Financial Repression

It's mostly those guys at PIMCO, Bill Gross and Scott Mather, talking about financial repression.  Japan has been at this for years and it probably won't end any time soon.  Now it's the U.S.'s turn: with  QE1/2 and maybe 3 it's already there and will probably be with us for a long time to so get used to it.  According to Mr. Mather's recent letter governments use financial repression:

...  to improve a country’s ability to finance government debt without resorting to painful fiscal adjustment. By artificially lowering the cost of debt financing below what would be demanded by free market forces, governments are able to reduce borrowing costs and slow down debt accumulation rates. One can think of financial repression as a form of “stealthy default”: a gentlemanly way for modern countries with fiat currencies to stiff their creditors while still ostensibly paying interest and principal in full. 

He calls it a "stealthy default," but we can also look at it as a tax if you happen to have savings.  I guess for most Americans that wouldn't be a factor, but those fat cats probably don't like the idea of low returns for years to come.  Here's the chart from Mr. Mather's letter showing real interest rates adjusted for inflation.

U.S. Government Lies, No Consequences!

This is not new, but just as a reminder at how criminal and debased of humanity the U.S. military can be I have posted this awful and disturbing video again.  Is it even legal to shoot the enemy after they are wounded?  Turns out these poor people weren't the enemy but journalists and other civilians. The complete lack of humanity should remind all at just what the government is capable of doing.  It's even worse when you watch this and then you hear Robert Gibbs (Obama's press secretary) say:

Our military will take every precaution necessary to ensure the safety and security of civilians and particularly those that report in those dangerous places on behalf of news organizations.

The total disconnect between Gibb's words and the video is enough to turn thousands of moderates against the U.S.  How Gibbs could say those words is beyond me after seeing what happened!

25% of U.S. Kids Live in Poverty

One of the richest countries in the world leaves behind its kids and families at an appalling rate.  The contrast between the U.S. and other advanced economies is striking and tells a story of a country that will sacrifice huge numbers of its population to Darwinism.  

More Republican Lies from Michele Bachmann

It's only going to get worse as the campaign heats up but it's nice to see NPR try to shed a little light on the lies and exaggerations of Michele Bachmann.  Also see here for more lies.

When Will the Banks and Mortgage Servicers be Prosecuted?

Check out this video for a very cogent explanation of the whole mortgage mess. Someone needs to hold these companies accountable, but rather we have the whole system just turning a blind eye.  It's appalling and please watch for yourself:

U.S. Kills Its Youth for Afghan Graft

Check out this New Yorker article for info on one of the greatest bank heists ever:

Graft infests nearly every interaction between the Afghan state and its citizens, from the police officers who demand Afghani notes to let cars pass through checkpoints to the members of Karzai’s government who were given land in Kabul’s once empty quarter of Sherpur, now a neighborhood of huge rococo-style buildings, where homes sell for hundreds of thousands of dollars.

Afghan graft is one thing, but when it's financed by billions in U.S. tax money and  its citizen's blood it's shocking that the U.S. is still in the country.  To top it off and to make matters worse, it will likely take a decade to wind down the whole shameless failure while they tell us it was a success!

U.S. Debts and Lying Republicans

I think this chart says it all when lying hypocritical Republicans say they are so concerned about the amount of debt and the debt ceiling.

The Obama administration took over in 2009; the debt was already a staggering $10 trillion.  Then the financial crisis struck, tax receipts plummeted and the government needed to step in to prevent a depression.  Without this spending the whole situation would have been much worse.

The real point of this graph is to point out that a Republican—George Bush, Junior—ran up the bulk of the debt during his presidency, kicking the can down the road, to President Obama.  An even bigger question was where were all these 'debt hawks' like Senator McConnell or Congressman Cantor during this great debt increase in the 2000's?  Well, they were in congress voting for those massive increases in spending from 2000 to 2008.  There you have it: the great lie!  All of a sudden these 'debt hawks' want to slash spending, not when the war criminal George Bush, Junior was in office, but now when the Democrat Obama is in office.  That says it all and simply exposes the fraud that Republicans represent.

I don't think I could sum it up any better than this blog describing the Republican leadership's (Boehner, Cantor, McConnell and Kyl) recent debt limit votes:

June 2002: Congress approves a $450 billion increase, raising the debt limit to $6.4 trillion. McConnell, Boehner, and Cantor vote “yea”, Kyl votes “nay.”

May 2003: Congress approves a $900 billion increase, raising the debt limit to $7.384 trillion. All four approve.

November 2004: Congress approves an $800 billion increase, raising the debt limit to $8.1 trillion. All four approve.

March 2006: Congress approves a $781 billion increase, raising the debt limit to $8.965 trillion. All four approve.

September 2007: Congress approves an $850 billion increase, raising the debt limit to $9.815 trillion. All four approve.

Are Republicans Stupid or Evil?

I'm guessing evil, but I'll give them the benefit of the doubt and just go with stupid or grand standing.    The latest Republican geniuses would like to pass a balanced budget amendment.  For years, while Republicans ran up the deficits with wasteful spending and tax cuts, these Republicans were silent and now they see the deficit as a great tool to score political points.  One way or another, these stupid, evil or grand standing Republicans would like to dismantle the little social safety net that actually exists in the U.S. and a balanced budget would be an effective tool to achieve their ends.  I think there should be a special vote to just throw them in Guantanamo or some newly constructed Gulag!  Most people would be better off without Republicans and big corporations are the only ones that would suffer—meaning that we might be able to end corporate welfare and subsidies without morally bankrupt Republicans to defend the indefensible.

Economic Models and How We Fail

Very interesting discussion here by John Kay, Financial Times columnist and professor at London School of Economics.  His book is called “Obliquity: Why our Goals are Best Achieved Indirectly” and the premise is: "Complex goals are best achieved by not pursuing them directly." He points out that all of our models, economic or whatever, are simplifications of complexity and choosing the right model is extremely difficult.  See for yourself here:

Out of Touch Republican Chris Christie

Chris Christie, the governor of New Jersey, received a call from a woman questioning Christie's decision to cut public school funding.  His response was basically: shut up!

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Stop the Insane "War of Drugs"

Finally a little sense is coming through:  Jimmy Carter recommends stopping the ridiculous and counter-productive 'war on drugs.'  See President Carter's NYT Opinion piece here.  It's been 40 years since some crummy politician, Nixon, declared this self-serving policy.  It's shocking that it has actually continued this long and destroyed so many lives.  Back in the eighties Carter said that the punishment for doing drugs shouldn't be worse than the harm from actually doing the drugs, but then one of the worst U.S. presidents, Reagan, enacted, pursued and escalated one of the most costly failures in American history. 

Groupon Should Have Taken the Money

Groupon—the online coupon, voucher, deal-of-the-day company—turned down a $6 billion offer from Google.  For a business model that has very low barriers to entry (no fortress or moat as Buffett would say) and questionable value in good economic times, it appears they may regret turning down Google's big fat offer.  That's not to say they won't get out making a killing, but it'll have to come by unloading their dubious business model onto the public when they go public.  The dot com bubble redux seems to be alive and well with a $15 billion valuation of Groupon (still losing money!) and a maybe a $100 billion valuation for Facebook.  It's absurd, but I guess the whole dot-com thing has been forgotten so Wall Street can begin the fleecing again—package it, hype it, sell it and forget it!

See here for more info on its business model and here for a sense of funky accounting since the real accounting would hurt that sky high valuation.

'Fracking' is Good for Us?

The oil and gas companies will tell us 'frackin' is just fine for us, but actually the shocking part is that these companies wouldn't disclose what chemicals they were pumping into the ground.  Chemicals have been found in drinking water, but still the oil and companies deny it's from 'fracking.'  Sound familiar?  Seems the oil and gas companies have taken a page out the tobacco industry's playbook: deny, deny, obfuscate and then deny some more!  We can bet they will continue that until the government does something—fat chance as long as those republicans keep telling us we have too many regulations.  I wonder if they might regulate if it comes to health?  Probably not!

Watch the full episode. See more PBS NewsHour.

California Unemployment 22%

That's a shocking statistic—22% unemployment when you count people that want work but gave up actively looking.  If you don't count those people California's unemployment still stands at 12.1%.  I think we are finally seeing the effects of administration after administration, from Reagan to Obama, pushing the American middle class under the bus.  From free trade (one-way, the U.S. is open but many other countries put up barriers) to tax policies that reward U.S. companies for closing factories and moving jobs overseas, the U.S. is in no position to be policing the world and spending billions in aid to other countries.  Instead of focusing on these issues seems that all congress is interested in is talking about Rep. Weiner's mental issues.

Andrew Ross Sorkin Suckles to Goldman

In a rather lame defense of Goldman Mr. Sorkin goes through the Levin Report and highlights some typos and mistakes—but more importantly Mr. Sorkin doesn't refute the main points that Goldman might have engaged in criminal behavior including non-disclosure of material information, misleading clients and possibly lying to Congress.  Goldman has a lot of money and lots of influence so be on the lookout for more to suckle up to Goldman.  Hopefully the government won't suckle up this time!

High Frequency Trading

Remember the "flash crash" back in May, 2010?  Thousands of stocks suffered unbelievable drops and recoveries in a matter of minutes.  No one knew what happened.  How could thousands of stocks completely disconnect from fundamentals?  The SEC looked at that question with this report and it seems to largely boil down to a lack of liquidity.  high frequency traders keep telling us that they serve the market by providing liquidity—well, guess what?  It wasn't true; not only didn't they provide liquidity, they exacerbated the situation by reversing long positions they were temporarily holding and pulling back their bids and offers.  The SEC has taken steps to prevent another "flash crash," but high frequency traders are trading more and more, up to 60% of trading in some stocks.  It's not so clear that this trading is helping or hurting the market overall.  Please see Thompson Reuters here, a WSJ article here or this opinion piece here for a lot more information.

Republicans Causing More Market Uncertainty

Being hypocritical must be a prerequisite for joining the Republican party.  They claim President Obama is causing market uncertainty yet this is a party that is trying to use extortion to get its priorities—dismantling the little social safety net that exists in the U.S.—by refusing to increase the debt ceiling.  These are the same Republicans that voted to increase the Federal debt ceiling in the past.  The same Republicans that cut taxes for the rich to create the problem in the first place!  The very same Republicans that ran up the deficit with massive increases in defense spending and started two unnecessary and very costly wars!  The same Republicans that want to repeal healthcare legislation that actually helps struggling families.  The same Republicans that put politics before country.  The hypocrisy is mind-boggling and yet there seems to be a recognition by Americans of the changes Republicans are trying to make.  In some ways, the Republican extremism is a gift that will hopefully will be fully recognized and acted upon by the next election.

Banks Will Do Anything to Go Back to the Old Ways!

Right on cue, Jamie Dimon from JPMorgan is complaining about too much regulation and actually blaming the slow economic recovery on bank regulations.  Talk about spin!  JPMorgan will rake in more than $20 billion this year and he's complaining?  These guys are trying so hard to twist the facts to serve their own purpose—fat bonuses with no regulatory oversight!  And they have the money and lobbyists to make it happen.

Government Documentary On a Building

Here's a very well done, short, documentary done by the GSA (General Services Administration) on the renovation of the McCormack building in Boston.  At first, I was going to post it to question the value of the government spending money on such things, but after watching it I thought "who else would fund and make such an informative documentary?"  I thought it was too good to criticize and the quality of it changed my mind!

Global Investment Outlook - Russian Forum 2011

With speakers like Hugh Hendry, Nouriel Roubini and Marc Faber this video is definitely worth a look for insights into the world economy.

Global Investment Outlook: Where is the Money & What are the Risks? from Troika Dialog on Vimeo.

Goldman Sachs Loses 1.3 Billion Dollars for Gadhafi

I guess given Goldman Sachs questionable, and possible criminal, past dealings it's not really surprising it would do business with the terrorist Gadhafi.  I wonder if Goldman was concerned that Ghadhafi was responsible for the bombing of Pan Am Flight 103 in 1988.  I guess dealing with a terrorist that killed 270 people wouldn't be a concern as long as there was money to be made.  I guess someone made money but it wasn't Ghadafi—somehow Goldman manged to lose 98% of Gadhafi's investment!  See WSJ article here.

Japan's Economic Comeback is Quickening

It's been going on 3 months since Japan was struck by a horrific earthquake and tsunami.  The country is still trying to figure out how to deal with the power shortage, but things are largely back to normal for most people.  According to this nightly business report the Bank of Japan is optimistic that the economy is on a path to recovery that should commence in the autumn.  

Watch the full episode. See more Nightly Business Report.

Shocking Ignorance by Republican Marsha Blackburn

At a recent hearing by The House Energy and Commerce Subcommittee on Oversight and Investigations, Ms. Blackburn blamed high unemployment on too much regulation. Maybe she wasn't paying attention or she was too busy to realize that the cause was the lack of regulatory action, instead of too much.  I don't know how anyone with a TV, radio or internet connection could have missed the multiple failures in regulating too little, but somehow Representative Blackburn manged to do just that.  She might appreciate this video of Greenspan admitting a mistake or two:

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Goldman Sach's Days Are Numbered?

It's been a long time coming but finally it seems some sort of action will be taken regarding the possible criminal behavior of Goldman Sachs leading up to the 2008 financial crisis and American taxpayer fleecing.  It seems Lloyd Blankfein may be trading in his Armani suits for something more like this.

Big Banks Will Do Anything to Avoid Dodd-Frank

It's not really surprising that big banks want to continue the status quo—it is lucrative after all.  The swaps industry is huge at 600 trillion U.S. dollars and it's largely unregulated.  Although most of the press and interested parties say it is used for hedging, it is also used for speculating.This is the same swap market that brought AIG to it's knees and ended up pushing the U.S. to the brink of a depression.  Although AIG wasn't speculating, the buyers of the swaps were—like Goldman Sachs!  Dodd-Frank would regulate and open the doors to this opaque market, hopefully preventing another financial meltdown.

Republican Lies and Distortions

For the hypocrisy and untruthfulness in presenting these charts on the Committee on the Budget web site, Paul Ryan gets this week's "Great Republican Propaganda Machine" award.  As far as we can tell these numbers are just completely made up to further Mr. Ryan's agenda—propaganda!

This propaganda award is for any Republican who furthers Republican Party propaganda and mindlessly sticks to talking points while disregarding the facts.  It's not an easy feat, but Paul Ryan is definitely up to the tasks of spewing propaganda,  ignoring the facts and turning up the distortion to achieve his goal of dismantling Medicare as we know it. Congratulations Mr. Ryan, but you might want to mix facts into your propaganda or the American people might notice what you are up to!

Mitt Romney is Not Entitled to His Own Set of Facts

Mitt Romney recently stated that Obama's American Recovery and Reinvestment Act (ARRA) made things worse.  Of course he claims he could have done better.  We know Republicans can play fast and loose with the facts, but perhaps someone should inform Mr. Romney that according to the CBO exactly the opposite happened.  In fact this CBO report estimated that the 2009 American Recovery and Reinvestment Act:

• Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.5 percent,

• Lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points,

• Increased the number of people employed by between 1.4 million and 3.3 million, and

• Increased the number of full-time-equivalent (FTE) jobs by 2.0 million to 4.8 million compared with what those amounts would have been otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)

I guess we'll be in for a lot more distortions and lies as the campaign progresses, but let's hope Mr. Romney educates himself and at least pays a little attention to the facts.   Most likely the "Great Republican Propaganda Machine" will just keep spewing out noise, spin and falsehoods until it just crumples under its own hollowed-out shell of what once was Abraham Lincoln's party.  Honest Abe Lincoln couldn't be a 2011 Republican and it seems a cruel and comical farce that it's actually the same party—I think Mr. Lincoln would agree!

16% Unemployment for U.S. African Americans

16.1% unemployment for African-Americans over the age of 16 is staggering—even more staggering is it was even worse in 1982 and 1983 with over 20% unemployment.  If 16% versus around 9% for the general public doesn't constitute a crisis, I wonder what would? 

And the best our politicians can do is squabble whether to honor already incurred debts!  It's as though the whole Washington establishment thinks the problem will just fix itself.  We hear lip service from the Republican Right—mainly how more tax cuts for the wealthy is the magic cure (no evidence whatsoever for this belief)—and more lip service from the Democratic Left—can't think of one coherent message received from the Democrats actually. 

And yet every indicator is pointing toward more economic funk for the foreseeable future.  In addition, it's not like politicians take a Hippocratic Oath to do no harm: there's a good chance that if Republicans get their way and slash and burn spending very rapidly we'll be heading toward a depression instead of a very very severe recession.  Of course by then, they'll be trying to put the blame on whoever might make a convenient scapegoat—kind of like how the Right blames Obama for deficits that were mostly created under Republican administrations—the hypocrisy is palpable!  But facts don't seem to get in the way of the "Great Republican Propaganda Machine!"

Dodd-Frank Act Would've Saved the World?

Would the Dodd-Frank Act have averted the financial crisis in 2008?
It's an interesting question and this FDIC paper (or here if that link doesn't work) takes a look at what would have happened when Lehman failed in 2008 if Dodd-Frank was enacted then.  Much like how the FDIC takes over a failing bank now and winds them down in an orderly fashion while maximizing value, Dodd-Frank would have done something similar.  That one change alone could have averted much of the crisis and allowed a much more orderly deleveraging process to take place.  The paper is worth reading and has a nice recap of the Lehman bankruptcy—the largest ever!

Why is the Federal Reserve's Medicine Good for Us?

Ben Bernanke has his hands full with QE2 and wrapping up an unprecedented expansion of the Fed's balance sheet.  We'll see how that turns out when the buying of treasury notes ends soon and the life support equipment is removed from the U.S. economy.  The patient could just keel over when the flip is switched, but more likely than not Ben will be there to flick that switch on and off as needed until the patient can walk out under its own power.  The situation is still quite bad with 9% unemployment, but by all accounts we have to give great  credit to the Fed and its actions.

The Fed's mandate is to promote maximum sustainable employment and price stability.  With deflation in check and a bit of inflation working its way through the system, the Fed has achieved its goals.  Given the unprecedented financial crisis (not actually but close enough unless you born in the 1800's), the whole thing could have been much much worse.  Ben Bernanke, being a scholar of the Great Depression, has applied his knowledge and walked a tight rope toward salvaging a quite decimated financial system.  The biggest question is if price stability can be continued or it will devolve into a deflationary or inflationary hell. 

James Bullard, the President and CEO of the St. Louis Fed, had this to say on the origins of the financial crisis.  He views the financial crisis as an engineering failure and compares it to asbestos!

I found his perspective interesting and I guess in some ways it was just an engineering failure; I guess until you actually look at what the engineers were thinking at the time—like Goldman Sachs knowing that they were pedaling garbage onto its clients, getting away with it and gladly just paying a fine after it was all said and done, bonuses paid, let's go home style.  For a big picture perspective you can see a timeline of events here and a Ben Bernanke speech from December 1, 2008 here.