"Our Children and Grandchildren are not merely statistics towards which we can be indifferent" JFK

Thursday, June 30, 2011

Grandpa's Suggested Reading For All Politicians

Sorry, Geithner and Bernanke used up every
tear-out check to pay for your fiscal ineptitude



When you hand a lobbyist a cookie...



Grandchildren know full well that it's
broken and both red and blue states
took their eye off the ball



Nuff Said...



Horton is laughed at by his jungle friends, exposed to the elements,
captured by hunters, forced to endure a terrible sea voyage,
and finally placed in a traveling circus. However, he refuses
to leave the nest through all of these because he promised
Mayzie he would look after the egg
("I meant what I said and I said what I meant,
And an elephant's faithful, one hundred per cent!")

Nuff Said II


If Horton was not inspirational enough for you...

As it neared the top of the grade, which had so discouraged
the larger engines, it went more slowly. However, it still kept saying,
"I--think--I--can, I--think--I--can." It reached the top by drawing on bravery
and then went on down the grade, congratulating itself by saying,
"I thought I could, I thought I could."






Time for all of you to cease stomping on our childrens'
and grandchildrens' dreams.
They deserve an opportunity to dream.





Tuesday, June 28, 2011

Bernanke, you have a sacred obligation to continue faking it (Bill Frezza)

Ben, you have a sacred obligation to continue faking it.
Nobody will think less of you if you just brazen it out.


Forbes
By: Bill Frezza
June 28, 2011

The United States economy has weathered countless panics, bubbles, and recessions throughout its history, typically recovering with a vengeance on the way to achieving new heights. One and only one downturn turned into a Great Depression. So far.

Countless scholars have studied exactly how the federal government managed to turn a stock market crash and cyclical recession into a fifteen year nightmare. Only incorrigible ideologues persist in spouting the idea that greed and selfishness caused the Great Depression. After all, these are eternal features of the human condition.

Thinking economists generally blame a combination of the Federal Reserve’s failure to maintain a steady price level and Congress’s insistence on destroying global trade with its protectionist Smoot-Hawley tariffs. Debate continues on the degree to which FDR’s interference in the economy helped or made things worse, but the undeniable fact remains that the country didn’t get back on track until all the economic controls loaded onto businesses were lifted at the end of World War II.

Ben Bernanke devoted his professional life to understanding these failures. Destiny put him at the helm of the Federal Reserve when a real estate bubble fueled by easy money, collapsed lending standards, rash derivatives gambling, and a bipartisan bailout upended the world’s financial system. As the economy teetered at the edge of the abyss Helicopter Ben flew into action, flooding the planet with liquidity determined to smother any hint of demon deflation under mountains of fresh greenbacks.

Hurrah, it worked! Prices are going up, slowly at the moment, but with every indication that we will soon be longing for the days when inflation was only in the single digits. Meanwhile debate continues on whether President Obama’s czar-driven interference in the economy is increasing or decreasing the rate at which things are getting worse.

So, Ben, now that you have saved us from the horror of cheaper stuff why isn’t the economy bouncing back like it has after every other recession?

Cue deer in headlights.

Come on, mumble some sphinx-like inanities to reassure us. It worked for your predecessor. “We don’t have a precise read on why this slower pace of growth is persisting” is not going to cut it. Grab a thesaurus and pull out whatever comes after “temporary factors” and “persistent headwinds.”

Don’t you realize that supporting the illusion that the Chairman of the Federal Reserve knows what the hell he is doing is central to maintaining investor confidence? Do you understand how paralyzed with fear your countrymen will become if they realize that all you economics professors in Washington are merely passengers on a runaway train? What will people make of your promises to know exactly when to soak up all this excess liquidity before it drowns us if it becomes obvious that you haven’t got a clue what is going on or why?

Ben, you have a sacred obligation to continue faking it. Nobody will think less of you if you just brazen it out. Follow the example of the president, go buy yourself a teleprompter and blame everything on the last guy. With a little luck your term in office will be over before voters figure out that turning over the economy to people who have never worked a real job a day in their lives is insane. This is not to belittle the value of waiting tables at South of the Border any more than discounting the lessons one learns as a community organizer. But asking unaccountable bureaucrats to steer a national economy without ever having contributed to it is like asking the Pope to train sex therapists.

We all know that the Federal Reserve rests on a shared illusion. In what other industry can the biggest suppliers collude and fix prices with impunity? Which other businesses can always count on helping themselves to “liquidity” whenever they get themselves in a pickle? Keeping the masses believing that some guy in Washington sets interest rates with a wave of his magic wand only works if all the co-conspirators play along. A fiat currency is only as good as the inordinate faith people place in it.

Ben, maintaining this faith is your sacred obligation. No journalist will call you a liar if your prognostications turn out to be dead wrong; after all there is never any accountability in Washington. But everyone will blame you if you start to look the fool. You are safe for the moment as your boss can’t turn you into a scapegoat without admitting that he’s equally clueless. But if we’re sitting here in the summer of 2012 with 10% unemployment, 10% inflation, and negative economic growth who do you think will be the first to walk the plank?

If you appreciate Bill's perspective,

Monday, June 27, 2011

Senator Bernie Sanders: Letter to President Obama (Sacrifice Sharing)

June 27, 2011
Dear Mr. President,

This is a pivotal moment in the history of our country. Decisions are being made about the national budget that will impact the lives of virtually every American for decades to come. As we address the issue of deficit reduction we must not ignore the painful economic reality of today -- which is that the wealthiest people in our country and the largest corporations are doing phenomenally well while the middle class is collapsing and poverty is increasing. In fact, the United States today has, by far, the most unequal distribution of wealth and income of any major country on earth.

Everyone understands that over the long-term we have got to reduce the deficit -- a deficit that was caused mainly by Wall Street greed, tax breaks for the rich, two wars, and a prescription drug program written by the drug and insurance companies. It is absolutely imperative, however, that as we go forward with deficit reduction we completely reject the Republican approach that demands savage cuts in desperately-needed programs for working families, the elderly, the sick, our children and the poor, while not asking the wealthiest among us to contribute one penny.

Mr. President, please listen to the overwhelming majority of the American people who believe that deficit reduction must be about shared sacrifice. The wealthiest Americans and the most profitable corporations in this country must pay their fair share. At least 50 percent of any deficit reduction package must come from revenue raised by ending tax breaks for the wealthy and eliminating tax loopholes that benefit large, profitable corporations and Wall Street financial institutions. A sensible deficit reduction package must also include significant cuts to unnecessary and wasteful Pentagon spending.

Please do not yield to outrageous Republican demands that would greatly increase suffering for the weakest and most vulnerable members of our society. Now is the time to stand with the tens of millions of Americans who are struggling to survive economically, not with the millionaires and billionaires who have never had it so good.

Senator Bernie Sanders


Sanders Says Stand Up to Schoolyard Bullies

MN "Leaders" Enter Their Cone of Silence after a 75 Minute Meeting

After a 75 minute meeting, the best and the brightest MN
Elected "Representatives" didn't say when negotiations would resume.



Pioneer Press
By: Dennis Lien
June 26, 2011

Budget talks between Democratic Gov. Mark Dayton and Republican legislative leaders ended without explanation Sunday afternoon, prompting questions about whether the two sides have hit a roadblock in their efforts to end a prolonged budget impasse.

The governor and leaders met on a third consecutive day for about 75 minutes before GOP staff told reporters the session had concluded. They didn't say when negotiations would resume.

Dayton and the key lawmakers left without going past reporters, opting to use other exits.

Later, House Speaker Kurt Zellers, R-Maple Grove, refused to provide specifics, referring to a "cone of silence'' that had been established by the parties.

We've maintained all the way through this weekend that we are going to keep the conversations we had in there in the room,'' Zellers said. "But we continue to talk. We continue to work.''

Senate GOP spokesman Michael Brodkorb said legislative leaders would continue meeting Sunday with finance chairs, but no further negotiations would be held later in the day. No meetings had been scheduled for Monday.

The mysterious conclusion followed 16 hours of private talks Friday and Saturday in which Dayton and leaders reported progress on trying to resolve the impasse that, barring an agreement in the next four days, would lead to a state government shutdown Friday.

The two sides have been at odds over how to resolve a looming budget deficit for the upcoming two-year spending period.

Republicans want a $34 billion two-year budget tied to existing revenue while Dayton wants to increase taxes on the state's highest earners to pay for a $35.8 billion budget.

Though no one signaled any type of agreement was imminent before Sunday's talks, Dayton again said he was optimistic as he entered the room in which talks were being held.

"I hope we can make the kind of progress we've made the past two days,'' a smiling Dayton said.

Afterward, Dayton spokeswoman Katie Tinucci said she wouldn't address what had happened in the meeting.

"There is still work happening around the budget,'' House GOP spokeswoman Jodi Boyne said.

As that work continues, some of the focus will shift to the courts.

A judge today will hear arguments in Ramsey County District Court about courts spending if a shutdown occurs.

In addition, Ramsey County Chief District Judge Kathleen Gearin could rule as early as today whether to keep parts of state government operating if Dayton and the Legislature fail to reach an agreement.

The budget talks were held Sunday afternoon so Dayton could participate in the Twin Cities Pride parade in Minneapolis in late morning. He is the first Minnesota governor to have done so.







Sunday, June 26, 2011

Michele Bachmann: handle our debt like an interest only mortgage

"Geithner can very simply pay the interest on the debt first,
then we're not in default."




By Douglass K. Daniel
June 26, 2011

WASHINGTON (AP) — On the eve of her entry into the 2012 GOP presidential race, Rep. Michele Bachmann said "scare tactics" are being used by those warning of an economic calamity unless Congress raises the government's borrowing limit by an August deadline.

The three-term congresswoman from Minnesota said the U.S. could avoid a default by paying only the interest on U.S. obligations while lawmakers work on a deal to cut spending dramatically as part of a new debt ceiling.

Such an approach has been derided as unworkable by Treasury Secretary Timothy Geithner.

Bachmann, a tea party favorite, planned to kick off her campaign Monday in her Waterloo, Iowa, her birthplace. The Iowa Poll released Saturday night by The Des Moines Register showed her in a statistical tie with Republican rival Mitt Romney among likely caucus-goers.

In an appearance Sunday on CBS' "Face the Nation," Bachmann said she found the poll gratifying but noted that the race for the nomination was just beginning.

The poll showed Romney with 23 percent support and Bachmann with 22 percent among those who said they were likely to vote in the nation's first Republican nomination contest.

The top five included former House Speaker Newt Gingrich and Rep. Ron Paul of Texas with 7 percent each and former Minnesota Gov. Tim Pawlenty with 6 percent.

President Barack Obama planned separate meetings Monday with Senate leaders as negotiations on trimming spending and raising the debt ceiling moved into a new stage. Talks among lawmakers of both parties ended last week when Democrats and Republicans reached an impasse over whether there should be any role for additional revenue in reducing the deficit.

Officials say the nation's borrowing will exceed its $14.3 trillion limit on Aug. 2 and that economic shockwaves around the world would result from the first financial default in U.S. history.

"It isn't true that the government would default on its debt," Bachmann said on CBS. She later added, "It is scare tactics." Geithner, she said, "can very simply pay the interest on the debt first, then we're not in default."

Geithner has dismissed the idea that the U.S. could avoid a default by just paying the interest on the national debt and picking which bills to pay, contending that even trying to do so would roil financial markets and make it more expensive to finance what the government does owe.

"There is no responsible path that avoids default, avoids catastrophe to the economy, that has us decide as a country, we're going to stop paying all our obligations so we can pay interest," Geithner told the House Small Business Committee last week. "It doesn't work. It's not workable. And it will not relieve Congress of the obligation of raising the limit."

Bachmann said she wasn't willing to allow the government to keep borrowing money and putting the country into a worse state.

"One year from now, we'll be back, having this same conversation," she said. "That cycle has to stop."

Although she once suggested that ending the minimum wage would be a boon to employment, Bachmann declined to say she would advocate that position as president and instead would ask a group of economists to consider the idea.

"I think everything needs to be on the table right now, every part of government," she said.

Saturday, June 25, 2011

The Fed is discriminating against the elderly (David Merkel)

 it is reasonable to call Bernanke the enemy of savers,
because he is the enemy of savers


Wall Street Pit
By: David Merkel
June 24, 2011

Today, Charles Rotblut, CFA who is the AAII Journal Editor wrote:

Federal Reserve Chairman Ben Bernanke continues to be the enemy of savers. Yesterday, the Boston Red Sox fan reiterated his belief that interest rates should be kept at rock-bottom levels for an extended period of time. He views this as necessary in order to keep the economy growing.

When you run an investment group that is largely composed of retirees and near-retirees, it is reasonable to call Bernanke the enemy of savers, because he is the enemy of savers. When one can’t earn anything over one year without risk, something is wrong. Better that the economy grow more slowly, than that savers not get their due for not consuming.

Saving deserves a return. Let the Fed raise the Fed funds rate by 1%, and they will see that there is no harm to the banks, and little harm to the economy. Once you have 1% slope between twos and tens you have more than enough oomph to make the economy move. What, does the AARP have to bring a age discrimination lawsuit against the Federal Reserve to make this happen? The Fed is discriminating against the elderly.

But now consider another issue — money market funds. I consider them to be superior to banks because their asset-liability mismatch is so small, and they have generated small losses relative to banks and other depositary institutions.

Prime money market funds in the US have been investing 50% of their assets in the Commercial Paper [CP] of Core Eurozone Banks. Well guess what? If the Greeks and other fringe members of the Eurozone default, and the core governments don’t bail the situation out, those holding CP of core Eurozone banks may take a loss. And this is at a time where French and German Banks are facing liquidity issues. Take time to review your money market funds.

The problems of the US and China are significant, but the problems of the Eurozone are pressing. The endgame there will arrive more rapidly because the underlying structure is unstable. One currency can’t serve multiple cultures. Also, there should have been an Eurozone exit plan designed in from the beginning. It was hubris to think it would never need that level of adjustment.

It seems like the ECB is becoming a repository of euro-fringe debt, and perhaps the IMF as well. After all, it doesn’t cost the ECB anything to absorb those debts, but it indirectly spreads the risk to the euro-core nations if there is ever a default or unfavorable restructuring. A central bank can’t go broke, but it can impose problems on those that use the currency if defending the central bank exacerbates other problems in the economy. (E.g., printing money to cover over bad debts absorbed by the bank, while inflation rolls on.)

On a slightly different level, I’m not sure that the banking regulators in the US or Europe really got the main lesson from the crisis. Risk management is liquidity management. I still think that banks rely too much on short liabilities to finance illiquid, longer assets. One advantage of mark-to-market accounting is that it can reveal those mismatches to investors, or perhaps, to regulators. Extra capital can help, but it is usually not enough when there is a run on short-term liquidity, particularly because capital is the excess of assets over liabilities. If there are not enough liquid assets to meet the redemption of liquid liabilities, the result is insolvency.

“But that’s a liquidity problem, not a solvency problem — just give it time and the market will normalize, the assets are worth more than the liabilities anyway.” But at such a time, no one wants to buy the longer, less liquid, lower quality assets. If the bank could raise liquidity, it would. It can’t, so it is not only illiquid, but insolvent. It’s always cheaper to issue liquid liabilities, because those are attractive to savers and investors, but they a poison in a crisis.

My fear here is that there may be another call on liquidity that forces the Fed or the ECB to backstop banks. Not sure what would cause it; it’s always hard to pick which straw will break the camel’s back.

Thus I say be cautious at present; have some safe assets available in case we have a panic that emanates out of Europe, and has second-order effects on the US.

Tuesday, June 21, 2011

John McCain: Substantial Evidence Illegal Immigrants Set AZ Fires

 "substantial evidence that some of these fires have been
caused by people who have crossed our border illegally..."

The Guardian
By: Mark Smith
June 21, 2011

The former Republican presidential candidate John McCain has been accused of "scapegoating" Mexicans over comments he made linking wildfires in his home state of Arizona to illegal immigration.

The issue ignited over the weekend when the US senator said there was "substantial evidence that some of these fires have been caused by people who have crossed our border illegally. The answer to that part of the problem is to get a secure border".

Two other Arizona Republicans backed McCain, but immigration activists swiftly condemned his statement as typical of a "blame it on the Mexicans" mentality. Democratic politicians also waded in to rebuke McCain's politicisation of the issue.

"It's his constant refrain for everything that ails mankind," said Roberto Reveles, founder of Somos America, an Arizona-based immigrant rights group. "It just seems like we have an epidemic of 'blame it all on the illegal aliens; blame it all on the Mexicans'. It's amazing that the public doesn't rebel against this type of scapegoating."

Republican senator Jon Kyl and house representative Paul Gosar defended McCain, claiming they had been told some fires in the southern part of the state are started by illegal immigrants. They did not specify to which fires they were referring, but framed the resulting debate as a distraction.

"While Arizonans continue to face the enormous challenges related to these wildfires, it's unfortunate that some are inserting their political agenda into this tragedy," their statement said.

This assertion raised the hackles of Arizona Democrat and house representative Raul Grijalva. "They served this, they pandered it," he said. "And now [they] say that anybody who criticises that inappropriate, unsubstantiated claim somehow has a political agenda. This is a tragedy of huge proportions for Arizona. Those of us who criticise it are only reacting to what they started."



Monday, June 20, 2011

17 Percent of Americans Approve of Congress' Job (including grandchildren, approval rate drops to 3%)


Gallup
By: Jeffrey M. Jones
June 17, 2011

PRINCETON, NJ -- Seventeen percent of Americans approve of the job Congress is doing, down seven percentage points from May's 24% approval rating, but similar to where it was in March and April. Congress' approval rating has been below 25% since January 2010.



The June 9-12 update on Congress was conducted in the midst of the scandal involving U.S. Rep. Anthony Weiner. However, the drop since May more likely reflects the end of the rally in support for the government after the death of Osama bin Laden rather than a reaction to the Weiner scandal. The bin Laden news preceded increases in approval ratings for President Obama and Congress as well as an uptick in Americans' satisfaction with the way things are going in the United States, but all three measures are back down in June.

The 17% now approving of Congress is just four points higher than the all-time low of 13% Gallup measured in December. Since Gallup began assessing congressional job approval in 1974, there have been only three ratings lower than 17%. All of these -- plus two other 17% ratings -- have been recorded in the past three years, underscoring the recent negative turn in Americans' views of Congress.

Implications
Congress' approval ratings remain historically low, and in recent years, Americans' dim view of Congress has contributed to the significant turnover in its membership after the 2006, 2008, and 2010 elections. Unless conditions in the United States improve and Americans become more charitable in their ratings of Congress, the 2012 elections may result in another shake-up in Congress' membership, although with divided control of the legislative branch, it is not clear which party would be hurt more. The irony is that even as Congress' membership has turned over a lot in recent years, its standing as an institution in the eyes of the public has not improved. Complete Report with Charts

Too bad Gallup did not include
grandchildren in their polling results

 



Sunday, June 19, 2011

The Extinction of Retirement (Michael Pento)

As of this writing, the S and P 500 is now no higher than
it was in January of 1999. For over 12 years the major averages
 have gone nowhere in nominal terms and have declined significantly
in real (inflation adjusted) terms. The dreams of becoming rich from
 investments have crashed along with Pets.com and Bernie Madoff.


Euro Pacific Capital
Michael Pento
June 15, 2011

For the better part of a century the foundations for a semi-comfortable retirement for many Americans have rested on the financial pillars of rising real estate and equity prices, positive real interest rates on savings, the continued solvency of public and private pension plans, and the reliability of national entitlement programs (Social Security, Medicaid). But in the last few years, the economic sands have fundamentally shifted and these pillars are no longer sturdy, some have cracked completely. For many Americans, the traditional idea of a comfortable retirement, filled with golf carts, cruises, and fishing trips, is going the way of the dodo bird.

Over the last decade incomes and job growth have stagnated, causing savings rates to drop. According to Jim Quinn author of the Burning Platform, 60% of retirees have less than $50,000 in savings. Such sums won’t last very long, especially when consumer prices are up 3.6%, import prices are up 12.5% and commodity prices are up 35% year over year. What’s worse, any savings placed in a bank will pay next to zero interest and will likely not even pay for the fees associated with the account. With cash savings essentially non-existent, the other pillars of income take on paramount importance. But these former bastions of financial security are being washed away by a torrent of red ink.

For years the essential Ponzi-like structures of Social Security and Medicare were concealed behind positive demographics. But once taxes collected from current payers fall short of the required distribution owed to current recipients, the ruse will be laid bare. That day is now in the foreseeable future. With insolvency a real and present danger, at least a consensus is now forming that Social Security must be structurally altered if it is to survive.

According to the Social Security Administration, in 2008, Social Security provided 50% of all income for 64% of recipients and 90% of all income for 34% of all beneficiaries. With these numbers, it’s not hard to see how even small cuts will spark big protests. Now try cutting the $20 trillion prescription drug program and the $79 trillion Medicare entitlements and watch the political sparks fly! However, given the realities, it’s hard to see how the program can escape deep cuts.

In the past many retirees could count on accumulated stock market wealth to help fund retirement. Not so much anymore. As of this writing, the S and P 500 is now no higher than it was in January of 1999. For over 12 years the major averages have gone nowhere in nominal terms and have declined significantly in real (inflation adjusted) terms. The dreams of becoming rich from investments have crashed along with Pets.com and Bernie Madoff. Then there is always the supposedly safest asset of all—a retiree’s home.

Despite a misguided faith that real estate prices could never fall, they have done just that…with a vengeance. According to S and P/Case-Shiller, the National Home Price Index has declined some 30% to levels not seen since the middle of 2002. And prices are still falling, with the rate of decline accelerating. The National Index dropped 4.2% in Q1 of 2011, after dropping 3.6% during Q4 2010. This means that only those retirees who have owned their homes for at least 10 years have any hope of selling at a profit. Ownership of significantly longer periods may be needed to have built up significant equity.

That leaves public and private pension plans. But here again there are serious issues. Let’s just look at state public pension shortfalls. According to the American Enterprise Institute for Public Policy Research, “States report that their public-employee pensions are underfunded by a total of $438 billion, but a more accurate accounting demonstrates that they are actually underfunded by over $3 trillion. The accounting methods that states currently use to measure their liabilities assumes plans can earn high investment returns without risk.” Huge returns without risk? Bond yields are the lowest they have been in nearly a century! What world are these states living in? With few options, the states will undoubtedly look to the Federal government (taxpayers) for a bailout. Failing that, cuts are inevitable.

The sad facts are; Americans are broke, the real estate market is still in secular decline, stock prices are in a decade’s long morass, real incomes are falling, public pension plans are insolvent and our entitlement programs are structurally unsound. If the pillars that seniors have relied on in the past fail to miraculously regenerate (and there is certainly no reason to believe they will), all that most retirees will have will be freshly printed greenbacks that come from a never ending policy of federal deficits and an obliging Federal Reserve. Unfortunately, the inflation that will result from such a policy will sap most of the purchasing power that those notes possess. In other words, for most people retirement is now an illusion, and many Americans will find themselves working far longer, for far less real compensation, then they ever imagined. The quicker we realize this, and plan accordingly, the better off we will be.












Sunday, June 12, 2011

New Jersey's "Liberty and Prosperity" Motto...Gov Christie Defines Prosperity as $118+ per Week

A single mother raising three kids on a
weekly salary of $118 will no longer be
eligible to take advantage of the medical
social safety net should she fall ill.

As if Governor Christy comprehends
a $118 week salary given
his salary of $3,365 per week.

Forbes
The Policy Page
By: Rick Ungar
June 12, 2011

If you live in the state of New Jersey and are earning $118 a week, congratulations!

According to Gov. Chris Christie, you have escaped the bonds of poverty and no longer are in need of the state’s Medicaid program.

Never mind that $118 a week is but a fraction of the poverty line as defined by the United States of America. Pay no attention to the fact that New Jersey battles California for the mantle of having the highest cost of living of any state in the nation.

Chris Christie, everyone’s favorite no-nonsense, “tell it like it is” governor, has decided that you can manage quite nicely on this paltry sum while remaining fully capable of paying for your own medical care.

Sound like a joke?

It’s not. And it is difficult to imagine anything less humorous.

 Currently, the cut-off to qualify is $30,000.

Think about that for a moment.

A single mother raising three kids on a weekly salary of $118 will no longer be eligible to take advantage of the medical social safety net should she fall ill.

I can hear my conservative friends rising in chorus – mom should have thought about that before having all those kids she couldn’t afford!

Maybe she should have. If only there were some place these women could turn to for family planning advice so that they might avoid this problem.

But wait – there is such a program in New Jersey. Or, to be more precise, there was such a program in New Jersey.

It turns out that women’s clinics are disappearing from the New Jersey landscape as Governor Christie uses the budget pen to wipe out women’s health programs that might also provide abortion services as a small part of what they make available to women so badly in need of their health care and counseling services. This, despite the fact that no state or federal taxpayer money went towards paying for any such abortion services long before Christie began his assault on women’s health.

In his last budget, Christy sliced $7.5 million from family planning clinics – a cut his new budget proudly continues. As a result, health and planning services so vital to low income women are becoming very hard to find in New Jersey- not to mention the many other states where Governors are using the budget to enact their social, anti-abortion agendas.

What do we call powerful people when they pick on the weakest among us?

We call them bullies. And Governor Chris Christie exemplifies the modern-day bully. Is it any wonder, then, that the GOP sees Christie as the man they would so gladly follow into the 2012 election battle?

Christie’s proposal to cut over $500 million from the state’s Medicaid program would not only affect parents earning far too little to support their families. Some of the deepest cuts would leave seniors, who require full-time, in-facility nursing home care, literally out in the cold as the funding that supports their ability to get the medical attention they need disappears.

I suppose these elderly can move back into the homes of their children – many of whom are the ones earning over $6,000 a year, but well below the national poverty line, who will no longer be able to care for their own health needs let another find a way to pay for the care of their sick parents.

There is some good news in this otherwise bleak story.

Come 2014, when the federal government steps in to play a larger role in financing the state Medicaid programs (they already pay for about half of the costs), it will be illegal for these people to be denied care.

Accordingly, all these folks need do is see to it they do not get sick between now and 2014.

How hard can this be?





Wall Street Banks Still Whining (Kevin Drum-Mother Jones)


Regulators aren't saying that mortgage originators can't make
any kind of loan they want.  20 percent down, 10 percent down,
5 percent down, whatever. Go to town. What they are saying is that
if mortgage loans are bundled up into securities and resold,
they want the issuer of the security to retain 5 percent of the total offering.

Mother Jones
By: Kevin Drum
June 10, 2011

The Fed and other regulators have proposed a set of rules that would put new limits on home mortgages: Borrowers would have to put 20 percent down and would have to show that their mortgage payments would amount to no more than 28 percent of their gross monthly income. The Washington Post makes this sound like doomsday:

Nearly three out of every five U.S. borrowers who bought homes last year would not have met the proposed restriction on total debt, according to an analysis by mortgage research firm CoreLogic....If the rules were in effect now, Todd Pearson of Ashburn predicts he'd be shut out of the market. Pearson wants to sell his house and buy another in Chevy Chase. He says he has no debts other than his mortgage. But he figures his mortgage payment alone would exceed the threshold proposed by the new rules.

You have to admit, these rules do sound pretty tough. In fact, they'd pretty much shut down the entire mortgage industry. So what's going on?

Answer: Lots of financial industry whining. As it turns out, regulators aren't saying that mortgage originators can't make any kind of loan they want. 20 percent down, 10 percent down, 5 percent down, whatever. Go to town. What they are saying is that if mortgage loans are bundled up into securities and resold, they want the issuer of the security to retain 5 percent of the total offering. That's part of Dodd-Frank, and it's designed to give issuers an incentive to make sure their mortgage securities aren't full of toxic waste. If they have to keep a piece of the action on their own books, they'll want to make sure their securities are safe and sound.

However, there's an exception: If your mortgages all conform to the new rules, you don't have to retain that 5 percent chunk. That's all that's happening. You can make any kind of loan you want, but if it's anything other than super safe, you have to keep a piece of it on your books.

The financial industry is in an uproar over this, claiming that it would shut millions of people out of the housing market. That's nonsense. Neither Todd Pearson nor anyone else is being denied a loan on whatever terms they can get one. All that's happening is that when their mortgages get bundled up and resold, the ABS issuer has to keep a 5 percent stake. The mortgage industry is on a rampage over this, claiming that it will dramatically raise the cost of mortgages, but that's nonsense too. Being forced to keep a 5 percent stake probably will have an impact on ABS issuers—that's the whole intent, after all—but the financial impact is almost certainly pretty minuscule. Tom Lawler at Calculated Risk roughly estimates it at perhaps 20 basis points at most on a nonconforming loan. In other words, the rate on nonconforming mortgages might go up 0.2 percentage points. At most. Something on the order of 0.1 percentage points or less is probably closer to reality.

This is yet another case of the financial industry biting the hand that's trying to help it out. The truth is that it would probably be a good idea to require ABS issuers to retain a 5 percent stake in every mortgage bundle they sell. But Dodd-Frank threw them a bone in the form of an exemption for loans that were transparently high quality and virtually certain not to default. And the result? Endless whining, a massive lobbying effort, and glossy four-color demagoguery about hardworking middle-class families being shut out of the mortgage market. Welcome to Wall Street.









Thursday, June 9, 2011

Bernanke is Hopelss (Michael Pento)

But Bernanke actually believes that
high oil prices drive the dollar lower,
not that dollar destruction drives
commodity prices up.


Euro Pacific Capital
By: Michael Pento
June 8, 2011

Mr. Bernanke appears to be getting either worse at economics or better at lying. During yesterday’s speech at the International Monetary Conference in Atlanta GA., the Fed Chairman played the role of a consummate politician with perfection. Almost every line of his speech constituted economic heresy. Below are some brief takeaways from his speech that are imperative for investors to know and understand.

He said it is absolutely imperative that the U.S. address its fiscal imbalances; but the time for doing so just isn’t now. What that really means is that he believes the U.S. must keep the Keynesian spending in place now, but in order to placate the bond market vigilantes, congress should agree to make some cuts in entitlements a decade or more down the road. Of course, Bernanke’s models continue to function with uncanny inaccuracy. By the end of this decade we will most likely have at least $20 trillion in publicly traded debt outstanding and debt service costs will eat up the majority of Federal revenue. We simply no longer have the luxury of waiting years to deal with our deficits.

His speech was also choc-full of platitudes and economic snake oil. One of the most egregious parts of his speech was his profound misunderstanding of inflation, which was on full display. While he acknowledged the surge in commodity prices and the duress they placed on consumers, he blamed the rise not on his own monetary policy but on, “strong gains in global demand that have not been met with commensurate increases in supply.”

Here was his answer to those Fed critics (like me) who have the audacity to blame low interest rates and excessive money creation as the cause of inflation: “…some have argued that accommodative U.S. monetary policy has driven down the foreign exchange value of the dollar, thereby boosting the dollar price of commodities. Indeed, since February 2009, the trade weighted dollar has fallen by about 15 percent. However, since February 2009, oil prices have risen 160 percent and nonfuel commodity prices are up by about 80 percent, implying that the dollar’s decline can explain, at most, only a small part of the rise in oil and other commodity prices; indeed, commodity prices have risen dramatically when measured in terms of any of the world’s major currencies, not just the dollar.”

How absurd! He measures the purchasing power of the dollar mostly against the Euro—which is a currency in utter turmoil. If the European Union completely falls apart the dollar would rally on the U.S. Dollar Index. Therefore, even if Bernanke continues to massively dilute the currency and keep interest rates at near zero percent, the dollar’s decline may not ever fully manifest itself against another flawed fiat currency. However, it will always manifest itself against hard assets like gold and oil. When the Fed created negative real interest rates by printing money and buying debt, investors flocked to tangible assets that kept pace with inflation. That is the main reason why energy prices have surged.

But Bernanke actually believes that high oil prices drive the dollar lower, not that dollar destruction drives commodity prices up. Again, in his own words; “...the United States is a major oil importer; any geopolitical or other shock that increases the global price of oil will worsen our trade balance and economic outlook, which tends to depress the dollar. In this case, the direction of causality runs from commodity prices to the dollar rather than the other way around.” Exactly backwards yet again Ben; the inflation you create drives investors away from fixed income and into commodities as a hedge against a falling dollar. Not some exogenous shock that he conjured up in his head.

Finally, does Mr. Bernanke regret his actions that have caused a decline in the purchasing power of the dollar and a lowering of living standards in the United States? Read the grade he gave himself and the Fed: “…the Federal Reserve’s actions in recent years have doubtless helped stabilize the financial system, ease credit and financial conditions, guard against deflation, and promote economic recovery. All of this has been accomplished, I should note, at no net cost to the federal budget or to the U.S. taxpayer.”

Did you get that, no cost to the budget or the taxpayer? Since he has exculpated the Fed from driving up commodity prices, he can’t be blamed for the destructive and regressive tax of inflation that is crushing the middle class. And in buying $1.5 trillion in Federal debt, he contends our central bank hasn’t facilitated the increased borrowing being done by the government by keeping interest rates artificially low!

During the Q&A session following his speech, the Chairman said that the Fed has kept inflation low since the early 80’s and that is the reason why the dollar is and will continue to be strong. He has the temerity to claim that inflation has been low for the last 30 years, even though the Fed helped create two massive bubbles in equities and real estate and has now dovetailed them both into the biggest bubble of all—the U.S. bond market. Ben Bernanke is hopeless and should be removed from office as expeditiously as possible.

Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.