Trillions For Wall Street Banksters

Mike Whitney - On Tuesday, the 30-year fixed rate for mortgages plunged to an all-time low of 4.56 per cent. Rates are falling because investors are still moving into risk-free liquid assets, like Treasuries. It’s a sign of panic and the Fed’s lame policy response has done nothing to sooth the public’s fears. The flight-to-safety continues a full two years after Lehman Bros blew up.

Housing demand has fallen off a cliff in spite of the historic low rates. Purchases of new and existing homes are roughly 25 per cent of what they were at peak in 2006. Case/Schiller reported on Monday that June new homes sales were the “worst on record”, but the media twisted the story to create the impression that sales were actually improving! Here are a few of Monday’s misleading headlines: “New Home Sales Bounce Back in June”–Los Angeles Times. “Builders Lifted by June New-home Sales”, Marketwatch. “New Home Sales Rebound 24 per cent”, CNN. “June Sales of New Homes Climb more than Forecast”, Bloomberg.

The media’s lies are only adding to the sense of uncertainty. When uncertainty grows, long-term expectations change and investment nosedives. Lying has an adverse effect on consumer confidence and, thus, on demand. This is from Bloomberg:

The Conference Board’s confidence index dropped to a 5-month low of 50.4 from 54.3 in June. According to Bloomberg News:

“Sentiment may be slow to improve until companies start adding to payrolls at a faster rate, and the Federal Reserve projects unemployment will take time to decline. Today’s figures showed income expectations at their lowest point in more than a year, posing a risk for consumer spending that accounts for 70 per cent of the economy.

“Consumers’ faith in the economic recovery is failing,” said guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, whose forecast of 50.3 for the confidence index was the closest among economists surveyed by Bloomberg. “The job market is slow and volatile, and it’ll be 2013 before we see any semblance of normality in the labor market.” (Bloomberg)

Confidence is falling because unemployment is soaring, because the media is lying, and because the Fed’s monetary policy has failed. Notice that Bloomberg does not mention consumer worries over “curbing the deficits”. In truth, the public has only a passing interest in the large deficits. It’s a fictitious problem invented by rich corporatists (and their think tanks) who want to apply austerity measures so they can divert more public money to themselves. In the real world, consumer confidence relates to one thing alone–jobs. And when the jobs market stinks, confidence plummets. This is from another article by Bloomberg:

“Consumer borrowing in the U.S. dropped in May more than forecast, a sign Americans are less willing to take on debt without an improvement in the labor market.

The $9.1 billion decrease followed a revised $14.9 billion slump in April that was initially estimated as a $1 billion increase, the Federal Reserve reported today in Washington. Economists projected a $2.3 billion drop in the May measure of credit card debt and non-revolving loans, according to a Bloomberg News survey of 34 economists.

Borrowing that’s increased twice since the end of 2008 shows consumer spending, which accounts for about 70 per cent of the economy, will be restrained as Americans pay down debt. Banks also continue to restrict lending following the collapse of the housing market, Fed officials said after their policy meeting last month” (Bloomberg)

Consumer confidence is falling, consumer credit is shrinking, and consumer spending is dwindling. Jobs, jobs, jobs; it’s all about jobs. Budget deficits are irrelevant to the man who thinks he might lose his livelihood. All he cares about is bringing home the bacon. Here’s a quote from Yale professor Robert Schiller who was one of the first to predict the dot.com and the housing bubble:

“For me a double-dip is another recession before we’ve healed from this recession … The probability of that kind of double-dip is more than 50 per cent. I actually expect it.”

There’s no need for the economy to slip back into recession. It is completely unnecessary. Fed chairman Ben Bernanke knows exactly what needs to be done; how to counter deflationary pressures via bond purchasing programs etc. He has many options even though interest rates are “zero bound”. But Bernanke has chosen to do nothing. Intransigence is a political decision. By the November midterms, the economy will be contracting again, unemployment will be edging higher, and the slowdown will be visible everywhere in terms of excess capacity. The Obama economic plan will be repudiated as a bust and the Dems will be swept from office. The bankers will get the political gridlock they desire. Bernanke knows this.

On Tuesday, a $38 billion Treasury auction drove 2-years bond-yields down to record lows. (0.665 per cent) Investors are willing to take less than 1 per cent on their deposits just for the guarantee of getting it back. Bond yields are a referendum on the Fed’s policies; a straightforward indictment of Bernanke’s strategy. Three years into the crisis and investors are more afraid than ever. The flight to Treasuries is an indication that the retail investor has left the market for good. It is a red flag signaling that the public’s distrust has reached its zenith.

Presently, big business is awash in savings ($1.8 trillion) because consumers are on the ropes and demand is weak. The government’s task is simple; make up for worker retrenchment by providing more fiscal and monetary stimulus. If private sector and public sector spending shrink at the same time, the economy will contract very fast and recession will become unavoidable. So, Go Big; create government work programs, help the states, rebuild infrastructure and support green technologies. The economy is not a sentient being; it makes no distinction between “productive” labor and “unproductive” labor. The point is to keep the apparatus operating as close to capacity as possible–which means low unemployment and big deficits.

Increasing the money supply does nothing when interest rates are already at zero and consumers are slashing spending. Bernanke has added over $1.25 trillion to bank reserves but consumer borrowing, spending and confidence are still flat on the canvass. The problem is demand, not the volume of money. Bernanke knows what to do, but he refuses to do it. He’d rather line the pockets of bondholders, bankers and rentiers. This is from Calculated Risk:

“This report from the National League of Cities (NLC), National Association of Counties (NACo), and the U.S. Conference of Mayors (USCM) reveals that local government job losses in the current and next fiscal years will approach 500,000, with public safety, public works, public health, social services and parks and recreation hardest hit by the cutbacks.

The surveyed local governments report cutting 8.6 per cent of total full-time equivalent (FTE) positions over the previous fiscal year to the next fiscal year (roughly 2009-2011). If applied to total local government employment nationwide, an 8.6 percent cut in the workforce would mean that 481,000 local government workers were, or will be, laid off over the two-year period.”

The cutbacks will ravage local governments, state revenues and public services. Emergency facilities by the Fed provided $11.4 trillion for underwater banks and non banks, but nothing for the states. The GOP is helping the Fed strangle the states by opposing additional aid for Medicare payments and unemployment benefits. Many cities and counties will be forced into bankruptcy while Goldman Sachs rakes in record profits on liquidity provided by Bernanke. It’s a disaster.

The bottom line? When Wall Street is hurting, money’s never a problem. But when the states are on the brink of default and 14 million workers are scrimping to feed their families, it’s time for belt-tightening. Explain that to your kids.

OBAMA " THE FINANCIAL THEFT ACT OF 2009"

I cannot believe that so many Republicans are supporting this stimulus package by President-Elect Obama. This stimulus package is worth a Trillion Dollars and it will rob our children of a solid economic future. This stimulus package will be full of pork and wasted projects that will not solve our economic crisis. There will be thousands of government jobs that will drain the coffers of the federal government for the next 50 years. President-Elect Obama is talking about creating green jobs that will help save our environment. "I Want To Know What The Hell Is A Green job". I tell you what a green job is a make work government job that does not make any damn common sense. I am tired of these Washington politicians trying to solve the Wall Street financial crisis with taxpayers dollars. The politicians in Washington need to come out in a united front and tell the American people that we need to ride out this financial crisis and support businesses that are successful in America and give them financial aide so they can create more jobs in America. This country is now rewarding failing businesses with bailouts and financial aide packages instead of letting some of these businesses go bankrupt and pay the price for there lack of business savvy. Finally, this is the beginning of a long four years when it comes to fiscal responsibility, because I expect President-Elect Obama to go on a spending spree and pay off all his Liberal Socialist friends who helped him become President Of the United States.

"A NEW AMERICAN REVOLUTION"

The way things are going in America today we may need a new American Revolution. The way are Federal government is run by the President and the Congress is unacceptable to most Americans. This Federal Government is bailing out some of the most "Notorious" Wall Street Firms in the history of American. These bailouts that the Federal Government is giving out to these Wall Street Firms without any consequences for there actions in destroying the American economy. There have been no arrests at Lehman Brothers, Merrill Lynch and many other Wall Street Firms that have misused stockholders and investors money. The Federal Government has no control over there wild spending spree over the last six months and they are destroying are children's future. I wake up every mourning and hear that our new President-Elect Obama is going to spend a Trillion Dollars on a stimulus package similar to the New Deal. This could be a disaster because, anyone who knows history knows that the New Deal did not get us out of the Depression it was World War Two. I have a Governor in New York State who believes that you should tax everything that is humanly feasible for example this clown wants to tax you for buying shoes, soda, and any thing "Clown Ass" thing you can think of in your mind. This is unacceptable because, the average American is getting shafted from every angle they are losing there jobs and getting higher tax bills. The Federal and State Governments have to shrink there budgets to fit the harsh times that we are living in today. The Federal Government should not be a ATM Machine for every problem that a Bank or a Wall Street firm is having because of bad management. These firms should be allowed to fail just like any other small business in America. This Bailout money should be going to Small businesses because, they create most of the jobs in America today. Finally, if the Federal and State Governments don't get there act together there will be another American revolution and you will not see Americans with pitchforks they will have guns and they will truly want change.

OBAMA "TRIlLLION DOLLAR STIMULUS PACKAGE"

The Obama Administration will be presenting a Trillion Dollar Stimulus package right before he is inaugurated President Of The United States. This package will cover re-building the nations infrastructure and so-called job training programs. I know that President-Elect Obama is trying to solve a difficult problem with the economy but, to throw a Trillion Government Dollars at the American economy so, that Wall Street can be happy that is a tremendous mistake. President-Elect Obama has to understand that money does not grow on trees and that there has to be some type of fiscal responsibility when it comes to running a government. This Stimulus package does not include his first federal budget which more than likely will be over Three Trillion Dollars. This means in the first year of his Presidency he, will have spent Four Trillion Dollars of our children's money and we will probably have to bailout even more banks and firms. If you don't think that we are spending money like Germany in the 1920's you are highly mistaken. This could sink the nation into a deeper depression if this Stimulus Plan does not work, because of the lack of fiscal responsibility by Bush and Obama. The Obama Administration has to present a program to pay down our Nations Debt and Federal deficit. This nations debt when you add up all of our bills we owe about 50 Trillion Dollars in world Debt. The nations deficit is about 400 billion dollars and that could be managed if the economy turns around in the next two years. The Obama Administration should use the stimulus package on certain areas of the economy that will help the average American get jobs. Finally, we have to spend the taxpayers dollars wisely or we will eventually, run out of money and create a massive depression. Our federal government cannot keep throwing money at failed corporations and failed government policies. The Welfare State has to end or our nation will end up like a Third World Country.

"WALL STREET PIRATES" MONDAY QUICKIE

These Wall Street Pirates who have destroyed the American economy have to be held accountable for there illegal actions. The CEO's who headed these large Wall Street Firms should be arrested and indicted for there crimes against America. The average American is suffering because, of the lack competence and leadership by these CEO's who only care about how much money they can make in there quarterly reports to Wall Street. This failure of leadership has had a ripple affect and cost millions of jobs in almost every sector of the American economy. President-Elect Obama should give his Attorney General Eric Holder the responsibility of prosecuting these CEO's for there economic crimes. The head of Merrill Lynch Stanley O' Neil walked away with 150 million dollars and nobody is holding him responsible for destroying one of Americas greatest Wall Street Firms. The big problem I have is that we are bailing out these large Wall Street Firms and the leadership who destroyed these large firms are still in charge. The American people are tired of our government giving there money away to the so-called best and the brightest so, they can keep on making the same business mistakes that has put us on the brink of a depression. The only people who seem to be hurting is the middle and lower level employees at these large firms who are losing there jobs at a record pace because of the lack of leadership from these corporate executives. Therefore, when these companies take a piece of the government bailout package their should be a requirement that you cannot layoff thousands of employees. Finally, I know that there are people out there who say there is no law on the books against a firm for being incompetent but, there is a law against hiding the real value of the corporations stock and the value on the stock market.