Tag: Economy

Note: I kept getting errors about text being corrupted while trying to post the complete diary.  This is only half the diary.  There are many more sections and editorial cartoons in this diary that I posted over at Daily Kos.

Crossposted at Daily Kos and Docudharma

One of the regulation under the Dodd-Frank bill that was passed by Congress was regulating the derivatives by publicly trading them in exchanges. One of those derivatives, foreign exchange swaps is now on the verge of being exempted from regulation by none other than Wall St,’s best friend, Secretary of the Treasury, Timothy Geithner. It is a $4 trillion-a-day market that allows businesses to convert one currency to another currency. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend high-yielding currencies, and which  may lead to loss of competitiveness in some countries. It is one of the markets that the Federal Reserves spent trillions of tax dollars propping up during the financial crisis in 2008 because of its speculative practices and lack of regulation.

Now, from Robert Kuttner at The American Prospect, Timmy wants to “blow a hole in Dodd-Frank”

Treasury Secretary Timothy Geithner is close to a decision to exempt the $4 trillion-a-day foreign-currency market from key provisions of the Dodd-Frank Act requiring greater transparency in the trading of derivatives. In the horse-trading over the final conference version of that legislation last year, both Geithner and financial-industry executives lobbied extensively to give the Treasury secretary the right to create this loophole. As the practical reach of Dodd-Frank is defined by the executive branch, this will be the first major decision to signal whether regulators will act to strengthen or weaken the reforms….

Geithner has already made his own views clear. In testimony before the Senate Agricultural Committee in December 2009, he declared that the foreign-exchange market needed no special regulation. “The FX [foreign exchange] markets are different,” he said. “They are not really derivative in a sense, and they don’t present the same sort of risk, and there is an elaborate framework in place already to limit settlement risk.”

snip

However, previously confidential information recently made public by the Federal Reserve Board reveals that in the aftermath of the collapse of Lehman Brothers in September 2008, the Fed pumped in $5.4 trillion over a three-month period to keep the foreign-currency market from collapsing. The Fed’s peak injection of dollars on any one day occurred on Oct. 22, 2008, when it reached $823 billion, according to a Wall Street watchdog group’s, Better Markets, analysis of the Fed data release….

Sen. Maria Cantwell, one of the most effective advocates for strong derivatives regulation during the Dodd-Frank debates, says, “I can’t believe the first decision the administration would make to carry out Dodd-Frank would be an anti-transparency decision. The idea that the foreign-exchange markets are not at risk is preposterous — we now know that they required multitrillion-dollar bailouts. Anytime you have a lack of transparency, there is potential for abuse.”

snip

Abuse of derivatives was at the absolute center of the financial meltdown. The collateralized debt obligations that were built on pyramids of sketchy mortgages whose value collapsed were, of course, derivatives. The mortgages themselves had been converted into highly leveraged, artificial securities — the essence of a derivative. So were the credit-default swaps that took down American International Group. With a derivative, a tiny amount of capital can control a much larger financial bet, and until the Dodd-Frank reforms, the derivatives were constructed and traded privately, with no regulator scrutiny. If such bets go wrong, massive losses ensue. And in a generalized loss of confidence, even well-capitalized institutions fail to accept each other’s credits.

(all emphasis mine)

In other words, it is business as usual that got us into the financial mess were are now trying to dig out from under. Nice work, Barack

Rachel explains how Republican efforts around the country to strip the middle class of union rights and other economic attacks are only serving to rally the Democratic voting base.

Transcript of the video is not yet available. When it is, it can be found here.

Reposted from Daily Kos

I graduated from a relatively large public high school in a impoverished area in rural Maine last year, having completed all 12 years in the local public school system. In case you haven’t noticed, there has been a lot of discussion on this site since the attacks on teacher’s unions. As someone who has experienced first hand the effects of No Child Left Behind and the budget shortfalls at the federal, state, and local level, I feel like I should share my experience. There have been quite a few diaries posted here by teachers and parents, but I haven’t seen any by students.

Before I begin to talk about everything that is terribly wrong with the public school system in this country, let me just say that I’m not doing it because it ended badly for me. I couldn’t be in a better place, and I’m happy to have spent all my years in the schools and surrounded by the people that I was. However, it worked out so well for me largely because I had a solid family situation, and I was self-motivated enough to accomplish what I needed to accomplish. However I did stand witness to all of those kids that it didn’t work out so well for, and it was obvious that things were only getting worse as I left.

So, let us begin.

Some of this is just really depressing. Where is this country headed?

• From Michael Moore: The Forbes 400 vs. Everybody Else
  

  According to the most recent information, the Forbes 400 now have a greater net worth than the bottom 50% of U.S. households combined.

  In 2009, the total net worth of the Forbes 400 was $1.27 trillion.

  The best information now available shows that in 2009 the bottom 60% (yes, now it’s 60%, not 50%) of U.S. households owned only 2.3% of total U.S. wealth.

  Total U.S. household net worth — rich, middle class and poor combined — at the time the Forbes list came out was $53.15 trillion. So the bottom 60% of households possessed just $1.22 trillion of that $53.15 trillion, less than the Forbes 400.

  Thus the Forbes 400 unquestionably have more wealth than the bottom 50%.

  By contrast, in 2007 the bottom 50% of U.S. households owned slightly more wealth than the Forbes 400; the economic meltdown has hurt the bottom more than the top. (And in fact, in 2010 the net worth of the Forbes 400 jumped to $1.37 trillion.)

• From TPM: Republicans Move To Strip Detainee Authority From Holder And Future Attorneys General
  

  Sens. John McCain (R-AZ) and Lindsey Graham (R-SC) are teaming up with Republicans on the House Armed Services Committee to write legislation that would take decisions about trying detainees out of the attorney general’s hands and hand that power to the secretary of defense.

  In the wake of the White House’s new executive order allowing Guantanamo detainees to be held indefinitely, House Armed Services Committee Chairman Buck McKeon (R-CA) unveiled legislation that would, among other things, affirm the military’s right to detain, hold and interrogate detainees at its discretion without Department of Justice or Attorney General Eric Holder involvement.

  What digby said about the above:

  Are these guys under the misapprehension that the Secretary of Defense doesn’t serve at the pleasure of the president, exactly as the Attorney General does? What’s the point of this?

• From the New York Times: AARP Sues U.S. Over Effects of Reverse Mortgages
  

  Reverse mortgages, which pay older homeowners a regular sum against the equity in their house, are supposed to shield borrowers from economic upheaval. But the popular loans have become tangled up in the real estate collapse.

  AARP, the seniors’ organization, filed suit Tuesday against the Department of Housing and Urban Development, which regulates reverse mortgages. The suit asserts that policy changes by HUD are pushing older homeowners into foreclosure.

  The case was filed in Federal District Court for the District of Columbia by the AARP Foundation, the organization’s charitable arm, and the law firm of Mehri & Skalet on behalf of the surviving spouses of three homeowners who had bought reverse mortgages. All three are facing eviction, the suit says.

  “HUD has illegally and without notice changed the rules in the middle of the game at the expense of vulnerable older people,” said Jean Constantine-Davis, a senior lawyer at the AARP Foundation.

  This is happening with a Democrat in the White House?

Even before the ink was dry on the continuing resolution that will keep the US government open until March 18, President Obama was already caving to Republican demands:

The White House has released what amounts to an opening bid in budget negotiations for Fiscal Year 2011 with Republicans. They have offered an additional $6.5 billion in cuts below the baseline of the 2010 budget. This goes on top of the $4 billion in cuts that have already been signed into law….this briefing took place before the first meeting between the White House and Congress even began. So the compromises preceded the negotiation. And there are no compromises happening on the other side.

That was Friday. Then on Saturday in his weekly address to the country via You Tube, he not only confirmed this but stated he was willing to go further.

How much further is he willing to sell out the middle class, the poor and future generations? Well this weekend he sent our one of his “canaries” to test the “air”, Austin Goolsbee, who in appearance on Lawrence O’Donnell’s “Last Word” couldn’t answer a straight question about Social Security.

From Gaius Publius at AMERICAblog points out the worst of Goolsbee’s administration apologia:

The Goolsbee interview starts at 3:20; the Social Security discussion starts at 7:15. At 8:80, weasel words begin leaving Goolsbee’s mouth – and they just don’t stop

Kudos to O’Donnell (who’s a benefit hawk himself) for pressing this hard. Question: Are you open to small changes to Social Security benefits, changes that would not be called “slashing”?

Goolsbee: “We don’t have a specific plan” … we want an “open discussion” … the president won’t weaken Social Security “including especially ideas about privatization” … but he “will look at” things that “insure the solvency” of the program. Weasel. They still want at it.

And by “they” I mean Obama. The Bush tax cuts blow a hole, and Social Security benefits are the fix. Dems, Reps, doesn’t seem to matter.

Senate Majority Leader, Harry Reid (D-NV), to his credit, very clearly and concisely stated on Meat the Press in January that Social Security did not contribute to the deficit or the current budget problems:

DAVID GREGORY: Social Security– how does it have to change? (an assumption by Gregory, TMC) What they put on the agenda is raising the retirement age, maybe means testing benefits. Is it time for Social Security to fundamentally change if you’re gonna deal with the debt problem?

HARRY REID: One of the things that always troubles me is when we start talking about the debt, the first thing people do is run to Social Security. Social Security is a program that works. And it’s going to be– it’s fully funded for the next forty years. Stop picking on Social Security. There’re a lotta places–

DAVID GREGORY: Senator are you really saying —

HARRY REID: –where you can go to save money.

DAVID GREGORY:– the arithmetic on Social Security works?

HARRY REID: I’m saying the arithmetic in Social Security works. I have no doubt it does.

DAVID GREGORY: It’s not in crisis?

HARRY REID: The ne– no, it’s not in crisis. This is– this is– this is something that’s perpetuated by people who don’t like government. Social Security is fine. Are there things we can do to improve Social Security? Of course.

Why is Obama even bothering to say he’s willing to “negotiate” when we all know the real word is “cave”?  

At least the way many economists practice it.  Instead it is a faith based Voodoo cult.

For one thing science is predictive and replicable.

Neo-classical synthesis predicts that reduction in Government spending, without increases in spending of other sectors of the overall economy like Business and Consumers, decreases Aggregate Demand.  In the absence of Demand businesses stop producing now surplus goods and services (there’s no demand for them you see) and reduce marginal expenses (fire people and close factories) and hoard capital (money).

Pretty predictive huh?

And in terms of replicable- we have seen this same phenomena time after time ever since there have been economies and the end result is always the same.  Voodoo economics believes in Tinkerbell and Pixie Dust.

How to Kill a Recovery

By PAUL KRUGMAN, The New York Times

Published: March 3, 2011

Republicans believe, or at least pretend to believe, that the direct job-destroying effects of their proposals would be more than offset by a rise in business confidence. As I like to put it, they believe that the Confidence Fairy will make everything all right.

…

(W)e have a lot of evidence from other countries about the prospects for “expansionary austerity” – and that evidence is all negative. Last October, a comprehensive study by the International Monetary Fund concluded that “the idea that fiscal austerity stimulates economic activity in the short term finds little support in the data.”

And do you remember the lavish praise heaped on Britain’s conservative government, which announced harsh austerity measures after it took office last May? How’s that going? Well, business confidence did not, in fact, rise when the plan was announced; it plunged, and has yet to recover. And recent surveys suggest that confidence has fallen even further among both businesses and consumers, indicating, as one report put it, that the private sector is “unprepared to fill the hole left by public sector cuts.”

…

Over the next few weeks, House Republicans will try to blackmail the Obama administration into accepting their proposed spending cuts, using the threat of a government shutdown. They’ll claim that those cuts would be good for America in both the short term and the long term.

But the truth is exactly the reverse: Republicans have managed to come up with spending cuts that would do double duty, both undermining America’s future and threatening to abort a nascent economic recovery.

I’m not taking any bets on whether Obama caves again or not, or what the results will be when he does, just over/unders on how long it will take.

David Cay Johnson, professor at Syracuse University, author of “Free Lunch” and columnist for Tax.com, spoke with Rachel Maddow about the Republican plans to cut funding to the IRS and the direct impact that will have on the governments ability to collect taxes and reduce the deficit.

Johnson also reported in an article at Tax.com, that tax revenues in 2010 were smaller than in 2000 before the Bush tax cuts.

We take you now to the official data for important news. Federal tax revenues in 2010 were much smaller than in 2000. Total individual income tax receipts fell 30 percent in real terms. Because the population kept growing, income taxes per capita plummeted.

Individual income taxes came to just $2,900 per capita in 2010, down 36 percent from more than $4,500 in 2000. Total income taxes and income taxes per capita declined even though the economy grew 16 percent overall and 6 percent per capita from 2000 through 2010.

Corporate income tax receipts fell 27 percent and declined 34 percent per capita, even though profits boomed, rising 60 percent.

Payroll taxes increased slightly overall, but slipped per capita because the nation’s population grew five times faster than the number of people with any work. The average wage also declined slightly.

You read it here first. Lowered tax rates did not result in increased tax revenues as promised by politician after pundit after professional economist. And even though this harsh truth has been obvious from the official data for some time, the same politicians and pundits keep prevaricating. Some of them even say it is irrelevant that as a share of GDP, income tax revenues are at their lowest level since 1951, when Harry S. Truman was president.

No matter how many times advocates of lower tax rates said it, tax rate cuts did not pay for themselves, did not spur economic growth, did not increase jobs, and did not make America better off.

(emphasis mine)

The full transcript for the video can be read a Rachel’s blog.

The Speaker of the House John Boehner told Fox News host Sean Hannity that it was not the Republicans that were talking about shutting down the government on March 4 but the Democrats. Parroting his lying cohort, an “exasperated”, House Majority Leader, Eric Cantor (R-VA) boasted the same to Hannity.

Really?

I guess these two don’t talk to the other Republicans :

 – Rep. Steve Womack (R-AR): “Womack said he would be open to forcing a government shutdown over spending.” (The Hill, 12/12/10)

   – Rep. Lynn Westmoreland (R-GA): “If government shuts down, we want you with us. … It’s going to take some pain for us to do the things that we need to do to right the ship.” (9/10/10)

   – Rep. Tom Price (R-GA): Q: do you think shutdown should be off the table? PRICE: Everything ought to be on the table. (2/11/11)

   – Rep. Steve King (R-IA): “(King) said last week that he wants Boehner and other House leaders to sign a ‘blood oath’ that they will include a repeal of health care reform in every appropriations bill next year, even if President Barack Obama vetoes the bills and a government shutdown occurs.” (Roll Call 9/10/10)

   – Rep. Tim Walberg (R-MI): If Obama…responds to the mandate from voters and understands he can’t disregard it, then he thinks Obama will do well “If he doesn’t, he will shut government down,” Walberg said. (Jackson Citizen Patriot, 11/03/10)

   – Rep. Alan Nunnelee (R-MI): Q: Are you willing to participate in what would lead to a shutdown of the federal government to stop this monstrosity from going down he tracks? NUNNELEE: I agree with Congressman Boehner. We need to do whatever is necessary to make sure this bill never goes into effect. (11/09/10)

   – Rep. Louie Gohmert (R-TX): “If it takes a shutdown of government to stop the runaway spending, we owe that to our children and our grandchildren.” (11/15/10)

   – Rep. Ron Paul (R-TX): “This is the way the government should adjust. If they can’t pay their bills, wait.” ()

   – Rep. Joe Walsh (R-IL): “We will do what we have to do, to shut down the government if we have to, to choke Obamacare if we have to.” (2/12/11)

   – Sen. Mike Lee (R-UT) when he was a candidate

Get the cotonout of your ears, guys. Ignorance is not bliss

h/t Think Progress

No doubt the Obama administration will tout today’s news that unemployment has fallen .4% to 9.0% as an indication the US economy is improving. It will be quite a back aching twist of logic in the face of poor job growth of only 36,000 jobs in January far below expectations. So what’s really happening? David Dayen at FDL explains the drop in the face of such dismal job growth:

How does this happen? Well, January is always a month when the establishment survey gets revised. New population estimates get incorporated into the survey, and the seasonal adjustment factors get updated. So there is a difference in the January survey of 600,000 less unemployed people; that number is down to 13.9 million according to the BLS (Bureau of Labor Statistics).

Does this mean that those people got a job in this month? Not really. The employment/ population ratio rose slightly to 58.4%, and the labor force participation rate declined to 64.2%, the lowest rate since the early 1980s. Basically, the drop in the top line unemployment rate is entirely due to changes in the total population estimates and other adjustments.

The U-6, which counts not only people without work seeking full-time employment (the more familiar U-3 rate), but also counts “marginally attached workers and those working part-time for economic reasons.” Note that some of these part-time workers counted as employed by U-3 could be working as little as an hour a week. And the “marginally attached workers” include those who have gotten discouraged and stopped looking, but still want to work, is currently 16.1%.

Another explanation of the job growth numbers is the horrendous weather across the country since late December:

January’s snowstorms probably had some effect on the anemic numbers, given that sectors like construction and transportation and warehousing shed jobs. The private sector added 50,000 jobs, so government layoffs, particularly at the state and local level, also restrained growth. Analysts had forecast an increase of about 145,000.

However, the real problem is what kind of jobs are being created, the number of people who have had to settle for part time employment as their job benefits run out and the number of jobless who are no longer counted in the numbers that are reported.

The other bad news is, this rate may not hold since austerity measures by the states and localities, facing huge budget deficits and no hope of relief from Congress, will most likely be laying off huge numbers of workers in attempts to salvage education and other vital programs.

President Barack Obama’s goal of driving the unemployment rate below 9 percent this year is threatened by state and local budget cuts that are likely to intensify as Federal stimulus money runs out.

Austerity measures may add as much as 0.25 percentage point to the unemployment rate this year, according to Mark Zandi, chief economist of Moody’s Analytics Inc.

“This could make the difference between ending 2011 with unemployment above or below 9 percent,” he said. “There’s no more serious drag on economic growth than the severe budget cutbacks at the state and local level.”