Monday, February 15, 2010

SAR #10046

Producing numbers isn't the same as producing wealth.

Asked and answered: Can Eurobanks survive a Greek default?  Probably not, certainly not without massive government bailouts – which seem unlikely to be offered. Société Générale is not enamored of bailing out Greece: “Any 'help' given to Greece merely delays the inevitable break-up of the eurozone.” That's  French for 'Let 'em freeze in the dark.' But the problem is not going to go away (although it may be temporarily 'solved'). It may have begun in Greece, but it is spreading to Portugal and Spain.  It is contagious and virulent and is unlikely to remain confined to just these small economies.

Seems Like Old Times:  US rockets killed 12 civilians in one attack as the search for hearts and minds got started in Helmand province.

Orientation:  Some folks – mostly those who make more money than most of us – admit that the US is unequal in terms of income, but claim that the US “is an extremely mobile society from year to year”.  Yeah, downward of late.

Name That Tune:  The US imports most of its manufactured goods, exports mainly raw materials. It is dependent on foreign loans, has a malfunctioning public health system, has immense disparities between the wealthy and the population at large.  Just like most other Third World countries, except they are often kleptocracies.... oh, wait!

Breaking the Good China:  A lot of money managers are (still) infatuated with China, pointing to a decade with an average GDP growth of 9%. But that was based on exports.  Now the 10% growth is based on lending – a 27% increase in loan-to-GDP ratio.  That's a lot of money.  It could become a lot of inflation and it certainly is a lot of credit.   We know what comes after “a lot of credit.”

Time Marches On:  The 5.6 million Americans drawing “extended” unemployment benefits will start tumbling into the mist next month – up to a 5 million will be without any income by June.

Be Very Afraid:  Soon the Fed will begin raising short-term interest rates and reducing outstanding bank reserves.  But don;t worry, Mr Benanke says “we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus.  We have full confidence that, when the time comes, we will be ready to do so."  Full confidence, that's what the man is full of. Confidence.

Good News/Bad News:  The good news is that you've still got a job.  The bad news is that you are paying for all those who've already lost theirs.  Or your children will.

Atlas, Shrugged:  Rep. Paul Ryan, ranking Republican on the House Budget Committee, has put out a new “Roadmap for America's Future,” which proposes the everyone under 55 should not get Medicare when they retire, but would instead get vouchers with which to enrich private health insurers.  But don't worry, Newt Gingrich is there to save the day: “Don’t cut Medicare. The reform bills passed by the House and Senate cut Medicare by approximately $500 billion. This is wrong.”  Newt Gingrich?

Whose Counting?   The CBO says the US overall debt/GDP ratio will rise from 53% now to 77% by 2020. Moody's says the CBO is being modest and that by 2020 the ratio will be “well over 100%”.  Which is well into the danger zone – just ask Greece, Italy, Portugal...

Things That Go Bump In The Dark Port::  A bunch of aluminum from Africa and South America ended up in some ports in northwestern Japan. Suspicion is that it is Chinese aluminum that has been declared surplus to requirements and quietly dumped.  In that Chinese buying has supported the commodities market for the last year, this may be a bad sign for the market.  See your doctor if symptoms persist.

Tailoring:  Asked about the Bush administration's claim that torture was 'legal' – despite both US and international law to the contrary - Cheney said that the Justice Department arrived at the legal opinions their masters desired.

Mea Culpa:  We'd like to blame Wall Street. Or the Government. But today's economic problems stem from our demand that we be pandered to, that we deserve more, that we are entitled, and that we should be able to get without saving, without even working. We wanted to believe in magic, but choices have consequences.


Anonymous said...


The fact that you accept at face value and parrot whatever Krugman writes belies your "alleged" scientific background, and is proof that you are less concerned with seriously addressing the serious problems facing this country than you are with perpetuating distortions and ad hominem attacks.

Whatever gets you off.

CKMichaelson said...

Dear Mysterious Anonymous Commenter: Would you be happier with a citation to Ryan's “Roadmap” ( (search on “payment will be made directly to the health plan designated by the individual", or read the whole thing).

Also read how he plans to save Social Security by giving the funds to the care and keeping of Wall Street.

The Gingrich quote is found here ( .
There, feel better now?


Anonymous said...

I've been reading your blog every day for probably almost a year now. I'm no economist or expert on political matters. I'm just a girl trying to be concientious of what the heck is happening to us. I'm a realist and want to be prepared. I can't say that I've always agreed with everything, but I can say that I appreciate what you pull together each day for everyone to ponder. Thank you, and please keep it coming.

CKMichaelson said...

Thanks, Anony 631 - I'm not sure I always agree with the views I present,but they are part of the parade and all I can do is call 'em as I see 'em. And if I see 'em differently later, I happily ignore what went before (inflation/deflation for one, Obama for another). I don't get paid except in the currency of comments & I do all the reading for my own benefit. Thanks for reading.

Anonymous said...

Good grief, it seems like the left wing press simply cherry picks quotes out of context and their lemming readers take it at face value.

Here's the entire paragraph from which you quoted the 1st 3 sentences:

The reform bills passed by the House and Senate cut Medicare by approximately $500 billion. This is wrong. There is no question that Medicare is on an unsustainable course; the government has promised far more than it can deliver. But this problem will not be solved by cutting Medicare in order to create new unfunded liabilities for young people.

I think Gingrich is right on policy but tries to be too cute on the politics. While it’s probably effective, he unnecessarily set himself up to be taken out of context. Medicare must be reformed, but not to simply help finance a new entitlement program. That's irresponsible fiscal policy.

As for Ryan, the stark eality is that if we are to prevent a massive debt explosion, unprecedented tax increases, and/or the destruction of other federal spending programs, Medicare’s spending growth will have to be dramatically curtailed from its current unsustainable 6.6% average annual growth rate. Medicare’s cost to taxpayers this year will be $25 B larger than last year.

As Keith Hennessey says, "Obama and Paul Ryan agree we need to significantly slow the growth of Medicare spending to address our long-term fiscal situation.

They differ on what should be done with the savings. The President wants to spend the savings on a new entitlement. Mr. Ryan wants to address our long-term deficit spending problem.

They also have different ways of changing the way Medicare works.

Dr. Krugman is attacking Mr. Ryan for the structure he proposes for Medicare. I imagine most Democrats would agree with the policy critique if not the inflammatory language.

Dr. Krugman is also attacking Mr. Ryan for the magnitude of the changes he wants to make – how much he wants to slow Medicare spending growth. But in this respect, he is attacking a rough Obama/Ryan agreement. Dr. Krugman is the irresponsible one here, not Obama/Ryan."

Ryan is taking political risk by offering sound fiscal policy, whereas Krugman lives in a fantasy world where the answer is always to spend more money we don't have (unless, of course, a Republican is spending it).