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)