Just 93 Million Full Timers in Private Sector Now Form the Tax Base for 53 Million Social Security Recipients

Some of the latest grim facts about Social Security, as reported here:

[T]otal revenue from Social Security taxes in 2010—$544.8 billion—was not enough to cover Social Security’s total benefit payments—$577.4 billion. ...

The Social Security board of trustees reported that there were 53.398 million Social Security beneficiaries in 2010. ...

93.641 million full-time private sector workers were the foundation of the tax base that supported both government at large and Social Security in particular.

Year Over Year GDP Declines From 1900 to 1949

1904 $  0.23 billion (1903 level exceeded in 1905): 3 years/a decline of less than one percent

1908 $  3.75 billion (1907 level exceeded in 1911): 5 years/a decline of eleven percent

1914 $  2.62 billion (1913 level exceeded in 1916): 4 years/a decline of less than seven percent

1921 $14.79 billion

1922 $  0.20 billion (1920 level exceeded in 1925): 6 years/a decline of almost seventeen percent

1927 $  1.40 billion (1926 level exceeded in 1928): 3 years/a decline of less than two percent

1930 $12.40 billion

1931 $14.70 billion

1932 $17.80 billion

1933 $  2.30 billion

1938 $  5.80 billion (1929 level exceeded in 1941): 13 years/a decline of over forty-five percent through 1933 with an additional six percent drop in 1938 relative to 1937

1946 $  0.80 billion (1945 level exceeded in 1947): 3 years/a decline of less than one half percent

1949 $  1.90 billion (1948 level exceeded in 1950): 3 years/a decline of less than one percent

Current revisions to GDP for 2008 and 2009 show declines of 0.3 percent and 3.5 percent, respectively, making the severity of the GDP decline most like 1938, though still not yet as severe.

Depression of 2008-2009 Comparable to 1938 in GDP Decline

Obama's Transformational Change of US Nuclear Weapons Posture Means We're Inviting Attack By Terrorists

From the source:

"[T]he United States will not use or threaten to use nuclear weapons against non-nuclear weapons states that are party to the NPT [Non-Proliferation Treaty] and in compliance with their nuclear non-proliferation obligations. ...

"The United States would only consider the use of nuclear weapons in extreme circumstances to defend the vital interests of the United States or its allies and partners.

"[T]he United States affirms that any state eligible for the assurance that uses chemical or biological weapons against the United States or its allies and partners would face the prospect of a devastating conventional military response – and that any individuals responsible for the attack, whether national leaders or military commanders, would be held fully accountable." (italics added)

Biggest Applause Lines From September 7, 2011 Republican Debate

"We should make English the official language of government."

-- Rep. Newt Gingrich

"But in the state of Texas, if you come into our state and you kill one of our children, you kill a police officer, you're involved with another crime and you kill one of our citizens, you will face the ultimate justice in the state of Texas, and that is, you will be executed."

-- Gov. Rick Perry

Full transcript here at The New York Times.

Reminiscent of Michael Savage's themes of borders, language and culture.

EU Crisis: PIIGS' Bankruptcy Could Dwarf Lehman's By Nearly Three Times

Phase One, in which Doris gets her oats, is now over.

Time to save your money. You're going to need it.

Carl Weinberg, the chief economist at High Frequency Economics is very worried about Europe. His central forecast is that the debt crisis will lead Europe into a depression that will mean soaring unemployment, deflation and zero interest rates for the foreseeable future.

After months of inaction, Weinberg believes the time to stop a Greek default has now passed. He believes that once it becomes clear that Greece has defaulted, the market will quickly come to the realization that other euro zone members like Portugal, Ireland, Spain and Italy will be allowed to fail as well.

With the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain) sitting on 3 trillion euros in debt, Weinberg is assuming losses could ultimately hit 50 cents in the euro, leading to a 1.5 trillion euro hit to the financial system.

This will in Weinberg’s opinion force banks to stop lending. Governments will then be forced to bail them out, elevating debt-to-GDP ratios for national governments to "horrific levels".

Read the full story here.

Hey al Qaeda! Happy Anniversary, You Rag-Headed Heathen Bastards!

West Texas Intermediate Crude Oil Up 200 Percent Since 911

(source)

Ten Years of the S and P Since 911: Up a Paltry 6.3 Percent

The Shiller S and P 500 Price to Earnings Ratio Stands at 19.84

As reported here.

1974 to 1984 was one hell of a buying opportunity by comparison.

Unmanned Drone

h/t Steyn

The New York Times Notices Sarah Palin Now Speaks Their Language

Here, where hope springs eternal:

Ms. Palin’s third point was more striking still: in contrast to the sweeping paeans to capitalism and the free market delivered by the Republican presidential candidates whose ranks she has yet to join, she sought to make a distinction between good capitalists and bad ones. The good ones, in her telling, are those small businesses that take risks and sink and swim in the churning market; the bad ones are well-connected megacorporations that live off bailouts, dodge taxes and profit terrifically while creating no jobs.

Strangely, she was saying things that liberals might like, if not for Ms. Palin’s having said them.

“This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk,” she said of the crony variety. She added: “It’s the collusion of big government and big business and big finance to the detriment of all the rest — to the little guys. It’s a slap in the face to our small business owners — the true entrepreneurs, the job creators accounting for 70 percent of the jobs in America.”

Is there a hint of a political breakthrough hiding in there?

Honey! I Shrank The Workforce!

Employed in January 2009: 142 Million. Employed in July 2011: 139 Million.

So Jim Powell, here, who says the private sector also has shrunk:

According to the U.S. Bureau of Labor Statistics, there are fewer people employed now than back in January 2009 when Barack Obama was sworn in as President, and there are more people unemployed now than in January 2009.

Back then, a reported 142 million people had jobs. In July 2011, 139.2 million people had jobs.

In terms of employment, the private sector is smaller now than when Obama was sworn in. In January 2009, 110.9 million people were working in the (nonfarm) private sector, but by July 2011 there were only 109.9 million - despite the larger U.S. population in 2011.

Of Course It's Class Warfare!

And of course he's an ideologue, and of course Obamacare is a Bolshevik plot.

And of course whatever he says is not something, is that, and of course whatever he says something is, is not that.

Here's the video.

YOU LIE!

Arizona Power Company Employee at North Gila Substation Causes Massive Outage in San Diego

Oops:

"The outage was triggered after a 500-kilovolt (kV) high-voltage line from Arizona to California tripped out of service. The transmission outage cut the flow of imported power into the most southern portion of California, resulting in wide-spread outages in the region," according to Cal ISO. ...

The Arizona power company APS said the outage appears to be related to a procedure an employee was carrying out in the North Gila substation, located northeast of Yuma, Ariz. Operator error was determined to be the initiating event.

Operating and protection protocols typically would have isolated the resulting outage to the Yuma area. The reason that did not occur in this case will be the focal point of the investigation, which is underway.

More here.

Who needs terrorists when home grown incompetence will do?

'Social Security's Long-Term Shortfall Grows About $1.2 Trillion Annually'

And by "long-term" the meaning is about 18 years.

So said Dennis Cauchon late in the spring for USA Today, here:

Social Security's long-term shortfall grows about $1.2 trillion annually — a sign of an imbalance between the number of young workers and older beneficiaries, according to the Social Security trustees' annual reports. The $21.4 trillion unfunded liability represents the difference between all taxes that will be paid and all benefits received over the lifetimes of everyone in the system now — workers and beneficiaries alike. This is the measure corporations and insurance companies use to assess financial adequacy of their retirement programs.

What this means is that this year and every year for the next two decades or so social security will be in the red annually to the tune of about $1.2 trillion, and government will have to borrow the funds to pay for that annual deficit spending.

Put another way, the social security scheme is a Ponzi scheme writ large. The pool of early fools putting up the dough for the few early, and very lucky, investors has now dried up so much that the program will run in deficit mode annually going forward, just like the rest of government has for years.

This will add significantly to the national debt, driving up interest payments on that debt and severely crimping the government's other spending options without massive injections of new revenues, aka higher taxes on the people.

In the short term, the $2.6 trillion in the social security trust fund (intragovernmental debt) would disappear in relatively short order under this analysis, say roughly in just over two years from now, except that the monies are invested in a mix of shorter and longer US Treasury securities which will reach maturity over a more or less longer period of time and thus force the program into deficit much sooner because redemptions are barred, compounding the pressure on the availability of funds for current year government spending.

You Own Treasuries. So Does The Social Security Trust Fund.

You'll find it classified under the debt government owes to itself, so to speak, otherwise called intragovernmental debt, which today totals about $4.6 trillion.

Of that, $2.6 trillion is money borrowed from the social security trust fund, money the government has borrowed to spend for other purposes and thus owes back to the social security program.

Social security takes in roughly what it expends of late, but whenever receipts do not match expenditures, it becomes necessary to cash in a treasury instead of re-investing it in more treasuries as it comes due.

So there really is no pile of cash in safe-keeping for social security. Instead there's a pile of IOU's, backed by the full faith and credit of the United States the printing presses of the US Department of the Treasury.

Governor Perry is correct when he says social security is a Ponzi scheme. 

Ben Bernanke: Clueless on the Consumer Because His Housing Data Are Not Current

From his speech today to the Economic Club of Minnesota:

One striking aspect of the recovery is the unusual weakness in household spending. After contracting very sharply during the recession, consumer spending expanded moderately through 2010, only to decelerate in the first half of 2011. The temporary factors I mentioned earlier--the rise in commodity prices, which has hurt households' purchasing power, and the disruption in manufacturing following the Japanese disaster, which reduced auto availability and hence sales--are partial explanations for this deceleration. But households are struggling with other important headwinds as well, including the persistently high level of unemployment, slow gains in wages for those who remain employed, falling house prices, and debt burdens that remain high for many, notwithstanding that households, in the aggregate, have been saving more and borrowing less. Even taking into account the many financial pressures they face, households seem exceptionally cautious. Indeed, readings on consumer confidence have fallen substantially in recent months as people have become more pessimistic about both economic conditions and their own financial prospects.

Here's the Fed's House Price Index on 8/24/11, which shows prices at late 2004 levels:

The fact is, prices have fallen to 1999 levels and may continue to fall to 1997 levels and perhaps lower than that:

Bernanke doesn't understand the severity of the home equity massacre which the consumer has sustained since 2006. That was the primary source of wealth for the vast majority of Americans, and Bernanke doesn't get that a whole decade of gains has been wiped out. His own data are off by five years.

Everyone hangs on every word of the Fed. "Don't fight the Fed" they say. Too bad the Fed doesn't know what it's talking about.

Obama's Army Kidnaps Guards, Destroys Property at Port of Longview, WA

Hoffa incited unions to violence on Monday here in Michigan, saying “President Obama, this is your army, we are ready to march. Let’s take these sons of bitches out,” and already union thugs are mixing it up before the week is out, in Washington State.

Story here:

Hundreds of Longshoremen stormed the Port of Longview early Thursday . . .

Six guards were held hostage for a couple of hours after 500 or more Longshoremen broke down gates about 4:30 a.m. and smashed windows in the guard shack . . .

Most of the protesters returned to their union hall after cutting brake lines and spilling grain from car at the EGT terminal . . .

One sergeant was threatened with baseball bats and retreated . . .


When is the Department of Homeland Security going to put unions on its list of home grown terrorist threats?

'I have abandoned free market principles to save the free market system'

"You know I feel a sense of obligation to my successor to make sure there's not a -- you know, a huge economic crisis.

"Look. I obviously have made a decision to make sure the economy doesn't collapse. I have abandoned free market principles to save the free market system. Having said that, I'm very confident that with time the economy will come out and grow and people's wealth will return."

-- George W. Bush, December 2008, here and here

'It became necessary to destroy the town to save it'

"'It became necessary to destroy the town to save it,' a United States major said today. He was talking about the decision by allied commanders to bomb and shell the town regardless of civilian casualties, to rout the Vietcong."

-- Peter Arnett, The New York Times, February 1968, cited here

'We had to save the banks in order to sue them'

Jonathan Weil gets off a good one here, concluding how ridiculous was bailing out the banks in the first place:

The government has so many conflicting agendas, we may never get satisfactory answers to those questions. All of this is part of the legacy of the unprecedented federal interventions in 2008, as well as a reminder of what a colossal mistake it was in the first place to create Fannie and Freddie with all their privatized profits and socialized losses.

The proper role of government in a free-enterprise system is to police market participants at arm’s length, not join their ranks and choose winners and losers. That’s a line we crossed a long time ago, though. The great outrage isn’t that a federal agency is suing some of these too-big-to-fail banks for damages. It’s that we ever bailed them out at all.

None dare call it fascism, though, not even Jonathan Weil.

Angela Merkel Believes in Magic, Which is a Very Bad Sign For Us All

As reported here, by Ambrose Evans-Pritchard:

Chancellor Angela Merkel said the ruling validated her rescue policies, and once again vowed to do whatever it takes to ensure the survival of monetary union.

"History has shown that countries with a common currency never wage war against one another, and that is why the euro is far more than just a currency. If the euro fails, Europe fails. It must not fail, and will not fail," she said in an emotional speech.

This faith in a mere currency construct is the same sort of faith neo-conservatives in America have in the political-economic construct known as democracy, the chief article of which faith is that democracies don't make war on democracies. Nevermind that Washington, DC, has been at war with the fifty united States since the American War Between The States. And make no mistake about it . . . that war has not been won even yet, otherwise there would be no such thing as a Tea Party.

If and when that war is won and the Tea Party disappears, the rest of the world should be afraid. Very afraid. For that is when you will discover that democracies have always gone to war to survive.

Long live The Republic.

Democracy? Not so much.

Liberals Love Progressive Taxation. Progressive Tax Deductions? Not So Much.

Peter Orszag for Bloomberg here likes the idea of flat tax deductions for some reason, but not flat taxes.

Maybe it's because such equality in deductions would increase the taxes paid by the top 25 percent of taxpayers, who already contribute the vast majority of the government's revenue. Orszag sees no reason why a person in the top marginal tax bracket should have his taxes reduced at that marginal rate by a deduction for a 401K contribution, or a mortgage interest payment, or a donation to charity. He wants the deduction to be a flat deduction for everyone, regardless of income, which sounds to me like an admission that there's something actually immoral about progressivity in the tax code.

Sounds like progress to me, the logical implication of which is that the tax rate also should be one flat rate for all.

In the meantime it remains that "tax reform" is to "progressive" as "tax increase" is to "liberal." The name has been changed to disguise the guilty.

Citigroup VP Pleads Guilty to Embezzling Millions Between '03 and '10

And he's only 35 NOW, according to this story:

A former vice president for Citigroup pleaded guilty Tuesday to embezzling more than $22 million from the company and funneling the money to his personal bank account.

Gary Foster, 35, pleaded guilty to bank fraud, admitting that he took the money between 2003 and 2010. He appeared in U.S. district court in Brooklyn before Judge Eric Vitaliano.

Obama Doesn't Give a Damn About Your Right to Privacy

Obama has allowed a privacy oversight board within his own appointment power to languish. Clearly he prefers a culture of unchecked surveillance of American citizens.

The Privacy and Civil Liberties Oversight Board, established in the wake of The Patriot Act to help protect Americans from Executive Branch abuses of their Fourth Amendment protections, has been the last thing on President Obama's mind since he got elected.

While Obama did name a privacy officer for the Department of Homeland Security, the president has so far failed to nominate a quorum for a Congressionally-mandated oversight board to track civil liberties issues government-wide.

So says Politico here today, but just as an aside in a story about the invasive procedures of the TSA as sensationalized by Drudge.

OMB Watch here a few months ago stated the issue of Obama's utter indifference much more accurately:

All five seats on the board are now vacant. President Obama nominated two members in December 2010, but even if confirmed they would not have a quorum to conduct business. The board has been inactive since 2008 due to vacancies.

We called attention to the issue of Obama's circumvention of this board over a year and a half ago here, based on reporting from Eli Lake for The Washington Times.

Obama may be a doctrinaire leftist ideologue, but more of the Leninist and Stalinist variety, in which the personal advantage for Der Fuehrer of spying on American citizens trumps the principles of the revolution.

And you dopes believed in the guy. 

Under Obama 15 Percent Unemployment or Greater for 31 Months Straight

(source)

Obama Decides It's Time To Imitate Failure and Put 'Country First'

In Cannon Falls, Minnesota, in August, as quoted here:

"You've got to send a message to Washington that it's time for the games to stop, it's time to put country first."

Gee, I wonder where he got that idea?

Let's see now, he stole "Yes We Can" from Bob the Builder.

And then there was this: "The same thing that swept Scott Brown into office swept me into office."


Hm. Interesting pattern.

Maybe that's why the lid remains slammed down tight on his academic record. 

Attorneys General of Just Four States Oppose $20 Billion Get Out Of Jail Card For Banks

And rightly so. Absolving the banks from further litigation in the robosigning and securitization scandal for such a paltry sum would be like getting away with murder.

For more, see here:

If banks are released from liability regarding documentation practices, some industry officials believe they would be able to evade state lawsuits directed at how they bundled the loans into securities.

The attorneys-general of New York, Delaware, Massachusetts and Nevada are probing such securitization matters, and have already indicated to the other states that they did not agree with the counterproposal.

Catherine Cortez Masto, Nevada’s legal officer, last week charged Bank of America’s Countrywide unit with failing to properly transfer mortgages into the trusts that issued securities to investors, and for fraudulently pursuing home seizures anyway. New York’s Eric Schneiderman has indicated his office has reached similar findings.

First We're Extremists, Then Hobbits, Terrorists and Hell Bound. And Now? Sons of Bitches.

So says Jimmy Hoffa.

Here.

Evidently only union people are workers. The rest of us . . . not so much.

And sorry, my mother was married to my dad.

It's nice that they want to take us out, though. I'd enjoy lunch anytime, just not with you.

Up Until February 2010, Sarah Palin Was A TARP Republican

Many have pointed out Gov. Sarah Palin's hypocrisy on the bailouts, especially after her book Going Rogue appeared in late 2009, which codified her support of the extraordinary measures of 2008. I documented her statements supporting the bailouts, here and here.

With a speech in February 2010, however, she made news not just because she chose to give the speech in a Tea Party venue instead of at CPAC, but because she basically flip-flopped on the issue of the bailouts just months after her book had appeared.

Someone had straightened her out in the interim.

I'm actually not surprised by this shape shifting behavior, but it disqualifies her in my mind as much as the same sort of flip-flopping disqualifies a Mitt Romney or Tim Pawlenty, or even a Rick Perry. Turning currents seem to sweep people one way and then another regardless of gender these days.

The trouble, however, is that Bush was for TARP, Paul Ryan was for TARP, Nancy Pelosi was for TARP, John Boehner was for TARP, Sen. Reid was for TARP, Sen. McConnell was for TARP, Sen. Obama was for TARP, Sen. McCain was for TARP, and so was Sarah.

They're all responsible for interfering deeply and dangerously with the free exercise of the markets at a critical time when we most needed our leaders to trust in the ability of capitalism to prove its superiority to socialism, to fascism and to communism. And they all blinked.

It was a horrible failure of nerve. Many acted out of fear. And many acted out of fear of the money they would lose.

The latest speech in Iowa yesterday is a diatribe against the bailouts, against crony capitalism, and against the entrenched interests in Washington, DC. You can read the full transcript here and make of it what you will.

It doesn't mention the banks or TARP per se, just "big finance" and Wall Street. That the public/private nexus of banking is at the heart of the mortgage debacle is nowhere in evidence, which inspires zero confidence that Sarah Palin knows anything about the correct way forward. 

As a solution to our many problems the speech expresses a naivete about human nature which would be breathtaking if it came from an actual statesman, say, a Margaret Thatcher. In point of fact, Sarah Palin is as sanguine about the prospects of cleaning house as Barack Obama is about perfecting our union. Just get a new team in there and make them accountable, that'll fix it.

As if there are human beings in our world who are not corruptible. 

If we really wanted a resurrection of the spirit of the founding era, it would begin with a deep suspicion of human nature and a construction of policies and institutions meant to check it as a matter of first importance. Republican enthusiasm to overturn Glass Steagall was an expression of the opposite. As a Christian Sarah Palin should know better.

As it is, the notion that good and evil dwell mixed up together in each of us might as well be an item of organic chemistry, Latin grammar or Greek philosophy. It is incomprehensible to the current generation who seem to retain boundless faith in the essential goodness of human nature, or at least of the human nature of their particular tribe.

Whether Republican or Democrat, however, this makes them all creatures of the left, including Sarah Palin.

To which I say, No, thanks.

The response from the right would be that human nature is essentially evil (David Mamet), and thus requires either theocracy or monarchy, or from the center that human nature is mixed and requires a mixed polity such as the founders bequeathed to us in the form of the constitution. The latter is classical liberalism, a kind of half-way house, and true moderation! Think gray-heads marching in the streets, but without the litter.

This is the Tea Party, a form of reactionary conservatism trying to recover a classical liberalism which looks ever smaller in the rear view mirror with every passing day. The brave new world lies dead ahead if they do not succeed.

And I do mean dead.

Shiller S and P 500 Price to Earnings Ratio Stands at 20.18 as of 09.02.11

Track it here:

Buttonwood provides a defense of it here.

Obama Voted For The Bush Policies He Still Blames Today

As memorialized here in Obama's vote for Bush's TARP bailout a month before he was elected president:

Sheila Marikar of ABC News Thinks 'Bona Fide' Comes From 'Bonify'

What a scream, here:

Call it a "Marikarism".

As I clicked on it, she fixed it, too!

Evidence That Treasury Bill Financial Collateral Has Dried Up in Europe

From a recent column by Ambrose Evans-Pritchard:

Lars Tranberg from Danske Bank said European banks are reduced to borrowing dollar funds for "a week at a time" rather than the usual six to 12 months. "This closely resembles what happened in late 2008 . . .."

It's a run on the primary short-term funding money of the 21st Century, and T-bill yields have gone deeply south to prove it as demand for them increases: 14 day yields are at .005.

21st Century Bank Runs are Runs on Treasury Bills, Not Dollars

Jeffrey Snider explains their role as the new prime financial collateral, here, and why Quantitative Easing slowed the velocity of this new money by reducing their supply:

It is operationally no different than a 1930's bank experiencing a run on its stock of national currency. The lower that level of real money gets, the shakier the perception of the bank becomes, the more counterparties continue the cycle of real money removal - physical dollars in 1930, rehypothecated collateral in 2011. The perception of risk becomes reality, and this may be exactly what is playing out today as banks with questionable exposures to PIIGS have seen their abilities to operate in wholesale money markets dwindle into this current crisis.

Bret Easton Ellis Invented Obama, Too: Just as Rich, Stupid and Narcissistic as They Come

Details: Your critique of society now seems way ahead of the curve. In a way, you invented Paris Hilton and Spencer Pratt and the Kardashians.

Bret Easton Ellis: All of whom I really like a lot, except Paris. But I actually like the Kardashians. I'd like to hang out with Rob Kardashian. I think he's a nice young man. Of course, if you watch that show, you get why people want to blow us up.

Details: Who's "us"?

Bret Easton Ellis: America! But I don't care. I like the show.

Details: Years ago people could have read some of your books and said, "Oh, this is just nihilism. These people don't exist! There's nobody that rich and stupid and narcissistic!"

Bret Easton Ellis: Ha ha ha! Surprise!

(source)

Actually, Obama is Less Than Zero

"In fact, in some ways the report was less than zero in that weekly hours fell, as did hourly earnings."

-- Heidi Shierholz, quoted here

Net Zero Jobs Created in August, First Time Since World War Two

As reported here:

It was the first time since World War II that the economy had precisely net zero jobs created for a month. ...

[J]ob creation in July, which originally came in better than expected, actually wasn't as good as thought. The 117,000 jobs originally announced was cut to 85,000, while June's number fell from 46,000 to a mere 20,000. That makes four consecutive months of sub-100,000 job growth when most economists believe that 150,000 is the minimum number needed to reduce the unemployment rate meaningfully.

"Though much attention is being paid to ‘zero job growth’ in August, the real news in today’s numbers is that job growth is worse than in recent months, and the nation continues to produce far fewer jobs than needed to meaningfully reduce the unemployment rate," Heidi Shierholz, economist at the Economic Policy Institute in Washington, D.C., said in a statement. "In fact, in some ways the report was less than zero in that weekly hours fell, as did hourly earnings."

Average hourly earnings slid 3 cents to $23.09 while average weekly hours edged lower to 34.2.

Headline unemployment remains at 9.1 percent. The broader measure is at 16.2 percent, while the number of unemployed persons not counted in the numbers actually grew significantly.

Follow the link for all the details.

The UK Depression is Huge, But the Response is a Shrug of the Shoulders

So says Martin Wolf for The Financial Times, quoted here:

For the present depression to be shorter than its longest predecessor, it must end not later than April 2012. But output is close to 4 percent below its starting point, with eight months to go. ...

The cumulative loss of GDP is likely to be worse this time even than in the 1930s. It was 17.7 percent of GDP back then, against 14.5 percent, this time, so far. But this depression is not over. If growth were to be 2 percent a year, the cumulative loss would be over 18 percent of GDP.

This then is a huge depression, by UK standards. Yet the response is a shrug of the shoulders.

In America we can't bring ourselves even to speak of 'economic depression,' so deep is our collective delusion caused by the widespread gnosticism of political correctness.

The United States has had back to back years of declining GDP in 2008 and 2009, followed by a mere balance sheet recovery in 2010 defined entirely by massive government spending. With the latter now nearly at an end, GDP is in the toilet.

The answer of the Democrats is to propose more fake GDP. And unfortunately for the Republicans, they're stuck with their free-trade religion which has misallocated hundreds of billions of dollars abroad, especially to China, and with it all our jobs.

Where are the Patriots?

Black Indiana Democrat Calls The Kettle Pot

Rep. Andre Carson (D, IN-7), quoted here:

"We have seen change in Congress. … The Tea Party is stopping that change."

"This is the beyond symbolic change. This is the effort that we are seeing of Jim Crow. Some of these folks in Congress would love to see us as second class citizens. Some of them in Congress of this Tea Party movement would love to see you and me … hanging on a tree."

You mean like this, Andre?

The Rep. from Indiana just won't let go of his animus, made famous by his baseless charges about racial epithets hurled at him in the wake of the passing of ObamaCare.

He was the very guy who was strutting in defiance with Speaker Pelosi through the crowd of protestors after passage of the legislation in March 2010. It got hot, but no one ever proved such epithets were directed at him or any other black member of Congress that day.

Even Adjusted For Inflation, Social Security Taxes Have Gone Up 800 Percent Since Inception

So figures Michael Tanner, here:

In fact, Social Security taxes have been raised some 40 times since the program began. The initial Social Security tax was 2 percent (split between the employer and employee), capped at $3,000 of earnings. That made for a maximum tax of $60. Today, the tax is 12.4 percent, capped at $106,800, for a maximum tax of $13,234. Even adjusting for inflation, that represents more than an 800 percent increase.

Unintended Consequences: Economic and Monetary Union 'is Turning Europe's Nations Against Each Other'

So Ambrose Evans-Pritchard here, writing about Hans-Olaf Henkel's remarks in the Financial Times:

Hans-Olaf Henkel, former head of Germany's industry federation (BDI), wrote in the Financial Times that his support for the euro had been "the biggest professional mistake I have ever made". He described EMU as an unworkable experiment that is turning Europe's nations against each other.

American Money Market Funds Pull Back Amid Growing Distrust of Europe

Jon Markman reports on one of the negative feedback loops threatening another credit crash as observed by Satyajit Das, here:

American money market funds, which manage around $1.6 trillion, historically invested around 40 percent, or $600 billion to $700 billion, with European financial institutions. Over the last few months, the money market funds have reduced their exposure to European entities. The funds have also decreased the term of their loans to the European entities that they are willing deal with to as little as seven days at a time, in an effort to limit risk, Das said.

What if This Time is Different, But Not in the Good Way?

Jeff Nielson argues here that the desperate efforts of governments everywhere, but especially in the US, to disallow a deflationary collapse are motivated by fear of actual insolvency, not mere deflation:

A solvency crisis is an economic nightmare several orders of magnitude worse than a mere deflation. In a solvency crisis, "deflation" implies nothing less than bankruptcy. This is why our intellectually bankrupt central bankers have refused to allow deflation to take hold in our economies. Our economies are saturated with bad debt, and when this bad debt is eventually purged from our economies, our economies will default on their debts. Period. ...

In an ordinary deflation, "cash is king" (even arguably worthless paper currencies). However, in a solvency crisis "cash is trash" unless that cash is directly backed with precious metals.

Why is Michael Lewis a Kraut-hating Bigot?

Scott Locklin wants to know, here:

Michael Lewis attempts to get to the bottom of the German side of the financial crisis. This is an interesting and tremendously important subject. Why? Because Germans didn’t have a financial crisis. This, despite the fact that the German Landesbanks were the counterparties in a good fraction of the printing of shitty bonds (aka, Germans own a lot of the worthless bonds printed up by American banks). This despite the fact that the Germans own a bunch of shitty Greek government paper. This despite the fact that Germany was incinerated and invaded in WW-2, and half her territory and a third of her population incarcerated under communism until 1989. Yet, Germany is a prosperous and pleasant nation to live in; one of the best in the world. Germany manages to have lower unemployment than the US, despite all their unions and socialistic regulations for hiring and firing: laws which Harvard economist ding a lings will insist would be the ruination of the American economy. How did the Germans manage this?

Michael Lewis doesn’t know; he’s too busy making turd jokes. 

On the Myth of the Peaceful, Unsuspecting and Unprepared Great Britain in 1911

"To say that Sir E. Grey, and à fortiori Mr. Asquith, the Prime Minister; Lord Haldane, the Minister for War, whose own book has been a most tremendous let-down to the fictions of the propagandists; Mr. Winston Churchill, head of the Admiralty, who at Dundee, 5 June, 1915, declared that he had been sent to the Admiralty in 1911 with the express duty laid upon him by the Prime Minister to put the fleet in a state of instant and constant readiness for war; to say that these men were taken by surprise and un-prepared, is mere levity."

Albert Jay Nock, The Myth of a Guilty Nation, 1922, here

All Housing Price Appreciation in the Last Decade is Now Gone

So says Calculated Risk Blog here:

In real terms, the National index is back to Q3 1999 levels, the Composite 20 index is back to September 2000, and the CoreLogic index back to May 2000. 

In real terms, all appreciation in the last decade is gone.

But there is still considerable room to drop before all excesses of the bubble, which began its inexorable rise in 1997 coincident with the provisions of the Tax Payer Relief Act of 1997, are expunged. The only question is, How much will prices overshoot to the downside of those 1997 levels?

"The act exempted from taxation the profits on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This is for residences that were lived in for at least 2 years over the last 5." (source)

I am not convinced that the bottom is in.

Barackukakis

(source)

The Gutsy One (in the background)

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.

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"