Friday, October 16, 2009

Ponzi-onomy (I think I just invented a word)

Bank of America lost a billion Dollars in the last quarter and this gave Wall Street pause. Traders were milling about, pawing at the ground, not sure which way to run. One silly metaphor is a good as another when describing this circus. These Masters of the Universe are supposed to be the experts on how business works and how money is made. Yet the only businesses that are "making" money are these giant too big to fail Wall Street banks.

You don’t have to look very close to figure out that these banks aren’t really making any money at all. Their profits are entirely from "trading", you know like churning the stock market or driving up the price of gasoline. Anything that they do that must interact with the real economy is hemorrhaging money. Credit cards can’t be written off fast enough and home mortgage defaults that were already high are up another 20%. In the next three hours, 1300 Americans will lose their homes to foreclosure.

B of A actually posted $9.6 billion in permanent losses tied to an array of bad debt, including mortgages, home equity loans, credit cards and loans tied to commercial real estate. The thing is that this still doesn’t reveal how bad things really are since banks can wait months or even years to declare a loan uncollectible after the payments stop coming in.

Home lenders still haven’t revealed the extent of their exposure to loans that have a variable rate and have yet to reset or the "interest only" loans that are going further and further underwater. Credit cards have had their interest jacked up to beat the new Federal rules and this will put more people into default. They are trillions in the hole, not because of the "crash" but be cause they have been creating this bubble for years to hide their losses. They were taking hundreds of billions in bonuses and paying interest on bonds held by rich people like the Bush family when in fact they weren’t doing anything that made money. It’s been a thirty year Ponzi scheme and they don’t see any reason to stop now. Welcome to the Ponzi-onomy.

Thursday, October 15, 2009

Initial unemployment claims were down slightly again last week, off about 10,000. Continuing claims were also down as another 100,000 people fell off the far end of the eligibility rolls and into poverty. Foreclosures continue to increase along with bankruptcies. The really poor don’t bother with bankruptcy of course and no longer have a house to lose. If they can keep the car going from where they camp at night to the part time job and over to the food pantry (and pray they aren’t out of food); all of that makes a good day for the working poor.

There is credit card available now from one of those predatory banks in South Dakota that charges 79 percent interest. Unregulated free market capitalism is alive and well in South Dakota. The reason you get all the predatory credit card offers from South Dakota is because of a landmark Supreme Court ruling. It was one of the first of many steps the "Conservative" court has taken to make America the land of the corporation.

This ruling disemboweled state regulation by allowing corporations to steal across state lines with impunity. South Dakota brought in a lot of jobs by doing away with all regulation but now those jobs are disappearing. These companies are sending the jobs to India or they simply disappear completely as the economy is driven into the ground.

The State of North Dakota on the other hand owns its own bank and loans money at cost and since they "create" their own money the same way the Fed does, they can loan money for as little as one percent. Why emigrate to Sweden when there’s North Dakota?

Wednesday, October 14, 2009

A better class of gangster

The Bureau of Labor Statistics does not track pay cuts but they do maintain an index of weekly pay for production workers and this accounts for 80 percent of the work force. That index has fallen for nine consecutive months, an unprecedented string over the 44 years the bureau has calculated weekly pay. This includes people working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession.

Some companies like Hewlett Packard are making no secret of their policy of driving down wages. Even union jobs that still exist are cutting pay and more insidious is the practice allowing new hires to be paid a fraction of union scale. The "I’ve got mine" attitude of the Reagan Democrats is alive and well. Those same workers that have now found that their pensions pay only pennies on the dollar deserve little sympathy from the new generation of workers that are getting minimum wage for the same job on the two tier union contract.

Cuts in benefits are much harder to calculate but the average increase in the employee share of health insurance for next year will be 10%. In dollar amounts this will be biggest increase ever, despite inflation being officially at zero.
The DOW crossed 10,000 today to wild cheering on the trading floor. It first did that ten and a half years ago. What are they cheering about? The traders are cheering because they didn’t put their 401k(s) in the stock market.

Wall Street bankers are really cheering, they were nearing extinction a year ago and needing trillions of taxpayer dollars to stay in business, they are now reportedly lining up to receive 140 billion in executive bonuses this year. To justify these outrageous amounts, they point to Wall Street, the average American is making money too. They say this with a straight face. The average American lost a third of his wealth in the past year, tens of the millions are completely broke and nobody is even talking about that changing. In reality we could simply pay these parasites this money and not miss it; if in return they would keep their paws off of our economy, an old-fashioned protection racket. But no, we pay them and still they smash the front windows of the store. We need a better class of gangster in our neighborhood.

This just in, Goldman Sachs is "forecasting" that oil will top $85 by the end of the year. How do they "know"? They own a lot of oil and if you don’t want to sit in the cold this winter, you will pay. If youse don’t like it, those gotta be some nice windows youse gots out fronts.

Tuesday, October 13, 2009

Each got a shilling

In the ongoing spiral of the economy, Gold and oil continues to go up as the Dollar goes down. A prominent equity analyst has downgraded Goldman Sachs stock. Usually it’s Goldman that is driving down somebody else’s stock or manipulating commodity prices in order to make a killing. Goldman stands to reap a cool Billion on the demise of CIT Bank and taxpayers will take a bath. Small and medium companies that depend on CIT for lines of credit will also suffer. But it doesn’t matter to Goldman how many companies go under. The real economy is none of their concern.

Goldman has a special fund for money it has allocated for executive bonuses. So far this year they have squirreled away 24 billion for this purpose. There really is money in the phony economy of financial services. Money that came right out of everybody else’s pockets. The conservatives love to talk about Obama’s plans for transfer of wealth. Look around, the wealth has already been transferred.

The Neo-Cons achieved one of their long desired goals this year. All branches of the US Military met their annual goals for recruiting for the first time since going all volunteer despite the ongoing wars. We now know what level of unemployment is needed to produce cannon fodder most efficiently. Thomas Jefferson warned that one of the biggest threats to Democracy was having men so poor that they would be willing to be shot at for a shilling a day. Obama authorized 13,000 more troops for Afghanistan today but the White House refused to characterize it as a troop increase and claims it is just a rotation of support troops. Each soldier got his shilling just the same.

Monday, October 12, 2009

Inexpensive Halloween Decorating with what's just laying around

Spin is everything as illustrated by separate news articles based on the same press release: one of the large conservative rags said the big sellers for Halloween costumes this year are vampires and witches. The wire service version that used the same survey data from costume retailers said it was Bernie Madoff and Sarah Palin masks. (same information, different spin) The conservative story also quoted the president of the National Retail Federation, as saying "Falling off the [costume] list are nurses and politicians" -- a sign that "Americans would like to shelve the health-care reform debate, at least for one night, to have a little bipartisan fun". They’ve got to get the message out about who is really scary, not unregulated Wall street crooks or religo-krazy politicians but health-care reform. (insert blood curdling screams and the rattling of the liberal chains on free enterprise)

The NRF also expects Halloween sales to be off 18% this year. The good news is that retail space is easy to come by for those temporary Halloween stores. There is plenty of it with commercial space having been overbuilt by at least double during the "service" economy years with the "endless credit for the sake of credit" mentality. The new jobless economy simply can’t support it and it’s only getting worse. The new "haunted house" at the end of the street that’s concealed by brush and weeds is a forty acre mega-mall.

You can’t have Halloween without a creepy graveyard and according to the county coroners, the need for pauper graves is up 40%. We’re not quite to the point of mass graves or uncollected bodies decaying in the street (except for New Orleans and Galveston).

More Halloween Horrors: The Nobel Memorial Prize for Economic Science went to two Americans, one of which is not even an economist. It’s not really one of the "Nobel" prizes but rather an award from the European central bankers for saying things they like or that they can twist to suit their needs, them calling economics a "science" should be a clue. Paul Krugman won his not for his legitimate but rather obscure research that nobody really cares about, but rather his constant and biting criticism of the then criminal in chief George W. Bush.

This years winners wrote obscure and probably perfectly fine papers. One was on the microeconomics of successful business relationships where trust develops between parties in the absence of public market forces or the oversight of shareholders. The sort of thing that used to tweak the interest of people at the DOJ back when conspiracy, price fixing and antitrust were treated as crimes. Is bank robbery a crime if there are no cops?

The other prize winner wrote about how throughout history, groups have successfully used the commons without government oversight. The commons, you know things like forests, fisheries, pasture land and the like or in Bush and company terms; clear cutting trees to save them, fish-free oceans, new desert lands and the death of all life outside their gated communities.

These researchers (who did not work together) were doing perfectly legitimate research on how things work. Both of them were taking counter positions to the accepted notions about market forces that we supposedly have been living under for the past thirty years and trying to ascertain how thing were really being done. The question is how will this be spun by the corporate media? Will it be calls for antitrust legislation to make businesses small enough so that they are run be people who need the commons to survive? Or will it be the no regulation, no oversight, "too big to fail" and we can do no wrong mentality of the bank robber class.

Happy Halloween, I’m dressing up like an uncollected corpse and laying out by the street. prairie2

Sunday, October 11, 2009

Nukes in the 12th Century

The attack on the Pakistan Army Headquarters has prompted some people to get all panicky about Pakistan's nukes and start pronouncing the Taliban as invincible. Nothing could be further from reality. This raid was an act of desperation rather than a show of strength. It was led by a senior figure in one of the many Taliban groups and he was captured alive.

These attacks only serve to galvanize the public and the military who don't want to live under the rule of fanatic religious extremists. It has been convenient to ignore the extremists in the remote areas who often served Pakistan's interests in Afghanistan or on the border of India and most had received government support at various times. Even the ones the Army really didn't like stayed in remote villages. Now that they pose a threat, this policy is changing.

From a newspaper in the region commenting on the practice of supporting some extremists: {In the aftermath of the attack on GHQ, at least one commentator, senior journalist Zaffar Abbas and resident editor of Dawn newspaper in Islamabad, wrote urging the military and civilian establishment to drop these distinctions.
“The attack on the GHQ may prove to be a watershed that compels the security and civilian establishment to realise that the time to distinguish between ‘good’ and ‘bad’ religious militants [is] over, and a consensus [is] needed to confront all such groups as enemies of the state,” he wrote in a front-page comment in the newspaper.}

If Pakistan cleans up its extremist problem, it will make disengaging from Afghanistan much easier for the US. As far as the nuclear weapons go, Pakistan does not keep their weapons in a ready state. It would be extremely difficult to steal all the components and be able to assemble them into a working bomb. I would be more concerned about the religious fanatics in the USAF stealing half a dozen, loading them on a B-52 and flying them to Barksdale LA. But that could never happen.