U.S. Housing Market Takes Another Dip

This is not really surprising, but it should make the optimists ponder a bit.  If the popping of bubbles in other countries is any kind of indicator, the U.S. housing market is in for years and years of this sort of funk.  This couldn't bode well for those millions of homeowners that have negative equity in their homes.  With the unemployment rate hovering around 9%, the genius Republicans wanting to cut spending at the worst possible time, billions being siphoned off for military actions, wars, nation building, whatever they call it, and political gridlock on anything that might actually help turn the economy around—don't look for things to get better on this front anytime soon!

Human Cost of Recessions: Assessing It, Reducing It

According to a November, 2010 IMF paper:

Labor markets remain in a dire state. Over 200 million people across the globe are unemployed. Nearly three-fourths of the increase in the number of unemployed people during the Great Recession has occurred in the “advanced” (i.e. high-income) economies. Youth unemployment and long-term unemployment have increased substantially in most advanced countries. If the effects of past recessions are a guide, these developments can exact a heavy human toll.

It's interesting to note that two-thirds of the increase in unemployment from 2007-2010 came from the U.S. and Spain:

It's also interesting to note the connection between shareholder rights vs. workers' rights when comparing the number of lost jobs throughout the world.  More coming on this later! See here.

Japan's Jobless Rate Rises to 4.7%, U.S. Envious

The March 2011 earthquake and tsunami understandably wreaked havoc on the labor market in Japan, but what would the U.S. give to have a 4.7% unemployment rate instead of its current 9%?  While Japan experienced a horrific tsunami and the U.S. experienced a financial tsunami of its own making, the increase in unemployment is all too real for average citizens.

U.S. Unemployment:

Japan Unemployment:

For more info and background see IMF paper here.

Big Banks Screw Tax Payers Redux?

According to this recently released IMF paper big banks have gotten bigger and we might get screwed again.  They use terms like "Too Important to Fail" and "Systemically Important Financial Institutions," but we can say politically connected banks that take advantage of their size to pay big bonuses when times are good and still pay big bonuses when times are bad—read bankrupt— thanks to an ability to stick the check to the government, to tax payers.  

The number of these monster banks has grown when looking at absolute size, interconnectedness and substitutability:

The assets of these "Too Important to Fail" banks have grown as well since the 2008 financial crisis along with their convoluted structures. Let's use a cooking analogy to sum up: you put these bank's political power, huge size, complicated structure and greed all in a bowl without adequate regulation and you'll get the same scrumptious delicacy we enjoyed so much in 2008 and 2009.  The banks are busy lobbying up to avoid the full bite of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Let's hope they don't succeed.

Paul Ryan's Medicare Plan Would Plunder Seniors

It reminds me of George W. Bush's belief that if you say something often enough it would make it true, irregardless of the facts.  Paul Ryan, picked up the baton on that idea with his insistence that his Medicare proposal would be good for seniors and the country.  It's amazing these Republican get elected at all, but I guess that's a whole different issue!

SEC's Revolving Door Leads to Fleeced Investors

If you ever wondered how financial firms get away with their crimes for so long we may just need to look at the revolving door between the investigators and the crooks.  The Project for Government Oversight has revealed that time after time SEC employees have taken jobs with the very companies they were charged with regulating.  They even document particular cases, Bear Stearns and the Stanford Ponzi scheme, where investigations were impeded because of this revolving door.  Between POGO and Senator Charles Grassley's efforts here and here we just may get to the bottom of why and how tax payers have been stuck with so many bills and how investors get fleeced so regularly!

Japan Wins the Fight Against Deflation

It's too early to say, but it's a big victory to get anything but deflation out of Japan.  They have been fighting deflation since the bubble popped in 1991.  That's 10 years and buckets of money thrown at the problem.  Of course, now they'll need to focus on the national debt, but hey, who doesn't!?

10 to 15 Years of Job Growth Coming Soon!

Talk about falling off a cliff!  This chart says it all and the big question is will it look more like 1950 to 1965 or more like or 1983 to 1990?  We could flounder around for years, but I think we have to give great credit to the Fed and our politicians for their reaction to the latest crisis.  Without QE1 and QE2 this chart would certainly be looking much worse. (See the full GAO report here or here for a concise blog post.)  It's still a big question whether they can remove these economic life-support measures successfully without killing the patient, but a number of indicators point to a rise in employment just around the corner—hopefully for the long term!

No Surprise: Oil Market was/is Manipulated

Finally the U.S. government is getting serious about market manipulation.  Let's hope that this is only the start as the blatant manipulation in energy markets has become a standard play for big trading houses, hedge funds, banks and investment banks.  See the previous post please.

Oil Speculation: The Biggest Scam Yet!!

Quotes:

‘‘There has been no shortage and inventories of crude oil and products have continued to rise. The increase in prices has not been driven by supply and demand.’’

‘‘Senator, the facts are—and I’ve said this publicly for a long time—the oil prices have been moving steadily up for the last 2 years. And I think I have been very clear in saying that I don’t think that the fundamentals of supply and demand—at least as we have traditionally looked at it—have supported the price structure that’s there.’’

Those quotes are from a couple of quacks?  Not quite—the first one is Lord Browne, Group Chief Executive of BP at the time and other is no one other than Lee Raymond, Chairman and CEO of ExxonMobil at the time.  Both are from 2005 and 2006.

So what happened in 2004 where prices start there inexplicable rise and volatility increases drastically?  The groups that benefit from this spectacular rise in oil prices will recite hurricane Katrina, Iraqi war, war on terrorism and emerging economies like China, Brazil and India.  What they won't talk about is the billion of dollars that hedge funds and big banks have dumped into commodity markets through speculation.  Actually, we can't tell just how much fuel is being dumped onto this blazing speculative bubble because there is no oversight or reporting.  The quotes from above are from 5-6 years ago but are equally applicable today.  One of the biggest Ponzi schemes ever is being orchestrated right under our noses with complete impunity.

Before the 2008 financial crisis Alan Greenspan said, ‘‘there has been a major upsurge in over-the-counter trading of oil futures and other commodity derivatives.’’ He goes on to comment that without this surge, prices wouldn't have risen as much as they had. Again, this is Alan Greenspan and not some fringe lunatic speaking.

The same thing is happening again even as supplies are up and the economy is still under-performing.  Who's to blame and what should the government be doing?  That's not such an easy question when big money and politics have been so intertwined for so many years.  This is one scam that will not actually blow up like the 2008 financial crisis.  The bubble will continue until the government has no choice but to end it through proper regulation.  I say hold on to your hats and enjoy the show. I guess looking into hybrid or electric cars and solar might be a good idea too!  These prices are going through the roof before it's all over!  The investment banks, hedge funds and big banks will be covered no matter what—they have the tax-payer put on one side and billions of dollars of unregulated, opaque OTC look-alike future contracts on the other.  The perfect trade!

Source: United States. Cong. Senate. Permanent Subcommittee on Investigations. The Role of Market Speculation in Rising Oil and Gas Prices:  A Need to Put the Cop Back on the Beat. 109th Cong., 2nd sess. S. Prt. 109-65. Washington: GPO, 2006. Print.

Sovereign Debt: How Big is Enough?

Again: Big Banks Ripping Off Its Customers

According to this Wall Street Journal: "Bank of New York Mellon Corp. has been fighting accusations that it took advantage of clients while trading currencies." Basically the Bank of New York Mellon Corp. gave its customers the worst price, or near the worst price, for currency transactions they did for pension funds. This is no big surprise, but it's nice to see the WSJ actually investigating these matters. I think there would be an even more interesting story in how banks rip off average consumers, but at least this is a good start toward some transparency.

Keeps Churning Along

January 2005 to March 2011

Producer Price Index's Incredible Rise

The economy has been tanked for some time, but these prices just keep going up.  If JPMorgan Chase is doubling its commodities trading, it's a good guess that the other big banks are doing the same thing.  According to this CNBC article, JP Morgan gobbled up 10 billion dollars in commodities in the first quarter—that's a lot of contracts!  I'm sure they are not alone as all these big banks mirror each others' trades.  This chart sure does look frothy and speculative-bubble like.  When the Chinese bubble finally deflates and all the big banks dump their speculative positions this whole chart will deflate wildly into the abyss!  And then we'll re-regulate, but the modern day robber barons will have moved onto their next game.

Republican Rand Paul Makes Ass Out of Himself

It's amazing he could get this out of his mouth without laughing or breaking up!  The first part is Bernie Sanders but then the ass-making commences after that as soon as Senator-You've-Got-To-Be-Joking Rand Paul opens his mouth.

Morgan Stanely Upgrades Citigroup!

There just seems something odd about one corporate welfare recipient receiving a blessing from another corporate welfare recipient where both of them wouldn't even exist without  a buy-out for one and  dipping into the public coffers for the other.  I put this right up there with all those AIG soccer sponsorships that continued through 2009 as the company wouldn't of had any chance to exist on its own without welfare from taxpayers.  I wonder when the public will see this financial industry for the scam it is—bubble after bubble, scandal after scandal, conflict of interest after conflict of interest, it just seems to churn along thanks to high-priced lobbyists and a few turns of some very blind eyes.

2008 Financial Crisis Fraud - Double Dipping!

Apparently investment banks thought they could play a game where they get to eat their cake, keep their cake and steal someone else's cake too.  It works something like this:  you buy a loan, securitize it, collect money on it, put it back to the originator, collect money again, and then disregard contractual obligations by selling it as though you still owned it (I may have that last bit screwed up as it's complicated and not clear exactly how they were ripping people off), but it's a great scam if you can get away with it—and apparently they have gotten away with it until a little report and couple of nice U.S. Senators stirred things up.  Click the link above for a court filing that explains what's going on in an MBIA v. Credit Suisse lawsuit.  Also see here for more background.

Fraud and Deceit Catching Up to Goldman Sachs?

With talk of possible perjury charges against Lord Blankfein and further investigations into possible illegal activity at Goldman Sachs leading up to the 2008 financial crisis, it may be just a matter of time before some pretty big fish get thrown into the skillet.

Skyscrapers - How Tall is Too Tall?

Very informative and well write article here on Skyscrapers on techquark.com.

Spending: U.S. vs Asia

I grabbed this slide from a presentation by Michael Milken.  His point was a possible misallocation of resources in that Americans are spending around 50% of their incomes on housing and transportation while people in Asia are spending around 16%.  The other interesting point is how much Americans are getting out-spent in education and how that might impact the future.  For more, check out his conversation with Gary Becker here.

Obama Takes Aim at Trump

President Obama really could do stand-up.  This dig at Donald Trump about the "birther" issue is too funny!