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

Saturday, September 5, 2009

week ending Sept 5

The Rise And Fall Of The US Dollar (chart from 1800) - "And this is just the beginning. Chairman Ben has yet to be fully unleashed."

A Dollar Crisis in the Making - This post is a response to the recent flurry of activity in print and in blogs about the dollar, US indebtedness, and the risks associated with both. Mish recently posted Countdown To Dollar Implosion Madness, in which he (very rightly) took to task various bloggers that have been peddling rumors of bank holidays and setting specific dates for a dollar implosion. However, I took exception to a snippet from a WSJ article by Andrew Batson, entitled Households Start to Rival the Chinese in Treasury Market (originally blogged about by Michael Pettis here), that offered the comforting impression that domestic savings are growing and are possibly sufficient to fund the US government deficit.

Thanks to the Deficit, the Buck Stops Here - Last week we learned that the national debt is likely to grow by more than $9 billion. That's not great news...

$9 trillion-- what, me worry? - Paul Krugman may not be that concerned by the Obama administration's new projection that the unified federal budget deficits will sum to $9 trillion dollars over the next 10 years. But I am...whereas in 1945 Americans could reasonably look ahead to a huge decrease in military expenditures, in 2009 when I look ahead what I see is a looming increase in federal medical expenditures.

You Think $9 Trillion Sounds Bad? - How about $14 trillion? If you start with CBO’s more pessimistic baseline budget outlook then add in the CBO-estimated cost of policies that have a good chance of coming true in the future (but aren’t yet written into law), you can come up with a projection that is perhaps more “plausible” than both the Administration’s and CBO’s. That’s what we at Concord try to do when we come up with our “Concord Plausible Baseline,” which based on today’s CBO report shows that current policy would lead to $14.4 trillion in deficits over the next 10 years. (chart)

From The 2009 Budget Deficit: How did we get here? - chart from Econobrowser
Contrary to popular assumption, stimulus spending under the American Recovery and Reinvestment Act has been a very small factor in the expansion of the federal budget deficit in 2009. Many policies that pre-date the Obama Administration, including Bush-era spending on the wars in Iran and Afghanistan, are key factors in the growing deficit.
Read full text of this publication in PDF format

Bank Leverage: Forever Blowing Bubbles Part Two (incl. Video) - The excess liquidity being pumped into the system by the world’s central banks is inflation, pure and simple. This inflation is now manifest in the extraordinary rise of asset prices, particularly assets of lower quality and higher risk. However, eventually the fundamentals will re-assert themselves once the malinvestment is discovered.

Treasury default in the cards? - it pays to remember that better than 50% of world governments typically end up in some manner of default during depressions such as this -- a far more common occurrence than hyperinflation..national defaults also generally are not the death sentence one might infer..particularly in the case of the united states, which is a very large component of global economic activity regardless of its fiscal condition...

Trying to Inflate Our Way Out of Debt Is Like a Monkey Trying To Outrun a Lion - as I have previously noted, UBS economist Paul Donovan has demonstrated that governments can't inflate their way out of debt traps...

Why the deficit hysteria? I only wish we'd borrow more - Robert Reich - Projections of national debt in the US and UK have triggered panic – yet investment in the future is crucial to recovery

We Need A Party Of Fiscal Responsibility - How long must we wait before one emerges?
Until recent times, a large budget deficit was something to be avoided to the greatest extent humanly possible even if it meant raising taxes. Taxpayers understood this as well, discouraging them from asking for benefits that couldn't be financed out of current revenues or without a dedicated new funding source.

Foreign Central Banks Accelerate Rotation From Agencies Into Treasuries - chart - The recent trend which indicates rotation by Foreign Central Banks out of Agencies and MBS and into Treasuries, continues is obvious that the reason why the Fed's QE program has a 4x capacity for agency/MBS purchases is solely to facilitate the disposition of agencies by foreign CBs...

Fed Will Now Monetize The Most Recently Issued Agencies - "Prior to August 31, 2009, purchases were focused on off-the-run securities in that category. Going forward, purchases will include on-the-run securities in that category. This change represents a technical adjustment designed to mitigate market dislocations and to promote overall market functioning." - Federal Reserve

Federal Reserve Assets and More - Just another mention: the Atlanta Fed puts out an Economic Highlights and Financial Highlights every week. They highlight different data each week ...The Federal Reserve released the Factors Affecting Reserve Balances today...

Defending the Fed - Now, here’s something you don’t see every day…
Amid a growing backlash against the Federal Reserve, whose popularity has been plunging in public opinion polls since they started spending trillion of dollars to prop up the financial industry, a lone voice defends their practices and argues against any audits.

The crisis and citizens’ trust in central banks - VoxEU -Most observers agree that central banks can claim partial credit for the stabilisation that have been achieved and the prospect of a recovery. This column warns that the general public seems to hold a completely different opinion; trust in central banks has declined and the reaction of central banks to the crisis is generally judged as unsatisfactory.

Federal Reserve made $14 billion on turmoil loans - (Reuters) - The Federal Reserve has made $14 billion in profits on loans made in the last two years, The Financial Times reported on Monday, citing officials close to the matter.

Bailout Profits? Don’t Make Me Laugh! - My definition of an investment profit is simple: You take the money you have invested, and if adds up to more that what you began with, well, then, you have a profit...say you own 20+30 positions; 5 of them are higher than where you purchased them, and all the rest deeply in the red. Net net, your portfolio is down immensely. Most rational investors would hardly call that investment a “profit.”

Bailout Propaganda Begins - Matt Taibbi - It was inevitable that the same people who pushed through the multi-trillion-dollar bailout of Wall Street would come out later on and tell us what a great idea theirs turned out to be, in retrospect and under the light of evidentiary examination. And we’re getting that now, with a pair of reports, one in the New York Times and another in the Financial Times, telling us the bailout is working because the government has made some money on TARP.

The (Intentionally) Misleading Mainstream Media - the media is once again "spouting" about how the government had "made money" on the bank bailouts. MSNBC was spouting the mainstream lie, with the following from the NY Times: "Nearly a year after the federal rescue of the nation’s biggest banks, taxpayers have begun seeing profits..."

Sorry America, We Didn't Really Make A $14 Billion Profit From Tarp - Despite what you might have heard about the US government making money from the bailout, the TARP investments
are currently down about $148 billion and the losses from the larger bailout are incalculable...

TARP Banks own 66% of all credit cards, 50% of all mortgages - The worst actors of the financial crisis, those who should have gone down in the flames they set themselves, who were rescued by our government, are now beyond belief mega financial oligarchs, limiting consumer choice and making a mockery of the phrase moral hazard...

White House to Propose Bigger Reserves at Banks - The thrust of the plan is to have banks, particularly those deemed too big to fail, maintain larger capital cushions — a move bankers have traditionally opposed because it eats into their profits...

Financial stability depends on more capital - Tim Geithner - FT - That regulatory framework failed last year. In the benign atmosphere before the crisis, government supervisors and those in the market underestimated risks building in the system. Major global financial institutions maintained capital levels that were too low, relied too heavily on unstable short-term funding, and their compensation plans rewarded excessive risk-taking...

Treasury Releases Outline For New Bank Capital Requirements - Yesterday, the Treasury Department released its vision for reforming regulation of capital and leverage in the financial industry. - Besides an across-the-board increase, the plan stipulates that firms that are designated Tier 1 (essentially those that are “too-big-to-fail”) have even higher capital requirements than everyone else.

FSA’s Turner backs ‘living wills’ for banks - FT - The regulatory drive to force big banks to pre-plan for their own demise will compel them to simplify their legal structures, potentially pushing up their tax bills, the UK’s chief financial regulator has told the FT.

Reverse Bank Robbery - No wonder America's banks are making profits again: the US government is bribing them to borrow its own money. - Most of us work for a living, the rest are bankers...these days the news is filled with great tales about how America's banks are coming back. These hopes are probably somewhat premature.

Congress: Where Are The Subpoenas? - Video - From the interview (specifically, at 3:20 in):
Paulson told this person (who is writing a biography, apparently) that he intended to use the TARP money to inject into the banks and not buy toxic assets a full ten days before he testified before Congress. He then testified before Congress to exactly the opposite.

Turning up the heat on non-bank lenders - Elizabeth Warren argues that it is time for serious oversight of non-bank lenders — like mortgage brokers or payday loan outfits — as well. A strong, well-funded CFPA would not only protect consumers from the abusive practices of these largely unregulated businesses, but it would also benefit the small banks that are hurting from the current system.

Rep. Frank eyes Fed audit, emergency lending curbs - (Reuters) - Rep. Barney Frank, the chairman of the U.S. House of Representatives Financial Services Committee, said he plans legislation to restrict the Federal Reserve's emergency lending powers and subject the central bank to a "complete audit."...By seeking a compromise with Ron Paul, Frank could strengthen the broader legislation's chance at passage.

The Case Against a Super-Regulator - Sheila C. Bair - Concentrating power in a single regulator would inevitably benefit the largest banks and punish community ones. This would generate more consolidation in the banking industry at a time when we need to reduce our reliance on large financial institutions and put an end to the idea that certain banks are too big to fail.

Why there can only be one basket of regulatory eggs - The prize for the weakest argument ever against a single strong bank regulator goes to Sheila Bair, with her inappropriate metaphor that “we can’t put all our eggs in one basket”. To the contrary, we have to put all our regulatory eggs in one basket, because otherwise the phenomenon of regulatory arbitrage will simply result in a race to the least-safe basket, as well as competition between regulators to see who can be most accommodating to banks.The most corrosive aspect of the US regulatory infrastructure to date has been the ability of financial institutions to go regulator-shopping...

It's All About Privatizing Gains and Socializing Losses - Currently, there is a story on EP about private equity firms feeding at the trough. It talks about FDIC's loss share agreements. These are very generous sweetheart agreements whereby the FDIC, and more directly taxpayers, assume losses of assets sold to private equity firms and other acquirers of failed bank assets.

Systemic risk and deposit insurance premiums - VoxEU - Financial institutions enjoy a large number of government guarantees. This column says that we ought to be charging banks for such subsidies and doing so in a way that promotes financial stability. It uses the example of demand deposit insurance in the US to explore the poor design of funding for such guarantees.

Swiss “Black” Accounts – A Trillion Dollar Problem - The case against UBS is over. A total of 4,450 out of a total of 52,000 names will be divulged to either DOJ or IRS. The question that has been hanging in the air is how much money is still in Swiss black accounts that has not been flushed out at this point?

The Widening Gap In America's Two Tiered Society - why should any Americans feel that they deserve to be treated more favorably by the transnational moneyed elites and their government backers than their counterparts across the rest of the world? The richest 225 people in the world today control more wealth than the poorest 2.5 billion people. And... the three richest people in the world control more wealth than the poorest 48 nations.

Industry Seeks Fannie, Freddie Overhaul - WSJ - A mortgage-industry trade group, the Mortgage Bankers Association, is calling for Congress to transform Fannie Mae and Freddie Mac into several smaller privately held companies that would issue mortgage securities carrying an explicit government guarantee.

An Insider look at Ginnie Mae MBS - I’m continually astounded by a lot in this market, but perhaps nothing has been as jaw-dropping as the performance of the GNMA MJM (multi-jumbo mortgage) wrapped loans made starting about 1 year ago. These were the ‘mod’ loans made especially for ‘problem zip codes’ (read: high-priced, low equity and free-falling CA, AZ and FL) to support those markets. To make these high priced homes eligible for FHA, the max loan amount was stretched to over $700k...

FHA: The Next Bailout? - John Burns Consulting sent out a note today titled: FHA Likely To Be The Next Shoe To Drop -"The FHA's aggressive lending programs have continued throughout the housing downturn, causing its market share of the mortgage industry to grow from 2% in 2005 to 23% today. The FHA insurance fund, however, is likely running dry...
...And from the WSJ: Loan Losses Spark Concern Over FHA

Bailed-out bankers to get options windfall: study - (Reuters) - As shares of bailed-out banks bottomed out earlier this year, stock options were awarded to their top executives, setting them up for millions of dollars in profit as prices rebounded, according to a report released on Wednesday...

Wall Street stealth lobby defends $35 billion derivatives haul - (Bloomberg) -- Wall Street is suiting up for a battle to protect one of its richest fiefdoms, the $592 trillion over-the-counter derivatives market that is facing the biggest overhaul since its creation 30 years ago.

SEC, CFTC urged to align rules to police markets - Reuters - At the second day of an unprecedented joint meeting of the Securities and Exchange Commission and Commodity Futures Trading Commission, former enforcers and market experts pushed for a coordinated approach against fraud.

Forget Tobin tax: there is a better way to curb finance - James Tobin proposed a tax on foreign exchange transactions to stabilise floating exchange rates and achieve greater national monetary policy autonomy in a world of increasing financial integration. From a political perspective, it may be more surprising that it was never implemented. Even at a very low rate, the Tobin tax could have been a massive government revenue raiser...

A Wall Street Transaction Tax - There seems to be momentum on the hill to push for a small transaction tax on stocks. The proposal puts a 0.1% transaction fee on every order by total cost.
Consider this a sales tax, although instead of regressive, this puppy is progressive as well as more biased towards institutional large investors.

Good and bad discussions of financial innovation - It looks like it's time for everyone's favorite whipping boy, "financial innovation," to come in for another round of mockery in the blogosphere. Simon Johnson and James Kwak make all the familiar arguments about CDS and CDOs, neither of which they seem to understand in the slightest.

What Is Finance, Really? - At one level and in most economics textbooks, the financial sector connects savers and borrowers – providing “intermediation services”. Unfortunately, two hundred years of experience with real world finance reveal that it also has at least three serious pathologies – features that can go seriously wrong and derail an economy.

Inquiry Stokes Unease Over Trading Firms That Shape Markets - NYTimes — Its superfast, supersecret oil trading software was called the Hammer. And if the Commodity Futures Trading Commission is right, the name fit well with an intricate scheme that allowed commodity traders in Chicago working for Optiver, a little-known company based in Amsterdam, to put their orders first in line and subtly manipulate the price of oil to the company’s advantage.

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

Deutsche Bank scraps oil notes - Deutsche Bank is scrapping a product that lets investors bet on oil prices, making it the first exchange-traded commodity product to go under as Wall Street braces for a potential regulatory crackdown on energy speculation.

Costs, Benefits, and Distribiution - Whenever people say they’re “against” cost-benefit analysis as a method for evaluating policy initiatives or regulatory schemes, they appear to be talking in paradox. To say that you think something is a good idea more or less just means that you think the benefits of doing it would outweigh the costs of doing it. Formal benefit cost analysis counts everyone’s gains and losses equally. But common sense and the principle of diminishing marginal utility agree that a dollar’s worth of gain is more valuable to someone with few dollars than it is with someone with many...

St. Louis Fed Charts – Banks Not Looking that Healthy at ALL… - The Fed tracks the banks’ Allowance for Loan and Lease Losses (ALLL) and produces charts showing ALLL versus NONPERFORMING loans (charts included)

Bank Numbers Reveal Troubling Trend On Main Street - More than one in four U.S. banks are unprofitable, a number fueled by rising numbers of bad loans. (charts)

Bank analysts see 'implosion' ahead - Hold tight folks, it’s not over yet. Bank failures heated up this summer, but expect an “implosion” next year.That’s the key takeaway from a deep dive into second-quarter bank results by sector experts at Institutional Risk Analytics, now that all the numbers are all in.

Bank Depository Reserves Hit 3 Month High As Banks Retrench And Consumers Save - reserves increased by $84 billion compared to two weeks ago, and are now at $856 billion. It appears that contrary to all rhetoric to the contrary, banks are still unable and/or unwilling to lend or otherwise dispose of the ever increasing duffel bags full of cash in the basement.

Credit Market Conditions and the Use of Bank Lines of Credit - SF Fed - Many credit line agreements contain restrictive covenants and other contingencies that may limit the ability of borrowers to draw on their lines, which is a particular concern to small firms. This Economic Letter reviews recent empirical studies that suggest that private firms’ access to credit lines is much more sensitive to changes in bank lending standards than is access by publicly traded firms.

What Banks are doing with Foreclosures - CNBC has some BofA info: What Banks Are Really Doing With Foreclosures...According to BofA, they are not sitting on REOs (Real Estate Owned) for longer than normal, but they are holding off foreclosing - pending modification attempts. That is basically what the data says too.

Rating Agencies Must Defend AAA Junk in Court - I suspect we are FINALLY seeing the beginning of the endgame for the rating agencies... Morgan Stanley, Moody’s, S&P must defend fraud claims (Reuters) - A U.S. federal judge ruled that Morgan Stanley and two credit rating agencies must defend fraud charges in a class-action lawsuit accusing them of masking the risks of an investment linked to subprime mortgages, and which eventually collapsed.

Richmond Fed Critiques The Rating Agencies - Of all organizations, the Richmond Fed was the last place one would expect a broad scope critique of rating agencies. Yet in a piece released today, this is precisely what the bank did.

Why a Housing Rebound Could Take 20 Years - There are tentative signs the depressed housing market may finally be close to bottoming out. That might sound like good news, but hitting bottom doesn't mean an upward rebound will follow anytime soon. Economist Celia Chen of Moody's has published a forecast suggesting that residential real estate could take 10 years to recover in most states—and 20 years in Florida and California.

Prices Rise 7% Nationwide, Says Clear Capital - Housing Wire - National home prices increased 7.3% and the saturation of real estate owned (REO) properties also declined three percentage points to 30.1% over the past four months compared to the previous three.

The Accidental Landlords and Shadow Inventory - We've been discussing accidental landlords for a couple of years. Here is another article about homeowners becoming landlords out of necessity, from the WSJ: The Reluctant Landlords...I'll give the same advice as last year: Owners should analyze the rent or sell decision based on current prices - and consider the probability that nominal prices will move lower or at best stay flat for several years.

First Time Home Buyer NAR Numbers - The first time home buyer tax credit applies to purchases that close in 2009 before Dec. 1, 2009. With regards to the tax credit, what really matters is the cost per additional home sold. And as I pointed out earlier today, even using the NAR numbers, the cost per additional home sold is $43.4 thousand.

For Commercial Real Estate, Hard Times Have Just Begun - NYTimes - Even though industry lobbyists were able to persuade Congress to extend a loan program aimed at prodding the stalled securitization market back to life, several analysts said it was unlikely to head off a spate of defaults, foreclosures and bankruptcies that could surpass the devastating real estate crash of the early 1990s.

August Economic Summary in Graphs - a decent collection of real estate and economic graphs for data released in August ...

Google Domestic Trends: tracking economic sectors -Today, we're really pleased to launch Google Domestic Trends on Google Finance. Google Domestic Trends tracks Google search traffic across specific sectors of the economy. The changes in the search volume of a given sector on may provide useful economic insight. We've created 23 indexes that track the major economic sectors, such as retail, auto and unemployment.

Housing’s ‘Poverty Effect’ Fouls Up U.S. Rebound (Bloomberg) -- The loss of some $7 trillion in household wealth is an albatross around the neck of the economy. The loss is about $54,000 per home if you average it out among 130 million U.S. housing units (including rentals), according to an estimate by the economic blog, based on Federal Reserve data.

U.S. Economy: Companies Cut More Jobs Than Forecast (Bloomberg) - U.S. companies cut more jobs than forecast in August and boosted their workers’ productivity the most since 2003 in the second quarter, signaling employers are seeking to cut costs further even as the economy stabilizes.

Weekly Unemployment Claims: Stuck at High Level - graph shows the 4-week moving average of weekly claims since 1971...It appears that initial weekly claims have peaked for this cycle. However it seem that weekly claims are stuck at a very high level; weekly claims have been around 570,000 for the last 8 weeks. This indicates continuing weakness in the job market.

Unemployment claims falling faster than in half of past recessions - contrary to my expectations, the fall in unemployment claims is very much in line with what we have seen in recessions over the previous 40 years...

Jobless Rate for Men Far Worse Than Women’s - WSJ - Men are getting hammered by this recession. The jobless rate for men hit 10.1% in August. This now matches the post World War II high hit in 1982. It’s even higher if you include teenagers; 10.9% unemployment for men and teen boys. That compares to a 7.6% jobless rate for women and an 8.2% rate for women and teen girls...

Unemployment and Government Jobs (analysis by c.martenson)- Since it's such big news, I will report on the latest unemployment report by the BLS, but I dislike spending too much time on it because I consider it one of the weaker or murkier sources of data, at least on a monthly basis. Often it conflicts heavily with other private or more reliable sources of data, which have been collectively telling a grimmer story than today's headline news release...

10-Year Private Sector Job Growth Finally Goes Negative Well, folks, it finally happened this morning. The employment report shows that private sector employment in August 2009 was lower than it was in August 1999—the first time this has happened since the Great Depression. Here’s the chart:

Unemployment: The Harder You Look, The Uglier It Appears - a reader pointed us to a very good post from the Economic Policy Institute which gives a thorough analysis of recent unemployment data and puts it in a broader historical context. Bottom line: it is not pretty. The fixation with looking for a turn in initial jobless claims as a sign of recovery seems to have diverted attention from how deep the unemployment hole is this time around.

Real Unemployment Rate Hits 16.8% As markets digest the worse, yet somehow better, than expected 9.7% unemployment, the real state of the labor market is much worse, as indicated by the U-6 number, which has hit a recent record of 16.8% on a seasonally adjusted basis. "U-6 represents total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers."

Cut my pay ... please! CNN - As the number of layoffs mount, more workers are ready and willing to take significant pay cuts to find employment. In a recent survey, 65% of out-of-work respondents reported willingness to accept wages up to 30% lower than their previous compensation.

Jobless benefits dwindle away - The government does not track how many jobless Americans have exhausted their standard and extended benefits, but experts estimate the figure to be nearly 100,000 — and rising. These are the most unfortunate of America's 14.5 million jobless: the ones whose benefits are drying up — in some cases after a record 18 months of government aid.

Is Your State's Unemployment System in Danger? (Interactive Map )

U.S. Economy Gets Lift From Stimulus - WSJ - Government efforts to funnel hundreds of billions of dollars into the U.S. economy appear to be helping the U.S. climb out of the worst recession in decades. But there's little agreement about which programs are having the biggest impact.

US debt markets showing signs of improved health - FT - The revival of markets for bonds backed by auto and credit card debts is expected to be underscored on Thursday when the US Federal Reserve reveals details of its latest loans to investors in asset-backed securities. The Fed offers cheap funding every month to investors in such bonds under its term asset-backed securities loan facility (TALF), an emergency measure meant to support the markets through which hundreds of billions of dollars in consumer loans are financed.

Better Data Don’t Spell Fed Rate Increases - The recession appears to be over for U.S. factories, in a welcome sign things are about to turn brighter for the rest of the economy. But that doesn’t mean its time to start pricing in rate increases from the Federal Reserve. Indeed, over the last week or so a number of central bankers have said rather forcefully the still very tender state of economic activity means tighter monetary policy right now would be wrong.

What Happened to the 'Depression'? - Despite the rhetoric from Washington, we were never close to 25% unemployment... as policy makers make decisions in order to alleviate the recession, they are not helped when economists overstate its severity.
Weakest employment market since the Great Depression - Recently Allan Meltzer, a former Vice Chairman of the Federal Reserve, wrote a widely noted and provocative article in the Wall Street Journal called “What Happened to the ‘Depression?. Meltzer, I believe purposely and misleadingly, conflates these issues for political purposes. His goal is to present a narrative in which stimulus, especially deficit-inducing stimulus is seen as wasteful and misguided.
The Economist : Unlike any since the Depression - No one credible that I know of says the current recession is as bad as the 1930s; they are saying it’s the worst since the 1930s. The recessions of 1973-75 and 1981-82 differ crucially from 2007-2009 in that they were both induced, and ultimately ended, by monetary policy. By contrast, the severity of this recession results from the collapse of an asset and credit bubble...

A Protracted Period of "Economic Adjustment": How Bad Will It Get? - Bankruptcies, delinquencies and defaults are all on the rise, which is pushing down asset prices and increasing unemployment. As joblessness soars, debts pile up, consumer spending slows, and businesses are forced to cut back even further. “If we have a recovery at all, it isn’t sustainable. This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later."

U.S. Food-Stamp Recipients Reach Record 35.1 Million (Bloomberg) -- A record 35.1 million people received food stamps in June as unemployment reached a 26-year high, according to the U.S. Department of Agriculture. The 22 percent increase from a year earlier marked the seventh straight month of record participation in the Supplemental Nutrition Assistance Program.

The Savings Rate Has Recovered…if You Ignore the Bottom 99% - It has become fashionable among equities managers of the bullish persuasion to argue that a strong recovery in GDP will occur in 2010 because the “structural adjustment period” of moving back to a more normal savings rate has been the extent that our savings rate is less negative than it was one or two years ago, that simply reflects the reality of reduced home equity and unsecured credit lines rather than any conscious effort to reach a “desired level” of savings...

Why Our Economy Is Utterly Screwed - Population went from roughly 205 million to roughly 304 million during that time, a 50% increase, while Outstanding consumer credit went from $128 billion to $2,525 billion, or a 1,973% increase - and this is only consumer credit, ignoring mortgages, financial firm credit, business credit, commercial real estate and of course government debt!

Forbes Polls the Wackosphere and Gets An Earful - One of the Big Lies is that the stock market discounts the future. We’ve had a big rally, so the economy must be about to get a lot better, so the story goes. But the truth is that the stock market is nothing more than a liquidity meter. It mostly measures how much cash is burning a hole in the pockets of the dealer community. Right now, thanks to the Fed, the dealer community, particularly the Fed’s Primary Dealers who dominate not only the Treasury market but the stock market as well, are rolling in oceans of cash, pumped directly to them by the Fed.

Why You Can't Have Both A Weak Consumer And Inflation - (charts)..consumer inflation happens when too many dollars chase too few goods. They key word here is chase. Yet currently we are no where near such a situation. In fact, there are probably too many goods chasing too few consumer dollars. We're experiencing the first major consumer expenditure decline in forty years.

Prime Credit Card Customers Now Doing Worse Than Subprime Ones - HSBC Holdings PLC, which was one of the first banks hit by a wave of subprime defaults in the U.S., says its portfolio of prime credit-card loans is performing worse than its subprime group

Retail Theft Skyrockets – Greenshoots, Meet Reality… We’ve now created a vicious cycle, do you see it? Bigger government spending money they don’t have becomes a bankrupt government... yet, they take from the people to give to the central bankers. Then those who fall by the wayside turn to crime to make ends meet. More crime means more government spending on police, prisons...

Mind The Gap- The Widening, Worsening Pay Gap Between the CEO and the American Worker
- According to the Institute for Policy Studies ( which has been tracking executive pay since 1994, there's a widening compensation gap between U.S. CEOs and American workers, and there's no end in sight... the average ratio between salaries for CEOs and the American worker in 2008 was 319 to one.

Most Americans want to soak the rich - Polling results are absolutely clear. Now and for the decades a clear majority of US residents support taking from the rich. Republicans often argue that this would be "class warfare" leading to the guess that they might have some reason to believe that class warfare is unpopular. (several poll results follow)

Financing Health Care Reform: 2009 vs. 2003 - we will have to finance that $1 trillion with either: -additional federal tax revenue, (or)
-cuts in currently projected spending on federal programs that the Congressional Budget Office will recognize (the jargon is “score”) as a genuine reduction in projected federal spending relative to its baseline forecast of federal spending.

Nixon's Plan For Health Reform, In His Own Words (outline of Nixon's Comprehensive Health Insurance Plan) "One of the most cherished goals of our democracy is to assure every American an equal opportunity to lead a full and productive life. Now it is time that we move forward again in still another critical area: health care."

The Divisions in the White House Over Health-Care Reform - The first camp could be called "universal-lite." They're focused on preserving the basic shape of the bill. The second camp is not universal at all. This camp believes the bill needs to be scaled back sharply in order to ensure passage.

Shoot Me Now (video) GOP Chairman Michael Steele, summoning up the fake earnestness of a vacuum cleaner salesman, is back to defending Medicare and scaring the elderly. "it's running in Florida and 'select national cable networks.'" It's surreal witnessing how unprincipled the national GOP has become, opposing a sensible cut to Medicare Advantage.

Give Congress the Same Plan the Random Draw Has - Some politicians like to push public-option health insurance plans by describing them as giving "every citizen the same plan that every member of Congress has"'s an alternative: let's give every member of Congress the same plan that a randomly drawn member of the public has.

Jamison Foster: Heads in the sand - Washington Post reporter Perry Bacon reacts to the finding by his paper's ombudsman that about 85 percent of Post articles about health care reform have "focused on political maneuvering or protests"

Healthcare Rationing Is Good - In the current healthcare debate, Conservatives warn us that a single payer system will bring government rationing… Progressives argue that we already have rationing, based on wealth. Both sides pretend that rationing is bad. Yet as every economist knows, the allocation of scarce resources is the basis of economics itself. The question is not whether we will have rationing – the question is how to structure a system of rationing that accomplishes our goals.

One-sentence health insurance reform - "Any health insurance provider must offer to any individual, on the same terms and rates, any policy of insurance that it offers to any other individual or group, and no such policy may exclude coverage of any pre-existing condition."
Period. End of bill.

Lies, damned lies and health care - ABC-AU - I’ve had rather a lot of care from what the Americans call “socialised medicine”, here and in the UK – in fact without it, I’d be dead several times over – and some of the things that have been said against it strike me as plain ridiculous.

How American Health Care Killed My Father - My dad became a statistic—merely one of the roughly 100,000 Americans whose deaths are caused or influenced by infections picked up in hospitals. One hundred thousand deaths: more than double the number of people killed in car crashes, five times the number killed in homicides, 20 times the total number of our armed forces killed in Iraq and Afghanistan...

Preparing for the second wave: lessons from current outbreaks WHO Pandemic (H1N1) 2009 briefing note 9 -- Monitoring of outbreaks from different parts of the world provides sufficient information to make some tentative conclusions about how the influenza pandemic might evolve in the coming months. WHO is advising countries in the northern hemisphere to prepare for a second wave of pandemic spread.

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

Gordon Brown's $1.1 Trillion G20 Consensus Unraveling - From The Times: Gordon Brown’s $1 trillion global rescue package unravels Some countries, led by Germany, are even calling for the bailout to be scaled back amid fears that it risks burdening economies with too much debt and could encourage inflation.

The global consensus is starting to crack - The eager anticipation and diplomatic hoopla that attended the London summit has given way to a certain weariness ahead of this month’s gathering of the Group of 20 leading nations. The G20 has outgrown itself. If you add in the myriad international and regional organisations, some 30 leaders will converge on Pittsburgh.

Merkel, Sarkozy demand end to bankster “blackmail " - Merkel and Sarkozy were also adamant that action needed to be taken over what Sarkozy termed the “bonus scandal”. Merkel added, “The riskier banks' business is, the higher the capital requirement should be.”

Norwegian oil output to fall more than expected - OSLO — A Norwegian Petroleum Directorate report said Tuesday that oil production is expected to average 1.91 million barrels per day this year, and dwindle to 1.62 million barrels per day in 2013, a 10 percent larger decline than projected last year. Production was about 2.2 million barrels per day at the end of 2008, after falling from a peak average of 3.1 million barrels per day in 2000.

BP's Ocean Of Oil Is Just A Drop In The Bucket - BP's giant discovery of oil is great news for the company, but doesn't alter the overall picture of the world's oil supply. Analysts believe BP will be pumping out 650,000 barrels of oil equivalent. And that's in 2014. At that point, the IEA expects global demand for oil to be around 85 million to 89 million barrels per day.

Deflation Is A Bitch - Mish -Eastern Europe, Spain and Ireland are now all experiencing the beginning of deflation. A deflationary spiral means that most of the debt will need to be written off, and the creditors will have to absorb the losses...

New evidence on international trade and US wages - This study revisits the heated debate over international trade, offshoring, and US wages using new data. It says that increased international exchange with low-income countries has depressed US wages. That effect only arose during the 1990s, suggesting a different conclusion about trade, offshoring, and income inequality than the previous round of debate.

Banking crises and exports: Lessons from the past - VoxEU - Both financial turmoil and falling demand have hit exporters hard. This column confirms the importance of financing problems by showing that sectors relatively more dependent on external finance suffer larger export drops during banking crises.

Fixing the trade finance gap - VoxEU - In April, G20 leaders agreed to massively support trade finance. Should international trade finance be a significant concern in current circumstances? This column cautions against overestimating the trade finance “gap”, yet highlights the possible rationales and conditions for an effective intervention in support of trade finance.

Supertankers may halt oil trading as rates drop on supply glut, Frontline says - (Bloomberg) -- Supertanker owners may start refusing cargoes within the next three months unless rates return to a profitable level, said Frontline Ltd., the biggest operator of the ships which carry almost half the world’s oil.

singapore harbor - of the many facets of this disaster, one of the most fascinating is the unbelievable collapse in global trade. One of the largest fleets of ships ever gathered — 735, according to AIS Live ship tracking service of Lloyd’s Register — idles here just outside one of the world’s busiest ports, marooned by the receding tide of global trade.

China’s Distorted Economy: SOEs Crowd out Private Enterprise - The great adjustment of China's macro-control policies in the global slowdown has turned out to be a huge boost for its state-owned enterprises (SOEs), unfortunately at the cost of driving out the private investment in companies the government claims it needs to set the economy to rights.

The China Consumption Gap - The figure helps immensely, showing the yawning gap between China and most other developed economies around the world in terms of private spending as a percentage of GDP...

PetroChina Agrees Biggest North America Acquisition - (Bloomberg) -- PetroChina Co. has agreed to pay C$1.9 billion ($1.7 billion) for a stake in a Canadian oil sands project in its biggest North American acquisition, widening the search for energy resources overseas. PetroChina has acquired gas fields in Kazakhstan and a Singapore refinery in deals accounting for about a fifth of China’s $17 billion spending on overseas energy assets since December. Oil sands resources are harder to exploit than conventional fields and the Athabasca transaction underscores China’s determination to snare reserves.

Head Of China Sovereign Wealth Fund Openly Admits Asset Bubble Addressed By Creation Of More Bubbles - "Both China and America are addressing bubbles by creating more bubbles and we're just taking advantage of that. So we can't lose." - Lou Jiwei, Head Of China's SWF

ROFL! China Tells IBs: Stuff It! - This is hilarious! - The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on was Monday's hot topic in financial circles from Shanghai to Singapore as commodity marketers feared that companies holding underwater price hedges could simply renege on the deals, costing banks millions of dollars in profit.

China “Serious About Plan To Internationalise” Yuan - Chinese vice-premier Wang Qishan has been appointed to lead a taskforce to make the renminbi the currency of choice for trade settlements, especially with regional trading partners. HSBC economist Qu Hongbin believes this latest salvo in China’s intensifying efforts to ditch the dollar demonstrates the Chinese are moving sooner than most expect to internationalise their domestic currency.

An Ill Wind Blows From Japan - More ominously a link-up between the Yen and Yuan, unthinkable with the former government, now looks possible. Create a basket-of-currency settlement system over in Asia with the Yen and Yuan as the core elements and the US immediately loses control of the game we've been trying to run with the banksters and fraud-laced credit games in the United States.

Q+A-What is Japan opposition party's policy on FX? -
DPJ officials have said Japan should start thinking of a strong yen as in its interest, a departure from traditional thinking that a weak yen helps exports. Nakagawa has said he was worried about the future value of the dollar and that Japan should consider asking the U.S. to issue debt in yen as Tokyo should reconsider how it piles up dollar assets.

A Less-is-More Growth Strategy for Africa - If African countries were to adopt only one policy to boost economic growth and improve macroeconomic stability, they should reduce the number of currencies in circulation across the continent as quickly as possible...

Melting glaciers threaten 'Nepal tsunami' - Scientists say the Imja Glacier above Dengboche is retreating by about 70 metres (230 feet) a year, and the melting ice has formed a huge lake that could devastate villages downstream if it bursts.

The Sermilik fjord in Greenland: a chilling view of a warming world - The wall of ice that rises behind Sermilik fjord stretches for 1,500 miles (2,400km) from north to south and smothers 80% of this country. It has been frozen for 3m years. Now it is melting, far faster than the climate models predicted and far more decisively than any political action to combat our changing climate. If the Greenland ice sheet disappeared sea levels around the world would rise by seven metres, as 10% of the world's fresh water is currently frozen here.

Arctic ‘warmest in 2,000 years’ - BBC - The 20th Century stands out in strong contrast to the cooling trend that should have continued. The last half-century was the warmest of the 2,000-year temperature record, and the last 10 years have been especially dramatic...

Troubling bubbles - Methane oozes from thawing permafrost - Pure methane, gas bubbling up from underwater vents, escaping into northern skies, adds to the global-warming gases accumulating in the atmosphere. And pure methane escaping in the massive amounts known to be locked in the Arctic permafrost and seabed would spell a climate catastrophe.

Global Boiling: Dangerous Feedback Loop Of Fire And Climate Change Nears The Tipping Point - For residents of the western United States — including California, which is fighting at least eight fires right now — a 1-degree rise in average spring and summer temperatures could mean a staggering increase in the extent and cost of fires, according to a recent study.

Ocean 'deserts' have expanded greatly in ten years Ocean "deserts" -(grapic)- where tiny amounts of life subsist on a scant trickle of nutrients -- have gotten more extreme in the last 10 years, according to a new study. Despite widespread uncertainty among scientists, these vast stretches of barren sea could affect the marine food chain, and ultimately impact global fish stocks.

As hybrid cars gobble rare metals, shortage looms - (Reuters) - The Prius hybrid's electric motor and battery guzzle rare earth metals, a little-known class of elements found in a wide range of gadgets and consumer goods....that makes Toyota's market-leading gasoline-electric hybrid car and other similar vehicles vulnerable to a supply crunch as China, the world's dominant rare earths producer, limits exports while global demand swells...

PHEVs and EVs: Plugging into a Lump of Coal - Since I've stirred up a hornet's nest over the last two weeks first by debunking the mythology that PHEVs and EVs will save their owners money and then by showing how PHEVs and EVs will sabotage America's drive for energy independence, I figured I might as well go for the triple-crown of harsh realities by showing readers that PHEVs and EVs won't make a dent in CO2 emissions...

What is the Future of U.S. Coal? - CO2 emissions from coal consumption accounted for 30 percent of U.S. greenhouse gas emissions in 2005, and nearly all resulted from coal’s use in generating electricity. Coal combustion generates the most CO2 emissions per unit of energy. As a result, a cap-and-trade system’s effect on the cost of coal use would be significantly greater than its effect on the cost of gasoline or natural gas consumption.

When carbon is priced, who ultimately pays? - VoxEU - Opponents of US climate change legislation voice concerns about its effect on consumers in coal-reliant states, industries’ competitiveness, and regressive distributional consequences. This column argues that these concerns are either unfounded or have been addressed fairly. It says the conflict is more about ideology than distributional issues.

Economists, stories & mechanisms - Anthony Evans has written a fine paper (pdf) proposing how economists might make themselves more useful. There’s much to like about this - not least his stress upon the need for economists to be imaginative and his claim that it is “simply anti-intellectual” to believe in economic forecasts.

Buy green, forget Congress - Americans concerned about climate change are far more likely to shop green than to call or write a lawmaker, according to a new poll...75 percent say they have rewarded and punished companies based on their environmental performance, but most had not called or written their Congresspersons.

Our best guess about global warming may be wrong - Scientists wonder whether rising CO2 may trigger something else that further warms the climate. A new study in the journal Nature highlights the mystery. Just before the PETM, CO2 levels were already gradually rising. Then, in a geological instant – a few thousand years – average global temperatures rose about 7 degrees C (13 degrees F.).

The improbable 2°C global warming target - VoxEU - Mitigating global warning is a pressing and daunting task for the world’s major economies. This column says that the 2°C target set by G8 leaders is both politically and technologically unrealistic. It argues they must adopt more realistic targets and long-term commitments to adaptation plans.

People won't change lifestyle for planet - People want to save the planet but are unwilling to make radical lifestyle changes like giving up air travel or red meat to reduce the effects of climate change, a straw poll by Reuters showed.

Google Books: A Metadata Train Wreck - Mark has already extensively blogged the Google Books Settlement Conference at Berkeley yesterday, where he and I both spoke on the panel on "quality" — which is to say, how well is Google Books doing this and what if anything will hold their feet to the fire? Nobody is ever going to scan most of these books again. So whoever is in charge of the collection a hundred years from now these are the files that scholars are going to be using then. All of which lends a particular urgency to the concerns about whether Google is doing this right.

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