Daily Digest

Daily Digest 3/20 - Asleep At The Wheel, U.S. Cruises Towards 2013 Fiscal Cliff, Firefight Erupts In Damascus, Syria

Tuesday, March 20, 2012, 10:52 AM
  • Asleep At The Wheel
  • A Wall Street Insider's Response To Greg Smith
  • The U.S. Cruises Toward a 2013 Fiscal Cliff 
  • Was MF Global Worth More As A Carcass?
  • The U.S. Economy Is Running On Borrowed Money And On Borrowed Time
  • There Is No Such Thing As Harmless Price Inflation
  • Grime Wave
  • Syria unrest: Fierce firefight erupts in Damascus

Our 'What Should I Do?' guide has steps to cook, see & stay warm in times of power outage

Economy

Asleep At The Wheel (JimQ)

The 2008 cataclysm was created by the voracious greed and avarice of Wall Street, sustained by corrupt politicians in Washington, non-existent regulation by banking regulators, Federal Reserve easy money policies, unspoken guarantees of Fed bailouts if Wall Street excess risk taking blew up, and millions of delusional Americans with an unlimited credit line. Excessive debt created the problem. Adding debt is the present solution to the problem. And the accumulation of debt will lead to a tipping point that destroys the U.S. dollar and topples the Great American Empire.

A Wall Street Insider's Response To Greg Smith (June C.)

But away from the advertising sets, Wall Street always has been a kill-or-be-killed pit of near-violent wills set against each other. Perhaps a bit less so in the retail businesses that sell to Moms and Pops (though “broker production” is a hotly competitive racket, to be sure), but certainly in the institutional businesses where Greg Smith operated. In these businesses, in which the banks trade with professional, accredited investors, the customers are often as bloodthirsty as the banks. Yes, many could use a good salesman’s hand in furthering their interests, but as many – so many – seek the desk that’s sleeping that day and exact a predatory price. Many I’ve traded against gleefully relished it.

The U.S. Cruises Toward a 2013 Fiscal Cliff (Jeff B.)

The result of all this can kicking is that Congress must make all those decisions by January 2013—or defer them yet again. If the House and Senate don't act in time, a list of things will happen that are anathema either to Republicans or Democrats or both. The Bush tax cuts will expire. The temporary payroll tax cut will end. Unemployment benefits will be severely curtailed. And all on Jan. 1, 2013. Happy New Year!

Was MF Global Worth More As A Carcass? (June C.)

Some say Mr. Freeh is rewarding JP Morgan by soft-peddling a fraud investigation despite his role as a federally appointed trustee and the apparent nod by the Department of Justice (DOJ) that anointed Mr. Freeh status as the DOJ’s eyes and ears on the case. Falsification of documents given by MF Global to regulators in the final days of the firm’s survival was alleged in Congressional Testimony by CMEGroup Chairman Terry Duffy, and knowledgeable industry sources speculate a web of fraudulent activity lies underneath the surface. The key to uncovering this evidence could be the MF Global back office, members of which are currently requesting immunity from prosecution in exchange for their testimony.

The U.S. Economy Is Running On Borrowed Money And On Borrowed Time (David B.)

Businesses generally only want to hire people if they can make a profit by doing so. When our politicians keep piling on the taxes and the regulations and the paperwork, that creates a tremendous incentive not to hire workers.

Michael Fleischer, the President of Bogen Communications, once wrote an op-ed in the Wall Street Journal entitled “Why I’m Not Hiring”. The following is how Paul Hollrah of Family Security Matters summarized the nightmarish taxes that are imposed on his company when Fleischer hires a new worker….

There Is No Such Thing As Harmless Price Inflation (David B.)

There is much criticism about the CPI indicators. But, you can pick other measures. In fact inflation can be whatever you want it to be.

For example, if you are wary of the BLS measures, then there is John Williams of Shadowstats who has two measures. One is based on the same methodology that the BLS used in 1990:

Grime Wave (Chris M.)

Why Tide and not, say, Wisk or All? Police say it’s simply because the Procter & Gamble detergent is the most popular and, with its Day-Glo orange logo, most recognizable of brands.

George Cohen, spokesman for Philadelphia-based Checkpoint Systems, which produces alarms being tested on Tide in CVS stores, said: “Name brands are easier to resell.

Syria unrest: Fierce firefight erupts in Damascus (jdargis)

The UK-based Syrian Observatory for Human Rights called the fighting "the most violent of its kind and closest to security centres in Damascus since the revolution began", adding that 18 government troops had been injured.

It said a cell of rebel fighters had fired a rocket-propelled grenade at the home of a leading army officer, but this has not been confirmed.

Article suggestions for the Daily Digest can be sent to dd@PeakProsperity.com. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

15 Comments

saxplayer00o1's picture
saxplayer00o1
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Bill Hicks's picture
Bill Hicks
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Eroding Profit Margins Cause Stores to Reduce Coupon Issuance

http://billhicksisdead.blogspot.com/2012/03/eroding-profit-margins-cause-stores-to.html

The story:

In 2011, name-brand grocery manufacturers' coupons fell 8.1 percent to 305 billion compared with the previous year, according to Michigan-based coupon processor NCH Marketing. But consumers used $4.6 billion worth of coupons last year — a 12.2 percent jump.



Coupon use has been on the upswing since the financial crisis in 2008. As consumers hit the brakes on spending, retailers began discounting, sometimes almost desperately. Companies were "chasing business just for business' sake," Dallas retail consultant Steven Dennis said. Now, they're trying to keep coupon redemptions from eroding profits.

And my reaction:

Of course it has been the American consumer's incessant obsession over getting things for the lowest possible prices which has wreaked so much havoc in our economy in the first place, from declining wages and benefits of workers who make the products, to the rise of the megastore and the destruction of locally owned businesses, to the dramatically decreasing quality of many of the products on offer. Coupons are not the cause of all of those things, but they are certainly a symptom of the prevailing mindset that has allowed them to happen. Only in a decadent and depraved society such as ours with a value system gone completely askew could a teevee show like Extreme Couponing actually find an audience.



And now, as we remain mired in our economic malaise, stores are finding out that you can only take price cutting so far, especially at a time of rising food and energy costs, before the effort becomes utterly self defeating. The sad irony is that this is now happening at a time when so many financially strapped shoppers could really use the discounts.


rhare's picture
rhare
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Symptom or cause?

Bill Hicks wrote:

Of course it has been the American consumer's incessant obsession over getting things for the lowest possible prices which has wreaked so much havoc in our economy in the first place, from declining wages and benefits of workers who make the products, to the rise of the megastore and the destruction of locally owned businesses, to the dramatically decreasing quality of many of the products on offer. Coupons are not the cause of all of those things, but they are certainly a symptom of the prevailing mindset that has allowed them to happen. Only in a decadent and depraved society such as ours with a value system gone completely askew could a teevee show like Extreme Couponing actually find an audience.

I think saying "American consumer's incessant obsession over getting things for the lowest possible prices" is describing the symptom rather  than the true cause.  Are people looking for cheap because of squeezed incomes?  Loss of purchasing power due to debasement of the currency?  Loss of high paying jobs due to regulatory burden, monetary and fiscal malfeasance?

I think the rise in couponing and drive for ever cheaper prices are simply the symptoms of a long slow decline in standard of living and not the cause.

saxplayer00o1's picture
saxplayer00o1
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Bernanke quote of the day

"Later, during a Q&A period after his lecture, Bernanke acknowledged the main arguments for a gold standard, before dismissing them. Proponents, like Rep. Ron Paul (R-Texas), argue that a gold standard maintains the value of the dollar, under the premise that paper money is inherently inflationary. Bernanke dismissed this, arguing that while the argument may hold for long-run price stability it is not valid on a year-to-year basis. A gold standard, Bernanke said, also stops the central bank from being able to respond to booms and busts through monetary policy."

.....................Once again, glad to have you back Davos, since I'm not going to be the one to say it.

Please also let minneapolisfed.org show the benefits to your currency by going off the gold standard.

Bill Hicks's picture
Bill Hicks
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 Indeed, it's tricky to

Indeed, it's tricky to sort that one out.  What came first, Wa-Mart, or Wal-Mart's downward effect on living standards?  

rjs's picture
rjs
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those states where a US minimum wage worker can afford rent:

map:
https://data360.wordpress.com/2012/03/16/hours-at-minimum-wage-needed-to-afford-rent/

Full Moon's picture
Full Moon
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new twist in the spiral

http://www.theblaze.com/stories/jpmorgan-chase-closes-vatican-bank-account/    Well this just puts a new twist on things .

FM

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darbikrash
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Dialectics and Wal Mart

rhare wrote:
 

I think saying "American consumer's incessant obsession over getting things for the lowest possible prices" is describing the symptom rather  than the true cause.  Are people looking for cheap because of squeezed incomes?  Loss of purchasing power due to debasement of the currency?  Loss of high paying jobs due to regulatory burden, monetary and fiscal malfeasance?

I think the rise in couponing and drive for ever cheaper prices are simply the symptoms of a long slow decline in standard of living and not the cause.

Coupons may not be the cause, but they do reflect a condition that is occurring which is most certainly not realistically represented by your line of questioning. Trying to assign debasement of currency to loss of purchasing power and Wal-mart, loss of high paying jobs to regulatory burden is just off base- and by a lot.

The relationship has absolutely nothing to do with currency debasement and regulatory overhang.

It does have to do with the dialectic relationship between wages and the cost of subsistence goods. Simply put, as the cost for subsistence goods drops, so do real wages. And as real wages drop, so must the cost of goods (price inelasticity) This is because there is a powerful link between what workers pay for (non luxury) goods and what they receive in their paychecks. Employers lower wages intentionally as cost of goods decline for the workforce- because they can.

Ironically, some of the busiest times of the month at Wal Mart are at 12:01 Am on the 1st of the month. Think they’re shopping for plasma TV’s at 1:00 in the morning?


At the stroke of midnight, a growing number of Americans are lining up at Walmart not to cash in on a holiday sale, but because they’re hungry.

The increasing number of Americans relying on food stamps to survive the sluggish economic recovery has changed the way the largest retailer in the United States does business.

Carol Johnston, Walmart’s senior vice president of store development, said that store managers have seen an “enormous spike” in the number of consumers shopping at midnight on the first of the month. That’s typically when those receiving federal food assistance have their accounts refilled each month.

“We’ll bring in more staff to stock. We’ll also make sure all of our registers…are open…Some people may think at 12:01, Walmart’s very quiet, but in a lot of our areas of the country, 12:01 is a big day or a big night for us, actually,” Johnston said.

Becca Reeder and her husband, T.J. Fowler, are one of the families shopping before the sun rises.

When NBC News visited their home six days before the first of the month, they had no milk in their refrigerator. Among the few things left were water, bacon grease for the dog’s food, a little bit of apple juice, cheese and tortillas.

The couple and their 2-year-old son, Miles, live in Nampa, Idaho, about a 30-minute drive from Boise. Reeder and Fowler married in September. She recently had to pawn her wedding ring to help support the family.

“As long as I got my family, I’m good,” she said.

The newlyweds are both certified nursing assistants but have been unable to find work in their field. Fowler is commuting an hour and a half round trip to a part-time job flipping burgers at a fast-food restaurant and Reeder is not working.

Source

And employers exploit this lower cost of goods very aggressively. One of the defining attributes used for location selection by any large firm in the US is the local cost of living. Usually, this means real estate, and unless there are technological workforce issues that contravene, companies looking to relocate seek low real estate costs because they know they can use this to directly discount wages. Low cost of staple food goods is another chapter from the same book.

This relationship creates a dialectic, or overdetermination, each condition feeding the other in a descending spiral.

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pwoody82
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WalMart and lower price and quality

I shop the big box for several reasons. First, I have not found the quality to be any different than any place else. These days, the products all come from the same places. I can hunt all over town for shoes, clothing, appliances, and what have you, and the same products are available in all the stores, just at different prices. The local 'mom and pop' stores belong to organizations like affiliated grocers and the like to be able to buy in quantity like the boxes, and for the most part it works.

Many grocery products are manufactured in the U.S., and looking at the labels in the box and local stores, the mix is about the same for made here and made there. I can save around 15-20% at the box store, but it does sell some things I do not like, the quantity, the packaging, and such so I generally buy those elsewhere. There are many reasons for so many jobs that used to be here are now elsewhere.

1. Environmental legislation making it much cheaper to manufacture overseas even when shipping is included. Now, I am not against cleaning up the air and water, I used to go to LA during the good ol smog days, and started crying as soon as the city came in sight. China now has imported all that polution and is paying the same kind of price we used to pay here. Down the road when they start to clean up their environment, they will export that polution on to some other third world nation. I live in New Mexico, and we have a very large coal fired plant up near the four corners area. If you go by, there is little or no smoke visible, little or no fallout of combustion particles and so on. They have put in scrubbers that get most of the sulpher out. All in all, it is a vast improvement in a mostly rural area where some minor polution is acceptable when cost to consumers is part of the solution. Yet the government wants very expensive upgrades which will produce little environmental improvement but will vastly increase consumer cost. Someone has to pay for it.

2. Unrestrained unions running compensation for labor up so high that manufacturers were forced out of the country just to stay in business. Back during the industrial revolution, there was a reason for unions since the employees needed to have their wages and working conditions improved and the government was not involved. Those problems are now in the past and the main activity of unions is political activism. They give the members' union dues to the union's choice of political candidate  whether the rank and file approves or not. If you are going to take away the super pac and large business contributions, you have to take away forced union contributions too.

3. An unrestrained banking system that works hand and glove with the federal government. Just as big business supported GW Bush with huge contributions and requests for special treatment, so it does with the Obama administration in equal or greated measure. The U.S. government has borrowed so much money that it is beholden to every large business, bank, and nation, and hence is not in control of it's budget or spending. We need to get government out of banking and other business, and business and banking out of the government starting by abolishing the FED. The American consumer is as much in debt as he was in 2008. Many consumers have shed their debt by default and bankruptcy causing massive consumer debt write-offs, but we sap citizens just keep borrowing and keep running up our debt. Also, the cost of a college education has become so expensive due to government subsidy and overeasy lending standards, that the value of a degree coupled with overwhelming debt and a job market with few jobs is questionable. Many think this trillion dollar debt load is the next bubble coming up in this country.

4. Unrestrained federal spending. Politicians thought that tax revenue could only go up and there would always be plenty of tax revenue so they spent on anything and everything that anyone could possibly want. Just as the baby boomers thought that they would sell their big house and retire on the money, the government thought it could spend forever and never have to pay the consequences. Well, my generation and the boomer generation have spent up our kids retirement, our grandkids retirement, and out greatgrandkids retirement and still have nothing to show for it. The average boomer has less than $50,000 in savings and cannot sell his big house, and even if he could, it would not bring in enough to live on until death the amount would be so small. In my generation, I had to pay social security and retirement, but now the government has spent the social security trust fund and the retirement benefits are questionable due to underfunding. So my nest egg is as small as that of most of the boomers. It don't look good out there. Even with all the ups and downs of the stock market to date, the money I put into social security along with the employer's share over over 40 years if put there would be way, way ahead of the zero dollars in the SS trust fund.

5. A something for nothing population. The reason there are so many migrant workers from Mexico in this country is because the unemployed think that working in the field or construction is beneath them. They refuse to take demeaning jobs. Well, when I grew up, a job was a job. If you did not have a job that was demeaning and you took what you could get and worked your way up by gaining work experience and by getting a reputation for being a good worker. Most people, before the present massive unemployment, took low paying jobs as a starting point. They were mostly single, staying at home or going to college, and without a family. Those jobs were the training fields for youth to get experience and reputation. Now it is argued that you cannot pay someone low wages because 'you can't raise a family on low wages'. Well, my father raised his family during the depression on very low wages. At one point, he worked for the CCC for $25.00 a month and he had a wife and four kids. College graduates today expect to start out at well above average wages, with vacation and health benefits, with wonderful working conditions, and an easy life style. Guess what kiddies, it doesn't work that way anymore. There are far more college graduates than there are jobs for them and the baby boomers are not retiring either.

I could go on and on.

If you have not already read it, everyone reading these blogs needs to find a copy of "DYING OF MONEY" by Jens O. Parsson and read it. What is happening in this country has happened over and over again during the history of mankind. The same ending has always come about and we are nearing the end of the financial mismanagement of the world economies and big trouble is ahead.

saxplayer00o1's picture
saxplayer00o1
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Arthur Robey's picture
Arthur Robey
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Gary Gensler comes as Clean as a Weasel.

The man was hand picked for the job. He even tries to hide behind a woman's skirt. Weasel watchers delight.

From Max Keiser.

osb272646's picture
osb272646
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The new economics

"Of course it has been the American consumer's incessant obsession over getting things for the lowest possible prices which has wreaked so much havoc in our economy in the first place"

Where I come from, that's called frugality.  You know, "A penny saved is a penny earned".   It's been practiced for centuries.  Now you're saying it's the cause of the destruction of our currency? 

It's exactly the opposite of frugality, at the consumer, governmental and worldwide level that got us into the mess we find ourselves in. 

msnrochny's picture
msnrochny
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Poet's picture
Poet
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Power Struggle In China (And A Shout-Out To Sax!)

Hey, Saxplayer00o1, I thought you were in charge on Wednesdays! :-)

That said, here's the most interesting news of today:

Rumours of power struggle in China, as the current generation of leaders is passing power to the new... Some may end up on house arrest, sent to a labor camp, or sent to administer some small town in Tibet or near Mongolia. Probably no executions this time around, though.

The Epoch Times has a section: "Chinese Regime In Crisis" with several articles:
http://www.theepochtimes.com/n2/t/chinese-regime-in-crisis

One such article:

The Ouster of Bo Xilai Is Only the Beginning
http://www.theepochtimes.com/n2/opinion/the-ouster-of-bo-xilai-is-only-the-beginning-208344.html

Poet

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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msnrochny

Well, since it was written by a Citigroup analyst....and we all know how well Citigroup functioned as an international financial conglomerate.....

It probably doesn't solve PO, but they promise you can make money off of dreaming it. 

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