the most beautiful girl in the world July 1940
Near Shawboro, North Carolina.
Florida migrants on their way to Cranberry, New Jersey
Ilargi: Let's look a bit more at the housing construction quagus mirus completus, since it's such a good way to counter all the 'green shoots shining through the trees' mumbo-jumbo. Monday, just two days ago, the National Association of Home Builders caused a happy stir worth 2.85% jump in the Dow. Tuesday, the Commerce Department said housing starts fell 12.8 percent in April, to a seasonally adjusted annual rate of 458,000 units, down 54.2% from a year before, and the lowest since January 1959. And that's in all probability just because no records were kept before. Today, Wednesday, there are some graphs that in my view illuminate the issue further in a useful way.
I should add that I looked at the graphs and was wondering how two different groups of people can get such different pictures out of the same set of data. I still don't think I fully understand what I see. There's different timelines: one starts in 1998, the other in 1991; one uses quarterly numbers, the other annual ones; one is not seasonally adjusted, the other is. Despite these differences, or even because of them, it's good to look at both:
- The first, courtesy of RM:
- The second, courtesy of Business Insider:
There's a lot here that deserves some more comment. Let's see. We can start with the fact that seasonal adjustment is a major factor. So prepare for positive news coming out of interested parties through spring, in the vein of "2nd quarter data up considerably over 1st quarter, don the beer hats". As you can easily see, the 2nd quarter is always better, simply because people tend to build less when their pipes, and the ones in their homes, are freezing. Be prepared.
Then there's an obvious time lag between housing starts coming apart and construction job losses. I looked at official numbers from the bureau that some claim has one letter to much, the BLS. From the US Bureau of Labor Statistics comes The Employment Situation: April 2009 published Friday, May 8, 2009.
Construction employment declined by 110,000 in April, with losses spread throughout the sector. Over the past 6 months, job losses have averaged 120,000 per month, compared with 46,000 per month from December 2007 through October 2008.This could lead us to believe that about a million jobs vanished from December ‘07 through April ‘09. Well, first of all, -we know how the BLS operates- that ignores the fact that most of those first to be laid off were illegal workers. It also ignores most temporary workers laid off, as well as those who moved from full time to temporary work. Still, even then, if you look at both the trendline and the timelag, it is clear that 3.5 million jobs lost in construction is the absolute minimum. Most of those have yet to be pink slipped, and if I were to bet, I’d put their down-the-line number much closer to 10 million, or even beyond.
Also note that in the first graph (something pretty well reflected in the second one), peak is at 170, while the trough (so far) is about 22, or more than 85% lower. And nothing in the graph indicates that any sort of bottom has been reached. Why would any homes be built anymore in the US? Prices just keep on dropping and there's a full year plus inventory in most places, and even that is based solely on the government putting your money on the line to guarantee your neighbors' purchases. You'd better hope your neighbor doesn't work in construction, for starters. Or a carmaker. A car dealership. Or a newspaper.
The Federal Reserve tries to .. eh.., let's say "absorb"... regulatory powers from government agencies. The Fed also worsens its economic forecasts today, though of course interspersed with the now obligatory green shooters: it says U3 unemployment might get as low as 9.6%!! Since U3 will be there by July, the Fed should not get any extra powers: their predictions are off by a hundred miles. Oh, and they're not a government agency, so having them protect voters is a lousy idea to begin with.
Let's make a deal: Bernanke et al can get their extra powers AFTER a committee of experts, elected by citizens without any interference from neither the government nor the financial industry, has completed a full audit of its actions and policies through the past 50 years. Yeah, didn't think so.
In the foreseeable future, less homes will be built in the US than are necessary just to replace the ones that fall apart. So people will have to move in together. Is that so bad in itself, as long as home is where the heart is?
Home
Home is where the heart is, home is so remote
Home is just emotion sticking in my throat
Let's go to your place Let's go to your place
Home is where the heart is, home is so remote
Home is just emotion dticking in my throat
Home is hard to swallow, home is like a rock
Home is good clean living, home is - I forgot
Let's go to your place Let's go to your place
Home is so suspicious, home is close control
Home is will you miss us, home is, I don't know
Let's go to your place Let's go to your place
Home is aggrovation, home is so much fuss
Home is mind your business, thank you very much
Let's go to your place Let's go to your place
I don't want to go back, I don't want to go back,
I don't want to go back anymore.
Lene Lovich
Housing: Recovering or Not?
Just as optimism began to bloom, U.S. housing starts hit a record low. The homebuilding sector may have to endure a long bottoming process. Hopes are high that the deeply troubled U.S. housing sector has finally seen the worst of the recession and financial crisis. But new data on May 19 raised questions about that optimism. U.S. housing starts hit a record low, dropping 12.8% in April, to an annual pace of 458,000. Housing starts are down 79.8% from their peak in January 2006. A sharp drop in construction of multifamily dwellings drove the reading, with single-family starts actually up 2.8%. However, the overall record low disappointed economists and investors, who had seen signs in recent months that housing might have hit bottom.
With housing starts at a record low, "it's early to pop the cork," says Michael R. Englund, chief economist for Action Economics. Yet, Englund and other economists told BusinessWeek, the data don't contradict hopes that housing might be near a bottom. A drop in construction activity is certainly troubling for the overall economy and for unemployment trends. But a drop in housing starts might actually be good news for the sector's eventual rebound, says Gary Wolfer, chief economist at Univest Wealth Management (UVSP). One of the housing market's main problems is a glut of supply—too many homes for sale. Idle homebuilders mean fewer new homes coming onto the market, thus hastening a bottom for the market. "We're getting there in a brutal fashion," Wolfer says, but at least we're "in the process of bottoming out." Keith Hembre, chief economist at First American Funds, worries that further home foreclosures could continue to drive the proliferation of "for sale" signs across the country.
However, he does see reasons to hope for a revival in demand. The government is helping: Low interest rates make mortgages more easily affordable (if you can qualify for one) and the federal government is providing an $8,000 tax credit in 2009 for first-time home buyers. "The signs are there that demand has generally hit bottom," Hembre says—and it may even be improving somewhat. First-quarter earnings reports from homebuilders have bolstered the case for guarded optimism. "For the homebuilding industry, we think that probably the worst is over," says Kenneth Leon, a Standard & Poor's equity analyst who covers the homebuilders. Key metrics seemed to improve in the homebuilders' first-quarter earnings reports, Leon says, including net orders, backlog, and the pace of homebuilder write-offs. Still, industry players continue to post quarterly losses.
Investors had a mixed reaction to the April housing starts data. Though the record decline was cited by some market observers as a troubling sign for the overall economy, shares of the largest homebuilders were mixed. On May 19, Pulte Homes (PHM) dropped 2.6%, to 10.03, but Toll Brothers (TOL) slipped just 0.7%, to 19.51, and D.R. Horton (DHI) gained 1.8%, to 9.96. After two very difficult years, homebuilders are trading solidly higher so far this year. The S&P Homebuilding index rose almost 19% in the first four months of 2009. S&P's Leon doesn't expect "a full sustained recovery" for the housing sector until the end of 2010. And several factors could derail or delay the housing market's recovery, experts say. Fresh foreclosures could flood the market with supply, even as homebuilders cancel new projects. Credit troubles could make it hard for buyers to get mortgages. Right now, "affordability is very attractive—if you can qualify and get a mortgage," Leon says.
Even if activity returns to the housing sector, home prices could continue to fall for some time. "While we are well into the housing bottoming process, we are a long way from recovery," Stifel Nicolaus (SF) analyst Michael R. Widner wrote May 19. "Our math suggests we have a couple years to go before excess inventory clears and paves the way for significant housing sector improvement," he added. Englund of Action Economics warns that there may be too much focus on foreclosures, government incentives, or individual data points. Those aren't the key drivers of a revival for housing, he says. As demonstrated by the "roller coaster of the last 2 1/2 years," he says: "It's the broader financial crisis that [is] really driving this process." While worries linger about the next potential financial disaster or an unforeseen economic meltdown, many home buyers are reluctant to take a risk on a major home purchase. "No one wants to jump headlong into this environment," Englund says. In other words, no matter what the data say from month to month, it's hard to imagine the housing sector bouncing back until the big picture significantly improves.
Toll Second-Quarter Revenue Declines 51% on Housing Slump
Toll Brothers Inc., the largest U.S. builder of luxury homes, said fiscal second-quarter revenue fell 51 percent as banks cut lending and demand for new homes sagged. Sales for the three months ended April 30 dropped to $398.3 million from $818 million a year earlier, the Horsham, Pennsylvania-based company said today in a statement today. Toll was projected to have revenue of $364 million, according to the median estimate of 11 analysts in a Bloomberg survey. Toll, the second-worst performing U.S. homebuilding stock this year, has lost more than a third of its value since 2006 as the housing slump and the recession have cut demand. Chairman and Chief Executive Officer Robert Toll said today there are some signs the housing market is starting to improve. Deposits for new homes last quarter rose from a year earlier, he said.
"With interest rates at an historic low, home price affordability at an historic high and consumer confidence starting to improve, we believe that more buyers are beginning to enter the enter the housing market," Toll said in the statement. "We have a few reasons for cautious optimism." The value of the company’s backlog, or homes under contract and not yet sold, slumped 55 percent to $944.1 million from a year earlier. The cancellation rate was 22 percent in the second quarter, down from 37 percent in the first quarter. Since the week ended March 22, per-community deposits have exceeded last year’s deposits in seven of the past nine weeks, Toll said. The average sale price fell to $563,000 in the second quarter, down from $575,000 in the first quarter. Toll fell 14 cents to $19.51 in New York Stock Exchange composite trading yesterday. The shares lost 20 percent in the 12 months through yesterday and have fallen 9 percent this year. Toll seeks buyers looking to upgrade from their current house and its sales are being hampered as prospective purchasers struggle to sell existing homes, said Megan McGrath, an analyst at Barclays Capital Inc. in a May 14 note to clients. She rates the shares "overweight."
"The decline in home equity will keep a portion of potential move-up buyers out of the market for some time, especially those who bought within the last five years," said McGrath. New home sales decreased 0.6 percent to an annual pace of 356,000, the Commerce Department said on April 24. Pending sales of U.S. existing homes posted their first back-to-back gain in almost a year in March. The median price of previously-owned single family homes fell 13.8 percent in the first quarter from a year earlier, the National Association of Realtors said on May 12. In the Northeast, where Toll has communities in New York, New Jersey and Pennsylvania, median home prices dropped 15.9 percent from a year earlier. The number of Americans signing contracts to buy previously owned homes jumped 3.2 percent after a 2 percent gain in February, the National Association of Realtors said on May 4. Toll will issue full earnings report on June 3. The company is projected to have a net loss of 30 cents a share for the second quarter, according to 11 analysts surveyed by Bloomberg.
Ilargi: Talking about housing starts, former GE CEO Jack Welch has some things right, but then veers off the track bigtime. People like Welch simply can’t imagine the party's over, truly over. Well, he's old, and that makes it harder, I guess. Growth shal resume!!!! No, it will not, Jack. Sorry.
Welch Criticizes Obama on Handling Chrysler Bankruptcy
Jack Welch, former chief executive officer of General Electric Co., criticized the government- backed bankruptcy of Chrysler LLC for favoring unions at the expense of creditors and said President Barack Obama’s economic stimulus programs will cause budget deficits. "I don’t particularly like where he’s taking us," Welch said, referring to Obama, during an interview yesterday at the Boston Convention Center. Welch, 73, who led GE from 1981 to 2001, was a guest speaker at the New England Business Xpo. "To get the money he needs, he has to have a fake budget," Welch said. "He’s fooling people about how we’re going to have the top line support the programs in the middle without enormous taxes and some programs not going."
Obama has defended the $17 billion in cuts he’s making in a $3.55 trillion budget against criticism from lawmakers by saying any savings, large or small, "add up." The administration’s plan eliminates or reduces 12 federal programs, from a $1 million Christopher Columbus fellowship foundation to $91 million for a nuclear waste repository in Nevada. The reductions represent one-half of 1 percent of the entire budget. Welch praised Obama’s communication skills, particularly his speech at the University of Notre Dame on Sunday. Still, he said he’s concerned about some of Obama’s programs. Among them is the restructuring plan for Chrysler LLC. The automaker and the government plan to use bankruptcy to transfer Chrysler’s best assets, such as its Jeep brand, into a new company with streamlined costs. The Chrysler workers pension fund will get a 55 percent stake.
Chrysler filed for bankruptcy in April after a group of secured creditors refused to participate in a $2.25 billion buyout for a $6.9 billion Chrysler loan. The government said the loan buyout would have prevented the bankruptcy, and Obama criticized the lenders for speculating at taxpayers’ expense. "I didn’t like the terms," Welch said. "The creditors’ rights were trashed and the unions got 55 percent of the company. Welch said the president’s plan to implement the nation’s first national standard for greenhouse-gas emissions was sound. "This emissions plan is not one that gives me great trouble," he said.
Welch said he’s optimistic about an economic recovery and looking closely at the housing market for signs as to when it may begin. "I want (new) housing starts to go down, down, down," he said. "It’s the only way to get housing prices stabilized, and we need to stabilize housing prices." Housing starts slid 13 percent to an annual rate of 458,000, a lower level than forecast, Commerce Department figures showed today in Washington. The drop was led by a 46 percent tumble in multifamily starts, a category that tends to be more volatile. Housing starts fell 10.8 percent to an annual rate of 510,000 in March. "While the market didn’t like it -- housing starts going down again -- I like it," Welch said.
Pension Funds Object to Chrysler Asset Sale, Want Trustee to Run Automaker
A group of Indiana pension funds that hold first-lien debt of Chrysler LLC objected to a plan to auction the company’s assets and said a U.S. District Court judge should rule on whether the sale is lawful. The Indiana State Teachers Retirement Fund, Indiana State Police Pension Trust and Indiana Major Move Construction filed court papers late yesterday and today asking U.S. Bankruptcy Judge Arthur Gonzalez in New York to block the sale, claiming the plan is illegal and tramples their rights. A hearing to approve the sale to a group led by Fiat SpA, or a bidder that tops its $2 billion offer, is scheduled for May 27. Gonzalez denied a motion by the funds to stay the sale process while they seek a review by the U.S. District Court of whether the sale is proper.
The funds’ attorney, Thomas Lauria, said after today’s hearing that the group already had filed papers with the district court. The funds also have asked for the appointment of a trustee to run Chrysler, saying the company has “ceded control over their business and their restructuring efforts to the United States Treasury Department,” which is using the bankruptcy to reward certain creditors that “the government deems politically important,” according to one of the filings. “The Treasury Department has taken constructive possession of Chrysler and is requiring it to adopt a sale plan in bankruptcy that violates the most fundamental principles of creditor rights,” lawyers for the pension plans wrote.
The funds are represented by Lauria and other lawyers at White & Case LLP, the same law firm that represented a group known as Chrysler’s Non-TARP lenders. U.S. District Judge Thomas Griesa in New York scheduled a hearing on the pension funds’ request for May 26 at 11:30 a.m. Court papers must be filed before then, he said. President Barack Obama criticized the Non-TARP lenders for refusing to accept an offer that would have paid them about 30 cents on the dollar, saying they forced the automaker’s bankruptcy. The Non-TARP group abandoned its fight to block Chrysler’s sale plan earlier this month, citing political pressure.
Fed's economic forecast worsens
Central bank now expects unemployment to rise to a range of 9.2% to 9.6% this year. Fed also predicts a sharper decline in GDP than it had forecast in January.
The Federal Reserve's latest forecasts for the U.S. economy are gloomier than the ones released three months earlier, with an expectation for higher unemployment and a steeper drop in economic activity. The Fed's forecasts, released as part of the minutes from its April meeting, show that its staff now expects the unemployment rate to rise to between 9.2% and 9.6% this year. The central bank had forecast in January that the jobless rate would be in a range of 8.5% to 8.8%, but the unemployment rate topped that in April, hitting 8.9%. The Fed also now expects the gross domestic product, the broadest measure of the nation's economic activity, to post a drop of between 1.3% and 2% this year. It had previously expected only a 0.5% to 1.3% decline.
At the April meeting, the Fed decided to once again leave its key federal funds rate near 0%, a level it has been at since last December. The central bank also announced that it did not plan on increasing purchasing more long-term Treasury notes anytime soon. The Fed disclosed plans to begin buying $300 billion's worth of such Treasurys in March in order to try and keep long-term rates down and boost economic activity. But according to the minutes, some members of the central bank's policy committee indicated they were open to increasing its purchases of Treasury notes and mortgage securities as a way of spurring more lending.
Treasury prices rallied after the minutes were released, pushing their yield, which moves in the opposite direction, down to 3.18%. Stocks, which have moved sharply higher during the past two months on hopes that the recession may soon be ending, were relatively flat Wednesday afternoon.
According to the minutes, Fed members did indicate they expected GDP to increase slightly in the second half of this year. However, it would not be enough to overcome the anticipated declines in the first half. GDP shrunk more than 6% in the first quarter. Policymakers acknowledged that there were some better economic readings in the period leading up to the April meeting, but added that they were not convinced the economy was out of the woods yet. In the minutes, Fed members indicated that there are a number of factors that "would be likely to restrain the pace of economic recovery over the medium term" and added that the credit crunch would "recede only gradually" and that "households would likely remain cautious" in their spending.
Fed members expressed concerns about rising problems in the commercial real estate market as well, indicating that this could cause further problems for financial institutions still struggling with the effects of the collapse of home prices and rising mortgage defaults. The Fed also reduced its GDP targets for 2010 and 2011, but the central banks still expects the economy to grow in both years. Rich Yamarone, director of economic research at Argus Research, said that the Fed's new forecasts were "more of a reality check than a revision," given the deterioration in the labor market and overall economy since January. But he and other economists said it also appeared from the minutes that the Fed is pleased with how the economy has started to respond to the steps it has taken, including the purchases of mortgages and Treasurys.
"I read [the minutes] as 'We think it's working, let's wait a few months to see how it plays out,'" said Gus Faucher - director of macroeconomics at Moody's Economy.com. He added that it did not seem like the Fed felt a "sense of urgency" to increase the scope of its Treasury purchase program. And Yamarone said it's important to remember that the forecasts and minutes are three weeks old, and that economic readings since the meeting, including home sales and the rate of job losses, have generally showed signs of improvement. "These minutes look like they have a bleaker assessment, but things were darker then," he said. "I can't say it's an accurate interpretation of their outlook today. I think that would be a little more favorable."
California Officials Prepare Budget Cuts After Voters Reject Ballot Measures
California voters rejected a handful of ballot measures Tuesday meant to plug less than half of the state's $21 billion budget hole, and state leaders today are preparing major program cuts to deal with the growing crisis.
Voters resoundingly snubbed five of the six ballot measures -- a combination of tax increases, borrowing and earmarks for education -- in Tuesday's special election, with most of them receiving more than a 65 percent "no" vote. The only measure approved was one that prevents legislators, including the governor, from receiving pay raises in years when the state is running a deficit. Had the measures passed, the state's deficit would have been slightly smaller: $15 billion. The timing couldn't be worse for the Golden State, which regularly takes out short-term loans this time of year to pay its bills. California will be hard pressed to secure a sizeable loan, given its shaky credit rating and the tight lending policies at banks following the national economic crisis.
"The legislature and the governor have very difficult decisions to make now," said Jason Dickerson, cash management analyst for the Legislative Analyst's Office, the state's nonpartisan fiscal and policy adviser. "The budget changes and payment delays that may have to be initiated will affect millions of Californians in some way or another. It will affect local governments, state vendors and many other entities." It was just three months ago that state legislators emerged from a lock-in at the capitol to unveil a $42 billion budget package, that included the budget provisions voted on yesterday. But their failure was anticipated. A Field Poll released earlier this month found that nearly 75 percent of registered voters disapproved of the state legislature's job -- the poorest rating ever recorded by the survey -- and that unhappy voters were less likely to support the measures.
Gov. Arnold Schwarzenegger (R), who came into office after a budget crisis confounded his Democratic predecessor, had said Tuesday's election would determine whether the state continues "tumbling down the path of financial ruin and despair." In anticipation of Tuesday's outcome, he released early two versions of the budget, one based on the measures passing and the other if they failed. The second one calls for more than $5 billion in cuts to schools, more than $1 billion from higher education, and $2 billion from health and human services, including cuts in HIV education and prevention programs. It also calls for turning over thousands of undocumented immigrant prisoners to federal custody, saving the state $100 million, Schwarzenegger said, and borrowing $2 billion from local governments. And in a move that has drawn some criticism, Schwarzenegger's budget also calls for selling off state properties, including San Quentin State Prison and the Los Angeles Memorial Coliseum.
American Express Says U.S. Card Law May Reduce Credit
American Express Co. Chief Executive Officer Kenneth Chenault said U.S. legislation to curb credit- card fees may reduce lending to "consumers who need it" and will hurt competitors more than his company.
The impact of the measure, passed by Congress today, will be "more negative than positive" for American Express, the largest U.S. credit-card issuer by purchases, because it may crimp the New York-based company’s ability to set prices according to risk, Chenault said today during a conference call. "My concern is about credit being available, particularly to consumers who need it," Chenault said. "We’ll be hurt less than our competitors because 80 percent of our revenues are generated from fees."
President Barack Obama plans to sign the legislation to curb credit-card fees and marketing practices that legislators have called deceptive, White House spokesman Robert Gibbs said today. Card companies have said the new law may reduce profit, increase costs for customers and reduce perks. The Senate passed the credit-card measure yesterday, and the House gave it final approval today with a 361-64 vote. In a separate conference call, MasterCard Inc. CEO Robert Selander told investors today the legislation will affect "every aspect" of how cards are marketed to customers, including those who pay on time. American Express will adjust to the legislative changes and the U.S. recession, in which consumers are spending less and defaulting on loans more, by focusing on customers outside the U.S. and on its charge-card business, in which users pay off entire balances every month, Chenault said.
The company, which converted to a bank holding company last year to tap the government’s Troubled Asset Relief Program for $3.39 billion, has "zero interest" in becoming a full-service bank, Chenault said. The lender has enough access to cash by accepting consumer deposits for products including certificates of deposit, he said. American Express slipped 45 cents to $24.34 at 3:03 p.m. in New York Stock Exchange composite trading. The lender has lost almost half its market value in the past 12 months. MasterCard, which has declined by more than a third in the past year, advanced 3.5 percent to $172.53. The legislation would require lenders to apply payments to balances with the highest interest rates first. It would prohibit increasing a consumer’s rate on existing balances based on late payments to another lender, a practice known as "universal default."
It will also mandate 45 days’ notice before lenders can increase a card’s interest rate and prohibit retroactive rate increases on existing balances unless a consumer was 60 days late with a payment. The U.S. economy is still shrinking and the "real risk" to it is a lack of credit, Treasury Secretary Timothy Geithner told the Senate Banking Committee today in Washington. The Treasury has about $124 billion left in the $700 billion TARP plan, including $25 billion in expected repayments over the next year, Geithner said. The U.S. unemployment rate reached 8.9 percent in April, the highest since 1983. That month, 539,000 jobs were lost, the smallest drop in six months, as the worst recession in half a century started to ease and the federal government stepped up hiring for the next census.
Japan’s Economy Shrank Record 15.2% Last Quarter
Japan’s economy shrank at a record 15.2 percent annual pace last quarter as exports collapsed and consumers and businesses cut spending. The contraction followed a revised fourth-quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. Gross domestic product fell 3.5 percent in the year ended March 31, the most since records began in 1955, confirming that the recession is Japan’s worst in the postwar era. Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy.
"There was a collapse across the board," said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Still, he added that there’s "light at the end of the tunnel" and the economy will resume growing this quarter as companies replenish inventories and stimulus plans at home and abroad take effect. The yen traded at 95.71 per dollar at 11 a.m. in Tokyo from 96.16 before the report was published. The Nikkei 225 Stock Average rose 0.4 percent. The first-quarter contraction was the most severe since records started 54 years ago. Economists predicted the economy would shrink 16.1 percent. GDP fell 4 percent on a non-annualized basis, more than double the U.S.’s 1.6 percent slide. It’s also worse than Europe’s record 2.5 percent contraction. Without adjusting for price changes, Japan shrank 2.9 percent last quarter. Weaker domestic demand was the biggest contributor to the decline, shaving 2.6 percentage points off GDP, the most since 1974. Net exports -- the difference between exports and imports -- was responsible for 1.4 percentage points of the drop.
Consumer spending slid 1.1 percent and business investment plunged a record 10.4 percent. Economists say companies will keep cutting spending because the decline in demand has left factories and workers underused. "There is a huge problem of over-capacity," said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. "That means capital spending is not likely to pick up." Hitachi, a maker of nuclear reactors, home appliances and hard-disk drives, will trim costs by 500 billion yen ($5.2 billion) this fiscal year to minimize losses after a record 787.3 billion yen deficit last year. The Tokyo-based company said in January it plans to cut 7,000 jobs. Still, reports in the past month suggest the world’s second-largest economy may grow for the first time in a year this quarter, albeit from a low point, as exports stabilize and Prime Minister Taro Aso’s 15.4 trillion yen stimulus plan, announced in April, takes effect.
Consumer confidence climbed to a 10-month high in April. Exports increased in March from a month earlier, and factory output rose for the first time since September. "While the economy will continue to be in a severe state, I expect less pressure from inventory adjustments and the stimulus package to provide support," Economy and Fiscal Policy Minister Kaoru Yosano said after today’s report. Falling inventories accounted for 0.3 percentage point of last quarter’s contraction. Companies including Honda Motor Corp. have cut stockpiles at a quicker rate than sales have declined, giving them room to increase production. The automaker plans to boost output in Japan this quarter as dealerships clear inventories, the Wall Street Journal reported last week.
Honda Executive Vice President Koichi Kondo said last month that the worst for the U.S. is probably over. Still, the failure of export demand to do better than simply stabilize will probably limit the scope of Japan’s recovery. Toyota, Hitachi, and Panasonic Corp. all forecast continued losses in the current business year. Panasonic said last week it plans to close about 20 factories this year and proceed with the 15,000 job cuts announced in February. "We basically bottomed out," said Jesper Koll, chief executive officer of hedge fund adviser TRJ Tantallon Research Japan. Even so, "on the consumer spending side you’ve got a very clear negative from the severe labor market adjustment."
Geithner Says Distressed-Asset Programs to Start in Six Weeks
Treasury Secretary Timothy Geithner said he expects a pair of government programs to help banks remove their distressed assets will start by early July, policy makers’ next step in ending the worst credit crisis in decades. "Working with the Federal Reserve and the FDIC, we expect these programs to begin operating over the next six weeks," Geithner said in prepared testimony to the Senate Banking Committee today in Washington. The Treasury’s Public-Private Investment Program will use $75 billion to $100 of government funds to finance sales of as much as $1 trillion in distressed mortgage-backed securities and other assets. The effort has two components, which the Treasury will manage in conjunction with the Fed and the Federal Deposit Insurance Corp.
Geithner also said that the Treasury has about $124 billion left in the $700 billion Troubled Asset Relief Program, including $25 billion in expected repayments over the next year. This compares with the department’s previous estimate of about $135 billion remaining as of late March. Geithner said the Treasury and the Fed also expect to expand programs designed to help asset-backed securities markets, such as the Fed’s Term Asset-Backed Securities Loan Facility. The central bank yesterday announced it would add older commercial real estate securities to the TALF, marking the first time the program has included legacy assets as well as newly issued securities.
"The Treasury and the Federal Reserve will continue to monitor and enhance the ABS programs to bring in new, more niche asset classes and make sure that the number of eligible borrowers and issuers continues to increase," Geithner said. The Treasury chief reiterated his view that "there are important indications that our financial system is starting to heal," highlighting diminished premiums in corporate, municipal and interbank lending markets. The department is investigating "metrics" to use in judging the health of markets and the economy to determine "whether additional or different steps are needed," he said. The "process of financial recovery and repair will take time."
Banks have taken steps to strengthen their capital reserves since the conclusion of regulators’ stress tests on the biggest 19 lenders, he noted. Geithner repeated that "the vast majority of banks have more capital than they need to be considered well capitalized by their regulators." Geithner said the Obama administration is still working with General Motors Corp. as that company seeks to meet a government-imposed deadline for restructuring. The company has until the end of this month to come up with a new plan or enter bankruptcy, as Chrysler LLC did. "We will continue to work with GM and its stakeholders in the lead up to the June 1 deadline," Geithner said. "We will also continue our significant efforts to ensure that financing is available to creditworthy dealers and to pursue efforts to help boost domestic demand for cars."
Ilargi: Geithner is not telling the truth here:
The government was forced to pay off those bets at 100 cents on the dollar, he said.
How do you know? If it were true, he would have said so a long time ago.
Fed could be completely retooled, Geithner says
The Federal Reserve, created nearly 100 years ago in the aftermath of a financial panic, could be transformed into a different agency as the Obama administration reinvents the way government interacts with the financial system. The current crisis has revealed gaping holes in the regulatory system, and the Fed and the Treasury Department have resorted to making up policies in the middle of the night to make sure the global economy didn't fall through one of those holes. Treasury Secretary Timothy Geithner was hammered at a Senate hearing Wednesday about the cozy deals the government has made with all the big financial firms, especially those companies that had placed huge bets with American International Group , the large insurance company that is now 80% owned by the taxpayers.
Geithner said the government's hands are tied, because it had no ability to quickly shut down AIG in the way that small banks can be when they fail. The government was forced to pay off those bets at 100 cents on the dollar, he said. Geithner was also grilled on the cozy relationships that exist between the big banks and the regional Federal Reserve banks. Before Geithner joined the administration, he was president of the New York Fed, which is a strange public-private hybrid institution that is actually owned and run by the banks. Geithner insisted that the private banks have no say over the policies of the New York Fed, but he acknowledged that the banks do have a say in hiring the president, who does make policy.
The chairman of the New York Fed, Stephen Friedman, was forced to resign earlier this month because of perceived conflicts of interest due to his large holdings in Goldman Sachs. Geithner said it could be time to re-examine how the Fed is put together. "We should take a fresh look at conflicts across the system, because you do not want to have anybody in public office have their actions viewed through the prism of concern that they're motivated by anything but the broader interests of the system," Geithner said. Washington is now debating whether the Fed, or some new agency, should take on the duty of protecting the economy from systemwide risks that come from having firms that are "too big to fail." That debate should also include an examination of whether the Fed is too close to the institutions it is supposed to regulate.
U.S. May Strip SEC of Powers in Regulatory Overhaul
The Obama administration may call for stripping the Securities and Exchange Commission of some of its powers under a regulatory reorganization that could be unveiled as soon as next week, people familiar with the matter said. The proposal, still being drafted, is likely to give the Federal Reserve more authority to supervise financial firms deemed too big to fail. The Fed may inherit some SEC functions, with others going to other agencies, the people said. On the table: giving oversight of mutual funds to a bank regulator or a new agency to police consumer-finance products, two people said. The 75-year-old SEC, chartered to oversee Wall Street and safeguard investors, has seen its reputation tarnished as some lawmakers blamed it for missing the incipient financial crisis and failing to detect Bernard Madoff’s $65 billion Ponzi scheme.
Any move to rein in the agency is likely to provoke a battle in Congress, which would need to approve the changes, and draw the ire of union pension funds and other advocates for shareholders. "It would be a terrible mistake," said Stanley Sporkin, a former federal judge and enforcement chief at the SEC. "Whatever the SEC has done or didn’t do, it is still the premier investor protection agency around." SEC Chairman Mary Schapiro’s agency has been mostly absent from negotiations within the administration on the regulatory overhaul, and she has expressed frustration about not being consulted, according to people who have spoken with her. She has pledged to fight any attempt to diminish the SEC, they said. Treasury Secretary Timothy Geithner was set to discuss proposals to change financial regulations at a dinner last night with National Economic Council Director Lawrence Summers, former Fed Chairman Paul Volcker, ex-SEC Chairman Arthur Levitt and Elizabeth Warren, the Harvard University law professor who heads the congressional watchdog group for the $700 billion Troubled Asset Relief Program.
Levitt, in an interview today with Bloomberg Television, said it’s unlikely the SEC will ultimately be stripped of its responsibilities. "I don’t think it’s a great idea nor do I necessarily think it’s going to happen," Levitt said. The SEC "is a pretty powerful unit and to substitute that for a new bureaucracy is a mistake. I don’t think policy makers are likely to go down that path." Levitt added that the SEC needs stronger resources to make up for "nearly 15 years of deregulatory efforts." Geithner and Summers are leading the administration’s effort to redraw the lines of authority for policing the financial system. "We’re going to have to bring about a lot of changes to the basic framework of oversight, so there’s better enforcement," Geithner, said May 18 at the National Press Club in Washington. "That’s going to require simplifying, consolidating this enormously complicated, segmented structure." Geithner may be asked about his plans for a regulatory revamp at a Senate Banking Committee hearing on financial-rescue efforts in Washington today.
"The Administration has been holding series of meetings with various parts of the government -- including regulators -- as it crafts its proposal for regulatory reform," Treasury spokesman Andrew Williams said. "No decisions have been made but" the administration "is seeking views as it puts together its framework." President Barack Obama has said he wants to sign legislation on regulatory changes by year-end. House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, is planning hearings with the aim of drafting a bill by the end of June. The SEC’s job is to regulate stock markets, police securities sales and make sure public companies make adequate disclosures to investors about their finances. The commission has five members, with the chairman and two commissioners typically from the president’s political party and the other two from the party not in the White House. Schapiro was appointed by Obama to replace Christopher Cox, who was named by President George W. Bush.
Under Cox, the SEC ceded some of its authority to the Fed after the central bank responded to Bear Stearns Cos.’ near collapse last year by inserting its own examiners into Wall Street securities firms. Former Treasury Secretary Henry Paulson, Geithner’s predecessor, urged Congress in a March 2008 "blueprint" for overhauling financial rules to give the Fed broader powers to oversee risk in the system. Opponents of giving the Fed more authority, such as former SEC chief Levitt, have said the central bank’s focus on keeping the financial system solvent may trump efforts to punish companies for violating securities laws. Levitt is a board member of Bloomberg LP, the parent company of Bloomberg News. The SEC’s reputation took a hit last week when U.S. Senator Charles Grassley, an Iowa Republican, released a report saying two of its enforcement attorneys face an insider-trading investigation by the Federal Bureau of Investigation.
The report, written by the SEC inspector general’s office, faulted the SEC for inadequately monitoring trades by the employees and said one of them sold shares in companies after co-workers opened probes into the firms. Both employees, who are enforcement attorneys in the SEC division that investigates securities fraud, denied any wrongdoing. While the agency has been battered recently, it still has powerful supporters, including a number of Democrats on the Senate Banking Committee who aren’t likely to support having an agency they oversee cut back. In addition, public pension funds that hold $872 billion of assets urged lawmakers this month to protect the SEC’s turf in any legislation overhauling financial regulation. The California Public Employees’ Retirement System, the New York retirement fund and 12 other pension funds wrote letters to Frank and Senate Banking Committee Chairman Christopher Dodd, arguing that the SEC "must maintain robust regulatory and enforcement authority" over securities trading, brokers, money managers, corporate disclosures and accounting rules.
Credit card crackdown wins U.S. Congress approval
The U.S. Congress on Wednesday gave final approval to a bill that would impose sweeping new limits on the credit card industry, with President Barack Obama expected to sign it into law within days. In a major win for the president and congressional Democrats, the House of Representatives voted 361-64 to approve the bill as adopted on Tuesday by the Senate. It would sharply restrict credit card issuers' ability to raise interest rates on cardholders' existing balances and to charge certain fees.
The profits of major card issuers -- such as Citigroup, Bank of America, JPMorgan Chase and Capital One would be hurt by the bill, analysts said. It represents the first of several banking and market rule reforms expected from the administration as it tightens regulatory oversight in hopes of preventing another financial crisis like the one now pounding economies worldwide. The bill could hit home with more consumers than any other economic initiative launched so far under Obama, with some experts predicting a broad restructuring of how credit cards are priced, managed and marketed.
"These are monumental and expensive changes for credit card issuers to implement," said Duncan Douglass, a lawyer with the firm of Alston & Bird who specializes in payment law. The KBW Banks index of 24 leading bank stocks was down 2 percent on Wednesday following the House vote, with broader market indexes up modestly on the day. "This cements a victory for every American consumer who has ever suffered at the hands of the credit card industry," said Senator Christopher Dodd, chairman of the Senate Banking Committee, who steered the bill to Senate passage on Tuesday.
Former head of US government pension agency takes the Fifth
The former director of the government's pension agency took the Fifth Amendment Wednesday when senators asked about allegations that he had inappropriate contacts with Wall Street firms while running the operation, which insures the pensions of 44 million Americans. Charles E.F. Millard denies that he had improper communications with the firms that recently won multimillion-dollar contracts to advise the agency on a new strategy to invest its assets more heavily in stocks, real estate and private equity rather than more conservative fixed-income treasury securities. In a statement issued before the hearing, Millard's attorney Stanley Brand questioned the Senate Special Committee on Aging's jurisdiction in the matter. He said he advised Millard to assert his constitutional rights because he believes certain members of Congress appear to have already reached negative conclusions about his client's actions. "I decline to answer any and all questions," Millard said.
The allegations were contained in a PBGC inspector general's report last week that said Millard's office had hundreds of phone conversations and e-mails with the Wall Street firms bidding for the work in 2007 and 2008 at the same time he was actively evaluating their proposals. "The draft report was published on a committee Web site and senators were calling for further investigations before the report was even final," Brand said. "The Fifth Amendment protects innocent people against hostile environments. And Congress's recent actions and statements have created a biased and hostile environment toward Mr. Millard." The hearing was held at a time when the rapidly deteriorating financial health of the PBGC is raising alarms in Congress. Key lawmakers are demanding tougher rules to ensure vigilant oversight of its multibillion-dollar investment portfolio. The recession is forcing into bankruptcy an increasing number of companies with underfunded pension plans, leaving the PBGC with billions of dollars more to pay out in pension checks to retirees in the future. Its long-term deficit tripled in the past six months to a startling $33.5 billion.
The PBGC says it will be able to meet its obligations for many years to come. Still, it is monitoring weak companies with underfunded employer-sponsored pension plans in all sectors of the slumping economy, including auto, retail, financial services and health care. "Given the state of the economy, the question of PBGC's viability is more urgent than ever," said Sen. Herb Kohl, D-Wis., who chaired the hearing. "One in seven Americans count on this agency to pay out their pension in case their employer cannot due to bankruptcy. As General Motors teeters on the edge of insolvency, hundreds of thousands of workers' pensions could soon become the responsibility of the PBGC. And though Chrysler has managed to maintain its pension plan despite filing for bankruptcy, it may be only a matter of time before PBGC will have to accept responsibility for that pension plan as well."
In response to the inspector general's and his committee's own probe, Kohl has called for the contracts with the Wall Street firms to be rebid and that if they are not, his committee will ask the Government Accountability Office's special investigations unit to review communications the committee staff has received from the firms that won the contracts. Kohl also is introducing legislation in coming weeks that will require the agency's presidentially appointed director to remove himself from potential conflicts of interest. The bill also will expand and strengthen the PBGC's board of directors. Kohl has called for the contracts to be rebid. Three members of the president's Cabinet oversee the government's multibillion-dollar safety net for retirement benefits covered by employer-sponsored plans; 401(k) plans are not insured by the agency. Representatives for the secretaries of treasury, commerce and labor meet regularly, but in 28 years, the full PBGC board has met only 19 times. Kohl's bill would force the board to meet more frequently and stagger membership to make sure experienced board members are serving at all times.
In February 2008, during Millard's tenure, the board approved a new investment strategy that would invest the PBGC's assets more heavily in private equities and real estate. Millard remains convinced that more aggressive investments will help reduce the agency's deficit and perhaps prevent the need for a future taxpayer bailout. To help implement the new strategy, the agency solicited the services of investment firms on Wall Street. Goldman Sachs, BlackRock and JPMorgan won awards to invest up to $2.5 billion of PBGC assets in real estate and private equity in return for fees that could exceed $100 million over 10 years. So far, no agency assets have been transferred to the three firms. PBGC's acting director, Vince Snowbarger, said Tuesday that the staff was working with the new board members in the Obama administration to decide whether the contracts should be terminated.
Pension Benefit Guaranty's Deficit Triples to $33.5 Billion
Pension Benefit Guaranty Corp.’s deficit tripled to $33.5 billion in the past six months as companies canceled retirement plans in the U.S. recession, the head of the government-owned corporation said. About $11 billion is for "completed and probable terminations" of company plans and $7 billion is from an increase in interest rates that boosted liabilities, Vince Snowbarger, the acting PBGC director, said in written testimony to be delivered today to the Senate Special Committee on Aging. The PBGC, set up to protect the employee pensions of bankrupt companies, will tell Congress that its financial condition may worsen amid the likelihood for more pension plan failures. In the first half of the fiscal year that began in October, the PBGC took on almost four times the number of participants as it did in all of 2008.
The potential for General Motors Corp. and Chrysler LLC to end their plans has left the PBGC facing the prospect of adding 900,000 current and future beneficiaries. The PBGC, which pays retirement income to almost 44 million Americans, estimates that $77 billion of the automotive industry’s pensions are underfunded, with about $42 billion of that guaranteed by the agency for retirees. Automotive industry workers are at substantial risk of losing money if companies terminate their plans, according to Snowbarger’s prepared comments. There are still sufficient PBGC funds to meet benefit obligations for many years because benefits are paid monthly, spread over the lifetimes of participants and beneficiaries, he wrote.
The PBGC also faces increased exposure from companies in other sectors of the economy, including retail, financial services and health care, Snowbarger wrote. Snowbarger is scheduled to testify alongside Barbara Bovbjerg, associate director of the Government Accountability Office, who plans to tell the committee that the PBGC’s board is failing to provide adequate oversight and direction. The three-member board includes Treasury Secretary Timothy Geithner, Commerce Secretary Gary Locke and Labor Secretary Hilda Solis. The three have yet to meet since joining the board this year. The previous board last met in February 2008, Bovbjerg said in written testimony. "These board members have numerous other responsibilities, and are unable to dedicate consistent and comprehensive attention to the PBGC," Bovbjerg said. Representatives of the board members did meet as recently as November and there have been telephone calls and other contacts with PBGC senior management, Jeffrey Speicher, a PBGC spokesman, said.
The GAO said the board still falls short in overseeing the PBGC’s performance, investment decisions and hiring, roles that have become critical as the agency may have its largest pension takeover since being created by Congress in 1974. The potential for General Motors and Chrysler to end their pension plans could "dramatically increase" the deficit at the PBGC, the GAO said. Auburn Hills, Michigan-based Chrysler, which filed for bankruptcy protection on April 30, is seeking court approval of a settlement among the company, the PBGC, Cerberus Capital Management LP and Daimler AG to partly fund the plans and avoid such a termination, Chrysler lawyers said in a filing yesterday in U.S. Bankruptcy Court in New York.
Detroit-based GM is facing a U.S.-imposed June 1 deadline to reduce its costs and debt obligations or face bankruptcy. The PBGC’s board approved in February 2008 a new investment strategy to shift more money from safer Treasury securities to stocks, real-estate and private-equity with the potential for greater returns. The change was pushed by former Director Charles E.F. Millard, who is now under congressional investigation for his ties to Wall Street. Millard was subpoenaed by the Senate Special Committee on Aging to answer questions related to a draft report by the PBGC inspector general alleges that Millard had inappropriate communications with eight of 16 Wall Street firms that bid last year to manage $2.5 billion of the agency’s $48 billion investment portfolio. A lawyer for Millard, Stanley Brand, said his client acted in a "transparent and ethical manner."
Millard never fully implemented the less conservative investment strategy before he left the agency in January, the PBGC has said. About 30 percent of the agency’s $48 billion investment portfolio is in equities, 69 percent in fixed-income, and less than 2 percent in alternative assets. "Millard’s actions were questionable and should be investigated further, but our main concern is that they are symptomatic of a much bigger problem," Senator Herb Kohl, a Wisconsin Democrat and chairman of the Special Committee on Aging, said in a statement. "PBGC oversight structure is obviously inadequate if one person’s authority goes unchecked. At a time when we need PBGC more than ever, we have got to take concrete steps to strengthen the agency."
Investors expand fraud claims against Freddie Mac
Freddie Mac investors have filed expanded court claims accusing the mortgage finance company and three former executives of committing fraud by misleading them about risky loan practices and manipulating financial results. The allegations, contained in a nearly 300-page court complaint filed late on Tuesday, are based in part on interviews with more than 100 former company employees and others who are described in the lawsuit as having knowledge of Freddie Mac's operations and finances. Both Freddie Mac and Fannie Mae, the largest providers of residential mortgage funds, were seized by the government last September to save them from massive capital shortfalls and put in a legal status known as conservatorship. Shareholders at both companies have suffered big losses, with Freddie Mac shareholders saying they collectively lost billions when the McLean, Virginia-based company's financial troubles came to light last year. Its shares have plunged to below $1 from nearly $28 a year ago.
The lawsuit, an amended version of an earlier case, was brought in U.S. District Court in Manhattan against the company, former Chief Executive Richard Syron, Former Chief Financial Officer Anthony Piszel and ex-Chief Business Officer Patricia Cook. A Freddie Mac representative and an attorney for the former executives were not immediately available for comment on Wednesday. One of the unnamed employees cited in the lawsuit is a former director of operational risk management at the company, who was quoted in the complaint as saying that Freddie Mac was an "appallingly run company" and that it was clear as far back as August 2007 that its capital position was inadequate.
Other so-called "confidential witnesses" cited in the complaint include a former Freddie Mac vice president of investor relations and an ex-senior examiner with the Office of Federal Housing Enterprise Oversight, the company's regulator, now part of the newly formed Federal Housing Finance Agency. The complaint was filed by the lead plaintiff in the case, Central States Southeast and Southwest Areas Pension Fund, along with another pension fund that also had bought Freddie Mac stock, the National Elevator Industry Pension Plan. The lawsuit seeks class-action, or group status. The defendants are accused of inflating the value of Freddie Mac stock through misleading statements, failing to disclose problems with the company's capital adequacy and manipulating financial results and accounting practices to distort the truth about the company's health.
"Freddie Mac was essentially a wolf in sheep's clothing," David George, an attorney for the shareholders, told Reuters. The company misrepresented both that "it was a safe haven and that its exposure to the subprime real estate market was minimal," said George, of law firm Coughlin Stoia Geller Rudman & Robbins LLP. The government's control of Freddie Mac poses questions about how shareholder litigation against the company will be resolved. U.S. taxpayers could potentially be responsible for paying damages if the plaintiffs win their case. George said that while it was unique to be suing a company under government control, "from our perspective, it does not and should not negatively impact our ability to recover monies on behalf of the shareholders."
Bill Ford Says Shunning U.S. Bailout Serves 'National Interest'
Ford Motor Co. Executive Chairman Bill Ford, great-grandson of the company’s founder, said it is in the national interest that the automaker keep operating without federal aid. "It’s in the country’s interest that Ford remain free of taxpayer money," Ford said yesterday in an interview in his Dearborn, Michigan, office overlooking the 2,000-acre Rouge factory complex built by Henry Ford. "Anything we can do to minimize the amount of taxpayer money going into the private sector is probably a good thing."
Ford, 52, said he has talked with members of the Obama administration to ensure the company isn’t hurt by being the only U.S. automaker to forgo federal funds. Chrysler LLC is restructuring in a U.S.-backed bankruptcy, and General Motors Corp. probably also will end up in Chapter 11 by June 1. The discussions are aimed at "not being disadvantaged from the fact that we’re an independent company, not taking taxpayer money," Ford said. "That’s in the national interest that that happens." His comments reinforced the company’s efforts to distance itself from Chrysler and GM, which received $19.4 billion in emergency loans to stave off collapse. While those automakers restructure in and out of court, Ford Motor has been showcasing projects such as factory investments to support new small cars. Ford Motor’s strategy on a bailout evolved throughout late 2008, Ford said.
On Dec. 2, Chief Executive Officer Alan Mulally testified to Congress with the CEOs of GM and Chrysler and appealed for a $9 billion credit line. Within weeks, the second-largest U.S. automaker reversed the decision after deciding it had the cash to "go it alone," said Ford, who served CEO before he hired Mulally in 2006. "When we started seeing what the restrictions of taking government money would mean to our ability to operate quickly and strategically, we felt that wasn’t a position we wanted to be in," Ford said. "We felt we could pull ourselves up by our bootstraps and make it on our own." While Ford Motor lost a record $14.7 billion in 2008 and remains at risk from the worst U.S. auto market in 27 years, it’s getting a public-image boost for not taking government aid, said Efraim Levy, a Standard & Poor’s equity analyst. "Ford is benefiting from its independence," said Levy, who is based in New York and advises holding the shares. "Consumers don’t resent them for taking their tax dollars to stay alive."
Mulally’s borrowing of $23 billion in late 2006, with all the company’s major assets pledged as collateral, positioned Ford Motor to shun a rescue, Levy said. "Ford was fortunate enough to get those loans in advance of the credit markets freezing up," he said. "Take away that liquidity, and Ford would be in the same boat as the other two." Ford Motor has more than doubled this year in New York Stock Exchange composite trading as it cut debt by $9.9 billion and won concessions from the United Auto Workers to pare annual labor costs by $500 million. The shares rose 13 cents, or 2.4 percent, to $5.63 yesterday. With $21.3 billion in automotive cash at the end of March, Ford Motor is now working to add new, fuel-efficient models and retool factories to wean itself from dependence on fuel-thirsty trucks. "This is a time of real opportunity for us, but also some real cautions as well," Ford said. "We are spending a lot of time trying to figure out what this all means to us."
Among the risks are lower costs and better financing for GM and Chrysler from a U.S.-backed restructuring, said Brian Johnson, a Chicago-based Barclays Capital analyst. He rates Ford as "underweight." More funding for those automakers and their credit arms would increase "their ability to offer discount financing and subsidize price wars," Johnson said. "It will certainly put pressure on Ford’s strategy to improve their retail prices." Ford said the automaker is improving its prospects with new models like the Fiesta subcompact car coming from Europe and the Fusion hybrid, along with two battery-powered autos coming in the next two years and a plug-in hybrid due in 2012. "I really like our competitive position," Ford said. "Having said that, we are still speaking with the government to say, where possible, ‘Please don’t disadvantage us.’"
Besides his own contacts with administration officials, company executives talk frequently with President Barack Obama’s autos task force, Ford said. He said he was pleased shareholders rejected a proposal at the May 14 annual meeting to strip Ford family members of a special class of stock that gives them 40 percent voting control of the 105-year-old company. Bill Ford and his cousin, Edsel Ford II, are directors. "I would hope that shareholders would see that our interests are aligned with theirs," Ford said. "It’s more than just a financial investment, it’s an emotional investment. It’s pride. I mean, our name is on the product. If it was just a financial investment, the family probably would have been out years and years a
Letter from a Dodge dealer
letter to the editor
My name is George C. Joseph. I am the sole owner of Sunshine Dodge-Isuzu, a family owned and operated business in Melbourne, Florida. My family bought and paid for this automobile franchise 35 years ago in 1974. I am the second generation to manage this business.
We currently employ 50+ people and before the economic slowdown we employed over 70 local people. We are active in the community and the local chamber of commerce. We deal with several dozen local vendors on a day to day basis and many more during a month. All depend on our business for part of their livelihood. We are financially strong with great respect in the market place and community. We have strong local presence and stability.I work every day the store is open, nine to ten hours a day. I know most of our customers and all our employees. Sunshine Dodge is my life.
On Thursday, May 14, 2009 I was notified that my Dodge franchise, that we purchased, will be taken away from my family on June 9, 2009 without compensation and given to another dealer at no cost to them. My new vehicle inventory consists of 125 vehicles with a financed balance of 3 million dollars. This inventory becomes impossible to sell with no factory incentives beyond June 9, 2009. Without the Dodge franchise we can no longer sell a new Dodge as "new," nor will we be able to do any warranty service work. Additionally, my Dodge parts inventory, (approximately $300,000.) is virtually worthless without the ability to perform warranty service. There is no offer from Chrysler to buy back the vehicles or parts inventory.
Our facility was recently totally renovated at Chrysler's insistence, incurring a multi-million dollar debt in the form of a mortgage at Sun Trust Bank.
HOW IN THE UNITED STATES OF AMERICA CAN THIS HAPPEN?
THIS IS A PRIVATE BUSINESS NOT A GOVERNMENT ENTITY
This is beyond imagination! My business is being stolen from me through NO FAULT OF OUR OWN. We did NOTHING wrong.
This atrocity will most likely force my family into bankruptcy. This will also cause our 50+ employees to be unemployed. How will they provide for their families? This is a total economic disaster.
HOW CAN THIS HAPPEN IN A FREE MARKET ECONOMY IN THE UNITED STATES OF AMERICA?
I beseech your help, and look forward to your reply. Thank you.
Sincerely,
George C. Joseph
President & Owner
Sunshine Dodge-Isuzu
Germany Prefers Magna's Opel Bid Preferred to Fiat's
Magna International Inc.’s offer for General Motors Corp.’s Opel unit is preferred by German regional governments over a bid from Fiat SpA, according to a state minister involved in the talks. The bid from Canada’s largest auto-parts supplier that GM received today "is more reliable, innovative and sustainable" than Fiat’s proposal, Hendrik Hering, economy minister of Rhineland-Palatinate, said today in a phone interview from the state capital of Mainz. The four German states where Opel employs 25,000 workers "predominantly" favor Magna’s concept, which shuns factory closures in Europe’s biggest economy, Hering said. Magna wants to turn Opel into an "integrated automaker" and supply it with components directly.
"The supplier angle is extremely attractive. That’s something that Fiat is lacking." Chancellor Angela Merkel’s government made "significant progress" yesterday in talks with state-owned banks including KfW Group toward securing bridge loans of at least 1 billion euros ($1.4 billion) for Opel, according to Juergen Reinholz, economy minister of the state of Thuringia. Bid outlines for Opel must be submitted to German federal authorities by 6 p.m. today to qualify for government backing. German Economy Minister Karl-Theodor zu Guttenberg, who’s overseeing government talks with bidders, said on April 28 that Magna’s plan is "interesting" as it would allow Opel to benefit from component transfers from Magna at a time when GM is contracting out some supplies.
The ministry has "no favorite" suitor for Opel and aims to evaluate bid details "speedily" once all offers have been submitted, Steffen Moritz, a spokesman in Berlin, said today. Detroit-based GM, facing bankruptcy if it doesn’t reorganize by June 1, is willing to sell a majority stake in cash-strapped Opel, which has headquarters in the Frankfurt suburb of Ruesselsheim and also operates assembly plants in countries including the U.K., Spain, Belgium and Poland. Fiat, Italy’s biggest manufacturer, plans to submit a bid, Reinholz said yesterday. Magna and RHJ International SA, a Brussels-based investment firm started by Ripplewood Holdings LLC founder Timothy Collins, have submitted detailed offers to Germany’s government and a fourth suitor may do so, a federal government official said today on condition he not be identified because the bids are confidential.
Unions in Germany have "serious misgivings" about Turin- based Fiat’s plan, Armin Schild, an Opel board member and an official at the IG Metall labor union, said yesterday in an e- mailed response to questions. Fiat Chief Executive Officer Sergio Marchionne met with unions in the past week in an effort to defuse concerns about a plan that Klaus Franz, the works council chief at Opel, said on May 13 could lead to as many as 18,000 industrywide job cuts in Europe.
Unions "are open to working with Magna, but not with Fiat," Franz, who represents 55,000 GM employees in Europe, said on April 29. The labor leader said yesterday that he doubted Marchionne’s meeting with IG Metall resolved workers’ concerns. Franz didn’t respond to requests for comment today.
Canada's Deepest Recession Since 1930s May Also Be Shortest
Canada’s recession, likely its deepest since the Great Depression, may also be its shortest. Rising home and car sales, unexpected gains in building permits and employment, easing credit conditions and higher commodity prices signal Canada’s slump may be nearing an end. Eight of 11 economists surveyed by Bloomberg this month predict the economy will return to growth next quarter. "It doesn’t feel quite like it’s over yet, but people are breathing a little bit better," said Russ Girling, president of pipelines at TransCanada Corp., the country’s biggest pipeline company, which recorded a 12 percent rise in revenue in the first quarter. All but one of the country’s five post-World War II major recessions have lasted at least one year, with the shortest in 1957 at nine months, according to Philip Cross, who tracks the country’s business cycles for Statistics Canada.
Canada’s economy contracted at a 3.4 percent pace in the last quarter of 2008 and growth in the first quarter may shrink at a 7.3 percent rate, the Bank of Canada estimates. The U.S. recession started in December 2007, according to the National Bureau of Economic Research, the arbiter of U.S. business cycles. Statistics Canada, which defines a major recession as a slump where both employment and output post annual declines, has yet to date the start of Canada’s recession, Cross said. The Bank of Canada has said the country entered into a recession in the fourth quarter of last year. While Canada has suffered from falling U.S. demand for exports, the country’s banks have largely avoided credit losses. No government money has been given to any of Canada’s 21 banks since global credit seized up in August 2007. The U.S. government oversees about $200 billion in investments in banks through the taxpayer-funded Troubled Asset Relief Program.
Canada’s housing market has also held up better than in the U.S., where prices declined 18.6 percent in February from a year earlier, according to the S&P/Case-Shiller index of 20 major cities. Average resale home prices in Canada dropped at less than half that pace during the same period, according to the Canadian Real Estate Association. "We may not be in a recovery, but I think we might be in a position where it’s not getting worse, where it’s truly plateauing," Prime Minister Stephen Harper said in a May 8 interview, adding he’d like another "month or two" of data before coming to that conclusion. Canada’s benchmark Standard & Poor’s/TSX Composite Index has posted a 50 percent gain in U.S. dollars since its low on March 9, compared with the 34 percent gain for the Standard & Poor’s 500 Index over the same period.
Economists surveyed by Bloomberg earlier this month said they expect Canadian growth to rebound at an annual pace of 0.5 percent in the third quarter and by 2 percent in the fourth quarter. "In February, the rapid decline in demand had come to an end and by April, the rapid declines in employment had come to an end," Cross said. "Was that a temporary end or not? We don’t know." While Canada’s jobless rate is at a seven-year high of 8 percent, the economy in April created new jobs for the first time in six months and sales of existing homes rose the most in more than five years. Credit markets are also improving. The Bank of Canada’s composite index of financial market conditions is at its strongest since September. Improved credit markets have allowed companies like Enbridge Inc., the biggest transporter of oil to the U.S. from Canada’s oil sands, to move ahead with the new debt sales to finance operations. Enbridge sold C$400 million of bonds last week.
"Our approach is to watch for windows when we think there are opportunities to raise capital funds," said Richard Bird, Enbridge’s chief financial officer. "This is a window and let’s cross our fingers and hope that it’s a trend." A quick end to the recession would raise pressure on the Bank of Canada, led by Governor Mark Carney, to say it no longer plans to keep its benchmark lending rate near zero through June 2010. The country’s central bank projected last month the economy will contract four consecutive quarters, bringing it closer to the average length of the last five major recessions. "The Bank of Canada will have to revisit their own view of what they will do with interest rates," said Paul-Andre Pinsonnault, an economist at National Bank Financial. "GDP will be stronger than what they are looking for." A quick end to the recession doesn’t guarantee a strong rebound. DBRS Ltd., a rating company, predicts an L-shaped recovery for Canada, which it defines as "a prolonged period of flat or slowly improving performance." "The earliest I can see an improvement is in October or November," said Jacques Plante, chief financial officer of Hart Stores Inc., a discount retailer. "I can’t imagine we’ll have anything positive this summer."
Alistair Darling on the UK's recession: it'll be over by Christmas
Alistair Darling insists the recession will be over by Christmas, despite growing doubts over his economic forecasts. In an interview with the Times, the chancellor stuck by his predictions, even though other forecasters, including the International Monetary Fund, have published a much gloomier assessment of the economy. "I am not going to change my forecasts," Darling said. "I remain confident that we will see a return to growth at the turn of the year." In last month's budget, Darling predicted the economy would shrink by 3.5% this year and surprised the City when he forecast a rapid economic recovery, with growth of 1.25% in 2010 and the year after.
Since then, government figures have shown a shock 1.9% plunge in Britain's gross domestic product in the first three months of this year - the sharpest decline in almost three decades. The IMF does not share the chancellor's optimism and believes the economy will continue to shrink next year. It has forecast falls of 4.1% in output this year and 0.4% in 2010. Darling argued that, while the IMF and the Bank of England have taken a "more cautious" view, the shape of their forecasts is similar to the Treasury's. "I delivered my budget statement four weeks ago," he said. "None of the figures I have seen since would change the projections that I have made."
The chancellor shrugged off fears that Britain could slide into a deflationary spiral after figures yesterday showed retail prices plummeting at the fastest rate since 1948. The government's benchmark consumer price index, which excludes housing costs, still stands at 2.3%, above the Bank of England's 2% target. Darling said the fall in inflation "is in line with expectations. Deflation is something quite different". He pinned his hopes on the rescue package agreed by the G20 major economies last month, saying: "I remain confident that we will come through this, provided we ensure that we deliver what we set out at the G20, and what we are doing ourselves, particularly in relation to ensuring that the bank-lending agreements are fully implemented. That is very, very important."
He welcomed early signs that bank lending had begun to resume. "What I expect is that, over the course of this year, you will see a gradual improvement, but we have still got to be vigilant," he said. "The lending agreements are there. We have got to make sure they are delivered." Darling played down suggestions that the government could start selling its stakes in Royal Bank of Scotland and Lloyds Banking Group within a year, saying he was in "no hurry" as he wanted to get the "best possible deal for the taxpayer". The chancellor also indicated that he hoped to stay at the Treasury despite talk that he could be moved to the Home Office or Foreign Office in a reshuffle this summer. He said: "The job is not done. This is very much work in progress."
Ilargi: The Chancellor is not the only one in Britain to do and say strange things under the cloud of eggnog:
Trader banned for concealing $10 million bet after long boozy lunch
The financial regulator has banned a former Morgan Stanley trader for concealing a bet he took after a long boozy lunch that could have cost the bank $10m (£6.5m). David Redmond, who traded freight and oil in London for the bank, returned from the three-and-a-half hour lunch and built up a substantial short position which he concealed overnight. This left the bank exposed to a significant loss, the Financial Services Authority (FSA) said. "He drank alcohol over lunch and it appears that this affected his behaviour on his return to the office, although he was not visibly drunk," the FSA said in a statement. The next day, rather than telling the company about his bet, he traded out of the position. Mr Redmond, who is now 28, only admitted concealing the position when directly challenged by Morgan Stanley. Margaret Cole, director of enforcement at the FSA, said Mr Redmond’s conduct on 6 and 7 February 2008 showed "a lack of honesty and integrity".
"Having created a large short position which he tried to hide overnight, Redmond continued to get his priorities seriously wrong when he focused on trading out of the position rather than telling his managers," she said. "Traders must not seek to conceal their positions from their firms.” The FSA took into account that the trading took place over two days rather than an extended period and that there was no risk to consumers. It also said Mr Redmond had expressed remorse, admitted his actions, co-operated with the investigation and his behaviour appeared "out of character and unpremeditated". As a result, the FSA has indicated that it is likely to agree to an application from Mr Redmond to lift the ban after two years, provided there is no further evidence of misconduct. The FSA said it make no criticisms of Morgan Stanley, which promptly identified and investigated the issue and took swift action against Mr Redmond. He was suspended by the firm on 7 February 2008 and subsequently dismissed.
Spanish economy shrinks at fastest rate on record
The Spanish economy shrank at its fastest rate on record in the first quarter as household spending plummeted due to soaring unemployment amid the recession, official data showed on Wednesday. Gross domestic product was down 1.9pc in the first three months of year from the previous quarter and off 3pc compared to the same period in 2008, the National Statistics Institute (INE) said. It was the third quarterly contraction in a row after a fall of 1pc in the three months to December and 0.3pc in the third quarter of 2008 and the sharpest decline since INE began recording such figures in 1970. The outcome was slightly worse than provisional data last week that put the first quarter contraction at 1.8pc from the previous quarter and 2.9pc from last year.
INE blamed the slump on lower household spending, down 4.1pc after a drop of 2.3pc in the last three months of 2008. Spending was badly hit by soaring unemployment, which jumped to 17.4pc in March, more than double the average of 8.3pc for the entire 27-nation European Union. Exports fell 19pc, compared to a drop of 7.9pc in the previous quarter, and imports were also sharply lower due to the economic crisis - down 22.3pc in the first quarter compared to 13.2pc in the previous three months. Spain entered its first recession for 15 years at the end of 2008 as the global credit crunch worsened a correction that was already underway in its once booming housing sector. The Socialist government has said in recent weeks that Spain has reached the trough of the crisis and predicted signs of recovery would soon be evident.
Independent ABN Amro will need more capital
ABN Amro has agreed to demands from Brussels to sell off its daughter HBU and other assets. But if the bank wants to survive as an independent player, it's going to need more capital from its only shareholder, the Dutch government, ceo Gerrit Zalm tells NRC Handelsblad. After months of negotiations with the Dutch government, the central bank and the European Commission, ABN Amro ceo Gerrit Zalm has finally raised the white flag. On Friday, Zalm agreed to sell off ABN Amro's daughter company HBU and a dozen regional offices as Brussels had demanded. The "EC remedy", as it has become known, was the only way the European Commission would approve the merger of ABN Amro and Fortis Bank Netherlands, which it said risked distorting competition in the small businesses sector in the Netherlands. Zalm, who started as ceo of ABN Amro in January, and the Dutch government, now the bank's main shareholder, would have preferred to sell off Fortis' small businesses branch rather than HBU. But now that the air has been cleared with Brussels, Zalm wants to go ahead with the merger of the two state-owned banks "as soon as possible". The road to becoming "the best bank of the Netherlands", as is Zalm's stated ambition, will be long and bumpy. First, the old ABN Amro has to be split with the two other owners, Royal Bank of Scotland and Santander from Spain. Next, ABN Amro Netherlands has to get its capital in order. "We're going to need fresh capital if ABN Amro wants to survive as an independent entity," Zalm says.
Did you conduct the difficult negotiations with [Dutch EU Commissioner for competition] Neelie Kroes yourself? You know her well.
Gerrit Zalm: "By sheer coincidence I sat next to her at a dinner a few months ago. It is the only time I brought it up. I said: 'Neelie, I hope you don't think it's funny that I haven't called you about ABN Amro?' She said she didn't. I said: 'Well, I won't bother you with it then. It is probably best to discuss this only with you director-general.' We both thought this was the cleanest way of doing it. Otherwise it would have been a bit too close for comfort, and it might have damaged her reputation. After all, the outside world still sees me as her good friend from the VVD." [Zalm and Kroes both started their careers in the Dutch right-wing liberal party VVD, Ed.]
You were not in favour of selling off HBU. When did you decided to go along with it?
"Quite a while ago. We found that there was no alternative. Because of all the fuss around [the sale of] Fortis Holding [to] BNP Paribas in Brussels, it just wasn't feasible to sell part of Fortis Netherlands again. Last Friday, I made peace with [Kroes' director-general] Philip Lowe. We will implement the remedy as soon as possible. But I did ask for something in return."
What was that?
"I made it clear that we want to speed up disentangling the old ABN Amro and its integration with Fortis Bank Netherlands. I want to start with the organisation. Our employees need to know where they're at. And part of the senior management needs to know what to get ready for. Hence the strategic blueprint I presented internally [on Tuesday], and the future appointments of some forty managers. Lowe initially thought this was rash as long as the sale of HBU wasn't finalised. But he now understands that I want to get to work. So they have given me the okay to present my plans on a conditional basis."
Isn't the sale of HBU as good as finalised? Deutsche Bank has been ready for a year.
"Deutsche Bank is clinging to the contract they signed with Fortis last year. I don't think that's right. Deutsche should come with a new offer. The situation has changed. But that's not really my business. It is in the hands of Crédit Suisse, which Brussels has appointed as divestment trustee. Perhaps there will be more candidates. There is also the matter of capitalisation. Deutsche Bank agreed with Fortis that the seller would guarantee HBU's credit portfolio. If they insist on that we have to do it. This means that we need to set capital aside that we don't have. So we will have to go to our main shareholder, the Dutch government. If Deutsche Bank is prepared to carry the risk of HBU's loans itself, the price will go down. That's something we will have to write off then. Whatever happens, the sale of HBU will have an impact on our capital situation."
How is ABN Amro's capital situation today?
"I can't say much about it, but there are still some issues regarding capitalisation. Large amounts are at stake. I'm talking to the [Dutch] finance ministry, the Dutch central bank and Brussels about a large capital injection plan. We need [more capital] if we're going to be independent."
Is there any truth to the rumour that there is disagreement between ABN Amro Netherlands and RBS about how to divide the business accounts?
"The line between ABN Amro's big accounts that went to RBS and the smaller ones that stayed with us is perfectly clear, although I couldn't tell you exactly where it is right now. We briefly discussed possible new criteria with RBS, but it wasn't practical. So we're going ahexad as before. Besides, there are a lot of Dutch customers who have said they would rather be with ABN Amro. Out of a nationalist pride, and because they say the have no need for RBS's international network. We are not allowed to actively recruit RBC customers, but luckily we can if they come to us on their own account."
Your plan was quite a shock to the employees. You are no longer ruling out forced lay-offs?
"I never expected applause from the unions to what is after all a reorganisation plan. Fact is we're going to have to cut costs, and we're going to have to avoid job overlaps at ABN Amro and Fortis. So I'm not going to write a blank check. Forced lay-offs is a debatable term. If someone is placed in our re-employment programme for a number of months, fails to find a new position and is given a generous redudancy pay, I wouldn't call that a forced lay-off."
The unions fear you will want to renegotiate the social contract.
"There are currently two banks with their own social contracts. It is logical that we shoud want to come up with a new plan for the new combined bank, in consultation with the unions of course. The main theme will be: work, work, work..."
'Suicidaire' Gunmen Stalk Diamond Diggers in Congo's Mining Hub
After digging all day on the edge of the Democratic Republic of Congo’s biggest diamond mine, Mike Mukadji hurries home to his pregnant wife and baby daughter for fear of encountering the gunmen known as "suicidaires." With the collapse in diamond prices over the past year, the gangsters have lost their main source of revenue, protection money extorted from diggers. The criminals, known as suicidaires for their suicidal propensity to confront police in shoot-outs, are turning instead to robbery. Their targets are workers in Mbuji Mayi, the capital of Eastern Kasai province and center of the country’s diamond-mining industry. m"They will just kill you," Mukadji, 29, said as dusk settled on the hundreds of diggers heading home, chewing on peanuts and roasted corn. His diggings average about 1,000 francs ($1.24) a day, Mukadji said.
The suicidaires, many armed with AK-47 rifles, are riddled with army and police deserters, said Dieudonne Tshimpidimbua, the coordinator of local human-rights body Groupe d’Appui aux Exploitants des Ressources Naturelles. As the global recession has cut producer prices by 70 percent in the region over the last eight months, suicidaires have started breaking into homes and stealing at gunpoint, threatening the workforce of small diggers that nationwide accounts for more than 90 percent of Congo’s $365 million diamond industry. "They’re harassing the population," said provincial police chief General Philemon Patience Mushidi, whose force killed two suicidaires last month in a firefight. "That’s what the crisis has brought to our province. We often start shooting at each other. It’s like a war. Before, the city was safer."
Mbuji Mayi’s police stepped up joint patrols with the army to counter the suicidaires, Mushidi said in an interview in his air-conditioned office in central Mbuji Mayi, ignoring one of his seven mobile phones as it rang to the tune of "Mon General Patience." "If the diamond price doesn’t pick up, this spike in crime will get even worse," he said. Prices of VS2 G diamonds, a commonly traded gem, are at $4,210 a carat for a one-carat stone, according to Antwerp-based PolishedPrices.com. They peaked in October last year at $6,920 a carat and averaged $4,672 in the last 12 months. A carat is equal to a fifth of a gram. De Beers, the world’s biggest diamond company, and BHP Billiton Ltd., the top mining company, have ended exploration projects in Kasai. De Beers cut output by 91 percent in the first quarter. The Societe Miniere de Bakwanga, or Miba, which is 20 percent owned by Mwana Africa Plc and 80 percent by the Congolese state, on Nov. 18 ceased production for the first time in more than a 100 years.
Diamonds fetch so little in Mbuji Mayi these days that they have taken on a nickname in the local Chiluba language, "ondja," which means something of such poor quality that it is almost worthless. The price for a carat has dropped to about $150 from about $500 a year ago, according to Celestin Kubela, the president of the Provincial Council of Diamond Merchants. Miba will restart operations when the price of diamonds exceeds the cost of production, Chief Executive Officer Christine Tusse said in a May 13 interview. The company wants a $140 million loan from South Africa’s Industrial Development Corp. and the Development Bank of Southern Africa. Diamond production drives the economy of Mbuji Mayi, which was uninhabited until mining started a century ago, said Kubela. About three-quarters of the international diamond-buying houses in town have closed, he said.
"The crisis has had a terrible impact on the city, it’s stopped everything," Kubela said. "Diamonds are everything. Life has become unsustainable." Congo is Africa’s fifth-biggest producer after Botswana, South Africa, Angola and Namibia, according to the Web site of the Kimberley Process, the organization which certifies that diamonds are not mined in conflict zones. The economic crisis has cut demand for most commodities, upending President Joseph Kabila’s plans to rebuild a country the size of Western Europe that has suffered two civil wars since 1996 and continuing violence in the east. The International Monetary Fund, the World Bank and the African Development Bank this year committed $392.5 million to Congo. The government says it isn’t enough.
Right now, the diggers are crucial to Congo’s mining industry, unearthing most of its copper, cobalt, tin and gold, Baudouin Iheta, coordinator-general of Saesscam, the state agency that oversees small-scale mining, said in an interview. Tresor Madimba, 21, who works in a water-logged pit near Lwamuela, about 20 kilometers east of Mbuji Mayi, said the suicidaire threat has forced him to sleep in the tall grass beside a cluster of mud huts, where women dry laundry and boil food for the diggers. He is afraid that if he sleeps in a hut he will be an easier target for the suicidaires. "I always give without arguing, otherwise you’re in trouble," Madimba said. "If you don’t have anything you get beaten up."
Missing Link Found: New Fossil Links Humans, Lemurs?
Meet "Ida," the small "missing link" found in Germany that's created a big media splash and will likely continue to make waves among those who study human origins. In a new book, documentary, and promotional Web site, paleontologist Jorn Hurum, who led the team that analyzed the 47-million-year-old fossil seen above, suggests Ida is a critical missing-0link species in primate evolution. The fossil, he says, bridges the evolutionary split between higher primates such as monkeys, apes, and humans and their more distant relatives such as lemurs. "This is the first link to all humans," Hurum, of the Natural History Museum in Oslo, Norway, said in a statement. Ida represents "the closest thing we can get to a direct ancestor."
Ida, properly known as Darwinius masillae, has a unique anatomy. The lemur-like skeleton features primate-like characteristics, including grasping hands, opposable thumbs, clawless digits with nails, and relatively short limbs. "This specimen looks like a really early fossil monkey that belongs to the group that includes us," said Brian Richmond, a biological anthropologist at George Washington University in Washington, D.C., who was not involved in the study. But there's a big gap in the fossil record from this time period, Richmond noted. Researchers are unsure when and where the primate group that includes monkeys, apes, and humans split from the other group of primates that includes lemurs. "[Ida] is one of the important branching points on the evolutionary tree," Richmond said, "but it's not the only branching point."
At least one aspect of Ida is unquestionably unique: her incredible preservation, unheard of in specimens from the Eocene era, when early primates underwent a period of rapid evolution. "From this time period there are very few fossils, and they tend to be an isolated tooth here or maybe a tailbone there," Richmond explained. "So you can't say a whole lot of what that [type of fossil] represents in terms of evolutionary history or biology." In Ida's case, scientists were able to examine fossil evidence of fur and soft tissue and even picked through the remains of her last meal: fruits, seeds, and leaves. What's more, the newly described "missing link" was found in Germany's Messel Pit. Ida's European origins are intriguing, Richmond said, because they could suggest—contrary to common assumptions—that the continent was an important area for primate evolution.
Climate change odds much worse than thought
The most comprehensive modeling yet carried out on the likelihood of how much hotter the Earth's climate will get in this century shows that without rapid and massive action, the problem will be about twice as severe as previously estimated six years ago - and could be even worse than that. The study uses the MIT Integrated Global Systems Model, a detailed computer simulation of global economic activity and climate processes that has been developed and refined by the Joint Program on the Science and Policy of Global Change since the early 1990s. The new research involved 400 runs of the model with each run using slight variations in input parameters, selected so that each run has about an equal probability of being correct based on present observations and knowledge. Other research groups have estimated the probabilities of various outcomes, based on variations in the physical response of the climate system itself. But the MIT model is the only one that interactively includes detailed treatment of possible changes in human activities as well - such as the degree of economic growth, with its associated energy use, in different countries.
Study co-author Ronald Prinn, the co-director of the Joint Program and director of MIT's Center for Global Change Science, says that, regarding global warming, it is important "to base our opinions and policies on the peer-reviewed science," he says. And in the peer-reviewed literature, the MIT model, unlike any other, looks in great detail at the effects of economic activity coupled with the effects of atmospheric, oceanic and biological systems. "In that sense, our work is unique," he says. The new projections, published this month in the American Meteorological Society's Journal of Climate, indicate a median probability of surface warming of 5.2 degrees Celsius by 2100, with a 90% probability range of 3.5 to 7.4 degrees. This can be compared to a median projected increase in the 2003 study of just 2.4 degrees. The difference is caused by several factors rather than any single big change. Among these are improved economic modeling and newer economic data showing less chance of low emissions than had been projected in the earlier scenarios.
Other changes include accounting for the past masking of underlying warming by the cooling induced by 20th century volcanoes, and for emissions of soot, which can add to the warming effect. In addition, measurements of deep ocean temperature rises, which enable estimates of how fast heat and carbon dioxide are removed from the atmosphere and transferred to the ocean depths, imply lower transfer rates than previously estimated. Prinn says these and a variety of other changes based on new measurements and new analyses changed the odds on what could be expected in this century in the "no policy" scenarios - that is, where there are no policies in place that specifically induce reductions in greenhouse gas emissions. Overall, the changes "unfortunately largely summed up all in the same direction," he says. "Overall, they stacked up so they caused more projected global warming." While the outcomes in the "no policy" projections now look much worse than before, there is less change from previous work in the projected outcomes if strong policies are put in place now to drastically curb greenhouse gas emissions.
Without action, "there is significantly more risk than we previously estimated," Prinn says. "This increases the urgency for significant policy action." To illustrate the range of probabilities revealed by the 400 simulations, Prinn and the team produced a "roulette wheel" that reflects the latest relative odds of various levels of temperature rise. The wheel provides a very graphic representation of just how serious the potential climate impacts are. "There's no way the world can or should take these risks," Prinn says. And the odds indicated by this modeling may actually understate the problem, because the model does not fully incorporate other positive feedbacks that can occur, for example, if increased temperatures caused a large-scale melting of permafrost in arctic regions and subsequent release of large quantities of methane, a very potent greenhouse gas. Including that feedback "is just going to make it worse," Prinn says.
The lead author of the paper describing the new projections is Andrei Sokolov, research scientist in the Joint Program. Other authors, besides Sokolov and Prinn, include Peter H. Stone, Chris E. Forest, Sergey Paltsev, Adam Schlosser, Stephanie Dutkiewicz, John Reilly, Marcus Sarofim, Chien Wang and Henry D. Jacoby, all of the MIT Joint Program on the Science and Policy of Global Change, as well as Mort Webster of MIT's Engineering Systems Division and D. Kicklighter, B. Felzer and J. Melillo of the Marine Biological Laboratory at Woods Hole. Prinn stresses that the computer models are built to match the known conditions, processes and past history of the relevant human and natural systems, and the researchers are therefore dependent on the accuracy of this current knowledge. Beyond this, "we do the research, and let the results fall where they may," he says.
Since there are so many uncertainties, especially with regard to what human beings will choose to do and how large the climate response will be, "we don't pretend we can do it accurately. Instead, we do these 400 runs and look at the spread of the odds." Because vehicles last for years, and buildings and powerplants last for decades, it is essential to start making major changes through adoption of significant national and international policies as soon as possible, Prinn says. "The least-cost option to lower the risk is to start now and steadily transform the global energy system over the coming decades to low or zero greenhouse gas-emitting technologies."
85 comments:
http://www.nytimes.com/2009/05/19/science/19tier.html?_r=3&hpw
Why does a diploma from Harvard cost $100,000 more than a similar piece of paper from City College? Why might a BMW cost $25,000 more than a Subaru WRX with equally fast acceleration? Why do “sophisticated” consumers demand 16-gigabyte iPhones and “fair trade” coffee from Starbucks?
....
Sometimes the message is as simple as “I’ve got resources to burn,” the classic conspicuous waste demonstrated by the energy expended to lift a peacock’s tail or the fuel guzzled by a Hummer. But brand-name products aren’t just about flaunting transient wealth. The audience for our signals — prospective mates, friends, rivals — care more about the permanent traits measured in tests of intelligence and personality, as Dr. Miller explains in his new book, “Spent: Sex, Evolution and Consumer Behavior.”
....
The grand edifice of brand-name consumerism rests on the narcissistic fantasy that everyone else cares about what we buy. (It’s no accident that narcissistic teenagers are the most brand-obsessed consumers.) But who else even notices? Can you remember what your partner or your best friend was wearing the day before yesterday? Or what kind of watch your boss has?
It will be over before Christmas. Sounds like a beautiful seasonal song. In future I think a better choice of words is advisable for the hope mongers.
The most important part of the Fed minutes was this. Which was enough to staunch the bleeding at the long end of the Treasury market, for awhile. Thursday they announce next weeks auctions and they are sure to be huge, and the week after and the week after that. If not something weird is going on. They have to borrow at least $800 billion by Sept 30 so they better start now.
Anyway, the magic words. QE 2, not the boat.
"Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery; all members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases."
Get ready for one of the biggest mass media Christmas buy campaigns ever in late 09. Rising up to take another fish from their trainers, the MSM will be clapping clumsily and sliding around like a family of happy seals on slippery economic surfaces. This reality, however, will not prevent comedy from meeting tragedy as mouthpieces of "confidence" implore broken economic hips and spines to get up off the floor and shop till they drop one more time again.
HAPPY DAYS ARE HERE AGAIN!!!
May 20 (Bloomberg) -- U.S. stocks are at the start of a bull market that may spur an 88 percent advance in the Standard & Poor’s 500 Index in the next two or three years, Laszlo Birinyi said.
“We’re confident we are in a bull market,” Birinyi, the founder of Westport, Connecticut-based research and money- management firm Birinyi Associates Inc., said in an interview with Bloomberg Television today.
The S&P 500 may jump to a record 1,700 as the economy rebounds from the worst recession since World War II, an increase from today’s close of 903.47, said Birinyi, who spent a decade on the trading desk at Salomon Brothers Inc. Signs the global contraction is easing have spurred a 34 percent rally by the index since it sank to a 12-year low in March.
OH JOY!
WE ARE ON THE CUSP OF WONDERFULLNESS!
So?
What have YOU done about preparing for your future?
Other than whining and complaining on some doomster blog about how bad things are
and how much more badder they are going to get?
Are you just a pontificator, a wandering purveyor of horsesh*t . . .
Or a real doer?
Hmmm?
Have you worked to supplement your food supply?
Have you . . .
Created a large square footage garden.
Planted perienniel fruit trees.
Created compost piles with home and yard materials.
I have,
Have you?
Have you done anything about food storage?
Have you . . .
Created 6 months of storable food in dried, canned, frozen, and other media.
I have.
Have you?
Have you learned how to protect those, including yourself, from those who would
attempt to take what you have away from you?
I have
. . .acquired two handguns and one rifle, and taken formal training on each one, and
become licenced in my state to carry. And acquired several hundred rounds of
ammo.
Have you?
Have you moved to a location that puts you and your family out of range of urban thugs, but within the range of a stable local community?
I have.
I've relocated 75+ miles from the nearest major metropolitan area, into a medium-sized town with hospital, schools, shops, etc., and with access to a large body of water that provides fishing/shellfishing, as well as access to forests for hunting/trapping.
Have you?
Have you rationalized your finances with the realities that face us?
I have . . .. . .removed everything from 401K, IRA, and Pensions . . .into Cash, Cash Equivalents, and Gold.
Have you?
In other words . . . Are you just one of the bullsh*tting complainers here about how horribly bad the Fed, and the Treasury, and all the other Corporate as*holes are . . . or are you one of those that is actually doing something about your life, to prepare, REALLY PREPARE for the life that awaits us?
Are you?
Hannibal
@Ilargi come on guy. I don't have to google the past, you're playing fast and loose with the numbers just today.
The BLS numbers you quote add up to a million and a quarter, not a million. If I have 12.50 not ten bucks to buy lunch, I feel a lot richer. The second graph shows about a million six jobs lost. That's not even close to a million.
Then you say, it will be eventually be 3.5 million even though a bunch of those workers ae actually still working. OK, you're likely right, but you're trashing the BLS for reporting about May Day when you want to predict for Labour Day. (Isn't that backwards for a European?) Not fair, guy, and you don't need to cheat.
Finally, I know you're busy reading the current stuff, but darn it, you're Dutch living in Canada and you continually miss fairly blatant stuff about how the US really works. In today's case, it's temporary vs. part time workers. There are many full time temp and part time permanent workers. Yes, the BLS pretends part time workers are full time, and it's a scandal. However, they're at least nominally honest about temporary workers. If you get a check, you're working, if you don't, you're not.
Most skilled tradesmen in the US are temporary workers all their careers. They work maybe 40 weeks a year. They get health insurance and a pension through their union. They sign on for a project and move on when it's done.
Thank you Ilargi - I never would have made the Lemur/Primate connection.
More downward pressure on housing prices
Residential Rental Market and Inflation
Frank, from where I'm sitting, you're all over the place. I may get numbers wrong, but if you don't specify which, it's hard to respond. And what it has to do with my place of residence I don't know.
"If you get a check, you're working, " sounds to me like playing the numbers, not providing them.
"Most skilled tradesmen in the US are temporary workers all their careers. They work maybe 40 weeks a year. They get health insurance and a pension through their union."
Well, that's where the hurt is, isn't it? Or do you think they'll actually ever get that money?
Or perhaps you think the system would first be hollowed out where you could see it?
Most skilled tradesmen do not work for a union and most do not receive health benefits from their employers. In fact, an expanding number of tradesmen fill out 1099's at the end of the year( contract labor) and are responsible for their own liability and workers compensation insurance.
Anon/Hannibal @ 9:48
You forgot to add:
"Have you become a pontificating more-prepared-than-anyone gonna-watch-you-starve-outside-my-compound survivalist?
I have."
Interesting observation on the chart put up (New housing vs Construction Employment)
As steep as the blue 'New Housing Starts line is boring into the ground, the red 'Construction Employment' line is diving even steeper!
In a race to the bottom, it looks like construction employment will flat line before the housing starts go to Zero.
Would this mean that contractors will go broke and lay off everyone even as the last of the housing start contracts dribble in?
What a weird thing.
I am not a green shooter by any means, nor do I doubt everything Stoneleigh says, but some of her recent predictions on the way in which society will break down strike me as nuts, not to mention internally contradictory. In particular, the part about extortionate taxes imposed on rural people and wealth being sucked to the center during deflation.
Since TAE readers always appreciates a good song, here's one:
Two strangers once climbed up on Rocky Top
looking for a moonshine 'still.
Strangers ain't come down from Rocky Top.
Reckon they never will.
That's a popular song celebrating the murder of federal agents attempting to collect tax on alcohol. It's the state song of Tennessee. Exactly which federal agents are going to collect the taxes Stoneleigh predicts? I think they are still on Rocky Top. High taxes on wages or transactions simply drives them off the books. High taxes on land depend on seizure and sale of the land in case of non-payment. Who can buy? And who would respect the transfer once the federal government has lost all legitimacy? And can the agents get down from Rocky Top in time to even run the few million auctions that are pending? (I picture it as a Charlie Chaplain movie, where some tuxedoed Goldman-Morgan banker hands Charlie a scroll of properties to auction, which falls to the floor, and runs down the stairs 50 floors as Charlie scrambles to gather it up.)
Stoneleigh vastly overestimates the power of the center vs. periphery. Think of the Marxist revolutions of East Asia, which set the urban elites against the rural peasants. Open your history books to see who won, and whether it was close.
If society breaks down, it would be more likely to take the form of centripital flying apart, where the center quickly loses its ability to tax or control the edges. The center will retain control of only two things: the legal apparatus it has built up, and whatever still responds to it; and the US$ printing press. The center could potentially seize treasury bonds and deposits in federally regulated banks. So if you believe as Stoneleigh does that the center will seize what it can, you would rush to put your money in houses and land. (Paper cash and gold can be stolen by theives. Don't go there.)
If a point came where the federal-Goldman-Morgan government were trying to seize citizens' assets arbitrarily, then federal democracy would be long over, and the legitimacy of the federal government would be worse than gone. At that point, citizens at the state and local level would have made some predictable reaction, mostly in the form of secession or simply ignoring Washington. The only way the federal-Goldman-Morgan government could exert any influence outside of DC, the tri-state area, and Palm Beach would be to adopt a naked feudal warlord strategy -- offering the lumpen proletariat of DC and NYC generous land grants if they join an army to subdue the regions. That would be open civil war, call it the 100-years war part 2. (Note to Hollywood -- if you make that movie, I demand royalties.)
But back to reality -- the path of least resistance is always preferred. And that is (says the slow student in class, who always ends up here) the old US$ printing press. As the center begins to lose its grip, it will simply print dollars to fund its operations, foreign wars, bailouts, and generous pork to buy some degree of continued loyalty. Want your social security check? No problem; click "print." That is a strategy which the states are hard-pressed to resist, because breaking off to form their own currency regimes would be very disruptive and difficult. They will be helpless as the feds debase the currency to Weimar levels. Watch for the financial elites to do what makes sense in preparation for that scenario, which would include buying land, gold, and commodities, while selling government debt and cash-like investments to dumb consumers.
OK:
This could lead us to believe that about a million jobs vanished from December ‘07 through April ‘09.No, the numbers you quoted add up to a million and a quarter. I stand by 12.50 vs ten bucks to buy lunch.
I cited your second chart, the one labeled "Business Insider Chart of the Day". The red "construction employment" line clearly shows a drop of a million six, not a million.
Still, even then, if you look at both the trendline and the timelag, it is clear that 3.5 million jobs lost in construction is the absolute minimum. Most of those have yet to be pink slipped,...As I said, likely enough, but the BLS is reporting on the past, while that paragraph is predicting the future. I own six pigs. Five of them are pregnant sows. With any kind of luck I'll soon own 46 pigs. But right now, it's six.
It also ignores most temporary workers laid off,No it doesn't. Temporary workers are counted, hired and fired. It's part time workers the scam is about.
As for your upbringing and residence, I was cutting you some slack figuring that your distance is why you got the BLS details wrong. The European upbringing harkens back to (eg) the unquestioned assumption that mortgage laws are uniform across all 50 states. In Europe, France is a very large country. In Europe, laws within a country tend to be quite uniform. In the US, France is the size of Texas. In the US, it took the federal government 150 years to dig as deeply into the business of "the several states" as the EU has into its member states in 50.
I get Europe wrong all the time. IME, Europeans are not noticeably better at North America. (They blow Canada too.)
Always a pleasure to read Mugabe's thoughtful comments.
I think the primary difference between you and Stoneleigh lies in your time frames. For example, Stoneleigh has said repeatedly that the fate of all fiat (paper) currencies is the same. She also agrees with you that governments with fiat currencies can never restrain themselves from printing. But the huge derivative market has made hundreds of trillions of dollars (and Euros) in credit "money," and credit money and fiat money are indistinguishable in times of expansion. Right now the central banks are helpless to effectively neutralize and counteract the derivatives and CDO pseudo-money going up the chimney. They are like tugboats trying to control supertankers in variable gale force winds. As you predict, all fiat money will go into hyperinflation - it's just not going to happen for several years. Of course timing has enormous importance for determining a practical course to attempt to survive this calamity. Hyperinflation means go out and buy everything you need tomorrow. Hyperdeflation means hold off buying stuff (except stuff which will disappear from the breakdown in globalization), and hold onto your cash.
And your apparent argument about the center versus the periphery. My first thought is to say that the center cannot hold without cheap energy. Yet then I think of the huge Roman and Inca empires of antiquity. The Incas didn't even have pack or riding animals. Human muscle was it. I think the USA will break up into regional sections run by warlords over the next 40 years, but this process may take longer than one thinks. Generations of fierce nationalistic propaganda will add considerable inertia to the nation state when manipulated to advantage.
Interesting thoughts mugabe, the two differing world views presented by you and stoneleigh are dependant on the extent of the collapse. If the US Govt survives it will probably at one point start hyperinflating and collecting higher taxes so land is the way to go. On the other if we see an outright orlov style collapse then bonds and physical cash are not the way to go as they will be as useful as toilet paper. In an orlov style collapse,there will be no housing market,no banks,no govt. Just people living and dying by the gun and their land and probably forming gangs and vigilante groups to survive. That is indeed one possibility, the type of center controlled scenario stoneleigh sees might be found in burma. Where the rulers - the generals - have absolute power and live in their own private city. While the rest of the population is on the fringes of survival. It gets even worse outside the main city of rangoon. That's one example of the center strangling the periphery to remain in power. Other examples include north korea and zimbabwe. While countries in which the center was taken down but quickly rearrested are tsarist russia and the soviet union and Argentina as well (was it 4 presidents in 3 weeks?). Countries which have no centre are reduced to constant anarchy eg somalia and congo.
Stoneleigh
Do you think the suckers' rally has peaked or merely retrenching?
Mugabe wrote:
"Exactly which federal agents are going to collect the taxes Stoneleigh predicts? I think they are still on Rocky Top. "
From a Canadian federal perspective, what happened when Paul Martin "balanced the budget" in the 90s is that he simply passed down costs of the services people demanded to provinces, who then passed them down to municipalities. Municipalities then have to raise property taxes. Municipalities (towns, cities, regional governments in Canada)are about as local as you get, and that is where much of the cutting takes place. In my home province (Nova Scotia) one of the municipalities (A de-industrializing wasteland much like the north of England on a smaller scale)is attempting to sue the province over this breakdown of tax revenue distribution. I watch the unfolding drama in California with great interest!
"High taxes on wages or transactions simply drives them off the books."
We've had a healthy underground economy here since the dreaded GST/HST (13% at the moment). When buying building supplies, gravel, plumbing or wiring services,etc, it is typical for tradesmen to give you a lower price if you pay by cash. I imagine it is already that way in the US as well? I doubt that will change much as there is a limit as to how much can be hidden and I think we are already there.
"High taxes on land depend on seizure and sale of the land in case of non-payment. Who can buy?"
I always keep an eye out for good land going up for tax sales, and I'm not overly wealthy. During the stagflation episode in the 70s and major recession in the early 80s many europeans aquired coastal land here for next to nothing and sold it for a good profit during the boom years of the 90s. Not that I think that particular strategy will work again in a more energy constrained future where tourism and vacation properties once again become the exclusive domain of a small elite. It has long seemed bizarre to me the way the middle class has deluded themselves into thinking they can live like the aristocracy and remain in some sort of balance. The notion that ordinary working people can put in 40 hours a week and expect to fly around the world for vacations and retire to a tropical beach in their 50s was obviously only a temporary phenomena that I never expected to last, and never bought into. I have a very good knowledge of how my ancestors lived, and have to laugh at the yuppies bemoaning (really a back-handed boasting) their "hectic lifestyles" in todays "fast paced world" leaving them no time for leisure. Ha! We'll see how much leisure we have in 10 years time!!
More fun with numbers.
Although I could not easily find a 2009 graduating class #, in the 2004 US Census there were 16 million College Students, assuming 1/4 of those do eventually graduate (a decent stretch), we will see 1/4 of those getting a diploma this May in the USA.
I've read two recent survey estimates where 20% of the College Graduates have found Jobs at this point this year, down from 56% in 2007 at the same time period. Let's assume that 5% more might find something in the next few months.
So 25% of 4Million = 1 Million
2009 College Graduates finding work
75% or 3Million will be UnEmployed.
However, this 3 million will not be registered under U3 or U6.
So where do they go?
Back to School for a bunch of them.. some will tinker around the house, some will read the net, work on there writing skills, go to the movies, maybe work for a non-profit, do some charity work. Much of this will be unpaid. Some will cause some trouble.
Many will be living with Mom/Dad continuing to put a strain on the household budget. Further hammering the disposable income so desperately needed in fueling the Revenue based GDP economy.
If you begin to look at the true number of UnEmployed piling up over the summer, tens of thousands in the Auto Industry, Education, Construction and the unreported College Grads the signs are pointing to a very eye opening Fall of a scary State of the Nation.
The great UnSpooling continues.
Mugabe,
The dynamic of the centre sucking wealth from the periphery is in force virtually all the time at all scales simultaneously. It is a consistent feature of human social systems, but in good times, when there is enough to go around, it is a peaceful process (taxation). It only becomes coercive once the continued existence of the centre is threatened, particularly when high level wealth concentration (through globalization in this case) is no longer possible and the centre tries to substitute for that with lower level (domestic) wealth concentration. The domestic version cannot compensate for what has been lost, especially since the domestic system has been almost completely hollowed out in recent years. The centre will nevertheless try to squeeze blood from a stone.
This would take time to play out, however, and a period of chaos before the resumption of control is very likely. I am not suggesting that an equal degree of control would eventually prevail everywhere, and would certainly expect a substantial degree of local variation. In some places there may be outright anarchy, and in some of those places there are very likely to be conflicts between the centre and local powers-that-be. I don't expect peaceful hinterlands either way.
I think in the initial phase we could see something similar to what Argentina experienced, with people on the streets and political upheaval (Argentina went through several presidents in very short order). Angry people are difficult to control. Later when people will be traumatized, hungry and afraid, control will probably be reestablished. Life will certainly never be the same again.
Anon @8:16,
Do you think the suckers' rally has peaked or merely retrenching?
Retrenching I think.
The Good Presbytarian,
From a Canadian federal perspective, what happened when Paul Martin "balanced the budget" in the 90s is that he simply passed down costs of the services people demanded to provinces, who then passed them down to municipalities. Municipalities then have to raise property taxes. Municipalities (towns, cities, regional governments in Canada)are about as local as you get, and that is where much of the cutting takes place.
Exactly. The squeeze begins at the bottom. The Feds make themselves look fiscally prudent simply by dumping the responsibilities. Municipalities are struggling already and many are close to hitting a wall, even though the impact of the financial crisis has been quite limited here so far (at least here in the east). Taxes are on the verge of shooting up, even as people's circumstances deteriorate.
Muncipalities are now supposed to be in charge of bridge maintenance, for instance, which they are generally ill-equipped to do. These are the things that will be cut back, both for lack of money and lack of expertise, and society will pay the price for lack of infrastructure maintenance.
I'd love to know where Mr Hannibal is living just so I could avoid moving nearby. Hannibal, you have one terrible flaw in your plan. Wherever you go, there you are! And, yes, for the record: I have been collapse ready since 1977. And if you feel you are such an exemplar, can you survive in the jungle with just a knife and a lens? Well, I can and I don't even need those. Survival tactics are very nice and all, but until we get to the fang and claw level, it's more about getting along than getting over. At the fang and claw stage, I'll repair to the nearby deep jungle where I hunted and gathered through 1990-1 as a dry run. When civilization does eventually break down, I assume it won't be all that civilized, and if there is one thing that really gives me the urge to kill, it's homicidal churlishness. Capice?
I reply here only to advise you that, yes, many of us have walked the walk for decades already. So shut up.
Is that the same Hannibal who is having a friend for dinner?
Hello,
Someone wrote:
The usual result is that you then have to put on an act the rest of your life or be branded a nutcase.There is a word for this, though it is generally for situations where one wishes to avoid repression. It is "ketman".
Ciao,
FB
@Stoneleigh - "Later when people will be traumatized, hungry and afraid, control will probably be reestablished. Life will certainly never be the same again."
Stoneleigh, you write beautifully and have a very good sense of general social history. Yet, as I mentioned yesterday, and other posters have noted as well, both you & Illargi have significant blind spots when it comes to understanding the true nature of what it means to be an American.
To begin to answer this question, you must first discard the process of how you two recently came to emigrate to N America.
You must go back further in time to the period of the great European civil & religious wars, to the days of the potato famine, to the era of high child mortality rates, to the period of an aristocracy supported by religious authorities which viewed the cycle of death & destruction as simply 'God's will'.
Consider the refugees that came to these shores from that environment, only to be confronted by a limited number of primitive natives. They discovered that with their superior technology (guns) that they could in effect become the new 'aristocrats', in that they could now control land, and more importantly, their destinies.
These people weren't cultured; they were rough, violent & unsophisticated. They certainly weren't going to give up what they believed was their new found right to self determination.
This is the core of the American 'spirit'. It is why we are armed to the teeth. Is is why America is one of the most violent places on earth (check the homicide stats). Hollywood may project an image of avante guard sophistication, but the reality is found in old Westerns.
The center will never control the periphery. State, county & city agencies may attempt to do the bidding of DC, but we will soon find out how effective this strategy is - it will fail.
Look to California to see how events unfold. It is the harbinger of the future of the USA.
Anonymous The Good Presbytaritan said...
It has long seemed bizarre to me the way the middle class has deluded themselves into thinking they can live like the aristocracy and remain in some sort of balance. The notion that ordinary working people can put in 40 hours a week and expect to fly around the world for vacations
But aren't you living the life of the aristocrat and not living in some mud and wattle hut? I wonder how your daily use of energy and resources differs from that of the Louis XIV, the Sun King. Of course, our current aristocracy would, I think, make that Sun King look like a bum mooning over a dumpsteer.
_-el prodigal-
Centiare,
First off, a disclaimer, I am an American, was born in Miami, and my family on both sides has been in North America since the 1600's. Having said that, I think I know a few things about my fellow countrymen;-) I agree with you that we are armed "to the teeth". But being fully armed and taking part in an armed rebellion apparently are two very different things. What amazes me about the USA today is the lack of any serious resistance to the wholesale pillaging of the economy that Obama, the banks and the Pentagon are carrying out. Where, I ask, is the revolution? Where is this spirit that makes us so different from the British or the Europeans? I think that Americans are aware of what's going on, but no one is fighting it. Not yet, at least.
Stoneleigh- I think a good part of the mis- and in-comprehension of what you say stems from people's variable positions regarding "the herd." You think, and act, and feel, outside it, though you do not forget the pains of those within. Much of Ilargi's anger comes, I think, from the fact that while his brain is outside the herd; his heart is firmly inside; and the friction is not fun.
Mugabe, I think you are inside the herd; looking out- but not truly seeing yet.
It's very very hard to get out of the herd in the first place; harder still to look back, look around, and see clearly.
Stoneleigh, have you spent any conscious effort on methods of communicating effectively with those inside- and, as is most common here, those stuck in the edge of the herd, not sure how or where to jump?
Biologically speaking, of course? :-)
Centiare
The USA "is one of the most violent places on earth (check the homicide stats). " Thanks for the advice. Most recent stats murders per 100,000 - wikipedia.
Honduras 57.9
Angola 40.0
Puerto Rico 18.8
Mexico 10
USA 5.8
India 3.44
Canada 1.85
Germany 0.98
Norway 0.78
Japan 0.64
Greenpa
I would be interested to hear in more detail why Stoneleigh "feels" outside the herd, why Ilargi doesn't, and what this means.
John Hemingway said...
What amazes me about the USA today is the lack of any serious resistance to the wholesale pillaging of the economy that Obama, the banks and the Pentagon are carrying out. Where, I ask, is the revolution?
------
Good discussions today!
You have chosen words that indicate your oposition to the present course of action.
Almost everywhere you read,
"Letting L.Bros. fail was a mistake!"
"Pouring money into the banks, to save them, is a mistake!"
"If the gov. had saved L. Bros. we would not have had the financial crisis"
"The gov. should not be spending money/interfering to save/restart the economy or save the banks"
I think that the reason that there is no revolution, at present, is that the people realize that without the present course of action we would indeed be in a revolution or up the creek without a paddle.
-----
Someone wrote:
The usual result is that you then have to put on an act the rest of your life or be branded a nutcase.
My experience has been that when the response is, "Markets go down and they go up. It will go back up."
That is a conversation stopper and I move on.
-----
The Good Presbytaritan said...
From a Canadian federal perspective, ... he simply passed down costs of the services people demanded to provinces, who then passed them down to municipalities. Municipalities then have to raise property taxes. Municipalities (towns, cities, regional governments in Canada)are about as local as you get, and that is where much of the cutting takes place.
------
My experience was that the services were cut instead of raising taxes.
Yes. How California deals with their budget will be instructive.
Just as instructive, are the different approaches from different countries around the world.
jal
"But aren't you living the life of the aristocrat and not living in some mud and wattle hut? I wonder how your daily use of energy and resources differs from that of the Louis XIV, the Sun King. Of course, our current aristocracy would, I think, make that Sun King look like a bum mooning over a dumpsteer.
_-el prodigal-"
The social infrastructure and skill set to survive at a low level of energy use is gone from this part of the world.
See the following essay for a detailed description of a failed attempt to consciously live a lower energy lifestyle:
http://www.countercurrents.org/goodchild050409.htm
As to the mud hut, you should see one of the houses I bought a few years ago ;-)
I cut my firewood with axe and handsaws, even though I have a good chainsaw for emergency use. I've been scavenging driftwood for building material, by rowboat, from the nearby islands the past 15 years (I have an outboard motor but hate the sound of small engines) I built a cistern by hand using flat rocks scavenged from the islands as well. (If I live long enough maybe I'll get around to building my own lime kiln?)
I've never expected to have any sort of pension when old enough to retire so have been establishing a varied nut (appropriate, eh?)orchard
(chestnuts are not native here so there is no blight!) the past 20 years.
I'm not a complete luddite though, as I've been working as a UNIX/C programmer the past 20 years to support my habits. (I had been studying biochemistry/biotech with some big NSERC postgraduate grants but had a "crisis of conscience")
I am aware this comes across as self-righteous, and I'm not an "environmentalist", but it was simply a recognition that economic expansion and resource exploitation was not likely to continue for all of my lifetime, so it was obviously sensible not to "bank on it". Simple as that.
I'm not really pessimistic about the long term future though, because people can adapt to a lower level of expectations. There are many french Acadian fishing communities in this province who's ancestors experienced an ethnic cleansing the Nazis or nationalists in the Balkans would be proud of, and after 10 to 20 years of chaos and homelessness after 1755 made the transition from being a self-sufficient (ignored by France) farming society (from about 1620 to 1755) to a culture of seafaring (trading/fishing) on marginal land the Loyalist "planters" from New England didn't want. Society will adapt eventually, even if some individuals can't.
Jal said, "I think that the reason that there is no revolution, at present, is that the people realize that without the present course of action we would indeed be in a revolution or up the creek without a paddle."
Or so the media teaches us...
Is it true? Well, our society generally thinks it's true.
Why is it true? Because they so.
Hello,
@ Centiare
I understand what you are saying about the U.S. "spirit", but it reminds me of something I read in the NYT just a few days ago on France.
The journalist commented that so many people in France feel they have peasant roots and somehow feel sly and wily because of that.
About 85% of the current population in France is urban and a vast majority of them would have to dig back at least two generations to find any trace of those roots. So just how prepared are they to deal with anything rural?
I would bet that the same holds for the "pioneering spirit" in North America. People talk about it, feel good about it. Some people are willing to shoot others, but how many are in fact shooting to defend their "right to self determination"?
I would bet that when the chips are down, we will see people clamouring for the central state to step in and willing to accept radical constraints to save even a minimum of order.
Could the case not be made that the U.S. has been on this road for almost eight years already?
Ciao,
FB
Hi Weaseldog!
"Or so the media teaches us..."
NO! Not true. Even Obama was accused of fear mongoring and had to change the message. The media is hidding what we have been discussing here and being positive.
"Is it true? Well, our society generally thinks it's true."
No! Our society is not aware of the facts. They have their own problems to concentrate on... The daily tasks of putting bread on the table.
Why is it true? Because they so.
The true problem is not being adressed by the "thinkers" and the "doers".
Capitalism is not "the money changers" and their activities.
Socialism is not the enemy of capitalism.
Now, what needs to be addressed is what is the sustainable financial system in a finite world. Usury is not the answer. (see wiki) A 6% margin does not permit a lavish lifestyle.
There are no political structures or financial structures without a sustainable social structure.
jal
RC said
"can you survive in the jungle with just a knife and a lens? Well, I can and I don't even need those."
Methinks you love to engage in a neurotic form of one-upsmanship.
Best wishes on your jungle rat and tree bark diet.
Hannibal
John Hemingway said:
What amazes me about the USA today is the lack of any serious resistance to the wholesale pillaging of the economy that Obama, the banks and the Pentagon are carrying out.
"What do you have in mind pal", he said, pulling the I-pod from his ear, straightening his baseball cap and spiting out the cheeze doodles, he had been grazing on?
It seems a whole lot like that guy in network only instead of a physical window we have devolved to the ethereal window of the internet, one more step away from the street.
---------------
The Good Presbytaritan said:
I am aware this comes across as self-righteous
Hey guy don't hog the glory or get above yourself! They is others out here just as self righteous as you portend to be and in spades!
I would Chat more here, as you sound like kin, but have to run now to Home Depo to buy some timers, plastic elbows and such as I am putting in some underground water pipe for my vegetable garden. Despite the odds I intend to be able to to grow my own in my golden elder years. I started gardening for self protection back before all this current survival stuff as my occupation is a painter (easel type) dictated that.
Hasta, -el prodigal-
http://www.cbc.ca/canada/british-columbia/story/2009/05/21/credit-cards-flaherty021.html
No hard cap on rates in Tories' new credit card rules
Flaherty unveils 9 new proposals, including 21-day interest-free grace period
Hans and Franz have joined the Fed to "Pump up the Money Supply". Look at the M1 and M2 Stats.
http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
@ el prodigal
"what do you have in mind, pal", he said, pulling the iPod from his ear, straightening his baseball cap and spitting out the cheeze doodles he had been gazing on?"
This is funny, made me laugh:-)
The reason there hasn't been a mass reaction is because the credit hasn't yet run out. Whether it is savings (meager), credit cards, or simply not paying the mortgage (or rent if the landlord is in default), this is truly the end-game before the SHTF.
As to American 'spirit' or 'can do' attitude, I wasn't referring to any patriotic impulse. I was referencing our general cultural/genetic predisposition towards acting first (usually in anger), then perhaps thinking afterward.
Where else besides the good 'ole USA does one hear of "road rage"? Has anyone on this board not experienced the righteous indignation of being cut off?
As to the stats, 3 out of the top 4 are in some form of a drug/civil war. The US is the world leader in violent crimes/homicides for a supposedly "civilized", legal society currently at peace.
Face it, we make great soldiers. We've all got the blood rage running through our veins. It's our nature. And to think some MSM crafted 'leader' and his effeminate pals on Wall St think they are really in charge. LOL
As to the armed services, just who do you think they represent? It's not gonna be citizens vs the military; they're one and the same thing.
Countries without civil wars or drug wars with a murder rate at least double the USA:
Brazil 25.7
Dominican Republic 23.6
Ecuador 18.8
Russia 16.5
Mongolia 12.8
Paraguay 12.1
OTOH
Palestine 4.04 (2004)
Tunisia 1.22 (2002)
Qatar 0.77
Denninger writing today that the jig is up with the Twolips and Benny show and that the bond dislocation is days or at most weeks away.
Denniger:
"So now what Ben?
If Foreign Central Banks are selling into Ben's bid then the game is literally weeks or even days away from being over.
I have written for over a year about the potential for a bond-market implosion and subsequent economic collapse."
Why has there not been more resistance or protest (beyond the Tea Parties)? Because the situation is so complex that no one really understands what to campaign against (or for).
"I am against the bank bailouts" is met with "Oh so you want all of the banks to fail?" Er, not really, that's where my money is.
"I am against the transfer of wealth by taxation from the middle class to the wealthy Wall Street tycoons" is met with "But if those guys keep getting rich the stock market will go back up and you'll start getting rich again too."
There's no simple rallying cry that can't be shot down at present by some kind of Wall Street financial gobbledygook. People are too intimidated and uncertain once the finance types start throwing arcane and complex terminology back at them (present company excepted of course).
That's why we need an SEC with some real backbone, or another champion "of the people" like the Pecora Commission. But for now the inmates seem to have taken over the asylum.
The Treasury is going to be auctioning $100 billion in paper next week, give or take a bit. The long end no likee today. The word on Crapvision is that the US of A might lose its AAA rating. What triple AAA rating is that I wonder? Launch the drones and another few brigades. That should take care of it. Same thing with Denenger's claim the FCB's are dumping Treasuries. Can't we threaten them or something?
Hannibal-
"Methinks you love to engage in a neurotic form of one-upsmanship."
Methinks you don't know sardonic humor when you see it.
Good luck with the blinders.
Hannibal
You come on here saying that we are all gas bags and haven't prepared - but "I HAVE." It is so in your face. There are people who read this blog whose greatest exercise everyday is feeding their parrot, and who wouldn't know a Glock from a glockenspiel, but they still want to live to a ripe old age and see their grandchildren graduate college, and they are very nice people. And Stoneleigh is trying to lead them gently into the night.
So RC comes on and says, "Well, I'm more prepared than you because I don't need all that shit. All I need is a knife and a lens and a jungle" (and maybe a jockstrap). (RC is actually for real.) And now you are offended that he "neurotically" one-upped you. LOL
Since guns are now allowed into the parks, you will need to learn how to find nuts and berries because the poachers will have deciminated everything that moves by the time you go to your "hideaway". :-(
jal
Centiare,I agree with you: the nature of our country is based in the old west..the Loner.Gunfighter,take what to want..If you think can keep it.We have a dark and bloody past.It is in our nature and reinforced by a thousand TV dramas for those of a certain age....And very well armed.Here in Oregon,If you want a gun,you have it.
John Hemingway...Folks are not hungry enough,or pissed off enough to start talking treason...yet.I Overheard a old pipfitter talking at job with a blistering evaluation of O-man...and it was takenat full value by the crew he spoke too.You have to multiple that guy by ten-thousand to get a idea of the sentiment that is out there.Its real ,and nasty ,and raceist..
If you read this blog ,Hannibal,you will know its check check,check ect ect ect.I have been there for a long long time...
back to work
snuffy
Oregon is quite the nanny state. And like all other nanny states, the public has been setup. Setup to become more dependent on state services, programs, and inflated education budgets. This dependency runs deep. In Oregon, you are not even allowed to pump your own gas by law. The budget crises that these sorts of states face may bring higher levels of civil unrest as people that have become addicted to government services will go through the same types of withdrawals that a heroin addict experiences as these services are cut.
Maybe it would be wise to be relocate to a state that is already mistrustful of centralized control. These states seem to be weathering the storm quite well so far. They offer nothing in terms of services to begin with, so the public remains on the wagon. Since these services will unlikely be available in the future, these states may already be ahead of the game.
Just announced Liddy of AIG resigned.
Could the following story have anything to do with it?
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6281953.ece
From The Sunday Times
May 17, 2009
Joseph Cassano: the man with the trillion-dollar price on his head
"Tripwire said...
Why has there not been more resistance or protest (beyond the Tea Parties)? Because the situation is so complex that no one really understands what to campaign against (or for)."
I have posed the question at other forums to people wanting a revolt/change. No one can ever answer. Everyone wants a revolt, but no one knows what changes they want. People have become placid.
The only thing worth preparing for is death itself. A point driven home to me a few months ago as I witnessed an unsuspecting victim get crushed on her way into a bagel store by a very elederly out of control driver.
Wanna make God laugh...tell him your plans, or so the joke goes
Anon @2:46,
Denninger writing today that the jig is up with the Twolips and Benny show and that the bond dislocation is days or at most weeks away.
I would argue that it is further away than that. The danger signals are flashing again with the (IMO) pause in the rally. That could last for a while and look like the decline is set to begin again imminently. With the pause, the fear returns, and confidence becomes wobbly again. Karl is good at reflecting the fear of market participants, which is not to take away from his analysis of the fundamentals. He's very good at that. I just take issue with his timing.
Once the rally really is over, then we will indeed be close to chaos in the bond market. Karl is quite right about that IMO. I think, on balance of probability, that we still have perhaps a few months yet. No one should be complacent though. Any kind of preparations to cope with very serious circumstances generally take a long time, and it's a lot harder to get out at the top than most people think.
from centiare
"As to the armed services, just who do you think they represent? It's not gonna be citizens vs the military; they're one and the same thing."
On the eve of the Great Depression:
"In June 1932 President Herbert Hoover called General Douglas MacArthur, army chief of staff, to disperse protesting members of the Bonus Army (World War I veterans) from the nation’s capital.
Hoover was sharply criticized over the incident in which MacArthur, left, shown here with his aide, Major Dwight D. Eisenhower, burned the tent encampment and used tear gas and bayonets to remove the disgruntled (WWI) veterans.
The Army had no problem turning against their 'own'. They won't this time either.
the photo:
http://encarta.msn.com/media_461520891_761570424_-1_1/macarthur_and_eisenhower.html
Ilargi,
Thanks for that last article. Yes, the planet is warming much faster than most of us think.
The last war of brothers in arms
The last great cavalry charge in the United States occurred within sight of the White House on a hot July day in 1932. It was led by saber-wielding Maj. George S. Patton Jr. under the command of Gen. Douglas MacArthur. Mounted troopers were followed by tanks, machine gunners and soldiers with fixed bayonets hurling teargas bombs. The enemy was an "army" of more than 20,000 of the poorest American civilians -- unarmed, gaunt, sometimes wounded or shellshocked veterans of World War I, their wives and children.
By Clancy Sigal April 24, 2005
MacArthur, Eisenhower and Patton all got big promotions and names for themselves within the US military establishment for elimanating the 'Hooverville' full of veterans in Washington, DC.
The cream always rises to the top, aye?
Greenpa,
Stoneleigh- I think a good part of the mis- and in-comprehension of what you say stems from people's variable positions regarding "the herd." You think, and act, and feel, outside it, though you do not forget the pains of those within. Much of Ilargi's anger comes, I think, from the fact that while his brain is outside the herd; his heart is firmly inside; and the friction is not fun.
Actually I would say I feel what everyone else feels, but I don't take my own emotional responses to financial matters at face value. I interpret them in light of the circumstances in order to figure out what they're really telling me. It takes a while to get used to doing that, and you're right that the friction, or cognitive dissonance, is not fun.
In person I may not be as emotional as Ilargi, but I'm not far off, and I relate best to people who are emotionally sensitive themselves. Being inherently emotional is a good thing IMO, as long as one doesn't allow the counter-productive emotional signals associated with herding behaviour to run the show (right off a cliff). I probably come across as some kind of female Spock here at TAE (remnants of being a repressed Brit), but appearances, like emotions, can be deceiving ;)
I keep reading about a bond market dislocation but don't really know what it means. Can someone explain in 20 words or less what it is?
Speaking of Spock! The new Star Trek is really quite good :D We might as well enjoy the movies, they might not be coming back.
Anon 6:02
Investors start selling long dated treasuries hard (i.e. greater then 1 year). Prices fall, yields rise.
Imagine 10 year treasuries yielding 10% or more, that makes home loan interest rates at 15-17%, car financing at 17-20%. What does that mean? Everything comes to a screeching halt in the economy as interest is to high. This kills any green shoots, more layoffs, more deflation, mega depression etc.
Stoneleigh,
As a long time reader here, I think you only come off like Spock by being super smart, but emotionally, you come off more like McCoy :-)
Anon @6:02,
Very briefly (because I have a meeting to get to), a bond market dislocation describes a sudden hike in interest rates, quite possibly to double digits in a relatively short space of time. When everyone is trying to borrow, few wish to lend and risk aversion becomes extreme, what little lending there is happens at punitive rates. That forces debt-junkie governments to make drastic budget cuts. It's a bit like hitting the 'emergency stop' button on the economy, as debt defaults would skyrocket. Entitlements would disappear just when people would need them most. The effect of this is not to be under-estimated. It's a TEOTWAWKI scenario.
Anon @6:08,
Thanks - as an aging Trekkie I always had a soft spot for both those characters :)
Stoneleigh,
The new, younger Spock is actually quite emotional, so the comparison might actually be rather favorable! Go boldly and be entertained. It took my mind off things for a couple of hours at least.
Anon @ 4:51: I'm not sure people have become placid; I think they're nervous, confused and hoping for the best... but fearing the worst.
What happens to yields on 30 and 90 days short term treasuries in a bond 'dislocation?
Does the government have to offer much higher returns for even short term treasuries or nothing at all because it will be judged the 'last safe haven'?
Or in a more sinister vein, will the central government mandate that all present short term notes be 'rolled over' indefinitely?
headline:
30-Day and 90-Day T-Bill Yields Plunge to just 0.10%
http://www.contrarianprofits.com/articles/30-day-and-90-day-t-bill-yields-plunge-to-just-010/9731
Anon 6:31
IMO very shirt term T-Bill rates will increase somewhat in a dislocation but not nearly as much as longer term notes and bonds. They will, to some extent, have to be competitive with 90 day CD's, but there will be a lot of demand for them as a safe haven, pushing the rates down. The value should be almost unaffected as almost everyone can finagle a way to get through a maximum of 13 weeks to get their cash back. A 30 year bond could easily lose more than half its value in the secondary market.
VK, Stoneleigh,
Thanks for the simple explanation of the term bond market dislocation. Since the new Star Trek movie came up (spoiler alert) it might instead be called a bond market singularity leading to a credit black hole. The Chinese have the Red Matter needed to start the process and destroy us.
My Dad, my son and I went to see the new Star Trek movie - it was certainly entertaining and what the heck, you may as well enjoy some techno-cornucopian fantasy here at the end of the empire.
Star Trek is wrapped up with all the feelings of unlimited future I had an an adolescent. My Dad the engineering professor worked with all this cool stuff. I believed it all - there was never any doubt in my mind we'd go to the stars. So I too became and Engineer. Now I wish I had learned to farm, as I guess we're staying here - whatever is left of it.
Twilight
Mugabe said:
Exactly which federal agents are going to collect the taxes Stoneleigh predicts?
I guess one thing that happens, as people leave starvation in the boonies, to become half starved townies is that the tax base shrinks (as well as federal subsidies) the increased taxes may not be so much Federal but municipal . What the local big frog wants is what the guy those mountain dudes will deal with, could be a close relative, and not that stranger at all, depending, of course, on how one views one's relatives.
-el prodigal-
Well, reasonable discussions, but disappointing i many ways as well. When people make gratuitous remarks like Ilargi is angry because his heart is stuck in a herd, what do you say to that? Do you ask where the person who says it sees himself? We're all stuck in a herd, most of all those of us who deny it.
And the attempts at creating some sort of American myth that I would not be able to understand is just so much bogus as well. Once you need to escape in that sort of thing, you got issues, I'd venture. As I've said before, America in its present form is a failed experiment, politically bankrupt, economically bankrupt and morally bankrupt. And I think 99.9% of Americans are too myopic to see that, and prefer the fairy tale to recognizing failure. You can see things better as you get closer to them, but that process is not endless. To understand, move your hand towards your eyes.
And it's a shame, since it stifles dialogue. I can do these conversations a dozen at a time, and file my nails while I'm at it, they are no challenge, I don't learn anything in the process. Let's move away from that to topics that are more interesting.
"Exactly which federal agents are going to collect the taxes Stoneleigh predicts?"
The poor. Come on, read some history, it's not exactly new material.
Ilargi:
http://www.marketoracle.co.uk/Article10755.html
Russia Dumps the U.S. Dollar for Euro as Reserve Currency
"Tripwire said...
Stoneleigh,
Anon @ 4:51: I'm not sure people have become placid; I think they're nervous, confused and hoping for the best... but fearing the worst."
Placid probably was not the best choice of words... What I am seeing is people want the economy to just be fixed and problems go away, and in the extremes, they want to be taken care of. So when I said "placid", I was meaning that they want the economy fixed, but they don't know how, so they just sit back and wait.
Do I need to come up with a specific "handle"?
Anon,
You don't need to, but it does make it a bit easier to carry on discussions. Also, if you read the comments frequently, you'll come to recognize favorite posters, and they you.
TW
RC, yes, is for real, and the jungle should tip you off that he does not live in the states any more. Hasn't for 30 years. He likes clothing as it works to keep off the scabies and the plant irritants, but is not into the jockstrap thing. He only intends to repair to the shade under the rain forest canopy above the 2,500 foot level {no mosquitoes there} if all else fails, thus, he refers to the option as Plan Z. Other options come first.
Red Flags replace Green Shoots and it looks like the light in the forest is an oncoming train
Unraveling markets bode ill for U.S. economic might
NEW YORK (Reuters) - The long shadow of a multi-trillion dollar financial rescue program is beginning to shake investor confidence in U.S. economic supremacy.
In a nervous day in financial markets, dollar-based assets took a rare, simultaneous plunge.
snip
On Thursday, investors decided it was time to get out, pushing the S&P 500 index, which rallied more than 35 percent over the last two months, 1.7 percent lower on the day. At the same time, the 30-year Treasury bond fell three full points in price and its yield jumped 0.17 percentage point to 4.33 percent, the biggest one-day increase in two weeks.
The dollar index, which captures the greenback in relation to a basket of major currencies, is down 7.5 percent in just the last month. The cost of hedging against a U.S. government default, which fell rapidly in recent weeks, crept back up.
At the back of investors' minds is the fear, long latent but now more prevalent, that foreign buyers of U.S. bonds, especially China, might tire of lending America money.
Since we are talking movies, Ilargi reminds me of Wolverine from X-Men. Sharp, experienced and intellectual claws, lets em rip when he has too. Maybe he's an Ilargine?
@ Persephone
Thanks for the reuters link but what made me laugh at the link was the list of top 10 stories
1) UPDATE 3-Dark horse Kris Allen wins "American Idol"
2) "American Idol" ends on low note
4) UPDATE 1-"American Idol" ends on low, questions over future
6) Tarantino's "Basterds" surprisingly tame war movie
7) Tarantino and Pitt in Cannes for Nazi-slaying caper
The link you provided isn't even in the top 10 and we're talking about events that will shape people's lives for decades if not centuries!
I guess the show must go on at the ignorance of all other costs.
@VK
What you said would be funny if it weren't so true :)
Then again, didn't Rome build the colosseum to keep the masses entertained? Bring on the gladiators!
New post up
ilargi, on this:
And I think 99.9% of Americans are too myopic to see that, and prefer the fairy tale to recognizing failure.
,
I have a cousin who curses right and left about both political parties and considers the military leaders so many goons and feels her country a lost cause ... but she says when she hears US Anthems she can't but stand up straight and feel some strange pride. The funny thing is she knows what is happening at the time but feels it is too ingrained what with beginning with it every day in school, just can't help it.
Odd but I never felt the same rapture when I heard 'Oh Canada', but I think that anthem has a few hurdles to it tunewise?
-el prodigal-
centiare wrote "As to the armed services, just who do you think they represent? It's not gonna be citizens vs the military; they're one and the same thing."
Hi -- I'm curious to know whether a soldier would fire on citizens if ordered to. I'm thinking along the lines of Tiananmen Square kind of thing. What do you think? I think it's a possibility.
Holy moly, you folks are intense! And smart. Here's a thought: just gather weapons, ammo and food for defense against an unknown future.
For yesterdays anon-mouse who suggested I flee Oregon due to its "nanny state"structure....
My family[fathers]has been in Oregon since the 1840.God knows when the native side came.I have seen all of the usa during my days as a contract Heath Physics tech...3 monthes at a time,during refueling outages at your local nuclear station.I came Home due to my having developed a distaste for the various states I lived in with the exception of Wisconson.[I almost married, bought a bar with a dock on the local great lake,near miss]Its true that the state takes proactive action..thats why there might be some kind of order in the event things get weird...The folks here are hip to peak,resource depletion,and climate change...and we are damn near all "aware"of whats going on...
snuffy
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