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Greetings good citizen,

I think I’ve done a good job of not being too ‘strident’ with my warnings…but when topics I raised over a year ago start cropping up in far better ‘trafic’ed’ sites, maybe it’s time to revisit things past.

Let’s start off with with this story about credit card debt ‘prefaced’ with this commentary by C.K. Michaelson of Some Assembly Required fame.

Consumer Economy: JP Morgan Chase reported deep losses on its prime mortgage and credit card businesses in 4Q09, pretty much stomping out the idea that the consumer was on the mend. Total credit losses were up 72% y/y even though the number of cards outstanding and credit balances both declined by 14%. Even losses on prime mortgages tripled to $568 million. In the coming decade, revolving consumer credit balances are expected to trend down from the current $900 billion to at least $500 and perhaps $300 billion. With consumption falling this much, companies will go out of business by the bucketfuls. Governments, unable to pay their bills, will need to renege on contracts for employees and retirees, with consequences few can imagine.

No matter how you slice it, that’s a far from ‘rosy’ prognosis, much more grim than we are accustomed to…although it isn’t from a MSM/Happy Talk source.

While we’re gazing into the future, let’s turn our attention to the ‘public education’ front for more grim news about the future of our children and, by extension, our society…

For-profit Education: Milton Friedman's Dream

by Paul A. Moore / January 12th, 2010

Something for advocates of public education to keep in mind now is the changed face of the enemy. The oligarchs; Gates, Broad, the Walton Family, the Bush Family, Bloomberg and the CEO’s represented in the Business Roundtable, had a plan for the destruction of the public schools. They were supremely confident they could bring to fruition Milton Friedman’s dream that education could become a highly profitable industry. Unbeknownst to them though, they had an Achilles Heel. Their plan was fatally flawed because it was inextricably bound up with the dynamic growth of a global capitalist economy.

That’s over with now. Why? For one, because globalization was so successful in its brief heyday. It penetrated every market on the planet. Who would have thought China could become the largest market for autos the way it has this year? It found the absolute lowest wage possible in the undeveloped world. They bumped right up against outright slavery where possible and went right over the edge.

The effect of this success was profits on a scale heretofore unimaginable but it also exhausted the systems possibilities for growth. And growth is its lifeblood. Growth kept it healthy and dynamic. When that growth became impossible capitalism turned in on itself. It began to cannibalize itself. That’s when you get Wall Street turning investment banks into casinos and investment vehicles into logarithms. No more real wealth was being created so the bankers turned to magic tricks, in the form of derivatives, to give the appearance of wealth creation. That’s when you get some of the largest corporate entities ever created disappearing into the history books. So long General Motors!

The other thing a global economy had to have if it was going to work was a plentiful and cheap supply of oil. If the world is not now on the downside of the Peak Oil curve, its close enough for government work in the US, China, India, Russia, the EU. Rulers in these developed and developing countries have begun to act along those lines. For instance, the US won’t be getting out of the Middle East anytime soon for the oil supply it offers. US military presence there has nothing to do with silly bleatings over “underwear bombers” or terrorist threats. And for another instance, economic nationalism, in the form of US tariffs on Chinese steel to give one example, is the wave of the future. Globalization cannot withstand the end of free trade or oil driven trade but it faces both.

A US soldier or two, away from the harrowing places they have been sent, given time to consider, has probably wondered why their government has contracted with Blackwater now Xe-type mercenaries at ten times the price to pull duties once assigned to them. It is completely absurd on its face. The product of a hidden agenda is always absurdity. Globalization, which seeks privatization of all things, is that agenda. [Um, that is indeed one and a very ‘superficial’ answer. What we’re really looking at here is an effort to ‘rein in’ the surplus population before civil unrest causes civilization to collapse. Sadly, it’s a poorly thought out plan.]

Teachers across this country have come to live everyday with this absurdity. Incessant testing with no relation to the real world, the mindless collection of trivia classified as data, forcing the “business model” (like Enron or Lehman Brothers or General Motors) on the public schools, driving the arts and the social sciences out of the curriculum, and having every Chancellor, Superintendent, Commissioner, and Secretary of Education promotes charter schools over their own public schools at every turn. Absurd! But why? Globalization.

There is the temptation to believe the global economy will enjoy a “recovery” and in the US we will visit even greater heights of material prosperity. This is a delusion that is being foisted on the American people. There is no rational reason for this system to be revived and there are oligarchs, and people at Goldman Sachs, and people in the US government and military that know this. They have left behind some people in the public schools, “dead-enders” like Michelle Rhee in Washington D.C. and Joel Klein in NYC to soldier on with the corporate catechism. But they are no longer a credible threat.

The new danger appears in the rise of the seamless melding of the corporation and the state in the US. Our new corporate-state is reflected in the unprecedented amount of money Secretary of Education Arne Duncan suddenly has at his disposal to disrupt the public schools. Duncan has put the 50 states in a competition, he calls it the Race To The Top, to become the most effective at destroying public education and building the charter school movement. Over $4-billion will be spread among the winners. The denial of funds is expected to finish off the losers.

Some people are confused as to why President Obama’s education policy is indistinguishable from that of George W. Bush. It is because both are servants of the corporate-state. In regards to the public schools and every other vestige of democracy in US society the corporate-state is the last stage where fighting back will be possible. Next comes the national curriculum from Winston Smith’s world.

I guess you’d have to be a regular reader to make sense of his last remark. I have no clue who ‘Winston Smith’ is much less what he’s noted for.

Now it’s time to throw some gasoline onto the spark I struck for you last night…watch the video, think about what he’s saying and try not to shit your pants…

Jim Rogers: Brace Yourself For Food Shortages, Thanks To The Banks Hoarding Cash

Actually, the headline is scary enough all by itself…

Thanks for letting me inside your head,

Gegner

'Witching day'

Greetings good citizen,

Today was one of those ‘option settlement days’ where investors are obliged to ‘resolve’ the positions they hold, either by taking delivery of the item or selling the contract to someone who wants to take delivery…hopefully at a profit.

Um, if we turn our attention to the broader market, it looks like there were a lot of investors holding options worth less than they bid for because markets around the world sold off today.

It doesn’t require too much imagination to figure out why, ‘speculators’ probably had to pony up some cash in order to ‘liquidate’ their positions in various commodities, even oil fell almost $5 a barrel today.

Sort of odd to see the true price of an item ‘discovered’ when it is time to actually take possession. Playing the commodities market in a world full of ‘broke’ deadbeats is a very dangerous game indeed, IF you can’t take possession of the goods and sit on them until you can get your price that is…

After ‘tasking’ you all week with, um, ‘alternative’ news sources I selected tonight’s offering from the NY Times (although at the time of selection, this story remained and ‘orphan’, no NY Times writer had attached their byline to it…)

JPMorgan Loan Losses Overshadow Higher Q4 Profit

NEW YORK (Reuters) - JPMorgan Chase & Co reported deep losses on mortgage and credit card loans in the fourth quarter, dashing hopes that consumer credit is on the mend and sending the bank's shares down 2.1 percent.

Quarterly profit soared to $3.3 billion (2 billion pounds), topping Wall Street expectations, but analysts had been hoping for signs that the bank's credit costs were levelling off or even starting to fall.

In a conference call with investors, Chief Executive Jamie Dimon said, "We don't know when the recovery is." [Boom, boom shaka-laka—what? Oh, did the cheerleaders forget what they were cheering about? That’s a damn shame, too bad it happens far too often.]

JPMorgan is the first of the major banks to report fourth-quarter numbers, and its results may bode ill for competitors.

Investors were keen to hear JPMorgan's forecast for 2010, and its projections were hardly sunny. Asked about the outlook for the economy, Dimon said, "There are some good signs out there, but we don't know."

The New York-based bank's overall quarterly profit amounted to 74 cents a share, beating analysts' average estimate of 61 cents, according to Thomson Reuters I/B/E/S. Year-earlier earnings were $702 million, or 6 cents a share. [That’s one heck of an upside no matter how you slice it, too bad it’s coming out of their customer’s hydes…]

Revenue, excluding assets that have been packaged into bonds and largely sold to investors, totalled $25.2 billion, falling short of analysts' average forecast of $26.8 billion.

JPMorgan shares were down 2.1 percent to $43.75 in morning trading. Shares of other major banks were also lower, weighing on the broader market.

"The logic is, as goes JPMorgan, so goes the rest of the banks," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati. [Understand good citizen that without trillions of your and my dollars, there isn’t a single bank out there that could have kept its doors open…worse, they’d all be toast still if they were forced to use honest accounting methods!]


CONSUMER EXPOSURE

The bank's large mortgage and credit card businesses have seen rising credit costs in the last year, offset only by record investment banking revenue.

JPMorgan said it set aside $4.2 billion to cover mortgage losses in the fourth quarter, up $653 million from the same quarter a year earlier. Loan loss reserves in its commercial banking unit increased to $494 million from $190 million.

Prime mortgage net charge-offs -- loans the bank does not expect to be repaid -- soared to $568 million, or an annualized 3.81 percent of the book, from $195 million, or 1.2 percent, a year earlier. [You don’t suppose the continuing off-shoring due to globalization is responsible for any of this, do you?]

The bank wrote off loans at a 9.33 percent annualized rate during the quarter, up from 5.56 percent a year earlier but down from 10.3 percent in the 2009 third quarter.

Investment banking generated a fourth-quarter profit of $1.9 billion, compared with a loss of $2.4 billion a year earlier but down 1 percent from the third quarter. Fixed-income trading volume fell from the third quarter.

"JPMorgan is the bellwether, it is the best, most well-capitalized, best-managed bank," said Jamie Cox, managing partner at Harris Financial Group in Colonial Heights, Virginia. "You would hope they'd be the first bank to be able to begin the process of paring down loan loss reserves." [One would guess that swallowing Bear Sterns took a larger toll on profits than they originally imagined…]

JPMorgan's credit losses could indicate further trouble for Citigroup Inc, which reports quarterly results on Tuesday, and Bank of America Corp, which reports on Wednesday. Both banks have large consumer exposure.

Bank of America shares fell 3 percent to $16.31, while Citi shares fell 1.4 percent to $3.46.

(Reporting by Elinor Comlay; additional reporting by Leah Schnurr, Clare Baldwin, Jonathan Spicer and Dan Wilchins; editing by John Wallace)

There’s a bit of irony for you good citizen, JP Morgan is bleeding red ink which doesn’t bode well for the rest of the banking community…except that banking powerhouse…Goldman Sachs.

In yet another ‘mind-bending’ report it seems JP Morgan also made 11.7 billion dollars in profit…but…it has somehow managed to set aside 29.7 billion dollars for ‘bonuses’.

I must be awfully stupid because I can’t for the life of me figure out how that works.

Speaking of , er, ‘stupid’, if you feel like taking a walk on the wild side you can have a gander at this ‘astrologically driven’ forecast for the upcoming year.

At ‘face value’ the whole thing appears a little absurd, but, if you start scratching around into some of the details…it’s not that far off.

Nobody knows what the future holds but this appears to have a bit more than ‘entertainment value’ going for it.

Thanks for letting me inside your head,

Gegner

Mystery Buyer!

Greetings good citizen,

I’m an hour ahead of market close and at last glance the US markets are, er, ‘out-performing’ our Western Hemisphere, er, ‘peers’.

I once again ditched a MSM story for ‘more reliable’ source to use as tonight’s offering

By way of comparison, the title of tonight’s article isn’t even ‘newsworthy’ as far as the MSM is concerned. They want you to keep believing that our creditors are tripping over themselves to buy up our, er, ‘recycled’ debt.

Um, there should be no irony lost on the fact that there are news stories which directly contradict that particular meme. China is buying up commodities like there was no tomorrow AND they just slammed the brakes down on their internal ‘stimulus spending program’.

In another ‘interesting development’ it seems retailers ‘overbought’…but the fucktards on Wall Street choose to view this as ‘confidence’ in the consumer rather than what it really is… an expensive fuck up that somebody’s bound to get canned for!

Without further adieu, let us proceed with tonight’s offering:

[Purloined from: Jesse’s Crossroads Café]

Who Is the ‘One Big Bidder’ For US Treasuries?

There are a number of possibilities for the identity of the non-primary dealer domestic source of enormous purchases at the longer end of the yield curve in recent US Treasury auctions.

It could be a misclassification, a branch of a bank representing a foreign power. The problem with this theory is that they have a particular reluctance to buy the long end of the curve.

It also could be a legitimate domestic purchaser like a pension fund compelled to match duration of obligations, as is required by a little noted ruling of the US government a couple of years ago. They might be shifting out of other long term instruments with similar durations but more risk.

And of course, it might very well be the Federal Reserve Bank, or the Treasury via the Exchange Stabilization Fund.

It could also be the one big bidder who comes in with some regularity and smashes down the price of precious metals with the obvious intent of manipulating the market like clockwork just after the PM fix in London.

It might even be the big bidder who stands ready to buy the SP futures market at every turn, maintaining a floor on the market and a steady drift higher in prices with no change in fundamental underpinnings. Their hand in the market is apparent.

It is less probable, given the state of market manipulation by a few big proprietary trading desks riding another wave of cheap Fed money, but it might even be the party that entered the US equity market yesterday at 12:03 PM with a HUGE order (228,000 contracts) to buy the SP futures. As Larry Levin noted, "As of now I don't have a firm answer, but whether it was HFT activity, the "Helicopter," or a massive cross trade, it sure set the bottom in for the afternoon. Everyone in the Dow, Nasdaq, and S&P pits were talking about it and nobody was willing to sell into that massive bid." And so the market rallied once again into its current peak.

As the article from the Financial Times indicates, it might never be possible to find out who this is, unless there is an audit of the market that is made public. As Edmund Burke noted, "Fraud is the Minister of Injustice" and it is my experience that opacity is the accomplice of fraud.

If this is price manipulation, no matter the intentions or beneficiaries, it is likely that it is mispricing risk in a big way, and will eventually will fail, and that its failure will cause a great deal of pain in the real economy for innocent bystanders, and will end in tears. And when that time comes, expect those who created the crisis to make you another offer that they think you cannot refuse.

You decide what is most likely, and what needs to be done about it, if anything. More than a few people are wondering at the lack of response from the people in various nations, particularly in the UK and the US.

Here is some old knowledge that might prove illuminating.

National Madness
Gilbert Keith Chesterton 1910

"This slow and awful self-hypnotism of error is a process that can occur not only with individuals, but also with whole societies. It is hard to pick out and prove; that is why it is hard to cure. But this mental degeneration may be brought to one test, which I truly believe to be a real test.

A nation is not going mad when it does extravagant things, so long as it does them in an extravagant spirit. But whenever we see things done wildly, but taken tamely, then the State is growing insane...

For madness is a passive as well as an active state: it is a paralysis, a refusal of the nerves to respond to the normal stimuli, as well as an unnatural stimulation. There are commonwealths, plainly to be distinguished here and there in history, which pass from prosperity to squalor or from glory to insignificance, or from freedom to slavery, not only in silence, but with serenity."


And in this slow descent into madness, the worst is yet to come.

Gegner here: I’m sure most of you will draw the correct meaning from the above passage, but paranoid types like myself fear you’ll miss the deeper message. Those who fail to realize that nobody is waiting to rescue us will be caught ‘unprepared’ for what will prove to be a very, er, ‘violent collapse’.

Which is to say that the people who are supposed to ‘warn us’ are in on the crime…that’s where the ‘surprise’ will come from.

Back to our article:

Financial Times
Direct bids for US Treasury notes lead to speculation over buyer
By Michael Mackenzie in New York
January 14 2010 02:00

Auctions of US Treasury notes this week have attracted extremely strong buying from domestic institutional investors, fuelling speculation that "one big bidder" has decided to defy the conventional wisdom on Wall Street that US government debt is due for a fall.

Yesterday, direct bids accounted for 17 per cent of the sales of $21bn in 10-year Treasury notes, far higher than the recent average of 7.4 per cent. It was the highest percentage of direct bids in a 10-year Treasury auction since May 2005.

On Tuesday, direct bids accounted for a record 23.4 per cent of the bidding for $40bn in three-year notes, up from an average direct bid of 6 per cent.

Market participants say the unusually high level of direct bidding suggests that a large investor is looking to accumulate Treasuries without alerting the primary dealers on Wall Street to its intentions.

"It appears to us that someone is trying to hide their apparent interest in owning these auctions from the rest of the market," said David Ader, strategist at CRT Capital.

Rick Klingman, managing director at BNP Paribas, said: "It is unusual to see such a spike in the direct bid and I would imagine it is one big bidder. There is no way we will find out who it is, not now, or ever." [How convenient…]

The surge in direct bidding is particularly notable because it comes after predictions that the record levels of Treasury debt issuance would exhaust investor demand, driving yields higher.

Among the most high-profile warnings came from Pimco, manager of the largest bond fund, which raised concerns about the escalating supply of US Treasury debt.

Attention will now focus on whether there is similar direct demand for today's $13bn 30-year bond sale.

The 10-year notes were sold at a yield of 3.754 per cent yesterday, the highest rate awarded for a note sale since June, when they were issued at 3.99 per cent. At the start of the year the yield on 10-year notes briefly traded at 3.90 per cent, as many investors talked down the prospects for Treasuries. The note traded at about 3.70 per cent earlier this week and was at 3.70 per cent late yesterday.

Under the three main classifications of buyers in Treasury debt sales, direct bidders are generally domestic non-primary dealer banks and large institutional investors. Normally their presence at Treasury auctions is small, as they usually buy debt through the primary dealer network, which currently numbers 18 banks and broker/dealers.

Posted by Jesse at 10:02 AM

What do you think good citizen? Who do you suppose our ‘mystery buyer’ of US debt is if it isn’t the Chinese? Understand that even the wealthiest individuals wouldn’t risk putting that much of their personal wealth in one basket. Government debt may be the safest but history is full of governments that no longer exist.

And given the actions of what passes for our current government, I’d say their days are numbered too.

Which brings us to the most disturbing aspect of our times…has our government AND the media been captured by the few who control the multi-national corporations?

You can’t believe the news and those poor slobs have to do what they’re told if they want to see their next paycheck, so how ‘free’ are they to report the truth?

There’s your answer, they aren’t…and neither are you.

Leaves you without any decent options, doesn’t it? You either listen to nutjobs like myself who are, er, guessing at what’s going down or you listen to bought and paid for shills who can’t tell you the truth because their superiors don’t want you to know.

How’s that for a fine kettle of fish?

Thanks for letting me inside your head,

Gegner

Centered

Greetings good citizen,

The markets closed up a tiny bit today; proving nothing that yesterday’s market didn’t already tell us, which is pretty much nothing.

Why bring it up? No good reason I guess. Just something to do while we’re waiting for the worms to come.

Which brings us to the ‘bad news’…

Tonight’s offering is another ‘meta’ piece on a subject that I can’t remember if I’ve already shot my mouth off about before. I’m not about to sift through three years worth of blog posts to figure it out either. As close as I can recall, it is one of those things I meant to write about but then I changed my mind and wrote about something else instead.

Um, there’s a fine line between ‘piquing someone’s interest’ and boring them to death…and I fear I’m on the verge of the latter.

What is ‘Goober’ going to waste your time with now?

Well, I was listening to NPR this afternoon and one the talking heads started into a diatribe about the fucking ‘center’…and I damn near lost it because where the center actually is and where these clowns pretend it is are two separate animals.

Um, this is sort of ‘typical’ because the whole story is actually kind of amusing, in that sick way that most conservative philosophies need you to be a little twisted to comprehend them.

There was a ‘political cartoon’ in the opinion section of one of NPR’s websites for one of their shows…the cartoon has been there for 2 months…and, as you might expect, the conservatives remained blissfully ignorant of it for a solid month and a half. The cartoon, actually it’s an animation so it’s a little more ‘graphic’ than a comic sketch with word balloons.

Um, anyway…the cartoon is titled ‘How to speak ‘teabag’’

Since this um ‘ridicules’ the conservative mentality…(such as it is) the conservative ‘community’ started an uproar over, you guessed it, their ‘tax dollars’ being used to fund this kind of, er, humor.

Believe me when I tell you good citizen, the conservatives are ‘outraged’, simply outraged that tax dollars are being ‘frittered away’ in this fashion.

I speak from experience when I say that NPR pays peanuts…you don’t create for them because you’re looking for a payday, you do it because you believe.

I guess what I’m trying to say is it went completely unnoticed for the first 6 weeks because of the well-established conservative, um, ‘aversion’ to exposing themselves to conflicting points of view.

Even Rush insists you have to listen to him for six weeks until you’re ‘de-programmed’ enough to begin accepting the ‘truth’…

But I’m drifting off track.

Where do you suppose we would have to go to find, er, ‘neutral’ territory? The theoretical ‘center’ of the political spectrum…does anyone have a clue?

I’m going to tell you right here and now that the center is a lot further to the left than most of you have been lead to believe.

Most of you have been taught that our ‘Fabian Democracy’ is a ‘left of center’ construct, something I vehemently deny because democracy as it is currently practiced removes you completely from the decision making process.

You only get to make one decision and after it’s made you remain out of the loop, completely out of touch with whatever is done in your name.

This, I don’t need to tell you, is no a ‘left of center’ construct but a right of center construct! Understand that the left doesn’t trust the government and the right doesn’t trust the people!

With that as a given, just where is this ‘center’ they keep talking about?

Perhaps we need to ‘simplify’ the sides a little more, we get a meaningful start when we go with the idea that the left is ‘people centric’ and the right is ‘power centric’ which is the same thing as saying they favor ‘rulers’ over justice.

These are the same freaks that supported monarchy (as long as they were favored by the ruling class.) These aren’t your ‘fellow citizens’, these are your ‘betters’, people who would have you clapped in irons and stripped of your holdings if you dared to stand up for your rights…and if you stood still and took it, so much the better as far as they were concerned!

And those ‘assholes’ haven’t ‘disappeared’; they’re still with us.

Um, sorry, where was I? Oh yeah, we were searching for the ‘center’, that neutral ground where everything is fair, square and on the level.

The left is interested in ‘fairness’ and the right is interested in power (for themselves, they fear others having power over them.)

So where is the middle? If you’re a ‘righty’ there’s no such thing! There are only those who have/wield power and those who don’t.

Not too ironically, this makes compromise damn near impossible!

The only possible compromise is one where nobody has power and this is ‘inconceivable’ to the conservative mind. Were they ever to find themselves in such a position, they would lead the charge to ‘fill the void’, even if none existed.

Um, sorry good citizen, I’m showing my own ‘prejudice’ here as I believe conservatism is the end result of centuries of bootlicking. Where a whole swath of humanity has become so accustomed to ‘leaching off of royalty’ that their minds are incapable of compromise, they would literally rather die than trust in an impartial, fair and just system.

Sadly, we are still no closer to finding the ‘center’. To accomplish that goal we have to make a very strange ‘assumption’, we’d have to ‘assume’ that people were rational and mentally competent enough to stand on their own two feet…then we can proceed.

Shazam! Now that we have magically eliminated those not mentally equipped to make decisions on their own, we can proceed with our exercise in finding the ‘center’ of the socio-political spectrum.

Note that I didn’t use ‘economic’ as one of our measures because ‘the center’ automatically assumes all participants are of ‘equal worth’, regardless of their economic circumstances.

So how many of our current ‘centrists’ actually belong there? I’d say we’ve wiped them out in one fell swoop, but that happens whenever you start looking at politicians and their ‘campaign war-chests.’

Does the center seek power for the sake of having power itself?

No, the center does not seek power, power is a tool that should never be used for personal gain…which effectively eliminates anyone not knocked out by the equality clause.

There is one more ‘metric’ that separates right from left and that is the definition of the ‘mission’ itself. Is the mission to assure the survival of the species or is the mission to hold on to power and advantage for as long as possible?

Where do you suppose that fits in our search for the ‘center’?

At issue here is the ‘purpose’ of government and I’m pretty sure most people would agree that our government has gone far beyond the scope of its intended mission. So there’s no ‘center’ to be found in that direction.

No irony should be lost on the fact that we establish governments to protect us from the machinations of the greedy...in light of recent events, I’d say the government, now more than 230 years old, has failed miserably.

Looks like I keep wandering off of the tracks but each of these pieces adds up to the larger whole.

We ‘should’ be moving towards the center, but that’s not happening.

The center isn’t ‘militaristic’ but it isn’t chicken either. The ‘right’ likes a strong military for the same reason it focuses so intensely on ‘law and order’, while being totally uninterested in ‘justice’.

For the right it’s not about ‘freedom’, it’s about suppressing dissent!

Most criminals were forced to commit their crimes by the, er, overzealous who criminalize normal acts just so they appear to be ‘tough on crime’.

Leaving an individual with no alternatives isn’t justice; it’s cruelty.

Looks like I have found out what happened to the first attempt to find the ‘center’, it’s not as simple a task as it seems.

That said, there seems to be a lot of hot air being expended by people who couldn’t find the damn center with both hands and an ICBM.

The middle ground is out there good citizen but nobody is particularly interested in finding it. Which leaves us with the conundrum of just who, exactly, are these so-called ‘centrists’ they keep babbling about?

If nothing else, this has been a rather enlightening exercise in examining the political spectrum. We gained a better understanding of the conservative mindset and what sets us apart.

Thanks for letting me inside your head,

Gegner

Red Ink...

Greetings good citizen,

With the solitary exception of the Shanghi market, the rest of the world logged a sea of red ink today.

What does that tell us good citizen? Nothing useful, just that the already rich aren’t quite as rich as they were yesterday. That, perhaps, is the most striking thing about this market rally. The ‘small investor’ isn’t there. The people who got ‘fried’ when the market lost half of its value early last year sold when the market crashed and they haven’t looked back…

Only the hedge funds and the institutional investors have participated in the market’s…er, ‘amazing’ recovery, which is conservatively estimated to be 25% overvalued at the present time.

Worse, it is making the rounds that Wall Street has indeed been using ‘taxpayer funds’ (at zero percent interest) to drive up stock valuations…which, ironically, makes the already wealthy, wealthier!

WTF!

Deep breath…let’s proceed to tonight’s offering before I lose my cool…

Wall Street Drops After Disappointing Alcoa Results

By THE ASSOCIATED PRESS
Published: January 12, 2010 [The markets closed in negative territory and this story remained an ‘orphan’, disappearing from the linked list. I shall point to a possible reason for this further along in the article.]

Shares on Wall Street traded lower on Tuesday, after the aluminum producer, Alcoa, reported earnings that fell short of expectations.

Overseas markets also mostly fell, reacting to China tightening its monetary policy and increasing bank reserve requirements in addition to the worse-than-expected results from the world’s biggest aluminum producer.

As one of the first companies in the Standard & Poor’s 500-stock index to report quarterly results, Alcoa’s earnings are often seen as a barometer for how companies will fare.

After the market closed Monday, Alcoa said it earned a penny a share excluding one-time items and special charges. Analysts polled by Thomson Reuters, on average, forecast earnings of 6 cents a share. [This would lend the ‘impression’ that Alcoa announced either late Monday afternoon or sometime in the early evening hours, which is to say before the Asian markets opened for trading on their Tuesday…]

The company said higher metal prices were offset by weakness in aerospace, construction and gas turbines businesses. [Note the ‘reversed’ market dynamics at play here, customers are buying less but ‘speculators’ are buying more!]

Revenue also fell at Alcoa. Investors will be tracking revenue as companies report earnings over the next few weeks for any signs that customers are returning to the marketplace. Upbeat earnings in recent quarters have often been due to cost cutting and not revenue growth. [Staunching the bleeding will only keep you alive for so long, fail to earn profits and there will soon be nothing left to save…or sell.]

However, a strong economic recovery is dependent on a rebound in consumer and corporate spending, which would result in improving revenue. [This means customers with cash in their pockets, not employees that don’t get pay increases for years on end!]

The video game publisher Electronic Arts did not see a rebound in sales during the most recent quarter. It slashed its full-year earnings forecast after the market closed Monday, saying ongoing weakness in game sales did not ease up over the holidays.

In early afternoon, the Dow Jones industrial average fell 51.31 points, or 0.48 percent. The S.&P. 500 fell 10.42 points, or 0.90 percent, while the Nasdaq fell 26.37 points, or 1.1 percent.

Alcoa shares fell 9.2 percent, to $15.83.

The Dow and S.&P. 500 both rose Monday helped by a rise in industrial stocks. The sector got a lift after a report showed Chinese exports jumped 18 percent in December. The larger-than-expected increase came after 13 months of declines, raising hopes the world economy is recovering. [The only place whose economic data is more ‘suspect’ than the US is China…]

Monday’s report on Chinese exports and other signs of strengthening in the economy is now pushing the country to tighten up its monetary policy. China’s central bank on Tuesday increased the interest rate on its one-year bill to 1.84 percent from 1.76 percent. The rate had been steady since August.

It also raised the ratio of reserves banks must hold by 0.5 percentage points. That change will go into effect Monday.

The United States trade imbalance continued to grow in November. The Commerce Department said a jump in exports was more than offset by growing imports as the economy starts to pick up. The trade deficit climbed 9.7 percent to $36.4 billion, its highest level in 10 months. [This is not necessarily ‘good news’ for the US labor market…]

European stock markets also fell as did most exchanges in Asia.

The FTSE 100 index in London was down 61.12 points, or 1.1 percent, while the DAX in Frankfurt fell 90.12 points, or 1.5 percent. The CAC-40 in France was 48.49 points, or 1.2 percent, lower.

Hong Kong’s Hang Seng, meanwhile, dropped 84.88 points, or 0.4 percent, to 22,326.64.

China’s Shanghai index jumped 61.22 points, or 1.9 percent, to 3,273.97 even though the People’s Bank of China increased the interest rate on its one-year bill by 8 basis points to 1.84 percent, having been steady since August.

But Japan’s Nikkei, which was closed for a public holiday on Monday, ended 80.82 points, or 0.8 percent, higher at 10,879.15. The advance in Japan came about even though Japan Airlines, Asia’s largest carrier, dived 45 percent to a new record low amid concerns that it will file for bankruptcy protection. [This wouldn’t be the first time the reporters got the market data wrong, Japan was solidly in negative territory when I checked a little while ago…but that could be today’s reading or their Wednesday I was looking at…]

In the energy market, oil prices fell to near $81 a barrel Tuesday on expectations a cold spell in parts of the United States, Europe and Asia will ease, weakening crude demand. [Um, is it just me or does that last ‘qualifier’ look a bit ‘predatory’ to you too?]

By early afternoon in Europe, benchmark crude for February delivery was down 87 cents to $81.65 a barrel in New York trading.

Crude prices have jumped from $69 a barrel a month ago as cold winter weather, particularly in the Northeast and the Midwest, lifted demand for oil products such as heating oil. Forecasters now expect those freezing temperatures to rise the rest of this month.

I’ve been following this financial stuff for a while now and I’ve seen some pretty ‘bizarre’ behavior, the kind of shit that makes you wonder why this sort bullshit isn’t illegal!

But I’ve never seen the kind of blatant…er, price gouging we see on display in this article, and no, if it has been like this ‘all along’ I’m sure I would have noticed.

Which is to say an already corrupt and broken system has actually gotten worse in the past few years.

Where do we draw the line good citizen? Because, sadly, we have never had any ‘say’ over what is permissible or a lot of the BS going on right now wouldn’t be happening!

Worse good citizen is the ‘off-hand’ way the press treats such a callous remark…

Go ahead, blow me away and ask, ‘what remark is he babbling about?’

Hey, I got my underwear tied in knots over the remark about aluminum prices going up while demand for the metal dropped. But this is merely and example of ‘investing gone wrong’ these people aren’t buying aluminum because they have a use for it, they are buying it to ‘shelter’ their wealth from drops in the value of their (local) fiat currency!

So we take that one step further and hold the gun to consumer’s heads during cold snaps, charging them a premium for what they really need.

Um, don’t try and disguise predatory behavior by saying ‘it’s just business’ because we both know it has nothing to do with ‘customer service’ and everything to do with taking advantage of the situation…which is fucking predatory, especially when you do it to your own species! There’s nothing fucking lower than that!

That said, perhaps you see why I advocate that those who fail to value the benefits of civil society should have those benefits withdrawn from them, to be left in the wild, naked and alone with only their ‘superior abilities’ to sustain them…

Probably be a lot of dead bodies lying around before too long but that’s preferable to letting these ingrates continue to kill hardworking folks who have done no wrong just so they can wax rich from their suffering.

Thanks for letting me inside your head,

Gegner

Mythical Money

Greetings good citizen,

Today’s markets closed ‘mixed’, The Dow and the S&P were ‘up but the darned Nasdaq was down…unlike last Monday, no exchange was up (or down) very much.

For a while there good citizen, if it was Monday that meant it was time for another installment of the Credit Bubble Bulletin But there was a while there that Mr. Noland stopped providing commentary to accompany his weekly reports…and the reports themselves were a bit dense to comment upon independently.

While it is always an interesting read, this week’s installment raises some important points about the global monetary regime that I think you all need to be aware of.

So without further adieu:

CREDIT BUBBLE BULLETIN
Issues 2010
Commentary and weekly watch by Doug Noland

Let's start by setting the backdrop. The world is operating without a stable monetary regime. There is no gold standard. There is no functioning Bretton Woods currency stability regime. There is no longer even an ad hoc dollar reserve "system" that tended - at least on occasion - to discipline foreign credit systems and restrain excesses.

Like never before, credit systems around the world operate unrestrained. It is my long-held view that pricing mechanisms - and capitalism generally - function poorly in a backdrop of unrestrained (inherently mis-priced) credit. [Can you say, ‘Stick ‘em up’?]

Most importantly, there is today no common understanding that stable international finance is wholly dependent upon individual credit systems being operated with discipline and restraint. Quite the contrary, as the universal policymaking view these days is that aggressive stimulus and monetary looseness are essential for supporting financial and economic recoveries. The world is devoid of a monetary anchor and operating in a unique monetary environment that foments speculation, financial excess, imbalances, economic maladjustment, and potent bubble dynamics. As we begin 2010, inflationism is still seen as the solution instead of the problem.

The year 2008 marked the collapse of the Wall Street/mortgage finance bubble. It specifically did not mark the end of the Chinese bubble, the global credit bubble, or even the greater US credit bubble. Last year saw the emergence of the global government finance bubble - quite possibly a monumental development. Accordingly, 2010 should be viewed as a bubble year. This implies a bipolar perspective when contemplating probable outcomes: on one end, the bubble expands and makes it through the year, or, on the other, the bubble bursts and financial systems and economies sink right back into crisis. As a long-time analyst of bubbles, I caution against predicting the timing of their demise.

Last year saw intense speculation reemerge in US and global financial markets. It is the nature of speculation to intensify as long as it is accommodated by loose financial conditions. Similarly, it is the nature of bubbles to expand and become more robust unless inflation dynamics are quashed through some type of monetary tightening. Excess begets excess ... and the more protracted - hence powerful - the bubble the greater the degree of tightening necessary to eventually rein it in. The more heated and expansive the bubble, the greater the dislocation associated with its bursting. I see no appetite anywhere in the world this year to aggressively suppress bubbles.

The unfolding bubble in China is historic, and their policymakers appear poised to tinker. Tinkering doesn't quell bubbles - certainly not seasoned ones. I have espoused the view that the Chinese credit bubble has entered the dangerous "terminal phase" of excess. How this dynamic and the course of policymaking play out is a major issue (in) 2010. I expect Chinese authorities to work diligently in an effort to ration the amount of credit available for real estate speculation. At the same time, the stated goal of stimulating domestic consumption implies huge growth in Chinese household debt.

I am generally skeptical in the efficacy of credit rationing. This was a focal point of a great debate in the US back in the late-1920s. One (dovish) camp believed that the focus should be on limiting the flow of credit financing stock market speculation, while at the same time working to maintain ample credit to fuel the booming economy. The problem is generally that years of expanding credit create a (financial and economic) system with both a huge credit appetite and a potent propensity for inflating the quantity of new credit. [Um, for some pretty smart people it doesn’t cease to amaze me that no one points to the ‘interest avalanche’ an unrestrained credit market produces. They have to keep lending to ‘cover’ the interest the principal keeps demanding.]

Attempts to limit speculative credit - or even lending to certain sectors - is generally ineffective in itself and fails to address the major issue of runaway total system credit growth. Indeed, after bubble dynamics have taken firm hold, attempts to restrict credit by the nature of its use will tend to distract policymakers and delay efforts to contain systemic excesses. From my point of view, determined, decisive and independent monetary management provides the only hope for reining in "terminal phase" credit bubble excess. Such an approach seems in very short supply these days, and I'll be surprised if much of it emerges in China in 2010. [He’s right, it won’t.]

Here at home, Federal Reserve chairman Ben Bernanke apparently doesn't discern bubble risk. Incredibly, in his Sunday morning speech he even argued that Fed rate policy was about right during the 2002-2006 period - and that a low Fed funds rate wasn't the cause of the US housing bubble. We can also assume the he believes his speeches (including his November 2002 - "Helicopter Ben" - "Deflation: Making Sure 'It' Doesn't Happen Here") did not create a major moral hazard issue. [I hope nobody misses what Mr. Noland means, that Mr. Bernanke’s actions did indeed create a HUGE moral hazard problem, we’re talking trillions here!]

The markets have no fear that the Fed will tighten in response to financial speculation. I believe the Fed examines today's real estate markets and fears "deflation". I would imagine they see a stock market still 25% below all-time highs and worry of "disinflation". They see stagnant (at best) household debt growth, declining bank credit, and still impaired securitization markets and see no credible inflation threat. [That’s because the jack asses aren’t looking in the right place, the place we’re most vulnerable…energy! If energy goes through the roof, life as we have come to know it, ‘vanishes’.] Looking in the rear-view mirror, they just don't see problematic financial leveraging and lending excesses. They would surely view the reemergence of asset inflation as confirmation of their adept policymaking. [Instead of what it really is, ‘wealth preservation’, where the rest of us get ‘stiffed’.]

The Fed's overriding focus is stimulating sustainable recovery. [Bullshit! The focus is on sustaining the ‘unsustainable!’] They will err on the side of caution when it comes to removing crisis-period liquidity measures. I will assume that they will not be raising rates meaningfully until they are confident that the markets and economy have first adjusted well to ending quantitative easing operations. [Which will be ‘never’] Meaningful financial tightening is nowhere in sight. The Bernanke Fed still believes that monetary policy is a "blunt tool" and, as such, is inappropriate for dealing with bubbles. They prefer stronger "regulation". So, who is responsible for regulating Washington credit excesses? [You can believe it when pundits like Elliot Spitzer say we already have all of the laws needed to end the crisis, it is the failure of our elected officials to prosecute that keeps the theft underway!]

The Fed's analytical framework and rear-view approach will not serve them well. Today's domestic credit excesses are concentrated in the Treasury and agency markets. In a replay of mortgage finance bubble dynamics, Federal Reserve policies today accommodate the government finance bubble. Bernanke's talk of helicopter money and the government printing press was fundamental to creating an environment where the markets operated confidently knowing the Fed was there to provide a market liquidity backstop. The Fed's fingerprints were all over the historic mispricing and over-extension of mortgage credit. Today, "quantitative ease" and the perception of potentially unlimited Federal Reserve monetization (balance sheet growth) have greatly distorted the pricing mechanisms for government borrowings and debt instruments generally.

Because of the Fed's words and deeds, the marketplace is dysfunctional when it comes to pricing risk. These days the price of government credit has no relationship to the interaction of its supply and demand. If Washington seeks to borrow a couple hundred billion - or a few trillion - it really has little impact on yields. In an ominous replay of the mortgage finance bubble, government intervention has severely distorted the capacity of the marketplace to properly price risk, allocate resources, and discipline market participants (borrowers and speculators). [Which sort of proves another point I’ve been trying to make, that money and the rules governing it’s use/value are largely ‘meaningless’.]

The Fed should have "leaned in the wind" in response to double-digit mortgage credit growth in years 2002 to 2006. Instead, the Fed did the exact opposite, believing at least for awhile that the expansion of mortgage credit was a mechanism to ameliorate deflationary pressures. Furthermore, it had convinced the marketplace that it was there to protect against any potential credit bust. And then, once the housing/mortgage bubble really gained a foothold, the Fed was unwilling to rein in the monster it had unleashed. The marketplace had become so dysfunctional that the best "trade" to profit from the inevitable bust was to load up (and further feed the mortgage bubble) on government-sponsored enterprise (GSE) obligations.

Similar dynamics now promote the government finance bubble. In a more orthodox financial world, our central bank would be expected to "lean against the wind" as our federal government sets course on destroying its (our) creditworthiness. Not these days, as the Fed holds short-term rates steadfastly at near zero, balloons its balance sheet with GSE mortgage-backed securities (MBS), and again convinces the marketplace that its balance sheet will always be there as a liquidity backstop. [Ironically, they always ‘will’ have the ‘liquidity’ to backstop the mortgage market…the problem is IF THEY ACTUALLY DO IT, they will turn our currency into ‘confetti’…then the only ‘way out’ will be to ‘devalue’ the currency…we’re talking ‘scam-a-rama’ trade-in time where you gotta give them a thousand old dollars for one new one sort of shit…and it’s still a ‘mind fuck’!]

Despite the prospect of the Fed ending its MBS purchase program in March, GSE MBS spreads to Treasuries ended last week near 17-year lows. The marketplace must expect that Fannie and Freddie are to resume their balance sheet growth (and market liquidity-backstop function!); that the Fed will state its intention to provide future support for the MBS market; or a combination of both. There is no end in sight when it comes to the nationalization of mortgage finance. Clearly, the MBS marketplace is rife with government intervention and price distortions. It has, once again, succumbed to dangerous bubble dynamics and how it functions through the year is a major issue for 2010.

As I mentioned again last week, combined Treasury and GSE MBS debt expanded US$2.8 trillion in the 15 months ended September 30, 2009. The emergence of the global government finance bubble was crucial for the stabilization of the US and global economy. US recovery is dependent upon the continuation of this bubble, and this bubble is dependent upon massive government fiscal and monetary stimulus. [It CAN’T work; not without bankrupting 80% of the population!] Optimism is now running high. Such a dynamic can be self-fulfilling for awhile, and the US economy could make the bulls look smart in 2010. But this is very unlikely to change the very bearish secular thesis. [We all know the stock markets didn’t return to 10,000 based on ‘fundamentals’. What we have observed, so far, is pure ‘Ponzi Dynamics’ pulled off with ‘free’ money that doesn’t really exist!]

The nature of the unfolding economic recovery is another issue for 2010. Will private-sector credit creation begin to expand sufficiently and, in the process, allocate ample credit for sound investment and meaningful non-government job growth? Will a self-reinforcing credit cycle commence, or is the system now trapped in government debt bubble dynamics?

A respectable December for the retailers has optimism for consumer rejuvenation running high. The S&P Homebuilding Index was up 14.6% last week, as the marketplace positions for a traditional economic rebound. But major questions for 2010 remain: how vulnerable is the housing market to higher mortgage yields? How long will the marketplace finance massive deficit spending and GSE debt issuance before demanding significantly higher yields? [Understand that this past December’s ‘respectable performance’ is due to under measurement of inflation coupled with an expanding consumer base…they may have thrown a ton of people out of work but they haven’t started killing them yet!]

My thesis that the unfolding reflation will be altogether different than past reflations may be tested in 2010. So far, massive government stimulus has stabilized both asset markets and national incomes, and some pent up demand throughout the economy is expected. At the same time, savers are receiving about nothing on their savings, while energy and many other [commodity] prices continue their ascent. Surging financial asset prices have boosted household confidence and net worth.[?] Yet a meaningful rise in market yields could easily pressure bond, stock and home prices. To what extent mortgage credit growth can recover and foster a self-reinforcing housing recovery is a key financial and economic issue for the year ahead. [Um, with a badly depleted ‘customer base’ for real estate and other ‘big ticket’ consumer goods, it is difficult to imagine how these markets will ever ‘come back’ without some major changes in economic policy/methodology. You can’t have 80% of your customer base ‘priced out of the market’ it simply doesn’t work.]

Unprecedented market interventions by the government played a decisive role in stabilizing mortgage finance, housing markets, and household spending. It played a similar role in stabilizing the municipal debt market. That cash-strapped state and local government regained access to inexpensive borrowings was instrumental to financial and economic stabilization. If a traditional recovery ensues, perhaps state and local governments can grow out of their debt problems. A more reasonable bet is that municipal finance faces serious and festering structural debt issues. California is an absolute fiscal mess. Do loose financial conditions continue to accommodate what will be enormous 2010 state and local borrowing requirements?

Today, the markets are infatuated with risk assets. From the perspective of bubble analysis, this is not all too difficult to explain. The first week of the year saw about $45 billion of corporate debt issues. Despite enormous new supply, investment grade debt spreads are at pre-Lehman crisis levels. The same can be said for junk bond and emerging debt spreads. Credit conditions are loose for most creditworthy borrowers, which feeds market demand for these debt instruments - which translates into even greater credit availability. In such an environment, even commercial real estate doesn't look so bad. But is such an accommodating financial landscape sustainable? [Because we come full circle once again to a ‘too small’ customer base…]

It is always impossible to know what developments will surface to upset the applecart: there are any number of festering financial, economic, political, and geopolitical issues that might impede the unfolding bubble. At the same time, it is not unreasonable to suspect that policymakers might tend to delay dealing with tough issues. The federal deficit is out of control, and monetary policy is outrageously loose. There is an "exit strategy" with assorted doors. There is the looming issue of Fannie Mae and Freddie Mac. The Federal Housing Administration and Ginnie Mae need to be reigned in.

Looking back, policymakers of all stripes missed their opportunities to make tough but necessary decisions in 2009. And now 2010 just doesn't have the feel of a year that will witness a lot of decisive policymaking. In Washington, the focus will turn to the 2010 elections. The Fed will worry about its reputation and independence. Fearing for their jobs and fearful of mistakes, timid will win over bold. Bubbles treasure timid.

Until proven otherwise, I'll project 2010 as a year of escalating monetary disorder - disorder globally across a broad spectrum of markets. A global bubble would seem to ensure unsettled currency markets. Dollar optimism runs surprisingly high to begin the New Year. Yet the scenario of a dollar problem leading to a jump in US borrowing costs still doesn't seem all that nutty to me. Another spike in energy and commodities wouldn't surprise me, but the best bet is numbing volatility. The emerging markets are poised for a wild year. And, of course, all eyes on interest rates.

As I mentioned above, a bubble year suggests the likelihood of bipolar outcomes. I'll conclude by admitting that I get that uneasy feeling that our central bank is quite determined to avoid learning lessons.

The principal reason I stopped using Mr. Noland’s commentary is because his ‘conservatism’ stated shining through his otherwise detached and impartial commentary. You can see traces in this article as well but it is otherwise a ‘solid’ piece of work.

Were I to be distressed by anything in this article it would be that Mr. Noland is, in my humble opinion, ‘too optimistic’.

We are far from ‘out’ of energy but the urge to start ‘charging through the nose’ for what’s left puts society itself at a very dangerous crossroads.

This is a crisis that threatens the very survival of our species. The coming ‘energy wars’ will not be fought by the white skinned peoples against the brown skinned peoples, but between the ‘haves’ and the ‘have nots’.

For all of the rhetoric to the contrary, ‘class ties’ are far stronger than racial or national loyalties.

Ironically, one’s ‘wealth’ makes them useful…regardless of where they stole it.

Thanks for letting me inside your head,

Gegner

Perception management

Greetings good citizen,

In an ‘I’m not sure how to interpret this’ moment, it is rather perplexing to see all of the wailing and screaming over the ‘much anticipated’ stock market bounce come to naught…

My last post was on how unemployment numbers were affecting the stock market and it seems to have been the ‘banner du jour’ of yesterday’s blogosphere commentary.

BUT, what most people were expecting to happen, DIDN’T happen…beyond a tiny surge at the end of trading on Friday, the markets remained fairly flat.

This is not to discount the fact that the markets tacked on 190 points over the course of the past week; and it is not unreasonable to assume that this was mostly in ‘anticipation’ of ‘better than expected’ unemployment figures…which sorta didn’t happen.

So, did it happen or didn’t it? I’d be inclined to say the weasels pulled off another ‘fast one’ right under the public’s unsuspecting nose.

The ‘owners’ of equities succeeded in ‘enriching’ themselves at the public’s expense for absolutely no good reason other than that they could. Isn’t zero percent interest fabulous (for fat cat bankers?)

Some of you have questioned why I go berserk over our obviously ‘massaged’ unemployment figures. After all, isn’t a ‘certain amount’ of unemployment ‘natural’?

Think about that for a minute because the answer is obvious…No, it’s not natural at all! Worse is claiming that the current rate of unemployment is 10% and then admitting that we have 83 million working aged citizens who are NOT unemployed…but are instead ‘Not in the workforce’…I mean WTF, just how badly does capitalism have to be broken for it to be scrapped?

Sadly, we all know the answer to that one. It doesn’t matter how badly broken capitalism is; so long as it benefits the elite, it’s not going anywhere.

So we proceed with tonight’s offering

[Purloined from: The Automatic Earth]

January 9 2010: Drowning by numbers

Ilargi: No doubt there are people who see this week's BLS Non-Farm Payroll survey as "not good, but not all that bad either". They can point for instance to the fact that the 85,000 jobs lost according to the report is much better than the 800,000 jobs lost back in March 2009. The Wall Street Journal puts it like this: ”Even though the payroll number was worse than expected, the data reflects an improvement in the jobs market.”.

But unfortunately, this is all smoke, mirrors, bias and outright falsehood. The Household part of the monthly BLS survey mentions 465,000 lost jobs. 647,000 full time jobs left the building. But that's not even remotely where the true problem lies.

The reason why unemployment, as per the Household survey, stayed at 10% and "only" 85,000 jobs are reported MIA in the Payroll survey can be found in the labor force numbers. From November to December 2009, the "persons not in the labor force" category went up by 843,000 (over 1 million when not seasonally adjusted), and now stands at 83,865,000. The vast majority of those signing off, i.e. not actively looking for work, are people who can't see any jobs anywhere in their environment. The worse the economy gets, the fewer people are counted as unemployed. It’s a lovely invention, but it's also am awfully perverted one.

That is also true for seasonal adjustments in other categories. It’s estimated that the actual initial claims numbers may be double what's reported, simply because the models used are too rigid to take into account present economic conditions. A similar idea is true for continuing claims. Michael Widner at Stifel, Nicolaus says:

”We could conceivably have nearly 11 million people collecting unemployment and see the data reported as a 3.something million figure."


U6 unemployment is up. Average and median unemployment duration is up on all counts. The amount of people without a job for more than half a year is soaring and these people now form 40% (6.1 million) of the total unemployed. The employment to population ratio fell to 58.2%, the lowest in at least 27 years. The national payroll level went from 130.8 million in 2000 to 130.9 million today. [ 100,000 jobs added for the 13 million people who were added to the "available" labor pool. In other words, 13 million unemployed were added.

Extended benefits and Emergency Unemployment Compensation, the two programs set up for the long-time jobless, are bursting through their seams. A slight decrease in initial and continuing jobless claims may seem to indicate something positive, but the reality is that people don't leave these programs because they find jobs, but because they've exhausted their benefits and are forced into extended and emergency programs. There are strong suggestions that the latter grew by some 43% in just the past month.

And though we've seen no mention of it this week, we haven't forgotten that the BLS "owes" us the 824,000 jobs they "forgot" to count till March 2009.

No matter where you stand, no matter what you see the economy doing in 2010, it should be clear to everyone who can read by now that reporting on unemployment in the US is a god-forsaken mess, strongly biased towards what pleases Washington, i.e. numbers much lower than the real ones. That said, while many citizens may still be fooled by the official data, you can bet that Washington knows perfectly well what the real numbers are, and many hours of backroom meetings are dedicated to the topic. How much of that reflects genuine care for constituencies, and how much mere worry about election numbers, we’ll leave up to you to ponder.

The same mentality that leads to the severely distorted jobs numbers speaks loudly from the AIG files, that increasingly question Tim Geithner role in the $100+ billion handed to Goldman Sachs et al as 100% compensation for lost credit default swaps wagers. And that, predictably, leads to calls for the resignation of Geithner.

But we've seen similar calls for Ben Bernanke and Larry Summers to resign. And they're still there. Moreover, what difference would it make to remove one of them and leave the others be where they are? If you don't clean up for real, why bother? It becomes just another silly game that way, doesn't it?

Reminds me of a man named Travis Bickle, who said some 35 years ago:

"All the animals come out at night - whores, skunk pussies, buggers, queens, fairies, dopers, junkies, sick, venal. Someday a real rain will come and wash all this scum off the streets."

Um, I’ve never heard of Travis, which isn’t necessarily a bad thing. I’m sure Ilargi included that quote with the best of intentions and purest of meanings; that someday in the uncharted and murky future, people will rise up and clean the, er, ‘scum infested’ halls of power.

Being the left wing ‘nut’ that I am, I’d propose a more certain option…tear the halls of power down! That will not only clean them out but it will also keep them clean!

Besides, if we are to ever put a stop to humans using their fellow humans as barnyard animals, we have to put ‘power’ beyond the reach of those who would abuse it for personal gain.

It can and must be done if mankind is to survive.

Thanks for letting me inside your head,

Gegner