Supply side nonsense

Greetings good citizen,

Happy Monday, such as it is. Uh, the ‘Stupidity Index’ advanced 29 whole points today but most commentators don’t expect that to go on much longer.

We’re confronted with the proverbial ‘Boy who cried Wolf’, only this time the boy cried it was all over…Well, people took what he said at face value, but now it’s six months later and we still can’t point to any positive economic activity. Did the boy lie to us like he’s done countless times before?

It’s sure looking that way.

Moving along we come to tonight’s offering for an in depth look at the properties of money…as well as why you end up holding the, er, ‘dirty’ end of the stick.

The supply-side tax con
By Henry CK Liu

In recent decades, an counter intuitive myth has been pushed on the unsuspecting public by supply-side economists - that low taxes encourage corporations, employers and entrepreneurs to create high-paying jobs. The counterintuitive historical truth is that a progressive income tax regime with over 90% for top-bracket incomes actually encourages management and employers to raise wages. The principle behind this truth is that it is easier to be generous with the government’s money. [And that the ONLY reason the ungrateful bastards handed it over. Once Reagan let them keep more of what they stole, workers stopped getting raises that kept abreast of inflation.]

In the past, when the top corporate income tax rate was over 50% and the personal income tax rate at over 90%, both management and employers had less incentive to maximize net income by cutting costs in the form of wages. Why give the government the money when it could be better spent keeping employees happy? [This is slightly off the mark…the reason for paying your people more was it increased the number of customers you had for your products. The ‘Ford Principle’ if you will.]

The Reagan "revolution", as inspired by voodoo supply-side economics, started a frenzy of income tax rate reduction that invited employers to keep wages low because cost savings from wages would produce profits that employers could keep instead of having it taxed away by high tax rates.

It follows that the low income tax rate regime leads directly to excess profit from stagnant wages, which leads to over-investment because demand could not keep pace with excess profit due to low wages. Say's Law [1] on "supply creating its own demand", which supply-side economists lean on as intellectual premise, holds true only under full employment with good wages, a condition that supply-side economists conveniently ignore.

To keep demand up, workers in a low-wage economy are offered easy money in the form of subprime debt rather than paying consumers with living wages, thus creating more phantom profit for the financial sector at the expense of the manufacturing sector. This dysfunctionality eventually led to the debt bubble that burst in 2007 with global dimensions.

The State Theory of Money (Chartalism) holds that the acceptance of a currency is based fundamentally on a government's power to tax. It is the government's willingness to accept the currency it issues for payment of taxes that gives the issuance currency within a nation. The Chartalist Theory of Money claims that all governments, by virtue of their power to levy taxes payable with government-designated legal tender, do not need external financing and should be able to be the employer of last resort to maintain full employment. [Um, ‘certain conditions apply’ and today, none of those conditions are being met…but you’ll see as you read along.]

The logic of Chartalism reasons that an excessively low tax rate will result in a low demand for the currency and that a chronic budget surplus is economically counterproductive because it drains credit from the economy. The colonial administration in British Africa learned that land taxes were instrumental in inducing the carefree natives into using its currency and engaging in financial productivity.

Thus, according to Chartalist theory, an economy can finance its domestic developmental needs to achieve full employment and sustainable optimum growth with prosperity without any need for foreign loans or investment, and without the penalty of hyperinflation. But Chartalist theory is operative only in closed domestic monetary regimes.

Countries participating in free trade in a globalized system, especially in unregulated global financial and currency markets, cannot operate on Chartalist principles because of the foreign-exchange dilemma. For a country participating in globalized trade, any government printing its own currency to finance domestic needs beyond the size of its foreign-exchange reserves will soon find its currency under attack in the foreign-exchange markets, regardless of whether the currency is pegged to a fixed exchanged rate or is free-floating. The only country exempt from this rule, up to a point, is the United States because of dollar hegemony.

Thus, all economies must accumulate dollars before they can attract foreign capital. Even then, foreign capital will invest in the export sector only where dollar revenue can be earned. Thus the dollars that Asian economies accumulate from trade surpluses can only be invested in dollar assets in the United States, depriving local economies of needed capital. This is because in order to spend the dollars from trade surplus, the dollars must first be converted into local currency, which will cause unemployment because the wealth behind the new local currency has been shipped overseas. The only protection from such exchange rate attacks on currency is to suspend convertibility, which then will keep foreign investment away. [snip]

History of personal income tax

When personal income tax was introduced in 1913, the top bracket was 7% for income over $5,000. By 1918, the top rate had risen to 77% for income over $1,000,000.

In 1921, the administration of Warren Harding lowered the top rate to 58% for income over $200,000. A year earlier, under Woodrow Wilson, income over $200,000 was taxed at 68% while the top rate was 72% for income over $1,000,000. In 1924, the administration of Calvin Coolidge lowered the top rate to 46% for income over $500,000. In 1924, the top rate was dropped sharply to 25% for income over $100,000. This rate stayed unchanged until to produce the Roaring Twenties of sizzling speculation on margin while wages stagnated that ended in the crash of 1929.

In 1932, the top rate rose back to 63% for income over $1,000,000 and the rate for income over $100,000 was raised to 56%. It was academic because very few people had income of these brackets. In 1936, the top rate was 79% for income over $5,000,000 while the rate for income over $1,000,000 was raised to 77%. But there was no employment and no corporate profit to make a difference until the war started after Pearl Harbor on December 7, 1941. Until the war started, people were willing to work just for food so there was no demand for goods to produce corporate profit. [Is this where we’re returning to, good citizen?]

In 1941, the top rate was raised to 81% for income over $5,000,000. In 1942, to help pay for the war, the top rate was raised to 88% for income over $200,000 in a wartime price control regime. In 1944, the top rate was raised to 94% for income over $200,000. In 1946, the top rate was lowered to 91% for income over $200,000. The post-war economy took off to produce a new middle class as the majority of the population. There were waiting lines, not at the unemployment offices, but long waiting lists for new cars and houses and television sets. [Rather than turn the money over to the government, they built a prosperous society instead! Another important ‘dividend’ reaped by paying decent wages was crime rates dropped to unheard of levels.]

In 1955, the top rate was 91% for income over $400,000 to adjust for inflation. That rate stayed until 1966 when it was lowered to 77% for income over $400,000. In 1965, the top rate was lowered 70% for income over $200,000. That rate stayed until 1982 with minor rise in the top bracket to income over $215.400. The period between 1965 and 1982 was the gold years of US economy, with high employment and high consumption, a period when guns and butter was both in ample supply.

Year Top rate(s) For income over (,000)
1981 59% $85.6
1982 50% $85.0
1987 38.5% $90.0
1988 33% and 28% $71.9 and $149.25
1991 31% $32.0
1993 39.6% $250.0
2001 35% $311.95
2009 35% $372.95


Wages began to stagnate, while the financial elite was keeping luxury-goods maker busy by using the pension funds of workers to move jobs to low-wage economies overseas. As American workers marveled at the low-price imports at Wal-Mart, and their pension funds were giddy with high returns, their own jobs at home were disappearing as the wages and benefits of those still working fell below living wage levels

The average American wage earner has very little reason to support a lowering of the top rates in a progressive income tax regime if they understand that employers would rather give tax savings to employees in higher wages than pay high taxes to the government, given the same after-tax net profit. [There’s another dynamic at play here, one brought on by ‘market saturation’ that will keeps jobs, er, ‘migrating’ to the cheaper there…even though these places exist solely through ‘currency manipulation’…illegal currency manipulation to be precise! Peak oil may be arriving ‘just in time’.]

But the Wall Street Journal or CNBC would never tell workers that basic truth. Rather, workers are told that high taxes lead to high unemployment to scare wage earners into voting for still-lower progressive rates that only benefit those who have been oppressing workers with the workers' own pension money.

Note
1. Say's Law, or the law of markets, is an economic proposition attributed to French businessman and economist, Jean-Baptiste Say (1767-1832), which states that in a free market economy, goods and services are produced for exchange with other goods and services, and in the process a precisely sufficient level of real income is created in order to purchase the economy's entire output.

Henry C K Liu is chairman of a New York-based private investment group. His website is at http://www.henryckliu.com

Again, it doesn’t matter what the ‘workers’ think, workers don’t write policy…it’s our stupid politicians that need to be aware of the damage done to society through ‘self-interest’.

Um, kicking that can a bit further down the road, we have recently witnessed strong evidence that the ‘ballot box’ won’t save us either because once elected the public is powerless to ‘punish’ an elected official. If they fail to live up to the campaign promises…OFW.

What? Your still not depressed enough? Here’s a piece titled ‘America's Race to the Bottom’ by David Michael Green. If you’re not depressed by the time you reach the end of that article, you must work on Wall Street!

That’s all she wrote for tonight, good citizen!

Thanks for letting me inside your head,

Gegner

There is no recovery

Greeting good citizen,

The weekends are usually tough because the financial world takes them off…depriving us bloggers of ‘low hanging fruit.’ But listen to me cry…you’d think nothing else was going on in the world!

Or worse, the world begins and ends with things that are important to me and me alone…and we both know that’s not true! Okay, I do get to set the agenda in this particular space (but only the space between the headline and the signature, the rest belongs to our gracious host.)

It’s Saturday night and the Holiday Season as well. My wife is attending an ‘adults only’ Christmas Party this evening at her brother’s house…since I can’t carry a tune with a crane, I’m home here with the kids, where I’ll do the least amount of harm.

See, stick me with a big open weekend and I babble!

So without further adieu, we proceed to tonight’s offering Where Ilargi sounds off on my favorite Hobby Horse, the ‘invisible’ recovery.

December 11 2009: There is no recovery

Ilargi: Jim Rogers is right. There is no recovery in the American economy. Things have only gotten worse, and a lot too. Still, Rogers can’t help seeing the world through his own subjective eyes either, distorted by his age and his professional views. He makes money as an investor, and can’t imagine a world in which investors like him are not part of the landscape. [This is what I was referring to earlier, the tendency to see things the way we think/are taught they ‘must be’ rather than opening our minds to the many possibilities there are!]

And that’s the big blind spot for most analysts, publications and websites that occupy themselves with finance and the economy. They're written by people who make a living because the economy is organized a certain way, and they see a situation in which that will mostly continue to be so, with some more or less minor tweaking. Rogers understands a lot of what’s coming, but he stops short of pondering himself as a victim. This may be completely natural and logical, but it does potentially cloud his vision. For him, the question is where to invest, not whether to invest at all. [Much of the ‘craziness’ in the markets has been due to too many investors and too few opportunities, driving ‘mal-investment’.]

But, again, he's right. There's no recovery. A Bloomberg piece this morning illustrates why. It says that China's Q3 output was up 19.2%, with exports down 1.3%, and imports up 26.7%. [Understand that this is the same economy that counts cars as ‘sold’ as soon as they drive off the assembly line, this in a world where nobody is buying new cars!]

China’s growth accelerated to 8.9 percent in the third quarter on the record lending and a $586 billion, two-year stimulus package, helping Asia to lead the recovery from the global economic slump.

The Chinese government injects a comparatively gigantic amount of money into the economy, which the banks use to hand out record loans. And that, all by itself, says Bloomberg, makes Asia (re: China) lead the recovery from the slump. This is the gospel according to Washington, the gospel of Barack Obama and George W. Bush. The first is on record claiming that the US can "spend its way out of the recession", the second became famous for encouraging people to go shopping in the face of economic hardship. In other words, as Jim Rogers phrases it:

"The idea you can solve a problem of too much debt and too much consumption with more consumption and more debt defies belief. I cannot believe that grown-ups would stand there and say that." [Never mind ‘adults’, this is the ‘Leader of the Free World’ blowing it out their collective backsides here!]

Well, Jim, grown-ups in governments ranging throughout history and across the globe have stood there, and today stand there, saying exactly that. By the way, if I were you, I would, but that's just me, in the light of the Chinese embrace of the Washington "spend and borrow your way out of debt" gospel, perhaps take another look at your own embrace of the Chinese economic model.

It would feel more consistent, since China, of course, has no genuine recovery either. Its exports are still falling, but its output rose 19.2%. In other words, the Chinese will have to buy their own products. Problem is, they don't feel like doing it. According to Michael Pettis, Chinese household consumption is 35% of its economy, vs 55-65% in Europe and 70-72% in the US. And its consumption isn't rising fast, if at all, either. What is rising are savings, presently at 26%, vs a negative savings rate in the US until recently. Pettis asks an intriguing question about China:

"Crises seem to drive the household consumption rate down, even though bull markets don’t seem to drive it back up. Is that because crises cause households to worry about risk (although if that were true they wouldn’t go permanently down, would they)? Or is it because the government responds to crises by increasing the amount of misallocated investment, the consequence of which is to reduce future consumption?"

So what would it take to drive Chinese consumption upwards towards levels that might sustain at least part of its economy if and when American and European export markets don’t rise from their ashes? Pettis says:

Just to return consumption to 40% of GDP over the next five years (and even that level is widely considered to be way too low, and probably unprecedented in the world excluding recent Chinese history), 8% average annual growth rates in GDP would require a tad under 11% annual growth in consumption. [..] [And that would do absolutely NOTHING for the stalled US (and European) economies!]

To bring Chinese consumption in 20 years up to 50% of GDP, which is the low end for other high saving Asian countries, and far lower than any other large economy in Asia (and remember that large economies are less able to rely on exports to fuel growth than small countries), 7% annual GDP growth would require average annual consumption growth of just under 9% for twenty years.

In other words while GDP growth slows significantly from its 12-13% rate of the past several years, consumption will nonetheless have to surge at rates far in excess of the 8-9% growth rates of recent years in order for even a small, partial re-balancing to take place.

One thing should become clear now: China won’t be able to run its economy on domestic demand for many years to come. Until then, it will rely on western consumers, who are broke, and on government subsidies, i.e. consumption of its own flesh. Whatever the choice may be, a 19.2% increase in Q3 2009 output looks a lot like despair. Who will buy all that extra output? There are no extra clients anywhere on the horizon.

Just as is the case in the US, people like the Bloomberg reporter quoted above confuse government funding with credit. Of course, if you ask no questions, both may look pretty much the same. But that doesn’t mean they are. You can't be both the seller and the buyer of your own products and still claim you’re making a profit.

The Chinese are trying to kick-start economy with their own reserves. But once the engine runs, if it does, it’ll need somewhere to go, someone to purchase its products. That someone will have to have a trade surplus, i.e. money to spare. The Americans don’t have any. They are trying to kick-start their economy with borrowed money, which means they are increasing their already sky-high debt levels. Which is why Jim Rogers is dead-on when he says that there is no recovery, and things have only gotten worse in the past year.

You wouldn't know it from looking at the stock markets yet, but if you imagine the economy as a closed system, which in the thermodynamics definition can exchange heat and work (energy), but not matter, with its surroundings, it becomes clear that whatever happens inside the system doesn’t solve any problems, but merely transfers wealth (heat) from one part of the system to the other. That is, while banks and investors have been making money over the past 6-month rally, someone everyone else has been losing out.

To figure out who, you need look no further than the record numbers of American citizens who are unemployed, homeless and/or living on foodstamps. The system as a whole shows no recovery, just parts of it do due to increased misery in other parts. Moreover, what does enter the system from outside is borrowed money that needs to be repaid. This should also make clear why printing money cannot solve any of the existing problems. For one thing, America's largest creditor is China, which has its currency pegged to the dollar. No gains there.

In more general terms, much, if not most, of what is seen as wealth consists of nothing but leveraged bets. Which is how a home that cost $100,000 to build comes to sell for $500,000. This wealth will have to be deleveraged, until things are worth what they are, i.e. they have a price someone is willing and able to pay for them. In the absence of cheap and abundant credit, that is.

All countries are chasing the same remaining pieces of the pie, which can only be obtained by increasing one’s exports, or, more correctly and comprehensively, one’s trade balance. And since the world economy as a whole can also be considered a closed system, the only possible turn of events in this case too is wealth transfer. Which can be achieved, as noted, by an increase in exports, or possibly through warfare. It cannot be achieved by printing one’s own currency. That could function (temporarily, until hyperinflation sets in) only if the system were what thermodynamics defines as an isolated system, i.e. no exchange whatsoever with the outside world.

Since the US depends on the money it borrows from outside its borders, it is as yet far from being an isolated system. It can try to devalue its currency, but so can any other country. The US has an added disadvantage in the fact that the US dollar is the world reserve currency, which means people will flee to it in times of global stress and uncertainty. Which in turn will push up the dollar’s exchange rate.

Once the US is cut off from the rest of the global economy, either forcibly or voluntarily, it may or may not go the way of Weimar and Zimbabwe, both more or less isolated systems in an economical sense. That moment, though, is years away.

Until then, to quote Jim Rogers once more, things will only get worse if the present "spend your way out of misery" gospel continues to rule our ways. Just look at how much more debt, most of which is owed to foreigners, the US has compared to a year ago. It runs in the trillions. In just one year.

Rogers is right again when he notes that Obama was merely a community organizer just 6 years ago, doesn't understand economics, and relies entirely on the people he nominated in his economic team. But that is not a valid excuse.

A headline in French weekly Le Point yesterday said : "Warlord Obama receives his Nobel Peace Prize". Being the President of the United States means you can't wreck the nation's economy and plead innocence or ignorance. Neither does it mean you can send 30,000 extra young Americans into battle and pick up a Peace Prize one week later. He could have refused the prize. And probably should have. Or, as someone suggested, sent an unmanned drone to pick it up for him.

Jim Rogers is buying American dollars. You?

If you wish to hear for yourself what Mr. Rogers has to say Here are a couple of links…

Um, I’m going to guess Ilargi’s last remark is ‘rhetorical’ in nature, most of us have no choice but to ‘buy’ dollars, it’s what they use to pay us.

If you’ve been following the financial news religiously then you know Mr. Rogers created a stir some time ago when he was selling his dollars after moving to Singapore. It’s kind of weird to see him buying after the commotion he caused by dumping his dollar holdings.

But this returns us to Ilargi’s central premise…are investors ‘wrong’ for assuming there will always be investment opportunities, given the destructive power so recently displayed by rampant mal-investment?

If it were up to me, I’d be making a case for A.) A limit on the number of investors and B.) Conditions to be met for legitimate investments. Lacking either of these ‘restrictions’ leaves the door open for investors to make more money from failure than could be had by success!

Failure doesn’t pay…except in the situation we currently find ourselves in, where the moron regulators failed to ban destructive practices that should never have been allowed in the first place.

What an interesting little experiment it would be if these highly destructive investments had a death sentence attached to them…how many do you suppose would try to collect then?

Thanks for letting me inside your head,

Gegner

Retail Sales exceed forecast!

Greetings good citizen,

The week ends here! In another couple of weeks, 2009 will be behind us as well. Dunno how much longer it will last but today was the first day local temps didn’t break the freezing mark. I’m sure it was warmer in Boston today but it’s always warmer in the city…and if you’re not in the city proper, the temperature can drop considerably the further you get from downtown.

That said, the curious creature known as the Stock Market tacked on 65 points today…but the Nasdaq fell, throwing today’s session into the ‘mixed’ category.

What do you suppose was the cause for today’s upswing in the markets?

Honestly good citizen, regurgitating these ‘heavily shaded’ er, ‘pep talks’ that contain more fiction than fact serves no public benefit whatsoever.

So we arrive at tonight’s first offering

U.S. Retail Sales Exceed Forecasts

By JAVIER C. HERNANDEZ [And look who’s back! ( fake Good news and they’re all over it!)]
Published: December 11, 2009

A strong start to the holiday shopping season helped push retail sales up nearly twice as much as expected in November, the government said Friday, signaling that consumers may be opening their wallets even in the face of a grim job market. [Shoppers learned last year that waiting until the last minute gained them nothing…the price is the price and if you don’t pay the price, you ain’t getting the sum bitch!]

Across the board, from personal health stores to electronics boutiques, sales were up last month, rising 1.3 percent over all from October, seasonally adjusted. Excluding cars and gasoline sales, which can be volatile, the jump was 0.6 percent, three times as high as economists had predicted. [If only prices were ‘static’…but they aren’t. left unanswered is ‘the value of a dollar’ which we all know has sunk like a rock…so it takes more money to buy the same or even a smaller basket of goods. But you’re not supposed to ‘notice’ such things.]

Friday’s figures brought relief to many business owners, who had feared consumers would rein in spending this year as unemployment crept to double digits and the economy showed signs of a nonexistent weak recovery. The data reinforced hints of a turning tide in consumer spending over the last few months, economists said, and suggested that sales might continue a steady march upward. The retail sales figure reflected a 1.9 percent increase from November 2008, when the chill in consumer spending had begun to take hold. [Bizarrely, we now have the BLS to thank for the ‘reliability’ of government reports…and the data shakier than the employment numbers have been the inflation figures. Just because the BEA ‘says’ inflation is ‘nonexistent’ doesn’t mean it’s true. Hell, why has the stock market been rising? Because the dollar has been sinking! Wake the fuck up!]

A separate gauge of consumer confidence released Friday fueled hopes of a turnaround in consumer behavior. The University of Michigan’s monthly barometer rose to 73.4, up 6 points, far outpacing expectations. [Lying fucks! Any reading below 90 in consumer sentiment is negative so picking up 6 points doesn’t mean shit!]

“The momentum here is positive,” said James F. O’Sullivan, chief economist for MF Global. [Makes you wonder what ‘MF’ stands for. Hey, yesterday we had a financial firm named after the pet name for a penis! So this could be just what it looks like…] “We’re seeing that better spending leads to a better job market which leads to better spending, in stark contrast to the downward spiral we were seeing a year ago.” [Stark contrast, eh? A goodly chunk of those 8 million jobs we lost over the last year are never coming back, so what are the odds that Chumley here is full of what makes the grass grow green?]

The picture of consumer spending in 2008 was far dimmer: sales took a steep plunge toward the end of the year, dipping below $340 billion, as the nerves of the financial crisis came to the fore. While sales reached $352.1 billion last month, the economy still has much ground to regain: spending was as high as $380 billion in 2007. [And the ‘good times’ peaked in 2006. Considering the crisis began in the Summer of 2007, using 2007 figures is more than somewhat misleading! GDP in the fourth quarter of 2007 was .6%, just to give you an idea of what they are trying to compare today’s figures to…]

Spending by consumers makes up more than two-thirds of the American economy, and some economists believe true recovery will not come until sales return to high levels. That may be difficult in a country where at least 98 million working aged citizens 15.4 million people remain unemployed, many of them for more than six years months, and where many families are struggling with meager paychecks and reduced hours.

“The difficulties in the labor market, the desire to reduce and the tightening of lending standards of all kinds should serve to cap the pace at which spending will rebound in 2010,” Dan Greenhaus, chief economic strategist for Miller Tabak, wrote in a research note Friday. [Understand that ‘capping the pace’ will also ‘choke off’ the largely imaginary recovery.]

Sales of cars and gasoline led the strong gains over all, though sales were up for goods of all types — food, electronics, garden supplies, sporting goods. Cars and car parts rose 1.6 percent, even in the absence of government incentives like the cash-for-clunkers program, and gasoline sales increased 6 percent, pushed up by rising prices. Mail and Internet orders rose 1.2 percent, while clothing sales declined by 0.7 percent. [So the ‘cost of living’ seems to account for most of the rise in spending…how can any rational observer call that an ‘economic recovery’?]

Retailers generally reported a weak sales day on Black Friday, the day after Thanksgiving that is the traditional start to the holiday shopping season. Analysts have said consumers are focused on finding rock-bottom prices this year and prefer discount stores to high-end retailers. [And retailers know they won’t get away with jerking people around on price…you can only ‘drop your drawers’ so much before the consumer starts to get suspicious…if the price drops 100% and you’re still in business—sort of tells the whole story, doesn’t it?]

Online retailers, electronics stores, jewelry stores and appliance stores all showed gains compared with last year, according to data released earlier this month. [This is rich! There’s no way to verify this activity…I’m home all day and I don’t see more delivery vehicles than usual.]

In its report, the government revised its data on October sales, saying sales increased by 1.1 percent rather than the 1.4 percent originally reported. The government adjusts its retail sales numbers to discount the boom from holiday shopping, but economists said strong sales still played a role. [Excuse me, the sales dropped from the original number but the morons are still claiming sales are ‘robust’. The last time we this kind of ‘robust’ economy, GW Bush was still in office and everything was going down the shitter (although he claimed otherwise!)]

In a separate report, there were signs that vast stimulus efforts worldwide are causing increases in prices. The price of United States imports rose 1.7 percent in November, the fourth consecutive month of increases, largely because of rising fuel prices. [Oh no, it’s not rising prices causing sales figures to spike, it’s consumers opening their dust filled wallets! The lying bunch of weasels…and I shouldn’t say that because it’s not fair to the weasels!]


Still, the Federal Reserve has said that inflationary pressures remain in check and that it does not expect inflation to emerge as a threat to economic stability, even as interest rates remain close to zero.

How much of the above article was absolute bullshit? Try All of it!

Oh, things are getting better, the economy is recovering, everything’s going to be just fine! (if you’re already rich!)

Well good citizen, the one thing they can’t fudge is the subject of tonight’s second offering

[Purloined from Some Assembly Required]

Collapse In Tax Withholdings Refutes Improvements In Either Unemployment Or Corporate Profitability

Submitted by Tyler Durden on 12/08/2009 12:40 -0500

Even as the BLS and the administration are trying to cover up the real state of unemployment affairs; using assorted semantic gimmicks of just what it means to be unemployed. As companies provide adjusted EPS numbers, while actual earnings continue to collapse, the true barometer of spending, provided by the Financial Management Service, tax withholdings (net of refunds), continues to paint the truest picture of just what is really happening with both America's consumer and the corporate world.

And it ain't pretty. On a rolling 12 month basis, individual tax withheld has dropped by nearly 8% YoY, from $1.42 trillion to $1.31 trillion, while company with holdings are down a whalloping 64%, from $274 billion to just under $100 billion! This is money that will never be used to pay down the skyrocketing US deficit, because both the US consumer and average US company are simply not collecting the required cash to line the Treasury's pockets with the one traditional way to pad the deficit: taxes. Expect much, much, much more debt issuance in America's short, medium and long-term future.

So there it is good citizen, pages of bullshit shot down by a couple of paragraphs of fact. If they ain’t collecting the taxes then the ‘recovery’ doesn’t exist, period.

Tomorrow’s offering will provide more proof (as if you needed any.)

Um, time to share another ‘observation’ with you. Seems as though it is no longer ‘a few skeptical individuals’ that are, er, ‘dissatisfied’ with the Obama administration’s performance.

Of all of the times for a president to sell out, this wasn’t one of them…the pain that is to come will be unimaginable, likewise the devastation will be incredible.

It’s one thing to suspect your electoral process is compromised and another to know. The public no longer has any faith in the process or the system that process produces. Since the public is convinced it cannot expect justice from a corrupt system, it will do its utmost to undermine that system and everyone who serves it.

Thanks for letting me inside your head,

Gegner

Unemployment claims up!

Greetings good citizen,

Here we are less than a week after the incredible report by the BLS that the economy only lost 11,000 jobs in the entire month of November. Well, what do you suppose the job loss number was for this week? You’d think it would only be in the 2,500 range, keeping pace with the latest report, wouldn’t you?

I was tempted o shoot in the 2,750 range, which would get us closer to the 11,000 figure but we have to keep in mind that the jobless numbers are ‘improving’ rapidly so I went with 2,500.

How far ‘off’ do you think I was? What we have here in another one of those ‘orphan’ stories that made it onto the NY Times web site but never got picked up by one of the in-house reporters.

So we arrive at tonight’s offering

New U.S. Jobless Claims Rise

By REUTERS
Published: December 10, 2009

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless benefits rose more than expected last week, but a surprise narrowing in the trade gap in October suggested the economic recovery was becoming entrenched.

Initial claims for state unemployment insurance rose 17,000 to 474,000 last week, the Labour Department said on Thursday, after five straight weeks of declines. [Note the spelling of ‘labor’, the reporter on this article obviously isn’t a citizen of the US.]

Analysts polled by Reuters had forecast claims climbing but only to 460,000. A Labour Department economist said claims had been bumped up by seasonal industries laying people off and by applications that had been held back during the Thanksgiving holiday week. [Okay, I can see the ‘holiday lag’ they’re talking about but what’s this ‘seasonal industries’ nonsense all about? Christmas is a month away although most places only hired skeletal crews to supplement their ordinary workers. I can’t put my finger on what a ‘non US citizen’ might suppose about our economy…roadwork never stops, there’s no fishing fleet to speak of…hell they even swing hammers and pour foundations in the dead of winter around here! It may suck to work outdoors in this weather but they do it.]

A separate report from the Commerce Department showed the nation's trade deficit in October shrank 7.6 percent to $32.9 billion (20.2 billion pounds). Analysts had expected the gap to widen to about $36.8 billion. [You know this knife has two edges, I’m betting on the side of orders being down rather than exports being up.]

"Overall we are in an environment where layoffs are abating but people who were fired are still having a difficult time in finding jobs. The trade deficit is worth a couple of tenths" for fourth-quarter economic growth, said Tom Porcelli, senior economist at RBC Capital Markets in New York.

U.S. stock index futures trimmed gains on the claims data, while the dollar fell against the euro.

The labour market, considered the missing link in the economy's recovery from the most crippling recession since the 1930s, is definitely NOT slowly healing. [Its not ‘healing’ at all, there are no jobs] Government data last week showed employers cut a mere 11,000 jobs in November. [Although alternative measures indicate a quarter of a million jobs were cut last month! So the alleged ‘11,000’ figure is deeply suspect.]

In signs that world trade is slowly shaking off the effects of the global financial crisis, U.S. exports of goods and services were the highest since November 2008 and imports the highest since December 2008. [Both positively abysmal months good citizen.]

The smaller-than-expected trade gap is likely to prompt analysts to raise their estimates of fourth-quarter economic growth and is good news for the Obama administration, which sees export growth as an avenue for creating jobs. [Um, wait a minute Slim, who said exports were up…it’s just as likely that imports are down!]

A stronger rise in imports than exports in the third quarter left a wider trade gap, which constrained economic growth in that period. The economy grew at a 2.8 percent annual rate in July-September quarter, ending four straight quarters of contraction.

Even though claims rose last week, applications for unemployment benefits have dropped from lofty levels in March. [Back to ‘fun with statistics’ and some numbers that never get mentioned in the media…the number of working US citizens is roughly equal to the number of working aged US citizens counted as ‘not in the workforce’. Only half of the ‘paycheck peasants’ have jobs, the other half doesn’t…there’s something very wrong with that picture.]

However, they are still holding above the 400,000 level that analysts reckon will signal payrolls growth. [The newspapers are devoid of jobs, there were only nine help wanted ads in the local rag, which has a circulation of nearly a half million households!]

The four-week moving average for new claims dropped 7,750 last week to 473,750, the lowest level since September last year. The four-week moving average, considered a better gauge of underlying trends as it irons out week-to-week volatility, has declined for 14 straight weeks. [You’d like to think that the heartless cocksuckers are letting their people keep their jobs through the holiday season, there are some types of ‘bad press’ that are hard to shake.]

"The claims are on a good trend, and the trade number is much better than expected. It's a big plus for fourth-quarter growth forecasts. People will be marking up fourth-quarter growth forecasts after this," Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. [Um, why does it seem like Nigel is full of what makes the grass grow green?]

The number of workers still collecting benefits after an initial week of aid dropped 303,000 to 5.16 million in the week ended Nov 28, the lowest level since February.

The decline, however, was largely due to people exhausting their benefits and hopefully moving to emergency unemployment programs.

This was below market expectations for 5.44 million. The four-week moving average of continuing claims fell 123,500 to 5.42 million, the lowest since March.

The insured unemployment rate, which measures the percentage of the insured labour force that is jobless, fell to 3.9 percent in the week ended November 28 - the lowest since February -- from 4.1 percent the previous week.

So, good citizen, that was a headline you didn’t get to see, not in the NY Times anyway.

You may have noted that this particular story appears to try a little bit too hard to be appealing to the image the US press tries to project. Makes you wonder which former British colony the reporter is from.

You can even imagine the ‘pep talk’ the editor gave the reporter before he turned over the ‘raw’ story. “we want to sell this to the Yanks so make sure it’s ‘upbeat’ as you can eh?”

Yes, the trade deficit has fallen but it more a function of demand being down for imports than it is a weak dollar driving exports, because we export next to nothing…food and a few raw materials, that’s about it.

This is where we need to, er, focus our attention, producing more of what we consume will be crucial to our future survival, screw the dickhead importers!

If we fail to prevent this nation from becoming a Banana Republic it will be our own damn fault because the only way to throw off the noose from our necks is to fight…and make no mistake about it good citizen, we’re fighting for our lives and the future of our children!

Perhaps that is the one factor where this ‘class war’ is most obvious. Their kids will walk into bright and prosperous future, our kids will be forced to fight for their kid’s table scraps…and I ain’t condemning my kid to that kind of fate…

Thanks for letting me inside your head,

Gegner

Wall Street 'snaps' two-day losing streak...

Greetings good citizen,

For most of the day it appeared the markets were going to close lower again today…but NO, at the end of the trading day the markets shot back into positive territory to snap a 2 day losing streak (on what must have been downright anemic volume.)

Honestly good citizen, only a psychopath would trade in these hugely manipulated markets and only paid shills would advise you to do likewise.

Our first offering of the evening has had it’s headline modified to indicate the market’s ‘success’ at breaking the losing streak, such as it was. Tonight’s second offering has ‘disappeared’ from today’s line up.

Wall Street Tries to End 2-Day Losing Streak

By REUTERS
Published: December 9, 2009

Wall Street shares were little changed on Wednesday as an unexpected rise in October wholesale inventories was offset by continued concerns on foreign debt and a weak outlook in the technology sector.

Gains were limited by concerns over the credit ratings of Greece and Spain and an outlook from Texas Instruments, as chip makers are generally considered one of the first sectors to recover from recession. [Some chips are still made here, missing from this picture is the items the chips are used in, there isn’t a single domestic computer manufacturer so it should shock no one that there are no jobs here in the US.]

America’s total wholesale inventories rose 0.3 percent in October, according to data from the Commerce Department, reversing a 12-month declining trend. Analysts were expecting inventories to fall 0.5 percent. [Did you catch that good citizen? There’s that ‘America’ blanket statement again…Mexico and Canada are ‘in America’ too so where the hell are these idiots pointing to?]

Added to Friday’s above-consensus jobs report, the inventory figure “shows surprising resilience as we work to recover,” said Thomas Nyheim, portfolio manager at Christiana Bank & Trust Company in Greenville, Del. [Um, here we go again with the ‘who is this and why should I give a shit what they think’ commentary. That’s besides the fact that the statement can be interpreted any way you want…what’s this ‘resiliency’ he’s talking about? Inventories being resilient is seldom a good thing when sales are down by record proportions.]

January crude futures initially rose but later fell back about 0.4 percent to $72.34 a barrel after data showed an unexpected drawdown in crude inventories, a positive sign for potential demand. [Uh, there is another story on today’s wires claiming the exact opposite is true!]

All three major exchanges were flat in early afternoon trading. [I did hold off a while before collecting these news items today…]

Gold and oil rose as the dollar weakened.

The Nasdaq was pressured a day after Texas Instruments gave a fourth-quarter earnings view that disappointed some investors who had hoped for a stronger outlook on signs of improving demand. The stock fell 2.6 percent to $25.65. [Is this just the beginning or is it the end for domestic semiconductor stocks?]

“People didn’t love the T-I news, especially since that company is such a barometer of what’s going on,” said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. [Now that’s hillarious, the cheeky bastards named their financial services company with the ‘pet name’ for a penis.]

Stocks were also buffeted by concerns about the global recovery after ratings agency Standard & Poor’s revised its outlook on Spain to negative, one day after Fitch Ratings downgraded Greece’s debt rating. [Which is pretty surprising considering that NONE of these asshole ratings agencies got it right! Were I an investor the ratings agencies would serve as ‘contrary’ indicators!]

The move also comes after a potential debt default in Dubai raised concerns about the prospects for another global economic crisis. [Understand that the real problem facing investors is the crisis ‘SHOULD BE’ over but it isn’t (because nobody wants to accept any losses so nothing’s been ‘fixed’.) Leaving the ‘real economy’ to struggle along the best it can.]

Exchanges in Europe ended the day lower on those concerns. In London, the FTSE 100 was down 0.37 percent; the DAX in Frankfurt fell 0.72 percent; and the CAC-40 in Paris declined 0.74 percent.

In Asia, both the Nikkei in Tokyo and the Hang Seng in Hong Kong were down more than 1.3 percent after the Japan said its economy grew more slowly than estimated.

It’s that last bit I’d like to spend an additional moment on if I may…the entire run up to 10,000 points on the Dow has been based on the idea that the ‘global recovery’ was underway. While we encounter this new report telling us what we already know (That the Japanese economy is (and has remained) in the Tank, there is another post on the NY Times Business page crowing about the ‘robust’ recovery China is enjoying…

And you know that’s bullshit too! There isn’t a domestic market for the expendable crap we buy from them…there’s no ‘there, there!’ Which might be to say that Chinese ‘government statistics’ aren’t any more ‘reliable’ than the home grown ones…and there was another series of ‘exposes’ on the net regarding the most recent (incredible) unemployment figures….but this speaks to a much more disturbing dynamic at play, far more serious than the lies themselves.

Thank you for indulging me, we shall now proceed to tonight’s second offering

U.S. Wholesale Inventories Rise Unexpectedly

[Note how both of tonight’s offerings are ‘orphans’…]

By THE ASSOCIATED PRESS
Published: December 9, 2009

WASHINGTON (AP) — Businesses unexpectedly added to inventories at the wholesale level in October, breaking a string of 13 consecutive declines. It was a hopeful sign that companies will begin restocking depleted store shelves, helping to bolster the fragile economic recovery.

Wholesale inventories rose 0.3 percent in October, the Commerce Department said in a statement Wednesday, easily beating economists’ expectations of a 0.5 percent decline. Inventories dropped 0.8 percent in September. [Understand what you’re being told here good citizen, inventories climbed while unemployment remained at record levels…so this definitely isn’t a ‘good thing’…but there’s another ‘factor’ at work here. Since we make next to nothing ourselves…if inventories ‘rose’ it means they were ‘replenished’ by an off-shore source! And this has zero to do with domestic productivity! So this article tells us what, exactly?]

Sales at the wholesale level rose 1.2 percent in October, also stronger than the 0.7 percent rise economists expected. It followed a 1.3 percent increase in September and was the seventh consecutive month that sales at the wholesale level have risen. [This would be terrific news…if we made anything here! Oops! The line we have been searching for is right below us…wanna read a line of shit? Here it is!]

Steadily rising sales should help encourage businesses to restock shelves, increase production and bolster a broad recovery. The worry is the rebound could still falter if consumer spending, which accounts for 70 percent of economic activity, slumps in the face of continued high unemployment. [Um, there’s another ‘disturbing’ factor at work with that 70% of the economy figure they keep beating us over the head with…do you recall what it is? I didn’t think so. Here it is, of that 70% of the economy, only 20% of the population accounts for 80% of that spending and yeah, that 20% is just who you think it is, the ‘richest 20 %’ Does it look to you like out ‘economic model’ is broken? It sure looks busted to me!]

Wholesale inventories are goods held by distributors who generally buy from manufacturers and sell to retailers. They make up about 25 percent of all business stockpiles. Factories hold another third of inventories and retailers hold the rest. [So the ‘uptick’ in wholesale inventories is essentially meaningless if retailers aren’t drawing that inventory down.]

Even with the slight rise, wholesale inventories at a seasonally adjusted $326.1 billion were still 13.5 percent below the year-ago level. Still, the October increase marked the first gain since a 0.7 percent rise in August 2008. [Um, there you have it good citizen, a lot of crowing about ‘nuthin’.]

With the rise in sales outpacing the rise in inventories, the inventory to sales ratio slipped to 1.16. That means it would take 1.16 months to deplete existing inventories at the October sales pace. It marked the seventh consecutive month that the inventory-to-sales ratio has fallen. [This number is likely ‘thin’ because everybody knows the consumer is broke and nothing has been done to alter that fact.]

Economists are hoping that inventory rebuilding will provide a key support to economic growth in the current quarter. The overall economy, as measured by the gross domestic product, rose at an annual rate of 2.8 percent in the July-September quarter, the first increase after a record four straight quarterly declines. [Most concur that the 2.8% GDP growth is due to governmental stimulus measures and not ‘real’ economic activity…tax receipts are way off and spell certain doom for many communities across the nation.]

A switch to rebuilding stockpiles could trigger higher factory production and economic growth. [Show me the customers, which can only be done after you show them the paychecks! ‘Switch to rebuilding stockpiles indeed!’ Welcome to Wall Street where the Happy Talk never stops and neither does the denial of reality!]

But consumer spending remains a concern. The unemployment rate dipped to 10 percent in November, down slightly from a 26-year high of 10.2 percent set in October.

Do you really believe the unemployment rate dropped in November? Worse good citizen, the BLS even ‘re-visited’ September’s and October’s numbers and essentially ‘cut them in half’. There is no basis in reality for doing this, what we’re seeing is ‘political expedience’ at its worst!

Politicians have become so used to molding the data to fit the desired outcome that they think the public is so totally disconnected from a reality that continually bites them on the ass that they can lie without getting caught, a mistake that is always fatal.

It is hard to tell if it is a ‘net positive’ that this is the article that ‘disappeared’ from the NY Times story list, although it was there most of the day.

I think Mr. Michaelson said it best the other day in his column, something needs to be done and a ballot box has no part in it…it’s well beyond that.

Thanks for letting me inside your head,

Gegner

Market Economy

Greetings good citizen,

The Stupidity Index closed down 104 points today and markets around the globe closed lower as well. What do you suppose accounts for this ‘lockstep’ phenomenon? I don’t have a good answer, just a sneaking suspicion that it has something to do with a single band of tightly knit criminals.

Markets that move in concert are easier to manage/manipulate than they are in the messy ‘real world.’

If any of you have been paying attention it will come as no surprise that the markets are falling while the Dollar is rising…the mystery, however, remains the same. There isn’t a good reason for the dollar to rise any more than there is a rational reason for ‘gold’ (a.k.a. ‘real money’) to lose $70 in two days.

If these events supposedly represent ‘rational markets’ then we’ve got serious problems because what we’re really seeing here is the opinion of a couple of empty-headed assholes. There isn’t a single ‘concrete’ reason for the US dollar to appreciate in value any more than the ‘fantasy land’ surrounding gold has any basis in reality. Both phenomena represent ‘abuses’ of the true purpose/value of money.

Anyway, let us proceed to tonight’s offering

Wall Street Slips as Dollar Picks Up Strength

By MATTHEW SALTMARSH
Published: December 8, 2009

Investors from Asia to Europe to Wall Street sent shares lower on Tuesday, confronted by an economic recovery that still has a ways to go. [What’s this? Are we seeing an admission that things aren’t 100% peachy keen? The ‘recovery’, more than six months in the making, still has farther to go! WTF…look as closely as you like, read every word twice because nowhere in this article will you find anything even resembling an apology. If you were ‘mislead’ by all of the ‘rah, rah, sis boom-ba!’ it’s not the media’s fault but your own! You ‘misinterpreted’ what the pervasive Pollyanna’s of Prosperity were telling you, you silly goose!]

The dollar continued to strengthen against the euro, which in turn was pushing down commodity prices, most notably gold and oil. [As I comment above, gold has been harder hit than oil has…but there’s a semi-obvious reason for that related to the ‘utility’ of the two substances…]

In late morning trading on Wall Street, the Dow Jones industrial average was down 76 points or 0.73 percent, while the broader Standard & Poor’s 500 stock-index dropped 7.23 points or 0.66 percent. [This piece was indeed culled earlier in the trading day, the markets dipped 111 points by 3:00 O’clock this afternoon but recovered a few points before the close.]

With little guidance this week, shareholders have been are trying to determine where the economy is headed while also preparing for the end of the year. Washington will report retail sales for November on Friday, which could provide another snapshot of holiday sales. [Um, while we have government bureaus for just about everything, it strikes me as a it peculiar to have the retail sector report to a Washington bureau to obtain a tabulation of monthly results.]

On Tuesday, 3M, the diversified manufacturer, forecast earnings this year, excluding items, of $4.50 t0 $4.55 a share. That was less than the forecast of $4.57 a share. And the McDonald’s Corporation, the fast-food restaurant chain, reported that sales at restaurants in the United States dipped in November for a second consecutive month. [Um, this could be a major problem good citizen because we have an entire generation that appears to be incapable of cooking for themselves…it is unknown at this point whether this bizarre phenomenon is by accident or by design.]

In Europe, credit fears related to Dubai and Greece sent markets sharply lower and pushed up the price of safe German government bonds as investors sought shelter in quality assets. [Could the ‘unraveling’ of certain unstable markets be driving investors into ‘liquid’ safe havens such as the world’s ‘reserve currency’?]

Fitch Ratings on Tuesday cut Greece’s debt rating to BBB+ with a negative outlook, the latest blow to the troubled euro-zone country, driving Greek bond prices and banking shares lower as investors started to fret about the possibility of a default.

A day earlier, the rating agency Standard & Poor’s had warned about a downgrade of Greece, whose Socialist government is struggling to cap its budget deficit. [Remember Greece had some serious civil unrest issues and that was BEFORE things went down the tubes. The Socialists aren’t the problem in Greece, it’s the ‘fuck you, pay me’ capitalists that are screwing them up!]

Meanwhile, Moody’s, another credit rating firm, further cut its ratings on six Dubai state-linked companies because it said that it cannot assume the government will stand behind their debts, The Associated Press reported. [I hope you all noticed that these same, largely criminal credit rating agencies also made the news today…for their crimes going completely unpunished.]

The downgrades by Moody’s Investors Service come as Dubai seeks to distance itself from at least $80 billion of loans — and perhaps far more — racked up by companies it created in recent years to expand Dubai’s global clout.

Lenders up until recently had assumed Dubai’s many state-linked companies had implicit government backing. Dubai officials have since made clear no such promise exists. [Fat lot of good ‘denial’ did here in the US.]

“It’s a macro story that’s making investors cautious,” said Stefan de Schutter, asset manager at Alpha Trading in Frankfurt. “They are worried that banks that hold debt from Dubai or Greece will be hit hard.”

He added that the markets did not appear to be entering a sustained decline, or bear phase, but rather investors were reacting to day-to-day developments and thin trading conditions were exacerbating moves. [Understand what this means good citizen, it means almost no one ‘trusts’ the markets and they feel investing is too dangerous because too few players hold all the cards…it’s like sitting down at a poker table knowing that you’re the mark.]

In London, the FTSE 100 shed 1.7 percent, and the DAX was off 1.8 percent in Frankfurt.

Greek stocks and government bonds tumbled on mounting concern the nation may struggle to meet its debt commitments as public finances deteriorate.

The benchmark Athens Stock Exchange General Index dropped 4.9 percent. The yield on the benchmark 10-year Greek government bond note surged and the spread — or difference in yield — with the German 10-year bond widened to 216 basis points as investors moved into safer assets like German bonds.

The spread had been as wide as 300 basis points in March, before narrowing to 108 basis point in August and then moving out again.

The Dubai financial market index closed down 6.1 percent with losses led by banks like Emirates NBD.

In Asia, the Nikkei-225 closed down 0.3 percent and the Hong Kong Hang Seng index lost 1.2 percent.

In Britain, the giant retailer Tesco retreated 2.7 percent. It said third-quarter sales at stores open at least a year in Britain gained 2.8 percent, excluding fuel and value-added tax. That compared with the advance of 3.1 percent in the second quarter.

Elsewhere, data showed that industrial production in Germany dropped 1.8 percent in October on a month earlier.

The interesting observation here is the criminals aren’t ready to ‘retreat’ and collect their ill-gotten gains. The markets are plenty high and there will be enough to go around when it’s time to sell.

Perhaps more bizarrely is the observation that Jesse shares with us about insider selling still being strong during the rally back to the 10,000 mark.

Why are these insiders selling every share they can get their hands on? Is it because they know their shares are extremely over-valued? The whole damn stock market is over-valued and the price to earnings ratio reflects that…but that was before we had taxpayer money propping up share prices.

Something that will also be revealed later as not being illegal…although it should be.

The more you scratch the surface here good citizen, the more obvious it becomes that this was neither an accident or a coincidence…it’s a criminal conspiracy and the criminals are getting away with it.

The people we elected to uphold the law have failed to do their job…what remains is if their resignation will suffice or should these people be prosecuted and ‘punished’ alongside those they failed to prosecute?

This isn’t a ‘game’ good citizen, this is survival and if we fail to get it right, we all suffer.

Time to afflict the comfortable and comfort the afflicted.

Thanks for letting me inside your head,

Gegner

Forked tongues

Greetings good citizen,

I hope everyone had a lovely weekend, we experienced the first snowfall of the season (just a dusting) here North of Boston and it snowed a little more earlier this evening. I guess that’s the ugly reality of winter, once it starts snowing it doesn’t stop and if it rains on top of the snow it only makes things worse.

While many fret over ‘global warming’ we only had one ‘heat wave’ in Boston this summer and I was, er, restricted to my (hospital) bed (freezing my ass off) for the entire time. Add that to a spring that was so wet most crops rotted in the fields due to lack of sunshine and you’ve captured the general mood of the nation good citizen.

Things are grim and getting grimmer…except for the damn ‘Stupidity Index’ and I suspect that is frightening more people than it’s providing ‘cover’ for.

Anyway, tonight’s offering is yet another example of a corporate owned media spewing ‘happy talk’ that has zero basis in fact.

U.S. Forecasts Smaller Loss From Bailout of Banks

By JACKIE CALMES
Published: December 6, 2009

WASHINGTON — The Treasury Department expects to recover all but $42 billion of the $370 billion it has lent to ailing companies since the financial crisis began last year, with the portion lent to banks actually showing a slight profit, according to a new Treasury report. [What $370 billion was this? The Tarp was $700 billion and the ‘total’ tally of funds either lent or guaranteed by the ‘Treasury/Taxpayer’ is roughly $24 Trillion, so what’s this psycho-babble about only losing $42 billion? This thing is only just getting started so it’s a little early to be estimating losses…]

[The caption beneath an accompanying photo of GW Bush said:]

The bank bailout has been unpopular since it was created in October 2008 by former President George W. Bush and (the, by that time, Democratically controlled) Congress. [WTF! Clarification: Gegner is neither a Republican nor a Democrat, Gegner is an Anarchist who believes in ‘rules without rulers!’ The elimination of the individual from the decision making process IS tyranny!]

Treasury officials said the government had lost roughly $30 billion to the insurance giant American International Group. The new assessment of the $700 billion bailout program, provided by two Treasury officials on Sunday ahead of a report to Congress on Monday, is vastly improved from the Obama administration’s estimates last summer of $341 billion in potential losses from the Troubled Asset Relief Program. That figure anticipated more financial troubles requiring intervention. [Um, wait a minute Slim, Obama didn’t take office until January of this year…yes Summer is over but it looks like they are talking about the year before the administration came to power…which would be pretty freaky.]

The [unidentified] officials said the government could ultimately lose $100 billion more from the bailout program in new loans to banks, aid to troubled homeowners and credit to small businesses. [Which is really bad news considering ‘the government’ when framed this way, means you and me…not Biff & Buffy Fatcat.]

Still, the new estimates would lower the administration’s deficit forecast for this fiscal year, which began in October, to about $1.3 trillion, from $1.5 trillion. [The ‘qualifier’ here is ‘optimistically speaking’…a lot of things have to go exceedingly well to achieve that $200 billion dollar savings…and it looks a lot tougher to hit when phrased that way, doesn’t it?]

The report could tamp down some of the public anger directed against both parties over the bailouts. [More unwarranted optimism] Congressional leaders are already planning to use some of the program’s money for economic stimulus and job creation. [Although not one of them has a clue how to go about it.]

Of course, the government’s potential losses extend beyond the Treasury program. The Federal Reserve, for example, still holds a trillion-dollar portfolio of mortgage-backed securities whose market value is unknown.

The improved picture of the Treasury program is the result of higher-than-expected returns on the loans and the fact that, as the financial sector has recovered from its free fall last year, the government has not had to use much more of its $700 billion in lending authority this year, according to the Treasury officials, who declined to be identified as discussing the report before it was presented to Congress. [I don’t know about you but the whole damn thing looks like a ‘strategic leak’ (read ‘intentional misdirection’) to me.]

Last week, Bank of America became the latest big bank to say that it was raising private capital and would soon repay its $45 billion bailout loan. Once that payment is made, Citigroup will be the last big bank tethered to the state. [Um, notice how there is zero mention of the ‘shellac’ing’ the taxpayer took on these so-call ‘preferred stocks’ the got in exchange for ‘interest free’ loans from John & Jane Q Public…]

The estimated $42 billion in losses is a net figure that accounts for some profits to offset the losses. The Treasury officials said the government had lost about $60 billion, roughly half to Chrysler and General Motors and the other half to the insurance giant American International Group. [Some of you will remember how AIG was going to sell itself to a private equity firm for $40 billion…right before the government (Hank Paulson) stepped in with $80 Billion from you and me…and now they’re into us for what…$120 billion? Probably more…]

But the government is projecting a $19 billion profit and perhaps more on the $245 billion lent to banks, through interest, dividends and the sale of warrants the government received as collateral. [Wait a minute Slim…here they go again, we, the taxpayers, are on the hook for $24 Trillion dollars…so a $19 billion ‘profit’ is actually ‘chickenfeed’ and more like chicken shit.]

Aside from the rare good news for the federal deficit, the latest bailout accounting could have political and legislative ramifications.

Politically, the Treasury program has been unpopular ever since it was created in October 2008 by former President George W. Bush and a Congress controlled by Democrats. It has grown only more reviled over time as a symbol for many Americans of the government’s perceived favoritism toward Wall Street, which is making money, over Main Street, which continues to struggle and shed jobs. [Only ‘perceived’ good citizen? You don’t suppose Mr. Calmes’ job is hanging in the balance here, do you?]

An anti-Washington anger is disturbing both parties as they approach a midterm election year, and some Republican lawmakers have drawn primary opponents largely because of their votes last year in favor of the bailout program. [Wouldn’t possibly have anything to do with their persistent obstructionism and their complete failure to act in the public’s interest, would it?]

It was unclear how that climate might be altered as taxpayers realize they did not actually lose $700 billion to help big banks. At most, the Treasury officials said, the ultimate losses will be one-fifth of that amount and probably less. [This is ‘moving the goal posts’ big time! The public got screwed on both sides of the bailout and now they’re back to using ‘creative accounting’ in a feeble attempt to turn a pig’s ear into a silk purse! Again, good citizen, I remind you that this is nowhere near being over…if anything, it’s only getting started!]

Democrats in Congress have already decided to divert about $70 billion from what is left in the bailout fund to the cost of additional road-building and other construction projects, credit to small businesses and further aid to state and local governments. [A much larger problem than this exercise in wishful thinking acknowledges…]

The administration had wanted to dedicate unspent bailout money to the deficit but signaled to Congressional leaders late last week that it would not oppose their plans. President Obama is expected to touch on those ideas and others in an economic speech on Tuesday. [Just one more ‘dangerous’ (and reckless) ‘about face’ for the Obama Administration.]

The bailout program is due to expire at the end of the year, but the Treasury has indicated it will use the authority it was granted by Congress to extend it into 2010. [Um, is anyone else wondering why we bother to elect a ‘president’?]

The Treasury secretary, Timothy F. Geithner, testified last week to a Senate committee that “nothing would make me happier than to end this as quickly as possible,” but he added, “we’re not quite there yet.” [What Timmy is really waiting for is the day he steps out of the limelight and into the Shadows known as Goldman Sachs, never to be heard from again.]

Mr. Geithner, who has become the administration’s lightning rod for anger among both liberal Democrats and conservative Republicans, said “there are parts of the system that are still very damaged” — in banking, housing, commercial real estate and credit-starved small businesses. [So why aren’t you and Ben doing anything to help these crucial sectors of the economy? Is it because the only place where the US remains ‘competitive’ is in ‘financial products’…even if they do blow up?]

He said the administration would propose within weeks when and how to end the program safely. [You know and I know that HE KNOWS this isn’t over, they aren’t ‘ending’ anything, they’ve simply run out the clock, the crap is about to hit the rotational device and the only thing left to do is stand clear!]

At that hearing, he hinted at the Treasury’s improved forecast for the program, saying “we’re going to be able to return very, very substantial amounts of money to address the critical economic needs, long-term fiscal needs, of this country.” [What is this retard babbling about? Isn’t he supposed to say ‘Hocus Pocus’ either before or after making these wildass claims?]

That prediction contrasts with the administration’s planning soon after Mr. Obama took office in January. Fearing that additional bank failures could exhaust the entire $700 billion fund, they proposed up to $500 billion more in federal lending authority in the administration’s first budget in February.

Instead, just $7 billion more in bailout money has gone out to banks since Mr. Obama became president, making a second loan authorization unnecessary. Meanwhile, banks have raised 16 times as much, $114 billion, in private capital, according to the Treasury. {Um, again, I didn’t see no ‘hocus pocus’…nor should there be as there was no magic involved…the gun and the mask have even become optional in case you’re wondering where that $114 billion came from.]

Since the Treasury subjected big banks to “stress tests” last winter to determine how much private capital they must raise to withstand future financial shocks, the financial institutions have been eager to do so, in order to repay the government and thereby exit the Treasury’s rescue program — not least to escape the restrictions on executive compensation that come with it.

Mr. Geithner now says that banks will repay $175 billion by the end of next year. To date, counting Bank of America’s promised payment, banks have repaid $116 billion, according to the Treasury. Also, in coming weeks the Treasury will sell more of the government’s bank warrants to investors.

At last look the Dow was up but the S&P and the Nasdaq were down…and that was a couple of hours before the close. All three European exchanges closed in negative territory…I could go look but it wouldn’t matter. Market performance tells as much as the ‘happy talk’ in this article does, would that it were!

Perhaps more disturbing is the growing reliance on ‘happy talk’ and ‘positive thinking’ while both fly in the face of actual conditions.

In fact, if you want to see some grim realities you can visit this link over at Financial Armageddon or this story over at Jesse’s Crossroads Café.

Me…this crisis is still very ‘fixable’ but the first step towards putting our species back on the right track is to wrest control of our nations from the self-interested bootlickers who have sold us out for their own enrichment…a la ‘Adam Smith’.

Personal greed seldom ends well for anyone, especially the society that fails to stop it.

Thanks for letting me inside your head,

Gegner