Daily Digest

Daily Digest - May 29

Friday, May 29, 2009, 11:10 AM
  • Huge Drop in Central Bank Liquidity Swaps (Chart)
  • Central Banks Announce Global Coordinated Liquidity Measures (Mish wrote this in September of 2008)
  • Can We Inflate Our Way out of this Mess? (Chart on page)
  • Are Worries About Rising Federal Debt Misplaced?
  • UPDATE 1-Chrysler submits $448 million electric car plan
  • Two-Thirds Off on Manhattan Office Space
  • Exploding debt threatens America
  • How Far From the Bottom? (Video)
  • JPMorgan’s $29 Billion windfall
  • Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look
  • Mental health center closes
  • Police officers saved by stimulus may still lose jobs
  • Police chief warns of deep cuts
  • Toledo police layoffs leading to gun buying
  • Americans' credit scores fall as they struggle to pay bills
  • IRS tax revenue falls along with taxpayers' income

Economy

Huge Drop in Central Bank Liquidity Swaps (Chart)

Central Banks Announce Global Coordinated Liquidity Measures Mish wrote this in September of 2008)

This effort will fail because the problem is a solvency issue not a liquidity issue. [emphasis mine]

Can We Inflate Our Way out of this Mess? (Chart on page)

Three ways the U.S. can decrease the level of nominal debt as a percent of GDP:

  • Default (not going to happen... at least while we still own the printing press)
  • Increase productivity (and GDP), while paying down or maintaining the debt load
  • Inflate our way out of it (decreases the value of debt in real terms)

Of the three, in theory, inflating our way out of it will be the easiest, as it does not require true real economic growth. In Wolfgang Munchau's recent FT article 'We Cannot Inflate our Way out of this Crisis' he states that it may not be all that easy after all. Wolfgang details:

Of course, it can be done, but only for as long as the commitment to higher inflation is credible. Inflation is not some lightbulb that a central bank can switch on and off. It works through expectations. If the Fed were to impose a long-term inflation target of, say, 6 per cent, then I am sure it would achieve that target eventually. People and markets might not find the new target credible at first but if the central bank were consistent, expectations would eventually adjust. In the end, workers would demand wage increases of at least 6 per cent each year and companies would strive to raise their prices by that amount.

Yves at Naked Capitalism agrees that it is a challenge, but possibly due to a different reason:
You may have noticed a crucial assumption...."workers will demand wage increases." Pray tell, how? Workers have no bargaining power in the US. Merely goosing interest rates does not a a tight labor market make.

Stagflation was seen as impossible until it took place. I wonder if we could wind up with rising bond yields due to concerns about large fiscal deficits, with a lower rate of goods inflation due to the lack of cost push (wages are a significant component of the cost of most goods, save highly capital intensive ones). In fact, we could see stagnant nominal wages with mildly positive inflation, which means wage deflation. If that was also accompanied by high yields, you would have much of the bad effects of debt deflation per Irving Fisher (high real yields and reduced ability to service debt) since real incomes would be falling in the most indebted cohort.
The key point is that in the current environment, workers have no power. While we all know about the spike in the unemployment rate, the other side of the story is the cliff dive in the number of new job openings. The odd thing is I first became fully aware of this information in Sunday's NY Times article Bleak Picture, Yes, But Help Still Wanted that made the case that the market was actually FULL of opportunity.

Consider that in March, nearly 700,000 jobs disappeared. But now consider this: At the end of March, there were 2.7 million job openings. What tends to get lost in the data picture is that just as some companies are laying off workers, other companies are hiring. In fact, the business world is changing at such a dizzying rate that some companies are cutting and hiring workers at the same time.

Uh.... no. 2.7 million is down from 4.8 million openings as recent as the Summer of 2007; when 6 million less people were unemployed. In other words, the number of job openings has halved, while the number of those unemployed has doubled. That is not "bleak"... that is frightening.

Are Worries About Rising Federal Debt Misplaced?

UPDATE 1-Chrysler submits $448 million electric car plan

ETROIT, May 26 (Reuters) - U.S. automaker Chrysler LLC said on Tuesday it submitted proposals totaling $448 million to the U.S. Department of Energy to research and develop electric vehicles and plug-in hybrid models.

Chrysler and its "partners," plus the Department of Energy, would pay $224 million each should the proposals be approved and would include an investment of up to $83 million to build a new technology and manufacturing center in Michigan to help develop and assemble these vehicles. That complex should be functional by 2010 and produce more than 20,000 vehicles a year, Chrysler said.

The applications for matching funds were made as part of two initiatives at the Department of Energy that are designed to speed up the development and manufacturing of electric vehicles and plug-in hybrids.

Chrysler has been operating in bankruptcy since April 30.

The announcement of Chrysler's proposal came a day before a judge is expected to rule on the automaker's plans to sell its most valuable assets to a new company owned by the U.S. and Canadian governments, Chrysler's union and Italian car maker Fiat SpA (FIA.MI).

It also came a week after U.S. President Barack Obama announced tough new fuel economy standards for automakers.

As of 2007, when Chrysler was still part of German automaker Daimler AG (DAIGn.DE), the U.S. automaker had the lowest fleet mileage of any of the major automakers.

That same year the company set up its ENVI unit to develop fuel-saving vehicle technology.

Chrysler said on Tuesday the vehicles it aimed to develop include the Dodge Ram 1500 plug-in hybrid, the Chrysler Town & Country plug-in hybrid and the Chrysler Town & Country electric vehicle. Continued...

Two-Thirds Off on Manhattan Office Space

From the NY Times: Manhattan’s Sublet Office Market Is Bursting (ht Sunil)

In Midtown Manhattan ... 13 percent of ... Class A space — was available in April, up from 7.2 percent a year earlier, according to Colliers ABR, a commercial real estate services company. And sublets now account for some 40 percent of the space available in Midtown, compared with 30 percent of the much smaller total that was available a year ago, the company said.
...
Robert Sammons, the managing director in charge of research at Colliers ABR, said that sublet space in trophy office towers along Madison Avenue and Park Avenue has been leasing for as little as one-third of what that space might have commanded in early 2008, at the height of the roaring market.

“A year and a half ago, this space might have leased for $150 per square foot,” Mr. Sammons said, while he has heard of recent sublets in high-end buildings in this office corridor with annual rents of as little as $40 to $50 per square foot. “This is the most remarkable turnaround in pricing that I’ve ever seen in such a short period of time.”

No wonder S&P is concerned about CMBS.

Note: that $150 sounds high, so maybe it's just half off!

Exploding debt threatens America

Standard and Poor’s decision to downgrade its outlook for British sovereign debt from “stable” to “negative” should be a wake-up call for the US Congress and administration. Let us hope they wake up.

Under President Barack Obama’s budget plan, the federal debt is exploding. To be precise, it is rising – and will continue to rise – much faster than gross domestic product, a measure of America’s ability to service it. The federal debt was equivalent to 41 per cent of GDP at the end of 2008; the Congressional Budget Office projects it will increase to 82 per cent of GDP in 10 years. With no change in policy, it could hit 100 per cent of GDP in just another five years.

“A government debt burden of that [100 per cent] level, if sustained, would in Standard & Poor’s view be incompatible with a triple A rating,” as the risk rating agency stated last week.

I believe the risk posed by this debt is systemic and could do more damage to the economy than the recent financial crisis. To understand the size of the risk, take a look at the numbers that Standard and Poor’s considers. The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP?

Inflation will do it. But how much? To bring the debt-to-GDP ratio down to the same level as at the end of 2008 would take a doubling of prices. That 100 per cent increase would make nominal GDP twice as high and thus cut the debt-to-GDP ratio in half, back to 41 from 82 per cent. A 100 per cent increase in the price level means about 10 per cent inflation for 10 years. But it would not be that smooth – probably more like the great inflation of the late 1960s and 1970s with boom followed by bust and recession every three or four years, and a successively higher inflation rate after each recession.

(More)

How Far From the Bottom? (Video)

JPMorgan’s $29 Billion windfall

JPMorgan Chase & Co. stands to reap a $29 billion windfall thanks to an accounting rule that lets the second-biggest U.S. bank transform bad loans it purchased from Washington Mutual Inc. into income.

Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look

With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax -- called a value-added tax, or VAT -- has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government's budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama's policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

"There is a growing awareness of the need for fundamental tax reform," Sen. Kent Conrad (D-N.D.) said in an interview. "I think a VAT and a high-end income tax have got to be on the table."

A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American -- a tangible benefit that would be highly valuable to low-income families.

Liberals dispute that notion. "You could pay for it regressively and have people at the bottom come out better off -- maybe. Or you could pay for it progressively and they'd come out a lot better off," said Bob McIntyre, director of the nonprofit Citizens for Tax Justice, which has a health financing plan that targets corporations and the rich.

A White House official said a VAT is "unlikely to be in the mix" as a means to pay for health-care reform. "While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers," said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag.

(More)

Mental Health Center Closes

The steady increase of mentally ill residents combined with Sacramento County's budget woes forced the county's main psychiatric hospital late Friday to close its doors to new patients.

The doors remained closed through Tuesday – and might stay closed for several more days, officials said, until its caseload falls.

Officials said the scene could repeat itself throughout the year as local and state funding continue their decline.

The situation, officials and advocates say, suggests the state is at the brink of a mental health catastrophe.

"I think that Sacramento County – like all counties in California – is facing a mental health crisis," said Dorian Kittrell, executive director of the Mental Health Treatment Center. "Unfortunately when (budget) cuts are needed, health care is often at or near the top of the list over and over again. And unfortunately, there's only so much a system can bear before it breaks."

The Mental Health Treatment Center handles the most severe psychiatric cases in the county. That's where police or concerned family members take people who pose a danger to themselves or others.

Caseloads have risen in recent years as the region's population has grown. The crisis center now sees about 590 patients a month, compared with 540 a month in fiscal year 2004-05, Kittrell said.

The admission rate from the crisis center to the inpatient unit has remained steady at almost 48 percent, he added.

The growth has pushed the treatment center – which has a capacity of 100 in its inpatient unit – to its limits.

To alleviate overcrowding, the Board of Supervisors allocated an additional $4.3 million to the treatment center in fiscal year 2006-07 to outsource patients to other facilities. Essentially, that paid for beds in other psychiatric hospitals such as Heritage Oaks Hospital, Sierra Vista Hospital and Sutter Center for Psychiatry, Kittrell said.

The county allocated that money again in fiscal year 2007-2008 and in the preliminary budget this year. The county, however, had to cut $1.2 million of that funding from this year's final budget in response to cuts the state made in the fall, Kittrell said.

By midyear the treatment center was out of money to send psychiatric patients to other hospitals.

(More)

Police officers saved by stimulus may still lose jobs

(CNN) -- It was a success story the White House was eager to highlight: Earlier this year, President Obama attended the graduation of 25 police recruits in Columbus, Ohio, touting it as a victory for the federal stimulus package.

On March 6 in Columbus, Ohio, President Obama touted the jobs the stimulus plan would save.

Without the money, the officers never would have hit the streets. They were to be laid off before their first day of patrol, victims of city budget cuts, until the stimulus money saved the class.

But the White House said the $1.2 million grant only guaranteed their jobs until the end of the year. And facing a growing deficit and a fight to pass an income tax hike, Columbus Police on Tuesday announced massive budget cuts that could mean hundreds of layoffs.

Among those who could lose their jobs if voters reject the increase: the 25 new officers who shook the president's hand.

Police chief warns of deep cuts (Chart)

Toledo police layoffs leading to gun buying

"I just don't feel safe with the amount they're laying off," says Jonna Ewing. "I think it's going to be a longer respond time."

She is spending the day at a conceal carry class. She's been thinking of getting a gun for awhile, but feels now's the time due to the recent layoffs.

Americans' credit scores fall as they struggle to pay bills

As more consumers struggle with bills, their credit scores are paying a price. From the third quarter of 2008 to the first quarter of 2009 — the latest data available — the average TransUnion credit score dropped 6 points to 651, the credit bureau says. Scores fell more dramatically in states hardest hit by the housing bust: California saw a 10-point drop, for example, and Arizona, 11.

"Consumers are feeling the bite of the current recession," says Ezra Becker, a director in TransUnion's financial services group. "With delinquencies showing up in credit files, it's not surprising that the average score is decreasing somewhat."

Becker believes credit scores aren't likely to improve — and could even drop further — through the second quarter of 2010.

More than 200 million U.S. consumers have credit scores, so a change of even a few points in the national average can be significant, experts say.

IRS tax revenue falls along with taxpayers' income

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says

14 Comments

gregroberts's picture
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Re: Daily Digest - May 29

"Dairy farmers in desperate straits

Two farmers have killed themselves.

The pain is being felt throughout the U.S. industry, but it's especially keen in California, the No. 1 dairy state. The Golden State's 1,800 dairies produce $7 billion worth of milk annually, more than one-fifth of the nation's supply. Slumping international demand combined with an American public ordering fewer cheese pizzas has turned the milk market sour.

Current prices are about half of what it costs California producers to feed and milk their herds; every carton sold in the supermarket represents a loss on the farm. Farmers are staying afloat by getting loans secured by every cow, tractor and acre they own. But experts say that if milk prices don't rise in the coming months, many farmers will burn through their cash and go out of business."
 

http://www.latimes.com/business/la-fi-milk-crisis29-2009may29,0,6551352.story
 
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2.7 Million Job Openings

At the end of March, there were 2.7 million job openings.

So, why aren't those jobs being filled, when there are 3x as many people unemployed?

A. The unemployed aren't qualified for those jobs (e.g. an unemployed auto worker can't fill the job of an electrical engineer)

B. The unemployed ARE qualified, but the wages being offered are not high enough.

C. Other, and/or some combination of the above.

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Re: Daily Digest - May 29 INFLATION

I'm unclear about something.  How can production (thus GDP) be raised when there is no demand to speak of, and workers are not employed?  Isn't it the plan of you-know-who to use inflation again, as the way to lower the cost of debt repayment since that really only hurts the people at the lower ends of the economic scale, like retired, etc who have no way of increasing their incomes fast enough to cover the increases in cost of living?  

My wife is a retired school teacher, and she's had NO cola in her little retirement check since 2000. That's 9 years.  How far is she REALLY behind now, even at 4 % annual cost of living increases?

(Of course, she realizes she's so much better off than those who've lost the jobs, and she's thankful for what she gets as her reward of 32 years in special education classrooms.  But I think there's a principle involved here somewhere.)

It seems to me that inflation is just one more way to shift wealth upward.  So, who's in charge of that?

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Re: Daily Digest - May 29

I was going to post this LA Times article too. It's really tragic, not just the two suicides, but what is really the suicide of the farms themselves. I suppose it can be argued that we can survive without car manufacturing (though not very convincingly), but can we survive without food production? It truly must be the sign of a dysfunctional system that values cheap milk above it's source of production. That has to be the epitome of what we are so good at,   short sighted thinking.

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Re: Daily Digest - May 29

'm unclear about something. How can production (thus GDP) be raised when there is no demand to speak of, and workers are not employed? Isn't it the plan of you-know-who to use inflation again, as the way to lower the cost of debt repayment since that really only hurts the people at the lower ends of the economic scale, like retired, etc who have no way of increasing their incomes fast enough to cover the increases in cost of living?

My wife is a retired school teacher, and she's had NO cola in her little retirement check since 2000. That's 9 years. How far is she REALLY behind now, even at 4 % annual cost of living increases?

(Of course, she realizes she's so much better off than those who've lost the jobs, and she's thankful for what she gets as her reward of 32 years in special education classrooms. But I think there's a principle involved here somewhere.)

It seems to me that inflation is just one more way to shift wealth upward. So, who's in charge of that?

Some really great reasons why the BLS and the BEA should use real numbers not Enron accounting when doing the GDP and the Unemployment and CPI.

Imputations, Hedonics, Birth Death Adjustments, backing out food and gas just makes it harder for those on a fixed income and it robs savers.

At least Bernie Madoff turned himself in for screwing with numbers. Even the Ninja borrowers who thought they could pay are now paying dearly.

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Re: Daily Digest - May 29

Class of '09: You're Screwed


05/29/09 London, England Last weekend, we journeyed to Boston to attend a college graduation. Thousands of callow scholars were on display. Each was handed his papers…and then marched out of the hockey stadium. To the tune of ‘Pomp & Circumstance,’ wearing a long, red robe, he entered the outside world solemnly…like a patsy joining a poker game.

So far, not a single major university has asked us to make the commencement address. Nor a minor college. Not even a school of cosmetology or taxidermy. But here at the Daily Reckoning headquarters in London, protected by a broad ocean and a narrow reading of the First Amendment, we will give them – and UK graduates too – advice no one asked for.

“Plastics,” was the advice given to college graduates in Mike Nichols’ ’67 film. But that was when there was still hope for America’s manufacturing sector. Even then, it was too late.The percentage of GDP from the manufacturing sector fell for the next four decades, from over 20% in the last ’60s to barely 12% last year. Better advice would have been ‘derivatives.’ They stank just as bad, but they were much more profitable. While only 8% of GDP, finance accounted for 40% of corporate profits in 2007. And derivatives grew from nothing to a face value of 16 times the GDP of the entire planet.

But your elders are always giving you bum advice.

“You cannot decline the burdens of empire and still expect to share its honors,” said Pericles to the class of 430BC. He lived during a time not unlike your parents’ era in the USA – when Athens was on top of the world. But vanity got the better of him. He launched an attack on Sparta that backfired badly. He soon died of plague and Athens was not only ruined, but enslaved. Athens’ ‘golden age’ turned to lead. Young Athenians should have shrugged off the burden rather than accept it. You should do the same.

When you were born 20-some years ago, the nation’s total debt per person was less than $90,000 – adjusted to ’09 dollars, of course. While that was a lot of money, it was nothing compared to what was coming. Now it’s $186,717 per person – more than twice as much, in real terms. Fortunately, private debt is not inheritable. But it comes to you as a lien against property. Instead of paying off their mortgages and leaving you a house, free and clear, the baby boomer generation spent the ‘equity’ in their houses even faster than they got it. House prices rose. But mortgage debt rose faster. While your grandparents owned 80% of their houses, by 2007, the typical homeowner only really owned 4 rooms of an 8-room house. And then, when house prices fell, so did his remaining equity…to the point where one out of six homeowners in America is now underwater. You could still eventually inherit a house, but you may have to scrape the barnacles off the front porch.

But that’s not even the half of it. While your parents had control of the US government they allowed themselves a little larceny. Add the unfunded retirement and healthcare benefits they voted for themselves to the official national debt, and together they are scheduled to cost your generation 4 times the total annual output of the US. This is over and above the private debt they accumulated.

Some of this debt can be carried. Some will have to paid down. But as it stands, as much as $77 trillion of post-’09 earnings must be stolen from the future in order to pay for the liquor your parents drank…the bombs they dropped on god-forsaken foreigners…and the interest on their debts. So, forget about saving for a European vacation or a house of your own.Even if every penny of your savings – and every other American’s savings – are put to the task you will still be paying for your parents’ expenses all your life.

...

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Re: Daily Digest - May 29

Peter Schiff today....

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TOLEDO

Another elderly Toledoan was attacked in their home today.  Fortunately, our dwindling police force was able to arrest the perpetrator.

Along the lines of gun buying, doing so may be a complete waste of time.  Unless, of course, the gun you buy in Ohio comes with plenty of shells.  A friend who is an Auxillary Sheriff Deputy recently told me that his friend who does all the purchasing for a suburban police department's tactical unit cannot buy ammunition anywhere in Ohio because vendors are completely wiped out.  Meaning shells are at a premium and police departments are not practicing their marksmanship, which may make it difficult for peace officers to meet annual qualification requirements.

Obama may not ban guns, but the military's refusal to sell spent brass for recycling is having an impact in the world of ammunition, which means there's no need to ban guns if there's no bullets.  Almost genius.

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Re: Daily Digest - May 29

Manipulation: How Markets Really Work

by Stephen Lendman

Wall Street's mantra is that markets move randomly and reflect the collective wisdom of investors. The truth is quite opposite. The government's visible hand and insiders control markets and manipulate them up or down for profit - all of them, including stocks, bonds, commodities and currencies.

It's financial fraud or what former high-level Wall Street insider and former Assistant HUD Secretary Catherine Austin Fitts calls "pump and dump," defined as "artificially inflating the price of a stock or other security through promotion, in order to sell at the inflated price," then profit more on the downside by short-selling. "This practice is illegal under securities law, yet it is particularly common," and in today's volatile markets likely ongoing daily.

Why? Because the profits are enormous, in good and bad times, and when carried to extremes like now, Fitts calls it "pump(ing) and dump(ing) of the entire American economy," duping the public, fleecing trillions from them, and it's more than just "a process designed to wipe out the middle class. This is genocide (by other means) - a much more subtle and lethal version than ever before perpetrated by the scoundrels of our history texts."

Fitts explains that much more than market manipulation goes on. She describes a "financial coup d'etat, including fraudulent housing (and other bubbles), pump and dump schemes, naked short selling, precious metals price suppression, and active intervention in the markets by the government and central bank" along with insiders. It's a government-business partnership for enormous profits through "legislation, contracts, regulation (or lack of it), financing, (and) subsidies." More still overall by rigging the game for the powerful, while at the same time harming the public so cleverly that few understand what's happening.

Market Rigging Mechanisms - The Plunge Protection Team

On March 18, 1989, Ronald Reagan's Executive Order 12631 created the Working Group on Financial Markets (WGFM) commonly known as the Plunge Protection Team (PPT). It consisted of the following officials or their designees:

...

The idea that equity prices reflect true value or that markets move randomly (up or down) is rubbish. They never have and more than ever don't now.

The Exchange Stabilization Fund (ESF)

The 1934 Gold Reserve Act created the US Treasury's ESF. Section 7 of the 1944 Bretton Woods Agreements made its operations permanent. As originally established, the Treasury ran the Fund outside of congressional oversight "to keep sharp swings in the dollar's exchange rate from (disrupting) financial markets" through manipulation. Its operations now include stabilizing foreign currencies, extending credit lines to foreign governments, and last September to guaranteeing money market funds against losses for up to $50 billion.

In 1995, the Clinton administration used the fund to provide Mexico a $20 billion credit line to stabilize the peso at a time of economic crisis, and earlier administrations extended loans or credit lines to China, Brazil, Ecuador, Iceland and Liberia. The Treasury's web site also states that:

"By law, the Secretary has considerable discretion in the use of ESF resources. The legal basis of the ESF is the Gold Reserve Act of 1934. As amended in the late 1970s....the Secretary (per) approval of the President, may deal in gold, foreign exchange, and other instruments of credit and securities."

In other words, ESF is a slush fund for whatever purposes the Treasury wishes, including ones it may not wish to disclose, such as manipulating markets, directing funds to the IMF and providing them with strings to borrowers as the Treasury's site explains:

"....Treasury has often linked the availability of ESF financing to a borrower's use of the credit facilities of the IMF, both to support the IMF's role and to strengthen assurances that there will be timely repayment of ESF financing."

The Counterparty Risk Management Policy Group (CRMPG)

Established in 1999 in the wake of the Long Term Capital Management (LTCM) crisis, it manipulates markets to benefit giant Wall Street firms and high-level insiders.
...
In fact, the "private sector" creates "financial shocks" to open markets, remove competition, and consolidate for greater power by buying damaged assets cheap. Financial history has numerous examples of preying on the weak, crushing competition, socializing risks, privatizing profits, redistributing wealth upward to a financial oligarchy, creating "tollbooth economies" in debt bondage according to Michael Hudson, and overall getting a "free lunch" at the public's expense.
...
Michel Chossudovsky explains that: "triggering market collapse(s) can be a very profitable undertaking. (Evidence suggests) that the Security and Exchange Commission (SEC) regulators have created an environment which supports speculative transactions (through) futures, options, index funds, derivative securities (and short-selling), etc. (that) make money when the stock market crumbles....foreknowledge and inside information (create golden profit opportunities for) powerful speculators" able to move markets up or down with the public none the wiser.

As a result, concentrated wealth and "financial power resulting from market manipulation is unprecedented" with small investors' savings, IRAs, pensions, 401ks, and futures being decimated from it.

Deconstructing So-Called "Green Shoots"

Daily the corporate media trumpet them to lull the unwary into believing the global economic crisis is ebbing and recovery is on the way. Not according to longtime market analyst Bob Chapman who calls green shoots "Poison Ivy" and economist Nouriel Roubini saying they're "yellow weeds" at a time there's lots more pain ahead.
...

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Re: Daily Digest - May 29 INFLATION

Ben A wrote:
I'm unclear about something.  How can production (thus GDP) be raised when there is no demand to speak of, and workers are not employed?

If there are enough resources and people willing to work, production can always be raised. There is plenty of demand and various needs around the world, but the real problem is artifitially created shortage of medium of exchange. That goes through unfair tax system where the richest pay the least or doesn`t pay taxes at all and especially through privatized monetary system which gives few people opportunity to control the many.

So, if newly created money would be put in circulation DEBT-FREE by spending it on infrastructure or by giving government loans to manufacturers which in turn produce various goods and servicies, there would be a balans between supply and demand and the best thing is, they would rise simultaneously with no inflation or deflation. Money would retain its value over time. Today, most of the newly created money goes directly into consumption or for derivative and other gambling schemes. Combining with charging interests and thus asking for money that does not exist, banksters badly hurting the economy and society as a whole.

More information here http://www.monetary.org/amacolorpamphlet.pdf

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Re: Daily Digest - May 29

I'm not done listening but part 3a here Puplava has some numbers that are staggering. Deficit debt of 2 trillion and 10 trillion by years end. He also points out that 50% of the bonds come due this year.

IMHO Chris's bond bubble article of way back when was quite forward looking.

Select an Audio Format - Part 1

RealPlayer | WinAmp | Windows Media | Mp3 Reading the Economic Tea Leaves The Coming Oil Shock Wave Select an Audio Format - Part 2RealPlayer | WinAmp | Windows Media | Mp3 Investment Strategy 2nd Half Other Voices: Eric King Q-Calls  
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VeganD
Status: Platinum Member (Offline)
Joined: Jul 18 2008
Posts: 580
Re: Daily Digest - May 29

Suicide is always a tragedy, I am sorry to hear about this but it is understandable-these farmers (not the corps but the real farmers) have always lived on a very narrow margin or so I have read.  Now mental health services are being cut too. I can tell you,seeing my patients get laid off one after the other, that in my own little world there is a skyrocketing rate of severe depression, recurrence to substance abuse and anxiety and suicidal ideation.  We shall see what the suicide statistics show as this recession goes on. Very sad. 

Denise

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