Worker at carbon black plant. Sunray, Texas
Ilargi: I find it strange that stocks go up ostensibly on account of Meredith Whitney's bull call on Goldman and a handful other bailed-out financial firms. I find that strange not only because nothing really changed inside the vaults of these institutions -the level of toxicity remains , say, elevated-, but also because Whitney simultaneously provides the worst unemployment prediction emanating to date from a "serious" finance source: 15%. U3, that is. Which would, if you allow me the back on the envelope, take U6 to around 30%, and Shadowstats' alternate U6 likely between 35% and 40%. If Whitney's right, the US economy would fall into what can only be called a pitch black hole.
That said, I also find it strange that people take Whitney to task for raising her bank targets. All she does is recognize that taxpayer bailouts may have impoverished the general population, but that they at the same time have opened up banks to huge new and additional profits. Which will raise their stock. Temporarily. Which is precisely the sort of information Whitney's clients seek from her. Whether she will be able to predict the right moment to get out again is another story. Certainly, a generous majority of those who bought in today don't stand much of a chance of picking that moment correctly.
But Meredith works for the rich and fortunate, not for the rest of us. If she can go on TV in the expectation of "talking up" a stock for a profit, I think she probably will. I personally find her choices morally questionable, but if that were the main criterion for assessing and rejecting the financial "in-the-know", or the political for that matter, we can all come up with a virtually endless list of people who should be kicked around and out. You'd have no financial system left, and no government either.
Which is how I can weave a seamless link to the furor over Goldman Sachs and its limitless litany of morally questionable to unquestionably unconstitutional practices. There seems little doubt left that folks from all walks of life will want to go after Goldman and the heads and faces that choose to proudly represent it for a few dozen million dollars per year.
But just as with Whitney, there is a problem with this, albeit not the exact same one. In the case of Goldman, if you would want to really go after the firm and its people, if you would want to dissect to the bone the books and transactions, the links, liaisons, and connections, the trades taking place on a daily basis over, on and under tables and counters, what would happen would look remarkably similar to the example of judging the likes of Meredith Whitney on strictly moral grounds. That is, if you hunt Goldman down, all the way down, you will wind up without a US government.
Which would be a moral victory, if you ask me, but there would also be some practical complications. At a certain point you need to realize that there really is no difference between Washington and Wall Street. Those mythological writers who talked about multi-headed monsters may have thought of similar phenomena, though probably on a smaller scale, when they told their tales. Chopping off one head is useless, and they mostly even grow right back.
I’ve started saying a long time ago that the entire system is beyond salvation of any kind, it's marked down as dead and gone. Still, all I see is people talking about saving the system. "Get rid of Goldman, and the system can be redeemed." "Get rid of W, and things will get better." "Fire Paulson, prosecute Cheney, throw out Geithner." But it's not going to work, none of it.
It's not about chopping off the heads. There's too many of them anyway, and they change all the time. The true problems are much deeper. The whole organism is riddled with diseases, it’s rotten to the core with debt and greed and corruption. And as for you, whatever role you have in the economy, you are feeding the creature. Whoever you vote for in the elections, you are feeding the creature. Every house bought, every dollar paid in taxes, it all feeds it.
The system, the creature, will eventually die of its own accord. It will bring down many, if not most, of us in its fall. There is nothing we can do about it, it will have to run its course. The creature has simply become too sick and too bloated with debt to survive, and it's only kept alive to allow the parasites that live inside its intestines and gobble up what you feed it, to find a new host. Then they will move on and the creature will die. Or it will perish before they find a new host.
The only smart thing you can do is to put as much distance between it and you as you possibly can. The further away you are, the better the chances of not being crushed when the remains crash to the ground. Most of you, I know, will keep on hoping and believing that the system can be cured and saved. That is not all that bad. It gives the rest a better chance to get the hell out of the way. Not that it provides any guarantees; just a slightly better chance.
US budget deficit tops $1 trillion for first time, with 3 months left in fiscal year
Nine months into the fiscal year, the federal deficit has topped $1 trillion for the first time. The imbalance is intensifying fears about higher interest rates and inflation, and already pressuring the value of the dollar. There's also concern about trying to reverse the deficit — by reducing government spending or raising taxes — in the midst of a harsh recession. The Treasury Department said Monday that the deficit in June totaled $94.3 billion, pushing the total since the budget year started in October to nearly $1.1 trillion.
The deficit has been propelled by the huge sum the government has spent to combat the recession and financial crisis, combined with a sharp decline in tax revenues. Paying for wars in Iraq and Afghanistan also is a major factor. The country's soaring deficits are making Chinese and other foreign buyers of U.S. debt nervous, which could make them reluctant lenders down the road. It could force the Treasury Department to pay higher interest rates to make U.S. debt attractive longer-term.
"These are mind boggling numbers," said Sung Won Sohn, an economist at the Smith School of Business at California State University. "Our foreign investors from China and elsewhere are starting to have concerns about not only the value of the dollar but how safe their investments will be in the long run." Government spending is on the rise to address the worst financial crisis since the Great Depression and an unemployment rate that has climbed to 9.5 percent. Congress already approved a $700 billion financial bailout and a $787 billion economic stimulus package to try and jump-start a recovery, and there is growing talk among some Obama administration officials that a second round of stimulus may be necessary.
This has many Republicans and deficit hawks worried that the U.S. could be setting itself up for more financial pain down the road if interest rates and inflation surge. They also are raising alarms about additional spending the administration is proposing, including its plan to reform health care. President Barack Obama and other administration officials, including Treasury Secretary Timothy Geithner, have said the U.S. is committed to bringing down the deficits once the country has emerged from the current recession and financial crisis.
Buddy, Can You Spare $5 Trillion?
by John Mauldin
I have been writing for months that I don't think the US can find $2 trillion dollars this year and then come back to the well for another $1.5 trillion next year without serious disruption in the markets. Where do you find that much money when all the rest of the world also wants to borrow massive amounts? How much are we talking about? The friendly folks at Hayman actually spent the time to add it all up. This is not a comforting graph.The graph shows the US will need to issue $3 trillion in debt. "Wait," I asked, "I thought it was only 1.85" The answer is that the number has grown to almost $2 trillion (as I wrote it would). Then you need to add in off-budget items like TARP, state and municipal debt, etc. Pretty soon it adds up to another trillion. All told, Hayman estimates that the world will need to find $5.3 trillion in NEW government financing. Never mind the needs of corporations or individuals or commercial mortgages, etc.
I am still trying to get my head around this. Let's hopefully assume that they made a mistake and it is "only" $4 trillion. Where do you find that kind of money in a global deleveraging recession?
The World Bank says that total world GDP in 2008 was $60 trillion
That means we need to find almost 9% of world GDP to fund the new government debt. Gentle reader, this is a serious problem. And now the next chart. Remove sharp objects or take another drink.
This one is titled "The Potential Shortage of Capital to Fund Treasuries." They take into account the need for corporate borrowing, new corporate equity issuance, real estate debt, capital inflows and outflows, household savings, etc.
Bottom line? There is simply not enough available capital under current conditions to do it all. Something has to give. More household savings? More foreign investment (flight to safety, as the rest of the world looks even worse)? Reduced corporate borrowing and thus less GDP growth? Higher rates to attract more foreign and US investment?
The combinations are infinite, but none of them bode well. Increased household savings means less consumer spending. To attract more foreign investment (in the amounts that will be needed) will mean higher rates. And this is 2009. What happens in 2010? And 2011?
One trillion dollars is 7% of US GDP. And we will be running trillion-dollar deficits for a very long time.
Just a thought: Do you want to be a senator or congressman running for office next year with unemployment nearing 11% (my estimate), with all of the problems mentioned above, and with a record of having voted for the largest unfunded deficits in history? It is going to be a very interesting election cycle.
I will close here, as going into the next slides will make the letter way too long, but we will get to them next week. As a teaser, they asked me what my number-one concern was. I said Europe and European banking. Interestingly, that was also their number-one concern for "exogenous" risk. It will make a great launch for next week's letter.
Time to tackle the real evil: too much debt
by Nassim Taleb and Mark Spitznagel
The core of the problem, the unavoidable truth, is that our economic system is laden with debt, about triple the amount relative to gross domestic product that we had in the 1980s. This does not sit well with globalisation. Our view is that government policies worldwide are causing more instability rather than curing the trouble in the system. The only solution is the immediate, forcible and systematic conversion of debt to equity. There is no other option.
Our analysis is as follows:
First, debt and leverage cause fragility; they leave less room for errors as the economic system loses its ability to withstand extreme variations in the prices of securities and goods. Equity, by contrast, is robust: the collapse of the technology bubble in 2000 did not have significant consequences because internet companies, while able to raise large amounts of equity, had no access to credit markets.
Second, the complexity created by globalisation and the internet causes economic and business values (such as company revenues, commodity prices or unemployment) to experience more extreme variations than ever before. Add to that the proliferation of systems that run more smoothly than before, but experience rare, but violent blow-ups. Our ability to forecast suffers due to this complexity and the occurrence of the occasional extreme event, or "black swan". Such degradation in predictability should have made companies more conservative in their capital structure, not more aggressive – yet private equity, homeowners and others have been recklessly amassing debt.
Such non-linearity makes the mathematics used by economists rather useless. Our research shows that economic papers that rely on mathematics are not scientifically valid. Not only do they underestimate the possibility of "black swans" but they are unaware that we do not have any ability to deal with the mathematics of extreme events. The same flaw found in risk models that helped cause the financial meltdown is present in economic models invoked by "experts". Anyone relying on these models for conclusions is deluded.
Third, debt has a nasty property: it is highly treacherous. A loan hides volatility as it does not vary outside of default, while an equity investment has volatility but its risks are visible. Yet both have similar risks. Thus debt is the province of both the overconfident borrower who underestimates large deviations, and of the investor who wants to be deluded by hiding risks. Then there are products such as complex derivatives, which in the name of "modern finance" make the system even more fragile.
Against this background, we have two options. The first is to deflate debt, the other is to inflate assets (or counter their deflation with a collection of stimulus packages.) We believe that stimulus packages, in all their forms, make the same mistakes that got us here. They will lead to extreme overshooting or extreme undershooting. They lead to more borrowing, by socialising private debt. But running a government deficit is dangerous, as it is vulnerable to errors in projections of economic growth. These errors will be larger in the future, so central bank money creation will lead not to inflation but to hyper-inflation, as the system is set for bigger deviations than ever before.
Relying on standard models to build policies makes us all fragile and overconfident. Asking the economics establishment for guidance (particularly after its failure to see the risk in the economy) is akin to asking to be led by the blind – instead we need to rebuild the world to make it resistant to the economist’s mystifications. Invoking the pre-internet Great Depression as guidance for current events is irresponsible: errors in fiscal policy will be magnified by this kind of thinking. Monetary policy has always been dangerous.
Alan Greenspan, former Federal Reserve chairman, tried playing with the business cycle to iron out bubbles, but it eventually got completely out of control. Bubbles and fads are part of cultural life. We need to do the opposite to what Mr Greenspan did: make the economy’s structure more robust to bubbles. The only solution is to transform debt into equity across all sectors, in an organised and systematic way. Instead of sending hate mail to near-insolvent homeowners, banks should reach out to borrowers and offer lower interest payments in exchange for equity. Instead of debt becoming "binary" – in default or not – it could take smoothly-varying prices and banks would not need to wait for foreclosures to take action.
Banks would turn from "hopers", hiding risks from themselves, into agents more engaged in economic activity. Hidden risks become visible; hopers become doers. It is sad to see that those who failed to spot the problem (or helped to cause it) are now in charge of the remedy. Just as the impending crisis was obvious to those of us who specialise in complexity and extreme deviations, the solution is plain to see. We need an aggressive, systematic debt-for-equity conversion. We cannot afford to wait a day.
Banks Stronger But Outlook Clouded by Job Loss: Whitney
Unemployment is likely to rise to 13 percent or higher and will weigh on the economy for several years, countering government efforts to stabilize the banking industry, analyst Meredith Whitney told CNBC. While Whitney raised her short-term outlook for banks, causing stocks to open in positive territory after pointing lower earlier, she said the long-term outlook for the economy remains murky. Consumers will not be able to spend as they continue to lose jobs and credit conditions stay tight, she said in a live interview.
The result will provide a vivid display of how critical housing and lending are to economic growth. Unemployment is currently at 9.5 percent but is expected to keep rising. "We underestimate how much the whole economy is dependent on the mortgage industry, and that has to change," Whitney said. "This is what happens when you delay the inevitable. We're buying time here, but we're not restructuring the economy."
Prior to the interview, Whitney raised hopes for banks when she said Goldman Sachs is in for a hugely profitable quarter. She expanded her remarks during her CNBC appearance, saying the Wall Street titan probably will earn $4.65 per share for the second quarter, $20 for the year and more than $22 for 2010.
Banking stocks will be good buys at least in the short term as the industry takes advantage of "the mother of all mortgage quarters," Whitney said. Little-noticed new Safe Harbor Mortgage Modification rules that went into effect May 20 prohibit mortgage investors from suing loan servicers. The legislation is significant in that it offers added protection for large servicers from investor litigation as the institutions modify mortgages for distressed homeowners.
President Obama endorsed the changes as part of his administration's efforts to head off foreclosures, protect consumers and support the flailing mortgage industry. Whitney said the new rules will be a boon for larger banks, but the momentum may not last. "It's a trading call," she said, adding that "you don't want to be short these names." Banks as a whole could see a 15 percent gain in the short term, "then you flatline, then I think you have another leg down."
Outside of Goldman, Whitney said Bank of America is "bar none" the cheapest of bank stocks compared to its tangible book value, and said JPMorgan Chase's earnings will provide a bellwether for institutions plagued by large consumer loan losses. It is joblessness, though, that poses the industry's greatest risk. "Unemployment continues to drive higher and the banks are not prepared for double-digit unemployment," she said. "That's going to be an issue for them that doesn't go away for the next year and a half."
The Mystery of the Missing Unemployed Man: On Jobs and Banks
For the book I'm writing about unemployed Americans, I had no trouble finding accountants, brokers, cashiers, or die casters. Admittedly, I had to go out of town to interview the die casters. But when I arrived, alphabetically, at unemployed editors, I had only to look in my address book. Financiers were further from my life experience than either die casters or editors. Yet the "do you know anyone who...?" method still proved an effective way of turning up unemployed hedge-fund analysts and bank loan officers -- and within a week at that.
It was only when I refined my search to ferret out unemployed financiers who had actually handled those infamous "toxic assets" that I hit the proverbial brick wall. Since mortgage-backed securities and the swaps that insure them had been the downfall of Lehman Brothers, Bear Stearns, Merrill Lynch, and the giant insurance company AIG, packs of bankers who worked on them must, I assumed, be roaming free on the streets of Manhattan. Yet I couldn't find a single one.
Finally, I phoned a law firm representing Lehman Brothers employees in a suit for the pay they were owed when the company shut down without notice. I asked the lawyer if he could possibly inquire among his unemployed clients for someone, anyone, who used to work with mortgage-backed securities and might be willing to talk about how he or she was getting by today. "I don't have to use real names," I assured him. Many of the unemployed people I'd already interviewed felt so lost and ashamed that I had decided not to use their real names. Unemployed bankers deserve anonymity, too.
But the lawyer made it clear that that wasn't the problem. "Most of them were snapped up immediately by Barclays," he said. He represents other financial plaintiffs as well, and he seemed to think that the kind of person I was looking for hadn't remained unemployed very long.
How could that be? We've heard ad nauseum about mortgage-backed securities. They're bonds "structured" out of thousands, or tens of thousands, of home or commercial mortgages. The bond's owner was to receive interest out of the mortgage payments from all those property owners. He could earn a low 5% interest if he opted to be paid out of the first money that came in. (Institutional investors often chose that safe "tranche," or slice, of the security.) But back when mortgages seemed so safe, a hedge-fund gambler might have been happy to opt for the last mortgage payments to come in -- in exchange for heftier 7% to 8% interest rates. Of course, that was the gamble. Too many missed mortgage payments meant little or no returns for his fund.
When last I heard, more than half of U.S. mortgages were held this way, so it was a reasonable supposition that a lot of people had been employed structuring, trading, and insuring those bonds. But who in his right mind would touch this stuff now? While that lawyer sounded like an honest, helpful fellow, I still wondered whether he wasn't just brushing me off to protect his embarrassingly unemployed clients. Soon after, however, I met a bank corporate loan officer who confirmed that his colleagues on the "structured side" were indeed still employed. In fact, he thought he noticed a couple of new chairs at their trading desk in the bank's trading room. "Those damn things" had become so complicated, he speculated, that the people who put them together were now needed in similar numbers to "unwind the bank's positions" -- that is, get them out of the deals.
That must be it, I thought, and recalled a moment soon after AIG got the last of its $182 billion bailout from the government. At that time, the company braved a massive public outcry to award big bonuses to its top employees, including those who had created the "swaps" (short for credit default swaps, or CDSs) that swamped the company. Like so many other companies, AIG claimed that bonuses were necessary to retain the "best brains," especially those who understood the credit-default swaps.
These swaps are a type of derivative that was supposed to represent a way of insuring the very bonds we've been talking about. Here's how it worked -- at least theoretically, at least before the ship went down: On a given bond, say number 123456, an insurance company like AIG would essentially say to a large investor, perhaps a mutual fund, "You pay us $7,000 a month and, if you fail to receive the interest on that bond for, say, two months, then we'll buy the whole bond from you for the $200 million you paid for it." In other words, it was a private, custom-written contract to simply "swap" one of those bonds for money under certain agreed circumstances.
These deals were couched in such terms, rather than as straight insurance policies, because insurance is regulated and the regulations require setting aside relatively small amounts of money in reserve in case the disasters insured against occur. But swaps aren't regulated. Nothing need be set aside. Here's the remarkable thing: both the Bush and Obama administrations decided that the government would make good on these non-regulated, non-insurance policies. The costs could be humongous.
Now, here's an even more distressing complication. You didn't have to own the original bond to buy the swap that was really an insurance policy. An "investor" could approach AIG and say, "You know that Merrill asset-backed bond -- number 123456? I'll pay you $7,000 a month, too, and if the bond defaults, then you owe me 200 million also." It's as if any number of people could buy (or, really, bet on) your life insurance policy. Or think of a race track where anyone can go to the window and bet on any horse in any race -- and collect if it comes in. (Or in this case, collect if mortgage payments didn't come in.)
If our government were merely going to cover the original mortgage-backed securities, the maximum payouts, though large, would at least be calculable. If 50% of the mortgages in the U.S. were, as they say, securitized, and if they all were to default, that would be a vast but finite loss. But since any number of people could buy into the swaps on those bonds, the swap payouts could be an unknown amount that would be many times the value of the real buildings. How many multiples of reality might that come to? Two times, 10 times, 100 times? Who knows? Remember, these are unregulated transactions.
And keep in mind that the "investment" being bailed out here has nothing to do with anything in the real world. Neither party to these "me too" swaps owned, built, or financed the original housing, or anything else for that matter. They were simply betting on whether a certain group of people would pay their mortgage bills. Why our government would underwrite these bets, and why such gambling contracts are legal in the first place, is beyond me, but as we know, they were placed on a vast scale. No wonder, I thought, that my swap men were all still employed. After all, even if there's no work for die-casters or editors, there's still all that "unwinding" to do by the people who did the winding in the first place.
Then I read this headline in the Financial Times: "Strange but true -- the credit specs are back." According to the column that followed by John Dizard, "[T]hanks to the Geithner Treasury's policy of reform, rather than dissolution, CDS trading has regained a vampiric strength that the real economy still lacks." So, now I understood: the man I couldn't find, the man who wasn't unemployed, wasn't just doing that final bit of unwinding or cleaning up old messes. He was busy making new ones! How could Dizard be certain, though, that the debt trade is really booming again? He cites "one friend of mine in the credit fund trade" who has "made money on both the downside and the upside during the past year."
Of course, who can know for sure? If there was a derivative exchange along the lines of the New York Stock Exchange, we'd have a good idea of the volume of the trade. But derivatives -- I know you've heard this more than once -- are unregulated. President Obama's recent white paper on financial reform suggests that derivatives should, in fact, be regulated, except for what it refers to as "custom" products. That, unfortunately, sounds like just the right-sized loophole for the financial instruments I've described. And -- I'm sure you won't be surprised by this -- financiers are lobbying furiously to expand that hole.
Why is there such an interest in reviving the debt market and why are financiers so determined to keep it unregulated? Aren't they scared of it, too? Let me quote Dizard one last time:
"After all, if the dictates of style and tax auditors say you have to go easy on conspicuous consumption, and if there's no demand for the products of real capital spending, then you might as well take your cash to the track, or the corner credit default swap dealer." In other words, people are speculating on derivatives and derivatives of derivatives because there's no action in the real world. You can't invest in new real businesses or lend money to old real businesses for expansion unless people can afford to buy the products they'll produce. That brings me back to where I started: our real world. You know, the one where just about everyone's unemployed except those swap guys.
The 1,000% loan: How debit cards are fleecing consumers
Born-again Democrats recently made a big to-do in reining in credit-card industry abuses. To really safeguard our interests, the new U.S. Consumer Financial Protection Agency now needs to halt the banking industry's coup in progress and the means of its power grab, the debit card.
Being able to whip out a debit card for virtually any transaction is so convenient. Yet in promoting our evolution to a cashless society, banks have commandeered and privatized the nation's payment system and profit mightily on all types of purchases, down to buying a candy bar.
The industry's initial aim was to reduce cash-handling, check-clearing and accounting costs via electronic transactions, including direct deposit of paychecks and automatic withdrawals for bills and expenses. Its ultimate windfall: While reaping those savings, it now generates billions in fee-based income -- and we've all sacrificed financial privacy in ways we've not yet even begun to fathom.
Used to be debit-card purchases wouldn't go through without sufficient funds in a cardholder's account. Then opportunistic banks realized that, with direct deposit, they could recoup the overdrawn funds the instant their clients' next payroll checks rolled in. The upshot: Banks may impose a $35 fee for "overdrawing" on a $3.50 fast-food purchase -- and have vigorously fought efforts to provide electronic warning of the debit-card overdraft at the point of sale. The equivalent interest rate for your $3.50 lapse: 1,000%.
Here's more to consider:
The double-standard on account theft Credit-card holders aren't on the hook for fraudulent use of their card numbers and can challenge charges on goods and services not delivered as promised. Debit-card holders still aren't guaranteed those same protections. The reason: It's the lenders' money on the line with a credit-card transaction -- and just our hard-earned savings with debit-card fraud.
They'll absorb the cost of investigating and prosecuting theft of their money, but they don't want to pick up the cost of policing the theft of ours -- by identical means through their very same hands. Credit-card borrowers are never out more than $50 regardless when they discovered potential fraud. Debit-card holders liability is limited to $50 only if they report perceived fraud within two days; the liability jumps to a maximum $500 from that point to 60 days, and is completely unlimited thereafter.
Vanishing gift-card balances When consumers buy gift cards, they're essentially giving retailers an interest-free loan until the recipient uses the card, rather generous when you think about it. Yet on many cards, in small print, is the caveat that the card's value is wiped out if not used by a certain date. What the hell? Cash value should never vanish, whether in hand or in stored electronic chits. Whoever let our payment system get boarded by Somali pirates?
How we got snookeredThe Federal Reserve under Alan Greenspan championed the banks' aims, since it cost the Fed five cents to process checks through its transfer system versus a penny for electronic transactions. To Greenspan, the cost savings for the Fed justified the unprecedented turnover of the payment system to the banks.
The IRS, meanwhile, loved the personal record the shift to a cashless society produces because it reduces the undocumented flow of cash through the "underground economy." We've improved the likelihood the government will collect on taxes owed, but at what societal cost? The debit card's predecessor, of course, was the ATM card, whose initial selfish aim was to eliminate the need for bank tellers and associated labor costs. We gained access to cash after banking hours in the 1980s -- and thanks to direct deposit -- never had to wait on long lines during Friday lunch hour to cash payroll checks. How great was that!
Thus began our drunkenness on electronic transactions and the demise of our financial self-discipline as we too liberally dispense with our limited savings simply because they're so readily accessible. That's just as the banks' intended when they shifted from making money off how they invested our deposits, and began vigorously promoting our spending for the fees it generated.
Debit-card practices now need some immediate curbs to turn the banking industry back into our financial servant rather than our master:
- Notice of deficient funds. Realizing its debit-card overdraft fees are blatantly usurious, the banking industry has been open lately to possibly letting accountholders "opt out" of the ability to overdraw accounts. Consumer advocates want the policy to instead be "opt-in," meaning accountholders have to agree to accept overdraft levies. The simple compromise: Notify card holders at the moment of transaction that they'll be overdrawn and let them decide it they want to pay the fee.
- Same theft protections as credit cards. Whether it's their money on the line or our own, the banks must afford debit-card transactions the same theft protection they do for credit cards.
- An outright ban on a dangerous ''next-gen' card. When retailers ask "credit or debit," it's merely a question of how consumers want the transaction processed; the funds still come out of their bank accounts.. What must be banned outright: Allowing banks to offer a single, combined debit and credit card that defaults to the latter if there's insufficient funds in one's bank account. That would be the industry's Holy Grail and we can't let them hand us that arsenic-laden cup.
America's entire payment system needs immediate scrutiny and reform to map out where it's headed. If not, we might as well cede the future of the world to the burgeoning Chinese middle class who aren't likely to blow banked, hard-earned yuan in an instant just because they have the ability to do so. That effort will fall to the Consumer Financial Protection Agency, which will take over regulation of consumer-lending products and practices now overseen by various federal banking regulators, if Congress passes current legislation.
The rub: The primary focus of those banking regulators -- which are funded and lobbied hard by the banks -- is ensuring banks' safety and soundness, and we've seen what a great job they did there. It's now time for federal authorities to look out more for the safety and soundness of our modest little accounts.
Goldman Sachs executives sold $700 million in stock while bank received $10 billion bail-out
Goldman Sachs Group Inc executives sold almost $700 million worth of stock since the collapse of rival Lehman Brothers last year, the Financial Times said on Monday. The newspaper said that most of the stock sales took place while the biggest U.S. investment bank was bailed out by the government with $10 billion of taxpayer money, according to filings with the Securities and Exchange Commission.
Goldman executives sold stock worth $691 million between September 2008 and April 2009, more than the $438 million in stock sold between September 2007 and April 2008, when the average share price was substantially higher, the Financial Times said. The stock sales peaked between December and February, when Goldman Sachs' shares traded near record lows, the newspaper said. After Lehman Brothers collapse froze financial markets, Goldman Sachs was forced to convert into a bank holding company to have access to government funding, and received $10 billion of taxpayer money.
The bank also reported its first quarterly loss since going public in 1999. However, Goldman has managed to sidestep the worst of the financial crisis, which has caught rivals with much higher losses and massive asset writedowns. Last month, the bank repaid the government the bailout funds, along with other big banks. Analysts expect Goldman Sachs will report strong quarterly earnings on Tuesday, boosted by sold trading income and improving equity underwriting markets.
Ilargi: Great little video through Ben Bittroff. See it!
A Complete Fleecing of the Sheeple
This has to be the most complete fleecing of the Sheeple ever. The truely amazing thing is that the Sheeple don't seem to know yet they've been absolutely pillaged. Wake up already!
The events preceding Goldman Sachs' new "blowout profits"
by Glenn Greenwald
Remember all of this -- the $700 billion bank bailout, the AIG scandal, dark and scary threats of imminent global meltdown if there wasn't full-scale capitulation by the citizenry to the immense transfer of public wealth to the private investment banking sector? Such distant, hazy memories: so many exciting celebrity deaths and riveting celebrity resignations ago. If sequences of events like these don't cause mass citizen outrage, then it's hard to imagine what will:The New York Times, September 19, 2008:
ABC News, September 26, 2008:WASHINGTON — It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first.
Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. had made an urgent and unusual evening visit to Capitol Hill, and they were gathered around a conference table in the offices of House Speaker Nancy Pelosi.
“When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York.
As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program “Good Morning America,” the congressional leaders were told “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.”
Mr. Schumer added, “History was sort of hanging over it, like this was a moment.”
When Mr. Schumer described the meeting as “somber,” Mr. Dodd cut in. “Somber doesn’t begin to justify the words,” he said. “We have never heard language like this.”
“What you heard last evening,” he added, “is one of those rare moments, certainly rare in my experience here, is Democrats and Republicans deciding we need to work together quickly.”
The New York Times, September 27, 2008:The embattled Goldman Sachs investment banking firm and its employees have spent more than $43 million dollars on lobbying and campaign contributions to cultivate friends and buy influence in Washington, D.C. since 1989, according to an ABC News analysis of campaign finance records compiled by the Center for Responsive Politics.
As a group, Goldman Sachs bankers have been the country's top political campaign contributors this year and have given $29.5 million in contributions since 1989, according to the Center.
"They are almost in a class by themselves," said Sheila Krumholz, the executive director for the Center for Responsive Politics.
"Their top executives are in a class that is way above the clout and name-dropping that most other American businesses can achieve," says Krumholz.
MSNBC, October 3, 2008:Two weeks ago, the nation’s most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster.
As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of America’s oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help.
One of the Wall Street chief executives participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern.
Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.
Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.
Wall St. Journal, October 6, 2008:President Bush signed into law Friday a historic $700 billion bailout of the financial services industry, promising to move swiftly to use his sweeping new authority to unlock frozen credit markets to get the economy moving again. . . .
But Majority Leader Steny Hoyer, D-Md., said compromise was needed. He said that while he strongly opposed the Senate’s decision to pay for many of the tax breaks with debt, he could not forget everyday Americans at home who were struggling. “For their sake, we must act,” Hoyer said in a floor speech.
New York Times, December 13, 2008 -- "A Champion of Wall Street Reaps Benefits":Treasury Secretary Henry Paulson is expected to tap Neel Kashkari, a key adviser on whom he has come to rely heavily during the financial crisis, to oversee Treasury's $700 billion program to buy distressed assets from financial institutions, according to people familiar with the matter.
Mr. Kashkari, 35 years old, a Treasury assistant secretary for international affairs and a former Goldman Sachs Group Inc. banker, is expected to be named interim head of Treasury's new Office of Financial Stability as early as Monday. The position confers substantial power on Mr. Kashkari. . . .
USA Today, January 27, 2009:Senator Schumer plays an unrivaled role in Washington as beneficiary, advocate and overseer of an industry that is his hometown’s most important business.
An exceptional fund raiser — a "jackhammer," someone who knows him says, for whom "'no' is the first step to 'yes,'" -- Mr. Schumer led the Democratic Senatorial Campaign Committee for the last four years, raising a record $240 million while increasing donations from Wall Street by 50 percent. That money helped the Democrats gain power in Congress, elevated Mr. Schumer’s standing in his party and increased the industry’s clout in the capital.
But in building support, he has embraced the industry’s free-market, deregulatory agenda more than almost any other Democrat in Congress, even backing some measures now blamed for contributing to the financial crisis. . . . But Mr. Schumer, a member of the Banking and Finance Committees, repeatedly took other steps to protect industry players from government oversight and tougher rules, a review of his record shows. Over the years, he has also helped save financial institutions billions of dollars in higher taxes or fees.
He succeeded in limiting efforts to regulate credit-rating agencies, for example, sponsored legislation that cut fees paid by Wall Street firms to finance government oversight, pushed to allow banks to have lower capital reserves and called for the revision of regulations to make corporations’ balance sheets more transparent.
Reuters, March 16, 2009:WASHINGTON — Treasury Secretary Timothy Geithner picked a former Goldman Sachs lobbyist as a top aide Tuesday, the same day he announced rules aimed at reducing the role of lobbyists in agency decisions.
Mark Patterson will serve as Geithner's chief of staff at Treasury, which oversees the government's $700 billion financial bailout program.
Robert Reich, March 18, 2009:President Barack Obama's nominee to oversee U.S. futures markets, who has confessed he should have done more to rein in exotic financial instruments that have battered global markets, was approved by the Senate Agriculture Committee on Monday.
The approval of Gary Gensler, a former Goldman Sachs executive, clears the way for a Senate vote putting him in charge of the Commodity Futures Trading Commission.
He was approved by a roll-call vote.
Tom Edsall, The Huffington Post, April 2, 2009:We've also learned that much of the 170 billion has been used by AIG to pay off AIG's putative obligations to other Wall Street banks such as Goldman Sachs. Goldman has maintained that it got no bailout money from the Treasury. But in fact it received some $13 billion through AIG. More troubling is that the original plan to bail out AIG was concocted at a meeting held last fall, run by then Treasury Secretary Hank Paulson who, before becoming Teasury Secretary, had been CEO of Goldman Sachs. Also attending the meeting was Lloyd Blankenfein, the current CEO of Goldman Sachs. Also at the meeting: Tim Geithner, then head of the New York Fed.
Former federal bank regulator Bill Black, The Bill Moyers Show, April 3, 2009:Decisions made during the final months of the Bush administration created an environment in which the most politically connected investment banks, Goldman Sachs and Morgan Stanley, not only flourished, but saw their competitors laid waste, with firms like Lehman in bankruptcy, and others, like Merrill Lynch and Bank of America, forced to merge in desperate hope of surviving.
The Washington Post, April 4, 2009:BLACK: The Bush administration and now the Obama administration kept secret from us what was being done with AIG. AIG was being used secretly to bail out favored banks like UBS and like Goldman Sachs. Secretary Paulson's firm, that he had come from being CEO. It got the largest amount of money. $12.9 billion. And they didn't want us to know that. And it was only Congressional pressure, and not Congressional pressure, by the way, on Geithner, but Congressional pressure on AIG.
Where Congress said, "We will not give you a single penny more unless we know who received the money." And, you know, when he was Treasury Secretary, Paulson created a recommendation group to tell Treasury what they ought to do with AIG. And he put Goldman Sachs on it.
MOYERS: Even though Goldman Sachs had a big vested stake.
BLACK: Massive stake. And even though he had just been CEO of Goldman Sachs before becoming Treasury Secretary. Now, in most stages in American history, that would be a scandal of such proportions that he wouldn't be allowed in civilized society.
MOYERS: Yeah, like a conflict of interest, it seems.
BLACK: Massive conflict of interests.
MOYERS: So, how did he get away with it?
BLACK: I don't know whether we've lost our capability of outrage. Or whether the cover up has been so successful that people just don't have the facts to react to it.
New York Times, April 27, 2009:Lawrence H. Summers, one of President Obama's top economic advisers, collected roughly $5.2 million in compensation from hedge fund D.E. Shaw over the past year and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations. . . . Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form.
Former IMF Chief Economist and current MIT Professor Simon Johnson, The Atlantic, May 2009:An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street’s giant financial institutions.
His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.
Matt Taibbi, Rolling Stone, this month:THE ATLANTIC: The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government -- a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. . . . .
JOHNSON: Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or—here’s a classic Kremlin bailout technique -- the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk -- at least until the riots grow too large. . . .
Paul Krugman, The New York Times, today:Any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain -- an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.
The New York Times, today:At this point, however, the acute crisis has given way to a much more insidious threat. Most economic forecasters now expect gross domestic product to start growing soon, if it hasn’t already. But all the signs point to a "jobless recovery": on average, forecasters surveyed by The Wall Street Journal believe that the unemployment rate will keep rising into next year, and that it will be as high at the end of 2010 as it is now.
Now, it’s bad enough to be jobless for a few weeks; it’s much worse being unemployed for months or years. Yet that’s exactly what will happen to millions of Americans if the average forecast is right -- which means that many of the unemployed will lose their savings, their homes and more.
Other than those individuals whose life purpose is to serve as reverent apologists and servile defenders for the most powerful financial elites, is there anyone who would be willing to claim with a straight face that the last event is unrelated to all the ones that preceded it? Add to that all the Serious consensus-talk about how the country can't afford health care reform and how Social Security, Medicare and Medicaid must be cut because they're too expensive, and the picture couldn't be clearer.Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs.
Up and down Wall Street, analysts and traders are buzzing that Goldman, which only recently paid back its government bailout money, will report blowout profits from trading on Tuesday.
Analysts predict the bank earned a profit of more than $2 billion in the March-June period, because of its trading prowess across world markets. If they are right, the bank’s rivals will once again be left to wonder exactly how Goldman, long the envy of Wall Street, could have rebounded so drastically only months after the nation’s financial industry was shaken to its foundations. . . .
Startling, too, is how much of its revenue Goldman is expected to share with its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 an employee. Top producers stand to earn millions.
Read the above-excerpted paragraph from Simon Johnson describing how, in his experience, fundamentally corrupt emerging-market nations respond to financial crises ("at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government. . . . Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk -- at least until the riots grow too large"). That "until" provision never seems to be triggered, which is why, as Johnson points out, the behavior continues unabated.
UPDATE: Several commenters add a crucial point: back in September, the Federal Reserve allowed Goldman (and a few other surviving institutions) to convert from an investment bank into a bank holding company. The Wall St. Journal claimed at the time that the move meant the firm would "come under the close supervision of national bank regulators, subjecting them to new capital requirements, additional oversight, and far less profitability than they have historically enjoyed." A mere nine months later, Goldman boasts of "blowout profits." So much for "less profitability." As for allegedly greater regulations and capital restrictions, they freely admitted from the start: "'We don't believe we'll have to get out of any businesses,' says Lucas van Praag, a Goldman spokesman. Adds Morgan Stanley's Mark Lake, 'There will not be much in terms of divestitures'."
But what the conversion did allow was access to lending from the Federal Reserve. Since then, the Fed has increased its balance sheet by $2 trillion while steadfastly refusing to disclose the beneficiaries of that credit. Thus, even aside from the bailout money it directly received and the billions in bailout money which it indirectly received (through AIG), Goldman has had access to massive amounts of Fed lending in order to fuel its bulging profits. That unimaginably enormous (though entirely secret) lending is, in part, what is behind the Ron Paul-sponsored bill to audit the Fed -- a bill that is now co-sponsored by a majority of House members from across the political spectrum (progressive, conservative and everything in between), yet which continues to be blocked by Congressional leaders from receiving a floor vote.
UPDATE II: I've been commenting on the Sotomayor hearing on Twitter -- only because my sanity precludes my remaining silent as I watch this ludicrous spectacle. Those interested can follow the feed, and read the commentaries from today, here.
UPDATE III: It's worth recalling this bit of central truth, blurted out in April by the number two Democrat in the U.S. Senate, Dick Durbin:
That was nice and blunt. That same week, it was announced that the newly-hired top lobbyist for Goldman Sachs, Michael Paese, was -- immediately prior to his hiring -- the top staffer to Rep. Barney Frank on the House Financial Services Committee chaired by Frank. If one's goal were to make all of this as blatant as possible, what else could one do besides what's being done?And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place.
UPDATE IV: The Huffington Post's Ryan Grim has details on growing anger among Congressional Democrats at the refusal of the Treasury Department to provide even basic disclosure and transparency regarding the disposition of TARP funds. Indeed, Geithner is simply refusing even to acknowledge their inquiries, and it looks as though the Democratic-led Congress will impose a legal deadline for him to do so.
All Roads Lead to Goldman
Few firms rival Goldman Sachs' prowess trading derivatives, currencies, fixed income, commodities and stocks. This makes the bank's Tuesday morning release of fiscal-second-quarter earnings a must-read for investors eager to check their performance against a firm that dominates the global markets as the Roman Empire once ruled the world. In the options market, investors are surprisingly cautious toward Goldman, putting them at odds with the recent rash of bullish analyst and media reports that suggest the bank will report a phenomenal quarter.
"Say you buy Goldman stock because you think it will be a blowout quarter but you have no idea about the next earnings report," says a derivatives trading strategist at a major investment bank, summing up the difficulties bulls face in the financial sector. "If you're right, Goldman trades up on earnings after which you may just want to get out since you have no idea about what to expect next. If you're wrong and they disappoint, the stock trades down and, again, you have no idea what to expect next."
The difficulty anticipating Goldman's near-term future results are reflected in Goldman's August 150 calls that are bid at a rather plump $7.10. Investors who own Goldman stock, and are worried about the bank's earnings power beyond the fiscal second quarter, can consider selling August 150 calls against a portion of their stock. The trade makes sense for investors with a cautious near-term view, and who do not mind selling the stock at about $157. "Goldman's options might be a better sale than a buy," said Michael Schwartz, Oppenheimer & Co.'s chief options strategist.
Of course, uber bulls who would rather not wager against Goldman and its ensuing symphony of bullishness can simply buy calls to position for an advance in the stock. Goldman's options prices suggest the stock will move 5.7%, up or down, when the company reports earnings. With the stock up almost $4 at about $145 Monday, the most widely held options include Goldman's July 150 and 155 call. A deeper review of trading patterns since the start of July, which is about the time traders would start making earnings trades, reveals caution among sophisticated traders.
According to data from Options Clearing Corp., which issues and settles all options, orders classified as "firm" -- often proprietary trading desks at investment banks or other institutional traders -- are more active in Goldman's puts than calls. For every 100 calls traded by firms, 127 puts have traded. This suggests the market's most sophisticated investors are slightly cautious. Orders classified as "customer," which includes institutional investors and individual investors, show 94 puts traded for every 100 calls since the start of July. This is slightly bullish, but "customer" trading volumes are typically considered "uninformed order flow." Institutional traders often like to sell when customers buy, and buy when they sell.
Options traders are not alone in disagreeing about Goldman's earnings. Among analysts following Goldman, earnings-per-share estimates range from $2.82 to $4.27, though the mean estimate is $3.21. The fact that there is broad disagreement among analysts who mostly follow identical earnings models indicates vastly different assumptions about the performance of various business units. One analyst, for example, might expect trading revenue to increase 15%, for example, compared with 5% for another.
The story in Goldman is reflected in the Select Sector Financial SPDR that is widely used by traders and investors to express views about financial stocks. XLF put and call volume has been extremely active since last week, reinforcing the battle underway in financial stocks. One way or the other, Goldman's earnings report will offer something for bulls and bears. The report will provide crucial data to investors wondering if the stock market's massive advance that began in March is an extraordinary bear-market rally or the beginning of the end of the worst financial crisis since the Great Depression.
Round 1: Goldman Wins, Taxpayers Lose
Goldman shares were strong Monday morning as Meredith Whitney made some positive comments about banks generally and upgraded Goldman, specifically. Goldman is a "bull stock for a bear market," the influential analyst said on CNBC. Whitney's comments come ahead of what are widely expected to be blockbuster results for Goldman when it reports second-quarter earnings on Tuesday. The firm could produce quarterly profits exceeding $2 billion and is planning to pay annual bonuses of $18 billion, or $600,000 per employee, in 2009, The New York Times reports.
On the surface, this performance can simply be chalked up to Goldman's superior talents at trading and risk management, as well as its underwriting prowess. But, of course, nothing is so simple when it comes to Goldman, about which the conspiracy theories are circulating at an even faster-than-normal pace owing to:
- Matt Taibbi's controversial Rolling Stone article, which refers to Goldman as a "great vampire squid wrapped around the face of humanity."
- A recent attempt by a former employee to steal Goldman's proprietary "black box" trading software, which has yielding unsubstantiated stories about Goldman front-running NYSE trades to the tune of $100 million per day.
- Government Sachs: There's no denying there are a lot of former Goldman executives in government, supporting a view the firm gets favorable treatment from Uncle Sam.
This last issue is particularly sensitive now given the TARP funds Goldman received last fall - both directly ($10 billion) and as an AIG counterparty ($13.5 billion) - and since the firm now appears to be printing money again. There's still the unresolved issue of whether the government will make any return on what former Treasury Secretary and former Goldman CEO Hank Paulson called its "investment" in Goldman Sachs last fall.
As with other TARP banks, the U.S. government took warrants in Goldman in exchange for bailout funds. As "investors" in Goldman, U.S. taxpayers should therefore be pleased to see the company return to profitability so soon and so strongly. If that's the case, then I have no qualms about Goldman employees getting big bonuses as they have proven to be the fittest firm in the Darwinian world of Wall Street.
But that outlook assumes the warrants will be either held to maturity or repaid at a valuation to reflect Goldman's renewed strength and stock price appreciation. As of Friday, Goldman had yet to repurchase its warrants and bailout monitor Elizabeth Warren has warned Treasury is undervaluing the securities across the industry. In other words, the taxpayer looks likely to get the short end of the stick, again.
Bank of America Said to Balk at Paying Backstop Fee
Bank of America Corp. is trying to avoid paying billions of dollars in fees to U.S. taxpayers for guarantees against losses at Merrill Lynch & Co., saying the rescue agreement was never signed and the funding never used. Regulators contend Bank of America owes at least part of a $4 billion fee it agreed to pay in January -- even without a completed legal document -- because the company benefited from implied U.S. backing on about $118 billion of Merrill Lynch assets, such as mortgage-backed bonds, people familiar with the matter said. The Charlotte, North Carolina-based bank says it owes the Treasury nothing, according to the people, who declined to be identified because the negotiations are confidential.
Bank of America, ranked first by assets and deposits in the U.S., "got a moral commitment for insurance without tendering a check, so it appears they got something for nothing," said Representative Brad Sherman, a California Democrat on the House Financial Services Committee. "If the government takes the risk, the government needs to be paid." Both sides are under pressure from lawmakers who questioned whether taxpayers are being adequately rewarded for propping up lenders, and why Bank of America’s January acquisition of New York-based Merrill Lynch required a publicly funded bailout. The U.S. provided the bank $20 billion in capital plus the asset guarantees to keep Chief Executive Officer Kenneth Lewis from abandoning the takeover of money-losing Merrill, once the world’s biggest brokerage.
The sum demanded from Bank of America is likely to be smaller than the $4 billion described in terms of the agreement, according to one of the people. An update on the program’s status may come July 17, when Bank of America reports second-quarter results, according to another person. Adjusted net income probably fell 31 percent to $2.44 billion, according to the average estimate of analysts surveyed by Bloomberg. Both sides agree the accord was never signed and the funding went untapped, the people said. Bank spokesman Scott Silvestri and Treasury’s Andrew Williams declined to comment.
The guarantees were crafted after Lewis, 62, told regulators in December he might abort the takeover of Merrill as quarterly losses at the brokerage spiraled toward more than $15 billion. Regulators were concerned Merrill might collapse and send fresh shock waves through financial markets. Bank of America disclosed the guarantees Jan. 16 along with its first quarterly loss in 17 years. The bank’s news release headlined the guarantee and called the program an "agreement."
The plan called for the Federal Reserve, the Treasury, and Federal Deposit Insurance Corp. to participate in a loss-sharing plan for loans, mortgage-backed securities and financial instruments that could last 10 years, according to company and Treasury documents. Most of the holdings came from Merrill Lynch, acquired Jan. 1. Bank of America would absorb the first $10 billion of losses, with U.S. agencies covering 90 percent of subsequent deficits, said the bank’s Jan. 16 statement. The bank "would pay a premium of 3.4 percent of those assets," the lender said. Similar commercial accords impose fees of as much as 6 percent, said Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, California, research firm.
The bank would pay a $4 billion fee in the form of preferred stock and warrants, plus an annual fee of 20 basis points for undrawn amounts of the $118 billion, or $236 million, according to Treasury’s summary of terms, with more fees if the bank tapped the program. A basis point is one-hundredth of a percent. Bank of America could end the guarantee any time if the U.S. consented, with an "appropriate fee" to be negotiated, the document said. The term sheet said it was "accepted and agreed by and among the following as of Jan. 15, 2009" and listed the bank, Treasury, Fed and Federal Deposit Insurance Corp. Each specific instrument in the pool of covered assets "must be identified on signing of the guarantee agreement," the sheet said.
The process dragged on as the Treasury dealt with multiple financial crises and debated which assets would be included, according to the people. By May, Bank of America told investors it was "seeking to end negotiations" because credit markets had improved and the protection wasn’t needed anymore. Losses weren’t likely to reach the $10 billion trigger for federal participation, according to a May 7 statement. Federal Reserve Chairman Ben S. Bernanke told Congress on June 25 the accord wasn’t "consummated."
"When I was in government, we got everything signed," said Paul Allan Schott, former chief counsel at the Comptroller of the Currency and ex-employee of the Fed and Treasury, according to his biography at WBC Financial Group LLC, a Washington consulting firm. "But I never had as many irons in the fire." The bank should pay at least a third of the premium, or about $1.3 billion, because investors assumed the agreement was in force from January through May, or about a third of a year, said Tim Yeager, a business professor at the University of Arkansas and former Federal Reserve Bank of St. Louis economist.
Bank of America shouldn’t have to pay anything, said Gary Townsend, president of Hill-Townsend Capital LLC, a Chevy Chase, Maryland, hedge fund that invests in lenders. "It’s the fault of the government for never getting it signed," said Townsend, who said his firm has purchased shares of the bank. "But part of the inherent unfairness in dealing with government is that they can manipulate all kinds of things to make your life hellish." Lewis has testified that regulators pressured him to complete the Merrill purchase, and said May 8 he wanted to get the government out of the bank’s operations. The Treasury holds $45 billion of preferred shares in the company through the Troubled Asset Relief Program, more than any bank except Citigroup Inc. Bank of America’s dividend payments to the government may exceed $2 billion a year.
"We don’t want to do anything that hinders their ability to exit from TARP, but in terms of fairness, there should be a recognition that the agreement benefited them," said Kurt Bardella, spokesman for Representative Darrell Issa, a California Republican and ranking minority member of the House Oversight Committee. Regulators face pressure from Congress to extract more money from companies that took part in the $700 billion TARP program. The Congressional Oversight Panel said July 10 the Treasury sold warrants obtained from rescued banks for about two-thirds of what they were worth. A Treasury official familiar with the matter said last week the agency rejected as too low most of the proposed prices from the largest banks.
"Treasury has to appear tough," said Kevin Jacques, a former economist for the agency, referring to the Merrill Lynch guarantees. "Otherwise this will be politicized and people will say that the bank and Treasury were in this together and they just ripped off the American taxpayer," said Jacques, now a finance professor at Baldwin Wallace College in Berea, Ohio. "There is a political cost here if they just let Bank of America walk."
California state ills could grow into a federal headache
California’s fiscal crisis is in danger of becoming a serious headache, not just for the state and its feuding politicians in Sacramento, but for the entire nation. In public, federal government officials talk about California’s problems as if they were ringfenced - a crisis for the state but with few national ramifications. They know the slightest whiff of federal intervention would take away the incentive for California’s politicians to agree on tough spending cuts and tax increases.
But they know they cannot ignore a fiscal crisis in the most economically important state in the middle of a global financial crisis. So they are keeping a careful eye on events and it would be surprising if they were not also reviewing the options at their disposal to mitigate the damage. California has a budget deficit of $26.3bn (€18.85bn, £16.18bn) on revenues of just $113bn, according to Keefe, Bruyette and Woods, a broking firm. It has a balanced budget rule that forces it to eliminate the deficit but no agreement as to how. It has already in effect decided to selectively default - paying vendors with IOUs rather than cash. Worse could follow if the impasse is not resolved soon.
The worst case scenario would be a default by the state which has $59bn in general debt, $8bn in bonds linked to securitised revenues such as tolls and $2bn commercial paper, according to Standard and Poor’s, the ratings agency. A California default would be a shock for fragile financial markets. While no other state is in quite as difficult a position there would be danger of widespread contagion in US markets and beyond. Default still looks like a so-called "tail risk" - a high cost but low probability event. California’s constitution makes debt service a high priority. Its main constraint is cash flow.
The decision to pay bills in IOUs saves cash for debt servicing and that should be enough for now. But it is not sustainable indefinitely. In the absence of a fix for the underlying deficit, vendors and banks will eventually lose faith in the value of the IOUs, forcing California to pay for vital services in cash instead. Moreover, there are institutional reasons why the budget gap is proving difficult to close. Aside from the absurdity of having to balance the budget in the midst of the worst recession in half a century, California’s fiscal flexibility is diminished by other statutory restrictions, mostly imposed by state referendums known as propositions.
These restrictions make it exceptionally difficult for the state to raise property taxes or cut basic education spending. About 25 per cent of revenue is, meanwhile, ringfenced. If the gridlock continues for months and the risk of default escalates, it would take a brave Treasury secretary not to step in with some kind of guarantee, credit line or outright bail-out for California.
The immediate outlays involved would not be vast compared with federal bail-outs for banks and carmakers. Yet, the federal government could not help California without aiding other troubled states and a de facto, or even de jure, federal guarantee for all state debt would add a huge fiscal burden. Nor is it clear what the exit strategy would be: if the federal government blinked this year, it presumably would blink again next year if the problems were not resolved. The most likely scenario is that California’s feuding politicians eventually reach a deal to close the $26bn budget gap.
But even then there would be ramifications. The state’s economy is already weak; unemployment is 11.5 per cent and the multiplier effects of $26bn in geographically concentrated spending cuts and tax increases could be high. Moreover, as KBW highlights in a research note, cutbacks at the state level will put additional pressure on highly stretched counties and municipalities. Like the state, these entities have little latitude to raise revenues. State-level fiscal consolidation could easily lead to a rash of defaults at the local level, which could roil the market for municipal debt nationally. If this happened, the federal government might have to support the municipal bond market, possibly through a guarantee scheme with risk-based pricing.
Geithner upbeat on economy
Tim Geithner, the US Treasury secretary, sounded an optimistic note on the US and global economy on Monday, suggesting a recovery was at hand and saying there was no need at the moment for another fiscal stimulus. Speaking in London at the start of a tour of European and Gulf capitals, he said: "There is a very good chance for seeing the US economy and the world economy get back to the point when it is growing again over the next few quarters."
The tone could not have been further from the irritation felt in the US administration at the perceived lack of European stimulus this spring. The Treasury secretary repeated the administration’s insistence that the stimulus policy was working and its power would intensify in the months ahead. "Policy has been very successful in arresting and mitigating the force of the storm and we’re starting to see a better basis for recovery," he said. Rejecting calls from Laura Tyson, a member of the White House’s Economic Recovery Advisory Board, for a bigger stimulus, Mr Geithner said: "I don’t mean ... we’re in a position now that you can think about more additional response."
Instead he focused on the $787bn (€563bn, £487bn) programme already in place. "Our stimulus package was designed so ... its maximum impact takes effect in the second half of this year ... so we’re just beginning to come to the point when you’re going to see the largest effective boost to the employment-intensive parts of the stimulus coming on stream." US officials are perplexed as to the reasons why unemployment in this recession has risen faster than would be expected from the loss of output so far in the downturn, while the reverse has been true in large European economies.
Underpinning the Treasury secretary’s optimism has been the stabilisation of the global economy and financial markets in recent weeks alongside the reduction in catastrophic risks, which he believes represent an essential condition for a recovery. He said, given that the US entered recession early, it was natural that it would be one of the first countries to emerge from the downturn. Apart from monitoring the early stages of recovery in the world economy, Mr Geithner was also canvassing support for regulatory reforms to the financial system, which will be on the table for discussion at the Group of 20 summit in Pittsburgh in September.
Mr Geithner and Alistair Darling, the UK chancellor, said there was a broad consensus on the core issues of international co-operation on banking regulation and resolution regimes for international banks. But neither held out hope that the summit would result in agreement on how much more capital banks would be required to hold, nor what additional penalties would apply to large or risky banks, nor how regulators would operate to tighten regulations in the next boom. Instead Mr Geithner said much of the onus for toughening banking regulation would come from countries acting alone: "The principal burden for these reforms will rest on on what we do as individual sovereign nations at the national level."
SEC to create group to check rating agencies
The Securities and Exchange Commission has created a new group of examiners to oversee credit rating agencies, which came under sharp criticism for their role during the financial crisis. The SEC has already adopted a number of measures to increase transparency at credit rating agencies, which are paid by the issuers they rate. But greater oversight is needed with officials expected to conduct both routine and special examinations of their activities, Ms Schapiro is set to tell a Congressional oversight hearing on Tuesday.
‘’I also have directed the Commission staff to explore possible new regulations in this area, including limiting the potential for rating shopping,’’ Ms Schapiro said in prepared testimony to the House Financial Services subcommittee on capital markets. The plan is part of a wide range of structural changes being made at the SEC, which has faced withering criticism in the past year for its oversight of financial firms and ratings agencies as well as for failing to detect the Bernard Madoff fraud in spite of credible allegations brought to it for at least a decade.
A report by David Kotz, the SEC’s inspector-general, into how and why the SEC failed to uncover the $65bn ‘’Ponzi’’ scheme is expected within the next six weeks, according to Ms Schapiro. On Tuesday, she is expected to outline a number of the changes already underway at the agency, including a renewed focus on cases likely to have the greatest impact, the overhaul of the system for handling tips received by the agency, and improvements in staff training.
‘’While we can never stop every scam artist scheming to defraud investors, I believe these and other changes will greatly improve our odds of catching them,’’ Mr Schapiro said in her prepared testimony.
‘’Indeed, in the wake of the Madoff fraud, I believe we owe it to investors to show them that we can and will adapt our ways and learn from our past errors so that we do not repeat them. The Madoff fraud is one that the agency did not detect, and not a day goes by that we don’t regret it.’’ The SEC is seeking legislation to incentivise whistleblowers and to revamp the process for evaluating the 2,000 tips per day, she said.
The SEC division of enforcement has opened 439 investigations since January, compared to 395 during the first six months of last year, while the Commission has issued 224 formal orders of investigation to the staff, compared to 93 during the same period last year. Ms Schapiro is also expected to discuss recent actions taken to strengthen regulation of money market funds, which were heavily hit during the credit crisis, recent proposals to strengthen shareholder rights, including giving them the ability to nominate company directors, and rules against abusive short-selling.
Speculators leave oil market as regulator mulls crackdown
Big speculators such as hedge funds and investment banks sharply reduced their buying positions in oil futures in the recent week, as the regulator said it's considering setting limits in energy speculation. The drop in speculative positions likely contributed to last week's 10% slump in oil prices -- the biggest weekly loss in six months, analysts said.
Long, or buying, positions held by non-commercial traders, a category the regulator uses to classify big speculators, dropped by 16,382 contracts in the week ended July 7, according to the weekly Commitments of Traders report released by the Commodity Futures Trading Commission late Friday. One contract represents 1,000 barrels of oil. That's the biggest drop in four months in oil futures traded on the New York Mercantile Exchange, according to COT historical data. Long positions held by speculators now stand at the lowest level since the week ended May 26.
Meanwhile, speculators increased their selling, or short, positions, resulting in a 60% slump in net long positions. Net long positions held by speculators now stand at 15,357 contracts, the lowest since May 12. The change in speculative positions came as the CFTC announced, also on July 7, that it's considering setting limits in the number of positions speculators can take in the energy futures market. The CFTC will hold a series of hearings starting from later this month, said David Gary, a spokesman for the Washington-based agency.
Oil prices tumbled nearly 6% in the two sessions ended July 7 on the Nymex. Over all, futures lost 10.3% last week -- the biggest weekly loss since the week ended Jan. 9. In Monday's trading, oil prices continued to slide, falling to the lowest level in two months as demand concerns weighed on prices. The United States Oil Fund, the biggest oil exchange-traded fund, fell 2%. The CFTC's new COT report, which could show further drop in speculative positions in the past few sessions, is scheduled to be released on Friday.
"The drop in oil prices last week has absolutely something to do with the drop in speculation positions," said Tariq Zahir, managing member of futures trading firm Tyche Capital Advisors. "Money is sitting on the sidelines. When you don't know what the new rules are going to be, you hold money," Zahir said. The regulatory focus, the biggest move by the Obama administration to respond to irregular swings in oil prices, came in the wake of trading patterns that saw oil jump to an all-time higher of nearly $150 a barrel last year, only to fall back to below $40 this spring before rising again to $70.
The sharp retrenchment in net noncommercial long positions is "not surprising given the recent buildup taking place just as prices started to erode," said Edward Meir, an analyst at MF Global. "This tells us that there will not be much firepower to drive prices higher, as non-commercials seem to content to watch the [regulatory] action from the sidelines for now." Some traders, however, said speculators are not to be blamed for oil prices' volatility.
"I know many in the market are tired of speculators getting the blame for things they have nothing to do with," said Phil Flynn, vice president at futures trading and research firm PFGBest Research. "I know some funds are holding off investing because they are unsure of what new regulations may come down the pike," he added. "There are some real concerns that due to the political climate we will see the regulators go too far and do damage to the global economy."
The COT non-commercial data don't include positions taken by big institutional investors that buy commodities by tracking a major commodity index. Those investors typically buy commodities by engaging in trades with swap dealers such as J.P Morgan Chase & Co. and Goldman Sachs Group. These dealers, in turn, hedge their risk by taking a similar position in futures exchanges. The CFTC currently allows swap dealers to take unlimited positions on energy commodities. It also classifies swap dealers as commercial traders, the same as refiners and oil producers.
In a statement released on July 7, CFTC Chairman Gary Gensler said he is planning to make it easier for the public to track changes in investment positions. In particular, the commission will enhance the weekly COT report to separate and categorize swaps dealers. The enhanced COT report also will distinguish professionally managed market positions such as hedge funds.
Rattner to depart US auto taskforce
Steve Rattner is to leave his role at the head of the US Treasury’s automotive taskforce after completing a whirlwind restructuring of General Motors and Chrysler. His departure was announced on Monday by Tim Geithner, Treasury secretary, and completes another chapter in a career that has spanned journalism, investment banking and private equity before Mr Rattner joined the government in February. Ron Bloom, the former investment banker, will lead the taskforce as it monitors the Treasury’s stakes in GM and Chrysler and prepares for an expected initial public offering for GM next year.
Mr Rattner’s brief tenure was not without controversy. The White House was accused of side-stepping the Senate’s scrutiny of administration nominees by naming him a mere member of a taskforce – rather than the touted "car czar" – even though he assumed charge of one of the biggest state interventions in US industry. After his move to Washington, his former private equity firm Quadrangle was caught up in an investigation by the Securities and Exchange Commission into alleged kickbacks sought by people linked to the New York state comptroller’s office.
There has been no suggestion of wrongdoing by Quadrangle or Mr Rattner, who received the backing of President Barack Obama. As the negotiations with stakeholders at Chrysler and GM wore on, he was lambasted by creditors and Republican politicians as the leading proponent of a "socialist" restructuring that rode roughshod over debtholders’ rights. But in the past few weeks the auto taskforce has received the ultimate verdict from the courts and it was favourable – allowing the team to drive the carmakers into and out of bankruptcy at break-neck speed, leaving them shorn of debt and healthcare costs and giving them a chance to return to profitability and long-term survival.
A person close to Mr Rattner said the former New York Times journalist and Lazard banker would take a holiday before deciding what to do next. Mr Geithner celebrated Mr Rattner’s "invaluable" leadership. But he added in a statement: "I hope that he takes another opportunity to bring his unique skills to government service in the future." After initial scepticism from local lawmakers, Mr Rattner on Monday garnered the praise of Carl Levin, the Michigan senator whose state is home to GM and Chrysler. "He has done a very good job and he made a significant contribution to a brighter future for the auto industry," he said. White & Case, the law firm that represented creditors in Chrysler, did not immediately return a call seeking comment.
"Another Bubble" In Housing? It Could Happen, Says Yale’s Robert Shiller
The slowing rate of decline in home prices is likely to continue but the housing market is "still in an abysmal situation," says Robert Shiller, a professor of economics at Yale. The co-creator of the S&P Case-Shiller Index, which tracks national housing prices, says the housing market could "languish for many years," due to the "huge inventory" of unsold holds, "shadow inventory" of homes kept off the market by banks and other potential sellers, and "a lot of financial problems."
But incredibly, the author of Animal Spirits (with George Akerlof), The Subprime Solution and Irrational Exuberance believes "there could be another bubble" in housing, once the excess inventory is worked off. "This is not my more probable scenario [but] people have gotten very speculative in their attitudes toward housing," he says. Shiller cites Boston as one area for a potential echo-bubble in housing, noting its typically volatile market did not fall in the past two years as dramatically as "more bubbly" cities like Phoenix. The professor and bubble expert isn't predicting it, but the fact he's even mulling the possibility is eye-opening, to say the least.
Whether you think the housing bubble is going to collapse further or reinflate, Shiller's firm MacroMarkets recently listed two indexes on the NYSE Arca that allow investors to place their bets (or hedge their own housing exposure): The bullish Major Metro Up and the bearish Major Metro Down. Going forward, Shiller hopes to offer similar securities for specific cities and geographic areas.
Why the ECB Isn’t Acting Like the Fed
Central bankers aren’t famous for speaking clearly. But European Central Bank President Jean-Claude Trichet’s speech in Munich Monday is a breezy tour through the 10 year-old central bank’s history and a spirited defense of its actions amid the crisis. It also underscores expectations the bank won’t yield to pressure to be more aggressive in the face of a worsening lending squeeze unless things take a big turn for the worse.
Mr. Trichet gives voice to the gripes of some inside the ECB who complain privately that — despite the fact that the central bank makes monetary policy for the world’s second-largest economy after the U.S., and has played a major role in keeping the financial system afloat amid the crisis — its actions seem rarely to stand on their own. Rather, it’s often measured against the Federal Reserve — and, to a lesser extent, the Bank of England. The speech comes as some analysts continue to believe that the ECB’s more muted response is among the reasons the euro-zone economy will suffer a more-severe slowdown than the U.S.
Among the main arguments:
It’s not all about the interest rate: Some observers, Mr. Trichet says, "tend to reduce monetary policy to the level of the key policy rate. The lower the policy rate, the argument goes, the more effective is monetary policy in response to a downturn. This view is too simplistic." The ECB’s lowered its key rate to 1%; the Fed has cut its key rate close to zero. But, Mr. Trichet says, the rates at which euro-zone banks lend to one another for six and twelve-month timeframes - which are important benchmarks for consumer and business loans across the bloc - are comparable to those stateside.
The ECB doesn’t want to step on governments’ toes: The Fed and Bank of England have launched massive programs to buy corporate and government bonds with freshly created money; the ECB’s 60-billion-euro program to buy low-risk bonds is puny by comparison. But banks are a far more important source of funding for firms in the euro-zone than in the US, where companies tap capital markets much more often. So the bulk of the ECB’s efforts — offering banks unlimited funding at fixed interest rates and broadening the universe of collateral the central bank accepts in return for the funds — focuses on keeping banks flush.
But the bloc’s setup, where 16 countries share a central bank but federal budgets remain national, also plays a big role. "Financial support measures potentially involving the significant transfer of credit risk from financial institutions to the taxpayer clearly fall within the realm of fiscal policy," Mr Trichet said. "This helps to explain why the ECB’s enhanced credit support measures … do not involve outright purchases of sovereign debt."
Inflation is never far from the ECB’s mind: The euro-zone’s labor and product markets are often (rightly) ridiculed for being less flexible than the U.S.’s. "In normal times, this sluggishness has drawbacks as it slows down the adjustment of the economy," Mr. Trichet says. But now, "it offers some protection against very bad outcomes, provided that the policy frameworks provide a solid anchor for private-sector expectations." That anchoring, Mr Trichet suggests, means keeping the potential for future inflation in mind, even amid crisis: "In this environment, overly activist policies may risk destabilizing expectations, thereby being counter productive."
The ECB always has an eye on the door: Finally, one component of the ECB’s decisions is how easy it’ll be to reverse them once the crisis passes. Offering banks one-year funding at fixed interest rates offers a clear exit - once the year is up, the funds disappear. "By contrast, the unwinding of outright purchases typically requires an additional decision," Mr Trichet says, "namely whether to hold the securities to maturity - and if not, when to sell."
The Consequences of Big Government
by Robert J. Samuelson
The question that President Obama ought to be asking -- that we all should be asking -- is this: How big a government do we want? Without anyone much noticing, our national government is on the verge of a permanent expansion that would endure long after the present economic crisis has (presumably) passed and that would exceed anything ever experienced in peacetime. This expansion may not be good for us, but we are not contemplating the adverse consequences or how we might minimize them.
We face an unprecedented collision between Americans' desire for more government services and their almost equal unwillingness to be taxed. The conflict is obscured and deferred by today's depressed economy, which has given license to all manner of emergency programs, but its dimensions cannot be doubted. A new report from the Congressional Budget Office ("The Long-Term Budget Outlook") makes that crystal clear. The easiest way to measure the size of government is to compare the federal budget to the overall economy, or gross domestic product (GDP). The CBO's estimates are daunting.
For the past half-century, federal spending has averaged about 20 percent of GDP, federal taxes about 18 percent of GDP and the budget deficit 2 percent of GDP. The CBO's projection for 2020 -- which assumes the economy has returned to "full employment" -- puts spending at 26 percent of GDP, taxes at a bit less than 19 percent of GDP and a deficit above 7 percent of GDP. Future spending and deficit figures continue to grow.
What this means is that balancing the budget in 2020 would require a tax increase of almost 50 percent from the last half-century's average. Remember, that average was 18 percent of GDP. To get from there to 26 percent of GDP (spending in 2020) would require an additional 8 percentage points. In today's dollars, that would be about $1.1 trillion, a 44 percent annual tax increase. Even these figures may be optimistic, because CBO's projections for defense and "nondefense discretionary" spending may be unrealistically low. This last category covers much of what government does: environmental regulation, aid to education, highway construction, law enforcement, homeland security.
Whatever the case, the major causes of the budget blowout are well-known: an aging population and rapid increases in health spending. In 2000, Social Security, Medicare and Medicaid -- the main programs providing income and health care for those 65 and over -- totaled nearly 8 percent of GDP. In 2020, CBO projects that will reach almost 12 percent of GDP. But the deeper source of our predicament is a self-indulgent political culture that avoids a rigorous discussion of government's role.
Everyone favors benefits and opposes burdens (taxes). Republicans want to cut taxes without cutting spending. Democrats want to increase spending without increasing taxes, except on the rich. The differences between the parties are shades of gray. Hardly anyone asks the hard questions of who doesn't need benefits, which programs are expendable and what taxes might cover remaining deficits.
What long sustained this system was falling defense spending and routine, though usually modest, deficits. As defense spending declined -- from 9 percent of GDP in the late 1960s to 3 percent in 2000 -- social spending could rise without big tax increases. Deficits provided extra leeway. But these expedients have exhausted themselves. Deficits have risen to alarming proportions; in a risky world, defense cannot drop indefinitely.
Obama would make matters worse. He talks about controlling "entitlement" spending (mainly Social Security and Medicare) but hasn't done so. He's proposing just the opposite. His health-care proposal would increase federal spending. He says he will "pay for" the added outlays with tax increases or other spending cuts, but what people forget is that every penny of this "payment" could be used (and should be) to close the long-term deficit -- not raise future spending and taxes.
The latest excuse for avoidance is the economic crisis. True, deep spending cuts or big tax increases would be undesirable now; they would further depress an already depressed economy. But that doesn't preclude action. Changes could be legislated now that would begin later and be phased in -- a gradual increase in eligibility ages for Social Security and Medicare; gradual increases in energy taxes; gradual elimination of some programs. Such steps might improve confidence by reducing uncertainty about huge budget deficits.
There is little appetite for any of this, and so we face the consequences of much bigger government. Certainly higher taxes for future Americans. Probably a less robust economy. The CBO notes that elevated deficits would penalize saving, investment and income, while unprecedented tax burdens could "slow the growth of the economy, making the [government's] spending burden harder to bear." To such warnings, Americans' collective response is: Go away.
It's not just Africa that must sort out politics to help economy
Barack Obama has spent the weekend in Ghana. One reason this relatively small West African country was chosen for his first sub-Saharan visit as US President is that the former Gold Coast has just struck black gold.By 2015, Ghana could pump 250,000 barrels of oil daily – only a tenth of nearby Nigeria's current output, but worth having. America is dismayed at China's growing influence in resource-rich Africa, as Beijing has carpet-bombed the continent with cash. But if US oil majors can get a toe-hold in Ghana, they'll be well-placed in the broader "Great Game" to control the sizeable hydrocarbon reserves across the Gulf of Guinea.
Obama's speeches and interviews aren't focusing on oil, of course. That – ahem! – would be too crude. The official line is that Ghana was picked due to its democratic credentials. There's something in that. As the first sub-Saharan nation to gain independence, Ghana is often seen as Africa's political leader. The post-colonial history of Africa is deeply scarred by the disastrous leadership of corrupt "big men" – brutal dictators who stayed in office for years. Relics of this era survive – not least Robert Mugabe.
Since 1992, though, Ghana has held five genuinely multi-party elections. The most recent was neck-and-neck. Rather than indulge in more inter-tribal bloodshed, Ghana's political elite acted maturely and the incumbent made way for a new president. The contrast with Kenya is stark. In 2007, a knife-edge election brought chaos to the birthplace of Obama's father. Amid allegations of ballot-rigging, tribal violence exploded. For the first time ever, the veins of the world's most powerful man run thick with African blood. The US President's inaugural "home-coming" is a very big deal. By choosing Ghana, America is sending Africa a message: "Sort out the politics, and economic progress will follow".
Energy imperatives aside, this is a legitimate message – a truism Africa needs to hear. Yet I can't help feeling it's a home truth too – given the appalling failure of the UK's leading politicians to rise above the point-scoring and tackle the extremely serious economic problems we face. The UK is drowning in debt. The total amount owed by our households, firms and the government is staggering – more than five-times our national income. On top of that debt stock, the UK is heading for a 2009 budget deficit of 14pc of GDP – by a long way the biggest in our peace-time history.
Yet our so-called leaders have buried their heads in the sand. Voters are crying out for someone to grab the situation by the scruff of the neck. Global investors are also watching extremely closely, waiting for signs the UK "gets it" and is taking definite and immediate steps to rein-in the deficit, bring debts under control and put the public finances of the world's fifth-biggest economy back on an even keel. If we don't, the "bond vigilantes" will call time – don't doubt it. A "gilts strike" will ensue, combined with a disastrous downgrade of our sovereign debt. In the short-term, interest rates will soar, as higher borrowing costs ripple across the economy. For many years to come, our children and grandchildren, as taxpayers, will have to fork out ever more to service HMG's debt burden.
I am, by no means, being alarmist. I'm merely describing an outcome which, sotto voce, is being widely discussed on international capital markets. Faced with this reality, the Government – inexplicably – has delayed its next detailed statement on the UK's public finances. We need to openly debate how we get out of this mess. The UK's creditors need to know our plans. Yet in response, Gordon Brown has cancelled the next budget. But aren't the Tories' "say nothing" tactics just as feeble? The party is almost certain to form the next government. So when it comes to long-term questions, the Tories have a duty now to say what they'll do – not just to be honest with the electorate but because our situation is so bad.
If the Tories unveiled workable plans to slash spending, if they began the task of building broad political support for such actions, the gilts market would react. By making a series of detailed debt-cutting proposals, which could be implemented quickly, and by winning public support for them, David Cameron could move the markets. In ordinary times, political rhetoric influences opinion polls. Such polls are watched, for the most part, only by the narrow political classes. Such is the state we're in that the next Prime Minister, while still in opposition, could seriously impact actual borrowing costs – and even prevent the UK from enduring the lasting damage and humiliation of a sovereign downgrade. "Sort out the politics, and economic progress will follow." It's as true today as it's always been. But does Mr Cameron "get it"?
China's central bank signals end to credit boom
China's central bank has signalled that an unprecedented boom in bank-lending is close to an end. Since January, Chinese banks have issued 7.3 trillion yuan (£663bn) in new loans. Despite calls from the government to restrain new lending, banks doubled the amount they handed out between May and June. The amount being issued by banks now far exceeds the government's 4 trillion yuan fiscal stimulus package and the volume of liquidity moving around the Chinese economy is worrying Beijing. The Shanghai stock exchange has risen 60pc so far this year, and there are growing signs of another property market bubble.
Li Dongrong, an assistant governor at the People’s Bank of China, said the central bank will "strengthen monetary and credit management" as monetary policy faces new challenges. "Recent news and events seemed to point to the same conclusion - that the PBoC or China Banking Regulatory Commission is tightening liquidity and credit supply," said Ting Lu, an economist at Merrill Lynch. "However, it's our view that some fine-tuning and stricter enforcement of some existing rules are necessary to prevent China's economic recovery from being hijacked by unchecked speculations on assets."
Qian Wang, an economist at JP Morgan, said banks would "increase scrutiny" of new loans. "Recently, some local governments, including in Hangzhou and Shanghai, where housing prices have surged the most, have scaled back their stimulus to the property market." Second-quarter figures for China's GDP growth are due on Thursday and should improve on the 6.1pc growth in the first quarter. Nevertheless, there are significant worries in Beijing that the economy remains on shaky ground.
China's exports, the most dynamic sector of the economy, are still falling year-on-year and the World Bank has forecast a 10pc drop in world trade volumes this year. Meanwhile, high unemployment in the United States suggests that China's biggest trading partner is unlikely to start increasing its purchases of Chinese goods in the near future. Beijing is now considering a major adjustment to economic policy in the second half in order to spur domestic consumption. A meeting of the Politburo is scheduled for later this month, and its nine members have undertaken 18 trips to the provinces in the past month to guage the health of the economy in the countryside.
China is now an empire in denial
When the Soviet Union collapsed in 1991, it suddenly became obvious that the USSR had never been a proper country. It was a multinational empire held together by force. Might we one day say the same of China? Of course, any such suggestion is greeted with rage in Beijing. Chinese politicians are modern-minded pragmatists when it comes to economic management. But they revert to Maoist language when questions of territorial integrity are touched upon. Supporters of Taiwanese independence are "splittists". The Dalai Lama, the spiritual leader of the Tibetans, has been described as a "monster with a human face and an animal’s heart". The Muslim Uighurs who rioted violently last week were denounced as the tools of sinister foreign forces.
According to David Shambaugh, an academic, the main lesson that the Chinese drew from studying the collapse of the USSR was to avoid "dogmatic ideology, entrenched elites, dormant party organisations, and a stagnant economy".
It is an impressive list. But it misses out one obvious thing. The Soviet Union ultimately fell apart because of pressure from its different nationalities. In 1991, the USSR split up into its constituent republics. Of course, the parallels are not exact. Ethnic Russians made up just over half the population of the USSR. The Han Chinese are over 92 per cent of the population of China. Yet Tibet and Xinjiang are exceptions. Some 90 per cent of the population of Tibet are still ethnic Tibetans. The Uighurs make up just under half the population of Xinjiang. Neither area is comfortably integrated into the rest of the country – to put it mildly.
Last week’s riots in Xinjiang led to the deaths of more than 180 people, the bloodiest known civil disturbance in China since Tiananmen Square in 1989. There were also serious disturbances in Tibet just before last year’s Olympics. In a country of more than 1.3bn people, the 2.6m in Tibet and the 20m in Xinjiang sound insignificant. But together they account for about a third of China’s land mass – and for a large proportion of its inadequate reserves of oil and gas. Just as the Russians fear Chinese influence over Siberia, so the Chinese fear that Muslim Xinjiang could drift off into Central Asia.
Han Chinese immigrants suffered badly in the race riots that convulsed Xinjiang. But China’s emotional and affronted reaction to the upheavals in Xinjiang is typical of an empire under challenge. With the British in Ireland, the Portuguese in Africa and many others besides, the refrain was always that the locals were ungrateful for all the benefits that had been showered upon them. In the mid-1990s I had a conversation with an Indonesian general who was genuinely outraged by what he regarded as the ungrateful attitude of the brutalised population of East Timor, after all the lovely roads and schools that had been paid for by Jakarta.
China is especially ill-equipped to understand ethnic nationalism within its borders because many government officials simply do not accept, or even grasp, the idea of "self-determination". Years of official propaganda about the need to reunify the motherland, and the disastrous historical consequences of a divided China, means that these attitudes are very widely shared. I once met a Chinese dissident who was strongly opposed to Communist party rule. But when I suggested that perhaps Taiwan should be allowed to be independent, if that was what its people wanted, his liberalism disappeared. That was unthinkable, I was assured. Taiwan was an inalienable part of China.
Yet the idea that Tibet and Xinjiang could aspire to be separate nations is by no means absurd. China insists that both areas have been an inseparable part of the motherland for centuries. However, they both experienced periods of independence in the 20th century. There was a short-lived East Turkestan Republic in Xinjiang, which was extinguished by the arrival of the Chinese People’s Liberation Army in 1949. Tibet experienced de facto independence between 1912 and 1949.
As things stand, the break-up of China looks very unlikely. Over the long term, a steady flow of Han immigrants into Xinjiang and Tibet should weaken separatist tendencies. The Dalai Lama, Tibet’s spiritual leader, is not even calling for independence. Some Uighurs may be more militant – but they lack leadership and the international sympathy that bolsters the Tibetan cause. The Mikhail Gorbachev years and the loss of the Soviet empire in eastern Europe created a degree of political turmoil inside the USSR that does not exist in contemporary China. The Chinese state is much more economically successful, more confident and more willing to shed blood to keep the country together.
Violent repression of separatism can be very effective for a while. But it risks creating the grievances that keep independence movements alive across the generations. For the moment activists campaigning for Xinjiang or Tibet look forlorn and defeated. That is often the fate of champions of obscure and oppressed peoples. The Baltic and Ukrainian exiles who kept their countries’ aspirations alive during the Soviet era seemed quaint and unthreatening for decades. They were the archetypal champions of lost causes. Until, one day, they won.
UK Government has lost £10.9 billion on stakes in RBS and Lloyds
The UK Government is sitting on losses of almost £11bn from its rescue of Royal Bank of Scotland and Lloyds Banking Group and there will be no quick exit for the taxpayer, the body that manages the stakes warned today. UK Financial Investments (UKFI) said in its annual report that its loss on the two stakes - 70pc of RBS and 43pc of Lloyds Banking Group - had reached £10.9bn at the end of June. The losses, which are not yet realised, have been wracked up since Gordon Brown was forced to inject billions into the troubled lenders in October.
The investment, which amounts to more than £3,000 that each UK household, will not be quickly disposed of. The recession is continuing to hit both banks hard. "Given the size of our holdings and assuming that there might not be a strategic buyer for our stakes in these banks, we migth expect to undertake several transactions in each bank's shares, and that these will take place over a sustained period," UKFI said.
The Treasury is hoping that the disposals of its stakes will eventually generate a profit for the taxpayer, after bailing out the banks when the system almost collapsed at the end of 2008 in the wake of the failure of Lehman Brothers.
Analysts at UBS have speculated that Lloyds could be forced to write off as much as £13bn on mortgage and commercial property lending, and lending to businesses, when it posts its results for the first half of the year on August 5.
Pensions experts predict 'horrific news' on funds
For Adam Crozier, things could be about to get a lot worse. The chief executive of Royal Mail saw 10,000 of his workers strike last week, but Britain's top postie knows that could be just the beginning. While postal workers are up in arms about job cuts and working conditions, their anger could soon pale into insignificance under the cloud of a far greater threat. At stake for many of them is their future financial security. The postal giant is considering whether to close the company's retirement scheme to existing members, forcing them to join a new pension pot with less lucrative benefits.
Pension industry insiders believe such a move could spark widespread strikes at Royal Mail. More worrying for British industry, trouble will not be reserved to the postal service. Over the next few months companies are expected to highlight the scale of Britain's pension crisis by revealing deficits on an unprecedented scale. Strikes and corporate failures could follow. Company executives will be in the firing line, but many will choose to point the finger elsewhere. For Jane Newell, the chairman of Royal Mail's pension trustees, and the 100,000 or so other trustees around the country, life could get very tough. Traditionally the silent power brokers of corporate Britain, pension trustees are about to find themselves dragged kicking and screaming into the limelight.
"Over the next few months we are going to see some horrific news on pension funds," says Ros Altmann, a former pensions adviser to the Government. "Around half the pension funds out there have a three-year valuation cycle that ended in March 2009. Trustees will face some awful deficit challenges as the new valuations come to light." The crisis is moving experts to call for change, arguing that the trustee system is no longer suited to the post-credit crunch world. "We need a radical overhaul of the pension system," says Ms Altmann. "There are no easy answers, but times have changed and so has the job of trustees. The complexity of investment means you have to question whether they are equipped for the task."
The job of the trustee is to protect the future livelihood of a company's current and future pensioners by investing a pension scheme's assets for sustainable growth and negotiating with the company over contributions to make up for any short-fall. Trustees should be the independent protectors of Britain's pension assets but in the wake of the collapse of the financial system experts are questioning whether they are up to the job. "The challenge has become a lot harder, particularly on the investment side, because there are so many tools to manage risk," says Glyn Jones, managing director at P-Solve, the pensions consultant. "Twenty years ago it was a choice of equities or gilts. Now it's about how you use interest-rate swaps or other derivatives to manage risk. That is a different level of sophistication."
In a world where some companies boast multi-billion pound profits and tens of thousands of employees, and others operate at a loss with a staff of just half a dozen, sophistication and financial expertise among trustees varies enormously. Pension trustees are a mix of the professional and the amateur, many of whom work part-time and are from non-financial backgrounds. Training is encouraged but not mandatory and there is no formal review process of a trustee or board's performance. Many experts believe that while non-professional trustees have a part to play, they should avoid involvement in the more sophisticated investment roles.
In March this year a survey from Punter Southall, an actuarial consultancy, suggested nearly 50pc of pension trustees were unsure of how the recession was impacting their scheme's funding position. The consultancy, which generates fees by advising trustees, said: "Significant gaps remain in trustee knowledge and understanding, suggesting that many schemes do not have effective governance structures in place." That might be the ideal, but for many small schemes it remains prohibitively expensive to employ external advice or independent trustees. However, the risk is that the ultimate cost of inexperienced trustees making poor investment decisions could be far higher.
The Pensions Regulator launched a three-month review of the trustee system in October last year and is next week set to release its final recommendations. While there will be some tweaks around the edges, the regulator is likely to give the system a clean bill of health. Many in the industry take a different view, and point out that the respondents to the regulator's review constitute many of the current system's chief beneficiaries. "Actuaries, consultants and lawyers earn millions of pounds each year advising Britain's pension funds – why would they want to change that?" points out one expert.
While some are calling for more formalised training and performance reviews or better use of external advisers, there are more radical suggestions on the table. Ms Altmann believes pensions schemes should be encouraged to work together, while John Ralfe, an independent pensions consultant, is calling for the UK to adopt a more US-style system where the law stipulates a level of minimum scheme contributions and companies take a wider role in asset allocation. Mr Ralfe believes the sponsoring company should recommend asset allocation to trustees, since it is responsible for funding pension plans. "If the company recommends a high risk equity weighting trustees should expect a cushion to absorb the risk" he says.
Ms Altmann is wary of such a system, arguing that companies could look to take advantage of their trustees, but she agrees change is needed. "Unquestionably we need greater investment expertise, but that is expensive," she says. "One way around that is to find a way to join schemes together and allow the larger ones to take responsibility, at least on the investment side, for the smaller ones. At the moment every fund is trying to find a liability-led investment strategy and paying its own advisers to do that. It's uneconomical."
Many experts argue that the regulator should also be taking a more activist role. By failing to act, they say, the Pension Protection Fund (PPF) – the government pension lifeboat scheme for companies that collapse – and healthy pension schemes will be left carrying the can. "The longer we leave this situation, the worse it will be," says Ms Altmann. "The number of companies failing over the next few months will accelerate. If the regulator believes they are going to fail anyway, it may decide the PPF is better protected if the company fails sooner rather than later."
Trustee boards will have a vested interest in allowing a parent company leeway because the longer they wait, the better it could be for their members. Ms Altmann argues that is the wrong approach for the wider market. "The regulator needs to take the view of what is best for the PPF and other pension schemes," she says. "The regulator might not be relishing this, but what choice does it have? Some schemes are simply not going to make it." Whether the regulator is prepared to take those tough decisions seems unlikely, but one thing is certain – desperate times call for desperate measures, and trustees will be growing increasingly desperate in the coming months.
Business Magazine Revenue Plummets
The big business magazines are tanking along with the economy. McGraw-Hill is trying to dump BusinessWeek while it still can. Earlier, Condé Nast pulled the plug on Portfolio. And Forbes has shed a large portion of its staff this year. In Q2, magazine ad revenue dropped an average 22% year-over-year, according to the Magazine Publishers of America. The big business mags had it even worse: BusinessWeek was down 30%, Forbes down 35%, and Fortune down 43%.
Even the Economist, which has outperformed its peers in recent years, was down 20%. (Subscription revenue and online revenue -- the lone source of growth for many publications -- is not included in these tallies.)
It's possible this is just a cyclical market, and that business magazines will somehow stabilize (or at least discover smaller, but still profitable, businesses on the web). But probably not without a lot more downsizing.
Madoff's Butner Prison Is The "Crown Jewel" Of Federal Prison System
Bernie Madoff won’t be serving his life sentence in a hellhole. The North Carolina prison where the convicted Ponzi schemer has been to serve his life sentence is considered "the crown jewel" of the federal prison system. It’s a place where many convicts hope to be sent. It may not be "club Fed" but it is the closest thing that exists in the federal prison system to a country club prison. The Butner Federal Correctional Complex is about 45 minutes northeast of Durham. From the outside you could mistake it for a college campus, except perhaps for the barb-wire.
It’s often sought after by convicts because its staff and facilities have a good reputation. There are no hardcore maximum security type criminals there. It’s all minimum, low and medium security. Former Enron CEO Jeff Skilling requested he be allowed to serve his sentence there. Butner is also known for having excellent medical facilities, especially its cancer-treament programs. There have been rumors that Madoff has been diagnosed with cancer.
Butner houses about 3,600 inmates. Notables include former U.S. Rep. Randy "Duke" Cunningham, former Adelphi CEO John Rigas, and former Navy intelligence analyst Jonathan Pollard. In the past the Butner prison has housed would be presidential assassin John Hinckley Jr. and televangelist Jim Bakker. It’s not totally safe for prisoners, however. Madoff may well find himself in fights with other inmates. As the saying goes, in minimum security prisons you get punched, and in medium security prisons you get knifed. It’s not clear whether Madoff will be in low or medium security. The length of Madoff's sentence would typically preclude him from being housed in the minimum-security prison.
Broken Promises and Phony Excuses
Democrats said, "Give us back the majority and we will give you health care, cut off war funding, bring our troops home, make it more costly to export jobs than to keep them here, hold criminals accountable for their crimes, no matter who they are, start a new era of openness and transparency in government, and more". We did it! Then it was 60 votes to stop a filibuster, then more, because some of them would vote against us, and now it's that they have to compromise with a "bipartisan" bill, though they know already that Republicans will vote against any bill that funds a single thing other than war, or perks for their biggest campaign donors and that any health care bill deemed "bipartisan" will be as good as no bill at all.
Republicans say "It's too expensive.", "We can't afford it.", about everything having to do with the American People. They cry about deficits and uncontrolled spending. They block everything the people need but they never stopped one penny of war funding, continued to insist on spending more billions for outdated war planes that will never be used, never worried about one penny that was spent on "contractors" whose work was so shoddy they electrocuted our troops, in their own showers, never held anyone accountable, covering up for them and making new laws to protect them instead, not one word of complaint about the $750 million dollars spent for an "embassy" in Iraq, or hundreds of bases and thousands of buildings there, also so shoddily built as to make them uninhabitable for those they were meant to house, and even though they'd told President Bush he couldn't build them in the first place, never held one person accountable, at least publicly, for supplying contaminated water to our troops while selling the fresh water to the highest bidders, making untold numbers of troops sick. Where was all the phony outrage and support for the troops when they were being "protected" by useless body armor and cheap, shoddy helmets, or when the specially armored vehicles that protect the troops from IEDs were being sold to contractors and the Iraqis first? Democrats will get nothing done because they will bring no bill to the table for a vote without an absolute guarantee of passage first.
They've all been living in their own little bubble of wealth and privilege for so long they have no idea what real people have to contend with. They can't even grasp the reality that millions don't even drive in this country. millions don't own homes, don't even have a chance in hell of ever owning a home, let alone 9 or 10 of them, don't own a jet plane or a yacht. They don't have it in them to understand that to millions of us $2.29 for a loaf of bread is out of our reach or that allowing speculators to artificially drive up the price of gasoline by even a few cents can take food off our tables, even as the money rolls in to them from big oil contributors.
I've read the Constitution and I don't believe that there is anywhere in there where it says "Anyone can lobby congress if they have millions of dollars to donate to a senator's or representatives campaign fund and cannot be heard if they don't , or if they are doctors or nurses trying to be included in health care legislation that directly affects them and their patients, or if they are patients, or that they deserve to be arrested instead of heard. I don't think I missed it. I believe the writers of the Constitution had the opposite in mind when they wrote it. Congress members take an oath to uphold and protect the Constitution but as soon as the words are out of their mouths, they turn their backs on the Constitution because there is way too much in there they don't like. And the biggest of those is, "promote the general Welfare".
They all hate that phrase and ignore it as much as they can, because it means that their JOB is to work for the betterment of all the American people, regardless of wealth, political affiliation, or religion, and they choose to work only for the betterment of those who already have everything, for their own betterment, and for profiting from the wars, destruction, lies, misery, hopelessness, and despair that they foist off on the rest of us, picking and choosing who they think deserve to live and die, based on their own "Christian principles", and on how much their material possessions are worth.
On December 10, 1948 our leaders signed The Universal Declaration of Human Rights. Article 25 reads:(1) Everyone has the right to a standard of living adequate for the health and wellbeing of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
To this day, when a disaster strikes, anywhere in the world, representatives from the United States are the first ones there to offer assistance and to help in any way possible. Yet, when the most recent disasters occurred here at home, our government was MIA. And now that so many millions of jobs have been lost on Republican watch, their solution is to cut benefits for the unemployed, cut free school lunch programs to motivate hungry children, to cut Social Security, Medicare, and Medicaid. They pray for another 9/11 on a much grander scale to "Save the Republican Party", they pray for the destruction of millions of people's lives and call themselves the party of "morals". Give me a break. They accuse the unemployed of being out of work "because they don't understand the need to work or even why there is a need to work". When it comes to helping Americans who are in trouble, our government is AWOL.
Some of them have been up there, in DC, living on the "dole" for 20, 30, 40 years, in those jobs they hate so much but don't want anyone else to have, insulting our postal workers, fire fighters, police officers, street departments, saying they don't really have jobs and don't really work. I dare them to try working as hard as these people do. They don't know the difference between right and wrong any more. They just understand profit and loss, cooking the books to show losses based on a projection when there is really a profit, boost the bottom lines of the only thing they really love, their war chests. Their be all and end all always comes back to their love affair with war.
The death and destruction and sorrow and suffering don't move them because there's no sacrifice too high for others to pay, suffering, sacrificing, dying, being tortured, locked up forever, on the word of a man who was proven to have lied over 900 times by himself , being beaten, raped and murdered. Oh no! They are the ones who say "Forget it, move on, hide it, cover it up, classify it, let it go." Very few in congress believe in accountability when it comes to their own, on either side of the aisle. They are the ones who care nothing for the Constitution, the people of the United States, the United States ITSELF, if doing the right thing means they might lose their next election, if doing the right thing might give the other side ammunition to call them "unpatriotic" without even really understanding what patriotism is.
Surely they don't honestly believe it is "patriotic" to force one of the few remaining American corporations that still produced their goods here and provided jobs for American workers to merge with a foreign corporation, put most of their own workers out of work, start producing off shore with cheaper foreign workers, force the American workers into destitution and the few left working to take lower pay and a lower standard of living to come down to the slave labor levels in China or India, to sell pieces of America, roads, bridges, property, ports, to foreign interests, even to those who, not so long ago, were considered our enemies, and may be so again in the future?
Both sides threaten war with the rest of the world and expect them to just bow to their demands. It is ludicrous to think more will not react like North Korea. They don't even care that Pakistan and Israel are nuclear armed countries with the will to use their horrendous weapons. They encourage Israel's' war mongering, and order our troops to covertly sneak into Pakistan and slaughter innocent civilians and spy on our allies in their quest for the elusive boogie man while the real boogie man is in their mirrors. They have become the thing they fear most, only they are so full of self righteousness they can't see the truth.
An awful LOT of people think Congress is doing a LOUSY job, not just me. Is it any wonder? Bipartisanship is a copout we can no longer afford to let them hide behind. We know who and what they really are now, and we don't like what we see, and we don't like what we hear. It's really very simple when you just look. When 73 percent of the American People want them, who are supposed to work for us, to do something, and they, instead, go with the people who fill their campaign coffers, it's pretty obvious where their loyalties lie. And that is a long way away from the American People!
€400bn energy plan to harness African sun
The world's most ambitious green energy project is about to take shape. It is a plan for a chain of mammoth sun-powered energy plants in the deserts of North Africa to supply power to Europe's homes and factories by the end of the next decade. In a few days' time a consortium of 20 German firms will meet in Munich to hammer out plans for funding the giant €400bn (£343bn) project, named Desertec.
The scheme is being backed by Chancellor Angela Merkel's government and several German industry household names including Siemens, Deutsche Bank, and the energy companies RWE and E.ON. The Munich meeting will also involve Italian and Spanish energy concerns, as well as representatives from the Arab League and the Club of Rome think-tank. Energy experts have calculated that Desertec could meet at least 15 per cent of Europe's needs, and be up and running by 2019.
By 2050, they estimate the contribution could be between 20 and 25 per cent. Although no host countries have been named, Desertec envisages a string of solar-thermal plants across North Africa's desert. The plants would use mirrors to focus the sun's rays, which would be used to heat water to power steam turbines. The process is cheaper and more efficient than the usual form of solar power, which uses photovoltaic cells to convert the sun's rays into electricity.
The project also envisages setting up a new super grid of high-voltage transmission lines from the Mahgreb desert to Europe. Hans Müller-Steinhagen, of German Aerospace, has researched the project for the German government. He said that although the idea behind the scheme had been around for several years, investors had been deterred by the high costs of setting up the infrastructure.
Professor Müller-Steinhagen said that similar projects have been operating in the American West for years, but these had failed to gain the appropriate recognition. "Solar thermal power plants were built in California and Nevada, but people lost interest in them because fossil fuels became unbeatably cheap," he said.
Until now, projects of Desertec's scale have failed to get off the ground because of the huge problems involved in delivering electricity to consumers hundreds of miles away. The main stumbling block is that the further electricity is transported, the more is lost. However, Siemens claims that it has come up with a solution. Alfons Benziger, a spokesman for the engineering giant which has been involved in the construction of major hydro-power plants in India and China, said: "We have developed so-called high-voltage direct current energy transmission. This can transport energy over long distances without heavy losses. We use the process at the power plants in India and China."
Andree Böhling, an energy expert for Greenpeace Germany, has heaped praise on Desertec: "The initiative is one of the most intelligent answers to the world's environmental and industrial problems," he said. Munich Re, meanwhile, which insures major insurance companies across the globe, was persuaded to invest in the project after seeing a steady rise in the number of claims the company had to meet as a result of climate-change-induced damage.
Yet Germany's largest solar energy company, SolarWorld, argues that North Africa is too risky a location. "Building solar power plants in politically unstable countries opens you to the same kind of dependency as the situation with oil," said Frank Asbeck, the firm's managing director. Other critics claim that by singling out comparatively poor North African countries as a location for a sophisticated European solar energy project amounts to a form of "solar imperialism".
Lars Josefsson, the head of the Swedish energy giant Vattenfall, has also rejected the idea because of a potential risk of terrorist attacks. However Desertec supporters, including the German conservative politician Friedbert Pflüger, argue that a far greater threat is posed by the prospect of nuclear power plants being subjected to such attacks. He points out that a number of nuclear reactors are scheduled to be built in North Africa – Egypt alone plans to build five. Mr Pflüger claims that the risk of politically motivated Russian-style energy stoppages by host countries could be avoided if the solar grid has enough supply channels.
But he warns that politics is likely to be the main stumbling block. "It's not Europe that will decide whether the desert can be used as an energy resource, but the countries of North Africa," he said last week. "So far these countries have either not been involved in the dialogue at all or only at a very limited level."
The planet's future: Climate change 'will cause civilisation to collapse'
An effort on the scale of the Apollo mission that sent men to the Moon is needed if humanity is to have a fighting chance of surviving the ravages of climate change. The stakes are high, as, without sustainable growth, "billions of people will be condemned to poverty and much of civilisation will collapse".
This is the stark warning from the biggest single report to look at the future of the planet – obtained by The Independent on Sunday ahead of its official publication next month. Backed by a diverse range of leading organisations such as Unesco, the World Bank, the US army and the Rockefeller Foundation, the 2009 State of the Future report runs to 6,700 pages and draws on contributions from 2,700 experts around the globe. Its findings are described by Ban Ki-moon, Secretary-General of the UN, as providing "invaluable insights into the future for the United Nations, its member states, and civil society".
The impact of the global recession is a key theme, with researchers warning that global clean energy, food availability, poverty and the growth of democracy around the world are at "risk of getting worse due to the recession". The report adds: "Too many greedy and deceitful decisions led to a world recession and demonstrated the international interdependence of economics and ethics." Although the future has been looking better for most of the world over the past 20 years, the global recession has lowered the State of the Future Index for the next 10 years. Half the world could face violence and unrest due to severe unemployment combined with scarce water, food and energy supplies and the cumulative effects of climate change.
And the authors of the report, produced by the Millennium Project – a think-tank formerly part of the World Federation of the United Nations Associations – set out a number of emerging environmental security issues. "The scope and scale of the future effects of climate change – ranging from changes in weather patterns to loss of livelihoods and disappearing states – has unprecedented implications for political and social stability."
But the authors suggest the threats could also provide the potential for a positive future for all. "The good news is that the global financial crisis and climate change planning may be helping humanity to move from its often selfish, self-centred adolescence to a more globally responsible adulthood... Many perceive the current economic disaster as an opportunity to invest in the next generation of greener technologies, to rethink economic and development assumptions, and to put the world on course for a better future."
Scientific and technological progress continues to accelerate. IBM promises a computer at 20,000 trillion calculations per second by 2011, which is estimated to be the speed of the human brain. And nanomedicine may one day rebuild damaged cells atom by atom, using nanobots the size of blood cells. But technological progress carries its own risks. "Globalisation and advanced technology allow fewer people to do more damage and in less time, so that possibly one day a single individual may be able to make and deploy a weapon of mass destruction."
The report also praises the web, which it singles out as "the most powerful force for globalisation, democratisation, economic growth, and education in history". Technological advances are cited as "giving birth to an interdependent humanity that can create and implement global strategies to improve the prospects for humanity". The immediate problems are rising food and energy prices, shortages of water and increasing migrations "due to political, environmental and economic conditions", which could plunge half the world into social instability and violence. And organised crime is flourishing, with a global income estimated at $3 trillion – twice the military budgets of all countries in the world combined.
The effects of climate change are worsening – by 2025 there could be three billion people without adequate water as the population rises still further. And massive urbanisation, increased encroachment on animal territory, and concentrated livestock production could trigger new pandemics. Although government and business leaders are responding more seriously to the global environmental situation, it continues to get worse, according to the report. It calls on governments to work to 10-year plans to tackle growing threats to human survival, targeting particularly the US and China, which need to apply the sort of effort and resources that put men on the Moon.
"This is not only important for the environment; it is also a strategy to increase the likelihood of international peace. Without some agreement, it will be difficult to get the kind of global coherence needed to address climate change seriously." While the world has the resources to address its challenges, coherence and direction have been lacking. Recent meetings of the US and China, as well as of Nato and Russia, and the birth of the G20 plus the continued work of the G8 promise to improve global strategic collaboration, but "it remains to be seen if this spirit of co-operation can continue and if decisions will be made on the scale necessary to really address the global challenges discussed in this report".
Although the scale of the effects of climate change are unprecedented, the causes are generally known, and the consequences can largely be forecast. The report says, "coordination for effective and adequate action is yet incipient, and environmental problems worsen faster than response or preventive policies are being adopted". Jerome Glenn, director of the Millennium Project and one of the report's authors, said: "There are answers to our global challenges, but decisions are still not being made on the scale necessary to address them. Three great transitions would help both the world economy and its natural environment – to shift as much as possible from freshwater agriculture to saltwater agriculture; produce healthier meat without the need to grow animals; and replace gasoline cars with electric cars."
This Land Was Our Land (apologies to Woody)
by Ed Ciaccio
This land was our land, but now it's their land,
From coast to coast, a most unfair land.
From the redwood forests, to the gulfstream waters,
They stole this land from you and me.
The Wall Street banksters and corporate cronies,
The weapons makers, the Congress phonies,
The liars and lobbies, and radio ranters,
They stole this land from you and me.
This land was our land, but now it's their land,
From coast to coast, a most unfair land.
From the redwood forests, to the gulfstream waters,
They stole this land from you and me.
In halls of Congress, where Corporate Tools lurk,
To serve their masters, while all us fools work
To feed our families, they count their campaign checks.
They stole this land from you and me.
This land was our land, but now it's their land,
From coast to coast, a most unfair land.
From the redwood forests, to the gulfstream waters,
They stole this land from you and me.
A bleeding soldier, dying in foreign sands
Wonders why she was sent to far-off lands,
As Exxon's profits set all-time records.
They stole this land from you and me.
This land was our land, but now it's their land,
From coast to coast, a most unfair land.
From the redwood forests, to the gulfstream waters,
They stole this land from you and me.
A young man dies in an E.R. ward,
Health care payments were too high to afford.
Insurance CO's jet to the Caymans.
They stole this land from you and me.
This land was our land, but now it's their land,
From coast to coast, a most unfair land.
From the redwood forests, to the gulfstream waters,
They stole this land from you and me.
The native people have always known how
Their land was stolen, so what we feel now
Is the cost of "progress" for corporate rulers
Who stole this land from you and me.
This land was our land, but now it's their land,
From coast to coast, a most unfair land.
From the redwood forests, to the gulfstream waters,
They stole this land from you and me.
146 comments:
Why do you hide behind names like Illargi and Stoneleigh?
Give me another 'serious' blog where the authors hide behind pseudonyms.
Do you think that the information you present here puts you at risk?
Do you think you are like Trotsky or Lenin?
I'm warming to Zerzan's anarcho-primitivism by the day.
"Most of you, I know, will keep on hoping and believing that the system can be cured and saved. That is not all that bad. It gives the rest a better chance to get the hell out of the way. Not that it provides any guarantees; just a slightly better chance."
We'll just hunt you down, rape your old lady, and take your shit and if your lucky you'll get out with your life. You can run but you can't hide.
Travails of a TAE reader. I asked my parents nonchalantly if they were allowed to raise chickens where they live. "Why would we want to do that??" Well, the guys at the disaster blog that I read say society will break down and ... "Why do you read a disaster blog??" If I mentioned picking up a water filter and 9mm, they would probably call the state mental health department. Better wait until budget cuts force that department to be eliminated.
Michael:
Not that I am a defender of Ilargi or Stoneleigh, but many American patriots of the Independence era actually used nom de plumes. These people were patriots. Point is, I don't see any problem with using a pen name.
The obvious reason to use a pen name is: you have an employer, and the employer has clients, and everyone is more comfortable if awareness of your controversial blogging is minimized in your day-job setting. Nothing wrong with that.
Michael Weiner writes: "Why do you hide behind names like Illargi and Stoneleigh?
Give me another 'serious' blog where the authors hide behind pseudonyms.
Do you think that the information you present here puts you at risk?
Do you think you are like Trotsky or Lenin?"
Yet just a few posts later we see an anonymous post stating: "We'll just hunt you down, rape your old lady, and take your shit and if your lucky you'll get out with your life. You can run but you can't hide."
I think, Mr. Weiner, that the question was answered right there. There is no useful purpose served by Stoneleigh and Ilargi further exposing themselves, particularly if they hold beliefs about the near certainty of collapse of civilization. What good, pray tell, does exposing their names actually serve?
While I can assure you that if things do get as bad as they say, the OPSEC from remaining anonymous will be considerable. And please spare me the counter arguments. You can make the counter arguments to their positions if you like but again it does not require a real name. If you succeed in altering their world view, then perhaps they might be persuaded to reveal themselves. And if you fail to persuade them, then their mask serves a useful purpose.
MW,
Why don't you try a critique of I&S's writings instead of pathetic personal attacks.
"Not that I am a defender of Ilargi or Stoneleigh, but many American patriots of the Independence era actually used nom de plumes. These people were patriots. Point is, I don't see any problem with using a pen name."
Yes, that was before they won the revolution and there was a real fear of prison or death via the King.
I know for a fact that Gary North will not reply to Illargi and Stoneleigh publicly because they choose anonymity.
There are many other people in the world using their real names and saying things that are light years more dangerous than what is said here. Think Mike Ruppert, Jay Hanson, Gerald Celente, Alex Jones.
Illargi and Stoneleigh are commenting on the daily news. They are not fomenting a revolution for chirstsakes.
While the system is quite rotted I feel I must dabble in one of my least favorite games; comparative atrocities.
The game of comparative atrocities is a defensive rhetorical strategy employed always by those holding a weak position. I don't want to suggest there are not terrible things happening, that have happened or will happen because of the American versions of human folly. I would just like to suggest that there have been much much worse.
Take the USSR during just about any period of it's sad existence. What about Europe 96 years ago in August. What about Nazi Germany or Imperial Japan of the 30s and 40's. Should I go on?
Listen, I hate this game but sometimes a little perspective is good. If Americas promise has always been quite a bit darker than the shining city on the hill myth says, it's pretty much impossible to say it's depredations visited upon it's own citizens or the worlds rate very high on any possible list of histories great monsters.
Occasionally a tone of sadness or regret instead of accusation and spite will do the story telling job just as well and who knows it might actually do a microscopic bit of good. Here we are still one of the richest people in all world history and thousands and thousands are thinking of guns to set right the maldistribution of what are in essence fictional assets and incomes.
More spooks around lately. Some prolly here for a long time, too.
They don't all make nasty posts. Some appear very supportive. Main thing is, they're here, they're watching, and they pretend to argue with each other.
When or if this site begins to get seriously hacked, then it'll be on the "map".
Great insights from both I&S.
I particularly like the analogy of the creature in today's posting by Ilargi.
Indeed, let's not feed the serpent. Resist it. Resist what it stands for. Detach and decouple as much as feasibly possible from this anti-christ, anti-light spirit destroying hell-hole.
Not a lot of sense in the first handful of comments. Does stuff like this normally get deleted before I peek in here?
I think we're going to collapse, FSU style per Dmitry Orlov's Reinventing Collapse, and I think we'll go to fighting internally. A certain sort of whites against Hispanics, another sort against the sundry heretics, pagans, and the like, and it'll be against a backdrop of the desperately poor doing what they can to survive.
Goldman Sachs either ends up in carefully guarded compounds, or they get sliced thin and fed to the masses to placate them. I guess we shall see which way it goes.
Michael Weiner said: "I know for a fact that Gary North will not reply to Illargi and Stoneleigh publicly because they choose anonymity.
There are many other people in the world using their real names and saying things that are light years more dangerous than what is said here. Think Mike Ruppert, Jay Hanson, Gerald Celente, Alex Jones.
Illargi and Stoneleigh are commenting on the daily news. They are not fomenting a revolution for chirstsakes."
And no one is holding a gun to your head making you read this blog. You are under no obligation to continue reading either, if you so dislike it. In short, stop making demands that others play by your rules.
The people you mentioned chose to public with their respective messages. You had nothing to do with those choices. And I suspect you will have nothing to do with I&S's choice to be anonymous.
Midway through his speech on urban and metropolitan policy in the Eisenhower Executive Office Building this afternoon, one of his two small glass prompters came crashing down, hitting the wood floor and crashing in many pieces. It made quite a ruckus.
“Oh, goodness,” a startled President Obama said. “Sorry about that, guys.”
He then proceeded on with his remarks, “To pull our economy back from the brink, including the largest and most sweeping economic recovery plan in our nation's history…”
http://tinyurl.com/ncpuad
Perhaps a power greater then him was trying to tell him something. Don't lie.
I can't help but I don't think Meridith would disagree much with I&S... She is within the system and she gives advice to her clients about stock prices. Which can go up and then down. In an earlier interview this year she said bank stocks will go up but retail investors should not buy them but get out of the market. In this interview she explains another stupid scheme of the govt to let the banks post short-termish profits at the expense of future profitability. I do not hear her saying she agrees with it. Furthermore if she says 13% connect this to the values used in bank stress testing. Her message thus is crystal clear. There are much better targets than her - so few women, so few voices of reason. The market did bottom during early European trading and was poised to rally anyway. She did add some fuel to the fire or better: was used to explain what was going on anyway.
Yes, some of these comments are nuts.
Agree wholeheartedly with the stance that we should completely detach from the "system.". I have been against consumerism, excessive spending and debt for quite some time now (decades)....but now I don't even want to get a job so I don't have to feed these bastards with taxable income.
Make it a goal to not spend anything and not vote....the only things they understand.
God I hate Goldman Sachs - almost as much as the Fed. Why couldn't the pentagon plane been targeted for the Fed instead....
On another note....I'm surprised there weren't any comments on yesterday's post about Wells Fargo (was that the correct crooked bank?) during itself. It's so absurd that I don't even know where to begin.
Also the fate of that Iranian lake going the way of Lake Chad and I'm sure many others. I wonder how people in the southwest US are going to fare when it's Lake Mead/Colorado River?!?
Jim
Sueing, not during....damn autocorrecting type.
Meredith Whitney’s prediction of 15% unemployment has got me thinking. Has anyone been keeping a running tally of these expert predictions? I would love to see a chart of their projections versus what has actually happened. If someone knows of such a thing or if I’ve missed it in a past entry here on TAE, please post a link. If said charts do not exist, let me know that too and I might start a little research project of my own.
The system, the creature, will eventually die of its own accord. It will bring down many, if not most, of us in its fall. There is nothing we can do about it, it will have to run its course.
And what then? Commerce will stop? Human beings will walk into the street to sit and starve? Or descend into some kind of Mad Max nightmare?
Seems too shallow an analysis. The system as it currently exists does so because it serves the interests of the top 1% or so of human population. As long as that is so it will likely continue - through the end of the oil age, through climate change. Use history as an example. Colonialism put 99% of the population of many regions under the control of 1% of foreign invaders. Its system did not collapse, it evolved as the 1% found new ways to exploit the 99%.
The clipping on China is a bit more in line with historical precedent. How can a country with so many disparate peoples, held together previously by force and now by a quickly fading economic carrot, continue? The Soviet Union is an apt parallel.
Seriously people, enough with the intrigue. Leave Ilargi & Stoneleigh alone. If you feel the need to do some googling, look up something useful like what kind of fruit trees will grow well in your location. I have been following their work for years and even contributed a little to funding this site and have never seen a need to intrude.
MW and interestingly enough 'anonymous' @3.41 -
If you only knew what an utter bore you are bringing your petty, trivial comments to this site.
There are very critical matters at hand to be concerned with in the world at this time including survival of the species (ever heard of global warming?) AND everything else humanity is faced with.
Please take your itsy bitsy teeny weeny little brains and
GO GET A LIFE.
c.diem
Wow, so many pointless comments around. You guys might wanna check out the chinese stock bubble bursting dates over at ZH
http://zerohedge.blogspot.com/2009/07/chinese-stock-bubble-watch-for-critical.html
"By the very nature of the model, this result gives us two conclusions. Firstly, there exists a bubble in the Shanghai Composite Index. Secondly, it will reach a critical level around July 17-27, 2009. This will lead to a change in regime which may be a crash or a more gently bubble deflation. An extended version of this note, with a careful assessment of the confidence intervals and comparisons with the previous Chinese bubble ending in Oct. 2007, will be released soon."
The Chinese bubble when it bursts is going to unleash the fury of a dragon.
It is pointless to say there are a lot of pointless comments around. Stating the obvious - hence pointless.
cd :)
Re the pseudonyms of Ilargi and Stoneleigh, I am glad for them to have a little protection.
I can easily recall the rage and discounts I have personally encountered in my attempts to give a head's up to family and friends. So much of it ,in fact, I have stopped bringing up the subjects of the economy and world goverance.
Two weeks ago a friend brought up the subject with me so I foolishly offered some insight thinking that was what was wanted. Wrong. My words simply triggered another attack. I retreated, in the argument, to the less emotional ground of history, of how the centre feeds off of the periphery, of the history of Rome. Three days later I received an e-mail from my angry friend asking for " the name of that economic site you read."
she wants to educate herself on economics. I referred her to the TAE Primers.
Another good reason to maintain pseudonyms is that many look for degree status, the expert but narrow opinion. In these times that can be a trap for both writer and reader. The task for each of us is to read/learn widely and connect our own dots.I now have so many dots I'm dizzy from trying to make a coherent pattern!
STARCADE, What's happening in your corner of California?
I know that what I am about to write about will probably have negligible effect in the Big Picture of things. However, I do think it might cheer some people up.
Over at TOD, there have been a couple of postings about a rather interesting way of getting power from the wind. Yes, I do know about the problems T. Boone Pickens has been having with the 600+ wind turbines that he has ordered. However, this is quite a different proposition and it made me quite cheerful.
High altitude wind power: an era of abundance?
High altitude wind power II: the reactions
Only a few miles away from where I am right now, the UK's only plant for making the large blades of wind-turbines recently closed down.
The trolling remarks coming in increasing amounts are a mark of the rising dissemination of this blog, so I guess it is a positive sign. Better to get use to it but probably not feed the trolls (unless they prove themselves to be validly curious in the theoretical basis of the ideas here). Sometimes it's hard to refrain, but remember, ignoring them pisses them off far more than responding to them. And it increases the value of the comment section.
Newcomers, if you are really interested, how about reading a few of Stoneleigh's primers (top right of home page) before commenting?
VK
I can hear Peter Schiff now, with so much of his clients' money in the Shanghai market, the Wednesday night after their crash. "You have to think long term. I will be proven right in the end." I am not a big fan of Keynes, but he did write one pertinent thing, "In the end we are all dead."
@Jim
"God I hate Goldman Sachs - almost as much as the Fed. Why couldn't the pentagon plane been targeted for the Fed instead...."
I find an even more interesting question (rhetorical and not seeking a reply) is why the "plane" was aimed at the side of the building exactly opposite from the offices of Rumsfeld, Wolfowitz, et. al? It appears to have destroyed all the documents which were in theory being used to audit the missing $2T of Pentagon funding over the years. Nice touch.
Ilargi, Stoneleigh
Since you both believe this system is doomed, what living arrangement do you suggest as a viable replacement after the shakeout?
What are you partial to? Capitalism? Socialism? Communism? Anarchism? Primitivism? I'd guess socialism or a hybrid form thereof.
Level with us. What will work?
Persephone
I have given up on Safari v.4 for the moment. I don't like the new interface and I find it buggy. I am back to 3.1.2.
Anon 8:24 is an example of a newcomer who asks nebulous questions loaded with political "hot words and labels" without touching Stoneleigh's primers.
A 8:24
Stoneleigh has a day job, a homestead, and is raising three kids. Do you have an hour to read a couple of her primers if you are really interested in these questions?
el g,
My question wasn't meant to bait them. I really do want to know what philosophical underpinning motivates them. I'm largely in the primitivist camp. I doubt there's a more out there underpinning than that.
A 8:22, 8:44
So are you interested enough in the answers to your questions to open a few of her primers? None of the "isms" offers much valid information. I doubt Stoneleigh would apply any of them to herself.
The mainstream consensus of this blog, including the hosts, is that nothing will "work." We don't have a problem, we have a predicament. Of things that won't work, some are worse than others. For those interested in trying to keep themselves and their loved ones alive and least miserable as possible, the least worst path has critical importance. For individuals, there are many paths, though they have common themes. Which path one might rationally choose depends on a multitude of factors, a few of which are age, family, financial status, health, employment prospects, etc.
I have never understood the rants about pseudonymous posters. Yes, pseudonyms tend to be a problem in the comments sections, however, it's not for blog posters since if you don't like their postings, don't read them. Even more, pseudonymity protects you only from the least ambitious forms of stalking but that's often enough.
MONUMENTAL ECONOMIC COLLAPSE AHEAD.
Dynamical globally complex system collapse caused by too many points of failure. Natural systems are simple by design and have redundancy by darwinism.
A 9:00
MONUMENTAL ECONOMIC COLLAPSE AHEAD
I think that should be a warning sign on the interstate highways. I am trying to figure out what the icon should be as well as the shape of the sign.
I think a horizontal line ending with a vertical line with an auto pointing downward to the right of the vertical, but I can't get blogspot to accept my attempt.
Ahh, Meredith, Meredith, Meredith. I loved you and trusted you and you've broken my heart.
<snif>
You're still just unbearably cute, though.
Michael Weiner
Maybe they have real names like yours and see it as a PR liability to post serious commentary under a name that sounds like the illegitimate offspring of Mr Weener and Ms Whiner.
See how easy it is to poke fun at a name?
Makes 'pen names' look more attractive, doesn't it?
Forces one to look at issues and facts instead of personalities and ethnicity, doesn't it?
Take your comment about our host's choice of pen names, for instance. What miniscule value could it possibly lend to any topical discussion?
Authors since the inception of writing have often chosen pseudonymous identities for a myriad of reasons.
Mark Twain, B. Traven, and George Elliot immediately spring to mind. Care to tar any of them with the discrediting brush of Trotsky or Lenin?
Shame on you for such a cowardly insinuation. If you think our hosts are commies then come right on out and say... citing chapter and verse of why you think so.
I for one, having nothing important to do this morning, would be happy to itemize the fallacy of your thinking.
But first, of course, YOU must have and present a legitimate thought.
"..Chopping off one head is useless, and they mostly even grow right back.."
When Max K said a while back during the very first TARP failout that Hank Paulson's head should be bouncing down the capitol steps for his broad daylight extortion threat, my first reaction, after briefly visualizing Hank's head bouncing like a Superball®, was to realize that in a large criminal syndicate, such as Paulson belongs to, no one within the Organization would give a rat's ass if that if fact happens to Hank, it would just give leave more loot for the rest of the Tapeworms to feed on.
The history of organized crime goes back a long long time and it really is a 'virtual' organism which has evolved over millenniums, building into the mega parasite we now see.
Think Sigourney Weaver in Aliens
The meme of organized crime is the institutionalized notion of 'something for nothing', which in Nature is the definition of the parasite niche in the ecological landscape.
Sponging off another organism's energy without a balancing return of it.
The movie "No Country for Old Men" has a pathological murderer at it's core. Relentless, merciless and without a scrap of remorse. Sounds like "Government Sachs" and it's vampiric blood funnel.
Everybody needs a Friendo
~~Resistance is Feudal~~
Ilargi writes it, and
The inimitable RAY CHARLES sings it
Busted
My bills are all due and the baby needs shoes and I'm busted
Cotton is down to a quarter a pound, but I'm busted
I got a cow that went dry and a hen that won't lay
A big stack of bills that gets bigger each day
The county's gonna haul my belongings away cause I'm busted.
I went to my brother to ask for a loan cause I was busted
I hate to beg like a dog without his bone, but I'm busted
My brother said there ain't a thing I can do,
My wife and my kids are all down with the flu,
And I was just thinking about calling on you 'cause I'm busted.
Well, I am no thief, but a man can go wrong when he's busted
The food that we canned last summer is gone and I'm busted
The fields are all bare and the cotton won't grow,
Me and my family got to pack up and go,
But I'll make a living, just where I don't know cause I'm busted.
I'm broke, no bread, I mean like nothing
It seems like there’s been an increasing number of folks trying to get their bearings around here lately, as already noted. IMO the Primers section has become too large for a newcomer to effectively navigate in order to grok the big picture, the foundational thinking and assumptions that underlie much of what is discussed here, in a reasonable amount of time, such that people could be expected to “do their homework reading” before “asking questions in class.”
I found it was most effective to direct friends and family to the Primers when there were just the 5-6 posts that Stoneleigh wrote around December 2008.
Here are a few off the cuff ideas about how the Primers section could be condensed, in order from least time consuming to most:
1. Revert back to a much smaller list of Primers
2. Write a short piece that contains an ordered list of “must read” posts, with a brief description of how each piece fits in to the bigger picture. John Michael Greer has done just this to summarize the foundations of his thinking with his piece A Deindustrial Reading List, which was a very popular post, and one that I found most useful.
3. Synthesize the crucial bits of thinking into an organized “Powerpoint with Notes” single presentation, in the style of Dmitry Orlov’s Closing the Collapse Gap. That was an enormously popular piece, and Orlov continues to use that format with success.
IMO if something like #2 or #3 were to be done, it would work best and would age better as a post that was separated from the daily news collection, if only because the comments section would then likely pertain directly to the foundational material, and not the news of the day.
Ilargi said:
"It's not about chopping off the heads. There's too many of them anyway, and they change all the time. The true problems are much deeper. The whole organism is riddled with diseases, it’s rotten to the core with debt and greed and corruption. And as for you, whatever role you have in the economy, you are feeding the creature. Whoever you vote for in the elections, you are feeding the creature. Every house bought, every dollar paid in taxes, it all feeds it.
The system, the creature, will eventually die of its own accord. It will bring down many, if not most, of us in its fall. There is nothing we can do about it, it will have to run its course."
Great words worth remembering...
@toddman
Great idea. I was just thinking the same thing. Having referred several people to the TAE primers, they said it seemed like graduate school. The primers don't need to be 'dumbed down' to be more accessible, the primers just need a prmer for themselves. They have just gotten a little to big for the causally curious. It's the causally curious that need the encouragement. Most of the people I have been able to persuade to see the light on the economy in the last year were, at the beginning, just mildly open to dramatic truth telling. They knew something was really off but were hesitant to explore, instinctively knowing the answers would be grim. It was their curiosity that drew them in. They weren't really motivate at the beginning to work to hard at it, but like a good mystery novel, the first chapter drew them in.
@ Ilargi - from yesterday, your call to the MDs on the site to provide some post-doom preparatory advice is interesting in that nobody has responded. Could it be that I am the only MD reading here? On the other hand, when I get very busy, I do find it hard to free up enough time to read everything or even just the comments. Over the last few days I have been in the Canadian arctic, attending a conference on circumpolar health issues. There have been vivid accounts of the effects of global warming - dried up lake beds, disrupted traditional food systems, and presentations on the prospects of heat-related deaths in the far north, a la Paris a couple of years ago.
In terms of preparing for the coming cataclysm, I agree with Ahimsa - you need to make sure you eat a healthy diet and make provisions to be able to continue to do so when the food systems start to collapse (we don't see entirely eye to eye on exactly what that diet should look like but there is a sizable overlap and we will defer that discussion in respect of the wishes of our gentle hosts). The reality is that virtually all the chronic disease and a good proportion of acute disease is directly linked to 'life-style' issues, code for diet. If you can't get yourself into shape now, with the vast array of easily obtainable foods, how are you going to fare when the going gets tough. If you have developed any of the components of metabolic syndrome, for instance, you need to get onto a very low carb regime asap (this can be done without eating animal products but it is harder. It cannot be done while also restricting fat, however). Possibly the best blog on this is proteinpower.com by Drs. Mike and Mary Dan Eades who are very good physicians and excellent interpreters of the science in this area.
As much as you stockpile morphine, pharmaceuticals and medical supplies and equipment there will come a point where it all runs out. Your best chances will lie in your ability to prevent illness.
F*ck GS!
#$@#!@$&^%$&$%#$@$!$@!$^$*(&^%&$%^$
Russin fussin grumbling
http://www.scientificamerican.com/article.cfm?id=why-do-we-swear
"Bad language could be good for you, a new study shows. For the first time, psychologists have found that swearing may serve an important function in relieving pain."
Grrrrr!!!
ps - The vampire squid sucking the face of humanity just made humongo profits courtesy of the majority of blog posters here, thank you for contributing to the bailouts and feeding the squid!
Sometimes I wonder...why not just let reality speak for itself? I mean, it would certainly be interesting---though don't get me wrong: I'm not advocating for this point---but it would be interesting if everyone stopped blogging----EVERYONE---and just did their thing (whatever that might be).
Eventually, reality would win out. It always does, in the end. I HAS to....because it is real. Sure for sometime the PTB could continue the ruse of recovery in its myriad forms...but eventually too few jobs and too much poverty and too much suffering would win the day---regardless of the billions of words being spoken in the blogosphere, day in and day out.
Just wondering...
@VK
"ps - The vampire squid sucking the face of humanity just made humongo profits courtesy of the majority of blog posters here, thank you for contributing to the bailouts and feeding the squid!"
The alternative, making license plates in Club Fed, also feeds the vampire squid. At least it feeds the prison/industrial complex.
Dr J
I wonder how long it will be before the historically short moratorium on 'illicit' drug manufacture is withdrawn/overlooked.
Hemp is going to start to look increasing attractive again, the seeds being a v. rich source of 3,6 omega oils in (IIRC) the perfect ratio for human consumption, the bast fibres more durable and pest resistant than cotton, etc.
Through my work we have contact with a company in Scotland that imports poppy straw for legal production of morphine, heroin etc. This comes from Tasmania, India, Iran, Hungary and Turkey predominantly. That's going to be an unfeasible distance to trade in years to come, not to mention that acetic anhydride (used to make heroin) is oil based.
Opium poppies are however available in the UK now, strictly for 'ornamental purposes' of course - but there's no reason shouldn't flourish in the future - morphine is still possible I think.
So - replacements for fish and cotton, + pain relief - all feasible.
My real worry is the semi-synthetic antibiotics. Could you comment on which broad spectrum antibiotics you think would be the most useful in the future? Longest shelf lives, most effective etc?
TIA
CS
Addendum...
Please don't read into my comment any hidden meaning. There is none. I'm simply pondering these days how, eventually, reality will speak for itself; it will dictate the rules. And it may be years, even decades, before the last "bubble" finally blows up---but at some point in the not-so-distant future, regardless of all of our musings on the topic, REALITY will arrive----and the system will collapse.
Not to mangle any points, but I wonder how much value “connecting the dots” really has. You can mark a dot for the head, dots for the feet, dots for the shoulder and the hip, and so on down the line. You can then connect all these dots and have a pretty good outline for the human figure, assuming all of the dots were placed in the correct spatial relationships ( not at all easy to do).
But by the time one has connected all the dots, the model/figure has probably assumed another pose so to speak. That is why I trust very little of what the “experts” assert regarding the economy. I simply have no faith whatsoever in their ability to render the moving target, much less project where the dots will be at any future point in time. Once again, it all boils down to the abilty to see. And it's hard enough to see clearly under any circumstance, much less with the filter of an agenda.
But I am referring to the media contortionists in my above comment. The real experts (I am not one of them) know where the lines of equilibrium and grace reside, and thus recognize the twisting and turning diversions from canonical proportion(however limited and generic that baseline usually proves to be). Which is probably why there own faces contort with consternation when told the slumping giant is about to take a victory lap.
Aesthete
OK...last thought re: reality
when I say 'reality", I mean the very basic reality of a system overloaded with debt and addicted to growth. Bad combination.
Toddman,
Thanks for the link to JMG Archrdruid list. I picked up several of his recos at half.com for a few bucks each.
Mike
Financial Crisis Comes Full Circle As Bank Sues Itself
It seems Wells Fargo has (as a result of mergers and acquisitions no doubt) a surplus of lawyers. Anybody know some good lawyer jokes?
Sonoluminescence can occur when a sound wave of sufficient intensity induces a gaseous cavity within a liquid to collapse quickly. This cavity may take the form of a pre-existing bubble, or may be generated through a process known as cavitation. Sonoluminescence in the laboratory can be made to be stable, so that a single bubble will expand and collapse over and over again in a periodic fashion, emitting a burst of light each time it collapses. For this to occur, a standing acoustic wave is set up within a liquid, and the bubble will sit at a pressure anti-node of the standing wave. The frequencies of resonance depend on the shape and size of the container in which the bubble is contained.
@cs That's going to be an unfeasible distance to trade in years to come,
It has long been demonstrated that there is no unfeasible distance to trade for drugs and spices. If something trades for its weight in gold, someone will go get it if the trip is physically possible.
@Michael Weiner And just why does anyone in the reality-based community want to hear from Gary North anyway?
To the comment about "isms"
IMO that is a part of the problem. People put align themselves with a form, a person, a movement, and go with it to destruction.
"isms" are boxes. They are traps that contain our creative thought. Example, Ghandi didn't start an ism, or join one, he went about living in an elegant and purposeful way.
CommunISM is problematic, so is capitalISM. Right living is not about an ism.
“Eliot Spitzer, the former New York governor and attorney general, said U.S. banks made a “bloody fortune” while receiving taxpayer money without a proven benefit to the wider economy.
[…]
Spitzer said rules proposed by President Barack Obama’s administration are irrelevant because agencies failed to enforce existing regulations.
[…]
Spitzer said the lessons of the financial crisis will only be remembered over a short period of time.
“Over and over we fall into the same trap,” he said.”
Spitzer Says Banks Made ‘Bloody Fortune’ on U.S. Aid
@Anon 11:30,
Financial imagery aside, that's a really cool physical effect! I'd like to see it one day. Your description reminds me a little bit of the resonance one gets in a properly designed laser cavity.
Corporate managers are virtually anonymous to most people and their actions are anonymous and stripped of almost all liability. Anything they say does not represent their mind but rather the corporations. Any act the do is not theirs but the corporations.
Anonymity for the individual is a practical way to gain some of the benefits of a corporate person while at the same time expressing their own very personal views. The expression of personal views is absolutely verboten in the public speech of a corporate person. Which in the end is one of the foundations of our problem.
A good investigator could ID I & S in a few hours or less and some certainly already have. Anonymity is never total. When a person is speaking and acting as an individual anonymity is perfectly acceptable. On the other hand those acting within and on the behalf of organizations, political or commercial, who hide behind false names online and supply anonymous quotes to the media, it's bread and butter, are deceivers.
Dr. J is correct in saying that one will eventually run out of stockpiled pharmaceuticals and that preventing illness is vital.
Herbal and homeopathic medicine are effective in the treatment and prevention of illness. Plus, they are readily available; we can grow them in our gardens or buy or barter for them locally.
Now is a good time for us to learn how to grow herbs and make tinctures from them, if we don't know already, as well as learn about homeopathy. IMP, we should start getting acquainted with herbalists and homeopaths in our areas.
I have used herbs and homeopathic remedies for over thirty years, and I find them very effective in the prevention and treatment of disease. My family has not used pharmaceutical drugs for many years; my 19-year-old son has never even taken antibiotics. I know of people who use herbs and homeopathic remedies (such as Arsenicum Album and Bioforce's Asthmasan) to treat non-severe cases of asthma. Anyway, without industrial foods and drugs, we'll probably have fewer "industrial" diseases.
Another benefit to using herbal and homeopathic medicine is that they don't carry the nasty side effects of pharmaceuticals. (Another drawback to pharmaceuticals: they alleviate the symptoms but don't address the root cause of the ailment.)
Holistic medicine will be the wave of the future.
We all definitely need to start eating a healthy, wholesome and organic diet (plant-based preferably, IMHO, but whatever your preference :)). Yes, absolutely avoid processed foods and simple carbohydrates. And, of course, exercise moderately and stay slim and fit.
It's also important to learn to detox our bodies. I grow organic wheatgrass, and my husband and I drink the nutritious juice to detox from the inevitable daily exposure to environmental contaminants. I juice my wheatgrass with a Back to Basics manual stainless steel juicer.
Good day to all!
Re.: Reality
In order to be able to plan and organize my future activities, I need to make decisions that will affect my future based upon reality. If you rely on others to make decisions for you then you can go back to sleep.
Garbage in garbage out.
Wrong decisions could mean losing my shirt, (assuming that I have one), or even losing my life.
Procrastination can also be fatal. (Waiting for more data until there is 100% certainty)
I cannot control very many variables that could affect me. However, I believe that it helps my decision process to find out what are the variable that can or cannot be affected by my action or inaction.
jal
Here's a good website on:
"Natural Health, Natural Living, Natural News"
http://www.naturalnews.com/Index.html
Horsecrap on the ism fear. Every living soul falls under one, or a combination of, these worldviews. Folks who shy away from confronting where they stand (I'm not saying that's the case with Ilargi or Stoneleigh) likely desire to hide behind ambiguity for any number of reasons, good or bad.
From what I've read from them (over 8 months of reading now) I'd say they'd prefer hybrid socialism to mercantile capitalism (I do), but much more prefer to work towards decentralized local economies.
I don't for a minute think they are Marxist/collectivists. I don't think they worship at the alter of productionism of any sort either.
Maybe you're right. Maybe they can't be put under neat labels. Maybe....
Toddman and others
I think a primer for primers is a great idea if and when Stoneleigh has the time. Perhaps separating the primers also into pre-k, primer 101 and 102 groups.
Aesthete
When I was 15 I was sent off to a wilderness camp in Maine. One thing we did there was to occasionally shoot white water in our canoes. It was an indelable experience, and I use the analogy with my friends here in many ways about dealing with the fiscal crises.
One of the first things we attempted to learn was where the shallow rocks were and where the safe chutes were by the appearance of the swirling water up ahead. When we had to make a decision in less than two seconds, there was little room for undue skepticism.
also
I see no one commented on my short medical price list of yesterday. I you are a Usaco without affordable medical insurance and need a major medical or dental procedure, I highly recommend what they are starting to call "medical tourism." My 34 year old son has several thousand dollars (NY City) of dental work coming up and I think I'll send him to Dr, Cepeda in Cusco. If you watch the Spirit Air specials, you can sometimes find a flight from Ft. Lauderdale to Lima for under $100 one way. Just something to consider. See the world and save a bundle.
Now now everyone, we should stop being so bitter and angry and *cheer* for Goldman Sachs, for they are the very *definition* of competitive, free-market capitalism!
US News even told me so!:
Why We Should Cheer Goldman's Fat Profits
In all seriousness, after that round of cheer leading I'm going to need a barf bag.
Michael Weiner = Michael Savage
Someone's making a wee jokums.
anon 10:17
I've also had better luck telling people about the financial Meltdown if I treat it like a mystery novel, a who done it. Many people find it more palatable if it is initially presented as 'fiction' and a puzzle to be solved and then it is gradually revealed to them as non- fiction.
thethirdcoast
I God didn't love vampire squid, he wouldn't have created them. I just wish S/He had kept them in the ocean.
A couple of points:
* IMO, the best primers are from Karl Denninger. His recent summaries are simply excellent; they really lay out the essence of the issue.
* It's interesting to see that many TAE readers are moving away from the notion of how to profit from the looming implosion, and are now focusing on survival strategies.
I'm still profit minded, but think the biggest opportunities will be found in filling the gaps created from collapsing gov't services. These could range from governance itself, to core public safety like police/fire, and baseline welfare such as food/water/housing.
In this type of scenario, I think Orlov provides an excellent framework of what type of localized socio-economic systems will emerge. I think it would behoove many readers to re-visit Clavell's 'King Rat'.
* Dr J - I feel sad when interacting with other professionals. They typically are so earnest in their faith of the system and belief that if they just focus on doing a "good job", things will work out ok.
I had a chance to speak to my son's doctor the other day, and she had no reaction (her back was to me) when I mentioned that the schools may not open in Sept, or will with dramatically scaled back services (So Cal, 'natch).
I know she heard me, and I know she knew what I meant, and I know she knew I was right.
The pity is, everyone tried so hard in school, worked the murderous hours to get established, started pulling it all together, and in the end realized that a select group of bandits had circumvented the entire process and went right to the source.
The reaction when the truth is realized is always the same.
Stoneleigh:
We have enough nuclear power available (if we built the plants) to last generations. We can get to 100% renewable liquid hydrocarbon fuels for off-track transport (cars and trucks) within 30 years.
None of this requires any engineering breakthroughs.
Kunstler is full of ****; I've put this program forward several times, and its VERY competitive with $100-150 oil, and FAR CHEAPER if oil goes higher.
Can you discuss this please? This was put forward by Karl Denninger. Since energy is your forte, I wanted your input.
ANON 1:24
Stoneleigh did this Excellent Energy Primer a few days back:
http://theautomaticearth.blogspot.com/2009/07/july-1-2009-renewable-power-not-in-your.html
Not only am I not a troll, but I actually agree with the premise of the blog. I do not agree with the conclusions. I have been a doomer for longer than most of you here, and have learned to keep an open mind as to the possibilities of what can come of it all. I have been at your stage of analysis- the utter doom and darkness of our future. If you are all settled on what you believe will happen that is fine, but I will continue to question and analyze the reality behind it.
The fact that some of you regular commentors leap to conclusions about my motives is disturbing. You read a little bit too much into the reasons that a question is raised. This reveals, at least to me, your inability to deal with adversity and difference. It certainly reveals your inability to properly read a situation, which leaves me to wonder if your reaction to collapse is as well thought out as your accusations of me being a troll.
None of you even know who Michael Weiner is? You do not even see the humor in it. If anything, the posts today reveal that you all certainly take things, mostly yourselves, much too seriously. No one is out to get this blog. You are but a blip on the blogosphere. Do not flatter yourself.
Stalkers? WOW! Some of you think I&S will be stalked if they reveal their names? You gotta be kidding.
Someone asked why we would want Gary North responding. Well, why in the world would you attack him in the first place? He believes that blogs whose authors hide anonymously are not serious enough to respond to publicly. If the issues we face are big enough to have Gary North as the focus of an introduction, would it not be beneficial to see him reply to your allegations?
Unruly Teen Charges $23 Quadrillion At Drugstore
The embarrassingly-named VISA BUXX card is a debit card for teenagers: parents get reports, control, etc. My daughter has one.
My lectures about financial responsibility appear to have failed: yesterday she charged $23,148,855,308,184,500.00 at the drug store. That's 2,000 times more than the national debt, which is a paltry 11 trillion.
The ever-vigilant folks at VISA added a $20 "negative balance fee," and have suspended the card.
When I called, they said that there was a "system problem," and that the "help desk was working on it."
Page 24 of the CIA manual for disinformation: "Anyone vehemently denying they are X, is almost certainly X. Eg; Richard Nixon, 'I am not a crook.' "
Michael Savage wrote,
"...No one is out to get this blog. You are but a blip on the blogosphere. Do not flatter yourself.
"Stalkers? WOW! Some of you think I&S will be stalked if they reveal their names? You gotta be kidding."
----------------------
Blip or blob, CIA monitors damn near everything. Furthermore, many "patriot" web sites are owned and operated by Big Brother. The purpose behind those is that it attracts real patriots who are then "tagged" and whose internet activities are then monitored.
You think TPTB leave anything to chance? Markets are manipulated. Sovereign governments unfriendly to US interests are overthrown. S-elections are rigged. Big Brother is very busy!
Blips when cobbled together can reveal a bigger picture, which may partially awaken the sleep walking inhabitants of this planet to the slave driven pseudo-reality we exist in that we call "life".
If authorities aren't worried about "blips" on the blogosphere, then why have old ladies and breast feeding mothers been searched while boarding aircraft? If they are not really a threat (which they are not) then a logical conclusion is that BB is at the very least playing with our heads (psyops), but more probably conditioning us for a coming totalitarian state.
@Anti-Church guy
As a former chemist, I think I can answer the question as to why Homeland Security is detaining nursing mothers. As you may recall, the whole thing about not bring any liquids onboard a plane centered on the purported conspiracy of a group in the UK to blow up a large number of planes from the UK to the USA. They were supposed to be using a two part reagent base which when mixed together should form an explosive peroxide. Incidentally, the whole group was tried a couple of years ago with zero convictions. I think the not guilty verdict made page 22 of the NY Times.
Well back to the nursing mothers and Homeland Security. They are afraid the mothers will inject each reagent into each of their breasts and then react them together to form an explosive peroxide in their infants' mouths. QED
OMG! gary north left his nuclear powered buttplug here >>>> MS 1:29 PM
Too bad Michael Savage devolved in the 1980s. Disgusting guy ...
http://en.wikipedia.org/wiki/Michael_Savage_(commentator)
Hmmmm, Scientific American did a post on what it would take to replace oil entirely.
In the case of nuclear it would require the construction of 2,800 power plants. If we assume 20 years of construction, that would mean a new power plant every 2.7 days :)
Good luck with nuclear.
Not to mention that water scarcity might be a real big issue, waste disposal, where do we get the uranium from? It takes a long time to start such large scale uranium mining and the recent source of much uranium has been from Russian nuclear warheads.
Also, the net EROEI might be very poor for nuclear when one considers the wide boundary implications. Not to mention that we need to dig up all the metals and minerals required for massive construction using fossil fuels.
Also metals and minerals might be a problem as critical deposits for the electrical economy lie in Bolivia for Lithium and China for rare earths who might not be too willing to partake of those resources. The US imports a 100% of a lot of important metals/ minerals while no world class metals discovery has been made since 2001.
Of course there are all these problems to deal with assuming the money is available, which it won't be due to goldman being the vampire squid sucking the world. What about the manpower required to build these - you need MANY MANY MANY technicians, physicists, nuclear scientists etc to manage these plants.
Oh and if the world needs to grow at 3% per annum as the world bank says is "NORMAL" then we would require 5000+ power plants to cater for that growth in the coming 20 year time frame
:-)
Stoneleigh, what is your opinion regarding the rapidly changing California IOU situation?
California Currency? A taste of things to come
State will accept IOUs for payment of taxes
As many readers are aware, I believe we will soon see devolution to states and local governments. Stoneleigh believes the center (ie FedGov) will draw resources away from the periphery before ultimately losing its grip on power.
Have we already passed the 'central grab' event (TARP, stimulus, et al) are are now accelerating toward de-federalization?
This past spring reminds me of the the 1940 'phoney war'. Events are now starting to percolate a little more vigorously.
@Michael Savage - Love your rants. Btw, my Google auto-complete function shows 14.3 million results by the time I type in "automatic e". It's not a small blog, but part of the pantheon including Mish, CR, Denninger & ZH.
Rising taxes on top of rampant overcapacity is a toxic brew that points to a jobless recovery at best. It is telling that Bernanke is willing to openly admit the possibility. Quote by Mish
So who is a jobless recovery when at home? Correct me, but the only way I can see that is for the economy as a whole first to make those jobless permanently supernumerary. How I am looking at it is of a drying pond, as it shrinks it doesn't collapse, it marginalizes.
-eye of newt-
Oh hello there, VK!
Say, maybe if they ramp up that marginalization rate then we won't need so many nuke plants? Want to ponder the get-off-the-bus rate that would have to be to make nuclear practical?
WOW, the truth from the WSJ! And from, Mortimer Zuckerman, Chairman and editor in chief of U.S. News & World Report.
http://online.wsj.com/article/SB124753066246235811.html#articleTabs%3Darticle
- The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).
- The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.
Worth a read for sure!
"In the case of nuclear it would require the construction of 2,800 power plants. If we assume 20 years of construction, that would mean a new power plant every 2.7 days :)"
Having worked on very large constructions projects for years as an inspector, I can categorically state that building and finishing a Port-a-potty in 2.7 days in impossible much less a nuclear reactor.
Even a Nazis using disposable slave labor couldn't have done it.
Nuclear power will replace oil when Flying Monkeys shoot out of Jiminy Cricket's little ass.
And spare us the Thorium reactor rant, been there, done that, goin' nowhere, move on little doeggies.
Great video of Orlov speaking in Ireland at his site.
One of the more interesting things he said was that most Americans have probably purchased their last car, they just don't know it.
Well, that will be easy to look back on and see if it's true a couple years from now. My hunch is that it is true.
There is no more credit, Elvis has left the building. And Ford would only finance your purchase of one of their cars in the future if the Treasury window of 'free money' was open to them.
He also mentioned that government funding of highway maintainence would probably collapse in parallel with car purchases.
"...the bricks lay on Grant St, where the Neon Mad Men climb, they all fall there so perfectly, it all seems so well timed..."
~~BD~~
On Medical
Well I'm not an MD, but let me say a little bit about our prep. First, we have engaged in some intentional changes in diet and exercise, but I leave the details to the imagination.
Second we have downloaded, printed and started reading "Where There Is No Doctor" a classic work on medical care when there isn't a doctor around, or when you can't afford one. Third, we've been learning herbalism. My wife, is learning more than I, but I'm learning a little too. She recommends HerbMentor.com, which has a series of webvideos and its sister site "Learning Herbs." Here in Terre Haute we have an excellent herb (and homebrew) store, and we are also growing some our own. We also have a number of contacts in the local informal medical community (midwives, etc.) Herbs sure ain't the answer to every problem, but they are a quite affordable answer to some problems. As with most things there is a learning curve, and we are on it NOW, before we need it badly.
And no one is holding a gun to your head making you read this blog. You are under no obligation to continue reading either, if you so dislike it. In short, stop making demands that others play by your rules.
Ho, do you ever read yourself. Greyzone? ... What a man!
-Ace Rimmer-
Bull call, is that like roll call?
Meredith Whitney is actually doing everyone a public service.
She's stating the obvious about record bank/bonus profits and unemployment. It's the juxtapositioning of these two stark facts that reveals the lethal pink elephant in America's living room.
Shame on you Meredith, you're just suppose to whistle by the Graveyard like Da Boyz do.
Nothing to see here folks, keep moving.
Sometimes the truth is as plain as the nose on your face.
Even if a vampire squid is sitting on our collective Face.
High drama at TAE -- right-wing hack extraordinaire Michael a.k.a. Savage (or someone claiming to be) challenges I&S to unmask themselves to earn a personal reply from Gary North, which they would undoubtedly treasure as a trophy on the wall of their blip in the blogosphere. How will it end ??? Laughter or tears? (cue the drumroll: doom doom doom doom doom doom)
Meanwhile, here is a serious query, getting to why I remain skeptical of the total-social-breakdown scenario. Ilargi writes: "The creature has simply become too sick and too bloated with debt to survive..."
I know there is a school of thought partaken of by Stoneleigh to some extent, and promoted whole by the more hard-boiled conspiracy theorists in the crowd: the debt holders will pursue their claims to the bitter end, using the tools of the police state to enforce them, and end up owing everything after the greatest margin call in history. The population will be coerced into debt serfdom, landless, peniless, literally forced labor, a 21st-century feudalism reminiscent of science fiction. (I am your father, Luke.) This of course requires the end of our democratic institutions in the early stages.
Then there is another scenario which I favor: when the current system and its various rescues prove unviable; when return to the status quo ante is clearly impossible, the old system will simply be chucked for a fresh start. There will be a lot of pole position in the new race, and the special interests experienced with lobbying will do well, just like they do well now, but the outcome will look more like the present with a 20% haircut than feudalism.
In support of the second scenario: there are three levels of interest in the current system:
1) the "system" which Ben and Timmy are always trying to preserve, bailing out zombie banks, automakers, underwater mortgages, etc.
2) the institutions, all legal entities with no arms and legs of their own (Citibank, Goldman Sachs, Freddie Mae, the New Jersey teachers pension fund, the government itself etc.) Institutions own all the debt.
3) individuals, who manipulate both the instutions and the system for personal gain, and whose loyalty to the system and/or institutions is very thin (plenty of evidence of that).
My theory is: the individuals primarily look out for themselves, and don't give a bleep about the institutions or the system (except as tools to exploit). Meanwhile, a lot of the debts are actually owed to institutions like pension funds and university endowments who would be awkward as genocidal feudal lords. Goldman Sachs partners don't actually want to be feudal lords in a future dystopia where half the population was exterminated; they like what they have now (Hamptons, Gstaad, yacht, happy little people to wash the yacht, etc.); and what they would most prefer is a system reboot that leaves their tangible assets in place and refreshed institutions they can exploit.
So the path of least resistance will be: democracy remains in place; once failure of the "recovery plan" is beyond doubt, the policy envelope disappears and the system is rebooted; the government allocates most (printed) capital in the early phase of the reboot so jobs can be created; debts are cancelled or paid with printed money; there is a lot of stress on individuals, waste, and stumbling as living standards roll back 30 years and the new system struggles for its feet. But Mad Max does not take over.
Michael
Why do you hide behind such a he-man, macho, WASPy name like Savage when we all know you're a wiener?
Great post. One of your best to date!
Weiner: Your silly question is irrelevant. Your motive is so obvious almost laughable but even more pathetic.
Mugabe nailed it. Party on.
Michael Savage (commentator) - Wikipedia
"As a result of being outside of the US, Savage was not subject to the Vietnam draft."
I wish someone had told tens of thousands of Usaco guys up in Canada who were under the illusion that if thye flew south with the geese there was an arrest warrant waiting for them.
For anyone trying to download Orlov's latest video, there is a note on his blog
Bruce Darrell said...
This video has become so popular that it caused a 100x spike in the download from the Feasta server and we hit our download limit of 150GB after 3 days!
Quite the community. It really caught us off guard and we have had to make the file unavailable as we cannot afford the charges.
I have rushed and made the video available on at:
http://www.vimeo.com/5592536
This should also solve the compatibility issues.
I will look into getting the Q+A session uploaded as well.
We hope to get recordings of the rest of the conference up on the Vimeo site ASAP, including another presentation by Dmitry.
Thanks again, Dmitry, for coming over to Dublin and taking part in the conference.
Bruce
Feasta
http://tinyurl.com/mrw9sj
Illargi,
Thank you for the great opening comments. I know this is a subject you've touched on many times before, but it is always good to hear it again. At times the worry and stress of what is coming can be so overwhelming, that action is impossible. Accepting reality is freeing and allows us to move forward.
Michael Savage: Your ability to dehumanize people saddens me.
DJ
@ Mugabe
"My theory is: the individuals primarily look out for themselves, and don't give a bleep about the institutions or the system (except as tools to exploit)."
Your world view is of denial.
Is that why Black people had no rights for centuries? Maybe they should have ignored the institutions and ended up dead and flogged.
That women were not allowed to vote till the 1900's? Maybe they should've ignored the institutions but wait they were persecuted for centuries.
That slavery was not abolished till 1863 and serfdom not in Russia in 1862ish? Maybe the serfs should've ignored that and been killed.
Maybe early scientists should have ignored the church and accelerated the ascent of humanity's knowledge? Oh but then they would've ostracised like Galileo and Copernicus.
Is that why 5 billion plus people in the world live in poverty, with 3 billion plus on less then 2 dollars a day? Why don't the poor nations simply ignore the debts they owe and tell fck off to the World Bank and IMF and the US/ Europe? They can't, they tried, they just got fucked even more.
These institutions that you say can be ignored by the general populace are real and they are dangerous. Take a look around Asia, your neighbourhood - North Korea, Myanmar, China and it's record on human rights as well. Let's see, death for resistance.
You think that American's are special and unique though as evidenced by your last paragraph.
"So the path of least resistance will be: democracy remains in place; once failure of the "recovery plan" is beyond doubt, the policy envelope disappears and the system is rebooted; the government allocates most (printed) capital in the early phase of the reboot so jobs can be created; debts are cancelled or paid with printed money; there is a lot of stress on individuals, waste, and stumbling as living standards roll back 30 years and the new system struggles for its feet. But Mad Max does not take over."
Have you studied history? Do you how absurd that would sound to the rest of the world, if it was that easy to default and get on with the party using a printing press then why doesn't every damn country on earth have the same standard of living as Europeans and Americans?
You don't take into account any of the geopolitical implications nor depleting energy nor the psychological shocks of the deflationary death spiral. You can't print yourself to prosperity. And have you not studied the world around you? The incessant wars, the race for global resources, the trafficking of human beings and the continued existence of slavery. People are capable of doing incredibly evil things.
We are in a negative sum game, conflict is the virtually guaranteed outcome in a negative sum game.
Good luck sir.
VK --
You totally misunderstood my point. When I mentioned individuals looking out for themselves, I meant well-placed individuals, the senior officers of Citibank, Goldman, Morgan, etc. I meant that wealthy banksters will happily sell out their institutions to get a good deal for themselves (plenty of evidence of that). That Citibank and Goldman are not sci-fi death stars; just legal shells useful to greedy individuals who frankly don't sweat the details as long as they can latch onto some institution that is useful going forward.
Honestly, feel free to impute silly ideas to people including me, but my advice is don't write hundreds of words on that basis -- wastes your time.
Reboot, huh -- no Mad Max. Wanna bet? We'll reboot right into THX1138 or Zardoz. You'll either be in the Matrix or out of it. There will be two worlds to choose from.
p.s. "deflationary death spiral" is nonsense. The dynamic is different:
Politicians promise to restore the status quo ante (because that is the safest position to take.) They try until it fails and no one can reasonably believe it's possible. Then comes an abrupt break -- a reboot where the policy envelope vanishes and all the rules change. No slow steady spiral of anything.
"There is no credit in the system." Until 18 months from now, when you can borrow all you want from the National Reconstruction Guaranty Corp (to be chartered next year). Here is a bold bet: there will be no second American stimulus like the first, a giant grab-bag of boondoggle federal spending. There will be instead an extension of unemployment benefits and trillion-dollar capitalization of the NRGC to pump money straight into business investment.
* Why do Ilargi and Stoneleigh use handles? Are they paranoid? Founding Fathers used handles; Some use handles to protect their employers from the embarassment of employing a TAE poster; Mike Ruppert, Jay Hanson and Alex Jones use their real names; Gary North refuses to respond to anonymous persons, therefore anonymous persons suck; Real names are too easy to lampoon say Thee Bent-one Smith; Ilargi and Stoneleigh are in company with Mark Twain, George Eliot and the Son of Sam
* Those who attack I and S are pathetic and boring with itsby, bitsy, teeny little brains; They HAVE NO LIFE or legitimate thoughts; Their comments are pointless and should be deleted before respectable folks have to read them; Shame on them and their cowardly insinuations; Someone should hold a gun to their head until they move to another blog
* Some parents don't want their children raising chickens, buying water filters or playing with 9mm semi-autos
* Don't feed the serpent; Decouple baby, decouple; TAEers are moving from profiting from collapse to preparing for collapse
* Collapse will be followed by internal fighting; Goldman Sachs will either eat or be eaten; Some will sit in the street and starve; Others will go Mad Max; Stimulus money to be spent on doomer freeway signs
* Chinese stock bubble will burst on July 17th with the fury of a dragon
* Wind from kites may solve all our problems; Nuclear power may solve all our problems; Hemp and opium may solve all our problems; Herbal medicine may solve all our problems
* New readers should read the primers; A primer of primers would be nice
* Which ISM do I and S prefer? All people live under ISMs
* Ilargi's words are great and worth remembering; Meredith Whitney best viewed with sound off
* Eating healthy and swearing can help prevent disease; Eat your damn vegetables; "Where There is No Doctor" recommended
* Connecting dots is a waste of time; Reality always wins; Where is Starcade?
* Wells Fargo told to go f--k themselves, complies
* TAE is just a blog on the bliposphere; TPTB leave nothing to chance; Ben Bernanke wears Depends
Good point Ace Rimmer.
@ Mugabe
"Politicians promise to restore the status quo ante (because that is the safest position to take.) They try until it fails and no one can reasonably believe it's possible. Then comes an abrupt break -- a reboot where the policy envelope vanishes and all the rules change. No slow steady spiral of anything."
Yes truly, Americans are unique God like creatures who can simply default on their debts and print their way into prosperity for the first time in history! I mean they made it to the moon didn't they and beat those bad, bad Nazis.
So in a few months time it's all back to normal, same old 9-5 jobs and sending dollars overseas so that the world will send over their hard assets like oil and precious metals and minerals as well as cheap electronics on credit in walmart!
It should be enshrined in the US constitution as the following ammendments,
1) We believe in free lunches.
2) Americans are legally entitled to the rest of the world's resources by printing money.
3) We will in no way suffer the consequences of our actions.
4) Unemployment may never go above 11%
5) Gas will be under 2 bucks for infinity.
Yipeee! Hip Hip Hooray for this,
"There will be instead an extension of unemployment benefits and trillion-dollar capitalization of the NRGC to pump money straight into business investment"
More walmarts, more pizza huts, more concrete jungles, condos and apartment blocks and providing global security and insecurity for the world!
Why worry folks, go back over to PerezHilton.com for your latest gossip fix! The FED just decreed good weather every sunday till eternity.
Despite all the obstacles, President Obama keeps on fighting the good fight for health-care reform--may he emerge victorious
"The greater danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it." -
Michelangelo
Aesthete
VK --
You will note in my original post a reference to "a lot of stress on individuals, waste, and stumbling as living standards roll back 30 years and the new system struggles for its feet." I don't understand why you waste so much time criticizing things I never wrote. But I don't take any offense.
@ Aesthete
"There are only two tragedies in life: one is not getting what one wants, and the other is getting it."
Oscar Wilde, that wily old fox!
;-)
p.s. when I say roll back of living standards 30 years from unwinding the current financial mess, I don't mean that growth will resume from there necessarily. The gradual decline in oil supply might well cause living standards to keep sinking from there, even after shock of financial reboot has subsided.
Mugabe - The simple math says that living standards have to decline by at least 30%, at least as measured by GDP.
Mugabe's last paragraph reminded me of a magician quickly reciting a few magic words, waving his wand over his top hat, and pulling out a white rabbit with big, pink eyes.
Living standard roll back thirty years. Hmmm. 1980. Enter Saint Ronnie. The destruction of the unions and Wall Street discovers leveraged buy outs, junk bonds, and steroids. Most people I know lived a lot higher on the proverbial hog (sorry, Ahimsa) in 1980 than they do today.**A lot** better if you eliminate all the crap that they paid for on credit and still owe on.
Another Wiki factoid on Michael Weiner Savage
Timothy Leary hired him as his compound caretaker / guard because he didn't drop acid!
Obama's health care plan is like me sitting down at the local nautical bar and telling everyone who will listen that I'm gonna buy a 200 foot schooner, all teak, mahogany, and mother of pearl. And the anchor chain will be gilded. The response would be where did I buy my stuff and how much did it cost.
If we have social security in four years I'll eat my boxers. When people asked me why I started at 62 and while I was still working and throwing half of it back in taxes, my reply was higher math.
Eighty percent of something is much larger than 100% of nothing.
@ Mugabe
I criticise because you are showing too much complacency.
"a lot of stress on individuals, waste, and stumbling as living standards roll back 30 years and the new system struggles for its feet."
So lets go back 30 years and see where the US was, the year was 1979.
US GDP adjusted to 2000 dollars was $5,204.7 billion dollars.
US population was 225 million.
US GDP per Capita was 23,132 dollars adjusted to year 2000 USD.
So now there are 305 million people and GDP adjusted to 2000 dollars is $11,360.5 Billion (Nominal is 14 trillion)
So GDP per capita today is 37,247 USD.
So lets take GDP back 30 years and leave population constant, thats give a GDP per capita of 17,100 USD in year 2000 inflation adjusted dollars.
So after the bursting of the biggest credit bubble in history, a time of epic fraud and contempt of the rule of law. The US would still be the richest country in the world at 5.4 trillion in terms of inflation adjusted GDP even if I assume that all other countries remain unaffected by the decline in GDP per Capita in the US as Japanese GDP as measured by PPP is around 4.5 trillion.
Your view point is seriously optimistic in my book sir and does not take into account our precarious energy situation and the global dependence on credit of oil output which is vital to food security.
@ Mugabe
I missed your 5:42 post, that's why I included this,
" does not take into account our precarious energy situation and the global dependence on credit of oil output which is vital to food security."
Further proof that being rich does not necessarily mean you're smart: Exxon investing $600Mil in Algae-diesel
It will, I do assure you, never happen. Mostly because huge monocultures of the right algae will quickly become soup to feed contaminating organisms.
Heard much about switchgrass lately? :-)
mister weiner... you really should check out zerohedge... they've got some seriously mind-bending militant 'fight club' style pseudonym shit going on over there and the only people who seem to have a problem with it are the jack-offs they expose with their pants down. funny that, eh?
VK
" and the recent source of much uranium has been from Russian nuclear warheads."
Uranium warheads are primarily U235. Do the Russians send bag ladies to southern Iraq to collect the unexploded depleted uranium shells to water down their house blend with U238?
@ El G,
Well here's the data, from http://www.theoildrum.com/node/3316
This Graph is key, http://www.theoildrum.com/files/Uranium.png
"According to Sanders Research Associates, a major source of imports is fuel created from dismantled Russian nuclear weapons. EIA data shows that in 2006, about 23% of US total nuclear fuel needs was from Russia. According to Sanders, our agreement for importing this material will end in 2013, and it is unlikely to be renewed. Other countries are also using dismantled Russian nuclear weapons as a source of fuel, so there could be an impact on competition for imports as will as a direct impact on supply."
Also, "According to the World Nuclear Organization (WNO), uranium production in recent years has been relatively flat, while world demand is much higher. WNO indicates current uranium production amounts to only 61% of world demand."
Also from TOD, http://europe.theoildrum.com/node/3450
"At present, annual demand for uranium is running at about 65,000 tonnes. Some 25,000 tonnes of this comes from sources other than mining, and it will be largely exhausted by 2013. 10,000 tonnes is derived from military uranium, the highly-enriched uranium used in Russia’s stockpile of nuclear weapons left over from the Cold War. Russia’s contract to supply the United States with fuel from this source ends in 2013, and it will not be renewed. Indeed, by that time, Russia’s store of military uranium will itself be running low.
Most of the remaining 15,000 tonnes comes from “secondary supplies” – that is, from stockpiles of uranium which were built up when supplies were abundant and comparatively cheap in the 1970s. This, source, too, is getting low, and by the middle of the next decade it will be doing little or nothing to fill the gap between demand and the annual 40,000 tonnes of mined uranium supply."
I'm thinking bag ladies is a future source of well paid employment ;-)
Thanks VK.
I would assume that the Russians cut it before they ship it to the US. I can't see them sending military, i.e. bomb grade. And to think of the energy necessary to produce it in the centrifuges. Second Law of Thermodynamics in action.
Fossil fuels have created way too many opportunities for persons of limited intellectual capacity to get filthy rich by virtue of their ability to dehumanize economic activity, which is in fact the essence of today's human behavior. A case in point would be mortgage securitization. Every mortgage of every tranche represents the hopes of some human being, be they a "flipper", move up buyer, or first time homeowner. Wall street has managed to financialate individual Americans' fico scores, which should come as no surprise since it was the only thing left.
What blows my mind, is that common people not only put up with it, they front run the shit. I guess media ownership was in fact a huge deal back in the day, it doesn't really matter anymore.
VK, Mugshot,
In 1979 we had passed peak wealth. It should be a lot worse now. So going back 30 years would actually make us richer then we are now. Oh, teh joys of depression.
No, let's try 300 years.
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Greenpa,
Who do you think will pay for Exxon's algae ponds?
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DJ
Good to see you, mate.
Oh, and ghost of Oscar Mayer, before criticizing my pseudonym, you could at least try to spell it correctly.
Ilargi- "Who do you think will pay for Exxon's algae ponds?"
Thee and me, of course. But you'd think that having already stolen our pennies, they'd at least not just toss them away...
It could, of course, make plenty of money as a tax write off.
I just watched a documentary about a group of folks around the Detroit area building their own race cars to race NASCAR. Whatever their job status, which was mostly unemployed, these folks welded and hammered together whatever they needed to stay in the race. One of them lost the use of his right arm as a teenager and still finished in the top 5 most years driving one-handed. Another gave up racing the car in lieu of building them when he lost his right eye in a pneumatic drill accident. The top contender was a grandmother who had been racing for three generations well into her sixties.
Though it may be anecdotal of sorts, for me it was just another little view of the USA and the tenacity of its people. Most folks commenting here at TAE have little claim to what it means to be a grass-roots from-your-bootstraps honest to God yank. These folks certainly do. Hell have pity on them that stir these folks to a new cause. And God pity the fate of those that raise them to anger.
Birthed in revolution, bred from tough immigrant scrappers, lacking in finesse like any smithy's anvil, the blood of our sons and brothers spilling on countries around the globe, these folks just soldier on.
I pity those that bring them to righteous anger in a cause they find just and worth dying for.
"No, let's try 300 years."
Worse. 300 years ago we had a clean environment and plenty of water ...
@7:25 PM
I totally agree with you.
The anonymity of i&s together with the intensity of the doom they prophecy make them seem dilettantes to many.
Better to drop the cloak. You will be taken more seriously.
If you don't think I/S worthy of being taken serious then WTF are you doing here???
Just dropping in to state how much I love the fact our self-appointed Greek chorus has ZERO sense of irony.
Love the pic on the July 13 post. At first I thought it was a statue that had been burnt in a fire of some sort. It took a few moments to realize that it was really a man.
You guys have a good eye for classic photos, though sometimes when you resize them, it screws with the resolution. Fortunately I can always Google to get a better res. In all the things that you two consider, I know this is small beans.
Areopagitica
Keep fightin' for freedom and justice, beloveds, but don't you forget to have fun doin' it. Lord, let your laughter ring forth. Be outrageous, ridicule the fraidy-cats, rejoice in all the oddities that freedom can produce. And when you get through kickin' ass and celebratin' the sheer joy of a good fight, be sure to tell those who come after how much fun it was.
THE MOLLY
Illargi,you talk about a political crisis and not just a financial one. I take it you don't realize its been a politcal condition for a long time.
You talk about pitchforks. hey one would expect those reciding in tent cities at least would be so inclined;but, no sign. I don't think you should wait in vain for such events if they have already not occurred.
http://informationclearinghouse.info/article23033.htm
'Practically On The Table'
http://informationclearinghouse.info/article23032.htm
The More Things "Change"...
How well I remember the black dust in Phillips, Borger and other towns near the carbon black plants of the Texas Panhandle.
From the Pickens string TOD today:
The wind does blow in the Pampa area. Google Amarillo dust storm. One of the dust storms was the inspiration for the Woody Guthrie song "So Long Its Been good to Know You" An Amarillo scientist H. H. Finnell was largely responsible for instituting agricultural practices to reduce the frequency of such storms. His papers are archived at Boone's favorite college, OSU.
http://images.amarillolibrary.org/cdm4/results.php?CISOOP1=all&CISOBOX1=...
The sweethearts they sat in the dark and they sparked.
They hugged and they kissed in that dusty old dark.
They sighed and they cried and they hugged and they kissed,
But instead of marriage they talked like this: Honey,
So long, it's been good to know yuh;
http://www.library.okstate.edu/scua/collect/finnell/index.htm
Ilargi & Stoneleigh
Now listen up! I want names, real ones!
I want addresses, Cell numbers, and I want a high res cameo posted up front!
Come on, level with us or I will take all my genius, expertise and extraordinary wit somewhere else!
You have been forewarned!
Ahimsa... Doesn't the picture today at the top (looks like a miner) remind one of an idiosyncracy of John Woolman?
He wore plain gray clothing, no colors, refusing to wear dyes because it was procured by the utilization of slaves in the mines.
Anons 7:25 and 7:32,
I don't doubt what you say, and I never meant to imply that I did. If I haven't made that clear enough, it's because it is simply not the issue.
Upon reading you, I wonder, though, what on earth makes you think there is something, anything at all, that sets Americans apart in that department?
People don't seem to want to believe that, for the most part, at the present time the average American's favorite pastime is pretending to be tough rather than actually being tough.
it's because it is simply not the issue.
Au contraire mon ami.
It is the issue. The issue entirely.
You seem to think that Americans cannot scale back and face reality. But we excel at it. You think we cannot shoulder adversity. But our society is based on it.
The challenges ahead call for a burden to be shouldered that dwarfs all those that came before. But someone must lead the way. The whole world must shoulder it. And to do that there needs be leadership and example.
We are up to the task. We are just not yet aware of the road that faces us. At least not quite yet. But to discount our ability to shoulder that burden and adjust our lives to what faces us, everyone, meaning our country, our neighbors, and even those that oppose us, is to be ignorant of who we are.
Therein lies the rub.
Hey! Why are all you people blogging? Harry Potter 6 is out. Take your kids and grandkids to the movies :)
"You seem to think that Americans cannot scale back and face reality. But we excel at it. You think we cannot shoulder adversity. But our society is based on it."
Yaaawwnn.
I have to admit American's are exceptionally good at denial :)
I suspect 500 years from now, some idiot will be blathering on about how the Mongoots are exceptional and how their ancestors survived the great peaking.
Blah, blah, blah.
Anon 8:52
It matters not much, what country or town
The moaning you hear, now what is that sound
It's 6 billion souls, who ran out of gas
Who hid from the future and lived in their past
"...Hell have pity on them that stir these folks to a new cause. And God pity the fate of those that raise them to anger..."
Gee, Duhmericans have been getting gang raped in earnest by bankers for the last, oh thirty years or so, and haven't seemed to notice, I'm sure the likes of Goldman Sacks America and JP Morgan the Pirate are shaking in their boots, with laughter.
The not so United Sheeple of America are spineless fools who follow anything the Ministry of Propaganda jams up their butt with the suppository of TV. They'll even ask for seconds, please!
If they didn't notice 8 years of a chimp dressed in the drag of a Man Suit called Bush Baby, they probably didn't notice the banking mafia robbing the country blind for a decade in overdrive.
What is it gonna take to 'rile them up'. No more Cheetos or beer or race cars?
Please, stop with the delayed reaction jingoism. By the time the Prole People 'wake up', the horse carrying the bankers and their loot will have left the barn, left the state and left the country.
The People won't be able to find food, clothing or shelter much less a bunch of parasitic vampire squids masquerading as bankers, lounging in obscene luxury on some foreign tax haven.
@ Occasional Summary
I started cracking up as soon as I read 'Occasional Summary'. I'm not a fan of swearing on the internet, nor of using lol, so let me just state -That was pretty phucking funny.
@acrumb
Pitchforks are not ready yet. Americans have been taught, since grade school, that there is no more to economic downtowns than that it's part of the business cycle. Expansion, peak, recession, trough(repeat). As bad as it is, no one will be willing to risk anything as long as we think we're only in the bad part of the business cycle.
Americans have always thought that the rest of the world wants to touch their Monkey.
Hubris brings delusion.
Delusion brings F.U.D.
Fear, Uncertainty and Dread brings confusion, which rhymes with delusion and also illusion.
All of which points to the inevitable conclusion that everything is really screwed at this point in history.
The End
New post up.
Iowa Boy, I agree with what you say. I smell a Bastille Day coming soon to the USA! Unfortunately there are too many people who don't have a clue whats going on. As long as the New Jersey housewives is on TV, seems to be all that matters to the masses.
I'd like to discuss the excellent video posted up earlier, about The financial flogging continues:
the transcript from Rep. Duncan (Tenn): "What would you say to the majority of this congress who has now co-sponsored the bill to require audits of the federal reserve, do you feel that the federal reserve is operating with too much secrecy? and too much refusal to disclose information that you have to federal regulators?"
Ben Bernanke responds: "The legislation is tha the GAO is auditing, not only only the operational aspects of our programs and details of the programs. But is making judgements about our policy, decisions that would in effectively be a takeover monetary policy by congress, a repudiation of the independence of the federal reserve, highly destructive to the stability of the financial system, the dollar, and our national economic situation."
I don't know about what you saw on this, but what i saw was that Rep. Duncan asked a simple question. Ben Bernanke, in return went on the immediate defensive position, without really answering the question. (typical politians, I know, but good gosh, answer the damn question)
a power struggle between the fed treasury and congress, , now didn't our 7th president in 1837, Andrew Jackson deal with the same or similar thing? by taking complete control over the treasury? since the treasury thought it was more powerful than the presidency? which ended up having the USA being being completely debt free.
no deficit!
could the same train of thought be applied here? the treasury thinks it's more powerful than the congress.
Coy Ote @ 8:30
You're right about John Woolman not wearing dyed clothes (Gandhi didn't either for similar reasons). Unlike the miner on the photo, though, Woolman's asceticism would have kept him away from cigarettes.
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