Blog

Daily Digest - March 3

Tuesday, March 3, 2009, 10:17 AM
  • FSN 2nd Hour, Documentarian and Author Edward Griffin, "The Creature From Jekyll Island"
  • $3,600,000,000,000 Budget Govt. Plans to Spend .68 cents for Every 1 Household Earned $
  • How Big is the Budget: Part II
  • Ukraine Unrest - Customers Told No Cash is Available (Hat Tip Yoshhash)
  • 60 Minutes - 6:30 Minute Point - People In Glass Houses
  • (Global Perspective) Our Deficit is Larger Than 23 Countries GDP!
  • Gold vs. stock market, big picture
  • Dow industrials fall below 7,000; lowest since '97
  • Housing
  • Cities face 20% cuts in water use during crisis (Hat Tip Zombie210)
  • Bad Banks (Hat Tip GreenDoc)
  • Marc Faber's Current Outlook - "In Gold I Trust, But..." (Hat Tip Wendy T)
  • Beck on Guns - Business is Booming, Afraid of Economy, Afraid of Banks, Afraid... (Hat Tip Nime)
  • MI5 Alert on Bank Riots (Hat Tip DamTheMatrix)
  • GOLDMAN SACHS LIQUIDATES (Gold Short Positions) (Hat Tip "Brainless")
  • Yoy Change, Private Construction Spending
  • February 2009 Manufacturing ISM Report On Business
  • I SOLD ALL MY STOCKS - PEOPLE DON'T UNDERSTAND WHAT IS HAPPENING
  • How Americans Lost Their Right To Own Gold And Became Criminals in the Process (repost, H/T C.P.)
  • Rudd urges G20 to tackle bad bank debts (Hat Tip DamTheMatrix)

Economy

FSN 2nd Hour, Documentarian and Author Edward Griffin, "The Creature From Jekyll Island"

$3,600,000,000,000.oo Budget Govt. Plans to Spend .68 cents for Every 1 Household Earned $

How Big is the Budget: Part II

Ukraine Unrest - Customers Told No Cash is Available (Hat Tip Yoshash)

Olexander Pavlenko, a young computer programmer, is one of tens of thousands of Ukrainians who cannot get their money out of the bank.

He stood in line in Kiev at Nadra Bank and Ukrprombank, two big troubled banks, planning to withdraw more than $10,000 (€7,950, £7,125). But like many others, he was told the cash was not available.

60 Minutes - 6:30 Minute Point - People In Glass Houses

The US Deficit in Global Perspective

Gold vs. stock market, big picture

My interpretation? Much higher to go in gold, pending the bearish blow horns, alarmists and guru swami's making the not-so-difficult call that gold needed to correct.

How Americans Lost Their Right To Own Gold And Became Criminals in the Process (repost, H/T C.P.)

Henry Mark Holzer is Professor of Law at Brooklyn Law School, where he teaches constitutional law, administrative law, and other courses. His practice is limited to appeals and constitutional litigation.

Prof. Hoizer has lectured widely on a variety of legal and law- related topics, and his articles have appeared in newspapers, popular and professional magazines, and academic journals.

His most recent books are The Gold Clause (1980) and Government's Money Monopoly (1981).

Dow industrials fall below 7,000; lowest since '97

NEW YORK (AP) -- The Dow Jones industrial average plunged below 7,000 Monday for the first time in more than 11 years as investors grew pessimistic about the health of banks, and in turn the economy. The Dow hadn't traded below 7,000 since Oct. 28, 1997, and last closed below that mark on May 1 of that year. The credit crisis and recession have now slashed half the average's value since it hit a record high over 14,000 in October 2007.

Housing

Cities face 20% cuts in water use during crisis (Hat Tip Zombie210)

"This drought is having a devastating impact on our people, our communities, our economy and our environment - making today's action absolutely necessary," Schwarzenegger said.

Bad Banks, (Hat Tip GreenDoc)

Marc Faber's Current Outlook - "In Gold I Trust, But ... .." (Hat Tip Wendy T)

Beck on Guns - Business is Booming (Hat Tip Nime)

MI5 Alert on Bank Riots (Hat Tip DamTheMatrix)

TOP secret contingency plans have been drawn up to counter the threat posed by a "summer of discontent" in Britain.

GOLDMAN SACHS LIQUIDATES (Gold Short Positions) (Hat Tip "Brainless")

A small news item appeared in the press this week, one which gathered almost no attention. If Morgan Stanley expects gold to slide all year, and silver to slide all year, like down to $11 per ounce in a corporate research forecast, then maybe they should tell Goldman Sachs. The kings of insider trading, taking full advantage of both USGovt implemented policy and politically managed commodity indexes, Goldman Sachs made an important move. They covered their remaining 69 short gold futures positions on the Tokyo Commodity Exchange (TOCOM). They have reduced their position to zero. In May 2006, the GSax position reached 52,000 short gold contracts. Now it is zero. TOCOM is unique, unlike the corrupted US commodity exchanges, since it requires all parties to post and publish their positions in a public manner. So Goldman must know something about the hugely positive prospects of gold. How about the new currencies to arrive by the stork in about one year time will all contain a gold component??? The simplest statement one can make about Wall Street is that traders became traitors.

Yoy Change, Private Construction Spending

February 2009 Manufacturing ISM Report On Business

(Tempe, Arizona) - Economic activity in the manufacturing sector failed to grow in February for the 13th consecutive month, and the overall economy contracted for the fifth consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

I SOLD ALL MY STOCKS - PEOPLE DON'T UNDERSTAND WHAT IS HAPPENING

Rudd urges G20 to tackle bad bank debts (Hat Tip DamTheMatrix)

"Dealing effectively with toxic assets and the balance sheets of globally significant banks is fundamental to the recovery of private credit markets and therefore to medium to long-term economic recovery across the global economy and for the Australian economy," he said.

Endorsed Financial Adviser Endorsed Financial Adviser

Looking for a financial adviser who sees the world through a similar lens as we do? Free consultation available.

Learn More »
Read Our New Book "Prosper!"Read Our New Book

Prosper! is a "how to" guide for living well no matter what the future brings.

Learn More »

 

Related content

30 Comments

gregroberts's picture
gregroberts
Status: Diamond Member (Offline)
Joined: Oct 6 2008
Posts: 1024
Re: Daily Digest - March 3

Greg

fujisan's picture
fujisan
Status: Gold Member (Offline)
Joined: Nov 5 2008
Posts: 296
Re: Daily Digest - March 3

FRB: Bernanke, Current economic and financial conditions and the federal budget

Quote:

the near-term imperative of achieving economic recovery and the longer-run desire to achieve programmatic objectives should not be allowed to hinder timely consideration of the steps needed to address fiscal imbalances. Without fiscal sustainability, in the longer term we will have neither financial stability nor healthy economic growth.

bearing01's picture
bearing01
Status: Silver Member (Offline)
Joined: Sep 7 2008
Posts: 153
Re: Daily Digest - March 3

 

This is a good article too:

 

http://www.campaignforliberty.com/article.php?view=20

 President Obama's Budget for fiscal year 2010 (for some reason titled "A New Era of Responsibility") in a nutshell:

- Department of Defense and international expenses (spending on wars and occupations) will go up from $666 billion to $673 billion (under President Bush it grew from $316 billion to $666 billion)

- Other appropriated programs will go up from $613 billion to $695 billion (under President Bush it grew from $298 billion to $613 billion)

- Social Security expenses will go up from $662 billion to $695 billion (under President Bush it grew from $406 billion to $662 billion)

- Medicare expenses will go up from $425 billion to $453 billion (under President Bush it grew from $216 billion to $425 billion)

- Medicaid expenses will go up from $259 billion to $290 billion (under President Bush it grew from $117.9 billion to $259 billion)

- Other mandatory program expenses will drop from $673 billion to $571 billion (under President Bush it grew from $290 billion to $673 billion)

- Net interest will go up from $139 billion to $164 billion (under President Bush it dropped from $222.9 billion to $139 billion)

- Disaster cost will go up from $4 billion to $11 billion (under President Bush it went from $0 billion to $4 billion)

Judithkitty's picture
Judithkitty
Status: Member (Offline)
Joined: Jul 8 2008
Posts: 11
Re: Daily Digest - March 3

How bizarre! This video comes from Fox and a "conservative" media network, and at the same time the guy is speaking out about these leftish issues - legalizing pot - civil liberties - then those anti-socialist quotes at the end, with that scarry picture of Obama. I am bewildered and heartened to see typical left-right ideologies and distinctions breaking down. Thanks for that link. It was interesting. Yours, Karla

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - March 3

Hello Greg:

I remember hearing about Rex84 in the 80s when they were interviewing Ollie, I think it is on youTube either Ollie or Loius Boy Guiffrida. In any event the head of that committe looked like he wet himself when the cat came out of the bag. Take care 

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Daily Digest - March 3

Krugman blames SAVERS for the crisis...that's right, SAVERS! How on earth did this guy win a Nobel Prize???

http://www.nytimes.com/2009/03/02/opinion/02krugman.html

gregroberts's picture
gregroberts
Status: Diamond Member (Offline)
Joined: Oct 6 2008
Posts: 1024
Re: Daily Digest - March 3

From #6 

"Krugman blames SAVERS for the crisis...that's right, SAVERS! How on earth did this guy win a Nobel Prize??? "

I thought it was curious that he recieved the prize right at the beginning of the crisis, the same ideas that caused the problem are being promoted as prizeworthy, oh oh , this could be a conspiracy. :-O

Greg

azzenstudent's picture
azzenstudent
Status: Member (Offline)
Joined: Dec 31 2008
Posts: 15
Re: Daily Digest - March 3

One way to look at the international situation right now is that we’re suffering from a global paradox of thrift: around the world, desired saving exceeds the amount businesses are willing to invest. And the result is a global slump that leaves everyone worse off.   Paul Krugman

Krugman doesn't traffic in the talk-radio blather that apparently intoxicates some in this forum. He's a serious economist who warned prior to 2005 about trade imbalances with the Chinese and an American economy reduced to people buying and selling houses to one another. Savings, paradoxically, led to our housing bubble. It wasn't ours, needless to say, but Asians.

Krugman necessarily looks for way to justify a global economy where real people will live or die through macro-economic maneuvers. For people in this forum, there's a huge theoretical problem about economies predicated on growth and debt. We wonder, justifiably, whether the entire system isn't prone to failure from its own inexorable logic. But we're not burdened by the need to keep the world spinning on its axis. It's ironic, but Krugman is less enthralled by ivory-tower theorizing than the doomers who roost here. Krugman's credibility derives from seeing the global economy as workable even if its not fully understandable. We can ask impertinent questions about the underlying strategy but only because we're not responsible for the lives of billions.

We're not going to invent a time machine that takes us back to the 19th century, that abolishes the Federal Reserve System, or that preceded a huge carbon-based economy allowing for huge population growth. Simply put, it's too late. We're stuck living on a planet that may be at the end-stage of an insidious calculation with no easy resolution. Krugman is taken seriously because he see the lives of others as a palpable moral demand, not as we might where those lives are easily expended in a rush of smug self-congratulation.

 

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Daily Digest - March 3
Quote:

Savings, paradoxically, led to our housing bubble. It wasn't ours, needless to say, but Asians.

So what if Americans instead had saved their money and not bought tons of junk from China and lived beyond their means and the government had not run up massive budget deficits, and therefore, not sent all that money to Asia? And what if the Federal Reserve had not dropped interest rates down so low and kept them there for such a long time? And what if we didn't allow banks to get leveraged up as much as they did? Sorry, but your argument, nor Krugman's, makes sense to me.

capesurvivor's picture
capesurvivor
Status: Platinum Member (Offline)
Joined: Sep 12 2008
Posts: 963
Re: Daily Digest - March 3

I may not approve of his thinking but I think that is a good post and summation of a "realist" approach to macroeconomics and why I am more pessimistic than most on this site. It's also why I refrain from theorizing about new and improved economic and governance models; ours will devolve to whatever it will become, IMHO; I don't really think my efforts are going to do much to change it. As I posted elsewhere, my radical friends in the 60's always used to say "after the revolution". Well, there was no revolution and they would have screwed up things afterwards anyway with endless committee meetings.

 

SG

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5568
Re: Daily Digest - March 3

But we're not burdened by the need to keep the world spinning on its axis. It's ironic, but Krugman is less enthralled by ivory-tower theorizing than the doomers who roost here.

That's exactly right but you have it entirely backwards.

Those who seek to promote the status quo regime of growth, growth, growth are the ones propelling us for a fast date with an unpleasant future which will include scarcity, crashes, civil unrest, maybe die-offs and probably war at some not-too-distant point in the future.

It is the people here who recognize the fallacy of the current economic models who are your best hope for a bright future.

Krugman is peddling "more of the same" and, frankly, that stuff scares me.

Krugman is the doomer, and so are all of the Keynesian Chicago-school economists and their apologists.  All one has to do is look at their track record including the current bust to see that their models are worse than worthless, they are misleading and damaging.

However, if you want to continue on this present course of strip mining our last resources, massive and burgeoning wealth disparities, putting more people in jail, living beyond our means, and with declining educational standards and mounting levels of obesity without ever questioning it all, be my guest.

Just don't call us here at this site the doomers, OK?

Because we here have not yet resigned ourselves to a derelict future shaped by broken models and obviously false premises.

Thanks in advance. 

Impartial's picture
Impartial
Status: Member (Offline)
Joined: Feb 24 2009
Posts: 7
Re: Daily Digest - March 3
joemanc wrote:

Krugman blames SAVERS for the crisis...that's right, SAVERS! How on earth did this guy win a Nobel Prize???

http://www.nytimes.com/2009/03/02/opinion/02krugman.html

I totally agree with Krugman's assesment.

The same ideas came to mine mind during a causal conversation with a couple of young Russian professionals whom I met in a pub in Prague last fall. While describing life in Russia, the guys (in their 30th) made a complaint about lost of money due to US financial crises. As I understood, they had invested their money in American papers (like Lehman brothers) considering them as safe investments in the "hard-working" American homeowners. After being out of Russian life for more than 20 years, the fact that emerging Russian middle class is investing in the American economy struck me somehow. The guys looked like ordinary people, not some kind of financial specialists. I thought that if this pattern was spread not only in Russia, but in other fast developing countries, like China, India, then the American economy must certainly be over-financed/overcapitalized.

The enormous flow of capital from the developing countries (China, Russia, India) into the Western, and especially US economy caused a dislocation on the worlds markets, and the rest went according to the hypothesis of financial instability of Hyman Minsky. My impression is that Krugman does not blame the SAVERS, he just explains how we have come to the situation we have now. The blame should go to the people who regulate the economy on national
levels. They have no clue of how the economy functions, but have ideas how it should be regulated/deregulated. And how can they know it, when a lot
of "leading" economists are on the same level. Hyman Minsky, who died
in 1996, was fully forgotten until very recently.

caroline_culbert's picture
caroline_culbert
Status: Platinum Member (Offline)
Joined: Oct 2 2008
Posts: 624
Re: Daily Digest - March 3
bearing01 wrote:

 

This is a good article too:

 

http://www.campaignforliberty.com/article.php?view=20

 President Obama's Budget for fiscal year 2010 (for some reason titled "A New Era of Responsibility") in a nutshell:

- Department of Defense and international expenses (spending on wars and occupations) will go up from $666 billion to $673 billion (under President Bush it grew from $316 billion to $666 billion)

- Other appropriated programs will go up from $613 billion to $695 billion (under President Bush it grew from $298 billion to $613 billion)

- Social Security expenses will go up from $662 billion to $695 billion (under President Bush it grew from $406 billion to $662 billion)

- Medicare expenses will go up from $425 billion to $453 billion (under President Bush it grew from $216 billion to $425 billion)

- Medicaid expenses will go up from $259 billion to $290 billion (under President Bush it grew from $117.9 billion to $259 billion)

- Other mandatory program expenses will drop from $673 billion to $571 billion (under President Bush it grew from $290 billion to $673 billion)

- Net interest will go up from $139 billion to $164 billion (under President Bush it dropped from $222.9 billion to $139 billion)

- Disaster cost will go up from $4 billion to $11 billion (under President Bush it went from $0 billion to $4 billion)

I suspected these increases; The costs will come down only after the BB start to die off.

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - March 3

Absolute momos. Soft depression. Gee, that car over there in that accident with the 18 wheeler was a soft total. 

No small wonder why we dove off this cliff.

 

  • We have momos reporting something that they know nothing about (the economy)
  • and reporters who are looking for a glimmer of false hope 
  • 3,000,000 new jobs
  • 23,000,000 under and unemployed 
  • A deficit to create 3,000,000 new jobs that is bigger than most nations GDP
  • and they call it a credit crisis when it is total insolvency

 

http://www.msnbc.msn.com/id/21134540/vp/29478113#29478113

Create jobs??? Yeah. Like that will prevent > 18% unemployment

 Chart of Unemployment Rate. U-3, U-6, SGS

http://link.brightcove.com/services/link/bcpid1155201977/bctid14637904001   

straight's picture
straight
Status: Silver Member (Offline)
Joined: Aug 25 2008
Posts: 103
Re: Daily Digest - March 3

Re GregRoberts comments about Krugman, questioning how he won a Nobel Prize.

The short easy answer is that he didnt.  I dont know if this has been covered on these forums, but there is no Nobel Prize in Economics...not now, not ever. 

Alfred Nobel set up prizes for Physics, Chemistry, Literature, Physiology and a class which is kind of international relations, now referred to as the Peace Prize.  There are five classes of prize, he didnt have a prize for maths, he didnt have a prize for Economics.

The prize you refer to, and most ppl refer to as the Nobel Prize in Economics is actually "The Nobel Memorial Prize in Economic Sciences, officially named The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel"

Thats right, the Nobel Prize for Economics was set up by a Swedish BANK,

The prize has come under many attacks over the years as not being impartial and being awarded by main stream economists to other main stream economists. 

The prize gets esteem from its association to the name Nobel, but this association was never an official one, indeed the descendants of Nobel are very critical of the Economics prize having the name Nobel.

Semantics, no.  But wtf, Henry Kissinger won the real Peace Prize.  Such is the world we live in where the criminals win the Peace Prizes... Nobel got rich making explosives and left a Peace Prize in his will. 

Money Talks. Bullshit walks. 

Straight.

 

 

joemanc's picture
joemanc
Status: Martenson Brigade Member (Offline)
Joined: Aug 16 2008
Posts: 834
Re: Daily Digest - March 3

Davos - that interview with Gibbs - did he look like a deer in headlights or what??  And what is this answering every question with "I might get in trouble answering that"???

But wait, now we got the president himself telling us to buy stocks!

Quote:

“What you’re now seeing is profit and earning ratios are
starting to get to the point where buying stocks is a potentially
good deal, if you’ve got a long-term perspective on it,” Obama
said at the White House today while meeting with British Prime
Minister Gordon Brown on battling the global recession.

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

 

Stephen Lark's picture
Stephen Lark
Status: Bronze Member (Offline)
Joined: Oct 27 2008
Posts: 44
Re: Daily Digest - March 3

Great article by the Young Turks guy on Daily Kos:
The Flaw in the System: The Bankers Don't Care About the Banks

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - March 3

Just been reading a Sydney Morning Herald article from Leon Gettler who quotes
economist and forecaster Harry Dent who warns that 2008 was only the beginning
and predicts that 2010-2012 will herald the worst banking figures since the
1930's. He also predicts a short lived recovery in the latter half of this year.
He mentions that a "possible" terrorist attack or seismic geopolitical event
could see oil prices soar to above $180US, then continues on to say that we
won't see the next "boom" occurring until between 2023 & 2036, musing "if we
live that long."

Yep. Just another economist sprouting off from an economists view of 'business
as usual', but wait!!

Next comes predictions from Kevin Phillips, and old 1968 Nixon campaigner who
recognises the twin dangers of diminishing energy and oil. He states that
"America is vulnerable to peak oil, which will weaken the US dollar even
further." Strange that he doesn't go one step further and say that the whole
world is vulnerable to peak oil. Ok. So he must be getting a little long in the
tooth to have been a Nixon campaigner and so maybe he can't see further than the
'good ol' US of A' but I'm still amazed that people cannot relate to how
dependant the entire world is on oil.

The full article can be found at............

http://www.smh.com.au/news/executive-style/management/were-all-doomed--again/200\
9/02/26/1235842307666.html?page=fullpage#contentSwap2

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - March 3

Very well said Chris.....  what people here need to do is get off their arses and start the revolution before the morons in charge take ever more opportunities to keep that status quo going.

Mike 

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
It's official - Australia in recession too

Swan defends stimulus as economy shrinks

By Online parliamentary correspondent Emma Rodgers

The bigger than expected contraction in Australia's
economy last quarter would have been much worse if the Government had
not moved to stimulate the economy, Federal Treasurer Wayne Swan says.

Mr Swan has been forced to defend the two stimulus packages, which
contained billions of dollars worth of cash handouts, in the wake of
today's grim national accounts.

The figures show that the economy contracted by 0.5 per cent in the December quarter, putting GDP growth at 0.3 per cent.

Mr Swan described the figures as sobering, but not surprising, but
he refused to speculate whether Australia was closer to a recession.

And he has used a small rise in household consumption to defend the
Government's stimulus packages, which have been criticised by the
Oppositon for having no effect.

"Our Government and the Reserve Bank have acted swiftly to stimulate
the economy and to support economic activity and jobs, precisely at the
time in the December quarter when there was this very sharp global
contraction," he said.

"What that demonstrates is the wisdom of moving early and swiftly as
the Government did both last October and also again in December."

The contraction in growth has prompted suggestions that a recession
is inevitable, but Mr Swan would not be drawn on the speculation.

"I think what is inevitable is that there will be a dramatic impact
[on Australia] of what is going on around the world," he said.

"Rather than have a debate about what technically this all means
what I say is it means a very significant economic challenge for our
country."

However Mr Swan says the figures show Australia cannot completely fight the pull of dire international conditions.

"I understand there will be a great deal of anxiety in our community
about today's numbers and about where things are going globally," he
said.

"There's no doubt that the global recession will get worse before it
gets better and of course that will have human consequences for many
Australians."

However he said much of the country's long term prospects were good, despite short term challenges.

Drops in manufacturing, wholesale trade and property and business
services have been blamed as the major contributors to the fall in GDP,
but the drop was partially offset by stronger performances in
agriculture, forestry and fishing.

Many of Australia's top 10 trading partners such as Japan, the US and the UK are already in or close to recession.

Yesterday the Reserve Bank refrained from cutting the country's 3.25
per cent interest rates, after slashing the rate by 400 basis points in
six months.

But today Reserve Bank (RBA) assistant governor Malcolm Edey said if
economic growth slows to near zero Australia will face a borderline
recession.

CB's picture
CB
Status: Gold Member (Offline)
Joined: Mar 18 2008
Posts: 365
Re: Daily Digest - March 3

This is just a bit of the article - the author suggests that the rape and pillage of the economy by GS and JPM is about to begin as the government is enslaved to their interests - read the whole thing:

 Excerpted from "America's Fiscal Collapse" by Michel Chossudovsky

http://www.globalresearch.ca/index.php?context=va&aid=12517

Quote:

War and Wall Street

This is a "War Budget". The austerity measures hit all major federal spending programs with the exception of:  1. Defence and the Middle East War: 2. the Wall Street bank bailout,  3. Interest payments on a staggering public debt. 

The budget diverts tax revenues into financing the war. It  legitimizes the fraudulent transfers of tax dollars to the financial elites under the "bank bailouts". 

The pattern of deficit spending is not expansionary. We are not dealing with a Keynesian style deficit, which stimulates investment and consumer demand, leading to an expansion of production and employment. 

The "bank bailouts" (involving several initiatives financed by tax dollars) constitute a component  of government expenditure. Both the Bush and Obama bank bailouts are hand outs to major financial institutions. They do not not constitute a positive spending injection into the real economy. Quite the opposite. The bailouts contribute to financing the restructuring of the banking system leading to a massive concentration of wealth and centralization of banking power. 

A large part of the bailout money granted by the Us government will be transferred electronically to various affiliated accounts including the hedge funds.  The largest banks in the US will also use this windfall cash to buy out their weaker competitors, thereby consolidating their position. The tendency, therefore, is towards a new wave of corporate buyouts, mergers and acquisitions in the financial services industry. 

In turn, the financial elites will use these large amounts of liquid assets (paper wealth), together with the hundreds of billions acquired through speculative trade, will be used to buy out real economy corporations (airlines, the automobile industry, Telecoms, media, etc ), whose quoted value on the stock markets has tumbled. 

In essence, a budget deficit ( combined with massive cuts in social programs) is required to fund the handouts to the banks as well as finance defence spending and the military surge in the Middle East war. Obama's budget envisages: 

1. defense spending of $534 billion for 2010, a supplemental 130 billion dollar appropriation for fiscal 2010 for the wars in Afghanistan and Iraq, and a supplemental $75.5 billion emergency war funding for the rest of the 2009 fiscal year. Defence spending and the Middle East war, with various supplemental budgets, is (officially) of the order of 739.5 billion. Some estimates place aggregate defence and military related spending at $ 1 trillion+. 

2. A bank bailout of the order of $750 billion announced by Obama, which is added on to the 700 billion dollar bailout money already allocated by the outgoing Bush administration under the Troubled Assets Relief Program (TARP). The total of both programs is a staggering 1.45 trillion dollars to be financed by the Treasury. It should be understood that the actual amount of cash financial "aid" to the banks is significantly larger than $1.45 trillion. (See Table 2 below). 

3. Net Interest on the outstanding public debt is estimated by the Bureau of the Budget) at $164 billion in 2010.

The order of magnitude of these allocations is staggering. Under a "balanced budget" criterion --which has been a priority of government economic policy since the Reagan era--, almost all the revenues of the federal government amounting to $2.381 trillion would be used to finance the bank bailout (1.45 trillion), the war ($739 billion) and interest payments on the public debt ($164 billion). In other words, no money would be left over for other categories of public expenditure. 

kemosavvy's picture
kemosavvy
Status: Martenson Brigade Member (Offline)
Joined: Oct 13 2008
Posts: 254
Re: Daily Digest - March 3

I just read through the Krugman article and I would have to say that I AGREE with Krugman.

Krugman is pointing out, in my opinion, the most critical aspect of this financial crisis, the overwhelming flood of money into this country. when truly safe investments (assets that were really AAA) got soaked up the china money had to find a new home, and once that get soaked up, the money looked for another new home. wall street had to become ever more creative to create illusion of safety to keep this watertap flowing.

just look at this chart of the US's trade deficit to china and you can see that year after year since 1986 wall street has had to keep looking for investments for china to pour money into.

http://www.census.gov/foreign-trade/balance/c5700.html

if china had taken their money home, we would not have had this distortion in the market, but hindsight is 20/20.

for my take on this subject watch my video on youtube

 

Steve

deadman's picture
deadman
Status: Member (Offline)
Joined: Mar 12 2008
Posts: 14
Re: Daily Digest - March 3

Talk on yahoo.finance techticker tonight that gold prices are finally going to give way to deflationary pressures.

Many large financial institutions will be selling gold to generate cash.

Anyone concerned? 

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Dubai is in deep financial trouble

Dubai is in deep financial trouble

Posted Feb 23rd 2009 11:00AM by Connie Madon
Filed under: International markets, Deals, Bad news, Middle East, Oil, Financial Crisis

Where have more than half of the real estate projects been abandoned? You'd be surprise, but we're not even talking about the United States. We're talking about oil-rich Dubai.

Guess how Dubai got into such financial trouble? Yep, excess
borrowing and over development. Does that sound familiar? Dubai is in
such a bind that it had to borrow $10 billion from The United Arab
Emirates. The loan will help Dubai to meet its financial obligations
and continue its development program.

However,
things are getting worse for Dubai on a daily basis. Sounds familiar?
Dubai raised $3.4 billion of refinancing from its government owned
Borse.

Dubai is trying not to go the way of Iceland, but last week its
credit default swaps were rising to levels similar to those in Iceland.
To support Dubai, The United Arab Emirates has made Dh 120 billion
available to banks in all seven emirates and also agreed to rescue two
mortgage companies, Amlak and Tamweel.

Abu Dhabi earlier this month injected Dh 16 billion in its own
banking system rather than supporting all financial institutions in the
UAE.

What is so fascinating about this story is that it demonstrates that the worldwide financial crisis is leaving no one unscathed.

presentmoment's picture
presentmoment
Status: Bronze Member (Offline)
Joined: Sep 22 2008
Posts: 57
Re: Daily Digest - March 3

 

bearing01,

 Thanks for posting that article. 

presentmoment

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Daily Digest - March 3
caroline_culbert wrote:
bearing01 wrote:

This is a good article too:

I suspected these increases; The costs will come down only after the BB start to die off.

 

Don't rush me, Caroline, don't rush me!!  Surprised

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Daily Digest - March 3
StephenLark wrote:

Great article by the Young Turks guy on Daily Kos:
The Flaw in the System: The Bankers Don't Care About the Banks

Good post, Stephen. And it is so true, it makes me want to reach out and touch someone - with a baseball bat! Yell

ernie's picture
ernie
Status: Bronze Member (Offline)
Joined: Feb 18 2009
Posts: 39
Re: Daily Digest - March 3

This Mises article from last year looks at the impact of Asian savings:

 

http://mises.org/story/3203

 

I don't think Krugman is on the right track.

 

- Ernie.

 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - March 3

(Former AIG CEO) Greenberg Sues AIG for Securities Fraud (Sachs CEO at 7:30+/-, Goldman Got 100% Coverage, Governments Can't Run Companies10:50, They Have Trouble Running Themselves)

http://www.cnbc.com/id/15840232?play=1&video=1050699862  

caroline_culbert's picture
caroline_culbert
Status: Platinum Member (Offline)
Joined: Oct 2 2008
Posts: 624
Re: Daily Digest - March 3
SamLinder wrote:
caroline_culbert wrote:
bearing01 wrote:

This is a good article too:

I suspected these increases; The costs will come down only after the BB start to die off.

 

Don't rush me, Caroline, don't rush me!!  Surprised

I know... Sorrrrrrrry.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments