Friday, December 3, 2010

Fairy Dust works, if you still have a good paying job

Where are the jobs? Economists were predicting 90,000 new jobs had been created in October but the real number was only 39,000 and we need a 150,000 new jobs to keep up with population growth. In simple terms this 111,000 jobs short fall is in terms of economic impact similar to laying waste to a city of 250,000 with no plans to rebuild it. And, this was a good month.

The US stock markets ignored the news since they have nothing to do with the real world, free money from the Fed continues to feed irrational exuberance. The NYSE listed companies do more than half their business outside the US but the rest of the world (outside China) isn’t doing so hot largely from all the new USD being printed. But in fact the big companies are still doing well as they continue to drive down wages and borrowing money at a fraction of percent interest makes it hard not to make money as long as there are more wage cuts to make and smaller competitors to target.

Gold is on the rise again and the USD is down sharply compared to the Euro despite the ongoing bond crisis in the conservative countries know as the PIGS (I’m referring to their banking and economic practices) . (Portugal, Ireland, Greece and Spain) This appears to be changing to the PIIGS as Italy’s borrowing costs have shot up despite their relatively good economic health. It’s just that they happen to be small enough to be brought down by the Wall Street predators.

The crocodile only grabs an animal it thinks it can drag under and the thing about crocodiles is the more they eat the bigger and hungrier they get. Since the total decriminalization of Wall Street’s practices, the feeding has been good. The Republicans in Congress are those little birds that clean the teeth of the big Crocs while they sun themselves on the river bank and nary a tear is shed. It’s the victim’s fault you know.

About those economists that were wrong about the job numbers; they all seem genuinely shocked that the numbers weren’t better. These are the same economists who have spent the last 30 years telling us how good Reaganomics is, that trickle down will make you rich too, told us what a good deal tariff free imports are and that the earth is flat don’t you know. This requires a level of detachment from reality that requires a firm belief in fairy dust to make their economic models work. In fact they have gone completely over to slogans and don’t bother with those depressing models anymore. It works for them, they still have good paying jobs.

Thursday, December 2, 2010

Economic crash with a silver lining?

Initial unemployment claims surged by 26,000 last week to 436,000 wiping out the happy talk about the jobs picture. Tomorrow’s monthly report is expected to show at least 80,000 new jobs in October but that of course is still far short covering the increase in population each month let alone any recovery. The number of unemployed youth unable to move out of their parents basement continues to grow and to age. This of course continues to worsen the US economy’s potential as the workforce continues to fall behind in education and job experience. But hey, serfs don’t need to know that much, and it makes them good Republicans.

Initial reports on the limited audit of the Federal Reserve mandated by Congress shows that they loaned $3.3 trillion to banks and a variety of corporations during the financial crisis. Much of it at 0.0078% interest, is an effectively zero interest loan, really a loan? BofA tapped the Fed overnight window heavily and they pledged ½ trillion in junk bonds to cover their short term loans totaling nearly 3 trillion total. These were called overnight loans but really ran for 30 days.

To define some jargon, “Junk bonds” are called that because they have no real assets behind them but are just a gamble that the company will be able to rob somebody else to pay you back before they go under. Trillions in junk bonds left over from the heyday of mergers and acquisitions will start coming due in 2012 as well as trillions in bad real estate loans. Just in case you were trying to time the big crash. The Mayans had it right.

This 3.3 trillion disclosed today doesn’t cover the entirety of Fed activity just the so called emergency loans. There was also the two trillion in QE that involved buying toxic assets for far more than they were worth, nor does it include trillions in what they call normal lending. The Fed and the Treasury made loans and guarantees totaling 23 trillion according to the Inspector General for the TARP program.

China has increased its imports of gold dramatically up 5 fold over last year and passing 209 tons in just 10 months, they are also the world’s largest producer of gold. India is still the largest consumer of gold at 600 tons per year but China is expected to pass them by as China seeks to protect itself from currency fluctuations and inflation. Gold is still far short of the inflation adjusted high price of 2300/oz set in 1980.

There is a viral internet rumor that JP Morgan is short selling 3.3 billion oz of silver. Short selling is betting it will go down in price and if it doesn’t you make up the difference to the people who actually own it. The Guardian of the UK is giving this rumor some credibility but I doubt that it’s so straight forward.

The scam is that the people pushing the rumor want everybody to buy silver driving up the price bankrupting JPM and forcing everybody onto hard metal “money” instead of fiat currency. A happy thought to be sure but JPM has probably hedged their bet with derivatives so I wouldn’t count on it working out the way we would like. In other words, I wouldn’t rush out and buy any silver unless you have no more room for canned goods. In these “interesting times” this could be the bubble that sets off the crash of the mega-banks and the economy in general or maybe it will just be a big fizzle.

Tuesday, November 30, 2010

It's Midnight for America, Reagan was wrong

Midnight is traditionally portrayed as the hour of doom and gloom when large scale disasters happen. Tonight 600,000 Americans will lose their last life line  as their Federal unemployment extensions run out. The number will be at least 2 million by Christmas and 3 million by the end of January and it doesn’t stop there. This doesn’t include the growing millions of 99ers who have reached the end of tier five benefits and even Democrats aren’t fighting for them.

It appears that Republicans might be willing to extend Federal unemployment benefits on the condition that the rich get their 700 billion tax giveaway. The negotiations are being led by Sen John Kyl R-AZ who is indicating a deal could be made but he is holding out for more concessions. The top 1% will get an average $83,347 a year for life and the unemployed will get an average 300/week for another year, that is unless they’ve used up their 99 weeks and then they can just die.

Food banks and homeless shelters have been gearing up for the onslaught of the newly desperate poor but are finding they are being overwhelmed by the people already running out of benefits without the millions that will come pouring in now that the Republi-scrooges have cancelled Christmas.

A new phenomenon is growing with an unknown number of neo-migrant workers traveling America. Some say there are already hundreds of thousands of formally middle class Americans that now live in the RVs, often with kids in 400 square feet or less. They travel from city to city across the United States doing seasonal work for companies like and others who pay wages that when adjusted to today’s dollars are little better than the 25 cent minimum wage established in 1938. The are provided free camping spaces for their RVs at the better jobsites. I guess it beats traveling by box car from jobsite to jobsite and living behind barbwire, but the century is young.

Despite all the hype over Black Friday, retail sales were only up 0.5% over the previous week. Same store sales were reported to be up 3.5% over the previous year largely on the deep discounting of big ticket items. This likely does not translate into higher profits, the “Black” in Black Friday is supposed to be black ink. Although it’s always been little more than Madison Ave hype, it does send signals about who will have a good year and who will be the next store to be boarded up. With Obama siding with the idiots pushing for austerity, the signal maybe that the business that provides window board up service maybe the only winner.

The DNC has made the bizarre move of asking people on its email list to write letters in support of the freeze in Federal worker wages (with inflation this is really a cut in pay) saying that “Cutting costs and spending responsibly has been a cornerstone of this administration’s record” Paul Krugman has pointed out that amounts to “Obama (saying he) has always been at war with East Asia”. Hope and change are out the window, cutting wages for the middle class is the new normal, scratch that, cutting wages for the middle class has always been the normal.

WikiLeaks expects that the documents that it plans to release in the new year will take down one or more major US banks as they reveal corruption and systemic wrong doing on a scale similar to Enron, this is according to Julian Assange in an interview with Forbes. He has previously said he has internal documents from Bank of America. This latest revelation explains the new calls from Republicans for his assassination, they weren‘t nearly as concerned about any alleged national security breach but don‘t mess with their benefactors.

Monday, November 29, 2010

Anybody know a good Borsch recipe?

The newspapers all had stories today about how on this day in history President Hoover foolishly froze government salaries as private sector wages were falling during the recession that followed the burst of real estate bubble of the 1920s. This drove the country into the Great Depression, but they screwed up the headline and put Obama’s name in place of Hoover. Obama would never do anything that stupid, it made Hoover a one term President. Sigh…

People always excused Hoover (he really seemed to be a nice guy) they excused him for not understanding economics. I’m not so sure, he was an engineer so he should have been able to do the math. Obama is a lawyer so maybe he can’t do the math but he has all kinds of people working for him who can, of course their advice seems to favor the billionaires they all plan to work for in the private sector making seven figure salaries. (after all they need to make up for the hardship of having Obama freeze their government salaries)

It’s common sense that when times are hard that you cut back. Just as it’s common sense that the earth is flat and unmoving, we couldn‘t possibly be revolving at a 1000 mph, that‘s just crazy. In simple terms it is wages that create demand for goods and services and this makes the economy run like a well oiled machine. Cutting wages is like draining oil from the crankcase, the machine will slow and stop. Reagan also de-criminalized the practice of stealing the gears from the machine and selling them to China.

Ireland is the latest victim of the Wall Street bankers as it is having its economy wrecked in the name of saving it. Portugal is next in line and there is little they can do about it. But the very same tactics the World Bank and IMF use to reduce vulnerable third world countries to corporate serfdom are playing out here. When the rightwing says that we are the next Greece they happen to be right, just for all the wrong reasons.

The right constantly tells us that Kenyan/socialist/ fascist Obama is taking us the way of the Soviet Union. They are right, he is. The Soviet Union was really organized with huge state owned corporations and the country was run by the managerial class. Socialism was a way to keep the workers content with low wages. The same process has been on going here for the last thirty years as wages have declined while the corporate domination of the state has grown.

Gorbachev ended the “socialism” but the same few people still owned the former soviet state. The same thing is about to happen here as the corporate state owned by the few will simply stop providing the “socialism“ that Americans take for granted as their birthright. The tea baggers believe they are going to end “socialism” for everybody else but them. They don’t grasp that most of that “socialism” goes to them and they are the real target. The teabaggers will to need to grow their own cabbage and potatoes and learn a good recipe for Borscht.