SAR #11232

When it comes down to what matters more to us -- democracy or capitalism -- what will we decide? And will we be allowed to choose? - Jakob Augstein

Nude Descending a Staircase: Now JP Morgan has downgraded its prediction for US GDP growth – to 1.0% for 4Q11, down from 2.5% and 1Q12 to 0.5% from the previous guess at 1.5%. And Goldman signs in with 3Q11 at an optimistic 1% and 4Q at 1.5%

Through a Glass, Darkly: What can explain the enthusiasm investors have for locking up their money in 10-year Treasuries at 2.0%? To be satisfied with that return you have to firmly believe that everything else is going to do worse. If the US economy picks up sometime in the next ten years these investors are going to suffer terrible losses. And the same will be true for those investing in other long-term, low-interest paper: mortgages, car loans and all the rest. But the market right now says that's not going to happen. It sees little or no growth for the next decade. And the market is always right, right? We live in interesting times.

Subtle Differences: Everyone can understand that Saudi Arabia's interest in building nuclear power plants to provide domestic power while it continues to sell petroleum abroad. Iran, on the other hand, has no excuse.

Warm-up Question: Is the endgame for the Euro approaching? Yes, it was handicapped at birth and its current physicians seem intent on making things worse as quickly as possible. This is not a Disney film; a happy ending is too much expect.

Timing is Everything: Why have the Republicans decided to gang up on the EPA right now? Quite possibly because the agency is preparing rules to curb pollution from coal-fired power plants – mercury, ozone, coal ash, water quality, and – gasp – greenhouse gas emissions. Obviously the GOP's sponsors in the coal and power industries see offense as the best defense, especially when it is very hard to defend ruining the environment for a couple of hundred years just to increase profits by a few cents per share.

It's Not Just the Dow: House sales dropped 12.7% m/m in July. In NYC, sales dropped 40% y/y in the second quarter.

The Little Things: Say the Euro-zone dissolves and the Euro goes away, as Soros speculates. Sure, their will be all sorts of other problems, but what happens to Euro-denominated bonds? Are they reissued in a local currency? Which local currency? At what conversion rate? It could make US Treasuries at 2.0% look like a good deal.

Lily Gilding: As part of its nationwide campaign to fight proposals to ban plastic bags, the American Chemistry Council helpfully revised California's school environmental curriculum to include positive comments about plastic shopping bags.

On Received Wisdom: The GOP has long maintained that no one wants to see taxes increased. And that has long been a lie. While people do not want their own taxes increased, for at least the last 20 years most Americans have wanted the taxes on the rich raised. They look at their paychecks and know that the right-wing blather about 51% of them paying no income taxes is a red herring. If I (and my employer) have surrender 15.3% of my wages in payroll taxes, why does the guy making $500,000 pay only 3%? And the guy making several million for pushing paper around Wall Street pay less than 1% of his income?

Truth Telling: Rick Perry's suggestion that the students decide on the right answers to science questions was marred by a minor factual error. Well, a couple of them. One, evolution is the most tested and proven theoretical concept in science and we long ago “figured out” it was right. And two, Texas schools do not teach creationism.

Mirror, Mirror: Don't look to the unemployed, the discarded, the unneeded to explain what drove the looters into London streets – look to the bankers, the politicians, all those who have made more and more and more the ultimate goal.