Tuesday, August 9, 2011

SAR #11221

There were empires before ours…

Walking Back the Cat: US stocks fell, US government debt rose. Thus the investor does not think stocks are worth the risk and is running to US bonds for safety. From this you conclude the US economy looks pretty bad while US government debt looks remarkably reliable. Did the investment community seize on the S&Pretext and use it to dump equities because they see things going to hell in a handbasket and wanting to put their funds someplace safe – US Treasury Bonds?

Suspicion: Will the rest of the story turn out to be that S&P's hatchet job on America's credit rating was a favor for someone? Qui bono is still a valid question.

Twofer: AIG, which took down the financial system back in 2008, is trying hard to do it again. Their lawsuit against BofA, seeking to reclaim $10 billion from the $28 billion in MBS that BoA palmed off on them, on top of the NY & Delaware AGs stepping in to halt the previously announced $8.5 billion settlement for some other MBS hanky-panky, has likely put BoA either into bankruptcy court or federal receivership. Can you say TARP 2?

Grid Search: Sometimes it is more important to figure out what's missing, what didn't happen. The things that are apparent at a glance are usually less interesting as the things that at first seem absent.

The Long Way Home: The European Financial Stability Facility (EFSF) is pocket change, barely enough to cover Greece and Portugal. The Germans think the Italians should take care of their own little problem.

Asked & Answered: Is the whole world going bankrupt? Going?

Liquidity, Trapped: US banks are so stuffed with cash - $981 billion and counting – that they really want not want any more; they cannot find places to invest it. If this reminds you of the Lehman Weekend, it should.

Performance Canceled: At the end of June 4.1 houses were either 90+ days delinquent or in foreclosure. The average foreclosure was 587 days delinquent. A total of 6.45 million loans were either delinquent or in foreclosure.

A View From Over There:The current recession is being experienced in Great Britain not as a catastrophe, but as a slow erosion of hopes and aspirations. But misery loves company and the US is racing to join them. There may not be riots here, there will certainly be consequences.

Going Through The Motions: The ECB bought €700 million in Italian and Spanish debt. Good for them, but that is €250 million short of what they need to do. Every day. Every day for the next 5 years.

Villains of the Piece: The Tea Party is proud to have hamstrung the government, preventing it from taking any creative action to stimulate growth or create jobs. As house prices tumble, consumer confidence deteriorates even further, the stock market collapses and the banks shuffle into stasis, remember to send a Thank You note.

Not Even A T-Shirt: In 2001 the US debt was $5.95 trillion. Now it is $14.3 trillion on its way to $16.7 trillion. The Federal Reserve's balance sheet has gone from 10.3 billion to $1. trillion in three years. What did we get for all that money? Stability? Economic growth? Jobs? Oh, right. Two dead bad guys.

Auction Block: Twenty percent of the House of Representatives are getting vacations in Israel this summer, courtesy of AIPAC – the leading pro-Israel lobby.

Don't Bet On It:Many expect the Fed to bail out the market with an announcement of QE3. It no longer has the credibility to pull it off, having lost its superhero status. We may still believe in God and Motherhood, but the Fed... not so much. The best Bernanke can hope for now is to save what's left of his own reputation.

Porn O'Graph: A Gaussian distribution of employment over time.


rjs said...

a little rant that was part of my sunday summary; something i think everyone is still missing:

the true irony of all these spending cuts is that when all is said & done, they may not reduce the deficit at all...the level of the deficit is determined by the difference between government revenues and outlays, and if the job & spending cuts (which are inherently contractionary) push the country back into a deeper recession, government revenues may fall far enough that the deficits may actually increase; that's not just my opinion; the economic policy institute estimates that the debt deal signed this week will end up costing the economy 1.8 million jobs by 2012, and even j.p.morgan estimates that "federal fiscal policy will subtract around 1.5%-points from GDP growth in 2012"; considering our recent GDP reports came in at 0.4% & 1.3%, a 1.5% hit to our current GDP growth rate would indeed put us into another official recession...the only real way to eliminate deficits and our long term debt is to get the country back on a growth path, so that in the long term GDP grows enough annually that the debt remaining is trivial by comparison (ie, we never paid off the debts from WWII, but the country grew fast enough in the 50s & 60s that that debt, which were a greater % of GDP than we have now, gradually diminished as a percentage of the economy)...despite the rhetoric from both parties, we still really dont have a debt problem now; our cost of servicing our debt is low historically...in 2010, interest payments on the debt were 5.7 percent of total government spending; the average for that ratio between 1950 and 2010 was 9.8%...if we had leaders who believed that the country has a future, they would be borrowing even more at a time when they can sell 10 year bonds at 2.4%, and investing the proceeds in the country's infrastructure and its young people...instead, we have leaders who are owned by the plutocracy who's only interest is to sell the rest of us into an austere debt slavery...the plutocracy well understands the planet's resources are limited and having a large middle class will consume too much of what's left...all the pharaohs really want is a slave class to build pyramids for them.....

CKMichaelson said...

Ah, nothing like Good Rant in the morning...

For reasons that I have nothing to do with, or at least no control over, Google Reader's Business & Economics list did not pick up SAR this morning. If you had to do an extra click or two to get here, your dedication is appreciated. In that we are ad-free, you might as well bookmark and come straight here anyway...


rjs said...

ckm, no extra clicks needed; ive got your blogger icon on my toolbar right next to naked capitalism...

Drewbert said...

Been bookmarked in Google reader for a long time now, but I always visit the page to read the comments.

Every morning I wait for the little indicator to show a new post. When you are on vacation, I start getting cold sweats and pick up smoking. Co-workers generally avoid me during this time.

OSR said...

Combine Suspicion, Twofer, and A View From Over There and you're getting the idea. We are the coach fares, the government is the captain and crew, and the elite are the first class passengers. The first class passengers have used their influence to become chummy with the crew, so they have advanced notice that the collision with iceberg is inevitable and unsurvivable. There are only enough lifeboats for the crew and 1st class, so we commoners are deliberately distracted by the crew. Since it stands to reason that the coach fares are already dead, the elite see no reason not to loot our resources in order to increase their own chances of survival.

Ever since the realization that Peak Oil was near spawned the PNAC's infamous essay, we've seen a series of successively brazen wealth transfers to the upper class. They know what's coming. They know that no technological or agricultural miracle is going increase the carrying capacity of the planet. While I don't give them much chance of actually surviving a post-petroleum scenario, they are sure as hell going to give it the old Harvard try.