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Daily Digest - Jan 27

Monday, January 26, 2009, 10:23 PM
  • Population growth is the biggest economic and environmental problem
  • How the Government Dealt With Past Recessions (2001 Audio)
  • 82,000
    Job Losses 
  • Job Losses (Chart)
  • Existing Home Sales (Chart Seasonally Adjusted Annual Rate)
  • Home Inventory (Chart)
  • Fannie to Tap U.S. for as Much as $16 Billion in Aid 
  • Fed looks like one more shaky bank (Hat tip CM) 
  • Just 'plane' despicable; rescued Citi buying $50M jet 
  • Downturn Accelerates As It Circles The Globe (Hat Tip CM)
  • U.K. Economy Shrinks Most Since 1980, in Recession (Hat Tip CM)
  • 2009 Country stock market performance - things already aren't pretty(Table in article) 
  • Panel Discusses the Stimulus Package

Economy 

Population growth is the biggest economic and environmental problem 

ARROYO GRANDE, Calif. (MarketWatch) -- Six years ago, Peter Orszag, President Obama's new budget director, co-authored a Brookings Institution study that concluded: "Balancing the budget would require a 41% cut in spending on Social Security and Medicare, a 47% cut in discretionary spending, or a 17% cut in all non-interest spending." It's getting worse: Today entitlements eat up 40% of the federal budget and are growing. 

No doubt Orszag's earlier thinking had a lot to do with why Obama picked him. But it's also a signal of what we can expect when a Social Security reform bill is sent to Congress during Obama's "first 100 days." And that will trigger a brutal battle. Why? Because AARP's 35 million members will fight all benefits reductions while young voters who put Obama in office will fight any new Social Security taxes.

Bruising battle? It won't matter. In the long term, reforming entitlements will be like rearranging deck chairs on the Titanic. Remember, Obama's adding a $1 trillion stimulus package on top of what Nobel economist Joseph Stiglitz calls a "$10 trillion hangover" of debt left by former President Bush and the economic meltdown. And all that's on top of the massive $60 trillion to $75 trillion of unfunded Social Security and Medicare liabilities.

To get perspective, let's shift our thinking into a parallel universe: Into Chris Buckley's satirical novel "Boomsday," which goes way beyond acceptable government policies. He offers a bizarre solution to reforming Social Security, a solution that forces all of us to focus, and not just on the out-of-control economics of retirement entitlements. He forces us to focus on the one core problem overshadowing all other global economic issues: Population growth. 

How the Government Dealt With Past Recessions (2001 Audio -1:20 Recession Missunderstood, Feds Rate too low too long)

82,000 Job Losses (Caterpillar 20,000, Home Depot 7,000, Sprint 8,000, Pfizer 19,000, Philips 6,000, ING 7,000, Corus 3,500, Wolseley 7,500, Texas Instruments 1,800, GM 2,000) (Bloomberg & Other Sources)

Job Losses (Chart)

Existing Home Sales (Chart Seasonally Adjusted Annual Rate)

Home Inventory (Chart REO's not included)

Fannie to Tap U.S. for as Much as $16 Billion in Aid  

Jan. 26 (Bloomberg) -- Fannie Mae, the largest source of home-loan money in the U.S., said it will need to tap as much as $16 billion in emergency funds from the U.S. Treasury Department to stay afloat as deterioration in the housing market persists. 

Fannie's planned request, announced today, follows Freddie Mac, which said Jan. 23 that it will need as much as $35 billion more in federal aid. Unprecedented mortgage losses drove the net worth of both companies below zero last quarter, they said in separate securities filings.

This will be Washington-based Fannie's first draw on a $200 billion emergency fund set up by Treasury in September to keep the government-sponsored enterprises solvent. Fannie said losses on mortgage loans and a decline in the market value of its assets accounted for the shortfall in the fourth quarter.

Fannie's Treasury request was "much worse" than expected, said Rajiv Setia, a fixed-income strategist at Barclays Capital in New York. Setia estimates taxpayers will have to shell out at least $50 billion for Fannie and $70 billion for Freddie this year. One or both, especially Freddie, may exceed the Treasury's backstop this year, he said.

The requests for funds comes as the Treasury faces increasing demands from U.S. financial companies such as Bank of America and Citigroup Inc., which are coping with the fallout from a slumping housing market and a deep recession that's driving foreclosures to record levels.

Freddie and Fannie are the largest sources of mortgage money in the U.S., owning or guaranteeing a combined $5.2 trillion of the $12 trillion home-loan market.

Treasury Lifeline

McLean, Virginia-based Freddie, which received $13.8 billion in aid in November, will be using about half of its $100 billion lifeline from Treasury once it receives its second capital injection.

"Hopefully policymakers are proactive in upping the $100 billion backstop," Setia said. "You don't want them to get to those levels and have to revisit the issue."

The companies have posted five consecutive quarters of losses totaling $68.4 billion combined. The Federal Housing Finance Administration seized their operations in September amid concern from regulators that the two may fail in the worst housing slump since the Great Depression.

Fannie has previously said that $100 billion may not be enough to keep it afloat. Treasury agreed to pump money into the companies if the value of their assets drops below what they owe on their obligations. Fannie's $3.1 trillion total book of business was worth $9.4 billion at the end of the third quarter. Fannie's preliminary request was $11 billion to $16 billion.

Stefanie Mullin, an FHFA spokeswoman, declined to comment.

Fed looks like one more shaky bank (Hat tip CM) 

Citigroup (C, news, msgs) is too big to fail. American International Group (AIG, news, msgs) is too big to fail. So is Bank of America (BAC, news, msgs). 

If $25 billion is not enough, shovel in $20 billion more in taxpayer money. Still not enough? Guarantee that taxpayers will pick up the tab for losses on $100 billion, $200 billion, $300 billion in shaky assets. There's no choice, right? Keep shoveling the cash into the black hole, because if we stop, the whole U.S. economy -- wait, make that the whole global economy -- will fall into disaster.

But how about the Federal Reserve, the key conduit for so many of these taxpayer billions? Is it too big to fail?

Bet you've never even thought about that question. Or what it means to anyone who lives in the United States. But you should.

A fistful of IOUs

The Federal Reserve's balance sheet increasingly looks like that of Citigroup or Bank of America. The Fed has extended loans backed by $200 billion in consumer and small-business loans and by $73 billion in assets from Bear Stearns and American International Group. It has extended loan guarantees of almost $300 billion to Citigroup and Bank of America.

As a result, its vaults aren't stuffed with the customary gold notes and U.S. Treasury bills, notes and bonds. Instead, they're piled high with paper assets without ready market prices that everyone suspects aren't worth what they were when the Fed accepted them as collateral.

For more investing news and advice, play the videos to the right.

The central bank is using theoretical valuation methods, often with considerable wiggle room, to price what it owns, just as Citibank and Lehman Bros. (LEHMQ, news, msgs) and Washington Mutual (WAMUQ, news, msgs) did. It has relied on credit ratings from the same rating companies that performed so dismally in the run-up to the current crisis to justify the value it claims for that paper. It has created specialized investment vehicles, just as Citibank and State Street (STT, news, msgs) did, in an effort to leverage a relatively modest amount of cash from the Treasury by 10-to-1.
What's the Fed to do?

Looking at all this, anyone who has seen this crisis take down what were once assumed to be rock-solid financial institutions, capable of surviving any crisis, has to ask whether the Federal Reserve really is too big to fail.

And the answer isn't nearly straightforward enough for investors and taxpayers who like to sleep soundly at night. 

JUST PLANE DESPICABLE 'RESCUED' CITI BUYING $50M JET 

Beleaguered Citigroup is upgrading its mile-high club with a brand-new $50 million corporate jet - only this time, it's the taxpayers who are getting screwed. 

Even though the bank's stock is as cheap as a gallon of gas and it's burning through a $45 billion taxpayer-funded rescue, the airhead execs pushed through the purchase of a new Dassault Falcon 7X, according to a source familiar with the deal.

The French-made luxury jet seats up to 12 in a plush interior with leather seats, sofas and a customizable entertainment center, according to Dassault's sales literature. It can cruise 5,950 miles before refueling and has a top speed of 559 mph. 

Downturn Accelerates As It Circles The Globe (Hat Tip CM) 

Economies Worse Off Than Predicted Just Weeks Ago

The global rout has altered high streets in Britain, where shops including retail icon Woolworths have gone bust. The number of jobless has climbed to nearly 2 million, a level not seen since 1997 when the Labor
washingtonpost.com readers have posted 149 comments about this item.
The world economy is deteriorating more quickly than leading economists predicted only weeks ago, with Britain yesterday becoming the latest nation to surprise analysts with the depth of its economic pain.

Britain posted its worst quarterly contraction since 1980 on the heels of sharper than expected slowdowns reported from Germany to China to South Korea. The grim data, analysts said, underscores how the burst of the biggest credit bubble in history is seeping into the real economies around the world, silencing construction cranes, bankrupting businesses and throwing millions of people out of work.

"In just the past few days, we've had a big downward revision, we're seeing that an even bigger deceleration is on the way than we thought," said Simon Johnson, former chief economist at the International Monetary Fund and a senior fellow at the Peterson Institute for International Economics.

The depth of the troubles, analysts say, indicates that nations may need to spend more than the billions of dollars already planned on stimulus packages to jump-start their economies, and that a global recovery could take longer, perhaps pushing into 2010.

Analysts are particularly concerned about the slowdown in China and the recession in Europe. There is mounting concern about the stability of the euro and the British pound, which dropped to a 24-year low against the dollar yesterday. Analysts are fretting about the possibility of a debt default in a euro-zone country that could send fresh shock waves through global financial markets.

The problems in Europe now appear to be as bad if not worse than those in the United States. In the last quarter of 2008, the British economy shrank at an annualized rate of 6 percent. That is worse than economists expected, but also showed the British recession may be even harsher than the one in the United States, where analysts predict data expected next week will show the U.S. economy to have contracted between 5 and 5.5 percent in the last quarter of 2008. 

U.K. Economy Shrinks Most Since 1980, in Recession (Hat Tip CM) 

Jan. 23 (Bloomberg) -- The U.K. economy shrank more than economists forecast during the fourth quarter in the biggest contraction since 1980 as the financial crisis crippled the banking industry and mired Britain deeper in the recession. 

Gross domestic product fell 1.5 percent from the previous quarter, the Office for National Statistics said in London today. Economists had predicted a 1.2 percent drop, according to a Bloomberg News survey. The economy has now shrunk in two quarters, the conventional definition of a recession.

The pound dropped against the dollar and U.K. stocks fell after the report. Prime Minister Gordon Brown said that the government is using "every weapon at our disposal" to fight the crisis. Bank of England Governor Mervyn King says officials may start buying up securities soon as interest rates lose their potency to aid the economy.

"This is undeniably grim," said Stewart Robertson, an economist at Aviva Investors in London, which manages about $230 billion in assets. "Two or three quarters more like this and you're talking about depression, not recession. This should hasten activity to address the credit and money market issues."

Service industries shrank by 1 percent on the quarter, manufacturing dropped 4.6 percent and construction fell 1.1 percent, the statistics office said. Business services and finance, accounting for 30 percent of the economy, contracted 0.5 percent and also slipped into a recession. 

2009 COUNTRY STOCK MARKET PERFORMANCE -- THINGS ALREADY AREN'T PRETTY (Table in article) 

Of the 84 country equity indices that we track, 19 are up so far this year, which is at least better than we could say for 2008. As shown, China is currently the second best performing country so far this year, with a gain of 9.33%. Another BRIC country that is currently in the black for 2009 is Brazil, with a gain of 2.49%. But 19 countries in the black means that 65 countries are already in the red, and some are bleeding pretty badly. Seventeen countries are down more than 10%, including G-7 countries Germany and Japan. Canada is the best performing G-7 country so far in 2009 with a decline of 3.50%. Puerto Rico has seen the biggest loss -- falling by 34%.

When all else fails, blame China

Timothy Geithner, the nominee for US Treasury Secretary, has risked damaging the global economy even before his confirmation by the full Senate. In a written answer to questions from US senators, Geithner said: "President Obama - backed by the conclusions of a broad range of economists - believes that China is manipulating its currency". In the US, the words "currency manipulation" are fighting words. If the US administration were to formally name China as a currency manipulator, a range of trade sanctions could be imposed by the US government.

The threat to world trade comes from the Omnibus Trade and Competitiveness Act of 1988. The section dealing with the exchange rate, bilateral current account balances and the overall current account balance is a monument to economic illiteracy.

Under the Omnibus Trade and Competitiveness Act of 1988, "The Secretary of the Treasury shall analyze on an annual basis the exchange rate policies of foreign countries, in consultation with the International Monetary Fund, and consider whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade."

"If the Secretary considers that such manipulation is occurring with respect to countries that (1) have material global current account surpluses; and (2) have significant bilateral trade surpluses with the United States, the Secretary of the Treasury shall take action to initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments adjustments and to eliminate the unfair advantage."
Should the US Treasury officially determine China to be a currency manipulator, the US Administration can unleash a range of remedies, including antidumping measures, countervailing duties, and safeguards. Although the World Trade Organization permits certain retaliatory responses from importing nations which can prove that they suffered material injury due to unfair trade practices, much of what the US Congress and some members of the Obama administration have in mind is likely to be in clear violation of the United States' WTO obligations. It would certainly provoke a response from China. The bilateral trade war that is likely to result could easily spread to the EU, Japan and emerging markets outside China.

Overall and bilateral current account imbalances and nominal and real, bilateral and effective exchange rates

The overall current account deficit of the US is the excess of US domestic investment over US national saving. The overall current account surplus of China is the excess of China's national saving over China's domestic investment. Bilateral trade balances are of no economic interest, unless there are only two countries in the world. Note that the first quote from the Omnibus Trade and Competitiveness Act of 1988 slides seamlessly from overall current account imbalances to bilateral trade imbalances, ignoring the transfer payments and foreign investment income items that are included in the current account but not in the trade balance. Trade balances and current account balances (bilateral or aggregate) can and do move in opposite directions.

There is no reason in economic theory or empirical fact why there should be any reliable correlation, between nominal exchange rates (bilateral or trade-weighted (effective) ) and the bilateral or aggregage trade balance, let alone a clear causal connection from any nominal exchange rate to the trade balance. Certain kinds of shocks and policy actions may produce an empirical association (not a causal relation) between a depreciation of the effective (trade-weighted) real exchange rate and an increase in the aggregate trade surplus. This is the case, for instance, for most aggregate demand shocks, e.g those produced by contractionary Keynesian fiscal policies. But supply shocks may produce the opposite correlation, that is, a depreciation of the effective real exchange rate and a reduction in the aggregate trade balance surplus.

In any case, as Chart 1 below shows, there has been a steady appreciation of the real effective exchange rate of the Yuan since the beginning of 2005. JP Morgan's broad real effective exchange rate index for the Yuan shows a 27 percent real appreciation since December 2004. The from a macroeconomic perspective uninteresting nominal bilateral US$-Yuan exchange rate appreciated 21 percent over the same period. 


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44 Comments

Davos's picture
Davos
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Re: Daily Digest - Jan 27

$214,000,000.00 Tax Payer's Money (TARP) no jet but "free" ice cream?!?!Free Ice Cream

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Pandabonium
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Re: Daily Digest - Jan 27

re: JUST PLANE DESPICABLE 'RESCUED' CITI BUYING $50M JET 

These kinds of stories leave me flat.  For starters, the purchase was agreed to two years ago.  Secondly, they are also trying to sell two other of their jets for 27 million each that the new one replaces.   But at the root of this story and its apparent impact is lack of understanding of corporate transport by the general public.  I am no fan of Citi or of major corporations in general, but what people don't understand is that large corporations use their aircraft to save their shareholders money.  Imagine paying someone millions of dollars a year and then having them sit around in airports (bus stations?) waiting for connections, or not being able to get into a small town for a meeting, and so on.  The cost of a corporate jet seems high to you or me an individual, but compared to the loss of time that would occur by not having them, it is not.  

On a personal level, I have small scale experience with this.  I lived in Hawaii and owned a single engine Cessna (which probably cost less than many of the cars that readers of this website own).   By owning that plane, I was able to commute to other islands and conduct business that would have been impossible had I been limited to the commercial airlines, especially to destinations that were serviced only a few times a day.  With the plane I could save money on airfare as well as avoiding having to rent a hotel room as I could come home the same day.  It was good business sense. 

The stories featuring business aircraft as extravegances are, in my opinion, simplistic propaganda.  There are actual crimes to be addressed in corporate America, so to focus on such superficial percieved excesses is grossly missing the point.

I may  get flamed for this comment, but so be it. 

Pandabonium's picture
Pandabonium
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Re: Daily Digest - Jan 27
Davos wrote:

$214,000,000.00 Tax Payer's Money (TARP) no jet but "free" ice cream?!?!n

Steven Wright said, "the ice cream truck in my neighborhood plays Helter Skelter"...

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Re: Daily Digest - Jan 27

Panda,

I get your point and agree.  I have a couple of thoughts. 

One, the actual crimes you mention will never be addressed.  That further frustrates the viewing audience so that they twist anything into something negative about those that are seemingly above the law.

Two, the corporations of America have, to a large degree, brought this animosity on themselves.  Lying, cheating and bribing will always bring ill will.

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Doug
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Re: Daily Digest - Jan 27

This article  sums up the banking situation pretty well and presents a clear view of what needs to be done.

http://www.europac.net/voicesframeset.asp?id=22

Quote:

An aggregator bank (the so-called "bad bank") is going to happen. So, for what it's worth, let me make a few suggestions. Banks that are technically insolvent and which will need to put taxpayer money at risk should just be "put down." The shareholders and bond holders need to be wiped out before taxpayer money is spent. And the banks should be put back in strong private hands as soon as feasibly possible. We do NOT want government agencies subject to political manipulation making decisions about lending. But deals should be structured which give taxpayers a real chance to get their investments back.

 

Davos's picture
Davos
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Re: Daily Digest - Jan 27

Hello Pandabonium:

Your points have a lot of merit, especially about the time spent waiting, and also meetings can and do run late, their own plane gives them flexibility and allows them to make it to the next meeting and not have to come back because they left early or on time so they could make their flight.

Having said that I would say these SOB's might save their companies a lot of money flying NetJets, FlexJets, or some other fractional jet company.

I, myself am not convinced that they need their own corporate barge, crew, flight attendants, hangar space, mechanics, dispatchers,,,,

My heart goes out to the crews, and support staff, but truly, I feel it would be like me declaring BK and taking delivery of a Mercedes I ordered last year - and then sent you and I the bill for it....Take care

 

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straight
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Re: Daily Digest - Jan 27

Pandabonium, did you pick that name because you enjoy baiting ppl on forums?

To say that Citi has a right to pay $50M on a new jet at a time like this, to save the precious hours of fat cats getting obscenely over paid is a criminal thing to say.

these bastards get multi millions per year and then purchase a $50M jet with tax payers money, having criminally driven the world economy into the ground, putting huge pressure on aid agencies around the world who would die for that $50M, to help those that will die without it!

Mate, you are one sick puppy to defend these guys.

 

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Re: Daily Digest - Jan 27

Read this. It's long but explicit about China's current situation. Timothy Geithner needs to be careful about what he does.

http://www.marketoracle.co.uk/Article8320.html

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Re: Daily Digest - Jan 27

The shareholders may feel they are getting better value for money making them walk after there performance over the last two years. The argument that these excutives are so precious has been around for years and regardless of which side anybody takes this is a PR disaster. There are people struggling to put gas in the car worrying about how they are going to look after their children in a recession which they blame on the banks. They are then asked to write a cheque to the IRS and then they see those they percieve as responsible for there own problems taking goverment money and buying Jets. How will riots help the banks shareholders?

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Re: Daily Digest - Jan 27

"The stories featuring business aircraft as extravegances are, in my opinion, simplistic propaganda."

Sorry, Panda: things are becoming disconnected here: I have been a pilot since 1982, using a Cessna 340 (light pressurized piston twin - used market price $ 150k to $ 350k) for business trips. Private / business flying is certainly good business sense in a way that you are flexible to reach your clients before your competitors do. A combination between public transportation and private flying results in efficient and cost / carbon saving travel. To make it fancy you can buy let's say a Cessna CJ2 jet wich brings you and up to 7 more business partners (plus crew of 2) in a very comfortable way from LA to NY with a short fuel stop maybe. The list price for a such aircraft is well below $ 5 million. In other words, replacing the two 27 million acft by one CJ2 for $5 mm would have been the alternative. Buying Cessna rather than French Dassault another one.

All the rest is puppets show: "That one wins who dies with the most expensive toys!" - The biggest and most expensive plane, the longest limo and the youngest secretary with the shortest red mini skirt walking over the red carpet towards the airsteps. Want to see yourself: go to your city business airport and ask the line man how many jetfuel he just pumped into that 20+ ton dinosaur to catapult a sick prick from one business dinner to the next.

Growth is not an option, Tom

 

 

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Re: Daily Digest - Jan 27

Woody,

 

Thanks for the interesting link. FYI I posted yesterday and the day before over the same concerns with more interesting links. This may turn out as a "black swan" faster than expected.

Tom in Colo, growth is not an option!

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Re: Daily Digest - Jan 27

Straight, just for the record - ad hominem attacks generally cheapen an argument.

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Re: Daily Digest - Jan 27 - re:citi jet

I am no fan of Citi or of major corporations in general, but what people don't understand is that large corporations use their aircraft to save their shareholders money.  Imagine paying someone millions of dollars a year and then having them sit around in airports (bus stations?) waiting for connections, or not being able to get into a small town for a meeting, and so on.  The cost of a corporate jet seems high to you or me an individual, but compared to the loss of time that would occur by not having them, it is not.  

I agree that a company can, in some cases, justify this stuff, but it appears these fellows didn't do so well for their company - they are going under. To paraphrase your comment: Imagine paying someone millions of dollars a year and then having them sink the company! Maybe if they weren't so "efficient" their company might be in better shape.

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Re: Daily Digest - Jan 27

Woody, that *is* a striking article and argument. Thank you for posting it.

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Re: Daily Digest - Jan 27
Pandabonium wrote:

re: JUST PLANE DESPICABLE 'RESCUED' CITI BUYING $50M JET 

These kinds of stories leave me flat.  For starters, the purchase was agreed to two years ago.  Secondly, they are also trying to sell two other of their jets for 27 million each that the new one replaces.  

<snip>

The stories featuring business aircraft as extravegances are, in my opinion, simplistic propaganda.  There are actual crimes to be addressed in corporate America, so to focus on such superficial percieved excesses is grossly missing the point.

I may  get flamed for this comment, but so be it. 

 Pandabonium, Looks like the torches are lit! 

Please tell me why selling one 27M jet and using the other for another year or three is not more responsible than your defense of selling both and buying a foreign jet at 50M with taxpayer dollars?

The alternative Homosapiens mentioned seems even better.

And what about the viewpoint of consuming ever more resources on a planet which is finite. I think your defense of the saving of the corporate salary is rather status quo thinking. The Crash Course data begs for solutions which are outside the box. The time which is the most valuable to save will be seen in how creative we will be in extending our energy and resource base for the future generations.

Coop

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Re: Fed looks like one more shaky bank (Hat tip CM)

Davos:

Found this article most curious.   Interesting to see what Fed reports next week w/r/t valuation.  Explanation of Fed assets composition indicates Fed is a increasingly fragile house of cards, just like entire financial system.

 

Nichoman    

 

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Re: Daily Digest - Jan 27

...which proves to me beyond any doubt whatsoever just how totally unsustainable business is.  Abandon the Matrix!

Mike 

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Re: Daily Digest - Jan 27

These people could afford teleconferencing using all the latest gizmos known to mankind and save squillions..  not to mention the greenhouse emissions.  Aaarfg!

Mike 

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Can Green New Deal solve economic crisis

http://www.yomiuri.co.jp/dy/editorial/20090126TDY04310.htm

Greens Call On Govt To Adopt `Green New Deal' Approach

http://www.guide2.co.nz/politics/news/greens-call-on-govt-to-adopt-green-new-dea\
l039-approach/11/5151

Green new deal proposed by Lord Turner
http://www.telegraph.co.uk/earth/earthnews/4323918/Green-new-deal-proposed-by-Lo\
rd-Turner.html

South Korea: Briefing on the Green New Deal for foreign correspondents
http://www.isria.info/en/diplo_21january2009_13.htm

Tony Blair insists economic downturn must not hamper green energy plans
http://www.guardian.co.uk/environment/2009/jan/21/climatechange-tonyblair

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Re: Fed looks like one more shaky bank (Hat tip CM)

Hello NichoMan:

It will be interesting...  I think it is also interesting to see the mountain of debt they are burying themselves under....

Take care

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Re: Daily Digest - Jan 27

Lisa, you are spot on.

 

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Pandabonium
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Re: Daily Digest - Jan 27

Thanks for all the comments people.   You all make valid points, but I think most of you missed my point. 

I do not defend CITI's management.  I do not defend the growth paradigm or jet travel.  My point was to criticize the media for choosing to focus on this issue over much more important ones.  Had the public debt  not been increased to keep these guys afloat (or is it aloft?), no one in the mainstream media would have ever questioned it.  It's a distraction and is not at all core to the situation.

Where is the mainstream media discussing the lack of control that shareholders have over their directors?  Where are they talking about reversing the legal status of coporations as entities with the same rights as a human being?  Where's is the reporting on CITI's drug money laundering and CIA ties?  Once again they are distracting the public with the bright shiny bauble while ignoring the serious issues.

I won't take further time or space to debate this further, we have bigger things to worry about than this.

Straight - FYI, my wife gave me the nickname Panda and I play the trombone.  Pandabonium was created as the name/logo for a trombone quartet.   If you look, you will find that most of my comments on this site consist of practical advice/observations which I made to help other readers.  Cheers.

 

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Re: Daily Digest - Jan 27

"Where's is the reporting on CITI's drug money laundering and CIA ties?  Once again they are distracting the public with the bright shiny bauble while ignoring the serious issues. "

Mr. Pandabonium.

I respectfully disagree with you on this one.  I believe that it may well be an issue like a $50M jet which tips the pubic perception on these obscene bail-outs.  Given the roasting that the auto makers got for their jet rides to bail out negotiations the public are primed on this issue.

ACTION is what is needed here.  ACTION by the American people is what has been missing for decades.  What will it take for Americans to be so fed up that the good people of America will ACT to FORCE change?

I have been to America a few times, I know that the average American is nothing like AMERICA INC...  but that means nothing if Americans dont get off their asses and FORCE change.

.

 

 

 

 

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Re: Daily Digest - Jan 27

Its strange the direction a conversation can take here. So where do exec jets rate in the scheme of things? (rehtorical)

Any thoughts on woodies post from you all that understand economics? I see two comments below the original that are disparaging. Your views - please?

Don

____________________________________________

7 billion people can be wrong, very wrong

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Re: Daily Digest - Jan 27

Hello Pandabonium:

I re-read your post. I agree with your point. It seems the media reports just what it sees, the blogs are super. Sorry I missed your point, seeing corporate waste on our dime probably leaves a lot like me - spring loaded to object... I flew corporate a little before going to the airlines, the cost is dumbfounding.

Take care 

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Re: Daily Digest - Jan 27
Pandabonium wrote:

re: JUST PLANE DESPICABLE 'RESCUED' CITI BUYING $50M JET 

These kinds of stories leave me flat.  For starters, the purchase was agreed to two years ago.  Secondly, they are also trying to sell two other of their jets for 27 million each that the new one replaces.   But at the root of this story and its apparent impact is lack of understanding of corporate transport by the general public.  I am no fan of Citi or of major corporations in general, but what people don't understand is that large corporations use their aircraft to save their shareholders money.  Imagine paying someone millions of dollars a year and then having them sit around in airports (bus stations?) waiting for connections, or not being able to get into a small town for a meeting, and so on.  The cost of a corporate jet seems high to you or me an individual, but compared to the loss of time that would occur by not having them, it is not.  

On a personal level, I have small scale experience with this.  I lived in Hawaii and owned a single engine Cessna (which probably cost less than many of the cars that readers of this website own).   By owning that plane, I was able to commute to other islands and conduct business that would have been impossible had I been limited to the commercial airlines, especially to destinations that were serviced only a few times a day.  With the plane I could save money on airfare as well as avoiding having to rent a hotel room as I could come home the same day.  It was good business sense. 

The stories featuring business aircraft as extravegances are, in my opinion, simplistic propaganda.  There are actual crimes to be addressed in corporate America, so to focus on such superficial percieved excesses is grossly missing the point.

I may  get flamed for this comment, but so be it. 

+1!

The only problem is now that Citi has accepted public bailout money, everyone thinks that they have a right to tell Citi how to run their business. Eveybody will now jump on the bandwagon to demonize this big evil corporation.What I want to know is how long will it be before people start telling YOU how to run your business? I want to know why people dont get just as upset at the government for pissing hundreds of times as much money away every day.

If you dont like how Citi is spending the bailout money then dont give them anymore.

But no one, not you, me, or the federal government has the right to tell a company how to run their business.

In other words, its NONE OF OUR BUSINESS.

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Re: Daily Digest - Jan 27

Fantastic video from Mornin Joe on MSNBC this morning, Ron Paul vs. 3 Keynsian economists:

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Re: Daily Digest - Jan 27

Hello JoeManC:

Great video, makes me wonder how he ever got into Congress or on MSNBC? Our great hope, 2 out of 535, (his friend who just got elected to SC is also knows his a$$ from his elbow). 2 out of 535, great odds.

Take care 

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Re: Daily Digest - Jan 27
pwoody82 wrote:

Read this. It's long but explicit about China's current situation. Timothy Geithner needs to be careful about what he does.

http://www.marketoracle.co.uk/Article8320.html

 

The article makes a lot of sense and the diagram is pretty helpful too...I have watched foreign currencies a little but it's not really my thing.  However, the way I see it, the U.S. demand for Chinese imports has taken a huge hit recently and I would suspect that the Dollar peg represented in the diagram is severely skewed at this point; China is not likely to be printing nearly as much as when the U.S. was going full boom ahead...I'm not sure what the implications of that are but inflation seems as likely for China as anywhere.

 

-Joe

 

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Re: Daily Digest - Jan 27

joemanc loved the comment at the end - "conversation keeps going backwards" - I guess that forwards isn't looking too good no matter what any important people do. I'm with Dmitry Orlov on this one. Boondoggles 

http://cluborlov.blogspot.com/

The doing only makes it worse.

Don

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seven billion people can be wrong, very wrong

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Re: Daily Digest - Jan 27

Great interview with Ron Paul. 

Ron Paul is like a laser beam cutting through this financial mess.  He is quick on his feet and he has a profound understanding of the building blocks and how they are misaligned.

Is he a laser beam cutting through the issues in the ball room of the titanic?  As he talks and tackles issues in one compartment, is he forgetting the ship we are on as we cruise into the iceberg?

I have not heard him talk on population control.  I have not heard him talk on a green solution.  I have not heard him talk on a level like i hear CM talking, or for that matter Prof. A Bartlett.  I have not heard all he has said, does he talk on these issues? 

Where are his comments which display his understanding that we are one min before midnight and even if we found two new worlds to consume and pollute it would only buy us two more minutes?

Does Ron Paul really have the answers? 

A question for you Davos, who is the second one? 2 out of 535.  Ron Paul and...

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Re: Daily Digest - Jan 27
Pandabonium wrote:

Thanks for all the comments people.   You all make valid points, but I think most of you missed my point. 

I do not defend CITI's management.  I do not defend the growth paradigm or jet travel.  My point was to criticize the media for choosing to focus on this issue over much more important ones.  Had the public debt  not been increased to keep these guys afloat (or is it aloft?), no one in the mainstream media would have ever questioned it.  It's a distraction and is not at all core to the situation.

Where is the mainstream media discussing the lack of control that shareholders have over their directors?  Where are they talking about reversing the legal status of coporations as entities with the same rights as a human being?  Where's is the reporting on CITI's drug money laundering and CIA ties?  Once again they are distracting the public with the bright shiny bauble while ignoring the serious issues.

<snip>

Pandabonium,

I did miss your point. Thanks for the clarification. 

As regards mainstream media, given that the seven men behind the Federal Reserve Act represented over 1/4 of the worlds wealth in 1910 and that the private bank they ultimately created has received tax free interest on 100% of all the money loaned since that time I really don't see what the surprise is here.("The Creature From Jekyll Island by Edward Griffen) They (or their heirs) own all (or certainly most) of the oil and gas companies, TV and radio syndicates, newspapers, mining companies, drug companies, shipping lines, transportation industries and the like.They decide what we want to hear.

And they certainly will control public policy both in statute law and political ideology by maintaining power over the officials who oversee it. The collapse of the dollar may turn out to be our biggest trump card in restoring a system of the people, by the people and for the people.

Curiously, returning to a simpler, less consumptive and more energy efficient way of living will get the job done. Some think it means a lowering of our living standard. I don't think so. More time, more freedom and more friends!

Coop

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Re: Daily Digest - Jan 27
Davos wrote:

Having said that I would say these SOB's might save their companies a lot of money flying NetJets, FlexJets, or some other fractional jet company.

I, myself am not convinced that they need their own corporate barge, crew, flight attendants, hangar space, mechanics, dispatchers,,,,

 

 I agree Davos. NetJet's guarantee a jet on your ramp within 4 hours from the time you call and say, "send me a jet."

Why anyone would want the resposibility of owning a jet, storing a jet, maintaining a jet, insuring a jet, fueling a jet, and paying two high priced pilots, is way beyond my understanding. Infact ! It's just a plane waste of money, time and resources.

With the brains like these corporations command, it's no wonder we are in finacial disarray.

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Re: Daily Digest - Jan 27

Hello Straight: I'd have to google it, I believe he got in, I saw Paul stumping for him when he was running for the seat in SC, and I believe the guy got elected becuase a week or 3 ago I saw him on the national news calling for govt. cuts in SC and holding unemployment benifits up as a bargaining chip.... Take care

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Re: Daily Digest - Jan 27

I agree with pandebonium and hammerhead.

The popular media treat their readership with intellectual contempt. They throw up populist headlines which require no analysis.

Where  are the serious attempts at challenging the root causes of our malaise. Maybe its not simply the result of a few industry leaders behaving badly, maybe its not lack of credit (too much debt), it might just be that our monetary system based on fractional reserve banking (our banking systems insolvency) that requires exposure.

Stan

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Re: Fed looks like one more shaky bank

Davos posted the following story on the Daily Digest:

Fed looks like one more shaky bank

I think this article is quite extraordinary, not least of all because of where it is coming from.  Jim Juback is the senior markets editor for MSN Money.  A pretty straight-laced kind of guy.

This is the same man who, on Oct. 20, 2008 said, "As scary as the financial markets seem lately, this could be a very
good time to dive into the market or beef up your portfolio."  He is the epitome of mainstream.  He has a daily readership of 1 million.

You'll notice a link in the above story to an editorial by Juback with the title, "5 Reasons the Fed is Obsolete."   That such a story would appear on the MSN Money website would have been unthinkable just 6 months ago.  

This is just the latest in a series of articles in the popular press which have been growing ever more bold, all saying the same thing: the system itself is broken, perhaps badly.  Reputable news sources are slowly agreeing that this is the worst economic emergency since the Great Depression, and also that it is still early in the crisis.  This is sensitizing the political leadership of the country to the possibility that radical change might be forced upon them by circumstances.  If mainstream media is saying it, the politician is thinking it. 

The focus has shifted.  Three months ago, the party line was still to defend the current system by pretending that things -- while bad -- were basically under control. That facade of control is becoming hard to maintain, and the smart planners in our political system are surely thinking of retrenchment policies.

If the mainstream media is hinting that the fed is obsolete, powerful people have been thinking that change is no longer a political impossibility. It is a possibility which they must prepare for.

The corporate lobbyists know this too, and it is at this moment they are beginning to think, "If there had to be a new system, what should it look like?  And how can we best profit under a new paradigm?"

Now is the time to be watchful.  Now is the time to cease focusing only on the problems with way the system currently works, and begin to watch very carefully for hints that a new financial system is being considered.  What kinds of new systems might the current leadership propose? If this economic crisis continues, then I think subtle political trial balloons will be floated in the next six to eight months hinting at potential changes to the financial/monetary system.  We ought to watch very carefully for these balloons.

By the time a critical mass of the public realizes the system must be changed, the political establishment will be prepared to admit the same thing.  But if and when this is admitted on the national stage, it will not be before plans for a new system have already been discussed in private.  This is not conspiracy, it's just human nature: you don't make a public announcement before you've felt out your political options and reached some preliminary agreements.

This also means that now is the time to influence those inevitable changes.  By the time potential changes are announced on the national stage, the political die may have been largely struck.

I have noticed that a lot of people on this site are focused on two things:  (1) criticizing the current system, and (2) preparing for a total collapse. Of course, if the entire banking system collapses, then all bets are off.  But we have another great challenge as well: we must prepare for the possibility that the system doesn't collapse.  If it doesn't, then that means some very important decisions will soon be made on the conventional political stage. It's a possibility worth preparing for, as much as the possibility of collapse.

If we are unprepared to help influence the coming decisions because we were too busy criticizing the current system, or hiding in our basements guarding our toilet paper and beef jerky, then we will be miserable indeed.  

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Re: Daily Digest - Jan 27
California prepares to stop paying bills Come Feb. 1, tax refunds, welfare checks replaced with IOUs
 January 26, 2009
By Drew Zahn

© 2009 WorldNetDaily

The state of California has run out of money.

Facing a $42 billion budget deficit, State Controller John Chiang
told the Sacramento Bee he has already borrowed $21.5 billion to try to
cover the state's checks, but by Feb. 1, there will be no more options
left but to simply stop paying some of the bills – including tax
refunds, welfare checks, student grants and other payments owned to
California citizens.

"It pains me to pull this trigger," Chiang said at a news conference
held in his office. "But it is an action that is critically necessary."

Federal law requires that many school and healthcare programs – a
total of about $6.6 billion in California – must be paid, the Los
Angeles Times reports, so Chiang has announced an expected payment
freeze on $3.7 billion worth of the state's bills, most of it refunds
owed to taxpayers.

But even with the freeze beginning next week, the Times reports,
California will still fall $346 million short for the month of
February, forcing Chiang to consider something only done once since the
Great Depression: issuing IOUs.

Formally called "registered warrants," the state's IOUs consist of
little more than a piece of paper that says the state owes a payee
money, plus interest, to be paid at some point in the future.

The last time California issued registered warrants was in 1992,
during two-month budget battle between then-Gov. Pete Wilson and the
state's legislators. But after the state issued almost $4 billion worth
of IOUs, many banks stopped accepting them as deposits, claiming the
five percent interest didn't pay for the hassle of processing them.

The Times reports that state officials have already designed an IOU
template for February and begun negotiating with banks to avoid a
repeat of 1992's problems.

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Re: Daily Digest - Jan 27

repost

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Re: Fed looks like one more shaky bank

Hi jrf29

While I can agree with much of what you write I would to make a few points.

Continuance of the status quo is not something for which preparation is needed. It is our present.

A new financial system is not the only option or even a good one. Most of us here, I believe, want the problems of the economy and foolish decisions made to rest squarely on the shoulders of those who made those decisions. But government(s) is/are interfering with doubtful intent and little efficacy.

Critizism of the current system is more a matter of observation than anything else. No need to criticize when the results speak so well for themselves.

I draw your attention to Dmitry Orlov

http://cluborlov.blogspot.com/

who uses the term 'boondoggles' to describe these issues that government is unable to influence but non-the-less tries and makes much worse. It seems that there is nothing that government can do to significantly arrest the collapse of money. Whether this in turn becomes economic collapse is yet to be seen.

If the only fix is a big one, then there is no fix.

Don

_________________________________________

7 billion people can be wrong, very wrong

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Re: Daily Digest - Jan 27
Pandabonium wrote:

re: JUST PLANE DESPICABLE 'RESCUED' CITI BUYING $50M JET 

These kinds of stories leave me flat.  For starters, the purchase was agreed to two years ago.  Secondly, they are also trying to sell two other of their jets for 27 million each that the new one replaces.   But at the root of this story and its apparent impact is lack of understanding of corporate transport by the general public.  I am no fan of Citi or of major corporations in general, but what people don't understand is that large corporations use their aircraft to save their shareholders money.  Imagine paying someone millions of dollars a year and then having them sit around in airports (bus stations?) waiting for connections, or not being able to get into a small town for a meeting, and so on.  The cost of a corporate jet seems high to you or me an individual, but compared to the loss of time that would occur by not having them, it is not.  

On a personal level, I have small scale experience with this.  I lived in Hawaii and owned a single engine Cessna (which probably cost less than many of the cars that readers of this website own).   By owning that plane, I was able to commute to other islands and conduct business that would have been impossible had I been limited to the commercial airlines, especially to destinations that were serviced only a few times a day.  With the plane I could save money on airfare as well as avoiding having to rent a hotel room as I could come home the same day.  It was good business sense. 

The stories featuring business aircraft as extravegances are, in my opinion, simplistic propaganda.  There are actual crimes to be addressed in corporate America, so to focus on such superficial percieved excesses is grossly missing the point.

I may  get flamed for this comment, but so be it. 

This is a great comment. I'm glad that you gave this story another
dimension, because the media's only going to give the one sided,
non-logical version.

 

I want to know though, is $50M costly in the jet world? What's the
equivalent in our world? Is a $50M jet a Rolls Royce, or is it a Honda
Accord? Because I believe that that should have some bearing on how we
see this. Was this a splurge or an investment?

 

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Re: Daily Digest - Jan 27

Davos and Straight - I believe it's Jim DeMint, if only because I found this link below on one of Ron Paul's websites. Demint talks about the White House creating a crisis/panic to get Congress to vote for the stimulus, similar to the way the Bush Admin. got Congress to do TARP last year.

http://businessandmedia.org/articles/2009/20090127165919.aspx

There are a couple more financial voices of reason in Congress, one being Denis Kucinich, who is proposing to bring the Federal Reserve under Treasury:

 

The other being Allan Grayson, who a couple of weeks ago scolded Fed. Vice Chairman Donald Kohn, before Mr. Grayson himself was scolded by Barney Frank:

I don't want to get too caught up in politics, but I also do want to mention that there is a group of people in my state that is trying to get Peter Schiff to run for Chris Dodd's senate seat in 2010. Peter Schiff has mentioned this group on his weekly show but he hasn't said he wouldn't run.

http://www.schiff2010.com/

As they say, you have to crawl before you walk.

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Re: Daily Digest - Jan 27

Pwoody82

Just have to add my "cud-dos" with everyone else.  That was a great article.  Thanks for sharing. 

Here it is again for those who missed it. 

http://www.marketoracle.co.uk/Article8320.html

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Re: Daily Digest - Jan 27

Troubled US bank Citigroup has cancelled an order for a new corporate jet after President Barack Obama questioned the wisdom of the purchase.

http://news.bbc.co.uk/2/hi/business/7855554.stm

I don't think this was posted here.

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Re: Daily Digest - Jan 27

wow, we're really just talking about gestures, but it sure makes Citi appear a lot humbler than the Big 3

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