Bits Bucket For January 9, 2010
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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FDIC sells $1B in loans
The Associated Press
Posted: 6:40 p.m. Friday, Jan. 8, 2010
WASHINGTON — The Federal Deposit Insurance Corp. has sold about $1 billion in troubled loans from 22 banks that failed during the past 18 months as it works through an inventory of assets from the institutions it has taken over.
The FDIC said Friday that the winning bidder in its auction, Los Angeles-based Colony Capital Acquisitions LLC, paid $90.5 million for a 40 percent stake in the new company set up to hold the commercial real estate loans. The FDIC has the remaining 60 percent.
About 840 of the 1,200 or so “seriously distressed” loans are delinquent, the FDIC said. The agency said 75 percent of the commercial properties involved are located in California, Florida, Georgia and Nevada, which are among the states with the highest numbers of failed banks.
Last year, 140 U.S. banks succumbed to the soured economy and a cascade of loan defaults — the most in a year since 1992 at the height of the savings-and-loan crisis. The failures compare with 25 in 2008 and three in 2007. They cost the federal deposit insurance fund, which fell into the red, more than $30 billion last year.
FDIC Chairman Sheila Bair has said the number of bank failures could rise further this year. The agency expects the cost of resolving failed banks to grow to about $100 billion over the next four years.
January 08, 2010 06:40 PM EST
Copyright 2010, The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
..Last year, 140 U.S. banks succumbed to the soured economy and a cascade of loan defaults — the most in a year since 1992 at the height of the savings-and-loan crisis…
1992 saw only 180 failures.. not exactly the height of the S&L crisis, imo. 1992 is also the year the FDIC fund went into the “red”.
1994- 15 failures
1993- 50 ”
1992- 180 ”
1991- 271
1990- 381
1989- 534
1988- 470
1987- 262
1986- 203
1985- 180
1984- 103
As for the fund currently being in the red, from what I read, the FDIC has pre-charged banks 3 years of fees in advance (worth about $45 billion) and has “set aside $38.9 billion in contingent loss reserves” .. whatever that means.
Subtract the $8 billion it actually was in the red last Sept and it might be in the black today by about $70B.. but i aint making any promises.
Thanks for the time series.
Tentative conclusion: We are still in the early stages of unwinding this banking crisis.
could be.. we could be on the ugly side of that curve, like down around 1985. I find it slightly interesting that the FDIC’s fund went “red” in 1992, only AFTER the vast majority of failures in that crisis..
On the bright side, if there is one, the FDIC currently insures some 8,099 banks and S+Ls. That’s a lot of banks when compared to the number of failures.. so far.
Your point is well taken, and worth bearing in mind as the crisis unfolds: The ultimate cumulative number of bank failures by the end of this crisis seems likely to remain a small share of the entire banking sector — that is, unless another Megabank fails (like Bear Stearns and Lehman Brothers did in 2008), as Megabank, Inc now constitutes something like a 40 percent share of the industry.
But not to worry — Megabanks remain too-big-to-fail!
“I find it slightly interesting that the FDIC’s fund went “red” in 1992, only AFTER the vast majority of failures in that crisis.”
My understanding is that they are in the “red” sooner this time around in part because they cut the bank’s FDIC premiums dramatically during the boom years, due to “lower than expected losses.”
‘…they cut the bank’s FDIC premiums dramatically during the boom years, due to “lower than expected losses.”…’
Fooled by “Randomness”…
Well admittedly, the question “How much do insurance companies need in reserves?” is a very difficult one to get right. It’s fairly easy to estimate how many houses you’ll lose to fire in a year, since those are poorly corelated. They tend to have about the same amount in losses every year. But when we’re talking about hurricanes or earthquakes, there tends to be either A WHOLE LOT or very little in the way of casualties in a given year. If they put too little away, they run the risk of not having enough money to pay off the policies. If they put too much away, they’re accused of hiding profits to avoid paying taxes.
Of course bank failures are highly corelated and big enough in dollar terms that really, only the government can effectively insure against them. But politically, it’s even MORE difficult for the government entities to save up for future unlikely events.
UPDATE 1-Horizon Bank first U.S. bank failure of 2010
Fri Jan 8, 2010 9:59pm EST
WASHINGTON, Jan 8 (Reuters) - U.S. regulators closed Horizon Bank (HRZB.O) of Bellingham, Washington, on Friday, kicking off what has been forecast as a peak year for small bank failures.
The Federal Deposit Insurance Corp said Horizon Bank had approximately $1.3 billion in total assets and $1.1 billion in total deposits as Sept. 30.
Friday’s bank failure is expected to cost the FDIC’s insurance fund a total of $539.1 million.
The 18 branches of Horizon Bank will reopen during their normal business hours beginning on Saturday as branches of Washington Federal Savings and Loan Association and deposits will continued to be insured by the FDIC.
WSJ:
* BUSINESS
* JANUARY 8, 2010, 10:29 P.M. ET
Bank, Credit Union Are First Failures of 2010
By ROBIN SIDEL
Regulators seized a small bank and a tiny credit union, the first two failures in a year that is expected to bring the collapse of many more financial institutions reeling from the economic downturn and other woes.
The Washington State Department of Financial Institutions closed Horizon Bank, an 18-branch bank based in Bellingham, Wash. Its $1.1 billion of deposits and nearly all of its $1.3 billion assets were assumed by Washington Federal Savings and Loan Association, of Seattle.
…
The FDIC estimates that the collapse of Horizon will cost the agency’s deposit-insurance fund $539.1 million. Like many small U.S. banks, Horizon was hobbled by bad real-estate loans.
…
Regulators closed 140 banks in 2009, the highest number of banks to collapse since the end of the savings-and-loan crisis in 1992, when 181 lenders failed.
Separately, regulators seized Kern Central Credit Union, Bakersfield, Calif., a three-branch institution that served farm workers and had a large concentration of auto loans.
…
“We’re just caretakers,” Cowan said. “We’re just trying to shepherd it through the worst”
“ba ba ba”
Search is on for new credit union executive
By Paul Gores of the Journal Sentinel
Posted: Jan. 8, 2010
Regulators are hopeful Prime Financial Credit Union, which was seized by the state more than 10 months ago, can be turned over to members again - with a new chief executive and board - sometime in the first half of this year.
Prime Financial, which is based in Cudahy, has been under the control of the Wisconsin Office of Credit Unions since regulators took it over on Feb. 27 for what they described as “a management structure issue.”
…Cowan said the state didn’t try to find a stronger credit union to acquire Prime Financial mainly because regulators weren’t sure how big the losses tied to Central States Mortgage would be. Central States is in receivership.
The eventual total losses still aren’t known, Cowan said. Prime already has written off a $525,000 investment in Central States, and regulatory records show it had lent almost $2.2 million to Central States.
“We’re just caretakers,” Cowan said. “We’re just trying to shepherd it through the worst.”
Yeah, right…nothing to see here lamb chops…keep it moving.
The lambs are screaming Clarice….
http://tinyurl.com/yl7h44g
The lambs are screaming Clarice….
ROTFLMAO!
Can somebody please verify my math and understanding of the situation. If the FDIC sold 40% of a $1 billion portfolio of loans for $90.5 million, that comes out to paying $90.5 million for $400 million worth of troubled loans… Which comes out to paying 23 cents on the dollar for these loans.
Is this right?
That was the way I computed it too… Was about to ask if that looked right/wrong to others here.
If our calculations are right, that seems like it might be a pretty decent deal for the buyers.
It’s worth keeping in mind, though, that this is the tier of junk-lending that the bank-purchasers didn’t buy, so this kind of loss-ration probably shouldn’t be used to estimate just how bad the balance sheets are at failing banks. The better-underwritten stuff probably passes on to the bigger bank buying the failing bank.
It sure seems like that first-time homebuyer credit is helping…
“The Austin market had another strong month in November. The number of sales was up 58% compared to last year at this time”
“There are two obvious factors. First the government tax credits are certainly increasing sales numbers. Second historically low mortgage rates are pushing sales numbers up.”
http://www.escapesomewhere.com/austinblog/
Brett: helping who?
Home sales “help” anyone who is employed in any business or sector that is somehow connected to and profits from anything that goes into the building or maintenance or furnishing or operation of a house and household… which is lots of people.
Lots more people than the (sustainable) historic norm are currently connected to and dependent on profits related to the building, maintenance, furnishing or operation of houses, thanks to the recent mania. Rather than recognizing this anomaly and letting the bubble die a natural deflationary death, the PTB appear to be acting on a collective judgment that the best remedy for a mania is a massive hair-of-the-dog effort to reflate it.
We’ve been around this block so many times I doubt we’ll come across anything new if we go around again..
Property prices will fall to the level of affordability.
If anyone out there, including the government or FED is actually unaware of this, and really believes they can re-inflate anything, then they are headed for a big disappointment.
Meanwhile, i appreciate the parachute on the way down.. the view is spectacular. Alls I need to remember is to stay loose and roll when I hit the ground.
Five years ago, I found this blog, which reinforced my belief that there was a bubble that was going to burst. It took longer to happen than I thought and now it is going to be much worse than I thought because of the following: I think the main problem for the future is all the debt from underwater homeowners, credit card debt, debt the government has created for its citizens. The debt has to be paid before people have money to spend so that jobs can be created. The government is running up debt (making it worse since we have to pay interest on the debt) trying to bail out business, but business is going to be hurting big time since no one is going to buy anything while deeply in debt, excepting essentials. Hidden inventory is more debt waiting to happen. I am sure I am missing some things here. Anyway, thinking back five years, it’s turning out worse than I thought it would be. For years I wanted the bubble to burst so folks would get their just deserts and I could feel justified in my belief, but now I am just scared.
“We’ve been around this block so many times I doubt we’ll come across anything new if we go around again…”
I believe there is value to occasionally recycling discussions here for the benefit of new readers in the virtual room. I doubt many have the time or inclination to hash through the HBB archives in order to harvest the numerous pearls of wisdom that have been planted here over the past half decade…
” …I am sure I am missing some things here. Anyway, thinking back five years, it’s turning out worse than I thought it would be. For years I wanted the bubble to burst so folks would get their just deserts and I could feel justified in my belief, but now I am just scared.”
Nothing wrong with admitting you’re a little scared. Most people with any grey matter would be a little afraid.
These are times to be scared for the county and to be scared for themselves. A little justified fear may keep you on your financial toes and alert enough to save you youself from the undertow. One helleva lot of people in America are going to be reuined and or devastated with this fiasco.
I think that all we can do is have a good financial family plan, stay alert and hope that they don’t drag the rest of us down with them when they drown.
“Property prices will fall to the level of affordability.”
I sure hope so, joey. The Fed has been far more successful at changing the course of things over this past year than I had expected them to be. Now granted, it was with massive intervention, which I don’t believe they can justify performing forever. But I really didn’t think they would manage to cause an up-tick in the Case-Shiller data, and they did. That has caused me to question whether they might really be capable of pumping sufficiently to avoid things declining to the level of affordability.
“Alls I need to remember is to stay loose and roll when I hit the ground.”
Feet and knees together, eyes on the horizon!
“A little justified fear may keep you on your financial toes and alert enough to save you youself from the undertow.”
GreedFear is good.“Alls I need to remember is to stay loose and roll when I hit the ground.”
Feet and knees together, eyes on the horizon!
For sure…this isn’t the time to be doing any fancy Ft. Bragg Standing Landings …a good PLF position and eyes on the horizon.
“Airborne”
So sales volume is up here and there. That is precisely what occurs when prices fall. And I’ll wager sales will continue to increase as prices continue to fall. If the sell side gets obstinate and attempt to increase prices, sales volume will grind to a halt.
Kinda like any market.
Prices seem fairly stable
“The average price is up 2 percent from last year and the median price is down 2 percent from last year. “
Exeter,
I wish I could agree with you, but things have turned very bullish in our area. Inventory is exceedingly low (like during the peak of the mania), and sellers are listing at or above peak prices…and often getting them.
It sucks, but it’s the truth.
I think some in the main stream media are still dilutional….
http://amfix.blogs.cnn.com/2010/01/08/turning-white-collars-blue/
Hi Stp - hope you are enjoying your civilian time. I don’t think the writer was delusional (or dilutional.) She’s pointing out the fact that kids are majoring in stupid things like “public relations” instead of learning real life skills. One of my nieces visiting over Christmas is majoring in public relations. That kind of major didn’t exist when I was in college. And she thinks she’s going to be able to find a job? At least when people major in philosophy they aren’t delusional enough to think that they’re going to find a job as a philosopher.
Goldman Sachs, Tiger Woods, and the NAR are certainly institutions who could use the ’services’ of good public relations consultants and lobbyists.
In their case it could be worth millions or billions. Keeping the sheeple on your side is especially valuable when more and more people and institutions make money off of their image.
I wouldn’t be surprised if some people don’t try to make it a basic human right to have your very own spinmeister.
A Philosophy major with the intent of going to law school is the exception, imho. Only if the degree had a majority of critical thinking classes in it. I agree on law demand majors.
Edward Bernanys, the Father of PR was Sigmund Freud’s nephew, and was an evil genius.
Law school is so 90s. Lawyers were laid off in droves last year, BigLaw can no longer expect $700/hour billings. check out: abovethelaw.com
Sorry, you have to be Military Spelling Poilce to bust Step. You have overstepped your authority.
Thirty days of KP for you.
KP is so 1950s. Now they have contractors at most military posts. And basic trainees who are being yelled at can pull out a “stress card” that indicates their sensitive feelings can’t handle such “abuse.” I wish I was making this up.
The “stress cards” went away along time ago. And you are right about KP. Last time I did KP was in basic. But stress cards were stupid and too Politically correct in my opinion.
“stress cards” ?
Sheesh… I sure missed out on those things!
Whenever I was about to be killed or “eaten alive”, my old Sgt. would just laugh and say…
“Do it today mikey, because tomorrow, it will be against the law”
There were a few times I would have loved to crawled over and slowly…strangled him but I was too busy with lots and lots of STRESS !
My DI at Parris Island relieved a lot of stress with his hands. Up close and personal.
I got a left and right stress reliever on more than one occasion. I think I smiled. No excuse sir!
LOL
IMHO: those “Stupid majors” make great second majors. In many schools you have to take a truckload of electives anyway, why not pool them into a double major? You may need to take a couple summer classes or maybe an extra semester, but few things looks better on an undergraduate resume than a second major in “organizational leadership” or “PR” or policy or business or accounting. It shows that you’re serious about being competent for all aspects of the job. Plus it gives you two fields to choose from.
Ugh,
This damn keyboard!
bad spelling…
stepn2me,
Don’t worry about a few minor spelling, typing or the grammatical errors.
I have tortured the spelling cops on this blog with mine for years.
They’re like mom’s and eventually declare you hopeless and give up !
“…still dilutional….”
The Fed sure does seem to be dilutional.
Case in point: Yesterday (and of course the MSM blames “investors” for the shifting of the impact of bad labor market news from Wall Street share prices into the dollar…)
Dollar Falls Most Since November on Surprise Payrolls Drop
January 09, 2010, 04:23 AM EST
MORE FROM BUSINESSWEEK
By Ben Levisohn and Inyoung Hwang
Jan. 9 (Bloomberg) — The dollar posted its biggest weekly loss since November versus the currencies of major U.S. trading partners as an unexpected drop in jobs boosted speculation that the Federal Reserve may extend stimulus measures.
Sterling was the only major currency to fall against the dollar this week as Prime Minister Gordon Brown clashed with the Conservative opposition on the U.K.’s budget deficit. The greenback slid from a four-month high against the yen on the prospects for the world’s largest economy. A report next week is forecast to show U.S. retail sales grew at a slower pace.
“Investors were disappointed and sold dollars,” said Hidetoshi Yanagihara, a senior currency trader at Mizuho Corporate Bank Ltd. in New York. “The market was expecting too much.”
…
But never fear; a strong dollar is still on the way in 2010, if only we collectively hold out hope…
Jan. 9, 2010, 9:58 a.m. EST
Dollar seen strengthening in early 2010
By Nick Godt, MarketWatch
NEW YORK (MarketWatch) — After watching the U.S. dollar slide for most of the past year, many analysts expect it to strengthen in the first part of 2010 as the U.S. economy recovers faster than other in Japan and most of Europe.
But beyond that, the longer-term outlook remains shakier. Much will depend on the shape of the economic recovery and what happens to the unprecedented stimulus measures by the Federal Reserve and the U.S. government.
“After a schizophrenic two years, the dollar has come full circle to pre-credit crisis levels,” said Sal Guatieri, senior economist at BMO Capital Markets.
…
When the chickens come to roost, when the cows come home, when pigs fly……
bad Bear, naughty Bear !
Oh the demand is there for highly skilled jobs alright. What isn’t is the pay.
Oops, I forgot to add “..and that demand is low, just like the pay.”
From step’s link:
“I think we’ve developed an idea that if work is dirty, it must be stupid,” he says. “I think we’ve developed a kind of a one-track educational system where every kid has to go to college. I think the truth is some kids who are plenty smart would rather build things and fix things.”
—————————-
Couldn’t agree more. IMHO, this is behind many of our problems with Wall Street and housing speculators and day traders, etc… When real WORK becomes something “lowly illegals” are supposed to do, while the “educated” Americans sit behind desks shuffling paper and trading assets back and forth, it means our country is headed downhill fast.
I certainly hope we can turn this ship around and become a nation of real innovators and productive workers who create new things that can make life better for society.
“TrueHaskell™” = “But, but, but…”
“…There haven’t been this many vacant rental apartments for at least 30 years, according to a new industry report.
Occupancy rates did climb during the quarter, with nearly 10,000 more apartments being rented than had been three months earlier, according to the report. But vacancy rates still managed to climb because 28,000 newly constructed units hit the market. A total of 120,000 new apartments came online during 2009, the most since 2003.”
Renters’ market: Prices fall 3%, vacancies up 8%:
By Les Christie, staff writer January 7, 2010 CNNMoney
Although encumbered with the shackles of government-sponsored market manipulation, Mr Market nonetheless appears to be alive and kicking.
You are correct PB, and of course the market closed up yesterday. Can’t help but feel that the next “unexpected” down draft will catch a lot of people off guard.
I may be wrong, that’s become the norm for me lately. I keep forgetting the old axiom… “Never bet against the FED”
“Never bet against the Fed.”
Some more nevers:
Never say never.
Never say never again.
Never underestimate the power of stupid people in large groups.
Never underestimate an old broad.
Never underestimate the predictability of stupidity.
Never underestimate the stupidity of the American public.
Anyone who reads and posts here, and who eschewed the opportunity to purchase a house circa 2005, bet against the Fed, the GSEs, the President and Wall Street, and hit the jackpot.
So how about an amended version:
Never bet against the Fed, unless you know by your own independent judgment that they are spectacularly wrong.
A shackled market precipitates great volatility at the very moment the shackles are no longer sufficient to contain it.
A problem with the conventional financial economics analysis of market behavior is that it implicitly assumes a competitive market — i.e., prices are decided by the collective wisdom of millions of individual investors, and there are no 800 lb gorillas who can make their own financial weather and profit from it. Any characterization of market behavior which does not address the disproportionate sway of 800 lb gorillas on Wall Street and K Street is a strawman misfit.
Get the 800 lb gorillas out of the market, and I bet it would price assets a lot more efficiently.
* THE WALL STREET JOURNAL
* THE INTELLIGENT INVESTOR
* JANUARY 9, 2010
Inefficient Markets Are Still Hard to Beat
* By JASON ZWEIG
Can’t anyone here play this game?
With the market so erratic at pricing stocks, it is tempting to think you can do better.
Between the Dow Jones Industrial Average’s record in October 2007 and the bear-market low in March 2009, Bank of America’s stock fell 94%. Then, by year-end 2009, it went up 380%. It wasn’t just financial stocks that acted like yo-yos: Over the same period, Alcoa’s stock fell 87%, then more than tripled.
How can such crazy swings in price be “efficient”? As millions of smart buyers and sellers compete to maximize their wealth, they update stock prices with all the relevant information that’s available. That’s what an “efficient market” means. It presumes that the market price is the best estimate of a stock’s intrinsic value, or what all its current and future cash flows are worth.
But the fact that the market price is the best available estimate doesn’t mean that the market price is right.
In 1974, the great financial analyst Benjamin Graham wryly described the efficient-market hypothesis as a theory that “could have great practical importance if it coincided with reality.” Mr. Graham marveled at how Avon Products, which traded at $140 a share in 1973, had sunk below $20 in 1974: “I deny emphatically that because the market has all the information it needs to establish a correct price the prices it actually registers are in fact correct.”
Mr. Graham proposed that the price of every stock consists of two elements. One, “investment value,” measures the worth of all the cash a company will generate now and in the future. The other, the “speculative element,” is driven by sentiment and emotion: hope and greed and thrill-seeking in bull markets, fear and regret and revulsion in bear markets.
…
“Mr. Graham proposed that the price of every stock consists of two elements. One, ‘investment value’, measures the worth of all the cash a company will generate now and in the future. The other, the ’speculative element’, is driven by sentiment and emotion: hope and greed and thrill-seeking in bull markets, fear and regret and revulsion in bear markets.”
Yep, and all the patient investor need to do is watch and wait with ready cash in hand for the materialization of this fear and regret and revulsion.
“Yep, and all the patient investor need to do is watch and wait with ready cash in hand for the materialization of this fear and regret and revulsion.”
I believe it’s a bit harder than that. One also must
1) avoid falling knives (how do you know when prices have bottomed out in a crash which may last for months if not years?);
2) jump in to make purchases when many others are predicting much lower prices than have already occurred, or a much longer period in the basement than is likely going forward;
3) correctly gauge the interplay between market forces and government efforts to thwart them.
“(how do you know when prices have bottomed out in a crash which may last for months if not years?)”
You don’t, but neither should you care.
Price doesn’t equal value, even though many people think it does. But price gives one an opportunity to buy something below its value and sell it above its value. All an investor need do is determine value and patiently wait for the offers of the extremely manic/depressive Mr. Market.
“…Yep, and all the patient investor need to do is watch and wait with ready cash in hand for the materialization of this fear and regret and revulsion.”
Ford @ $1.53 …Blind Faith & x3 Heel Clicking
Mr. Graham was a very wise man.
“Although encumbered with the shackles of government-sponsored market manipulation, Mr Market nonetheless appears to be alive and kicking.”
For sure, it’s alive and kicking but in the dying cockroach position?
As I have oft pointed out here, if plankton dies, so do whales. Think of individual market participants as the plankton in this version of the analogy and government financial engineers as the whales and you will get the point…
Millions of other Americans are steering the same course. After being key players in bull runs of the past, small-time investors have not only stopped buying, they’re selling. The question for the new year: If the man on the street doesn’t jump back in, will stocks continue to defy gravity?
So far, the market’s comeback is almost entirely due to buying by professional investors at hedge funds, pension funds, banks and other institutions.
“We’ve never seen this before — such a huge rally, and the little guy is out,” says Vincent Deluard, a strategist for TrimTabs Investment Research, a Sausalito firm that tracks mutual fund flows to get a sense of what individual investors are doing. Mutual funds are a good proxy for such investors because more than three-quarters of fund assets are held by individuals, both
Millions of other Americans are steering the same course. After being key players in bull runs of the past, small-time investors have not only stopped buying, they’re selling. The question for the new year: If the man on the street doesn’t jump back in, will stocks continue to defy gravity?
So far, the market’s comeback is almost entirely due to buying by professional investors at hedge funds, pension funds, banks and other institutions.
“We’ve never seen this before — such a huge rally, and the little guy is out,” says Vincent Deluard, a strategist for TrimTabs Investment Research, a Sausalito firm that tracks mutual fund flows to get a sense of what individual investors are doing. Mutual funds are a good proxy for such investors because more than three-quarters of fund assets are held by individuals, both
I’m curious…
Does one define “the market” as the sum of commerce of goods and services exchanged in individual transactions (i.e. direct consumption)?
Is “the market” the commoditization and speculative trade of goods and services by brokers, traders and other middlemen to investors (i.e. Wall Street)?
Some even define “market” as a macroeconomic term like M3 velocity.
The semantics make it easy for people to be weasel-ey about what’s really being discussed and sows confusion, especially when discussing predictions or rules…since you can have a lot of overlap of these concepts.
I don’t know much about the muddled plethora of definitions you have served up, but when I say “market”, I am talking about an institution which facilitates the trade of a known quantity of goods, services or financial assets between a willing buyer and willing seller at a mutually agreed price.
I’m not trying to be disingenuous or an a$$, but when you say markets are “shackled”, I don’t understand how goods, services, and financial assets aren’t being exchanged as mutually agreed?
I see people arguing incessantly on the Internet about “free markets”, and when you read carefully they are often overgeneralizing and talking about different ideas, especially what kind of market needs regulation and what is exactly being regulated.
“Regulation of markets” is a catchphrase that gets thrown around like even a grade schooler should know what it means, but yet no one can seem concisely define it…which is a shame because laws are made and interpreted in so many different ways. I’ve actually looked into this in depth and am dismayed at how this politically divisive term has (as you put it) a plethora of muddled meanings.
History has never had an unregulated market. Even the traders in the Fertile Crescent at the dawn of civilization had to follow a set of rules, had to be transparent about the quality of their goods and were taxed to pay for enforcement and oversight.
Economics is an empirical pseudoscience and that gets proved to me the more and more I read about it (which is pretty much daily now). I find it frustrating and counterproductive when no one can even agree on basic definitions about what they’re arguing about. Perhaps that’s why intelligent people can reach such vastly different conclusions about the origins of the financial crisis from exactly the same information. Anyway…
“I don’t understand how goods, services, and financial assets aren’t being exchanged as mutually agreed?”
That’s not my point. Rather, I am suggesting that when a few 800 lb financial gorillas (whether on Wall Street or DC) are able to create their own financial weather (e.g. to execute trades which have an immediate material impact on prices), then efficient market theory will not work very well…
By analogy, think of waves on the ocean. One could think of waves as the collective movement of trillions of individual water molecules. But if a 9.0+ magnitude earthquake happens in the Indian Ocean sea floor, a tsunami will ensue which will violate the normal rules of wave motion. Similarly, the actions and fates of 800 lb financial gorillas can cause large waves or even tsunamis in financial markets which do not follow a set of rules rules intended to explain the collective interaction of a large number of homogeneous and independent market participants.
Corollaries:
1) The essence of systemic risk is the continued existence of the government-guaranteed too-big-to-fail cartel on Wall Street.
2) The elimination of systemic risk depends on busting up the trusts which comprise the government-sponsored Megabank, Inc cartel.
“Economics is an empirical pseudoscience…”
It is a victim of coicumstance, as it is difficult if not impossible to run controlled experiments on human subjects under actual real world conditions. There is also something analogous to the Heisenberg principle in play — even if a controlled experiment could be designed and executed, there is a risk the ‘treatment’ group would respond differently under the ‘controlled experimental conditions’ than they would in real world circumstances. And good luck at controlling confounding factors which could completely screw up the experimental results.
TBTF and trustbusting are examples of inefficient markets but hardly the only things keeping markets from functioning ‘efficiently’.
The water analogy is already on thin ice (heh), but when you talk about molecular interactions (electrostatic, van der waals, etc.) in water as being similar to individual economic transactions, you can’t talk about waves as being “unnatural”, regardless of their origin. All standing bodies of water have waves, heck even individual molecules have wave-like motions. Rather than say the only “good” water is water that doesn’t have waves, it’s better to talk about how to keep waves from getting too destructive to the environment.
Similarly, every market has to have rules for commerce to work. If the state issues money, the state has to regulate the rules of exchange, and then it just spirals from there. When people talk about unregulated markets, they presume honesty and transparency in commerce are automatic, which strikes me as stupid. It’s like an engineer and a physicist discussing classical mechanics of missiles without considering the effects of structural tolerances or friction. Looks good on paper but it will never work in the real world.
“When people talk about unregulated markets, they presume honesty and transparency in commerce are automatic, which strikes me as stupid.”
Even Adam Smith (father of capitalism) argued markets need to be subject to a rule of law in order to function properly. Suggesting otherwise is as preposterous as a belief that society itself best functions without a rule of law. The fact that Western Civilization muddled through centuries of feudal organization, where small independent protectorates were shielded from attack by high-walled castles, does not suggest we should wish for a return to this social system.
‘Rather than say the only “good” water is water that doesn’t have waves, it’s better to talk about how to keep waves from getting too destructive to the environment.’
Sorry, I apparently failed to get my point across. Anyone who surfs or who has witnessed a tsunami and lived to tell about it gets the difference between ‘good’ waves and ‘bad’ waves. Eliminate Megabanks, and you will go a long way to reducing the number of ‘bad’ waves which strike the global economy.
“Eliminate Megabanks,…”
I’m thinking this would have to be done at the international negotiation level, perhaps coordinated by the IMF. Given that IMF vets such Kenneth Rogoff and Simon Johnson seem to clearly apprehend the problems associated with the Megabank cartel, is there any chance a move to bust them up at the international level might ensue?
Even Adam Smith (father of capitalism) argued markets need to be subject to a rule of law in order to function properly.
… but this viewpoint is not universal:
“In his 1973 book The Machinery of Freedom, Friedman developed a form of anarcho-capitalism where all goods and services including law itself can be produced by the free market. ”
en dot wikipedia dot org/wiki/David_D._Friedman
And Rothbard, quoting Chuang-Tzu, suggests that all legal systems and court systems are ultimately counter-productive:
mises dot org/daily/3903
History has never had an unregulated market. Even the traders in the Fertile Crescent at the dawn of civilization had to follow a set of rules, had to be transparent about the quality of their goods and were taxed to pay for enforcement and oversight.
NSO, the question is, whether the need to be transparent and follow rules can be enforced by the purchasers, or whether this need requires (or is better served by) the intervention of bureaucrats and lawyers.
Actually, I think many markets are de facto unregulated. Unless the sums involved are huge, there’s little practical recourse in disputes between owners/contractors or buyers/sellers.
I’ve long been familiar with David Friedman’s works. Also Morris and Linda Tannehill’s “The Market for Liberty.” Throw in Lysander Spooner’s “No Treason: The Constitution of No Authority,” and you’ll think you have just taken the red pill.
So really, there are two questions:
1) If even the most naked capitalist asserts that there needs to be a rule of law, what is the tipping point when laws ‘impede’ markets? When do waves stop being challenging but fun to surf and start being dangerous? Apparently only after someone gets hurt, but not before. Phil Gramm, the Great Deregulator who famously militated against our “nation of whiners”, but has never acknowledged that his ‘harmless’ unregulated derivatives were the reason for our biggest bailouts and the spread o the contagion to global markets. For him, the pursuit of happiness was letting his buddies rob society blind. For the rest of us, not so much…
2) Why must we constantly “experiment” with the latest en vogue economic theories? Ever since Reagan, politicians and economists alike have been aggressively inventing ideologically sexy-but-bizarre economic theories, some of which may have had some benefit but most ultimately led to ever more risky and less transparent markets. I know most here don’t like Krugman, but I wholeheartedly agree with him that at least that banking should be boring.
Think about it: Wall Street is essentially just a bunch of venal middlemen, the supposed bogeymen of all free markets. They provide credit, but insulate seller and buyer from each other and profit immensely out of proportion to the good that they do. Since I haven’t read in any detail about Spooner, D. Friedman, Rothbard and Tannehill…I’m going to have to ‘pull a Sarah Palin’ and get back to you guys about this topic in the future.
Is there any chance Hoenig might be promoted to Fed chair at some future point? He seems relatively more attuned with the collective interests of the American people that other Fed governors whose ties to Wall Street are tight (e.g. Bernanke and Geithner).
Fed’s Hoenig: ‘Dismembering’ Large Financial Firms Should Be Considered
Tuesday, January 5, 2010 - 11:26
Written by Steven K. Beckner
ATLANTA, Ga. (MNI) - Kansas City Federal Reserve Bank President Thomas Hoenig Tuesday said that “dismemberment” of some large financial institutions is something that should be considered.
Hoenig, participating in a panel at the annual convention of the Allied Social Science Associations, said he is hopeful of passage this year of legislation that would provide for a “resolution mechanism” for dealing with failing financial institutions.
However, he expressed reservations about a House bill that would empower the Treasury Department, rather than a firm’s primary regulator, to decide when a firm needs to be taken over by the government.
He said Congress needs to take its time and get it right.
Hoenig emphasized the need, as he has before, to deal with the “too big to fail” problem.
Responding to a suggestion made by University of Maryland Professor Carmen Reinhardt, Hoenig said, “dismembering firms is a fair thing to consider.”
…
“If even the most naked capitalist asserts that there needs to be a rule of law, what is the tipping point when laws ‘impede’ markets? ”
__________________________________________________
I believe the tipping point comes when any given society becomes overly concerned or obsessed with the moralistic aspect of law (as the desired outcome), per se, rather than the societal efficacy of said law.
Societies tend to lose their way when meeting the self-actualization needs of individuals (their egos) becomes paramount at the policy level.
That’s what I think, anyway.
Dang, I love this blog….
Shrinking U.S. Labor Force Keeps Unemployment Rate From Rising
Jan. 9 (Bloomberg) — An exodus of discouraged workers from the job market kept the U.S. unemployment rate from climbing above 10 percent in December, economists said.
Had the labor force not decreased by 661,000 last month, the jobless rate would have been 10.4 percent, according to economists including David Rosenberg at Gluskin Sheff & Associates in Toronto and Harm Bandholz at UniCredit Research in New York.
“The actual unemployment rate is higher than shown by the official numbers,” Bandholz said yesterday after a Labor Department report released in Washington showed the economy unexpectedly lost 85,000 jobs in December while the jobless rate was unchanged.
“An exodus of discouraged workers from the job market kept the U.S. unemployment rate from climbing above 10 percent in December, economists said.”
How do these “discouraged workers” make a living? People need money to live, where do these people get their money?
Welfare?
Re: discouraged workers
Disability, if a bit older with something chronic.
Ever seen those daytime TV lawyer ads?
Moving in with relatives.
Welfare and food stamps, if no assets.
Food pantries
“Off the books” work
Panhandling
And don’t forget one of the favorites: taking early SS payments at 62.
…taking early SS payments at 62
Yes, and early retirement.
some went back across the border.. some musta moved back in with parents.
Another thing is all the two income families, which is most popular these days.
I know they tend to spend so much money on “stuff” that both need to keep working to maintain the lifestyle, but if one person’s income covers the basic monthly nut, the other can probably get laid off without it being disastrous. Cut back on spending.. maybe some unemployment is coming in.. maybe sell some stock or other stuff.
combotechie, many of them aren’t making any money. Maybe you haven’t noticed that crime is up.
And of course there is the off the books, under the table work, much of it only part time. Or even straight part time, which doesn’t show up on labor stats because most states don’t require the same taxes, regulations and reporting on part time employees, if any.
And then there’s the old hustle. Black market. Drug dealing. Etc.
But crime is up in my city.
Posted on Yahoo Finance:
“Beyond Friday’s lackluster headline payroll figures, the “real” unemployment rate (or U6) rose to 17.3% and the average hourly work week remained near record lows at 33.2. In addition, the average duration of unemployment rose to 29.1 weeks as the ranks of the long-term (or “permanently”) unemployed continue to swell. Furthermore, the household survey showed a decline of 589,000 employed persons to the lowest level since 2003, according to Miller Tabak.
In sum, fewer people are working, more Americans are dropping out of the labor pool and those who are working are working fewer hours: Average hourly earnings up just 2.2% vs. a year ago in December, lowest rate since 2004 and vs. an average gain of 3.3% over the prior decade, according to Miller Tabak.”
Nice to see reality acknowledged by the MSM once in a while.
Have we moved on from global warming to The Day After Tomorrow with no warning whatever from the Cassandras in the climate science business? It must really svck to live in a flyover country McMansion this winter with no job and high heating costs due to fuel prices which refuse to deflate with the economic recession.
* The Wall Street Journal
* U.S. NEWS
* JANUARY 9, 2010
A Freezing Nation With Little Relief in Sight
Southern Growers Expect to Bite Their Nails Through the Weekend and Shrimpers Pack It In; Schools Close in Swath of Midwest
By CHRIS HERRING
[Icicles hang from an orange tree after it was sprayed with water throughout the night in Plant City, Fla., earlier this week. The water was sprayed to protect the other plants in the nursery from cold weather in the state.] Reuters
Icicles hang from an orange tree after it was sprayed with water throughout the night in Plant City, Fla., earlier this week. The water was sprayed to protect the other plants in the nursery from cold weather in the state.
South Carolina officials called an early end to the shrimping season and Florida citrus growers remained on edge Friday as a cold snap persisted across much of the U.S.
Heavy snowfall and icy temperatures prompted dozens of Minnesota schools to close and delayed the opening of some state offices Friday, while wind-chill levels in the Dakotas hovered around 25-degrees below zero.
In the South, arctic blasts of air blew across a region unaccustomed to prolonged subfreezing temperatures, icing roads and threatening crops.
Temperatures have fallen the past several days as much as 20 degrees below normal in parts of the country, and it will feel “brutally cold” this weekend in the Southeast, before the cold starts letting up next week, said Brian Korty, a meteorologist for the National Weather Service. He called the cold snap “an event you’d only see every 10 or 20 years. It’s just not common to see temperatures that are 20 or 30 degrees below normal over this wide a region for this long.”
…
Here in upstate SC it’s not the Coldest , but the longest sustained cold spell we ever recall . A couple of our tenents who insisted the gas be turned off earlier because of the expense , Claiming then that they’ll do fine with a few plug-in heaters , are now colder then they’d like to be .
We try to monitor and help as best we can . All plug-in heaters put out exactly the same heat , wether it is a $400. ”Amish” heater , or a $25 Home Depot one .
The big kicker is if the wiring is up to it , and to space the heaters so only one is per circuit .
Also we try to stay with the metal , and the infrayed ones , to stay away from the plastic itty bitty type. Don’t trust those.
I’ve also introduced the ”’Closing off rooms” concept , which is closing down unused rooms . All the old-timers used to do that .Thankfully , the outside temps raise into the 40’s in the afternoons before plunging into the low 20’s come nighttime.
Jess:
I lived in North Charleston for a while in an old concrete block house with a propane tank…there was no city gas hookup yet…I had a 240v outlet for the AC, so I went to Grainger and bought a 4000 watt heater as an emergency back up on cold night or if we ran out of propane, we were really old school, living on the edge….. there was no gauge on the propane tank…
The cold is all east of the Rockies….the jet stream hangs a right in Alberta and goes straight down the continental divide.
Here in Boise it’s warmer than northern Florida. That’s just wrong. It only got down to 31 deg. F last night here, but got down to the high 20’s in Florida - and to 17 deg. in Dallas Texas!
“Have we moved on from global warming to The Day After Tomorrow with no warning whatever from the Cassandras in the climate science business? It must really svck to live in a flyover country McMansion this winter with no job and high heating costs due to fuel prices which refuse to deflate with the economic recession.”
Sometimes I surf the RE sites and peek at craigslist.
It’s nothing anymore to see over-priced MaManions with dream prices at or near Madison and Milwaukee well over 400K and up. I think the median household income was somewhere about $52,094 in Wisconsin in 2008. Now you’re lucky to have a job.
What is truly amazing is to see all these Super-McMansion Gentlemen Estates with 10-40 acres up for sale with dream prices of 700k up into the millons of dollars out in the middle of NoWhere, Wisconsin. One of these log cabin 3 level behemoths even has it’s own elevator. I didn’t know that these monstrosities even existed until lately. Now, there’s tons of them in WI. I guess that’s they way they wanted that too.
Now my family raised me modestly but well. I actually do know the difference between Emily Post and a Fence Post but these big empty shacks are bigger than some small English and Scottish castles I’ve been in.
And now, they sit on RE sites and on Craigslist. Out upon some lonely hillside or unknow coulee in the blowing snow at -10 empty, hopeful and silent.
I peek at their pictures, gaze at their innards, think of Shelly and Ozymandias. It’s not the empty house’s fault. It was the builder’s, buyer’s and bankster faults. I wish them luck and move on.
rant over
That is surprising, Mikey. I would have thought people in Wisconsin were more rational.
“‘A lot more people were living on the edge than we ever even anticipated,’ Haynes said. ‘So many people were just barely making it. It’s absolutely shocking.’”
~ Hospitality House spokesman Barry Frost, quoted in Economy Creates Newly Homeless by Kimberly Edds, OC Register, December 11, 2009
“There is no normality and no recovery. You cannot spend your way into recovery. It just doesn’t work. Look at the 1930s. It didn’t work then and it won’t work now. Government guarantees challenge reality and reality always wins. As a result of Fed policy we have corporatist fascism at its worst. Day by day we attract less foreign capital and that is because any semblance of free markets are gone. All the Fed has done is rescue its owners and other connected elitists and such a plan is doomed to failure.”
~ Bob Chapman, The Greatest Outpouring of Money and Credit from Central Banks and Governments in History, December 19, 2009
Counterpoint re the New Deal:
http://www.trib.com/news/opinion/forums/article_5616d60c-08a4-50a2-b45c-d59666b328b5.html
The “New Deal” added tangible things. Public works projects that *gasp* benefited the public.
The only deal we’re getting today is the raw deal.
BOHICA!
+1
“‘A lot more people were living on the edge than we ever even anticipated,’ Haynes said. ‘So many people were just barely making it. It’s absolutely shocking.’”
Some people REALLY need to get out more often. And don’t mean in the nice way.
News Hub: Geithner Under Fire Again
1/8/2010
The White House defends Treasury Secretary Geithner as he faces new questions — and a congressional hearing — about his role in the rescue of AIG. WSJ’s Deborah Solomon joins Simon Constable on the News Hub to discuss.
My understanding is that when he was chairman of the NY Fed he falsified documents about AIG transfering money to Goldman Sachs when AIG applied for a bailout. He is a criminal, for sure. I think treason would be too broad, and bribery would be too narrow.
What would be the charge? Corruption? Conspiracy? Contempt of Congress?
10:1 that Obama will wind up pardoning him or using Bush’s precedent of executive privilege.
Paulson needs to be indicted as well.
Obama may eventually let TTT in order to rid himself of a lightning rod for political controversy. Can anyone think of another Treasury Secretary who was similarly gifted in this department?
“…let TTT go…”
So PB, what do you think about the rumors of Dodd moving to Treasury?
Let’s hope they are spurious.
Jan 7 2010, 11:10 am by Daniel Indiviglio
Dodd To Treasury?
Roll Call speculates that Sen. Christopher Dodd (D-CT) may not be retiring after all — he may trade his office in the Senate’s Russell Building for one in the Treasury. Could he replace Tim Geithner as Treasury Secretary? It’s not beyond the realm of possibility, but I doubt it.
Roll Call says:
“For instance, several Democratic Senate aides noted that Treasury Secretary Timothy Geithner is an extremely unpopular figure in the Senate. Geithner has also taken the brunt of the criticism for the administration’s handling of the economy and, these sources speculated, if the country’s financial picture does not brighten before Election Day, he could be the first secretary to leave the administration.
Although Dodd would appear to be well-situated to take control of Treasury if the position were to open, it may not be smooth sailing for his nomination.”
I have a few thoughts about this. The
conspiracy theoristpragmatist in me wonders if the Obama administration promised Dodd a prominent position — even if it isn’t Treasury Secretary — in order to secure his promise not to seek re-election. Dodd’s prospects of winning in November were relatively dim, and the Obama administration knows that it can’t lose any Senate seats if it wants to push through its ambitious agenda in the second half of its term. Powerful Senators tend not to be meek or humble, so I find it surprising that Dodd wouldn’t want to go down without a fight, unless he had some other incentive to throw in the towel early.…
Would the Obamanites really pull a Blagojevich like that??? I certainly doubt Dodd could prove that much more controversial than TTT has so far…
Why not steer entirely clear of the crony capitalist crowd and go with Spitzer instead? That would be a change I could believe in.
Spitzer for Treasury?
posted by Katrina vanden Heuvel on 03/22/2009 @ 2:11pm
Frank Rich is right. Firing Treasury Secretary Timothy Geithner won’t get us out of the economic disaster we’re in. But at this time of righteous rage, deploying Geithner and Lawrence Summers as the administration’s chief economic messengers displays an astonishing tone-deafness. These are men who, as Rich puts it, ” are too marinated in the insiders’ culture to police it, reform it or own up to their past complicity with it.”
Or as The Nation’s William Greider explains in Sunday’s Washington Post, the anger roiling the nation could “devour his presidency.” Yet Obama “does not seem to grasp that the tone-deaf technocrats are leading him into a dead-end.”
…
Why not steer entirely clear of the crony capitalist crowd and go with Spitzer instead? That would be a change I could believe in.
———————-
I’d LOVE to see Spitzer as Treasury Secretary. Hadn’t thought of it until your post, but that’s a really wonderful idea!
And…because it’s such a good idea, we can bet it will never happen.
Isn’t it too late to indict Paulson, given that he is no longer in office? Or is there a precedent for indicting top officials in defunct administrations?
“is there a precedent for indicting top officials in defunct administrations?”
Of course you can. You don’t often hear about it because most indictments are of politicians still in office, unless the the charge has a statute of limitations.
Are you kidding me? He saved the economy from an apocalyptic downfall. The lender of last resort HAD to be the US taxpayer, because there was NO other lender of last resort. And there always has to be one. Otherwise we get Madmax.
You young guys should get out there and learn how to REHAB houses, not flip. Study your market and REHAB skills. You can create value. Even in a down market. I’m too old, so I won’t attempt it anymore, but if you are of sound body and mind, trust yourself and DO it. Wish I had in 1993, but everyone thought I was crazy. I foolishly listened to them. Had I not, I’d be a multi-millionaire by now. House prices are down, and may even go lower, but with sweat equity, you can still make money! Good luck out there. Buy low, sell high.
Exactly. Rehab is hard, but it’s where the money is. That’s how we used to do it.
I wouldn’t get into it right now. Maybe one or 2 more years. Maybe longer.
But…but…but…I thought The One promised us the most transparent administration in our history. Defending a high Fed official who deliberately schemed to deceive the public (who granted, are too dumb to make that much of a challenge) isn’t my idea of honest government.
Hehehe…. so many people believed the Prophet of Change, and now he has led the sheeple to slaughter.
Megabank, Inc better learn to shed crocodile tears fast, or Main Street citizens currently enjoying a bird’s eye view of the bus’s suspension system won’t take kindly to multimillion dollar banker bonuses.
News Hub: Bankers Back in the Hot Seat
1/8/2010
The Financial Crisis Commission will require top bankers and regulators to testify about the causes of the financial crisis. WSJ’s John McKinnon details what to expect from the hearings in an interview with Kelsey Hubbard.
We need another Pecora Comission headed by someone who isn’t a partisan patsy. It has to be someone independent of Wall Street, like Pecora or Brooksley Born.
I think Eliot Spitzer (whose future as a career politician has a fork stuck in it) would be a great choice.
I sure wish Spitzer could somehow get back into the Megabank, Inc containment business. He showed himself to be one of the few power players with the right combination of balls and principles to stand up to them (right up until the point when his balls and lack of principles in another realm ran his political career aground).
Megabank thugs were the ones responsible for exposing Spitzers sexual proclivities. Spitzer is/was a pitbull and Megabank prevailed.
It is about time American politics grew up a little and got over its preoccupation with public figures’ private lives. After all, Spitzer did nothing that Tiger Woods or Bill Clinton wouldn’t have done under similar circumstances. What do his private foibles have to do whatever with his ability to execute the duties of public office?
I get it. For me Clinton stepped over the line when he shook his finger in my face and lied, but I’m good with Spitzer.
Dear Carl Morris,
This is why the Europeans (or Asians, Africans and Latin Americans for that matter) laugh at our political jihads.
Find me an example of a politician, or even a human being, who has never told a lie…I dare you.
What is more important is what sort of lies are relevant to what type of job.
Spitzer lied about hoes…but Geithner lied about his taxes and on federal documents on behalf of AIG. As a voter, which should concern you more in the selection of a Treasury secretary?
Carl, Did you work for the Clinton Admin?
Rhetorical question, I assume. Go ahead and deliver whatever lefty lecture you’re dying to deliver…
Not at all. Your comments imply that you have a personal relationship with the former president.
Will California become the next Iceland?
Governor demands help from U.S. government
By Brian Joseph
Orange County Register
Faced with a projected state deficit of $20 billion, Gov. Arnold Schwarzenegger unveiled Friday a proposed budget that calls for severe cuts to health and human services and state employee salaries and threatens even deeper cuts if the federal government doesn’t pony up $6.9 billion in reforms and reimbursements.
“Tough times still lie ahead,” the governor said.
The grim plan proposes such “draconian” cuts, as the governor himself called them, that reaction from many lawmakers and special interest groups was perhaps best captured by Senate Leader Darrell Steinberg, D-Sacramento, who said simply, “You’ve got to be kidding.”
On top of dramatic cuts already made to close a $60 billion budget gap last year, Schwarzenegger proposes slashing an additional $8.5 billion in state spending, including cuts of $2.9 billion from health and human services, $1.6 billion from state employee compensation and $1.2 billion from prisons.
For state employees, the governor is proposing a 5 percent payroll cap, 5 percent salary reduction and a 5 percent increase in employees’ retirement contribution.
“I know many of these cuts are painful,” Schwarzenegger said. “Yet there is simply no conceivable way to avoid more cuts and more pain.”
That includes raising taxes, which the governor said is off the table.
That sounds about right.California wants the rest of america to pay for their bogus investments and their inability to fire people when they have no money to pay them.I think about half the state workers need to go myself.
In fairness to California, they’ve also been hit hard by the Federal government’s abject failure to secure our southern border and otherwise limit immigration. That has imposed huge costs on our Southwestern states, although the political class they elected panders to open-borders advocates.
Thank you for pointing this out. No discussion of California’s plight is complete without acknowledging a failed immigration policy.
Failed ILLEGAL immigration policy.
Comment by Professor Bear
2010-01-09 11:25:26
Thank you for pointing this out. No discussion of California’s plight is complete without acknowledging a failed immigration policy.
———————-
IMHO, immigration is the #1 issue that has to be addressed if we want to fix our budget mess.
If employers want illegal labor, they should have to pay for all the additional infrastructure burden (perhaps a fixed fee per illegal immigrant per year — which should include all dependents of the laborers), in addition to health insurance, education (if they have minor children in school, even if they’re “anchor” babies), and the employers should have to pay for any legal expenses that arise as a result of a laborer and his/her dependents in the U.S.
Let’s see how “concerned” they are about the immigrants’ rights when they’re the ones who have to pay for it.
“In fairness to California, they’ve also been hit hard by the Federal government’s abject failure to secure our southern border and otherwise limit immigration. That has imposed huge costs on our Southwestern states, although the political class they elected panders to open-borders advocates.”
Corporate Ag. No Mexicans, no harvest.
I have a dream…unemployed realtors, welfare queens, and juvenile delinquents learning the value of honest labor in the fruit orchards and grape plantations of California. Or starving.
Sigh.
$20 billion.. It’s hard to believe California could go bankrupt over such a small percentage of it’s value..
It’s value? Who knows what that is… but it’s easy to figure out how much of California’s real estate is worth $20 billion.
Take a typical “middle class” neighborhood in San Francisco: The Sunset District.
It’s about 2 miles by 2 miles square. The average value of a property there is about $1M… rough estimate.
This neighborhood is about 15 by 30 blocks.. very roughly.. a total of maybe 400 city blocks.
———
With about 50 properties per block, each block is worth $50M.
20 blocks are worth $1 billion.
All 400 blocks together are worth $20 billion, which is also the state’s deficit.
———
Just this one neighborhood in one city is equal to the entire State deficit.
How many cities are in California? Aside from cities, what enormous number of properties are there in ALL of California, city and rural? And what is their total worth? Megabucks.. Gigabucks?
Lets make this simple. I vote that we kick everyone out of the Sunset district and sell off their property and cure the deficit.
Your point seems well taken: Why couldn’t CA eliminate its debt through a pound of flesh in property sales?
Why couldn’t they..
i dunno.. My guess would be because there’s huge political pressure preventing them from selling any valuable public property to private entities.. The proposal would be tied up in court and in the legislature for years. Then the EPA would step in.. etc.
Aside from that, just the idea of taking the easy way out would disturb a lot of people.
“Why not cut spending instead?”
“Why not raise taxes instead?”
“Why not get a federal bailout instead?”
“Why not stiff the creditors instead?”
Joey:
There is no hope unless we tell the illegals to go home, and stop paying to care for them.
And to stop making their anchor kids American citizens. Only if you are here legally will your new born kid be an American
Its only Fair to the rest of us.
aNYCdj,
+1,000,000 on the illegals.
The rules were made when nobody was here “legally”.
My family has had nothing but trouble with immigrants ever since we came to this country.
Quote of the year, still laughing. Thanks Sammy.
Re-channeling Pogo:
“We have met the immigrants, and they are us.”
“My family has had nothing but trouble with immigrants ever since we came to this country”
Crazy Horse, Little Bighorn River, June 25, 1876.
(Ben’s HBB, morning coffee clutch rant archives)
Personally, I think that illegal aliens are not as big a contribution to Sacramento’s fiscal woes as they’re often made out to be.
While not arguing their status as an entitlement drain, most are at least contributing something to the local economy, not only directly but also to the tax rolls by increasing the profit/wage ratio of the companies that hire them (providing their employers are not tax dodging robber barons-ha!). Their $10 billion annual cost is balanced at least somewhat by this, but I can’t find any numbers online. Maybe it hasn’t been studied.
In any case, California did not fail because of illegals. Texas has just as big a problem with them but they didn’t turn it into a failing state. I think the more deserving scapegoats are the incumbents sitting in the Sacramento legislature and Congress.
“…most are at least contributing something to the local economy, not only directly but also to the tax rolls by increasing the profit/wage ratio of the companies that hire them…”
Nice angle. I have occasionally joked (I think!) that the San Diego economy would fail if it were not for the illegal alien dark matter that buoys its labor force.
One of CA’s biggest problems is our prison system. Per the Governator: “Thirty years ago, 10% of the general fund went to higher education and 3% to prisons,” he said. “Today almost 11% goes to prisons and only 7.5% goes to higher education.”
Here’s an idea: Take every “sanctuary city,” and come up with a back-of-the-envelope calculation of how much their facilitation of illegal immigration has cost state and U.S. taxpayers. Then seize the assets of the pro-sanctuary politicians and their backers and auction them off to reimburse the taxpayers who get stuck with the tab for such foolishness.
As I have recently suggested, I foresee two alternative futures for California:
1) After the election of a D-ratic governor, the feds acknowledge California is TBTF and send in helicopters loaded with cargo drops of stimulative liquidity;
2) OBWan tells CA to “Drop Dead” and CA responds by going Icelandic.
Am I being too extreme here?
Could you imagine a helicopter loaded with cash flying over los angeles?There would be the nastiest brawls you have even seen.It would make walmart crowds on black friday look like childs play.Then the govt would get sued when someone got hurt trying to get the cash.
I would love to see the aftermath of helicopter drops of cash literally dropped on LA (but only though the safety filter of my evening news broadcast, of course…).
It’s not too extreme at all, and I think both scenarios are likely to occur in tandem…but it doesn’t have to necessarily happen on a Dem governor’s watch.
Congressional intervention is limited by the Commerce Clause, and a threat to companies that potentially impedes interstate commerce (or Indian tribes) will be their legal excuse to put them into conservatorship.
Contracts between Sacramento and its own employees and contractors, however, may be defaulted on and the Feds are not obligated to get involved. Hopefully the latter will occur before the former, but the entitlement crowd will of course want the opposite.
Look for the unions and pension funds to militate against “out of state interests” as the noose tightens.
Get ready for Icelandic mail-order brides.
Now that is a pleasant thought…
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LOL! As a prophet I guess I’m behind the power curve. OK, get ready for mail-order California brides. That’s a least a week away.
Well consider this….use Civil War precidence and hold California to be a state in actual rebellion.
The Federal Government suspends the California Constitution. All property owners are assessed property taxes of about 1% of present market value.
That would be great, as many would summarily walk away from California property ownership and leave for other states. Free-flowing thoroughfares and greatly improved housing affordability would await those who stuck around and purchased homes whose prices were deeply discounted to reflect the 1% federal tax assessment.
“Faced with a projected state deficit of $20 billion, Gov. Arnold Schwarzenegger unveiled Friday a proposed budget that calls for severe cuts to… state employee salaries and threatens even deeper cuts if the federal government doesn’t pony up…”
Schwarzenegger: “Pay up or I will cut my own salary”
IIRC Arnold has always refused to accept his salary as Governor. It’s a matter of principle to him since he’s already filthy rich and wouldn’t need it.
As a warmup to the Congressional inquisition, Bernanke is already standing trial in the Court of Public Opinion.
* The Wall Street Journal
* OPINION
* JANUARY 8, 2010, 11:12 P.M. ET
Chairman Bernanke’s Monetary Apologia
Discounting the role Fed policy played in the crisis won’t help avert the next one.
By JUDY SHELTON
This past Sunday, at the American Economic Association’s annual meeting in Atlanta, Ga., Federal Reserve Chairman Ben Bernanke offered up a lengthy, professorial defense of U.S. monetary policy over the last decade, focusing on its role in the financial crisis that has gripped the world economy.
It doesn’t quite rise to the level of Homeland Security Secretary Janet Napolitano’s claim after a barely foiled attempt to blow up a U.S.-bound airliner on Christmas Day that “the system worked really smoothly.” But Mr. Bernanke’s calm observation that “monetary policy from 2002 to 2006 appears to have been reasonably consistent with the Federal Reserve’s mandated goals of maximum sustainable employment and price stability” is nevertheless disturbing.
If the integrity of the dollar is not the Fed’s primary concern, or if its notion of “price stability” is restricted to some narrow core inflation index that does not include escalating costs for food and energy, let alone runaway prices for financial market assets and commodities, then the Fed is woefully inadequate to the task of safeguarding the value of our nation’s money.
Mr. Bernanke is not oblivious to criticism of the Fed’s role in the crisis. His assertion that “regulatory and supervisory policies, rather than monetary policies, would have been more effective means of addressing the run-up in house prices” hints at a possible scapegoat for the housing bubble that presaged financial calamity.
Yet nowhere in his 34-page apologia does the Fed chairman fault Congress for inflicting Fannie Mae and Freddie Mac on the home mortgage industry; nowhere does he attempt to analyze the damaging influence of government intervention in the private sector, or its distorting impact on market assessments of risk-and-return tradeoffs.
Instead of trying to shift blame away from the easy-money policies of the Fed that accommodated such ill-considered government intrusion into the mortgage-lending business—spawning a treacherous boom in exotic derivative instruments structured against seemingly endless supplies of securitized U.S. debt—Mr. Bernanke should strive to better explain why the Fed ignored troubling indications of a growing bubble.
…
Weekend at Bernie’s. This doze not only missed the bubble, but denied there was even a problem until Bear Stearns failed.
He’s trying to shock and awe everyone with his knowledge of economic theory, without owning up to the fact that the theories he used were wrong and he ignored mounting evidence of that.
I hope Bernie Sanders, Jim Bunning and allies can derail this guy and send him back to Princeton.
He’s trying to shock and awe everyone with his knowledge of economic theory, without owning up to the fact that the theories he used were wrong and he ignored mounting evidence of that.
You give them too much credit.
Instead of an economic theory what BB presents is a well connived cover story for theft and consolidation of political and economic power.
Instead of an economic theory what BB presents is a well connived cover story for theft and consolidation of political and economic power.
Sounds too conspiratorial. I don’t think Bubbles Bernanke is smart enough for that. Holding rates down too low for too long was the political path of least resistance since Wall Street’s resulting profits were greasing palms on both sides of the aisle.
The Fed wants to be free of politics, but politics should be free of the Fed. I think things would have turned out differently if Greenspan hadn’t achieved rock star status by facilitating a 25 year long bubble, allowing him to conflate ideology and ego with his responsibility as a public servant.
Perhaps Fed governors should have term limits. Sorry, I don’t think abolishing the Fed is realistic when other countries have central banks and our own voters include economic prosperity as a measure of a given politician’s effectiveness. Abolishing the Fed would undermine our economic security to external threats…even if the current Fed was completely oblivious to threats from within.
“Abolishing the Fed would undermine our economic security to external threats…even if the current Fed was completely oblivious to threats from within.”
You bring to mind my biggest question for the ‘End the Fed’ camp members (e.g. Ron Paul):
WHAT THEN?
But I would be interested to hear more on this point. Are you suggesting that it is generally necessary to have a central bank in order to remain an economic superpower, or that it is particularly necessary for the central bank known as the Federal Reserve to remain in power for Uncle Sam to maintain security against external threats? In the latter case, please explain further, as the USA has been around since 1776, while the Fed has only existed since 1913 (incorporated nearly coincidental with the onset of half a century’s worth of global war).
I am generally pretty weak on the linkages between central banking and military security; any enlightenment by those who understand this would be welcome.
…please explain further…
For the sake of brevity, I’ll use one possible example (though I could think of several very different ones, actually).
In our vignette, let’s say that China, the biggest holder of US treasuries, has a strong central bank, and the US doesn’t. The US experiences some sort of small economic shock, devaluing the dollar. They could destabilize our currency by raising their own interest rates and get multinationals to gorge their coffers through the carry trade. The US couldn’t counter in a coordinated way without the Fed because individual banks would risk failure, with only the FDIC as backup and there would be no discount window.
This would cause rampant inflation and cause a spiraling run on the dollar. The US then goes Icelandic and defaults, and the US economy in particular goes t!ts up. China then says “you are not meeting your obligations” and even though both are broke, Beijing decides to use the default as an excuse to “repossess” their capital by seizing assets of US multinationals or, possibly even assets in satellite countries or even on US territory, depending on how weak they perceive the US to be. With the US economy in shambles and a 25% unemployment rate and our manufacturing base dismantled, we would be ill prepared to fund a war to defend our far flung territories.
I don’t think I need to go any further….do I?
Apparently, knowledge of economic theory and Great Depression history are decoupled from a clear perception of present economic reality.
“Apparently, knowledge of economic theory and Great Depression history are decoupled from a clear perception of present economic reality.”
Hey, we’re the taxpayers…we’re good for it.
“I’ll have one regular McMansion, 3 strawberry cappuccino’s and a side order of 54″ HDTV’s…to go please”
Walkaway from your mortgage– strategic default in NY TIMES
http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html
our Ben Jones is going to be a rock star soon.
Housingbunnleblog financial common sense is finally going mainstream!!!
Love it! Strategic default might override any buying incentive the gov’t is providing through tax credits. Which might force the market to affordability with more of a thud than this parachute ride we’re on.
Our Ben Jones is already a rock star. Although our HBB ladies are generally too demure to throw their undergarments at him.
Unless Ben has evidence to the contrary….
Maybe Oly left because she was out of underwear?
“Although our HBB ladies are generally too demure to throw their undergarments at him.”
I heard some stories about things that happened in Vegas, but I didn’t actually see any of them……
Please remind me again why people think chaining their lives to owning a home in California is a smart financial move? I forecast rising property taxes and falling government services for the foreseeable future, with moderate chances of state debt default, marijuana legalization, and increased offshore oil drilling.
Drill, baby, drill!!!
Not mentioned in the article posted below (unless I am missing it): Proposed new $10K home buyer tax credit.
State budget calls for big cuts
Declining tax revenue leaves $19.9 billion gap
By Michael Gardner, U-T SACRAMENTO BUREAU
John Marelius, UNION-TRIBUNE STAFF WRITER
Saturday, January 9, 2010 at 12:50 a.m.
Associated Press and Union-Tribune
SACRAMENTO — Gov. Arnold Schwarzenegger yesterday unveiled a $118.8 billion state spending plan that avoids general tax increases but proposes deep cuts in services for the neediest Californians, setting off an immediate battle with legislative Democrats.
After the recession left California with a $60 billion budget deficit in the past two years, declining tax revenue leaves the Republican governor’s proposed 2010-11 budget with a new hole of $19.9 billion. He proposes to fill that gap by cutting health, social-services and transportation programs, reducing the pay of state workers, rolling back recent corporate tax breaks and hitting up the federal government for money he claims is owed the state.
“For our economy, recovery is on the horizon,” Schwarzenegger said. “And I wish I could say this about our budget, but I can’t. Tough times still lie ahead.”
…
CALIFORNIA BUDGET: BY THE NUMBERS
$118.8 billion: Overall state spending proposed for 2010-11
$82.9 billion: General fund, $3.1 billion less than last year
$20 billion: How much bigger the general fund was three years ago
$19.9 billion: Deficit closed by the proposed budget
6: Years since the general fund has been this small
BUDGET HIGHLIGHTS
Gov. Arnold Schwarzenegger’s proposed budget, which requires approval by the Legislature, would close a $20 billion deficit until June 30, 2011. Key elements of his plan:
Health and human services: $2.9 billion reduction, including $950 million in cuts to the state’s in-home supportive services program for the disabled.
State employee compensation: $1.6 billion in savings achieved partly through a 5 percent across-the-board pay cut and a 5 percent increase in employees’ contribution to their pension funds. Additional 5 percent pay cut if federal funding to California falls short. The three-a-month furlough days would end.
Prisons: $1.2 billion in cuts, mostly through health care reductions and savings, and shifting nonviolent state inmates into county jails.
Education: Hold spending at $48 billion for K-12 schools, community colleges and the four-year university systems. School funding could be reduced, through a complicated tax swap involving gasoline sales tax and the excise tax. The University of California and California State University systems would get a $225 million increase.
Transit cuts: A potential reduction of hundreds of millions of dollars in tax money to transportation programs as a result of a plan to eliminate the sales tax on fuel (about 16 cents per gallon) and increase the per-gallon excise tax on gasoline by 10.8 cents.
Offshore drilling: Fund state parks by allowing more oil drilling off the Santa Barbara coast. The administration said the drilling would generate $1.8 billion in royalties for the state over the next 14 years. If the plan fails, the state parks budget would be funded through the general fund.
Catching speeders: Install radar-equipped cameras at city and county intersections. The administration says the speeding tickets generated by the technology would raise about $300 million a year for government operations, including courthouse security.
Federal money: Seek $6.9 billion more in federal money Schwarzenegger says the state is owed. If the money does not come though, the governor proposes billions more in cuts, mostly to health and social-services programs.
Jobs: $500 million to train 140,000 workers and create 100,000 jobs.
I dont know about you guys but these cameras on every corner are starting to really piss me off.It is all about revenue but they claim it is for safety as usual.
It seems sneaky and intrusive, no? Our tax dollars pay for the installation of remote sensing equipment to be used against us to collect — more tax dollars?
Actually, the cameras are free to install, and expenses related to the management are paid for by the company that makes them…all in exchange for a percentage of the ticket revenue. Free money for local governments, and a brilliant business model in tough economic times. Expect to see more of them.
Corporations run the MSM
Corporations run the hospitals
Corporations run the prisons
Corporations run the food supply
Corporations run the Military Equipment supply
Corporations run the Banks
Corporations run the Entertainment Industries
Corporations run the high schools
Corporations run the elementary schools
Corporations run the day-care centers
(Hwy quietly smiles, pondering the sunrise & global necessities of reproduction.)
“Actually, the cameras are free to install, and expenses related to the management are paid for by the company that makes them…all in exchange for a percentage of the ticket revenue.”
Backloading the costs does not equate to offering a service for free — any more than a 2005 interest-only liar loan with super-low initial teaser rate was ‘affordable’…
Corporations run the internet
Corporations build the computers from which we post here
It’s turtles all the way down!
Corporations run the internet
Corporations build the computers from which we post here
People build computers and networks. Corporations and governments are just parasites.
i noticed something funny the other day..
the story goes that it’s Sunday morning about 5am. I’m sitting at a red light. A car is behind me. The signal is malfunctioning, going green-yellow-red for cross traffic (which doesn’t exist) but not for us.
I finally say screw it and cross the red. The guy behind me hesitates a few seconds but then follows..
OK.. well.. it then dawns on me that it’s a freakin camera controlled intersection. The fine is something like $270 according to the warning signs..
I didn’t see the flash of a camera, but i figured I’d get a ticket in the mail.
Nope.. no ticket.
Next time I’m at that intersection i look at the cameras. They are all pointed at the sky or are way off kilter.. wtf? At other intersections, same thing. Cameras are either missing or pointed away.
I think there’s a law suit pending or a moratorium on these red light cameras around here, but nobody mentioned it..
In our small rural county with a very high percentage of tourist traffic passing through, the sheriff maintains an extra squad patrol car with a stuffed dummy that they move around from place to place, to make it look like they’ve got a speed trap going. Same idea?
It’s really funny when it snows and it’s obvious the car hasn’t been moved for days, but Sgt. Parker Bogus is still on the job…
i guess that’s the idea.. Why pay for functional cameras if dead ones accomplish the job..
Come to think of it, reluctance to paying for a working system in these tough times might be the reason the ones around here aren’t working.
they used dummy tanks way back in WW1 .. fake inflatables in WW2.. and i think the army has one “tank” that fits in a backpack now.
They were doing that here until some kids sprayed some pro-gay epithets on the squad cars.
The dead ones do the job, if the job is to enforce the desired behavior. Now on the other hand, if the job is to raise revenues, they don’t quite work so well.
You bring to mind another likely scenario. Those who regularly drive around San Diego may notice a very bizarre local form of vandalism: Green lights in stop lights typically have broken covers, as if somebody shot them out with a gun; whether this is done for fun or out of malice is beyond me.
If it is that easy to shoot the plastic out of so many green lights, what will stop the vandals from disabling the automatic cameras?
azdude,
I heard on the radio, that AZ govt isn’t getting the revenue they anticipated, and the cost of operating those cameras is becoming a ROI issue. Evidently, folks are stopping on time, and the effect has been safety, not revenue.You might want to do an internet search and see what’s up in AZ govt. ixquick doesn’t retain your search info, btw. Other states (even mine, Ca) are complaining about the same issue
“I dont know about you guys but these cameras on every corner are starting to really piss me off.It is all about revenue but they claim it is for safety as usual.”
Think of the children.
Mixed feelings about them. I love seeing a$$holes who run red lights getting automatic tickets. I could really get enthusiastic about a camera with a noise sensor that triggers automatic shotgun blasts at “Boy Racer” cars pumping the bass or rap at 2:00 a.m.
I got dinged with a $404 red light ticket last year, for not making a complete stop before making a right turn, and now I’m on high alert for these red light cameras which are popping up everywhere.
I am very paranoid about them. My driving habits are good, but imperfect, as I tend to instinctively make reasoned judgments rather than blindly adhere to the rule book. Case in point: I rolled into a crosswalk a few nights back at a red stoplight; there were no pedestrians in it, and moving up a bit further gave me a better vantage point for spotting speeding drivers from the left who might otherwise pose a crash hazard if I made a (legal) right turn on red. The instant I came to a complete stop, two cameras flashed.
If I get a ticket, I will learn for sure whether the remote camera successfully demonstrated that I broke the law by rolling into an empty cross walk before coming to a complete stop…
This is exactly the scenario that freaks me out, since like you, this is something I do instinctively for better visibility, and I have no idea what the threshold is for getting a ticket. I thought I had triggered the flashing cameras a couple months ago and didn’t get a ticket, so you may be in the clear. I much prefer, these days, to have a car in front of me when I need to make a right turn!
My kid blew through Colorado hitting the gate at 98 heading to Wisconsin.
Evidently he blew through the wrong lane somewhere, because a month or so later, he received a real nice photo of his car, license plate a bill for $82 pull a veiled Death Threat for a $2.00 toll. His ex-g/f had thankfully forwarded it to my address. God, imagine if that girl had hated him.
It didn’t phase that kid a nano-second. He whipped out his CC and cellphone, reached some girl in Colorado, spun her the biggest line of poor college kid BS I ever heard in my life. She bought it and agreed on a payment of $10 and it was over and done within 5 minutes.
Sure, these all these high-tech traffic and security camera’s bother and scare me…but not 1/2 as much as that durned kid does. We have the same name.
I’m still afraid of the Colorado Hwy Patrol car showing up on my doorstep with guns drawn looking for him…or me !
Who gets to pay for this new round of government stimulus payments to CA home builders? Is it intended as a ruse to attract federal stimulus dollars? If the state is funding this new program, wouldn’t it properly be termed “against” California taxpayers rather than “for” them?
Gov. backs $10,000 homebuyer tax credit
January 6th, 2010, 11:43 am
posted by Jeff Collins
Gov. Arnold Schwarzenegger proposed this morning the adoption of a new homebuyer tax credit for California taxpayers.
Unlike the previous tax credit, which was depleted eight months before the deadline, the latest proposal would apply to the purchase of existing as well as new homes.
While Congress extended the federal tax credit through next spring, the state tax credit was halted early after nearly 10,700 California homebuyers took advantage of it. The homebuilding and real estate industries have been clamoring for an extension of the state credit.
Schwarzenegger said in his final State of the State address in Sacramento this morning that his first priority for the coming year will be the state’s economy and “jobs, jobs, jobs.” He then outlined four proposals to boost the economy including:
“To stimulate other construction jobs, you will receive a proposal for homebuyer tax credits of up to $10,000 for the purchase of new or existing homes.”
In a press release issued as the governor began to speak, the executive’s press office said:
“To continue encouraging homeownership among Californians, the Governor will propose to extend and expand the $10,000 homebuyer tax credit to include the purchase of existing homes in addition to new residences for first-time homebuyers. The buyer must not be a dependent and must be purchasing a home that does not belong to a relative. Under the Governor’s proposal, the Franchise Tax Board will extend the credit to buyers who purchase homes until $200 million dollars in tax credits have been granted.”
Other details haven’t been released, such as whether there’s a deadline by which homes must be purchased.
…
i don’t get your reasoning..
A tax credit reduces taxes for someone who spends money on a certain thing. Those earned dollars, which would normally be mailed to Sacramento, instead are spent in the community, and (most) never make it to the government.
How is this a penalty to tax payers? Are you assuming that the government will raise taxes somewhere else so that it balances out the credit? If so, how or where will Calif raise taxes on the rest of us?
“How is this a penalty to tax payers?”
I have to assume that at most a minuscule fraction of California taxpayers will potentially purchase a home over the period this new $10,000 homebuyer credit is in effect. This vanishingly small fraction of taxpayers will be helped at the expense of a penalty on the vast majority who will pick up the tab.
Did any one watch PBS and catch the Bill Moyer’s show. I would advise every one to go watch it on the PBS web site. Bill interviews David Corn and Kevin Drum about the influence of the financial system on the government. I found the segment about “Intellectual Capture” revealed a critical element of how this all happened. In effect the DNA of democracy has been infected by the HIV virus of corporatism.
My personal diagnosis is the disease is terminal and the patient, that is the government, is doomed.
pbs.org/moyers/journal/01082010/profile.html
I’d say the real problem is the “duh” of democracy. Yahoos tend to vote in bigger yahoos - I give you exhibit A, the past three Presidential elections. Imagine if voters had to take and pass the same test that they give to new citizens. Or better yet, had to pay more into the system in taxes than they take out in benefits. Buh-bye, greedy AARPsters.
“Imagine if voters had to take and pass the same test that they give to new citizens.”
I would be in favor of voters having to demonstrate a basic understanding of our system of government in order to earn the vote.
Would that be the way our government is SUPPOSED to work, back when we had an actual Constitutional Republic, or the way it actually DOES work, i.e. bought and paid for by corporate cartels and special interest groups? Just wondering.
“…In effect the DNA of democracy has been infected by the HIV virus of corporatism.”
See my silly post up above…and this more specific to “types” of disease that is in desperate need of some serious “Vector Control”!
The Importance of the “$100,000+” Vector Control:
“$100,000+” Vector Control in today’s world is extremely important. As the impacts of disease and virus are devastating, the need to control the vectors in which they are carried is prioritized. Because of the high movement of the population, disease spread is also a greater issue in these areas.”
Can’t say when, if ever, their defunct industry will ever come back, but the hope builders certainly have enviable skills in the area of using lobbyists to tap up the feds for handouts!
Handsome government handout for homebuilders
By Colin Barr, senior writerJanuary 7, 2010: 1:00 PM ET
NEW YORK (Fortune) — Talk about cash for clunkers.
Lennar (LEN), the Miami-based homebuilder that has been gushing red ink since its misguided bets on house prices went bad three years ago, on Thursday posted its first quarterly profit since 2007 — thanks to a handout from Congress.
The company earned $36 million for the fourth quarter ended in November. In a Thursday morning press release, CEO Stuart Miller pointed to a rare increase in new home orders and reduced spending on giveaways to customers. Lennar shares rose 8% to their highest level since October.
But don’t congratulate Miller. The entire profit — and then some — came straight from taxpayers’ pockets.
The real driver of Lennar’s rebound, as the company acknowledged Thursday, was a $353 million tax gain that stems from a bit of congressional largesse in November.
What’s more, dozens of zombie homebuilders and other serial money-losers will stake similar claims in coming months, in a cash scramble that could cost the government more than $50 billion.
The gift came in a piece of legislation that was billed as expanding unemployment benefits by 20 weeks and extending the homebuyer tax credit into the middle of this year.
But thanks to months of lobbying by the homebuilders, the measure also gave companies the right to apply losses incurred in 2008 and 2009 to income earned in any five years through 2007. Previously, losses could be counted against profits over just two previous years.
…
What’s more, dozens of zombie homebuilders and other serial money-losers will stake similar claims in coming months, in a cash scramble that could cost the government more than $50 billion.
The real zombies are the voters who keep returning to office the corrupt Republicrat politicos who orchestrate such bailouts.
“Previously, losses could be counted against profits over just two previous years.”
And strangely enough, but normal non-corporate taxpayers can’t carry back losses against previous profits AT ALL. I would love to be able to carry some of my losses in 2009 back to 2008, when I had a bumper year of invetsment profits, and paid a good chunk of change on them. Can I get any of that back? Nope—I can only carry my losses forward.
You can make an arguement for saving large banks, not that I agree with it but you can make a reasoned arguement. There is absolutely no reason to save large home builders. If the market rebounds and we need new homes there is an army of people who can do the job.
This is a perfect example of the HIV infection of our gov.
BEIJING – A U.S. solar power company said Saturday it will help build a series of solar thermal power plants in China, as the world’s biggest emitter of greenhouse gases tries to decrease its heavy reliance on coal, imported gas and oil.
California-based eSolar Inc. will provide Shandong Penglai Electric Power Equipment Manufacturing Co. with the technology and information to build the concentrated solar thermal power farms with a capacity totaling 2,000 megawatts.
The $5 billion investment would be the largest such project in China, though the companies didn’t say who would be investing how much.
“This is a huge jump for China,” said Deborah Seligsohn, director of the China climate program for the U.S-based World Resources Institute. “That amount suggests a number of commercial plants.”
Interest in China as a solar energy market is growing quickly as the government looks for alternatives to coal. Saturday’s deal comes four months after the largest solar panel maker in the U.S., First Solar, struck a tentative deal to build a massive solar field in China.
The eSolar deal is for concentrated solar thermal power — not the traditional image of vast farms of solar panels, but a system of taking what essentially are mirrors and focusing them to heat water to create steam to power a generator.
“There’s room in the world for both systems, and we need both,” Seligsohn said.
China is moving much faster than the U.S. in solar power development, eSolar officials said.
Seems like some jobs could be created building and running these plants in the US.
700 billion to bail out wallstreet should have been funneled into solar, wind, nuclear, distributive power, and high speed rail and public transport. It could have been used to rebuild far more infrastructure, We could have improved high speed internet access, All things that would stimulate the economy, make the economy more efficient, and give the american tax payer a tangible benefit when all is said and done. Instead money has been spilled down a black hole to prop up bankers profits.
We’re providing technology and information. That’s a few jobs. China gets to manufacture and install the solar sytems. That’s thousands of jobs. And after China builds these systems, they will have our technology and information so they don’t need to hire us again. Seems like a good deal–for China,
I sense a “Trend”
You like solar.. but don’t like bailing out “Wall Street”?
“First Solar”, referred to in that article, is a publicly traded company. Their stock was worth about $330 a share before the crash last March or so.
It dropped like a rock. If allowed another few weeks or so of free fall and that company would have gone bankrupt (along with thousands of others)… guaranteed..
your “Wall Street bailout” prevented that from happening.
I have a hard time understanding how falling stock price would bankrupt a company.
Chinese manufacturers intended to make a killing on US government subsidized solar installations. US companies intended to make a killing on Chinese government subsidized solar installations. The Chinese are pumping more than the US is.
The whole game is a huge and inefficient pull forward of energy demand, postponing a much needed era of efficiency and conservation. People are smart.
“I have a hard time understanding how falling stock price would bankrupt a company.”
+1zillion.
joey, you have some serious explaining to do here. A stock price can go to one penny, and it does not make the company go bankrupt. Only not having the cash-flow to meet their obligations can make them go BK.
Now a low stock price can make it hard to raise NEW capital, but a company funding growth via cash-flow does not need to raise new capital.
yeah, you’re right.. i misspoke about the bankruptcy and can’t defend that… but it’s such a minor thing compared to the point of my post.. that the evil Wall Street bailout scheme pulled some green bio enviro solar wetdream company’s ass out of the fire.
If you were a company trying to issue new shares to raise cash, would you rather sell them for $100 a share or for $0.01 a share?
well.. i guess you’re right. When a company’s book value is less than their debt, are they then bankrupt? Not really.. bankruptcy is a legal term.
If the stock price (book value.. aka shareholders’ equity) is zero and debt is greater than zero.. the debt to equity ratio is.. infinite?
So they are insolvent.. but I suppose they could just sit there forever.. waiting for some judge to say “Yeah.. they’re insolvent.”
———
IMO all this solar stuff is still experimental and will remain so for decades.
The USA has about half a dozen thermal solar plants in operation.. and another 30 officially announced new installations yet to be built. I don’t know what China has. But I feel good about guessing that none of them makes any money.
Joey
What happens if we build a bunch of these plants using today’s dollars and compare the total operating costs as the us dollar buys less and less coal over the next decade or two. If you really believe in hyperinflation this is the best investment in the world.
That’s why it only makes sense as a pull forward. Pencils out only if the price of fuel extrapolates to infinity. Just like the alt energy stuff in 1980. Exactly.
Here’s an article about agents being sued after a real estate firm in Saint John NB went bust last year.
http://www.cbc.ca/canada/new-brunswick/story/2010/01/08/nb-mawhinney-agents-sued.html
Apparently the agents co-signed loans that gave them an advance on their commissions that they would normally get when the sale closed. Thye would get this advance when the sale was agreed to. But when Mawhinney went out of business, they hadn’t received these commissions although the loan company says they gave the money to Mawhinney, but because they co-signed they are being sued.
Empty apartments at 30 year high:
http://lansner.freedomblogging.com/2010/01/08/really-empty-apartment-at-30-year-high/51117/
Would now be a good time to buy the dip?
Jan 8, 6:42 PM EST
Main Street to Wall Street: We don’t buy the rally
By BERNARD CONDON
AP Business Writer
NEW YORK (AP) — Edward Shook can’t resist a bull market.
He rode the one in the late 1990s and lost $350,000 in the dot-com collapse. Shaken but optimistic, he bought into the bull market that followed - and lost another $350,000 from his portfolio’s peak when stocks fell to a 12-year low in early 2009.
Now the 65-year-old roofing contractor from Raleigh, N.C., says “he’s getting smart for a change.” Even though the Standard & Poor’s 500 has climbed 68 percent since March, Shook is largely leaving the stock market “to the crooks that run” it. He’s sold shares and bought bonds instead, with no regrets.
Millions of other Americans are steering the same course. After being key players in bull runs of the past, small-time investors have not only stopped buying, they’re selling. The question for the new year: If the man on the street doesn’t jump back in, will stocks continue to defy gravity?
So far, the market’s comeback is almost entirely due to buying by professional investors at hedge funds, pension funds, banks and other institutions.
“We’ve never seen this before - such a huge rally, and the little guy is out,” says Vincent Deluard, a strategist for TrimTabs Investment Research, a Sausalito, Calif., firm that tracks mutual fund flows to get a sense of what individual investors are doing.
Mutual funds are a good proxy for such investors because more than three-quarters of fund assets are held by individuals, both directly and through retirement plans.
Small investors yanked a net $14 billion from stock mutual funds from the beginning of last year through mid-December. That’s on top of a net $245 billion withdrawn in 2008, according to TrimTabs.
The firm says most of $592 billion taken out of money market mutual funds last year has gone into bond and bond-hybrid funds instead.
…
The 65 year old should have been mostly out of stocks after he turned 60.
Ouch! But I think the S&P 500 will return at least 10% this year and gold will gain at least 30% this year.
Converted all but one of my traditional IRAs to Roth IRAs. I’m working on the last conversion. It’s a great feeling because I will be able to spend the latter part of my life in California without paying income taxes on the distributions of my Roths. I hope to not start withdrawing from them until I’m 80. I’ll start to withdraw from my 401ks and traditional IRAs sometime in my late 60s.
Bill –
I want to apologize for the hard time I used to give you for your DCA investing advice. In all honesty, I tend to follow this approach myself — especially at times like the present when the resolution of countervailing market fundamentals and opposing governmental interventions to ’stabilize’ asset prices is very difficult to predict. I have been buying stocks on a DCA basis since mid-2008, in anticipation of a once-in-a-lifetime opportunity to buy some really big dips.
I did a Roth IRA conversion a few years back. We just pulled out a nice tidy lump sum (tax free, as this was part of the initial after-tax rollover basis) to pay off all of our Christmas credit card bills before Megabank, Inc saw a penny’s worth of interest payments from us.
Them that understands interest, gets it. Them that don’t understand interest, pays it.
Well thank you! I don’t remember you giving me any flak about DCA though!
The December jobs report makes 0 interest rates this entire year very likely, which also means the continued trend in equities and precious metals.
Note platinum has been doing very well relative to gold. Above $1600 per ounce! Commodities are back. In energy, BBEP looks like an even better value than EVEP.
I’ve been looking at price vs. 50 day MA and 200 day MA on my stocks and the charts look even better lately, meaning more upward movement is likely.
“I don’t remember you giving me any flak about DCA though!”
It has been a while. At any rate, I meant no offense — was just playing my usual onerous old devil’s advocate role…
You guys are so wrong about the bond market. I went short the long bond in December. I wanted to go 50% short @ 3.50% but it just keeps going up. I might point out the the 10 and 30 year bonds actually went up a little bit on Friday when the bad employment numbers came out. If you were to pull up a 1-min. chart of the GLD index you can see what I mean. Before the jobs numbers were released gold was down $9-$11 dollars but within seconds gold shot up nearly $20 to end the day up $5+ buck. If one of gold’s primary functions is to compensate for inflation then I would say that gold’s price action is telling us that the loss of jobs in December will cause the Govt. to pump more dollars into the system and that devalues the greenback. If you want to think like a black swan you might want to focus on the historic bubble in Govt. debt. It’s the one thing that has been drilled into the public’s mind for 75+ years and is a prime example of “Intellectual Capture”, that is: the ability of the elite to convince the common man that what good for Wall St. is good for Main St.
The very fact that everyone thinks that’s the safest place to put money is the very reason I would NOT put money in long term Govt. debt.
People tend to forget that our FED is the proxy for all countries that fix their value to the dollar. In effect our Ben Bernanke is setting their short term money rates every time he adjust our discount rate. We are near the point where these other Govt. are going to break with our FED and raise their short term rates or drop the dollar peg because they are tired of importing our inflation.
I’m not putting money into long term federal government debt. I do agree with you about the scent that gold is sniffing. Smells like more government stimulus and low interest rates.
Makes me wonder if we are in an economic depression now. Gold seems to do well whether high unemployment or high monetary inflation in a price deflation environment.
I thought I posted my prediction that equities (stocks) will continue to do well in this economic environment of government stimuli.
Watch out for the late summer. if it looks like we will have gridlock in the 2011 congress, the spending spree is going to stop, maybe reverse. And gold will plummet.
What’s up with these strange looking models in the LowerMyBills.com ads?
They’re all ex-realtors. They work cheap, you know.
It certainly appears they are cherry-picking for weirdness.
As Hunter S. Thompson used to say, when the going gets weird, the weird turn pro.
I noticed them too, a cross between che guevara, frank zappa and charles manson. That look has been out of fashion for 40 years now?
LOL. Sounds like your typical Democratic Party activist.
One of Ben’s ads reminds me of a blog topic we have not covered recently:
Bressi Ranch Home Search
Free List of Hot New Listings With Pictures and Addresses
sandiegocountyhomeinfo.us
Stocks up 2% to start the first week of 2010. Hey, that’s more than most checking accounts pay in a whole year.
Still claiming that rental prices are up, considering the exact opposite of what you claimed was one of the biggest economic news stories this past week? You really made yourself out to be a fool on that one for everyone to see, dude.
I am puzzled over in what technical sense it would be a “conspiracy” if the Fed and/or Treasury were “revealed” to have deliberately inflated U.S. asset prices. After all, the Fed has been quite open about its MBS and long-term Treasury bond purchases; obviously these programs have the effect of inflating asset prices. Stock prices also go up when interest rates are artificially suppressed. How could an openly-announced program possibly be conspiratorial?
And what if the Fed did not directly prop up stock prices, but made it easy for Megabank, Inc to do so, say through offering them zero-interest rate loans to the tune of hundreds of billions of dollars. Would that be considered “conspiratorial”?
Jan. 5, 2010, 5:47 p.m. EST
TrimTabs suggests government manipulated stocks
Analysts say government’s financial rescues have fueled conspiracy theories
By Nick Godt, MarketWatch
NEW YORK (MarketWatch) — The unusual circumstances that led the U.S. market to rally powerfully in 2009 might be explained by secret government moves to buy stocks, according to Charles Biderman, the founder and chief executive of TrimTabs, a research firm that tracks liquidity flows in the market.
“We cannot identify the source of the new money that pushed stock prices up so far so fast,” Biderman said in a statement Tuesday.
Are foreign stocks the way to go in 2010?
Jonathan Auerbach, managing director of Auerbach Grayson, discusses the performance of foreign stocks in 2009 and their outlook for 2010. He talks with Kelsey Hubbard about which overseas funds are a good bet for investors.
The source of approximately $600 billion net new cash necessary to lift the market’s overall capitalization by $6 trillion last year could not be identified by TrimTabs, Biderman said. The money, he said, didn’t come from traditional players such as companies, retail investors, foreign investors, hedge funds or pension funds.
“We know that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers. Why not support the stock market as well?”
The Federal Reserve or the Treasury, Biderman said, could have easily manipulated the stock market by purchasing $60 to $70 billion worth of futures of the S&P 500 Index on a monthly basis.
…
Just checked themls dot com and my prediction for 2009 just came true a week late.
First condo in downtown Los Angeles under $100,000 is listed for $99,000.
With more projects at or near completion. This has a good chance of becoming a trend.
This doesn’t look like an unbearable place to live. Wonder how oppressive the HOA is. Parking downtown sucks ass, though.
Unintended Consequences of Fed Manipulation
post Dec 31 2009, 12:41 AM
I’ve been watching the reaction to Christmas eve uncapping of funds available to the GSE’s. An issue which may sound removed, but is part of the same distortion of the market is the Fed’s support of market prices or caps on those prices. A law suit was filed today by GATA (see a post below). They are demanding that the Federal Reserve reveal the extent of its intervention in the gold market, including its agreements with other governments to limit prices. In response to previous requests, Fed governors tacitly admitted that funds had been used to intervene in the markets.
There are two sorts of problems with this.
1) It is tax payer money that is being used to manipulate commodity and possibly stock prices. Congress has not authorized public funds to be used for this purpose.
2) more importantly, hidden government intervention in any market means that true price discovery is not possible and therefore it is no longer possible to make rational decisions for the allocation of private capital.
…
@ CA renter. update you requested.. on the OC re. My gf is re in the OC and she mentioned Monday she had gotten a lot of residential REO from the banks.. so here is a tiny update.
“What is the deal on REO properties? Lots of them? More than usual? ”
About 3-5 years worth of inventory to move….we haven’t even scratched the surface.
“Are the prices going up or down?”
Up…the banks are limiting distribution of these properties, creating supply and demand…thus driving up prices.
“What areas are the ones getting more ? ”
I only sell in the IE and OC…both are doing very well.
“About 3-5 years worth of inventory to move….we haven’t even scratched the surface.”
Awesome! How much longer will the lying banksters be able to keep this elephant under the rug from stinking up the living room?
right. I don’t think banks have the discipline, strategic abilities, communication with other banks and so on to maintain an orderly and measured release of properties long term.
UNLESS there is collusion from above to circumvent market forces… more good fodder here for Fed auditors. I am not accusing the Fed of involvement, but given their bank regulatory role, one would expect them to be aware of whether banks were engaging in widespread collusion to support anti-competitive price fixing.
One of the things that the government is still deathly afraid of is that a very large state based Regional Bank and Thrift or a Regional Bank they thought was safe suddenly goes off the radar and toes up now. They’re not in some way away strange land called Wall Street, out of sight and mind and protected from Doomsday by the taxpayers and some vague promises of eventuall repayments. Regional Banks and Regional Banks and Thrifts with their many branches are close and up-front…in j6p’s face and within his reach.
Sure, some of the large Regional Banks as well as the Wall St
Street biggies have received TARP bailout monies. Some would have DIED if they hadn’t gotten it. Some in-state based Regional Banks and their Holding Companies are thought of as too big to fail. They are deeply intertwined with the biggies, smaller banks, the states themselves as well as j6p on the street. They are still very big money and they tried to dabble in selective other states like AZ,CA and Fl. like the Wall Street Boyz. You don’t hide the immediate local obligations and demands on these banks from j6p and family on some backroom “bad bank” self off in a lonely hanger in Area 51.
The problem with any headlines playing the song “The Largest Bank in the State of AZCAFL Fails” or even the 2nd largest bank in any state, is it’s a brick and mortor Wonderful Life Panic scene in real life. It’s in YOUR State. Unlike the wonderful and Magic Wall Street Banks where they and the Gov’t can virtually print money, swap billions immediately in 1’s n’ 0’s, shuffle papers and issue BS promises to other Idiots, joe & jill six pack will want their CASH and they’ll want it Now.
It’s a Matter of Confidence and Perception …at a state and the Main Street levels. If the grocery stores, gas stations and Pet Mart suddenly demand cash on the barrel, j6p and family will be heading hell bent for it’s local source.
Katey better bar the doors and bar the Press if it isn’t there.
The tellers better be into dealing dollars and the ATM’s farting out 20’s fast aS THEY CAN. If they’re not, there better be a column armored cars with CASH coming into the parking lots while dodging the helicopters drops. Either that or an armored column of tanks with light infantry.
The cops won’t be enough and don’t have the guts to put DOWN these types of riots if they ever start. Even George Bush was terrified by the idea street level Regional bank runs in the country and questioned the wisdom of not having a stateside divison on stand-by available for such an event .
Can’t happen here you say. Is everybody so young that they don’t remember US cities burning in the night skies on TV…for less reasons than the personal pain of hunger?
We’ll be Riding Wildfire. Forget the city race riots and fires of the 60’s and 70’s because homeless or hungry roving mobs don’t much care what color you are or what badge or Army patch you’re totten if you’re between them and food for themselves and their own kids.
Of course, NAR, Wall Street and Timmy could meet in Conference Room # 7 of the Executive Mansion’ basement tonight with a flashlight, a box of Crayolas, a map of all the bank debts, bad loans and foreclosures. They could roll the prices of houses back to 2007 with a well planned invasion by well-healed Canadian Snowbirds from the north and some new strawberry pickers from the south.
You could have your tiny flags ready but it’s too late as the NAR lobbyists are already humming Deguellea.
Sleep well tonight…your Government is awake…and probably plotting against you !
“…the banks are limiting distribution of these properties, creating supply and demand…”
Creating supply and demand? I am having a hard time getting my brain around that one…
My legal questions remain unanswered:
1) Do banks act individually to withhold supply from the market, or is there coordinated collusion?
2) Are banks legally allowed to indefinitely hold REO off the market, even if they do it unilaterally?
3) Why wouldn’t it be in a bank’s interest to get falling-knife inventory off its books sooner, rather than having to sell later on at a deeper loss?
De Beers has huge vaults overflowing with gem quality diamonds.. think it’s in their interest to release them and flood the market?
imo, the banks DO want to get the REOs off the books. The problem is that with every REO released and sold, they lose some money. That loss has been realized and has to be accounted for immediately.
If they don’t sell that REO, the loss is not on the books.
So, here’s what I think they’re doing. As soon as their profitable activities bring in enough money to cover the calculated, probable loss of selling some particular REO, that one property is released to the market for sale.
The sooner the banks can afford to take the losses, the sooner all those properties will hit the market.
“De Beers has huge vaults overflowing with gem quality diamonds.. think it’s in their interest to release them and flood the market?”
De Beers is not an American country. If it were, I have to assume it would be broken up, as its continued existence as a monopolist would violate the Sherman Antitrust Act.
countrycompanySorry — edit key is stuck…
“The sooner the banks can afford to take the losses, the sooner all those properties will hit the market.”
That is why the release is so…..slow….IMO. The Fed rules encourage this. Stretch it out. I’m not an accuntant, but my impression is that there used to be some Come to Jesus moments every year or someone was breaking the law.
http://realestate.yahoo.com/California/Encinitas/cambria-way:872b915d32357b873f4d524478f9719
Can anyone explain this public bank auction set for February? The market value, based on recent sales in this area is around $500K, though I’d expect with the number of recent foreclosures, it would be more like $450K. These homes have never sold for $700K even at the height of the bubble. WTF?
Wouldn’t it be great if a Congressional audit could once and forever clear up this lingering cloud of conspiratorial suspicion that perpetually envelops the Fed?
Stock Rally Owing to Plunge Protection Team Conspiracy?
Written by Bob Adelmann
Thursday, 07 January 2010 16:25
The 60 percent gain in stocks since March was largely caused by secret government purchases of stock-index futures, the CEO of TrimTabs claims.
The Plunge Protection Team (PPT), otherwise known as the Working Group on Financial Markets, has been the target of conspiracy theorists ever since an article in the Washington Post in 1997 first shed light on the operation. The Working Group was created by Executive Order following Black Monday’s market crash on October 19, 1987, when the stock market declined more than 20 percent in a single session. Its purpose was to give recommendations for legislative and private sector solutions for “enhancing the integrity, efficiency, orderliness, and competitiveness of financial markets and maintaining investor confidence.”
The Group is made up of the Secretary of the Treasury (Timothy Geithner), the chairman of the Federal Reserve Board (Ben Bernanke), the chairwoman of the Securities and Exchange Commission (Elizabeth Murphy), and the chairman of the Commodity Futures Trading Commission (Gary Gensler). Claims are made that this committee consists of an “orchestrated mechanism that attempts to manipulate U.S. stock markets in the event of a market crash by using government funds to buy stocks, or other instruments such as stock index futures — acts which are forbidden by law.”
Some of the attacks are dated and histrionic while others deny the existence of PPT altogether.
The recent massive rise in the stock market since March has raised serious issues by some highly credible observers.
Charles Biderman, founder and CEO of TrimTabs, a highly respected research firm that tracks money flows into and out of the markets, said on Tuesday, “We do not know the source of money that pushed [the market capitalization] up $6 trillion since Mid-March. We cannot identify the source of the new money that pushed stock prices up so far so fast. The money did not come from the traditional players:
- Corporate America has been a huge net seller [of stocks].
- Retail investor funds [stock mutual funds] have received just $17 billion since the start of April.
- [Individual] investor sentiment has been mostly neutral since the rally began. We have no evidence [that] retail investors were piling into individual stocks.
- Foreign investors have provided some buying power … but we suspect [these] purchases slowed in November and December.
- Hedge funds … posted an outflow of $12 billion from April through November. We doubt their buying power.
- Pension funds have not moved [substantially] into U.S. equities since the rally began.
Where did the money come from to push up stock prices? Biderman says, “We do not know where all the money has come from. What we do know is that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers. Why not support the stock market as well?”
…
A friend just tried to get me to sit in on a “Go To Webinar” conference call to hear about Donald Trump’s vitamin company. It sounded like a ponzi scheme and I told her that Donald Trump has already declared bankruptcy at least twice. She then advised that was because of the housing bubble and wasn’t his fault. In any event, I was wondering if anyone has any info I can go back with that may speak to this vitamin company or Trump in general. Thanks.
Are Multi-vitamins necessary?:
http://www.news-medical.net/news/2007/04/05/23190.aspx
I’ve never seen a healthy-looking person come out of a health food store.
I am increasingly convinced the leadership at the Fed and the Treasury deserve the opportunity to publicly dispel lingering rumors about possible deliberate use of the American people’s money to inflate the stock market. They owe it to themselves and to the American citizenry to permanently lay this persistent conspiracy theory to rest.
Is The U.S. Government Buying Stocks?
Contributed by Anonymous on Monday, January 04, 2010 11:30:26 AM
As I pointed out in December 2008, Nouriel Roubini wrote the month before that the government might buy U.S. stocks:
“The Fed (or Treasury) could even go as far as directly intervening in the stock market via direct purchases of equities as a way to boost falling equity prices. Some of such policy actions seem extreme but they were in the playbook that Governor Bernanke described in his 2002 speech on how to avoid deflation.”
Given that Roubini was previously a senior adviser to Tim Geithner, he probably knows what he’s talking about.
Now, Charles Biderman, CEO of TrimTabs, argues that the government may, in fact, have been buying stocks to prop up the stock market. Given that 25% of the top 50 hedge funds in the world use TrimTabs’ research for market timing, it is a credible source.
Specifically, Biderman writes:
‘As far as we know, it is not illegal for the Federal Reserve or the U.S. Treasury to buy S&P 500 futures. Moreover, several officials have suggested the government should support stock prices.’
For example, former Fed board member Robert Heller opined in the Wall Street Journal in 1989, “Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole.”
In a Financial Times article in 2002, an unidentified Fed official was quoted as acknowledging that policymakers had considered buying U.S. equities directly, not just futures. The official mentioned that the Fed could “theoretically buy anything to pump money into the system.”
In an article in the Daily Telegraph in 2006, former Clinton administration official George Stephanopoulos mentioned the existence of “an informal agreement among the major banks to come in and start to buy stock if there appears to be a problem.”
Mike Whitney - in commenting on Biderman’s essay - adds another juicy quote:
‘Consider the comments of former Clinton advisor George Stephanopoulos who verified the existence of the PPT in an appearance on Good Morning America on Sept 17, 2000. He said:
“What I wanted to talk about for a few minutes is the various efforts that are going on in public and behind the scenes by the Fed and other government officials to guard against a free-fall in the markets . . . perhaps the most important the Fed in 1989 created what is called the Plunge Protection Team, which is the Federal Reserve, big major banks, representatives of the New York Stock Exchange and the other exchanges and they have been meeting informally so far, and they have a kind of an informal agreement among major banks to come in and start to buy stock if there appears to be a problem. They have in the past acted more formally . . . I don’t know if you remember but in 1998, there was a crisis called the Long term Capital Crisis. It was a major currency trader and there was a global currency crisis. And they, with the guidance of the Fed, all of the banks got together when it started to collapse and propped up the currency markets. And, they have plans in place to consider that if the markets start to fall.”‘
Biderman continues:
‘This type of intervention could explain some of the unusual market action in recent months, with stock prices grinding higher on low volume even as companies sold huge amounts of new shares and retail investors stayed on the sidelines. For example, Tyler Durden of ZeroHedge has pointed out that virtually all of the market’s upside since mid-September has come from after-hours S&P 500 futures activity.
If we were involved in a scheme to manipulate the stock market, we would want to keep it in place until after the “wealth effect” put a floor under the economy of, say, three quarters of positive GDP growth. Assuming the economy were performing better, then ending the support for stock prices would be justified because a stock market decline would not be so painful.’
…
TrimTabs Asks: Who Is Responsible For The Non-Stop Market Rally Since March; Gives Some Suggestions
Submitted by Tyler Durden on 12/31/2009 10:28 -0500
…
We do not know where all the money has come from. What we do know is that the U.S. government has spent hundreds of billions of dollars to support the auto industry, the housing market, and the banks and brokers. Why not support the stock market as well?
…d
I’m wondering if there will be a significant amount of conversions of traditional IRAs to Roth IRAs this year that tax revenue could go up remarkably?
I think just my federal taxes on my IRA conversions will amount to over $50,000 spread out over 2011 and 2012.
I suppose you could be right. Its at the expense of future revenue, however. I also plan to convert my IRA. I thought the tax burden was spread over two years (which would be 2010 and 2011), not three as your post suggests.
No I did not mean to imply over three years. It’s spread over tax year 2010 and 2011, meaning you can pay half of the tax in 2011 and the other half in 2012.
BTW: You’ll be able to convert a traditional IRA to a Roth IRA any year from this point on regardless of income. This year is unique in that the tax on conversion can be spread out over two years. So this is a good opportunity to convert the large holdings you have.
That fetid brown muck ain’t quick sand…and those aren’t his ankles, they’re his ears…
Realty Q&A
Jan. 8, 2010, 12:01 a.m. EST
Flaky market
Foreclosure glut deflates even ‘cream puff’ sales
- Is it time to change home appraisal practices?
- Geithner ankle deep in AIG quicksand
By Lew Sichelman
WASHINGTON (MarketWatch) — Question: My question concerns the thousands of homes out there for sale that have no foreclosure hanging over them. Is there a premium perceived in their value due to the lack of a foreclosure or has their value been degraded along with the REO properties? Would these homes be of more value due to less hassle associated with the sale?
Answer: Generally speaking, the value of all properties is impacted by the large number of foreclosures because the market is saturated by homes for sale. With so many houses to choose from, sellers of all kinds, desperate or not, have to lower their prices to be get the attention of would-be buyers.
Gains in home sales have been driven by government stimulus, leading some to wonder if the nascent housing recovery needs federal assistance to sustain, Nick Timiraos reports.
That said, however, a pristine property should stand out above the rest. There are always going to be bargain hunters who opt for the lowest price and are willing to make whatever repairs are necessary as long as they get a “good deal.”
But there are just as many folks who don’t want that kind of hassle. The latter group should be willing to pay a premium for a cream-puff house, but not much of one. Just as rising prices float all boats, an ebb tide like the one we’re in right now scuttles everyone too.
The sad fact is people shop by price, so to be noticed at all you’ve got to be in the ballpark. That’s the only way to be “found.” Then, once you’ve been discovered in this sea of sinking ships, you should be off and running. You may not command a higher price, at least not much of one, but you should be able to sell your property sooner rather than later because it is in good shape and there are no time-consuming lender problems with which to deal. A quicker sale has to be worth something.
…
Realty Q&A
Dec. 30, 2009, 12:01 a.m. EST
The valuation question
Will short sales, foreclosures lead to a change in appraisal practices?
More mortgage-modification horror stories
By Lew Sichelman
WASHINGTON (MarketWatch) — Question: Devaluing an already devalued market by including short sales and foreclosures when appraising property has not helped the already volatile real-estate market. Do services like Zillow’s take the sales price of short sales and foreclosures into account when they assess a neighborhood? Do you foresee the appraisal standard changing in the near future to give less weight to the short sales and foreclosures that continue to hurt the value of other homes for sale? M.S.
…
Wouldn’t it be better to just walk away than to continue throwing away money on an unaffordable loan?
Realty Q&A
Dec. 23, 2009, 12:01 a.m. EST
Winning the trial, losing your house
Trying to prevent foreclosure while waiting for a permanent loan modification
By Lew Sichelman
WASHINGTON (MarketWatch) — Question: I have also made trial payments under the Making Home Affordable program. But my house truly was in foreclosure and I spoke with an attorney. Your advice in your column is wrong. They can foreclose, they will foreclose, and they are foreclosing on thousands of people who have made their trial payments every month! See previous Realty Q&A.
There is nothing written into this program that provides any penalty for lenders if they do not modify a loan. They very clearly state that you are not actually approved for the program, and stipulate that the magical approval (or denial) will happen at some unspecified future time.
My story is not unique. I was able to stop foreclosure (only days before the trustee sale) temporarily by filing a complaint with my state attorney general. However, I still have not received a permanent modification and my lender continues to claim paperwork that I have provided is missing.
The bottom line is that paying trial payments in anticipation of a modification does not guarantee anything and foreclosure is the most likely outcome.
…
“The bottom line is that paying trial payments in anticipation of a modification does not guarantee anything and foreclosure is the most like outcome.”
Trial payments:
1) Keep money flowing into the bank.
2) Keeps the homebuyer’s hope alive, which keeps him living in the house. An occupied house is worth more to the bank and to neighboring houses than an abandonded one.
Sorry for the repost, but I am hoping this story trickles up to the Congressional Fed audit team, as there may be something worth checking out here.
DECEMBER 2009
Is it all just a Ponzi scheme?
By: Eric Sprott & David Franklin
In our May/June Markets at a Glance, “The Solution…is the Problem”, we discussed how much debt the US government would need to issue in order to balance the budget for fiscal 2009. We calculated they would need to sell $2.041 trillion in new debt - or almost three times the new debt that was issued in fiscal 2008. As a thought experiment, we
separated all the various US Treasury owners and asked our readers whether each group could afford to increase their 2009 treasury purchases by 200%. In the end, we surmised that most groups couldn’t, and prepared our readers for the worst.
Almost seven months later, however, nothing particularly bad has happened on the US debt front. There have been no failed auctions, no sovereign defaults, no downgrades of debt and no significant increase in rates…not so much as a hiccup in the treasury market. Knowing what we discussed this past June, we have to ask how it all went so smoothly.
After all – it was pretty obvious there wasn’t enough buying power to satisfy the auctions under ‘normal’ circumstances.
…to summarize, the majority buyers of Treasury securities in 2009 were:
1. Foreign and International buyers who purchased $697.5 billion.
2. The Federal Reserve who bought $286 billion.
3. The Household Sector who bought $528 billion to Q3 – which puts them on track purchase $704 billion for fiscal 2009.
These three buying groups represent the lion’s share of the $1.885 trillion of debt that was issued by the US in fiscal 2009.
We must admit that we were surprised to discover that “Households” had bought so many Treasuries in 2009. They bought 35 times more government debt than they did in 2008. Given the financial condition of the average household in 2009, this makes little sense to us. With unemployment and foreclosures skyrocketing, who could afford to increase treasury investments to such a large degree? For our more discerning readers, this enormous “Household” investment was made outside of Money Market Funds, Mutual Funds, ETF’s, Life Insurance Companies, Pension and Retirement funds and Closed-End Funds, which are all separate reporting categories.9 This leaves a very important question - who makes up this Household Sector?
Amazingly, we discovered that the Household Sector is actually just a catch-all category. It represents the buyers left over who can’t be slotted into the other group headings. For most categories of financial assets and liabilities, the values for the Household Sector are
calculated as residuals. That is, amounts held or owed by the other sectors are subtracted from known totals, and the remainders are assumed to be the amounts held or owed by the Household Sector. To quote directly from the Flow of Funds Guide, “For example, the
amounts of Treasury securities held by all other sectors, obtained from asset data reported by the companies or institutions themselves, are subtracted from total Treasury securities outstanding, obtained from the Monthly Treasury Statement of Receipts and Outlays of the United States Government and the balance is assigned to the household
sector.” (Emphasis ours)
So to answer the question - who is the Household Sector?
They are a PHANTOM. They don’t exist. They merely serve to balance the ledger in the Federal Reserve’s Flow of Funds report. Our concern now is that this is all starting to resemble one giant Ponzi scheme. We all know that the Fed has been active in the market for T-bills. As you can see from Table A, under the auspices of Quantitative Easing, they bought almost 50% of the new Treasury issues in Q2 and almost 30% in Q3. It serves to remember that the whole point of selling
new US Treasury bonds is to attract outside capital to finance deficits or to pay off existing debts that are maturing. We are now in a situation, however, where the Fed is printing dollars to buy Treasuries as a means of faking the Treasury’s ability to attract outside capital. If our research proves anything, it’s that the regular buyers of US debt are no
longer buying, and it amazes us that the US can successfully issue a record number Treasuries in this environment without the slightest hiccup in the market.
…
Muggy: Might I interest you and the missus in a lovely Honduran vacation?
(I notice the guy in the accompanying photo has adopted the catatonic position. The Suzanne and his wife must have given him a severe p(!)ssy whipping over his prudent financial decision to dump the house.)
Home & Garden
Men Who Jump the Picket Fence
Max Whittaker for The New York Times
DOWN SIDE Nathan Quevedo, seated at his unused pool, is disillusioned with being a homeowner. After he bought his house, its value decreased by half in just over two years.
By MICHAEL TORTORELLO
Published: January 7, 2010
THE house was an ordinary house: It bore him no malice. Alan Berks knows that now. But back in the spring of 2005, when Mr. Berks, a playwright, and his wife bought the three-bedroom home for $214,000, it often seemed that it was trying to ruin his life.
CHANGING VALUES For Nathan Quevedo, home ownership is no longer a vital part of the American dream. His house’s value has tumbled; his pool has gone unused since the pump filters died.
Alan Berks the renter had spent his evenings with friends at African dance nights and jazz clubs. Alan Berks the homeowner lost an entire day rearranging the living room furniture. “I did find a spot for the couch that made me happy,” he said. “I was proud of myself. But where the couch is — that’s how I’m going to measure my happiness from now on? I remember thinking: ‘This is how people live? Why am I doing this?’ ”
There were other problems, too.
“I couldn’t walk to anything,” said Mr. Berks, 37, who lived in the Powderhorn Park neighborhood, south of downtown Minneapolis. And routine maintenance distracted him from writing. “Why would I have any interest in fixing the bathroom sink?” he said. “I’m in my 30s. If fixing something made me happy, I would have learned how to do it.”
Mr. Berks’s wife, Leah Cooper, 40, a theater director, initially liked the house. But “I was miserable,” he said, so she came to dislike it, too.
If the couple’s relationship with their home was like a bad love triangle, it was clear which partner needed to go. Eighteen months after moving in, Mr. Berks and his wife took drastic action: They dumped their house (managing to break even), sold almost everything in it, loaded up their Subaru and drove to Honduras for a six-month adventure.
…
I get it, man. Let’s move on.
BTW, all of the guys in this article are dudes that I would NOT hang with, especially this guy: And routine maintenance distracted him from writing. “Why would I have any interest in fixing the bathroom sink?” he said. “I’m in my 30s. If fixing something made me happy, I would have learned how to do it.”
I have several friends who write professionally, as well as other creative friends (musicians and producers/editors) — they are all very handy and “roll up the sleeves” types. This bathroom sink guy probably sucks at writing, too.
I could see some of my own descriptions in all of those guys in the story. I was just not the house buying type, but I did not know that.
Funny how price drops of a house is the big dark cloud that brings out all the reasons why they want out of home ownership.
Even those men who buy the house for status instead of investment go negative when the house price goes negative.
The problem starts when you are driven by your idea of how others would perceive you if you get a house, get a certain car, get a spouse. I know a 45 year old first generation American who is on a spouse-hunting trip in China. He just bought a house, he has two luxury cars that are not even registered but garaged. So the prediction is when he finally gets a spouse to come to America, she will eventually learn the lucrative divorce laws and take half of what he has ever earned with her. Probably within a year or two. His close friends keep warning him about this, but he does not listen.
Another tragedy in the making.
Bill, Bill, Bill…
You worry so much about about some gold digging gal getting into your money assets or gold that you’re gonna put yourself into stress-induced SCA(sudden cardiac arrest) while swimming laps for your health.
Forget the cheap wild enjoyable sex, the cute vamps and tramps, the bad marriages and those nasty divorce courts.
Have an a nice California navel orange…instead. Heck Bill, live a little…have TWO !
j/k
“Politicians have no conception of the amount of dollars that make up a trillion.
Most of them have never even run a candy store! The vast majority have never had to ‘meet a payroll.’
~ Peter Degraaf
“P.S. And don’t give a damn, it’s not their money. It’s “free” money”!
~Me
China port faces worst ice threat in 30 years.
Key northern China port faces worst ice threat in 30 years, as ships work to keep lanes open.
BEIJING (AP) — A northern China port that is one of the world’s largest was facing the worst ice conditions in 30 years Saturday, and icebreaking ships were working to keep the path to it open.
Some ships were having trouble reaching the port at Tianjin — the port for China’s capital, Beijing, and the third largest in the country, China Central Television said. Footage showed ships on the Bohai Gulf working to keep shipping lanes open.
About 40 people had already been saved from ships in danger from the ice, the state-run Xinhua News Agency cited maritime officials as saying.
The region has been hit by its worst winter weather in decades over the past week, including Beijing’s coldest morning in almost 40 years and its biggest snowfall since 1951.
Temperatures over the next week in Beijing are forecast to remain below freezing.
The sea ice along the coast of the Bohai Gulf was the most serious in 30 years, China National Radio reported Saturday afternoon.
China’s transport minister, Li Shenglin, urged authorities to work to prevent accidents, Xinhua reported.
In 2008, the Tianjin port was among the top 15 in the world in container handling, according to the Web site of its operator, Tianjin Port Development Holdings Ltd. The port 60 miles southeast of Beijing has a sprawling export zone designed to spur the region’s growth.
The past week of bitter cold already has hit China’s power companies, with officials ordering rotating shutdowns of hundreds of factories in central provinces to ensure sufficient power to heat homes.
The Decade for Women: Forward, Backward, Sideways?
How have American women fared in what seems to be everyone’s least favorite decade since the Fall of Rome, which at least was fun for the Vandals? (Well, to be fair, today’s investment bankers have plenty to chortle over.) Herewith some feminist highs and lows of the era that began with the Supreme Court choosing the president and ended with hope hangovers and tempests in teabags.
Government. Sonia Sotomayor joined the Supreme Court. Before that, Hillary Clinton and Sarah Palin showed how far we’ve come–and how far we haven’t. Between them they normalized forever the idea of a woman running for president and withstood a ridiculous amount of sexist garbage, from nasty cracks (from both sexes) about Clinton’s legs, clothes, voice and laugh to tinfoil-hat accusations that Palin’s baby was actually her daughter’s.
In 2000 women were 13 percent of the House and Senate; in 2009 they were 17 percent. The right direction, but too slow: if women have to make up about 30 percent of leadership before they can move a feminist agenda, we’re looking at thirty more years of political marginality.
Economics. The earnings of women working full time, year round went from around 73 cents on the male dollar to 77 cents. Good news–especially considering that the Bush administration basically dismantled affirmative action and antidiscrimination enforcement. By mid-2009, women made up 50 percent of the workforce–unfortunately, partly because of male unemployment. Elite women inched forward, going from 15.6 percent of law partners to 19.2 percent, and from 24 percent of physicians to 28 percent. At the same time, women are as concentrated in the same job categories as ever–secretarial, retail, caregiving, primary education. Parking valets still make more than daycare teachers, and in every field men still earn more than women. Conditions for single mothers were deteriorating even before the recession. The percentage of female-headed households in poverty went from 28.5 in 2000 to 31.4 in 2008, but because of welfare reform, the TANF rolls have barely risen. And the mortgage crisis hit black women hardest of all.
Education. The percentage of undergraduates who are female rose to 57 percent in 2007, provoking calls for “affirmative action” for male applicants; in 2006, a sheepish New York Times op-ed from the admissions director of Kenyon College conceded that it was already happening. Women now earn 62 percent of degrees in biology, up from 59.2, and 49 percent of biology PhDs, up from 44.8. Take that, Larry Summers! But physics stayed flat, at 22 percent of female undergrad degrees and 13 percent of PhDs, while female degrees in math and computer science have declined to 44 percent and 18 percent, respectively. By 2007 only 26.5 percent of tenured full professors were women. But Women’s Studies has been thriving, with about 1,200 degrees now granted annually. And with the ascension of Drew Gilpin Faust to the presidency of Harvard, women head three out of the eight Ivies
http://www.thenation.com/doc/20100125/pollitt
Yup, eventually Homo sapiens will be like the mantises; women will hump us, bite our heads off, then go about their day. We’re pretty much there right now.
Some of this stuff seems encouraging for my sisters. I worry about their economic situations. Two of them spend like crazy.
Will they look to you for a family bailout if it comes to that? (I have a SIL who is already there at this point…luckily we are not the only family members with the means to help.)
PB, the answer may be “yes.” But yours truly stopped bragging to them about hourly rates four years ago. I only complain about expenses and taxes these days. They visit me, they see I have very few possessions - apartments with very little furniture and lots of space. And my only car is an economy car, and is not the newest of the siblings’.
A “Two Buck Chuck” cheers!
Bill You really must be my brothers lost twin…LOL
he has a 3 bedroom house fully paid off and very minimal amount stuff .
Yes he has the huge HD tv, and the latest $3000 laptop..but other then his white convertible in the garage…( the other is a 10 year old minivan)…you think he was barely making it
Everyone in my family is a borderline hoarder. After my mom died, my dad got rid of a bunch of stuff and simplified the surroundings.
It looks less “white trashy” that way. It looks more like the sleek cosmopolitan living you see in magazine advertisements.
Hand over the cash, or those pet D-ratic social programs will get slashed and trashed…
The Financial Times
California in call for $6.9bn
By Matthew Garrahan in Los Angeles
Published: January 8 2010 23:06 | Last updated: January 8 2010 23:06
Arnold Schwarzenegger published his last budget as governor of California on Friday and immediately walked into a political storm when he said the state needed $6.9bn from the federal government to help address a $19.9bn budget deficit.
…
Mr Schwarzenegger, who said the budget would protect education funding, has also outlined $4.5bn in “funding shifts”. But it is the $6.9bn the state is seeking from the federal government that is the most contentious part of his budget.
If California does not receive the federal money Mr Schwarzenegger says is owed to the state, spending on social services, such as CalWorks, the state’s welfare-to-work programme, will be slashed.
The governor said California was owed money for faulty reimbursement formulas and for federal mandates over spending on Medi-Cal, the state’s healthcare programme. He also called for an extension of the American Reinvestment and Recovery Act, which provided money to states following the financial crisis.
“Federal funds must be part of our budget solution because the federal government is part of our budget problem…right now there are discriminatory formulas that force California to subsidise other states,” said Mr Schwarzenegger.
…
“Hand over the cash…”
Sorry, fresh out of fiats. Need to print up some more.
Oh, wait. Only the Fed can do that. The states aren’t allowed to.
Hmmmm… now what?
Plan B: Stiff Cali’s Wall Street creditors…
House prices and wages are closely coupled, over the long run.
* The Wall Street Journal
* JANUARY 9, 2010
Wages Still Under Pressure
Rising Tide of Unemployed Lets Employers Keep Lid on Pay Amid Productivity Gains
By SARA MURRAY
Wages of U.S. employees are generally stagnant and likely to remain so as the pool of unemployed workers helps employers keep wages from rising even as productivity, or output per hour of work, soars.
Average hourly earnings for private-sector production and nonsupervisory workers, who account for about four-fifths of people on private payrolls outside farming, rose three cents in December from November to $18.80 before adjusting for inflation, the Labor Department said Friday.
In the past year, hourly wages have risen 2.2%, not enough to offset the 2.3% increase in the Consumer Price Index from November of 2008 to November 2009.
“There may be pockets of the labor market…where we do see some upward pressure,” such as for highly skilled workers, said Steven Davis of the University of Chicago Booth School of Business. “But I don’t see any reason in the recent reports to expect strong growth in real [inflation-adjusted] wages.”
…
“Productivity Gains”, now there’s an interesting statistic. A business can enjoy productivity gains all the way into bankruptcy.
Laying off one employee of a two-employee business will automatically double productivity, a good thing as long as the customer base doesn’t dwindle. But a dwindling customer base is most likely the reason the layoff occured in the first place.
An expanding customer base tends to hurt productivity, at least at first. That’s because new employees must be hired to serve the added customers and these new employees aren’t necessairly procuctive ones, at least not at first. Time and experience is needed to bring new employees up to speed. In the meantime productivity numbers take a hit.
China vows to keep “hot money” out of property marketJanuary 10, 2010 2:01 AM ET
All Thomson Reuters news BEIJING (Reuters) - China vowed on Sunday not to let foreign speculative investment affect the property market, the latest expression of official concern that real-estate prices are racing ahead too fast.
The directive from the State Council, China’s cabinet, will serve as a guideline for local authorities and ministries, including the People’s Bank of China and the China Banking Regulatory Commission, to work out detailed policies.
“Relevant departments must enhance monitoring of loans and cross-border investment to prevent illegal inflows of capital into the property market and to avoid the impact of overseas hot money on China’s real-estate market,” the cabinet said.
It said the central bank and banking regulator should step up oversight and “window guidance” of mortgage lending.
About one-sixth of China’s nearly 10 trillion yuan ($1.5 trillion) in new loans last year flowed into the property sector.
Concerned that a property bubble could stir social and economic instability, Beijing has vowed to combat overly fast price increases, although its moves to date, such as restricting sales tax exemptions, have been relatively mild.
The cabinet urged local authorities, especially in cities where housing prices are rising sharply, to increase the supply of affordable housing.
It reiterated that it would curb house buying for “investment and speculation purposes” and keep the minimum down payment for purchases of second homes at 40 percent.
China’s central bank said this week that it would pay particularly close attention to the property market in 2010 while managing inflationary expectations.
(Reporting by Zhou Xin and Tom Miles; Editing by Alan Wheatley)