Posted By thestatedtruth.com on December 9, 2010
So that’s why interest rates have been rising lately!
Pacific Investment Management Co., which manages the world’s biggest bond fund, is raising its forecast for U.S. growth next year as policy makers pump a “massive amount†of stimulus into the economy, Chief Executive Officer Mohamed El-Erian said.
Posted By thestatedtruth.com on December 9, 2010
Definition: A Credit Default Swap (CDS) is a swap contract and agreement in which the protection buyer of the CDS makes a series of payments (often referred to as the CDS “fee” or “spread”) to the protection seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) experiences a credit event.
In its simplest form, a credit default swap is a bilateral contract between the buyer and seller of protection. The CDS will refer to a “reference entity” or “reference obligor”, usually a corporation or government. The reference entity is not a party to the contract. The protection buyer makes quarterly premium payments—the “spread”—to the protection seller. If the reference entity defaults, the protection seller pays the buyer the par value (100) of the bond in exchange for physical delivery of the bond.
Much has been written and reported about the European debt crisis, but if you look at the chart below, the capital markets are starting to anticipate defaults among some over-levered U.S. states.
Posted By thestatedtruth.com on December 9, 2010
From the looks of this, it understates the actual wealth loss by about 2-4%
Summary Consumer Balance Sheet:
Change In Household Debt:
Change In Corporate/Business Debt:
Â
Change In Government/State And Local
Source: Z.1
Posted By thestatedtruth.com on December 9, 2010
This may get very personal with President Obama. Democrats are playing with fire here!
Ben Smith of Politico says the House Democratic caucus has just voted to reject the tax deal. Posturing or the real deal?
Posted By thestatedtruth.com on December 9, 2010
Unintended Consequences
Chris Verrone over at Strategas points out that the recent sell off in treasuries was “the second largest 2 day sell off in 50 years.â€Â  A move by the 10 year to 3.50% could have serious consequences. We’re getting dangerously close.
Posted By thestatedtruth.com on December 9, 2010
December 9, 2010
Excerpts from Art Cashin on the floor of The New York Stock Exchange
Back in February of 2009, we wrote in these Comments that there was nothing stimulating in the proposed “stimulus packageâ€. We were not alone in that assessment. Our good friend, Dennis Gartman, and several others voiced the same doubts and concerns.
In the 22 months since, the ineffectiveness of the stimulus package has become much more evident to many more people. Some like, Paul Krugman, had maintained the failure was because the package wasn’t big enough. We’ve always felt it was structurally flawed and improperly designed. Now there appears to be more evidence that the flaw was, in fact, in the design.
Here are some points from a fascinating op-ed in today’s Wall Street Journal:
Although the policy debate has mainly focused on the multiplier’s size, data covering the first year and three quarters of the 2009 American Recovery and Reinvestment Act (ARRA) show that, despite the large size of the program, the dollar volume of additional government purchases that it has generated has been negligible.
The ARRA attempted to stimulae government purchases in two ways. First, it provided funds to finance federal government purchases of goods and services; mainly for infrastructure, law enforcement and education. Second, it provided grants to states and local governments to enable them to increase purchases of similar goods and services.
The essay goes on to asses why and how it failed:
So where did ARRA’s state and local grant money go? While some of it increased transfer payments to individuals in the form of welfare and Medicaid, the major part was simply used to reduce borrowing. As ARRA grants increased, net borrowing by state and local governments decreased. In the third quarter of 2010, for example, state and local governments received $132 billion in stimulus grants at an annual rate. In that quarter they borrowed $136 billion less at an annualized rate than they had in the fourth quarter of 2008, even though their revenues from all other sources were only $76 billion higher.
The bottom-line is the federal government borrowed funds from the public, transferred these funds to state and local governments, who then used the funds mainly to reduce borrowing from the public. The net impact on aggregate economic activity is zero, regardless of the magnitude of the government purchases multiplier.
So, the stimulus was not stimulating because it was basically a wash. The money never really got into the private sector. No wonder there were no jobs produced. I’m from the government and I’m here to help you.
Â
Posted By thestatedtruth.com on December 8, 2010
Anyone care to guess where the counter hackers are coming from……so, one wonders what’s taken so long for this!
Posted By thestatedtruth.com on December 8, 2010
ICI reports equity domestic funds saw outflows of $1,801MM last week, which is the 31st consecutive outflow.Â
Posted By thestatedtruth.com on December 8, 2010
Stay tuned, best guess to the question above is NO…..but one has to wonder!
Posted By thestatedtruth.com on December 8, 2010
Is this going to be viewed as a World War involving the Internet? In apparent revenge for Wikileaks Julian Assange’s arrest, hackers targeted MasterCard.com earlier and now the hacker organization Anonymous Operation, via its WikiLeaks supporting Operation called Payback has launched an attack on visa.com. Visa.com is down.
Posted By thestatedtruth.com on December 8, 2010
Question: Aren’t we in an economic recovery.   Answer:  Well, yes…..according to the government!
The Department of Agriculture reports that 42.9 million people collected food stamps last month, up 1.2% from the prior month and 16.2% higher than the same time a year ago.
Posted By thestatedtruth.com on December 8, 2010
Art Cashin touched on this winter weather situation last week. It looks like a cold one!   Heavy snowfall is unusual in Paris.
PARIS – Heavy snowfall has forced the closure of airports and shut down the Paris bus system.Â
Posted By thestatedtruth.com on December 8, 2010
Personal consumption expenditures still account for 70.4% of national income (GDP) as of Q3 2010, that was down slightly from the record of 71.1% Q3 2009. But look where it was just 10 years ago in 2000.
Standard of living reductions will force the chart below to seek lower levels of consumption. A small reduction in consumption expenditures will have a large negative effect on the ability for the economy to grow!
Posted By thestatedtruth.com on December 7, 2010
Here is the real reason that the old folks get no cost of living increase for Social Security……Inflation data relies heavily on housing prices and removes food and energy costs. No kidding! Ah, but Congress gave themselves a raise this year, I guess they looked at it the other way around.
U.S. government inflation data is “a sham” and is causing the Federal Reserve to vastly understate price pressures in the economy, influential U.S. investor Jim Rogers said on Tuesday.
The U.S. central bank uses inflation data that relies too heavily on housing prices, Rogers told the Reuters 2011 Investment Outlook Summit, and he criticized the Fed’s $600 billion bond-buying program.
Rogers, who rose to prominence after co-founding the now defunct Quantum Fund with billionaire investor George Soros some four decades ago, said he was betting against U.S. Treasuries. “I expect interest rates in the U.S. to go much, much, much higher over the next few years,” he said.
The core personal consumption expenditure index, which removes food and energy costs, is the Fed’s favored measure of inflation and was flat in October for the second straight month.
“Everybody in this room knows prices are going up for everything,” Rogers told the Reuters Summit.
Posted By thestatedtruth.com on December 7, 2010
AccuWeather.com meteorologists are predicting a storm will move from the northern Plains into the Ohio Valley, then redevelop off the mid-Atlantic coast. On that path, the storm will produce a swath of plowable snow from the Dakotas through the Midwest and Great Lakes and into the Northeast. The storm has the potential to explode into a major snowstorm that could produce in excess of 6 inches of snow over a large area of the Northeast states and eastern Canada.
Based on the latest information Tuesday morning, the areas from Missouri to western New York could be hit by the greatest impacts from the snow. The danger we see is a storm that produces almost blizzard conditions over a large area of the Ohio Valley and eastern Great Lakes.
And……….New Record Low Temperature Recorded In Florida
South Floridians woke up Tuesday morning to temperatures hovering around the very low 40s that sometimes felt like the mid-30s because of the wind chill factor.
In Fort Lauderdale, a low temperature record of 42 degrees for Dec. 7 that had been in place for 169 years was broken, said Dan Gregoria, a meteorologist with the National Weather Service in Miami.
“It was at 7:24 a.m. when the temperature reached 40 degrees,” Gregoria said.
Posted By thestatedtruth.com on December 7, 2010
A report out of RealtyTrac talks about “the new normal” thinking!
Two-thirds of mortgage holders said they would consider trying to modify loan terms if they couldn’t afford their payment, Trulia and RealtyTrac said. Almost half would think about halting payments altogether if their home value fell below the loan amount.
Mounting foreclosures and an unemployment rate close to 10 percent are delaying a recovery in the industry that triggered the worst recession since the 1930s. Home sales tumbled 21 percent in the third quarter from a year earlier and half of U.S. metropolitan areas showed price declines, the National Association of Realtors reported last month.
Demand is unlikely to pick up soon amid a “catastrophic drop in confidence,†Robert Shiller, a Yale University economist and co-creator of the S&P Case-Shiller Index, said in a Nov. 30 Bloomberg Television interview. The home-price gauge has dropped 29 percent since peaking in 2006.
Posted By thestatedtruth.com on December 7, 2010
The Stated Truth  Op-Ed
Tuesday, December 7, 2010
Let’s Go Back In Time……To 1997
In July 1997, the Asian crisis evolved into fears of a worldwide economic meltdown due to financial contagion. On December 1st 1997 South Korea had to be saved with a $55 billion bailout. It was then the largest bailout in the history of the world, but would only amount to a small $75 billion in today’s money…..By contrast, Ireland will cost more then $100 billion before breaking open another piggy bank! And we haven’t yet got to Portugal or Spain! These are huge amounts of money that in retrospect may be thrown at problems that are unsolvable. In the European situation, the ECB says 440 billion Euros will be enough, but we all know it will likely require more, a trillion Euros isn’t out of the question when it’s said and done.  Portugal, Spain and let’s throw in Italy just for good measure… will all have their hands out.Â
Maybe the worst outcome would be if the Euro dissolves itself. Should that happen, then all HELL will brake loose…..Gold anybody?  On second thought, maybe that’s the best outcome!Â
The point of all of this is that just a mere 12 years ago, $55 billion was the largest save the world had ever seen……..now 12 years later, we hear talk most often about $500+ billions to trillions. Things have truly turned into “monopoly” money……and to think, it only took a mere 12 years!
Posted By thestatedtruth.com on December 7, 2010
Makes perfect sense!
United Parcel Service will require customers shipping packages to show government-issued photo identification in an effort to intensify security after explosives were found on October cargo flights.
The new policy expands a previous rule in place at UPS Customer Centers to include all retail outlets. Customers without a pre-printed shipping label will have to display an ID, Atlanta-based UPS said in a statement today.
Posted By thestatedtruth.com on December 7, 2010
It’s a done deal….Julian Assange has been arrested. In one of his releases he implied the United States usually gets its way with other countries…..Our guess is that he will end up some where else for trial (anyone care to guess where)?
Bloomberg reports that Wikileaks founder Julian Assange  was arrested by London police over rape allegations made in Sweden. “Assange, 39, was arrested “by appointment†today at 9:30 a.m. after an international request by Swedish police for the Australian’s detention, a Metropolitan Police spokesman said today in a phone interview. He is to appear at City of Westminster Magistrate’s Court at 2 p.m. today, a court official said… The arrest follows a European arrest warrant on one count of unlawful coercion, two counts of sexual molestation and one count of rape allegedly committed in August 2010, the police’s extradition unit said in an e-mailed statement.
Now we turn to whether (and when) Wikileaks will release the decryption code to the 1.4 GB torrent file (as threatened upon his arrest) that may contain a trove of new data that will “bury” an American bank among other interesting things!
Posted By thestatedtruth.com on December 6, 2010
Didn’t the government say things were getting better….by the looks of the chart below, we’ve seen a very anemic recovery considering all the money (debt) that has been thrown its way.
The latest AAR Rail-Time Indicators report that seasonally adjusted rail carloads across all commodities have seen a sequential volume decline in three of the past four months.
 
Posted By thestatedtruth.com on December 6, 2010
Can’t say it’s a done deal, but it sounds pretty darn close!
President Barack Obama said he’ll agree to a two-year extension of all Bush-era tax cuts in exchange for extending federal unemployment insurance. The plan also would cut the payroll tax by 2 percentage points.
Obama said he would accept a lower rate for the estate tax than Democrats wanted in order to break a stalemate over extending the Bush tax cuts before Congress adjourns. The current tax rates, enacted in 2001 and 2003, are set to expire Dec. 31.
Without the compromise, middle-income families would become “collateral damage for political warfare here in Washington,†Obama said in televised remarks. He said he still believes the nation can’t afford to permanently extend the top tax rates.
“This compromise is an essential step on the road to recovery,†Obama said. He criticized Republicans for insisting on permanent tax cuts for the wealthiest Americans “regardless of the cost of impact on the deficit.â€
Obama spoke in Washington after a White House meeting with Democratic congressional leaders. They and the Republican leadership still have to sell the plan to their caucuses. Obama called it a “framework†for a deal.
The compromise plan would set the estate tax at a top rate of 35 percent, which applies after a $5 million tax-free allowance per individual, according to two people familiar with the discussions. That rate would be the lowest since 1931, not counting 2010, when the rate was zero and replaced with a complicated capital gains tax that applies when inherited assets are sold.
Obama also endorsed allowing a full deduction for equipment purchases that currently must be deducted over time. The proposal would accelerate $200 billion in tax savings for companies in the first year and benefit 1.5 million companies and several million individuals who run businesses, according to White House estimates.
Posted By thestatedtruth.com on December 6, 2010
Census Reports indicate that the most frequent family name in the U.S. is “Smith.” …..How many Smith’s do you know?
Posted By thestatedtruth.com on December 6, 2010
This is an interesting summary of a review on retirement plans “Broken Promises” from Knowledge@Wharton ……
From the women’s movement to the sexual revolution, the generation of 77 million baby boomers born in the United States between 1946 and 1964 has spent the last five decades loudly breaking new ground. Now, as they head toward their “golden years,” they promise to redefine those as well — though not entirely in the way they might have hoped. While boomers want to keep working to remain active and earn needed income, they are woefully unprepared to finance the decades after standard 9-to-5 careers.
Without such preparation, the trail they blaze into their twilight years may provide inspiration to future generations solely as an example of what not to do. The boomers will become “the guinea pig generation,” says finance professor Richard Marston, who directs the Weiss Center for International Financial Research at Wharton. “We will learn from their bad experiences.”
By 2050, developed countries will average just two people between the ages of 15 and 64 for each person 65 and older, according to the United Nations, down sharply from five younger persons for each older one in 1999. With fewer people to finance their retirement, older individuals will have to settle for less generous benefits or spend more years on the job, or perhaps do both.
The Action: The growing imbalance is forcing governments to revamp their retirement promises in sometimes politically explosive ways.
Social Security — The Challenge: Although the United States is aging less rapidly than Europe or Japan, the strain on Social Security is growing. Some 155 million U.S. workers paid Social Security taxes to cover about 38 million recipients in 2000, for a ratio of 3.4 workers per beneficiary, according to Social Security trustees. Today, roughly the same number of workers supports 43.5 million beneficiaries for a ratio of 2.9 to 1. That number is certain to keep falling as 77 million baby boomers move into retirement.
The Social Security trust funds are projected to run dry by 2037, at which time payroll taxes will cover just 78% of the benefits that retirees will require. But the date 2037 belies the true nature of the crisis that is already unfolding, says Kent Smetters, professor of insurance and risk management at Wharton. “The system is taking in less money than it’s paying out,” he says.
Nor is the system’s $2.6 trillion trust fund really something to fall back on, according to Smetters, since Washington counts the fund as both an asset for Social Security purposes and a source of financing for the federal debt. This amounts to “counting the same dollar twice,” Smetters says. “The real question is, ‘What is our nation’s ability to pay future retirement benefits?’ The trust fund itself does not really contribute to that ability.”
The Action: The United States has quietly reduced Social Security benefits “through the back door,” says Wharton’s Mitchell. In the past, only half of Social Security income was taxed,” she says. “Now it’s up to 85% and it may go up to 100% if the system gets into worse trouble.”
But such fixes may be stopgaps at best. The chairmen of President Obama’s have floated the idea of raising the full Social Security retirement age to 69, up from the current ceiling of 67 for those born since 1960. Raising the age to 70 would solve about 20% of the Social Security shortfall, says Smetters. Attacking such increases are critics who say that raising the age would leave people who hold physically demanding jobs unable to work long enough to collect full benefits.
Permanently eliminating the annual cost-of-living-increases for Social Security benefits could be another step toward fixing the program. These increases began in 1975 and will be suspended in 2011 for the second straight year because of low inflation. But like the notion of raising the retirement age, the idea of permanently ending the increases is highly controversial.
Posted By thestatedtruth.com on December 6, 2010
Sens. John Ensign (R-Nev.), Joe Lieberman (I-Conn.) and Scott Brown (R-Mass.) introduced a bill Thursday aimed at stopping WikiLeaks by making it illegal to publish the names of military or intelligence community informants.
Ensign accused WikiLeaks founder Julian Assange and his “cronies” of hindering America’s war efforts and creating a “hit list” for U.S. enemies by outing intelligence sources.
“Our sources are bravely risking their lives when they stand up against the tyranny of al Qaeda, the Taliban and murderous regimes, and I simply will not stand idly by as they become death targets because of Julian Assange,” Ensign said. “Let me be very clear, WikiLeaks is not a whistleblower website and Assange is not a journalist.â€
The Securing Human Intelligence and Enforcing Lawful Dissemination Act (SHIELD) would give the government the flexibility to pursue Assange for allegedly outing confidential U.S. informants. Brown said the law would prevent anyone from compromising national security in a similar manner, while Lieberman said its passage was essential to restore the international diplomatic community’s faith in the U.S.
Posted By thestatedtruth.com on December 6, 2010
From Art Cashin on the floor of the New York Stock Exchange
On this day in about 705 A.D., the Nordic tribes of Europe, recently converted to Christianity, began to adopt a theologically un-definable affection to an Archbishop who had existed three centuries before in an area east of Greece. Legend says he was as wise as they come. And certainly he was devout.
But was that enough to make him a big hit? He did have the added benefits of being the designated patron saint of scholars (ain’t we all); merchants (a popular Nordic pastime); sailors (the other Viking pastime) and children. He had gained the latter role through the legend that he had saved three dowry-less young girls by dropping jewels into their home through an open window.
So, over the next thousand years, these Nordic tribes would recall his love of children and his generosity by giving gifts to their children and the poor on Saint Nicholas’s feast day – December 6th. When the Dutch came to America, they brought their gift-giving “Sinte Klaus” with them. America moved the gift giving day to Christmas and mispronounced his name to Santa Claus.
Of course by this time Nordic and American winters had made open windows rather impractical in December. So the chimney became the logical point of entry. And since cold floors tended to make you reach for your stockings (hung to dry by the fire) they became the logical place to hide the jewels (gifts).
Posted By thestatedtruth.com on December 6, 2010
This from NBC: Julian Assange’s attorney says a place and time are being negotiated for a meeting with Scotland Yard. There will be a waiting line of countries that want to arrest Julian Assange.Â
Interestingly, despite discussion that the British authorities are well aware of where Assange is located, his arrest has so far been elusive.  It does make one wonder just what is contained in the 1.4 gigabyte file floating in torrentspace, which Assange’s threatens to release if arrested!
From Reuters:
A lawyer for WikiLeaks founder Julian Assange said on Monday he and his client were in the process of arranging to meet British police.
“Julian Assange has not been charged with anything,” Mark Stephens told BBC television.
“We are in the process of making arrangements to meet with the police by consent in order to facilitate the taking of that question and answer that’s needed.”
He could not give details about when that might be arranged.
Assange is wanted in Sweden in connection with alleged sex crimes.
The latest from the Guardian:
8.24pm: This just in from Ewan MacAskill, the Guardian’s correspondent in Washington:
“International pressure on Julian Assange intensified tonight as the U.S. attorney general, Eric Holder, disclosed that he had authorised “significant” actions aimed at prosecuting the WikiLeaks founder over the release of thousands of diplomatic cables.
The US attorney general, speaking at a press conference in Washington, said: “The lives of people who work for the American people have been put at risk. The American people themselves have been put at risk by these actions that I believe are arrogant, misguided and ultimately not helpful in any way. We are doing everything that we can.”Asked if he might mount a prosecution under the Espionage Act, Holder said: “That is certainly something that might play a role, but there are other statutes, other tools at our disposal”
Posted By thestatedtruth.com on December 5, 2010
Let’s put these two answers in deep perspective….Troubling is putting it mildly!
Q: [On calls to cut the deficit]
We’re looking at ten, 15, 20 years from now, a situation where almost the entire federal budget will be spent on Medicare, Medicaid, Social Security, and interest on the debt. There won’t be any money left for the military or for any other services the government provides. We can only address those issues if we think about them now.
And………
Q: The gap between rich and poor in this country has never been greater. In fact, we have the biggest income disparity gap of any industrialized country in the world. And I wonder where you think that’s taking America.
A: Well, it’s a very bad development. It’s creating two societies. And it’s based very much, I think, on– on educational differences the unemployment rate we’ve been talking about. If you’re a college graduate, unemployment is five percent. If you’re a high school graduate, it’s ten percent or more. It’s a very big difference. It leads to an unequal society and a society– which doesn’t have the cohesion that…that we’d like to see.
Posted By thestatedtruth.com on December 5, 2010
Here are a couple of zinggers…..Ben Bernanke: Economic recovery is very close to not being self-sustaining…..Anyone surprised on this one? …….and……We’re looking at ten, 15, 20 years from now, a situation where almost the entire federal budget will be spent on Medicare, Medicaid, Social Security, and interest on the debt. There won’t be any money left for the military or for any other services the government provides. We can only address those issues if we think about them now.  And more…..Q: The gap between rich and poor in this country has never been greater. In fact, we have the biggest income disparity gap of any industrialized country in the world. And I wonder where you think that’s taking America.   A: Well, it’s a very bad development. It’s creating two societies. And it’s based very much, I think, on– on educational differences The unemployment rate we’ve been talking about. If you’re a college graduate, unemployment is five percent. If you’re a high school graduate, it’s ten percent or more. It’s a very big difference. It leads to an unequal society and a society– which doesn’t have the cohesion that– that we’d like to see.
Â
Excerpts from the interview with Ben Bernanke on 60 Minutes (via the WSJ):
Federal Reserve Chairman Ben Bernanke appeared Sunday evening on CBS’s “60 Minutes†to discuss the state of the economy, the central bank’s controversial $600 billion bond-buying plan and the financial crisis. Following are excerpts from the interview with CBS’s Scott Pelley, as released by the network:
Q: The major banks are racking up profits in the billions. Wall Street bonuses are climbing back up to where they were. And yet, lending to small businesses actually declined in the third quarter. Why is that?
A: A lot of small businesses are not seeking credit, because, you know, because their business is not doing well, because the economy is slow. Others are not qualifying for credit, maybe because the value of their property has gone down. But some also can’t meet the terms and conditions that banks are setting.
Q: Is this a case of banks that were eager to take risks that ruin the economy being now unwilling to take risks to support the recovery?
A: We want them to take risks, but not excessive risks. we want to go for a happy medium. And I think banks are back in the business of lending. But they have not yet come back to the level of confidence that –or overconfidence –that they had prior to the crisis. We want to have an appropriate balance.
Q: What did you see that caused you to pull the trigger on the $600 billion, at this point?
A: It has to do with two aspects. the first is unemployment The other concern I should mention is that inflation is very, very low, which you think is a good thing and normally is a good thing. But we’re getting awfully close to the range where prices would actually start falling.
Q: Falling prices lead to falling wages. It lets the steam out of the economy. And you start spiraling downward. … How great a danger is that now?
A: I would say, at this point, because the Fed is acting, I would say the risk is pretty low. But if the Fed did not act, then given how much inflation has come down since the beginning of the recession, I think it would be a more serious concern.
Q: Some people think the $600 billion is a terrible idea.
A: Well. I know some people think that but what they are doing is they’re looking at some of the risks and uncertainties with doing this policy action but what I think they’re not doing is looking at the risk of not acting.
Q: Many people believe that could be highly inflationary. That it’s a dangerous thing to try
A: Well, this fear of inflation, I think is way overstated. we’ve looked at it very, very carefully. We’ve analyzed it every which way. One myth that’s out there is that what we’re doing is printing money. We’re not printing money. The amount of currency in circulation is not changing. The money supply is not changing in any significant way. What we’re doing is lowering interest rates by buying treasury securities. And by lowering interest rates, we hope to stimulate the economy to grow faster. So, the trick is to find the appropriate moment when to begin to unwind this policy. And that’s what we’re going to do.
Q: Is keeping inflation in check less of a priority for the Federal Reserve now?
A: No, absolutely not. What we’re trying to do is achieve a balance. We’ve been very, very clear that we will not allow inflation to rise above two percent or less.
Q: Can you act quickly enough to prevent inflation from getting out of control?
A: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.
Q: You have what degree of confidence in your ability to control this?
A: One hundred percent.
Q: Do you anticipate a scenario in which you would commit to more than 600 billion?
A: Oh, it’s certainly possible. And again, it depends on the efficacy of the program. It depends, on inflation. And finally it depends on how the economy looks.
Q: How would you rate the likelihood of dipping into recession again?
A: It doesn’t seem likely that we’ll have a double dip recession. And that’s because, among other things, some of the most cyclical parts of the economy, like housing, for example, are already very weak. And they can’t get much weaker. And so another decline is relatively unlikely. Now, that being said, I think a very high unemployment rate for a protracted period of time, which makes consumers, households less confident, more worried about the future, I think that’s the primary source of risk that we might have another slowdown in the economy.
Q: You seem to be saying that the recovery that we’re experiencing now is not self-sustaining.
A: It may not be. It’s very close to the border. — it takes about two and a half percent growth just to keep unemployment stable. And that’s about what we’re getting. We’re not very far from the level where the economy is not self-sustaining.
Q: [On calls to cut the deficit]
A: We need to play close attention to the fact that we are recovering now. We don’t want to take actions this year that will affect this year’s spending and this year’s taxes in a way that will hurt the recovery. That’s important. But that doesn’t stop us from thinking now about the long term structural budget deficit. We’re looking at ten, 15, 20 years from now, a situation where almost the entire federal budget will be spent on Medicare, Medicaid, Social Security, and interest on the debt. There won’t be any money left for the military or for any other services the government provides. We can only address those issues if we think about them now.
Q: How concerned are you about the calls that you’re beginning to hear on Capitol Hill that would curb the Fed’s independence?
A: Well, the Fed’s independence is critical. The central bank needs to be able to make policy without short term political concerns. In order to do what’s best for the economy. We do all of our analysis, we do all of our policy decisions based on what we think the economy needs. Not based on when the election is or what political conditions are.
Q: Is there anything that you wish you’d done differently over these last two and a half years or so?
A: Well, I wish I’d been omniscient and seen the crisis coming, the way you asked me about, I didn’t, But it was a very, very difficult situation. And– the Federal Reserve responded very aggressively, very proactively
Q: How did the Fed miss the looming financial crisis?
A: there were large portions of the financial system that were not adequately covered by the regulatory oversight. So, for example, AIG was not overseen by the Fed. … The insurance company that required the bailout, was not overseen by the Fed. It didn’t really have any real oversight at that time. Neither did Lehman Brothers the company that failed Now, I’m not saying the Fed should not have seen some of these things. One of things that I most regret is that we weren’t strong enough in in putting in consumer protections to try to cut down on the subprime lending problem. That was an area where I think we could have done more.
Q: The gap between rich and poor in this country has never been greater. In fact, we have the biggest income disparity gap of any industrialized country in the world. And I wonder where you think that’s taking America.
A: Well, it’s a very bad development. It’s creating two societies. And it’s based very much, I think, on– on educational differences The unemployment rate we’ve been talking about. If you’re a college graduate, unemployment is five percent. If you’re a high school graduate, it’s ten percent or more. It’s a very big difference. It leads to an unequal society and a society– which doesn’t have the cohesion that– that we’d like to see.
Q: We have talked about how the next several years are going be tough years in this country. But I wonder what you think about the ten year time horizon. Fifteen years. How do things look to you long term?
A: Long term, I have a lot of confidence in the United States. We have an excellent record in terms of innovation. We have great universities that are involved in technological change and progress. We have an entrepreneurial culture, much more than almost any other country. So, I think that in the longer term the United States will retain its leading position in the world. But again, we gotta get there. And we have some very difficult challenges over the next few years.
Links:
[1] http://blogs.wsj.com/economics/2010/12/05/bernanke-on-cbss-60-minutes/
Posted By thestatedtruth.com on December 5, 2010
Sounds like the United States had better re-assess its relationship with China……The situation becomes even more interesting with China owning so much of the United States debt (bonds). Oh, that’s right, we can’t…..nobody else will buy our debt.
“Patriotic hackers†backed by Chinese authorities conducted extensive computer hacking on U.S. government agencies and companies, including computer networks of Google Inc. according to a report published by the New York Times.
An examination of 250,000 diplomatic cables made public by WikiLeaks.org by the U.S. newspaper showed that high-level Chinese civilian and military officials assisted successful hacking attacks aimed at retrieving a wide range of U.S. government and military information.
At least one previously unreported attack conducted by Chinese hackers linked to the People’s Liberation Army in 2008 yielded more than 50 megabytes of e-mails, user names, and passwords from a U.S. government agency, the Times said.
A January cable reported that a “well-placed†Chinese source told U.S. Embassy officials in Beijing that a series of computer intrusions into Google’s networks in China were conducted by the highest levels of the Chinese government.
Posted By thestatedtruth.com on December 5, 2010
Inflation anybody? “What we’re seeing is really just the tip of the iceberg,†Trilby Lundberg said today in a telephone interview. “At the retail level, we could see another six to eight more cents†per gallon as refiners pass through higher crude costs.
The average price for regular gasoline at U.S. filling stations rose 3.92 cents to $2.9121 a gallon, according to a survey.
The price covers the two-week period ended Dec. 3 and is determined from data provided by 2,500 filling stations nationwide to Trilby Lundberg, an independent gasoline analyst in Camarillo, California.
Crude oil for January delivery surged 9.4 percent in the two weeks ended Dec. 3, rising $7.68 to $89.19 a barrel on the New York Mercantile Exchange.
Posted By thestatedtruth.com on December 5, 2010
It sounds like we have everybody’s attention here, doesn’t it!
President Barack Obama said any new legislation must extend federal jobless aid and include his own soon-to-expire tax policies.
Obama told Democratic leaders in Congress he’d reject even a temporary extension of the Bush-era tax cuts if the legislation doesn’t encompass his own policies, which include the “Making Work Pay†tax credit that adds up to $800 per year in a married couple’s paycheck, an administration official said. Obama also wants more generous credits for the working poor, college students and adoptive parents enacted in 2009 to be renewed.
The ultimatum changes the stakes as negotiators race the calendar before the tax cuts lapse at the end on this year. Obama’s demands also would add about $150 billion in cost to the bill, all of which would have to be financed by deficits. Allowing his own tax cuts to expire, Obama told lawmakers, would result in a tax increase on 95 percent of Americans, according to the official who spoke on condition of anonymity.
Obama made his demand after the U.S. Congress failed to advance legislation that would renew the Bush-era policies only for American individuals who earn less than $200,000 and couples who make under $250,000, thresholds Obama set as a campaign promise. The Senate yesterday rejected legislation with that cap as well as another measure with a $1 million threshold.
Senate Republican Leader Mitch McConnell of Kentucky said it’s “pretty clear†Bush-era tax cuts will be extended and that he’s “optimistic†that Congress will strike a deal to extend existing tax breaks before the end of the year.
“We’ve had more conversations in the last two weeks than the last two years,†he said on NBC’s “Meet the Press†today. “I think we’re going to get there.â€
McConnell said he expects Congress to extend existing tax rates on income, capital gains and dividends for all Americans, including a temporary extension for high-income taxpayers. He also said he expects that unemployment benefits will be extended.
“This is a nonstarter†unless unemployment benefits are extended, Democratic Senate Whip Dick Durbin of Illinois said on CBS’s “Face the Nation†program. He said it would be “unconscionable†to “turn our backs on two million Americans who will lose unemployment benefits before Christmas.â€
Posted By thestatedtruth.com on December 5, 2010
Well, here is our opinion on this and it’s just an opinion. Sounds like the New Orleans Hornets name will be retired at some point (maybe next season) just like the baseball Motreal Expos were (they moved to Washington D.C. and became the Nationals), and the Supersonics may be reestablished in Seattle. The old Sonics moved to Oklahoma City (after a court battle to stay in Seattle) and were renamed the Thunder, while at the same time the Seattle Supersonics history will be shared, the colors and the name were given back to the city of Seattle and can be used for a new NBA team. This makes logical sense, despite the NBA saying that it intends to keep the team in New Orleans. The Hornets originated in Charlotte back in 1988-89 as a NBA expansion team and moved to New Orleans after the 2001-02 season because of a dispute over a new arena in Charlotte.
The New Orleans Hornets will soon be playing for the first franchise in league history owned by the NBA.   Sources close to the situation told ESPN.com on Sunday that the league’s fast-moving plans to take temporary control of the New Orleans Hornets are going ahead “100 percent” and will be publicly confirmed within the next few days, mirroring what Major League Baseball did with the Montreal Expos before that franchise was sold and moved to the nation’s capital as the Washington Nationals.  This is unprecented.
Posted By thestatedtruth.com on December 5, 2010
It tells us that things are not, repeat are not getting materially better. People are giving up on getting a job. This is not what we want to see, especially not at this point in an economic recovery (that’s what the government calls this).
The Unemployment is shown by the (red line).
The Employment-Population ratio declined to 58.2% in November matching the cycle low set in 2009 (black line).
The Labor Force Participation Rate was steady at 64.5% in November (blue line). This is the percentage of the working age population in the labor force. The participation rate is well below the 66% to 67% rate that was normal over the last 20 years.
Posted By thestatedtruth.com on December 5, 2010
Posted By thestatedtruth.com on December 5, 2010
Hmm…..It’s really a simple concept…..Even with sales below prior peeks, the auto makers are profitable now because they have shed so much debt. GM did it through bankruptcy which converted much of its high interest bond debt into equity, and Ford did a bond to stock swap and buy back.  When you don’t pay all of that interest, natuarlly your expenses are less and you make more.
Based on an estimate from Autodata Corp, light vehicle sales were at a 12.26 million SAAR (seasonally adjusted annual rate)Â Â in November. That is up 13.2% from November 2009, and up slightly from the October 2010 sales rate.
This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for November (red, light vehicle sales of 12.26 million SAAR from Autodata Corp).
This is the highest sales rate since September 2008, excluding Cash-for-clunkers in August 2009.
Posted By thestatedtruth.com on December 4, 2010
Federal, State and Local City workers are about to see related  jobs destroyed. This has never…read never happened before. Governments at every level are broke. This is going to end badly. It will take a while, but it will end badly. There simply isn’t economic growth when this happens. Period! A few years down the road, everyone will understand, but for now……denial is the word of the day.  The leader of the denial pack have been elected officials,  out only for themselves.Â
As director of the Office of Management and Budget under Ronald Reagan, David Stockman knows a thing or two about trying to balance the national budget.  This 10 minute presentation by former OMB director David Stockman on the CNBC’s strategy session left the hosts somewhat speechless.
Definition of OMB….The Office of Management and Budget (OMB) is a Cabinet-level office, and is the largest office within the Executive Office of the President of the United States (EOP).
Among his observations: the government sector for the first time in history is shrinking: “the reason is that governments are broke… we are going to have to cut back government employment.” And it gets scarier: “if you take core government plus the middle class economy (65 million jobs), that’s the breadwinning economy, if we take some numbers – how many jobs in the “core economy” in November – zero; how many jobs since last December: net zero; how many jobs since the bottom of the recession in June 2009: still a million behind from when the recession ended.” As to whether the economy can grow without employment growth: “I can’t imagine how it can because employment growth generates income growth which is the basis for spending and saving ultimately and we are not getting income growth out of the middle class.” And the stunner: the job “growth” has come almost exclusively from the part-time economy (two-thirds). Why is this a major problem: “there is 35 million jobs in that sector, with an average wage of $20,000 a year: that is not a breadwinning job, you can’t support a family on that, you can’t save on that. Those jobs will not generate income that will become self-feeding into spending.” “I can’t explain the market… I don’t know what it is pricing today, I don’t think the market discounts anything anymore, it is purely a daytraders’ market that is trading off the Fed, trading off the headlines. One day it is manic, the next day it is depressive, and we can’t draw any conclusions.”
Posted By thestatedtruth.com on December 4, 2010
From Art Cashin on the floor of The New York Stock Exchange………..Moscow and Europe may have its coldest winter in 500 years! Wheat and Rice in short supply and grain supplies indicating potential shortages next year…..Oh, and Oil heading back towards $100 a barrel! It’s going to be an expensive winter for heating on the U.S. East Coast, in Europe and Russia!
Posted By thestatedtruth.com on December 4, 2010
We fully expect that the ‘can will get kicked down the road’ on this matter……
WASHINGTON…..An increase to the federal government’s borrowing limit is being considered in talks on extending the Bush-era tax cuts. But that issue would be politically very toxic.
The current federal government debt limit stands at $14.3 trillion, a mark that may be reached by April or May. The federal government’s current accumulated debt stands at roughly $13.8 trillion.
Before hitting the debt limit, Congress must agree to an increase to the borrowing ceiling. Otherwise, the U.S. could be forced to default on its debt obligations.
If an increase in the debt ceiling is not included in a compromise on the tax cuts, lawmakers face a contentious political fight next year.
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