Friday, August 28, 2009

All it takes is an earthquake or a new generation

The jobless recovery continues.... Other than the apparent oxymoron created by that sentence, who or what is recovering? Billionaires are doing just fine, Senators are still being wined and dined by overpaid lobbyists, oh and China is doing pretty good. The rest of us, not so much.
US employers reported the permanent elimination of 247,000 jobs in July bringing the total to 6.7 million since the recession officially began 21 months ago. Nine million continue on unemployment with 120,000 running out of benefits last week. In the media this was portrayed as if people were going back to work but the opposite is true with large layoff notices picking up.

The number of jobs required to keep up with population growth is now 150,000 per month or more than 3 million since the recession began and we haven’t been keeping up with job creation since the Bush fiasco began eight years ago.

People who have found new jobs find that they are no longer in the Middle Class and those who still have jobs are having their hours cut or their pay is cut and their hours increased. So consumer confidence is down and savings are up.

Surveys show volunteering and charitable giving is way down as the Depression deepens. Fully 70% of people have cut back their giving to formal charities but 50 % say they are giving directly to people in need who are not their family as well as helping relatives with money and shelter.

To the surprise of many, the younger generation is far more engaged in giving than previous generations. It’s possible that they recognize as a group that the American Dream is dead or at least the illusion of the libertarian every man for himself world view doesn’t fool them. Perhaps they are reverting to an instinct of survival that requires working as group, much like the way you see all types of people working side by side after an earthquake. Yes we can. www.praire2.com

Thursday, August 27, 2009

I can fly, I can fly. Oh Crap there's the ground

The FDIC has increased the number of banks on its official watch list of dodgey banks from 300 to 420 not counting the 81 closed so far this year. They admit they are unsure what to do about even more banks that are holding at least one trillion in toxic assets on their books. Technically the banks have until next year to reconcile these losses against their capital requirements. How many institutions are involved is unknown but one trillion dollars in losses would wipeout the entire equity of an awful lot of banks. Waiting for the deadline would crash all these banks at once and that could cause an old fashioned bank panic.

The FDIC’s favorite method for dealing with an insolvent bank is to sell it to another solvent bank. The problem is that they are running out of solvent banks to be the new owners. To deal with this, they have sharply reduced the capital requirements to own a bank in order to attract private equity firms as buyers. Private equity groups are shadowy investment companies that are not required to file reports to the SEC like publicly traded firms do. Much of the mess we are in was driven by their risky practices, most of which used to be illegal. A lot of it still is, except nobody has enforced the law in 30 years. When Foxes with flame-throwers are guarding the hen house, there’s fried chicken for everybody.

This ongoing crisis is no where near peaking as a huge number of adjustable rate loans are yet to reset to interest rates the borrowers will not be able to pay. Then you have millions of unemployed mortgage holders whose middle class jobs are gone for good and are drifting toward default. With half of home loans underwater nobody can sell to avoid foreclosure and as the default rate picks up this will drive prices still lower, putting still more into potential default. You also have a fantastic amount of commercial paper that will soon be determined to be of no value.

This all will continue to drive the cycle of layoffs, bankruptcies, business failures, foreclosures and bank failures. Then repeat the cycle faster and faster. It’s as if everybody is in a decaying orbit, enjoy the view while it lasts. The ground is rushing up to greet us.

Watching the shooting stars at www.prairie2.com

Wednesday, August 26, 2009

I thought I saw him walkin' up over the hill...

Teddy Kennedy was capable of partying like a Frat boy, as are most men of power and privilege. Something sanctimonious conservatives would constantly say proved he had no moral values. But his "values" weren’t just empty campaign slogans like spew from the right. He wouldn’t give a speech making promises to retirees in the morning and conspire to steal their life savings in the afternoon.

He was a rich kid who didn’t need to work just like George Bush. The difference is that Kennedy wanted to leave a legacy of peace and healing, not a trail of death and suffering. Was he a perfect man? Of course not, but he wasn’t a cynical smirking hypocrite. He had plenty and he didn’t need to steal more to prove he was the bigger man. He wasn’t afraid of the unwashed masses, he didn’t hold them in contempt and he didn't see them as so much fodder for the mill.

He was a Liberal like the men of history that created the United States. They weren’t perfect either but they and he changed things for the better. In the end that is all you can ask of a public servant.

Chess vs 52 Pickup

A Federal Judge has ruled against the Federal Reserve in a Freedom of Information Act suit over the Fed’s secret bank bailouts totaling at least two trillion in cash and another 22 trillion in other loan guarantees and god knows what else (it’s secret). The Fed’s excuse is that to reveal just how insolvent this handful of large banks really are would cause a panic.

Don’t hold your breath to ever get this information since the ruling can be appealed up to a Bush appointed appeals court and ultimately to the Supreme Court of Corporate America. To show his solidarity with the Fed’s policies, President Obama did immediately on the announcement of this ruling interrupt his vacation and re-appoint Fed Chairman Bernanke to a four year term several months before this would normally be expected.

The spin in the media was that Obama made this announcement to distract from the new larger projected ten year deficit but trillion dollar a year deficits were of never of any concern for the financial services industry in the past. Revealing how bad things really are is a concern however since rich people that have all their money invested in these institutions might start to suspect that their money is long gone. They would be right, it has been a multi-trillion dollar Ponzi scheme, Bernie Madoff was an amateur.

The idle rich have always lived on the blood of the American middle class but Reaganomics has killed the host and the parasites are increasingly just sucking air. The Federal Reserve has created bubble after bubble to reanimate the corpse but each time it falls down faster and harder. The unemployment rate continues to climb not because consumers are buying less and saving more but because jobs continue to be out sourced just as fast it can be arranged.

These lost jobs do eliminate supporting service jobs but increased Government spending and higher and higher trade deficits have been offsetting this for years. This of course could not be sustained and last year it began to collapse in earnest. The only thing that broke the fall was the worldwide panic made the dollar suddenly more valuable and imports became more affordable. This will not last, even at the USD’s peak the trade deficit was still a billion dollars a day. The next bubble’s bursting will be far more severe.

This mess can still be undone and it’s possible Obama is positioning himself to do something (you know, playing chess), but the Republicans are still playing 52 pickup.

Handicapping the Four Horses of the Apocalypse at www.prairie2.com

Tuesday, August 25, 2009

The Bell Tolls, Bring Out Your Dead, Bring Out Your Dead, Ask not....

A scientific panel advising the President has come out with what it says is a worst case scenario for the Swine Flu. Thirty to ninety thousand dead of two million hospitalized and 150 million taken ill. This would be on top of the typical 36 thousand dead from the far less dangerous "seasonal" flu that normally infects 15 to 60 million Americans each year.

That this is the worst possible case is little more than wishful thinking. Let’s start with the number infected. If it is so contagious that half the population will get it and since no one has immunity, it probably will not stop there since it will be nearly impossible to avoid exposure.
The number hospitalized is largely a moot point since there aren’t enough beds even with the wide distribution of tent wards to local hospitals. In a typical year 200,000 people are hospitalized from the flu and 18% of those die. Eighteen percent of 2 million is 180,000 but in 1918 the death rate from all cases was much higher and would be 12 million from today’s population.

The good news is the current swine flu lacks a critical protein found in the 1918 virus that made it so deadly. The bad news is this protein is available as raw material in humans and the virus mutates constantly. In fact we don’t know if the 1918 virus that has been studied is the worst possible version since in some places the death toll ran as high as twenty percent of the population. Even in the US whole families were wiped out by the flu.

Since its nature is to mutate constantly there is no predicting an out come. It could be nothing worse than a sneeze but evolution favors the virus the reproduces the fastest and makes its victim sneeze the most. The ever practical British have issued a booklet to local governments on the proper construction of mass graves. The UK has had a robust public health service for sixty years, we’ve had a steady slide into privatization for the last thirty years. The Republicans call this report nothing but Obama scare tactics. We need a name for mass graves similar to "Hoovervilles" for the homeless. For the dead buried by bulldozers it could be "Reagan Estates" or "Bush Lawn" or "Republican Rest".

Handicapping the Four Horses of the Apocalypse at www.prairie2.com Plague, now the favorite, paying 4 to 3.

Monday, August 24, 2009

A Lamp Post

Only three weeks of the first 7 months of the Obama have come and gone without Friday bank seizures by the Government. Last Friday was not one of them. The FDIC had to shell out a large pile of tax dollars to clean up yet another small mess left by Republicans of the Bush Adm. Four banks including a large chain out of Texas had a visit from the men with the bags of padlocks.

Again, none of these banks failed from writing home mortgages or any sort of exotic paper contrivance of Wall Street, but like rest of the eighty so far this year they succumbed to large loans made to housing developers and builders. The really big shoe that has yet to drop is the commercial real-estate market. This is expected to bring down another 200 banks by the end of the year but less Pollyanna predictions are for another 1000 banks to fold which could even put a strain on the 500 billion the FDIC has secured from Congress to cover losses.

You can do a lot with 500 billion dollars. You’ve probably seen the list when they thought the Iraq War was "only" going to cost 500 billion. And this is only a small down payment on the cost of 30 years of Reaganomics. What is the cost of the end of the American Dream? Or the end of civilization? It would have been cheaper to have just given each Republican a truck load of money. The problem is that a sociopath is not happy with being rich, it’s the destruction and suffering that make him happy. The price tag is just a way of comparing the size of his to the next guy’s.
Bush and Cheney should be happy men, very few despots get to do this much damage and live to tell about it. Some where, in an inner circle of Hell, there is a lamp post with their names on it.

Handicapping the four horses of the Apocalypse at www.prairie2.com