scandal - The Wall Street Journal, which broke the massive options-backdating scandal three years ago in one of the great enterprise stories of the decade, returns to the well today with a report on an academic study that finds the practice was far more widespread than thought...the research found 141 companies...

AIG CEO Gives Uncle Sam (and Us) the Finger (Financial Services Industry Arrogance Watch) - Tim Duy pointed out this priceless remark from AIG's new CEO: Benmosche told employees that he “had the luxury to say to the government, I’m not going to rush to do this. I’m appalled at how much pressure has been put on all of you to just sell it no matter what, because the Fed wants out, or the Treasury wants out. If they want out in a hurry, they shouldn’t have come in in the first place...

UBS clients used foreign shells to hide income - Wealthy American clients of Swiss bank UBS AG used sham corporations set up in havens from Hong Kong to the British Virgin Islands as part of their efforts to evade U.S. taxes, according to documents filed in Florida and California court cases.

UBS: Just The Tip Of The Tax Haven Iceberg According to the Government Accountability Office, 83 of the 100 largest U.S. corporations have subsidiaries in nations judged by the US to be tax havens. In the Cayman Islands, for instance, “one mailing address alone houses 18,857 corporations.”

UBS Money Laundering: What Did Phil Gramm Know? - former Sen. Phil Gramm, the Texas Republican, is vice chairman of UBS' investment banking business.

Clawbacks Coming? Uncle Sam should be going after senior executives who were vastly overcompensated for helping to drive their firms into the ground. In particular,t he focus should be on the excess compensation that was unrelated to actual performance.
Stock options, bonuses for excess risk taking should all be clawed back to the taxpayer.

Lehman Brothers: the (BBC) movie - "The Last Days of Lehman Brothers” will feature James Cromwell as Hank Paulson and Corey Johnson as Dick Fuld.

Sachs Appeal: white house influence of Tim Geithner’s Wall Street consigliere

Debunking US Economic Myths - Yves Smith - the widely-held fantasies that America is a land of dynamic entrepreneurship, that if you work hard and apply yourself, you can improve your economic standing considerably, etc...

Gillian Tett: Eliminate financial double-think - elites in a society typically maintain their power not simply by controlling the means of production (ie money), but by dominating the cultural discourse too (ie a society’s intellectual map). And what is most important in relation to that cognitive map is not what is overtly stated and discussed – but what is left unstated, or ignored.

Consumers Tightening Belts, Raising Worries About Recovery - Yves Smith - no where does the WSJ article acknowledge that the consumption level was unsustainable and debt fueled. We are in the midst of a secular change, not merely a prolonged recession responses.
The misunderstanding of "debt-fueled consumption" - Today I plan to rant just a bit about consumption because I was reading Yyves Smith’s article today, and she referred to “debt-fueled consumption” – the now pejorative phrase that just rolls off the tongue...the debt-fueled consumption was more likely paying surging health care bills than buying cute Q2 2009, 25% of service spending went to health care...

Shoppers holding back - Consumer inflation tumbles to zero. Consumer prices have fallen more in the past year than in any 12-month period in nearly six decades — a huge break for shoppers but also a reminder that prices are being restrained by weak spending that's likely to slow an economic recovery...

Worst Performance Ever For Back-To-School Sales - Mish - Citigroup is predicting a decline in back-to-school sales (of 3-4%) for the first time since they began tracking the figures in 1995.

Investors Should Stop "Worrying" About Consumers: They Don't Have Any Money USA Today tells us that the stock market dropped because investors are worried that consumers have bad attitudes and therefore will not sustain consumption...

Household Debt to Net Worth Ratio Spiking - What we've seen is a large decline in household net worth, but unfortunately we haven't seen a corresponding decline in household debt.

Bacteria, Boids and Market Instability Old-time economics saw investors as rational individuals, all behaving autonomously in a logical fashion. Today not even economists really believe that this is how people actually operate. Just as we might have suspected all along, stockmarket investor behaviour can be modelled by examining the way a bunch of brainless, single celled and barely animate creatures interested only in food and reproduction disport themselves on a Petri plate.

Weak consumer spending will last for years - we are seeing a secular change in consumption patterns in the United States. This will have grave implications for a world economy used to seeing the American consumer as an economic growth engine and consumer of first choice.

The consumer isn’t overleveraged — the middle class is - By contrast, the upper 10% of income earners face a much smaller debt burden relative to income and net worth. Those people should have ample spending power to help fuel an economic recovery.

YoY personal income 1960-present (chart)

“Self-Preservation” Bodes Ill for U.S. Economy - U.S. citizens are the most-indebted people on the a matter of survival, Americans must dramatically curb their spending to pay down their debts to a level which doesn't threaten them with imminent Americans make necessary reductions in their debt-levels this reduced spending will inevitably cause the loss of vast numbers of jobs in the retail sector...

Debtor's Revolt? - will the US remain mired in decades long sustained debt repayment?

Not Too Hard - a 2001 study, "What Makes a Revolution," shows that more people favor revolt when inequality is high and their net incomes are low." Given that, it's not hard to draw some troubling conclusions from the research paper highlighted in the following Huffington Post report, "Income Inequality Is At An All-Time High: Study"

Obama Pushes States to Shift on Education NYTimes Holding out billions of dollars as a potential windfall, the Obama administration is persuading states to rewrite education laws to open the door to more charter schools and expand the use of student test scores for judging teachers.
California's universities in trouble - The Economist - California’s financial crisis jeopardises one of the world’s finest universities. THE best public higher education in the world is to be found at the University of California/

UC System Will Consider Implementing Furloughs - UC President Mark Yudof released a memo last week announcing the university's intent to look into and potentially implement furloughs to combat severe budget cuts.
Orange crush - The present reflation will do very little for individual Americans. If 11.6 per cent unemployment in California during a time of $72 oil doesn’t make the point, then perhaps 15 per cent unemployment and $100 oil Elizabeth Warren, the chair of the Congressional Oversight Panel, put it last week, reflation is not likely to work “if the idea is to use the practices of the last five years, and see if we can get a little bubble going.”

JP Morgan Bails Out California - Remember when the US government had to bail out investment banks. Now a bank is bailing out the state of California...

Greetings from Bulgaria - In the heyday of the Sofia empire, all Bulgarians were renters. But they did have free health care.

Why We Need Health Care Reform - NYTimes - op od by Obama

white house health care reality check

COMPARING COSTS - "it's important to remind people that when they say 'trillion dollars,' they're talking about over 10 years, thats $100 billion a year...just to give you a sense of perspective the amount of money that we're spending in Iraq and Afghanistan is $8 billion to $9 billion a month..."

In Defense of Britain’s Health System – washington post - The myth-making ranges from the misleading to the mendacious to the downright ludicrous

Ezra Klein: What Would You Do With $4,298? - The British health-care system is worth studying for a simple reason: It is insanely, unbelievably, cheap. According to the latest OECD numbers, America's 2007 health-care costs equaled out to $7,290 per person. Britain spent $2,992.

The World From Berlin - Der Spiegel - Americans Want 'Freedom to Pay Too Much for Inferior Health Care'
In America, Crazy Is a Preexisting Condition: Birthers, Town Hall Hecklers and the Return of Right-Wing Rage - The Birther Movement of 1377…:

GOP Rep. encourages guns at town hall meetings - Asked by an MSNBC anchor on Monday, a Georgia Republican member of Congress actually encouraged Americans to attend public forums packing heat.
Same Old Same Old - Ronald Reagan attacks Medicare as “socialized medicine”: YouTube

Health Care Hypocrisy - Many of the pundits attacking government health insurance rely on government health insurance for their own families.

Obama’s Pre-emptive Health Care Surrender - Taibbi: "I’ll say this for George Bush: you’d never have caught him frantically negotiating against himself to take the meat out of a signature legislative initiative just because his approval ratings had a bad summer."

The Trouble With Appeasement _ Krugman - "you can’t actually satisfy the crazies by trying to offer substantive concessions”

Obama Falling Victim to Krugman's Law. Again. - "as with the stimulus package, Obama has again fallen into a trap of his own making. In his quixotic quest for bipartisanship, the President is offering major concessions that will nonetheless earn him zero support from his "unreasoning, unappeasable" Republican opposition."

Obama's Fake Bipartisanship - Is the president delusional to hope for bipartisanship in the face of Republican demagoguery over health care? Far from it, says Eric Alterman. Obama’s using a strategy honed in last fall’s election.

Obama: knowing when to be an asshole - If liberals are convinced that the President is too conservative and conservatives are convinced that he's too liberal then either the President must be doing everything right or everything wrong. Obama needs to jettison the professorial above-the-fray coolness and get down in the trenches and fight for what he believes in. And that means he is going to have to run roughshod over his enemies.

Obama Goes Postal, Lands in Dead-Letter Office - (Bloomberg) -- “UPS and FedEx are doing just fine. It’s the Post Office that’s always having problems.” -- Barack Obama, Aug. 11, 2009

Alicia Mundy: White House-PhRMA Memo Surfaces Again (WSJ) Since mid-July, the White House and the drug industry’s Washington lobby, PhRMA, have denied any specific agreement that would give the industry big benefits in exchange for its support for President Barack Obama’s health care overhaul effort. But there is an email outlining a four-part deal that industry lobbyists were sending to each other on July 7...

Insurance Fraud - In the health-care reform debate, the insurance lobby is a wolf in sheep's clothing. What's going on? In simple terms, they cut a deal. If the government imposes an individual mandate, forcing all Americans to buy health insurance – and thus guaranteeing us millions of new customers – we won't stand in the way of new regulations curbing some of our worst abuses.

Employer-sponsored health insurance premiums projected to double by 2020 - Nationally, family premiums for employer-sponsored health insurance increased 119 percent between 1999 and 2008, and could increase another 94 percent to an average $23,842 per family by 2020 if cost growth continues on its current course, according to a new Commonwealth Fund report.

Roger Ebert: 'Death Panels.' A Most Excellent Term - "Death panels" is such an excellent term. You know exactly what it means, and therefore you know you're against them. Debate over.

Rhetoric of Rationing Health Care Overlooks Reality - NYTimes - rationing is an inescapable part of economic life. It is the process of allocating scarce resources.

Doctor shortage looms as primary care loses its pull - USAToday - The number of U.S. medical school students going into primary care has dropped 51.8% since 1997. Considering it takes 10 to 11 years to educate a doctor, the drying up of the pipeline is a big concern to health-care experts.
Health care games - political analysis by The Economist

Why the Gang of Six is Deciding Health Care for Three Hundred Million of Us - Last night, the so-called "gang of six" -- three Republican and three Democratic senators on the Senate Finance Committee -- met by conference call and, according to Senator Max Baucus, the committee's chair, reaffirmed their commitment "toward a bipartisan health-care reform bill" (read: less coverage and no public insurance option).

U.S. Population Distribution by Age, 1950 through 2050 - interesting animated chart from Calculated Risk that updates every two seconds...

A Public Option Isn’t a Curse, or a Cure - WE clearly don’t need any more distractions from the two main issues of health care reform: how to deal with our large uninsured population and how to make the entire system more cost effective.

10 Steps to Better Health Care - Brookings

Health Care’s Senior Moment - Seniors have recently emerged as an important battleground in the health reform war. The New York Times has a post on the “new generation gap” separating the elderly from the not-so-elderly, and multiple polls have shown that seniors are more resistant to reform, at least when it is phrased broadly. In addition, the nonsense about “death panels” has worried at least some seniors, enough for the AARP to pitch in to try to shoot it down.*

An Expansion on Pallative Care - "I’m going to comment on this based on my perspective as a health-care professional who has seen more than one person die (in many ways, from relatively good, to bad, to horrible), and as a man who sat at his mother’s bedside for a month as she lay dying with cancer: we are all going to die. And on that day, you, or your nearest and dearest and best beloved, are going to wish to God that you had taken the time to make some plans and communicate those plans to others."

Nonprofit nursing homes provide better care, major study finds - The authors' systematic review compared quality-of-care measurements in 82 individual studies that collected data from 1965 to 2003 involving tens of thousands of nursing homes, mostly in the United States. The study was published in the online edition of the earlier this month.

The Social Security Tax Increase Is Coming - Get ready for the social security caps to be lifted. It will represent one of the larger tax increases in US history, but it's unlikely to fix the looming Social Security's inevitable shortfall.

British Conservative Party Leader David Cameron Says U.S. Republicans Are Bats— Insane -
UK defends its healthcare: The fractious British political classes have united in defence of the UK’s healthcare system after it has become a byword for the failings of universal, state-funded provision among US Republicans

USPS Threatens Health Pension Default - What happens when you have no money coming in but still have obligations going out? Specifically in this case, pension obligations regarding health care benefits for retired postal workers?

Concentration of wealth in hands of rich greatest on record - The wealthiest 10 percent of Americans now have a larger share of total income than they ever have in records going back nearly a century — an even larger amount than during the Roaring Twenties...
As The Rich Got Richer, The Poor Got Poorer - as those at the top of the income scale have been getting richer, those at the bottom have been getting poorer. Bloomberg reported today on a new analysis by Tax Notes: The share of all U.S. income made by the 66 million Americans who earn less than $30,000 a year shrank by 2.3 percent from 2006, a decline of $149 per taxpayer.

The Two-Track Economy The United States has, over the past two decades, started to take on characteristics more traditionally associated with Latin America: extreme income inequality, rising poverty levels, and worsening health conditions for many. Can the richest people spend enough to power a recovery in overall GDP? Perhaps, but is that really the kind of economy you want to live in?

Who are the liberal Democrats and conservative Republicans? - these graphs show the income distribution of voters self-classified by ideology (liberal, moderate, or conservative) and party identification (Democrat, Independent, or Republican). We found some surprising patterns...

Political Life’s Mysteries - the level of self-interest at stake isn’t all that high. Selling the public good down the river to bolster your re-election chances isn’t like stealing a loaf of bread to feed your starving children. The welfare rolls are hardly stocked with the names of former members of congress.

The case of Troy Davis “This court has never held,” Justice Scalia wrote, “that the Constitution forbids the execution of a convicted defendant who had a full and fair trial but is later able to convince a habeas court that he is ‘actually’ innocent.”

Poll: 57% don’t see stimulus working (USA TODAY/Gallup Poll) 57% of adults say the stimulus package is having no impact on the economy or making it worse. Even more —60% — doubt that the stimulus plan will help the economy in the years ahead, and only 18% say it has done anything to help improve their personal situation.

Stimulus spending at street level: the USDA and Google Maps API Premier

America cannot resolve global imbalances on its own
The Obama administration is increasingly signalling that the US will not continue to be the world’s consumer and importer of last resort. The US must become an export-oriented rather than a consumption-based economy and must rely on real engineering rather than financial wizardry.

Exports, stimulus lift Japan out of recession Reuters Japan's economy returned to growth in the second quarter...the nascent recovery was based on short-term stimulus efforts around the world.

Department stores had terrible July - Japan Times - Department store sales in July fell 11.7 percent from a year earlier on a same-store basis, logging the 17th straight month of decline. The rate of decline was the largest for a July since 1965, the oldest comparable data available
Japan Turns to Taxis for Help in Selling Bonds as Deficit Grows (Bloomberg) -- Japan is expanding efforts to attract buyers to the nation’s growing debt load, flooding the backs of taxi cabs for the first time with pamphlets in the hopes of getting retirees to invest more money in bonds.

Germany braces for second wave of credit crunch - Germany's economics ministry is drawing up a raft of special measures with the Bundesbank to head off a fresh financial crisis, fearing that a loan squeeze by struggling banks will set off a serious credit crunch early next year.

The Global Crisis and Emerging Europe: Why the Script Differs from the Asian Crisis - IMF direct -Nine months into the crisis, it is clear that emerging Europe as a whole is not following Asia’s script. But it is also clear that the crisis is evolving differently across countries.

Sustaining a Global Recovery - IMF - In normal recessions, however disruptive they are to businesses and jobs, things turn around predictably. The current global recession is far from normal.The recovery has started. Sustaining it will require delicate rebalancing acts, both within and across countries

Is there scope for fiscal stimulus for debt-intolerant countries?
Developed economies are implementing massive fiscal stimulus packages. Should emerging economies? This column warns them that fiscal multipliers are not certain, financing budget deficits will not be easy, the risk of default looms, and central bank independence may be eroded.

Don’t Be Fooled, Europe Won’t Recover Until 2013 (Bloomberg) -- Europe won’t fully recover from the worst recession since World War II until 2013 even if it returns to a “moderate” pace of economic growth, Morgan Stanley says.

There’s no quick fix to the global economy’s excess capacity - There is one overwhelming fact about the world economy that cannot be wished away. Excess capacity in industry is hovering at levels not seen since the Great Depression.

US Railroad Carload Traffic Down 19% - "this is likely another data point that would be cheered by the wildly optimistic Philadelphia Fed as yet another piece of information that can only go up from here."

Floating storage reaches record levels - The number of product tankers being used for storage is at record levels because of the lack of onshore storage in Europe...Infectious Greed has a chart of the current storage situation for both petroleum and clean products, like gasoil and then follows up with Destroying Market Overcapacity -- Literally showing grapically record numbers of containerships being sent off to scrap yards in India, Bangladesh, Pakistan and China.

"Peak Oil” Has Gone - It is interesting to note that during this severe global recession, worldwide oil usage has dropped by a minuscule 2.7%. So, what will happen when the world comes out of this recession? Who will rise up to the challenge and meet our insatiable thirst for energy? These are critical questions not many are willing to ask.

Hedge fund bets millions that gas price will triple - A hedge fund has made a large bet that natural gas prices will triple by winter just as the price of the commodity slides to a seven-year low.

Import & Export Prices, YoY change (chart)

No secrets to China’s success - China's rapid growth is no accident: it has had the right policies both practically and from the viewpoint of economic theory

When China rules the world: a (book) review - Martin Jacques argues that as China gets rich, it will not become westernized, but it will become a hegemonic power, using its economic might for political, military and cultural purposes. This will lead to a “different kind of world”, in which economic and political progress are no longer identified with “western” liberal democracy.

The Secrets of China's Economy: The Government Owns the Banks rather than the Reverse - While the U.S. spends trillions of dollars to bail out its banking system, leaving its economy to languish, China is being called a “miracle economy” that has decoupled from the rest of the world. As the rest of the world sinks into the worst recession since the 1930s, China has maintained a phenomenal 8% annual growth rate.

Foreign Direct Investment in China Fell 35.7% in July

China’s fiscal stimulus fading fast - Was the small July loan growth number the result of banks being quietly restrained, or just exhaustion on the part of loan officers after the blow-out in June? When will ‘moderate adjustment’ evolve into something public and substantive like raising the deposit reserve requirement and/or interest rates?

Yet another discussion on the Asian savings glut hypothesis, and why it matters - The whole “savings glut” debate is a controversial one because almost from the start it has degenerated into a fairly silly argument about who to blame for the global imbalances and the subsequent crisis – or more specifically, whether the predator was wholly the foolish American consumer or the beetling Chinese saver...

Another View: Tunneling to True Profit in China - Mark Dixon, a founder of the mergers and acquisitions adviser, which is active in mainland China, unwittingly unearthed some Chinese accounting tricks while valuing a local company.

The Specter of Debt Revolt Is Haunting Europe - Why Iceland and Latvia Won't (and Can't) Pay for the Kleptocrats' Ripoffs

Zimbabwe Bus fare is 3 Trillion Dollars A woman pays her bus fare with 3 trillion in old Zimbabwe dollars — the equivalent of 50 U.S. cents. The collector accepts the brick of neatly folded bundles of a trillion each without bothering to count the notes.
Zimbabwe’s Hyperinflation: #2 in world history - a paper calculating last year’s hyperinflation in Zimbabwe concluded that in prices were doubling every day.

Food Security: All Investment is not Created Equal - The G8 countries committed $20 billion in aid to address global hunger and promote more productive farming in the world's poorest countries this July...

Five Key Reasons Why Newspapers Are Failing

Financial Times Feels Vindicated by Web Strategy - Quality journalism has to be paid for. Other publishers seem to agree.

The Nichepaper Manifesto - Dear Newspaper Magnates: So you're going to try and charge people for news yet again. Cart, meet horse. Journalists didn’t make 20th century newspapers profitable — readers did.

Where the NYT beats the WSJ - It’s better designed, easier to comprehend, broader in scope, and in general much more of a pleasure to read than the WSJ.

CNBC: ‘Anyone Who Owns A Suit Can Come On Television’ (The Onion) Citing a need to provide quality programming 24 hours a day, CNBC has extended an invitation to anyone who owns a suit to drop by the financial news network and be a guest expert, or cohost a show with Larry Kudlow.

GM raises production as clunker sales rise - The No. 1 U.S. carmaker said it would build 60,000 more vehicles than planned for the third and fourth quarters by increasing overtime and adding shifts...

Coming Soon - Cash For Clunkers: Home Appliance Edition - Unlike the Cash for Clunkers car program, you won't have to turn in your old appliance to get the rebate...

National Association of Manufacturers Blasts … American Manufacturing? - our tax abatements and public investments are dwarfed by the efforts of national governments in other lands. …It's not just that the United States uniquely lacks an industrial policy. It's that the United States uniquely has an anti-industrial policy.

Original “cash for clunkers”: International trade in used vehicles - VoxEU study - the programme will reduce international trade in used cars, which significantly benefits consumers in developing economies. Such trade also increases the average emission efficiency of automobiles in both the US and developing nations, which raises the possibility that “cash for clunkers” might raise global emissions.

Antarctic glacier 'thinning fast' - One of the largest glaciers in Antarctica is thinning four times faster than it was 10 years ago, according to research seen by the BBC.
A study of satellite measurements of Pine Island glacier in west Antarctica reveals the surface of the ice is now dropping at a rate of up to 16m a year.

Lower temperatures grist for global warming debate - Official government measurements show that the world's temperature has cooled a bit since reaching its most recent peak in 1998.
That's given global warming skeptics new ammunition to attack the prevailing theory of climate change.

Global Warming and the Only Question that Matters - the science on climate change is getting increasingly dire. There's a growing consensus among researchers that we have to get atmospheric concentrations of greenhouse gasses (GHG) - now at 387 parts per million - down below 350 ppm as soon as possible, or risk self amplifying feedbacks that will result in abrupt, catastrophic and irreversible heating of the Earth.

Scientists Say Uncounted For Source Of Greenhouse Gas Could Promote Global Warming - A U of Calgary study says that when crops are exposed to increased temperature, drought and ultraviolet-B radiation -- some plants show enhanced methane emissions. Methane is a very potent greenhouse gas; 23 times more effective in trapping heat than carbon dioxide.

India's water use 'unsustainable' - BBC - Parts of India are on track for severe water shortages, according to results from Nasa's gravity satellites.

Oil lobby to fund campaign against Obama's climate change strategy = Email from American Petroleum Institute outlines plan to create appearance of public opposition to Obama's climate and energy reform.

Big Food rallies against climate change legislation - Multinational food and agritech giants are banding together in a bid to throw light on areas of climate change legislation they warn could severely hike food prices.

Cockroaches future-proofed against climate change – New Scientist - The widely loathed insects can hold their breath to save water, a new study has found – and the trick could help them to thrive in the face of climate change.

It’s Too Late to Stop Global Warming - When it comes to climate, what counts is not only what humans do to reduce the buildup of greenhouse gases, but also how the earth responds. The big worry now is that the planet may not adhere to the diplomatic timetable.

Is there any point in fighting to stave off industrial apocalypse? - UK guardian - The collapse of civilisation will bring us a saner world, says Paul Kingsnorth. No, counters George Monbiot – we can't let billions perish.

New battery could change world, one house at a time - a team of specialists in advanced materials and electrochemistry has produced what could be the single most important breakthrough for clean, alternative energy since Socrates first noted solar heating 2,400 years ago -- a new generation of deep-storage battery that's small enough, and safe enough, to sit in your basement and power your home.

IBM uses DNA to make next-gen microchips - Reuters - Artificial DNA nanostructures, or "DNA origami" may provide a cheap framework on which to build tiny microchips. But the new processes are at least 10 years out.

A step closer to 'synthetic life' - BBC - In what has been described as a step towards the creation of a synthetic cell, scientists have created a new "engineered" strain of bacteria.

Better Monkeys? h+ Transgenic research can aid the study of Parkinson's, Huntington's and other diseases. A transgenic animal is one that carries a gene that has been deliberately inserted into its genome, typically constructed using recombinant DNA methodology.

Does Language Shape What We Think?: Scientific American - A new study looks at what happens when a language doesn't have words for numbers.

This is Your Brain on Neurotechnology - book review of Zack Lynch's "The Neuro Revolution: How Brain Science Is Changing Our World"

How the brain hard-wires us to love Google, Twitter, and texting. And why that’s dangerous For humans, this desire to search is not just about fulfilling our physical needs. Humans can get just as excited about abstract rewards as tangible ones. He says that when we get thrilled about the world of ideas, about making intellectual connections, about divining meaning, it is the seeking circuits that are firing. We actually resemble nothing so much as those legendary lab rats that endlessly pressed a lever to give themselves a little electrical jolt to the brain.

Future Angst? Brain Scans Show Uncertainty Fuels Anxiety - uncertainty intensifies a person’s perception of a bad experience...the emotional centers in the brain respond much more strongly to disturbing photos if the person didn't know what was coming.
Personality Traits Associated With Stress And Worry Can Be Hazardous To Your Health - Research shows that higher levels of neuroticism can lead to earlier mortality...
& from "The Frontal Cortex" - The Stress Spiral - Natalie Angier has an excellent column on the self-defeating feedback loop triggered by chronic stress...when mice are chronically stressed, they end up reverting to habit and routine, even though these same habits are what led to the chronic stress in the first place...

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