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!