Wednesday, December 30, 2009

Two Dollars in, three out

Budget a little tight after the holidays? You’re not alone, 60% of Americana spend more each month than they make, this according to the credit card industry. Right-wingers will stick their nose in the air an make disparaging remarks about all the people who buy flat screen TV’s with their credit cards. The credit card banks have slashed credit limits so there are damn few shopaholics left.

People whose pensions have disappeared are living on their savings. Medical bills, kids in school, lost one of the three jobs needed to scrape by, on and on. With twenty percent of the country unemployed, even if you have a job, you probably aren’t doing that well. It comes down to sixty percent of the workforce being underpaid. If brought up to pre-Reagan levels (the good old days when the American Dream wasn’t to win the lottery) the minimum wage should be $14/hour. Adjusted to the increases in productivity over the last forty years the average wage should be nearly double what it is now.

The China based economy has drained all the money out of the country. Two thirds of corporations pay no taxes because they either off shore all their profits like Haliburton or they pay such obscene executive pay that they don’t have any profits. Shipping raw materials to China and goods back is not cheaper even with slave labor since labor cost is not that big a portion of the retail price of an item. (typically less than 10%)

It’s all about heavy handed control. The super rich don’t like the middle-class, period. They want the gilded age back and they are very close to having it their way. The average American is so ignorant that they spend more than they make every month and don’t realize that something is wrong.

Thursday, December 24, 2009

Rigged betting parlor

Goldman Sachs is coming under increasingly close scrutiny for having created billions in CDOs (collateralized debt obligations) to sell to their clients and then betting against them with derivatives. Incredibly this is probably legal unless it can be shown that they systematically picked the debts most likely to fail to sell to their clients. Your pension fund lost billions buying these worthless pieces of paper but the chances of you ever seeing any of your money are slim at best.

Not only did Goldman make billions from this scheme but certain hedge funds that apparently knew what was happening also bet heavily against these worthless debt bombs and made billions as well. In fact Goldman and the few hedge funds were the only people allowed to place bets against the debt funds that Goldman itself was selling. Goldman is using as a defense that investors did know that Goldman itself was betting against its own investment funds but they chose to keep buying into Goldman’s ponzi scheme anyway since it continued to go up in value.

But the investment banks were also advertising the historical record of low default rates of consumer debt when they sold CDOs even though they knew the historical data was really ancient history from a day when what they were doing to the real-estate and mortgage markets was illegal. They knew it would blow up and they structured ever more complex derivatives to harvest as much money as possible from the system when it did.

So far this collapse has cost 14 trillion Dollars although much of this money is just paper printed by the Federal Reserve to keep the banks worldwide from going under. The theft has really been going on for forty years or more as the debt has piled up and the wealth of the middle class has disappeared. Americans that haven’t lost everything already don’t realize that what they do have isn’t worth much. With a dead economy real wealth disappears very quickly

Monday, December 21, 2009

Rats leaving the oil tanker

Have you heard about the Gulfo, no it’s not another old Volkswagen being built in Mexico. It’s the new Petro Dollar or rather not Dollar. The Arab oil states have announced the creation of their own joint currency to get them off of the USD and just in case we decide to go all Iraqi Freedom on them they’ve announced a joint response task force as well. Okay so these guys are bluffing more then not but you didn’t hear a whisper about this in the US media.

Most western newspapers that did cover it dismissed it as unlikely because of squabbling among the parties but its probably more that everybody who consumes oil is just whistling past the gas pump. The rest of the world is even more dependent on Arab oil than the US is and the fact that they are moving ahead with this new currency at all is reason for concern if you are outside the US and hold Dollars.

It isn’t that they are really going to be issuing a lot of new currency but rather that they are pooling their foreign cash reserves and gold to make them a major player in the international banking community. We’ve been embargoing Iran to keep them from banking on a big scale so what will the US response be to this?

You have to wonder who is really behind this? Has anybody seen Dick Cheney lately? It wouldn’t be the first time the Saudis helped out the Bush Crime Family or are the rats just leaving the oil tanker while they can? We’ll just have to wait and see how this oil well burns.

Friday, December 18, 2009

The padlock men on overtime

The FDIC seized another seven banks today at a cost approaching two billion. Two of the banks could not be sold at any price and they appear to have been trying to unload them for some time. So the government will just mail checks to those depositors that are covered by insurance. Everybody else will just eat their losses.

Banks that are healthy enough themselves to absorb other banks are becoming increasingly scarce. An indication of what the padlock men expect for next year is that they have increased their staffing budget by 55% and doubled the budget for the holding of banks in receivership. That would be for the temporary running of banks they board up and the mothballing of other assets that they can’t unload because of their excessive toxicity.

They like to say at a 140 closings we are no where near the numbers of the banks closed during Reagan’s crash of the S&Ls that peaked at 650 in one year during Pappy Bush’s years but many of these banks are large chains so the numbers don’t directly compare. The FDIC and/or the Treasury Dept. as well as the Federal Reserve have already been assuming the risk for trillions of toxic assets that far outstrip the losses from the good old days of that meltdown.

Next year we will see the first real wave of the bank tsunami, so far people are just standing on the beach wondering where the water went. We can expect the illusion of recovery from the Obama bubble but what we need is some real leadership because those waves are just going to keep coming.

Monday, December 14, 2009

The two economies of Alan Greenspan

Paul Samuelson died yesterday at 94, by any standard the foremost academic economist of the past hundred years. He made no bones about who was responsible for the current economic crisis and how much worse this one was compared to the last Depression. He pulled no punches about what a monster that Wall Street has become and the need to rein them in.

President Obama had some of the monsters ( I mean the big Wall bankers) to the White House for a chat today, Obama has been upping the rhetoric about Wall Street. They in turn pledged a few billion in small and medium business lending, a fraction of what they paid back to the Treasury. They paid the TARP money back early to avoid any restrictions on executive pay and will doubtless not follow through on any pledges they made to Obama now that he has no leverage over them.

Alan Greenspan made the rounds of the news programs Sunday and expressed his concern for the dual economy. The economy of the big corporations and the rich is doing just fine but the economy for everybody else is doing poorly. Really Al? You spent your entire career keeping wage inflation down. Your policies made the entire middle class into the working poor and now you’re concerned?

The big news last week was that retail sales were up (they’re still way down compared to last year). But a closer look at the numbers underscores Greenspan’s comments, the entire increase for all of the retail sector was made up of increased spending just by people whose incomes exceed 100,000 Dollars. Spending for people in the bottom tier continues to plummet even compared to last year. Those people Greenspan suddenly is concerned about can’t afford a Christmas goose nor healthcare for tiny Tim.

Friday, December 11, 2009

Rice in the Christmas stockings

Three more bank chains were seized today bringing the total to 133 for the year. The head of the FDIC says the peak for bank failures will come next year. Indeed the commercial loans made five years ago will be coming due. Those loans will be to the many of the more overextended developments built at the peak of the bubble years.

The Treasury Dept. has instituted a program to bail out as many of the small banks as it can to keep the failure numbers from getting too big right before the 2010 elections.
The headline today was that retail sales for November were up more than 1% but contrast this will state sales tax receipts that are down 10 to 20 percent depending on how deep your state is into the Depression. States are gearing up to slash next years budgets and this will not be good for the economy.

The House has passed a bill regulating the financial services industry. It’s not nearly enough but Republicans are screaming that it’s the end of freedom for Americans so there most be a couple of good things in it. Funny how they don’t care about any of the freedoms we’ve lost so far but regulate parasitic bankers and it’s the end of the world.

The rest of the world is paying close attention to whether or not the US is serious
about reining in these overgrown corporations that threaten the world economy. This is a no brainier for the rest of the world after last year’s banking collapse. The runaway food commodity markets fueled by speculators and the specter of famine was a wake up call for most. There is some hint that this could be starting up again as the rice market is heating up. It’s possible to store grain for a number of years if you go about it right or you can just go with canned goods in the Christmas stockings this year.

Rice in the Christmas stockings

Three more bank chains were seized today bringing the total to 133 for the year. The head of the FDIC says the peak for bank failures will come next year. Indeed the commercial loans made five years ago will be coming due. Those loans will be to the many of the more overextended developments built at the peak of the bubble years.

The Treasury Dept. has instituted a program to bail out as many of the small banks as it can to keep the failure numbers from getting too big right before the 2010 elections.
The headline today was that retail sales for November were up more than 1% but contrast this will state sales tax receipts that are down 10 to 20 percent depending on how deep your state is into the Depression. States are gearing up to slash next years budgets and this will not be good for the economy.

The House has passed a bill regulating the financial services industry. It’s not nearly enough but Republicans are screaming that it’s the end of freedom for Americans so there most be a couple of good things in it. Funny how they don’t care about any of the freedoms we’ve lost so far but regulate parasitic bankers and it’s the end of the world.

The rest of the world is paying close attention to whether or not the US is serious
about reining in these overgrown corporations that threaten the world economy. This is a no brainier for the rest of the world after last year’s banking collapse. The runaway food commodity markets fueled by speculators and the specter of famine was a wake up call for most. There is some hint that this could be starting up again as the rice market is heating up. It’s possible to store grain for a number of years if you go about it right or you can just go with canned goods in the Christmas stockings this year.

Thursday, December 10, 2009

With a Twinke In Their Eye

Initial unemployment claims were up 17,000 last week dampening hopes that we had really turned that corner on jobs. The news readers then reported with a twinkle in their eye that the number of people receiving extended benefits dropped sharply. They were in fact down 303,000 in just one week. This is not good news, it reflects how many people that exhausted their benefits.

They were estimating that one million people would fall off the rolls by the end of January but I would say that was not an accurate guess. The millions that lost their jobs in the final months of the Bush reign of terror came from out sourced industries. Their jobs are gone for good and with all the other occupations laying off workers their chances of finding a job in a new field are not good.

Great Britain has had enough with its criminal class and has slapped a 50% tax on big bonuses. In the rest of Europe this is about what the normal tax rate is for that income level. Before Reagan there was a 72% top rate in the US. Today these parasites only pay an average of 17%.

Home foreclosures were down slightly again last month but the number of people on track toward eventual foreclosure continues to climb. You can probably add many of the 303,000 who lost unemployment benefits to that list. This year will set another new record for foreclosures.

Bankruptcies continue to climb as well but nearly 2/3 of those cases are people with medical bills who still have a good paying job. The jobless and the working poor either don’t need bankruptcy anymore or can’t afford to file and then jump through all the hoops put in place by the Republicans. The new law doesn’t keep that many people from filing, its real intent was to make securitized debt instruments based on unsecured debt seem more attractive.

This added to the quadrillion Dollar credit derivative market. In fact the added risk made the sale of credit default swaps even more profitable and in turn pumped up the need for derivatives based on the CDS and on and on. One dollar of credit issued could produce hundreds of dollars in market activity. You know, "innovative products" from your financial services industry. Making American capitalism the envy of the world. Better learn to speak Chinese.

Wednesday, December 9, 2009

Reanimating the corpse

The markets rallied late today on a weakening USD. With the Dollar down 1.2% measured against gold that would mean for each trillion the big banks have invested against the USD in foreign markets they made $12,000,000,000 (12 billion) today. That’s assuming they can cash out before everybody else, but since they are the "market makers" they do have the inside track on that.

Meanwhile back in the "real" world; US home owners lost 500 billion of their personal wealth this year. Still we did better than last year when we collectively lost $3.6 trillion. Of course that $4.1 trillion wasn’t real money since it was just a market bubble created by the big banks to create a basis for their 1000 trillion dollar credit derivative trade.

If your house is worth less than you paid for it, you might not think of it as "pretend" money. When the Wall Street bankers use that money to buy another yacht or a personal jet it is real money, but not for you, just keep making the payments. By the way they say you are paid to much and will have to take another pay cut.
Some good news for a change, maybe. The lowering of the Medicare age could be a real boon for the economy if it isn’t sabotaged somehow. The 55 to 65 group that this affects are the people at the top of the food chain. These are the people who could make real change if they are no longer shackled to their corporate masters by their company health care plan.

This could produce a real resurgence of small business that has been suppressed since Reagan made health care a for profit business in the eighties. Coincidentally President Obama has just come out with a long list of incentives, loans and tax breaks for small business.

To make this work Obama will need to order AG Holder to open the crypt and reanimate the corpse of the DOJ antitrust division. Is there a new lightning rod on the roof of the RFK building? No new laws would be needed to get started. Everything from the Sherman Antitrust law to Packers and Stockyards Act to an assortment of laws against leveraged buy outs and other corporate predators have been ignored by every President since 1980. Millions of jobs would be created and this is why the Republicans are loathe to allow health care reform besides the bribes from the insurance companies.

Once set in motion the Republicans will be hard pressed to oppose this but they will anyway. Already only 22 percent of voters will identify themselves as Republicans, openly opposing people who want to start a small business since their 401k is gone to hell could put Republicans in single digits. We can hope, yes we can.

Tuesday, December 8, 2009

Chump change we can believe in

World markets were down sharply today on the news that Greece has had its credit rating downgraded and the word is that the Dubai crisis won’t be resolved anytime soon despite a sell off of Dubai World’s overseas holdings. Gold continued going down as the Dollar continued to strengthen against other currencies. Oil was down again reflecting the continued decline of the economy.

A survey of US companies found that at least half of them will continue to layoff into the new year and the rest won’t be hiring that much. President Obama unveiled an array of new ideas he would like to use to encourage more hiring. He didn’t say how much he intends to spend on this. He has a so-called windfall from the TARP program of 200 billion that is coming back from the big banks who want to pretend they are making money to justify their obscene bonuses.

In reality the banks consider this money chump change compared to the trillions they got from the Fed. They’ve been able to use the Fed money to churn the markets worldwide and are just wallowing in profits. The reality is of course is that they aren’t creating any new wealth, they are just harvesting it from pension plans and other such investments made by the unwary. It looks like everybody is making money but when the markets plunge to about a third of what they are now the accounting will take place. The rich will be richer and the middle-class will disappear for good. The really rich don’t play the stock market.
If the Dollar continues to strengthen this accounting will come sooner rather than later. Greece won’t be the only country that can’t pay its bills. The US can ride the strong Dollar for a time but a strong USD means more out sourcing and more unemployment. Two hundred Billion won’t make a dent in that and there will be more calls for working people to accept lower and lower wages.

Fed Chairman Bernanke wasn’t kidding about cutting Social Security either. The conservative wet-dream about the government being too broke to pay entitlements is getting closer everyday. Even if the talk about taxing the rich were to come to something it probably wouldn’t be enough anymore. The economy needs to be totally rebuilt from the ground up or it will just continue to deteriorate. Any boost from stimulus will just be a bubble if the same parasites are left in place.

Monday, December 7, 2009

Not much thinking going on

Fed Chairman Bernanke testified to Congress not to expect too much from the recovery and the jobless rate will not be coming down. This is bad news for the 1,000,000 people who had their unemployment benefits extended by the stimulus act earlier this year. Their checks will stop coming in the next few weeks and Congress has yet to do anything. They had also been receiving a 65% subsidy on their health insurance with their average family premium of $1100 but this has already run out while Congress is bogged down on health care reform that won’t kick in for years if ever.

The CBO estimates extending these benefits for another year will cost a hundred billion Dollars and this doesn’t allow for more people becoming unemployed. FDR refused to just hand out money during the last Republican Great Depression believing that jobs were the key to rebuilding an economy. But Roosevelt didn’t have today’s problems. The factories were still there and hadn’t been sold off to China.

Even if Obama creates jobs the money will drain off to multinational corporations that will not do anything to rebuild America. Obama’s economic advisors have him playing a monetary game of chicken with China that is putting the entire world economy at risk. In the meantime its making the people who run Goldman Sachs (where most of his advisors come from), it’s making them very rich. .

Meanwhile we have millions of people on "temporary" assistance instead of working and more are joining them every day. The rest of us continue to slide toward this same cliff edge since nothing has been done fix the underlying problems and no more than a handful of Congressmen are even thinking about it. The rest don’t do much thinking at all.

Friday, December 4, 2009

Controling the "real" economy with the "not real" economy

The cheap Dollar policy has started to pay off for the Obama Adm. with job losses way down for November. Cheap Dollars make sending jobs out less attractive but also good deal of the reluctance to move jobs comes from a crack down by China on factory expansions after Obama slapped their wrists with a 99% tariff on steel pipe to curb below cost dumping into the US market. This has brought out-sourcing to a stand still for now but the very real risk of total market collapse is rearing its ugly head.

The markets reversed early gains today on fears that the Fed will raise interest rates as they did under Greenspan to control wage inflation. This caused the Dollar to strengthen dramatically as investors became fearful of the over inflated markets worldwide. Gold dropped almost 5% today priced in USD and the Dollar gained dramatically against the Euro. If this panic continues Monday it could cause a worldwide sell off as investors try to move into cash and force margin calls on huge blocks of traded... well, stuff (they’ve been driving up the price of everything across all markets with cheap Dollars) A selling panic could easily bring about the mother of all market crashes.

It’s difficult to know what is really going on in the markets as an ever increasing amount of trading is being done in Dark Pools. This is where the large banks run their own private exchanges for the big market players and none of this becomes public. The small investor is left in the dark until it’s much too late for him to do anything but take the loss.

Even if the market bubble does not burst this time we are by no means out of the woods since we need at least 150,000 new jobs every month just to keep up with population growth. The new year will bring a new crop of commercial loan defaults with this type of loan on a five year cycle at least 20% are due and deep underwater. Add to this an ever increasing number home foreclosures. With declining wages and no credit available, a lack of consumer demand will continue to drag down the economy.

Six more banks were seized today at a cost of 2.4 billion not counting at least 3 billion in bank assets the FDIC couldn’t sell and probably never will. This does not include the shareholder and bond holder losses or any depositors in excess of the insurance limit.

Obama has declared himself a deficit hawk saying the 1.5 trillion that the budget is already in the red precludes any new stimulus. Any sort of crisis is likely to dramatically drive up the interest the government must pay on its debt. Currently we are paying only 200 billion on a 12 trillion Dollar debt by putting most of it on 30 day notes at zero or even negative interest rates as bond holders look for security rather than return on investment. Just a return to "normal" bond interest rates would make interest the single biggest item in the budget and interest would probably not stop going up at "normal".

The stupid thing is that none of this is the real economy, it’s just paper. But they hold the rest of us hostage and determine whether we have a job, what our house is worth, the price we must pay for everything or if we even have anything to eat. Feudal serfs had more security.

Thursday, December 3, 2009

No Jobs Here, Keep Moving

The White House jobs summit didn’t do well on its price point evaluation and production is being outsourced to China.

Obama said there will be no government money to create jobs but he will cut red tape on exports anywhere he can and expects that to create 200,000 jobs. What red tape? Does he mean on technology transfers? The Bush Crime Family simply ignored that law. China has the best guidance systems that Boeing could develop and can pick which window of the White House they want to put an ICBM in through.

Even if the 200,000 jobs was to materialize from cutting red tape it won’t offset the 30 million jobs lost. The only thing more pathetic was Newt Gringrich’s counter summit where he promoted more tax cuts for the rich. He wants to cut the corporate tax rate too, no matter that 2/3 of corporations that do business in the US pay no taxes already.
New jobless numbers came out today. Great news! The initial claims were down for the fifth week in a row! New claims dropped by 5000 BUT continuing claim are up by 28,000 this week alone. And of course they don’t count all the people who aren’t eligible to claim. The government now admits the real number is 18% but even that is well below the real number.

We have Depression Era unemployment already but safety nets intended to help the poor are keeping the middle class going too, but this can’t last. Add in the trade deficit with China which is keeping up the appearance of prosperity and that will end when it either suits China or if the China bears are right will end suddenly with China’s collapse. Then you will see scenes from the Great Depression and worse, much, much worse.

Wednesday, December 2, 2009

Jobs Summit, Bah Humbug

Thursday is the big White House jobs summit, yawn. Everybody will be there except the people with the answers. Business wants their taxes cut, they especially want to quit paying into social security and cut the minimum wage so they can hire more slaves (I mean workers). Not that they would, they'll just pay the ones they have less. They wouldn’t mind a hand out from the government directly or at least cut the capital gains tax, 15% is too much they say, when they sell their factory to China they want it to be completely tax free. Unions will be there but you’d need someone who can talk to ghosts to hear anything they have to say.

This summit will be largely kabuki theater because the only thing that would bring back jobs is a complete reversal of every thing that has been done by the government since 1980. But Obama’s advisors that were recycled from the Clinton Adm. believe in doing everything with monetary policy. The big advantage is that almost nobody realizes what they are doing. They may be able to produce a large prosperity bubble like Clinton did although it will be much more obvious how hollow it is. Indeed job losses are starting to ease but the boom and bust cycles come faster every time this is done.

They seem to think all they have to do is convince people that everything will be all right. We aren’t in free fall in US retail sector right now largely from pent-up demand. Electronic sales are up as the people who still have money are making replacement equipment purchases that they had been putting off. But sales of everything else are flat at best and most sectors are way down despite a massive campaign by retailers to lure shoppers.

The Federal Reserve is running PSAs on the responsible use of credit cards, as if people still had any credit line to spend. State and local governments are forcing unions to take pay cuts to maintain full employment. The Republican talking point is that unions will expect something in return and that jobs should have been cut instead. Fire them on Christmas Eve if at all possible, bah humbug.

Tuesday, December 1, 2009

The Bear Dances on One Foot

The Dollar resumed it rapid descent against anything of real value while China holds fast to its direct peg to the Dollar. This caused world equity markets and other risky investments to continue to inflate. Vietnam entered the fray by formally devaluing its currency by 5%. This move has the rest of the countries who compete with Vietnam to provide cheap labor to consider making similar moves to keep from being overwhelmed by the surge of cheap Dollars and the corresponding cheap Yuan from China.

Conservative economists are decrying this break down of free floating foreign exchange as the precursor of protectionist tariffs. (if only we could be so lucky) In reality every country in the world but the US already has some sort of tariff scheme to protect their vital industries. If not out right tariffs and import bans like China then some sort of value added tax as the Europeans do.

Gold had dropped in price due to the Dubai panic as investors feared a strengthening Dollar but Dollars continue to flow like water and gold has resumed its climb. Even oil is going up again despite a lack of demand as anything that is not USD is considered a good bet.

The Fed is continuing to let it be known it intends to be ready to take liquidity out of the market by "buying" money in a scheme called "reverse repos" to take up surpluses from the big banks if needed to maintain stability. When the bubble bursts this is about as likely to work as expecting Smokey the Bear to pee on the forest fire. Saying that they are prepared to control the call flow this is just what is needed to pump up the irrational exuberance in the markets still higher so it can fall even harder. The bear looks nervous and is dancing on one foot.

Monday, November 30, 2009

Building castles from sand

The Dubai World Company who is currently unable to repay some 60 billion in loans had the equity markets wound pretty tight Friday but everything seemed to settle down Monday. However the overnight markets indicate that Tuesday could be a rough day. If you’re not familiar with Dubai World they have the giant palm tree sand sculpture that you can see from space. Built to service the pretend economy created by the financial services industry it will probably go down in history as a giant white elephant that you can see from space.

You may remember one of their sister companies, Dubai Ports World, a favorite of the Bush Crime Family to take over all our major seaports. The ones not already controlled by Red China.

Dubai World is not however the worst threat to the world economy and not the largest over leveraged entity likely to fail. A ridiculous amount of money has been created out of thin air by the world’s central banks in an attempt to keep up with the Federal Reserve’s wholesale printing of money over the past fifteen years. Everything is leveraged to the hilt and any deflation will drag all those debt laden companies under.

In a world where everybody works for a corporation, the fallout will be severe.
Already in the US one in eight adults and one and four children receive food stamps. Only 2/3 of those eligible receive nutritional assistance and although reformed in 2007 is still not adequate and food banks are struggling to keep up. In really blighted areas, 50% of residents receive food aid.

Pontiac Michigan has 35% unemployment and standing in the line to sign up for food stamps can take all day. Massive layoffs of city workers including about half the city police force. The governor has declared a state of emergency and replaced the city’s officials. The population of Pontiac is about 700,000 and so probably has about 280,000 people who have or would like to have a job. This is about how many jobs that are officially being lost each month in the US.... Pontiac syndrome is slowly spreading across the country.

Friday, November 27, 2009

Sand for sale

Dubai was all over the news over its inability to make the mortgage payments on its showpiece development to the tune of 60 billion USD. The resulting hubbub pushed world markets down with fears that this could start an avalanche of bank failures.
After all if a country that literally sits on a pool of money can’t pay, who can?

Compared to the US crash this is chicken feed but it is of course it's just the tip of the iceberg. The Fed has been pumping tens of trillions of Dollars into the world economy over the past few years in order to keep the Wall Street elite in business even though they do nothing constructive. Indeed they had existed for many years by shredding the real economy in the US and have simply run out of raw meat. Now they are dragging down the rest of the world economy by selling investment vehicles that amount to Ponzi schemes that they inflate until they burst.

The entire world is crisscrossed with dodgey investment schemes put together like a cheap sweater. Will Dubai be the loose thread that unravels it all? Probably not, it is relatively small but it will expose even more loose threads. Sri Lanka purchased 10 tons of gold the other day from the IMF and other countries have been buying up gold in order to get away from the USD. Afghanistan is rumored to have a huge gold mining potential so don’t plan on us leaving there anytime soon. China has put a high priority on gold mining and has over a thousand tons on hand including a hundred tons quietly purchased in recent months.

There is simply no predicting exactly what will happen except that things will be volatile and for many tragic. Economists talk about the paradox of how if consumers behave conservatively that they drive down the economy further. Since nothing has been done to reform the underlying corruption, there is no point in the consumer doing anything "for the economy".

Wednesday, November 25, 2009

Eaten by the Bear

Fears that the USD would strengthen and cause the worldwide market bubble to burst came to naught as the USD met a grizzly end early today. The Dollar was surging early on comments by the Fed Chairman Ben Bernanke that the Fed was committed to a strong Dollar. This didn’t last long as the Dollar was dragged out into the Canadian forest and eaten by a bear. This was the result of Russia announcing that it will be dumping an unspecified amount of its 400 billion in USD reserves in favor of the Canadian Dollar.

The CanD jumped up about a nickel on the news and the Dollar plunged to a new low against gold and other metals. It also fell to a sixteen month low against the Euro but keep in mind this is also a paper currency and not immune to its own collapse given the damage that Wall Street has done to the world economy.

Unemployment claims dropped last week but the Fed Chairman made it clear that unemployment will remain high. Good news for capitalists as they can continue to drive down wages. Bad news for anybody in the real economy. It is expected that there will be a 140,000 jobs lost on the next monthly report. This is a smaller number than we’ve been seeing if it is true but by no means good news.

We need 125,000 new jobs per month just to keep up with population growth. So even if the government numbers are accurate, we are still losing more than a quarter million jobs every month and they are just plain gone. To put this in real terms this is like losing every job in a good sized American city each month. This damage will catch up with us soon, no matter how big the bonuses on Wall Street.

Weakening the Dollar is a back door way of putting tariffs on imports and eliminating the debt. Germany did this to pay off its WWI reparations and it is a risky game. Fascists like Prescott Bush have a way of inserting themselves into these schemes and they can produce unforeseen consequences.

Monday, November 23, 2009

Mutton, chicken and canned goods

The stock market was up today, supposedly because home sales were up 10% in October, but a third of the sales were first time buyers getting government subsidies. Since buyers and sellers were all expecting the program to end, it is likely just a temporary spike. The real reason the markets are up of course is the cheap Dollar policy. The Fed is basically giving money to the big banks at a loss and they have so much money that they are simply driving the market like a flock of sheep. (mutton anyone?)

Germany is warning the US about creating market bubbles, echoing China’s fears. Germany is despite paying union wages and benefits to everybody , Germany is the world’s largest exporter of manufactured goods with twice the volume of China. They don’t like the game of chicken that Obama is playing with China.

Since March, the Euro has jumped more than 18 per cent against the dollar. At the same time risky assets have sky rocketed, the S&P 500 is up more than 60 per cent and a barrel of oil up 125 per cent to around $76 and has been higher. Long term oil futures have been around a $100 per barrel. Gasoline has been trending down however, as the economy has been collapsing faster than refineries can shut down. The collapsing Dollar is driving gold to a new high everyday.

Things have gotten so spooky in the financial markets that interest rates for short-term US Treasury bills have turned negative - meaning that investors have been buying securities at a loss. This has been good news for the government with interest so low that they are currently spending only 200 billion per year on interest on the more than 12 trillion in debt. The bad news is they have only been able to do that by putting most of the debt on thirty day notes. A spike in interest rates could easily drive that to a trillion in interest and if nobody wants to buy the government’s debt, it or rather we could be on the hook for paying out trillions to redeem notes overnight. (baaa...)

Negative interest rates can foretell deflation or it can just be the banks stockpiling safe securities on their year-end balance sheets - a strategy meant to appeal to regulators and risk-averse investors. The problem is that everything so poorly balanced on top of an house built of worn out playing cards that was left behind by the Republicans that simple prudent behavior can trigger a panic.

The National Retail Federation forecasts a 1% drop in holiday sales, this has to be a first as this industry group is always irrationally exuberant. Expect the drop to be much worse as shoppers are much more prudent this year on top of all the people who have no job and no money. The prudent purchase of some canned goods would help boost retail sales.

Friday, November 20, 2009

Those "interesting times" you've heard of

The economic news this week is much as you would expect it to be, that would be grim news, but something more happened that few people appreciate magnitude of the potential consequences. The usual news is that new unemployment claims remain over half a million for the week, 200,000 jobs were lost last month (really many more than that) and fourteen percent of US homes are deliquent on payments or in foreclosure on top of millions lost already. The really serious news is that the next world war has started to heat up. Peace talks appear to have failed and a clash of empires is under way for world domination. Much of this is not apparent on the surface but the events now set in motion will bring profound changes across the planet.

Japan has declared that its economy is officially in deflation after seven months of declines in consumer price. Demand for services dropped sharply last month and the new liberal government is preparing a new stimulas package. The falling USD has made imports into Japan too cheap and fully a third of their factories stand idle. Price wars are starting to ramp up between retailers, something Japan’s economists see as alarming. While not as apparent as the flood of Dollars in the world, there is an awful lot of yen in circulation and it needs to find a home.
Japan’s central bank has cut the interest rate effectively to zero in an attempt to boost their equities market after disappointing corporate earnings are threatening to crash their stock market. So Japan, who is for now still the second largest economy in the world has gone full in on the monetary war between the US and China. The Chinese Yuan is still pegged to the USD and this is driviing up the Yen and driving down Japan’s economy.

Medium sized economies like Brazil are trying to protect themselves from the tsunamis of Dollars and Yen from washing them away by restricting and taxing foreign capital coming in to their countries. The question is will China blink? Even while Obama was still in China ,they were calling on the rest of the world to do something about the US weak Dollar policy. Does this mean China is being hurt by this or are they just positioning themselves to take over after the worldwide market collapse?

The assumption is that the world will flee back to the Dollar after a market collapse as they did last year and as they always have. Increasingly though it’s China that has the goods, literally. If you want to buy anything you need a currency that China will accept. Oil producers are the key and they would like nothing better than to get off the USD. The US has always had the added benefit of offering military security and shock and awe if you didn’t play ball. But China’s military is far larger and their spending is now second only to the US and you can buy a lot more bang for your buck with a Yuan than with a Dollar.
Russia has the experience and an increasing capability to project military power. The Russians are cozying up to China as a model of modern capitalism after a decade of disasters brought on by the Chicago School of unregulated theft (I mean economics).
China has let it be know that any embargo of Iran will bring Chinese ships to supply Iran. China is already projecting power around Africa and Russian ships have been protecting Venezuella from US aggression.

China Bears and I mean market short sellers and not the fuzzy pandas are telling everyone who will listen that China is near collapse. This is probably not true but China will not fade quietly into the sunset either way. If either empire were to collapse they will only become more dangerous. These are about to be the "interesting times" the Chinese curse refers to.

Thursday, November 19, 2009

How much is that Kidney in the window?

The equities markets were down worldwide today as were most commodities markets except for gold. The Dollar continues its slide and China isn’t happy because it’s cheap Dollars that has been driving the markets up. The markets are already overvalued and this will either cause the mother of all market crashes or spark hyper inflation and then a crash. China has been manipulating its currency for decades and resents the US doing the same thing and more.

Obama's last stop in Asia was in South Korea where he was very warmly received. He returned the warmth by promising to push for a free trade agreement between the US and Korea.

Obama’s Sec. of Treasury appeared before the Joint Economic Committee of Congress today and was not warmly received. Liberal Congressmen want his resignation and the Republicans smelling blood jumped on him too but he didn’t hesitate to point out it was Republicans that were in charge when everything fell apart and that they are wrong about everything.

All true, but Tim Geithner has a lot of explain’n to do just the same, he has been up to his eyeballs in current practice of shoveling money to the Wall Street Banks that are driving the market bubble. Money created out of thin air is flowing through the banks and into markets worldwide. The lone economic super power in the world told Obama how displeased they are about it when he visited them this week with hat in hand.
Congressman Barry Frank’s new legislation will force all foreign exchange currency trading to go through a central clearing house and that has the foreign exchange bankers all up in the air. They are warning that transparency and regulation will bring on the end of the world. The blood sucking leeches prefer to keep the lights turned off.

Obama is apparently trying to fix our problems with a "just print money" monetary policy. China has been eating our lunch with their monetary policy but they also have a trade policy, a policy on manufacturing, an economic growth policy, a health care policy and a bunch of other policies that we just leave to predatory corporations. The kind of criminals are in charge here that end up on the organ market in China.

Wednesday, November 18, 2009

What flavors?

Was Obama’s trip to China a failure? Well, he didn’t give anybody a public back rub or throw up on the prime minister. However, the Chinese President ignored everything Obama said in their joint press conference, where the Chinese refused to take questions. In his half of the press event President Hu lectured Obama on America’s unacceptable weak Dollar policy. He went on to complain about Obama having put huge tariffs of 40% on tires and 99% on pipe that China was dumping into the US market to eliminate US producers.

Obama let the Chinese have things their own way in public and indeed he said many things to build up their stature (face is a very important thing to the Chinese). The question is did he get anything back in private? Obama came out today and warned we could have a double dip recession if government deficits are not brought under control. He knows there is no practical way to balance the budget given the mess the Republicans left behind. The Chinese complain constantly about all our deficit spending, so is he just telling them what they want to hear? Or taking orders from our masters?

Maybe he has made a deal with China to allow us to rebuild without China interfering. What is required is a total restructuring of the economy from the rebuilding of the manufacturing base to a realignment of our currency and the elimination of the debt (not repayment). Throw in a complete breakup of all the monopolistic corporations and a roll back of the Reagan tax cuts and we could become an emerging economy instead of plunging deeper into the third world.

Is Obama preparing the ground for a New Deal reform program and maybe a trade war with China? Or is he preparing us for the final transfer of power to the corporate elite? Obama is warning about a double dip Recession if we spend more money on the recovery. We’re still going down the first dip. Either way things are going to get bad, but will they get better again? Asking, what flavors on your double dip?

Tuesday, November 17, 2009

The Grim Reaper

According to a Harvard Study, an American with no insurance who goes to the ER is twice as likely to die of traumatic injury if they have no insurance. The first thing that comes to mind is that these people have underlying health conditions. This would be expected because if you are sick you don’t get to have insurance and so you could be expected to succumb to your untreated illness but those in this study were all trauma cases. The majority of the uninsured are young healthy adults who also tend to have a much higher incidence of trauma injuries so being sick should not be that big of a factor.

You could say that these people routinely waited too long to go to the ER, but this study only looked at people with injuries from things like car crashes, falls and gunshot wounds where waiting isn’t really a choice for most people. They didn’t count people who were DOA or were treated and released. Certainly waiting too long could be a contributing factor in some deaths, since if you’ve ever been to an ER without insurance you will find the first call you will receive when to get home will be from the collection agency. Your bill will be four times what the insurance company would have had to pay and this is why collection companies that prey upon the uninsured sick are the darlings of Wall Street.

There is a long list of ways in which the system is stacked against the uninsured. Many live in areas where the hospitals are not well equipped and lack adequate staff. If you seek emergency treatment at a private for profit hospital which used to be required to be nonprofit but has been taken over as a stacked system eliminates the public hospitals, if you go to one of these bastions of Free Enterprise without an insurance card, they will only give you as little treatment as they can get away with to stabilize you so that you can be shipped out to a public hospital no matter how far away that may be. They would let you die on the doorstep if this was allowed by law.

Republicans insist that all uninsured Americans get excellent health care by going to the ER in the ever shrinking pool of public hospitals. In fact all of the people at focal point of this study got ER care... and died. They got care in public hospitals with ever diminishing resources as the Republicans do what ever they can to cut funding.

Republican crony Insurance companies make it ever more difficult for these hospitals to provide services by using every under handed billing trick they can to push payment onto the policy holder who is sick and simply cannot pay.

Since the US spends twice as much per person as the next most expensive country and gets worse outcomes, it isn’t a matter of spending the money. It’s a matter of making the rich richer and the middle class health plan simply is, die quickly. poking the eye of the Grim Reaper and Republicans (I repeat myself)

Monday, November 16, 2009

Obama in a Mao jacket

Obama arrived in China Sunday and gave a speech saying that the US will not try to contain China. Indeed he spoke of a Pacific free trade zone. He did however stop short saying that the US would join in such folly as was the policy of the Bush Adm. The U.S. trade deficit, which ballooned by more than 18 percent to $36.5 billion in September alone must give Obama pause about continuing the full speed dash toward the abyss.

Our President is popular in China, especially among the young, of course with the decades old one child policy the young are a small minority in China. But you need to remember the scale that they operate on, with a population between 1.3 and 1.5 billion (nobody in the west knows for sure), that’s still a lot of young people. There are more fluent English speakers in China than in the US even if you count Republican voters as fluent English speakers.

Obama is not as popular as Bush was. Many Chinese are wary and think of him as more of a cult figure, you can buy T-shirts in Beijing with Obama wearing a Mao jacket. Indeed Bush should be more popular since he gave China many trillions of Dollars and a big leg up toward world domination. Many are afraid that Obama wants the money back, he talks about a strong Dollar but his real policy apparently is a weak Dollar. Obama’s speech only made the evening news on the main network in China after 27 minutes in and after a story about a rural policeman who seems to spend most of his time helping old women husk their corn crop.

Indeed China has been very concerned about Obama’s policies. Liu Mingkang, China’s chief banking regulator, said that the combination of a weak dollar and low interest rates had encouraged a "huge carry trade" (by using one countries cheap currency and low interest to buy another countries market assets, in this case using USD to buy everything) and that this "carry trade" was having a "massive impact on global asset prices".
Since the Chinese currency is unofficially pegged to the USD there is rising international criticism that China’s currency is undervalued. Mr Liu’s unusually blunt remarks underscore how China – the largest US creditor because of its massive holdings of Treasury bonds plus another trillion give or take in increaingly worthless cash – China has become a forceful critic of US fiscal and monetary policies to say the least.

The Federal Reserve has a policy of cheap money and plenty of it (if you are Wall Street bank) and to quote Mr Liu, [This] "is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets,"
However, Mr Liu’s criticism of the Fed comes as China’s own monetary policy is attracting growing scrutiny at home. Critics say the massive expansion in bank loans this year could cause asset price bubbles and inflation. China was forced to launch a stimulus plan equal to the US to avoid a panic at home since prior to the crash in the US, 40% of China’s economy was exports.

China has warned the US repeatedly not to try to inflate its way out of its debts. In reality the US has no choice but to inflate the Dollar unless it defaults and prints new currency. Even if we had an economy again, it would never be possible to produce enough goods to repay the debt the Republicans have run up at any thing close to the Dollar’s current value. Oh by the way, on Friday we spent another billion Dollars cleaning up three more Republican bank failures, but that’s chicken feed, the interest on the debt the Republicans left behind is moving toward two billion everyday. - where we party like it’s 2011

Saturday, November 14, 2009

Every Island

Friday the thirteenth was an unlucky day for three more banks and of course for taxpayers, costing us another billion Dollars. Technically the FDIC operates on premiums from insured banks and not public money but bankers don’t have their pay docked for this, they pass it on to us.

Everything stupid that corporations do gets paid for by us. Libertarians think every man is an island. Unless you live on a real island in a remote part of the world you can’t even begin to be independent. Of course with global warming, you had better have pontoons on your island.

Friday, November 13, 2009

The processing line runs on a chain.

Sholom Rubashkin, the CEO of the notorious Kosher slaughter house in Postville IA has been convicted of 86 of 91 fraud charges with potential sentence of about 1250 years give or take a century. He has been remanded to Federal Prison while awaiting trial in December on 72 immigration charges and the State of Iowa would like to get their hands on him for numerous child labor law violations. A good number of the fraud convictions carry a potential twenty year sentence so he is likely to be in the Federal pen (cow revenge joke) for some time. At trial he blamed his subordinates for the violations despite him being the only one with the authority to take these actions.

They all took plea deals and ratted on him. The jury only took two and a half days to wade through a month worth of testimony and decide guilt on all but five charges.
Contrast this with the show trial given the 300 immigrants rounded up at the Postville Plant by agents of the Bush Crime Family. The so-called trials were conducted in special courtroom set up in a large County Fair barn, prisoners were presented to a Federal Judge shackled in strings of fifteen. Represented by lawyers who had been hand picked by the government and had spent only minutes on each of the dozens of cases each lawyer was given. This all happened within days of the roundup, but the facility having been rented more than a month in advance by the government.

The lawyers had to agree to use a script produced in advance by the government; use only that script and to emphasize, use nothing else, present no evidence, make no motions, just use what the prosecution gave them to read and accept a flat fee for the appearance. It was a modest amount per unit but made lucrative by volume, like any meat processing enterprise. Many of the invited attorneys refused to accept these terms.
The meat processing plant (I mean court room) had several stations, a set up that these workers would certainly recognize from their recent employment. Each group of fifteen was shuffled on a chain from holding pens to station where they were informed that they were going to Federal Prison for ten years unless the workers who spoke no English and few could even read Spanish, unless they pled guilty to a felony carrying a lesser sentence. It is unlikely they understood any of their rights or the ramifications of a plea would have on their future or on their families hiding in churches around Postville.

Processors then moved the chain down the line to a judge who accepted their guilty plea with the lawyer dutifully reading his script. The processed carcasses (I mean convicts) were then moved to another station where they were all given identical USDA Meat Inspection Stamps (I mean duly rendered sentences) and distributed to the freezer (I mean prison). Industrial efficiency; from holding pen to cold storage in a matter of minutes. Attorneys watching the proceedings said that Bush DOJ officials seemed to be practicing, like they were trying to refine a system that could be scaled up. You could easily argue that as their crimes go, this wasn’t even the top ten worst things that the Bushies did. But they were just practicing. Conservatives wouldn’t even have a problem with what they did, as long it isn’t them being loaded into the cattle cars.

So far no lawyers have been disbarred, no judges impeached by Congress, nobody from the DHS or DOJ has been fired. A string of Bush Crime Family members are not being moved on a chain to their appearance before a judge.

Thursday, November 12, 2009

Race to the bottom

Initial jobless claims have declined slightly but still no where near the level where new jobs could be created. States and municipalities continue to pressure workers into pay cuts and bigger workloads as they eliminate jobs. The same tactics are being used on white collar workers and the unions continue to accept pay cuts. The most insidious practice is the two tier system that is relentlessly replacing middle class jobs with the working poor as union workers retire or take buyouts.

No job below the level of the predatory class at the top is exempt from this push down of wages. Service workers like health care are under increasing pressure to accept lower pay as millions leave middle class jobs forever.

The Flat Earthers who make billions and pay right-wing mouth pieces millions to tell us that American workers make too much money. A few years ago they told us that we could give up manufacturing because it would raise our standard of living. Now they are telling us we need to compete with a part of the world that lives on five Dollars a day. Guess what, they tell those people they need to compete with people who live on a Dollar a day.

The really terrifying aspect of this kind of race to the bottom is that at some point you reach the bottom. Then things get really bad.

Wednesday, November 11, 2009

Being Bullish on White Rabbit Futures

Treasury Sec. Geithner is already in Asia ahead of President Obama and he told Japanese reporters today that a strong Dollar is essential. That would be great for Japanese exports, at least in theory. The currency market responded with 15 month lows for the Dollar. Gold and equities are up as well is everything else that can be traded on speculation. The flood of trillions of Dollars into the Wall Street banks to stave off their collapse at the end of the Bush Adm. is hyper inflating all world markets. They were supposed lend the money into the economy, but interest rates are low and trading the markets pays great. Goldman Sachs "earns" a hundred million a day inflating the markets.

When this bubble bursts it could very well plunge us into a global depression or worse. The thing that will burst this bubble will be, you guessed it, a strong Dollar. This ponzi scheme is being financed on margin with credit from the Wall Street banks. When the traders can’t make their margin calls, all that credit will default and start a cascade of failures. Why do you think the bankers want billions in "bonuses" now? If they stop passing out money, a side effect of this would be to drive up interest rates, that brings us to the massive debt.

The Federal Debt has zoomed past 12 trillion Dollars today, this does not include trillions more that are not counted in the general fund. The interest on this amount alone is close to 600 billion putting it in range of passing the official Pentagon expenditures as the single largest budget item. Add in the interest on all the other debt and it would easily be the largest.

Almost all of this debt was run up by Republican Presidents over the past 40 years. Most of it by Reagan and the two Bushes. Reagan holds the record by quadrupling the debt to four trillion by himself. Geo W. ran up the debt by the largest amount in dollars but a trillion won’t buy what it did in 1980. What Bush did is a bigger deal though since our net worth as a nation is approaching zero.

The big problem that Bush built into the debt crisis is that he borrowed almost all the money on 90 and 180 day notes. The debt needs to be resold constantly as it expires and more and more of it every day as the terms of older bonds ends. Reagan had done the same thing but Clinton had refinanced all of the debt with ten year bonds that are now all expiring. Clinton’s budget called for all the debt to be repaid by the end of President Gore’s second term.

The Fed has been holding down the interest for the past two years by buying bonds on the Treasury auctions but say they plan to stop doing this. Where does the Fed get all the money to buy bonds? The Treasury first sells special bonds and then gives the proceeds to the Fed who then "creates" more "money" on a ten to one margin. They really shouldn’t have followed that White Rabbit after eating those mushrooms.

Tuesday, November 10, 2009

The Birdseed Milkshake Economy

Today’s economic news is brought to you by the number forty.

Sesame Street turned forty today and they still tell truth to children and sometimes they don’t. In 1968, Big Bird could buy a bird seed milkshake at Mr. Hoopers store for 20 cents and today the posted price is 2.99. If they wanted to be totally honest, Mr. Hooper’s store and all the others would be gone and Big Bird would be working at Walmart.

According to the conservatives, Sesame Street was supposed to make all the kids into socialists and destroy capitalism. Instead, forty years of conservatives dominating economic policy has dragged us down to where we look increasing like the Soviet Union of 1968, except for the universal health care they enjoyed. Of course in 1968, Mr. Hooper’s store sold American goods. Today he would be selling goods exclusively from Communist China, not because he wanted to, but because that is conservative policy.

Still there have been positive changes that Sesame Street can take some of the credit for. The first year they were on the air, the show with the integrated cast was banned in Mississippi. Today Sesame Street had First Lady of the United States Michelle Obama showing kids how to plant vegetables. A skill they will need in the conservative future and Big Bird will need to watch his back and his drumsticks.

I’m stocking my garbage can with extra canned goods.

Monday, November 9, 2009

The "carry trade" and your 001k

Gold hit a new high today as the Dollar continued to decline. Long term oil futures are hovering around $100 and inflation protected instruments are big sellers. The stock market is up as well as the glut of cheap Dollars is driving everything up. Boom times for Goldman Sachs but the danger is building in an obscure class of investors called the "carry trade".

The "carry trade" is where investors will borrow currency in a country that has a cheap money policy and move it to country that has risky but profitable investments. This can be done with any currency and the difference doesn’t need to be that great since little "real money" is involved. It’s all done on margin, you know like 1929.

For the past couple of decades the Japanese Yen has been the favored currency for this purpose. This was what caused the collapse of the company Long-Term Capital Management in 1998 and exposed the folly of deregulation. The big Wall Street banks chipped in to take this problem off of Clinton’s hands and in return the last of the New Deal regulation of banks was done away with entirely. Since banks could take care of the financial services industry themselves, why should millions of taxpayer money be spent on regulation. (In the past year something like 24 trillion has been committed to the bank bailout as a direct result of this policy)

Cheap yen has been replaced by the cheap dollar, so now everything priced in dollars has been inflating the bubble. Dollars are flowing like water into all markets worldwide and it’s going to be a problem. Countries like Brazil fearing the inevitable collapse are restricting capital inflow and others like India and China are buying gold. As the Dollar continues to weaken from this illicit activity, it creates its own pressure for a reversal. Since there is no real restrictions on debt being used for leveraged investment the reversal creates a stampede to sell in order to cover margins calls since the market bubble is being financed with debt on margin. The ensuing panic drives people into Dollars making the non-Dollar investments worth even less triggering more margin calls and creating a spiral of credit defaults.

Nobody knows how much "carry trade" there really is, but it is a huge bubble and it really can’t be reversed once started, it will grow until it bursts. Since it is based on trillions in debt, it will drag everything down with it. This risk is spread across all types of investment and will destroy an unprecedented amount of paper wealth and will surge across the real economy as well. This is of course bad news for your 401k, 301k, 201k, 101k, until finally 001k. Unfortunately the past thirty years of Reaganomics has embedded the financial services industry into all aspects of the economy. Last year’s credit freeze is just a taste of what likely to happen. We will get change, whether we believe in it or not.

Sunday, November 8, 2009

Mass murder, some numbers

Joe Leiberman went on Fox Sunday and implied that he might have information through his office as Chairman of the Senate Homeland Security Committee confirming that last week’s Fort Hood mass killer was an Islamic terrorist. This from the Senator representing the health insurance terrorists who mass murder a 1000 people a week by denying care and corporatized hospitals who according to the AMA murder another 2000 people a week. Largely from under staffing and poor management in order to maximize profits. This is only a partial list of corporate created deaths supported by Leiberman.

The Conservatives see this one suicidal mad man as justification to kick all the Muslims out of the military and that as the first step toward a general roundup. They ignore the fact that right-wing Christians have in total killed more people in the past year and if they had not been stopped quickly, each of their murder sprees would have been much larger.

And of course it is a Christian who holds the record for domestic terrorism deaths. The Oklahoma City bomber driven by so-called Christian values had no problem planting his truck bomb in front of a daycare nursery in order to kill Federal workers on the floors above. Remember that Timothy McVeigh was not clinically insane or suicidal and did not act alone.

You would expect Joe Leiberman would think twice about going on Fox and inciting the very people who would commit mass murder at a Synagogue just as quick as they would at Mosque or a liberal Christian church.

Friday, November 6, 2009

Forget about it

Four relatively small banks were seized today costing us only about 133 million bringing the count to 119. The FDIC admits to be tracking another 416 banks, but some of the biggest seizures have not been on the official list. The list will get much longer if the banks are ever required to account for the real value of the toxic assets that they hold on their books.

Unemployment has jumped up over 10% and gold has jumped up over $1100. Really though, unemployment is closer to 20% and gold isn’t up but rather the Dollar is down yet again.

The stock market is up and Goldman Sachs brags that it averages a hundred million a day in profits from its trading operations. They don’t say how they do that, experts don’t like to share their methods unless they are trying to make a plea deal like Bernie Madoff. That didn’t work out so good for him.

Another fourteen executives from the hedge fund Galleon Group were indicted this week for insider trading. You would think naming your company for a kind of ship from an age when slave trading and piracy were noble professions might be a give away. (although it sounds more benign than Cerberus) So far, among those indicted are men who used the nicknames "Octopussy", "the Greek" and "the Rat". Their wire tapped conversations reportedly sounded like Soprano scripts. Octopussy was taped berating his cappos to not be too greedy, "That's a ticket right to the (expletive) Big House." The FBI expects to make more arrests.

In case you’ve been wondering what Cerberus Group has been doing since Chrysler went south, in the past three years they’ve quietly acquired seven US gun and ammunition makers and have consolidated them under the name Freedom Group. These include a company that makes large caliber sniper rifles and another that specializes in silencers. What sort of insider knowledge do you suppose they have. Their upper management is loaded up with made men from the Bush Crime Family. Forget about it.

We thought we were getting off cheap with the bank failures today but the United Commercial Bank in California, that failure will cost us 1.4 billion, just about enough to fund the health insurance reform plan for a week. This doesn’t count all the investors in the bank who lose 100% or anybody whose account was over the 250,000 limit.

Unemployment is the worst since the Reagan reccession but comparing the unemployment rate from the mid-eighties to today’s rate doesn’t work. Reagan seriously screwed up the way the numbers are generated to make it look like he had a rapid recovery from his disaster. Even doubling and redoubling the Federal debt didn’t produce the desired numbers.

Reagan slashing the top tax rate from 71% to 28% for people making the equivalent of 3.5 million produced a brief boost to tax revenue but not because business activity picked up. This tax cut kicked off the big sell out of business and the mergers and acquisitions craze that drove up business debt leading into the S&L collapse and bubble after bubble and concentrated business in the hands of transnational companies so on and so on.

Thursday, November 5, 2009

Roll up your sleave Comrade but not today

Hospitals are having a hard time getting enough swine flu vaccine for their high risk patients such as pregnant women and sick kids. Corporations on the other hand, have had no problem getting plenty of vaccine for the in house clinics that serve only their executive office buildings. We are rapidly approaching a Soviet style economy where the party elite get the best of everything and the rest of us wait in line.

The chant from the tea-baggers is that the government can’t handle health care because the vaccine did not appear as promised. They ignore the fact that the vaccine is being done by the same corporations that the tea-baggers want to run their health care. These companies apparently either lied about their ability to manufacture vaccine or they are deliberately withholding the vaccine to embarrass Obama.

The band U2 put on a free concert at the Brandenburg Gate tonight commemorating the fall of the Berlin wall, but since MTV planned to use one of the songs live for the European Music Awards they put up a two meter wall of steel to block public access. This ensured that nothing inconvenient like teeming masses of free people got in the way of corporate profits.

Initial unemployment claims got down to 512,000 last week for the first time in ten months. It needs to get below 350,000 to expect any jobs to be created and over 200,000 were officially lost last month, the real number is much higher. Congress finally extended unemployment benefits after months of foot dragging by the Republicans.

Today the AARP came out to endorse the health insurance bill coming from the House but since they are basically an insurance company, the devil will likely be in the details. Thousands of Tea-baggers showed up on Capitol Hill to attempt to intimidate Congress into maintaining the status quo. They got a pretty good crowd for a weekday and there were almost as many Tea-baggers as there are lobbyists, literally. Guess which group Congress is really intimidated by. The tea-baggers are afraid Obama will make them slaves or drag them before death panels. If they only knew but they never will.

Wednesday, November 4, 2009

Eat your vegatables

The Senate finally extended unemployment benefits by 14 or 20 weeks depending on what level of Depression your state is living with; they should have done this 14 weeks ago. The Republicans that have been holding up this bill have pushed something on the order of a million people into poverty with little chance of them ever leaving it. The corporate media is circulating the rumor that Larry Summers was really behind the delay in order to reduce the unemployment numbers. The White House denies that this was ever in any way the policy of the Obama Adm.

Personal bankruptcies were up 9% last month. Home foreclosures already in the pipeline equal 60% of the total of annual home sales. Officially over 200,000 jobs disappeared last month, of course we know its much worse than that. The self employed and contractors don’t count, jobs that are split into 2 or 3 part time jobs at half pay or less don’t show up in the statistics either.

As the Dollar slowly fades away to nothing but a grin, a major clearing exchange will now allow US trading houses to use physical gold as collateral to meet all margin requirements. We aren’t quite to the point where gold is the "only" thing acceptable. Then we will know how Jefferson Davis felt when they stopped accepting Confederate script.

When Obama goes to China he is expected to ask them to end their so-called "unofficial" peg of their currency to the Dollar. This would in theory reduce the trade deficit and make US goods competitive in China as the Dollar would weaken against Chinese currency. It would not of course increase our exports, since China doesn’t import anything from the US if it can produce it themselves.

It’s not clear what Obama is really hoping to accomplish with this trip but he has been successful in getting China to end the massive dumping of products into the US. This practice has been destroying US companies that were otherwise able to resist the Big Box stores’ deliberate attempts to force them to manufacture all products in China.

Making some sort of deal with China is crucial but what will work at this point isn’t clear. How soon will Chinese parents be exhorting their children to finish their vegetables, "don’t you know there are starving children in America".

Tuesday, November 3, 2009

Hard assets

The price of gold spiked up sharply today on the news that the IMF has been quietly selling gold to India over the past few weeks totaling 200 tonnes. The excuse given was that IMF needed to raise money for its bailouts of various third world countries. Some are newly members of the third world like Iceland. This need for cash is a transparent lie of course, the IMF does not own any of its own gold but has pledges from its members to provide over 3000 tonnes of gold to provide legitimacy to the IMF. If it needed currency, it could have all it wants by the same mechanism. The third world country the IMF based in Washington DC is desperately try to prop up is the United States of America. By taking Dollars out of circulation they hope to keep countries like India from dumping them on the market.

China has been quietly buying gold for several years, purchasing at least a 100 tonnes this year alone bringing its total holdings to well over a thousand tonnes. China has been telling its own people to put at least 5% of their savings into copper, silver or gold. In the US, coins contain no precious metals to speak of, even "copper" pennies are made of nickel and the mint would prefer to make coins of steel if not stop minting entirely. The rest of our money is imaginary, why mint coins?

The world wide banking crisis last year panicked holders of Euros into buying Dollars because the historical belief has been that the US is the most stable economy in the world. This fiction has worn thin and we’re gradually converting to a gold backed world economy. This is a problem for the holders of trillions of Dollars as a reserve currency. It’s a really big problem for any country that has been printing Dollars to fiancĂ© its trade deficit.

China has been unloading Dollars for hard assets and natural resources anywhere they can. India was not in a position to do this on any scale so they went with gold. In the US, Warren Buffett is apparently on the same page. He paid 34 billion in cash for 100% stake in a railroad, one of the hardest of hard assets you can still buy in the US.
If times get really hard Buffett can probably count on government subsidy for operating expenses. And if we convert entirely to fascism, railroads will be in big demand. Moving troops, tanks and people....

Monday, November 2, 2009

The alligator you don't see

Friday was a busy day in the bank seizure business with the FDIC liquidating nine under water banks at a cost of 2.5 billion Dollars. This brings us to 115 for the year, but to put this in a better historical perspective you need to remember that many of these banks have dozens and some more than a hundred branches. This amount of banking consolidation used to be illegal, so the comparison to past economic down turns just by number of banks closing is deceptive, things are much worse.

Speaking of much worse; today, after a long struggle, CIT (not Citi) has filed for Chapter 11 bankruptcy. Unlike the too big to fail Wall Street banks that are known as the thirteen families, this really large bank does real business banking and is a driver of the real economy. They provide lines of credit to many of the small and medium businesses that you take for granted but also to their suppliers. This could have even more far reaching implications since they in turn provide goods and services on credit to small business that are not able to get extensive lines of credit on their own.

In theory with the prepackaged Chapter 11 proceeding they should be able to continue operations, but this is by no means certain. Even the months this will take if successful will put a huge drag on the customers of CIT. If this plan fails however, it could be the trigger for a retail sector collapse. That could make the minor fluctuations in the economy we’ve experienced so far, seem like the prosperous good old days.

Consumer spending accounts for over 60% of the economy, before the last year was 70%. Because the cult of Reaganomics converted us to a so called "service" economy, the loss of thousands more retail businesses will cause unemployment to spike much higher and accelerate the downward spiral that we are already in.

The uncertainty alone will make things worse and can lead to unexpected consequences. Economic crisis is like alligators, its the one you don’t see that gets you.

Ironically an Amphibious Transport Dock like the LPD-21 USS New York is the perfect humanitarian relief vessel. With fully equipped surgical theaters, helicopter deck and inboard well for boat docking it can off load hundreds of tons relief supplies and vehicles in a few hours without a dock. This a level of relief support that is hard to accomplish in a remote theater. Not surprisingly, nobody would spend a billion Dollars for one of these if it were called "Peace" ship. This is the fifth in the series so far.

It still would be good thing for the Navy to have if it wasn't the center of a multi-warship task force that cost more billions and still more billions to operate and it will be rarely if ever used for anything but intimidating third world countries into submitting to US corporate domination right up until they inadvertedly clash with a Chinese warship and start WWIII. Chomp, Chomp!

Friday, October 30, 2009

We can trade pork for everything we need

The US GDP was up sharply last quarter. Consumer spending which used to make up almost 70% of the economy continues to decline and there was no growth in personal income. New home sales were down sharply in September. What is wrong with that equation? Any measure of the real economy is down but the GDP is up 3.5 %. The missing variable is financial services, trillions of Dollars created out of thin air sloshing back and forth across the economy.

This phony economic activity is pumping up the GDP but produces nothing and in fact when one of these tsunami waves hits your segment of the economy you can be washed away. The price of oil is up again and sucking money out of the real economy to fill the money bin at Goldman Sachs. But hey, it makes the GDP look better (the music is playing, everybody get up and dance now).

The number of unemployed continues to increase, the jobs continue to leave the country and the trade deficit continues to grow. China continues to dump Dollars anywhere in the world that they can to build up their commodity reserves. At some point the people getting those Dollars will want to spend them and nobody will take them. Then dance music will stop.

China has lifted the ban on US pork, one of the few things we have to sell. Of course China is modernizing its agriculture as well as sponsoring projects in South America and Africa to dramatically increase their ability to produce food. They can grow food for China far cheaper than we can. At some point we won’t be able to make the minimum payment on our Bank of China credit card and we’ll be cut off. Anything that you use that says on it "made in China", if you can’t do with out it, you should buy it ahead of time and store with your canned goods. (pssst, just between you and me, that "made in China" stuff is just about everything)

Tuesday, October 27, 2009

Too big to fail but not for the chopping block, Barney Frank sharpens the cleaver

The USD continues to strengthen against the Euro for no apparent reason. News reports claimed this was from the report of the new Consumer Confidence Index being down unexpectedly. This just seems odd, somebody with a lot of muscle is pushing the market. China, that has a bin full of Dollars that would make Scrooge McDuck faint, has been saying that they would like to reduce their Dollar holdings but how much they actually hold is a closely guarded secret. Opinions vary but a trillion plus in Dollars is likely with that much or more in other currencies, mostly Euros with significant holdings of Sterling and Yen.

Meanwhile in the too big to fail department, Congressman Barney Frank is getting close to producing a new set of rules for seizing and craving up these too big to fail banks and non bank financial institutions like AIG. The Republicans will have fits about this but it really is no different than what the FDIC does to the Third National Bank down on the corner when it fails.

According to the reports, "the legislation will make it easier for government to seize control of troubled financial institutions, remove management, change terms and conditions of existing loans, and wipe out shareholders".

This would circumvent Bankruptcy Court and most importantly, bond holders would not be treated as a special class and be wiped out as well. This would hit the rich elite where they live.

Class warfare could be taking an entirely new turn or maybe not. The Federal Reserve seems to be deeply involved in this new proposal and that should send a chill up your spine. We’ll have to see what is in the final bill but even then we really won’t know what is going on until these broad new powers are actually used. Since all of the too big to fail institutions have all actually failed and the bailout really didn’t change that, we will find out soon enough.

Monday, October 26, 2009

Would you like fries with that or eat your Kronas

You know you are in trouble when your economy is so bad that McDonalds packs up and leaves. Iceland, that was until recently the darling of the Chicago School of economics; a philosophy where anything goes if some rich guys want to do it. They were among the first to have their banking system completely collapse leaving the country with a debt so big that its entire GDP could not keep up the interest payments.

This time last year the island was within thirty days of running out of food since they couldn’t import anything and the still of the night was regularly interrupted by the explosion of burning SUVs. Today Iceland is struggling to recreate a real economy again after the fairy land of international banking has evaporated. The McDonalds restaurants will stay open with a new name and with locally grown food on the menu.
Iceland has negotiated its debt from the banking scandal down to about 9 billion Dollars, this for a country of 320,000 people. The US equivalent would be 9,000,000,000,000 (9 trillion). What are they whining about? That’s much less than we owe. Of course the American frog was brought to boil slowly, Iceland thought they were rich a little more than a year ago and now find themselves in the frying pan.

Iceland doesn’t have much of a real economy, fishing doesn’t have much future with the oceans dying, but they hope to be a shipping hub in a couple of years with unrestricted passage across the arctic ocean thanks to global warming. Oh, and so far, no rich guys have gone to prison for the massive fraud and it doesn’t really look like they will. They apparently imported our justice system as well as our ponzi schemes.

Our own dead economy continues to lurch along looking for brains to eat. The USD spiked up unexpectedly today pushing down oil and gold or maybe it was the other way round. It’s hard to keep the market manipulation straight from the plain old fashioned panic. Either way this pushed the DOW industrials further below 10,000. A stronger Dollar means the stuff at Walmart will be cheaper, at least until the Dollar goes the way of the Krona.

Friday, October 23, 2009

The Naked Man in the Limo Rode Over the Bridge

The Wall Street markets retreated this morning supposedly on the decline of home prices but it probably had more to do with the Fed threatening banks with stricter capital requirements, they would actually need to have some money before they borrow more from the Fed. They already increased the capital requirement to 13 to one, when they all collapsed last year it was 20 to one. This was regular banks, investment banks had been operating at 40 to one or worse. That’s gambling with $2.50 of their money and $97.50 of the public’s money.

If the new requirements are pushed through, the really big banks would have to issue a new class of bonds that would convert to equity if the bank fails, in other words, bonds that would become worthless like stock does. It doesn’t sound like much, but if enforced would force the super rich who buy these bonds to pay for their failures. This assumes that this isn’t all done with a wink and a nod. The rich really lost all their money in the bank crash last year but the rest of us are bailing them out at 100%. George Bush continues to ride in his limo while many of us are living in the old sedan or in a box under a bridge. The bastards.

When I say the rich lost it all last year, what I mean is their Ponzi scheme was revealed for what it is, the wealth the rich hold is just worthless paper. Unfortunately, most people only know what the corporate media tells them and still think the Emperor isn’t buck naked.

Initial unemployment claims are up again, continuing claims are down as another 100,000 or more Americans fell off the rolls and into poverty. One Republican Senator has a hold on the bill extending unemployment benefits, the bastard.
The median price of homes continues to fall, down 8.5% from last year. The government tax credit that has been boosting sales will expire shortly and even if renewed will result in a several month gap that will drive down prices more, putting more homeowners underwater.

The Fed put out its regular Beige Book summary of business activity on Wednesday and said "Reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered."
The view from under the bridge: A new CNN poll this week found that 42% of Americans now rate the economy as "very poor" worse than the 35% who did in August. Okay, 42% of Americans have noticed the Emperor has no clothes.

Thursday, October 22, 2009

the price of moose meat in Brazilian Reais

Sarah Palin has suddenly discovered the frightening new world of international currency trading. OK, not really, she has no clue why the Dollar is strong or weak or what that means or how it got there. But the headlines say the Dollar is "weak" and that’s a good talkin’ point, you betcha. It makes Obama look weak or evil or something. With the corporate media talking up the so called stock market rally, her kind need something, anything to keep Obama from looking good. They desperately need to blame the steam roller of poverty that is overtaking their followers on Obama and not on the people who are really turning them into corporate serfs.

Palin can rant about how Obama’s pay czar will be cutting their pay but that’s dangerous ground with the growing populist outrage about multi-million Dollar salaries for people who don’t do anything productive. Headlines that say Obama has cut those parasites pay by 50% are hard to spin but tying him to a weak Dollar makes Obama look to be to blame for the pain and suffering on main street since he’s destroying the American Dream. The Dream that your parents can pay $60,000 for you to get a Harvard MBA and pull strings at the country club to get you a job on Wall Street starting at 400,000 and you go on to make billions in the derivative market. You know, just pull yourself up by your bootstraps. Okay, maybe she won’t tell her people that.

Palin could rightly say to her followers that the weak Dollar will make everything they buy at Walmart a lot more expensive since it all comes from China and the Dollar buys less and less everyday. That might be a bit dangerous because at some point her followers might want to know why everything at Walmart comes from China. Instead she will doubtless tell them they will lose their jobs because the weak Dollar will hurt US exports. Of course in theory just the opposite is true. Not that those theories really matter much to those living in the wreckage of our economy. Palin’s followers had better be canning moose meat.

Wednesday, October 21, 2009

Round up the usual suspects

The value of the Euro went above $1.50 today for the first time in 14 months. Oil was approaching $80 but fell back on release of inventory data showing a glut of diesel fuel as the collapsing US economy makes it difficult for refiners to cut production far enough to keep the supply down. Traders were hoping to drive oil above $80 so that the large number of pending futures contracts would be activated forcing people to buy oil to cover their positions and driving the price still higher. The usual suspects like the "too big to fail" banks are hoping to make a killing.

Currency traders, also working for these same criminal enterprises, have been driving up foreign currencies by dumping huge amounts of Dollars (the Dollars they got from you and me for free), dumping them in countries with a strong currency like Brazil. This conversely drives down the Dollar and oil goes up ever closer to the triggers on all those futures contracts they own. It takes money to make money. It helps if you get that money for free and have no conscience. Jiminy Cricket is under glass in the CEO’s office with a pin through him. (a bit of history: some of Mickey Mouse’s biggest hits in the 30’s fed on the popular outrage over bankers throwing people out of their homes, the Sheriff was often the bad guy in early cartoons)

You can learn a little bit about how the usual suspects are able to loot and pillage our economy by watching the FRONTLINE episode The Warning that features the adventures of Brookslyey Born as Chairman of the Commodity Futures Trading Commission during the Clinton Adm.

Not to give away the plot but we do know how it all turns out; our heroine Brooksley Born is summoned before the most powerful man in the world and told by the Dark Lord Allen Greenspan that The Market will deal with fraud and she need not concern her agency with such things as enforcing the law. This meeting took place before she suspected that there was any systemic fraud going on. It would be ten years before the Ponzi scheme she tried to stop would grow to more than 600 trillion Dollars (maybe a 1000 trillion) and collapse. (the entire world GDP is less than 60 trillion)

My only problem with the FRONTLINE presentation is that they let Greenspan off as basically just being a fool. The man is a criminal with no equal since Hoover’s Sec. of Treasury Andrew W. Mellon, who single handed created the last Great Depression. Melon had a personal fortune would make Bill Gates look like he digs under the couch cushions for cigarette money. Mellon was put on trial by the FDR Adm. but died before the verdict. Greenspan’s pretense of stupidity is doubtless aimed at avoiding the same fate. Greenspan’s Doctoral Thesis was on land boom of the twenties that precipitated the crash and apparently served as his blueprint for running the Fed and creating the current Great Depression. The only question is do we have a new FDR? Greenspan would look good in an orange jumpsuit.

Tuesday, October 20, 2009

The Red Phone is ringing and the Republicans want to cut the wire

The right-wing had a fit over Obama’s canceling of Bush and Cheney’s ABM installations in the former Warsaw Pact countries on Russia’s frontier. Even worse by their thinking he reached an agreement for each side to further reduce their strategic warheads.

Well, the Republicans aren’t done trying to bring on Armageddon, they are doing everything they can to meddle in the negotiations for a new START Treaty replacing one from the Soviet era that will expire in a few weeks. Under the treaty we and the Russians each have 30 inspectors keeping track of the other’s arsenals. The Obama Adm. is trying to negotiate a treaty to further reduce delivery vehicles, bombers, ICBMs and submarines.

The Republicans in the Senate have said "Hell NO" we want new and better bombs. Since no treaty can pass the Senate without at least seven Republicans (2/3 being 67 votes required by the Constitution), so a treaty is out of the question. Sec. Clinton just recently left Russia and hopefully she carries an Executive Agreement for the President to sign that will keep the existing treaty in effect.

The Republicans would like to funnel many billions into building a new production line for a next generation of warhead. New warheads haven’t been built since Reagan’s Peace Keeper missile. These were taken out of service with the SALT treaty but the nose cones were retained. (they shipped some to Taiwan by mistake) These have been used to modernize old Minuteman II missiles and the Russians weren’t very happy about it but Bush dressed up in his codpiece and did as he liked, he didn’t believe Soviet treaties applied to the Russians. That’s why we are coming down to the last minute and Obama has to cobble together a gentleman’s agreement to keep the world from ending. He’s doing this over the Republicans’ objections and they will do everything they can to stop him. They really hate that Peace Prize, it doesn’t have a plutonium core.

Freeper Flu

I have a hard time with articles that concentrate on the crazy freeper stuff as if that was the real concern and by refuting them they have dismissed everybody else too.

I am not opposed to vaccine per se, but I would like them to be tested by a disinterested third party. A study published in Lancet a couple of years ago said no flu vaccine had ever really been tested and the death rate in the elderly does not change from year to year regardless of the composition or availability of vaccine. I'll be interested to see if a real study of this current outbreak is ever undertaken.

The facts are that these vaccines are being made by same old killer corporations so you can't assume they are safe. The government didn't test them for safety or even if they actually worked, just to see if they produce an immune response, that isn't the same thing. I'd like to see a follow up study on people vaccinated. When they say the method used to produce the vaccine is the same "except for the virus"; that is a very big "except". Then we come back to; does the seasonal vaccine work? Finally, even if this vaccine is safe and effective, you still can’t trust these bastards. Even the most corrupt cop will lock up the occasional bad guy, that does not excuse him.

Expecting it to work because it sounds good is not a substitute for actual legitimate studies.

Some actual facts: the H1N1 virus that is going around is a hybrid of swine, human and bird flu. the first H1N1 to be identified was found in hogs in the 1930s hence the "swine" name, until electron microscopes they couldn't "see" viruses and had to infer their properties. The letter/number designation has to do with the shape of the virus and not its source or who or what gets it.

pigs do get this strain and it has been going around in mega hog farms since sometime in the 1990s. Why it jumped to humans in the villages surrounding a million hogs per year Smithfield factory farm in northern Mexico is unknown but probably because the people were exposed repeatedly until a mutation occurred. Flu mutates very easily and can even pick up protein snippets from its host. Unless you keep pigs you probably don't have any resistance to H1N1 since it hasn't gone around in humans since 1918.

The thing that determines how well an individual virus strain spreads is its ability to attach to and absorb blood sugar molecules found in different species. This is why they don't jump easily from birds, pigs, people, etc. They can spread but if they can't absorb sugar easily, they don't survive or reproduce fast enough to cause disease before being destroyed by the immune system. Until it mutates.

Monday, October 19, 2009

Making Money the Old Fashioned Way

The Fed is testing a system for handling transactions designed to suck up surplus cash by issuing special bond instruments called Reverse Repurchase Agreements to securities dealers in exchange for cash. The Fed would guarantee to buy these back for cash after a fixed term at a loss for the Fed. In the meantime Securities dealers could use them as collateral to borrow money from banks. They claim that this would keep inflation down by reducing the amount of liquidity in the money market mutual fund industry and keep down the interest rate that they pay. I’m not sure it really takes money out of circulation but Wall Street will make a lot money in the process.

The Fed has officially pumped 800 billion into bank reserves in the past year and the fear is this could trigger inflation if the banks decide they are willing to part with any of it. The truth is that the Fed has created tens of trillions of new dollars by any number of convoluted schemes and we only get the occasional hint of what they’ve been up to. The goal of all this paper pushing is to make it look like the financial services industry isn’t just a large parasite on the back of the economy sucking us all dry.

This brings us to the situation of a California man who lost his savings to the convicted Ponzi schemer Bernie Madoff. Unlike millions of other Americans he has managed to find work, all be it as door greeter. His boss says he is an inspiration to us all.... But since he has been forced to go back to work at age 95, he should not be an inspiration but a wake up call. There will be many millions of people who won’t be able to retire since their 401k(s) and pensions have been looted by the financial services "industry". Don’t kid yourself that the market is going to stay up. Predatory capitalism needs prey and the hunting is getting thin.

By next year the majority of US workers will be women, this is up from 40% when Ronald Reagan campaigned for a return to 1950 when women were 28% of the work force. He actually ran for President on the idea that too many women were working. Of course, his policies were really aimed at every women having a job so that overall wages could be driven down and the middle class destroyed. In 1980 it was not difficult for a family to live on a single income, now two or three are required to have the same standard of living.
Today, women are increasingly becoming the main breadwinner in families. Not because they are making more money but because the jobs their husbands trained for have either been out sourced or have disappeared entirely with the collapse of the economy. Door greeting simply does not pay that well. Many men (and women too) have retrained several times as career after career disappears and all they have to show for it is student loans they have to repay with ever smaller incomes.

The official advice being passed out to men at state job counseling offices is "Forget about ever getting a job like you had and go after a women's job". Why don’t they tell them to buy Reverse Repo’s with money that came free from the Fed and make a guaranteed return? Oh, that’s right, that’s only for the 1/10 of one percent at the top that made their money the old fashioned way. By stealing it.