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Sunday, December 4, 2011

Economic Stories of Relevance in Today's World -- December 4, 2011

Lies, Damned Lies, and (Unemployment) Statistics - - Mac Slavo - December 2nd, 2011 - 1) Tens of thousands of people have given up searching for work, so they don’t count as part of the labor force anymore - When people stop looking for work they are considered to no longer be participating in the labor force, which means that the BLS ratios are adjusted to reflect a better overall employment rate. 2) Many of the jobs created are likely seasonal - As retailers got sold a bill of goods about the economic recovery, they hired more workers for the holidays. Chances are that many of those jobs are temporary. 3) The government’s more realistic measure of unemployment is still above 15% - There are several ways the government measures employment data. The “U-6,” which is the broadest available measure, counts the total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. According to the BLS, this statistic decreased from the previous month, but is still sitting at a whopping 15.6%. 4) The Unofficial unemployment rate remains in Great Depression territory - Over the years the government has created all sort of formulas and methods of calculating statistic like unemployment to provide a watered-down, best-case version to the general public, especially in times of crisis. In reality, however, if we were to calculate unemployment numbers the way they were counted as recently as 1994, we would be looking at a starkly different picture. According to John Williams of, the actual unemployment rate in the United States is in excess of 22%. That’s one in five Americans who are without meaningful labor. 5) Europe’s debt, monetary system and the stability of their Union is on the brink of collapse - Over the last several months we’ve seen what happens to global stock markets when the European debt crisis hits the news cycle. European and US central banks have been able to stave off a complete meltdown for now, but it’s becoming increasingly clear that they won’t be able to hold the center much longer. The EU as we know it today will not exist in its current form in the very near future. When their monetary and financial systems collapse there will be a substantial financial and economic impact here in the United States. Those are Federal Reserve chairman Ben Bernanke’s words, not ours. 6) Consumers are spending, but they are spending from savings not income - The primary reason why employers hire more laborers is because they are growing. GDP is growing sluggishly by official accounts (and is in negative territory when adjusted for inflation). Consumers, it seems, are still spending. But an alarming report says that “consumers spent more while earning less. Many had to dip into their savings to make up the difference.”

Fed’s Fisher Says U.S. Risks ‘Social Unrest’ Amid Rising Federal Deficits - Bloomberg - Steve Matthews - December 2, 2011 - Federal Reserve Bank of Dallas President Richard Fisher said today that the U.S. risks “social unrest” if it doesn’t bring the federal debt under control. “Our debt burden is larger than that of Europe. We are headed in the wrong direction,” Fisher told the Dallas/Fort Worth Minority Supplier Development Council. “If we don’t bring it under control, we will have social unrest.” Fisher said the Federal Reserve would not allow inflation to rise as a way to cushion the impact of rising deficits. The U.S. lost its last stable outlook from the three-biggest credit- ranking companies when Fitch Ratings lowered the nation’s outlook to negative on Nov. 28 following the so-called congressional supercommittee’s failure to agree on deficit cuts. “Deficits matter for what we do at the Fed,” Fisher said. “Economists have found structural deficits raise long-term interest rates” and “create political pressure” on central banks. “Running the printing presses to pay today’s bills leads to much greater problems,” including a surge in inflation. “We will never let that happen at the Federal Reserve, never,” he said. “Stable prices go hand in hand with achieving sustainable growth.” ...... “There are too many people out of work, too much unemployment, too much underemployment,” Fisher said. At the Fed, “We have filled the gas tank. Someone has to press on the accelerator” with fiscal and regulatory policies.

Will the Fed's move to help Europe hurt the U.S.? - CBS Moneywatch - Mark Thoma - November 30, 2011 - Is there any possible downside? As a taxpayer, will it cost me money to help the Europe mess? Since these are loans between central banks -- the U.S. Fed will not lend to any foreign banks directly -- there is essentially no risk to the U.S. If the Fed makes a loan to the European Central Bank, and the ECB lends the money to a bank that later fails, it is the ECB that is on the hook for losses, not the U.S. The European Central Bank would still be obligated to pay back the U.S. in full. The other possible downside is that the short-term expansion in the Fed and other central bank balance sheets that would come with these loans will stoke inflation fears. But since these loans have an expiration date (i.e. the balance sheet will be expected to contract at some point in the future), this shouldn't be a big problem. Finally, note that while this move can ease financial market conditions, it does nothing to address the underlying problems creating those conditions. So this is no substitute for the difficult decisions that Europe must make to overcome its troubles.

Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts - The Silver Bear Cafe - Ben Bernanke, Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets. Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on Senator Sander’s webpage earlier this morning. $16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious - the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.

The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..
Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all places
View the 266-page GAO audit of the Federal Reserve(July 21st, 2011):

Hank Paulson's Inside Jobs - Reuters - Felix Salmon - November 29, 2011 - What on earth did Hank Paulson think his job was in the summer of 2008? As far as most of us were concerned, he was secretary of the US Treasury, answerable to the US people and to the president. But at the same time, in secret meetings, Paulson was hanging out with his old Goldman Sachs buddies, giving them invaluable information about what he was thinking in his new job.                           The first news of this behavior came in October 2009, when Andrew Ross Sorkin revealed that Paulson had met with the entire board of Goldman Sachs in a Moscow hotel suite for an hour at the end of June 2008. He told them his views of the US and global economies, he previewed a market-moving speech he was about to give, and he even talked about the possibility that Lehman Brothers might blow up. Maybe it’s not so surprising that Goldman Sachs turned out to be so well positioned when Lehman did indeed do just that a few months later.                          Today we learn that the Goldman meeting in Moscow was not some kind of aberration. A few weeks later, on July 28 2008, Paulson met with a who’s who of the hedge-fund world in the headquarters of Eton Park Capital Management — a fund founded by former Goldman superstar Eric Mindich.

"6 Shocking Revelations About Wall Street's "Secret Government" - Top officials willfully concealed the true extent of the 2008-'09 bailouts from Congress and the public - AlterNet - Les Leopold - November 30, 2011 - We now have concrete evidence that Wall Street and Washington are running a secret government far removed from the democratic process. Through a freedom of information request by Bloomberg News, the public now has access to over 29,000 pages of Fed documents and 21,000 additional Fed transactions that were deliberately hidden, and for good reason. (See here and here.)               These documents show how top government officials willfully concealed from Congress and the public the true extent of the 2008-'09 bailouts that enriched the few and enhanced the interests of giant Wall Streets firms. Here’s what we now know:
  • The secret Wall Street bailouts totaled $7.77 trillion, 10 times more than the $700 billion Troubled Asset Relief Program (TARP) passed by Congress in 2008. 
  • Knowledge of the secret bailout funds was not shared with Congress even while it was drafting and debating legislation to break up the big banks.
  • The secret funding, provided at below-market rates, gave Wall Street banks an additional $13 billion in profits. (That’s enough money to hire more than 325,000 entry level teachers.)
  • The secret loans financed bank mergers so that the largest banks could grow even larger. The money also allowed banks to step up their lobbying efforts. 
  • While Henry Paulson (Bush’s Secretary of the Treasury) was informing Congress and the public that only minor reforms were needed to protect Fannie and Freddie from collapse, he met secretly with leading Wall Street hedge fund managers -- among them his former colleagues at Goldman Sachs -- to alert them that he was about to nationalize the giant mortgage companies – a move that would eradicate nearly all the stock value of the companies. This information was enormously valuable because it allowed these hedge funds to short Fannie and Freddie and thereby make a fortune.
  • While Timothy Geithner was head of the NY Federal Reserve, he argued against legislative efforts by Senator Ted Kaufman, D-Delaware, to limit the size of banks because the issue was “too complex for Congress and that people who know the markets should handle these decisions,” Kaufman recalls. Meanwhile, Geithner was fully aware of the enormous secret loans while Senator Kaufman was kept in the dark. Barney Frank, who was authoring key bank reform legislation was also not informed of the secret loans. No one in Congress was told.

Meet 5 Big Lenders Profiting From the $1 Trillion Student Debt Bubble (Hint: You Know Some of Them Already) - AlterNet - Sarah Jaffe - November 28, 2011 - ...the dramatization of what happens upon graduation to many of America's students was spot-on. Despite a few moves by the Obama administration in past years and even recent months to lessen the burden of student loans, many graduates are still saddled with more debt than they can conceivably pay back and have little hope of finding a good job in the current economy.                      The talk of debt refusal or debt strikes, as I reported just recently, has ratcheted up along with the momentum of the Occupy Wall Street movement, as the occupiers made the connection between Wall Street bankers and student debt--right down to the bailouts, as student lenders received a bailout of their own from the federal government, which handed over billions in taxpayer dollars to the banks and lenders in exchange for loans that could no longer be sold on the secondary market.                      “Student loans are among the most lucrative you can make because the borrower has no protections and the creditor is afforded extraordinary powers,” noted Andrew Ross, NYU professor and labor expert, at the student debt press conference. Ross spoke, too, of the need for professors to work in solidarity with the students on this issue since their salaries are paid through the debt of their students. “Our public universities, once the democratic gold standard worldwide, are increasingly and ruinously dependent on debt financing from the people they are supposed to serve,” he said.
So just who are the lenders profiting from the massive student debt load?         You already know some of the names: JP Morgan Chase, U.S Bank, Citi, Bank of America. Others are non-bank student lenders. What all of them have in common, though, is that their practices are shrouded in secrecy. 1) Sallie Mae 2) Wells Fargo  3) Discover  4) NelNet  5)  JP Morgan Chase

Despite earmark ban, lawmakers try to give money to hundreds of pet projects - Wahington Post - Kimberly Kindy - November 29, 2011 - Members of the House and the Senate attempted to pack hundreds of special spending provisions into at least 10 bills in the summer and fall, less than a year after congressional leaders declared a moratorium on earmarks, congressional records show.             Despite recurrent calls to crack down on earmarks, the practice had reached a peak before the moratorium. The Congressional Research Service found that earmark spending nearly tripled over a 15-year period, to $31.9 billion in 2010, the year before the ban.            

Massachusetts' Attorney General Files Lawsuit Against 5 Big Banks involving Fraudclosure!

Nomi Prins - Former Goldman Sachs Exec - SGT Report - Part 1

Nomi Prins - Former Goldman Sachs Exec - SGT Report - Part 2

1 comment:

harryhipps said...

The list of institutions that received money from the fed is impressive, but what's a little change among friends.
My mantra is: no short term fixes until the long term plan is approved. The fed has said, and I agree that they can't solve the world's problems with their actions. in fact, it will hurt in the long haul. There has to be a fiscal, sturctural fix. We have to restructure our financial structure, entitlement programs, budgets at all levels, start producing some things of value, clean up debt, and renew some of our infrastructure, and reform our corrupt political system. No small tasks. My question remains: can we do it through will, or do we have to collapse and live through calamity to wake us up.
So far, the American public's reaction is that we don't like it and want change, but we want "the rich" or the "foreign aid" or the "congressional salaries" or someone else's taxes to go up or benefits go away. Trimming away some of the small ticket items is ok, but I don't think people understand the depth of the changes we need to make.
When we really get to the point that we can't just talk about change and have to really change, what shape will it take? Scary.