Going green will make US dependent on China

Rare earth metals are needed for the "green" movement such as wind generators. China has essentially a monopoly on those elements. By becoming less dependent on OPEC oil the US will become more dependent on China. Which is worse? I don't know. But it is something never discussed in the green movement is it?

Discretionary spending is collapsing

We keep being told that consumer spending is increasing. Maybe, but only because the dollar is falling like a rock and gasoline, food, and other necessities are more expensive now. Discretionary spending is collapsing and is at 10-year lows. The economy is NOT recovering, it is getting worse by the day.

And it's getting worse . . .

The downside from the CMI shows that things are getting worser and worser.

The market can only go down

Difficult times ahead fot the S&P 500

William K. Black interview

William K. Black does not pull punches. Interview starts at 13:00.

Recovery? Really?

Is this what Tax Cheat Timmy was talking about in his op ed on how the recovery is going just swimmingly?

Investment in malls, office buildings, and hotels continue to crater - some at 20 year lows, and some at all-time lows. I guess that's just one more reason why the stock market continues to rocket upwards. Crazy crazy.

The real GDP chart

The real GDP chart.

Small businesses not too excited about the "recovery"

Reality is very different from the spin machine in DC and the MSM. Small business are not very thrilled with the so-called recovery.

No way to dig out of this hole . . .

Fannie and Freddie are such deep holes that there is no way for the Fed to dig out of this one. Also, GM, owned by tax payers, just bought AmeriCredit which will be the new GMAC (again). Wonderful.

Double Dip is here

Here it comes. Acutally there never really was an end to the recession. Thanks to trillions of dollars spent by the Government to prop things up and pull demand forward some more it only appeared that the recession was ending and there was a recovery. There is no recovery. Period.

ECRI continues to plunge. Someday, maybe, this will affect the stock market. Fundamentals no longer matter. Strange days.

How's the housing deleveraging going? (Not)

One graph tells it all - and why the Fed is so afraid of reality. Reinflating a popped balloon is really difficult.

And this post shows how the US has horribly overbuilt houses over the past 20 years. Housing will crash - it's a matter of when, not if. And it will crash regardless of what the Fed, Congress, and the White House does. Also, with millions of jobs lost (and many will not come back for a long time if ever) there will be even less demand for houses, especially the $500K+ mcmansions.

Whose fault was it?

Pretty much everyone in DC.

Notice the graph on how the debt to GDP has been masking the decline of the US over the past decade. Both Democrats AND Republicans blew up the country.

Small businesses are cratering

There isn't and has not been a recovery - it was all propaganda. Also, the gdp numbers were propped up solely from huge (trillions) of government spending.

Small businesses are hurting. It's just another disaster being covered up by the government.

Also, as long as small businesses are not hiring the overall unemployment situation will not improve as seen here.

Many small businesses are funding themselves with credit cards which is disasterous long-term with today's rates.

The real job numbers

Obama gave speeches this week touting the wonderful jobs numbers but reality is quite different from propaganda. Here is a great post from Slope of Hope on what the job numbers are REALLY like (just another reason NOT to listen to anything on CNBC):

In the spirit of the words of the legendary samurai swordsman, Miyamoto Musashi (Book Of Five Rings), "Think of what is right and true. Learn to see everything accurately", let us parse the number we have been given on Friday, June 4, 2010. Hat tip to John Williams of Shadowstats for methodology.

Employment increased by 431,000 jobs was the reported number. Of that 431,000 jobs, 411,000 were temporary census jobs created by the 2010 Census. These jobs disappear in a few months. The Bureau Of Labor Statistics says that 31,000 new jobs created in May were TEMPORARY service jobs. These 31,000 jobs were also included in the May figure.

Next we come to the infamous birth/death deflater. This attempts to measure the creation of new jobs due to the formation of new small business enterprises. In an economic expansion, there maybe some merit to this. In an economic contraction, it creates pure fantasy. Included in the May report was the fantasy of an increase 215,000 jobs due to this "factor."

Let us do the math here together. 431,000 jobs less the census temporary hiring leaves us with 20,000 new jobs. Subtract out the 31,000 TEMPORARY service jobs and we have a LOSS of 11,000 jobs. From this, we need to subtract out the birth/death deflater fantasy number of 215,000 jobs and we are now at a LOSS of 226,000 jobs! Now it really starts to get "fun." Though not statistically rigorous, a case can be made that in order to keep up with population growth, 150,000 new jobs must be created per month just to stay even. IF you were to add that number in, the jobs that were NOT there would be a negative 376,000.

Month of June. A month for joyous graduations. We should all have a moment of silence and send out good thoughts to the June graduates of 2010. They are coming out of our institutions of higher learning, most laden with student loan debt and will have a very difficult time finding part-time jobs at WalMart stocking shelves at a minimum wage.

The market did not believe the numbers on Friday either. It seems that the managers of the perception manipulation machinery are running out of tricks. MOPE (Management Of Perspective Economics) is beginning to fail.

I will leave you with the wise observation of Herr Doctor Joseph Goebbels, Reich Minister for The Ministry of Public Enlightenment and Propaganda.

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

The first sentence is often quoted. Once you read the complete quote, you will understand WHY the rest is usually omitted.

http://slopeofhope.com/2010/06/a-dissection-of-the-may-employment-report-market-sniper.html

Are we there yet?

http://jessescrossroadscafe.blogspot.com/2010/05/guest-post-slouching-towards-despotism.html

Raising taxes will not raise tax revenues

Karl Denninger buried a very important stat in a post about Germany here:

http://market-ticker.org/archives/2347-I-Know!-Lets-Vilify-Germany!.html

Here is the stat:

Historically, no matter the tax rate, governments seem to be unable to collect more than about 20% of GDP in taxes.

The human nature in people seem to have a built in monitor for what is fair in paying taxes. Once that threshold is reached people will start to find ways to avoid the increase in taxes such as saving more instead of spending, using cash transactions, bartering, paying people in perks, finding other ways to hide income/assets, starting businesses so that they can write off expenses and losses, move to other cities/states/countries that have lower tax rates , selling investments at a loss, setting up trusts, donating to charity, etc. Also, increased taxes will hurt GDP on the other side of the ratio.

We are going to see countless articles about "unexpected" shortfalls in tax revenues for cities, states, and countries over the next few years. Rasing tax rates DOES NOT mean that there will be a equal increase in tax revenues. Unfortunately, politicians are ignorant of math and the human nature in regard to paying "fair" amounts of taxes. They are going to continue to increase taxes and fees on everything they can think of but will, over and over, be shocked at how the tax revenue streams just aren't increasing accordingly. The MSM will be equally shocked.

The day the market almost died

http://www.zerohedge.com/article/day-market-almost-died-courtesy-high-frequency-trading

The last dance

Now that Germany has capitulated and has decided to bail out Greece (and Italy, Spain, Portugal, and every other EU country that's lining up at the trough) the die is cast. Rome is burning. This is the last dance.

http://www.zerohedge.com/article/michael-krieger-last-dance

Europe is on fire. The EU is dead. It's over.

http://www.zerohedge.com/article/john-taylor-dead-man-walkingthe-euro-finished

Cutting back not enough for PIIGS

The paragraph below is excellent at describing the real problem with Greece and the PIIGS - it's competitiveness, not just spending and debt. The same could be said of the US today. Without a competitive engine no deficit reduction measures will bring the country back to health by itself - one can't starve themselves back to health. And the only ways to create wealth is to build something, grow something, or mine something. The only free lunch comes from the energy of the sun. If companies and consumers are willing to use slave labor, no pollution controls, poor working conditions with no recourse, etc., by outsourcing to China, India, and others, then the competitiveness of the West will continue to decline in competitiveness. Collapse is coming for the PIIGS, Europe, Japan, and the US.

If you're really good at making a pigs ear of things, why not join the EU? Of course, this is not meant as a piece of solid advice, rather it is a cry of frustration at being impotently forced to watch so many things done so badly, each in turn, and one after the other. Southern Europe's problem is essentially a competitiveness problem, and not a fiscal one, and if many states have been having growing difficulty with their negative fiscal balances, this is a symptom of the problem, and not its cause. Even in the worst of cases - countries like Greece and Portugal - the rising recourse to fiscal outlays has been a response to lack of "healthy" growth, and the root cause of this continuing difficulty in generating real growth has been the underlying lack of competitiveness, and the inability to export your way out of trouble once the burden of debt starts to rise, so simply pruning the fiscal side isn't going to cure the problem, and by now that simple point should be obvious, I would have thought.

http://globaleconomydoesmatter.blogspot.com/2010/03/why-not-unravel-imf-too-while-were-at.html

Game Over

The US has crossed the event horizon. There is only one path now - one of collapse. Spending more money is actually causing a decrease in productivity. Obama, his Administration, the Fed, and Congress have proven that they only have one tool in their toolbox and that tool is to print and spend more money. That tool no longer works - in fact it is detrimental. It is only a matter of time now, not if, for when the US and the Western Civilization as we know it collapses - and it will be fairly soon. Who knows how it all will end, but the standard of living that we have all enjoyed is about to be shaken to its core. We will be living in a different world.

http://economicedge.blogspot.com/2010/03/most-important-chart-of-century.html

The economy is NOT improving

It's all cover-up. All of it.

http://www.nakedcapitalism.com/2010/03/guest-post-no-wonder-the-economy-isnt-improving.html

How the Fed/Treasury bypassed Congress

Good article from John Hussman

http://www.hussmanfunds.com/wmc/wmc10012....

How to spend $1.5 trillion without Congressional approval

Step 1: Federal Reserve purchases $1.5 trillion in Fannie Mae and Freddie Mac securities, creating $1.5 trillion of monetary base to pay for these purchases.

Step 2: U.S. Treasury quietly announces unlimited 3-year support for Fannie Mae and Freddie Mac on December 24, 2009, exploiting a loophole in a 2008 law that was originally written to insure a maximum of $300 billion in total mortgage principal (not losses, but principal).

Step 3: Within that 3-year period, we can expect the U.S. Treasury to issue $1.5 trillion in new Treasury debt to the public, taking in the $1.5 trillion in base money created by the Fed in Step 1.

Step 4: U.S. Treasury then hands that $1.5 trillion in proceeds from the new debt issuance to Fannie Mae and Freddie Mac.

Step 5: Fannie Mae and Freddie Mac use the proceeds to redeem the $1.5 trillion in mortgage securities held by the Fed, thus reversing the Fed's transactions in Step 1, without the need for any other "unwinding" transactions (watch). The base money created by the Fed comes back to the Fed, and the mortgage securities purchased by the Fed disappear, by burdening the American public with a new, equivalent obligation in the form of U.S. government debt.

Outcome: The Federal Reserve closes its positions in Fannie Mae and Freddie Mac securities, the quantity of outstanding Fannie Mae and Freddie Mac liabilities declines by $1.5 trillion, thus allowing their remaining assets repay the remaining liabilities without a $1.5 trillion hole of insolvency, and the outstanding quantity of U.S. Treasury debt expands by $1.5 trillion in order to protect the lenders, while ordinary Americans continue to lose their homes and jobs.

A Blueprint for Financial Reform

1) Immediately vest the FDIC (or other regulator that has a strict consumer-protection mandate) with the authority to take receivership / conservatorship of distressed bank and non-bank financial institutions, including bank holding companies, in the event of insolvency.

2) Require a significant portion of the capital of bank and non-bank financial institutions to be in the form of convertible debt (contingent capital).

3) Abandon the misguided and dangerous notion of "too big to fail" by making regulatory receivership / conservatorship a credible threat, and encouraging insolvent financial institutions to exercise the option of voluntary debt-equity swaps as an alternative to regulatory intervention.

4) Approve the Volcker Rule.

5) Prohibit the use of credit default swaps except for bona-fide hedging purposes.

6) Require the originator or arranger of securitized mortgage loans to retain a substantial unhedged equity exposure to every securitization deal.

7) Recognize that "toxic assets" remain on bank balance sheets. They have merely (and most probably temporarily) been written up, in an environment where FASB rules provide "significant discretion" in the valuation of these assets, and where "off balance sheet" assets will not be required to be brought onto balance sheets until first quarter reports are released.

8) Discharge and replace Ben Bernanke and Timothy Geithner.

Ecosystems and finances

Interesting article.

http://theautomaticearth.blogspot.com/2010/01/january-1-2010-fractal-adaptive-cycles.html

Stimulus money screwing the states

Good read on how the stimulus money is hurting the states more than helping them.

http://www.financialarmageddon.com/2010/01/unintended-contraction.html

For example, the stimulus offered $80 billion for Medicaid to cover health-care costs for unemployed workers and single workers without kids. But in 2011 most of that extra federal Medicaid money vanishes. Then states will have one million more people on Medicaid with no money to pay for it.

A few governors, such as Mitch Daniels of Indiana and Rick Perry of Texas, had the foresight to turn down their share of the $7 billion for unemployment insurance, realizing that once the federal funds run out, benefits would be unpayable. "One of the smartest decisions we made," says Mr. Daniels. Many governors now probably wish they had done the same.
Second, stimulus dollars came with strings attached that are now causing enormous budget headaches. Many environmental grants have matching requirements, so to get a federal dollar, states and cities had to spend a dollar even when they were facing huge deficits. The new construction projects built with federal funds also have federal Davis-Bacon wage requirements that raise state building costs to pay inflated union salaries.

Worst of all, at the behest of the public employee unions, Congress imposed "maintenance of effort" spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs, from road building to welfare, if the state took even a dollar of stimulus cash for these purposes.

One provision prohibits states from cutting Medicaid benefits or eligibility below levels in effect on July 1, 2008. That date, not coincidentally, was the peak of the last economic cycle when states were awash in revenue. State spending soared at a nearly 8% annual rate from 2004-2008, far faster than inflation and population growth, and liberals want to keep funding at that level.