Friday, January 22, 2010

They just went home

Initial unemployment claims jumped sharply last week as out-sourcing continued unabated. The weekly number is again approaching 500,000 and since 350,000 is considered neutral for job losses as this is without accounting for the need to create 150,000 new jobs each month just for new workers. Non-government Union membership dropped 10% last year, the biggest drop in a single year since the heyday of Ronald Reagan.

The stock market gave up 5% in the past three days as investors feared the worldwide market bubble could be coming to an end. Wall Street would normally be up on news of higher unemployment since this means “wage inflation” will be kept in check. The Fed has even been reassuring the business community that their thirty year policy of linking inflation to unemployment numbers is proving correct. In fact the two numbers have never moved in sync before the current crisis and really they still aren’t.
We are teetering on the edge of runaway deflation and that is what is keeping the trillions the Fed is injecting into the banking economy from producing the expected inflation not the savaging of the workforce by ruthless corporations.

Only one small bank has been seized so far today but the FDIC makes no it no secret that they expect the pace to pick up dramatically. Small and medium banks are heavily burdened with commercial loans and they have a much longer reset term than home mortgages that are typically reset after two years. Home foreclosures that doubled in number last year over a really bad year before that, the number of foreclosures is expected to double again this year. This will put even more people under water as this will continue to drive down prices. It is impossible to borrow money to build a house since the value of the house will be less than it cost to build. Without a real economy that is not going to change.

Historically it takes ten years to recover from these things but often governments change in the interim. Ours just changed to the corporate form. In the 1920’s, it took the Italian parliament two years to realize they had been put out of business by the corporations and then they just went home.
Congress hasn’t quite caught on, but it is starting to sink in as they grasp that their campaign war chests aren‘t even tip money compared to what their corporate masters can bring to bear, not to mention the stranglehold a handful of companies have on the media.

Thursday, January 21, 2010

The worldwide war on Ponzi schemes

The DOW dropped 200 points today and Wall Street blamed President Obama for proposing that banks no longer be allowed to play the markets with our money and that they be required to keep reserves again. Things that were the law from 1933 to 1999. Wall Street would like it if you would forget that China has already started to crack down the banks in order to avoid the really big worldwide crash the banks are building toward.

Obama has reportedly gone to war on this massive Ponzi scheme despite kicking and screaming from Guithner and Summers. The Republicans claim this proposal is a response to Tuesday but the timing has to do with the banks handing out 145 billion in bonuses that they “earned” pumping up the current market bubble.

Goldman Sachs alone handed out 17 billion which is enough money that you could build three Nimitz class super carriers or pay unemployment to a million people for almost a year. These banks have put seven million people out of work in the past year alone. The damage is not confined to what they steal but multiplies through the economy.

The Supreme Court ruling that makes the coup of Bush v. Gore permanent will be a huge gift for the media. Potentially billions in ad revenue and since not only will they be able to sell every minute but they can jack the rates to levels they can’t even get for the Super Bowl. Not being able to find an open slot for an ad may make buying one for your candidate impossible even if you could raise the money.

One pundit on the evening news said that Obama is considering a response to the ruling. One thing that they are supposedly talking about is public financing of elections. Presumably this would keep corporations from overwhelming any one candidate since any ads would be matched with public money. This method has passed court tests in the past but today’s treason overturned previous Supreme Court rulings, so we’ll see.

Wednesday, January 20, 2010

A little bit of normalcy

Fox News told the faithful if they got out the vote Tuesday that their 401k’s would go up. Stocks went down today instead. It didn’t have anything to do with the insurance companies (who stand to lose that 30 million of new suckers in captive market that the “insurance reform” bill was giving them) but rather a hiccup in the economy of the super power we are vassals to. China is having a real-estate bubble and has put the brakes on home mortgage lending, requiring banks to hold 16% of their deposits in reserve.

What a novel idea, Clinton and the Republicans did away entirely with bank reserve requirements for large banks here and some Wall Street Banks were operating 95 to 1 before the crash (that‘s about 1% reserves). The big banks are now operating on trillions they got free from the Fed, so the whole concept of reserve capital is right out the window. Compared to a couple of trillion, the 145 billion they are giving themselves in bonuses is chicken feed.

So with China watchers getting nervous, the markets worldwide are down and the USD is up. Since the markets have been pumped up by the Wall Street banks throwing around their new found trillions the USD has been way down. This makes it look like they are showing a record profits so they can give themselves record bonuses. You can’t give yourself a huge bonus if you are showing record losses which they would be if not for the market bubble creating all these profits. Profits that only exist on a computer screen and no where in the real world.

If the USD starts to strengthen too fast then all the markets worldwide will suddenly have major liquidity problem as investors will need to make margin calls on their loans. The Fed’s response to this so far is to keep interest rates at zero. China made a token increase in rates and has let it be known interest will go up. The question is when will this dance with the devil end? China is trying to cool things off but this will expose Wall Streets Ponzi scheme. But, the longer it goes on the worse the bust will be.

In good news, the USN finally has a hospital ship within helicopter range of Haiti. One of the USN reservist doctors brought along 1500 stuffed animals for the children he will be doing amputations on. It will be a little bit of normalcy for the kids, just like being back at work where they get 28 cents an hour making the toys for Disney.

Monday, January 18, 2010

Credit Union? Dodge the exploding hair plugs

Three more banks went under Friday, these were by today’s standards quite small and only cost us a couple of hundred million to close. That amount of money would go a long ways in Haiti. Nobody seems to even blink about spending that amount on failed banks. The only notice people pay to it is make sure that the FDIC says that they can still use their debit cards. That money is gone, long ago stolen by Reaganomics policies and it’s only the tip of the iceberg.

The larger of Friday’s three banks was un-saleable or rather they couldn’t give it away. The FDIC doesn’t really sell off any of these failed institutions but rather it offers a sweet pot of incentives and guarantees to another more or less healthy bank to take the whole works off the Government’s hands. The shareholders lose everything and that brings up an opportunity that will never be considered an option.

Since the shareholders are wiped out, the failed bank is suddenly not owned by anybody but it still has considerable assets that the FDIC gives away to another set of shareholders after taking the losses on our back. (technically it’s not tax money, but who are they kidding) They could simply convert each of these banks into a credit union and give each bank customer a share.

It wouldn’t really cost any more than what they are doing now. Try suggesting this to your Congressman and watch his hair plugs explode. Of course you will probably need to explain it all to him at length, unless he’s on the banking committee all you’re likely to get is a blank stare.