Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.

Tuesday 08.24.2010

The taxman cometh
By Palash R. Ghosh - IBTimes.com
Prospects for higher taxes in 2011 and beyond will retard the pace of economic recovery in the U.S.
Milton Ezrati, senior economist and market strategist, said that the tax increases both planned (and threatened) by the current administration over the next few years will likely cut GDP growth.
Consider the plethora of tax hikes on the horizon:
The tax cuts initiated by George W. Bush in 2001 and 2003 are scheduled to expire at the end of this year. The President and Congress will probably extend the cuts for all but the two top brackets of wealthier Americans, thereby letting the tax brackets rise from their present levels of 35 percent and 33 percent, respectively, to 39.6 percent and 36 percent.

ObamaCare's Tax on Taxes
WSJ.com - $$
The latest gambit to punish for-profit health insurers.
Lately a lot of Democrats are taking the ObamaCare walk of shame, and not only those whose votes may return them to the labor market this fall. Liberals still think the bill didn't raise taxes enough.
So they've cooked up a virtuoso new scheme. A phalanx of powerful committee Chairmen - including Henry Waxman (House Commerce), Max Baucus (Senate Finance) and Sander Levin (Ways and Means) - want to tax the taxes that the health insurance industry already pays.

The Decline in American Optimism
By Richard Posner
I don't put much weight on public opinion polls that show a drop in Americans' optimism about the economic future of the country. Optimism and pessimism are personality traits that condition people's reaction to uncertainty, but they are also influenced by uncertainty. This was one of Keynes's insights. When a sharp economic downturn creates the kind of uncertainty about economic prospects that we're now observing, people's "animal spirits" (his term for optimism) droop; hoarding increases and entrepreneurship flags. These are rational responses to uncertainty, but they do not predict a nation's future economic performance.

79 Common Sense Reasons For A Gold Standard
By: Toni Straka - Safehaven.com
The world enters the final stage of financial destruction thanks to a one-sided application of John Maynard Keynes' equation because politicians and central bankers did a terrific job in deficit spending since the USA defaulted on its gold obligations in 1971, but never followed Keynes advice to build reserves in surplus years. This is a direct result of a fiat money system that allows to create money at essentially no cost, to quote Fed chair Ben Bernanke from his infamous 2002 speech.
IMHO the heated discussion about a new gold standard will follow philosopher Arthur Schopenhauer's saying: "All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

Will The Price Of Gold Reach $5,000?
By: Marvin Clark - iStockAnalyst.com
All the current chatter these days on whether or not to reduce a portfolio's exposure to gold is, to put it bluntly, a short term trader's conversation. A crowded trade, whales exiting a crowded trade, is it deflation or inflation? Gold is the inferior commodity to soft commodities such as wheat; gold's current price elasticity, and more, all sound reasonable.
However, if you are a trend position builder and/or a long term investor of gold, we shall now review other important long term considerations that transactional traders omit from discussions.

Why Gold Is Not In A Bull Market
By: Julian D. W. Phillips - Safehaven.com
What is a 'Bull' market? It is a market in an upward price phase of a market with the expectation that it will be followed by a 'Bear' or downward phase of a market. This mindset is common to all markets. Sayings like, "everything that goes up must come down" is pretty standard and taken as part of life itself, but few examine it to see if it is really true. Why should everything that goes up come down? For some years now gold has been thought of as moving in the opposite direction to the U.S. Dollar. So if gold goes up it must come down must also mean that if the Dollar goes down it must come up? Is that true? The history of currencies in the last few thousand years tell us something quite different. Currencies have gone down and never come up again, just disappeared. Gold has always retained a monetary value. Since the eighties to 1999, gold has gone down and in this century has gone up. So we take issue with the saying, in the light of the history of gold. Even though the 'powers that be' have tried to discredit gold and underlying money, the vast majority of central banks have retained most of their gold because they believed it to be a very valuable reserve asset.

China Ditches US Currency - Are Times Changing?
By: Shae Smith - Safehaven.com
We all know the US flogs its debt to anyone willing to buy it. And up until recently, that's been China.
Very slowly, over the past twelve months China has been lowering its exposure to US treasuries. In fact, in the last twelve months, they've offloaded about USD$100 billion dollars worth.
Some of this has been by simply not purchasing more bonds upon maturity. While some of it has been by turning those US dollars into precious resources. Instead of waiting for bonds to mature, it has used the cash to buy up natural gas stores, investing in oil rigs and even throwing money into companies with large iron ore mines.

How Hyperinflation Will Happen
by Gonzalo Lira
Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain.
To counter this, the U.S. government has been running massive deficits, as it seeks to prop up aggregate demand levels by way of fiscal "stimulus" spending-the classic Keynesian move, the same old prescription since donkey's ears.
But the stimulus, apart from being slow and inefficient, has simply not been enough to offset the fall in consumer spending.

Hyperinflation is a Fiscal, Not Monetary Phenomenon
By: Jordan Roy-Byrne - Safehaven.com
Months ago we wrote about the true causes of hyperinflation. We proceed to expand upon our views as we disagree with the views put forth by John Mauldin, Mike Shedlock and now Jim Rickards who all focus on velocity and/or bank lending as important causes of hyperinflation.
The reality is that hyperinflation is first and foremost set in motion and driven by a deteriorating fiscal situation. In fact, significant economic weakness and deflation is a precursor to hyperinflation. Too many analysts believe that there has to be some economic demand or some consumption to stimulate inflation or hyperinflation. Printing money to try and stimulate your economy or excessive credit growth is what leads to inflation. Printing money because you are broke and can't service your debts is what leads to hyperinflation.

SEC suspends trading in more stocks this year
By Matt Krantz, USA TODAY
Regulators are stepping up efforts to weed out some of the smallest and most questionable publicly traded companies.
Hoping to prevent investors from being misled by companies with big promises but little financial information, the Securities and Exchange Commission suspended trading in 202 stocks this year, already topping the 183 stocks that were suspended through the end of the third quarter of 2009. The SEC suspended a record 234 companies for all of 2009, a level that will be easily surpassed this year at the current clip. Suspensions are way up from the 183 and 98 in 2008 and 2007, respectively, a USA TODAY analysis of SEC data shows.

Fed Loses Bid for Review of Bailout Disclosure Ruling
By Bob Ivry
Aug. 23 (Bloomberg) -- An appeals court refused to reconsider a decision compelling the Federal Reserve Board to release documents identifying banks that might have failed without the U.S. government bailout.
The full U.S. Court of Appeals in New York, in a docket entry dated Aug. 20, denied a May 4 request by the Fed to review a three-judge panel's unanimous March 19 decision requiring the agency to release records of the unprecedented $2 trillion U.S. loan program begun primarily after the 2008 collapse of Bear Stearns Cos.

Lunch with the FT: Adam Fergusson
By Jonathan Ford - FT.com
As befits a man who has written an acclaimed book about money and prices, Adam Fergusson starts our encounter by eyeing the menu beadily and asking who will be paying the bill. "Milton Friedman said the most efficient way of spending money is to spend your own, and the least efficient way is to spend other people's," he says. "If you go out to lunch and have to pay your own bill, you have what you want and can afford. If someone else is paying, you may as well have the lobster."

BoA sees US double-dip danger from 'fiscal chicken'
By Ambrose Evans-Pritchard - Telegraph.co.uk
Bank of America has accused the Democrats and Republicans in Congress of endangering the US economy in a game "fiscal chicken", risking a grave policy error by tightening too early.
Ethan Harris, the bank's chief North American economist, said early data for August suggest that "an already weak recovery is getting weaker" with a rising risk of a relapse into recession, yet the two parties seemed determined to outbid each other with austerity measures.
"Politicians are clamouring for quick action, not to stimulate a dangerously weak economy, but to bring down the budget deficit. We strongly support efforts to bring down the deficit, but only once the economy is on a healthy growth trajectory," Mr Harris said.

Global Shivers Mean That Nobody Escapes
the Worsening Economic Cold
By Irwin Stelzer - WSJ.com
The U.S. economy grows smartly-at an annual rate of 5.6% in the last quarter of last year-but when the final figures are in America will have recorded a growth rate of less than 2% in the most recent quarter. Meanwhile, in that recent quarter Germany grew at an annual rate of close to 9%, and powered the euro-zone annual growth rate to almost 4%. But in part because America has now slowed, the Bundesbank and other experts are forecasting much lower growth rates in the second half of the year. In short, America spurts, Europe slows, so America slows; Europe spurts, America slows, so Europe slows. Coincidence? Not likely.

CFR: China Poised to Shock the Oil Market
And Its Possible Consequences for Hyperinflation
I found this paper published by the Council on Foreign Relations to be a plausible argument in favor of the exhaustion of cheap oil, also known as Peak Oil. This growth in Chinese oil consumption into the 'knee of the curve' given its growing per capital income could very well cause an oil shock as the title of the paper suggests. As you may recall it was an oil shock that triggered the stagflation of the 1970's, a black swan event if there ever was one.

Stimulus round 2 waiting in the wings: PineBridge
By Hao Li - IBTimes.com
A second round of stimulus is waiting in the wings, ready to be deployed if the economy further deteriorates, said PineBridge Investments, an investment adviser with $78 billion in assets under management.
If the Chinese economy does not glide into the "soft landing" engineered by their regulators, PineBridge believes their government will resort to fiscal stimulus near the end of 2010. For the U.S., regulators are gearing up for another round of quantitative easing if the economy worsens, said PineBridge.

Fed's Hoenig Says Big Banks Benefit From Safety Net
By Steve Matthews
Aug. 23 (Bloomberg) -- The largest U.S. banks have an implied government safety net that gives them a lower cost of capital compared to community banks even after a congressional overhaul of banking regulation, Kansas City Federal Reserve President Thomas Hoenig said.
"Despite the provisions of the Dodd-Frank Act to end too- big-to-fail, community banks will continue to face higher costs of capital and deposits until investors are convinced it has ended," Hoenig said today in testimony to a congressional hearing in Overland Park, Kansas.

Investors Shake Up Funds With Record Bond Love Affair
By Charles Stein
Aug. 23 (Bloomberg) -- Retail investors in the U.S., burned by two market crashes in a decade, have shunned stocks for the longest stretch in more than 23 years, upsetting the balance of power in the $10.5 trillion mutual-fund industry.
Bond funds attracted more money than their equity counterparts in 30 straight months through June, according to the Investment Company Institute, a Washington-based trade group. Preliminary data show the trend continued in July, matching the streak posted by bonds from 1984 through 1987.

Greek Banks Pressured to Merge as Economic Slump Hurts Profits
By Niklas Magnusson
Aug. 24 (Bloomberg) -- Greek banks are under growing political pressure to merge as second-quarter earnings probably slumped on rising loan losses and worsening asset quality in the debt-burdened country.
National Bank of Greece SA, EFG Eurobank Ergasias SA, Alpha Bank SA and Piraeus Bank SA, which will report results within the next week, have been called upon to consider partnerships by Greek Finance Minister George Papaconstantinou and Bank of Greece Governor George Provopoulos. Profits at the lenders probably fell more than 60 percent, according to analysts' estimate.

U.S. Judges Sound Off on Bank Settlements
By BINYAMIN APPELBAUM - NYTimes.com
WASHINGTON - Everything was rolling along traditional lines. A bank broke the rules. The government found out. The company agreed to pay a fine and improve its behavior.
And then the judge assigned to approve the deal blew his top.
In a scene that is becoming increasingly common, Judge Emmet G. Sullivan of Federal District Court chewed out federal prosecutors at a hearing in Washington last week for a proposed settlement with Barclays.
"Why isn't the government getting tough with banks?" he asked.

Now That's Rich
By PAUL KRUGMAN - NYTimes.com
We need to pinch pennies these days. Don't you know we have a budget deficit? For months that has been the word from Republicans and conservative Democrats, who have rejected every suggestion that we do more to avoid deep cuts in public services and help the ailing economy.
But these same politicians are eager to cut checks averaging $3 million each to the richest 120,000 people in the country.

Paul Craig Roberts: America is Truly being Destroyed by Design - 1

Paul Craig Roberts: America is Truly being Destroyed by Design - 2

Paul Craig Roberts: America is Truly being Destroyed by Design - 3

Commercial foreclosures revisit Chicago Loop
Office tower at 500 W. Monroe flirts with foreclosure again
By: Eddie Baeb and Thomas A. Corfma - ChicagoBusiness.com
The owner of a downtown skyscraper that managed to stave off foreclosure last year is on the hot seat again as the commercial real estate market continues to sag.
A Georgia firm that holds two junior mortgages on the 46-story tower at 500 W. Monroe St. says the building's loans went unpaid when they came due this month and that the company may foreclose and take control of the property.

How States Hide Their Budget Deficits
By John Frisby - Lux Libertas
The SEC's charges against New Jersey for misleading investors should warn other states against sweeping the truth under the rug.
Article By STEVE MALANGA
In April, the New York State Comptroller, Thomas DiNapoli, issued a damning report on the Empire State's financial practices. Albany's budgets, he observed, increasingly employ "fiscal manipulations" to present a "distorted view of the State's finances." Money shuffled among accounts to hide deficits, loans made by the state to itself, and other maneuvers Mr. DiNapoli called a "fiscal shell game" are meant to "mask the true magnitude of the State's structural budget deficit."
The comptroller's report produced yawns. Last week, however, the Securities and Exchange Commission (SEC) filed fraud charges against New Jersey for misrepresenting its financial obligations, particularly its pension obligations, and misleading investors in its bonds. New York - and many other states - had better sit up and take notice.

Americans Using Their Rainy Day Savings to Live
BY CHUCK - RebelTraders.net
Recently I commented on the outflow of money from mutual funds and the increase in 401K hardship withdraws.
Today the New York Times carries the story further by stating that investors have simply given up on the stock market. While this may indeed be true that investors simply don’t trust it anymore, and who could blame them, I contend that there is still a significant percentage of those pulling money from stocks who need the funds to live.
Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.

How low can we fall this fall?
TheAutomaticEarth.com
. . . . A society cannot buy its way out of a debt-driven depression by taking on more debt, or at least not when a number of vital necessities are entirely lacking. When there's no (rise in) productive capacity, or in consumer spending, and when exports can't go up substantially, in other words, when every penny written off has to be replaced by another penny borrowed just to stand still, it doesn't really matter what all sorts of statistics seem to indicate, that society is no better off for it, and can thus not be said to be out of its recession.

Housing's Second Leg Down
by PAUL JACKSON - HousingWire.com
Home prices have fallen 34% from their peak in the middle of 2006, according to Standard & Poor's HPI data - but is that enough? Or is there further to go? How much further could we fall?
It's worth noting that the question of what happens next with home prices isn't merely an academic exercise. With CoreLogic estimating that more than 11.2 million U.S. borrowers were underwater on their mortgages at the end of the first quarter, the direction of U.S. home price trends over the next few years will have a direct impact on bank and related financial balance sheets the world over.

Housing Slide in U.S. May Drag Economy Into Recession
By John Gittelsohn and Bob Willis
Aug. 23 (Bloomberg) -- Housing led the U.S. out of seven of the last eight recessions. This time, it may kill the recovery.
Home sales collapsed after a federal tax credit for buyers expired in April. Since then, the manufacturing-led expansion, which began in the second half of 2009, has been waning, with jobless claims rising and factory orders falling.
"If foreclosures continue to mount and depress home prices, that could send the economy back into a recession," said Celia Chen, an economist who tracks the industry for Moody's Analytics Inc. "The housing market and the broader economy are closely intertwined."

The Costs of Homeownership Drive First-time Buyers Away
by CHRISTINE RICCIARDI - HousingWire.com
The costs of owning a home can substantially outweigh the benefits because of issues such minimal home equity retention and an owners desire to "flip" a home on the market quickly, researchers Wenli Li and Fang Yang said in their report American Dream or American Obsession? The Economic Benefits and Costs of Homeownership, published Friday by the Federal Reserve Bank of Philadelphia.
"One thing that is certain," the two analysts said, "is that homeownership is not for everyone, and thus, based on economic benefits, the case for trying to achieve a nation of homeowners needs to be rethought."

Let the Housing Market Normalize!
By: Ron Paul - Safehaven.com
Recently there have been some encouraging signs that Congress is finally willing to admit what should have been evident two years ago. Even after a $150 billion bailout, Fannie Mae and Freddie Mac are still bankrupt and should be abolished. Indeed Rep. Barney Frank, a longtime champion of Fannie and Freddie has made a few statements alluding to this and I have signed on to a letter asking him to clarify his remarks and hold hearings on this topic. There seems to be a growing consensus in favor of abolishing Fannie and Freddie. This is the good news.

Mortgage Fraud Is Rising, With a Twist
Adopting to Tighter Rules After Collapse,
Scammers Turn to More Complex Plots
By ROBBIE WHELAN - WSJ.com
New data suggests that mortgage fraud - which got tougher to pull off after the collapse of the U.S. real estate market - is returning in a big way.
Data prepared for The Wall Street Journal by research firm CoreLogic, examining about seven million home loans made by hundreds of lenders, show that losses from mortgage fraud - ranging from falsified credit reports to identity theft - rose 17% last year after declining 57% in the two years after its 2006 peak.
In 2009, $14 billion in loans, or about 0.7% of all mortgage loans made in the U.S., were originated with fraudulent application data.

Oregon loses 10,600 jobs in last year
PORTLAND BUSINESS JOURNAL
Oregon has lost 10,600 jobs in the past year, ranking No. 42 among all 50 states and the District of Columbia for job retention, according to the latest figures from the U.S. Bureau of Labor Statistics.
Thirty-one states increased their nonfarm employment totals between July 2009 and July 2010. Nineteen states - including Oregon - suffered declines, while Wyoming was unchanged.
Texas enjoyed the biggest increase in raw numbers, adding 134,600 nonfarm jobs during the past year. The runners-up were Indiana (up 47,600 jobs), Massachusetts (up 36,600) and Minnesota (up 23,200).
California suffered the biggest decline and lost 103,900 jobs in the past year.

Will the Next Generation be Better off Than Their Parents' Generation?
By Gary Becker
The great majority of parents would like to see their children become better off economically than they are, and that hope would be even more common among the children. Yet, polls for a while have suggested that neither the majority of children nor parents in the United States are confident that this progress will happen. Despite frequent recent commentary on these polls, little systematic analysis has been presented of what determines whether the average child will be better off than the average parent, and why pessimism about such progress has apparently grown in the US.

Credit-Card Rates Climb
Levels Hit Nine-Year High as New Rules Limiting Penalty Fees Help Fuel Rise By RUTH SIMON - WSJ.com - (free)
Interest rates continue to tumble for the U.S. Treasury, companies and home buyers alike. But for a large portion of 381 million U.S. credit-card accounts, borrowing rates have been moving only one way: up.
And average rates are likely to climb further in the near future.
New credit-card rules that took effect Sunday limit banks' ability to charge penalty fees. They come on top of rule changes earlier this year restricting issuers' ability to adjust rates on the fly. Issuers responded by pushing card rates to their highest level in nine years.

President: poor jobs numbers stem from inaction in Senate
By Joseph Picard - IBTimes.com
President Obama reacted to the grim news on job loss by calling on Congress to pass the Small Business Jobs Bill.
"In the final few months of last year, small businesses with fewer than 50 employees accounted for more than 60 percent of the job losses in America," Obama said. "These are the businesses that usually create most of the jobs in this country."
The president said that "if we want this economy to create more jobs more quickly, we need to help them."

Americans confused about healthcare reform
By Julie Steenhuysen - Reuters.com
(Reuters) - Julia Wood, a 51-year-old mother of 12 from Chicago's East side, has some health insurance through a state program -- but is so worried she may lose it she asks not to give her real name.
Wood's husband, a plumbing contractor, watched his business dry up in 2008 with the mortgage crisis.
"The economy hit us," said Wood in an interview at the not-for-profit Chicago Family Health Center.
Like millions of Americans, she is waiting for healthcare reform legislation signed into law by President Barack Obama in March to take effect. But like millions of Americans, she is not sure what it will do for her.

SB1070 critics boycott Budweiser, Hensley
PHOENIX BUSINESS JOURNAL - BY Mike Sunnucks
A Hispanic group opposed to Arizona's Senate Bill 1070 immigration measure has launched a boycott of Budweiser beer and the Phoenix-based Anheuser-Busch distributorship headed by Cindy Hensley McCain.
Hensley McCain is the chairwoman of the Hensley & Co. distributorship and the wife of U.S. Sen. John McCain, R-Ariz.
Somos America said today it wants consumers to boycott Budweiser beer until Hensley denounces SB 1070. The law has police determine the immigration status of those they have already detained and whom they suspect are illegally in the U.S.

Obama's Islamic agenda
He embraces the Muslim world and turns his back on us
By Jeffrey T. Kuhner - The Washington Times
President Obama has revealed his true nature. After 20 months in the Oval Office, he still remained a largely unknown figure. A picture is coming into focus now, and it should trouble all Americans. It is widely known that Mr. Obama is a post-national progressive. Yet he is also a cultural Muslim who is promoting an anti-American, pro-Islamic agenda. This is the real meaning of his warm - and completely needless - embrace of the Ground Zero Mosque.
At an Iftar dinner celebrating Ramadan at the White House, Mr. Obama told Muslim-Americans that he supports the building of an Islamic community center and mosque just two blocks away from where the Twin Towers were destroyed and nearly 3,000 Americans were murdered on Sept. 11, 2001. He later tried to back away from those comments. Mr. Obama said he was defending the right of religious freedom but not the "wisdom" of erecting the mosque.

Feinberg Says Spill Victims May Be Able to Sue Some Companies
By Jim Snyder
Aug. 23 (Bloomberg) -- Kenneth Feinberg, who today will start drawing from a $20 billion escrow fund for Gulf oil spill victims, hasn't decided whether they must waive their right to sue companies involved if they accept final reimbursement.
"The question of whether or not a final payment will require a claimant to release one defendant, BP Plc, or all defendants, has not yet been resolved by me," Feinberg said yesterday in a telephone press conference with reporters.

Germany to roll out ID cards with embedded RFID
International Business Times
The production of the RFID chips, an integral element of the new generation of German identity cards, has started after the government gave a 10 year contract to the chipmaker NXP in the Netherlands. Citizens will receive the mandatory new ID cards from the first of November.
The new ID card will contain all personal data on the security chip that can be accessed over a wireless connection.
The new card allows German authorities to identify people with speed and accuracy, the government said. These authorities include the police, customs and tax authorities and of course the local registration and passport granting authorities.

Is Tony Robbins Right About The Coming Economic Collapse?
By Michael Snyder - DailyMarkets.com
It seems like almost everyone is warning of a coming economic collapse these days. Do you remember Tony Robbins? He is probably the world's best known "motivational speaker" and his infomercials dominated late night television during the 80s and 90s. He was always urging all of us to "unleash the power within" and to take charge of our lives. Well guess what? Now Tony Robbins is warning that an economic collapse is coming. In fact, he has issued a special video warning about what he believes is about to happen. Considering the incredible connections that he has at the highest levels of the financial world, it makes a lot of sense to consider what he is trying to warn us about. Robbins says that a "major retracement" is coming to financial markets and that the coming collapse is going to be a "painful process" as we go through it.

Tony Robbins Economic Warning 1-2

Tony Robbins Economic Warning 2-2

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