Saturday, June 27, 2009

splish, splash

From Mark L: I'm perplexed by what I see as a total lack of change in virtually everyone's lifestyle around me. I live in New York's Upper East Side, and I am stunned by the continued volume of spending and the continued lack of financial awareness displayed by my most of those surrounding me. Can this really go on unheeded?

- These people are much like those who invested everything with Bernie Madoff. They don’t realize that there is nothing underpinning the economy that is providing their income. They think that their lifestyle is secure because they have done all the "right things". The coming wave of foreclosures is made up of people with prime loans that have just now missed their first payment ever. The thing about waves is that they spread and propagate new waves, some predictable and some not. Most people don’t have any idea how top heavy their own boat is. - Prairie2

Friday, June 26, 2009

pick cotton or hoe turnips?

The conventional "wisdom" that is being hawked by Republicans is that the government is driving us toward a hyperinflationary abyss. The problem with this thinking is that the economy along with state and local governments have been so crippled by decades of Republican policy that inflation can’t get started. No inflation might sound good but in an crippled economy no inflation means a free fall into deflation.

The consumer savings rate is up again, it’s now over 7% from a negative number a year ago. This is sucking an awful lot of product out of the GDP and driving spiraling unemployment. The number of new claims is way up again as is the number of people that are continuing to claim despite a record number of people who have had their benefits run out.

The true magnitude of the problem continues to be ignored by those in charge even as the middle class becomes increasingly fearful of becoming homeless. The Obama Adm. continues to operate the Bush policy of giving the large banks free money that they can invest in Treasury Bonds rather than loan to anybody. Does he think people aren’t sufficiently terrified yet to support real reform or does Obama believe we can live on bubble after bubble as we have the past 28 years?

The really big bubble is of course China. This bubble could be burst at anytime, either as a deliberate act on the part of China or simply because of their own instability. Then there are other players or any combination of players that could cause the collapse. Even if nobody acts in a malicious way the bubble continues to grow and a some point can’t be sustained.

We need to move to a sustainable economy and so far Obama hasn’t even suggested anything that would work on a large scale. The Republicans of course would oppose any plan as another New Deal boondoggle and instead hold out for a mixed system of plantations and feudal serfdom. Would you prefer to pick cotton or hoe turnips?

Thursday, June 25, 2009

The Threat That Could Bring Down the US

Moody’s has issued a renewal of the US Treasury’s AAA credit rating. Their assessment is based heavily on the notion that the rest of the world can’t get off the dollar and that the US can continue to increase it’s debt to GDP ratio as long as the cost of borrowing stays low.

Some unpleasant facts: the debt to GDP ratio will go from 40 to 60 percent this year and the Fed has been keeping interest rates (the cost of borrowing) down by purchasing huge blocks of government debt. It pays for these purchases with government borrowing.

Moody’s issued this report in Japan where they are the second largest holder of US debt as well as the holder of trillions of US business assets. The fact that the Full Faith and Credit of the United States of America has to be discussed in the same manner as the credit worthiness of a company like GM or Chrysler should be a red flag. And pinning the hopes and dreams of Americans on the idea that the rest of the world will keep propping us up no matter what because they can’t figure out how to live without us, is absurd.

We are providing less and less of what the world needs and wants everyday. We don’t export anything and they really don’t want more Dollars, China just unloaded 8 billions of its Dollar reserves to buy another oil company and they are doing this at every opportunity. At some point, one of these big ticket sales will fail to go through because they won’t take Dollars and then nobody will want them. As it is Chinese exporters prefer to be paid in anything but Dollars. China now has over half of its foreign currency reserves in non-dollars and has acquired over 100 tons of gold.

We no longer need to worry about terrorists or who has nukes, we need to worry about being ignored.

Wednesday, June 24, 2009

Dark Pools or The Creature From the Black Lagoon

Obama’s SEC has suggested that we need to do something about Dark Pool trading or the trading of large blocks of stocks through unregulated and secret exchanges. Who is doing this? Most of these exchanges are being operated by the same big banks we all heard about last year being bailed out after all the unregulated and secret exchanges of Credit Default Swaps.

Basically these markets exist to permit insider trading and gaming of the system that was the reason we went to highly regulated and transparent markets a hundred years ago. As these Crossing Networks (the other name for these markets) gain volume; now about 10% but they could easily jump to 50%; they increasingly make the published prices of stocks irrelevant. They also increase the tendency of public markets to make wild swings as daylight traders try to guess the "real" market price. Will what’s left of the economy be dragged under in the Dark Pool?

Tuesday, June 23, 2009

From SanMigMike: "I think that we all have to take some of the responsibility for our current mess. Much to my regret we have had to vote for the "Lesser of the Evils" or the "Democrat in Name Only" far too often. We have allowed ourselves to be divided by sideshow differences so that both parties can be bought and used by big business." - no, this is blaming the victim, she shouldn’t have worn that dress thinking. The people making the decisions knew exactly what they were doing and are the only people to blame. Could average people have done more? Yes, but that doesn’t change anything. Everybody was told loudly and often that this is the natural order of things and it didn’t occur to them to do anything different. prairie2

"As an experiment it is obvious that Capitalism has failed, just like Communism it is a great idea until people get to making it better for themselves." - Capitalism has worked just fine for the capitalists. The problem is that most Americans aren’t really capitalists. The mom and pop store thinks he is a capitalist but it is Walmart that is the capitalist. Americans are just grist to be ground in the capitalist mill.

"Like the old line about everything looks like a nail to a man with a hammer, so long as the people pulling the levers have a stake in keeping the existing banking and health systems going we will have no real change. We will pay the price for trying to keep a crippled and failed system struggling along a few more years until we get to try to live through an even bigger crash." - these boom and bust cycles have been going on for 150 years with only the occasional rise of progresive reform to push them back. The only difference this time is the bust is getting so big that even the Republican base is starting to notice.

Monday, June 22, 2009

Eat Your Car

Not only are the post industrial cities in the US returning whole subdivisions back to "green" space since nobody can afford to own the houses anymore, but latest trick for cash strapped states is to sell the pavement. It is a growing trend that when they tear up asphalt to recycle it, they don’t replace it, just leave it gravel.

They promised us flying cars in the 21st century but it seems that in the New American Century we won’t even have paved roads. What’s next? Only cross the river when the water is low enough to ford across.

The right wing crazies like to call in and ask where in the constitution does it say we are entitled to health care? Iran has constitutionally mandated health care. All other industrialized countries have health care for everybody. Of course when the Republicans are done with us we won’t be an industrialized country. Iran builds a million cars a year, but the Republicans think it is just fine if there are no American made cars. I guess if we can’t maintain the roads, we really don’t need cars. Time to start saving up for a horse, in a pinch you can’t eat your car.

Sunday, June 21, 2009

Enough to Eat?

Happy Father’s Day!
Do your kids have enought to eat? A record number of people are hungry in the world with the number now past 1 billion. Hunger continues to increase in the US as well. Those canned goods that you have under the bed, take a case down to food bank. It’s a good idea to rotate your stock anyway. Plant a Fall garden and donate from that too. Have gardening tips? Send them in and I’ll post them.