[QUOTE=Christenson;268801]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.[/QUOTE]

That is all I was saying. I was trying to make a point before the damn was to be broken with comments pertaining to how much one pays for gas. One can open a new thread with that as the heading and a breakdown of how much one pays (I recall this was done with electricity prices elsewhere).

[QUOTE=Christenson;268801]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.[/QUOTE]

This was implicit in my post. I merely discussed short term / medium term effects. As the time period increases, almost everything will have a price elasticity or demand / supply that increases in concert.

[QUOTE=Christenson;268801] The rest ...[/QUOTE]

Excellent points.

"Short-Selling"
 

Apart from time scale, how does this differ from the maxim
"Buy Low - Sell High"?

David

Economics vascectomized
 

[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). 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]

[URL="http://mersenneforum.org/showthread.php?t=15944"]I have done so already[/URL]

David

(Sorry Ernst, noticed that your post predates mine; but
as you say, it ain't simply economics)

[QUOTE=cheesehead;268951]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]

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]

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.

Got that? "Both spending cuts and revenue increases" That's reality, not the Tea Party's stonewalling absolutist ideology.[/QUOTE]LOL. And you still don't get it.

I agree that raising taxes is the right thing to do (if we can ever get spending also under control) and those Republicans like Bachmann who are adamantly against any and all tax increases are hurting the nation due to their ideology. What I don't get is how one-sided your posts are. Try looking at the faults of the other party now and then without blaming it on the Republicans or Tea Partiers.

This is well worth watching, but keep in mind that it is slanted quite a bit.

[url]http://w3.newsmax.com/a/aftershockb/video.cfm[/url]

DarJones

[QUOTE=Zeta-Flux;269051]LOL. And you still don't get it.[/QUOTE][I]I[/I] don't get? Nay, it's [I]you[/I] who have once again forgotten what I have consistently and repeatedly explained in this forum over and over during the past several years.

See below for another refresher of what you've forgotten seeing me say in the past.

[quote]I agree that raising taxes is the right thing to do (if we can ever get spending also under control)[/quote]1) Are you saying no tax raising until after spending is under control? 2) What is your definition of "spending ... under control"?

[quote]those Republicans like Bachmann who are adamantly against any and all tax increases are hurting the nation due to their ideology.[/quote]Well, thank you for that.

[quote]What I don't get is how one-sided your posts are.[/quote]As I have repeatedly explained for several years, and will now once again (* sigh *) explain for you today:

My goal as a former Republican[sup]*[/sup] is to see the Republican Party resume what I view as its proper role in balancing the Democratic Party's faults by telling the truth about conservative values. (Perhaps that could be categorized as Goldwater conservatism, but I'm not an expert on Barry Goldwater, so I don't know for sure.)

To do that, I point out what I see as Republican/conservative mistakes that interfere with their proper effectiveness. Their "War on Science" has done no long-term good for the conservative cause. Their overreliance on convenient mythology instead of reality has likewise hurt American society's long-term interests. I point out these things for the purpose of spurring conservatives to steer their party back on course.

I have never presented myself as any expert on the faults of liberalism, nor have I ever made any claim to be giving equal time to critiquing both sides. I presume that my readership is smart enough to be able to analyze liberal faults if they choose to do so, and I am under no obligation to spend equal portions of my time composing critiques of both sides.

Those, such as you, Zeta-Flux, who criticize me for not commenting on liberal flaws, are either too lazy to do so themselves and so are trying to draft me to do their work for them, or are making incorrect assumptions about my purposes, goals, and position and not bothering to check those assumptions against my plain written words to the contrary.

If there's still something you don't "get", what is it?

It seems to me that it's been only a short time since I last laid out this explanation for you, Zeta-Flux. Can you try to remember it a bit longer this time?

- - -

(Does anyone else have trouble remembering my POV on this stuff? Is there something about my explanation that is particularly hard to understand or remember?)

- - -

[quote] Try looking at the faults of the other party now and then without blaming it on the Republicans or Tea Partiers.[/quote]Do you say that because:

1) You are too lazy to write your own critiques of the faults of the "other party", so you keep raising a strawman of pretense that I have some obligation to double my workload to enable you to shirk your duty?

or

2) Did someone teach you, when you were very young, that every statement that is critical of one side must necessarily and always automatically be complimentary to the other side -- and you still believe that, unable to comprehend the possibility that a statement criticizing one side may actually have no relevance to the other side?

or

3) You genuinely have not comprehended my previous explanations that have been very similar to the paragraphs I wrote just above in this posting about my goal and purpose?

or

4) You're raising yet another straw man with this business of my supposedly blaming the faults of Democrats on Republicans? I am not blaming the faults of Democrats on Republicans; I'm blaming the faults of Republicans on Republicans. (If you disagree, please show us specific evidence to support your accusation next time.)

- - -

[sup]*[/sup] -- I voted mostly Republican when I first became eligible to vote. When I've taken those online tests that purport to show where one is on the political spectrum, I come out as being on or next to the triple intersection of libertarian, middle-of-the-road, and liberal. There used to be room for me in the Republican Party, but now there's not, and I resent that.

I'm a liberal. My heart doesn't bleed...I've got better, much more selfish reasons than that....truth is, cities burning because the poor blacks in them have no opportunity because of discrimination isn't a good idea. (Detroit, NYC, Miami, LA over Rodney King). Truth is, i believe in streets being safe...but cops are a poor disincentive for violent crime, and throwing barely-functioning people in jail because they got caught doing small-time drugs doesn't help them function and RAISES TAXES since my government gets to house them and feed them and guard them. Relative equality does a little better. Truth is, SARS (sudden acute respiratory syndrome) scares the daylights out of me...I remember that the 1918 flu epidemic killed millions, and having everyone fairly healthy is part of preventing a repeat. Truth is, I drive too much, at the expense of exercising daily, and it doesn't take a scientist to show that there's a price for it. Truth is, we are spending more money shuffling claim forms for health insurance than we are on doctors, something is crazy about that. And we abuse doctors with internships, discouraging the best from becoming doctors in the first place. Truth is, if some obscure animial or a type of whale dies out, what is to say we aren't next? And what about the very useful drugs derived from rare plants, what if that plant that is dieing out has the next one, and all of us miss out? Truth is, if we don't stop feeding antibiotics to our cattle and chickens, and generally make antibiotic molecules rare in the environment, the bacteria evolve to get stronger, and soon humans die as a consequence. Therefore, antibiotics should not be available for animals that are not pets.

And truth is, there's a lot of pure luck involved in the opportunites that made me who I am....I thank my lucky stars for my good genes, my brains, my relatively good health, my ability to work, and my surviving all the hazards of childhood and a few of adulthood. Others may not be so fortunate, or may have lead paint in their houses destroying their brains, so it is my obligation to share the hope with them...for if not, bad things (like city-burning riots) will happen. Yes, a few will abuse that generosity, but there was a point where I needed it myself, and I know others who it has helped tremendously, making all the difference between someone who is part of the problem and someone who is part of the solution.

EW, could you look up some numbers for the expansion of the US prison system (at federal, state, and local levels) and tell me how much more we are spending on jails since 1980 or so? I claim (without support yet) that this is one excellent place for spending cuts.

This suggestion isn't a matter of religion, it is one of science...of examining the consequences of our actions. Mr Cheesehead's problem with the republicans, I think, is that repudiation of science and fine nuances in favor of religion and barely covert racism on many subjects, including drugs, sex, and now the budget.

Incidentally, growth is itself a religion...we all worship at the altar that the economy will grow, the population will grow...that companies must grow....that the stock market must climb....

[QUOTE=Christenson;269073]EW, could you look up some numbers for the expansion of the US prison system (at federal, state, and local levels) and tell me how much more we are spending on jails since 1980 or so? I claim (without support yet) that this is one excellent place for spending cuts.[/QUOTE]

We aim to please here at MET central - this article is from last November:

[url=http://articles.boston.com/2010-11-08/bostonglobe/29303068_1_prison-boom-housing-bubble-prison-systems]The prison boom comes home to roost[/url][quote]WILL THE fiscal collapse that has laid bare gross inequalities in the US economic system lead to meaningful reforms toward a more just society? One answer is suggested by the bursting of what might be called the “other housing bubble,’’ for these two years have also brought to crisis the three-decade-long frenzy of mass imprisonment. If there was a bailout for bankers, can there be one for inmates?

It is commonly observed now that, beginning about 1981, during the Reagan administration, the wealth of a tiny percentage of top-tier earners sky-rocketed, while the wages of the vast majority of Americans went flat. A rapid escalation in the illusory value of homeownership soon followed. But an unseen boom began then, too — in American rates of incarceration, the housing bubble in prisons. A recent issue of Daedalus, the journal of the American Academy of Arts and Sciences, lays it out. [b]In 1975, there were fewer than 400,000 people locked up in the United States. By 2000, that had grown to 2 million, and by this year to nearly 2.5 million. As the social scientist Glenn C. Loury points out, with 5 percent of the world’s population, the United States imprisons 25 percent of all humans behind bars. This effectively created a vibrant shadow economy: American spending on the criminal justice system went from $33 billion in 1980 to $216 billion in 2010 — an increase of 660 percent. Criminal justice is the third largest employer in the country.[/b][/quote]


The U.S. 11th Circuit Court of Appeals (based in Atlanta; the various judicial Circuit Courts are 1 level below the Supreme Court) [url=http://www.nytimes.com/2011/08/13/us/13health.html]just ruled against the individual mandate part of the Obama healthcare act[/url], making the same point I have raised (first bolded section). Since there have been seevral disparate court rulings on the act, this is very likely going to the Supreme Court, but the key constitional issues are well-laid-out here.

[url=http://www.uscourts.gov/uscourts/courts/ca11/201111021.pdf]From the ruling:[/url]
[quote]...For these reasons, we conclude that the individual mandate contained in the Act exceeds Congress’s enumerated commerce power. This conclusion is limited in scope. The power that Congress has wielded via the Commerce Clause for the life of this country remains undiminished. Congress may regulate commercial actors. It may forbid certain commercial activity. It may enact hundreds of new laws and federally-funded programs, as it has elected to do in this massive 975-page Act. [b]But what Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die.

It cannot be denied that the individual mandate is an unprecedented exercise of congressional power. As the CBO observed, Congress “has never required people to buy any good or service as a condition of lawful residence in the United States.”[/b][sup]CBO MANDATE MEMO, supra p.115, at 1.[/sup] Never before has Congress sought to regulate commerce by compelling non-market participants to enter into commerce so that Congress may regulate them. The statutory language of the mandate is not tied to health care consumption—past, present, or in the future. Rather, the mandate is to buy insurance now and forever. The individual mandate does not wait for market entry.

Because the Commerce Clause is an enumerated power, the Supreme Court’s decisions all emphasize the need for judicially enforceable limitations on its exercise. The individual mandate embodies no such limitations, at least none recognized by extant Commerce Clause doctrine. If an individual’s decision not to purchase an expensive product is subject to the sweeping doctrine of aggregation, then that purchase decision will almost always substantially affect interstate commerce. [b]The government’s five factual elements of “uniqueness,” proposed as constitutional limiting principles, are nowhere to be found in Supreme Court precedent. Rather, they are ad hoc, devoid of constitutional substance, incapable of judicial administration—and, consequently, illusory.[/b] The government’s fact based criteria would lead to expansive involvement by the courts in congressional legislation, requiring us to sit in judgment over when the situation is serious enough to justify an economic mandate.[/quote]


On the "Best government money can buy" front:

[url=http://news.yahoo.com/special-interests-gave-millions-budget-panel-203543930.html]Special interests gave millions to budget panel[/url][quote]WASHINGTON (AP) — The 12 lawmakers appointed to a new congressional supercommittee charged with tackling the nation's fiscal problems have received millions in contributions from special interests with a direct stake in potential cuts to federal programs, an Associated Press analysis of federal campaign data has found.

The newly appointed members — six Democrats and six Republicans — have received more than $3 million total during the past five years in donations from political committees with ties to defense contractors, health care providers and labor unions. That money went to their re-election campaigns, according to AP's review.

Supporters say the lawmakers were picked for their integrity and experience with complicated budget matters. But their appointments already have prompted early concerns from campaign-finance watchdog groups, which urged the lawmakers to stop fundraising and resign from leadership positions in political groups.

The congressional committee, created as part of the debt limit and deficit reduction agreement enacted last week, is charged with cutting more than $1 trillion from the budget during the coming decade. If the committee doesn't decide on cuts by late November — or if Congress votes down the committee's recommendations — spending triggers would automatically cut billions of dollars from politically delicate areas like Medicare and the Pentagon.

The lawmakers represent a large swath of political ideology and geography, but they have some things in common: They received more than $1 million overall in contributions from the health care industry and at least $700,000 from defense companies, the AP found. Those two industries, especially, are sensitive to the outcome of the committee's negotiations because the automatic spending cuts could affect them most directly.[/quote]


And on a lighter note...

[url=http://dilbert.com/strips/comic/2011-08-12/]Dilbert on what it takes to run a successful hedge fund[/url]

ZehoHedge contributor (and government-trust-fund specialist) Bruce Krasting calls out recently-stepped-down Obama economic-team member Christina Romer for lying about the national debt by engaging in the oh-so-common ploy of ignoring the Social Security and Medicare trust fund borrowings as if they were not there (boldface highlighting is his, not mine):

[url=http://www.zerohedge.com/contributed/romer-lies]Romer Lies[/url]
[quote]Christina Romer is one on the leading liberal economist in the nation. She’s no dummy. Valedictorian from Princeton, PHD from MIT, former Chairperson of the Council of Obama’s council of Economic Advisors and now she is a professor of economics at U.C. Berkley. [b]She’s also a liar.[/b]

Ms Romer penned a piece for the NYT over the weekend. This was her plea for, guess what, more fiscal and monetary stimulus.

Romer acknowledges that US public sector debt is already too high. But she argues that we are nowhere near the levels that were reached post WWII. Her words:
[i]
At the end of World War II, that ratio hit 109 percent — [b]one and a half times as high as it is now. [/b]
[/i]
One and a half times Ms Romer? (This equates to a debt to GDP of 72%) Where does that number come from? A few facts:

First, [b]total debt is now $14.588 Trillion.[/b] From Treasury Direct:

GDP as measured by the BLS was running a tad over $15b as of the most recent read. From BLS:
[i]
Current-dollar GDP -- the market value of the nation's output of goods and services -- increased 3.7 percent, or $136.0 billion, in the second quarter to a level of $15,003.8 billion.
[/i]
[EWM: Note that that computation includes new government borrowings as part of GDP - More hilarious government-style "accounting"]

Put the two together and the actual debt to GDP is currently at [b]97.25%[/b] (and rapidly rising). We will exceed the 100% barrier over the next six months.

What Ms Romer has done to spin her number is to exclude all of the debt ($4.7 Trillion) of the nation that is held by the Intergovernmental Accounts ("IG"). [b]This is fast and loose economics. Ms. Romer knows that. But she elects to mislead the public with a totally false claim.[/b]

Does Romer think the debts owed to Social Security, Medicare, Military Pensions and Federal employees pension funds don’t count? If she takes that position, [b]she is flat wrong.[/b] I maintain that the Intergovernmental debts are much more toxic to the economy than the debt held by the public.

The simple reason is that the Intergovernmental accounts have to be paid back in full. The process of running down the intergovernmental accounts has already started. It will accelerate very rapidly for the next decade. Every penny of the draw down of these accounts [b]MUST result in an increase in debt held by the public.[/b]

The US has a huge outstanding of debt to the public. But neither the interest on that debt or the principal has to be paid back. This debt can be rolled over to a new maturity and a new investor. That happens virtually every single day. [b]That is not the case with the Intergovernmental account.[/b] All of those Special Issue Treasury notes held by the various government agencies are going to come due over the next 20 years. [b]When that happens it will result in a dollar for dollar increase in Debt to Public. Exactly the worst possible outcome.[/b][/quote]
One of the reader replies (UserId refers to a great heavy-metal [url=http://en.wikipedia.org/wiki/Gwar]band[/url]) is quotably trenchant:
[quote]by gwar5
on Sun, 08/14/2011 - 12:35
#1559011

Romer's vaunted Keynesian Multiplier Effect of stimulus spending did not work because it was overwhelmed by massive sovereign debt. Romer was apparently not smart enough to figure this out by simply observing the trends over the years that this terminal event was coming, and predictably, on her watch.

The positive effect of stimulus has consistently ratcheted down over the decades, like habituation to heroin, as the national debt has grown. As hardcore Keynesian addicts, Romer and Krugman are merely advocating massive amounts of stimulus to get the same response they are accustomed to in order to try to selfishly validate their theories one more time. It's just sad neither has the intellectual honesty to admit it's a dead end.

Romer (and Krugman) are now reduced to desperately doddering around the country defending their wasted life's work and the Cult of Cul-de-sac Keynesianism. It's an economic theory that was born out of fear of communism and fascism back in the 1930's to legitimize government deficit spending to keep the masses placated and fleece the public through inflation.

Delegitimization of Keynesianism has also delegitimized fiat currencies. Time to move back to the future and honest money with a gold or metals standard.[/quote]

Given the laughable patheticity (oh, it's a word - I just write it, didn't I?) of Ms. Romer's claims, the bit about "lampooning of celebrities and figures in current events" from the Wikipage on Gwar seems especially apt:
[quote][b]Stage performance[/b]

The band's characteristic costumes are generally made of foam latex, styrofoam, and hardened rubber. The costumes cover very little, with the rest of their bodies accentuated with makeup. They further their production in concert by spraying their audiences with fluids. Most of the fluids are made of water and powdered food coloring which, for the most part, flakes off or washes out easily. The thicker fluids are made from a clear seaweed extract called carrageenan which is also used in ice cream and milkshakes.[4] Gwar does not use syrups or stage blood because they dry solid and can damage the band's costumes.[5] In concert, Gwar has been known occasionally to perform their encore without costumes or anything else.

[b]Another trademark of Gwar's live show is their lampooning of celebrities and figures in current events. Targets of Gwar's humor have included O. J. Simpson, John Kerry, Mike Tyson, as well as every American President since Ronald Reagan, Jerry Garcia, Joan Crawford, Osama Bin Laden, Michael Jackson, Steve Wilkos, Al Gore, John McCain, Hillary Clinton, Paris Hilton, Arnold Schwarzenegger, Adolf Hitler, Lady Gaga, Bernard Madoff, Oprah Winfrey, Jerry Springer, Mr. Lordi, Sarah Palin and many others[/b]. The band also makes frequent references to political and historical figures, fantasy literature, and mythology. For instance, the song "Whargoul" makes reference to Minas Morgul as well as the eternal warrior of Michael Moorcock. Gwar also has many references to H. P. Lovecraft themes (Antarctica, Yig, Giant Penguins, Fleshy Insanities, etc.). In addition, the title of their fifth album Ragnarok comes from Norse mythology. They were nominated for two Grammys, one for Best Metal Performance "S.F.W." and one for Best Long Form Music Video "Phallus in Wonderland". The band also performed fire dancing until the character "Slymenstra Hymen" left the band.[/quote]

[QUOTE=ewmayer;269093]
<snip>

And on a lighter note...

[url=http://dilbert.com/strips/comic/2011-08-12/]Dilbert on what it takes to run a successful hedge fund[/url][/QUOTE]

Believe it or not, I have recently read an ad from a hedge fund looking for programmers on craigslist.

0.2 Trillion out of 15 trillion does not a balanced budget begin to make...though it may help a bit.

Personally, I believe that insurance poisons the markets it dominates in....I have seen this with both car body repairs and the health field, because it removes significant responsibility for controlling costs from the consumer. When I wrecked a car, landing it on its side, I ended up with a gold-standard, like-new job where a bronze-standard job would have done fine for me.

I don't have any good solutions for health insurance...I see significant benefits to myself of having reasonable health care universally available, but can't see how to get there. I don't see how to discourage abuse of the system by the consumers, except through financial charges which some cannot afford, and I don't see how to put all the insurance clam-handling clerks out of business, and how to control the "my machine is better than your machine" phenomenon. I also don't see how to encourage an epidemic of science-based medicine, when becoming a doctor rquires suffering significant amounts of abuse. Proposals on how to control the cost of this highly valuable commodity?

Dear cheesehead,

Would you believe that I didn't post what I did out of laziness? Or childhood indoctrination? Or stupidity? Or an attempt to accuse you? Or anything like that?

Would you believe that I posted what I did out of concern? Would you believe that I've seen the type of resentment you have quickly fester into an obsessive one-sided mindset that blinds the person to alternate viewpoints? This obsession then leads the person to focus on what they perceive to be the faults of those who "failed" them, not realizing in their crusade that there is more to the story. I've seen it with all sorts of people leaving all sorts of institutions/parties/relationships.

Anyway, to keep this post somewhat on topic, I'll try to answer your question "What is your definition of "spending ... under control"?" Frankly, it is a very loose sort of notion, and the answer I would give might differ from someone else's answer (even if they understood the concept the same way I did). My feeling is that taxes should cover what we, the citizens, collectively want the government to fund. We shouldn't leave the debt for others to pay. We should pay it ourselves.

The trouble is, in our system, it often only takes a majority of politicians to decide to increase government functions. Obamacare is a prime example. Furthermore, politicians somehow think that if there is a *projected* surplus then that authorizes them to spend less frugally now (cue the Bush tax cuts). So, somehow, we never seem to be in the black.

So, on principle, I'm not opposed to raising taxes. However, I'd like to see any tax hikes correspond to actual programs needing to be funded (so the other "consumers" [i.e. citizens] can stop thinking of these programs as free) and that they be accompanied by [b]serious[/b] budget reform. And I'm not talking about 1 trillion is cuts to [i]projected[/i] spending, leaving us spending even more money than last year.

I think Obamacare would have had a different vote if our tax rates were all raised by a flat percentage to cover the additional costs. If it had still passed, so be it.

I'd also like to see a tax rate which is a little more flat, so that everyone pays at least a little--so they realize the programs they benefit from are not free rides.

I am definitely for closing up tax loopholes, etc...

What we really need is an interactive tool that shows what making cuts to different programs would do for the whole budget mess....the Sacramento Bee had links to one for California when [url="http://www.youtube.com/watch?v=yhEjXYvS08w"]The Governator[/url] was in office and he was duking it out with the legislators over the budget.

Here's an interesting graphic from Barry Ritholtz's [url="http://www.ritholtz.com/blog/2011/08/federal-finances-budget-and-growth/"]blog[/url] (~40% is a huge cut!):

[QUOTE=Zeta-Flux;269109]Would you believe that I posted what I did out of concern?[/QUOTE]I would if you'd simply say straight out what you mean instead of playing rhetorical tricks. But for a while lately, whenever I've asked straight questions, you've often evaded giving straight answers. This has puzzled me because it wasn't typical of you in the past when we discussed other matters. I now see glimmers of a possibility that you might be leaving the evasive phase. If your future responses avoid rhetorical evasion, I'll welcome the change.

How about giving us a straightforward answer to this: What was it that you were claiming in post #392 that I didn't "get"? Because you didn't say what that was in #392, it seemed that your "What I don't get is how one-sided your posts are" implied that you might have been claiming that what I didn't "get" was being less "one-sided". I based my response on that -- if my guess was wrong, it's up to you to tell us just what you meant.

Again, the question is:

What was it that you were claiming in post #392 that I didn't "get"?

[quote]Would you believe that I've seen the type of resentment you have quickly fester into an obsessive one-sided mindset that blinds the person to alternate viewpoints?[/quote]You wouldn't be trying to evade making straight responses to my posts by trying to frame my posts as "obsessive", would you?

Whether you abandon that framing attempt will be a telling measure of your intent to eschew evasion.

[quote]This obsession then leads the person to focus on what they perceive to be the faults of those who "failed" them, not realizing in their crusade that there is more to the story. I've seen it with all sorts of people leaving all sorts of institutions/parties/relationships.[/quote]But you seem to have overlooked that my statements are factually correct, and neither you nor anyone else has yet posted any fact-based refutation.

Spinning a fantasy of my supposed "obsession" does not constitute a refutation.

Did you notice that in #394 I wrote: "(If you disagree, please show us specific evidence to support your accusation next time.)" ?

In #399, what evidence do you present to support your new accusations about me? None. No evidence at all.

Please demonstrate the sincerity of your change of course by showing us evidence to support your accusations from now on.

[quote]Anyway, to keep this post somewhat on topic, I'll try to answer your question "What is your definition of "spending ... under control"?" Frankly, it is a very loose sort of notion, and the answer I would give might differ from someone else's answer (even if they understood the concept the same way I did). My feeling is that taxes should cover what we, the citizens, collectively want the government to fund. We shouldn't leave the debt for others to pay. We should pay it ourselves.[/quote]Okay, that's a straightforward answer.

[quote]The trouble is, in our system, it often only takes a majority of politicians to decide to increase government functions.[/quote]What do you propose as an alternative?

[quote]Furthermore, politicians somehow think that if there is a *projected* surplus then that authorizes them to spend less frugally now (cue the Bush tax cuts). So, somehow, we never seem to be in the black.[/quote]Yes, those are obvious faults that spring from human nature. We need to find ways to get around them.

[quote]So, on principle, I'm not opposed to raising taxes. However, I'd like to see any tax hikes correspond to actual programs needing to be funded (so the other "consumers" [i.e. citizens] can stop thinking of these programs as free)[/quote]Straightforward -- thank you.

[quote]and that they be accompanied by [B]serious[/B] budget reform. And I'm not talking about 1 trillion is cuts to [I]projected[/I] spending, leaving us spending even more money than last year.[/quote]What is your definition of "serious budget reform", using positive terminology, not merely negation of one possibility?

[QUOTE=schickel;269117]What we really need is an interactive tool that shows what making cuts to different programs would do for the whole budget mess....the Sacramento Bee had links to one for California when [url="http://www.youtube.com/watch?v=yhEjXYvS08w"]The Governator[/url] was in office and he was duking it out with the legislators over the budget.

Here's an interesting graphic from Barry Ritholtz's [url="http://www.ritholtz.com/blog/2011/08/federal-finances-budget-and-growth/"]blog[/url] (~40% is a huge cut!):[/QUOTE]

Nice and extremely informative! Now what the heck is "discretionary spending"?

I have a question: To what extent does defense spending (especially on weapons engineering programs) constitute a "brain drain" on the rest of the economy? I certainly note that the internet boom happened on the heels of a defense downturn.

[QUOTE=Christenson;269137]Now what the heck is "discretionary spending"?
[/QUOTE]From [URL]http://en.wikipedia.org/wiki/United_States_budget_process[/URL]

[quote]Discretionary spending requires an annual appropriation bill ... Discretionary spending is typically set by the [URL="http://en.wikipedia.org/wiki/United_States_House_Committee_on_Appropriations"]House[/URL] and [URL="http://en.wikipedia.org/wiki/United_States_Senate_Committee_on_Appropriations"]Senate Appropriations Committees[/URL] and their various [URL="http://en.wikipedia.org/wiki/U.S._Congressional_subcommittee"]subcommittees[/URL]. Since the spending is typically for a fixed period (usually a year), it is said to be under the [I]discretion[/I] of the Congress. ...

Direct spending, also known as mandatory spending, refers to spending enacted by law, but not dependent on an annual or periodic appropriation bill. Most mandatory spending consists of entitlement programs such as [URL="http://en.wikipedia.org/wiki/Social_Security_%28United_States%29"]Social Security[/URL] benefits, [URL="http://en.wikipedia.org/wiki/Medicare_%28United_States%29"]Medicare[/URL], and [URL="http://en.wikipedia.org/wiki/Medicaid"]Medicaid[/URL]. These programs are called "entitlements" because individuals satisfying given eligibility requirements set by past legislation are entitled to Federal government benefits or services. Many other expenses, such as salaries of Federal judges, are mandatory, but account for a relatively small share of federal spending. ...

Congress can affect spending on entitlement programs by changing eligibility requirements or the structure of programs. Certain entitlement programs, because the language authorizing them are included in appropriation bills, are termed "appropriated entitlements." This is a convention rather than a substantive distinction, since the programs, such as Food Stamps, would continue to be funded even were the appropriation bill to be vetoed or otherwise not enacted.[/quote]However, this Wikipedia article has cautions that it needs more citations for verification. Some of its external links are 404ed.

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

Congressional Research Service

"Introduction to the Federal Budget Process"

[URL]http://assets.opencrs.com/rpts/98-721_20101202.pdf[/URL]

This seems mainly to assume that the reader already knows the definitions of terms such as "discretionary" and "direct spending", but it has lots of description, within which is sometimes buried a parenthetical definition.

Example, page 6:
[quote]Budgeting for Discretionary and Direct Spending

The distinction drawn by the BEA and the congressional budget process between discretionary
spending (which is controlled through the annual appropriations process) and direct spending
(which is provided outside of the annual appropriations process) recognized that the federal
government has somewhat different, though overlapping, means of dealing with these two types of spending. One set of procedures pertained to discretionary spending, another to direct spending.[/quote]-----------

Aah, [U]here[/U] we go!

From the GAO:

"A Glossary of Terms Used in the Federal Budget Process"

[URL]http://www.gao.gov/new.items/d05734sp.pdf[/URL]

[quote]Discretionary

A term that usually modifies either “spending,” “appropriation,” or “amount.” “Discretionary spending” refers to outlays from budget authority that is provided in and controlled by appropriation acts. “Discretionary appropriation” refers to those budgetary resources that are provided in appropriation acts, other than those that fund mandatory programs. “Discretionary amount” refers to the level of budget authority, outlays, or other budgetary resources (other than those which fund mandatory programs) that are provided in, and controlled by, appropriation acts. (See also Appropriation Act; Appropriations under Forms of Budget Authority under Budget Authority; One-Year Authority under Duration under Budget Authority; Gramm-Rudman-Hollings. For a contrast, see Entitlement Authority; Mandatory.)[/quote]But one has to follow several links to other terms in order to get the picture that the Wikipedia article presents in one place.

[QUOTE=schickel;269117]Here's an interesting graphic from Barry Ritholtz's [url="http://www.ritholtz.com/blog/2011/08/federal-finances-budget-and-growth/"]blog[/url] (~40% is a huge cut!):[/QUOTE]

Nice, but the lower-right chart "Federal Deficit" again omits the $4.5 Trillion borrowings against the SS and Medicare trust funds. I am thoroughly sick of that bit of fraudulent accounting. You borrowed it, you have to pay it back, hence it's part of the Federal debt. I you have no intention of paying it back then it was in fact a tax all along, meaning you defrauded the American people to the tune of $4 Trillion-plus, and (this is to both of the major parties have that been happily playing these Ponzi accounting games since the late 1960s) your legitimacy as a government is ended. Which is it?

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

Mish reveals why the markets were coughing up hairballs over several of the biggest French banks in the past 2 weeks - Shades of 2008, Bear Stearns, Lehman, etc, a.k.a. "Fun games one can play with one's Tier 1 capital computation":

[url=http://globaleconomicanalysis.blogspot.com/2011/08/bnp-paribas-leveraged-271-societe.html]BNP Paribas leveraged 27:1; Société Générale Leveraged 50:1[/url]

The buck does NOT stop here. There are no bucks left. All we have now are dollars and they are pretty much worth the paper they are printed on. I keep hoping a president will have something serious to say about stopping the political maneuvering and get down to doing something about the nations finances. Fat chance.

As an fyi, I am considering selling a few thousand dollars worth of silver coins and a few pieces of gold jewelry that I purchased several years ago as an investment. Anyone interested before I place them on Ebay?

DarJones

Indecision 2012 Update
 

So the Iowa Straw Poll (a kind of Republican presidential primary) was this past weekend, and Michelle Bachmann, who put huge time and money into courting the voters in that state, won, just ahead of Libertarian, antiwar campaigner and sound-money-advocate Ron Paul. I watched the evening news afterward on the local Fox affiliate, and was startled to hear no mention of Paul ... they mentioned Bachmann, Mitt Romney and Texas governor Rick Perry as the "clear top tier Republican frontrunners". That struck me as bizarre ... and it appears I am (thankfully) not alone in that. This would be merely funny if the media bias weren’t so flagrant (but it’s still pretty damn funny):

[url=http://www.zerohedge.com/news/jon-stewart-ron-paul-media-blackout]Indecision 2012: Jon Stewart On The Ron "13th Floor In A Hotel" Paul Media Blackout[/url]

Time magazine also comments on this curious phenomenon:

[url=http://tunedin.blogs.time.com/2011/08/16/the-morning-after-jon-stewart-sticks-up-for-invisible-man-ron-paul/]The Morning After: Jon Stewart Sticks Up for Invisible Man Ron Paul[/url]

I vaguely remember a time, years ago, when now-Fox-chief-anchor-shill [url=http://en.wikipedia.org/wiki/Chris_Wallace_%28journalist%29]Chris Wallace[/url] was actually a respected newsman. Performances like you see in the Daily Show clip make the following quote of his (from the above Wikipage) especially ironic:

“After another 14 years at ABC, Wallace left in 2003 to join the Fox News Channel. He has remarked in the past that [u]his work at Fox opened his eyes to what critics cite as bias in the mainstream press[/u]."

And note that it’s not just the right-biased media which engage in this sort of thing: See if you find any mention of Rep. Paul in this [url=http://www.nytimes.com/2011/08/17/us/17iht-letter17.html?_r=1&ref=us]New York Times piece[/url].

Rock Musician and satirist Frank Zappa may have said it best in his song [url=http://www.songmeanings.net/songs/view/3530822107858727645/]I’m the slime (oozing out from your TV set)[/url]:
[i]
You will obey me while I lead you
And eat the garbage that I feed you
Until the day that we don't need you
Don't go for help...no one will heed you
Your mind is totally controlled
It has been stuffed into my mold
And you will do as you are told
Until the rights to you are sold.[/i]

[QUOTE=ewmayer;269278]So the Iowa Straw Poll (a kind of Republican presidential primary) was this past weekend, and Michelle Bachmann, who put huge time and money into courting the voters in that state, won, just ahead of Libertarian, antiwar campaigner and sound-money-advocate Ron Paul. I watched the evening news afterward on the local Fox affiliate, and was startled to hear no mention of Paul ... they mentioned Bachmann, Mitt Romney and Texas governor Rick Perry as the "clear top tier Republican frontrunners". That struck me as bizarre ... and it appears I am (thankfully) not alone in that. This would be merely funny if the media bias weren’t so flagrant (but it’s still pretty damn funny):

[url=http://www.zerohedge.com/news/jon-stewart-ron-paul-media-blackout]Indecision 2012: Jon Stewart On The Ron "13th Floor In A Hotel" Paul Media Blackout[/url]

Time magazine also comments on this curious phenomenon:

[url=http://tunedin.blogs.time.com/2011/08/16/the-morning-after-jon-stewart-sticks-up-for-invisible-man-ron-paul/]The Morning After: Jon Stewart Sticks Up for Invisible Man Ron Paul[/url]

I vaguely remember a time, years ago, when now-Fox-chief-anchor-shill [url=http://en.wikipedia.org/wiki/Chris_Wallace_%28journalist%29]Chris Wallace[/url] was actually a respected newsman. Performances like you see in the Daily Show clip make the following quote of his (from the above Wikipage) especially ironic:

“After another 14 years at ABC, Wallace left in 2003 to join the Fox News Channel. He has remarked in the past that [u]his work at Fox opened his eyes to what critics cite as bias in the mainstream press[/u]."

And note that it’s not just the right-biased media which engage in this sort of thing: See if you find any mention of Rep. Paul in this [url=http://www.nytimes.com/2011/08/17/us/17iht-letter17.html?_r=1&ref=us]New York Times piece[/url].

Rock Musician and satirist Frank Zappa may have said it best in his song [url=http://www.songmeanings.net/songs/view/3530822107858727645/]I’m the slime (oozing out from your TV set)[/url]:
[i]
You will obey me while I lead you
And eat the garbage that I feed you
Until the day that we don't need you
Don't go for help...no one will heed you
Your mind is totally controlled
It has been stuffed into my mold
And you will do as you are told
Until the rights to you are sold.[/i][/QUOTE]

See:

[url]http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=2[/url]

[QUOTE=R.D. Silverman;269283]See:

[url]http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=2[/url][/QUOTE]

Sorry, I simply can't take any more of Warren "Wall Street Bailout Whore #1" Buffett's self-serving editorials - I'll let Karl Denninger (link at bottom of this post) reply.

Denninger has a high-quality rant about "how to create jobs":

[url=http://market-ticker.org/akcs-www?post=192355]You Want growth and Jobs? Here's How[/url]
[quote]I'm an entrepreneur. I've done everything from carrying golf bags to washing cars to programming computers to selling PCs to small, medium and large businesses. I've pulled cable in hot warehouses, wired office buildings and repaired computers. MCS, as a company, existed twice - once as a small computer and networking concern which operated for a few years and then was closed voluntarily as there just wasn't enough business to make it work, and then again as an ISP - when it "hit big." I've worked for myself and I've worked for others, including Fortune 50 companies, IPO startups and, lastly, I was the CEO of my own small tech company (MCSNet.) I've known both failure and success, as have most entrepreneurs.

I've been an employee and I've created jobs - about three dozen of them at MCSNet, prior to its sale to Winstar Communications. And I've worked more than my share of 26-hour - and occasional 40 hour - days.

Large-company CEOs and other executives of that sort live in a different world. They may work "relatively" long hours, but it is relative. They fly in a private jet and are coddled in expensive suites with private cars and limousines. Entrepreneurs don't have that sort of money to blow, and our long hours are spent huddled over a desk, writing code, interpreting business data - or humping routers into racks in our ISPs.

Big company CEOs don't get phone calls at 3:00 AM when something goes wrong - they have someone else for that. Entrepreneurs are the ones with the pager - we're the ones who get up at 3:00 AM and go down to the data center to fix something our night guys can't handle, or just because we think we should make sure it's all ok. We're the ones who age at three times the rate of the line guy making his 40-hour wage and we're the ones who risk our health and wealth so that other guy can have a job. We're the ones who don't get a vacation for five straight years.

Finally, when we screw up we lose it all. When the big company CEO screws up, he gets a golden parachute and retires to write books, living out his life with his LearJet in Monaco.
[i]
If you want people like me to create jobs you have to stop threatening to steal my capital. I have several ideas for new enterprises, but today I wouldn't even consider committing that capital to these ventures. Not because I might be wrong and fail - that's always a risk, and one that entrepreneurs accept as inherent in the game - but because government wishes to reserve the right to steal my capital any time they wish with their unconstitutional and outrageous mandates and demands.[/i][/quote]
[i]My Comment:[/i] The above is just the first half of the full piece. (Although [url=http://market-ticker.org/akcs-www?post=192345]his retort[/url] to Warren Buffet`s latest hypocrisy-dripping op-ed has a snappier title).

There's one fly in my ointment:
What actually does cause entrepreneurs to start businesses? Ones that actually grow? And what discourages them? Any science, or just rantings? (Recalling Moneyball, where the experience of the individual does not generalize to the statistical whole)

ECB prints money: "Trichet est un tricheur"
 

[b]Number of the Day: 795,000,000,000 Euros[/b]

A startling figure mentioned on last night`s "Number Cruncher" segment of DW-TV`s business news - It is the amount of debt which needs to be refinanced by Eurozone governments in the coming 2 years. You can guess how disparate the financing-needs-relative-to-GDP are among the various EU member states.

On the same topic, Mish has a piece describing yesterday`s nothingburger of a "critical high-level meeting" between Merkel and Sarkozy about the dead-on-arrival bailout idea of "Eurobonds":

[url=http://globaleconomicanalysis.blogspot.com/2011/08/merkel-sarkozy-reject-euro-bonds-and.html]Merkel, Sarkozy Reject Euro Bonds and Expansion of Rescue Fund; What Does it Mean? Middle of the End for Merkel[/url]
[quote][b]What Does it Mean?[/b]

For starters it means Angela Merkel no longer has capability to ram her ideas through the German Bundestag, the national parliament of Germany.

It also means that even if she could have, the measure would have failed.

The Dutch prime minister essentially rejected Eurobonds, and it is likely Finland would have as well.

More importantly, Germany's Finance Minister Wolfgang Schäuble emphatically stated [i]"I rule out eurobonds for as long as member states conduct their own financial policies and we need different rates of interest in order that there are possible incentives and sanctions to enforce fiscal solidity."[/i]

Given that it takes a unanimous approval from all Eurozone nations to enact Eurobonds, Merkel and Sarkozy both realized political support was simply not present.

[b]Middle of the End for Merkel[/b]

This is the "middle of the end" for Merkel. She has exhausted all of her political capital fighting a battle that is far bigger than she is. Merkel will not survive this mess.

Sadly, Merkel had it correct in the beginning, initially insisting on haircuts on bondholders. She gave in to the "no haircuts" fantasy under pressure from ECB president Jean-Claude-Trichet and French president Nicolas Sarkozy.

I said at the time it was a fatal Merkel mistake. Since then, Greece defaulted anyway and there are haircuts on bonds. More haircuts are coming.[/quote]
[i]My Comment:[/i] According to ZeroHedge, the corrupt ECB`s latest round of sovereign-debt buying [url=http://www.zerohedge.com/contributed/ecb-starting-massively-print-money-again]has so far not been sterilized[/url], that is, it amounts to pure money-printing. Overheard the following deft quip about that; "Trichet est un tricheur".


[b]How to Create Jobs (cont.)[/b]

Back on yesterday`s theme of "how to create jobs at home", Starbucks CEO Howard Schultz has a pair of interesting proposal:

[url=http://money.cnn.com/2011/08/16/news/economy/starbucks_boycott_washington/index.htm]Starbucks CEO calls for boycott on campaign contributions[/url]
[quote]NEW YORK (CNNMoney) -- Starbucks CEO Howard Schultz is fed up with Washington.

And he is doing something about it.

Spurred by what he describes as a failure of leadership on the part of lawmakers, Schultz is mounting a one-man bull rush against a political culture that has "chosen to put partisan and ideological purity over the well being of the people."

What does that mean? No more political donations -- not for anybody.

And he's recruiting other CEOs to join him.

"I am asking that all of us forgo political contributions until the Congress and the President return to Washington and deliver a fiscally, disciplined long term debt and deficit plan to the American people," Schultz wrote in a letter that was passed on to members of the NYSE and Nasdaq.

...The Starbucks (SBUX, Fortune 500) CEO said that in the 30 hours since the letters went out, he has heard back from thousands of Americans -- both CEOs and everyday citizens. Not one lawmaker has contacted him so far.

"I suspect in the coming days, people who will be signing the pledge with me will be both Republican and Democrat CEOs who have had enough," he told CNNMoney.

The amount of money spent to influence elections has been steadily climbing.

During the 2008 election cycle, more than $5.2 billion was spent by candidates, political parties and interest groups, according to data compiled by the non-partisan Center for Responsive Politics

In 2010 -- a year that did not include a presidential election -- $3.6 billion was spent. Of course, 2012 has the potential to break all records.
[b]
It's unclear exactly how much of an impact -- if any -- Schultz's pledge might have. But a relatively small number of Americans do wield an outsized influence when it comes to political donations.

Only 0.04% of Americans give in excess of $200 to candidates, parties or political action committees -- and those donations account for 64.8% of all contributions.[/b][/quote]
[i]My Comment:[/i] and on the "creating jobs at home" front, Schultz is the first major-company CEO I am aware of who is making a point of actually using some of his company`s recent "record corporate profits" (in no small part thanks to jobs-slashing and squeezing remaining workers until their pips squeak) to create a significant number of jobs at home:


[url=http://seattletimes.nwsource.com/html/businesstechnology/2015919504_starbucks16.html]Starbucks CEO Howard Schultz: Don't contribute to politicians[/url]
[quote]Starbucks CEO Howard Schultz has had it with political dickering in Washington, D.C., and is calling for a boycott on campaign contributions to President Obama and congressional lawmakers until they put the country's financial house in order.

He also wants companies to override their fear and start spending the cash they're sitting on. Starbucks had $1.7 billion in July, up from $1.2 billion when its fiscal year ended nine months earlier.

"Right now our economy is frozen in a cycle of fear and uncertainty. Companies are afraid to hire. Consumers are afraid to spend. Banks are afraid to lend," he wrote in a letter sent Monday to other corporate leaders. The heads of Nasdaq and the New York Stock Exchange forwarded it to their thousands of members.

Besides stopping campaign contributions, Schultz — the Northwest's top-paid CEO last year — vowed to help get the economy moving by hiring.

"We are going to accelerate growth, employment and investment in jobs," he said.

Confidence is contagious, he reasoned, so "we are not waiting for government to create an incentive program or a stimulus. We are not waiting for economic indicators to tell us it's safe to act. We are hiring more people now."

They are big promises for a company that over the past few years has closed stores and cut some 35,000 jobs. It had 137,000 employees when its fiscal year ended last October.

Starbucks has hired 36,000 people in the U.S. and Canada since January, including filling an unspecified number of positions that were left open when workers left the company.

That's up 15 percent from a year ago, and Starbucks expects to hire 70,000 more people in the U.S. over the next six to 12 months, said spokeswoman Stacey Krum.[/quote]

[QUOTE=ewmayer;269285]Sorry, I simply can't take any more of Warren "Wall Street Bailout Whore #1" Buffett's self-serving editorials - I'll let Karl Denninger (link at bottom of this post) reply.

Denninger has a high-quality rant about "how to create jobs":
[/QUOTE]

It seemed to make reasonable sense down to the bottom where he suddenly asserts the existence of a malevolent government. The US government has been a lot better than many at not stealing capital.

If he means 'I don't want to have to pay health insurance when I hire employees', he should say so; and this means that his employees aren't creating wealth disproportionate to their compensation, and probably small companies shouldn't be dealing with employees who aren't creating value disproportionate to their compensation. Small boosts at the margins are what big industries can afford to do.

There is a problem that 'entrepreneur' often goes in the same box as 'freelance' or 'consultant'; it gets used as a middle-class way of being unemployed without saying so.

And governments 'promoting entrepreneurship' on any sort of scale are encouraging people to risk things they can't afford to lose; it's sad to see the owners of small stores on the news complaining that they're having to close down because "the bank won't lend them money" (to cover their ongoing losses), because you know that they're losing money they didn't really have. The buy-in was too much and the cards were against them from the start.

[quote]To what extent does defense spending (especially on weapons engineering programs) constitute a "brain drain" on the rest of the economy?[/quote]

Oh, a hundred percent. As a noted pacifist wimp once said,

"Every gun that is made, every warship launched, every rocket fired signifies in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the clouds of war, it is humanity hanging on a cross of iron."

[QUOTE=fivemack;269335]It seemed to make reasonable sense down to the bottom where he suddenly asserts the existence of a malevolent government. The US government has been a lot better than many at not stealing capital.[/quote]
That is quite debatable, as there are so many ways for a government - especially one which issues its own unbacked fiat currency - to steal capital. Currency debasement has been the favored method of the U.S. government for the past century.

[quote]If he means 'I don't want to have to pay health insurance when I hire employees', he should say so; and this means that his employees aren't creating wealth disproportionate to their compensation, and probably small companies shouldn't be dealing with employees who aren't creating value disproportionate to their compensation. Small boosts at the margins are what big industries can afford to do.[/QUOTE]

He does pretty much say so:

[quote]Chief among them is that Leviathan must stop protecting and incentivizing those who use leverage in an abusive fashion to undermine entrepreneurship. Chief among them are tax and trade policy. Borrowing should never be a tax-deductible act and neither should offshoring production. [b]In addition, compelling me as an entrepreneur to provide health coverage to all employees irrespective of cost means that the abusive leverage employed by the medical industry, including restraint of trade across national boundaries that forces me to pay for the health developments that benefit everyone in the world, falls on my lap[/b].[/quote]
He is talking there about the fact that e.g. Canadians can buy many U.S.-developed pharmaceuticals far cheaper than U.S. citizens and healthcare providers can, thanks to anticompetitive deals made between the U.S. government and Big Pharma.

Bottom line: U.S. spends twice as much as the next-highest-medical-cost developed nation on healthcare, for no better overall outcomes. Due to economies of scale, small businesses are hit disproportionally by this.

KD also describes the litany of taxes businesses are forced to fork over to the government in a [url=http://market-ticker.org/akcs-www?post=192433]followup post today[/url] (the details of the costs start below the "Finally, let's deal with the "but the poor!" crap and the truth about your W2 income" line).

Lastly, here is a snip from his "Dear Mr. Buffett: Bite Me" post which I forgot to include alon with the link yesterday:
[quote]I'll listen to you when you take the very step you claim needs to be taken all on your own, voluntarily. At the same time I insist that you deposit with Treasury every penny Berkshire - and you personally - earned by stealing from others with bailouts, handouts and inside information, along with your "special status" with the SEC allowing you - and pretty much only you - to not disclose large positions that every other American must.[/quote]

Again, Denninger's problem is that his posts are too often over-the-top on the rant coefficient, but he does a good job at providing solid facts and figures to back up his arguments. (In other words, most of his rants are far from baseless). I just wish he'd stick to economics, rather than wasting time and digital ink (and making it easy for TPTB to dismiss him as a loon) on distractions like the Obama birth-certificate controversy, where he did some exhaustive "forensics on the White-House-provided PDF").

[QUOTE=fivemack;269336]There is a problem that 'entrepreneur' often goes in the same box as 'freelance' or 'consultant'; it gets used as a middle-class way of being unemployed without saying so.[/QUOTE]I resent your casting of nasturtiums against the honourable profession of consultancy.

I call myself a consultant and have been happily employed as such for several years.

Paul

:wink:

Denninger definitely presses a lot of my 'loon' buttons.

I would like to see what his use of 'leverage' means other than 'economies of scale'; there are lots of sectors in which a person without spare millions/billions and without political power cannot compete with organisations which have spare millions/billions and political power, and the answer which he never mentions is to work only in the sectors in which that doesn't apply.

It comes across as complaining that there are lots of fields in which he can't competitively operate; but the whole point of entrepreneurship is to pick fields in which one can. Which he clearly managed initially; if he's now got tired of it and would rather live off the capital, I can't see why he shouldn't, and I hope he invests the capital in instruments by dint of which useful activity by others is furthered before he gets round to spending it. Motivating the weary and adequately-wealthy serial entrepreneur is not obviously a sensible target for tax policy.

And the tax burden that he complains about is pretty uniform; he can't justify paying someone $30k a year unless he gets work amounting to substantially more than that out of them, but neither can his competitors in the United States.

Max Keiser contrasts the UK government`s response to the trillion-dollar London looters (the banks), and the small-time (in terms of scale of their looting, not degree of thuggishness) London looters in the recent riots:

[url=http://www.youtube.com/v/kUyutryL_SY&amp;hl=en_US&amp;fs=1?rel=0]YouTube: Max Keiser on Russia Today[/url]
[i]
"STFU, David Cameron - you are a total product of an elitist school of banking schmucks..."
[/i]
And speaking of government-abetted financial criminality, Matt Taibbi`s latest [i]Rolling Stone[/i] piece reveals that the SEC has been destroying huge numbers of investigative dossiers in contravention of the law:

[url=http://globaleconomicanalysis.blogspot.com/2011/08/sec-destroys-9000-fraud-files-involving.html] SEC Destroys 9,000 Fraud Files Involving Wells Fargo, Bank of America, Citigroup, Goldman Sachs, Credit Suisse, Deutsche Bank, Morgan Stanley, Lehman[/url]
[quote]Imagine a world in which a man who is repeatedly investigated for a string of serious crimes, but never prosecuted, has his slate wiped clean every time the cops fail to make a case. No more Lifetime channel specials where the murderer is unveiled after police stumble upon past intrigues in some old file – "Hey, chief, didja know this guy had two wives die falling down the stairs?" No more burglary sprees cracked when some sharp cop sees the same name pop up in one too many witness statements. This is a different world, one far friendlier to lawbreakers, where even the suspicion of wrongdoing gets wiped from the record.

That, it now appears, is exactly how the Securities and Exchange Commission has been treating the Wall Street criminals who cratered the global economy a few years back.
...
In at least one case, according to Flynn, investigators at the SEC found their desire to investigate an influential bank thwarted by senior officials in the enforcement division – whose director turned around and accepted a lucrative job from the very same bank they had been prevented from investigating.
...
Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency’s records – “including case files relating to preliminary investigations” – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term “Orwellian,” devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or “Matters Under Inquiry” – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission’s internal website.[/quote]
The final call on whether to prosecute cases rests with the enforcement director at the SEC. Not that there have been any potential conflicts of interest with said enforcement heads, or anything:
[quote]The allegations were made by SEC enforcement attorney, Darcy Flynn, in a letter to Grassley. Flynn is a current employee, and according to the letter, received a bonus for his past year’s work.

Flynn alleges the SEC destroyed files related to matters being examined in important cases such as Bernard Madoff and a $50 billion Ponzi scheme he operated as well as an investigation involving Goldman Sachs Group Inc. trading in American International Group credit-default swaps in 2009.

Flynn also alleged that the agency destroyed documents and information collected for preliminary investigations at Wells Fargo, Bank of America,, Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley, and the now-bankrupt Lehman Brothers.
[b]
The letter goes into particular detail about Deutsche Bank, the former employer of current SEC enforcement chief Robert Khuzami as well as former enforcement chiefs Gary Lynch and Richard Walker. [/b][/quote]
[i]My Comment:[/i] Deutsche Bank is probably speedily putting together a multi-million-dollar job offer to Sen. Grassley as I write this.

[QUOTE=Christenson;269294]There's one fly in my ointment:
What actually does cause entrepreneurs to start businesses? Ones that actually grow? And what discourages them? Any science, or just rantings? (Recalling Moneyball, where the experience of the individual does not generalize to the statistical whole)[/QUOTE]

And, asking another question: What about reforming the rotten patent system?

Two things are needed:
1) Technical juries instead of lay juries -- laymen from the general public are in no sense the peers of those who patent things. This would allow the patent office to actually require nonobviousness on things patented.
2) The legal sense that the purpose of patents is to put useful things into commerce, and concrete changes to make that a reality.

What a Schock!!!!
 

[QUOTE=ewmayer;269376]

<snip>

.[/QUOTE]

[url]http://finance.yahoo.com/news/Report-Government-probe-of-apf-269452809.html[/url]

More Republican Lunacy....
 

[QUOTE=R.D. Silverman;269408][url]http://finance.yahoo.com/news/Report-Government-probe-of-apf-269452809.html[/url][/QUOTE]

[url]http://money.cnn.com/2011/08/18/news/economy/bachmann_gas_prices/index.htm?hpt=hp_t2[/url]

[QUOTE=R.D. Silverman;269408][url]http://finance.yahoo.com/news/Report-Government-probe-of-apf-269452809.html[/url][/QUOTE]

Oh, now that S&P actually appears to be doing their job and the U.S. government happens to be the debt-issuer who got dinged, *now* the government is investigating S&P? What a shock, indeed.

Re. your Bachmann-promises-$2-gas link: Her fellow Republo-right-wing-religious-loon-o-crat candidate Rick Perry says prayer is the answer to the nation`s economic problems. So Perry should just lead a national prayer vigil for a return of $2 gas, then we don't need to that outcome to be subject to the whims and caprices of the voting public.

[QUOTE=ewmayer;269423]Oh, now that S&P actually appears to be doing their job and the U.S. government happens to be the debt-issuer who got dinged, *now* the government is investigating S&P? What a shock, indeed.

Re. your Bachmann-promises-$2-gas link: Her fellow Republo-right-wing-religious-loon-o-crat candidate Rick Perry says prayer is the answer to the nation`s economic problems. So Perry should just lead a national prayer vigil for a return of $2 gas, then we don't need to that outcome to be subject to the whims and caprices of the voting public.[/QUOTE]

From the senior editor at Fortune Magazine:

[url]http://finance.fortune.cnn.com/2011/08/18/how-washington-is-destroying-the-economy/?hpt=hp_t1[/url]

Among many witticisms:

" But despite being an irreverent professional skeptic, I never felt there was a total absence
of adult supervision in our nation's capital. Now I do.

I spent July on family leave, not writing columns, and watching with increasing horror as
market-illiterate know-nothings, abetted by the craven leaders of the Republican Party
(from which I'm about to resign) and the unspeakable ineptness of Obama and his minions,
brought our country to within an inch of defaulting on its debts.

Some policies and statements you hear from Tea Party types about the economy and the debt
markets are utterly insane. Any competent economics instructor would give you an F if
you asserted the same sort of nonsense on an exam."

Horrorshow Philly-Fed data causing another day of trouser-soilage in global equity markets - Here`s a snip from the German [i]Die Welt[/i] online, translation and inline links are mine. ("Gift-cocktail" or "poison cocktail" is a common German expression roughly analogous in terms of usage to "perfect storm" in English):

[url=http://www.welt.de/finanzen/article13552521/Horror-Cocktail-loest-Boersen-Crash-aus.html]Horror-Cocktail causes market plunge[/url]: [i]The Dax crashed by almost 7 percent. New York also opens deep in the red. Cause of the selloff is a veritable poison cocktail.[/i]
[quote]A poisonous mix causes markets to plunge. In the USA inflation [url=http://www.zerohedge.com/news/more-jobless-stagflation-cpi-05-expectations-02-jobless-claims-back-comfortably-400k-territory]rose faster than expected[/url]. Multiple members of the U.s. Fed have criticized the loose monetary policies of Ben Bernankes. Also having a negative effect is the debate in the EU over the introduction of a financial-transaction tax the ban of short selling.

On top of that, a key economic indicator in the U.S. - the Philadelphia Fed Index – literally [url=http://globaleconomicanalysis.blogspot.com/2011/08/collapse-in-philly-fed-manufacturing.html]collapsed in August[/url]: The business-climate barometer plunged from +3,2 points in the previous month to -30,7 points, putting it at its lowest level since March 2009.

Economists had reckoned with +2,0 points. A value greater than 0 indicates expansion of economic activity, whereas a negative value signals contraction. The US-consumer price index jumped by its highest amount since March. The increase of 0,5 percent in July follows a decrease of 0.2 percent in the preceding month.[/quote]
[i]My Comment:[/i] So much for that European short-selling ban in financials "stabilizing the markets"...for example, [url=http://finance.yahoo.com/q/bc?s=GLE.PA]Société Générale shares[/url] down over 12% as I write this. Oh, look! and there`s no buying from short sellers covering their now-in-the-moeny puts, either! That means any price support will come from "dips buying the dips", a much-more-unreliable pool of buyers.

[QUOTE=ewmayer;269429]Horrorshow Philly-Fed data causing another day of trouser-soilage in global equity markets - Here`s a snip from the German [i]Die Welt[/i] online, translation and inline links are mine. ("Gift-cocktail" or "poison cocktail" is a common German expression roughly analogous in terms of usage to "perfect storm" in English):

[url=http://www.welt.de/finanzen/article13552521/Horror-Cocktail-loest-Boersen-Crash-aus.html]Horror-Cocktail causes market plunge[/url]: [i]The Dax crashed by almost 7 percent. New York also opens deep in the red. Cause of the selloff is a veritable poison cocktail.[/i]

[i]My Comment:[/i] So much for that European short-selling ban in financials "stabilizing the markets"...for example, [url=http://finance.yahoo.com/q/bc?s=GLE.PA]Société Générale shares[/url] down over 12% as I write this. Oh, look! and there`s no buying from short sellers covering their now-in-the-moeny puts, either! That means any price support will come from "dips buying the dips", a much-more-unreliable pool of buyers.[/QUOTE]

And some more reading......

[url]http://globalpublicsquare.blogs.cnn.com/2011/08/18/why-germany-might-let-europe-fall/[/url]

[url]http://globalpublicsquare.blogs.cnn.com/2011/08/18/obama%E2%80%99s-job-1-create-jobs/?hpt=hp_t2[/url]

[url]http://www.washingtonpost.com/opinions/obamas-job-no-1-create-jobs/2011/08/17/gIQAHXQ8LJ_story.html[/url]

[url]http://www.mckinsey.com/mgi/publications/us_jobs/pdfs/MGI_us_jobs_full_report.pdf[/url]

Bob (and other posters), could you please do us readers the kindness of prettifying your posted links with descriptive text summarizing the article content? You can either paste the descriptive text (e.g. article title)

I have an easy way I do this when I read an online article which I find post-worthy (this is for Firefox, other browsers will have different meta-key sequences:

- Copy the article title from the page you are reading;
- Ctrl-L takes you to the url field of the browser;
- Left-arrow to put cursor at left of url-field, type (I insert a # between the [ and the 'url' to keep VB from treating my text as an inline url here) [b][#url=[/b];
- 'End' to put cursor at right of url-field, type [b]]<paste article title>[/url#][/b] (again you need to strip out the #);
- Ctrl-A to highlight the resulting VB-annotated url, copy and paste into your post.

It becomes very easy once you do it a few times and your fingers get used to the resulting keystroke sequence.

Thanks,
-E

I think I would go further; I don't think there's much to be gained by posting isolated links (and particularly not chunks of text copy-and-pasted from links), especially for things which were the biggest headline on every finance news site today. I'd prefer having the links as occasional background in an actual discussion of the state of the world.

Century-old record in government bonds breached
 

[url]http://www.bbc.co.uk/news/business-14587093[/url]

[quote]On Thursday, there was a sharp rise in the price of bonds issued by countries considered to be the least risky. This caused their yields - the implied cost of borrowing - to plummet to historic lows.

The 10-year US treasury yield briefly dipped below 2% to its lowest level since World War II.

The 10-year German bond yield also fell to a post-war low, while the 10-year UK gilt yield hit the lowest level since the 19th century.

So although the lower cost of borrowing is good news for those countries, the "torrent of money" going into putatively safe US and British government debt is redolent of a worrying trend, according to BBC business editor Robert Peston.

He says it means one of two things: "Either money tends to become harder to obtain by those in the private sector who take the risks which generate economic growth and wealth; or the climate of pervasive anxiety means that even when money is available to consumers and businesses, they don't want to spend or invest it."[/quote]

[QUOTE=xilman;269527][url]http://www.bbc.co.uk/news/business-14587093[/url]


"Either money tends to become harder to obtain by those in the private sector who take the risks which generate economic growth and wealth; or the climate of pervasive anxiety means that even when money is available to consumers and businesses, they don't want to spend or invest it."


[/QUOTE]

My bet is on the latter.

BTW: In regard to the unemployment situation in the U.S., NBC news had
a brief segment about Siemens Corp. They claim to have "several thousand"
jobs openings that they can't fill because they can't find people with the
needed skills. I saw another report showing that college educated people
are NOT having a hard time finding jobs. It is the uneducated (especially
minorities whose culture disdains education) that are having the hard time.
Thus, the unemployment problem may be as much a SOCIAL problem as it
is economic. ....... Comments?

A bit of me thinks that 'can't find people with the required skills' often means 'can't face training up people who have approximately the required skills'; on the other hand on another forum I frequent someone's complaining that he's trying to recruit machine-tool operators and gets less than 30% correct answers, among what looked like serious applicants, to the question 'how many thousandths of an inch are there in an inch'.

I can see an argument for the government encouraging employers to take on and train unskilled people, by paying a substantial fraction of the newbies' salary while they're being trained; but after many years of assiduously trimming the fat, not many employers will have spare highly-competent people available to train newbies.

[QUOTE=fivemack;269534]A bit of me thinks that 'can't find people with the required skills' often means 'can't face training up people who have approximately the required skills'; on the other hand on another forum I frequent someone's complaining that he's trying to recruit machine-tool operators and gets less than 30% correct answers, among what looked like serious applicants, to the question 'how many thousandths of an inch are there in an inch'.
[/QUOTE]

I certainly think there's a lot of "can't face up to training someone who could learn it quickly", and "scared they will train someone that won't stay because they are too smart".

However, a mexican gentleman who leads a contract crew that builds pallets had a question to me yesterday about the dimensions on the print; after I explained to him that the dimensions were in both millimeters and inches, he wasn't sure that a number ending in 0.750 meant 3/4 was to be added to the number of inches.

[QUOTE=R.D. Silverman;269533]My bet is on the latter.

BTW: In regard to the unemployment situation in the U.S., NBC news had
a brief segment about Siemens Corp. They claim to have "several thousand"
jobs openings that they can't fill because they can't find people with the
needed skills. [/QUOTE]

[QUOTE=fivemack;269534]A bit of me thinks that 'can't find people with the required skills' often means 'can't face training up people who have approximately the required skills'......[/QUOTE]

[QUOTE=Christenson;269548]I certainly think there's a lot of "can't face up to training someone who could learn it quickly", and "scared they will train someone that won't stay because they are too smart"....[/QUOTE]This kind of reminds me of Circuit City a few years ago:

[URL="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=awBiOvPYHhgc"]Circuit City to Fire 3,400, Hire Less Costly Workers[/URL]:[quote]Circuit City Stores Inc., the second-largest U.S. electronics retailer after Best Buy Co., fired 3,400 of its highest-paid hourly workers and will hire replacements willing to work for less.

The company said its eliminating jobs that paid ``well above'' market rates. Those who were fired can apply for the lower pay, company spokesman Bill Cimino said today. [/quote][URL="http://techcrunch.com/2010/08/28/silicon-valley%E2%80%99s-dark-secret-it%E2%80%99s-all-about-age/"]Another perspective[/URL]:[quote]An interesting paradox in the technology world is that there is both a shortage and a surplus of engineers in the United States. Talk to those working at any Silicon Valley company, and they will tell you how hard it is to find qualified talent. But listen to the heart-wrenching stories of unemployed engineers, and you will realize that there are tens of thousands who can’t get jobs. What gives?[/quote]And wasn't there a push a while back to raise the limit on H1B visas in the US because there wasn't enough talented people here?

There is indeed a shortage of skilled talent in the industry I work in. But there is also a reason why those people are in short supply. Communications businesses have assiduously trimmed headcount for the last 8 years, especially in the last 4 years. The result is that skilled employees went elsewhere and stayed there. Now there are very few people available that can do the required work. This is a serious problem that really hits home to me because I have been working 70+ hours per week for about 3 months. It would not be so bad except that I am on salary which means I get paid for 40 hours. It does not help to know that projected workload next year is set to double.

DarJones

Shickel:
Just a quick reminder that Circuit City is no longer with us...and I've seen analysts say that that kind of personnel move is just what destroyed morale and cost the company its existence.

Much of the rising standard of living over the last few years has been disproportionately awarded to college graduates, but a college degree by itself is not a guarantee of anything anymore. My wife's (2010) graduate school class on the whole had a great deal of trouble finding jobs. What amazed me was that in 2008 there were very few paying job postings in her field in the DC area but lots of openings for volunteer spots. In 2009 the volunteer positions were *gone*, nobody needed to advertise for them. And the DC area is supposed to be one of the *better* employment regions.

It used to be that a degree in electrical engineering meant you could write your ticket, but the competition is just ruthless now. I've worked places where just the hall with my office had people from India, Taiwan, Spain and Morocco. On the one hand engineers can make a decent living in the US, but engineering is on the borderline between a field where solving hard technical problems is a requirement and gets a lot of respect and a field where what you know is a commodity that can almost be paid for by the pound. So you get the paradox where everyone says they need engineers and skilled programmers, but nobody in the US wants to major in EE.

part of what JasonP sees is this charade caused by US immigration policy...to import an H1-B engineer, you need to show that noone else can do the job...advertise it, wait 6 months for paperwork, etc. So would-be employer writes a job description for *exactly* that engineer, with *exactly* the tools used by the guy, and no real intention to even look at someone with ability, similar skills, and similar tools, possibly looking at the same problem. Thus appears the "shortage" of engineers.

As an engineer in Graduate School, it was a tremendously uneconomic proposition. Living poor, getting hired by working on low-level research that should have been done by in-house engineers at the sponsor....major discouragements. And watching a certain math professor self-destruct after getting tenure, on account of not being at Princeton...you want to see where RDS was, it wasn't a pretty place. There's a reason I do this math stuff on a strictly amateur basis.

In my own experience, the average employment decider in engineering has no engineering background, and cannot recognise the required talent and persistence by itself, and the degree is not a good analog. I work with degreed electrical engineers for whom ohm's law is not obvious, who cannot recognise parasitic coupling, etc. I certainly remember a fellow graduate student for whom the degree measured his ability to stick around more than it did to get anything meaningful done or calculated, and I'm pretty sure RDS could name similar people from the math field. I'm now up to the second technician in a decade in my organisation with more engineering talent than most of the degreed engineers he works for, out of a group of about a dozen.

I think a big part of the problem is similar to one in the world of equine sports: Students don't want to pay for the hard education that would stretch their abilities and give them real skills. Colleges, like most horse instructors, are not in a position to turn down the student's (often borrowed) money.

Not that I liked classes whose job was to weed out the untalented...circuits 2 did a good enough job of that.

[QUOTE=jasonp;269595]Much of the rising standard of living over the last few years has been disproportionately awarded to college graduates, but a college degree by itself is not a guarantee of anything anymore. My wife's (2010) graduate school class on the whole had a great deal of trouble finding jobs. What amazed me was that in 2008 there were very few paying job postings in her field in the DC area but lots of openings for volunteer spots. In 2009 the volunteer positions were *gone*, nobody needed to advertise for them. And the DC area is supposed to be one of the *better* employment regions.

It used to be that a degree in electrical engineering meant you could write your ticket, but the competition is just ruthless now. I've worked places where just the hall with my office had people from India, Taiwan, Spain and Morocco. On the one hand engineers can make a decent living in the US, but engineering is on the borderline between a field where solving hard technical problems is a requirement and gets a lot of respect and a field where what you know is a commodity that can almost be paid for by the pound. So you get the paradox where everyone says they need engineers and skilled programmers, but nobody in the US wants to major in EE.[/QUOTE]Back in the late 70's, when I was mid-way through my first degree (BA in Natural Science (Chemistry) --- Oxford has some rather idiosyncratic nomenclature) it was clear that the majority of the opportunities for the more capable scientists and engineers were not located in the UK. The brain drain had started several years earlier and continued for at least a decade afterwards.

It may be the case that the US has to come to terms with a brain drain of its own.

Paul

When there was the strong brain drain from the UK to the US, it wasn't (as far as I know) particularly difficult for a UK person, having got a job offer in the US, to get the right to work there and start working; and the US salaries were more than the UK offered even for such jobs as existed here.

There's a degree of that now from southern to northern Europe; if you've got an engineering PhD from NTU Athens, you're likely to find more interesting work for more money if you look for it in Cambridge or London or Amsterdam or Frankfurt.

But, if I see things correctly, the situation with America isn't quite the same. You're not seeing thousands of smart American engineers get their PhD and get on the next plane to Bangalore or Shanghai because the opportunities are better there; you're seeing Indians who got their first degree from IIT Mumbai and their PhD from Caltech get on the next plane back to Bangalore rather than looking for work in Silicon Valley, and there doesn't seem to be much demand from Bangalore or Shanghai for American engineers; they have enough engineers locally and American engineers ask for too much money.

The glass banking towers of Pudong contain a fair number of Westerners, but they're expats working temporarily in Shanghai for Western banks.

(I should mention that 99% of the foreign-born folks in the environment I described were naturalized US citizens, and had worked for the company for many years)

Engineering grad school, in the mid-90s, was much more of a thought exercise for me than any sort of concrete training in EE. Two years into the grad program I realized I sucked at the specialty I'd chosen, and that I was much better at programming than at conventional engineering design. It made me sad to realize that I myself would have never measured up to the standards of actually getting stuff done that I looked for in resumes from college grads.

Former US Secretary of Labor Robert Reich explains what the S&P downgrades means for the US (and what happens if it gets downgraded further):
[youtube]xexh5uq1UBM[/youtube]

Mish has a piece [url=http://globaleconomicanalysis.blogspot.com/2011/08/in-praise-of-timely-blatant.html]thanking S&P and the other major ratings agencies for their gross incompetence[/url] and corruption - his take being that things needed to get really bad in order for there to be a chance of real reform.


Mish also has a nice link-fest about the credit crunch hitting the EU financial system - I love the obligatory spate of soothing "this is not 2008"..."things are not as bad as they seem"..."investors are overreacting"...blurbs from the sell-siders and government officials, I`ve bolded the most-notable such:

[url=http://globaleconomicanalysis.blogspot.com/2011/08/lehman-like-credit-crunch-hits-eu-ecb.html]"Lehman-Like" Credit Crunch Hits EU; ECB Will Not Disclose Affected Banks; Euro-Style Anxiety Spreads to U.S.[/url]
[quote]Please consider [url=http://finance.yahoo.com/news/European-bank-stocks-hurt-by-apf-3163658363.html?x=0]European bank stocks hurt by borrowing crunch[/url]
[i]
European bank stocks tanked Thursday as fears mounted about their exposure to the region's debt crisis and weakening economy.

The stock prices of Britain's Barclays and France's Societe Generale led the way down, falling 11.5 percent and 12 percent, respectively. Germany's Commerzbank fell 10 percent.

Analysts said the plunge was partly a reaction to evidence that European banks are being forced to pay more for the short-term loans they need to finance day-to-day operations.

Some European banks with heavy exposure to the debts of Greece and other weak countries are relying on loans from the European Central Bank because other private banks are reluctant to do business with them. The ECB said one bank, which it didn't identify, had paid above-market rates to borrow $500 million a day for seven days.[/i]
[b]
Euro-Style Anxiety Spreads to US
[/b]
The New York Times reports [url=http://www.nytimes.com/2011/08/19/business/global/fears-grow-in-europe-that-banks-need-cash.html?partner=rss&emc=rss]Euro-Style Anxiety Spreads[/url]
[i]
European banks are continuing to show signs of strain, making investors increasingly skittish about American financial institutions.

[b]Regulators, bank executives and others continued to play down the risks on Thursday, emphasizing that this would not be a repeat of the 2008 financial crisis. In Europe, political leaders have vowed to prevent a Lehman-like collapse of a major bank, while American firms are better insulated from potential shocks than they were three years ago.[/b]

But on Thursday, shares of some big Wall Street banks sank to levels nearly as low as that in the months after the downfall of Lehman Brothers. Among investors, anxiety has been intensifying over the soundness of European banks despite repeated efforts to contain the sovereign debt crisis. The latest fears flared up after an unspecified lender tapped an emergency borrowing program set up by the European Central Bank to ensure that firms had ample funds in dollars.
...[b]
“A lot of this concern around the European banks is overstated,” said Alex Roever, a short-term fixed income analyst at JPMorgan. “We are not looking at another 2009, although investors are obviously being cautious.”[/b][/i][/quote]
[i]My Comment:[/i] I`m confused: Is it a repeat of 2008 or of 2009 we are most assuredly not looking at?

[b]Former Moody's Senior VP ays Ratings Agency Rotten To Core With Conflicts, Corruption, And Greed[/b]

[url=http://www.businessinsider.com/moodys-analyst-conflicts-corruption-and-greed-2011-8]MOODY'S ANALYST BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts, Corruption, And Greed[/url]
[quote]A former senior analyst at Moody's has gone public with his story of how one of the country's most important rating agencies is corrupted to the core.

The analyst, William J. Harrington, worked for Moody's for 11 years, from 1999 until his resignation last year.

From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody's issued during the housing bubble.

Harrington has made his story public in the form of a 78-page "comment" to the SEC's proposed rules about rating agency reform, which he submitted to the agency on August 8th. The comment is a scathing indictment of Moody's processes, conflicts of interests, and management, and it will likely make Harrington a star witness at any future litigation or hearings on this topic.
...
In short, Harrington describes a culture of conflict that is so pervasive that it often renders Moody's ratings useless at best and harmful at worst.

Harrington believes the SEC's proposed rules will make the integrity of Moody's ratings worse, not better. He also believes that Moody's recent attempts to reform itself are nothing more than a pretty-looking PR campaign. [/quote]

[QUOTE=ewmayer;269715]

[B]Former Moody's Senior VP ays Ratings Agency Rotten To Core With Conflicts, Corruption, And Greed[/B]

[URL="http://www.businessinsider.com/moodys-analyst-conflicts-corruption-and-greed-2011-8"]MOODY'S ANALYST BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts, Corruption, And Greed[/URL][/QUOTE]

This senior VP has apparently sustained a little bit of brain damage in his commentary to the SEC...it reads like Irwin Feerst (a cross between SM88 and RDS -- angry, truthful, and not quite coherent). He would have much better impact if he had an editor and trimmed down his comments. And if you think the alphabet soup around here is bad, you should try reading his document! :smile:

But I'm with the consumer federation of america....in any system where the ratings are payed for by the issuer, you need incredible management patience to keep the conflicts from destroying integrity.

So, I have an investment/startup idea for you....let's call it Mersenne's investor's service...for 0.1% of the price of your security, assuming you are a buyer, we will tell you all about it. I claim it's a good idea, because if we wait for the SEC to get it, we'll all be selling pencils on the street.

B'berg details recipients of Fed`s $1.2 Trillion
 

Bloomberg (as a result of winning its FOIA lawsuit after 2 years of foot-dragging by the Fed) has released more details of the Fed`s 2008 emergency-lending-facilities beneficiaries - "stretching its emergency lending authority to the limit" is a gross understatement:

[URL="http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html"]Wall Street [strike]Kleptocracy[/strike]Aristocracy Got $1.2 Trillion From Fed[/URL]
[quote]Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.

By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.

[U]Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages[/U]. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

[B]Foreign Borrowers[/B]

[U]It wasn’t just American finance. Almost half of the Fed’s top 30 borrowers, measured by peak balances, were European firms[/U]. They included Edinburgh-based Royal Bank of Scotland Plc, which took $84.5 billion, the most of any non-U.S. lender, and Zurich-based UBS AG (UBSN), which got $77.2 billion. Germany’s Hypo Real Estate Holding AG borrowed $28.7 billion, an average of $21 million for each of its 1,366 employees.

The largest borrowers also included Dexia SA (DEXB), Belgium’s biggest bank by assets, and Societe Generale SA, based in Paris, whose bond-insurance prices have surged in the past month as investors speculated that the spreading sovereign debt crisis in Europe might increase their chances of default.

The $1.2 trillion peak on Dec. 5, 2008 -- the combined outstanding balance under the seven programs tallied by Bloomberg -- was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

[B]Peak Balance[/B]

[U]The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001[/U], the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.
[B]
The Fed has said it had “no credit losses” on any of the emergency programs, and a report by Federal Reserve Bank of New York staffers in February said the central bank netted $13 billion in interest and fee income from the programs from August 2007 through December 2009.[/B][/quote][I]My Comment:[/I] With regard to the bolded last claim (boldfaced, because it`s so baldfaced), the Fed is again playing one of its "these aren`t the bailout losses you`re looking for" misdirection games. The real losses are still waiting to be recognized: Firstly on the banks` own balance sheets, where they continue to carry trillions in bad (the polite term is "nonperforming") loans at face value, thanks to the 2009 government-sponsored suspension of mark-to-market valuation rules, and secondly in the $1.25 Trillion of similarly dubious MBS paper the Fed bought from the banks (again at par value, based on what we know) in 2009 as part of it QE1 program. Bernanke, like central bankers are wont to do, appears to be following the maxim of one Meyer Rothschild: "Give me control of a nation's currency and I care not who makes its laws."

And speaking of balance-sheet rot, recent action in Bank of America shares and CDS spreads looks very reminiscent of the likes of Lehman Brothers shortly before it went belly-up. In other words, either somebody knows something very bad and this is the usual insider-trading ahead of the news going public, or both the stock and CDS markets are completely wrong about BAC.

[QUOTE=Christenson;269768]So, I have an investment/startup idea for you....let's call it Mersenne's investor's service...for 0.1% of the price of your security, assuming you are a buyer, we will tell you all about it. I claim it's a good idea, because if we wait for the SEC to get it, we'll all be selling pencils on the street.[/QUOTE]

Consider my imaginary friend Tim, who is a timorous character and wishes to buy nine shares in Intel for $175; he goes and asks your advice, pays his eighteen cents; you inform him not to touch a fly-by-night start-up like Intel with a bargepole. That evening, over a half-pretzel (price eighteen cents) he informs me of your advice, causing me to refrain from purchasing ninety million shares.

The analysis really has to be [b]publicly[/b] funded, since it's a non-confinable good.

On the "bipartisan stupidity" front, Joe Nocera`s latest NYT op-ed taks the Democrats to task for their counterproductive coziness with organized labor:

[url=http://www.nytimes.com/2011/08/23/opinion/nocera-how-democrats-hurt-job-creation.html?_r=1&ref=opinion]How Democrats Hurt Jobs[/url]
[quote]The airplane’s aft section arrived early Monday morning. That’s what they’d been waiting for at the final assembly plant in North Charleston, S.C. They already had the wings, the nose, the tail — all the other major sections of Boeing’s new 787 Dreamliner. With the arrival of the aft, the 5,000 nonunion workers in the plant can finally begin to assemble their first aircraft — a plane three years behind schedule and critical to Boeing’s future.

The Dreamliner is important to America’s future, too. As companies have moved manufacturing offshore, Boeing has remained steadfast in maintaining a large manufacturing presence in America. It is America’s biggest exporter of manufactured products. Indeed, despite the delays, Boeing still has 827 Dreamliners on order, worth a staggering $162 billion.

Boeing’s aircraft assembly has long been done by its unionized labor force in Puget Sound, Wash. Most of the new Dreamliners will be built in Puget Sound as well. But with the plane so far behind schedule, Boeing decided to spend $750 million to open the South Carolina facility. Between the two plants, the company hopes to build 10 Dreamliners a month.

That’s the plan, at least. The Obama administration, however, has a different plan. [u]In April, the National Labor Relations Board filed a complaint against Boeing, accusing it of opening the South Carolina plant to retaliate against the union, which has a history of striking at contract time. The N.L.R.B.’s proposed solution, believe it or not, is to move all the Dreamliner production back to Puget Sound, leaving those 5,000 workers in South Carolina twiddling their thumbs.

Seriously, when has a government agency ever tried to dictate where a company makes its products? I can’t ever remember it happening. Neither can Boeing, which is fighting the complaint. J. Michael Luttig, Boeing’s general counsel, has described the action as “unprecedented.”[/u] He has also said that it was a disservice to a country that is “in desperate need of economic growth and the concomitant job creation.” He’s right.

That’s also why I’ve become mildly obsessed with the Boeing affair. Nothing matters more right now than job creation. Last week, President Obama barnstormed the Midwest, promising a jobs package in September and blaming Republicans for blocking job-creation efforts. Republicans, of course, have blamed the administration, complaining that regulatory overkill is keeping companies from creating jobs.

They’re both right. Republicans won’t pass anything that might stimulate job growth because they are so ideologically opposed to federal spending. But the Democrats have blind spots, too. No, the Environmental Protection Agency shouldn’t be rolling back its rules, as the Republican presidential candidates seem to want. But a fair-minded person would have to acknowledge that the N.L.R.B.’s action is exactly the kind of overreach that should embarrass Democrats who claim to care about job creation. It’s paralyzing, is what it is. [/quote]
(The above is roughly the 1st half of the full piece).

[QUOTE=fivemack;269923]Consider my imaginary friend Tim, who is a timorous character and wishes to buy nine shares in Intel for $175; he goes and asks your advice, pays his eighteen cents; you inform him not to touch a fly-by-night start-up like Intel with a bargepole. That evening, over a half-pretzel (price eighteen cents) he informs me of your advice, causing me to refrain from purchasing ninety million shares.

The analysis really has to be [B]publicly[/B] funded, since it's a non-confinable good.[/QUOTE]

Consider my imaginary friend, Harvey, a six-foot rabbit.... :smile::oolong:

Turns out, there are 7 competitors to the "big three" of S&P, Moody's, and Fitch's. You can find their names in the SEC comments, they have about 2% market share collectively. Some of them operate on a subscription model -- their rabbit friends know that they pay for the information, and keep it confidential for a year or two. But these are almost certainly large, sophisticated investors.

I think you are seeing some of the really smart investors looking at changes in that information and opinion, and that is causing the bank stocks to move in the correct direction.

*************
We can see how a relentless drive for market share has completely corrupted Moody's Investment Seller's Service.

I don't see how to keep Tim's lips, on average, sealed, since he didn't pay much for the information -- what's a pretzel worth?

I can see that if you took the cash value of the transaction, added a fraction of a cent to it, you could collect enough taxes to make an evaluation system work. But I don't see how to distribute that tax money in such a way as to have multiple, independent opinions, and startups challenging the government-funded ratings agencies when they got slothful.

Ideas on how to get objective information on the markets paid for, with incentives for correctness in place? Or does this need to become a function of the "Underwriters", who would take the risk (how?) in a catastrophe?

[QUOTE=ewmayer;269960]On the "bipartisan stupidity" front, Joe Nocera`s latest NYT op-ed taks the Democrats to task for their counterproductive coziness with organized labor:

[URL="http://www.nytimes.com/2011/08/23/opinion/nocera-how-democrats-hurt-job-creation.html?_r=1&ref=opinion"]How Democrats Hurt Jobs[/URL]

(The above is roughly the 1st half of the full piece).[/QUOTE]

Behind the hype, I remember Boeing as being a place where they actually had an engineer's union......I also remember working in the facilities department, where all the people they couldn't work with but couldn't quite fire ended up.

But Boeing screwed up with the way they presented the SC plant....it's clearly an expansion, and they should bill it that way and offer to let their union members move down there. Yes, it might be a threat to the union in Puget Sound, but the last company I know that did that (Mack Truck, Allentown/Macungie PA) managed to get a union certified in South Carolina three years after moving there to get rid of the attitude problems on the shop floor. The problem: All the management and first-line supervisors went with them, and the union was a reaction to the (mis-)management.

The most important thing for Boeing management to do here is to ensure that everyone in the SC plant is re-trained, and understands what not to do to create an adversarial relationship between the employed and management. That kind of energy needs to be applied to beating the rest of the world.


I've heard guys who have been in both union and non-union shops talk about the difference between the two when something production critical breaks down and a bunch of hands are needed....in the non-union shop, he said, he could walk through the shop and pick up guys to work the problem, where he could not do that in a union shop.

Is GM a sinking ship?
 

We saw GM resuscitated about a year ago with a fast track bankruptcy followed by the "NEW" GM shares floated in the market. The initial float was about $36 and the stock trended up for a few weeks until it reached $39 before starting a long downhill slide. Today it is sitting in the $22 range which represents a 40% loss in one year. The question to ask is whether GM can actually compete in a global market, a place where Ford is reasonable adept. I personally would not buy GM shares at this time because the outlook is overwhelmingly negative given the weak economy.

DarJones

[b]NYAG Refuses to Play Ball With Mortgage Firms, Gets the Boot:[/b]

[url=http://www.huffingtonpost.com/2011/08/23/new-york-attorney-general-eric-schneiderman_n_934517.html]New York Attorney General Kicked Off Government Group Leading Foreclosure Probe[/url]
[quote]WASHINGTON -- New York Attorney General Eric Schneiderman on Tuesday was kicked off the committee leading the 50-state task force charged with probing foreclosure abuses and negotiating a possible settlement agreement with the nation's five largest mortgage firms.[/quote]
[i]My Comment:[/i] The reason? Schneidermann was against letting the mortgage giants in question off with a mere wrist-slap, and against giving them blanket immunity against further prosecutions as a reward for paying some (in relative terms) token fines. As I`ve said repeatedly, the rule of law means nothing when it comes to big-time financial and corporate fraud in this country.

Here is the take on the story by a popular Foreclosure-fraud-focused blog, [url=http://4closurefraud.org/2011/08/25/dismissal-of-ny-attorney-general-schneiderman-shows-obama-administration-and-iowa-ag-miller-poised-to-let-big-banks-off-the-hook-for-mortgage-fraud/]4closurefraud.org[/url].

[b]Buffett Sinks $5 Bln Into "Well Capitalized" BofA[/b]

Hilarious action in Bank of America shares this morning...after strongly denying in the past several weeks that it was in dire need of fresh capital, BofA today announced (and the MSFM gleefully jumped on as a sign of "new bull market in financials") a $5 Bln capital infusion from "Uncle Warren" Buffett, similar to the one he made in Goldman Sachs in 2008. As a result BAC shares opened up nearly 20%, quickly rose another 5% (likely as result of desperate shorts covering), and then promptly started selling off to as low as 5% above the previous close, recovered slightly to +10% as I write this. Now WEB is a smart man, and would not sink that kind of dough into a firm he thought was in deep trouble ... but in the current environment that may have less to do with BAC`s viability as a going concern than it does with the (not ill-founded) belief that the government will ride to the rescue if needed, and make Uncle Warren`s bet a winning one. Mish is [url=http://globaleconomicanalysis.blogspot.com/2011/08/bank-of-america-surges-on-fluff-buffett.html]similarly underwhelmed[/url] by WEB`s riding-to-the-rescue. And lastly, here is ZeroHedge`s take:
[i]
As for what to expect with this surprising move out of Omaha? Absolutely nothing. The $5 billion in cash, unlike Buffett's investment in Goldman, will be laughably insufficient, considering that the bank's mortgage exposure is in the tens of billions, while its litigation liability is another $20-30 billion. This does nothing to change our thesis that BAC will need to come to the market again and again to raise capital. However, as this "raise" confirmed, BAC only has access to private investments: we hope Buffett has very deep pockets to keep doubling down.[/i]


[b]German president says ECB bond buying illegal[/b]

[url=http://www.ft.com/cms/s/0/b05e5324-ce5f-11e0-99ec-00144feabdc0.html]German president says ECB bond buying illegal[/url]
[quote]Germany’s head of state has accused the European Central Bank of “legally questionable” action in buying up the bonds of countries worst-hit by the eurozone debt crisis.

The blunt attack by German president Christian Wulff on Wednesday is the highest profile criticism so far of the ECB’s controversial programme,

Earlier this month, the ECB started buying bonds issued by Italy and Spain in an attempt to stop their governments’ borrowing costs spiralling out of control.

So far, the ECB has spent €110bn on bonds under the programme originally launched in May last year. Last week, it spent €14.3bn, following €22bn of bond purchases in the previous seven days.

The ECB’s action is seen by financial markets as having bolstered investor confidence in the eurozone. But Mr Wulff said the ECB had gone “way beyond the bounds” of its mandate.

“I regard the huge buy-up of government bonds of individual states ... as legally questionable,” he told an international gathering of economists in Lindau, south Germany.

European Union treaties forbid the ECB from buying debt directly from governments, Mr Wulff pointed out. The Frankfurt-institution has instead bought bonds on the open market but Mr Wulff argued that the prohibition on central bank financing of governments “only makes sense if those responsible do not get around it by making substantial purchases on the secondary market”.
...
The ECB declined to comment on Wednesday. But an official at one central bank in Europe said the German president failed to realise the ECB’s crucial role in preventing the collapse of the eurozone.

In Frankfurt, the ECB has long recognised that it has lost support among German voters – even though it was originally modelled on the Bundesbank and inherited many of the policy instincts of the Germany’s famously conservative central bank.

Officially, the ECB argues that its bond purchase programme is temporary and aimed at ensuring the functioning of financial markets so that its interest rate decisions are passed on effectively to the real economy. That argument has been harder to sustain more recently, however. Jean-Claude Trichet, ECB president, this month used the programme as a lever to force Rome and Madrid to introduce fresh fiscal austerity measures.

The ECB hopes that its role in intervening in bond markets will be taken over later this year by the European Financial Stability Facility – once eurozone member states have approved new powers for the EU’s bail-out fund.[/quote]
[i]My Comment:[/i] Yes, you read that right: "Jean-Claude Trichet, ECB president, this month used the programme as a lever to force Rome and Madrid to introduce fresh fiscal austerity measures." And how did Mr. Trichet 'accomplish' this? Why, by removing any market incentives which would actually act as the desired austerity-forcing mechanism. Probably some kind of very clever "reverse-psychology" ploy by Mr. Trichet: To get a debtor nation to get its finances in order, give it all the money it needs to avoid having to do so. Yeah, that makes sense.

In other German-Financial-Market news, the DAX had another flash crash today about 90 minutes before the close:

Interesting article on the China debt-bubble from [url=http://en.wikipedia.org/wiki/The_Daily_Beast]The Daily Beast[/url]:

[url=http://www.thedailybeast.com/articles/2011/08/23/why-china-s-debt-problems-are-worse-than-america-s.html]China’s Looming Debt Disaster[/url]: [i]The United States has made painstaking efforts to reassure China about the American economy. Yet it’s China that should be doing the reassuring.[/i]
[quote]Despite all the apocalyptic pronouncements about America’s budget problems, the reality is that the U.S. has a higher credit rating than China and, unlike Beijing, has never repudiated its sovereign debt. More important, the People’s Republic has been understating its debt for years to avoid global attention and criticism.

Indeed, [b]China claims its debt-to-GDP ratio—the standard measure of sustainability—was a healthy 17 percent at the end of last year. Yet Beijing-based Dragonomics, a well-respected consultancy, put China’s ratio at 89 percent—about the same as America’s. Worse still, a growing number of analysts think the Chinese ratio was really 160 percent. At that astronomical level, China looks worse than Greece.[/b]

The wide discrepancy in estimates is due to the so-called hidden debts. The largest of these off-the-books obligations have been incurred by local governments and state banks. Yet there are other components, including central-government debt incurred for municipal and local projects, Ministry of Finance guarantees related to partial bank recapitalizations, and miscellaneous obligations such as grain-subsidy payments. No one actually thinks Beijing will default on its outstanding external debt, but these hidden obligations matter; to work down the crushing debt load, the country’s technocrats are adopting strategies that will cripple growth for a decade, maybe longer.

It didn’t have to happen this way. When the global downturn hit in 2008, China decided to spend its way out of the crisis. The country adopted a stimulus program that in 2009 pumped, according to my calculations, about $1.1 trillion into its then–$4.3 trillion economy. Beijing created robust growth—9.1 percent in 2009 and 10.3 percent last year—but in the process, the country’s hidden debts ballooned, as the country’s leaders forced state banks to lend to unviable projects.

These include ghost cities such as [url=http://www.nytimes.com/2010/10/20/business/global/20ghost.html]Ordos in Inner Mongolia[/url], where the government has built sundry new homes and office buildings, which remain empty. Last year, the state grid reported there were 64.5 million flats—enough housing for 200 million people—that used no electricity for six consecutive months. Despite the obvious oversupply, the government—in conjunction with private developers—is constructing 40 million to 50 million more units. And the Chinese government recently announced it will be building 20 new cities a year over the next two decades.

All this building is technically creating gross domestic product, but it is extraordinarily wasteful. In a free-market economy, this grossly imbalanced situation would lead to both a property crisis and a banking crisis. Weak developers and financial institutions would go bankrupt, their assets would end up in the hands of more productive market participants, and the economy would recover quickly.

But Chinese leaders are not allowing this creative destruction to occur. To rescue financial institutions, for instance, central authorities are forcing down interest rates paid to depositors so that banks can earn their way out of difficulties. Yet in doing so, they are condemning their economy to years of stagnation.[/quote]
[i]My Comment:[/i] The hidden-debt numbers claimed in the article (if at all close to the mark) are startling. The article concludes with

[i]Until now, just about everyone seemed to be looking to the Chinese to become the new engine of world economic growth. We will surely be disappointed.[/i]

Apologies for the ThreadSpammage, but I`ll be out tomorrow and may not be online all weekend, so wanted to leave you, loyal readers, with plenty of material to chew on.

Matt Taibbi comments in his inimitable fashion on the [i]Banks/Government vs Schneiderman[/i] case:

[url=http://www.rollingstone.com/politics/blogs/taibblog/obama-goes-all-out-for-dirty-banker-deal-20110824]Obama Goes All Out For Dirty Banker Deal[/url]
[quote]A power play is underway in the foreclosure arena, [url=http://www.nytimes.com/2011/08/22/business/schneiderman-is-said-to-face-pressure-to-back-bank-deal.html?_r=1&pagewanted=all]according to the [i]New York Times[/i][/url].

On the one side is Eric Schneiderman, the New York Attorney General, who is conducting his own investigation into the era of securitizations – the practice of chopping up assets like mortgages and converting them into saleable securities – that led up to the financial crisis of 2007-2008.

On the other side is the Obama administration, the banks, and all the other state attorneys general.

This second camp has cooked up a deal that would allow the banks to walk away with just a seriously discounted fine from a generation of fraud that led to millions of people losing their homes.

The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.

This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty, so that they know exactly how much they’ll have to pay in fines (trust me, it will end up being a tiny fraction of what they made off the fraudulent practices) and will also get to know for sure that there are no more criminal investigations in the pipeline.

This deal will also submarine efforts by both defrauded investors in MBS and unfairly foreclosed-upon homeowners and borrowers to obtain any kind of relief in the civil court system. The AGs initially talked about $20 billion as a settlement number, money that would “toward [url=http://topics.nytimes.com/your-money/loans/loan-modifications/index.html?inline=nyt-classifier]loan modifications[/url] and possibly counseling for homeowners,” as Gretchen Morgenson reported the other day.

The banks, however, apparently “balked” at paying that sum, and no doubt it will end up being a lesser amount when the deal is finally done.

To give you an indication of how absurdly small a number even $20 billion is relative to the sums of money the banks made unloading worthless crap subprime assets on foreigners, pension funds and other unsuspecting suckers around the world, consider this: in 2008 alone, [url=http://www.tampabay.com/news/business/article905919.ece]the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion)[/url] thanks in significant part to investments in these deadly MBS.

So this deal being cooked up is the ultimate Papal indulgence. By the time that $20 billion (if it even ends up being that high) gets divvied up between all the major players, the broadest and most destructive fraud scheme in American history, one that makes the S&L crisis look like a cheap liquor store holdup, will be safely reduced to a single painful but eminently survivable one-time line item for all the major perpetrators.

But Schneiderman, who earlier this year launched an investigation into the securitization practices of Goldman, Morgan Stanley, Bank of America and other companies, is screwing up this whole arrangement. Until he lies down, the banks don’t have a deal. They need the certainty of having all 50 states and the federal government on board, or else it’s not worth paying anybody off. To quote the immortal Tony Montana, [url=http://www.hark.com/clips/yvrfczjhsc-last-cop-i-am-going-to-have-to-grease]“How do I know you’re the last cop I’m gonna have to grease?”[/url] They need [i]all[/i] the dirty cops on board, or else the whole enterprise is FUBAR.[/quote]
[i]My Comment:[/i] If you like that snip, read the full piece - simply the ability Taibbi has to turn a phrase - gems such as [i]"these banks just finished the longest and most orgiastic campaign of stealing in the history of money"[/i] - will make it worth your while.

Sam Harris has something to say to Ayn Rand-ish opponents of raising U.S. taxes on the wealthy: that they seem to ignore the role of luck in lives.

(Note: I'm not endorsing what Harris writes outside of what I quote here.)

[URL]http://www.samharris.org/blog/item/how-to-lose-readers-without-even-trying/[/URL]

[quote]. . .

And lurking at the bottom of this morass one finds flagrantly irrational ideas about the human condition. Many of my critics pretend that they have been entirely self-made. They seem to feel responsible for their intellectual gifts, for their freedom from injury and disease, and for the fact that they were born at a specific moment in history. Many appear to have absolutely no awareness of how lucky one must be to succeed at anything in life, no matter how hard one works. One must be lucky to be able to work. One must be lucky to be intelligent, to not have cerebral palsy, or to not have been bankrupted in middle age by the mortal illness of a spouse.

Many of us have been extraordinarily lucky—and we did not earn it. Many good people have been extraordinarily unlucky—and they did not deserve it. And yet I get the distinct sense that if I asked some of my readers why they weren’t born with club feet, or orphaned before the age of five, they would not hesitate to take credit for these accomplishments. There is a stunning lack of insight into the unfolding of human events that passes for moral and economic wisdom in some circles. And it is pernicious. Followers of Rand, in particular, believe that only a blind reliance on market forces and the narrowest conception of self interest can steer us collectively toward the best civilization possible and that any attempt to impose wisdom or compassion from the top—no matter who is at the top and no matter what the need—is necessarily corrupting of the whole enterprise. This conviction is, at the very least, unproven. And there are many reasons to believe that it is dangerously wrong.

Given the current condition of the human mind, we seem to need a State to set and enforce certain priorities. I share everyone’s concern that our political process is broken, that it can select for precisely the sorts of people one wouldn’t want in charge, and that fantastic sums of money get squandered. But no one has profited more from our current system, with all its flaws, than the ultra rich. They should be the last to take their money off the table. And they should be the first to realize when more resources are necessary to secure the common good.

. . .[/quote]

[QUOTE=Sam Harris quoted by cheesehead;270190]Many of us have been extraordinarily lucky[/QUOTE]

Perhaps a forgivable rhetorical flourish, but if it has happened to "many" then it is "ordinary" not "extraordinary"

[QUOTE=wblipp;270201]Perhaps a forgivable rhetorical flourish, but if it has happened to "many" then it is "ordinary" not "extraordinary"[/QUOTE]William: your irony detector is starting to fail and I suggest that you get it checked out asap.


Paul

So Bernanke gave his much-awaited annual Jackson Hole speech yesterday. It was really "a speech about nothing" in that it was utterly devoid of anything remotely surprising. BB basically admitted "economy still sucks", made vague claims about the Fed "not being out of bullets" - a lie, but even if the Fed still has "things it can try", it's not as if any of its previous efforts [url=http://www.nytimes.com/2011/08/28/business/economy/the-feds-rescue-missed-main-street.html?ref=business]have succeeded at anything but sponsoring another round of idiotic risk-taking by Big Finance[/url] - and hinted at "further measures possible" while committing to nothing. The only sign that anyone cared was an immediate low-volume ramp in US equities which had "HFT intervention" written all over it. I was offline all day, but fully intend to take advantage of any further government-sponsored levitation next week by going short, and this time not in small fashion. Financial markets around the world are flashing warnings of extreme events dead ahead, and I don't mean "extreme upside" events.

One ZH reader summed up "market" reaction to BB's speech pithily:

[i]Bernank sponsored equity boner for Fraud Street".[/i]

By way of an aside, Jackson Hole is a truly lovely place, I encourage readers who have not already been there to add a visit to their bucket list. Try to go during the 360+ days of each year when JH happens to not be overrun by global-financial-engineering types:

Distinctly off topic, but I agree re Jackson Hole. There are some outstanding nearby attractions such as the the Elk Preserve, Grand Tetons, and Yellowstone. It is also not far to Dinosaur National Monument. If you have an opportunity, this is an outstandingly beautiful region to visit. Please note that the JH/Yellowstone area generally is snowbound sometime in October so plan accordingly.

More on topic, there is growing recognition that QE has triggered an uptick in inflation. It is easily shown that the govt measure of inflation shows little to none, but if you go to a grocery store, you will see it in action. The current rise in food prices is insidious.

I'm curious if anyone can show that inflation has a very specific effect in transferring the cost of living from one generation to another and how that effect works.

DarJones

Well, if you are a wage earner, and your wages follow inflation, with a lag, you pay a small price for inflation. If you are a retiree, and the value of your investment dividends fall with inflation, you pay a bigger price for inflation.

Inflation encourages spending of money in the short term, rather than saving it for the long term, since inflation will destroy the value of savings. That is, it encourages available money to be spent on something real that can be had today, and (hopefully) will have value tomorrow, over transferring the decision to, say, a banker or stock market as it would be if cash were saved or invested.

What Do You Mean, Australian Housing Bubble?
 

A friend from Oz sent me the link to this Australian-real-estate-centric blog posting, which I found quite interesting:

[url=http://www.whocrashedtheeconomy.com/blog/?p=1657]Real House Price Index Update | WhoCrashedTheEconomy[/url]

Compared to the flat-out insane valuations in Oz, U.S. housing looks downright affordable, though I would gauge that we still have 15-20% to fall before getting back to the long-term trendline, and of course that ignores the huge shadow inventory of properties still held off-market by the banks, which will be a drag on prices for years, and would need a downward price-overcorrection (which is what markets tend to do unless propped up by external forces, e.g. government intervention) to clear more quickly.

Now, despite the glaringly-evident bubble-spike in US home prices from 2000-2006, Ben Bernanke is on record saying that "bubbles are hard to spot in real time". So instead of leaping to a hasty "Oz is in a huge bubble which is beginning to deflate catastrophically" conclusion, let's ask the readership: Oz home prices in a bubble, or just taking a little breather on their way up to a "permanently high plateau". [Google that phrase with quotes and you'll get some quite-interesting links.]

[QUOTE=ewmayer;270425]A friend from Oz sent me the link to this Australian-real-estate-centric blog posting, which I found quite interesting:

[url=http://www.whocrashedtheeconomy.com/blog/?p=1657]Real House Price Index Update | WhoCrashedTheEconomy[/url]

Compared to the flat-out insane valuations in Oz, U.S. housing looks downright affordable, though I would gauge that we still have 15-20% to fall before getting back to the long-term trendline, and of course that ignores the huge shadow inventory of properties still held off-market by the banks, which will be a drag on prices for years, and would need a downward price-overcorrection (which is what markets tend to do unless propped up by external forces, e.g. government intervention) to clear more quickly.

Now, despite the glaringly-evident bubble-spike in US home prices from 2000-2006, Ben Bernanke is on record saying that "bubbles are hard to spot in real time". So instead of leaping to a hasty "Oz is in a huge bubble which is beginning to deflate catastrophically" conclusion, let's ask the readership: Oz home prices in a bubble, or just taking a little breather on their way up to a "permanently high plateau". [Google that phrase with quotes and you'll get some quite-interesting links.][/QUOTE]

Let's see Mr Bernanke take out a huge personal position in Mortgage-Backed securities and home equities in Oz....otherwise, bubble, bubble, boil and trouble... fire burn and cauldron bubble....tulip bulbs, anyone?

[QUOTE=ewmayer;270425]A friend from Oz sent me the link to this Australian-real-estate-centric blog posting, which I found quite interesting:

[url=http://www.whocrashedtheeconomy.com/blog/?p=1657]Real House Price Index Update | WhoCrashedTheEconomy[/url]

Compared to the flat-out insane valuations in Oz, U.S. housing looks downright affordable, though I would gauge that we still have 15-20% to fall before getting back to the long-term trendline, and of course that ignores the huge shadow inventory of properties still held off-market by the banks, which will be a drag on prices for years, and would need a downward price-overcorrection (which is what markets tend to do unless propped up by external forces, e.g. government intervention) to clear more quickly.

Now, despite the glaringly-evident bubble-spike in US home prices from 2000-2006, Ben Bernanke is on record saying that "bubbles are hard to spot in real time". So instead of leaping to a hasty "Oz is in a huge bubble which is beginning to deflate catastrophically" conclusion, let's ask the readership: Oz home prices in a bubble, or just taking a little breather on their way up to a "permanently high plateau". [Google that phrase with quotes and you'll get some quite-interesting links.][/QUOTE]
Well, I live in Sydney, so that automatically makes me well informed on our housing market... riiiiiight :whistle: Regardless, I'll go with "it's a bubble" - but very unlikely to deflate catastrophically, more likely a slower decline in real terms, and fairly likely in numbers-of-$ as well.

Firstly supply & demand: the amount of new land becoming available for housing around our major cities has not kept pace with population growth (including significant immigration) for several years now.

Secondly borrowers here can't just walk away from their mortgage: if they're under water on the loan there's a strong tendency to sit it out & hope the market improves before they have to sell. The alternative is a personal loss, possibly even bankruptcy. Forced sales by the lender are fairly rare (subjective - IMHO) although increasing.

Being underwater isn't what makes most walk away from loans...it's simply being unable to make the payments.

In the US, we got into a situation where houses would appreciate, in terms of the resale value, to the point where you could sell your house, make a down payment on a bigger one, and use the excess to pay the new, larger mortgage for a few years. Works fine until your measly salary has to actually make the monthly mortgage payments.

Today's news down here in Australia included this timely release - two sources supplied to give me more choice of quotes to cherry-pick.
[QUOTE][URL="http://www.abc.net.au/news/2011-08-31/house-prises-expected-to-rise/2864028"]House prices continue downward trend[/URL]
The average home price fell for the seventh straight month in July as uncertainty over the direction of interest rates and the economy's health weighed on homebuyers.

The RP Data-Rismark home value index showed capital city home values fell 0.6 per cent in seasonally adjusted terms in both regional areas and capital cities.[/QUOTE]
[QUOTE][URL="http://www.smh.com.au/business/house-prices-extend-falls-in-july-20110831-1jkvh.html"]House prices extend falls in July[/URL]
"I wouldn’t be surprised if we see further month-to-month falls," [RP Data research director Tim Lawless] said, with the declines so far on track to push capital city house prices down between 6 and 8 per cent for 2011.[/QUOTE]
Sounds like the bubble is deflating gently - so far anyway. According to the graphs in the [URL="http://www.whocrashedtheeconomy.com/blog/?p=1657"]article[/URL] linked to in post #457 - and my own impressions - the peaks in the last couple of cycles (1970s & late 1980s) were followed by declines over a few years then a longer period of stability / plateau / stagnancy - depending what you think house prices "ought" to do. Of course this time the bubble is bigger...

[QUOTE=Christenson;270461]Being underwater isn't what makes most walk away from loans...it's simply being unable to make the payments.[/QUOTE]
True, but the consequences are different so people's thresholds are different - there is more incentive to hang in there longer scrimping more or ask family for help if most of the loss would be one's own rather than the bank's.

And on the campaign trail
 

[QUOTE=markr;270464]

<snip>

.[/QUOTE]

Why is a cretin from Mars leading the GOP polls? See:

[url]http://www.cnn.com/2011/08/31/opinion/moore-romney-perry/index.html?hpt=hp_t2[/url]

[QUOTE=markr;270445]Well, I live in Sydney, so that automatically makes me well informed on our housing market... riiiiiight :whistle: Regardless, I'll go with "it's a bubble" - but very unlikely to deflate catastrophically, more likely a slower decline in real terms, and fairly likely in numbers-of-$ as well.

Firstly supply & demand: the amount of new land becoming available for housing around our major cities has not kept pace with population growth (including significant immigration) for several years now.

Secondly borrowers here can't just walk away from their mortgage: if they're under water on the loan there's a strong tendency to sit it out & hope the market improves before they have to sell. The alternative is a personal loss, possibly even bankruptcy. Forced sales by the lender are fairly rare (subjective - IMHO) although increasing.[/QUOTE]


I'd be very careful drawing those conclusions. Go read some of the commentary from Ireland in 2007-8 and people were making the same kinds of statements. Ireland is non-recourse and land rezoning is or rather used to be a bit of a scam/side-earner for local county councillors so an artificial shortage was created. Mind you, Ireland is one of the least densely populated countries in west Europe and has plenty of land just like Australia.

Markets on a tear again today but Hussman urges caution. [url]http://www.hussmanfunds.com/wmc/wmc110829.htm[/url]
If I had any equities left, I would've used any rally past 1250 to sell them. YMMV. September and October are historically bad months for the market.

Rick Bookstaber has a nice take on "late capitalism": [url]http://rick.bookstaber.com/2011/08/workers-of-world-good-night.html[/url]

[QUOTE]Among the many sources of this rising disparity in income is the changing nature of capitalism. A little bit of capital goes a lot further in building out the virtual world than it did in the burgeoning industrial revolution with its railroads, steam-driven mills and iron foundries, or even in the pre-rust belt, brick and mortar 20th century. Not only does it take less capital, the capital that is required need not be committed for very long before the outcome of the enterprise is manifest.
The reduced capital requirements for creating even multibillion dollar businesses can be thought of as providing a new type of leverage, what might be called functional leverage. Functional leverage means that a given amount of capital can capture a greater base of production. Which means that it is easier for the entrepreneur to bootstrap up from one enterprise to the next while maintaining a much higher equity stake than would have occurred during the period of capital intensive production. Think of the trajectory of Google, Facebook, LinkedIn or GroupOn. How much capital was needed to push the businesses past the billion dollar valuation mark, and how long was that capital required? When the IPOs in these businesses finally do occur, it is not so much to allow access to further capital as to provide a channel for the owners to monetize their stake.
Functional leverage widens the distribution of income by changing the odds and payout for risk-taking activities. Think of a casino where the bet limit is kept low and the odds of winning are close to fifty percent. At the end of the day there will be winners and losers, but the implications for their relative wealth will be small; the distribution of income that arises will be tight around the mean. With functional leverage of the new capitalism, the casino allows very high limits and the bets are ones with high odds but high payoffs. Such a casino alters the distribution of wealth by creating a large right-hand tail.
Thus the rise of the super-elite is not a product of educational differences, but rather a result of the new capitalism which creates bigger winners, and does so much more quickly than in the capital-intensive capitalist era. Less capital is needed, it is applied for a shorter period before the results are realized, and because less capital is required, the entrepreneur captures more of the value of the enterprise. The result is an accentuation in the very wealthy.[/QUOTE]

[url=http://globaleconomicanalysis.blogspot.com/2011/08/obama-spent-535-million-on-solyndra.html] Obama Spent $535 Million on Solyndra Solar Energy Firm in 2010; Firm Went Bankrupt Today; Pricetag $486,363 Per Job Saved for 18 Months[/url]
[quote] President Obama faces political catastrophe in the form of Solyndra -- a San Francisco Bay area solar company that he touted as a gleaming example of green technology. It has announced it will declare Chapter 11 bankruptcy. More than 1,100 people will lose their jobs.

During a visit to the Fremont facility in spring of 2010, the President said the factory "is just a testament to American ingenuity and dynamism and the fact that we continue to have the best universities in the world, the best technology in the world, and most importantly the best workers in the world. "

It's not his statements the administration will regret; it's the loan guarantees. The President was celebrating $535 million in federal promises from the Department of Energy to the solar startup. The administration didn't do its due diligence, says the Government Accountability Office. "There's a consequence if you don't follow a rigorous process that's transparent," Franklin Rusco of GAO told the website iWatch News.[/quote]
[i]My Comment:[/i] Sheesh, what an embarrassment – not that far from Keynes’ (in)famous ‘wealth creation engine’ of [url=http://www.businessweek.com/blogs/money_politics/archives/2009/02/stimulus_keynes.html]burying new-printed money[/url] in fields for people to dig up. (Note that the [i]Business Week[/i] piece I linked to denies that Keynes said anything like that, but their denial is refuted by the full quotes they use, "run-on sentence" and "impenetrable prose" excuses notwithstanding.) In other words, Krugman and his ilk would argue that the idea of giving Solyndra the money was right, we just needed to give them much, much more.

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

And ZeroHedge`s Bruce Krasting has a very interesting (and attention-span-longer-than-gnat-like-requiring) piece laying out what he thinks is the most likely avenue by which the Fed is angling to implement QE3 ... it`s essentially a way of achieving the administration`s recently-highlighted goal of allowing the millions of underwater (and thus currently refi-ineligible) homeowers (no 'n' in there for obvious reasons) to refi at the current record-low rates, via an intricate debt-shuffle involving the FHFA and those wards of the state, Fannie and Freddie. It sounds pretty plausible ... pop quiz for the regular readership: Since there is no such thing as a free lunch, who is in fact eating the cost of the resulting massive wave of refis?

My understanding is that Australia has also never had a really big stock market bust, and it's considered normal for your 'aggressive stocks' money to be 200% leveraged.

[url]http://abcnews.go.com/Blotter/obama-administration-solyndra/story?id=13640783[/url] is vaguely interesting, suggesting that there were some problems with the Solyndra deal visible three months ago.

Solar-cell companies in the West have all managed to lose money quite impressively recently - subsidies in Europe for installing the panels have gone down, factories in China for building the cells have gone up, there's substantial oversupply and no room for profit. I've personally lost the price of a 32-core Magny Cours server investing in a German polysilicon maker.

The question is, which of these companies had plans in place to deal with the strong downward price pressure?
Remember, "everybody" knows solar explodes at $1 per installed watt, and the price is around $2 per installed watt. (You can read this in the power engineering literature -- $1 per installed watt is the approximate cost of a commercial electric plant)

Too little, too late?
 

[QUOTE=fivemack;270549]

<snip>

.[/QUOTE]

The guv'mint [i]may[/i] finally be getting its head out of its proverbial
ass in taking action against some of the fraud that has taken place......



[url]http://www.huffingtonpost.com/2011/09/01/us-suits-big-banks-mortgages_n_946010.html?icid=maing-grid7%7Cmain5%7Cdl1%7Csec1_lnk3%7C92223[/url]

More gloom and doom
 

[QUOTE=R.D. Silverman;270640]The guv'mint [i]may[/i] finally be getting its head out of its proverbial
ass in taking action against some of the fraud that has taken place......



[url]http://www.huffingtonpost.com/2011/09/01/us-suits-big-banks-mortgages_n_946010.html?icid=maing-grid7%7Cmain5%7Cdl1%7Csec1_lnk3%7C92223[/url][/QUOTE]

[url]http://money.cnn.com/2011/09/02/news/economy/jobs_report_unemployment/index.htm?hpt=hp_t1[/url]

The White House said yesterday that it predicts the unemployment rate will remain stubbornly high,
not falling below 6% until 2017.


---> Wonderful.



Blacks have it the worst, with an unemployment rate at 16.7% -- its highest level since 1984. The
unemployment rate for Latinos was unchanged at 11.3% and the unemployment rate for whites fell
slightly to 8%.

---> Lack of education?


Another 2.6 million people were considered "marginally attached" to the workforce in August. They
wanted and were available for work, and had looked for a job sometime in the last year, but were
not counted in the unemployment figures because they weren't actively searching for a job in August.

---> Spin!


We need a 5-million person stampede on Washington. Maybe Congress will then do something.

Note that there are things that Congress could do. But with Republitards in control they
would be impossible. One thing Congress could do IF IT WANTED: Put a [b]very[/b] restrictive
ceiling on corporate managerial compensation until both the 'official' unemployment rate and the 'marginally
attached' rate drop substantially.... We'd see companies start hiring in one quick hurry.
Require that public companies hire one U.S. citizen for every foreign hire. Place a heavy
tax penalty for every U.S. citizen laid off.

Mish reviews the latest global macro data and concludes that a (nother) global recession is here:

[url=http://globaleconomicanalysis.blogspot.com/2011/09/global-recession-right-here-right-now.html]Global Recession, Right Here, Right Now: Japan's Capital Spending Plummets; Eurozone PMI, UK PMI, US ISM ex-Inventory, China Exports in Contraction[/url]


[b]Regulators seek high-frequency trading secrets[/b]

[url=http://mobile.reuters.com/article/idUSTRE7806J420110901?irpc=932]Regulators seek high-frequency trading secrets | Reuters[/url]
[quote]WASHINGTON/NEW YORK (Reuters) - U.S. securities regulators have taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes.

The requests for proprietary code and algorithm parameters by the Financial Industry Regulatory Authority (FINRA), a Wall Street brokerage regulator, are part of investigations into suspicious market activity, said Tom Gira, executive vice president of FINRA's market regulation unit.
...
According to interviews with attorneys, traders, industry executives and regulators, the unusual requests for algo code and other computerized trading strategies really ramped up this year and have targeted stock-trading firms such as broker dealers and hedge funds.

It has alarmed some traders who are afraid their "secret sauce" -- intellectual property sometimes developed over years and at great cost -- could get into the wrong hands, especially when SEC and FINRA examiners leave for the private sector.

"I'd be disappointed and upset" if they asked for code, said a high-frequency trading firm executive who declined to be named. "I mean, are these people all going to work at the SEC forever?"

The SEC's new focus on algo strategies will likely help inform any new structural rules the government agency applies to an electronic market, criticized by some as unstable or unfair, especially after the "flash crash" on May 6, 2010.

While anything the regulators find could lead to legal action such as market manipulation suits, FINRA's effort appears more targeted at wrong-doing.
...
SEC examiners want the information to ensure that hedge funds are actually using the strategies they market to investors. They also review it to make sure that algos are not being used to manipulate the market.
...
FINRA, meanwhile, has made market manipulation a high priority since it fined a small firm called Trillium Brokerage Services $1 million last year for "baiting" other traders with a high volume of "illegitimate orders" in 2006 and 2007.[/quote]
[i]My Comment:[/i] This could be a welcome development - although I have doubts the SEC will actually seriously go after the rampant front-running and market-manipulation via criminal charges - but in fact one very simple change suggested by numerous people familiar with the kinds of strategies used by HFT algos would instantly clear up most of the abuses: Simply ban the practice of "stub quoting", that is, rapid-fire posting and cancellation of buy and sell orders which are never intended to be filled. But that would cause mass cancellation of cozy lunches and hookers-and-blow junkets for Wall Street`s supposed regulators, not to mention closing some of the revclving doors many SEC and FINRA staffers are counting on for fat paychecks after their government stints are over.

Wow, it takes them this long???

I vote simply requiring that a buy or sell order be valid for an hour...and that the exchanges tax the cancelled ones. Maybe simply require all equities to be held for an hour.

Banning it won't work, but taxing the behaviors involved will....or is my glass only half full?

[QUOTE]I vote simply requiring that a buy or sell order be valid for an hour[/QUOTE]

This basic concept has been proposed repeatedly though most often as 1 to 5 minutes instead of an hour. It would significantly slow down the market process and make HFT profits pretty much disappear. That "ain't" gonna happen.

DarJones

DarJones:
Are you saying the basic concept won't happen? Or that my hour is simply too extreme?

I'm saying that anything that disrupts the profits of the market maker HFT's is not going to happen.

DarJones

[QUOTE=Fusion_power;270743]I'm saying that anything that disrupts the profits of the market maker HFT's is not going to happen.

DarJones[/QUOTE]
Unfortunately, probably 100% correct, for all the wrong reasons.

[QUOTE=Fusion_power;270695]This basic concept has been proposed repeatedly though most often as 1 to 5 minutes instead of an hour. It would significantly slow down the market process and make HFT profits pretty much disappear. That "ain't" gonna happen.[/QUOTE]

Even 1-2 seconds minimal order lifetime would suffice to nip most HGT stub-quote schemes in the bud. But your point about anything which would kill HFT profits will never happen is likely correct.

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

With tomorrow being Labor Day here in the U>S., let`s focus on private-sector-jobs-related themes, namely "what kinds of businesses create most of the jobs" and "what if anythign can government do to help spur private-sector job creation?".

First, a McClatchy survey casts doubt on frequent Republican claims about "excessive government regulation" stifling job creation

[url=http://www.mcclatchydc.com/2011/09/01/122865/regulations-taxes-arent-killing.html]Regulations, taxes aren't killing small business, owners say[/url]
[quote]WASHINGTON — Politicians and business groups often blame excessive regulation and fear of higher taxes for tepid hiring in the economy. However, little evidence of that emerged when McClatchy canvassed a random sample of small business owners across the nation.

"Government regulations are not 'choking' our business, the hospitality business," Bernard Wolfson, the president of Hospitality Operations in Miami, told The Miami Herald. "In order to do business in today's environment, government regulations are necessary and we must deal with them. The health and safety of our guests depend on regulations. It is the government regulations that help keep things in order."

The U.S. Chamber of Commerce is among the most vocal critics of the Obama administration, blaming excessive regulation and the administration's overhaul of health care laws for creating an environment of uncertainty that's hampering job creation.

When it's asked what specific regulations harm small businesses _which account for about 65 percent of U.S. jobs — the Chamber of Commerce points to health care, banking and national labor. Yet all these issues weigh much more heavily on big corporations than on small business.
...
McClatchy reached out to owners of small businesses, many of them mom-and-pop operations, to find out whether they indeed were being choked by regulation, whether uncertainty over taxes affected their hiring plans and whether the health care overhaul was helping or hurting their business.

Their response was surprising.

[b]None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.[/b][/quote]
[i]My Comment:[/i] I`m not sure about the specific cliam about healthcare costs weighing more heavily on big than small businesses - but rest of the piece seems spot-on.

And career entrepreneur Henry Nothhaft has

[url=http://online.wsj.com/article/SB10001424053111904716604576542820083918028.html]A Labor Day Message for President Obama[/url]: [i]We know that job growth comes from start-up companies, not established ones. Why not make life easier for them?[/i]
[quote]Dear Mr. President,

As you spend this Labor Day preparing your speech to the nation on job creation, I urge you to avoid ideologically loaded programs like a new stimulus that probably won`t get through Congress, and instead focus on a few practical, low-cost measures that we know will create lots of jobs quickly.

Despite all the hand-wringing and inaction over jobs the last three years, job creation itself is actually no mystery. We know how jobs are created, and by whom.
[b]
We know, for starters, that 100% of net job growth in the U.S. comes from entrepreneurial start-ups, as a Kauffman Foundation report documented in 2010. If you took start-ups out of the picture and looked only at large or incumbent businesses, job growth over the last 35 years would actually be negative. In the words of Kauffman`s Tim Kane, "When it comes to U.S. job growth, start-up companies aren`t everything. They`re the only thing."
[/b]
So if we all know this, Mr. President, why aren`t you doing everything you can to nurture start-ups and make it easier for them to access capital, grow and hire people so they can develop the breakthrough products, services and medical advances that drive our national prosperity?
[b]
Earlier this year, you convened a summit of 20 of the nation`s top CEOs to discuss ways to create more jobs. Shortly thereafter you appointed General Electric CEO Jeffrey Immelt to chair your new jobs and competitiveness council.

I`m sure that Jeff Immelt is an excellent CEO. It took more than a little skill, after all, for GE to avoid paying even a penny of tax on $150 billion in revenues. But he and his fellow Fortune 100 CEOs don`t know much about job creation.[/b] In fact, they`re a "who`s who" of outsourcers of American jobs. Over the last 10 years, U.S. multinational firms cut their domestic work forces by 2.9 million while boosting hiring abroad by 2.4 million.

The fault here is not yours alone, Mr. President. When it comes to job creation, Washington is afflicted with a totally bipartisan cluelessness. For every Democratic Congress that passes a health-reform bill with new 1099 tax reporting requirements that impose heavy new costs on small businesses, a Republican-led Congress passes a Sarbanes-Oxley law that forces small firms to shoulder the onerous costs of new accounting rules meant to stop fraudulent behavior by big businesses. This despite the fact that small businesses pose zero risk to the economy.

Unfortunately, Mr. President, the only thing that Sarbanes-Oxley stopped was the ability of start-ups to pay the vastly increased costs of going public, thus crippling the IPO market and job creation (92% of which occurs after an IPO, according to the National Venture Capital Association). It certainly didn`t stop Wall Street banks—all of whom were compliant with Sarbanes-Oxley—from recklessly sinking the economy in 2008.
...
You and your Republican opponents could also spur job creation by withdrawing your support for a patent-reform bill that puts the needs of big technology firms ahead of the real job creators—entrepreneurial start-ups—and that continues to divert hundreds of millions of dollars annually in patent-office user fees to other purposes, like the Census.

By treating the patent office as a petty-cash drawer, Congress has starved it of funds and created a backlog of 1.2 million patent applications waiting for examination. Your own patent office director, David Kappos, says this backlog has cost the nation "millions of jobs."

As I noted in an article last year with retired chief judge Paul Michel of the U.S. Court of Appeals for the Federal Circuit, which handles patent appeals, simply clearing the patent backlog could create up to 2.25 million jobs by 2014. And it wouldn`t cost the taxpayer a dime, since the patent office is the only self-supporting agency of the federal government.
[b]
Finally, Mr. President, why are we the only major nation on Earth that refuses to offer tax and other incentives to manufacturers who set up shop here? Every other nation in the Organization for Economic Cooperation and Development does so. They know that manufacturing is the greatest economic force multiplier in the world, creating up to 15 jobs outside manufacturing for every position on the shop floor.
[/b]
None of these measures requires bleeding the treasury. None is political. And all of them will work—quickly—to create literally millions of new jobs.

Mr. President, there`s still time for you to kick-start the engine of job growth. All you need to do is listen to the voices of entrepreneurs who create those jobs.[/quote]

And speaking of unfair advantages enjoyed by mega-corporations, another McClatchy piece (here by way of the [i]St. Petersburg Times[/i] - Florida, not Rudssia) lays it out nicely:

[url=http://www.tampabay.com/opinion/columns/wanted-patriotic-ceos-to-stop-corporate-moochers/1189210]Wanted: Patriotic CEOs to stop corporate moochers[/url]
[quote]Some of the biggest corporations in the United States are moochers.

They're like the guy who shows up at your Labor Day picnic empty-handed. He drinks all your beer, eats four helpings of barbecue and leaves a huge mess for everyone else to clean up. Then he asks you for 20 bucks in gas money to get home.

A troubling number of U.S. corporations behave as moocher guests at our national cafeteria. They help themselves to all the taxpayer-funded goods and services we create and pay for together and leave patriotic small businesses and individual taxpayers with the bill.

According to a new report by the Institute for Policy Studies that I co-authored, 25 corporations among the top 100 firms paid their CEOs more in compensation than they paid in taxes. Twenty of them spent more on lobbying Congress than they paid in taxes.

Twenty of the 25 paid not one dime in federal taxes last year. Many use offshore tax havens to shift their profits overseas to avoid U.S. taxes. In fact, their hands are out, collecting millions in government subsidies.

This elite group of super-moochers includes Ford, eBay, Verizon, Boeing, Motorola, Honeywell, Dow Chemical, General Electric, Coca-Cola Enterprises, Prudential Financial, Capital One Financial and International Paper.

These companies utilize roads, ports, Internet broadband, weather services — our entire public infrastructure. They spin off products created from a foundation of Uncle Sam's investments, such as the Internet, drug research and innovation in aviation and science. They hire educated workers from our school systems — and complain when they don't have adequate skills.

When someone tries to steal their product or idea, they rush to the U.S. court system and law enforcement agencies for help and justice. They rest assured knowing their global assets are protected by the U.S. military and government agencies.

They claim to love America. They just don't want to pay for its upkeep. At the end of the cafeteria line, with their tray piled with food, they point to you and me and say, "They're picking up the tab."

Think about it: Where would Honeywell be without government research and contracts? Where would Boeing be without the U.S. taxpayer, including a recent contract for $35 billion in new planes?

These companies imply they should be relieved from taxes since they are creating U.S. jobs. But as new studies show, many of these same global firms are shifting jobs overseas as fast as they can.

General Electric CEO Jeffrey Immelt advises President Barack Obama on how to create jobs in America. He was paid $15.3 million last year as his company paid no U.S. taxes and collected $3.3 billion in refunds. In the past three years, GE has closed more than a dozen U.S. factories and eliminated 19,000 American jobs. In the past decade, the percentage of GE's global work force based in the United States has declined from 54 percent to 46 percent.

Many companies avoid disclosing the breakdown of their work force between the United States and other countries. They don't want the public to know how aggressively they are outsourcing jobs. Once-patriotic U.S. firms now view the United States as a platform for shifting capital, jobs and profits around the world to their narrow advantage.[/quote]

[b]And on a lighter note...[/b]

Tom Toles' latest editorial cartoon

[url=http://cdn.svcs.c2.uclick.com/c2/31f659b0b26c012e2f8a00163e41dd5b]Debt Counseling Meeting"[/url]

I am curious as to the definition of 'pays no taxes' that the writer of the above extract used; Coca-Cola's form 10K

[url]http://www.thecoca-colacompany.com/investors/pdfs/form_10K_2010.pdf[/url]

includes a $2,384 million line item for taxes paid in the year 2010, an effective rate of 16.7%

'Our effective tax rate reflects tax benefits derived from significant operations outside the United States, which are generally taxed at rates lower than the U.S. statutory rate of 35 percent.'

'Based on current tax laws, the Company’s effective tax rate in 2011 is expected to be approximately 23.5 percent to 24.5 percent before considering the effect of any unusual or special items that may affect our tax rate in future years.'

GE similarly is paying about 16.8% on GE earnings; the issue there is that GE Capital Services is an enormous financial organisation which a few years ago made a prodigiously large loss, and this loss provides an enormous tax credit to GE.

A simpler question, in case Mr Immelt is reading:
A dozen years ago, I worked for a very dysfunctional unit of GE. Everyone with eyes could see the operation going downhill, the spurning of customers, that some vice-presidential heads needed some serious knocking. Noone sent from headquarters could seem to turn it around, they all fled instead. You screwed up, now GE-FANUC is almost gone.

Do you have the ears to hear the folks on the ground? In that case, you are doing terrible by both your employees and your stockholders.

In my current job, I could use GE-Fanuc products...but they'd raise my engineering costs through the roof, and I couldn't get anyone from sales to talk to me when I was there anyway.

[QUOTE=fivemack;270842]I am curious as to the definition of 'pays no taxes' that the writer of the above extract used; Coca-Cola's form 10K

[url]http://www.thecoca-colacompany.com/investors/pdfs/form_10K_2010.pdf[/url]

includes a $2,384 million line item for taxes paid in the year 2010, an effective rate of 16.7%[/QUOTE]

GE Capital indeed did provide a big write-off to GE ... but that was mainly for the [url=http://blogs.wsj.com/marketbeat/2009/10/16/general-electric-analysts-raise-eyebrows-at-tax-benefit/]2009 tax reporting period[/url], not 2010.

You need to be very careful about the numbers the corporations point to in such cases. Without looking into the specifics of the Coca-Cola numbers, I'll stick to GE. Here is a March piece from [i]Business Insider[/i] which takes a claim from GE PR that the NYT (which broke the GE-paid-no-U.S.-taxes-in-2010 story a few days previously) was "way off base" and follows it up - hilariously (underlines mine):

[url=http://www.businessinsider.com/ge-taxes-2010]WHO'S FULL OF CRAP? GE, The New York Times, And The Hazards Of "Tweeting The Record Straight"[/url]
[quote][i][url=http://www.businessinsider.com/author/henry-blodget]Henry Blodget[/url] | Mar. 28, 2011, 4:29 PM[/i]

We spent much of this afternoon sparring with GE's public affairs division on Twitter over a New York Times report that GE paid no US taxes last year.

GE had taken to Twitter to blast the New York Times for "misleading" everyone about this fact.

So, naturally, when we saw that GE was trying to set the record straight, we asked some specific questions of GE--because we wanted to determine whether the New York Times was wrong or whether GE was just trying to spin everyone.

Either was fine with us, by the way -- especially after New York Times editor Bill Keller's latest lecture this weekend about why the New York Times is great and everyone else sucks.

Bill Keller's message in his latest lecture was "We believe in verification rather than assertion."

So when we got a tweet from GE public affairs this morning telling us to stop repeating the NYT's "misleading attack" that GE paid no US taxes in 2010, we naturally wanted to find out whether Bill Keller was full of it.

We had, after all, gotten that "misleading attack" [url=http://www.nytimes.com/2011/03/25/business/economy/25tax.html?_r=3&hp]directly from a New York Times story from last Friday about how little tax GE pays.[/url]

The third paragraph of that story said the following:
[b]
"[GE's] American tax bill? None."
[/b]
That sentence couldn't have been clearer. So we were surprised to get these tweets from GE this morning:
[i]
@BusinessInsider - Stop the misleading attacks. No Taxes?? GE paid $2.7 billion in cash taxes alone in 2010. [url]http://bit.ly/goMKB9[/url]

@hblodget Consolidated tax rate last few yrs is lower than historical avg & statutory rate, but @NYTimes grossly oversimplified the facts
[/i]
We asked GE whether the New York Times had, in fact, "grossly oversimplified the facts" or had just gotten them wrong.

GE temporarily went silent.

So we asked again.

And again.

Eventually, GE piped up, with a non-answer. And so, for the next half-hour, we kept asking GE ever narrower and more precise questions to try to make sure they weren't just spinning us (which initially they appeared to be doing). One of the theories that emerged, for example, was that the New York Times had been referring to "federal income tax," while GE's Public Affairs department had been pointing to global taxes, taxes paid in dollars, payroll taxes, state taxes, local taxes, and other taxes, rather than federal income tax.

For a while, we assumed that that's what GE was doing--spinning to cover up the fact that it had paid no federal income taxes by pointing out that it had paid payroll taxes, state taxes, and so forth.

But then GE finally tweeted the following:
[i]
GE paid significant U.S. fed income tax in 2010, along w/ $1B+ in payroll, state & local
[/i]
Now, that statement, you will presumably agree, seems entirely inconsistent with the sentence in the New York Times article that said GE's US tax bill was "none."

In which case, the New York Times story is wrong, and Bill Keller has a correction to issue.

But having spent the last half-hour trying to get a straight answer out of GE, another thought occurred to us. What if the NYT story wasn't wrong?

[u]What if what GE's wordsmiths had been so clever in their spinning that what they actually meant was that GE "paid" US income taxes that were later refunded by the US government, the same way most Americans "pay" taxes with each paycheck and then get a refund at the end of the year? (Which obviously is not what everyone thinks that sentence means.)
[/u]
Or what if what GE's clever wording meant that GE executives had paid federal income tax?

In those cases, @GEpublicaffairs folks would be guilty of the most insidious kind of spin: The kind that looks as though it's straight-up truth from a party that has been wronged but is actually a bunch of crap.

So we asked @GEpublicaffairs very simple questions about those "significant federal income taxes" that GE says it paid in 2010.

And @GEpublicaffairs went silent again.

And stayed silent.

For the rest of the afternoon.
[u]
So eventually, we had to conclude that @GEpublicaffairs had probably just been shamelessly spinning, that GE had paid no federal income taxes (net), and that that we had busted them on it. So GE's public affairs folks had had no choice but to disappear.[/u][/quote]
[i]My Comment:[/i] There are 2 Updates to the above article, which essentially confirm the "GE shamelessly spinning" hypothesis.

So Tom, see if you can figure out if Coca-Cola similarly *paid* several $Bln in taxes, but had most or all of that offset by later refunds and credits. Because the PDF you cite and similar statement`s by the company sound suspiciously like GE`s "we paid so much" claims which conveniently omit "how much we paid, after factoring in refunds and credits:

[url=http://ctj.org/ctjinthenews/2011/07/atlanta_journal_constitution_corporate_giants_find_ample_shelter.php]Atlanta Journal Constitution: Corporate giants find ample shelter[/url]
[quote]Coca-Cola’s “current” federal tax expense — not counting “deferred” taxes that might not be paid for decades, if ever — was $470 million last year. That was only 6.5 percent of the $7.2 billion in pre-tax profits that Coca-Cola reported for its U.S. operations in annual disclosures to investors last year. (A Coca-Cola spokesman said the company actually paid federal income taxes “significantly higher” than $470 million last year. It also said its federal tax rate worked out to 38 to 39 percent because its taxable income was lower than the $7.2 billion reported to shareholders, but didn’t release supporting figures.)[/quote]

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

Interesting week coming up in Europe - Mish [url=http://globaleconomicanalysis.blogspot.com/2011/09/telegraph-reports-italy-needs-to.html]has a preview of key events[/url]. I will be watching the decision of the German Constitutional Court on the legality of the Eurozone bailouts (and the entire EFSF mechanism) with great interest.

Re taxes and spin, the difference between a piece of half-raw castrated bull meat and a sizzling hot juicy rib-eye steak is just a matter of semantics.

DarJones

OK, I was wrong; I thought that a company registered in the US would be paying all its taxes in the US (indeed, that that was why the US might want to have multinationals registered there).

This is the issue that extremely-multinational companies whose main expansions are outside the US can keep the profits from their subsidiaries outside the US, use them to fund expansion outside the US or simply keep them in a pot, and not pay US tax on them unless they need to bring them back to the US. If I read the Coca-Cola report correctly (and what better thing to do on Labor Day than read 10-K filings) this is a loophole which was closed briefly in 2005, and has been re-opened 'temporarily for a one-year period' annually since then. Coke declares much lower profit margins on its US activities than on its world-wide ones (and North America is its third-largest business area) which is suspicious, though that might be because they bought the US bottler out presumably of US money.

I don't quite understand how Coca-Cola can pay dividends (which at least in theory come out of profits) without having to bring the profits in; I suppose they've got almost perfect credit and so can borrow extremely cheaply in the US from multi-national banks using the external-profits as collateral, and pay their 2.5% dividend yield with the borrowed money.

[QUOTE=fivemack;270872](and what better thing to do on Labor Day ...[/QUOTE]So called because no labor is performed on that day.

In other news, the stock markets are on the slide again over Euro fears. The FTSE-100 is actually doing rather well at the moment (1403 UTC) being down only 3.0%, compared with the DAX and CAC 40 at 5.0% and 4.7% respectively.

[url]http://www.bbc.co.uk/news/business/market_data/overview/default.stm[/url] for current figures.

Paul