Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Mon 06.01.2009
Main Street takes a hit in GM bankruptcy The loser in a General Motors Corp. bankruptcy would be Main Street, not Wall Street, said a lawyer who represented Chrysler LLC’s dissident lenders and is trying to organize bondholders who hold up to $7 billion in GM’s debt. What’s being offered is the U.S.-backed plan to give the American and Canadian governments as much as 69 percent of the equity and a 17.5 percent trust for unions, while bondholders only get 10%. GM plans to file for bankruptcy on June 1, people familiar with the matter said. The difference with GM is that, whereas the ‘bad guys’ in Chrysler were hedge funds, who Obama called ‘speculators,’ here they’re Main Street -- individual retirees who bought bonds when bankruptcy was unthinkable.
Gerald Celente on The Greatest Depression 31 May 2009
It's Official: It's Barack Obama's Economy Now With the stock market now up solidly since Obama's inauguration, consumer confidence nearing pre-crisis levels, and the banking crisis now in the rear-view mirror, the economy is Obama's to own. If we'd just kept going down and down, then it'd still be on Bush, and anything bad that happened could be laid at the feet of the prior administration. But with even Austan Goolsbee comparing the actions of the government to heroic fire fighters, it's clear who'll be taking the blame from here on out.
'Gold price to touch $1,400 in six months' . . . . I’m saying that in the next six months the realization will kick in that the world has changed in a significant way and the United States is losing its role as the overwhelming economic superpower and will continue to do so over the next 20 years as other countries such as China and India come into their own and pick up the slack that’s created by the collapse of consumption right now. If it breaches $1,000, I think it’ll very quickly go to $1,300-$1,500 and establish that as a new base.
Gold sense in high places Maybe the fact that central banks, banks and governments around the world are acting like monetary idiots explains why gold is shooting up in price; or maybe that it is going up in price explains why there is such a new interest in gold; or maybe it just explains why people are as disrespectful of the dollar, as am I.
If cash is king, Gold is Emperor . . . The Great Credit Contraction The global economy is built on a derivative illusion. As the great credit contraction grinds on, the importance of performing accurate mental calculations of value will become more and more important. Every major country, including the United States, uses a fiat currency illusion as its legal tender.
The Curious Problem of Gold and Silver Coins as Legal U.S. Tender The idea that gold and silver coins are still legal tender in the U.S. has always struck me as one of the more intriguing aspects of our monetary system, a system that appears to teeter a bit more each and every year, its fate sure to be the same as all prior fiat money systems throughout history - they never end well. The notion that a quarter or a dime from the 1950s or early-1960s that contains 90 percent silver might be worth ten times its face value seems like more of an oddity than anything else since the values are so small.
Silver shines and will continue to out perform gold Silver had its best monthly gain in 22 years in May, and ended at $15.70 an ounce, still considerably shy of the $20 the metal reached when gold passed $1,000 in March 2008. That there is still some immediate upside in the silver price is thus evident with gold finishing the week at $980, tantalizingly close to its former March 2008 high. Indeed, while performing well over the past couple of weeks silver has actually lagged behind the recovery in gold, hence it is still short of its recent high.
On Gold and Civil Liberties Decades ago Ludwig von Mises wrote in The Theory of Money and Credit, It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights. There is a simpler way to state the rule: He who has the gold makes the rules. One of the reasons, if not the chief reason, for the excessive government encroachment on civil liberties is the abandonment of sound money. Contained within the United States Constitution are very specific monetary powers and disabilities. This constitutional violation is the chief cause the world has become a very dangerous place. Governments and their central banks are able to engage in legalized counterfeiting which is confiscation through inflation and a form of taxation without representation or due process of law.
Our Exploding Deficit Will Kill The Economy In its own inimitable language, S&P warned last week that a debt-to-GDP ratio of 100% is "incompatible with" a Triple A rating. What it meant is that the United States is rushing headlong toward a ratings downgrade--and, in the opinion of some, disaster. In a much-discussed piece in the FT this week, John Taylor echoed many others in clanging the alarm bells.
Exploding debt threatens America Standard and Poor’s decision to downgrade its outlook for British sovereign debt from “stable” to “negative” should be a wake-up call for the US Congress and administration. Let us hope they wake up. Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years.
Another Reason Obama's Mortgage Mods Aren't Working There are two problems with Obama's attempts to stave off foreclosures through mortgage modifications. First, the program is a drop in the bucket (at best, a couple of million mortgages will be modified out of tens of millions that are underwater). Second, even homeowners whose payments are reduced usually go on to default. Why? Because they can't afford ANY payment, not even a smaller one. And also because many homeowners see no reason to keep making payments on houses when they owe more on the house than its worth.
US economy contracts at rate of 5.7% The US economy continued to contract in the first quarter of this year, but at a slower pace than previously thought, as the pain of the recession spread from consumers to businesses in the face of eroding global demand. Revised commerce department figures showed on Friday that US gross domestic product declined by an annualised rate of 5.7 per cent in the first three months of the year, compared with last month’s estimate of 6.1 per cent. The decline was less severe than original projections due to slower liquidation of inventories and the narrowing trade gap.
Geithner to Reassure China U.S. Will Control Deficits Treasury Secretary Timothy Geithner arrived in Beijing with a pledge that the Obama administration will control its borrowing as he sought to reassure China its holdings of U.S. government debt are safe. “No one is going to be more concerned about future deficits than we are,” Geithner told reporters on the way to two days of meetings that start today in China’s capital. Geithner will meet with Premier Wen Jiabao, who in March called for the U.S. to “guarantee the safety of China’s assets.” China is the largest foreign holder of U.S. government debt, which so far this year has handed investors the worst loss since at least 1977 on forecasts for ballooning federal budget deficits.
Treasuries, Dollar ‘Only Game in Town’ as China Buys For all the hand-wringing over the dollar’s slide, the expanding U.S. deficit and the nation’s AAA credit rating, the bond market shows international demand for American financial assets is as high as ever.
Dangers of a Dollar Collapse As the Federal Reserve continues to monetize the money supply (quantitative easing) at a breakneck pace, nations around the world have become very concerned about their holdings of US dollars and dollar backed assets. The dollar at this point in time looks like it's virtually guaranteed to lose its status as the international reserve currency. It's estimated that dollar holdings of foreign governments as exchange reserves totals $5,385 billion. From the CIA's World FactBook, the United States' holdings of foreign currencies is around $71 billion. Therefore, the US would not be able to counteract a mass exodus from the dollar. If this were to happen, the dollar's value would collapse to a mere fraction of its present worth.
Troubled Bank Loans Hit a Record High OVERALL loan quality at American banks is the worst in at least a quarter century, and the quality of loans is deteriorating at the fastest pace ever, according to statistics released this week by the Federal Deposit Insurance Corporation. The report highlighted that even as the government and major banks have scrambled to deal with the impaired securities the banks own, the institutions have been plagued by an unprecedented volume of old-fashioned loans going bad.
Record demand, record angst The bond market vigilantes are (supposedly) back. And this time, they aren’t just Wall Street traders. America’s foreign creditors are no longer willing to provide endless amounts of long-term credit to the US at low rates. So argues Mark MacQueen of Austin, Texas- based Sage Advisory Services (via Bloomberg): “The vigilante group is different this time around … It’s major foreign creditors. This whole idea that we need to spend our way out of our problems is being questioned.” From all this talk, you would never know that the world is actually still buying record amounts of US Treasuries. In fact, Treasuries are the only US financial asset that the rest of the world is still buying in large quantities. Demand for Agencies — and asset backed securities — has fallen off a cliff. Demand for equities has been anemic (though the last data point comes from March). By contrast, the 52 week increase in the New York Fed’s custodial holdings is way, way up.
Bond Vigilantes Confront Obama as Housing Falters For the first time since another Democrat occupied the White House, investors from Beijing to Zurich are challenging a president’s attempts to revive the economy with record deficit spending. Fifteen years after forcing Bill Clinton to abandon his own stimulus plans, the so-called bond vigilantes are punishing Barack Obama for quadrupling the budget shortfall to $1.85 trillion. By driving up yields on U.S. debt, they are also threatening to derail Federal Reserve Chairman Ben S. Bernanke’s efforts to cut borrowing costs for businesses and consumers.
Niall Ferguson: No One Has The Faintest Idea When The Economy Will Recover Barrons sits down with Harvard/Oxford professor Niall Ferguson. He thinks Obama's economic forecasts are as much of an outlier possibility as another Great Depression. He's also concerned, as we are, that there's just not enough money in the world to finance all the borrowing the U.S. and other big countries will be doing over the next few years. Barron's: Is the worst over for the global stock markets and the economy? Ferguson: It may look that way, but appearances can be deceptive. . . .
Paul Krugman, Please Call Ben on This 'Printing Money' Thing So Extreme Left Wing Hack Paul Krugman came up with this one in a May 28th article about those concerned with the possibility of inflation. In it he claimed "I suspect that the scare is at least partly about politics rather than economics." He later went on to say: So if prices aren’t rising, why the inflation worries? Some claim that the Federal Reserve is printing lots of money, which must be inflationary, while others claim that budget deficits will eventually force the U.S. government to inflate away its debt.
Ben Bernanke Interview Part 1 (March 17, 2009) It's a repeat, but worth remember Bernanke's objectives
Ben Bernanke Interview Part 2
Ben Bernanke Interview Part 3
Ben Bernanke Interview Part 4
Bernanke Has Lost Control On Thursday evening CNBC broke into their regular programming to have Steve Liesman announce that The Fed "is not targeting interest rates on the long end." This, of course, was in response to the action in the market Wednesday, and the widespread expectation that The Fed would intervene immediately - but it did not. This statement from "people with knowledge of the matter" is rather curious given the March FOMC Statement in which it was said: To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.
How economists can misunderstand the crisis By Niall Ferguson On Wednesday last week, yields on 10-year US Treasuries – generally seen as the benchmark for long-term interest rates – rose above 3.73 per cent. Once upon a time that would have been considered rather low. But the financial crisis has changed all that: at the end of last year, the yield on the 10-year fell to 2.06 per cent. In other words, long-term rates have risen by 167 basis points in the space of five months. In relative terms, that represents an 81 per cent jump. Most commentators were unnerved by this development, coinciding as it did with warnings about the fiscal health of the US. For me, however, it was good news. For it settled a rather public argument between me and the Princeton economist Paul Krugman. It is a brave or foolhardy man who picks a fight with Mr Krugman, the most recent recipient of the Nobel Prize for Economics. Yet a cat may look at a king, and sometimes a historian can challenge an economist.
Federal Rescue: Unthinkable Trillions Here’s a pie chart that puts into perspective the size of the Fed’s involvement in the financial crisis. The entire circle represents approximately 8 trillion dollars. Yes, $8,000,000,000,000. The blue quadrant represents federal lending including expansion of swap lines to the tune of about $2 trillion. The purple quadrant comprises housing related purchases ($1.45 trillion) and buying $1.8 trillion of commercial paper. You can see a more itemized breakdown here…
Max Keiser On the Edge - 29 May 2009 pt 1 / 3 US toxic debts (sovereign debt in form of government issued bonds) are about to go belly-up
Max Keiser On the Edge - 29 May 2009 pt 2 / 3
Max Keiser On the Edge - 29 May 2009 pt 3 / 3 Michael Hudson, guest on China's bilateral deal with Russia and Brazil; countries are reversing free ride for US military overseas
Is Larry Summers Taking Kickbacks From the Banks He’s Bailing Out? Last month, a little-known company where Summers served on the board of directors received a $42 million investment from a group of investors, including three banks that Summers, Obama’s effective “economy czar,” has been doling out billions in bailout money to: Goldman Sachs, Citigroup and Morgan Stanley. The banks invested into the small startup company Revolution Money, right at the time when Summers was administering the “stress test” to these same banks. A month after they invested in Summers’ former company, all three banks came out of the stress test much better than anyone expected—thanks to the fact that the banks themselves were allowed to help decide how bad their problems were. (Citigroup “negotiated” down its financial hole from $35 billion to $5.5 billion.)
A Promise to Be Ethical in an Era of Immorality When a new crop of future business leaders graduates from the Harvard Business School next week, many of them will be taking a new oath that says, in effect, greed is not good. Nearly 20 percent of the graduating class have signed “The M.B.A. Oath,” a voluntary student-led pledge that the goal of a business manager is to “serve the greater good.” It promises that Harvard M.B.A.’s will act responsibly, ethically and refrain from advancing their “own narrow ambitions” at the expense of others. What happened to making money? That, of course, is still at the heart of the Harvard curriculum.
THE MBA OATH As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can create alone. Therefore I will seek a course that enhances the value my enterprise can create for society over the long term. I recognize my decisions can have far-reaching consequences that affect the well-being of individuals inside and outside my enterprise, today and in the future. As I reconcile the interests of different constituencies, I will face choices that are not easy for me and others. Therefore I promise:
I will act with utmost integrity and pursue my work in an ethical manner.
I will safeguard the interests of my shareholders, co-workers, customers and the society in which we operate.
I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.
I will understand and uphold, both in letter and in spirit, the laws and contracts governing my own conduct and that of my enterprise.
I will take responsibility for my actions, and I will represent the performance and risks of my enterprise accurately and honestly.
I will develop both myself and other managers under my supervision so that the profession continues to grow and contribute to the well-being of society.
I will strive to create sustainable economic, social, and environmental prosperity worldwide.
I will be accountable to my peers and they will be accountable to me for living by this oath. This oath I make freely, and upon my honor.
Ireland set to go bust, claims economic historian A dire warning that the Republic is a prime candidate to go bust has come from one of the world's leading economic historians. "The idea that countries don't go bust is a joke," said Niall Ferguson, Harvard professor and author of The Ascent of Money. "The debt trap may be about to spring" he said, "for countries that have created large stimulus packages in order to stimulate their economies." His chosen prime candidate to go bust is "Ireland, followed by Italy and Belgium, and UK is not too far behind". Argentina is top of his list of shaky countries but "the argument that it can't happen in major western economies is nonsense".
Fed Mortgage Efforts Prove Costly Securities Purchases 'Under Water,' Seem to Have Transitory Effect on Rates The U.S. Federal Reserve's program to keep mortgage rates low by buying securities and Treasury bonds so far has been costly and seems to be having a fleeting impact. An analysis of the timing of the Fed's purchases of mortgage-backed securities by J.P. Morgan Chase & Co. shows the Fed is "under water" on its portfolio by about 10%, and it would have to take about $5 billion in losses if it were to mark its portfolio to the market.
Schwarzenegger Plan Would Close 220 California Parks Gov. Arnold Schwarzenegger's budget cuts could mean the closing of up to 220 state parks, among them the home of the world's tallest tree and other attractions that draw millions of visitors. Schwarzenegger this week recommended eliminating $70 million in parks spending through June 30, 2010. An additional $143.4 million would be saved in the following fiscal year by keeping the parks closed. "This is a worst-case scenario," said Roy Sterns, a spokesman at the state parks department. "If we can do less than this, we will try. But under the present proposal, this is it."
Obama Should Tell California to Drop Dead by Peter Schiff During the height of New York City's financial crisis in the 1970's, President Gerald Ford had the good sense to turn down Mayor Abe Beame's request for a federal bailout. The refusal prompted the famous New York Post headline, "Ford to City: Drop Dead." More than 30 years later, as California Governor Arnold Schwarzenegger makes a similar plea to Washington, I hope President Obama will show similar restraint. Unfortunately, given Obama's recent string of unwise economic decisions, it's hard to imagine that his judgment will suddenly improve. A federal bailout would spare California from having to make spending cuts needed to bring its budget into balance. The matter has become urgent since California voters rejected several tax-hiking ballot initiatives. Rather than taking the vote as a signal to dramatically curtail spending, the state turned to the feds. If they get a free pass, the politicians can avoid fixing any of their past mistakes or preparing California for the future.
Mark Klein - AT&T WhistleBlower Mark Klein, a previous AT&T worker concerned for the privacy of millions of Americans, blows the whistle on AT&T's illegal wiretapping and internet surveillance tactics. He is interviewed by Keith Olbermann of MSNBC.
Unemployment in U.S. Probably Surpassed 9% in May Unemployment in the U.S. probably surpassed 9 percent in May for the first time in more than 25 years, underscoring forecasts that the economy will be slow to pull out of the worst recession in half a century, economists said before a report this week. The jobless rate climbed to 9.2 percent, the highest level since September 1983, according to the median of 59 estimates in a Bloomberg News survey before the June 5 Labor Department report. Other data may show manufacturing and service industries shrank at a slower pace and consumer spending dropped.
G.M. Bankruptcy Plan Clears Bondholder Hurdle General Motors’ bondholders finished voting Saturday on the company’s plan to exchange their debt for an ownership stake as high as 25 percent in G.M., the final obstacle to an orderly bankruptcy for the ailing carmaker. Bondholders with slightly more than 50 percent of G.M.’s $27.2 billion in bond debt agreed to support the plan by the deadline of 5 p.m., according to people briefed on the matter. Among the backers was a committee of large investors holding about 20 percent of G.M.’s outstanding bonds.
Industry Fears U.S. May Quit New Car Habit For all the drastic cuts and financial overhauls that are meant to secure a future for General Motors and Chrysler, their prospects in coming years will be determined more by the answer to a simple question: Can American drivers live without that new-car smell? In recent years Americans appeared to be hooked on it and took advantage of home equity loans, easy credit and cheap short-term lease deals to send new-car sales to levels of more than 17 million a year.
Doctor Who Performed Abortions Is Shot to Death WICHITA, Kan. — George Tiller, a Wichita doctor who was one of the few doctors in the nation to perform late-term abortions, was shot to death on Sunday as he attended church, city officials in Wichita said. Dr. Tiller, who had performed abortions since the 1970s, had long been a lightning rod for controversy over the issue of abortion, particularly in Kansas, where abortion opponents regularly protested outside his clinic and sometimes his home and church. In 1993, he was shot in both arms by an abortion opponent but recovered.
Boston Police Being Equiped With High Powered Assault Weapons
Pentagon Plans New Arm to Wage Cyberspace Wars The Pentagon plans to create a new military command for cyberspace, administration officials said Thursday, stepping up preparations by the armed forces to conduct both offensive and defensive computer warfare. The military command would complement a civilian effort to be announced by President Obama on Friday that would overhaul the way the United States safeguards its computer networks.
U.S And Canada Sign New Border Security Agreement Part 1 Of 2
U.S And Canada Sign New Border Security Agreement Part 2 Of 2
U.S.-Cuban immigration talks resuming Cuba is ready to resume talks with the United States over the legal immigration of Cubans to the U.S. and postal service between the two nations, the Associated Press reports today. The Communist government notified the Obama administration on Saturday that it had accepted a May 22 overture restart immigration talks suspended by former President George W. Bush in 2003, the AP's Matthew Lee reports, citing a State Department official requesting anonymity because the time and place of talks have not been determined yet. Cuba also has expressed a willingness to cooperate with the U.S. on combating terrorism and stemming drug trafficking as well as hurricane preparedness.
If the EU seems intent on a putsch then UKIP should give it a shove The European Union has slipped the leash of democratic control. It is one thing to advance the Monnet Project by treaty creep and stealth directives. It is another to put questions of sovereignty to a popular vote and then refuse to abide by the outcome. Europe's elites have crossed a political line by reviving the EU Constitution under the guise of the Lisbon Treaty and ramming it through without referendums, after it had already been rejected by French and Dutch voters. To continue a second time after rejection by the Irish – alone in voting – amounts to a putsch.
Obama steps into diplomatic minefield Ahead of two critical elections, in Lebanon and Iran, United States President Barack Obama's visit to the Middle East next week is a delicate matter that may even prove to be a litmus test of his foreign policy orientation. The trip is unlikely to have any major impact on the parliamentary elections in Lebanon on June 7 or the Iranian presidential elections on June 12. Nonetheless, the visit to the region's two leading Sunni Arab powerhouses - Egypt and Saudi Arabia - may be interpreted as a sign of foreign policy continuity with the past. That is, a return to former president George W Bush's Cold War-style politics that encouraged an alliance of Arab moderates versus Iran-led radicals.
Dr. Ron Paul on North Korea Dr. Paul discusses the NPRK's detonation of an atomic device and how they achieved that technology using subsidies from the Clinton Administration.
Gates Issues Warning to North Korea SINGAPORE — Defense Secretary Robert M. Gates warned North Korea on Saturday that the United States would not accept it as a nuclear weapons state, as Asian security officials struggled to find a new way to deal with the isolated Communist nation. “We will not stand idly by as North Korea builds the capability to wreak destruction on any target in Asia — or on us,” Mr. Gates told a major defense conference here that has been dominated by North Korea’s test this week of a nuclear device and the firing of at least six short-range missiles, all in defiance of international sanctions.
Pyongyang shakes up pacifist Japan TOKYO - An increasingly belligerent North Korea is reawaking hawkish sentiments in Japan, still one of the world's most powerful nations and equipped with ultra-modern weaponry. Prompted by Pyongyang's recent provocations - including an underground nuclear test, short-range missile launches and a long-range missile test - normally pacifist Japan is considering acquiring the capability to make pre-emptive strikes to destroy enemy bases, such as those in North Korea. More than a few government officials and lawmakers have reservations about making the leap, as it would be a huge departure from Japan's exclusively defense-oriented, post-World War II policy. The strong pacifism enshrined in the United Stated-imposed "peace constitution" would be a thing of the past.
World powerless to stop North Korea North Korea's decision to carry out its second nuclear test on Monday could have far-reaching consequences, if South Korea and Japan conclude that nothing can be done to persuade Pyongyang to denuclearize. Under such circumstances, developing their own nuclear weapons might become increasingly desirable for Seoul and Tokyo.
Niall Ferguson - British Empire Debate (1/4) (odd global mix of debaters but sheds light on globalism)
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