STOCK MARKET WATCH -- Wednesday, 18 January 2012

[Tansy_Gold]

[font size=3]STOCK MARKET WATCH, Wednesday, 18 January 2012[/font]

SMW for 17 January 2012

AT THE CLOSING BELL ON 17 January 2012
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Dow Jones 12,482.07 +60.01 (0.48%)
S&P 500 1,293.67 +4.58 (0.36%)
Nasdaq 2,728.08 +17.41 (0.64%)


[font color=red]10 Year 1.85% -0.02 (-1.07%)
30 Year 2.90% -0.02 (-0.68%)





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[font size=2]Market Conditions During Trading Hours[/font]
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[font size=2]Euro, Yen, Loonie, Silver and Gold[center]

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[font color=black][font size=2]Handy Links - Market Data and News:[/font][/font]
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Economic Calendar
Marketwatch Data
Bloomberg Economic News
Yahoo Finance
Google Finance
Bank Tracker
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Daily Job Cuts
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[font color=black][font size=2]Handy Links - Economic Blogs:[/font][/font]
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The Big Picture
Financial Sense
Calculated Risk
Naked Capitalism
Credit Writedowns
Brad DeLong
Bonddad
Atrios
goldmansachs666
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[font color=black][font size=2]Handy Links - Government Issues:[/font][/font]
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LegitGov
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Earmark Database
USA spending.gov
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[font color=black][font size=2]Handy Links - Videos:[/font][/font]
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Charlie Rose talks with Roubini
Charlie Rose talks with Krugman
William Black: This Economic Disaster
Bill Moyers with Kevin Drum and David Corn
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Financial Sector Officials Convicted since 1/20/09 = [/font][font color=red]12[/font]


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[font size=3][font color=red]This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.[/font][/font][/font color=red]

[Po_d Mainiac]

1. odd shit

SIL just called...dentist dropped a screw driver down his throat

OK Fudd...see if you can come up with anything I didn't.

[Fuddnik]

2. Hmmm

It's either a fad diet, or he saw one too many Romney ads.

I had a similar idea, but I was thinking of a chainsaw.

[Po_d Mainiac]

3. I thunked it was payback

for what he done to me daughter

[Demeter]

4. It is now SLEETING on the Snowdrops

Temperature dropped like a stone 20 degrees in a couple of hours, and glazed the pond with ice.

I survived another board meeting. It's hard work, although it went amicably.

[Tansy_Gold]

6. Sunny and nice here today, but that's normal

This quote was on the front page of Etsy today, from the "quit your day job" blog/thread/WTFE --

"The scariest part is jumping in. But if you won’t take a bet on yourself, who will?" - Lauren Beacham

[Demeter]

8. Just have a Plan B, and don't give away the Homeworld

buena suerte, amiga!

[Tansy_Gold]

13. I haven't jumped. . . . . .

yet.

[Demeter]

5. MERS, the law, and the State By lambert strether.

http://www.nakedcapitalism.com/2012/01/mers-the-law-and-the-state.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

The current version of Harpers — go buy it on the newstand! (OR SUBSCRIBE ONLINE http://www.harpers.org/archive/2012/01 )— has a terrific article by Christopher Ketcham on the MERS mess, which NC has done so much to bring to the attention of the public. I’m going to excerpt and contextualize two portions of the article. First, Ketcham interviews foreclosure activist Vermont Trotter of Coeur D’Arlene, Idaho on the “clouded title” problem. I’m a connoisseur of the worst case scenario, and this is a doozy:

Trotter told me that the “true horror” of MERS (1818 Library Street, Suite 300
Reston, VA 20190, 1-800-646-6377) was what it could do to homeowners who were current on their mortgage payments: The “good” homeowners who still had a job and weren’t facing foreclosure. If there was no legal record of which bank owned their debt (see below if you haven't been following NC on MERS), and the MERS-mortgaged homeowners had been making payments, then who exactly was the homeowner paying? The checks, clearly, were going out every month, cashed by a bank that claimed to own the note. But without the legal record to certify the owner of the note, it followed that the bank could not legally issue the homeowner a clear title to the home. In effect, a homeowner with MERS on his mortgage could spend thirty years paying a lender that wasn’t the owner of the note. …. “[ Y] ou’d always be looking over your shoulder,” said Trotter. “Some other lender could come and say ‘No, we owned that note. You paid the wrong guy.” “WIth MERS”, he said, “nobody owns anything. You’re only paying rent.”

That’s not a bug. It’s a feature. At least for a rentier, although not necessarily for Trotter.

Second, Ketcham offers a lucid and succinct explanation of how this MERS feature came to be implemented:

Mortgage Electronic Registration Systems was created in 1995 as a privately held venture of the major mortgage-finance operators… Its stated purpose was to manage a confidential electronic registry for tracking of the sale of mortgage loans between lenders… No longer would the traffickers in mortgages have to document their transactions with county clerks, nor would they have to pay the many and varied courthouse fees… This centralized database facilitated the buying and selling of mortgage debt at great speed and greatly reduced cost. … Without the efficiencies [dread word] of MERS there probably would never have been a mortgage bubble.

After the housing market collapsed, however, MERS found itself under attack in courts across the country. MERS had single-handedly (oh?) unraveled centuries of precedent in property titling and mortgage recordation, and judges in state appellate and Federal bankruptcy courts in more than a dozen jurisdictions — the primary venues where real estate cases are decided — determined that the company did not have the right to foreclose on the mortgages it held. … “There is no evidence of record that establishes that MERS either held the promissory note or was given the authority to assign the note,” the Kansas court held. … “It appears that every MERS mortgage,” a New York State Supreme Court judge recently told me, “is defective, a piece of crap.”

“What’s happened,” said Christopher Peterson, a law professor at the University of Utah who has written extensively about MERS, “is that, almost overnight, we’ve switched from democracy in real-property recording to oligarchy in real-property recording.” The county clerks who established the ownership of land, who oversaw the records, were democratically elected stewards of those records, said Peterson. Now a corporation headquartered outside Washington, DC oversaw the records. “There was no court case behind this, no state from Congress or the state legislatures” , Peterson told me. “It was accomplished in a private corporate decision. The banks just did it.“

Let’s return to that statement: “The banks just did it,” because it raises a number of questions (not necessarily internally consistent). I feel like this post should have been written by a political scientists with training in computer forensics, neither of which I am. And I’d be really happy if the whole post were completely off base, because while I like imagining worst case scenarios, I don’t like it when they actually come to pass. Nevertheless, if the existence and possible retroactive legalization of the MERS system could raise important questions about the nature of law and the State, we’d better start hashing these questions out now. So, far fetching and blue-skying freely:

1. Doesn’t MERS look just like kleptocracy is supposed to look? Leave aside the banks’ outright looting of $200 billion or so in recording fees (so far). Even if those billions would go a long way toward solving the fiscal crisis at the state and local level. Haven’t the banks just appropriated for themselves the very ability to claim the title to hundreds of billions of dollars worth of housing stock? “You own your house if we say you own it..” Well, who owns your house, then?

2. If MERS is what banks can “just do,” is government really the problem?” Aren’t we already living in a libertarian paradise just like the Somalians, except that we’ve got a lot more stuff and a lot more delusion about the warlords who run the country?

3. If MERS controls the chain of title, where and what is the law? Apparently, the supreme law of the land is no longer to be found in in the “the code” — the state and local statutes, rules, regulations, interpretations, and precedents that lawyers and officials and citizens work with. No, so far as I can tell, “the code” is now the computer code of the MERS registration system itself, because the computer code controls the chain of title. But the MERS computer code is proprietary and opaque, so citizens can’t really know what the law is anymore (and possibly not even the MERS programmers themselves, if the system is poorly documented (as it might well be, to provide executives bent on accounting control fraud with plausible deniability)).

4. If MERS is the law, then where is the State? If the supreme law of the land is embodied in software and not controlled by the State as we know it — and empirically it’s not, because with MERS “the banks just did it” — then where is the State to be found? And how does the State gain legitimacy? Does that even matter?

NOTE 1 Questions 3 and 4 are not as far-fetched as they might seem. For example, election results are controlled by proprietary software that’s both proprietary and known to be insecure. And yet election results using these systems are presumed to be legitimate, both by voters and the powers that be. In the FISA debacle, the Fourth Amendment was destroyed by the retroactive legalization of Bush’s program of warrantless surveillance; “the law” was reverse engineered from an already running data mining system.

NOTE 2 If all the title assignments performed under MERS are indeed “crap,” that would give an additional motive — besides pure greed and the lust to inflict pain on the powerless — for the banksters to avoid cram down, HOLC, and any other solution that would involve opening up the MERS can of worms systemically.

[Demeter]

7. "Abbott, I've been a bad boy!"

[Fuddnik]

31. That exact thought has crossed my mind a few times.

If I pay off my home, who delivers a clean title to me? Can they?

I'm gonna have to do some digging that I've been putting off.

[Demeter]

9. THIS IS IRONY: World Bank warns emerging nations

Developing countries should take steps to plan for a global economic meltdown on a par with 2008-09 if the European sovereign debt crisis escalates, the World Bank warned on Wednesday in its latest economic forecasts.

Predicting significantly slower global growth in 2012 than it expected last summer even if the eurozone muddles through its crisis, World Bank economists said that if financial markets deny funds to eurozone economies, global growth would be about 4 percentage points lower than even these figures with poorer economies far from immune.

Read more >>
http://link.ft.com/r/S4XZQQ/HY1024/204L2/NJUH7W/L9B9HD/FW/t?a1=2012&a2=1&a3=17

[Demeter]

10. Jerry Yang quits as Yahoo chief executive

Jerry Yang has resigned as chief executive and director of Yahoo, the company he founded 18 years ago.
The company named Scott Thompson as its new chief executive, saying Mr Yang had resigned to pursue 'other interests'. The company's shares have risen more than 5 per cent in after market trading following the announcement.

Read more >>
http://link.ft.com/r/TWK799/08WSSX/06MUC/GDSNRM/2OKO53/ID/t?a1=2012&a2=1&a3=17

[Demeter]

11. Jobs boost fuels hope for US industry

Manufacturing employment has grown faster in the US than in any other leading developed economy since the start of the recovery, as productivity gains and subdued pay rises raise hopes for an American industrial renaissance

Read more >>
http://link.ft.com/r/VKY5JJ/62EPK8/FDFZE/HYJS5V/GDUDSP/ZH/t?a1=2012&a2=1&a3=17

AND THAT'S SUPPOSED TO MAKE IT ALL BETTER, NO HARD FEELINGS, RIGHT? RIGHT?

[Demeter]

12. Warning on returns from MF Global UK

Anger over the pace of returns of money invested through the UK arm of failed futures broker MF Global risks being inflamed further by a blunt warning by the administrator of the business that customers might not get all their money back

Read more >>
http://link.ft.com/r/8P1R88/DWNGF4/JQU4J/R3H8RY/2OKOAS/FW/t?a1=2012&a2=1&a3=17

[Demeter]

14. METHINKS THE PTB ARE GETTING A LITTLE LESS COCKY--AS THEIR PLANS GO INTO A COCKED HAT

It really looks like they are preparing for serious $*** to hit the fan, and very soon.

I don't think we will make it to March. Greece will go down the tubes, MERS will go down the tubes, everything will go down the tubes, and the denial will FINALLY come to an end.

Unless we end up with riots in the streets immediately, some of those Big Boys will end up in jail. They are probably drawing straws as I type.

It's Costa Concordia, in the seas of finance....

[Demeter]

15. News Flash: Democracy Now A Felony Conspiracy, plus Fixed Bulk Occupy America Stickers Link‏

(email)


For all those trying to request the bulk "Occupy America" bumper
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government. Only when we do it nowadays we get assaulted by police
with military weapons, or as in San Diego the other day, we get
arrested for "felony conspiracy", when some activists raised their
voices to the mayor there in an OWS style mic-check.

Cute, huh? Now democracy is deemed a felony conspiracy.

All the more reason we must continue to speak out. So please make
sure you submit the Junk SOPA action page from the last alert. The
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[Demeter]

33. America Occupies the Capitol

http://www.nationofchange.org/america-occupies-capital-1326819181


On January 17 Americans from across the nation and the world will assemble in the shadows of a broken system to participate in real democracy. At 9 am on the opening day of Congress, Occupy Congress will convene for a day of action against a corrupt political institution. Actions include a multi-occupational General Assembly, teach-ins, an OCCUParty, a pink slip for every congressional “representative” and a march on all three branches of a puppet government that sold our rights and our futures to the 1%.

This is an illegitimate system. Around half of the nation’s population doesn’t participate in electoral politics. More than 6 million Americans who want to vote are disenfranchised, including the entire populace of the District of Columbia. There is consensus that we are on the wrong track and that our “leaders” do not have our interests at heart.

All “elected” officials bought their way into gerrymandered seats with Wall Street money. These bankers’ henchmen have shown themselves both unwilling and unable to take on the tremendous, systemic issues in our country, our place in this world. In the face of this endemic corruption, the Occupy movement is about organizing locally to discuss and change these problems from the ground up. We came to show the 1%’s Congress what democracy looks like.

Our nation, and our world, is in crisis and our “elected” officials have failed us. They refused to hold their bankrollers—Wall Street—responsible for the financial crimes that bankrupted our nation and destroyed the global economy. This last legislative cycle was the least productive in recorded U.S. history; 90% of the country disapproves of these “elected” officials. We refuse to accept the grim future that Wall Street’s cronies have designed. We refuse to be the 1%’s captive citizenry. We stand together to show that the 99% are creating a better world. The 99% will no longer be complacent. Our many voices will be amplified on the steps of Capitol Hill. We shall have a nation by, for, and powered by the people once again. We are building it.

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#OccupyCongress is a part of the Occupy movement, which began with Occupy Wall Street on Sept. 17, 2011, in Liberty Square in Manhattan’s Financial District. #Occupy is a people powered movement that has spread to sustained occupations in hundreds of cities in the United States and actions in thousands of cities globally. #Occupy is fighting back against the corrosive power major banks and multinational corporations have over the democratic process, and the role of Wall Street in creating an economic collapse that has caused the greatest depression in generations. The movement is inspired by popular uprisings in Egypt, Tunisia, Spain, Greece, Italy and the UK, and aims to expose how the richest 1% are writing the rules of the global economy and the laws of the land, imposing an agenda of neoliberalism and economic inequality that is foreclosing on our future.

[Demeter]

16. American Capitalism: Profit, but Fairly Adam Levitin

http://www.creditslips.org/creditslips/2012/01/profit-but-fairly.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+creditslips%2Ffeed+%28Credit+Slips%29

Adam Davidson wrote up an interesting apologia for Wall Street in the NY Times last week, which I think is ultimately a call for better regulation, rather than bank-hating. I missed the piece originally, but Yves Smith found it and has nothing good to say about it. I think Yves is a little too harsh on Davidson. I've got issues with parts of the piece, but on different grounds, namely that it refuses to engage on the real issue. The problem isn't financial intermediation. That's a perfectly fine thing that plays a useful role in society.

Instead, the problem is when financial intermediaries do not treat the intermediating parties (meaning consumer and investors) fairly. The history of US financial services is nothing short of a history of scandals involving financial institutions variously ripping off investors and consumers. I'm not just talking about those scandals we remember, like Milken or Madoff or the recent slew or even the second tier ones like the Salad Oil scam or all of 1920s mortgage bonds. The history of US financial services is largely a history of unregulated innovation resulting in abuse and then follow-up regulatory reform. Lather, rinse, wash, repeat.

Davidson argues that the reason to "hate the banks" is that

Wall Street firms enforce the cold rules of capitalism: hostile takeovers, foreclosures, fee increases, defaults. But those rules clearly do not apply to the largest banks themselves.

Davidson misses the mark here a bit. It's not just that the banks get bailed out, meaning that the rules of market discipline don't apply to them. It's that the banks frequently break the rules when applied to others. It's fine to do foreclosures or hostile takeovers or sell consumers speculative securities. But it's not ok to foreclose without following the law or to profit on insider knowledge on hostile takeovers or or to sell investors "safe" assets when you know they are junk.

The fundamental rule of American capitalism is "profit, but fairly." Whatever one thinks is "fair", I don't think there should be much disagreement that Wall Street too often disregards the second part of this dictum to focus on the first. But take away the "but fairly" and society quickly becomes a Gilded Age baronial kleptocracy, a post-Soviet (or pre-Soviet) Russia. If we want capitalism to work--meaning that there is social stability, pace OWS--market players must play by the rules. This is where the debate needs to be focused: ensuring that our financial intermediaries play by the rules.

Davidson could use a little work on his history. Consider his arguments about the importance of Wall Street for fighting poverty, innovation, funding socially beneficial projects, and for the existence of the middle class. All seem quite debatable to me.

The Poor Would Stay Poor?

Davison argues that Wall Street has helped the poor:

In the U.S., we use credit cards, mortgages, credit scores, securitized loans and other Wall Street innovations to do the miraculous: to persuade some institution with a lot of money to hand it over to someone who doesn’t have that much.

This is just ridiculous. First, the poor still generally do not get credit and when they do, it is of dubious value to them. For the poor, credit may help with today's problem, but it becomes tomorrow's problem, not least because of the terms on which it is offered, which are often based as much on market power, not risk-based pricing. Second, it often isn't Wall Street that's funding the loans--it is investors, with Wall Street taking a commission, meaning no skin-in-the-game. The result is what we saw in the housing bubble--Wall Street fleecing investors by brokering unsustainable loans to homeowners. Finally, Davidson presents no case that any of these innovations help the poor. If you want to look at programs that have been successful at raising living standards and eradicating poverty in the US, you need to look at government programs like the TVA (which for all of its controversy resulted in electricity and employment and a decline in malaria in the Tennessee valley).

Innovation?

We have seen some innovation in consumer finance over the past century, no doubt. As for innovation, how much has really benefitted consumers, as opposed to benefitting Wall Street? No doubt we have much greater convenience in payments due to plastic and ACH. But what else? The payment-option ARM? Yes, an innovation. But a good one? Credit life insurance? Cash-out refinancings? We have Paul Volcker's famous comment that the last major innovation in consumer finance was the ATM. I'd say that's more or less correct. Consider the cutting edge innovations of today--mobile payments, contactless, etc. None of them are game changers.

Beyond that, let's give credit where it's due. Some of the greatest innovation has been by the government, not by Wall Street. Securitization, in its modern form, is a government invention (Ginnie Mae!). Likewise, the 30-year fixed-rate mortgage is a government creation (a genesis from the HOLC to the FHA to the VA). Suburban housing--financed originally by the FHA. Other innovations have been made possible only because of implicit governmental backing (e.g., money market mutual funds, which also benefit from an accounting treatment exception). Par clearing payment systems (meaning when you pay $100, the payee gets $100 credited, not $90), are a function of the Federal Reserve.

No Awesome Things?

Davidson is on his strongest ground when he argues that but for Wall Street, lots of cool projects would never be funded. No Facebook, no Apple, no mobile phones, etc. I can't disagree with him that businesses need funding, and that financial intermediation by Wall Street enables this to happen on a much larger scale than otherwise. But whether it is being done fairly is another question, and that's where my issue lies.

This is not my particular area of academic focus, so others may have better examples, but consider IPOs, which are the intermediation par excellence, of shifting funding from limited private sources to public sources. That's fine, but the intermediaries frequently engage in insider trading on the IPOs. And again, remember that government plays a role in all of this, with support for small businesses, ranging from tax breaks for partnerships and S-corporations to SBA-loan guarantees and industry specific (e.g., solar) loan guarantees.

No Middle Class?

What about the "there would be no middle class" meme? This is a very debatable counterhistory. Consumer credit enabled greater consumption by the middle class, but consumer credit isn't free. It just shifts consumption between time periods. The US had a well-established middle class by the end of the 19th century (and arguably much earlier). It grew substantially in the 20th century, but the GI Bills and post-War employment boom and unionization had as much to do with that as anything.

Still, consumer credit played a role, but that role can't be attributed solely to Wall Street. The original consumer credit wasn't Wall Street. It was companies like Singer Sewing Machines or Sears Roebuck and employer- and community-based credit unions. Banks didn't do consumer finance for quite a while. If you look at the source of mortgage loans historically, the "household sector" was a major provider well into the 1950s, meaning that you would get a mortgage from the rich guy down the street or from your uncle, etc., rather than from a bank. As for other financial services, they can, have been, and are often provided not by the private sector, but by the government. Recall that we had a US Postal Service Bank from 1911-1968, that at one point had 20% of deposits and innovated deposit by mail (the postal bank was the Republican counter-proposal to federal deposit insurance!). Most of the rest of the world still has postal banking systems. (Yes, I'm working on a project about this.) The government supports payment systems via the Fed, and housing finance via deposit insurance, FHA, VA, FHLBs, and Fannie/Freddie.

This is hardly a system of pure private capitalism. And if government is going to be assuming some of the risks, it will, not surprisingly dictate some of the terms on which services are offered, both to manage its risk and to further its policies; government support comes with strings attached.

Bottom line here is that the benefits of increasingly specialized financial intermediation are questionable, and the role of government in financial intermediation and development is often overlooked. Privatized financial intermediation often means privatization of gains and socialization of losses, as we have recently seen. More critically, though, absent vigorous regulation, it easily dissolves into a system of profit über alles, in which rules of fair play (and we can debate just what those should be) are disregarded as inconvenient. For capitalism to work in a democracy, it is necessary that everyone play by the rules of the game.

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[Demeter]

17. How to Create a Depression By Martin Feldstein

http://www.informationclearinghouse.info/article30276.htm

European political leaders may be about to agree to a fiscal plan which, if implemented, could push Europe into a major depression. To understand why, it is useful to compare how European countries responded to downturns in demand before and after they adopted the euro...Consider how France, for example, would have responded in the 1990’s to a substantial decline in demand for its exports. If there had been no government response, production and employment would have fallen. To prevent this, the Banque de France would have lowered interest rates. In addition, the fall in incomes would have automatically reduced tax revenue and increased various transfer payments. The government might have supplemented these “automatic stabilizers” with new spending or by lowering tax rates, further increasing the fiscal deficit. In addition, the fall in export demand would have automatically caused the franc’s value to decline relative to other currencies, with lower interest rates producing a further decline. This combination of monetary, fiscal, and exchange-rate changes would have stimulated production and employment, preventing a significant rise in unemployment.

But when France adopted the euro, two of these channels of response were closed off. The franc could no longer decline relative to other eurozone currencies. The interest rate in France – and in all other eurozone countries – is now determined by the European Central Bank, based on demand conditions within the monetary union as a whole. So the only countercyclical policy available to France is fiscal: lower tax revenue and higher spending. While that response implies a higher budget deficit, automatic fiscal stabilizers are particularly important now that the eurozone countries cannot use monetary policy to stabilize demand. Their lack of monetary tools, together with the absence of exchange-rate adjustment, might also justify some discretionary cyclical tax cuts and spending increases.

Unfortunately, several eurozone countries allowed fiscal deficits to grow in good times, rather than only when demand was weak. In other words, these countries’ national debt grew because of “structural” as well as “cyclical” budget deficits. Structural budget deficits were facilitated over the past decade by eurozone interest rates’ surprising lack of responsiveness to national differences in fiscal policy and debt levels. Because financial markets failed to recognize distinctions in risk among eurozone countries, interest rates on sovereign bonds did not reflect excessive borrowing. The single currency also meant that the exchange rate could not signal differences in fiscal profligacy. Greece’s confession in 2010 that it had significantly understated its fiscal deficit was a wake-up call to the financial markets, causing interest rates on sovereign debt to rise substantially in several eurozone countries. The European Union’s summit in Brussels in early December was intended to prevent such debt accumulation in the future. The heads of member states’ governments agreed in principle to limit future fiscal deficits by seeking constitutional changes in their countries that would ensure balanced budgets. Specifically, they agreed to cap annual “structural” budget deficits at 0.5% of GDP, with penalties imposed on countries whose total fiscal deficits exceeded 3% of GDP – a limit that would include both structural and cyclical deficits, thus effectively limiting cyclical deficits to 3% of GDP.

Negotiators are now working out the details ahead of another meeting of EU government leaders at the end of January, which is supposed to produce specific language and rules for member states to adopt. An important part of the deficit agreement in December is that member states may run cyclical deficits that exceed 0.5% of GDP – an important tool for offsetting declines in demand. And it is unclear whether the penalties for total deficits that exceed 3% of GDP would be painful enough for countries to sacrifice greater countercyclical fiscal stimulus...The most frightening recent development is a formal complaint by the European Central Bank that the proposed rules are not tough enough. Jorg Asmussen, a key member of the ECB’s executive board, wrote to the negotiators that countries should be allowed to exceed the 0.5%-of-GDP limit for deficits only in times of “natural catastrophes and serious emergency situations” outside the control of governments. If this language were adopted, it would eliminate automatic cyclical fiscal adjustments, which could easily lead to a downward spiral of demand and a serious depression. If, for example, conditions in the rest of the world caused a decline in demand for French exports, output and employment in France would fall. That would reduce tax revenue and increase transfer payments, easily pushing the fiscal deficit over 0.5% of GDP....If implemented, this proposal could produce very high unemployment rates and no route to recovery – in short, a depression. In practice, the policy might be violated, just as the old Stability and Growth Pact was abandoned when France and Germany defied its rules and faced no penalties....

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Martin Feldstein, Professor of Economics at Harvard, was Chairman of President Ronald Reagan's Council of Economic Advisers and is former President of the National Bureau for Economic Research.

[Demeter]

18. The Myth of “Isolated” Iran: Following the Money in the Iran Crisis By Pepe Escobar MUST READ

http://www.tomdispatch.com/post/175490/tomgram:_pepe_escobar,_sinking_the_petrodollar_in_the_persian_gulf/#more

...Banking on Sanctions?

Let’s start here: In December 2011, impervious to dire consequences for the global economy, the U.S. Congress -- under all the usual pressures from the Israel lobby (not that it needs them) -- foisted a mandatory sanctions package on the Obama administration (100 to 0 in the Senate and with only 12 “no” votes in the House). Starting in June, the U.S. will have to sanction any third-country banks and companies dealing with Iran’s Central Bank, which is meant to cripple that country’s oil sales. (Congress did allow for some “exemptions.”) The ultimate target? Regime change -- what else? -- in Tehran. The proverbial anonymous U.S. official admitted as much in the Washington Post, and that paper printed the comment. (“The goal of the U.S. and other sanctions against Iran is regime collapse, a senior U.S. intelligence official said, offering the clearest indication yet that the Obama administration is at least as intent on unseating Iran’s government as it is on engaging with it.”) But oops! The newspaper then had to revise the passage to eliminate that embarrassingly on-target quote. Undoubtedly, this “red line” came too close to the truth for comfort.

Former chairman of the Joint Chiefs of Staff Admiral Mike Mullen believed that only a monster shock-and-awe-style event, totally humiliating the leadership in Tehran, would lead to genuine regime change -- and he was hardly alone. Advocates of actions ranging from air strikes to invasion (whether by the U.S., Israel, or some combination of the two) have been legion in neocon Washington. (See, for instance, the Brookings Institution’s 2009 report Which Path to Persia.) Yet anyone remotely familiar with Iran knows that such an attack would rally the population behind Khamenei and the Revolutionary Guards. In those circumstances, the deep aversion of many Iranians to the military dictatorship of the mullahtariat would matter little.

Besides, even the Iranian opposition supports a peaceful nuclear program. It’s a matter of national pride...Iranian intellectuals, far more familiar with Persian smoke and mirrors than ideologues in Washington, totally debunk any war scenarios. They stress that the Tehran regime, adept in the arts of Persian shadow play, has no intention of provoking an attack that could lead to its obliteration. On their part, whether correctly or not, Tehran strategists assume that Washington will prove unable to launch yet one more war in the Greater Middle East, especially one that could lead to staggering collateral damage for the world economy....In the meantime, Washington’s expectations that a harsh sanctions regime might make the Iranians give ground, if not go down, may prove to be a chimera. Washington spin has been focused on the supposedly disastrous mega-devaluation of the Iranian currency, the rial, in the face of the new sanctions. Unfortunately for the fans of Iranian economic collapse, Professor Djavad Salehi-Isfahani has laid out in elaborate detail the long-term nature of this process, which Iranian economists have more than welcomed. After all, it will boost Iran’s non-oil exports and help local industry in competition with cheap Chinese imports. In sum: a devalued rial stands a reasonable chance of actually reducing unemployment in Iran.

*************************************************************************

Iran may be “isolated” from the United States and Western Europe, but from the BRICS to NAM (the 120 member countries of the Non-Aligned Movement), it has the majority of the global South on its side. And then, of course, there are those staunch Washington allies, Japan and South Korea, now pleading for exemptions from the coming boycott/embargo of Iran’s Central Bank. No wonder, because these unilateral U.S. sanctions are also aimed at Asia. After all, China, India, Japan, and South Korea, together, buy no less than 62% of Iran’s oil exports. With trademark Asian politesse, Japan’s Finance Minister Jun Azumi let Treasury Secretary Timothy Geithner know just what a problem Washington is creating for Tokyo, which relies on Iran for 10% of its oil needs. It is pledging to at least modestly “reduce” that share “as soon as possible” in order to get a Washington exemption from those sanctions, but don’t hold your breath. South Korea has already announced that it will buy 10% of its oil needs from Iran in 2012....Most important of all, “isolated” Iran happens to be a supreme matter of national security for China, which has already rejected the latest Washington sanctions without a blink. Westerners seem to forget that the Middle Kingdom and Persia have been doing business for almost two millennia. (Does “Silk Road” ring a bell?)...In fact, China may be the true winner from Washington’s new sanctions, because it is likely to get its oil and gas at a lower price as the Iranians grow ever more dependent on the China market....


/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////

Pepe Escobar is the roving correspondent for Asia Times, a TomDispatch regular, and a political analyst for al-Jazeera and RT. His latest book is Obama Does Globalistan (Nimble Books, 2009).

[Demeter]

19. Hacker brings down Israeli websites

http://www.aljazeera.com/news/middleeast/2012/01/20121171536991286.html

Sites of El Al and the Tel Aviv Stock Exchange affected in latest incident in a series of attacks over past two weeks...Both sites were affected early in the day on Monday, posting messages saying they had been taken down for "maintenance." By early afternoon the El Al site was back up, although the TASE website was still inaccessible. The websites of two small banks were also attacked, Israeli media reported. It was the latest incident in a series of attacks over the past two weeks, which have seen details of tens of thousands of Israeli credit cards posted online and websites defaced by hackers claiming to be from Saudi Arabia or Gaza.

A spokeswoman for the stock exchange confirmed the site had come under attack but said only the website and not the trading systems had been affected. "There is someone that has been attacking the Tel Aviv Stock Exchange website since this morning," Idit Yaaron told the AFP news agency, describing what appeared to be a distributed denial of service attack (DDOS). The sites crashed several hours after an alleged Saudi hacker who calls himself "0xOmar" warned he was going to target both websites, Israeli media reported.

Praise from Hamas

The cyber attacks were hailed by Sami Abu Zuhri, a spokesman for Gaza's Hamas rulers, who said it was "a sign of the Arab youth's creativity in inventing new forms of Arab and Islamic resistance against the Israeli occupation...Hamas praises the Arab hackers and calls on the Arab youth to play their role in cyberspace in the face of Israeli crimes," he said....Danny Dolev, professor of computer science at the Hebrew University, said Monday's attacks were unlikely to have any serious impact. "Most of these attacks appear right now to be on the surface, attacking only the websites that present information to the public, but happily it didn't touch the internal information systems," he said. "Right now, these attacks don't seriously damage any function, either economic or otherwise. I hope that small incidents like that will continue for some time because it helps to raise awareness of the issue and many companies will take the threat more seriously," he added.

Cyber security expert Ron Porat said Israel's military and government sites were protected by an advanced level of security, with corporate and civilian websites more open to attack. "El Al and the Israeli Stock Exchange are some of the bodies that were well protected," he told AFP, saying that even the best-defended online systems were at risk. "There is not one organisation in Israel and around the world that cannot be hacked -- it's a matter of effort," he said. But lone hackers like 0xOmar were unlikely to pose a threat to Israel's critical infrastructure, he said. "This cannot be done by one person, it has to be a well-organised group of people like in a terror act or warfare," he said. Meanwhile, hackers also brought down several government websites in Azerbaijan, Israel's main Muslim ally. They hacked the interior and communications ministries, that of its governing party and the constitutional court, leaving threats and anti-Israeli messages.

MORE BAD BOY STUFF

[Demeter]

20. Israeli hackers bring down Saudi, UAE stock exchange websites

http://www.haaretz.com/news/diplomacy-defense/israeli-hackers-bring-down-saudi-uae-stock-exchange-websites-1.407846

Israeli hackers brought down the websites of both the Saudi Stock Exchange (Tadawul) and the Abu Dhabi Securities Exchange (ADX) Monday, in the latest episode of a continuing cyber war between hackers in the two countries. The Israeli hackers, who go by the name IDF-Team, were able to paralyze the Tadawul website, while causing significant delays to the ADX exchange site. The hackers wrote that the attack came in response to the “pathetic” hacking of Israeli sites on Monday. The hackers warned that if the attacks continue, they will “move to the next stage and paralyze websites for a period of two weeks to a month.”

Earlier Tuesday, a pro-Israel hacker published a list of 30,000 e-mail addresses and Facebook passwords of "helpless Arabs" on a popular hacking site. The hacker, who goes by Hannibal, wrote that his actions - which began Friday - are a "counter-attack" following the publication of Israeli credit card details on the Internet by a reportedly Saudi hacker.

"I noticed that poor intelligence of 0x omar and his friends [sic]," he wrote on pastebin.com, the same site used by the Saudi hacker. "State of Israel, not to worry, you're in the hands of the world's best hacker that I am [sic]," Hannibal reassured. "I will continue to support the government of Israel will continue to attack the Arab countries," he wrote.

Hannibal claims to have 30 million e-mail addresses of Arabs, complete with passwords, and to have fielded e-mails not only from potential victims but from officials in France and other countries asking him to desist. But if Prime Minister Benjamin Netanyahu declares a cyber war, he's ready to publish the details of 10 million bank accounts, Hannibal wrote, adding that he also had information on 4 million Arab credit cards.

[Demeter]

21. SOMEBODY JUST GOOSED THE NIKKEI

ANY IDEA WHY?

[Demeter]

22. Romney admits he pays lower tax rate than most Americans

http://www.cbsnews.com/8301-503544_162-57360230-503544/romney-admits-he-pays-lower-tax-rate-than-most-americans/

Republican presidential front-runner Mitt Romney acknowledged Tuesday that he pays an income tax rate close to 15 percent, the same rate that billionaire investor Warren Buffett has decried as lower than that paid by most middle-class Americans.

Asked a press conference what rate he pays, Romney responded, "What's the effective rate I've been paying? It's probably closer to the 15 percent rate than anything. Because my last 10 years, my income comes overwhelmingly from some investments made in the past, rather than ordinary income or rather than earned annual income. I got a little bit of income from my book, but I gave that all away. And then I get speakers fees from time to time, but not very much."*

Romney earned more than $300,000 in speaking fees in the twelve months through February 2011, according to financial disclosure statement filed to the government by his campaign. While that income would be taxed at a 35 percent rate, minus deductions, he suggested it is a fraction of his overall income.

Romney, who in August disclosed to the Federal Election Commission a net worth of between $190 and $250 million, in effect confirmed that, like many wealthy investors, he earns the bulk of his income from his investments. Dividends and capitol gains are taxed at a relatively low 15 percent rate. Romney said at Monday's Republican presidential debate that he would "probably" release his tax returns in April, though he would not promise to do so...MORE SPECIAL PLEADING AT LINK

[Demeter]

23. MITT ROMNEY (R) Top Contributors

http://www.opensecrets.org/pres12/contrib.php?id=N00000286&cycle=2012

This table lists the top donors to this candidate in the 2012 election cycle. The organizations themselves did not donate , rather the money came from the organizations' PACs, their individual members or employees or owners, and those individuals' immediate families. Organization totals include subsidiaries and affiliates.

Because of contribution limits, organizations that bundle together many individual contributions are often among the top donors to presidential candidates. These contributions can come from the organization's members or employees (and their families). The organization may support one candidate, or hedge its bets by supporting multiple candidates. Groups with national networks of donors - like EMILY's List and Club for Growth - make for particularly big bundlers.


Goldman Sachs $367,200
Credit Suisse Group $203,750
Morgan Stanley $199,800
HIG Capital $186,500
Barclays $157,750
Kirkland & Ellis $132,100
Bank of America $126,500
PriceWaterhouseCoopers $118,250
EMC Corp $117,300
JPMorgan Chase & Co $112,250
The Villages $97,500
Vivint Inc $80,750
Marriott International $79,837
Sullivan & Cromwell $79,250
Bain Capital $74,500
UBS AG $73,750
Wells Fargo $61,500
Blackstone Group $59,800
Citigroup Inc $57,050
Bain & Co $52,500

[Demeter]

24. Our cars are getting older, too: Average age now 10.8 years

http://www.usatoday.com/money/autos/story/2012-01-17/cars-trucks-age-polk/52613102/1

...The average age of the cars and trucks on U.S. roads hit a record 10.8 years as of July 1, 2011, as worries about job security the economy kept many people from making big-ticket purchases.

That's up from 10.6 years in 2010, and it and continues a trend that dates to 1995, when the average age of a car was 8.4 years, according to the Polk research firm, which studied state vehicle registrations...

[Demeter]

25. Insight: Recovery at risk as Americans raid savings

http://www.reuters.com/article/2012/01/17/us-recovery-risk-idUSTRE80G08320120117

More than four years after the United States fell into recession, many Americans have resorted to raiding their savings to get them through the stop-start economic recovery. In an ominous sign for America's economic growth prospects, workers are paring back contributions to college funds and growing numbers are borrowing from their retirement accounts. Some policymakers worry that a recent spike in credit card usage could mean that people, many of whom are struggling on incomes that have lagged inflation, are taking out new debt just to meet the costs of day-to-day living.

American households "have been spending recently in a way that did not seem in line with income growth. So somehow they've been doing that through perhaps additional credit card usage," Chicago Federal Reserve President Charles Evans said on Friday. "If they saw future income and employment increasing strongly then that would be reasonable. But I don't see that. So I've been puzzled by this," he said.

After a few years of relative frugality, the amount of money that Americans are saving has fallen back to its lowest level since December 2007 when the recession began. The personal saving rate dipped in November to 3.5 percent, down from 5.1 percent a year earlier, according to the U.S. Commerce Department...

[Demeter]

26. Wells profit rises 20%, credit provisions fall

CAN YOU SAY CIA AND DRUG MONEY LAUNDERING? I THOUGHT YOU COULD

http://www.marketwatch.com/story/wells-profit-rises-20-credit-provisions-fall-2012-01-17?link=MW_home_latest_news

Wells Fargo & Co. grew fourth-quarter earnings by 20% as the banking giant posted more loan growth and again reduced the amount of money it sets aside to cover potential loan losses...

[Demeter]

27. Greece Is Insolvent, Will Default on Debt: Fitch

http://www.bloomberg.com/news/2012-01-17/greece-is-insolvent-will-default-on-its-debt-fitch-says.html


Greece is insolvent and probably won’t be able to honor a bond payment in March as the country negotiates with creditors to cut its debt burden, Fitch Ratings Managing Director Edward Parker said.

The euro area’s most indebted country is unlikely to be able to honor a March 20 bond payment of 14.5 billion euros ($18 billion), Parker said today in an interview in Stockholm. Efforts to arrange a private sector deal on how to handle Greece’s obligations would constitute a default, he said.

Prime Minister Lucas Papademos is scheduled to meet tomorrow with a group representing private bondholders after a five-day break to hold talks on forgiving at least 50 percent of the nation’s debt in the euro area’s first sovereign restructuring. Greece’s official creditors begin talks Jan. 20 on spending curbs and budget cuts that will determine whether to disburse additional aid.

“The so-called private sector involvement, for us, would count as a default, it clearly is a default in our book,” Parker said. “So it won’t be a surprise when the Greek default actually happens and we expect it one way or the other to be relatively soon.”

[Demeter]

28. S&P Expects More Euro-Zone Downgrades In Coming Weeks

http://online.wsj.com/article/BT-CO-20120117-709743.html

Standard & Poor's said more European local and regional governments, government-related entities and financial companies could face ratings actions over the next four weeks following downgrades of France and eight other euro-zone countries on Friday.

The downgrades, including the loss of France's and Austria's coveted triple-A ratings, renewed concerns about Europe's ability to rebound from its credit crisis. The downgrades also hurt the euro zone's bailout fund, the European Financial Stability Facility,...

[Demeter]

29. IMF executive warns of eurozone 'spiral'

http://news.yahoo.com/imf-executive-warns-eurozone-spiral-103430769.html;_ylt=AkQbtWRZ5eQ.coN_ZzV_wmCw73QA;_ylu=X3oDMTRvc2t1ajJjBGNjb2RlA2dtcHRvcDEwMDBwb29sd2lraXVwcmVzdARtaXQDTmV3cyBmb3IgeW91BHBrZwM0NTA5OGFjYS04YmE0LTNiMGQtYTI5OC0yOWZkZDYwNmU4YmYEcG9zAzM

A senior International Monetary Fund executive warned on Monday that Europe required bold action to avert a "downward spiral" that could drag the world economy into "catastrophe".

IMF First Deputy Managing Director David Lipton, in his first major speech since his appointment late last year, told a meeting of Asian finance and banking chiefs in Hong Kong that the world economy was in trouble.

"At the global level, the pace of economic activity is weakening, and the risks for Europe and the world are high," he told the Asian Financial Forum.

"Rather than allow ourselves to be paralysed by pessimism, it is time to focus on the more hopeful perspective of working our way through this crisis."

[Demeter]

30. UK 'planning for eurozone collapse'

http://www.thisislondon.co.uk/standard/article-24028690-uk-planning-for-eurozone-collapse.do

The Government is undertaking "extensive contingency planning" in the event of a eurozone collapse, peers have been told.

Treasury minister Lord Sassoon said the planning was aimed at dealing with "all potential outcomes of the eurozone crisis". At question time, he said Britain wanted to see a "strong and dynamic" eurozone and European economy. But he stressed it was for the eurozone countries to "take the lead in supporting the euro as a currency". Lord Sassoon also indicated that Britain would be prepared to stump up more cash to tackle the crisis if the IMF requested it.

"The Government sees the role of the IMF to support individual countries and not to support currencies.

"If the IMF puts forward a case, as it may well do, for an increase in its resources, if there is a strong case the UK will, as it has always done in the past, support the IMF in increasing resources as required," he said.

Tory former chancellor Lord Lawson of Blaby said: "There is only one thing as worrying as the collapse of the eurozone and that's the continuation of the eurozone." He said it has been shown to be "fundamentally flawed and the cause of all these problems". Lord Lawson said ministers needed to look at the risk of a banking meltdown, adding: "If it should prove necessary for the UK Government to rescue any British banks, they should do so on much tougher terms than the ludicrously soft terms which the previous administration used."

[Tansy_Gold]

32. DU Planning for Blackout

In case you haven't seen it elsewhere, DU will be down for 18 hours starting at 3:00 a.m. EST in solidarity with the SOPA protests.

Just didn't want you to be shocked.



TG

[Demeter]

34. Is it just me, or does this sound like a really stupid idea?

Whatever. I'm due for some shuteye anyway.

[Tansy_Gold]

35. Well, it probably won't accomplish anything

but like the whole Occupy thing, maybe it will bring some attention to the issue and spark some discussion.

Anyway, I just wanted to give you a heads up so didn't log on and go WHAT THE FUCK IS THIS ALL ABOUT IT?????????????????????????????

You can get some rest, I'll do some cleaning.

[Fuddnik]

36. Greenspan's Laissez Fairy Tale: How Flawed Economic Theories Fail to Account for Financial Fraudster

http://www.alternet.org/economy/153756/greenspan%27s_laissez_fairy_tale%3A_how_flawed_economic_theories_fail_to_account_for_financial_fraudsters/


By William K. Black

Greenspan's Laissez Fairy Tale: How Flawed Economic Theories Fail to Account for Financial Fraudsters
Alan Greenspan touted 'reputation' as the characteristic that made possible trust and free markets. He was dead wrong.
January 16, 2012 |

We continue to witness remarkable developments in the intersection of the related fields of economics, finance, ethics, law, and regulation. Each of these five fields ignores a sixth related field – white-collar criminology. The six fields share a renewed interest in trust.

The key questions are why we trust (some) others, when that trust is well-placed, and when that trust is harmful. Only white-collar criminologists study and write extensively about the last question. The primary answer that the five fields give to the first question is reputation. The five fields almost invariably see reputation as positive and singular. This is dangerously naïve. Criminals often find it desirable to develop multiple, complex reputations and the best way for many CEOs to develop a sterling reputation is to lead a control fraud. Those are subjects for future columns.

This column focuses on theoclassical economics' use of reputation as “trump” to overcome what would otherwise be fatal flaws in their theories and policies. Frank Easterbrook and Daniel Fischel, the leading theoclassical “law and economics” theorists in corporate law, use reputation in this manner to explain why senior corporate officers' conflicts of interest pose no material problem. The most dangerous believer in the trump, however, was Alan Greenspan. His standard commencement speech while Fed Chairman was an ode to reputation as the characteristic that made possible trust and free markets. I've drawn on excerpts from one example: his May 15, 2005 talk at Wharton. I find Greenspan's odes to reputation as the antidote to fraud to be historically inaccurate and internally inconsistent in their logic. Here, I ignore his factual errors and focus on his logical consistency.

(snip)

[Demeter]

37. Greenspam was as much a criminal fraud as Bruno Betteleim.