Friday, October 30, 2009
Thursday, October 29, 2009
"A Sham GDP for a Sham Economy"
OCTOBER 29, 2009, 1:18 PM ET
Mean Street: A Sham GDP for a Sham Economy
By Evan Newmark
Americans rejoice! GDP grew by 3.5% in the third quarter and the recession is over.
It’s time to drink champagne, dance in the streets, and have a group hug with Nancy Pelosi and Ben Bernanke. But whatever you do, don’t ask yourself why the recession has ended. The answer might ruin the party.
The recession is over only because Washington decided it should be. With billions in fresh government spending, it was only a matter of time before GDP posted some growth.
It’s too bad all that government spending is borrowed money. Someday, we’ll actually have to pay off this year’s $1.4 trillion deficit.
Saturday, October 24, 2009
The Parable of Old Butch the Rooster
A Parable
John was in the fertilized egg business. He had several hundred young layers (hens) called 'pullets' and ten roosters to fertilize the eggs. He kept records, and any rooster not performing went into the soup pot and was replaced.
This took a lot of time, so he bought some tiny bells and attached them to his roosters. Each bell had a different tone, so he could tell from a distance which rooster was performing. Now he could sit on the porch and fill out an efficiency report by just listening to the bells.
John's favorite rooster, old Butch, was a very fine specimen, but this morning he noticed old Butch's bell hadn't rung at all! When he went to investigate, he saw the other roosters were busy chasing pullets, bells-a-ringing, but the pullets, hearing the roosters coming, could run for cover.
To John's amazement, old Butch had his bell in his beak, so it couldn't ring. He'd sneak up on a pullet, do his job and walk on to the next one. John was so proud of old Butch, he entered him in the Renfrew County Fair and he became an overnight sensation among the judges. The result was the judges not only awarded old Butch the No Bell Piece Prize but they also awarded him the Pulletsurprise as well.
Clearly old Butch was a politician in the making. Who else but a politician could figure out how to win two of the most highly coveted awards on our planet by being the best at sneaking up on the populace and screwing them when they weren't paying attention?
Vote carefully next year, the bells are not always audible.
Posted by Sean G at 04:27, Saturday, October 17, 2009
"The Banks Must Be Restrained"
Total bank failures year to date reached 106 yesterday, bringing the total cost to the FDIC Deposit Insurance Fund this year to about $25 billion, with only about $100 billion to go, according to the FDIC's own projections.
The FDIC likes to take over banks on Friday afternoons, believing you won't notice it as readily with the weekend intervening before the next regular day of business. They wouldn't want you to panic, you know. So people who watch this stuff carefully like to call the last day of the work week "Bank Failure Friday." Yesterday, I noticed that the 106th bank to fail this year was in Itasca, Illinois, near where I used to live, and it reminded me of these words posted by Mish (who lives in Illinois) in July of 2008:
23. FDIC Chairman Sheila Bair said the FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits.
24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.
25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.
What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.
Since those words were penned, the FDIC is planning to charge premiums several years forward to banks to the tune of $45 billion, its deposit fund is down to about $10 billion, and its troubled bank list has ballooned to over 400 banks, with nearly 300 in serious trouble. The FDIC expects to need at least another $100 billion for bailouts through 2013. Let's see, $10 billion on hand plus $45 billion charged forward = $55 billion. Only $45 billion short! Hmm. And you think we can afford to federalize health care?!
When you go down to the bank to ask for a loan to buy a house, you typically get leverage of only 5 to 1 (20% down), because nobody's got your back but you. So why does the bank get leverage to the tune of 25 to 1 (4% down)? Because of the taxpayer guarantee, that's why. And "rules" which let them, written by politicians on the take. It's high time we ended all that or this country will surely go bankrupt. Consider Citigroup.
It alone has $800 billion in "assets" off the books, and looks to be in serious trouble: suddenly this week it ended its gasoline credit card program and dramatically hiked interest rates on its other cards. Forget about the FDIC covering Citigroup with forward charged premiums to its member banks if it goes under. There isn't enough money there. The taxpayer will be on the hook. Again. Are you mad as hell yet? Are you going to take it anymore? Vote the bums out.
No wonder Jesse keeps saying, "The banks must be restrained . . . before there can be any sustained recovery."
Monday, October 19, 2009
Friday, October 16, 2009
90 Jobs--10,000 Applicants/99.1% Disappointed
The country needs to create roughly 150,000 new jobs per month just to keep up with first time job seekers, but the inventory of already unemployed Americans just continues to grow. Who's going to have the money to buy the washing machines these lucky 90 are going to make? Certainly not the 15+ million Americans who've lost their jobs.
October 8, 2009
10,000 apply for 90 factory jobs
By Jere Downs
jdowns@courier-journal.com
In the latest sign of weakness in Louisville-area employment, about 10,000 people applied over three days for 90 jobs building washing machines at General Electric for about $27,000 per year and hefty benefits.
The jobs dangle medical, eye care, prescription and dental benefit packages, as well as pension, disability, tuition assistance and more, said GE spokeswoman Kim Freeman. And despite the recession, no union workers have been laid off from Appliance Park since the company negotiated lower wages with workers in 2005.
“There are no jobs out there paying these kinds of wages that also offer these kind of benefits,” said Jerry Carney, president of IUE-CWA Local 761 at Appliance Park.
Just four years ago, the same jobs paid $19 per hour. But that was before Local 761 approved wage cuts for new workers aimed at preventing the closure of Appliance Park.
“People still value these jobs,” Freeman said.
With the Jefferson County unemployment rate at 10.6 percent in August and more than 38,000 unemployed people looking for work, the opportunity for moderate pay and health care was an attractive lure.
“In this recession, there are lot of people who are just about to run out of unemployment benefits,” said Richard Hurd, a labor relations professor at Cornell University. The national average of time unemployment benefits collected now stands at 26 weeks, Indiana University Southeast Professor of Business Uric Dufrene said.
That’s about a third of the maximum that can currently be collected.
Larissa Roos, 38, never worked in a factory, but was one of the thousands who bid on jobs assembling appliances.
Until she was laid off from Bank of America in February, Roos said she made $18 per hour fielding calls, often from irritated merchants, about credit card glitches. Roos took that job just out of high school. But severance payments end this month, and Roos said she is looking everywhere to try to replace the income.
“I need something so I can live day to day. The job market is horrible,” Roos said Thursday, adding the family relies on her husband’s job as a printer to pay the mortgage on their Fern Creek home as well as utility, fuel and other bills.
With 10,000 vying for GE line jobs, “I am sure my application won’t even get looked at,” she added.
The rush of applicants came as no surprise to Carney, who noted that another recent GE advertisement for 13 maintenance workers, who are paid a union skilled trades rate of $23 hourly, drew 700 job seekers.
Carney credited GE’s reputation for union job security and blue chip benefits as a powerful lure.
GE announced the new jobs last week and started accepting applications through a website Monday. Wednesday was the deadline. The jobs are being added to a new second shift early next month to assemble Energy Star washing machines in Building 1 at the historic Louisville complex.
Roughly 80 percent of applicants report factory experience, Freeman said. That is not surprising, given the recession so far has slashed 8,000 manufacturing jobs from the region’s economy, Dufrene said.
“There is an abundance of potential employees with manufacturing-related skills,” Dufrene said.
The rough profile of applicants, most of them former factory workers, suggests many lack sufficient education to apply for more than minimum wage jobs in the current job market.
Half lacked a high school diploma. Just 5 percent of the applicants said they had a bachelor’s degree or higher. and
GE employs roughly 2,100 hourly and 2,000 white collar workers at Appliance Park. Now, about 440 workers labor on the first shift making washing machines in Building 1.
Applicant Shane Hopkins, 48, hopes his factory experience provides an edge.
Until mid-August, he said he maintained presses at a plastics factory. Now, Hopkins said he picks up occasional work as a flooring contractor for a cousin.
He still pays $300 per month to keep health care benefits for himself and his wife, an independent contractor for a Ford Motor Co. parts supplier at the Louisville Assembly Plant. Hopkins anticipates she’ll be out of work next year, when the plant closes for retooling.
A year from now, “her job ain’t going to be there,” Hopkins said. “I am thinking seriously about going to McDonalds, just for the benefits if nothing else.”
Reporter Jere Downs can be reached at (502) 582-4669.
Tuesday, October 6, 2009
The Keynesian Moment: "Markets Can Stay Irrational Far Longer Than You Can Stay Solvent"
Very thoughtful and wise words of warning today, making sense of the nonsense, from Barry Ritholtz over at The Big Picture. For the original as it appeared go here.
What Does the Economy Have to Do with the Market?
Posted By Barry Ritholtz On October 6, 2009 @ 7:33 am
“There’s a lot of risk going ahead of some big bumps. There’s a very big risk that markets have been irrationally exuberant.”
-Nobel Prize-winning economist Joseph Stiglitz
Far be it from me to challenge the 2001 economics Nobel prize winner, but sometimes, indeed, quite often, markets decouple from the economic fundamentals.
I can show you many eras in history when the economy was awful, and nonetheless markets rallied strongly.
There have also been times when earnings did not matter, and profitability was irrelevant. There are times when animal spirits run the show, when irrational exuberance was in charge.
Such is the result of giving two million primates lots of money and keyboards and a belief they can make a living based on numbers and letters moving around — on a screen, in a futures pit, on an exchange floor, or even under a buttonwood tree.
Most mainstream economists — with notable exceptions like John Maynard Keynes, Richard Thaler, and Robert Shiller — have traditionally paid little attention to this reality. To a trader or investor, rationality matters far less than what the tape was doing.
Indeed, prices matter a great deal more to traders than theories or annoying things like “Objective Reality." To a trader, prices ARE the objective reality; to them economic theorists are peripheral players trying to rationalize reality.
I believe you can describe and explain what the market is doing, but in doing so, we must acknowledge Keynes' terribly accurate observation that “Markets can stay irrational far longer than you can stay solvent.”
I’ll have more on this later in the week . . .
Friday, October 2, 2009
Congratulations, chicagoansforrio.com!
Congratulations Chicagoans! You escaped a financial catastrophe of Olympic proportions. Now if you could just get rid of Daley, Stroger, and Durbin. Good luck with that!
We've got lots of cheap real estate over here in Michigan. Come on over! And bring the poppy seed hot dog buns.
Chemical Castration for Pedophiles in Poland
Roman Polanski maintains citizenship in two countries. One of them is Poland. Let's send him there for justice.
Poland okays forcible castration for pedophiles
Fri Sep 25, 2009 12:45pm EDT
WARSAW (Reuters) - Poland on Friday approved a law making chemical castration mandatory for pedophiles in some cases, sparking criticism from human rights groups.
Under the law, sponsored by Poland's center-right government, pedophiles convicted of raping children under the age of 15 years or a close relative would have to undergo chemical therapy on their release from prison.
"The purpose of this action is to improve the mental health of the convict, to lower his libido and thereby to reduce the risk of another crime being committed by the same person," the government said in a statement.
Prime Minister Donald Tusk said late last year he wanted obligatory castration for pedophiles, whom he branded 'degenerates'. Tusk said he did not believe "one can use the term 'human' for such individuals, such creatures."
Tuesday, September 29, 2009
The Myth of the Obama Mandate 2008
The supporters of Barack Obama like to point to his 9.5 million vote margin of victory over John McCain in last year's election as evidence of his mandate for change. But viewed from the perspective of the percentage of the popular vote he won, the rookie will have to do a whole lot better in office than he has to date to move into the "mandate" ranks with Johnson, Nixon, Reagan, Eisenhower, and FDR. In the only poll that counts, Obama has no more claim to a mandate than Carter in '76, GW Bush in 2004, nor Reagan in 1980.
1964 Johnson 61.05
1972 Nixon 60.67
1984 Reagan 58.77
1956 Eisenhower 57.37
1952 Eisenhower 55.18
1944 Roosevelt 53.39
1988 GHW Bush 53.37
2008 Obama 52.87
1980 Reagan 50.75
2004 GW Bush 50.73
1976 Carter 50.08
1960 Kennedy 49.72
1948 Truman 49.55
1996 Clinton 49.23
2000 GW Bush 47.87
(Gore) (48.38)
1968 Nixon 43.42
1992 Clinton 43.01
Perhaps more to the point, however, is the fact that John McCain would be president today but for 1,383,540 more votes properly apportioned in the nine formerly red states which went to W in 2004. Mandates don't hang in the balance of so few votes out of over 30 million cast. The cracker thin margins of victory for Obama in those states for 2008 are as follows (rounded to the nearest thousand):
Colorado 215,000
Florida 236,000
Indiana 28,000
Iowa 147,000
Nevada 121,000
New Mexico 126,000
North Carolina 14,000
Ohio 262,000
Virginia 235,000.
These handfuls of people made all the difference for Obama, but he had to outperform his predecessor John Kerry in those states by 3,036,289 votes to get them while his opponent McCain had to underperform his predecessor Bush by 191,852 votes at the same time. Neither eventuality is likely next time. The Republican candidate in 2012 won't have a record of alienating the base as a maverick and won't take four weeks to cash a check, nor another four to allocate it correctly, because she won't be McCain. And the Democrat candidate will not be able to run on a platform of change because we'll all have had plenty enough of that already. And staying the course won't work either because large numbers of chronically unemployed people who've lost their homes won't find that prospect very appealing.
There's a reason sales of firearms and ammunition are up over 30% since Obama got elected. There's a reason the normally undemonstrative and silent majority recently marched on Washington. There's a reason town hall meetings this summer witnessed excessive hyperventilating. And "mandate" isn't one of them.
Sunday, September 27, 2009
John Smith Looks for a Job
John Smith started the day early, having set his alarm clock (made in Japan) for 6:00 AM. While his coffeepot (made in China) was perking, he shaved with his electric razor (made in Hong Kong). He put on a dress shirt (made in Sri Lanka), designer jeans (made in Singapore), and tennis shoes (made in Korea). After cooking his breakfast in his new electric skillet (made in India), he sat down with his calculator (made in Mexico) to see how much he could spend today.
After setting his watch (made in Taiwan) to the radio (made in India), he got in his car (made in Germany), filled it with gas (from Saudi Arabia), and continued his search for a good paying American job.
At the end of yet another discouraging and fruitless day checking his computer (made in Malaysia), John decided to relax for a while. He put on his sandals (made in Brazil), poured himself a glass of wine (made in France), and turned on his TV (made in Indonesia), and then wondered why he can't find a good paying job in America.
And now he's hoping he can get help from a president (made in Kenya).
(author unknown)
Friday, September 25, 2009
Oba Mao
Why does an entrepreneur in Beijing think Mao and Obama are kindred spirits?
Maybe because they are?
Wednesday, September 23, 2009
Tuesday, September 22, 2009
"The Sons of Liberty and Nullification of State Power"
The nullification of the power of the British state during the American "Revolution" actually prevented a revolution as far as the founders were concerned. The only thing revolutionary going on was Britain's attempt to deny the colonies their chartered rights as Englishmen.
(Click here for the source)
In 1765 the British Parliament passed the Stamp Act. This act was applicable to Britain's North American colonies. The act called for a one cent tax on all newspapers, wills, codicils, manifests, contracts, paper, glass, lead and paint. The act was part of a larger plan of the British government to tighten its hold on its American colonies after the Seven Years War with France, which ended in 1763. The object of this essay is to give a history lesson. This lesson has been lost, but provides an excellent example of what an oppressed and determined people can do to resist tyrannical government power and actions.
What did the colonists do? They did two very important things. They formed into secret organizations like the Sons of Liberty, and they forcibly resisted and nullified the Stamp Act. Yes, I said "nullify". This word makes statists the world over gasp with trepidation. Through the actions of the Sons of Liberty, protests, mass meetings, inflammatory news articles, and sometimes violence were employed to thoroughly disable and nullify the act. Many conspiracy theorists will also gasp and fret that the birth of the American Revolution was started by a secret society. Yes, the Sons eventually came out publicly, but even today we do not know their full membership. Let's examine some of their tactics.
Secret Meetings
In Boston, Newport, New York, New Haven, Ct, Savannah, Ga, Philadelphia and Charleston men calling themselves "Sons of Liberty" (after the name given to the colonists by Colonel Issac Barre in the British Parliament) organized themselves to resist the hated Stamp Act. Many of these men came from the upper classes, but a large section of them came from the colonial middle and lower classes. In these meetings they vowed to oppose the Stamp Act and prevent it from being enforced in America, effectively nullifying it. Stamp collectors were threatened, beaten, tarred and feathered, harrassed, and in some cases had their property destroyed. Many were made to sign pledges to refuse to collect the tax, and were threatened to be labeled "enemies to their country" if they didn't reject their new positions. Many Marxist historians, while praising the resistance of the Sons of Liberty, condemn them as rich white men who only cared about their own liberty. Of course in any mass movement there will be people who are myopic and concerned only with their own interests. To broadly paint the leaders of these secret societies as selfish only furthers the Marxist myth of class warfare. The fact is, no revolution can survive without leadership. This leadership generally comes from the upper and middle classes, and all revolutions up to our day have proven this. What revolutionary leaders cannot do is continue any revolution without the mass support of the populace. Let's examine this further.
Support of the Masses
When one truly examines the American Revolution it is apparent that it was a mass movement of the colonial population. Murray Rothbard, in his four volume history of the American colonies, Conceived in Liberty, details this in full. Men in the Sons of Liberty, Masonic Lodges, and colonial churches lead the charge, but it was the people who made the Revolution possible. From 1765 through 1776 the American people were subjected to increasing tyranny from the British establishment in America. Higher taxes, impressment of sailors, nepotism in the colonial governments, dual officeholding, enforcement of mercantilist laws, like the Navigation Acts, suspension of several legislatures, particularly New York and Massachusetts, and the keeping of a standing military in the midst of the civilian population all contributed to the restiveness of the colonial population. The Boston Tea Party, the burning of the British warship Gaspee in Rhode Island, tarring and feathering of royal officials, threats and protests against Stamp agents, are just a few examples of the actions of the people. The people were lead by men like Samuel Adams, Charles Thomson, Thomas Paine, Thomas Jefferson, Joseph Warren, John Adams, most of whom were members of secret societies like the Masons and Sons of Liberty. These men lead the populace in nullifying the power of the British government in America.
The Nullification of British Power
Throughout the period of the American Revolution, royal governors and officials routinely complained about the violence of the populace and how their authority was threatened by the revolutionaries. They recognized that their power was slowly evaporating. They saw laws like the Stamp Act repealed due to pressure and threats, the Townshend duties resisted by nonimportation agreements, mass meetings in defiance of law, and confrontations with soliders, like the Boston Massacre, and colonial assemblies asserting their power. This nullification movement was lead by secret societies like the Sons of Liberty, behind closed doors. Masonic lodges met and developed plans and agreements for their members to utilize for resistance. Leaders met in taverns and coffeehouses to discuss resistance measures and plot, yes plot, future actions. These combinations effectively nullified and eviscerated British power. We could learn from their examples. Americans should use non violent means to resist the following:
1) Any attempt to submerge the USA into a North American Union with Canada and Mexico
2) A war with Iran
3) Increased power for the UN or WTO
4) Continued abuse of eminent domain
5) Fascistic measures destroying American liberties
6) Any gun control legislation
7) Any attempt to increase the power of the federal government
8)Any attempt to institute a draft or civilian conscription
9) Any law or act that further restricts liberty
10)Any attempt by the federal government to suppress a secession movement within the USA
11) Further evisceration of our constitutional rights and liberties (particularly the 4th, 5th and 6th Amendments). The Bush Administration's attack on attorney-client privilege is particularly appalling.
I am in no way advocating any violence. I do not believe that we are at that stage. Non violent protest and action should always be a first step.
The New Stasi
The Stasi was the feared and ruthless secret police of the German Democratic Republic, or more appropriately, Communist East Germany. In America today the neocon rightwing and leftist groups are building a new despotism in our nation of liberty. In the growing power of the Federal government are the building blocks of a new Stasi, so to speak. The FBI, DIA, ATF, and DOJ are amassing great power through laws like the PATRIOT Act, The Real ID Act, and the definition of some American prisoners as "enemy combatants". People may laugh, joke or wave my comments aside as paranoia, but the building of this massive power structure is real. A new "Sons of Liberty" type movement is needed.
Liberty and freedom are not free. Both are typically destroyed by the overpowering hand of the state. It doesn't matter if you are rightwing, leftwing or libertarian. Our freedoms are ours to have, not government's to grant.
POSTED BY DL AT 7:58 AM
FRIDAY, JANUARY 18, 2008
Sunday, September 13, 2009
An Open Letter to President Obama
Dear President Obama:
You are the thirteenth President under whom I have lived and unlike any of the others, you truly scare me.
You scare me because after months of exposure, I know nothing about you.
You scare me because I do not know how you paid for your expensive Ivy League education and your upscale lifestyle and housing with no visible signs of support.
You scare me because you did not spend the formative years of youth growing up in America and culturally you are not an American.
You scare me because you have never run a company or met a payroll.
You scare me because you have never had military experience, thus don't understand it at its core.
You scare me because you lack humility and 'class', always blaming others..
You scare me because for over half your life you have aligned yourself with radical extremists who hate America and you refuse to publicly denounce these radicals who wish to see America fail.
You scare me because you are a cheerleader for the 'blame America ' crowd and deliver this message abroad.
You scare me because you want to change America to a European style country where the government sector dominates instead of the private sector.
You scare me because you want to replace our health care system with a government controlled one.
You scare me because you prefer 'wind mills' to responsibly capitalizing on our own vast oil,coal and shale reserves.
You scare me because you want to kill the American capitalist goose that lays the golden egg which provides the highest standard of living in the world.
You scare me because you have begun to use 'extortion' tactics against certain banks and corporations.
You scare me because your own political party shrinks from challenging you on your wild and irresponsible spending proposals.
You scare me because you will not openly listen to or even consider opposing points of view from intelligent people.
You scare me because you falsely believe that you are both omnipotent and omniscient.
You scare me because the media gives you a free pass on everything you do..
You scare me because you demonize and want to silence the Limbaughs, Hannitys, O'Reillys and Becks who offer opposing, conservative points of view.
You scare me because you prefer controlling over governing.
Finally, you scare me because if you serve a second term I will probably not feel safe in writing a similar letter in 8 years.
Lou Pritchett
Former Vice President
Procter and Gamble
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