Former Sen. Phil Gramm Underestimates The Cost Of Obama's Debt Bomb

Sen. Phil Gramm for The Wall Street Journal, here:

Since the World War II era, the average maturity of outstanding federal debt has been about five years, and the average interest cost on a five-year Treasury note has been 5.9%. At this interest rate, the expected cost of the Obama debt burden will eventually approach some $590 billion per year in perpetuity, exceeding the current annual cost of any federal program except Social Security.

----------------------------------------------------------------------------------

As might be expected, the senator who didn't understand the consequences of the final repeal of Glass-Steagall in 1999 grossly underestimates the cost of carrying the national debt under a normalized interest rate environment.

Interest expense on the debt for fiscal 2009-2012 has averaged $404 billion annually. The debt to the penny on October 1 for each year 2009-2012 has averaged $14.1 trillion annually. Therefore the implied interest rate has been 2.87% annually. Normalized to 5.9% as he suggests, which is just a little more than double the current average rate, the debt service interest expense would have been $832 billion annually, over 40% higher than the former senator predicts down the road.

Of course, not all debt resets instantly in a rising interest rate environment, but in view of the number, size and long duration of many of the securities on the fed's balance sheet which would suffer immediate declines in net asset values, it is difficult to imagine how the fed could prevent a bond market debacle and unwind everything as gradually, and as imprudently, as it wound it up in the first place.

This is what passes for conservatism, folks.

Lois Lerner Pleads The Fifth Amendment After Trampling On The First

Seen here.

The Current Asset Allocation Of The United States

Total bond market: $38 trillion (Bloomberg/SIFMA here)

Total stock market: $21 trillion (Wilshire 5000 x 1.2)

MZM money stock:$12 trillion (StLouisFed here)

That's 17% to cash, 30% to stocks, and 53% to bonds.

With stock and bond markets at all time highs, the country really ought to be raising cash.

The 3-Month Treasury Yield Is An "Abomination"

So says John Hussman, here:

The 3-month Treasury yield now stands at a single basis point. Unwinding this abomination to restore even 2% Treasury bill rates implies a return to less than 10 cents of monetary base per dollar of nominal GDP. To do this without a balance sheet reduction would require 12 years of 6% nominal growth (which is fairly incompatible with sub-2% yields), a more extended limbo of stagnant economic growth like Japan, or significant inflation pressures – most likely in the back half of this decade. The alternative is to conduct the largest monetary tightening in the history of the world.

Normalization of yields to even 2% implies 50% balance sheet contraction [see his last graph].

-------------------------------------------------------------------------------------

The latter would mean a contraction of $1.55 trillion or so based on the current level, and that those securities would not mature on the balance sheet for their respective terms and come off naturally over time but quickly in a disorderly fashion, and therefore a bond market debacle is implied, and that to be defensive under this threat is to remain in cash, painful as that is.

Latest Tanana River, AK, Ice-Out In 97 Years Today, Surpassing 1964 Record By Hours

Story here, where they live-blogged the event linked to the official Nenana Alaska "Ice Classic" webcam.

Up there you pays you money and takes you chances. But it's only $2.50 for a ticket, on which you predict the date and time of the ice-out, which seems to occur as early as April 20 and as late as, well, today. If you're the closest, you win the kitty, this year over $318K.

Previously scientists were wont to point to seemingly earlier and earlier ice-outs on this river as evidence of the phenomenon of global warming. The long record in this location, however, has shown a cyclicality of its own which on days like today produces silence from that community. 

It was like watching paint dry overnight, but one guy did show up all alone in the parking lot to entertain everyone for a moment by mooning the cam, which is fixed on the tripod-like marker placed out in the ice every March for the event. 

Ron Fournier: Obama Is An Incompetent, Obfuscatory, Demagogic, Bungling Political Quack And Buffoon

Well, that about covers it from the former Washington Bureau Chief of the Associated Press.

Ron Fournier says all that, and more, for National Journal here.

Obama's IRS, FBI, ATF And OSHA Gang Up Vs. Family At Center Of TrueTheVote

There is must reading here today at National Review about coordinated Obama regime harassment of the family at the center of TrueTheVote.org.

America Remains In A Depression

So says James Rickards, here:

“We don’t have to worry about a recession — we are in a depression,” says James Rickards. “If you take the classic definition of a sustained, long-term downturn with economic growth below trend, then we are in the midst of a depression,” says the senior managing director of Tangent Capital and author of “Currency Wars.” Rickards doesn’t see Fed Chairman Ben Bernanke as having the solution to the economic malaise gripping the county.

Real GDP per capita through 1/1/11 bears this out (I think this gets updated through 1/1/12 this summer in the big annual GDP revision):

The peak to trough decline was 5.1% January 2007 to January 2009.

The metric remains 2.6% off peak.

Obama Remains A Small Man Without The Courage Of His Socialist Convictions

Here The New York Times matter of factly displays Obama the socialist, longing to be free like the character Bulworth ("Yeah, yeah / You can call it single-payer or Canadian way / Only socialized medicine will ever save the day! Come on now, lemme hear that dirty word - SOCIALISM!"):

In private, he has talked longingly of “going Bulworth,” a reference to a little-remembered 1998 Warren Beatty movie about a senator who risked it all to say what he really thought. While Mr. Beatty’s character had neither the power nor the platform of a president, the metaphor highlights Mr. Obama’s desire to be liberated from what he sees as the hindrances on him.

“Probably every president says that from time to time,” said David Axelrod, another longtime adviser who has heard Mr. Obama’s movie-inspired aspiration. “It’s probably cathartic just to say it. But the reality is that while you want to be truthful, you want to be straightforward, you also want to be practical about whatever you’re saying.”

Inflation Year Over Year April Is 1.06%: Bob Brinker Thinks That's Great!

Here's a news flash for you: At 1% inflation it will take about 69 years to halve the value of your money. I said halve it. To many people like Bob Brinker on his radio program "Money Talk" today it is more than acceptable that after 69 years go by your dollar will be then worth 50 cents. That's what the rule of 72 teaches, but our contemporaries couldn't care less about rules, especially involving MATH!

Back in the good old days of the gold standard when you couldn't pull a fast one on the average Joe without getting a bullet in your chest, a dollar from 1774 lost nearly NOTHING of its value by 1899, when you needed an extra 3 cents to buy what $1 bought 125 years prior.

But things have completely collapsed in this country in the 113 years since 1899. Compared to then, in 2012 you needed $28.60 to buy what your $1.03 could buy two years before the close of the 19th century. What would you choose? A loss of 3 cents over 125 years, or a loss of $27.57 over 113 years, for every dollar you own?

The founders of our country would find today's relatively very low rate of inflation an outrage and a cause for taking up arms against the government because the government of the United States is robbing its own people blind as a matter of policy.

None dare call it tyranny.

Obama's Choom Gang In 2012

Another Big Lois Lerner Lie: There Was No Surge In 501(c)(4) Applications In 2010

In addition to trying to deceive the public that the IRS under Obama has been a transparent, apolitical arm of the government by planting the question she took from the audience of an American Bar Association conference, now we learn there was no surge in tax-exempt applications from conservatives as Lois Lerner has said, undermining her excuse that aggregating them in that way was merely an administrative efficiency.

TheAtlantic.com here explains how on Friday it was revealed that the IRS itself provided data to the Inspector General which shows the actual number of such applications went down in 2010, not up as she claimed in testimony:

Lois Lerner is a snake who, sensing a threat, struck before the Inspector General's disclosure that the IRS unaccountably and exclusively targeted Tea Party and other conservative group applications, and then recoiled to the safety of a demonstrably false excuse.

Like the rest of the incompetents in Obama's administration, she can't even lie properly.

Real Compensation Under Obama Down 0.5%, Under Bush Up Almost 8%

Real Comp Under Obama Down 0.5%

Real Comp Under Bush Up Almost 8%

3 Recent Failed Banks Subsidiaries Of Troubled Lansing-Based Capitol Bancorp LTD

Story here in the Lansing State Journal.

Evidently the closure of the 13th bank to fail in 2013 in Scottsdale, Arizona was concluded on a Tuesday for prudential reasons related to the immediately previous two Capitol Bancorp-related closures last week.

Bank failures have normally occurred on Friday nights.

I wouldn't be surprised if there's more bad news to come about Capitol Bancorp LTD.

Whoops! The 13th Bank Failure Of 2013 Was On Tuesday The 14th!

Well now, that's unusual. The 13th bank failure of 2013 occurred this past Tuesday, May 14th. Usually the FDIC waits until Friday late to close a bank. Can you imagine having closed it the day before, on Monday, May 13th? Me either. I guess the Feds are having a little fun with us. Either that or the FDIC is having a baseball game with Goldman Sachs tonight.

The bank in question which failed on Tuesday was Central Arizona Bank, Scottsdale, Arizona, costing the FDIC a measly $8.6 million.

Lefty Rep. Sander Levin Calls For The Head Of IRS' Calculating Snake Lois Lerner

Quoted here:

Sander Levin, the [House Ways and Means Committee's] ranking Democrat, said the IRS and its employees 'have completely failed the American people' by 'singling out organizations for review based on their name or political views, rather than their activity.'

'All of us are angry about this on behalf of the nation,' the left-leaning Michigan congressman said.

Lois Lerner is the civil servant who heads up the IRS division in charge of evaluating charitable and other nonprofit organizations. Levin called for her head.

'Ms. Lerner should be relieved of her duties.' he said.

We must seek the truth, not political gain.'

In what [ousted acting IRS commissioner Steven] Miller called 'a prepared Q-and-A' on May 10, Lerner told an American Bar Association conference about a pending IRS Inspector General report examining the targeting of conservative groups inside the IRS's Exempt Organizations section.

That admission started the media feeding frenzy that has spiraled into a full-blown scandal. The acknowledgement that Lerner went to the event with the intention of publicly disclosing the IG report's existence raised eyebrows on the congressional panel.

The Daily Caller here emphasizes that the disclosure by Lerner was pre-planned and misrepresented as an answer to an innocent question posed by an audience member at the American Bar Association conference when in fact the question was planted:

As it turns out, it was not a spontaneous revelation. The question, said outgoing IRS Commissioner Steven Miller in testimony before the House Ways and Means Committee Friday, was planted, as part of a prepared strategy for the IRS to release this information to the public.

Profiles in Courage, or Something

Benito Curly & Barack, As A Trio They're A Crock

Oh Yeah, That'll Work: Incompetent FBI To Investigate Terrorist IRS

The guys who didn't lift a finger to notify Boston police that Tamerlan Tsarnaev was a potential threat and then committed illegal searches for his brother in Watertown but skipped the place he was hiding are going to put the heat on their own kind whose job it has become to intimidate the American people?

Might as well have the Crips investigate the Bloods.

Reuters reports here that the focus of the investigation would come down to "speech rights", the only rights liberals care about other than abortion:

Analysts said that a federal criminal prosecution of IRS employees for allegedly violating a taxpayer's speech rights - by delaying or rejecting a conservative group's legitimate claim to tax-exempt status, for example - could be unprecedented and that the offense would need to be egregious.

Why you shouldn't feel "forced" to own stocks.

"The perception that investors are 'forced' to hold stocks is driven by a growing inattention to risk. But Investors are not simply choosing between a 3.2% prospective 10-year return in stocks versus a zero return on cash. They are also choosing between an exposure to 30-50% interim losses in stocks versus an exposure to zero loss in cash. They aren’t focused on the 'risk' aspect of the tradeoff, either because they assume that downside risk has been eliminated, or because they believe that they will somehow be able to exit stocks before the tens of millions of other investors who hold an identical expectation that they can do so."

-- John Hussman, here

If QE Were Cash Going Straight To Shareholders, Markets Would Be Up Just 6%/Year

But, of course, stocks are up almost 17% in the last year, and just under 13% annually over the last three years, and QE is NOT reaching the stock markets anywhere near so efficiently as it would if it were a direct cash distribution to shareholders.

So the penetrating thinker, John Hussman, here:

[T]he suppression of risk premiums [is] the remaining and primary effect of QE. In other words, QE has not increased the value of equities. It has only increased the price, but that increase in price has no significant fundamental underpinning.

To see this, first consider cash flows. Imagine that instead of attempting to boost stock prices indirectly through quantitative easing, the Fed took the candy-land approach of literally handing the $85 billion directly to stockholders to reward them for owning stocks. How much would that direct cash distribution benefit a stock market with a $17 trillion market capitalization? Do the arithmetic. Only 0.5% a month. Yet investors have chased prices at a far more rapid pace as a result of quantitative easing. Remember, of course, that the Fed is not in fact distributing cash to shareholders.

Presently the effect of such QE would probably be even less than 0.5% per month if every point of the Wilshire5000 represents a multiple of $1.2 billion, yielding a total market cap far higher than $17 trillion. A 0.4% per month rate of QE on $20.5 trillion of total market cap comes to $82 billion a month.

Rosie May Be Right: Cash May No Longer Be Safe

David Rosenberg points out that financial repression could go on as long as 2018, here:

[T]he Fed said in its December post-meeting press release that it will not budge from its 0% policy rate until the U.S. unemployment rate drops to 6.5%. It is currently around 8%.

We have done estimates based on various assumptions and found that achieving this Holy Grail likely takes us to the opening months of 2018 or another five years of what is otherwise known as financial repression.

People think their money is safe in cash, but it isn’t.

Following on that, just compare cash in the form of Vanguard's Prime Money Market Fund with stocks in the form of Vanguard's Total Stock Market Index Fund over the last five years and you will see that while cash was relatively safe compared to stocks for the four years up to May 2012 with stocks mostly underperforming cash, since then stocks have firmly broken out, as of about May 31, 2012 (the dot on the chart grabbed from Morningstar).

The only problem is that with a Shiller p/e today of 24.26 it's an awfully rich time to be investing in stocks which have reached new all-time highs.

And the alternatives don't look very attractive either.

At this hour the gold/oil ratio stands at 15 indicating that relative to each other their prices may have normalized but both at high levels relative to the long term.

Housing prices also are at the far upper end of the long term trend prior to the bubble.

And the bond market is within 2% of its highest valuations and also remains expensive to buy.

In my humble opinion the smartest thing to buy under these conditions is any long term debt one may be carrying at a rate of interest higher than about 3.5%. To retire it one would have to deploy capital, i.e. savings, but you can hardly lock in say 6.25% for twenty or twenty-five years anywhere else more easily than by retiring a 30yr-mortgage taken out at that rate in 2007. Bonds have returned less than 5% annually over the last ten years, and one year returns have fallen below 3.5%.

Still, there is no substitute for savings.

The surest way to get a 10% return is to save one dollar of every ten earned.

What Do The FBI And The IRS Have In Common In March 2010?

How about a conspiracy against the president's political opponents?

Late March 2010 was when the FBI swatted the Hutaree militia for supposedly subversive activities, and now it turns out also when the IRS explicitly began targeting conservative groups for investigation. It was also the month ObamaCare was very controversially passed and some vandalism erupted in various places around the country.

It's clear the trigger was pulled way too early on the Hutaree militia. The government's case was still too weak at the time, and it subsequently fell apart in court, quite ignominiously for the FBI. The militia members were completely vindicated in court of conspiracy to overthrow the government. Only the charge of illegal possession of a fully automatic weapon stuck. Not even the bomb charges could be proven. The rationale for pulling the trigger early must have been as a shot across the bow of the right wing, so to speak, in the light of the vandalism across the country after ObamaCare passed. The coincidence of the raid on the Hutaree at the end of that week in March 2010 should not be discounted, especially now that it turns out that the IRS also began targeting conservatives in that same month in 2010, according to ABC News, here:

The targeting of conservatives by the IRS started earlier and was more extensive than the IRS acknowledged last week, according to a draft IRS inspector general report obtained by ABC News.

As we reported on “Good Morning America” this morning, the IRS began targeting “Tea Party or similar organizations” in March 2010. That was when the Cincinnati-based IRS unit responsible for overseeing the applications for tax exempt status starting using the phrases “Tea Party,” “patriots” and “9/12″ to search for applications warranting greater scrutiny.

The only other person I know to have called the government's response in the Hutaree affair a calculated response to ObamaCare violence at the time, other than yours truly, is Monica Crowley. But now it appears there is more to it than that, making it look more and more like Obama has been using other organs of government against the people who oppose him, with deliberation and in a coordinated manner.

And George Will, of all people, might as well be calling for Obama's impeachment.

Maybe it's time to subpoena the mayor of Chicago.

Forbes Magazine Calls Keynes A Dead White European Male

Some of us would beg to differ.

All kidding aside, Jerry Bowyer makes some great points about John Maynard Keynes, pederast, misogynist, anti-Puritan immoralist and devotee of the cult of the higher sodomy:

"Keynes was a man who exhibited what most of us would see as an almost pathological preference for exclusively male intellectual and sexual companionship specifically because of the great admiration for the male mind and disdain for the female one, who disapproved of the presence of women in his economics classes, who found women’s thinking patterns repugnant and who associated savings with feminine reticence. Is it really such an unforgiveable sin to take these facts and to surmise that his odd sexual views might be related to his odd economic views? Is it really right that anyone who suggests that they are connected should be drummed out of polite society?"

Much more here.

John Tamny's Libertarian Myopia On The Plan B Pill

John Tamny, libertarian ideologue extraordinaire, asks us to join him in complete denial about reality, here:

"[G]overnments don’t nor can they exist as our Nanny."

An awful lot of people chafing under Nanny Bloomberg in NYC would beg to differ with that statement.

Does it really need to be pointed out that the mayor of New York routinely acts like he's everyone's mother? I think Bloomberg would be just as amused as we are to learn that his own perception that he even exists is as mistaken as is our perception that he exists. The man does exist, and gets away with what he does because there are plenty of people in the world who want him to, at least in New York City. The fact of the matter is that there are plenty of people just like Bloomberg who are all too happy to accomodate those who want to be ruled. Lately these characters also want in the worst way to be president of the United States for some reason. Just because we wish these things were not so doesn't mean that they are not so. The assertions of success of five-year-plan after five-year-plan in the Soviet Union eventually bowed to reality, as must we.

This sort of denial of reality is what lies behind Tamny's analogy between teen use of alcohol and teen use of the plan B pill, which he evidently advocates not because it is necessarily good but because it is not preventable for the same reason we cannot prevent teen use of alcohol. But this is not the proper analogy. The proper analogy is between the alcohol and the sex, both of which are desirable for the sensations which they provide, which is why it is difficult to regulate them. The reality is that a profound difference exists between the alcohol and the plan B pill: the pill is designed to kill, while the beer is not.

The plan B pill provides no pleasure analogous to beer which makes us desire it, except of a psychological sort such as any medication or placebo may provide. For that reason alone it should be as easy to regulate as any other medication. It alleviates a condition like an aspirin does after too much beer, but it does so by taking a human life. The utility of it masks its gravity.

Deregulation of the plan B pill for minors stands in stark relief against the FDA's own labeling regulations: Warnings "to keep product out of children's reach" must appear on over-the-counter medications like aspirin bottles, they say. My bottle says,  for example, "Reye's syndrome: Children and teenagers who have or are recovering from chicken pox or flu-like symptoms should not use this product." My aspirin bottle even comes with a child-thwarting cap in compliance with the FDA regulations: "Many OTC medicines are sold in containers with child safety closures. Use them properly.  Remember—keep all medicines out of the sight and reach of children." Contrary to its own stated mission, the FDA will be placing the plan B pill in plain sight of them.

One would think that a libertarian, being consistent, would be calling also for the abolition of all such age restrictions on medications and on alcohol, if the plan B pill is to be allowed to minors. But that, too, is conspicuously missing from Tamny's argument, which is sort of what one would expect of the perpetual childishness of the libertarian. Johnny still can't tell the truth. 

If government really no longer has any interest in preventing young girls from murdering their unborn children, which is what the plan B pill debate is really all about, then we might as well disband police departments everywhere.

No wonder gun stores are running empty. The people know too many of us have given up just like Tamny.

Boston Herald Calls Obama And Company Biggest Bunch Of Liars Ever

Here:

"Surely there has never been a bigger bunch of liars than the crew currently occupying the White House and the now-departed secretary of state. The steady drip, drip, drip of the Benghazi scandal is now a torrent — one that cries out for a special congressional Select Committee to put it all together email by email, revelation by revelation and lie by lie. ... For eight months the lies have continued. ... There surely must be a special place in hell reserved for those who cried crocodile tears at the death of our ambassador after doing nothing to help keep him safe and everything to cover up the true nature of the attack."

The Anti-Gang-Of-Eight-Bill Lines Of The Day

"A huge amount of American social policy is directed to reducing the number of people in our country who have low levels of skills and education, and it would be bizarre to use our immigration policy to increase that number significantly. Between the temporary-worker program . . . and its increase in low-skill immigration, this bill envisions a very significant increase in that number."

-- Yuval Levin in National Review, here.

Oh well, no more bizarre than imposing new federal taxes on mortgages while we attempt to drive down interest rates to boost home ownership. The ancients called this carding wool into the fire or carrying water in a sieve, the fruitless, eternal occupations of the inhabitants of the infernal regions.

Welcome to hell.

Larry Kudlow Wants To Exploit Immigrant Labor To Help Business, Not People

Here:

The dynamic idea is that immigration significantly increases the size of the U.S. labor force, and that more workers mean more growth.

The labor force has shrunk because there are no jobs, not because there is insufficient labor. If you bring in more labor competition, all you will do is lower the wages available for such jobs as exist, and enrich the employers at the workers' expense.

Sorry pal, more workers means even less opportunity for the Americans already unemployed. The last thing this country needs is more cheap labor undercutting the people who are already here and out of work.

We're all against you, Kudlow! 

The Guaranteed 10% Investment Return

For every ten bucks you earn, save one.

Gold/Oil Ratio Falls To 14.96, Slightly Favoring Gold For First Time Since 2008

Gold is presently trading at 1436.60 in after hours trading, oil at 96.04.

We haven't had a buy gold signal like this since 2008, but it's way too early to really say we should buy gold now. A sustained ratio below 15 is required, and this is just the first week of many weeks required below 15 to say buy gold without qualification.

Still, noteworthy.

Jim Cramer Sucks: Vanguard's Total Market Index Vaults To 41.02

Up 147% since the March 2009 low of about 16.60.

Don't forget, Jim Cramer told you on NBC, the Obama network, the Monday morning after TARP was signed the previous Friday in early October 2008, to sell if you needed your money in five years.

His statement materially contributed to more panic selling and the market lows. Within weeks the market plunged even though TARP was supposed to restore confidence.  By the following April the percentage of the public claiming to own stocks had fallen a full five percentage points from the previous April before the crisis began, according to Gallup, an unprecedented decline of confidence. And the decline has continued another full five percentage points since then.

Let's look at the lows by year as reported by Vanguard, remembering that on Friday, October 3, 2008 VTSMX, a proxy for the total market, closed at 26.62, before Cramer opened his big yap:

Nov. 20, 2008 = 18.00 (a decline of 32% from October 6 when Cramer said "sell"; thanks Jim)

Mar.  9, 2009 = 16.43 (over 38% down after Cramer opened his yap; what's another 6 points, huh?)

Jul. 2, 2010 = 25.36 (this low is already back up to within less than 5% of the pre-Cramer level)

Oct. 3, 2011 = 27.16 (this low for the year firmly 2% above the pre-Cramer level)

Jan. 4, 2012 = 31.75 (this low for the year almost 20% above the pre-Cramer level).

In other words, you had all your money back in three years to the date, despite the damage Cramer caused.

But what if he had just shut up? And what if we just hadn't listened?

Looks Like An Awful Lot Of People Stupidly Took Jim Cramer's Advice In 2008

The percentage of the population claiming stock market ownership plunged dramatically between April 2008 and April 2009 by five points, and has continued to decline by more than a point per year since then as of April 2013.

Jim Cramer told everyone to sell in October 2008 on NBC's Today Show after the panic of September, saying to do so "if you needed your money in five years". Well, if you had just left your money in the market, you'd be sitting pretty right now, four and a half years later. Since March 2009 the broad market is up over 140%, and since October 2008 to March 2013 your real rate of return in the S&P500 index has been +11.88% annually.

Gallup has the story and graph here.

American investing behavior over the long haul is a contrary indicator.

Net Credit Market Debt Contraction In Two Sectors Is Repressing GDP

The domestic financial sector continues net negative in credit market debt outstanding, $3.27 trillion below the October 1, 2008 peak, as of October 2012.

And the household mortgage sector continues net negative in credit market debt outstanding, $1.22 trillion below the January 1, 2008 peak, as of October 2012.

These broken sectors for credit expansion have been large, important channels through which trillions in "money" has historically been created in the economy but no longer is, destroying GDP growth in the process. Until these channels are repaired, or replaced, total credit market debt outstanding will not double every 6-11.5 years as it has since the Second World War, and GDP will not recover to its historic 20th century levels.

TCMDO last doubled between 1999-2007

The level at which total credit market debt owed last doubled starting from 1949 was $49.8 trillion in July 2007. Five years later, in July 2012, the level was only $55.7 trillion when arguably it should have been already $74 trillion.

Something has gone horribly wrong with credit expansion in the United States, and the financial and housing sectors remain ground zero for the problem.

For When "Incompetent" Just Doesn't Convey How You Feel

(see them all, here)

Vanguard Prime Money Market Fund 3yr Return: 0.05% Annually

That figure is not inflation-adjusted, which if it were would mean sizeable negative returns.

Meanwhile the S&P500 Index for the 13 years since 2000, adjusted for inflation, is up 0.05% annually:

Stocks Have Barely Beaten The Lowly Money Markets From The March 2000 Highs

For the full thirteen year period since March 2000 (when the S&P500 reached the last of six annual new high watermarks going back to 1995) to March 2013 (when the index had firmly revisited the 1500 level) stocks have barely beaten the performance of the lowly money markets.

Had you invested $10,000 in, say, the Vanguard S&P500 Index Fund, VFINX, you would have reaped an extra $3,900.02 (39%).

But the same amount invested in Vanguard's Prime Money Market Fund, VMMXX, would have netted you $3,370.96 (33.7%).

Charts from Morningstar using Vanguard data:

Cyclically-Adjusted p/e Above 20 Forecasts Near-Zero 10yr Returns

As discussed here by Mark Hulbert:

Where does the CAPE stand today?

It currently is at 23.3, which is 41% higher than its historical average. While the CAPE’s current level is not as high as the 40+ readings that were registered at the top of the internet bubble, it does not bode well for the next ten years. On average over the last century, the S&P 500 has produced a 10-year inflation-adjusted return of close to zero whenever the CAPE has been above 20.

To be sure, note carefully that this is a 10-year forecast. Even if it turns out to be accurate, it doesn’t mean the market will decline in a straight line between now and 2023. It wouldn’t be inconsistent with this forecast for the market’s impressive recent rally to continue for a while longer, for example.

politicalcalculations.blogspot.com

Hulbert is right. On March 1, 2000 the Shiller p/e stood at 43.22. For the thirteen years from March 2000 to March 2013, your return in the S&P500, adjusted for inflation and with all dividends re-invested, as been exactly +0.05% per annum.

Sort of like investing in a money market fund right now.

Ouch.

By the way, the Shiller p/e this morning stands at 24.14.

GLD is down to 1062 metric tons yesterday

So says Reuters, here:

"Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell a further 0.3 percent to 1,062.30 tonnes or 34.15 million ounces on Monday - the lowest since August 2009."

Barack Obama: The Social-Democratic Philistine Who Embraces The State . . .

"WE GOT YOUR MONEY!"

. . . and fears the people.

Barack Obama, disappointment to true believers everywhere, here at Ohio State University, May 5, 2013:

"Unfortunately, you've grown up hearing voices that incessantly warn of government as nothing more than some separate, sinister entity that's at the root of all our problems. Some of these same voices also do their best to gum up the works. They'll warn that tyranny [is] always lurking just around the corner. You should reject these voices. Because what they suggest is that our brave, and creative, and unique experiment in self-rule is somehow just a sham with which we can't be trusted."

Friedrich Engels, March 18, 1891, here:

"And people think they have taken quite an extraordinary bold step forward when they have rid themselves of belief in hereditary monarchy and swear by the democratic republic. In reality, however, the state is nothing but a machine for the oppression of one class by another, and indeed in the democratic republic no less than in the monarchy; and at best an evil inherited by the proletariat after its victorious struggle for class supremacy, whose worst sides the proletariat . . . cannot avoid having to lop off at the earliest possible moment, until such time as a new generation, reared in new and free social conditions, will be able to throw the entire lumber of the state on the scrap-heap. Of late, the Social-Democratic philistine has once more been filled with wholesome terror at the words: Dictatorship of the Proletariat."

Aren't Keynesianism and Homosexuality Equally Forms Of Psychological Rebellion?

"Despite his Cambridge education, aristocratic manner and wealth, Keynes was also an outsider in his own way. He was an aesthete who enjoyed describing himself as an 'immoralist,' a leading member of that sparkling circle of British intellectuals known as the Bloomsbury group that defied Victorian mores in both art and love. Keynes was married but was also homosexual, a fact that automatically put him in defiance of social convention.

"Keynes's rebellion against economic orthodoxy, as he explained himself, was not derived from the political discontents of socialism and class conflict. It was based on a psychological insight: capitalism was ripe for unprecedented abundance, universally distributed, if only human society could get beyond the stern dogma of the Protestant ethic, the Calvinist ethos that insisted self-denial and suffering were good and necessary for the human spirit. Save for the future, the Calvinist creed taught, and you will be rewarded in the long run and certainly in heaven. 'In the long run,' Keynes observed, 'we are all dead.' Enjoy the here and now, he insisted. Pleasure is good. Suffering is mostly unnecessary."

-- William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country (New York: Touchstone, 1989), p. 318.

Funniest Chart Ever From The St. Louis Federal Reserve

Someone had a fat finger on the "zero" when updating the not-seasonally-adjusted full-time jobs data for this chart on Friday morning.

The result: 66.48 billion full time jobs in the US in December 1969!

Alas, our country has fallen from a great height indeed.

Mish Is Wrong About Full Time Employment Being Down. It's Up.

seasonally-adjusted full-time, 2007 peak to now

Mish is wrong about full time employment being down. It's up.

Here's Mish:

"Voluntary plus involuntary part-time employment rose by a whopping 441,000 jobs. Take away part-time jobs and there is not all that much to brag about. Indeed, full-time employment fell once again, this month by 148,000."

In the seasonally-adjusted category, full-time is up 150,000 in April from March. In the not-seasonally-adjusted category, full-time is up 878,000 between March and April! Usually-part-time is flirting with its highs again but is not yet at a new high above the March 2010 level of 28.106 million.

That said, what really counts is that despite some improvement in the figures, the fact is full-time employment remains either 7.5 million off the 2007 peak in not-seasonally-adjusted terms, or 5.8 million off the peak in seasonally-adjusted terms. But part-time is not yet meaningfully above its peak levels to be able to say ObamaCare is part-timing the country at the expense of full-time jobs. The trend up in full-time has been in fits and starts and has been wholly inadequate, but it is up since 2010.

  

April Unemployment Drops To 7.5%, Full-Time Job Gains Ominously Slowing

The full unemployment report in pdf from the Bureau of Labor Statistics is here.

The official number of unemployed is unchanged from March at 11.7 million, while other broad categories are little changed from a month ago.

Part-time for economic reasons was back up almost 280,000 to 7.9 million while the average work week in April declined by 0.2 hours to 34.4 hours, a sign that part-timing may be an emerging trend as ObamaCare rules begin to percolate through the economy.

Job additions were relatively strong in April at 165,000 and a significant upward revision to March helped keep the prior twelve month average jobs gained figure to 169,000, unchanged from the last report.

Gains in full-time, year over year, took a huge jump in this month's report in the not-seasonally-adjusted category compared to last month's report when 880,000 full-time jobs were added from March 2012 to March 2013 (about 73,333 per month). For April 2012 to April 2013 the figure soars to 1,675,000 full-time jobs added year over year (about 139,583 per month).

As it turns out, that only looks like a big number compared to the last fifteen months of year-over-year full-time job additions, not-seasonally-adjusted:

April 2013/April 2012 = 1.675 million

March/March = 0.880 million

Feb/Feb = 1.604 million

Jan/Jan = 1.989 million

Dec/Dec = 2.029 million

Nov/Nov = 2.377 million

Oct/Oct = 2.589 million

Sept/Sept = 2.698 million

Aug/Aug = 1.928 million

Jul/Jul = 2.372 million

Jun/Jun = 2.769 million

May/May = 2.016 million

April/April = 2.155 million

March/March = 2.730 million

Feb/Feb = 1.856 million

Jan/Jan = 1.506 million.

In other words, for the current year 2013 to date the average report of full-time job gains year-over-year has been just 1.537 million January to April, down over 25% from the same period last year when the average was 2.062 million, and down nearly 32% from 2012's average report of 2.252 million full-time job gains year-over-year.

Whatever happy talk may be happening out there, the fact of the matter is that the pace of full-time job gains has definitely slowed to a significant degree while full-time employment remains over 6% off the July 2007 peak of 123.2 million.

Bad news.

ObamaCare Has Its Own Hitchhiker's Guide To The Galaxy Moment

ABCNews reports the following here:

The Kaiser Family Foundation released results of a non-partisan study today finding more than 40 percent did not even know the law was in place.

“Four in ten Americans (42%) are unaware that the ACA [Affordable Care Act] is still the law of the land,” the report says, “including 12 percent who believe the law has been repealed by Congress, 7 percent who believe it has been overturned by the Supreme Court and 23 percent who say they don’t know enough to say what the status of the law is.”

Bloomberg: Incompetent Cops Skipped Street Where Wounded Tsarnaev Hid In Boat

Here:

Sue Lund lives about five blocks from where police engaged in a wild shootout April 19 with the two Boston Marathon bombing suspects and about eight doors down from where the one who escaped alive was found 18 hours later.

Yet, during the all-day manhunt, she said police never searched her Franklin Street home or garden shed in Watertown, Massachusetts. Ten other neighbors had the same story and said they didn’t know of any homes that had been searched on Franklin, where Dzhokhar Tsarnaev was discovered by someone on the street about 30 minutes after an area lockdown was lifted. ...

How did hundreds of police who descended on the town fail to find a 19-year-old, who was unarmed and shot, lying under a tarp on a boat in the backyard of a house about 400 yards (366 meters) from where he had abandoned a car after fleeing the scene of the firefight? ...

Initial reports described the gunfire and grenade explosions as a firefight with a desperate fugitive. In fact, it was a one-sided shootout. Investigators didn’t recover a weapon from the boat, according to two federal law enforcement officials who asked not to be identified in discussing an active criminal probe.

Real Federal Spending Growth Since 2000 Has Outstripped Real GDP 3 To 1

Your government in action

People who keep saying government should spend more to grow the economy more don't want to confront the fact that despite the growth in real federal outlays between fiscal 2000 and fiscal 2012, real GDP growth has lagged far behind by a ratio of 2.77 to 1.

Federal outlays in fiscal 2000 (in 2005 dollars) were $2.0406 trillion, and $3.2125 trillion in 2012, according to the Tax Policy Center, here. That's an increase in real spending of 57.4% over the period.

Contrast that with real GDP. On October 1, 2000 real GDP stood at $11.325 trillion. Twelve years later it was only $13.6654 trillion, an increase in real GDP of only 20.7% over the same years.

If federal spending counts just as much as private spending for GDP, it's not self-evident from these numbers that the higher rate of spending is doing anything to boost real GDP. Quite the opposite.

A more prudent way to look at would be to say that maybe all those federal expenditures in excess of the 20.7% of real economic growth were wasted, even destroyed, and that in fiscal 2012 real federal spending should have been $750 billion less than it was.

Meanwhile the bureaucrats scream bloody murder over a lousy $85 billion across the board spending cut for 2013.

Cutting off a drunk is never pretty.

On the other hand, he probably won't remember who last put a foot in his ass, either.

Housing, Shmousing. Here's What's Really Been Happening.

RC Whalen, here, in January:

"[J]udicial states remain mired in foreclosure backlogs that still stretch ahead for years to come.  Because Barack Obama and Tim Geithner refused to restructure the truly sick parts of the US housing sector (and the zombie banks with these exposures), only sectors where speculative capital can be deployed quickly and easily are showing signs of life.  You don’t see private equity firms buying homes in Scarsdale, NY, or Greenwich, CT, now do you?  Even ignoring the horrible effects of SS Sandy, was NJ housing really recovering?"  

Mish Finally Calls This Economy Fascism

Took him long enough, here:

"In short, the problems we face are not the result of free market capitalism, but rather the results of Fed sponsored corporate and military fascism."

The instrumentality through which fascism is expressed in the United States today is the banking system reorganized in 1913 under the Federal Reserve. The brakes put on it with the Glass-Steagall Act in 1933 after it cracked-up the first time after only twenty years were released in 1999 with the passage of the Gramm-Leach-Bliley Act.

It took only nine years to crack up the second time.

Number One Insult Which Made Tamerlan Tsarnaev Angry

"Your mother just wears a suicide vest because she's flat."

Imagine A World Without Balloons? How About One Without Idiots?

Another remove-all-doubt moment from the irrepressible Rep. Hank Johnson of Georgia, here, on "helium", one of America's "real concerns".