- Schakowsky: Tea parties ‘despicable’
- Just how inane Schakowsky’s comment is
- Markets Rise After Tax Day Tea Parties
- State Tax Collections Decline…. Sales Taxes with a Record Drop (Chart)
- Green Shoots Are For Suckers
- Report: One-Third of REOs Seriously Damaged
- Fed’s Yellen: A Minsky Meltdown: Lessons for Central Bankers
- Summer 2009: The international monetary system’s breakdown is underway (H/T HukleJohn)
- Hey, Economics Geniuses! What Happened? (H/T James)
- IMF warns over parallels to Great Depression (Video)
- Eurozone Industrial Production Collapse (Chart)
- A ‘Copper Standard’ for the world’s currency system? (H/T Cat233)
- State Unemployment Spike (Chart)
Rep. Jan Schakowsky (D-Ill.) blasted "tea party" protests yesterday, labeling the activities "despicable" and shameful."
"The tea parties being held today by groups of right-wing activists, and fueled by FOX News Channel, are an effort to mislead the public about the Obama economic plan that cuts taxes for 95 percent of Americans and creates 3.5 million jobs," Schakowsky said in a statement.
"Its despicable that right-wing Republicans would attempt to cheapen a significant, honorable moment of American history with a shameful political stunt," she added. "Not a single American household or business will be taxed at a higher rate this year. Made to look like a grassroots uprising, this is an Obama bashing party promoted by corporate interests, as well as Republican lobbyists and politicians.
To help put things in perspective, the Peterson Foundation calculated the federal government accumulated $56.4 trillion in total liabilities and unfunded promises for Medicare and Social Security as of September 30, 2008. The numbers used to calculate this figure come directly from the audited financial statements of the U.S. government.
If $56.4 trillion in financial commitments is too big a number to digest, think of it as $483,000 per American household, or $184,000 for every man, woman and child in the country.
Even broken down, the numbers can be tough to swallow. Yes, you’ve paid your taxes, but you still bear a significant share of the government’s own financial burden.
Signs seen at the Chicago "Tax Day Tea Party":
"I’ve listed the federal government as a dependent on my tax return"
"If Our Treasury Secretary Doesn’t Have to Pay His Taxes, Then Why Do I Have to?"
"You can’t borrow your way out of debt" [emphasis mine] "Jesus Saves – Obama Spends"
"Read My Lips – No New Bailouts!"
"Free Markets, Not Freeloaders"
"Don’t count your recoveries before they’re hatched."
So says Paul Krugman, who agrees with our assessment of the economy. As we noted a few weeks ago, its not getting better, its only getting worse more slowly.
And the same damn fools who missed the oncoming freight train in the first place are now busy declaring its all clear. They were wrong before and they are wrong now.
Even when it’s over, it won’t be over. The 2001 recession officially lasted only eight months, ending in November of that year. But unemployment kept rising for another year and a half. The same thing happened after the 1990-91 recession. And there’s every reason to believe that it will happen this time too. Don’t be surprised if unemployment keeps rising right through 2010.
Why? "V-shaped" recoveries, in which employment comes roaring back, take place only when there’s a lot of pent-up demand. In 1982, for example, housing was crushed by high interest rates, so when the Fed eased up, home sales surged. That’s not what’s going on this time: today, the economy is depressed, loosely speaking, because we ran up too much debt and built too many shopping malls, and nobody is in the mood for a new burst of spending.
Employment will eventually recover – it always does. But it probably won’t happen fast.
Ever notice how poorly Human Beings conceptualize time? The idea that events occur slowly, take patience, prudence, and above all the slow elapsing of the calendar seems to be beyond many people’s ability to comprehend. It makes me understand why some folks want to believe *all of this* is only 5,000 years old – they can wrap their heads around that number.
V-shaped recovery? Ha! Long lived the "L" . . . .
From CNN: Experts: Some foreclosed homes too damaged to sell
"About a third of all of the foreclosed properties nationwide have been so damaged, either by the previous owners or by criminal gangs coming in after the foreclosure, that they no longer qualify for standard mortgage financing," [researcher] Thomas Popik told CNN. "So there is going to be all kinds of government programs to help, but if they don’t qualify for standard mortgage financing, there’s no one to buy these properties."
Popik says responses from thousands of real estate agents nationwide to the questionnaires he sends out quarterly indicate that badly damaged foreclosed homes … are a much bigger element of the national housing picture than officials in Washington have acknowledged.
"In many cases, it costs so much to rehabilitate these houses, it’s just not cost-effective," he told CNN. "And the properties are eventually going to be bulldozed."
This probably explains some of the "shadow" inventory.
From San Francisco Fed President Janet Yellen: A Minsky Meltdown: Lessons for Central Bankers
… with the financial world in turmoil, Minsky’s work has become required reading. It is getting the recognition it richly deserves. The dramatic events of the past year and a half are a classic case of the kind of systemic breakdown that he-and relatively few others-envisioned.
Central to Minsky’s view of how financial meltdowns occur, of course, are "asset price bubbles." This evening I will revisit the ongoing debate over whether central banks should act to counter such bubbles and discuss "lessons learned." This issue seems especially compelling now that it’s evident that episodes of exuberance, like the ones that led to our bond and house price bubbles, can be time bombs that cause catastrophic damage to the economy when they explode.
In this issue of the GEAB, our researchers anticipate the different forms a US default will take at the end of summer 2009, a US default which can no longer be concealed concealable from this April (most taxes are collected in April in the US) onward (10). The perspective of a US default this summer is becoming clearer as public debt is now completely out of control with skyrocketing expenses (+41%) and collapsing tax revenues (-28%), as LEAP/E2020 anticipated more than a year ago. In March 2009 alone, the federal deficit has nearly reached USD 200-billion (way above the most pessimistic forecasts), i.e. a little less than half of the deficit recorded for the entire year 2008 (a record high year) (11). The same trend can be observed at every level of the country’s public organisation: federal state, federated states (12), counties, towns (13), everywhere tax revenues are vanishing, suffocating the whole country with spiraling debts that no one can control anymore (not even Washington).
"If you are an economist and did not see this coming, you should seriously reconsider the value of your education and maybe do something with a tangible value to society, like picking vegetables," he wrote on patrick.net.
"The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.
The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters) and praseodymium (glass).
While it makes sense for China to take advantage of last year’s commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank.
John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. "We’re very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China’s pockets are deep."
Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor", floated by John Maynard Keynes at Bretton Woods in 1944.
The Bancor was to be anchored on 30 commodities – a broader base than the Gold Standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of "credit-based" excess that has brought the global finance to its knees.
If his thoughts reflect Communist Party thinking, it would explain the bizarre moves in commodity markets over recent weeks. Copper prices have surged 49pc this year to $4,925 a tonne despite estimates by the CRU copper group that world demand will fall 15pc to 20pc this year as construction wilts.
Analysts say "short covering" by funds betting on price falls has played a role. But the jump is largely due to Chinese imports, which reached a record 329,000 tonnes in February, and a further 375,000 tonnes in March. Chinese industrial demand cannot explain this. China has been badly hit by global recession. Its exports – almost half GDP – fell 17pc in March.
While Beijing’s fiscal stimulus package and credit expansion has helped lift demand, China faces a property downturn of its own. One government adviser warned this week that house prices could fall 50pc.
One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America’s debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. "We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets," he said.
This is slightly disingenuous. China has the world’s largest reserves – $1.95 trillion, mostly in dollars – because it has been holding down the yuan to boost exports. This mercantilist strategy has reached its limits.
The beauty of recycling China’s surplus into metals instead of US bonds is that it kills so many birds with one stone: it stops the yuan rising, without provoking complaints of currency manipulation by Washington; metals are easily stored in warehouses, unlike oil; the holdings are likely to rise in value over time since the earth’s crust is gradually depleting its accessible ores. Above all, such a policy safeguards China’s industrial revolution, while the West may one day face a supply crisis.
Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1pc, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a "Copper Standard" as a "Gold Standard".