[QUOTE=Zeta-Flux;266857]Claiming that the GOP is acting out of ideological purity rather than reality (and by implication, without concern for the country) is just poison to the conversation (and untrue).[/QUOTE]There's yet another aspect to that accusation to point out:

The parenthetical phrase "(and by implication, without concern for the country)" slips in the idea that I was implicitly accusing the GOP of acting without concern for the country.

I never said (or even thought) that, so Zeta-Flux's insertion sets up a strawman about what I meant. (It's possible that his insertion was done without sufficient contemplation of how it looks to others.)

Instead, what I actually think is that [U]GOP conservatives acting in accord with the ideology to which I referred [I]really, truly, authentically do think[/I] that they're acting with extreme concern for, and in the best interest of, our country[/U]!

It's just that they are mistaken in that regard, and that mistake is dangerous.

The danger is based on the conservative worldview's lack of recognition of the validity of other worldviews held by those at other places in the political spectrum. Without recognizing and granting that validity to others, it becomes too easy for conservatives to justify a no-compromise one-sided stance on fiscal policy -- a sort of fiscal crusade -- that is not firmly enough tied to reality to be best for the combination of them [I]plus the rest of the country[/I].

The Norquist pledge was politically useful, but has now lost that usefulness.

- - -

I invite Zeta-Flux to apologize for his strawman-in-effect insertion and for his "poison" accusation.

[QUOTE=cheesehead;267650]I invite Zeta-Flux to apologize for his strawman-in-effect insertion and for his "poison" accusation.[/QUOTE]No thanks. I'll stand by my statement.

Every independent bipartisan study of the US fiscal situation has concluded that the solution must involve [I]both[/I] reducing entitlements and increasing taxes.

Republicans' rejection of the latter is not a reflection of reality; it is a manifestation of ideological rigidity for partisan purposes. Pointing out that truth is not introducing poison to the conversation; it is simply accurate reporting.

Pointing out other examples of Republicans' preference for ideology over reality is not introducing poison to the conversation; it is simply accurate reporting.

I want to see Republicans return to reality in order to properly function as natural counters to Democratic excesses.

As long as Republicans are seen to deny reality, Democrats will see that as an excuse to continue their excesses, and Republicans will win national elections only through repetition of electronic voting fraud (Ohio 2004) and voter suppression tactics (Florida 2000, Wisconsin [i]et al.[/i] 2012).

[QUOTE]As long as Republicans are seen to deny reality, Democrats will see that as an excuse to continue their excesses, and Republicans will win national elections only through repetition of electronic voting fraud (Ohio 2004) and voter suppression tactics (Florida 2000, Wisconsin et al. 2012). [/QUOTE]

This is a pretty wide divergence from topic Cheesehead. It is easy to point out that both Democrats and Republicans are at fault in the current debt impasse and that is on topic with this thread. That does not translate to proof that either is winning elections by dishonest means. I suggest you start a separate thread about dishonest politicians and rigged elections.

If you have 100 politicians buried up to their necks in concrete, what do you have?

Answer: A severe shortage of concrete.

DarJones

[QUOTE=Fusion_power;267685]It is easy to point out that both Democrats and Republicans are at fault in the current debt impasse and that is on topic with this thread.[/QUOTE]Just make sure to blame all of the Democrats' faults on the Republicans. Then it isn't their fault after all!

[QUOTE=Fusion_power;267685]It is easy to point out that both Democrats and Republicans are at fault in the current debt impasse and that is on topic with this thread.[/QUOTE]"The Appalling Hypocrisy Of The Republican Party Exposed In Three Simple Charts"

[URL]http://www.businessinsider.com/republican-budget-hypocrisy-2011-7[/URL]

[quote]That does not translate to proof that either is winning elections by dishonest means.[/quote]I never said it did. I have never, ever claimed that anything about fiscal policy proves anything about election fraud.

(You're right that the latter is OT.)

[quote]I suggest you start a separate thread about dishonest politicians and rigged elections.[/quote]Too late; already started a while ago, with a recent update -> "Electronic voting fraud vs. the old-fashioned type" [URL]http://mersenneforum.org/showpost.php?p=267322&postcount=19[/URL]

- - -

[QUOTE=Zeta-Flux;267698]Just make sure to blame all of the Democrats' faults on the Republicans. Then it isn't their fault after all![/QUOTE]"The Appalling Hypocrisy Of The Republican Party Exposed In Three Simple Charts"

[URL]http://www.businessinsider.com/republican-budget-hypocrisy-2011-7[/URL]

[quote]. . .

As [URL="http://www.businessinsider.com/government-spending-2011-7"]we've reported[/URL], and as the three charts below show, the Republicans are every bit as responsible for the country's budget and debt mess as the Democrats (if not more so).

. . .[/quote]When Republicans can admit that, we can make progress.

[QUOTE=cheesehead;267661]I want to see Republicans return to reality in order to properly function as natural counters to Democratic excesses.

As long as Republicans are seen to deny reality, Democrats will see that as an excuse to continue their excesses[/QUOTE]Note that I'm implying (really, this time) that Republicans are correctable; Democrats may not be, without honest Republican help.

debt ceiling Kabuki update
 

I used to think that pro wrasslin' was the only genuinely original American theater form, but it's become clear to me that debt-ceiling wrangling is another ... highly ritualized, lots of stomping around on stage and glowering ... as I've mentioned before, I like to call it "debt ceiling [url=http://en.wikipedia.org/wiki/Kabuki]Kabuki[/url]". (I can't help but have this image of John Boehner in full Kabuki-style [url=http://upload.wikimedia.org/wikipedia/commons/thumb/0/0e/Toshusai_Sharaku-_Otani_Oniji%2C_1794.jpg/220px-Toshusai_Sharaku-_Otani_Oniji%2C_1794.jpg]face makeup[/url] and samurai regalia, angrily snapping his fan at Obama and stomping out of the latest crisis meeting at the white House.)

My bottom line: USGov is broke-and-more, the debt ramping-up has been busily ongoing for 30 years and is thoroughly bipartisan (Obama has added as much in just 3 years as Dubya in a full 8, btw - but of course Obama 'inherited all these problems', blah, blah). There is no way any of that debt is ever gonna be repaid - at least not in dollars that are worth anything near what those originally provided by the lenders were. Neither party has a clue (nor really any desire) to make the needed cuts in any of their precious pet govt-welfare programs (Dems: SS and Medicare, Reps: Tax breaks for the rich, Both Sides: Defense), so let's just get it over with an default already, cut up the federal credit card, and take the pain that's coming as a result of our multidecadal profligacy. The pain is unavoidable, but the longer the PTB try to out it off in their desperate quest for a free-lunch magical fix, the worse it's gonna be and the longer it's gonna last.

I mean, really: The most delusionally-optimistic 'plan' anyone has proposed claimed to cut an impressive-sounding $4 trillion over 10 years ... only 20-25% of our current debt-issuance rate (which is between 1.6-2 trillion per year). Not even close to getting back to balance (much less running the actual surpluses which would be needed to actually start paying down the massive pile of debt), and the CBO quickly exposed the numbers as hocus-pocus anyway [see link below]. Obama says he doesn't like any of the Rep. plans, yet has proposed no plan whatsoever of his own. None. Zero, zilch, nada. Pathetic.

Regarding the various debt-reduction proposals that have been floated, Mish has this nice summary of the latest "plans" - Note Mish is a bit of as goldbug, though he’s certainly right that gold is likely a better place to be than stocks these days:

[url=http://globaleconomicanalysis.blogspot.com/2011/07/rating-obama-reid-and-boehner-deficit.html ]Rating the Obama, Reid, and Boehner Deficit Reduction Plans on Mish's 10-Point Credibility Scale[/url]

But the real question of the week is: Will any of the Big 3 ratings cartels have the guts to do the right thing and downgrade the US, irrespective of whether some silly "temporary agreement to pretend we will actually try to get our budget house in order but first extendify the debt ceiling, blah blah" is reached at the 11.99th hour, as we all know it will be?

Michele Bachmann's Holy War
 

And in case the DC Kabuki gets too strident for you, here is Matt Taibbi`s latest piece - admittedly only peripherally related to the thread topic, by way of the Tea Party theme -- But I can't help wondering if Ms. Bachmann believes that organized mass-scale prayer could help fix the national-debt situation. ("Pray as you go" budgeting, to abuse a common fiscal-hawk pet phrase.)

[url=http://www.rollingstone.com/politics/news/michele-bachmanns-holy-war-20110622]Michele Bachmann's Holy War[/url]: [i]The Tea Party contender may seem like a goofball, but be warned: Her presidential campaign is no laughing matter[/i]
[quote]It may be the hardest thing you ever do, for Michele Bachmann is almost certainly the funniest thing that has ever happened to American presidential politics. Fans of obscure 1970s television may remember a short-lived children's show called Far Out Space Nuts, in which a pair of dimwitted NASA repairmen, one of whom is played by Bob (Gilligan) Denver, accidentally send themselves into space by pressing "launch" instead of "lunch" inside a capsule they were fixing at Cape Canaveral. This plot device roughly approximates the political and cultural mechanism that is sending Michele Bachmann hurtling in the direction of the Oval Office.

Bachmann is a religious zealot whose brain is a raging electrical storm of divine visions and paranoid delusions. She believes that the Chinese are plotting to replace the dollar bill, that light bulbs are killing our dogs and cats, and that God personally chose her to become both an IRS attorney who would spend years hounding taxpayers and a raging anti-tax Tea Party crusader against big government. She kicked off her unofficial presidential campaign in New Hampshire, by mistakenly declaring it the birthplace of the American Revolution. "It's your state that fired the shot that was heard around the world!" she gushed. "You are the state of Lexington and Concord, you started the battle for liberty right here in your backyard."
...
[Her] background is significant considering Bachmann's leadership role in the Tea Party, a movement ostensibly founded on ideas of limited government. Bachmann says she believes in a limited state, but she was educated in an extremist Christian tradition that rejects the entire notion of a separate, secular legal authority and views earthly law as an instrument for interpreting biblical values. As a legislator, she not only worked to impose a ban on gay marriage, she also endorsed a report that proposed banning anyone who "espoused or supported Shariah law" from immigrating to the U.S. (Bachmann seems so unduly obsessed with Shariah law that, after listening to her frequent pronouncements on the subject, one begins to wonder if her crazed antipathy isn't born of professional jealousy.)[/quote]

Tea Party "Hobbits"
 

[QUOTE=Zeta-Flux;266857]Claiming that the GOP is acting out of ideological purity rather than reality (and by implication, without concern for the country) is just poison to the conversation (and untrue).[/QUOTE]From one still-in-business Murdoch rag:

"The GOP's Reality Test

Republicans who oppose Boehner's debt deal are playing into Obama's hands."

[URL]http://online.wsj.com/article/SB10001424053111903591104576470061986837494.html?mod=WSJ_Opinion_LEADTop[/URL]

(with my emphasis)

[quote]. . .

Strangely, some Republicans and conservative activists are condemning this as a fiscal sellout. ...

... [B]The idea seems to be[/B] that if the House GOP refuses to raise the debt ceiling, a default crisis or gradual government shutdown will ensue, and the public will turn en masse against . . . Barack Obama. [B]The Republican House that failed to raise the debt ceiling would somehow escape all blame.[/B] Then Democrats would have no choice but to pass a balanced-budget amendment and reform entitlements, and [B]the tea-party Hobbits could return to Middle Earth having defeated Mordor.[/B][/quote]Hey, the [U][I]Wall Street Journal[/I][/U] said it ... probably without having first read any of my posts in this or another thread.

Is that just some Murdoch poison ... or is it just that the [I]WSJ[/I] knows the difference between fiscal ideology and fiscal reality, too?

[QUOTE=Zeta-Flux;267698]Just make sure to blame all of the Democrats' faults on the Republicans. Then it isn't their fault after all![/QUOTE]Yes, that's one way to weasel out of acknowledging Republican faults -- saying that they're really Democratic faults that are just being blamed on those innocent Republicans (and be sure to throw in the "all" strawman so that you inflate a statement about only [I]some[/I] faults into an imaginary inflated statement about "all" faults that makes a much easier target than what the person you're responding to actually said).

I guess the [I]WSJ[/I]'s spellchecker must've exchanged "Republican" and "Democrat".

When you don't realistically admit (without strawman exaggeration) that Republicans really, truly made some mistakes, then your excuses look just as one-sidedly ideological as the "Hobbits".

[QUOTE=cheesehead;267721]When you don't realistically admit (without strawman exaggeration) that Republicans really, truly made some mistakes, then your excuses look just as one-sidedly ideological as the "Hobbits".[/QUOTE]I can't begin to express the irony I see in this statement.

[QUOTE=Zeta-Flux;267733]I can't begin to express the irony I see in this statement.[/QUOTE]Oh. ... Well, when you [i]can[/i] begin to express it, will you please do so, so that we don't have to guess wrong about your meaning? I'd hate to think that all you have in mind is another evidence-free word-mimicry with "Democratic" substituted for "Republican".

[QUOTE=ewmayer;267709]My bottom line: USGov is broke-and-more, the debt ramping-up has been busily ongoing for 30 years and is thoroughly bipartisan (Obama has added as much in just 3 years as Dubya in a full 8, btw - but of course Obama 'inherited all these problems', blah, blah). There is no way any of that debt is ever gonna be repaid - at least not in dollars that are worth anything near what those originally provided by the lenders were. Neither party has a clue (nor really any desire) to make the needed cuts in any of their precious pet govt-welfare programs (Dems: SS and Medicare, Reps: Tax breaks for the rich, Both Sides: Defense), so let's just get it over with an default already, cut up the federal credit card, and take the pain that's coming as a result of our multidecadal profligacy. The pain is unavoidable, but the longer the PTB try to out it off in their desperate quest for a free-lunch magical fix, the worse it's gonna be and the longer it's gonna last.[/QUOTE]If I was reasonably sure that the pain would be inflicted only on the US I would support your proposal unreservedly.

Unfortunately, the rest of the world is going to take a big hit as well. Should we take the hit all at once or spread over a few years? Ay, there's the rub.

Paul

[QUOTE=ewmayer;267709]

<snip>

so let's just get it over with an default already, cut up the federal credit card, and take the pain that's coming as a result of our multidecadal profligacy. The pain is unavoidable, but the longer the PTB try to out it off in their desperate quest for a free-lunch magical fix, the worse it's gonna be and the longer it's gonna last.

[/QUOTE]

Yep. For the time being I have pulled my entire IRA/401K out of the
stock market. I maintain a position in REITS and in some bond funds
but I have pulled out of all equities. I will rethink my portfolio in a month
or so. I will probably put a much higher percentage into precious metals.

[QUOTE]

I mean, really: The most delusionally-optimistic 'plan' anyone has proposed claimed to cut an impressive-sounding $4 trillion over 10 years ... only 20-25% of our current debt-issuance rate (which is between 1.6-2 trillion per year). Not even close to getting back to balance

[/QUOTE]

Amen! We should be making cuts in the 7-8e12 range. But congress
lacks the courage. We should shut down the so-called "wars" in IRAQ
and Afghanistan completely. We should close AT LEAST half of our
overseas military bases [yeah. good luck with that]. Raise the
minimum age for FICA from 62 to at least 65. Raise the minimum age
for full FICA benefits to at least 68. FICA is collected separately
from FIT. Let's pass a law forbidding Congress from using the FICA
fund from any other purpose. FICA is currently a regressive tax.
The more one earns (once the full amount is paid), the lower the percentage
of one's income is taxed. Let's get rid of the ceiling.

To do something about Medicare, we need to do something about underlying
health care costs. We need to stop heaping large amounts of money
on people who are hopelessly ill. Care for them, yes. But "Life at all costs" is
unaffordable. Strangely, the Republitards who most want to reduce Medicare
costs have the attitude of the religious "right to life" crowd. This crowd
wants to keep people alive as long as possible regardless of the cost. i.e.
you can't "pull the plug".


We need [b]tort[/b] reform so that doctors can stop practicing
defensive medicine. The old addage about an "ounce of prevention"
is applicable. To bring down Medicare costs we have to bring down
medical costs in general. I have a real proposal: Just as the intelligent
among us insure our automobiles against getting hit by someone who
has no insurance, let [i]individuals[/i] buy medical malpractice insurance
instead of doctors. i.e. if I am going to have surgery, I will buy my own
insurance gainst the doctor making a mistake instead of relying on my
right to sue. This would relieve doctors of having to practice defensive
medicine against possible lawsuits. --> cut down on unnecessary tests.

[QUOTE]

But the real question of the week is: Will any of the Big 3 ratings cartels have the guts to do the right thing and downgrade the US, irrespective of whether some silly "temporary agreement to pretend we will actually try to get our budget house in order but first extendify the debt ceiling, blah blah" is reached at the 11.99th hour, as we all know it will be?[/QUOTE]

I doubt it.

Too high a percentage of the taxes we pay goes to paying interest on
the debt. If we brought down the debt to zero, the money that [i]is[/i] collected
would all go directly to programs and infrastructure. This would result
in our ability to lower taxes as the Republicans want, because we would not
be wasting what is collected on paying interest.

[QUOTE=R.D. Silverman;267753]

<snip>

.[/QUOTE]

I have a comment and an interesting rhetorical question.

Most of us (I would hope) are willing to make economic sacrifices
for ourselves so that our children will benefit. I am currently putting
my three children through college. I spend almost nothing on myself.
I have not had a vacation in about 5 years. Every cent that I can
scrape up goes to paying their tuition. (Although I do continue to
make some 401K contributions).

Why then is society unwilling to make COLLECTIVE sacrifices for the benefit
of the next generation? Noone seems willing to give up anything. We have
a collective NIMBY mentality when it comes to budget cuts. Everyone wants
cuts, but only "for the other guy".

[QUOTE=R.D. Silverman;267755]I have a comment and an interesting rhetorical question.

Most of us (I would hope) are willing to make economic sacrifices
for ourselves so that our children will benefit. I am currently putting
my three children through college. I spend almost nothing on myself.
I have not had a vacation in about 5 years. Every cent that I can
scrape up goes to paying their tuition. (Although I do continue to
make some 401K contributions).

Why then is society unwilling to make COLLECTIVE sacrifices for the benefit
of the next generation? Noone seems willing to give up anything. We have
a collective NIMBY mentality when it comes to budget cuts. Everyone wants
cuts, but only "for the other guy".[/QUOTE]

Further observation/question. Is the current debt reduction mess a prime
example of the "tragedy of the commons"???? It does seem that way.

[QUOTE=R.D. Silverman;267755]I have a comment and an interesting rhetorical question.

Most of us (I would hope) are willing to make economic sacrifices
for ourselves so that our children will benefit.

<snip>

[/QUOTE]

Some of us, (one Tea Bagger Republican in particular) are [b]not[/b] willing
to make such sacrifices. See:

[url]http://www.huffingtonpost.com/2011/07/28/joe-walsh-sued-for-100000_n_911800.html[/url]

So much for "family values"

Next time Republicans claim that (a) their actions are not ruled by ideology, (b) they always want to save the taxpayers money, or that (c) if government cuts taxes on businesses, those businesses will pass the savings on to consumers, ask them why none of those was true in this case:

"FAA mess disproves two key conservative tenets"

[url]http://www.dailykos.com/story/2011/07/28/999904/-FAA-mess-disproves-two-key-conservative-tenets?via=blog_1[/url]

[url]http://www.nytimes.com/imagepages/2011/07/24/opinion/sunday/24editorial_graph2.html?ref=sunday[/url]

@Ernst: Also, don't just compare deficits. Compare expenditure and revenues as well.

[QUOTE=garo;267800][url]http://www.nytimes.com/imagepages/2011/07/24/opinion/sunday/24editorial_graph2.html?ref=sunday[/url]

@Ernst: Also, don't just compare deficits. Compare expenditure and revenues as well.[/QUOTE]

Thanks ... But while continuing an idiotic/ruinous policy may be morally less-offensive than initiating one, it is functionally little different. (Try substituting things like continuing the indefinite detentions at Guantanamo and other "black sites" around the world for the deficit spending).

Also, the sheer lack of genuine leadership on so many key fronts is palpable ... Where are the FDR-style targeted jobs programs for the long-term unemployed? Where is the decisive action (there is a lot Obama could do by executive order and a couple phone calls to the IRS here) to close the gaping corporate tax loopholes and abuses which are costing us hundreds of billions per year? Instead we are hearing buzz about [url=http://www.rollingstone.com/politics/blogs/taibblog/evil-corporate-tax-holiday-gains-bipartisan-support-20110726]growing bipartisan support[/url] for another "tax holiday", which would allow US multinationals to repatriate around $1 trillion in overseas-parked earnings, tax-free, for a loss of $250 Billion in revenues. The excuse for this insanity is "the companies will use the money to create jobs". Suuuuuuuuuuuuuuuuuure they will ... in fact, we have data from the [url=http://www.zerohedge.com/article/lost-cause-tax-repatriation-or-folly-homeland-investment-act-part-2]last similar tax giveaway[/url] which show unambiguously that the companies blew nearly all of the tax-free windfall on stockholder dividends, executive compensation, and any job creation which occurred in its wake was overwhelmingly in the same pl;ace those profits were earned -overseas. Obama could direct the IRS to force repatriation of the money and the tax to be paid ASAP ... but no, that would be "business-unfriendly", meaning it would cost him some juicy campaign contributions in his upcoming re-election bid.

[QUOTE][QUOTE]But the real question of the week is: Will any of the Big 3 ratings cartels have the guts to do the right thing and downgrade the US, irrespective of whether some silly "temporary agreement to pretend we will actually try to get our budget house in order but first extendify the debt ceiling, blah blah" is reached at the 11.99th hour, as we all know it will be? [/QUOTE][/QUOTE]

It seems that they definitely [B]don't[/B] have the guts: The USA is still rated with AAA which means that there is almost no risk for default.

Currently there is a non-negligible risk that the debt ceiling will NOT be raised - and I don't see any way that the USA will [i]not[/i] default (or selectively default) sooner or later - this would normally result in a CC rating (speaking in S&P terms, and no, I don't have any connections to this agency) or worse (look at the rating of Greece!) - please correct me if I'm wrong.

So currently the debt ceiling needs to be raised, and to achieve this, either the Republicans or the Democrats (or both!) need to have the guts to accept a compromise. In other words, the circumstances (i.e. debt ceiling) need to improve to avoid at least a selective default. Translated to German, this (approximately?) means "nur bei günstiger Entwicklung sind keine Ausfälle zu erwarten", which is the phrase which [URL="http://de.wikipedia.org/wiki/Rating#Ratingcodes"]stands near the CCC+ and CCC (S&P) resp. Caa1 and Caa2 (Moody's) in German wikipedia[/URL].

[QUOTE=R.D. Silverman;267753]Yep. For the time being I have pulled my entire IRA/401K out of the
stock market. I maintain a position in REITS and in some bond funds
but I have pulled out of all equities. I will rethink my portfolio in a month
or so. I will probably put a much higher percentage into precious metals.
[/QUOTE]

What is IRA/401K, what is RETIS? (sorry, I have just joined this thread and I am not familiar with these abbreviations.)

BTW: if the "unthinkable" happens and the USA defaults (possibly causing treasury bonds worth 14.3e12 $ to become worthless overnight if the US would go bankrupt) - would ANY kind of financial investment (including noble metals) be able to withstand the jet-black days on the stock-markets? (imagine 14e12$ "disappearing" from the portfolios of banks, insurances and other financial institutions) :nuke:

[QUOTE=Andi47;267854]What is IRA/401K, what is RETIS? (sorry, I have just joined this thread and I am not familiar with these abbreviations.)[/quote]IRAs and 401Ks are tax-adavantaged retirement accounts. IRAs are set up and maintained by the individual, 401Ks are set up and maintained by a person's employer. Both allow you to contribute money each year, subject to limits; the money (hopefully) grows tax-free until you retire. After retirement, as you draw the money out, it is taxed at your current (most likely lower) tax rate.
[quote]BTW: if the "unthinkable" happens and the USA defaults (possibly causing treasury bonds worth 14.3e12 $ to become worthless overnight if the US would go bankrupt) - would ANY kind of financial investment (including noble metals) be able to withstand the jet-black days on the stock-markets? (imagine 14e12$ "disappearing" from the portfolios of banks, insurances and other financial institutions) :nuke:[/QUOTE]Hopefully it will not reach that point. There is some talk about whether or not the 14th ammendment to the US constitution would allow President Obama to ignore the debt ceiling.....even if that option is not used, currently the revnue would allow the US to pay interest on US Treasuries due in the coming days, the hard part comes after that.

After the current interest is paid, painful decisions will have to be made about who/what to pay next.....

Apple holding more cash than USA
 

Hmm...

[url]http://www.bbc.co.uk/news/technology-14340470[/url]

[QUOTE=Andi47;267854]BTW: if the "unthinkable" happens and the USA defaults (possibly causing treasury bonds worth 14.3e12 $ to become worthless overnight if the US would go bankrupt) - would ANY kind of financial investment (including noble metals) be able to withstand the jet-black days on the stock-markets? (imagine 14e12$ "disappearing" from the portfolios of banks, insurances and other financial institutions) :nuke:[/QUOTE]

The risk of an actual default (in terms of not paying the interest due on maturing government debt) has been greatly overblown, especially by those desperate to kick the can past the 2012 elections. The treasury has plenty of money coming in to pay maturing debt, the main impact of not raising the debt ceiling would be that they would only be able to pay about 60% of the total bills of all kinds coming due each month. It's been quite hilarious, actually, listening to the pundits and financial media describing such a scenario - "Treasury would only be able to pay out as much as it takes in in revenues" - as though it were some bizarre, alien concept.
There are also numerous "creative financing" avenues Treasury can use - typically involving some debt-shuffle-dance between the various govt trust funds and the Fed - to help make good the 4)% shortfall, at least for a few months. Apparently there have been ongoing secretive "doomsday scenario" talks at Treasury mapping out exactly such things.

So even absent a last-second "compromise" (I use quotes because the spending-cut component of any such is likely to be laughably small, i.e. "both sides have agreed to a compromise involving less spending cuts than either side previously proposed") there is 0 risk of a technical default near-term, just the same kinds of painful who-gets-paid decisions needing to be made that any household needing to live within its means must make.

The ratings agencies should have started downgrading already anyway, because no scenario I've seen involves cutting even close to the $400 billion-per-year figure the RAs have cited as a "good start" in terms of avoiding a rating downgrade. That number appears to have stemmed from the recommendation of the bipartisan Bowles/Simpson debt-reduction commission which was constituted by the president himself and tasked with mapping out a short and long-term path toward fiscal sustainability, and whose serious, well-thought recommendations were promptly ignored by the president and both sides of the congressional aisle - but apparently not by the ratings agencies.

[QUOTE=Andi47;267854][QUOTE=R.D. Silverman;267753]< snip > I maintain a position in REITS[/QUOTE]

<snip> what is RETIS?[/QUOTE]REITs = Real Estate Investment Trusts

[URL]http://en.wikipedia.org/wiki/Real_estate_investment_trust[/URL]

[URL]http://www.investopedia.com/terms/r/reit.asp[/URL]

ewmayer,

I'm disappointed in you. You don't seem to recognize that the faults you are attributing to the Democrats are actually the Republicans' fault. As Garo pointed out, the spending policies approved by Democrats under George Bush's watch, and which have been continued by Obama, are really just the Republican party's fault. You need to stop "weasel[ing] out of acknowledging Republican faults".

Oh, and this new bill just passed by the Republicans? Clearly it's the Republicans' fault it won't pass in the Senate. They need to stop acting out of ideological purity.

[Note for the sarcasmless among us: The post above is not serious. I appreciate ewmayer for clearly understanding the faults of both sides, and trying to put those faults in perspective of one another.]

Zeta-Flux,

Setting sarcasm aside for a moment:

Will you please point out for us where you've posted sincere acknowledgements of Republican faults described by other posters?

[QUOTE=cheesehead;267914]Zeta-Flux, Will you please point out for us where you've posted sincere acknowledgements of Republican faults described by other posters?[/QUOTE]

Um, how 'bout going a mere one post back:

[quote]I appreciate ewmayer for clearly understanding the [b]faults of both sides[/b],[/quote]

The debt problem can be solved in 2 easy steps.

1. Flat tax, no deductions. Poor? Too bad, pay the lower tax and deal with it. Rich? We're sticking it to you the same percent as the poor, so stop complaining about the millions you're taxed on and be happy with the many-more-millions you're not.

2. Hold a $1 lottery for the right to stick a pin into Bill Gate's butt 1 time, but award 1 million winners. That will generate enough revenue to alleviate the debt.

[QUOTE=Prime95;267920]Um, how 'bout going a mere one post back:[/QUOTE]Tell us just what specific Republican faults he acknowledged with that.

"That Time in 1979 When the U.S. Government Defaulted"

[URL]http://www.mentalfloss.com/blogs/archives/95271[/URL]

[quote]As the Congressional debate over the debt ceiling rages on this week, more analysts are raising the question of what would happen if the country defaults on U.S. Treasury bonds. . . . Could the government really default?

It sure could. It’s happened before! In the spring of 1979, Congress was in the midst of a similarly heated debate about raising the debt ceiling, Legislators eventually reached a last-minute deal to raise the debt ceiling and (they thought) save the day, but something went wrong. The Treasury didn’t redeem $120 million worth of securities that matured in April and May.

In other words, the U.S. Treasury defaulted on its securities even though Congress settled the debt-ceiling issue. What happened? It’s not totally clear.

Ball State University finance professor Terry Zivney later co-authored a paper entitled “The Day the United States Defaulted on Treasury Bills,” ...

By all indications, the 1979 default seems to have been the result of a run of bad luck. The deal over the debt ceiling was a decidedly eleventh-hour affair, and when it sparked a run on Treasury securities by investors, the department got backlogged on its paperwork. Moreover, the Treasury later explained that it had problems with the word-processing and printing software that printed its checks. (This defense is otherwise known as, “We wanted to pay you, but you know how these dang computers are!”)

... The government quickly got its act together and paid off investors—the Treasury still considers the episode to be a delay rather than a default—but Zivney’s research found that the blip had real consequences for the economy.

After the default, investors no longer saw Treasury securities as totally risk-free options, so the government suddenly had to pay a higher interest rate when it wanted to borrow money. Zivney and co-author Richard Marcus estimate that as the result of the small 1979 default, the Treasury had to up the interest rate it was paying by 0.6 percent on all of its debt. That may look like a tiny number, but when it’s spread across the Treasury’s entire debt, it adds up quickly.

. . .[/quote]

Prime95,

I appreciate your response. Unfortunately, pointing out the obvious in this case only confuses the issue. My purpose in posting has not been to point out Democrat faults. So asking where I specifically point out Republican faults (even in the post right after I do so) is besides the point.

ZeroHedge has some nifty charts illustrating the history of US debt-ceiling-hikes since 1940:

[url=http://www.zerohedge.com/news/filed-under-exponential]Filed Under Exponential[/url]

And the CBO just weighed in on the oh-so-predictable 11.99th-hour debt ceiling raise "agreement" and reveals it - even more predictably - to be just another ginormous can-kicking exercise. The "S&P Required" bit in the title below is a reference to S&P stating recently that unless the government came up with a budget plan which amounted to at least $4 trillion in real, credible budget cuts over the next 10 years, it would downgrade US sovereign debt. Yah right, I`ll believe that when I see it. S&P`s buddy Moody`s made a similar warning recently, but Moody's former top-economist Mark Zandi was tripping all over himself to proclaim-to-the-media that [url=http://www.zerohedge.com/news/moodys-chief-economist-says-proposed-deal-will-avoid-us-downgrade]they would be satisfied[/url] with the "bipartisan agreement" hastily announced over the weekend, even before seeing any real details or letting a semi-credible 3rd party (e.g. CBO) analyze it. Of course Zandi no longer speaks for Moody's, but I expect he has as good a good feel for how things work there as anyone. Of course once the CBO finished their first look, the "budget savings" proved underwhelming: No impact this year, and targeted cuts amounting to just 0.6% of next year's budget. And since these sorts of plans always blather about "10 year savings" but US budgeting is done on a year-by-year basis, any kind of back-loaded savings projections are meaningless:

[url=http://www.zerohedge.com/news/cbo-scores-bipartisan-plan-half-sp-required-savings-only-2-total-cuts-take-place-obama-reelecti]CBO Scores "Bipartisan" Plan At Half Of S&P Required Savings; Only 2% Of Total Cuts To Take Place Before Obama Reelection[/url]

House member (R-Texas), presidential candidate and Fiscal-balance guru and fierce Fed/Ponzi-Finance critic Ron Paul [url=http://www.zerohedge.com/news/ron-paul-exposes-deficit-plan-lies-cuts-are-illusory-not-current-amounts-spent-projected-spendi]describes what`s really in that sausage[/url]:
[quote]"No plan under serious consideration cuts spending in the way you and I think about it. Instead, the 'cuts' being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family 'saving' $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people. The truth is that frightening rhetoric about default and full faith and credit of the United States is being carelessly thrown around to ram through a bigger budget than ever, in spite of stagnant revenues. If your family's income did not change year over year, would it be wise financial management to accelerate spending so you would feel richer? That is what our government is doing, with one side merely suggesting a different list of purchases than the other."[/quote]
[i]My Comment:[/i] And after opening in predictably higher risk-fully-back-on idiot-rally mode, European and U.S. markets plunged shortly after US market-open on a slew of horrendous economic-indicator data, most prominently the [url=http://globaleconomicanalysis.blogspot.com/2011/08/gap-and-crap-it-was-ism-plunges-to-509.html]latest ISM manufacturing index plummeting[/url] far below even the lowest prediction among that of the numerous economists polled last week. In Europe, the DAX responded via a now-classic HFT-driven flash crash ... for our German-speaking readers, here is [i]Die Welt[/i] [url=http://www.welt.de/finanzen/article13520241/Die-naechste-Panik-Attacke-kommt-aus-den-USA.html]describing that excitement[/url]:
[quote][url=http://www.welt.de/wirtschaft/article13519921/Einigung-mit-Restrisiko-USA-werden-zum-Sparmeister.html]Die Vereinigten Staaten sorgen für eine Panik-Attacke nach der nächsten[/url]. Erst war es die Furcht vor dem Staatsbankrott, die die Märkte durchpflügte. Nachdem US-Präsident Barack Obama eine Einigung im Schuldenstreit verkündet hatte, zerstörten katastrophale Konjunkturzahlen die Hoffnung der Investoren auf ruhigeres Fahrwasser.[/quote]
[i]My Comment:[/i] Here is the DAX intraday chart showing the step function:

[QUOTE=ewmayer;268081]ZeroHedge has some nifty charts illustrating the history of US debt-ceiling-hikes since 1940:

[url=http://www.zerohedge.com/news/filed-under-exponential]Filed Under Exponential[/url]

And the CBO just weighed in on the oh-so-predictable 11.99th-hour debt ceiling raise "agreement" and reveals it - even more predictably - to be just another ginormous can-kicking exercise. The "S&P Required" bit in the title below is a reference to S&P stating recently that unless the government came up with a budget plan which amounted to at least $4 trillion in real, credible budget cuts over the next 10 years, it would downgrade US sovereign debt. Yah right, I`ll believe that when I see it. S&P`s buddy Moody`s made a similar warning recently, but the folks there were tripping all over themselves to hastily announce that [url=http://www.zerohedge.com/news/moodys-chief-economist-says-proposed-deal-will-avoid-us-downgrade]they would be satisfied[/url] with the "bipartisan agreement" hastily announced over the weekend, even before seeing any real details or letting a semi-credible 3rd party (e.g. CBO) analyze it:

[url=http://www.zerohedge.com/news/cbo-scores-bipartisan-plan-half-sp-required-savings-only-2-total-cuts-take-place-obama-reelecti]CBO Scores "Bipartisan" Plan At Half Of S&P Required Savings; Only 2% Of Total Cuts To Take Place Before Obama Reelection[/url]

House member (R-Texas), presidential candidate and Fiscal-balance guru and fierce Fed/Ponzi-Finance critic Ron Paul [url=http://www.zerohedge.com/news/ron-paul-exposes-deficit-plan-lies-cuts-are-illusory-not-current-amounts-spent-projected-spendi]describes what`s really in that sausage[/url]:

[i]My Comment:[/i] And after opening in predictably higher risk-fully-back-on idiot-rally mode, European and U.S. markets plunged shortly after US market-open on a slew of horrendous economic-indicator data, most prominently the [url=http://globaleconomicanalysis.blogspot.com/2011/08/gap-and-crap-it-was-ism-plunges-to-509.html]latest ISM manufacturing index plummeting[/url] far below even the lowest prediction among that of the numerous economists polled last week. In Europe, the DAX responded via a now-classic HFT-driven flash crash ... for our German-speaking readers, here is [i]Die Welt[/i] [url=http://www.welt.de/finanzen/article13520241/Die-naechste-Panik-Attacke-kommt-aus-den-USA.html]describing that excitement[/url]:

[i]My Comment:[/i] Here is the DAX intraday chart showing the step function:[/QUOTE]

And still no tax hikes for the rich.

Silverman,

Do you really want tax hikes on the rich before they even start paying down the debt? I'm all for increasing taxes on the rich, closing loopholes and the like [b]IF[/b] government used the money wisely. But at this point it would just give the politicians more excuses to waste the money and pretend they are saving money when in fact they are incurring more debt this year than last year.

[QUOTE=R.D. Silverman;268082]And still no tax hikes for the rich.[/QUOTE]

Well, that issue is actually quite interesting ... If I read the 'agreement' correctly, while there is no mention of *adding* such, it is well-known that the Bush-era tax breaks for the high-income folks will expire at year's end ... and there is no mention of extending them. There has been some speculation that this was a concession Obama wrung from Boehner, but of course Boehner would not want to *announce* such a tacit agreement to the Republicans and tea partiers. Stay tuned for more on this - fellow readers, feel free to weigh in if you read anything that updates or contradicts the above speculation.

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

As for a question many are surely asking, "what to do with one's investments?", I won't offer any advice except the general note that multiple data (e.g. the latest US GDP revisions and manufacturing numbers out of US, Asia and Europe) point to a global double-dip recession already being well underway, and there are multiple extreme-danger signals flashing: Sovereign-debt crises in Europe and the US, massive credit bubbles making loud "pffffffffft" noises in China and other BRIC nations, job market in the US remains firmly moribund despite the happy noises in certain areas, notably high-tech and Ponzi finance, though the latter is showing signs of strain now that the government-supplied financial cocaine is running out.

For myself, I (somewhat belatedly) cashed out all my company ESPP (employee stock purchase plan) shares last Tuesday and went into the weekend nearly entirely in cash, except for a small "disaster hedge" short position I started the same day I cashed out my ESPP. With respect to the latter, the idea is that one is confident that there is going to be a major market selloff (in the -20% range), buy some puts which are roughly that much out of the money (and hence should be very cheap), and thus will pay off handsomely if the bear market prediction comes true. (If not, they expire worthless, but they were cheap, so it's only a small loss). it's a good question as to what one should short here - a broad index short (say S&P500) is probably a good idea. I decided to put a small short on one of the "top 5 most bubbleicious dotCom mania v2.0" stocks I've been tracking for most of the year. Originally had planned on Netflix, but missed the recent brief pop over $300 and next thing I knew, NFLX had announced less-than-jaw-dislocating earnings and guidance and the stock dropped 10% in a day. Around the same time, another one of my T5MBDM2.0 watch-list companies, China Internet-search giant Baidu, shot up by a similar amount to a new all-time high, on little real news which would justify such a move. So I shorted that. Those puts quickly doubled and I was sorely tempted to sell them last Friday, but decided to give the DC dysfunctionality a few more days. Today's price range for those was from a full 1-2x what I paid (Opened at the low, quickly doubled on the ISM miss, then started settling back again), I dumped them at about 1.7x. Yes, such a quick-flip defeats the purpose of a disaster hedge, but given how volatile the markets are, the time-is-money cost of all options, and the added danger of betting against the interests of the politicians and bankers in keeping the debt-Ponzi going, "take the money and run" - good thing, too, as the puts I sold finished the day back down close to breakeven. So 100% cash, and waiting for the inevitable "debt ceiling raise market orgasm" to re-short whatever T5MBDM2.0 watch-list companies are looking most bubbly at that time. Again, only betting a very small % of my portfolio - this stuff is too crazy to wager more. But for this day, I'll happily take the 6 months' rent money from the pro-Ponzi gamblers.

[QUOTE=Zeta-Flux;267980]My purpose in posting has not been to point out Democrat faults.[/QUOTE](No one claimed that was your purpose.)

[quote]So asking where I specifically point out Republican faults (even in the post right after I do so) is besides the point.[/quote]Yes, asking that would be ... if anyone [I]had[/I] actually asked that. [U]I[/U] never asked where you specifically point out Republican faults, and I don't recall where anyone else did, either.

Instead, you've just trotted out another evasive straw-man to try to mislead readers.

- -

Let's review what I [U]ACTUALLY[/U] posted:

[QUOTE=cheesehead;267721]Yes, that's one way to weasel out of acknowledging Republican faults[/QUOTE]I didn't say "... [I]pointing out[/I] Republican faults", which would be to bring them to the thread's attention before anyone else did.

I said, "... [U]acknowledging[/U] Republican faults", which is admitting the existence of faults [I]that had already been pointed-out (by another)[/I].

[quote=cheesehead;267721]When you don't realistically admit (without strawman exaggeration) that Republicans really, truly made some mistakes,[/quote]I didn't say "[I]... point out[/I] ... that Republicans really, truly made some mistakes", which would be to bring Republican mistakes to the thread's attention before anyone else did.

I said, "... [U]admit[/U] ...", which is to acknowledge descriptions of mistakes already pointed-out by others.

As for my "(without strawman exaggeration)", it looks like I should have written "(without strawman exaggeration, [I]misdirection or evasion[/I])".

[QUOTE=cheesehead;267914]Will you please point out for us where you've posted sincere acknowledgements of Republican faults described by other posters?[/QUOTE]I didn't write, "... point out for us where you've [I]pointed out[/I] Republican faults ...".

I wrote, "point out for us where you've posted sincere [U]acknowledgements of Republican faults described by other posters[/U]".

- -

I never framed my statements so as to imply that you had any obligation to have [I]taken a first step[/I] in describing or listing, or "point out", Republican faults or mistakes.

But once again you dance, dodge and evade my question by responding with a straw man instead of straightforward honesty about what I actually asked.

[QUOTE=ewmayer;268088]As for a question many are surely asking, "what to do with one's investments?", I won't offer any advice except the general note that multiple data (e.g. the latest US GDP revisions and manufacturing numbers out of US, Asia and Europe) point to a global double-dip recession already being well underway, and there are multiple extreme-danger signals flashing: Sovereign-debt crises in Europe and the US, massive credit bubbles making loud "pffffffffft" noises in China and other BRIC nations, job market in the US remains firmly moribund despite the happy noises in certain areas, notably high-tech and Ponzi finance, though the latter is showing signs of strain now that the government-supplied financial cocaine is running out.[/QUOTE]Likewise, I won't offer advice --- I'm not allowed to because I'm not registered under the relevant regulations.

However, my wife and I have been taking financial advice over the last couple of years because we are an age when significant amounts of cash have been arriving. Specifically, my father died a couple of years ago and Jean has just retired and taken a cash sum element from her pension scheme. Our approach has been to follow the old advice: keep several months living expenses (at least) in cash or cash equivalent and diversify what's left over. Some of our stuff is in gilts (the UK equivalent of US Treasury bonds), some in UK market tracker funds, some in highly speculative developing-economy stocks, some in somewhat less risky (we believe) managed US, UK and European managed funds, some in company bonds, and so on.

We also applied the diversification advice to the financial advisors. It's unwise, in my opinion, to rely on a single so-called expert.

We're interested in long-term investment (>= 5 years) and don't mind too much if we lose 20-30% of our money next year (another reason for keeping a good cash-equivalent float) as long as it comes back again in good time.

YMMV.

Paul

Some interesting comments on Bloomberg:

[url=http://mobile.bloomberg.com/news/2011-07-28/democrats-can-lose-on-debt-win-on-bush-tax-cuts-commentary-by-ezra-klein]Democrats Can Lose Debt Fight, Win on Bush Tax Cuts: Ezra Klein[/url]

Selected reader comments:
[quote][b]Kiev500[/b]
5 days ago

Great, so the Bush tax cuts for the wealthy will survive a second time under Obama, a man who promised to end them. You say time will eventually end the tax cuts, but we didn;t elect time president, we elected Obama. And why did we elect Obama? -Because of his campaign promises, most of which he has broken or reneged on.

As a Democrat, I look at President Obama’s re-election campaign and I’m not excited
...
I look at America and see Guantanamo still open. I see America involved in more than twice the number of wars that president Bush started. I remember a candidate who promised to close Guantanamo and end those wars. In hindsight, I realize that Obama has not pursued the promises he made to progressive democrats with any discernable enthusiasm, and I wonder why that is.

I look at the world and see wide-spread political unrest spreading across many states in the mid east. This unrest has spawned conflict that President Obama has openly encouraged and in some cases directly supported with funding and military operations. Obama took advantage of America’s desire to end it’s involvement in the wars in Iraq and Afghanistan, but has in fact doubled the number of wars we are involved in. The governments of several mid east countries, including Egypt and Tunisia, have collapsed and been replaced, while Obama continues to act directly against the government of Libya and indirectly against the government of Syria. Obama claims these acts are intended to protect civilians. That old argument helped get us into the Vietnam War.
...
Remember when Bush said "Saddam must go, -he must leave Iraq"? Obama said the same thing about Gadhafi in Libya. It was a Freudian slip.

Regarding Libya, Obama has argued that the war powers act does not apply to him because we are not involved in “hostilities” as the legal term was intended to be used. The bottom line is Obama has involved the US military in operations that are killing people in a foreign country that did not attack us, and has done so without the constitutional approval of Congress. In addition, Obama presides over a CIA drone program that targets and bombs groups deemed unfriendly in Pakistan and Yemen. Taken together, all this sounds like something Dick Cheney would do. We didn't vote for this.

Many progressives have asked themselves where the change went. This man who rode a popular wave of change to the White House has applied that mantra of change almost entirely to Arab countries in the middle east, while little to nothing substantial has happened at home. This man who promised he would end the mid east conflict between Israel and the Palestinians through peace negotiations has accomplished nothing in that regard besides being lectured to and publically humiliated by Israel‘s prime minister.

I cannot forgive Obama's veto in the UN Security Council of the recent resolution denouncing Israeli Settlements and continued Settlement construction in occupied territory. This illegal Settlement construction prevents any possibility of peace and prejudices the outcome of future negotiations. It also violates Israel's commitment from the Road Map peace plan.
...
Obama seems to operate on the premise that Democrats have no choice but to re-elect him because the other guys, -the Republicans, are worse. I’m not ready to re-elect Obama without a careful analysis of what he promised to do and what he has actually accomplished for the party that sent him. From my perspective, that analysis does not produce a favorable result.
[b]
We voted for a man who would end the wars, close Guantanamo, repair the economy, create jobs, reign in the un-regulated and immoral behavior of Wall Street, protect the middle class from job losses and mortgage foreclosures, and adjust our income tax system to better address the incomes of the wealthy that completely outstrip the current tax table brackets. We got none of that. After generously bailing out the banks, Goldman Sachs and Wall Street, and big corporations including General Motors and AIG, -and after extending the Bush tax cuts for the wealthy, Obama has done almost nothing for working class Americans who can’t find jobs and are losing their homes to foreclosure. Worse, it seems that Obama is about to extend the Bush tax cuts for the wealthy AGAIN with his plan for raising the debt ceiling. It's unbelievable! We didn't vote for this.
[/b]
In fact, if you look at the net results of the first 2 years of Obama’s administration, what you actually see looks a whole lot like George W. Bush’s third term.

Obama didn’t change Washington. He didn’t change the things he promised to change. He hardly even tried. Instead, Obama changed himself. It seems to me that his real agenda was to eliminate Hillary Clinton in the primary, get elected as a black democrat who was opposed to the wars, accomplish little to nothing for Democrats, compromise at every opportunity with Republicans, and basically run out the clock on all the hopes and dreams of Democrats and working class citizens who voted for him.

So will I vote again for Obama? -Fool me once, shame on you. Fool me twice, -shame on me.

Don't get me wrong, I'm not against Obama because he's black or because some idiot questioned his nationality. Far from it. I'm against Obama because he's red. He has kept more of George Bush's campaign promises than he has kept of his own. I didn't vote for that, and I sure as Hell won't vote for it a second time.

[b]marquis6[/b]
2 days ago

Politians make big promises but being able to deliver those promises is hard. We had all these great expectations for Obama's Presidency and so did he but reality delivered something different. You can't be too far right or too far left in running this country. You need to be somewhere in the middle and that is what has happened to Obama. I think he is doing the best that he can with what he has to work with. Our expectations for him far exceeded reality, that is all. As a country, we expect our Presidents to solve all our problems. They do what they believe is the right thing to do which may prove later to not be a good decision...just like the rest of us. I think Obama did a really good job up until the time the GOP took control of the House and created gridlock. Now he will really be forced to play cards he may not want to play but reality dictates compromise sometimes.

[b]Kiev500[/b]
1 day ago

No, the political "middle ground" is utterly worthless as a descriptive term because conservatives have taken the middle ground and moved it several miles to the right. Our glorious leader has done nothing to take that middle ground and move it back to the place it used to be. Thus when he compromises, they move the middle further to the right, he compromises again, they move the center again, over and over, ad infinitum. Aside from that, the lack of presidential words of leadership on issues like the right wing attacks against Acorn, Planned Parenthood, women's reproductive rights, worker's rights, public radio, union rights and collective bargaining, and new voter-ID laws that oppress or prevent hundreds of thousands of legitimate minority votes -are unforgivable. He has sat quietly as Republican governors in several states attempted to destroy some of the most prominent political organizing arms of progressive democrats. Regarding the economy, employment, banks, and Wall Street, he has operated like the ineffective coach of an arrogant football team that does not like him or his policies. This football team has become accustomed to making their own rules and serving their own corrupt interests, including fixing and betting on games for profit. They have no intention of allowing the coach to end their little party. To be rid of the coach and his policies, the team has chosen to intentionally lose until the coach gets fired. Think about that for a moment. What can the coach do? How far is he willing to go to assert the authority of his office and regain control of the situation? In order to overcome this situation and be effective, the coach needs to walk out onto the field and shoot a couple of those players. Right there, under the lights, in front of the crowd. An example needs to be made of real consequences for disrespect of the coach and his position of authority. Otherwise, these “football players“, who are over-paid, arrogant, self-centered, and in many cases corrupt, -will forget that they play to defend their home field, their school, and the honor of the men who came before them, -and they will continue to place greed and personal profit ahead of fidelity and patriotism. Of course, in my example above the football team is a metaphor for Wall Street and the corporate establishment. I’m sure some would ask me just how this “football team” has chosen to lose. Failing to produce American jobs while allowing more and more American worker's homes to fall into foreclosure puts pressure on the middle class, who the "team" hopes will ultimately fire the coach. These groups, including the US Chamber Of Commerce and dozens of corporate-funded PACs, have gone out of their way and spent millions of dollars to destroy this president and the reforms that a majority of American voters supported. To my regret, it seems to me that Obama has played right along with this "kill the middle class" strategy which is aimed at undermining democratic support for the agenda Obama was elected on. He CAN'T play along with that. We must refuse to allow the leader we elected to lie down for that. You can't compromise with a group whose only goal is to destroy you. Like the coach above, Obama must take control of the situation.[/quote]

My dear [i]CaseusCorpus[/i],

While it surely must be the case that the internet masses hang upon your every word, it is my sad duty to inform you that with one brief sentence I am about to cast your post to the dustbin of irrelevancy. Of course, Prime95 had already accomplished this great task with a previous post, but I thought I'd follow his cue.

I do hereby decree and sincerely affirm that the phrase "point out" was meant as a contraction of the longer phrase "point out sincere acknowledgments of", and that all such instances of the phrase should irrevocably hereafter and forever be replaced by the longer phraseology.

Now back to your regularly scheduled programming.

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

R.D.,

I thought that was a decent gauge of how many people feel about the Obama administration. However, the sentence "I think Obama did a really good job up until the time the GOP took control of the House and created gridlock." doesn't really seem to fit with the rest of the critique, but rather appears to be a careless attack on the GOP. As far as I understand, it wasn't GOP gridlock which led to any of the faults that author pointed out. Guantanamo still being open? Continued wars? A new war in Libya? Lack of government creation of jobs?

About the only real beef he could have is in the lack of tax increases in the recent deal but, again, the Bush tax cuts were renewed by Obama in 2010, not due to GOP caused gridlock. But I'll grant that the GOP has prevented new tax increases, which could be useful (once we rein in spending).

One other thing: I think many of these critiques will vanish during the actual primary. Sure Obama didn't close Guantanamo, but he won't "double" it as Romney would.

Bob, appreciate the contributions, but please add links to your sources!

(I fixed it up you this time, but you just forfeited part of your rental-agreement cleaning deposit ;)

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

ZeroHedge proposes an interesting "market topping' indicator - the share price of high-end auction house Sotheby`s:

[url=http://www.zerohedge.com/news/ultimate-indicator-easy-money-access-rolling-over-and-absent-more-qe-it-market]Is "The Ultimate Indicator Of Easy Money Access" Rolling Over, And Absent More QE, Is This It For The Market?[/url]
[quote]Two weeks ago courtesy of Sean Corrigan, [url=http://www.zerohedge.com/article/presenting-ultimate-indicator-easy-money-access]we presented[/url] what many consider the "ultimate shorthand indicator of easy money and speculative access" - the stock price of auction house Sotheby's. Well, the easy money may be about to end, and with it the latest bout of irrational market exuberance. As the chart shows, Sotheby's has timed the three previous armageddon with uncanny precision, with the red vertical lines marking the market tops almost perfectly. These occur when the i) RSI hits overbought, a condition that has been realized now; ii) when the stock price has a monthly closing below its 12 month Moving Average, also realized and iii) when the MACD crosses below its Signal line - this is about to occur any minute. We expect the 4th red vertical line to mark the end of this particular period of uber easy money any minute, and absent another monetary stimulus, to begin the at first slow, then very fast collapse to another market secular low.[/quote]
[i]My Comment:[/i] The bit in the title about "Absent More QE" may well be key here - Unlike the Treasury, the Fed`s money-printing is not subject to any kind of congressionally-approved ceiling. Previous similar indicators such as "Hindenburg Omen" may have well sent false (or at least premature) alarms as a result of the market-distorting power of Fed printing. In any event, the above "indicator" is at the very least amusing.

Well, now that I know those were multiple authors being quoted, it makes sense that they don't say the same thing. :-p Thanks ewmayer for making half of my post irrelevant!

[QUOTE=ewmayer;268088]So 100% cash, and waiting for the inevitable "debt ceiling raise market orgasm"[/QUOTE]

"Almost inevitable debt ceiling raise market orgasm":

[QUOTE=Zeta-Flux;268132]My dear [I]CaseusCorpus[/I],

< snip >[/QUOTE]If you were actually being honest, you could've simply given us the specific location at which you did what I actually asked about.

Instead, you keep dancing.

Oh, get a room, you two!

[Don't tempt the mods to begin engaging in "heavy handed censorship" and other assorted kinds of unpleasantness].

EU Crisis Hits Spain, Italy | Barfly-Ben Speaks!
 

[I took the link headline from Mish`s article on the same newspiece]

[url=http://globaleconomicanalysis.blogspot.com/2011/08/italy-holds-2-hours-of-emergency.html]Italy Holds 2 Hours of Emergency Meetings with Juncker; EU says "Euro Area's Systemic Capacity in Doubt"; Italy Banks Have Difficulty Securing Funding[/url]
[quote]European Commission President Jose Manuel Barroso said a surge in Italian and Spanish bond yields to 14-year highs was cause for deep concern and did not reflect the true state of the third and fourth largest economies in the currency area.

"In fact, the tensions in bond markets reflect a growing concern among investors about the systemic capacity of the euro area to respond to the evolving crisis," Barroso said in a statement.

He urged member states to speed up parliamentary approval of crisis-fighting measures agreed at a July 21 summit meant to stop contagion from Greece, Ireland and Portugal, which have received EU/IMF bailouts, to larger European economies.

Italian Economy Minister Giulio Tremonti held two hours of emergency talks with the chairman of euro zone finance ministers, Jean-Claude Juncker, in Luxembourg but neither disclosed anything of substance after the meeting.

The euro zone's rescue fund cannot use new powers granted at last month's summit to buy bonds in the secondary market or give states precautionary credit lines until they are approved by national parliaments in late September at the earliest.

The European Central Bank could reactivate its bond-buying program, which temporarily steadied markets last year but has been dormant for more than four months. Weekly data released on Monday show it has so far refrained from doing so despite market rumors to the contrary last week.

Italy and Spain could offer new austerity measures to try to placate the markets, but Rome has just adopted a 48 billion euro savings package and Madrid's lame duck government has just called an early general election for November 20.

Shares in banks exposed to euro zone sovereigns, particularly in Italy, have taken a hammering and are having growing difficulty in securing commercial funding.[/quote]
[i]My Comment:[/i] Barroso is in fact not lying - Once the true state of Spanish and Italian finances becomes known, yields demanded by bond investors will soar from their already-high levels into double-digits.

[b]Lipstick-on-a-Pig Headline of the Week:[/b]

Yesterday`s edition of my local newspaper (the San Jose Mercury News) had a graphic depicting the breakdown of the various holders of the $14.3 Trillion in U.S. government debt. Next to the $2.7 Trillion chunk for Social Security, they have this description:
[i]
"Surpluses generated by the program that are [b]invested[/b] in government bonds".
[/i]
That is strange, because it seems to imply that if Social Security hits a sluggish-revenue patch, it can simply sell some of those bonds to raise cash needed to cover any shortfall. So when the debt-ceiling theater was heating up recently, why did the president say that absent a debt-ceiling raise, he could not guarantee that the next month's Social Security checks would go out? A closed-end-mutual-fund or fixed-term-CD "Substantial penalty for early withdrawal?" kind of deal, perhaps?

[b]And On a Lighter Note:[/b]

From the risible writers at The Onion – The sad thing is, even though the Barfly-Ben bit is pure invention (I mean, a DC beltway insider not-in-campaign-mode showing up in Nebraska – yeah, right), the economic analysis behind the humor is spot-on:

[url=http://www.theonion.com/articles/drunken-ben-bernanke-tells-everyone-at-neighborhoo,21059/]Drunken Ben Bernanke Tells Everyone At Neighborhood Bar How Screwed U.S. Economy Really Is[/url]

[QUOTE=ewmayer;268203]From the risible writers at The Onion – The sad thing is, even though the Barfly-Ben bit is pure invention (I mean, a DC beltway insider not-in-campaign-mode showing up in Nebraska – yeah, right), the economic analysis behind the humor is spot-on:

[/QUOTE]

Spot-on? The bit about "spiraling interest rates" seems very wide of the mark.

[QUOTE=R.D. Silverman;268209]Spot-on? The bit about "spiraling interest rates" seems very wide of the mark.[/QUOTE]

I read that as being a reference to bond-market interest rates for the various indebted sovereigns ... which have not yet hit US debt, but the falling dominoes are getting closer all the time.

(Then again, it could just be the flaming shots of Wild Turkey talkin'. :)

[QUOTE=ewmayer;268203]
Yesterday`s edition of my local newspaper (the San Jose Mercury News) had a graphic depicting the breakdown of the various holders of the $14.3 Trillion in U.S. government debt. Next to the $2.7 Trillion chunk for Social Security, they have this description:
[I]
"Surpluses generated by the program that are [B]invested[/B] in government bonds".
[/I]
That is strange, because it seems to imply that if Social Security hits a sluggish-revenue patch, it can simply sell some of those bonds to raise cash needed to cover any shortfall. So when the debt-ceiling theater was heating up recently, why did the president say that absent a debt-ceiling raise, he could not guarantee that the next month's Social Security checks would go out?[/QUOTE]As I understand it:

When Social Security redeems some of those bonds, the Treasury has to have enough cash for that. (Soc Sec can't sell the bonds to anyone else; it can only present them to the Treasury for redemption.) If Treasury happens not to have enough cash to redeem the bonds from Soc Sec, normally it would sell enough bonds to other parties to raise the cash. But if that would exceed the debt ceiling, it can't.

AFAIK it's not kosher for Treasury to receive bonds from Soc Sec, subtract that amount from the total outstanding debt (to get below the debt ceiling), then sell an equal amount of bonds (back up to the debt ceiling again) to other parties [I]before it pays Soc Sec cash for its redeemed bonds[/I]. It needs to have the cash on hand in order to redeem bonds from Soc Sec, but it doesn't have that, and it can't raise any more cash by selling bonds to others as long as the Soc Sec bonds are still outstanding and the overall bond total is at the debt ceiling.

(Unless Obama were to invoke the 14th Amendment -- but he's not that bold.)

There is quite a bit to read between the lines re the Eurozone instability. Here is a quote from an article: [url]http://www.bbc.co.uk/news/business-14404852[/url]

[QUOTE]"Markets highlight, among other reasons, the global economic uncertainties due to both economic growth and the protracted decision on budgetary adjustments in the US but, first and foremost, the undisciplined communication and the complexity and incompleteness of the 21 July package."[/QUOTE]

You might be confused by all the blabbage and blurbage in that statement. It is summarized by the word "incompleteness". In other words, the bailout fund is NOT NEAR ENOUGH! I did a BOTN calculation of just how big it would have to be and came up with something just north of $3.5 Trillion. This would presume another bailout for Greece to the tune of $100 billion, $1.6 Trillion for Italy, and $800 Billion for Spain. There would also have to be a reserve to the tune of at least $1 Trillion.

Somehow, I don't see Germany going on the hook for them kind of bucks.



And on the home front, the USA is now set to hit $18 Trillion in total debt without meaningful reform of either spending or revenue increase. The can has been kicked, down the road it goes, next stop is only 2 years away.

Whats that? You think the "budget reform committee" has a realistic possibility of doing something about spending? Whatever it is that you are drinking, pass it around, everyone here needs a drink of some really good koolaid!

DarJones

I'm seriously wondering when the first year will be when we actually lower spending. No, not the projected spending, the actual spending. As in, spending less than the year before. I don't think it will happen during Obama's tenure, and maybe not even during the next presidency.

I'm betting that we don't cut deficit spending below 1 trillion a year for the next six years. Meaning we will get up to $20 trillion in debt. At that point, maybe something serious will finally be done.

[QUOTE=cheesehead;268263]As I understand it:

When Social Security redeems some of those bonds, the Treasury has to have enough cash for that. (Soc Sec can't sell the bonds to anyone else; it can only present them to the Treasury for redemption.) If Treasury happens not to have enough cash to redeem the bonds from Soc Sec, normally it would sell enough bonds to other parties to raise the cash. But if that would exceed the debt ceiling, it can't.[/QUOTE]

You are correct about the non-marketability of the T-bonds placed as markers in the Social Security and Medicare trust funds as IOUs for government having borrowed and spent the surpluses of the past few decades. But here is the interesting part, which prompted my pointed (rhetorical) question about the Obama Social-Security-doomsday threat: Those intragovernmental borrowings [b]are already factored into the debt ceiling numbers[/b]: That is why the ceiling is northward of $14 Trillion, rather than around the $10 Trillion figure for "debt held by the public" which excludes such trust-fund borrowings.

That is, Treasury issuing more open-market debt in order to replace some of those IG borrowings with cash [b]has no effect on the total outstanding debt subject to the ceiling[/b]. That's why it was so disingenuous (although perhaps politically effective) of the president to make such a statement. Again, I suspect the real reason Treasury might well be loath to make such IG-redemption bond issuance is that, absent both a ceiling agreement and with the Fed (temporarily) having ended its bond-buying scheme, Treasury was rightly wary of the kinds of rates bond investors might demand, since with so much debt-issuance to come and the illusion of any kind of self-sustaining economic recovery having vanished, even a small rise in Treasury rates (and all the consumer-borrowing rates tied to them) would be very bad for the economy.

Another interesting post-ceiling-raise note: I was having a discussion last weekend about the "hardness" of the August 2nd deadline given by Treasury, and surmised that in fact the deadline was far more squishy than most of the heated debate and media coverage would have had us believe. In other words, I believe Treasury has numerous "back channel" ways of (at least on a short-term basis) bridging shortfalls. The latest Treasury-debt numbers bear this out, though details of where the bridge loans came from are as yet scant:

[url=http://www.zerohedge.com/news/gross-us-debt-surges-240-billion-overnight-us-debt-gdp-hits-post-world-war-ii-high-972-official]Gross US Debt Surges By $240 Billion Overnight, US Debt To GDP Hits Post World War II High 97.2%, Official Debt Ceiling Increase Only $400 Billion[/url]
[quote]Two things happened when the Senate voted in the "Bipartisan" plan into law yesterday: i) deferred debt on the Treasury's balance sheet finally caught up with reality, and ii) as a result of i) America's Debt/GDP just hit a post World War 2 High of 97.2%. Because as the [url=https://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=w&fname=11080200.pdf]Daily Treasury Statement[/url] as of last night indicates, total US marketable debt surged by $124.6 billion, while debt in intragovernmental holdings (Social Security, Government Retirement Accounts, etc), soared by $113.6 billion, for a combined one day change of $238.2 billion, the single biggest one day increase of US debt in history.[/quote]

[QUOTE=ewmayer;268311]You are correct about the non-marketability of the T-bonds placed as markers in the Social Security and Medicare trust funds as IOUs for government having borrowed and spent the surpluses of the past few decades. But here is the interesting part, which prompted my pointed (rhetorical) question about the Obama Social-Security-doomsday threat: Those intragovernmental borrowings [b]are already factored into the debt ceiling numbers[/b]: That is why the ceiling is northward of $14 Trillion, rather than around the $10 Trillion figure for "debt held by the public" which excludes such trust-fund borrowings.
[/QUOTE]

I looked for data on the following question, but did not find it:

What would the deficit be now if the Bush tax cuts had not happened?

[QUOTE]What would the deficit be now if the Bush tax cuts had not happened? [/QUOTE]

Whatever might have been collected as additional taxes, the politicians would have long since spent with no measurable decrease in the debt.

DarJones

[QUOTE=ewmayer;268311]
<snip>

[/QUOTE]

The following seems clear:

[url]http://www.cnn.com/2011/OPINION/08/04/owens.job.crisis/index.html?hpt=hp_t1[/url]

[QUOTE=R.D. Silverman;268323]The following seems clear:

[url]http://www.cnn.com/2011/OPINION/08/04/owens.job.crisis/index.html?hpt=hp_t1[/url][/QUOTE]

Yep, it's right back to the 1992 Clinton-campaign mantra, "It's the economy, stupid." And most folks outside the DC and Wall Street bubbles know that the stock market is not the economy, especially after hearing for most of the past year about record corporate profits and Wall Street bonuses and waiting in vain for any of that windfall to trickle down to them by way of some actual jobs-creation.

The article focuses on the distraction that was the debt-ceiling theater, but the fact is, the government has had 3 full years to deal with the fundamental rot in the economy - the papering-over of a deteriorating middle-class wage base by way of debt-expansion - and instead squandered multiple trillions in new-printed and borrowed money bailing out Big Finance and many of the same multinational corporations which have been so busily moving jobs overseas at the same time they use accounting tricks to avoid paying taxes on the resulting profits, thus shifting an ever-increasing share of the tax burden onto the same middle-class whose earnings capacity they have eviscerated, with the complicity of an economic-delusion-embracing federal government. Time to pay the piper.

Fun fun day at the markets today. Italian banks were suspended repeatedly. FTSE futures and gilts were suspended for over an our too. Watch out for a bounce though if tomorrow's jobs report is not as bad as expected. Market expectations are pretty low now so a bounce of the dead feline variety is certainly a possibility. Beyond that I think we have a fun Sept/Oct ahead of us.

Grantham advised pulling all money in April. Barry Ritholtz is also expecting at least a 25% correction. And of course, Bob has taken is money out on a one month holiday. All significant indicators.

[QUOTE=garo;268335]Grantham advised pulling all money in April. Barry Ritholtz is also expecting at least a 25% correction. And of course, Bob has taken is money out on a one month holiday. All significant indicators.[/QUOTE]

Barry R also has a similar personal-travel indicator as George does around here: George going on a vacation correlates much more than random chance would predict with a new M-prime being found, Barry going on vacation correlates oddly with wild market action. Fittingly, at 8am NY time today Barry posted thusly:

[url=http://www.ritholtz.com/blog/2011/08/brace-yourselves-im-traveling/]Brace Yourselves, I’m Traveling[/url]
[quote][i]By Barry Ritholtz - August 4th, 2011, 8:00AM[/i]

Brace yourselves, I am heading to Leens Lodge in Maine for David Kotok’s Shadow Federal Reserve Committee/Pre-Jackson Hole/Fishing Trip. Via the wonders of Instagram, I will do regular updates when the limited connectivity allows (you can follow it on my Twitter feed).

Regular readers will recall that whenever I travel, the markets seem to do funky things. Like Flash crash, collapse, whipsaw, and flop about. My West Coast swing took me through San Diego, LA and Vancouver last week, and it was the worst week since October 2008. I leave for Maine today, and the futures are already getting shellacked.

I am not making claim to any sort of causality, but I do find the correlation terribly amusing.

More shortly . . .[/quote]

[QUOTE=R.D. Silverman;268315]I looked for data on the following question, but did not find it:

What would the deficit be now if the Bush tax cuts had not happened?[/QUOTE][URL]http://www.cbpp.org/cms/index.cfm?fa=view&id=3036[/URL]

[QUOTE=R.D. Silverman;268315]I looked for data on the following question, but did not find it:

What would the deficit be now if the Bush tax cuts had not happened?[/QUOTE]This graphic is also from the CBPP, but I haven't found the article it is from yet....

[QUOTE=schickel;268399][URL]http://www.cbpp.org/cms/index.cfm?fa=view&id=3036[/URL][/QUOTE]

This should be required reading for every voter and elected official.

[QUOTE=schickel;268400]This graphic is also from the CBPP, but I haven't found the article it is from yet....[/QUOTE]

What assumptions did the graph creator make about the economic activity that would have happened absent the tax cuts? Typical assumption is a static analysis - everybody would have behaved exactly the same and just paid more taxes.

[QUOTE=wblipp;268447]What assumptions did the graph creator make about the economic activity that would have happened absent the tax cuts? Typical assumption is a static analysis - everybody would have behaved exactly the same and just paid more taxes.[/QUOTE]

True but at the same time it is quite possible that absent these tax cuts the government would have spent some money on sorely needed infrastructure giving a more self-sustaining boost to the economy than the tax cuts for the rich which were anyway spent in buying over-priced houses and gambling on the wall street casino.

[QUOTE=garo;268465]True but at the same time it is quite possible that absent these tax cuts the government would have spent some money on sorely needed infrastructure giving a more self-sustaining boost to the economy than the tax cuts for the rich which were anyway spent in buying over-priced houses and gambling on the wall street casino.[/QUOTE]I guess anything is possible. But their spending habits haven't really made much sense to me lately.

That said, the article didn't seem too balanced. It placed the blame squarely on Bush policies, when those policies were continued by Obama (while he controlled congress and the senate) and his budget was defeated by, let's see, 97-0.

If Obama didn't want to continue the Bush tax cuts, he could have easily vetoed any extension. But he didn't, and in fact his party supported the extensions.

I'm happy to start paying more taxes IF (and this is a big if) government stops spending like it has.

The shoe dropped!
 

You might note that the article in question above is a bit dated. The information and analysis appear to be from 2010, in other words, a year old.


It finally happened. It was about time.
S&P lowered the U.S. credit rating to AA+, down one notch from AAA.
[url]http://finance.yahoo.com/news/SampP-downgrades-US-credit-apf-2107320979.html[/url]

The net impact of this downgrade will be to increase the cost of borrowing money in the credit markets. Sans serious debt reduction plans in the next two years, it will be lowered again. Please note that I said "debt reduction", not "deficit reduction". There has been no talk from Washington from either political party about ways to reduce the debt. They have used smoke and mirrors to reduce the projected deficit. That is somewhat akin to shoveling manure vs smelling manure from a distance. I shouldn't disparage manure, it makes a very good fertilizer. But it still stinks, just like the U.S. debt.

There is one very interesting concept about the U.S. debt. Treasury has pumped several trillion dollars into the economy over the last few years primarily by creating money that was used to purchase U.S. debt obligations. The net result is that the U.S. owes the U.S. treasury. Now what if the U.S. starts paying back the debt? That means they would have to pay back the treasury negating the effect of "quantitative easing". Don't get the idea this will ever happen. Treasury would have to turn around with the money paid back and figure out another way of injecting it into the world economy. Otherwise it would destabilize the currency market and drive the dollar high above other currencies. In other words, IT AIN'T GONNA HAPPEN!

DarJones

[QUOTE]Bitcoin, the future of global commerce, or ideal drug money?

(RNN) - Bitcoin, an internet currency that exists independent of banks and countries, was thrust into the mainstream a few weeks ago when Gawker published a story about SilkRoad, a website that sells hard drugs and accepts nothing but Bitcoin in payment.

Much like Amazon, SilkRoad offers a broad array of items for sale and buyers and sellers are ranked by the quality of their products and transactions. But instead of books, MP3s and video games, SilkRoad offers drugs ranging from prescription pills like Adderall, to marijuana and black tar heroin.

But to access the site, you'll need to download TOR; an Internet engine that few people have heard of and even fewer have the technical expertise to configure.

Since SilkRoad's start in February, the site has never taken credit card or PayPal - it only accepts the untraceable online currency called Bitcoins.

One Bitcoin is worth somewhere in the neighborhood of $10 to $12, and the prices fluctuate rapidly, but most customers seem happy to pay a premium for the convenience and privacy of the transactions. The currency rate fluctuates - just like the value of a U.S. dollar.

The world of Bitcoin payment may seem a little hard to figure out, but those surfing the SilkRoad seem to have no problem picking up on it.

Some have said that there are scammers on SilkRoad, but most customers seem pleased by the products they receive.

"Three hits and one of my friends (urinated in) his pants. I'm pretty sure it's good," said one customer.

However, Bitcoins aren't only used for illegal drug purchasing through sites like SilkRoad, they can also be used to purchase a variety of items on the Web.

The birth of a currency

Bitcoin is the brainchild of a mysterious cyber guru called Satoshi Nakamoto, who may or may not be an actual person. In a 2009 paper, Satoshi described a "peer-to-peer version of electronic cash" that would allow individuals to send payment directly to each other without going through a financial institution.

The author claimed that timestamps, mathematical functions and other wonders of computer science could allow individuals anywhere in the world to simulate a face-to-face exchange of cash for goods or service. It would eliminate the need for a "trusted third party" – such as a broker, a bank or a government - and the inevitable complications and expenses.

Zachary Lewis, a video game developer from Huntsville, AL, said it was a quick, simple process to download the software enabling him to take Bitcoin in payment for his services.

Bitcoin is something entirely different from any means of exchange that has existed before, he said.

"Thinking of Bitcoins as an alternative to cash is like thinking of euros as an alternative to cash," he said. "Yes, it only exists digitally, but it isn't another form of the dollar like PayPal and credit cards are."

It's a hedge against identity theft in internet commerce, he added.

"The security in place is very strong," he said. "It is much harder for someone to steal your identity, since each user has an encrypted, public-private key pair for each transaction, specific to that transaction."

Not an 'outlaw currency'

Proponents say Bitcoin has multiple advantages over traditional currency.

It is hard to create – so counterfeiting is unlikely if not impossible. It is decentralized and not backed by any commodity, such as gold, whose price could fluctuate. There will not be more than 21 million units at any time, no new units would ever be created, which gives the currency more stability than national currencies.

Before the Gawker story went viral, Bitcoin existed for about two years in near anonymity, developing a foothold in the community of computer geeks, online merchants, libertarians, anarchists, Reiki masters and yes, online drug dealers, who accepted it as payment.

Because of its association with Silk Road, Bitcoin acquired a cachet as an outlaw currency that enables shady dealings.

Some Bitcoin enthusiasts were outraged. Others shrugged, saying anarchy was kind of the whole idea.

One self-described libertarian merchant pointed out that any kind of money can be used for bad things.

"I would ask those that allege Bitcoin is only an outlaw currency how they feel about U.S. dollars being used to buy drugs, murder, child prostitutes and more all over the world every day," said Michael Boyd, who owns and operates BitVapes.com, a website that sells e-cigarettes and accepts Bitcoin.

"Less than 1/2 of 1 percent of Bitcoin users have ever used the 'Silk Road' website," Boyd said via email. "The vast majority of Bitcoin vendors like myself pay our taxes and use Bitcoins to buy everyday, legal items."

Boyd says Bitcoin allows his company to exist because PayPal has been shutting down the accounts of many U.S. merchants who sell e-cigarettes.

"The problem you face with monopolized payment systems, PayPal and credit card companies can shut you down whenever they want," he said. "If they don't like what you are selling due to political pressure, they will not allow you to conduct business."

Authorities want Bitcoin regulated

A few United States senators don't like the fact that the currency can't be regulated and want to see Bitcoin outlawed.

Chuck Schumer (D-New York) and Joe Manchin (D-West Virginia) wrote a letter to U.S. Attorney General Eric Holder in July calling Bitcoin "an untraceable peer-to-peer currency," and "an online method of money laundering."

But keeping governments from being able to regulate the currency is exactly what its creators had in mind. Because it is peer-to-peer, no authority can crack down on middlemen to stop the flow of currency from one source to another.

Jerry Brito of George Mason University, in an interview with reason.tv, painted an example that would keep governments from controlling funds to troublemaking institutions.

"If the U.S. wants to block money from going to Wikileaks, for example, they can go to PayPal, Visa, Mastercards of the world, put pressure on them. With Bitcoin, there is nobody in the middle. You can't go after them there."

He said Bitcoin serves a real need in a global society that values freedom, and something will always fill that need. Some means of exchanging value for value will emerge, he said, that will circumvent authority and control.

"Whether Bitcoin succeeds is neither here nor there," he said. "If not Bitcoin, it's going to be something else that doesn't have a central intermediary that can either print money or be shut down."[/QUOTE]

[url]http://www.waff.com/story/15209359/bitcoin-future-of-global-commerce-or-internet-fad[/url]

There is something about this that resonates as the wave of the future. Many sci-fi books over the years have speculated about some "money-metal" or similar scheme that allows anonymous exchange, can't be counterfeited, and is not govt regulated. What would it be like if the U.S. dollar's position as the defacto world currency were replaced with something like bitcoin?

I'm curious, is there a bitcoin bank? as in a place that issues bitcoin? If so, how is it set up to operate?

DarJones

I have to say, I was impressed by S&P laying down clear deficit-reduction targets last month as a requirement for them to maintain their AAA rating on US debt, and sticking to their guns now that the debt-ceiling-raise 'agreement' promises to fall far short of their stated minimum targets. I think fears of another market-panic due to the downgrade are overblown, partly because I believe the markets have already braced themselves for such an event, and in second part because only one of the "Big Three" downgraded the US so far - Moody's and Fitch have affirmed their previous ratings of "AAA with negative outlook." Will be interesting to see what Mr. Market says on Monday, though.

European FinMins are holding emergency talks this weekend, here is Mish's prediction about those goings-on:

[url=http://globaleconomicanalysis.blogspot.com/2011/08/euro-area-central-banks-to-hold-crisis.html]Euro-Area Central Banks to Hold Crisis Call; G-7 Officials to Discuss Coordinated Action; Ratings of UK, France in Jeopardy; Meeting Agenda[/url]
[quote]In "secret" meetings (that everyone knows about) [url=http://www.bloomberg.com/news/2011-08-06/euro-region-central-banks-will-conference-tomorrow-on-debt-u-s-downgrade.html]Euro-Area Central Banks to Hold Crisis Call[/url]

[i]Euro-region central bank governors will hold emergency talks tomorrow aimed at stopping Spain and Italy from becoming the next victims of the sovereign debt crisis and limiting the market fallout from the first U.S. rating downgrade in history.

The central bank heads will hold a conference call at 6 p.m. Paris time, said a euro-area central bank official who declined to be identified because the talks are confidential. An spokesman for the European Central Bank declined to comment.[/i]
...
[b]Summary of Meeting Agenda[/b]

Few details have been released on the "secret" meetings but I have a list of agenda items in advance.

1. How to kick the can down the road
2. How to make it look like we are not kicking the can down the road
3. How to get Germany to agree to kick the can down the road
4. How to silence Germany if Germany refuses to kick the can down the road[/quote]
Barry Ritholtz, who like me is still disgusted at the extent to which the ratings agencies disgraced themselves during the great housing bubble by engaging in what can only be characterized as epidemic mortgage-securitization fraud, is loath to cut S&P much slack as a result of their call on US debt, and poses [url=http://www.ritholtz.com/blog/2011/08/10-question-about-sp-downgrade/]10 Questions About S&P Downgrade[/url]
[quote] 1. The change in trajectory of US debt was in service of Banks: It began with TARP, and continued with every other bailout/stimulus/economic plan. What was S&P’s role in creating that crisis?

2. How will non-US investors (Private and Central Banks) view the downgrade?

3. What is S&P’s methodology of rating sovereigns beyond Probability of Default? How does this differ from other rating agencies?

4. What does the downgrade do to US currency — is that the true impact of the credit downgrade?

5. Will borrowing costs likely increase for the US? What about consumers?

6. Will the downgrade of US spill over to other agencies, states, municipalities?

7. Will private sector holders of US Treasuries — insurers, pension, foundations, etc. — be downgraded as well?

8. Why did the rating agency not wait until the special committee / debt ceiling deal was completed later this year?

9. The Rating Agencies were downgraded by Dodd-Frank, with all regulatory and legal references to be removed. Was S&P’s move retaliatory?

10. How will US markets open on Monday in response to the downgrade?[/quote]

[QUOTE=ewmayer;268341]Barry R also has a similar personal-travel indicator as George does around here: George going on a vacation correlates much more than random chance would predict with a new M-prime being found[/QUOTE]

Actually, I think it is an indicator that I take too many vacations. Speaking of which, I'll be on vacation for the next three weeks. Happy M-prime hunting.

[QUOTE=xilman;268110]
However, my wife and I have been taking financial advice over the last couple of years because we are an age when significant amounts of cash have been arriving. Specifically, my father died a couple of years ago...
Paul[/QUOTE]

When my father died in 1994 I didn't need financial advice to succeed
in blowing the inheritance within a year or so.
Then again, I had got divorced a year or so previously, and was thus
unencumbered by nagging, my house, beloved children and most of my nest egg.

David

Obama calls U.S. a Triple AAA nation
 

[QUOTE]"Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we have always been and always will be a triple-A country," Obama said.[/QUOTE]

Maybe I'm getting pessimistic but it seems to me that this is more of a political argument than a financial disagreement.

DarJones

Classic Soundbites: Tim Geithner, April 2011
 

So much for my speculation that the markets might have already "baked in" the possibility of a U.S. credit downgrade...Read one of those [URL="http://www.ritholtz.com/blog/2011/08/nyt-neurofinance-investors-lack-of-reason/"]investor psychology[/URL] pieces over the weekend - Not bad, but I find it interesting that these "most investors are not nearly as rational as they would like to believe" pieces seem to mainly crop up during bear markets. In other words, lots of stuff about "panic selling", but never a peep about "panic buying". I didn`t see much noise in the MSFM in the past year about "Are investors being rational in driving markets back within range of their late-2007 housing-bubble-peak highs despite the weakest economic recovery in living memory and global worries about sky-high consumer and sovereign debt levels?"

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

Back in April of this year when S&P first put US debt on credit watch with "negative outlook", Tim Geithner immediately took to the airwaves proclaiming there was "no risk" of a downgrade:

[URL="http://thehill.com/blogs/on-the-money/budget/156747-geithner-no-risk-that-us-loses-its-top-credit-rating"]`No risk` the US will lose its top credit rating, says Treasury`s Geithner[/URL]
[quote]There is no chance that the U.S. will lose its top credit rating, Geithner said, forcefully disputing the notion that S&P or other ratings services might downgrade U.S. bonds from their current AAA rating.

"No risk of that, no risk," Geithner said on the Fox Business Network.

"Washington is a hard place to read. And it`s hard for people to look past the political rhetoric and try to understand whether the leadership of Washington is going to take the tough steps necessary to get ahead of this problem," the Treasury secretary explained. "I think the prospects for a bipartisan agreement are better than they`ve been in a long period of time. Of course, we have to turn that into action."[/quote][I]My Comment:[/I] In the wake of this embarrassment, Treasury officials have derided S&P for allegedly "making a $2 Trillion mistake" (presumably Treasury relies on much-more-accurate long-term budget forecasts [URL="http://www.zerohedge.com/news/speaking-credibility-here-cbos-2001-forecast-which-predicted-negative-25-trillion-net-debt-2011"]such as these by the CBO[/URL] and Geithner said that S&P`s decision to downgrade showed [URL="http://www.npr.org/blogs/thetwo-way/2011/08/08/139084249/treasury-secretary-geithner-s-p-has-shown-really-terrible-judgement"]"really terrible judgment"[/URL]. Rest of the world, to T-Sec Geithner, in unison: "Treasury Secretary Geithner showed `really terrible hubris` in publicly proclaiming that there was `no risk` of a U.S. debt downgrade this past April, despite S&P`s [URL="http://market-ticker.org/akcs-www?post=191664"]very clear warnings and criteria for maintaining their AAA rating[/URL], which fiscal targets were nowhere near the targets agreed upon by congress as part of its framework agreement for raising the debt ceiling."

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

Postscript on Bob`s question about how much of the current US federal debt can be attributed to the Bush-era tax cuts: Wikipedia`s page on the [URL="http://en.wikipedia.org/wiki/United_States_federal_budget"]US Federal Budget[/URL] has a nice breakdown based on a Pew Center report released in April of this year:
[quote]
Both economic conditions and policy decisions significantly worsened the debt outlook since 2001, when large surpluses were forecast for the following decade by the CBO. The Pew Center reported in April 2011 the cause of a $12.7 trillion shift in the debt situation, from a 2001 CBO forecast of $2.3 trillion cumulative surplus by 2011 versus the estimated $10.4 trillion public debt in 2011. The major drivers were:

Revenue declines due to two recessions, separate from the Bush tax cuts of 2001 and 2003: 28%
Defense spending increases: 15%
The Bush Tax cuts (EGTRRA-2001 and JGTRRA-2003): 13%
Increases in net interest: 11%
Other non-defense spending: 10%
Other tax cuts: 8%
Obama Stimulus: 6%
Medicare Part D: 2%
Other reasons: 7%[2]
[/quote]Lots of great analysis on that page - Are budget deficits driven by a "revenue problem" or a "spending problem"? Could tax increases suffice to balance the budget? Can the U.S. grow its way out of the debt problem if the economy is plied with enough Republican-supported tax cuts? That sort of thing. And I found this quote in the "Describing the budgetary challenge" section quite insightful:
[I]
Fareed Zakaria said in February 2010: "But, in one sense, Washington is delivering to the American people exactly what they seem to want. In poll after poll, we find that the public is generally opposed to any new taxes, but we also discover that the public will immediately punish anyone who proposes spending cuts in any middle class program which are the ones where the money is in the federal budget. Now, there is only one way to square this circle short of magic, and that is to borrow money, and that is what we have done for decades now at the local, state and federal level...So, the next time you accuse Washington of being irresponsible, save some of that blame for yourself and your friends."[/I]

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

[URL="http://globaleconomicanalysis.blogspot.com/2011/08/decade-of-stimulus-yields-nothing-but.html"]Decade of Stimulus Yields Nothing But Mountain of Debt; What to Do About It?[/URL]
[quote]Is there any kind of stimulus the US did not try in the last 10 years?

1. We had 1% interest rates from Greenspan fueling housing.
2. We had wars from Bush and Obama fueling defense industry employment.
3. We had two rounds of Quantitative easing from the Fed.
4. We had cash-for-clunkers.
5. We had two housing tax credit packages.
6. We had an $800 billion stimulus package from Congress for "shovel-ready" projects.
7. We had stimulus kickbacks to states.
8. We had HAMP (Home Affordable Mortgage Program).
9. We had bank bailouts out the wazoo to stimulate lending.
10. We had Small Business lending programs.
11. We had central bank liquidity swaps.
12. We had Maiden Lane, Maiden Lane II, and Maiden Lane III
13. We had Single Tranche Repurchase agreements
14. We had the Citi Asset Guarantee
15. We had TALF, TARP, TAF, CPFF, TSLF, MMIFF, TLGP, AMLF, PPIP, and PDCF
16. We had so many programs the Fed must have run out of letters because they were not given an acronym.

That is a partial list. Other than bailing out bondholders what exactly do we have to show for any of it? The one-word answer is "debt".

Decade of Stimulus Yields Nothing But Debt

Bloomberg's Caroline Baum wrote an excellent article on this theme. It was so good I asked if I could reproduce it in entirety.

With permission please consider [URL="http://www.bloomberg.com/news/2011-08-05/decade-of-fiscal-stimulus-yields-nothing-but-debt-caroline-baum.html"]Decade of Stimulus Yields Nothing but Debt: Caroline Baum[/URL]
[I]
When George W. Bush took up residence in the White House in January 2001, total U.S. debt stood at $5.95 trillion. Last week it was $14.3 trillion, with $2.4 trillion freshly authorized by Congress Tuesday.

Ten years and $8.35 trillion later, what do we have to show for this decade of deficit spending? A glut of unoccupied homes, unemployment exceeding 9 percent, a stalled economy and a huge mountain of debt. Real gross domestic product growth averaged 1.6 percent from the first quarter of 2001 through the second quarter of 2011.

It doesn’t sound like a very good trade-off. And now Keynesians are whining about discretionary spending cuts of $21 billion next year? That’s one-half of one percent. And it qualifies as a “cut” only in the fanciful world of government accounting.[/I][/quote][I]My Comment:[/I] Full text of Baum`s piece is worth a read, but among her and Mish`s suggestions, one omission I found glaring: How about downsizing the federal government to, say, roughly year-2000 levels? (That is, by roughly half, as the above-linked Wikipage on the US Budget details). Of course that would involve goring just about everyone`s sacred cows: We would need to slash defense spending, healthcare spending, raise eligibility ages for Social Security and Medicare, and so on. Wewould also need to stop warmongering and acting as the world's policeman, and would need to radically roll back the huge state security apparatus that has steadily grown since the 9/11/2001 attacks. On the revenue side - and note that this needed because even if the "draconian" downsizing of government spending (and government in general) were made sufficient to balance the current fiscal equation, the concomitant reduction in GDP would negatively impact tax revenues - government workers may be economic parasites, but they pay taxes - and of course it not sufficient long-term to merely current current-year budgets: One needs to run a primary surplus for at least a decade to actually make a dent in the accumulated debt. So on the revenue side, one must let the Bush-era tax cuts on the wealthy expire, close the gaping loopholes in corporate taxation, and in general radically reform and simplify the entire tax code.

So there is the overall prescription for the painful, long-term medicine we must take - Not that I have any confidence whatsoever that even modest parts of the overall prescription will actually be undertaken. Not voluntarily, at least.

Dear ewmayer,

In that table, what are the "other tax cuts" that account for 8%? That nearly equals the Bush tax cuts.

A big portion of the "other tax cuts" are from programs like the ethanol tax subsidy.

DarJones

[QUOTE=Zeta-Flux;268692]Dear ewmayer,

In that table, what are the "other tax cuts" that account for 8%? That nearly equals the Bush tax cuts.[/QUOTE]
The wikipage links to the original Pew report - I expect you could find details on the "mystery 8%" in there.

6th largest drop in history the DJIA today, based on absolute points, but not even in the top 20 on a percentage basis. Bank shares - especially BofA (which got hit by a [url=http://market-ticker.org/akcs-www?post=191701]multibillion-dollar MBS-related lawsuit[/url] from, of all places, AIG) and Citigroup - [url=http://globaleconomicanalysis.blogspot.com/2011/08/in-vote-of-no-confidence-bank-stocks.html]got absolutely destroyed[/url] today. I expect Ben Bernanke is oiling up the metaphoric printing presses as I write this, now that he has the perfect excuse to go on another money-printing binge. (Because the previous ones were so successful, obviously).

Looks like shares in the Asia/Pacific region opened ~4% lower - probably another wave of margin-forced selling. (Margin debt has been near all-time highs, so there were a lot of leveraged bets on further market rises this year). Amid all the market turmoil, the NYT has this hopeful article, which could be retitled: "Don`t worry about your retirement nest egg having lost 20% of its value - you stand to save a few dollars a week at the gas pump!":

[url=http://www.nytimes.com/2011/08/09/business/as-markets-reel-consumers-get-a-break-on-gas-prices.html?ref=business]Their Stock Portfolios May Be Bleeding, but Consumers Get a Break on Gas Prices[/url]: [i]Hidden in the market’s fear dynamic is that oil prices have dropped precipitously. But whether consumers and businesses will spend that freed-up cash is a question mark.[/i]
[quote]HOUSTON — The growing gloom about the economy has pushed down oil and gasoline prices, along with the prices of an array of other commodities. And while that could mean more spending power for consumers, perhaps tempering any possible downturn, the steep drop in energy prices reflects worries that economic activity is headed in the wrong direction.

A customer pumped gas at Grand Gasoline in Mill Valley, Calif. A drop in energy prices reflects worries that economic activity is headed in the wrong direction.

Since April, the price of the American benchmark crude oil has fallen by roughly $30 a barrel, with more than half the drop occurring in just the last two weeks. On Monday, oil closed at $81.31 a barrel, down more than 6 percent. The decline in recent months is the most rapid in nearly three years, when oil and gasoline prices collapsed in response to the financial crisis.

As a result, drivers could see a gallon of regular gasoline selling for a national average of as little as $3.25 next month, a drop of more than 40 cents from current levels, according to economists.[/quote]
[i]My Comment:[/i] So far, gas at my trusty local Valero station is down a massive - brace yourself - $0.04 in the past month, roughly 1%. And you said oil was down how much?

I don't know if I can get to the article in the Boston Globe, but this chart is linked from The Daily Beast [url="http://www.thedailybeast.com/articles/2011/08/05/economic-meltdown-villain-george-w-bush-s-staggering-debt-numbers.html?obref=obinsite"]here[/url]:

[QUOTE=ewmayer;268734][i]My Comment:[/i] So far, gas at my trusty local Valero station is down a massive - brace yourself - $0.04 in the past month, roughly 1%. And you said oil was down how much?[/QUOTE]Here in sunny NE California, we're down from $3.979 around 7/4 to $3.779 when I drove home tonight....

[QUOTE=Fusion_power;268527][url]http://www.waff.com/story/15209359/bitcoin-future-of-global-commerce-or-internet-fad[/url]

There is something about this that resonates as the wave of the future. Many sci-fi books over the years have speculated about some "money-metal" or similar scheme that allows anonymous exchange, can't be counterfeited, and is not govt regulated. What would it be like if the U.S. dollar's position as the defacto world currency were replaced with something like bitcoin?

I'm curious, is there a bitcoin bank? as in a place that issues bitcoin? If so, how is it set up to operate?

DarJones[/QUOTE]No, Bitcoin is totally decentralized. Everything (Bitcoin created, amounts paid from whom, amounts paid to whom, etc) exists as an entry in a block in an online P2P database. FAQ is available [url="https://en.bitcoin.it/wiki/FAQ"]here[/url].

[QUOTE=schickel;268743]Here in sunny NE California, we're down from $3.979 around 7/4 to $3.779 when I drove home tonight....[/QUOTE]And here in Cambridgeshire, regular unleaded is around 139.9p/l --- or $8.674 / US gallon.

Spot exchange rate is 1 GBP = 1.63798 USD according to [url]www.xe.com[/url] and 1 US gallon = 3.7854118 litres according to units(1).

No sign of fuel prices dropping at all around here.

Paul

Here in Wiener Neustadt, regular unleaded is at 1.344€/l = $7.257 / US gallon.

Spot exchange rate is 1 € = 1,42653 USD according to [url]www.xe.com[/url]

3.77 USD/gallon in california?? If USA would rise the fuel taxes to european levels, this would ease the US debt problems quite a bit! (does USA have fuel taxes at all? In Austria, this tax is called "Mineralölsteuer")

30-40% of the price of US gasoline is taxes. The population density of the US is so much lower than in Europe that outside of a very few metro areas with good public transportation a car is a necessity. Remember that France is about the size of Texas :)

It is absurd to expect an immediate and similar change downward in the prices of gasoline subject to the market price change downward of oil.

1. The price elasticity of demand for gasoline is very low.

2. Changes in supply short run average costs trending down are seldom transferred in their entirety to price changes, or their lag time is long, (many reasons behind this -- first being that there are few substitutes and thus price anchors tend to slow price changes on the down side, lack of competition, limited capital-intensive infrastructure for processing, profit taking, etc.).

I suspect that the price elasticity of supply is highly asymmetric (e.g. when input costs increase, costs are transferred to prices rapidly, approaching and perhaps exceeding a ratio of 1:1; when input costs decrease, costs are transferred to prices gradually and most likely less than a 1:1 ratio) in the short to medium run.

As I don't drive, I can't sympathize nor fully appreciate these costs, although they do affect the transportation of goods and services of everyone.

This market correction will most likely have a short term downward effect on gas prices. As world demand (i.e. emerging economies) increases, prices can only go up. Look to China as a reference point in the number of vehicles purchased compared to the US in the last five years, trending changes year over year in the number of vehicles purchased and the equilibrium point at which vehicles per person numbers approach a steady state (in the US, it varies between 75-80% and China 10-15%, depending on the period).

In my younger and more vulnerable years, a financial advisor gave me some bad advice despite my wanting to invest in oil and precious metals. Perhaps it was a good lesson in some ways.

[QUOTE=imwithid;268767]It is absurd to expect an immediate and similar change downward in the prices of gasoline subject to the market price change downward of oil.[/QUOTE]

It is similarly absurd to expect immediate upward rises in gasoline prices when oil futures rise, and yet I daresay that phenomenon is well-known to most motorists.

I'm not sure I understand your argument about asymmetry - are you suggesting that there *should* be a difference in the time-lag from oil-price-change to gas-price-change depending on the sign of the change? Or are you simply citing various reasons for a time-lag which should be similar irrespective of the price-change direction?

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

Getting back to the equity markets, and this is as always FWIW, not intended to constitute investment advice, everyone must plot their own course, the usual disclaimers, et cetera: [url=http://market-ticker.org/akcs-www?post=191778]Denninger is predicting[/url] a "reflex" (perhaps government-aided) snapback rally of perhaps 5-10% in the near term, but cautions very strongly that you do not want to be buying into that; rather that would the time to sell remaining equity exposure, and perhaps place a few defensive short positions for what he predicts will be the next big move, which he predicts will be "the big one", that is, the major downleg which does not bounce (or which goes really, really far down before it does, a la 2008-2009).

As for my own short-lived defensive short ($135-strike puts on BIDU, 20. Aug. expiry), those were in fact slightly in the money yesterday, which would have made for a nice gain of perhaps 5-10x, but Baidu shares have rallied by nearly 10% to back over $140 since local-bottoming yesterday - quite possibly in response to the Asian-government market-interventions described in the next bit below. As you can see, the volatility is so high on options, especially deep-OOM ones close to expiry - you can reap huge gains if the markets move in big fashion in your favor, but those gains can evaporate in a matter of mere hours (sometimes minutes). Still feel that take-the-money-and-run the day after the US debt-ceiling "accord" was announced was the right thing to do, though next time I may cash out just enough to cover my purchase price and let the rest ride. (If there is a next time, but in volatile markets like we have now and going forward there always is).

Mish notes that there was [url=http://globaleconomicanalysis.blogspot.com/2011/08/more-overnight-intervention-bear-market.html]government intervention in the Asian markets[/url] in the just-concluded trading session, which helped reverse what was shaping up to be another bloody day.

Mish also correctly points out: [i]"The fastest and most furious rallies are short-covering rallies in bear markets. We saw many of them in Autumn of 2008."[/i]

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

Would any of our UK readers care to comment on the London (and now elsewhere) riots? It seems there is much more at work there than mere protests against against police brutality (the proximate-cause cited) or government austerity (the structural cause cited by many). Mish has a long piece and [url=http://globaleconomicanalysis.blogspot.com/2011/08/stunning-pictures-of-senseless-london.html]photo gallery[/url] on the riots, with his take:

[i]"Sources report the exact cause for massive riots, now in their third day in London, is unknown. While the trigger may be a deadly shooting by police, I believe the cause is social-breakdown fueled by rising unemployment, loss of dignity, and a desperate realization that hope for a better future and for government to do something responsible about jobs and rising food prices is fruitless."[/i]

[QUOTE=ewmayer;268772]Mish also correctly points out: [i]"The fastest and most furious rallies are short-covering rallies in bear markets. We saw many of them in Autumn of 2008."[/i][/QUOTE]

Like, say, the 600+ point swing in the DJIA in the hour-and-a-half leading up to the close today - Today's [url=http://market-ticker.org/akcs-www?post=191843]FOMC minutes[/url] came out just after 2pm eastern and led to some crazy (likely HFT-driven) action, first a sharp spike up to 11000, then a 400-point drop in the next 20 minutes as traders actually read the frickin' thing and probably realized "hey, this basically admits that things are far worse than the Fed has been admitting ... but no hint of QE3! Where's our candy, man?" Then a sharp reversal starting around 2:40 and a 600-point rocket shot into the close - On what "news", I have no idea. That may have been government intervention like we saw in Asia last night. If the boys at ZeroHedge figure out where the buying was coming from, I will post.

But, without further ado: Yeah, that looks like a healthy stock market, there:

[QUOTE=ewmayer;268772]It is similarly absurd to expect immediate upward rises in gasoline prices when oil futures rise, and yet I daresay that phenomenon is well-known to most motorists.

I'm not sure I understand your argument about asymmetry - are you suggesting that there *should* be a difference in the time-lag from oil-price-change to gas-price-change depending on the sign of the change? Or are you simply citing various reasons for a time-lag which should be similar irrespective of the price-change direction?

[/QUOTE]

ew, imwithid is citing phenomenology with his assymetry ... this is the way it does happen, regardless of whether he thinks it is right or not.

The only quibble I have with imwithid is that gasoline/petrol consumption has long-term elasticity, as people either stop travelling so much or buy more efficient vehicles, or car-pool, and net US consumption is down from the peaks at $4 per gallon.

My understanding is that about 50 cents on my $3.75 gallon of gas is taxes, and economists were saying that inflation had eroded its purchasing power for the roads necessary to sustain all the cars.

The first problem with the tax is that it is per gallon, not per dollar sold, so the ability of that tax to fix the potholes and bridges varies substantially with the price of gas. The second problem is that gas and oil recieve a major, off-the-books subsidy from the rest of the federal government whenever troops go off to the mideast, ultimately protecting our low-cost foreign oil sources. The third is that none of the gas taxes go towards improving fuel efficiency, for example, by getting people and goods out of cars and trucks and onto rails, for example. Meanwhile, more and more time is spent in cars commuting and more and more stoplights go up in my area, slowing everyone.

[QUOTE=ewmayer;268772]Would any of our UK readers care to comment on the London (and now elsewhere) riots? It seems there is much more at work there than mere protests against against police brutality (the proximate-cause cited) or government austerity (the structural cause cited by many).][/QUOTE]Not a personal comment, but one from someone who lives nearby: [url]http://www.alexhudson.com/2011/08/10/short-thoughts-on-the-riots/[/url]

Paul

[QUOTE=xilman;268830]Not a personal comment, but one from someone who lives nearby: [url]http://www.alexhudson.com/2011/08/10/short-thoughts-on-the-riots/[/url]

Paul[/QUOTE]

An excerpt from the above:

"What is disturbing, though, is what comes out of the mouths of these people when you listen to them being interviewed. I’ve heard a variety of interviews with people across the country who’ve been rioting, and the message is basically the same no matter who they are. They hate the police (the “Feds”), but this is just a proxy for authority of any sort. They don’t care who gets hurt, they don’t identify with any particular societal structure except for maybe their own gang, and they see an easy opportunity to gain at low risk of getting caught."


....easy opportunity to gain??? Exactly what is it that they hope to gain???

The essay referred to the failure of the education system for these people.
Some people (as evidenced in this forum!) are simply uneducable. Lack
of jobs for the uneducated may be driving these riots. Much of the same
is happening in the U.S. (minus the riots as yet). Is this an example of
"Idiocricy" or "The Marching Morons"? (C. Kornbluth)

Lack of education is certainly driving the Tea Party here.

[QUOTE=R.D. Silverman;268834]An excerpt from the above:

"What is disturbing, though, is what comes out of the mouths of these people when you listen to them being interviewed. I’ve heard a variety of interviews with people across the country who’ve been rioting, and the message is basically the same no matter who they are. They hate the police (the “Feds”), but this is just a proxy for authority of any sort. They don’t care who gets hurt, they don’t identify with any particular societal structure except for maybe their own gang, and they see an easy opportunity to gain at low risk of getting caught."


....easy opportunity to gain??? Exactly what is it that they hope to gain???[/QUOTE]Money, electronic goods, booze, ...

Most anything they can conveniently carry out of a shop before it's burnt down.

[QUOTE=Christenson;268801]
My understanding is that about 50 cents on my $3.75 gallon of gas is taxes, and economists were saying that inflation had eroded its purchasing power for the roads necessary to sustain all the cars.
[/QUOTE]
[url="http://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States"]Looks like it varies by state[/url] (my estimate was way off)

[QUOTE=Christenson;268801]The first problem with the tax is that it is per gallon, not per dollar sold, so the ability of that tax to fix the potholes and bridges varies substantially with the price of gas. The second problem is that gas and oil receive a major, off-the-books subsidy from the rest of the federal government whenever troops go off to the mideast, ultimately protecting our low-cost foreign oil sources. The third is that none of the gas taxes go towards improving fuel efficiency, for example, by getting people and goods out of cars and trucks and onto rails, for example. Meanwhile, more and more time is spent in cars commuting and more and more stoplights go up in my area, slowing everyone.[/QUOTE]

I was going to make a similar comment about the (alleged) large hidden tax in the form of military expenditures, supported by a few numbers. It is estimated that around 1/3 of the U.S. military budget can be tied to "defending our interests in oil regions". [Don't have a citation handy - If anyone finds one which gives a drastically different estimate, please post it]. So let's do the math - we don`t need to know the precise breakdown of how-much-of-each-barrel-of-oil-goes-to-make-gasoline, just what fraction of the price of each barrel is accounted for by the subsidy hidden in the defense spending. (Or better, how much higher the per-barrel price would be if the government imposed a direct oil tax to get the same revenue).

- Current U.S. defense budget is roughly [URL="http://en.wikipedia.org/wiki/Military_budget_of_the_United_States"]$680 Bln/year[/URL]. [On top of that, there are roughly [URL="http://www.americanprogress.org/issues/2011/05/big_oil_tax_breaks.html"]$70 Bln per year[/URL] in tax breaks and sundry subsidies the US government gives to the oil industry, but that seems not germane to the present computation], One-third of that is ~$230 Bln/year.

- US oil Imports average roughly [URL="http://www.eia.gov/dnav/pet/pet_move_neti_a_EP00_IMN_mbblpd_m.htm"]9 million barrels/day[/URL], or ~3.3 Bln barrels/year;

- Per-barrel prices have averaged ~$80-90 over the past 4-5 years, so U.S. spends ~$300 Bln/year on oil imports, a little [URL="http://www.calculatedriskblog.com/2005/04/oil-imports-as-of-gdp.html"]over 2% of GDP[/URL].

So that points to a hidden government subsidy equivakent to around 75% of the price of a barrel of oil. If the government instead collected that money via taxes, gasoline prices would be in the $6-7/gallon range, which is close to what Europe pays.

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

I was chuckling yesterday at the insane late-session market rocket-shot into the closing bell, thinking to myself “What are these folks smoking? The FOMC just basically admitted that we’re back in recession, and only promised to keep interest rates low forever, which is exactly what anyone who knows the Greenspan/Bernanke mind-set knew they were going to do anyway.” Easy come, easy go, I guess. Though this morning’ s excuse – rallies always have reasons, whereas sell-offs require excuses not involving the nasty words “market is fundamentally overvalued” – is [URL="http://www.zerohedge.com/news/run-socgen-begins-bank-down-17-rumors-it-verge"]rumors swirling about SocGen’s balance sheet[/URL]. Now those may or not prove true – but massive market moves on rumors of bank-balance-sheet insolvency is what you get when you allow (and more, encourage) banks to mark-to-myth on the same balance sheets.

[QUOTE=ewmayer;268843]

<snip>

.[/QUOTE]

An interesting summary of the situation:

[url]http://money.msn.com/exchange-traded-fund/can-anyone-fix-this-economy-mirhaydari.aspx?page=2[/url]

European indices started today solidly in the green, but the latest [url=http://globaleconomicanalysis.blogspot.com/2011/08/european-banks-hammered-societe.html]investor panic about bank shares[/url] (mainly banks in Italy and France) led to a vicious late-afternoon selloff. For example, Germany's DAX suffered another flash crash, plunging 5% in 30 minutes starting around 4pm local time:

[QUOTE=ewmayer;268843]I was going to make a similar comment about the (alleged) large hidden tax in the form of military expenditures, supported by a few numbers. It is estimated that around 1/3 of the U.S. military budget can be tied to "defending our interests in oil regions". [Don't have a citation handy - If anyone finds one which gives a drastically different estimate, please post it]. So let's do the math - we don`t need to know the precise breakdown of how-much-of-each-barrel-of-oil-goes-to-make-gasoline, just what fraction of the price of each barrel is accounted for by the subsidy hidden in the defense spending. (Or better, how much higher the per-barrel price would be if the government imposed a direct oil tax to get the same revenue).

- Current U.S. defense budget is roughly [URL="http://en.wikipedia.org/wiki/Military_budget_of_the_United_States"]$680 Bln/year[/URL]. [On top of that, there are roughly [URL="http://www.americanprogress.org/issues/2011/05/big_oil_tax_breaks.html"]$70 Bln per year[/URL] in tax breaks and sundry subsidies the US government gives to the oil industry, but that seems not germane to the present computation], One-third of that is ~$230 Bln/year.

- US oil Imports average roughly [URL="http://www.eia.gov/dnav/pet/pet_move_neti_a_EP00_IMN_mbblpd_m.htm"]9 million barrels/day[/URL], or ~3.3 Bln barrels/year;

- Per-barrel prices have averaged ~$80-90 over the past 4-5 years, so U.S. spends ~$300 Bln/year on oil imports, a little [URL="http://www.calculatedriskblog.com/2005/04/oil-imports-as-of-gdp.html"]over 2% of GDP[/URL].

So that points to a hidden government subsidy equivakent to around 75% of the price of a barrel of oil. If the government instead collected that money via taxes, gasoline prices would be in the $6-7/gallon range, which is close to what Europe pays.

<snip>
[/QUOTE]

Only 1/3 of the defense budget? I think that estimate is conservative...we have all these troops in the mideast, in two separate countries, who would not be there if not for oil. That's all of the active fighting our troops do.

Does TSA fall under defense? Make sure that silliness falls in your numbers too, as bin Laden would certainly have less traction if it weren't for oil....

******
As for the london riots, I think we should recall various riots here in the US...I'm just old enough to half-remember riots like Kent State in 1968 (funny, how the man who set up that shooting became Ohio Governor Jim Rhodes, not a pariah), Detroit, and Miami. There were also riots when the lights went out in New York City.

I think the common formula is "large number of hopeless people + triggering signal = riots". I can also attest to having heard people observe that when breaking "the rules" gets to a certain level, they realise punishment for crime has become a statistical matter, and the police are on the wrong end of the statistics. This was a practical truth in the soviet union in the mid 1980s.

I also think that, at least in the US, the forces at work are that we will "educate" almost anyone, burying them in debt in the process, without regard to the ultimate welfare of the erstwhile student or the welfare of the society as a whole. Results include (though this may have always been true) that employers have no idea who can do the jobs they need done, and most degrees are devalued since they are no longer scarce.

[QUOTE=R.D. Silverman;268847]An interesting summary of the situation:

[url]http://money.msn.com/exchange-traded-fund/can-anyone-fix-this-economy-mirhaydari.aspx?page=2[/url][/QUOTE]

Please forgive me, but I was unable to bring myself to read much further once I saw this segment of neo-Keynesian "we need another lending bubble!" claptrap from who other but a dyed-in-the-wool FedHead:

[quote]The Fed has room to do more, and it's possible chief Ben Bernanke is saving something to announce at the Fed's annual economic conference in Jackson Hole, Wyo., later this month.

But Allan Meltzer, an elder statesman and the mastermind behind the epic "A History of the Federal Reserve," believes that monetary policy has pretty much done all it can. He told me that "we don't have a monetary policy problem" given that interest rates have been stuck near 0% since 2008 and that excess bank reserves have swollen to a whopping $1.6 trillion. There is plenty of cheap money already in the system.

Unlocking this cash, along with the more than $1.2 trillion held by nonfinancial companies, according to Moody's, would be like finding an emergency fuel reserve. It would reignite the economy's engines and get it moving again. The cash would be used to fund new loans and new investments in equipment and employees.[/quote]
Right ... it wouldn`t go into financial speculation and inflated asset prices now, would it? I mean, just because the last (n >> 1) times the Fed tried this it didn`t do f***-all for the productive economy or the labor market (in terms of creating lasting jobs) doens`t mean it won`t work this time, does it?
[quote]Remember that all the ingredients for a corporate-investment-led economic expansion remain in place: high profitability, undercapitalization, unsustainably low spending rates, falling productivity and low financial leverage.

The key is confidence. Corporate confidence. If we're going to save ourselves, we're going to need the CEOs to do it.[/quote]
Wrong, wrong, wrong, wrong. The key is DEMAND - without demand for their products, companies will not invest in new equipment or employees. The past decade, all the demand growth has occurred overseas, so that`s where companies invested their profits. Thus they created woefully few jobs back home. And why has there been no demand growth domestically? Because for decades now we`ve been shipping good-wage middle-class jobs overseas in order to maximize corporate short-term profits. That has led to a declining wage base, meaning that consumers could only maintain their piece of the American dream by going ever-deeper into debt to finance the difference between their (corporate and bank-encouraged) needs and wants and their declining incomes. The same "Fed which can cure all our ills" encouraged this by throwing cheap credit around like mad. This led to biggest consumer-debt binge in the history of the world. But now the debt overhang has gotten so big that the resulting population of debt slaves is being choked by its financial shackles. With no prospects of those tens of millions of decent-wage jobs returning, consumers won`t go further into debt except out of dire necessity (and in that case usually with every intention to default), and those that can are cutting back and paying down their debt, even though it will a long drawn-out process. The resulting deflationary environment trumps all of your other bogus "ingredients for economic expansion".
[quote]4 ways the feds could prime the pump

Meltzer suggests four things politicians and Fed officials could do to help prod them along.[/quote]
...and I stopped reading when the first of the ensuing presented options was not any of these:

1. Fed should admit that the "third mandate" it adopted under Greesnapn of supporting equity-market prices and [url=http://www.ritholtz.com/blog/2011/08/how-the-fed-got-itself-boxed-in/]throwing gobs of money at the markets and cheap credit at consumers every time they suffered a bad stumble[/url] has not helped the economy by way of the inflated-asset-price "wealth effect" and hoped-for neo-Keynesian "virtuous circle" due to the increased consumption resulting from all that newly-created paper wealth, but rather, has ignited a series of ever-more-ruinous speculative boom/bust cycles, each of which the Fed attempted to cure by trying an even bigger dose of the same financial Patent Nostrum.

2. Fed should further admit that its bogus market-distorting "cures" have in fact left the economy worse off than it would have been, left to its own devices, by encouraging moral hazard, insane risk-taking and massive lending fraud, and by diverting a large fraction of the nation`s financial and human capital from genuinely productive economic activity toward Ponzi finance and speculative manias.

3. Fed should unwind its bloated balance sheet by forcing the banks to take back the over $1 trillion in garbage-MBS the Fed deliberately overpaid for during its QE1 experiment, selling its similar quantity of Treasury debt (not all at once, but in as expedient a fashion as reasonably possible) into the open markets.

4. Fed should disband itself and the right of "coinage" (monetary issuance) should return to Congress as specified in the Constitution. Government should pass legislation (or better, seek to amend the Constitution) to the following effect, thus returning the Fed`s willfully-misinterpreted mandate of "price stability" to its original meaning:

"Any monetary issuance above the rate of U.S. population growth may only occur by way of U.S. government debt issuance into the open markets."

[That allows for emergency financing as occurred e.g. in WW2, but only so long as people were willing to buy the bonds on reasonable terms].

5. Banks shall henceforth be required to hew to the [url=http://market-ticker.org/akcs-www?post=192007]1 dollar of capital[/url] rule, that is, hold one dollar of actual unencumbered capital against every dollar of unsecured lending, said capital being marked-to-market nightly. For secured lending, a leverage limit of no more than 6:1 shall apply.

6. Bank demand deposit accounts (e.g. Checking accounts) shall return to being true demand deposit accounts backed by actual capital. (Repeal of the Greenspan sweep-account 'innovation'.)

[QUOTE=Zeta-Flux;266857]Claiming that the GOP is acting out of ideological purity rather than reality (and by implication, without concern for the country) is just poison to the conversation (and untrue).[/QUOTE]Here is yet another exposure of the [U][B]un[/B][/U]reality of the GOP's no-tax stance:

"Republicans’ No-Tax Stand Unsupported by History or Facts: View"

[URL]http://www.bloomberg.com/news/2011-08-10/republicans-no-tax-stand-unsupported-by-history-or-facts-view.html[/URL]

[quote]You would think that abysmal growth and jobs data, the first-ever downgrade of U.S. debt and heart-stopping gyrations in the financial markets would impel political leaders to at least take a second look at some of their assumptions about restoring confidence in the U.S. economy.

Sadly, you would be mistaken.

President Barack Obama called again this week for a deficit-reduction plan that includes both new revenue and spending cuts, a solution that he said would require “common sense and compromise.” Alas, we have seen little of either quality from Speaker John Boehner and the House majority leader, Eric Cantor. The Republican leaders reiterated their determination to oppose any solution to the U.S. fiscal mess that involves revenue increases.

Whatever one thinks of the validity of Standard & Poor's decision to downgrade U.S. debt, it contained an admonition that we should take seriously: Spending cuts alone won’t be sufficient to place the debt, and by extension, the economy, on a sustainable path. In a memo to his Republican colleagues, Cantor warned that S&P’s analysis put the party under “pressure to compromise on tax increases” on the ground that there is “no other way forward.” His response: “I respectfully disagree.”

As always, the Republican leaders justified their intransigence by invoking the demons of job-killing taxes that would suppress the dynamism of overtaxed Americans, hampering growth.

[B]Low Taxes[/B]

This is partisan nonsense. First, consider the claim that Americans are being taxed to death. In fact, in terms of the economy as a whole, federal taxes are at their lowest level since 1950. The Congressional Budget Office estimated that federal taxes would account for 14.8 percent of gross domestic product in 2011.

That isn’t a one-year anomaly: Revenue was 14.9 percent of GDP in both 2009 and 2010. Compare that with a postwar average of about 18.5 percent of GDP, and an average of 18.2 percent during the administration of President Ronald Reagan.

Which brings us to a second dubious claim: Raising taxes in a downturn hinders growth. In 1982, amid a punishing 16-month recession, Reagan approved the largest peacetime tax increase in U.S. history. A booming economy followed in 1983 and 1984, enabling him to sail to re-election.[/quote]Got that? [B]"amid a punishing 16-month recession, Reagan approved the largest peacetime tax increase in U.S. history. A booming economy followed"[/B]

[quote][B]‘Job Killer’[/B]

In 1993, President Bill Clinton forced a tax increase through Congress that Representative Dick Armey, then chairman of the House Republican Caucus, condemned as a “job killer” that would push the economy into recession. That increase was succeeded by the creation of 23 million new jobs, and the Clinton administration left a budget surplus of about $236 billion.[/quote]Got that? [B]"President Bill Clinton forced a tax increase through Congress that Representative Dick Armey, then chairman of the House Republican Caucus, condemned as a “job killer” that would push the economy into recession. That increase was succeeded by the creation of 23 million new jobs, and the Clinton administration left a budget surplus of about $236 billion."[/B]

These are FACTS that ideologically-blinded conservatives prefer to ignore, preferring instead to believe in their comfortable protect-the-wealthy myths prescribed by conservative think-tanks that are funded by those very wealthy folks, and in a starve-the-beast strategy intended to force all of us to live in a one-sided conservative Strict Father ideological paradise whether we like it or not.

Conservatives are still parroting the "job-killing taxes" line in order to avoid rational reality-based discussion.

[quote]By contrast, President George W. Bush pushed through two rounds of tax cuts and created just 3 million jobs. He also turned the surplus he inherited into a $1.2 trillion deficit.

Obviously, today’s economic crisis is vastly more severe than anything Reagan or Clinton faced, thus the timing and scope of tax increases must be carefully calibrated. Over the long term, however, the Republican mantra of “no higher taxes, ever” is as senseless as are claims by some Democrats that we can solve our fiscal gaps simply by soaking the rich. Both spending cuts and revenue increases are required. [/quote]Got that? "Both spending cuts and revenue increases" That's reality, not the Tea Party's stonewalling absolutist ideology.

[quote]One of the oddest aspects of this debate is that the Republican position may not even be good politics -- at least outside safe Republican districts. Public-opinion polls show an increasing acceptance of the need to raise taxes to put the nation’s fiscal house in order. (A large majority of voters would like to see the wealthiest 1 percent raise their hands first.)

The American people are showing that they grasp a fundamental notion that still eludes some of their political leaders. As Justice Oliver Wendell Holmes said, “Taxes are what we pay for a civilized society.” That is well worth the price.[/quote]

Lately I have been noticing articles about shelf companies in the USA (not quite the same as shell companies, but not that different either).

Anyway, with these methods to obscure things I have been reminded about reverse mergers that have been used to shoehorn Chinese companies onto American stock exchanges without the scrutiny that an IPO would entail.

I mentioned something about this back in January in this very thread
[url]http://mersenneforum.org/showpost.php?p=247320&postcount=37[/url]

The other day, more was published on this story.[URL="http://www.reuters.com/article/2011/08/05/us-china-accounting-shorts-idUSTRE7740PC20110805"]Special report: The "shorts" who popped a China bubble[/URL][QUOTE]After spotting his first alleged China fraud - Universal Travel Group - Hempton says there was no turning back.

"They are so obvious that this is like shooting fish in a barrel. It's not going to remain that way. We are already finding it's tougher to find them in the U.S., and the ones that are really obvious are already mostly exposed. We are looking a little in Hong Kong now."[/QUOTE]

[QUOTE=imwithid;268767]It is absurd to expect an immediate and similar change downward in the prices of gasoline subject to the market price change downward of oil.[/QUOTE]

[QUOTE=ewmayer;268772]It is similarly absurd to expect immediate upward rises in gasoline prices when oil futures rise, and yet I daresay that phenomenon is well-known to most motorists.[/QUOTE]You're both [i]quite understandably[/i] missing key factors in explaining these apparent "absurdities":

(1) the discrepancy between (a) the time-length of the processing chain between crude oil purchase and gasoline delivery to consumers and (b) the rapidity with which news of oil price changes is disseminated, combined with

(2) the unique situation, compared to other commodities and their raw materials (e.g., bread and wheat), of gasoline and oil in this regard.

Several years ago, in an earlier Soap Box thread, someone else asked me to explain why gas prices rise so soon after crude oil price increases, even though it's impossible for the newly-more-expensive oil to actually have been refined yet into the newly-more-expensive gasoline pumped into a car's tank. I outlined a response, but set it aside because it wasn't quite right.

This is also related to explaining why oil companies usually have high profits in the quarters during and just after a jump in oil prices (bringing them unfounded "obscene profits" condemnation by uninformed or biased critics), but then have low profits, or even losses ("windfall losses"), just after a collapse in oil prices. That latter half of the phenomenon goes without comment by those critics of the former half.

Now I think I have a proper explanation in mind, but it needs just a bit of polishing. I'll post it as soon as it's ready.