White House Response To The Virginia Earthquake

“(He) didn't feel the earthquake today.”

It's still all about you, isn't it? "What I think, what I like, what I know, what I want, what I see . . .." The good of one man only.

Story here.

Hurricane Irene Disappoints Alarmists and Catastrophists

As reported here:

From North Carolina to Pennsylvania, Hurricane Irene appeared to have fallen short of the doomsday predictions. But with rivers still rising, and roads impassable because of high water and fallen trees, it could be days before the full extent of the damage is known.

More than 4.5 million homes and businesses along the East Coast lost power, and at least nine deaths were blamed on the storm. But as day broke Sunday, light damage was reported in many places, with little more than downed trees and power lines.


At 0900 the National Hurricane center had Irene hit New York City as a tropical storm, not a hurricane, with wind speed at 65 mph:

At 1037 Stormpulse.com still had Irene as a hurricane at 75 mph:

Obama Ends Vacation Early, Appeared Keen to Appear In Charge of Downgraded Hurricane

To no useful purpose, except to trivialize the office of the presidency even more:

Obama chaired a meeting at the National Response Coordination Center (NRCC) set up at the Federal Emergency Management Agency's (FEMA) headquarters in Washington, which is marshaling federal and local hurricane-relief efforts. ...

Obama returned home one night early on Friday from his island vacation on Martha's Vineyard in Massachusetts and appeared keen to be visibly in charge as the response to Hurricane Irene unfolds.

The full story is here.

Perhaps he felt a storm downgraded to a Category One hurricane was a good match-up with himself, the president who presided over the AAA downgrade to AA+.

It's reminiscent of his unsuccessful sports picks.

Good Night Irene: Sometimes Communism is Suicidal

Some times I live in the country

Some times I live in town

Some times I take a great notion

To jump in the river and drown

Irene good night Irene good night

Good night Irene Good night Irene

I'll see you in my dreams

Notice the Mussolini!

(see it here)

Estimated Social Security Revenue Lost to $106,800 Wage Base is $100 Billion

So said Janemarie Mulvey last September in a Congressional Research Service report at senate.gov, here:

Thus, supporters of changing the base argue that raising or eliminating the base not only would be more fair, but also that Social Security’s projected long-range financing problems could be substantially alleviated or, alternatively, that the payroll tax rate could be reduced without causing a loss of revenue to the system. It is estimated that almost $100 billion in revenue to the Social Security program would be generated annually by taxing all earnings, and if such revenues were not used to lower the tax rate, they would reduce the government’s outstanding debt and eliminate about 95% of Social Security’s long-range deficit.

So, my back of the envelope number is $50 billion higher than hers.

Hers is still bigger than my mortgage deduction "loophole"!

All is Not Well on Martha's Vineyard: Pres. Obama's Vacation Spot

The Boston Globe has the story here:

At the core of islanders’ misgivings is the shaky local economy. ...

Empty storefronts dot main streets in Vineyard Haven, Edgartown, and elsewhere. ...

[N]early 700 of the roughly 16,500 year-round Vineyard residents are unemployed, state labor statistics show. In January, the jobless rate was 13.2 percent. ...

Islanders have lost homes to foreclosure at a rate of two per month since 2008, a rate not showing any signs of abating, according to The Warren Group, a company that tracks real estate transactions.

The Biggest Tax Loss Expenditure Benefits the Rich: $150 Billion for Social Security

In 2008, the AGI of the top 10 percent of earners was $3.9 trillion, represented in just 14 million tax returns, as reported here.

Assuming these are individuals (which cannot be true because only 140 million returns in total were filed that year but let's make the assumption anyway), about $2.4 trillion of that money would have escaped Social Security taxation above the threshold limit, rounded, of $107K of income per year.

About $1.5 trillion of the $3.9 trillion would have been taxed for Social Security purposes. Again, I'm using adjusted gross income which is also not going to be an accurate measure, but it'll have to do for this back of the envelope calculation.

6.25 percent of the remaining $2.4 trillion comes to $150 billion in lost revenue for Social Security in 2008, way ahead of the top tax loss expenditures, medical insurance at $131 billion, pensions at $117 billion, and your mortgage interest at $88 billion. See the data here.

The Super Committee, aka The Gang of Twelve, is interested in all proposals to raise revenues by closing "loopholes," like your mortgage interest deduction. Yet that's only fourth on the list of "lost" government revenues. The biggest loophole goes to the richest 10 percent of earners.

We're taxed enough already. Cut the spending instead. 

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.