By now it is more than obvious except to a few economists (yes, we realize this is a NC-17 term) that QE2 will be an absolute and unmitigated disaster, which will likely kill the dollar, send risk assets vertical (at least as a knee jerk reaction), and result in a surge in inflation even as deflation on leveraged purchases continues to ravage Bernanke’s feudal fiefdom. So all the rational, and very much powerless, observers can do is sit back and be amused as the kleptogarchy with each passing day brings this country to final economic and social ruin. Oddly enough, as Paul Farrell highlights, the list of objectors has grown from just fringe blogs (which have been on Bernanke’s case for almost two years), to such names as Buffett, Gross, Grantham, Faber and Stiglitz. And that the opinion of all these respected (for the most part) investors is broadly ignored demonstrates just how unwavering is the iron grip on America’s by its economist overlords. Which brings us back to the amusement part. Here are Farrell’s always witty views on the object which very soon 99% of American society will demand be put into exile: the genocidal Ph.D. holders of the Marriner Eccles building.
Warning, Fed Chairman Ben Bernanke’s foolish gamble to stimulate the economy will backfire, triggering a new double-dip recession. Bernanke is “medding” too much in the economy, say Marc Faber, Bill Gross, Jeremy Grantham, Joseph Stiglitz and others.
The Fed is making the same kind of mistakes Japan made that resulted in its 20-year recession. The Washington Post says Larry Mayer, a former Fed governor, estimates that to work it would take QE2 bond purchases of “more than $5 trillion …10 times what analysts are expecting.”
Bernanke’s plan is designed to fail. And, unfortunately, that will make life far more dangerous for American investors, consumers, taxpayers and voters.
“I’m ultrabearish on everything, but I believe you’ll be better off owning shares than government bonds,” said Hong Kong economist Marc Faber at a recent forum in Seoul. He sees a repeat of dot-com-bubble insanity today. Faber publishes the Gloom, Boom & Doom Report.
The American people are experiencing financial death by a thousand cuts and most of them don’t even realize it. The U.S. government, state governments, local governments and the financial elite are draining us financially in dozens upon dozens of different ways, and yet we have become so programmed to accept it that it just seems normal to us. 2011 is rapidly approaching, and a whole slate of federal taxes is scheduled to go up, state taxes are being increased from coast to coast, local governments are finding new and creative ways to stick it to us and the financial elite are becoming more predatory than ever.
Meanwhile, the incomes of many average Americans are actually going down. According to the Census Bureau’s annual survey of income and poverty in the United States, of the 52 largest metro areas in the nation, only the city of San Antonio did not see a decline in median household income during 2009. Tens of millions of Americans are flat broke and they are getting pissed off. According to a new poll conducted by CNBC, 92 percent of Americans believe that the U.S. economy is either "fair" or "poor". The American people desperately want someone to fix the economy, but instead our "leaders" are trying to come up with new and creative ways to drain even more money out of us.
In no particular order, the following are 75 ways that the U.S. government, state governments, local governments and the financial elite will be sucking even more of the life blood out of the American people in 2011….
#1 State governments across the U.S. are raising fees and taxes in so many different ways it is staggering. A reader named Richard recently sent me an email in which he described the shock that he experienced when he recently received his license plate renewal notice in the mail….
I just got a license plate renewal notice from the Oregon Department of Motor Vehicles. When I opened the envelope and saw the amount of the renewal, I was shocked. The amount seemed much higher than usual.
I have a computerized record of all my financial transactions over the last many years. I looked up previous DMV license plate renewals and I saw
I would like to place this seminar’s topic, ‘Global Governance,’in the context of global control, which is what ‘governance’ is mainly about. The word (from Latin gubernari, cognate to the Greek root kyber) means ‘steering’. The question is, toward what goal is the world economy steering?
That obviously depends on who is doing the steering. It almost always has been the most powerful nations that organize the world in ways that transfer income and property to themselves. From the Roman Empire through modern Europe such transfers took mainly the form of military seizure and tribute. The Norman conquerors endowed themselves as a landed aristocracy extracting rent from the populace, as did the Nordic conquerors of France and other countries. Europe later took resources by colonial conquest, increasingly via local client oligarchies.
The post-1945 mode of global integration has outlived its early promise. It has become exploitative rather than supportive of capital investment, public infrastructure and living standards.
In the sphere of trade, countries need to rebuild their self-sufficiency in food grains and other basic needs. In the financial sphere, the ability of banks to create credit (loans) at almost no cost on their computer keyboards has led North America and Europe to become debt ridden, and now seeks to move into Brazil and other BRIC countries by financing buyouts or lending against their natural resources, real estate, basic infrastructure and industry. Speculators, arbitrageurs and financial institutions using “free money” see these economies as easy pickings. But by obliging countries to defend themselves financially, their predatory credit creation is ending the era of free capital movements.
Does Brazil really need inflows of foreign credit for domestic spending when it can create this at home? Foreign lending ends up in its central bank, which invests its reserves in US Treasury and Euro bonds that yield low returns and whose international value is likely to decline against the BRIC currencies. So accepting credit and buyout “capital inflows” from the North provides a “free lunch” for key-currency issuers of dollars and Euros, but does not help local economies much.
The natural history of debt and financialization
Today, financial maneuvering and debt leverage play the role that military conquest did in times past. Its aim is still…
Yesterday’s "paper" (more in the napkin sense than as a synonym for "intellectual effort") by Mark Zandi and Alan Blinder, which was nothing more than a glorified cover letter for selected perma-Keynesian posts in the administration’s Treserve complex, was so outright bad we did not feel compelled to even remotely comment on its (lack of any) substance. A man far smarter than us, Stanford’s John Taylor (the guy who says the Fed Fund rates should be -10%, not the guy who says the EURUSD should be -10), has taken the time to disassemble what passes for analysis by the tag team of a Princeton tenurist (odd how those always end up destroying the US economy when put in positions of power), and a Moody’s economist, who is undoubtedly casting a nervous eye every few minutes on the administration’s plans for EUCs and other jobless claims criteria. Below is his slaughter of dydactic duo’s demented drivel.
Yesterday the New York Times published an article about simulations of the effects of fiscal stimulus packages and financial interventions using an old Keynesian model. The simulations were reported in an unpublished working paper by Alan Blinder and Mark Zandi. I offered a short quote for the article saying simply that the reported results were completely different from my own empirical work on the policy responses to the crisis.
I have now had a chance to read the paper and have more to say. First, I do not think the paper tells us anything about the impact of these policies. It simply runs the policies through a model (Zandi’s model) and reports what the model says would happen. It does not look at what actually happened, and it does not look at other models, only Zandi’s own model. I have explained the defects with this type of exercise many times, most recently in testimony at a July 1, 2010 House Budget Committee hearing where Zandi also appeared. I showed that the results are entirely dependent on the model: old Keynesian models (such as Zandi’s model) show large effects and new Keynesian models show small effects. So there is nothing new in the fiscal stimulus part of this paper.
Iceland represents an interesting situation. Most people are not very familiar with it. With only 300,000 inhabitants, Iceland certainly fits the description of a ‘microcosm.’ The story of the privatization of the Icelandic banks, and the ensuing orgy of credit expansion and fraud, is well worth some attention.
Banks that are private sometimes should be allowed to fail. One might consider saving the depositors, especially if it is a fraud, and certainly if the accounts are explicitly insured, but the creditors and investors should be wiped out, utterly and completely. This is the only way to wring moral hazard out of the system. This of course should be accompanied by vigorous and aggressive investigations for fraud, and prosecutions if the evidence indicates for indictment. I would follow those perpetrators to the ends of the earth, seeking their extradition, to insure that justice was done. These people are little better than traitors to their country and their people.
We tend to treat these sorts of banking frauds far too lightly. They are like poison to the system, because they not only involve the theft of funds, but the destruction of the confidence and integrity which permits the social system to function.
Their reform movement and new approaches to banking in Iceland are hopeful signs. They should not even think about joining the EU, or taking any loans for their banks.
They might also consider relieving the Social Democrats of power, because it sounds as if they are not interested in serving the people. The only question I would have is, "Why are they still in office, and not out on the street looking for employment?"
While not mentioned in the video, the implications of the recent Icelandic Supreme Court’s decision on the illegality of loans indexed to foreign currency baskets may be significant.
Under the provisions of the IMF Articles of Agreement, courts of other member states, including the US, UK and the Netherlands, are presumably/arguably barred from reaching a different conclusion. See, Article VIII, Section 2(b):
(b) Exchange contracts which involve the currency of any member and which are contrary to the
On one side are the bankers, who say borrowers should be liable for what they owe. On the other side are real estate agents, who say those who lost their houses should not be so burdened by debt that they cannot move on.
The differences have real financial consequences: bankers want to collect on billions of dollars in outstanding loans; real estate agents want as many people as possible to return to the housing market.
For the first time, the debate is spilling into the realm of law making, with state legislators in California considering a bill that would redefine the obligations of many defaulting homeowners.
Obviously the bankers are "in the right" as far as wanting homeowners to meet their obligations. Strategic default is cute, and in some cases it is economically the smart move, although these are adults that signed their name to a piece of paper so there should be a consequence. That said, in many instances, these loans were grotesque characitures of fair contracts so it’s hard to empathize with the creditors.
The realtors on other hand will make the case that the silver lining of strategic default is that at least it keeps properties turning over and the real estate market moving. They are jackals and a rapid turnover of homes with less consequence to the defaulter leads to buy and sell commissions, which is really all they’re after.
California Bankers versus Realtors to me is like if the Hells Angels and the Mongols fought for territorial control over a gas station bathroom. Whatever.
The IMF, like many other international institutions, asserts that it has a “preferred creditor status”, and this has been a practiced convention in the past. Thus, IMF has de facto seniority rights over private creditors despite the fact that there is no legal or treaty-based foundation to support this claim and this seniority of rights for IMF will continue under the recent EU rescue plan announced as well as it has not been noted otherwise implicitly nor explicitly. This is the reason why Sarkozy said it is a said day when the EU has to accept a bailout from the IMF (aka, the US). The EU now, and truly, contains a significant parcel of debtor nations.
To add fuel to this global macro tabloidal fire, the Euro members’ loan will be pari passu with existing sovereign debt i.e. it will not be considered senior. Although there is no written, hard evidence to support this claim, it is our view that otherwise there will be no incentive for investors to hold the debt of troubled countries like Greece, which will ultimately defeat the whole purpose of the rescue package. Moreover, there are indications that support this idea. As per Dutch Finance Minister Jan Kees de Jager, “We are not talking about a special preference for the eurogroup loans, that’s not possible because then you would have the situation that already-existing rights of creditors at the moment would be harmed.” (reference http://www.businessweek.com/news/2010-04-16/netherlands-excludes-senior-status-for-greek-aid-update1-.html). Of course, if more investors did their homework and ran the numbers, that same disincentive can be said to exist with the IMF’s super senior preference given the event of a default and recoverable collateral after the IMF has fed at the trough.
IMF’s preferred creditor status coupled with the expensive Euro members’ loans which are part of the rescue package can create a public debt snowball effect that could push the troubled countries towards insolvency when the IMF debt becomes repayable in three years time. This could be seen particularly in case of Greece (subscribers, please reference Greece Public Finances Projections). Even if all the spending cuts and revenue raising are achieved as planned for Greece, its debt will peak to 149.1% of the GDP in 2013. Please keep…
By now you have heard that Dubai World, the investment company, has asked its creditors for a six-month delay in repaying its debt (see articles in links). This is what is commonly referred to as default. Now many are wondering if Dubai the country is on the verge of default and asking who is most exposed. Markets are selling off in a major way. While this situation has been building for sometime, the announcement was an unexpected shock – an exogenous event – which has some talking about Creditanstalt and 1931.
Dubai is not an oil-rich country. It certainly has the greatest population amongst the United Arab Emirates, but oil and natural gas provide only 6% of income to the country. The country’s oil is expected to be depleted in as little as 20 years. Dubai is now much more dependent on its services like sporting events, trade and entrepôt services, and financial services and especially on property. So, when the Dubai property bubble went spectacularly bust in the credit crisis, Abu Dhabi, a UAE emirate with considerably more oil revenue, stepped into the breech in February.
Even before the Abu Dhabi bailout, I thought the Dubai property boom and bust was a marvel to watch. In January, I commented:
I am fascinated by Dubai. They don’t have oil and they massively overbuilt. I would very much like to keep tabs on this economy because its position in the Middle East makes it a symbol for much of the interconnected financial bubble-like world we have just exited.
I think of the events in Dubai as having a bit of the butterfly effect to it – with everything…
In a last ditch effort to stall the Chrysler sale, the Indiana Pension Fund has moved its objection to the 363 sale away from Gonzalez who flatly denied the plaintiff’s objection, and have moved it, with the assistant of White & Case’s Tom Lauria to NY Southern District Court. A hearing with Judge Thomas Griesa commenced at 11:45am today, ahead of tomorrow’s bankruptcy court hearing to approve the sale. From the memorandum filed in district court (attached below in its entirety):
Rather than pay the secured creditors as required, the Debtors – at the Government’s direction – are essentially transferring the Collateral with any value to New Chrysler and then divvying up the majority of that value among unsecured creditors (the United Auto Workers (“UAW”)) and third parties (the US Treasury Department and Fiat).
In response to this action, the U.S. Treasury Department had the following retort: "Put simply, it is nothing more than a last-ditch, eleventh-hour effort by a dissident faction of the debtors’ senior secured lenders to obstruct and impede core matters in Chrysler’s chapter 11 cases from being heard in bankruptcy court, which is the proper forum."
While it is unclear how quick the turnaround on the case should be, and just how the two venues would interact, at this point it is safe to say that Lauria is willing to take this matter to the Supreme Court if need be (and need likely will be). He better hurry before brand spanking new Obama nominee Sotomayor is inducted.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
If after months of Eurasian axis formation, one still hasn't realized why in the grand game over Ukraine supremacy - not to mention superpower geopolitics - Europe, and the West, has zero leverage, while Russia has all the trump cards, then today's latest development in Chinese-Russian cooperation should make it abundantly clear.
Overnight, following a grand ceremony in the Siberian city of Yakutsk, Russia and China officially began the construction of a new gas pipeline linking the countries. The bottom line to Russia - nearly half a trillion after China's CNPC agreed to buy $400bn in gas from Russia's Gazprom back in May. In return, Russia will ship 38 billion cubic meters (...
The Markit Eurozone Manufacturing final data shows Eurozone Manufacturing PMI at 13-month low in August. The rate of expansion in eurozone manufacturing production eased to its lowest during the current 14-month growth sequence in August, as companies faced slower increases in both total new orders and new export business. The final seasonally adjusted Markit Eurozone Manufacturing PMI® posted 50.7 in August, down from 51.8 in July, its lowest reading since July last year. The headline PMI was also below its earlier flash estimate of 50.8. National PMI data signalled a broad easing in the manufacturing recoveries underwa y across much of the currency union. Although Ireland was a noticeable exception, with its PMI at the highest level since the en...
In honor of Labor Day, which was signed into law as a national holiday in 1894, I'd like to share some graphical snapshots of a major change in our nation's workforce over the decades.
The Department of Labor's Bureau of Labor Statistics has monthly data on employment by industry categories reaching back to 1939. The first chart below is an overlay of the compete series of employment numbers for the two major categories, manufacturing and services industries.
When I say major, I'm referring to the complete domination of the labor market by these two industries -- anywhere between 91.3% to 95.3% of total nonfarm employment.
In 1939 service industries employed more people than manufacturing by a ratio of 2.1-to-1.0. But that ratio was soon to change. For a clearer picture of the rela...
Buffalo Wild Wings Inc. (Ticker: BWLD) shares are in positive territory in early-afternoon trading on Thursday, reversing earlier losses to stand up 0.50% on the session at $148.50 as of 12:15 pm ET. Options volume on the restaurant chain is running approximately three times the daily average level due to heavy put activity in the October expiry contracts. It looks like one or more traders are buying the Oct 140/145 put spread at a net premium of roughly $1.45 per contract. As of the time of this writing, the spread has traded approximately 3,000 times against very little open interest at either striking price. The put spread may be a hedge to protect a long stock position against a roughly 6% pullback in the price of the underlying through October expiration, or an outright bearish play anticipating a dip in BWLD shares in the next couple of months. The spread makes money at expiration if shares in BWLD decline 3.3% from the current price of $148.50 to breach the breakeven point...
Gradient Senior Analyst Nicholas Yee reports on six companies that are using a variety of techniques to shift pretax profits to lower-tax areas. Featured in this USA Today, article, the companies include CELG, ALTR, VMW, NVDA, LRCX, and SNPS.
Mt Gox may be long gone in the annals of bankruptcy, but its founder refuses to go gentle into that insolvent night. And, as CoinDesk reports, the disgraced former CEO of the one-time premier bitcoin trading platform has decided to give it a second try by launching new web hosting service called Forever.net and is registered under both Karpeles’ name and that of Tibanne, the parent company of Mt Gox.
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Author Helen Davis Chaitman is a nationally recognized litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense. In 1995, Ms. Chaitman was named one of the nation's top ten litigators by the National Law Journal for a jury verdict she obtained in an accountants' malpractice case. Ms. Chaitman is the author of The Law of Lender Liability (Warren, Gorham & Lamont 1990)... Since early 2009, Ms. Chaitman has been an outspoken advocate for investors in Bernard L. Madoff Investment Securities LLC (more here).
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
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