Friday, July 10, 2009

July 10 2009: Stupid Human Number Tricks

National Photo Co. Race out of Bankruptcy July 11, 1925
Auto races at Laurel, Maryland." The 1,5-mile wooden oval at Laurel Speedway.

Ilargi: Alright, I got nothing. Well, I do have Paul Krugman, and that doesn’t seem to make me happy. 'Cause Krugman just won't stop will he? The man who never recovered from his fake Nobel week nights spent on solid Stockholm aquavit, wants more stimulus. It looks to me like he always wants more stimulus. After the second one, he'll want a third, and so on. He's the stimulus monster.

Moreover, his analysis is just plain dead wrong. The problem with the present stimulus plan is not, as in NOT!, that it is too small. Nor is it that 3/4 of the money hasn't been spent.

Look, it's simple: the true problem is twofold.
  1. The money is taken from the wrong group of people.
  2. The money is given to the wrong group of people.

See? It’s a dead easy analysis. Nothing to do with size, nor with timing. Make the stimulus bigger, or get a second one, and what do you think will happen? Exactly, both sides of the twofold problem will become bigger problems.

Not only does the administration get every single step of the way gruesomely wrong, its critics do the same thing. They just get it wrong in different ways. What sort of future does that promise?

Alors, as I said, I have nothing. I’ll lift along on Mike Shedlock's excellent piece on unemployment numbers, Unemployment Claims: How Bad are the "Real" Numbers? Mish shines some much needed light (since the government categorically refuses to come clean and tell the truth) on what happens in the murky world of continuing jobless claims:
The continuing claims number that mainstream media focuses on is 6,883,000 as boxed in red above. However, that number ignores extended benefits from the Emergency Unemployment Compensation (EUC).

Turns out, if the 2.519.101 people covered under those extended benefits are added to the 6,883,000 number, we arrive at a total of 9.4 million.

And, as Mich remarks, even that's not all:
I am unsure how Federal Employees, Newly discharged Veterans, the Railroad Retirement Board, and especially the 346,559 Extended Benefit numbers fit into the EUC 2008 program, but I suspect all those numbers need to be added in as well, making the true count still higher.

And no, that’s still not the whole story; there's more to it than Mish covers today. In Looming crisis spells stimulus , Marie Cocco states:
President Barack Obama made everything perfectly muddy when he said in an ABC News interview that the seriousness of the downturn and how to attack it is "something we wrestle with constantly." Yet in the next breath, he expressed concern about the burgeoning deficit. But if anyone's looking for some clear voices, there are 650,000 of them just waiting to be heard. That is roughly the number of long-term unemployed who will begin losing their jobless benefits in September, according to the National Employment Law Project

.... the Labor Department says, the number of unemployed people out of work for 27 weeks or longer continues to grow, reaching 4.4 million last month. In June, three out of 10 jobless workers had been out of work for at least six months....

In other words, the continuing jobless claims by no means cover all unemployed Americans. There are millions of miserable people out there who simply fail to get counted. Or get counted in places we don’t know about. Or get counted in all sorts of different places, to spread the pain around so to say. Hundreds of thousands will soon not even be eligible for extended benefits. And for sure, as long as you can keep them hidden through creative number games, you can keep the real problem from the public a little longer. But since when is that the task of the government? What sort of government, other than maybe Kim-Yong-Il's, thinks it's a good way to spend their own time and their voters' money, trying to hide from people what happens in their communities and their nation? Or is it just me?

Looming crisis spells stimulus
When a virulent disease is ravaging you like a cancer, you don't want a cacophony of voices promoting different or contradictory cures. Yet that is what we're starting to hear about the economic crisis, not only from a politically divided -- and pretty scared -- capital, but from within the Obama administration itself. In just the past few days, Vice President Joe Biden has said the young administration misread the depth of the recession -- an honest account, since most private economists did as well. Laura Tyson, an outside economic adviser to the White House, said it's wise to start preparing another stimulus package.

Then President Barack Obama made everything perfectly muddy when he said in an ABC News interview that the seriousness of the downturn and how to attack it is "something we wrestle with constantly." Yet in the next breath, he expressed concern about the burgeoning deficit. But if anyone's looking for some clear voices, there are 650,000 of them just waiting to be heard. That is roughly the number of long-term unemployed who will begin losing their jobless benefits in September, according to the National Employment Law Project.

Remember, the recession didn't start last fall when the government bailed out AIG and the financial system froze. It began in December 2007 -- and 6.5 million jobs have been lost since then. Depending on which state and the sort of triggers that apply to benefits, hundreds of thousands of workers laid off early in the downturn are soon to be left without the basic sustenance of an unemployment check. Meanwhile, the Labor Department says, the number of unemployed people out of work for 27 weeks or longer continues to grow, reaching 4.4 million last month. In June, three out of 10 jobless workers had been out of work for at least six months, according to the department's data.

The stimulus package the president signed soon after taking office did provide extended benefits, and boosted weekly payments. But even that extension runs out on Dec. 26, and would not apply to all the unemployed. Does anyone really believe that a significant portion of the unemployed will have found new work by then? Hardly. Both private and government economists now predict that unemployment will continue to rise at least through the end of this year. "We can't ignore this moment when all these folks are running out (of benefits)," says Maurice Emsellem of the National Employment Law Project. "That needs to be a top priority, to help these workers."

Let's stop kidding ourselves. In no contemporary economic crisis -- not even those that unfolded on the Republicans' watch -- has Congress left the unemployed completely in the lurch. So some sort of spending package -- call it stimulus, call it stopgap emergency aid, whatever works -- is going to have to be passed. The unemployment emergency helps feed another crisis Congress is going to be forced to address: the state budget disasters unfolding around the country. So far, 42 states have cut budgets that already had been enacted for fiscal 2009, according to the National Governors Association. More and deeper cuts are expected next year.

Already, states have laid off and furloughed workers -- including, in some states, the very workers who process unemployment claims. Generally speaking, states are required to balance their budgets each year, a mandate that forces them to pull money out of the economy through spending reductions and tax hikes, counteracting the federal government's efforts to juice things up. "That is what happened during the Great Depression, we had states working against what the federal government was doing," says Heidi Shierholz, an economist with the Economic Policy Institute.

With red states and blue, Republican governors and Democrats, all struggling against the same relentless, recession-driven drops in tax revenue, an almost irresistible political coalition for more aid to states eventually will take shape. And with the fast-approaching September deadline for extending some unemployment benefits, there will likely emerge one of those must-pass measures that may or may not be called another stimulus bill. Any hot air expended trying to stop it serves no purpose but to fuel political fires. Remember, that is the whole point of those now huffing and puffing most heartily. They don't want to figure a way out of this morass; they just want to figure out a way to unseat those now in office.

Unemployment Claims: How Bad are the "Real" Numbers?
As noted in Continuing Claims Soar by 159,000 to New Record the record continuing claims number is dramatically understated by over 2.5 million. Charts of what is really happening are shown below but first let's recap the data as reported by the Department of Labor.

Here is a chart from Department of Labor Weekly Claims Report.

Weekly Claims

click on chart for sharper image

Emergency Unemployment Compensation

The continuing claims number that mainsteam media focuses on is 6,883,000 as boxed in red above. However, that number ignores extended benefits from the Emergency Unemployment Compensation (EUC) program.

Those on extended benefits are not counted in the continuing claims numbers.

Inquiring minds may wish to consider the Emergency Unemployment Compensation (EUC) PDF.
EUC is a federal emergency extension that can provide up to 33 additional weeks of unemployment benefits. The first payable week was the week of July 6-12, 2008.

The original extension passed in July 2008 paid up to 13 weeks of additional benefits. Effective November 23, 2008, we can pay up to 7 additional weeks of benefits.

Effective December 7, 2008, we can pay up to another 13 weeks of benefits.
Adding 2.519 million from the above chart to 6.883 million from the second chart the current real total (assuming nothing else is missing) the current number receiving unemployment benefits is 9.4 million.

I am unsure how Federal Employees, Newly discharged Veterans, the Railroad Retirement Borad, and especially the 346,559 Extended Benefit numbers fit into the EUC 2008 program, but I suspect all those numbers need to be added in as well, making the true count still higher.

With that backdrop, here are some custom created charts courtesy of Chris Puplava at Financial Sense, based on my request. The charts show the effect of the EUC program over time.

Thanks Chris!

Continuing Claims + EUC Extended Benefits from 2000-2009

click on chart for sharper image

Note the dips in the EUC numbers and the corresponding dips in the total numbers. Compare to double extensions in emergency benefits:

"The original extension passed in July 2008 paid up to 13 weeks of additional benefits. Effective November 23, 2008, we can pay up to 7 additional weeks of benefits. Effective December 7, 2008, we can pay up to another 13 weeks of benefits."

Continuing Claims + EUC Extended Benefits from 1970-2009

click on chart for sharper image

Note how the combined claims is twice as bad as the recessions is 1975 and 1982. Also note how the reported headline numbers were understated in the last recession. This is how manipulated the reporting is.

Some might claim the numbers need to bee adjusted for population growth for a valid comparison. It's a reasonable request. Chris was only able to go back to 1980 so here is what the chart looks like.

Continuing Claims + EUC Extended Benefits from 1980-2009 Population Adjusted

click on chart for sharper image

On a percentage of population basis the 2001 recession was not quite as bad as the 1982 recession, whereas the current recession is 50% worse than the 1980 recession.

Furthermore, the jobs picture is even worse than it looks. The US consumer was nowhere near as leveraged to real estate in 1980 as now. Also note that boomers are heading into retirement now, undercapitalized and looking for jobs, in effect competing against their kids and grandkids for jobs.

Look at the average age of baggers in grocery stores or greeters at Walmart. These people are not working because they want to; they are working because they have to. Demand for jobs is at an all time high while the number of available jobs and the pay scales of those jobs have both collapsed. The employment situation is not only an unmitigated disaster, things are about to get even worse with pending state cutbacks.

Japan's wholesale prices mark record drop in June
Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June from the year-ago period, the Bank of Japan said Friday. The result was a heavier drop than a 6.3% fall forecast in a survey of economist by Kyodo News and a 6.4% projection in a Reuters poll. It was also the largest on-year tumble on record.

From May, the index was down 0.3%. Export prices were down 12.8% on year in June, while import prices were 32.2% lower. "The slide in wholesale prices is highly likely to widen in July, August and September, exceeding 7% down the road," Tetsuro Sawano, senior fixed income strategist at Mitsubishi UFJ Securities, was quoted as saying in a Reuters report following the data. "Today's data would help the Bank of Japan reinforce its cautious stance on the economy." The Bank of Japan is slated to hold a policy meeting next week, and could extend some of its programs designed to add liquidity to the nation's financial markets.

U.S. monthly trade gap smallest since 1999
The U.S. trade gap narrowed unexpectedly to $26 billion in May, the smallest since November 1999, as exports rose and domestic demand for foreign goods slumped, government data on Friday showed. The Commerce Department said exports increased 1.6 percent in May, while imports declined by 0.6 percent. Economists said the drop in imports signaled continued weakness in the recession-mired U.S. economy.

"The trade deficit report is another indicator that things are not improving as expected," said William Larkin, portfolio manager with Cabot Money Management in Boston. "There is growing pessimism about how quickly the U.S. will recover, which I think will be slower than people expect." Still, the stronger-than-anticipated export performance could bolster the contribution of trade to economic activity in the second quarter.

"If the real trade deficit in June remains unchanged, real net exports would add about two percentage points to GDP growth in the second quarter, everything else equal," Jay Bryson, global economist at Wells Fargo Securities, said in a note to clients. The U.S. economy plummeted at a 5.5 percent annual rate in the first three months of the year. Economists expect a much smaller decline in the second quarter, with growth resuming in the second half of the year.

Analysts polled by Reuters had expected the trade deficit to widen to $30.2 billion in May. The trade gap in April was revised to $28.8 billion. May's import level was the lowest since July 2004 and May marked the tenth straight month in which imports had declined, underscoring the weakness in the U.S. economy. Imports of automotive vehicles and parts slipped to $10.2 billion in May, the lowest level since March 1996, while auto exports were the lowest since July 1998.

The monthly deficit on goods trade with China grew to $17.5 billion from $16.8 billion in April and was the largest with any single country. But the U.S. trade deficit with other big trading partners declined, falling to $2.8 billion with the European Union in May, for the lowest reading since March 1999, and retreating to $1.9 billion with Japan, which was the lowest since February 1984. Imported oil cost $51.21 a barrel in May, up from $46.60 in April. The value of crude oil imports in May declined only slightly to $13.4 billion, despite a sharper decline in the quantity of oil imported, to 262 million barrels from 293 million in April, the Commerce Department said.

The increase in oil prices was a factoring driving import prices higher in June, Labor Department data showed. The Labor Department said import prices jumped 3.2 percent last month, the biggest jump since November 2007, while export prices were up 1.1 percent. Import prices have risen for four consecutive months, but are still down for the year ended in June, largely because of oil prices are well off record highs reached last year. Petroleum prices rose 20.3 percent in June, the largest monthly advance since April 1999. However, these prices are down 45.9 percent over the past 12 months.

Canada Has Record C$1.42 Billion Trade Deficit as Exports Fall
Canada’s trade deficit widened more than economists predicted to a record in May, when the country’s dollar appreciated at a record pace, as exports fell twice as fast as imports. Canada had a deficit of C$1.42 billion ($1.22 billion), the largest in records dating back to 1971, Statistics Canada said today in Ottawa. The figure was almost triple the C$500 million deficit expected in a survey of economists taken by Bloomberg News.

Canada’s run of trade surpluses dating back to 1976 ended in December as prices for crude oil plummeted, and as exports of lumber and cars to the U.S. plunged amid a housing slump and rising unemployment. Bank of Canada Governor Mark Carney has said the global economy will be slow to emerge from the worst slump since the Great Depression in the 1930s. Imports and exports both fell for a third straight time in May, a month where automobiles and energy accounted for more than half the declines.

Exports fell 6.9 percent to C$28.4 billion in May, and imports fell 3.5 percent to C$29.8 billion. Automobile exports fell 12 percent, led by a 33 percent drop in trucks as production of some models was halted, Statistics Canada said. Energy exports fell 11 percent. Canada’s trade surplus with the U.S. narrowed to C$1.48 billion in May, from C$2.62 billion in April. The Canadian dollar strengthened against the U.S. dollar at the fastest monthly pace on record in May, prompting the bank to say on June 4 that it could “fully offset” positive economic developments. Exports will fall 21 percent this year, the government’s export financing agency said yesterday.

Statistics Canada also increased its estimate of the April trade deficit to C$389 million from C$179 million. In a separate report, the statistics bureau said that new home prices fell for the eighth straight month in May, declining 0.1 percent. Economists surveyed by Bloomberg expected a 0.5 percent drop, based on the median of 12 estimates. From the year- earlier month, home prices fell 3.1 percent.

Bank of Wyoming Seized; 53rd U.S. Failure This Year
Bank of Wyoming in Thermopolis was closed by regulators, the 53rd lender to fail this year, amid rising unemployment and home foreclosures in the deepest recession in a quarter century. Bank of Wyoming, with $70 million of assets and $67 million of deposits, was closed by the state’s Department of Audit, Division of Banking and the Federal Deposit Insurance Corp. was named receiver, the FDIC said today in a statement. Central Bank & Trust in Lander, Wyoming, will assume the deposits and the failed bank’s only office.

“There is no need for customers to change their banking relationship to retain their deposit insurance coverage,” the FDIC said. Regulators have accelerated the pace of bank seizures this year, shuttering the most since 1992 and more than twice as many as last year. The recession has wiped out about 6.5 million U.S. jobs in the past two years, pushing unemployment in June to a 26-year high 9.5 percent, making it harder for consumers to pay their bills.

Central Bank will buy all of Bank of Wyoming’s deposits except for $8 million in brokered deposits, and agreed to purchase about $55 million of assets. Bank of Wyoming, the state’s first failed bank since 1991, will open as a branch of Central Bank “during normal business hours,” the FDIC said. The FDIC estimates closing Bank of Wyoming will cost the agency’s deposit insurance fund $27 million. The fund, supported by fees on insured banks, fell to $13 billion in the first quarter, the lowest since September 1993.

Banks Turn the Screws on California
Banks are refusing to cash IOUs issued by the state of California after July 10, putting pressure on the Golden State to resolve its budget crisis. Governor Arnold Schwarzenegger and state legislators are slugging it out over how to fix California's $26.3 billion budget gap. Now, some of the nation's biggest banks are sending them a message: You're on your own. The Republican governor and Democrat-controlled statehouse have been at an impasse for weeks, after the state's runaway spending collided spectacularly this year with its falling property, sales, and income tax revenues.

Legislators have offered up a tonic of steep spending cuts, new taxes, and fee hikes. Schwarzenegger says he wants more long-lasting reforms—such as cutting the length of time the jobless can collect welfare from five years to two. It's gotten so bad that even the press secretaries for the governor and state Assembly Speaker Karen Bass have taken verbal shots at each other. California missed its June 30 deadline to sign off on the new fiscal-year budget. On July 6 Fitch Ratings downgraded the state's general obligation bonds to a BBB rating, the lowest among the 50 states. "California's situation is a concern to everybody," says Maud Daudon, chief executive of Seattle-Northwest Securities, a municipal bond broker.

"It's a bellwether of the market, and if they don't find a way through this it has the potential for a tidal wave of change." Already, state Controller John Chiang's office has begun issuing IOU paper to thousands of state agencies, contractors, and municipal governments. The controller began issuing the IOUs on July 2. Some 92,000 of them have gone out since, totaling more than $350 million. Estimates are that $3 billion will be issued by the end of July. That flurry of paper, however, may just be the tool that forces politicians to reach an agreement.

Many of the state's banks and credit unions have been cashing the IOUs like checks. They have some incentive to do so, as the IOUs carry a 3.75% annual interest rate. But the interest and principal amounts aren't due to be paid until Oct. 2—and that's only if the cash-strapped state has the money. So after initially agreeing to cash the IOUs, some of the state's biggest banks are now saying no more. Bank of America, JPMorgan Chase, and Wells Fargo all say they won't accept the IOUs after July 10.

Banks have balance-sheet issues of their own these days. And the big lenders do not want to be perceived as an enabler of the Golden State's dysfunctional government. "The state of California, just like any household or business, must live within its means," says Julia Tunis Bernard, a spokeswoman for San Francisco-based Wells Fargo. "Banks can't be the solution to the budget problems."

With the big banks refusing to cash the state's paper, fears are that desperate IOU recipients will turn to other more expensive outlets such as check-cashing stores and third parties who offer to buy the paper at steep discounts. Already dozens of offers to purchase IOUs for 85¢ on the dollar are popping up on "If a bank will not honor an IOU then someone may need to rely on a third party," says Hallye Jordan, a spokeswoman for the state controller. She says federal regulators may step in "to prevent people from being gouged."

J.J. Feldman, an investment advisor in Los Angeles, says he posted an ad on offering to buy IOUs at 85¢ on the dollar after hearing about them on the radio. He put the ad up on July 9 but so far hasn't had any offers. "I figure if someone needed the money fast I could buy $10,000 worth of a state tax refund," he says. Feldman says he made good money earlier in the year buying the bonds of distressed companies such as General Growth Properties and Hertz (HTZ). California, he says, is just another distressed issuer. "They've had their ratings lowered but they're not junk status, yet," he says.

The Securities and Exchange Commission has declared that the IOUs are municipal securities, meaning that only dealers authorized to trade in such paper can do so. In a statement, the agency also warned that "broker-dealers, as well as any potential secondary markets, should be aware that the requirements of the securities laws and the rules of the Municipal Securities Rulemaking Board apply to the IOUs." Other security steps may be taken.

The controller's office is expected to require a bill of sale for all who try to redeem an IOU that was not issued in their name. "It's going to be more painful for people who are trying to sell them for money," says Matt Fabian of Municipal Market Advisors, a research firm devoted to municipal bonds. "There are additional hoops to jump through to sell municipal securities. It would really be unfortunate for the people of California, and increase pressure on the state to get something done."

This is only the second time that California has had to issue IOUs since the Great Depression. The last time, in 1992, a budget compromise was reached, in part because banks refused to cash the paper. IOU recipients may not all be on the hook, however. One IOU being offered for sale on eBay (EBAY) already appears to have appreciated in value. Bidding on the $2 check—issued to cover a state tax refund—has already risen to $21. The auction ends July 16. "Hopefully this will never happen again," the eBay listing says. "This is a piece of history right here."

Influence Is All In The Bag For 'Government Sachs'
When I last wrote about Goldman Sachs in late March the most politically-connected and luckiest firm on Wall Street was in the middle of rigging the stock market -- again. "Something smells fishy in the market. And the aroma seems to be coming from Goldman Sachs," is the way I put it in that March 28 column. Well, a lot has changed in just the past few weeks. And I'd like to put it all together for you, and for the rest of the media should it choose to follow what is shaping up to be the most incredible financial story ever.

Back in March I noted that the rally occurring in the stock market had the indisputable fingerprints of Goldman all over it. There were numbers to back it up. Despite the fact that regular investors seemed to be pulling their money out of the market or -- at best -- investing conservatively, stock prices were zooming. The reason was simple: Big investors were pouring money into equities. And Goldman Sachs was the biggest of the big.

According to the New York Stock Exchange figures for the week of April 13 that I quoted, Goldman executed twice as many big trades -- called "program" trades by the industry -- as any other firm. And, the bulk of the 1.234 billion shares bought by Goldman that week were paid for with the firm's own money. Of course, Goldman would have to be mighty confident that stock prices were going up to risk so much of its own capital. Or, perhaps, it knew stocks would be rising. This was the time, remember, when banks were trying to recapitalize by selling shares to the public. Goldman, you'll also recall, had turned itself into a bank holding company so it could take $10 billion in government money under the Troubled Asset Relief Program.

Goldman also sold billions worth of new stock to the public while all this was happening. How much harder would it have been for banks to sell stock to nervous investors if the market was swooning rather than booming? Goldman's sudden and inexplicable optimism about stocks was incredibly opportune for the banking industry in general, for Goldman in particular and -- here's where the conspiracy starts to unfold -- for the government. It's tough, however, to do what needs to be done to rescue the market when pesky journalists and annoying bloggers are looking over your shoulder.

So a couple weeks ago the NYSE suddenly announced that brokerage firms would no longer have to report their program trades. The new rule takes effect next week. Convenient! Wall Street and Washington have been playing footsie for decades. Back in the late 1980s, President Reagan determined that the stock market was so vital to the country that he signed an executive order creating the President's Working Group on Financial Markets. What the president wanted from this group was unclear, but the precipitous drop in stock prices in 1987 and 1989 had made everyone nervous.

Soon afterward, Robert Heller, a former Federal Reserve governor, came right out and proposed what the president was probably thinking -- the stock market should be rigged in times of impending disaster. But instead of going through all the trouble of buying actual stock, like firms do in program trades, Heller suggested a shortcut -- the purchase of stock index futures contracts. From that point on everyone suspected that Washington would jump in to calm the stock market whenever the waters got rough. Goldman has so many top executives who've moved into government that the company is now not-so-affectionately called Government Sachs.

Hank Paulson, the incompetent Treasury secretary during the last Bush Administration, was a former chairman of Goldman. Paulson almost slipped about the cozy relationship Washington had with Wall Street when he was being interviewed on TV and blurted out that it was part of his job to speak frequently with "market participants." No, it's not. Was he tipping information to Goldman during these conversations, like interest rate decisions? Was Goldman some sort of ex-officio government conduit? The clincher came last week in the most bizarre and unexpected twist to this unpredictable decades-long tale.

Federal prosecutors accused a guy named Sergey Aleynikov of stealing proprietary "black box" computer codes from Goldman. The agent in charge of the case said the following in court: "The bank (Goldman) has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate the market in unfair ways." What was Goldman doing with a program that could "ma nipulate the market in unfair ways"? The answer: It was using it to manipulate the market.

Goldman Sachs profit bonanza could stoke anger
Under normal circumstances, Goldman Sachs Group Inc might be afforded a moment of gloating as it struts toward what could be a banner earnings announcement just nine months after being roiled by Wall Street's worse crisis since the Great Depression. But these aren't ordinary times for the biggest U.S. investment bank, which lately has faced a torrent of unwanted publicity stemming from employee theft allegations and an unflattering spread in Rolling Stone magazine.

Now Goldman, expected to announced second-quarter earnings on Tuesday, finds itself in a no-win situation. If earnings are too good critics may lambaste it for ramping up risk too much and embracing a hedge fund-like model that could make it vulnerable to big market swings. If they fall short, investors may accuse the firm of failing to live up to its reputation for being more aggressive and intelligent than its rivals.

"They are between a rock and a hard place," said Walter Todd, a portfolio manager with Greenwood Capital Associates, which owns shares of rival Morgan Stanley. And, regardless of the results, critics may fall back on the old "Government Sachs" refrain, a nod to the number of former Goldman defectors now working in government, and claiming special treatment. From a public relations standpoint, Todd said that leaves Goldman asking questions familiar to the oil industry as it contended with windfall profit taxes amid spiking gas prices. "How well do they really want to do?" Todd asked.

Analysts polled by Thomson Reuters are expecting Goldman to report net income for common shareholders of $3.54 a share. That is down from a pro-forma $4.58 a year earlier, but would best a surprisingly strong first quarter in which Goldman reported net income of $3.39 per share. Strong trading income and improving equity underwriting markets are expected to bolster the results, offsetting a one-time charge of $425 million related to payback of loans Goldman took from the U.S. Treasury's Troubled Asset Relief Program, or TARP.

In a noisy second quarter, Goldman repaid $10 billion in TARP loans, while raising $8.9 billion in equity, debt and asset sales to win its way out of the government program. Getting the approval to exit TARP was considered a key step from getting out from under the thumb of the U.S. government, which has taken the industry to task for lavish compensation. If Goldman reports strong earnings, it will confront another public relations challenge in how it translates profits to compensation for employees. Last month, the Observer newspaper reported that Goldman employees in London were briefed on the company's performance and told to expect record bonuses if the year finished strongly. Goldman has denied such a briefing ever took place.

Banc of America Securities-Merrill Lynch analysts said in a research note this week that Goldman could set aside as much as $17.9 billion for compensation this year, more than the $10.9 billion last year, but still below the $20.19 billion set aside in 2007. Using Goldman's first-quarter headcount, that comes out to $642,000 per employee, based on the research estimates. "Does the strong earnings and the employee pay-out mean it is back to the future and that they are wheeling and dealing and engaging in higher risk activities, as was true just a few years ago?" said Lawrence White, a professor at New York University's Stern School of Business. "We don't really know."

To be sure, there is more than a touch of jealousy to the chorus of ill-will toward Goldman, which rivals have in recent years waited -- so far in vein -- to break its long earnings hot streak. The bank's defenders say Goldman is simply being upbraided for its success and argue that the firm has Wall Street's most sophisticated risk management procedures in place -- systems that put it in a stronger position than most rivals to ride out last fall's turmoil.

And the fact is that better-than-expected earnings would boost Goldman's share price, already up 73 percent so far this year, which would be good news for its investors and partners. "In the financial realm, they are smartest guys around," said Bill Hackney, chief investment officer of Atlanta Capital Management Co, which owns Goldman shares. "I doubt there's any behind the scenes conspiracy among Goldman executives to cause them to have an unfair advantage in the market. This harping is just sort of sour grapes."

Sour grapes or not, Goldman, despite the fact that the Treasury Department is no longer run by one of its former CEOs and that a retired Goldman chairman has been forced out of key post at the New York Federal Reserve, continues to raise hackles among many. A scathing article in Rolling Stone that accused the bank of having a key role in various market bubbles stretching back to the 1920s and stoked outrage on the Daily Kos and other blogs.

The arrest of one of its former employees earlier this week for allegedly stealing computer codes that were the key to hefty trading profits at the firm also stirred up chatter on various financial blogs where little love is lost for the firm. The case is not expected to impact earnings but the firm, famously publicity-averse, may have little chance of retreating from the spotlight anytime soon.

AIG bonuses: $235 million to go
Troubled insurer AIG has asked the government's 'pay czar' to review hundreds of millions more in bonus payments to employees of its most crippled division.

Bailed-out insurer AIG again found itself in the crosshairs of bonus rage on Friday over its plans to pay $2.4 million in executive bonuses next week. But the larger issue is how AIG will deal with its obligation to pay roughly $235 million still owed to employees of its crippled financial products division. The contentious issue of the bonuses resurfaced late Thursday after The Washington Post reported that AIG was seeking the government's consent to make a scheduled performance bonus payment of $2.4 million to 43 of its top-ranking executives.

But there's still the $235 million in retention bonuses owed to about 400 employees of AIG's Financial Products (FP) division that the company has to deal with. Public furor erupted in March when it was revealed that AIG had paid out $165 million of retention bonuses to those employees. AIG put the issue before Kenneth Feinberg, the Obama administration's pay czar. Feinberg is tasked with reviewing bonuses and retirement packages for the 100 highest-paid executives at AIG (AIG, Fortune 500), Citigroup, Bank of America, General Motors, GMAC, Chrysler and the now defunct Chrysler Financial.

A source close to the matter said Feinberg will be reviewing both the $2.4 million, as well as the much more controversial $235 million that is scheduled to be paid out to AIG-FP employees next year. AIG-FP is the division that wrote insurance contracts on shaky derivatives that were at the root of the company's near-collapse. In September, the government bailed out AIG with funds now worth up to $182 billion. The $165 million of bonus payments in March was the second installment of a larger, $454 million retention plan for the FP employees. The first -- $50 million -- was made in 2008, before the company was bailed out by the government.

After the uproar in March, FP employees returned about a third of their bonuses, and a dozen workers resigned. The reaction from the public and Congress consumed AIG, Treasury and Federal Reserve officials, and called into question what to do with the last payment that is scheduled to go out in 2010. Feinberg only has to review payments that were contracted beginning in 2009, so the $235 million in FP payments -- contracted in 2008 -- do not officially fall under his purview. Still, a source close to the matter said that AIG wants Feinberg to take a look at those bonuses to make sure the government is completely comfortable with the company's compensation plan.

Feinberg was also asked to review the $2.4 million in performance bonuses set to be paid out to 43 of AIG's top executives. That is part of a larger bonus pool of $121 million, the vast majority of which was paid out in March to the company's most senior executives. But with pressure mounting from Congress and the Obama administration, AIG restructured its bonus payments for the top 50 executives. The top seven AIG executives opted to forgo their bonuses. The other 43, set to receive $9.6 million in March, took home only half -- $4.8 million -- in March, and are set to receive $2.4 million July 15 and another $2.4 million Sept. 15.

Experts say asking Feinberg to review the bonuses takes the pressure off of AIG and turns Feinberg into a punching bag for criticism. Outgoing AIG Chief Executive Edward Liddy has said on many occasions that the public outrage about the bonuses has limited the company's ability to move forward with its plan to repay the government. "If you have the government OK the plan, it makes AIG look less like they're flushing taxpayer money down the toilet," said Julie Grandstaff, managing director of insurance consultant StanCorp Investment Advisers. "There's no way the poor guy who is reviewing all of this can win."

A Treasury spokesman would not comment directly on AIG's bonuses, but suggested Feinberg can review those payments and the FP bonuses if he chooses, even though they were contracted in 2008, saying, "Mr. Feinberg has broad authority to make sure that compensation at those [seven] firms strikes an appropriate balance." "Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives," the spokesman added.

Prof. Elizabeth Warren, chair of the Congressional Oversight Panel created to oversee the bailout, told that AIG's lack of comment spoke to a larger disconnect between the insurer and the American public. "If they're not commenting, that makes me very nervous, because what I would like to hear is 'no, that report is a mistake,'" Warren said. "Taxpayers are under enormous stress. There's going to be trouble over this."

AIG Seeks Clearance to Release Bonuses
American International Group Inc. is asking the Obama administration's new compensation czar whether it should pay previously agreed-to retention bonuses, including about $235 million pending for employees at the insurer's controversial financial products unit, according to people familiar with the matter. AIG asked Kenneth Feinberg to weigh in on the bonuses after the last round of multimillion dollar payments in March sparked an outpouring of public frustration amid the financial crisis. Before Mr. Feinberg was appointed, AIG had pledged to try to reduce the overall payments for this year's performance to a few hundred employees at the financial products unit by 30%.

It had also delayed a much smaller set of payments to 40 high-ranking AIG officials that it is set to begin paying next week -- payments for 2008 performance. Mr. Feinberg is expected to issue a decision on the 2008 payments although his primary job with regard to AIG will be to deal with compensation issues going forward, including whether to allow the company to pay bonuses slated for 2009. The aim of the current negotiations with Mr. Feinberg, according to the people familiar with the matter, is to come to an agreement that lets employees keep enough of the promised bonuses to serve as an effective incentive, but reduces the payments by enough to make them more palatable to the public.

"We have been giving a lot of thought to this," said an AIG official. "We don't want there to be any surprises." The request from AIG puts Mr. Feinberg and the government in a potentially sensitive position of either having to endorse ongoing payments of whatever amount, or trying to block them and risk setting in motion employee departures that could prove costly to AIG and potentially the broader financial system.

Dealing with AIG is expected to be one of the thorniest tasks for Mr. Feinberg, who has the power to set pay for the top executives and design compensation structures for the most highly compensated 100 employees at seven firms receiving the most aid from the government. The Obama administration was embarrassed in March after the original AIG bonuses were disclosed. The administration had been looking to rein in excessive pay, at one point proposing a salary cap for top executives.

President Barack Obama pledged to do all he could to recoup the money, but the administration concluded it couldn't stop the payments because they were contractual obligations. A firestorm ensued, with Congress attempting to tax Wall Street bonuses. More broadly, compensation has proved one of the most explosive issues amid the financial crisis, with companies scrambling to repay federal aid in part to avoid government scrutiny and control over their pay practices.

Any decision on AIG bonuses -- and payments to employees at other firms receiving bailout money -- will be scrutinized on Capitol Hill. Indeed, the administration tapped Mr. Feinberg in part to deflect some of the criticism. The pending $235 million in retention bonuses at AIG's financial products unit, whose woes were largely responsible for forcing AIG to the brink of bankruptcy court last year, are part of roughly $450 million in retention bonuses for that unit that AIG has previously disclosed. AIG agreed in early 2008 to make those payments, months before it received a government bailout. The first installment of those payments was made late last year, after the bailout.

The second installment came due in March, and it was the preparations to make those payments that set off the prior controversy. The next installment of payments to the financial products unit employees is not due to be paid for months. AIG has argued that it is obligated to make these payments, and that keeping employees in their jobs is crucial to avoiding additional losses on trades that the unit still has in place and is trying to wind down.

The government has said it stepped in to rescue AIG because it feared a collapse of the company could damage the broader financial system. In the bailout, the government has made up to $173 billion in aid available to AIG. In a statement, Treasury said: "Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives. That process is just beginning now, and Mr. Feinberg has begun consulting with those firms about their compensation plans."

TARP Recipients Fighting To Keep Charging Exorbitant Credit Card Fees
Undeterred by their sullied reputation, big banks and credit card companies are making a major play to protect a key source of profit: credit card swipe fees. Last year, the country's largest financial institutions -- including many banks that have received bailout funds -- raked in an estimated $48 billion from credit card swipe fees. That's an average of $400 per American household.

Every time a shopper swipes his card, the credit card-issuing banks charge retailers a percentage (usually between 2 and 5 percent) of the purchase. The charge was initially intended to cover the administrative costs of processing credit card payments. But even as technology has reduced those costs substantially, the amount of money generated by credit card swipe fees has continued to rise. Since 2001, revenue from "interchange fees" has gone up 120% in the United States.

Industry representatives claim that the purpose of the fee is to cover the costs and risks of credit card transactions, which have increased over the years. But critics say the system isn't fair. The banks themselves, after all, are responsible for the proliferation of credit cards. And because more people than ever are using plastic as a form of payment, merchants have been forced to raise the price of goods to compensate for the rise in associated swipe fees.

"If their risks have gone up exponentially, it's because they're issuing cards to everyone," said John Emling, senior vice president of government affairs at the Retail Industry Leaders Association. "The claim that they're somehow not responsible for the assumed risk is just a false claim." Legislative attempts to change the system have been met by a major lobbying and advertising pushback. Spearheading that effort has been the Electronic Payments Coalition. The coalition's membership reads like a who's who of bailed-out institutions, including Bank of America, Citigroup, Wells Fargo, Barclay's and JP Morgan Chase.

The main battle has revolved around an obscure but aptly named piece of legislation called the Credit Card Fair Fee Act. The Senate version of the bill will empower retailers to negotiate interchange fees with banks and credit card companies, with disagreements to be settled by a three-person, independent arbitration panel. The House version is much the same, and both would require better transparency measures for all transactions between banks, credit card companies and retailers.

Retailers, led by the Merchants Payments Coalition, have run what one official described as a "mid-six-figure" advertising campaign in support of the reform measures on the radio, the Internet and in print. They have been outspent by the EPC, which has paid $260,000 in lobbying already in 2009 and spent close to $500,000 dollars in 2008. The Coalition, which also includes MasterCard Worldwide and Visa Inc., has hired 10 former congressional staffers as lobbyists to push their legislative agenda, according to a review of public records. The EPC also has run a slew of ads in some of Washington D.C.'s most widely read websites, including Roll Call and Politico as well as on the radio. Days after being contacted for this story, the group began running ads on the Huffington Post as well.

The combined effort has been to protect the status quo, with the main argument being that if the fees were changed, the merchants would merely pocket the money rather than passing the savings on to consumers. In the context of the current economic crisis, it is an odd spectacle: The architects of the subprime mortgage crisis and the largest financial meltdown since the Great Depression -- many of whom are currently dependent on taxpayer funds -- have styled themselves as champions of consumer rights, protecting unsuspecting shoppers from predatory retailers.

"If I could sum up the debate," said Trish Wexler of the EPC, "the bottom line is that merchants don't want to pay their fair share. Instead, they want to shift that cost onto their customers." "Merchants should pay their share," echoed the ads. According to a statement issued by Visa, the legislation "would significantly and negatively impact consumers, especially those struggling in this time of economic uncertainty." Not everyone is buying it.

"It is a bizarre argument because it essentially says, 'let's keep ripping folks off because if we don't someone else will,'" added Rep. Peter Welch (D-Vt.). Welch is a cosponsor of the Credit Card Interchange Fees Act of 2009, which would significantly alter the credit card swipe fee process. As Welch sees it, the current system is unfairly tilted in favor of the bank and credit card companies. Interchange fees, he says, are unilaterally set by the credit card companies and not at a flat rate. High-end credit cards with reward programs, for instance, tend to have higher fees. Debit card and PIN transactions have lower associated rates, as do cards issued by credit unions.

Under the existing system, retailers are prohibited from charging customers different rates based on the form of payment they choose. That is why retailers say they are often forced to raise the prices of all their goods in order to keep up with interchange fees. "The person that pays cash is subsidizing the person who's getting rewards of frequent flyer miles," said Emling. This past year, Sen. Dick Durbin (D-Ill.), attempted to attach an amendment to the Credit CARD Act of 2009 that would have prohibited credit card companies from taking action against retailers who offered reduced prices to customers paying with cash, checks or debit cards instead of credit cards. It was ultimately removed from the bill.

Since then, Durbin, Welch and other lawmakers have sought to pass the measures as stand-alone legislation. The hope is that it will be considered at some point in the year ahead. In the interim, the debate is being reframed as a matter of transparency -- whether banks will give retailers the option of seeing the available rates. It's an effort to make the issue less objectionable, but many banks remain opposed. "The banks are fighting this tooth and nail," said Welch, "It is pretty stunning. Why would the banks be against transparency? Why? What do they fear... the fear is people might know what they are going to charge and say, you know what, I don't need this credit card."

Banks buying back TARP warrants at a discount, panel says
A panel that oversees a $700 billion bank bailout package said Friday that financial institutions buying out warrants they gave the government in exchange for capital injections are now buying back those stakes at well below their fair value.

The Congressional Oversight Panel, which is charged with overseeing the Troubled Asset Relief Program, or TARP, said in a report that a group of 11 small banks that have repurchased government warrants in exchange for taxpayer-funded assistance, have bought-out the stakes at 66% of their face value. The C.O.P., which employed three Harvard University valuation experts to conduct the analysis, said that taxpayers would have received $10 million more had the warrants been sold back to the banks at their face value.

The report argues that liquidity discounts are a key factor for why the warrants were purchased at such low prices. Should a similar discount be a major factor for warrant repurchases at larger institutions buying out government stakes, the shortfall to taxpayers could be as much as $2.1 billion, the report said. A group of 32 financial firms, including 10 large financial institutions, are paying back roughly $70.2 billion of TARP funds they've received. Banks that received financial assistance as part of TARP were required to give the government warrants for the future purchase of some of their common shares. Warrants are the right to buy shares of a company at a set price at some point in the future.

The panel employed three valuation experts from Harvard Business School -- Robert Merton, Daniel Bergstresser and Victoria Ivashina -- to conduct the review. The report said, however, that the Treasury may have other goals with the repurchases that supersede maximizing taxpayer returns. "Treasury has said that it wants to allow banks to operate again without TARP assistance as soon as they are strong enough to do so," it said.

The report said the C.O.P. is exploring the possibility that Treasury consider selling the TARP warrants in an open, public auction, as an alternative that could possibly give taxpayers a better valuation for the stakes. "This has the benefit of stopping any speculation about whether Treasury has been too tough or too easy on the banks that want to repurchase their own warrants. It also permits the banks to bid for their own warrants -- in direct competition with outsiders," the report said. The report also raises the question of whether banks should be repaying TARP funds at all at this stage in the economic recovery. The C.O.P.'s next report will examine this question.

"Any exit from the TARP system implicates an important policy question: If the banks give up federal support prematurely, will the economy suffer as a result? The panel has not reached a consensus on whether it is wise policy to release banks from the TARP program at this time, but our June report on the bank stress tests raised key questions about whether we know enough about the banks' overall health," the report said. Harvard Law School professor Elizabeth Warren chairs the panel, which has five members including AFL-CIO General Council Damon Silvers; Rep. Jeb Hensarling, R-Tex.; and former GOP senator John Sununu.
The C.O.P. report also urged the Treasury to make the process for repayments as transparent as possible.

"As always, it is critical that Treasury make the process -- the reason for its decisions, the way it arrives at its figures, and the exit strategy from or future use of the TARP -- absolutely transparent. If it fails to do so, the credibility of the decisions it makes and its stewardship of the TARP will be in jeopardy," the report said. As of June 30, the Treasury has received roughly $6.7 billion in dividend payments from TARP-funded financial institutions, according to a GAO report Thursday. The dividend funds have been allocated to pay down the national debt, but legislation under consideration on Capitol Hill would use some of the revenues from those funds to help revitalize neighborhoods and create affordable housing.

White House Ponders Bernanke's Future
As the White House begins to ponder whether to reappoint or replace Ben Bernanke when his term expires in January, the Federal Reserve chairman's standing on Wall Street is on the rise while attacks on him from Congress mount. Treasury Secretary Timothy Geithner is expected to play a key role in advising President Barack Obama on whether to reappoint Mr. Bernanke. Mr. Geithner has worked closely both with Mr. Bernanke and with the leading alternative for the powerful post -- Lawrence Summers, the former Treasury secretary, who is currently the president's top economic adviser.

Before making a decision later this year, the White House also is expected to look at other economists, including Roger Ferguson and Alan Blinder, former Fed vice chairmen; Janet Yellen, president of the San Francisco Federal Reserve Bank; and Christina Romer, chairman of Mr. Obama's Council of Economic Advisers. Mr. Bernanke's reputation on Wall Street has ebbed and flowed. But a Wall Street Journal survey conducted this week of 46 private-sector economists found that 43 endorsed his reappointment. "Bernanke's leadership during this financial crisis was outstanding, but not flawless," said Scott Anderson of Wells Fargo & Co., one of those surveyed. "But given human limitations and the limitations of economic and financial knowledge he deserves another tour of duty."

Some saw benefits to continuity. "Don't change horses in midstream," said David Wyss of Standard & Poor's. Others cited the alternatives: "Stated differently: Don't appoint Summers," said Nicholas Perna of Perna Associates. The White House isn't rushing to decide on reappointing Mr. Bernanke, who hasn't sent any signal that he wants to leave the post. The Intrade online wagering Web site puts 60% odds on reappointment. But a bad turn in the economy could prompt Mr. Obama to seek a new helmsman of his own choosing, or new embarrassing revelations about Mr. Bernanke's handling of the financial crisis could alter the picture before the president makes a decision.

For now, the White House is concentrating on finding new members for the Fed board. Two of the seven seats are vacant. Two sitting governors -- Kevin Warsh, 39 years old, and Donald Kohn, 66 -- are widely believed to be eyeing the exits. The White House is seeking at least one candidate with financial-market experience, a tough task at a time when likely choices are tainted by Wall Street ties. Waiting to decide on Mr. Bernanke has its costs. "The uncertainty about Mr. Bernanke being reappointed has helped to stoke some of the inflation concerns because it does add to the risk that monetary policy gets politicized," said Michael Feroli, a J.P. Morgan Chase economist.

Mr. Bernanke has come under tough questioning on Capitol Hill, and new powers that the Obama administration proposes to give the Fed have intensified congressional scrutiny of the central bank. "If these new powers are going to be granted to the Fed, then maybe a professor of economics will never again be the best choice for the Fed chairman," said Darrell Issa (R., Calif.). Rep. Brad Sherman (D., Calif.) accuses the Fed of "a Wall Street mentality." Regarding Mr. Bernanke, he said, "Of those who are infected...better than average," but he said he would prefer a Fed chairman with "populist Democratic values."

Still, Mr. Bernanke has influential admirers -- including Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee, and Rep. Carolyn Maloney (D., N.Y.), chairman of the Joint Economic Committee. Ms. Maloney, who backs Mr. Bernanke's reappointment, said, "He's basically an academic working in a nonpartisan way to save the economy." Mr. Bernanke would need to be confirmed by the Senate if reappointed for a second four-year term. Both the chairman of the Senate Banking Committee, Christopher Dodd (D., Conn.), and the panel's senior Republican, Richard Shelby of Alabama, have been critical of the Bernanke Fed.

Mr. Bernanke's chief rival, Mr. Summers, is widely regarded as one of the sharpest economists of their generation. But his blunt, domineering style makes some bristle and could be greeted with trepidation at the Fed. Mr. Summers also could meet resistance on Capitol Hill. He was forced out of his job as president of Harvard University, in part because of tense relations with the faculty and comments about women. Antipathy toward Wall Street could also be a factor. Mr. Summers raked in $5.2 million from hedge fund D.E. Shaw in the year before he joined the White House and was an advocate of financial deregulation in the 1990s.

For those and other reasons, other names are surfacing. Among them is Ms. Yellen, who was an adviser in the Clinton White House and Fed governor during the tenure of former Chairman Alan Greenspan. She has strong academic credentials and fans inside the administration, but is in the dovish wing of the Fed. "I think the predominant risk is that inflation will be too low, not too high, over the next several years," she said in a recent speech. That image could unsettle financial markets -- whose opinions matter to presidents picking a Fed chairman. Ms. Yellen declined to comment Wednesday.

Another candidate is Mr. Ferguson, who was Mr. Greenspan's loyal deputy and is now chief executive of financial-services firm TIAA-CREF and a member of the President's Economic Recovery Advisory Board. "Ben Bernanke has led the Fed well during this crisis and, in my view, well deserves to be renominated," he said in response to an inquiry. "I am eager to continue leading TIAA-CREF, but honored to be mentioned in this regard." Mr. Blinder, now a Princeton economist, said, "I don't want to engage in rumors about myself or anybody else, except to say I didn't spread any of those rumors." Ms. Romer, who was a University of California at Berkeley professor, declined to comment.

White House Eyes Bailout Funds to Aid Small Firms
The Obama administration is developing an initiative to take money from the $700 billion rescue program for the banking system and make it available to millions of small businesses, which officials say are essential to any economic recovery because they employ so many people, according to sources familiar with the plan. The effort would represent a striking shift from the rescue program's original mandate, since it would direct billions of bailout dollars toward a plan that aims more at saving jobs than at righting the financial system. Some economists estimate that small businesses, defined as firms with fewer than 500 workers, employ most of the country's workforce.

A proposal being floated by senior Treasury Department officials calls for using the bailout funds to expand an existing government program that helps small companies borrow from banks at low rates to keep their businesses going, the sources said. These "working-capital" loans would come with few restrictions and could be used to buy inventory, hold on to employees and pay off short-term debt. The initiative would bulk up the Small Business Administration's most popular lending program, called 7(a). Lines of credit for small companies could greatly increase in size. If a firm failed despite receiving this help, the government would cover most of the losses on the federal loan, perhaps as much as 90 percent. Lines of credit act like the credit cards for companies -- short-term, revolving debt used to pay a variety of immediate expenses.

The scope of the Troubled Assets Relief Program, or TARP, has been expanded several times already, first to save General Motors and Chrysler and then to help life insurers. In both cases, government officials argued that emergency assistance was critical for preventing economic upheaval. Making the bailout funds available to millions of small businesses would be a far more dramatic expansion. "Small business is the backbone of American jobs and innovation," said Matthew Vogel, a White House spokesman. "We are deeply committed to continuing to work every single day to devise and implement policies that will help small businesses through these challenging economic times."

He added, "This concept, among many others, has been raised in discussions on small business, but certainly no proposals are imminent." Administration officials said discussions are in the early stages and that no plan is expected before the fall. Concepts now on the table may evolve or be scrapped altogether, they said. No dollar figure has been set. But discussions about the plan have reached the highest levels of the government. In a meeting at the White House last week, Treasury Secretary Timothy F. Geithner expressed support for the proposal, but National Economic Council Director Lawrence H. Summers was more skeptical. Neither has made up his mind, officials said.

"[Summers] has supported every small-business idea we have implemented so far," said Gene Sperling, a counselor to Geithner who has been coordinating small-business issues at the Treasury. "When we have a brainstorming session on new ideas, Larry, as always, asks the toughest questions in the room." The debate over the proposal has centered on whether taxpayers would be protected and whether banks that make these loans to small firms would lower their lending standards if the government promises to cover loans that go bad, according to participants present or briefed on the discussions. They spoke on the condition of anonymity because the conversations were considered private.

Administration officials want to prevent small businesses from closing and adding their workers to the growing ranks of the unemployed. Some officials say small companies are key to reversing the soaring unemployment rate, which has hit 9.5 percent, the highest since the early 1980s. Small businesses employ 60 percent to 80 percent of all workers, according to some economists, though others say those figures are too high.

Aiding small businesses could be a gamble because they have a poorer record than large corporations when repaying loans; it would be the riskiest government investment so far under the bailout plan. Officials are trying to design the program to exclude companies that are likely to fail even if they received federal aid, people with knowledge of the discussions said. Some administration officials hoped to present several proposals to President Obama last week. But the meeting has been put on hold indefinitely while the Treasury conducts a deeper analysis of the problems afflicting small companies.

The administration has carried out several other programs to help small businesses through the $787 billion economic stimulus package passed by Congress in February. That measure doubled the SBA's budget to help it spark new lending. Since the bill passed, $6 billion worth of small-business loans have gone out the door, said Karen Mills, the administrator of the SBA. "If we are going to move out of this recession and into recovery, it's going to be small businesses that leads us," Mills said. She added that her appointment to the NEC, the council led by Summers, is a sign that the administration has made this sector a priority.

The Treasury is working on a separate $15 billion effort, announced in March, to provide more credit for small businesses by aiding the financial firms that package SBA loans together and turn them into securities. The administration is considering purchasing these securitized loans as a way of helping lenders, but conditions in the TARP program that require aid recipients to surrender ownership stakes and submit to executive pay restrictions have discouraged participation.

Rep. Nydia M. Velázquez (D-N.Y.), chair of the House Committee on Small Business, expressed concern over the administration's plans to use bailout funds to help small firms but said she had not yet been briefed on the details. "The Committee has long recognized that a shortage of capital is the fundamental problem facing entrepreneurs right now," she said. "While it is promising to hear the administration acknowledges the importance of addressing small businesses' capital needs, it is critical that these efforts build on existing programs, and not needlessly duplicate them, undercut them or create additional red tape."

Obama Seeks to Give SEC Clout to Ban Wall Street Pay Practices, Wrongdoers
The Obama administration is seeking to give the U.S. Securities and Exchange Commission power to prohibit pay practices at brokerages and investment advisers and broader authority to bar individuals from work in the industry. The Treasury Department today sent Congress legislation that would let the SEC ban “sales practices, conflicts of interest and compensation schemes” deemed harmful to investors. The measure lets the agency remove individuals who violate rules from all aspects of the industry, rather than a specific segment such as selling securities or managing money.

President Barack Obama’s SEC proposal is part of the overhaul of financial regulations in response to the worst economic crisis since the Great Depression. Lawmakers have vilified securities firms for selling investors unsuitable products and basing pay on how many transactions bankers execute without regard to whether deals succeed in the long term. “The SEC would be given broad authority to define those kinds of” pay arrangements it deems inappropriate, Michael Barr, assistant Treasury secretary for financial institutions, told reporters in a briefing.

Types of compensation practices the SEC may deem improper might include banks paying brokers more to sell “in-house” investment products, rather than those offered by competitors, he said. “There has always been a concern that because these people are acting in an advisory capacity, they might be operating under pay practices that are in their interest, not those of their clients,” said Mark Borges, a principal at Compensia Inc., a San Francisco-area pay consultant.

The proposal, which Congress must approve, also would give the SEC authority to impose a so-called fiduciary duty on brokerages offering investment advice. The stipulation requires firms and their employees to put clients’ interests before personal motivations, such as fees. SEC Chairman Mary Schapiro, in a statement, said “applying tough standards that require financial professionals to put investors first will provide us with needed tools to better safeguard investors.” The Obama plan targets mandatory arbitration agreements, granting the SEC power to prohibit them in contracts consumers sign with brokers, investment advisers and those who sell municipal bonds.

Mandatory arbitration bars customers from suing financial professionals in court. The measure gives the SEC authority to reward whistle blowers who give the agency tips about those violating all securities laws. The SEC currently has power to pay individuals who provide the agency with tips on insider-trading violations. Under the legislation, the SEC would use fines it collects from enforcement actions to reward whisteblowers for information that results in “significant financial awards.”

Geithner testifies on over-the-counter derivatives
The following are highlights from the U.S. House Financial Services and House Agriculture committees' joint hearing on Friday on the Obama administration's proposal to regulate over-the-counter derivatives with Treasury Secretary Timothy Geithner.

GEITHNER ON CONTROLLING OIL PRICE VOLATILITY: "I think what the CFTC chairman proposed the other day ... is a prudent approach to policy, is to look for ways to limit volatility. It's very hard to not look at the last two years of pattern in the global energy markets, even though there's been such enormous shifts in confidence about the strength or weakness of the global economy, not to believe we've seen a level of volatility that has been damaging, fundamentally, to the capacity of business to manage risk and damaging to confidence. I think it is worth trying to see whether you can limit that risk through better disclosure -- hard to do, a lot of people have tried it. If you're going to do that effectively you're going to have to do that in a common approach to where oil and other commodities are traded globally."

GEITHNER ON EFFECTIVENESS OF STIMULUS: "The stimulus package is on its expected path in terms of the rate of putting money in the pockets of taxpayers, to provide substantial forms of assistance to states to reduce the risk of their being forced to fire tens of thousands of teachers, workers, firemen, and there are very substantial investments in infrastructure projects that have already started to take effect and will have their maximum impact on he economy in the second half of the year. My own sense is, and I think this is the consensus of broad-based economists, that there have been substantial improvements in arresting what was the worst recession globally we've seen in generations."

GEITHNER ON DEFINING STANDARDIZED CONTRACTS: "I don't think we have made a financial judgment as to what extent we want to define those attributes of standardized contracts in statute or in regulation. My suspicion is that we'll lay out road principles in statutes and have them defined with more clarity in regulation. The important thing is that we move to standardize on the central clearing and we establish comprehensive enforcement authority, comprehensive transparency, comprehensive reporting, and sufficiently conservative margin and capital requirements across the entire market."

GEITHNER ON URGENCY OF REFORM: "It's not surprising that we're having this debate. It's the typical pattern of the past. As the crisis starts to recede, the impetus to reform begins to fade in the face of the complexity of the task and opposition by the economic and institutional interests that are affected. It's not surprising because the reforms proposed by the president, and the reforms that your two committees are discussing, would substantially alter the ability of financial institutions to choose their regulator, to shape the content of future regulation and to continue the financial practices that were lucrative for parts of the industry for a time but that ultimately proved so damaging. But this is why we have to act and why we need to deliver very substantial change."

GEITHNER ON DANGER OF CURRENT REGULATION OF OTC DERIVATIVES: "Under our existing regulatory system, some types of financial institutions were allowed to sell large amounts of protection against certain risks without adequate capital to back those commitments. The most conspicuous and most damaging examples of this were the monoline insurance companies and AIG. These firms and others sold huge amounts of credit protection on mortgage-backed securities and other more complex real-estate related securities without the capacity to meet their obligations in an economic downturn."

GEITHNER ON OBJECTIVES TO REGULATE MARKET: "In designing its proposed reforms for the OTC derivative markets, the Administration has attempted to achieve four broad objectives: * Preventing activities in the OTC derivative markets from posing risk to the stability of the financial system; * Promoting efficiency and transparency of the OTC derivative markets; * Preventing market manipulation, fraud, and other abuses; and * Protecting consumers and investors by ensuring that OTC derivatives are not marketed inappropriately to unsophisticated parties."

FDIC gearing up for bank closures
The Federal Deposit Insurance Corp. is gearing up to handle a large number of bank failures expected as a result of bad mortgages, both in residential and commercial real estate, an economist said Tuesday. “They know they’re going to take down a large number of banks and they can’t do it until they’re staffed up,” said Mark Dotzour, chief economist and director of research for the Real Estate Center at Texas A&M University.

Dotzour expects federal regulators to establish an agency, similar to the Resolution Trust Corp. that disposed of assets belonging to insolvent S&Ls in the late 1980s and early 1990s. “Once they start to sell [foreclosed real estate], we’ll find out what the market really is,” Dotzour told attendees at an economic summit hosted by a handful of real estate groups in Tampa, Fla.

Dotzour blamed federal intervention for the lack of commercial real estate investment activity in recent months, as well as the failure of businesses to make major decisions. “Nobody knows what to do so they’re doing nothing,” Dotzour said at the luncheon meeting at the Intercontinental Tampa. Government, in its quest to help the economy, is causing harm by propping up failing companies and regularly changing rules, he said.

“No one can predict what the government will do,” Dotzour said. “People are frozen. It’s not that they don’t want to invest in the future, the rules are unclear,” he said. He jokingly called the Federal Reserve “inksters” for routinely printing money to bail out big business, including banks that are still not making many loans. The government’s role in a capitalistic society, he said, “is to make the rules and get off the dance floor.”

Businesses and individuals that can’t pay their bills should resolve their problems in bankruptcy court, not with money from the government, he said. It’s a process that has worked for decades, for generations. “Everyone has a lesson to learn here, including you and me,” he said. “We have to live within our means.” Dotzour expects foreclosure rates to continue to climb, real estate prices to fall more and cap rates to rise to at least 9 percent before leveling off.

In 2010 and 2011, interest rates will begin to rise, as will inflation. Once investors realize the market is at bottom, deals will begin to flow again, he said. In the meantime, he compared the bad loans that remain on banks’ books to a smelly cat litter box and the feds keep throwing more litter on top to mask the smell. But they’ll eventually have to remove the organic material to fix the problem.

When Will The Recovery Begin? Never.
The so-called "green shoots" of recovery are turning brown in the scorching summer sun. In fact, the whole debate about when and how a recovery will begin is wrongly framed. On one side are the V-shapers who look back at prior recessions and conclude that the faster an economy drops, the faster it gets back on track. And because this economy fell off a cliff late last fall, they expect it to roar to life early next year. Hence the V shape.

Unfortunately, V-shapers are looking back at the wrong recessions. Focus on those that started with the bursting of a giant speculative bubble and you see slow recoveries. The reason is asset values at bottom are so low that investor confidence returns only gradually. That's where the more sober U-shapers come in. They predict a more gradual recovery, as investors slowly tiptoe back into the market. Personally, I don't buy into either camp. In a recession this deep, recovery doesn't depend on investors. It depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery, V or U shaped.

Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water -- owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can't are hunkering down, as they must.

Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can't be built on replacements. Don't expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don't rely on exports. The global economy is contracting.

My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.

The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.

The Stimulus Trap
As soon as the Obama administration-in-waiting announced its stimulus plan — this was before Inauguration Day — some of us worried that the plan would prove inadequate. And we also worried that it might be hard, as a political matter, to come back for another round. Unfortunately, those worries have proved justified. The bad employment report for June made it clear that the stimulus was, indeed, too small. But it also damaged the credibility of the administration’s economic stewardship.

There’s now a real risk that President Obama will find himself caught in a political-economic trap. I’ll talk about that trap, and how he can escape it, in a moment. First, however, let me step back and ask how concerned citizens should be reacting to the disappointing economic news. Should we be patient and give the Obama plan time to work? Should we call for bigger, bolder actions? Or should we declare the plan a failure and demand that the administration call the whole thing off?

Before you answer, consider what happens in normal times. When there’s an ordinary, garden-variety recession, the job of fighting that recession is assigned to the Federal Reserve. The Fed responds by cutting interest rates in an incremental fashion. Reducing rates a bit at a time, it keeps cutting until the economy turns around. At times it pauses to assess the effects of its work; if the economy is still weak, the cutting resumes.

During the last recession, the Fed repeatedly cut rates as the slump deepened — 11 times over the course of 2001. Then, amid early signs of recovery, it paused, giving the rate cuts time to work. When it became clear that the economy still wasn’t growing fast enough to create jobs, more rate cuts followed. Normally, then, we expect policy makers to respond to bad job numbers with a combination of patience and resolve. They should give existing policies time to work, but they should also consider making those policies stronger.

And that’s what the Obama administration should be doing right now with its fiscal stimulus. (It’s important to remember that the stimulus was necessary because the Fed, having cut rates all the way to zero, has run out of ammunition to fight this slump.) That is, policy makers should stay calm in the face of disappointing early results, recognizing that the plan will take time to deliver its full benefit. But they should also be prepared to add to the stimulus now that it’s clear that the first round wasn’t big enough.

Unfortunately, the politics of fiscal policy are very different from the politics of monetary policy. For the past 30 years, we’ve been told that government spending is bad, and conservative opposition to fiscal stimulus (which might make people think better of government) has been bitter and unrelenting even in the face of the worst slump since the Great Depression. Predictably, then, Republicans — and some Democrats — have treated any bad news as evidence of failure, rather than as a reason to make the policy stronger.

Hence the danger that the Obama administration will find itself caught in a political-economic trap, in which the very weakness of the economy undermines the administration’s ability to respond effectively.
As I said, I was afraid this would happen. But that’s water under the bridge. The question is what the president and his economic team should do now. It’s perfectly O.K. for the administration to defend what it’s done so far. It’s fine to have Vice President Joseph Biden touring the country, highlighting the many good things the stimulus money is doing.

It’s also reasonable for administration economists to call for patience, and point out, correctly, that the stimulus was never expected to have its full impact this summer, or even this year. But there’s a difference between defending what you’ve done so far and being defensive. It was disturbing when President Obama walked back Mr. Biden’s admission that the administration “misread” the economy, declaring that “there’s nothing we would have done differently.” There was a whiff of the Bush infallibility complex in that remark, a hint that the current administration might share some of its predecessor’s inability to admit mistakes. And that’s an attitude neither Mr. Obama nor the country can afford.

What Mr. Obama needs to do is level with the American people. He needs to admit that he may not have done enough on the first try. He needs to remind the country that he’s trying to steer the country through a severe economic storm, and that some course adjustments — including, quite possibly, another round of stimulus — may be necessary. What he needs, in short, is to do for economic policy what he’s already done for race relations and foreign policy — talk to Americans like adults.

Obama's Cap and Trade Carbon Emissions Bill - A Stealth Scheme to License Pollution and Fraud
On May 15, HR 2454: American Clean Energy and Security Act of 2009 (ACESA) was introduced in the House purportedly "To create clean energy jobs, achieve energy independence, reduce global warming pollution and transition to a clean energy economy."

In fact, it's to let corporate polluters reap huge windfall profits by charging consumers more for energy and fuel as well as create a new bubble through carbon trading derivatives speculation. It does nothing to address environmental issues, yet on June 26 the House narrowly passed (229 - 212) and sent it to the Senate to be debated and voted on. More on that below.

On March 31, Energy and Commerce Committee Chairman Henry Waxman and Energy and Environment Subcommittee Chairman Edward Markey released a "discussion draft" of the proposed legislation and falsely claimed:

-- it's "a comprehensive approach to America's energy policy that charts a new course towards a clean energy economy;" it will

-- create millions of clean energy jobs....that can't be shipped overseas;

-- put America on the path to energy independence;

-- reduce our dependence on foreign oil;

-- save money by the billions;

-- unleash energy investment by the trillions;

-- cut global warming pollution;

-- strengthen our economy;" and

-- make "America the world leader in new clean energy and energy efficiency technologies."

Strong-arm pressure, threats and bribes got the bill through the House. Forty-four Democrats opposed it. Eight Republicans backed it. Over 1200 pages long, few if any lawmakers read it.

After passage, Chairman Markey said:

"It's been an incredible six months to go from a point where no one believed we could pass this legislation to a point now where we can begin to say that we are going to send President Obama to Copenhagen in December as the leader of the world on climate change."

Speaker Pelosi praised the bill as "transformational legislation which takes us into the future" and added that after passage she took congratulatory calls from Obama, Senate Majority Leader Harry Reid and Al Gore. The former vice-president has long-standing ties to Goldman Sachs (GS), and in 2004 he and David Blood, CEO of GS's asset management division until 2003, co-founded Generation Investment Management LLC, a firm likely to profit greatly from cap and trade schemes.

In a prepared June 25 statement ahead of the House vote, Obama said:

"Right now, the House of Representatives is moving toward a vote of historic proportions on a piece of legislation that will open the door to a new, clean energy economy."

After citing the same false claims as Waxman and Markey, he called the legislation "balanced and sensible" and "urge(d) every member of Congress - Democrats and Republicans - to come together and support" it.

Polluters love it. So does Wall Street and corporate-friendly environmental groups like the Environmental Defense Fund. The opposition, however, includes Greenpeace, Friends of the Earth and Public Citizen.

In a joint May 13 press release, they were "extremely troubled (about) compromises to the already flawed American Clean Energy & Security Act."

It contains enough loopholes to make its claimed performance standards worthless, one of which prohibits the EPA from using the Clean Air Act to regulate future greenhouse gas emissions. That alone means they'll proliferate beyond what new technology reduces on its own, and only then if it's profitable to do it.

On June 23, Friends of the Earth president Brent Blackwelder said:

"Corporate polluters including Shell and Duke Energy helped write this bill, and the result is that we're left with legislation that fails to come anywhere close to solving the climate crisis. Worse, the bill eliminates preexisting EPA authority to address global warming - that means it's actually a step backward."

A June 25 Greenpeace press release stated:
"As it comes to the floor, the Waxman-Markey bill sets emission reduction targets far lower than science demands, then undermines even those targets with massive offsets. The giveaways and preferences in the bill will actually spur a new generation of nuclear and coal-fired power plants to the detriment of real energy solutions."

On June 27, Public Citizen (PC) called the bill "a new legal right to pollute (that) gives away 85 percent of (its) credits to polluters. (It) will not solve our climate crisis but will enrich already powerful oil, coal and nuclear power companies." PC wants polluters to cut their emissions 80% below 1990 levels by 2050 and pay for credits, not get them free. It also cited the American Wind Energy Association saying that the renewable standard will deliver "effectively zero" new ones.

PC wants consumers protected, not charged a "carbon tax....The bill doesn't, but should, provide money to help homeowners pay for such things as weatherization or to receive rebates for rooftop solar." Its main "consumer protection provision distributes free pollution allowances to electric and natural gas utilities (on the assumption) that the 50 different state utility commissions will redirect all that money back to consumers." In fact, HR 2454 is a thinly-veiled scheme to let companies profit from polluted air, in part financed by a consumer "carbon tax."

Big Coal gets a waiver until 2025. Agribusiness is exempt altogether even though it's responsible for up to one-fourth of greenhouse gas emissions. The nuclear industry will benefit hugely from the free allowances provision. A leaked memo had Exelon, the nation's largest nuclear power company, bragging that it will reap a $1 - $1.5 billion annual windfall.

Overall, carbon trading is a scam, first promoted in the 1980s under Reagan. Clinton made it a key provision of the 1997 Kyoto Protocol. He signed it in 1998, but it was never ratified. As of February 2009, 183 nations did both, but independent scientists call it "miserable failure" needing to be scrapped and replaced by a meaningful alternative.

ACESA is about profits, not environmental remediation. Its emissions reduction targets are so weak, they effectively license pollution by creating a new profit center to do it.

The Next Bubble

Wall Street also will reap a huge bonanza through carbon trading derivatives speculation exploiting what Commodity Futures Trading commissioner Bart Chilton believes will be a $2 trillion market - "the biggest of any (commodities) derivatives product in the next five years." Others see a future annual market potential of up to $10 trillion based on these schemes:

-- government-issued cap and trading carbon allowance permits to let polluters emit a designated amount of greenhouse gases; those exceeding the limit can buy rights for more from companies below their limit;

-- carbon offsets that let companies emit excess greenhouse gases provided they invest in projects purportedly cutting them elsewhere, either domestically or abroad; they can also fulfill their obligation by stretching out investments for up to 40 years - far enough ahead to avoid them altogether; and

-- besides trading allowances and offsets, polluters and Wall Street can play the derivatives game, including with futures contracts for a designated number of allowances at an agreed on price for a specified date.

According to Robert Shapiro, former Undersecretary of Commerce in the Clinton administration: "We are on the verge of creating a new trillion dollar market (through) financial assets that will be securitized, derivatized, and speculated by Wall Street like the mortgage-backed securities market" and all others that inflated bubbles that burst. If cap and trade becomes law, this market will explode so Wall Street is pressuring senators to pass it.

According to the Center of Public Integrity (CPI), around "880 total businesses and groups....reported they were seeking to influence climate change policy" as addressed in HR 2454. Representing 770 of them are "an estimated 2340 lobbyists," a 300% increase in the past five years, or more than "four climate lobbyists for every member of Congress."

In 2003, Wall Street employed none on climate issues. CPI says it now has 130 representing the usual players like Goldman Sachs, JP Morgan Chase, Citigroup and others, and why so is simple - to create a huge new revenue stream to make up for ones lost with perhaps others in the wings, thus far not revealed. Waxman - Markey delivered splendidly, setting the stage for another bubble if HR 2454 becomes law with huge pressure now on senators to assure it.

Warning: Cap and Trade Bubble Ahead

On July 1, Catherine Austin Fitts' blog headlined "The Next Really Scary Bubble" in stating:

"If you think the housing and credit bubble diminished your financial security and your community, or the bailouts, or the rising gas prices did as well, hold on to your hat" for what's coming. "Carbon trading is gearing up to make the housing and derivative bubbles look like target practice."

She quoted Rep. Geoff Davis calling it "a scam," Rep. Devin Nunes saying it's a "massive transfer of wealth" from the public to polluters and Wall Street, Rep. James Sensenbrenner stating "Carbon markets can and will be manipulated using the same Wall Street sleights of hand that brought us the financial crisis," and Dennis Kuchinich citing "The best description to date (to) be found in Matt Taibbi's....'The Great American Bubble Machine: From tech stocks to high gas prices, Goldman Sachs (GS) has engineered every major market manipulation since the Great Depression - and they are about to do it again.' "

Taibbi calls GS the "world's most powerful investment bank....a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." It operates by positioning itself "in the middle of (every) speculative bubble, selling investments they know are crap."

They control Washington and profit by extracting "vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that (lets it) rewrite the rules in exchange for the relative pennies (it)throws (back as) political patronage."

When inflated bubbles burst "leaving millions of ordinary (people) broke and starving, they begin the entire process over again (inflating new bubbles and) lending us back our own money at interest...." They've been at this since the 1920s and are "preparing to do it again (with) what may be the biggest and most audacious bubble yet" - a new cap and trade derivatives scam written into HR 2454 with GS positioned to profit most from it. Taibbi calls its market edge a position of "supreme privilege (and) explicit advantage" ahead of all others on the Street.

Contributing $4,452,585 to Democrats in 2008 (around $1 million to Obama) was mere pocket change for what it can reap from scams like cap and trade disguised as an environmental plan. The scheme was devised. GS helped write it. The House passed it and sent it to the Senate. Unless stopped, it will transfer more of our wealth to corporate polluters and Wall Street on top of all they've stolen so far from derivatives fraud and the imploded housing and other bubbles. And Goldman will lead the way finding new ways to do it until there's nothing left to extract.

Markets mayhem puts spin on statistics
International trade is the greatest casualty of this economic crisis, and nowhere is this more visible than in the large Asian exporting nations. As consumers stopped buying durable manufactured goods last year, some countries’ exports were cut in half. For the past half year, official export statistics have seemed to rub in the bad news, with every monthly release suggesting continued steep falls in exports across Asia. When China’s latest export figures are published on Friday, they will no doubt show yet another year-on-year double-digit percentage fall.

But there is more to the official trade statistics than meets the eye. Year-on-year changes in exports – which is how many statistics offices present their updates and what newspapers usually report – do tell a depressing story. Until the end of last year, Chinese exports came in every month 20-30 per cent higher than a year earlier. Then, in the last two months of 2008, year-on-year growth was approximately zero – and in January it plunged to -15 per cent and has stayed around -20 per cent since.

You might interpret those figures as saying that Chinese exports stagnated at the end of 2008, went over a cliff in January and have been tumbling ever since. But you would be wrong. In fact exports peaked in July 2008, at $137bn (€98bn, £85.5bn). They stayed close to this level until October, and the big tumble happened in the months just after the Lehman Brothers bankruptcy paralysed markets. The world’s other largest exporters – Japan, Germany and South Korea – show similar patterns.

Interestingly, the contractions had more or less finished by the beginning of 2009. Since then, exports have been bumping along at the levels of the middle of the decade – stagnant, to be sure, but not falling. Indeed Korean and Chinese exports are already up from their midwinter nadir by a double-digit percentage. In most months of 2009 China exported goods worth about $90bn. Of the four top exporters, only Germany’s sales have continued falling, but even that at a much slower pace than half a year ago.

So we fell off a cliff late last year, but have mostly been crawling flat or upward for almost six months. This may not be the best of news, but it suggests the worst is over. And it seems a whole lot better than suggested by a look at year-on-year changes, which can exhibit a worsening pattern even when exports are actually growing – if they are growing at a slower pace than the year before.

In normal times there is good reason to concentrate on year-on-year changes. Monthly figures are noisy: exports always jump around from one month to the next for reasons unrelated to the general trend. China’s exports, for example, regularly dip in January and February, around the Chinese new year. It would be a mistake to interpret that as reversals of the country’s astounding export growth. Year-on-year figures display the economically significant information in the data – the continuing upward trend – by removing seasonal variations.

But we are not in normal times where monthly changes in exports are just insignificant disturbances around a stable trend. Last year’s disruption to global markets caused the trend itself to change dramatically. In such a fast-changing environment, year-on-year changes at best obscure what is happening in the economy, and at worst misrepresent what is going on as something else. It is better then to look at monthly change or level figures, as long as one adjusts them for historical seasonal variation.

Those awaiting Friday’s statistics’ release should take heed. They should also be prepared for the end of the summer, when it will be a year since exports collapsed. If nothing changes until then, we may see year-on-year figures suddenly improve in October. But this will only be because the basis of comparison – exports one year ago – worsens, even if current export levels show only anaemic growth. Year-on-year figures will look better, not because they tell us something new, but because they stop telling us something old. So before cheering at news of a strong upswing in exports, take a closer look at those numbers.

Euro Falls on Report IMF Discussing Aid to At Least 10 East Europe Nations
The euro fell, heading for its worst week against the yen in two months, after Handelsblatt reported the International Monetary Fund is discussing aid programs with at least 10 Eastern European governments.
Europe’s currency weakened versus 12 of its 16 major counterparts after the German newspaper cited unidentified IMF officials as saying the countries applying for loans for the first time included Bulgaria, Croatia and Macedonia.

The yen and the dollar rose against most major currencies as U.S. stock futures fell, boosting demand for safer assets. South Korea’s won completed its biggest weekly loss in four months as demand for emerging-market assets declined. “There are lingering worries over the financial health of eastern and central European countries,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Investors are still risk averse, so they’re likely to sell the euro and buy the yen and dollar as safe-haven currencies.”

The euro declined to 129.09 yen as of 7:58 a.m. in London from 130.36 yesterday in New York, set for a 3.8 percent loss this week, the biggest since the period ended May 15. Europe’s currency dropped to $1.3947 from $1.4020. Japan’s currency rose to 92.64 per dollar from 92.99. The won fell 0.3 percent to 1,282.50 per dollar. The Nikkei 225 Stock Average trimmed its advance to close little changed after earlier rising as much as 0.9 percent. Futures on the Standard & Poor’s 500 Index declined 0.3 percent.

The euro headed for a second weekly loss against the dollar after Finance Minister Peer Steinbrueck said yesterday Germany’s regional state banks are the “biggest systemic risk” to the nation’s financial industry. Ukraine, Serbia, Romania, Belarus and Latvia aim for faster payment of IMF funds or an increase of existing loans, Handelsblatt also reported, citing the IMF officials. “People are still cautious about the sustainability of a recovery,” said Takao Yahata, senior manager of foreign exchange and financial-products trading in Tokyo at Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s largest publicly traded lender by assets. “As risk-aversion resurfaced, buying- back of the yen against higher-yielding currencies may continue.”

Losses in the euro accelerated after so-called stop-loss orders on investors’ positions on the currency were activated around $1.40, said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. A stop-loss order is an automatic instruction to sell or buy a currency should it reach a particular level. The yen headed for a fourth week of gains against the Australian dollar on signs Japanese investors are losing appetite for overseas assets.

Nikko Asset Management Co. said it collected 4.9 billion yen ($52.7 million) in new funds for three high-income sovereign funds, investing in the Brazilian real, South Africa’s rand and Turkish lira, which launched today, compared with the pre- registered amount of 300 billion. “Individual investors are not 100 percent certain about the prospect of the global recovery, which if continued, should have favored the currencies of resource-rich nations,” said Morio Okayasu, chief analyst at Monex FX Inc., a unit of Japan’s third-largest online broker.

The yen earlier pared its weekly gain against the dollar after Japanese Economy Minister Yoshimasa Hayashi said the government will closely watch the stock market and the appreciation of the yen. “If the yen’s rise and stock declines last a long time, there are concerns they may have a negative impact on both exporter and overall sentiment,” Hayashi told reporters today. A stronger yen may squeeze corporate profits of exporters and hurt households by eroding their wages, Japan’s Vice Finance Minister Kazuyuki Sugimoto said at a press conference in Tokyo yesterday said.

“As the ongoing recovery is still fragile, we can’t rule out the possibility of the Bank of Japan intervening in the market to prevent the appreciation of the yen if the currency breaches 90 per dollar,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Co. South Korea’s won led Asian currencies lower as sliding stock markets and concern about the pace of the global economic recovery damped appetite for riskier assets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks Asia’s 10 most-traded currencies excluding the yen, was poised for a sixth weekly decline in seven. The Kospi share index dropped as foreign investors sold more local shares than they bought, exchange data show. “The dominant theme is still risk, growth is a secondary issue,” said Julian Wee, a Singapore-based economist at IDEAglobal. “The market’s paring back its optimism and Korea is vulnerable.” The won fell 1.3 percent this week, the largest decline since the period ended Feb. 27.

New York Times could make online charging decision 'within weeks'
New York Times looking at $60 a year subscription fee for online news

The New York Times could reportedly take the decision to start charging for online news "within three to four weeks". Readers who subscribe to the print version of the New York Times could be charged $30 a year to gain access to its website, whereas nonsubscribers could be charged $60 a year, according to the Financial Times. These prices are based on a monthly subscription model which would see nonsubscribers paying $5 a month, and print subscribers being charged a discounted rate of $2.50 a month, the FT reported.

The figures are estimates based on results from a survey conducted by The New York Times to find out how much its readers would be willing to pay for online content. A source "familiar" with the New York Times has said a decision to charge could be made within the next three or four weeks.

As revenues from print advertising continue to fall in tandem with newspapers' readership figures in the US and UK, and consumers increasingly turn to the internet to seek out news, moving to an online pay system would put the New York Times at the forefront of attempts by the industry to find alternative business models. In 2007, the New York Times scrapped an experiment to charge readers access to its archive and columnists. Despite attracting 200,000 subscribers the resulting revenues were too low for the model to be sustainable.

The New York Times's latest plans are indicative of a wider urgency for the industry to adopt new business models, particularly for digital content. In May, Rupert Murdoch said that he expects News Corporation will begin to charge for access to its newspapers' online content within a year. When asked if fees would be introduced to British newspaper websites such as the Times, the Sun and the News of the World, he said: "We're absolutely looking at that."

Ilargi: One more time: QE doesn’t work.

Bank of England indicates an end to quantitative easing
London's money markets were left shuddering yesterday after the Bank of England gave its first firm indication that it is considering bringing an end to its radical programme of quantitative easing (QE). The Monetary Policy Committee voted not to increase the scale of its programme, in which it is buying massive amounts of Government debt with newly-created money. City economists had expected that with the MPC already close to meeting its £125bn QE target, it would extend the programme to the Treasury-endorsed ceiling of £150bn.

However, the MPC instead voted to leave both QE and its 0.5pc interest rate unchanged. The Bank then confirmed that it would trim the size of the impending reverse auctions in which it buys government bonds to ensure it does not meet the target ahead of the next MPC meeting. The decision caused one of the biggest leaps in government bond yields since the programme began in March. The benchmark 10-year gilt yield leapt by almost a fifth of a percentage point as traders abandoned UK government debt, fearing that the Bank may soon abandon its purchases of them altogether. The yield was at 3.8pc by the end of the day, while the pound rose by almost one and a half cents against the dollar, closing at $1.6235.

In a statement accompanying the decision, the Bank said it: "expects that the announced programme will take another month to complete. The Committee will review the scale of the programme again at its August meeting, alongside its latest inflation projections." Although economists said it was rational for the Bank to re-examine the scheme in the light of their new Inflation Report projections, they said the mere fact that it had stopped short of renewing the scheme indicated that it may soon close it.

Michael Saunders of Citigroup said: "If it was already blindingly obvious to the Committee that they will need to extend QE at the August meeting, then they would surely have used some or all of the final £25bn of the £150bn authorised by the Chancellor, hence continuing QE up to the August meeting and getting in as much stimulus as quickly as possible. The fact that they have not done so implies the MPC are in considerable doubt as to whether they will need to extend QE at the August meeting."

It is understood that senior Bank policymakers have come to the increasing conclusion that although deep-seated deflation was a significant threat earlier this year, the weight of monetary stimulus pumped into the economy through interest rate cuts, QE and sterling's depreciation will serve to prevent a deflation trap. The decision underlines the likelihood that at some point in the coming year attention will turn instead to so-called exit strategies from QE, which could involve selling off some of the gilts or raising borrowing costs. However, Dominic Bryant of BNP Paribas said: "Ultimately, having played a good game since March when QE was announced, the Bank has scored an own goal at its July meeting. It disappointed expectations... it has also increased uncertainty about the level of the Bank's commitment to QE generally."

Prices charged by UK manufacturers unexpectedly falls in June
The prices Britain's manufacturers charged for their goods fell unexpectedly in June, underlining the pricing pressure on a key part of the economy. Producer output prices fell 0.2pc in May, pushing them 1.2pc lower than a year earlier - the biggest annual fall in prices since December 2001. Economists had predicted a 0.3pc rise in June. The drop mainly reflected falls in chemical product prices, which fell 3pc in June according to the Office for National Statistics, and was partly offset by a 3.9pc rise in petrol product rises. "June's retreat in producer prices reinforces belief that consumer price inflation is headed down significantly further over the coming months," said Howard Archer, chief UK economist at IHS Global Insight.

The Consumer Prices Index, which is the Government's preferred measure of inflation, is currently 2.2pc and ONS data published next week are expected to show a further fall. Input prices, which manufacturers pay for their raw materials, rose by 1.5pc in June, almost twice as much as the 0.8pc increase expected and mainly reflecting oil price rises. Prices were down 11pc in the year to June however. "The data reinforce belief that the Bank of England could yet very well increase its quantitative easing programme in August, particularly if the economic and lending data disappoint over the coming month," said Mr Archer. On Thursday the Bank's MPC voted to leave interest rates unchanged at 0.5pc, and did not raise its commitment to QE above the £125bn it had already pledged to spend.


PKP said...

Prime Minister Stephen Harper acknowledged for the first time on Friday that the federal government could run a deficit beyond five years if the recession lasts or Canada's economic recovery is weaker than forecast in the January budget.

In response to a question about his five-year budget plan, Harper was clear he would not cut any programs, even if it meant abandoning his plan to eliminate the deficit within five years.

"Let me be very clear on this: we will allow the deficit to persist if necessary," he said. "We will not, in order to meet some timetable, start raising taxes and cutting programs. That's a very dumb policy."

Harper says he'll allow deficit to persist 'if necessary'

Arnold said...

Stoneleigh & Ilargi:

I am a long time reader. I have a short comment to make. First, I absolutely love your blog and really appreciate your (both) insights on the state of the world and I really appreciate your ability to look at things from a multi-faceted manner.

However, I want to challenge you both to also provide some of the positive developments that can arise during and after this crisis. I would also really appreciate if Stoneleigh could expand upon what she is basing her call for a multi-decade depression. I agree with another commenter who saw a recovery sometime around 2015 since the housing market should bottom and begin recovery around then. Of course, this entire thesis is contingent on the United States re-developing its industrial base. Again, I want to challenge both Ilargi and Stoneleigh to at least provide some good news and perspectives when the opportunity presents itself. The world is not going to fall apart. It will come under stress, but, for a bunch of reasons, I don't see the United States disintegrating into anarchy.

Thanks and appreciate the good works.

Anonymous said...

Someone needs to tell Prime Minister Stephen Harper when that little housing bubble up there blows he is going to be in a world of hurt.

jal said...

I guess that the "lawmakers" knows best. (How to make money)

"Carbon trading is gearing up to make the housing and derivative bubbles look like target practice."
When the unemployment numbers, that are reported, reach record lows, would be a good time for the "lawmakers" to start worrying.
There is no housing bubble in Canada ... The people just aren't going to make enough money to pay their mortgages and their credit card.

Ilargi said...


I want to challenge you both to also provide some of the positive developments that can arise during and after this crisis.

Like what? "Obamaville family finds tent that doesn't leak"?

I would also really appreciate if Stoneleigh could expand upon what she is basing her call for a multi-decade depression. I agree with another commenter who saw a recovery sometime around 2015 since the housing market should bottom and begin recovery around then.

Recovery based on what? A recovery indicates a return. What do you want to return to?

Of course, this entire thesis is contingent on the United States re-developing its industrial base.

Producing what?

Again, I want to challenge both Ilargi and Stoneleigh to at least provide some good news and perspectives when the opportunity presents itself.

That's what the mainstream media have specialized in.

Therefore, we don’t need to balance ourselves, we are the balance.

The world is not going to fall apart.

But human society as you know it will.

It will come under stress, but, for a bunch of reasons, I don't see the United States disintegrating into anarchy.

Fair enough, let's see those reasons.

Anonymous said...

"Look, it's simple: the true problem is twofold.

1. The money is taken from the wrong group of people.

2.The money is given to the wrong group of people."

The richest one percent of this country owns half our country’s wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It’s bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you’re not naive enough to think we’re living in a democracy, are you buddy?
Gordon Gekko

"never knew there were so many virgins commenting on finance."

Arnold said...

Hi Ilargi:

1) Despite its very severe problems, the American political institution, in my opinion, is a great deal stronger and more flexible than many other countries in the world. I really do believe that.

2) It is in no countries economic interest to see America completely fail, since for this to happen we would effectively see a world-wide collapse. Will we see America severely weakened as an international power? I suspect so. However, I don't see it falling into dissolution.

3) Despite all of the friction in this country, there really is still an "American" identity that almost everyone in this country identifies with. No one I can think of would want to see this country collapse and certainly would not be involved in any activities to that end.

4) The American populace is extremely docile. I don't see Americans today as the same people that started the Civil War or even the American Revolution.


Arnold said...

BTW Ilargi. I expect that America will return to a productive economy, and like the prior Depression, will be forced to produce its way out of it. Since consumers still have some demand for material goods, and thus there is a market, we can produce those items that are demanded. Many of the things from China can be produced here. I mean demand has not completely ceased after all.


Anonymous said...

The deliberate and malicious withholding of anything resembling the truth about our financial situation by the MSM, the Administrations of Clinton, Bush and Obama, and the gutless cowardliness of the Congress will be our legacy and epitaph as a so called modern 'civilization'.

Because we have not faced up to this mess in a timely fashion, it's severity has increased exponentially in the last year. Each day, week or month it gets drawn out puts us years, decades or even centuries into a hole that we as a species will never climb out of.

I've never been so disgusted with humanity in my entire life as this last couple of years. A wallowing pig sty of greed and an inability to live within our means, as merely one species among many on Earth.

We really were watching a chilling preview of our collective future as hurricane Katrina unfolded on TV and the future of our great grandchildren living in a Gangster Nation rapidly devolving into soulless desperate scavengers, dung beetles rolling what's left of the previous culture into stinking little balls.

The planet will give an enormous sigh of relief at the self destruction of Homo-megalomanius.

Anonymous said...

Sigh. Where does one begin with Arnold?

Mugabe said...

Since everyone loves to breathe fire on the MSM, here is a tidbit from the WAPO.

You couldn't make that stuff up.

P.S. if Ilargi ever sounds cheerful, it would be like the end of the movie One Flew Over the Cuckoo's Nest -- start looking at his head for scars.

Arnold said...

Mugabe - The problem is that fatalism is just as bad as complacency. Both are counterproductive and both are destructive. I appreciate Ilargi and Stoneleigh but we need some analysis of possible solutions, as well as acknowledgment of some of the positives out there.

Anonymous said...

Bit of advice to Arnold from a long time lurker - take the predictions here with whatever sized grain of salt you have at hand. There is no oracle who can predict the future. Despite the fact I&S will largely get it wrong they do provide interesting fodder for thought and discussion.

We make our own future, both individually and collectively. And I agree with your view on US cohesion. Neither I nor S are Americans and do not live here. Thus they miss key parts of what makes us "us". And this is not to say we are somehow superior or different than other folks in the world. I'd chalk it mainly up to the attitude that giving up is not part of the equation and somehow there will always be a set of solutions to any problem. This seems something Americans possess in much larger measure than many other cultures or countries. The power of this apparent blindness to adversity and an utter refusal to give up or desist is part and parcel of our culture.

Folks outside of our culture often ailt to understand our basic pigheadedness. It's what got our ancesters across oceans, forest, and prairies solving innumerable "intractable" problems in the hope of a better life. I would say it's probably something genetic in fact.

PKP said...

Rothbard believes (as do I) that the severity of a depression is directly proportional to the amount of government intervention directed at “fixing things.” He contrasts America’s depression of 1920, which lasted less than a year, with the Great Depression, which just about dragged out into World War II.

America used to have depressions all the time. The 19th century and early 20th century were peppered with them. They were always short and sweet, because the US government was not yet large or powerful enough to really do anything about them. So the panics would come and quickly pass…excesses would be removed from the system…and the path would be clear for the next economic upturn.

The last time the US government pursued a mostly laissez-faire policy in handling a recession/depression was 1920-1921. Warren Harding was president - so it’s not hard to imagine he had a difficult time keeping his hands off the levers, because Harding was widely regarded as one of the least qualified presidents in American history. He’s the guy who Republicans believed just looked like a president – so they dressed him up, and sure enough, he was eventually elected into office.

Ironically, the man Harding appointed as Secretary of Commerce in March 1921 was none other than Herbert Hoover, who only accepted the position on the condition he’d be able to meddle in government economic policy. So Hoover quickly set to work in 1921 by mapping out boneheaded designs for public works projects and other central planning types of activities.

Fortunately for the US, the depression ended before Hoover was able enact any of his programs. But the stage was set for the big dance, coming up at the end of the decade.

When the stock market crashed on October 24, 1929, Hoover kicked into gear right away and started “doing stuff”. He ignored the laissez-faire advice of his Secretary of Treasury Andrew Mellon, who said:

"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

How Herbert Hoover Put the “Great” in Great Depression

Tom B. said...

Re: July 10

I must protest your dissing of Paul Krugman for his fake Nobel. Despite this handicap, he seems like a decent guy with good instincts and to pick on this irrelevant issue cheapens your argument

VK said...

@ anon 11.44, I have no idea as well. I wonder if he's been regularly reading? As well as going through comments? The optimism bias shines clearly through many times on the comments section, the human brain is wired to be slightly optimistic and happy for most ppl and living through a period of unrivaled progress, the message of I&S can be tough to absorb. It requires a lot of additional reading, on energy and net energy, evolution and mate selection, how the brain works, how societies collapse etc etc. The thing is that the financial crisis is just one aspect of the crisis, there are other dangers out there- peak net energy, fertilizer production declining,limits on metals and minerals,top soil erosion,climate change,the population time bomb etc to name a few. In a negative sum game which is the world we are in, there are declining resources every year-this creates a dangerous situation,where countries inorder to mitigate their declines must cause other countries to crash faster and still the real wealth pie gets smaller :-(

el gallinazo said...

Tom B.

Among the minority of Usacos who have heard of Nobel prizes, the group that realizes that The Bank of Sweden's Prize in the Economic Sciences in Memory of Alfred Nobel is not a "real" Nobel prize is in indeed select. Since winning a Nobel gives the winner greater authority and validity in the eyes of the public, when it comes to something as political as the economic crises (as opposed to say mitochondrial research) it is useful to remind people that the prize is a sham. Particularly when the winner is a regular op-ed journalist for a major national newspaper. I prefer myself to refer to it as a pseudoNobel.

VK said...

@ Tom B, good instincts?? For what? Cheerleading for debunked keynesian ideas? The promotion of the misallocation of resources via 'stimulus'? Changing his stance on economic prospects virtually every 2 weeks- oh it's a depression,oh it's not so bad,we're recovering soon,oh it's a deep recession we need more stimulus. Someone please tell him, the problem can not be the solution, it merely kicks the can down the road until you can't kick anymore when the radioactive brick road comes. He might be a pleasant man in person but from anecdotal evidence so was Bush, it's the ideology that's dangerous.(though I do agree with his worry on climate change and the recent malthus posts)

Anonymous said...

First time poster - long time reader.
Last Night's "Bill Moyers Journal":
on the current Healtcare Reform big show" is probably worth a watch/read, but it was the last five minutes of Moyer's commentary that stuck me the most. Could easily apply to just about anything that goes on in DC.

BILL MOYERS: Quality, affordable health care's on the critical list in America. And so is the newspaper business. So maybe it's not surprising that one of the most powerful papers in the country attempted an unholy alliance, trying to turn a profit from its newsroom's coverage of the fight for health care reform.

You may have missed the story because it broke on the eve of the July 4th weekend. The publisher of THE WASHINGTON POST, Katharine Weymouth — one of the most powerful people in the nation's capital — invited top officials from the White House, the Cabinet and Congress to her home for an intimate, off-the-record dinner to discuss health care reform with some of her reporters and editors covering the story.

But she then invited CEOs and lobbyists from the health care industry to come, too — providing they fork over $25,000 a head, or a quarter of a million if they want to sponsor a whole series of these cozy little get-togethers. And what is the inducement she offers them? Nothing less than — and I'm quoting the invitation verbatim — "An exclusive opportunity to participate in the health care reform debate among the select few who will actually get it done." The invitation reminds the CEOs and lobbyists that they will be buying access to "those powerful few in business and policy making who are forwarding, legislating, and reporting on the issues."

Remember, the invitation promises this private, intimate, and off-the-record dinner is an extension "of THE WASHINGTON POST brand of journalistic inquiry into the issues, a unique opportunity for stakeholders to hear and be heard."

Let that sink in. The "stakeholders" in health care reform in this case do not include the rabble — the folks across the country who actually need quality health care but can't afford it. If any of them showed up at the kitchen door on the night of this little soiree, a bouncer would drop kick them beyond the beltway.

In other words, before you can cross the threshold in Washington to reach "the select few who will actually get it done," you must first cross the palm of some outstretched hand. The dinner was canceled after the invite was leaked to the website — by a health care lobbyist, of all people. But it was enough to give us a glimpse into how things really work in Washington. A clear insight into why there is such a great disconnect between democracy and government today, between Washington and the rest of the country.

According to one poll after another, a majority of Americans not only want a public option in health care, they also think that growing inequality is bad for the country, that corporations have too much power over policy, that money in politics is the root of all evil, and that working families and poor communities need and deserve public support when the market fails to generate shared prosperity. But when the insiders in Washington finish tearing worthy intentions apart and devouring flesh from bone, none of these reforms happen. Oh, they say, "it's all about compromise, all in the nature of the give-and-take of representative democracy." That, people, is bull — the basic nutrient of Washington's high and mighty.

It's not about compromise. It's not about what the public wants. It's about money, the golden ticket to "the select few who actually get it done." And nothing will change. Nothing. Until the money-lenders are tossed out of the temple, and we tear down the sign they've placed on government — the one that reads: "For sale."

I'm Bill Moyers.


PKP said...

Tom B.

By PAUL KRUGMAN Published: Friday, August 2, 2002

The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble

Leona said...

Anon 4:00 am

Just one little note on our cohesive and resiliant American spirit.

The other day I was walking around a designed walkable community in the middle of a large heartland metropolis. It was lovely and I was walking with my mother, a long time social advocate for such things.

As we walked a couple inner city kids from the next block over started throwing rocks at us. We said "hey, quit throwing rocks!" The one kid looked at us, kept throwing rocks at us and said "Who are you accusing of throwing rocks?" Rock fly. "Are you accusing ME of throwing rocks?"

It was surreal. I think that portends how Americans will deal with the future. In very few places are we one people with one mind.

Anonymous said...

"...To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that... Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble..."

Krugman deserves to be tarred and feathered for saying crap like that. Jim Cramer's Youtube of him admitting to manipulating the market (illegal and immoral) is the stuff that main stream 'journalists' are made of, pure godshite hubris.

On second thought, maybe we should just start throwing rocks at this assclowns as a 'warm up act'.

ric2 said...

Aloha Arnold -

Hope for the best. Prepare for the worst. Iʻd much rather have smart critical thinkers and communicators like I & S who are so generous of their time helping me to prepare for the worst instead of hope for the best. Especially when it seems like the "American political institution" you claim is so strong and flexible focuses on presenting unrealistic hope to the docile citizens. I agree that fatalism and complacency are deadly traps that will ensnare many people in the upcoming months and years, and the US .gov seems to be actively setting these traps. It is left to private individuals like ourselves and this blogʻs hosts to avoid these traps and help others avoid them. I am grateful some non-citizens like I&S are doing so much to help us undeserving Americans.

Anonymous said...

How can I PDF TAE each day? I'd enjoy reading it away from my computer. Thoughts? DR

Unknown said...

Arnold - In your view, how can we have an extremely docile public while also maintaining strong political institutions?

Hombre said...

For Arnold

I like your positive attitude but...

Try this site for some reasons why we are looking at an X (unknown) future.

Hombre said...


You said it better... and before I could type it out.

dan w said...

Mornin' everyone....

a couple of comments:

1. The unemployment tale is so far, far worse than the agents of government would ever let on. Something we often forget when we crunch these numbers is how the unemploymewnt of but ONE adult impacts those with whom he/she has contact and FOR WHOM he/she has responsibility. I wrote about this very issue in AshizAshiz some months ago...but even I under-estimated the situation.

In a United States in which a one-income household simply cannot make ends meet (Maybe it could in 1967, but in 2009 a one-income household that is making ends meet is an anomaly), such a household----assuming for the sake of argument 2 children---immediately (or once the severance and unemployment benefits go away) experiences significant stress. Bills go unpayed, family tensions are externalized (often violently), alcohol and substance abuse skyrockets, children lack proper nutrition and supervision, the number of kids needing mental health services increases dramatically.........

I think my point is clear: when we examine unemployment, we need to consider just how disastrous the unemployment of ONE adult is to the healthy maintenance of the fabric of family, community and society. As with ALL exponential functions, growing and mass unemployment not only expands exponentially, but its impact extends well-beyond just the added digit to the rolls.

2. Have we even begun to consider how dependent we are upon the Internet as a source for free-flow of information )via blogs like TAE, etc.)???? If/when the PTP turn the filters "up to 11", have we any contingencies for keeping in contact and maintaining our mechanism for political dissent???

Hombre said...

Dan said...

"I think my point is clear: when we examine unemployment, we need to consider just how disastrous the unemployment of ONE adult is to the healthy maintenance of the fabric of family, community and society. As with ALL exponential functions, growing and mass unemployment not only expands exponentially, but its impact extends well-beyond just the added digit to the rolls."

Great point. I can only add... Arnold (above) are you getting this?

Ilargi said...

Now, I don't want to bash anything American other than the lying cheating Mussolini politics that are destroying the US economy and, inevitably as a result, its society. But I do want to question that alleged American spirit that, oh so conveniently, "nobody but an American can understand".

As a commenter just claimed about that spirit: "It's what got our ancesters across oceans..."

You shouldn't have said that. Across oceans, you say? So where did they come from? Obviously, from a myriad of countries where now people, as per your claim, are unable to understand their own ancestors. For they are as much their ancestors as yours, of course. A 100 or 200 year period of time doesn't negate that in any possible way. So what could it be, pray tell, that renders all those Europeans incapable of understanding their very own great (great-great-etc) grandparents?

Perhaps one response might be that those European ancestors who came to America were the most audacious, the most adventurous and the strongest at will. But that doesn't seem to fly either. The vast majority among them were the poorest and the most desolate in the European countries they came from, not the smartest or strongest, not the alpha males and females in their societies. Apart from the occasional exception, they were the ones that had failed.

Hence, it would seem to me that the only ones who believe in that special American spirit that everybody else fails to comprehend are the Americans who from their earliest days get force-fed a myth that cannot withstand much of any scrutiny.

And I think that's just fine. Why should it? There's nothing more special about Americans then there is about the French or Germans or British or Japanese or Chinese they descend from, all of whom, in case you're not aware of it, will gladly and boastfully claim a similar special status among peoples. People like myths. But that doesn't make them true.

Still, yes, I know, I know, saying so makes me anti-American in the eyes of, but only in the eyes of, Americans.

Stoneleigh said...

Anon @4:00,

We make our own future, both individually and collectively. And I agree with your view on US cohesion. Neither I nor S are Americans and do not live here. Thus they miss key parts of what makes us "us". And this is not to say we are somehow superior or different than other folks in the world. I'd chalk it mainly up to the attitude that giving up is not part of the equation and somehow there will always be a set of solutions to any problem. This seems something Americans possess in much larger measure than many other cultures or countries. The power of this apparent blindness to adversity and an utter refusal to give up or desist is part and parcel of our culture.

Perhaps Americans are not always aware of what the populations of other countries have stoically endured. Within the last century I'm thinking of the Blitz in London, the Hungry Winter in Holland, the carpet bombing of Germany, the Holodomor in the Ukraine, Norwegians watching almost everything south of the arctic circle burned down, Rwandans knowing that they and their families were being hunted by their own neighbours, people in Sierra Leone having their limbs hacked off by roving bands of drugged child soldiers, or the anarchy and starvation in Somalia, and many other unbelievably awful things that people have had to live through in many other places.

My own mother can tell me about the bomb that blew the roof off her house in Whitely Bay when she was a terrified little girl hiding in a bomb shelter. My father was evacuated from London and sent to live with relatives in the country when he was only three, while his mother stayed behind to work in a city being bombed constantly. My grandfather died in the war. I traveled to study in London and had to evacuate buildings and subways subject to IRA bomb threats. I also remember running to catch a train across Belfast in the late 1980s, past burned out cars and police stations surrounded by razor wire, wondering if the ever-present security forces were going to think I was running away from having planted a bomb or something.

Americans have not been personally tested for a very long time. Even 9/11 was a single incident. How would modern Americans cope with bombings every night? Would they still get up the next day and the day after that and walk to work past the wreckage and the casualties? What would they do if they had to go to work everyday knowing that there could easily be a bomb on their bus or subway? Would society hold together under that kind of pressure? I am not so sure.

The notion that there will always be a solution to a given set of problems, so that one will never have to face any real consequences, and business as usual can continue after a minor interruption, is not just harmlessly delusional. It is symptomatic of a deep state of denial that actively interferes with taking the small-scale actions necessary to mitigate the worst of what is coming. Grand visions lead to massive stimulus plans that do nothing at all to help ordinary people and only add to the burden they must carry. A little humility might lead instead to strengthened communities, local currencies, or a deliberate attempt to re-acquire and share lost knowledge.

Ilargi said...

Very valid points, Dan.

I'm as you can see, trying just to figure out the numbers. And that's just about impossible. What lies beyond and comes with them in real life terms is another, and far more important, story.

I've ranted before against government practices that are geared towards making the unemployment numbers invisible, and thereby the people who lose their jobs. The same, of course, happens with the consequences of unemployment: the main focus is on hiding them from the "main constituencies", aka the folks who vote you into power.

As for the level of information we produce in the face of the generally accepted "don't ask don't tell and if you must talk, make sure you lie about it" policy, we are but a bleep. That's why I always emphasize looking around in your won life and gathering your family and friends closer while you still can.

Anonymous said...

The notion that there will always be a solution to a given set of problems, so that one will never have to face any real consequences, and business as usual can continue after a minor interruption, is not just harmlessly delusional. It is symptomatic of a deep state of denial that actively interferes with taking the small-scale actions necessary to mitigate the worst of what is coming.

Talk about misstating the premise to fit your thesis! Climb off it.

My family lost a total of five people in WWII. We lost three in the Korean War and two more in Vietnam. Such is life (and war).

My statement was that there are myriad solutions to any problem. This has nothing to do with business as usual. But you are smart enough to know this already. Your are simply twisting things to fit your little doomsday scenarios. Well dear, you are neither psychic nor prophetic. Your refusal to entertain a larger scope of solutions to your envisioned future and its problem set are mark of a closed and narrow mind.

Hombre said...

Stoneleigh... "Perhaps Americans are not always aware of what the populations of other countries have stoically endured. Within the last century I'm thinking of the Blitz in London"

And you might add, the 21 million killed in Russia, the raping of China by Japan, etc. etc.

And yes, many, if not most of us are well aware of those things and a plethora of other realistic truths about the world.

You are answering the silly remarks of ONE narrowminded U.S. citizen commentor who does not speak for me nor most other broader minded folks here in the states.

Ilargi is, of course, not anti-American (U.S.), he's just anti silly-biased commentor!

There's only 9 cents difference between Canada and the states in any case!


Ilargi said...

"There's only 9 cents difference between Canada and the states in any case!"

Maybe only 6 cents, as in:

The Sixth Sense of Separation.

Stoneleigh said...

I should add that the most recent test of American social cohesion in the face of crisis was Hurricane Katrina and its aftermath. Look at what happened to ordinary people who were stuffed in a stadium without necessities and left there for days, or turned back on the bridge out of the city or treated as criminals by the security forces who should have been helping them. Since then they have dispersed with nothing, or been stuffed in pathetic FEMA trailers and forgotten. The city remains mostly empty. Even in the French Quarter which was untouched by floods, the upper floors of the buildings are mostly empty, although the shops on the ground floor are open. Basic services are still not available for many.

This was one predictable event in one city and the response has been shameful. What would the response be if many places were affected simultaneously?

Greenpa said...

Stoneleigh; 9:11 - very nicely done. Please- just ignore this idiot now. Any moron who responds with "well, dear" is so far beneath you as to be ludicrous. :-) He IS delusional. Explaining things to delusional personalities is a sisyphean undertaking.

Chaos said...

@ Anon 9:24

NIce. I suppose there's a link to your successful predictions or some other materials that you can point to that would justify your intemperate response? Because the name calling seems to, well, distract from your point, and directing it to Stoneleigh, who will not respond in kind, diminishes any credibility you might have had.

Persephone said...

Excellent response Stoneleigh!

The night following 9/11, I was enjoying cocktails with 2 extremely interesting Irish gentlemen who enlightened me to living with the IRA.

I came away realizing that we Usacos are fortunate to have experienced ONE 9/11.

Fuser said...

I'm sure this has been answered at some point, but how did you come up with the name Automatic Earth?

BostonJoe said...

Anonymous @ 4:00 a.m. says, And I agree with your view on US cohesion. Neither I nor S are Americans and do not live here. Thus they miss key parts of what makes us "us". And this is not to say we are somehow superior or different than other folks in the world. I'd chalk it mainly up to the attitude that giving up is not part of the equation and somehow there will always be a set of solutions to any problem. This seems something Americans possess in much larger measure than many other cultures or countries. The power of this apparent blindness to adversity and an utter refusal to give up or desist is part and parcel of our culture.

American exceptionalism. Manifest destiny. A load of bullshit. As a life-long "American," who has served, etc., I'd welcome S & I as honest observers of my culture--and remain pretty certain in my belief formed on personal observation--that we are among the most brainwashed nations in the history of the world for the vast majority of us in the U.S. to accept this idea of exceptionalism without any true critical thought, and to lash out at the ignorance and lack of understanding of foreigners (or natives) who challenge that baloney.

Seriously--the critiques of this blog in the last months make me imagine a room of stooges trying to influence what is becoming apparent reality. System is in trouble. Feel as exceptional as you want. System as you know it--as you labor to support it--is going away. New system going to follow.

Has anyone read "The Road" by McCarthy in last few years? Does anyone else get the feeling that our human nature is not going to do well with extreme scarcity?

justjohn said...

Anon DR at 8:21am asks how to create a PDF ...

If you are on a Mac, choose print, then PDF.

If you are on windows, search Google for "create pdf". There are several solutions listed on the first page of results. I've never used any of them, since I get the paid version of Acrobat thru work, it allows printing to pdf.

BUT, do you really need PDF? Your web browser probably includes a feature to "save as HTML", which the browser will then display off line.
Note to Ilargi: would you consider providing an export of TAE? I was thinking of doing a "textual analysis" project. creates an XML file, but I'm not sure what it contains.

Of course, I ask this as piker, never having donated....

Anonymous said...

My family lost a total of five people in WWII. We lost three in the Korean War and two more in Vietnam. Such is life (and war).

Well that is a pretty hard solution to the problem of patriotism but as you argue there is a solution to every problem. I could be wrong though and it might be instead a solution to a genetically derived propensity to lose things.

Anonymous said...

Ilargi @ 9:10 AM

Excellent response!


el gallinazo said...

Mad Max this week with Michael Hudson

Hudson is a national treasure. He is incredibly lucid. If W was the decider than Stoneleigh and Hudson are the explainers (to be pronounced in Ricky Ricardo fashion)..

He made one comment that I found interesting. He referred to the $4T of "worthless" dollars that other central banks and sovereigns hold and how they are attempting to dump them for farmland in places like Africa. But he goes on to point out that ownership of the land means nothing. What counts is who can reap the surplus wealth from the land. These African countries, for example could elect or coup governments that would decided to impose a surplus wealth tax on production, so the wealth would be diverted from the foreign sovereign owners to the local governments. Perhaps that is why one world government and "law" are so critical to TPTB.

I guess I would like to ask Stoneleigh about Hudson referring to these trillions in worthless dollars owned by sovereigns. And he says they are worthless because the USA will never be able to repay them. And most of these dollars are in Treasuries, whether bills, notes, or bonds. I figure they are not worthless as long as the US Treasury keeps making the interest payments on them. Deleveraging will destroy almost all the credit, but the treasuries are as close to "real" money as you can get outside of actual cotton (candy) currency, So Hudson is saying the dollars are worthless but Stoneleigh is saying that over the next several years and probably to or beyond the middle of the coming decade they will be far from worthless. I suspect that part of the resolution to this difference is that their value will be a lot higher domestically than internationally. Comments?

Anonymous said...

Robert W says: A while back I read a post that said the phrase automatic earth came from Paul Simon's Graceland Concert. True or not I loved that explanation as I was a huge fan. especially of Ladysmith Black Mombazo.

Robert said...

It was a dry wind
And it swept across the desert
And it curled into the circle of birth
And the dead sand
Falling on the children
The mothers and the fathers
And the automatic earth
These are the days of miracle and wonder
This is the long distance call
The way the camera follows us in slo-mo
The way we look to us all
The way we look to a distant constellation
Thats dying in a corner of the sky
These are the days of miracle and wonder
And dont cry baby, dont cry
Dont cry

Anonymous said...

Stoneleigh @ 9:11 AM

A very touching response... May I add, too, the horrors endured by human beings in Hiroshima and Nagasaki. Personally, I remember as a child the anxiety of hiding in a bomb shelter in La Habana with my mother and sister during the Bay of Pigs invasion in 1961. Perhaps most Americans (75 to 80 percent supported the Iraq War initially) would not be so gung-ho and supportive of war and empire if they suffered the horrors of modern warfare on their own soil.

jal said...

If I was an optimist, I would only find “good” news/info and disregard any “bad” news, (conflicting info)
If I was a pessimist, I would only find “bad” news/info and disregard any “good” news, (again, conflicting info).
Since I’m a realist, opportunist and pragmatist, I’ll consider both sides and take whatever action that I can to minimize danger and optimize the rewards. (Like most of the contributors that are here.)

If we were among the top 1% of the population we would react the same way, ( minimize danger and optimize the rewards). If we did not we would not be among the top 1%.

Letting the banking industry crash would not have been in the interest of the top 1%.

If you disagree you are a fool and an idealist.

Those who expect to see a stop to the “stimulus” packages are dreaming.
Those who expect to see a redistribution of wealth, in the USA, as has been done by other countries (overthrow of the government), are also dreaming.

Getting the “facts” and taking actions to minimize danger and optimizing the rewards is all that there is.
Get it wrong and you’ll lose your shirt and maybe your life.

Ilargi said...

El G:

1) Between now and the moment the dollars actually become worthless, they can be put to a lot of creative and valuable uses. And they will. It really doesn't matter if the currency loses 20% or 40% of its value. What matters is what they buy, and not in today's value but in future value.

2) The Chinese won't let a warlord or two stand in their way. Not an overly clever remark by Hudson.

We need to start looking through Chinese eyes, or we'll keep getting it all wrong.

China over the next century needs Lebensraum. They have very little arable land for a rapidly growing population, and what land there is deteriorates fast. Their entire water supply is fading even without climate change.

We know the solution to that one, it's how today's US and Canada came into existence.

Sub-saharan Africa, with the exception of Nigeria, is sparsely populated. All China needs to do to get control of many countries is to send over 5 or 10 million Chinese prepped to defend themselves. They'll be happy to be rid of them. They can, or maybe even need to, do this 10-20 times. And that's a conservative estimate. They may realistically need and want to relocate half a billion people.

South America looks good too. Land prices in Uruguay are plummeting. Which proves it doesn't matter if the USD loses a chunk of its value; not if other things do too.

China needs land. They need dollars to buy it. They have lots of dollars. Alternatively, you can see the dollars as the beads and trinkets of the 21st century.

If countries refuse to sell, Beijing can send over a 1 million strong fully equipped army. They're not just now thinking about these things, they've been preparing for decades.

Of course, Beijing doesn't count on a Tea Party. But that's in the future.

jal said...

@ Ilargi
re: China

Darn .... its sounds like a practical way to minimizing the danger and optimizing the rewards.

VK said...

"If countries refuse to sell, Beijing can send over a 1 million strong fully equipped army. They're not just now thinking about these things, they've been preparing for decades."

I can see it happening but I doubt for that the Russians, Europe and the US will stand idly by while resources are snatched away from them. Historically, Sub Saharan Africa has been under the influence of the US, UK and France. These countries wield enormous power, they get access to cheap resources - gold, diamonds, copper, cocoa etc which are then processed overseas and sold back in Africa at a premium.

The possibility of resource wars is immense as Europe and the US don't want to lose 'their' resources. I see a strong possibility of Japan rearming itself along with Germany. These two are not going to stand on the sidelines with so much at stake.

It's a negative sum game and while China holds many cards, I don't think they hold all of them, Brazil might have a thing or two to say about a Chinese invasion of S. America being the regional power. One thing is for sure, the player who is the quickest and most nimble will emerge as the winner. If there was to be a nuclear war, the country that would strike first and the hardest would win. The idea would be to take your opponent out 'quick and clean'.

D. Benton Smith said...

@ Anonymous 4:00 am

For better or worse, we are not our ancestors. We are us.

Take a long hard look at us, and then tell me how many of your neighbors could handle a return to the markedly more primitive conditions such as were commonplace as late as the 1930's.

Some people of extraordinary wealth may avoid that sort of jarring decline in standard of living, but most will not.

From what you wrote it appears that you aspire to the right values. To that aspiration must be added a great deal of discomfort and sweat.

In the past few decades the most highly rewarded abilities were abstract reasoning and sociopathy. In the near future (and for a long time thereafter) the key skills will be the capacity for hard work and social cooperation.

There will be neither time nor patience with talking the talk. It will be all about walking the walk.

The lives of those who fail the test will be, as the man said, "nasty, brutal and short."

Anonymous said...

Humans are adaptable. It doesn't matter if you are rich or poor or what your family history may have been. You will adapt or you will die. Humans are designed to adapt and have shown time and time again throughout history that survival will be maintained despite the level of trauma or discomfort experienced.

Anonymous said...

Illargi says: Perhaps one response might be that those European ancestors who came to America were the most audacious, the most adventurous and the strongest at will. But that doesn't seem to fly either. The vast majority among them were the poorest and the most desolate in the European countries they came from, not the smartest or strongest, not the alpha males and females in their societies. Apart from the occasional exception, they were the ones that had failed.

You seem to not only contradict yourself, but also prove the point you are arguing against.

This is quite an elitist statement, Illargi.

Anonymous said...

Obama Says Economic Stimulus Plan Worked as Intended

Pretty honest headline really. Bailed out the banking cartel and the elite oligarchy and throw everyone else under the impovrishment bus, just as it was intended to do. Got to love it when a plan comes together.

Greenpa said...

"This is quite an elitist statement, Illargi."

You are cracking me up!! A textbook provocateur statement.

Golly, and here I believed. with all my heart, that everyone here was Pure Joe SixPack, with a GED.

Dang. Crushed again.

Bigelow said...

About that American exceptionalism and Manifest destiny: earnestly suggest Americans do some research on the “American Way” and the National Association of Manufacturers (NAM) and Chamber of Commerce's relentless campaigns of persuasion that Americans have been subject to for about 100 years.

el gallinazo said...

Is the comment section of this blog on the down slope of peak intelligence?

Jim R said...


This is what keeps me reading TAE. I just read another dkos article about the GS & Aleynikov matter. You immediately wondered why he was waving a red flag, an observation that was absent from other early reports on the matter. This guy clearly had inside access to GS' computer security network yet chose to leave tracks.

I continue to read TAE for insights such as these.

Anonymous said...

The Recession's Silent Victims
“In today's global economic downturn, there's at least one business that's expanding: modern-day slavery.”

Anonymous said...
“The Dow, S&P and Nasdaq each gained Wednesday, led by commodity stocks; Alcoa is poised to report earnings after the bell. Oil fell on economic fears as some called for controls on speculation-driven prices.

Art Cashin, director of floor operations at UBS Financial Services, offered CNBC his stock-market outlook.

Cashin reiterated his belief that another government stimulus package would be useless — because the first package was "part illusion, part hoax." And now that the economy's problems seem to be continuing, "the fire extinguisher's empty," he said.”

Anonymous said...

Potato famine disease striking home gardens in U.S.


Anonymous said...

"This guy clearly had inside access to GS' computer security network yet chose to leave tracks. "

Listen to Max K's take on that. He said that the injunctions against Teza, and soon Citadel, to bar them from program trading because they might have seen or 'been exposed' to GS's proprietary code and thus would 'seriously compromise' GS's patented code effectively eliminates all competition for GS in the NYSE program trading theater.

It was a setup by GS, and well done at that. Now they are making the market (Market Makers) not 'playing' the market like the little people.

They really can collapse the securities market at will and this is game - set - match. Nobody is going to touch them, not Congress, not the Whitehouse and certainly not the Courts. They own the whole shooting match.

~~Resistance is Futile~~

timekeepr said...

Credit bubble has not burst in China yet?

China’s preliminary June bank lending data was out this week. Incredibly, loans increased by $224bn. First half loan growth surpassed $1.0 Trillion, about three times the year ago rate and way above government forecasts. As a Credit analyst, these numbers gave me the chills. The Chinese Credit system appears to have commenced the “terminal phase” of Credit excess. Export industries may remain weak, but Chinese housing, auto and equities markets – the current focal point of Credit expansion – are generally robust.

Perhaps Chinese authorities are already moving behind the scenes to try to rein in excesses. Yet a key facet of a Credit Bubble’s “terminal phase” is that it becomes a formidable challenge to muscle the Jeanie back in the bottle. Over time, Bubble economies become increasingly unstable. As we witnessed here at home, a point is reached where policymakers view the risks of bursting the Bubble as too great – and they justify and rationalize. Too many – individual and institutions – become dangerously exposed to inflated asset prices. The unbalanced and maladjusted economy becomes acutely vulnerable to a downward spiral. Erratic behavior engulfs assets markets, economic activity and speculative flows, creating confusion and policymaker paralysis. And, especially relevant to the current Chinese predicament, an increasingly unequal distribution of (Bubble economy) wealth creates a volatile social backdrop. When push comes to shove, authorities will generally feed the Credit beast – and the unchecked “terminal phase” is left to run completely out of control.

Prudent Bear Link

Anonymous said...

Lurker here. Thanks to those providing (or at least trying to) another perspective. Not everyone who is reading this blog thinks that you are bringing the intelligence level down. Not everyone here can afford to heed the advice of the hosts. Not everyone here can buy a farm, or solar panels, or get out of debt. I can barely buy food for the week. Not everyone agrees with the future painted by Illargi and Stoneleigh. Just because people might not agree, does not make them less intelligent. Illargi likes to shoot down anyone calling him a doomer, but what would you call yourself? I am sure you will say that you are a realist, projecting based on odds and likelihoods. Negativity breeds negativity. I keep reading here everyday because it is a great source of news that interests me. But as Arnold pointed out, you fail miserably on pointing out the positive things that come from a crunch like this. You simply insist that nothing good can come of it and ridicule any suggestion that says otherwise. I also have seen people attack Ron Paul and Peter Schiff. From what I have seen from both of these men is that they believe the credit collapse needs to happen with as little government intervention as possible. To laugh at them for saying essentially what you are describing everyday is strange to me. In the future we will need more than ever to work together. How can we work together when those with whom you disagree are ridiculed and laughed at? Is it your way or the highway? If so, we will eat you first for dinner.

Anonymous said...

Arnold - those aren't reasons backed by facts, those are wishes backed by nothing more than some vague belief in our superiority as a country and a culture and an unsubstantiated belief that the people upon whom we depend in the international scene are endlessly willing to put their own interests at risk rather than let us suffer the consequences of our own stupidity. Every single one of your "reasons" basically boils down to "everything will work out okay because I want to believe it will work out okay!"

Let me put it this way: We can't even properly handle a HURRICANE hit to one small part of our coastline. Missisippi, Lousisiana and the Texas coasts are still a frickin' MESS and with Katrina, it's been years since it made landfall.

Given that fact, what makes you think we can properly handle and recover from an event that will have many, many times more impact on people's lives than that?

Ilargi said...


"I can see it happening but I doubt for that the Russians, Europe and the US will stand idly by while resources are snatched away from them. Historically, Sub Saharan Africa has been under the influence of the US, UK and France. These countries wield enormous power,:

Holding their debt is a big axe to wield.

Ilargi said...


Why would I want to do that export thing?

ric said...

Sometimes when I realize how different the future will be from the past, I become fearful or despair about the paucity of my preparations. Then I think that while the transition will be terrible--and most, including myself, will probably not survive it--life is terminal for everyone and it's not our wealth or electrical toys that constitute value. Here's something I read as an antidote to fear. It comes from The Firefox Book published in 1972 and is a short essay called "Aunt Arie" written by Tom Cook about a woman in the Appalachian mountains:

"Far back in the neighboring mountains, alone in a log cabin with no running water and only a single fireplace for heat, lives an elderly lady. She draws her water from a well; she raises her own vegetables in the spring. Even though her husband died several years ago, and one side of her body was later paralized due to a stroke, Aunt Arie refuses to leave. With her husband's clothes still hanging inside, washed and ready to wear, her home has become a sacred place over which she alone must now keep watch.

Her occasional visitors are also sacred, as we were shown when she said, on our arrival, that she had wanted to go somewhere but had stayed at home simply because she felt like someone was coming. And she showed us by her warmth that she really meant we were welcome in her home, though we had met her only moments before.

Talking to her was like talking to one's own grandmother. She told us stories of her past, spiced now and then with local gossip, and she also gave some advice in her reflections about living in today's world.

It is somehow reassuring to know that even now in our time, there are Aunt Aries left from an age which has so much to teach us."

I recommend the whole Firefox series for those preparing for the future. Aunt Arie is not an "American"--she's a peasant, as most of us will be again. Wealth is seeing real value and not illusions.

Anonymous said...

The code the Russian compromised is proof that the whole game is rigged.I figured that out about the time I was forced into a 401k many years ago,but kept it mostly to myself,as I don't like appearing too tinfoil to my associates.Stocks are a fools game designed to separate fools from their hard earned,and always have been. Designed for those who can afford to lose a good chunk of their money and still survive...not for those who are coping with bills and babies.

That the esteemed Bill Moyers spent a good bit of time eviscerating the wash. post for their pay to play games is good.Lots of folks listen to him...and the heat generated by those folks may help matters.

We're still going to get screwed,but perhaps not so badly...


You need to have a chat with your doc about the meds...What worry?...and excessive optimism over what the next few years is going to bring America may get you and yours hurt badly.You speak as one who has never experienced hunger,or cold,or watched systemic injustice deny the basics of life to the weakest and poorest of what was the wealthiest nation on earth.

I have seen it ,and lived it,and am sickened by reading the garbage you just posted..

Ilargi,Your point is taken,it was the losers in the feudalistic societies of Europe,and Britain that were the ones who made the trip....but you forget the death rate for stupidity on the frontier was 100%.You made one mistake...and you did not breed.One side of my family has been here in Oregon since the 1840's[Irish ],the other side came here in the 1700 as french Hugonauts thru Britain and settled in the Carolina's,and then came west in the great depression.I have a complete history of that group named Sexton[my nieces could claim D.A.R. status,if the thought didn't make them laugh themselves silly]We came here in the time of the colonies.Another branch married into the Gilkie clan of the Kalamath Indians,Gilkie was a Scottish sea captain who liked the lower oregon coast...and native women.

That family history showed me how chillingly ruthless the culling was.

Families were large then 8-10-12 was not uncommon due to the fact that it was your old age who could/would take you in when you could not make it alone...
Most of those kids did not make it to adulthood.Death by misadventure was very common.It astounded me when I found out one of my grandfathers [by marriage]as a child in the Idaho territories,was terrified by Indians[native Americans]as the Indian wars were still fresh in the memories of his parents,who were original settlers in the area.[He made it to 93 and taught me gardening as a lifestyle...the way he describe it was "his garden was his life",until his 80s,he could work me into the ground,and never break a sweat.]
I don't know how familiar our gentle hosts are with early west history...but trust me,the ones who made it here were not the losers... you won by staying alive.

time to be productive...


PKP said...


July 10 (Bloomberg) -- China failed to attract enough bidders in a government debt sale for a second time this week on speculation record bank lending will spark inflation in the world’s third-largest economy.

The Ministry of Finance sold 25.1 billion yuan ($3.7 billion) in bills of the 35 billion yuan it had sought, according to statements on the Web site of Chinabond, the nation’s biggest debt-clearing house. The government fell short of its target in a bond sale for the first time in almost six years on July 8.

The auction’s failure reflects concern that Premier Wen Jiabao’s 4 trillion yuan stimulus package will cause bubbles in stock and housing markets, forcing the central bank to tighten monetary policy. The People’s Bank of China this week pushed up money-market rates and drained cash from banks, the biggest investors in the nation’s $2.2 trillion debt market.

“The central bank’s open-market operations suggest concerns that the rapid surge in new bank lending in the first half of this year could fuel inflation,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore. “Some people speculate the central bank will raise interest rates this year but I don’t think they can as global growth slows.”

China Fails to Attract Enough Buyers in Bill Sales

Greenpa said...

You might want to try looking for The Foxfire Books; rather than Firefox. :-)

ric said...

Greenpa: You might want to try looking for The Foxfire Books; rather than Firefox. :-)

Yes! Foxfire! Senility starts early in my family...

Hombre said...

Problems with Pickens Texas wind farm idea is a pretty fair microcosm of why alternative energy plans are full of contradictions and futilities.

But at least Ole Boone is trying to do SOMETHING

Anonymous said...

Ilargi said...


Why would I want to do that export thing?

Wouldn't that violate the "fair use" doctrine under which you quote others writing?

el gallinazo said...


Your piece was both eloquent and moving. However, from my studies, the genetics of human behavior are so complex, that even with a severe culling over a half dozen generations, I think it unlikely that a meaningful change in genetically induced behavior would be effected. Besides, culling could be induced, for example by one brother, in a certain circumstance being too audacious, and another too timid. I am rather leery of genetically based American exceptionalism, most forcefully expressed (if not logically supported) by Centaire. Perhaps Greenpa would care to weigh in on this?

el gallinazo said...

Coy Ote

Boone makes a cameo video appearance on Mad Max Keiser this week in which he voices the idea that Iraq owes us its oil because we lost 4,000 soldiers there.

el gallinazo said...


What is your take on the government blowing a new bubble with the Cap & Trade if the Senate passes an identical bill to the one the house passed?

My feeling is that it will be totally ineffective in blowing a new bubble as bubbles require increased debt and we are at peak debt. So do you figure that this is just a stupid Hail Mary pass by a terrified banking system? (It obviously has nothing to do with slowing climate change.)

Also, do you have any observations about China's money supply expansive actions which has made the news lately. It seems even larger, proportionally, than the Fed's.

VK said...

@ el gallinazo

About this immigration exceptionalism, even South America had a large amount of migration. Millions of spaniards, germans, french, welsh people etc went to Argentina and Brazil and S. America in general. Did they become global superpowers, yet they consisted of the same pool of risk taking immigrants setting of to a new world for bettering their lives :)

Next theory up for debate: It was the English langauge that made America rich!

Gravity said...

What's the difference between hyperbolic and parabolic market space?

Hombre said...

El Gall

I'm sorry to hear that. Sometimes he makes a lot more sense than that.


Greenpa said...

Gravity- the square root of eye.

el gallinazo said...

Karl has an excellent rant today - well worth reading. Embedded in it is a wonderful sub-rant which would make Gordon Gekko proud. His Greed Is Good paragraph is more electrifying than anything that Oliver Stone wrote in Wall Street,

The main gist of the rant is how the US Congress has aided and abetted the fraud by allowing and legalizing marking to fantasy. Does anyone know what the Canadian situation is with banks and off ledger BS and marking to fantasy compared to the US?


It's how you slice the conehead.

Jim R said...


It's just a different 'bolic. I would guess that most economists and other financial wizards were indifferent students in analytic geometry. Conic section, schmonic section.

I wonder if they'll eventually stumble on the word "asymptotic".

el gallinazo said...


"Asymptotic" as in the S&P500 approaching but never reaching zero?

timekeepr said...

PKP said...

"China Fails to Attract Enough Buyers in Bill Sales"

I thought China had a bunch of $$ to invest, not creating debt? They had been buying treasuries.

Ilargi said...


So if they make more on their US debt than they pay for their own, they have free money....

But once more, the Chinese holdings of US debt are a far larger issue than a purely monetary one.

Anonymous said...

"But at least Ole Boone is trying to do SOMETHING"

Yup, make money.

VK said...

This was actually a post by a commenter on TOD and it left be absolutely baffled.

"Clean, unlimited, cheap energy will be our's sooner than most of you think.

The next boom is going to be RE: atomic, wind, geo. It will happen very fast, and it will be a tough transition, but it will happen.

And it will succeed, because it CAN succeed. It is logistically possible and so it is the path we will take.

Then there will be a second, atomic energy boom after that. Then, when we have free energy, it will be easy to fix the other problems in the world. We have yet to see the golden ages. Anyone in science or tech surely knows what I am speaking of.

Unlimited resources / unlimited pollution cleanup (co2 extraction) / unlimited food. It's coming."

Personally I don't know what's scarier, running out of fossil fuels or actually having unlimited energy...

Greenpa said...

VK : "Personally I don't know what's scarier, running out of fossil fuels or actually having unlimited energy..."

Or Unlimited Loons.

El Buzzardo- re the genetics of American exceptionalism; I actually put a theory forward on that very topic here long ago: to wit, the persons who left Europe were the most unscrupulous, looking for quick wealth. When they got here, they established the concept of "grab all you can, you deserve it!" And firmly believe in it to this day. Alas, Ilargi poured cold water on it.

For those unaware of it, take a look at this very brief intro to The Minnesota Twins Studies; and no, it's not about baseball. The example they give seems extreme; but the studies are jam packed full of other sets of twins who only have 10 bizarre things in common; instead of 15.

el gallinazo said...


A thought problem, as they say in the physics business. The aliens descend to the White House lawn, but this time no soldiers shoot them or piss off Gort. Obama is tied up, so they meet with Summers and Geitner. He offers them his null field energy extractor, which powers their UFO's, out of pity for our predicament. A single unit lasts practically forever, is completely safe, produces no pollution, and puts out 5 megawatts. He gives them the plans to manufacture them and estimates the cost to be about $200k per unit. What would happen to it and the plans?

Anonymous said...

el galenazo,

Say I want to increase my business, or maybe even stay the same size, and I need to buy trade and cap 'certificates' I go to the market and a price results ... after there is a market I think all sorts of bets could be made or insured for and for all sorts of reasons. If there's a greed there's a way, money will be made, but not for thee or me, or the general economy.

About Canadian banks, I don't think about them much but if I do I would think that they have less trouble with their Canadian mortgage portfolio, as those mortgages aren't so easily walked away from and I understand they are insured( What else they got I don't know). As well the housing business is, temporarily, not as bad as might be expected. As Mary Muggins would wont to say "I don't know what will happen to them both tomorrow". BTW I thought you were off to some oxygen free zone of Peru what do you care about Canadian banks for anyway?


el gallinazo said...


The question at hand was not whether genetics, including identical genetics, has a overwhelming force on behavior and temperament. The question is whether a severe culling environment will produce major behavioral genetically based outcomes on humans in a few generations. What is your opinion on that?

Greenpa said...

El Gal - oh, sorry. Yes, it can- which was part of my point in referring to the MTS- a LOT of stuff is WAY more heritable than we want to think.

What's coming up looks like a classic "evolutionary bottleneck" to me. What comes out the other side is likely to be significantly different.

el gallinazo said...


"BTW I thought you were off to some oxygen free zone of Peru what do you care about Canadian banks for anyway?"

I will be off by mid-August, if I don't face further complications. While that small city in Peru is a serious contender, I want to travel around Latin America and check out other possibilities. I am starting out in Oaxaca Mexico.

As to Canadian banks, I have a choice of having a bank or, like Blanche DuBois, I can rely completely on the kindness of strangers. My current bank in the US Virgin Islands is ScotiaBank, a Canadian Bank which has no branches in the 50 states proper. Scotia is amazingly well represented throughout Latin America, and using it for my banking is very convenient for a variety of reasons, not the least of which is extracting money from a Scotia cash cow anywhere in Latin America without charge. Consequently, the solvency of Canadian banks, and Scotia in particular, holds some interest for me.

And yes, I know that all the banks will go down in flames over the next several years. I just hope to be ensconced in my new home and Hobbit house by then.

timekeepr said...

Ilargi said...

So if they make more on their US debt than they pay for their own, they have free money....

But once more, the Chinese holdings of US debt are a far larger issue than a purely monetary one.

All they have to do is sell? Then big trouble for the US...

Arnold said...

To all of my detractors, please read this piece by Charles Smith. Please pay close atttention to his comments about fatalism. Also, I don't see why insults need to be hurled by some of the posters here. Are you so spiteful and insecure in your position that you need to insult people? Does it somehow make you feel more intelligent?

VK said...

@ El G

What would happen to it and the plans?

Get shelved? *confused by this thought experiment*. Do enlighten me!

VK said...

“What we do not grasp, is that the economy is no different than any other complex system. It can be easily predicted from a long-term perspective that the present course of events will unquestionably lead to the destruction of the United States and Western economies from excessive debt, declining real growth, and rising costs of government that set in motion the same collapse of Rome and just about every other empire.”

Anonymous said...

VK regarding the thought experiment

It's who gains control of the energy source. Not likely to be passed out to everyone as a public good.

And not likely to be cheap to the end users.


Anonymous said...


I also think it represents the cost of solar panels


Anonymous said...

"..Also, I don't see why insults need to be hurled by some of the posters here. Are you so spiteful and insecure in your position that you need to insult people?.."


Grow a thicker skin Dude, this is nothing compared to what's in the 'on deck circle'.

Practice having spiteful, insulting people on all sides of you. There will be a mongo surplus shortly.

You will be able to tell them coming from a distance. They will have torches and pitch forks and red hot buckets of tar and crow feathers.

And they will be hungry and armed, unlike a handful of bloggers shooting spitballs at your fantasies.

Get a grip.

~~Resistance is Feudal~~

Anonymous said...

"...They will have torches and pitch forks and red hot buckets of tar and crow feathers..."

On second thought, make that Black Swan Feathers

~~Resistance is Feudal~~

el gallinazo said...


Though experiment properly referred to as
Gedankenexperiment :

Hombre said...


Thanks. I read the "Of Two Minds" piece. Been to the site many times. It's pretty interesting.

One paragaph...

"Prudence suggests always maintaining a skeptical point of view: what if we're wrong? What's our Plan B/alternative strategy?"

I'm in agreement that having a plan B (and C and D) is good policy. I'm also confident that most of the folks reading TAE and similar sites have such plans in mind.

To me it is vitally important to not form a FIXED OPINION -- that is, that we remain dynamic in thought and action, rather than static.

Right now the opinions expressed by I & S make good sense to me. If that changes I will ingest the new and accomodate.

Arnold said...

Coy Ote - I agree, but flexibility requires being able to at least consider certain strategies that can be productively implemented to achieve long term SUSTAINABLE economic progress. I don't think the economy will stand as in, but to simply through my hands up. Say the situation is completely doomed and whine all day on TAE does not seem productive to me. I have been writing my representatives in government and am actively trying get involved in the formation of a new political party. I do this, because I am displeased with the way the system is currently set up. Decadent and corrupt. I agree, however I think that real change can be achieved if only the people decide to do so.

Dr J said...

Denial, Anger, Bargaining, Depression and Acceptance - the five stages of grief a la Kubler-Ross. I have observed myself traversing these as I adjust to the idea that the party is over and that I will have to face a world much more daunting and less comfortable than the one I have known for so long. I think the hapless optimists here are in the early stages and tincture of time rather than harsh words will bring them along.

Just my $0.02 (CDN) worth.

@ Stoneleigh - I think you meant north of the Arctic circle in Norway. I toured that region a few years ago and was told many harrowing stories of the hardships of that winter as the Wehrmacht executed their scorched earth policy while in retreat.

Toddman said...


I don't think the economy will stand as in, but to simply through [sic] my hands up. Say the situation is completely doomed and whine all day on TAE does not seem productive to me.

You clearly have other options, yes? May I suggest a subscription to Yes! magazine? They seem more up your alley ;-)

Hombre said...

Anyone who has seriously considered the implications of peak energy has to be REALISTIC! It is not pessimism to understand one's limitations and try to make the best of them.

"Economic progress" you say?

That has to be... learning to properly use simple machines... say the lever and the inclined plane!

Anonymous said...

The ‘American exceptionalism ‘ discussion has really taken a turn toward biased generalities. No doubt, it was the lower classes who predominantly immigrated to America; however, many of Europe’s poor chose not to make the trip-- they didn’t call them coffin shops for nothing.

One of my male ancestors was put on a ship to America from County Mayo during the Irish famine, never to be seen again by his mother. Most likely she starved to death. And yet, nobody ever seems to mention the loss Europeans felt due to the departure of their loved ones. In many ways Europeans are like women: much stronger emotionally because they have had to be. Husbands and sons have marched off to war, never to be seen again; nonetheless, women have picked up the emotional pieces and carried on throughout the centuries. That is some genetic culling that I can believe in.

On the other hand, and if one really believes in the power of nature, then one might concede that a vast continent of pristine majesty and real danger imposed a form of national character adaptation on the people who marched into her wilderness.

So we get back to adaptation via imposed demand. The Irish and Jewish boxers of the early twentieth century were not any more inherently formidable or pugnacious than the African-American or Latino fighters of the mid to late twentieth century. If genetics, or ethnic proclivity towards the rough and tumble has any merit, then Centiares everywhere would be castimng aside their weekend Celtic festival kilt costumes and validating the claim for a national martial identity by stepping into the boxing ring--for millions at a time.


Anonymous said...

We are already in a Kleptocracy controlled by Government Sachs.

You are already in a fascist state.

They will not abide the formation of a truly effective challenge to their power.

They will do anything including no fly list 'roundups' for warrant-less arrest and detention, assassination and just plain old vanilla physical threats, to you and your extended family, just like in the Third World.

Welcome to realpolitik and reality Babe.

"the formation of a new political party" ....could just as easily be an American neo-nazi party.

This is a very real possiblity.

Palin was their trial balloon poster/pinup girl.

Just put a swastika and a riding crop in her hand on every street corner and voila, American Nazi Prom Queen.

Naivete is the hobgoblin of the reality challenged.

The economy isn't going to totallly collapse, it already is collapsed.

The shockwave hasn't arrived yet, it doesn't mean it isn't a done deal, it is.

TAE does not have any Rose Colored Glasses because that is precisely what got us into this very, very deep hole.


Smell the Java Arnold.

Jim R said...

El G,

Yes, the 1/x function as x increases. I'm interested in that wacky derivative that does the opposite, until they kill it off as a terra' suspect.

And, they'd piss off Gort. I'm convinced of that.

Ilargi said...


You may be stupendously naive and all that, but even for one such as you to suggest that TAE is about whining all day is plain pitch dark blind, insulting of tens of thousands of people who've had more courage to pay attention, use their brains and follow their instincts then you ever will have, and so far south of intelligent that there is no hope for any plans you may concoct. Don't bother. You will fail.

el gallinazo said...


I don't wish to be insulting in this post, but I will be blunt. I&S are extremely intelligent and very heavy duty theoretical thinkers. Stoneleigh is uniquely capable of expressing the conclusions of her investigations in a clear and concise manner. Ilargi spends most of his waking hours studying the details and numbers and can express and write the results in a more emotionalize intense form than Stoneleigh.

I just ran through today's comments with your name in a find function, and most of what I saw was "i feel," "I believe," and "I don't see."

You are entitled to your belief systems, but much of that system seems to be congruent with the deliberate and obfuscating lies that we are getting from our government. And these lies are dangerous because they stop people from attempting to prepare for the coming hard times, and they allow the elite to continue to steal the remainder of our money and wealth and bury us deeper in debt slavery.

This blog has a particular point of view but it is only censored or moderated in extreme cases of nastiness or stupidity. We welcome challenges to our thinking, but those challenges, when the gauntlet is throw, had better have some substance to it. IMO, Mugabe, for example, is a poster who challenges I&S on issues. I usually don't agree with him, but he often builds a coherent fact based case. We are too busy here to be buried in blather. And when you challenge, be prepared to take some hits to your ideas. This does not mean that you should be personally attacked, but it's always open season on ideas.

None of use "regulars" here with maybe one or two exceptions, looks forward with any pleasure to the hardships, complexities, and dangers that we expect to face in the coming years. But we all agree that;s it's better to face the reality of a probable, less than ideal future, than to be blindsided by it.

Stoneleigh has updated a short primer on how to prepare for a deflationary collapse. All of our circumstances are different, so each of us is taking from it what we can use. If you think you are performing a service here, by giving us a faith based pep talk that this "recession" will not be nearly as bad as I&S predict - you are not.

None of us here "through (sic) up our hands." I really have no idea where you get this idea from. Snuffy? His hands are too busy productively preparing for his families survival. He has no time to throw them up. Stoneleigh, who works a full time day job, is raising three kids, and finds time to give each of us incredibly useful advice.

And you talk about the "whining" here. I see no whining at all, and I do find that insulting, inaccurate, and dumb. Anger at the crimes being perpetrating against the common people of the world from the elites? But "whining." Where do you read any whining here?

Finally, I think your approach to change is totally ineffective, but it's probably not harmful to anyone but yourself and your dependents, so go for it,

Ilargi said...

"In many ways Europeans are like women"

To think there's people who actually write this sort of thing.

Anonymous said...

@ Dr J

Years ago I knew a guy from Norway. He had been too young to fight during WWII in Norway. Many members of his extended family had been killed or executed by the Germans during their occupation of Norway. He told me the war had finally ended but that their were still German soldiers garrisoned in his town awaiting departure back to Germany. There was a barge in the harbor of his town that had been converted to a German 'floating' barracks. It housed about two hundred German soldiers.

He said that he and a friend, both 14, decided to 'strike a blow for justice' and one night rowed out to the barge in the fall of 1945 to sink it. There was only one guard that night and they snuck up and hit him in the head with a piece of lead pipe and tossed him in the water to drown. They then securely locked the two hatches on the barge shut with chains and opened the stop cocks on the bilge and the whole barge sank, drowning several hundred German soldiers. He said they could hear the screaming panic of the soldiers trapped within to open the hatches.

He had absolutely no regrets about this.

Technically, since the war was officially over, what they had done was mass murder. Instead, the Norwegian authority do not press any charges and the towns people were so grateful and proud, they sponsored a scholarship for him and the other boy to attend university, which neither had had the money for.

That he said, it pay back in a nut shell.

Dr J said...

@ anon 10:25 - No doubt we have experienced a "Golden Age" here in North America these past decades. Our mistake is to believe that this is normal. In fact, the usual state of affairs for humans is long periods of strife and conflict separated by usually shorter periods of relative stability. That we have had a long and prosperous period of stability in NA is an anomaly in terms of world history. Your story of the brutality of German occupation and the retaliation that followed is incongruous with the world to which we have become accustomed but I know in my heart of hearts that if an occupying force murdered my kin I would not rest until I had exacted maximum vengeance. Scary, huh?

EconomicDisconnect said...

118 comments and counting! Ilargi and Stoneleigh this is a great resource.

el gallinazo said...


How about....... in many ways, half of Europeans are like women?

Anonymous said...

"In many ways Europeans are like women"

To think there's people who actually write this sort of thing.

To think that some male ego from was offened by my analagous women comment is not surprising; but I am surprised it was you, Ilargi.

More careful reading will reveal the comment to be a compliment, for women and Europeans of both genders

Ilargi said...

New post up

Endtimer said...

Arnold said,

"...I have been writing my representatives in government and am actively trying get involved in the formation of a new political party. I do this, because I am displeased with the way the system is currently set up. Decadent and corrupt. I agree, however I think that real change can be achieved if only the people decide to do so..."

What makes you think a new political party will clean up the corruption and decadence? If you've been paying attention, the governments of this world dance to a higher master. It doesn't matter who gets in because government bows to the dictates of the unseen ruling elite.

This talk about working together to find a solution within this evil, exploitative, corrupt beyond redemption paradigm is very misguided. It's like attempting to clean out a pig pen without being able to remove the crap. Instead the crap just gets buried or shovelled off into the corner.

What is happening is the demise of a putrid system, but it will hang on as long as it can and take as many down with it before it ceases to exist.

Endtimer said...

"They" are making this crisis so much worse in order to usher in a NWO run by a One World Government.

Some people think this will be a viable solution to fix this mess, but who do you think will be running the One World Government? Indeed the same evil ones who created this very situation in order to consolidate more control over the world's populace and turn up the screws of tyranny like no other time in this planet's history.