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Weekender thread

May 29, 2009

Timmeh the Elvin One is heading off to China. He’s probably going to try to get them to keep buying our massive debt. He’s probably going to further finagle in ways he knows best. There’s been quite a bit of hype around recent Treasury rates and Mortgage rates. All this means those green shoots aren’t as green or shooty as they tried to make us believe. Nope, they are weeds. Here are some good links that helped me comprehend:

A Return to a Nasty External Dynamic?

So we are stuck with two apparently contrasting views. On one hand, rising long rates and the related steepening of the yield curve should indicate improving economic conditions – after all, rising yields simply imply that market participants are gaining confidence to put their money to work in more risky endeavors. The steeper yield curve should boost bank earnings and, in time, encourage lending. On the other hand, higher yields may undermine support for the housing market, thus extending the downturn. The Wall Street Journal believes the Fed is choosing the positive spin:

“Federal Reserve officials believe the recent sharp rise in yields on U.S. Treasury bonds could reflect a mending economy and a receding risk of financial catastrophe, suggesting the central bank won’t rush to react — even though some investors see danger in the government’s rising cost of borrowing.”

The WSJ is most likely correct. Indeed, I too want to believe the first story; the steep yield curve should be a clear signal that economic activity is poised to soar. Two things are holding me back. First, the 10-2 spread went positive in mid-2007, which should have indicated that the expected Fed easing later that year would catch fire and the economy would be clear of recession territory by mid-2008. Oops – the signal was premature. Something was different (just as I had come to embrace the yield curve’s signals). My second concern is that rising yields indicate capital is fleeing the US, and the shape of the yield curve is being influenced significantly by shifts in patterns of foreign central bank purchases. And while the resulting depreciation of the Dollar will support US growth over time, the transition can be very disruptive. Interestingly, the Wall Street Journal story quoted above does not point to this possibility.


Bottom Line: I want to believe that the rapid reversal of Treasury yields is a benign, even positive, event. This is likely the Fed’s view; consequently, the will hold steady on policy. Challenging this benign view is that the reversal appears to be lock step with a return to dynamics seen in 2007 and 2008 – exceedingly low US rates encouraging Dollar outflows, stepping up the pace of foreign central bank reserve accumulation and putting upward pressure on key commodity prices. I worry that policymakers have forgotten the external dynamic that was hidden by the crisis induced flight to Dollars last fall. Indeed, capital outflows (indicated by a foreign central bank effort to reverse those flows) would signal that much work still needs to be done to curtail US consumption to bring the global economy back into balance. Policymakers are unprepared for this possibility.

Another story on Bloomberg, Bond Vigilantes Confront Obama as Housing Falters discusses the Treasuries/Mortgages conflict in terms of Bond Vigilantes, essentially the Chinese who are seeking to punish the US for having outrageous levels of debt. It is an interesting read in light of the article above. In short, we’re still far far from being out of the woods and we aren’t the only ones who think Elvin Timmy is full of chop suey! or kung pao? or tofu cheesecake? or General Tso’s amassed borders with bean sprouts? :)

Related to a story discussed here yesterday, the Super Regulator Idea for Wall Street isn’t too popular in DC

Proposal for US bank regulation draws flak

enior lawmakers weighed into the turf war on regulation on Thursday, expressing scepticism over an idea for a single banking watchdog but supporting a careful overhaul of the discredited system.

Chris Dodd, chairman of the Senate banking committee, said he was “a little uneasy” about a proposal to replace the range of banking supervisors with one super-regulator, which has been considered by the Obama administration

“I get a little uneasy about a single regulator,” he told the Financial Times. “I think there’s a value in having overlapping jurisdictions who offer a counterweight from time to time – where you don’t place all your eggs in one basket.”

Barney Frank, chairman of the House financial services committee, also poured cold water on the idea, saying the US should not follow the UK’s model of the Financial Services Authority.

However, both lawmakers are open to some consolidation and are working with the administration to redesign regulation in a bid to prevent – or at least mitigate – the next financial crisis.

Damn, I’ve got work all weekend. The income is great, but this work stuff really interferes with my blahging! I hope you all have a good one.

20 Comments leave one →
  1. Stemella permalink*
    May 29, 2009 1:08 pm

    Nouriel has a new article up at his place When the public debt rubber meets the investors’ anxiety asphalt

    Another way to consider fiscal sustainability is to estimate the permanent primary balance (as a share of GDP) necessary to stabilize the public debt to GDP ratio at 82% (the estimated level of such ratio by the CBO in 2018), i.e. we need to estimate what the US primary gap is. If average public debt rates were to average 5% (over time as long rates go higher and short rates are eventually normalized) and if the inflation rate is 2% and if the potential growth rate of the US slows to 2% (as discussed in my Yellow Weeds column), you need a primary balance of 0.8% of GDP to stabilize the debt ratio at 82% and avoid an unsustainable increase in that ratio. The primary balance this year is likely to be over 8% of GDP (but this is not a cyclically adjusted figure). If one measures the structural permanent primary balance (i.e. the one that is cyclically adjusted) then the estimate of it is between -2% and -3% of GDP depending on assumptions about long term growth and trends in revenues and spending. Thus, the permanent primary gap (i.e. the difference between the primary balance needed to stabilize the public debt ratio and the structural permanent primary balance) could range between 2.8% of GDP and 3.8% of GDP.

    These are very large figures that suggest that, even after the US reduces its current large fiscal deficit once the recession is over and the recovery to potential growth is achieved, there will be a very large primary gaps that will take between about 3% and 4% of GDP to close to stabilize the public debt ratio at very high levels. Thus, the issue of medium term debt sustainability is quite serious for the US. Of course, higher potential growth rates for the US economy and lower real interest rates on the public debt would shrink this primary gap. But even in the unlikely scenario that the real interest rate – growth differential were to be zero the primary gap would still be between 2% and 3% of GDP. And these estimates of the primary gap do not even include the long term liabilities that the US faces from unfunded public sector liabilities (Social Security, Medicare and other health care costs).

    Indeed, as pointed out above, the US is not yet at the stage where rating agencies will downgrade its rating from the current AAA, even if – by some parameters – this downgrade will be warranted in the next year or so. But over time the continuation of unsustainable fiscal deficit may lead to such downgrade. Rating agencies may delay such downgrade as their oligopoly power derives from the special and official regulatory role that the US and other governments have provided them; thus, the same conflicts of interest that led the rating agencies to mis-rate toxic assets may lead them to postpone for a long time the necessary downgrade of the US public debt. But investors should start doing their own homework – and assess the medium term unsustainability of current US fiscal policy rather than rely on rating agencies that are always doing “too little too late” and whose ratings are biased by the US government being the effective and official source of their rating power. This US government has already effectively bullied rating agencies in being lenient on US state and local government ratings in spite of the sharp deterioration of their fiscal balances. So one cannot expect rating agencies – that are effectively captured by their political masters – to provide unbiased ratings of the US public debt.

  2. Stemella permalink*
    May 31, 2009 9:13 am

    Here’s some news on Geithner’s China trip: Geithner says U.S. committed to pull deficits down

    U.S. Treasury Secretary Timothy Geithner, aiming to persuade China that its U.S. investments were safe, pledged that the Obama administration was firmly committed to ratcheting down huge deficits as quickly as it can once economic recovery is assured.

    “No one is going to be more concerned about future deficits than we are,” he told reporters while en route to Beijing for two days of meetings Monday and Tuesday with top Chinese officials including President Hu Jintao and Premier Wen Jiabao.

    During the past week, uneasiness in financial markets over soaring U.S. budget deficits has driven interest rates up and added to worry about whether there will be buyers for the flood of U.S. debt securities that are being auctioned to pay for recovery efforts.

    China is the largest single purchaser of U.S. Treasury debt and already has shifted investment of some of its reserves to shorter-term maturities, a sign that it may fear the U.S. will be forced to push interest rates up to control inflation when recovery begins.


    He told reporters accompanying him that the Obama administration wants to broaden its engagement with China and said there was room for the two countries to cooperate more closely in promoting recovery and fostering sustainable long-term growth.

    “We are seeing more durable stability in the economy and the financial system is in substantially better shape,” Geithner said. “But we have a ways to go and we need to keep working in the United States and with the other major economies to restore conditions for a sustainable recovery.”

    The United States and other major economies are pushing for key international financial institutions like the International Monetary Fund to play a more prominent role monitoring global economic practices.

    Geithner said the United States believes China, with one of the most vibrant economies, should have a bigger say in how the IMF is run.

    So it looks like Elfman is going to bargain a bigger Chinese role in the IMF in trade for them not bailing on the US currency and debt. That’s what it sounds like to me.

    No wonder N. Korea is jerking our chains. We are in a position of incredible weakness.

    • cometman permalink*
      June 1, 2009 11:57 am

      After reading the main post and these links, it sounds to me like the US oligarchs are in panic mode and this mish mash of a bailout isn’t fooling anybody in the rest of the world. China and other countries seem to realize we are essentially broke and not doing anything constructive to remedy the situation. The banksters can keep saying over and over again that recovery is right around the corner, but it seems that only the credulous in this country are buying that line.

      We seem unwilling to swallow the bitter pill of allowing the GoldSux of the world to fail as they would in a real “free market” economy. Sure it would hurt for a bit, but then we’d be able to get a fresh start at least. It seems like the rest of the world is trying to decide when it is time to stop investing with and propping up our broke ass country, let our economy fail, and cut their losses. I think your speculation about Timmy’s motivations in China are right on the money.

  3. Stemella permalink*
    May 31, 2009 9:20 am

    And here’s a story to get your blood boiling: Is Larry Summers Taking Kickbacks From the Banks He’s Bailing Out?

    The title alone has me rolling my eyes and shaking my head. Here’s a snippet.

    Last month, a little-known company where Summers served on the board of directors received a $42 million investment from a group of investors, including three banks that Summers, Obama’s effective “economy czar,” has been doling out billions in bailout money to: Goldman Sachs, Citigroup, and Morgan Stanley. The banks invested into the small startup company, Revolution Money, right at the time when Summers was administering the “stress test” to these same banks.

    A month after they invested in Summers’ former company, all three banks came out of the stress test much better than anyone expected — thanks to the fact that the banks themselves were allowed to help decide how bad their problems were (Citigroup “negotiated” down its financial hole from $35 billion to $5.5 billion.)

    The fact that the banks invested in the company just a few months after Summers resigned suggests the appearance of corruption, because it suggests to other firms that if you hire Larry Summers onto your board, large banks will want to invest as a favor to a politically-connected director.

    Revolution Money?!?!? you just can’t make this shit up

    The last paragraph makes me chuckle. It seems like something we might write or have written…

    Everything about Summers, from his horrible track record in the developing world in the 1990s to the sleaze and plunder he’s overseeing in the White House should make us terrified. Hell, he even looks like some old Batman villain: Summers, whose trademark bullfrog neck was enough of a distraction before Obama brought him into the White House, has seen his gelatinous layers of neck-fat swell up like an amphibian guarding its eggs ever since he took control of the economy.

    Get this monster out of the White House now, before he devours us all.

    Cane Toad Summers! ;)

    • cometman permalink*
      May 31, 2009 3:13 pm

      That was a great article on Summers and it does get you a little hot under the collar. He was shilling for an internet credit card company! Where you can get credit as fast as you can spend it with just the click of a mouse! This is really getting to the point of farce, but it would be a lot funnier if it wasn’t costing all of us so fucking much.

      That last paragraph was priceless :)

  4. Stemella permalink*
    May 31, 2009 8:11 pm

    John Kerry is back on the investigative trail now that he is chair of the Sentate Foreign Relations Committee. Reviving the role he once played in tracking BCCI in Iran-Contra days, he

    plans to take on Iran’s nuclear program, gun-running on the Mexican border, terrorism, narcotics and human trafficking, all through the prism of money laundering. He has hired a former investigative reporter, an ex-CIA agent and a one-time managing director of Bear Stearns Cos. LLC to help him.

    “There are lots of big pieces out there that depend on money moving,” he said in an interview in his office in the Senate, where he is serving his 24th year.

    Kerry, who was a prosecutor and attorney in Massachusetts before starting his political career in 1982, said the lack of congressional oversight during the Bush administration left behind a target-rich environment for his panel. The Treasury Department “has its hands full” and is “inadequately resourced” to pursue these inquiries, he said.

    “For the last eight years we’ve had an administration that has done its utmost to protect, hide, obfuscate, neglect, void, simply not even care about these issues,” said Kerry, 65.

    The results of his investigations could help Kerry recover some of the prominence he lost after 2004, when he was the Democratic presidential nominee and failed to unseat George W. Bush. He took over the committee chairmanship in January after his predecessor, Senator Joe Biden of Delaware, became vice president

    Maybe he will come across something on Stanford and maybe he might even not bury it, maybe….

    • cometman permalink*
      June 1, 2009 12:08 pm

      Love to see something come of this and I think Kerry did great work uncovering the BCCI scandal. Unfortunately he didn’t raise too much of a peep when Clinton brushed it all under the rug, and I bet StausQuobama does the same thing if Kerry’s work gets some skeletons to start spilling out of closets.

      • Stemella permalink*
        June 2, 2009 12:04 pm

        Yeah, even if he gets a scoop I doubt too that evidence will go far. The torture photo issue does not bode well for transparency no matter what Status quO says.

  5. Stemella permalink*
    June 1, 2009 5:51 am

    The Bankstas are so damn ungrateful. After all that money that has been thrown their way, they are lobbying against any regulation.

    Even in Crisis, Banks Dig In for Fight Against Rules

    The nine biggest participants in the derivatives market — including JPMorgan Chase, Goldman Sachs, Citigroup and Bank of America — created a lobbying organization, the CDS Dealers Consortium, on Nov. 13, a month after five of its members accepted federal bailout money.

    To oversee the consortium’s push, lobbying records show, the banks hired a longtime Washington power broker who previously helped fend off derivatives regulation: Edward J. Rosen, a partner at the law firm Cleary Gottlieb Steen & Hamilton. A confidential memo Mr. Rosen drafted and shared with the Treasury Department and leaders on Capitol Hill has, politicians and market participants say, played a pivotal role in shaping the debate over derivatives regulation.

    Today, just as the bankers anticipated, a battle over derivatives has been joined, in what promises to be a replay of a confrontation in Washington that Wall Street won a decade ago. Since then, derivatives trading has become one of the most profitable businesses for the nation’s big banks.

    The looming fight over regulation is the beginning of a broader debate over the future of the financial industry. At the center of the argument: What is the right amount of regulation?


    There are two distinct camps in this argument. One camp, which includes legislative leaders, is pushing for trading on an open exchange — much like stocks — where value and structure are visible and easily determined. Another camp, led by the banks, prefers that some of the products be traded in privately managed clearinghouses, with less disclosure.

    The Obama administration agrees that more regulation is needed. A proposal unveiled recently by Treasury Secretary Timothy F. Geithner won plaudits for trying to make derivatives trading less freewheeling and more accountable — a plan that hinges in part on using clearinghouses for the trades.

    Critics in both the financial world and Congress say relying on clearinghouses would be problematic. They also say Mr. Geithner’s plan contains a major loophole, because little disclosure would be required for more complicated derivatives, like the type of customized, credit-default swaps that helped bring down A.I.G. A.I.G. sold insurance related to mortgage securities, essentially making a big bet that those mortgages would not default.

    Mr. Rosen and other bank lobbyists have pushed on Capitol Hill to keep so-called customized swaps from being traded more openly. These are contracts written for the specific needs of a customer, whose one-of-a-kind nature makes them very hard to value or trade. Mr. Rosen has also argued that dealers should be able to trade through venues closely affiliated with banks rather than through more independent platforms like exchanges.

    My guess is that Elfthang will cave to the lobbyists, the Congress critters will say they tried on our behalf, and then we the people eat it, yet again.

    Business as usual, courtesy of Status Quobama, our President

    (I would so love to be wrong)

    Hey, I’m on the road all day. Have a good one.

    • cometman permalink*
      June 1, 2009 12:06 pm

      Not one iota of shame among these crooks. After credit default swaps have caused unprecedented damage to the entire economy, with thousands laid off and/or defaulting on their mortgages with thousands more to come, and all because these banks wanted to trade more and more CDS, they have the gall to name their consortium after the very thing that caused all the problems in the hopes they will be able to repeat the performance.

      Maybe they ought to stop and think for a moment about the fact that having millions of marginally employed people who live paycheck to paycheck with no time to take off from work and raise some rabble is the only thing keeping those millions of people at bay for the time being. Once they having nothing left to lose and a lot of time on their hands, I doubt things will go quite so well for the banksters.

  6. cometman permalink*
    June 1, 2009 12:31 pm

    More rearranging the deck chairs. Citi and GM dropped from the Dow Jones Industrials:

    The Dow Jones industrial average is the latest Wall Street institution to be reshaped by the financial crisis.

    The stock market’s best-known barometer is adding Travelers Cos. and Cisco Systems Inc., replacing Citigroup Inc. and General Motors Corp. The move comes as GM enters bankruptcy protection, a move that was widely expected.

    Dow Jones said Travelers, the property and casualty insurer and one-time division of Citicorp, would replace its former parent. Cisco, which makes computer networking gear, is filling the role left by GM after 83 years as part of the Dow.

    The changes to the 30-stock index take effect June 8.

    Just replace the crappy companies and voila, everything is rosy again! The economy is now fixed.

    And somehow I missed this when it happened:

    The selection of Travelers helps maintain the representation of the financial industry in the index. Dow dropped insurer American International Group Inc. in September after the federal government funneled billions to the company to keep it afloat during the financial crisis. Kraft Foods Inc. replaced AIG.

    I do like the phrasing “helps maintain the representation”. Maintaining representations and appearances rather than doing anything concrete to solve problems seems to be the entire MO of this bailout.

    • Stemella permalink*
      June 2, 2009 12:07 pm

      They just take do overs, change their books, print some money and say New Game! Woo Hoo! We win!


      We don’t get to do that. Nope, we go to jail, do not pass go, do not collect $200.

      As Black said, best way to rob a bank is to own it. Sick thing is, we do own them with the bail outs, but we can’t do anything about the pirates because they’ve robbed us all blind.

  7. cometman permalink*
    June 1, 2009 12:49 pm

    Very concise common sense article from Pam Martens on why a few people having all the money isn’t good for the rest of us.

    Wealth-deprived consumers can’t buy the goods and services being produced. This leads to repetitive cycles of layoffs and growing unemployment which leads to more wealth-deprived consumers leading to more overcapacity in production plants, more layoffs, more shrinking purchasing power.

    The accompanying, and equally dangerous, problem is that concentrated wealth stifles the very innovation that is necessary to create new industries, new jobs and lead us out of the downward economic spiral.

    Let’s think about the individuals who tapped into Wall Street’s rigged wealth transfer system and what they have done with their ill-gotten loot: typically, they own three or more homes, fancy cars, multiple country club memberships, airplanes, yachts, and numbered offshore bank accounts. The problem is, they just can’t buy enough to compensate for the purchases they have deprived hundreds of thousands of other consumers from being able to make.

    I think part of the problem is that once numbers start getting too large, a lot of people just tune things out. But I’ve tried to make it clear to friends in the past why it’s bad for a few people to make so much money. A CEO making $20 million could take a 50% pay cut and give 2000 people in their company a $5000 raise and still be filthy rich themselves. It’s discouraging to see people buy into the whole trickle down thing, especially ones who should know better. A relative of mine who made a career out of being good with numbers remarked that a friend who caters to the wealthy wouldn’t have their job if it weren’t for all the rich people who give them business, so maybe there was something to the trickle down theory. But somehow they failed to understand that while one guy might lose some income, hundreds of others would be able to make a living if those at the top weren’t hoarding the wealth for themselves.

    Regarding plans under discussion to regulate the banking industry Martens has this to say, and I couldn’t agree more:

    What all of this means is that President Obama has precious little time left to stop rewarding failure and bad behavior before his own Presidency is deemed a failure. It was difficult enough to countenance the reappearance in his administration of all those Wall Street faces who failed to rein in the Wall Street abuses or, worse, aided and abetted the actual creation of the opaque system that permitted the looting and pillaging. But this past week’s news that the President might be considering a pivotal role for the Federal Reserve in the new regulatory structure planned for Wall Street crosses the line, if true, from hubris to outright contempt for the American people.

  8. cometman permalink*
    June 2, 2009 8:52 am

    So GM is going bankrupt. After we handed over several billion dollars. I may be mistaken but I’m assuming the bankruptcy means they won’t be paying any of that money back to the taxpayer anytime soon. But once they emerge from bankruptcy, they will again be able to provide decent paying jobs for autoworkers. In China. This according to Robert Weissman at Counterpunch where he mentions several ways the GM situation could have been better handled and then throws this in:

    The ultimate evidence of the task force’s disconnect from its public mission is its approval of GM plans to increase outsourcing production of cars for sale in the United States. GM has now disclosed its intent to begin production in China for sale in the United States. What is the possible rationale of permitting a company propped up with U.S. taxpayer funds to increase production overseas for sale in the U.S. market? The point of the bailout is not to make GM profitable at any cost, but to protect the communities that rely on the automaker, as well as U.S. manufacturing capacity.

    But labor just keeps taking concession after concession lately with barely a peep as they continue to get abused. Earlier the autoworkers agreed to a concession that said if they went on strike, GM would go into bankruptcy which basically made the union toothless. They don’t go on strike and GM goes bankrupt anyway, and now they want to send jobs to China when they are up and running again.

    Why won’t anyone get pissed off about this?

  9. cometman permalink*
    June 2, 2009 9:14 am

    John Nichols at The Nation gets more specific regarding the GM bankroptcy debacle and shipping more jobs overseas:

    The GM bankruptcy and bailout is the continuation of post-industrial policies of the Clinton and Bush years. Those policies, which encouraged companies to shutter factories in the US and move operations to foreign countries with lower wages and weaker regulations, were defined by Wall Street rather than Main Street. The model of a “healthy” American company was defined by stock and bond speculators, who rewarded short-term thinking and brutal cost-cutting, even if these strategies resulted in the loss of millions of jobs, the closing of hundreds of functional factories and the deindustrialization of communities, regions and whole states that had once been among the most productive in the world.


    If all goes according to plan, the “New GM” will close down as many as 20 factories in Michigan, Indiana, Ohio and Delaware. Additional plants in Tennessee and Michigan will be put on “standby,” for probable closing. At least 21,000 family-supporting jobs will be lost, as the corporation shifts production to new facilities in China and other foreign countries. Those cuts come on the heels of GM factory closings last year that cost tens of thousands of jobs and shattered communities across the Great Lakes states just as the downturn was developing into a deep recession.

    This massive de-industrialization plan — with its rapid offshoring of work once done in the United States — will be paid for by the federal government.

    It will cost US taxpayers a great deal to eliminate this many US jobs — Washington has already handed GM $20 billion and is expected to shift another $30 billion into the coffers of the corporation. “Whether that investment will ever be recovered is still an open question,” suggests the New York Times report.

    $50 billion spent not to save the jobs of US citizens, but to ship them overseas. Of course this will make it more difficult for people who are laid off to make their mortgage payments, which will mean more money handed over to the banks. Where is all the money going to come from to keep bailing out all these industries at taxpayer expense if the taxpayers don’t have jobs creating payroll tax revenue and the big corporations keep getting tax breaks? And once we have created a service economy and can’t make anything anymore, and on top of that our country is broke, what exactly happens when China and other countries decide the US isn’t worth the risk anymore and stop loaning us money? China has an untapped market of around a billion people to sell the things they manufacture to. They won’t need us at all soon.

    • Stemella permalink*
      June 2, 2009 12:12 pm

      I don’t think they have an exit plan, c-man. This govt has been and continues to be a fly by night wing it what the fuck take the money and run and we have bigger nukes than they do operation.

      I think they keep on kicking the can just so they squander enough dough for their familial and crony estates and fuck the rest of us.

      I have no trust, no respect, no belief in this system at all as it stands. We are living the end of an empire. Everything must be viewed in that light, their decisions. There is desperation and insanity all around.

      And yes, China, not the dolphins, not the squids, China will be our new overlords. It is inevitable.

  10. cometman permalink*
    June 2, 2009 9:31 am

    Dean Baker on the sis-boom-bah from the media in the face of consistently bad economic news:

    Last week we got a whole series of bad reports on the state of the economy. New and existing home sales both remain near their lowest level for the downturn, as house prices continue to drop at the rate of 2% a month. New orders for capital goods, a key measure of investment demand, fell by 2% in April. Excluding the volatile transportation sector, new orders were still down by 1.5%.

    On Friday, the Chicago Purchasing Managers Index fell by more than 5 percentage points from its April level, approaching its low for the downturn. The employment component of the index did hit a new low.

    These reports might have led to gloomy news stories, but not in the US media. The folks who could not see an $8tn housing bubble are still determined to find the silver lining in even the worst economic news.

    For example, National Public Radio told listeners that the new home sales figure reported for April was up from the March level. While this was true, the April figure was only 1,000 higher than a March level that had just been revised down by 5,000. April new home sales were 4,000 below the sales level that had originally been reported for March. USA Today touted a “surge” in durable goods orders, which was also based on a sharp downward revision to the prior month’s data.

    The media have obviously abandoned economic reporting and instead have adopted the role of cheerleader, touting whatever good news it can find and inventing good news when none can be found.

    And of course this critique appears in the Guardian UK, not in a US paper. Not sure if Baker works for them directly or not, but I keep finding that paper as the original source for a lot of his articles lately.

    • Stemella permalink*
      June 2, 2009 12:25 pm

      Here’s another good piece from a regular over at Financial Times, Willian Buiter, The Browning of America where he discusses global warming/CO2 emissions and how the govt isn’t dealing with it. He thinks the govt should tax the hell out of us for gas. He also gives a nice parting shot to Squobama. :)

      The brave thing to do would be for the US to put a $4.57 per gallon additional Federal tax on gas. Recognising that politicians are wimps, let’s phase this in, to soften the blow: 57 cents per gallon immediately, and a credible commitment to a $1.00 increase in the Federal gasoline tax for the next four years. After that, both the US and the UK (and the rest of the environmentally well-intentioned nations, could add an additional $0.50 per gallon each year to the fuel tax, until the last gasoline-propelled vehicle has been driven off the roads. Any undesirable aggregate demand fall-out from this cost-increasing proposal could be compensated by returning the revenue raised to the public through an income tax cut or an increase in transfer payments.

      Even this wimpish proposal is way beyond the delivery capacity of the US political system. Dr. Chu has discovered very soon what so many well-intentioned academics who entered politics before him found out eventually: the power of logic and facts is no match for that of lobbyists and well-heeled pressure groups. The only thing green about the Obama administration’s policy agenda are the greenbacks of the of the vested interests opposed to any meaningful environmental policy.

      Back to Berkeley for Professor Chu, after a decent interval, I would have thought – assuming there still is a university at Berkeley following the imminent bankruptcy of the once-proud state of California.

      • cometman permalink*
        June 3, 2009 11:24 am

        That sounds like a good idea to me. It’s about time we started paying for gas what the rest of the world has been paying for years. Phasing it in gradually would work well I think, especially if it coincided with affordable non-fossil fuel cars being made readily available. In fact that should be a requirement for Chrysler and GM as they continue to flush taxpayer dollars down the toilet – they must use the money to come up with a line of affordable alternative fuel cars to compete with the other nations that are already making them. But of course it isn’t a requirement and it won’t be.

  11. Stemella permalink*
    June 3, 2009 5:53 am

    Unemployment numbers for May still way high: ADP Estimates U.S. Companies Cut Payrolls by 532,000

    Companies in the U.S. cut an estimated 532,000 workers from payrolls in May as the labor market showed little sign of improving even as the recession abated, a private report showed today.

    The drop in the ADP Employer Services gauge was higher than economists forecast. April’s reading was revised to show a reduction of 545,000 workers, up from a previous estimate of 491,000.

    Companies from General Motors Corp. and Chrysler LLC to American Express Co. continue to cut jobs to control costs even as the economy shows signs of stabilizing. Mounting unemployment will restrain consumer spending, muting any recovery.

    and the sectors where the losses are taking place continue to be in manufacturing and small business is eating it worst. This is exactly the wrong direction the economy should be trending.

    Today’s ADP report showed a reduction of 267,000 workers in goods-producing industries including manufacturers and construction companies. Employment in manufacturing dropped by 149,000. Service providers cut 265,000 workers.

    Companies employing more than 499 workers shrank their workforces by 100,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 223,000 jobs and small companies decreased payrolls by 209,000.

    * * * * * * *

    The shoots are green for the bankstas,
    because they are taking all the green paper
    and they buy up all the foreclosures,
    slum lords of our future.

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