[QUOTE=jasonp;195416]Regarding inflation, remember that Japan has been injecting money for twenty years and has barely seen any inflation.[/QUOTE]
...Except in their sovereign debt, which has mushroomed. I would say that assuming that rampant money-printing invariably leads to hyperinflation is too simplistic ... more generally it will lead to a currency crisis of one kind or another, with a time lag that depends greatly on how low the government can keep its borrowing costs. Japan was able to keep its borrowing costs near zero by drawing on the once-tremendous pool of domestic savings, but with debt-to-GDP currently rocketing past 200% and domestic savings rates close to zero the endgame for the Yen is nigh - I estimate sometime in the next 5 years the crisis will hit.

For the U.S. the equation is somewhat different - we've had to borrow much more from abroad, but the dollar's reserve currency status has allowed the government to keep borrowing rates relatively low, especially since in times of financial crisis the dollar has historically (and increasingly paradoxically) been seen as a safe haven. It's not clear to me whether we'll have a sudden sharp currency crisis or an ongoing bleed in the dollar, such as has been fueling the recent stock market "rally" and dollar carry trade - those are where the excess liquidity are going, and inflation (so far) has manifested itself - by way of dollar devaluation - in rising oil and commodity prices.

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

[url=http://www.ritholtz.com/blog/2009/11/state-local-taxes-plummet/]State and Local Tax Revenues Continue to Plunge[/url]
[quote]Via the Rockefeller Institute of Government, an independent research firm focusing on state and local governments, we get some nasty data and fugly charts.

The overview paints a picture of state and local governments in economic distress:
[i]
• State tax collections for the second quarter of 2009 showed a record drop of 16.6%, the second consecutive quarter in which revenues fell more sharply than during any previous time on record.

• Forty-nine states saw total tax revenue fall during the quarter,
with 36 states reporting double-digit declines. Both those numbers were up from the first quarter of this year.

• For the year ending in June 2009, the period corresponding to most states’ fiscal years, total state tax collections declined by $63 billion or 8.2% from the previous year. [u]That loss is also a record, and is roughly twice the amount states gained during the year in fiscal relief from the federal stimulus package[/u].

• Preliminary figures for July and August for 36 early-reporting states [u]show continued deterioration[/u], with overall tax collections dropping 8%. Early indications of September income tax payments provide further evidence of more troubling news for states during the third quarter of 2009.

• Local tax revenue declined by 2.8% in nominal terms and 4.2% in real terms, marking the first such decline since 2003[/i].[/quote]
[i]My Comment:[/i] Check out the "state income tax" data in the first of the two accompanying charts in Barry`s blog posting - a truly truly appalling plunge going on there. Barry also has a followup showing changes in retail slaes and state tax revenues for the [url=http://www.ritholtz.com/blog/2009/11/economy-state-tax-revenues-1964-2009/]most-recent 5 U.S. recessions[/url] - it is clear from those charts that the current downturn is unprecedented among the ones in this 40-year sample. Interestingly the 1980 recession had roughly the same percentage decline in retail sales at its low point as the current one does at present, but took longer to reach this nadir, probably because consumers were far less overleveraged going in. (And the current one may yet go lower still, despite the pulled-forward demand from the government cash-for-clunkers and new-homebuyer subsidies). also interesting is that in the 2001 recession, consumer spending [u]continued to increase[/u], probably as as result of Greenspan`s massive credit easing and liquidity pump. This sowed the seeds for the current and much-nastier downturn.

But despite the very clear writing on the wall, many state legislatures [url=http://market-ticker.denninger.net/archives/1603-Oh-Yeah,-Its-Improving-A-Compendium.html]are still dithering[/url] while their budgets burn.

Lets examine some of the overwhelming issues facing us in today's economy.

1. U.S. debt has ballooned.
2. The majority of pension plans are underfunded.
3. Various fiscal policy effects are triggering inflation especially for imported goods.
4. Real estate values are still dropping - in spite of news to the contrary.
5. The consumer debt burden is at an unmanageable level.
6. The economy is still borderline on a depression.
7. The major U.S. automakers are still in dire straits - Ford's recent profit notwithstanding.
8. Consumer spending has not just slowed, it has withered on the vine.
9. Unemployment is at an adjusted 20% plus level.
10. Cheap energy supplies are in trouble on a slightly longer time horizon.

Now extrapolate the effects of the above. Government is not going to get smaller, but it will become more expensive. National debt levels will continue to rise. Inflation will creep in reducing effective buying power. Lack of jobs will crimp state and local budgets to the point of collapse of many local governing bodies. Saving money will become a pointless exercise since inflation will eat it up and besides, who will have any extra to save in the first place.

DarJones

[QUOTE=Fusion_power;195447]Lets examine some of the overwhelming issues facing us in today's economy.

1. U.S. debt has ballooned.
2. The majority of pension plans are underfunded.
3. Various fiscal policy effects are triggering inflation especially for imported goods.
4. Real estate values are still dropping - in spite of news to the contrary.
5. The consumer debt burden is at an unmanageable level.
6. The economy is still borderline on a depression.
7. The major U.S. automakers are still in dire straits - Ford's recent profit notwithstanding.
8. Consumer spending has not just slowed, it has withered on the vine.
9. Unemployment is at an adjusted 20% plus level.
10. Cheap energy supplies are in trouble on a slightly longer time horizon.

Now extrapolate the effects of the above. Government is not going to get smaller, but it will become more expensive. National debt levels will continue to rise. Inflation will creep in reducing effective buying power. Lack of jobs will crimp state and local budgets to the point of collapse of many local governing bodies. Saving money will become a pointless exercise since inflation will eat it up and besides, who will have any extra to save in the first place.

DarJones[/QUOTE]
Damn, Fusion, you're just a bundle of economic optimism today. ;)

Mish notes today that the U.S. has plenty of company in its reckless deficit spending ... Japan's new ruling party has committed to increasing public spending even more (one of the comments in that snippet echoes my "fiscal crisis in the next 5 years" prediction), UK is following America's lead in terms of money-printing, most of the Eurozone is going to flagrantly violate the zone's rule of debt-no-more-than-3%-of-GDP this year. Even traditionally debt-averse Germany has succumbed. Sheer madness.

I saw a C-SPAN broadcast last night of a congressional committee hearing on the U.S. federal debt ... one of the numbers that got mentioned during that is that U.S. unfunded liabilities will increase by a whopping $4 Trillion this year, from $56T to $60T, which is over 4x GDP, even allowing the government's optimistic GDP figures, which include this year's current-account deficit (of around $1.5T) as part of the GDP. None of the committee members said so much, but I expect most deep down must have realized "this is simply unpayable". Massive currency debasement or sovereign default: pick your poison. Either will involve a significant hit to America's debt-sponsored artificially high standard of living, and quite possibly signal the end of U.s. global economic (and political) dominance. "The American Century" would appear to be over. The 16th-century Spanish, 17th-century French and 18th-century British probable all thought it equally unthinkable that their respect empires would someday come to an end, and that they would yet by dint of [Spanish | French | English] ingenuity and [Spanish | French | English] fortitude and [Spanish | French | English] love of country be able to fix things.

Via [URL="http://www.ritholtz.com/blog/2009/11/the-lloyds-prayer/"]Barry Ritholtz[/URL]:
[INDENT] [B]THE LLOYD’s Prayer[/B]

Our Chairman,
Who Art At Goldman,
Blankfein Be Thy Name.
The Rally’s Come. God’s Work Be Done
On Earth As There’s No Fear Of Correction.
Give Us This Day Our Daily Gains,
And Bankrupt Our Competitors
As You Taught Lehman and Bear Their Lessons.
And Bring Us Not Under Indictment.
For Thine Is The Treasury,
The House And The Senate
Forever and Ever.
Goldman.
[/INDENT]

For Goldbugs
 

[url]http://blogs.ft.com/maverecon/2009/11/gold-a-six-thousand-year-old-bubble/[/url]

Good article by Willem Buiter. Some lovely turns of phrase such as "in most of the overdeveloped world" and "So when fiscal incontinence threatens price stability"...

Sample cover Letter for AIG CEO Candidates
 

It appears that 3-month-long AIG CEO Robert "Jetaway Getaway" Benmosche is unhappy with the curbs being proposed for executive compensation at firms being propped up by the U.S. government, and may step down. Terrible as the loss of Mr. Benmosche would be for truth, justice and the American way - he knows *all* the best vacation villas along the Dalmatian coast - it appears AIG may find itself searching for a new head soon. In that vein, Mish quotes reader "Tin Hat"`s suggestion for a [url=http://globaleconomicanalysis.blogspot.com/2009/11/resume-tips-for-ceos-board-members.html]sample cover letter for would-be CEO candidates[/url]:
[quote][i]Dear AIG,

I am highly qualified for the position of AIG Chief Executive given that I possess all the skills necessary to lay waste of what's left of AIG.

I have no conscience, guilt or remorse. I am able to extort money from taxpayers and Congress by convincing them I do God's work. I am very skilled at making numbers fuzzier, covering up losses and generating bonuses so large even a blank check would blush. I have no concern for leverage, torch bearing mobs, Congress or President Obama.

I'm convinced that together, we can squeeze the middle class so successfully, they would be envious of the Haitian life style. I am looking forward to discussing this personally profitable opportunity with you soon.

Sincerely

AIG Candidate[/i]

[Mish] Clearly that is an extremely powerful cover letter. It is tailored specifically to AIG and lists all the skills required to run any large financial corporation these days.

The only thing lacking is a connection to Goldman Sachs or Tim Geithner. That could be a problem. Otherwise it is perfect. Also note how easy that sample cover letter would be to modify. A few simple changes and the cover letter would be entirely suitable for would be seekers of CEO or board member at Bank of America.

"Tin Hat" and I are both proud to do our part to help out in these trying times. Would be CEOs, all you need to do on your part is to get your cover letters in order.

Let's get America hiring again, the right talent for the right job. It all starts with an appropriate cover letter attached to your résumé.[/quote]
[i]My Comment:[/i] Besides name-dropping any connections you have with Goldman, it might not hurt to mention that by heading a TBTF financial firm, you will be [url=http://globaleconomicanalysis.blogspot.com/2009/11/gods-work-and-goldmans-prayer.html]doing God's work[/url]. (Yes, Goldman CEO Lloyd Blankfein really did say that recently).


A ZeroHedge reader [url=http://www.zerohedge.com/article/and-other-side-rodgin-cohen-story]comments[/url] on the New York Times` altogether-too-gushy treatment (another ZH reader describes the specific article in question as "textual fellatio") of their local patrons in Big Finance:
[quote]As I finish up Andrew Ross Sorkin's book, "Too Big To Fail", and read the article above linked....I can't help but wonder how much the commission offered to them to pen these fluffs was. A book about the largest scams in history that produces little in the way of an antagonist(s) and paints most as heroes doing Patriotic dealing to save us....yikes.

One of the most nauseating moments (of many) of Sorkin's book comes as TaxEvading Timmy [i][Geithner][/i] was set to take a morning jog along the East River after a hellish weekend of commandeering taxpayers money to give to AIG. Young Timmy gazes out at the morning commuters wondering if he has done the right thing. Seeing us, the unwashed non-financial masses, he thinks [i]"it is about them", "Never mind the staggering numbers. Never mind the ruthless complexity of structured finance and derivatives, nor the million-dollar bonuses of those who made bad bets. This is what saving the financial industry is really about...protecting ordinary people with ordinary jobs"[/i]. page 409.

No need for Syrup of Ipecac after a dose of that.[/quote]


[url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aTQOjxN0UtLw&pos=3]China’s Liu Says U.S. Rates Cause Dollar Speculation[/url]: [i]The decline of the dollar and decisions in the U.S. not to raise interest rates have caused “huge” speculation in foreign exchange trading and seriously affected global asset prices, said Liu Mingkang, chairman of the China Banking Regulatory Commission.[/i]
[quote]His view echoes that of Donald Tsang, the chief executive of Hong Kong, who said the Federal Reserve’s policy of keeping interest rates near zero is fueling a wave of speculative capital that may cause the next global crisis.

“I’m scared and leaders should look out,” Tsang said in Singapore Nov. 13. [u]“America is doing exactly what Japan did last time,”[/u] he said, adding that Japan’s zero interest rate policy contributed to the 1997 Asian financial crisis and U.S. mortgage meltdown.[/quote]
[i]My Comment:[/i] There is no doubt the Chinese understand that what the U.S. is trying to do - address the consequences of the collapse of one debt-fueled bubble by blowing another - in in all likelihood doomed to fail; during Obama`s visit to Asia over the past week the Chinese had a lot of questions about things like the administration`s health care initiative - not about the legislative details, only about the likely effects on the U.S. federal debt. The problem for the Chinese (and other major holders of IOUSAs) is that they are in effect trapped - while they can shift some modest percentage of their holdings out of U.S. treasuries without devaluing the rest and causing bond yields to spike (which would crash the alleged economic recovery and hammer their own already-hurting export economies even more), they`re effectively stuck with most of them, which means watching their $2T holdings steadily bleed as the U.S. devalues the dollar, despite the lies folks like Geithner repeatedly tell about "being committed to a strong dollar". Of course the Chinese are busy blowing their own economic-bailout credit bubble, but aren't borrowing from abroad to do so.

You only left out one detail Ernst. You forgot to mention the effect on the average person in America of devaluing the dollar. You get paid the same or less but everything costs more to buy and oh, by the way, we are going to turn any savings you have into so much worthless paper.

Inflation is here folks. China has reason to be concerned.

DarJones

It Was a Dark and Stormy Financial Reform Bill...
 

Denninger, having digested the 1136-page whopper, reports back on Senator Dodd`s [url=http://market-ticker.denninger.net/archives/1625-Financial-Stability-Bill-A-Chimera.html]Financial Stability Bill[/url] - his key notes:
[quote] * It does not ban off-balance sheet exposures. Why not, given their history both in ENRON's collapse and the panic of 2008? How many times do we have to see these entities abused for the explicit purpose of hiding risk?

* It draws a distinction between "regular" and "too big to fail" companies, putting the second into a putative "more supervised" bucket.

* It lists requirements that allegedly already exist - including for capital, leverage and "prompt corrective action." But nowhere in the proposed Title does it appear to contain either civil or criminal penalties for the new agency if it fails to discharge its responsibilities. As we have repeatedly seen under existing "Prompt Corrective Action" you can have all the laws you want but if nobody will enforce them they are meaningless.

* It does not appear that this act prevents "large" companies from restructuring as a group of bank holding companies to evade supervision.

* The leverage limits specified in the act [i][as much as 50:1][/i] is ridiculously low.

* This bill puts a 25% limit (!) on unaffiliated credit exposure - a more than doubling of the previous limits. This is a tightening of risk controls? Like hell.

* The putative "resolution authority" allows the assumption of literally any risk, putative "asset" or liability of a failing firm with the full faith and credit of The United States. This is effectively the provision of a blanket guarantee of any large financial firm's assets and liabilities by The US Federal Government. I thought we were getting rid of moral hazard (or is that "mortal hazard" - to the government?)

* The putative "resolution authority" creates an explicit right to do what The Administration did with GM, Chrysler and others - to insert the government in front of Senior Creditors. Over the last year or so the sanctity of the capital structure has been essentially destroyed - this act makes that destruction a matter of formal federal law. Blech.

* The putative "resolution authority" specifically bars judicial review for those creditors who claim they were screwed by the imposition of modified claim priority. This codifies in black letter Federal Law what was done to Chrysler and GM bondholders.

* Ridiculous shortening of statutes of limitations. There are peppered all over this legislation unbelievably short periods of time to file claims, from 30 to 90 days - dramatically shortening the time to bring suits. This appears to be intentionally designed to limit the ability of those who believe they were abused by these processes to obtain judicial relief.

* The supposed "strengthening" of regulation of OTC derivatives contains a very important weasel provision on page 385. Specifically, it says ".... MAY jointly prescribe rules defining the term "swap" or "security-based swap" to include transactions that have been structured to evade this title." Note the word MAY. It is not SHALL, meaning that just as has occurred to date, the CFTC and SEC can willfully and intentionally allow firms to evade all of these "reforms" - and you can bet they will, since this is entirely within their discretion. Oh, and the byzantine definition of these products has enough holes to drive a truck through - sideways.

* This act specifically preempts state "bucket shop" laws relating to swaps and OTC derivatives. This is a serious problem folks - the issue with "bucket shops" is that the putative "dealer" isn't really dealing at all - you're betting against him and he controls the bid and offer, thereby making it trivially easy to guarantee that you lose. While there hasn't been much in the way of attention paid to this, I am deeply troubled by inclusion of explicit federal preemption of these laws - who in the financial industry wants to be able to evade these important protections in state law, and why?

There is a fair bit to like in this act. The explicit statement of support for state laws in the consumer protection realm that are stronger than federal protections is one of these areas. The abolishment of "venue shopping" when it comes to regulators (e.g. OCC .vs. OTS) is long overdue.

But the above bullet points are troubling, and this act reeks of having intentional loopholes written into it via obfuscation, along with no statutory demand that the new FIRA agency actually stomp on such abusers. There are too many "mays", not enough "shalls", and an absolute lack of "or else's" - making this one of those acts that says more by its absence than presence.

Add to that the further loosening of leverage limits and you have what is obviously a lobbyist-written "bill" that totals 1136 pages primarily as a means to dissuade anyone from reading it.[/quote]
[i]My Comment:[/i] We would expect no less from Chris "friend of Angelo Mozilo" Dodd.

As initiated in the thread: [URL="http://www.mersenneforum.org/forumdisplay.php?f=78"]http://www.mersenneforum.org/forumdisplay.php?f=78[/URL]

Here's the appropriate music for the topic.

[URL="http://www.youtube.com/watch?v=UOOx_nOvS6w"]http://www.youtube.com/watch?v=UOOx_nOvS6w[/URL]

[quote=Fusion_power;196066]You only left out one detail Ernst. You forgot to mention the effect on the average person in America of devaluing the dollar. You get paid the same or less but everything costs more to buy[/quote]... but the devalued-dollar argument applies only to what we buy that's imported (from countries whose currency rises versus the dollar). If one shops exclusively at stores with a "We Sell Stuff Made in the USA" slogan, notably Wal-Mart ... oh, wait ... that was back during the Clinton administration.

My keyboard was made in China.

Never mind.

Michigan: Pontiac Silverdome Sells for a Song
 

[url=http://money.cnn.com/2009/11/17/news/economy/silverdome_buyer/index.htm]Silverdome sells for ... less than a house[/url]: [i]Unidentified Toronto-based real estate company buys Pontiac stadium for $583,000 - a fraction of the $55.7 million it cost to build.[/i]
[quote]A Toronto-based family-owned company bid $583,000 for the under-used stadium on Monday, which is currently owned by the City of Pontiac, Mich., according to auctioneer Williams & Williams.

The company plans to refurbish the Silverdome into a stadium for men's Major League Soccer and women's professional soccer teams, said the auctioneer. While the stadium was the former home of the National Football League's Detroit Lions, it also played host to the World Cup in 1994, when Brazil beat Italy in a knuckle-biter that ended in a penalty shootout.

The auctioneer Williams & Williams, based in Tulsa, Okla., said it will not identify the buyer "until the final details are worked out and the sale closes."

"The Silverdome will now be in the hands of professionals who can devote their time to transform this high-profile property into a vital asset instead of enabling it to continue to languish as an empty facility," said Fred Leeb, the emergency financial planner for Pontiac, in a press release.
0:00 /02:32Hollywood helps Michigan jobless

The sale of the Silverdome takes a large financial burden off the hard-hit city of Pontiac, which has fallen on hard times, with budget shortfalls and high unemployment. Earlier this year, GM announced it would close a truck plant, taking about 1,400 jobs from the city.

As a result, Leeb said, Pontiac could ill afford to continue paying $1.5 million in annual upkeep for the stadium. With a private owner, the property "will go back on the tax rolls," he explained.

The 80,000-seat Silverdome was the biggest stadium in the National Football League when it was built in 1975 for $55.7 million. The stadium, which sits on a 127-acre plot, is also the former home of the National Basketball Association's Detroit Pistons.

The stadium reached its football zenith in 1982 as the site of Super Bowl XVI, when San Francisco's 49ers beat the Cincinnati Bengals.

The Silverdome has also served as a music venue for some of the hottest acts in show business, including Michael Jackson, Madonna and Elvis. Another high profile visitor, Pope John Paul II, once delivered Mass from the field.

But the Silverdome's biggest event was Wrestle Mania III in 1987, when 93,000 fans packed into the stadium to watch Hulk Hogan body-slam Andre the Giant. That was the biggest turnout ever for an indoor sports event.[/quote]
[i]My Comment:[/i] When CNN/Money say "Silverdome sells for less than a house", I presume they mean a California house, not a Michigan house... but `tis a quibble. My one and only visit to the Silverdome was for a Pro Wrasslin extravaganza around 1990 ... me and a buddy went mainly to root for our favorite [url=http://en.wikipedia.org/wiki/Heel_(professional_wrestling)]Heel[/url], [url=http://en.wikipedia.org/wiki/The_Honky_Tonk_Man]The Honky Tonk Man[/url], whose shtick was as an [url=http://www.worldwrestlinginsanity.com/am2/uploads/1/HonkyTonkMan.jpg]Elvis impersonator[/url] and who used to introduce himself with exaggerated Southern-drawl-y lines like "Ah wuz born on a pool table in Memphis, Tay-nuss-see" and whose finishing move was to smash a guitar over the head of his faux-incapacitated opponent. Ah, good times...

Getting back to business - While the sale of the Silverdome may be a good thing in terms of recovering some tax revenues for the city of Pontiac in the near term, I doubt that area of the country will support a pro soccer team of any caliber, much less one which could fill the Silverdome a couple dozens of times per year. Even with the low distress-sale price, it`s going to to be a huge money-losing boondoggle for the investors.

Cash4Cage.com Wants Your Unused Gold Rolls Royces!
 

Now we know why movie star and [URL="http://money.cnn.com/2009/11/13/real_estate/Nicolas_Cage/index.htm?postversion=2009111613"]foreclosure victim[/URL] (if one can properly classify having one`s Bavarian castles foreclosed upon as "victimhood") Nicolas Cage is spending his time of late in an avid [URL="http://www.google.com/url?q=http://www.imdb.com/title/tt0368891/&ei=0jAES5u7FIGkswOJoeW4BA&sa=X&oi=nshc&resnum=1&ct=result&cd=1&ved=0CAkQzgQoAA&usg=AFQjCNHLmYBZDRyuCDcdOfYo6V4Wwm6_tg"]search for lost treasure[/URL]:

[URL="http://money.cnn.com/2009/11/17/pf/Nicolas_Cage_lawsuit_manager.cnnw/index.htm"]Nic Cage sues ex-Manager for Fraud[/URL]: [I]Nicolas Cage brought about his own financial ruin with a spending spree that included two castles, 15 palatial homes, a flotilla of yachts and a squadron of Rolls Royces, his former business manager said.[/I]
[quote]Levin said he warned Cage - whose given name is Nicolas Coppola - that he needed to earn $30 million a year "just to maintain his lavish lifestyle." He urged Cage to save "a cash cushion" of at least $10 million "to alleviate the financial pressure to take film roles that might be detrimental to his career," Levin`s response said.

Several of Cage`s recent movie roles have been seen by critics as "paycheck gigs" taken only because of his pressing debt.

Levin`s filing claimed that starting in 2005 and then "with increasing urgency" over the next two years he "implored Coppola to stop buying real estate and urged him to reduce his real estate holdings, warning Coppola that the financial press was filled with references to a `real estate bubble.`"

He countered Cage`s claim that the actor was left in the dark about his finances.

"Levin repeatedly warned Coppola that he was living beyond his means, urged him to spend less, and warned him that financial disaster loomed if he continued to spend uncontrollably," Levin`s filing said.

"Levin described the folly of several other well-known entertainers who compulsively overspent their way into bankruptcy, and warned Coppola `it could happen to you,`" the filing said.

Cage should have known about his debt because "he signed every check for every monetary transaction throughout the relationship," Levin said.

"Instead of listening to Levin, cross-defendant Coppola spent most of his free time shopping for high ticket purchases, and wound up with 15 personal residences, most of which were bought against Levin`s advice," Levin`s complaint said. "Likewise, Levin advised Coppola against buying a Gulfstream jet, against buying and owning a flotilla of yachts, against buying and owning a squadron of Rolls Royces, against buying millions of dollars in jewelry and art."

Cage`s four yachts included one each for the Caribbean, the Mediterranean, Newport Beach, California, and Rhode Island, Levin said.

In 2007 alone, Cage`s "shopping spree entailed the purchase of three additional residences at a total cost of more than $33 million; the purchase of 22 automobiles (including 9 Rolls Royces); 12 purchases of expensive jewelry; and 47 purchases of artwork and exotic items," Levin`s filing said.

"Coppola also spent huge sums taking his sizable entourage on costly vacations and threw enormous, Gatsby-style parties at his residences," it said.

Levin`s warnings that Cage was living beyond his means were not just ignored, but "at times Levin was rebuked for trying to restrain the outflow of cash," he said.

"The pinnacle" of Cage`s spending spree was the purchase of two castles - in England and Germany - which Levin warned "were decrepit and needed huge expenditures," he said.

Cage`s financial collapse came in 2008 when the real estate values plunged in 2008 and most of his residences turned "upside down, just as the global credit crunch made it impossible to cover Coppola`s endless cash calls by borrowing more money," Levin said.[/quote][I]My Comment:[/I] Nic Cage`s fiscal habits are very reminiscent of the U.S. government`s ... substitute "foreign wars" for "castles", "military spending" for "Rolls Royces", "pork-barrel spending" fro "expensive jewelry and artworks" and "welfare state" for "entourage" and there you go.


[URL="http://money.cnn.com/2009/11/18/news/improper_payments.cnnw/index.htm"]White House: $98 billion in bad payments[/URL]: [I]The federal government made $98 billion in improper government payments in 2009, budget director Orszag says.[/I]
[quote]WASHINGTON (CNN) -- The federal government made $98 billion in improper payments in fiscal 2009, and President Barack Obama will issue an executive order in coming days to combat the problem, his budget director announced Tuesday.

The 2009 total for improper payments -- from outright fraud to misdirected reimbursements due to factors such as an illegible doctor's signature -- was a 37.5% increase over the $72 billion in 2008, according to figures provided by Peter Orszag, director of the White House Office of Management and Budget.

In an evening media briefing, Orszag was unable to provide an overall figure for what percentage of the bad payments was due to fraud. He also lacked a breakdown on how much of the total improper payments involved spending on Obama's $787 billion economic recovery package passed in February.[/quote][I]My Comment:[/I] I wonder if the 4-year-old kid and the cat who (among many hundreds of thousands of other worthy benefitees) signed up for the $8000 home-purchase subsidy got counted in that sample? But as the president properly understands, fixing these problems is as simple as the stroke of a pen and a pompous "let me be clear" TeeVee N00z soundbite - just sign that executive order and your problems are solved, mate. surely no one in their right mind would attempt to take advantage of our government`s fiscal profligacy if there`s an -gasp! - EXECUTIVE ORDER - saying it`s a no-no. and just think - if we only manage to eliminate 20 times that amount in wasteful spending, we could close the federal deficit! (Or maybe the O-man can simply sign an executive order to that effect, as well - I`m surprised he hasn`t done so yet, think I`ll send him a quick note suggesting it.)

[quote=ewmayer;196302]But as the president properly understands, fixing these problems is as simple as the stroke of a pen and a pompous "let me be clear" TeeVee N00z soundbite - just sign that executive order and your problems are solved, mate.[/quote]Exactly what would you have the president do _instead of_ ordering designated people to fix the problem?

Are you thinking Obama should roll up his sleeves and _personally_ audit the records, issue federal arrest warrants, and so on, instead of delegating authority to someone a bit further down the line to do the actual gruntwork?

[quote]EXECUTIVE ORDER[/quote]What is your beef with Executive Orders? Are you under some misimpression that an EO is magical or something?

An EO is just a presidential order that is intended to be permanent and entered on the public record. By "permanent", I mean that it is intended to remain in force throughout not only Obama's term of office, but all future terms no matter which individual succeeds him as president, unless/until it is specifically rescinded by Obama or a later sitting president. Presidents have issued thousands of them -- what's the problem with that?

Is it just that EOs have a special official name because they're issued by the president rather than someone else in the executive branch? Got over it. Call them "permanent public-record orders by the president" if you have some trouble with the name "Executive Order".

Do you think any executive, not only the president, is to govern without issuing orders in writing, and without designating some of those orders to be permanent until explicitly cancelled?

[QUOTE=cheesehead;196325]Exactly what would you have the president do _instead of_ ordering designated people to fix the problem?

Are you thinking Obama should roll up his sleeves and _personally_ audit the records, issue federal arrest warrants, and so on, instead of delegating authority to someone a bit further down the line to do the actual gruntwork?

What is your beef with Executive Orders? Are you under some misimpression that an EO is magical or something?[/QUOTE]
In order:

- Rather than issuing EOs "to combat fraud", How about actually enforcing existing laws against fraud? You know, arrest alleged fraudsters, try them and send them to prison if they are found guilty, that sort of thing. Wall street and the financial industry would be a good place to start. An interesting factoid: During the S&L crisis of the early 1990s, over 1000 executives of S&Ls ended up going to jail. The current crisis dwarfs S&L, and the amount of fraud, mis- and malfeasance which appears to have been perpetrated - by regulators who didn't, mortgage lenders who cooked the books and encouraged borrowers to lie, appraisers who gave fraudulent appraisals of property values, banks who packaged the resulting loans into securities and sold them despite knowing they were toxic, and ratings agencies who gave the junk fraudulently high ratings - is proportionally larger. Where are the arrests and mass prosecutions?

- Obama could, during his first days in office, given the justice department a broad mandate to go after the criminals who caused the financial crisis, and insisted that they be brought to justice without regard to rank or position. The needed extra funding for the effort (likely in the billions of dollars) could have been recouped from fines levied against the firms involved. But instead of thousands of criminal indictments, what have we gotten to date? Madoff in jail, and a couple of Bear Stearns hedge-fund managers (Cioffi and Tannin, who peddled billions in toxic CMBS to their clients while they were exchanging e-mails that indicated they knew it was garbage) got put on trial [url=http://www.bloomberg.com/apps/news?pid=20601103&sid=a7WIPBzOuvlc]and acquitted[/url] "because they were working hard to save their funds right up to the end". (But I'll take a trial with a too-naive jury over nothing).

- I am under no impression that an EO is in any way magical ... but Obama seems to think otherwise. Much like he seems to think that [url=http://abcnews.go.com/Business/wireStory?id=9112558]talking about this whole federal debt problem[/url] is equivalent to "doing something about the federal debt".

Picture a stack of $1000 bills stacked up as high as the interest that we Americans will accrue on the federal debt over the next 10 years. It is nearly $5 Trillion. How high would that stack of $1000 bills be given that each is about .001 inches thick.

I make it as a stack nearly 800 miles tall. There is no atmosphere and for all practical purposes, you are in space at 100 miles. I thought at one time that "stratopheric debt" was a good description. Guess I was wrong.

Darrel Jones

[QUOTE=Fusion_power;196441]Picture a stack of $1000 bills stacked up as high as the interest that we Americans will accrue on the federal debt over the next 10 years. It is nearly $5 Trillion. How high would that stack of $1000 bills be given that each is about .001 inches thick.

I make it as a stack nearly 800 miles tall. There is no atmosphere and for all practical purposes, you are in space at 100 miles. I thought at one time that "stratopheric debt" was a good description. Guess I was wrong.[/QUOTE]
Stratospheric debt only covers the 5-30-mile-high range ... what you describe extends well into what is considered outer space, hence is clearly "astronomical debt".
[b]
Breaking News: Attempt to Gut the "Audit the Fed" Bill Denied
[/b]
[url=http://www.zerohedge.com/article/paul-grayson-amendment-audit-fed-passes-overwhelmingly-43-26]Paul-Grayson Amendment To Audit The Fed Passes Overwhelmingly By 43-26[/url][quote]In what could be the biggest news of the day, with potentially historic consequences, Mel Watt's attempt to detour the Fed transparency process has been soundly denied. The vote on the final passage of the bill is delayed, but the critical amendment has passed. Congratulations to Messrs Paul and Grayson.[/quote]
A related link, from the Huffington Post via Mish: The Fed's having bought and paid for 90% of U.s. economists in one way or another is no longer going unnoticed:

[url=http://globaleconomicanalysis.blogspot.com/2009/11/economists-opposing-fed-audit-are-on.html]Economists Opposing Fed Audit Are All on Fed Payroll[/url]


[b]
Chart of the Day:
[/b]
Courtesy of [url=http://www.ritholtz.com/blog/2009/11/single-housing-starts/#comments]Barry Ritholtz[/url] ... the October housing starts numbers yesterday almost caused the markets to sell off, but apparently there was too much giddiness (or the ongoing "hidden bid" buoying the NYSE, take your pick) for the expected "reality check correction" to get started. At some point enough folks will realize that all the happy talk about "recovery" is BS, but we haven't yet reached critical mass. Anyway, it's interesting to put recent data regarding U.S. single-family housing starts in a longer-term perspective, so here ya go, let me know if you see a "recovery" going on there:

[QUOTE=ewmayer;196453]Stratospheric debt only covers the 5-30-mile-high range ... what you describe extends well into what is considered outer space, hence is clearly "astronomical debt".[/QUOTE]

Does this mean that when universal healthcare blows up we jump over galaxial debt and go straight to universal debt?

Recap of the Audit-the-Fed House vote
 

The Huffington Post - which broke the news about 7 of the 8 "independent economists" who signed a last-minute "auditing the Fed would be very bad" letter to congress being anything but independent of the Fed - has a followup today about the defeat of Mel Watt`s "gut the audit the Fed bill" amendment ... especially interesting is the bit about House Finance Committee chair Barney Frank showing his true colors at the last moment:

[url=http://www.huffingtonpost.com/2009/11/19/fed-beaten-bill-to-audit_n_364546.html]Bill To Audit Federal Reserve Passes Key Hurdle[/url]
[quote]In an unprecedented defeat for the Federal Reserve, an amendment to audit the multi-trillion dollar institution was approved by the House Finance Committee with an overwhelming and bipartisan 43-26 vote on Thursday afternoon [u]despite harried last-minute lobbying from top Fed officials and the surprise opposition of Chairman Barney Frank (D-Mass.), who had previously been a supporter[/u].

The measure, cosponsored by Reps. Ron Paul (R-Texas) and Alan Grayson (D-Fla.), authorizes the Government Accountability Office to conduct a wide-ranging audit of the Fed's opaque deals with foreign central banks and major U.S. financial institutions. The Fed has never had a real audit in its history and little is known of what it does with the trillions of dollars at its disposal.

Backers of the Watt amendment pressed their case on Wednesday by sending a letter from a "political cross section of prominent economists" backing a measure like Watt's. HuffPost reported, however, that those economists might well have be prominent, but they certainly aren't a "political cross section." Seven of the eight economists in question have extensive connections to the Fed -- and half of them are currently on the Fed payroll. Those affiliations were not noted in the letter.

The playbook in Washington often goes like this: When a measure that threatens the establishment builds enough momentum that it must be dealt with, it is labeled as "unserious." The Washington Post editorial board, true to the script, called Paul's measure "an unserious answer to a serious question."

And it particularly rankles the center that a pair of "wingnuts" are behind a successful effort to challenge the prevailing order. [See Grayson Called "Wingnut" By New York Times].

For anyone remaining confused, the debate was further clarified by the central bank itself: Federal Reserve Vice Chair Don Cohn and General Counsel Scott Alvarez spent much of the day calling committee members, urging them to oppose the Paul-Grayson amendment in favor of Watt's, a member of Congress who asked for confidentiality told HuffPost.
[u]
Paul's opponents also placed a letter from former Fed chairmen Alan Greenspan and Paul Volcker on the seats of every committee member. Such a move is in violation of House rules and Grayson was able to have the letters removed[/u].[/quote]
[i]My Comment:[/i] Gee, do you get the impression that the folks at the Fed really, really, really don`t want to open up their books and show us where they`ve been spending the trillions of taxpayer dollars they`ve thrown at the financial crisis over the past couple of years?

But the victory is not yet won - as Mish [url=http://globaleconomicanalysis.blogspot.com/2009/11/ron-paul-alan-grayson-audit-fed-bill.html]reminds us[/url], [i]"Bear in mind there will be other attempts to water down this bill and/or to change it dramatically in the Senate. Be prepared to phone, fax, and call in again as necessary."[/i]

Lastly, ZeroHedge has a video clips of post-vote comments by HR1207 co-sponsor Alan Grayson (who I admit can come off as a bit of a nut sometimes, but who has his facts about the need for opening up the secretive Fed cabal to public scrutiny right), as well a [url=http://www.zerohedge.com/article/grayson-remarks-passing-paul-grayson-amendment-well-full-list-voters]complete lists of votes[/url] for and against. Representative Paul`s own website has the vote breakdown [url=http://www.ronpaul.com/2009-11-19/audit-the-fed-amendment-passes-43-26/]by party[/url] - Interesting that every single one of the "nays" was a democrat, so much for the Dems being "the party of the common man" and similar nonsense.

[QUOTE=ewmayer;196513][i]My Comment:[/i] Gee, do you get the impression that the folks at the Fed really, really, really don`t want to open up their books and show us where they`ve been spending the trillions of taxpayer dollars they`ve thrown at the financial crisis over the past couple of years?[/QUOTE]Nah, you're just an old cynic making a [mountain out of a molehill / storm in a tea cup]* and should [get a life / don't worry, be happy]*. They know far more about what's really happening than do hoi polloi like us.

Paul

* Delete cliche as appropriate.

[quote=ewmayer;196513] Interesting that every single one of the "nays" was a democrat, so much for the Dems being "the party of the common man" and similar nonsense.[/quote]

I wouldn't read anything party political about it. If the same bill had come out last year and Paulson was mobilized against it like Timmy was this time, you would have had the worms from the other side voting nay.

Green stocks
 

It appears that any consequences of the GW-Hack haven't hit the public newsrooms yet, so every investor might want to consider under-weighting or even shorting stocks which are profiting from GW-alarmism.

Full Disclosure: I'm not invested in any of these stocks, but I'm short in NASDAQ futures and long in other sectors.

1 in 7 mortgages in U.S. is delinquent or worse
 

[url=http://www.nytimes.com/2009/11/20/business/20mortgage.html]U.S. Mortgage Delinquencies Reach a Record High[/url]: [i]The economy and the stock market may be recovering from their swoon, but more homeowners than ever are having trouble making their monthly mortgage payments, according to figures released Thursday.[/i]
[quote]The combined percentage of those in foreclosure as well as delinquent homeowners is 14.41 percent, or about one in seven mortgage holders. Mortgages with problems are concentrated in four states: California, Florida, Arizona and Nevada. One in four people with mortgages in Florida is behind in payments.[/quote]
[i]My Comment:[/i] I would remind readers that a scant 2 years ago, most MSM pundits were arguing that all was well because [url=http://www.washingtonpost.com/wp-dyn/content/article/2007/12/14/AR2007121401521.html?hpid=opinionsbox1]over 90% of mortgages are current[/url]. In that short time span, the delinquency rate - in a near-perfect harmony with the nationwide unemployment rate - has roughly doubled to well over 10%

(Note that the above-cited George Will`s latest op-ed assures us that the world is [url=http://www.washingtonpost.com/wp-dyn/content/article/2009/11/20/AR2009112002619.html]awash in fossil fuels[/url], while completely ignoring that e.g. Alberta tar-sands oil is both expensive and extremely environmentally toxic to extract ... so since supply is so high, it would be all that "robust demand" due to the rampaging economic recovery from the recession-which-never-really-happened as a result of the financial crisis caused by the completely-overblown toxic-mortgage-loan-o-rama that would responsible for the more-than-doubling of oil prices in the past year, then, would it? Apparently "getting it right more often than not" is not one of the required qualifications for mainstream-media-punditry fame ... you can in fact be egregiously wrong most of the time, as long as you make your incredibly-misguided arguments in a manner that is convincing to the credulous reader.

BLS Admits What the B and S stand for...
 

...and it ain't "Bureau" and "Statistics":

[url=http://norris.blogs.nytimes.com/2009/10/02/jobs-vanish/]NYT | Floyd Norris: Jobs Vanish[/url]: [i]The recession took a much larger toll on employment than was previously reported, the government said today.[/i]
[quote]The Labor Department said that it planned to revise the job figures by subtracting more than 800,000 jobs that it had wrongly estimated were filled by workers.

The planned revision indicates that this has been by far the worst recession since World War II, causing a 5.8 percent reduction in the number of jobs in this country since employment peaked at the end of 2007.

The decline in private sector employment was even greater, at 7 percent.

The so-called “benchmark revision” that was announced today will not formally be incorporated into the job figures until February, and could be revised. But the figures indicate that last March the government overestimated the total number of jobs by 824,000, or 0.6 percent. Its overestimate of private-sector employment was even greater — 855,000 jobs, or 0.8 percent.

It is the largest benchmark revision in at least the past dozen years. In 2006, when the economy was booming, it underestimated the total number of jobs by 752,000 jobs, or 0.6 percent. The private sector accounted for nearly all of that, causing an 0.7 percent upward revision.

In each of the three years since then, the benchmark revisions have indicated the government overestimated the number of jobs in the economy. But the 2007 and 2008 revisions were relatively small.

[u]The culprit is probably the much maligned birth-death model[/u], although Victoria Battista, an economist at the Bureau of Labor Statistics, said the bureau was looking into other possible issues, such as changing response rates to the questionnaire sent out by the bureau to employers each month.[/quote]
[i]My Comment:[/i] Notice the pathetic attempt at diversion in the last paragraph ... I wonder: do "employers who went out of business" contribute to those "changing response rates"? One also wonders: If their core statistical modeling of vital economic data is this poor, how reliable are the much-needed benchmark revisions going to be? Are their grossly over-or-underestimating their ongoing overestimation?


[url=http://money.cnn.com/2009/11/24/news/companies/fdic_list/index.htm]Bank 'problem' list climbs to 552[/url]: [i]Number at risk of failing soars in latest quarter. Deposit insurance fund slips into the red for first time since 1992.[/i]
[quote]NEW YORK (CNNMoney.com) -- Despite the frenetic pace of bank failures this year, 552 banks are still at risk of going under, according to a government report published Tuesday.
[u]
The Federal Deposit Insurance Corp. said that the number of lenders on its so-called problem list climbed to its highest level since the end of 1993[/u]. At that time, the agency red-flagged 575 banks.

Mounting bank failures have proven costly for the FDIC, an agency created to cover the deposits of consumers and businesses in the event that a bank is shut down.

On Tuesday, the agency revealed its deposit insurance fund slipped into the red for the first time since 1991.

At the end of the quarter on Sept. 30, the value of the fund was $8.2 billion in the hole. But that number accounts for $21.7 billion the agency has set aside in anticipation of future bank failures.[/quote]
[i]My Comment:[/i] Note that the wave of failures in the early 1990s was in the wake of the Savings and Loan crisis - more on that in my "flashback" below. The "552 banks are still at risk" phrasing in the opening sentence is disingenuous - it implies something to the effect of "552 banks remain at risk", but in fact the number is likely to continue to soar, especially as the commercial real estate market (whose ongoing implosion has lagged residential RE by 1-2 years) crashes. Unlike the residential-RE-and-securitization Ponzi bubble blowup which hit major banks and Wall Street firms who had leveraged up massively on RRE-based securities, CRE will hit small-to-midsize local and regional lenders particularly hard.

Time to flash back to [url=http://mersenneforum.org/showthread.php?p=138253&highlight=sheila+bair+bank#post138253]July of last year[/url], at which point there had been a modest 5 bank failures year-to-date and most "experts" believed Bernanke and Paulson's lies about the subprime mortgage crisis being "contained":

[url=http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2008/07/23/BUHA11TFGJ.DTL]FDIC: Don't worry about bank failures[/url]
[quote]"There will be more bank failures, [u]but nothing compared with previous cycles, such as the savings-and-loans days[/u]," Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., said in an interview.[/quote]

Ernst,

You've been calling it well for over two years (since Oct. 26 '07) now! While I've disagreed on some details, I'm impressed by your perspication.

[URL]http://www.roberttwigger.com/journal/2009/7/15/innovation-is-99-perspication.html[/URL]

[quote]Perspicacious people are observant. They look at things. They aim to be aware rather than in a doze. Perspicacity means the ability to zoom in and out- seeing the detail and then the whole picture. They then see solutions that others don’t. They don’t need lots of trials and lots of errors.[/quote]Fits you at least as well as your last fortune cookie fortune. :)

From Berlin, A Comment on U.S. National Priorities
 

[QUOTE=cheesehead;196964]Ernst,

You've been calling it well for over two years (since Oct. 26 '07) now! While I've disagreed on some details, I'm impressed by your perspication.[/QUOTE]
You are too kind ... Perhaps I should pick up some antiperspicant roll-on during my next trip to the drugstore?

[b]A Comment on National Priorities[/b]:

Barry Ritholtz returns from a visit to Berlin, and [url=http://www.ritholtz.com/blog/2009/11/federal-reserve-endorses-communism-for-the-wealthy/]comments[/url]:
[quote]My pet theory is that all of the anger about Health Care Reform is misdirected rage at the corrupt Bailouts. I don’t want to get too Continental on you, but the conversation in Europe I encountered repeatedly was the sheer perplexity at why people are protesting health care coverage for all. One fund manager said to me in Berlin, [i]“You give trillions to rogue bankers, yet you have 40 million uninsured American. Why is that?”[/i][/quote]
[b]
Fannie "Serious Deliquencies" Triple; and Fed Gobbles 'em Up
[/b]
[url=http://market-ticker.denninger.net/archives/1663-FraudiePhoney-MBS-And-More-Lies-From-Congress.html]Fannie "Serious Deliquencies" Triple; and Fed Gobbles 'em Up[/url]
[quote][i][url=http://www.reuters.com/article/GCA-Housing/idUSTRE5AN5EE20091124]NEW YORK (Reuters)[.url] - Fannie Mae shrunk its gross mortgage portfolio by an annual rate of about 28 percent in October and delinquencies on loans it guarantees rose sharply in September, the largest U.S. home funding company said on Tuesday.[/i]

The key in the story is that the single-family "serious" delinquency rate (that is, 90+ days behind - in the "forget it, they're hosed" bucket) is now 4.72% of the [b]entire portfolio[/b], where a year ago it was 1.72%.

That's 275% of the previous rate.
Where's the MBS portfolio [b]going?[/b] Fannie isn't running it down, you know.
Oh no - those MBS are going right onto The Federal Reserve's balance sheet through "outright purchases" - that is, monetization.
Unlike a [b]loan[/b], which is recourse and can be "put back", these can't. They're owned by The Federal Reserve, which printed up new money (debasing the currency) to purchase an "asset" of questionable (or worse) quality.

The perversity of The Fed's "purchase" program is that it has dramatically boosted the price of these "securities", even as their quality has gone into the toilet.
The outcome of this should not have been in question, of course - you can always drive up the "price" of something by intentionally overpaying for some of that thing. The wise owner of said "asset" will immediately sell it to you, of course, detecting that you are willing to overpay on purpose.

The perversity of such a "program", however, is that it destroys the market. The claim is that such "quantitative easing" is in some way "supportive" of the market for these securities. Nothing could be further from the truth - what has instead happened is that private demand has disappeared as The Fed has been paying more for them than the market price - and as a consequence anyone who might have been a buyer has immediately turned into a seller instead. Worse, the cost of funding new securities has become unattractive for Fannie and Freddie.
Net-on-net [b]the risk of default is being transferred to you[/b] as The Fed, if they have taken in so-called "good securities" by intentionally overpaying for toilet paper [b]their actions amount to nothing more than raw printing of money.[/b]

The dollar is reacting to this, along with the fact that the so-called "independent" Central Bank has effectively correlated its actions with Treasury, which [b]instantly[/b] issued more than $1 trillion in new debt right into its "low interest rate" environment and "Quantitative Easing" program.
Reality is this:
[u]
The housing market's performance is not improving - it continues to deteriorate, with loan performance [b]deteriorating[/b], not stabilizing.
[/u]
Virtually [b]all[/b] of the Fannie/Freddie paper that is "Seriously Delinquent" will foreclose. Nobody 90+ delinquent (statistically) cures - those are "hard" defaults that are either in foreclosure or will be in foreclosure.

The Fed will, by the end of the first quarter of 2010, own [b]20% or more[/b] of this paper - and it intentionally overpaid. The losses will be real, they will be in the tens if not hundreds of billions of dollars, and [b]you will eat it[/b] via devaluation of the currency and deterioration of your living standard - even if you were prudent.
There is no exit from this policy. Should The Fed dump the MBS paper on the market the price would collapse. Should they not and run it off the value will collapse. Either way the losses are real and will be absorbed - by you.

"Independent" Central Bank eh? Contemplate the wisdom of a so-called "independent" central bank having the right to levy a tax on all Americans - because that's what they're doing, in point of fact, to the tune of [b]hundreds of billions of dollars.[/b]
Oh, and to Darrell Issa, who made the comment to a constituent when challenged that HR.3221 of 2008 provided a "full faith and credit" guarantee to Fannie and Freddie, thus making their MBS purchase-eligible by The Fed: [b]That was a lie sir.[/b]

HR.3221 did no such thing. It in fact authorized [b]but did not require[/b] the purchase of MBS and Debt Instruments [b]by Treasury[/b], to wit ([url=http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221enr.txt.pdf]Sec 1117, P30[/url])

[size=-1]‘‘(A) General Authority - In addition to the authority under subsection (c) of this section, [b]the Secretary of the Treasury is authorized to purchase any obligations and other securities issued by the corporation under any section of this Act, on such terms and conditions as the Secretary may determine and in such amounts as the Secretary may determine. Nothing in this subsection requires the corporation to issue obligations or securities to the Secretary without mutual agreement between the Secretary and the corporation.[/b][/size]

That's crystal clear. [b]TREASURY[/b] is authorized to buy an unlimited amount of Fannie and Freddie paper - either MBS or outright debt issue. But nowhere in this act is Treasury [b]required[/b] to do so in satisfaction of debt - that is, [b]nowhere is the implied Fannie and Freddie guarantee modified to an explicit full faith and credit guarantee issued by The Federal Government.[/b]

Further, [b]Fannie filed a 10Q effective as of September 30th of this year in which it stated ON THE FIRST PAGE:[/b]

[size=-1]Although we are a corporation chartered by the U.S. Congress, and although our conservator is a U.S. government agency and Treasury owns our senior preferred stock and a warrant to purchase our common stock, [b][u]the U.S. government does not guarantee, directly or indirectly, our securities or other obligations. [/u][/b]
[/size]
End of discussion Mr. Issa. Fannie issued that 10Q as a document filed with the SEC by a firm that has publicly-traded capital stock. Not only does the general rubric of fraud apply should they make a knowingly-false claim, SarBox provides that such documents are specifically attested to as true and correct by the officers of the corporation responsible for said filing.

The reason that Treasury isn't buying these securities, and The Fed is doing so (and in my opinion illegally doing so) is quite simple: [b]If Treasury were to buy these securities it would have to issue Treasury Debt to fund the purchases. This would lay bare on the table the fact that The Federal Government is not running a $1 trillion annual deficit [u]it is in fact running a $2 trillion annual deficit[/u], and the consequence of that recognition by the market would likely be the [u]instantaneous collapse of Treasury Bond prices with a commensurate rocket shot in demanded coupon[/u]. [/b]

This would [b]force[/b] fiscal discipline on The United States Government - a reality you and the rest of Congress, along with Treasury, refuse to face.[/quote]
[i]My Comment:[/i] "Fiscal Discipline" ... is that some kind of kinky S&M thing?

An Exposition of Jurisprudential Erudition
 

Anybody remember the [url=http://en.wikipedia.org/wiki/Jackie_Chiles]Jackie Chiles, attorney-at-law[/url] character on [i]Seinfeld[/i]? You know, the one who was homage-to/parody-of the late defense attorney Johnny Cochran, of O.J.-Simpson-trial [i]"If it does not fit, you must acquit"[/i] fame? It would appear that Mr. Chiles lives on in Suffolk County (NY) judge Jeffrey A. Spinner:

[url=http://www.newsday.com/long-island/suffolk/judge-cancels-li-family-s-mortgage-berates-lender-1.1621785]Judge cancels Long Island family's mortgage, berates lender[/url]: [i]A Suffolk judge awarded a Long Island family their East Patchogue house, wiping the slate clean on their mortgage debt and ruling that the bank holding their home loan had acted in a manner "so completely devoid of good faith that equity cannot be permitted to intervene on its behalf."[/i]
[quote][u]In a terse, no-holds-barred decision[/u] rendered Nov. 19, Suffolk County Supreme Court Justice Jeffrey A. Spinner blasted the actions of IndyMac Mortgage Services, a division of OneWest Bank F.S.B., and its representatives - and awarded the home to Diana J. Yano-Horoski and husband Greg Horoski.

"We never asked for this," Greg Horoski said Wednesday from the modest single-story home on Oakland Street. "I was shocked, honestly."

"It's not like we said, 'Judge, please throw the loan away.' We just wanted them [the bank] to be reasonable."

The decision came after a series of state-mandated, pre-foreclosure settlement conferences between the lenders and borrowers of subprime loans.[/quote]
[i]My Comment:[/i] While I applaud the judge`s decision, I wouldn't exactly describe the wording in his ruling as "terse":
[quote]Spinner wrote in his decision: "It was [u]celeritously[/u] made clear to the Court that Plaintiff had no good faith intention whatsoever of resolving this matter in any manner other than a [u]complete and forcible devolution[/u] of title from Defendant."
...
The judge noted Yano-Horoski and her husband both had health issues and that IndyMac denied an offer by Yano-Horoski's daughter to purchase the home at fair-market value - a move that would have created "a win-win situation" for all the parties involved. He also noted that Dickinson "insisted" that Yano-Horoski had been offered a so-called "Forbearance Agreement" but had "quickly defaulted" on it, which then led to the foreclosure action.

However, Spinner said that "it was only after substantial prodding by the Court that [IndyMac representative] Ms. Dickinson [u]conceded, with great reluctance[/u], that it [the Forbearance Agreement] had not been sent to [the] Defendant until after its stated first payment due date."

Which meant, Spinner wrote, that Yano-Horoski could not have [u]consummated[/u] the agreement - and that, through what he called the "[u]Plaintiff's duplicity[/u]," found herself "in the unique and uncomfortable position of being placed in default of the 'agreement' even before she had received it."[/quote]
Judge Spinner is just getting warmed up in terms of judicial loquacity and verdictual prolixity: It [url=http://mandelman.ml-implode.com/2009/11/judging-indymac-%E2%80%93-new-york-supreme-court-judge-finds-indymac%E2%80%99s-behavior-%E2%80%9Crepugnant-shocking-repulsive-and-completely-devoid-of-good-faith%E2%80%9D/]gets even better[/url]:
[quote]The judge referred to IndyMac’s conduct as being “[u]inequitable, unconscionable, vexatious and opprobrious[/u]”
...
“[u]Plaintiff’s conduct is wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf[/u]. Indeed, Plaintiff’s actions toward Defendant in this matter have been [u]harsh, repugnant, shocking and repulsive to the extent that it must be appropriately sanctioned so as to deter it from imposing further mortifying abuse against Defendant.”[/u]
...
The judge described Ms. Dickinson as having an “[u]opprobrious demeanor and condescending attitude[/u]”
...
He also said that, taking into consideration the conduct of IndyMac in its entirety, [u]compelled him to invoke an “ancient and venerable principle” known as “Falsus in uno, falsus in omni,”[/u] which is Latin for “false in one, false in all” ... [u]“Regrettably, the Court has been unable to find even so much as a scintilla of good faith on the part of Plaintiff[/u]. Plaintiff comes before this Court with unclean hands yet has the [u]insufferable temerity to demand equitable relief against Defendant.”[/u]
...
“Equitable relief will not lie in favor of one who acts in a manner which is shocking to the conscience, neither will equity be available to one who acts in a manner that is oppressive or unjust or whose conduct is sufficiently egregious so as to prohibit the party from asserting its legal rights against a defaulting adversary. The compass by which the questioned conduct must be measured is a moral one and the acts complained of need not be criminal nor actionable at law but must merely be willful and unconscionable or be of such a nature that honest and fair minded folk would roundly denounce such actions as being morally and ethically wrong. Thus, where a party acts in a manner that is offensive to good conscience and justice, he will be completely without recourse in a court of equity, regardless of what his legal rights may be.”[/quote]
[i]My Comment:[/i] [i]"Your honor, I assert, avow and aver that Plaintiff`s behavior was outrageous, egregious, malicious and injudicious ... the effect on my client was inflammatory, defamatory, vexatious, mendacious, injurious, with intent to be penurious. We hereby request indemnification, restitution, absolution and dissolution of all contractual obligations, said separations to be accompanied by reparations."[/i]

Oh, and by the way ... "They`re real, and they`re spectacular!".

Happy Thanksgiving to our U.S. readers!

The biggest news of the last 2 days is the request to put debt repayment on hold for Dubai. This can be shown as a case of gross mismanagement of finances by a country that is trying hard to develop its potential. They grew too big too fast on someone else's money. The result is an overall debt in the $80 Billion range. In their favor is the huge infrastructure they have developed with shopping centers, hotels, and financial expertise. Standing against them is a huge and overwhelming debt.

Why is this important? It will have rock-on impact to financial markets around the world. We can expect serious volatility over the next week. Any further financial blows can be expected to have an amplified effect on the market.

We've had the earthquake. This is an aftershock, and a BIG one.

DarJones

[QUOTE=Fusion_power;197131]The biggest news of the last 2 days is the request to put debt repayment on hold for Dubai.[/QUOTE]

Yep - here are some related links detailing various aspects of the extent and likely fallout of the potential Dubai debt default:

[url=http://www.bloomberg.com/apps/news?pid=20601087&sid=azd17alFNikQ&pos=2]Dubai Debt Delay Rattles Confidence in Gulf Borrowers[/url]: [i]Dubai shook investor confidence across the Persian Gulf after its proposal to delay debt payments risked triggering the biggest sovereign default since Argentina in 2001.[/i]


[url=http://www.bloomberg.com/apps/news?pid=20601085&sid=abFTDi7T0.VE]RBS Led Dubai World Lenders, HSBC Has Most at Stake in UAE, JPMorgan Says[/url]: [i]Royal Bank of Scotland Group Plc was the biggest underwriter of loans to Dubai World, the state company seeking to reschedule debt, while HSBC Holdings Plc has the most at risk in the United Arab Emirates, according to JPMorgan Chase & Co.[/i]


[url=http://www.bloomberg.com/apps/news?pid=20601085&sid=aao0Hm5CgWC0]British Banks Have $49.5 Billion Loans to U.A.E., Most in Europe, RBS Says[/url]:[i]British banks are Europe’s biggest lenders to the United Arab Emirates, constituting $49.5 billion of the continent’s $87.3 billion loans outstanding to the Gulf state, Royal Bank of Scotland Group Plc said.[/i]

China Losing Big on U.S. Debt Holdings
 

[url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aMLpLWLx8Y3Y&pos=5]China Losses Inevitable as Dollar Weakens, Ex-PBOC Adviser Says[/url]: [i]China’s foreign-exchange reserves face a “triple whammy” as inflation, oversupply and the “inevitable” decline of the dollar threaten to erode the value of its holdings of U.S. Treasuries, said Yu Yongding, a former adviser to the Chinese central bank. [/i]
[quote]China needs to divert its trade and investment surpluses away from U.S. debt if it is unable to reduce them, Yu, a member of the central bank’s monetary policy committee from 2004 to 2006, said in a speech in Melbourne last night. The nation, with the world’s largest foreign-exchange reserves of $2.3 trillion, is the U.S.’s biggest creditor, holding $798.9 billion of Treasuries as of September.

“Capital losses -- let alone obtaining decent returns -- seem inevitable,” said Yu, a member of the Chinese Academy of Social Sciences. “There is no question whatsoever that the U.S. dollar will go south, which started in April 2002 and, after a short interval, restarted in March 2009.”

The dollar traded near a 14-year low against the yen as the Federal Reserve signaled it will tolerate a weaker greenback and Russia’s central bank announced plans to add Canadian dollars to its reserves to reduce its reliance on the U.S. currency. Russia, holder of the world’s third-largest foreign currency reserves, and China this year suggested the world economy would perform better with an alternative reserve currency to the greenback.
[u]
A 10 percent slide in the greenback would cut the value of China’s dollar-denominated assets by about 1.5 trillion yuan ($220 billion), exceeding Chinese central government spending under the nation’s $586 billion stimulus plan[/u], Yu said Oct. 28 at a forum in Beijing.

The U.S. dollar has declined against all 16 of the most- traded currencies this year. It traded at $1.5125 per euro as of 9:22 a.m. in Tokyo and has weakened 8.3 percent against the currency this year. [/quote]
[i]My comment:[/i] The single-ply toilet paper known as the U.S. dollar hit a 14-year low against the Japanese Yen - the Yen! (Can you say "Japan has 200% debt-to-GDP"?) - today. Do you think this intentional ongoing devaluation of the dollar by our "committed to a strong currency" buffoons at the U.S. Treasury and Federal Reserve will make China eager to continue purchasing our debt?

I think there's a fair amount of double-counting of the Dubai debt to RBS; people in national treasuries aren't entirely naive, and may well already have counted Dubai debt as not entirely likely to be recovered.

Obviously they won't publish the spreadsheets with this assumption in, since it would be a substantial diplomatic offence to Dubai, but I don't think governments would invest taxpayer's money on the assumption that Dubai semi-state-owned debts were guaranteed to be repaid in full and on time.

Slightly surprised that there don't seem to have been enormous CDS bets against Dubai World, but I suppose we've had eighteen months in which enormous CDS bets have not been terribly popular.

[QUOTE=fivemack;197254]I think there's a fair amount of double-counting of the Dubai debt to RBS; people in national treasuries aren't entirely naive, and may well already have counted Dubai debt as not entirely likely to be recovered.

Obviously they won't publish the spreadsheets with this assumption in, since it would be a substantial diplomatic offence to Dubai, but I don't think governments would invest taxpayer's money on the assumption that Dubai semi-state-owned debts were guaranteed to be repaid in full and on time.

Slightly surprised that there don't seem to have been enormous CDS bets against Dubai World, but I suppose we've had eighteen months in which enormous CDS bets have not been terribly popular.[/QUOTE]
Apparently it was not so much the debt situation in Dubai which surprised many investors/banks/governments - rather, it had been widely assumed that Dubai's oil-rich neighbor and serial financial sponsor Abu Dhabi [url=http://www.zerohedge.com/article/quantifying-external-uae-and-dubai-loss-exposure]would step in[/url] and bail out its overleveraged (and oil-poor) spendthrift little brother. That may still happen, but given its own significant sovereign debt load and a sovereign wealth fund whose value appears to [url=http://www.zerohedge.com/article/dubai-digits]have dropped significantly from the $500B[/url] touted before last year`s worldwide financial blowup I suspect Abu Dhabi will first wait and see how the various interested parties respond - if Dubai can negotiate a payment delay and/or debt restructuring with significant haircuts to the creditors, that would be the best outcome for Abu Dhabi.

ZeroHedge has an interesting piece on the intrigues regarding the controversial post-9/11 agreement - which the EU is keen to renegotiate - allowing the U.S. to snoop on the European SWIFT bank-transaction data network:

[url=http://www.zerohedge.com/article/pull-swift-one]Pulling a SWIFT One[/url]
[quote]Given the backbone nature of the SWIFT network, it was the natural home for the (eventually scandalous) [url=http://en.wikipedia.org/wiki/Terrorist_Finance_Tracking_Program]Terrorist Finance Tracking Program[/url], in no small part part of the large rift that grew between the most recent Bush administration and Europe. [url=http://brusselsblogger.blogactiv.eu/2009/11/26/swift-eu-to-grant-usa-nearly-unlimited-access-to-all-eu-banking-data/]Brusselsblogger explains[/url]:

[i]The move of SWIFT the data server to Switzerland would be an excellent opportunity to stop the nearly unlimited access of US authorities on EU bank transactions. But EU justice and interior minister are apparently keen agree a deal as soon as possible, on 30 November. Why 30 November? Because one day later, on 1 December 2009, the EU’s Lisbon Treaty will be in force and would allow the European Parliament to play a major role in the negotiations of the deal with the USA. A deal one day before will be a slap in the face of democracy in the EU.

SWIFT handles 15 mio bank transactions daily for more than 9000 banks worldwide. Nearly every transnational bank transaction within the EU is recorded in the SWIFT data centers, including amount, sender, recipient, and transaction comments. The agreement will even allow to transmit “other personal data”.

This will allow US authorities to establish a huge data mining database, allowing to query [sic] every substantial business link within the EU. No question that the United States will never admit that openly.
[/i]
Interestingly, the agreement is not bilateral. The EU enjoys no reciprocity in data sharing. For the United States here it is all take and no give. In its role as the latest American lapdog, Switzerland is unlikely to hinder the New Moon-like U.S. thirst for the financial lives of others (like tax evadersterrorists, for instance). Nice work if you can get it.[/quote]

U.S. mainstream media last night and today full of optimistic stories about [allegedly] "big" Black Friday shopping crowds and "strong" sales - I can believe that plenty of folks were at the malls, but everything I've heard and seen tells me folks were mainly focused on finding the best discounts and were really watching their spending (this is by reckless-spending 21st-century American ConsumerBot[sup]tm[/sup] standards, mind you ;). I don't even listen to the blather from the various self-interested retail tracking outfits - "show me the sales tax receipts...". I hit a couple online sites that had some really great Black Friday specials (e.g. Amazon had the 2009 "Star Trek" DVD for $9 - bought 1 for me and 2 for friends so got free shipping, too) - but avoid the malls the day after Thanksgiving.

Just watched local surprise college football team of the year Stanford come back to beat Notre Dame 45-38 in a barnburner ... nice!

HAMP Plan's Mortgage-Revision Score: 0 for 650,000
 

[url=http://money.cnn.com/2009/11/30/news/economy/permanent_modifications/index.htm]Getting tough with mortgage lenders[/url]: [i]Under new Treasury procedures, loan servicers must detail plans to assist borrowers long-term. Laggards could face penalties and sanctions[/i]
[quote]NEW YORK (CNNMoney.com) -- Struggling to stem the swelling foreclosure tide, the Obama administration announced new steps Monday to pressure banks to help homeowners long term.

The administration said it will require top loan servicers to report their plan to reach a decision on each loan for which they have all the needed documentation. Also, these servicers must explain to Treasury how they will communicate the decision to borrowers.

Servicers will also be required to report the status of each modification. Those failing to meet their obligations could face penalties and sanctions.

To help borrowers through the process, the administration is providing more information on the documents they need to submit to be considered for a permanent modification. Federal, state and local officials will increase outreach to delinquent homeowners.

The administration's move is its latest attempt to jumpstart its $75 billion loan modification plan, which many fear will fall far short of its goal to help up to 4 million delinquent homeowners.

A growing number of borrowers are complaining that they are stuck in trial modifications. Some 650,000 homeowners are currently in this preliminary phase, [u]but only a small fraction have received permanent assistance[/u].

About 375,000 people should receive long-term relief by year end, said Treasury officials in their first estimate of how many permanent modifications would be made this year. The administration is set to release its first report on the conversions in coming weeks.[/quote]
[i]My Comment:[/i] Hmmm ... I wonder what Treasury`s definition of "a small fraction" is in this regard? Ah yes, here we go:

[url=http://www.bloomberg.com/apps/news?pid=20601087&sid=a0HakbseT9rk&pos=2]U.S. Treasury to Push Lenders to Finish More Home Modifications[/url]
[quote]Nov. 30 (Bloomberg) -- The U.S. Treasury Department plans to intensify public pressure on lenders to finish modifying more home loans to troubled borrowers under a $75 billion campaign against the record tide of foreclosures.

Almost 651,000 loan revisions had been started through the Obama administration’s Home Affordable Modification Program as of last month, from about 487,080 as of September, according to the Treasury. [u]None of the trial modifications through October had been converted to permanent repayment plans[/u], the Treasury data showed. That failure is getting the administration’s attention. [/quote]
So, of the 650,000 homeowners taking part in the HAMP program, despite more than enough time having passed for the related paperwork to have been taken care of for many of the in-progress revisions, precisely ZERO have actually been revised. Zero is indeed "a small fraction", so the folks at Treasury are being quite truthful there. As to the "375,000 should receive relief by year`s end", well - let`s just say one hopes they're not holding the breath.


[b]Bernanke On Self-Promotional "Let Me Keep Saving The World" Blitz[/b]

While Ben Bernanke (whose confirmation hearings for re-nomination as Fed Chair by President Obama are this Thursday) will likely be confirmed for another term "because he`s done such a fabulous job handling the economic crisis and the markets would react badly were he not confirmed", the hearings promise to be the most contentious in memory for that post. I have no interest in twisting myself into knots to attempt to give a pro-Bernanke side of the argument by way of being "fair and balanced" - I think he has done little other than put present and future generations of taxpayers on the hooks for multiples of the GDP in order to paper over the results of a debt-bubble-caused crisis he and his predecessor had a large role in causing and further to bail out the Wall Street crooks who benefited from the mania. I will however point the interested reader to a self-promoting op-ed our esteemed "Dear Chairman" wrote [url=http://www.washingtonpost.com/wp-dyn/content/article/2009/11/27/AR2009112702322.html?sub=AR]in last week`s Washington Post[/url]. On the less-hagiographical side of the argument, here are some links to articles by prominent skeptics in the blogosphere about Mr. Bernanke`s fitness for the job:

[url=http://globaleconomicanalysis.blogspot.com/2009/11/ben-bernanke-pleads-for-his-job-my.html]Mike Shedlock: Ben Bernanke Pleads For His Job; My Response to Bernanke[/url]
[quote]The Greenspan Fed, of which you were a part, blew an enormous housing/credit bubble to bail out banks from stupid loans made to dotcom companies and Latin America.

You are back at it once again, only bigger.

Your policy is and always has been to blow repetitive bubbles of increasing amplitude, each bigger than the last, hoping to bail out the system. You have learned nothing from 2001, from, Japan, or from the Great Depression.

You are a complete disgrace in your inability to learn anything from history, and unfortunately the US is held hostage to your foolish policies.
...
It is imperative to stop the Fed's power grab. The Fed bailed out banks and the bondholders of banks, illegally, at taxpayer expense. Moreover, the Fed would do it again in a flash. While the bondholders were made whole (the same applies to Fannie and Freddie), taxpayers are footing the bill.

Moreover the Fed has expanded its balance sheet by $trillions and no one really knows exactly what is in it, how much it is worth, or how much taxpayers might be on the hook for it.

While making claims of transparency, the Fed has fought to kill mark to market accounting at banks and the Fed certainly does not mark its own books to market. The whole thing is a huge shell game. The FDIC and the entire banking system is insolvent.

Bernanke's self-serving mission is to make sure the Fed is not accountable for its actions and my uphill battle mission is to help move along Ron Paul's bill [HR 1207] so that Bernanke does not succeed.[/quote]


[url=http://market-ticker.denninger.net/archives/1671-The-Black-Hats-Strike-Back-Bernanke.html]Denninger: It appears that Ben Bernanke has his knickers in a bit of a bind this morning...[/url]
[quote]You should not have bank regulatory powers. The reason is simple: You have abused them and willfully ignored the abuses served upon the people ... The Federal Reserve is one of the primary architects of the current economic malaise and indeed the credit bubble that led to it. For you to come to The People of this Nation and ask for more power and authority, say much less keeping that which you have had but refused to exercise in the best interest of the people, is an outrage.

You "arrested" the crisis through lies, chicanery and papering over the truth of insolvency. Not one step has been taken by The Fed since the inception of the crisis to address the root causes of the collapse ... Indeed, had The Federal Reserve exercised its already existing authority to demand that banks never lend out more unsecured than they have in "owner's capital" - that is, the total amount of bond and stockholder equity - there would have been no "systemic risk" or "crisis." Instead those who had done imprudent things would have simply gone bankrupt, as businesses do each and every day, but the banking system as a whole would have been just fine.

But The Fed didn't do that, because forcing Wall Street and other big banking interests to live within their capital would mean they would make less money when times were good.

Leverage multiplies both risk and reward. There is nothing wrong with using it, provided that the risk you take is your own - that is, it entirely belongs to the owners of the firm (the aforementioned stock and bondholders.) But when you allow leverage to extend beyond a firm's capital you force the risk on to other, non-affiliated and non-consenting parties.

This is an outrage, and yet it is part and parcel of The Fed's mantra for the previous twenty years or more. We have seen repeated instances of this, beginning with LTCM, extending into the Latin American and Asian debt crises, and then again into the Tech Wreck in 2000. Time and time again the solution has been to reduce the margins between systemic insolvency and operating leverage.

This time you went too far and the system failed. Rather than admit this, you now come to the people of this nation and demand even more control, after proving that you're a financial arsonist with both a big can of gasoline and an insatiable smoking habit.[/quote]

Tobin Harshaw: Goodbye Dubai
 

Tobin Harshaw, author of the NYTimes online column [i]The Opinionator[/i], collects articles from the English-language world press and opinions [url=http://opinionator.blogs.nytimes.com/2009/11/28/goodbye-dubai/index.html?ref=opinion]about the debt crisis in Dubai[/url]. The most interesting bit for me was the "Three narratives" take by the NYT`s own Paul Krugman:
[quote]As far as I can tell, there are three ways to look at it — three stories, if you like, about what Dubai means.

First, there’s the view that this is the beginning of many sovereign defaults, and that we’re now seeing the end of the ability of governments to use deficit spending to fight the slump. That’s the view being suggested, if I understand correctly, by the Roubini people and in a softer version by Gillian Tett.

Alternatively, you can see this as basically just another commercial real estate bust. Either you view Dubai World as nothing special, despite sovereign ownership, as Willem Buiter does; or you think of the emirate as a whole as, in effect, a highly leveraged CRE investor facing the same problems as many others in the same situation.

Finally, you can see Dubai as sui generis. And really, there has been nothing else quite like it.

At the moment, I’m leaning to a combination of two and three. For what it’s worth (not much), US bond prices are up right now, suggesting that the Dubai thing hasn’t raised expectations of default.

Anyway, we continue to live in interesting times.[/quote]
[i]My Comment:[/i] I think Door #2 is the most-apt analogy, but Krugman then attempts to downplay the potential significance by dodging into Door #3, "it`s really unlike anything else". Sorry, you can`t first argue that Dubai is "just another commercial real estate bust" (albeit a really, really big one) but then - instead of drawing the obvious comparison with the deeply troubled CRE sectors in the U.S. and elsewhere - try to have your cake and eat it too by claiming some (unexplained) exceptionalism. "Oh, it`s that weird place way out in the desert of the Middle East" ... that sort of vague bullcrap. In fact, Krugman has it exactly right with choice #2: Dubai was simply one of the most-egregious of the overleveraged boom-time speculative CRE ventures the Greenspan bubble (which was global, because other countries were drinking from the same punch bowl of debt-expansion-as-miracle-economic-growth-tonic) bequeathed the world. Like so many of the its fellow ventures, Dubai is doomed, and was only able to play the "extend and pretend" game for a limited time. In Dubai`s case the default - because in Dubai CRE *was* the economy - immediately led to what is effectively a sovereign default. Others will similalrly follow, just with a longer time lag. Thus, getting back to our game-show metaphor, signs point from Door #2 back to Door #1, not to the bogus Door #3.

NY Fed Rapes the Taxpayer Once Again
 

[url=http://money.cnn.com/2009/12/01/news/companies/aig/index.htm]Fed reduces AIG's debt by $25 billion[/url]: [i]Two life insurance companies sold to Federal Reserve Bank of New York in completion of deal.[/i]
[quote]NEW YORK (CNNMoney.com) -- AIG announced Tuesday that it completed a deal wiping out $25 billion of its debt to taxpayers by selling stakes in two subsidiaries to the Federal Reserve Bank of New York.

The troubled insurer gave the New York Fed preferred shares of two of its international life insurance companies, including $16 billion of American International Assurance Co. and $9 billion of American Life Insurance Co. The deal was originally announced in March.

The deal brings the New York-based insurer's debt to the New York Fed down to $17 billion. AIG also still owes the U.S. Treasury $44.8 billion from a separate Troubled Asset Relief Program (TARP) loan, so the insurer still owes taxpayers just under $62 billion. [/quote]
[i]My Comment:[/i] More outrageous stuff here - the obvious let-the-market-set-the-valuation approach here would have been for AIG to sell the units to private investors and use the proceeds to repay the government. Especially so now that the credit markets are oh-so-much-more-stable according to the very same Fed officials who pull this sort of crap. Given that there was no kind of transparent valuation process or parallel attempt at a public offering - and given the NY Fed`s previous scret shenanigans in paying off certain "preferred AIG creditors" at par last Fall, costing the U.S. taxpayer billions of dollars - I have little doubt that "we the taxpayer" grossly overpaid for the above 2 AIG subsidiaries. How does doing this sort of no-transparency-no-bid price-setting with what are effectively taxpayer monies not amount to gross malfeasance on the part of the NY Fed?


[url=http://www.nytimes.com/2009/12/01/business/global/01debt.html?em]In Wake of Dubai, Trying to Predict the Next Blowup[/url]: [i]Like overstretched American homeowners, governments and companies across the globe are groaning under the weight of debts that, some fear, might never be fully paid back.[/i]
[quote]As Dubai, that one-time wonderland in the desert, struggles to pay its bills, a troubling question hangs over the financial world: Is this latest financial crisis an isolated event, or a harbinger of still more debt shocks?
...
From the Baltics to the Mediterranean, the bills for an unprecedented borrowing binge are starting to fall due. In Russia and the former Soviet bloc, where high oil prices helped feed blistering growth, a mountain of debt must be refinanced as short-term i.o.u.’s come due.

Even in rich nations like the United States and Japan, which are increasing government spending to shore up slack economies, mounting budget deficits are raising concern about governments’ ability to shoulder their debts, especially once interest rates start to rise again.

The numbers are startling. In Germany, long the bastion of fiscal rectitude in Europe, government debt is on the rise. There, the government debt outstanding is expected to increase to the equivalent of 77 percent of the nation’s economic output next year, from 60 percent in 2002. [u]In Britain, that figure is expected to more than double over the same period, to more than 80 percent.[/u]

The burdens are even greater in Ireland and Latvia, where economic booms driven by easy credit and soaring property values have given way to precipitous busts. Public debt in Ireland is expected to soar to 83 percent of gross domestic product next year, from just 25 percent in 2007. Latvia is sinking into debt even faster. Its borrowings will reach the equivalent of nearly half the economy next year, up from 9 percent a mere two years ago.

Like Latvia, the Baltic states of Lithuania and Estonia remain worryingly exposed, as do Bulgaria and Hungary. All of these nations carry foreign debt that exceeds 100 percent of their G.D.P.’s, said Ivan Tchakarov, chief economist for Russia and the former Soviet states at Nomura bank. [u]External debt is often held in a foreign currency, which means governments cannot use devaluation of their own currencies as a tool to reduce their debt when they run into trouble[/u], according to Maurice Obstfeld, an economics professor at the University of California, Berkeley.

Few analysts predict a major nation will default on it government debts in the immediate future. Indeed, many maintain that rich nations and the International Monetary Fund would intervene if a government needed a bailout.

But there are no assurances that companies in these nations, which, like governments, gorged on debt in good times, will be rescued. Dubai’s refusal to guarantee the debts of its investment arm, Dubai World, may set a precedent for other indebted governments to abandon companies that investors had in the past assumed enjoyed full state backing.

“I see very good reasons to be worried that at some point in 2010 we are going to see more cases of ring-fencing because governments realize they can’t afford to guarantee the debts of these companies,” said Pierre Cailleteau, managing director of the global sovereign risk group and chief economist of Moody’s.

Kenneth Rogoff, a Harvard economist whose recent book, “This Time Is Different,” chronicles 800 years of financial crises, said: “I think right now every vulnerable country has one or two deep-pocketed backers that pretty much rule out a sudden run.” But [u]Mr. Rogoff said he expected a wave of defaults about two years from now[/u], when the countries now serving as implicit guarantors turn their focus to economic problems at home.[/quote]
[i]My Comment:[/i] Note the underlined comment about issuing debt in one`s own currency ... the question is, when debt-to-GDP levels become sufficiently large, is devaluation really that different from sovereign default?

I notice that officials of the various governments which are attempting to borrow-nd-spend their way back to the illusory prosperity of the Greenspan Bubble decades are of course inclined (or paid) to see things quite differently - for example in today`s NYT reader letters section we see this:

[url=http://www.nytimes.com/2009/12/01/opinion/lweb01britain.html?ref=opinion]Letter: The British Economy[/url]
[quote]To the Editor:

“[url=http://www.nytimes.com/2009/11/21/business/global/21pound.html]In Britain, Visions of Japan’s Decade of Stagnation[/url]” (Business Day, Nov. 21) is unduly negative about the British economy.

The measures the British government took to respond to the global economic crisis were described as “bold and wide-ranging” by the International Monetary Fund. We acted early and decisively to support the stability of Britain’s financial system and to prevent the recession from turning into a depression.

Concerns about the British budget deficit need to be put in context. Britain entered this crisis with lower levels of debt than every other Group of 7 country except Canada. In line with that commitment to sound public finances, the government has undertaken to pass legislation that will oblige it to halve the deficit in the lifetime of the next Parliament.

The British government expects the nation’s economy to return to growth at around the turn of the year; the International Monetary Fund, the Organization for Economic Cooperation and Development and other independent experts agree. Indeed, the O.E.C.D. has upgraded its view of growth prospects for 2010 and 2011, forecasting growth of over 2 percent in 2011.

The greatest risk to recovery is complacency. But presenting our economy in a balanced and contextualized way is important to genuinely understanding its prospects.

Dominick Chilcott
Deputy Head of Mission
British Embassy
Washington, Nov. 23, 2009[/quote]
[i]My Comment:[/i] I beg to differ - in my opinion, the greatest risk to recovery is deeply misguided and debt-burdening government policies to prop up failed businesses and play the "extend and pretend" game, based on a combination of political spinelessness and delusional "tomorrow will be so much better" expectations. Note that Mr. Chilcott is mum as to what the alleged drivers of all that expected "economic growth" will be - based on the level of government deficit spending, 2 percent is in fact not "growth" at all; it`s deflation temporarily being masked by mostly-wasteful and real-economy-nonstimulative deficit spending.

Currency devaluation.

What strange effects this is having now. Japan is goosing the economy with high levels of liquidity (translate this to mean lots of easily borrowed money at low interest rates) in order to fight deflation. Canada's Loonie is 95.5 to the dollar. This should prompt an intervention to push it back down by Canada's banking sector but now that Russia has announced it is stockpiling Loonies, there is no way it can be kept sub par with the dollar. Some countries national debt is denominated in another countries currency. This means currency devaluation can NOT be used to manipulate the debt.

What if the next major bubble being blown in the world economies is a currency bubble? What extreme turmoil will some economies suffer as currency imbalances mushroom..... and implode.

Peter peter money eater had a currency but couldn't keep her. Put her in a pumpkin shell and there her currency began to smell.

Just a thought or two for a late afternoon.

DarJones

GM's Henderson Outed by Board
 

...not that there`s anything [url=http://www.imdb.com/title/tt0098904/quotes]wrong[/url] with that:

[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=ayWKfNZ6HmUE]GM's Henderson Resigns From Helm of Automaker; Whitacre Is Interim Chief[/url]: [i]General Motors Co. Chief Executive Officer Fritz Henderson stepped down after running the biggest U.S. automaker for eight months, and Chairman Ed Whitacre took over on an interim basis.[/i]
[quote]“They’re looking to rebuild the company in a completely different form,” Maryann Keller, president of consultant Maryann Keller & Associates, told Bloomberg Television today. “They’re looking to bring in someone who has a completely different perspective.”
...
Henderson “has done a remarkable job leading the company through a time of challenge, and momentum has been building over the past several months, but we all agreed changes needed to be made,” Whitacre told reporters. He didn’t take questions or elaborate on the executive shake-up.

That assessment differed from the one Whitacre gave in a Nov. 10 interview at his office in Texas, when he said directors backed Henderson, whose posts at GM included serving as chief operating officer and chief financial officer under Wagoner.

“We have some momentum now, there’s a lot of enthusiasm,” Whitacre said. “We’re all cautiously optimistic. The board is fully behind Fritz; he’s working hard.”[/quote]
[i]My Comment:[/i] Hmmm ... there would appear to be more to the story than the pundits (e.g. Ms. keller quoted above) admit - Henderson, in his TV ads promoting "The New GM", certainly wasn't touting himself as "just a short-term caretaker kind of guy". But it appears (based on followup stories) that the board did not see 25-year GM veteran Henderson as the kind of innovator needed to reshape the company into a viable 21st-century enterprise.


[url=http://money.cnn.com/2009/11/30/real_estate/mortgage_lessons.fortune/index.htm]Junk mortgages: It just gets worse[/url]: [i]In 2007 we dissected one toxic issue. The horror story continues, but can we still learn from our mistakes?[/i]
[quote]NEW YORK (Fortune) -- Back two years ago when the mortgage meltdown was heating up, we wrote an article called "Junk Mortgages Under the Microscope" dissecting a particularly wretched mortgage-backed securities issue peddled by Goldman Sachs.

We wanted to show how these complex securities really worked and how Moody's and S&P, the rating agencies, aided and abetted the process by giving two-thirds of an issue backed by ultra-risky second mortgages the same safety rating they gave to U.S. Treasury securities.

We thought this was a cautionary tale -- but it's turned into a horror story. [u]All the tranches of this issue, GSAMP-2006 S3, that were originally rated below AAA have defaulted. Two of the three original AAA -rated tranches (French for "slices") are facing losses of about 90%, and even the "super senior," safer-than-mere-AAA slice is facing losses of 25%[/u]. How could this happen? And what lessons can we take away from it?

Let's revisit the way this security was put together, and how and why it fell apart. And for the first time, we can even estimate the value -- low -- of the mortgages backing it, thanks to a new service called ABSNet Loan HomeVal.

Our tale begins in April 2006, when Goldman Sachs sold $494 million of securities to institutional investors seeking yields somewhat above those that were available on U.S. Treasuries or high-rated corporate bonds.

It was an especially hinky offering, because it was backed by second mortgages rather than by traditional first mortgages. A first mortgage rarely becomes completely worthless, because a house is usually worth something.

But often all it takes is a decline of 20% in a home's value to wipe out a second mortgage, which is typically piled on top of an 80% first mortgage. In our case, borrowers' stated equity in their homes averaged less than 1% -- 0.71%, to be precise. Even that was doubtless overstated because a majority of the mortgages were low-documentation and no-documentation.

Despite these problems, the formulas used by Moody's and S&P allowed Goldman to market the top three slices of the security -- cleverly called A-1, A-2 and A- 3 -- as AAA rated. That meant they were supposedly as safe as U.S. Treasury securities.[/quote]
[i]My Comment:[/i] To echo Denninger, "Where are the indictments?"

[QUOTE=Fusion_power;197518]Canada's Loonie is 95.5 to the dollar.[/QUOTE]

?

North Koreans Find Savings "Gone With the Won"
 

[QUOTE=axn;197604][QUOTE=Fusion_power;197518]Canada's Loonie is 95.5 to the dollar.[/QUOTE]

?[/QUOTE]

Wait for it ... it'll get there before too long at this rate.

And speaking of radical currency debasement (and no, by "debasement" I don't mean "de place below de ground floor", except in a metaphorical sense), pity the poor North Koreans ...

One of the great things about running a totalitarian government is that when you want to do something, even if it will cause immense suffering for your citizenry, you just do it. For instance, say you`re running North Korea, and have bled your country dry for decades to prop up an oversized military which (among other things) makes sure you stay in power as long as the troops are well-fed and the generals have access to all the rent-free housing, western porn/action-flicks/sports-TV, booze, gold watches and hookers they want. Now this has trashed your real economy, and the only way for you to buy anything you need - that is most everything above the level of "half-rations of subsistence food" - from abroad is to run the government money-printing-presses 24/7, paying your poor-slob citizenry for real labor with Ponzi money whose value is far less than the labor is worth. No need to try to do it on the sly like the U.S. Federal Reserve, by engaging in complex "mortgage-backed asset-purchase programs" and "temporary emergency lending facilities" ... no, you simply tell your citizens one day, "All your money is worthless, you need to work extra-hard just to keep yourself fed with substandard Kimchee and keep us from confiscating your stuff":

[url=http://www.washingtonpost.com/wp-dyn/content/article/2009/12/01/AR2009120101841_pf.html]Chaos reportedly erupts after North Korea revalues currency[/url]: [i]Move restricts amount of old bills that can be traded for new, wipes out personal savings[/i]
[quote]TOKYO -- Chaos reportedly erupted in North Korea on Tuesday after the government of Kim Jong Il revalued the country's currency, sharply restricting the amount of old bills that could be traded for new and wiping out personal savings.

The revaluation and exchange limits triggered panic and anger, particularly among market traders with substantial hoards of old North Korean won -- much of which has apparently become worthless, according to news agency reports from South Korea and China and from groups with contacts in North Korea.

The sudden currency move appeared to be part of a continuing effort by the government to crack down on private markets, which have become an essential part of the food-supply system in chronically hungry North Korea.

In recent years, some market traders have stashed away substantial amounts of cash, while establishing themselves in profitable businesses that the government struggles to control.

But under the rules of the new currency system, the wealth of these traders has largely disappeared, unless it is held in Euros, dollars or Chinese yuan.

The revaluation replaces 1,000 won notes with 10 won notes, but strictly limits the amount of old currency that can be exchanged, news reports said.

According to two web-based groups with sources in the North, that limit was set Monday at 100,000 won, which at current black-market rates amounts to just $40. All North Korean currency that individuals possess in excess of that amount becomes worthless, under the revaluation.
...
Amid widespread protests, the limit was slightly raised to 150,000 won (about $60) in cash and 300,000 won ($120) in bank savings, according to DailyNK, an online news organization that has informants in the North.

"I worked like a dog for two months for the winter, but the money became useless paper overnight," a resident of Sinuiju, a city that borders China, was quoted as saying on the web site of Good Friends, a Seoul-based aid organizations with informants in the North.

China's Xinhua news agency said in a report from Pyongyang that state-run shops were closed Tuesday as sales staff posted new prices on goods.

The exchange of old currency for new began Monday and will end on Sunday, Xinhua said, adding that the government did not explain why the revaluation had occurred.

The move shocked local markets in the North Korean capital, according to Yonhap, a news agency in Seoul.

"Many citizens in Pyongyang were taken aback and in confusion," according to a person quoted by Yonhap. "Those who were worried about their hidden assets rushed to the black market to exchange them for yuan or U.S. dollars. The yuan and the dollar jumped."

In the past year, North Korea has put increasing pressure on local markets, closing several large ones and limiting the range of goods that can be sold in them.
[u]
The government has also criminalized everyday market behavior, while creating a new kind of gulag for those it deems economic criminals[/u], according to a report released this fall by the East-West Center, a research organization established by Congress to promote understanding of Asia.

The report says security forces in North Korea have broad discretion to detain without trial nearly anyone who buys or sells in the local markets. But if traders can pay bribes, security officials will often leave them alone, the report says.

If the currency move substantially cripples the operation of local markets in the North, the consequences could be severe for the millions of people who now depend on them for food. U.N. officials have estimated that as much as half the calories consumed by North Koreans comes from food bought in markets.

South Korean officials said last month that North Korea appears to be on the brink of another severe food crisis, with stocks of food likely to run short by March of next year.[/quote]
[i]My Comment:[/i] Ah, the irony of a government which has no compunction robbing its people blind while at the same time "creating a new kind of gulag for those it deems economic criminals". The gang of criminal psychopaths running N. Korea makes the cabal of criminal kleptocrats rinning the U.S. seem almost benign in comparison ... almost. The really amusing thing is the numerous parallels between the economies of North Korea and the latter-day U.S., once you get beyond all the flag-draped "truth, justice and the American way" jingoism:

o Both have monstrously bloated militaries relative to the size of their economy;

o Both evade being called to account by using the threat (explicit for NK, implied for USA) of their nuclear arsenal;

o Both have government operations which run ongoing deficits and can only be sustained thanks to the largesse of China.

Imagine if the U.S. wasn't blessed with a disproportionate share of the world's richest topsoil (rapidly being degraded - e.g. in Iowa roughly half of all that rich topsoil accumulated over multiple cycles of glaciation and intervening warmth has been lost due to farming in the past 100 years) and was not able to keep its citizens well-fed with ridiculously low effort...

VT Senator: "Ben Bernanke Is Part Of The Problem"
 

[url=http://www.zerohedge.com/article/senator-sanders-ben-bernanke-part-problem]ZeroHedge: Senator Sanders: "Ben Bernanke Is Part Of The Problem"[/url]
[quote]Ben Bernanke's low-road approach of taking the Fed's "noble mission" of bailing out Wall Street at any and all costs directly to the people seems to have come at curiously opportune time, a mere week ahead of his December 3 Senate Banking Committee hearing for his second 4 year term nomination. It also seems to have backfired as some people in high standing seem less than enthused by the oodles of human lactic acid kindness that suddenly overflow from each and every floor (yes, even the 3rd sub-basement which houses the 10 consistently overheating [i]druckmaschinen[/i]) of the Marriner S. Eccles building.

One such among them is Senator Bernie Sanders who earlier said on ABC's "This Week" that Bernanke will be renominated over his dead body (metaphorically speaking):
[i]
"No, I absolutely will not vote for Mr. Bernanke. He is part of the problem. He's the smartest guy in the world, why didn't he do anything to prevent us from sinking into this disaster that Wall Street caused and which he was a part of? No, I will not vote for Bernanke to stay on as chairman."
[/i]
And even as the dollar moves increasingly underwater and is now even more "collateralized" by worthless and completely unwanted (except by the Fed) MBS and Agency securities, less and less people buy Bernanke's strong dollar Kool Aid: it was not enough for Bernanke to launch the greatest bail out in history using the Mutual Assured Destruction threat as the "end of the world as we know it" event that would occur if Goldman Sachs shareholders were to get wiped out. No, now he has to destroy the US middle class to ensure that Wall Street has one more, maybe two years, of good bonuses, before the main show of commingled feces and precariously balanced cards can collapse with impunity.

As senators consider how much money their Wall Street backers will stuff in their Christmas lobby stockings, we present a modest proposal of 15 or so questions that those in Washington with even half a conscience should ask the Chairman before making sure that nothing ever changes and we are set on a catastrophic bubble collapse of even more epic proportions...[/quote]
[i]My Comment:[/i] The 15-questions list is recommended reading ... If I were allowed to asked Mr. Bernanke just one question, it would be "Why do you feel it is reasonable to attempt to address the effects of the collapse of one asset-price bubble fueled by excessive leverage (that is, debt) by encouraging the taking-on of even more debt by consumers, financial institutions and the Federal government?"

[i][UPDATE: With the committee vote looking to be very close, it appears Senator Sanders has upped the ante:][/i]

[url=http://www.nytimes.com/2009/12/03/business/03fed.html?_r=1&hp]NYTimes: Senator Sanders To Place "Hold" On Bernanke Reconfirmation, Chairman Will Need 60 Senate Votes To Override[/url]
[quote]The move is unlikely to derail Mr. Bernanke’s reappointment, but it could slow the confirmation process and give the Fed’s critics additional opportunity to press their case. As a practical matter, it means Senate Democratic leaders will have to line up 60 votes in favor of Mr. Bernanke rather than a simple majority at a time when the Federal Reserve is under increasing populist attacks from lawmakers on both the right and the left.

Mr. Bernanke will testify on Thursday at his confirmation hearing before the Senate banking committee. He is expected to face criticism for not doing more to prevent the financial crisis, and calls by some lawmakers for a sharply reduced regulatory role in the future.

Mr. Sanders, an independent, is not a member of the Senate banking committee, but he has frequently accused the Federal Reserve of bailing out Wall Street firms and the banking industry at the expense of ordinary citizens. [/quote]

Kudos to at least one leading MSFM publication, [i]Forbes[/i] for coming out in favor of the Paul/Grayson bill to audit the Fed:

[url=http://www.forbes.com/2009/11/28/ron-paul-alan-grayson-audit-fed-opinions-columnists-michael-maiello.html]Bring On Fed Transparency[/url]: [i]By all means, we should let Congress audit our central bank.[/i]
[quote]There`s a good chance the call for the Government Accountability Office to audit the U.S. Federal Reserve will lead to nothing. Still, it`s a proposal worth enacting. Ron Paul, the Libertarian-leaning Republican representative from Texas, teamed up with lefty Democrat Alan Grayson of Florida to get this very good idea into the Financial Stability Improvement Act of 2009.

Some say this threatens the Fed`s independence. It doesn`t. Fed Chairman Ben Bernanke is a brilliant man who may well go down in history for having spared us "Depression II: Buddy Can Ya Spare An iPhone?"--but he isn`t a king. He can be audited and still get his job done. The Fed might even be better off for being forced to explain itself in greater detail to the public it`s supposed to serve.[/quote]

But the Fed is pulling out all the stops to get Bernanke reappointed and to preserve the sanctity and secrecy of The Temple -- Today`s defense of Templar secrecy comes courtesy of Fred "Iceman" Mishkin, a.k.a. [url=http://www.zerohedge.com/article/fred-iceman-mishkin-says-paul-bill-incredibly-dangerous-says-gold-side-show]"The Man Who Singlehandedly Destroyed Iceland"[/url]:

[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aqUfLCJcZ7Ow]Mishkin Calls Paul's Proposal to Audit Fed Policy `Incredibly Dangerous'[/url]: [i]U.S. Representative Ron Paul’s proposal to allow audits of the Federal Reserve’s monetary policy is “incredibly dangerous” and could stoke inflation, said Frederic Mishkin, a former Fed governor.[/i]
[quote]“The Ron Paul bill is incredibly dangerous,” said Mishkin, who is now a Columbia University professor, in a Bloomberg Radio interview. “It is remarkable the kind of attacks that are occurring on Fed independence.”

Fed Chairman Ben S. Bernanke has opposed the proposal by Paul, a Texas Republican, saying it might open the door to interference in monetary policy. A separate proposal in the Senate backed by Banking Committee Chairman Christopher Dodd would strip the Fed of authority to supervise banks.

Paul’s bill “would be very dangerous in terms of promoting inflation,” Mishkin said. “If you make the central bank beholden to politicians on a short-run basis, you get very bad outcomes: high inflation and less of the ability to deal with shocks like the ones we had recently.” [/quote]
[i]My Comment:[/i] Self-serving claptrap by another high-profile Fed lackey ... as the above [i]Forbes[/i] piece points out, the Paul/Grayson bill makes the Fed no more "beholden to politicians" than the federal judiciary is. On the other hand hand, if the Fed eventually is subject to an audit - and you can see that is shaping up to be one hell of a nasty political and media fight - and we find out that some of those trillions of taxpayer liabilities incurred by the Fed in order to bail out Big Finance are as dodgy (or borderline illegal) as skeptics believe, then maybe it *will* prove time to make the Fed "beholden" to someone other than the banksters. I note Mishkin is unbelievably disingenuous regarding "the inflation threat" - if rampant money-printing and overpaying for toxic assets by the Fed in order to bail out the banks (who are not lending the money, but are certainly using a large part of it to speculate in the equity and commodities markets, knowing full well the Fed "has their back") ain`t inflationary, I don`t know what is. God, these arrogant idiots need to have their secretive shenanigans aired so badly ... the first step in ending the fraud is to expose the fraud.

One ZeroHedge reader puts it nicely: [i]"Does anyone know if Mishkin has ever been on the payroll of an institution that had to endure the consequences of poor judgment?"[/i].

Bernanke Vote "Possibly On Hold Until Next Year"
 

[URL="http://money.cnn.com/2009/12/02/news/companies/bank_of_america_tarp/index.htm"]BofA to return $45 billion to taxpayers[/URL]: [I]Nation's largest bank said it planned to sell $18.8 billion in securities to fund move that would free it from government restrictions.[/I]
[I]My Comment:[/I] I must say I`m impressed at the speed with which BofA was able to do this (can you say "year-end executive bonuses"? I knew you could) ... of course the extra revenues from rate-jacking millions of its credit card customers (including many with sterling credit scores) plus the effects of a seven-month-long government-liquidity-and-propaganda-aided bear market rally which has seen BofA`s share price more than quintuple from its early-March lows have surely helped rather a lot in that respect. Now there remain only the $40B-plus in [URL="http://www.zerohedge.com/article/proposal-goldman-sachs-pay-down-212-billion-tlgp-borrowings-using-your-20-billion-bonus-accr"]FDIC-guaranteed debt[/URL].

Of course, getting out from under the TARP-associated restrictions has *nothing* to do with golden-parachute planning of BofA execs ... it`s strictly "the right thing to do to pay back America for savings our butts" ... and of course millions of credit-card accounts now yielding 29.9% usury rates are a much better long-term business-profitability model.


[URL="http://online.wsj.com/article/SB10001424052748704107104574572160340353006.html"]WSJ: Ben Bernanke should Not Be Reappointed[/URL]
[quote]Federal Reserve Chairman Ben Bernanke faces his Senate renomination hearing today, [U]amid signs that the confirmation skids are greased[/U]. We nonetheless think someone should say that, as a matter of accountability for the financial crisis and looking at the hard monetary choices to come, the country needs a new Fed chief.

We say this not because of Mr. Bernanke's performance during the financial panic of 2008, for which he has been widely and often deservedly praised. Like others in the regulatory cockpit at the time, he had to make difficult choices with imperfect information and when the markets were shooting with real bullets.

He supplied ample liquidity when it was most needed last autumn, and he has certainly been willing to pull out every last page of the central banker playbook. If some of those decisions were mistakes, the conditions the Fed faced were extraordinary. Anyone at the helm would have made calls that in hindsight he'd regret.

The real problem is Mr. Bernanke's record before the panic, with its troubling implications for a second four years. When George W. Bush nominated the Princeton economist four years ago, we offered the backhanded compliment that at least he'd have to clean up the mess that the Alan Greenspan Fed had made. That mess turned out to be bigger than even we thought, but we also didn't know then how complicit Mr. Bernanke was in Mr. Greenspan's monetary decisions.[/quote][I]My Comment:[/I] More evidence of the "greased skids" mentioned by the WSJ: After being "highly critical" of Ben the Mery Monetizer in public statements leading up to today`s confabulation meeting, Senate Banking Committee Chairman Chris Dodd said he [URL="http://money.cnn.com/2009/12/03/news/economy/bernanke_hearing/index.htm"]will vote to give Bernanke another 4-year term[/URL].

[I][UPDATE: Faced with the prospect of a filibuster requiring 60 votes to override (as opposed to just 51 for a normal rubber-stamp confirmation) Dodd hinted that Bernanke`s confirmation may have to waikt until earely next year. Between the uncertainty of whether Bailout Ben will be there for 45 more years and strategic White House hints that tomorrow`s jobs report may look weak, markets sold off in the last hour. But no worries - tomorrow is another day, and another opportunity to restart the Ponzi Pumping.][/I]


[URL="http://www.bloomberg.com/apps/news?pid=20601039&sid=a3m5YKDn20BE"]Fudging Losses Is Easy When the FDIC Does It, Too[/URL]: [I]No wonder so many banks are delaying their losses. The Federal Deposit Insurance Corp. keeps showing them how, by doing the same thing with its own.[/I]
[quote]Last week the FDIC, led by Chairman Sheila Bair since 2006, said its insurance fund’s liabilities exceeded assets by $8.2 billion as of Sept. 30. That marked the first time since 1992 that the industry-financed fund had shown a deficit. There’s plenty of reason to believe its financial health is much worse.

That’s because the FDIC has been underestimating its losses ever since the financial crisis began, which is another way of saying it has consistently overstated its insurance fund’s capital position. At the rate it’s going, the FDIC soon may have no choice but to borrow money from taxpayers by tapping its $500 billion credit line with the Treasury Department, an option it so far has avoided.

What’s just as troubling, though, is the example the FDIC is setting for the industry it’s supposed to regulate. Either the FDIC isn’t very good at gauging its obligations, or it has a habit of denying reality. [/quote][I]My Comment:[/I] Another great, probing piece by Bloomberg`s Jonathan Weil.

November Jobs | Proxy Data for Black Friday Sales
 

[b]Thought of the Day[/b]: In the wake of President Obama`s long-awaited decision to up the ante in Afghanistan/Pakistan:

[i]"A continuation of the wars on Shadows and Things is the wrong way to go. You cannot win a war against Terror. Terrorism is a tactic: it has no consciousness; it cannot be aware that it won or lost, same with the war on drugs. Perhaps BO can come up with some different shadows and things to wage wars against to distinguish himself from Bush and Reagan and bankrupt our country even faster than them."[/i] -- anonymous ZeroHedge reader


[url=http://www.zerohedge.com/article/unemployment-drops-amazingly-10-nfp-down-11000-much-higher-consensus-172-u-6-unemployment]November Unemployment Shows "Surprise Drop"[/url]

...Down from 10.2% to 10.0% - lots of BLS "birth/death black box" mystery meat as usual. Main result -ignored by the MSFM as usual - is the continuing increases (at a rate of a half-million per month or more) of long-term-unemployed, "marginally attached" and "not in labor force", as folks who`ve been out of work for on the order of a year or more simply give up looking. Numbers there not quite a disastrous this month as earlier this year, but still not remotely indicative of the much-touted "recovery". Lastly, the sharp difference between the ADP [url=http://www.adpemploymentreport.com/pdf/FINAL_Report_November_09.pdf]November payroll numbers[/url] (based on actual employer data, and not put out by the government) and today`s BLS report makes me suspicious that the BLS numbers may have been upwardly fudged even more than usual ... call it the [url=http://www.tradingmarkets.com/.site/news/TOP%20STORY/2701807/]"Obama post-jobs-summit town-hall meeting pump"[/url]. For a guy presiding over the highest unemployment rate since the Great Depression, he sure is not shy to take credit for all his various "accomplishments". Apparently the latest plan - to be announced by Obama next Tuesday - is to use some $170 billion in TARP monies repaid by the banks to fund "Stimulus 2: The Next Job Generation". The resulting wave of hopeful optimism for Change You Can Believe In[sup]tm[/sup] and Putting America to Work will sweep the nation, revive housing prices and support a huge V-shaped recovery resulting in a boom in tax revenues which will allow the government to eliminate the budget deficit, re-fund the $50 Trillion missing from the Social Security "Trust Fund" and related mandatory spending programs and live in happiness and sustainable prosperity ever after. Or something like that - a few small details remain to be worked out, obviously.


[b]Black Friday Sales: A Boots-On-The_Ground Perspective[/b]

I sent the following link and commentary about SF_Bay Area Rapid Transit ridership numbers serving as a useful proxy for shopping-district activity to several of my favorite econo-bloggers yesterday afternoon ... I see Karl Denninger has [url=http://market-ticker.denninger.net/archives/1695-More-Black-Friday-And-Final-Demand.html]run with it[/url].

[url=http://abclocal.go.com/kgo/story?section=news/business&id=7150199]anc7news.com | San Francisco News - BART ridership down during Black Friday - 12/02/09[/url]
[quote]SAN FRANCISCO (KGO) -- BART ridership to San Francisco's Union Square shopping district was down nearly 18 percent on Black Friday. Nearly 49,000 riders took the train to Union Square last year, as compared with only about 40,000 this year -- the lowest number in four years.

BART doesn't rely on Black Friday to get in the black like retailers, but there is more at stake than fares alone.

"Think about it this way, when people aren't spending money it hurts us two ways: one, obviously is the ridership revenue that we receive. And two is the sales tax they would spend here, we don't get that either so it's a double-whammy," said BART spokesman Linton Johnson.

And it's not as if the shoppers came in cars instead.

The Union Square Merchant's Association says parking was down 10 percent at the Sutter-Stockton and Union Square garages.

Retailers aren't revealing sales results, but when the association asked merchants if they agreed with the prediction that this year's sales would be down one percent from a year ago and 55 percent agreed.

Gumps CEO Marta Benson was in the 45 percent who disagreed.

"We were really pleased with Black Friday and the whole weekend," she said.[/quote]
[i]My Comment:[/i] I’ll take this kinds of boots-on-the-ground metric of shopping-day traffic over vague “we feel really good about holiday sales” (as touted by the Gumps CEO) self-pumping by merchants and retail organizations any day. The BART numbers correlate well with a [url=http://market-ticker.denninger.net/archives/1691-See-What-They-Hide-Retail-Results.html]Reuters article[/url] (which got little play in the MSFM) indicating that Black Friday was in fact a bust this year.

Note in the article that not only was BART traffic down, but so was parking – in other words, this wasn’t a result of more people driving to go shopping in downtown SF.

[b]House Readies Legislation to Replace Previous Regulatory Failures with New Ones:[/b]

[url=http://www.bloomberg.com/apps/news?pid=20601103&sid=aCPJxWAXbEx]Systemic-Risk Bill Approved by House Panel, Advancing Financial Overhaul[/url]: [i]A House panel approved legislation strengthening U.S. authority to police large, complex firms that pose risks to the economy, advancing the Obama administration’s effort to overhaul U.S. financial rules.[/i]
[quote]The House Financial Services Committee voted 31-27 today for a bill creating a council of regulators to monitor systemic risk, shifting the cost of a failure to the financial industry and giving regulators the power to break up healthy firms.

The legislation would give the Federal Deposit Insurance Corp. the authority to dismantle systemically risky firms and merge two bank regulators, the Office of Thrift Supervision and the Office of the Comptroller of the Currency.

The legislation was amended by Representative Paul Kanjorski, a Pennsylvania Democrat, to let regulators dismantle healthy, well-capitalized financial firms whose size would threaten the economy.[/quote]
[i]My Comment:[/i] If that makes you feel better about yourselves, great - but it sounds to me like more feel-good legislation with no teeth. We had plenty of regulators throughout the Greenspan Ponzi-bubble era, who were either bought off, deeply-conflicted industry insiders, or who were simply there to collect a government paycheck and didn`t want to "make any waves" by actually doing their job.

Ireland On Sale | Friday Humor
 

[b]Deflation Trade in Post-Boom Ireland:[/b]

[url=http://www.bloomberg.com/apps/news?pid=20601109&sid=aQw1pm.Qz9sg]`Vultures' of Irish Recession Snap Up Champagne and Mercs From Liquidators[/url]: [i]The worst recession in Ireland’s modern history has turned the country into a bargain basement with cut-price champagne, country houses and Mercedes cars.[/i]
[quote]The liquidator of Dublin wine importer Parbind is selling boxes of six bottles of Bernard Remy rosé champagne for 132 euros ($199), down from the original tag of 205 euros. Elsewhere, prices of empty homes have been slashed by as much as two-thirds as property developers are forced to wind up.

“It’s a bit like old vultures over the carcass,” said Donall O’Murchu, a retired school teacher, avoiding shoppers with trolleys laden with cases of Parbind wine. “You see all sorts of places coming down. The recession seems to be biting.”

Ireland’s decade of breakneck economic growth made it one of the richest countries in the world, alongside Switzerland and Austria, and with that new wealth came unprecedented demand for faster cars, fancier homes and finer wines. The abrupt end to that boom has made the country prime ground for deal-hunters.

Accounting firm KPMG LLP is selling 23,000 cases of wine at a discount of as much as 60 percent as it liquidates Parbind to try to pay creditors. The wine wholesaler joined developers, pub owners and car merchants struggling to meet debts as consumers spent less and unemployment rose to a 14-year high. [/quote]
[i]My Comment:[/i] This is the flip side of U.S.-style bailouts of failed companies and overleveraged banks: Such bailouts vainly attempt to reinflate asset bubbles whose popping is vital to freeing up remaining capital and thus prolong the agony, while at the same time providing perverse incentives ("moral hazard") which only encourage new misallocation of capital ("asset-price bubbles"). Instead, allowing the imprudent and overleveraged to fail and using interventions only in genuine emergencies (e.g. to stave off wide-scale panic and prevent disorderly collapse from taking down otherwise-healthy sections of the economy, e.g. by providing means by which functioning revenue-positive companies can meet payrolls even if the financial firms that normally handle the short-term-credit aspects of such day-to-day business transactions go under) frees up capital, lowers prices for those who were prudent (thus speeding the process of new-business creation vital to a real recovery), and makes a repeat occurrence less likely, at least until enough generations have passed for the lessons of the bust to have once again been forgotten. (Note that roughly 3 generations passed between the Great Depression and the Greenspan Credit Bubble - just enough time for most folks who lived through the GD as adults to die. Somehow, reading about it just ain't the same as hearing about it firsthand - such is the power of "living memory").


[b]Friday Humor[/b]

An oldie but a goodie -- The inimitable Mark Twain weighs in on currency debasement:
[quote]Riverdale-on-the-Hudson, OCTOBER 15, 1902.

THE HON. THE SECRETARY OF THE TREASURY, WASHINGTON, D. C.:

Sir,--Prices for the customary kinds of winter fuel having reached an altitude which puts them out of the reach of literary persons in straitened circumstances, I desire to place with you the following order:

Forty-five tons best old dry government bonds, suitable for furnace, gold 7 per cents., 1864, preferred.

Twelve tons early greenbacks, range size, suitable for cooking.

Eight barrels seasoned 25 and 50 cent postal currency, vintage of 1866, eligible for kindlings.

Please deliver with all convenient despatch at my house in Riverdale at lowest rates for spot cash, and send bill to

Your obliged servant,

Mark Twain, Who will be very grateful, and will vote right.[/quote]

Greece May Be First European Default Since 1948
 

[url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aDMQfsXXnSqw&pos=2]Greece My Be First EU Default[/url]: [i]Former Bank of England policy maker Willem Buiter said Greece may be the first major country in the European Union to default on its debts since the aftermath of World War II.[/i]
[quote]“It’s five minutes to midnight for Greece,” Buiter, who will join Citigroup Inc. as its chief economist next month, said in a Bloomberg Television interview today. “We could see our first EU 15 sovereign default since Germany had it in 1948.” [/quote]
[i]My Comment:[/i] Spain, Ireland and the Baltics also flashing huge warning signs.

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

[url=http://globaleconomicanalysis.blogspot.com/2009/12/stimulus-checkup-100-ridiculous.html]Stimulus Checkup - 100 Ridiculous Projects Funded by the American Recovery Act[/url]
[quote]As this and the last report, 100 Stimulus Projects: A Second Opinion, suggests billions of dollars of stimulus funding have been wasted, mismanaged, or directed towards silly and shortsighted projects. Many projects may not produce the types of jobs that most Americans had hoped for or expected.

Some of the close to seven billion dollars in projects in Stimulus Checkup create few jobs; benefit private interests over the public good; or make improvements where they are not necessary. Some send money to companies facing fraud charges. Others take millions of dollars to do work local officials and experts admit are not needed or will not help.

Stimulus money has been, or will be, spent on dinner cruises, golf courses, puppet shows and stimulus road signs. Many Americans will question whether investing $787 billion in these projects are the highest national priorities.[/quote]
[i]My Comment:[/i] But I told them to put "Spinal Tap" *above* "Puppet Show" on the sign ...

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

ZeroHedge has [url=http://www.zerohedge.com/article/bob-ivrys-eulogy-mark-pittman]Bob Ivry's Eulogy For Mark Pittman[/url], the Bloomberg reporter who nailed the ratings agencies for their AAA-plated fraud and who was the prime mover behind Bloomberg`s suing the Federal Reserve - which is still fighting the suit - to require it to disclose what assets it has purchased, from whom and at what prices, under the Freedom of Information Act. Great stuff ... the line (by the six-foot-four-inch Pittman) "I'm tall enough to see above the bullshit" is classic.

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

[b]Federal Tax Receipts Belie Economic Recovery Propaganda[/b]

[url=http://www.zerohedge.com/article/collapse-tax-withholdings-refutes-improvements-either-unemployment-or-corporate-profitabilit]Collapse In Tax Withholdings Refutes Improvements In Either Unemployment Or Corporate Profitability[/url]
[quote]Even as the BLS and the administration are trying to cover up the real state of unemployment affairs using assorted semantic gimmicks of just what it means to be unemployed, and as companies provide adjusted EPS numbers, while actual earnings continue to collapse, the true barometer of spending, provided by the Financial Management Service, tax withholdings (net of refunds), continues to paint the truest picture of just what is really happening with both America's consumer and the corporate world. And it ain't pretty. On a rolling 12 month basis, individual tax withheld has dropped by nearly 8% YoY, from $1.42 trillion to $1.31 trillion, while company withholding are down a walloping [sic] 64%, from $274 billion to just under $100 billion! This is money that will never be used to pay down the skyrocketing US deficit, because both the US consumer and average US company are simply not collecting the required cash to line the Treasury's pockets with the one traditional way to pad the deficit: taxes. Expect much, much, much more debt issuance in America's short, medium and long-term future. [/quote]
[i]My Comment:[/i] And speaking of the exploding national debt, a startling statistic puts into perspective just how deep the hole into which America has dug herself is:

[url=http://money.cnn.com/2009/12/07/news/economy/citizen_suggestions_debt/index.htm]Citizens lay down law on U.S. debt[/url]: [i]Americans from around the country weigh in on how lawmakers should deal with the fast-growing fiscal challenges facing the United States.[/i]
[quote][u]To solve the country's fiscal problems, the gross domestic product would need to increase by double digits on average for the next 75 years[/u], according to estimates from the Government Accountability Office. Oh, and that's on an inflation-adjusted basis.

So unless someone finds a serious stash of economic fairy dust, lawmakers are left with three unpopular choices: cut spending, raise taxes and stop making promises the country can't afford.

Instead, they've done just the opposite. They've increased spending and lowered taxes as the country's long-term obligations continue to grow - obligations both to those who buy government debt and to the Medicare and Social Security programs, from which Uncle Sam has been borrowing surplus revenue for years.[/quote]
[i]My Comment:[/i] Ah, but there is another way to keep the debt from exploding, and it is precisely the one the pols - who would never have the spine to raise explicit taxes anywhere near enough to cover their out-of-control spending - have been doing, or acquiescing to as the U.S. Treasury and Fed do it for them: Impose a "savings tax" by debasing the dollar, whose purchasing power has dropped by a factor of more than 20 times in the past century, starting with the printing used to help finance WWI, the Great-Depression-era government spending, WW2 and all the other wars the U.S. has fought (and continues to) and the explosion in entitlement programs which coincided roughly with LBJ`s "Great Society" program - it is no coincidence that Nixon took the U.S. off the gold standard a few years later, as the nation was pouring unheard-of amounts of money into the Vietnam war and all the new entitlements. And entitlements are extremely persistent things ... once people become dependent on them, it`s an addiction which is almost impossible to break, as long as the money-printing presses are supplied with paper and ink. (And nowadays the paper and ink are metaphors for "computer keystrokes by central bank officials").

Focus on Europe
 

The focus of today`s installment is Europe, whose casinos are currently up on news of a UAE [url=http://market-ticker.denninger.net/archives/1725-UAE-Joins-Bailout-World-Dubai.html]kinda-sorta bailout[/url] of the nearest-term chunk of Dubai World`s debt:

[url=http://www.bloomberg.com/apps/news?pid=20601109&sid=a0TGt_uAV5vs]Greece's Papaconstantinou Under Siege as Deficit Woes Hurt Ratings, Bonds[/url]: [i]Greek Finance Minister George Papaconstantinou began the week with his office protected by baton-wielding riot police taming student protests. Now, investors have him under siege as the country’s bonds tumble.[/i]
[quote][Greek Prime Minister George] Papandreou appointed Papaconstantinou, who holds a doctorate from the London School of Economics, after he led the socialists to victory in October elections, winning a 10-seat majority in parliament. While the party won on a platform of higher wages that contrasted with Karamanlis’s pledges for a pay freeze, Papaconstantinou was within weeks forced to publish revised figures that cast doubt over Greece’s fiscal health.
[b]
Data showed Greece’s deficit this year would be more than twice the previous government’s forecasts and four times the EU limit. Other revisions showed that, rather than being one of the few European economies still growing amid the worst global slump since World War II, Greece had been in a recession for a year.
[/b]
Papaconstantinou defends his government’s strategy to reduce the deficit by more than 3 percentage points of GDP to 9.1 percent next year.

“What exactly has changed in the last 40 days to justify a downgrade?” he said of the Fitch [Ratings] decision [to further downgrade Greek debt to BBB+]. [/quote]
[i]My Comment:[/i] Uh, I`d say the boldfaced paragraph makes quite clear what has changed ... the grossly over-optimistic economic delusions you used to justify impossible-to-keep election promises has been blown to bits, that`s what changed. And the fact that you are still in denial mode does not make me optimistic about the chances that the Greek government will take the drastic measures needed to tackle the debt monster in time to avoid a default.


[url=http://www.businessweek.com/globalbiz/content/dec2009/gb20091214_347629.htm]Adios Christmas as Spain's Recession Bites[/url]: [i]Hit hard by the continuing economic downturn, Spanish shoppers are paring back sharply on holiday spending—or canceling Christmas altogether[/i]
[quote]Spanish holiday spending will drop 9.1 percent this season, according to Deloitte, more than the 6.3 percent decline forecast for western Europe. El Corte Inglés SA, the nation's biggest department store operator, is advertising 70 percent discounts to lure shoppers.

The credit crunch exacerbated the collapse of Spain's housing boom last year, leaving people struggling to pay household debt that is among the highest in the euro region. The protracted crisis means more than half the jobless, including Serrano's husband, have been out of work too long to get full benefits. Spain's unemployment rate is 19 percent.

The outlook for next year doesn't give consumers much reason for holiday cheer. The economy is forecast to contract 0.8 percent in 2010, lagging behind the European Commission's estimate for European expansion of 0.7 percent. Spanish unemployment is expected to rise to 20 percent.[/quote]
[i]My Comment:[/i] That estimate of GDP contraction for 2010 is likely both overoptimistic and inclusive of government deficit spending. I expect as in the U.s. the one sector of the Spanish "work force" which will get raises next year is government employees.


[url=http://www.bloomberg.com/apps/news?pid=20601085&sid=aMfDDCK0lqIo]Austria Decides to Nationalize Hypo Alpe-Adria Bank[/url]: [i]Austria will take over Hypo Alpe-Adria Bank International AG and inject as much as 450 million euros ($660 million), the country’s second bank nationalization since the start of the financial crisis.[/i]

[i]My Comment:[/i] A half-billion Euros is peanuts compared to what`s coming. Tick, tick...


[b]Friday Humor:[/b] [Deferred to Monday] Courtesy of our friends-in-Britain-with-too-much-time-on-their-hands, a humorous spin on executive bonuses in tough economic times:

[quote][b]UK suicide Bombers Set to Strike in Dispute Over Virgin Allotments[/b]

Muslim suicide bombers in Britain are set to begin a three-day strike on Monday in a dispute over the number of virgins they are entitled to in the afterlife. Emergency talks with Al Qaeda management have so far failed to produce an agreement.

The unrest began last Tuesday when Al Qaeda announced that the number of virgins a suicide bomber would receive after his death will be cut by 25% next January from 72 to only 60. The rationale for the cut was the increase in recent years of the number of suicide bombings and a subsequent shortage of virgins in the afterlife.

The suicide bombers` union, the British Organisation of Occupational Martyrs (or B.O.O.M.) responded with a statement that this was unacceptable to its members and immediately balloted for strike action. General secretary Abdullah Amir told the press, "Our members are literally working themselves to death in the cause of jihad. We don`t ask for much in return but to be treated like this by management is a kick in the teeth."

Mr Amir accepted the limited availability of virgins but pointed out that the cutbacks were expected to be borne entirely by the workforce and not by management. "Last Christmas Abu Hamza alone was awarded an annual bonus of 250,000 virgins," complains Amir. "And you can be sure they`ll all be pretty ones too. How can Al Qaeda afford that for members of the management but not 72 for the people who do the real work?"

Speaking from the shed in the West Midlands where he currently resides, Al Qaeda chief executive Osama bin Laden explained,

"We sympathise with our workers` concerns but Al Qaeda is simply not in a position to meet their demands. They are simply not accepting the realities of modern-day jihad, in a competitive marketplace. Thanks to Western depravity, there is now a chronic shortage of virgins in the afterlife. It`s a straight choice between reducing expenditure and laying people off. I don`t like cutting wages but I`d hate to have to tell 3,000 of my staff that they won`t be able to blow themselves up." He defended management bonuses by claiming these were necessary to attract good fanatical clerics. "How am I supposed to attract the best people if I can`t compete with the private sector?" asked Mr. Bin-Laden.[/quote]
[i]My Comment:[/i] Well, it's nice to know what al Qaeda's orificial policy is on this matter, at least .... as with California, explosive growth in "retirement benefit" payouts is blowing holes in the budget.

I hear there's a thriving trade in eBay's middle east branches in "Gently used virgins".

[URL="http://money.cnn.com/2009/12/08/real_estate/housing_outlook.fortune/index.htm"]Housing outlook for 2010[/URL]

[quote](Fortune magazine) -- In a dour year for the economy, the housing market has offered some glimmers of hope. Home sales have improved, recently hitting their highest level in more than two years. There's been talk of bidding wars resuming in places like Silicon Valley and New York City. And cocktail party chatter everywhere has started to turn to talk of a bottom. So at least where housing's concerned, things are looking not so bad -- right?

If that's what you think, you may not want to invite Mark Zandi to your next cocktail party. The chief economist of Moody's Economy.com, Zandi has some sobering predictions: Home prices are going to fall 5% to 10% more -- and over 30% in places like Miami -- between now and this time next year. Then they might start turning around. (Emphasis on "might.")

At the top of Zandi's list of worries are foreclosures -- specifically, the millions of loans that are in foreclosure or headed there that can't or won't be modified. According to RealtyTrac, nearly 2 million housing units in the U.S. are in foreclosure or bank-owned, and millions more are likely to join them.
...[/quote]

[QUOTE=Batalov;198865]There's been talk of bidding wars resuming in places like Silicon Valley and New York City[/QUOTE]

I talked with a Brooklyn bidding war loser last weekend.

[QUOTE=wblipp;198887][QUOTE=Batalov;198865]There's been talk of bidding wars resuming in places like Silicon Valley and New York City[/QUOTE]

I talked with a Brooklyn bidding war loser last weekend.[/QUOTE]

Unprecedented money-printing in a desperate attempt to prop up still-inflated (in most of the Greenspan-bubble areas) housing coupled with 9 months of incessant "green shoots" propaganda from the govt and the MSM will have that effect. Consider:

- The Fed has been buying on the order of $100 billion (you read that right, as in $10^11) of MBS per month in order to keep the mortgage-securitization market on life support ... in fact the Fed now *is* the mortgage-securitization market, as they appear to be overpaying for the MBS paper (although we really have no idea how much they're paying nor who they're buying it from ... but Bernanke is on record last year saying that if the govt were to start buying MBS, they should overpay in order to "instill confidence" or some such nonsense) and there is no private demand for the stuff at anywhere near par value;

- The Fed has also been buying agency paper (Fannie & Freddie's MBS) and Treasuries (usually by way of using the primary dealers overbidding to create the illusion of demand, then the Fed buys the paper from the PDs a few weeks or months later) in order to keep mortgage rates artificially low;

- The FHA is now making subprime loans on a scale exceeding Countrywide Financial's heyday;

- The original $8000 giveaway for first-time homebuyers has been extended and expanded to include "trading up" home purchases.

Couple those things with hefty price drops (but still not enough to bring prices in line with longtime Case-Shiller income-normalized averages) in most bubble areas, banks keeping millions of foreclosed homes off the market in order to create the illusion of scarcity, and high rental demand (in no small part from victims of foreclosure and folks who lost their jobs in the past year), and you get a large number, and bidding wars - especially at the lower end - is what you get. Here in silicon valley a large portion of the buying is [url=http://www.mercurynews.com/real-estate-news/ci_13972794?nclick_check=1]being done by investors[/url] who are looking to rent out the homes in the near-term and then either keep them as rental properties or resell them for a (hoped-for) profit "when prices recover" to bubble levels.

[QUOTE=ewmayer;198392][i]My Comment:[/i] Spain, Ireland and the Baltics also flashing huge warning signs.[/QUOTE]

Q: What's the difference between Ireland and Iceland?
A: One letter and six months.

Courtesy of my youngest brother, who lives and works in Dublin.


Paul

Followup on the Austrian Hypo Alpe Adria Failure
 

[QUOTE=xilman;198955]Q: What's the difference between Ireland and Iceland?
A: One letter and six months.

Courtesy of my youngest brother, who lives and works in Dublin.[/QUOTE]
Reminds me of a quip from my physics days:

Q: What's the difference between a cosmologist and a cosmetologist?

A: Two letters and a whole lot of hubris.

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

[b]Followup on the Austrian Hypo Alpe Adria Failure[/b]

Barry Ritholtz - or better, guest poster Edward Harrison of the [i]Credit Writedowns[/i] blog - provides some perspective on the nationalization by the Austrian government of the insolvent bank Hypo Alpe Adria (note to our non-German-speaking readership: The "Hypo" in the names of many of these troubled German and Austrian banks derives from the German "Hypotheke" which is a catchall for a debt instrument such as a mortgage or commercial loan ... there is an English word "hypothec" which comes from the same Latin and Greek root and means the same thing, but it appears to be a little-used term in English), reminding us that [url=http://www.ritholtz.com/blog/2009/12/bank-collapse-in-austria-brings-debt-in-eastern-europe-center-stage/]Austrian banks have emerging-market financial exposure that is 70% of GDP[/url]:
[quote]The Austrian government has nationalized the insolvent bank Hypo Group Alpe Adria (HGAA). The financial institution, which has 40 billion Euros in assets, is the country’s sixth largest bank. But, in relative terms, this is a very large bankruptcy – using GDP at purchasing power parity, an American HGAA would have assets of $2.5 trillion, larger than any of the American banks. So, this is a very big deal and it speaks to the size of Austrian banks’ international exposure, renewed risks in banking and the possibility of contagion.[/quote]
[i]My Comment:[/i] I similarly commented on the huge exposure of various Austrian banks to toxic eastern-Europe real estate loans several times this past year, but the name that was top on my list was Raiffeisen ... the name of the most-recent imploded bank may differ, but the symptomology is the same. To its credit, though, the Austrian government dealt decisively with the matter ([url=http://kurier.at/geldundwirtschaft/1962148.php]this article[/url] in Austria`s [i]Kurier[/i] daily uses the term "Kahlschlag", which is borrowed from forestry and translates as "clear-cutting" ... in a non-arborist context it means roughly "cleaning the slate") and will spend the coming year poring over all of HPAA`s financial machinations and selling off viable parts of the enterprise, instead of attempting to keep the bank afloat in quasi-nationalized form, allowing it to gamble with an explicit taxpayer backstop and no clear exit strategy. Are you listening, Messrs Geithner, Bernanke and Summers? Yeah, I thought not.

This is most definitely *not* the kind of "Austrian Economics" the world needs.

Citi TARP "Repayment" is Government-Approved Scam
 

Now we know why - in addition to opening the way to pay huge executive bonuses - big banks like Citigroup are so eager to "repay TARP bailout funds":

[url=http://www.washingtonpost.com/wp-dyn/content/article/2009/12/15/AR2009121504534.html]U.S. gave up billions in tax money in deal for Citigroup’s bailout repayment[/url]
[quote]The federal government quietly agreed to forgo billions of dollars in potential tax payments from Citigroup as part of the deal announced this week to wean the company from the massive taxpayer bailout that helped it survive the financial crisis.

The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.
[u]
While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits[/u]. [/quote]
[i]My Comment:[/i] So the alleged "repayment" is just a front for yet another multi-billion-dollar backdoor bailout scheme courtesy of Uncle Scam.


[b]Pittsburgh To Tax Students For City Pension Shortfalls[/b]

[url=http://www.nytimes.com/2009/12/16/education/16college.html?_r=1&hp]Pittsburgh Sets Vote on Adding Tax on Tuition[/url]: [i]The mayor of Pittsburgh calls it the “Fair Share Tax.” But to officials at the city’s 10 colleges and universities and many of their 100,000 students, it is anything but.[/i]
[quote]On Wednesday, the City Council is expected to give preliminary approval to Mayor Luke Ravenstahl’s proposal for a 1 percent tuition tax on students attending college in Pittsburgh, which he says will raise $16.2 million in annual revenue that is needed to pay pensions for retired city employees.[/quote]
[i]My Comment:[/i] Sheer insanity ... pandering politicians spend years making wage and pension promises guaranteed to bankrupt the city except under ludicrous Ponzi-stock-market-appreciation-in-perpetuity, then when the scheme inevitably blows up, they gouge some of the folks least able to afford extra taxes. If this passes, the ensuing "brain drain" from area universities will cost Pittsburgh far more than they estimate to gain from the surtax.

[QUOTE=ewmayer;199024][b]Pittsburgh To Tax Students For City Pension Shortfalls[/b]

[url=http://www.nytimes.com/2009/12/16/education/16college.html?_r=1&hp]Pittsburgh Sets Vote on Adding Tax on Tuition[/url]: [i]The mayor of Pittsburgh calls it the “Fair Share Tax.” But to officials at the city’s 10 colleges and universities and many of their 100,000 students, it is anything but.[/i]

[i]My Comment:[/i] Sheer insanity ... pandering politicians spend years making wage and pension promises guaranteed to bankrupt the city except under ludicrous Ponzi-stock-market-appreciation-in-perpetuity, then when the scheme inevitably blows up, they gouge some of the folks least able to afford extra taxes. If this passes, the ensuing "brain drain" from area universities will cost Pittsburgh far more than they estimate to gain from the surtax.[/QUOTE]

[I]My comment to your comment:[/I]The solution is to create an even larger education-bubble where the government subsidizes 2nd, 3rd and 4th educations, because every mental retard has already been swindled into buying 4-year college education for $200,000.

[QUOTE=ewmayer;199024]


[b]Pittsburgh To Tax Students For City Pension Shortfalls[/b]

[url=http://www.nytimes.com/2009/12/16/education/16college.html?_r=1&hp]Pittsburgh Sets Vote on Adding Tax on Tuition[/url]: [i]The mayor of Pittsburgh calls it the “Fair Share Tax.” But to officials at the city’s 10 colleges and universities and many of their 100,000 students, it is anything but.[/i]

[i]My Comment:[/i] Sheer insanity ... pandering politicians spend years making wage and pension promises guaranteed to bankrupt the city except under ludicrous Ponzi-stock-market-appreciation-in-perpetuity, then when the scheme inevitably blows up, they gouge some of the folks least able to afford extra taxes. If this passes, the ensuing "brain drain" from area universities will cost Pittsburgh far more than they estimate to gain from the surtax.[/QUOTE]

It may also be illegal. Aren't the universities non-profit? AFAIK,
non-profit entities are not required to collect (and may be prohibited from)
collecting such taxes on their goods and services.

[url=http://www.forbes.com/2009/12/18/government-budget-deficit-personal-finance-financial-advisor-network-treasury-debt.html]Trillions Of Troubles Ahead[/url]: [i]A crushing burden of debt threatens to sap America's growth for years to come.[/i]
[quote]Not too long ago, a billion dollars in a governmental budget was a lot of money. Then we got into hundreds of billions. People understood that this was a lot, just because of all the zeros. Now, unfortunately, the number has become small: the world "trillion," as in $1.2 trillion for health care reform, seems so tiny. But it has 12 zeroes behind it, which is so easy to forget.

What is a "trillion?" According to the Web site [url]www.100777.com[/url], if you laid 1 dollar bills end to end, you could make a chain that stretches from Earth to the moon and back again 200 times before you ran out of dollar bills! One trillion dollars would stretch nearly from the Earth to the sun. It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out 1 trillion dollar bills.

Our colleague Rob Arnott, who always does terrific research, wrote in his recent report that "at all levels, federal, state, local and GSEs, the total public debt is now at 141% of GDP. That puts the United States in some elite company--only Japan, Lebanon and Zimbabwe are higher. That's only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. Less than three years ago our total indebtedness crossed 500% of GDP for the first time."

Add the unfunded portion of entitlement programs and we're at 840% of GDP.

The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements. The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt.

It assures a period of economic devastation. In a last, desperate attempt, politicians at the federal and local levels will raise taxes to astronomical heights to raise revenues. And that only assures destruction of the economy. Forget the fable of economic recovery. Unless there is a change in Washington by next year's election, there will be no way to turn back.

Japan's recession is now 19 years old. It has the highest debt-to-GDP level (227%) of any industrialized country. The Fitch rating agency is talking about a potential downgrade of Japan's debt. Japan's stock market is still down 75% from the high in 1990. We predict it will make new bear market lows next year. That will make it a 20-year-long bull [ewm: I'm pretty sure he intended 'bear' here] market on the way to 25 years. The bulls in the U.S. should consider that possibility in the formerly great United States of America.

I do not believe the bullish theory that the U.S. situation is different than Japan's. Ours is so much worse. [/quote]

[quote=http://www.forbes.com/2009/12/18/government-budget-deficit-personal-finance-financial-advisor-network-treasury-debt.html]Unless there is a change in Washington by next year's election, there will be no way to turn back.[/quote]I don't know just what Bert Dohmen meant by "a change in Washington by next year's election", but I'll bet very few Republicans will admit that their party's administrations since 1980 were responsible for 70% of the national debt that the recent Bush administration turned over to Obama.

The turnabout in regard to conservatives' approach to fiscal responsibility that their side's think-tanks formulated in the late 1970s in order to "buy" political power now has the nation so accustomed to multi-trillion-dollar national debt that we acquiesced to last year's Bush-started trillion-dollar fix with not nearly so much resistance as we could have had (or needed!).

Had the last three Republican administrations produced the balanced budgets their party used to claim as a goal when I was young, and all else was equal, we'd now have a national debt of only three trillion dollars -- actually, probably less than half that because of the different fiscal environment -- and a proposal to add a trillion dollars to one year's spending might have seemed correspondingly more shocking. I like to think that a proposal to raise national debt by over 66% in one year would have had much less chance of success than one to raise it by only 10% in that period. But conservatives decided to adopt a policy that "deficits don't matter anymore" in a trade of principle for power, as I've outlined in more detail in my postings over the past few years.

The chances that the average economically-and-fiscally-ill-educated American realizes the impact of that late-70s turnabout in conservative fiscal policy, or its connection to our present-day troubles, are quite slim. I've tried to do my small part here in Soap Box to spread that information. Perhaps if I'd blogged instead ...

[url=http://www.washingtonpost.com/wp-dyn/content/article/2009/12/15/AR2009121503382.html]America's decade of dread[/url]
[quote]By Harold Meyerson
Wednesday, December 16, 2009

This decade began and ended in dread. It began with Wall Street -- the World Trade Center -- targeted for mass murder. It ends with Main Street fearful and reeling from economic reverses that Wall Street helped create.

It was the decade of distraction. While the U.S. economy bubbled and then crumbled, the president for eight of the decade's 10 years embroiled us in a grudge match with Saddam Hussein and then persisted in throwing lives and money into the chaotic conflict that (as many predicted would happen) ensued. The decline of the American middle class was nowhere on his radar screen.

The stocks bubble of the late 1990s was succeeded by a bubble in housing; these were the engines of our economic growth. America's production of goods no longer received the level of investment that had made it the engine of our economic growth from the mid-19th century through the 1970s. The change began at the outset of the Reagan years, when the percentage of corporate profits retained for new investment dropped sharply. A report from the International Labor Organization published last week shows where the money went: to shareholder dividends, disproportionately benefiting the wealthy. In the prosperity years of 1946 to 1979, dividends constituted 23 percent of profits. From 1980 to 2008, they constituted 46 percent.

Finance boomed. The gap in annual wages between workers at financial companies and workers at non-financial companies, the ILO reports, grew from $11,000 in 1989 to $40,000 in 2007. The financial sector defended this shift by arguing that it had created many innovative financial products -- the very financial products that managed to turn downturn into Great Recession. [b]In an interview in Monday's Wall Street Journal, former Fed chief Paul Volcker said that he has "found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy." He went on to say: "All I know is that the economy was rising very nicely in the 1950s and 1960s without all of these innovations."[/b]

[u]The dread in the land today isn't just a fear of losing your job -- or of your spouse, sister, father or child losing his or hers. It's a fear that America has been hollowed out, that we don't have a sustainable path back to mass prosperity, let alone to economic preeminence[/u]. A poll taken last month for the Council on Foreign Relations (CFR) shows that 44 percent of Americans considered China to be the world's leading economic power, while just 27 percent thought the United States still held that throne. Such fears can only be intensified by public policies that fail to champion America's national interests by fostering the flight of investment abroad.

Overcoming some of our national phobia about having an industrial policy, the Obama administration has rightly targeted the renewable energy sector for investment -- a long overdue shift back to real, rather than financial, production. [b]But we don't yet have policies to ensure that the real production we're fostering is done at home. As Joan Fitzgerald, director of the Law, Policy and Society program at Northeastern University, notes in a recent article, 84 percent of the $1.05 billion in federal clean-energy grants distributed since September has gone to foreign wind turbine manufacturers. Unionized, high-wage Germany and non-unionized, low-wage China both have thriving wind-power industries that profitably export their products to us. We have shunned policies that bolster domestic production, which is why more Americans are betting on China's economy than on our own.[/b]

The problem is that America's economic elites have thrived on the financialization and globalization of the economy that have caused the incomes of the vast majority of their fellow Americans to stagnate or decline. The insecurity that haunts their compatriots is alien to them. Fully 85 percent of Americans in that CFR-sponsored poll said that protecting U.S. jobs should be a top foreign policy priority, but when the pollsters asked that question of the council's own members, just 21 percent said that protecting American jobs should be a top concern.

The moral world that we see in that poll is the moral world of Charles Dickens. Of the elite of his day, he wrote in "Bleak House," "there is much good in it...." But, he continued, "it is a world wrapped up in too much jeweller's cotton and fine wool, and cannot hear the rushing of the larger worlds, and cannot see them as they circle round the sun. It is a deadened world, and its growth is sometimes unhealthy for want of air."

America, at the end of this dreadful decade. [/quote]
[i]My Comment:[/i] Nice quote from Dickens, but in my opinion describing the world of Big Finance as merely being unhealthily disconnected from the real productive economy is being far too kind. Modern-day big finance is in fact better analogized as an army of blood-sucking leeches parasitizing the productive economy and doing everything in its power to suck as much blood out of the host before it dies as possible. I estimate that over 90% of the activity of the much-hallowed and oh-so-necessary "capital markets" is nothing more than Ponzi finance and purely-speculative money-changing which constitutes a "parasite tax" on the real economy.

The ethos of modern day finance is "eat as much as you can as fast as you can".

DarJones

[QUOTE=ewmayer;199554]I estimate that over 90% of the activity of the much-hallowed and oh-so-necessary "capital markets" is nothing more than Ponzi finance and purely-speculative money-changing which constitutes a "parasite tax" on the real economy.[/QUOTE]

So, what's the problem? As long as purely-speculative money-changing leaves fewer resources in the hands of idiots, there will sooner or later be a shortage of idiots with resources.

Let me guess: the "real" economy is precisely the economy that produced goods you prefer, right? Since you don't listen to [I]Norwegian Death Metal[/I], all the effort that goes into making CDs of [I]Dimmu Borgir[/I] is wasted and a 'parasite tax' on real music, because what the world needs is more CDs from the [I]Musikantenstadl[/I].

ewmayer's favorite song: [url]http://www.youtube.com/watch?v=m5AM_bVXbXw[/url]

The Great Ponzi Market Rally of 2009
 

Some great insights into how the nearly-year-long Fed-orchestrated market-futures-pump works (ZeroHedge.com has also remarking on the near-daily futures-pump for months, but this article ties motives and methods together nicely) ... note that during the recent Bernanke 2nd-term reconfirmation hearings, the closest any senator got to to asking the right question was by way of asking whether THE FED ITSELF was engaged in buyign and selling market futures, which allowed Bubble-Head Ben to easily evade the issue by answering in literally honest but ethically disingenuous fashion, "no, Senator":

[url=http://finance.yahoo.com/news/Are-Big-Banks-Pumping-Up-etfguide-3166930847.html?x=0&.v=1]Are Big Banks Pumping Up Stock Prices?[/url]
[quote]Even though big banks have received untold billions in bailout funds, banks are not lending. Where did all the money go?

Much of it went right back to the government as banks have loaded up on all sorts of Treasury bonds. But where did the rest go?

Real estate prices are still falling, unemployment is sky-high, consumer spending is down and corporate profits are nowhere near to last year's levels.
[u]
The only thing that provides comfort for the masses is rising stock prices. The S&P 500, Dow Jones and Nasdaq have gained in excess of 65% in less than ten months against a backdrop of continuously less than stellar news. The government, banks and other financial institutions have a vested interest in rising stock prices.[/u]

Things would look grim if it wasn't for the hope provided by the Dow and S&P's of the world. [u]But more than hope is at stake. Another drop in investor's perception would send real estate and equity prices tumbling. It could also push many financial institutions to the brink of ruin and discredit all government efforts.[/u]

Looking at what's at stake and the motivations involved, could it be that some of the big players are manipulating the market to keep prices artificially afloat?
[b]
A secret committee
[/b]
Already back in 1988, Ronald Reagan signed an executive order to establish a specific committee designed to prevent major market collapses. [i][EWM: This is the [url=http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets]President's Working Group on Open Markets[/url], colloquially referred to as the "plunge protection team" - it would appear that the "maintaining investor confidence" part of their multifold-self-contradictory mandate trumps the "enhancing the integrity of the financial markets" bit.][/i]

As per this order, the Secretary of the Treasury, the chairman of the Federal Reserve, the chairman of the SEC and the chairman of the commodity futures trading commission make up the core of this team. By extension, [u]major financial institutions like JP Morgan Chase and Goldman Sachs are used to execute their orders.[/u]
[b]
Artificially inflating prices, how?
[/b]
Supply and demand drives prices. Where the demand comes from does not matter. In emergency situations, the Federal Reserve is said to lend money to major banks, which serve as surrogates who will take the money and buy markets, predominantly futures, through large unknown accounts.
[u]
The timing of those buys will be such that those shorting the market will be forced to buy back shares. In theory, this eliminates the most pessimistic investors and causes others to buy. Soon sideline money from mutual and hedge funds comes in and the rally gathers a life of its own.[/u]
[b]
A close ally
[/b]
One of the obvious suspects to serve as surrogate and carry out the government's plan would be Goldman Sachs. For years, the ties between the U.S. government and Sachs have been too close for comfort. Earlier this year the ETF Profit Strategy Newsletter touched on a case of 'indiscretion' which never received much publicity.

Stephen Friedman, the chairman of the New York fed was instrumental in orchestrating the multi-billion bailout for Goldman and AIG. AIG used nearly $10 billion of the initial $85 billion to pay Goldman.

Chairman of the New York Fed was not the only title Mr. Friedman held. He also happened to be on Goldman's board during that time and was Goldman's CEO in the 1990s. Also during that time, Mr. Friedman was actively buying Goldman stock and generated profits worth millions of dollars.

Other ties between government and Sachs include Hank Paulson, former Secretary of the Treasury and former Goldman CEO. When Mr. Paulson needed someone to oversee see the government's first $700 billion bailout, Paulson recruited an inexperience, 35-year old, former Goldman investment banker. The list continues, but we'll stop here. [i][EWM: Another former treasury-secretary-by-way-of-Goldman, Robert Rubin, who was highly instrumental in getting the Depression-era Glass-Steagall law repealed, shortly before leaving government to take a $30-million-per-year-plus board seat at the chief beneficiary of the law's repeal, Citigroup, would surely feel slighted at being omitted from the list of notables here.][/i]
[b]
Putting the odds in your favor
[/b]
The Financial Times reported that [u]Goldman Sachs suffered only one losing day during the 65 business days of the third quarter[/u]. On 36 separate days during the quarter, the firm's trades netted more than $100 million.

In addition, Bloomberg reported that [u]Goldman Sachs' effective income tax rate for 2008 was 1%. In dollars, Goldman's tax liability was $14 million. For the same year, Goldman reported a $2.3 billion profit and paid out $10.9 billion in bonuses[/u].

One could argue that a record of 90%+ winning trades and a 1% tax rate could only be accomplished with certain connections to high-ranking government personnel.

Is it possible?

The notion that prices can be inflated artificially makes sense and sounds good in theory. Based on the evidence, this kind of maneuvering even seems to be more common than we think.

But a simple look at the chart shows that even the government and big banks do not have superhuman powers, at least not unconditionally. [i][EWM: "Unconditionally" here means "unless they work together".][/i]

In 2000, 2002, 2008 and 2009, the major indexes a la S&P 500, Dow Jones and Nasdaq declined 30% or more.

It is now known, as it was back then, that the nation's most powerful financiers got together on October 24, 1929 to prevent a major meltdown. Their plan succeeded on that very day which came to be known as Black Thursday. The recovery on Black Thursday was as remarkable as the selling that made it so Black.

On Friday, the Times reported that the financial community felt 'secure in the knowledge that the most powerful banks in the country stood ready to prevent a recurrence of panic.' In a concerted advertising campaign in Monday's papers, stock market firms urged to pick stocks at bargain prices. The rest is history and the Great Depression unfolded in all its cruel ways.

One of the flaws of artificial buying is that all the money used to buy stocks will eventually have to be taken out [i][EWM: Unless one of the parties involved can literally print money ot of thin air ... nah, that could never happen][/i]. As we know, banks are not immune to greed and once prices start declining, banks are likely to be the first to cut their losses and flee the sinking ship.

What goes up ...

In summary, we can conclude that there seems to be an organized committee with the job description of lifting markets. Quite likely, their efforts have contributed to the protracted rally in stock prices. However, as we've seen, the market is too wild to be contained. Normal market forces still apply. [i][EWM: Uh, I think you just laid out in detail why "normal market forces" most certainly do *not* apply currently.][/i]

One of those age-old forces is investor sentiment, possibly the best known and most accurate contrarian indicator around. Extreme levels of pessimism tend to signal market bottoms while extreme levels of optimism tend to signal tops.

The ETF Profit Strategy Newsletter used this contrarian indicator as a foundation to issue the March 2nd Trend Change Alert which foretold a massive rally with a target range of Dow 9,000 - 10,000 a mere seven days before the March lows were reached.

Now once again, we see an extreme of investor sentiment - this time it's optimism. According to the Investors Intelligence survey, this week saw the highest percentage of bulls since December 2007.

More importantly, the major indexes are butting up against levels of resistance that have been years, even decades in the making. Those different resistance levels converge in the Dow 10,100 - Dow 10,500 range, which is the very range the Dow has been stuck in for over three months.

The ETF Profit Strategy Newsletter includes an analysis of predominant, and probably formidable, levels of resistance along with a short, mid and long-term forecast, and a target range for the ultimate market bottom. If history is a guide, and it usually is, the market will do what it wants, regardless of the government's efforts.

The question is this: Who are you putting your trust in, the market or big banks?[/quote]
[i]My Comment:[/i] Leaving aside the - admittedly important - issue of whether there even *is* a semblance of an equity market anymore which is not a Fed-rigged Ponzi casino designed to (a) recapitalize the insolvent TBTF banks by allowing them to issue billions in new shares at highly inflated prices and (b) support the illusion of an "economic recovery" in the absence of any credible real-economic data to that effect ... the problem is, even if the banks involved in the Ponzi once again get burnt in a major market downleg, their downside is limited because they will simply get bailed out again.

A very merry (and preferably non-Ponzi) Christmas to our readers who celebrate Christmas!

[url]http://www.time.com/time/specials/packages/article/0,28804,1946375_1947251,00.html[/url]

[QUOTE=Xyzzy;199922][url]http://www.time.com/time/specials/packages/article/0,28804,1946375_1947251,00.html[/url][/QUOTE]

No real surprise there. Obama got the Peace Prize, Krugman got the Economics prize, so probably Malin Akerman is going to win an Oscar for her performance as the [I]Silk Spectre[/I]. It goes without question that [I]Lactating Biker Sluts take it up the Number 2 Chute[/I] is going to win best picture.

Fed's exit [strike]strategy[/strike]tactic
 

"Fed exit strategy: Let banks set up CDs"

... with no early withdrawals.

[URL]http://news.yahoo.com/s/ap/20091228/ap_on_bi_ge/us_fed_exit_strategy_3;_ylt=AsbunpuepOxunGgT1HqtPktH2ocA;_ylu=X3oDMTE2MG11OGs0BHBvcwMzBHNlYwN5bi1yLWItbGVmdARzbGsDZXYtZmVkZXhpdHN0[/URL]

Neat gig! Fed lends banks money at 0.5% and accepts the same money back in CDs yielding 4% or whatever. Frankly, it is just more bullshit from Benny.

Bank claims to Ireland
 

[QUOTE=xilman;198955]Q: What's the difference between Ireland and Iceland?
A: One letter and six months.

Courtesy of my youngest brother, who lives and works in Dublin.


Paul[/QUOTE]


We are lucky as Icelandic taxpayers that some of this claims went to wrong country. This one letter mistake can surely make someone lose his job.
I hope my translation is ok.

Bank claims to Ireland:
Number of claims described in bankrupt old Glitnir came too late. The total of these claims amounts billion. Part of them was sent to Ireland by mistake. This occurred in News Broadcasting.
The deadline to describe the requirements in bankrupt old bank expired 26th November. Approximately 8700 claims were received in finished and the total amount of over 3400 billion(Icelandic króna). In the news RTÉ stated that part of the requirements had been received too late or just not. Repeated after Paul Eiríksson in termination control of Glitnir to approximately 100 claims were received too late and still had requirements to receive. He said amounts different, some of which are millions of dollars. An attempt would be to have test the accuracy of these claims for the courts in this country.
[url]http://www.mbl.is/mm/vidskipti/frettir/2009/12/24/glitniskrofur_til_irlands/[/url]

Terrible Timmay Geithner over at Treasuray had a nice Christmas gift for Phoney and Fraudie: "As one of our most valued customers this past year, we're saying 'thanks!' by giving you an unlimited line of credit":

[url=http://www.bloomberg.com/apps/news?pid=20601087&sid=abTVUSp9zbAY&pos=1]U.S. Treasury Ends Cap on Fannie, Freddie Lifeline for 3 Years[/url]: [i]The U.S. Treasury Department will remove the caps on aid to Fannie Mae and Freddie Mac for the next three years, to allay investor concerns that the companies will exhaust the available government assistance.[/i]
[quote]The two companies, the largest sources of mortgage financing in the U.S., are currently under government conservatorship and have caps of $200 billion each on backstop capital from the Treasury. Under a new agreement announced yesterday, these limits can rise as needed to cover net worth losses through 2012.The Obama administration is “beginning to realize it’s not getting better and it’s not likely to get better” soon in the housing market, said Julian Mann, who helps oversee $5.5 billion in bonds as a vice president at First Pacific Advisors LLC in Los Angeles. “They don’t want the foreclosures now, so they’re saying, we’ll pay whatever it takes to continue to kick the can down the road.”[/quote]
[i]My Comment:[/i] Apparently "whatever it takes" includes [url=http://market-ticker.denninger.net/archives/1800-Are-Banks-Scamming-Fannie.html]allowing banks to scam F&F[/url] by dumping over-appraised mortgages onto the GSEs` balance sheets, and by giving U.S. law enforcement marching orders to look the other way as the same kind of lie-about-your-income scam that ran wild during the peak years of the Great Housing Bubble now gets run in reverse [url=http://market-ticker.denninger.net/archives/1797-HomeDebtor-Fraud-Intentionally-Unpunished.html]when it comes to loan modifications[/url]. Treasury's unofficial motto with respect to the latter would appear to be "Come smoke some HAMP with us."

Has anyone yet commented on this December 9th Matt Taibbi [I]Rolling Stone[/I] article?

"Obama's Big Sellout"

[URL]http://www.rollingstone.com/politics/story/31234647/obamas_big_sellout[/URL]

[quote]The president has packed his economic team with Wall Street insiders intent on turning the bailout into an all-out giveaway.[/quote]

[QUOTE=cheesehead;200262]Has anyone yet commented on this December 9th Matt Taibbi [I]Rolling Stone[/I] article?

"Obama's Big Sellout"

[URL]http://www.rollingstone.com/politics/story/31234647/obamas_big_sellout[/URL][/QUOTE]

The article proves that Matt Taibbi is a racist who has simply seized the moment to criticize our beloved president. God bless Barack Obama for having the wisdom of Aristotle, the courage of a Kenyan lion and the strength of King Kong to make even the most unpopular choice, when they are mandated by necessity.

I'm certain that deep in his heart even Matt Taibbi knows that our leader, Barack Obama, has made the right choice: America and the American proletariat deserve only the best [I]primi inter pares[/I] to lead our one nation under God into the eternal light of happiness and understanding; it is beyond all doubt that our beloved leader will appoint only the most qualified, humble and incorruptible Wall Street insiders this greatest of all nations has to offer.

God bless America,

Theobald Tiger

Yeah I posted in the Obama wins Nobel Peace Prize thread. I posted a couple of blog entries from Taibbi as well in which he takes on critics of critics of Obama. I'm going to change the title of that thread and we can perhaps continue all Obama related discussion there in order to keep this thread focused on Econ? This thread is going to be closed in a couple of days anyway.

[QUOTE=garo;200302]This thread is going to be closed in a couple of days anyway.[/QUOTE]

...In advance of which I would like to ask all of the would-be-pundits amongst our readership to prepare their "Predictions for 2010" - you can make them as broad or narrow-focused as you like, as serious or as tongue-in-cheeky - so we can get the discussion started with those when I open the Econ 2010 thread tomorrow morning (Pacific time, i.e. 2010 will already be rolling westward across Asia toward Europe). Please supplement your [strike]Nosferatian[/strike] Nostradamian prognostications (actually that's a bad descriptor, as I hope ours will be far less vague than those of the late "Dr. No") with a pithy phrase you think will apply well to the global economic and financial scene in 2010.

(NB: I'm claiming dibs on "Reality Bites")

In the latter spirit, we need an informal moniker to apply to the soon-departed 2009 ... some of the more-popular ones which seem apt:

"Extend and Pretend"
"Kick the Can"
"The Year of Living Delusionally"
"Hopium Smoke Gets In Your Eyes"
"Green Shoots, Shits and Leaves"
"Playing Suckface With the Vampire Squid"

Other suggestions?

All good suggestions. My choices in order are:
"The Year of Living Delusionally"
"Hopium Smoke Gets In Your Eyes"
"Playing Suckface With the Vampire Squid"

"Rats"
"Phantom of the Oprah"
"Hoplahoma!"
"Everything Went"
"Porky and Stressed"
"Wasted Side Story"

But definitely not:

"Less Miserable"

If we graduated from this class of "Econ 2009" (grades may vary), perhaps the next one could be "Mystery Econ Theater 3000"? We will continue to be forced watching some bad economic mov(i)es and riff?

Reality Bites - predictions for 2010
 

Predictions for 2010:
1. There will be a gradual lessening of economic stress through the 1st half of the year.
2. Unemployment will gradually stabilize but won't significantly decline.
3. By the latter half of the year, storm clouds will be on the horizon again, the economy will be prepared for a serious downturn.... again.
4. GM will be back at the trough again.. and again... and again.....
5. Inflation will be the next major economic hurdle. It will begin to show in 2010.
6. More companies will go bankrupt including several heavy industry players.
7. You will see a LOT of trucks and trailers on the road hauling scrap metals to sell for whatever it brings.
8. Fewer people will buy new cars relative to 2009.
9. I will move to a new house.... because I dislike paying rent, even if it is only $400 per month.
10. More people will have gardens in 2010 because that is a major way to put food on the table.

DarJones

[quote=cheesehead;200175]t

... with no early withdrawals.

[/quote]

Unless you had a vascectomy or hysterectomy recently
this line of conversation may be better pursued elsewhere.
(Unless of course you are Irish or use a condom).

David

PS I confidently expect Ernst to exercise his powers of moderation here.

Somebody's prop desk f*cked up...
 

Lovely illustration of what happens when you enter a multi-million-share end-of-year sell order and forget to make it a "limit sell". I suspect some 20something fund trader just got a big fat "No Red Bull for you!" for this little goof-up: