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Daily Digest - Feb 13

Thursday, February 12, 2009, 10:23 PM
  • Comedy (Video)
  • Economist, Rivlin, Marron, Rogogg and Krugman, Kicking the can down the road? (Video, don't miss the 7:00 - on point and Part II)
  • Primary Bond Market Flow Chart
  • Fed in Talks to Add Primary Dealers as Sales Surge
  • Home Prices in U.S. Slid 12% in Fourth Quarter, Most on Record
  • Greenspan Says He Was Mystified by Subprime Market
  • New Bailout Plan, Paying The Neighbor's Mortgage, Rallies Market
  • Stimulus plan compromise
  • Will the stimulus actually stimulate? Economists say no
  • More...
  • Unemployment (Chart, averages now > 600k initial and >800 Continued)
  • Effective Practices in Crisis Resolution and the Case of Sweden
  • Blair: Global economic fallout is nation's major threat (Hat Tip Christopher Peters)
  • Global economic crisis, economy not terrorism is the biggest threat (Video)
  • States Push to Take Back National Guard
  • RX FOR CITY: 4-DAY WEEK
  • Band-Aids for the Ailing Economy
  • Seven Stages of a Bubble
  • China Tidbits
  • Commodity Snapshot (Chart)

 

Economy 

Comedy (Video)

Economist, Rivlin, Marron, Rogogg and Krugman, Kicking the can down the road? (Video, don't miss the 7:00 -on point and Part II)

Part II (4:50 point on)

Primary Bond Market Flow Chart

Fed in Talks to Add Primart Dealers as Sales Surge 

Feb. 12 (Bloomberg) -- The Federal Reserve Bank of New York is in talks with at least four firms to expand the network of dealers that underwrite government-bond auctions as the U.S. prepares to sell more than $2 trillion in debt this year. 

MF Global Ltd. and Nomura Securities International Inc. are in discussions to join the 16 so-called primary dealers that trade directly with the central bank and are required to bid at auctions, officials at the companies said. RBC Capital Markets, the investment-banking arm of Canada's biggest bank, and Jefferies & Co., a brokerage for institutional investors, are in negotiations, according to people familiar with the process.

Treasury Department and Fed officials want to ensure there are enough firms bidding at auctions to keep borrowing costs low after the total number of dealers dropped last year to the lowest amount since the network was formalized in 1960. The Treasury Borrowing Advisory Committee, a market group that works with the central bank, wrote in a memo released Feb. 4 that more dealers would reduce "the possibility of an undersubscribed auction."

"With the contraction in primary dealers in the marketplace over the past year, clearly there's a need to replace some of them, especially with the increased issuance coming out of the Treasury," said Donald Galante, a senior vice president in New York at MF Global, which he said is in talks with the central bank about a dealership position. 

Home Prices in U.S. Slid 12% in Fourth Quarter, Most on Record 

Feb. 12 (Bloomberg) -- Home prices dropped the most on record in the fourth quarter as foreclosures dragged down values and the recession pushed buyers out of the market. 

The median price of a U.S. home declined 12 percent to $180,100 from a year earlier and sales of properties with mortgages in default accounted for 45 percent of all transactions, the Chicago-based National Association of Realtors said today. Prices declined in almost nine out of every 10 cities.

The worst U.S. housing slump since the Great Depression is deepening as foreclosures drain value from neighboring homes and the economic recession worsens. The number of Americans collecting unemployment benefits rose to a record 4.81 million in the last week of January as companies such as Caterpillar Inc. and Home Depot Inc. slashed jobs. The U.S. lost 2.6 million jobs last year in the biggest workforce reduction since 1945. 

Greenspan Says He Was Mystified by Subprime Market 

Mr. Greenspan also lays the blame on the ratings agencies and the people that trusted their judgment for the proliferation of the mortgage derivatives that were a major part of the current financial crisis. 

New Bailout Plan, Paying The Neighbor's Mortgage, Rallies Market 

The market rallied strongly into the close on news that the Administration was planning to offer financial help to deserving homeowners who are falling behind on their mortgages. 

According to Reuters, "The Obama administration is hammering out a program to subsidize mortgage payments for troubled homeowners who have gone through a standardized re-appraisal and affordability test."

That means some taxpayers will be helping cover the mortgage of the person who lives next door to them. In a perverse way that works out. A foreclosure hurts the value of every home in its neighborhood. 

Stimulus plan compromise

Will the stimulus actually stimulate? Economists say no

WASHINGTON - The compromise economic stimulus plan agreed to by negotiators from the House of Representatives and the Senate is short on incentives to get consumers spending again and long on social goals that won't stimulate economic activity, according to a range of respected economists.

"I think (doing) nothing would have been better," said Ed Yardeni, an investment analyst who's usually an optimist, in an interview with McClatchy. He argued that the plan fails to provide the right incentives to spur spending.

"It's unfocused. That is my problem. It is a lot of money for a lot of nickel-and- dime programs. I would have rather had a lot of money for (promoting purchase of) housing and autos . . . . Most of this plan is really, I think, aimed at stabilizing the situation and helping people get through the recession, rather than getting us out of the recession. They are actually providing less short-term stimulus by cutting back, from what I understand, some of the tax credits."

Unemployment (Chart, averages now > 600k initial and >800 Continued)

Effective Practices in Crisis Resolution and the Case of Sweden 

The current financial crisis is a painful reminder that the developed world is not yet immune from these devastating shocks. But while we haven't learned to prevent them, we have learned some lessons about what is necessary to contain them once they begin and to limit the damage that follows. As policymakers worldwide focus on resolving the current financial crisis, they might look to Sweden as a useful model for effective strategies. 

Blair: Global economic fallout is nation's major threat (Hat Tip Christopher Peters)

Global economic crisis, economy not terrorism is the biggest threat (Video)

States Push to Take Back National Guard 

Going on its seventh year, the Iraq war has taken its toll on not only the US military, but also on the states's National Guard units, which were called up when Congress passed the 2002 Authorization to Use Military Force (AUMF) against Iraq. Now a growing state-level movement is working to keep the Guard at home. 

Its logic: The AUMF's goals have been fulfilled. The authorization's explicit purposes were to defend the US against the "threat posed by Iraq" and to enforce UN Security Council resolutions regarding Iraq's alleged ballistic missiles and weapons of mass destruction. Saddam Hussein - along with his supposed threat - is gone, and the UN resolutions are no longer relevant, so there's no longer a mandate to keep troops in Iraq.

The president can call up the states' Guard units in a time of war. But when the mandate for war becomes obsolete, say members of the Bring the Guard Home: It's the Law (BTGH) campaign, sending those troops overseas is illegal. BTGH members and their allies are now sponsoring a chain of bills and resolutions in states across the country, demanding an investigation into the legality of deploying the Guard to Iraq, and a refusal to comply with any illegal federal orders.

"There is not Congressional authorization for the use of the Guard today," Vermont State Rep. Mike Fisher told Truthout. "One Guard member improperly called into federal service to fight a war - that's a real problem. Choosing to go to war is one of the most serious decisions that we make. The very least we can do is follow the Constitution." 

RX FOR CITY: 4-DAY WEEK 

The recession-ravaged city should consider imposing a four-day workweek on municipal employees, reducing health and vacation benefits for new workers and adopting pension formulas that don't count overtime, a study released yesterday found. 

Some of the changes would remedy questionable FDNY pension practices revealed this week by The Post. 

Band-Aids for the Ailing Economy

Seven Stages of a Bubble 

Stage seven - Revulsion 

Sometimes, panic of the insiders infects the outsiders. Other times, it is the end of cheap credit or some unanticipated piece of news. But whatever may be, euphoria is replaced with revulsion. The building is on fire and everyone starts to run for the door. Outsiders start to sell, but there are no buyers. Panic sets in; prices start to tumble downwards, credit dries up, and losses start to accumulate.

Here is the paradox of all bubbles - everyone knows how the fatal combination of easy credit, overtrading and euphoria will affect prices. Minsky didn't need to write down a thing about the madness of speculation. America's investors have a lifetime of experience. Within the space of five years, America moved from the tech stock bubble into the real estate bubble.Today's housing prices are grossly overvalued. Everyone knows that prices will collapse. It might be tomorrow, or it might be two years from now. One thing, however is certain, the longer it takes for the bubble to burst, the more painful it will be. 

China Tidbits 

Job Loss:The Chinese government says that 20 million
migrant workers have "recently lost their jobs," according to state
media. This follows an official statement that 2009 would be "possibly
the toughest year" for economic development in China since the turn of
the century. 

Some 15.3 per cent of China's 130 migrant workers are now jobless, the Ministry of Agriculture said in a statement.

China says five to six million new migrant workers are trying to enter
the job market every year. "Therefore, about 25 million rural migrant
workers will face huge pressure finding jobs this year," Chen Xiwen,
Director of the advisory body Central Rural Work Leading Group, said.

Chen added that, "The increasing number of jobless migrant workers has posed a fresh threat to the social stability."

UK-based The Guardian newspaper says that, "Some economists say the real figure could ultimately reach 40 million." 

Commodity Snapshot (Chart)

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14 Comments

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Feb 13

government.jpg

Our solutions have created more problems! ~ Dr. Al Bartlett

And just to clarify, I'm not anti-government or an anarchist ---- I just hate stupidity. 

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - Feb 13

Lloyds shares tumble on HBOS loss

By Europe correspondent Emma Alberici

http://www.abc.net.au/news/stories/2009/02/14/2491461.htm?section=justin

Shares in Lloyds Banking Group plunged 40 per cent overnight after it revealed that HBOS, the bank it rescued last year, had made a loss of $22 billion.

Lloyds Banking Group is now 43 per cent owned by the British taxpayer after the Government pumped $37 billion into the bank last year and agreed to a Lloyds takeover of HBOS.

A statement from the bank said trading at HBOS had worsened in December, driving its losses to 10 billion pounds ($22 billion).

The statement seemed to contradict assurances by the bank's chairman in January that all the bad news about HBOS had been revealed.

Shares in Lloyds, the bank which traces its origins back 244 years, were trading at 60 pence ($1.30) overnight.

joemanc's picture
joemanc
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Posts: 834
Re: Daily Digest - Feb 13

3 more banks failed...must be Friday night!!

Quote:

Banks in Florida, Illinois and
Nebraska were shut by state regulators, boosting the toll of
failed institutions to 12, as a worsening economy and slumping
housing market pushes home foreclosures to records.

http://bloomberg.com/apps/news?pid=20601087&sid=a.5SavmJX_Bk&refer=home

 

Davos's picture
Davos
Status: Diamond Member (Offline)
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Posts: 3620
Re: Daily Digest - Feb 13

Hello JoeManC:

I'm seeing a LOT of economists really talking about nationalization. Yves was on CNN,  http://money.cnn.com/video/#/video/news/2009/02/11/news.yves.smith.bailout.cnnmoney

joemanc's picture
joemanc
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Posts: 834
Re: Daily Digest - Feb 13

Ron Paul on today's House vote - 1100+ page stimulus(depressant) document posted at 12:30AM this morning, voted on this afternoon...yup, business as usual reigns in D.C.

Damnthematrix's picture
Damnthematrix
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Posts: 3998
banks are like dead men walking.

In the NYT, no less :

http://www.nytimes.com/2009/02/13/business/economy/13insolvent.html?pagewanted=1&_r=3&emc=eta1

Ailing Banks May Require More Aid to Keep Solvent

Published: February 12, 2009

Some of the nation’s large banks, according to economists and other finance experts, are like dead men walking.

A sober assessment of the growing mountain of losses
from bad bets, measured in today’s marketplace, would overwhelm the
value of the banks’ assets, they say. The banks, in their view, are
insolvent.

None of the experts’ research focuses on individual banks, and there
are certainly exceptions among the 50 largest banks in the country. Nor
do consumers and businesses need to fret about their deposits, which
are federally insured. And even banks that might technically be
insolvent can continue operating for a long time, and could recover
their financial health when the economy improves.

But without a cure for the problem of bad assets, the credit crisis
that is dragging down the economy will linger, as banks cannot resume
the ample lending needed to restart the wheels of commerce. The answer,
say the economists and experts, is a larger, more direct government
role than in the Treasury Department’s plan outlined this week.

The Treasury program leans heavily on a sketchy public-private investment fund to buy up the troubled mortgage-backed
securities held by the banks. Instead, the experts say, the government
needs to plunge in, weed out the weakest banks, pour capital into the
surviving banks and sell off the bad assets.

It is the basic blueprint that has proved successful, they say, in resolving major financial crises in recent years.

Japan endured a lost decade of economic stagnation in the 1990s before it adopted such measures from 2001 to 2003.

The Swedish government took tough steps in 1992 and Washington did so in 1987 to 1989 to overcome the savings and loan crisis.

“The historical record shows that you have to do it eventually,”
said Adam S. Posen, a senior fellow at the Peterson Institute for
International Economics. “Putting it off only brings more troubles and
higher costs in the long run.”

Of course, the Obama administration’s stimulus plan could help to spur economic recovery in a timely manner and the value of the banks’ assets could begin to rise.

Absent that, the prescription would not be easy or cheap. Estimates
of the capital injection needed in the United States range to $1
trillion and beyond. By contrast, the commitment of taxpayer money is
the $350 billion remaining in the financial bailout approved by
Congress last fall.

Meanwhile, the loss estimates keep mounting.

Nouriel Roubini, a professor of economics at the Stern School of Business at New York University,
has been both pessimistic and prescient about the gathering credit
problems. In a new report, Mr. Roubini estimates that total losses on
loans by American financial firms and the fall in the market value of
the assets they hold will reach $3.6 trillion, up from his previous
estimate of $2 trillion.

Of the total, he calculates that American banks face half that risk,
or $1.8 trillion, with the rest borne by other financial institutions
in the United States and abroad.

“The United States banking system is effectively insolvent,” Mr. Roubini said.

For its part, the banking industry bridles at such broad-brush
analysis. The industry defines solvency bank by bank, and uses the
value of a bank’s assets as they are carried on its books rather than
the market prices calculated by economists.

“Our analysis shows that the banks have varying degrees of solvency
and does not reveal that any institution is insolvent,” said Scott
Talbott, senior vice president of government affairs at the Financial
Services Roundtable, a trade group whose members include the largest
banks.

Edward L. Yingling, president of the American Bankers Association,
called claims of technical insolvency “speculation by people who have
no specific knowledge of bank assets.”

Mr. Roubini’s numbers may be the highest, but many others share his
rising sense of alarm. Simon Johnson, a former chief economist at the International Monetary Fund,
estimates that the United States banks have a capital shortage of $500
billion. “In a more severe recession, it will take $1 trillion or so to
properly capitalize the banks,” said Mr. Johnson, an economist at the Massachusetts Institute of Technology.

At the end of January, the I.M.F. raised its estimate of the
potential losses from loans and other credit securities originated in
the United States to $2.2 trillion, up from $1.4 trillion last October.
Over the next two years, the I.M.F. estimated, United States and
European banks would need at least $500 billion in new capital, a
figure more conservative than those of many economists.

Still, these numbers are all based on estimates of the value of complex mortgage-backed
securities in a very uncertain economy. “At this moment, the
liabilities they have far exceed their assets,” said Mr. Posen of the
Peterson institute. “They are insolvent.”

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
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Re: Daily Digest - Feb 13
Quote:

I'm seeing a LOT of economists really talking about nationalization. Yves was on CNN,

Davos - Just watched the link...stay tuned, tomorrow they'll be talking about a Bad Bank again. There's no plan, no transparency, no direction, you name it. And worst of all, everyone, but a few, are only talking about the symptoms and not the disease itself, a failed banking system. This is not going to end well.

bikemonkey's picture
bikemonkey
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Posts: 45
Re: Daily Digest - Feb 13

I think the common people may finally be mobilizing around a common center. 

A family member sent this to me. 

 http://www.bornagainamerican.org/

 He works at ibm and recently saw coworkers he has worked decades with laid off.  The person behind this is Norman Lear, tv producer and public policy pundit.  With Lear's backing, this could have legs.

cwixom's picture
cwixom
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Posts: 44
Re: Daily Digest - Feb 13

I just finished watching the videos in the first post. 

I can't believe what Donald Marron said.  "These things (SIVs, CDOs, MBSs, CDSs) were very profitable in O7 and 08"  Geese buddy, so was the Madoff Ponzi scheme!  All fraud is very profitable until the scheme unravels.  And then he has the nerve to say that private equity was going to need public sector guarantees to get them back into the market, even if it means that some of them (the purchases of bad debt packages) would be more profitable than originally anticipated, which is just another way of saying we (the private equity firms) want none of the down side risk but all of the upside potential.  Here is my response, "Donald, if you can't play with the big dogs and if the risk is to high for your taste, get out of the game and don't come begging me for a floor under your investment because quite frankly I didn't get a fat bonus last year, in fact, I didn't get any kind of bonus at all.

Based on her comments my money says that Alice Rivlin has at least two "Obama in 08" bumper stickers on every car she owns and three Obama yard signs still on display at her home.

CB's picture
CB
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Posts: 365
Re: more good news

http://www.nytimes.com/2009/02/15/business/15global.html?hp 

Quote:

Rise in Jobless Poses Threat to Stability Worldwide

Published: February 14, 2009

PARIS — From lawyers in Paris to factory workers in China and bodyguards in Colombia, the ranks of the jobless are swelling rapidly across the globe.

Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs.

High unemployment rates, especially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria and Iceland and contributed to strikes in Britain and France.

Last month, the government of Iceland, whose economy is expected to contract 10 percent this year, collapsed and the prime minister moved up national elections after weeks of protests by Icelanders angered by soaring unemployment and rising prices.

Just last week, the new United States director of national intelligence, Dennis C. Blair, told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism.

“Nearly everybody has been caught by surprise at the speed in which unemployment is increasing, and are groping for a response,” said Nicolas Véron, a fellow at Bruegel, a research center in Brussels that focuses on Europe’s role in the global economy.

In emerging economies like those in Eastern Europe, there are fears that growing joblessness might encourage a move away from free-market, pro-Western policies, while in developed countries unemployment could bolster efforts to protect local industries at the expense of global trade.

Indeed, some European stimulus packages, as well one passed Friday in the United States, include protections for domestic companies, increasing the likelihood of protectionist trade battles.

Protectionist measures were an intense matter of discussion as finance ministers from the Group of 7 economies met this weekend in Rome. [Page A16.]

While the number of jobs in the United States has been falling since the end of 2007, the pace of layoffs in Europe, Asia and the developing world has caught up only recently as companies that resisted deep cuts in the past follow the lead of their American counterparts.

The International Monetary Fund expects that by the end of the year, global economic growth will reach its lowest point since the Depression, according to Charles Collyns, deputy director of the fund’s research department. The fund said that growth had come to “a virtual halt,” with developed economies expected to shrink by 2 percent in 2009.

“This is the worst we’ve had since 1929,” said Laurent Wauquiez, France’s employment minister. “The thing that is new is that it is global, and we are always talking about that. It is in every country, and it makes the whole difference.”

In Asia, any smugness at having escaped losses on American subprime debt has been erased by growing despair over a plunge in sales among major exporters. On Thursday, Pioneer of Japan said it would abandon the flat-screen television business and cut 10,000 jobs worldwide in response to sagging demand for consumer electronics.

Millions of migrant workers in mainland China are searching for jobs but finding that factories are shutting down. Though not as large as the disturbances in Greece or the Baltics, there have been dozens of protests at individual factories in China and Indonesia where workers were laid off with little or no notice.

The breadth of the problem is also becoming apparent in Taiwan, where exports were down 42.9 percent last month, compared with a year ago, the steepest plunge in Asia.

Chang Yung-yun, a 57-year-old restaurant kitchen worker, was laid off when her employer closed in mid-November. Her son, an engineer, has been put on unpaid vacation for weeks, a tactic that has become common in Taiwan.

“The greatest fear for our people is losing jobs,” Taiwan’s president, Ma Ying-jeou, said in an interview.

Calls for protectionism have resonated among a fearful public. In Britain, refinery and power plant employees walked off the job last month to protest the use of workers from Italy and Portugal at a construction project on the coast. Some held up signs highlighting Prime Minister Gordon Brown’s earlier promise of “British jobs for British workers.”

Unemployment in Britain is expected to rise to 9.5 percent by the middle of 2010, from 6.3 percent now, according to Peter Dixon, an economist with Commerzbank in London. Germany’s jobless rate could rise to 10.5 percent from 7.8 percent, he added. .......

Farmer Brown's picture
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US Obligations exceed WORLD GDP

WND Exclusive


MONEYNETDAILY

Federal obligations exceed world GDP

Does $65.5 trillion terrify anyone yet?


Posted: February 13, 2009
11:35 pm Eastern

By Jerome R. Corsi

© 2009 WorldNetDaily

 

As the Obama administration pushes through Congress its $800 billion
deficit-spending economic stimulus plan, the American public is largely
unaware that the true deficit of the federal government already is
measured in trillions of dollars, and in fact its $65.5 trillion in
total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and
Medicare benefits to be paid in the future, effectively have placed the
U.S. government in bankruptcy, even before new continuing social
welfare obligation embedded in the massive spending plan are taken into
account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury.

The difference between the $455 billion "official" budget
deficit numbers and the $5.1 trillion budget deficit cited by "2008
Financial Report of the United States Government" is that the official
budget deficit is calculated on a cash basis, where all tax receipts,
including Social Security tax receipts, are used to pay government
liabilities as they occur.

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But the numbers in the 2008 report are calculated on a GAAP basis
("Generally Accepted Accounting Practices") that include year-for-year
changes in the net present value of unfunded liabilities in social
insurance programs such as Social Security and Medicare.

Under cash accounting, the government makes no provision for
future Social Security and Medicare benefits in the year in which those
benefits accrue.

"As bad as 2008 was, the $455 billion budget deficit on a cash
basis and the $5.1 trillion federal budget deficit on a GAAP accounting
basis does not reflect any significant money [from] the financial
bailout or Troubled Asset Relief Program, or TARP, which was approved
after the close of the fiscal year," economist John Williams, who
publishes the Internet website Shadow Government Statistics, told WND.

Find out what's behind the chaos at the White House, in the No. 1 best-seller "Obama Nation"

"The Congressional Budget Office estimated the fiscal year 2009
budget deficit as being $1.2 trillion on a cash basis and that was
before taking into consideration the full costs of the war in Iraq and
Afghanistan, before the cost of the Obama nearly $800 billion economic
stimulus plan, or the cost of the second $350 billion in TARP funds, as
well as all current bailouts being contemplated by the U.S. Treasury
and Federal Reserve," he said.

"The federal government's deficit is hemorrhaging at a pace
which threatens the viability of the financial system," Williams added.
"The popularly reported 2009 [deficit] will clearly exceed $2 trillion
on a cash basis and that full amount has to be funded by Treasury
borrowing.

"It's not likely this will happen without the Federal Reserve
acting as lender of last resort for the Treasury by buying Treasury
debt and monetizing the debt," he said.

"Monetizing the debt" is a term used to signify that the
Federal Reserve will be required simply to print cash to meet the
Treasury debt obligations, acting in this capacity only because the
Treasury cannot sell the huge of amount debt elsewhere.

The Treasury has been largely dependent upon foreign buyers,
principally China and Japan and other major holders of U.S. dollar
foreign exchange reserves, including OPEC buyers purchasing U.S. debt
through London.

"The appetite of foreign buyers to purchase continued trillions
of U.S. debt has become more questionable as the world has witnessed
the rapid deterioration of the U.S. fiscal condition in the current
financial crisis," Williams noted.

"Truthfully," Williams pointed out, "there is no Social Security
'lock-box.' There are no funds held in reserve today for Social
Security and Medicare obligations that are earned each year. It's only
a matter of time until the public realizes that the government is truly
bankrupt and no taxes are being held in reserve to pay in the future
the Social Security and Medicare benefits taxpayers are earning today."

Calculations from the "2008 Financial Report of the United
States Government" also show that the GAAP negative net worth of the
federal government has increased to $59.3 trillion while the total
federal obligations under GAAP accounting now total $65.5 trillion.

The $65.5 trillion total federal obligations under GAAP
accounting not only now exceed four times the U.S. gross domestic
product, or GDP, the $65.5 trillion deficit exceeds total world GDP.

"In the seven years of GAAP reporting, we have seen an annual
average deficit in excess of $4 trillion, which could not be possibly
covered by any form of taxation," Williams argued.

"Shy of the government severely slashing social welfare
programs, federal deficits of this magnitude are beyond any hope of
containment, government or otherwise," he said.

"Put simply, there is no way the government can possibly pay
for the level of social welfare benefits the federal government has
promised unless the government simply prints cash and debases the
currency, which the government will increasingly be doing this year,"
Williams said, explaining in more detail why he feels the government is
now in the process of monetizing the federal debt.

"Social Security and Medicare must be shown as liabilities on
the federal balance sheet in the year they accrue according to GAAP
accounting," Williams argues. "To do otherwise is irresponsible,
nothing more than an attempt to hide the painful truth from the
American public. The public has a right to know just how bad off the
federal government budget deficit situation really is, especially since
the situation is rapidly spinning out of control.

"The federal government is bankrupt," Williams told WND. "In a
post-Enron world, if the federal government were a corporation such as
General Motors, the president and senior Treasury officers would be in
federal penitentiary."

 

Davos's picture
Davos
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Posts: 3620
Re: Daily Digest - Feb 13

Geithner Reassures G-7 on Bank Plan, Is Urged to Act (Update1)

Clear Answers

Geithneranswered questions from G-7 officials "very clearly," Finance MinisterChristine Lagarde told reporters in Rome today. "On paper it looksgreat," said Lagarde. "The essential thing is now to implement it."

Bank of Italy Governor Mario Draghi was the most critical, saying the U.S. is "lagging in the implementation of the package."

Moredetails on a public-private partnership to buy banks' illiquid assetswill be delivered in coming weeks, a U.S. official said in Rome oncondition he not be named.

 

...I'll be posting this on the DG of the 15th, thought it was interesting to see the G-7 has more answers than we do right now 

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Daily Digest - Feb 13
Quote:

Bank of Italy Governor Mario Draghi was the most critical, saying the U.S. is "lagging in the implementation of the package."

Isn't it ironic that so many of these countries around the world blamed us for the financial collapse and now they are looking to us for the soution? May I suggest to those countries to do the right thing: Abandon ship!

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - Feb 13

http://online.wsj.com/article/SB123454070638883495.html

Bernanke's boyhood home sold at foreclosure 

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