Thursday, October 29, 2009
OCTOBER 29, 2009, 1:18 PM ET
Mean Street: A Sham GDP for a Sham Economy
By Evan Newmark
Americans rejoice! GDP grew by 3.5% in the third quarter and the recession is over.
It’s time to drink champagne, dance in the streets, and have a group hug with Nancy Pelosi and Ben Bernanke. But whatever you do, don’t ask yourself why the recession has ended. The answer might ruin the party.
The recession is over only because Washington decided it should be. With billions in fresh government spending, it was only a matter of time before GDP posted some growth.
It’s too bad all that government spending is borrowed money. Someday, we’ll actually have to pay off this year’s $1.4 trillion deficit.
Go here for the rest of the story at WSJ Blogs.
Saturday, October 24, 2009
From the blog Too Much Liberty:
John was in the fertilized egg business. He had several hundred young layers (hens) called 'pullets' and ten roosters to fertilize the eggs. He kept records, and any rooster not performing went into the soup pot and was replaced.
This took a lot of time, so he bought some tiny bells and attached them to his roosters. Each bell had a different tone, so he could tell from a distance which rooster was performing. Now he could sit on the porch and fill out an efficiency report by just listening to the bells.
John's favorite rooster, old Butch, was a very fine specimen, but this morning he noticed old Butch's bell hadn't rung at all! When he went to investigate, he saw the other roosters were busy chasing pullets, bells-a-ringing, but the pullets, hearing the roosters coming, could run for cover.
To John's amazement, old Butch had his bell in his beak, so it couldn't ring. He'd sneak up on a pullet, do his job and walk on to the next one. John was so proud of old Butch, he entered him in the Renfrew County Fair and he became an overnight sensation among the judges. The result was the judges not only awarded old Butch the No Bell Piece Prize but they also awarded him the Pulletsurprise as well.
Clearly old Butch was a politician in the making. Who else but a politician could figure out how to win two of the most highly coveted awards on our planet by being the best at sneaking up on the populace and screwing them when they weren't paying attention?
Vote carefully next year, the bells are not always audible.
Posted by Sean G at 04:27, Saturday, October 17, 2009
Total bank failures year to date reached 106 yesterday, bringing the total cost to the FDIC Deposit Insurance Fund this year to about $25 billion, with only about $100 billion to go, according to the FDIC's own projections.
The FDIC likes to take over banks on Friday afternoons, believing you won't notice it as readily with the weekend intervening before the next regular day of business. They wouldn't want you to panic, you know. So people who watch this stuff carefully like to call the last day of the work week "Bank Failure Friday." Yesterday, I noticed that the 106th bank to fail this year was in Itasca, Illinois, near where I used to live, and it reminded me of these words posted by Mish (who lives in Illinois) in July of 2008:
23. FDIC Chairman Sheila Bair said the FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits.
24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.
25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.
What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.
Since those words were penned, the FDIC is planning to charge premiums several years forward to banks to the tune of $45 billion, its deposit fund is down to about $10 billion, and its troubled bank list has ballooned to over 400 banks, with nearly 300 in serious trouble. The FDIC expects to need at least another $100 billion for bailouts through 2013. Let's see, $10 billion on hand plus $45 billion charged forward = $55 billion. Only $45 billion short! Hmm. And you think we can afford to federalize health care?!
When you go down to the bank to ask for a loan to buy a house, you typically get leverage of only 5 to 1 (20% down), because nobody's got your back but you. So why does the bank get leverage to the tune of 25 to 1 (4% down)? Because of the taxpayer guarantee, that's why. And "rules" which let them, written by politicians on the take. It's high time we ended all that or this country will surely go bankrupt. Consider Citigroup.
It alone has $800 billion in "assets" off the books, and looks to be in serious trouble: suddenly this week it ended its gasoline credit card program and dramatically hiked interest rates on its other cards. Forget about the FDIC covering Citigroup with forward charged premiums to its member banks if it goes under. There isn't enough money there. The taxpayer will be on the hook. Again. Are you mad as hell yet? Are you going to take it anymore? Vote the bums out.
No wonder Jesse keeps saying, "The banks must be restrained . . . before there can be any sustained recovery."
Posted by jm at 10:34 AM
Monday, October 19, 2009
Friday, October 16, 2009
The country needs to create roughly 150,000 new jobs per month just to keep up with first time job seekers, but the inventory of already unemployed Americans just continues to grow. Who's going to have the money to buy the washing machines these lucky 90 are going to make? Certainly not the 15+ million Americans who've lost their jobs.
The news from Kentucky:
October 8, 2009
10,000 apply for 90 factory jobs
By Jere Downs
In the latest sign of weakness in Louisville-area employment, about 10,000 people applied over three days for 90 jobs building washing machines at General Electric for about $27,000 per year and hefty benefits.
The jobs dangle medical, eye care, prescription and dental benefit packages, as well as pension, disability, tuition assistance and more, said GE spokeswoman Kim Freeman. And despite the recession, no union workers have been laid off from Appliance Park since the company negotiated lower wages with workers in 2005.
“There are no jobs out there paying these kinds of wages that also offer these kind of benefits,” said Jerry Carney, president of IUE-CWA Local 761 at Appliance Park.
Just four years ago, the same jobs paid $19 per hour. But that was before Local 761 approved wage cuts for new workers aimed at preventing the closure of Appliance Park.
“People still value these jobs,” Freeman said.
With the Jefferson County unemployment rate at 10.6 percent in August and more than 38,000 unemployed people looking for work, the opportunity for moderate pay and health care was an attractive lure.
“In this recession, there are lot of people who are just about to run out of unemployment benefits,” said Richard Hurd, a labor relations professor at Cornell University. The national average of time unemployment benefits collected now stands at 26 weeks, Indiana University Southeast Professor of Business Uric Dufrene said.
That’s about a third of the maximum that can currently be collected.
Larissa Roos, 38, never worked in a factory, but was one of the thousands who bid on jobs assembling appliances.
Until she was laid off from Bank of America in February, Roos said she made $18 per hour fielding calls, often from irritated merchants, about credit card glitches. Roos took that job just out of high school. But severance payments end this month, and Roos said she is looking everywhere to try to replace the income.
“I need something so I can live day to day. The job market is horrible,” Roos said Thursday, adding the family relies on her husband’s job as a printer to pay the mortgage on their Fern Creek home as well as utility, fuel and other bills.
With 10,000 vying for GE line jobs, “I am sure my application won’t even get looked at,” she added.
The rush of applicants came as no surprise to Carney, who noted that another recent GE advertisement for 13 maintenance workers, who are paid a union skilled trades rate of $23 hourly, drew 700 job seekers.
Carney credited GE’s reputation for union job security and blue chip benefits as a powerful lure.
GE announced the new jobs last week and started accepting applications through a website Monday. Wednesday was the deadline. The jobs are being added to a new second shift early next month to assemble Energy Star washing machines in Building 1 at the historic Louisville complex.
Roughly 80 percent of applicants report factory experience, Freeman said. That is not surprising, given the recession so far has slashed 8,000 manufacturing jobs from the region’s economy, Dufrene said.
“There is an abundance of potential employees with manufacturing-related skills,” Dufrene said.
The rough profile of applicants, most of them former factory workers, suggests many lack sufficient education to apply for more than minimum wage jobs in the current job market.
Half lacked a high school diploma. Just 5 percent of the applicants said they had a bachelor’s degree or higher. and
GE employs roughly 2,100 hourly and 2,000 white collar workers at Appliance Park. Now, about 440 workers labor on the first shift making washing machines in Building 1.
Applicant Shane Hopkins, 48, hopes his factory experience provides an edge.
Until mid-August, he said he maintained presses at a plastics factory. Now, Hopkins said he picks up occasional work as a flooring contractor for a cousin.
He still pays $300 per month to keep health care benefits for himself and his wife, an independent contractor for a Ford Motor Co. parts supplier at the Louisville Assembly Plant. Hopkins anticipates she’ll be out of work next year, when the plant closes for retooling.
A year from now, “her job ain’t going to be there,” Hopkins said. “I am thinking seriously about going to McDonalds, just for the benefits if nothing else.”
Reporter Jere Downs can be reached at (502) 582-4669.
Tuesday, October 6, 2009
Very thoughtful and wise words of warning today, making sense of the nonsense, from Barry Ritholtz over at The Big Picture. For the original as it appeared go here.
What Does the Economy Have to Do with the Market?
Posted By Barry Ritholtz On October 6, 2009 @ 7:33 am
“There’s a lot of risk going ahead of some big bumps. There’s a very big risk that markets have been irrationally exuberant.”
-Nobel Prize-winning economist Joseph Stiglitz
Far be it from me to challenge the 2001 economics Nobel prize winner, but sometimes, indeed, quite often, markets decouple from the economic fundamentals.
I can show you many eras in history when the economy was awful, and nonetheless markets rallied strongly.
There have also been times when earnings did not matter, and profitability was irrelevant. There are times when animal spirits run the show, when irrational exuberance was in charge.
Such is the result of giving two million primates lots of money and keyboards and a belief they can make a living based on numbers and letters moving around — on a screen, in a futures pit, on an exchange floor, or even under a buttonwood tree.
Most mainstream economists — with notable exceptions like John Maynard Keynes, Richard Thaler, and Robert Shiller — have traditionally paid little attention to this reality. To a trader or investor, rationality matters far less than what the tape was doing.
Indeed, prices matter a great deal more to traders than theories or annoying things like “Objective Reality." To a trader, prices ARE the objective reality; to them economic theorists are peripheral players trying to rationalize reality.
I believe you can describe and explain what the market is doing, but in doing so, we must acknowledge Keynes' terribly accurate observation that “Markets can stay irrational far longer than you can stay solvent.”
I’ll have more on this later in the week . . .
Friday, October 2, 2009
Congratulations Chicagoans! You escaped a financial catastrophe of Olympic proportions. Now if you could just get rid of Daley, Stroger, and Durbin. Good luck with that!
We've got lots of cheap real estate over here in Michigan. Come on over! And bring the poppy seed hot dog buns.
Posted by jm at 11:54 AM
Roman Polanski maintains citizenship in two countries. One of them is Poland. Let's send him there for justice.
Poland okays forcible castration for pedophiles
Fri Sep 25, 2009 12:45pm EDT
WARSAW (Reuters) - Poland on Friday approved a law making chemical castration mandatory for pedophiles in some cases, sparking criticism from human rights groups.
Under the law, sponsored by Poland's center-right government, pedophiles convicted of raping children under the age of 15 years or a close relative would have to undergo chemical therapy on their release from prison.
"The purpose of this action is to improve the mental health of the convict, to lower his libido and thereby to reduce the risk of another crime being committed by the same person," the government said in a statement.
Prime Minister Donald Tusk said late last year he wanted obligatory castration for pedophiles, whom he branded 'degenerates'. Tusk said he did not believe "one can use the term 'human' for such individuals, such creatures."
Read the full story here.