As Big Banks Repay Bailout Money, U.S. Sees a Profit

This is the load of BS spin NYT puts out. Does it really take a lot of thought to figure out the travesty of having lent to these guys in the first place? They make huge profits, payback their loans with interest, and move on and NYT tries to makes it sound great. Of course the banks want to pay back quickly and make sure the gov't. stays out of the banking business. It would ruin the party they have going on. - MBC

http://www.nytimes.com/2009/08/31/business/economy/31taxpayer.html?_r=1&th&emc=th

"...taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again.

The profits, collected from eight of the biggest banks that have fully repaid their obligations to the government, come to about $4 billion, or the equivalent of about 15 percent annually, according to calculations compiled for The New York Times..."

"...“The taxpayers want their money back and they want the government out of our banking system,” Representative Jeb Hensarling, a Texas Republican and a member of the Congressional Oversight Panel..."

Desperate for Capital, the FDIC Backs Away From Tougher Rules Governing Private Equity Purchases of Failed U.S. Banks

Another reason to fear all the talk about things 'turning around'. Too many bad things still roiling around in the financial industry. - MBC

http://www.moneymorning.com/2009/08/28/fdic-funding-crisis/

"...A new Federal Deposit Insurance Corp. (FDIC) plan to offload busted banks to vulture investors strikes an uneven balance between private equity players and public taxpayers and may inadvertently sow the seeds for another round of bank failures.

The FDIC currently insures bank depositors up to $250,000 – up from $100,000 prior to the financial crisis. So far this year, 81 banks have failed, costing the FDIC an estimated $21.5 billion.

And the situation is almost certainly going to get worse..."

"...number of distressed banks rose to the highest level in 15 years during the second quarter, thanks to an economic malaise that’s saddling banks with a growing level of bad loans..."

"...In a fatalistic twist of irony, however, the FDIC’s demand for another special assessment in the fourth quarter and another expected special assessment in the first quarter of 2010 may tip several more banks into failure.

Although there seems to be a desperate need for private equity capital to come running to the rescue, the reality unfortunately isn’t that simple..."

"...The ongoing cost of a busted bank becomes higher for the FDIC if the agency cannot merge that failed institution with a healthy player, or can’t sell it outright. When The FDIC can’t find a willing partner or buyer, the agency must instead manage the “unwinding” of every failed bank’s stockpile of illiquid and toxic assets. With so many more banks in trouble and so many fewer banks willing to acquire additional suspect assets, private equity firms have offered to step up and buy failed banks these professional investors believe can be turned around....

...The FDIC issued its final decision on the matter on Wednesday. The new version was much weaker, once again underscoring the federal government’s proclivity for weakening banking regulations – a willingness we’ve repeatedly warned will have dire consequences for the U.S. financial system, as well as for the broader economy.

These alterations are setting the stage for an escalation in bank failures. The real losers will once again be the U.S. taxpayers, who will end up footing the bill for the FDIC’s failure to take a tough stand.

How much weaker were the new regulations, when compared with the earlier proposals? In one instance, instead of the initially proposed requirement that new investors maintain a 15% Tier 1 common equity capital ratio – three times what traditional bank holding companies are required to maintain – the new entry hurdle is only a 10% ratio.

Private equity firms will be spared the requirement of other bank holding companies and will not be called upon as a “source of strength,” should their investment in a bank need shoring up...

...The FDIC granted other compromises granted in favor of private equity buyers. For instance, the agency spared them from having to cross-guarantee their portfolio-bank investments – unless they owned at least 80% of two or more banks..."

"...valiant efforts Bair, the FDIC chairman, to keep the howling wolves of private equity at the door and out of the banking henhouse were ultimately undermined by the rapidly dwindling coffers of the Deposit Insurance Fund, which brought the FDIC to its knees. The compromises in the final policy statement grant the private-equity crowd a lot of what it was lobbying for while only momentarily sparing the FDIC the embarrassment of being knocked out.

But make no mistake. That day of reckoning is on its way. And not even the entrepreneurially gifted private-equity set will be able to keep that from happening..."

"...The problem with banks is that they became too leveraged. When they couldn’t amass assets on their books, against which they had to set aside “reserves,” they established “off-balance-sheet” vehicles to acquire leveraged pools of assets. They were leveraged inside and out.

But now the originators of the leveraged-buyout business model want to control taxpayer-backed banks, to apply another round of leverage to already crippled banks in order to squeeze out all the profits possible. Although this comes at a cost to duped and already drained taxpayers, regulators, legislators and the American public would be foolish to expect anything else from the private equity crowd. If the FDIC thinks it has a problem now, wait until the next implosion of leveraged banks happens..."

"...the Private Equity Council, an industry advocacy group, without recognizing the irony of its comment, suggested that mandating higher capital ratios for private equity buyers of failed banks would actually increase the risk at those banks because their owners would essentially have to employ more leverage to generate sufficient returns to meet the higher capital standards – while still generating returns high enough to satisfy the investors in their private-equity funds.

If that’s not an advance look at the next round of financial-sector problems we could be facing, we are deluding ourselves..."

"...Unfortunately, we’ve once again placed ourselves in a position where the viable solutions to the problems that were created will end up causing an entirely new set of problems – problems that always seem to provide a benefit to the old crony network while leaving the battered U.S. taxpayer as the ultimate victim.

We have no one to blame but ourselves..."

Paul Krugman: Till Debt Does Its Part

My comments in red - MBC

Paul Krugman: Till Debt Does Its Part

http://www.nytimes.com/2009/08/28/opinion/28krugman.html?_r=1

Should you be worried about the national debt, or the politicians in charge of it?:

Till Debt Does Its Part, by Paul Krugman, Commentary, NY Times: So new budget projections show a cumulative deficit of $9 trillion over the next decade. According to many commentators, that’s a terrifying number, requiring drastic action — in particular, of course, canceling efforts to boost the economy and calling off health care reform.

The truth is more complicated and less frightening. Right now deficits are actually helping the economy. In fact, deficits here and in other major economies saved the world from a much deeper slump. The longer-term outlook is worrying, but it’s not catastrophic.

The only real reason for concern is political. The United States can deal with its debts if politicians of both parties are, in the end, willing to show at least a bit of maturity. (I hate the use of this term, 'maturity'. If someone doesn’t agree with Mr. Krugman they are considered less mature? Anyway, even not taking offense at his words just consider what he’s saying – ‘we can deal with our debts if politicians… show maturity.’ That’s an awfully big IF and another thing history has proven quite unlikely to happen. Politicians are solely worried about amassing power, influence and funds to assure their next election.) Need I say more?

Let’s start with the effects of this year’s deficit. ... Consider what would have happened if the U.S. government and its counterparts around the world had tried to balance their budgets as they did in the early 1930s. (Where is this coming from? Who is talking about ‘balanced budget’? We’re talking about reducing or trying to get some control over the deficit. What a leap to absurdity.) It’s a scary thought. If governments had raised taxes or slashed spending in the face of the slump, if they had refused to rescue distressed financial institutions, we could all too easily have seen a full replay of the Great Depression. (Check history – many feel now, with review, Federal actions prolonged things rather than shortened things.)

As I said, deficits saved the world. (So he claims.)

In fact,... the ... White House forecast shows a nation stuck in purgatory for a prolonged period, with high unemployment persisting for years. If that’s at all correct — and I fear that it will be — we should be doing more, not less, to support the economy.

But what about all that debt we’re incurring? That’s a bad thing, but it’s important to have some perspective. ...

Here’s one way to look at it: We’re looking at a rise in the debt/G.D.P. ratio of about 40 percentage points. The real interest on that additional debt (you want to subtract off inflation) (Why?) will probably be around 1 percent of G.D.P., or 5 percent of federal revenue. (I question the value of this analysis – he's understating by only considering interest on additional debt - our entire debt is still there and must be dealt with and that does sound a bit overwhelming.) That doesn’t sound like an overwhelming burden.

Now, this assumes that the U.S. government’s credit will remain good so that it’s able to borrow at relatively low interest rates. So far, that’s still true. (We’re buying or own debt – quantitative easing) Despite the prospect of big deficits, the government is able to borrow money long-term at ... less than 3.5 percent, which is low by historical standards. People making bets with real money don’t seem to be worried about U.S. solvency. ...

So is there anything to worry about? Yes, but the dangers are political, not economic. (Very stupid argument – lacks the very basic insight of how the politics of any situation plays out in the economic reality)

As I’ve said, those 10-year projections aren’t as bad as you may have heard. Over the really long term, however, the U.S. government will have big problems unless it makes some major changes. In particular, it has to rein in the growth of Medicare and Medicaid spending.

That shouldn’t be hard in the context of overall health care reform. After all, America spends far more on health care than other advanced countries, without better results, so we should be able to make our system more cost-efficient.

But that won’t happen, of course, if even the most modest attempts to improve the system are successfully demagogued — by conservatives! (pure genius – Mr. Maturity blaming the conservatives, as it this single issue is what’s solely behind keeping healthcare reform bill from approval!) — as efforts to “pull the plug on grandma.”

So don’t fret about this year’s deficit; we actually need to run up federal debt right now and need to keep doing it until the economy is on a solid path to recovery. And the extra debt should be manageable. If we face a potential problem, it’s not because the economy can’t handle the extra debt. Instead, it’s the politics, stupid.

The New Crisis Report: What's in It for CFOs?

Just one of my questions from ignorance but could this 'flexibility to choose when to apply fair-value standards to financial instruments' be an issue that's still going to come to a head at some point? - MBC


http://www.cfo.com/article.cfm/14155093/1/c_2984368

"...A global advisory group released 37 pages of recommendations on Monday discussing how regulators, accounting standard–setters, and — to some extent — CFOs can help prevent the next financial crisis, and work to fix existing "weaknesses" in accounting standards..."

"...Independence was a hot-button issue during the past year, as standard-setters on both sides of the Atlantic were bullied by special interests and politicians to relax fair-value accounting rules... "Accounting rules of the highest quality — written by independent standard-setters — will help to restore investor faith in the fairness and integrity of financial markets," (said) Goldschmid, a former SEC commissioner..."

"...The reach of undue influence played out on the world stage last November, when German chancellor Angela Merkel, French president Nicolas Sarkozy, and other global policymakers jumped into the fray on fair-value accounting. As a result, the IASB ignored its normal rule-revision process and rushed out guidance that gave banks and other companies more flexibility to choose when to apply fair-value standards to financial instruments.

The expedited process came after banks lobbied heavily for the change — claiming that fair-value accounting led to excessive write-downs — and European policymakers threatened to pass laws that essentially would have given the banks the accounting treatment they sought. By March, members of Congress were vilifying fair-value accounting as the cause of the financial crisis, and FASB quickly pushed through its new guidance on valuing assets..."

"..."What would be wrong, however, would be to suspend due process and take direction from Congress or business interests who say, 'use this accounting method because that's what we want,'" asserted the former SEC official..."

"...the FCAG asked the standard-setters to "reconsider" the appropriateness of including credit risk when measuring the fair value of a liability. At issue is an accounting rule oddity that allows companies to book a gain when their credit rating sinks. Further, the group is prodding the accounting boards to continue consulting with bank regulators concerning consolidation and derecognition issues, especially as they pertain to off-balance-sheet transactions. From the FCAG's perspective, the way financial instruments are treated under accounting rules may also affect regulatory capital, and therefore robust risk disclosures should be made to investors..."

Subprime Lenders Getting U.S. Subsidies, Report Says

More debt - great - Wonder why the mortgage lenders and servicers are reluctant to participate? Shouldn't have to think about this one too long. - MBC

http://www.washingtonpost.com/wp-dyn/content/article/2009/08/25/AR2009082502975.html

"...Many of the lenders eligible to receive billions of dollars from the government's massive foreclosure prevention program helped fuel the housing crisis by issuing risky subprime loans, according to a report to be issued Wednesday by the Center for Public Integrity..."

"..."Mortgage lenders and servicers have been reluctant to participate in foreclosure prevention programs despite their role in creating the subprime debacle. Intense pressure from Congress and the White House hasn't worked, either," the report said. "The stick has not been effective, so the Obama administration is offering a carrot -- billions of dollars in incentive payments to lenders and loan servicers to encourage them to participate."

"...report has drawn fire from lenders. It oversimplifies the causes of the housing crisis and misses the complexity of the markets, said Scott Talbott, chief lobbyist for the Financial Services Roundtable, which represents some of the nation's largest lenders..."

A Sobering Wake Up Call

The Federal Government will spend almost $31,000 per household! What part of that are any of you getting? I know it costs to fund an army, etc... but come on - I think avg. household income is $50 - $55,000. Can we keep this up? - MBC

http://blog.heritage.org/2009/08/26/morning-bell-a-sobering-wake-up-call/

"...Washington Post reports:

The extra $1.9 trillion in red ink mainly reflects the Office of Management and Budget’s adoption of more realistic — that is, more pessimistic — estimates of economic growth and unemployment. White House officials protest that their original, rosier numbers made sense at the time; actually, plenty of forecasters, including those at the nonpartisan Congressional Budget Office, made more accurate calls. This situation was foreseeable and should have been acknowledged earlier.

"...good that the Obama administration is finally admitting that the fundamental assumptions driving their economic policy were wrong, the reality of our current budget deficit, and what President Obama’s policies threaten to do to our national debt over the next decade, are truly sobering. Heritage senior policy analyst Brian Riedl details the carnage:

• Since World War II, the largest budget deficit recorded was 6.0 percent of GDP in 1983. The Bush Administration oversaw budget deficits averaging 2.0 percent of GDP. The projected 2009 budget deficit of 11.2 percent of GDP would nearly double the post-war record.
• The 2009 budget deficit will be larger than all budget deficits from 2002 through 2007 combined. More than 43 cents of every dollar Washington spends in 2009 will have been borrowed.
• While President Obama claims to have inherited the 2009 budget deficit, it is important to note that the estimated 2009 budget deficit has increased by $400 billion since his inauguration, and the whole point of the “stimulus” was to increase deficit spending to nearly $2 trillion based on the unproven notion that would it alleviate the recession.
• The 22 percent spending increase projected for 2009 represents the largest government expansion since the 1952 height of the Korean War (adjusted for inflation). Federal spending is up 57 percent since 2001.
• In 2009, Washington will spend $30,958 per household–the highest level in American history–and under President Obama’s budget, the figure will rise above $33,000 by 2019.
• The White House brags that it will cut the deficit in half by 2013. The President does not mention that the deficit has nearly quadrupled this year. Merely cutting it in half from that bloated level would still leave budget deficits twice as high as under President Bush.
• The public national debt–$5.8 trillion as of 2008–is projected to double by 2012 and nearly triple by 2019. Thus, America would accumulate more government debt under President Obama than under every President in American history from George Washington to George W. Bush combined.

And now for the real kicker: none of these numbers include the costs of Obamacare which would create another $1.5 trillion health care entitlement on top of our existing unsustainable entitlement obligations. The OMB’s Mid-Session Review should serve as a wake up call to the American people. President Obama’s policies are leading us down a path of unsustainable spending and borrowing.

Daily Pfenning 8-26-09

http://www.dailypfennig.com/

"...radio interview on Bloomberg yesterday with a panel of investment strategists, and some were of the opinion that, and tell me if this at all sounds familiar, the dollar will continue to weaken this year as the global economy recovers from recession and investors seek currencies linked to growth...

The idea was simply that too many investors had cash tied up in T-Bills, and T-Notes, and that as the global economies recover ahead of the U.S. there will be higher yields to be gotten in those global economies. So, when the investors sell their T-Bill and T-Notes to buy overseas, the dollar will get sold, and thus lead it to weaken more and more...

Speaking of Treasuries... once again the U.S. Treasury is going to the well... And they will auction $197 Billion in new Treasuries this week... Is it just me, or does any one else wonder just how much more debt foreigners can choke down? I guess the thing to do this week and next is to check the cartel's, I mean the Fed Reserve's balance sheet to see if they take back any of these auctioned Treasuries like they did last month with the 7-year T-Note auction. Monetizing the debt, printing more paper dollars like it's Monopoly money...

And in a follow up from yesterday's report on the Budget Deficit being forecast for the next 10 years... The total of the deficit for those 10 years is now forecast to be $9 Trillion dollars... And in a follow up from yesterday's rant about forecasts... The $9 Trillion is more than $2 Trillion more than was forecast just 6 months ago! Hmmm... Another $9 Trillion!

Hey! A month ago, when I prepared for the Agora Financial Reserve Wealth Symposium in Vancouver, the National Debt stood at a level that put each citizen's piece of the debt at $37,000... Today, just one month after I pulled that data, each citizen's piece of the debt now stands at $38,191! That's absolutely shameful, folks..."

White House, Congress projects record deficits

Comment that continues to be paraded "..."This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter," said Obama economic adviser Christina Romer..." The information was there but the ones who missed it float this out as some plausible excuse and still expect us to have confidence in them being the folks to lead us out of this mess. Scary part is many folks are buying it! - MBC

http://www.comcast.net/articles/news-general/20090825/US.Obama.Economy/

"...White House Office of Management and Budget and the nonpartisan Congressional Budget Office predicted the budget deficit this year would swell to nearly $1.6 trillion, a record, and far above the then-record 2008 budget deficit of $455 billion.

But while figures released by the White House foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May, congressional budget analysts put the 10-year figure at a lower $7.14 trillion.

One reason for the difference: The CBO projection is based on an assumption that all the tax cuts put into place in the administration of former President George W. Bush will expire on schedule by 2011 as dictated by current law. President Barack Obama's budget baseline, however, hews to his proposal to keep the tax cuts in place for families earning less than $250,000 a year.

Beyond the 10-year forecast, the nation will face further challenges posed by rising health care costs and the aging of the population, the CBO said. "The budget remains on an unsustainable path" over the long-term and will require some combination of lower spending and higher tax revenues, it said.

Both forecasts see unemployment rising to 10 percent before falling and both suggest growth will return to the economy later this year but that recovery will be slow after the longest and deepest recession since the 1930s..."

"...continuing stresses on the economy have, in effect, increased the size of the stimulus package because the government will have to spend more in unemployment insurance and food stamps, Orszag said. He said the cost of the stimulus package — which spends most of its money in fiscal year 2010 — will grow by tens of billions of dollars above the original $787 billion..."

Daily Pfennig 8/25/2009

http://www.dailypfennig.com/

"...see where a Manhattan Chief U.S. District Judge ruled against the Fed Reserve? Way to go Loretta Preska, the judge, who has rejected the argument that the Federal Reserve was making about disclosing loan records... The Fed said that loan records aren't covered by the law because their disclosure would harm borrowers' competitive positions... The judge said, that the Federal Reserve MUST identify the companies in its emergency lending programs..."

"...here's where I make sure you understand the difference between China adding economic stimulus, and the U.S. adding economic stimulus... China has the treasure chest of reserves to do so, and the U.S. doesn't! They are working from a position of monetary strength... The U.S. on the other hand, has done a wonderful job of jacking up the national debt! And we still have 1 in 5 people unemployed! We still have banks failing left and right, 77 of them in 2009, and we still have an economy in depression..."

Ron Paul - Texas Talk

I'd like more teeth in this - make it part of swearing in oath that all will read every bill to be voted up on its' entirety before vote. - MBC

http://www.house.gov/htbin/blog_inc?BLOG,tx14_paul,blog,999,All,Item%20not%20found,ID=090824_3501,TEMPLATE=postingdetail.shtml

We Need Sunlight to Disinfect the Legislative Process!

During August recess, many legislators have heard an unexpected amount of discontent from their constituents about what is happening on Capitol Hill, particularly regarding healthcare. Some people are justifiably terrified at what the government could do to healthcare, should it get its claws even further into it. Others demand a public option for health insurance and are adamant that healthcare be treated as yet another absolute entitlement. One thing everyone agrees on is that the final bill needs to be read and understood by all legislators before a vote is taken. To any American, this is common sense. In Washington, that is unlikely to happen.

There is much confusion and debate over what is and is not in the reform plan being considered. Are there or are there not so-called death panels? What are the end-of-life consultations really for? How will private insurance be affected? Can you keep your current plan or will you eventually be forced into a government plan? Will it pay for elective abortions or not? What are the implications for medical privacy? The truth is no one knows what will be in the final bill until it is on the House floor, and provisions could be added in and taken out in the wee hours of the morning before.

In February, the House was forced to vote on an over 1,000 page “stimulus” bill that had first been posted on the internet just after midnight the morning of the vote. It passed. Then in June, House leaders rushed a vote on the cap-and-trade bill, even though an over 300 page “manager’s amendment” making substantive changes to the bill, was introduced shortly after 3:00 a.m. the morning of the vote.

Washington thrives on crisis. If enough people can be convinced that we are in an emergency, they will more likely tolerate rushing legislation to the floor like this. Last minute changes will be slipped in, benefitting who knows what special interests and at what expense to the taxpayer. But the mantra is repeated over and over: We are in a crisis. We must act immediately.

It should be unconscionable for legislators to vote in favor of legislation they have not had the opportunity to read. This is why I have re-introduced the Sunlight Rule, H.Res 216. The Sunlight Rule prohibits any piece of legislation from being brought before the House of Representatives unless it has been available to read for at least 10 days.

The Sunlight Rule allows citizens to move for censure of any House Member who votes for a bill in violation of this act. Because the Sunlight Rule could never be waived, any Member could raise a point of order requiring any bill in violation to be immediately pulled from the House calendar until it can be brought to the floor in a manner consistent with this rule. This rule does not require that Members read the bills. It merely guarantees the opportunity to do so. It has 4 cosponsors.

Justice Louis Brandeis famously said, “Sunlight is the best disinfectant.” The Sunlight Rule would do much towards negating the cycle of pseudo-crises and cleaning up the legislative process here in Washington. I sincerely hope this is the year Congress remembers its deliberative duties and passes it.

We saved the world from disaster

The parts of this I find most telling; "...His history of the crisis essentially begins in September 2008, and ignores the actions and decisions that led to disaster. Of the origins of the crisis, Bernanke's only remark was that, until just before the crisis, "there was little to suggest that market participants saw the financial situation as about to take a sharp turn for the worse."..."

"...He said nothing about how the Fed would unwind its support for the banking system. That day seems to be in the distant future, however. "Although we have avoided the worst, difficult challenges still lie ahead,' including securing a sustainable economic recovery and rebuilding the institutional framework to make sure a similar crisis can be averted..."

Now I have serious trouble buying into this whole thing from a guy who didn't see it coming and who doesn't have a presentable plan for securing a sustainable economic recovery. - MBC

http://www.marketwatch.com/story/we-saved-the-world-from-disaster-bernanke-says-2009-08-21-10100

Daily Pfenning - 8-24-09

http://www.dailypfennig.com/

"...It seems the US government is intent on getting consumers to go back to their borrow and spend habits. This is what created the bubbles, and the administration seems intent on creating another bubble economy. US consumers have made some historic cut backs on the amount of debt they are amassing (whether or not these cutbacks are by choice). The US government should not be encouraging these consumers to go back to their previous ways, but should instead be trying to use the funds to educate and train consumers and to encourage new and innovative companies. Use this downturn to correct some of the bad habits which we had gotten into. Yes, it will be painful, but breaking an addiction is always hard and painful. US consumers need to break our addiction to easy credit and massive debt. This recession/depression has given consumers a much needed wake up call, hopefully the administration won't be able to push consumers back into their old habits..."

"...Nouriel Roubini wrote a commentary in today's Financial Times which agrees with my thoughts. Roubini said the chance of a double dip recession is increasing because of risks related to ending global monetary and fiscal stimulus. He believes the global economy still has further to fall, and will bottom out sometime during the second half of 2009. While some economies such as China, Germany, Australia, and France will likely recover; others such as the US and UK will double dip with another leg down. "There are risks associated with exit strategies from the massive monetary and fiscal easing," Roubini wrote. "Policy makers are damned if they do and damned if they don't."


"...dollar's role as the world's reserve currency has been a continued topic among scholars and was undoubtedly discussed out in Jackson hole last week. China and Russia have both been adamant about discussing the possibility of moving toward a new reserve system to replace the greenback. Since no single currency is strong enough to replace the dollar in today's global economy, most discussion has centered around the idea of creating a 'reserve currency' which is comprised of a basket of the world's largest currencies. This idea is supported by Joseph Stiglitz, a Nobel Prize winning economist and Columbia University economics professor. "The dollar's role as a good store of value is questionable and the currency has a high degree of risk," Stiglitz said at a conference last Friday. "There is a need for a global reserve system. The currency reserve system is in the process of fraying," Stiglitz said. "The dollar is not a good store of value."

"...Frank Trotter was thinking about the same thing...

"Went to the touring musical Mary Poppins Saturday night; it's always great to see a play about a run on a bank. While the books were written in the 1930's and beyond most of you will remember the Disney film set in 1910 - before the Great War when England ruled the waves and empire was returning untold dividends to the mother country. At that time of course there was no questioning the power, status and earning capacity of the British Empire. As George Banks replies to Admiral Boom in the movie, "Credit rates are moving up, up, up. And the British pound is the admiration of the world."

Well that was then and this is now. Soon after, in 1914 England suspended the conversion of Bank of England notes to gold for the period surrounding World War I, and the on again off again slide into today's fiat currency world began. Over the next 100 years England has leaned the lesson of empires that came before. That extending the resources of a country in non-producing capacity leads to the decline of the currency and a fall in the economic power of the country and the economic wellbeing of it's population. In 1910 it took 4.25 pounds to buy an ounce of gold, and 0.2056 pounds to buy a US dollar. Today of course the price of gold has risen 13,447% for British buyers, while the price of a greenback is only up 195%. We are uncomfortably comfortable in feeling that the carabineers have given way for the good old USA in a parallel fashion.

We'll freely admit that there has been a slow motion slide going on in the US dollar since establishment, and especially since the removal from the gold standard and the Bretton Woods Agreement in 1971. But we feel even more strongly that the fiscal and monetary policies put in place starting in 2001, accelerating through the 2000's, and now amplified since January 20th have left us with no legs for our stool. Fiscal policy has been and continues to be out of control. The Federal Reserve policy of the 2000's created the credit bubble and now stands to create the largest monetary inflation experienced in a first world nation. Both political parties have determined that no one can be an adult in government by slashing spending or raising taxes to cover our exploding gap (mathematically the only two options), and instead are hiding behind the invisible tax of currency depreciation. For a country we conclude that a strong currency is essential to long term well being, and by extension that our government has given up on the dream in exchange for election and reelection.

So what's to be done? If you are a believer that the political process can sort things out and return our wonderful nation to fiscal prudence and steady governance go ahead and stay the course. For the rest of us who like Margaret Thatcher believe that "the problem with socialism is that eventually you run our of other people's money", we'll be letting our "tuppance safely invested in the bank" seek diversification across the globe in countries and markets with more opportunity and prudence. We couldn't agree more with the Mary Poppins conclusion, re-written for modern times that "Where stands the banks of [the USA], America stand. Oh, oh, oh, oh! When falls the banks of [the USA], America falls!"

Canada gets high ranking for cancer survival rates

I was digging around trying to find information re 5-year survival rates of nations with Universal Health Care versus USA. Here's an interesting piece from Canadian source published July 2008.

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20080716/cancer_statistics_080716/20080716/

"...report on worldwide cancer survival rates, Canada ranked near the top of the 31 countries studied with an estimate five-year survival rate of 82.5 per cent...U.S. has a five-year survival rate in all the cancers studied of 91.9 per cent, while Europe's is much lower at 57.1 per cent..."

"...The research was conducted by more than 100 scientists, led by Coleman of the Cancer Research UK Cancer Survival Group and the London School of Hygiene and Tropical Medicine.

Researchers compiled data on the five-year survival rates of patients who were diagnosed between 1990 and 1994 and were followed up with until the end of 1999. Breast, colon, rectum and prostate cancer patients were included in the study..."

Ignore the 230 miles-per-gallon claims being touted for GM's plug-in hybrid

Good read if you want to know some facts about MPG calculations versus claims. - MBC

http://www.economist.com/daily/columns/techview/displaystory.cfm?story_id=14292008&fsrc=nwl

"...The efficiency ratings that makers are claiming for their plug-in hybrids are nonsense. They are little more than figures plucked from the air because they depend on specific sets of circumstances. That makes comparisons with fossil-fuelled cars almost impossible..."

"...forget GM’s outlandish claims: the Chevy Volt will get at best 50mpg in the city. As your correspondent noted at the beginning, that is not at all bad—but it is nowhere near the preposterous 230mpg being touted..."

The Economist - How many minutes to earn the price of a Big Mac?

Being a BigMac fan I couldn't resist this. Global average looks to be about 38 minutes! - MBC

http://www.economist.com/daily/news/displaystory.cfm?story_id=14288808&fsrc=nwl

"...UBS report published this week offers a handy guide to how long it takes a worker on the average net wage to earn the price of a Big Mac in 73 cities. Fast-food junkies are best off in Chicago, Toronto and Tokyo, where it takes a mere 12 minutes at work to afford a Big Mac. By contrast, employees must toil for over two hours to earn enough for a burger fix in Mexico City, Jakarta and Nairobi..."

The Economist - US housing market

http://www.economist.com/daily/news/displaystory.cfm?story_id=14291870&fsrc=nwl

"...S&P/Case-Shiller index, which tracks home prices in 20 cities, ticked up slightly in May, its first gain in 34 months. New construction of single-family homes rose in July for the fifth straight month, while sales of existing homes are expected to show their fourth consecutive month of gains when latest numbers are released on August 21st. Dig deeper, however, and the recovery’s foundations look shaky. A glut of supply will also weigh on prices, thanks to a wave of repossessions. Seized properties now account for almost one in four sales. Some 23% of homes with mortgages are underwater by one estimate, and others are even higher. Deutsche Bank’s securitisation team expects negative equity to peak at 48% of total homes by 2011..."

Write your Congressman and Senators

I have written to my Congressman (John Olver) and Senators (Kennedy & Kerry) as follows:

I am writing to ask you to present legislation that requires all Congressmen and Senators, as part of their swearing-in oath, commit to have read, in full, all bills being brought forward for vote. Considering the importance and long-term impact much of this legislation entails it is a simple and valid requirement. Congress may realize an added benefit of creating an incentive to be more concise and judicious with legislative wording. Attached to this bill should be further stipulation that all legislation applies equally to our Representatives as it does to the People.


Feel free to cut and paste and send to yours.

Daily Pfennig - 8/21/09

http://www.dailypfennig.com/

"...leading indicators climbed for a fourth straight month and the Philadelphia fed reported a big jump in their gauge of activity, but the initial jobless claims unexpectedly rose. Unemployment in the US will continue to be a drag on the economy, slowing any recovery and possibly pushing the US back into recession (or as some predict a depression). Today we will get some news on the housing market, and while the media will pump up the fact that month on month sales continue to rise, another report released yesterday showed mortgage delinquencies hit a record high in July. The proportion of homeowners delinquent on their mortgage or in foreclosure rose to its highest levels in four decades. An ominous sign for the US economy is that the problem loans have shifted away from the subprime borrowers to those driven into delinquency by unemployment. More than half the mortgages in the foreclosure process during the second quarter were prime loans..."

"...European markets took the Euro higher against the dollar after reports showed German services and French manufacturing unexpectedly expanded in August. Another report showed an index of German services industry grew for the first time in more than a year. This data confirms that the largest nation in the EU is pulling itself out of recession...composite index of both services and manufacturing for the 16 nations sharing the euro moved to 50 from 47, another strong indication that Europe is starting to grow again...recovery in Europe, on the other hand, is being fueled by increased consumer confidence and internal private sector demand...Currency traders got excited about these European data releases and took the Euro back above 1.43..."

"...Mohamed El-Erian, who is the CEO of bond giant PIMCO was on the news wires with suggestions for the central bankers meeting in Jackson Hole. He apparently is worried about the disjointed approach these central bankers have taken in their intervention with the markets and believes the approach will lead to volatile markets and slower global growth. He also believes we are in for a drop in the value of the US$. "The question is not whether the dollar will weaken over time, but how it will weaken," said El-Erian. "The real risk is that you will get a disorderly decline." According to El-Erian, the euro will rise to $1.60 by the end of 2010 and the Canadian dollar will appreciated to 1.01..."

How Over-Regulating Goldman Sachs Will Lead to Higher Oil and Commodity Prices

I don't really understand all this deeply but have to appreciate the author's view regarding trust in free market. - MBC

http://www.moneymorning.com/2009/08/21/commodities-regulation-controversy/

"earning hefty profits on its commodities trading for nearly 18 years, heavyweight trader Goldman Sachs Group Inc. (NYSE: GS) now finds itself on the hot seat, defending this crucial source of revenue. And while that may not be good for Goldman, it’s also bad for investors..."

Complicated story of Goldman's big move into commodities market in 1991. Author touches on Goldman's 'special' relationships but makes a credible argument, the free market should be allowed to ultimately rule. - MBC

"...If regulations with real “teeth” – in this case, position limits on energy futures – are actually put in place... While the final result is difficult – if not impossible – to picture, here’s my best guess: The financially lucrative, economically prestigious and strategically important commodities-trading business won’t fold up and disappear – it will just move to another country, where it’s better treated, and even nurtured.

Perhaps it will end up in Asia, as has been the case with so many other important businesses during the past couple of decades. And that, once again, will end up costing America jobs – these jobs high-paying and prestigious – at the worst possible juncture..."

The Economist - This week's Economist/YouGov poll

This is an interesting site to quickly read through. - MBC

http://www.economist.com/blogs/democracyinamerica/yougov/

The Economist - Health reform

http://www.economist.com/displaystory.cfm?story_id=14258740&fsrc=nwl

"...new poll conducted for The Economist by YouGov confirms that scepticism over the reform effort is widespread. Of those respondents expressing a clear view, twice as many believe reform on the scale Mr Obama is still contemplating will leave them worse off than today (38%) as believe they will be better off (19%). Over half are convinced they will end up paying more. And more people (59%) believe that any new system will lead to rationing of care than think it will lead to long-term cost savings (only 46%). Details are available at www.economist.com/yougovpoll..."

"...Jon Kingsdale. As head of the Commonwealth Connector, the official insurance exchange set up in Massachusetts...pioneering reformers in Europe and in Massachusetts have shown that universal coverage is achievable without a government-run insurer. Among the policies needed are strong regulation of insurers to prevent bad behaviour, subsidies for the poor and the creation of health-insurance exchanges..."

"...officially appointed committee of experts has just recommended that his state scrap the fee-for-service model of reimbursement, which many economists believe is at the heart of America’s health-inflation problem. Doing so would require his state to get a special waiver from the federal government, but this radical and hugely worthwhile proposal is now being seriously considered. Sadly, the idea is nowhere to be found in the leading bills in Washington, DC.

Mr Kingsdale does acknowledge that it is easier to pull off reform in a small and wealthy state like his than it would be at the national level, and accepts that his state has not yet actually passed any legislation that would curb health inflation. And given Congress’s history of fiscal irresponsibility, it is surely right to be sceptical about any strategy that expands entitlements today in the hope of forcing a fiscal crisis to win support for cost cuts tomorrow.

Mr Kingsdale sums it up this way: “Trying to anticipate and address related cost, quality and access issues in one national reform would be more than Herculean—it would be Sisyphean…Herculean effort, followed by failure, then a renewed attempt at reform, ad infinitum.” ..."

Daily Pfennig 8-20-2009

http://www.dailypfennig.com/

"...investment conference last week in Chicago, and listened to several good presentations on the current state of the economy. While every speaker had differing opinions on how to invest during the next few months, they all seemed to agree on one thing; the recent rally and 'recovery' would reverse, and the US will likely head back into another downturn. The timing of this next downturn is hard to pin down, but most believe we will see the US economy falter again toward the first quarter of 2010. If and when this occurs, the dollar could see a temporary rally as investors flee back into US treasuries. But longer term, everyone at the conference was in agreement with what Warren Buffet said in his op-ed piece yesterday: the US$ will ultimately lose value..."

"...time of year again when Central bankers and economists from around the world have a boondoggle at Jackson Hole Wyoming... You might recall that last year they all hunkered down and tried to think of ways to keep the financial mess forum worsening, only to have Lehman Brothers collapse a few weeks later!

Well... I'm sure we're going to hear a lot of rhetoric about the "recession coming to an end"... but they have it all wrong! this isn't a recession it's a depression...

With pockets of risk remaining, such as the collapsing U.S. commercial real estate market, and the double digit unemployment rate... I would think that these guys who missed seeing the subprime meltdown coming and then when it was presented to them, told us it wouldn't filter out into the economy..."

It's the Post Office that's always having problems

Barack Obama recently said, "I think private insurers should be able to compete...I mean. If you think about it, UPS and FedEx are doing just fine. It's the Post Office that's always having problems."

Now just fairly consider these words. Our President is clearly admitting a gov't. run program is in trouble compared to privately run companies. Yet he expects us to openly accept that a gov't. run health care program is required.

Governments job is not to limit free market competitiveness by getting involved it's to ensure that competitiveness is fair and open to all, no price fixing, no monopolies, etc... - MBC

The Greenback Effect by Warren Buffett

He can make this sound like it was the only thing to do but I still think he's wrong and I think he's even more wrong to be hanging his hat on "Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources." Has Congress EVER shown restraint? Who does Buffett think is going to control the Fed who can increase our debt at will? - MBC

http://www.nytimes.com/2009/08/19/opinion/19buffett.html?_r=2&ref=todayspaper

"...The United States economy is now out of the emergency room and appears to be on a slow path to recovery. But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself..."

"...leave aside the war-impacted years of 1942 to 1946, the largest annual deficit the United States has incurred since 1920 was 6 percent of gross domestic product. This fiscal year, though, the deficit will rise to about 13 percent of G.D.P., more than twice the non-wartime record. In dollars, that equates to a staggering $1.8 trillion. Fiscally, we are in uncharted territory.

Because of this gigantic deficit, our country’s “net debt” (that is, the amount held publicly) is mushrooming. During this fiscal year, it will increase more than one percentage point per month, climbing to about 56 percent of G.D.P. from 41 percent. Admittedly, other countries, like Japan and Italy, have far higher ratios and no one can know the precise level of net debt to G.D.P. at which the United States will lose its reputation for financial integrity. But a few more years like this one and we will find out..."

"...With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.

Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”.."

Why Asia Will Supplant Detroit as the Global Center of the Auto Industry

This should give us all a pause. Losing the auto industry (however slowly it's surely), losing dollar value and it's position as the world's reserve currency, high unemployment, rising foreclosures, etc... and the Fed has sent $500 billion to Central Banks overseas but Bernanke can't (won't) even say to who, and our Administration and Congress want to spend more! Republican or Democrat - Liberal or Conservative - ANYONE - does this make any sense?

http://www.moneymorning.com/2009/08/19/global-auto-industry/

"...In India, for example, sales were up 31% on a year-over-year basis, while auto sales in China were an astonishing 70% above those of a year ago. Even if U.S. auto sales continue to improve, China’s automobile market may outsell its U.S. counterpart for a full year for the first time ever..."

"...global automobile sales are undergoing a major reorientation towards Asia and away from the United States and Europe. This will inevitably have a huge effect on the structure of the sector..."

"...GM is doing much better in China, thanks largely to its joint venture with Shanghai Automotive Industry Corp., which expects to sell 1.4 million vehicles in 2009. Since GM is also selling Opel, its European operation, GM will find itself driven primarily by the demands of the Chinese market. Given the growth of that market, it will probably make the most economic sense for GM to become Chinese-owned. Politics may delay this, but probably only for a few years..."

The Economist - Which industries are viewed most positively by Americans?

Interesting how far down the Fed. Government is on the list. Geez, and those poor hard-working farmers who get something like $36 billion in subsidies NOT to farm. - MBC

http://www.economist.com/daily/news/displaystory.cfm?story_id=14254455&fsrc=nwl

"...recent Gallup poll, Americans say they are keenest on the computer industry, with the restaurant business and hard-working farmers not far behind. Oil and gas producers come off worst, with the troubled car industry and the federal government only slightly more popular. Banking has plummeted in the public's estimation. Only two years ago, it enjoyed an overall positive rating from 30% of people..."

Stealth move to single payer system

"...good public option is the strategy to get to single payer system..." Their words! Is this honest debate as the President challenges? Is this transparency in action? Sure we need health care reform but let's do it in such a way that the American people really know what's going on. This is BS! - MBC

http://www.youtube.com/watch?v=f3BS4C9el98&eurl=http%3A%2F%2Fvideo.google.com%2Fvideosearch%3Fq%3Dbarney%2520frank%2520public%2520option%2520trojan%2520horse%2520for%2520single%2520payer%2520health%2520care%26o&feature=player_embedded

http://www.youtube.com/watch?v=YzhSIzt25Yk&eurl=http%3A%2F%2Fvideo.google.com%2Fvideosearch%3Fq%3DJan%2520Schakowsky%2520public%2520option%2520trojan%2520horse%2520for%2520single%2520payer%2520health%2520care&feature=player_embedded

Daily Pfennig 8/19/2009

If Bernanke is not reappointed it will be interesting to see who Obama picks. Lawrence Summers? Will Bernanke go to work at Goldman Sachs or become a lobbyist? - MBC

http://www.dailypfennig.com/

"...a classic case of "The Markets do what they're supposed to do... Just not when" There are more than a handful of very well educated people and well respected investor types that have see the writing on the wall for the dollar... But... The markets have decided that it's just not the right time...

The reason this whole idea came to light for me this morning is a story that appeared on the Bloomie: "Buffett Says U.S. Federal Debt Poses Risks to Economy, Dollar."

Calling it the "gusher of federal money"... Buffett had this to say... "The U.S. must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the world’s largest economy and its currency." (Now that Warren Buffett is saying it maybe some more will finally start to listen! - MBC)

The folks over at PIMCO (Pacific Investment Management Co), the world's largest bond fund, also believe that the dollar will weaken as the U.S. pumps "massive" amounts of money into the economy. They even go further, in a letter to customers, saying that the drop of the dollar will come mostly against the emerging market currencies. "the greenback is losing its status as the world's reserve currency, said Curtis Melbourne, a PIMCO portfolio-manager. He went on to say... "Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure."

"...Speaking of Central Banks... The cartel, I mean the Fed Reserve, has been keeping very quiet recently... I think that since Big Ben Bernanke told Congress that he had no idea where $500 Billion dollars that left the Fed went, he's doing damage control... He is up for re-appointment in January, and that statement won't be a gold star on his resume', eh? I was reading my friend, John Mauldin's weekly letter this past weekend, and he mentioned that some pretty important people that are "in the know" made a bet that Big Ben won't get re-appointed by the President in January... WOW! One and done for the helicopter Ben? I'll have to see that to believe it, as he has gone along with all the back room deals, brokerage sales, and changes to power that the administration is orchestrating... Whatever administration it was or is... Doesn't matter folks... There's been no change, except for the different color of lipstick on the pig..."

cash for clunkers - healthcare edition

New Chief at A.I.G. to Be Paid at Least $7 Million a Year

If there had been no gov't. bailout this company would not be paying any where near this kind of money to CEO, IF they had survived. Contend it's gov't intervention that's, at least partially, to blame for these unwarranted salaries. So much for all the Administration's bluster re controlling salaries!! Let the free market control salaries! - MBC

http://www.nytimes.com/2009/08/18/business/18insure.html?_r=1&ref=todayspaper

"...A.I.G. disclosed Monday in a regulatory filing that it would pay Robert H. Benmosche, 65, the former head of MetLife, $3 million a year in cash and $4 million in stock.

Mr. Benmosche will also be eligible for up to $3.5 million in stock as part of an incentive plan, A.I.G. said in a regulatory filing.

The pay package has received preliminary approval by Kenneth R. Feinberg, the administration official in charge of overseeing compensation for top executives at seven large firms bailed out by the federal government, according to the regulatory filing..."

Daily Pfenning - 8-18-2009

Interesting that Germany is World's largest exporter although predicted to soon be overtaken by China in 2010. Germany at $1.465 trillion - China at $1.428 trillion U.S. dollars last year. Not good re short-term Treasuries not really a surprise either. Have to imagine this means bad news for the dollar looming at some point. Speaking of looming issues - these failing banks are something to watch. - MBC

http://www.dailypfennig.com/

"...Last week, I told you how the German GDP had posted a positive number, and therefore the economy had exited the recession. I don't believe the German economy to be "out of the woods" yet though... There are still things that go bump in the night that could very well drag the economic growth down... But for now... The Eurozone's largest economy is basking in the sun of not only exiting a recession but a strong Investor Confidence report..."

"...The TIC's data for June that printed yesterday was quite strong... For Long-Term Treasuries, that is... The short end got ambushed and was so weak that the positive for the Long-Term Treasuries was wiped out by the selling on the short end...

This probably (upset) all those people that bought short term T-Bills last year in what they thought was a "flight to safety"... I'm sure they exited with some red in the numbers... They basically gave the Gov't a loan, paid the Gov't for that loan, and lost money... Great "flight to safety" I'd say... NOT! Safe Haven? What Safe Haven?...

There's no information right now about what games the Gov't played in these figures... I think that for now though we can believe in our heart of hearts that they are playing games, which means the question at heart is... When the Fed winds down their buying of Treasuries, what happens to yields... And in turn what happens to borrowing costs... And finally the economy. My opinion? It won't be pretty... But neither will the monetizing of debt that the Fed keeps performing... So, it's a case of pick your poison... I would prefer the quantitative easing / monetizing of debt to stop, and let's take our lumps on the economy that the Gov't has been so hell-bent in attempting to stop... Get it over with, and live to see another day, rather than prolonging all this bad stuff...

For instance, last week, I read an article that talked about how the Big Banks are still in trouble... That just stinks! See what I'm talking about here? If they had been told to close their doors a year ago, we would be probably be pulling our selves out from that mess now... But nooooooooo! Instead the Gov't spent hundreds of Billions of dollars to prop them up, and a year later, they still have problems! That just stinks!

So far this year, and I know, these aren't the Big Banks, but ones that have caused significant damage to the funds of the FDIC, there has been 77 banks close... 77 Banks folks! One of the banks that closed was sold to another bank, but with the Gov't guaranteeing that the buying bank didn't experience any losses... Well, that would be a big wouldn't it? If the closed bank didn't have losses, it wouldn't be getting closed! My friend and excellent writer, David Galland, had this to say about these back door deals for closed banks...

"Note that bit about the government “agreeing to shield acquirers from certain losses on assets of the failed bank.” This sort of guarantee has become a popular backdoor way for the government to deal with various elements of this crisis, without the more overt method of writing a check to cover losses or, heavens forbid, actually letting the equity holders bear the brunt for having made a bad investment in a poorly run bank.

Instead, the government jiggers things to hand off the good assets of a bad bank to one of their buddies, while agreeing to shift the liability for the poor assets onto the backs of taxpayers – with the IOU due and payable at some point down the road."..."

"...other piece of data that printed yesterday was the NAHB Housing Market Index, which printed a digit higher than the July print of 17... So, 18 is the index number, what does that mean to us? Well, first of all, the Index represents a survey of Home Builders of Single-Family detached homes, and is comprised of three surveys... 1. Present Sales 2. 6-month expectations 3. traffic of buyers. The index has a range between 1 and 100, with 1 being bad, and 100 being excellent... A figure above 50, suggests that survey participants are seeing good economic conditions for Home Sales.

So... Now that we've learned that in class today, who can tell me what an index reading of 18 represents? You, over there in the corner, please take the IPOD ear-phones out of your ears and answer the question! Yes... It means we have a LOOOOOOOONNNNNNGGGGG time to go before we get back to 50..."

The Free Market as Regulator

http://www.house.gov/htbin/blog_inc?BLOG,tx14_paul,blog,999,All,Item%20not%20found,ID=090818_3092,TEMPLATE=postingdetail.shtml

"...We must watch out when government comes up with interventionist solutions to interventionist problems. The root of our problems lie in interventionism. Trusting the free market is the solution..."

Maybe I'm wrong about 'cash for clunkers' not increasing production. In the case of GM it's a bit suspect as they are gov't. owned and figure on getting help again if need be. Too bad none of the GM products are in the top 5 of newly purchased vehicles. Ford, Toyota, and Honda are a different story though. - MBC

http://www.comcast.net/articles/news-general/20090818/US.GM.Production.Increase/

"...Higher sales from the government's Cash for Clunkers program have prompted General Motors Co. to boost production at several of its factories, according to company and union officials.

The increases include an extra day of work at the Lordstown, Ohio, assembly plant and increased hours at a factory in Orion Township, Mich., said the union officials..."

"...Toyota Corolla small car was the top new vehicle purchased by people trading in clunkers, followed by the Honda Civic and Ford Focus compacts. Toyota's midsize Camry was fourth, while its gas-electric hybrid Prius was fifth, according to the government.

Ford Motor Co., Honda Motor Co., Toyota Motor Corp., Hyundai Motor Co. and Chrysler Group LLC all have announced production increases due to the clunkers program..."

The Whole Foods Alternative to ObamaCare Eight things we can do to improve health care without adding to the deficit.

There are alternative and thoughtful ideas that deserve attention and consideration. It seems this guy is taking a lot of abuse and threatened boycotts of Whole Foods for writing this. - MBC

http://online.wsj.com/article/SB10001424052970204251404574342170072865070.html

• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor's visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program.

Failed Banks Weighing on FDIC

Bet we hear a lot more about bank failings coming up. - MBC

http://online.wsj.com/article/SB125046283572235251.html

"...three of the five banks that failed Friday, increasing the total to 77 so far this year, the financial hit to the agency's deposit-insurance fund is expected by the Federal Deposit Insurance Corp. to be about 50% of their assets..."

"...Regulators also have been blamed for not taking quick enough action and for allowing zombie banks to limp along. Inspectors general at the Treasury Department and FDIC, which serve as watchdogs, have issued more than a dozen reports that conclude regulators dithered while banks they oversaw plowed ahead with rapid and unsteady growth..."

Obama criticizes a Cold War approach to defense

This is long overdue. This is the kind of 'change' I can get behind. - MBC

http://www.comcast.net/articles/news-general/20090817/US.Obama.VFW/

"...Obama chastised the defense industry and a freespending Congress on Monday for wasting tax dollars "with doctrine and weapons better suited to fight the Soviets on the plains of Europe than insurgents in the rugged terrain of Afghanistan."

"Twenty years after the Cold War ended, this is simply not acceptable. It's irresponsible. Our troops and our taxpayers deserve better," he told a national convention of the Veterans of Foreign Wars. "If Congress sends me a defense bill loaded with a bunch of pork, I will veto it."

"...He assailed "indefensible no-bid contracts that cost taxpayers billions and make contractors rich" and lashed out at "the special interests and their exotic projects that are years behind schedule and billions over budget."

He took on "the entrenched lobbyists pushing weapons that even our military says it doesn't want" and blistered lawmakers in Washington whose impulse he said was "to protect jobs back home building things we don't need (with) a cost that we can't afford."

He said such waste was unacceptable as the country fights two wars while mired in a deep recession.

"It's inexcusable. It's an affront to the American people and to our troops. And it's time for it to stop," Obama said.

"...Despite objections and veto threats from the White House, a $636 billion Pentagon spending bill was approved by a 400-30 vote in the House late last month. It contains money for a much-criticized new presidential helicopter fleet, cargo jets that the Pentagon says aren't needed and an alternative engine for the next-generation F-35 Joint Strike Fighter that military leaders say is a waste of money.

The Senate will deal with the spending measure in September..."

:...He praised McCain for joining him and Defense Secretary Robert Gates in opposing unneeded defense spending...:

Administration Official: "Sebelius Misspoke." (re public option health insurance)

Who knows what who's saying?

http://politics.theatlantic.com/2009/08/administration_official_sebelius_misspoke.php

"...An administration official said tonight (Sunday 8-16) that Health and Human Services Secretary Kathleen Sebelius "misspoke" when she told CNN this morning that a government run health insurance option "is not an essential part" of reform..."

"...second official, Linda Douglass, director of health reform communications for the administration, said that President Obama believed that a public option was the best way to reduce costs and promote competition among insurance companies, that he had not backed away from that belief, and that he still wanted to see a public option in the final bill..."

"...On Saturday, Mr. Obama defended the public plan before an audience in Colorado Springs. At the same time, he said that the government option was not the single critical element of reform, pointing instead to the provisions preventing insurance companies from discriminating against people, requiring them to offer plans to everyone, and capping premium increases.

"The public option, whether we have it or we don't have it, is not the entirety of health care reform. This is just one sliver of it. One aspect of it," Obama said..."

My thoughts on the future

I’ve been trying to put this together in my mind in the simplest way. Certainly it’s all more complicated but that’s what keeps it from coming to the forefront and getting the attention it deserves.

We have:

1) high unemployment (presented figures at around 10% but more accurate figures at over 16%. http://www.bls.gov/news.release/empsit.t12.htm when considering marginally attached and discouraged workers.)

2) Artificially induced low interest rates.

3) Devalued dollar.

4) Unprecedented national debt with the assurance of more as the new Administration’s spending goes unchecked.

5) Record foreclosures

6) Low tax revenue.

I’m not sure what comes first in the scenario going forward.

Start with debt. We have this enormous debt and an administration bent on more spending, which obviously only leads to further debt.

A stimulus package was voted through and money was directed to the financial industry both here and overseas, threatening that without it the financial system would collapse! Yet now many have been reporting record profits. My sense (granted it’s not always correct) tells me that if we were so close to financial collapse it should have taken a bit longer (sarcasm!!!) to turn things around and have these severely ailing companies get healthy again. Frankly, I don’t believe anything significantly constructive has been done to remedy issues in the financial industry and that there are issues bubbling below the surface just waiting to erupt.

Nevertheless, the financial, educational, and environmental investments really have had no impact on significant job creation or improved the financial situation of most Americans, just added to our debt.

All the ‘cash for clunkers’ program has done is run through existing inventory and add more to our debt, but realistically done nothing to warrant increased production or increased employment.

Now we are being warned health care reform must be passed to save the economy yet I’m some how not seeing this argument laid out in black and white. It’s being lost in all the other superfluous bickering and spin.

How many times will we listen to the boy crying wolf? “We must do this to save the economy.”

We are finding it hard to sell our debt (Treasury auctions) and being forced to buy it back, which clearly is a losing proposition.

To satisfy our unchecked government spending (Remember this Congress can’t even cut $100 million from their budget given 90 days to figure out how.) the Administration must raise taxes. Obviously as unemployment is so high fewer have jobs and thus the tax base has declined significantly. Outside of going after ‘those making more than $250,000/yr.”, the next choice is to tax businesses. This simply leads to higher cost of doing business, which leads to higher cost of goods sold, which is simply a ‘hidden’ tax on those making less than $250,000/year. Don’t have to be a genius to see where this heads.

Again, with high unemployment fewer customers are out buying higher cost goods so the net revenue of businesses falls and their tax contribution falls. Likely the businesses contract and/or look to locations outside America to produce, or opt to close. Even more concerning is the impact on new business ventures. Budding entrepreneurs trying to crunch the numbers are likely going to be put off or again look to other locations or simply invest their money out of the country.

The other option being pursued is taxing so called luxury goods like alcohol and cigarettes. Clearly this is another tax on those making less than $250,000/year but it’s going to happen anyway.

Our government is going to be forced to keep the dollar value low (inflation) to service our debt, which means further contraction of our consumer driven economy, which leads to further unemployment or at the very best slower reemployment, which leads to lower tax revenue, etc… Hyperinflation anyone?

The number of people, and institutions, to blame for this is myriad but play a huge role in deflecting attention to the problem continuing. Each consecutive administration can blame the last, and their policies, but the facts remain, they each are doing nothing to truly eliminate the problem. They all continue to grow government’s role in the market and outspend the revenue stream.

This is just a downward spiral. The government spin-doctors and ‘expert’ advisers can try to reinflate the bubble but that just prolongs the inevitable. With bureaucrats sticking their fingers in how the market works we are never, ever, going to get out of trouble. Each new group will have some new, and likely worse (but better sounding), plan to lead us out of collapse.

I see the option simply as forcing government out of the market. We are the ones who are going to lead America out of this death spiral and we’ll do it by writing our Congressman and Senators and letting them know our thoughts and wishes. If they don’t react we vote them out. This country does need “CHANGE” but not the kind that takes us down the road to socialism rather the kind that leads us back to strong Democracy, respect for individual freedoms with opportunity for all to succeed. - MBC

Poll: 57% don't see stimulus working

Well gee whiz how many predicted this was going to be the case? Even a bunch of dumb people figured out this wasn't the way to get things moving. - MBC

http://www.usatoday.com/money/economy/2009-08-16-stimulus-poll_N.htm

"...Six months after President Obama launched a $787 billion plan to right the nation's economy, a majority of Americans think the avalanche of new federal aid has cost too much and done too little to end the recession..."

"...USA TODAY/Gallup Poll found 57% of adults say the stimulus package is having no impact on the economy or making it worse. Even more —60% — doubt that the stimulus plan will help the economy in the years ahead, and only 18% say it has done anything to help improve their personal situation..."

Daily Pfennig 8/17/2009

http://www.dailypfennig.com/

"...The U. of Michigan Confidence Survey for Aug unexpectedly dropped to 63.2, from the previous month's 66 level. The real drop though was from the forecast for this month which was 69! The drop brought the index to a five-month low..."

"...In the overnight markets, the return of risk aversion got even stronger. From what I understand happened, it seems that China's largest steel makers announced that they were going to see iron ore prices at 35% below the benchmark. This sent shockwaves through the commodities, and that has carried over to further losses in the currencies..."

"...Bill Bonner ... "And remember, too, the feds don't really have any money to hand out. They can only get money by taking it from its rightful owners - either in taxation or loans. Or, they can print it up themselves. In any case, the money adds nothing real or extra to the economy. It merely distorts the economy...twists it...misleads it...and makes it a bigger mess than it was already."

Emanuel Wields Power Freely, and Faces the Risks

Here's a guy we didn't vote for, who's wielding incredible power, and is essentially totally focused on 'raising money, mobilizing interest groups, and harvesting the latest policy ideas from research groups.' One day he's talking about rising deficits and cutting back stimulus and a week later he's talking about a 2nd stimulus plan. Are these good for the country considered decisions or politically considered decisions? - MBC

http://www.nytimes.com/2009/08/16/us/politics/16emanuel.html?_r=1&th&emc=th

"...He knows how to pull all the levers of influence in Washington — raising money, mobilizing interest groups and harvesting the latest policy ideas from research groups. At the same time, his relentless campaign-style approach sometimes leaves some colleagues worried they spend too much time reacting to events.

At times, it seems as if Mr. Emanuel is White House chief of staff, political director, legislative director and communications director all rolled into one. He has fingers in almost every decision, like who gets invited to social events at the White House and how to shape economic and foreign policy..."

"...Mr. Emanuel is more involved in domestic and foreign policy than outsiders realize, colleagues said..."

"...At one staff meeting this summer, Mr. Emanuel and colleagues discussed whether rising deficits justified scaling back stimulus spending, one participant said. A week or so later, the discussion had turned 180 degrees. Concerned the stimulus was not working, the group discussed a second stimulus plan..."

The Daily Pfennig - 8/14/2009

http://www.dailypfennig.com/

"...Sean believes that we'll see $1,300 Gold by the end of this year, and $2,500 Gold in 2010... He bases this on a number of things, but mostly on the fact that the IMF announced sales of Gold made earlier this year, is being completely offset by Chinese buying. With all the demand for Gold, having this huge IMF selling of Gold offset by the Chinese is HUGE!..."

Retail sales weak, but prices expected to stay low

Again, the economists missed and missed rather badly. So, if consumers aren't buying what/who is going to pull us out of recession? The Administration seems to believe they can 'spin' us some good news and then push through more spending. The Fed claims they'll stop buying our debt back but who else is going to keep buying it? Does anyone see a train wreck coming? - MBC

http://www.comcast.net/articles/news-general/20090811/US.Economy/

"...Overall, sales fell 0.1 percent, the Commerce Department said, after two months of modest gains. Economists had expected a 0.7 percent increase. Excluding autos, sales fell 0.6 percent, also much worse than predicted..."

Warning over US cash-for-clunkers scheme

Another example of short-term thinking that quickly enough reveals the faults. Democrat or Republican, whenever politicians make these decisions they're more often than not full of holes. Then the 'spin doctors' get at it and we're being convinced it was a brilliant idea that saved the economy from collapse. - MBC

http://www.ft.com/cms/s/0/940088ae-8830-11de-82e4-00144feabdc0.html

"...The popular US cash-for-clunkers programme may be drawing money from other consumer purchases and could also undermine future car sales, US economists have warned..."

Hilary suffering severe PMS?

What is wrong with this woman? Am I off base to consider this an incredibly unAmerican statement? This is just plain embarrassing when our Secretary of State is dealing with severe PMS. - MBC

"...Hillary Clinton drew some negative attention for comparing a disputed Nigerian election with the 2000 U.S. stalemate that ended with George W. Bush winning out over Al Gore...

"Our democracy is still evolving," Clinton said. "You know we had some problems in some of our presidential elections. As you may remember, in 2000 our presidential election came down to one state where the brother of one of the men running for president was governor of the state. So we have our problems too."

U.S. Initial Jobless Claims Increased to 558,000 Last Week

Very importantly WHY do we keep listening to these economists? They don't seem to get any forecasts right yet they continue to be quoted and believed. - MBC

http://www.bloomberg.com/apps/news?pid=20601087&sid=a1Bhl_i8WRnA

"...number of Americans filing first-time claims for jobless benefits unexpectedly rose last week, while the number of people on unemployment rolls dropped to the lowest since April, signaling the labor market may be stabilizing as the recession eases..."

"...Economists forecast claims would drop to 545,000 from a previously estimated 550,000, according to the median of 42 projections in a Bloomberg News survey..."

Daily Pfennig - 8/13/2009

http://www.dailypfennig.com/

"...getting back to the thought of abolishing the Fed... Think about this for a minute... What good are they? Have we not had dozens of recession and one Great Depression since they were created? Have we not seen a 95% loss of purchasing power for the dollar since they were created? Let me tell you something else, folks... If the markets set the interest rates based on activity, we would never experience inflation or deflation..."

"...The U.S. Budget Deficit swelled to $180.7 Billion in July, from $102.8 Billion in June... Hmmm... Think about that for a minute folks... In June, when quarterly tax receipts should be enough to cover the expenditures, they not only were not enough, but they fell short by $180.7 Billion dollars! This is a combination of slower tax receipts because of the depression were in, and... The unsustainable deficit spending by the Gov't. Oh! And the Budget Deficit year to date is now $1.27 Trillion... But you don't see the knuckleheads in Washington D.C. doing anything about it, except for coming up with new things to spend more money on... I say fire them all!

Speaking of tax receipts... My friend, and writer & Marketing genius extraordinaire, David Galland, had this to say recently in one of his most excellent news letters... Here's David...

"I like the idea of also forcing the government to stop automatically withdrawing taxes from paychecks. Instead, wage earners would be responsible for sending out their tax payments on a monthly basis. By my back-of-the-envelope calculations, it would take about two months of writing out the big checks to Uncle Sam before people came to grips with just what government (or, in this case, one slice of government) is actually costing them… and out would come the pitchforks. We cannot afford our current level of government, and the sooner we get around to cutting it back, the better. Period." -- Thanks David... As always you think on a different level than the rest of us!

The Trade Deficit also grew larger in July as Oil prices rose... The Trade Deficit moved to $27 Billion from $26 Billion... Now, the Trade Deficit is much smaller than it used to be thanks to the depression, but, the fact remains that it is still nipping at the heals of the dollar like one of those small dogs, and whenever it is that the U.S. comes out of this depression, this figure will balloon once again..."