Broader Measure of U.S. Unemployment Stands at 17.5% reports The New York Times.
More than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.
This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.
The official jobless rate — 10.2 percent in October, up from 9.8 percent in September — remains lower than the early 1980s peak of 10.8 percent.
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With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.
Chart from Innocent Bystanders
Via American Thinker comes this graph of the day showing the extraordinary fossil fuel energy resources the United States has - more than Russia, Saudi Arabia, Iran, Iraq, Venezula and Canada. The figures are sourced from this Congressional Research Service report released last week.
Randall Hoven pulls out these statistics from that same report.
Total fossil fuels (oil, coal, natural gas) reserves of the US, in Barrels of Oil Equivalent: 1,321.3 billion BOE.
US consumption of fossil fuels in 2008: 14.8 billion BOE.
Earlier this week Daniel Yergin in the WSJ wrote about America's Natural Gas Revolution
Yet the natural gas revolution has unfolded with no great fanfare, no grand opening ceremony, no ribbon cutting. It just crept up. In 1990, unconventional gas—from shales, coal-bed methane and so-called "tight" formations—was about 10% of total U.S. production. Today it is around 40%, and growing fast, with shale gas by far the biggest part.
The potential of this "shale gale" only really became clear around 2007. In Washington, D.C., the discovery has come later—only in the last few months. Yet it is already changing the national energy dialogue and overall energy outlook in the U.S.—and could change the global natural gas balance.
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With more drilling experience, U.S. estimates are likely to rise dramatically in the next few years. At current levels of demand, the U.S. has about 90 years of proven and potential supply—a number that is bound to go up as more and more shale gas is found.
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A 'shale gale' of unconventional and abundant U.S. gas is transforming the energy market.
The Wall St Journal calls it The Worst Bill Ever
In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.
Yet at this point, Democrats have dumped any pretense of genuine bipartisan "reform" and moved into the realm of pure power politics as they race against the unpopularity of their own agenda. The goal is to ram through whatever income-redistribution scheme they can claim to be "universal coverage." The result will be destructive on every level—for the health-care system, for the country's fiscal condition, and ultimately for American freedom and prosperity.
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Mr. Obama rode into office on a wave of "change," but we doubt most voters realized that the change Democrats had in mind was making health care even more expensive and rigid than the status quo. Critics will say we are exaggerating, but we believe it is no stretch to say that Mrs. Pelosi's handiwork ranks with the Smoot-Hawley tariff and FDR's National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated.
Annual Medicare Fraud: $60 Billion; Annual Profits of Top Ten Insurance Companies: $8 billion
As 60 Minutes reported last week, Medicare fraud is rampant and has now replaced the cocaine (ahem) business as the major criminal activity in South Florida
House Republicans Find 111 New 'Bureaucracies' in Health Care Bill
Among some off the new agencies, the list cites a Health Insurance Exchange; the Center for Medicare and Medicaid Innovation; the Public Health Investment Fund; the Public Health Workforce Corps; an Assistant Secretary for Health Information; the Food and Drug Administration Office of Women's Health; grant programs for alternative medical liability laws, infant mortality programs and other issues; and about 100 other government-sponsored creations.
26 reasons to oppose Pelosi's health care bill, H.R. 3962. Here are a few:
• Permits federal taxpayer funding of abortion services, above and beyond the status quo of current law.
• Provides for a "health care czar" called the Health Choices Commissioner, who could forcibly enroll individuals in government-run insurance and whose tasks include requiring random compliance audits on Americans' health benefits plans.
• Allows for "community organizations" like ACORN and Planned Parenthood to assist the Health Choices Commissioner in enrolling individuals in the Health Insurance Exchange.
• Provides for 13 new and different tax increases, including an employer mandate excise tax.
• "Grandfathers" out of existence individual health insurance coverage.
• Retains the "death panels" by providing for bureaucrats working for a new comparative effectiveness institute funded by a tax on health benefits. The institute could publish the protocols needed to deny patients access to life-saving treatments on cost grounds.
• Contains NO ban on federal promotion of assisted suicide and/or health care rationing of treatments.
• Slashes Medicare payments to providers by more than $400 billion.
Using the English to 12-year-old -AOLer Translator, I've translated the above.
• P3RMITS FADARAL TAXPAEYR FUNDNG OF ABORTION S3RVIECS ABOVE AND BYOND DA STATUS QUO OF CURENT LAW
•!1111 PROVIEDS FOR A H3ALTH R CZAR CALED TEH H3ALTH CHOIECS COMISION3R WHO CUD FORCIBLEY ANROL INDIVIDUALS IN GOV3RNMANT-RUN INSURANC3 AND WHOS3 TASKS INCLUD3 RAQUIRNG RANDOM COMPLIANCE AUDITS ON M3RICANS H3ALTH BNEFITS PLANS
•!11!!11!! WTF ALOWS FOR COMUNITY ORGANIZATIONS LIEK ACORN AND PLANAD PAERNTHOD 2 ASIST TEH H3ALTH CHOIECS COMISION3R IN 3NROLNG INDIVIDUALS IN DA HAALTH INSURANCE 3XCHANGE
•!1!!! OMG WTF PROVIEDS FOR 13 NU AND DIFARENT TAX INCREAESS INCLUDNG AN 3MPLOY3R MANDAET EXCIES TAX
•!!1!! OMG WTF LOL GRANDFATHERS OUT OF EXISTANCE INDIVIDUAL HEALTH INSURANC3 COV3RAEG
•!1!1!1!1 WTF RETANES DA DEATH PAENLS BY PROVIDNG FOR BUREAUCRATS WORKNG FOR A NU COMPARATIEV EF3CTIEVNES INSTITUT3 FUNDAD BY A TAX ON HAALTH BN3FITS!!11!!!! OMG LOL TEH INSTITUT3 CUD PUBLISH DA PRO2COLS NEDAD 2 DANY PATEINTS ACES 2 LIEF-SAVNG TR3ATMENTS ON COST GROUNDS
•!1!1!1 WTF LOL CONTANES NO BAN ON FED3RAL PROMOTION OF ASISTED SUICIED AND/OR HAALTH R RATIONNG OF TRAATMANTS
•!1!1!11 SLASHAS R PAYMANTS 2 PROVIEDRS BY MORE THAN $40 BILION!!!11!!! WTF
I didn't know how JP Morgan Chase and Goldman Sachs made $6.8 billion in profit last quarter but then I read How Wall Street is making its billions.
the big investment banks are able to borrow money from the U.S. government at 0 percent interest. Then they can turn around and buy short-term bonds that pay 2 or 3 percent annual interest. Now they’re making 2 percent on whatever they borrowed....
Are they investing the money in American business? “No, they are mostly buying Treasuries.” So the money is just being shuffled from one Federal bank account to another, with each Wall Street bank skimming off $1 billion per month for itself? “Pretty much.”
via Kottke
In the Financial Post, Have we learned anything?
WHAT EXACTLY HAPPENED? How could overly enthusiastic homebuyers in the United States sink the global economy?
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The problem, however, was not that we had too few regulations; on the contrary, we had too many, and above all, faulty ones. Some readers may object that I am mainly quibbling about the meaning of words and fighting an ideological battle. You may have a point. Please feel free to call the problem whatever you like -- just so long as you are aware of what it consists of. Because what would be fatal would be for slogans about "insufficient regulation" to give rise to the idea that the crisis happened because the government was absent, and that the government must therefore intervene and regulate more to avoid a repeat.
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The problem is, we do not have a casino economy. To borrow a metaphor from child rearing, we have a "helicopter economy." Helicopter parents hover over their kids, preventing them falling and hurting themselves. This means their children never grow up and learn to see dangers for themselves. And for this very reason, such children will eventually fall in more serious and dangerous contexts instead, because risk is part of the human condition. The helicopter economy works in a similar way. The government hovers over the banks and investors, making sure they do not get hurt too badly (and cleaning up any messes they leave behind.) Whenever there is an accident, the benchmark rate is lowered, the central bank extends credit and taxpayers' money is pumped in. The players never learn to look out for risks; they just continue their reckless behaviour, and sooner or later they will fall off a ledge that they were not watching out for and pull us all down with them.
Capitalism without bankruptcy is like Christianity without hell -- it loses its ability to motivate humans to be prudent or respect their fears.
There should never be a company that's too big to fail.
Wouldn't this be great.
Energy crisis is postponed as new gas rescues the world
America is not going to bleed its wealth importing fuel. Russia's grip on Europe's gas will weaken. Improvident Britain may avoid paralysing blackouts by mid-decade after all.
The World Gas Conference in Buenos Aires last week was one of those events that shatter assumptions. Advances in technology for extracting gas from shale and methane beds have quickened dramatically, altering the global balance of energy faster than almost anybody expected.
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Rune Bjornson from Norway's StatoilHydro said exploitable reserves are much greater than supposed just three years ago and may meet global gas needs for generations.
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Tony Hayward, BP's chief executive, said proven natural gas reserves around the world have risen to 1.2 trillion barrels of oil equivalent, enough for 60 years' supply – and rising fast.
"There has been a revolution in the gas fields of North America. Reserve estimates are rising sharply as technology unlocks unconventional resources," he said.
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The US Energy Department expects shale to meet half of US gas demand within 20 years, if not earlier. Projects are cranking up in eastern France and Poland. Exploration is under way in Australia, India and China.
Texas A&M University said US methods could increase global gas reserves by nine times to 16,000 TCF (trillion cubic feet).
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Natural gas has much lower CO2 emissions than coal, even from shale – which is why the Sierra Club is backing it as the lesser of evils against "clean coal" (not yet a reality). The US Federal Energy Regulatory Commission said America may not need any new coal or nuclear plants "ever" again.
As boom- and bust-prone as high finance always has been and remains, the greatest systemic risk to our economy is not Wall Street. It's the growing federal debt (and weakening dollar) being enacted by those Washington politicians -- the ones who want to protect us from Wall Street.
It soon may be not a risk but a certainty of generations-long economic stagnation and hard times as a direct result of "unsustainable" and ever-growing national debt, driven by a federal budget almost half of which is to be paid for each year by borrowing money -- primarily from China -- and already weakening the dollar such that foreigners are trying to get rid of their dollars any way they can.
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And yet the same Congress and president who want to stop the banks from taking too much risk cannot stop themselves from ever more deficits. Indeed, so intoxicated -- nay, hypnotized! -- by debt is the current government that it is not even proposing to try to cut back.
Imagine if you had to spend 40% of all you earned on credit card interest. Not paying down your credit card debt, just paying the interest. How secure or hopeful would you feel about the future? Would you be looking to borrow more?
Yet, that's just the situation we're in.
In 2009, 40% of our income tax will go to pay interest on our national debt. Lawrence Kadish in Taking the National Debt Seriously writes that such debt makes our future unstable
unless Americans are made aware of this financial crisis and demand accountability, the very fabric of our society will be destroyed. Interest rates and interest costs will soar and government revenues will be devoured by interest on the national debt. Eventually, most of what we spend on Social Security, Medicare, education, national defense and much more may have to come from new borrowing, if such funding can be obtained. Left unchecked, this destructive deficit-debt cycle will leave the White House and Congress with either having to default on the national debt or instruct the Treasury to run the printing presses into a policy of hyperinflation.
It is against this background that Washington is now debating whether to create social programs it can't afford.
Even though no one can expect benefits under the proposed health care reform bill until 2013, cuts to Medicare and tax increases will take effect immediately, the AP reports.
By counting 10 years of Medicare cuts and tax increasing and only 7 years before and subsidies and benefits kick in, the cost looks lower than it really is.
Even more expensive will be health care premiums that individuals and families already pay -about $1700 a year to the cost of family coverage in 2013 said a study released today by Pricewaterhousecoopers.
At the heart of the argument is whether the Finance Committee bill does enough to draw young, healthy people into the insurance risk pool. By postponing and reducing penalties on people who do not sign up for health insurance, industry analysts predict it would attract less-healthy patients who would drive up costs.
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"Market reform enacted in the absence of universal coverage will increase costs dramatically for many who are currently insured by creating a powerful incentive for people to wait until they are sick to purchase coverage," the authors of the report wrote
Because the study was commissioned by the industry group America's Health Insurance Plans, and despite the obvious fact that all corporate audits are performed by outside independent auditors such as Pricewaterhousecoopers, the White House attacked the auditing firm and not the specifics of the report.
"Those guys specialize in tax shelters," said Nancy-Ann DeParle, director of the White House Office of Health Reform. "Clearly this is not their area of expertise."
From Powerline
I want to focus on just one feature of the Baucus plan that the PWC report addresses: the "weak mandate" to buy insurance, coupled with a strong requirement on the insurance industry that it insure everyone, regardless of pre-existing conditions or state of health. This combination will devastate the individual insurance market:
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PWC is stating the issue politely, to say the least. What is meant by a "weak mandate" is that, in the current version of the Baucus bill, there is no requirement to buy health insurance at all until after 2013, and by 2017 the penalty for failing to buy health insurance still amounts to only about 15% of the cost of the insurance. Now, think about it: if you know that you don't have to buy health insurance when you are young and healthy, but if you should get sick, or just get older, you can apply for health insurance at any time and it will be illegal for the insurance company to turn you down, what would you do? Obviously, you would defer buying insurance unless and until you get sick. This means that the pool of those who are insured will be lower quality, and the cost therefore higher for everyone who buys insurance. It is as though you could wait until you die, and then your heirs can buy life insurance on you.
This isn't reform, it is stupidity.
It actually would be very easy to make health insurance cheaper. All we have to do is allow insurance companies to compete nationally instead of state-by-state and eliminate all mandates that limit consumer choice. It has been estimated that these simple reforms--which are not part of any of the Democrats' "reform" bills, for obvious reasons--would reduce health care costs by one-quarter to one-third. Instead of such common-sense reforms, the Dems are proposing Rube Goldberg measures that will make health care more expensive. Instead of eliminating mandates, their measures, including the Baucus bill, increase them--in effect making cheaper health insurance illegal
Jennifer Rubin in Simple and Cheap points to Jeffrey Anderson who culled all the best Republican proposals for health care reform and put them on a single page.
1. Leave employer-provided insurance as it is and give individuals a $2,500 tax credit to equalize tax treatment for individuals who buy their own insurance.
2. Allow individuals to buy insurance across state lines.
3. Extend COBRA for up to 30 months, allowing people to keep their insurance if they leave a job.
4. Remove government regulations limiting insurers from offering premium breaks for healthy lifestyle choices.
5. Enact real malpractice reform (limit punitive damages to $250,000 and all noneconomic damages to $750,000).
6. Provide help to encourage insurance pools for the hard to insure.
Over 10 years Anderson’s plan would spend $75B and include $345M in tax cuts.
At least even Congressmen would be able to read the whole thing.
The Congressional Budget Office director told Senator Max Baucus that his
plan to cut $123 billion from Medicare Advantage—the program that gives almost one-fourth of seniors private health-insurance options—will result in lower benefits and some 2.7 million people losing this coverage.
Imagine that. Last week Mr. Baucus ordered Medicare regulators to investigate and likely punish Humana Inc. for trying to educate enrollees in its Advantage plans about precisely this fact. Jonathan Blum, acting director of a regulatory office in the Centers for Medicare and Medicaid Services (CMS), said that a mailer Humana sent its customers was "misleading and confusing to beneficiaries, who may believe that it represents official communication about the Medicare Advantage program."
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Meanwhile, we have the case of the Association for the Advancement of Retired Persons (AARP), and its fanciful Medicare claims. The self-styled seniors lobby is using all its money and influence to cheer on ObamaCare, even though polls show that most retired persons oppose it. AARP has spent millions of dollars on its TV ad campaign and bulletins and newsletters to its members, including eight million direct-mail letters over Labor Day. The AARP Web site claims that it is a "myth" that "health care reform will hurt Medicare," while it is a "fact" that "none of the health care reform proposals being considered by Congress will cut Medicare benefits or increase your out-of-pocket costs.
This is not good news.
The CBO predicts Social Security cash deficits in 2010-2011
John Taylor, a professor of economics at Stanford University, has put up on his blog some astounding charts to show
the immensity of the explosion of debt problem we now face in the U.S. His alarming debt charts.
Here's a grabber of a headline, U.S. Debt Crisis May Cause ‘Fall of Rome’ Scenario, Duncan Says
The U.S. has little chance of resolving its deteriorating financial position because the manufacturing industry continues to shrink, leaving the nation with few goods to export, said Duncan, now at Singapore-based Blackhorse Asset Management.
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“As unemployment remains above 10 percent well into the foreseeable future, it won’t be long before Americans start voting for protectionism,” Duncan said. “That’s going to be bad because protectionism will mean world trade will diminish and will overall reduce global prosperity.”
Once the U.S. debt burden becomes too large and the government can no longer sell debt to the public the Federal Reserve will likely step in and monetize it, resulting in high levels of inflation, he said.
When the financial bubble burst, a lot of people with jobs in financial services lost them suddenly and had to find other ways of making a living.
"Something I've never seen before in 30 years is that this economy has made people really soul-search," says executive recruiter Jeanne Branthover, who heads global financial services for Boyden Global Executive Search. "They're saying, 'If I'm not going to make as much money as I did, I want to look for something that I really like this time.' "
As Riches Fade, So Does Finance's Allure
Cap and Trade could cost families $1761 a year
The Obama administration has privately concluded that a cap and trade law would cost American taxpayers up to $200 billion a year, the equivalent of hiking personal income taxes by about 15 percent.
A previously unreleased analysis prepared by the U.S. Department of Treasury says the total in new taxes would be between $100 billion to $200 billion a year. At the upper end of the administration's estimate, the cost per American household would be an extra $1,761 a year.
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The documents (PDF) were obtained under the Freedom of Information Act by the free-market Competitive Enterprise Institute and released on Tuesday.
These disclosures will probably not aid the political prospects of the Democrats' cap and trade bill. The House of Representatives approved it by a remarkably narrow margin in June -- the bill would have failed if only six House members had switched their votes to "no" -- and it faces significant opposition in the Senate.
Christopher Horner who filed the FOIA request said
"It's nice to see they're not spinning each other behind closed doors."
"They're not telling you the cost -- they're not telling you the benefit. If they don't tell you the cost, and they don't tell you the benefit, what are they telling you? They're just talking about global salvation."
We could lose half the doctors practicing today.
45% Of Doctors Would Consider Quitting If Congress Passes Health Care Overhaul
Two of every three practicing physicians oppose the medical overhaul plan under consideration in Washington, and hundreds of thousands would think about shutting down their practices or retiring early if it were adopted, a new IBD/TIPP Poll has found.
The poll contradicts the claims of not only the White House, but also doctors' own lobby — the powerful American Medical Association — both of which suggest the medical profession is behind the proposed overhaul.
It also calls into question whether an overhaul is even doable; 72% of the doctors polled disagree with the administration's claim that the government can cover 47 million more people with better-quality care at lower cost.
In my lifetime, I have never seen such a spontaneous, self-organized rally of up to so many --- 2 million people according to the Daily Mail, 60,000 according to ABC News. The spokesman for the National Park Service is quotes as saying, "It is a record.... We believe it is the largest event held in Washington, D.C., ever."
It was a remarkable event by ordinary people who are rightly alarmed about what's happening and not happening in Washington.
Nick Gillespie on the scene says
First, the crowd was truly huge. Second, the crowd was from all over the place (both geographically and ideologically). And third, the crowd, well-behaved and stunningly normal in the main, was genuinely pissed off at out of control spending and government policies. "Stop spending," was the basic answer to any questions about what Congress and the president should do come tomorrow. Throw the bums of either party out come next fall was the second most-common answer.
I'm with them, the people pushing back. The government is not fixing the economy, but making everything worse.
The president's chief economic advisor Larry Summers warns that the unemployment rate could stay "unacceptably high" for years which means no new jobs are being created in the private sector.
Already, 2 out of 5 Californians don't have a job!
So the idea we are starting a trade war with China at the behest of the steelworkers' union is mind-boggling because it could so easily "ratchet up into a full-blown trade war and inflict serious economic damage on both countries."
The problem that got us into this mess, the bad regulation of the financial services sector, has not and is not being fixed.
Bloomberg reports that Joseph Stiglitz, the Nobel Prize- winning economist says
the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”
Which brings me to health care. Why doesn't the President just fix Medicare and Medicaid which will go broke in the next 10 years? Why does he want to cut benefits to seniors by cutting the only part Medicare that is competitive?
Medicare for Dummies says the Wall St Journal, with "contradictions worthy of the Marx Brothers"
No cuts, for anyone—except, that is, for the 24% of senior beneficiaries [who] are enrolled in the Medicare Advantage program, which Democrats want to slash by $177 billion or more because it is run by private companies. Mr. Obama called that money "unwarranted subsidies in Medicare that go to insurance companies—subsidies that do everything to pad their profits but don't improve the care of seniors."
In fact, Advantage does provide better care, which is one reason that enrollment has doubled since 2003. It's true that the program could be better designed, with more competitive bidding and quality bonuses. But Advantage's private insurers today provide the kind of care that Mr. Obama said he would mandate that private insurers provide for the nonelderly—"to cover, with no extra charge, routine checkups and preventative care."
Advantage plans have excelled at filling in the gaps of the a la carte medicine of traditional Medicare, contracting with doctors and hospitals to coordinate care and improve quality and covering items such as vision, hearing and management of chronic illness. If seniors in Advantage lose this coverage because of the 14% or 15% budget cut that Mr. Obama favors, well, that's "waste and abuse."
When they looked at the observable data instead of the computer models, MIT scientists found that Carbon Dioxide was irrelevant in climate change.
Professor Richard Lindzen of MIT has published a paper which proves that IPCC models are overstating by 6 times, the relevance of CO2 in Earth’s Atmosphere.
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Professor Richard Lindzen of MIT’s peer reviewed work states “we now know that the effect of CO2 on temperature is small, we know why it is small, and we know that it is having very little effect on the climate.”
The global surface temperature record, which we update and publish every month, has shown no statistically-significant “global warming” for almost 15 years. Statistically-significant global cooling has now persisted for very nearly eight years.
Go to the link above or this pdf from the Science and Public Policy Institute to see the graphs and scientific explanations to see why the theory of man-caused global warming is completely false.
All of this data leads to the conclusion that the UN/IPCC models are not only wrong, they are so far off the mark as to be laughable. The satellite and bathythermograph data clearly do not match the IPCC theory, which means that the theory is incorrect.
What this data does tell us is if CO2 concentration should double, global temperatures will not rise by the devastating 6 degrees F the UN predicts, but by a completely harmless 1 degree F. The ERBE data shows an Earth system that is radiating more heat into space as sea surfaces warm, in other words a system at equilibrium, and is clearly demonstrated by observed data. The UN theory of Anthropogenic Global Warming is dead wrong.
The big conclusion is devastating:
There are only a couple of conclusions to be made of this. Either the world has been misled by scientists working for the UN and IPCC due to faulty science, or faulty science has been deliberately used in a global scheme to generate tax revenues for the Governments instituting Cap and Trade Taxation policies.
Remember this as Congress takes up cap and trade in what can be called an Economic Suicide Pact that won't work but will bring the largest tax increase in American history.
There is a startling difference between the pay of the average federal employee who makes $79,197 and the average private sector employee who makes only $49,935.
graph from Chris Edwards
In light of the current economic crisis and the jobless rate of 9.5%, President Obama has decided to reduce the across-the-board increase in pay federal employees will get next year from 2.4% to just 2%.
You've heard a lot about Fannie Mae and Freddie Mac and the $34.2 billion and $51.7 billion respectively it cost to bail them out which is by no means the end. By the end of next year the continuing cost of bailouts for these two could approach $200 billion. EACH
Now it seems Ginnie Mae and FHA are following in their footsteps.
The Next Fannie Mae
Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee.
Herein lies the problem. The FHA’s standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.
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Is anyone on Capitol Hill or the White House paying attention? Evidently not, because on both sides of Pennsylvania Avenue policy makers are busy giving the FHA even more business while easing its already loosy-goosy underwriting standards. A few weeks ago a House committee approved legislation to keep the FHA’s loan limit in high-income states like California at $729,750. We wonder how many first-time home buyers purchase a $725,000 home. The Members must have missed the IG’s warning that higher loan limits may mean “much greater losses by FHA” and will make fraudsters “much more attracted to the product.”
In the wake of the mortgage meltdown, most private lenders have reverted to the traditional down payment rule of 10% or 20%. Housing experts agree that a high down payment is the best protection against default and foreclosure because it means the owner has something to lose by walking away. Meanwhile, at the FHA, the down payment requirement remains a mere 3.5%. Other policies—such as allowing the buyer to finance closing costs and use the homebuyer tax credit to cover costs—can drive the down payment to below 2%.
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All of which means that the FHA and Ginnie Mae could well be the next Fannie and Freddie. While Fan and Fred carried “implicit” federal guarantees, the FHA and Ginnie carry the explicit full faith and credit of the U.S. government.
We’ve long argued that Congress has a fiduciary duty to secure the safety and soundness of FHA through common sense reforms. Eliminate the 100% guarantee on FHA loans, so lenders have a greater financial incentive to insure the soundness of the loan; adopt the private sector convention of a 10% down payment, which would reduce foreclosures; and stop putting subprime loans that should have never been made in the first place on the federal balance sheet.
The housing lobby, which gets rich off FHA insurance, has long blocked these due-diligence reforms, saying there’s no threat to taxpayers. That’s what they also said about Fan and Fred—$400 billion ago.
It is unbelievable to watch what is happening in California. In terms of unemployment, the hardest hit state is California and the hardest hit county in California is Fresno with a jobless rate reaching 40% in some towns.
There's been a three year drought, the farmers in the most productive valley in the world are really hurting, the government controls the water and they are not giving any to the farmers.
It's all going to the delta smelt.
This is not a story about fish. Rather, it is a story about how efforts to save the fish through a court-ordered water shortage have pushed a region already brought to the brink by recession over the edge.
It is also a story about how farmers are fighting back, using almost unimaginable stories of economic hardship to argue for a reversal of environmental rules that could see their farms thrive once again, but also endanger wildlife that may never come back.
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Last December, fresh restrictions meant to protect the fish were imposed, effectively shutting down the spigots and starving the Central Valley farmers of water.
Those in Fresno County saw their monthly allotments evaporate, virtually overnight. Here's how Mr. Allen recalls it: “When it came time to get my initial water allocation in January, we were told it would be zero. In February, my heart was pounding. Zero again. March, same thing. April, zero.” By that point, most of his crop of winter wheat had already withered and died.
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Today, Interstate 5, the highway that slices through the San Joaquin Valley, is flanked by parched fields. Signs, in English and Spanish, proclaim: “Congress-created dustbowl” and “No water, No future” and “Like foreign oil? You'll love foreign food.”
The bitter irony that farm families in the region known as America's salad bowl are flocking to food giveaways at churches and community centres is lost on no one.
Without water, farmers have left an estimated 200,000 hectares of once-productive farmland fallow. Thousands of farm workers, mainly Spanish-speaking migrants, have been laid off.
Mr. Howitt estimates lost farm revenue in the San Joaquin Valley could top $2-billion this year and will suck as many as 80,000 jobs out of its already-battered economy.
The problem is the Endangered Species Act, which, unless you impacted, you have no idea how draconian it is. The basic problem is there is no balancing of interests between animal and humans. Once a species is declared endangered, it doesn't matter how much money it costs to 'save' the critter or what economic devastation it creates in the surrounding human community, the species must be saved.
Now the California water agency is changing its course on the delta smelt and petitioning the federal government to reconsider its protections for the delta smelt citing new information about another population of smelt that's not effected by the state water operation.
I'm all for protecting ecosystems and endangered species, but not at such an egregious human cost.
Like Todd Allen in How green was my valley
His farm, a million-dollar operation in good times, is 70-per-cent financed. He also owes money on three tractors, a $140,000 drip system, which is useless to him now, and his house.
“I've never been in a predicament like this … so, if I can survive this year, I can survive anything,” he says, blinking back tears.
When he began to farm full-time 20 years ago, he had a consistent water supply. He also had 10 employees and started with 600 hectares of cantaloupe, cotton and wheat.
This year, he has laid everyone off and is doing what little labour is left himself.
“You know, I am really scared for my family. I have two daughters and I thought I had a future going out here, and now I can't even sell this land because, without water, it is worthless,” he says.
“It seems like in this economy the government would look for quick fixes instead of throwing money at everything. All they have to do is turn the pumps on. The water is there.”
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But most farmers here say they don't want a handout. At a town hall meeting in Fresno a few weeks ago, tempers flared as farmers flustered Interior Department officials by shouting: “We don't want welfare, we want water.”
Just as the Obama administration has promulgated federal funding rules for embryonic stem cells, Forbes magazine reveals The Dirty Secret of Embryonic Stem Cell Research
Hope for any benefits from ES research is decades away.
Thomson blamed simple biology. Among other problems, ES cells require permanent use of dangerous immunosuppressive drugs. They have a nasty tendency to form tumors both malignant and benign including teratomas--meaning "monster tumor." Teratomas can grow larger than a football and can contain eyeball parts, hair and teeth. Yech!
OK, so how many "decades?"
"The routine utilization of human embryonic stem cells for medicine is 20 to 30 years hence," embryonic stem cell research advocate William Haseltine and then-chief executive officer of Human Genome Sciences.
Others say 'three to five decades' or 'never in my lifetime'.
Meanwhile adult stem cells (AS) have proved to be just as flexible as embryonic stem cells (ES) without the health concerns or moral baggage.
AS cells have now treated scores of illnesses including many cancers, autoimmune disease, cardiovascular disease, immunodeficiency disorders, neural degenerative diseases, anemias and other blood conditions. They've been used in over 2,000 human clinical trials. There has never been an ES cell clinical trial. Former National Institutes of Health director Dr. Bernadine Healy, once an ES cell research enthusiast," now calls them "obsolete."
That's why it hardly makes sense to vastly increase federal research funding for ES cells. Medical research spending is always a zero-sum game. However big the overall budget, every dollar approved for one grant is a dollar lost to others.
UPDATE; Researchers produce cells they say are identical to embryonic stem cells
Two groups of Chinese researchers have performed an unprecedented feat, it was announced today, by inducing cells from connective tissue in mice to revert back to their embryonic state and producing living mice from them.
By demonstrating that cells from adults can be converted into cells that, like embryonic stem cells from fetuses, have the ability to produce any type of tissue, the researchers have made a major advance toward eliminating the need for fetal cells in research and clinical applications.
I dislike being pressed to make any financial decision "right now" because I feel I'm being swindled. I feel that same way about the health care proposal now before the Congress.
What I read and see makes me want to yell to all of Congress, "Stop, stop. Go home. Take a break and come to your senses."
Mr. Obama's February budget provided the outline, but the House bill now fills in the details. To wit, tax increases that would take U.S. rates higher even than most of Europe. Yet even those increases aren't nearly enough to finance the $1 trillion in new spending, which itself is surely a low-ball estimate. Meanwhile, the bill would create a new government health entitlement that will kill private insurance and lead to a government-run system.
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The most remarkable quality of this health-care exercise is its reckless disregard for economic and fiscal reality. With the economy still far from a healthy recovery, and the federal fisc already nearly $2 trillion in deficit, Democrats want to ram through one of the greatest raids on private income and business in American history. The world is looking on, agog, and wondering why the United States seems intent on jumping off this cliff.
The Congressional Budget Director says all the various health care proposals will increase, not reduce federal government spending and so the Federal Budget is on an unsustainable path
While the Vice President says We Have to Go Spend Money to Keep From Going Bankrupt
The Investors' Business Daily says the individual private health insurance is illegal under the House plan. It's Not an Option
It didn't take long to run into an "uh-oh" moment when reading the House's "health care for all Americans" bill. Right there on Page 16 is a provision making individual private medical insurance illegal.
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So we can all keep our coverage, just as promised — with, of course, exceptions: Those who currently have private individual coverage won't be able to change it. Nor will those who leave a company to work for themselves be free to buy individual plans from private carriers.
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What wasn't known until now is that the bill itself will kill the market for private individual coverage by not letting any new policies be written after the public option becomes law.
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The public option won't be an option for many, but rather a mandate for buying government care. A free people should be outraged at this advance of soft tyranny.
Dick Morris points out that rationing health care is inevitable and it's older people who will suffer the most.
Obama’s health care proposal is, in effect, the repeal of the Medicare program as we know it. The elderly will go from being the group with the most access to free medical care to the one with the least access. Indeed, the principal impact of the Obama health care program will be to reduce sharply the medical services the elderly can use. No longer will their every medical need be met, their every medication prescribed, their every need to improve their quality of life answered.
It is so ironic that the elderly - who were so vigilant when Bush proposed to change Social Security - are so relaxed about the Obama health care proposals. Bush’s Social Security plan, which did not cut their benefits at all, aroused the strongest opposition among the elderly. But Obama’s plan, which will totally gut Medicare and replace it with government-managed care and rationing, has elicited little more than a yawn from most senior citizens.
The organizational chart of the Democratic plan charted.
click image to enlarge. Via Maggie's Farm who Says it all.
Rick Moran asks
So what do we get after spending at least a trillion dollars over 10 years? The [5] CBO says we would still have 17 million legal Americans not insured. We would also almost certainly have some form of rationing. And the chances are good that we would have a system performing much worse for people who are insured today.
What God Has Joined Together, Recession Makes Hard to Put Asunder
For Some, the Downturn Keeps Divorce on Ice; Ms. Brewster, Husband Share a House Divided
A May survey by the Institute for Divorce Financial Analysts, a national organization for financial professionals who work on divorce cases, found that the recession was delaying divorces, and inspiring "creative divorce solutions" in living arrangements.
"People are saying, 'I've put up with it for the last 10 years, I can put up with it for another year,'" says Gary Nickelson, president of the American Academy of Matrimonial Lawyers. In a poll of 1,600 of its members, the group says, respondents estimated that divorce cases in the six months through March were off 40% from normal levels.
How did we fall so far so fast? And can consumer confidence and spending be restored when every household I know is saving as much as they can, worried about their jobs, afraid of losing them and troubled about what's happening to their retirement savings. Every sector of the economy is hurting. Hoping on a wish, Sears and K-Mart are starting Christmas sales in July.
Robert Reich on When will the Recovery begin? Never
The so-called "green shoots" of recovery are turning brown in the scorching summer sun.
Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water -- owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can't are hunkering down, as they must.
The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin.
David Goldman on the Zombie Economy
It’s not about getting a recovery going. That’s not going to happen, not if Martians land in flying saucers with a billion tons of gold to invest in bank capital. It’s about preventing something worse than we have now, namely screaming, bug-eyed, blood-in-the-streets, rape-the-crops-and-burn-the-women panic. Zombie not bad. Zombie good. Zombie better than alternative, which is you dead. Really dead. No breath, never get live again. Zombie is as good as it gets. You zombie, you still alive, sort of. You not zombie, you dead. Opposite of zombie not happy, lively, active. Opposite of zombie is you push daisies up. The best we can get out of this is a zombie banking system, one that still pays its debts because it earns enough interest from the toxic assets left over from the last boom.
Thanks to David Layman for pointing out the Cosmic Convergence of these two.
Here's Nouriel Roubini,Doctor Doom, on Brown Manure, Not Green Shoots who says the jobs situation is even worse than the headlines.
With the current rate of job losses, it is very clear that the unemployment rate could reach 10% by later this summer--around August or September--and will be closer to 10.5%, if not 11%, by year-end. I expect the unemployment rate is going to peak at around 11% at some point in 2010, well above historical standards for even severe recessions.
It's clear that even if the recession were to be over anytime soon--and it's not going to be over before the end of the year--job losses are going to continue for at least another year and a half.
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The details also suggest that other aspects of the labor markets are worsening. If you include discouraged workers and partially employed workers, the unemployment rate is already above 16%.
Yes, we can print more money, but who's going to buy the paper? Paul Craig Roberts A Perfect Storm
It is obvious to Chinese officials that neither China nor the entire world has enough spare money to purchase $4 trillion of US Treasuries over the next two years.
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The Obama-Federal Reserve-Wall Street plan for the US to spend its way out of its problems is coming unglued. The reckless spending is pushing the dollar down and interest rates up.
Every sector of the US economy is in trouble. Former US manufacturing firms have been turned into marketing companies trying to sell their foreign-made goods to domestic consumers who have seen their jobs be moved offshore. Much of what is left of US manufacturing–the auto industry–is in bankruptcy. More decline awaits housing and commercial real estate. The dollar is sliding, and interest rates are rising, despite the Federal Reserve’s attempts to hold interest rates down.
When the Reagan administration cured stagflation, the result was a secular bull-market in US Treasuries that lasted 28 years. That bull market is over. Americans’ living standards are headed down. The American standard of living has been destroyed by wars, by offshoring of jobs, by financial deregulation, by trillion dollar handouts to financial gangsters who have, so far, destroyed half of Americans’ retirement savings, and by the monetization of debt.
The next shoe to drop will be the dollar’s loss of the reserve currency role. Then the US, an import-dependent country, will no longer be able to pay for its imports. Shortages will worsen price inflation and disrupt deliveries.
Life for most Americans will become truly stressful.
Negative equity found to be the biggest reason for the mushrooming rate of mortgage foreclosures since 2007.
Zero money down, not subprime loans, led to the mortgage meltdown.
The horrific solution of the cap and trade legislation is far worse than the problem.
The formulation of the so-called Waxman-Markey bill was less traditional legislative sausage-making than an unspeakable practice out of The Jungle. Its architects bought off every possible interest group no matter what the policy consequences until they had a bare majority to slam it through the House sight unseen (a physical copy of the final bill didn’t yet exist when it passed)
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Originally, the Obama administration counted on $80 billion a year from the government’s sale of emissions credits. To win over industry, Waxman-Markey gives the credits away for free. Poof! There goes the revenue.
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The upshot is that an Environmental Protection Agency analysis says that under Waxman-Markey, there will be no reduction in emissions by 2020. The progressive Breakthrough Institute estimates that emissions could continue at their current business-as-usual rate through 2030. Perversities abound. According to the Los Angeles Times, under the bill, the U.S. “would use more carbon-dioxide heavy coal in 2020 than it did in 2005.” Time writes that “the total amount of renewable energy generation under Waxman-Markey would actually be less than the renewable energy that would have been produced without the bill.”
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Even if Waxman-Markey were perfectly formulated, it would reduce global surface temperatures by only one-tenth of 1 degree Celsius in 100 years. That’s a negligible difference, purchased at a great price.
The only people who benefit are the "permanent class of government-addicted elites"
The Obama/Pelosi/Reid Democrats in charge of everything in Washington have decided to order everything on the menu, and a permanent class of government-addicted elites --lawyers, economists, think-tankers, MSMers, senior bureaucrats-- are cheering them on because the growth in the size and complexity of government means a growth in the demand curve for specialist services at specialist prices.
The jobs supposedly created are an illusion.
Looking at the experience of creating green jobs in Spain which bet heavily on that premise and the promise of wind energy, a recent study found that each green job cost more than a million dollars to create and resulted in the destruction elsewhere of 2.2. jobs.
The Beacon Hill Institute at Suffolk University in Boston released a study today finding that the studies claiming economic benefits to government imposed green jobs were seriously flawed and that such programs actually hurt the economy.
Proponents of “green collar” jobs promise that government subsidization of these jobs will create a net increase in employment, economic growth, recovery from the current crisis, and energy savings, all in addition to environmental benefits. Unfortunately, these claims are based on seriously flawed economic analysis.
Given how poorly the stimulus has worked and given the 4 million newly unemployed in the past six months, it doesn't seem the right time to remake the energy sector to impose the largest tax increase in history when the economy is in recession.
Cap and Trade Fiction
The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment.
Costs range from the CBO estimate of $175/year which admittedly doesn't take account of the effect of the carbon tax on anything other than the consumers' own electric bill next year. Taking into account the ripple effect of higher taxes for everything, the Heritage Foundation estimates $1870 for a family of four by 2020.
Man-Made Disaster
Not since a misguided piece of legislation imposed tariffs that turned a recession into a depression has there been a piece of legislation as bad as Waxman-Markey.
The 1,000-plus-page American Clean Energy and Security Act (H.R. 2454) is being rushed to a vote by House Speaker Nancy Pelosi before anyone can seriously object to this economic suicide pact.
Its centerpiece is a "cap and trade" provision that has been rightfully derided as "cap and tax." It is in fact a tax on energy everywhere it is consumed on everything it is used to make or provide.
It is the largest tax increase in American history — a tax on all Americans — even the 95% that President Obama pledged would never see a tax increase.
Looking at the European experience Cap and Trade doesn't work
According to European Commission figures, emissions from the 27 member states rose by 1.9% in the first three years of the regime.
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Translated across the Atlantic, any climate change bill will become the subject of the worst kind of pork-barrel politics riddled with loopholes for key industries before it becomes law.
Tilting at Green Windmills George Will looks at a puzzled Spanish professor Gabriel Calzada, an economics professor at Universidad Rey Juan Carlos who studied the effects at the "torrential spending" on wind and solar energy in Spain and concluded
each "green" job created cost $752,000 -$1.4 million in subsidies
each "green" job entailed the loss of 2.2.other jobs
Why are the leaders in Congress pushing so hard on this bill of a thousand pages which was just amended with 300 pages this morning. I would bet few,if any, Congressman have even read it.
The number of skeptics on global warming are swelling and the tide is turning . There is no scientific consensus whatsoever on global warming or what causes it. The science is not settled.
Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. -- 13 times the number who authored the U.N.'s 2007 climate summary for policymakers. Joanne Simpson, the world's first woman to receive a Ph.D. in meteorology, expressed relief upon her retirement last year that she was finally free to speak "frankly" of her nonbelief. Dr. Kiminori Itoh, a Japanese environmental physical chemist who contributed to a U.N. climate report, dubs man-made warming "the worst scientific scandal in history." Norway's Ivar Giaever, Nobel Prize winner for physics, decries it as the "new religion."
If this passes the house, there is hope it will not pass the Senate. If it does, every Congressman who voted for it should be held accountable in 2010 for its consequences.
Mark Steyn on why "stirring up apathy" is the key to understanding the health care debate
Willie Whitelaw, a genial old buffer who served as Margaret Thatcher's deputy for many years, once accused the Labour Party of going around Britain stirring up apathy. Viscount Whitelaw's apparent paradox is, in fact, a shrewd political insight, and all the sharper for being accidental. Big government depends, in large part, in going around the country stirring up apathy – creating the sense that problems are so big, so complex, so intractable that even attempting to think about them for yourself gives you such a splitting headache it's easier to shrug and accept as given the proposition that only government can deal with them.
Take health care. Have you read any of these health care plans? Of course not. They're huge and turgid and unreadable. Unless you're a health care lobbyist, a health care think-tanker, a health care correspondent or some other fellow who's paid directly or indirectly to plow through this stuff, why bother? None of the senators whose names are on the bills have read 'em; why should you?
“For the first time in their lives, people feel sort of useless. All of a sudden, you can go to lunch for two and a half hours and really not be missed. It’s a blow to the ego. You’re talking about people who have never really failed.”
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Another effect of the credit crisis - Why Major Law Firms Are Shrinking
People are shellshocked,” said one top partner at the firm who, like many of its current and former lawyers, spoke on condition of anonymity for fear of retribution. “If they survived the first two rounds, they’re happy to have a job, but are still very nervous. And if their phones don’t ring, if their work doesn’t come back with a vengeance, they fear they aren’t long for this world.”
As the apocalypse on Wall Street ripples out into the larger economy, a thick red tide is lapping at the once-impregnable foundations of New York’s corporate law firms, threatening to turn the industry — and with it, some iconic city characters — into an endangered species.
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THE gentleman’s profession of the law is becoming a vestige of the past, removed enough from reality to be remembered, like phone booths or fedoras.
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While the legal industry is hardly battling the existential threat that is facing, say, the newspaper trade, Big Law — especially in competitive New York — is facing a potential paradigm shift as fundamental as the one that has hit investment banks and the auto industry. Big, as a business model (let alone as an expression of the national mood), seems bound for obsolescence.
Even before the news that the May unemployment is worse than predicted, 9.4%, the highest in more than 25 years, there's been precious little heard in Washington about creating new jobs except for the public sector. Two exemplary graphs show just what's been happening.
The first striking visual shows The Geography of Jobs at TIP strategies. It's animated so you have to click on the link to see it. It's well worth it to see the Jobs Gained and the Jobs Lost since 2004 and where.
Says Jim Geraghty in Watching Big Green Dots Turn Into Big Red Ones
the job losses in major metropolitan areas since the beginning of 2009 have been on par with Hurricane Katrina's impact on employment in New Orleans.
The second visual at Innocent Bystanders is reproduced below.
So, all that money spent on the Recovery Plan has made it worse! We would have been better off doing nothing.
Megan McArdle asks Is California Too Big to Fail?
So what about California? A reader asks. Ummm, that's a tough one. No, wait, it's not: California is completely, totally, irreparably hosed. And not a little garden hose. More like this. Their outflow is bigger than their inflow. You can blame Republicans who won't pass a budget, or Democrats who spend every single cent of tax money that comes in during the booms, borrow some more, and then act all surprised when revenues, in a totally unprecedented, inexplicable, and unforeseaable chain of events, fall during a recession. You can blame the initiative process, and the uneducated voters who try to vote themselves rich by picking their own pockets. Whoever is to blame, the state was bound to go broke one day, and hey, today's that day!
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I am not under the illusion that this will be fun. For starters, the rest of you sitting smugly out there in your snug homes, preparing to enjoy the spectacle, should prepare to enjoy the higher taxes you're going to pay as a result. Your states and municipalities will pay higher interest on their bonds if California is allowed to default. Also, the default is going to result in a great deal of personal misery, more than a little of which is going to end up on the books of Federal unemployment insurance and other such programs.
I know many will think the federal government should bail them out, but not me. We just have too much on our plates and the debt the U.S, in incurring is frightening and as Robert Samuelson says Risky Debt.
Let's see. From 2010 to 2019, Obama projects annual deficits totaling $7.1 trillion; that's atop the $1.8 trillion deficit for 2009. By 2019, the ratio of publicly held federal debt to gross domestic product (GDP, or the economy) would reach 70 percent, up from 41 percent in 2008. That would be the highest since 1950 (80 percent). The Congressional Budget Office, using less optimistic economic forecasts, raises these estimates. The 2010-19 deficits would total $9.3 trillion; the debt-to-GDP ratio in 2019 would be 82 percent.
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Except from crabby Republicans, these astonishing numbers have received little attention -- a tribute to Obama's Zen-like capacity to discourage serious criticism. Everyone's fixated on the present economic crisis, which explains and justifies big deficits (lost revenue, anti-recession spending) for a few years. Hardly anyone notes that huge deficits continue indefinitely.
And that's without talking about Social Security or the looming unfunded public pension crisis in just about every state.
The plan most everyone seems to agree on is Soak the Rich. Only problem is they leave.
We can not imagine how bad it's going to get. The future looks dim indeed and California is the canary in the mine. There are lessons to be learned from the California debacle but will we learn them?
Victor Davis Hansen says
It is generally known that Americans want it both ways — green giddiness and plenty of oil and gas for their cars and homes; lots of government services and low taxes; a big military but spasms of isolationism. But now California is where the rubber meets the road, and we just saw the big-government side of the equation dissolve. With the highest income taxes, highest sales taxes, and biggest deficits, Californians finally said "no mas," and let the cutting begin. Of course, we have expanded government to such a degree that "radical" cuts will only get us back to about 2005-sized government, and "tax cutting" in this loopy state will mean holding firm at a 9% sales tax and 10%-plus income tax. But one must begin somewhere.
Fabulous charts at QanddO. Here's one.
The good news is Gimundo is back with good news served daily like
Delaying Retirement Can Ward Off Alzheimer's Disease
“The intellectual stimulation that older people gain from the workplace may prevent a decline in mental abilities, thus keeping people above the threshold for dementia for longer,” Simon Lovestone, one of the study’s co-authors, said in a press statement.
Happy News from the Recession: 5 Good Things about Hard Times
I quite liked the idea of Job Angels and Estonia's Bank of Happiness
The Bank of Happiness has no physical presence, but is merely an Internet portal where Estonians can register their contact details, along with details on what personal and professional skills they can use to help community members, as well as requests for what they’d like help with from others.
“I think young people would love to do this. Not everything has to be based on money,” 18-year-old student Evelin Tamm told the Times Online. “I love to clean and to babysit. Perhaps, in return, someone could help me with my maths and physics.”
Last week the trustees reported that the Medicare will run out of money in less than 10 years, by 2017, two years ahead than projected last year. Social security will run out of money in 2037. It will start running deficits in 2017. The trust funds have always been a fiction since the surpluses have been used to reduce budget deficits.
From the summary issued by the trustees
Medicare's annual costs were 3.2 percent of Gross Domestic Product (GDP) in 2008, or about three quarters of Social Security's, they are projected to surpass Social Security expenditures in 2028 and reach 11.4 percent of GDP in 2083.
The argument goes Medicare is going to bankrupt us which is why we have to have universal health care. To which Megan McArdle replies
I hear this argument quite often, and it's gibberish in a prom dress. Any cost savings you want to wring out of Medicare can be wrung out of Medicare right now:
The Wall St Journal reports that the "unfunded liability" of Medicare over the next 75 years is $38 trillion. Yes, trillion. It's hard to wrap your mind around just how big a trillion is.
A trillion seconds ago, no one on this planet could read and write. Neither the Roman Empire nor the ancient Chinese dynasties had yet come into existence. None of the founders of the world's great religions today had yet been born.
A million seconds is 13 days.
A billion seconds is 31 years.
A trillion seconds is 31,688 years
Do you believe the White House estimate that it could save $2 trillion in health care over 10 years just like that the Boston Globe asks.
President Obama is right that the cost of healthcare, now more than 16 percent of the economy, is simply unsustainable.
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But will the industry's gauzy pledges of better coordination of care, more standardization of insurance claim forms, reduced administrative costs, and greater efficiency actually yield the promised savings?
Wesley Smith says we're Pushing Health Care Rationing By Not Discussing Health Care Rationing
rationing prohibits health care funders from paying for otherwise covered treatments, based on the patient’s age, state of health, disability, or perhaps, because the patient committed politically incorrect lifestyle crimes such as smoking or being overweight.
The rationing has already begun and the elderly are hardest hit.
Viking Pundit reports on a story in the Boston Globe on the "pathbreaking effort to cut medical costs" begun by Massachusetts General Hospital: send home the frail elderly from the hospital sooner and reduce their emergency room visits.
Medicare is now the country's largest purchaser of health care. OMB budget chief Peter Orszag believes that "comparative effectiveness research" will determine what works best. Problem is virtual colonoscopies work best for the elderly but not for anyone else. So as the WSJ reports in How Washington Rations, Medicare now will refuse to reimburse for virtual colonoscopies.
The problem is that what "works best" isn't the same for everyone. While not painless or risk free, virtual colonoscopy might be better for some patients -- especially among seniors who are infirm or because the presence of other diseases puts them at risk for complications. Ideally doctors would decide with their patients. But Medicare instead made the hard-and-fast choice that it was cheaper to cut it off for all beneficiaries. If some patients are worse off, well, too bad.
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All this is merely a preview of the life-and-death decisions that will be determined by politics once government finances substantially more health care than the 46% it already does. Anyone who buys Democratic claims about "choice" and "affordability" will be in for a very rude awakening.
David Brooks in Fiscal Suicide Ahead says that for Obama Health care costs are now the crucial issue of his whole presidency.
I tip my hat to Edmund Andrews who did what none of us can imagine - expose his personal financial delusions - to write all about My Personal Credit Crisis.
If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.
But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds. We all had our reasons. The brokers and dealmakers were scoring huge commissions. Ordinary homebuyers were stretching to get into first houses, or bigger houses, or better neighborhoods. Some were greedy, some were desperate and some were deceived.
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I felt foolish, ashamed and angry as I confessed to Bob. Why had I been trying to live a lifestyle that I couldn’t afford? Why had I tried to keep up the image of a conventional suburban family man, when nothing about my situation was conventional? How could I have glossed over the fact that we had been spending about $3,000 more than we were earning, month after month after month? How could a person who wrote about economics for a living fall into the kind of credit-card trap that consumer groups had warned about for years?
UPDATE;
Neo takes a much tougher view.
Andrews remains mystified as to how this could have happened to him. I can help him out on that: greed and denial. No one forced him to do any of this, and he of all people ought to have known better. But his story is an excellent example of how far many people in this country have come from any idea of personal responsibility.
Reality bites and hard.
In the comments, Beth said...
I read this with disbelief. This guy, after child support, was bringing home less than $3k a month, and his fiancee at the time had no job at all, and it made sense to borrow HALF A MILLION BUCKS???? He keeps saying how easy it was to borrow it, but until months after the bills actually start coming in, he never thought about how hard it would be to pay back. That's the kind of thinking I've seen in friends with manic depression, in a manic phase.
For the past 50 years, we've tried to control health care spending and no one is satisfied with the results. Yet, for the most part, we have better care, more advanced technology and more effective medicines than we did 50 years ago. But there's no question we waste enormous amounts of money and even more is lost to fraud. We cut back again and again on payments to doctors who treat Medicaid and Medicare patients with the result that make almost no money treating such patients.
Seems to me there are two ways to go. Either the government takes over and imposes price controls and rations health care or we let the market do it. Now, I can hear you say, but the market hasn't done it and it's not fair.
One country did it and did it well while spending far less. Singapore put the consumer in control with money each individual was required to put aside for health care. By using the money wisely and getting the care they wanted, they had money left over they could use in retirement. A twofer.
American health care policies are sick by Robert Herbold
I believe it's just plain silly for the folks in Washington D.C. to consider spending an additional $600 billion for healthcare. Why throw money at an ineffective and bureaucratic system that is totally out-of-control? Why not figure out how to get it under control before deciding to drown it with more borrowed money from the Chinese or, even worse, further taxing the rich and thus retarding investment that might have a chance of turning around our economy?
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So, what countries seem to be handling healthcare most effectively and efficiently? Well, there's one nation that has the lowest infant mortality rate in the world as well as the third longest average lifespan for its citizens - and it spends only 3.7 percent of its GDP on healthcare. That country is Singapore.
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Singaporeans participate in a mandatory savings program that sets up a "Medisave" account for each individual. The individual is required to pay a small percentage of his or her income each month into that account, and employers also make a contribution. For individuals who are unemployed, there is a government subsidy. Singaporeans also engage in a "Medishield" program, which is a national catastrophic illness insurance plan. Premiums for the Medishield program are small, because it is government subsidized; as a result, the premiums are paid for out of an individual's Medisave account.
Choice and Competition
Most significantly, when individuals in Singapore feel the need to go to a physician, they select the doctor based on the quality of the care they believe they will get and the cost associated with going to that physician. In essence, physicians compete for the patient's business. Individuals select carefully since it's their Medisave account money that's used to pay for the chosen physician.
Individuals cannot take money out of their Medisave accounts except for medical use. On the other hand, these accounts grow steadily over time because the government invests these funds for the individual in a safe and modestly performing investment fund.
What's important here is that the money is not the government's. It's the individual's money and, at retirement age, people actually have access to these funds. That's why individuals use the funds wisely.
I 'm not trained in economics, but I am trained in the law and the rule of law still means something to me. So I'm with Neo who writes
Where's the Outrage.
The general lack of concern about the administration’s throwing out the usual rules regarding senior lenders in the Chrysler negotiations still has the power to surprise me.
There is no way this course of action can end up benefiting our economy, or even Chrysler. The only beneficiaries are the unions (at least, temporarily; if the company ends up failing, they will go down too)
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Hedge funds which hold about $1 billion in Chrysler bonds, refused the government's offer to take 30 cents on the dollar. Legally, they couldn't: they are obligated to get the best return for their shareholders. The best return would be in bankruptcy court where their senior position as secured creditors under the U.S. bankruptcy code would be followed. These are the rules of the game that everyone knows. -
Neo quotes s Bill Frezza who asks
Has it dawned on you what the consequences will be if the President gets his way and consideration is given to creditors not according to contracts, rules, and established legal precedents but according to which group is most politically favored? And do you believe the President advanced the cause of economic recovery by publicly excoriating “speculators” who once hoped to profit by lending money against hard assets to an ailing company?
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In Chrysler’s case the TARP-backed lenders – that is, banks-too-big-to-fail now living on the dole – chose to kowtow to the executive branch. What they “sacrificed” was the economic interests of their shareholders in favor of the political interests of their management. The non TARP-backed lenders, in this case a handful of hedge funds trying to protect the pension funds, university endowments, and insurance companies that invested in them, balked at getting lower consideration for their secured debt than the UAW is getting for its unsecured obligations. Hence, a trip to court and a tongue lashing by the president.
This is a colossal abuse of power against the rule of law. Megan McArdle asks
when did it become the government's job to intervene in the bankruptcy process to move junior creditors who belong to favored political constituencies to the front of the line? Leave aside the moral point that these people lent money under a given set of rules, and now the government wants to intervene in our extremely well-functioning (and generous) bankruptcy regime solely in order to save a favored Democratic interest group.
One hedge fund leader blasted the "bullying" and "abuse of power". Hedge Funds outraged at Obama Bullying But Also Cowering in Fear
Clients of hedge funds include, among others, pension funds of all kinds of workers, unionized and not. The managers have a fiduciary obligation to look after their clients’ money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That’s how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could “share in the sacrifice”, you would not be happy.
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The President's attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to "sacrifice" some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.
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Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could stand up to this bullying. The TARP recipients had no choice but to go along. The hedge funds were singled out only because they are unpopular, not because they behaved any differently from any other ethical manager of other people's money. The President’s comments here are backwards and libelous.
This is America. We have a free enterprise system that has worked spectacularly for us for two hundred plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President.
And what do we taxpayers get out of all of this? Bill Frezza again.
A doomed third-rate car company majority owned by its militant union run by Italian management building congressionally designed “green” cars no one wants to buy financed by taxpayers into perpetuity because no private investor in their right mind will touch the company with a ten foot pole. Is this supposed to be economic policy or comic opera?
I don't see how this is going to turn out well.
The cavalier use of brute government force has become routine, but the emerging story of how Hank Paulson and Ben Bernanke forced CEO Ken Lewis to blow up Bank of America is still shocking. It's a case study in the ways that panicky regulators have so often botched the bailout and made the financial crisis worse.
In the name of containing "systemic risk," our regulators spread it. In order to keep Mr. Lewis quiet, they all but ordered him to deceive his own shareholders. And in the name of restoring financial confidence, they have so mistreated Bank of America that bank executives everywhere have concluded that neither Treasury nor the Federal Reserve can be trusted.
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No wonder no banker in his right mind trusts the Fed or Treasury, and no wonder nobody but Pimco and other Treasury favorites is eager to invest in the TALF, the PPIP, or any of the other programs that require trusting the government as a business partner.
The political class has spent the last few months blaming bankers for everything that has gone wrong in the financial system, and no doubt many banks have earned public scorn. But Washington has been complicit every step of the way, from the Fed's easy money to the nurturing of Fannie Mae and Freddie Mac, and since last autumn with regulatory and Congressional panic that is making financial repair that much harder. The men who nearly ruined Bank of America have some explaining to do.
"The enormous pot of TAARP money has in fact corrupted both the private and the public sector," writes Donald Luskin in TARP Looking More Criminal by the Minute.
Yesterday’s sensational claims by New York Attorney General Andrew Cuomo — that Ken Lewis, CEO of TARP-recipient Bank of America, was pressured into what amounts to securities fraud by the Treasury and the Federal Reserve concerning his bank’s acquisition of Merrill Lynch — throws the question right into the headlines. It raises issues of corruption all around, and at the highest levels — from corporate CEOs and federal regulators to Mr. Cuomo himself.
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What originally prompted my friend Larry Kudlow to ask if TARP is a criminal enterprise was Wednesday’s report to Congress by TARP’s special inspector general, Neil M. Barofsky, in which it was disclosed that “nearly 20 preliminary and full criminal investigations” are underway, including “large corporate and securities fraud matters affecting TARP investments, tax matters, insider trading, public corruption, and mortgage-modification fraud.” When I first read that I rolled my eyes and said to myself, “Hey, what do you expect?”
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It’s easy to guess that Barofsky is looking into the possibility that Treasury Secretary Henry Paulson coerced the CEOs of the nine largest banks to accept capital investments from TARP, even though several of them didn’t want the government as a stakeholder. Wells Fargo chairman Richard Kovacevich, for example, says that he was “forced to take the TARP money.” Philip Swagel, who served at the time as assistant secretary for economic policy at the Treasury, admits that “there is no authority in the United States to force a private institution to accept government capital. This is a hard legal constraint.”
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But then again, the Emergency Economic Stabilization Act, the statute that authorizes TARP, doesn’t give the Treasury the power to make direct investments in banks at all. It gives the Treasury the power to buy troubled assets and to write insurance against losses in troubled assets. But there’s not one single solitary word in the act that authorizes the Treasury to buy stock in banks.
And there’s not one single solitary word in the act that authorizes the Treasury to do anything at all for auto companies like General Motors and Chrysler. The act only authorizes helping “financial institutions.” Yet billions of TARP dollars have gone to the two automakers.
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A $700 billion budget buys one heck of a big dog — apparently a dog that attracts some pretty big fleas.
Is TARP a criminal enterprise?
Larry Kudlow asks
Is the whole TARP plan a criminal enterprise? Sounds farfetched, I suppose. But after reading about Special Inspector General Neil Barofsky’s report, it may well be that TARP is just one big criminal problem.
Listen to this: Barofsky’s investigators reported Monday that they have opened 20 criminal probes into possible securities fraud, tax-law violations, insider-trading, and mortgage-modification fraud related to TARP. Yup, those are criminal probes. Barofsky is the special IG overseeing the bailout program. And for some reason the mainstream media refuses to report this on the front pages where it belongs.
Barofsky’s report spans 247 pages. And it says that the very character of the bailout program makes it “inherently vulnerable to fraud, waste and abuse, including significant issues related to conflicts of interest facing fund managers, collusion between participants and vulnerabilities to money laundering.”
By the way, one of Barofsky’s recommendations is for Treasury to abandon its whole plan of buying toxic assets from banks and investors. The IG’s report also notes that what started last October as a single-purpose $750 billion effort to buy toxic securities has morphed into twelve separate programs that cover up to $3 trillion in direct spending, loans, and loan guarantees. In other words, TARP is nearly equal in size to the entire federal budget.
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Think about this: TARP, which is now linked to substantial criminal activity, has ballooned to the size of a second federal budget and represents the biggest government-directed intrusion into the economy in history — vastly bigger than the New Deal. And not only is there TARP for banks, insurance companies, and non-bank financial institutions, but also for GM, Chrysler, and various auto suppliers, and perhaps soon enough for credit cards, newspapers, and other sectors of the economy.
Much as I am dismayed about the direction of the economy, I'm more distressed at what John Bogle calls the Crisis of Ethic Proportion
The old notion of trusting and being trusted -- which once was not only the accepted standard of business conduct but the key to success -- came to be seen as a quaint relic of an era long gone.
The proximate causes of the crisis are usually said to be easy credit, bankers' cavalier attitudes toward risk, "securitization" (which severed the traditional link between borrower and lender), the extraordinary leverage built into the financial system by complex derivatives, and the failure of our regulators to do their job.
But the larger cause was our failure to recognize the sea change in the nature of capitalism that was occurring right before our eyes. That change was the growth of giant business corporations and giant financial institutions controlled not by their owners in the "ownership society" of yore, but by agents of the owners, which created an "agency society."
The managers of our public corporations came to place their interests ahead of the interests of their company's owners. Our money manager agents -- who in the U.S. now hold 75% of all shares of public companies -- blithely accepted the change. They fostered the crisis with superficial security analysis and research and by ignoring corporate governance issues. They also traded stocks at an unprecedented rate, engaging in a dangerous spree of speculation.
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What's to be done? We must work to establish a "fiduciary society," where manager/agents entrusted with managing other people's money are required -- by federal statute -- to place front and center the interests of the owners they are duty-bound to serve. The focus needs to be on long-term investment (rather than short-term speculation), appropriate due diligence in security selection, and ensuring that corporations are run in the interest of their owners. Manager/agents need to act in a way that reflects their ethical responsibilities to society. Making that happen will be no easy task.
Jeffrey Goldberg in The Atlantic on Why I Fired My Broker
For most of our our adult lives, my wife and I have behaved in the way responsible cogs of capitalism are supposed to behave—we invested in a carefully calibrated mix of equities and bonds; we bought and held; we didn’t overextend on real estate; we put the maximum in our 401(k) accounts; we gave to charity; and we saved, but we also spent: mainly on gasoline, food, and magazines. In retrospect, we didn’t have the proper appreciation for risk, but who did? We were children of the bull market.
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Well, goodbye to all that. I took a random walk down Wall Street and got hit by a bus.
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IT TURNS OUT that my crucial mistake was believing that the brokers and wealth managers and cable-television oracles who make up the financial-services industrial complex actually had my best interests at heart. Or so say the extremely smart—and wealthy—people I asked to help me figure a way out of my paralysis. One of these people was Robert Soros, the deputy chairman of the fund started by his father, George. I went to see him at his office, where he spent two hours performing an autopsy on my assumptions.
“You think a brokerage should be a place you go to pay commissions for fair and unbiased advice, right?” he asked.
“Yes,” I said.
“It’s not. It never has been.” He then cited another saying of Buffett’s: “‘Wall Street is a place where whatever can be sold will be sold.’ You are the consumer of their dreck. What they can sell to you, they will sell to you.”
“But they told us—”
“They lied.”
He went on: “You should be disheartened and disappointed. But don’t kid yourself. You’re a naive capitalist. They were never your advisers. Do not for a moment think that a brokerage firm is your friend.”ß
Who Will Guard Your Nest Egg
Brokers are not legally bound to put your best interests first.
Independent registered financial advisors are.
Vetting a Potential Financial Advisor
There is so much sense in Nassim Nicholas Taleb's Ten principles for a Black Swan-proof world everyone should read the whole thing.
1. What is fragile should break early while it is still small.
2. No socialisation of losses and privatisation of gains.
Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus.
Find the smart people whose hands are clean.
4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks.
5. Counter-balance complexity with simplicity.
6. Do not give children sticks of dynamite, even if they come with a warning .
Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.
7. Only Ponzi schemes should depend on confidence.
Governments should never need to “restore confidence”.
8. Do not give an addict more drugs if he has withdrawal pains.
Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.
9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement.
Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require
10. Make an omelette with the broken eggs.
Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.
William Black, the author of The Best Way to Rob a Bank is to Own One, was in New York last week for a conference at the John Jay College of Criminal Justice to answer the question "How did they get away with it."
Now Black won a reputation as the senior regulator who cracked down on banks in the savings and loan crisis of the 1980s ,so he knows what he's talking about. His interview by Bill Moyers last week on PBS was extremely disturbing and damning.
Hat tip Rod Dreher, Williamm K. Black, The government is lying to us.
Black goes on to say how can we justify not having a first-rate, nonpartisan investigation finding out why this happened and how it can be prevented. Why aren't we having that? Because, he says, the government literally doesn't want to know, or rather, doesn't want the public to know. Black alleged that the government is lying about the bank losses to maintain artificial public confidence. Moyers pinned him down on this point, asking if he really did believe that the Obama administration is intentionally deceiving the public.
Black: "Absolutely. Because they are scared to death of a collapse. ... I think they are sincerely just panicked: 'We cannot let big banks fail.'"
And if they keep lying about it? Black says banks will stay enormously weak, and the government will continue "obscene giveaways of taxpayer money."
You can watch the interview here and read the transcript.
Here are a few excerpts:
Fraud is deceit. And the essence of fraud is, "I create trust in you, and then I betray that trust, and get you to give me something of value." And as a result, there's no more effective acid against trust than fraud, especially fraud by top elites, and that's what we have.
It begins in the boardrooms and the CEO offices and this is how they do it.
Well, the way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road.
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Liars' loans mean that we don't check. You tell us what your income is. You tell us what your job is. You tell us what your assets are, and we agree to believe you. We won't check on any of those things. And by the way, you get a better deal if you inflate your income and your job history and your assets.
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This stuff, the exotic stuff that you're talking about was created out of things like liars' loans, that were known to be extraordinarily bad. And now it was getting triple-A ratings. Now a triple-A rating is supposed to mean there is zero credit risk. So you take something that not only has significant, it has crushing risk. That's why it's toxic. And you create this fiction that it has zero risk. That itself, of course, is a fraudulent exercise. And again, there was nobody looking, during the Bush years. So finally, only a year ago, we started to have a Congressional investigation of some of these rating agencies, and it's scandalous what came out. What we know now is that the rating agencies never looked at a single loan file. When they finally did look, after the markets had completely collapsed, they found, and I'm quoting Fitch, the smallest of the rating agencies, "the results were disconcerting, in that there was the appearance of fraud in nearly every file we examined."
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Black said it was more than a financial crisis, it was a moral crisis, a fundamental lack of integrity. In the Savings and Loan crisis only about 10% of the CEOs engaged in fraud.
So, 90 percent of them were restrained by ethics and integrity. So, far more than law or by F.B.I. agents, it's our integrity that often prevents the greatest abuses. And what we had in this crisis, instead of the Savings and Loan, is the most elite institutions in America engaging or facilitating fraud.
David Brooks writes there are two overlapping narratives that explain the implosion of the global economy Greed and Stupidity
There's Greed
The U.S. economy got finance-heavy and finance-mad, and finally collapsed. When it did, the elites did what all elites do. They took care of their own: “Money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves,” Johnson writes.
An oligarchy takes control of the nation. The oligarchs get carried away and build an empire on mountains of debt. The whole thing comes crashing down. Johnson’s remedy is clear. Smash the oligarchy. Nationalize the banks. Sell them off in medium-size pieces. Revise antitrust laws so they can’t get back together. Find ways to limit executive compensation. Permanently reduce the size and power of Wall Street.
Or does Stupidity explain it better?
Overconfident bankers didn’t know what they were doing. They thought they had these sophisticated tools to reduce risk.But when big events — like the rise of China — fundamentally altered the world economy, their tools were worse than useless.
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Banks got too big to manage. Instruments got too complex to understand. Too many people were good at math but ignorant of history.
The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.
Either way or both, we're in for crushing amounts of taxation.
Michael Boskin calculates that Obama's borrowing and spending adds $6.5 trillion to the national debt which will have to be paid back.
If distributed among those who pay taxes, only about 50% of the US population, every family will have to pay an additional $163,000.
These deficits are so large for a prosperous nation in peacetime -- three times safe levels -- that they would cause the debt burden to soar toward banana republic levels. That's a recipe for a permanent drag on growth and serious pressure on the Federal Reserve to inflate, not the new era of rising prosperity that Mr. Obama and his advisers foresee.
Charles Krauthammer on Obama's Ultimate Agenda
we are now so deep into government intervention that constitutional objections are summarily swept aside. The last Treasury secretary brought the nine largest banks into his office and informed them that henceforth he was their partner. His successor is seeking the power to seize any financial institution at his own discretion.
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Obama has far different ambitions. His goal is to rewrite the American social compact, to recast the relationship between government and citizen. He wants government to narrow the nation's income and anxiety gaps. Soak the rich for reasons of revenue and justice. Nationalize health care and federalize education to grant all citizens of all classes the freedom from anxiety about health care and college that the rich enjoy. And fund this vast new social safety net through the cash cow of a disguised carbon tax.
Obama is a leveler. He has come to narrow the divide between rich and poor. For him the ultimate social value is fairness. Imposing it upon the American social order is his mission.
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If Obama has his way, the change that is coming is a new America: "fair," leveled and social democratic. Obama didn't get elected to warranty your muffler. He's here to warranty your life.
"Congress and the White House are as prudent as a family that greets a huge, emergency roof-repair bill by visiting gourmet bistros, booking Caribbean cruises, and buying Maseratis for the teenagers." - Deroy Murdock
Look across the pond to see what crushing debt foretells about our future. The Spectator tells us just what will be needed to bring the U.K.'s budget into balance. via Tim Montgomery
To comprehend the scale of the sickening task awaiting George Osborne if he becomes chancellor, consider the following. If he were to raise VAT to 25 per cent, double corporation tax, close the Foreign Office, cancel all international aid, disband the army and the police, release all prisoners, close every school and abolish unemployment benefit he would still be unable to close the gulf between what the UK government spends and what it raises in taxes.
...in the long violent saga of mankind we have rarely done anything as benign as going shopping, rarely devised anything as socially advantageous as property rights and the rule of law, rarely enriched the poor or enhanced lives as we did by creating capitalism.
War, pestilence. And your problem is shopping?
Daniel Finkelstein in the London Times on whether there is a fairer, more rational alternative to capitalism.
I just can't keep up with all the news coming from Washington
America, World's Scariest Emerging Market by Desmond Lachman
A singular characteristic of an emerging market heading for deep trouble is a seemingly suicidal tendency to become overly indebted to foreign creditors. That tendency underlay the spectacular collapse of the Thai, Indonesian and Korean currencies in 1997. It also led Russia to default on its debt in 1998 and plunged Argentina into its economic depression in 2001. Yet we too seem to have little difficulty becoming increasingly indebted to the tune of a few hundred billion dollars a year. To make matters worse, we do so to countries like China, Russia and an assortment of Middle Eastern oil producers -- none of which is particularly well disposed to us.
Like Argentina in its worst moments, we never seem to question whether it is reasonable to expect foreigners to keep financing our extravagance, and we forget the bad things that happen to the Argentinas or Hungarys of the world when foreigners stop financing their excesses. So instead of laying out a realistic plan for increasing our national savings, we choose not to face up to the Social Security and Medicare crises that lie ahead, embarking instead on massive spending programs that -- whatever their long-run merits might be -- we simply cannot afford.
The Czech prime minister told the European Parliament
“The U.S. is repeating mistakes from the 1930s, such as wide-ranging stimuluses, protectionist tendencies and appeals, the Buy American campaign, and so on. All these steps, their combination and their permanency, are the road to hell.”
The Financial Times says the crisis has broken the American social contract
people were free to succeed and to fail, unassisted. Now, in the name of systemic risk, bail-outs have poured staggering sums into the failed institutions that brought the economy down. The congressional response is a disaster. If enacted these ideas would lead to an exodus of qualified employees from US banks, undermine willingness to expand credit, destroy confidence in deals struck with the government and threaten the rule of law. I presume legislators expect the president to save them from their folly. That such ideas can even be entertained is a clear sign of the rage that exists.
The Social Security surplus has run out, ten years early. Without that surplus the government will be forced to borrow an additional $700 billion over the next decade from China, Japan and other investors.
"Over the past 25 years, the government has gotten used to the fact that Social Security is providing free money to make the rest of the deficit look smaller," said Andrew Biggs, a resident scholar at the American Enterprise Institute. "Now they've essentially got to pay their own way, at least a little more fully.
"Instead of Social Security subsidizing the rest of the budget," he said, "the rest of the budget will have to subsidize Social Security."
Chairman Barney Frank and his House Financial Services Committee approves on a new bill that would impose financial controls on the pay of all employee of any company that received a capital investment from Washington
It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.
The prospect of a new era of government-controlled business, a dramatic break from American free enterprise is unnerving.
I await the plans from the Office of People Who Are Much Smarter Than You Are, the vast majority of whom have no business experience, on just how they will keep American car companies running and make them profitable.
Already, the Food Safety Modernization Act, pending in the House, promises a vast new bureaucracy to regulate even small roadside stands by forcing them to register with the federal government as 'food production facilities" or risk a million dollar fine.
It will only be eight or ten years before stocks recover to its prior peak
It's all too much, too fast, too expensive and too much indebtedness.
I just can't keep up with all the news coming from Washington
America, World's Scariest Emerging Market by Desmond Lachman
A singular characteristic of an emerging market heading for deep trouble is a seemingly suicidal tendency to become overly indebted to foreign creditors. That tendency underlay the spectacular collapse of the Thai, Indonesian and Korean currencies in 1997. It also led Russia to default on its debt in 1998 and plunged Argentina into its economic depression in 2001. Yet we too seem to have little difficulty becoming increasingly indebted to the tune of a few hundred billion dollars a year. To make matters worse, we do so to countries like China, Russia and an assortment of Middle Eastern oil producers -- none of which is particularly well disposed to us.
Like Argentina in its worst moments, we never seem to question whether it is reasonable to expect foreigners to keep financing our extravagance, and we forget the bad things that happen to the Argentinas or Hungarys of the world when foreigners stop financing their excesses. So instead of laying out a realistic plan for increasing our national savings, we choose not to face up to the Social Security and Medicare crises that lie ahead, embarking instead on massive spending programs that -- whatever their long-run merits might be -- we simply cannot afford.
The Czech prime minister told the European Parliament
“The U.S. is repeating mistakes from the 1930s, such as wide-ranging stimuluses, protectionist tendencies and appeals, the Buy American campaign, and so on. All these steps, their combination and their permanency, are the road to hell.”
The Financial Times says the crisis has broken the American social contract
people were free to succeed and to fail, unassisted. Now, in the name of systemic risk, bail-outs have poured staggering sums into the failed institutions that brought the economy down. The congressional response is a disaster. If enacted these ideas would lead to an exodus of qualified employees from US banks, undermine willingness to expand credit, destroy confidence in deals struck with the government and threaten the rule of law. I presume legislators expect the president to save them from their folly. That such ideas can even be entertained is a clear sign of the rage that exists.
The Social Security surplus has run out, ten years early. Without that surplus the government will be forced to borrow an additional $700 billion over the next decade from China, Japan and other investors.
"Over the past 25 years, the government has gotten used to the fact that Social Security is providing free money to make the rest of the deficit look smaller," said Andrew Biggs, a resident scholar at the American Enterprise Institute. "Now they've essentially got to pay their own way, at least a little more fully.
"Instead of Social Security subsidizing the rest of the budget," he said, "the rest of the budget will have to subsidize Social Security."
Chairman Barney Frank and his House Financial Services Committee approves on a new bill that would impose financial controls on the pay of all employee of any company that received a capital investment from Washington
It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.
The prospect of a new era of government-controlled business, a dramatic break from American free enterprise is unnerving.
I await the plans from the Office of People Who Are Much Smarter Than You Are, the vast majority of whom have no business experience, on just how they will keep American car companies running and make them profitable.
Already, the Food Safety Modernization Act, pending in the House, promises a vast new bureaucracy to regulate even small roadside stands by forcing them to register with the federal government as 'food production facilities" or risk a million dollar fine.
It will only be eight or ten years before stocks recover to its prior peak
It's all too much, too fast, too expensive and too much indebtedness.
Senator Gregg says U.S. couldn't even join EU due to debt levels
I agree with Fred Barnes that the incredible period of growth over the past quarter century was not 'fleeting' who writes
Obama also seems misinformed about America's economic record in recent decades. Prosperity was "fleeting," he said, --f he's talking about the past quarter-century, most Americans would love to return to that era. From late 1982 well into 2007, we experienced one of the greatest economic booms in the history of the world, interrupted only by two shallow and brief recessions. Prosperity wasn't fleeting. It was practically non-stop--until the housing bust and credit crisis hit last year.
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Treasury Secretary Tim Geithner just had to defend his institutional takeover plan against charges of radicalism.
"Do you realize how radical your proposal is?" Rep. Donald Manzullo (R-Ill.) asked.
"It's not radical. . ." Geither began, before Manzullo interrupted him.
"You're talking about seizing private businesses and you don't consider that radical?"
Some people wonder whether Obama wants his bank plan to fail so he can nationalize the financial sector
I just don't have much confidence in the government running things. Neither does Scipio
You might wonder what sort of people will be attracted to these new centers of power and influence. Easy answer: The same sort of people who are attracted to the Internal Revenue Service, Environmental Protection Agencies and Departments of Education—petty busybodies, grim manipulators, and small-minded paper pushers. These types will exert more direct control over your life than any religion ever could. Indeed, this motley throng will become the new priesthood of the new America.
And from where will come the necessary funds to pay for all of this? It will come from you. You will be taxed and taxed again to pay for these creatures whose sole reason to live is to ride herd over you.