Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Tues 07.28.2009
Bernanke to the sheeple: don't even THINK about auditing the Fed, you swine!
Rearranging Deck Chairs On The U$$ Titanic America's paper empire is slowly sinking into the sea, and all the powers that be can do about it is rearrange the deck chairs for a while as they wait for the inevitable. Increasingly, more and more people are comparing the US to Japan, and it's 20-plus year bear market / economic doldrums, realizing try as they might, the prognosis for American is a match. This is of course why the stock market trading patterns are a match, because once you bubblize the real estate market (Japan peaked in 1990) it's all over, as this assures a structural high in credit creation that cannot be fixed as easily as floating a new CDO, or throwing a trillion or two at the bond market. Nope - once you play that card, as Sir Allen did back in 2002 to counter the negative effects of the tech wreck, yet another bubble he inspired, there's nothing left to do but inflate with abandon and hope nobody notices.
Barofsky Discovers The Bailout Was Based On A Big, Fat Lie At the heart of the clash between TARP watchdog Neil Barofsky and his critics in the Obama administration is that Barofsky thinks that the bailout should be publicly accountable for meeting its public goal: Keeping banks lending money to fuel the economy. The Treasury Department, meanwhile, is happy with the secret goal--recapitalizing banks and consolidating weak banks with stronger ones.
How To Think About The TARP Bait And Switch When then-Treasury Secretary Hank Paulson explained to the American people that the TARP had shifted gears from buying toxic assets toward making direct capital injections in banks, he insisted that the purpose of the program was to get banks to "deploy, not hoard, their capital." "And we expect them to do so, as increased confidence will lead to increased lending," Paulson said.
Richard Posner: Nope, Fed Probably Won't Stop Inflation In Time Richard Posner has weighed in on the chances the Federal Reserve will act as promised and use its tool kit to enact an exit strategy. His answer is: probably not. The main problem will be that, if trends continue, the Fed may be faced with the need to raise rates while employment is at the highest levels seen in generations. That will be enormously politically unpopular. And this time around we'll have the Barack Obama rather than the Ronald Reagan in the White House.
Peter Schiff Moneybomb August 7th 2009
Gold Futures Rise in New York as Dollar Retreats; Silver Gains Gold futures climbed in New York as the dollar retreated, supporting demand for the precious metal as an alternative investment. Silver also gained. The dollar dropped to a seven-week low against a basket of six major currencies. Gold gained 4.8 percent in the previous two weeks as the greenback dropped 1.8 percent. Purchases of new homes in the U.S. jumped 11 percent in June, the biggest gain in eight years, government data showed today. A "positive economic outlook" and the sliding dollar are "slightly bullish" for gold, Societe Generale analysts in London said in a note.
Gold moves in a mysterious way - well perhaps not! People trust gold more than governments and the political establishment. That is gold's inherent strength that makes it a good investment throughout difficult economic times. Fundamentals are not good, the season is not one where gold is known to perform well, the top gold ETF seems to be losing a bit of its allure - and its volume - buying from the jewellery sector remains very depressed, general stock markets appear to be strengthening, some feel the financial crisis is behind us reducing the safe haven perception of gold, yet the gold market continues to show strength. True it is off its peaks, but every time it seems to be slipping back toward $900, so far this summer doldrum season it has picked up again to settle around the $950 level. Why?
Why US Fed should buy tons of gold American government has one good thing about it. It has Inspector Generals. The government ignores what they say, but at least they give us a measure of truth about government. The truth these days on the extent of government bailouts is undeniably mind-boggling. It may make you feel queasy. It may set off alarm bells. There is something called The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). Congress, you will recall, created the TARP program in 2008 in its Emergency Economic Stabilization Act.
Higher risk appetite may decrease appeal for gold Equity rally may reflect the global sentiments about economic recovery and the feeling that the worst may be over. Gold prices also rallied last week and traded between $940-960 levels. However the uptrend seems to have settled for gold as beyond a point stock rally signifies increased risk appetite that weakens the yellow metal's safe haven appeal. On the other hand increased risk appetite often benefits the energy and agri-commodities at the global level. This week too gold is expected to trade above $960 but still below the $1000 mark while the picture looks positive for silver as its prices are often determined by increase or decrease in industrial demand.
Real U.S. Treasury Yields Highest In History The highest inflation-adjusted yields in 15 years are helping provide the Treasury with record demand at auctions as the U.S. prepares to sell $115 billion of notes this week. Treasuries are the cheapest relative to inflation since 1994 after consumer prices fell 1.4 percent in June from a year earlier. The real yield, or the difference between rates on government securities and inflation, for 10-year notes was 5.10 percent today, compared with an average of 2.74 percent over the past 20 years. The gap helps explain why investors are buying bonds after losing 4.8 percent this year, the steepest decline on record, according to Merrill Lynch & Co. indexes that date back to 1978.
Emerging markets rush to issue debt Emerging market bond issuance has risen to record levels as investors hungry for greater risk switch to the securities because of attractive yields. The surge in issuance this year, to its highest since records began in 1962, is an encouraging sign for the world economy as activity in emerging market bonds had seized up until a few months ago. The bond market freeze had made it difficult for governments and companies, especially those in eastern Europe hit by the credit crunch and needing to refinance debt.
Is the Emerging Market Bubble About to Burst? Attracted by rich returns this year, The Wall Street Journal reports investors are once again throwing piles of cash into emerging market funds. $35.5 billion flowed into these stock funds in the first half of the year according to EPFR Global. That's the most since the company started tracking the data in 1995.
China warns banks over asset bubbles Chinese regulators on Monday ordered banks to ensure unprecedented volumes of new loans are channelled into the real economy and not diverted into equity or real estate markets where officials say fresh asset bubbles are forming. The new policy requires banks to monitor how their loans are spent and comes amid warnings that banks ignored basic lending standards in the first half of this year as they rushed to extend Rmb7,370bn in new loans, more than twice the amount lent in the same period a year earlier.
China's hidden debt problem Despite robust growth, the world's third largest economy is potentially deeper in debt than originally thought. But when Chinese leaders meet their U.S. counterparts this week, they should pause for reflection before venting any criticism, because hidden liabilities mean China's books are uglier -- potentially much uglier -- than at first sight. Thanks to successive years of fast economic growth and even faster government revenue growth, the official debt-to-GDP ratio was 17.7% at the end of last year, far lower than almost any other major economy.
Hidden from sight, debt creeps up on China On the surface, China presents a fiscal study in contrast with the United States, keeping a remarkably low ceiling on debt even as it spends its way out of the financial crisis. But when Chinese leaders meet their U.S. counterparts this week, they should pause for reflection before venting any criticism, because hidden liabilities mean China's books are uglier -- potentially much uglier -- than at first sight.
U.S.-China Economics: They Need Us as Much as We Need Them This week's U.S.-China economic dialogue kicked off Monday with the usual pomp and circumstance befitting a visiting head of state, as well as a joint WSJ op-ed by Treasury Secretary Tim Geithner and Secretary of State Hillary Clinton. Despite the fanfare, don't expect any major policy announcements to emerge, says William Gamble, president of Emerging Market Strategies, a consulting firm that specializes in emerging markets. "There might be some nice talk but the economics of both sides of the coin show there will not be any great announcements," he says.
Top US officials seek to reassure Chinese Administration brings in top officials to reassure Chinese government on deficits, inflation President Barack Obama put forward his top economic officials on Monday to try to reassure China that the U.S. will not let huge budget deficits or runaway inflation jeopardize the value of Chinese investments here. Among the officials meeting with Chinese representatives Monday, the first day of two-day talks, were Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, National Economic Council Director Lawrence Summers and Peter Orszag, Obama's budget director.
A cautionary tale from China One company's experience of fraud highlights the potential pitfalls of doing business in China Raiding his own company's Beijing headquarters with the help of lawyers and a police escort was not what Heinz Zuercher had in mind when he agreed in March to take over as chief executive of Frankfurt-listed Business Media China. But that is where he found himself in early June as he and another German manager broke into the finance department while a group of his employees barricaded themselves inside and hid under their desks.
Dollar in Disarray, China Buys Away Since peaking on March 5, the dollar has fallen nearly 12 percent against the trade-weighted U.S. Dollar Index (DXY). This weakness has coincided with price gains for gold, oil and copper, but several other commodities are starting to break out as well. Cocoa, sugar, cotton and orange juice prices have all jumped recently. Dollar weakness has been especially bullish for emerging markets.
Obama Opens Policy Talks With China Saying that the ties between the United States and China are as "important as any bilateral relationship in the world," President Obama welcomed senior Chinese leaders on Monday to begin high-level consultations on issues like the global economic downturn and North Korea. "The United States and China share mutual interests," Mr. Obama declared at the opening ceremony for the two days of talks, which will be led by both the secretary of state, Hillary Rodham Clinton, and the Treasury secretary, Timothy F. Geithner, and their Chinese counterparts.
U.S. courts China cooperation The Obama administration is hoping that two days of high-level talks with top Chinese officials in Washington this week will help restore China's confidence in the dollar and to restore some balance to the lopsided U.S. trade deficit with Beijing. President Obama, during opening ceremonies Monday morning at the Ronald Reagan Building and International Trade Center, stressed the two countries' special bond as two of the world's economic superpowers.
Top US officials seek to reassure Chinese Administration brings in top officials to reassure Chinese government on deficits, inflation President Barack Obama put forward his top economic officials on Monday to try to reassure China that the U.S. will not let huge budget deficits or runaway inflation jeopardize the value of Chinese investments here. Among the officials meeting with Chinese representatives Monday, the first day of two-day talks, were Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, National Economic Council Director Lawrence Summers and Peter Orszag, Obama's budget director.
Mr. Bernanke's Report Card: We Should All Be Holding Our Noses On Sunday, July 26, 2009, Federal Reserve Chairman Benjamin Bernanke participated in a town-hall styled meeting, moderated by public television's Jim Lehrer in Kansas City, Mo., where he was peppered with several questions about government decisions last year to rescue so-called "too big to fail companies" like insurance giant American International Group.
Will They Ever Grasp the Simple Truths? It's funny how little those in charge have learned from the nightmare of the past two years. All the evidence suggests that the various machinations of the Fed, the misjudgments of the Treasury, the manipulations of the moneyed interests, and the malfeasance of elected officials who supposedly serve our interests has helped bring about the worst financial crisis since the Great Depression. And yet, what do we have now? More of the same. More of the same kind of disastrous thinking and misguided policy-making that has helped transform the U.S. from an unrivaled economic powerhouse into a nation that is slowly being consumed from within by wreckless profligacy and an addict's dependence on borrowed money.
Taking Questions: Mr. Bernanke Fed Chairman Opts for Televised Event to Explain Moves Federal Reserve chairmen have long explained their decisions to Congress and groups of economists using dry and technical language. On Sunday night, Ben S. Bernanke showed a different side of himself. Bernanke took questions from ordinary Americans in an unusual town-hall-style event in Kansas City, Mo., hosted by PBS anchor Jim Lehrer and set to be broadcast this week. It was part of a campaign by the Fed chairman to instill confidence in the economy and to position himself as a voice of calm leadership amid the financial crisis. Also, his term as chairman will end in January, and President Obama will decide in the coming months whether to reappoint or replace him.
Bernanke Unplugged! - the Heartland Tour, Kansas City - 26 July 2009
Ben Bernanke's Big Problem Ben Bernanke has proved that he's an effective public advocate for the Federal Reserve, ably defending it in front of his Capitol Hill inquisitors. One of his most effect talking points was to argue that the Fed has an effective "tool kit" to implement on "exit strategy" to prevent hyperinflation once the economy starts to recover. Unfortunately, Bernanke lacks the one tool he needs the most: a gauge to tell him when to use the other monetary policy tools.
Bernanke on the Campaign Trail: Does the Fed Chief Deserve Reappointment? Any doubts whether Ben Bernanke is lobbying for reappointment were dashed this weekend when the Fed chairman participated in a "Town Hall" style meeting in Kansas City. Starting Tuesday, the meeting will air this week in three installments on PBS's "The NewsHour with Jim Lehrer," but both the content and the intention of the campaign-style event are clear: Fearing a lack of support in the Obama Administration, Bernanke is taking his case for reappointment directly to the American people.
Upside Down and Backwards: Is Central Banking on Death's Door Step? In a rare lucid moment, British Prime Minister Gordon Brown recently quipped, "Technology means that foreign policy will never be the same again" Elaborating before a group of leading thinkers at the TED global conference in Oxford, England, Brown further explained, "The power of technology - such as blogs - meant that the world could no longer be run by "elites" While Mr. Brown didn't exactly enunciate it, he might as well have said, "the advances in technology [read: the internet] also mean that our system of fractional irredeemable fiat currency [read: backed by NOTHING] practiced by Central Banks like the Federal Reserve may also soon be passé too." This is largely due to the masses becoming informed about the world's biggest ponzi scheme, namely, irredeemable fiat currency - forget about the warm-up acts like Madeoff and sub-prime.
Call for Rapid Recovery Is Bubble All Its Own Hats off to officials in Seoul. South Korea's ability to expand at the fastest pace in almost six years is some of the best news Asia has had in a long while. It's a sign that even with the $14 trillion U.S. economy in chaos, Asia is beating the odds and holding its own. For now, at least. The region can't be complacent for two reasons. One, increased spending and low interest rates are fine for the moment, yet they don't replace a return of global demand. Two, loose policies may be doing more to fuel bubbles that merely provide the illusion of economic recovery, leaving Asia even more vulnerable to further problems in markets.
When the Revolution Begins, Socialism Ends
Newsweek Says: The Recession Is Over! The recession is over, Newsweek screams from the cover of its most recent issue, which is out today . . . Three things you need to know:
a) No, it isn't.
b) Magazines depend on rack sales for revenue.
c) Rack sales are driven by purposefully hyperbolic headlines, everything from "ELVIS LIVES!" to "The Recession Is Over!"
Is"Better Than Expected"Good? When you expect a failing grade, but just past that math class, is that "better than expected" necessarily good? Evidently on Wall Street, limping over the very low "expectations" hurdle has been enough to push stocks up and over to be solidly higher for the year. In the rear view mirror are now the market lows for this cycle, the worst economic collapse in a few generations and the broken banking system. The markets seem to be anticipating a better than 3% economic growth (that we don't see yet) based upon their 3+ month rally. Also missing in the analysis has been the decline in revenues by many of the companies reporting "better than expected" earnings, which came at the hands of cost cutting (read layoffs). Without revenue growth, sustainable earnings growth will be very hard to come by, making the current valuations of the markets seem a bit rich. While will the markets come to their economic senses? Judging by the recent market action, it could be a while - but look out when it does.
SEC rule on 'naked' short-selling now permanent SEC makes emergency rule targeting 'naked' short-selling permanent Federal regulators on Monday made permanent an emergency rule put in at the height of last fall's market turmoil that aims to reduce abusive short-selling. The Securities and Exchange Commission announced that it took the action on the rule targeting so-called "naked" short-selling, which was due to expire Friday. Short-sellers bet against a stock. They generally borrow a company's shares, sell them, and then buy them when the stock falls and return them to the lender -- pocketing the difference in price. "Naked" short-selling occurs when sellers don't even borrow the shares before selling them, and then look to cover positions sometime after the sale.
When Workers Attack! Thank god. Thank god that for all of the layoffs, vanished 401(k)s, and general economic devastation we still haven't seen any meaningful social unrest or violence in the US. There's been gun buying, but no pitchforks. That can't be said elsewhere, however. In China, India, Belgium and France (especially France), violent unrest has been common, with workers taking out their frustrations against their bosses in the form of kidnappings and even murder.
Dodd, Conrad told deals were sweetened Loan official says Dodd, Conrad were told they were getting VIP home loan deals Despite their denials, influential Democratic Sens. Kent Conrad and Chris Dodd were told from the start they were getting VIP mortgage discounts from one of the nation's largest lenders, the official who handled their loans has told Congress in secret testimony. Both senators have said that at the time the mortgages were being written they didn't know they were getting unique deals from Countrywide Financial Corp., the company that went on to lose billions of dollars on home loans to credit-strapped borrowers. Dodd still maintains he got no preferential treatment.
Obama czar pick: 'Raving animal rights nut' Nominee advocated hunting ban, giving creatures right to file lawsuits Martosko told Beck, "When you embrace this whole utilitarian idea, guess what else comes in the back door? Some animals, according to Singer, are worth more than some humans. A smart border collie, he says, is worth more, inherently, than a retarded child. … Cass Sunstein has embraced the whole enchilada. … He believes that animals should have some of the same rights as humans, in fact, greater rights than some people – including the right to follow lawsuits."
Guest David Martosko 7-22-09
Actually, There Will Be TWO Housing-Market Bottoms... Jim Cramer said six months a year ago that housing would bottom on June 30. He's been declaring victory ever since. Meanwhile, another group of analysts--Barry Ritholtz, Whitney Tilson, ourselves, et al--think Cramer & Co. are hallucinating. Prices have at least another 15% to fall! Part of the disconnect here is a failure to define exactly what one means by a "bottom." When prices continue to fall into next year, as they almost certainly will, those who say housing is bottoming now can always say they were talking about housing activity, not prices. Housing activity, as measured by housing starts, new home sales, and other similar measures, does appear to be bottoming.
Renters finding it cheaper to own a house For Aaron Carter, a musician who was struggling to fit a drum set, a piano and three guitars into his 600-square-foot apartment in Phoenix, the math on owning a home finally began to work in his favor. Rent for the apartment he shared with his wife: $615. Mortgage payment for a home with twice the space: $760. And the interest on a mortgage is tax deductible. So they jumped at the chance to buy some elbow room.
Main Street's soaring sour loans Small businesses that aren't considered 'too big to fail' are doing exactly that: Failing. As the effects of the economic collapse began pouring down Main Street, the government last year was left holding a record $2.1 billion in write-offs of small business loans it had guaranteed. Officials expect the number of defaults to rise as the nation continues to climb out of the recession. Records obtained under the federal Freedom of Information Act show the public is paying to offset bank losses on small business loans across the country, from a convenience store in the tiny Canadian border town of Houlton, Maine, to a graphic arts design company on the island of Hawaii, more than 5,000 miles away.
Verizon profit falls, eyes 8,000 job cuts Verizon Communications Inc posted a lower quarterly profit and said it would cut 8,000 jobs in its wireline business, as weakness in wholesale and corporate segments overshadowed wireless growth. Verizon, whose shares fell 2.6 percent on Monday morning, said it would accelerate cost cuts in its landline business, with new layoffs amounting to 3.4 percent of its workforce of 235,000 employees. They come on top of 8,000 job cuts in the last year.
Past, Present And Future: All In the Numbers While recent economic data have shown signs of improvement, there just haven't been that many numbers to look at lately. That changes this week, with several important releases shedding light on the economy's recent past, its present and its future. For the economy just past us, Friday marks the release of second-quarter gross domestic product data. The numbers are expected to show that the economy shrank at a 1.5 percent annual rate from April through June. That would be much milder than the 5.5 percent rate of decline in the first quarter, but it would signify that the recession continued through the spring.
New-Home Sales Up 11%, Most Since 2000 Purchases of new homes in the U.S. climbed 11 percent in June, the biggest gain in eight years, underscoring evidence that the deepest housing slump since the Great Depression is starting to stabilize. Sales increased to a 384,000 annual pace, higher than every forecast in a Bloomberg News survey and the most since November, figures from the Commerce Department showed today in Washington. The number of houses on the market dropped to the lowest level in more than a decade.
Americans With Insurance Become Pivotal in Debate With the Obama administration's top domestic priority struggling in Congress, supporters and opponents of the current health-care proposals are now focusing on the constituency that both sides agree has become pivotal to the debate: the majority of Americans who have health insurance and, despite concerns, are generally satisfied with their care. Although polls have consistently shown that just over half of Americans think the health-care system is in need of reform, a substantial majority say they are satisfied with their own insurance and care. Any hope of changing the system will require their support, according to experts and advocates across the ideological spectrum.
The Scary Reason Healthcare Can't Be Reformed It turns out that if you want to find good examples of healthcare institutions meaningfully improving quality and reducing costs at the same time, you don't have to look very far. They're right here in our own backyard. The New York Times has a story on the unusual idea of paying doctors a flat salary, rather than fees for actions performed, thus cutting down on unnecessary tests to patients, while changing the incentive structure for the doctor:
Drugmakers May Pay for $100 Million in Health Ads Drugmakers may spend $100 million for an advertising campaign starting as early as September to push legislation that would overhaul the health-care system, said a person familiar with the discussion. The Pharmaceutical Research & Manufacturers of America, the industry lobbying group, discussed funding the ad campaign during a meeting in Washington last week, the person said. A PhRMA spokesman, Ken Johnson, said no decision has been reached on the group's campaign strategy for when Congress reconvenes after the August recess.
Bureaucracy drives up health care plan's costs House Democrats propose new boards, task forces The health care reform plan proposed by House Democrats would create at least a dozen new federal programs, boards and task forces, contributing to the proposal's hefty price tag that has drawn criticism from Congress' official scorekeeper. Democrats say the bureaucratic infrastructure is necessary to administer the expansion of health care benefits to the tens of millions of uninsured Americans while creating more competition for private insurers to drive down out-of-control costs.
Democrats Face 'Peril,' Opportunity for Health Plan President Barack Obama and Democratic leaders are trying to salvage health-care legislation as disputes within their own party stall progress on the president's top domestic priority. Senate Finance Committee Chairman Max Baucus is struggling to get a bipartisan deal on his panel before an Aug. 7 recess after weeks of delay, and party leaders postponed a vote by the full Senate until September. Leaders in the House, which is scheduled to adjourn July 31, are fighting to contain a mutiny over the $1 trillion cost of the bill that last week had them threatening to force a quick floor vote.
Pastor James David Manning: White Folks Are Not Gonna Take It No More !!!
An Incoherent Truth Right now the fate of health care reform seems to rest in the hands of relatively conservative Democrats - mainly members of the Blue Dog Coalition, created in 1995. And you might be tempted to say that President Obama needs to give those Democrats what they want. But he can't - because the Blue Dogs aren't making sense. To grasp the problem, you need to understand the outline of the proposed reform (all of the Democratic plans on the table agree on the essentials.)
Dubai boom ends as one cheque in four bounces Up to one quarter of all the cheques written in Dubai may be bouncing as expatriate residents in the Gulf state struggle as the economy slows. Blank cheques are used to underwrite financial arrangements, such as credit cards, in Dubai, guaranteeing future payments such as a rental agreement or bank loan. This system arose in the United Arab Emirates (UAE), which includes Dubai, because of the difficulty of doing credit checks on foreign workers. As many of these workers have now lost their jobs in the recession, the number of bounced cheques has risen.
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