Town Hall Meeting

Knowing inflation helps to understand whether a CD rate, raise, or mortgage rate is good or not. After deflation in 2008, inflation is back.

2009 Consumer Price Index: 2.7%
http://www.bls.gov/news.release/cpi.nr0.htm

2009 Producer Price Index: 4.4%
http://www.bls.gov/news.release/ppi.nr0.htm

I have an account with them, and I will be closing it ASAP. I never use it, and so I don’t check the monthly statements often. I just checked them and they had been charging me $20 per month for the past 3 months! I haven’t made a single transaction with this account in almost a year. I called twice, and finally was told it was a glitch. They thought my account had gone under the minimum amount, but of course this was a mistake.

I had strong words for them, and they did fix the “glitch,” or so they told me. If I had stolen $60 from Bank of America, they would put me in jail. But they can steal from me and get away with it by saying its a glitch. How am I supposed to know it won’t happen again. I know one way, closing the account and moving my money to a credit union in my neighborhood!

A common sense idea is gaining steam to get your money out of those Wall Street, “too big to fail” banks, such as BofA, Citigroup, Wells Fargo and JP Morgan Chase, and move them to your local bank. They are all FDIC insured up to $250k. Credit Unions are also a great thing to use and usually have higher interest rates for your cash savings. It’s a way of both punishing the banksters and making more money from whatever savings you may have.

Find a credit union near you here:
http://www.creditunion.coop/cu_locator/quickfind.php

The “Move Your Money” website with all the info:
http://moveyourmoney.info/

From the Inauguration, to Newspapers crumbling, to the Peace Prize, to Democrats. 2010 really is the Year of the Tiger!

Goodbye to 2009, Hello to 2010: Year of the Tiger

By ALEXANDER COCKBURN of Counter Punch

Once again hands are raised in stupefaction. How could they have missed him – meaning in this case Umar Abdulmutallab the Nigerian bomber on that flight from Amsterdam to Detroit. Why, his own father – one of the most powerful bankers in Africa – gave the US embassy in Lagos a warning! He was on the US master computer list of potential terrorists but never made it on to the watch list.

The Truthers reject the obvious answers – caution, bureaucratic inertia, buck-passing, turf fights – and say it was a plot. Obama joins Bush and Cheney in the big conspiracy. It won’t be long before David Griffin rushes out a book on the affair.

Personally, I’m not at all dismayed at evidence that intelligence gathering networks are flawed, that bureaucrats pass the buck. Hyper-efficiency in these matters indicates we have arrived at the perfect police state.

Of course there is room for common sense and elementary vigilance. In the case of the Virginia Tech killer there was plenty of evidence that Cho Seung-hui was a time bomb waiting to explode. Students talked about him as a possible shooter and refused to take classes with him. His essays so disturbed one of his teachers with their violent ravings that she arranged a secret signal in case she needed security during her tutorials.

And then was there was proof positive that the time bomb had exploded and the mass murder session began in the engineering building, the police state proved all too human in actual performance. The police cowered behind their cruisers until Cho Seung-hui finished off the last batch of his 32 victims, then killed himself. Then the police bravely rushed in and started sticking their guns in the faces of the traumatised students, screaming at them to freeze or be shot.

Read the rest here

The new season of the PBS show “Frontline” began and check out the 2nd episode. It goes into the economic debacle, started on Wall Street and built on the idea that the economy should not be regulated or subject to democratic principles – leave “the market” alone. Sort of a religious view, of blind faith, oddly enough. All must bow at the altar of the free market! The first few minutes is very interesting showing how Alan Greenspan ran the economy for so long and his very close relationship as a disciple of Ayn Rand.

Pres. Ford, Greenspan, and Rand in the White House

I hope the US news companies all air this speech in its entirety today. If you don’t painfully remember, the basic theme of the speech: give money to me so I can keep the powerful from losing all their money, otherwise we are taking you all down with us. Quotes below, in chronological order, are doozies:

“Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets”

“democratic capitalism is the best system ever devised” (Did anyone ever get to vote for/against capitalism?!?! If not, how is it democratic exactly?)

“good luck losers, I’m retiring in two months!” (Okay, this last one was added by me)

I admit it, we regular folks lost the battle when that uber bailout of $800 billion was given to Wall St. banks. When Bush, Paulson, Geithner, Bernanke, Frank, Dodd, Reid and Pelosi gave all our money to bailout Wall Street corporations, aided and abetted by then-candidate Obama and McCain. The writing was on the wall and now Washington has ruled out a bailout for California, the 8th largest economy in the world, which has a $24.3 billion budget gap. Check out this excellent 30 minute report on California, called “Fault Lines – California: Failed State.” Hint: Milton Freidman would love the solutions being put at the front of the table…sell off all our parks and other public assets to private companies while any tax increases are out of the question. It sucks to lose, and we are just now starting to pay for it.

Part 1:

Part 2:

EXCERPTS:

“The US dollar will inevitably bear the full and ferocious brunt of the decidedly hyper-inflationary policies of Washington, notwithstanding the Federal Reserve’s empty promises to reverse such policies swiftly to protect the currency when inflation inevitably rears its ugly head again.”

“All the while, the strongest evidence indicates that when economic recovery finally arrives, it will be feeble at best for years to come. So the financial and economic sectors won’t be able to withstand any promised rapid reversal of Washington’s hyper-inflationary policies. But nor will the dollar be able to withstand the option of leaving such policies in place. Washington is therefore setting up the most colossal catch-22 imaginable for the dollar and for the US economy. The dollar cannot survive such a scenario intact.”

“China and its Eastern partners in Asia and the Middle East, have soured on the dollar’s future beyond the short to medium term. They’ve entirely lost faith in the ability of the US to really get its monetary, financial and economic houses in order before the repercussions of shortsighted policy come home to roost with a vengeance. They’re preparing new solutions that will take two or three more years to fully enact but which will shove the dollar aside toward the margins of international finance and international monetary policy. The handwriting is therefore on the wall for dollar-denominated financial assets.”

“When the catch-22 alluded to above soon becomes fully set in place and irreversible, say in the next few months when sufficient new sovereign debt is actually racked up, and then a short distance farther down the road when Washington, the Fed and the Treasury try to withdraw the present hyper-inflationary policies and find themselves fully trapped in that catch-22 bind, with no viable way out – say within the next 12 to 24 months – then Washington may have no choice but to let the Treasury default on some flavors of sovereign debt, while simultaneously inflating away some other flavors.”

“Unless the most rosy and unrealistic scenario comes about wherein vibrant US economic growth returns very soon, unless the government toxic asset and bailout plans become renowned successes, unless securitization gets a new lease on life and America is able to quickly get its house in order in the next three to four years, the dire forecasts here for US sovereign debt defaults and a dollar crisis, with all their colossal implications and repercussions, are unavoidable in the next 24 to 36 months at most. The UK and Japan face a similar outcome.”

http://www.atimes.com/atimes/Global_Economy/KE07Dj02.html

-Thanks G for the excerpts and link!

Where are the US news media and leaders? Simple economics 101 teaches that massive deficits and debt will lead to inflation or default or both. People should be warned so they can take measures to protect themselves!

Check out this short interview of the former chief economist of the IMF and current Economics professor at Harvard, Kenneth Rogoff. I don’t know of this person, but his analysis is pretty clear and easy to understand, and seems plausible. Check it out, but basically he’s saying that if we do everything correctly (big “if”), we should see about four years of recession, and start to see better days around the end of 2011. But at that time, we will have spent $8-9 trillion to get us out of the recession and banking crisis. He seems pretty sure that at that time, the plan is to use inflation to deal with the giant accumulated debt. So those folks who were smart enough to hold cash and avoid the stock market and housing bubbles will eventually get screwed too I guess!

If you don’t already watch the weekly show Now on PBS yet, we highly recommend it.

Check out this clip from the film “The American Ruling Class” made in 1998. It’s one thing to have “full employment” as economists say, but if it includes jobs that pay less than people can live on, those jobs shouldn’t count. On some level, it is true that as long as people don’t accept a job for less than they can live on, then we will be A-OK! But desperate people do dumb things, that’s just the way life is. This is where unions come into play. They require their members to only work for so much money and for the businesses that want their members to only hire folks from their union – thus making sure nobody is able to do the desperate thing. DON’T BE FOOLED, AND DON’T BE NICKEL AND DIMED!!!

The dialogue is a little corny, but the best part of the clip is the song at the end, sing along!

This article is in reference to the $450 million in bonuses going to AIG executives and other employees even though the US govt owns 80% of the company.

Published on Monday, March 16, 2009 by Salon.com
The Sanctity of AIG’s Contracts
by Glenn Greenwald

Larry Summers, March 15, 2009, on AIG’s payment of executive bonuses:

We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.

Associated Press, February 18, 2009:

The United Auto Workers’ deal with Detroit’s three automakers limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies’ labor costs, people briefed on the agreement said today. The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive. CONCESSIONS WITH THE UNION ARE A CONDITION OF THE $17.4 BILLION IN GOVERNMENT LOANS that the automakers have received so far.

Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others….

http://www.commondreams.org/view/2009/03/16-6

Good job Larry Summers appointed by Obama. Looks like campaign contributions to Obama by Wall Street, Investment Banks, and Hedge Funds was money well spent. Did you know that former investment banker and current white house chief of staff Rahm Emanuel was the “top House recipient in the 2008 election cycle of contributions from hedge funds, private equity firms and the larger securities/investment industry?” If we don’t keep their feet to the fire, these jerks will keep getting away with applying one rule to the rich and well connected, and another rule to the rest of us!

http://www.opensecrets.org/news/2008/11/obamas-pick-for-chief-of-staff.html

So as of today in the United States, foreclosure is a major issue. One article says that there were 2 million foreclosures in 2008 and could be up to 10 million in “the coming years.” While this article says that “19 million homes and apartments across the country – one in seven – are now sitting vacant as the foreclosure crisis takes its toll.” And 1.5 million foreclosures a year are due to medical costs (can we get single-payer instituted TODAY please!).

So a woman in Florida is one of many homeowners who have figured out a way to fight back — force the bank to prove that they own your mortgage and show you their paperwork. A huge part of this whole mortgage meltdown is due to the fact that banks could sell away your loan to others. This previously non-existent commodity would be known as “mortgage backed securities.” This insane idea was concocted in the 1980’s at the firm Salomon Brothers (now a part of the also infamous Citigroup) and is detailed in Michael Lewis’ great book “Liars Poker.”

Check out this article explaining the story and how it may work for you.

http://www.msnbc.msn.com/id/29242063/?gt1-42003

We really are a country to envy, right?
So Christian at heart.

Man who froze over $1K in unpaid bills had $600K

BAY CITY, Mich – An attorney says a 93-year-old Michigan man who froze to death after a power company restricted electricity to his home over roughly $1,000 in unpaid bills left an estimated $600,000 to a hospital.

Marvin Schur’s attorney, Cathy Reder, told the Detroit Free Press the World War II veteran bequeathed his entire fortune to Bay Medical Center.

Schur’s frozen body was found Jan. 17, four days after Bay City Electric Light & Power installed a device on his electric meter that cuts power after a predetermined level is reached.

State regulators on Wednesday issued emergency rules designed to protect more people against electricity or heat shutoffs in the winter.

-Thanks A for the link

The view of serious observers:

The US and the UK are bankrupt and the defaults of the financial system and government will appear in the first half of this year. Many believe that the dollar will drop at least 20-30% (~ 1.75 to the euro), inflation will eventually increase a lot, official unemployment will remain above 10%. With a weak productive base and inefficient institutions in pensions, education, medicine, and transportation, the problems will continue for about a decade. East Asia and Eurozone will emerge first and slowly in 2010.

…

It shall be finished neither in spring 2009, nor in summer 2009, nor at the beginning of 2010. It is only towards the end of 2010 that the situation will start stabilizing again and improving a little in some regions of the world, i.e. Asia and the Eurozone, as well as in countries producing energy, mineral and food commodities (2). Elsewhere, it will continue; in particular in the US and UK, and in all the countries depending on their economy, where the duration could approximate a decade. In fact these countries should not expect any real return to growth before 2018.

http://www.leap2020.eu/GEAB-N-30-is-available!-Global-systemic-crisis-New-tipping-point-in-March-2009-When-the-world-becomes-aware-that-this_a2567.html

…

I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aS0yBnMR3USk

…

It’s no wonder that so many Icelanders are angry. They live in a country bankrupted by the excesses of their bankers, who took on liabilities 10 times the nation’s GDP, betting billions in Britain’s property bubble. Bailed out only by a jumbo IMF loan, inflation and interest rates are now 18% and rising. Many are considering emigration. Only membership of the euro, if it can be secured, offers a lifeline.

We too have a banking system that is huge in relation to our GDP, but, like Iceland, we are not in the euro. Unless we act quickly, decisively and cleverly, the difficulties of our banks could overwhelm us, triggering an enormous run on the pound. Britain, in short, risks bankruptcy.

http://www.guardian.co.uk/commentisfree/2009/jan/18/recession-banking

…

The Obama stimulus package is a good place to start, but it skirts the core issues of wages and debt relief.

http://www.informationclearinghouse.info/article21792.htm

…

I don’t believe the US has either the external credibility or the goodwill capital any longer to ask, Oliver Twist-like, for a little more leeway, a little more latitude. I believe that markets – both the private players and the large public players managing the foreign exchange reserves of the PRC, Hong Kong, Taiwan, Singapore, the Gulf states, Japan and other nations – will make this clear.

There will, before long (my best guess is between 2 and 5 years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury Bills and Bonds are still viewed as a safe haven by many. But learning takes place.

The US Federal government has taken on massive additional contingent liabilities through its bail out/underwriting of the US financial system (and possibly other bits of the US economic system that are too politically connected to fail). Together will the foreseeable increase in actual Federal government liabilities because of vastly increased future Federal deficits, this implies the need for a future private to public sector resource transfer that is most unlikely to be politically feasible without recourse to inflation. The only alternative is default on the Federal debt. There is little doubt, in my view, that the Federal authorities will choose the inflation and currency depreciation route over the default route.

If I can figure this out, so can anyone in the US or abroad who follows recent economic developments. The dawning of the realisation will lead to the dumping of the assets….

Given the bad fiscal position of the US Federal government and given the vulnerability of the external position of the US and its growing reliance on foreign funding, the scope for expansionary fiscal policy in the US is much more limited than president-elect Obama’s advisers appear to realise. Underneath the effective demand problem is a deep structural rot, especially in household sector and financial sector balance sheets.

http://blogs.ft.com/maverecon/2009/01/can-the-us-economy-afford-a-keynesian-stimulus/

-Thanks G for the links!

Capitalism, sometimes called Wall Street, works thusly, from this hilarious article by Joel Stein. For the record, I think kiva is a good idea, so long as the lender remains a SILENT partner!

Cupcake Kings Go Global, With a Little Help From Joel
By Joel Stein Wednesday, Nov. 26, 2008

Anyone can lend money; I am able to lend genius. So when I started making small loans to Third World entrepreneurs through the nonprofit website kiva.org I felt as though I wasn’t doing enough. That’s why a few weeks after I sent $25 to a baker in Nicaragua, I decided I needed to stop being a silent partner and start calling him all the time with my ideas.

Unfortunately, Freddy Antonio Castillo Luna doesn’t have e-mail or a phone in his bakery-home outside Managua. So I had to get a Kiva volunteer to go there with a cell phone and translate. My first suggestion was to change the name of the place from the Little Mango Bakery to the far more compelling Joel and Freddy’s Extreme Cupcakery. I thought the bakery should switch its focus from empanadas and breadsticks to extreme cupcakes, for which we would charge $4 apiece. I would have my loan repaid in five cupcakes, assuming generous tipping.

Click here to read the rest

An informative chart, where does this bear market stand? (Click on it for a better view)

Thanks G for the link!

Due to global economic weakness, St. Nick does not have enough money to pay his elves, reindeer, or packaging costs. In this light, Santa has gone to Washington, DC to ask for a slice of the bailout pie.

“Although many of you have been naughty, authorizing the bombing of innocent people in Afghanistan and Pakistan, Iraq and Somalia, I am willing to give you a gift anyway, in return for $12 billion,” Santa said, speaking in front of the House Committee on Financial Services.

It remains to be seen whether Congress will okay the Santa bailout. “We have given over $1 trillion already to banks, insurance companies, and mortgage lenders,” House Rep. Barney Frank said. Multiple congressmen admitted they would probably pass this bailout, because they would miss their Christmas gifts too much. When asked why Santa should be considered for a bailout, House Rep. Spencer Bachus said, “It’s one thing for gross, poor kids to not get any toys on Christmas, but when my kid is affected by Santa’s financial struggles, well, it’s time to take action.”

It was noted that Santa did fly his usual private sleigh and team of reindeer. There were only 8 reindeer however, as Blitzen was sold to Donald Trump in Santa’s first tranche of liquidating his assets.

Eat your heart out Onion!

From the beaten down regular US citizen…

I tend to pick emotionally unavailable governments…So even though America steals my money to pay off gambling debts, beats me senseless, kicks my cat through a window, then goes out on power-drunken binges, bombing people, poisoning the planet, and annihilating whole civilizations — I know that, deep down, America really loves me

http://mrzine.monthlyreview.org/day131008.html

From a 37 year old hedge fund manager….

The boss of a successful US hedge fund has quit the industry with an extraordinary farewell letter dismissing his rivals as over-privileged “idiots” and thanking “stupid” traders for making him rich….All of this behaviour supporting the aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

http://www.guardian.co.uk/business/2008/oct/18/banking-useconomy

Thanks G for the links!

Alan Greenspan, who led the Federal Reserve for 18 years and pushed through the Gramm-Leach-Bliley Act that led to the expansion of banks into the brokerage, insurance, and investment banking businesses.

According to his testimony to Congress today, Greenspan was “shocked, shocked” that he was wrong to believe “banks in operating in their self-interest would be sufficient to protect their shareholders and the equity in their institutions.” Suuure, we believe you Greenspan, just as we all believed Captain Renault in the film Casablanca.

I’m really disappointed that people think that a law meant to help poor people own their homes is the cause of this systemic financial crisis. I want to lay out why this is not only wrong according to all data out there, but is reprehensible to even bring up. And I know that this is a right wing talking point lately, so it must be addressed.

The Community Reinvestment Act (created in 1977 and updated in 1995) is not the problem here. Other than just being racist code for saying blacks can’t pay their bills, its flat out wrong. THE DATA IS VERY CLEAR ON THIS.

Here is one link that may just explain it all. It actually has data and links to data, so I’m not sure if people who believe this stuff will actually read it, but here it is: http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html

The main quote from this article: “Not surprisingly given the higher degree of supervision, loans made under the CRA program were made in a more responsible way than other subprime loans.”

Here is a quote from an interview on Bill Moyers show that dealt with this right wing talking point…

[Using sub-prime borrowers and minorities] as a wedge issue to make people who pay their mortgages believe that the people who are getting the benefit of the 700 billion dollars, that we’re being asked to pay, are poor, minority people who caused the crisis.

This is unconscionable. This problem is not a problem that was caused by the Community Reinvestment Act. The data is very clear that the Community Reinvestment Act loans were being offered in a way to people that were much more responsible and had none of the characteristics of
default that are being attributed in this discussion. And what this does is to say, this problem is a problem that was caused by black people.

And it means that it gives an opportunity to bring up that old wedge. But I think the people in the country are smarter today. I just don’t think it’s going to fly. I think that people understand that the enemy is not a person who got a home loan and was tricked into getting that loan by a fast-talking broker who originated the loan but that the problem was the securitization process, the high leveraging that Wall Street was doing, the lack of regulation.

Watch the whole interview here. The discussion on the Community Reinvestment Act starts 8 minutes in.

The Gramm-Leach-Bliley Act, passed in 1999, was a huge part of this whole crisis. It is the main reason that banks are failing, because it allowed real banks, subject to regulation, to combine with unregulated investment banks. The problem with that is the investment bank side of the business can become so toxic that it can take down the normal bank part of the conglomerate. The risky, unregulated companies are the ones going down: Lehman, Bear Stearns, Morgan Stanley, etc. The regulated ones that are still mainly just banks: Bank of America, Wells Fargo, Chase, are still standing, for now. The deal, made in the Glass-Steagall Act passed in 1933, was that if you are a bank and want to be FDIC insured, you must follow regulations. One of which is you must maintain a minimum amount of capital in order to be able to pay back your customers. The ratio was 8 to 1, I think. Gramm of Gramm-Leach-Bliley, is the Phil Gramm who was chief economic advisor to McCain until he made his “whiners” and “mental recession” comments. He ran UBS bank which is now going down in flames. He was McCain’s front runner for Sec. of Treasury and may still have been until this whole financial crisis blew up.

Some of what they say about the Democrats is true. Obama does have Fannie Mae and Freddie Mac problems. Bill Moyers (once again did the leg work on this) shows how both our beloved Presidential saviors have their hands dirty…

Obama is second among members of Congress in donations from Fannie Mae and Freddie Mac’s employees and political action committees, even though he’s only been in the Senate since 2005. The former chairman of Fannie Mae originally led Obama’s vice presidential search committee but had to step down in a controversy over favorable loans he received, while at Fannie, from a company doing business with Fannie. Among Obama’s contributors are three directors and one senior vice president of the two companies. Furthermore, Obama’s fellow Democrats in Congress have long been enablers of both corporations.

And what about John McCain? His entire campaign team stepped right out of a predator’s ball. His confidante and top adviser lobbied several years for Freddie Mac. His deputy fundraiser lobbied Fannie Mae, and his campaign manager (Rick Davis) lobbied for both of them, leading a coalition of beltway insiders whose goal was to “stave off regulations” that might have short circuited this nightmare. One wealthy member of Freddie Mac’s board has contributed more than $70,000 to McCain and Republican Party members working for McCain’s election. Even the guy who vetted John McCain’s vice presidential options is a former lobbyist for Fannie Mae.

Obama also has Robert Rubin and Larry Summers on his team, and they supported Gramm-Leach-Bliley. Clinton signed that terrible bill at their request. Republican Alan Greenspan also pushed hard for that bill. Democrats are not guilt free in this. Dodd was a part of it too, and so is Barney Frank. But I would say 40-50% of Democrats are complicit, while 90% of Republicans are complicit.

THE REAL PROBLEM: “A housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector de-leveraging since the Great Depression” (quote from NYU professor Roubini). In housing, greedy companies gave out all these crappy loans so they could make their $2000 commission (called closing costs). Note that the higher the price of the house, the higher the commission, so high prices were in their favor too. They also didn’t care if the loan was even paid back because Wall Street had created a new thing in the 80’s where home loans could be bought from the primary lenders and sold as securities in bundles. The bundles sounded great because when you pool all these loans together, the risk is spread. So lots of folks bought these things on the promise they were “safe,” such as the School Boards in Kansas and pension funds in Iceland. Wall Street in the meantime made billions on commissions for selling these stupid things, again, whether or not anyone defaulted on their loan. So the problem is a lack of regulation, it is so blatantly clear. Go research the funding of US regulatory bodies, such as the SEC. Their budgets are amazingly small, even after the debacle of Enron and others just 7 years ago. THESE ASSHOLES JUST WANT TO BLAME POOR BLACK PEOPLE.

If you want the whole housing thing explained in cartoon form, see this.