Saturday, October 31, 2009

Long Live the Recovery

"Railroads' New Timetable" WSJ Oct 31-Nov 1 B10
The Association of American Railroads reports that average weekly container loads were down 15% from 2008 and 17% from 2007. "To get back fo a prerecession level, traffic would need to jump more than a fifth"

From Calculated Risk:
"Fannie Mae reported today that the rate of serious delinquencies - at least 90 days behind - for conventional loans in its single-family guarantee business increased to 4.45% in August, up from 4.17% in July - and up from 1.57% in August 2008."

Friday, October 30, 2009

Recovery Bubbles

Andy Xie offers another insightful analysis:

"Even though the global economy is staging a modest recovery, mainly on inventory restocking and fiscal stimuli, the overall economic situation is still difficult. Unemployment rates in OECD countries are at record highs. Global trade is still at one-fifth its peak level. The small- and medium-sized economies that employ most of the world's people are struggling. We see a contrast – unprecedented in modern times -- between the asset market boom and real economic difficulties..."

Thursday, October 29, 2009

Steel Sector Shows New Weakness

From today's WSJ, page B7.

"ArcelorMittal, the world' largest steelmaker by volume and revenue, Wed. said its third-quarter net profit improved from earlier quarters but fell 76% to $903 million over the previous year, because of weak steel demand."

A 76% fall in revenue due to weak demand in steel, the metal of industry and infrastructure, points to continuing economic contraction.

Wednesday, October 28, 2009

Defense Budget Horror

Today Obama signed the National Defense Authorization Bill Act of 2010.

I went through "Subtitle A-Authorization of Appropriations" of the bill and added up all of the procurements.

I came up with the figure of $99,738,563,000. This figure includes aircraft, missiles, weapons, and amunition. It also inlcudes "other procurements."

I am fairly certain "other procurement" does not include salaries. And nowhere are logistics and support covered.

Also missing is data about spending on the veterans whose health, bodies, and sanity have been compromised by military imperialism.

That means that approximately 100 billion is being spent on military equipment. This is an obscene figure, particularly when hunger and homelessnes in America are growing daily.

The US military empire has brought death and destruction to Iraq and has won the US enemies around the world.

Diplomacy and foreign aid would further our interests; military force simply produces hatred and resistance.

The Housing Market is NOT recovering

The hype on the so-called recovery in housing ignores the fact that new homes sales continue to fall, despite intermittent stabilization.

More importantly, foreclosures continue to rise and bank inventories of foreclosed properties are growing. Banks are not attempting to sell foreclosed properties because that would require them to take the losses on their books.

However, if one looks carefully at the data, it is easy to discern the negative trends in the housing market. My favorite blogs that analyze housing are Dr. Housing Bubble and Calculated Risk.

Today in the WSJ (pC11) there is an article titled "S&P Puts Mortgage Insurers on Watch." The article explains that the S&P noted with respect to 3rd quarter earnings by mortgage insurers that they "are experiencing a sharper and more rapid transition of delinquencies into prime books of business than we expected." The article continues, "Mortgage insurers have seen claims continue to rise along with home delinquencies and defaults."

The upshot is that with higher unemployment and declining wages, more and more individuals are going to lose their houses. Foreclosures are going to keep the banks and insurers in trouble for some time. That means lending to individuals will remain tight. It also means that the recession is far from over.

Max Keiser on Manufactured Volatility

More Max Keiser on how financial arsonists are destroying social justice and the American republic.

Tuesday, October 27, 2009

Stealth Bailout of Commercial Mortgages

Link for an analysis of a Treasury "stealth" plan for a bailout of the imploding commercial mortgage market.

I find it outrageous that nearly every major commercial industry/sector in the economy is eligible for a tax payer funded bailout but the states are allowed to collapse as their tax revenue decreases.

The government is bailing out banks, investment banks, AIG, and various insurance companies. Now it plans to bail out commercial real estate.

But the states are offered nothing and are forced to cut funds for education, domestic violence shelters, programs for poor families, etc.

Market Correction Coming

Washington's blog has an article citing Roubini and Gross (from PIMCO) who both describe a coming market correction.

Saturday, October 24, 2009

"Free Market" Fraud

In today's WSJ, Jason Zweig writes that "More than two-thirds of stock-market volume comes from high-frequency traders, who can buy or sell in less thant 400 microseconds, or nearly a thousand times faster than you can blink your eye."

Zweig claims that high frequency trading "have helped cut costs for everyone." However, Zero hedege has posted quite a few articles debunking that propaganda.

The upshot is there is no such thing as a "free market."

Friday, October 23, 2009

A Declining Empire Resorts to Force?

Paul Craig Roberts, former Secretary Treasury under Reagan, offers a critical take on the U.S. as declining empire.

I think his points about the US reliance on force over diplomacy abroad and at home are particularly noteble.

I expect to see more use of force as the US's economic power deteriorates further.

I read today that Japan's new leadership is questioning the use of its ports for US nuclear armed ships. (WSJ 10/23/09 p. 15). I believe this illustrates the growing disillusionment with US military-style diplomacy in the world.

Wednesday, October 21, 2009

Latvia Targeted for Debt Peonage

Max Keiser, whose work I admire, interviews Michael Hudson (who I also admire) about the debt peonage system being directed at Latvia. Hudson is helping Latvia resist this debt peonage.

The IMF is demanding that Latvia cut social spending, hospitals, etc in order to "service" the nation's debt.

This debt was accumulated as individuals in Latvia purchased homes using foreign currency. Hungary has the same problem. Individuals in former USSR nations were encouraged to take out loans from western European banks. When nations such as Hungary and Latvia experienced currency collapses due to the financial crisis (hot money outflows helped crash their currencies), it became impossible for Latvians and Hungarians to repay mortgages denominated in foreign currencies.

Forcing individuals in nations such as Latvia and Hungary to cannabilize their nations in order to pay back debt inflated by the financial crisis is absolutely disgusting.

Frontline "The Warning"

Frontline ran a must-see program last night on the efforts of one woman, Brooksley Born, to regulate the over-the-counter derivatives trade.

She ran into very strong opposition from the "free market" trio of Greenspan, Rubin, and Summers.

The Frontline story is a saga of arrogance, sexism, and self-interested commitments to the now-failed laissez-faire neoliberal ideology.

Monday, October 19, 2009

There Has Been a Financial Coup

More and more academics and financial analysts are joining the "coup" chorus.

I suppose there are other terms to use, such as "regulatory capture," but the basic point is that a wide variety of economic observers agree that the US Government is making decisions about the banks and investment agents (e.g., hedge funds) that are counter to the interests of the public.

The financial interests are looting the country.

Saturday, October 17, 2009

Ransacking America

October 17, 2009
Bailout Helps Fuel a New Era of Wall Street Wealth
"Even as the economy continues to struggle, much of Wall Street is minting money — and looking forward again to hefty bonuses..."

SIMON JOHNSON of Baseline Scenario:
"The US increasingly displays characteristics that we have seen many times in middle-income “emerging markets” – new dimensions of vast inequality, forms of financial instability that benefit the best connected, and consistently easy credit for the privileged. But this raises the question: who exactly is going to dominate our economic and political landscape moving forward?"

Friday, October 16, 2009

Goldman Sachs Rapes America

Dylan Ratigan on MSNBC provides the following data in order to support his case for "clawbacks" for the government from the investment banks.

Goldman Sachs received the following from the US Government since October 2008:
$10 billion from TARP
$11 billion from Federal Reserve Bank
$30 billion from FDIC
$13 billion from AIG
$70 billion total received from US Government to Goldman.

Goldman used this money to purchase assets in the US at the bottom of the market.

Now those assets have inflated because of the huge injections of capital into the economy by the US Government.

Goldman reaps $10 billion in trading and principle investments from the inflation of assets purchased at the bottom of the market with US Government supplied funds.

CONCLUSION: The US Government should demand that $10 billion be handed over.

IMPLICATION: The financial crisis and the bank bailouts enabled Goldman and other investment banks to rape America.

Why the Recesion is NOT Over

Unemployment continues to rise and those looking for work are typically not successful in finding jobs with living wages.

California's official unemployment number exceeds 12.3%. This figure understates the unemployment problem because it does not include those who were self-employed, those whose benefits have expired, and those working part-time although needing full time.

The states' rising unemployment creates a deflationary cycle.

As states/cities/counties cut state workers' hours and lay off workers unemployment grows in precisely that sector of the economy that Keynes argued must replace collapse of private sector demand.

There is no way the economy can recover when it suffers from a deflationary collapse caused by rising unemployment and underemployment.

Wall Street banks' recovery is a mirage enabled by fraudulent accounting that allows banks to avoid writing down losses.

It seems to me that the bankers are pillaging through bonuses while they can because they know at some point the game will be up as the losses become too large to hide.

Thursday, October 15, 2009

Diploma Mills and Debt Peonage

Danny Weil has a great article at Counterpunch on diploma mill "professional" colleges and universities.

I believe strongly in public education. I find it sickening that public dollars are supporting--in the form of hefty student loans--diploma mills that end up robbing the unfortunate students who pay upward of 30,000 for useless degrees.

Why are these degrees useless? They are useless because students do not learn to write, to read, to think critically, to reason, etc at these fraudulent "universities." Moreover, students do not find the jobs or wages promised by the "university" recruiters. That is how the students end up in debt peonage.

How do I know? I know because I have had many students recount their experiences at these places before transferring to ASU.

Federal and state dollars should not support loans for students at "universities" or "colleges" that lack formal professional/academic certification.

Wednesday, October 14, 2009

Global Hunger at Emergency Levels

United Nations: 1 Billion Going Hungry Worldwide

Obama is the New Gorbachev

Check out Club Orlov for a very, very sobering assessment.


I ordinarily do not simply vent my feelings on this blog but this time I gotta:






Tuesday, October 13, 2009

Neoliberal Order Crumbles

Jeff Faux of the economic policy institute has a nice speech about what crumbled and what needs to be done (minimally) to stabilize the global economy.

He has some important observations. Here are a few of his remarks:

"In my country, we talk of competition with Mexico. But what we call the Mexican economy is dominated by Americans and Mexicans corporate investors who use that competition to maintain low wages in both labor markets. And what we call the American economy is dominated by corporations who no longer consider themselves American.

So it is a great mistake to think of this cross-border economic relationship simply as competition between the people of Mexico and the people of the United States. In the global marketplace the interests workers in Mexico and the US – and in Chile and the rest of the world -- have increasingly more in common with each other, and less in common with the managers of global corporations who share their nationality. That the people of our countries understand this point is essential for organizing a politics to support social justice in the global economy...."

Misplaced Concerns About Debt

Simon Johnson and James Kwak have an article in today's Washington Post that reinforces my position that debt hawks risk extending and exacerbating the recession.

This position does not endorse frivolous government spending, nor does it support the pursuit of endless military expenditures.

However, debt spending is necessary to compensate for the collapse of private sector demand. Well targeted debt spending can help repair America's crumbling infrastructure and improve its education system. It can support small business lacking access to credit and it can improve the health and vitality of the population.

Debt spending does not necessarily impoverish future generations. Read the article and my previous post about this subject.

Monday, October 12, 2009

Bill Moyers' Interview

Excellent interview. It is rather long but every minute is worth watching!

Ellen Brown on IMF Stimulus Spending Bolsters Rich Banks

Much of the developing world has been ruled through debt servitude for decades. The developing nations have had to restructure their economies around neoliberal principles--liberalization of finance, domestic austerity, privatization--in order to receive loans. The net effect of neoliberal reforms is that the world's population is increasingly impoverished.

Ellen Brown's analysis suggests the IMF has found a new tactic in the battle to govern the developing world through debt. This new tactic further enriches the few financial agents who increasingly govern the world with their values, their policies, and their interests.

A Second Great Depression is Still Possible

Thomas Palley discusses some key reasons why the economy may continue to contract and/or stagnate.

I personally feel that all the talk about the recession being "over" is harmful for the vast numbers of people and small businesses that are still suffering so significantly.

Sunday, October 11, 2009

How is Money Created and What Processes Explain its Circulations?

This is a great article by Alan Nasser that explains why the bailout (not stimulus) is mis-directed by unpacking how money and credit are created.

The issue of money creation may seem arcane and not particularly interesting. However, understanding money creation is critical to understanding whether the deficit matters or not. It is also critical to evaluating the relative effectiveness of different forms of government spending.

The problem with the current government approach is too much money is being directed at banks, which are not lending. Commercial banks are investing their money in stock markets and are paying their execs outrageous bonsues. Calculated risk and credit writedowns (2 internet sites) have chart after chart showing that banks are cutting consumer credit, rather than lending.

Households are abruptly being forced to repay debt under increasingly onerous repayment conditions. Banks are raising rates on credit cards before new rules regulating their behavior go into effect in 2010. Individuals are seeing their interest rates double on outstanding balances.

The lack of credit and the deteriorating repayment conditions are enriching banks and financial interests. They are also directly undermining the living conditions of middle-class and lower-class households.

The economy cannot "recover" under these conditions. Small businesses cannot get credit and individuals cannot consume enough to stabilize the collapse of retail products and services.

I highly recommend reading the article. Here is one of the conclusions derived from the analysis of credit creation and circulation:

"The state is now transparently -dare I say it- the executive committee of the ruling class, and is no longer governing in the interests of the industrial elite. It is the financial elite that conceives and often executes policy, and these fellows don’t depend on production and employment to make their fortune. They sell not widgets but debt, the most fitting product for a population consigned to perpetual austerity."

Sweatshop Conditions in US Cities

A new study, "Broken Laws, Unprotected Workers," examining a wide array of workplace abuses by employers is discussed in detail at Global Research. The study is very disturbing and points both to the erosion of labor rights and protections in the US and to the erosion of basic workplace conditions for lower-wage workers. The Labor Department under Bush was unwilling to investigate workplace conditions and created a climate conducive to these abuses and conditions.

Calculating the Shrinking Budget of American Families

Nice breakdown of the difficulty of maintaining a middle-class lifestyle.

America seems to be headed in the direction of a Mexico-style class distribution.

Friday, October 9, 2009

Paul Krugman: Drop in Trade is Worse Than Great Depression

Krugman explains in an article in the WSJ:

“When it comes to international trade, actually it’s not the Great Depression, it’s worse,” he said, presenting charts showing the decline in global trade activity falling much more steeply in the current downturn than during the Depression.

“The scale of the collapse of world trade has been so large that it has produced a degree of international linkage that surpasses what even the pessimists imagined,” he said. “World trade acted as a transmission mechanism,” spreading economic distress “even to those countries that had relatively healthy financial systems,” such as Germany.

25% of Jobs Offshorable

According to a study posted at Economist's View 25% of all US jobs are offshorable. Moreover, "In terms of major substantive results, we found that more educated workers appear to hold somewhat more offshorable jobs."

The study claims that offshoring was not found to affect wages. Right!

Thursday, October 8, 2009


George Washington's blog, a well respected blog cited frequently on the blogosphere, has a posting today examining conspiracies.

First read:
"The US Air Force Shot Down Flight 93"

Then read:
"If We Don't Learn Our History, We're Doomed to Repeat It"

With regard to the second posting, I think it important to keep in mind that U.S. Freedom of Information Access requests that are honored reveal, time and time again, outrageous covert and illegal activities perpetrated by the CIA and other clandestine agencies.

Wednesday, October 7, 2009

S&P 500 Companies Expected Earnings

WSJ "Investors Seek Better Evidence" 2009, Oct 5. p. C2.

"Overall earnings for the S&P 500 companies are expected to fall 25% from last year's third quarter, according to Thompson Reuters"

Inflation or Deflation?????

A battle rages between those observes who see inflation on the immediate horizon and those who see deflation. Deflationists argue that the infusion of credit from the government is keeping the U.S. from entering a deflationary whirlpool from which there is no easy escape.

Inflationists argue that the increase in money supply will eventually trigger Weimer like inflation.

For an excellent, intelligible analysis of how the economy can be both inflationary and deflationary, check out this webpage:

Tuesday, October 6, 2009

SDRs and the Declining Dollar

Circulating on today's blogosphere are stories about the SDR replacing the dollar. There seems to considerable consensus that this will happen, eventually. The debate centers over the time scale. Most observers see this process as occurring very slowly and incrementally.

However, it appears the discussion is underway now about using SDRs or some other basket of currency to purchase OPEC oil.

The story that kicked up today's speculation can be found here:

Max Keiser was interviewed about the story and his comments can be found in short taped interview here:

Nearly every financial blog I frequent has analyses of the story that either dismiss it or ponder the death of the dollar as the world's currency reserve.

I find the article here to be a nice summary:

I am personally agnostic. I think the practical, logistical implications of trying to replace the dollar quickly defy the imagination. However, I also understand why many nations would like to speed up that time table.

Monday, October 5, 2009

New Unemployment Statistics
SPECIFIC UNEMPLOYEMNT DATA provided by the Economic Policy Institute:

"Other demographic breakdowns in unemployment show that while all major groups have experienced large increases, racial and ethnic minorities, men, and workers with lower levels of schooling are getting hit particularly hard.

—In September, unemployment was 15.4% among black workers, 12.7% among Hispanic workers, and 9.0% among white workers (increases of 6.5, 6.5, and 4.6 percentage points, respectively, since the start of the recession).

—Unemployment was 11.0% for men, compared to 8.4% for women (increases of 6.0 and 3.6 percentage points since the start of the recession).

—For workers age 25 or older, unemployment reached 10.8% for high school educated workers and 4.9% for those with a college degree (increases of 6.2 and 2.8 percentage points, respectively, since the start of the recession). "

Repressive State Apparatuses

The Washington Post reports the DHS is helping local police buy military style sonic equipment.

I believe it was precisely this equipment used recently against peacefully protesting university students and faculty in Pittsburgh.

It is sad to see that the Department of Homeland Security defines security in terms of repressive state apparatuses rather than in terms of Constitutionally defined rights.

Sunday, October 4, 2009

Janet Tavakoli with Max Keiser on Debt in the Financial System

Janet Tavakoli is an expert on derivatives. The link here is for her discussion with Max Keiser about the debt still in our financial system.

The point of her comments mirrors remarks made by Steve Keen, the Australian economist. The financial system and the economy cannot recover until the debt choking the system is eliminated. Citizens cannot pay down their debt while their wages decline.

Debt forgiveness is the only viable way forward for a quick and robust recovery.

Friday, October 2, 2009

Unemployment Data

Lots of posts today on today's unemployment data. Several sites are featuring statistical representations of changing civilian workforce participation over the last 4 decades.

Only one of the sites I've seen today takes into account the role of women entering the workforce. The fact that the percentage of civilian workforce participation today is still slightly above that of the 70s era recession does not mean that the 70s era recession was worse.

The mere fact that today's workforce participation rate is close to the 70s recession era level is scary given the fact that women were not widely represented in the workforce then.

Karl Denninger's post at seeking alpha gives us a better sense of how significant September's unemployment numbers are:

"... the Household Data is VASTLY worse than reported. Here are the month-over-month changes, and they're in the realm of frightening. (all numbers in thousands)

Civilian Labor Force: 154,879 to 153,617 this month.

Employed: 140,074 down to 139,079 this month.

That's a loss of 995,000 jobs, not 263,000, and the labor force contracted by 1,262,000 people!

The participation rate was absolutely decimated, down 0.6% this last month alone. The people "not in the labor force" rose by a staggering 1,516,000 in the last month."

"Weekly earnings are also down by $1.54, which is bad news too."

On Budget Deficits and Stimulus Spending

The budget deficit has ballooned. I used to believe that ballooning deficits were the primary concern. Certainly, many financial pundits seem to think so. My opinion on this issue has been revised after reading Randall Wray's work , Understanding Modern Money.

The basic point of his analysis is that federal budgets are NOT the same as household budgets. Government deficits are necessary for private spending and do not in fact compete with private spending.

This view on money does not mean that governments should spend money without concern.

However, it does mean that a contraction of private money supply and spending must be met with government deficit spending.

To cut deficits when private spending is collapsing ensures deflation

Robert Reich today argues for the necessity for more government spending to assist those without work and to promote public works projects. His article is persuasive, especially when one loses the fear of deficits as the demolisher of civiliations