New Deal 2.0 Tue 2010-03-09 17:23 EST

Wall Street's War Against Consumers and Labor Heats Up

Michael Hudson

...Throughout the world, scaling back the 20th century's legacy of progressive taxation and untaxing real estate and finance has led to a public debt crisis. Property income hitherto paid to governments is now paid to the banks. And although Wall Street has extracted $13 trillion in bailouts just since October 2008, the thought of raising taxes on wealth to pay just $1 trillion over an entire decade for Social Security or health insurance is deemed a crisis that would lead Wall Street to shut down the economy. It is telling governments to shift to a regressive tax system to make up the fiscal shortfall by raising taxes on labor and cutting back public spending on the economy at large. This is what is plunging economies from California to Greece and the Baltics into fiscal and financial crisis. Wall Street's solution - to balance the budget by cutting back the government's social contract and deregulating finance all the more - will shrink the economy and make the budget deficits even more severe. Financial speculators no doubt will clean up on the turmoil.

0; consumer; labor heats; new dealing 2; Wall Street's War.

Fri 2010-02-05 11:29 EST

Michael Hudson: Myths of Recovery

...Obama's most dangerous belief is in the myth that the economy needs the financial sector to lead its recovery by providing credit. Every economy needs a means of payment, which is why Wall Street has been able to threaten to wreck the economy if the government does not give in to its demands. But the monetary function should not be confused with predatory lending and casino gambling, not to mention Wall Street's use of bailout funds on lobbying efforts to spread its gospel...The pro-financial mass media reiterate that deficits are inflationary and bankrupt economies. The reality is that Keynesian-style deficits raise wage levels relative to the price of property (the cost of obtaining housing, and of buying stocks and bonds to yield a retirement income). The aim of running a ``Wall Street deficit'' is just the reverse: It is to re-inflate property prices relative to wages. A generation of financial ``ideological engineering'' has told people to welcome asset-price inflation (the Bubble Economy). People became accustomed to imagine that they were getting richer when the price of their homes rose. The problem is that real estate is worth what banks will lend -- and mortgage loans are a form of debt, which needs to be repaid.

Michael Hudson; myth; recovery.

Joe Bageant Sun 2010-01-31 11:57 EST

Raising up dead horses

bageant

The national money shamans have danced around the carcass of our dead horse economy, chanted the recovery chant and burned fiat currency like Indian sage, enshrouding the carcass in the sacred smoke of burning cash. And indeed, they have managed to prop up the carcass to appear life-like from a distance, if you squint through the smoke just right.

dead horses; Joe Bageant; raised.

naked capitalism Fri 2010-01-29 16:22 EST

Fed Secrecy Claims Bogus, Redacted AIG Bailout Details Already Public

...The SEC agreed to let AIG keep Maiden Lane III information secret until 2018, since it ``qualifies as confidential commercial or financial information.'' ...this argument is worthless. Nearly all of the deleted information can be reassembled from sources that are publicly available...An examination of our data raises troubling questions about how the Fed is valuing the Maiden Lane III assets.

Fed Secrecy Claims Bogus; naked capitalism; public; Redacted AIG Bailout Details.

Thu 2010-01-07 19:24 EST

Precious Metals Derivatives: Louder Music, Fewer Chairs

...The weight of gold and silver represented by derivatives on the precious metals has grown so large relative to all reasonable measures of physical supply that more and more questions and doubts are being raised about not only the integrity of the price discovery mechanisms for these metals, primarily among LBMA members and on the COMEX, but also the reliability of many paper claims to the physical delivery of them.

chair; Louder Music; Precious Metals Derivatives.

New Deal 2.0 Mon 2009-11-30 13:44 EST

Geithner's Disgrace

Eliot Spitzer

he issue has been festering for months: Why were AIG's counterparties -- including Goldman Sachs, JPMorgan Chase, and UBS -- paid 100 cents on the dollar when the feds rescued the insurance giant, helping raising the cost of the bailout to nearly $200 billion? A new report issued by Special Inspector General Neil Barofsky now reveals that government officials, notably then -- New York Fed President and current Treasury Secretary Timothy Geithner, grievously damaged the nation and capitulated to the very banks they should have been supervising.

0; Geithner's Disgrace; new dealing 2.

zero hedge Mon 2009-11-30 11:15 EST

Fannie Mae Reports Massive Q3 Loss, Asks For Another $15 Billion From Government As It Is Set To Become Largest US Landlord

The latest particular does of lunacy and economic calamity coming out of the intellectual midgets at Fannie and the FHA should be sufficient to push the market well into 1,100 territory tomorrow. FNM's loss for Q3 is $18.9 billion, up from $14.8 billion in Q2, a time when the market was up a good 15%: ever wonder who keeps on subsidizing those gain? That's right - you. Credit-related expenses increased to $22 billion in Q3 from $18.8 billion in Q2. Oh, and Fannie now wants another $15 billion rescue from the Treasury (which is having some troubles with getting that pesky debt ceiling raised to one googol) so it can continue with its plan of keeping shadow inventory away from the market, rent foreclosed houses to their owners at staggeringly low rates, and continue the pretence that bank's balance sheets are well capitalized...

15; asks; becoming largest; Fannie Mae Reports Massive Q3 Loss; government; landlord; set; Zero Hedge.

The Guardian World News Fri 2009-11-20 09:45 EST

US pressure distorted oil figures, says whistleblower

Terry Macalister

Exclusive: Watchdog's estimates of reserves inflated says top official The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying. The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves. The allegations raise serious questions about the accuracy of the organisation's latest World Energy Outlook on oil demand and supply to be published tomorrow -- which is used by the British and many other governments to help guide their wider energy and climate change policies.

Guardian World News; pressure distorted oil figures; says whistleblowers.

zero hedge Mon 2009-10-12 09:37 EDT

The 60% Plunge In Private Equity Deal Flow

If there is one sector that is really hurting despite the outperformance of all other asset classes (money being thrown at equities, bonds, and commodities without regard or prudence as Rosenberg has pointed out), it is private equity. Indeed, while credit has thawed in general, investors are still completely shutting out the 5x+ leverage transaction world: the bread and butter of the LBO business model. For a sober look at the desolation in the PE landscape, even as funds rush to raise more billions in dry equity powder which sits at banks collecting 1%, consider that YTD only $33 billion in 654 PE deals has been disclosed, a 60% drop from the 1,532 deals done through Q3 in 2008, and N/M when compared to the heady days of 2007....

60; plunge; Private Equity Deal Flow; Zero Hedge.

Sun 2009-10-11 18:48 EDT

The Ongoing Plight of the U.S. "Nightcrawler" - Part 2 | zero hedge

We're just as scroomed as we were a year ago--skying stock markets and gold-hating trolls posting "Gold isn't money" notwithstanding. There is absolutey ZERO chance that the Fed raises their Fed Funds Politburo rates, and a ONE HUNDRED PERCENT CERTAINTY that both the Fed and Uncle Sugar MUST continue their monetizations, back stops and being the "lenders, insurers, and market of last resort" for all things credit, but especially the McHousing market where they have multi-trillion fiatsco exposure. So, it is little wonder that the U.S. fiatsco is getting pounded in the currency casino and that people are piling into PMs in droves--even going so far as to DEMAND physical delivery from the corrupt exchanges, even as the jawboning and pie-holing by the Fed Heads and Treasury twerps continues unabated. Because we are still very much in the midst of the "convulsions" of collapse AND the massive monetary and fiscal insanity the Fed and Uncle are undertaking to fight them.

nightcrawlers; Ongoing Plight; Part 2; U.S.; Zero Hedge.

Willem Buiter's Maverecon Sat 2009-10-10 14:00 EDT

Expect little and you may yet be disappointed

Willem Buiter

...the most disappointing development this year was the performance of president Barack Obama and his administration - and my expectations were modest to begin with...On the fiscal side, Barack Obama is presiding over the biggest peace-time government deficits and public debt build-up ever. According to my back-of-the-envelope calculations there is about a 10 percent of GDP gap between the medium and longer-term spending plans of the Obama administration and the taxes the Congress is willing and able to impose. The reality that you cannot run a West-European welfare state (with decent quality health care, decent pre-school, primary and secondary school education for all), rebuild America's crumbling infrastructure, invest in the environment and fulfill your post-imperial global strategic ambitions while raising 33 percent of GDP in taxes, has not yet dawned on the Obama administration or on the American people at large...Clearly, the qualities one needs to get elected to high office in western democracies are not qualities that are likely to be helpful once you have achieved high office and are expected to govern and lead. To survive the selection process to become president you have to be able to stitch together a coalition of special interests that can provide sufficient financial and sweat equity resources to win this grueling race to the top. Once you get there, you should shed the unfortunate baggage you accumulated on your way up and govern in the interest of all the people. Few can do that. Apparently Obama is not one of them.

disappointment; expectations; Willem Buiter's Maverecon.

Thu 2009-10-08 17:10 EDT

Recovering from Neoliberal Disaster - Why Iceland and Latvia Won't (and Can't) Pay

Michael Hudson

Can Iceland and Latvia pay the foreign debts run up by a fairly narrow layer of their population? The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings. Resentment is growing not only toward those who ran up these debts -- Iceland's bankrupt Kaupthing and Landsbanki with its Icesave accounts, and heavily debt-leveraged property owners and privatizers in the Baltics and Central Europe -- but also toward the neoliberal foreign advisors and creditors who pressured these governments to sell off the banks and public infrastructure to insiders. Support in Iceland for joining the EU has fallen to just over a third of the population, while Latvia's Harmony Center party, the first since independence to include a large segment of the Russian-speaking population, has gained a majority in Riga and is becoming the most popular national party. Popular protests in both countries have triggered rising political pressure to limit the debt burden to a reasonable ability to pay...

Iceland; Latvia; Neoliberal Disaster; pay; recover.

Ambrose EvansPritchard Finance and business comments Thu 2009-10-08 17:07 EDT

China calls time on dollar hegemony

Ambrose Evans-Pritchard

You can date the end of dollar hegemony from China's decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners. Beijing does not need to raise money abroad since it has $2 trillion (£1.26 trillion) in reserves. The sole purpose is to prepare the way for the emergence of the yuan as a full-fledged global currency. [dollar losing reserve status]

Ambrose EvansPritchard Finance; Business Comment; China calls time; dollar hegemony.

The IRA Analyst Mon 2009-09-21 17:23 EDT

Exposure at Default: As Banks Shrink, So Does the Economy

...before Treasury Secretary Tim Geithner and the other G-20 finance ministers set about to raise capital levels, they need to understand that the earnings of the banking industry are going to be impaired for years as the cost of resolving failed banks is repaid. Restoring solvency is the first issue for many banks, then we can talk about increased capital and restrictions on risk taking equally. And as the banking industry shrinks defensively in order to conserve capital and fund liabilities impaired by realized losses, the credit available to the US economy also shrinks. You can't have economic growth without credit growth...Bottom line is that deflation is still the chief threat to the US economy, driven by a relentless contraction in bank and nonbank credit. Until we see a restoration of the market for nonbank finance and a sustained turn in the EAD of the large bank peer group, which accounts for almost 70% of the entire US industry balance sheet, we do not believe that any economic recovery will be meaningful in terms of jobs or asset prices.

Banks Shrink; default; economy; exposure; IRA Analyst.

Credit Writedowns Mon 2009-09-21 15:32 EDT

The FDIC acknowledges it is to run out of money

Sheila Bair has run out of options to seize banks because the FDIC's coffers are running dry. Now she either needs to tap taxpayer money via a loan from the Treasury or she has to raise funds through a special assessment on banks, who are already capital-constrained.

credit writedowns; FDIC acknowledges; money; running.

Mish's Global Economic Trend Analysis Sun 2009-09-20 11:23 EDT

Yellen Calls For "U" Shaped Recession and Another Jobless Recovery

Michael Shedlock

...excerpts from Janet Yellen's Outlook for Recovery in the U.S. Economy: ...the complex topic of inflation. In my career, I have never witnessed a situation like the one that exists now, when views about inflation risks have coalesced into two diametrically opposed camps. On the one hand, one group worries about the long-term inflationary implications of a seemingly endless procession of massive federal budget deficits. At the same time, others fear that economic slack and downward wage pressure are pushing inflation below rates that are considered consistent with price stability and even raising the specter of outright deflation... My personal belief is that the more significant threat to price stability over the next several years stems from the disinflationary forces unleashed by the enormous slack in the economy.

Jobless Recovery; Mish's Global Economic Trend Analysis; Shaped Recession; U; Yellen called.