Free Market Fraud

European Default Concern Will Spread to U.S., Japan, Buiter Says – Fears of a sovereign default are “manifest” in Europe and will soon spread to Japan and the U.S. as governments struggle to control deficits, according to Citigroup Inc. economists led by former Bank of England policy maker Willem Buiter.  “Despite the recent drama, we believe we have only seen the opening and second act, with the rest of the plot still evolving,”  “There is absolutely no safe” sovereign.  The warning comes after the threat of default forced Greece and Ireland to seek bailouts and as borrowing costs for Portugal this week surged at a six-month bill sale as investors speculate it will be next to seek aid. Elsewhere, U.S. lawmakers last month extended tax cuts and are now wrangling over whether to raise the nation’s debt limit, while Japan’s public debt is set to exceed twice the size of the economy this year.  “The U.S. and Japan likely cannot continue to ignore the issues of fiscal sustainability,” said the Citigroup economists, who added that it’s “only a matter of time” before the U.S. government can only fund itself through debt issuance at “significantly higher interest rates.”

Have the rich caused middle class wage stagnation? – I don’t always agree with Kevin Drum, but usually I find that he has good arguments.  In this passage, however, I think he is overreaching: First, take a look at middle class income stagnation. What caused that? Matt already pointed to one cause: monetary policy since the late 70s that’s kept inflation low at the cost of keeping labor markets persistently loose. To that, I’d add several other trends that have marked the past three decades: trade policies that accelerated the decline of U.S. manufacturing; domestic deregulation policies that squeezed workers; stagnation in the minimum wage; immigration policies that reduced wages at the low end; and a 30-year war against labor that devastated unions and reduced the bargaining power of the working class. First, money matters in the short-run most of all.  Tight money (unless maybe it is radical deflation, but even then the U.S. resumed growth out of the GD fairly quickly and furthermore the median worker was not unemployed) is not a plausible cause of median income stagnation over decades.  The link between trade and wage stagnation does not find support in the data
Free Market Fraud –  At first glance, the December jobs report seems to be a step in the right direction. An unemployment rate of 9.4 percent, the lowest level in 19 months. And a president, happy to boast about another 103,000 jobs being created last month. However, renowned economist Peter Morici points out two important caveats. For one, 260,000 Americans simply dropped out of the labor force in December. They are out of work, yet no longer counted as unemployed by the government. And secondly, 103,000 jobs is nowhere near the number of jobs we need to be adding each month. To bring unemployment down to 6 percent by 2013, businesses need to hire an average of 350,000 new workers each month. Even Federal Reserve Chairman Ben Bernanke, who continues to defend his Quantitative Easing (aka money-printing) program, couldn’t ignore the writing on the wall during a Senate hearing Friday morning. "If we continue at this pace", said Bernanke, "we are not going to see sustained declines to the unemployment rate."

GOP Targets EPA Rules To Address Global Warming – House Republicans wasted no time Thursday in trying to block the Obama administration from acting to stem global warming. On their second day in power, Republican lawmakers introduced several bills that would hamstring the Environmental Protection Agency from moving forward with regulations to reduce heat-trapping pollution from factories and other sources that they say contributes to global warming. The bills are part of an effort by House Republicans to reverse what they consider job-killing policies of the administration. Poe’s measure would prohibit the EPA from using any money to implement or enforce regulations to impose a limit on global warming gases. Blackburn’s bill would change the Clean Air Act so the EPA could no longer use the law to control greenhouse gases. A 2007 Supreme Court decision said the EPA had the authority to regulate carbon dioxide and other global warming gases under the statute.

Unofficial Problem Bank list at 932 Institutions –  Note: this is an unofficial list of Problem Banks compiled only from public sources.  Here is the unofficial problem bank list for Jan 7, 2011. Changes and comments from surferdude808: The FDIC got back to work closing some banks and updating their structure database, which contributed to most of the seven removals this week. Also, there were four additions this week. The net changes leave the Unofficial Problem Bank List standing at 932 institutions with aggregate assets of $410 billion.

The Truth Comes Out: Paul Volcker Was Forced Out, Because The White House Is Going More "Pro Business" -Yesterday when we heard that Paul Volcker was leaving the White House we figured it was normal midterm rotation. Or perhaps, we thought, he was quitting out of frustration. But nope. The man who created the Volcker Rule, the part of Financial Reform with the sharpest teeth, is being forced out, as The White House takes on a more business-friendly stance. According to Bloomberg, Volcker was kept out of discussions to reconstitute the Economic Advisory Recovery Board. Also on the "pro business" front, Obama officially announced that Bill Daly is taking over as chief of staff.Somewhere Larry Kudlow is very, very happy.

Food Stamps Used by Record 43.2 Million in October, USDA Reports –  The number of Americans receiving food stamps rose to a record 43.2 million in October as the jobless rate stayed near a 27-year high, the government said.  Recipients of Supplemental Nutrition Assistance Program subsidies for food purchases jumped 15 percent from a year earlier and increased 0.7 percent from September, the U.S. Department of Agriculture said today in a statement on its website. Participation has set records for 23 straight months.  An average of 43.3 million people, more than an eighth of the population, will get food stamps each month in the year that began Oct. 1, according to White House estimates.
ZeroHedge: Some Very Bad News For The "Sweep Fraudclosure Under The Rug" Brigade – This was an Amicus Curiae brief (friend of the court) filed by the Massachusetts Attorney General Martha Coakley. (see attached) Page 10:  “Plaintiffs’ claims that the Land Court’s ruling will cause widespread confusion or significant cost to innocent parties are greatly exaggerated, and such reasoning does not warrant ignoring the plain requirements of the law designed to protect Massachusetts consumers. Indeed, it is the foreclosing entities themselves who will bear the greatest cost of clearing titled from their invalid foreclosures.   Having profited greatly from practices regarding the assignment and securitization of mortgages not grounded in the law, it is reasonable  for them to bear the cost of failing to ensure that such practices conformed to Massachusetts law.”


Dead Birds Fall From Sky In Sweden, Millions Of Dead Fish Found In Maryland, Brazil, New Zealand  Millions of dead fish surfaced in Maryland’s Chesapeake Bay in the U.S., Tuesday, while similar unexplained mass fish deaths occurred across the world in Brazil and New Zealand. On Wednesday, 50 birds were found dead on a street in Sweden. The news come after recents reports of mysterious massive bird and fish deaths days prior in Arkansas and Louisiana. The Baltimore Sun reports that an estimated 2 million fish were found dead in the Chesapeake Bay, mostly adult spot with some juvenile croakers in the mix, as well. Maryland Department of the Environment spokesperson Dawn Stoltzfus says "cold-water stress" is believed to be the culprit. ParanaOnline reports that 100 tons of sardines, croaker and catfish have washed up in Brazilian fishing towns since last Thursday. In New Zealand, hundreds of dead snapper fish washed up on Coromandel Peninsula beaches, many found with their eyes missing.   UPDATE: Hundreds and possibly thousands of dead birds have reportedly fallen from the sky in Italy. Wildlife officials say that even more previously unreported dead birds were found in Kentucky last week. 

The Congressional Budget Office’s estimate of interest payments on the U.S. federal debt, as a share of annual economic output, in the year 2020. As the Obama administration girds for a potential showdown in Congress over raising debt limits to accommodate the budget deficit, it’s helpful to get a sense of just how much that debt is costing U.S. taxpayers. It’s actually not that expensive at the moment, but it’s likely to get pretty painful over the next ten years. Thanks to the Federal Reserve’s efforts to keep interest rates extremely low, the U.S. government is currently getting a very good deal on its borrowings, according to the Congressional Budget Office. Low interest rates, however, won’t last forever — assuming the U.S. economy doesn’t succumb to long-term, Japanese-style stagnation. The CBO estimates that interest rates on 3-month bills and 10-year notes will reach 5.0% and 5.9%, respectively, by 2020. That, together with a rapidly rising debt load, would cause annual net interest payments to more than double by 2020 — to $778 billion, or a record 3.4% of GDP. That’s closer to what the government spends every year on national defense.


What is the Treasury Up To? -As I pointed out here, the QE2 Treasury security purchases by the Fed have actually had little effect on the stock of outside money, principally because there have been large inflows into the Treasury’s General Account at the Fed. That continues to be the case. The first chart shows securities held outright by the Fed.  According to plan, the Fed’s stock of securities has increased about $122 billion since the QE2 program began in November 2010. However, in the next chart, we see modest increases in currency and reserves.  Since early November, the increase in currency is about $18 billion, and in reserves only about $10 billion. The next chart, however, shows that the Treasury accumulated $81 billion in its General Account over the same period.  In its General Account and Supplementary Financing Account with the Fed, the Treasury now holds a total of about $315 billion.

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s