Moral Hazard In Pictures

US Federal Reserve

European Central Bank

Bank of England

People's Bank of China

German Bundesbank

Bank of Japan

Banque de France

Swiss National Bank

The British Knee Is On The March!

“It’s quite impossible that the man who had invented Sir Roderick Spode in 1938 was prey to any covert sympathy for fascism.”

-- Christopher Hitchens on P.G. Wodehouse, quoted here

Deposit Insurance In Spain Is Meaningless

If you want to know why 100 billion euros have fled Spain in the first quarter of this year, here's why:

In Spain there are about 800 billion euros of insured deposits, but the deposit insurance fund has assets of just 7.9 billion euros, and 5.3 billion has already been committed to troubled savings bank Caja de Ahorros del Mediterraneo (CAM), Barclays analysts estimated.

Unemployment Rate Climbs To 8.2 Percent Despite Weasel Words From Bureau Of Lies And Statistics

Obama's Laser-Like Focus On Jobs

The report from the Bureau of Labor Statistics may be found here. PDF here.

Notice the attempt to weasel out of the fact that the rate actually increased 0.1 from last month by stating the rate was "essentially unchanged":

Nonfarm payroll employment changed little in May (+69,000), and the unemployment rate was essentially unchanged at 8.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in health care, transportation and warehousing, and wholesale trade but declined in construction. Employment was little changed in most other major industries.

The Obama regime is presiding over an employment catastrophe above 8 percent for his entire presidency: 3 years and 4 months.

GDP Revised Down For Q1 2012 From 2.2 Percent To 1.9 Percent

You talkin' to me?

Way to go, Brownie!

Here's the story from the horse's mouth:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.9 percent in the first quarter of 2012 (that is, from the fourth quarter to the first quarter), according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2011, real GDP increased 3.0 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.2 percent (see "Revisions" on page 3).

The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, residential fixed investment, private inventory investment, and nonresidential fixed investment that were partly offset by negative contributions from federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the first quarter primarily reflected a deceleration in private inventory investment, an acceleration in imports, and a deceleration in nonresidential fixed investment that were partly offset by accelerations in exports and in PCE.

Michelle Obama Lies About When And Why Obama Gave Up Pot

Neither one can tell the truth

Here's what Michelle Obama has just claimed, as quoted here, in response to a question about her husband's prolific pot-smoking habits:

'When he lost his father, that was one of those click-in moments. And he really buckled down, he transferred schools, went to Columbia, and thought about how to use his life to the fullest.'

This is nothing but the same sort of fictionalization we've come to expect from Obama himself, say, about his girlfriends, experiences with whom are conflated in his book in composite characters, not real ones.

Michelle is lying about the chronology of events which supposedly led to Barack becoming a serious person, pinning it all of the death of Barack Obama Sr. But Obama's father died late in 1982 when Barack was already at Columbia for a year. Barack transferred to Columbia in the fall of 1981. See for example, here.

The death of Obama's father had nothing to do with transferring to Columbia. In fact, the death post dates the move from Occidental to Columbia by two years.

The truth is we don't know when Obama quit smoking weed. But we do know Michelle Obama isn't telling the truth about it.

President Pothead Strikes Again, Angering Poland

This time the president has referred to Nazi concentration camps in Poland as Polish concentration camps.

Just one more reason why the president's past (?) drug use makes him unfit for office in the present. Kind of like how Biden's 1988 brain aneurysms have something to do with his now very full repertoire of offensive gaffes which disqualify him.

The story is here.

But look on the bright side. At least Obama didn't call Jan Karski a corpseman.

Middle Class Implies Far More Than Being Able To Buy A House

Robert Weissberg details here the older definition of what it meant to be middle class, you know, the one which is now politically incorrect to talk about, let alone be:

The core of being middle class was a strong work ethic, self-discipline, a willingness to defer gratification, an aversion for flashy consumption,  and an embrace of what might be called “respectability,” (i.e., sobriety), a morality that stressed honesty, a solid family life, being law-abiding, and valuing education (though not necessarily being “intellectual”).

Inner dispositions were associated with speaking clear, grammatical English, exhibiting decent table manners, never using profanity in public (and almost none in private, too), being “clean cut”  in appearances and always acting politely. Middle class members also abhorred the thought of taking government handouts. ...

These “square” traits were associated with material well-being but were really a result of middle class values, not its defining elements. Nobody believed that the causal flow was reversible—home ownership could inculcate middle-class values. In principle, it was possible to be lower class despite owning middle-class doodads. A well-paid entertainer may live well but could still be considered white trash if he dressed in tattered clothing, beat his wife, openly philandered, cursed and spit in public and spent a dime for every nickel earned.

Case Shiller Home Price Index Falls To 128.13 Through 12/31/11

And everyone's happy for some reason.

When you consider that the mean for the whole history of the index is 123 and the median 120, which include the irrational exuberance of recent history, today's new low of 128 after this massive, outlier, bubble merely looks like more progress in the direction of regression toward the mean, not a "bottom" as many are saying. Indeed, the historical mean implies we have a fair way DOWN to go in price, to say nothing of the very real possibility of overshooting that to the downside.

The quarterly index, adjusted for inflation, has now hit today's level eight times in the post-war period:

Dec. 31, 2011 128.13

Mar. 31, 1999 128.40

Dec. 31, 1990 128.27

Dec. 31, 1979 128.78

Sep. 30, 1978 128.22

Dec. 31, 1955 128.21

Mar. 31, 1955 128.15

Dec. 31, 1954 128.30.

There's enough history between 110 and 130 to suggest that "normal" is still somewhere south of 128.

Take two aspirin every morning and call me in ten years.

Go here for the chart.

Banking Since 1913 In A Nutshell

From Daniel Oliver at Myrmikan Capital, here: 

Like any Ponzi scheme, the fractional reserve system must periodically collapse because wealth creation cannot stem from an eternal expansion of credit. Betrayed and confused, the little people march into the halls of power and hang the perpetrators from the nearest lamp posts. ...

When the next crisis comes, as it must, the central banks of the world will face the same choice as in 2008, only on a larger scale. They will have to decide whether to allow the major banks to fail, wiping out trillions of dollars of paper wealth and plunging the globe into a 1931-style bond market failure depression, or to print money on an even larger scale.

That crisis may be here now, which, perhaps, is what the gold markets have been telegraphing for months. ... 

In 1944, Christian Men Made The Best Soldiers

Dear Friend:

Pvt. V. L. Meyer was with us in our Field Service last Sunday afternoon. The men of his Battalion and attached units are on maneuvers in the Wichita Mountains near Fort Sill for two weeks. Since the men cannot come to the Chapel on Sunday, we take the service out to them.

We take our Field Organ and small books with familiar hymns in them. The men are usually brought by truck to a place set for the service. It is entirely up to the men whether they attend.

We meet them at the appointed place and have an informal outdoor service. The men choose the hymns and we have a short message, scripture readings and prayers.

The outstanding leaders of our armed forces are convinced that Christian men make the best soldiers, sailors and marines. With their fine cooperation, we do our best to help the men be real Christians.

Sincerely yours, 

Lawrence C. Upton

Chaplain (Capt.)


Jan. 3, 1944

They Didn't Die . . .

. . . for this

TSA VIPR Unit Patrolling Beneath Elevated Trains For Detroit Electronic Music Fest

As reported here by an attendee:

“[I]f you don’t like it,” the solution is clear: don’t leave your house. Or, you know, you could make your disapproval of TSA antics known now, before the TSA can expand in this absurd fashion and say, “Well you let us do it in the airports, so why can’t we do it in train stations?” “…at bus stops?” “…as you’re driving down the street?” “…whenever we want to.” If we don’t demand the Fourth Amendment in airports now, can you really, truly believe that I’m just talking hyperbole about what will happen next?

Waste Management Converting Over 18K Trucks To Natural Gas

Read all about it here in the Houston Chronicle.

Anti-Christian Army General Thomas Bostick Sued For Discriminating Against Women

Gen. Bostick and wife

The general who helped craft the Army's DADT policy and a five-year personnel reduction plan meant to weed-out members of the military who object to homosexuality on moral grounds has been sued by women in the military who want to fight in combat but are barred from doing so.

The general, Thomas Bostick, just assumed command of the US Army Corpse of Engineers on May 22 (a little Obama lingo there).

I'm guessing he's secretly happy he's named in the suit and that he hopes he'll lose so women, like homosexuals, can hit the front lines with the men.

In the job of transforming America, Obama's work is never done.  

The New York Times has the story here.

The UK Isn't Austere: Spending Has Increased To Record Levels

So reports the UK Telegraph here:

[T]he Office for National Statistics (ONS) revealed that the double-dip recession was even worse than feared. The economy shrank by 0.3pc in the first quarter of the year, the ONS said in its second estimates, rather than the 0.2pc initially thought. Government spending hit record levels in the three months to March in spite of the austerity drive, rising by 1.6pc to £81.5bn and delivering 0.4 percentage points of overall economic growth. However, the taxpayer-funded boost was not enough to offset weak activity in construction, trade and the financial sector.

Unfortunately for Great Britain, it has a leader who is more concerned with gay marriage, tax increases and diverting attention away from domestic failures.

Gee, kind of reminds one of none other than Barack Obama.

Hm.

The UK Lets Taxes Rise in 2010, Gets Ugly Recession in 2012

Louis Woodhill for Forbes details the history here, wondering why they call tax increases in the throes of an economic crisis Conservatism in the UK.

Maybe because Prime Minister Cameron isn't really a conservative, just like George Bush wasn't a conservative (junking free market principles to save the free market system). The top marginal tax rate went from 40 percent to 50 percent in 2010 in the UK.

Conservatism hasn't been practiced in either place in a very long time.

Radiation From Fukushima Accident Revised Up In New Report

CNN.com reports here:

Japan's largest utility said Thursday that more radiation than previously thought was released into the atmosphere in March 2011, in the days after the nuclear disaster that followed an earthquake and tsunami. TEPCO (Tokyo Electric Power Co.) estimates about 900,000 terabecquerels of radioactive materials were released between March 12 and March 31, according to Japan's Kyodo news agency. ... In one town in the Fukushima area, the estimated thyroid doses to infants are within a dose band of 100 to 200 millisieverts (mSv), the preliminary report said. This level of radiation exposure could be associated with an increased likelihood of developing cancer. However, in the rest of Japan, the estimated thyroid doses are within a dose band of 1 to 10 mSv, the report said. Outside the country, the estimated thyroid doses are less than 0.01 mSv, and are usually far below this very low level, it said.

PBS.org had a fuller report here, comparing the accident's severity to Chernobyl and assessing the health consequences of the radiation releases:

Tokyo Electric, the plant’s operator, said on Thursday that reactor meltdowns at the Fukushima Daiichi plant released approximately 900,000 terabecquerels of radioactive substances into the air in the immediate aftermath of the March 2011 accident. By comparison, approximately 5.2 million terabecquerels of total radiation were emitted in the 1986 Chernobyl disaster. ... In terms of the accident’s health implications, the World Health Organization said on Wednesday that the amount of radiation released fell below cancer-causing levels in nearly all of Japan. Outside of “no-go zones” in Fukushima prefecture, residents were exposed to radiation levels between 1 millisievert and 10 millisieverts, the W.H.O. said. The annual average amount of exposure from naturally occurring background radiation is 2.4 mSv globally, according to the report ... . Cumulative exposure to 100 mSv is generally thought to raise a person’s risk of cancer death by 0.5 percent.

Reuters.com reports here that Namie and Iitate were the two towns hardest hit:

In a preliminary report, independent experts said that people in two locations in Fukushima prefecture may have received a radiation dose of 10-50 millisieverts (mSv) in the year after the accident at the power station operated by TEPCO. ... The areas estimated to have received the highest doses of radiation were Namie town in Futaba county and Iitate village in Soma county, northwest of the stricken plant, the report said. Infants in Namie were thought to have received thyroid radiation doses of 100-200 mSv, it added. The thyroid is the most exposed organ as radioactive iodine concentrates there and children are deemed especially vulnerable.

Follow the labels at the end of this post for this blog's reporting on the accident from the beginning.

President Pothead Has Been Saying, Repeatedly, He Has Sons

Maybe Joe Biden isn't the only one who needs his head examined.

The story is here.

Irrational Exuberance in Corporate Debt Reaches $7.8 Trillion v. $1.2 Trillion in Cash

"I would go a hundred percent equities if I thought that we had reached a point when equity values made sense."

"People always say stocks are cheap, stocks are cheap. They're trading 10 times forward PE, 12 times PE. The problem is, I don't know the E[arnings]."

"What if the U.S. had a balanced budget? What would GDP be? Then what would earnings be? The U.S. cannot in perpetuity run a $1.3 trillion annual deficit. I don't believe in any of the earnings numbers."

"You basically have 30 years of accumulated debt that funds consumption and that has to unwind. And as it unwinds, it's going to have implications on economic activity and it's impossible that it won't ultimately find its way back to U.S. companies."

--Andre Kovensky, Managing Director of bond and real estate investment firm, Octavia Investment, quoted here.

Stocks presently are relatively expensive when measured by the Shiller p/e, which this morning stands at 21.21, almost 34 percent elevated from the median level of 15.84 going back to 1881. Investors might want to consider that the Shiller median level itself incorporates earnings from past decades when increased borrowing by both business and government might make the metric somewhat artificially elevated anyway.

The assertion that debt "has to unwind", however, is evidenced in the post-war period by the corporate data set only in the early 1990s when aggregate quarterly debt dropped briefly by 2 percent, and in the decline just concluded when it dropped briefly by 3.5 percent or just $256 billion.

Total corporate assets, by way of contrast, have reached an all time high of nearly $30 trillion.

One wag notes that Kovensky is just talking his book.

Bonds remain at nose-bleed prices, as do all assets.