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

Saturday, July 30, 2011

The Chinese Have Stopped Laughing (Michael Pento)

Euro Pacific Capital
Friday, July 29, 2011
By: Michael Pento       
The economy continues to prove that it didn’t need a stalemate between democrats and republicans over whether or not we should expand our credit limit in order to poop the bed. Gross Domestic Product climbed a paltry 1.3% in the second quarter of this year following a severely downgraded Q1 print of just 0.4%. Growth in the first quarter was revised down from a 1.9% prior estimate. Also today, the Institute for Supply Management-Chicago Inc. said its business barometer fell to 58.8 in July, from 61.1 in the prior month. And the Thomson Reuters/University of Michigan final index of consumer sentiment fell to 63.7 this month, which was the weakest since March 2009, from 71.5 in June.
Where are all those shills who assured us last year that 2011 would display a “V” shaped recovery in jobs and the economy? I know, I heard some of them today saying that the second half of this year is going to be great! Their reasoning was the same as it always is. Earnings are going to be wonderful because half of S&P 500 companies' earnings are in foreign currencies. Then, thanks to our crumbling currency, those foreign earnings translate into a ton of U.S. dollars—those dollars don’t buy you very much, but who cares as long as we are able to say we beat Wall St. expectations.
The poor, lonely Tea Party is vilified as being inhuman and behaving as insane children for not allowing the country to bankrupt itself as quickly as possible—even by members of their own party (read here what John McCain had to say for yourself). I guess the philosophy of McCain and his friends is that we should raise the debt ceiling to infinity and beyond and just pay our creditors back with more printed money. After all, the National Debt has grown from $400 billion in 1971 to $14.4 trillion today, so what’s a few more trillion between now and 2013? The dollar has lost 98% of its purchasing power in the last 40 years, so why not keep on defaulting on our debt through inflation and destroy the last few vestiges of the middle class. Sounds like a plan to me. It’s just business as usual. They urge us to keep up the spirit of cooperation and goodwill that has served to render this country insolvent.
The only problem is that the Chinese have stopped laughing at Geithner’s so called “strong dollar policy” and are now allowing the Renminbi to rise against the greenback (up nearly 6% in the last year). If we continue down this road much longer the only buyer of U.S. debt will be the Fed. That’s the real down grade to come. Not from the credit rating agencies, but from our foreign creditors. Once we have a failed Treasury auction, it will engender a vicious cycle. Debt service expense will soar, which causes out of control deficits. The Fed will be forced to purchase more of the debt and inflation rates become intractable, thus destroying GDP growth. Runaway debt, interest rates and inflation is what the Tea Party is trying so hard to avoid and it is a cause worth fighting for!

Thursday, July 28, 2011

With ample time until the debt ceiling is breached, House delays debt ceiling vote to rename a Post Office

Los Angeles Times
By Nichael A. Memoli and
Kathleen Hennessey
July 28, 2011

House leaders have delayed a scheduled vote on the debt ceiling plan offered by House Speaker John A. Boehner, a possible acknowledgement that Republicans lacked the votes to ensure passage.

The postponement was announced just minutes before the planned 6 p.m. vote. The House instead moved to consider a far less controversial measure -- to rename a post office in Peoria, Ill.

Republicans had been working throughout the day Thursday to lock down support for their plan to raise the nation's debt ceiling, even as Senate Democrats vowed to swiftly kill it if passed.

"We're not there yet; we don't have the votes yet. But today is the day," Boehner had told members at a morning meeting, according to a GOP source who was not authorized to publicly discuss the private conversation.

Aides to House Majority Leader Eric Cantor insisted that a vote could still take place Thursday. A spokesman for Senate Majority Leader Harry Reid posted on Twitter that the body was "ready to defeat the Boehner plan whenever House Republicans can get their act together."

Lawmakers are working to meet the Aug. 2 deadline for extending the nation's borrowing capacity, or administration officials warn of a chain reaction of potentially disastrous economic consequences.

Boehner's bill would raise the debt limit in two stages -- one that could cover borrowing through the end of the year and another to cover 2012. The first increase is paired with $915 billion in spending cuts over 10 years. The second would be contingent on passage of a larger deficit-reduction package crafted by a new congressional committee.

Rather than promising passage of a balanced-budget amendment -- a top priority for conservatives -- the bill only ensures a vote in both chambers. Such a vote would be largely symbolic. The GOP-preferred version of the amendment is widely rejected by Democrats and would fall well short of the two-thirds vote needed to pass.

Michele Bachmann Will Be Quized at The National Press Club (email your questions kids)

Star Tribune
By Paul Walsh
July 28, 2011

Minnesota Rep. Michele Bachmann speaks Thursday before the National Press Club in Washington, D.C.

The Republican presidential candidate, whose standing in Iowa caucus polls has surged in recent weeks, will make her remarks starting at noon CDT, and questions from news media members will follow.

Also, questions from anyone can be submitted all morning and during the live event by sending them to @QNPCLunch on Twitter. Or questions can be e-mailed to president@press.org before 10 a.m. E-mails should have BACHMANN in the subject field.

Bachmann's appearance, which can be viewed live on www.press.org/ as the White House and Congress grapple over raising the federal government's debt ceiling. The congresswoman has questioned the urgency of the White House's Aug. 2 deadline and pushed a plan she says could avoid default without raising the legal borrowing limit.

Wednesday, July 27, 2011

Credibility of the nation’s ability to pay its bills will be tarnished (Michael Pento)

Euro Pacific Capital
Tuesday, July 26, 2011
The U.S. economy may suffer an abrupt blow of austerity come August 2nd. Indeed, that is what we truly need to bring lasting prosperity to this great country. But even if the republicans and democrats find a way to hold hands in the next few days, it won’t mean clear sailing is in store. A credit rating downgrade seems unavoidable at this juncture because a grand deal to cut over $4 trillion in spending is impossible to achieve by the deadline.
Therefore, whether it is a small deal or no deal, the credibility of the nation’s ability to pay its bills will be tarnished.
So no matter what happens after the deadline passes the economy will still be mired in trillions of dollars in debt that has to be serviced and rolled over. And since higher interest rates are virtually guaranteed to manifest because of inexorable debt issuance and inflation, the solvency of the U.S. is sadly, just ephemeral.
An increased cost of borrowing won’t help our comatose housing market either. But even before that inevitable increase occurs, data on New Home sales released today showed a declined for a second month in a row. Purchases dropped 1% to a 312,000 annual pace, which is a three-month low. And while the S&P/Case-Shiller index rose 1.1% and 1.0% for the 10 and 20 city index respectively, the YOY decline in home prices was still 3.6% and 4.5% for the 10 and 20 city index.
Mr. Case of the famous Case-Shiller Home Price Index explained the reason for weak sales data was the fact that household formation is negative. I’ve said over and over again that the cheerleaders and shills were wrong when saying the increasing U.S. population would solve our real estate problem. That’s because Population growth doesn’t equate to household formation. You need a job, savings and access to credit to afford a house.
I think most markets are far too complacent about the prospect of higher interest rates and the damage they will wrought. The Gold market has it correct and investors shouldn’t take solace in quiescent bond prices. The two biggest mistakes in the history of global financial markets are that the U.S. dollar will always be the world’s reserve currency and that U.S. sovereign debt is the ultimate safe haven.

Tuesday, July 26, 2011

Mr. "I reject the word compromise" Boehner's budget reduces debt on our grandchildrens' back by a pathetic $850 billion over 10 years

Yes grandchildren, the same man who rejects the word compromise, yet voted yes to an Iraq Shock and Awe (while voting yes to make the Bush tax cuts permanent), will not let his buddies to pay for Shock and Awe (a.k.a. pass it along to the grandchildren), is tightly bound to his lobbyist friends, votes yes to bail out banks via TARP,  and then drafts a budget that removes $850 billion (6% of our current deficit) off your back over 10 years. This is the same Mr. "reject compromise" that grew up in a family of 12 children (including sisters) with one bathroom.

Grandpa remains party agnostic. Take Harry Reid's budget for example...smoke and mirrors and he too does not care about what debt ultimately ends up on the backs of our grandchildren. Grandpa's bottom line (no pun intended): you can wrap a box full of dog poo in Red State paper or Blue State paper and it does not change the gooey mess in the box let alone the stench.

The Hill
By Erik Wasson

The Congressional Budget Office has told House Speaker John Boehner (R-Ohio) that his debt ceiling fallback plan will reduce the deficit by about $850 billion over ten years.

House GOP rank-and-file have been waiting eagerly for the score since they are worried the bill would not measure up to claims made about it by House leadership. Leadership on Monday said the bill would reduce discretionary spending by $1.2 trillion over ten years.

The CBO revealed the score in a Tuesday letter to the speaker.

The score is against the latest CBO baseline as adjusted to reflect the 2011 spending cuts deal between Congress and the White House that cut $38 billion in budget authority. Those 2011 cuts have ripple effects over the budget window.

The CBO has also determined that taking that earlier deal into account, the spending levels in the Boehner plan is a $1.1 trillion cut in the deficit.

Most of the effects of the Boehner plan come from caps it imposes on discretionary spending. Next year the cap is $1.043 trillion, a $6 billion drop from current levels.

Actual federal spending outlays in the ten-year period would be reduced by $710 billion relative to that March baseline, CBO says, if the discretionary spending caps in the Boehner plan are instituted.

Overall, savings in discretionary spending is cut $695 billion, mandatory spending is cut by $20 billion, and the savings in interest equals $135 billion.

CBO also looked at other more minor provisions in the Boehner bill. One would provide extra funding for Pell Grants to students and this costs $17 billion, while another would limit other student loans saving over $30 billion.

The Boehner plan is a two-step process whereby the debt ceiling would be raised before Aug. 2 and then again next year.

The CBO score reflects part one of the process, which grants President Obama the right to request a $900 billion increase in the debt ceiling, slightly more than the amount CBO says the Boehner plan cuts from combined deficits compared to the March baseline.

Boehner this spring said Congress would only raise the debt ceiling if spending cuts exceed the amount by which the debt ceiling is raised.

CBO does not assign a score to the second phase of the Boehner plan which would require a joint committee to come up with a plan to cut $1.8 trillion from the deficit by Nov. 23.

Obama Demagogues Default (John Browne)

Euro Pacific Capital
By: John Browne       
Monday, July 25, 2011

President Obama has continued and increased the reckless spending of the previous Administration. Now, as the federal debt reaches its statutory limit, he is spreading fear and panic in the hopes of having it raised.

Many of the key people responsible for America’s historic mess, including the President, Treasury Secretary Geithner, former NEC Director Summers, and Fed Chairman Bernanke, have pronounced publicly that a failure to lift the debt ceiling will cause a catastrophic Treasury debt default.

This is simply not true. The US Treasury has tax revenues that cover the service of its current (staggering) debt of some $14.3 trillion.

Yet, that doesn't mean the US government won't be forced to default in other ways. Failure to pay the nominal interest and principal on bonds is only the narrowest definition of “default.” When a broader definition is used – which includes the use of inflation to erode the real value of US debt – the US government has in fact been in a state of continuous default for almost a century.

A 2011 dollar is worth just four cents in terms of a 1914 dollar. As that new money circulates, your dollar will lose some 53% of its purchasing power, productivity increases notwithstanding. That's just in the last three years!

However, despite this continued stealth default and the constant underfunding of government obligations, hitting the debt ceiling would represent a very serious escalation of the United States' insolvency. For, while Treasury bonds would continue to be honored, many other obligations would not. This is the time when seniors and soldiers should being paying attention.

If the debt limit were not raised, the Administration would be forced to literally choose which checks to send and which to cancel. On the chopping block could be Social Security checks, Medicare reimbursements, military salaries, federal pensions, and myriad boondoggles that the federal government has taken upon itself to fund. Perhaps the President would cancel his next campaign stop to save the expense of fueling Air Force One? Not likely!

While President Obama would find himself walking through a minefield of special interest groups as he chose where to cut, I expect the overall effort to be broadly popular. This is, after all, what the boisterous American Tea Party has been demanding all along. And the ultimate result would be a renewed faith in the US dollar and Treasuries.

In fact, the Republicans have in their hands the opportunity of a lifetime, the chance to force the Administration into good sense, while avoiding the political fallout.

Unfortunately for them and for the country, President Obama and his key Democrat allies appear to have terrified the Republican establishment into believing that if they stand up for prudent finance, default will result and conservatives will be blamed for it.

Already, key Republicans have stated publicly that they are unwilling to risk triggering the debt ceiling, thus handing Obama their trump card. In doing so, they are forgoing any chance that Obama would be forced to re-prioritize the government's reckless spending. Therefore, they are actually raising the risk of a true default – in which not even Treasuries will be honored – in the coming years.

Increasingly, it appears likely that the Republicans will buckle. If they do, Americans will be faced with a package that both sides will claim as a victory. The losers will be hard working, patriotic Americans and those around the world who believed the United States was good for its word.

Running Out of Runway...next time you fly, ask pilot if he/she rejects "compromise"

USA Watchdog
July 25, 2011
By: Greg Hunter

It looks like even the mainstream media (MSM) can see a calamity if we are right on top of one. Finally, the dire debt ceiling negotiations between Congress and the White House were covered wall-to-wall on all the major media outlets yesterday. No comment better describes the frightful situation America faces over its debt problem than what Treasury Secretary Tim Geithner said yesterday on FOX, “. . . we’re running out of runway. I never thought they would take it this close to the edge and let politics get in the way of demonstrating we will pay our bills on time.” To extend that metaphor, even if the debt ceiling is reached just before the August 2nd deadline, doesn’t mean the government can get enough altitude to clear the trees. It will take some time to implement the new bill, and time is very short.

Meetings in the nation’s capital yesterday did not produce a bill that can garner approval of the House, Senate and President. At the open of the Asian markets overseas, gold was up $20 an ounce in the first hour of trading. It hit another record high (with many more to come.) Who knows if the yellow metal will hold onto the gains, but that amounts to a giant vote of no confidence from overseas consumers of our dollar and debt. 

Remember, there are $12 trillion in liquid assets (treasury bonds and dollars) held outside the country. A panic over the stalled debt talks in the United States could cause massive selling of those assets. Interest rates would spike and the value of the dollar would plunge. It would cause immediate pain for U.S. consumers and could disrupt markets worldwide. The stakes in Washington D.C. couldn’t be higher. What has been called a “cloud of default” could start hurling thunder bolts and producing torrential rain in the global economy.

To say the Democrats and Republicans are not on the same page is an understatement—they’re not on the same planet. The argument between raising taxes and cutting spending has morphed. It now includes a “must do” deal to take negotiations on raising the debt ceiling out of 2012 elections. When the idea of a short-term debt increase was posed to White House Chief of Staff Bill Daley on “Meet the Press” yesterday, it was soundly shot down. Host David Gregory asked, if “The President would veto a plan if it does not extend the debt ceiling into 2013?” Daley quickly said, “Yes.”

Meanwhile, over on FOX, Speaker of the House John Boehner said, “I think the better path forward at this moment will be … to put together a process that’s doable.” He’s basically talking about a short-term Republican plan that cuts some spending and pushes the debt ceiling up enough to pay the nations bills until the end of this year. I don’t think the President will think that is “doable.” That means no so-called “grand plan” and more debt ceiling debates in 2012. Mr. Boehner says he will announce details of that plan on Monday. On the other hand, Senate Majority Leader Harry Reid is getting a different plan together on the Democratic side. It will reportedly cut the budget and raise the debt ceiling until after the 2012 November elections. Does it sound like a deal is coming together to you? Not to me.

Maybe that’s why the host of “FOX News Sunday,” Chris Wallace, asked Secretary Geithner yesterday, “What’s your plan for default?” Geithner has already admitted he recently had meetings about this very subject with Fed Chief Ben Bernanke and others. Mr. Geithner responded, “Our plan is to get Congress to raise the debt ceiling on time . . . we do not have the ability to protect the American people from the consequences of Congress not taking action.” According to Geithner, 80 million checks a month are sent out by the government. The U.S. borrows 42% of every dollar it spends, and a short-term default to some will happen. Geithner repeatedly sidestepped the question of who will get paid and who will not. I think Treasury debt, Social Security and the military will all get paid, but plenty of other commitments will not be.

I do not see how you tackle a debt problem by adding trillions of new debt. I do not mean to sound like a Republican, but spending is the problem. So where can you make some big cuts? Neither party is talking about cutting spending for the military. The U.S. spends more on defense than all other countries—combined. I am not anti-military, but do we really need to start another war in Libya? Do we really need to have bases in Korea and Europe? Both parties are also mum on the continuing banker bailouts through Fannie and Freddie. Why do taxpayers get the bill for $trillions in sour mortgage debt pumped into the failed mortgage giants by the big Wall Street banks? Not a word about that by either party, let alone prosecutions. To top it off, the big banks are in the process of negotiating immunity for their crimes! You think I am kidding? (Click Here)  Literally trillions could be cut in both areas, but that’s not what the debate is about. Don’t expect the MSM to point that out because they all will get big bucks in political advertising for the 2012 election.

Most people are living like they are in the “blue pill” world of a Matrix movie. I keep having this vision of a slow motion crash, and then, all of a sudden, someone flips a switch and bam!–we are at the speed of real life. It’s sure looking like that switch is going to be flipped right around the beginning of August.

Monday, July 25, 2011

The (Cuisan)art of fiscal policy (Paul Daggett)

Puréeing: Flawed ideas and denial
result in mush that no one can swallow.

July 24, 2011
By: Paul Daggett

The continuing stalemate over whether to raise the debt ceiling and how to control the nation's budget deficits is revealing. Politicians are unable or unwilling to acknowledge the seriousness of the U.S. fiscal position.

Consider the central disagreement between the parties: taxes. The Republican Party opposes increases of any kind, saying that taxes on "job creators" are exactly the wrong policy at a time of high unemployment. To reduce budget deficits without raising taxes, Republicans propose major cuts in government spending.

Democrats contend the huge cuts required to reduce deficits without "revenue increases" would decimate the lower and middle classes, which are more dependent than ever on government's safety-net programs. They argue that higher taxes on the wealthy are a fair way to balance government budgets.

Unfortunately, both parties' positions are fundamentally flawed.

The Republican position that tax increases would destroy jobs fails to acknowledge that spending cuts would also destroy jobs. Cutting government spending destroys the jobs of government employees as well as the jobs of those who sell goods and services to the government and to the recipients of government benefits.

Many Democrats insist that everything was fine with the budget under President Bill Clinton -- the federal government ran a budget surplus in the final three years of Clinton's second term. Undo the Bush tax cuts for the wealthy and end his expensive wars, and everything should be fine, they say.

Clinton's surpluses, however, were the result of a temporary surge in tax revenue as the Internet bubble inflated, not fiscal responsibility.

More important, these arguments both miss the larger point -- the financial/housing crisis and the Great Recession have changed everything.

The crisis has had enormous impact on the federal budget. The various stimulus plans, bailouts, tax incentives, etc., passed in response to the Great Recession cost far more than the Afghanistan and Iraq wars combined. And while federal spending surged at an unprecedented rate, government revenue was collapsing. Federal tax revenues plunged $400 billion from 2008 to 2009 and failed to recover, remaining level in 2010. Federal government revenues were lower in 2010 than they were in 2000!

Prior to the Great Recession, maybe the government's debt problem could have been solved with some reductions in the major entitlement programs, cuts in war spending and tax increases on the wealthy. But now, even the most "austere" proposals for dealing with the budget crisis (such as those from Rep. Paul Ryan or Obama's deficit commission) do not come close to balancing the budget. They simply slow the pace at which the nation hurtles into debt.

It seems unlikely, in the current political climate, that the United States will take the necessary steps to restrain its profligate ways voluntarily, but at least the country still has the time and resources to do so. Greece, Ireland, Portugal (and now likely Italy) failed to get their budgets under control fast enough and effectively went bankrupt. Now the budget decisions for those countries are dictated by their financial patrons, the European Union and the International Monetary Fund.

So while parties wrangle over whether the wealthy should endure a small tax increase or federal spending should actually be reduced for the first time in most Americans' lifetimes, soon enough the topics of debate will be far more serious:

Should Social Security and Medicare be drastically reformed or eliminated? Should taxes be raised significantly -- and on everyone? How should the United States adapt, geopolitically, to a dramatically downsized military?

The nation's debt will require real sacrifice and tough decisions. America can make those decisions itself or, like Greece, Ireland, and Portugal, leave them to foreign creditors.

Isn't it time the nation's politicians
started taking this seriously?

Paul Daggett is an investment analyst in Minneapolis.

Chance favors the concentration of wealth, U of M study shows

University of Minnesota
July 21, 2011
Jeff Falk

Most of our society's wealth is invested in businesses or other ventures that may or may not pan out. Thus, chance plays a role in where the wealth of a society will end up.

But does chance favor the concentration of wealth in the hands of a few, or does it tend to level the playing field? Three University of Minnesota researchers have built a simplified model that isolates the effects of chance and found that it consistently pushes wealth into the hands of a few, ever-richer people.

The study, "Entrepreneurs, chance, and the deterministic concentration of wealth," is published in the July 20 issue of the journal PLoS ONE.

The researchers simulated the performance of a large number of investors who started out with equal amounts of capital and who realized returns annually over a number of years. But wealth did not remain equal, because each year an entrepreneur's return was a random draw taken from a pool of possible return rates. Thus, a high return did not guarantee continuing high returns, nor did early low returns mean continuing bad luck.

Even though all investors had an equal chance of success, the simulations consistently resulted in dramatic concentration of wealth over time. The reason: With compounding capital returns, some individuals will have a string of high returns and, given enough time, will accumulate an overwhelming share of the wealth.

This appears to be a fundamental feature of economies where wealth is primarily generated from returns on investment (for example, through business ownership and growth), the researchers said.

"Predictions from this model about how wealth is distributed were more accurate than predictions from classic economic models," said first author Joseph Fargione, an adjunct professor of ecology, evolution and behavior in the university's College of Biological Sciences.

The model predicts that the rate at which wealth concentrates depends on the variation among individual return rates. For example, when variation is high, it would take only 100 years for the top 1 percent to increase their share of total wealth from 40 percent—a recent level in the United States—to 90 percent.

Healthy economies support diverse entrepreneurial efforts, leading to high economic growth. But concentration of wealth reduces diversity, and with it the most likely growth rate for a country's economy, according to the researchers.

"The implication is that nations with diverse economies should tend to outcompete on the world stage those with large concentrations of wealth, such as monarchies, or established democracies that have allowed their wealth to concentrate," said author Clarence Lehman, associate dean for research in the College of Biological Sciences.

But while the rate of wealth concentration was increased by high variation among individual investors' returns, it bore no relation to the average economic growth.

"This leads to the surprising finding that wealth will concentrate due to chance alone in growing, stagnant or shrinking economies," said author Steve Polasky, professor of applied economics in the College of Food, Agricultural and Natural Resource Sciences.

The simulation results showed wealth concentrating regardless of economic cycles of growth and recession and regardless of whether wealth is split between two offspring every generation. As wealth concentrates with a few individuals, the growth of the economy will depend more and more on the returns of those few, making the economy less resilient to disruptions in their investments, the researchers said.

"The irony is that the economic diversity that helps ensure the presence of some successful enterprises and spurs economic growth could be lost if the success of these enterprises undermines economic diversity," said Fargione. "To retain the benefits of a diverse capitalist economy, we need economic policies that counter what seems to be the innate tendency for economies to concentrate wealth and become less diverse." 

The simulations showed that a tax (or other mandatory donation to the public good) on the largest inherited fortunes would short-circuit the over-concentration of wealth. But the researchers stress that their point is to advocate not a particular policy, but a policy that accomplishes the goal of protecting long-term economic stability.

Monday, July 18, 2011

John Chambers does not get his tax holiday so 6,500 are fired & Mexico picks up another 5,000

Chief Executive Officer John T. Chambers has led the charge
 for the tax holiday, which would be the second since 2004.
He says it would encourage companies to “repatriate” as much as
$1 trillion held abroad, spur domestic investment and create jobs.

By: Benjamin Pimentel

SAN FRANCISCO (MarketWatch) — Cisco Systems Inc. announced Monday that it plans to cut 6,500 employees, as part of efforts to lower costs.

The tech bellwether also said it was moving another 5,000 jobs to Foxconn Technology Group, as part of a sale of its manufacturing facility for set-top boxes in Mexico.

The company said the cuts include 2,100 employees who opted to take part in a voluntary early-retirement program. The plan also includes a 15% reduction of employees at the level of vice president and above.

Cisco also said that it has agreed to sell its set-top box manufacturing facility in Juarez, Mexico to Foxconn Technology. The sale would mean that 5,000 of the facility’s workforce will become Foxconn’s employees in the first quarter of fiscal 2012, according to the company.

The maker of networking gear recently embarked on new initiatives to reduce annual costs by $1 billion.

Analysts had been speculating that Cisco would drastically cut its workforce, with reduction estimates ranging from 5,000 to 10,000 jobs. “No surprises, but part of the healing process for Cisco to get back up on its feet,” Gleacher & Co. analyst Brian Marshall said of the announcement.

Shaw Wu of Sterne Agee also called the news “painful steps in the right direction.” “This should help lower overhead and allow the company to be more competitive in the marketplace,” he said.

Marshall at Gleacher added there had been rumors that Cisco was considering selling the Juarez facility.

But Wu pointed out the sale was a surprise — “a pleasant one, I would add, because it’s always tough to see people lose their jobs. At least now they will be at Foxconn. … Cisco really shouldn’t be in the business of manufacturing, as they are a designer and marketer of products.”

Over the past few months, Cisco has shut down its Flip video-camera business and moved to simplify its business operations through a “streamlined operating model.”

Friday, July 15, 2011

On This Day In History: Pres. Carter states, "Politics was full of corruption, inefficiency and evasiveness..."

Sorry kids, NO CHANGES in 32 Years

This Day In History
July 15, 1979

On this day in 1979, President Jimmy Carter addresses the nation via live television to discuss the nation's energy crisis and accompanying recession.

Carter prefaced his talk about energy policy with an explanation of why he believed the American economy remained in crisis. He recounted a meeting he had hosted at the presidential retreat in Camp David, Maryland, with leaders in the fields of business, labor, education, politics and religion. Although the energy crisis and recession were the main topics of conversation, Carter heard from the attendees that Americans were also suffering from a deeper moral and spiritual crisis. This lack of "moral and spiritual confidence," he concluded, was at the core of America's inability to hoist itself out of its economic troubles. He also admitted that part of the problem was his failure to provide strong leadership on many issues, particularly energy and oil consumption.

In 1979, America could still feel the effects of OPEC's (Organization of Petroleum Exporting Countries) 1973 cuts in oil production. Carter quoted one of the Camp David meeting participants as saying that America's "neck is stretched over the fence and OPEC has a knife." In addition, inflation had reached an all-time high during Carter's term. Americans saw the federal government as a bloated bureaucracy that had become stagnant and was failing to serve the people. Politics, Carter said, was full of corruption, inefficiency and evasiveness; he claimed these problems grew out of a deeper, "fundamental threat to American democracy." He was not referring to challenges to civil liberties or the country's political structure or military prowess, however, but to what he called a "crisis of confidence" that led to domestic turmoil and "the loss of a unity of purpose for our nation."

At a time when Europeans and the Japanese began out-producing the U.S. in energy-efficient automobiles and some other advanced technologies, Carter said that Americans had lost faith in being the world's leader in "progress." He claimed that Americans obsession with self-indulgence and material goods had trumped spiritualism and community values. Carter, who after the presidency would teach Sunday School, tried to rally the public to have faith in the future of America. After restoring faith in itself, the nation would be able to march on to the "the battlefield of energy [where] we can win for our nation a new confidence, and we can seize control again of our common destiny."

Carter then launched into his energy policy plans, which included the implementation of mandatory conservation efforts for individuals and businesses and deep cuts in the nation's dependence on foreign oil through import quotas. He also pledged a "massive commitment of funds and resources" to develop alternative fuel sources including coal, plant products and solar power. He outlined the creation of a "solar bank" that he said would eventually supply 20 percent of the nation's energy. To jumpstart this program, Carter asked Congress to form an "energy mobilization board" modeled after the War Production Board of World War II, and asked the legislature to enact a "windfall profits tax" immediately to fight inflation and unemployment.

Carter ended by asking for input from average citizens to help him devise an energy agenda for the 1980s. Carter, a liberal president, was heading into a presidential campaign just as a tide of conservatism was rising, led by presidential hopeful Ronald Reagan, who went on to win the 1980 campaign. More from History.com

Wednesday, July 13, 2011

MN Shutdown: Early Signs of Prohibition II

"We have a permit to sell alcohol,
we just don't have a permit to buy alcohol,"

July 13, 2011
By: Rena Sarigianopoulos

MINNEAPOLIS -- Bars, restaurants and liquor stores in Minnesota could be the latest victims of the state government shutdown. Pretty soon many of them will be unable to purchase the very product they sell to customers.

"We have a permit to sell alcohol, we just don't have a permit to buy alcohol," said Eirk Forsberg, Owner of The Ugly Mug in Minneapolis.

Forsberg is one of hundreds of bar owners that is caught in the middle of a clerical dilemma. He has a valid liquor license through the city of Minneapolis, but his "buyer's card" is up for renewal.

In Minnesota, those wishing to sell alcohol must get their liquor license through their local municipality. Once approved, they pay a $20 fee to the state to obtain a buyer's card. That card allows them to purchase alcohol from a wholesaler, they only place they can legally purchase alcohol in Minnesota. There's one problem, there is nobody at the Department of Public Safety to process those cards.

"They have my money, they offered me a receipt, that should be good enough," said Forsberg.

It's not. If any wholesaler tries to sell alcohol to a retailer with an expired buyer's card, both could be fined. The issue could potentially lead to layoffs and possibly some businesses shutting their doors.

"This doesn't just affect retailers , but wholesalers, and the manufacturers, and wedding parties, and church functions, and one day liquor licenses for charity events, and festivals and the list goes on and on and on," said Frank Ball with the Minnesota Licensed Beverage Association.

Ball petitioned the special master for a solution to the issue Tuesday. No word on when a decision from the court will come down. Until then, those up for renewal can sell what they have on hand, but will not be able to purchase more alcohol until the state settles its budget problems.
"This is in the shadows of a recession, our social clubs are closing at a rate of 20% a year, it's in the shadows of the smoking ban, with all the mandates that have come our way, this is just another hit for us," said Ball.

Monday, July 11, 2011

John Chambers (Cisco) to fire 10,000 and still wants a tax holiday to create jobs

"Mamas Don't Let Your Babies
Grow Up to be Cowboys"
Make 'em be CEO's and politicians and such

Encourage and guide them to be CEO's of America's finest corporate institutions. You know, the ones that snuggle up to our D.C. elected "representatives" under the pretense of assisting them to write policies and tax code that will create investments and employment in the United States. You know, the pretty boys and girls paraded around the CNBC set talking the talk, pushing their agenda. The are the likeable ones and you never see the knife until it is planted deeply and firmly in your back. 

Welcome to the way America does business.  

Cisco Systems Inc. Chief Executive Officer John Chambers earned $18.9 million in total compensation in fiscal 2010, ($51,780 per day) more than double his earnings the previous year.

July 2011:
Cisco Systems has cut its income taxes by $US7 billion ($6.7 billion) since 2005 by booking roughly half its worldwide profits at a subsidiary at the foot of the Swiss Alps that employs about 100 people.

Now Cisco, the largest maker of networking equipment, wants to save even more by asking US Congress to waive most federal taxes due when multinationals bring such offshore earnings home.

John Chambers, has led the charge for the tax holiday, which would be the second since 2004. He says it would encourage companies to ''repatriate'' as much as $US1 trillion held abroad, spur domestic investment and create jobs.

Bloomberg July 11, 2011
Cisco Systems may cut as many as 10,000 jobs, or about 14 percent of its workforce, to revive profit growth, according to two people familiar with the plans.

The cuts include as many as 7,000 jobs that would be eliminated by the end of August, said the people, who asked not to be identified because the plans aren’t final. Cisco, based in San Jose, California, is also providing early-retirement packages to about 3,000 workers who took buyouts, the people said.

Eliminating jobs will help Cisco wring $1 billion in expenses in fiscal 2012, the company said in May. Cisco expects costs of $500 million to $1.1 billion in the fiscal fourth quarter as a result of the voluntary early retirement program, it said in a quarterly filing.

“We will provide additional detail on the cost reductions, including layoffs, on our next earnings call,” Karen Tillman, a spokeswoman for Cisco, said in reference to an earnings call scheduled for early August. She declined to discuss job cut figures.

Trimming about 5,000 jobs would reduce operating expenses by about $1 billion annually and boost 2012 earnings by about 8 percent.

Tuesday, July 5, 2011

Greeks Buy Time for Insolvent Bankers and Delusional Politicians (John Browne)

Euro Pacific Capital
By: John Browne
Tuesday, July 5, 2011

Last week, the Greek parliament voted by a narrow margin to pass an economically crippling austerity plan of some $40 billion in return for some $159 billon of fresh liquidity injections. Although many hailed the event as a needed first step on a long road to recovery, I believe the austerity program will make a bad situation worse. It is a flawed solution that stems from a false premise: that Greece should continue to be part of the euro zone, and continue to use the euro as its currency.

To return to national economic viability Greece must abandon its use of the euro currency, which has become a financial straight jacket. Nevertheless, Greek politicians may have agreed secretly to accept the austerity in name only, in return for a liquidity bailout that will buy time for European unity to solidify. Once political unity is restored, we should expect more massive financial transfers from northern countries, present day Germany and Britain, to the subsidized southern regions.

As its price to maintain the status quo, central bank lenders, including the IMF and ECB, are demanding that Greece sell off some $72 billion of its national assets. The likely buyers will be international companies based in the EU, U.S. and possibly even China. Such a fire sale can't restore the Greek economy, but it gives the appearance that the Greeks are paying something for their loans, and it provides cover to northern European politicians who are feeling increasing frustration from voters who have been continually asked to foot the bill for southern European profligacy.

In contrast, Greece could have decided instead to abandon the euro and devalue a new Greek currency unilaterally to pay its debts. This is the typical remedy for marginal economies that have gotten into debt quicksand. Most certainly, devaluation would reduce Greece's standard of living by slashing the purchasing power of Greek citizens. But in recompense it would boost exports and improve Greece's balance of payments. The Greeks could then begin the hard work of restoring their economy while maintaining ownership of their national assets.

However, if Greece was to abandon the euro, the shaken confidence could lead to a euro collapse, bringing to an end the idealistic dreams of a unified Europe. Politicians are desperate to avoid this no matter what it costs their increasingly subjugated peoples.

In addition, a Greek debt default would trigger massive losses on the books of EU banks, many of which had been 'persuaded' by their governments to invest in Greek debt. Also, major U.S. banks have profited hugely by selling Credit Default Swaps (CDSs) to insure these loans. Indeed, they have insured some $32.7bn of Greek debt alone. Furthermore, U.S. banks have invested directly in European sovereign debt. In other words, the financial pressure to keep Greece from defaulting is enormous.

The euro is the world's second largest reserve currency. Its dissolution would cause huge shockwaves in a currency system that already is causing some investors to hedge in precious metals. A collapse of the euro could likely send gold, silver and most food commodities skywards in price. As a result, politicians and the bankers share a common interest in saving Greece from debt default and so salvaging the euro, regardless of the effect on the Greek people.

Greece's vote to accept austerity has yet to be enacted in specific cuts and taxes, but when they do, expect public resistance that will dwarf what we have seen thus far. At that point we can expect this debate to be revisited. I believe that when the pressure becomes too intense, Greece may in fact return to the Drachma.

I have consistently argued in these columns that a sovereign debt crisis would develop into a possible currency collapse. The beginnings of this endgame can be seen today on the streets of Athens.

John "I reject the word compromise" Boehner Responds to Obama's Fruitless Invitation

Now Remember Grandchildren,
These Are Professionals. Do Not Attempt
Any of This At Home.

Washington (Jul 5) House Speaker John Boehner (R-OH) today issued the following statement after President Obama discussed his request for an increase in the national debt limit:

“The American people are worried about our economy, and our future. More than two years after the start of Washington Democrats’ ‘stimulus’ spending spree, they’re still asking, ‘where are the jobs?’

“We’re not dealing just with talking points about corporate jets or other ‘loopholes.’ The legislation the President has asked for – which would increase taxes on small businesses and destroy more American jobs – cannot pass the House, as I have stated repeatedly. The American people simply won’t stand for it. And their elected representatives in Congress won’t vote for it. I’m happy to discuss these issues at the White House, but such discussions will be fruitless until the President recognizes economic and legislative reality.

“Our focus should be on getting our economy back on track by making the spending reductions and structural reforms necessary to address our nation’s out-of-control debt. We can do so without raising taxes on America’s small business job-creators. I’m pleased the President stated today that we need to address the big, long-term challenges facing our country. Our nation’s long-term future requires presidential leadership to address those challenges.”

The Hill 
June 29, 2011
House Speaker John Boehner (R-Ohio) called President Obama "sorely mistaken" that the House will support tax increases in a deal to raise the debt limit.

Boehner was quick to respond to remarks that Obama made in a Wednesday news conference, in which the president suggested that the House would vote for a measure to close so-called tax loopholes.

“The President is sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the House. ... A debt limit increase can only pass the House if it includes spending cuts larger than the debt limit increase; includes reforms to hold down spending in the future; and is free from tax hikes," Boehner said in a written statement. Complete Article

7 Reasons Why America Needs a Good Depression NOW (Paul Farrell)

On Behalf of Grandchildren Everywhere...
Thank You Mr. Farrell

By: Paul B. Farrell
July 5, 2011

SAN LUIS OBISPO, Calif. (MarketWatch) — No, do not raise the debt-ceiling. You heard me: Block the debt ceiling vote. Don’t raise it. America’s out-of-control. A debt addict. Time to detox. Deal with the collateral damage before it’s too late.

We need to fix America’s looming credit default, failing economy and our screwed-up banking system. Now, with a Good Depression. If we just kick the can down the road one more time, we’ll be trapped into repeating our 1930’s tragedy, a second Great Depression.

Yes, depression. Spelled: d-e-p-r-e-s-s-i-o-n. Wake up America, recessions do not work. Won’t work in the future. Remember that 30-month recession after the dot-com crash? Didn’t work. Why? Because in the decade since that 2000 peak, Wall Street’s lost an inflation–adjusted 20% of America’s retirement money.

And what about the so-called Great Recession of the 2008 credit meltdown? Didn’t work either. In fact, made matters worse: Wall Street got richer by stealing from the other 98% of Americans, the middle class, the poor. And now their conservative puppets in Washington want to make matters worse, widening the wealth gap further to benefit the Super Rich.

Seems nobody really gives a damn about our great nation any more. America’s now a capitalists anarchy: “Every (rich) man for himself.” Proxy battles are fought by high-priced lobbyists in a broken political system. America needs a 21-gun wake-up call. Yes, that’s why America needs a Good Depression. The economy’s bad now. But kicking the can down the road again will make matters much worse later.

America’s leaders lost their moral compass, lack a public conscience
This is not our first call for a Good Depression. As early as 2005 we began reporting on excessive debt. In November 2007 we warned of a crash dead ahead. The subprime credit meltdown had been accelerating for many months, although for a year our leaders kept misleading Americans: Fed Chairman Ben Bernanke’s “it’s under control.” Treasury Secretary Henry Paulson’s delusional “best economy I’ve ever seen in my lifetime.”
In August 2008 came the original of our seven reasons why America needs a Good Depression. Yes August, just two months before Wall Street banks collapsed into de facto bankruptcy, after many warnings predicting a crisis. This was no Black Swan. In September 2008 we reported on Naomi Klein, author of “Shock Doctrine: The Rise of Disaster Capitalism,” warning of Wall Street’s insidious plan to take over America:
“Nobody should believe the overblown claims that the market crisis signals the death of ‘free market’ ideology.” Then as the meltdown went nuclear, Klein warned: “Free market ideology has always been a servant to the interests of capital, and its presence ebbs and flows depending on its usefulness to those interests. During boom times, it’s profitable to preach laissez faire, because an absentee government allows speculative bubbles to inflate.”
But “when those bubbles burst, the ideology becomes a hindrance, and it goes dormant while big government rides to the rescue. But rest assured,” she predicted, Reaganomics “ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis that will be the rationalization for deep cuts to social programs, and for a renewed push to privatize.”
Totally predictable: No Black Swans in 2000, 2008 … nor in 2012
Yes, all was predictable: The events of the past few years were well known in advance. In fact, the events of the entire decade were predictable. The rich got richer off the backs of the middle class and the poor. Why? “There’s class warfare all right,” warns Warren Buffett. “But it’s my class, the rich class, that’s making war, and we’re winning.”
And they are also blind and deaf to the havoc their free-market Reaganomics policies are creating, selfishly undermining America, the world’s greatest economic power.
Lessons learned? Zero. Why? Wall Street, Washington and Corporate America are focused on one narrow-minded short-term strategy: Economic g-r-o-w-t-h, bull markets, megabonuses, tax cuts. In good times they tout “free markets.” But when greed bombs, they throw free-market “principles” under the Reagan Revolution bus and unleash their mercenary lobbyists to go whining to Congress for huge taxpayer bailouts and access at the Fed discount window, to siphon off more taxpayer money. And they’ll do it again soon.
Wall Street and their cronies are doing such a miserable job, America needs a new strategy: First, stop “kicking the can down the road.” Let a good old-fashioned Good Depression do the job that our hapless, happy-talking leaders refuse to do. Take our medicine. Let a new depression clean house and reawaken Americans to core values.
Trust me folks, it’s either a Good Depression now … or a Great Depression 2. Here are seven reasons favoring the do-it-now strategy:
1: Capitalism’s now a lethal soul sickness, needs a reawakening
What’s the real problem? Not the economy, not markets, nor even politics. Yes, our economic pains are real. But they’re just symptoms. Something’s structural wrong. Since 2000 endless bad news: Greed, deceit, stupidity, corruption, unethical behavior, lack of moral conscience.
The real problem’s deep in our character, the “mutant capitalism” Jack Bogle warned of in “The Battle for the Soul of Capitalism.” Sadly, that battle was lost. With it we lost our soul, our moral compass. America’s character is measured by our net worth.
2. We’re already in the early stages of a Great Depression
Comparing today with the Great Depression is common sport. In a Newsweek special “Seeing Shades of the 1930s,” Dan Gross wrote: “Wall Street, after two terms of a business-friendly Republican president, self-immolated on a pyre of greed, incompetence and excessive optimism.” Today’s “new normal” economy means high unemployment for years, inflation driving prices, rising interest rates, more debt, chaos.
We are destroying ourselves from within. Former U.S. Comptroller General David Walker warns that “there are striking similarities between America’s current situation and that of another great power from the past: Rome.” Three reasons “worth remembering: declining moral values and political civility at home, an overconfident and overextended military in foreign lands, and fiscal irresponsibility by the central government.” We are becoming more vulnerable to external enemies.
3. Good Depression exposes our self-destruct bubble-thinking
Before the 2008 crash, “Irrational Exuberance” author Robert Shiller warned in the Atlantic magazine that “bubbles are primarily social phenomena. Until we understand and address the psychology that fuels them, they’re going to keep forming.” Housing inflated 85% in the decade: “Historically unprecedented … no rational basis for it.”
Bubble thinking is an toxic virus that infected everyone. Shiller warns of another coming: “We recently lived through two epidemics of excessive financial optimism … we are close to a third episode.”

Keep Reading

Monday, July 4, 2011

Geithner might be leaving and it took The Onion for Grandpa to realize I have been a bit hard on "The Geithner."

Word on the street is that Turbo Tax Timmy is considering leaving his position as Treasury Secretary albeit: “I live for this work,” he said at the Clinton Global Initiative in Chicago. “It’s the only thing I’ve ever done. I believe in it. We have a lot of challenges as a country. I’m going to be doing it for the foreseeable future.”

Grandpa wishes Mr. Geithner a speedy departure and I am sure we have not seen nor heard the last of Tim Geithner. Who knows, given the political machine in D.C., Mr. Geithner might end of with Goldman Sachs offering tax advice to the Lord himself, Lloyd Blankfein.

Whooda Thunk It, it took rereading The Onion for Grandpa to realize that maybe, just maybe I have been a bit hard on "The Geithner."

First Grandma, Treasury Secretary Geithner Up
All Night Talking, Laughing

February 11, 2009
ISSUE 45•07

WASHINGTON—Accounts from several White House staffers suggest Treasury Secretary Timothy F. Geithner and the president's live-in mother-in-law, Marian Robinson, have developed an unlikely bond, meeting nearly every night by the Green Room fireplace after Geithner has finished his daily economic briefing and Robinson has put her granddaughters Sasha and Malia to bed.

"They're generations apart, but they've really hit it off," said aide Jennifer Bronner, who often sees the 71-year-old retiree from Chicago's South Side and the 47-year-old overseer of the nation's economy spend hours giggling and whispering together late into the night. "Last night I heard [Robinson] call Secretary Geithner 'Honeybee' when she offered him one of her famous chocolate-chip walnut cookies and a mug of hot cocoa.

They share something that would warm the heart of even the most jaded old cynic." Despite his uphill battle against a worsening recession and failing global markets, Geithner's midnight chats with Robinson have reportedly taught him to take life one day at a time, not sweat the small stuff, and always save old nylons so they can be filled with potpourri and used to freshen sock drawers.

Geithner Refuses To Come Down Off Capitol Dome
February 22, 2010
ISSUE 46•08

WASHINGTON—Three days after a sulking Timothy Geithner climbed to the top of the U.S. Capitol dome, the treasury secretary remained steadfast Monday in his refusal to come down. "You all hate me," said Geithner, his arms crossed as he shouted at the crowd of onlookers gathered on the Capitol lawn below. "What do you care if I stay up here? You'll just make fun of me if I come down anyway. Well, I'm not coming down—not ever!" Federal security teams monitoring the situation said they believed Geithner might be planning an extended stay atop the dome, as evidenced by what appeared to be a burlap sack containing various snacks, a six-pack of root beer, and several copies of The Economist.

Cheney Dunk Tank Raises $800 Billion For Nation
February 2, 2009
ISSUE 45•06

WASHINGTON—Organizers reported Sunday that the 44th White House Carnival was a rousing success, raising a record $800,000,066,845 for the federal government—$800 billion of which came from a dunk tank featuring former vice president Dick Cheney.

According to Secretary of the Treasury and carnival volunteer Timothy Geithner, the 5-foot-deep tank has provided a much-needed boost to the nation's flagging economy.

"We expected a big turn out, but this is unbelievable," said Geithner, adding that it's tradition for the outgoing vice president to work the dunk tank. "More than half the country has already gone, and there's still about 20 million people stretching all the way to Maryland waiting for their chance to sink Cheney. We'll be leaving this booth open for as long as it takes for everyone to get a turn." Peel back more of The Onion.

Geithner told associates he needs a break from government service after dealing with the turmoil that followed the collapse of Wall Street firms, including Bear Stearns Cos. and Lehman Brothers Holdings Inc. Take all the time you need Mr. Geithner...the grandchildren feel your pain.

Sunday, July 3, 2011

Obama (scolder-in-chief) Packs his Bags for a Camp David Vacation

“You need to be here. I’ve been here. I’ve been doing
Afghanistan and bin Laden and the Greek crisis.”

Capitol Hill Blue
By: Doug Thompson
July 1, 2011

After scolding Congressional Republicans for failing to work hard at resolving the debt crisis — and urging Congress to stay in town over the July 4th holiday and act — President Barack Obama packed his bags and headed to Camp David for a vacation.

In an astounding show of political hypocrisy the scolder-in-chief practiced the old Washington art of “don’t do as I do, do as I say.”

Obama flees Washington after issuing a long list of one-liners aimed at the GOP.

He claimed his daughters accomplish more with their homework than Congress does in dealing with the debt crisis, bringing back — to some — visions of former one-term Democratic President Jimmy Carter‘s incredible admission that he once turned to his daughter Amy for advice on nuclear policy.

“There is more activity in a nursing home than there is in the House under the GOP majority,” Obama said.

While no one can claim with a straight face that Congress accomplishes much, hearing one politician claim he is more adult than another is — in itself — childish.

Obama, like everyone else in the messy debt-limit debacle, is posturing and jockeying for position. He knows full well that nothing will happen until the last minute and that the blame for the delay lies as much with his own party as with recalcitrant Republicans.

Governing is not a high priority on either end of the National Mall. Both the White House and Congress play politics while Americans suffer in the worst economic downturn since the Great Depression and that will not stop after August 2 when the debt ceiling is extended — as it most certainly will.

With public approval of both parties in the crapper, voters head into the 2012 election year with more pessimism about the future. Polls show 39 percent of Americans believe the economy will never recover and that it doesn’t matter which party is in control of Congress or living at 1600 Pennsylvania Avenue.

Obama to Congress: Do your Job by Michael Crowley Time Swampland (not to be confused with Swamp People).