These days catching the Fed chairman telling the truth as opposed to a b(a)ld faced lie is in itself a six sigma event.
Recovery without inflation is another way of articulating the Fed’s quixotic dual mandate. Of course, everyone knows the Fed does not care about inflation, or, it seems, the economy, unless of course Goldman Sachs recently changed its name to Inflation Economy, Inc.
Read more about Ben Bernanke...
This is a copy of the e-mail from Doug Middleton. A guy I admire who was in the forefront yeas ago to help people get out of credit card debt for literally PENNIES on the dollar. He Welcomes Your Comments. E-mail HIM!
It's over.
John McCain went down to defeat today in what was an obvious, predictable loss.
Claiming to be a "maverick" while in reality being anything but, Senator McCain came across instead as alternatively a petulant child and an apologist for bankers that have robbed America blind for the previous six years. As one of the "Aye" voters both for the $700 billion robbery of taxpayer bill (an affront that Barack Obama shares) and the "bankruptcy reform" bill that put a noose around American's necks, he finally "got his" on the national political stage.
America spoke, and said not just "no", but "hell no."
Unlike when we spoke to you Senator McCain when you were voting for the bailout, this time you're obligated to listen.
Unfortunately the McCain campaign turned out to be nothing more than apologists for the liars, cheats and frauds.
I called this back in July, and there are times I hate being right.
This is one of them.
In reality there is nothing to like here in this election season. America's economy is headed for the hole in the center of the bowl no matter what we do, and the imperative now must be to guarantee that the bankers and fraudsters don't make off with any more of our money, to claw back what we can, and to protect the funding capacity of our government, not to protect bankers and attempt to do what is mathematically impossible.
I have only faint hope that President-elect Obama will accomplish any of that in his time as President, and even less faith that he will be able to interdict the present idiocy prior to his inauguration.
It takes a strong man to stand up to the banking interests that bribe everyone up and down Washington DC. President Obama is only 10% likely to do the right thing, a President McCain was 0% likely to do so.
I do see, however, two possibilities and no middle ground, which gives me some hope. One possibility is that President Obama will proceed to play "pigman handout-a-thon", in which case our nation is headed for an economic collapse that will make The Depression look like a cakewalk.
Should President Obama listen to such idiots as Ben Bernanke and Henry Paulson, this outcome is assured. Two years from now the Democratic Party will suffer the worst defeat in the history of the Republic, being mortally wounded and forever removed from American Politics. Four years from now President Obama will depart with his tail between his legs and head home to Chicago with a new middle name - "Hoover".
The depths to which American could sink under such a series of mistakes cannot be underestimated. It is entirely possible that a worst-case scenario could come to pass, including a political failure in our nation.
Barack Obama understands what this could mean, since he has ancestors who dealt with not being free men - and one hopes he is conscious of the risk that continuing down the "bailout path" brings in this regard. This risk cannot be overstated; it is REAL. Political and monetary failure, if it occurs, has an extremely high risk of leading to a form of government that is very different than our founding fathers intended, and none of us want to see.
The second possibility is that President Obama actually thinks on his own and comes to recognize that he's not a figurehead, nor is he a puppet of the bankers and fraudsters - that he was sent to Washington DC for a reason.
To imprison all the fraudsters both on Wall Street and Main Street, and recover every nickel possible from their ill-gotten gains for ordinary Americans.
To clean up American Finance and implement The Genesis Plan or something akin to it, forcing full transparency and limits on leverage throughout the financial system.
To tell The American People that no, you cannot have houses appreciate faster than incomes, that the maximum sustainable home price is 3.5x income, and that spending more than 36% of your pretax income on all your debt, housing included, is both unreasonable and unsafe, leaving you one minor household disaster away from bankruptcy.
This pronouncement, along with policies that encourage same, will lead to a rapid revaluation of home prices downward, and clear the market.
To tell The American People that "free trade" sounds fine in theory, but that as practiced over the last 20 years it has led to tremendous distortions in foreign exchange and interest rates, not to mention millions of Americans losing their jobs to overseas workers who aren't better at what they do - they are just cheaper, mostly because they are either coming from or still living in slave-like conditions. Perhaps President Obama will do something to correct that imbalance, although you can bet the "masters of American Capitalism" will scream loud and long about any such attempt.
To tell The American People that the age of bubblenomics is over - that one must earn enough money to buy what one wishes to purchase, and if you can't, then you're unable to afford it - and that this applies to government as well.
To tell The American People that an Obama Administation will not permit The Fed to print money, nor to monetize bad assets - whether they be fraudulent mortgages, bad credit card debt, upside down auto loans or anything else. That such bad debt must instead be forced to default, and those who wrote that paper must eat their loss, no matter how painful and whether or not it results in business failure.
Tough but necessary words - words that are exactly opposite that which President Bush uttered after 9/11.
This is the change that America voted for Senator, now President-Elect Obama.
Is this the change that we truly can believe in, or were those mere words in a Presidential campaign?
We shall soon find out.
Douglas Middleton
[first, a little note about the Mooseburger Caribou Killing Machine Aerial Wolf Hunter/Madame from Alaska, Via National Enquirer and the Grand Old Party]
Republican vice presidential nominee Sarah Palin's coming out party on the world stage kicks off tomorrow with a series of meetings with the types of foreign leaders she would regularly interact with as vice president, ABC News' Imtiyaz Delawala reports. Palin sits down with foreign leaders (and one rock star) in New York this week for the United Nations General Assembly.
On Palin's Tuesday
schedule: Afghanistan President Hamid Karzai and Colombian President Alvaro Uribe, as well as former US Secretary of State Dr. Henry Kissinger. Delawala reports that on Wednesday Palin will meet with Iraq President Jalal Talabani and Pakistan's newly-elected President Asif Ali Zardari.
More from Delawala: "Palin has not met any foreign heads of state in her capacity as governor of Alaska, and has been criticized for her lack of foreign policy experience. She first received a passport two years ago, before visiting American troops in Kuwait and Germany in 2007. Palin will be joined by Sen. John McCain for joint meetings on Wednesday with the presidents of Georgia and the Ukraine, as well as with the prime minister of India. The Republican running mates will also meet Wednesday with U2 lead singer Bono, who has been active in international humanitarian issues." ]
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Daniel Bruno Sanz [see his website: www.WhytheDemocratswillwinin2008.com]
Perhaps the reader will think it presumptuous of me to proclaim Obama the winner before the first vote has been cast and arrogant of me to contradict our financial high priests Hank Paulson and Ben Bernanke, the successor to Alan Greenspan. They have declared that we are on the edge of the abyss and their prescriptions must be followed to avoid certain economic collapse. Democrats Chuck Schumer and Barney Frank tell the press that there was no alternative to granting Paulson and President Bush astonishing powers over government deficits, spending, taxation, the budget and with them the national agenda for the next eight years and more.
Let us assume that deteriorating economic indicators boost the opposition party at election time. Even before last week's market meltdown, McCain's prospects were already dim. Here's why: Joblessness is on the rise in all 12 battleground states with Michigan leading the way at 8.9%.
In Florida unemployment has surged by over 50% to 6.5% since August, 2007. Nationwide, unemployment has hit a 5 year high of 6.1% and rose in no less than 44 states overall. The Labor Department has reported that out of a dozen swing states, 11 had a "significant" increase in joblessness over the last 12 months. In the key swing states of Florida, Virginia, North Carolina (6.9%) , Colorado and Nevada unemployment is up by over 40%. Michigan, Missouri, Nevada, New Hampshire, New Mexico, Ohio and Pennsylvania have also seen heavy increases. These 12 states account for 157 of the 270 electoral college votes needed to win the White House. In Missouri, which has voted for every presidential winner except one since 1900, unemployment is up to 6.6% from 5.2% last August. Nationwide unemployment claims now exceed 3.45 million, a 25 year high.
But there's more bad news: Florida, Nevada and California have the highest foreclosure rates nationwide. California, the electoral prize of prizes, already leans Democratic and Florida has 27 electoral college votes, more than any other swing state. The Wells Fargo Home Refinance Index is in deep recession territory.
So what does any of this have to do with Obama becoming president in a "close" election? Isn't the real issue his skin color and whether angry female Hillaryites will seek revenge by voting for McCain/Palin? Isn't the burning issue lipstick on a pig? For an answer to this question, please examine "Why Obama Will Win in 2008 & 2012" at www.WhytheDemocratswillwinin2008.com
What we have seen this past week is a paradigm shift in the economy of the United States that will have a frightening impact on our future. Fannie, Freddie and AIG have been nationalized and with them two thousand thousand million dollars in debt of unknowable value transferred to the government's balance sheet. On September 19 the government promised to transfer another 700 thousand million dollars in toxic debt ( debt instruments worth far less than par that nobody wants) from both domestic and foreign bank ledgers to its own liabilities, causing bank stocks to soar while Lehman Brothers, now extinct, was removed from the DOW average. This is why the DOW rallied 700 points this past Thursday and Friday. Meanwhile on September 17, Americans, in a panic, pulled 89 thousand million dollars of their savings out of money market funds in what may be the beginning of a run on the banks. In response, Treasury has promised 400 thousand million dollars to support the money markets.
The government (taxpayer) infusion of massive financial waste into its portfolio is the socialization (spreading out) of risk and loss while profit and reward remain in private hands. Its Adam Smith's invisible hand when stocks are up and the heavy hand of Socialism when losses threaten to wreck the system. Deregulation, Milton Freedman and his Chicago School, Reaganomics, George W. Bush and John McCain are in the ash heap. Without getting too technical with a lot of dismal economic theories and graphs, let me cut to the chase. Here are the consequences of this past week :
The bank bailout will be (rightly) seen as grossly unfair by voters who will vent their anger at the incumbent party ( Republican), which is also the party most identified with high finance and therefore the most culpable. This puts John McCain at yet further disadvantage on November 4.
In early 2009 president Obama and the Congress will pass sweeping new regulation of the financial industry, bring Glass-Steagall back and otherwise please the voters but it will be too little too late.
The US dollar will now be the world's first currency backed by junk bonds, i.e. Mortgage Backed Securities, Credit Default Swaps and shaky car loans. Devaluation must follow unless Bernanke is a magician.
Waves of Adjustable Rate Mortgages and Option Arms are due to reset higher through 2010, adding fuel to the foreclosure fire. Housing prices must deflate further. The irony is that homelessness will increase.
This month's closed door, weekend meetings between Paulson, Bernanke and other un-elected personalities have effectively set America's fiscal policies for the next eight years and more. A 2009 tax increase of 44% and a spending cut of 20% will be required with no visible benefit to the taxpayer. Universal healthcare will be shelved while the unfounded liabilities of Social Security and Medicare go unresolved, creating an unmanageable fiscal crisis that could require the suspension of four thousand thousand million dollars ( that's 4 trillion) in benefits to78 million baby boomers set to retire over the next ten years, forcing many into poverty. Any reform agenda Obama and the Democrats had will become a distant dream as they attempt to contain the crisis they inherited. ( The Democrats' hands in creating the mess are not clean either.)
US sovereign debt may be downgraded, something unthinkable until now. The US dollar, already down by nearly 50% on George Bush's watch, will resemble the Mexican peso. Foreign central banks will continue to diversify ( that's banker's lingo for dump) out of the dollar as it becomes clear that the United States government is unable to pay its debts. Digital dollars created out of thin air will no longer be wanted. That's when the United States ceases to be a super power and becomes a second rate nation in hock to the banks of Japan, China and others. Its military superiority can no longer be financed. Asian creditors get left holding the big bag of devalued American paper. They are not amused.
Long term US interest rates will skyrocket and double digit inflation not seen since the 70s will return. Real wages will fall, the union movement will be invigorated and Americans' living standard will plummet, causing a political crisis that will be laid at Obama's feet.
I have not even touched upon the unsustainable current account deficit, another kind of cancer altogether.
Finally, this panic has not run its course. Markets will plunge again in the next few hours, days and weeks leading into October, 2008. There will be yet another recovery before election day as the Arab oil sheiks use all their financial might to support US stocks and the US dollar while depressing oil prices to help McCain claim victory. But it wont work.
What is President Obama to do?
I don't presume to be smarter than Ben Bernanke, the renowned Princeton scholar on the Great Depression. But I do think that political choices are now being made to best serve the elites who most benefited during the bubble years. Speculators are bailed out while homeowners are left underwater with their mortgages. Their debt is not forgiven and their payments will not decrease. Paulson, whose Goldman Sach's stock was worth 500 million dollars when he cashed out and become Treasury Secretary, tells us we must save the banks at any cost.
I say country first, banks second.
Here, at first blush, is my solution: Publicly go along with Paulson's plan for now. Do everything possible to reassure the banks their money is safe.
Quietly create a new banking institution free of toxic debt. Avoid counterparty transactions with banks that hold ( held) such debt. Prohibit trading of derivatives of Mortgage Backed Securities.
Repeal the bailout in 2009. Shift bad debt off the government balance sheet back to the banks it came from and let the chips fall where they may. Banks will be ruined and fortunes lost. The stock market will crash.
Slowly write down the mortgage principal on the ruined banks' balance sheets. Apply mortgage payments to principal first, interest and fees last. Homeowners keep their homes and build equity quickly. Housing deflation is checked. The dollar is saved. Economic recovery follows.
Of course, I have not considered all the ramifications. But the bottom line is that the current bailout will bring about the ruin of the United States and does not keep people in their homes. As Commander in Chief, Barack Obama can not allow this to happen.
Daniel Bruno Sanz is a currencies trader and the author of "Why Obama Will Win in 2008 & 2012."
Why confidence is so important in stabilizing our current near financial panic, and why Alan Blinder and Jamie Dimon (CEO, JPMorganChase ) are my leading candidates for the next Secretary of the Treasury.
"The Fed Can't Do It Alone"By Alan S. Blinder Tuesday, March 18, 2008; Washington Post, page A19 "Psychology has now overwhelmed economics. What started last summer as a serious problem in a little-known -- but not so little -- corner of the U.S. mortgage market has blossomed into a worldwide financial panic, the sort we read about in history books. Except within the Republican Party, laissez-fairy tales have been discarded, and government support is being both sought and given. The financial markets live or die on confidence. If you sell a security, you must believe the other guy will pay. You must also believe that something worth $30 at Friday's close, such as shares of Bear Stearns, will not be worth $2 at Monday's open. Such confidence looks to be draining from the system. Who can restore it? Once upon a time, it was J.P. Morgan -- the man, not the company. Today, it must be the world's leading central banks and treasuries, starting with our own. Unfortunately, this past weekend was a bad one for Team USA. On Friday, President Bush gave a speech at the Economic Club of New York that left people wondering whether he was in touch. On Sunday, Treasury Secretary Henry Paulson, who has been eerily silent as this crisis unfolded, made the rounds of the morning talk shows. It was not reassuring to see this former titan of Wall Street recite his talking points. Wolf Blitzer asked him five times, "Why did you bail out Bear Stearns?" He never got an answer. Actually, the Treasury didn't bail out Bear Stearns; the Federal Reserve did. Chairman Ben Bernanke and the Fed have been working overtime; they have slashed interest rates and lent or offered money to almost everyone potentially involved in this mess. On Sunday, the Fed even put its own balance sheet at risk to smooth the way for J.P. Morgan (the company, not the man) to "buy" Bear Stearns. But the stunningly low purchase price, far below even the value of Bear Stearns's Manhattan building, did not exactly inspire confidence. Earth to the White House and Congress: The Fed cannot do this job alone. But isn't the central bank the fabled "lender of last resort"? Yes, and the Fed is performing that role extensively. But central banks are designed to lend money to banks that are illiquid but not insolvent. It is not supposed to spend taxpayer money or even put much of it at risk. Those political decisions are properly made by elected leaders. So what can be done now? First, everyone should take a deep breath. To those living far from the canyons of Manhattan, the sky is not falling. If you don't want to sell your home, forget about falling house prices. Even on paper, it's unlikely that you've "lost" anything near what you "gained" in the run-up. Yes, the economy is limping, but it's not collapsing. And the effects of the Fed's interest rate cuts and the stimulus package that Congress enacted last month are still to come. Second, it would be nice to see some patient capital step up to the plate. With so many assets on fire sale, buying opportunities abound. Highly leveraged public companies with mark-to-market accounting and daily liquidity drains are too petrified to buy. But patient investors who don't need liquidity and don't have to worry about mark-to-market accounting have a chance to be the J.P. Morgans of our day. Third, our nation's great financial houses need to use the breathing space the Fed is providing to put themselves in order -- post haste. They need to come clean, book the losses and, in many cases, raise new capital. If the capital must come from abroad, Americans must set aside their pride and/or xenophobia. (By the way, why are some of these companies still paying large dividends and enormous bonuses to their top executives?) Fourth, we need leadership from political Washington. Forget the president. We need the Treasury secretary to take charge, not just to "support the Fed." While Paulson repeats his "strong dollar" mantra, confidence in the dollar ebbs. How about doing something about it -- such as a dramatic currency market intervention in concert with other nations? Fifth, I'd like to hear the Fed, which has the credibility the administration lacks, talk more -- and in plain English. For example, I'd like to hear it answer Wolf Blitzer's question -- and others. I'm sure Bernanke can do it better than Paulson. But our best hope for leadership from Washington may now be in Congress. Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.) are working on a fine bill that, by easing some of the stresses in the mortgage market, could do some real good. I urge Frank, Dodd and the Democratic leadership to expedite the process, and congressional Republicans should stop standing in the way. In 1933, Franklin Roosevelt famously told Americans that "the only thing we have to fear is fear itself." Unbridled fear is gripping today's financial markets. We need some soothing words right now -- followed by actions, as FDR's words were. Who will step forward? "
"The Fed Can't Do It Alone"
By Alan S. Blinder Tuesday, March 18, 2008; Washington Post, page A19
"Psychology has now overwhelmed economics. What started last summer as a serious problem in a little-known -- but not so little -- corner of the U.S. mortgage market has blossomed into a worldwide financial panic, the sort we read about in history books. Except within the Republican Party, laissez-fairy tales have been discarded, and government support is being both sought and given.
Who can restore it? Once upon a time, it was J.P. Morgan -- the man, not the company. Today, it must be the world's leading central banks and treasuries, starting with our own.
Unfortunately, this past weekend was a bad one for Team USA. On Friday, President Bush gave a speech at the Economic Club of New York that left people wondering whether he was in touch. On Sunday, Treasury Secretary Henry Paulson, who has been eerily silent as this crisis unfolded, made the rounds of the morning talk shows. It was not reassuring to see this former titan of Wall Street recite his talking points. Wolf Blitzer asked him five times, "Why did you bail out Bear Stearns?" He never got an answer.
Actually, the Treasury didn't bail out Bear Stearns; the Federal Reserve did. Chairman Ben Bernanke and the Fed have been working overtime; they have slashed interest rates and lent or offered money to almost everyone potentially involved in this mess. On Sunday, the Fed even put its own balance sheet at risk to smooth the way for J.P. Morgan (the company, not the man) to "buy" Bear Stearns. But the stunningly low purchase price, far below even the value of Bear Stearns's Manhattan building, did not exactly inspire confidence.
But isn't the central bank the fabled "lender of last resort"? Yes, and the Fed is performing that role extensively. But central banks are designed to lend money to banks that are illiquid but not insolvent. It is not supposed to spend taxpayer money or even put much of it at risk. Those political decisions are properly made by elected leaders.
First, everyone should take a deep breath. To those living far from the canyons of Manhattan, the sky is not falling. If you don't want to sell your home, forget about falling house prices. Even on paper, it's unlikely that you've "lost" anything near what you "gained" in the run-up. Yes, the economy is limping, but it's not collapsing. And the effects of the Fed's interest rate cuts and the stimulus package that Congress enacted last month are still to come.
Second, it would be nice to see some patient capital step up to the plate. With so many assets on fire sale, buying opportunities abound. Highly leveraged public companies with mark-to-market accounting and daily liquidity drains are too petrified to buy. But patient investors who don't need liquidity and don't have to worry about mark-to-market accounting have a chance to be the J.P. Morgans of our day.
Fourth, we need leadership from political Washington. Forget the president. We need the Treasury secretary to take charge, not just to "support the Fed." While Paulson repeats his "strong dollar" mantra, confidence in the dollar ebbs. How about doing something about it -- such as a dramatic currency market intervention in concert with other nations?
But our best hope for leadership from Washington may now be in Congress. Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.) are working on a fine bill that, by easing some of the stresses in the mortgage market, could do some real good. I urge Frank, Dodd and the Democratic leadership to expedite the process, and congressional Republicans should stop standing in the way.
Alan S. Blinder, a vice chairman of the Federal Reserve from 1994 to 1996, is an economics professor at Princeton and vice chairman of the Promontory Interfinancial Network.
source: http://www.washingtonpost.com/wp-dyn/content/article/2008/03/17/AR2008031702152.html?hpid=opinionsbox1
