US Economy

[chanman]

A long article with some very scary implications:

http://www.dailymail.co.uk/home/moslive/article-1212013/Revealed-The-ghost-fleet-recession-anchored-just-east-Singapore.html

Summary: Over 500 merchant ships of all sorts are anchored off the coast near Singapore, representing @ 12 % of the global shipping fleet standing idle. It is suspected that the deepening recession might increase the numbers up to 25% of the global fleet.

This is made worse because a huge surplus of ships is coming on line now, having been ordered 3-5 years ago. This can only make the problem worse, increasing overcapacity.

Deleveraging will have lots of bad consequences.

At least targets for live ASM testing are now cheaper than ever?

 

[Edward Campbell]

This report, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail, suggests that the declining US dollar, while a short term problem for Canadian manufacturers, is good for the global economy:

http://www.theglobeandmail.com/report-on-business/why-the-us-dollars-decline-means-a-rise-in-global-fortunes/article1322552/

Why the U.S. dollar's decline means a rise in global fortunes
In the search for post-crisis economic stability, a weaker greenback is widely thought to be a key component

Kevin Carmichael

Ottawa

Wednesday, Oct. 14, 2009

It's both a symptom and a cure.

The acceleration of the U.S. dollar's decline in recent days is creating anxiety for exporters in Canada, Europe and Japan. But in the search to create a post-crisis economy that's less prone to financial catastrophe, the U.S. dollar's decline is widely accepted as a necessary ingredient.

Before the crisis, countries grew overly reliant on U.S. consumers, who created an unsteady platform for the global economy based on debt-fuelled spending supplemented by a favourable exchange rate. Now, policy-makers in the Group of 20 nations are trying to spread out consumer demand to Asia and elsewhere, a process that will both result in, and be facilitated by, a weaker dollar.

“What's wrong with the dollar weakening?” said Sophia Drossos, a currency strategist at Morgan Stanley in New York and a former economist at the U.S. Federal Reserve. “There needs to be a rebalancing. I think it's moving in the right direction.”

An index that measures the value of the U.S. dollar again six major currencies, including the loonie, the euro and the yen, fell to the lowest in 14 months Tuesday because investors seeking short-term gains are gaining confidence in the global recovery.

When the world economy appeared on the verge of collapse last autumn, investors rushed to the dollar, seeking safety in a legal tender that's accepted most everywhere and backed by a government that has never defaulted on its debt.

A year later, investors are back on the hunt for yield, selling their dollars to buy everything from futures contracts on commodities, to European debt, to Brazilian reals – anything that looks better over the next few months than the assets of a country with a record budget deficit, a benchmark interest rate near zero and one of the slowest growth rates among major economies.

Canada's dollar topped 97 U.S. cents for the first time in 13 months Tuesday, continuing a rise toward parity that Prime Minister Stephen Harper Tuesday called a “concern.” As the loonie rises, Canadian goods become more expensive in international markets already suffering from a lack of demand.

But that kind of pain is what policy-makers accepted when they pledged last month at the Group of 20 Summit in Pittsburgh to adopt – and in some cases, resist – policies that will reshape the global economy into something that is less prone to financial meltdown, if a little less dynamic.

For Americans, the falling dollar will make imports more expensive, curbing the American consumer's impulse for debt-fuelled spending. At the same time, the country's battered manufacturing industry should get a lift as its exports become more competitive, offering the hope of employment in an economy badly in need of jobs.

In the same way that a crisis in the world's largest economy sunk the world into its deepest recession since the Second World War, a rebound in the United States should translate into stability elsewhere, investors and economists said.

“This is kind of good for the global recovery,” said David Baskin, president of Toronto-based Baskin Financial Services, which manages assets worth about $300-million. “It's unclear to me that you can have a U.S. recovery and have no one else recover.”

Paradoxically, the U.S. dollar's weakness is the result of rising confidence in the global economy's prospects. The drop picked up speed last week when the Australian central bank raised its key interest rate, citing a strengthening global economy, especially in Asia.

The Australian move triggered expectations other countries will eventually follow suit, including Canada. Though the Bank of Canada has said it expects rates to remain at rock-bottom levels until next summer, there is upward pressure on some rates. Just Tuesday several major Canadian banks hiked five-year mortgage rates by 0.35 percentage points to 5.84 per cent.

The longer-term benefits of a weaker U.S. dollar will test the resolve of politicians who face explaining them to constituents who will bear the brunt of the short-term pain.

Mr. Baskin said he fears the gyrations in foreign-exchange markets will stoke reactionary policies aimed at protecting exporters, but which will ultimately end up slowing trade and the recovery.

The political impetus to mitigate the harmful effects of the U.S. dollar's descent is understandable. In Canada, for example, Canadian Manufacturers & Exporters, a trade association, estimates that the country loses 25,000 factory jobs for every one-cent increase in the loonie against the U.S. dollar.

So far, Mr. Harper appears to be taking the longer view.

Speaking to reporters in Vancouver Tuesday, the Prime Minister echoed Bank of Canada Governor Mark Carney's warnings that a persistently strong currency will slow Canada's rebound. Still, Mr. Harper said the Canadian dollar's rise is at least in part due to forecasts by the International Monetary Fund and others that predict Canada's gross domestic product will expand faster than that of most other major industrial countries.

“There are many risks, some of them within our control, some of them beyond our control, and obviously the value of the Canadian dollar is a risk to our recovery,” Mr. Harper said. “I don't think it's a risk to choking off the recovery, but if it goes up too rapidly, it does have difficult effects on our economy.”

Last week, Finance Minister Jim Flaherty said the biggest factor behind the U.S. dollar's weakness is the budget deficit, which, according to the Congressional Budget Office, was $1.4-trillion in the fiscal year that ended Sept. 30, greater than India's GDP.

The U.S. dollar's decline also reflects a broader recognition by international investors that Asia is taking on a greater role in driving the global economy, investors and economists said. The U.S. economy will expand 1.5 per cent in 2010, compared with 9 per cent in China and 6.4 per cent in India, according to the IMF.

“This is what you would expect with a transition like this from one region to another,” said Daniel Bain, president and chief investment officer at Thornmark Asset Management Inc. in Toronto. “When currencies move, they move in broad trends. I don't see anything that is going to shift away from current trends.”

Canada’s recovery and its short and medium term economic success depends upon a US recovery; the US is our only important market.

Canada will have to learn how to produce goods and services more efficiently and effectively for export into a more protected US market and without the advantage of a weak Canadian dollar. But Canada remains, at root, a resource economy, not a major industrial economy, and we have the opportunity, now, to move to diversify our exports. Manufacturing is easy to move to the biggest market, or to the lowest labour market or to the lowest transport cost market, but resources are “in the ground” and they have to be extracted, here, by local people and – to some degree, to the greatest degree possible – processed here by local people and moved, by local people, to Canadian seaports and then loaded, by local people, on to ships. Global demand for our resources is growing; we should be ready and able to satisfy it.

A "new," devalued US dollar and concomitant weaker us demand makes the process of developing new exports markets more urgent.

 

[a_majoor]

We also have to be alert against media/Obama weasles and understand the true state o0f the economy:

http://www.zerohedge.com/article/dow-10000-oh-wait-make-7537

DOW 10,000!!!! Oh Wait, Make That 7,537
By Tyler Durden
Created 10/14/2009 - 13:21

Another great representation of the amazing loss of purchasing power by the US public are today's oblivious statements about the Dow at 10,000. While in absolute terms the Dow may cross whatever the Fed thinks is a necessary and sufficient mark before QE begins to taper off (Dow crosses 10k just as Treasury purchases expire), the truth is that over the past 10 years (the first time the DJIA was at 10,000) the dollar has lost 25% of its value. Therefore, we present the Dow over the last decade indexed for the DXY, which has dropped from 100 to about 75. On a real basis (not nominal) the Dow at 10,000 ten years ago is equivalent to 7,537 today! In other words, not only have we had a lost decade for all those who focus on the absolute flatness of the DJIA, but it is also a decade where the US Consumer has lost 25% of purchasing power from the perspective of stocks! You won't hear this fact on the MSM.

And if you want to be really scared, here is the comparable representation for the DJIA in ounces of gold. It cost about 30 ounces to buy the 10,000 Dow last time. Now it costs less than 10.

edit to add link

 

[tomahawk6]

Couldnt agree with you more. With the media operating as an extension of the White House truth is lost in the classic Big Lie where the opposite may be true. Where the lie is told often enough its believed. Classic example was this week's lies about Rush Limbaugh. None of it was true and in the face of pending legal action the lefty blogs and press are backtracking as fast as they can. It doesnt help Rush though because the damage is done. The lies were traced to a NY law firm that may have had a client who was also trying to get the Rams or it was just another hit piece that they have perprtrated. In any case their chickens are coming home to roost. I hardly recognize my country as it is rapidly heading towards civil unrest.

 

[tomahawk6]

I dont know why Obama lets Joe Biden leave the VP's mansion. Everytime he does he creates a stir with some gaff or other. TSunday he declared the US was in a depression - not quite on message.

http://www.youtube.com/watch?v=Ct7TGWGWYzk&feature

 

[a_majoor]

Heh:

 

[old medic]

For those keeping track of things spun off from the old GM.
The bold is mine.

http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20091025.wcapmark1025/business/Business
/businessBN/ctv-business?ctvBeta=yes

Capmark Financial files for bankruptcy

Reuters

New York — Commercial real estate company Capmark Financial filed for bankruptcy protection Sunday, undone by declines in the sector and a heavy debt load related to its leveraged buyout.

The company was created out of the commercial real estate assets of General Motors' finance arm GMAC in March of 2006. According to the bankruptcy filing, GMAC owned 21.3 per cent of the company's stock while an investor group, which includes Kohlberg Kravis Roberts & Co., Goldman Sachs Group's Goldman Sachs Capital Partners and Five Mile Capital, owned 75.4 per cent.

 

[a_majoor]

The war against the US economy:

http://pajamasmedia.com/eddriscoll/2009/10/25/war-is-over-if-you-want-it/

War Is Over, If You Want It

At Big Government, Peter Schweizer writes, “Okay, it’s time to finally admit it:  Barack Obama hates businessmen.  Not just certain businessmen, mind you, but the entire profession:”

Of course President Obama will deny this.  He told Businessweek magazine in a recent interview that he is not anti-business and that he believes in the private sector.  But the evidence is overwhelming,  and it helps explain why he is pursuing kamakazi-like economic policies that will damage the private sector in America.

Obama has demonized just about every business sector in America.  Through the 2008 campaign to the present,  he has gone after credit card companies, the coal industry, mortgage companies, real estate companies, steelmakers, utilities, drug companies, doctors, oil companies, Wall Street, defense contractors, and health insurance companies, just to name a few.  In each case he has dinged them for greed, taking excessive profits, and failing to put people first.  His criticisms have not been over minor matters but over their basic core functions, and their values or lack of them. [His demonization of talk radio and Fox News also constitutes a front in his attack on business -- Ed]

Obama demonstrates almost complete ignorance about the private sector and it’s no wonder:  he has so little experience in it.  He has spent his adult life in college, teaching college, and organizing communities.  The one private sector job he has held, for a consulting firm in New York, he recounts as a terrible experience.  In his memoirs he describes the experience as working for a private business “like a spy behind enemy lines.”  He also recounts in his memoirs that the multinational corporations in the Indonesia of his youth were propelling the average worker “into deeper despair.”  He likened the presence of corporations in his native Africa to a form of “neocolonialism.”  Michelle Obama has beseeched young people, “We left corporate America, which is a lot of what we are asking young people to do.  Don’t go into corporate America.  You know, become teachers, work for the community,  be a social worker, be a nurse….move out of the money-making industry, into the helping industry.” (Interpolation: Where does the money to pay for the "helping industry" come from? Anyone, anyone, Buler?)

This is, of course, the Obama Cosmotology.  The private sector is largely populated by devils, who are self-oriented, concerned about personal gain,  and unconcerned about others.  The government, on the other hand, is made up of people bathed in altruism, whose only concern is you.  Thus it is quite easy for Obama to recall the divide between the private and public sector as “enemy lines”  even though he would never call the Iranian Mullahs, Hugo Chavez, or Vladimir Putin an “enemy.”

All of this begs the question:  does Obama’s demonizing of business simply reflect his lack of experience in the private sector or is it based on a well-thought out analysis?  In short, is it based on ignorance or ideology?

When it comes to Obama’s domestic war, why can’t the answer be both?

 

[old medic]

CIT has filed for chapter 11

http://www.latimes.com/business/la-fiw-cit-bankruptcy2-2009nov02,0,6238765.story

CIT files for Chapter 11 bankruptcy protection
From the Associated Press
November 1, 2009

Lender CIT Group has filed for Chapter 11 bankruptcy protection, in an effort to restructure its debt while trying to keep loans flowing to the thousands of mid-sized and small businesses.

CIT made the filing in New York bankruptcy court today, after a debt-exchange offer to bondholders failed. CIT said in a statement that its bondholders have overwhelmingly approved a prepackaged reorganization plan which will reduce total debt by $10 billion while allowing the company to continue to do business.

"The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy," said Jeffrey M. Peek, chairman and CEO. Peek has said he plans to step down at the end of the year.

CIT's move will wipe out current holders of its common and preferred stock, likely meaning the U.S. government will lose the $2.3 billion it sunk into CIT last year to prop up the ailing company. The government could have lost billions more, however, had it not declined to hand over more aid to the company earlier this year.

The Chapter 11 filing is one of the biggest in U.S. corporate history. CIT's bankruptcy filing shows $71 billion in finance and leasing assets against total debt of $64.9 billion. Its collapse is the latest in a string of huge cases driven by the financial crisis over the past two years, as bailed out industry heavyweights like General Motors and Chrysler both entered bankruptcy court.

CIT has been trying to fend off disaster for several months and narrowly avoided collapse in July. It has struggled to find funding as sources it previously relied on, such as short-term debt, evaporated during the credit crisis.

It received $4.5 billion in credit from its own lenders and bondholders last week, reportedly made a deal with Goldman Sachs to lower debt payments, and negotiated a $1 billion line of credit from billionaire investor and bondholder Carl Icahn. But the company failed to convince bondholders to support a debt-exchange offer, a step that would have trimmed at least $5.7 billion from its debt burden and given CIT more time to pay off what it owes.

It is unclear what the filing will mean for the nation's small businesses, many of which look to CIT for loans to cover expenses like buying materials at a time when other credit is hard to come by.

Analysts have warned that already ailing sectors, like retailers, could be hit especially hard, since CIT serves as the short-term financier for about 2,000 vendors that supply merchandise to more than 300,000 stores.

 

[a_majoor]

Now get ready for the bailouts of insolvent States and cities:

http://www.latimes.com/news/opinion/la-oe-voegli1-2009nov01,0,825554.story

THE CALIFORNIA FIX
The Golden State isn't worth it
Our high-benefit/high-tax model no longer works, especially compared with low-tax states like Texas.

By William Voegeli

November 1, 2009
In America's federal system, some states, such as California, offer residents a "package deal" that bundles numerous and ambitious public benefits with the high taxes needed to pay for them. Other states, such as Texas, offer packages combining modest benefits and low taxes. These alternatives, of course, define the basic argument between liberals and conservatives over what it means to get the size and scope of government right.

It's not surprising, then, that there's an intense debate over which model is more admirable and sustainable. What is surprising is the growing evidence that the low-benefit/low-tax package not only succeeds on its own terms but also according to the criteria used to defend its opposite. In other words, the superior public goods that supposedly justify the high taxes just aren't being delivered.

California and Texas are not perfect representatives of the alternative deals, but they come close. Overall, the Census Bureau's latest data show that state and local government expenditures for all purposes in 2005-06 were 46.8% higher in California than in Texas: $10,070 per person compared with $6,858. Only three states and the District of Columbia saw higher per capita government outlays than California, while those expenditures in Texas were lower than in all but seven states. California ranked 10th in overall taxes levied by state and local governments, on a per capita basis, while Texas, one of only seven states with no individual income tax, was 38th.

One way to assess how Americans feel about the different tax and benefit packages the states offer is by examining internal U.S. migration patterns. Between April 1, 2000, and June 30, 2007, an average of 3,247 more people moved out of California than into it every week, according to the Census Bureau. Over the same period, Texas had a net weekly population increase of 1,544 as a result of people moving in from other states. During these years, more generally, 16 of the 17 states with the lowest tax levels had positive "net internal migration," in the Census Bureau's language, while 14 of the 17 states with the highest taxes had negative net internal migration.

These folks pulling up stakes and driving U-Haul trucks across state lines understand a reality the defenders of the high-benefit/high-tax model must confront: All things being equal, everyone would rather pay low taxes than high ones. The high-benefit/high-tax model can work only if things are demonstrably not equal -- if the public goods purchased by the high taxes far surpass the quality, quantity and impact of those available to people who live in states with low taxes.

Today's public benefits fail that test, as urban scholar Joel Kotkin of NewGeography.com and Chapman University told the Los Angeles Times in March: "Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California. Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California's government and the middle class is constantly being renegotiated to the disadvantage of the middle class."

These judgments are not based on drive-by sociology. According to a report issued earlier this year by the consulting firm McKinsey & Co., Texas students "are, on average, one to two years of learning ahead of California students of the same age," even though per-pupil expenditures on public school students are 12% higher in California. The details of the Census Bureau data show that Texas not only spends its citizens' dollars more effectively than California but emphasizes priorities that are more broadly beneficial. Per capita spending on transportation was 5.9% lower in California, and highway expenditures in particular were 9.5% lower, a discovery both plausible and infuriating to any Los Angeles commuter losing the will to live while sitting in yet another freeway traffic jam.

In what respects, then, does California "excel"? California's state and local government employees were the best compensated in America, according to the Census Bureau data for 2006. And the latest posting on the website of the California Foundation for Fiscal Responsibility shows 9,223 former civil servants and educators receiving pensions worth more than $100,000 a year from California's public retirement funds. The "dues" paid by taxpayers in order to belong to Club California purchase benefits that, increasingly, are enjoyed by the staff instead of the members.

None of this happens by accident. California's interlocking directorate of government employee unions, issue activists, careerists and campaign contributors has become increasingly aggressive and adept at using rhetoric extolling public benefits for all to deliver targeted advantages to itself. As a result, the political reality of the high-benefit/high-tax model is that its public goods are, increasingly, neither public nor good. Instead, the beneficiaries are the providers of the public services, and certain favored or connected constituencies, rather than the general population.

The recession will eventually end, and California's finances will get better. Given its powerful systemic bias against efficient and effective public services, however, the question is whether the state will ever get well. California's public sector has pinned its hopes for avoiding fundamental reform on increased federal aid to replace dollars the state's fed-up taxpayers refuse to surrender. In other words, residents in the other 49 states -- the new 49ers? -- would enjoy the privilege of paying California's taxes. Their one consolation will be not having to endure its lousy public services.

If, on the other hand, America's taxpayers (and China's bond buyers) succumb to bailout fatigue, California may reach the point at which, after every alternative has been exhausted, it is forced to try governing itself competently. You wouldn't know it from putting up with California's transportation and educational systems, but there actually is a principled, plausible argument to be made for the high-benefit/high-tax model. For the sake of both California and their own political ideals, its advocates ought to be leading the charge against every excess and inefficiency that deprives taxpayers of good value for their dollars. That won't happen until they stand up to their coalition partners by breaking their Faustian political bargain with California's self-serving governmental-industrial complex.



William Voegeli is a contributing editor of the Claremont Review of Books. This article is adapted from the autumn 2009 issue of City Journal

 

[a_majoor]

Jerry Pournell:

http://jerrypournelle.com/view/2009/Q4/view595.html#Saturday

Health Care Bill Day

Unemployment is over 10%. It wasn't supposed to get that high. TARP was supposed to fix that.

Meanwhile today may be the most important vote in Congress since the days of the New Deal. If the health care bill passes, it will fundamentally convert these United States into a different kind of popular democracy, which generally means rule by a unionized bureaucracy  organized to vote. Once that much of the economy is run by government, economic recovery as many hope for will simply be impossible.

Permanent unemployment at 7% or so; median income perhaps 10% higher than it is now, but not much higher; and a long period of stagflation. Reluctance to take on new employees, and great incentive to export jobs. Is this a picture of the future? We will have to see, as Congress debates the health care and carbon tax bills.

One of the big debating points is over abortion. That is certainly in important moral point, but the creation of an enormous entitlement overshadows it. At least under this bill, illegal immigrants can't be jailed for not buying government approved health insurance. The rest of us can be. I have no idea what happens to those my age. I gather that it pretty well eliminates the Medicare Advantage that pays most of my Kaiser dues. This all promises to be interesting.

With Detroit a ruin and manufacturing industries on the ropes, small business is the only possible engine of recovery from what they don't call a Depression; so the Congress is going to add an 8% tax on employing people. We already have the longest period of increasing unemployment since the Great Depression; I presume we are going for a really big record setting period of increasing unemployment.

What incentives people have to invest and create new jobs in this environment is pretty murky now; with the health bill there will be fewer incentives to invest in new jobs in the US. The incentives are now to the job black market -- hire illegal immigrants who don't have to have health insurance -- or to export the job if that can possibly be done.

Meanwhile the credit index is way down: people aren't borrowing or lending, meaning investment is down. Moving money around in circles keeps Wall Street going, but next year the Bush tax cuts expire, meaning a new round of higher taxes to go with the new taxes of the health care and carbon taxes, and the new regulations. And with a trillion dollar deficit the incentive to add surtaxes is overwhelming, thus again confiscating money from the successful -- money that otherwise would have been invested. Perhaps the government can invest for us with a new TARP?

Parts of the economy will thrive, but then some made good money during the Great Depression. The incentive will be to tax those who continue to do well, meaning they won't invest either, and will spend more on tax avoidance rather than making more money. We have seen that spiral before; the remedy was to cut taxes, but that is not a politically viable incentive.

Without investment there isn't a lot of job creation. Companies thrive by getting more work from fewer workers. That's good for the productive (who will have to work harder to pay their increased taxes) but doesn't do much for those without jobs. Unemployment compensation and welfare do not create jobs nor do they get people employed. Government employees don't increase production and wealth, but they have to be paid for what they do; and that takes more out of the economy. The spiral continues. When we do recover we may consider getting where we are now to be a great thing.

In other words: Have we seen the end of the good times? Tax rates go up, but government revenues keep going down. And down. Raising tax rates doesn't seem to make the government much more money. And unemployment goes up. And the beat goes on.

A new Great Depression is not inevitable, but each time there is another transfer of resources to the government, it becomes more likely. The trick to survival is to find niches where one can thrive or at least hang on in the midst of the downward spiral. Who is succeeding in today's Detroit? It would be worth studying those survivalists...

It's also worth considering vegetable gardens. I wish I were kidding.

The other survival tool is to learn a lot more about the tax laws. The return on investment from knowing more about tax laws is probably higher than the return on investment from increasing productivity.

 

[observor 69]

New York Times

ARTICLE LINK

November 9, 2009
Op-Ed Columnist
Paranoia Strikes Deep
By PAUL KRUGMAN

Last Thursday there was a rally outside the U.S. Capitol to protest pending health care legislation, featuring the kinds of things we’ve grown accustomed to, including large signs showing piles of bodies at Dachau with the caption “National Socialist Healthcare.” It was grotesque — and it was also ominous. For what we may be seeing is America starting to be Californiafied.

The key thing to understand about that rally is that it wasn’t a fringe event. It was sponsored by the House Republican leadership — in fact, it was officially billed as a G.O.P. press conference. Senior lawmakers were in attendance, and apparently had no problem with the tone of the proceedings.

True, Eric Cantor, the second-ranking House Republican, offered some mild criticism after the fact. But the operative word is “mild.” The signs were “inappropriate,” said his spokesman, and the use of Hitler comparisons by such people as Rush Limbaugh, said Mr. Cantor, “conjures up images that frankly are not, I think, very helpful.”

What all this shows is that the G.O.P. has been taken over by the people it used to exploit.

The state of mind visible at recent right-wing demonstrations is nothing new. Back in 1964 the historian Richard Hofstadter published an essay titled, “The Paranoid Style in American Politics,” which reads as if it were based on today’s headlines: Americans on the far right, he wrote, feel that “America has been largely taken away from them and their kind, though they are determined to try to repossess it and to prevent the final destructive act of subversion.” Sound familiar?

But while the paranoid style isn’t new, its role within the G.O.P. is.

When Hofstadter wrote, the right wing felt dispossessed because it was rejected by both major parties. That changed with the rise of Ronald Reagan: Republican politicians began to win elections in part by catering to the passions of the angry right.

Until recently, however, that catering mostly took the form of empty symbolism. Once elections were won, the issues that fired up the base almost always took a back seat to the economic concerns of the elite. Thus in 2004 George W. Bush ran on antiterrorism and “values,” only to announce, as soon as the election was behind him, that his first priority was changing Social Security.

But something snapped last year. Conservatives had long believed that history was on their side, so the G.O.P. establishment could, in effect, urge hard-right activists to wait just a little longer: once the party consolidated its hold on power, they’d get what they wanted. After the Democratic sweep, however, extremists could no longer be fobbed off with promises of future glory.

Furthermore, the loss of both Congress and the White House left a power vacuum in a party accustomed to top-down management. At this point Newt Gingrich is what passes for a sober, reasonable elder statesman of the G.O.P. And he has no authority: Republican voters ignored his call to support a relatively moderate, electable candidate in New York’s special Congressional election.

Real power in the party rests, instead, with the likes of Rush Limbaugh, Glenn Beck and Sarah Palin (who at this point is more a media figure than a conventional politician). Because these people aren’t interested in actually governing, they feed the base’s frenzy instead of trying to curb or channel it. So all the old restraints are gone.

In the short run, this may help Democrats, as it did in that New York race. But maybe not: elections aren’t necessarily won by the candidate with the most rational argument. They’re often determined, instead, by events and economic conditions.

In fact, the party of Limbaugh and Beck could well make major gains in the midterm elections. The Obama administration’s job-creation efforts have fallen short, so that unemployment is likely to stay disastrously high through next year and beyond. The banker-friendly bailout of Wall Street has angered voters, and might even let Republicans claim the mantle of economic populism. Conservatives may not have better ideas, but voters might support them out of sheer frustration.

And if Tea Party Republicans do win big next year, what has already happened in California could happen at the national level. In California, the G.O.P. has essentially shrunk down to a rump party with no interest in actually governing — but that rump remains big enough to prevent anyone else from dealing with the state’s fiscal crisis. If this happens to America as a whole, as it all too easily could, the country could become effectively ungovernable in the midst of an ongoing economic disaster.

The point is that the takeover of the Republican Party by the irrational right is no laughing matter. Something unprecedented is happening here — and it’s very bad for America.


 

 

[tomahawk6]

The point is that the takeover of the Republican Party by the irrational right is no laughing matter. Something unprecedented is happening here — and it’s very bad for America.

What a crock of crap. A conservative takeover is exactly what is needed to stop the unconstitutional power grab now going on in Washington.

The Obama administration’s job-creation efforts have fallen short..

It boggles my mind that you can spend almost a trillion bucks and have zero job creation. Due to all the Federal spending we get a 3.2% bump in GNP,that wont last. The democrats know that voters vote their pocket book because thats how they got elected last year.The economy isnt any better and with real unemployment around 18% and with democrat job killing bills on the horizon 2010 will see big GOP gains in the House and Senate.

 

[a_majoor]

Cut spending by trillions of dollars, inflate debt away or default.....

http://www.newsweek.com/id/221563

Up Against a Wall of Debt, Part II
Are the United States, Japan, Great Britain, and other first-world nations in danger of defaulting on their debt?

By Robert J. Samuelson | Newsweek Web Exclusive

Nov 6, 2009

In my latest NEWSWEEK column, I suggested that the unthinkable had become thinkable: some advanced society—say, the United States, Spain, Italy, Japan, or Great Britain—might someday default on its government debt. It wouldn't pay its creditors all they were owed or wouldn't pay them on time. Just a few days later, and completely coincidentally, the International Monetary Fund (IMF) issued a report that, without saying so, added credence to this unsettling hypothesis. (Click here to follow Robert J. Samuelson).

The report, done by IMF staff economists, comes with the forbidding title "The State of Public Finances Cross-Country Fiscal Monitor: November 2009." And it isn't much fun to read, because it's full of tables, charts, and various ratios. But the central conclusions, buttressed strongly by all the statistics, are simple enough: the economic and financial crisis has dramatically increased the deficits and debt of most countries, and many wealthy countries are in worse shape than major developing nations.

The economic crisis both increased spending—mainly through government "stimulus" packages and bailouts for the financial system—and devastated tax revenues. Of these, the falling taxes are the most important, the IMF said, because they may last much longer. The tax losses are especially large for the United States and Britain, because they stem heavily from "taxation of the financial sector and real-estate activities."

A look at the report's statistics reinforces the grim message. The table below shows government debt in relation to a country's gross domestic product (GDP), which is the output of its economy. The first column shows the debt-to-GDP ratio for 2007, the last pre-crisis year; the second column gives the IMF's projection for 2014. (Debt reflects government borrowing to cover annual budget deficits.) By this standard measure, many rapidly growing emerging-market countries are less indebted than wealthier nations.

(Connoisseurs of budget statistics will notice that the figures for the United States differ from those published by the Office of Management and Budget and the Congressional Budget Office. The reason is this: the OMB and CBO figures cover only the federal government; the IMF statistics cover "general government," which includes states and localities. For example, the OMB and CBO debt-to-GDP ratio for fiscal 2007 was 37 percent. But in both series, the big driver of higher debt-to-GDP ratios is rapidly rising federal debt.)

Just as sobering are estimates done by the IMF staff economists of so-called structural deficits—the hypothetical gaps between government spending and taxes, assuming that the economy has recovered from the crisis and that all crisis-related spending has ended. For the United States, this underlying deficit is 3.7 percent of GDP in 2010 and, in future years, would be driven higher by an aging society and increased spending on Medicare and Social Security. Some other countries' structural deficits for 2010 are even higher: 7.8 percent of GDP for Great Britain, 5.8 percent for Spain, 6.9 percent for Japan, and 8.2 percent for Ireland.

The political implications of these dry numbers are chilling. To prevent an unending upward spiral of debt would require huge spending cuts or tax increases. The IMF report doesn't suggest that those be made immediately, because doing so might cripple the fragile economic recovery. But the report does argue that without these adjustments, government debts could become unmanageable.

To show the size of needed changes, the IMF performed one final exercise. It estimated the spending cuts or tax increases needed over the next decade to return a country's debt-to-GDP ratio to 60 percent by 2030. For the United States, the changes would amount to 8.8 percent of GDP. In today's dollars, that's about $1.2 trillion and roughly a third of the existing federal budget. But again, some other countries would face even larger adjustments: 12.8 percent of GDP for Great Britain, 10.7 percent for Spain, 13.4 percent for Japan, 11.8 percent for Ireland, and 9 percent for Greece. For France and Germany, the required changes would total 6.1 percent and 3.4 percent of GDP, respectively.

No one can doubt that changes along these lines would be politically, economically, and socially wrenching. Government benefits, especially for the elderly, would have to be trimmed, and there would have to be large, broad-based tax increases. As a practical matter, the IMF doesn't think that governments can easily inflate away their debt, in part because much of it is short-term and has to be rolled over constantly. The report estimates that increasing inflation to 6 percent annually would on average eliminate less than a quarter of projected increases in debt-to-GDP ratios. At the same time, defaulting on the debt could trigger a broader financial and economic crisis: many financial institutions, businesses, and individuals hold large amounts of government debt; their wealth would drop, and their solvency might be threatened.

The simple and dispiriting point is that rapidly rising debt burdens confront most wealthy societies with deeply disturbing and damaging choices. My original column did not suggest that a debt default is imminent or that any country would eagerly go that route. The argument was that as debt rose and the ugly choices were clarified, some government—or governments—might decide that default was the least bad of many bad choices. If nothing else, the IMF report confirms that possibility.

 

[Kirkhill]

There is, I believe, a fourth alternative:  Radically redefine the measuring stick - replace the current system of fiat moneys which have a loose association with the gold standard by, for example, carbon tax credits.

First of all, with respect to the fiat/gold relationship:  Government economists have been wishing that relationship away for decades now but unfortunately the market refuses to play along.  All market values of all goods and services always go up and down relative to each other but, it seems to me, some of the most volatile commodities in trade are fiat moneys issued by governments.  The price of oil relative to the price of gold has been much more stable. 

I am a firm believer that there is merit to a firm, unchanging metric that allows performance to be accurately gauged.  The gold standard provided that.  The fiat market failed to provide that.  Perhaps a carbon market http://forums.army.ca/forums/threads/83087/post-800696.html#msg800696 can supply it again.

Call it a political "bait and switch" - There will be massive disruptions in the economy with some really big losers with some even bigger winners (Gore amongst them) but it will all be justified on the twin pillars of environmental and fiscal necessity......

And all those old debts -  an accounting fiction washed away in a sea of green.

 

[a_majoor]

I suspect the "accounting fictions" are a lot more real than most people want to admit. After all, the Japanese didn't take nonperforming assets off the books when their economy imploded at the end of the 1980's, and an entire decade was lost.

Of course, we are also reminded there are much simpler solutions that are also much easier to impliment:

http://dodocanspell.blogspot.com/2009/11/obama-asked-palin-answered.html

Obama asked ........Palin answered
Great advice from the woman lamebrains love to hate.

    I commend the president for acknowledging today that “there are limits to what government can and should do” to ease our 10.2% unemployment rate – the highest it’s been since 1983. I also applaud his call for suggestions and expression of openness to considering “any demonstrably good idea.” Taking him at his word, I’d like to suggest this one: let’s learn from history and follow the example of the man who occupied the White House in 1983 and was able to transform an even worse recession than the one we’re currently experiencing into the largest peacetime economic expansion in American history,

    When you realize the magnitude of President Reagan’s achievements, there is absolutely no reason why anyone would ignore his “demonstrably good” example. If you want real job growth, cut taxes – including capital gains taxes and small business payroll taxes – and slay the death tax once and for all. If you want to stimulate the economy and help poor and middle class families, cut payroll taxes so that more Americans can keep and invest more of what they earn.....

    ......If you want lasting economic expansion and prosperity, get the federal government’s budget under control. Instead of more pork-laden stimulus plans, let the free market correct itself. That’s what Reagan did, and history proves it worked.

    These are difficult times for so many Americans who are out of work. I implore our leaders to not threaten our economy’s job creators with increased taxes and job-killing schemes like cap-and-tax and the government health care takeover. Government needs to get out of their way and off their backs so that they can grow and hire again.

    The lessons of history are clear. We’re blessed to have so many lessons from which to learn, and we’d be smart to emulate successes in America’s past. Our economic recovery decisions should be based on the same free market principles that Reagan employed. They work, history proves it, and I thank our president for asking for this input.

 

[a_majoor]

More bad news:

http://blogs.dailymail.com/donsurber/archives/3784

Obamanomics does the impossible

The upside of a falling dollar is that it makes our exports cheaper to foreigners — so we sell more stuff — and a falling dollar makes their products more expensive, so we buy less stuff.

This helps the trade deficit, right?

Not this time.

“Instead, the nation’s trade deficit rose in September by the largest percentage in a decade as U.S. exports grew for the fifth straight month, but imports rose faster, a government report showed Friday. That trend is likely to continue until the middle of next year, economists said,” the Associated Press reported.

Obamanomics. It’s as if it were designed by someone who cannot figure out Turbo Tax.

The Associated Press story:

WASHINGTON – A weaker dollar may boost the nation’s economy by increasing exports and narrowing the trade gap — but that won’t happen anytime soon.

Instead, the nation’s trade deficit rose in September by the largest percentage in a decade as U.S. exports grew for the fifth straight month, but imports rose faster, a government report showed Friday. That trend is likely to continue until the middle of next year, economists said.

Rising oil prices and higher purchases of foreign goods by U.S. companies drove imports higher. So did more purchases of foreign parts by U.S. manufacturers, which are ramping up production in the fledgling economic recovery.

Higher exports, spurred by a lower dollar, probably won’t reduce the trade gap and boost the U.S. economy until 2011, economists said.

“You tend to see imports surge when production begins to grow,” said Julia Coronado, senior U.S. economist at BNP Paribas. That’s overriding the benefit of the weaker dollar on exports, she said.

Imports in September rose 5.8 percent from August, led by a 20 percent jump in oil shipments. That’s the biggest rise in imports in 16 years. Exports, meanwhile, increased about 3 percent, reflecting stronger sales of American autos, aircraft and industrial machinery.

Overall, the monthly trade deficit jumped 18.2 percent to $36.5 billion, the Commerce Department said, the largest monthly percentage increase since February 1999.

The weaker U.S. dollar will likely have a greater impact on U.S. exports by late next year, economists said. When the dollar declines compared with other currencies, it makes U.S. exports cheaper and imports more expensive, narrowing the trade deficit.

“Longer term, there’s no question the weak dollar is a big plus for U.S. export growth,” Nigel Gault, chief U.S. economist at IHS Global Insight, said.

But the dollar hasn’t yet fallen that much, Gault noted. It is down about 12 percent against a basket of major currencies since last spring, but is at roughly the same level it was in the summer of 2008, he said. The financial crisis that fall drove many international investors to the safety of U.S. Treasury bonds, driving up the dollar’s value.

The impact of a cheaper dollar can also take as long as a year to kick in, said Paul Dales, U.S. economist at Capital Economics. That’s because foreign exporters to the U.S. don’t immediately adjust their prices to take into account changes in exchange rates.

For now, the value of U.S. exports is still about 20 percent below where they before the financial crisis erupted last year. And Dales said exports and imports are likely to continue rising at roughly the same pace. If so, U.S. trade wouldn’t likely contribute to U.S. economic growth during the early stages of the recovery.

Still, further rises in exports should provide some aid to U.S. manufacturers. Heavy equipment maker Caterpillar Inc. expects sales to rise next year, after being battered by the downturn, mostly due to greater demand in China and other Asian markets.

But those gains will be offset by a rebound in imports as U.S. consumer demand for foreign goods also picks up, analysts said.

Higher imports and exports are a sign of economic recovery in the U.S. and other countries, Gault said.

But imports in September were higher than expected, which means that less production took place in the U.S. in the July-September quarter than the government estimated last month.

In late October, the Commerce Department said the economy grew at a 3.5 percent rate in the third quarter. But now that September’s trade figures have been reported, that figure will likely be revised lower later this month, economists said.

Oil rose sharply during October, from about $71 per barrel to $77, a factor that could help widen the trade deficit further once the government reports that figure next month.

The U.S. deficit with China, which had been falling, jumped 9.2 percent to $22.1 billion in September, the highest imbalance in 10 months. For the year, the U.S. trade deficit with China is down about 16 percent, though the gap is still the largest the U.S. has with any country.

China on Thursday appeared to signal that it would allow its currency, the yuan, to rise against the dollar. The Chinese central bank said Thursday it would alter how it manages the yuan, which is currently pegged to the dollar. That change raised hopes among economists that China was preparing to allow its currency to rise in value, a change that would boost the competitiveness of American products in China.

American manufacturers contend that China is manipulating the value of its currency, keeping it undervalued by as much as 40 percent in relation to the dollar. That gives Chinese manufacturers a competitive advantage and makes U.S. goods more expensive in China.

And from comments:

Anil Petra says:
November 15, 2009 at 10:26 AM

It’s all about expectations.

We anticipate that the dollar will be worth less in the future, so we accelerate durable goods purchases of foreign products. That’s all there is to it.

No one on the left wants to talk about, and certainly won’t acknowledge the significance of, expectations.

Last July and August, with the most extreme Leftist ever put forward by the Democrats as their nominee, economic decline not only affected people’s expectations about the election outcome, but also their expectations about future economic policies and performance.

The nation “went John Galt”, anticipating the tightening of regulations, wholesale pursuit of non-economic goals through economic disruption (”cap & trade”, health care “public option” and elimination of “pre-existing condition” underwriting, “card check”, pay controls, nationalizations, “jobs programs”, massive deficits and redistribution), and of course, much higher taxes (with state & local, over 75% at the margin for the most productive Americans).

Is it any wonder people are spending money before it is taken from them, with dollars facing further dilution of value, of goods before they are banned as environmentally insensitive or insufficiently “domestic” or “union made”?

 

[a_majoor]

We "only" had a billion dollar boondoggle, totally ineffective 2 billion dollar gun registry and ADSCAM. This American administration does things in a big way:

http://www.washingtontimes.com/weblogs/back-story/2009/nov/17/recoverygov-shows-money-flowing-to-nonexistent-di/

Recovery.gov shows money flowing to nonexistent districts

By Amanda Carpenter on Nov. 17, 2009 into The Back Story

The government Web site that promised to show exactly where the $787 billion in stimulus spending was going to "create or save" jobs is allocating billions of tax dollars to hundreds of congressional districts that don’t exist.

Researchers at the Franklin Center for Government & Public Integrity found 440 “phantom districts” listed on Recovery.gov, consuming $6.4 billion and creating or saving nearly 30,000 jobs. Their findings are listed HERE.

For example, Recovery.gov shows 12 districts, using up more than $2.7 billion, in Washington, D.C, which only has one congressional district.

Recovery.gov also shows 2,893.9 jobs created with $194,537,372 in stimulus funding in New Hampshire’s 00 congressional district. But, there is no such thing.

The site also shows $1,471,518 going to New Hampshire’s 6th congressional district, $1,033,809 to the 4th congressional district and $124,774 to the 27th congressional district. In fact, New Hampshire only has two congressional districts; inviting confusion about where the money listed for the 00, 4th, 6th and 27th districts is going.

Edward Pound, communications director for the Recovery Accountability and Transparency Board, said, "Some recipients of Recovery Act funds entered incorrect congressional districts in their award reports. We are doing an analysis of what we might be able to do at this time to correct the problem."

The burden of reporting information lies on the stimulus recipients and if they submit incorrect forms there is no penalty, said Mr. Pound. “The American Recovery and Reinvestment Act set forth all the reporting requirements, but is silent as to penalties to enforce the reporting requirements,” he said. Fraudulent forms could be punished for as a crime, but there is no mechanism to deter recipients from submitting inaccurate information through human error.

G. Edward DeSeve, who is Special Advisor to the President, Assistant to the Vice President and Special Advisor to the Office of Management and Budget for Implementation of the Recovery Act issued a statement about these errors on Tuesday, arguing some mistakes were inevitable and do nothing to disprove the effectiveness of the stimulus.

“Even if as many as 5-10% of the reports or 5-10% of the totals are wrong (and we don’t think it is that high), that still means the Recovery Act saved or created between 600,000 and 700,000 direct jobs in its first seven months -- more than most experts predicted when it passed,” he said. “And most leading experts agree that -- whatever the recipient reported total should be -- the actual number of jobs saved or created is about double that, because the recipient reports don’t include direct payments to individuals, the jobs created by Recovery Act tax cuts, and the jobs created when workers on Recovery Act projects spend their paychecks.”

Edit to add another link with more details and an interactive map!:

http://www.washingtonexaminer.com/maps/Bogus-jobs-created-or-saved-by-the-Stimulus.html

 

[Kirkhill]

Lessee Now:

Allow them 800,000 jobs created or "saved".  If they allow me 800,000,000,000 dollars spent. 

That means 800,000,000,000 dollars divided  by 800,000 bodies resulting in 1 and 6 zeroes.......1,000,000 per body.  I wonder how many lawyers and community organizers got a chunk of those dollars in supplying the money.  I'm sure the recipients the benefits of the project would have much preferred just to receive the 1,000,000 per, directly.

 

[mariomike]

"New tale of Detroit’s woe: Pontiac Silverdome sold for $583,000: Pontiac, Mich., sold the 80,300-seat Silverdome for $583,000 Wednesday. The former home of the Detroit Lions cost $55.7 million to build in 1975.":
http://features.csmonitor.com/economyrebuild/2009/11/18/new-tale-of-detroits-woe-silverdome-sold-for-583000/