Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Fri 02.27.2009
America's $3 trillion IOU Obama's plan aims to reshape government at a high price The massive budget blueprint that President Obama released Thursday puts his stamp on the entire operation of the federal government - fulfilling campaign promises of redistributing the tax burden and stripping Bush-era policies that the Democrat dubbed irresponsible, while amassing more than $3 trillion in debt over the next two years. From making permanent a tax cut for workers to ending tax cuts for the better-off, the president signaled his vision for government in a document outlining massive new spending - $3.6 trillion in 2010 alone. The proposal would make a down payment on universal health care and tackle his No. 1 priority of curbing the effects of climate change. It greatly adds to the national debt, projecting deficits of $1.8 trillion in 2009 and $1.2 trillion in 2010.
Hitler's Economics For today's generation, Hitler is the most hated man in history, and his regime the archetype of political evil. This view does not extend to his economic policies, however. Far from it. They are embraced by governments all around the world. The Glenview State Bank of Chicago, for example, recently praised Hitler's economics in its monthly newsletter. In doing so, the bank discovered the hazards of praising Keynesian policies in the wrong context.
Government could own up to 36 pct. of Citigroup Citigroup reaches deal that could give the government up to a 36 percent stake in the bank The U.S. government will exchange up to $25 billion in emergency bailout money it provided Citigroup Inc. for as much as a 36 percent equity stake in the struggling bank. The deal announced Friday -- the third attempt at a rescue plan for Citigroup in the past five months -- is contingent on private investors also agreeing to a similar swap. The aim is to keep the New York bank holding company alive and bolster its capital as it faces growing losses amid the intensifying global recession. Existing shareholders would see their ownership stake shrink to as litte as 26 percent and the bank said it is eliminating all dividends on common shares.
Economy shrinks at fastest pace in 26 years Economy shrinks at faster-than-expected 6.2 percent pace in fourth quarter, worst in 26 years The economy contracted at a staggering 6.2 percent pace at the end of 2008, the worst showing in a quarter-century, as consumers and businesses ratcheted back spending, plunging the country deeper into recession. The Commerce Department report released Friday showed the economy sinking much faster than the 3.8 percent annualized drop for the October-December quarter first estimated last month. It also was considerably weaker than the 5.4 percent annualized decline economists expected. Looking ahead, economists predict consumers and businesses will keep cutting back spending, making the first six months of this year especially rocky.
China on gold buying spree to grab bullion market BEIJING: Chinese investors beware! Don’t get trapped in the glitter of gold. In China, investors have been rushing to gold following the crash of global markets. But, the investment in gold is also riddled with risk and this is a critical time now where investors should be cautious with their gold investment. According to analysts, gold can be a very good product for holding its value. But the risks for paper gold and gold futures are nearly 10 times bigger than real gold investment. Buying gold related stocks can also be a risky move.
Worried Investors Want Gold on Hand The global recession and worries about the stability of the financial system have sent the price of gold to $1,000 an ounce. But more surprising is that buyers are taking the unusual and expensive step of taking possession of it. "We're having some of our strongest months ever," said Scott Thomas, president and chief executive of American Precious Metals Exchange, a precious-metals dealer in Edmond, Okla. "The bottom line is our numbers are probably double what they were last year, and last year was very busy." Bob Coleman, who runs a bullion fund out of Nampa, Idaho, has taken multiple deliveries of gold and silver since last fall for his clients. The fund, Dollars and Sense Growth Fund, primarily invests in precious metals for high-net-worth individuals. "It's more of a trust issue," says Mr. Coleman. "Given all the turmoil in the market, people prefer to have access to the metal." Sales of American Eagle gold bullion coins at the U.S. Mint in Philadelphia more than doubled in the first two months of this year.
Gold Targets $1,200 as Central Banks Sales Dwindle Momentum and technical driven players with speculative short term horizons such as hedge funds are again pressurizing gold however the fundamentals of strong investment demand and anemic supply shall likely see gold well supported between $900/oz and $930/oz. A period of correction and consolidation was clearly needed and this will likely lead to gold targeting the $1,200/oz level in the coming weeks. While jewelry demand has fallen and scrap supply has increased significantly in recent weeks, this is being negated by the hugely increased investment demand for gold coins, bars, certificates and ETF’s. The increase in scrap supply is due to owners of jewelry selling in order to raise much needed cash. Ironically, it shows that there is no ‘mania’ for gold amongst the “man in the street” at the retail level. Quite the opposite, consumers internationally are selling their gold rather than buying.
Obama brings back era of big government Bill Clinton declared more than a decade ago "the era of big government is over." With his new budget, President Barack Obama has brought it back. Obama's $3.55 trillion budget proposal represents a gamble that Americans are ready for the sort of change they embraced by electing him in November, including a tax increase on Americans making more than $250,000 a year. He proposes expansion of spending on the U.S. healthcare system, on greater energy independence and on education, hoping Americans weary of paying for a raft of expensive bailouts for banks and the car industry will go along. "What I won't do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century -- investments that have been neglected for too long," Obama said in rolling out his plan on Thursday.
Obama’s Budget Plan Sweeps Away Reagan Ideas The budget that President Obama proposed on Thursday is nothing less than an attempt to end a three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters. The Obama budget — a bold, even radical departure from recent history, wrapped in bureaucratic formality and statistical tables — would sharply raise taxes on the rich, beyond where Bill Clinton had raised them. It would reduce taxes for everyone else, to a lower point than they were under either Mr. Clinton or George W. Bush. And it would lay the groundwork for sweeping changes in health care and education, among other areas. More than anything else, the proposals seek to reverse the rapid increase in economic inequality over the last 30 years. They do so first by rewriting the tax code and, over the longer term, by trying to solve some big causes of the middle-class income slowdown, like high medical costs and slowing educational gains.
The Obama Fraud: An Open Video to Barack Obama Supporters Barack Obama is being hailed by his supporters as one of the greatest leaders to ever guide America. He is the voice of hope and change that this county is dying for. Unfortunately, when you look past the side issues and media hype, you discover that there is little meaning to his rhetoric. He is controlled by the same corporate and globalist interests that Bush and Clinton were controlled by. He is a C.F.R. puppet and it is very dangerous to blindly support him. For the record, I am not a McCain/Bush supporting republican nor an Obama supporting democrat; I am a concerned American that cares about the Constitution.
What to Do in 'The Greater Depression' Bullion and oil appear in the lineup of power players that Doug Casey thinks investors can count on as the world slips deeper and deeper into what he calls the “Greater Depression.” Despite the raging economic storm and Doug’s doubts that Western civilization’s governments will take the actions needed to quell it, though, the Chairman of Casey Research is nowhere close to calling the game. In fact, he sees silver lining in the clouds of crisis—opportunity—and expresses optimism that technological advances, coupled with capital rebuilding once over-consumption runs its course, will prevail eventually. The Gold Report caught up with the peripatetic author, publisher and professional international investor between polo matches in New Zealand, one of several nation-states he calls home from time to time.
Obama's $2-3-Trillion Political Gamble It's the biggest spending bill of it's kind ever passed by Congress. And it only took a day for negotiators to reconcile the House and Senate versions of the bill. Congressional Democrats realized pretty quickly they had no choice but to basically agree to the demands of those three Senate Republicans. So they did, and did it relatively quickly. And the White House and Democrats say this bill meets President Obama's original demand to create or save 3.5-million jobs. The $789-billion stimulus bill is compromised of:
$242 billion for tax cuts
$311 billion for infrastructure, education and federal investments
$196-billion for aid to state, local governments, and individuals for food stamps and unemployment
We have never seen anything like this. Overall, with TARP money and money from the Federal Reserve, the government is pushing $2-3-trillion into the economy.
Dramatic Changes in the U.S Dollar / Gold Relationship Who knows where things will go from here - yesterday was certainly an interesting day for both the trade-weighted U.S. dollar and gold - but the relationship between the two certainly seems to have changed quite dramatically over just the last month. What used to be an inverse relationship that saw the two going in different directions more than 70 percent of the time has turned into a very positive correlation over just the last month or so, the two moving together for 15 consecutive days as of last Thursday.
Platinum-Gold price differential almost zero Platinum made a surprising jump higher in mid-February, reaching at $1,087/oz on the 12th, 11% above its level at the start of the month and its highest since September 2008. While such a move could easily be reversed, there are a few solid reasons why platinum has returned to favour. On the supply side, quarterly reports from the mining houses showed that production is responding to lower prices, albeit relatively slowly. The cutbacks will help erode what might have been a significant surplus this year. Looking at demand, sales of new vehicles might be stabilising, albeit at very low levels.
Obama budget pushes change, carries risks President Barack Obama has pulled out his most potent weapon -- the dry federal budget -- to try to carry out his promise of change, including winding down the Iraq war, expanding health care and tackling global warming. But in proposing a record $3.55 trillion federal budget for next year, Obama's gambit is full of political and financial risks that Congress will have to weigh when it debates his proposals and writes its own budget blueprint in coming weeks. The popular president, who came to office on January 20 with a vow of bipartisanship, is not expected to attract much support from opposition Republicans for a document that is packed with ever-rising domestic spending and tax increases on the wealthy. And even some of Obama's Democrats, who control both chambers, might have a hard time swallowing new spending and cuts in some sacred programs such as agriculture.
Bank 'Stress-Tests' Could Discourage Many to Lend The government's "stress-test" of the nation's largest banks could end up discouraging lending as banks hoard cash to appear healthier to regulators, banking analysts say. The reason: most banks want to avoid taking more government money because of the onerous restrictions the government places on the funds. As a result, they are likely to become even more conservative with their money and pull back on lending—defeating a major goal of the bank bailout in the first place. "The stress test may well create some unintended consequences, and among those unintended consequences would be the chance that banks would hoard capital leading up to the government examinations," says Greg McBride, senior financial analyst at Bankrate.com.
Why More US Banks Aren't Being Allowed to Fail With all the doom and gloom surrounding the banking industry from the toxic assets to the nasty recession, you’d think banks would be failing at a furious pace. Think again. Since the recession began in January 2008, the FDIC has closed just 39 banks—25 in 2008 and 14 thus far in 2009. By contrast, more than 1000 institutions were closed during 1988 and 1989 when the savings and loan crisis was at its peak. Another 850-plus failed in the ensuing three years when the S&L crisis intersected with the fairly mild recession of 1990-1991. In 1933, the government closed all 17,000 of the nation’s banks for a long, bank holiday weekend and some 5,000 never reopened. If all this doesn’t hold up to logic, then try politics. "It’s worse than the statistics indicate," says veteran bank analyst Bert Ely. "One of the problems is how slowly regulators move in dealing with this problem." Sure, there are more banks now than in the 1930s and 20 years ago — roughly 8,300 today — but analysts say that still doesn’t explain the huge difference.
China banks told to halt lending to US banks Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday. The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.
China to Stop Buying U.S. Debt? China has just under $2 trillion invested in America. Its appetite for U.S. debt allows the American government to continue to spend as if there is no tomorrow. But tomorrow is nearing. China is getting fed up with buying America’s debt. In a global recession, a lot of strategic assets are priced cheap, and China has a lot of money. According to official figures, China owns $1.95 trillion in foreign assists. Brad Setser of the Council on Foreign Relations says that in reality the figure is around $2.3 trillion. Setser estimates that $1.7 trillion of these assets are dollar denominated, making China the largest creditor to the United States. Last year, China lent America $400 billion—a sum equivalent to more than 10 percent of China’s gross domestic product. “Day after day, China is the single biggest buyer of treasury bonds in the market,” wrote Setser in a recent report. “Never before has the U.S. relied so heavily on another country’s government for financing.”
The Coming Depression: See It Clearly Through Historical Eyes Over 95% of investors claim not to have seen the current downturn coming nor do they accept the probability of a coming depression (at least they did not by the end of 2007). There continues to be conversation whether we are near a bottom. Much money on the sidelines is eagerly waiting to go back into the market or more likely, existing investments with big book losses waiting for the market to recover. Yet when our probable course is viewed in historical terms, there is a very clear and likely path, much further reduction in the value of everything particularly including real estate, equities, bonds and most commodities (gold is shaping up as a hedge against the problems). What does history tell us?
Jim Rogers: Become a farmer if you want to survive the coming Collapse Expect turmoils and civil unrest in the US in the coming few years.
'There will be blood' Harvard economic historian Niall Ferguson predicts prolonged financial hardship, even civil war, before the ‘Great Recession' ends Harvard author and financial crisis guru Niall Ferguson has landed with a thud in Ottawa, spreading messages that could make even the most confident policy makers squirm. The global crisis is far from over, has only just begun, and Canada is no exception, Mr. Ferguson said in an interview before delivering a presentation to public-policy think tank, Canada 2020. Policy makers and forecasters who see a recovery next year are probably lying to boost public confidence, he said. And the crisis will eventually provoke political conflict, albeit not on the scale of a world war, but violent all the same. “There will be blood.” The Buy America penchant pushed by the U.S. Congress in passing the recent stimulus bill was only the tip of the iceberg. Abu Dhabi buying Nova Chemicals at bargain-basement prices on Monday is a sign of things to come, with financial power quickly being transferred over to the world's creditors – namely sovereign wealth funds – and away from the world's debtors. And much of today's mess is the fault of central bankers who targeted consumer-price inflation but purposefully turned a blind eye to asset inflation.
California’s Newly Poor Push Social Services to Brink In California’s Contra Costa County, 40,000 families are applying for just 350 affordable-housing vouchers. Church-operated pantries are running out of food. Crisis calls have more than doubled in the city of Antioch, where the Family Stress Center occupies the site of a former bank. The worst financial crisis in seven decades is forcing thousands of previously middle-income workers to seek social services, overwhelming local agencies, clinics and nonprofits. Each month 16,000 people, including many who were making $60,000 to $100,000 annually just a few years ago, fill four county offices requesting financial, medical or food assistance. “Unless we do things differently, not only will we continue to be on life support, but the power to the machine is going to die,” said county Supervisor Federal Glover, who represents Antioch and the cities of Pittsburg and Oakley about 50 miles (80 kilometers) east of San Francisco.
Las Vegas Running Out of Water Means Dimming Los Angeles Lights On a cloudless December day in the Nevada desert, workers in white hard hats descend into a 30- foot-wide shaft next to Lake Mead. As they’ve been doing since June, they’ll blast and dig straight down into the limestone surrounding the reservoir that supplies 90 percent of Las Vegas’s water. In September, when they hit 600 feet, they’ll turn and burrow for 3 miles, laying a new pipe as they go. The crew is in a hurry. They’re battling the worst 10-year drought in recorded history along the Colorado River, which feeds the 110-mile-long reservoir. Since 1999, Lake Mead has dropped about 1 percent a year. By 2012, the lake’s surface could fall below the existing pipe that delivers 40 percent of the city’s water.
The Three Missteps in President Obama’s Economic Turnaround Plan U.S. President Barack Obama’s speech to the joint session of Congress late Tuesday was a beautiful performance. His language was exquisite, his delivery was superb, his rhetoric - at times - truly uplifting. It no doubt reflects a fault in my makeup that I found it not entirely convincing - but then I’m a math major and a former banker. The speech - which took the place of the State of the Union address since it’s Obama’s first year in office - concentrated almost entirely on economics, and in particular on the financial and economic crisis currently facing the United States. President Obama’s comments were least convincing when they focused on the financial aspects of the crisis.
Facts and figures from Obama's first budget President Barack Obama on Thursday released an outline of his budget for fiscal year 2010 that begins October 1. The budget is a summary version of a more detailed proposal he will release in April. Here are some details: DEFICIT Obama forecast a budget deficit of $1.75 trillion in the current fiscal year 2009. That is equivalent to 12.3 percent of gross domestic product (GDP), making it the highest deficit as a share of the economy since World War Two. The deficit totaled $455 billion in 2008, which was an all-time high in dollar terms.
Obama’s Budget Chief Doesn't Know Total Cost of Obama's Health-Care Plan Even President Obama’s budget chief doesn’t know how much it will eventually cost to enact the president’s vision of health-care reform. The proposed $3.5 trillion budget for the 2010 fiscal year, which would raise the federal deficit to $1.75 trillion, contains $634 billion for health-care reform to come from tax increases and “savings” in the medical system – money to expand health coverage for Americans currently without health insurance. But Peter Orszag, the director of the White House Office of Management and Budget (OMB), was unable – when asked by CNSNews.com – to come up with the total cost for Obama’s plan to reform the nation’s healthcare system.
Obama budget plan forecasts soaring deficits President Barack Obama forecast the biggest U.S. deficit since World War Two in a budget on Thursday that urges a costly overhaul of the healthcare system and would spend billions to arrest the economy's freefall. An eye-popping $1.75 trillion deficit for the 2009 fiscal year underlined the heavy blow the deep recession has dealt to the country's finances as Obama unveiled his first budget. That is the highest ever in dollar terms, and amounts to a 12.3 percent share of the economy -- the largest since 1945. In 2010, the deficit would dip to a still-huge $1.17 trillion, Obama predicted. With that backdrop, his budget represents a gamble that Americans are ready for the sort of change they embraced by electing him in November -- a shift of wealth through higher taxes on the rich to pay for more government attention to healthcare, education, climate change and social programs.
Obama budget has $5 billion for infrastructure bank U.S. President Barack Obama called for the creation of a National Infrastructure Bank in his budget released on Thursday, saying it would "expand and enhance existing federal infrastructure investments." "The mission of this entity will be to not only provide direct federal investment but also to help foster coordination through state, municipal and private co-investment in our nation's most challenging infrastructure needs," according to budget documents. The budget, which must be approved by Congress, requests $5 billion for the bank in fiscal year 2010 which starts October 1, and anticipates that it will receive $25.2 billion from then through 2019.
Debt markets take fright at 'EU bond' The capital markets have become increasingly uneasy over proposals to use the European Investment Bank as an all-purpose fireman to prop up weaker regions of the eurozone or come to the rescue of Eastern Europe. The borrowing cost on the EIB's 10-year bonds has risen to 90 basis points above the benchmark German Bunds. The yield is now closer to the borrowing costs of Spain and even Italy, suggesting that investors already suspect the bank will be used to issue "EU bonds" for rescue purposes – whatever its original mandate. The EIB, the world's biggest multilateral lender, was able to borrow for years at rates that were almost the same as the German government – or even lower – enabling the entire EU to take advantage of the Germany's credit-rating for project finance. The change has been abrupt. The bank said this week that yields had been pushed up by the avalanche of sovereign bond supply as governments around the world tap investors for $3 trillion (£2.1 trillion) of fresh money. But EIB debt has been hit surprisingly hard.
Peter Schiff Reaction to the State of the Union Address Feb-24-09
Obama Budget Includes $634 Billion for Government-Funded Health Care President Barack Obama is sending Congress a budget Thursday that projects the government's deficit for this year will soar to $1.75 trillion, reflecting efforts to pull the nation out of a deep recession and a severe financial crisis. A senior administration official told The Associated Press that Obama's $3 trillion-plus spending blueprint also asks Congress to raise taxes on the wealthy in 2011 and cut Medicare costs to provide health care for the uninsured. The president's first budget also holds out the possibility of spending $250 billion more for additional financial industry rescue efforts on top of the $700 billion that Congress has already authorized, according to this official, who spoke on condition of anonymity before the formal release of the budget.
Obama healthcare plan relies on the evidence President Barack Obama's budget proposal relies on the evidence when it comes to healthcare reform, using research done by government and other groups on the best ways to change the system and save money. It pulls heavily from reports by the Commonwealth Fund, Institute of Medicine and others that show extending health insurance coverage to more people will save money by preventing illness or catching diseases early, before they become expensive. About 46 million Americans have no health insurance. The nonprofit Commonwealth Fund has also published studies showing that moving from paper medical records and prescribing to electronic technology can save money. Health information technology is a cornerstone of the Obama healthcare reform plan.
Insurers, drugmakers take hit under Obama plan U.S. President Barack Obama's 2010 budget proposal takes direct aim at drugmakers and health insurers to help fund an overhaul of the U.S. healthcare system. His plan, outlined Thursday, calls for lowering Medicare payments to private insurers, allowing consumers to buy cheaper medicines from overseas and preventing drug companies from making deals that block generic competition. Shares of U.S. health insurers suffered, with Humana Inc down 19 percent, Aetna Inc off 11 percent, Cigna Corp down 7 percent, UnitedHealth Group Inc off 12 percent and WellPoint Inc down 9 percent in afternoon trading. Shares of drugmakers also fell. The American Exchange Pharmaceutical Index, which includes GlaxoSmithKline Plc, Merck & Co Inc and Johnson & Johnson, was down 3.6 percent, underperforming the broader market. Congress will consider the White House proposal as it spends the coming months crafting a spending plan for fiscal 2010 that begins October 1. While Obama could seek action on anti-competitive drug deals and drug imports without Congress, many other changes would need lawmakers to implement them through legislation.
U.S. Companies Will Continue to Pull Back Business Spending on Durable Goods The nosedive in U.S. durable goods orders is more proof the slump in the economy is far from over and companies will continue to cut back on business spending. The drop "illustrates the magnitude of the current slump in investment and the overseas demand for US exports," Capital Economics economist Paul Ashworth said. Ex-transportation, durable goods orders fell 2.5% in January, against expectations for a 2.2% drop. No component saw improvement, save civilian aircraft and communication equipment orders. "Off on the wrong foot? That's an understatement! 2009 started off with the economy being in its maximum state of recession stress," Dr. Ken Mayland, economist at ClearView Economics, said following the report.
GM posts $9.6 billion fourth-quarter loss DETROIT -- General Motors Corp. posted a $9.6 billion fourth-quarter loss and said it burned through $6.2 billion of cash in the last three months of 2008 as it fought the worst U.S. auto sales climate since 1982 and sought government loans to keep the century-old company running. The nation’s biggest domestic automaker said Thursday it lost $30.9 billion for the full year and expects to state in its upcoming annual report whether its auditors believe the company remains a “going concern.” GM and its auditors must determine whether there is substantial doubt about the automaker’s ability to continue it operations. Chief Financial Officer Ray Young said the determination will depend a lot on whether GM gets further government loans and whether it can accomplish its restructuring goals.
GM posts $30.9 billion loss, keeps spending billions DETROIT - For General Motors Corp. nothing has stopped the bleeding. Not cutting 50,000 jobs in the U.S. Not closing 11 factories. Not $13.4 billion in government loans. The teetering company, once the symbol of American industrial might, revealed today that it burned through $19.2 billion in cash last year on its way to a $30.9 billion loss. The century-old automaker said its only hope of living another year is more aid from the government. GM has continued to spend on a company too big for the market, paying workers when plants are closed and covering other costs such as machinery, marketing, pensions and healthcare. Expenses are so high and income so low that GM warned that auditors are reviewing whether it can continue as "going concern." Auditors are determining whether there is substantial doubt about the company's ability to stay in business.
Peter Schiff - Austrian Economist Peter Schiff applies Austrian Economics on a wide range of topics.
Billions flow to water, sewer funds in Obama budget U.S. states would get a significant bump in funds for clean drinking water and sewer systems under the budget President Barack Obama proposed on Thursday. According to budget documents, $3.9 billion would go to the Clean Water State Revolving Fund and the Drinking Water State Revolving Fund in an "historic increase" that would fund more than 1,700 water projects in states, Native American tribes and territories. That comes on top of $4 billion that will go to the funds through the recently-enacted economic recovery plan. The Environmental Protection Agency estimates that for every federal dollar put into these funds, at least $2 in financing is provided to municipalities, according to the budget supplement. The states' revolving funds use federal money for leverage and for offering low interest loans to communities.
Obama seeks higher taxes on private equity in 2011 Corporate takeover financiers could be hit by steeper taxes on certain profits starting in fiscal 2011 under a long-range federal budget outline released by President Barack Obama on Thursday. In a move that would hurt private equity and hedge fund managers, Obama's plan calls for increased federal revenues of $2.7 billion in fiscal 2011 from taxing so-called "carried interest" as ordinary income. Carried interest is the main source of profits for partners in private equity firms, some hedge fund deals and other partnerships involving oil and gas, timber and real estate. At present, the carried-interest system allows partners in such firms to take 20 percent of returns for investing just 1 or 2 percent of their own money in a fund. Carried interest is taxed at the 15 percent capital gains rate, not the ordinary income rate of up to 35 percent.
Panel Suggests Higher Gas Tax A commission established by Congress to study options for financing the nation’s roads and bridges recommended on Thursday raising the federal gas tax by 10 cents a gallon. In a report, the National Surface Transportation Infrastructure Financing Commission cited a “crisis” of neglect for infrastructure, and also called for an eventual switch to a tax based on miles driven, rather than gasoline consumed.
Taxing motorists by the mile: Inevitable Taxing motorists by the miles driven, as opposed to gallons of gas consumed, is the way to go - according to a federal commission's report today. Trouble is, the White House already has deemed the idea of a Vehicle Mileage Traveled tax "a no go'' -- the words of the White House press secretary the day it was reported that the president's transportation secretary was talking up the VMT tax. "The White House was somewhat premature'' in its reaction to Transportation Secretary Ray LaHood's creative thing, says Robert Atkinson, chairman of the National Surface Transportation Infrastructure Financing Commission mileage plan. The nation's reliance on gas taxes is unsustainable and "likely to erode more quickly than previously thought," the commission's report released today says. Spending per mile traveled has dropped almost 50 percent, adjusted for inflation, since the Highway Trust Fund was created in the late 1950s.
Fannie Mae seeks $15.2B in US aid after 4Q loss Fannie Mae seeks $15.2 billion in government aid after posting $25.2 billion 4th-quarter loss Fannie Mae said Thursday it needs $15.2 billion in government aid -- though that figure is expected to grow -- because it lost nearly $59 billion last year as the foreclosure crisis mushroomed. The Washington-based mortgage finance company hemorrhaged $25.2 billion, or $4.47 per share, in the fourth quarter. That compares with a loss of $3.6 billion, or $3.80 a share, in the year-ago period. Fannie's net worth -- the value of its assets minus the value of its liabilities -- fell below zero at the end of the quarter, forcing the company to request funding from the government for the first time. The government seized control of Fannie Mae and its sibling Freddie Mac in September and last week doubled their lifelines to $200 billion each to guarantee they would never fail. Treasury Secretary Timothy Geithner said the increase in cash is "not a judgment about the expected losses ahead. It's just a way to make sure people understand that they will be able to play this role going forward."
The Schiff Report 2nd episode Feb 24 2009
J.P. Morgan to cut 12,000 jobs related to WaMu deal The New York bank expects about $2 billion in net savings to be achieved through the acquisition of Washington Mutual, including about $1.4 billion related to the job cuts. J.P. Morgan Chase & Co. said Thursday it will eliminate about 12,000 jobs as it folds in the operations of Washington Mutual Inc. According to slides on the company's Web site from an investor day presentation, the New York bank expects about $2 billion in net savings to be achieved through the acquisition, the majority of which will be realized by the end of this year. This includes about $1.35 billion related to the job cuts, the bank said.
Jobless Claims Data Points to Possible 750k Loss in U.S. Nonfarm Payrolls The upside surprise in U.S. initial jobless claims points to a continued deterioration of the U.S. labour market, and the possible loss of up to 750,000 jobs in February's official nonfarm payrolls report. Initial claims rose to 667k in the week ending Feb. 21, well above the 625k level economists had expected. The previous week's reading was also upwardly revised to 631k, the U.S. Department of Labor reported. Continuing claims rose above expectations as well, coming in at 5.112 million compared to the 5.025 million expected. Ken Maylan of ClearView Economics called the rise in initial claims "painful," but noted that on an adjusted basis, weekly claims exceeded 1 million claims in the 1982 recession.
Laid Off? No New Job? How Bad Can It Get? Yes, times are tough. The big banks are on life support. Home prices are in the pits. The stock market's tanked. Unemployment's way, way up. And … uh-oh. How are you doing? What about your home? Your investments? Your job? How safe is it? What's the worst that can happen to you? We put that question to the expert -- Joshua Piven, author of the best-selling "Worst-Case Scenario Survival Handbook" series. His tongue-in-cheek answer is not pretty: "You lose your job, you run out of savings or a safety net, have to sell [your] home, it's a down market and you can't sell your house, you move, pull the kids out of school, it's not easy to get another job and your whole lifestyle has to change. "Then there's homelessness, maybe spiraling alcoholism, and then living on the side of the train tracks." Ugh. More people are facing an extended period of joblessness and the potential financial difficulties that go along with it.
BofA CEO Ken Lewis keeps lips sealed BofA CEO Lewis refuses to give names of Merrill execs who got bonuses; NY AG issues subpoena The New York attorney general's office has subpoenaed Bank of America Corp. seeking the names of Merrill Lynch executives who received $3.6 billion in year-end bonuses, after Chief Executive Ken Lewis failed to provide those details during a lengthy deposition Thursday evening. Lewis, who traveled to New York on the company's corporate jet, said that he "answered the questions that were asked to the best of my knowledge." Lewis' deposition was part of an ongoing investigation by New York Attorney General Andrew Cuomo into the timing of Merrill Lynch's bonuses and whether proper disclosure was made to shareholders about the size of the bonuses. They were granted just before Bank of America's acquisition of Merrill closed, and as that bank was seeking additional government aid on top of $25 billion it had already received.
FBI arrests Stanford Financial Group exec Chief investment officer for Stanford Financial Group arrested on obstruction charge FBI agents arrested the chief investment officer of troubled Stanford Financial Group on Thursday, accusing Laura Pendergest-Holt of obstructing a Securities and Exchange Commission fraud investigation. The SEC has been investigating allegations of an $8 billion investment fraud involving Texas billionaire R. Allen Stanford's financial group. Pendergest-Holt was arrested in Houston, where Stanford Financial Group is based. The FBI said she was taken to the federal detention center and would appear in federal court Friday morning for an arraignment. "She is looking forward to working with the government to get all the facts out and put this behind her," her attorney Brent Baker said Thursday night.
Peter Schiff names the Top Culprits Chief culprit is Alan Greenspan . . .
Senate Votes Down Fairness Doctrine The Senate has barred federal regulators from reviving a policy, abandoned two decades ago, that required balanced coverage of issues on public airwaves. The Senate vote on the so-called Fairness Doctrine was in part a response to conservative radio talk show hosts who feared that Democrats would try to revive the policy to ensure liberal opinions got equal time. The Federal Communications Commission implemented the doctrine in 1949, but stopped enforcing it in 1987 after deciding new sources of information and programming made it unnecessary.
Vast Majority of Baby Boomers Have Accumulated Little to No Wealth Attention Baby Boomers: If you are trying to sell your home, more than 30% of you will have to bring money to the table. And the combination of falling house and stock values means that the vast majority of people near retirement have accumulated little or no wealth, meaning they will be almost completely reliant on Social Security and Medicare to support them in their retirement years. These are the findings of “The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble,” a report by the Center for Economic and Policy Research (CEPR), a non-partisan research firm. “The collapse of the housing bubble, which led to the current recession, has already destroyed almost $6 trillion dollars in housing wealth for homeowners,” said report co-author Dean Baker, who will testify today before the Senate Special Committee on Aging. “This reality is compounded by the recent collapse of the stock market. The result is that many baby boomers will only have Social Security and Medicare to rely on in their retirement.”
Rocky Mountain News closing after Friday edition DENVER – The Rocky Mountain News, Colorado's oldest newspaper and a Denver fixture since 1859, will publish its last edition Friday. Owner E.W. Scripps Co. said Thursday the newspaper lost $16 million last year and the company was unable to find a buyer. "Today the Rocky Mountain News, long the leading voice in Denver, becomes a victim of changing times in our industry and huge economic challenges," Scripps CEO Rich Boehne said. The News is the latest — and largest — newspaper to fail amid a recession that has been especially brutal for the industry. Four owners of 33 U.S. daily newspapers have sought Chapter 11 bankruptcy protection in the past 2 1/2 months. A number of other newspapers are up for sale. "People are in grief, and they're very, very upset trying to process all the emotions that go with it and trying to recognize that we will be putting out our final edition tomorrow," said News publisher John Temple.
NRA-ILA Grassroots Minute 02/27/09
Light At The End Of The Tunnel Turned Off! t is a painful time for Americans of my age. We have the memories of an America, glorious and honorable in her past—a past, which has been forgotten and erased, in many cases, from the history books of America’s students… Above all things our America was honorable. A young American today would be hard pressed to define “honor.” To define “dishonorable” is much easier. One has only to turn one’s attention to the actions of the American Congress, ruled by the American Left, for a real-time view of dishonor. As we Americans view ourselves in that inner mirror, we can know that even today, America can be defeated… only by herself. And that is the shameful path we have chosen. One of our Founding Fathers and President, John Adams, once said: “Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.
Montana Senate Approves Pro-Life Personhood Amendment Montana became the first state on Thursday to pass a Personhood Amendment – which establishes legal rights for humans from the moment of conception – in the state Senate. SB 406 states: “All persons are born free and have certain alienable rights … person means a human being at all stages of human development of life, including the state of fertilization or conception, regardless of age, health, level of functioning, or condition of dependency.” "Senator Dan McGee, writing the language of SB 406 himself, has shown what it truly means to be pro-life," Keith Mason of Personhood USA said in a statement. "Senator McGee's successful efforts on behalf of all human beings at all stages of human life are a giant step forward in historic efforts to ensure the rights and protection of every individual."
Dr. Tiller to Stand Trial for Late-Term Abortions A judge has refused to toss out the criminal case against a doctor accused of violating Kansas' late-term abortion law. Sedgwick County Judge Clark Owens on Wednesday denied a defense request to dismiss charges against Dr. George Tiller of Wichita or throw out evidence because of the conduct of former prosecutor Phill Kline. Owens found that Kline's conduct during the investigation of Tiller did not warrant such action.
Judge denies Tiller motion to dismiss case Sedgwick County District Judge Clark Owens on Wednesday denied a motion by lawyers for Wichita abortion provider George Tiller to dismiss his criminal case. The ruling prompted a lawyer for former Kansas Attorney General Phill Kline to say Kline's investigation of Tiller had "once again been vindicated." Tiller will go to trial March 16 on 19 misdemeanor counts related to how he obtained second opinions for late-term abortions. "We are continuing forward with the case and preparing for trial," said Ashley Anstaett, spokeswoman for Attorney General Steve Six, whose office is prosecuting the case.
Japanese Opposition Wants American Troops Out of Japan The number of American troops stationed in Japan should be cut as Tokyo takes on more responsibility for its own defense, says Japanese opposition leader Ichiro Ozawa. According to United Press International, Ichiro Ozawa, leader of the main opposition Democratic Party of Japan, said Tuesday that stationing U.S. soldiers in Japan doesn’t make much sense given the geopolitical realities of the day, the Kyodo news agency reported. “I think putting Japan-based troops on the front line does not have much significance in times like these, and the 7th Fleet would be enough for the U.S. presence in the Far East from a strategic viewpoint,” Ozawa told reporters in Kashiba, Japan.
Pakistan needs 'urgent' help The United States and its allies must act urgently to prevent Pakistan - the only predominantly Muslim nation with nuclear weapons - from descending into a spiral of economic, security, and political crises, according to a new report released here by an influential think-tank. The 27-page report, "Needed: A Comprehensive US Policy Towards Pakistan", called for at least US$4 billion to $5 billion in new aid for Islamabad of which $1 billion should be earmarked for the military and the police, to help ward off the growing threat posed to the central government by Islamic militants based in the frontier regions with Afghanistan and linked to al-Qaeda. "Simply put, time is running out for stabilizing Pakistan's economy and security," the task force warned. "We cannot stress the magnitude of the dangerous enough nor the need for greater action now," it stressed, adding that failure to provide needed assistance could well result in "state failure".
Ahmadinejad’s Apocalyptic Ambitions “Oh Allah, give me the strength to hasten the return of the Promised One.” That is an unusual request, particularly given the stage on which it was made. For the few ever given the opportunity to speak before world leaders at the UN General Assembly, the occasion is generally used to define and debate world problems, advance national foreign policy, garner support for humanitarian programs or request financial assistance. Iranian President Mahmoud Ahmadinejad is different. Given the opportunity, he has no compunction about standing before world leaders, bowing his head, and praying for the personal strength to usher in the return of the Promised One.
Why the U.S. Government Should be Cut Off Like a Subprime Borrower By Peter Schiff With millions of homeowners now struggling to repay money that they clearly never should have borrowed, our leaders have been righteously wagging fingers at predatory lenders who allegedly enticed innocent borrowers, and the country, into a financial snake pit. While the mortgage industry clearly deserves a good share of the blame, unindicted co-conspirators abound. The ringleaders are still at-large and are, in fact, busy hatching a plan that would dwarf their earlier mistakes. Contrary to the message bouncing off the marble walls of the Capitol building, most borrowers in the inflating housing bubble clearly understood the terms of their loans. Most knew that they could not afford their mortgage payments once their teaser rates expired, but enthusiastically jumped into the debt pool anyway, believing that guaranteed real estate appreciation, or a quick and profitable sale, would keep them afloat, or bail them out.
A Second Try at Calming Bank Investors Government Wants New Infusions to Be Regarded as Capital The revised financial aid plan for troubled banks that the Obama administration is launching this week is the government's second attempt to convince investors that it is giving banks the money they need to cover mounting losses and survive the recession. The government has insisted that its investments should be counted as capital, the reserve that banks must maintain against losses. The Bush administration went so far last year as to rewrite the regulatory definition of capital to include the federal aid, which comes in the form of preferred shares.
Gold Most Favored Investment This Year, World Gold Council Says Gold is the most favored investment this year ahead of investment-grade bonds and other assets, according to a survey of investment advisers, the producer-funded World Gold Council said. About 60 percent of the 31 advisers surveyed in Europe expect investors to take fewer risks this year compared with 2008, while about 30 percent expect investors to be less risk averse, the London-based council said today in a report. Almost 60 percent expect better market conditions this year.
Bernanke: Bail out bad borrowers too Federal Reserve Chairman Ben Bernanke said Wednesday that the embattled housing market has crippled the economy, and at-risk homeowners need a bailout - even if they knew they couldn't afford their home in the first place. "Some borrowers presumably knew what they were getting into," Bernanke said before the House Financial Services Committee. "But from a public policy point of view, the large amount of foreclosures are detrimental not just to the borrower and lender but to the broader system." "In many of these situations we have to trade off the moral hazard issue against the greater good," he added. Bernanke's comments come after President Obama unveiled a $75 billion plan Feb. 18 to help up to 9 million borrowers suffering from falling home prices and unaffordable monthly payments. Borrowers with little or no equity will be able to refinance their mortgages at the current market rate, and monthly payments will be reduced for at-risk borrowers.
Plan to Repair U.S. Banking System Unveiled by Former Hedge Fund Manager The economic house of the United States is ready to collapse upon itself, leaving us exposed and defenseless against the next Great Depression. Bureaucratic handymen with a staple gun and a trillion-dollar roll can’t paper over holes in bank balance sheets or fill in the others created by plunging consumer spending. It won’t work. What is needed - and what would arrest the slide in U.S. housing prices - is a renewed general confidence in protective regulations, and tax incentives for investors to buy troubled assets and to make equity investments in banks.
In Geithner We Trust Eludes Treasury as Market Fails to Recover It was 2004 and Tim Geithner, president of the Federal Reserve Bank of New York, had a message for the Federal Open Market Committee in Washington. He told his 18 colleagues gathered around the long mahogany table that a clearinghouse was needed to monitor risks in the burgeoning $5 trillion market for credit-default swaps -- the over-the-counter derivatives that would later spin out of control and help take down Wall Street. In a move that may have foreshadowed his role as President Barack Obama’s Treasury secretary, Geithner over the next two years nudged financial firms to voluntarily clear a backlog of swap trades. They stopped short of creating a clearinghouse to bring more transparency to the market.
U.S. Sets a Six-Month Deadline for New Bank Capital The government set a six-month deadline for the biggest 19 U.S. banks to raise any new capital deemed necessary after a mandatory review of their balance sheets. The regulators will oversee the so-called stress tests by the end of April, which will identify how much extra cushion each bank will need, the Treasury said today in Washington. Lenders will have six months to raise private capital or accept government funds and the conditions that come with it. “While the vast majority of U.S. banking organizations have capital in excess of the amounts required to be considered well capitalized, the uncertain economic environment has eroded confidence in the amount and quality of capital held by some,” the Treasury said, announcing guidelines for new bank reviews.
Obama Showers Wall Street Fees With Muni Stimulus While U.S. President Barack Obama criticized Wall Street bonuses, his stimulus plan offers bankers the opportunity to boost fees with incentives that may lead to $65 billion in municipal bond sales. School districts and local borrowers from Pennsylvania to California have already sold $465 million of tax-exempt bonds since Feb. 17 under revised rules in Obama’s stimulus package, signed last week, according to data compiled by Bloomberg. Municipal Market Advisors, a Concord, Massachusetts-based research firm, estimates the new measures may drive more than $65 billion in new bond sales through 2010. Banks that advise state and local governments and market their debt may collect $314 million in fees as a result of the sales, based on Bloomberg data. Municipal bond offerings, which totaled $392 billion last year, may expand as underwriters urge clients to take advantage of the stimulus tax breaks.
Gov't says 'mass layoffs' soared in January A purist could argue that the word nationalization should only be used to describe situations in which the government owns a company, the government runs the company and the government plans to keep on running the company. That kind of nationalization is wildly unpopular in the United States. So it's no surprise that Obama administration officials have objected so vigorously when their plans to rescue the banking industry are described as a form of nationalization. To understand why others continue to use the word, however, it's helpful to consider each of three components: Ownership, control and long-term intent.
What Is 'Nationalization'? Depends Who You Ask. A purist could argue that the word nationalization should only be used to describe situations in which the government owns a company, the government runs the company and the government plans to keep on running the company. That kind of nationalization is wildly unpopular in the United States. So it's no surprise that Obama administration officials have objected so vigorously when their plans to rescue the banking industry are described as a form of nationalization. To understand why others continue to use the word, however, it's helpful to consider each of three components: Ownership, control and long-term intent.
The Best Argument Against Nationalization We are very much in favor of the US government forcing banks to tell the truth about how little their assets are worth (take the writedowns) and then going to the shareholders and bondholders to fill the capital hole. It is hard to see how the government can do this without actually temporarily seizing such banks. Thus, in cases where it is warranted, we support "nationalization." We are NOT, however, in favor of the government actually running the banks. This would be a disaster. One of the big flaws of the current approach to the crisis, in fact, is that the government is already quasi-managing the banks (see Citi), while insisting that it not actually taking them over. As today's Wall Street Journal illustrates, the current situation at Citi is probably worse than temporary nationalization.
Government Offers Details of Bank Stress Test The Obama administration ordered the nation’s 19 biggest banks on Wednesday to undergo stress tests to check whether they could hold up if the economy deteriorated further. But analysts say the administration’s worst projections, which it describes as unlikely, is not much more dire than what many private forecasters already expect. According to the new Treasury Department guidelines, the banks would have to assume that the economy contracts by 3.3 percent this year and remains almost flat in 2010. They would also have to assume that housing prices fall another 22 percent this year and that unemployment would shoot to 8.9 percent this year and hit 10.3 percent in 2010.
'Oil is good buy at $40. Gold is good buy at $900' Bullion and oil appear in the lineup of power players that Doug Casey thinks investors can count on as the world slips deeper and deeper into what he calls the “Greater Depression.” Despite the raging economic storm and Doug’s doubts that Western civilization’s governments will take the actions needed to quell it, though, the Chairman of Casey Research is nowhere close to calling the game. In fact, he sees silver lining in the clouds of crisis—opportunity—and expresses optimism that technological advances, coupled with capital rebuilding once over-consumption runs its course, will prevail eventually. The Gold Report caught up with the peripatetic author, publisher and professional international investor between polo matches in New Zealand, one of several nation-states he calls home from time to time.
Gold investments to boom in Middle East DUBAI: Amidst dwindling property prices, increasing unemployment and dip in equity trading, there is a glittering line of hope as far as gold investments are concerned in the Middle East nations. Gold investments across the Gulf countries are set for a sharp rise this year. According to the World Gold Council (WGC), several Middle East nations including the City of Gold, Dubai, are going to be action centers for gold investments. “We feel Middle East nations are going to witness lots of investments in gold sectors. Several global companies including gold mining processing and production companies are looking at Middle East for major investments,” says Lama Al Saheb, head of marketing WGC head of marketing in Middle East.
Home Sales and Prices Continue to Plummet Sales of previously owned homes fell 5.3 percent in January from December, an industry group reported Wednesday. The National Association of Realtors reported that existing-home sales, fell to an annual rate of 4.49 million in January, the slowest rate in more than a decade. Sales were down 8.6 percent from January 2008. The median home price fell to $170,300, its lowest point since March 2003. The median price in January was down 26 percent from its peak of $230,100 in July 2006.
Ben Bernanke and the Unabridged "May Happen" List for 2009 Satire From Lillpop Fed Chairman Ben Bernanke made instant headline news by telling Congress that America’s gut-wrenching recession MAY end in 2009… His words brought immediate relief to Wall Street investors and others worried about America’s dire economic circumstances, including President Obama who is not sure whether it is better to tell the American people that it will take many years to heal the mess, or to promise a miraculous halving of the deficit by the end of his first term. While the “Bernanke Bounce” was a welcome change of pace after six consecutive sessions of dreadful news, the Fed Chair made a number of other forecasts which he believes are just about as likely as an economic recovery in 2009.
Waiting for Inflation? It May Take Awhile Talk of the inevitable incoming inflationary spike has increased as gold broke through $1000 an ounce, Chairman Bernanke discussed the Fed retracting liquidity and money supply surged. Of course this chatter has spilled into the bond market and is one of the legs of the “short the bond bubble” theme. However, a close inspection of the mechanics of inflation suggest that it may be a long time before we have to worry about rising prices.
Tax Suspicions Grow on Swiss Accounts Federal authorities suspect the scandal over Americans’ secret offshore accounts at UBS, the big Swiss bank, runs far deeper than they believed only a week ago. While UBS admitted last week that it had failed to properly withhold American taxes on 17,000 accounts held by affluent Americans, the authorities are now investigating how the bank and its intermediaries handled taxes for an additional 35,000 accounts, according to two people briefed on the investigation. At issue is whether UBS withheld taxes, as required by American law, and, if so, where the money went, these people said. If UBS failed to collect taxes on all 35,000 accounts, the bank could owe the Treasury Department as much as $800 million in taxes, interest, fines and penalties, according to a tax lawyer briefed on the investigation, who spoke on the condition he not be named because he is representing UBS clients.
Peter Schiff "Obama should fire his economists and ask Ron Paul what to do!"
Stocks drop as Obama speech and housing data weigh Stocks fell on Wednesday as investors found little new in a major speech by President Barack Obama on how he planned to stabilize the economy, while gloomy home sales data weighed on the market. Long-standing worries about recession and the fate of the banking sector persisted despite Obama's speech to Congress on Tuesday night, sending shares of financial services companies, big manufacturers and energy companies lower. "The market was up 4 percent yesterday and I think that was probably a little excessive given the economic backdrop," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles. "There was a little bit of an overshoot to the upside yesterday and we're just giving some of that back early as President Obama didn't have anything substantive to say last night."
Obama urges quick action on Wall Street reform President Barack Obama called on Wednesday for a sweeping overhaul of Wall Street regulations, saying big changes were needed to avoid a repeat of the financial meltdown. Obama convened a high-level White House meeting on the issue that included Democratic and Republican lawmakers who said they would work with the administration to craft legislation in the next few weeks. Obama, a Democrat, said "painful experience" showed the rules needed to be modernized. The economy cannot sustain "21st century markets with 20th century regulations," Obama told reporters after the meeting with lawmakers.
Obama’s Cap on Carbon Pollution Is A Huge Tax Increase, Republican Lawmaker Says In his speech to Congress Tuesday night, President Barack Obama “committed himself to the largest annual tax increase in the history of America,” warns a Republican congressman. The implementation of a cap-and-trade system, something Obama favors, would raise $300- to $330-billion a year, said Sen. Jim Inhofe (R-Okla.). “As bad as the stimulus spending bill was, this would be much worse because instead of being one-time spending, the cap-and-trade tax increase would keep occurring year after year,” Inhofe said.
Higher Taxes, Fewer Govt. Services Coming Despite Obama's Pledge In his first address to a joint session of Congress last night, President Obama called for expensive and broad efforts in three major areas -- energy, health care and education. He also suggested government bailouts are far from over. In short, Obama outlined a broad, ambitious overhaul of domestic policy after eight years under President George W. Bush. Will the blueprint work? Our guest Joe Brusuelas, director of market economics for Moody's Economy.com, so far likes what he has heard, saying now is the time for decisive leadership on spending issues. And that's a compliment coming from Brusuelas, who publicly had supported Senator John McCain.
The next big financial meltdown? The mortgage and credit sickness that brought banks and brokers to their knees has now infected the companies that insure our lives and protect our families. The life insurance companies that millions of Americans entrust to help protect their families or pay the bills in their golden years are caught in a downward spiral eerily similar to the one that has brought down banks and brokers. Like Bear Stearns and Lehman Bros., life insurers Hartford Financial Services, Principal Financial Group, Lincoln National and many others all have significant exposure to mortgage-backed securities and other risky debt instruments. They're reporting huge losses that -- if they continued -- could trigger a meltdown.
Obama's words on home aid ring hollow President Barack Obama knows Americans are unhappy that their taxes will be used to rescue people who bought mansions beyond their means. But his assurance Tuesday night that only the deserving will get help rang hollow. Even officials in his administration, many supporters of the plan in Congress and the Federal Reserve chairman expect some of that money will go to people who used lousy judgment. The president skipped over several complex economic circumstances in his speech to Congress — and may have started an international debate among trivia lovers and auto buffs over what country invented the car. A look at some of his assertions:
Obama Seeks $634B over 10 Years for Health Care President Barack Obama's first budget will seek $634 billion over 10 years as a down payment on health care reform, a senior administration official said Wednesday. The official said Obama's proposal is meant to start a dialogue with Congress over how to provide coverage for an estimated 48 million uninsured while also slowing health care costs, which amount to $2.4 trillion a year and keep rising even as the economy is shrinking. The senior official spoke on condition of anonymity because the budget won't be released until Thursday. Obama's request comes on top of recent health care expansions approved by Congress and also described by his administration as down payments toward overhauling the health care system. Those include $32 billion to expand coverage for the children of low-income workers and $19 billion to speed the adoption of computerized health records.
This is a MUST-SEE Video . . . Testimony of illegal alien care from 1 Florida hospital
Obama Chooses Locke to Run Commerce Department President Barack Obama on Wednesday announced he has chosen former Washington Gov. Gary Locke as his nominee for Commerce secretary, trying a third time to fill a key Cabinet post for a country in recession. "I'm sure it's not lost on anyone that we've tried this a couple of times. But I'm a big believer in keeping at something until you get it right. And Gary is the right man for this job," Obama said, standing with the fellow Democrat in the Indian Treaty Room at the Eisenhower Executive Office Building near the White House.
A Contrived Crisis? You Decide Through a series of supposedly random but arguably deliberate chain of events, America is poised to jettison 220 years of a free market system called capitalism, in favor of the tried and failed system of socialism. Myself and others are now starting to question how we reached this point… Last summer, as McCain and Obama were in the midst of their campaigns to capture the presidency, a series of events dramatically changed the focus of the campaign from Iraq to the economy. From that point on, Obama took the lead and eventually won the presidency.
Citi customers angry about reported gov't plans Citigroup customers disgruntled as government considers taking a larger stake in the company The sight of a Citibank logo makes Rumi Turkel cringe. She's seen her banking fees climb, and found out Tuesday that interest rates on her savings accounts have fallen again. That's not to mention the substantial amount of money she says her family has lost from owning stock in the bank's parent company, Citigroup Inc. Like other Citi customers interviewed by The Associated Press on Tuesday, she is infuriated that the company has reportedly approached regulators about expanding government ownership of the bank, which has already received $45 billion in bailout money and guarantees to cover losses on hundreds of billions of dollars in risky investments.
Home sales sink unexpectedly, lowest since 1997 Home sales sink unexpectedly in Jan. to lowest level since 1997; rebound hinges on jobs, banks Sales of existing homes sank unexpectedly last month to the lowest level in nearly 12 years as potential buyers worried about their jobs and awaited details of President Barack Obama's plans to stabilize the housing market. But the banking industry's teetering fortunes and mounting job losses could stall any recovery. Falling prices and low mortgage rates don't make much of a difference for people who are out of work -- or fearful of losing their jobs. The most optimistic outlook is for a spring revival as home prices plummet. Government officials, hoping to spur demand, on Wednesday rolled out the details of a new $8,000 tax credit for first-time buyers. About 40 percent of all home sales last year were from first-time buyers.
Gov't says 'mass layoffs' soared in January 'Mass layoffs' increased sharply last month as companies cut costs amid worsening recession Employers took a large ax to their payrolls in January, the government said Wednesday, and the cuts are likely to get worse over the next few months. The Labor Department reported that mass layoffs, or job cuts of 50 or more by a single employer, increased to 2,227 in January, up almost 50 percent from the same month last year. More than 235,000 workers were fired as a result of last month's cuts. January was a bad month for the labor market. Companies from a wide range of sectors announced thousands of layoffs, including Home Depot Inc., Boeing Co., Pfizer Inc. and Caterpillar Inc.
U.S. consumer confidence plunges to record low in February U.S. consumer confidence plunged to another record low in February with expectations that already dire economic conditions will continue to weaken and the jobs market will further deteriorate. The Conference Board, an industry group, said on Tuesday that its sentiment index fell to 25.0 from a downwardly revised 37.4 in January. The median forecast of economists polled by Reuters was for a reading of 35.5. The February reading was a new all time low for the index, which began in 1967. "All in all, not only do consumers feel overall economic conditions have grown more dire, but just as disconcerting, they anticipate no improvement in conditions over the next six months," said Lynn Franco, director of The Conference Board Research Center.
Defaults by Franchisees Soar as the Recession Deepens List of Small Business Administration-Backed Bad Loans at 500 Brands Increased 52% in Most Recent Fiscal Year The recession is bruising businesses across the franchising industry. From ice-cream parlors to tanning salons, franchisees' defaults on loans guaranteed by the U.S. Small Business Administration are piling up in amounts unseen in years. A list of loans at 500 franchises shows the number of defaults by franchisees increased 52% in the fiscal year ended Sept. 30, 2008, from fiscal 2007. Loan losses totaled $93.3 million, a 167% jump from $35 million just 12 months earlier. The figures, a stark barometer of the downturn's severity and scope, could give pause to banks that have loan money about where to lend next. Banks that make SBA-guaranteed loans say they use the annual list as guidance in assessing future commitments.
U.S. is a vast arms bazaar for Mexican cartels PHOENIX: The Mexican agents who moved in on a safe house full of drug dealers last May were not prepared for the fire power that greeted them. When the shooting was over, eight agents were dead. Among the guns the police recovered was an assault rifle traced back across the border to a dingy gun store here called X-Caliber Guns. Now, the owner, George Iknadosian, will go on trial on charges he sold hundreds of weapons, mostly AK-47 rifles, to smugglers, knowing they would send them to a drug cartel in the western state of Sinaloa. The guns helped fuel the gang warfare in which more than 6,000 Mexicans died last year.
America -- They Are Laying the Groundwork to Change the U.S. Constitution! WAKE UP AMERICA! Socialist Democrats are in the process of hijacking your country right from under you. These brazen people aren’t doing it in baby steps either. They are making bold moves every day. Their proposals may seem benign to you, however, if you open your eyes, you will see that these people are “An Enemy Of America.” Why do I say this? First, we have a socialist President, along with his confederates in the Congress and United States Senate who tried to sneak Universal Health Care into his so-called stimulus bill. Oh, Universal Health Care, at least the start of this socialist program is in Hussein’s package, but he was hoping that no one caught it.
Tea Party revolution brewing The kettle's whistling. Tea Parties are popping up all over the country. People are flocking to these sites which have cropped up practically overnight in search of information about rallies, demonstrations and Tea Parties in their cities. The revolution is brewing! "Somebody in our government needs to finally pay attention. It is what I've been talking about that was coming for a very long time and that is disenfranchisement which will turn into anger and then turn into God knows what," Glenn Beck said Friday on his radio program about CNBC'S Rick Santelli's passionate comments made Thursday from the floor of the Chicago Mercantile Exchange.
Oklahoma House passes sovereignty bill Path set for other states seeking to reassert constitutional rights Oklahoma's House of Representatives is the first legislative body to pass a state sovereignty resolution this year under the terms of the Tenth Amendment. The Oklahoma House of Representatives passed House Joint Resolution 1003 Feb. 18 by a wide margin, 83 to 13, resolving, "That the State of Oklahoma hereby claims sovereignty under the Tenth Amendment to the Constitution of the United States over all powers not otherwise enumerated and granted to the federal government by the Constitution of the United States." The language of HJR 1003 further serves notice to the federal government "to cease and desist, effectively immediately, mandates that are beyond the scope of these constitutionally delegated powers."
European Creationists Take On Darwin By Jens Lubbadeh The US isn't the only place with heated debates about Darwin's theory of evolution: Europe has its own hardcore creationists and intelligent design backers, too. Increasingly, they are making their voices heard. He hesitated because he knew full well that his findings would have dramatic consequences on established notions of the world. For 20 years, Charles Darwin kept his revolutionary ideas about evolution to himself. "It's like confessing to a murder," he wrote to a friend. His anxiety was justified -- because it was no less than God himself who would fall victim to his theory of evolution. And so Darwin, a former student of theology who was married to a deeply devout woman, put off publishing his groundbreaking work "On the Origin of Species." In the end, he only published it when he did because he was forced to. Otherwise, Alfred Russel Wallace -- who had proposed his own theory of natural selection -- would have beat him to it.
'If One Major Bank Collapsed, Others Would Fall Like Dominoes' German regional bank HSH Nordbank has been saved from collapse through a bailout by the states of Schleswig-Holstein and Hamburg. Observers warn, though, that the states may be entering into an unknown risk they are ill-equipped to handle. Schleswig-Holstein Governor Peter Harry Carstensen and Hamburg Mayor Ole von Beust looked relaxed and confident Tuesday when they announced their states' joint rescue package for the troubled regional lender HSH Nordbank. But many observers are asking if the duo really knew what they were getting into.
Obama to Seek $75.5 Billion More for Wars in 2009 President Barack Obama will seek $75.5 billion more for combat operations in Iraq and Afghanistan through the end of this fiscal year, according to three people familiar with the request. It will be submitted along with the fiscal 2010 budget Obama sends to Congress tomorrow. That proposal will request $130 billion for the wars in fiscal 2010 in addition to a total Defense Department budget of about $534 billion, the people said. The amounts for the wars are less than Defense Secretary Robert Gates asked for and in keeping with expectations that the president plans a major reduction of the 142,000 U.S. troops now in Iraq.
And you think they don't HATE Americans and the USA?? Kuwaiti Professor Fantasizes about a Biological Attack at the White House and Prays for the Bombing of a Nuclear Plant on Lake Michigan
Kuwaiti prof: 330,000 dead from 4 pounds of anthrax Outlines potential White House attack that would make 9/11 'small change' A professor from Kuwait, the country liberated from Saddam Hussein's attack squads by the United States in the first Gulf War, has outlined on Arab television a potential terror attack that would involve smuggling anthrax from Mexico into the U.S. and killing 330,000 people in 60 minutes. The plan was described by Abdallah Al-Nafisi in a speech that aired on Al-Jazeera television Feb. 2, according to MEMRI, the Middle East Media Research Institute, an independent nonprofit that provides translations and analysis of media reports.
Fox News Strategy Room w/ Judge Napolitano, Ron Paul, Glenn Beck 02/25/2009 Part 1
Fox News Strategy Room w/ Judge Napolitano, Ron Paul, Glenn Beck 02/25/2009 Part 2
Fox News Strategy Room w/ Judge Napolitano, Ron Paul, Glenn Beck 02/25/2009 Part 3
Fox News Strategy Room w/ Judge Napolitano, Ron Paul, Peter Schiff, Glenn Beck 02/25/2009 Part 4
Fox News Strategy Room w/ Judge Napolitano, Ron Paul, Glenn Beck 02/25/2009 Part 5 Ron Paul anticipates they will destroy the dollar . . .
Fox News Strategy Room w/ Judge Napolitano, Ron Paul, Glenn Beck 02/25/2009 Part 6
Home mortgage relief for millions of illegals Obama's program provides $275 billion to assist homeowners facing foreclosure Illegal aliens can apply for mortgage relief under the Obama administration's $275 billion plan, according to immigration experts and a group the government will use to help homeowners modify loans. Steven Camarota, director of research at the Center for Immigration Studies in Washington, D.C., told WND approximately 1 million households headed by illegal immigrants acquired mortgages through the beginning of 2007, before the housing bubble burst. "There is no legal prohibition against illegal immigrants owning homes," he said, "and in most cases mortgage lenders will accept a taxpayer ID or a Matricula Consular card issued by a Mexican Consulate office as identification to illegal immigrants from Mexico."
Obama Assures Nation: ‘We Will Rebuild’ President Obama urged the nation on Tuesday to see the economic crisis as reason to raise its ambitions, calling for expensive new efforts to address energy, health care and education even as he warned that government bailouts have not come to an end. In his first address to a joint session of Congress, Mr. Obama mixed an acknowledgment of the depth of the economic problems with a Reaganesque exhortation to American resilience. He offered an expansive agenda followed by a pledge to begin paring an ever-climbing budget deficit. “While our economy may be weakened and our confidence shaken, though we are living through difficult and uncertain times, tonight I want every American to know this,” Mr. Obama said. “We will rebuild, we will recover, and the United States of America will emerge stronger than before.”
Republican Response to Pres. Obama Address to Congress
Obama vows to lead US from dire 'day of reckoning' Obama vows to lead nation from 'day of reckoning' to a brighter future in address to Congress Standing before the nation on a "day of reckoning," President Barack Obama summoned politicians and public alike Tuesday night to forge a path out of the worst economic disaster in a quarter-century by embracing shared sacrifice and costly new endeavors to improve health care, schools and the environment. "The time to take charge of our future is here," Obama declared in his first address to a joint session of Congress, watched by millions of worried Americans on television and the Internet. Adding words of reassurance, he said, "Tonight I want every American to know this: We will rebuild, we will recover, and the United States of America will emerge stronger than before."
Obama calls for health-care reform in 2009 President Obama pledged Tuesday night to cure Americans from what he called "the crushing cost of health costs," saying the country could not afford to put health-care reform on hold. "This is a cost that now causes a bankruptcy in America every 30 seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes," Obama said in his speech to a joint session of Congress. Obama pointed to the increasing number of uninsured and rapidly rising health-care premiums, which he said was one reason small business closed their doors and corporations moved overseas. Obama's prescription for health-care reform included making "the largest investment ever" in preventive care, rooting out Medicare fraud and investing in electronic health records and new technology in an effort to reduce errors, bring down costs, ensure privacy and save lives.
Did Marx Know All This Was Coming? "Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism." - Karl Marx, 1867, Das Kapital That quote is almost assuredly bogus. We haven't tormented ourselves by re-reading sections of Das Kapital. Once in college was enough. This quote, though, has been making the rounds on the Internet, as if Marx and his minions somehow knew all this was coming. Whether the analysis is accurate is a separate question from whether Marx ever wrote it. German is a torturous language to read in translation, full of compound sentences and words. And it's highly unlikely, writing in the late 19th century, that Marx would have referred to the working class buying houses and technology. The horseless carriage hadn't even been invented yet, much less the iPod, the BlueRay, or the George Foreman grill. Nope. This is a clever bit of revisionism by some unemployed Marxist student or tenured professor trying to discredit the free market while rehabilitating the Marxist playbook.
Obama to America: Tighten your belts No more extravagant buying, get ready for more regulations The president told the nation tonight the "day of reckoning has arrived" for Americans after a spree of extravagant buying, too-few regulations and not enough long-term financial planning. Obama said he will submit a budget this week that he sees as a vision for America and a blueprint for the future. He says the budget will reflect the harsh reality of the worst economic crisis since the Great Depression, one for which he was quick to blame his predecessor, Republican George W. Bush. "While our economy may be weakened and our confidence shaken, though we are living through difficult and uncertain times, tonight I want every American to know this: We will rebuild, we will recover," Obama said in his televised speech before a joint session of Congress with all the trappings of a State of the Union Address. "And the United States of America will emerge stronger than before." Five weeks after taking office, Obama pressed the case for his economic revival plans that includes a health-care system overhaul, new centralized education priorities and investment in alternative energy sources.
Wall Street points lower after Obama speech After rally sparked by Bernanke, US futures point lower as Obama speech lacks specifics U.S. futures pointed lower after President Barack Obama's address to Congress Tuesday evening, as investors didn't get the specifics they hoped for on the government's plan to rescue troubled banks. Earlier in the day markets rallied after Federal Reserve Chairman Ben Bernanke gave Wall Street a double dose of reassurance. He told Congress Tuesday the recession might end this year, and that regulators aren't planning to nationalize banks. The news alleviated some of investors' worries about the economy and the banking industry, and lifted the Dow Jones industrial average and Standard & Poor's 500 index off their lowest levels since 1997. Anticipating that Obama would provide specifics about his plans to stabilize the financial system and further stimulate the economy, investors drove beaten-down financial shares up sharply.
Bernanke: Recovery depends on banks The economy will start to recover from a severe recession this year only if the government is successful at reviving the foundering banking system and collapsed credit markets, Federal Reserve chairman Ben S. Bernanke testified Tuesday morning. In testimony before the Senate Banking Committee, the Fed chief stressed once again that massive fiscal stimulus and even the Fed's only efforts to keep interest rates at record lows will not suffice to revive the economy from recession so it can start growing again next year. The banking system and financial markets are the critical element, he said. "If actions taken by the administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability -- and only if that is the case, in my view -- there is a reasonable prospect that the current recession will end in 2009," he said.
Nouriel Roubini and Mark Zandi on Bank Nationalization - Charlie Rose 2/18/09
Bernanke: economy suffering 'severe contraction' Bernanke: economy suffering 'severe contraction,' pledges to use all tools to provide relief Federal Reserve Chairman Ben Bernanke told Congress Tuesday the economy is suffering through a "severe contraction" and pledged to use all available tools to lift the country out of the recession that already has cost millions of Americans their jobs. In testimony prepared for the Senate Banking Committee, Bernanke said the economy is likely to keep shrinking in the first six months of this year. Housing, credit and financial crises -- the worst since the 1930s -- plunged the economy into its worst downhill slide in a quarter-century at the end of last year.
Bernanke Testimony to be Closely Watched for Inflation Target Federal Reserve Chairman Ben Bernanke's two-day testimony to the U.S. Senate and the House of Representatives, which begins Tuesday, will be closely-watched for any new revelations on government programs to rescue the U.S. economy. Most economists say Bernanke's testimony may not hold much new information last week's speech and Q&A session with the press as well as the release of minutes from the Jan. 28 Federal Open Market Committee meeting. Still, Bank of Tokyo-Mitsubishi economist Ellen Zentner said that when Bernanke speaks, the market watches. She said he would probably have to justify the Fed's recent forecast downgrades "and possibly lay out, albeit in a broad sense, what additional steps can be taken by the government to help turn around the U.S. economy". He needs to show the Fed still has tools to save the economy, she said. Economists at Deutsche Bank called his testimony "potentially one of the most significant [events] in terms of market impact".
Stocks up as Bernanke says recession to end in '09 Federal Reserve Chairman Ben Bernanke has steadied Wall Street by telling Congress the recession would end this year. Bernanke, making his semiannual report to the Senate Banking Committee, said the economy is likely to keep contracting in the first six months of 2009 — hardly a surprise to Wall Street. But he also said the recession will end this year and that he would use all available tools to help end it. Bernanke's comments helped the market absorb a worrisome report on consumer spending. The Conference Board's consumer confidence index for February came in at 25, well below expectations. The finding is the latest sign that consumers are deeply worried about the recession and the safety of their jobs.
Why US and IMF want to dump gold onto market A Golden Sword of Damocles? . . . . It’s true – the United States and the IMF (International Monetary Fund) have a lot of gold in reserve. Some of you fear a good chunk of that gold could be dumped on the market, acting as a sharp break to the yellow metal’s rise. Let’s start by asking the question, just how much gold do these guys have? The World Gold Council regularly updates the stats on official holdings of central bank reserves. According to December 2008 data from the WGC, the U.S. holds 8,133.5 tonnes (metric tons) of gold. The IMF holds 3,217.3 tonnes. When you do the math, that adds up to 11,350.8 metric tons (tonnes), or 12,512 short tons, of gold. Converted to ounces at $1,000 per ounce, that’s a touch over $400 billion bucks worth of bullion. Does this count as a lot? Yes and no.
Ron Paul & Glenn Beck - "International Governments - Global New Deal" 2/24/2009
FDIC: 'Stress Test' Will Determine Banks' Health The head of the Federal Deposit Insurance Corp. said Tuesday additional government steps to shore up the shaky financial system will hinge in part on a test to determine how the largest banks would fare in an even weaker economy. Chairman Sheila Bair cautioned at the same time against rushing to a judgment that Washington intends to take over the industry, saying, "I think there's ambiguity in the word 'nationalization.' " "I think that is something that would be surprising," she said. White House press secretary Robert Gibbs said the Obama administration is "going to help banks get through this crisis, but nobody imagines nationalizing banks." Bair said that a "stress test" for some 20 of the largest banks this week will help federal policymakers "what type of additional capital investments the government may need to make."
Treasury, Citigroup debate control Nationalization fears hit stocks The federal government is negotiating a deal with Citigroup that may expand its ownership share to the point that it effectively nationalizes the nation's third-largest bank. The Treasury and bank regulators sought to reassure investors Monday by pledging to stand behind Citi and other major banks, outlining a new strategy of allowing banks to convert Treasury's preferred stock in the banks to common shares. The move boosts bank capital without having to invest more taxpayer money, but also gives the government substantial ownership of the firms - raising the specter of nationalization.
"Nationalization" of Citi and BofA Inevitable in '09 In the past few months, an increasing number of economists have become convinced that the best "fix" for the banking system is a government takeover and restructuring of companies like Citigroup. And some voices in the government are finally supporting this idea. Over the weekend, Senator Lindsey Graham said he thought "nationalization" has to be considered, because he doesn't want to throw good money after bad. What would this mean, exactly? The government running our banks for the next decade? No, says our guest Chris Whalen of Institutional Risk Analytics. "Nationalization" is a poor word to describe the process. "Receivership and restructuring," along the lines of what the FDIC did with WaMu, is the right way to think about it.
U.S. Clears Path to Bank Takeovers Obama's Revised Plan for Industry Aid Could Result in Nationalization The Obama administration yesterday revamped the terms of its emergency aid to troubled financial firms, setting a course that could culminate with the government nationalizing some of the country's largest banks by taking a controlling ownership stake. Administration officials said the change, which allows banks to repay the government with common stock rather than cash, is intended to give banks more capital to withstand a continued deterioration of the economy, and not to nationalize the banking system. But in seeking to bolster investor confidence in troubled companies such as Citigroup, the government said it is willing to acquire large chunks of their shares. . The move is a significant gamble. The magnitude of the effort could underscore the severity of the crisis, further alarming investors. The government could also forego billions of dollars in dividend payments.
Gone in 60 Days: Citi and Bank of America Won’t Live to See May Citigroup and Bank of America won’t live to see May. The government will take them over within the next 60 days. The announcement may come as soon as tomorrow evening. . . . . We’re going to make another bold prediction. Bank of America and Citigroup won’t live to see May. The two banks will be nationalized in the coming weeks, and we think that the announcement can come as soon as tomorrow evening (Friday evenings are when major bank announcements and failures occur). The US government has already committed half a trillion dollars to these two firms which is more than 10 times the amount it would cost to buy and control both companies. The market doesn’t believe that $500 billion is enough to save these companies. All the kings horses and all the kings men can’t put humpty dumpty back together again.
Bank Nationalization Isn't the Answer Trust me. I've done this before. People who should know better have been speculating publicly that the government might need to nationalize our largest banks. This irresponsible chatter is causing tremendous turmoil in financial markets. The Obama administration needs to make clear immediately that nationalization -- government seizing control of ownership and operations of a company -- is not a viable option. Unlike the talking heads, I have actually nationalized a large bank. When I headed the Federal Deposit Insurance Corporation (FDIC) during the banking crisis of the 1980s, the FDIC recapitalized and took control of Continental Illinois Bank, which was then the country's seventh largest bank.
Nassim Taleb: Time to Nationalize US Banking System?
Treasury's strategy: 'What elephant?' At some point, the feds or the private sector will have to absorb banks' bad assets. If the administration keeps ignoring that fact, we can't move forward. I don't think it's worth spending a lot of time discussing the Treasury's not-ready-for-prime-time nonplan plan to fix the banks. Accounts have been nearly unanimous in concluding that what was promised to be "shock and awe" turned out to be nothing more than "aw shucks, we're confused." (Read Jon Markman's "Geithner's first test is a disaster" for one example.) Reckoning with the rotten assets One of these days, the mind-boggling mass of bad assets held by banks will have to be sold to the private sector at a price or, more likely, transferred to the government. However, the real sticking point continues to be discovering the prices at which these various assets can be sold. It looks as though the Treasury is unwilling (or unable) to acknowledge that elephant in the room, which is the first variable that must be solved for if we are to move forward.
Fed Chief Vows to Use Every Tool to Stem Crisis While the United States economy is likely to worsen significantly over the next year, the Federal Reserve is “committed to using all available tools” to stanch the financial crisis and unfreeze credit markets, the Fed chairman, Ben S. Bernanke, told the Senate Banking Committee on Tuesday. But he added that there is a risk that the economy could get even worse than recent forecasts. In the first leg of his twice-annual report to both houses of Congress on the state of the economy and the Fed’s actions, Mr. Bernanke painted a dire picture of the financial markets going forward, but assured the committee that government agencies were taking all necessary actions to thaw credit markets.
There's only one Cure for a Depression In contrast with a depression, a recession is relatively easy to bring to an end. The genesis of a recession is caused by excessive credit creation on the part of banks and the Fed. The superfluous money drives prices higher and the rate of inflation begins to increase at a pace that makes the Fed uncomfortable. The Central bank then begins to raise rates in order to soak up that liquidity and put an end to its easy monetary policy. The higher interest rates serve to choke off consumer borrowing and the amount of money in the system compared to the total availability of goods and services becomes reduced. Any inflation that was in the economy gets squeezed out. Once prices return to a favorable level, the Fed begins to reduce rates again and the boom bust cycle repeats. That's the playbook response to a minor reduction in GDP. However, the only cure for a depression is time. Not the abrogation of the free market. The seeds of a depression are sown when an extreme over supply of money and credit is allowed to continue for a protracted period of time. When this phenomenon occurs, it produces a pernicious level of debt to pervade throughout the economy.
The long and the short of it "The great boom that the world is enjoying, is in effect an enormous shorting of cash and going long on debt. Eventually, there will be a short squeeze on cash which will have to be covered by going long on cash and shorting debt." This appears to be a succinct description of events we are now seeing. A tenet of the Austrian School of Economics holds that all human action involves choosing. I am indebted to Professor Antal E. Fekete for the insight that choice involves going long what we choose and giving up - shorting - what we give in exchange. The US consumer has been shorting cash for decades. The very low, sometimes negative savings rate has shown that Americans have not wanted to accumulate cash. Americans did not want to go long on cash, they wanted to short it. They went long on houses to live in, houses to speculate with, boats to have fun with, new cars, extra cars, ocean cruises. They also went long on stocks - now selling for 50% of their value in October 2007.
This Isn't Socialism We Are Heading To, But It May Very Well Be the Other 20th Century "ism" Under socialism the means of production come under control of the state. De jure ownership resides with the government, de facto ownership resides with the public officials who control access. The reality of economic life under state socialism is one of attenuated property rights, where control rights are in the hands of state officials, but above ground cash flow rights are cut off. What we saw in operation under such a system is that those who possessed control rights used that position to their best ability to generate cash flow rights which were hidden from official view. This is one of the reasons why post-communist privatization was more difficult in practice than on paper --- the existing status quo of "ownership" rights was rarely taken into account in the grand designs.
Spending bill stuffed with earmarks President Obama on Monday vowed to reel in wasteful Washington spending and blasted deceptive "accounting tricks" used by the Bush administration to fund the Iraq war even as House Democrats released a $410 billion stopgap spending bill studded with thousands of pork-barrel projects. The 1,000-plus-page spending bill provides a fat target for deficit hawks. It includes hundreds of pages of earmarks - pet spending projects inserted by lawmakers, ranging from $185,000 for coral reef research and preservation in Maui County, Hawaii, to $55,000 in meteorological equipment for Pierce College in Woodland Hills, Calif., to $9.9 million for science enhancement at historically black colleges in South Carolina.
Suspend 'Mark-to-Market' Accounting Rule? We've noticed some recent chatter about "mark-to-market." That's the 2-year-old accounting rule requiring companies to value an asset for its immediate sale price on the open market. The rule made sense following Enron, Worldcom and other scandalous debacles. It prevents companies from lying about what certain assets are worth. But now some folks claim the rule goes too far, forcing companies to write down the value of certain assets even though they could end up being worth something down the road. So why not suspend the rule?
AIG's Distress: Are There Enough Fingers for This Dike? [AIG's plan to bleed the government dry] Management at AIG has calculated exactly how much money the Treasury and Fed will have access to after all of the TARP, financial stimulus, and mortgage bailout projects have been funded. The insurance company then plans to ask for whatever is left to fund its deficits so that it can stay in business, effectively making the federal government insolvent. According to CNBC, AIG is about to post another huge loss. "Sources close to the company said the loss will be near $60 billion due to writedowns on a variety of assets including commercial real estate." The financial channel also reports that the need for capital may be so great that AIG might have to enter Chapter 11, something the government has spent over $130 billion trying to prevent. Just like Detroit, Bank of America, and Citigroup, AIG is playing a game of chicken with Washington that the government does not feel it can afford to lose.
Analysts Using Credit Default Swaps to Predict Currency Movements High-level currency traders - such as analysts at Citigroup and Bank of Tokyo-Mitsubishi - are using credit default swaps to analyze the trend of currencies. Specifically, according to an article in Bloomberg, many traders believe that the level of higher credit default swaps against a given country, the worse that nation's currency will do.
Oil Primed for Quick Climb, But Don't Fantasize About Return to 2008 Highs If any market qualifies as rockier than equities, consider oil. Crude prices have done a complete roundtrip from $40 a barrel, up to $147/barrel last summer, only to tumble back down to today's levels under $40/barrel. So what exactly happened? As our guest James Cordier, president of Liberty Trading Group, explains, oil's recent adventure was the result of a "perfect storm" of many factors.
Global demand was rising, along with hedge fund speculation.
The dollar was falling, boosting all dollar-denominated commodities.
China and other major oil consumers were providing fuel-price subsidies that propped up demand.
But by the summer of 2008, when those subsidies were removed and the global economy sputtered, oil's unraveling began. So is the oil party over? Not exactly. Once the economy begins its recovery, expect oil prices to race up to the $60-$70/barrel levels, Cordier forecasts.
A Sharp Drop in Home Prices at End of Year Home prices in the United States plunged at the fastest pace on record in December, a sign that housing is likely to continue declining in the months ahead as the economy sinks deeper into recession. Single-family home values in 20 major metropolitan areas fell 18.5 percent in December compared with a year earlier, according to a data released Tuesday by Standard & Poor’s Case-Shiller home price index. Housing prices dropped 2.5 percent from November to December. Nationwide, housing prices in the last three months of 2008 sank to their lowest levels since the third quarter of 2003. Prices fell in all of the 20 cities surveyed by Case-Shiller, but the declines were starkest in Phoenix and Las Vegas as well as much of Florida and Southern California, where development has all but dried up.
Consumer confidence plummets to new low in Feb. Consumer confidence plummets to new low in Feb. as consumers grapple with massive layoffs Americans' already battered confidence in the economy went into free fall in February, sinking to new lows as consumers grow more fearful over massive job cuts and shrinking retirement accounts. The dismal news came just hours after major retailers including Target Corp., Home Depot and Macy's Inc. reported depressed fourth-quarter results as shoppers focus on necessities like food. And another widely watched index showed home prices tumbled by the sharpest annual rate on record in the fourth quarter and in December. The New York-based Conference Board said Tuesday that its Consumer Confidence Index, which was down slightly in January, plummeted more than 12 points in February to 25, from the revised 37.4 last month. That was well below the 35.5 level that economists surveyed by Thomson Reuters expected.
Socialized Medicine on the Installment Plan The withdrawal of Tom Daschle as President Obama's nominee for secretary of health and human services is generally viewed as a setback for the president's health care reform plans. Even so, the Obama administration is already well on its way toward putting the government in charge of our health care system. Less than two weeks into his administration, President Obama has already signed a massive expansion of the State Children's Health Insurance Program (SCHIP). The bill is ostensibly designed to provide health insurance to children from poor families. The language of the bill, however, will allow states to increase SCHIP income eligibility to 400 percent of the poverty level – amounting $83,000 for a family of four. Furthermore, the bill allows states to disregard some household expenses, like mortgages, in determining eligibility. Consequently, some families earning as much as $100,000 could receive government provided health insurance.
Pro-lifers Call HHS Candidate Sebelius “The Most Pro-Abortion Governor in the Country' Kansas Gov. Kathleen Sebelius (D), the leading candidate to head the U.S. Department of Health and Human Services, is “the most pro-abortion governor in the country,” according to pro-lifers. Sebelius, who is reportedly President Obama’s top choice for the position of HHS secretary, has often stirred controversy within Kansas due to her history of vetoing abortion legislation -- and her alleged connections with Wichita-based late-term abortionist George Tiller. “There’s absolutely no doubt that she is the most pro-abortion governor in the country,” said Cheryl Sullenger, senior policy analyst at Operation Rescue in Wichita.
U.S. May Set Greenhouse Gas Standard for Cars The Obama administration is considering establishing national rules for regulating greenhouse gas emissions for automobiles, according to White House officials, a move backed by both auto manufacturers and some environmentalists. For weeks, administration officials have been meeting with car companies as well as green groups and representatives from California -- which is awaiting word on whether it will receive a federal waiver to regulate greenhouse gas emissions from vehicles -- to try to broker a deal on the issue. On Sunday, Carol M. Browner, assistant to the president for energy and climate, said she and others backed the idea of a single standard for cars and trucks. "The hope across the administration is that we can have a unified national policy when it comes to cleaner vehicles," Browner said at the Western Governors' Association meeting in Washington.
Ghost Town: The Future of the American Economy? If you want to get rich, don’t waste your time mining gold; instead, mine the gold miners. A related truism is this: You can tell how rich the goldfields are by how rich the local businesses are. Is boom-town America on its way to becoming a dusty ghost town? Judging from business reports, America is no longer the land of golden opportunities, and the economy is drying up. How can you know ahead of time whether your bustling gold town is about to turn into an empty ghost town? Once upon a time, the Wall Street Journal used the term “barometric box” to describe the predictive nature of certain industries. This describes how “causes” in one industry lead to “effects” in all others. Roy Harris of cfo Magazine describes how watching these “barometric box” companies reveals the current health of the economy. Unfortunately, barometric box indicators say America should prepare for lean times ahead.
Nassim Nicholas Taleb - What is a "Black Swan?"
Why Aren't You Hearing About House Resolution 45 (HR 45)? "The Take America’s Guns” Bill! Here it comes! And most of you haven’t heard a word about it, now, have you? Why do you suppose that is, huh? Could it be that the Mainstream Media is so deeply in the tank for Obama? Or could it be their very own leftist agenda motivating them to keep the lid on this story? Do you suppose they think that if you learn about it (HR 45) you might get off you tired, lazy, butts and begin lobbying your Congressman/woman and Senators to stop this hellish piece of legislation? Methinks the correct answer is… all of the above! ? Put simply, the MsM DOESN’T WANT YOU TO HEAR ABOUT IT! ATTENTION all you Conservative BLOGGERS: if this story is to get out, to be disseminated to the American people, then you are going to have to do it. So, let’s be about it! OK, as an American you need to know exactly what this bill says and what it is proposing. We urge you to go to the official site if the US House of Representatives (for legislation), “THOMAS”, and read it, in its entirety, for yourself. You’ll find it HERE . Keep in mind: “Like the old saying goes...once they know where all the guns are, it will be easier to come take them....”
World's economies tumbling like dominoes Almost everybody now realizes how grave the crisis has become. But we won't be able to escape from this dark place until we understand how we got here. Lately, I have been struck by how bleak and black the newspapers have been in their coverage of the economy. Not that I've been surprised, but one can never know when events in the economy will coalesce into the news that causes the masses to realize how difficult the environment is. In reading the papers, it was obvious to me that it's becoming clear to everyone that "the next time down" is well under way, though the average person wouldn't call it that. 1980-82 versus now I was trying to remember the last time I had seen the economic news quite as ugly. For me, the 1980-82 period is the closest example I have lived through. Of course, it was quite a bit different.
Crisis Prompts Calls to Boost IMF Reserves Eastern Europe's Struggles May Test Fund's Capacit A looming financial crisis in Eastern Europe is fast depleting International Monetary Fund reserves, fueling tensions between the wealthy but cash-strapped countries that have traditionally controlled it and emerging economies that have the resources to shore it up. The faltering economies of Eastern Europe were on the minds of European leaders as they met in Berlin over the weekend. They called for doubling the IMF's resources, to $500 billion, to cope with crises spawned by the worldwide recession. Since last fall, the IMF has lent more than $30 billion to Hungary, Belarus, Latvia, Serbia and Ukraine. All have been hurt by collapsing demand for exports; foreign investors who have pulled back sharply, partly to cover losses at home; and falling currency values. And some may be coming back for more.
Prepare Yourself for Higher Gas Prices With the economy tumbling, joblessness rising, and the stock market at 11-year lows, about the only positive thing for Americans' pocketbooks lately has been (relatively) lower gas prices. But this too shall pass, according to James Cordier, president of Liberty Trading Group in Tampa. Corider, whose firm specializes in selling options on commodities, notes that while oil supplies are at a 16-year high, gasoline inventories are at a 5-year low. So when demand rises with the summer driving season - which he says it will even as many Americans opt for "staycations" - expect prices at the pump to rise 20-30 cents per gallon. If you're looking for a villain in this scenario, the refiners fit the bill; they have kept capacity idle in anticipation of the coming demand and hope to profit from the widening crack spread - or the difference in price between crude oil and refined products.
Mexican drug wars may cross into Ariz. Police warn lawmakers about cartel gunbattles Violence involving Mexican narcotics cartels threatens to bleed across the border into Arizona and other states already coping with an epidemic of drug-related murders and kidnappings, law-enforcement officials told an Arizona Senate subcommittee on Monday. During their testimony, the experts described recent gunbattles just south of the border where Mexican gangs fought rival cartels as well as police, blasting away with machine guns and lobbing hand grenades. "This is organized crime," said Arizona Attorney General Terry Goddard. "The enemy we are combating is extremely well organized, extremely disciplined and extremely well trained." Goddard joined federal, state and local police leaders in a state Judiciary Committee session convened to evaluate the effects and perils of border-related violence.
Calif. lawmaker introduces bill to legalize pot A state legislator is reviving the debate about legalizing marijuana as a way of raising money for cash-strapped state and local governments. Assemblyman Tom Ammiano, a San Francisco Democrat, introduced a bill Monday that if approved by the California Legislature would put pot on the same legal footing as alcohol. Adults over the age of 21 would be allowed to buy it, and driving under the influence of marijuana would be prohibited. Under Ammiano's proposal, which has been endorsed by some law enforcement officials, pot would be taxed at a rate of $50 per ounce and bring an estimated $1 billion into state coffers. In 1996, California became the first state to legalize medical marijuana.
Ammiano wants to make marijuana legal in state California would become the first state in the nation to legalize marijuana for recreational use under a bill introduced Monday by Assemblyman Tom Ammiano of San Francisco. The proposal would regulate marijuana like alcohol, with people over 21 years old allowed to grow, buy, sell and possess cannabis - all of which is barred by federal law. Ammiano, a Democrat in his third month as a state lawmaker, said taxes and other fees associated with regulation could put more than a billion dollars a year into state coffers at a time when revenues continue to decline. He said he thinks the federal government could soften its stance on marijuana under the Obama administration. "We could in fact have the political will to do something, and certainly in the meantime this is a public policy call and I think it's worth the discussion," Ammiano said. "I think the outcome would be very healthy for California and California's economy."
Mexican drug gangs wage war VILLA AHUMADA, Mexico — It was 3 a.m. when Griselda Munoz says she got the first terrifying phone call: "Mom, there are people all over, and they're shooting!" A convoy of gunmen had invaded the ranch where her son, Jorge Marrufo, 32, was working. As shots crackled in the background, he told her he was running into the desert to hide in the sagebrush. Before dawn, another call: "If anything happens to me, tell my kids I love them." Later that day, Munoz found her son at a morgue with his skull caved in and four bullet holes in his chest. He was among 21 people killed Feb. 10 in this town near the U.S. border after drug gangs abducted several men, then fought a massive running gunbattle with the Mexican army — one of the bloodiest episodes yet in Mexico's war on drugs.
Drug violence spins Mexico toward 'civil war' A shootout in a border city that leaves five alleged drug traffickers sprawled dead on the street and seven police wounded. A police chief and his bodyguards gunned down outside his house in another border city. Four bridges into the United States shut down by protesters who want the military out of their towns and who officials say are backed by narcotraffickers. That was Mexico on Tuesday. What is most remarkable is that it was not much different from Monday or Sunday or any day in the past few years. Mexico, a country with a nearly 2,000-mile border with the United States, is undergoing a horrifying wave of violence that some are likening to a civil war. Drug traffickers battle fiercely with each other and Mexican authorities. The homicide rate reached a record level in 2008 and indications are that the carnage could be exceeded this year.
Mexico needs Obama's eye With a full plate ranging from war to recession, a new president might want to avoid Mexico. Topping the reasons are the minefield of immigration policy, a raging drug war, and free-trade frictions. But President Obama can't afford to dodge a foreign-policy challenge on his southern doorstep. Mexico is the latest and most sweeping test of the "too big to fail" imperative as White House policymakers try to steady a shaky world. Mexico is hardly in the same dire shape as the auto or banking industries. But it has problems that light up the worry-meter. These issues can't be solved on one side of the border alone. The situation requires a steady, unswerving partnership that both countries have not yet forged.
Liberals Mobilize Against Obama’s Afghanistan Plan President Barack Obama’s plan to send an additional 17,000 troops to Afghanistan is stirring opposition from anti-war activists, many of whom voted for Obama. And House Speaker Nancy Pelosi, who recently made a stop in Afghanistan, said on Monday that members of Congress returned with “many questions” for the Obama administration. In an interview with Fox News’s Alan Colmes on Monday, Bill Ayers – a former member of the Weather Underground and an early Obama supporter – called Obama’s called for additional troops a “colossal mistake.” “I fear that this brilliant young man, this hopeful new administration, could easily burn their prospect of a great presidency in the war in Afghanistan or elsewhere,” Ayers said.
Jailed Billionaires Show New Face of China as Markets Unravel If China’s richest man knew he was about to become the most prominent casualty of the country’s love-hate relationship with capitalism, he didn’t show it this past August. Huang Guangyu, a peasant’s son who became a billionaire by building Gome Electrical Appliances Holding Ltd. from scratch, outlined plans for continued expansion of the 800-store appliance chain. He told the board members gathered in the company’s mauve- carpeted executive offices 61 floors above Hong Kong’s Victoria Harbor that Gome’s profit had tripled in the first half of 2008 from a year earlier. The directors lunched on Cantonese dishes ordered in from Man Wah, one of the city’s ritziest restaurants. “It was a very pleasant, chatty meeting,” says Mark Greaves, 51, chief executive officer of London-based investment bank Hanson Capital, who is one of the company’s two non-Chinese directors. “Mr. Huang talked about his crusade to take Gome to all corners of China.”
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Taleb Says Crisis Is Harder to End Than Depression The financial crisis will be harder to end than the Great Depression and may force banks to be nationalized, “Black Swan” author Nassim Nicholas Taleb said. A more complex financial system makes the current problems, which cut global stock market value by 55 percent to $28 trillion since October 2007, worse than the contraction in the 1930s, Taleb said in a Bloomberg Television interview today. Bonuses paid on Wall Street encouraged risk taking with no regard for losses, he added. Rare and unforeseen events are known as “black swans,” after Taleb’s 2007 book, “The Black Swan: The Impact of the Highly Improbable.” The financial crisis isn’t one, he said. Watch his Bloomberg video (or click on VIDEO tab)
Commodities Outlook - Gold's Melting Value - Bloomberg
AIG in talks with Fed over another bail-out AIG is in talks with the US government over a new bail-out aimed at giving the stricken insurer, which is already 80 per cent-owned by the authorities, fresh capital to absorb an expected fourth-quarter loss and more time to sell assets. People close to the situation said AIG could announce the new rescue plan as early as next week, together with fourth-quarter results that are likely to show a loss bigger than the $24.5bn reported in the previous three months. A new bail-out of AIG would be the third time in five months that the US taxpayers have come to the rescue of a company that was once a global insurance powerhouse and is now fighting for its survival.
Beware doomsayers, gold may hit $6,000/oz! YES, gold futures closed in New York on Friday at $1002.20 an ounce. So, talk about the gold bubble bursting can’t be far away. The world has started speculating heavily on the gold bubble, which, according to some analysts, will burst very soon. But reality is far from that. Do you know the present gold prices are far from what it was in 1980. And definitely gold will have to reach its inflation adjusted 1980 high of $2,400/oz before it can come down. In fact, it is currently less than half the value that it was in 1980. There cannot be a bubble in an asset class unless it rises to all time inflation adjusted highs and often times asset bubbles result in prices of multiples of their previous record highs.
Silver: Potential safe haven like Gold It is time investors look closely at the white metal and give it its rightful place as a safe haven. Some very significant aspects of Silver have come forth in these trying times. As we mentioned in our earlier reports about Silver’s ability to race ahead Gold in a rally but drop faster than a brick when the market turns, losing more than it had gained and eventually losing much more than Gold. Its higher lows and lower highs have proven this time and again.
**Fixing the Banking System - Bloomberg 2.23.2009 Time to Nationalize Banks? A "Bad Bank" for Toxic Assets? What is the FDIC's Role? - Roundtable Discussion with Josh Rosner of Graham Fisher & Co., Catherine Mann of Brandeis International Business School, and Mark Sunshine of First Capital
Timothy Geithner, the man who will run Obama's economic team, is a basketball playing 'pressure junkie' Barack Obama will this weekend hand the levers of the US economy to a pressure junkie who shares his love of basketball. He has revealed details of his economic team - who will be in charge of America's response to the greatest financial crisis for 80 years - in an attempt to boost confidence in his ability to tackle his gravest problem on taking office next month. Democratic sources have told The Sunday Telegraph that the President-Elect is disgruntled with the failure of Congress or the Bush administration to act quickly to tackle the continuing turmoil in the markets. Mr Obama's transition team on Friday night leaked that Timothy Geithner, the chairman of the New York branch of the Federal Reserve is a sure bet to become Treasury Secretary.
Auto team drives imports Fed task force has few new U.S. cars . . . . The co-chairs of the task force -- Treasury Secretary Timothy F. Geithner and White House National Economic Council Director Lawrence Summers -- both own foreign automobiles. Geithner owns a 2008 Acura TSX, registered in New York. He once owned a 1999 Honda Accord and a 2002 Acura MDX, according to public records. Geithner is the president's designee for purposes of enforcing loan agreements with GM and Chrysler and must approve or reject any proposed transactions by either company that would cost $100 million or more. His maternal grandfather, Charles Moore, was a vice president at Ford Motor Co. from 1952-63, according to Peter Geithner, the secretary's father. But Geithner wasn't very interested in cars growing up -- in part because he graduated from high school in Asia, his father said.
SP 500 Still Overvalued by 46% as Dividends Plummet at Record Pace We have not reached a sustainable bottom yet in US equity prices despite the infomercials and chief strategist's exhortations to buy them while they are cheap on the financial news channels. Stocks are valued based on their returns, and those returns are based on real cash flow and profits paid out to shareholders as dividends or stock buybacks to boost share prices. For too many years US companies have essentially robbed Peter to pay Paul, servicing short term profits by offshoring US jobs, manipulating their balance sheets, and appropriating the savings of the world through the US reserve currency mechanism.
China’s record demand for Treasuries (and all US assets) in 2008 . . . . China has now released data on the PBoC’s other foreign assets (what I have called China’s hidden reserves) for December. The US TIC data for December is now out at as well. The two together permit us to paint a reasonably comprehensive picture of Chinese demand for US financial assets in 2008. This post updates the estimates of China’s true demand for US assets laid out in my paper with Arpana Pandey.* It consequently touches on the central subject of Geoff Dyer’s FT analysis piece, namely the scale of China’s holdings of US assets and China’s willingness to continue to add to its US portfolio.
Bear Market's Bite Could Go Deeper Dow at 6-Year Low, but Analysts Say More Pain Lies Ahead With the Dow Jones industrial average plunging past its lowest point since the financial crisis began, panicked investors are asking: How much uglier can it get? Many market analysts and technicians armed with reams of historical data say that even though the Dow has given back all its gains -- and more -- from the five-year bull market that ended in 2007, it is unlikely the market has hit bottom. Mark Arbeter, chief technical strategist at Standard & Poor's Equity Research, said the current market environment is showing few of the signs that have characterized previous lows -- high price volatility, high volumes of trading and even higher levels of fear.
Dow, S&P Slip To 1997 Levels Investors Still Wary of Recovery Plans Stock markets tumbled to 12-year lows yesterday as new details of the government's plan to shore up ailing banks failed to quell investors' fears of a long and difficult recovery. The Dow Jones industrial average closed down 250.89, or 3.4 percent, to 7114.78 -- a level not seen since the bull market of 1997. The Standard & Poor's 500-stock index dropped 26.72, or 3.5 percent, to 743.33, another 1997 level. And the tech-heavy Nasdaq composite index fell 53.51, or 3.7 percent, to 1387.72. "Basically, it's a disaster," said David Dietze, chief investment strategist at Point View Financial Services. "There's much more pain ahead."
Treasury, Citigroup discuss partial takeover Nationalization fears hit stocks The federal government is negotiating a deal with Citigroup that may expand its ownership share to the point that it effectively nationalizes the nation's third-largest bank. The Treasury and bank regulators sought to reassure investors Monday by pledging to stand behind Citi and other major banks, outlining a new strategy of allowing banks to convert Treasury's preferred stock in the banks to common shares. The move boosts bank capital without having to invest more taxpayer money, but also gives the government substantial ownership of the firms - raising the specter of nationalization.
Controlling the Banks - Bloomberg Bank Nationalization - Interview with Former New York State Bank Superintendent Elizabeth McCaul, Now of Promontory Financial Group (Bloomberg News) 2.23.2009
A Third Rescue Would Give Washington a 40% Stake in Citigroup Inside Citigroup headquarters, everyone is buzzing about the N-word. Nationalization, at least a partial one, seems inevitable for the troubled financial giant. As Washington prepares to tighten its grip on the struggling company, the implications - for Citigroup and the rest of the financial industry - are starting to sink in. Under a plan federal regulators were discussing on Monday, the government may end up owning as much as 40 percent of Citigroup, which has already grabbed two multibillion-dollar lifelines from Washington.
Nation faces enormous fiscal obstacles Agency reports warn nation must tackle challenges "A billion here, a billion there - pretty soon it adds up to real money," Sen. Everett Dirksen famously observed. Mr. Dirksen, the late Republican fiscal conservative, held the Illinois Senate seat Barack Obama later occupied. To meet the standards of Monday's "fiscal responsibility summit" Mr. Obama hosted at the White House, Mr. Dirksen's quip would have to be adjusted by several orders of magnitude. Even "a trillion here, a trillion there" would not suffice.
Citi Seeking More Federal Aid Another Round of Help May Not Require Taxpayer Money Citigroup executives have approached federal regulators to discuss steps the government could take to strengthen the troubled company, according to two people familiar with the matter. The giant New York bank is under mounting pressure to convince investors that it can survive its financial problems. The government already has invested $45 billion in Citigroup and promised to limit its losses on a portfolio of more than $300 billion of loans and other troubled assets. But investors remain nonplussed, and the company's stock price has dropped 71 percent this year.
In Latest Plan for Banks, U.S. Could Demand Voting Stake The Obama administration put the nation's biggest banks on notice Monday that the government could become their biggest shareholder if regulators decide they are not strong enough to weather a deeper-than-expected downturn in the economy. In an unexpectedly assertive joint statement, the Treasury Department, Federal Reserve and federal bank regulatory agencies announced that the government might end up demanding a direct ownership stake in major banks after they undergo a tough evaluation of their strength, which is to begin shortly.
Bank stress tests to start Wednesday Federal regulators said Monday they plan to start evaluating the needs of major banks on Wednesday and served notice that the U.S. government "stands firmly behind the banking system" during the current financial crisis. They said they will ensure that the banks have the money and liquidity necessary to restore economic growth as part of a Capital Assistance Program that is to begin with an evaluation of the banks.
Stimulus Package Earmarks & Pork - The Today Show/NBC News Investigation Exposes pet projects such as . . . a high speed magnetic levitation rail line from Las Vegas to Disneyland
U.S. Pledges Capital for Banks as Stress Tests Begin U.S. financial regulators pledged to inject additional funds into the nation's major banks to prevent their collapse and will this week begin examinations to determine whether they have enough capital. Banks that cannot privately raise the additional capital they need after the so-called stress tests will get taxpayer money, regulators said in a statement in Washington. Government funds would be in the form of "mandatory convertible preferred shares" that would be exchanged into common equity "only as needed over time." Stakes the Treasury has already bought will be eligible to be changed to convertible preferred shares.
JPMorgan Cuts Dividend 87 Percent to 5 Cents a Share JPMorgan Chase & Co., the second- largest U.S. bank, slashed its dividend by 87 percent to 5 cents and said it plans to maintain that level "for the time being." The bank and its predecessors haven't cut the dividend since 1990. The move aims to protect the bank even if the economy deteriorates "significantly," Chief Executive Officer Jamie Dimon said in a statement today. It isn't "directly related" to the $25 billion that JPMorgan received under the government's Troubled Asset Relief Program, or TARP, Dimon said.
U.S. to provide 'capital buffer' as needed for banks Government reiterates position that banks must 'remain in private hands' As part of the latest efforts by regulators to thwart concerns that some banks need to be nationalized, U.S. regulators vowed Monday to provide a "temporary capital buffer" to financial institutions that fail a planned stress test and are unable to secure help from private sources. "The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth," regulators from various agencies said in a joint statement. Shares of major banking institutions surged after the statement, in which the Treasury, Federal Reserve and other bank regulators asserted that no "systemically important" financial institution will be allowed to fail.
On Transparency of the Fed by Ron Paul This week the Federal Reserve responded to the American people's increased concerns over our monetary policy by presenting new initiatives aimed at enhancing the Fed's transparency and accountability. As someone who has called for more openness from the Fed for over 30 years, I was pleased to see the Fed acknowledge the legitimacy of this need. The Federal Reserve controls the flow of money and credit in our economy because Congress has abdicated its responsibility over the nation's currency. This process therefore occurs centrally, and almost completely outside the system of checks and balances. Because of legal tender laws, people are left with no real choice, except to build their lives and futures around this monopoly currency, vulnerable to powerful central bankers. The Founding Fathers intended only gold and silver to be used as currency, however, inch by inch over the decades, this country has backed away from this important restraint. Our money today has no link whatsoever to gold or silver. For many reasons, this is extremely dangerous, and has a lot to do with the boom and bust cycles that have resulted in the crisis in which we find ourselves today.
U.S. Pressed to Add Billions to Bailouts The government faced mounting pressure on Monday to put billions more in some of the nation's biggest banks, two of the biggest automakers and the biggest insurance company, despite the billions it has already committed to rescuing them. The government's boldest rescue to date, its $150 billion commitment for the insurance giant American International Group, is foundering. A.I.G. indicated on Monday it was now negotiating for tens of billions of dollars in additional assistance as losses have mounted.
Nouriel Roubini - Outlook for Government on Facing Global Economic Crisis - Bloomberg 2.20.2009 Analysis and Discussion with Roubini Global Economics Chairman and Economic Professor at NYU Stern School of Business Nouriel Roubini (Starting Bell)
Obama Vows to Cut Federal Deficit in Half by End of First Term [commnet: yesterday he vowed to cut deficit by two-thirds in first term!] States to Start Getting Funds to Cover Medicaid Costs Wednesday; Biden to Oversee Stimulus's Implementation President Obama launched a bipartisan effort today to restore fiscal discipline to the nation, pledging to cut the budget deficit in half in four years and reinstate pay-as-you-go rules to prevent the government from spending money it does not have. At the end of an extraordinary "fiscal responsibility summit," he called on a broad cross-section of Democratic and Republican lawmakers, independent experts, business leaders and advocates to help the administration move toward tough decisions on reforming Social Security, health care, the tax code, the budget process and federal procurement. And he announced that the White House will hold a "health care summit" next week in an effort to capitalize on momentum for change.
Paul Krugman: The econoclast The New York Times columnist and Princeton professor is in his policy-influencing prime, and has become one of the highest-profile advocates of bank nationalization. Paul Krugman couldn't help but do a victory dance last week when none other than Alan Greenspan, a most-ardent defender of laissez-faire capitalism, acknowledged that several big U.S. banks would probably have to be nationalized. "Comrade Greenspan: Seize the economy's commanding heights!" Mr. Krugman crowed on his blog ( http://krugman.blogs.nytimes.com ).
Entitlements on the back of an envelope Today’s “fiscal responsibility” summit, which was originally much feared as a Trojan Horse for Social Security cuts, has apparently been downgraded into relative obscurity. But I thought it might nonetheless be worth talking briefly about the math of the entitlements issue. Usually this is done with fairly elaborate projections, but I think the essence can be explained with a back-of-the-envelope calculation. So here goes. Right now, the federal government spends about 9 percent of GDP on the three biggies, Social Security, Medicare and Medicaid, with the total roughly evenly divided between retirement and medical care.
Dick Armey discusses Senate economic plan
Obama Picks Nation's First Chinese-American Governor for Commerce Secretary Official: Obama Likely to Name Locke to Commerce A senior administration official says that President Barack Obama's likely third pick for Commerce secretary is former Washington Gov. Gary Locke. The official spoke on condition of anonymity because the announcement has not yet been made. Locke was the nation's first Chinese-American governor when he served two terms in the Washington statehouse from 1997 to 2005. Obama's expected choice of Locke arose less than two weeks after his most recent pick, Republican Sen. Judd Gregg of New Hampshire, backed out.
Microsoft to Ask Laid-Off Workers to Return Portion of Severance Pay A few weeks after launching the first wide-scale layoffs in its history, Microsoft Corp. admits it screwed up a key part of the plan. The company is asking some laid-off employees for a portion of their severance back, saying an administrative glitch caused the software maker to pay them too much. Lou Gellos, a Microsoft spokesman, would not say how many of the 1,400 workers let go in January were overpaid, or by how much. Microsoft has said severance would be calculated by length of service and position in the company. The Redmond, Wash.-based software maker is asking former employees for reimbursement, by check or money order, within two weeks, according to a redacted letter posted by the technology blog TechCrunch. Gellos confirmed the letter's authenticity.
Forecasters see higher unemployment in 2009 Brace yourself: The recession is projected to worsen this year. The country stands to lose a sizable chunk of economic activity in 2009 as consumers at home and abroad retrench in the face of persistent economic troubles. And the U.S. unemployment rate - now at 7.6 percent, the highest in more than 16 years - is expected hit a peak of 9 percent this year. That gloomy outlook came from leading forecasters in the latest survey by the National Association for Business Economics to be released Monday. The new estimates are roughly in line with other recent projections, including those released last week by the Federal Reserve. "The steady drumbeat of weak economic and financial market data have made business economists decidedly more pessimistic on the economic outlook for the next several quarters," said NABE president Chris Varvares, head of Macroeconomic Advisers.
World Of Trouble How the mortgage industry destroyed itself. Three years before the housing market crash, Paul Bishop says he warned his superiors at World Savings that many of the mortgages they were granting were misleading and predatory.
Mortgage Whistleblower World Savings whistleblower Paul Bishop spoke with Harry Smith about when he first noticed the company was taking on unstable loans.
Elderly Emerge as a New Class of Workers -- and the Jobless Mary Appleby, 76 years old, lost her job in January as a cashier at a courthouse cafeteria here. She is now looking for minimum-wage work. Mary Bennett, 80, began filling out applications for fast-food restaurants and convenience stores after she was laid off last March as a machinist. Fred Dase, 81, a bartender until last summer, also needs another job. During past recessions, older workers simply would have retired rather than searching want ads and applying for jobs. But these days, with outstanding mortgages, bank loans and high medical bills, many of them can't afford to be out of work. With jobs so scarce, people in their seventh and eighth decades are up against those half their age in a desperate scramble for work.
China's dollar dilemma The flotation of Blackstone in June 2007 has already gone down as one of the symbolic events in America's financial bubble - the end-of-an-era deal when some of Wall Street's savviest insiders decided to cash out. Yet the listing of the private equity group could also be the turning point in another chapter of financial history; one that will shape the world that emerges from the current crisis: the moment when China really began to question its deep financial entanglement with the US.
Will Germany deliver on the Faustian bargain that created monetary union? If Der Spiegel is correct, the German finance ministry is drafting rescue plans to prevent default on the edges of the eurozone leading to a full-blown collapse of Europe's monetary system. This is an entirely appropriate policy in economic terms. One dreads to think what would happen if the world's twin reserve currency were to disintegrate at this stage. But what about the solemn pledge to voters by Germany's political elites – promiscuously given over the years – that monetary union would never leave them on the hook for the debts of half Europe? The vast imbalances that have been allowed to build up under the seductive protection of EMU leave German taxpayers facing bail-out liabilities that exceed the cost of reparations after the First World War, in proportional terms. The political ground has not been prepared for this. EMU was foisted on the German people without a referendum, in the face of deep public scepticism and scathing criticisms by the professoriat. This failure to secure a mandate for such a revolutionary undertaking is coming back to haunt them.
Beer sales: Economic indicator 101 So the Dow hit a low unseen since 1997 today, but the real economic indicator of the recession at hand may lie in another measure: "There has generally not been much of a relationship between alcohol purchases and changes in GDP -- the correlation is essentially zero,'' the good analytical folks at fivethirtyeight.com -- "politics done right'' -- note. "But something was very, very different in the fourth quarter of 2008,'' they report. "Sales of alcohol for off-premises consumption were down by 9.3 percent from the previous quarter, according to the Commerce Department. "This is absolutely unprecedented: the largest previous drop had been just 3.7 percent, between the third and fourth quarters of 1991. "Beer accounts for almost all of the decrease, with revenues off by almost 14 percent,'' they add.
Stimulus Watch - Projects by state StimulusWatch.org was built to help the new administration keep its pledge to invest stimulus money smartly, and to hold public officials to account for the taxpayer money they spend. We do this by allowing you, citizens around the country with local knowledge about the proposed "shovel-ready" projects in your city, to find, discuss and rate those projects. These projects are not part of the stimulus bill. They are candidates for funding by federal grant programs once the bill passes.
As It Falters, Eastern Europe Raises Risks Since the fall of the Berlin Wall, the countries of Eastern Europe have emerged as critical allies of the United States in the region, embracing American-style capitalism and borrowing heavily from Western European banks to finance their rise. Now the bill is coming due. The development boom that turned Poland, Hungary and other former Soviet satellites into some of Europe’s hottest markets is on the verge of going bust, raising worrisome new risks for the global financial system that may ricochet back to the United States. Last week, Wall Street plunged after Moody’s Investors Service warned that Western banks that had recently beat a path to Eastern Europe’s doorstep now faced “hard landings,” spooking investors with new fears that the exposure could spread beyond Europe’s shores.
A Crisis Is Separating Eastern Europe’s Strong From Its Weak PRAGUE — The owner of some of the Czech capital’s chic restaurants unveiled a novel approach this week to lure business clients to one of his upscale dining rooms: let diners pay what they like. The owner, Sanjiv Suri, hopes executives will not want to appear cheap to their guests when presented with a blank check after dining at the lunch buffet, laden with grilled vegetables instead of foie gras. Even if they pay nothing, he added, they will almost certainly return as paying customers. “During an economic crisis you need to be creative,” said Mr. Suri, sipping pinot noir in a half-empty dining room.
Don't miss this one - it will come back to "bite US" . . . Obama Issues Questionable Executive Order to Close Guantanamo Bay Newly minted president Barack Obama issues an executive order to close the terrorist detention center at Guantanamo Bay, Cuba. This video questions the wisdom of such a move. True, there were cases where innocent people were being held there unjustly, but what about those who are known sympathizers of terrorist groups? What SHOULD be in place is a system where solid verification of these individuals' affiliations (if any) is confirmed.
Soros sees no bottom for world financial "collapse" Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis. Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union. He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.
Volcker Speaks on Economic Crisis - Bloomberg
Gold’s Assault On the Clueless We’ve been monitoring gold’s vital signs closely, since any foray above $1000 is cause for nervousness. The yellow stuff has always been free to roam, and even to misbehave, below that price; but once above it, the bankers regard each rally with a glower of malice. While it is indisputable that debt deflation’s irresistible power has rendered the central banks incapable of exerting any meaningful control over the sovereign economies they represent, the bankers and the IMF still have the ability to crush any hint of rebellion by those gold bulls who would deign to challenge the monetary status quo. With their relatively large stocks of physical gold, and the complicity of institutional agents such as JP Morgan to help suppress “paper gold” in futures markets, the bankers still have enough influence over bullion’s price to temporarily suspend the laws of supply and demand.
Gold Little Changed After Gain Over $1,000, Highest Since March Gold was little changed after rallying above $1,000 an ounce last week for the first time in almost a year as investors sought a haven from slumping equities. Gold for immediate delivery traded at $987.03 an ounce after reaching $1,006.29 on Feb. 20, the highest since March. The metal has soared 45 percent from an October low of $682.41 as investor confidence in financial assets eroded and central banks pumped trillions of dollars into the banking system.
Oil Trades Near $40 a Barrel on Concern Recession Will Deepen Crude oil traded near $40 a barrel in New York as traders weighed the risk of a deepening global recession against government measures to revive economic growth. The Organization of Petroleum Exporting Countries may make another production cut should oil prices continue to fall, Chakib Khelil, the Algerian oil minister and former OPEC president, said yesterday. The dollar fell on speculation the U.S. government will take larger stakes in the nation’s banks. “Crude really has been seeking direction from other markets,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “In the near term, the rather dismal macro-economic backdrop will put a lid on oil prices.”
Santelli's Chicago Tea Party: The Quest for Our Nation's Soul CNBC’s Rick Santelli's calls for a Chicago Tea Party (here) are patriotic, American, and on point. A Chicago Tea Party is what our rabble-rousing founding fathers envisioned, and I will be there this July 4. Santelli’s diatribe of genius, fury and heart had one quick quote that you may have missed. “Don’t get scared, Joe. They’re already scaring you.” We are being scared into a submission. It’s not “their” intention, but you know that road to hell. We cannot submit. We have not so utterly gone down this road. Our government started this race to bottom in the dark days of November, 2008. This was about the time I decided that Paper Is Dead.
Saving America: Time to hit the streets? Jim DeMint's gentlemanly air and refined tone belie a power and an urgency in his words. The stately senator from South Carolina sees America's unique centuries-old system of freedom dying out. And he thinks we may have to take to the streets to save it. "I would think it's time to start thinking about peaceful demonstrations," he told us last week. Seriously? "Seriously. "The power of the people is there. Freedom is in the people's hands right now, and it's about to slip through." Of course, the recent "stimulus" debate is what's fresh on DeMint's mind. Despite DeMint's putting 15 aides on it overnight, no one in Washington was able to read the bill, which was the most expensive in American history -- as well as being perhaps the most irresponsible. The worst since the adoption of the income tax, DeMint figures.
Alan Keyes: Stop Obama or U.S. will cease to exist!!!!
Peter Schiff: How He Would Fix America Apparently there is a movement to get doomsayer investor/libertarian Peter Schiff to run for the U.S.. Senate in Connecticut. And a website has gone up to draft him. Here is the Schiff agenda as the website outlines it: 1. Increase savings and production. . . 2. Vote no on all bailouts. . . 3. Allow the recession to run its course. . . 4. Let the free market operate. . . 5. Drastically cut federal spending. . . 6. Cut corporate and personal income taxes. . . 7. Minimize corporate regulation. . . 8. Restore the value of the US dollar. . .
Predatory Legislators With millions of homeowners now struggling to repay money they clearly never should have borrowed, our leaders have been righteously wagging fingers at predatory lenders who allegedly enticed innocent borrowers, and the country, into a financial snake pit. While the mortgage industry clearly deserves a good share of the blame, unindicted co-conspirators abound. The ringleaders are still at-large and are, in fact, busy hatching a plan to dwarf the earlier mistakes.
Roubini says crisis end distant (see video) Nouriel Roubini, one of the few economists who foretold much of the current financial turmoil, on his view that the banking and credit crisis is still far from over.
Third time lucky for gold - the ultimate money? As this article was commenced, the gold price was at $997 and seemingly inexorably headed towards breaching the US$1,000 level once again. Indeed by the time you read this it may well already have done so. April futures had already marginally gone through the $1,000 level. The big question is, assuming spot gold does push through $1,000, will this be third time lucky for the gold bugs? Gold has breached $1,000 twice beforehand and on each occasion its climb into the four figure level was shortlived. This time it may well be a different situation with the likelihood that the price is poised to go higher still - and maintain its position above $1,000 for some little time to come.
The Citigroup/Gold Ratio In 2001, an investor who wanted to exchange his gold bullion for Citigroup (C) shares was able to acquire about six shares of stock for each ounce of gold. With Citigroup closing just under $2.00 yesterday and gold above the $1000.00 mark, that same swap now entitles the holder of gold to about 514 Citigroup shares. The change in fortunes says much less about gold, which is almost 300% above the 2001 lows, than it does about Citigroup, which has fallen about 96% from an early 2007 high.
Decoding What Gold Is Telling Us Well, gold bugs around the world have been having a good chuckle of late, as the market is re-affirming the often eccentric and practically religious views of gold bugs: gold is up over 11% for the year in US dollars, and up over 4% over just the past five trading days. Which begs the question: why? There are a few possible answers to this question:
Deflation. This crisis is global, and everyone is flying to safe stores of wealth. Over the big picture of human history, gold has served as the best store of wealth -- and thus gold is rising. In many ways this is the classic "gold is money" argument, one typically championed by Austrian economists. Robert Blumen has offered an excellent explanation of this argument.
Inflation. Gold is typically a hedge against inflation concerns, and as the US federal government continues to aggressively "stimulate" the economy, the rally in gold may be a reflection of increased concerns regarding inflation.
So which one is it?
Cramer: Staggering Losses of Capital If you want revelations, go over the largest-cap companies right now vs. the ones that were the largest-cap last year at this time. The stocks, the losses, the changes, they are staggering. First, the aggregate: The largest 100 companies a year ago were worth $8 trillion; they're now worth $5 trillion. That's a lot of missing trillions. In the day-to-day drudgery and decline, they seem largely unaccounted for until you look at each line item.
Wall Street awaits Treasury details Increasingly skeptical investors await Treasury plan details, signs gov't efforts are working This week, Washington will get another chance to prove to Wall Street it means business. Investors are expecting details on the Treasury Department's plans to fix the financial industry. The questions they want answered: How the government will decide which banks are healthy enough to be saved, how their toxic assets will be priced and how officials will convince private investors to buy them.
Ron Paul on Real Time w/ Bill Maher 02/20/2009
DeMint: Don't 'censor' talk radio President Obama's effort to clear the air last week has failed to ease conservative fears that the White House and congressional Democrats are conspiring to dominate the airwaves. At issue is the "Fairness Doctrine," a rule that, from 1949 to 1987, mandated that broadcasters present contrasting views on controversial issues. Despite Mr. Obama's denials, leading conservative talk-show hosts and their allies in Congress warn that a plan is afoot to revive the rule in camouflaged form with a simple goal in mind: silencing conservative talk radio.
As Doubts Grow, U.S. Will Judge Banks’ Stability The Obama administration will begin taking a hard look at the financial condition of the country’s 20 biggest banks this week to judge whether they could hold up even if the downturn worsens further than policy makers already expect. These reviews of the banks’ books, known as “stress tests,” are heightening a dilemma for Obama aides about how candid they should be about the health of banks like Citigroup and Bank of America. The tests are expected to take several weeks. Bank shares were pummeled last week, partly because of rumors that the government might nationalize some of the banks. Officials consider many of the top 20 banks “too big to fail.”
U.S. Rejects Nationalization of Citi and BAC Just as the US equity market was in the process of a major breakdown over the issue of possible government takeover of Bank of America and Citigroup, the White House made some comments that appeared to reject the notion of nationalization, and there was a sudden market turnabout. After Bank of America CEO Ken Lewis stated his bank was profitable and did not need government aid, BAC shares moved higher by about +20% in minutes. By the end of the session, however, the broad market rally ran out of steam.
Bank rescue details key to stave off bears Bears could have the upper hand again this week if Wall Street fails to get assurance that major banks can be rescued without being seized by the U.S. government. The Dow breached a six-year low in the holiday-shortened week amid mounting fears that the White House would nationalize banks, thus wiping out shareholders. Stocks pared losses in the final hours of trading on Friday after the White House said it strongly believed in a privately held bank system.
Investigator to lead stimulus oversight Obama to name former Abramoff investigator to oversee $787B stimulus President Barack Obama plans to announce Monday a former Secret Service agent who helped expose lobbyists' corruption at the Interior Department as his pick to oversee the $787 billion economic stimulus plan. Obama is set to name Earl Devaney as chairman of the new Recovery Act Transparency and Accountability Board, an administration official said Sunday. Vice President Joe Biden also will be given a role coordinating oversight of stimulus spending. The official spoke on the condition of anonymity because the White House had not made public the announcement.
Conference in Financial Crisis - Bloomberg
Why Does Obama Think Stimulus Can Shock Economy Back to Life? It would be unfair to pounce all over Team Obama this early in their administration. After all, while the Democrats bear a lot of responsibility for the knee-deep toxic mess now covering the floor of the engine room, the bulk of the responsibility has to rest on the shrugging shoulders of Obama’s immediate predecessor and those that came before him. Early though it may be, however, it’s not too early to come right out and say what needs to be said: when it comes to the steps being taken to address the current crisis, Obama has no clothes.
The Great Depression has Arrived - Collapsing American Dreams “They're out there losing millions and it's up to me and you to come running to the rescue. Well pardon me if I don't shed a tear/they're selling make believe and we don't buy that here/cause in the real world they're shutting Detroit down, while the boss man takes his bonus pay and jets on out of town/DC's paying out the bankers as the farmers auction ground/while they're living it up on Wall Street in that New York City town, here in the real world they're shutting Detroit down.” My favorite line is – “the boss man takes his bonus pay and jets on out of town.” Wow! All these collapsed dreams! All the thousands of baby boomers with calloused hands looking at 50% reduced portfolios.
Jumbo Loan Defaults Rise at Fast Pace as Rich Suffer Luxury homeowners are falling behind on mortgage payments at the fastest pace in more than 15 years, a sign the U.S. financial crisis that began with the poorest Americans has reached the wealthiest. About 2.57 percent of prime borrowers who took out jumbo loans last year were at least 60 days delinquent, according to LPS Applied Analytics, a mortgage data service in Jacksonville, Florida. They got to that level within 10 months, almost twice as quickly as 2007 borrowers and the fastest rate since at least 1992, when LPS Applied Analytics began tracking the market.
Obama plan would cut deficit by two-thirds in first term After a string of costly bailout and stimulus measures, President Barack Obama will set a goal this week of cutting the annual deficit by nearly two-thirds by the end of his term, administration officials said. This reduction will come in large part through Iraq troop withdrawals and higher taxes on the wealthy. Obama's budget outline, which he will release Thursday, will also confirm his intention to deliver this year on ambitious campaign promises on health care and energy policy.
Max Keiser UK is Doomed Feb 21 2009
Clinton Urges China to Keep Buying U.S. Treasury Securities Secretary of State Hillary Clinton urged China to continue buying U.S. Treasury bonds to help finance President Barack Obama’s stimulus plan, saying “we are truly going to rise or fall together.” “Our economies are so intertwined,” Clinton said in an interview today in Beijing with Shanghai-based Dragon Television. “It would not be in China’s interest” if the U.S. were unable to finance deficit spending to stimulate its stalled economy. The U.S. is the single largest buyer of the exports that drive growth in China, the world’s third-largest economy. China in turn invests surplus earnings from shipments of goods such as toys, clothing and steel primarily in Treasury securities, making it the world’s largest holder of U.S. government debt at the end of last year with $696.2 billion.
Dubai to take up $10bn UAE loan The United Arab Emirates is to lend Dubai $10bn to ease the emirate’s debt repayment schedule in an effort to rescue the struggling economy, officials say. The UAE central bank subscribed to half of a $20bn five year bond programme launched by the Dubai government. The unsecured paper yields a 4 per cent dividend. “This program will secure the necessary funding for Dubai to meet its financial obligations and continue its development program,” the Dubai government said on Sunday. Federal backing is designed to help restore confidence in the Dubai economy, the foundations of which are based on real estate, tourism and trade, making it particularly exposed to the global credit crunch.
Asia Agrees on $120 Billion Currency Pool Amid Crisis Asian nations will form a $120 billion pool of foreign-exchange reserves that can be used by countries to defend their currencies in an expansion of efforts to battle fallout from the global financial crisis. Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations agreed to the fund at a summit yesterday in Phuket, Thailand. The amount is 50 percent more than was proposed last May, and a broadening of the current arrangement called the Chiang Mai Initiative that allows only bilateral currency swaps. No date was set for completion of the new pool.
When Consumers Cut Back: A Lesson From Japan As recession-wary Americans adapt to a new frugality, Japan offers a peek at how thrift can take lasting hold of a consumer society, to disastrous effect. The economic malaise that plagued Japan from the 1990s until the early 2000s brought stunted wages and depressed stock prices, turning free-spending consumers into misers and making them dead weight on Japan’s economy. Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whiskey, the favorite drink among moneyed Tokyoites in the booming ’80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990.
Secret U.S. unit trains commandos in Pakistan BARA, Pakistan: More than 70 United States military advisers and technical specialists are secretly working in Pakistan to help its armed forces battle Al Qaeda and the Taliban in the country's lawless tribal areas, American military officials said. The Americans are mostly Army Special Forces soldiers who are training Pakistani Army and paramilitary troops, providing them with intelligence and advising on combat tactics, the officials said. They do not conduct combat operations, the officials added.
Gold Near 11-Month High, Breaks New Non-Dollar Records, as "Smart Investors Hedge Against Devaluations SPOT GOLD in US DOLLARS slipped back from a near 11-month high early in London on Thursday, bouncing off $970 an ounce as world stock markets held flat, down almost 5% for the week so far. A surge in after-hours trade overnight saw the Gold Price in Dollars come within a few cents of mid-July's top above $987 an ounce. Prior to that, gold reached its highest price ever amid the Bear Stearns collapse of March 2008. Versus the other major world currencies last night, the metal broke new record highs for British, European, Swiss, Canadian and Australian savers now Ready to Buy Gold. "Higher highs and higher lows keep the bullish trending price action in place," says a technical note from Scotia Mocatta, the London market maker.
Gold amid Inflation and Deflation "Inflation and deflation are both a crisis in money. Which leaves gold as a secure store of wealth against both monetary panics..." THE 1970s DIDN'T JUST curse the world with cheap German wine and the Bay City Rollers. That decade gave us soaring inflation, too. Gold's stellar run up to $850 per ounce, rising more than 24 times over, also came in the '70s. So gold, therefore, must deliver its strongest returns when the cost of living shoots higher. Right? Wrong. "In the long run, stocks have thrashed gold as great long-term hedges against inflation," says Jeremy Siegel, professor of finance at Wharton University, Pennsylvania. What's more, the eight-year bull run in Gold Prices so far this decade has come against the lowest average consumer-price inflation since the early 1960s.
Gold Continues to Climb as Economic Catastrophe Looms Last week, when Congress passed its $787 billion stimulus package, the size of the plan caused many observers to forget the water that has already passed under the bridge. Fewer still are wondering what havoc will erupt when all this liquidity eventually washes ashore. The latest spending, signed into law yesterday by President Obama, came on top of $300 billion committed to Citigroup, $700 billion for TARP 1, $300 billion for the FHA, $200 billion for TAF and some $300 billion for Fannie and Freddy. Just over the last six months, which excludes the initial Bush stimulus and several massive, unfunded Federal guarantees, nearly $5 trillion has been committed by the government to the financial industry. Rational observers cannot be faulted for concluding, despite Administration claims to the contrary, that the government is merely throwing money at the problem.
Gold primed to be 'mania asset' Gold is exhibiting all the classic signs of being in a structural bull market. On fears of inflation in early 2008, it rallied. Then, on fears of deflation in late 2008, it rallied again. So does gold perform better during inflation or deflation? In our view, that question is the wrong starting point. On the contrary, the rationale for owning gold, as it once again approaches the $1,000 an ounce level, is the prospect of mounting monetary disorder. The US Federal Reserve, having flooded the market with liquidity by more than doubling its balance sheet in less than six months, may be unable or unwilling to withdraw it in time for fear of precipitating a secondary relapse in economic activity. Other central bankers will also face intense pressures to "support" their domestic economy by weakening the currency, leading to competitive currency devaluations.
See 'tea party' call by CNBC analyst Reacts to Obama's economic plans with 'Howard Beale rant' on live TV With tongue only partially in cheek, a CNBC analyst on the floor of the Chicago Mercantile Exchange this morning responded to President Obama's proposed $275 billion deficit-financed homeowner bailout plan and other massive spending measures with a call for a new "tea party." Rick Santelli, in a nearly three-minute rant that drew approving hoots and comments from nearby traders, said the Obama administration's promotion of bad behavior must be causing the founding fathers to roll over in their graves. "We're thinking of having a Chicago Tea Party in July," Santelli told CNBC "Squawk Box" co-anchor Joe Kernan. "All you capitalists who want to show up at Lake Michigan, I'm going to start organizing."
Rick Santelli and the "Rant of the Year" Repeat from Thursday, in case you missed it.
Wilbur Ross Calls out Banking Chiefs
Liesman argues with Rick Santelli
Millions could get help, but is foreclosure plan fair? The Obama administration's $75 billion housing rescue plan promises to help millions of financially struggling homeowners keep their homes, but it may be too little and too late for millions of others. More than 3 million owners have lost their homes during the past three years, and almost 5 million more could follow this year through 2011, according to Moody's Economy.com.
Dow Hits 6-Year Low in Latest Milestone of Crisis Banking Shares Dive Again; Fears Over Jobs Intensify NEW YORK, Feb. 19 -- The Dow Jones industrial average slid to its lowest level in six years Thursday on fears about the weak financial system and a gloomy jobs outlook. The Dow's fall illustrates the rapid destruction of wealth in the stock market during the financial crisis. The Dow now stands at about half of its all-time high of 14,164, reached in October 2007. The total value of all shares of companies on the Dow has dwindled to $2.45 trillion, down from $4.51 trillion. With banks stocks weighing on the market Thursday, the Dow sank 1.2 percent to 7465.95, dipping below the bear market low of 7552 reached in November. The index is now at its lowest level since October 2002.
Late-Day Drop Sends Dow Below 7,500 Threshold Wall Street slipped lower on Thursday. The Dow Jones industrial average closed at its lowest level in six years amid concerns about the plans by the Obama administration to help homeowners in foreclosure and shore up the struggling banking system. After bouncing between light gains and losses, financial markets dropped in the last hour of trading. While stocks have been trading in a broad range over the last three months, analysts say that the indexes may be carving out a new, deeper trench, where the bottom of the old range becomes the top of the new one.
Fed's Lockhart Says Bank Nationalization Off the Table Nationalizing banks is "substantially" off the table, Federal Reserve Bank of Atlanta President Dennis Lockhart said following a speech in Alabama. Speaking to reporters after his speech, Lockhart said he was "unaware" of any serious consideration of bank nationalization. However earlier in the day, bank stocks plunged on fears that substantial losses could lead to the U.S. government taking control of banks, which could harm shareholders. Lockhart said correctly valuing assets is a central challenge to fixing banks and that the Treasury is not ruling out guarantees of toxic assets.
Ron Paul: small group of people can create money out of thin air!
Fed Leaders Issue Bleak Forecast Policymakers Project High Unemployment Through 2011, Vow Aggressive Action It could take years for the nation to fully bounce back from the recession, according to new projections by leaders of the Federal Reserve, who indicated that even once the economy starts expanding again, it will be an "unusually gradual and prolonged" recovery. The unemployment rate will remain elevated through at least 2011, according to the policymakers' official forecast, released yesterday, and the economy this year could shrink by 1.3 percent. That would mark the sharpest contraction in 27 years.
U.S. Tries a Trillion-Dollar Key for Locked Lending Credit cards, home equity lines, student loans, car financing: none come cheaply or easily in these credit-tight times. The banks, the refrain goes, just will not lend money. But it is not simply the banks that are the problem. It is also what lies behind them. Largely hidden from view is a vast financial system that serves as the banker to the banks. And, like many lenders, this system is in deep trouble. The question is how to fix it. Most banks no longer hold the loans they make, content to collect interest until the debt comes due. Instead, the loans are bundled into securities that are sold to investors, a process known as securitization.
The Banking Industry's Dirty Little Secret: Money Laundering For The Drug Cartels The United Nations’ Office on Drugs and Crime executive director Antonio Maria Costa recently told the Austrian magazine Profil that drug money has been the only thing that has kept many major banks in business… Costa said: “In many instances, drug money is currently the only liquid investment capital. In the second half of 2008, liquidity was the banking system’s main problem and hence liquid capital became an important factor.” Costa went on to say that UNODC has discovered that “interbank loans were funded by money that originated from drug trade and other illegal activities.” Incredibly, he said there were “signs that some banks were rescued in that way.” In the last few years, large banks have been getting into the remittance industry, which sends over $50 billion annually from the U.S. to Latin America.
Merrill Lynch Jumps On Shovel Ready Bandwagon Reports of the death of Wall Street have been exagerated. The newest game in town is to get in on restructuring the American economy for the new age of Obama. First up on the agenda: find a "shovel ready" infrastructure project and start sifting through the soil for fees. Take, for example, the plan to replace the Tappan Zee Bridge that crosses the Hudson from Westchester County, just north of New York City. Replacing the huge bridge--it's very long because the river is pretty wide--will cost an estimated $16 billion.That's more than half of the total amount appropriated in the stimulus bill for this kind of project, so New York can't rely on Obamanomics to supply the money. But where Obama fails, maybe Wall Street can help. Yesterday the state Department of Transportation announced it had hired Merrill Lynch to help put together the financing for the bridge.
Commercial real estate's crisis point approaching? $171 billion in loans coming due this year With credit markets still shaky, about $171 billion in loans backed by offices, shopping centers, hotels and other commercial buildings are coming due this year. Experts increasingly wonder whether there's enough credit capacity in the system to refinance them. Yesterday, at a conference sponsored by the Burnham-Moores Center for Real Estate at the University of San Diego, bankers and real estate experts tried to tackle the crucial questions facing the market. Two of them were: When will the credit freeze thaw, and what can commercial landlords expect when dealing with lenders? The overall message was that it's too soon to know. Too much uncertainty remains over the direction of the economy and federal efforts to shore it up. For months, experts have been saying commercial buildings will be the next shoe to drop in a real estate-led downturn that began with toxic subprime home loans and has spread to every sector of the economy.
Public fears about troubled economy growing As the economy continues to struggle, the public is growing increasingly concerned about losing jobs, not having enough money to pay the bills and seeing their retirement accounts shrink, according to an Associated Press-GfK poll. Nearly half of those surveyed said they worry about becoming unemployed - almost double the percentage at this time last year. The poll released Wednesday also found public support dipped slightly in the past month for the $787 billion package of tax cuts and government spending President Barack Obama signed into law this week on the promise that it will save or create 3.5 million jobs and re-ignite the economy.
The Long Retreat by Patrick J. Buchanan "The situation in Afghanistan is deteriorating," said President Obama, as he announced deployment of 17,000 more U.S. troops. "I'm absolutely convinced that you cannot solve the problem of Afghanistan, the Taliban, the spread of extremism in that region, solely through military means." "(T)here is no military solution in Afghanistan," says Secretary of Defense Robert Gates. Said U.S. Commander Gen. David McKiernan yesterday, U.S. and NATO forces are "stalemated." Such admissions by our military and political leadership in a time of war call to mind other words heard back in 1951, when Gen. Douglas MacArthur delivered his farewell address to the Congress: "(O)nce war is forced upon us," said MacArthur, "there is no other alternative than to apply every available means to bring it to a swift end. War's very object is victory, not prolonged indecision. "In war, there is no substitute for victory."
Barter Fits the Bill for Strapped Firms Small businesses, squeezed for cash and unable to get loans, are turning to an ancient payment system: barter. Daniel Blank, creative director at Bureau Blank Inc., a New York graphic-design and brand-identity company, first used bartering when he started the company in 2004, because it was hard to get capital for a start-up. But he hadn't had to barter since then, until now. For the past couple of months, Mr. Blank has been getting advice on running his business from Joe Hunt, a former ad-agency owner who has started Workforce Enterprises LLC, a document-solutions company in New York. For about two hours each week, Mr. Hunt helps Bureau Blank with its accounting and finance operations, among other things.
The Hijacking of America Watching the perverted circus of corrupt politicians and administrators in Washington and New York the last six months is enough to make anyone with a brain want to shout a primal scream of disgust and anger. I use the word "brain" because it is becoming increasingly apparent that many Americans unfortunately are no longer using the gray matter that exists between their ears with regards to what is going on in our country. The rapidly accelerating chain of events moving us faster and faster towards economic oblivion is beyond shocking. It is happening much quicker than I anticipated. The numbers these stooges in Washington and New York are throwing around for the bailouts and economic stimulus package are simply too big for the average person to comprehend. First analogy: If someone spent one million dollars per day each and every day since Jesus was born, it would take another 731 years (beyond today) before one trillion dollars was spent.
$1,000,000,000,000 / $1,000,000 per day = one million days
one million days / 365 = 2740 years
2740 - 2009 = 731 (years remaining)
Second analogy looks at a million, a billion, and a trillion in terms of seconds. One million seconds comes out to be about 11? days. A billion seconds is 32 years. And a trillion seconds is 32,000 years! The third analogy puts dollar bills end to end. If you laid one dollar bills end to end, one trillion dollars would stretch nearly from the earth to the sun. It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollar bills! But thelast analogy is the one that absolutely blows my mind. If you took freshly minted brand new $1,000 dollar bills and starting stacking them one on top of another, it would take a stack over 68 miles high to reach one trillion dollars!
"The Federal Government Is Bankrupt. If The Federal Government Were a Corporation, the President and Senior Treasury Officers Would Be In [Jail]" In the quote of the week, economist John Williams - who has been tracking the real fundamentals of the economy for many years at his website Shadow Stats - said: "The Federal Government Is Bankrupt ... If The Federal Government Were A Corporation … The President And Senior Treasury Officers Would Be In Federal Penitentiary." What's Williams talking about? He explains: "The federal government's deficit is hemorrhaging at a pace which threatens the viability of the financial system," Williams added. "The popularly reported 2009 [deficit] will clearly exceed $2 trillion on a cash basis and that full amount has to be funded by Treasury borrowing. . .
Inflation Not Dead Yet What happened to all those fears of deflation? AP: The Labor Department said Thursday that wholesale prices increased by 0.8 percent last month, the biggest gain since last July and well above the 0.2 percent increase that economists had expected. . . . . Some economists might say this is a good thing, since for all of inflation's evils, mainstream economics considers deflation to be much worse. Bet let's just common-sense this for a second: If the economy is worsening, wages are going down, and people are losing their jobs, don't higher prices just make things worse?
Wholesale inflation takes biggest jump in 6 months WASHINGTON Inflation at the wholesale level surged unexpectedly in January, reflecting sharply higher prices for gasoline and other energy products. The Labor Department said Thursday that wholesale prices increased by 0.8 percent last month, the biggest gain since last July and well above the 0.2 percent increase that economists had expected. The acceleration was led by a 3.7 percent surge in energy prices with gasoline prices jumping by 15 percent, the biggest gain in 14 months. Even outside the volatile food and energy sectors, wholesale prices showed a bigger-than-expected increase, rising by 0.4 percent. Economists had expected a slight 0.1 percent rise in so-called core inflation. Food prices were well-behaved last month, falling for a second straight month. The 0.4 percent decline in January reflected lower costs for beef and dairy products which offset gains in the price of vegetables and chicken products.
Bank of America, AmEx May Suffer on Card Defaults Credit-card defaults may rise beyond 10 percent this year, breaking records and wiping out more than half of annual profit for lenders including Bank of America Corp. and JPMorgan Chase & Co., analysts said. Loan failures are about to surpass a previous high of 7.53 percent as people losing jobs amid the U.S. recession can't repay debt, according to Fitch Ratings. The defaults may peak at 10 percent to 11 percent of loans by year end under a stress scenario, Goldman Sachs Group Inc. analyst Brian Foran said yesterday in an e-mail, reducing 2009 earnings for issuers including an almost 40 percent cut for American Express Co.
Now Facing Financial Crisis, Kansas Boosted State Spending Nearly 15% in Past Two Years Kansas, which faces a massive budget shortfall, has consistently increased its spending over the past decade, even as state revenues began to level off over the past few years. According to a National Governors Association/National Association of State Budget Officers report and the Kansas Division of the Budget, the state’s general fund spending has increased by at least 8 percent each year from Fiscal Year 2005 through Fiscal Year 2008--with total expenditures of $4.6 billion in FY 2005, $5.1 billion in FY 2006, $5.6 billion in 2007 and $6.1 billion in FY 2008. The state’s spending increased by 9.5 percent from FY 2007 to FY 2008. Additionally, the report said spending was set to increase by another 4.3 percent in 2009--to a projected $6.5 billion. The financially strapped state, meanwhile, now faces a dire economic situation.
Jobless hit with bank fees on benefits First, Arthur Santa-Maria called Bank of America to ask how to check the balance of his new unemployment benefits debit card. The bank charged him 50 cents. He chose not to complain. That would have cost another 50 cents. So he took out some of the money and then decided to pull out the rest. But that made two withdrawals on the same day, and that was $1.50. For hundreds of thousands of workers losing their jobs during the recession, there's a new twist to their financial pain: Even when they're collecting unemployment benefits, they're paying the bank just to get the money - or even to call customer service to complain about it. Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JP Morgan Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards.
Nearly 5M get jobless benefits Unemployment jumps 627,000 The number of Americans receiving jobless benefits rose to a record near 5 million in the first week of February, and new unemployment claims jumped by a surprising 627,000, the Labor Department reported Thursday. Economists had expected that new jobless claims would dip to 620,000 from the 623,000 of a week earlier. It was not to be. The number of new claims and the 4.99 million people who are continuing to receive unemployment benefits, up from 4.81 million the previous week, indicate there has been no letup in the toll that the worst recession since 1982 has been taking on American workers.
Newly poor swell lines at U.S. food banks MORRISTOWN, New Jersey: Cindy Dreeszen and her husband live in one of the wealthiest counties in the United States. They have steady jobs, his at a movie theater and hers at a government office. Together, they earn about $55,000 a year. But with a 17-month-old son, another baby on the way, and, as Dreeszen put it, "the cost of everything going up and up," the couple went to a food pantry this month to ask for some free groceries. "I didn't think we'd even be allowed to come here," said Dreeszen, 41, glancing around at the shelves of fruit, whole-wheat pasta and baby food. "This is totally something that I never expected to happen, to have to resort to this." Once a crutch for the most needy, food pantries have responded to the deepening recession by opening their doors to what one pantry organizer described as "the next layer of people," a rapidly expanding group of child-care workers, nurse's aides, real estate agents and secretaries who are facing a financial crisis for the first time.
Disney plans layoffs, streamlining as economy eats into revenue The Walt Disney Co. on Wednesday said it will eliminate an undisclosed number of jobs as part of a sweeping corporate overhaul at its domestic resorts, which includes plans to combine back-office operations at Walt Disney World and Disneyland. Disney would not say how many jobs it intends to cut or how much money it expects to save through the moves. The company employs about 80,000 people at its U.S. resorts, including 62,000 in Central Florida. With the shake-up, Disney will consolidate East and West Coast "operating infrastructure" -- responsibilities ranging from procurement to menu-planning to merchandise -- under Al Weiss, the president of worldwide operations for Walt Disney Parks and Resorts.
Its Muscle Car Glory Faded, Pontiac Shrivels Up DETROIT - With its history of building muscle cars like the GTO and the low-slung Firebird, Pontiac had good reason to take pride in its best-known marketing slogan from the 1980s, "We Build Excitement." Lately it has been using "Pontiac is CAR," a phrase more likely to catch the attention of grammarians than car buffs. And on Tuesday, when General Motors asked the federal government for more bailout money, it also announced a reorganization plan that included demoting Pontiac to a "focused niche brand," signaling that its lineup of vehicles would shrink and that it would no longer be a separate division.
Gerald Celente on Glenn Beck's Radio 19 Feb 2009 pt 1/2
Gerald Celente on Glenn Beck's Radio 19 Feb 2009 pt 2/2
States fearing mandates assert rights Worried the federal government is increasing its dominance over their affairs, several states are pursuing legislative action to assert their sovereignty under the 10th Amendment of the Constitution in hopes of warding off demands from Washington on how to spend money or enact policy. The growing concerns even have a handful of governors questioning whether to accept federal stimulus money that comes with strings attached. The sentiments to declare themselves legally independent from Washington have swept across as many as a dozen states, renewing a debate over so-called unfunded mandates that last raged in the 1990s. The states question whether the U.S. government can force states to take actions without paying for them or impose conditions on states if they accept certain federal funding.
FBI finds financier Stanford in Virginia Texas financier R. Allen Stanford was tracked down Thursday in Virginia, where FBI agents served him with legal papers in a multibillion-dollar fraud case. FBI agents, acting at the request of the Securities and Exchange Commission, served Stanford papers in Fredericksburg, Va., said FBI spokesman Richard Kolko. Stanford is not under arrest and is not in custody. In a civil papers Tuesday, the SEC alleged Stanford and three of his companies committed an $8 billion fraud that lured investors with promises of improbable and unsubstantiated high returns on certificates of deposit and other investments.
Marc Faber Eastern Europe is Collapsing Faber Says Germany, France May Have to Bail Out Marc Faber, publisher of the "Gloom, Boom & Doom Report" and managing director of Marc Faber Ltd., talks with Deirdre Bolton about the possibility that France and Germany may have to bail out entire nations as European government budgets buckle under the weight of recession. Faber also discusses the outlook for the U.S. stock market. Erik Schatzker joins the discussion
Israeli warning to Obama: Your talk gives Iran nukes Ex-Mossad chief says Tehran stalling, worries about president's 'learning curve' JERUSALEM - President Obama's policy of direct diplomacy with Iran may buy Tehran enough time to produce nuclear weapons, Shabtai Shavit, former chief of the Mossad intelligence agency, warned in an exclusive WND interview today. "I don't believe there is a political solution which can be achieved through negotiations with Iran," he said."My concern is that until Obama finishes his learning curve of the subject, the Iranians are going to have maybe the first or even more nuclear bombs." Shavit served as director of the Mossad from 1989 through 1996. He clarified that although diplomacy cannot be ruled out, from his experience he doesn't believe there can be a political solution with Iran.
Iran Has More Enriched Uranium Than Thought In their first appraisal of Iran’s nuclear program since President Obama took office, atomic inspectors have found that Iran recently understated by a third how much uranium it has enriched, United Nations officials said Thursday. The officials also declared for the first time that the amount of uranium that Tehran had now amassed — more than a ton — was sufficient, with added purification, to make an atom bomb. In a report issued in Vienna, the International Atomic Energy Agency said it had discovered an additional 460 pounds of low-enriched uranium, a third more than Iran had previously disclosed. The agency made the find during its annual physical inventory of nuclear materials at Iran’s sprawling desert enrichment plant at Natanz. Independent nuclear weapons experts expressed surprise at the disclosure and criticized the atomic inspectors for making independent checks on Iran’s progress only once a year.
Putin: Post-US World Blueprint The World Economic Forum took place in Davos Switzerland last week. The global picture enabled a nice snapshot of sentiment, fault for the crisis, blame doled out, the vacuum of leadership, the perks for blunderers in a country club setting (instead of prison), and warnings on a potential situation that could spiral out of control. Amidst all the finger pointing, surprisingly little blame was given to themselves, the corporate chieftains in attendance. Let's be clear! The Davos Forum was a funeral wake, and Putin rode in on a white horse to announce there is a new sheriff in town!! Davos afforded a unique opportunity for Russian self-styled leader Vladimir Putin to storm the forum stage and to steal the show. Putin presented a basic Blueprint for what should be called 'The Post-US World' as the United States and United Kingdom have lost the mantle of leadership and control.
Clinton: U.S. Preparing for Possible Regime Change in North Korea Clinton's stop in Seoul, the third in her week-long tour of Asian capitals, comes amid increasing tensions between the two Koreas. The Obama administration and America's Asian allies are preparing for a possible regime change in North Korea, Secretary of State Hillary Clinton said Thursday. Speaking to reporters aboard her plane from Indonesia to South Korea, Clinton said "the whole leadership situation (in North Korea) is somewhat unclear." She said the difficulties of dealing with the Stalinist regime of Kim Jong Il -- who is believed to have suffered a stroke last year -- have been compounded by "the uncertainties that come from questions about potential succession." She said the administration and its allies in the East are studying the scenarios surrounding such a succession of power.
For weekend viewing . . .
The Crash Course(New) End of Money? Chris Martenson Part 1 of 4
The Crash Course(New) End of Money? Chris Martenson 2 of 4
The Crash Course(New) End of Money? Chris Martenson 3 of 4
The Crash Course(New) End of Money? Chris Martenson 4 of 4
Paul Krugman Takes Listener Questions on CSPAN PT1
Paul Krugman Takes Listener Questions on CSPAN PT2
Paul Krugman Takes Listener Questions on CSPAN PT3
Paul Krugman Takes Listener Questions on CSPAN PT4
It's Getting Ugly: Economist Says Hoard Gold & Scotch Williams predicts hyperinflationary depression will mean a $100 dollar bill is worth less than toilet paper Respected economist John Williams, editor of ShadowStats.com, a popular web site that tracks real inflation figures, is advising that people hoard physical gold as well as food items in bulk so that they have some means with which to barter as the economic crisis turns ugly. "Three or four years into the future I think we could be in a hyperinflation, within the current year you're going to see much higher inflation than most people are looking at," Williams told MarketWatch. Williams said that his definition of hyperinflation would be a situation in which a $100 dollar bill would become more functional as a piece of toilet paper than a store of value. "This is a time when you want to preserve your wealth and assets because inflation will knock the value out of it," he added, advising that people buy physical gold and assets other than the U.S. dollar.
John Williams . . . "Go long Scotch!"
Want a Way Out of the Economic Stupidity? Buy Gold Make 203% as Washington becomes a global laughing stock According to our nation's new "Intel Czar," the economy is the number one threat to the U.S. right now. In testimony before the Senate Intelligence Committee, National Intelligence Director Dennis Blair warned that: "The longer it takes for the recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests." Now, one ought to keep in mind that Blair was addressing the committee just a day or so before Congress would be disgorging the bolus known as the 2009 Stimulus Act. As such, Blair, with his 49-page statement, was just one more player in the administration's full court press.
The New Currency Trade: Gold Vs. All Else Investors have taken to terming the flight from risky assets into gold a new currency trade. The ongoing concern about the enormous task of getting the world’s banks on track — bedeviling investors across the globe — has produced a safe-haven trade into the likes of Treasurys and the dollar. However, the dollar’s success is, in some ways, a mirage, improving only because other major world currencies have been dreadful. The dollar has strengthened in the last couple of months, along with gold, which is an odd occurrence, and speaks to the dearth of worthy investments around the world. But the shift to gold has picked up as “everyone is trying to devalue their own currency against everyone else,” says Sean Peche, manager at BlueAlpha Investment Advisory Limited in London.
Why Gold Rallying in all currencies In the latest manifestation of the world financial crisis, gold is rallying strongly now in all major currencies. Gold detached from the usual commodity drivers gradually over the period August 07 to the present, and closely reacted to any major new developments in the credit crisis. Gold now is almost totally dominated by ongoing credit crisis developments, and the massive attempts to bailout the financial system in every country. That is why gold and the USD are rallying together.
In times of crisis, never forget the value of gold The dollar is simply a piece of paper. Gold is a much better store of value and is the best insurance against future shocks . . . . People buy gold when they are nervous about the economy, and they are right to do so because gold is a unique commodity. It has to a high degree two qualities that are seldom found together: liquidity and reality. It has strong liquidity; it can almost always be bought, sold or exchanged. There are other liquid assets, of which the US dollar is probably supreme, but they lack gold's quality of real value. Dollars do not constitute a real asset, such as property or “real estate”. The dollar is simply a piece of paper. Gold has been a much better store of value than the dollar. . .
Why You Probably Shouldn't Trust Ben Bernanke's Rosy Forecast The Federal Reserve's FOMC released its minutes today showing that while its views on the economy of 2009 have grown darker, it still expects only a mild downturn that shrinks the economy from 0.5% to 1.3%. Our initial reaction to this was basically to scoff. We're expecting a lot worse than a 1.3% downturn. How can we think we know more than the geniuses at the Federal Reserve? Well, for one thing, these guys are terrible at economic forecasting. If you followed their predictions, you probably would have ended up bankrupt. Just go ask Lehman Brothers.
Fed Chief Defends Steps Taken to Contain Crisis The chairman of the Federal Reserve, Ben S. Bernanke, vowed on Wednesday to do whatever it took to pull the economy out of its downward spiral, even as he acknowledged that the most recent indicators were "dismal." Speaking at the National Press Club, the first time that a Fed chairman has taken questions from journalists in a public forum, Mr. Bernanke defended the central bank's efforts and tried to allay concerns that it had been printing money at a dangerous pace.
Bernanke Speaks on Economy (Part 1) - 2.18.2009
Bernanke Speaks on Economy (Part 2) - 2.18.2009
Fed Leaders Issue Bleak Forecast Policymakers Project High Unemployment Through 2011, Vow Aggressive Action It could take years for the nation to fully bounce back from the recession, according to new projections by leaders of the Federal Reserve, who indicated that even once the economy starts expanding again, it will be an "unusually gradual and prolonged" recovery. The unemployment rate will remain elevated through at least 2011, according to the policymakers' official forecast, released yesterday, and the economy this year could shrink by 1.3 percent. That would mark the sharpest contraction in 27 years.
The Grand Illusion An old friend who had been in the mortgage banking business told me a story about a smart old fox of a financier. A real estate developer had given a long presentation to this old fox with all sorts of rates, paybacks, revenue streams, time value of money, etc. etc. At the end of the presentation, the developer finished with the usual words: "Are you on board?" The old fox replied: "Ok, now how many dollars am I supposed to put in and how many dollars do you propose to give back to me." The machinations between the FED and the US Treasury, have taken the word bamboozle to new heights. Here is an example. "In the new consumer-lending program, the Treasury provides $100 billion of capital and the FED uses that as a cushion against which it could make up to $1 trillion in three-year loans …" (WSJ, Feb 12, pg. A4, FED Faces Constraints, by Jon Hilsenrath). Let me get this straight. The Treasury has no actual treasure. So, it is authorized by a Congress to borrow what it needs (that is because Congress has already spent all the tax revenue) and the Treasury will then issue $100 billion in Treasury instruments of some sort that supposedly qualify as 'capital'. Then that 'capital' will be transformed into $1 trillion in new currency. Congress is not raising taxes in order to provide a revenue stream. So where does this money come from? How does this magic work.
U.S. Doubles Fannie, Freddie Backing to $400 Billion The federal government yesterday doubled its commitment to Fannie Mae and Freddie Mac, promising to reimburse the companies for up to $400 billion in losses on their investments in mortgage loans. he massive expansion of the government backstop is a response to mounting strains on the two companies, officials said. It was announced as part of the Obama administration's broad plan to reduce foreclosures, which will further squeeze the companies' revenue by requiring the pair to refinance or modify millions of loans to lower monthly payments.
Obama Offers Homeowners Exploding Mortgages Ever since the credit crisis began, a lot of blame has been heaped on adjustable-rate mortgages, home loans that recalibrate according to market fluctuations. One brand of these innovative mortgages that have come under special criticism has been so-called "exploding A.R.M.'s" that lured borrowers with unusually low teaser rates that then reset skyward a few years later. These have often been derided as predatory, and lenders who offered them accused of luring homeowners into buying homes they couldn't afford for the long-term. Critics of these might want to check out the Homeowner Stabilization Plan put forward by the Obama administration today. The plan would reduce mortgage payments and interest rates for homeowners who have seen their payments rise to more than 38% of their monthly income. But those reductions last just five years, after which they begin to reset to higher rates. In short, Obama is just drawing out the teaser rates a bit longer.
President Obama Unveils Plan for Troubled Housing Market PT1 - 2.18.2009
President Obama Unveils Plan for Troubled Housing Market PT2 - 2.18.2009
Obama’s $75 Billion Foreclosure Plan Spells Relief for Bankers President Barack Obama offered $75 billion of relief yesterday to homeowners facing foreclosure. He also gave bankers a reprieve. Some lenders, including New York-based JPMorgan Chase & Co., have worried that proposed “cramdown” legislation giving judges the power to modify mortgages of those who file for bankruptcy would increase the number of filings. Obama, who said yesterday he supports a cramdown law, signaled that it would only be a last resort for struggling borrowers. “Allowing cramdowns is a bad idea,” said Andrew Sandler, a partner in the Washington office of law firm Skadden, Arps, Slate, Meagher & Flom LLP, whose clients include mortgage companies. “Obama’s program has the potential to reduce the number of bankruptcies. The fewer loans that go to bankruptcy and are subject to cramdowns the better.”
Obama's homeowner aid swells to $275 billion Program to help up to 9 million Americans pay mortgages President Obama offered a long-awaited plan Wednesday to spend up to $275 billion to help troubled homeowners refinance and stay in their homes. The program, which was far more expensive than the $50 billion the administration initially suggested, aims to assist up to 9 million homeowners who are behind on their mortgage payments, in danger of losing their homes or stuck with mortgages that they cannot refinance because their home's value has dropped below the outstanding loan value.
Obama's Stimulus Creates Useless Jobs Theres one reason, and one reason only, that President Barack Obamas stimulus passed so swiftly through Congress: Most Americans are worried about their jobs. And Barack Obama promises to save or create four million jobs. Even Obamas most ardent opponents embrace the make jobs programs embedded in the stimulus. Construction projects that put people to work, that fits the bill, Sarah Palin told Greta Van Susteran of Fox News. But these big, huge, expanded social programs that's not right, that's not fair. Neither Republicans nor Democrats get it. The problem isn't just the pork barrel social welfare spending. Its not merely the redistributionist scheme disguised as tax cuts. The public relations backbone of this bill -- government spending on our nations crumbling infrastructure -- is misguided. While the country's infrastructure may need revamping, this sort of spending will not stimulate the economy. It will not create the kind of jobs Americans need.
Stocks fluctuate on details of housing plan Stocks fluctuate in narrow range as president releases details on $75B mortgage relief plan Stocks fluctuated Wednesday as President Barack Obama released details of his $75 billion mortgage relief plan and investors remained uncertain about the prospects for the economy. The plan is designed to help stabilize the housing market and reduce foreclosures. Sharp drops in housing prices and sales and rising foreclosures have caused the toughest recession in decades. Obama's announcement of the plan comes a day after he signed into law a $787 billion economic stimulus plan he hopes will help revive the economy. "First of all, we have to address the housing market and the more plans that are needed and the more plans that are announced -- this is all part of the process," said Steven Goldman, chief market strategist, Weeden & Co., in Greenwich, Conn. He said it will take time for investors to determine whether the plans are working and that the lingering unknowns will lead to more volatility in the stock market.
$275 Billion Plan Seeks to Address Crisis in Housing MESA, Ariz. - President Obama announced a plan on Wednesday to help as many as nine million American homeowners refinance their mortgages or avert foreclosure, saying that it would shore up housing prices, stabilize neighborhoods and slow a downward spiral that was "unraveling homeownership, the middle class and the American Dream itself." The plan, which was more ambitious and expensive than many housing analysts had expected, drew praise from consumer advocates as well as the financial industry.
HUD Secretary Shaun Donovan explains the Obama housing plan in detail 2.18.2009
Modifying Mortgages Can Be a Tricky Business MIAMI GARDENS, Fla. - When her brother could no longer help support her, Luzetta Reeves asked her small mortgage company to cut her monthly payments. It did - by 11 percent - making it possible for her to afford her house here on her modest fixed income. In Miami, Jeffrey Mitchell saw his family income drop just as real estate taxes and insurance premiums increased, making his monthly mortgage payments crushing. He got a lower interest rate, too. But with the added fees and penalties, his monthly payment remained the same. He is now back in foreclosure.
Fed Debated Buying "Substantial" Amounts of Treasuries, FOMC Minutes Show (CEP News) - The Federal Open Market Committee (FOMC) meeting minutes revealed the Fed discussed the benefits of buying "substantial" amounts of U.S. Treasuries at its Jan. 28 meeting. The minutes also confirmed that Federal Reserve Bank of Richmond President Jeffrey Lacker dissented, "because he preferred to expand the monetary base by purchasing U.S. Treasury securities rather than through targeted credit programs." However, the FOMC said its would embark on the Treasury purchase plan only if circumstances show buying up bonds would improve private credit markets. For now, buying agency debt and mortgage-backed securities would be more effective, the minutes read.
Reaction with Rep. Scott Garrett - Obama's Housing Proposal - 2.18.2009 New Jersey Republican Scott Garrett reacts on Obama's Housing Plan, he says if housing plan contains what he hears, he is against it; What does plan do for 90% of Americans who did everything right Garrett added
More Details Are Pending, but First Some Answers The Obama administration's housing plan aims to help millions of homeowners who fall into two categories: either they have been struggling to pay their mortgages or they have been shut out of the refinancing market. The initiative gives lenders incentives to modify the mortgages of the three million to four million homeowners on the brink of foreclosure or who cannot make their monthly payments. The goal is to reduce the payments to levels they can afford.
California Foreclosure Center Shows Obama Challenge It has taken Susan Erb just three years to see the value of her Merced, California, home plunge by more than half to $350,000. Next month, her mortgage payment jumps 20 percent to $3,321 and she knows she can’t afford it. Her bank won’t rework the loan unless she stops paying altogether. “Now I know how people feel when I go knocking on their door,” said Erb, 53, a real estate agent who works for a company that notifies residents in foreclosed properties that they must vacate. “I’m in their shoes.” Merced, the epicenter of the U.S. foreclosure crisis, demonstrates the steep challenges President Barack Obama will face in trying to stem defaults. One in 59 housing units in the Merced metropolitan area received a foreclosure filing in January, the highest rate in the U.S., according to RealtyTrac Inc., an Irvine, California-based seller of default data. For- sale signs are everywhere and a building boom fueled by subprime mortgages has been brought to a standstill. Just 16 construction permits were issued last year. In 2005, there were 1,427.
Obama’s Stimulus Will Cause 'Lower Wages' for American Workers, Says Congressional Budget Office The huge economic stimulus package that President Obama signed into law Tuesday will result in “lower wages” for American workers, according to the Congressional Budget Office (CBO). The CBO analysis, dated Feb. 11 and sent to Sen. Judd Gregg (R-N.H.), says the $787-billion plan will increase employment in the short-term, but will run up deficit spending which will “crowd out” private investment in the economy in the long-term. The analysis concludes that the stimulus will put downward pressure on Gross Domestic Product (GDP) and wages after 2014. (The Gross Domestic Product is the total value of all goods and services produced in the United States in one year.)
"Stimulus" Has Never Worked "At this particular moment, only government can provide the boost necessary to lift us from a recession this deep and severe." - Obama, Brietbart, January 8, 2009 "We are spending more money than we have ever spent before, and it does not work. After eight years we have just as much unemployment as when we started, and an enormous debt to boot." - US Treasury Secretary, Henry Morgenthau, May, 1939
Professor Nouriel Roubini on the economy 2.18.2009 Dr. Roubini discusses the housing recovery plan, bank bailouts
Three Big Fears Have Market on Edge The DOW dropped below the November closing this morning. Joe Weisenthal of The Business Insider discuss the three big issues:
Bankrupt Detroit. Will Obama shovel another $20+ billion of taxpayer money at our rickety car-makers? Or will he take the more expensive but arguably more effective route of letting them file for bankruptcy?
Bank Nationalization. Since Tim Geithner dropped his lead balloon last week, the market has gotten busy solving the bank problem itself. The emerging answer? Temporary nationalization and restructuring of Citi, Bank of America, et al. Is Obama listening?
Housing Fix. Obama seems determined to help people who bought houses they can't afford and shaft everyone else--including homeowners who can still make their payments and renters who decided not to buy houses because they were too expensive. It will be interesting to see how effective this plan is and how it sits with the majority of the country--who won't get bailed out.
UBS to pay $780m to settle US tax probes UBS on Wednesday agreed to pay $780m in fines and turn over some customer names to the US government as part of a landmark settlement in which the Swiss bank admitted it helped thousands of clients evade taxes. The deferred prosecution agreement settles a long-running criminal investigation by the US Department of Justice into whether UBS helped wealthy US clients hide bank accounts from the Internal Revenue Service. The fine is one of the biggest yet and underscores the US government’s efforts to crack down on tax evasion. “The veil of secrecy has been pulled aside and we will continue to aggressively pursue those who shirk their federal tax obligations or assist others in doing so,’’ said John DiCicco, acting assistant attorney-general of the justice department’s tax division.
Swiss bank to ID U.S. tax evaders The world became smaller Wednesday for U.S. citizens seeking to hide money in Swiss bank accounts. Banking giant UBS AG, Switzerland's largest bank, agreed to pay $780 million to settle accusations that it helped U.S. customers hide money from the IRS. And in what the Justice Department described as an "unprecedented move," UBS agreed to provide the names of up to 20,000 Americans who sought to avoid paying income taxes by keeping secret accounts. According to court records, those U.S. customers, who had assets totaling about $20 billion, did not pay taxes on income earned on their UBS accounts. "The veil of secrecy has been pulled aside and we will continue to aggressively pursue those who shirk their federal tax obligations or assist others in doing so," said John A. DiCicco, acting assistant attorney general for the department's tax division.
America's Insolvent Banks John Hempton has 5,155 words on bank insolvency today, and makes the good point that "insolvency" is not well-defined. So what do I mean when I say that some big banks are insolvent? I mean that when you look at assets you shouldn't include things like goodwill, and instead concentrate only on concrete things like cash and retained earnings; then, value loans on a held-to-maturity basis. If you do that, those assets are worth less than the face value of total liabilities. Hempton makes the good point that mark-to-market values are significantly lower than held-to-maturity values because the buyers of distressed loans want much higher returns (on the order of 15%) than the discount rate (on the order of 5%) that you'd use to value a held-to-maturity value. So how do you work out a reasonable held-to-maturity value for an asset book? As Hempton says, you can't trust the banks themselves to tell you, because they will lie: the downside to telling the truth is death.
SEC drops the ball over Stanford A blog says Sir Allen's $8bn alleged fraud was clear, but not to the US regulator Last Tuesday the popular satirical blog "I'm Bernie Madoff" ran a spoof letter from Andy Madoff to his father, the alleged architect of the now infamous Ponzi scheme. The subject was Stanford Bank, the Antiguan-based financial group run by Sir Allen Stanford, the Texan businessman and cricket benefactor. "It seems that [Stanford Bank's] "consistent year over year returns and CD payouts of 7.5pc" are being questioned by a guy named Dalmady," writes Madoff Jnr. "[He] could be another nutcase like that guy Markopolos [the Madoff whistle-blower]. But maybe he's on to something ... maybe because Stanford Bank uses invisible auditors, just like you."
Morgan Stanley exec charged with embezzlement A former vice president of the investment bank has been arrested and arraigned on charges that he embezzled more than $2.5 million. A former Morgan Stanley vice president has been arrested on charges of embezzling more than $2.5 million from the investment bank. Richard Garaventa Jr., of Manalapan, N.J., pleaded not guilty Tuesday at his arraignment in Manhattan's state Supreme Court on grand larceny and other counts. He faces up to 25 years in prison if convicted. Prosecutor Jeremy Glickman said the 36-year-old defendant was authorized to request or approve checks for certain corporate payments from one of the company's in-house accounts.
Next Wave of Banking Crisis to come from Eastern Europe European banks face an entirely new wave of losses in coming months not yet calculated in any government bank rescue aid to date. Unlike the losses of US banks which derive initially from their exposures to low-quality sub-prime real estate and other securitized lending, the problems of western European banks, most especially in Austria, Sweden and perhaps Switzerland arise from the massive volumes of loans they made during the 2002-2007 period of extreme low international interest rates to clients in eastern European countries.
Zoellick urges EU to help east Europe Robert Zoellick, World Bank president, has called for European Union-led co-ordinated global support for the economies of central and eastern Europe, even as divisions emerge in the EU over handling the crisis. Speaking to the Financial Times amid turmoil in central and east European markets yesterday, Mr Zoellick said the bank was trying to work with the International Monetary Fund and other multilateral institutions to help the region but needed more backing from Brussels. “It’s got to have support from the European governments,” he said. “It’s 20 years after Europe was united in 1989 – what a tragedy if you allow Europe to split again.”
Ukraine must be rescued from tragi-comedy for Europe's sake Ukraine is degenerating into tragi-comedy. The president and premier are at daggers drawn. The finance minister has resigned in disgust, no longer willing to serve as a "political pawn" in a government that tears up its agreements. The IMF has stormed off, refusing to disburse the next tranche of its $16.4bn (£11.5bn) rescue loan. Kiev's leaders are winking at Russia, hoping that this sort of geo-strategic blackmail will force the West to open its purse strings. Meanwhile gross domestic product has contracted by 20pc over the last year, apparently worse than early Bolshevism or the Stalin famine. It would be tempting to leave this misgoverned country to its fate. That would be an error. If Ukraine defaults on its foreign debt – or lets its private companies default on their dollar and euro loans – it will lead to near instant contagion through much of Eastern Europe.
U.S. Forced to Offer Discounts to Lure Buyers of Failed Banks U.S. regulators are being forced to sell the assets of failed banks at a discount to lure buyers spooked by the likelihood of increased loan losses amid a deepening recession. The assets of four banks have been sold to healthier rivals at a combined discount of $107 million this year, the Federal Deposit Insurance Corp. said. The FDIC had to offer a discount just once in 2008, when it engineered 25 bank takeovers. Buyers for banks are in short supply after last year, when regulators closed the most lenders since 50 were shuttered in 1993. RBC Capital Markets analyst Gerard Cassidy predicts as many as 1,000 more will collapse within five years. The result may be a buyer’s market in which the FDIC will lay out even bigger sums to get rid of seized banks.
Do Not Trust This Market Following my update, I have included an article from one of the foremost economic analysts of our time, Ambrose Evans-Pritchard. He called the subprime crisis just 6 months before it hit, and this weekend came out with extraordinary comments about the banking and currency crisis hitting Europe and parts of Asia right now. The reasons why his warnings are important will be obvious, and it's important to remember that just as the U.S. appeared to be coming out of the Great Depression in 1932, a foreign banking and currency crisis helped to push the U.S. back into a Depression that lasted another eight years. We live in a global economy that is interconnected more than at any point in history, and as difficult as it is already going to be for the U.S. to recover from the recession / depression at hand, any kind of global meltdown will make the recovery that much more complex and lengthy.
"Nationalization" of Citi and BofA Inevitable in '09 In the past few months, an increasing number of economists have become convinced that the best "fix" for the banking system is a government takeover and restructuring of companies like Citigroup. And some voices in the government are finally supporting this idea. Over the weekend, Senator Lindsey Graham said he thought "nationalization" has to be considered, because he doesn't want to throw good money after bad. What would this mean, exactly? The government running our banks for the next decade?
THE BURNING PLATFORM "The US government is on a "burning platform" of unsustainable policies and practices with fiscal deficits, chronic health care underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon." - David M. Walker David Walker served as Comptroller General of the United States from 1998 through 2008. He is now the CEO of the Peter G. Peterson Foundation and leader of the Fiscal Wake Up Tour. He has been a lone voice in the wilderness for the last decade regarding our looming fiscal disaster. As head of the General Accounting Office he would go before Congress and explain that the country need to change course before we flounder in a Perfect Storm of debt. They listened to him respectfully and proceeded to add $5 trillion to the National Debt in the next eight years. The borrowing binge is now entering a hyper-speed phase. President Obama has been only concerned with speed rather than long term corrective actions. The $787 billion 1,074 page stimulus bill has been passed. President Obama has signed it. The market immediately dropped 500 points. It will have no impact on the economy in 2009. The bill will stimulate nothing but the National Debt.
Gold Declines on Speculation Rally to Seven-Month High Overdone Gold fell in Asia as some investors sold the precious metal following its climb to a seven-month high on concerns about a worsening global recession. Bullion’s 14-day relative strength index held above 70, a chart signal that prices may be set to drop. The metal climbed to $987.71 an ounce yesterday as investors sought a safe-haven asset. Immediate-delivery gold fell as much as 0.8 percent to $977.22 an ounce, before trading at $977.72 at 10:40 a.m. in Singapore. Gold for April delivery was little changed at $978.70 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
Bankruptcy Could Be More Costly Businesses filing for bankruptcy need loans to work out their troubles, or face liquidation. But General Motors and its smaller rival, Chrysler, have threatened that they will need $125 billion, in what would be the largest bankruptcy financing packages ever, if they do not receive the additional federal aid they are requesting. G.M. alone has said that it needs $100 billion to finance its bankruptcy. To many, that figure seems far too high, and may be a negotiating tactic to keep the companies out of bankruptcy.
Paul Krugman: House Passes $787 Billion Stimulus Plan 2.14.2009
OREGON FAIL: WITH HARD TIMES AHEAD FOR BUSINESS AND REAL ESTATE, IT'S TIME TO LOOK SMALL There is something about Oregon that ignites something close to poetic inspiration, even among the most level-headed types. When I asked Hank Hoell recently about the state, he waxed on about hiking the spectacular Cascades, the dreamy coastal towns and the rich farmlands of the green Willamette Valley. "Oregon," enthused Hoell, president of LibertyBank, the state's largest privately owned bank, from his office in Eugene, "is America's best-kept secret. If quality of life matters at all, Oregon has it in spades. It is as good as it gets. It's just superb." As developer Shelly Klapper, a rare skeptic in the Beaver State, reminded me: "This is a state that buys its own hype." Hype or not, however, Oregon is hurting – something that's clear to even the most self-respecting narcissist. Over the past year, Oregon's economy has fallen off a cliff just about as fast as any state in the union.
Pink Slips Being Readied in California The Associated Press reports that pink slips are now being readied for some 20,000 state workers in California after another late-night session failed to produce a budget bill. Legislators could not find the one last Republican needed to join the other two who have already pledged their votes for a budget that includes $15.1 billion in spending cuts, $14.4 billion in tax increases, and $11.4 billion in new borrowing. The huge tax increases continue to be the major stumbling block for the minority party. Without a budget, governor Arnold Schwarzenegger is making good on his promise to cut payrolls by roughly 10 percent in corrections, health and human services, and other areas.
Bin Laden’s “Right-Hand Man in Europe” Mocks British Justice Another victory for terrorist “lawfare.” The story of Abu Qatada clearly shows the failings of the British justice system. Described by a judge as “Osama bin Laden’s right-hand man in Europe,” Qatada arrived in Britain in 1993. Since then, the taxpayer has lavished ?1.5 million upon him as authorities fight to deport him. Meanwhile, the government is more concerned about sticking to European laws than about protecting the British public. Abu Qatada, a radical Jordanian preacher, arrived in Britain with his family on a forged passport in 1993. He was granted asylum in 1994, and quickly began spreading hate.
'Obama diplomacy will give Iran nukes' Ex-Mossad chief warns Tehran stalling, worries about president's 'learning curve' JERUSALEM – President Obama's policy of direct diplomacy with Iran may buy Tehran enough time to produce nuclear weapons, Shabtai Shavit, former chief of the Mossad intelligence agency, warned in an exclusive WND interview today. "I don't believe there is a political solution which can be achieved through negotiations with Iran," he said. "My concern is that until Obama finishes his learning curve of the subject, the Iranians are going to have maybe the first or even more nuclear bombs." Shavit served as director of the Mossad from 1989 through 1996. He clarified that although diplomacy cannot be ruled out, from his experience he doesn't believe there can be a political solution with Iran.
The Resurgence of 1930s-Style Anti-Semitism Anti-Semitism was fashionable in Europe during the 1930s and was the precursor to the ultimate expression of hatred toward Jews: 1940s-style anti-Semitism. “All Jews to the gas.”. . . “Jews to the oven.” . . . “Kill the Jews.” Recently, those chilling slogans, chanted by tens of thousands, echoed in Europe’s streets. Yes, you read that correctly. These were, of course, popular slogans in Germany during World War ii. By this time, Hitler’s unchecked anti-Semitism had matured beyond boycotting Jewish stores, banning Jews from schools, firebombing synagogues and flogging Jews in dark alleys. By the early 1940s, the ultimate expression of hatred toward Jews had been reached: The führer was rounding Jews up like sheep, and cramming them—shocked and naked, men, women and children—into steel chambers, then gassing them. Granted, the recent Continent-wide choir was largely comprised of European Muslims protesting Israel’s incursion into Gaza and showing support for Hamas. European governments are by no means condoning 1940s-style Nazi anti-Semitism.
Egypt Holds Exercise To Prepare For Israeli Invasion CAIRO [MENL] -- Egypt, amid a troop buildup, has staged a major militaryexercise in the Sinai Peninsula meant to counter an invasion from Israel. Officials said the Egyptian military completed a major multi-serviceexercise in mid-February 2009 despite poor weather in the Sinai. They saidthe 10-day exercise, titled "Badawi-3," tested interoperability between theair force and infantry, both based on U.S. platforms and weapons, as well asEgypt's ability to repel an invasion from the east.
China Feasts on Miners as ‘Bank of Last Resort’ Wuhan Iron & Steel Group and Jiangsu Shagang Group Co., China’s third- and fifth-largest steelmakers, are shopping for iron ore mining stakes in Australia and Brazil, executives said in interviews. “We are evaluating and selecting” candidates in Australia and Brazil, said Shen Wenrong, Jiangsu-based Shagang’s chairman. “Going overseas is the government policy, so I believe we will get financing from Chinese banks.” Wuhan spokesman Bai Fang said his company is “looking for opportunities” amid lower acquisition costs for iron ore assets in Australia and “won’t rule out other countries.”
US Dollar will default in 2009 1/3 Feb 16, 2009
US Dollar will default in 2009 2/3 Feb 16, 2009
US Dollar will default in 2009 3/3 Feb 16, 2009
Peter Schiff Responds to Saudi Dollar Crash Video
Peter Schiff Responds to Saudi Dollar Crash Video - Part 2
Obama signs huge stimulus, readies foreclosure aid Huge stimulus signed, Obama readies $50 billion foreclosure aid, hears car restructuring plan DENVER (AP) -- Racing to reverse the country's economic spiral, President Barack Obama signed the mammoth stimulus package into law Tuesday and readied a new $50 billion foreclosure rescue for legions of Americans who are in danger of losing their homes. There was no recovery yet for beleaguered automakers, who were back in Washington for more bailout billions. General Motors Corp. said it was closing plants, Chrysler LLC said it was cutting vehicle models and both said they were getting rid of thousands more jobs as they made their restructuring cases for $5 billion more for Chrysler and as much as $16.6 billion more for GM. The United Auto Workers union said it had agreed to tentative concessions that could help Detroit's struggling Big Three.
A Bailout Aimed at the Most Afflicted Homeowners The long-awaited housing bailout will finally be announced on Wednesday. In a speech in Phoenix, a signature real estate boomtown gone bust, President Obama will explain his plan to reduce foreclosures. And the key to understanding that plan will be remembering that there are two different groups of homeowners who are at risk of foreclosure. The first group is made up of people who cannot afford their mortgages and have fallen behind on their monthly payments. Many took out loans they were never going to be able to afford, while others have since lost their jobs. About three million households — and rising — fall into this category. Without help, they will lose their homes.
Why Geithner's Bank Fix Will Fail Treasury Secretary Tim Geithner released his desperately awaited banking-system fix last week...and the market immediately dropped several hundred points. Why? Because the plan lacked what the market needs most right now: clarity. And, says our guest Chris Whalen of Institutional Risk Analytics, because it is just another half-measure that will attempt to prop up zombie banks and preserve the status quo.
Gold Climbs to Seven-Month High in London as Economy May Worsen Gold rose to its highest in almost seven months in London as investors bought the precious metal to preserve their wealth on speculation the global economy will deteriorate. Silver climbed to a more than five-month high. Stocks in Europe and Asia retreated on concern banks face further losses and lower debt ratings and as the economic slump deepens. Bullion has climbed 33 percent since October as governments lowered interest rates and spent trillions of dollars to combat the recession. Physical demand has pushed holdings in exchange-traded funds to records.
Economic meltdown fuels gold fever Now, you may witness gold fever in the bullion market. Reason for this is fear among investors. According to a newspaper report, gold markets continue to rise during the global economic downturn and could spur symptoms of gold fever, a newspaper has suggested. According to an article in the Las Vegas Review-Journal, investors are seeking a safe place to put their money, as equities could continue to fall in the US. John Dobra, an economics professor at the University of Nevada, Reno, told the publication: “If you’re asking why gold prices are going up while other things are falling, my standard answer is ‘fear’.”
Why gold & silver coins sales are surging in US Back in late 1985, the US Congress authorized the Gold Bullion Coin Act of 1985 which President Ronald Reagan promptly signed into law. It ordered the US Treasury, through its US Mint branch, to start producing gold bullion coins. This law outlined very specific requirements for these new coins, including that they be produced from gold mined in the United States. This legislation, partially in response to the soaring popularity of foreign national coins like the famous South African Krugerrand in the early 1980s, ushered in the modern era of American bullion coins. The American Gold Eagles and American Silver Eagles that emerged out of this program have since grown very popular among investors worldwide for several reasons.
Gold and Silver break through Resistance Bull markets move like advancing armies – they take out one objective at a time. Last week, gold and silver each took out an important objective by closing above key points that had previously provided considerable resistance. On Wednesday, February 11th, gold closed above $930, but silver that day was stopped at $13.50, its 200-day moving average and a key resistance point. Silver did not retreat, however. It remained firm and finally won the battle by breaking above this resistance point on Friday, closing at $13.62.
Bullish Long Term Outlook for Gold The long-term outlook for gold is very bullish, for to paraphrase Sir Winston Churchill’s famous remark, “never before in history have so many dollars chased so few ounces of gold (and silver)”.* The mountains of currency are rising, while the number of ounces of gold produced by gold mines is dropping. The passing of the Stimulus Bill, referred to by some as the Porkulus Bill, will add billions of dollars to an already ballooning deficit. Instead of allowing the excesses in the credit markets to work themselves out by letting healthy institutions prosper, while allowing unhealthy institutions to fail, the new administration, aided by Congress, is throwing gasoline at the fire by rewarding shoddy business practices. People like Barney Frank and Christopher Dodd, who strong-armed the banking industry to make questionable mortgage loans, are now helping to shape the decisions that will prolong the problems. The foxes are still in the hen house.
Gold Feeding Frenzy as Economy Worsens Ever seen what happens to a piece of meet thrown into a tank full of vicious piranhas? The water is whipped into a froth and within seconds the meatless bone sinks to the bottom. There’s virtually nothing left. The same thing is about to happen in the gold bullion market. After some apparent weakness in Asian markets, gold powered higher yesterday as news of the Japanese economic rout sent global markets into free fall. The only thing that stopped it from happening in the Unites States was the mixed blessing of a holiday keeping markets closed. I say mixed, because a second day of selling overseas means the American market will have two days of pent up selling pressure to be unleashed as the market opens this morning. The news keeps getting worse out of global G7 economies, and that has investors flocking to gold in recognition of its safe haven role.
Gold Setting Records in Non-dollar Currencies Gold’s performance in 2008 could look like a real yawner. After all, it only managed to eke out a 5.7% gain. Not the kind you’d normally brag about over cocktails. As we rang in the 2009 New Year, gold at $850 an ounce (in U.S. dollars) was roughly 15% below its all-time record high, set in March 2008. But everything in life is perspective. In a year when oil lost 59%, the Standard & Poor’s 500 Index was down 38%, and the Dow Jones Industrial Average gave back 30%, things could certainly be worse for gold bullion investors. Much worse, in fact. Just ask the typical investor about his portfolio: He’s likely to grumble, and change the subject. As it turns out, 2008 marks the eighth consecutive year that gold has clocked a positive annual return. It’s now starting to look like the trade of the decade.
China Asks the Trillion-Dollar Question “We hate you guys.” This was the message Luo Ping, director general at the China Banking Regulatory Commission, gave the United States. “Once you start issuing $1 trillion, $2 trillion … we know the dollar is going to depreciate, so we hate you guys, but there is nothing much we can do.” “Except for U.S. treasuries, what can you hold?” asked Luo. “Gold? You don’t hold Japanese government bonds or UK bonds. U.S. treasuries are the safe haven. For everyone, including China, it is the only option.” Yu Yongding, a former adviser to the Chinese central bank, said that China should seek guarantees that its $682 billion holdings of U.S. government debt would not be eroded away by “reckless policies.” He Zhicheng, an economist at Agricultural Bank of China, the nation’s third-largest lender by assets, stated that such a guarantee would be “one of the prerequisites for more purchases.”
U.S. Accuses Texas Financial Firm of ‘Massive’ Fraud Stopping what it called a “massive ongoing fraud,” the Securities and Exchange Commission on Tuesday accused Robert Allen Stanford, the chief of the Stanford Financial Group, of fraud in the sale of about $8 billion of high-yielding certificates of deposit held in the firm’s bank in Antigua. Also named in the suit were two other executives and some affiliates of the financial group. In the complaint, filed in Federal District Court in Dallas, the S.E.C. accused Mr. Stanford and two associates — James M. Davis, a director and chief financial officer of Stanford Group and the Antigua-based bank affiliate, and Laura Pendergest-Holt, the chief investment officer of both organizations — with misrepresenting the safety and liquidity of the uninsured CDs.
U.S. charges Allen Stanford with "massive" fraud Texas billionaire Allen Stanford and three of his companies were charged with "massive" fraud on Tuesday as federal agents swooped on his U.S. headquarters. In a civil complaint filed in federal court in Dallas, the U.S. Securities and Exchange Commission accused Stanford, a high-profile cricket promoter, and two executives of fraudulently selling $8 billion in high-yield certificates of deposit in a scheme that stretched from Texas to the Caribbean. "We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world," said Rose Romero, regional director of the SEC's office in Fort Worth, Texas.
Stanford International Bank Said to Bar Withdrawals Amid Probe Stanford International Bank Ltd., the Antigua-based affiliate of billionaire R. Allen Stanford’s U.S. investment firm, placed a 60-day moratorium on early redemptions of its certificates of deposit, people familiar with the matter said. Stanford Group Co. financial advisers have told three clients that they can’t redeem CDs sold by the firm prior to their maturity date, according to the customers, who asked that their names not be used. The bank in the past let customers pay a three-month interest penalty to get their money back before the contractual maturity of the certificates, the people said. “Bank depositors may withdraw funds in accordance with the terms of their accounts,” Stanford spokesman Brian Bertsch said.
Monetary Policy – not Obama’s stimulus – is what needs watching Let us take stock for a moment of Obama's brilliant economic management. The Democrats just bulldozed through the biggest barrel of pork in American history, the stock market dives, long term treasuries rise, manufacturing is stagnant, unemployment is still rising. Americans are being ruled by the most reckless and self-serving bunch of greedy political partisans to have ever held power. And what makes them especially dangerous to the country's prosperity is their utter stupidity. Obama's mindless adherence to Roosevelt's destructive economic policies have the appearance of a tragic comedy in the making — minus a happy denouement — given his attack on what he called "the same tired arguments and worn ideas that helped to create this crisis". This is a man who is incapable of grasping his own contradictions.
Obama’s Economic Stimulus Bill Most Ambitious Since Roosevelt President Barack Obama today signs into law one of the largest pieces of legislation in U.S. history, a $787 billion behemoth that combines massive tax breaks and government spending designed to resuscitate the moribund U.S. economy. The size of the new law and its speed moving through Congress -- it was approved within weeks of Obama’s inauguration -- place it among the most significant legislative accomplishments since President Franklin Roosevelt overhauled the U.S. government in his first 100 days, historians and political analysts say. “We have plenty of big, complicated pieces of legislation that come down the pike, but this bill is unprecedented,” said Stuart Rothenberg, an independent political analyst in Washington.
Top bankers are in no position to hold taxpayers to ransom If the experts who got us into this mess threaten to walk, then let them go, argues Tracy Corrigan Sir Fred Goodwin, erstwhile chief executive of the stricken Royal Bank of Scotland, is undoubtedly Britain's most famous banker – and since, in good times, bankers are boring and anonymous, his celebrity is not a good sign. In Sir Fred's case, the news is all bad. Last week, he apologised to everyone who has ever worked, banked or invested money with him. His reputation is in tatters and his name is uttered in tones of disgust. He is being sued by American investors and he has lost huge sums of his own money following the collapse of RBS. He is unlikely to work again and many old friends – Gordon Brown among them – now shun him. The outrage directed at Sir Fred is understandable, since his arrogant but disastrous stewardship of RBS pushed it to the verge of collapse.
Larry Pratt Gun Owners of America on Glenn Beck 02/16/2009 Larry Pratt, Executive Director of Gun Owners of America appears on Glenn Beck to discuss HR45.
U.S. Mayors Request Funding For A Police State On the weekend of January 16-18, 2009, the U.S. Conference of Mayors held their annual meeting. At the top of their agenda was the growing economic crisis and how their own municipal budgets have been affected. Of course, their solution is to ask for a taxpayer-funded bailout. However, this bailout request looks more like the national defense budget for a small country, than a plea to keep the lights on in city hall… The Mayors’ 2009 meeting report began: “The U.S. economy enters 2009 in crisis.” the report ends with 344 pages of requests from Washington. The Mainstreet Economic Recovery proposal can be viewed at USMayors.org. While the Conference of Mayors often asks for help from the federal government, this year’s list is larger than ever and incredibly heavy with requests for law enforcement. From armored vehicles to “live fire houses,” police departments both large and small seem to be preparing for full-scale war. The following is a small sampling of U.S. cities and their requests for police equipment:
Treasuries Gain as Global Slump Concern Deepens, Stocks Plunge Treasuries rose, pushing yields on benchmark 10-year notes to a three-week low, as concern eastern European banking losses will drive the global economy deeper into recession raised the haven appeal of U.S. government debt. U.S. securities climbed as stocks plunged worldwide after Moody’s Investors Service said credit ratings of banks with units in eastern Europe may be lowered. International demand for long- term U.S. financial assets rose more than economists forecast in December, a report showed. President Barack Obama plans to sign the $787 billion economic stimulus bill into law today.
Bailed-Out Banks Charge Taxpayers Highest Fees in FDIC Sales Citigroup Inc. and Bank of America Corp., recipients of $90 billion in bailout funds from American taxpayers, are charging financial companies three times more to sell bonds under a U.S.-backed rescue program than government- controlled Fannie Mae and Freddie Mac pay to issue notes with similar maturities. Since the Federal Deposit Insurance Corp. started guaranteeing debt in November, banks have charged clients, including themselves, more than $375 million in fees on $154 billion of deals in the U.S., according to data compiled by Bloomberg. Pittsburgh-based PNC Financial Services Group Inc., which received $7.6 billion from the U.S. Treasury, paid Citigroup and JPMorgan Chase & Co. 30 basis points, or $6 million, in December to sell FDIC-backed notes due in three-and- a-half years. A month later, JPMorgan and two other banks charged Freddie Mac 7.5 basis points for a similar offering. “The fact that you have U.S. government support in the form of the FDIC guarantee, there should be a reduction in fees,” . . .
"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment. But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:
An $8 trillion negative wealth effect from declining home values.
A $10 trillion negative wealth effect from weakened capital markets.
A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies." "The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," Davidowitz says. "A lot of that is gone."
GM Seeks Up to $16.6 Billion in New Aid, Plans 47,000 Job Cuts General Motors Corp. asked the U.S. for as much as $16.6 billion in new loans, more than doubling the aid to date, and said it needs some of the cash next month to survive as it sheds brands and cuts 47,000 more jobs worldwide. Chrysler LLC, propped up like GM with federal assistance, said it’s seeking $5 billion more from the government and will shed 3,000 more positions. The automakers met a deadline yesterday to report progress in revamping operations with $17.4 billion in loans granted so far. Now, they must show the U.S. by March 31 that they can become profitable in order to keep the money. Along with Ford Motor Co., they got a boost when the United Auto Workers said it reached tentative agreements to help trim labor expenses.
Weakness Unmatched in 35 Years One of the best gauges of an economy is tax collections. No one pays taxes unless they have to, so collections are a real-world, real-time analysis of the US economy. And the best source I know of for tracking taxes is The Liscio Report, by Philippa Dunne & Doug Henwood. Tax collections are down. Philippa and Doug give us the actual numbers, which are not pretty. Bottom line? "What does this all mean? It suggests that the consumer retrenchment in this recession will be deep and long, and will probably continue into any recovery. The American consumer is no longer the world consumer of last resort, and that's an enormous change for both this country and the rest of the world to get used to."
Recession and bank worries slam Wall Street Stocks tumbled on Tuesday as investors confronted fresh signs that the recession is worsening and worried that efforts to stabilize the beleaguered financial system may not prove sufficient. The slide took the benchmark S&P 500 below the 800 level for the first time since the bear market low of November 21, weighed by financials, energy companies and big manufacturers. . . . "There's still trouble in the banking sector, trouble with respect to corporate earnings and nothing that we've seen is going to reverse that in the short term," said Dan Greenhous, market analyst at Miller Tabak & Co in New York. "I don't believe equities are appropriately priced for weakness through the entirety of 2009."
Little-known agency that insures pensions of 44 million workers braces for recession fallout The deepening recession spells trouble for a little-known government corporation that insures the pensions of 44 million workers and retirees. The Pension Benefit Guaranty Corp. already has an $11 billion deficit that seems sure to grow larger as Corporate America suffers through the worst economic crisis since the Great Depression. With companies reporting shortfalls in their pension funds, it's all but certain that the PBGC will be forced to take over the pension plans of a rising number of bankrupt businesses. That means more red ink at the corporation before things possibly can improve. The future financial health of the agency is hard to forecast. It is hinged on interest rates, the length of the recession and the PBGC's own luck in playing the market, where it has billions invested.
The Liquidationist Alternative As the Obama stimulus plan passes and Treasury Secretary Tim Geithner unveils the outline of a $1.5 trillion bank rescue package, the die has been definitively cast in favor of the Keynesian stimulus approach to the ongoing unpleasantness. That has been conventional wisdom since the Great Depression, but it’s still worth looking at what might have happened had policymakers followed an alternative route, the liquidationist approach favored by 1920s Treasury Secretary Andrew Mellon. In December 1929, as what we now know to have been the Great Depression loomed, Mellon outlined his formula for fighting recession, which had worked well in the previous episode of 1920-21. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. … It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.’’ Mellon then foolishly remained at Treasury until 1932, a powerless spectator of the opposite approach taken by President Hoover, tarnishing his reputation for the rest of his lifetime and beyond.
Treasury's strategy: 'What elephant?' At some point, the feds or the private sector will have to absorb banks' bad assets. If the administration keeps ignoring that fact, we can't move forward. I don't think it's worth spending a lot of time discussing the Treasury's not-ready-for-prime-time nonplan plan to fix the banks. Accounts have been nearly unanimous in concluding that what was promised to be "shock and awe" turned out to be nothing more than "aw shucks, we're confused." (Read Jon Markman's "Geithner's first test is a disaster" for one example.) Reckoning with the rotten assets One of these days, the mind-boggling mass of bad assets held by banks will have to be sold to the private sector at a price or, more likely, transferred to the government. However, the real sticking point continues to be discovering the prices at which these various assets can be sold. It looks as though the Treasury is unwilling (or unable) to acknowledge that elephant in the room, which is the first variable that must be solved for if we are to move forward.
Government pension agency braces for recession WASHINGTON -- The deepening recession spells trouble for a little-known government corporation that insures the pensions of 44 million workers and retirees. The Pension Benefit Guaranty Corp. already has an $11 billion deficit that seems sure to grow larger as Corporate America suffers through the worst economic crisis since the Great Depression. With companies reporting shortfalls in their pension funds, it's all but certain that the PBGC will be forced to take over the pension plans of a rising number of bankrupt businesses. That means more red ink at the corporation before things possibly can improve.
Dr. Jerome Corsi: The Obama Honeymoon is Over!! 1/3
Dr. Jerome Corsi: The Obama Honeymoon is Over!! 2/3
Dr. Jerome Corsi: The Obama Honeymoon is Over!! 3/3
Ron Paul: On Reinstating the Draft Much has been made by the new administration of the idea of national service and volunteerism. While service to one’s community is certainly admirable, it is not the federal government’s place to “encourage” or promote volunteerism. Moreover, there are troubling signs that national service could transition from voluntary to mandatory, or de facto mandatory, such as the requirement of service in order to be granted a diploma, or something along those lines. Involuntary servitude was supposed to be abolished by the 13th Amendment, but things like Selective Service and the income tax make me wonder how serious we really are in defending just basic freedom. The income tax enslaves workers for nearly 4 months out of a year by garnishing what amounts to all their wages in that period of time. A military draft could demand your very life, without your consent. This should be unthinkable in a free society.
Wages, Unemployment, and Inflation This essay originally appeared in Christian Economics, March 4, 1958 Our economic system - the market economy or capitalism - is a system of consumers' supremacy. The customer is sovereign; he is, says a popular slogan, "always right." Businessmen are under the necessity of turning out what the consumers ask for and they must sell their wares at prices which the consumers can afford and are prepared to pay. A business operation is a manifest failure if the proceeds from the sales do not reimburse the businessman for all he has expended in producing the article. Thus the consumers in buying at a definite price determine also the height of the wages that are paid to all those engaged in the industries.
Wages Ultimately Paid By the Consumers
What Makes Wages Rise
What Causes Unemployment
Credit Expansion No Substitute for Capital
Inflation Cannot Go On Endlessly
The Policy Of The Unions
The Purchasing Power Argument
Wage Raises As Such Not Inflationary
The Dilemma of Present-Day Policies
Insincerity In The Fight Against Inflation
The Importance of Sound Monetary Policies
Why the U.S. Dollar Constantly Loses Value Ever wonder why your dollar doesn’t seem to stretch as far as it used to? There is a simple explanation: It’s worth less. The reason for that is, the nation’s money supply is constantly being expanded. Between 1783 and 1913, the U.S. dollar was a real store of wealth. Except during war-time periods, inflation within the U.S. was essentially zero. If you saved one dollar in 1800, a hundred years later you could still purchase approximately the same amount of goods with that dollar. But then in 1913 something changed, and the U.S. dollar started down a long, steady road of dollar devaluations. Using the U.S. government’s own figures, to obtain the same amount of purchasing power of $100 in 1913, you would need $2,038.38 today.
Trump Resorts files for bankruptcy again The company filed for Chapter 11 protection; Tuesday was the deadline to reach a new deal with bond holders to restructure $1.25 billion in debt. The three Atlantic City casinos once run by Donald Trump filed for Chapter 11 bankruptcy protection on Tuesday — for the third time. Trump Entertainment Resorts made the filing in U.S. Bankruptcy Court in Camden, N.J., four days after the real estate mogul whose name remains on the company and its three seaside gambling resorts resigned as chairman of its board. Mr. Trump was frustrated that bond holders and their allies on the board rebuffed his offer to buy the company and take it private. "Other than the fact that it has my name on it — which I'm not thrilled about — I have nothing to do with the company," Mr. Trump told The Associated Press Tuesday.
Massachusetts [& other states] May Consider A Mileage Charge for Motorists Boston (AP) - A tentative plan to overhaul Massachusetts' transportation system by using GPS chips to charge motorists a quarter-cent for every mile behind the wheel has angered some drivers. "It's outrageous, it's kind of Orwellian, Big Brotherish," said Sen. Scott Brown, R-Wrentham, who drafted legislation last week to prohibit the practice. "You'd need a whole new department of cronies just to keep track of it." But a "Vehicle Miles Traveled" program like the one the governor may unveil this week has already been tested -- with positive results -- in Oregon. Governors in Idaho and Rhode Island, as well as the federal government, also are talking about such programs. And in North Carolina, a panel suggested in December the state start charging motorists a quarter-cent for every mile as a substitute for the gas tax.
California Lawmakers Face Lockdown as Budget Falters in Senate California lawmakers failed to reach agreement on how to eliminate a $42 billion budget shortfall as Governor Arnold Schwarzenegger prepares to shut down hundreds of public works projects and fire thousands of state workers. Senate President Darrell Steinberg, a Democrat, plans to lock lawmakers in the capitol unless they pass a $40 billion package of tax increases, spending cuts and bond sales today. The bills, backed by the Republican governor and by Democrats, remain one Republican vote short. “We are dealing with a catastrophe of unbelievable proportions,” said Senator Alan Lowenthal, a Democrat from Long Beach. “We cannot deny it any longer.”
Wealthy cities discovering they're not recession-proof Beverly Hills, Santa Monica and Newport Beach, which are usually shielded from economic downturns, are seeing decreases in sales tax revenues, along with two-thirds of cities in Southern California. There are million-dollar mansions in foreclosure, layoffs on Rodeo Drive. And reservations are no longer a must at all but the most exclusive restaurants. As recently as the summer, many wealthy Southern California enclaves appeared beyond the reach of the worst recession in decades. But rich cities, it turns out, aren't always so different from the rest. City officials in Beverly Hills -- a place insulated from most economic downturns -- now project a $24-million drop in tax revenues over the next 16 months. The loss represents about 15% of the general fund budget, said Beverly Hills City Manager Roderick Wood.
Tax troubles for president's chief of staff Emanuel's rent-free Washington residence draws questioning There could be tax troubles on the horizon for White House Chief of Staff Rahm Emanuel, who reportedly has lived rent-free in Washington for five years but hasn't paid taxes on the imputed income from that, according to reports. He's the latest in a growing list of President Obama's nominees to have been involved in tax issues, according to those tabulating the tally in Washington. According to WND columnist Phyllis Schlafly, several of "Obama's major nominees are mired in political embarrassment. Three withdrew their names from consideration, one sneaked through confirmation because senators were still intoxicated with the Obama honeymoon, and Obama plans to use a waiver so the Senate will approve the fifth."
Jerome Corsi - North American Union PT 1
Jerome Corsi - North American Union PT 2
PROOF That The North American Union IS COMING! The Doublespeak about the North American Union...not only is the plan in motion, our highest "elected leaders" have deliberately lied about it, while lower-level "elected representatives" have plainly stated that it is, indeed, a fact, and that it has been a plan which has been in place for more than a decade of active development. It's high time that we remove our corrupt politicians from office, and take back our lives, and our countries.
G-20 needs joint efforts, not talk of a 'new order' PARIS: Nicolas Sarkozy talks of a meeting to "remake capitalism." Giulio Tremonti, Italy's finance minister, only a little less bombastically - his country's shrillest register is always held in reserve for Silvio Berlusconi - has called for "new rules so that a new world economic order" can be born. That sounds messianic. And it's a problem. When it comes to looking toward the G-20 summit meeting April 2 in London, where Barack Obama will meet with the representatives of 19 of the global economy's greatest powers, the misery of having no game-turning solution for the international economic and financial crisis is creating an over-compensating language of excessive expectations, illusion, and it's-not-my-responsibility positioning.
Obama boosts U.S. forces in Afghanistan A Democratic leader supports the troop request of "ground commanders.'' President Barack Obama, ordering the deployment of an additional 12,000 U.S. troops and 5,000 support personnel to Afghanistan, said today it "is necessary to stabilize a deteriorating situation in Afghanistan, which has not received the strategic attention, direction and resources it urgently requires.'' The president is authorizing 8,000 Marines and 4,000 soldiers - a Marine Expeditionary Force from Camp LeJeune, N.C., and an Army Stryker brigade from Fort Lewis, Washington - in addition to supporting forces to augment a U.S. force of about 30,000 troops already deployed in Afghanistan.
Switzerland threatened with bankruptcy In an interview with Swiss daily Tagesanzeiger, a well-known economist has warned that Switzerland risks bankruptcy, if the recent market turmoil centering on Eastern Europe is not contained quickly. At issue are loans made in Swiss Francs to Eastern European debtors. With many countries in the region falling into depression, currencies and asset prices are plunging. Therefore, debtors domiciled in Eastern Europe are increasingly expected to have difficulty with mounting foreign debt loads — and that spells trouble for Switzerland.
Germany to break postwar taboo with new bank law BERLIN/FRANKFURT (Reuters) - Chancellor Angela Merkel's government appears ready to end weeks of intense debate and back a new law this week which would give Berlin the right to seize private property for the first time in the postwar era. The law, an extension of bank rescue legislation agreed last year, is due to go before Merkel's cabinet on Wednesday and would set the stage for a nationalisation of Hypo Real Estate, a high-profile casualty of the financial crisis. Her government decided last month it needed to take control of Hypo, a Munich-based lender, after giving the bank 87 billion euros (77 billion pounds) in state guarantees over the past year and seeing no improvement in its financial condition.
Eastern Europe worries spark Western bank slide Several of Europe's top banks skidded on Tuesday as investors fretted that exposure to their once-fast growing Eastern neighbours will prove to be a thorn in the side of many lenders. The sell-off was sparked by a report from Moody's Investors Services, which said it's concerned about Western European banks that are supporting subsidiaries in Eastern Europe against a rapidly deteriorating global macroeconomic backdrop. "Deteriorating financial strength of East European subsidiaries has a negative spillover effect on their West European parents. Maintaining a robust risk-return profile during a downturn in the untested and still more volatile East European markets will prove a challenge going forward," the agency said.
Britain Busts Its Economy—Using Fancy Language Britain is running the risk of revisiting one of its darkest economic hours in the postwar period. That’s how bad it is, says opposition leader David Cameron. “If we continue on Labor’s path of fiscal irresponsibility, at some point—and it could be very soon—the money will run out,” Cameron said. Alas, it would be a good thing if Britain could run out of money. At least then there would be a limit to government spending. But David Cameron is talking as if it is still the 1970s and the pound still has gold reserves backing its value. Today, the UK Treasury has bottomless pockets. Money, after all, is just numbers.
Is Ireland the next big bomb in the global debt crisis? Ireland's main stock index dived 4% today, the fifth straight decline, after European media reports over the weekend focused on the possibility of the once-booming Emerald Isle reneging on its debt. "Fears are mounting that Ireland could default on its soaring national debt pile, amid continuing worries about its troubled banking sector," Britain’s Sunday Times reported. In the credit-default-swap market, the cost to insure $10 million in Irish sovereign debt against default jumped to $377,000 on Friday, up from $262,000 at the end of January and just $24,000 a year ago, MarketWatch.com reported.
"Hostile" forces seen stirring up China jobless BEIJING (Reuters) - China must guard against "hostile forces" within and outside the country working to stir up trouble among its masses of newly unemployed workers, a senior trade union official said in comments published on Wednesday. Beijing's Communist Party leadership has issued repeated warnings that legions of idle rural workers gathered in the country's struggling export hubs could pose a threat to the social stability. Clashes between police and unpaid workers locked out of failed factories have flared up across China in recent months, but the government bans independent trade unions, depriving workers of a key channel for resolving disputes.
Hillary Clinton promotes Tokyo stimulus Secretary of State Hillary Clinton, having tea with the empress of Japan today, also was having a somewhat more substantive meeting with the nation's foreign minister. As the American president signs a $787-billion stimulus back home, the travelling secretary was calling on Japan to boost its own economic stimulus spending.
Japan’s Finance Minister Quits After G-7 Blunder TOKYO — Japan’s finance minister resigned Tuesday after widespread criticism of embarrassing behavior at the weekend Group of 7 meeting in Rome. The minister, Shoichi Nakagawa, raised eyebrows for his slurred speech and muddled answers, and for appearing to fall asleep at a news conference in Rome on Saturday. A clip of Mr. Nakagawa in which he appeared to be groggy in front of journalists was posted on YouTube. After intense criticism from politicians who said he had embarrassed Japan, Mr. Nakagawa stepped down on Tuesday, adding to the woes of a government that is facing a backlash for its handling of the economic crisis.
Japanese finance minister drunk at G-7 February 16, 2009 - The Japanese finance minister, Shoichi Nakagawa, denied on Monday that he was drunk at a news conference in Rome where he slurred his words and said his political fate was up to the prime minister after the opposition called for him to be fired. Nakagawa, a close ally of Prime Minister Taro Aso, told reporters that he had drunk alcohol the day before the press conference and took medicine on his flight to Rome for a meeting of Group of 7 finance leaders and central bankers on Friday and Saturday. He said the combination may have affected him badly.
Is Israel assassinating Iran nuclear scientists? Israel is assassinating Iranian nuclear scientists as part of a covert war against the Islamic Republic's illicit weapons program, the Daily Telegraph on Tuesday quoted Western intelligence analysts as saying. The British daily said Israel's Mossad espionage agency was rumored to be behind the death of Ardeshire Hassanpour, a top nuclear scientist at Iran's Isfahan uranium plant, who died in mysterious circumstances from reported "gas poisoning" in 2007. Other recent deaths of important figures in the procurement and enrichment process in Iran and Europe have been the result of Israeli "hits", intended to deprive Tehran of key technical skills at the head of the program, according to the analysts.
Israel launches covert war against Iran Israel has launched a covert war against Iran as an alternative to direct military strikes against Tehran's nuclear programme, US intelligence sources have revealed. It is using hitmen, sabotage, front companies and double agents to disrupt the regime's illicit weapons project, the experts say. The most dramatic element of the "decapitation" programme is the planned assassination of top figures involved in Iran's atomic operations. Despite fears in Israel and the US that Iran is approaching the point of no return in its ability to build atom bomb, Israeli officials are aware of the change in mood in Washington since President Barack Obama took office. They privately acknowledge the new US administration is unlikely to sanction an air attack on Iran's nuclear installations and Mr Obama's offer to extend a hand of peace to Tehran puts any direct military action beyond reach for now.
Last article is an IMPORTANT READ!
John F. Kennedy vs The Federal Reserve On June 4, 1963, a virtually unknown Presidential decree, Executive Order 11110, was signed with the authority to basically strip the Federal Reserve Bank of its power to loan money to the United States Federal Government at interest. With the stroke of a pen, President Kennedy declared that the privately owned Federal Reserve Bank would soon be out of business. The Christian Law Fellowship has exhaustively researched this matter through the Federal Register and Library of Congress. We can now safely conclude that this Executive Order has never been repealed, amended, or superceded by any subsequent Executive Order. In simple terms, it is still valid. When President John Fitzgerald Kennedy - the author of Profiles in Courage -signed this Order, it returned to the federal government, specifically the Treasury Department, the Constitutional power to create and issue currency -money - without going through the privately owned Federal Reserve Bank. President Kennedy's Executive Order 11110 [the full text is displayed further below] gave the Treasury Department the explicit authority: to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury. This means that for every ounce of silver in the U.S. Treasury's vault, the government could introduce new money into circulation based on the silver bullion physically held there. As a result, more than $4 billion in United States Notes were brought into circulation in $2 and $5 denominations. $10 and $20 United States Notes were never circulated but were being printed by the Treasury Department when Kennedy was assassinated. It appears obvious that President Kennedy knew the Federal Reserve Notes being used as the purported legal currency were contrary to the Constitution of the united States of America.
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Tues 02.17.2009
Federal obligations exceed world GDP Does $65.5 trillion terrify anyone yet? As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world. The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account. The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury. The difference between the $455 billion "official" budget deficit numbers and the $5.1 trillion budget deficit cited by "2008 Financial Report of the United States Government" is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.
Gold is Starting to Believe the Obama Administration Despite making loud headlines about stimulating the economy, the US government has been unable to raise the level of optimism among the general public, while the stock market seemed to drop into a deep state of apathy. Last week we received the long-awaited economic stimulus packet as well as the so-called plan for the rescue of the US financial system. We have already voiced our skepticism regarding the structure of the stimulus and its potential effect on the economy in a prior article. As far as the size of the $787 billion package, it is clear that it is too small and too spread out into 2010 and beyond to be called a stimulus. $787 billion is just 5.6% of the GDP and when spread over two years will account for just 2.8% at a time when many industrial economies around the world are contracting by 5-10% per year. It can only be called a life support package, not a stimulus.
Platinum Declines in Asia on Auto Industry Woes; Gold Advances Platinum dropped in Asia as a slumping automotive industry may curb demand as carmakers slash profit forecasts, output and jobs. Gold gained. Nissan Motor Co., Japan's third-largest automaker, today said it will stop output at three plants for as much as 13 days after demand plunged. General Motors Corp., racing to complete a report asking the U.S. to increase a $13.4 billion aid package, may close or sell as many as four plants under a spending-reduction drive in Europe.
Obama's Opening Salvo There is nearly universal agreement that the opening salvo of the Obama Administration's campaign to restore health to the financial system, delivered this week by new Treasury Secretary Geithner, fell with a loud and ugly thud. The most common criticism is that the announcement was short on detail. What is abundantly clear, however, is that the new Administration intends to push spending back up to pre-crash levels and to fill the entire credit void that has disappeared into the black hole of the American financial system. Whether or not the prior levels of spending and lending were justified by market conditions then, or now, appears to be largely unexamined.
Ron Paul Discusses Stimulus on CNN American Morning 02/16/2009
How the stimulus bill affects you The $787 billion package might cut your taxes, make your health insurance cheaper, fix the roads you drive on and keep the best teachers in your children's schools. And that's just for starters. Here's an examination of how the economic stimulus plan will affect Americans. Taxes. The recovery package has tax breaks for families that send a child to college, purchase a new car, buy a first home or make the one they own more energy efficient. Millions of workers can expect to see about $13 extra in their weekly paychecks, starting around June, from a new $400 tax credit to be doled out through the rest of the year. Couples would get up to $800. In 2010, the credit would be about $7.70 a week, if it is spread over the entire year. A $1,000 child tax credit would be extended to more low-income families that don't make enough money to pay income taxes, and poor families with three or more children will get an expanded earned income tax credit. Middle-income and wealthy taxpayers will be spared from paying the alternative minimum tax, which was designed 40 years ago to make sure wealthy taxpayers paid at least some tax but was never indexed for inflation. Congress fixes it each year, usually in the fall.
Big-City Leaders Call Stimulus a Fine Start But Advocates Hope Funding Measure Is Just Down Payment on Broader Plan New York City Mayor Michael R. Bloomberg (I) has said the federal money from the economic stimulus plan could save 14,000 teacher jobs and 1,000 police officer positions he had planned to cut. The money could expand the subway system, avert hospital closures and create a new urban economy surrounding energy retrofitting, according to other officials. Across the country, urban leaders and advocates say the stimulus plan that President Obama is to sign Tuesday will create jobs in cities and blunt the impact of the economic crash. But they hope the funding package only begins to hint at the ambitious urban policy agenda Obama has articulated. "It's a down payment," said Trenton Mayor Douglas H. Palmer (D), the past president of the U.S. Conference of Mayors. "But we're certainly on the right track."
Late Change in Course Hobbled Rollout of Geithner's Bank Plan Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face. According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers. They needed an alternative and found it in a previously considered initiative to pair private investments and public loans to try to buy the risky assets and take them off the books of banks. There was one problem: They didn't have enough time to work out many details or consult with others before the plan was supposed to be unveiled.
Money As Debt (1 of 5)
No excuses if Obama can't fix 'his' recession If, like John Maynard Keynes, you believe that spending, any spending, will revive a flagging economy, the freshly minted, 1,000-page American Recovery and Reinvestment Act of 2009, calling for $504 billion in deficit-financed spending, is for you. Well, not quite. It seems that most of the money will not be spent very soon. About 30% won't hit the economy until 2011, and the balance is likely to be tied up in the procurement processes of the federal and state governments until well into 2010, and beyond. Besides, much of the spending will end up boosting other economies - subsidies for wind machines will benefit workers in the other countries in which such machines are manufactured, not our very own horny-handed toilers. And much of the spending will not create jobs for the unemployed: laid-off car workers do not have the skills to design the software to manage the "smart grid" that is the apple of the greens' eye.
Mirror, Mirror on the Wall... We have been fortunate enough to make some important calls over the past ten years. The top of the stock market in early April of 2000; the beginning of the gold bull market in June 2000; 9/11 in November ten months before it happened; the Iraq and Afghanistan Wars; the beginning of the real estate bubble; the top of that market in June of 2005; the beginning of the subprime fiasco in 2006 and the beginning of the commercial real estate freeze. We also forecast the terrible financial conditions facing states and the freezing up of insurance and the municipal bond market. We called the recession in February 2007 and told readers to get out of the market at 14,000. That's with the exception of gold and silver and oil shares. The recession was right on schedule. The depression that began two weeks ago happened quicker than we had anticipated, but it is here and now.
Money As Debt (2 of 5)
Obama May Press Banks to Cut Mortgage Payments President Obama's plan to reduce the flood of home foreclosures will include a mix of government inducements and new pressure on lenders to reduce monthly payments for borrowers at risk of losing their houses, according to people knowledgeable about the administration's thinking. The plan, to be announced Wednesday, is expected to include government subsidies for reducing a borrower's interest rate, which a lender would have to match with its own money. But officials cautioned that subsidies for lower interest rates would not in themselves help many troubled homeowners, because lenders were still likely to view many of those borrowers as bad risks and refuse to restructure their loans. As a result, they have been casting about for sticks as well as carrots to persuade the lenders to take part.
Diluted to Oblivion, Dead Banks A hard time came when deciding upon a title today. "Dead Banks Walking" or "Insolvent & Motionless Yet Standing" or "Much Ado About No Credit" or "The Bank Vampires" or "The Primary Dark Syndicates" made sense. But what came to mind when a comment made by the Jackass in June 2008 on the Vancouver stage at a Cambridge House Metals & Mining Conference. My words to close a panel discussion on the banks were "Just wait, in several months you will see the entire US banking system go insolvent, its stock prices dwindle to nothing, as it will be diluted into oblivion!" It happened. The response by the USGovt, the USFed, Wall Street banks, and the USCongress will result in very little remedy since their first objective is to keep in place the cover-up to their gigantic fraud, much of which still eludes the financial press. By the time conditions worsen, rescues will not be the primary objective any longer. Rather, prevention of collapse will become the urgent priority. Desperate official actions will result in turning the corner on inflation, from the so-called deflation toward hyper-inflation. The gold & silver price will find release. Already, their prices are disconnected from the USDollar.
Money As Debt (3 of 5)
President's day A creepy feeling ushers in President's Day this year as the suspicion grows that nobody in charge of anything knows what what to do next. The usual yin-yang consensus has solidified in congress along party lines, both equally idiotic. In the White House, Mr. Obama is under excruciating pressure to "do something" as systems unravel and economies augur into darkness. Amid all the anxiety and raging cluelessness, one thing is clear: we're doing everything possible to evade reality.
Greatest Wealth Transfer since Joseph was in Egypt We are on the threshold of a major move in gold equities, which would probably lead the Gold index on the JSE (Johannesburg Stock Exchange) to all time highs of 7000 plus within the next 2 to three years. With GOLD on 2732 on 12 Feb 2009, this is where I want to invest my savings when I am not putting it in real money (by now most readers should know what is real money). GOLD has just broken out of a down trend that started in 2006, and this breakout also, just about, almost signals a full recovery of gold equities from their fall that started in March 2008. I hope you know by now that gold is in a bull market that could still run many years; therefore the 7000 estimate could be too low. It therefore follows naturally that your successful gold miners will follow the success of gold.
Money As Debt (4 of 5)
2009 Outlook, Part 3 Currencies: Policies of INSOLVENCY, aka Dominoes! In 2008, the currency markets offered some of the greatest opportunities of all markets. Every currency had substantial moves 'up and down' and many times BOTH ways, as deleveraging and stampedes of panic swept through the markets at different times. 2009 will be no different, only now we are going to look for sharp differences in two in particular. Those that exist in REAL MONEY will skyrocket and pretenders to that moniker will decline regardless of the country that issues them.
Still Looking for Rock Bottom in Markets Hong Kong container traffic slumped 28 per cent in January, car sales across Europe fell by 27 per cent, these are critical trade depression indicators. Equity markets have weakened but not retested the lows of late last year, while gold is on the way up yet not above $1,000 an ounce. Oil prices touched the low 30s last week. Talk of US house prices bottoming out by the end of the year excited some comment. But really the problem is that we can not see light at the end of this tunnel. That is what you might expect to see, or not to see, at the moment of maximum pessimism - the proverbial dark before the dawn. And yet the spark of optimism about the future is still missing.
Money As Debt (5 of 5)
Ratio Reversal: Re-thinking Fractional Banking Bill Gross of PIMCO makes the argument in his most recent "Investment Outlook" that the government needs to support asset prices to stop the hemorrhaging of the global economy. He argues that the TARP funds, while successfully instigating lending among large financial institutions on a limited basis, have not slowed the continued deleveraging by what he calls the "Shadow Banking System" continues to drag asset prices down. The reason, he says, is because government assistance cannot be diverted to the institutions in this class (hedge funds, investment banks and structured financial conduits) because they are invisible, and therefore such rescues would not pass public scrutiny.
How the Crash Will Reshape America MY FATHER WAS a child of the Great Depression. Born in Newark, New Jersey, in 1921 to Italian immigrant parents, he experienced the economic crisis head-on. He took a job working in an eyeglass factory in the city's Ironbound section in 1934, at age 13, combining his wages with those of his father, mother, and six siblings to make a single-family income. When I was growing up, he spoke often of his memories of bread lines, tent cities, and government-issued clothing. At Christmas, he would tell my brother and me how his parents, unable to afford new toys, had wrapped the same toy steam shovel, year after year, and placed it for him under the tree. In my extended family, my uncles occupied a pecking order based on who had grown up in the roughest economic circumstances. My Uncle Walter, who went on to earn a master's degree in chemical engineering and eventually became a senior executive at Colgate-Palmolive, came out on top-not because of his academic or career achievements, but because he grew up with the hardest lot.
Wall Street Execs Knew Madoff Was a Fraud Years Ago But Kept Silent There is no way that the top execs on Wall Street did not know Bernie Madoff was running a scam. No way. Why? Because once they heard he was pulling down those kinds of returns in all types of markets they would have had their own whiz kids climbing up his company's investment portfolio looking to see how he did it. They would want to do it too. It took Markopolos how many minutes to figure out it wasn't legitimate? But now you know why so few Wall Street firms lost any money with Madoff despite his 'superior returns.' Why did they keep quiet? Professional courtesy amongst scumbags is not likely, because there isn't any. More likely Bernie knew about some of their frauds, and that made him untouchable.
Madoff Wall of Silence KEPT MUM ON FEARS Senior executives at some of Wall Street's biggest firms were convinced Bernard Madoff was a fraud as early as 2005 - yet none alerted authorities, documents filed with the Securities and Exchange Commission reveal. Leon Gross, the former managing director in charge of worldwide equity derivatives research for Citigroup, told friends and colleagues on Wall Street in 2005 that he thought Madoff was being less than honest about the returns he could make for investors but did nothing to prevent the fraud. Likewise, Joanne Hill, Goldman Sachs' global head of equity derivatives research, believed there was something wrong with Madoff's investment scheme because the returns he boasted in marketing materials seemed too good to be true.
That Perk in the Sky Has Defenders on Land THERE are bad economic times. Then there are bad economic times made even worse by a furious public and political fallout against high-end spending. The luxury hotel industry, as I've said, was the first to feel this effect. It started with understandable public outrage last fall when the insurer American International Group ran up a hotel bill of $443,343.71 for an incentive junket for its salespeople at a fancy Southern California resort five days after accepting a big emergency federal bailout loan. The ensuing furor caused many corporate travel managers across the country to abandon the use of luxury hotels, partly for the sake of appearances.
Economy Strains Under Weight of Unsold Items The unsold cars and trucks piling up at dealerships and assembly lines as consumers cut back and auto companies scramble for federal aid are just one sign of a major problem hurting the economy and only likely to get worse. The world is suddenly awash in almost everything: flat-panel televisions, bulldozers, Barbie dolls, strip malls, Burberry stores. Japan yesterday said its economy shrank at an 12.7 percent annual pace in the last three months of 2008 as global demand evaporated for Japanese cars and electronics. Business everywhere are scrambling to bring supply in line with demand.
Fed's Duke: housing woes show tough rules needed PHOENIX (Reuters) - Federal Reserve Governor Elizabeth Duke said on Monday the crisis in housing highlights the need for vigorous enforcement of bank rules and questioned the wisdom of letting banks affiliate with commercial firms. In a speech to the American Bankers Association (ABA), Duke said bankers "have a responsibility to act in a safe and sound manner" and urged them to do more to help slow the pace of home foreclosures. She said that letting banks and commercial firms affiliate "threatens the ability of banks to continue to serve as effective and objective intermediaries of credit" by exposing them to risks that commercial affiliates take.
Why your home's value will keep falling The market is forecasting a further 14.5% drop in home values, and so far the feds haven't helped. Investors can dabble, but home sellers and potential buyers still have it rough. The housing collapse led the stock market and the economy into the cellar. And this crucial sector is headed deeper still, along with the value of your home. How low? One measure suggests a further 14.5% drop. "The problem we have right now is that our animal spirits are beaten down, and this is a fundamental problem," says economist Robert Shiller, the foremost expert on the U.S. housing market. And, he adds, the feds aren't helping. "The (Obama stimulus plan) has a good chance of not fixing that," he says. Though it's the largest such government initiative since the Great Depression, the announced stimulus certainly hasn't changed the psychological tone on Wall Street. Confidence in the Troubled Asset Relief Program and its ability to save banks from bad mortgage assets may be even lower.News circulated last week of proposed relief for some homeowners in default, but it would have little benefit for the majority of creditworthy Americans. And psychology is going to play the determining role in ending the housing crisis, as well as everything that has flowed from it.
California, Almost Broke, Nears Brink LOS ANGELES — The state of California — its deficits ballooning, its lawmakers intransigent and its governor apparently bereft of allies or influence — appears headed off the fiscal rails. Since the fall, when lawmakers began trying to attack the gaps in the $143 billion budget that their earlier plan had not addressed, the state has fallen into deeper financial straits, with more bad news coming daily from Sacramento. The state, nearly out of cash, has laid off scores of workers and put hundreds more on unpaid furloughs. It has stopped paying counties and issuing income tax refunds and halted thousands of infrastructure projects. Twenty-thousand layoff notices will go out on Tuesday morning, Matt David, the communications director for Gov. Arnold Schwarzenegger, said Monday night. “In the absence of a budget we need to realize this savings and the process takes six months,” Mr. David said.
The Next Slum? The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today's McMansions into tomorrow's tenements. Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have become overgrown, as the houses they front have gone vacant. Signs of physical and social disorder are spreading. At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community's 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in. In December, after a stray bullet blasted through her son's bedroom and into her own, Laurie Talbot, who'd moved to Windy Ridge from New York in 2005, told The Charlotte Observer, "I thought I'd bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen."
Dead End in Detroit For all the ups and downs, and more downs, that white-collar workers here have lived through, they have always managed to put on a brave face, assuring one another that the American auto industry will come back stronger than ever. But now that resolve has given way to grim resignation, as General Motors, Ford Motor and Chrysler have announced wave upon wave of job cuts. After closing plants and shrinking their blue-collar work force, Detroit's troubled Big Three are cutting white-collar jobs in their hometown at an unprecedented pace - more than 15,000 in the last year, with more to come.
Circuit City gets OK to auction off or break leases At a hearing in Richmond, Va., U.S. Bankruptcy Judge Kevin Huennekens gave Circuit City permission to begin the auction process for its 567 U.S. stores. Circuit City Stores Inc. received approval Friday to auction leases or break them for its remaining properties, including 567 U.S. stores, its corporate headquarters and various distribution centers. At a hearing in Richmond, Va., U.S. Bankruptcy Judge Kevin Huennekens gave Circuit City permission to begin the auction process. The retailer is shuttering eight stores in New York state, including its Gunhill Road location in the Bronx, Flatbush location in Brooklyn and 86th Street store in Manhattan. Circuit City also announced plans ot close two stores in New Jersey and one in Connecticut.
GM to get $4 billion aide tranche Tuesday The U.S. government will release $4 billion in additional aid to General Motors Corp (GM.N) on Tuesday as planned, a White House aide said on Monday, ahead of the deadline for the automaker to submit a new survival plan. The aide said GM's smaller rival Chrysler LLC's request for additional aid would be treated as a new request and dealt with separately. GM is seeking concessions from the United Auto Workers union and creditors under the terms of its $13.4 billion federal bailout. It must submit a restructuring plan to U.S. officials on Tuesday showing how it can cut costs and pay back the loans.
GM Said to Be Considering Sale, Closure of Four European Plants General Motors Corp. is considering shutting or selling as many as four European plants as it tries to meet the terms of a U.S. government bailout, a person familiar with the plans said. Factories run by GM's Opel division in Antwerp, Belgium, and Bochum, Germany, could be closed and an Eisenach, Germany, factory may be sold, as GM seeks about $1.5 billion of savings, said the person, who requested anonymity because the plans aren't public. The sale or closure of GM's Trollhaettan, Sweden-based Saab division would also eliminate a plant, the person added.
G.M. Presses Union for Cuts in Health Care With its access to a government lifeline possibly at risk, General Motors executives were locked in intense negotiations Monday with leaders of the United Automobile Workers over ways to cut its vast bills for retiree health care. G.M. will file what is expected to be the largest restructuring plan of its 100-year history on Tuesday, a step it must take to justify its use of a $13.4 billion loan package from the federal government. The plan will outline in considerable detail, over as many as 900 pages, how G.M. will further cut its work force, shutter more factories in North America and reduce its lineup of brands to just four, from eight, according to executives knowledgeable about its contents. The remaining core brands will be Chevrolet, Cadillac, GMC and Buick.
Plea for aid as BMW gives 850 workers one hour's notice and puts the Mini in mothballs The Bank of England will come under pressure today to help the ailing car industry after BMW's decision to cut 850 jobs at its Mini plant near Oxford. Lord Davies of Abersoch, the new Trade Minister and former banker, will try to broker a deal to allow the car makers' finance arms to access the Bank's £50 billion liquidity scheme. Mervyn King, the Governor of the Bank of England, is opposed to the idea of finance companies getting credit direct from the Bank. His argument is that the companies are not banks because they do not take deposits from savers and therefore cannot be treated in the same way. Ministers are sympathetic to his views but do not want them to stand in the way of a viable scheme. The industry is desperate for car finance deals because showrooms and factories are full of unsold vehicles, crushing the need for fresh production.
Crude Oil Falls Below $37 on Slowing Global Demand for Fuels Crude oil fell below $37 a barrel in New York on speculation a deepening recession in Europe and Asia will stifle demand for fuels. Brent crude, a benchmark for European, Africa and Russian grades, slumped to a three-week low yesterday after U.K. bank stocks dropped and the Bank of England said the economy's first quarter contraction may match last quarter's 1.5 percent decline. Japan, the world's third-largest oil consumer, yesterday said its economy shrank the most since 1974 in the fourth quarter. "The market data from the U.S. and the other major economies is not painting a picture of an imminent recovery," said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. "The Japanese data was pretty bad."
Kan. suspends income tax refunds, may miss payroll TOPEKA - Income tax refunds and state employee paychecks could be late after Republican leaders and the Democratic governor clashed Monday over how to solve a cash-flow problem. Payments to Medicaid providers and schools also could be delayed. "We are out of cash, in essence," state budget director Duane Goossen said. The move places state taxpayers, workers and schoolchildren in the middle of a political battle over budget cuts. Republicans, who hold majorities in both chambers, blocked Gov. Kathleen Sebelius' proposal to borrow $225 million from healthy state funds to cover shortages in accounts used to meet the state's payroll and issue tax refunds. GOP leaders said they won't approve the IOUs until Sebelius either cuts the current budget herself or signs the bill they passed last week slashing $326 million - including $32 million for education - to balance the budget.
Officially "Out of Control" Now for some news from Europe The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached an acute danger point. If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off Round 2 of our financial Gotterdammerung. Austria's finance minister Josef Proll made frantic efforts last week to put together a E150 billion rescue for the ex-Soviet bloc. Well he might. His banks have lent E230 billion to the region, equal to 70 percent of Austria's GDP. "A failure rate of 10 percent would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.
ARE WE READY FOR THE ONE WORLD ORDER? By Attorney Constance Cumbey The New Agers shifted their focus from 1982 to a 25 year campaign for the Earth that opened in 1987 and they hoped would culminate in 2012. They shifted their expectations for having their "messiah" in the Holy Land for his staged fake second coming from the 1980s to the conclusion of a 42 year period that they claim opened with the end of the Six Day War in 1967 until 2009.[1] Curiously enough, 2009 was also the year that the greatly focused on the Middle East, Javier Solana, the only constant figure in all the various Mitchell Commission and Quartet for Peace in the Middle East configurations, said was IMPERATIVE that the new machinery be in place. Are we there?
Ireland 'could default on debt' FEARS are mounting that Ireland could default on its soaring national debt pile, amid continuing worries about its troubled banking sector. The cost of buying insurance against Irish government bonds rose to record highs on Friday, having almost tripled in a week. Debt-market investors now rank Ireland as the most troubled economy in Europe. Simon Johnson, the former chief economist of the International Monetary Fund, called for this weekend's meeting of G7 finance ministers to put Ireland's troubles at the top of the agenda. Johnson said: "Don't, please, tell me more about the basic principles of financial reform unless and until you have addressed the Irish problem. And don't tell me the Irish have to sort this out for themselves. Eventually, the world always comes to help; check your notes on Iceland.
Israeli election muddies Obama's waters United States President Barack Obama's Middle East project took two impressive steps forward during the week, but eventually got pushed back by almost one. Obama made his most pronounced overture so far to Iran in his press conference on Monday, and Tehran promptly grasped it within hours. But former Iranian president Mohammad Khatami's decision to jump into the fray in the forthcoming presidential election in June introduces complications in the highly accident-prone US-Iranian enterprise.
Israel cautions anew against a nuclear-armed Iran Israeli Defense Minister Ehud Barak told a forum of military chiefs on Monday that Israel would regard a nuclear-armed Iran as an "existential threat" that would speed up a regional arms race. Israel's military spokesman released Barak's comments after the United Nation's nuclear watchdog chief said global nuclear disarmament work was being hampered by Arab perceptions Israel wasn't abiding by a non-proliferation treaty. Barak told a closed forum of military chiefs at a strategy session that if Iran obtained atomic weapons it would pose a "central threat to world order," the statement said.
Obama promises Palestinians he'll protect 'biblical heartland' President pledges to protest Jewish housing developments JERUSALEM - The Obama administration has pledged to the Palestinian Authority it will closely monitor Jewish construction in the West Bank and will protest any new housing developments in the biblical territory, a top PA negotiator told WND. "They told us the White House will watch for any Jewish construction," said the PA negotiator, speaking on condition of anonymity. "Obama knows that if [Likud Chairman Benjamin] Netanyahu is the next prime minister, he will try to expand the settlements. They pledged to us this will be strongly protested," the negotiator said. Although Foreign Minister Tzipi Livni's Kadima party captured one more seat that Likud in last week's elections, Netanyahu is considered most likely to form the next government, since he is reportedly able to forge the most stable coalition with other parties in the 120-seat Knesset.
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Federal obligations exceed world GDP Does $65.5 trillion terrify anyone yet? As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world. The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account. The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury. The difference between the $455 billion "official" budget deficit numbers and the $5.1 trillion budget deficit cited by "2008 Financial Report of the United States Government" is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.
Gold is Starting to Believe the Obama Administration Despite making loud headlines about stimulating the economy, the US government has been unable to raise the level of optimism among the general public, while the stock market seemed to drop into a deep state of apathy. Last week we received the long-awaited economic stimulus packet as well as the so-called plan for the rescue of the US financial system. We have already voiced our skepticism regarding the structure of the stimulus and its potential effect on the economy in a prior article. As far as the size of the $787 billion package, it is clear that it is too small and too spread out into 2010 and beyond to be called a stimulus. $787 billion is just 5.6% of the GDP and when spread over two years will account for just 2.8% at a time when many industrial economies around the world are contracting by 5-10% per year. It can only be called a life support package, not a stimulus.
Platinum Declines in Asia on Auto Industry Woes; Gold Advances Platinum dropped in Asia as a slumping automotive industry may curb demand as carmakers slash profit forecasts, output and jobs. Gold gained. Nissan Motor Co., Japan's third-largest automaker, today said it will stop output at three plants for as much as 13 days after demand plunged. General Motors Corp., racing to complete a report asking the U.S. to increase a $13.4 billion aid package, may close or sell as many as four plants under a spending-reduction drive in Europe.
Obama's Opening Salvo There is nearly universal agreement that the opening salvo of the Obama Administration's campaign to restore health to the financial system, delivered this week by new Treasury Secretary Geithner, fell with a loud and ugly thud. The most common criticism is that the announcement was short on detail. What is abundantly clear, however, is that the new Administration intends to push spending back up to pre-crash levels and to fill the entire credit void that has disappeared into the black hole of the American financial system. Whether or not the prior levels of spending and lending were justified by market conditions then, or now, appears to be largely unexamined.
Ron Paul Discusses Stimulus on CNN American Morning 02/16/2009
How the stimulus bill affects you The $787 billion package might cut your taxes, make your health insurance cheaper, fix the roads you drive on and keep the best teachers in your children's schools. And that's just for starters. Here's an examination of how the economic stimulus plan will affect Americans. Taxes. The recovery package has tax breaks for families that send a child to college, purchase a new car, buy a first home or make the one they own more energy efficient. Millions of workers can expect to see about $13 extra in their weekly paychecks, starting around June, from a new $400 tax credit to be doled out through the rest of the year. Couples would get up to $800. In 2010, the credit would be about $7.70 a week, if it is spread over the entire year. A $1,000 child tax credit would be extended to more low-income families that don't make enough money to pay income taxes, and poor families with three or more children will get an expanded earned income tax credit. Middle-income and wealthy taxpayers will be spared from paying the alternative minimum tax, which was designed 40 years ago to make sure wealthy taxpayers paid at least some tax but was never indexed for inflation. Congress fixes it each year, usually in the fall.
Big-City Leaders Call Stimulus a Fine Start But Advocates Hope Funding Measure Is Just Down Payment on Broader Plan New York City Mayor Michael R. Bloomberg (I) has said the federal money from the economic stimulus plan could save 14,000 teacher jobs and 1,000 police officer positions he had planned to cut. The money could expand the subway system, avert hospital closures and create a new urban economy surrounding energy retrofitting, according to other officials. Across the country, urban leaders and advocates say the stimulus plan that President Obama is to sign Tuesday will create jobs in cities and blunt the impact of the economic crash. But they hope the funding package only begins to hint at the ambitious urban policy agenda Obama has articulated. "It's a down payment," said Trenton Mayor Douglas H. Palmer (D), the past president of the U.S. Conference of Mayors. "But we're certainly on the right track."
Late Change in Course Hobbled Rollout of Geithner's Bank Plan Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face. According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers. They needed an alternative and found it in a previously considered initiative to pair private investments and public loans to try to buy the risky assets and take them off the books of banks. There was one problem: They didn't have enough time to work out many details or consult with others before the plan was supposed to be unveiled.
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No excuses if Obama can't fix 'his' recession If, like John Maynard Keynes, you believe that spending, any spending, will revive a flagging economy, the freshly minted, 1,000-page American Recovery and Reinvestment Act of 2009, calling for $504 billion in deficit-financed spending, is for you. Well, not quite. It seems that most of the money will not be spent very soon. About 30% won't hit the economy until 2011, and the balance is likely to be tied up in the procurement processes of the federal and state governments until well into 2010, and beyond. Besides, much of the spending will end up boosting other economies - subsidies for wind machines will benefit workers in the other countries in which such machines are manufactured, not our very own horny-handed toilers. And much of the spending will not create jobs for the unemployed: laid-off car workers do not have the skills to design the software to manage the "smart grid" that is the apple of the greens' eye.
Mirror, Mirror on the Wall... We have been fortunate enough to make some important calls over the past ten years. The top of the stock market in early April of 2000; the beginning of the gold bull market in June 2000; 9/11 in November ten months before it happened; the Iraq and Afghanistan Wars; the beginning of the real estate bubble; the top of that market in June of 2005; the beginning of the subprime fiasco in 2006 and the beginning of the commercial real estate freeze. We also forecast the terrible financial conditions facing states and the freezing up of insurance and the municipal bond market. We called the recession in February 2007 and told readers to get out of the market at 14,000. That's with the exception of gold and silver and oil shares. The recession was right on schedule. The depression that began two weeks ago happened quicker than we had anticipated, but it is here and now.
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Obama May Press Banks to Cut Mortgage Payments President Obama's plan to reduce the flood of home foreclosures will include a mix of government inducements and new pressure on lenders to reduce monthly payments for borrowers at risk of losing their houses, according to people knowledgeable about the administration's thinking. The plan, to be announced Wednesday, is expected to include government subsidies for reducing a borrower's interest rate, which a lender would have to match with its own money. But officials cautioned that subsidies for lower interest rates would not in themselves help many troubled homeowners, because lenders were still likely to view many of those borrowers as bad risks and refuse to restructure their loans. As a result, they have been casting about for sticks as well as carrots to persuade the lenders to take part.
Diluted to Oblivion, Dead Banks A hard time came when deciding upon a title today. "Dead Banks Walking" or "Insolvent & Motionless Yet Standing" or "Much Ado About No Credit" or "The Bank Vampires" or "The Primary Dark Syndicates" made sense. But what came to mind when a comment made by the Jackass in June 2008 on the Vancouver stage at a Cambridge House Metals & Mining Conference. My words to close a panel discussion on the banks were "Just wait, in several months you will see the entire US banking system go insolvent, its stock prices dwindle to nothing, as it will be diluted into oblivion!" It happened. The response by the USGovt, the USFed, Wall Street banks, and the USCongress will result in very little remedy since their first objective is to keep in place the cover-up to their gigantic fraud, much of which still eludes the financial press. By the time conditions worsen, rescues will not be the primary objective any longer. Rather, prevention of collapse will become the urgent priority. Desperate official actions will result in turning the corner on inflation, from the so-called deflation toward hyper-inflation. The gold & silver price will find release. Already, their prices are disconnected from the USDollar.
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President's day A creepy feeling ushers in President's Day this year as the suspicion grows that nobody in charge of anything knows what what to do next. The usual yin-yang consensus has solidified in congress along party lines, both equally idiotic. In the White House, Mr. Obama is under excruciating pressure to "do something" as systems unravel and economies augur into darkness. Amid all the anxiety and raging cluelessness, one thing is clear: we're doing everything possible to evade reality.
Greatest Wealth Transfer since Joseph was in Egypt We are on the threshold of a major move in gold equities, which would probably lead the Gold index on the JSE (Johannesburg Stock Exchange) to all time highs of 7000 plus within the next 2 to three years. With GOLD on 2732 on 12 Feb 2009, this is where I want to invest my savings when I am not putting it in real money (by now most readers should know what is real money). GOLD has just broken out of a down trend that started in 2006, and this breakout also, just about, almost signals a full recovery of gold equities from their fall that started in March 2008. I hope you know by now that gold is in a bull market that could still run many years; therefore the 7000 estimate could be too low. It therefore follows naturally that your successful gold miners will follow the success of gold.
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2009 Outlook, Part 3 Currencies: Policies of INSOLVENCY, aka Dominoes! In 2008, the currency markets offered some of the greatest opportunities of all markets. Every currency had substantial moves 'up and down' and many times BOTH ways, as deleveraging and stampedes of panic swept through the markets at different times. 2009 will be no different, only now we are going to look for sharp differences in two in particular. Those that exist in REAL MONEY will skyrocket and pretenders to that moniker will decline regardless of the country that issues them.
Still Looking for Rock Bottom in Markets Hong Kong container traffic slumped 28 per cent in January, car sales across Europe fell by 27 per cent, these are critical trade depression indicators. Equity markets have weakened but not retested the lows of late last year, while gold is on the way up yet not above $1,000 an ounce. Oil prices touched the low 30s last week. Talk of US house prices bottoming out by the end of the year excited some comment. But really the problem is that we can not see light at the end of this tunnel. That is what you might expect to see, or not to see, at the moment of maximum pessimism - the proverbial dark before the dawn. And yet the spark of optimism about the future is still missing.
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Ratio Reversal: Re-thinking Fractional Banking Bill Gross of PIMCO makes the argument in his most recent "Investment Outlook" that the government needs to support asset prices to stop the hemorrhaging of the global economy. He argues that the TARP funds, while successfully instigating lending among large financial institutions on a limited basis, have not slowed the continued deleveraging by what he calls the "Shadow Banking System" continues to drag asset prices down. The reason, he says, is because government assistance cannot be diverted to the institutions in this class (hedge funds, investment banks and structured financial conduits) because they are invisible, and therefore such rescues would not pass public scrutiny.
How the Crash Will Reshape America MY FATHER WAS a child of the Great Depression. Born in Newark, New Jersey, in 1921 to Italian immigrant parents, he experienced the economic crisis head-on. He took a job working in an eyeglass factory in the city's Ironbound section in 1934, at age 13, combining his wages with those of his father, mother, and six siblings to make a single-family income. When I was growing up, he spoke often of his memories of bread lines, tent cities, and government-issued clothing. At Christmas, he would tell my brother and me how his parents, unable to afford new toys, had wrapped the same toy steam shovel, year after year, and placed it for him under the tree. In my extended family, my uncles occupied a pecking order based on who had grown up in the roughest economic circumstances. My Uncle Walter, who went on to earn a master's degree in chemical engineering and eventually became a senior executive at Colgate-Palmolive, came out on top-not because of his academic or career achievements, but because he grew up with the hardest lot.
That Perk in the Sky Has Defenders on Land THERE are bad economic times. Then there are bad economic times made even worse by a furious public and political fallout against high-end spending. The luxury hotel industry, as I've said, was the first to feel this effect. It started with understandable public outrage last fall when the insurer American International Group ran up a hotel bill of $443,343.71 for an incentive junket for its salespeople at a fancy Southern California resort five days after accepting a big emergency federal bailout loan. The ensuing furor caused many corporate travel managers across the country to abandon the use of luxury hotels, partly for the sake of appearances.
Economy Strains Under Weight of Unsold Items The unsold cars and trucks piling up at dealerships and assembly lines as consumers cut back and auto companies scramble for federal aid are just one sign of a major problem hurting the economy and only likely to get worse. The world is suddenly awash in almost everything: flat-panel televisions, bulldozers, Barbie dolls, strip malls, Burberry stores. Japan yesterday said its economy shrank at an 12.7 percent annual pace in the last three months of 2008 as global demand evaporated for Japanese cars and electronics. Business everywhere are scrambling to bring supply in line with demand.
Fed's Duke: housing woes show tough rules needed PHOENIX (Reuters) - Federal Reserve Governor Elizabeth Duke said on Monday the crisis in housing highlights the need for vigorous enforcement of bank rules and questioned the wisdom of letting banks affiliate with commercial firms. In a speech to the American Bankers Association (ABA), Duke said bankers "have a responsibility to act in a safe and sound manner" and urged them to do more to help slow the pace of home foreclosures. She said that letting banks and commercial firms affiliate "threatens the ability of banks to continue to serve as effective and objective intermediaries of credit" by exposing them to risks that commercial affiliates take.
Why your home's value will keep falling The market is forecasting a further 14.5% drop in home values, and so far the feds haven't helped. Investors can dabble, but home sellers and potential buyers still have it rough. The housing collapse led the stock market and the economy into the cellar. And this crucial sector is headed deeper still, along with the value of your home. How low? One measure suggests a further 14.5% drop. "The problem we have right now is that our animal spirits are beaten down, and this is a fundamental problem," says economist Robert Shiller, the foremost expert on the U.S. housing market. And, he adds, the feds aren't helping. "The (Obama stimulus plan) has a good chance of not fixing that," he says. Though it's the largest such government initiative since the Great Depression, the announced stimulus certainly hasn't changed the psychological tone on Wall Street. Confidence in the Troubled Asset Relief Program and its ability to save banks from bad mortgage assets may be even lower.News circulated last week of proposed relief for some homeowners in default, but it would have little benefit for the majority of creditworthy Americans. And psychology is going to play the determining role in ending the housing crisis, as well as everything that has flowed from it.
The Next Slum? The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today's McMansions into tomorrow's tenements. Strange days are upon the residents of many a suburban cul-de-sac. Once-tidy yards have become overgrown, as the houses they front have gone vacant. Signs of physical and social disorder are spreading. At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community's 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in. In December, after a stray bullet blasted through her son's bedroom and into her own, Laurie Talbot, who'd moved to Windy Ridge from New York in 2005, told The Charlotte Observer, "I thought I'd bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen."
Dead End in Detroit For all the ups and downs, and more downs, that white-collar workers here have lived through, they have always managed to put on a brave face, assuring one another that the American auto industry will come back stronger than ever. But now that resolve has given way to grim resignation, as General Motors, Ford Motor and Chrysler have announced wave upon wave of job cuts. After closing plants and shrinking their blue-collar work force, Detroit's troubled Big Three are cutting white-collar jobs in their hometown at an unprecedented pace - more than 15,000 in the last year, with more to come.
GM to get $4 billion aide tranche Tuesday The U.S. government will release $4 billion in additional aid to General Motors Corp (GM.N) on Tuesday as planned, a White House aide said on Monday, ahead of the deadline for the automaker to submit a new survival plan. The aide said GM's smaller rival Chrysler LLC's request for additional aid would be treated as a new request and dealt with separately. GM is seeking concessions from the United Auto Workers union and creditors under the terms of its $13.4 billion federal bailout. It must submit a restructuring plan to U.S. officials on Tuesday showing how it can cut costs and pay back the loans.
GM Said to Be Considering Sale, Closure of Four European Plants General Motors Corp. is considering shutting or selling as many as four European plants as it tries to meet the terms of a U.S. government bailout, a person familiar with the plans said. Factories run by GM's Opel division in Antwerp, Belgium, and Bochum, Germany, could be closed and an Eisenach, Germany, factory may be sold, as GM seeks about $1.5 billion of savings, said the person, who requested anonymity because the plans aren't public. The sale or closure of GM's Trollhaettan, Sweden-based Saab division would also eliminate a plant, the person added.
G.M. Presses Union for Cuts in Health Care With its access to a government lifeline possibly at risk, General Motors executives were locked in intense negotiations Monday with leaders of the United Automobile Workers over ways to cut its vast bills for retiree health care. G.M. will file what is expected to be the largest restructuring plan of its 100-year history on Tuesday, a step it must take to justify its use of a $13.4 billion loan package from the federal government. The plan will outline in considerable detail, over as many as 900 pages, how G.M. will further cut its work force, shutter more factories in North America and reduce its lineup of brands to just four, from eight, according to executives knowledgeable about its contents. The remaining core brands will be Chevrolet, Cadillac, GMC and Buick.
Plea for aid as BMW gives 850 workers one hour's notice and puts the Mini in mothballs The Bank of England will come under pressure today to help the ailing car industry after BMW's decision to cut 850 jobs at its Mini plant near Oxford. Lord Davies of Abersoch, the new Trade Minister and former banker, will try to broker a deal to allow the car makers' finance arms to access the Bank's £50 billion liquidity scheme. Mervyn King, the Governor of the Bank of England, is opposed to the idea of finance companies getting credit direct from the Bank. His argument is that the companies are not banks because they do not take deposits from savers and therefore cannot be treated in the same way. Ministers are sympathetic to his views but do not want them to stand in the way of a viable scheme. The industry is desperate for car finance deals because showrooms and factories are full of unsold vehicles, crushing the need for fresh production.
Crude Oil Falls Below $37 on Slowing Global Demand for Fuels Crude oil fell below $37 a barrel in New York on speculation a deepening recession in Europe and Asia will stifle demand for fuels. Brent crude, a benchmark for European, Africa and Russian grades, slumped to a three-week low yesterday after U.K. bank stocks dropped and the Bank of England said the economy's first quarter contraction may match last quarter's 1.5 percent decline. Japan, the world's third-largest oil consumer, yesterday said its economy shrank the most since 1974 in the fourth quarter. "The market data from the U.S. and the other major economies is not painting a picture of an imminent recovery," said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. "The Japanese data was pretty bad."
Kan. suspends income tax refunds, may miss payroll TOPEKA - Income tax refunds and state employee paychecks could be late after Republican leaders and the Democratic governor clashed Monday over how to solve a cash-flow problem. Payments to Medicaid providers and schools also could be delayed. "We are out of cash, in essence," state budget director Duane Goossen said. The move places state taxpayers, workers and schoolchildren in the middle of a political battle over budget cuts. Republicans, who hold majorities in both chambers, blocked Gov. Kathleen Sebelius' proposal to borrow $225 million from healthy state funds to cover shortages in accounts used to meet the state's payroll and issue tax refunds. GOP leaders said they won't approve the IOUs until Sebelius either cuts the current budget herself or signs the bill they passed last week slashing $326 million - including $32 million for education - to balance the budget.
Officially "Out of Control" Now for some news from Europe The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached an acute danger point. If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off Round 2 of our financial Gotterdammerung. Austria's finance minister Josef Proll made frantic efforts last week to put together a E150 billion rescue for the ex-Soviet bloc. Well he might. His banks have lent E230 billion to the region, equal to 70 percent of Austria's GDP. "A failure rate of 10 percent would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.
Ireland 'could default on debt' FEARS are mounting that Ireland could default on its soaring national debt pile, amid continuing worries about its troubled banking sector. The cost of buying insurance against Irish government bonds rose to record highs on Friday, having almost tripled in a week. Debt-market investors now rank Ireland as the most troubled economy in Europe. Simon Johnson, the former chief economist of the International Monetary Fund, called for this weekend's meeting of G7 finance ministers to put Ireland's troubles at the top of the agenda. Johnson said: "Don't, please, tell me more about the basic principles of financial reform unless and until you have addressed the Irish problem. And don't tell me the Irish have to sort this out for themselves. Eventually, the world always comes to help; check your notes on Iceland.
Israeli election muddies Obama's waters United States President Barack Obama's Middle East project took two impressive steps forward during the week, but eventually got pushed back by almost one. Obama made his most pronounced overture so far to Iran in his press conference on Monday, and Tehran promptly grasped it within hours. But former Iranian president Mohammad Khatami's decision to jump into the fray in the forthcoming presidential election in June introduces complications in the highly accident-prone US-Iranian enterprise.
Israel cautions anew against a nuclear-armed Iran Israeli Defense Minister Ehud Barak told a forum of military chiefs on Monday that Israel would regard a nuclear-armed Iran as an "existential threat" that would speed up a regional arms race. Israel's military spokesman released Barak's comments after the United Nation's nuclear watchdog chief said global nuclear disarmament work was being hampered by Arab perceptions Israel wasn't abiding by a non-proliferation treaty. Barak told a closed forum of military chiefs at a strategy session that if Iran obtained atomic weapons it would pose a "central threat to world order," the statement said.
Obama promises Palestinians he'll protect 'biblical heartland' President pledges to protest Jewish housing developments JERUSALEM - The Obama administration has pledged to the Palestinian Authority it will closely monitor Jewish construction in the West Bank and will protest any new housing developments in the biblical territory, a top PA negotiator told WND. "They told us the White House will watch for any Jewish construction," said the PA negotiator, speaking on condition of anonymity. "Obama knows that if [Likud Chairman Benjamin] Netanyahu is the next prime minister, he will try to expand the settlements. They pledged to us this will be strongly protested," the negotiator said. Although Foreign Minister Tzipi Livni's Kadima party captured one more seat that Likud in last week's elections, Netanyahu is considered most likely to form the next government, since he is reportedly able to forge the most stable coalition with other parties in the 120-seat Knesset.
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Presidents' Day - PTG is CLOSED Monday, Feb 16, 2009 No new radio show today; we'll be back tomorrow.
Geithner Pressed By G-7 to Push Ahead With Bank Bailout Plan Finance chiefs from the Group of Seven nations joined the chorus of U.S. investors and lawmakers pushing Treasury Secretary Timothy Geithner to move faster to fix the banking system. Stung by domestic criticism for failing to provide details last week on just how he plans to clean up banks' toxic assets and revive lending, Geithner was told by foreign policy makers at weekend talks in Rome that speed was of the essence.
G-7 Takes 'Back Seat' as Crisis Pushes G-20 to Fore The Group of Seven, whose finance chiefs convene this weekend in Rome, is ceding its traditional power to rebuild the world economy to a broader body of governments that now wield greater sway over global growth. As U.S. Treasury Secretary Timothy Geithner and European Central Bank President Jean-Claude Trichet join their G-7 counterparts, it's the Group of 20 that occupies the vanguard responding to the financial crisis. The shift in influence to the group, whose membership ranges from the U.S. to China to Saudi Arabia, reflects the fact that industrial nations lack the resources to fix the world's economic woes alone. That curbs the G-7's scope to deliver new initiatives this week, say economists and former officials.
Ron Paul - Legislative Update - Government Stimulus Bill
Congressional disconnect on banks and bailouts Midway through the seven-hour grilling of bank executives by the House Financial Services Committee on Wednesday, a voice off camera suggests it is going to make good material for a "Saturday Night Live" skit. The quip came during a strange interlude when a committee member was asking the eight chief executive officers to raise their hands if they could ascertain whether their banks had increased lending since receiving money from the Troubled Asset Relief Plan or TARP. The question caused confusion because half of the CEOs don't run traditional banks. Hands kept popping up and down as the House member repeatedly rephrased the question and the bankers struggled to understand it.
The Worst Misstep: Geithner Added to the Doubt TIMOTHY GEITHNER, the brand new Treasury secretary, was panned last week for how he unveiled the Obama administration's plan to rescue the financial system from the bankers who broke it. Mr. Geithner was not especially articulate, his critics said, and he provided only an outline of an outline, not the detailed blueprint people anticipated and wanted. To a degree, one of Mr. Geithner's biggest problems was not of his own making. His boss, President Obama, had fanned expectations for his debut as Mr. Fix-It, leaving the impression that it would be boffo. It wasn't.
Allowing Banks To Fail Bob Schieffer spoke with Sen. Richard Shelby and Rep. Barney Frank about the stimulus bill President Obama will sign and whether bailing out banks is the right move to heal the economy.
White House dampens stimulus expectations President Barack Obama's aides warned Americans on Sunday not to expect instant miracles from the $787 billion economic stimulus bill he will sign this week, but said it would help eventually. Obama is due to sign the bill passed last week by Congress in Denver on Tuesday. It was the first major legislative victory of his young presidency, which could rise or fall with its success or failure. "There will be signs of activity very quickly," David Axelrod, the White House senior adviser, said on "Fox News Sunday." "But it's going to take time for that to show up in the statistics. The president has said it's likely to get worse before it gets better."
Ailing Banks May Require More Aid to Keep Solvent Some of the nation's large banks, according to economists and other finance experts, are like dead men walking. A sober assessment of the growing mountain of losses from bad bets, measured in today's marketplace, would overwhelm the value of the banks' assets, they say. The banks, in their view, are insolvent. None of the experts' research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country. Nor do consumers and businesses need to fret about their deposits, which are federally insured. And even banks that might technically be insolvent can continue operating for a long time, and could recover their financial health when the economy improves.
Joseph Stiglitz: Bad Bank is 'Cash for Trash' Joseph Stiglitz criticizes the creation of a "bad bank" to deal with untradeable assets left over from the U.S. financial crisis, and compares the bad bank solution to garbage collection. "You shouldn't chase good money after bad money," says Stiglitz.. Stiglitz points out that for the amount of money we've poured into bad banks, the social security system could have been made secure for the next 100 years (bad trade-off for seniors).
Opportunities and Dangers in Stimulus and Bailout Shockers! "We are no better off today than we were three months ago." --- Representative Paul Kanjorshi (D - PA) Capital Markets Subcommittee Chair, January 28, 2008 In order to identify Opportunities in today's Markets, it is critical to first have a Realistic Overview of the Dangers. Clearly the Bailout Bill (inter alia) of the Fall 2008 neither got credit Flowing again, nor saved The Financial System, as its proponents claimed it would do. Considering the major provisions of the Stimulus Bill, which recently passed the House and Senate, we can conclude that it contains one Fatal (and several serious) Flaws which will render it ineffective or likely worse.
Senator 'Appalled' At Bailout Senate banking committee member Richard Shelby, R-Ala., tells Harry Smith on "The Early Show" the White House should have waited before announcing its bailout plans.
G7 sets sights on new world economic order The world's richest nations have called for urgent reform of global finance to save the world from the economic devastation that is dragging more and more countries into recession. Italy's finance minister called for a "new world economic order" as he wrapped up the crisis meeting of finance leaders from the Group of Seven leading economies over which he presided here. In a joint declaration, the G7 called for "urgent reforms" of the international financial system. Tremonti said a so-called set of "legal standards" discussed in Rome would be presented at a meeting of 20 key advanced and emerging economies (G20) in London in April and a summit of the Group of Eight (G8) world powers in July.
Government Won't Bailout BankUnited In a story citing "people familiar with the matter," the paper said the government declined to provide assistance to a bid by investors W.L. Ross and Carlyle Group to buy BankUnited, the largest Florida-based bank. The BankUnited thrift had $291.9 million in total risk-based capital on Dec. 31, which left it nearly $1.14 billion short of meeting the capital ratio the OTS's required. In a phone interview Friday, BankUnited CEO Ramiro Ortiz said he wouldn't comment on the Wall Street Journal report, which he called rumor and speculation. "We continue to remain actively involved in negotiations with different private equity firms," Ortiz said. "This is an incredible franchise, which has an incredible franchise value. This is a bank that is important to the community. How could I not step up to the challenge?"
Chairman Tom Price with 1,073-page Non-Stimulus Text Republican Study Committee Chairman Tom Price discusses the big-government handout that Democrats are going to push through Congress. The final version of the bill even has hand written notes that allow for more irresponsible spending. Democrats made the bill available at 11 p.m. on Thursday night. At 9 a.m. Friday morning, the House begins debate on the bill. If members of Congress actually took the time to read the bill, they would have to read through the night at a rate of 626 words per minute before heading to the House floor. What are the odds of that happening?
Chairman Price Speaks Out Against the Stimulus on the House Floor
Wall St eyes influence over rescue plan Wall Street is to lobby the Obama administration to relax its plans for stringent reviews of banks' financial health and capital injections that could leave the government as a large shareholder in many of those institutions. People close to the situation say financial groups were frustrated by the administration's decision not to hold detailed talks with the industry before last week's release of its $2,000bn financial rescue plan. Administration officials said the announcement was always intended to be a framework rather than a final plan and stressed that input would be sought from industry "stakeholders" as details were fleshed out. "We're going to get opinions from across the industry ... to help shape the final plan," said one official.
Ackerman to CEOs: What Did You Do with Bailout Money? Rep. Gary Ackerman (D-NY), House Financial Services Committee hearing with major banking CEOs, February 11, 2008
Obama wants public to track stimulus As he prepared to sign the massive economic stimulus bill, President Obama called Saturday for the public to become watchdogs on where the $787 billion in the bill goes. "Ultimately, this is your money, and you deserve to know where it's going and how it's spent," Mr. Obama said in his weekly radio address, promising to help with the most ambitious spending-scrutiny project the government has ever undertaken. Mr. Obama called on "every American" to use 'recovery.gov' - a Web site that will be up and running once the money begins to be spent - to track where the money is being spent and to "weigh in with comments and questions."
Obama's Rhetoric Is the Real 'Catastrophe' In 1932, automobile production shriveled by 90%. President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression. First, he did so to win votes in the November election. He has done so again recently to sway congressional votes for his stimulus package. In his remarks, every gloomy statistic on the economy becomes a harbinger of doom. As he tells it, today's economy is the worst since the Great Depression. Without his Recovery and Reinvestment Act, he says, the economy will fall back into that abyss and may never recover.
Congressman Shadegg discusses healthcare rationing and the stimulus.
Capitalism Needs a Sound-Money Foundation Let's give the Fed some competition. Abolish legal tender laws and see whose money people trust. Let's go back to the gold standard. If the very idea seems at odds with what is currently happening in our country -- with Congress preparing to pass a massive economic stimulus bill that will push the fiscal deficit to triple the size of last year's record budget gap -- it's because a gold standard stands in the way of runaway government spending. Under a gold standard, if people think the paper money printed by government is losing value, they have the right to switch to gold. Fiat money -- i.e., currency with no intrinsic worth that government has decreed legal tender -- loses its value when government creates more than can be absorbed by the productive real economy. Too much fiat money results in inflation -- which pools in certain sectors at first, such as housing or financial assets, but ultimately raises prices in general.
Committee on Doubt and Uncertainty A day in the life of House Financial Services. Anyone trying to understand why the credit mess keeps getting messier needs only to have sat through Wednesday's hearing of the House Financial Services Committee. The eight bank CEOs were mere props. The stars were the politicians, who managed to demand more loans for consumers while simultaneously giving lenders new cause to wonder if they'll ever be repaid. This gathering of the esteemed Committee on Doubt and Uncertainty occurred as markets desperately need less of both. Chairman Barney Frank's hearing was intended to flay the CEOs for not lending enough. It fell flat as political theater because banks have actually increased their lending in recent months. The people who aren't lending more are investors in nonbank financing such as asset-backed securities.
Arnold Kling, Why The Stimulus Won't Work Conference Economist Arnold Kling speaks at The Heritage Foundation & Club For Growth Conference on Why the Stimulus Won't Work
As US economy tanks, no limits to make ends meet Americans are selling everything from the hair on their heads to what's coursing though their veins to make ends meet, as the US economy continues to tank. Websites offering advice on selling plasma, sperm, or locks of hair have seen huge upticks in traffic, as have the individuals and businesses that will buy the highly personal items which are now being used by desperate Americans for their own personal bail-out. "I'm having problems paying rent, food, car insurance, bills. Ten, 20 or 40 dollars is a little help I'm glad to accept. I wouldn't have thought I would go this low... but I'm trapped," a woman named only as Emily said in a message sent to Phil Maher, founder of the bloodbanker.com website.
Mint Sells $948 Million in Bullion Coins Just out is the 2008 Annual Report of the Director of the Mint, a 70-page breath of fresh air that at once pays homage to the state quarters program and simultaneously is a valedictory address of Edmund Moy, who became Mint director in 2006. Over the past dozen or so years, the annual report read more like an advertising brochure than the annual accounting of an entity that, if found in the private sector, could qualify as number 700 in the "Fortune 1,000" listing of American corporations. It had the graphics and sizzle, but lacked substance and core information.
The Oracle with Max Keiser - 13 February 2009 (1 of 3) Guests: Peter Schiff and Pierre Briancon. Topics: Dubai, Abu Dhabi and Middle East sovereign wealth funds should buy gold miners and oil producers.
The Oracle with Max Keiser - 13 February 2009 (2 of 3)
The Oracle with Max Keiser - 13 February 2009 (3 of 3)
Deluge of Financial Calamities Looming by Mid-March As horrible as the financial news for currencies and paper assets has been since mid-2007, it looks like the worst is yet to come - perhaps as early as next month. Over the weekend the Managing Director of the International Monetary Fund (IMF), Dominique Strauss-Kahn, told a gathering of Southeast Asian central bankers that the world's advanced economies are already in a depression and that the financial crisis may deepen unless the banking system is fixed. On Febr. 4, Paul Wolfowitz, the former president of the World Bank, said the IMF and similar institutions are incapable of coping with the global financial crisis because they do not have enough resources.
Economic And Financial Systems Deliberately Destabilized Several months ago we said the relationship between the dollar and gold was over. The days of a lower dollar and a higher gold price are no longer connected in the same way. Gold is now trading on its own as the best of all currencies. The world is headed for zero interest rates and massive increases in money and credit. The rally in the dollar versus other currencies over the past eight months ended a month ago as we forecast. December was the watershed month for gold as it began its present rally, which will soon take it to new highs. There isn't a word to describe the tremendous amount of financial creation the US government will need. For that matter many other governments as well. That is why we are seeing competitive devaluations. Nation's are carrying 64.5% of their foreign reserves in US dollars. It is no wonder they are manipulating their currencies.
Gerald Celente Was Right !
Gold May Climb for Second Week on Demand for Haven, Survey Says Gold may gain for the second straight week as the banking crisis and recession deepen, boosting the metal's appeal as a store of value. Twenty-six of 32 traders, investors and analysts surveyed from Tokyo to Chicago on Feb. 12 and Feb. 13 advised buying gold, which rose 3.1 percent last week to $942.20 an ounce in New York. Five survey respondents said to sell, and one was neutral.
Gold forecast for return to bull trend Gold shone this week as investors looked for a haven amid weak economic data and uncertainty about revamped plans from the US Treasury to rescue the financial sector. Over the week, gold rose 2.7 per cent to $935 a troy ounce after reaching a near seven-month high at $953.30 on Wednesday. Stephen Briggs, at RBS, described this week's inflows into gold exchange traded funds, which reached a record 3.54m ounces, as "astonishing", noting that they were equal to 5 per cent of global gold mine output.
In case you missed this last Wednesday when we posted the full version . . . Peter Schiff Tells the Saudis How to Crash the US Dollar
US Mint Bullion Coin Sales Back in late 1985, the US Congress authorized the Gold Bullion Coin Act of 1985 which President Ronald Reagan promptly signed into law. It ordered the US Treasury, through its US Mint branch, to start producing gold bullion coins. This law outlined very specific requirements for these new coins, including that they be produced from gold mined in the United States. This legislation, partially in response to the soaring popularity of foreign national coins like the famous South African Krugerrand in the early 1980s, ushered in the modern era of American bullion coins. The American Gold Eagles and American Silver Eagles that emerged out of this program have since grown very popular among investors worldwide for several reasons.
Burris denies affidavit contradicts testimony Illinois' freshman U.S. senator says he never misled anyone when he testified before an impeachment committee last month. Senator Roland Burris is fielded questions about a major omission from his testimony after he released an affidavit Saturday that appeared to contradict statements he made to a state House committee investigating former Gov. Rod Blagojevich's impeachment. The affidavit indicates Blagojevich's brother asked Burris to host a fundraiser for the governor before Burris was appointed to the Senate seat vacated by Barack Obama.
Pelosi's mouse slated for $30M slice of cheese Talk about a pet project. A tiny mouse with the longtime backing of a political giant may soon reap the benefits of the economic-stimulus package. Lawmakers and administration officials divulged Wednesday that the $789 billion economic stimulus bill being finalized behind closed doors in Congress includes $30 million for wetlands restoration that the Obama administration intends to spend in the San Francisco Bay Area to protect, among other things, the endangered salt marsh harvest mouse. House Speaker Nancy Pelosi represents the city of San Francisco and has previously championed preserving the mouse's habitat in the Bay Area.
Paul Krugman Supports Stimulus, Warns No Quick Fix
Charlotte in same predicament as Wall Street Banktown Charlotte feeling the sting as economic downturn hits Wall Street South CHARLOTTE, North Carolina (AP) -- The financial collapse has hit hard in the city known as Wall Street South. For years, Bank of America Corp. and Wachovia Corp. helped turn Charlotte into a financial powerhouse. Now, the big banks have thrust it into the same predicament as the real Wall Street -- the city is losing thousands of jobs and an unquantifiable amount of prestige. Residents who invested heavily in the banks have seen their wealth dissipate and lifestyles change radically. "It's kind of sad, disheartening because the banks have been the backbone of Charlotte for so long," said Carl Clayton, a 55-year-old retired school teacher. The loss of so many bank jobs is causing upheaval in other industries. Consumers who have been laid off or fear being out of work are curtailing their spending, forcing restaurants and retailers to close -- among them Morton's, a high-end steakhouse, and a 15-month-old Home Depot Design Center. Even some of the Charlotte's lively night clubs have shuttered their doors.
Average net worth declines 22.7% The recession has cut many Americans' net worth by more than 20 percent as the values of homes, stock portfolios and businesses have plummeted, the Federal Reserve said Thursday. The Fed said the average net worth of American households plunged 22.7 percent since the recession began in December 2007 through October 2008, when the report was prepared. The median net worth, or the midpoint between the wealthiest and poorest, fell 17.8 percent. The impact has disproportionately fallen on the wealthiest households and those between the ages of 55 and 64, a Federal Reserve economist said. Net worth tends to peak in that age bracket, as retired Americans begin to spend down their savings.
Dr Ron Paul 02 10 2009 Educates Ben Bernanke on free market
Dr Ron Paul on Fox-business by phone02 14 2009 - 1 of 2
Dr. Ron Paul 02 - 14 - 2009 by phone 2/2
Punctual Payers Face Higher Rates From Card Companies Mel Brandt said he got a Citibank Home Depot MasterCard for its rewards program. His reward for paying on time was an interest rate increase to 19 percent from 12 percent. "If I didn't opt out and close the account, I'm afraid the interest payments would snowball and I would default," said Brandt, 52, a self-employed house painter in St. Louis, who relies on credit cards to fund his painting business. Lenders came under fire yesterday in a U.S. Senate Banking Committee hearing for raising interest rates, adding fees and cutting credit lines, even for consumers perceived to be low- risk with high credit scores. Connecticut Democrat Christopher Dodd, the chairman, called the practices "gouging."
Mortgage Rescues Fail as Price Drops Spur Defaults The Obama Administration wants banks to offer loans with easier terms to more than 2 million borrowers in danger of defaulting on their mortgages, twice as many as 2008. That won't stem the foreclosure crisis if prices keep falling. A third of owners will walk away when the value of their homes drops 20 percent or more below what they owe, even if they can afford the payments, a situation known as "rational default," said Norm Miller, director of real estate programs at the University of San Diego School of Business Administration.
More drivers are uninsured as recession grows deeper DES MOINES, Iowa | Chances are increasing that the next fender bender you're involved in could be with someone without car insurance. As the recession leaves millions of workers unemployed and pressures family budgets, one place many are cutting is their insurance coverage. The Insurance Research Council (IRC) estimates that by next year nearly one in six motorists may be driving without insurance. That's 3 million more uninsured drivers than just five years ago. "We can't explain why people drive uninsured. We just know that a certain percentage of people do, and it does change with economic conditions like unemployment," said IRC Vice President David Corum.
Matt Kibbe Addresses Press Club on Economic Stimulus FreedomWorks President, Matt Kibbe, addresses the National Press Club regarding the implications of the near trillion dollar stimulus package.
Union-GM talks break down DETROIT | Negotiators for the United Auto Workers walked out of concession talks with General Motors Corp. on Friday night in a dispute over payments to a union-administered retiree health care fund, a person briefed on the talks told the Associated Press on Saturday. The breakdown comes at a critical time as GM races against a Tuesday deadline to submit a plan to the government that is supposed to show how it can become viable. The Detroit-based auto giant is living on $9.4 billion in government loans, and the Treasury Department must approve its viability plan for GM to get $4 billion more.
Auto industry must restructure President Obama's senior adviser said Sunday that any plan to shore up the auto industry will need to require sacrifice by all involved, from auto workers and industry executives to shareholders and creditors. His statement came just before negotiations about such concessions were set to resume Sunday between General Motors Corp. and the United Auto Workers, according to a person briefed on the talks. Bargaining broke off Friday night in a dispute over payments into a union-run trust fund that will take on retiree health care costs next year. GM and Chrysler LLC are expected to submit plans to the government by a Tuesday deadline to show how they can repay billions in loans and become viable in spite of a drop in auto sales not seen for a generation.
Deere in the crosshairs as recession hits farmers Before the first biker ever tattooed a Harley-Davidson logo on his arm, before Apple ever inspired the first MacHead to swear she would never -- ever -- marry a Windows user, Deere & Co (DE.N) was creating one of the enduring corporate cults. For 172 years now, the company's products -- with their leaping deer logo and distinctive green and yellow iron -- have stirred something like love in the farmer's breast. Generations have come to count on Deere's plows, planters, tractors and harvesters to make their jobs a little easier. Today, especially during the summer months, it is common to see small convoys of vintage Deere tractors, lovingly restored by retired farmers, popping and wheezing down rural roads in rallies that are rolling reminders of the brand's appeal.
Job Losses Pose a Threat to Stability Worldwide From lawyers in Paris to factory workers in China and bodyguards in Colombia, the ranks of the jobless are swelling rapidly across the globe. Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, ac
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