Sunday, August 29, 2010

Jumpstarting The Economy: Part 2 of 20

We like stimuli!

Second, third, fourth, fifth stimulus, it is not going to help. "Extend and Pretend" is the policy now. Go for it guys!, JM Keynes would be proud of you.

And thank you very much for all the profit we, the goldbugs, are going to make on our gold and silver investments.

Why We Need A Second Stimulus

New York Times Editorial

OUR national debate about fiscal policy has become skewed, with far too much focus on the deficit and far too little on unemployment. There is too much worry about the size of government, and too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth. By focusing on the wrong things, we are in serious danger of failing to do the right things to help the economy recover from its worst labor market crisis since the Great Depression.

The primary cause of the labor market crisis is a collapse in private demand — the same problem that bedeviled the economy in the 1930s. In the wake of the financial shocks at the end of 2008, spending by American households and businesses plummeted, and companies responded by curbing production and shedding workers. By late 2009, in response to unprecedented fiscal and monetary stimulus, household and business spending began to recover. But by the second quarter of this year, economic growth had slowed to 1.6 percent, according to a government estimate issued Friday. Clearly, the pace of recovery is far slower than what is needed to restore the millions of jobs that have been lost.

Households and businesses are on a saving spree to rebuild their balance sheets. Their spending relative to income has fallen more than at any time since the end of World War II. So there is now a substantial gap between the supply of goods and services the economy is capable of producing and the demand for them. This gap is starkly reflected by the 23 million Americans who are looking for full-time jobs and the millions more who have left the labor force because they could not find one.

The situation would be even worse without the $787 billion fiscal stimulus package passed in 2009. The conventional wisdom about the stimulus package is wrong: it has not failed. It is working as intended. Its spending increases and tax cuts have boosted demand and added about three million more jobs than the economy otherwise would have. Without it, the unemployment rate would be about 11.5 percent. Because about 36 percent of the money remains to be spent, more jobs will be created — about 500,000 by the end of the year.

But by next year, the stimulus will end, and the flip from fiscal support to fiscal contraction could shave one to two percentage points off the growth rate at a time when the unemployment rate is still well above 9 percent. Under these circumstances, the economic case for additional government spending and tax relief is compelling. Sadly, polls indicate that the political case is not.

Two forms of spending with the biggest and quickest bang for the buck are unemployment benefits and aid to state governments. The federal government should pledge generous financing increases for both programs through 2011.

Federal aid to the states is especially important because they finance education. Although the jobs crisis is primarily a crisis of demand, it also reflects a mismatch between the education of the work force and the education required for jobs in today’s economy. Consider how the unemployment rate varies by education level: it’s more than 14 percent for those without a high school degree, under 10 percent for those with one, only about 5 percent for those with a college degree and even lower for those with advanced degrees. The supply of college graduates is not keeping pace with demand. Therefore, more investment in education could reduce both the cyclical unemployment rate, as more Americans stay in school, and the structural unemployment rate, as they graduate into the job market.

An increase in government investment in roads, airports and other kinds of public infrastructure would be cost-effective, too, as measured by the number of jobs created per dollar of spending. And it would help reduce the road congestion, airport delays and freight bottlenecks that reduce productivity and make the United States a less attractive place to do business. The American Society of Engineers has identified more than $2.2 trillion in public infrastructure needs nationwide, and a 2008 study by the Congressional Budget Office found that, on strict cost-benefit grounds, it would make sense to increase annual spending on transportation projects alone by 74 percent.

Over the next five years, the federal government should work with state and local governments and the private sector to finance $1 trillion worth of additional investment in infrastructure. It should extend the Build America Bonds stimulus program, which in the past year has helped states finance $120 billion in infrastructure improvement.

The federal government should also create and capitalize a National Infrastructure Bank that would provide greater certainty about the level of infrastructure financing over several years, select projects based on rigorous cost-benefit analysis, invest in things like interstate high-speed rail that require coordination among states and attract private co-investors in projects like toll roads and airports that generate dedicated future revenue streams.

But can the government afford this additional spending? The answer is yes. Despite the large federal deficit, global savers, including savings-hungry American households, are snapping up United States government securities at very low interest rates. And they will continue to do so as long as there is ample slack in the economy and inflation remains subdued. Over the next few years, there is little risk that federal deficits will crowd out private investment or precipitate a crisis of confidence in the American government, a spike in American interest rates or a sudden drop in the dollar.

On the other hand, as long as private demand remains weak, the risk is uncomfortably high that trying to reduce the deficit — by cutting spending or increasing taxes — will tip the economy back into recession or condemn it to years of faltering growth and debilitating unemployment. In fact, either outcome would depress tax revenue and could mean larger deficits.

Faced with these risks, as long as the economy is operating far below potential, policy makers should do two seemingly contradictory things. First, they should provide additional fiscal support for job creation and growth. And, second, they should enact a credible multiyear plan now to stabilize the ratio of federal debt to gross domestic product gradually as the economy recovers.

By easing capital market concerns about the government’s future borrowing needs, such a plan would permit larger deficits and slower debt reduction while unemployment is still high. The long-run debt problem — the result of imprudent fiscal decisions before the recession, escalating health care costs and an aging population — must be addressed once the economy has recovered. But for now the priorities of fiscal policy should be jobs and investment.

Laura Tyson, a professor at the Haas School of Business at the University of California, Berkeley, was chairwoman of the Council of Economic Advisers and the National Economic Council in the Clinton administration. She is a member of President Obama’s Economic Recovery Advisory Board.

Friday, August 20, 2010

Same Stupid System, Same Stupid People - Nothing Has Changed.

Nothing Has Changed

Of Two Minds - Charles Hugh Smith, August 19, 2010

Despite the legislative churn that produced thousands of pages of new laws and regulations and much self-congratulatory PR, nothing of any importance has changed.

What's truly amazing is how little has changed in the past two years of global financial turmoil.

All the truly important systems remain completely status quo:

1. The U.S. Global Empire continues to export paper (a.k.a. U.S. dollars) in exchange for real goods.

2. Global owners of capital and the Empire's owners/managers continue to buy the Empire's bonds in their endless trillions.

3. No Imperial war has been declared over and the troops withdrawn.

4. Not one of the hundreds of U.S. overseas bases has been shuttered; rather, new ones have been established and existing ones hardened and expanded.

5. The "too big to fail" banks have grown even larger and thus even more securely protected from failure by the Savior State.

6. The national Security State continues expanding at a staggering rate, seeking global hegemony over all electronic communications even as its own sprawling tenacles have no awareness of what the other tenacles know or don't know.

7. Thanks to "healthcare reform" (sic), the sickcare cartels have tightened their grip on the nation's income stream.

8. Lobbyists still control the lawmaking machinery of the Federal government. Indeed, any real reform has been attacked like a carcass tossed in a piranha-infested river; reform has quickly been stripped and then repackaged as a gutted faux reform for PR purposes.

9. The wealth/income/power gulf between the top 5% and the bottom 95% of citizens continues widening.

10. The two political parties continue spewing propaganda-laden facsimiles of the ideologies that once powered their values: both are owned or leased by the financial Power Elites and other cartels/fiefdoms. Neither party has any plan other than "extend and pretend" the status quo.

"Tax cuts" are double-speak for enriching the wealthy and saddling future generations with unpayable debts: "tax and spend" is now "borrow and spend" to both parties.

11. All the thousands of pages of "reform" legislation merely tweak the parameters of entrenched fiefdoms and cartels; the insurance and other sickcare cartels are firmly in control ("more studies" is always the marketing ploy proffered as "reform"), the military-industrial cartel/State partnership's revolving door still spins, etc.

12. Not one major weapons system has been cancelled; weapons procurement programs are shaved and stretched over more years, increasing their costs.

13. No real effort has been made to enforce laws which might bring indictments of the financial Power Elite players who gamed, embezzled, plundered and looted the nation's financial system.

14. The overhang of uncollectable debts in the nation's real estate (residential and commercial) remains firmly in place; "extend and pretend" the status quo is the order of the day.

15. No one in the nation has learned to say "no;" sacrifice is something reserved for those at the tip of the Imperial spear.

16. The nation's Power Elites have no plans for adapting to new realities; their only plan is to keep applying the same "fixes" that "worked" over the past 60 years: Keynesian "stimulus" to the Elites and fiefdoms, 2,300-page excretions of arcane, incomprehensible legislation, bailouts of politically powerful unions and other fiefdoms, more benefits showered on reliably self-centered voter blocks (seniors and other recipients of Savior State largesse) and more corporate welfare for the cartels and monopolies which fund their costly campaigns to con the great unwashed.

17. "Innovation" stays safely corralled in the realm of toys, gadgets and social media. Real innovations in education, governance, the legal system, etc. that threaten the status quo fiefdoms and Power Elites are smothered at birth.

18. The rot at the center of the Empire--the culture of lies, marketing, prevarication, misrepresentation, embezzlement, parasitic looting, cheating, gaming the system and ceaseless distractions, the culture based on presenting facsimiles as "the real thing," remains firmly in place, strengthened every day by the political classes' prevarications and PR and the notion that lying, cheating, stealing and hiding the truth are all "the name of the game" and justified to nail down your share of the swag. That is the national politics of experience which remains safely unexamined.

Nothing of any importance has changed. The engine of Empire is lugging a bit as the load increases, but the Empire's army of high-caste technocrats are hard at work, securing their perquisites and fat paychecks by keeping the sprawling global machine running.

Just as in the late stages of the Roman Empire, magical thinking abounds. This is America, the capital of can-do! We are audaciously hopeful because we always arise, newly envigorated by the unquenchable spring of American innovation, blah blah blah.

Thus is truth silenced because it might be painful, and require actual change rather than highly glossed facsimiles.

Tuesday, August 17, 2010

Commando Team Will Replace Dutch Central Bank Governor Wellink

"No really, there are no problems at all, in fact: all banks are healthy. Green shoots everywhere. Trust us, we are your bankers ".

And in the 50 year old tradition of Dutch problem solving, unhealthy banks will be subsidised. Should there be unintended consequences of this subsidy these subsequent problems will also be subsidised. And these subsidies will go on and on until there are no trees left for the paper to write down the regulations of these subsidies.

No Reappointment Wellink

Financieel Dagblad

Google Translation: De Nederlandsche Bank (DNB) gets a commando team to quickly intervene when there is a bankruptcy risk with banks. Nout Wellink simultaneously may no longer apply for a new term as director of DNB.

This is an action plan caretaker Minister Jan Kees de Jager of Finance presented to the House on Monday.

The action plan is designed to become "intrusive, critical, and especially more effective". The amendment comes after a damning report over a month ago about the events surrounding the downfall of DSB Bank. An inquiry chaired by Michiel Scheltema then stated that DNB never should have granted a banking license to the bank of Dirk Scheringa.

Command Team

To speed up action on problems, De Nederlandsche Bank (DNB), a new department on Interventions will be formed. This should be a command0 team which must actively intervene if things threaten to go wrong with banks and other regulated financial institutions.

The intervention team is separate from the regular monitoring and will have a separate mandate. This new department should "not shy away from confrontation and timely intervention as the evidence is not yet complete. More often than in the past, conflicts will be fought in court, says the action plan.


De Jager also wants the term of the DNB board maximized to fourteen years with a renewal term. Now its members are unlimited renewable for further periods of seven years.

This marks the end of the Wellink who has been criticized as bank president. July next year is his second time limit. Starting last year, Wellink yet that he was in third period, but de Jager cut that route now. Critics see the amendment as a way to save Wellink loss of face but to secure his departure.

Thursday, August 12, 2010

License Plate Recognition: Big Brother Is Watching You !


"No really, we use this software not to follow you, not to check you out, not to cross reference your movements with information from the tax man, insurance companies, employer and criminal records. Not at all!

You see, we are looking for terrorists.

Don't you agree we must do EVERYTHING to find evil people? Don't you agree we need to use the latest techniques to avoid a terrorist bombing?

An imaginary chat with civil servants in charge of project "find a terrorist". And of course 99% of the people would agree we should find terrorists. And hey, what's a digital picture of your car? Doesn't hurt.

But the consequences will be devastating. We're giving governments the green light to look behind our curtains. Will they abuse it? Of course they will! 100% sure. Governments throughout the ages never stepped back, unless through war or revolution. You give them a finger and they swallow you. Just a matter of time.

Now check out this video below. Is that not you? Why were you there? said you were going to the doctor. And then to the shop! Explain, please!!

UPDATE: And don't you trust Google; read what the CEO of this US privacy buster company has to say about privacy:

"But if you are trying to commit a terrible, evil crime, it's not obvious that you should be able to do so with complete anonymity."

Shiver! Mr Schmidt wants to be the Alpha and Omega in deciding if you are going to commit a crime. He wants to look over your shoulder. Gone Net Neutrality.
Together with the police and intelligent agencies. You see, you could be planning evil crimes. You lied before when you said you were going to the doctor and then to the shop. Why should we believe you now?

I heard that one before...let me think where...hmmmm..

UPDATE1: You prove you're not guilty! ABC News: Software predicts criminal behaviour

UPDATE2: Yahoo News: The Government's new right to track your every move through GPS

Monday, August 9, 2010

If Harry Markopolos Speaks, I listen: Major Scandals To Be Revealed About The $600 Trillion CDS Market.


UPDATE JUNE 2011: Dead Silence.....
UPDATE SEPTEMBER 2011: Harry! Where aaaaarrre you?????

Harry, tell us more!

You must know Harry Markopolos, I sat in awe in front of the TV when he gave his Congressional testimony in 2009:

From senseoncents:

"His service and commitment are truly heroic. I hold him in the highest regard. America needs more men like Harry Markopolos!! Mr. Markopolos and three of his colleagues dedicated thousands of hours to investigating the Madoff fraud over the course of more than ten years. His comments and condemnations are riveting. Here is a summary of Harry Markopolos’ remarks:
1. The SEC has been totally incompetent and neglectful throughout this entire process. He provided the SEC with reams of evidence and tips for them to pursue. They never fully investigated.
2. There were significant turf battles between the SEC Offices in Boston, New York and Washington D.C..
3. Markopolos claims it took him a mere 5 minutes in reviewing Madoff’s reported returns to know they were suspect. It took him approximately 4 hours to confirm his suspicions based on reviewing options trading volume.
4. He recommends one governmental financial regulator to oversee all of the other regulators so that all information is shared and tips are pursued.
5. He provided 29 separate red flags on the Madoff fraud!!
6. The largest feeder fund to Madoff was Greenwich Fairfield. This entity utilized three separate auditors for 2004, 2005, 2006. Red Flag!!
7. Markopolos was obsessed with his pursuit in order to rid the system of a criminal fraud. He received no compensation for his work!!
8. Every money manager and investment advisor MUST have separate custodians to handle investor funds.
9. He maintains that Madoff had to have had a “lot” of help in perpetrating this fraud both inside and outside of his office.
10. He maintains that there are 12 other fund of funds in Europe that have provided a significant flow of funds into Madoff. He is going to release those names to the SEC tomorrow.
11. The SEC does not have the degree of professional expertise to detect, investigate, and pursue cases. The SEC should hire seasoned financial professionals and pay them on an “incentive basis” to unearth and process financial frauds.
12. In Mr. Markopolos’ opinion, while the SEC is incompetent, the NASD and its offspring FINRA are CORRUPT!!! FINRA is in bed with the industry. He recommends that FINRA read his report. He references that the regulators missed a number of failed and fraudulent practices including the Auction Rate Preferred market. Perhaps Mr. Markopolos also read FINRA’s 2007 Annual Report which highlights that FINRA had investments in Auction Rate Securities. When Mr. Markopolos remarks that FINRA is in bed with the industry, is he referencing that they are invested in hedge funds, fund of funds, and private equity? Our new SEC chair, former FINRA chair Mary Schapiro, should be compelled to answer these questions!!!
13. Mr. Markopolos will reveal another $1 billion fraud to the SEC tomorrow.
14. Mr. Markopolos offered to go undercover for the SEC to fully reveal the Bernie Madoff fraud.
15. Mr. Madoff attracted a LOT of dirty money, including funds from the Russian mob and Latin American drug cartels!! There were times when Mr. Markopolos feared for his life.
I can not speak highly enough of Mr. Markopolos and the character, integrity, and patriotism he has displayed throughout this process. His country, in the form of the SEC, failed him and failed all of us. The question I ask is how and why did that failure occur? To think that these failures occurred merely due to incompetence and negligence is naive. Follow the money!! I can only hope that Congress has the courage to reengage Ms. Schapiro and pursue the line of questioning that Mr. Markopolos has proposed for a thorough investigation of FINRA and which I highlighted in Let’s Really Question Ms. Schapiro…
Harry….YOU ARE THE MAN!!!"
But gets better:


"When Harry Markopolos speaks, I listen. Harry spoke at a recent gathering on Long Island. Why isn’t Harry’s message being widely disseminated?
Harry has unquestioned credibility and integrity given his Congressional testimony this past February 4th. While listening to Harry’s testimony, I knew he was truly special and wrote “Riveting Testimony from a Great American, Harry Markopolos”:
This morning I have been witnessing the Congressional testimony of a great American, Harry Markopolos, in regard to the specifics of the Bernie Madoff debacle and the state of the regulatory world at large. His service and commitment are truly heroic. I hold him in the highest regard. America needs more men like Harry Markopolos!! Mr. Markopolos and three of his colleagues dedicated thousands of hours to investigating the Madoff fraud over the course of more than ten years. His comments and condemnations are riveting.
What does Harry have to say now and why is it that Page Six of The New York Post seems to be the only media coverage of his comments? The Post reports Scandal Bigger Than Bernie:
HARRY Markopolos - the whistleblower on Bernie Madoff who proved to be much smarter than the SEC - says there are evildoers out there who will make the Ponzi scum “look like small-time.” Markopolos gave a speech to 400 of the faithful at the Greek Orthodox Church in Southampton and predicted major scandals will soon be revealed about the unregulated, $600 trillion, credit-default swap market. “To put it in simple terms, it is like buying fire insurance policies from five different insurance companies on your neighbor’s house and then burning down the house,” he said. After his lecture, Hampton Sheet publisher Joan Jedell reports Markopolos was feted at a dinner at Nello Summertimes hosted by John Catsimatidis and his wife, Margo, who were joined by Al D’Amato and Greek shipping magnates Nicholas Zoullas and Spiros Milonas.
Where to start?
2. What is the correlation or connection between Harry making these comments and the Obama administration releasing word on regulation within the derivatives space? The Wall Street Journal reports Derivatives Overhaul Seeks to Reduce Risk.
Will regulators profess that risks and improprieties within the derivatives space have been addressed with the new regulations? In the process, will they try to muzzle Harry’s assertions?
3. I want to hear more from Harry. He can’t pull the fire alarm with this sort of statement without pointing to the flames and the arsonists.
Thoughts and insights appreciated."

Wednesday, August 4, 2010

An Authoritarian Culture That Values Conquest And Consumerism More Than Innovation And Production.

It now becomes clear. The Obama slogan "Yes, We Can!" refers to "Yes, we can eat, drink & spend more" rather than "Yes, we can innovate ourselves, work harder and go through a bad patch".

The hollowness of the slogan is a slap in the face of everybody who believed in the message of Obama after the arrogant face of Bush c.s.

The lying, cheating and manipulative manner in which the US is being governed becomes clear in the Daily Bell piece below.

Why should we, outside of the US, care? Because if the US sneezes, they will make sure we will get the flu. And they will be let off scott free. Trust them at your own risk.


US FedGov Saves the Day

The Daily Bell

Welcome to the Recovery ... We have a long way to go to address the fiscal trauma and damage across the country, and we will need to monitor the ups and downs in the economy month by month. The share of workers who have been unemployed for six months or more is at its highest level since 1948, when the data was first recorded, and we must do more to ensure that they have the skills they need to re-enter the 21st-century economy. Small businesses are still battling a tough climate. State and local governments are still hurting. These are considerable challenges, but we are in a much stronger position to face them today than when President Obama took office. By taking aggressive action to fix the financial system, reduce growth in health care costs and improve education, we have put the American economy on a firmer foundation for future growth. And as the president said last week, no one should bet against the American worker, American business and American ingenuity. – New York Times / Timothy Geithner (left)

Dominant Social Theme: Thank goodness for the Obama administration.

Free-Market Analysis: Timothy Geithner has written a long, self-congratulatory New York Times article entitled "Welcome to the Recovery." In it, he points out that the US is gradually beginning to do better economically and that the country is "on the path back to growth." The recession, he writes, began in late 2007 and was quite deep, but the Obama administration acted quickly to arrest it.

Geithner writes that the economy has a long way to go reach its full potential but has made a good start. He is sympathetic to workers still out of work but claims better days are coming. He admits the data shows that the "recession" was even deeper than previous numbers evince but concludes that "no one should bet against the American worker, American business and American ingenuity. We suffered a terrible blow, but we are coming back."

One wonders who "we" are. We haven't noticed that either Geithner, nor the president who is on the golf course or generally on vacation every chance he can get, has "suffered a terrible blow" that we can see. American business and ingenuity has indeed suffered, but we would argue that government has been the proximate cause – not the solution.

Some of what Geithner writes – which he no doubt construes as soothing – sounds more like a threat to us. He writes for instance that the American economy has a long way to go to reach full potential. If by this he means that he wishes to see the same feverish activity that presaged the bubble economy of the 2000s, then we would argue that the US economy ought never to reach such a capacity again.

He makes the point that a surge in imports indicates that demand in America is healthy and growing. Demand for what? From our point of view, not all import demand is healthy as some of it simply indicates that America is making less and less as the "service" economy takes hold.

You know, this is no ordinary recession. In fact, it is a crack-boom that has taken something like US$20 to $30 TRILLION to stabilize in Europe and the US – and thus the Obama Administration's various actions are in a sense trifling. We estimated once that the total cost of reflation would be in the area of US$100 trillion. No one will ever know of course, but we still believe that's a fair figure. And it is quite a lot because – we would argue – the 20th century monetary system effectively ended in 2007. Something else is coming, we're just not sure what.

Geithner makes the requisite melancholy noises regarding American unemployment, which according to government figures hovers around 10 percent. Others think it is more realistically 20 percent – and we think it is actually nearer 30 percent. This is of course the trouble with a fiat-money economy. It inflates so fast that it sucks the oxygen out of people's jobs. They see others are making two, three, four times what they are making in a given field and they quit to seek greener pastures, not understanding the nature of monetary inflation. When the boom collapses, so do their new, profitable, fashionable gigs.

This has happened over and over again during the past decades. And every time the wave washes up and then retreats, it takes more good jobs with it. The effect is tremendously distortive. Government and its central banks, in fact, cannot create jobs but can certainly remove them. The American economy from our point of view is going through a kind of South Americanization process. We've pointed this out before. South American economies are notoriously polarized. A handful of extraordinarily wealthy families and businesspeople own all the industrial and financial businesses of consequence. Everyone else is on the street, metaphorically speaking, selling cell-phones to each other at ever-more competitive prices.

The state of American industry is not healthy in our estimation. So much of America's industrial might has eroded. (And, no, we don't accept the idea that a service economy can take its place.) GM's latest auto was unveiled the other day, a US$45,000 electric car that can only travel short distances at a time. GM executives admitted the car was costly for its performance and then claimed that federal government rebates on the car of up to US$10,000 would make the car competitive. From our point of view the destruction of GM is complete, metaphorically anyway. It depends on the government for financing and then depends on government largesse to make its uncompetitive autos marketable.

Geithner can claim victory if he wants in the pages of the New York Times. But such a victory will be a hollow one indeed. If the Administration has truly managed to reflate the US bubble economy, the result will be an even bigger crash next time around (and that would be a mighty crash indeed). However, we have seen more and more predictions that the West is entering a kind of Japanese lost decade. That smells about right to us.

America's entrepreneurial vitality has been increasingly neutralized by a torrent of regulations, massive new entitlement programs and de-facto tax hikes pouring out of Washington. The can-do spirit of America has turned rancorous due to the corruption in government at all levels and especially because of the increasingly well-understood and immoral mechanism of central bank money creation.

Conclusion: Finally, there are the wars and the growing power of the American military industrial complex. Put all of these factors together and you end up with an increasingly authoritarian culture that values conquest and consumerism more than innovation and production. Geithner and Co. may visualize such a state of affairs as a "recovery." We see a calm before the storm.

Tuesday, August 3, 2010

"Krugman is wrong: Americans need more Deflation": Jim Rickards

Jim Rickards, Business Insider:

"Let's say you make $40,000 and you go to your boss and say 'Give me a raise,' and the boss says, 'Are you crazy? You're lucky I don't fire you; go back to your desk.' But if the price level drops 10 percent, he just had a 10 percent increase in his real standard of living."