Portfolio.com has a neat interactive feature, “The Green Miles,” by Jocelyn Hanamirian,that shows you what the government’s debt would look like if it were stretched bill by bill across the solar system.
The Bear Stearns buy-out, at $29 billion, for example, takes us just past the moon.
The 2009 federal budget deficit, at $1.2 trillion, takes us past the sun.
My piece on Team Obama’s propaganda effort on behalf of its economic interventions,
“Green Shoots and White Lies,” is up at Lew Rockwell this morning.
I’m posting the part that sums up a few of the biggest whoppers the administration is pushing to get those old animal spirits juiced up again. Will the PR work? Well, no one ever went broke underestimating the intelligence of the public. Tell a lie big enough and tell it often enough and people will buy it.
White Hats Telling White Lies:
Fudge One:
Goldman Sachs had a great quarter, making a profit of $3.5 billion and the government made $1.4 billion on its investment in Goldman Sachs. The government also got a 15% return on its investment in the eight biggest banks.
Truth:
Goldman had a great quarter only because it moved its reporting calendar to cut out December 2008, when it had a loss. And the government only made a profit on the TARP money it gave to Goldman because
* It funneled more money via the bailout of insurance giant AIG to AIGs counterparties, including Goldman (which took in $13 billion of the AIG money).
* Warren Buffett made a pre-TARP financial investment in Goldman.
* Goldman got the benefit of exceptionally low interest rates from the government at the expense of savers and to the benefit of borrowers.
* Goldman was issued FDIC-guaranteed bonds.
Without that extra welfare thrown at it, Goldman would actually be broke, not showing a profit. Ditto for the other banks.
Fudge Two:
The labor market is getting better because jobs are growing. The unemployment rate fell from 9.5% in June to 9.4% in July.
Truth:
That number only shows a slowing in the growth of unemployment. And even that small improvement has been offset by other aspects of the labor market that are worsening quite sharply:
* The duration of unemployment is increasing
* Temporary jobs are declining.
* The percentage of the eligible population receiving unemployment insurance has increased (0.1 percentage point to 4.7%. by September).
* The four-week moving average of initial claims has moved to its highest level in a month.
Even when jobs have been added, they’ve been created by government spending and they’ve been in areas like education, health, and government. In the purely private economy, in manufacturing, construction and retail, job losses have been huge. (“Brown manure not green shoots,” Nouriel Roubini, Forbes, July 9, 2009.)
Note: Recent improvement in the ISM (Institute of Supply Management) Index that signals expansion of production (and thus hiring) also needs to be discounted against the huge price inflation an increasingly pressured dollar will entail. That’s beside the effects of a hike in the Federal Funds rate that’s bound to follow a dollar-crashing scenario.
Note: The ISM is a leading indicator of executive expectations for future productions, orders, inventories, hiring, and deliveries.
Fudge Three:
Increases in real personal income in April and May will increase consumer spending.
Truth:
The increases were caused by tax-rebates and unemployment benefits kicking in, and most of it was saved, not spent (80 cents on the dollars). There was a temporary lift in consumer spending, but it petered out quickly. And as unemployment rises, benefits decline, and credit tightens in the future, consumption will decline even further
Fudge Four:
The bank stress tests came out better than expected.
The bank stress tests led Ben Bernanke to conclude that nearly all of the banks had enough capital to absorb higher losses should the economy worsen, and that the Treasury stood ready to provide more.
(AFP, “Hope is alive for green shoots,” May 11, 2009)
Truth:
The bank stress tests used an unemployment figure of 10.3% (the most adverse case). But unemployment is likely to be 11% and above by next year. If you take into account discouraged and partially employed workers, some economists suggest the figure is more likely to be 16%.
Another point. The stress tests overlooked all the other ways in which the government was paying for the banks, through FDIC guarantees and cheaper loans, for instance.
Fudge Five:
The housing market is improving.
In July, the Pending Home Sales Index was up 3.2%. Another improvement was in the value of U.S. homes. In the second quarter that number fell year-on-year (the 10th consecutive quarterly decline), but it fell by a smaller amount than in the previous quarter, for the first time since 2007.
Truth:
The improvement in home sales has been mostly in the lower end of the market and it largely reflects foreclosure sales and government credit, not real improvement in the market.
The slowdown in price decline has been offset by negatives in other areas:
* 23% of all homeowners owe more on their mortgages than their houses are worth.
* 22% of all home sales nationwide in June were foreclosure resales.
* 29.2 percent of all homes sold in June were sold for less than the owners originally paid.
(Portfolio.com August 11, 2009)
Loan problems aren’t confined to subprime. Prime mortgages are going underwater too.
Meanwhile, the market also has to deal with the decline in commercial real estate, which is undergoing one of the greatest contractions in retail in decades. Rents, even in the best urban shopping districts, have been declining.
(Colliers International Spring 2009 Retail Report, May 14, 2009).
Beyond commercial real estate, there are also all the other plagues about to visit us, when personal loans, auto loans, and student loans tighten over the coming years.
Bottom line?
There is no real basis for sustained optimism about the economy yet.
In the news, on September 7, Bloomberg reports that the UN wants a new global currency, ostensibly to protect emerging markets:
“UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said today in a report.
China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II. China, the world’s largest holder of dollar reserves, said a supranational currency such as the International Monetary Fund’s special drawing rights, or SDRs, may add stability. “
My Comment
(coming up)
In the news, gold failed to find a foot-hold above $1000, despite a weakening dollar. A better-than-expected jobs report probably had something to do with that.
From Market Watch via Goldseek:
“Gold futures fell Thursday for a second session, continuing to pull back from the $1,000-an-ounce level as a slightly better than expected U.S. weekly jobless data reduced the metal’s safe-haven appeal.
The number of people filing for initial unemployment benefits fell to a seasonally adjusted 550,000 last week. Economists surveyed by MarketWatch expected claims to stand at 558,000.”
Update:
Following up on whether there’ll be a focus on lobbyist-lawmaker corruption and what favors (if any) were exchanged between Duvall and the lobbyists he’s purported to have sex with, it seems that, fortunately, progressive groups are indeed trying to force a broader investigation of the subject.
Meanwhile, one of the two married lobbyists who are allegedly the subject of Duvall’s graphic boasts, Heidi De John Barsuglia, denies the affair (which means little at this point), and Sempra Energy, the giant utility company that employs her, has issued the usual public statement about how seriously it takes such charges. TPMMuckraker has the go-to round-up of the situation, no seamy detail left unmentioned.
Duvall voted several times against renewable energy measures (that Sempra also opposes), but since that’s a broadly-supported GOP position, it’s unclear that there was a quid-pro-quo in any of it.
My Comment:
I don’t cover sex scandals here unless they raise some sort of ideological point or tie in to the issue of blackmail and media/political control. But coming so soon after the salacious Vanity Fair piece on Palin, I wanted to post this one, which has at its center a California assemblyman and strong “family values” defender ‘outed’ by a mic he didn’t realize was on.
I’d really like to see if the media will treat a male conservative law-maker caught bragging publicly about his adulterous affairs with two lobbyists as viciously as they treated a female conservative governor who hasn’t been caught doing anything at all (she’s been accused not very successfully of some less than major ethical infractions).
Duvall will get a lot of flak for being
a. a hypocrite (which, as I’ve noted before, he may not necessarily be)
b. an idiot (which he clearly is)
c. crude/odious (check)
d. deceitful (check)
But I doubt if anyone will post photoshopped pictures that defame him, the way Sarah Palin was defamed.
Why won’t they? Something to do with the strange misogyny that conservative women with children and pro-life views elicit from liberal women. I’ve noticed it before….
The female of the species is [sometimes] more vicious than the male…especially to other females.
Let’s see how the media treats the actual news in this story – Duvall’s unprofessional relationship with lobbyists and what political favors he might have done them – or whether it gets side-tracked by the even-for-politics-exceptionally-racy details and the usual diatribes about hypocrisy.
This is from February 09, 2009, shortly after the World Economic Forum at Davos in January, where they both spoke on the same topic – the financial crisis.
I’m working on a new piece on the propaganda effort on the economy coming out of Team Obama. Here’s a part:
“How green are our shoots!
Thus say both Chairman Ben Bernanke and Treasury Secretary Tim Geithner.
And the public believes them. How come?It all began in March. In the first televised interview by any sitting Fed chairman in 20 years (CBS 60 Minutes), Bernanke used the term, “green shoots” for the first time. He pointed out that the Dow Jones index had recovered from 12 year lows in 2008 and the banking system had stabilized. No more big banks would fail, he predicted (AFP, March 15, 2009).
Two months later, His Timness echoed Big Ben. Geithner cited reduced spreads on corporate and muni bonds, the reduction in costs in credit protection at the big banks, and smaller risk premiums in the interbank market. He too said the economy was recovering. (Tim Geithner, Statement before the Senate Banking Committee, May 20, 2009)
In June, World Bank President Robert Zoellick joined the ‘shooters.’ Zoellick is a former US trade representative notorious for forcing US government subsidies and trade policies inimical to small farmers onto emerging markets. Zoellick noted “signs of global recovery,” but cautioned that they might be killed off if protectionism were adopted (Reuters, June 8, 2009)
Translation: foreigners had better not object to US government-managed trade policies…or the global recovery will fold.Put out….or look out.
Zoellick added his own revealing metaphor to the shooter lexicon: “Right now there is a low-grade fever; it isn’t full influenza, but we need to keep a close watch…”.[my emphasis]
[Oddly, Zoellick’s own employees at the World Bank contradicted their boss’s assessment in a report only a couple of weeks later (See “World Bank Global Economic Outlook” below]
In May billionaire hedge-fund manager George Soros was seeing green. And in July , chief wonk of the Obama economic team Lawrence Summers detected greenery in remarks to the Peterson Institute for International Economics.
Green shoots were now being sighted by everyone:
*In July the International Monetary Fund published its World Economic Outlook update
The Fund revised expected global growth in 2010 upward to 2.5%. The main source of the improvement, it claimed, was a brightening outlook for Asia.*Simon Johnson, IMF economist–turned-Peterson-Institute-spokesman-turned green-shooting-star even went on PBS to announce, “we are turning some sort of corner.” (August 20, 2009)
*Surveys of economists and business leaders in the summer showed that, in contrast to only a few months earlier, slightly more than half thought that the economy had bottomed.”
There’s a lot more I’m working on. Hope to have it on Lew Rockwell tomorrow, although I’d like to see it on some left-anarchist sites too. What began as a bit of trivia hunting (I was trying to figure out when the “green shoots” meme started) ended up throwing some interesting light on politics, the media, and the economy….
This harsh reality is reflected in the World Bank Global Outlook Report of June 22, 2009.
It notes the following for 2009:
*Global growth is set to fall by 2.9%
*World trade is likely to shrink by nearly 10%
*Industrial production in rich countries will drop by 15% from August 2008
*Developed economies will contract by 4.5% in 2009 and grow only in 2010 and 2011
*The US economy will decline by 3%
*Private capital flows to developing countries are likely to be halved, from $US 707 billion (2008) to $US 363 billion (2009)
*Industrial production in developing countries, excluding China, is set to fall by 10%.
*GDP growth in developing countries will fall from 5.9% (2008) to 1.2%.
Samuel Johnson writing about the misuse of the charge of “hypocrisy”:
“Nothing is more unjust, however common, than to charge with hypocrisy him that expresses zeal for those virtues which he neglects to practice; since he may be sincerely convinced of the advantages of conquering his passions, without having yet obtained the victory, as a man may be confident of the advantages of a voyage, or a journey, without having courage or industry to undertake it, and may honestly recommend to others, those attempts which he neglects himself.”
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