America's Chief and Most Deadly Export Has Been The Credit Bubble

Few have wanted to talk about it, but it is one of the chief consequences of decade-long Federal Reserve policy mistakes as mediated through the world's reserve currency, the dollar:

When the financial system collapsed in 2008, the eurodollar market was its epicenter. Banks in Germany and Holland failed because of overpriced real estate in Florida and California, yet hardly anyone questions the link between these incongruent geographical realities. For the most part, there was no housing bubble in Bavaria or Amsterdam, yet long established banking concerns were stricken, and then failed by one a world away.

For the most part, bank risk managers will prudently match their asset structure to their liability structure to the best of their abilities. In addition to managing overall durations and interest rate spreads, this also means a sensible policy of matching asset and liability denominations. So large funding exposures denominated in dollars leads to pointed acquisitions of dollar-denominated credit assets.

. . . [T]his explains the global spread of a dollar-based credit bubble . . .

Jeffrey Snider goes on to explain, here, how once stalwart Switzerland has become our latest victim.

Q2 2011 GDP Revised Down to 1.0 Percent from 1.3

As reported here.

Evidently Q1 remains at 0.4 percent.

Growth at these low levels implies a rise in unemployment since there isn't enough growth even to absorb the increase in population hitting the workforce.

Expect continued deterioration in the employment to population ratio.

Unprecedented Weakness in Consumer Spending Growth in Post WWII Period

So says Stephen Roach of Yale, here, who can't call this is a depression evidently because such anemic growth is, afterall, growth. He must not dwell on the overall negative back to back GDP prints for 2008 and 2009.

He prefers "Great Crisis" and the term "unprecedented" to describe what many others have rightly identified as a balance sheet recession. He does not see this being repaired any time soon, however, because we're nowhere near the needed savings rate of 8 percent nor the 75 percent level of debt to disposable personal income:

The number is 0.2%. It is the average annualized growth of US consumer spending over the past 14 quarters – calculated in inflation-adjusted terms from the first quarter of 2008 to the second quarter of 2011. Never before in the post-World War II era have American consumers been so weak for so long. This one number encapsulates much of what is wrong today in the US – and in the global economy.

There's hardly a more succinct and elegant framing of the issue to be found in what follows after that.

America, Europe and Japan are in a Mini-Depression

So says Robert Mundell, here, during a nice little chat with Ambrose Evans-Pritchard, who isn't quite willing to eat the entire meal.

The Federal Reserve Should Stop Paying Interest On Reserves

So says Louis Woodhill, here:

While the IOR rate has been constant at 0.25% since December 2008, the 90-day T-bill has fallen from an average of 0.14% in November 2010 (when QE2 commenced) to zero today.

Most people believe that an inverted yield curve heralds a recession, and right now we have an inverted yield curve at the point where new money is supposed to enter the economy. Not surprisingly, more and more economic indicators are now signaling recession. And, with inflation accelerating, the specter of stagflation once again looms over the land.

America does not need QE3, it needs a complete reversal of Fed policy. The Fed should end IOR. Then it should announce an upper limit for the gold price and use Open Market operations to contract bank reserves as needed to enforce this ceiling price. To accomplish this, the Fed would have to let interest rates be set by the markets, rather than by fiat.

The ultimate solution for a stable dollar, stable financial markets, and a stable, growing economy is for Congress to pass H.R. 1638, which would require the Fed to keep the value of the dollar stable in terms of gold. Until then, let’s pray that the Fed learned its lesson with QE2, and that it doesn’t give us QE3.

On The Religious Origins of Free Market Capitalism

Jerry Bowyer for Forbes reminds us here that Milton Freedman must have gotten his atheism from someone other than Jacob Viner, Professor of Economics, University of Chicago:

[Jacob] Viner concluded that [Adam] Smith was an example of a strand of thought which he called “optimistic providentialism.” This view goes back to the early Christian church fathers, as far back as the time of St. Augustine. It grew to eventually become popular in intellectual circles at the time of Smith. Viner pointed to the extremely important idea he dubbed “providential abundance,” which held that the universe was designed by God to be abundant. The necessities of life were widely distributed by Him, and even the luxuries of life could be had when free people are allowed to pursue self-interest. Man, being in possession of free will, could waste and squander opportunity through plunder, war and empire, but those were not the original design.

Your Cost for Moochelle Obama's Extravagance to Date: About $10 Million

The First Lady and her husband the cadger are milking the presidency to the hilt, according to the story here.

And it's a good thing, too.

God forbid we had a tyrant for president who didn't subscribe to the notion that in a tyranny the good of one man only is the object of government.

Otherwise we'd have a real problem.

Big Banks Aren't Fixed: The Same Problems Remain as Before

So says Ritholtz, here:

• stuffed with declining assets


• eliminating Fair value accounting via FASB 157 did not fix balance sheet problems, but instead allowed banks to hide them


• management does not keep adequate capital


• management and traders still have the same upside to roll the dice, but do not have the downside risks, which remains on shareholders and taxpayers

The rest of the entry provides a good summary of how a bad bank should get seized and carved up instead of zombie-fied as in current practice.

HUD Secretary Shaun Donovan, Clinton Retread, Pushes For Bank Immunity Deal

Robert Scheer for The Nation:

It is a sellout deal that, in return for a pittance of compensation by banks to ripped-off mortgage holders, would grant the banks blanket immunity from any prosecution. That is intended to short-circuit investigations by a score of aggressive state officials, inquiries that offer the public a last best hope to get to the bottom of the housing scandal that has cost U.S. homeowners $6.6 trillion in home equity in the past five years and left 14.6 million Americans owing more than their homes are worth. ...

Donovan has good reason not to want an exploration of the origins of the housing meltdown: He has been a big-time player in the housing racket for decades. Back in the Clinton administration, when government-supported housing became a fig leaf for bundling suspect mortgages into what turned out to be toxic securities, Donovan was a deputy assistant secretary at HUD and acting Federal Housing Administration commissioner. He was up to his eyeballs in this business when the Clinton administration pushed through legislation banning any regulation of the market in derivatives based on home mortgages.

Armed with his insider connections, Donovan then went to work for the Prudential conglomerate (no surprise there), working deals with the same government housing agencies that he had helped run. As The New York Times reported in 2008 after President Barack Obama picked him to be secretary of HUD, “Mr. Donovan was a managing director at Prudential Mortgage Capital Co., in charge of its portfolio of investments in affordable housing loans, including Fannie Mae and the Federal Housing Administration debt.”

Read the whole thing here.

Yield on up to 1 Year LIBOR Exceeds 2 Year Treasuries

Mish tells the insane tale here:

Overnight, 3-month, 6-month, and 1-year LIBOR rates exceed yield on 2-year treasuries.

Dow Up 322 in High Frequency Trading Induced 'Flash Rally'

They blame HFT for the declines, but no one will credit the gains to same.

The story is not here, which basically says the market had an orgasm today in anticipation of Fed fondling. 'Oh! Just the thought of you makes me . . ..'

The more they talk, the less I believe them.

Obama's Corrupt, Fascist, Mussolini Style Noted by Self-Described Centrist

It's a red letter day for us when we get to note two attacks on Obama which do not originate from the right (although Richard Posner of The University of Chicago and now Yves Smith of Naked Capitalism are to the right of Obama), especially when both attacks insist on the meaning of words, like "depression" and "fascism."

Here's Smith's contribution:

It is high time to describe the Obama Administration by its proper name: corrupt.

Admittedly, corruption among our elites generally and in Washington in particular has become so widespread and blatant as to fall into the “dog bites man” category. But the nauseating gap between the Administration’s propaganda and the many and varied ways it sells out average Americans on behalf of its favored backers, in this case the too big to fail banks, has become so noisome that it has become impossible to ignore the fetid smell.

The Administration has now taken to pressuring parties that are not part of the machinery reporting to the President to fall in and do his bidding. We’ve gotten so used to the US attorney general being conveniently missing in action that we have forgotten that regulators and the AG are supposed to be independent. As one correspondent noted by e-mail, “When officials' allegiances are to El Supremo rather than the Constitution, you walk the path to fascism.” ...

[T]he bullying of [New York state attorney general Eric] Schneiderman looks to be misguided, since the settlement is likely to fall apart. But it is nevertheless germane because it reveals the Administration’s warped thinking and sense of priorities. As we’ve said, the Administration’s decision to cast its lot with the banks in early 2009 dictated its course of action:

     Obama’s incentives are to come up with “solutions” that paper over problems, avoid meaningful conflict with the industry, minimize complaints, and restore the old practice of using leverage and investment gains to cover up stagnation in worker incomes. Potemkin reforms dovetail with the financial service industry’s goal of forestalling any measures that would interfere with its looting. So the only problem with this picture was how to fool the now-impoverished public into thinking a program of Mussolini-style corporatism represented progress.

Honest Liberals Agree: It's a Depression

Richard A. Posner, appointed by Reagan to the US 7th Circuit Court of Appeals, in The New Republic:

If the notion that we are merely living through the aftereffects of a mere “recession” that ended in 2009 sounds somewhat ridiculous, that’s because it is. If we were being honest with ourselves, we would call this a depression. That would certainly better convey both the severity of our problems, and the fact that those problems have no evident solutions.

And he admits, here, that he doesn't know what to do about it, either.

The issue has been bothering him for some time, as evidenced here.

Radiation in Iitate, Japan, Today Measures 2.53 Micro Sieverts Per Hour

As reported here.

That rate of exposure is 3.5 times higher than is typical in America from all sources on an annualized basis.

The Book Value of the US Gold Reserve Uses $42.22 the Ounce

Don't believe me?

Look it up, at the US Department of the Treasury, here:

It's Organized Labor Unions That Are Violent, Not The Tea Party

Bill Frezza unloads on them here in the wake of the recent acts of Verizon sabotage:

According to the National Institute for Labor Relations Research there have been 4,400 recorded acts of labor violence since 1991. The Teamsters lead the pack with 454, as one would expect from an organization once infiltrated by organized crime. The Teamsters have plenty of company, yet few offenders are called to account. In the Homestead tradition, law enforcement tends to melt away when a union goes on a rampage. Barely three percent of violent crimes committed by union members lead to an arrest or conviction.


Incidentally, damage to the Wisconsin State Capitol, occupied in the teachers' union showdown with Republican Gov. Scott Walker in February and March, is now estimated at about $270,000 according to this story.

The Four Boxes Protecting Freedom

Hey Maxine! Wanna Go For A Ride?

"The Tea Party Can Go Straight To Hell"

Net Return On Massive Secret Loans To Biggest Banks By Federal Reserve Was Barely 1 Percent During Subprime Meltdown Between 2007 and 2009

Bloomberg has the story here.

This while home buyers in the US in 2007 with excellent credit were paying 6 percent or more for 30 year fixed rate mortgages.

Here's the propaganda line from the article:

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages.

But the depression wasn't averted, no matter how much lipstick Bloomberg tries to put on this pig:

While the 18-month U.S. recession that ended in June 2009 after a 5.1 percent contraction in gross domestic product was nowhere near the four-year, 27 percent decline between August 1929 and March 1933, banks and the economy remain stressed.

Instead of "banks and the economy remain stressed," how about, "it was a depression nevertheless"? We now know thanks to revised GDP numbers released by the government in its annual revision in July that GDP went slightly negative for the first time in 2008, followed by a substantial negative GDP report for 2009. Two back to back years of negative GDP are a depression, just as surely as two back to back quarters of negative GDP are a recession. Clearly not the Great Depression, but a depression nonetheless.

Yet we still can't bring ourselves to say it.

As usual, the banks are ground zero for depression, whether it's under the Federal Reserve Act of 1913 which was meant to prevent booms and busts, or not:

Data gleaned from 29,346 pages of documents obtained under the Freedom of Information Act and from other Fed databases of more than 21,000 transactions make clear for the first time how deeply the world’s largest banks depended on the U.S. central bank to stave off cash shortfalls. Even as the firms asserted in news releases or earnings calls that they had ample cash, they drew Fed funding in secret, avoiding the stigma of weakness.

Why do you think there's been such a flight to cash ever since, first by the banks, then by the corporations, and now by the citizenry, always the last to know?

Nothing has changed, and nothing has been fixed. 

Debt that can be repaid might be. What cannot be repaid won't be. Not ever. And that's what depressions in real capitalist economies are for: quick, dirty and nasty little episodes of failure which reset the chess board. Except we can't seem to accept that because we're not really a capitalist society anymore, which is why this sorry tale keeps dragging on.

We Still Don't Know Obama's GPA, But We Already Know Gov. Rick Perry's

From an important story about the Texas governor from Andrew Ferguson for The Weekly Standard, here:

At Texas A and M he earned a grade point average a bit over 2.0 (Ds and Cs in chem and trig and Shakespeare, an A in world military systems, and a B in phys. ed.) and majored in animal science. 

Gov. Rick Perry Would Fight Dollar Collapse, Maybe With A Little Tar and a Few Feathers

"Bernanke also is facing external dissent of a different type. This week, Texas Gov. Rick Perry, who's running for the GOP presidential nomination, made a controversial comment that appeared to encourage bodily harm to Bernanke if he continued to 'print money.'" -- Tom Petruno, LA Times, here.

"Gov. Rick Perry scorched the political pot on Tuesday with a red-hot rhetorical attack on Fed-head Ben Bernanke. When asked about the Fed reopening the monetary spigots, Perry said, 'If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we -- we would treat him pretty ugly down in Texas.'

"And that wasn’t all. In a more controversial slam, Perry said, 'Printing more money to play politics at this particular time in American history is almost treacherous -- or treasonous -- in my opinion.'" -- Larry Kudlow, here.

"There is no known case of a person dying from being tarred and feathered in [the Revolutionary] period. During the Whiskey Rebellion, local farmers inflicted the punishment on Federal tax agents." -- Wikipedia entry, here.

This dramatization shows the victim stripped naked from head to toe, whereas to the waist only was more customary. -- (source)

Largest Daily Percentage Losses in the SPX to Date

(source)

Largest Daily Point Losses in the SPX to Date

(source)

The Increasing Quantity of Money is the Problem, Not the Solution

Because the last thing we need is more debt when we haven't settled the bad debt we've already got. 

Jeffrey Snider here rips the monetarists at two bastions of liberal opinion, The New York Times and National Review Magazine:

There is a definite quality of absurdity to all this intervention. Besides the fact that every method of intervention or monetary "solution" guarantees ongoing crisis and instability, what else has to be said about a condition where increasing cash for the banking system actually creates a liquidity crisis. Whatever rabbit hole exists for central banks and economic experts, they have widened and deepened it, inviting the rest of the world to follow them down it.

For once someone actually explains in macroeconomic terms why there isn't a dime's worth of difference between the Democrats and the Republicans.

Recent Explosion in M2 in US a Sign of European Bank Run?

Larry Kudlow explores the issue here:

According to the St. Louis Fed, M2 is up 24.2 percent at an annual rate over the past two months. Almost out of the blue, that comes to a near $500 billion increase. In rough terms, the M2 explosion breaks down to $165 billion in demand deposits and $335 billion in savings deposits.

What's going on here? There's a flight to government-guaranteed accounts. Some people believe Europeans are withdrawing from their own banking system and parking their money in the U.S. banking system, guaranteed by Uncle Sam.

The smart money has already left Europe. Last one out please switch off the lights. 

Throngs Used To Greet Bill Clinton, Obama Settles For Dozens on Martha's Vineyard

Amid security concerns, says the story here.

Hm. I thought the summer playground for the rich was friendly territory.


"With a democracy tyranny quarrels with the nobles, and destroys them both publicly and privately, or drives them into banishment, as rivals and an impediment to the government; hence naturally arise conspiracies both amongst those who desire to govern and those who desire not to be slaves."


-- Aristotle, The Politics

Imported Oil's Cost to Economy in 2009 Was About $190 Billion

Assuming an average price of $54 per barrel of crude in 2009, and net imports in excess of 9 million barrels per day.

US Oil Production 2009: 9.056 Million Barrels Per Day

CIA estimate here.

US Oil Consumption 2009: 18.69 Million Barrels Per Day

CIA estimate here.

'Serious Recession Coming, Possibly Even a Depression'

So says Roger Nightingale, quoted here:

"We have done everything to monetary policy that we could do and this slowdown is going to be uncontrollable," Roger Nightingale, RDN Associates, told CNBC.

"We have a serious recession coming, possibly even a depression."


Excuse me, but negative GDP back to back in 2008 and 2009 shows that we were indeed in a depression. One might even be tempted to argue that the regime's gymnastics merely bought us a subsequent recession in 2010. But it was very expensive.

With GDP now running at less than half the rate in 2011 than in 2010, it is clear that monetary easing combined with extravagant government spending has failed to address the real problem dragging down the economy, which is bad debt.

Until we accept the cure for this prescribed by capitalism, we're going to drag this out indefinitely.

Orderly bankruptcy is the pressing need of the day. 

Tax Reform Had Better Be Revenue Neutral, Otherwise No Thanks

Louis Woodhill isn't fooled by Gang of Six types, Gang of Twelve types, or any other types looking for increased revenues from tax reform flying under the banner of eliminating tax loss expenditures while making the Bush brackets permanent:

Republicans want to reform the tax code and broaden the tax base in return for lower tax rates.  However, they must insist that such reform be (at most) “revenue neutral”, because an effort to get more revenue via reform would mean higher tax rates, and therefore lower economic growth.  An increment of economic growth provides somewhere between 27 times and infinitely more benefit to federal finances than raising taxes.  So, no thanks.

And he says No Thanks to about seven other things, too, here.

The Number One Reason No One Would Even Think Of Assassinating Obama

No one would want a mental case like this running the country:

Rep. Mike Doyle (D-Pa.) said “we have negotiated with terrorists,” and the story quotes Biden agreeing, saying: “They have acted like terrorists.”

(source)

Picking Biden actually was a sign of intelligence in the young president, though it kind of makes you lonesome for the days of the nattering nabobs of negativism.

The Veep only seems like a loose cannon on the ship of Obama, but his penchant for screw loose partisanship and outrageously inaccurate comments both get to fly under the dim pall of his brain aneurysm in 1988. He possesses a kind of sacrosanctity because of his illness, which consequence Obama skilfully exploits in order to push the radical envelope.

Obama may very well not know what to do in the positive sense, and even if he did he would choose against it, but he does know what he needs in the negative sense: unapologetic, partisan rhetoricians on whom no one can lay a finger.

Which also helps explain the choice of Jewish female Debbie Blabbermouth Schultz, who possesses double sacrosanctity.

Caligula picked a horse.

Wisconsin Republicans Fail To Unseat Run Away Democrats In Senate Recalls

Story here.

Republicans retain control of the Wisconsin Senate 17-16.

Where Are All The Liberals Protesting Obama's Illegal War In Libya?

And how is it that a non-kinetic operation to protect innocent civilians has become a state-sponsored assassination plot?

Obama has thumbed his nose at the War Powers Act, for which he should be impeached and convicted, but he won't be because our Congress is composed of his slaves.

Are We Following in Japan's Footsteps?

Seen at The Big Picture here.

The idea is that the Japanese stock market experience in red superimposed over the US SPX in green (lagged by a decade) predicts a new low in the US below the 683/666 level of March 2009 by 2015.

The market trend line in the US went haywire in 1995. The February/March 2003 and March 2009 lows represent corrections toward that old line.

The Maestro noted the irrationality of the break out from the trend already in December 1996.

Capitalism Hasn't Failed in America. It Just Hasn't Been Tried For A While.

So says Chris Whalen here, in reply to Roubini:

[D]espite America’s pretensions to being a free market, democratic society, the Marxian world view won the battle for ideas in the 20th Century. The New Deal and Great Society efforts to increase the scope of government in America all stem from the socialist ideas of FDR and his political heirs in both parties.

Which explains, among other things, Paul Krugman.

A Functioning Economy Most Certainly Did NOT Depend on Passing TARP

So says John Carney, here, for CNBC.com, responding to the batshitcrazytalk coming out of the economic ignoramuses of the regime in The New York Times.

Obama and his people are as stupid as George W. Bush ever was, except without the experience. Heh, heh.

Forget GDP: 'Real GPP in 1944 was a quarter below its 1932 nadir.'

So says Martin Hutchinson, here, for The Asia Times.

He thinks the present is a Bond Bubble akin to the Tulip Bubble, and is about to go Pow!

Let's see. A $35 trillion bond market taking a 30 percent haircut wipes out $10.5 trillion vs. a $16 trillion equity market taking a 50 percent haircut wipes out $8 trillion.

Isn't this why cash is so attractive? Especially cash of the Swiss Franc variety backed by relatively enormous gold reserves compared to every other currency?

The Next Stop For The S and P 500?

575.

And that may very well be this secular bear market's final low, though it is more than likely that that level will be retested at least once after we hit it. Say in 2015.

We are in denial about bad debt, which is typical behavior for a drunk. It's the evil flip-side of human adaptability. We can put off the final reckoning seemingly indefinitely, but we'll be drawn and gaunt when we do hit bottom.

If we're lucky no one will mug us before we come to in the alley.  

The Forehead Wishes He Had Gov. Rick Perry's Hair

But that's about it. Oh, except for the ambition.

Story here.

He doesn't mention that as nitwits go, this one made the bright choice to become an organizer for the divinity school dropout, Al Gore, before he became a Republican.

That Didn't Take Long: Pawlenty Quits After Poor Showing Against Bachmann in Iowa

"'I'm announcing on your show that I'm ending my campaign for president,' the former governor said on This Week."

More here and here.

Thomas Jefferson Recommended Castration as Punishment for Buggery

Look it up, Ann Coulter, and maybe you can discuss it at your next council meeting with GOProud:

"Punishments I know are necessary, and I would provide them, strict and inflexible, but proportioned to the crime.

Death might be inflicted for murther and perhaps for treason if you would take out of the description of treason all crimes which are not such in their nature.

Rape, buggery etc. -- punish by castration.

All other crimes by working on high roads, rivers, gallies etc. a certain time proportioned to the offence. But as this would be no punishment or change of condition to slaves (me miserum!) let them be sent to other countries.

By these means we should be freed from the wickedness of the latter, and the former would be living monuments of public vengeance. Laws thus proportionate and mild should never be dispensed with."

-- Thomas Jefferson to Edmund Pendleton, August 26, 1776

Obama Was Given A Pass On Evil Associations Because He Was Black

Norman Podhoretz in The Wall Street Journal here:

To be sure, no white candidate who had close associations with an outspoken hater of America like Jeremiah Wright and an unrepentant terrorist like Bill Ayers would have lasted a single day. But because Mr. Obama was black, and therefore entitled in the eyes of liberaldom to have hung out with protesters against various American injustices, even if they were a bit extreme, he was given a pass.

Cash in Bank Savings Accounts Hits New Record of $5.86 Trillion

As reported by Tom Petruno for the LA Times, here.

What?! James Pethokoukis Must Be High.

I just heard James Pethokoukis on Kudlow's radio program say Gov. Rick Perry is very conservative, to the right even of . . . Rep. Paul Ryan.

Wow! Whoopee! Imagine that, someone to the right of a moderate Republican.

Mish's Whopper of the Week

"Bank closings remain elevated. We have had 106 bank failures so far in 2011."

-- Mike Shedlock, here on Friday

The rate of failure this year so far has fallen to 2 per week from 3 per week last year.

Failures year to date number 64, not 106.

Figures reported here in May put costs of failures to the FDIC's Deposit Insurance Fund through 2010 at $24.18 billion. That estimate is 9 percent more than previously estimated.

Mish thinks this is one among many indicators showing continuing deflation in the economy.

Don't bailouts of this kind get counted as government expenditures accruing to GDP? Counting them as such would make GDP less reliable as an indicator of growth in the economy, but you must admit the number is tiny in a $15 trillion economy, not even 2/10ths of 1 percent.

California Becomes Ninth State Seeking To Overthrow Electoral College

The story, reported here, reveals that the anti-constitutional National Popular Vote initiative had its origin in California:

California's involvement, combined with the other eight states, brings supporters nearly halfway there, to 132 votes, said Vikram David Amar, associate dean at the UC Davis School of Law. Amar, along with his brother and another law professor, started the movement a decade ago.


Check the relevant Wikipedia entries and you will find that name, Vikram David Amar, liberally referenced.


The proposal, despite all the protestations to the contrary, is an end-run around the constitution, setting up a process alien to its electoral college assumptions. States who join this plan are in effect agreeing to allocate their electoral votes in a manner different from that prescribed by Article II, Section 1, which assumes that each state will appoint its own electors.

In effect, the National Popular Vote proposal seeks subtly to alter this provision by making the electors creatures not of the individual states, but of the voters and electors of the participating states as a whole. It does this by replacing the method of appointing electors based on winner-of-the-state-takes-all with winner-of-the-country-takes-all.

It is an ingenious and devious scheme which exploits the absence of a prescribed method for appointing electors, something the constitution wisely left up to the states.

It dives into this vacuum with a rival system which will award electors who by law must ignore the will of the very people whose Representatives and Senators appointed them, and represent instead the interests of a larger constituency which did not appoint them.

In Michigan, I expect my electors to cast votes for president based on who won Michigan, not on who won California, Texas, Florida and New York. The electors appointed in those states are appointed by Representatives and Senators for whom I did not, indeed cannot, vote. Requiring my electors in Michigan to answer to them, just because there are more of them, rather than to me thus severs me from my representation, and thus from my liberty.

Put another way, the National Popular Vote seeks to sever the electoral college electors from the people and the states whose Representatives and Senators are the basis for their existence.

Get the word out to stop this pestilence before it goes any farther.

  

Stinging Blow to ObamaCare Delivered by 11th Circuit Court of Appeals

As reported here:

A divided three-judge panel of the 11th Circuit Court of Appeals ruled Friday that Congress overstepped its authority when lawmakers passed the so-called individual mandate, the first such decision by a federal appeals court. It's a stinging blow to Obama's signature legislative achievement, as many experts agree the requirement that Americans carry health insurance — or face tax penalties — is the foundation for other parts of the law and key to paying for it.

The case will go next before either the full 11th Circuit or the US Supreme Court.

Newt Gingrich Rightly Slams Gang of Twelve on Secrecy

The DC has the story here. Newt called the Super Committee one of Washington's dumber ideas.

Sen. Rob Portman Will Shill for Gang of Six Taxes on Gang of Twelve

There's Portman on July 21 giving aid and comfort to the Gang of Six enemy while the US House is trying to push the only true plan to cut spending:

The bipartisan “Gang of Six” proposal on the deficit continues to draw attention from rank-and-file senators, even as House leaders come out in opposition to any plan that includes new revenues as part of a deal.

“It's a step in the right direction,” Sen. Rob Portman, R-Ohio, who was budget director under President George W. Bush, told us on ABC’s “Top Line” today. “It's the one effort out there where you've got Republicans and Democrats coming together. And I think it could actually mesh well with what I think is the ultimate solution here with regard to the debt limit increase.”

While many Republicans are pushing back against the notion of including revenues as part of any deal, Portman said tax reform must be built in to a bipartisan solution.

“We've signed up to the concept that we do need a bipartisan approach here, and it's got to deal with tax reform, and it's got to deal with the long-term problem -- which is sustainability of these entitlement programs,” Portman said.

S and P 500 Downsy Daisy Upsy Daisy: Now 14 Percent Off April Highs

Another Jim Cramer machine-caused flash rally?

Watch For The Sucker Rally Starting From S and P 500 1100, She Says

“The sucker rally is what’s going to get people. Because then we’re going to implode from there.”

-- Kathy Boyle, president of Chapin Hill Advisors in New York, quoted here

People have been able to bank their gains comfortably in this cyclical bull for quite some time, but haven't because the alternative places to park profits all seem so unattractively high priced, and cash so unthinkable. Who wants to go from spectacular gains in equities to the somnolence of a money market account?

Trust me. Sleep is worth its weight in gold. And you're going to need it for what's coming.

S and P 500 Down 17.8 Percent Since April Highs

AP Reports Householders Converted to Renters Total 3 Million

With 3 million more expected by 2015:

Since the housing meltdown, nearly 3 million households have become renters. At least 3 million more are expected by 2015, according to census data analyzed by Harvard's Joint Center for Housing Studies and The Associated Press.

Read the rest of the story here, which says that the GSEs presently own 250,000 foreclosures.

Meredith Whitney's Caricature of Tea Party is Sexist and Liberal: Video and Transcript

She expressed her opinion on CNBC this morning (here is the video), saying the Tea Party is at bottom a phenomenon of unemployment, but composed mostly of freaked-out white men who've lost their jobs and their identities. She's obviously worried about it enough to offer advice to Machiavellian Democrats to defuse this supposed bomb before it's too late.

I guess she never examined the Gallup poll on the subject (here), which found that 45 percent of the Tea Party is female, is barely 5 percent more non-Hispanic white than the general population, and that the unemployment rate in the movement was lower than in the general population. Gallup concluded the Tea Party is fairly representative of the general population, unlike Whitney.

Sexist remarks start at 5:55 into the interview.

Translation: I'm a Machiavellian Democrat

Cost-Cutting and Job Creation Helped Republicans in Wisconsin

So says David Freddoso for The Washington Examiner here:

How did Republicans hold out? It hasn't hurt that Walker's reforms have dramatically helped school districts within the state save millions of dollars by abolishing the main Wisconsin teachers' union's insurance racket. Nor does it hurt that Wisconsin, under the business-friendly leadership of Walker and a Republican state legislature, created more than half of the jobs created in the United States during the month of June.

Republicans Keep Senate in Wisconsin Recalls Despite Millions Spent by Unions

The Republicans retained 4 of 6 seats in the unusual recall elections yesterday, narrowing their hold on the Wisconsin Senate to a 1 seat majority.

But two Democrats still face recalls next week. If they lose that would return the situation to the margins of the status quo ante and suggest that all the sound, fury and expense since March signified nothing, except folly.

Upwards of $35 million is being spent on the recalls, launched by angry unions and Democrats against Republicans under Governor Scott Walker who successfully pushed through legislation to curtail public union power over salaries and benefits in Wisconsin.

Read all about it at The Milwaukee Journal Sentinel Online, here:

By keeping a majority in the Senate, Republicans retained their monopoly on state government because they also hold the Assembly and governor's office. Tuesday's elections narrowed their majority - at least for now - from 19-14 to a razor-thin 17-16.

Republicans may be able to gain back some of the losses next week, when two Democrats face recall elections.

Jim Cramer's 'Machines' Cause Flash Rally, Reversing Some of Yesterday's Losses

Now 14 percent off the April highs.

S and P 500 is Almost 18 Percent Off the Recent Highs

And it's a long way back down to 683, another 39 percent.

Food Stamps in Michigan: 30K College Students Removed From Program

Who knew? Apparently that number on the program was huge, 10 times more than in other states.

New rules for eligibility are coming, requiring assets to be counted. Like lotto winnings.

The Detroit News has the story here:

Even after the recent removal of 30,000 college students from the food stamp program, close to 2 million Michigan residents — one in five — are on the program, [Brian] Rooney [Deputy Director, Department of Human Services] said.

Jim Cramer Blames The Machines

Here:

"You have to believe that it's related to the machines . . .."

Obama Talks Again of 'Balanced Approach' Meaning New Taxes, Market Tanks

CBS News reported here at 2:36 pm on the president's remarks made today after the lunch hour:

Mr. Obama noted that S and P attributed its downgrade in part to doubts about the U.S. political system's ability to act to reign in the nation's ballooning deficit and debt, and called for a "balanced approach" to deficit reduction - one that includes both tax increases on high earners and "modest adjustments" to Medicare and other health care programs.

At 1:47 pm the S and P 500 was down 56 points. At 2:18 pm it was down 67 points. By the close it stood at nearly 80 points down for the day:

Democrats Still Play The Dictator, Commit Crime Against Democracy: Attack Tea Party Over Credit Downgrade

Pat Caddell last September, referring to ramming ObamaCare down our throats:

"The Democrats had a chance to do this right — most people supported aspects of reform — but because of the way it was passed, as a crime against democracy, the country has simply not accepted it. The lies, the browbeating, the ‘deem and pass’ — all of it was a suicide mission. ...

“Democrats used to be the voice of the common man in America, not his dictator.”

The whole interview, here, is as applicable now as it was then.

China Lectures America While Failing To Comply With The Rules

From Ambrose Evans-Pritchard, here, who points out there is a dwindling supply of growth to steal from the future:

China has already pushed credit to 200pc of GDP. It cannot repeat the trick. ...

As for China's bluster, it is chutzpah and self-delusion. We all agree that the US needs to "cure its addiction to debts", but so will China soon.

China buys US debt in order to recycle $200bn a quarter in foreign reserves, hold down the yuan, and continue its mercantilist export strategy. If China had not distorted world trade in this fashion, the US would not be in such a mess.

Obama is Engineering the Decline of the American Republic

Rush Limbaugh said it, right?

No, Pete Wehner, here.

Real Clear Politics' Image of Obama Doesn't Match The Video

Are they having just a little too much fun?

We do that, but should they?

Seen here:

'And the glory of the Lord shone round about him.'

The Permabulls' Latest Ploy

You know your leg is being pulled when steep market declines are just flash crashes to be blamed on high frequency trading, but buying on the dips couldn't possibly be pre-programmed to cause flash rallies.

Have fun at the casino!  

Recent Sell-Off Was Another Flash Crash? Why isn't the Opposite a Flash Rally?

A couple of people here are blaming the market meltdown last week on high frequency trading.

Gee whiz, what isn't to be blamed on high frequency trading when 75 percent of the trading, and climbing, is high frequency?

These explanations have become a distinction without a difference.

So movements are amplified, so what? People just aren't used to the increased volatility, which is just like turning up the volume on the stereo. The music is the same, just louder.

Obama's Defeated 2012 Budget Would Have Taken Public Debt to $24 Trillion in 10 Years

TheHill.com reported the CBO projection in March here:

CBO estimates Obama's plan would produce 10 years of deficits totaling $9.5 trillion. By 2021, it would increase the debt held by the public to 87 percent of gross domestic product.

On March 18, 2011 public debt stood at $14.225 trillion, to which add $9.5 trillion over ten years, and you get nearly $24 trillion, nearly 122 percent higher than the debt at the end of 2008.

Was that "a balanced approach"?

Was Standard and Poor's wrong at $22.1 trillion? It would be more accurate to call it generous, in Obama's favor. Brow-beaten by criticism from the regime, S and P dropped the number to $20.1 trillion.

I predict that if Obama is still in office in 2015, we'll have already hit that $20.1 trillion mark by then and won't have to wait for 2021. 

EU Growth Rate 2000-2010 at 1.56 Percent

Yeah! Let's be more like Europe!

Wait. We already are.

Data here and here.

Let's Play 'Who's The Bigger Liberal: Clinton, Bush or Obama?'

In January of 1993, the total public debt stood at $4.2 trillion. By the end of the year 2000, it stood at $5.7 trillion. So Bill Clinton increased the debt by 35 percent, about 4.4 points per year.

At the end of December in 2008, the debt stood at $10.7 trillion. So George Bush increased the debt by 88 percent, about 11 points per year, a rate 2.5 times higher than Bill Clinton's.

As of August 4, 2011, the debt stands at $14.6 trillion. So Barack Obama has increased the debt by 36 percent . . . in just over one half of one term in office, not two full terms like his predecessors, or 14.4 points per year.

George Bush is clearly a bigger liberal than Bill Clinton, but Obama is already topping him by a rate of 1.3 times.  

Standard and Poor's Estimate of GDP is Way Too Optimistic

From their downgrade report:

Key macroeconomic assumptions in the base case scenario include trend real GDP growth of 3 percent and consumer price inflation near 2 percent annually over the decade. ... our downside case scenario assumes relatively modest real trend GDP growth of 2.5 percent and inflation of near 1.5 percent annually going forward.

Real GDP in the first decade of the 21st century was a pathetic, anemic 1.67 percent.

If that continues (we're at 1.3 percent right now), the gap between spending and revenues will continue to widen, increasing the size of annual deficits and adding to the total debt.

Not Triple A

Thanks, Harvard.

Story here.

Israel Is Doomed: by a Mental Disorder Better Known as Liberalism

Because even its leading newspaper can't bring itself to condemn the virulent liberal-anti-Semitism of Norway which the Utoya shooter attacked, personified in the Labor Party's AUF and one Gro Harlem Brundtland, his real target.

The obsequious apology is noted here.

Why Did Californians Have Herpes While Coloradans Had Texans?

Because Californians had first choice.

(You had to be in Colorado in the summers in the 1970s before AIDS to really appreciate this).

Senator John Kerry: Enemy of a Free Press and Free Speech

Story here, about media reporting on the Tea Party:

"The media has got to begin to not give equal time or equal balance to an absolutely absurd notion just because somebody asserts it or simply because somebody says something which everybody knows is not factual."

In other words, free speech and a free press are only for some people.

Kind of like how stop signs are only for some people, right Senator? 

Unemployment to 9.1 Percent: 25 of 27 Months At Or Above 9.0

Story here.

The broader measure called U-6 which adds the marginally attached and the part-time for economic reasons has been above 12 percent for 33 consecutive months going back to November 2008.

Fannie Mae Follows First Quarter $8.7 Billion Loss With $5.2 Billion in Second

Bailouts to date: $104 billion.

Story here.

Time Magazine's Marxists Agree: Inequality Caused The Financial Crisis

Why, even Wall Street hates inequality so much it, too, dived in obeisance.

Read it here, if you must.

Debt and leverage are so bourgeois.

Today's DOW Drop Ranks 9th For Daily Point Losses. It's Not a 'Crash'.

Wikipedia has this nice chart, among others, here:

The percentage loss was big, but won't be truly significant unless it becomes part of a larger pattern of losses like we had in the fall of 2008, which dominates this chart.

For all we know, the decline today and Tuesday was the market's verdict on President Obama's and Senator Harry Reid's expressed resolve to raise taxes in the very near future in the wake of the debt ceiling deal.

Notice, however, that the historic market lows of February and March 2003, and March 2009 are absent from this chart. Those were incredible buying opportunities which did not reveal themselves precipitously. Those lows were achieved by grinding down to them.

Cash is King: US Banks Now Hold Nearly $2 Trillion

From a fascinating story at The Wall Street Journal:

The fastest-growing asset on bank balance sheets this year is cash. Since the beginning of the year, U.S. bank holdings of cash are up 83%, or $890 billion, to $1.98 trillion. ...

BNY Mellon said that customers that have deposited more than $50 million into their accounts since the end of July will face an annual fee of at least 0.13% of the excess deposits. ...

Holding cash comes at a cost to banks. Bank of New York and others pay fees of about 0.10% to the FDIC to insure their deposits, said people familiar with the matter. ...

One place banks have turned to put their cash is the Federal Reserve. Since late 2008 it has been paying 0.25% interest on funds banks hold ... in reserve with the Fed.

Learn all about it, here.

Market Panics Just After The Nick Of Time. Have A Nice Day.

Why is Gold Climbing?

"[T]here should be no doubt that gold is reacting to competitive currency devaluation schemes of central banks."

-- Mish, here

Obama's Laser-Like Focus Vaporizes Full-Time Jobs

Get mort-ified, here.

Post-War Doubling Times For Federal Spending: Every 9 Years at 8 Percent per Year

US government spending on World War Two reached a crescendo in 1945 at $107 billion, after which spending reset to a post-war low of $36 billion in 1948.

Within 4 years, spending had doubled to $72 billion, in 1952.

It took more than 14 years for federal spending to double again, sometime between 1966 and 1967, when spending shot up on the Vietnam War and the Great Society programs under President Johnson. Spending in 1966 was $135 billion.

By 1974, just 8 years later, spending had nearly doubled again to $269 billion.

Under Jimmy Carter it took just over 5 years for spending to double again, sometime between 1979 and 1980. Federal spending reached $504 billion in 1979.

By 1987, 8 years later, federal spending had doubled again to $1 trillion under Ronald Reagan.

Federal spending did not double again until sometime between 2001 and 2002. It took more than 14 years to do so going through the Bush 41 and Bill Clinton presidencies to the presidency of Bush 43. Federal outlays reached $1.9 trillion in 2001.

Which brings us down the pike to today, when spending is projected to finish the fiscal year at $3.8 trillion, doubling in the 10 years since 2001.

That's 7 doublings in 63 years, or a doubling of US government spending every 9 years since World War Two.

According to the Rule of 72, a doubling every 9 years implies an interest rate of 8 percent per year.

In other words, federal spending has an effective rate of built-in spending increases at 8 percent per year every year since 1948.

When you consider that real GDP growth from 1930-2000 has been 3.5 percent and only slightly better than half that in the decade just past, our spending is completely out of step with reality.

(data from usgovernmentspending.com)

Jonah Goldberg Tells 'Them' Where To Go

"And yet you know the next time there’s the slightest, remotely exploitable tragedy or hint of violence, the same reporters, editors, producers, and politicians are going to insist that blood was spilled because of the right wing’s rhetoric.

Well, go to Hell. All of you."

Here.

Standards are Inimical to the Left, That's Why Ratings Agencies are the Enemy

As here at Slate.com:

"If everyone hates the credit rating agencies, why won't anyone enforce the Dodd-Frank provision to dethrone them?"

Even Ken Rogoff Knows It's A Depression But Can't Bring Himself To Say So

We're still co-dependents in the disaster when even our truth-tellers continue to insist on the euphemism which is its rhetorical basis.

Ideas have consequences, and ideas require words.

Story here.

On the knees of the gods our fates are spun.

What Baseline Budgeting Does to Spending in Ten Years

If you listen to Larry Kudlow, you know that he believes that baseline budgeting contributes only as much as 4 percent to the annual increase in spending built-in to the process.

Many others assert the number is more like 7 percent.

Let's see what 7 percent does to a budget over ten years.

Obama submitted a budget for fiscal year 2012, which was defeated in the Democrat-controlled Senate 97-0 in the spring. It called for $3.729 trillion in spending for the fiscal year 2012, set to begin in October 2011.

Let's assume his spending proposal had passed both houses of Congress without objection, and then add 7 percent to the total spending to get the next year's budget, also passed without objection, and so on for ten years.

Here are the ten annual increases, in billions of dollars: 261, 279, 299, 320, 342, 366, 392, 419, 448, and 480. The built-in new spending after ten years totals $3.606 trillion. (Coincidentally, to keep the AAA bond rating from Standard and Poor's, its Sovereign Ratings Committee was looking for $4 trillion in spending cuts today as a first step. It didn't get them.)

That gives you a total budget in 2022, ten years later, of $7.335 trillion, just $123 billion shy of a doubled budget in 10 years, and just what you should expect under the rule of 72.

This kind of doubling is fairly typical for actual spending for any ten year period you pick in the last forty or fifty years, and explains how we got into the pickle in which we presently find ourselves.

So spending increases are built-in at about 7 percent, and Kudlow is underestimating.

Growth to pay for these increases, however, is not built-in, and can never be. It's highly unpredictable and for that reason alone baseline budgeting should be abandoned.

But there's another reason. There hasn't been a single decade since the 1930s where average real growth has come even close to 7 percent, as Louis Woodhill has shown here. Our best decade was way back in the 1940s, when real growth measured 5.57 percent. We haven't done as well since.

There's only one word for what passes for America's spending policy: insanity.

We haven't ever been able to afford what we've been doing.

Radiation of 10 Sieverts Per Hour Detected Between Reactors 1 and 2 at Fukushima

The measurements were made yesterday and reported here and here.

Just 2 sieverts in an hour can be fatal.

Republicans Should Have Demanded Far More Than Reid's Cuts Because They're the Last

(Have you noticed that just like with ObamaCare, it's the Senate calling the shots on everything?)

Senator Reid's cuts are the last spending cuts anyone's going to be seeing for the foreseeable future.

From TheHill.com here:

“The numbers relative to the problem are minimal, but the directional change is huge,” said Rep. Jeb Hensarling (Texas), the chairman of the House Republican Conference.

Yeah, right.

The opposite is more like it. The next fight will be over the 2012 fiscal year budget, and Republicans will die on that hill, after which it's a long way to the election.

Democrats will dig in, having compromised on the Bush tax rates extension, new revenues in the debt ceiling debate, and spending cuts. Their attitude will be that it's time for Republicans to give in on something.

More spending cuts before the election aren't going to happen.

Let's Index the Federal Budget to Existing Housing Prices

Existing housing prices are down roughly 32 percent from the highs (see here). Many are underwater on their mortgages, but people are making do, muddling through, because they have no other choice.

Why can't government do the same?

A 32 percent cut to federal spending currently at $3.819 trillion dollars would be $1.22 trillion. That would reset the budget to $2.6 trillion.

Freeze the federal budget there and index it to the Case-Shiller housing price index. When housing recovers in value, the feds can have a similar raise. If housing values continue to decline, the feds get a similar cut.

Linking the federal budget to the health of the American dream?

Sounds fair to me.

Maybe those SOBs might do their jobs for a change.

Stabilizing Debt to GDP Ratio Requires $1 Trillion in Cuts Per Year, Not $400 Billion

So says John Chambers of Standard and Poor's Sovereign Ratings Committee here. The ratio stabilized at the current level of 75 percent would remain consistent with a AAA debt rating going forward.

The $1 trillion per year represents about 7.5 percent of GDP. With the latest report of current dollar GDP running at $15 trillion, 7.5 percent is $1.13 trillion.

Viewed another way, if we simply threw out baseline budgeting, which builds in increases to the budget each year at a rate near 7 percent, we'd be nearly home free without having to do anything.

And another way to put that is, just freeze the damn budget at current levels for a decade.

Sort of like what the average working Joe has experienced since 2000: no real wage progress. If he can do it, government certainly should.

Obama Caused the Panic, Not the Media

So says Jim Cramer. And he voted for the guy.

Video here:

"He came out and panicked the heck out of us.

"He talked about the higher interest rates for mortgages, he talked to spiking credit cards, he talked about how hard it's going to be to get a student loan. It took us all aback because we felt that he'd be a compromise leader.

"Instead, he created tremendous fear. Tremendous fear means uncertainty. Uncertainty means no spending. Uncertainty means no spending by businesses. It means no hiring. It was a setback.

"He caused the panic, not the media."


Obama went outside the experience of his enemy, Jim Cramer.