reality is only those delusions that we have in common...

Saturday, August 29, 2009

week ending Aug 29

Economists React: Bernanke Reappointment Is ‘Good News’

Critically Assessing Bernanke's Record - Now that Bernanke has been renominated to lead U.S. monetary policy his time at the Fed is being critically assessed by a number of observers. Here are five assessments:

The case against Bernanke - "While most economists have come out in favor of Barack Obama’s decision to re-appoint Ben Bernanke as Chairman of the Federal Reserve Board, Stephen Roach has penned an Op-Ed in today’s Financial Times which highlights the case against Bernanke. It is must reading."

The troubling side of Ben Bernanke - He has saved the world but he helped cause the crisis in the first place...indeed, he was picked to join the Fed because he provided academic cover for Greenspan's view that asset bubbles do not matter.

Ben Bernanke's version of history is incomplete - Telegraph - In a speech to the global conference of central bankers at Jackson Hole, Wyoming, the leading member of the profession blamed investors for the crisis and praised - would you believe it? - central bankers for their response. As far as he is concerned, the reason things got so bad so fast was that investors freaked out.

Which Bernanke? Whose Bubble? - Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. But which Bernanke are we getting? There are at least three.

Bernanke’s Next Tasks Will Be Undoing His First - NYTimes - most of those bold actions — lending hundreds of billions of dollars to banks and businesses, slashing overnight interest rates to nearly zero, having the Fed almost single-handedly finance the mortgage market — will have to be reversed or rolled back over the next few years.

The Dangers Ahead for Bernanke - NYTimes economists symposium

Court Orders Fed to Disclose Emergency Bank Loans (Bloomberg) -- The Federal Reserve must for the first time identify the companies in its emergency lending programs after losing a Freedom of Information Act lawsuit.

Federal Reserve Says Disclosing Loans Will Hurt Banks - (Bloomberg) -- The Federal Reserve argued yesterday that identifying the financial institutions that benefited from its emergency loans would harm the companies and render the central bank’s planned appeal of a court ruling moot.

ECB's Trichet warns on complacency as economy heals - Reuters - Speaking at the close of a two-day annual Federal Reserve retreat, European Central Bank President Jean-Claude Trichet warned policy-makers from around the world on Saturday not to forget the lessons of the devastating financial crisis now that the worst has passed.

Union Official Becomes N.Y. Fed Chairman - NYTimes - The bank said Monday that Denis Hughes, who is president of the New York State AFL-CIO labor union, will lead the bank’s board. Hughes has been serving as acting chairman since May.

Central bankers content to keep rates low most officials indicated they believed that rates could be maintained at ultra-low levels for a considerable time without generating excess inflation, in spite of better economic data and a return of “animal spirits” in financial markets.

Get Ready for Interest Rate Shocks - One of the important messages coming out of the central banker's annual retreat in Jackson Hole, Wyoming is that once the crisis is over the Federal Reserve's tightening of monetary policy may be abrupt. If so, increases in short term interest rates will not be gradual but jarring.

Fed’s Kohn Defends Pledge to Keep Rates Low -
The commitment to low rates is meant to keep inflation from falling, Kohn said during a discussion on monetary policy at an annual Kansas City conference being held here at a lodge in Wyoming.

Geithner: "Fed Audit Would Be Problematic For The Country" - It is the esteemed Treasury Secretary's opinion, that anything that has to do with demystifying why the Fed is hell bent on destroying the US dollar, killing the middle class, and allowing Lloyd Blankfein to purchase Larry Ellison's yacht collection, is squarely in the "problematic for the country" camp.

Fed Raises Mortgage-Bond Purchases as Lacker Suggests Slowdown - (Bloomberg) -- The Federal Reserve disclosed that it bought a greater-than-average amount of mortgage bonds for a second straight week, following a period of reduced purchases. Comments from an official today suggested the U.S. central bank’s purchases may slow. Net purchases totaled $25.4 billion in the week ended yesterday.

The Fed balance sheet: it is a-growin' I know that it's a bit cheesy relating the Fed balance sheet to Bob Dylan lyrics, but it just happened. The Fed's exit strategy is policy talk numero uno these days; but that's just it, talk. The balance sheet is still growing!

The Next Credit Bubble Is Now - Are you ready for a replay? ...the difference with this "boom" is the center of gravity has shifted: from giddy, cowboy bankers to the Federal Reserve.

Andy Xie: New Bubble Threatens a V-Shaped Rebound - In a normal economic cycle, an inventory-led recovery would be followed by corporate capital expenditure, leading to employment expansion. Rising employment leads to consumption growth, which expands profitability and more capex. Why won’t it work this time? policymakers think in terms of creating another bubble to fight the recessionary impact of a bubble burst.

The Spend-And-Borrow Economy - Roubini - Governments have been spending and borrowing like never before. The question now is: how do they stop?

There’s no will to fight inflation –
As we're already seeing outside the US, central banks won't stop printing money if it means choking off growth. Don't expect anything different from the Fed. Money printing is just too easy (and seemingly painless) for central planners-cum-bankers to resist.

Is the output gap showing? Atlanta Fed macroblog - the usual measures of economic slack (output gap measures) suggest that there is so much excess production capacity that prices and wages are under great—and increasing—disinflationary pressure. All this is occurring at a time when inflation measures are trending below the FOMC's longer-term projection. The public may come to believe that the combined efforts of the monetary and fiscal authorities to prop up a sagging economy will ultimately lead to a familiar place—rising inflation—and if inflation expectations begin to move higher, so too will inflation.

The Burden Is on the Inflation Hawks - What I always find remarkable about these discussions is that proponents of early tightening essentially (sometimes explicitly) argue that the expected loss from too much inflation (that is, the loss weighted by the probability of it happening) is greater than the expected loss from a double-dip recession.

PIMCO Says Dollar to Weaken as Reserve Status Erodes (Update4 - (Bloomberg) -- Pacific Investment Management Co., the world’s biggest manager of bond funds, said the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy.

The market-perceived monetary policy rule In a new paper co-authored with Federal Reserve economist Seth Pruitt and Office of Immigration Statistics economist Scott Borger, I take a look at what monetary policy rule the market perceived the Fed to be following over different historical periods.

No sign of bond vigilantes, despite soaring U.S. deficit estimates -
The long-term outlook for the federal budget deficit has worsened dramatically, the Obama administration conceded today. But in the short run, investors’ appetite for U.S. Treasury debt shows no sign of waning. If Uncle Sam is addicted to red ink he still has plenty of enablers around the globe.

US bonds give insight into long-term prospects
US government bond yields dipped quietly to their lowest levels in a month this week, suggesting that some investors are distinctly less bullish than the ones that drove Wall Street to its highest levels of the year.

Insight: Do not fear falling bond prices - Despite the deafening chorus of warnings about rising public debt and inflation, investors have little cause to fear either for the time being, or maybe for a considerable time. In a deleveraging, low nominal world, most bonds won’t generate high returns, and default rates and refinancing problems will continue to rise, but the much-feared imminent collapse in bond prices is much exaggerated.

Obama to Raise 10-Year Deficit to $9 Trillion - The Obama administration will raise its 10-year budget deficit projection to approximately $9 trillion from $7.108 trillion in a report next week, a senior administration official told Reuters on Friday. See also Your Federal Budget, in Pictures (NY Times - Economix)

Obama Continues Peddling Fantasy Deficit Numbers - I don't need to look at the ever-changing (and ever-worsening) estimates of future deficits, I only need to look at their past accounting – where the numbers are not “estimates” but (supposedly) the actual “balance sheet” for the U.S. can any (honest) government justify any “off-balance sheet” accounting?

Paul Krugman: The burden of debt - in 1950, federal debt in the hands of the public was 80 percent of GDP, which is in the ballpark of what we’re looking at for 2019. By 1960 it was down to 46 percent — and I haven’t heard that anyone considered America a debt-crippled nation when JFK took office...we’re talking about the height of the Cold War (with a hot war in Korea along the way), and federal spending actually rose as a share of GDP.

Debt is bad, but... - the Economist - Paul Krugman makes the right points here concerning the forecast $9 trillion addition to the American national debt over the next decade: "So we’re talking about adding debt that will be equal to around 40% of GDP. Right now, federal debt is about 50% of GDP. So even if we do run these deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II."

Don't Succumb to Deficit Hysteria - Robert Reich - as expected, the same old group of deficit hystrics went ballistic. "A 10-year deficit of $9 trillion is $30,000 for each man, woman and child in the United States!" kabaam. "Public debt will total a whopping $17.5 trillion by 2019 — three-quarters of the nation's entire economy!" Kaboom!

CBO Warns of Higher Unemployment: Washington Worries About the Deficit - The real story in the new CBO projections should be the more dire economic outlook. CBO now expects the unemployment rate to be near 10 percent through most of 2010. Its new projections will show that the unemployment rate will only return to more normal levels in 2013 or even 2014...

Failed Banks and the Deposit Insurance Fund - "The graph shows the cumulative estimated losses to the FDIC Deposit Insurance Fund (DIF) and the quarterly assets of the DIF (as reported by the FDIC). Note that the FDIC takes reserves against future losses in the DIF, and collects fees and special assessments - so you can't just subtract estimated losses from assets to determine the assets remaining in the DIF"

FDIC Running Out of Cash - Given the enormous increase in bank failures — some estimates are for more than 300 this year — we will very likely see some taxpayer support of the deposit insurer. That has happened only once before — during the savings-and-loan crisis of the early 1990s, when the FDIC was forced to borrow $15 billion from the Treasury and repay it later with interest.

FDIC to Ease Entry for Private-Equity Firms Buying Failed Banks - (Bloomberg) -- The Federal Deposit Insurance Corp., is poised to make it easier for private-equity firms to buy banks after the fastest pace of bank closings in 17 years cost the agency’s insurance fund more than $21 billion.

Barbarians back at bank gates - As failing banks pressure the FDIC's deposit insurance fund, regulators reach out to private equity investors for help. The Federal Deposit Insurance Corp.'s board voted 4-1 to set new rules governing the terms under which private investors such as buyout firms may invest in failed banks.

FDIC lowers capital rule, but there’s a twist
The previous proposal was that banks in the hands of private equity would have to maintain Tier 1 capital of 15%, triple the standard of 5% that is currently considered “well-capitalized.” Under the rule that was adopted, such banks will have to maintain a 10% capital ratio, but the definition of capital isn’t Tier 1, it’s Tier 1 common equity.

The FDIC is not bust, ok? - FT - The FDIC published its quarterly banking profile on Thursday, and it appears that while things are certainly pretty dismal, the agency is not exactly about to go bust anytime soon. In fact, the agency reckons the fund movement is somewhat irrelevant as it still has the ability to borrow up to another $500bn from the US Treasury.

The FDIC to draw on its line of credit at Treasury soon - The FDIC has just released a press statement outlining the second quarter results for the fund and the financial institutions it regulates. What was particularly notable in the statement was the decrease in funds available to deal with failed institutions and the increase in the number of problem institutions to 416.

Meredith Whitney’s Good News… Only 300 Bank Failures (BAC, C) » Notorious bank analyst Meredith Whitney of Meredith Whitney Advisory Group is out with some new harsh predictions calling for the demise of more banks. So far there have been 78 bank closures and Whitney’s firm now projects that there are going to be more than 300 bank closures and also 5% to 8% of bank liquidity taken out of the system before this is all done.

1,000 Banks to Fail In Next Two Years: Bank CEO - The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May.

Almost 1/3 of Banks Rated F - Chris Whalen (via The Big Picture) provides an update of Institutional Risk Analytics latest bank stress test results. Before we dive in, here is a breakdown of what defines an F bank (a full description of all ratings can be found here):
F: At this degree of stress, one or more of the key elements of the business model has reached failure mode. What concerns exist are probably already public...

New Wave Of Bank Failures Show We Got The Crisis All Wrong - Via: NYtimes - The severity of the current string of bank failures shows that many of the proposed remedies batted about since the financial crisis erupted would have done nothing to stem this wave of closures. These banks did not get in over their heads with derivatives or hide their bad assets in off-balance sheet vehicles. Nor did their traders make bad bets. What they did do is see loans go bad, in some cases with stunning rapidity, in volumes that they never thought possible.

Bank Holding Companies Ranked by Commercial Real Estate Loans -list of 150
Insurers’ Biggest Writedowns May Be Yet to Come - Via: Bloomberg: How many legs would a calf have if we called its tail a leg? Four, of course. Calling a tail a leg wouldn’t make it a leg. Nor does calling an expense an asset make it an asset. This brings us to the odd accounting rules for the insurance industry...

Roubini On U Shaped Recovery: More Statesmanlike or Less Certain? - Parsing Roubini's latest piece at the Financial Times (with his characteristic list), his bottom line is we seem to be on track to an anemic recovery, but also says another drop could be in the works...Roubiini was early on to the U shaped recovery, but he is not calling for a Japan rerun (the L shape, for alphabet fans). But this is his second possibility:"...there is a rising risk of a double-dip W-shaped recession. For a start, there are risks associated with exit strategies from the massive monetary and fiscal easing..." This second possibility is not getting the play it deserves.

Why the Austrian, Keynesian, Marxist, Monetarist, and Neo-Liberal Economists Are All Wrong
US Personal Income has taken its worst annual decline since 1950.This is why it is an improbable fantasy to think that the consumer will be able to pull this economy out of recession using the normal 'print and trickle down' approach. Until the median wage improves relative to the cost of living, there will be no recovery. And by cost of living we do not mean the chimerical US Consumer Price Index.

No Recovery, Not Now… Not Ever - In this age of miracles, people seem ready to believe that anything is possible. Recklessly crossing the street at the end of the Late Bubble Epoque, the world economy got hit by a cross-town bus. Now, the feds propose to reverse and run over the poor fellow again. It will be as if they had reversed the film; the economy will be as good as new, they say.

A Stimulating Train Wreck - In this excellent, short-and-sweet report, the case is made that a 3.5% boost to GDP from government stimulus spending alone will hit in the third quarter of 2009. This means that whatever reading is turned in, you should mentally subtract 3.5% from it, because "growth" resulting from government deficit spending is not real growth at all, it is merely consumption borrowed from the future.
Philly Fed State Coincident Indicators: Still a Widespread Recession in July - On a one month basis, activity decreased in 35 states in June, and was unchanged in 8 states. Here is the Philadelphia Fed state coincident index release for July.

Lost cause purgatory - Paul Krugman has proposed the term "economic purgatory" for the current situation of jobless recovery. It's a lost cause arguing with Krugman, but let me record a dissent for posterity. I'm no closer to to a mediaeval Catholic than he is, but Dante's and Aquinas' concept of purgatory is quite clear...

Economic View - How Cuts in State and Local Spending Endanger a Recovery - The more than $15 billion excised from California’s budget last month was just a small fraction of recently announced cuts.

Economic recovery in Europe: Rhetoric and reality - the German business newspaper Handelsblatt declares, “The harshest downturn since the Second World War is over. The nightmare is at an end.” With a “powerful growth of 0.3 percent” in the second quarter, he continues, the economy has “awakened from its state of shock,” and done so “more rapidly than anyone had reckoned.”

Bank bail-outs weigh on some states - Financial Times - Governments around the world are still sitting on multi-billion dollar losses from their direct shareholdings in banks, in spite of a strong rebound in equity markets in recent months. The US government, by contrast, is sitting on a paper profit of almost $11bn on its 34 per cent shareholding in Citigroup, its only direct stake in a large financial institution.

Asia’s Recovery Highlights China’s Ascendance - NYTimes - In past global slowdowns, the United States invariably led the way out, followed by Europe and the rest of the world. But for the first time, the catalyst is coming from China and the rest of Asia, where resurgent economies are helping the still-shaky West recover from the deepest recession since World War II.

The global financial crisis one year after - Stimulus packages are controversial, because they increase budget deficits, and thus imply the need to cut spending or raise taxes sometime in the near future. The question is whether they successfully boost output and jobs in the short term, and, if so, whether they do enough to compensate for the inevitable budget problems down the road.

A Plunge in Foreign Net Capital Inflows Preceded the Break in US Financial Markets - The peak of foreign capital inflows into the US was clearly seen in the second quarter of 2007, just before the crisis in the US that has rocked its banking system and driven it deeply into recession.Are the two events connected? Had the US become a Ponzi scheme that began to collapse when new investment began to wane, and the growth of returns could not be maintained?

The timing of fiscal interventions - VoxEU - The composition and timing of the fiscal stimulus is a major concern for policymakers. This column presents research showing that anticipated tax cuts result in reduced economy activity before they take effect. During the current downturn, that constitutes a strong argument against stimulus policies that phase in tax cuts over time.

America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession This report traces the roots of the current financial crisis to a faulty U.S. macroeconomic paradigm...pdf

Financial and Monetary Issues as the Crisis Unfolds - A group of experts associated with the Economists for Peace and Security and the Initiative for Rethinking the Economy met recently in Paris to discuss financial and monetary issues; their viewpoints, summarized here by Senior Scholar James K. Galbraith, are largely at odds with the global political and economic establishment [more)

Overmighty finance levies a tithe on growth - The protracted debate over how to clean up after the financial crisis – and how to reform our accident-prone financial system to prevent another such episode – is stuck on the problem of how to regulate markets without undermining the benefits they bring. What is sorely missing is any real discussion of what function our financial system is supposed to perform and how well it is doing that job – and, just as important, at what cost.

Finance: Before the Next Meltdown - If finance is the lifeblood of our economy, then figuring out new ways to pump blood through the economy should foster investment, entrepreneurialism, and progress. Right? This, in any case, has been the mantra throughout three decades of deregulation and expansion of the financial sector. And yet today, financial innovation stands accused of being complicit in the financial crisis that has created the first global recession in decades...

How toxic finance created an unstable world - two French economists describe in great detail how money from European and Asian exporters ended up in US consumer or mortgage debt and how risk was transformed in the process. The main point is that global imbalances would not have become so extreme if global finance had not provided exotic new instruments.

Fun with Derivatives review of Traders, Guns, & Money, the anecdote-packed overview of derivatives by Satyajit Das: "We needed ‘innovation’, we were told. We created increasingly odd products. These obscure structures allowed us to earn higher margins than the cutthroat vanilla business. The structured business also provided flow for our trading desks. The more complex products were stripped down into simpler components that traders hedged. …New structures that clients actually wanted were not that easy to create. Even if somebody came up with something, everybody learned about it almost instantaneously. They reverse-engineered the structure and then launched identical products."

ARE YOU KIDDING? Toxic Waste Becomes Triple-A Again… What to do about hundreds of billions of dollars in mortgages that are still choking the system and making bankers reluctant to make new loans? In recent months, banks have tiptoed toward a possible solution, one in which the really good bonds get bundled with some not-quite-so-good bonds. Banks sweeten the deal for investors and, voila, the newly repackaged bonds receive AAA ratings, a stamp of approval that means they're the safest investment you can buy.

We should put sand in the wheels of the market - The secret that few in the industry would like you to know is that financial transaction taxes are not only commonplace, but have become easier to enforce. The real question today is not their feasibility; but their desirability.

A case for (even) more transparency in the OTC markets - VoxEU - Over-the-counter (OTC) markets produced most of the toxic assets that played a prominent role in the ongoing crisis. This column advocates further transparency in OTC markets regulation, arguing that it would make participants apply appropriate risk controls, lower systemic risk, and better situate regulators to address failures of large institutions.

Subprime Lenders Getting U.S. Subsidies - WaPost - Many of the lenders eligible to receive billions of dollars from the government's massive foreclosure prevention program helped fuel the housing crisis by issuing risky subprime loans, according to a report to be issued Wednesday by the Center for Public Integrity.

Greed & The Other Seven Deadly Sins! - Greed is back already, perhaps it never went away. On the back of revived earnings, compensation for star bankers is looking up. Even signing and guaranteed bonuses are stirring. Excessive executive remuneration is widely viewed as a symptom of ‘greed’, one of the seven deadly sins. For some, excessive pay contravenes ideas of ‘equality’

Financial pay shouldn’t be left to the market - should governments step back and let financial firms reform themselves? The answer is clearly no. In the post-crisis financial order, governments must take on the role of monitoring and regulating pay in financial firms; otherwise, the perverse incentives that contributed to the current crisis could easily recur.

Wall Street pay disclosure looms as flash point - Reuters - Wall Street salaries have become everybody's business lately, but the Obama administration's pay czar, Kenneth Feinberg, has said he is uncertain how much information will be made public.

Power and pragmatism - OUR friends on the other blogs are having an interesting discussion about the inherent tension between moral purity and political ambitions. Free Exchange adds that there is a whole apparatus in DC working to provide the ethical comfort and cover for politicians who already want to vote a certain way for selfish political reasons.

Common Sense 2009 - Larry Flynt, Huffington Post - "I'm calling for a national strike, one designed to close the country down for a day. The intent? Real campaign-finance reform and strong restrictions on lobbying. Because nothing will change until we take corporate money out of politics. Let's set a date. No one goes to work. No one buys anything. And if that isn't effective -- if the politicians ignore us -- we do it again. And again. And again. The real war is not between the left and the right. It is between the average American and the ruling class. If we come together on this single issue, everything else will resolve itself. It's time we took back our government from those who would make us their slaves."

CNBC Host: Tax Havens ‘Help Prevent Tyranny’ (video) - "I wrote yesterday that UBS’ acquiescence is a victory for the U.S., and a small first step in the much larger fight against tax evasion. But CNBC’s Michelle Caruso-Cabrera did not see it that way "

FBI Protects Fortune 500 - [DWR] had made a fortune by allegedly gulling dozens of consumer product giants, including Proctor & Gamble, Unilever, and Hershey, in exquisitely orchestrated scams...It used to amaze me how readily the DOJ prosecutes when a Fortune 500 company is the victim as opposed to the perpetrator. That's how it is. DWR's actions are not new...

Tyler Cowen: Codes of the Underworld: How Criminals Communicate
That's the new book by Diego Gambetta and it is the best applied book on signaling theory to date. "Given these propensities, one wonders how criminals ever manage to do anything together. On one hand they wish to signal a certain untrustworthiness, namely that they are criminals in the first place. This is useful for both meeting other criminals and also for intimidating potential victims. On the other hand, the criminals wish to signal that they are potentially cooperative, for the purpose of working with other criminals."

California spends $216,000 annually on each inmate in the juvenile justice system. It spends $8,000 on each child attending the Oakland public school system. The United States incarcerates people at nearly five times the world average. Of those sentenced to state prisons, 82 percent were convicted of nonviolent crimes.

NY Fed: US Credit Conditions Map - Check out the updates to the NY Fed Credit Conditions map. Another tool from the NY Fed: New York Fed Launches Expanded U.S. Credit Conditions Section of Website

A comment on House Prices - Calculated Risk - I've seen story after story today suggesting the bottom is in for house prices. In some areas prices have probably already hit bottom - like some non-bubble areas, and some bubble areas with significant foreclosure activity. But I think many areas, especially the mid-to-high priced bubble areas, there will be further price declines.

House Sales and Mortgage Applications - Something Doesn't Add Up - Now we only get to read the weekly percentage and yearly changes, without the confusing benefit of an absolute number to guide our perceptions. So for those without the time or the inclination to dig through the data, it is what it is. For me? The only way to resolve this was to obtain all the base data, hand-enter it into a spreadsheet, and see what was up.

Existing Home Sales Far Worse Than Advertised -
"In the past, I have gone so far as to imply the Realtors group are spinmeisters. This month, I will be more blunt: Their actual data has become untrustworthy, their spokesmen lie for a living, and their “news releases” is little more than misleading junk. Investors who rely on the NAR version of the news do so at their own great financial peril." (charts & analysis)

Clunkers and Home Sales – It’s All the Same Thing - Did the clunker program just steal from future consumption, or has there been a permanent increase in demand that reflects a stronger economy? I visited a car dealer on Tuesday and they had not seen a customer. Without the rebate there are no buyers. There is another clunker like program that is out there stimulating demand. It is focused on the low end housing market.

Homebuilders Buying Land After Three Years of Cutting Inventory (Bloomberg) Homebuilders that spent the past three years selling off land and writing down the value of property holdings are scouring markets in Sacramento, Phoenix, Denver and Orlando — cities synonymous with the real estate bubble — looking for deals on ready-to-build lots as they prepare for a rebound.

You Broke It, You Fix It? - Subprime Players Get Tax Money To Fix Subprime Mess -
Firms that fed off the subprime lending frenzy that devastated the banking system are lining up to collect more than $21 billion in taxpayer funds meant to help bail out borrowers now in trouble on their loans.

Adjustable Mortgages Loom as Threat to Housing Recovery - NYTimes - more than a half-million option ARMs are scheduled to reset in the next four years, at rates many homeowners cannot afford.

Fewer Catching Up on Lapsed Mortgages - Homeowners who fall behind on their mortgage payments have become much less likely to catch up again, a new study shows. Fitch found that the cure rate for prime loans dropped to 6.6% as of July from an average of 45% for the years 2000 through 2006. For so-called Alt-A loans -- a category between prime and subprime -- the cure rate has fallen to 4.3% from 30.2%.

Banks Sitting on Bad Mortgages, And They Aren't Getting Any Better - Fitch found that the cure rate for prime loans dropped to 6.6% as of July from an average of 45% for the years 2000 through 2006. For so-called Alt-A loans the cure rate has fallen to 4.3% from 30.2%....banks have gone from foreclosing on about 45% of their severely delinquent Alt-A loans each month to 20%. So if you own a house that’s underwater, in practice you can probably keep living there for a year or so without making payments to the bank...

American Housing, 1900-1990 - Via Brad DeLong, an interesting illustration of improved standards of living across the 20th century: (imbedded table) It strikes me as noteworthy that the trend toward bigger-and-bigger houses has continued apace over the past 20 years even though by 1990 the problem of overcrowded housing had become the exclusive province of the very poor...

The Incredible Shrinking Boomer Economy - I'm sure you've heard the expression "spend money like there's no tomorrow." That's precisely what the Boomers did. It was unprecedented debt-fueled spending spree made possible by easy credit. See my Don't Buy Stuff You Can Not Afford for some details. As Bill Bonner put it at the Daily Reckoning, that household debt now "represents spending that has been taken from the future."

Another Jobless Recovery, Even with a Deficit Spike - The Office of Management and Budget just came out with their revised Mid-Session Review budget of the U.S. The projections are for a "recovery" with a 9.7% unemployment rate in 2010 and 8.6% in 2011.

Job Losses Are Not the Problem a lot of useless jobs in finance, real estate, and construction were destroyed, as well as perhaps old manufacturing jobs that hadn’t caught up with the latest technology, and jobs in retail trade that needed to be replaced by the Internet...there weren’t an unusually large number of total jobs being destroyed...relative to the overall level of employment, job destruction was happening at a faster rate during the boom of the late 1990s than it was during the last quarter of 2008...

Real US unemployment rate at 16 pct: Fed official "If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart.

34 Percent of U.S. Workers Surveyed Have Only One Week or Less of Savings
* 2-4 Weeks: 16%
* 1-2 Months: 16%
* 3-5 Months: 14 %
* 6 Months or Longer: 20%

The Wage Freefall (chart)

U.S. Economy Probably Contracted More Than Initially Estimated - Gross domestic product shrank at a 1.5 percent annual rate from April to June compared with the 1 percent drop reported last month, according to the median forecast of 75 economists surveyed by Bloomberg News.

Another Sign of the Futility of the 2005 Bankruptcy Law - A big feature of the 2005 changes to the U.S. bankruptcy law was supposed to be a means test that would get people into chapter 13 instead of chapter 7. Anyway you measure it, chapter 13s have returned to their historical level.

Searching for the Depression and Finding It
Economic Stress Is Hidden, But It’s There in a Recovery That Isn’t.

The End of a 30-Year Wealth Bubble? - the cutoff to qualify for the highest-earning one ten-thousandth of households was roughly $2 million, in inflation-adjusted, pretax terms. By 2007, it had jumped to $11.5 million. The cutoff to be in the top 1 percent doubled since the late 1970s, to roughly $400,000. By contrast, pay at the median — which was about $50,000 in 2007 — rose less than 20 percent, Census data shows. Near the bottom of the income distribution, the increase was about 12 percent.

Death of the Consumer - Moving forward, the most critical indicator of the viability of our economy will be consumer spending. Simply put, without a buoyant consumer, there will be no recovery. Due no doubt to the negative characteristics of consumer data, the death of the consumer is receiving scant coverage. (data & charts follow)

Report: Car Sales Slump 11% Below June Levels - From the Financial Times: ‘Cash-for-clunkers’ sales disappoint Detroit - Signs are already emerging that overall sales will fall back sharply now that the incentives have expired.[] estimates that, based on visits to its websites, “purchase intent” is down 11 per cent from the average in June...

Follow up on debt-fueled consumption growth - Wow, this post got a lot of attention/criticism on the web (see comments on RGE Economonitor, Investment Postcards from Cape Town, and of course News N Economics). I guess it's hard to believe that the mortgage buildup over the last decade was financing health care rather than durable-goods consumption.

This Isn’t Reform, It’s Robbery - any debate about health care must acknowledge that the for-profit health care industry is the problem and must be destroyed. This is an industry that hires doctors and analysts to deny care to patients in order to increase profits. It is an industry that causes half of all bankruptcies. And the 20,000 Americans who died last year because they did not receive adequate care condemn these corporations as complicit in murder.

Dying for affordable healthcare — the uninsured speak - For 35 years Manley had a thriving health clinic in Kansas...eventually his lack of motor control interfered with his work to the degree that he was forced to give up his practice. He fell instantly into a catch 22 that he had earlier seen entrap many of his own patients: no work, no health insurance, no treatment.

Squandered Honeymoon: How Botched Bailouts Hamper Healthcare Reform - Instead, we got a plan-to-have-a-plan in early February, followed by the announcement of PPIP and infinite forbearance through an intravenous-drip system of capital injections so that the behemoth banks, their executives, their stockholders--and most profoundly, their unsecured creditors-could hold onto their money.

Five Myths About Health Care in the Rest of the World - Washington Post - I've traveled the world from Oslo to Osaka to see how other developed democracies provide health care.

The Public Option? It's About Accountability - Let's be blunt. The public option -- emphasis on the word "option" -- is a way to hold the insurance companies accountable should they (entirely unexpectedly, of course) fail to live up to their promises, ignore the rules, and keep doing things the way they have for the past several decades. By contrast, the core of the argument against the public option is nothing more than a sort of whiny plaint of "Leave the insurance companies alone!"

A Public Option That Works Today, almost all residents in the city have affordable access to a comprehensive health care delivery system through the Healthy San Francisco program. Covered services include the use of a so-called “medical home” that coordinates care at approved clinics and hospitals.

Fixing Health Care Is Good for Business - WSJ - You have probably heard the horror stories about President Barack Obama's health-care proposals leading to rationed care and bankrupt businesses and governments. Those claims are flat wrong. The real horror story is not what health-care reform will bring. It's what's already happening.

Trillion Dollar Health Reform, $3 Trillion in Tax Cuts - It is interesting, and perhaps worth noting, that while political opposition seems to be hardening against the $1 trillion, ten-year cost of the early versions of health reform, barely a peep of concern has been raised about the $3 trillion price tag for President Obama’s plan to extend most of the Bush-era tax cuts.

The Deficit Isn't A Distraction: It's A Subterfuge - The budget deficit isn't being used as a distraction; it's being used to hide the real purpose of the accusation: defeating an Obama priority. Neither the deficit nor health care reform are what's important here.

There Are Some Things That (Government) Money Can’t Buy, But Medical R&D Isn’t One Of Them (I think)

Placebos Are Getting More Effective. Drugmakers Are Desperate to Know Why. - The fact that taking a faux drug can powerfully improve some people's health—the so-called placebo effect—has long been considered an embarrassment to the serious practice of pharmacology.
It's not that the old meds are getting weaker, drug developers say. It's as if the placebo effect is somehow getting stronger. The fact that an increasing number of medications are unable to beat sugar pills has thrown the industry into crisis. The stakes could hardly be higher. In today's economy, the fate of a long-established company can hang on the outcome of a handful of tests.

Millions face shrinking Social Security payments - By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

Elders Leading the Charge, Frugality-Wise - Yesterday, Gallup released the results a new poll. It explains how different generations have pulled back spending since 2008. The results are interesting, though not entirely unsurprising...

Here Comes Trouble: Three Problems : The CBO's annual Social Security Update is out, and its pretty ugly: (chart) we were not supposed to have a negative income-to-outlay view on Social Security for another decade or so. That's bad. Now let's add the other two issues to the mix for the "worse." We'll start with China: China plans to tighten capital requirements for banks, threatening to curb the record lending. Finally, we have the Eurozone putting up a surprise this morning...

The Global Crisis and the Implications for Developing Countries and the BRICs: Is the B Really Justified? The term BRIC was first coined by Goldman Sachs and refers to the fast-growing developing economies of Brazil, Russia, India, and China–a class of middle-income emerging market economies of relatively large size that are capable of self-sustained expansion. Their combined economies could exceed the combined economies of today’s richest countries by 2050. [more]

China edges ahead of Germany on exports - China’s exports narrowly edged ahead of those from Germany in the first six months of the year, new figures showed on Monday, in a fresh sign that the latter’s status as the world’s leading exporter is at risk.

China’s 2% Inflation Estimate Puzzles Economists as Prices Fall - Bloomberg) -- A Chinese government estimate that inflation may be 2 percent for 2009 is puzzling economists after prices fell for six of the past seven months. The Ministry of Commerce made the estimate in a statement on its Web site yesterday, citing rising demand and gains in commodity prices.

China: Bogus Boom? - Make no mistake: China's 8 percent growth target for 2009 will be achieved, almost by definition. Whether or not that is a healthy outcome depends upon how you look at it and upon understanding just how China's economy functions and what China's growth "accomplishment" means. Chinese economic data are constructed very differently from the roughly comparable U.S. statistics. China has a planned economy; policymakers have substantial control over the path the economy takes and certainly over the path of reported data...

World faces hi-tech crunch as China eyes ban on rare metal exports - Beijing is drawing up plans to prohibit or restrict exports of rare earth metals that are produced only in China and play a vital role in cutting edge technology, from hybrid cars and catalytic converters, to superconductors, and precision-guided weapons.

Baltic Dry Index Down 45% From High in June - Some investors see the Baltic Dry Index, a proxy for the shipping rates for dry bulk cargoes, as an indicator of international trade activity. BDI is admittedly noisy, and so needs to be interpreted along with other information. Chinese imports have been a driving factor in commodities demand, which drives the BDI

US trade’s transmission of the global recession - VoxEU - International trade has played a major role in the global recession especially in transmitting demand contractions across national boundaries. According to standard trade-linkages reasoning, countries “catch” recessions from their major export partners while transmitting recessions to their major import suppliers.

Japan exports dip, stimulus effect may be waning - Reuters - Japan’s exports slipped in July as annual drops in exports to the United States and China accelerated, in a sign that the impact of stimulus measures in major economies worldwide may be starting to wane.

Japan reports record unemployment rate for July(MarketWatch) -- Japan issued sobering July economic data on Friday, including a record unemployment rate and the biggest decline in consumer prices in roughly 38 years.

Dive in business investment raises fears for recovery - Independent - UK -Business investments crashed at a record-breaking rate in the second quarter, adding to fears that recovery from recession will be weak and protracted. Investment fell 10.4 per cent compared with the previous three months, its fastest rate for nearly 25 years, and by 18.4 per cent compared with the previous year, the biggest fall since records began in 1966

Pemex Output Fell 7.8% in July as Cantarell Plunged - (Bloomberg) -- Petroleos Mexicanos, the state-owned oil company, said oil output in July fell 7.8 percent to 2.561 million barrels a day as production from its Cantarell field kept sinking. Cantarell, once the world’s third- largest field, accounted for 23 percent of total output, the lowest level since Pemex began publishing monthly records for the field in 1990.

Mexico's Declining Oil Production: Clarion Call for Cantarell - The eighth largest oil field in the world will be dead by the end of next year...Saga North America: How The North American Oil Crisis Will Force Ottawa, Washington, and Mexico City to Confront One Another As Never Before. In that report, I forecast the next oil crisis will unfold as Mexico loses the ability to export oil, starting sometime in late 2011. However, as so often is the case in this era of peak oil, that forecast now looks optimistic...

US offshore rigs - Baker Hughes rig counts chart. Total offshore rigs for the last 10 years

OIL: The Long Goodbye - a Foreign Policy Special Report - links to a dozen articles...

Entropy gets no respect - (energy bulletin) - None of these new resources can actually provide the cheap abundant energy needed to maintain the kind of society we have today. Still, it’s worth noting that every alternative energy resource that’s actually been brought into production has turned out, at best, to provide a modest increment to existing energy supplies, and that only if you don’t keep track of the energy subsidy the new resource gets from fossil fuels...

Peak Water - The notion of peak water probably sounds crazy to most people. The earth is 70% covered by water. The water cycle replenishes water on a continuous basis. The global warming enthusiasts tell us that glaciers are melting and oceans are rising. This should make water more plentiful. But, as they say in the real estate business – Location, Location, Location...

a perfect storm of shortages - from John Beddington, the UK government's chief scientific adviser: As the world's population grows, competition for food, water and energy will increase. Food prices will rise, more people will go hungry, and migrants will flee the worst-affected regions.

China Leading World in Green Energy - Yves Smith - This idea of China being ahead of the game in anything environment protection related probably strikes readers as ironic, given reports of extensive industrial pollution, such as air pollution on a scale that is changing weather patterns, large scale lead poisoning, and cadmium in the soil. But China is running away with the green technology prize. It has conquered a third of the world market for solar cells and is on a breakneck course to build 100 gigawatts of wind turbines by 2020, doubling again the global capacity for wind power across vast stretches of Inner Mongolia and Xinjiang.

China moves to address overcapacity in emerging sectors like wind power – Xinhua - China’s State Council, the Cabinet, warned Wednesday of overcapacity in emerging sectors such as wind power, saying the country would move to "guide" development troubled by overcapacity and redundant projects. Overcapacity has persisted in the steel and cement sectors, while redundant projects have surfaced in the emerging sectors of wind power and polysilicon...

U.S. Biofuel Boom Running on Empty - wsj subscriber content - The biofuels revolution that promised to reduce America's dependence on foreign oil is fizzling out. Two-thirds of U.S. biodiesel production capacity now sits unused, reports the National Biodiesel Board. Biodiesel, a crucial part of government efforts to develop alternative fuels for trucks and factories, has been hit hard by the recession and falling oil prices.

U.S. Chamber of Commerce seeks trial on global warming - The business lobby, hoping to fend off potentially sweeping emission limits, wants the EPA to hold a 'Scopes'-like hearing on the evidence that climate change is man-made.

Nonlinear Temperature Effects Indicate Severe Damages to U.S. Crop Yields Under Climate Change

Global forest destruction seen overestimated - The amount of carbon emissions caused by world forest destruction is likely far less than the 20 per cent figure being widely used before global climate talks in December, said the head of the Brazilian institute that measures Amazon deforestation.

Stern Review: The Economics of Climate Change - 27 pp pdf UK - commissioned by the Chancellor of the Exchequer, reporting to both the Chancellor and to the Prime Minister, as a contribution to assessing the evidence and building understanding of the economics of climate

A brief history of climate change and conflict - Article Highlights:
The interaction between climate change and conflict started as early as 35,000 years ago.
The Neanderthals, Vikings, and Mayans all benefited and suffered from a changing climate that affected resources such as water, game, and agriculture.
By analyzing historical case studies of climate and societal collapse, we can identify a set of discernible lessons for today.

Science Blogs: Effect Measure -Primer on greenhouse gases, I.
Primer on greenhouse gases, II.
Primer on greenhouse gases, III.

In hot water: World sets ocean temperature record - July was the hottest the world's oceans have been in almost 130 years of record-keeping. The heat is most noticeable near the Arctic, where water temperatures are as much as 10 degrees above average.

Warming ocean contributes to global warming - more than 250 plumes of bubbles of methane gas are rising from the seabed of the West Spitsbergen continental margin in the Arctic, in a depth range of 150 to 400 metres. the warming of the northward-flowing West Spitsbergen current by 1° over the last thirty years has caused the release of methane by breaking down methane hydrate in the sediment beneath the seabed.

Research finds higher ocean acidification off Alaska that could threaten fishing industry - Oceans absorb 22 million tons of carbon dioxide from human activities per day, removing 30 percent emitted to the atmosphere each year and mitigating the harmful impact of greenhouse gas. When carbon dioxide dissolves in sea water, it forms carbonic acid. That decreases the amount of calcium carbonate, used by marine creatures to construct shells or skeletons.

Scientists find 'great Pacific Ocean garbage patch' - Discover extensive plastic debris floating 1,000 miles from land.

Federal study shows mercury in fish widespread - The toxic substance was found in every fish sampled, a finding that underscores how widespread mercury pollution has become.

Laughing Gas: The Latest Threat to the Ozone Layer - A study published in the Aug. 28 Science found that N2O — a by-product of agricultural fertilizer and a number of other industrial processes — is now the biggest ozone-depleting gas in the air, and could present a real threat to the ozone layer in coming decades.

The Continuing Militarization of Biological Sciences Via: Nature: We will be, as the British Medical Association concluded in its 2007 study, The Use of Drugs as Weapons, “knowingly moving towards the top of a ’slippery slope’ at the bottom of which is the spectre of ‘militarization’ of biology” including “intentional manipulation of peoples’ emotions, memories, immune responses or even fertility”

How to Publish a Scientific Comment in 1 2 3 Easy Steps - actually 123 steps plus addendum (comic relief)

Saturday, August 22, 2009

week ending Aug 22

Fed’s Net MBS Purchases Top $741bn: Barclays - The Fed has purchased nearly $1.1trn and sold more than $356bn MBS since the beginning of 2009 in its effort to “provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets”

A Look Inside Fed's Balance Sheet — 8/20/09 Update - WSJ - interactive graphic - The Fed’s balance sheet expanded back above $2 trillion in the latest week. The majority of the increase came from some $67 billion purchases of mortgage backed securities... Central-bank liquidity swaps declined again, as overseas demand for dollars continues to abate.

How fast can the economy grow? - macroblog - "We at the Atlanta Fed see a meaningful output gap developing, but in our view it is smaller than would normally be associated with the weak pace of growth we expect over the next couple of years...

Running low on ammo - On Monday the Fed announced it had purchased another $7 billion worth of Treasuries under its quantitative easing last week’s FOMC statement, the Fed said it was maintaining its total purchase commitment of $300 billion. After today’s $7 billion purchase, the Fed has just $40 billion left. To date, purchases have averaged over $12 billion per week.

Growth Accounting, Potential Output, and the Current Recession - SF Fed - This Economic Letter looks at potential output from the perspective of growth accounting, which assesses some of the key supply-side factors determining sustainable, noninflationary potential output. Perhaps most importantly, we find that the underlying pace of efficiency improvements—“technological progress,” broadly construed—has remained strong during the recession.

One Of Three Down; Is The FDIC Still Solvent? - A 40% loss on this one would, if my math is right, kill the rest of their insurance fund plus quite a bit and put the FDIC in the position of immediately needing to go hit up Treasury for more money. That ought to be good for confidence, right?

Big banks still hold FDIC captive
Sheila Bair has moved with impressive alacrity to shutter failed small and medium-sized banks. But she is still held hostage by the too-big-to-fail four. The biggest banks are far too big for her to resolve. One way to measure this is deposits in failed banks as a percentage of GDP...

Loss Rates for FDIC higher than during S&L Crisis From the WSJ: Failed Banks Weighing on FDIC - For the 102 banks that have collapsed in the past two years, the FDIC's estimated cost averaged 34%, higher than the 24% rate between 1989 and 1995...

The FDIC Is Broke - Now What? - complete analysis & breakdown With the most recent bank failures, the FDIC is out of funds.
The FDIC is levying a one-time fee on member banks to cover the shortfall, but it will not be enough and it punishes the prudent.
The FDIC has been suspiciously slow at shutting down banks that have admittedly already failed.

No Denying This Reality There's no doubt that hubris, greed, and recklessness helped bring about the worst financial crisis this century. But other factors have also played a major role, including ignorance and denial. In fact, it is hard to think of a circumstance where a failure to acknowledge reality was more evident than in regard to Fannie Mae and Freddie Mac..

The US doesn’t need foreigners to finance the fiscal deficit? Who knew? - The market for Treasury bonds is now more reliant on U.S. buyers — including the Federal Reserve after its recent buying spree — than the Chinese.
-- America’s new love affair with Treasury bonds - From Q1, US households held $643.9 billion in Treasury debt and that is up from $256.6 billion in Q4 2008. Households bought an astounding 84% of new US Treasury issuances in Q1

so who's selling? China cuts holding of U.S. Treasury securities - if foreign agents sell their securities, interest rates in America should increase as demand for US public debt evaporates.
Now comes evidence that China is indeed selling. The BBC reports: "China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury." Meltdown 101: Foreign Investments in US Debt

Oh Oh.... Trouble Dead Ahead - You can read the original article at this link, or I'll just point out the important parts: foreigners are rejecting virtually all forms of US debt, most specifically corporate and agency (mortgages.) The only place foreigners are "still buying" is in the Treasury market, and one wonders: for how much longer, and how much of that is really foreign buying?

Wall Street Journal Wants To Add $5 Trillion To The Federal Debt With Nonsensical Accounting - Following the Journal’s proposal would be like assuming that the government will have to pay out every single deposit insured by the FDIC.

Why Budget Deficits Matter: Government at a $1.26 Trillion Budget Deficit for the 2009 Fiscal Year. Three Times as Large as Last Year and we still have Two More Months of Data.

Foreigners’ Cumulative 12-Month Net Purchases-Sales of U.S. Assets (chart)

Fears of Inflation - check here for the Federal Reserve’s most recent reporting on nominal and real interest rates on 20-year government bonds. The former is 4.37% and the latter is 2.24%. So the market is expecting a long-term inflation rate around 2%.

Monetary Policy in the Aftermath: The Case for a 5% Inflation Target - where will this investment come from? The most plausible answer to me seems to be lower real interest rates. Of course we have a problem. We are currently experiencing deflation and short term interest rates are zero. This puts obvious limits on the ability of the Fed to generate lower real rates.

Fed Says Banks Tightened Lending in Second Quarter (Bloomberg) -- U.S. banks tightened standards on all types of loans in the second quarter and said they expect to maintain strict criteria on lending until at least the second half of 2010, a Federal Reserve report showed today.

From the Fed: The July 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices: "Demand for loans continued to weaken across all major categories except for prime residential mortgages."

Hoenig: Let Big U.S. Banks Fail - Kansas City Fed President Thomas Hoenig, the host for the annual Jackson Hole Fed confab, is utterly against bailouts, and thinks “Too Big To Fail” is a losing strategy.

Bernanke’s Speech: The Quick Version - WSJ Staff - In case you don’t want to read the entire Ben Bernanke speech at the Federal Reserve’s summer retreat at Jackson Hole, Wyo., this is a summary...

Orwellian Madness "Bernanke Saved The World" - Mish - In a speech at the Kansas City Fed's annual retreat in Jackson Hole, Wyo., Bernanke summarized a hellish year and explained modestly how he and his central bank colleagues saved the world from a bigger disaster. The MarketWatch Headline Bernanke: We Saved The World is the height of Orwellian madness.

Thanks to Ben Bernanke, Ben Bernanke Doesn't Need to be Reappointed as Fed Chair - a reality-based critique of the bailouts allows them to be both effective at saving the world and unconscionable screw-jobs that kept an array of bad actors from paying for their greed and incompetence...

Bernanke: He Didn't Just Miss the Housing Bubble
The NYT reports that Fed Chairman Ben Bernanke seems to be cruising to reappointment in spite of having missed the largest financial bubble in the history of the world, giving us the worst downturn since the Great Depression.

The roots of the "clean up after bubbles" approach - The Economist - via Bernanke (the 29 crash & depression were caused by trying to head off a bubble)
The Weird Cult of Ben Bernanke - ever since some time last year when it become absolutely undeniable that Ben Bernanke was had been completely wrong about “The Great Moderation”, Bernanke has done an admirable job of trying to clean up the mess created by the errors of the school of thought to which he adhered...

John Berry: Time for the Fed to stand up to its critics
Many members of Congress want to clip the Fed’s wings for failing to prevent the crisis and for its actions since the meltdown began two years ago. Angry as they may be at the central bank right now, members of Congress would surely rue the day they had to deal directly with raising interest rates — a step that will inevitably be needed at some point to curb inflation and keep the economy on an even keel.

The Fed goes multimedia - Cleveland Fed on YouTube (What to Do about Systemically Important Financial Institutions)

Bank Exposure to Commercial Real Estate - Cleveland Fed - (analysis w/ charts) -The economic downturn has hit bank CRE loan portfolios particularly hard....unlike the residential mortgage market (where a majority of lending has been done by a few large banks), the array of banks holding large concentrations of commercial mortgage debt is broad and diverse. This distribution means tremors in this market can affect banks of all sizes heavily, both nationally and in the District.

U.S. Banking crisis just BEGINNING - Thanks to the U.S. accounting 'watch-dog' – the FASB – legalizing fraudulent accounting (see “FASB strong-armed into mark-to-fantasy accounting”), the “solution” which the bankster oligarchs have come up with to the mass-insolvency of U.S. banks is to simply hide a lot more bad loans....fraudulent accounting has become a way of life for the U.S.

Grayson On Banks: We Should Have Liquidated The Assets And Liquidated The Management »
"I don’t believe taxpayer money belongs in the pockets of private interests." (includes video of interview)

The deleveraging process is inevitable - "My sense is that in the US, even if intervention on the order of magnitude required was feasible (and I doubt it), the political will, financial resources, and economic wisdom to intervene to offset the assets and wealth losses are simply not there"

America’s Japanese banks - A banking system loaded down with hundreds of billions of dollars worth of unrecognized bad debt — Japan in the 1990s? No, it’s the United States today. And where are American banks hiding their losses? In loan portfolios.

SEVERELY delinquent loans crippling U.S. banks - Writing about how “non-performing” loans are ravaging the U.S. financial sector may sound like “old news”. However, data released in a Bloomberg article indicates that the number of delinquent loans is literally only half the story here. The average length of delinquency on these loans – for the entire U.S. financial sector – was 90 days.

Problem Banks - unofficial list - "The list is compiled from regulator press releases or from public news sources (see Enforcement Action Type link for source). "

Emerging market debts: Why don’t investment banks pay attention? - VoxEU - How would financial markets assess complicated structured products in the absence of ratings agencies? This column uses the history of emerging economies’ government debt to argue that investment banks used to win market share by building a reputation for quality products. It says that ratings agencies insulated investment banks from reputational rewards and freed them to deal in junk.

The Billion Dollar Gram _ PWA - look at the full-size chart from Information Is Beautiful - The graph is dominated by $7.8 trillion supposedly spent by the US government on bailouts in the present financial crisis.

“Too Big to Fail” Must Die - "If we continue to subsidize irresponsible risk-taking, we’ll just get more of it."

New Claims Day - New claims for unemployment insurance rose 15K last week from 561K to 576K. This is not going well. This is the second week in a row that we have seen a rise and its beginning to flatten the overall trajectory. Staying anywhere in the 500Ks makes for a terrible economy.

1.5 Million to Exhaust Benefits by End of ‘09 - It is clear we are coming up on a tidal wave of need for more extensions and help from the federal government. (state-by-state breakdown attached)

Structurally High Unemployment For A Decade - Mish, regards the July 2009 Opinion Survey on Bank Lending Practices and the article on it from Calculated Risk: Lending Standards Tighten, Loan Demand Weakens

*The Week in Charts – Buckle the Heck Up! - I’m going to show you the week in charts courtesy of the St. Louis Fed. This week, however, I’m issuing a WARNING. The evidence in these charts points to the beginning of a DEFLATIONARY SPIRAL...

Can The World Avoid The Deflation Trap? "The most important investment decision you will have to make this year and possibly for years to come is whether to structure your portfolio for deflation or inflation."

More Evidence of Deflation - From the BLS: From July 2008 to July 2009, prices for finished goods fell 6.8 percent, the index for intermediate goods decreased 15.1 percent, and crude goods prices dropped 44.8 percent, all of which are record 12 month declines. Federal tax receipts on corporate income is down 40+% year over year; not since 1930 has the collapse been this great.

The Greenback Effect - Warren Buffett - "Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt."

Pimco Says Dollar to Weaken as Reserve Status Erodes - PWA - the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy. The dollar will drop the most against emerging-market counterparts...

How Will We Know when the Economy Turns the Corner? - Thoma - "In order to be convinced that the economy is on solid footing and headed to better times, I will want to see several things."

Discerning a fake, technical, statistical, or partial recovery - a recovery is still likely to come. It will be a fake recovery, a technical recovery, a statistical recovery, a partial recovery, not a real recovery. Let me explain...

The shape of things to come is probably not ‘V’ - So say Bank of America Merrill Lynch economists — and it’s all because of those debt-ridden US consumers. consumers are expected to deleverage significantly in the coming months. In ‘The deleveraging playbook’, BofA-ML economists consider how much debt needs to be removed from balance sheets to get back to more sustainable levels...

A Phantom Economic Recovery - Roubini - "for a number of reasons, growth in the advanced economies is likely to remain anaemic and well below trend for at least a couple of years"

“Just because the conventional economists are drinking the Kool-Aid doesn’t mean you have to” – FT Alphaville - David Rosenberg spins another tale of doom...

Economists – not the best recovery forecasters - economists have a long and repeated history of underestimating the strength of recoveries

Sunday Lesson: Why "Normal" WILL NOT Return -William Black video - "this is a long presentation, lasting more than an hour and a half, but is in fact essential to understanding both what happened and more importantly why the economy cannot recover on a durable basis."

Systemic Risk: Is it Black Swans or Market Innovations? - Many popular explanations of recent financial crises cite "Black Swan" events; extreme, unexpected, "surprise" price movements, as the causes of the calamity. However, in looking at our crisis wracked markets, we might consider that the Black Swan hypothesis doesn't fit the facts...

Home Prices: There's No Quick Recovery Ahead - WSJ - Prices may -- may -- be nearing the bottom in many markets. But beyond the headlines, there are plenty of reasons to stay cautious. There may even be fresh dangers just ahead.And even if prices have stopped falling, it may be years before they start rising sharply again.

House Prices Gain 3% in June: Radar Logic - "The stabilization and subsequent uptick in home prices in the first half of 2009 indicates a return of demand on the part of buyers, and the shift in the mix of sales toward more expensive neighborhoods sheds some light on who the buyers are”

Fed: Delinquency Rates Surged in Q2 2009 Residential real estate, 8.8%. Commercial real estate, 7.9%. Credit cards, 6.7%. Residential real estate charge-offs are up 30% to 2.3%, credit cards up 25% to 9.5%.

Mortgage delinquency rate hits all time high in 2Q
Delinquent U.S. mortgages break record AGAIN - U.S. “delinquent mortgages” increased by 65% in the 2nd quarter of this year from the total of a year ago, according to a report from credit reporting agency Transunion...a Transunion representative said that the “good news” was that delinquent mortgages “only” increased by 11.3% from the 1st quarter. An 11.3% quarter-over-quarter increase works out to a 50% rise on an annualized basis – and this is being called “good news”.

Nine Notes on Residential Real Estate - accumulated observations & links

Strong Gain in Existing-Home Sales Maintains Uptrend “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,”

1 in 8 US Mortgages Falling Behind - This is an astonishing number:“A survey found that one in eight U.S. households with mortgages was in foreclosure or behind on its mortgage payments during the second quarter, putting added pressure on programs aimed at preventing foreclosures.”

Vermont, Texas, and Subprime Loans - (w/ links to other analysis) The Wall Street Journal has a story about Vermont and subprime loans: Vermont’s strict mortgage-lending laws largely prevented the state’s residents from signing the types of dubious home loans written in other markets across the country.

The Demand for Housing When it comes to no-money-down liars loans; if someone offers you a giant mortgage, and the upside that your new house may become worth a lot more, and the downside is that you got to live in a nicer house than normal for a year or two, that’s a perfectly rational bet. But that’s not the experience on the ground, where people hang onto their house, fighting, often desperately at times, to keep them. Houses aren’t dumped like underperforming stocks by the overwhelming majority of consumers.

Tax Bills Put Pressure on Struggling Homeowners - NYTimes - Hard times are causing more homeowners to fall behind on their property taxes. But in thousands of cases, they are not responsible to their local governments, but to private debt-collection companies that charge double-digit interest and thousands of dollars in service fees.

Brace for a Wave of Foreclosures, the Dam is About to Break - Mish - 32-37% Of All Mortgage Holders Are Stuck, Unable To Sell

MBA: Record 13.2 Percent of Mortgage Loans in Foreclosure or Delinquent in Q2 - From the Mortgage Bankers Association (MBA): The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans...The percentage of loans in the foreclosure process at the end of the second quarter was 4.30 percent, an increase of 45 basis points from the first quarter of 2009...

MBA Forecasts Foreclosures to Peak at End of 2010 - The MBA data shows about 5.8 million loans delinquent or in the foreclosure process nationwide.... the MBA surveys covers close to 90% of the mortgage market. Many of these loans will cure, but the foreclosure pipeline is still building.

U.S. Mortgage Market and Seriously Delinquent Loans by Type (pie charts)

Has Mortgage Modification failed? - Obama’s mortgage modification plan, HAMP (Home Afforable Modification Program), isn’t working very well. Is it likely to work in the future? My guess is no. Let’s discuss some reasons why. (article also includes links to other analysis)

The Treacherous Path for Housing - 42 Percent of California Mortgages with Negative Equity: $1 Trillion in Mortgages Submerged Underwater in California. $3 Trillion in U.S. Mortgages Underwater and Risking Foreclosure.

California Housing Bottom Callers and the Foreclosure Clones of 2008: Notice of Default Wave Part Two Gearing up for Q4 of 2009 and 2010. U-6 Unemployment and Underemployment Rate for California now at 21 Percent.

Mortgage Armageddon - if the government steps in and somehow socializes such large and pervasive losses in some districts, how does it sell such a colossal bailout to the voters in many states where borrowers and lenders were prudent rather than profligate and almost everyone remains solvent?

The New American Dream: Renting - It's time to accept that home ownership is not a realistic goal for many people and to curtail the enormous government programs fueling this ambition.

Credit Slips: Show Me the Original Note and I Will Show You the Money
as the number of foreclosures increase each quarter, the “new mantra” of many pro-se and represented consumers is to demand that the mortgage servicer “prove up the original note.” Is this just some new and creative gimmick? I submit that there is really something to it.

China to Buy $2 Billion Worth of US Mortgages - China Investment Corp, the country's $200 billion sovereign wealth fund, is set to pour up to $2 billion soon into the U.S. mortgage system by hiring mandates under the U.S. Treasury-backed Public-Private Investment Plan (PPIP), sources told Reuters.

Why is the US taxpayer subsidizing Chinese participation in PPIP ?
the Treasury matches whatever a private investor puts up, then credits 6X as much capital. So if the Chinese are buying $2 billion, the US puts up $2 billion, and then the PPIP allows the purchase of $24 billion of distressed assets in the open market.

‘Jingle Mail’ Comes to Hotels . . .an increasing number of hotel owners in the U.S. market are simply walking away from money-losing properties and forfeiting them to lenders.

CRE: ABI and Nonresidential Structure Investment - The (AIA) releases the Architecture Billings Index (ABI) monthly, and there is an "approximate nine to twelve month lag time between architecture billings and construction spending." It suggests that nonresidential structure investment will decline through most of 2010, with no bottom in sight...

Commercial Real Estate: There Goes the (Entire) Bubble (Chart on page)

Q2 2009 Corporate Defaults More Than Double 2008 Total - The second quarter of 2009 set a new record for the number of corporate defaults, with 82 non-financial events of default, consisting of 16 names in media and entertainment, 15 in autos and 15 in natural resources, according to a new report published by S&P. The total amount of defaulted debt was $254 billion, far larger than the $102 billion spread among 69 defaults in all of 2008...

Reforming Wall Street, and Why Early Indications Aren’t Hopeful - like the healthcare industry, Wall Street has platoons of lobbyists and an almost unlimited war chest to protect its interests and prevent change...

Filling the Financial Regulatory Void "The administration’s proposal appears to portray the financial crisis as nothing more than an accident of reasoning. Because financial regulation in our country evolved in a fragmented manner, regulators’ perceptions of risk were determined by their respective niches".
counterpoint: An Inside Perspective on Regulatory Capture: "Filling the Financial Regulatory Void” provided insight into human deficiencies in the current financial regulatory system. But it overplays the human failings of regulators and concludes with a proposed solution that, in all likelihood, would turn out worse than the current situation"
which, in turn, provoked the following response

Derivatives Proposal Is Too Soft, Regulator Says - Agency Chief Concerned About Rule Exemptions - warning that the administration's new vision of market regulation could contain loopholes...

Rogoff: We Need to Regulate Banks - Kenneth Rogoff warns us not to believe those who argue that the crisis was largely due to government failure, and hence that regulating the financial sector is counterproductive and unnecessary: Why we need to regulate the banks sooner, not later, by Kenneth Rogoff, Commentary, Financial Times: When in doubt, bail it out,” is the policy mantra...

U.S. Companies Increasing Short-Term Incentives In Pay Packages - a study of changes made in pay practices by 191 of the nation’s largest companies this year shows that where pay is concerned, enlightenment remains a long way off: “If you were going to encourage long-term thinking and behavior, you would reduce short-term pay, but companies have in fact reduced the long-term programs,”

"Pay Czar" Refusing to Back Down Over Possible $100 Million Citi Bonus - Yves Smith - Feinberg is now claiming broader authority to claw back funds under the TARP. This is certainly not what was provided for in the legislation, at least not as generally reported.

Wall Street ponders pay czar's move on clawbacks - Reuters - Wall Street is warily watching the Obama administration's pay czar and wondering if he will flex his muscle to "claw back" past bonuses paid to some of the biggest players in high finance.

Citigroup’s Asset Guarantees to Be Audited by TARP (Bloomberg) -- Citigroup Inc.’s $301 billion of federal asset guarantees, extended by the U.S. last year to help save the bank from collapse, will be audited to calculate losses and determine whether taxpayers got a fair deal.

Citi CFO Resigned After Bank Signed Secret Pact With Government - The FT quotes from the agreement: “Citigroup will (decide whether) the CFO for Citigroup...can be more effectively utilised in other Citigroup responsibilities, and if so, on replacements by a person...with relevant financial, accounting or other experience acceptable...(Apparently Kelly resigned on hearing of the agreement.)

WSJ Back to the Backdating Scandal - The Wall Street Journal, which broke the massive options-backdating scandal three years ago in one of the great enterprise stories of the decade, returns to the well today with a report on an academic study that finds the practice was far more widespread than thought...the research found 141 companies...

AIG CEO Gives Uncle Sam (and Us) the Finger (Financial Services Industry Arrogance Watch) - Tim Duy pointed out this priceless remark from AIG's new CEO: Benmosche told employees that he “had the luxury to say to the government, I’m not going to rush to do this. I’m appalled at how much pressure has been put on all of you to just sell it no matter what, because the Fed wants out, or the Treasury wants out. If they want out in a hurry, they shouldn’t have come in in the first place...

UBS clients used foreign shells to hide income - Wealthy American clients of Swiss bank UBS AG used sham corporations set up in havens from Hong Kong to the British Virgin Islands as part of their efforts to evade U.S. taxes, according to documents filed in Florida and California court cases.

UBS: Just The Tip Of The Tax Haven Iceberg According to the Government Accountability Office, 83 of the 100 largest U.S. corporations have subsidiaries in nations judged by the US to be tax havens. In the Cayman Islands, for instance, “one mailing address alone houses 18,857 corporations.”

UBS Money Laundering: What Did Phil Gramm Know? - former Sen. Phil Gramm, the Texas Republican, is vice chairman of UBS' investment banking business.

Clawbacks Coming? Uncle Sam should be going after senior executives who were vastly overcompensated for helping to drive their firms into the ground. In particular,t he focus should be on the excess compensation that was unrelated to actual performance.
Stock options, bonuses for excess risk taking should all be clawed back to the taxpayer.

Lehman Brothers: the (BBC) movie - "The Last Days of Lehman Brothers” will feature James Cromwell as Hank Paulson and Corey Johnson as Dick Fuld.

Sachs Appeal: white house influence of Tim Geithner’s Wall Street consigliere

Debunking US Economic Myths - Yves Smith - the widely-held fantasies that America is a land of dynamic entrepreneurship, that if you work hard and apply yourself, you can improve your economic standing considerably, etc...

Gillian Tett: Eliminate financial double-think - elites in a society typically maintain their power not simply by controlling the means of production (ie money), but by dominating the cultural discourse too (ie a society’s intellectual map). And what is most important in relation to that cognitive map is not what is overtly stated and discussed – but what is left unstated, or ignored.

Consumers Tightening Belts, Raising Worries About Recovery - Yves Smith - no where does the WSJ article acknowledge that the consumption level was unsustainable and debt fueled. We are in the midst of a secular change, not merely a prolonged recession responses.
The misunderstanding of "debt-fueled consumption" - Today I plan to rant just a bit about consumption because I was reading Yyves Smith’s article today, and she referred to “debt-fueled consumption” – the now pejorative phrase that just rolls off the tongue...the debt-fueled consumption was more likely paying surging health care bills than buying cute Q2 2009, 25% of service spending went to health care...

Shoppers holding back - Consumer inflation tumbles to zero. Consumer prices have fallen more in the past year than in any 12-month period in nearly six decades — a huge break for shoppers but also a reminder that prices are being restrained by weak spending that's likely to slow an economic recovery...

Worst Performance Ever For Back-To-School Sales - Mish - Citigroup is predicting a decline in back-to-school sales (of 3-4%) for the first time since they began tracking the figures in 1995.

Investors Should Stop "Worrying" About Consumers: They Don't Have Any Money USA Today tells us that the stock market dropped because investors are worried that consumers have bad attitudes and therefore will not sustain consumption...

Household Debt to Net Worth Ratio Spiking - What we've seen is a large decline in household net worth, but unfortunately we haven't seen a corresponding decline in household debt.

Bacteria, Boids and Market Instability Old-time economics saw investors as rational individuals, all behaving autonomously in a logical fashion. Today not even economists really believe that this is how people actually operate. Just as we might have suspected all along, stockmarket investor behaviour can be modelled by examining the way a bunch of brainless, single celled and barely animate creatures interested only in food and reproduction disport themselves on a Petri plate.

Weak consumer spending will last for years - we are seeing a secular change in consumption patterns in the United States. This will have grave implications for a world economy used to seeing the American consumer as an economic growth engine and consumer of first choice.

The consumer isn’t overleveraged — the middle class is - By contrast, the upper 10% of income earners face a much smaller debt burden relative to income and net worth. Those people should have ample spending power to help fuel an economic recovery.

YoY personal income 1960-present (chart)

“Self-Preservation” Bodes Ill for U.S. Economy - U.S. citizens are the most-indebted people on the a matter of survival, Americans must dramatically curb their spending to pay down their debts to a level which doesn't threaten them with imminent Americans make necessary reductions in their debt-levels this reduced spending will inevitably cause the loss of vast numbers of jobs in the retail sector...

Debtor's Revolt? - will the US remain mired in decades long sustained debt repayment?

Not Too Hard - a 2001 study, "What Makes a Revolution," shows that more people favor revolt when inequality is high and their net incomes are low." Given that, it's not hard to draw some troubling conclusions from the research paper highlighted in the following Huffington Post report, "Income Inequality Is At An All-Time High: Study"

Obama Pushes States to Shift on Education NYTimes Holding out billions of dollars as a potential windfall, the Obama administration is persuading states to rewrite education laws to open the door to more charter schools and expand the use of student test scores for judging teachers.
California's universities in trouble - The Economist - California’s financial crisis jeopardises one of the world’s finest universities. THE best public higher education in the world is to be found at the University of California/

UC System Will Consider Implementing Furloughs - UC President Mark Yudof released a memo last week announcing the university's intent to look into and potentially implement furloughs to combat severe budget cuts.
Orange crush - The present reflation will do very little for individual Americans. If 11.6 per cent unemployment in California during a time of $72 oil doesn’t make the point, then perhaps 15 per cent unemployment and $100 oil Elizabeth Warren, the chair of the Congressional Oversight Panel, put it last week, reflation is not likely to work “if the idea is to use the practices of the last five years, and see if we can get a little bubble going.”

JP Morgan Bails Out California - Remember when the US government had to bail out investment banks. Now a bank is bailing out the state of California...

Greetings from Bulgaria - In the heyday of the Sofia empire, all Bulgarians were renters. But they did have free health care.

Why We Need Health Care Reform - NYTimes - op od by Obama

white house health care reality check

COMPARING COSTS - "it's important to remind people that when they say 'trillion dollars,' they're talking about over 10 years, thats $100 billion a year...just to give you a sense of perspective the amount of money that we're spending in Iraq and Afghanistan is $8 billion to $9 billion a month..."

In Defense of Britain’s Health System – washington post - The myth-making ranges from the misleading to the mendacious to the downright ludicrous

Ezra Klein: What Would You Do With $4,298? - The British health-care system is worth studying for a simple reason: It is insanely, unbelievably, cheap. According to the latest OECD numbers, America's 2007 health-care costs equaled out to $7,290 per person. Britain spent $2,992.

The World From Berlin - Der Spiegel - Americans Want 'Freedom to Pay Too Much for Inferior Health Care'
In America, Crazy Is a Preexisting Condition: Birthers, Town Hall Hecklers and the Return of Right-Wing Rage - The Birther Movement of 1377…:

GOP Rep. encourages guns at town hall meetings - Asked by an MSNBC anchor on Monday, a Georgia Republican member of Congress actually encouraged Americans to attend public forums packing heat.
Same Old Same Old - Ronald Reagan attacks Medicare as “socialized medicine”: YouTube

Health Care Hypocrisy - Many of the pundits attacking government health insurance rely on government health insurance for their own families.

Obama’s Pre-emptive Health Care Surrender - Taibbi: "I’ll say this for George Bush: you’d never have caught him frantically negotiating against himself to take the meat out of a signature legislative initiative just because his approval ratings had a bad summer."

The Trouble With Appeasement _ Krugman - "you can’t actually satisfy the crazies by trying to offer substantive concessions”

Obama Falling Victim to Krugman's Law. Again. - "as with the stimulus package, Obama has again fallen into a trap of his own making. In his quixotic quest for bipartisanship, the President is offering major concessions that will nonetheless earn him zero support from his "unreasoning, unappeasable" Republican opposition."

Obama's Fake Bipartisanship - Is the president delusional to hope for bipartisanship in the face of Republican demagoguery over health care? Far from it, says Eric Alterman. Obama’s using a strategy honed in last fall’s election.

Obama: knowing when to be an asshole - If liberals are convinced that the President is too conservative and conservatives are convinced that he's too liberal then either the President must be doing everything right or everything wrong. Obama needs to jettison the professorial above-the-fray coolness and get down in the trenches and fight for what he believes in. And that means he is going to have to run roughshod over his enemies.

Obama Goes Postal, Lands in Dead-Letter Office - (Bloomberg) -- “UPS and FedEx are doing just fine. It’s the Post Office that’s always having problems.” -- Barack Obama, Aug. 11, 2009

Alicia Mundy: White House-PhRMA Memo Surfaces Again (WSJ) Since mid-July, the White House and the drug industry’s Washington lobby, PhRMA, have denied any specific agreement that would give the industry big benefits in exchange for its support for President Barack Obama’s health care overhaul effort. But there is an email outlining a four-part deal that industry lobbyists were sending to each other on July 7...

Insurance Fraud - In the health-care reform debate, the insurance lobby is a wolf in sheep's clothing. What's going on? In simple terms, they cut a deal. If the government imposes an individual mandate, forcing all Americans to buy health insurance – and thus guaranteeing us millions of new customers – we won't stand in the way of new regulations curbing some of our worst abuses.

Employer-sponsored health insurance premiums projected to double by 2020 - Nationally, family premiums for employer-sponsored health insurance increased 119 percent between 1999 and 2008, and could increase another 94 percent to an average $23,842 per family by 2020 if cost growth continues on its current course, according to a new Commonwealth Fund report.

Roger Ebert: 'Death Panels.' A Most Excellent Term - "Death panels" is such an excellent term. You know exactly what it means, and therefore you know you're against them. Debate over.

Rhetoric of Rationing Health Care Overlooks Reality - NYTimes - rationing is an inescapable part of economic life. It is the process of allocating scarce resources.

Doctor shortage looms as primary care loses its pull - USAToday - The number of U.S. medical school students going into primary care has dropped 51.8% since 1997. Considering it takes 10 to 11 years to educate a doctor, the drying up of the pipeline is a big concern to health-care experts.
Health care games - political analysis by The Economist

Why the Gang of Six is Deciding Health Care for Three Hundred Million of Us - Last night, the so-called "gang of six" -- three Republican and three Democratic senators on the Senate Finance Committee -- met by conference call and, according to Senator Max Baucus, the committee's chair, reaffirmed their commitment "toward a bipartisan health-care reform bill" (read: less coverage and no public insurance option).

U.S. Population Distribution by Age, 1950 through 2050 - interesting animated chart from Calculated Risk that updates every two seconds...

A Public Option Isn’t a Curse, or a Cure - WE clearly don’t need any more distractions from the two main issues of health care reform: how to deal with our large uninsured population and how to make the entire system more cost effective.

10 Steps to Better Health Care - Brookings

Health Care’s Senior Moment - Seniors have recently emerged as an important battleground in the health reform war. The New York Times has a post on the “new generation gap” separating the elderly from the not-so-elderly, and multiple polls have shown that seniors are more resistant to reform, at least when it is phrased broadly. In addition, the nonsense about “death panels” has worried at least some seniors, enough for the AARP to pitch in to try to shoot it down.*

An Expansion on Pallative Care - "I’m going to comment on this based on my perspective as a health-care professional who has seen more than one person die (in many ways, from relatively good, to bad, to horrible), and as a man who sat at his mother’s bedside for a month as she lay dying with cancer: we are all going to die. And on that day, you, or your nearest and dearest and best beloved, are going to wish to God that you had taken the time to make some plans and communicate those plans to others."

Nonprofit nursing homes provide better care, major study finds - The authors' systematic review compared quality-of-care measurements in 82 individual studies that collected data from 1965 to 2003 involving tens of thousands of nursing homes, mostly in the United States. The study was published in the online edition of the earlier this month.

The Social Security Tax Increase Is Coming - Get ready for the social security caps to be lifted. It will represent one of the larger tax increases in US history, but it's unlikely to fix the looming Social Security's inevitable shortfall.

British Conservative Party Leader David Cameron Says U.S. Republicans Are Bats— Insane -
UK defends its healthcare: The fractious British political classes have united in defence of the UK’s healthcare system after it has become a byword for the failings of universal, state-funded provision among US Republicans

USPS Threatens Health Pension Default - What happens when you have no money coming in but still have obligations going out? Specifically in this case, pension obligations regarding health care benefits for retired postal workers?

Concentration of wealth in hands of rich greatest on record - The wealthiest 10 percent of Americans now have a larger share of total income than they ever have in records going back nearly a century — an even larger amount than during the Roaring Twenties...
As The Rich Got Richer, The Poor Got Poorer - as those at the top of the income scale have been getting richer, those at the bottom have been getting poorer. Bloomberg reported today on a new analysis by Tax Notes: The share of all U.S. income made by the 66 million Americans who earn less than $30,000 a year shrank by 2.3 percent from 2006, a decline of $149 per taxpayer.

The Two-Track Economy The United States has, over the past two decades, started to take on characteristics more traditionally associated with Latin America: extreme income inequality, rising poverty levels, and worsening health conditions for many. Can the richest people spend enough to power a recovery in overall GDP? Perhaps, but is that really the kind of economy you want to live in?

Who are the liberal Democrats and conservative Republicans? - these graphs show the income distribution of voters self-classified by ideology (liberal, moderate, or conservative) and party identification (Democrat, Independent, or Republican). We found some surprising patterns...

Political Life’s Mysteries - the level of self-interest at stake isn’t all that high. Selling the public good down the river to bolster your re-election chances isn’t like stealing a loaf of bread to feed your starving children. The welfare rolls are hardly stocked with the names of former members of congress.

The case of Troy Davis “This court has never held,” Justice Scalia wrote, “that the Constitution forbids the execution of a convicted defendant who had a full and fair trial but is later able to convince a habeas court that he is ‘actually’ innocent.”

Poll: 57% don’t see stimulus working (USA TODAY/Gallup Poll) 57% of adults say the stimulus package is having no impact on the economy or making it worse. Even more —60% — doubt that the stimulus plan will help the economy in the years ahead, and only 18% say it has done anything to help improve their personal situation.

Stimulus spending at street level: the USDA and Google Maps API Premier

America cannot resolve global imbalances on its own
The Obama administration is increasingly signalling that the US will not continue to be the world’s consumer and importer of last resort. The US must become an export-oriented rather than a consumption-based economy and must rely on real engineering rather than financial wizardry.

Exports, stimulus lift Japan out of recession Reuters Japan's economy returned to growth in the second quarter...the nascent recovery was based on short-term stimulus efforts around the world.

Department stores had terrible July - Japan Times - Department store sales in July fell 11.7 percent from a year earlier on a same-store basis, logging the 17th straight month of decline. The rate of decline was the largest for a July since 1965, the oldest comparable data available
Japan Turns to Taxis for Help in Selling Bonds as Deficit Grows (Bloomberg) -- Japan is expanding efforts to attract buyers to the nation’s growing debt load, flooding the backs of taxi cabs for the first time with pamphlets in the hopes of getting retirees to invest more money in bonds.

Germany braces for second wave of credit crunch - Germany's economics ministry is drawing up a raft of special measures with the Bundesbank to head off a fresh financial crisis, fearing that a loan squeeze by struggling banks will set off a serious credit crunch early next year.

The Global Crisis and Emerging Europe: Why the Script Differs from the Asian Crisis - IMF direct -Nine months into the crisis, it is clear that emerging Europe as a whole is not following Asia’s script. But it is also clear that the crisis is evolving differently across countries.

Sustaining a Global Recovery - IMF - In normal recessions, however disruptive they are to businesses and jobs, things turn around predictably. The current global recession is far from normal.The recovery has started. Sustaining it will require delicate rebalancing acts, both within and across countries

Is there scope for fiscal stimulus for debt-intolerant countries?
Developed economies are implementing massive fiscal stimulus packages. Should emerging economies? This column warns them that fiscal multipliers are not certain, financing budget deficits will not be easy, the risk of default looms, and central bank independence may be eroded.

Don’t Be Fooled, Europe Won’t Recover Until 2013 (Bloomberg) -- Europe won’t fully recover from the worst recession since World War II until 2013 even if it returns to a “moderate” pace of economic growth, Morgan Stanley says.

There’s no quick fix to the global economy’s excess capacity - There is one overwhelming fact about the world economy that cannot be wished away. Excess capacity in industry is hovering at levels not seen since the Great Depression.

US Railroad Carload Traffic Down 19% - "this is likely another data point that would be cheered by the wildly optimistic Philadelphia Fed as yet another piece of information that can only go up from here."

Floating storage reaches record levels - The number of product tankers being used for storage is at record levels because of the lack of onshore storage in Europe...Infectious Greed has a chart of the current storage situation for both petroleum and clean products, like gasoil and then follows up with Destroying Market Overcapacity -- Literally showing grapically record numbers of containerships being sent off to scrap yards in India, Bangladesh, Pakistan and China.

"Peak Oil” Has Gone - It is interesting to note that during this severe global recession, worldwide oil usage has dropped by a minuscule 2.7%. So, what will happen when the world comes out of this recession? Who will rise up to the challenge and meet our insatiable thirst for energy? These are critical questions not many are willing to ask.

Hedge fund bets millions that gas price will triple - A hedge fund has made a large bet that natural gas prices will triple by winter just as the price of the commodity slides to a seven-year low.

Import & Export Prices, YoY change (chart)

No secrets to China’s success - China's rapid growth is no accident: it has had the right policies both practically and from the viewpoint of economic theory

When China rules the world: a (book) review - Martin Jacques argues that as China gets rich, it will not become westernized, but it will become a hegemonic power, using its economic might for political, military and cultural purposes. This will lead to a “different kind of world”, in which economic and political progress are no longer identified with “western” liberal democracy.

The Secrets of China's Economy: The Government Owns the Banks rather than the Reverse - While the U.S. spends trillions of dollars to bail out its banking system, leaving its economy to languish, China is being called a “miracle economy” that has decoupled from the rest of the world. As the rest of the world sinks into the worst recession since the 1930s, China has maintained a phenomenal 8% annual growth rate.

Foreign Direct Investment in China Fell 35.7% in July

China’s fiscal stimulus fading fast - Was the small July loan growth number the result of banks being quietly restrained, or just exhaustion on the part of loan officers after the blow-out in June? When will ‘moderate adjustment’ evolve into something public and substantive like raising the deposit reserve requirement and/or interest rates?

Yet another discussion on the Asian savings glut hypothesis, and why it matters - The whole “savings glut” debate is a controversial one because almost from the start it has degenerated into a fairly silly argument about who to blame for the global imbalances and the subsequent crisis – or more specifically, whether the predator was wholly the foolish American consumer or the beetling Chinese saver...

Another View: Tunneling to True Profit in China - Mark Dixon, a founder of the mergers and acquisitions adviser, which is active in mainland China, unwittingly unearthed some Chinese accounting tricks while valuing a local company.

The Specter of Debt Revolt Is Haunting Europe - Why Iceland and Latvia Won't (and Can't) Pay for the Kleptocrats' Ripoffs

Zimbabwe Bus fare is 3 Trillion Dollars A woman pays her bus fare with 3 trillion in old Zimbabwe dollars — the equivalent of 50 U.S. cents. The collector accepts the brick of neatly folded bundles of a trillion each without bothering to count the notes.
Zimbabwe’s Hyperinflation: #2 in world history - a paper calculating last year’s hyperinflation in Zimbabwe concluded that in prices were doubling every day.

Food Security: All Investment is not Created Equal - The G8 countries committed $20 billion in aid to address global hunger and promote more productive farming in the world's poorest countries this July...

Five Key Reasons Why Newspapers Are Failing

Financial Times Feels Vindicated by Web Strategy - Quality journalism has to be paid for. Other publishers seem to agree.

The Nichepaper Manifesto - Dear Newspaper Magnates: So you're going to try and charge people for news yet again. Cart, meet horse. Journalists didn’t make 20th century newspapers profitable — readers did.

Where the NYT beats the WSJ - It’s better designed, easier to comprehend, broader in scope, and in general much more of a pleasure to read than the WSJ.

CNBC: ‘Anyone Who Owns A Suit Can Come On Television’ (The Onion) Citing a need to provide quality programming 24 hours a day, CNBC has extended an invitation to anyone who owns a suit to drop by the financial news network and be a guest expert, or cohost a show with Larry Kudlow.

GM raises production as clunker sales rise - The No. 1 U.S. carmaker said it would build 60,000 more vehicles than planned for the third and fourth quarters by increasing overtime and adding shifts...

Coming Soon - Cash For Clunkers: Home Appliance Edition - Unlike the Cash for Clunkers car program, you won't have to turn in your old appliance to get the rebate...

National Association of Manufacturers Blasts … American Manufacturing? - our tax abatements and public investments are dwarfed by the efforts of national governments in other lands. …It's not just that the United States uniquely lacks an industrial policy. It's that the United States uniquely has an anti-industrial policy.

Original “cash for clunkers”: International trade in used vehicles - VoxEU study - the programme will reduce international trade in used cars, which significantly benefits consumers in developing economies. Such trade also increases the average emission efficiency of automobiles in both the US and developing nations, which raises the possibility that “cash for clunkers” might raise global emissions.

Antarctic glacier 'thinning fast' - One of the largest glaciers in Antarctica is thinning four times faster than it was 10 years ago, according to research seen by the BBC.
A study of satellite measurements of Pine Island glacier in west Antarctica reveals the surface of the ice is now dropping at a rate of up to 16m a year.

Lower temperatures grist for global warming debate - Official government measurements show that the world's temperature has cooled a bit since reaching its most recent peak in 1998.
That's given global warming skeptics new ammunition to attack the prevailing theory of climate change.

Global Warming and the Only Question that Matters - the science on climate change is getting increasingly dire. There's a growing consensus among researchers that we have to get atmospheric concentrations of greenhouse gasses (GHG) - now at 387 parts per million - down below 350 ppm as soon as possible, or risk self amplifying feedbacks that will result in abrupt, catastrophic and irreversible heating of the Earth.

Scientists Say Uncounted For Source Of Greenhouse Gas Could Promote Global Warming - A U of Calgary study says that when crops are exposed to increased temperature, drought and ultraviolet-B radiation -- some plants show enhanced methane emissions. Methane is a very potent greenhouse gas; 23 times more effective in trapping heat than carbon dioxide.

India's water use 'unsustainable' - BBC - Parts of India are on track for severe water shortages, according to results from Nasa's gravity satellites.

Oil lobby to fund campaign against Obama's climate change strategy = Email from American Petroleum Institute outlines plan to create appearance of public opposition to Obama's climate and energy reform.

Big Food rallies against climate change legislation - Multinational food and agritech giants are banding together in a bid to throw light on areas of climate change legislation they warn could severely hike food prices.

Cockroaches future-proofed against climate change – New Scientist - The widely loathed insects can hold their breath to save water, a new study has found – and the trick could help them to thrive in the face of climate change.

It’s Too Late to Stop Global Warming - When it comes to climate, what counts is not only what humans do to reduce the buildup of greenhouse gases, but also how the earth responds. The big worry now is that the planet may not adhere to the diplomatic timetable.

Is there any point in fighting to stave off industrial apocalypse? - UK guardian - The collapse of civilisation will bring us a saner world, says Paul Kingsnorth. No, counters George Monbiot – we can't let billions perish.

New battery could change world, one house at a time - a team of specialists in advanced materials and electrochemistry has produced what could be the single most important breakthrough for clean, alternative energy since Socrates first noted solar heating 2,400 years ago -- a new generation of deep-storage battery that's small enough, and safe enough, to sit in your basement and power your home.

IBM uses DNA to make next-gen microchips - Reuters - Artificial DNA nanostructures, or "DNA origami" may provide a cheap framework on which to build tiny microchips. But the new processes are at least 10 years out.

A step closer to 'synthetic life' - BBC - In what has been described as a step towards the creation of a synthetic cell, scientists have created a new "engineered" strain of bacteria.

Better Monkeys? h+ Transgenic research can aid the study of Parkinson's, Huntington's and other diseases. A transgenic animal is one that carries a gene that has been deliberately inserted into its genome, typically constructed using recombinant DNA methodology.

Does Language Shape What We Think?: Scientific American - A new study looks at what happens when a language doesn't have words for numbers.

This is Your Brain on Neurotechnology - book review of Zack Lynch's "The Neuro Revolution: How Brain Science Is Changing Our World"

How the brain hard-wires us to love Google, Twitter, and texting. And why that’s dangerous For humans, this desire to search is not just about fulfilling our physical needs. Humans can get just as excited about abstract rewards as tangible ones. He says that when we get thrilled about the world of ideas, about making intellectual connections, about divining meaning, it is the seeking circuits that are firing. We actually resemble nothing so much as those legendary lab rats that endlessly pressed a lever to give themselves a little electrical jolt to the brain.

Future Angst? Brain Scans Show Uncertainty Fuels Anxiety - uncertainty intensifies a person’s perception of a bad experience...the emotional centers in the brain respond much more strongly to disturbing photos if the person didn't know what was coming.
Personality Traits Associated With Stress And Worry Can Be Hazardous To Your Health - Research shows that higher levels of neuroticism can lead to earlier mortality...
& from "The Frontal Cortex" - The Stress Spiral - Natalie Angier has an excellent column on the self-defeating feedback loop triggered by chronic stress...when mice are chronically stressed, they end up reverting to habit and routine, even though these same habits are what led to the chronic stress in the first place...